The U.S. Justice Department charged two Chinese nationals
with laundering more than $100 million in cryptocurrency on behalf of
North Korea, in court filings that detail Pyongyang’s use of hackers to
circumvent sanctions.
FILE
PHOTO: A small toy figurine is seen on representations of the Bitcoin
virtual currency displayed in front of an image of China's flag in this
illustration picture, April 9, 2019. REUTERS/Dado Ruvic/Illustration
According
to an indictment filed in federal court in Washington, D.C., and
unsealed on Monday, the two Chinese allegedly laundered cryptocurrency
stolen by North Korean hackers between December 2017 and April 2019,
helping to hide the stolen currency from police.
“These
defendants allegedly laundered over a hundred million dollars worth of
stolen cryptocurrency to obscure transactions for the benefit of actors
based in North Korea,” Assistant Attorney General Brian Benczkowski said
in a statement.
In a related civil forfeiture complaint also
unsealed on Monday, Justice Department lawyers said they had seized some
of the roughly $250 million that they said North Koreans hackers stole
from a virtual currency exchange in 2018.
Those funds were then
laundered through hundreds of automated transactions designed to prevent
investigators from tracing the funds, the complaint alleged.
At
least some of those funds were eventually used to help pay for the
infrastructure in North Korea used to launch cyberattacks, according to
the documents.
The same North Korean hackers were linked to a
November 2019 attack on a South Korean virtual exchange that netted the
hackers more than $48 million in stolen cryptocurrency.
“The
hacking of virtual currency exchanges and related money laundering for
the benefit of North Korean actors poses a grave threat to the security
and integrity of the global financial system,” U.S. Attorney Timothy
Shea of the District of Columbia, said in the statement.
The
United Nations Security Council has imposed sanctions on North Korea
since 2006 in a bid to choke off funding for Pyongyang’s nuclear and
ballistic missile programs.
North Korea has generated an
estimated $2 billion for its weapons of mass destruction programs using
“widespread and increasingly sophisticated” cyber attacks to steal from
banks and cryptocurrency exchanges, a confidential United Nations report
said last year.
The U.N. experts said North Korea’s attacks
against cryptocurrency exchanges allowed it “to generate income in ways
that are harder to trace and subject to less government oversight and
regulation than the traditional banking sector.”
At the time, North Korea denied those U.N. allegations, calling them a “fabrication” aimed at tarnishing the country’s image.
The
United States last year charged American digital currency expert Virgil
Griffith with helping North Korea use cryptocurrency and blockchain
technology to evade U.S. sanctions, after he attended a 2019 North
Korean cryptocurrency conference.
Prosecutors said he and other
conference attendees had discussed how cryptocurrency technology could
be used by Pyongyang to launder money and evade sanctions.
Griffith’s lawyer has rejected the charges.
The bitcoin community is currently immersed in an experiment called the “lightning torch.”
The effort is intended to show the value of bitcoin’s lightning network –
an up-and-coming technology that is experimental and hard to use so
far, but it does offer improvements over today’s most common payment
systems by allowing users to pass money around the world quickly and
without a third party, unlike Mastercard and Paypal.
And participants are out to show this facet of the technology in a kind
of global relay race using an ever-increasing amount of BTC.
By way of the social media platform Twitter, people pass the “torch
payment” from one person to another, adding 10,000 satoshis (worth about
$0.34 at press time) to the payment before sending it further along.
Imagine a kind of lightning network-style snowball effect and you get
the basic gist of what’s happening around the world.
It’s been called the “LN Trust Chain” since whoever has the torch is
supposed to send it on to someone they trust will send the payment on,
rather than keep the payment to themselves.
Indeed, developers might still call lightning “reckless,” since it’s
experimental software and users can lose money if they (or the software)
makes a wrong move. There’s even a Twitter hashtag dedicated to this
fact.
But so far, the experiment seems to be having its intended effect, The
“torch” has attracted the participation of 139 people in at least 37
countries, according to the pseudonymous torch ringleader, who goes by
the name Hodlonaut.
lightning, map
The list of participants includes some notable names in the bitcoin
community, such as advocate and Mastering Bitcoin author Andreas
Antonopoulos.
“Heretical thought of the day: Playing #LNtrustchain is better than
watching the Superbowl,” he tweeted after sending the torch to the next
participant, adding:
“Ok, I lied. Anything is better than watching the Superbowl for this geek.”
Thus far, other participants include Morgan Creek Digital founder Anthony Pompliano and Lightning Labs engineer Joost Jager.
Humble beginnings
The torch started on a whim.
On January 19th, Hodlonaut said he would pass on 100,000 satoshis to the
first person he trusts. “How many satoshis until it breaks?” he
tweeted.
“The reason I started this was just to have some fun with the lightning
network and maybe spread more awareness. I thought it would maybe do
five or six hops and then die, without many people noticing,” Hodlonaut
told CoinDesk.
But now, of course, it’s grown into a worldwide phenomenon as
illustrated in the map above, equipped with its own website and an
accompanying hashtag.
Not to mention, it’s come to mean a lot to its participants.
“The #LNTrustChain showed the world: 1. Lightning works and it’s
amazing. All of us who’ve used it in a solo context (buying stickers,
playing games, etc) already knew it, but this experiment was the first
widespread public demonstration of its power,” said one user.
Antonopoulos told CoinDesk that the torch represents a way to test and
uncover problems with the technology. And it’s not quite as easy to
participate as it sounds: setting up a lightning node is a hard enough
task, but there are other tricky factors as well.
“To be able to ‘play’, your [lightning network] node must be well
connected, with enough capacity and well balanced (local vs remote
balance),” he explained. “Since a lot of that is not fully automated
yet, it poses a challenge for node operators and an opportunity to test
their setup. As the amount gets bigger, it is harder and harder to find
routes and keep it going.”
In this way, the lightning torch can help to unearth bugs, Antonopoulos added.
It’s even been used to experiment with new tech. The first so-called
“hodlinvoice” – a new type of tech by LND – was used in the wild for the
first time.
As Hodlonaut explained:
“The way this has played out has completely blown my mind, and made me realize how awesome the bitcoin community is.”
To that end, he’s been making sure people know who has the torch and cat-herding the community on Twitter.
Escape from extinguishing
As might be expected from any kind of globe-trotting experiment, the
torch itself almost died a few times, most notable on Jan. 31 when a
Twitter user by the name of edward_btc stole it.
“I’ll seize it because I can, and no one can stop me. This is bitcoin,”
edward_btc wrote, his point being that bitcoin is supposed to be
“trustless” money.
The community responded with irritation, not wanting the torch to die out.
“Are you really going to be *that* guy? Seriously?” responded Elizabeth
Stark, the CEO of Lightning Labs and one of CoinDesk’s Most Influential
awardees for 2018.
On a darker level, though, edward_btc went as far as to claim that he received death threats for keeping the torch.
And later on, he claimed that he was actually planning to send the torch
on. But before he was given a chance, user Klaus Lovegreen swooped in
and started a new torch.
“Is there anyone with some dignity around that that can be trusted with
the Lightning Torch?” he said. Since then, the torch has jumped another
30 hops.
But when will it end? As it stands, there’s a hard-coded limit to how
large the torch can get: 4,390,000 satoshis, which worth about $150.
The companies behind the world’s bitcoin ATM networks say their market is alive and well.
Matias Goldenhörn, director of Latin America operations at the ATM
operator Athena Bitcoin, told CoinDesk that such ATMs are “becoming a
real alternative to banks” for diverse users in emerging markets.
“The machines have proven resilient to the price fluctuations,” he said.
Indeed, Coin ATM Radar estimates there are now 4,213 cryptocurrency ATM
machines deployed worldwide, most of which strictly offer bitcoin,
compared to roughly 471 machines worldwide in January 2015. Now that
some of these machines also include support for a wide array of digital
assets, they offer a conduit for participation in broader cryptocurrency
markets without relying solely on web-based exchanges.
Jorge Farias, a Venezuelan expat and CEO of the Panama-based startup
Cryptobuyer, told CoinDesk that demand for bitcoin ATMs to support
cryptocurrencies like dash and flash is largely driven by sponsored
educational initiatives in Latin America – some of which literally give
away small amounts of crypto to prospective users in emerging markets
like Venezuela, which is currently roiled by crippling financial and
political insecurity.
That’s why Farias is preparing to open Venezuela’s first bitcoin ATM in
Caracas in early February, which will include support for other
cryptocurrencies as well. The machine is already operational. But Farias
said for safety reasons it’s important for the current unrest and
surging demand for bitcoin to settle down slightly before the public
launch.
Moe Adham, cofounder of the crypto ATM retailer BitAccess, told CoinDesk
such multi-asset machines provide near-instant liquidity for
cryptocurrencies that were otherwise difficult for many users to
convert.
“If you earn some other cryptocurrencies through one of these
decentralized networks, you can cash it out,” Adham told CoinDesk,
adding:
“The bitcoin ATM industry is kind of coming into its own now. … We
can provide access to different cryptos with bitcoin as the settlement
layer.”
This combination of market demand and new technical capabilities has
allowed ATM machines to become an anomaly in the broader industry: a
sector where usage and profits are actually growing.
Inflation-driven demand
Although the majority of bitcoin ATMs are currently located in North
America, demand from Latin American markets is growing at a breakneck
pace, operators say.
According to Goldenhörn, Athena Bitcoin earned $3 million in net profits
in 2018, after installing 25 new machines in Latin America, in part
because of the Venezuelan diaspora in Colombia and Argentina spreading
awareness of how unbanked people can still use bitcoin ATM machines.
“In the U.S., our clients predominantly use our machines to buy
bitcoin,” Goldenhörn said. “In Colombia for example, it’s the other way
around, people use the ATM to withdraw cash.”
Several of these machines are located inside Latin American Walmart
Superstores. If Athena Bitcoin is able to raise a $7 million Series A
round – for which the Chicago-based startup is currently fundraising –
then Goldenhörn said the plan is to deploy up to 150 new bitcoin ATMs
across Latin America in 2019. And his company isn’t the only startup to
recognize the opportunity in the region.
When inflation rates in Argentina rose above 46 percent in 2018 – not to
mention Venezuela’s staggering economic crisis – Farias raised an
undisclosed amount from South African venture capital firm Invictus
Capital to launch a new sector of his business with six bitcoin ATMs in
Panama.
Farias aims to build a transnational network by working with Lamassu and
General Bytes as manufacturing partners and the e-commerce giant
MercadoLibre for prime locations, since MercadoLibre has branches across
Latin America that allow people to deposit cash for store credit and
transfer credits or fiat value to cryptocurrency wallets.
In 2019, Cryptobuyer plans to open 10 more ATMs in Argentina, 10 in
Mexico and 10 in Venezuela, since Farias said inflation boosted demand
for bitcoin access among local unbanked communities.
“The focus right now is on Mexico and Argentina, which have major
immigrant populations from Venezuela,” Farias said. “This lady of 65
years came to one of our [Panama] locations one day with a piece of
paper, a QR code printed, and she said to use that her son in Venezuela
said with this paper I can send him money.”
For small transaction amounts, this remittance methodology appears to
fly under the scope of money transmission regulations in Panama.
However, Farias admitted his team is often in contact with local
regulators because the compliance landscape could shift in the near
future.
“They allow us to work because there isn’t a specific regulation right
now, so we are always looking out for new regulations,” he said.
More options
Meanwhile, BitAccess will soon roll out support options for up to 70 tokens across its product lines.
BitAccess co-founder Adham told CoinDesk that aside from bitcoin,
ethereum, litecoin and tron saw the most demand from operators and
users. He also added that 2018 was the first time his company –
originally founded in 2014 – noticed ATM usage was decoupling from the
bitcoin’s market volatility.
“The price was decreasing but demand was increasing month over month,”
Adham said, speaking of an uptick that has lasted since July 2018.
For example, demand and usage related to BitAccess machines grew more
than 9 percent in November 2018, despite bitcoin’s market price sinking
below $6,000. Plus, the average buy and sell amounts have both remained
relatively constant since March 2018 – around $100 and $250,
respectively.
BitAccess’ 242 machines are predominantly located in North America and
Europe, with four machines located in Vietnam. Sellers with a more
international client base, like the Switzerland-based retailer Lamassu,
have also noticed demand is growing more quickly in Asia, the Middle
East and Latin America.
“Singapore has been very popular with us, Malaysia as well,” Lamassu CEO
Zach Harvey told CoinDesk. “Israel as well, we probably had only one
bitcoin ATM until 2018. Now we have 20 machines in Israel.”
Compliance challenges
But as more people use bitcoin ATMs to convert cash and transact across
borders, the opaque regulatory landscape presents ever-steeper hurdles.
Last October, Indian police arrested the co-founder of the Indian
exchange Unocoin after the company opened a multi-asset cryptocurrency
ATM in Bangalore. Unocoin co-founder Sathvik Vishwanath, who has since
been released because he did not break any particular law, told CoinDesk
that police confiscated the machine because it was unclear whether
operators required a license.
“We await the judgment regarding the lifting of this restriction by the
Supreme Court,” Vishwanath said, adding that he expects a ruling by the
end of February.
Such regulatory complexities are compounded by questions about whether
certain cryptocurrencies classify as unregistered securities according
to local laws.
In Adham’s case, he said that although BitAccess is merely a retailer
and responsibility lies with owners and operators, his company still
worked with legal counsel to review tokens and make sure ATM machines
only supported assets that were already accessible on other platforms in
each jurisdiction.
“Then the question of securitization is very scary,” Adham said, adding:
“There’s not anyone who is entirely certain of where the cards are
going to fall on this. … Are there other reputable companies that are
offering these tokens? And do they have clearly listed statements about
why they are listed?”
Both Harvey and Goldenhörn said they also have to take a unique approach
to compliance in each jurisdiction and created a legal review process
for both themselves and their partners, even if the burden of
responsibility eventually falls on another operator or landlord.
“These systems, which started out as very simple, are becoming very,
very complex,” Harvey said, noting that Lamassu machines offer the
ability for operators to support ethereum, bitcoin cash, zcash, litecoin
and dash. “Depending on which jurisdiction you’re in, there are
different demands.”
All things considered, Adham said that his company was “cash flow
positive” for the past four quarters and growing demand creates economic
incentives to innovate in this space.
“I don’t think that compliance is the No. 1 hindrance,” he said. The
biggest challenge, in his mind, is finding and targeting sources of real
demand.
While 2018’s falling bitcoin prices led
many observers to write off digital assets altogether, the correction
should actually help force the market as a whole to mature.
That maturation is exactly what the space needs to attract more
institutional investors, whose arrival en masse will improve the market
for everyone by increasing liquidity, both directly, via the funds they
invest, and indirectly, via the fact of their adoption. Their entry will
signal to other traders that the market is stable and trustworthy.
Taking risk seriously
Between 2015 and late 2017, when the price of bitcoin was steadily
rising, there was bullish euphoria in the market. Traders were willing
to rely on little-known or unregulated exchanges despite the risks – the
potential upside made those risks worthwhile.
In the early days, digital assets presented a unique scenario by
conventional trading standards: the operational risk (risk of loss from
inadequate procedures, security, and policies used to conduct
operations) of trading was greater than the market risk (risk of
financial loss due to the prevailing conditions of a market an investor
is invested in).
Loss of some money (or digital assets) here and there to hacking, for
example, could be outweighed by the fact that returns were astronomical
and investors were indifferent to the price of bitcoin and other digital
assets as it was increasing, exponentially, in a very short period of
time. For example, bitcoin experienced a price increase of 460+ percent
over the six-month period from July 1, 2017 ($2,492.60) to January 1,
2018 ($14,112.20).
Trading on platforms with very high operational risks could be entirely
logical using an “adjusted” Sharpe Ratio, a risk-weighted measure. The
adjusted Sharpe Ratio would take into account the return of investing in
bitcoin over a period of time and the risk-free rate of investing in a
risk-free asset (such as a U.S. Ttreasury bond) and determine the risk
of the portfolio (market and operational risks) to determine the
risk-adjusted return.
Using the example above, taking a risk-free rate of approximately 1.5
percent, the portfolio’s return, which exceeds 460 percent, and the
portfolio’s risk of, let’s say, 135 percent (35 percent for market risk
and 100 percent for operational risk), would yield a Sharpe Ratio of
approximately three. This Sharpe Ratio would represent an attractive
risk-weighted return as the return exceeds the risk by a multiple of
three.
Today, returns have normalized for arbitrage opportunities as liquidity
has increased across exchanges. Those who employed a purely long
strategy and enjoyed exponential returns would now be experiencing
losses if employing the same strategy over the last six months.
Aside from a purely directional strategy, traders will tell you that
“easy returns,” such as simple arbitrage opportunities (buying the same
asset on one exchange and selling it at a much higher price on another)
have disappeared. When the returns they’re seeing are closer to what
they’d expect from more established asset classes, traders’ willingness
to accept the op-risk, or potential of losses from hacking and other
preventable causes, is greatly diminished.
In short, the change to the risk-reward ratio means that exchanges are
no longer given a pass for poor operations, lax security, troubling
conflicts of interest, and insufficient oversight.
For example, most exchanges use a single wallet to hold assets for all
participants. Even with the bulk of assets held in cold storage, a
single wallet creates a tempting target for hackers and other criminals.
Now, we’re seeing more exchanges introduce segmented wallet
infrastructure (as at Seed CX, where we create a dedicated wallet for
each exchange participant).
This attitude shift means exchanges that offer dedicated wallets and
other security-focused features – those that have the lowest operational
risk – will attract more institutional investors, who must consider not
only financial and operational risks but also risks to their reputation
when trading digital assets.
It also means exchanges have to offer the surveillance and account
infrastructures required to prevent inefficient or suspect trading:
trade alerts, circuit breakers, order book audit trails, and so on.
Growing sophistication
As we mentioned above, changes in the market since 2017’s rally mean
that “long-only” strategies are no longer workable and “easy return”
opportunities are much harder to come by because more groups are chasing
the same opportunities. For example, DeVere Capital recently announced
the launch of an actively managed cryptocurrency fund that will be
focused on arbitrage opportunities between exchanges.
This means exchanges that want to attract and keep traders must build
the infrastructure to offer more sophisticated trading strategies,
including swaps, derivatives, and options, not to mention combinations
of those and spot markets.
Legacy of the bear
The transformation of the market infrastructure still has an overhang of
its history. In the first three quarters of 2018, hackers stole $927
million of cryptocurrency from exchanges and other trading platforms.
And while many exchanges still fall short on security measures, others
are making significant strides forward. In addition to segmented
wallets, we’re seeing greater use of multi-signature security (at Seed
CX we require two keys, generated by independent parties, to access
wallets), more enforcement of whitelisted withdrawal IP addresses, and
the increased pursuit of regulatory licenses.
Two years ago, the entrance of institutional investors to the digital
asset space seemed distant and unlikely. Today, thanks to falling
prices, institutional investors are not only entering the market but are
increasingly dictating the terms of the marketplace – to the benefit of
everyone trading in it.
For the first time in more than a year,
there are no active bitcoin exchange-traded fund (ETF) proposals pending
before the U.S. Securities and Exchange Commission (SEC).
Money manager VanEck, financial services firm SolidX and Cboe BZX
Exchange withdrew a highly-anticipated proposal Tuesday, citing an
ongoing U.S. government shutdown as the reason. The proposal, first
filed last June, faced a final deadline of February 27 for approval or
rejection. Due to the shutdown, many legal experts anticipated that the
SEC would reject the proposal outright rather than let it be approved by
default.
VanEck CEO Jan van Eck said the companies will “re-file and re-engage in
the discussions” with the SEC when the shutdown ends, he did not
provide a timeline for when this may happen. And indeed, it is unclear
when the government will reopen – while the U.S. Senate was set to vote
on two different bills that could potentially re-open the government,
neither bill passed.
Other companies are also hesitant to file for a bitcoin ETF while the
regulator is in a state of limbo. Bitwise Asset Management announced its
intention to file for a fund with NYSE Arca earlier this month, and
while NYSE Arca has submitted the required rule change proposal, the SEC
has not yet published the document for review in the Federal Register.
Proponents of the fund hope a regulated bitcoin ETF, once approved, will
bring in new investors, boosting bitcoin’s liquidity and potentially
even pumping its price.
Any day now?
There are also nine different rule change proposals for ETFs that are in a state of limbo.
The proposals, filed by ProShares, Direxion and GraniteShares, were
rejected last year by the SEC staff, who cited concerns about bitcoin
market manipulation. But a review of that decision by the commission was
called for the next day.
However, while the SEC must stick to strict deadlines when initially
examining a rule change proposal, there are no such deadlines for a
review, attorney Jake Chervinsky told CoinDesk. These reviews have taken
anywhere from six to 16 months in the past, but are also suspended
while the SEC is closed.
Hence, a decision on any of these nine proposals could happen as soon as
the government re-opens, or it could drag on for months or even,
theoretically, years.
Glimmer of hope
It is possible that an ETF may still be approved by the end of the year,
Chervinsky told CoinDesk via email, though he added that it “will
depend on (1) when the ETF proposal is filed and (2) the state of the
bitcoin markets when the SEC makes its decision.”
Once a proposal is filed, the SEC has 240 days to approve or deny it,
should the regulator take every extension allowable under the law. As
such, any proposal filed by May 5, 2019 at the latest would require a
final decision before December 31, Chervinsky explained.
He added that he would be “surprised” if at least one proposal was not published within that time.
“The question will then be whether the bitcoin markets mature enough
before the SEC makes its decision to adequately address all the issues
that have killed ETF proposals in the past, such as valuation,
liquidity, custody, and market manipulation,” Chervinsky said,
concluding:
“In my view, it’s entirely possible that another [10] months of
development in the cryptocurrency ecosystem could be enough to finally
warrant approval of a bitcoin ETF.”
Distributed ledger technology provider R3 has carried out an extensive
internal reorganization, resulting in the departure of two members of
its management committee, CoinDesk has learned.
Brian McNulty, a managing director and head of global services, and
Lauren Carroll, chief administrative officer, are leaving the company,
R3 told employees at town hall meetings Friday, according to people
familiar with the situation.
An R3 spokesperson confirmed the internal reorganization, which he said
will include an expansive hiring program for 2019, but declined to
comment on individual staff departures. Neither McNulty nor Carroll
answered requests for comment by press time.
McNulty joined R3 in March 2016 when the start-up was busy onboarding
consortium member banks. He had previously founded the PTDL (Post Trade
Distributed Ledger) Group, a rival blockchain group which numbered
around 40 members including CME Group, State Street Bank and the London
Stock Exchange.
Carroll was formerly in-house counsel at ICAP before transitioning into
business management roles at the electronic trading firm.
New team structure
As part of the reorganization, co-founder Todd McDonald will run a new
“design” team that combines all of R3’s product and marketing efforts,
according to a memo CEO David Rutter sent the company’s roughly 200
employees after Friday’s town hall meetings.
Product management was previously in the same division as engineering, which Richard Gendal Brown will continue to lead.
The memo also outlined several other changes:
Chief engineer James Carlyle will run a new “production” team
dedicated to supporting the deployment of R3’s technology at client
companies.
The general counsel’s office has been merged with external affairs
and placed under Charley Cooper, who has long overseen regulatory
affairs and public relations for R3.
Chief of staff Zack Kavanaugh assumed added responsibilities for recruiting, HR and business resources.
Chief financial officer (CFO) Paul Harris will oversee a combined finance and corporate development (M&A team.
A search is underway for a chief revenue officer (CRO) to lead the
sales team. As CoinDesk reported earlier this month, Scott Grayson, R3’s
former chief sales officer, left in September and recently joined the
blockchain services firm AlphaPoint.
In June 2018 R3 had to field media speculation that the company was
running short of funds. More recently, a legal dispute with Ripple
concerning a contract to purchase five billion XRP tokens was resolved.
Mingxing “Star” Xu, the founder of cryptocurrency exchange OKCoin, has
become the largest individual shareholder of a public company listed in
Hong Kong via a $60 million acquisition.
LEAP Holdings Group, the construction engineering firm acquired,
announced the competed deal on Wednesday. OKC Holdings Corp, the parent
company of OKCoin, purchased about 3.2 billion shares of the company for
HK$0.15 (around $0.02) per share to achieve the takeover, it said.
OKC Holdings is now the largest shareholder of LEAP Holdings, owning
60.49 percent of its stock and having the same percentage of voting
rights. As a result, the exchange is a step closer to a possible
back-door listing on the Hong Kong Stock Exchange (HKEX).
Xu holds the majority stake in OKC Holdings with 52.32 percent ownership
through two firms StarXu Capital and OKEM Services Company.
Other notable shareholders of OKC Holdings include Gang Mai, who holds
5.08 percent stake via Vlab Capital, and Bo Feng of Ceyun Ventures
holding 9.86 percent through Golden Status Ventures. Mai also has
another joint fund called Venturelab jointly created with the U.S.-based
venture capitalist Tim Draper. Jing Shi, daughter of Chinese
billionaire entrepreneur Yuzhu Shi, also invested in OKC Holdings and
owns 13 percent.
OKC Holdings initially filed for the application with the HKEX on Jan.
10 to buy the controlling stake in LEAP Holdings Group, with the deal
closing in just two weeks.
Crypto exchanges are increasingly looking to opt for a reverse-merger
route to become publicly listed companies, rather than going for the
conventional IPO route which is a lengthy and complex process.
Just yesterday, the holding company of South Korea’s Bithumb exchange
signed a binding letter of intent agreement with U.S.-listed investment
firm Blockchain Industries for a reverse merger.
And, last August, Singapore-based crypto exchange Huobi took a similar
step, acquiring 66.26 percent of a HKEX-listed firm called Pantronics
Holdings for around $70 million.
Starting today, CoinDesk will use GitHub to help crowdsource potential
methodology changes and data sources for our Crypto-Economics Explorer
(CEX), our comprehensive data tool designed to measure and compare
crypto assets.
After we launched the beta version of our tool in November, the clearest
critical comment we heard was related to our methodology for
calculating developer interest in a blockchain. More precisely, we heard
feedback on the decision to only count activity on one GitHub code
repository toward each blockchain’s “developer score.”
The critique was that the methodology behind the CEX was insufficient to measure developer interest across each project.
As an example, bitcoin’s reference implementation is Bitcoin Core (which
is the repository the CEX tracks). While that works fine for bitcoin,
ethereum is implemented through several clients, which includes the
largest repository (Geth, which we track), but also the independently
developed, interoperable, but equally important Parity client (whose
repository is not currently tracked in the CEX), as well as clients such
as cpp-ethereum and still others.
By counting bitcoin’s single client, critics said the CEX painted a more
accurate picture of developer interest in bitcoin, but by counting only
one client for ethereum, the explorer missed out on some of the
developer interest on that blockchain.
Our logic for the conservative approach was that we wanted to get the
beta version of our tool off the ground with a lowest common denominator
— developer interest in core protocols as implemented in their
principal client. Comparisons of highly heterogeneous blockchains is a
challenge and we wanted to have a solid foundation before we expanded
data points and methodology any further.
The plan from there was, and is, to grow the list of code repositories
we track. Our ambition is to soon track GitHub activity beyond the core
protocol and client implementations all the way to associated projects
built off of that blockchain, including wallets, dapps and layer-two
solutions like state channels and sidechains.
After we launched and heard the criticisms, we set out to implement our
full vision and expand the repos and activity on GitHub we tracked. When
we started, however, we quickly realized the complexity of this task.
What we wanted to do meant tracking thousands of projects and
repositories. What we needed was a solution that could scale to the
complexity and size of the industry and that could capture developer
interest and activity in a blockchain from “head to toe.”
Our solution is now to go directly to developer communities, enabling
the coders powering various blockchains to provide their input on our
methodology in a setting that’s most apt given their work.
That is, Coindesk Data has now published the methodology and data sources for the CEX’s developer interest in GitHub itself.
There are several master files in our new repository to get the effort
launched: one for the repos we currently track, another for the weights
we give each data point, and finally another for the methodology of how
to integrate associated projects in the future.
The goal is to use GitHub’s workflow tools to help us scale this
important metric. Now, anyone can make a pull request for CoinDesk Data
to follow a repository, to change weights given to a certain data point
or to help inform any larger methodology change.
Two popular refrains by crypto commentators in 2018 were “the herd is coming” and a call for “mainstream adoption.”
Prognosticators openly speculated on the impact institutional investors
would have on the value of the crypto assets in their portfolios.
Although we did see bitcoin futures launch, exploding venture capital
activity and Yale’s endowment dipping its toes in crypto investing,
prices have gone down, not up. We are still waiting for this herd.
However, it’s safe to say retail speculation on crypto assets has
already reached some level of “mainstream adoption,” as evidenced by
constant media coverage by CNBC and Bloomberg and markets like Square
Cash, Robinhood and Coinbase. Depending on which researcher you ask, the
run-up in crypto prices in late 2017 and early 2018 was fueled largely
by retail and enthusiast investors.
In the burgeoning decentralized applications space, on the other hand,
the conversation about “mainstream adoption” is focused on DAUs and UX
improvements. I have to say — things are not looking good. Usage numbers
remain pitifully low and the user experiences offered are generally
terrible. The dapp space has been rife with questionable ICOs, outright
scams and useless tokens that have lost nearly all their value.
The prophesied inflection point of “mainstream adoption” for dapps feels
incredibly distant. However, I would argue that this level of froth is
to be expected and that we are way too early for “mainstream adoption”
to be a sensible success metric for dapps.
Building Blocks
This was an important year for dapp building. There have been a number
of impressive development wins, even if user numbers don’t reflect this.
We saw the release of the prediction market Augur, the first ever ICO
for a dapp built on Ethereum, after three years of development. Although
it isn’t a pleasure to use (yet), it represents a remarkable technical
achievement. Augur saw a notable amount of users, open interest and
markets opened after launch. This activity dropped quickly, as
commentators were eager to point out, but the US midterm elections was a
bright spot for Augur.
Over $1 million was staked on Augur in this market, compared to around
$550,000 on PredictIt, the leading centralized prediction market.
Prominent Ethereum dapps Golem and Aragon also went live on mainnet in
2018. 0x and MakerDAO saw increased adoption and activity, with several
successful relayers launching and 1 percent of all ether locked as
collateral to issue Dai stablecoins.
Decentralized exchanges like IDEX and ForkDelta saw huge growth in users and trade volume.
Gnosis launched its “slow.trade” auction-based DEX. Status, a
decentralized messaging platform, moved to beta, enabling mainnet by
default. Spankchain, Connext and Liquidity Network launched state
channel payments on Ethereum, providing a path towards cheaper and
faster payments for dapps. Loom Network launched Plasma.
Cash sidechains for its suite of games and dapps. My own company’s peer-to-peer marketplace dapp went live on mainnet, as well.
In the bitcoin world, the Lightning Network saw a significant increase
in the number of nodes and channels. The list of Lightning apps is
growing. Blockstack’s platform now supports dozens of dapps, including
Graphite, a decentralized Google Docs alternative.
Bubble Behavior
Many transformative technologies have been accompanied by speculative
bubbles, from railroads, petroleum, electricity, to the internet.
Frenzied investors have been plowing money into questionable,
“oversubscribed” schemes for hundreds of years.
Long after these bubbles burst, primordial companies borne from them,
such as Union Pacific, the descendants of Standard Oil, (Edison) General
Electric and Amazon, remain giants.
There is a common thread in all of this. Speculators expect too much too
quickly, bad actors rush in to take advantage of this, people sour on
the technology after market crashes, and this underlying technology does
eventually change the world in profound ways — even if it doesn’t make
every impatient speculator rich.
I have been exposed to a huge variety of blockchain projects and
founders due to my role in dealing with partnerships for a blockchain
platform company. Earlier this year, the crypto bull market and ICO
mania created an environment of perverse incentives. Short-term greed
and FOMO ruled. Many projects focused solely on fundraising and
marketing.
There were even rumors of some projects acting like unregulated hedge
funds, investing company money into their friends’ companies. Extreme
price appreciation inflated many egos. A lack of sensible treasury
management and a total disregard of securities laws were shockingly
common. We are seeing some of the consequences of our failure to
self-regulate now, with SEC enforcement on the rise and once-hyped
projects shutting down due to their war chests experiencing 90%
drawdowns.
All of this is deleterious for long-term growth. The sooner we rid ourselves of this behavior, the better.
Beyond the bubble
Something to keep in mind is that we are competing with the legacy
internet, computer applications and financial infrastructure all while
trying to launch a grand, fragile economic experiment.
We should remember that it took decades for automobiles and tractors to
overtake horses. This may seem surprising today, but if you consider
that early drivers had to contend with a complete lack of supporting
infrastructure, it becomes easier to understand. I would liken the
current state of blockchain to before the beginning of the dot-com boom,
placing us in the 1980s rather than the 1990s. We are still in an
infrastructure building phase.
We are not ready for mainstream adoption. Everyone knows that the
“layer-one” of public blockchains badly needs to scale. Developers are
running into the current limits of blockchain and shifting focus to
layer 2 and off-chain solutions.
I predict we will see the terms “Web3” and “decentralized web” more and
more in 2019. Another major long-term challenge in the dapp space is
that we don’t yet have a proven economic model for dapp tokens. Many
dapp tokens which have been good investments suffer from questionable
economic design.
Even the dominant narratives about bitcoin and ether — bitcoin being a
store of value akin to digital gold, and ether paying for the gas
required to use a decentralized world computer — are not universally
accepted by researchers.
It will be an ongoing challenge for projects to demonstrate a model that
supports the price of their token that is rooted in utility instead of
speculation. A dapp token claiming to be like bitcoin’s digital gold or
ether’s gas should face extreme scrutiny. Tokens have
tremendous potential to incentivize growth and good behavior. We need to figure this out.
The good news is, there are tons of smart and motivated people quietly
working on all of these problems. Testing new economic models and
improving the base infrastructure that supports billions of dollars in
value takes time.
Be Patient
Finally, we must learn to separate price movements from underlying
fundamentals. High prices don’t mean that a blockchain revolution is
imminent and low prices don’t mean that the technology is doomed. Things
aren’t going to look like what we expected when everyone was drunk off
100x returns, at least not anytime soon.
It will take a while for this technology to mature, but the underlying fundamentals are strong.
The amount of smart contract computations on Ethereum is nearly the same
as it was during the beginning of the year, when prices were at
all-time highs. This year has seen hundreds of thousands of GitHub
commits to blockchain projects and developer tool downloads. Blockchain
offers open platforms with novel economic incentives for developers,
which will win their hearts and minds in the long-run.
A herd of builders is coming, laying the foundation for mainstream
adoption in the future. When this inflection point hits, it will be
hugely disruptive. There are going to be applications and use cases we
never dreamed of. The world will be transformed by blockchain technology
and decentralization.
Two popular refrains by crypto commentators in 2018 were “the herd is coming” and a call for “mainstream adoption.”
Prognosticators openly speculated on the impact institutional investors
would have on the value of the crypto assets in their portfolios.
Although we did see bitcoin futures launch, exploding venture capital
activity and Yale’s endowment dipping its toes in crypto investing,
prices have gone down, not up. We are still waiting for this herd.
However, it’s safe to say retail speculation on crypto assets has
already reached some level of “mainstream adoption,” as evidenced by
constant media coverage by CNBC and Bloomberg and markets like Square
Cash, Robinhood and Coinbase. Depending on which researcher you ask, the
run-up in crypto prices in late 2017 and early 2018 was fueled largely
by retail and enthusiast investors.
In the burgeoning decentralized applications space, on the other hand,
the conversation about “mainstream adoption” is focused on DAUs and UX
improvements. I have to say — things are not looking good. Usage numbers
remain pitifully low and the user experiences offered are generally
terrible. The dapp space has been rife with questionable ICOs, outright
scams and useless tokens that have lost nearly all their value.
The prophesied inflection point of “mainstream adoption” for dapps feels
incredibly distant. However, I would argue that this level of froth is
to be expected and that we are way too early for “mainstream adoption”
to be a sensible success metric for dapps.
Building Blocks
This was an important year for dapp building. There have been a number
of impressive development wins, even if user numbers don’t reflect this.
We saw the release of the prediction market Augur, the first ever ICO
for a dapp built on Ethereum, after three years of development. Although
it isn’t a pleasure to use (yet), it represents a remarkable technical
achievement. Augur saw a notable amount of users, open interest and
markets opened after launch. This activity dropped quickly, as
commentators were eager to point out, but the US midterm elections was a
bright spot for Augur.
Over $1 million was staked on Augur in this market, compared to around
$550,000 on PredictIt, the leading centralized prediction market.
Prominent Ethereum dapps Golem and Aragon also went live on mainnet in
2018. 0x and MakerDAO saw increased adoption and activity, with several
successful relayers launching and 1 percent of all ether locked as
collateral to issue Dai stablecoins.
Decentralized exchanges like IDEX and ForkDelta saw huge growth in users and trade volume.
Gnosis launched its “slow.trade” auction-based DEX. Status, a
decentralized messaging platform, moved to beta, enabling mainnet by
default. Spankchain, Connext and Liquidity Network launched state
channel payments on Ethereum, providing a path towards cheaper and
faster payments for dapps. Loom Network launched Plasma.
Cash sidechains for its suite of games and dapps. My own company’s peer-to-peer marketplace dapp went live on mainnet, as well.
In the bitcoin world, the Lightning Network saw a significant increase
in the number of nodes and channels. The list of Lightning apps is
growing. Blockstack’s platform now supports dozens of dapps, including
Graphite, a decentralized Google Docs alternative.
Bubble Behavior
Many transformative technologies have been accompanied by speculative
bubbles, from railroads, petroleum, electricity, to the internet.
Frenzied investors have been plowing money into questionable,
“oversubscribed” schemes for hundreds of years.
Long after these bubbles burst, primordial companies borne from them,
such as Union Pacific, the descendants of Standard Oil, (Edison) General
Electric and Amazon, remain giants.
There is a common thread in all of this. Speculators expect too much too
quickly, bad actors rush in to take advantage of this, people sour on
the technology after market crashes, and this underlying technology does
eventually change the world in profound ways — even if it doesn’t make
every impatient speculator rich.
I have been exposed to a huge variety of blockchain projects and
founders due to my role in dealing with partnerships for a blockchain
platform company. Earlier this year, the crypto bull market and ICO
mania created an environment of perverse incentives. Short-term greed
and FOMO ruled. Many projects focused solely on fundraising and
marketing.
There were even rumors of some projects acting like unregulated hedge
funds, investing company money into their friends’ companies. Extreme
price appreciation inflated many egos. A lack of sensible treasury
management and a total disregard of securities laws were shockingly
common. We are seeing some of the consequences of our failure to
self-regulate now, with SEC enforcement on the rise and once-hyped
projects shutting down due to their war chests experiencing 90%
drawdowns.
All of this is deleterious for long-term growth. The sooner we rid ourselves of this behavior, the better.
Beyond the bubble
Something to keep in mind is that we are competing with the legacy
internet, computer applications and financial infrastructure all while
trying to launch a grand, fragile economic experiment.
We should remember that it took decades for automobiles and tractors to
overtake horses. This may seem surprising today, but if you consider
that early drivers had to contend with a complete lack of supporting
infrastructure, it becomes easier to understand. I would liken the
current state of blockchain to before the beginning of the dot-com boom,
placing us in the 1980s rather than the 1990s. We are still in an
infrastructure building phase.
We are not ready for mainstream adoption. Everyone knows that the
“layer-one” of public blockchains badly needs to scale. Developers are
running into the current limits of blockchain and shifting focus to
layer 2 and off-chain solutions.
I predict we will see the terms “Web3” and “decentralized web” more and
more in 2019. Another major long-term challenge in the dapp space is
that we don’t yet have a proven economic model for dapp tokens. Many
dapp tokens which have been good investments suffer from questionable
economic design.
Even the dominant narratives about bitcoin and ether — bitcoin being a
store of value akin to digital gold, and ether paying for the gas
required to use a decentralized world computer — are not universally
accepted by researchers.
It will be an ongoing challenge for projects to demonstrate a model that
supports the price of their token that is rooted in utility instead of
speculation. A dapp token claiming to be like bitcoin’s digital gold or
ether’s gas should face extreme scrutiny. Tokens have
tremendous potential to incentivize growth and good behavior. We need to figure this out.
The good news is, there are tons of smart and motivated people quietly
working on all of these problems. Testing new economic models and
improving the base infrastructure that supports billions of dollars in
value takes time.
Be Patient
Finally, we must learn to separate price movements from underlying
fundamentals. High prices don’t mean that a blockchain revolution is
imminent and low prices don’t mean that the technology is doomed. Things
aren’t going to look like what we expected when everyone was drunk off
100x returns, at least not anytime soon.
It will take a while for this technology to mature, but the underlying fundamentals are strong.
The amount of smart contract computations on Ethereum is nearly the same
as it was during the beginning of the year, when prices were at
all-time highs. This year has seen hundreds of thousands of GitHub
commits to blockchain projects and developer tool downloads. Blockchain
offers open platforms with novel economic incentives for developers,
which will win their hearts and minds in the long-run.
A herd of builders is coming, laying the foundation for mainstream
adoption in the future. When this inflection point hits, it will be
hugely disruptive. There are going to be applications and use cases we
never dreamed of. The world will be transformed by blockchain technology
and decentralization.
Starting today, CoinDesk will use GitHub to help crowdsource potential
methodology changes and data sources for our Crypto-Economics Explorer
(CEX), our comprehensive data tool designed to measure and compare
crypto assets.
After we launched the beta version of our tool in November, the clearest
critical comment we heard was related to our methodology for
calculating developer interest in a blockchain. More precisely, we heard
feedback on the decision to only count activity on one GitHub code
repository toward each blockchain’s “developer score.”
The critique was that the methodology behind the CEX was insufficient to measure developer interest across each project.
As an example, bitcoin’s reference implementation is Bitcoin Core (which
is the repository the CEX tracks). While that works fine for bitcoin,
ethereum is implemented through several clients, which includes the
largest repository (Geth, which we track), but also the independently
developed, interoperable, but equally important Parity client (whose
repository is not currently tracked in the CEX), as well as clients such
as cpp-ethereum and still others.
By counting bitcoin’s single client, critics said the CEX painted a more
accurate picture of developer interest in bitcoin, but by counting only
one client for ethereum, the explorer missed out on some of the
developer interest on that blockchain.
Our logic for the conservative approach was that we wanted to get the
beta version of our tool off the ground with a lowest common denominator
— developer interest in core protocols as implemented in their
principal client. Comparisons of highly heterogeneous blockchains is a
challenge and we wanted to have a solid foundation before we expanded
data points and methodology any further.
The plan from there was, and is, to grow the list of code repositories
we track. Our ambition is to soon track GitHub activity beyond the core
protocol and client implementations all the way to associated projects
built off of that blockchain, including wallets, dapps and layer-two
solutions like state channels and sidechains.
After we launched and heard the criticisms, we set out to implement our
full vision and expand the repos and activity on GitHub we tracked. When
we started, however, we quickly realized the complexity of this task.
What we wanted to do meant tracking thousands of projects and
repositories. What we needed was a solution that could scale to the
complexity and size of the industry and that could capture developer
interest and activity in a blockchain from “head to toe.”
Our solution is now to go directly to developer communities, enabling
the coders powering various blockchains to provide their input on our
methodology in a setting that’s most apt given their work.
That is, Coindesk Data has now published the methodology and data sources for the CEX’s developer interest in GitHub itself.
There are several master files in our new repository to get the effort
launched: one for the repos we currently track, another for the weights
we give each data point, and finally another for the methodology of how
to integrate associated projects in the future.
The goal is to use GitHub’s workflow tools to help us scale this
important metric. Now, anyone can make a pull request for CoinDesk Data
to follow a repository, to change weights given to a certain data point
or to help inform any larger methodology change.
Ethereum core developers have proposed activating Constantinople – a
planned system-wide upgrade that was called off earlier this week – in
late February.
Also called a hard fork, Constantinople is now estimated by developers
to go live some time between Feb. 26 and Feb. 28, with a block number to
be determined at a future date.
The proposal was made during a core developer phone call on Friday
morning, and participants on the call included ethereum creator Vitalik
Buterin and other developers, including Hudson Jameson, Lane Rettig,
Afri Schoedon, Péter Szilágyi, Martin Holste Swende, Danny Ryan and
Alexey Akhunov, among others.
The decision comes after smart contract audit firm ChainSecurity flagged
on Tuesday a security vulnerability in one of five Ethereum Improvement
Proposals (EIPs) set for inclusion in Constantinople relating to data
storage costs on the blockchain.
As a result of the vulnerability, Constantinople, now set for activation
next month, will not feature inclusion of the buggy EIP, which will be
tested and refashioned for inclusion in a subsequent hard fork.
Instead, Constantinople will be issued in two parts simultaneously on
the main network. The first upgrade will include all five original EIPs
and a second upgrade will specifically remove EIP 1283.
This strategy – first suggested by Szilágyi during today’s call – is
meant to ensure that test networks and private networks that have
already implemented the full Constantinople upgrade can easily implement
a fix without rolling back any blocks.
“My suggestions is to define two hard forks, Constantinople as it is
currently and the Constantinople fix up which just disables this
feature…By having two forks everyone who actually upgraded can have a
second fork to actually downgrade so to speak,” explained Szilágyi.
The decision comes after smart contract audit firm ChainSecurity flagged
on Tuesday a security vulnerability in one of five EIPs set for
inclusion in Constantinople relating to data storage costs on the
blockchain.
Speaking to CoinDesk on Tuesday, Matthias Egli – COO of ChainSecurity –
highlighted that the issue was likely not picked up by core developers
when running tests on the software given that the impact is rooted in
smart contract development, not necessarily “[ethereum virtual machine]
core” development.
A prompt decision to reactivate Constantinople sooner rather than later
was needed in part due to prolonged activation of ethereum’s difficulty
bomb – a piece of code embedded into the blockchain making block times
increasingly longer over time.
Meant to encourage transition to a new consensus algorithm known as
proof-of-stake (PoS), a delay of the bomb was suggested in EIP 1234 due
to insufficient research at present for a transition to PoS.
Overstock.com’s long-awaited tZERO security token trading platform will
go live by the end of next week, CEO Patrick Byrne said Friday.
Byrne told CoinDesk the company is “ready to hit the button and go live
today,” but was waiting a few more days to process user signups.
“But by the end of the next week we will be turning the trading system live,” Byrne said, adding:
“It’s a big moment for us — four years in the making.”
The announcement means tZERO will meet the timetable given last month by
Jonathan Johnson, president of Medici Ventures, Overstock’s venture
fund and tZERO’s direct parent company. Speaking to CoinDesk in
December, he said the company would go live in January.
The company has already notified investors in tZERO’s token sale – which
concluded last August – that they can gain access to their tokens.
According to a letter to investors, the three-month lockup period for
the tokens had ended, and investors could either create a brokerage
account with broker-dealer and tZERO partner Dinosaur Financial Group or
put the tokens in a personal wallet.
“Some people said, ‘Ok, they let people open wallets, but who knows when
they turn the trading system on’ — I wouldn’t do that if I wasn’t sure
that the technology was ready to go live,” Byrne said.
New leadership, new listings
tZERO will be led by Steven Hopkins, until recently the chief operating
officer and general counsel at Medici. Hopkins will serve as tZERO’s
president, and the startup is now looking to fill two other executive
positions: head of issuance and head of an in-house broker-dealer that
will serve tZERO’s retail clients.
The platform will allow trading of its native tZERO token at launch, but
is also talking to about 60 different companies. Elio Motors, a company
producing light three-wheeled cars, will probably issue the next token
traded on the platform, Byrne told CoinDesk.
tZERO is a key asset in Medici Ventures’ portfolio and an ambitious
effort to disrupt established security trading practices on Wall Street
that Byrne has been famously challenging for more than a decade, such as
his fight against naked short selling.
Though tZERO will not go live for a few more days, the company has
already been busy laying other groundwork for the nascent security token
market.
In December, tZERO was hired by Hong Kong-based GSR Capital to create a
token for trading cobalt, with GSR also buying $30 million in tZERO
security tokens from Overstock. However, the partnership was delayed
after GSR asked for additional time to on-board a third partner and
close the deal. The deal has yet to be completed, Byrne said Friday.
Also in December, tZERO acquired another company in Medici’s portfolio, crypto wallet startup Bitsy.
Byrne first revealed his plans for a security token trading system in
2014, but technological and compliance efforts took some time.
BlockEx’s treasury couldn’t stop taking
hits in 2018 – and for the London-based startup, it has meant
significant delays, scaled-back ambitions and layoffs.
CEO Adam Leonard confirmed to CoinDesk that “staff reductions” had taken place.
“Some of it naturally as products finished and additionally to reduce
burn,” Leonard said via email, declining to offer specifics on how many
were let go. “We are not winding down the business and hope to have some
good news next week.”
According to a year-end review penned by Leonard earlier this month, the
company is working to finalize a new round of fundraising. So, how did
BlockEx go from a reported $24 million ICO and equity raise to layoffs
in roughly 12 months?
Fund management
BlockEx’s treasury took a number of hits with cascading effects through 2018.
BlockEx first got attention as a platform for issuing tokens, but the
company had aimed to offer a place to trade the tokens it issued as
well, plus ways for existing trading shops to easily get into crypto
trading. The company believed it could have been first to market with a
securities token issuer that had the blessing of a European Union
regulator, that is if it hadn’t had various troubles with investor
funds.
“We would have been up by now,” Leonard explained to CoinDesk in a phone call.
He wrote in the annual review about some of the company’s issues in
2018, calling it “a rollercoaster of a year,” but he expanded on those
observations in interview. “You could say it’s setting back the security
token industry in Europe,” Leonard said.
BlockEx ran its own token sale last year for the DAXT token, the chief
utility of which was giving holders early access to tokens issued by
BlockEx. The trouble, the company now believes, was that it insisted on
strict adherence to KYC/AML practices. Prices on ETH dropped
dramatically from the start of its sale at the end of December 2017
until it closed in early March 2018.
Further, the company chose not to finalize any sale until a buyer had
received DAXT in exchange for their ETH. So, if the buyer saw ETH
plummeting and wanted out of the position, they would let them go.
Still, many stayed in, but by the time BlockEx got its hands on funds
after all the KYC/AML checks, it had lost considerable value.
Leonard wrote in his update: “So, in reality, out of the £20 million
raise, we were actually left with just £5.5 million of available funds
for the business go-forward basis.”
Nevertheless, as Leonard pointed out, “£5.5 million is a lot of money if the market had been marginally successful.”
The cascading effects set in from here. With ICOs freezing up, there
weren’t new offerings on the platform to make. This cut into revenue and
the value of the DAXT token. “Most of the ICOs we contracted with
killed their ICO or pushed it back into 2019,” he said.
On top of all this, BlockEx had expected an $8 million investment from
one fund set up by a blockchain advisory that never came through. It had
planned to buy both a large share of tokens and some equity in BlockEx.
The fund never succeeded in closing, so it never delivered its promised
investment.
Project graveyard
Due to these setbacks, BlockEx ended up not coming through on a number of initiatives for 2018.
Among its unfinished projects: its mobile app, functionality by which
DAXT could be staked on the BlockEx exchange for discounted trading,
supporting third-party market makers and additional quick-buy features.
BlockEx saw setbacks in its ability to quickly set up white-label
brokerage services for equity shops. It also has had to delay an overall
audit feature for the BlockEx exchange.
“The plan for BlockEx always was for different auditing firms to run
regular audits,” Leonard said, so users and traders would never have any
doubt the funds were there. “We wanted to make it 100 percent
transparent that the exchange had traders’ money.”
The advantages to using BlockEx as an exchange included its banking
rails (for easy exit and entrance from fiat), white labeling features,
what should have been a larger liquidity pool and an exchange that
should soon be regulated.
But without funds, it hasn’t been able to run the marketing campaign to
tell that story. Nevertheless, the company hasn’t shut down and its
products are coming out, if more slowly, Leonard says.
“We are nicely in a position to generate revenue,” he added.
Looking back, Leonard wondered if his strict adherence to the rules was more of a bug than a feature.
“If we didn’t follow rules so much, we could have taken in a lot more money,” he told CoinDesk.
Industries that we never thought would be
disrupted, will be disrupted massively and the company executives know
it and they want to be ahead of the curve and find ways to not be
disrupted out of their business. Blockchain has got a lot of amazing
applications and uses cases but at the same time blockchain will not
solve all of the world’s problems. It can certainly go along way towards
solving quite a few of them which is amazing as a tool.
Let have a look at some of the recent survey statistics from a report from Deloitte related to blockchain technology:
Around 95% of the companies surveyed say that their company plans to invest in blockchain technology in 2019.
With 16% of the company executives surveyed said that they are
planning on investing $10 million or more into blockchain technology in
2019.
84% believe that blockchain technology is broadly scalable and will eventually achieve mainstream adoption.
68% of the executives polled also believed that they will lose a
competitive advantage if they don’t implement blockchain technology.
59% of people who were polled believe that blockchain will disrupt their industry.
39% of the people viewed blockchain as being overhyped.
The executives who are most interested in blockchain technology by
industry are Automotive industry: 73%, Oil and Gas industry: 72%, Live
Sciences: 72% being the most bullish on blockchain technology.
84% of executives polled expect blockchain to provide more security than conventional IT systems.
32% of executives expect greater speed.
28% of executives are looking for new revenue models.
Only 2% perceive no significant advantage of blockchain over existing systems.
42% of surveyed view blockchain as a critical strategic priority for their organization.
According to 39% of people surveyed, regulatory issues present the
greatest barrier to further investment in blockchain technology.
37% of executives are more concerned with the actual implementation
of the technology. Citing things like lack of in-house understanding of
how to implement blockchain technology.
45% of companies are considered to be likely to join a blockchain
consortium with competitors while 29% are already a part of a blockchain
consortium.
52% of companies are focused on permissioned blockchains. So we are
going to see a lot of permissioned blockchains within companies so
that’s not surprising but 44% are prioritizing public blockchains.
There are going to be a lot of companies that don’t really do very much
in terms of buying bitcoin or any other cryptocurrency but there are
will be a lot of companies that will because the use case for public
blockchain is very real and the use case for value transfer is very real
and companies recognize that. Some of the biggest use cases that
companies are looking at are supply chain, internet of things and
digital identity. A lot of that has very strong value on public
blockchains in particular. So public blockchains such as bitcoin will
see a lot of use.
If we assume that as surveyed, 44% of the world’s top 1000 businesses
start using pubic blockchains such as bitcoin and ethereum on a regular
basis. What do you think that is going to do for the price and adoption?
The United States is lagging behind overall, especially behind the other
nations, particularly which were polled: China, Canada, Germany. Going
back to the regulatory concerns which are probably holding back a lot of
American executives from getting more into blockchain technology
particularly into public crypto assets such as bitcoin or ethereum. The
report from Deloitte finishes up saying that blockchain is not ready for
prime time yet, it is getting closer to its break out moment every day.
The report states the momentum is shifting from a focus on learning and
exploring the potential of the technology to identifying and building
practical business applications.
If we go back to when the internet started and invest in companies that
became the big things, that’s what we have right now with
cryptocurrencies. Though there will be companies that won’t need crypto
assets themselves, they’ll be using blockchain technology but we are
going to have a lot of companies which are going to be using these
public blockchains for a wide range of use cases. This is going to be
the new internet of value and the future of the web and cryptocurrencies
are going to play a very strong part in that. The crypto markets are
just these powder cakes ready to blow. We have institutional investors
coming in, we have better infrastructure than we have ever had before
for the crypto industry and businesses are using and investing in
blockchain technology.
Ross Ulbricht, the founder of the Silk
Road, the online black market which was best known for selling illegal
drugs has been shifted to another high-security prison. Ross Ulbricht is
currently serving a double life sentence along with 40 years in prison
without parole.
Why is Ross Ulbricht being shifted?
According to the authorities, the prison where Ulbricht is being shifted
is quite safer than the previous prisons he has been in. From the start
of his prison days, Ross Ulbricht has been transferred to quite a few
prisons. The current prison has been proposed by Katherine Bolan
Forrest, the judge who is overseeing the case.
The tale:
The prison journey of Ross Ulbricht started from Metropolitan
Correctional Center, New York where Ross was kept during his trial.
After this Ross was shifted to USP Florence High, Colorado. He was again
shifted to USP Tucson, Arizona from there. This would be the fourth
time that Ross will be transferred to yet another prison.
Ross Ulbricht has been accused of money laundering, computer hacking,
and conspiracy to traffic narcotics with the start of the Silk Road.
However, Ross had created the Silk Road with the aim of creating a free
marketplace where users can easily transact with each other. There was
no intention of causing hurt to anyone. The website was launched in 2010
and was shut down by the federal authorities in 2013 when Ross was
arrested from a library in San Francisco. Ross is accused of being the
founder of Silk Road.
The family members and supporters of Ross Ulbricht are wishing that Ross
shall be moved to a non-high security prison and he shall not be
considered a threat or a dangerous criminal. The family is fighting to
get Ross’s sentence reduced and have been continuously trying to gather
people’s attention towards the injustice that Ross Ulbricht has been
facing from years. The supporters of Ross have been coming up in large
numbers to sign the petition on Change.org which has a target of 150,000
signatures.
And NVIDIA has taken notice, judging by CEO Jensen Huang’s comments.
After AMD released its seven-nanometer Radeon VII graphics card with
impressive-looking performance, NVIDIA CEO Jensen Huang responded by
essentially trashing it. "The performance is lousy and there's nothing
new," he told PC World. "No ray tracing, no AI. It's 7nm with HBM memory
that barely keeps up with an [NVIDIA RTX] 2080."
NVIDIA's CEO doth protest too much, perhaps, but he's right to be
worried. According to a CES performance tease, the Radeon VII actually
beat the RTX 2080 in several video-editing and 3D-animation tasks. It
also bested the RTX 2080 when playing Strange Brigade and other titles,
especially at 4K resolution.
While NVIDIA just adopted 12-nanometer tech for the RTX series, AMD has
moved on to seven-nanometer designs for the Radeon VII. Rather than
criticizing its rival's performance, NVIDIA notably attacked AMD's lack
of (NVIDIA-exclusive) features like ray tracing, G-SYNC and AI-powered
DLSS anti-aliasing. However, that has yet to prove useful for gamers and
doesn't help content creators at all. If ray tracing doesn't pan out
and AMD keeps pushing the chip-design envelope, the next couple of years
could get rough for NVIDIA.
NVIDIA still dominates
NVIDIA GeForce RTX
NVIDIA still dominates PC graphics, as its performance at CES 2019
clearly showed. It will own the laptop-gaming space this year with its
all-new RTX Max-Q designs, as numerous PC makers introduced fast and
light devices based on the GPUs. NVIDIA managed to shrink its chips down
to a point where you can get a GeForce RTX 2080 Max-Q GPU into a
4.5-pound laptop, which is a pretty incredible feat.
During his last keynote, Huang spent more time talking about ray tracing
than Max-Q. First he showed off some cinematic ray traced graphics and
how they improve games like Atomic Heart. Next he flaunted the company's
AI-powered DLSS anti-aliasing tech running at 1440p resolution to
smooth out blocky pixelation, along with a cool demo of light-scattering
"caustics" in Justice.
After unveiling the midrange GeForce RTX 2060 at a not-exactly-cheap
$345, NVIDIA launched into G-SYNC, announcing that it was testing and
certifying a number of monitors packing AMD's FreeSync tech. Out of
hundreds tested, he noted, only a dozen were certified, but Huang didn't
stop there. "As you know, we invented the area of adaptive sync," he
said. "The truth is most of the FreeSync monitors do not work. They do
not even work with AMD's graphics cards."
However, opinions of RTX ray tracing are mixed so far. A recent patch
for Battlefield V has eliminated some of the stuttering and other
problems, but frame rates are still about half of what they are when the
feature is turned off. DLSS is another feature that makes games look
better but also degrades performance. The results can be beautiful, but
gaming companies must do extra work to implement both types of tech
while knowing it won't work on AMD cards.
Huang said that FreeSync tech is problematic even on FreeSync monitors,
but that doesn't quite jibe with users' experiences. G-SYNC does work
better, especially near the lower limits of a monitor's certified
refresh rates, according to many gamers and reviewers. However, many
feel it's not worth the hefty premium you pay for the NVIDIA tech that
must be integrated into the display. It's another way NVIDIA locks users
into its ecosystem, giving itself more power to set (higher) prices.
(Both companies recently unveiled new standards, AMD with FreeSync 2 and
NVIDIA with G-SYNC Ultimate.)
Finally, it's worth noting that NVIDIA sells a large chunk of its GPUs
to workstation users for video editing, 3D animation and graphics
chores. While it has boasted that its latest chips allow for real-time
8K editing, the ray tracing and DLSS tech don't yet help content
creators in any way.
AMD's seven-nanometer response
AMD Radeon VII
AMD unveiled not only a CPU that should unsettle Intel (Ryzen
third-generation with seven-nanometer tech) but also the $699 Radeon VII
graphics card. Using the seven-nanometer Vega 20 engine, it seems to
have at least as much horsepower as NVIDIA's $799 RTX 2080, though it
obviously lacks its rival's ray tracing and DLSS features. Still, it's
the world's first seven-nanometer gaming GPU, meaning it's ahead of the
12-nanometer technology in NVIDIA's latest graphics cards.
AMD claims gaming performance that's more or less on par with the RTX
2080, besting it in some areas and falling short in others. Moreover, it
shows its GPU beating NVIDIA's card when editing 8K video and doing
color correction and other tasks.
However, all we saw from AMD at CES 2019 in terms of gaming laptops were
ASUS' TUF laptops with Ryzen 5 CPUs and Radeon RX 560 discrete
graphics. The company is supposed to start shipping more mobile GPUs
soon, but until then, it's been all NVIDIA, all the time.
The Radeon VII doesn't have the AI tricks and ray tracing of its NVIDIA
counterpart, however. While that doesn't impact gamers much yet, AMD has
acknowledged that it will become an important feature. Ray tracing is
"deep in development, and that development is concurrent between
hardware and software," said CEO Lisa Su. "The consumer doesn't see a
lot of benefit today because the other parts of the ecosystem are not
ready."
What this means for gamers
It's encouraging to see that for once, AMD is actually ahead of NVIDIA
with its seven-nanometer chip technology, at least in terms of
transistor density. Given how NVIDIA significantly ramped its RTX
pricing over the previous-generation GTX tech (the RTX 2060 starts at
$345 while the GTX 1060 first hit the market at $100 less), anything
that forces it to compete is a good thing.
The Radeon VII appears to stack up well to the RTX 2080 in terms of raw
horsepower. Many gamers might prefer to pay $100 extra for the latter
card, however, to get the ray tracing and anti-aliasing performance. If
AMD's card does eat into its sales, NVIDIA has room to discount, and a
price war between the companies would be great for buyers. AMD likely
won't have a long time to stay ahead in the nanometer race, as NVIDIA is
expected to switch soon to a seven-nanometer process (both companies'
chips are built by TSMC).
The problem, though, is that the market is starting to get fragmented.
In an effort to tighten its grip, NVIDIA is placing more emphasis on
exclusive feature like ray tracing, DLSS and G-SYNC. At the same time,
it's de-emphasizing benefits where AMD can compete directly, like higher
TFLOPs and memory bandwidth. AMD's own ray-tracing features, when they
arrive, will likely be limited to its own cards too. That means that
both consumers and game designers need to choose between one ecosystem
or the other.
The idea of a bank run is where essentially everyone goes to the bank
and takes their money out of the bank. The fact is that banks kind of
doesn’t have your money and the bank kind of do have your money. If just
you go to the bank and withdraw your money, the bank’s got your money
but if everybody goes to the bank and asks for their money, the bank
might not have your money. That is because banks practice fractional
reserve lending.
Yellow Vests Bank Run:
In response to the Yellow Vests are going to be doing a bank run, the
banks in France have been closing up. Maybe this is because they don’t
want any violence at their branches. Not only banks but ATMs are also
experiencing mysterious glitches where suddenly they are not working
anymore. Now if you add in that to the fact that your banks only open
from Monday to Friday (9 AM to 5 PM) anyway and that if you want to go
to an ATM which has a daily withdrawal limit of say $500, it’s really
hard to get your money out of the banks. It’s quite easy to put it in
though. This all comes back to the idea of fractional reserve lending.
How a bank can take a $1,000 and turn it into $10,000 is a bit of magic
when it comes down to it.
For eg: A takes $1000 to the bank and you put it in his savings account.
Now because of the fractional reserve lending idea, the bank only needs
to keep a fraction of that money in a reserve. So they put $100 in the
vault and take the other $900 and lend it out to B. Now B takes the $900
and goes to buy a car from C. Now C takes his $900 which he got from B
to the bank and puts it in his savings account. Now the bank again put
$90 in the vault and again lends $810 to D. This process repeats and
continues but let’s just say it stops there. So A goes to the bank and
tells the bank that he needs to withdraw his $1000 from the bank but the
bank says they have only $190 in the vault because they lent all his
money out. That is a very basic example of how it works but essentially,
you take that to a large scale and the banks don’t actually physically
have everyone’s money.
Now its ok if a certain percent of the population goes to the banks
every day to withdraw some money as the banks are already prepared that
5% or 10% of the people are going to come and take out their money on
any given day. But if everyone went to take their money out of the
banks, then it becomes a big trouble for the banks because they simply
do not have everyone’s money. Now we add into this a few different
factors and we can see some of the real problems of the banking system.
One, of course, is that about 10% of the total money supply is in
physical bills and coins. Then we have the debt factor. It is very
serious because so many people have taken loans from the banks. People
don’t actually have any money sitting in the banks, they just owe the
banks a lot of money. So that is why it is quite difficult for everyone
to do a bank run because a lot of people don’t have any money sitting in
the banks at the first place and they owe tens of thousands of dollars
to the banks. Looking at 2008, banks crashed the global economy and got
bailed out which is a classic situation where there is socialism for the
rich and capitalism for the poor. Some countries also have bail in
clauses where the banks can take your money bailing in which is another
crazy system.
Now, all of this fraud is because the banking system is probably a
system of fraud, the business model of banks is fraud and it is enabled
by the debt system and the fiat money system. The fact that the
governments can just keep printing money is insanely broken and every
time the government prints new money, your own money becomes worth a
little bit less which is crazy again because you just cannot win. The
banks and the government are always the winners and that’s a pretty bad
game to be playing. The fiat debt backed backing system may be the
biggest scam in history and yet we all continue to support that system.
The lies are so incredibly big and they are repeated so often that
people start to believe them. Money lending and the idea of charging
massive amounts of interest on people for buying houses, cars etc. has
made people slaves to the banks. Interestingly, the Bible was quite
anti-money lending. There are quite a few passages in the Bible about
the dangers of money lending and how Jesus was anti-charging interest.
Remember when Jesus went to the temple, he didn’t kick out the poor, he
didn’t kick out the beggars or anyone else except the money lenders.
We have created a society where the money lenders are in charge of
everything and that has not given a good result to our society. We
understand by the Yellow Vests protestors out in France protesting
against the system because the government has supported a system that
has enslaved the citizens.
A quote by Henry Ford:
“It is well enough that people of the nation do not understand our
banking and monetary system for if they did, I believe there would be a
revolution before tomorrow morning”.
It seems that the French are starting to figure this out. They are
sitting at a table, trying to play a game where everyone else holds the
cards except the regular citizens. That is why the French people think
that doing a bank run is a good idea.
Although the Yellow Vests have a very big voice and are very prominent,
they do not have 100% support of everyone inside of France. A successful
bank run would require everyone or near everyone to go and take their
money out of the banks but that is not actually happening.
Plan Bitcoin:
Bitcoin is where the real revolution lies at. Bitcoin is meant to take
the power away from banks. Bitcoin encourages people to stop supporting
the banks but we are still stuck to this old system. Bitcoin is
definitely the money of the future because sound money is powerful. The
fact that the governments print money whenever they want is a broken
system. The fact that you can only access your money when the banks say
so is totally broken as it’s your money and you should have access to it
24X7, be allowed to send it to whoever you want to and whenever you
want to send it. That is why the idea of a bank run is incredibly
powerful but for a bank run to succeed is very difficult.
Jimmy Song has weighed in on the idea of bitcoin as a revolution. Jimmy Song said:
