Monthly Archives: June 2017

A June 2017 staff discussion note from the International Monetary Fund (IMF) suggests that banks should consider investing in cryptocurrencies more seriously than they have in the past. According to the IMF staff team responsible for the note, including prominent economists such as Dong He, Ross Leckow, and Vikram Haksar, "rapid advances in digital technology are transforming the financial services landscape." These members of the IMF feel that such transformations generate new opportunities for consumers as well as service providers and regulators. The ultimate message of the report seems to be one of support for cryptocurrencies, as it outlines some of the ways that the fintech industry might be able to provide solutions for consumers related to trust, security, financial services, and privacy in this area.

One of the key findings of the IMF report is that "boundaries are blurring." This means that the borders between intermediaries, service providers, and markets, previously well-defined, have become blurry with the advent of new technology related to digital currencies and cross-border payments. Along with the blurring of these boundaries, the authors of the report suggest that "barriers to entry are changing." This does not, however, mean that barriers to entry are universally being lowered. Rather, they are being lowered in some situations but raised for others, particularly "if the emergence of large closed networks reduces opportunities for competition."

Absolutely key in the view of the authors of this report is that "trust remains essential." With less reliance on traditional intermediaries, consumers are turning more toward new networks and providers. The facilitation of this transfer on a large scale requires significant levels of trust in security, privacy, and efficiency. Along with this, and perhaps contributing to a new sense of trust, is the authors' conclusion that "technologies may improve cross-border payments" by serving better and more cost-efficient services, by lowering compliance costs, and by working to fight against terrorism financing.

In the view of the IMF authors, the financial services sector is poised to make the change toward cryptocurrency involvement. That being said, the report suggests that "policymaking will need to be nimble, experimental, and cooperative" in order to successfully navigate this crossing. Simultaneously, regulatory authorities will have a careful job to do: they must balance efficiency concerns and stability tradeoffs. In order to be willing to enter into this world, regulatory authorities will likely need reassurance that risks including cyberattacks, money-laundering, and terrorism support can be mitigated without harming the innovative progress of the digital currency world. To do this, the authors believe that regulators might need to increase their attention on activities and that governance will need to be strengthened. If all of these things take place, the IMF authors believe that banks could integrate cryptocurrencies successfully.

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IMF Urges Banks to Invest In Cryptocurrencies - Investopedia

Following a flash crash last Wednesday, the company that runs GDAX, an exchange for the ethereum digital currency, announced that it would pay back investors who lost money. If Mondays market performance for the cryptocurrency is any indication, that move didnt reassure investors.

Cryptocurrencies are risky as hell. A new competitor in the blockchain currency world, Ethereum,

The most reasonable explanation for why the Ethereum currency dropped from a high of $311.46 on Monday to a low of $238.65 is that a market correction is taking place for the out of control values of digital currencies. Analysts reasoned that investors who have seen their bets pay off decided today was a good time to take their money and run. Across the board, the most popular cryptocoins showed huge declines.

Ethereum, the second most popular coin offering around was particularly vulnerable today. It didnt experience the highest losses but it came close, shedding 19.79 percent of its value. The aforementioned flash crash and its recent notoriety mean that a lot of eyes were watching as its counter steadily ticked down. But some observers have placed part of the blame for Ethereums fall on the shameless tricksters on 4Chans /biz/ board.

On Sunday, an anonymous post appeared on 4Chan claiming:

Vitalik Buterin confirmed dead. Insiders unloading ETH. Fatal car crash. And now we have our answer. He was the glue. It will be difficult for ETH to recover and the entire crypto sphere is in big trouble.

Vitalik Buterin is the young inventor of the ethereum blockchain. Unlike the creator of bitcoin, hes not masking his identity. Hes also not dead. He also doesnt control ethereums decentralized network. But hes the face of his own creation and nervous investors may have seen the rumor as a good time to sell. Buterin quickly took to Twitter to issue proof of life through data from the most recent block in the chain.

According to Quartzs calculations, Sundays escapades knocked $4 billion off the digital currencys market value. At the time of posting, ethereum is worth $257.55 which is still way higher than the $8.37 it started at in January.

Thats nothing compared to bitcoin which is currently valued at $2376.29. The digital currency that started it all experienced an 8.81 percent decline today. Investor and crypto hedge fund manager Tim Enneking tells CoinDesk that this is the primary reason for todays market activity. When bitcoin sees a large move down, as weve seen in the past 48 hours, it still has a tendency to take the entire rest of the market with it, he says.

What goes up must come down. But Union Square Ventures partner Fred Wilson is feeling good about the long-term. My gut says we are headed for a selloff in the crypto sector, he wrote in a blog post on Monday. He says hes still convinced itll be a good bet over the next five or ten years. He also wrote, I am wrong a lot.

[CNBC, Quartz, CoinDesk]

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Investor Jitters and 4Chan Hoax Knock $4 Billion Off the Value of Ethereum Cryptocurrency - Gizmodo

Ripple may be the latest craze in the cryptocurrency world. Although its price still lags far behind Ethereum and Bitcoin, it has nonetheless gained 3800% in recent months, catapulting it to the number 3 spot on the list of over 100 cryptocurrencies with regard to market capitalization. What's more important, perhaps, is the technology that Ripple offers aside from its currency. The Ripple blockchain protocol has gained recognition by more than 60 major financial institutions around the world, with the National Bank of Abu Dhabi one of the latest to incorporate it into its practices. Ripple has, in this way, broken a barrier that virtually no other cryptocurrency has, by finding a way to integrate itself within the broader financial world. To some, this spells a new way for the future of the digital currency industry. To others, though, Ripple has some significant security weaknesses. What could bring down this rising star?

A recent report by Technology Review discusses how Ripple has made use of a "small world" philosophy. According to this way of thinking, virtually anyone in the world can be connected to anyone else via approximately six steps. "Strangers" can thus be connected to one another via a few intermediary people, all of whom know each other in some capacity. For Ripple, this idea holds for transferring money: Ripple users establish connections with other users that they trust, and then funds are transferred along a chain to reach the ultimate recipient in a transaction.

Within Ripple, if a user has connections to two other users, the amounts of funds entrusted to each will likely vary, while the total transferred is kept constant in order to generate liquidity. Each user has an incentive to act as the intermediary, as he or she receives a small payment for the role. With this protocol, Ripple allows users to move funds quickly and for much less money in transaction fees than many other methods of money transfer. This has popularized the system with many banks that would have otherwise not been interested in a cryptocurrency.

The openness with which the Ripple network operates has, on the other hand, also allowed for vulnerabilities to develop. Researchers at Purdue University have found that, although the core of the network remains highly liquid, that the structure also allows for attacks on certain nodes within the network to cripple some users' access to funds. In fact, some 50,000 wallets may be immediately at risk if such an attack were to occur. However, the researchers suggest that the fact that they have been able to detect weaknesses in Ripple's system is actually a good thing, as the conventional world of banking often lacks transparency in this regard. Having identified those weaknesses, Ripple's developers may be able to work to correct them.

Continued here:
What is the Biggest Security Threat to Ripple Cryptocurrency? - Investopedia

If there is one thing to take away from most cryptocurrency ICOs as of late, it is how most of them run into some issue sooner or later. The Status ICO, for example, caused quite a few issues. The Monaco ICO needs to get tokens reissued, a process which is expected to be completed soon. It is evident there are a lot of issues behind the scenes which need to be worked out sooner or later. Below is a brief recap of recent ICOs currently resolving initial issues.

Although the SONM ICO has been quite successful in its own right, it is not without flaws by any means. A lot of people were surprised when the team announced they would accept multiple cryptocurrencies other than Ether. In hindsight, that was probably a bad decision, as it is causing major delays for ICO investors. More specifically, the team is still in the process of allocating tokens to investors who used currencies other than ETH to invest in the ICO. A very problematic development, and one that can linger for quite some time.

To make things even worse, a fair few investors are not too happy about the way things have been run. It is a bit unclear where this beef is coming from, but some investors have demanded a refund. Sorting out these issues takes up a lot of valuable time as well, which further delays the SNM token from getting listed on big exchanges. It appears SONM will sort things out shortly, but it is something to take into account.

The Status ICO has been subject to a lot of speculation and misinformation over the past week or so. It appears the smart contract used for the ICO was not full, but with the large pending queue of transactions, a lot of investors could not make a contribution. As a result, the Ethereum network got clogged up and started slowing down quite significantly The team feels this is no ones fault, as blockchains are highly experimental technology, and Ethereum is still in the testing phase. An interesting statement, although not a lot of people will agree.

Moreover, the Status team somewhat regrets using a dynamic ceiling for their cryptocurrency ICO. It is one of the main reasons why so many Ethereum transactions took place, as the maximum amount of Ether was a lot higher compared to what the team initially hoped to raise. It caused quite a bit of confusion and a lot of scaling issues for the network. It is evident this test was a good one, as it shows the Ethereum network is far less capable in this regard than most people think.

The Monaco ICO has proven to be quite successful, as many people feel this cryptocurrency debit card can make a big impact. Unfortunately, the ICO has been a bit of a hit-and-miss so far. Granted, the project raised a good amount of money, and people from all over the world invested in the crowdsale. That is where the good news ends, though, as none of the investors have received their official MCO tokens so far. The team is working together with TokenMarket to reissue the coins as quickly as possible.

The tokens have to be reissued because of an issue in the initial smart contract, which could cause multisig wallet incompatibility. All of the tokens have been issued on the Kovan testnet, and so far, things appear to be going quite well. However, it will take a few more days until all tokens are issued to investors, due to the ongoing Ethereum network issues. If all things go according to plan, tokens should be issued and tradeable by June 27th in the evening, at the latest. It is good to see TokenMarket work on this matter alongside the Monaco team.

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Top 3 Recent Cryptocurrency ICOs Sorting Out Major Issues The ... - The Merkle

Bitcoin declined as much as 17% on Monday, while smaller competitor ether continued to slide after experiencing a flash crash last week, raising concern about mainstream acceptance of the digital currencies.

Bitcoin slumped to as low as US$2 255.44 in intraday trading, the least since 15 June. Ether, the virtual currency based on the ethereum blockchain, plunged 26% to $221.45, according to data compiled by Coindesk.com. And ripple, the third largest digital currency based on market cap, has dropped about 13% to around $0.26, according to prices compiled by CoinMarketCap.com.

Ether slumped on 21 June after congestion on its network slowed transactions, causing some cryptocurrency exchanges such as Bitfinex and ShapeShift to halt transactions.

Coinbases GDAX exchange experience a flash crash, as price slippage sent ether to trade around $0.10, said GDAX vice president Adam White, who on Monday decided to reverse an earlier decision not to refund flash-crash victims. He said the crash on GDAX was instigated by a multimillion-dollar market sell order.

The two biggest digital currencies have still surged in value this year. Ether started the year around $8, meaning even with its current drop, the price has doubled many times over. Bitcoin has advanced about 150% year to date.

When people fixate on price movements over a single day, my recommendation is zoom out of the price chart and look at the broader trend, said Peter Van Valkenburgh, director of research at Coin Centre, a Washington-based nonprofit research firm focusing on cryptocurrencies.

Blockchain could either catch on as the rails for global finance, or not, so valuations for a digital currency like bitcoin can either go to zero or be worth much more than it is today, so these assets are bound to be very volatile as peoples calculations of what they are worth can be all over the map.

Coinbase was down earlier on Monday, according to online forums on ether, which could explain some of the losses, as this comes after other exchanges temporarily suspended trading last week due to a bottleneck on ether orders.

The steeper decline in ether than bitcoin means ethers market cap at $25bn is now just about 60% of bitcoins, down from about 80%, when ether climbed over $400 two weeks ago. The rapid growth of the ethereum network had prompted speculation that ether would overtake bitcoin to become the biggest cryptocurrency as soon as this year, a phenomenon known as the flippening.

Chip makers that had benefited from cryptocoin miners last week are now giving up some of those gains. Nvidia dropped for the third consecutive day, slumping 1.1% to $152.15/share. Advanced Micro Devices dropped 0.6% to $14.08. Reported by Alexandria Arnold and Camila Russo, (c) 2017 Bloomberg LP

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Bitcoin, ether lead cryptocurrency slide - TechCentral

Rich Svinkin is the CEO of Jaywalk.me, a startup that motivates increased physical activity with brick-and-mortar retail rewards.

In this opinion piece,Svinkin argues that using cryptocurrencies for rewards schemes can demonstrate the value of the technology and ultimately help bring mass adoption.

Before the hype and before the price explosions of the past year, I sat down and looked at cryptocurrencies from a UXperspective.

That post, published on CoinDesk,offered a simple central premise: the entire bitcoin project was envisioned, designed, built and released as a peer-to-peer value exchange system. It wasn't supposed to be a standalone asset class or a messaging system for banks.

A year later, we're in the midst of a hype-ridden initial coin offering (ICO) explosion. ICOs are another use case in the UX quiver, one we can add to the progress of the last few years. The ICOs (I prefer to call them token sales) are a great engine of growth but they do not achieve our ultimate goal: adoption of cryptocurrency by the masses.

Prior to Jobs and Wozniak, computers were the domain of engineers, hobbyists, large corporations and government agencies. The dominant framework for users to interact with these machines, the command line, ensured low user adoption.

As Neal Stephenson noted, however, the wizards who held sway over the simple cursor and text interfaces later built the tools to drive mass adoption. From the command line, we moved into something relatable and simple, and, in the process, we hid all of the piping behind wall after wall of abstraction.

I don't want to understate how big of a leap this was for my generation. You mean we can make the screen do what we want like an arcade game? We can "save" what we're doing and come back to it later? We can put stuff on a disk and put it on another computer? Wow!

After we were hooked, we started learning heuristics for the things we'd need to master to get more out of the experience. We started implicitly understanding what a KB meant. We grew to "kinda know" how much would fit on a floppy disk.

Some of us started learning how to make simple animations and games. The computer was at first a toy then a tool.

I argue that, in the crypto space, we're at the point in our evolution where the command-line is giving way to new and more generalized heuristics with similarly explosive opportunities. Right now, the equivalent of the command line are things like wallet addresses, private keys, cold storage, and other obfuscating elements.

I wrote a year ago that I think we need a Steve Jobs in this space. No one has yet stepped up to the plate.

Even if regular people were to learn all the terms of art, master using the exchanges, grow comfortable with identity verification and currency exchange rates, and accept the long wait times in transferring fiat in/out, we'd still have a problem that would keep the bulk of the planet off the chain in a meaningful way: risk.

Modern operating systems mitigate risk immensely. Every program we use has some sort of backup system and now you rarely lose work. With cryptocurrencies, the existential threat of losing everything is still there.

The best way to deal with risk, at least at the start, is to try to eliminate it. We must not treat crypto like a competitive currency at least not now. Instead we must treat it like a reward, something new.

We must allow people to buy it, but also allow folks to earn it, with their time, effort, attention, with non-monetary capital. Don't force people to have to buy it with fiat.

Instead, let them earn it.

There are folks that are on a rewards-oriented path: Steemit, Brave, Bitwalking, Metal and others.

This is going to be a growing trend in the months and years to come. All of them want to reward you for something Steemit for creating and engaging with digital content, Bitwalking just for walking. Brave is taking things to the next level: you get rewards just for using a secure browser and for engagement and attention.

Metal will reward you for converting, sending and spending.

All are trying to get to the same goal: they want the cryptocurrency they've issued to become valuable in the real world, to become the lifeblood of a new economy centered around a particular set of use cases.

The success of these products is dependent on ultimately hooking the masses via a rewards-based introduction points, miles, cash back these are notions we all get, just like I did 30 years ago with writing, drawing and reading on the Mac.

But the final step requires users to make that leap from rewards to currency for this revolution to get to the next level. And for that goal, I a true believer am very hopeful with this recent wave.

That said,I still have one hesitation. All of these solutions make progress on the various complexities and issues surrounding adoption.

But, the one thing they all do not do, is obfuscate the currency exchange problem inherent in forging ahead with something new right away. It can show the value of the new currency in terms of fiat, but even currency earned through effort will be at risk of losing credibility and lasting power.

There will always be fear that the $398 I have in crypto will one day be $0, or in anhour will be worth $118.

Sure, we could be at the start of a fiat currency collapse and not even know it, as the market cap of crypto currency rockets up. This may even be good for the whole system. But, even if the crypto world supersedes the money we know, it will be the option with the most perceived stability that ends up winning. Not the ones with the most speculative upside or interesting "applications."

Well know we've "won" when a cryptocurrency becomes woven into the daily lives of the majority of people on earth. That people recognize finally that the fiat they know is also volatile and purchasing power is dynamic and ever changing, and cryptocurrency has many other benefits the analog doesnt have. Or simply that a cryptocurrency finally becomes more stable so people run to it to escape losing all their value in government-backed money as a crisis looms or is underway.

Until then, it's hard to say what weve accomplished truly, but the goal is ultimately that we move belief in fiat money to belief in cryptocurrency.

To me, the best way to start that transition is to get people used to and interested in this new phenomenon by utilizing familiar bridges like air miles and minimizing fear and risk to allow for everyday use to come to bear and even bring some fun to the strange world of cryptocurrencies.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Brave.

Mac computer image via Shutterstock

The leader in blockchain news, CoinDesk strives to offer an open platform for dialogue and discussion on all things blockchain by encouraging contributed articles. For more details on how you can submit an opinion or analysis article, view our Editorial Collaboration Guide or email [emailprotected].

Link:
Cryptocurrency: How We Hook the Masses - CoinDesk