Monthly Archives: July 2017

Investors will soon have yet another way to bet on or against Bitcoin.

Namely, cryptocurrency traders will now be able to place option bets on digital money via LedgerX. That came after the Commodity Futures Trading Commission granted LedgerX approval to clear derivatives , making it the first federally regulated platform of its kind.

The approval will also give buyers of Ethereum and Bitcoin several regulated ways to lower the risk on their existing cryptocurrency bets which may be welcome or may increase their risk in the hopes of potentially outsized returns. That's possible because derivatives are a varied group that includes options and future contracts.

"Our recently-granted licenses give LedgerX an enormous regulatory advantage for serving our institutional customers," wrote the company's CEO Paul Chou in a blog post after the decision. "LedgerX offers our customers a one-stop shop for tools to buy and sell spot bitcoin, derivatives, and all manner of specialized cryptocurrency swaps."

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LedgerX, which plans to roll out bitcoin options first starting in the fall, may also make it easier for investors to short cryptocurrencies. While it isn't the first to offer bitcoin options, LedgerX is the first to offer options regulated by the CFTC. In 2015, a San Francisco-based bitcoin options trading platform Derivabit, also known as Coinflip, was asked to cease operations by the CFTC in 2015 for failing to register with the agency.

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LedgerX Just Gave Us Another Way to Bet Against Bitcoin - Fortune

Just as the bitcoin world thought it was safe, a new threat to the cryptocurrencys stability has emerged.

Last week, the price of bitcoin rallied near all-time highs as a proposal to increase its transaction capacity was backed by over 97% of the cryptocurrencys miners, reducing the odds of a so-called hard fork. But now, a weird new proposal has emerged that guarantees a split in the currency on Aug. 1. This time, however, the bitcoin world isnt freaking out about it.

Last weeks relief rally came in response to what was called Bitcoin Improvement Proposal (BIP) 91. Nearly all minerswho process transactions and introduce new bitcoins to the money supplybacked it. But BIP 91 stops short of delivering what a vocal faction of the bitcoin world wants: A greatly increased limit on the number of transactions the network can handle, also called the block size limit.

Some quick background on this increasingly messy situation: Bitcoins creator set an arbitrary cap on the block size of 1 megabyte. The so-called civil war in bitcoin over the past few years has centered on whether that limit should be changed, how, and by how much. BIP 91 will double the maximum number of transactions on the bitcoin network but, crucially, without touching the hard-coded 1-megabyte limit. It achieves this with a workaround called Segregated Witness, or SegWit, that cleverly cleaves off chunks of transaction data, freeing up space for more transactions.

Since SegWit doesnt change the block-size limit, some bitcoiners feel that its simply kicking the can down the road. They also fear it could diminish the bitcoin networks importance, as SegWit paves the way for layer two solutions that will allow speedy and voluminous transactions to take place outside the bitcoin network. This creates a scenario in which most transactions take place off the bitcoin network, with the occasional settlement transaction on the network.

Which brings us to the new proposal, which is confusingly named bitcoin cash. It calls for an eight-fold increase in the block-size limit on Aug. 1. Its name alludes to the faction that wants bitcoin to be a payment networkas readily available and easy to use as cashas opposed to the group that sees bitcoin as akin to digital gold.

One exchange has started a futures market for bitcoin cash, since it doesnt actually exist yet. On its first day of trading, on July 23, one unit of bitcoin cash traded for around half a bitcoin. It has slipped to around 0.2 bitcoin per bitcoin cash at the time of writing.

Although bitcoin cash is certain to enact a hard fork in the cryptocurrency, that will matter only if it attracts enough miners to keep it going. Then, bitcoin and bitcoin cash could end up like ethereum and ethereum classic; two separate but viable coins that originated from the same blockchain. If miners ignore bitcoin cash, it will simply fade away as its transactions are rejected by miners.

With a week to go until Aug. 1, the value of bitcoin cash versus bitcoin will gauge the markets confidence in this new rival prevailing in bitcoins raging internal conflict.

Read next: Bitcoins civil war threatens to blow up the cryptocurrency itself

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There's a strange new twist in bitcoin's civil warand a way to bet on the outcome - Quartz

Fortune convened some top cryptocurrency entrepreneurs, venture capitalists, bankers, and others to chat about the future of digital money at Fortunes Brainstorm Tech conference in Aspen, Colo. last week. A select group met at the Aspen Institute for a breakfast roundtable discussion on Wednesday morning.

Headliners on the panel included Balaji Srinivasan , CEO and cofounder of 21.co, a cryptocurrency startup that has raised more in traditional VC funding than almost other one. Another was Peter Smith, CEO and cofounder of Blockchain, a U.K.-based cryptocurrency wallet company that recently raised $40 million from GV , the venture capital arm of Alphabet , parent company of Google ( goog ) . And Kathleen Breitman, CEO and cofounder of Tezos, a blockchain startup that this year raised more than $200 million in an initial coin offering, or ICO, and which counts celeb investors Tim Draper and Mark Cuban among its backers.

The crew of experts weighed in on everything from the longevity of Bitcoin, the original cryptocurrency and blockchain, or cryptographically secured public ledger, to the latest trend of hosting so-called token sales to fund projects, especially on Ethereum , a rival blockchain to Bitcoins, to the future of a decentralized web. Here are some of the predictions we heard.

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Most people who are enthusiastic about cryptocurrency appear to agree that Bitcoin and its newer rival Ethereum have staying power, though they may be more bullish on one versus the other. "In terms of 5 to 10 years, Bitcoin and Ether will be around I bet," Balaji Srinivasan told the room of more than 70 people.

Peter Smith said his company, Blockchain, which was early to Bitcoin, has only just started to warm up to newcomer Ethereum. In contrast, Mike Cagney, CEO and cofounder of SoFi, a personal finance company, said during a separate session on the main stage that he was hotter on the latter technology .

Bitcoin "has some purpose but its application for commercial transaction is limited right now," Cagney said. "The blockchain and Ethereum, on the other hand, have absolutely fascinating infrastructure applications, he continued, mentioning the possibility to overhaul title insurance, which involves policies related to real estate, as one example.

Bitcoin and Ethereum may have stolen the show at this point, but the innovation wont end there. Expect more winners on the horizon.

Kathleen Breitman is hopeful that Tezos, her own blockchain bet, will fill a niche that solves problems with extant blockchains. In particular, she and her projects developers are designing Tezos to automatically push software updates out to the network, thus, in theory, avoiding the divisive feuding over upgrades that has wracked systems like Bitcoin over the past few years.

No one can say how many tokens and coins and blockchain protocols will eventually win out, but the experts seem to think theres room for a multitude. "Its likely that another one or two dominant ones we havent seen yet in the market," Smith projected. "Another really dominant coin could come out this year or next year.

For the time being, token sales might seem like a fantastic way to raise a lot of money quickly and with few questions asked. Will this lead to riches for some? Undoubtedlyindeed, it already has. And rip-offs for others? Almost certainly.

Smith said he presumes that market manipulation and insider dealing is rampant among purveyors of initial coin offerings. Were cautious about it in the short term, Smith said of his company. But you have to temper that with the idea that every new technology is going to be like that in the beginning.

Brad Garlinghouse, CEO of Ripple and a former executive at Yahoo , voiced his less forgiving concerns about the sector on a separate panel. Heavily regulated markets are typically heavily regulated for a reason, he said. Frauds are happening, people are going to jail.

The days of making a pilgrimage to the homes of the holders of purse strings are coming to an end. In a world where anyone can participate as an investor online, physical location matters much less.

It used to be you had to come to Silicon Valley, walk up Sand Hill Road, network with individuals, Srinivasan said about entrepreneurs seeking funding, often strolling up a strip to the west of Palo Alto that long has been associated with venture capital firms. ICOs change all that.

Projects are already getting funded this Kickstarter-like new way. Breitman said she that when she set up Tezos token sale, she aimed to get as many people who wanted to participate in the ecosystem to contribute. The company raised more than $200 million to date and, according to her, more than 30,000 Tezos wallets have been opened.

Elena Kvochko, chief information officer of the security division at Barclays, said that her bank has had many talks with regulators about Bitcoin and its ilk. The rule-sticklers actually dont mind working with Bitcoin, she said. What they do care about is financial institutions obeying know your customer laws, which prevent terrorists and other sanctioned groups from getting financed.

Meanwhile, as governments settle on sets of rules of the road, countries like Switzerland, Singapore, and Estonia are jostling to develop frameworks that easily accommodate the new technology, Srinivasan said. Theyre seeking to displace geographic incumbents and become hubs for a new wave of business financing. If youre a U.S. person or business, you have a good deal to be concerned about, Smith said.

Breitman added that until the rules are agreed upon, its best to be transparent about what one is doing.

As cryptocurrency prices fluctuate wildly, speculators have been having a field day. However, theres reason to believe the markets will become more stable, as Bitcoin gradually has over the past couple of years (despite its still big price swings), Smith said.

In order for these computer coins to catch on big-time, they need a use-case that beats traditional money. Ideally, this ought to be better than merely buying drugs, as Jeff John Roberts, Fortune reporter and the sessions moderator, noted.

Srinivasan proposed one possible scenario. Imagine that all your waking hours are spent in the Matrix, he said, referring to a virtual reality in which everyone is enmeshed in the future. As people from all over the world meet and interact, they will need a medium of exchange. To transact, you cant just hand over a dollar bill, Srinivasan said. You need an international currency for that.

It might take a while but theres going to be more of a need to transact across borders than there is today, he said.

Whenever a consumer swipes or dips a credit card, payment processors charge a fee.

Nicko van Someren, chief technology officer of the Linux Foundation, pointed out that the fee companies like Visa or Mastercard charge exceeds the cost to clear or settle transactions. These businesses can potentially process transactions quicker and cheaper, he contended.

One potential outcome of the adoption of alternate systems, like Bitcoin, is to provide companies with the impetus to improve their services. Bitcoin is good because it will make banks move toward the real cost of handling these transactions, van Someren said. (By extension, in Ethereum's case, one could imagine upstart companies built on it forcing giants like Amazon , Facebook , or Dropbox to reconsider or improve their respective offerings.)

Smith, meanwhile, was less optimistic about incumbents ability to adapt to such change. I dont think be lot of room for banks to simply adjust their price models, he said.

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7 Cryptocurrency Predictions From the Experts - Fortune