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The Evolutionary Perspective
Daily Archives: January 5, 2020
Posted: January 5, 2020 at 3:55 am
This post is part of CoinDesk's 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. Dr. Gina C Pieters is an assistant instructional professor in the Department of Economics at the University of Chicago, and a Research Fellow at the Cambridge Centre for Alternative Finance at the University of Cambridge. She has been researching cryptocurrencies since 2015.
There is an unresolved debate over how to define decentralization in a distributed ledger system, even though decentralization of peer-to-peer payments was the motivating factor for bitcoin. Personally, I like an approach that defines it as the absence of a named party participants must engage with. Think of it this way: Can someone in North Korea use it if they wanted to (that is, a permissonless system like bitcoin) and: Could China prevent me from using it? (a permissioned system, like Libra).
Libras Calibra wallet will only allow users who provide government ID to obtain Libra account numbers wallets, which appears to be how the project will satisfy AML/KYC requirements. The system plans to use a permissioned blockchain, and it is currently unclear which, if any, proof system it will use. Therefore, while Libra incorporates blockchain, it does not strictly require it as it is not fully decentralized: remove the blockchain and the project could find a way to continue substantially unaltered in its function. Despite this, the most descriptive, agreed-upon label we would apply is to call Libra a cryptocurrency on a permissioned blockchain.
This muddy language around cryptocurrency matters. In 2019 we began to see a serious investigation of cryptocurrencies from major, established, politically-connected entities instead of the pure marketing stunts from earlier years (compare the Libra project with Long Island Iced Tea). The regulatory hearings for Libra highlighted that the crypto-community urgently needs to provide linguistic guidance about whether we should allow projects that could fundamentally continue without decentralization to be referred to as a cryptocurrency. This moves further than the permissioned/permissionless blockchains distinction. It raises questions about the decentralization of proof, funding, and maintenance systems as well.
Linguistically, we need to distinguish between projects originating from centralized entities that use blockchain for either marketing or optimality, and projects that fundamentally require that any participant can avoid any named agent in the system. Without this distinction, 2019 showed us projects like Libra and projects like bitcoin will be cast as comparable cryptocurrencies even though they are fundamentally different. In addition to projects like Libra, this matter is brought into focus by the potential rise of Central Bank Digital Currencies (CBDC).
Central banks began to experiment with blockchain tech as early as 2015, leading to breathless accounts that they would soon begin issuing cryptocurrencies. These early experiments were not cryptocurrency projects at all: central banks were testing the use of blockchain (or DLT) as part of a potential upgrade to the legacy payment rails involved in wholesale banking (which moves large amounts of funds between a few, known parties). The most well-known project here is Bank of Canadas Project Jasper, though Hong Kong, Russia, South Africa, and Bank of England are also experimenting in this sphere. So far, these projects have either concluded that DLT technology is not a good fit, or they have significantly scaled back the use of DLT.
Ironically, a surveillance-focused CBDC could be the thing that defeats bitcoin as 'dissident tech'
But some central banks have now begun projects that may issue digital payment tokens. The earliest project, the Venezuelan Petro, is of questionable legitimacy given the fractured government support for it. The next generation includes more credible projects, including ones from the Bahamas (Project Sand Dollar), China (digital yuan), Sweden (e-krona), and Uruguay (e-peso). Central bankers are uniform in referencing these projects as Central Bank Digital Currencies (CBDC) and not as cryptocurrencies (or statecoins) for a very specific reason.
The Central Bank consensus is that decentralization is not a desirable property in a CBDC as it could aid tax avoidance and enable criminal payment systems. Therefore, while they recognize digital money may be an improvement over physical money, a central bank designed digital currency will not resemble a decentralized cryptocurrency. Planned CBDCs are not bitcoin-but-issued-by-the-government. They are more like credit-cards-but-issued-by-the-government, where your transactions can be tracked, examined and linked to your taxpayer-identity.
A CBDC project does not need to be decentralized to differentiate itself from current central bank policies in the manner that some desire. A monetary policy with negative interest rates would simply require disallowing all alternative money forms. Savings accounts at central banks do not require a digital payment token at all. A CBDC is not a requirement for a multinational currency (the Euro is a multinational currency, and the US dollar is accepted in transactions globally). If the intention is government surveillance coupling taxpayer ID with transactions, a decentralized CBDC that allows anyone to join without permission or barriers would never be installed. Ironically, a surveillance-focused CBDC could be the thing that defeats bitcoin as dissident tech, as it could make it impossible to buy-in or cash-out of the system undetected.
The main difference between Libra and bitcoin is one is centralized while the other is not. The main difference between Libra and a CBDC is one is a digital transaction token issued by a private company, while the other is issued by a government. There are powerful arguments on all sides as to which project type represents the best (or worst) type of digital money. What we need to realize going into 2020 is that those debates were not the debates legislators and regulators were having in 2019 when discussing Libra. To them, Libra and bitcoin are both cryptocurrencies because we have not provided more precise, differentiating language. At the moment, it appears this lack of distinction will continue unabated in 2020, when various governments begin to test and perhaps even issue the next generation of CBDCs.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
Posted: at 3:55 am
In late 2017, Bitcoin piqued the interest of millions of people hoping to capitalize on the ongoing frenzy and, as a result, drew the attention of various traditional media outlets. The press seemed largely skeptical about the concept of decentralization but proceeded to report on Bitcoins erratic price movement.
This year, as the space has become more regulated, cryptocurrencies saw a notably different kind of coverage. The industrys Wild West days are over, and media outlets most of whom were quick to bury Bitcoin at least once over that period are now focusing on how cryptocurrencies are entering the agenda of Big Tech and, for instance, the Peoples Bank of China.
Still, many spectators remain unconvinced as illustrated by United States President Donald Trumps tweet earlier this year that summarized the most popular concerns about cryptocurrencies in under 280 characters and was covered by most mainstream media outlets (with diametrically opposed views regarding the critiques potential impact on Bitcoins value). The presidents tweet read:
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity....
Here are the main highlights of 2019s Bitcoin and blockchain coverage gathered from mainstream media.
Title: Crypto Crazy
Airing date: Sept. 9Sept. 13
Back in August, Julia Chatterley the anchor for CNNs daily global business program First Move announced she would host a week-long series called Crypto Crazy the following month, signaling that her audience was interested in hearing more on digital money. The shows main objective was to debunk some of the most popular misconceptions about cryptocurrencies. Notably, in the first episode, Chatterley asked the guest expert to explain some not-so-basic concepts, especially for a TV audience such as fake volume reports, whales and cold wallets. In the following episodes, the anchor focused on this years most mainstream crypto events, including Libra and the Winklevoss twins attempts to take digital assets to Wall Street.
Title: Bitcoins Wild Ride
Airing date: May 19
Earlier this year, CBS devoted so much as 60 Minutes to cover Bitcoins many swings that happened over 10 years. To get a first-person perspective, the channels correspondent, Anderson Cooper, interviewed a handful of industry participants including, among others, the guy who infamously bought two pizzas for 10,000 Bitcoin, marking the first time the preeminent crypto was used as a currency. Sorry, let me just get this straight, Cooper asked, as would any person hearing this story for the first time. You spent about $80 million on pizza?
Title: Bitcoin Has Saved My Family
Date of publication: Feb. 23
In this op-ed, the Times audience was presented with a curious case of how Bitcoin often depicted as a tax cheating tool for radical libertarians or even terrorists can actually help those living in poverty-stricken countries. Penned by Carlos Hernndez, a Venezuelan economist, the essay explains how keeping money in bolvars the local soverign currency is seen as financial suicide due to the overwhelmingly high inflation rates. The annual inflation rate in Venezuela was almost 1.7 million percent last year.
The author, who had gone grocery shopping after changing his Bitcoin into bolvars, could not find any milk in about 20 shops nearby due to extreme food shortages. Still, he had to buy something that day otherwise, his bolvars would lose value so he opted for cheese, the closest thing to milk he could find.
Hernndez, who keeps all his money in Bitcoin, says that he is not the only Venezuelian relying on digital assets in fact, as much as $1 million worth of bolvars was traded for Bitcoin in a single day in April via LocalBitcoins.com, a peer-to-peer exchange.
On page 9 of the Times, Hernndez wrote:
You could say that cryptocurrencies have saved our family. I now cover our households expenses on my own. My father is a government employee in a printing department with no paper and earns about $6 a month. My mother is a stay-at-home mom with no income. And cryptocurrencies helped my brother Juan, 28, escape Venezuela last summer.
Title: A Chinese Digital Currency Is the Real Threat, Not Facebooks Libra
Date of publication: Nov. 11
Earlier this year, the Guardian selected Kenneth Rogoff a professor of economics and public policy at Harvard University, who worked as a chief economist at the International Monetary Fund in the early 2000s to write a piece on cryptocurrencies.
Rogoff focused on an important trend: digital, state-run currencies that employ blockchain. China has advanced more than others in that regard, the economist argued, comparing the countrys efforts to Facebooks Libra, which is by far a much more well-known project. Indeed, Zuckerberg himself made this analogy during a hearing before Congress. China is moving quickly to launch a similar idea in the coming months, the Facebook CEO said at the time. We cant sit here and assume that because America is today the leader that it will always get to be the leader if we don't innovate.
A widely used, state-backed Chinese digital currency could certainly have an impact, especially in areas where Chinas interests do not coincide with those of the west, Rogoff wrote, stressing that Chinas currency will most likely be permissioned and hence have strict control over all transactions that it entails. Ironically, that would entirely contradict the anonymous, pro-decentralization agenda that Bitcoin is famous for and average readers are starting to realize that cryptocurrencies are not just some internet coins, but a global technology that can change financial systems forever.
Title: The Mueller Report
Date of publication: April 19
In April, the Department of Justice released special counsel Robert Muellers report detailing his investigation into Russian interference in the 2016 U.S. election. One of its major points was that Russian agents allegedly used cryptocurrency at numerous stages in their online efforts to disrupt the election, hoping to capitalize on the perceived anonymity of cryptocurrencies. Specifically, Muellers report revealed that the systems used in the hacking of the Democratic Party were paid for with Bitcoin, as were online hosting services used by websites that published the hacked materials and participated in the targeting of disinformation at American voters.
Indeed, while cryptocurrencies are known for the anonymity they provide, there is another side to the coin: All Bitcoin transactions are posted to the publicly accessible blockchain, therefore making it possible to identify the senders wallet address and track their entire transaction history.
Nevertheless, Bitcoin allowed Russians to avoid direct relationships with traditional financial institutions, allowing them to evade greater scrutiny of their identities and sources of funds, Muellers investigation concluded.
Title: The Worlds Most-Used Cryptocurrency Isnt Bitcoin
Date of publication: Oct. 1
Bloomberg is by no means an apprentice in the crypto world, as the publication has been closely following digital assets for the past few years. Despite being regularly criticized by biased community members for spreading FUD, Bloomberg often offers quality insights into the space.
In October, the magazine moved focus from Bitcoin to Tether (USDT) the popular but controversial stablecoin that is designed to maintain a one-to-one ratio with the U.S. dollar in terms of value. Tethers trading volume surpassed that of Bitcoins for the first time in April and had been consistently exceeding it since early August at about $21 billion per day, Bloomberg noted.
But why Tether of all stablecoins? people familiar with the companys scandalous lawsuit might ask. The answer is simple, yet not so obvious: According to Bloombergs source, some traders dont even realize they are holding Tether.
I dont think people actually trust Tether I think people use Tether without realizing that they are using it, and instead think they have actual dollars in a bank account somewhere, Thaddeus Dryja, a research scientist at the Massachusetts Institute of Technology, told the magazine. Some exchanges even mislabel their pages to convey the impression that customers are holding actual dollars instead of Tethers, he argued.
Title: Theres Another Reason Behind Bitcoins 200% Rise This Year Its Got Nothing to Do With Facebook
Date of publication: June 25
Back in June, when Bitcoin was in the midst of a long-awaited bull rally (which would soon end), CNBC tried to pinpoint the reason behind the positive price movement. The publication suggested that it wasnt Facebooks arrival into the space, as many believed, but something more niche an event called the Bitcoin halving, when the rewards to miners are cut in half every four years. The next one is scheduled for May 2020, and the tightening of supply had forced the price upward, the article opined.
Perhaps CNBC was too early to take the Bitcoin halving into consideration, but the fact that a major news source is covering the technologys complexities for a mainstream audience is a sign that Bitcoin is not as underground as we used to think.
Title: If Bitcoin Looks Like It Isnt Trading, Its Because It Isnt
Date of publication: Dec. 6
The Wall Street Journal has kept its overall conversvative stance toward cryptocurrencies.
The energy that drove bitcoin and the cryptocurrency industry through much of the early years has been replaced by the sobering reality that creating new global monetary standards requires more than computer code, the publication wrote, citing data from research firm Flipside Crypto. Apparently, in the last week of November, only about 14% of the 18 million outstanding Bitcoin was actively traded.
Now, with the number of daily Bitcoin transactions falling, the journal continued, hopes rest with institutional investors, and there have been signs of progress on this front, citing Bakkt as an example.
Title: A US Recession Could Fuel a New Cryptocurrency Boom and Bust
Date of publication: Nov. 14
According to the Financial Times, if global economic decline and uncertainty about the future of U.S.China trade lead the U.S. into recession, cryptocurrencies could serve as a financial safe haven and even experience another bull run. However, that would be followed by another price bust, the publication argued:
The last bust made clear that gains not linked to adoption by real world users do not last. While the underlying digital technology continues to hold promise, it has yet to find a significant user base beyond enthusiastic techies.
Title: Cryptocurrency 101 in the South Bronx
Date of publication: Dec. 2
The New Yorker published a story of Carlos Acevado a public school teacher in Morrisania, the poorest congressional district in the U.S. who shares his cryptocurrency knowledge as someone who got into Bitcoin back in 2014 with a group of his former students.
When we first talked about Bitcoin in your class, I thought, Criminals, one of Acevados students said. Im not talking about machine guns on the street, the teacher replied. Its not Mad Max out there.
To Acevado, cryptocurrencies are more about helping the unbanked which is why he created the Crypto Community Project, with the goal of building a cryptocurrency economy in the South Bronx.
After these two days, youre going to be the one per cent, he told the 25 young people who had attended his class. Youre going to know more about cryptocurrency and blockchain than ninety-nine per cent of people out there. You have the opportunity to get in on the industry right now.
Title: Cryptocurrency Will Not Die
Date of publication: Nov. 26
GQs Rosecrans Baldwin interviews some of the people who were lucky enough to get in early (and some who, in their own words, were late to the party of crypto but still enjoyed nice gains during the crazy days of late 2017) most of them got burned, but their morale remained unshaken. You know, honestly, if I had a better car, Id sell it and get back in, said one of the interviewees. The other one admitted to selling his old car to pay some bills and get back in the game. Needless to say, that kind of devotion surprised Baldwin.
He too tried to get a hang of crypto trading, investing $100 that he borrowed from his magazine. I spent about $10 worth of Bitcoin on 20 coins of IOTA because I didnt have one iota of knowledge about trading crypto, he writes, describing a shameless, unenlightened attempt at getting rich that might recall some early memories for most cryptocurrency holders out there.
What is crypto? the author ponders in his column. A couple years ago, crypto was the future, according to your cousin at Thanksgiving. Closer to the end of the article, he develops this idea further:
Only crypto didnt disappear, it just went quiet. And this Thanksgiving, the evangelists will tell you its bigger, more relevant than ever, only theyre not just your cousin anymore. Theyre the Peoples Bank of China. Theyre Mark Zuckerberg. Talking about crypto today is more like talking about the climate crisis. Forget real or unreal. Its how soon, and oh crap.
Posted: at 3:55 am
The Koreas|Economy|East Asia
After an early wave of public enthusiasm, South Koreas government is taking steps to regulate crypto assets.
South Korea is considering legislation to bring cryptocurrencies into the mainstream and mulling whether to tax crypto assets.
When Bitcoin was created in 2009, the idea of a cryptocurrency was new and a largely unregulated field. As more cryptocurrencies have been developed there has been a growing push to regulate the industry internationally and in key markets such as South Korea.
South Korea first took steps to regulate cryptocurrency in 2017, when rising prices for Bitcoin and Ethereum raised concerns about disruptive financial speculation, along with growing concerns about fraud and illicit activities.
At the time, South Koreans were among the initial cryptocurrency enthusiasts, with one-in-three salaried workers investing in cryptocurrency and local exchanges Bithumb, Coinbit, and Upbit among the top exchanges by volume in the world. As recently as June of this year, the South Korean won was the third most used fiat currency to trade in Bitcoin, accounting for 6.5 percent of transactions.
To clamp down on speculation and improve security, South Korea moved toward requiring real name accounts and introducing a ban on initial coin offerings in 2017 that remains in place.
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Despite increasing regulation in recent years, South Korea continues to be an important market for cryptocurrency. Though Bithumb, Coinbit, and Upbit are no longer among the top exchanges by volume and South Korean blockchain startups are increasingly listing their cryptocurrencies abroad, the South Korean won remains the fifth most utilized national currency by cryptocurrency exchanges for Bitcoin and South Korea is among the top 10 countries for total exchanges.
However, in recent years there has been growing scrutiny of cryptocurrency internationally as well as domestically in South Korea.
In June, the Financial Action Task Force (FATF) issued guidelines on virtual assets and virtual asset service providers relating to their obligations to take steps to prevent money laundering and terrorist financing. These include enforcing the travel rule requiring financial institutions to provide customer information when transferring more than $1,000 to another financial institution. The FATFs guidelines help to create regulatory harmony across different financial jurisdictions and an auditable record for the enforcement of sanctions and investigations after terrorist attacks.
In response, the South Korean National Assembly is taking steps to provide a legal foundation for virtual assets. The legislation will require firms to register with South Koreas Financial Services Commissions Financial Intelligence Unit (FIU), which would also have regulatory authority for cryptocurrency exchanges. At the moment, the FIU only indirectly regulates cryptocurrency exchanges through its oversight of South Korean banks. The change would allow bring cryptocurrency exchanges into the financial regulatory framework and allow the FIU to directly develop new regulations for the exchanges.
The legislation would also help bring cryptocurrency exchanges in South Korea in line with the FATFs requirements to prevent money laundering and terrorist financing by setting ground rules for transactions and requiring firms to adopt greater accountability.
For the moment, South Korea is unable to tax crypto assets such as crypto currency. The Ministry of Finance and Economy (MOFE) has indicated that profits from cryptocurrency trades cannot be taxed under current law. Not all forms of capital gains are taxable in South Korea and there are currently no references to cryptocurrency in the current tax codes. In order for South Korea to tax crypto assets something government officials have expressed an interest in doing it will need to develop a definition of crypto assets, determine which type of assets should be taxed, and decide how crypto exchanges should report tax liabilities to the government.
If South Korea moves forward with revising its tax law to cover cryptocurrency, it will not be alone. The United States, the United Kingdom, and Australia all tax cryptocurrency as an asset. There has been some concern expressed about South Koreas ability to define cryptocurrency, but if tax authorities decide to tax cryptocurrency as an asset it will have other models to look to for how to handle crypto transactions based on capital gains.
Get first-read access to major articles yet to be released, as well as links to thought-provoking commentaries and in-depth articles from our Asia-Pacific correspondents.
While cryptocurrency began as an effort to conduct financial transactions outside of the traditional financial system, if it is to grow to be more than a speculative asset there will need to be regulation to protect consumers, ensure transparency for tax purposes, and to protect against its illicit uses. If South Korea has seen a short-run decline in cryptocurrency transactions as a result of regulation, the focus on establishing a proper regulatory structure should place South Korea in position to benefit from new regulated markets in the long-run.
Posted: at 3:55 am
On Wednesday, Google restored Ethereum app MetaMask, after it mistakenly removed it from its Play Store.
Earlier this week, Google backtracked on its ban of Ethereum ETH app and wallet MetaMask after removing it from its Play Store just a week earlier. The wallet app conveyed the U-turn in a tweet on New Years Day.
However, MetaMask doesnt mine cryptocurrencies, rather it serves as an cryptocurrency and token wallet to allow users to interact directly with Ethereum dapps.
Google has had a tumultuous past when it comes to cryptocurrency apps and its Play Store.
Back in July 2018, it banned cryptocurrency mining apps from its Play Store. A report from Ars Technica in 2017 found that malicious cryptocurrency mining malware installed on phones could physically damage devices if left to run for too long.
Indeed, by banning mining apps Google was, in part, working in the interests of its users. However, 30 days after the initial ban, the Play Store still featured numerous apps that contravened its policy update.
Once Google is made aware of apps that break its rules, it usually acts relatively swiftly to remove them. For MetaMask though, it looks like Google was a little too quick to the draw.
Published January 3, 2020 09:00 UTC
Posted: at 3:55 am
On Friday, December 27, 2019, Chinese regulators issued a joint regulatory warning on the rise of virtual currency trading activity in the country. The Beijing Local Financial Supervision Bureau, the People's Bank of China Business Management Department, the Beijing Banking and Insurance Regulatory Bureau, and the Beijing Securities Regulatory Bureau noted that the uptick in activity is the result of the promotion of blockchain technology.
Indeed, on October 25, Chinese President Xi Jinping issued a statement for Chinese companies to seize the opportunity offered by blockchain technology. The markets reacted with a surge in the price of bitcoin and an increase in internet searches for the term blockchain on WeChat. The positivity on blockchain coming from Chinas leader is not new as he has in the past referred to blockchain as ten times the importance of the discovery of the Internet.
BEIJING, Nov. 7, 2019 -- Jing Xiandong, CEO of Ant Financial, introduces the blockchain platform of ... [+] Ant Financial during the fifth World Internet Conference in Wuzhen, east China's Zhejiang Province, Nov. 7, 2018. (Photo by Chen Yehua/Xinhua via Getty) (Xinhua/Chen Yehua via Getty Images)
The approach of being tough on virtual currency trading platforms while encouraging blockchain technology might seem at first to be complicated - particularly if public platforms such as Bitcoin or Ethereum are used that has a native token or cryptocurrency used as an essential part of the blockchain or distributed ledger technology. Of course, for China, with the imminent release of a Central Bank Digital Currency, and its wish to maintain control over the types of digital or cryptocurrencies traded similarly to the way it has controlled the spread and use of the Internet, a policy coming down hard on cryptocurrency trading platforms makes sense.
Many in the United States have noted the focus should not be on cryptocurrencies, but rather blockchain technology. Indeed, the cryptocurrency and blockchain community seems to swing like a pendulum. When Bitcoin goes up, its all about the cryptocurrency and the focus on blockchain gets blurred. When Bitcoin goes down, the industry and developers are quick to note that finally, there can be a focus on the real gem in all of this technology - a distributed ledger technology that will fundamentally change the way people, processes, and organizations operate.
Indeed, a recent Forbes article noted how Chinas approach to Blockchain was winning and notes the U.S. should pay attention. The U.S. has similarly started to pay attention, more as the result of Project Libra, that forced Congress to pay attention to both cryptocurrency and blockchain at the same time. While many Members of Congress became quickly adept at some of the finer distinctions in the marketplace, cryptocurrency and blockchain still seem to be words quickly conflated, where an increase in blockchain is the same as an increase in cryptocurrency, and so the U.S. runs a much higher risk than China in stopping cryptocurrency trading and also significantly impacting the development of blockchain technology in the country.
The notice from China harped on how the virtual currency trading platforms were creating the potential for investor harm in a variety of ways. As stated in the joint risk release, They launch zero-interest loans, dual currency financial management and other projects through digital currency mortgages. In other words, Decentralized Finance or DeFi, meet the Peoples Republic Of China.
And therein lies the issue for China - which is that there is very little interest in decentralization, and much more interest in seeing the development of blockchain technology and its central bank digital currency as a way of spreading its influence around the globe to push its own agenda.
Meanwhile, for the virtual currency trading platforms, The release, seriously warn institutions and personnel in Beijing that carry out related activities. They must not publicize and promote relevant virtual currency projects or platforms, they must not conduct virtual currency business sales or transactions, they must not engage in virtual currency transactions or disguised trading operations with investors, Acting on domestic and overseas virtual currency issuance and trading activities, financial institutions and non-bank payment institutions within its jurisdiction shall not provide services for any virtual currency transaction.
HONG KONG - 2019/04/06: In this photo illustration a cryptocurrency electronic cash Bitcoin logo is ... [+] seen on an Android mobile device with People's Republic of China flag in the background. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)
Thus, the seriousness of this warning makes it clear virtual currency trading is not welcome in China, and finishes by noting that investors should, maintain rationality ... beware of being deceived, and promptly report relevant clues about violations of laws and regulations. So, investors are then part of the regulatory structure as well in China, encouraged to provide tips to authorities if violations in the marketplace are noticed.
So, as China continues to pour money into the blockchain technology and prepares the release of its central bank digital currency, the country continues what was likely the inevitable, which is to push back on any other virtual currencies that might compete with its national currency.
The U.S. should take note, at a minimum, of the level of proficiency and understanding regulators in China have regarding cryptocurrency and blockchain, particularly in its ability to note how the promotion of blockchain technology can lead to cryptocurrency schemes as a result.
Posted: at 3:55 am
Those who held Bitcoin Cash (BCH) during its meltdown in the latter half of 2019, there may still be time to generate enormous gains.
Famous crypto analyst DonAlt on Friday discussed the bullish prospects of the fifth-largest blockchain project by market capitalization. The trader said he expects the BCH-to-dollar exchange rate to hit $380 in 2020, revealing that he would open a long position towards the said upside target.
The statements followed BCHs impressive gains in the spot market during the Friday session. The cryptocurrency soared by up to 11.11 percent, or $21.66, as the US killed a top Iranian military official,Qassem Soleimani, in an airstrike. The event sent investors looking for haven assets, which pushed the prices of gold and oil higher.
The upside sentiment further crept into the crypto market. Eight hours after the US attack, top cryptocurrency bitcoin registered 6 percent gains. So it appears, other altcoins merely tailed bitcoin, with its forked cousin Bitcoin Cash bringing maximum profits home.
DonAlt stressed that Bitcoin Cash could attract a considerable capital from the neighboring Bitcoin market. He noted that the BCH-to-BTC exchange rate is forming an inverse head and shoulder pattern on the daily charts. Traditionally, it is a sign of a bearish reversal.
Bitcoin Cash testing the neckline of its inverted H&S pattern | Source: DonAlt
The trade should play out like this: A break above the red neckline signals a sharp move higher if further confirmed by a spike in volume. The ideal bullish target for a jump is equal to the distance between the inverse H&S bottom and neckline. So it appears, that distance is close to 3,947 satoshis, or 0.003947 BTC.
Considering the red neckline is coinciding with 0.029 BTC, the ideal upside target for long positions is circa (0.029+0.003947) BTC (or 0.032 BTC).
The BCH/BTC chart is an absolute beauty, said DonAlt.
Part of Bitcoin Cashs gains could come on the backs of a more extensive altcoin rally.
Market analystBeastlyorion in November predicted that bitcoins dominance, which measures the share of the cryptocurrencys market capitalization relative to that of the broader market, could break below 66 percent. He added that such a move would have traders exchange their bitcoin holdings for altcoins.
Meanwhile, other analysts think that bitcoin, in the long-term, will eat the market cap of altcoins. The sentiment follows speculation about bitcoins adoption among institutional investors. The involvement of Wall Street firms like Fidelity and Bakkt in the cryptocurrency has already upped the scenario.
Posted: at 3:55 am
Facebooks Libra, Twitter, Nation-Backed Digital Currencies, China and Other Macro Trends
Lets look at some macro trends circling the esoteric inner core of this ongoing technological revolution. First up theres Facebooks Libra, which currently is a swirling mass of confusion. Its clearly become a major part of the worlds biggest social media giants roadmap and theyre throwing a lot of resources at it. For crypto generally, its a huge affirmation of the technology and has been utterly out of the realms of expectation just a few years ago. As expected, however, with an entity as big as Facebook, Libra got the worlds major power structures hot under the collar, given that a global stablecoin, accessible to billions of people around the world, goes straight after governments grip on monetary policy, which is effectively like trying to wrestle away the ultimate superpower of state.
The major nation state in question, the US, responded by calling those responsible to a hearing where officials, that clearly never read the briefing on what Libra is trying to be, shouted totally irrelevant questions to the treasonous upstarts, betraying the true aims of these hearings, which is to do nothing more than grandstand and bang a drum along party lines. If that wasnt enough, they then fired off breathtakingly threatening letters to members of the Libra association with the clear intention of performing audits, which worked just as intended, with Visa, MasterCard, eBay and Stripe all quickly stepping away from their previous intention to join Facebooks Libra network. In 2020, we will see this dance begin to intensify, most likely not only with Facebook but many other powerful players in different regions, think Uber, Grab in South East Asia, possibly Softbank in Japan, the already existing payment networks of WeChat and Alibaba in China and well also see nation-states joining in the competition. Soon after this things will come to a head, perhaps in 2021 when Facebook and others will be forced to launch outside of the US, in smaller jurisdictions as pilot programs. This will hamper their ability to gain strong network effects and end up being the perfect talisman for why decentralisation, in the face of entrenched power structures, is the only way to proceed if the intent is to provide a new means of transacting value globally inclusive of the whole world.
What superpowers like the USA seemingly misunderstand is that although Facebook has lots of users, many more than Bitcoin, their power is already being whittled away by the very fact that permission-less, decentralised digital currencies, for the first time in history, provide a new option and choice for people to exit from centralised fiat currencies that have an average life expectancy of 27 years. It may take decades, but that paradigm shift is not going back in the bag. Jack Dorsey at Twitter has a much better grip on that power boiling away in the background and has just announced hes set up a research team to investigate how to decentralise the entirety of his platform, Twitter as the decentralised protocol. Validation once again?
Perhaps another global institution thats seen the light is the ECB, having set up a Digital Currency Taskforce where doubtless they will spend most of 2020 eyeing Libra from afar, writing tomes on how fiat currency can work alongside digital decentralised currencies and how theyre going to create their own special crypto recipe to try and stem the ever-growing tide of permissionless stablecoin usage. This is no doubt what Christine Lagarde means by saying they plan to get ahead of the curve but in reality, to really get ahead, theyd have to decentralise themselves and thats a tad hopeful perhaps.
The year 2020 will see yet more strange antics from the worlds most populated country. China is at the very heart of the Bitcoin ecosystem because the mining world, that secures the Bitcoin network with massive computing power, relies on cheap energy and a major percentage of the Bitcoin networks mining farms find endless amounts of close to free energy, by camping out around the many nuclear power plants that service Chinas massive ghost cities. But thats not all! Its going to get even stranger, as we watch Chinas government battle with two sides of the same coin. Theyre clearly enthralled by the prospect that a state run blockchain could bring a paradigm shift in its intent on surveilling its populace, but their desires to harness the technology might by necessity usher in a swathe of decentralised technologies that even the great firewall couldnt keep at bay. Perhaps this technology is the ultimate trojan horse? Tune in for the next episode in 2020 when they release their state run DCEP cryptocurrency, take the vast spending data theyll capture and add it into their citizen points scheme database and then triangulate all of this in real time with their pervasive facial recognition systems and hey presto, they go from 2020 to 1981 at the flick of a switch.
Now lets explore what the future looks like through the lens of each of the main areas of the blockchain ecosystem. As we at KR1 see it, the areas of most interest are Bitcoin as a digital store of value, macro trends including Facebooks Libra and other corporate or nation-state-backed currencies, the flourishing Ethereum ecosystem especially in Decentralised Finance (DeFi), specific competing projects to watch closely and the wonderful world of non-fungible tokens.
As the Bitcoin narrative still forms the backdrop to the ecosystem, both in terms of new participants entering into the space and price action, lets begin there. Were at a critical stage in Bitcoins price trajectory. We had a parabolic rise from 2016 through to the end of 2017 with the price peaking at just under $20,000, followed by a 54 week bear market which saw close to an 87% retracement in price down to a value of $3200. This was the 4th such retracement since the birth of Bitcoin in 2009.
Between March and July 2019, we saw the pendulum swing back, with Bitcoin reaching just under $13,000, signalling an end to the bear market. Since then however weve had six months of sliding prices back to a low of $6,300 and this could well continue down to the $5,000 area towards the middle of January 2020. However, we think that with the clear over-enthusiasm that signalled the end of the bear market, combined with the strong fundamentals behind the scenes such as hashing power, transaction volume and new Bitcoin wallets being created, Bitcoin will most likely bounce back strongly from a steep dive in price and return to the $7,500 mark and then move higher into the middle of 2020. Its important to understand that Bitcoins issuance model, with the halving coming up in May 2020, combined with a strong digital gold narrative and the dominant hard money philosophy of the asset, which maintains a very powerful set of strong hands will create many boom and bust cycles, you could say theyre somewhat baked into the protocol by design.
Away from nation-state superpowers and Bitcoin, diving a little deeper into the technology, the area causing the most commotion and interest is Decentralised Finance (DeFi) on the Ethereum blockchain. The DeFi movement essentially is a suite of flourishing financial applications that allow for seamless interaction and interoperability with each other. It seems there is a new project launching every other day that is building on the composability with previously launched projects. As an example of the flow available to people who hold digital assets, you could use a token swap exchange such as Uniswap to exchange the volatile Ethereum (ETH) asset to a stablecoin, that is pegged to 1 USD by market forces such as Makers DAI, send it to a smart contract lending platform like Compound, where you can lend your assets and stablecoins out for a yield and then you could cover the value held in the lending platform smart contract with an alternative insurance provider such as Nexus Mutual. In essence, this is not dissimilar to using a peer-to-peer lender to loan out money you have and earn interest in return, plus a decentralised stock market where one can exchange unlimited amounts of assets and a digital and decentralised alternative to a specific insurance contract all in one.
All of this can be achieved in very little time, were talking seconds or minutes here, without any paperwork permisionlessly and at very little cost. As a testament to the growing use of that network, the USD value of assets locked up in Ethereum-powered DeFi applications crossed an all-time high of $700 million USD recently, despite the depressed market sentiment especially regarding Ethereum. We do not expect this trend to halt any time soon, in fact we foresee major uplifts in use as the underlying systems gain trust, the applications boost their numbers, improve their offerings and become more accessible to wider audiences. We look forward to watching 2020 continue to be the year where money legos connect together to build a financial fortress.
Not mentioned so far, were seeing huge interest recently launched or soon-to-launch competing layer-1 blockchains, especially in the interoperability or application-specific blockchains ecosystems. In opposition to Bitcoins energy and computing-intensive Proof-of-Work, most of these platforms are Proof-of-Stake networks, where participants guarantee their truthful behaviour by putting up a financial deposit that is at risk instead of wasting computer resources and energy. Staking will be a major trend in 2020 and weve already seen Coinbase and Binance, the worlds largest exchanges move directly into the space. By staking assets, the process where tokens of value are used as collateral or deposit that is at risk, in return for securing the network and agreeing on transactions that happened, stakers are receiving a healthy yield. This system has become a core use case for digital assets in many projects but especially underpins two projects that we will see break new grounds over the next year, Cosmos and Polkadot. Both are providing interoperability for application-specific blockchains while increasing throughput by some order of magnitudes. As of writing, Cosmos is live with a strong community of developers and validators that form the backbone of the staking ecosystem. The key feature of Cosmos, which aims to allow for the seamless transition of tokens between different chains, is IBC (Inter-Blockchain Communication Protocol), which is due to come online in the next year and should showcase the true potential of the protocol. There are currently lots of developer teams that are building on the Cosmos technology stack (including Binance) but thus far those networks are still isolated. With IBC properly enabled well see all of these sovereign networks starting to communicate and interact with each other through the Cosmos Hub network.
Polkadot is an equally powerful system that, with a different digital architecture, aims to both allow cross chain data and token transmission while also radically increasing throughput. Polkadot lies at the core of a new vision for the internet, the Web 3.0, where data sovereignty, property privacy protections and permissionless applications become a new internet for the world. Currently a canary network Kusama is live, which aims to test many of the systems already put in place by the Parity development team, who is in charge of bringing the Polkadot network to the world. We expect to see a full roll out of Polkadot in the first half of next year and hope it will be a leap forward for the whole ecosystem.
Other technologies that deserve a notable mention for what they will achieve next year are mesh networks like Althea Mesh that bring faster and more private community-based internet to areas of the world that need it most. For example, in parts of Africa people are now getting high speed, low cost internet access when they didnt before, all enabled by Althea and the blockchain ecosystem.
There will also be clear excitement next year for tBTC, brought to us by the Keep Network, which enables a trustless bridge to move Bitcoin as an asset onto Ethereum or other networks like the previously mentioned Cosmos and Polkadot. Considering the strong DeFi trend currently, there will be those with major positions of Bitcoin that will jump at the chance to get their wealth working for a return in the rapidly expanding DeFi ecosystem.
Layer-2 scaling technologies will again be at the forefront of the space, including Matter Labs ZKsync implementation and other solutions like optimistic rollups. Counterfactual and Connexts efforts are continuing to gain traction with their state channel technology allowing developers to enable instant, low-cost Ethereum transactions in their wallets, browsers, and applications. With the complete scope of the release of Ethereum 2.0 still some time away, layer-2technologies performing settlements on the main Ethereum 1.0 blockchain will become far more prominent next year and beyond. We will also see far greater interest in privacy focused technologies such as the Nym project, who are looking to bring mixnet technology back from the computer science labs of the 1980s. Theres an opportunity for network layer privacy projects such as Nym to form a major layer in the forthcoming Web3 stack. Another project tackling this area is HOPR, who are building an incentivised data transmission system that rewards nodes for passing on messages anonymously as they Hop from node to node, before finding their true destination. When combined with an endless flow of cover traffic through the network, privacy can be fully achieved.
Lastly, a look to next year wouldnt be complete without mentioning the rising star of Ethereum adoption charts, non-fungible tokens (NFTs). Digital scarcity is no better represented than through one-off unique tokens that represent in-game items, collectibles and even art works. All areas are gaining adoption by the day with games, market places, galleries and more all appearing at an astonishing rate. Next year we will see this go into overdrive as some of the big names in the entertainment business begin to experiment with issuing their own NFTs.
Theres plenty to be excited about, far more than current prices would reflect. Were only just beginning to understand the vast breadth of use cases unlocked by programmable money, assets and scarcity in the digital realm. Each year brings new and exciting opportunities and 2020 will be no different.
Mid 2020: $7,500
End 2020: $20,000+
Posted: at 3:55 am
Bitcoin Is Now 11 Years Old
Today is January 3rd, 2020. And if you know anything about the history of Bitcoin, you know that this means the worlds first cryptocurrency and its respective blockchain has turned 11 years ago, with this being the date that Satoshi Nakamoto, the pseudonymous coder-hacker behind the project, mined the Genesis Block of Bitcoin.
In it, the creator encoded a headline regarding the Great Recession of 2008, cementing the idea that he launched the project to counteract banks and governments in the minds of many.
Since then, Bitcoin has seemingly been on an unstoppable rise, with the price of the asset, which many say is the best measure of its success, rising by literal millions of percent, making it the best-performing asset, well, ever. Thats not to mention that the cryptocurrency has accomplished this all in a decades time, effectively irrelevant on a macro scale.
The project has also been successful on a transactional basis. Cryptocurrency research firm TradeBlock found that the cryptocurrency has had a record 2019 with transaction count, transaction volume (USD equivalent basis), and hash rate reaching new all-time highs this past year.
All this has made some of the worlds most prominent people talk about it.
In February, Elon Musk co-founder of PayPal, chief executive of SpaceX and Tesla, founder of the Boring Company, among other titles said in a podcast that the cryptocurrency has an underlying structure that is quite brilliant, adding that he thinks maybe Ethereum and maybe some of the others might have technological merit. The renowned technologist concluded by stating that he thinks without a doubt that crypto is a far better way to transfer value than pieces of paper.
While Bitcoin has done absolutely stellar in its 11-or-so years in existence as laid out earlier in this article, analysts and industry executives are optimistic that the following decade for the leading cryptocurrency and its ilk will just not good, if not better.
Andy Bromberg told Bloomberg that we are seeing a level of building that has happened in 2019 [which makes it feel like] were in the moment of everyone is putting on their jumpsuits, ready to take off. Bromberg added were seeing crypto-related innovation hasnt been seen since 2017, boding well for prices in the future.
And Changpeng CZ Zhao, the prominent chief executive behind cryptos top firm, Binance, was recently quoted as saying that he thinks that the long-term trajectory for the Bitcoin and crypto market remains decidedly positive:
Bitcoin is still a small market cap instrument so there will be high volatility in the short term. However, if you look at the fundamental technology, the longer-term view, about a 5-year or 10-year horizon, were very confident that bitcoin and cryptocurrencies are here to stay.
Posted: at 3:55 am
From outrageous price predictions to the future of altcoins, crypto analysts and industry leaders are placing their bets on the fate of digital assets in 2020.
Here are seven forecasts predicting some major shifts in the year ahead.
1. Twelve months ago, Bob Loukas, a Bitcoin trader and analyst, accurately predicted what the price of BTC would be at the end of 2019. Now, he thinks Bitcoin is headed for its all-time high near $20,000 by the end of 2020.
In the absolute bear case, after a 6-month downtrend, expect a counter-trend move towards $10k-$11k before another big downtrend. If you think you will FOMO buy $10k then buy it now instead.
Bob Loukas (@BobLoukas) December 26, 2019
2. Mike Novogratz, the CEO of crypto investment giant Galaxy Digital, is also bullish on BTC, saying he expects the king coin to end the new year above $12,000.
2020 prediction #1. @realDonaldTrump loses by more than 10mm votes. #2 $btc finishes over 12k. #3. @USAWrestling wins 3 golds in Tokyo (MF). #4 @tomhanks wins the Oscar for Mr Rodgers. #5 @reform and its partners help shrink the supervised population from 4.5mm to 4mm or <
Michael Novogratz (@novogratz) December 28, 2019
3. Changpeng Zhao, the founder and CEO of Binance, thinks numerous governments around the world will experiment with blockchain and their own digital assets.
Says Zhao in an interview with Global Coin Research,
I think in 2020, we will see different experiments tried by many different governments around the globe for adoption. Some will work, some may not, but overall, they will have a tremendously positive effect for crypto adoption.
4. Ripple CEO Brad Garlinghouse predictsthat 10 of the 20 largest banks on the globe will begin to actively hold and trade digital assets in 2020 as fiat currencies go digital.
Hes also predicting that at least one G20 currency becomes fully digitized by 2021.
5. Decrypt columnist Matt Hussey echoed Zhao and Garlinghouses sentiments, predicting numerous nation states will roll out their own digital currencies this year.
6. Jimmy Song, a Bitcoin educator, thinks BTC dominance will be at more than 75% by the end of the year. He also predicts lots of altcoin delistings.
2020 Predictions Part 1:
* Bitcoin dominance will be 75%+ at end of year* Taproot will be activated without much controversy* Bitcoin price will have a bottom to top difference of at least 100%* Halving will be the big narrative
Jimmy Song () (@jimmysong) December 30, 2019
2020 Predictions Part 2:
* Lots of altcoin delistings* IEOs will lose steam* Some coin will be 51% attacked and cause an exchange to lose lots of money. Coin will go down less than 20%.* More coins will change to be merge mined with Bitcoin.
Jimmy Song () (@jimmysong) December 31, 2019
7. And last but not least, John McAfee now has only one year left to see whether Bitcoin reaches his sky-is-the-limit, dick-on-the-line forecast.
When I predicted Bitcoin at $500,000 by the end of 2020, it used a model that predicted $5,000 at the end of 2017. BTC has accelerated much faster than my model assumptions. I now predict Bircoin at $1 million by the end of 2020. I will still eat my dick if wrong. pic.twitter.com/WVx3E71nyD
John McAfee (@officialmcafee) November 29, 2017
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Posted: at 3:55 am
XRP was once the best-performing crypto assets of all-time, peaking near the $3 price point at the top of the previous bull market on the back of retail FOMO, perpetuated by those saying that the cryptocurrency was on the verge of being adopted by the worlds largest banks and financial institutions.
But since then, the price of the third-largest cryptocurrency has absolutely fallen off a cliff, collapsing from the heights above $3 to $0.192, where XRP sits as of the time of writing this.
Some say it is only a matter of time before the cryptocurrency rips higher to revisit its all-time highs.
Per previous reports from Ethereum World News, popular trader and long-termXRP bull Credible Crypto remarked in November that those getting impatient about the XRP price are missing the big picture, and will miss out on the gains that are sure to come. Elaborating on why this is, he noted that XRP only started running nearly 2 years after the BTC bear market low was put in in 14-15 and that too, only afterBTCbroke prior ATH.
The implication in this Twitter message, of course, being that theres a rather high likelihood the cryptocurrency will surge higher in a move that will bring it to orders of magnitudes above where it started.
Though a prominent and respected cryptocurrency analyst has branded XRP but a moonshot investment, meaning that it has dramatic upside potential, but a low likelihood of that potential being fulfilled.
Mati Greenspan, a former senior analyst at eToro and the founder of Quantum Economics, released his startups latest newsletter on Friday morning. In it, the prominent cryptocurrency analyst took a moment to touch on XRP, specifically in regards to the narrative spreading on Crypto Twitter that the cryptocurrency will be used as a bridge currency for the world.
Should XRP become the worlds bridge currency, meaning that it will effectively be used as a form of liquidity by all banking institutions, the price would likely go sky-high, surging past the previous all-time high in a short period of time.
While possible, Greenspan noticed that it does seem more likely that a coin created by banks, for banks, would be favorable to most large financial institutions, before adding that some competitor or central bank digital currencies may become widespread and efficient. This risk factor led him to the conclusion that XRP is just a moonshot investment in his eyes.