The Hack Fund will use crypto to give startups early liquidity

Now that “utility” tokens have become a popular and international way to fund major blockchain projects, a pair of investors are creating a new way to turn tokens into true equities. The investors, Jonathan Nelson and Laura Nelson, have created Hack Fund, an early stage investment vehicle that allows startups to launch what amounts to “blockchain stock certificates,” according to Jonathan.

“Our previous business model exchanged equity from startup companies for services, and wrapped that equity into funds that we then sold to investors. These fund investors have included family offices, institutions, and high net worth individuals,” said Jonathan. “However, Hack Fund represents a new business model. Because Hack Fund leverages the blockchain, investors all over the world at all levels can participate in startup investing by trading blockchain stock certificates. Also, its SEC compliant structure means that it is also available to a limited number of accredited investors in the US.”

The team originally created Hackers/Founders, a tech entrepreneur group in Silicon Valley, and they now support 300,000 members in 133 cities and 49 countries. Hack Fund is a vehicle to support some of the startups in the Hackers/Founders network.

“HACK Fund, through its Hackers/Founders heritage, has a large, unique global network,” said Jonathan. “This provides Hack Fund with unparalleled reach and deal flow across the global technology market. There are a few blockchain-based funds, but they are limited themselves to blockchain-only investments. Unlike typical venture funds, HACK Fund will provide quick liquidity for investors, leveraging blockchain technology to make typically illiquid private stocks tradeable.”

The idea behind Hack Fund is quite interesting. In most cases investing in a company leads to up to ten years of waiting for a liquidity event. However, with blockchain-based stock certificates investors can buy shares that can be bought and sold instantly while company performance drives the value up or down. In short, startups become liquid in an instant, which can be a good thing or a bad thing, depending on the founding team.

“HACK Fund is a publicly traded closed-end fund. The fund’s venture investments are valued on a quarterly basis by an independent third party, audited and posted to the blockchain for all token holders to review. There are no K-1 statements issued, there is no partnership/LLC, rather HACK Fund is an investment company akin to Berkshire Hathaway which invests in the same manner as early-stage venture capital,” said Jonathan.

The team is raising a little over $2 million in an ICO to build out the fund. They’ve already raised most of their $100 million total goal from individual investors but the ICO will let retail investors buy some of the tokens as they are made available on the BRD wallet.

Report: Most ICO project financing unaffected by crypto market crash

Despite a bear market that has seen the price of Ethereum drop by over 80 percent since the start of the year, most projects that raised money via an ICO remain unaffected, according to the findings of a new report.

Bitmex, best known for a crypto trading service, claims to have crunched the numbers on over 200 of the biggest ICOs and found that, on average, most projects have already converted what they had raised in crypto into fiat currency. That’s not to say that they did so immediately or that 100 percent of the proceeds have been converted — many projects didn’t, and haven’t — but the general trend is that most have reaped the paper gains of their ICO without being stung by the crash.

One Ethereum — technically an ‘Ether,’ the crypto token associated with the Ethereum Foundation and the Ethereum Blockchain — was worth nearly $1,400 in January, a then record. That valuation has plunged during 2018, to the point that the cryptocurrency ducked below $200 during September, raising alarm among some in the community over its long-term sustainability.

Ethereum’s rollercoaster ride over the last twelve months including a record valuation of nearly $1,400 in January 2018

It’s easy to assume, therefore, that ICO projects — which raise the majority of their funds in Ethereum — have been hit hard. But the Bitmex research appears to suggest that many projects managed to convert their crypto and also retain a decent amount of Ethereum, too. It’s, of course, important to remember that this is a report, not gospel truths, but there’s plenty of insight to dig into.

Bitmex suggests that the projects it looked at collectively still hold 3.8 million Ethereum, or around one-quarter of the crypto total that they originally raised. If that’s true — and the accuracy will vary from project to project — then it’s a big win. Not only do projects get the money they thought they’d earned from their ICO, but they also retain some ‘skin in the game’ and are thus incentivized by the future value of Ethereum.

According to Bitmex, the deficit between total Ethereum value raised and the total amount of Ethereum cashed into fiat is just $11 million. Spread across over 200 projects, that’s quite low and it leaves plenty of Ethereum for future opportunities. Estimated unrealized Ethereum gains — i.e. crypto raised that hasn’t been cashed out — stands at $93 million, and that’s based on the current ‘low’ value of Ethereum.

The Bitmex data is fairly skewed by the huge EOS ICO — which raised around $4 billion in crypto earlier this year. Not only does the EOS project inflate the numbers, but it also continuously offloaded Ethereum during its year-long token sale making it tricky to track value.

Nonetheless, even taking EOS out of the acquisition, the shortcoming between ‘paper’ ICO raises and the net conversion to fiat is $79 million and that’s padded out by the $93 million in estimated unrealized gains.

Despite the industry-wide figures, there are examples of companies who quickly cashed their crypto into fiat in order to plump for a sure thing, and others who held off converting the pile or cashed out small bits when needed. The situation is certainly more challenge for any ICOs happening right now, although — as we wrote recently — the market has shifted towards private sales which makes tracking the flow of money a great detail more challenging.

You can read the full report on the Bitmex blog here.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Crypto mining giant Bitmain reveals heady growth as it files for IPO

After months of speculation, Bitmain — the world’s largest provider of crypto miners — has opened the inner details of its business after it submitted its IPO prospectus with the Stock Exchange of Hong Kong. And some of the growth numbers are insane.

The document doesn’t specify how much five-year-old Bitmain is aiming to raise from its listing — that’ll come later — but it does lift the lid on the incredible business growth that the company saw as the crypto market grew massively in 2017. Although that also comes with a question: can that growth continue in this current bear market?

Without further ado, let’s get to the numbers.

The company grossed more than $2.5 billion in revenue last year, a near-10X leap on the $278 million it claims for 2016. Already, it said revenue for the first six months of this year surpassed $2.8 billion.

Bitmain is best known for its mining devices — which allow the owner to mine for Bitcoin and other cryptocurrencies — and that accounts for most of its revenue. 77 percent in 2016, 90 percent in 2017, and 94 percent in the first half of 2018. Other income is generated by its mining farms, shared mining pools, AI chips and blockchain services.

The company is fabless, which means it develops its own chip design and works with manufacturing partners who bring them to life as physical chips. Those chips are then used to power mining hardware which lets the owner earn a reward by mining Bitcoin and other cryptocurrencies. Bitmain claims over 80,000 customers with just under half of sales in China and the rest overseas.

The company said it posted $701 million in net profit in 2017, up from $104 million in 2016. For the first half of this year, it is claiming a gross profit of $743 billion. (Operational profit touched $1 billion for that period.)

That’s quite staggering growth, but there are some signs that 2018 comes with more challenges.

Margins are down. Gross margin in the first six months was 36 percent, down from 48 percent in 2017 and 54 percent in 2016. Contributing to that, the cost of sale percentage in the first half of 2018 rose to 64 percent from 51 and 52 percent in 2017 and 2016, respectively.

Interestingly, Bitmain accepts Bitcoin and other cryptocurrencies as payment for its miners, with some 27 percent of purchases last year paid for using crypto. As a result, those payments aren’t included in revenue but do show up as “investing cash inflow” when they are converted to fiat and used in the business. That’s a 2018 accounting problem right there.

As a result, Bitmain has a negative net cash used in operating activities position but those become positive when factoring in the crypto. The company said it received $887 million in crypto in the first half of 2018, $872 million in 2017, $56 million in 2016 and $12 million in 2015 — that’s based on rate at cost. Data appears to show that Bitmain cashed $484 million in crypto in 2017, and in the first half of 2018 that figure was $382 million.

The wild ride of 2017, however, led the company to over-estimated demand and, as a result, its inventory ballooned by $1 billion.

Here’s Bitmain explanation of how it managed to get it so wrong:

In early 2018, we anticipated strong market growth for cryptocurrency mining hardware in 2018 due to the upward trend of cryptocurrencies price in the fourth quarter of 2017, and we placed a large amount of orders with our production partners in response to the anticipated significant sales growth. However, there had been significant market volatility in the market price of cryptocurrencies in the first half of 2018. As a result of such volatility, the expected economic return from cryptocurrency mining had been adversely affected and the sales of our mining hardware slowed down, which in turn caused an increase in our inventories level and a decrease in advances received from our customers in the first half of 2018. Going forward, we will actively balance our business growth strategy, inventories and cryptocurrency asset levels to ensure a sustainable business growth and a healthy cash flow position, and we will adjust our procurement and prediction plan to maintain an appropriate liquidity level.

Despite an extra $1 billion in inventory, Bitmain estimates it has the working capital — including crypto pile and the result of its IPO — to sustain operations for at least another 12 months. That, according to its figures, is around $343 million in cash and cash equivalents but clearly it needs another megahit product or for the market demand to rise again.

Indeed, Bitmain just last week announced its newest mining chip — shrunk down to 7nm — which it believes will offer more power and greater efficiency for miners. That progress coupled with the rising value of crypto — i.e. what owners of Bitmain miners can earn — has helped the company steadily raise the price of its hardware.

Average selling price for its Bitcoin mining machines in 2015 was just $463, but that jumped to $767 in 2016, $1,231 in 2017 and $1,012 in the first half of 2018.

Bitmain co-founder Jihan Wu is the face of the company and one of its largest shareholders with a 20 percent stake

Beyond mining, the company is also developing AI chips, the first of which launched last year. They are used for developing cloud systems, as well as object, image and facial recognition purposes.

Citing third party figures, Bitmain claims to have a dominant 75 percent of the ASIC mining hardware market. It is investing heavily in R&D, which reached $73 million last year and $86 million during the first half of 2018. In addition, around one-third of its 2,594 employees are listed as working in research and development.

Bitmain’s document confirms the company raised some $784 million across Series A, Series B and Series B rounds.

Its investor roster is fairly public thanks to leaks and it includes the likes of IDG, Sequoia China, and Kaifu Lee’s Sinovation fund. However, the prospectus does confirm that shareholders include retailer NewEgg, EDBI — the corporate investment arm of Singapore’s Economic Development Board — and Uber investor Coatue. Founders Ketuan Zhan and Jihan Wu are the largest shareholders and they control 36 and 20 percent, respectively.

We can expect Bitmain to flesh out the prospectus with more juicy information, including a target raise which will also generate its valuation. But for now there are over 400 pages of information to process, you can find them all right here.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Circle wants more women to invest in cryptocurrency

The earliest adopters of Bitcoin — the libertarian anarchist “cypherpunk” crowd — were mostly men. Today, roughly a decade after Satoshi Nakamoto’s famed white paper was released, the majority of cryptocurrency holders are still men.

This poses a problem for the companies betting on the mainstream adoption of cryptocurrency. At this point, they’ve already tapped into that core base of Bitcoin enthusiasts, namely Millenial men. But how do they reach more women? Or Gen Xers? Or Baby Boomers?

Crypto finance company Circle thinks accessible, educational resources are the answer. As of today, the company has added a new feature (pictured above) to their crypto investing app, Circle Invest. Their hope is that simple, jargon-free explainers — sort of a ‘Cryptocurrencies for Dummies’ built into the app — will make it easier for new demographics to get their foot in the door of the crypto universe and learn a thing or two along the way.

“A lot of the apps that exist on the market are geared toward folks that understand the market already and unfortunately, that tends to be men,” Circle’s head of product Divya Agarwalla told TechCrunch.

The inspiration for the new feature came after the results of a study showed a serious lack of diversity among crypto investors. The study, commissioned by Circle, surveyed 3,000 Millennials, Gen Xers and Baby Boomers in the U.S. and found that Millennial men are more than twice as likely to invest in crypto in the next year.

For anyone that has attended a blockchain event or crypto conference, this probably isn’t news. According to Coin.dance, roughly 95 percent of Bitcoin “community engagement” comes from men.

A strategic attempt to tap into a new user base is a natural step for Circle, which has long had ambitions of becoming the PayPal (and Venmo) of cryptocurrency.

Most people are familiar with Circle’s consumer-facing payments app, Circle Pay, though the company also operates a trading desk called Circle Trade, as well as Poloniex, another exchange platform the company tacked on via its acquisition of the company of the same name earlier this year. That deal, according to Fortune, was worth some $400 million.

Circle has raised about $250 million in venture capital funding to date from IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group, Pantera, Blockchain Capital, Goldman Sachs, Tusk Ventures and more. A $110 million round in May valued the company at $3 billion. 

ICOs are increasingly just for venture capitalists

The rollercoaster-get-rich ICOs of 2017 are over — crypto companies are waking up to the idea that VC investors aren’t so bad after all.

Companies used initial coin offerings (ICOs) to raise some $5.5 billion in cryptocurrency-based funding last year. As an emerging investment system with no regulation, nearly anyone was allowed in. The knock-on effect was that many who rode the wave made huge profits, often into the millions of U.S. dollars, as a 10X return seemed to become the minimum standard among those getting crypto-rich.

The trend went into overdrive in 2018, when the price of Bitcoin hit a peak of nearly $20,000 and Ethereum notched $1,200. ICO funding hit $6.3 billion in only the first three months of the year, as noted by Coindesk, but, fast forward six months and a new trend has emerged. Public ICOs, which allow anyone to invest, are increasingly replaced by a new approach of limited, private sales that consist only of accredited investors and close connections. Many ICOs today include no public sale component, with retail investors forced to wait until a token is listed on an exchange.

Private sale only

Telegram’s huge $1.7 billion ICO best exemplifies the change.

ICOs in 2017 began to include a private pre-sale before the ‘open’ public sale stage, the idea being to attract big bucks and in some cases give incentives like discounts. But Telegram opted to keep its entire sale public. It also stuck to accepting money from accredited investors in the U.S. — those who are legally certified to make investments — rather than opening its doors to anyone wanting to own a piece of its token sale.

That’s a trend that has been repeated in other ICOs, including the recent $32 million “seed” round for Terra and its stable coin project. Terra co-founder Daniel Shin explained to TechCrunch that it will hold a second round of private sale investment, but that’ll be reserved for investment professionals and others in the network.

Legally, of course, this makes absolute sense.

The SEC is steadily increasing its crackdown on ICOs, and it has long been standard for companies planning ICOs to overlook citizens of the U.S, China and often other countries where the legalities are unclear from taking part in the sales. But, actually, the rationale of private sales goes beyond legalities.

Professional investor benefits

The crypto industry has woken up to the reality that getting your capital from a handful of professional investors can be more advantageous than a bunch of regular people.

For one thing, dealing with a dozen investors is far easier than a Telegram group that numbers tens of thousands. Professional investors are more accustomed to giving a company money and letting it use it independently, but retail investors in the crypto space tend to be more demanding and unrealistic as they seek a quick return on their money. While liquidity is a major appeal for all in an ICO, VCs tend to hold a longer-term approach than retail investors who look to flip and move to the next money-making opportunity. Or, in times of downturn such as right now, investors have deeper pockets to ride out recessions.

There’s a popular refrain that ICOs mean not having to deal with “Evil Venture Capitalists”, but a community of retail investors is demanding in its own way. Plenty of ICO projects waste time and precious resources putting out mundane press releases that are devoid of news just to produce something that they hope will placate their thirsty community of retail investors, and miraculously give their token a price jump. For example, inking a “strategic partnership” with the American Chamber of Commerce Korea isn’t news — getting actual sales is.

This kind of distraction and allocation of resources makes no sense when you are setting out building a company or a product, which ultimately the founders of these projects are doing. As any experienced founder or investor will say, retaining focus is key in those early times.

Added to that, professional investors can actually help with the building by leveraging their network. Whether that is assisting on hiring in the competitive blockchain industry, introducing potential customers — American Chamber of Commerce Korea eat your heart out — bringing on other investors, etc.

That’s why in the aforementioned case, Terra opted to bring four crypto exchanges into its private sale — no doubt their influence will be key in building what remains a hugely ambitious project. Other companies that raised large ICOs, including TenX and MCO, have publicly expressed interest in holding new investment rounds to bring in professional VCs. That’s because money alone won’t open doors, but often connections can.

To recap: professional VCs can be more trusting, less of a distraction and more useful, but there are some instances in which a more open public approach should be a part of an ICO. That’s when it comes to building a community.

The exception: Community

The term “community” has been thoroughly bastardized by ICOs, but there are some projects that — at least on paper — can benefit by allowing specific types of people, people that will use the product, to get involved early.

Huobi, the exchange, developed a token for its users earlier this year, while chat app Line is also minting a token that it hopes will be used as part of its messaging platform. In both cases, neither company held an ICO, but they did use a crypto token to build a community.

Civil, the startup hoping to ‘fix’ media using the blockchain, is holding an ICO that’s open to members of the public. That’s also a community play, as the CVL token will be required to create newsrooms on its platform, and also to interact with them, such as challenging stories written by reporters.

Other technical projects out there are doing the same — focusing squarely on the community they are building for and adopting lower target figures for their ICO fundraising.

The technology space is so vast that there are exceptions, but it is certainly notable that there are relatively few credible projects planning ICOs that include retail investor participation. A report co-authored by PwC shows that the general pace of ICO investing settled in Q2 2018. If you ignore outliers such as Huobi, Telegram and EOS — the $6 billion project that fundraised for a year — then activity has certainly settled down after an explosive 12-months of growth.

Increased stability is likely to mean that the trend of private sales continues. Traditional VCs are launching dedicated crypto funds and those in the crypto space are formalizing investment vehicles of their own, all while the SEC and other regulators across the world intensify their gaze on ICOs. VC capital is likely to play a more pronounced role in funding ICOs than ever before.

That’s not to say that the retail investment phase is over. Speaking at TechCrunch Disrupt last week, Coinbase CEO Brian Armstrong sketched out his vision of the future in which all company cap tables are “tokenized.”

He foresees retail investors across the world being free to invest in security tokens that operate as a more accessible offshoot to traditional investment systems like the New York Stock Exchange, the NASDAQ etc. Whether that extends to participation in ICOs themselves remains to be seen.

Coinbase CEO Brian Armstrong believes retail investors have a big future in the crypto market

Disclosure: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

The Winklevoss stablecoin is one small step toward crypto acceptance

A stablecoin is a cryptocurrency pegged 1-to-1 with another “stable” currency. In most cases, these coins are pegged to the US dollar and, as such, allow for true transfers of actual fiat currencies between parties using the blockchain. If you’re nodding off right now thinking about this, I would posit that these moves, however minor right now, are an important step forward in cryptocurrency acceptance.

The latest stablecoin to hit the virtual streets is the Gemini Dollar. This coin comes on the heels of the much-ridiculed Tether, a stablecoin created in 2014 that has been the the brunt of much criticism including suggestions that the team has been artificially pumping the currency with wash trades.

The new currency by Winklevoss-run Gemini is pegged directly to the US dollar on the Ethereum blockchain. This means that for every Gemini Dollar there is one actual dollar in a bank account. The Gemini Trust Company holds the deposits and has been officially accepted by the New York Department of Financial Services, the regulatory body associated with banking and finance.

The GD, in other words, is the first stablecoin to gain a truly official imprimatur.

“As the financial technology marketplace continues to evolve, New York is committed to fostering innovation while ensuring responsible growth. These approvals demonstrate that companies can create change and strong standards of compliance within a strong state regulatory framework that safeguards regulated entities and protects consumers,” said Department of Financial Services Superintendent Maria T. Vullo.

From the release:

DFS issued a limited purpose trust company charter to Gemini in October 2015 to operate a virtual currency exchange through which it offers customers services for buying, selling, sending, receiving, and storing virtual currency. DFS issued a limited purpose trust company charter in May 2015 to itBit, now Paxos Trust Company, which operates the itBit exchange, to offer services for buying, selling, sending, receiving, and storing virtual currency.

The NYDFS requires that the Gemini dollars “are fully exchangeable for a U.S. dollar” and that Gemini will maintain records of their movement. The requirements also include controls including AML and OFAC controls to present money laundering or terrorist financing. An independent accountant will examine the fiat-holding bank account to ensure that all of the stable coins are accounted for. You can convert and withdraw Gemini Dollars directly onto the Ethereum blockchain.

What all this means is that there is now a stable, regulated coin that should offset some of the traditional volatility of crypto. It’s an interesting – if limited – move by a big player in the crypto space.

Crypto market crashes after Goldman reportedly scraps trading plans

The crypto market is down significantly today, practically across the board of all coins, following a report that claims Goldman Sachs has backed down on plans to start a dedicated cryptocurrency trading desk.

Bitcoin is down over five percent in the last 24 hours, but ‘altcoins’ have been hit harder. Ethereum (down 14 percent), XRP (down 13 percent), EOS (down 16 percent) and Litecoin (down 11 percent) are seeing bigger drops, according to data from Coinmarketcap.com.

Business Insider reported this week that Goldman has backed down on its aspiration to enter crypto trading due to continued uncertainty around regulation. That’s according to sources, although it does appear that the bank is holding off making a full-on commitment to crypto.

“At this point, we have not reached a conclusion on the scope of our digital asset offering,” a Goldman spokesperson told Reuters in a statement.

Added to that, there may also be some concern around a Reuters reported that claims the EU is looking into regulating crypto. The organization is said to be preparing a report that proposes regulation of crypto exchanges and ICOs.

95 of the top 100 cryptocurrencies have dropped in valuation over the last 24 hours

Goldman has never gone public with its intention but reports first surfaced of its plans back in December 2017. That period was one of the peaks for crypto. During a bull run in December and January, the value of Bitcoin touched almost $20,000, that’s a record high and significantly higher than today’s price of just under $7,000.

So, in addition to regulatory concerns, the fact is that there is ongoing uncertainty around Bitcoin and the crypto more generally from an investment perspective. While it is worth noting that, counter to that, many in the industry believe price stability has many benefits because it allows a stronger focus on technology and product, it is clearly a problem for banks like Goldman which are ultimately focused on making money.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

The collapse of ETH is inevitable

Here’s a prediction. ETH — the asset, not the Ethereum Network itself — will go to zero.

Those who already think that ETH will not see real adoption — thanks to a failure to scale, to adopt more secure contract authoring practices, or to out-compete its competitors — don’t need to be convinced that a price collapse would follow as a consequence.

But, if one believes that Ethereum will succeed beyond anyone’s wildest dreams as a platform then the proposition that ETH (as a currency) will go to zero will take a bit more convincing running a substantial share of the world’s commerce securely.

So here’s how Ethereum ends up succeeding wildly but ETH becomes worthless. Ethereum’s value proposition, as given by ethereum.org, is as follows:

Build unstoppable applications

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.

These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.

This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middleman or counterparty risk.

If Ethereum succeeds on its value proposition it will therefore mitigate external risk factors for decentralized applications.

İstanbul, Turkey – January 28, 2018: Close up shot of Bitcoin, Litecoin and Ethereum memorial coins and shovels on soil. Bitcoin Litecoin and Ethereum are crypto currencies and a worldwide payment system.

No Future for ‘Gas’

There’s no value proposition for ETH in the official description. Perhaps this omission is because ETH’s value seems so obvious to the Ethereum Foundation that it is hardly worth mentioning: $ETH fees (dubbed ‘Gas’) is how you pay for all this.

If the concept of gas isn’t immediately obvious, let’s expand the metaphor: The Ethereum network is like a shared car. When a contract wants to be driven by the shared car, the car uses up fuel, which you have to pay the driver for. How much gas money you owe depends on how far you had to be driven, and how much trash you left in the car.

Gas is a nice metaphor, but the metaphor is insufficient as an argument to support non-zero $ETH prices. Gasoline actually burns inside an internal combustion engine; an internal combustion engine will not work without a combustible fuel. $ETH as Gas is a metaphor for how gasoline is consumed; there is no hard requirement for Gas in an Ethereum contract.

(Photo by Manuel Romano/NurPhoto via Getty Images)

Buying the “BuzzwordCoin”

Suppose we’re building a new decentralized application, BuzzwordCoin. By default, following a standard ERC-20 Token template, every transaction on BuzzwordCoin will pay gas in $ETH. Requiring every BuzzwordCoin transaction to also depend on ETH for fees creates substantial risk, third party dependency, and artificial downwards pressure on the price of the underlying token (if one must sell BuzzwordCoin for ETH ahead of time to run a BuzzwordCoin transaction, then the sell-pressure will happen before the transaction requires it, and must be a larger sale than necessary to ensure sufficient funds to cover the transaction).

Instead of paying for Gas in ETH, we could make every BuzzwordCoin transaction deposit a small amount of BuzzwordCoin directly to the block’s miner’s address to pay for the contract’s execution. Paying for Gas in a non-ETH asset is sometimes referred  to as economic abstraction in the Ethereum community.

The revised BuzzwordCoin contract has no functional dependence on ETH. We’re able to incentivize miners to mine transactions without paying any fees in ETH whatsoever.

If the BuzzwordCoin contract has non-transactional contractual clauses — that is, a functionality that should be regularly called by any party for tasking like computing and updating cached statistics in the contract — we can specify that the miner performing those clauses receives coins from an inflation or shared gas pool. In the shared pool, all fees for user’s transactions in a specific contract are paid to the contract’s wallet. A fee dispensing contract call performing the non-transactional clauses releases the fee to the miner (this bears some semblance to Child Pays for Parent in the Bitcoin Ecosystem).

Battling the economic abstraction

There are four main counterarguments to economically abstracting Ethereum: the lack of software support for economic abstraction; difficulty in pricing many tokens; the existence of contracts not tied to tokens; and the need for ETH for Proof-of-Stake. While nuanced, all four arguments fall flat.

Software Support: Currently, miners select transactions based on the amount of Gas provided in ETH. As ETH is not a contract (like an ERC-20 token), the code is special-cased for transactions dealing in ETH. However, there are efforts to make Ethereum treat ETH less special-cased and more like other ERC-20 Tokens and vice-versa. Weth, for instance, wraps ETH in a 1:1 pegged ERC-20 compliant token for trading in Decentralized Exchanges.

Detractors of economic abstraction (notably, Vitalik Buterin) argue that the added complexity is not worth the ecosystem gains. This argument is absurd. If the software doesn’t support the needs of rational users, then the software should be amended. Furthermore, the actual wallet software required for any given token is made much more complex, as the wallet must manage balances in both ETH and the application’s token.

Market Pricing: To mine on Ethereum with economic abstraction, miners simply need software which allows them to account for discrepancies in their perceived value of active tokens and include transactions rationally on that basis.  Such software requires dynamically re-ordering pending transactions based on pricing information, gleaned either through the miner’s own outlook or monitoring cryptocurrency exchanges prices.

Vlad Zamfir argues that the potential need to monitor market information on prices makes economic abstraction difficult.

However, miners requiring pricing information is already the status quo — rational actors need a model of future ETH prices before mining (or staking) to maximize profit against electricity costs, hardware costs, and opportunity costs.

Non-Token Contracts: Not all contracts have coins, or if they do, they may not be widely recognized, valuable, and traded on exchanges. Can such contracts pay fees without ETH?

Users of a tokenless contract can pay fees in whichever tokens they want. For example, a user of TokenlessContract can pay their fees in a 50/50 mix of LemonadeCoin and TeaBucks. To ensure liquidity between users and miners with different assets they would pay or accept fees with, a user can simply issue multiple mutually-exclusive transactions paying with fees in different assets.

Specialized wallet contracts could also negotiate fees with miners directly .  A miner could also process transactions paying fee with an asset they do not want if there is an open Decentralized Exchange (DEX) offer to exchange the fee asset for something they prefer —  it is possible to create DEX orders for paying fees which allowing only a block’s miner to fill a user’s offers in proportion to the fees that a user has paid in that block preventing the case where a user’s fee diversifying offers are taken by non-miners.

Proof-of-Stake: Without ETH, a modified version of Proof-of-Stake with a multitude of assets could still decide consensus if each node selects a weight vector for the voting power of all assets (let’s call it HD-PoS, or Heterogeneous Deposit Proof Of Stake). While it is an open research question to

show under which conditions HD-PoS would maintain consensus, consensus may be possible if the weight vectors are similar enough.

Proofs of HD-PoS may be possible by assuming a bound on the pairwise euclidean distance of the weight vectors or the maximum difference between any two prices. If such a consensus algorithm proves impossible, the failure to find such an algorithm points to a more general vulnerability in Ethereum PoS.  

Assuming a future where ETH’s main utility is governance voting, why wouldn’t all the other valuable applications on Ethereum have a say in the consensus process? Rolling back actions in a valuable token contract by burning ETH stake could be a lucrative business; if HD-PoS is used such attacks are impossible.

Vitalik Buterin (Ethereum Foundation) at TechCrunch Disrupt SF 2017

ETH’s ethereal value

If all the applications and their transactions can run without ETH, there’s no reason for ETH to be valuable unless the miners enforce some sort of racket to require users to pay in ETH. But if miners are uncoordinated, mutually disinterested, and rational, they would prefer to be paid in assets of their own choosing rather than in something like ETH. Furthermore, risk-averse users would want to minimize their exposure to volatile assets they don’t have to use. Lastly, token developers benefit because pricing in their native asset should serve to reduce sell-pressure. Thus, in a stateless ecosystem, replacing ETH is a Pareto Improvement (i.e., all parties are better off). The only party disadvantaged is existing ETH holders.

  • The author holds Stellar and Bitcoin,  but has relatively little holdings in other cryptocurrencies. He has previously done a Virtual Lapel Pin Sale (like an ICO) for his cause, “Fuck Nazis”, on top of Ethereum which faced both government censorship and censorship from the Ethereum community. 

Terra is an ambitious crypto project to build a stable coin through e-commerce

Four of the world’s largest crypto exchanges are leading a $32 million investment in an ambitious venture out of Korea that’s aiming to develop a new stable coin using e-commerce as the lynchpin.

Global exchanges Binance Labs, OKEx, Huobi Capital, and Dunamu — the firm behind Korea’s Upbit — have all poured capital into Terra, a crypto project whose founding team is headed by Daniel Shin, founder and president of TicketMonster — the $1.7 billion Korean e-commerce firm that has been owned by both Living Social and Groupon.

This is the first time global exchanges have come together on a deal, and the stellar line-up of investors includes Polychain Capital, China’s FBG Capital, Hashed, 1kx, Kenetic Capital and Arrington XRP — the crypto fund from TechCrunch founder Michael Arrington .

The deal is a token-based investment round, as opposed to equity. Shin told TechCrunch that Terra plans to hold a private sale in a couple of weeks to add additional capital to this “highly strategic” set of investors. The company will eschew a public sale with retail investors, but it plans to hit exchanges — you guess which ones… — in the coming months.

Terra co-founder Daniel Shin also started Korean e-commerce unicorn Ticket Monster

Yet another stable coin

Stable coins, for the uninitiated, are tokens that are designed to remain at the same price… stable, as the name suggests.

They’re typically pegged to the U.S. dollar and are highly sought after in the world of crypto, where stability is hard, nay impossible, to find. Today, stable coins are mostly used for trading and exchange-related purposes and Tether, the controversial project backed by Bitfinex, is probably the best-known. There’s plenty of criticism around Tether, and research has suggested that Bitcoin’s phenomenal rise in late 2017 — when its value it a record high of nearly $20,000 — was fuelled by Tether manipulation.

Arguably, Tether is the best example of a stable coin, and since it is propped up by the injection of hundreds of millions of dollars on a routine basis, it would be fair to say that the concept has never worked.

That viewpoint might be a little cynical, and Terra believes it can make the concept work through mass adoption of its token. Its gateway for that is to leverage e-commerce in Asia.

While Terra is marketed as a stable coin in its whitepaper and other documents, it would be fair to see it as more of a fintech platform — think Alibaba’s Alipay on the blockchain. That’s because the project is kicking off by working with a slew of e-commerce firms across Korea and other parts of Asia.

Shin explained that Terra aims to complement existing payment solutions by offering its own Stripe -like payment option that would allow customers to pay using its coin (a name hasn’t been decided on yet). For merchants, that could mean circumventing existing payment networks like Visa, which take a cut of all revenue. On the other side, the project could help offer incentives for consumers to buy using the token, for example, through discounts that don’t add to the e-commerce platform’s cash burn.

Because buying crypto and using wallets still isn’t mainstream — and it is a clunky experience — there’s also the potential for consumers to earn tokens when they use platforms, Shin said. The token would be spendable across all supported e-commerce services.

Already, Terra has secured quite a list of partners. There are 15 e-commerce services signed up — including Woowa Brothers, Qoo10, Carousell, Pomelo, and Tiki — which between them boast a cumulative 40 million customers and some $25 billion in annual transaction volume.

Shin said the project is targeting Asia because it is the world’s most active crypto region. He believes that Terra can take a slice of the payments behind the partner businesses — he’s targeting payment GMV in the region of “tens, if not hundreds, of millions of U.S. dollars” before the end of 2019 — and in doing so set itself up for becoming a stable token by virtue of usage.

Of course, it also has its own stability engine. That features a second token — Luna — which Shin said acts as collateral by accumulating revenue by taking the small transaction fee incurred when spending the Terra token. Shin said an algorithm will use Luna to buy back the Terra token in high season to keep the price stable, while it will burn a portion of tokens to maintain stability during periods of recession. A more detailed explanation of the ‘reserve ratio’ can be found in the Terra whitepaper.

Singapore’s Carousell is among the e-commerce partners slated to work with Terra

Alipay on the blockchain

What makes Terra particularly interesting is that the intention is to build the next Alipay.

Alibaba affiliate Ant Financial, which runs Alipay, may be little known in the U.S. and Europe, but it is dripping with ambition. It is tipped to go public in the next year or two, and already it is valued at over $100 billion following a recent $14 billion funding round.

Alipay is China’s dominant mobile payment service, and it has spawned a digital bank, lending products and more. Ant claims over 500 million users, and it has spent close to $1 billion on a series of aggressive expansions across Asia and beyond as it aims to replicate its formidable Chinese business outside of the country.

Shin explained that he believes Terra could do the same in Asia where, like Alipay, it will try to leverage e-commerce (in this case its partner businesses) to go beyond payments and into financial services.

Shin explained that the plan is to roll out with initial e-commerce partners in Korea during Q4 of this year, before widening to cover Southeast Asia and beyond in 2019. One year later — 2020 — is when he believes Terra will have the required base to welcome developers and third-parties.

“Many projects open up a developer platform prior to adoption,” he explained in an interview. “Once we have tens of millions, if not hundreds of millions, of users is when we’ll open up.”

Exactly what that platform will look like is unclear at this point. Terra is designing a multi-chain structure in order to accommodate numerous chains with its stable coin concept, but it is yet to decide which will primary and therefore the platform for third-party development. Ethereum has tended to be that canvass, but the project is a challenging phase right now so holding out isn’t necessarily a bad thing at this point.

Terra is a hugely ambitious project in the field of often-impossible ideas that is crypto.

Taking on Alipay head-to-head is tough, developing a stable coin is impossible, but doing both lengthens the odds further still. But yet Shin and his team have won the backing of a collective of top names in the crypto space. That, if nothing else, is a good reason to keep an eye on this project.

The odds may be long but, as Shin explains it, you can readily argue that there is upside to having so many big-name partners on board.

“The worst case scenario with this project is a reverse ICO with over 10 e-commerce companies,” he explained. “But the best possible outcome is that we build a platform that competes with Alipay on the blockchain.”

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Security tokens will be coming soon to an exchange near you

While cryptocurrencies have generated the lion’s share of investment and attention to date, I’m more excited about the potential for another blockchain-based digital asset: security tokens.

Security tokens are defined as “any blockchain-based representation of value that is subject to regulation under security laws.” In other words, they represent ownership in a real-world asset, whether that is equity, debt or even real estate. (They also encompass certain pre-launch utility tokens.)

With $256 trillion of real-world assets in the world, the opportunity for crypto-securities is truly massive, especially with regards to asset classes like real estate and fine art that have historically suffered from limited commerce and liquidity. As I’ve written previously, imagine if real estate was tokenized into security tokens that you could trade as safely and easily as you do stocks. That’s where we’re headed.

There’s a lot of forward momentum around tokenized securities, so much so that based on their current trajectory, I believe security tokens are going to become a common part of Wall Street parlance in the near future. Investors won’t just be able to buy and sell tokens on mainstream exchanges, however; “crypto-native” companies are also throwing their hats into this ring.

The starter pistol has been fired

The race is on to bring security tokens to the masses

 

Because Bitcoin and other cryptocurrencies are not classified as securities, it’s been much easier to facilitate trading on a large scale. Security tokens are more complex, requiring not just capabilities around trading, but also issuance and, critically, compliance. (See more of my thoughts on compliance here.) It’s a major undertaking, which is why we haven’t seen the Coinbase or Circle of security token trading emerge yet (or seen these companies expand their platforms to address this—more on that later).

Meanwhile, regular exchanges are blazing the trail and moving into providing tokens trading. The founder and chairman of the company that owns the NYSE announced a new venture, Bakkt, that would provide an on-ramp for institutional investors interested in purchasing cryptocurrencies. Last month, the SIX Swiss Exchange—Switzerland’s principal stock trading exchange—announced plans to build a regulated exchange for tokenized securities. The trading and issuing platform, SIX Digital Exchange, will adhere to the same regulatory standards as the non-digital exchanges and be overseen by Swiss financial regulators.

This announcement confirms a few things:

  1. Most assets (stocks, bonds, real estate, etc) will be tokenized and supported on regulated trading platforms.

  2. Incumbents like SIX have a head start due to their size, regulatory licensing and built-in user base. They are likely to use this advantage to defend their position of power.

  3. Most investors will never know they are using distributed ledger technology, let alone trading tokenized assets. They will simply buy and sell assets as they always have.

I expect other major financial exchanges to follow SIX’s lead and onboard crypto trading before long. I can imagine them salivating over the trading fees now, Homer Simpson style.

Live shot of financial exchanges drooling over crypto trading fees

 

Crypto companies are revving their engines

The big crypto companies are preparing to enter the security token arena

Stock exchanges won’t have the space to themselves, however. Crypto companies like Polymath and tZERO have already debuted dedicated platforms for security tokens, and all signs indicate announcements from Circle and Coinbase unveiling their own tokenized asset exchanges are not far behind.

Coinbase is much closer to offering security token products after acquiring a FINRA-registered broker-dealer in June, effectively backward-somersaulting its way into a state of regulatory compliance. President and COO Asiff Hirji all but confirmed crypto-securities are in the company’s roadmap, saying that Coinbase “can envision a world where we may even work with regulators to tokenize existing types of securities.”

Circle is also laser-focused on security tokens. Circle CEO and co-founder Jeremy Allaire explained the company’s acquisition of crypto exchange Poloniex and launch of app Circle Invest in terms of the “tokenization of everything.” In addition, it is pursuing registration as a broker-dealer with the SEC to facilitate token trading—it could also attempt to take the same backdoor acquisition approach as Coinbase.

If there’s a reason Circle and Coinbase haven’t moved into security token services even more rapidly, it’s that there simply aren’t that many security tokens yet. Much of this is due to the lack of compliance and issuance platforms, keeping high-quality securities on legacy systems issuers feel more comfortable with. As projects like Harbor ramp up more, this comfort gap will grow smaller and smaller, driving the big crypto players deeper into security token services.

The old guard vs. the new wave

Expect a battle between traditional and crypto exchanges.

 

This showdown between traditional finance incumbents and crypto giants will be worth watching. One is incentivized to preserve the status quo, while the other is looking to create a new, more global financial system.

The Swiss SIX Exchanges of the world enjoy some distinct advantages over the likes of Coinbase — they have decades of traditional financial operating experience, deep relationships throughout the industry and a head start on regulatory compliance. Those advantages probably mean that such incumbents will probably be the first to make infrastructural and logistical upgrades to their systems using security tokens. The first time you interact with a security token, it is likely to be through the Nasdaq.

Having said that, incumbents’ greatest disadvantage will be transporting an old-finance-world mentality to these innovations. Coinbase, Circle, Polymath, Robinhood and other newer players are better suited to harnessing the stepchange elements of security tokens — particularly asset interoperability and imaginative security design.

University of Oregon Professor Stephen McKeon, an authority on security tokens, told me that “the potential for programmable securities to enable the expression of new investment types is the most exciting feature.” Harbor CEO Josh Stein explained why private securities in particular will be transformed: “by automating compliance, issuers can allow their investors to trade to the limit of their liquidity across multiple exchanges. Now imagine a world where buyers and sellers around the world can trade 24/7/365 with near instantaneous settlement and no counterparty risk – that is something only possible through blockchain.”

Those hypergrowth startups are going to experiment with these new paradigms in ways that older firms won’t think of. You can see evidence of this forward thinking in Circle’s efforts to build a payment network that allows Venmo users to send value to Alipay users — exactly embracing interoperability, if not in an asset sense.

The race is on

As Polymath’s Trevor Koverko and Anthony “Pomp” Pompliano have been saying for the past year, the financial services world is moving towards security tokens. As the crypto economy matures, we’re inching closer to a new era of real-world assets being securitized on the blockchain in a regulatory compliant manner.

The challenge for both traditional and crypto exchanges will be to educate investors about this new way to buy and sell investments while powering these securities transactions via a smooth, seamless experience. Ultimately, security tokens lay the groundwork for granting investors their biggest wish — the ability to trade equity, debt, real estate and digital assets all on the same platform.

Ethereum’s falling price splits the crypto community

Hello And Welcome Back To The Latest Edition Of All The Cryptos Are Getting Rekt Right Now.

Crypto bloodbaths have become fairly common in 2018 — mainly because of the insane growth in 2017 — but we’ve not covered them all because they are so numerous and often include so-called ‘flash crashes’ or small drops, but the fall happening today is worth noting for several wider reasons.

Primarily that’s because this is a major test for Ether — the token associated with the Ethereum Foundation that is the second largest cryptocurrency by volume — has been on a downward spiral with little sign of change.

Ether, which is the preferred platform of choice for most developers building on the blockchain, is down nearly 17 percent over the past day. That’s erased billions of dollars in paper (crypto) value as the bear market for cryptocurrencies continues to pull markets south.

The drop also marks the first time ever that the price of an Ether has fallen below its valuation over one year: one Ether is worth $266 right now at the time of writing, versus $304 on August 14 2017. The token has been steadily falling since early May, when its peak value was $808, and as the lynchpin for many ICO project tokens, its demise has sent the value of most other tokens down, too.

Just looking at Coinmarketcap.com this morning, all but two of the top 100 tokens are down over the last 24 hours with many losing 10-25 percent of their value over the past day. Bitcoin, too, has dropped below $6,000, having topped $8,000 for a time last month.

Ether’s plummet below $300 has sparked a mixed debate among those in the crypto community. The token had been held as visionary, an improvement on Bitcoin that gives developers a platform to build on — whether it be decentralized apps, decentralized systems or more — but that hasn’t been reflected in in this months-long price retreat.

Certainly, two founders who spoke TechCrunch and have held ICOs expressed a belief that Ether “needs to find some price stability” to allow the focus to become about product and not just ‘get rich’ speculation. Of course, it helps that the two founders and many of those who held token sales have long since sold the Ether or Bitcoin they raised in exchange for fiat currency. Indeed, if their token sale was last year, the chances are they got a lot more real-world cash than they initially bargained for or would get now.

But still, the idea of consistency is shared by others who are in crypto professionally. That includes investors like Kenrick Drijkoningen, who is in the midst of raising a $10 million fund for LuneX, a spinout of Singapore-based VC firm Golden Gate Ventures.

In an interview last week, Drijkoningen told TechCrunch that raising a fund and doing deals in a ‘low tide’ market like now beats attempting to do the same amid a frothy period with hype and peak valuations — one Ether was worth nearly $1,400 in January, for example. A number of others VCs have long said that, ultimately, stability is good for the ecosystem.

Vitalik Buterin is the creator of Ethereum

But, on the other side, there are more pessimistic voices.

Among some investors canvassed by TechCrunch, the sense is that with the downturn of the ICO funding boom that fueled much of Ethereum’s rise, there may be less incentive to hold as the broader market’s interest in the cryptocurrency wanes.

For one Bitcoin bull, the intrinsic value of Bitcoin as an immutable, decentralized ledger acts as a more powerful draw than the perceived mutability and centralization that the Ethereum platform offers.

“People are also beginning to understand the unique value of an immutable, decentralized ledger, and recognize that Ethereum is not that,” the investor wrote in an email.

Another long-term problem that Ethereum faces, according to this investor, is that the promise of decentralized apps backed by the token is yet to be released. Crypto Kitties, a smash hit earlier this year, has faded and now there’s competition as Bitcoin’s Lightning Network is adding nodes and apps — referred to as LApps — which can operate in a similar but leverage the Bitcoin ledger.

It’s still early days, of course, and markets will always rise and fall, but this is the first big test for Ether and Ethereum. Beyond the sport of price speculation, it’ll be worth watching to see where this heads next.

Note: One of the authors of this post — Jon Russell — owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Turkish Bitcoin Volume Soars as Traders Flee the Lira

Turkish Bitcoin Volume Soars as Traders Flee the Lira

Trading volume on Turkish cryptocurrency exchanges has soared over the last 24 hours as citizens have sought refuge from the weakened lira. Turkey’s national currency has faced a torrid time on a day when President Recep Tayyip Erdogan accused the US of trying to “stab it in the back”. Trade volume on domestic exchange Btcturk is up 350% in the last 24 hours, with BTC capturing 38% of the action.

Also read: Crypto Cafe and Coworking Space ‘Hash House’ Established in Xi’an, China

Turks Seek a Haven from the Crumbling Lira

The Turkish lira (TRY) plunged to record lows against the US dollar today as tensions between the stricken nation and western counterparts ramped up. The embattled President Erdogan sees Turkey’s financial straits as a US-led plot to cripple the country, as opposed to the consequences of an imprudent economic policy that’s lead to rising inflation and spiraling debt accrued in foreign currency, exacerbated by borrowing to fund a construction boom.

Turkish Bitcoin Volume Soars as Traders Flee the Lira
The Turkish lira hit new lows against the US dollar today

While Turkey’s interior ministry has been threatening to take legal action against almost 350 social media accounts deemed to have made “provocative” comments against the lira, cryptocurrency holders have been busy exchanging their TRY for BTC, XRP, and ETH. After bitcoin core and the dollar-pegged tether (USDT), ripple and ether formed the leading trading pairs at Btcturk over the last 24 hours; the site also offers LTC.

Turkish Lira is the Third Worst Performing Fiat Currency This Year

Only the Venezuelan bolivar and Sudanese pound have performed worse than the Turkish lira, which is down 45% this year. While BTC has lost close to 54% this year, it’s looked a veritable fortress of strength against TRY of late, and with limited options for swapping their lira into a more stable currency, Turkish citizens have flocked to bitcoin. In addition to Btcturk, which has exchanged close to $14 million of BTC in the last 24 hours, regional exchanges Paribu, Koinim, and Koineks have witnessed a major increase in volume this week, as has Localbitcoins.com.

Turkish Bitcoin Volume Soars as Traders Flee the Lira
Trade volume (in USD) on Btcturk this week

Amidst rumors of Turkish banks ending support for customer accounts holding USD, and President Erdogan desperate to quell the flight to the currency whose issuing nation he blames for the lira’s plight, citizens are left with few places to turn. (Tether is the closest most Turkish traders can get to the US dollar right now.) While predictions of ‘hyperbitcoinization’ in Turkey may be premature, it is evident that cryptocurrencies such as BTC are proving a lifeline in nations whose fiat currency is devaluing by the day.

Do you think the Turkish lira can recover or will the flight to cryptocurrency increase? Let us know in the comments section below.


Images courtesy of Shutterstock, Xe.com, and Coingecko.


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Crypto exchange Binance buys Trust Wallet in first acquisition deal

Binance, the world’s largest crypto exchange based on volume, has made its first acquisition after it snapped up mobile wallet company Trust Wallet.

The deal is undisclosed, but Binance confirmed to TechCrunch that the compensation is a mixture of cash, Binance stock and a portion of its BNB token. U.S.-based Trust Wallet will remain independent following the deal, but Binance, which is headquartered in Malta these days, will assist running the admin side of the business and in non-technical areas like marketing.

“The Trust Wallet team shares the same values as us and the products are very complementary,” Binance CEO Changpeng “CZ” Zhao told TechCrunch in an interview. “For users who like to withdraw funds into a wallet now we have a product they can use.

“We plan to keep the app as independent as possible. There will be more features going into it but not so much from a Binance demand perspective. We are like the addition of a godfather for the baby… there’ll be some cooperation,” he added.

Trust Wallet may not be as well known as wallets such as Imtoken, Delta, or Blockfolio, but Zhao called the company a “diamond in the dirt” with “strong technical skills.”

“They haven’t done much marketing which is where we can help. They are strong technically but don’t like doing marketing, HR etc… now merging with us they don’t have to worry about money,” he added.

Money is, indeed, not a huge issue for Binance these days. The company made a profit in the region of $450-$500 million (dependent on token prices) from its first year of operations. That’s according to figures from the company, which uses 20 percent of its quarterly profits to buy back and ‘burn’ its BNB token.

(Left to right) Binance CEO Changpeng Zhao and Trust Wallet founder Viktor Radchenko

Indeed, Trust Wallet did hold an ICO to raise capital but last month it decided to cancel the sale and return money to its investors.

Trust Wallet founder Viktor Radchenko, who is based in Mountain View, told TechCrunch that the decision was about getting back to developing the app and technology.

“I’m a product person and developer. I spend my time thinking about solving problems for the end-user. I never liked dealing with investors and money people, it is so much hassle,” he said. “Having resources will help us grow quicker and so I can focus on adaption for the users that don’t even have wallets.”

Radchenko said he is now setting his sights on growing the team from five developers right now to 10. The app is currently focused on Ethereum and Ethereum-based tokens, but the plan is to add support for other blockchains including Bitcoin, EOS, NEO.

Trust Wallet will also be one of a number default wallets supported by Binance’s upcoming decentralized exchange, which will remove the shackles of a decentralized exchange and allow users to trade directly with one another. Zhao said the highly-anticipated project is in “active development” although he was hesitant to put a date on when it will be ready.

This Trust Wallet deal is likely the first of many strategic acquisitions for Binance. The company announced plans for a $1 billion fund this summer, and Zhao said that the intention is to make 10-20 investments per year but also augment that with three to four strategic.

“We’re looking for strong tech teams,” he explained. “Acquisition will be a very key component to continuing to grow and contributing to this industry.”

Zhao said that Binance had considered buying companies to accelerate the development of its decentralized exchange, but it wasn’t able to identify the right match.

“Our requirements are very specific, we are looking for speed, there’s no need for fancy smart contracts,” he explained. “We didn’t find the right match for an acquisition [but are] still very open to someone who makes an ultra-fast blockchain.”

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Bolivar ‘Anchored’ to the Petro to Be Issued in August, Maduro Says

Bolivar ‘Anchored’ to the Petro to Be Issued in August, Maduro Says

A new Venezuelan fiat currency, ‘anchored’ to the nation’s crypto, the Petro, is expected to start circulating in the second half of August. The news was announced by president Maduro himself, along with other measures intended to improve the economic situation in the country. The ‘Sovereign Bolivar’ will have less zeros than the inflated ‘Strong Bolivar’.

Also read: Vietnamese Regulator Tells Firms and Funds to Stay Away From Crypto

Pegged to the Petro? Bolívar Soberano Said to Bring Hope to Venezuela

Bolivar ‘Anchored’ to the Petro to Be Issued in August, Maduro SaysBolívar Soberano (Sovereign Bolivar), the new Venezuelan currency claimed to be anchored to the national cryptocurrency, the Petro, will start circulating on August 20, president Maduro announced on state TV. The Sovereign Bolivar will have five zeros less than the current, highly inflated “Strong Bolivar”, or Bolívar Fuerte (VEF), which replaced the original Venezuelan bolívar (VEB) about a decade ago. As for the oil-backed El Petro, Nicolás Maduro promised that the state-issued crypto “will end up being consolidated technologically and financially” to “permeate all the national and international economic activity.”

“The economic reconversion will start on August 20, definitively, with the circulation and issuance of the new Sovereign Bolivar, the new monetary cone that is going to have a new method of anchoring the Petro,” said the Venezuelan head of state, as quoted by the Telesur television network. The measure, president Maduro added, will serve “to stabilize and change the monetary and financial life of the country in a radical manner.”

Maduro went on to emphasize that a “productive, diversified and sustainable economic model must definitely be born” in the South American country, which has experienced hyperinflation and struggled with deep economic woes for years. The socialist leader stressed that the reconversion and the anchoring to the Petro represent “a great hope.” No details have been revealed on the exact mechanism of the link to the Venezuelan cryptocurrency.

Building New, Post-Oil Economic Model

“I ask for your confidence, I ask for your support, beyond ideologies and political positions, because Venezuela needs this change, the mafias are over!” said the leftist Venezuelan president, who also announced other measures aimed at improving the country’s suffering economy. Among them, a new decree assigning the Ayacucho 2 Block (over 29 billion barrels of oil) to Venezuela’s central bank to bolster its reserves, and legal amendments concerning crimes related to foreign exchange. “We have the correct vision of what the economic future in Venezuela should be, above all, we will achieve it,” Maduro stated.

According to the Bolivarian leader, his nation’s economy has been hurt by two major factors. “Venezuela has been trapped during these years by two fundamental variables: the exhaustion of the oil model […] and the establishment of a mechanism of economic warfare, as part of a political strategy,” he explained. The president believes that the “oil-dependent model has come to an end and it will not return,” and Venezuela has to continue its efforts to build a new economic model. This one, Maduro stressed, should be “diversified, productive, relevant, [and] advanced.”

Bolivar ‘Anchored’ to the Petro to Be Issued in August, Maduro Says

The Venezuelan bolivar is one of the most inflated national currencies in the world. For example, the new 100,000-bolivar note was reportedly exchanged for less than $2.50 when it was issued last November. Inflation is now expected to reach 1 million percent by the end of 2018, according to the IMF, quoted by Bloomberg. The exact price of the bolivar is hard to determine as the restricted access to foreign convertible currencies in the country has created a sizeable black market with its own rates that differ considerably from the official one.

In March, Nicolás Maduro announced he “decided to remove three zeros from the current money and replace these bills with new ones.” The denomination of the bolivar was meant to “guarantee the country’s economic stability,” as he put it. The Venezuelan president showed specimen banknotes that were supposed to enter into circulation this past June but the launch was later delayed until August 4. The release of the newly announced Sovereign Bolivar, expected on the 20th of August, is supposed to fulfil that promise.

Do you think Venezuela will be able to overcome the hyperinflation with its new fiat anchored to the Petro cryptocurrency? Share your expectations in the comments section below.


Images courtesy of Shutterstock, Michael Novogratz (Twitter).


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Malta paves the way for a decentralized stock exchange

Malta AKA “Blockchain Island” has been making waves lately in the world of cryptocurrency and governance. Their latest move involves the crypto exchange Binance and the ICO builders at Neufund.

The plan is simple: Neufund will help MSX, the Malta Stock Exchange’s skunkworks, create tokenized securities. Binance has agreed to carry these securities on its own exchange, essentially creating a straight path to regulated tokens via the already regulated Malta Stock Exchange. In short, this enables Malta to become the first country to be able to offer tokens alongside traditional equities as well as an easy way to go public in multiple ways including via ICO.

The plan is still in the pilot stage. This year they will begin “the public offering of tokenized equity on Neufund’s primary market which may later be tradable on Binance and other crypto exchanges pending regulatory and listing approvals” said Neufund CEO Zoe Adamovicz.

“We are thrilled to announce the partnerships with Malta Stock Exchange and Binance, that will ensure high liquidity to equity tokens issued on Neufund. It is the first time in history, that security tokens can be offered and traded in a legally binding way. The upcoming pilot project will allow us to test the market’s reaction and realize the overall project idea in an environment with minimized risk.” said Adamovicz.

“We are delighted to welcome Neufund as our key partner in building a Blockchain-based exchange that is fully integrated with established financial markets. With the upcoming pilot project we become a worldwide pioneer in digital finance,” said Joseph Portelli, chairman of the Malta Stock Exchange.

This move is interesting in that it offers a parallel track to companies wishing to go public via token sales. While even the terminology isn’t completely hashed out in regards to the future of these systems, having a spot like Malta lead in the matter of token sales selling alongside equities is a solid decision. Malta is increasingly becoming the testbed for these sorts of experiments and, even if this is not yet a real project, it could create a turnkey solution for ICO launches on the island.