Tag: Blockchain

Is it difficult to build a successful crypto exchange? Cryptonomos asks exchange executives

There are several hundred crypto exchanges in the world, a lot more than stock and commodity exchanges taken together. And new crypto exchanges open almost every day even on the bear market. Cryptonomos has asked several executives of crypto exchanges about how to develop a profitable business and attract customers. Technology, reputation, fees, customer support and trust are cornerstones of successful business
 The success of the crypto exchange starts from its website, it shows whether the exchange is reliable, or not, says Kriptomat CEO Srdjan Mahmutovich. “We noticed our new clients first put and withdraw some small amount of money, that they are testing us, whether our solution works. Once we pass the test, they could start trusting us,” he says.  Changelly.com has designed a simple interface for a broad audience, says its CEO Ilya Bere: “Even though regular customers and professional traders often use our product, the service is more focused on a mass audience. I'm talking about those who come to the crypto industry as a beginner and independently study all the market aspects aiming to diversify their portfolios”. “To make a successful exchange is not easy at all,” says CHAOEX CEO Jason Wang, “this business is related with people, so the community is the most important to help us growing during this crypto winter. We design new operation activities to build community. Recently one of our users noticed that he never saw so many activities on other platform besides CHAOEX. Even when the market is dump, our users can earn. And we entertain them too.” According to Jason Wang, CHAOEX team should understand at least three aspects: trading system, blockchain knowledge and community.   Technology Technology is of crucial importance, say all executives who participated in our survey. “Technology is crucial to advancing this mission; our technologists collaborate with researchers and managers to design, engineer, and run exchange platforms which enable systemization and scale in everything we do,” says Andrei Popescu, Co-Founder of COSS.IO.  “The basic IT knowledge helps us build high concurrency system, this is the basement of exchange, then we can list all individual (custom) blockchains besides ERC20 tokens, then understanding the trading system to improve user experience”, says CHAOEX CEO Jason Wang. According to him, CHAOEX can upgrade the platform 3 times a week as the whole intellectual property is owned by it co-founders, which is a big advantage, because they can change the platform as users wish.  Customer Support: time-consuming and expensive  One of our biggest problems is customer support, says Alex Strześniewski, Business Development Director at CoinDeal. “Since day 1 we've customer support chat, which is currently available in 6 languages and as we grow there's going to be more. Sometimes one of the founders of Coindeal, is on Telegram, answering questions or me. Our customers really enjoy being able to see someone on another side who cares about the customers and their money,” he adds. Kriptomat offers online support in 20 languages, says its CEO Srdjan Mahmutovich: most people who register at Kriptomat have to pass KYC, and it is important that they should understand the exchange’s employees. “We have very fast and helpful customer service,” says Jason Wang, “we always consider each user's request personally and there were not a single problem that we couldn't solve. We gathered 100K+ new users from Nov to now, that's a strong number that inspires us to move forward." Trust “Building trust is the most important thing and other criteria are also important but they can be managed more easily,” says Max Grain, Product Management Executive at Bitlish, “people value trust, if customers have a positive experience with an exchange then any problem which may arise can be solved." According to Johnny LYU, VP at KuCoin, “trust is a must feature for an exchange to grow bigger”. Trust is based on two pillars – exchange security and its relations with customers. For example, Stellarport chose a decentralized model to protect customers’ funds. “Trust is a big factor. At centralised exchange there can be hacks. Stellarport doesn`t control the funds, so the risk of hacks is minimum,” says its Co-Founder Ishai Strauss. Customers’ trust is the result of the exchange’s operational history, openness, and customer relations, says Max Grain from Bitlish. “To build trust will never be easy,” says CHAOEX CEO Jason Wang, “we try to keep users updated with the problems we have and take their advice and comments. Besides, our customer service talk to our users as they are friends. Users really like it and step by step trust us.” Coindeal chose creative approach to transfuse trust in their customers, tells Alex Strześniewski: “One of the founders had a genius idea. Now we are an official global sponsor of Wolferhampton (football team in English Premier league). No company sponsors a Premier League team, if they want to make a scam exit in 6 months, right? I think that was a brilliant move not only in terms of acquiring new customers, but building trust.” Since more and more newcomers begin to trade at crypto exchanges, we asked Alex Strześniewski (Coindeal) for a list of things one should check before making the first trade. Reputation The best way to find out about an exchange is to search through reviews from individual users and well-known industry websites. Fees Most exchanges should have fee-related information on their websites. Before joining, make sure you understand deposit, transaction and withdrawal fees.  Payment Methods What payment methods are available on the exchange? Credit & debit card? Wire Transfer? PayPal? If an exchange has limited payment options, then it may not be convenient for you to use it.  Verification Requirements Although verification, which can take up to a few days, might seem like a pain, it protects the exchange against all kinds of scams and money laundering. Geographical Restrictions Make sure the exchange you want to join allows full access to all platform tools and functions in the country you currently live in. Exchange Rate Different exchanges have different rates. It’s not uncommon for rates to fluctuate up to 10% and even higher in some instances. 24/7 User support  Effective user support services are a critical element for the development of any online service. Most crypto exchanges do not provide support in real time. In some cases, users even have to wait for a few days for an exchange to reply, sometimes even weeks. This article is based on the exclusive interviews with top-managers of several crypto exchanges. Cryptonomos is most grateful to Andrei Popescu, Co-Founder of COSS.IO; Johnny Lyu, KuCoin VP; Srdjan Mahmutovich, Kriptomat CEO; Jason Wang, CHAOEX CEO; Max Grain, Product Management Executive of Bitlish, changelly.com CEO Ilya Bere, Alex Strześniewski, Business Development Director at CoinDeal, and Stellarport Co-Founder Ishai Strauss for their time and expertize. 

Articles/January 29, 2019

Central Banks Think Crypto will Fail – This is Why They’re Wrong

We typically think of crypto as a threat to the traditional financial system, and therefore to the current industry incumbents and institutional players - from JP Morgan and HSBC to Central Banks and the Federal Reserve. However, this over-simplified perspective ignores the fact that the current industry incumbents are actually among the blockchain technology's biggest investors, and that some Central Banks have been inspired by crypto to explore the possibility of Central Bank-issued  digital currencies. So, is crypto a threat or an opportunity for these giant companies and institutions? The answer is both. Blockchain technology is an opportunity for traditional players because it has the potential to eliminate bottlenecks that exist within the current financial paradigm. Visa is exploring blockchain as a way to facilitate faster cross-border transfers, while Deutsche Bank believes they can aid faster clearance of securities trades. With few exceptions, the opportunities that traditional players see in adopting blockchain technology are those which would improve back-end processes, creating monetary savings. The position of traditional incumbents who see blockchain technology as an opportunity rather than a force of disruption feels a little similar to the position of Blockbuster CEO Jim Keyes in 2008, who famously said: "Neither RedBox nor Netflix are even on the radar screen in terms of competition." Ten short years later, Netflix is worth $118 billion and Blockbuster is largely out of business. Incumbents limit their perspective to what they can imagine within the current paradigm, in a way that tends to leave them flat-footed in the face of disruption. They can imagine new technologies as complimenting their existing services, but not disrupting them. But blockchain and crypto-native startups, like Netflix and the Internet, are a genuinely disruptive force and they're not going away. However, the fact that crypto is a threat does not mean that traditional institutions necessarily view it as such. In fact, many of them remain very sceptical. Earlier this year, the research bureau of the People's Bank of China published a paper written by one of its employees on "What Blockchain Can Do and What it Can Not". The paper's central conclusion was that cryptocurrencies will not replace the fiat monetary system, but that blockchain technology itself holds promise. In other words: Blockchain, not Bitcoin. Sound familiar? More recently, Nic Carter - Cofounder of coinmetrics.io - took to Twitter to publish his account of the sentiment of talks held at DC Fintech week at the International Monetary Fund (IMF). One panel was made up of central bankers - Nic summed up their sentiment like this: "- they are laser focused on central bank digital currency - they have 0 concern about BTC/crypto threatening dominant monetary regimes - general view that everything can be regulated  - do not hate crypto, just indifferent" This echoes the sentiment of the paper from The People's Bank of China - central banks are confident in the superiority of fiat and aren't worried about the potential of cryptocurrencies to topple it. If this position sounds overconfident, that's because it is. The fiat monetary system is failing, and it's not clear if things can be made better within the system. John Hopkins University economist Steve Hanke believes that prices in Venezuela are doubling every 52 days, having risen by 12,875% during 2017.  Inflation and quantitative easing - flooding the economy with more cash to stimulate growth, as was done throughout the West in the early 2010s - cause asset price bubbles, an upwards transferral of wealth from the many to the few and steal wealth from savers and wage workers. The national debt of the US is $21.6 trillion, and it's ordinary workers who will have to pay this off as the the value of their salary is inflated away. Fiat is failing, and crypto is offering a genuine alternative. The positive thing for crypto believers is that what central banks think probably doesn't matter too much. Disruptors don't need permission from incumbents. Disruptors innovate to better meet people's needs, and incumbents simply see their relevance decline as the new world is created around them.

Articles/December 11, 2018

In November Bitcoin Lost 36% of its Value, but It Is Here to Stay

The bloodbath on the crypto market that we all witnessed last week swept away several hundred dozens of dollars of capitalization. The market sell-off and “hot news”, including the articles about Chinese crypto miners that are selling mining equipment ‘by kilo’, brought to life all kinds of speculations. Last week we wrote about the possible reasons for the crypto capitulation. Now let’s talk about what to expect next. Take a deep breath and relax, this is a long story. I do not know how much Bitcoin will cost by the end of this year or by the end of June, 2019. But some people seem to know: they expect the price to be anywhere from $2500 to $25,000. You can read their predictions here, here and here.  I am not so brave to make my own forecasts, but I would like to remind you several well-known stories. The first is about the tulip mania in the Netherlands when fortunes were lost after the bubble burst. Still, the Netherlands remains the biggest market of tulip distribution.  The second story is about the first banknotes that were issued in Stockholm also in the 17th century. The idea belonged to Johan Palmstruch, founder of Stockholms Banco. Unfortunately, the printed banknotes were not secured, and Stockholms Banco issued too many. Palmstruch was sent to prison, but soon was reprieved as the acknowledgment of the significance of his invention. The other two cases are more recent: the bubbles on the dotcom and mortgage markets. In all the four cases the bubbles burst, people and corporations lost money, but after some time a new market emerged which is still flourishing. I would dare to propose that the developments on the crypto market will be similar. There will be several months (let’s hope that not years) of crypto winter, and then a new reality will emerge. There might be some bad news on the ICO market in this new reality. “The ICO market is dead — over,” says Barry Silbert, the founder of crypto investment fund Digital Currency Group. But Bitcoin and cryptocurrency market are here to stay despite the bear market: “We’re 5, 6, 7, times through this now. The first couple of times you see your balance sheet drop by 80 percent, it’s kind of rough on the stomach. By the third or fourth time, you get used to it. Now we view this as a fantastic opportunity.” “Somehow bitcoin has lived in a swamp and survived,” Jeff Sprecher, chairman of the NYSE and CEO of its parent company, Intercontinental Exchange. “The unequivocal answer is yes [crypto will survive].” Institutional investors are knocking on the door While crypto investors are nursing their wounds, a lot of interesting things are happening below the surface. According to Silbert, institutional investors have not slowed down, and “behind the scenes companies are being built that will provide infrastructure for them. Massive on-boarding might happen as early as in 2019, he says. One of the game-changing developments was in October 2018 when Harvard, Dartmouth, MIT, Yale, and Stanford announced that their university endowments had started investing in cryptocurrencies.  And the University of Basel made the creator of ethereum, Vitalik Buterin, an honorary doctor. Here are some examples of infrastructure that will soon be in use: In January 2019 Bakkt, the cryptocurrency trading exchange owned NYSE’s parent company, opens a futures market that delivers physical Bitcoin to its investors. Its biggest rival, NASDAQ, will do the same in Q1 2019. One of the biggest US crypto exchanges, Coinbase, has launched over-the-counter (OTC) trading for institutional customers. “We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading,” - Christine Sandler, head of sales at Coinbase, said. Fidelity Investments, one of the biggest asset managers in the world, is expanding its institutional crypto asset platform to include trading services for the top five to seven cryptocurrencies by market capitalization.  Fidelity has 13,000 institutional clients, and they are interested in bitcoin and ether because they make up a large part of the current market cap, explained Fidelity Digital Assets CEO Tom Jessop. Goldman Sachs, the biggest investment bank, has been clearing Bitcoin futures contract for its clients since June, said its CEO David Solomon. However, Goldman Sachs is not able to hold cryptocurrencies for its clients, because it needs regulatory approval to do this. Bitcoin technology blockchain is also making gradual advance to the new sectors. The South Korea is completing its voting system on distributed ledger technology.  And the United Arab Emirates want to conduct half of its government’s transactions on a blockchain platform by 2021. And just one more figure to conclude. In November, when the trading volume was high, Bitcoin made over $8 billion a day, which is comparable of $12 billion per day for Mastercard, the second largest credit card network in the world.

Articles/December 4, 2018

China: The World’s Biggest Blockchain and Mining Hub

China, the Asian fintech giant, has been through a real ‘crypto whirlwind’ since 2013. Judging by the fact that Chinese regulators banned ICOs and cryptocurrency exchanges last year, many now think of the country as rather unfriendly to blockchain tech. However, that’s easy to contradict. Today we’ll shed some light on China’s attitude to crypto, particularly to cryptocurrency mining, and its future plans in relation to it.  ‘Ambiguity’ is China’s middle name. In 2013 the People’s Bank of China issued a warning notice on the risks of Bitcoin and prohibited financial institutions from engaging in crypto-related activities. Three years later however the Chinese government apparently forgot about this and added blockchain to its five-year technology plan instead.  Then, a real ‘hardcore’ crackdown began in 2017. In September, the Chinese government imposed regulation banning all ICOs and crypto-to-fiat exchanges. Three months later, in January 2018, China imposed regulations banning P2P sales and over-the-counter markets. Later, China finished crypto enthusiasts off by blocking access to foreign crypto exchanges and ICO websites. Despite the fact that the country’s government did not manage to eliminate crypto-related operations for good, its crackdowns made the community skeptical about China’s environment. Before the aforementioned bans were enacted, crypto mining in China had been flourishing and had attracted dozens of giant players from all over the world who wished to locate their facilities in the ‘red superpower’. China was and, perhaps surprisingly, still is home to the world’s largest mining manufacturers, including Bitmain, Canaan, Ebang, to name a few.  To prove how vital the country’s role in the mining market has been, at its peak China accounted for three quarters of the world’s Bitcoin mining operations and over 95% of the Bitcoin trading volume.  Two years ago China was the obvious, if not the only, choice for mining enthusiasts. Low electricity costs were the true temptation for miners, along with an accessible, low-cost and high-efficiency mining hardware. Provincial governments are happy to welcome crypto-based entrepreneurs as they use excessive electricity, meaning more revenue for the local grid. However, recent statistics show that mining in China indeed requires too much electricity (to compare, it requires the equivalent of the power of three nuclear reactors). When the government’s attitude toward crypto became hostile, several large mining entities unsurprisingly began to look elsewhere for places to base their operations. One of those is Bitmain, a somewhat notorious mining company, which decided to expand its activity to Europe, North America and the Middle East in order not to be affected by a possible request to make an ‘orderly exit’ from the country.  Nevertheless, many still remain bullish on blockchain and crypto in China, based on recent statements made by the country’s President, Xi Jinping. In late May, he mentioned blockchain as a “new generation” technology: “The new generation of information technology represented by artificial intelligence, quantum information, mobile communication, internet of things, and blockchain is accelerating breakthroughs in its range of applications.” Following this statement, on June 4, the country's leading state-run broadcaster - China Central Television (CCTV) - issued an hour-long special about the ledger. During the show, it was said that blockchain is "10 times more than that of the internet" in terms of economic value.   Now it’s time to stop here and ask ourselves: How on earth do these severe crypto-bans coincide with a truly supportive attitude to blockchain? That can be easily explained. China's policies suggest a “Blockchain > Crypto” attitude. In other words, the government is much more interested in the underlying technology rather than in cryptocurrencies themselves.  China sees the enormous potential of blockchain, as it always does when it comes to the adoption of innovative new technology. Dominating the blockchain development industry can bring a lot of economic wealth to the region.  And this process has already begun. For instance, Hangzhou, the home city of Alibaba, has committed $1.6 billion to blockchain company investments. Plus, the People’s Bank of China (PBoC) is currently developing a blockchain-based digital currency. 'Decentralized' power in the hands of centralized giants is a hell of an idea - a terrifying idea. If such a blockchain-based digital currency were to be adopted, the PBoC could easily access all kinds of information about the economic activity of its citizens, thus becoming not a decentralized financial institution, but a veritable dictator.  Blockchain is still a unique and unprecedentedly traceable instrument which can allow the financial authorities of all countries to monitor small-scale transactions and reduce fraud, counterfeiting, and money laundering. By all accounts, we should expect China to be one of the leaders of a new blockchain-based economy in the nearest future. Photo by Henry & Co. on Unsplash

Articles/November 29, 2018

What Universities Offer Blockchain Education

It is very, very silly to say that the crypto market is dead. And I will tell you why. All CEOs and startup founders know how painful talent shortages can be for business. For fintech and blockchain startups, a lack of qualified professionals is one of the main reasons for startup failures. And hardly a day passes without some media or Blockchain bloggers harping on about the imminent decline of blockchain and crypto currency-related businesses. True, the last several months have been difficult for the sector and the bear market has been rather harsh and exhausting. We are tired too, but we're also defiant. So today we're going to look into a phenomenon that's developing under the very nose of those who take pleasure in the supposed decline of crypto. It's been estimated that around 1% of the global population owns cryptocurrencies. In the US this figure rises to 9% and among students is as high as 18%, as shown by a recent Coinbase survey. In 3 to 5 years these young people will roll their eyes when asked a simple question about crypto for the hundredth time - just as their parents did 25 years ago when Internet became widespread. A recent Cointelegraph article quotes a doctoral student at Stanford Benedikt Bünz who says that “if you’re an expert in cryptocurrencies and cryptography you’ll have a difficult time not finding a job.” And little wonder: the best blockchain engineers can command a salary above $250,000, says Jerry Cuomo, IBM’s vice-president of blockchain technologies. Universities understand this. Many are investing heavily in creating curriculums around blockchain that reflect the fact that blockchain technology is a fundamentally interdisciplinary topic related to business, economics, computer science and law, reports CoinDesk. In October, Coindesk published its ranking of the top-10 US universities offering blockchain education. The ranking takes into account the University’s access to the blockchain technology industry (5 percent), the number of blockchain clubs on campus (25 percent) and the number of blockchain-related courses (70 percent). The names on the list are impressive: Stanford University (94%), the University of California, Berkeley (88%), New York University (84%), Massachusetts Institute of Technology (MIT) (68%), Cornell University (65%), Georgetown University (50%), Harvard University (47%), Duke University (41%), Carnegie Mellon University (35%), and the University of Pennsylvania (33%). This goes to show that blockchain is not a marginal but a mainstream discipline, firmly on the radar of the best universities in America. South Korea went even further. This summer it opened the Walton Blockchain Institute that plans to cultivate 10,000 blockchain talents. Currently, Walton offers a six-month educational program; upon its completion, the institute will offer students job recommendation as well as support for startups. In Europe it is the UK that offers most blockchain courses. Oxford, Cambridge, LSE, The University of Edinburgh, Imperial College London and more offer courses covering subjects from fintech and blockchain to cryptocurrencies and digital disruption.  The University of Oxford also offers an online blockchain course.  There are chances to study blockchain in Switzerland, Cyprus, Singapore and Australia. China is planning to establish a blockchain research center, and several top-tier Chinese universities are stepping up their efforts to patent blockchain applications developed on campus. China hosts at least eight top universities that offer blockchain courses. In three to five years there will be thousands of people who bought their first bitcoins in their late teens and for whom having several crypto accounts is as normal as having accounts in US dollars, euros and yuans. This young generation will help the world to meet its needs by providing the expertise to facilitate more and more blockchain and tokenized projects. For investors, there is still time to find good projects that will become the new blockbusters in some 8-10 years.

Articles/November 27, 2018

Ethereum 2.0 – Millions of Transactions Per Second?

Vitalik Buterin, founder of Ethereum, used his recent keynote speech at Devcon 4 to provide a warts-and-all account of the development of the Ethereum network since the publication of its Whitepaper in 2014. Buterin's presentation also looked forward, exploring the specifications and implications of the different projects which encompass Ethereum 2.0 - a milestone which is 'really no longer so far away': "Ethereum 2.0 combines a lot of different features that we have been talking about, researching and actively building for several years. They are finally about to come together in one cohesive whole" Those 'different features' include the much-anticipated Casper - the switch from Proof of Work to Proof of Stake, and Sharding - requiring nodes to validate only pieces of the database rather than the whole. Each of these developments is aimed, at least in part, towards achieving greater scalability. The question of scalability is pertinent for investors, as the extent to which Ethereum can scale will have a profound effect on how many decentralized applications (DApps) will be built upon it. This is likely to influence the value of ether - the native token of the Ethereum network. Analysts have for years debated whether Ethereum is capable of achieving the scalability, in terms of transactions per second, that will be needed to run many different types of DApps. In a recent OmiseGo AMA, Buterin suggested that through a combination of Layer 1 and Layer 2 solutions, Ethereum could potentially reach millions of transactions per second: "Sharding is a Layer 1 scalability solution...that makes the blockchain itself have higher scalability. Plasma is a Layer 2 solution. Layer 1 and Layer 2 are complimentary because the scalability gains from Layer 1 and Layer 2 improvements do ultimately multiply up with each other... ...So if you get a 100x from Sharding and a 100x from Plasma, those two give you a 10,000x scalability gain, which basically means blockchains will be powerful enough to handle most applications most people are trying to do with them” Transaction speed has presented a serious bottleneck to scale for blockchains generally, but Ethereum's historical emphasis on security has seen it facing greater concerns than its competitors.  Specifically, the issues that Ethereum has faced have led to an emergent narrative that Ethereum's share of the DApp market will only extend to those that need the greatest level of censorship resistance. This has benefitted competitors such as EOS who instead employ a lesser, 'secure-enough', attitude to censorship resistance in favour of building greater scalability and transaction speed into their model. EOS' 2017 ICO raised $4 billion. The developments which Buterin describes, if all goes to plan, would see them far outstrip the transaction throughput of Visa - 24,000 per second - which is often seen as the benchmark for blockchain scalability. Buterin pushes back on the significance of this milestone however, instead looking forward to the world of the internet-of-things, the needs of which will be on the order of 100,000s per second. What does this mean for investors? The question for investors is two-fold. First: "Which smart contract platform is likely to capture the most use cases and users?" Second: "Will the value that this smart contract platform creates be captured by its token?" There's no simple answer here, and the best thinkers in the space are divided. Multicoin Capital have provided the best exploration of these questions that I know of in two blog posts.  The first, The Smart Contract Network Effect Fallacy, advocates for the idea that smart contract platforms will not benefit from network effects in the same way that platform businesses, such as Facebook or Uber, do. This is because users won’t have to know or care about which blockchain they’re interacting with, and most DApps will be interoperable across chains. This would mean that the native token of smart contract platforms is unlikely to capture much value, regardless of the scale that the network achieves - a bearish stand on ether. The second, Paths to Tens of Trillions, pits founders Kyle Samani and Tushar Jain against each other in a debate which explores what kind of cryptocurrency or token is most likely to become sound money.  In advocating for the utility hypothesis, Tushar Jain believes that the most useful cryptotoken is likely to become the most valuable. This isn't a direct advocation of a smart contract platform's native token, as the argument could extend to a DEx or governance token as well.  However, in a Web 3.0 enabled world, it's hard to envision what kind of token could become more useful than one that enables the smart contract platform itself - a bullish position on ether. So, it's not clear what Ethereum 2.0 means for ether as a potential investment. However, successful blockchain scalability improvements would have wider ramifications than those for ether. The Bigger Picture Ethereum stands at the forefront of what blockchain technology can do. The viability of many potential use cases of blockchain technology will be demonstrated by Ethereum and the specific features, protocols and applications it can support. A scalable Ethereum network would facilitate the operation of thousands of DApps, and succeed in moving more and more financial and online services over to the blockchain. Ethereum 2.0 is therefore an important step along the way toward a decentralized future. One emergent narrative right now is that of Bitcoin maximalism - the belief that Bitcoin, a censorship-resistant store of value outside the reach of nation-states and Central Banks, is the only use-case that blockchain technology will ultimately serve. One central tenet of this thesis is that blockchains are slow and cumbersome, and therefore unsuited to any other application. An improvement to the number of transactions per second that Ethereum can facilitate would therefore provide a powerful refutation of Bitcoin maximalism, and a bullish signal for the viability of a much larger blockchain technology market. Blockchain enthusiasts and crypto investors should therefore be keeping a close eye on the success of Ethereum 2.0.  One reason is that the timing and magnitude of future market bull runs will likely be influenced by it. Another is that it will provide a clue as to 'how deep the rabbit-hole goes', and how much of our future online and financial lives will be decentralized, supported by the blockchain. So, watch this space and stay tuned with Cryptonomos for further exploration of the world of blockchain and crypto.

Articles/November 20, 2018

The US: Mining Superpower or Land of Ambiguity?

With over thousand of different ever-expanding interpretations of uses for blockchain and cryptocurrency, it’s not surprising that many governments are showing a keen focus to the digital currencies and associated operations. Today we are going to take a broad look at cryptomining in the US – one of the most discussed tech pioneer in the world. So, it’s time to ‘Make Americans Mine Again’!   In March 2018, the United States Joint Economic Committee issued a report which officially endorses cryptocurrency and blockchain. However, for a layman miner, the US is one of the most complicated countries for getting involved in crypto mining. As we’ve already mentioned in our recent post, the US is mired in the ambiguity of legal system. It means that each of the state has its own ‘crypto legislation’. Literally, give an inch here – your mining process flourishes, give an inch there – it’s feasible and forbidden. Thus, it cannot be said whether the process is completely dead in the country or not. It depends on the state one is going to deal with crypto in.  To show the difference in the attitudes, let’s review several states. For instance, according to the variety of sources and rates, the most appropriate state for mining cryptocurrency in the US is Louisiana. Sandwiched between Mississippi and Texas, Louisiana has never been considered to be a safe haven for crypto miners, or indeed for anyone from the fintech sector.  Nevertheless, Louisiana has the cheapest energy rates in the entire country, when compared to other attractive regions including Idaho, Washington, Tennessee, and Arkansas. Unfortunately, a fertile environment for mining makes many people lose their heads. Recently, Louisiana Attorney General Jeff Landry opened a criminal investigation into his own office's information technology department, including its recently ousted director, amid allegations that former staffers tapped state resources to mine Bitcoin. Among the terminated employees were a systems administrator, a help desk manager, a litigation support coordinator and a human resources employee. Despite the above, crypto still has a legal status in the state. However, not every ‘Louisiana-like region’ in the US takes advantage of cheap energy rates. For example, Plattsburgh, New York, has become the first city in the US to ban cryptocurrency mining. A city council unanimously voted to impose the 18-month moratorium on Bitcoin mining to prevent miners from using the city’s cheap electricity. With accordance to Plattsburgh mayor’s words, Plattsburgh has the “cheapest electricity in the world” where residents pay only 4.5 cents per kilowatt-hour. For the sake of comparison, the US average is a little over 10 cents per kilowatt-hour. Industrial enterprises, including mining companies, pay even less - just 2 cents per kilowatt-hour. Nevertheless, the US attracts many large players on the mining market. The best evidence of this is the fact that 2 out of 5 largest mining facilities in the world are located in the US. Among them are $65-million Bcause LLC and Washington State-based Giga Watt mining facilities. The latter has more than 20k GPUs hosted. Noteworthy, team at Giga Watt designed so-called Giga Pods, a groundbreaking solution which takes advantage of mining hardware’s extremely high power density, avoids active cooling consumption, and saves power for high-efficiency computing. The US legal framework is far from ‘united’ when it comes to crypto regulation. It’s true: while some ban, others endorse, and there’s no common logic about it. One thing is clear: the harmonization and unification of regulations across the country would create a stable and conducive environment for private users and crypto-related businesses. That’s what the US government needs to focus on.  Next time we’ll take a closer look at the country’s most powerful rival in the mining market – China. Stay tuned for that!

Articles/November 13, 2018

The Holy Trinity: What Do the ‘Big Boys’ Think of Crypto?

For almost 10 years now, cryptocurrency has been one of the most discussed and controversial buzzwords in the financial sector. While some governments see great potential, even perhaps foreseeing an era of ‘blockchainization’, others are afraid of losing the ‘levers of influence’ on the traditional financial paradigms in their region and around the globe.  Having analysed and reviewed how the big players - including South Korea, the US and China - regulate crypto, we can conclude that all of these jurisdictions are adopting a broadly moderate or moderate-aggressive approach. Today we’ll take a closer look at each of these approaches, as well as the latest regulatory and legal developments in each country mentioned above. So, sit back and stock up on popcorn. The show has just begun! United States According to Cryptocompare, the US handles the second largest volume of Bitcoin transactions (roughly 26%). Another indicator of the US' power and relevance in the space is the number of crypto exchanges based in the country. However cryptocurrency is still not legal tender, as the Financial Crimes Enforcement Network’s guidance states. Right now, the US is losing the ‘crypto war’ due to the ambiguous nature of its legislation. While the United States House of Representatives has gone so far as to say that cryptocurrencies are the ‘future of money’, the same commitment has only been witnessed in some states and by a handful of regulators. For instance, the Securities and Exchange Commission (SEC) considers digital currency to be a security, while the Commodity Futures Trading Commission says crypto is a commodity. Such ambiguities serve to demonstrate, once again, that the US financial sector is overregulated and cumbersome. That’s why the majority of Americans aren't likely to benefit from the full integration of cryptocurrency into the financial system, with its superior simplicity and transparency, in short-term.  Nevertheless, the seeds of crypto development have been sown by the SEC and some local regulators. Last year, following the SEC’s move to regulate ICOs, the value of cryptocurrencies went up, as institutional investors gained more confidence in coin trading. The involvement of the SEC brought legitimacy to crypto trading, giving confidence to both existing and potential traders. Plus, several states have already passed supportive laws related to crypto. These are Arizona (recognition of smart contracts), Vermont (recognition of blockchain) and Delaware (pending initiative authorizing registration of shares of Delaware companies in blockchain-enabled form). South Korea  Lauded as one of the most technologically advanced countries in the world, South Korea has been pioneering within the ‘crypto revolution’. However, the country is currently perhaps most famous for its flirtation with the idea of banning cryptocurrencies and ICOs. To prove how influential the South Korean market is, we can cite the case of the ‘January collapse’.  On January 11 2018, South Korea - which had the world’s third-biggest crypto market at that time - announced plans to ban crypto trading altogether. Just a few minutes after the announcement, around $106 billion was wiped off the crypto market as Koreans withdrew from trading. The move by Korean authorities led to a massive worldwide sell-off throughout the month, sending the value of the top cryptocurrencies to a 2-month low. Despite despising crypto, the South Korean government is actually an ‘avid supporter’ of decentralized technologies. According to recent news, this summer the country pushed through accommodative legislations that would imply both tax reductions for new growth engine investment and the easing of requirements for new technology support, including blockchain technology investment support. China Here's an interesting observation: China is always associated with the color red. Its massive territory, painted in red on geographical maps, is the first thing to jump out at you. The same thing is true of ‘crypto maps’ too. China is famous for saying a hard ‘NO’ to crypto and ICOs.  However, China was actually titled the ‘King of Crypto’ in 2015-2016. The country used to be responsible for a vast majority of the global Bitcoin trade volume (95%) and for controlling about two-thirds of mining operations worldwide.  But then everything went downhill. It all started in the beginning of 2017 when the People’s Bank of China announced the investigation of the four major coin exchanges in the country. Following the announcement, mining faced serious crackdowns in the country, while the price of cryptocurrencies fell dramatically in value. Later in September, the Chinese government announced regulations that implied a ban of ICOs and crypto exchanges. New regulations affected every sphere of crypto, including P2P sales, over-the-counter markets, crypto-to-fiat exchanges, foreign crypto exchanges and ICO websites. Now the Chinese crypto community is expecting new legislation to hit the country. These expectations are possibly being driven by the newly elected governor of the People’s Bank of China, Yi Gang, who expressed a positive attitude towards blockchain and cryptocurrencies. Meanwhile, PBOC’s Institute of International Finance has released a report identifying cryptocurrencies as a top priority for 2018. This release served as a wake-up call for the community, and has breathed new life into the hope that China will come back into the crypto-friendly camp of nations.   Considering current levels of geopolitical uncertainty around the the world and the alarm expressed by some of the largest nations in relation to crypto, only one thing is clear just now: crypto is a priceless, unique, groundbreaking technology. It was once scarcely imaginable that the ‘empty-shell’ technology – as it has been called by naysayers - could create so much hype in the corridors of the world's most important institutions. Yet here we are.

Articles/October 25, 2018

The Construction Sector Badly Needs Blockchain, and is Likely to Get it Soon

The recent history of the US and EU construction sectors can be summed up in two sentences. First, there was a construction and mortgage boom. Then the boom became a bust, leading to the global financial crisis that began with the bankruptcy of Lehman Brothers 10 years ago. Since then the global construction market has recovered, reaching $10.6 trillion in 2017. It is currently expected to hit $12.7 trillion by 2022. It could be developing faster, but digital technologies and new investment are badly needed. The lack of each of these has created a crisis of confidence in the last few years. Now though, the construction sector - that for decades was the backbone of economic growth - is seeing technological adoption to rival some of the most innovative industries. According to Jones Lang LaSalle Inc, in the first half of 2018 investors poured a record-high $1.05 billion into construction-technology startups.  It is no longer an option to invest in technology, it’s an imperative, says Jones Lang LaSalle. The construction sector is getting used to 3-D printing, augmented reality, drones and…blockchain. Using blockchain and smart contracts will help to streamline processes in project development, eliminate the need for intermediaries or third parties, and reduce expenses. Every time a smart contract is fulfilled - the architect has completed his plans and designs, construction workers have built the first (or the last) floor and electricians have installed the necessary infrastructure - the operations are verified by the smart contract itself and the relevant sum of money is transferred automatically from wallet to wallet. The project manager pays only for the work that has been completed and his contractors and sub-contractors receive their wages without delay. Meanwhile there is no paperwork for any party and no need to pay intermediaries to facilitate the necessary transactions. Blockchain will also help project managers hire better sub-contractors and suppliers, quickly. The market is currently short of sub-contractors, and finding the right ones can delay work from being carried out and increase costs. However, companies whose sub-contractors' work were to be accounted for daily and paid for instantly would enjoy a competitive advantage. Some sub-contractors may also enjoy receiving tokens for their work, the value of which could increase in future. A number of organizations are already taking their first steps along this path. For example, the Dubai Land Department (DLD) is implementing a blockchain network to interface with all digital and manual processes across more than 200 combined projects in different stages of development. Blockchain technology should facilitate seamless exchanges between investors, buyers and developers - thereby reducing unnecessary time, effort and financial costs.  In the near to medium term, blockchain will help DLD to eliminate paper documents and introduce smart contracts to secure and simplify property transactions. On a longer time horizon DLD hopes to implement blockchain technology in even more spheres, from selling parking tickets to land & title deeds. Manhattan has gone even further. The East Village contains 12 condos, and each has been tokenized on the Ethereum blockchain. One of those luxury condos has recently been valued at $30 million. This gives those who cannot afford to buy a luxury condo the opportunity to invest in a small portion of one instead. To do this, investors need to buy a certain amount of tokens, which is much easier than using traditional bank financing. Tokenization is a win-win both for buyer and sellers because it saves them heaps of money and effort, according to managers of the East Village.

Articles/October 23, 2018

Blockchain in Your Plate

In 2017  the global counterfeit market reached $1.2 trillion; global GDP, meanwhile, was $75 trillion. For comparison, the size of the counterfeit market is a little less than the GDP of Spain but more than the GDP of Mexico, Indonesia, Turkey and the Netherlands. Many of us struggle to understand the scale of the counterfeit market. I did not think much of it for a long time either, until several years ago I went to Kuala Lumpur, where I was stunned by its street watch market. It is enormous. It covers several streets and offers a great variety, from watches that are indistinguishable from the authentic ones (and cost almost as much) to $5 fakes that only distantly remind one of the originals and do not work. Honestly, I do not care. Who cares about bags, shoes, cosmetics and watches that cost a fortune just because they have become a status symbol? Certainly, stakeholders of luxury brands should, but actually many seem to agree with me: luxury brands have been struggling for the last several years to keep their shares afloat. It is different with medicine and food. Here I want to be sure that the migraine or insomnia medication that I take is genuine, and the steak I order at my favorite restaurant does not come from a stock of beef that has been frozen for the last 50 years. But I can’t be sure that I buy genuine medicine. Do you remember the fake cancer drug scandal in the US in 2012? Globally, counterfeit medicine kills an estimated 1 million people a year. According to the World Health Organization, around 10% of medicines around the world are counterfeit and in some countries of Asia, Latin America and Africa this rate is as high as 30%. Patients and doctors often can’t tell the difference between authentic and fake medicine because criminals duplicate everything so well - from packaging to product shape and taste. Online pharmacies are just another side of the same problem. In some countries they are notorious for their lack of transparency, and are considered the mostly likely candidates to sell counterfeit drugs. In other countries, online pharmacies ask no questions when customers use one and the same prescription to buy a dangerous amount of their medication, often becoming addicted to it. Hopefully, the status quo will soon change. Pistoia Alliance estimates that more than 80% of pharmacy chains will adopt blockchain technology within five years to track the movement of drugs. Blockchain tech. will ensure the safety and security of the product, because each transaction will be noted and remembered by the blockchain. The FDA has been tracking drug shipments for some time already using special software, but blockchain is expected to make those operations far more efficient. The UK’s fastest growing online pharmacy, UK Meds, has entered an agreement to use blockchain solutions to prevent patients from making multiple orders. UK Meds handles around 4,000 patient prescriptions each day, and some addicts manage to cheat the system, the company says. Using blockchain technology, it will be able to create a unique identifier for each patient: this will prevent them from buying too many drugs. In Wyoming ranchers have begun to assign blockchain-facilitated tags to their calves (the price is $5 per tag). Wyoming is home to 2.1 million cows, and in 2017 its ranches generated $1.1 billion in cattle sales. With blockchain, information about what the cattle eats, what type of vaccines it has received, and if it was ever sick will be accessible to consumers. Consumers will benefit from this new transparency in a number of different ways. This solution is offered by a blockchain startup called Beefchain.io. It hopes that as soon as in 2019 consumers will be able to go to a store, scan a QR code and track the farm conditions of the beef they buy. So far six Wyoming ranches (out of 2,100) have partnered with Beefchain: local farmers hope that it will help to increase the value of their cattle by up to 20%. There are already several tracking partnerships in the agricultural sector: IBM Food Trust, Walmart, Carrefour’s traceability program for its premium farm products and Subway, who is currently testing a blockchain traceability project.

Articles/September 16, 2018