Their Goal: Make Cryptocurrency Less Scary

If you have a tough time with the idea of putting even a dollar of your net worth into a digital cryptocurrency — Bitcoin, Litecoin, Ethereum, and the like — no sensible person would blame you.

Aside from the price fluctuations, there’s the question of who’s protecting those digital assets. Is it an institution like QuadrigaCX, an exchange for cryptocurrency run from its founder’s laptop, which reportedly lost $140 million in customer funds after the founder died in India in December? Or one like Tokyo-based Coincheck, which had $532 million in cryptocurrency stolen by hackers in January 2018?

“Every time I see one of these exchanges get hacked, or the founder take off with money in some kind of scam, it’s another reminder of how immature this industry is,” says Matthew Walsh, a former Fidelity Investments vice president who helped launch a private fund that invested in cryptocurrency there. “It’s bordering on a joke how immature the infrastructure is — and how dangerous it is.”

But for a growing group of venture capital firms and startup companies in Boston, the dangerous and mostly unregulated realm of cryptocurrency represents an opportunity. They see these digital currencies — which can store value and operate independently of government-controlled monetary systems — eventually becoming as safe for investors as a Bank of America money market fund. That, however, is going to require a lot of new technology. Which they plan to build and sell.

Walsh’s new venture capital firm, Castle Island Ventures, is among them. After he and cofounder Nic Carter left Fidelity, they raised $30 million to invest in what Walsh says is a “whole new category of infrastructure” required to make cryptocurrency safer and more reliable.

Sharon Goldberg and Ethan Heilman cofounded Arwen, a Boston startup trying to make cryptocurrency exchanges more secure.

“The reason we launched the fund is we think a lot of these cryptocurrencies will be investible assets,” Walsh says — even if they don’t feel that way to most mainstream investors today.

Castle Island has already invested in six startup companies, Walsh says, and other local firms like General Catalyst, First Star Ventures, Highland Capital Partners, and Underscore VC have also been writing checks to fledgling cryptocurrency companies.

Highland and Underscore helped incubate a startup called Arwen, founded by a Boston University computer science professor and her doctoral student.

“We’re in the early days,” says Arwen CEO Sharon Goldberg. “But let’s go back to 1999 and using credit cards on the Internet. Nobody wanted to put their credit card number into a website. But you do today, because you trust the encryption. You see that little lock in your browser.”

Goldberg is taking a sabbatical from teaching to build the company, which has eight employees and earlier this month moved out of Underscore’s space into its own office.

She points out that cryptocurrency is designed to be a “decentralized” system — there’s no central bank regulating how much of it there is, just software code running on computers. Yet if you want to exchange one kind of cryptocurrency for another, or turn cryptocurrency into dollars or yen, you need to entrust that transaction to a centralized exchange. “Centralized exchanges are the way to trade this decentralized currency,” Goldberg says. “It’s strange.”

So Arwen is creating a layer of technology that would enable you to convert one currency into another securely, even if the exchange gets hacked or goes offline in the middle of a trade. Arwen’s technology is based on something called an “atomic swap,” which Goldberg explains using the metaphor of a briefcase full of cash. If two people intend to swap briefcases filled with two different kinds of currency, the risk is that you hand your briefcase to the other person and they run off. An atomic swap ensures that each person get the other person’s briefcase, even if the other person tries to split.

Late last month, Arwen launched a “sandbox” environment for demonstrating the technology, and Goldberg says the company is talking with prospective customers. “The majority of our customer calls are outside of the US,” Goldberg says. “In Japan, for instance, there are just a massive number of companies creating ways to buy cryptocurrencies.”

Why is the United States behind? “Regulation is stronger here, and other institutions are more trustworthy,” she says.

Arwen is working on “an important problem” and it could prove “a key missing piece needed to get wider adoption of crypto assets as a real investment asset class,” says Drew Volpe of Boston-based First Star Ventures.

Volpe’s firm last year put money into Everbloom, which is building its own cryptocurrency exchange that tries to solve the issues of trust and reliability “from the ground up.” Everbloom, he explains, is a decentralized exchange that never has to take ownership of the asset itself — similar to Arwen’s approach, the trades happen “trader to trader” using the same atomic swap idea.

Two things could happen to make holding and trading cryptocurrencies more trustworthy, observes Boris Revsin, managing director of Republic Labs, a firm that has made recent investments in the cryptocurrency sector.

One is that trusted financial services brands like Fidelity or Charles Schwab will launch cryptocurrency-related products and services and “offer recourse if something terrible happens” to your money, he says.

But the other is that non-brand name exchanges that today are not trustworthy could start to incorporate technology from Arwen or other companies like it, and begin to build trust with investors.

Either of those scenarios, Revsin says, could encourage more asset managers and investors to move some of their assets into cryptocurrency.

In case you haven’t been tracking it closely, the price of Bitcoin is down almost 60 percent from February 2018. But over two years, the price has risen 240 percent, and more than 800 percent over three years. It’s a risky place to keep your wealth today — but investors and entrepreneurs are betting that just as credit card transactions on the Internet became more trustworthy, that will change.


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Author: Scott Kirsner
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51 percent Ethereum Classic hacker returns $100,000 in stolen cryptocurrency

An exchange has mulled over the possibility of the hacker being white-hat, but $1 million is still unaccounted for.

 

The cyberattacker believed to be responsible for a 51 percent on the Ethereum Classic (ETC) blockchain has returned $100,000 in stolen proceeds, while keeping roughly $1 million.

According to Gate.io, the funds were returned last week but it is not known why the cryptocurrency has been returned, or for what purpose — and efforts to contact the hacker have proved fruitless so far.  

“We still don’t know the reason,” the cryptocurrency exchange said. “If the attacker didn’t run it for profit, he might be a white hacker who wanted to remind people the risks in blockchain consensus and hashing power security.”

This is a possibility, but even so, the potential ‘white hat’ has still kept a fortune in cryptocurrency for themselves following the attack.

The ETC blockchain was the victim of what is known as a 51 percent attack starting on 5 January, leading to the theft of $1.1 million in the Ethereum Classic cryptocurrency. 

51 percent attacks force a blockchain to reorganize and permit attackers to seize control over transactional power of a network. In this case, it is believed over 100 blocks were reorganized.

If they manage to wrestle control of over 50 percent of the network, they are given leave to modify and execute transactions, as well as reverse transactions after they have been confirmed. This is known as “double spending.”

Theoretically, 51 percent attacks could take place on any kind of blockchain, but it does take access to a vast amount of computing power to execute these types of attacks.

Coinbase identified a total of 15 attacks, 12 of which included double spending in order to steal 219, 500 ETC. In an analysis of the attack, SlowMist researchers documented transactions involving thousands of coins at a time taking place.

“We believe that due to the recent decline in blockchain funding, the net mining power of the whole network has declined,” the researchers said. “You have really felt the impact of the 51 percent on ETC, and it is foreseeable that the attack will increase rapidly with the cost of attack reduced.”

Some of the funds have been returned but this does not mean that the blockchain is safe from potential attacks by the same hacker in the future, or copycats who also possess the means to conduct 51 percent attacks.

Gate.io says that the hashing power of the ETC network is still not strong enough to fend off these types of attack and that the possibility exists of enough hashing power being rented out to hit the blockchain again.

“Gate.io has raised the ETC confirmation number to 4000 and launched a strict 51 percent detect for enhanced protection,” the platform added. “We also suggest other ETC exchanges take actions to protect the trader from blockchain rollback/reorg.”

SlowMist recommends that exchanges and pool operators increase their block confirmation times as a matter of urgency to mitigate the risk of 51 percent attacks. Both Gate.io and Bitfly have done so; however, if enough computing power is in play to permit over 50 percent of the network to be in an attacker’s control, block confirmation extensions may not be enough.


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Author: Charlie Osborne
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Expect ‘Large increase’ in Cryptocurrency Taxes Filed for 2018, Says Bittax CEO

Why did you decide to launch Bittax? Are Bitcoin taxes too cumbersome to calculate for the average person? 

Gidi Bar Zakay: I’ll admit that, like everyone else, I was also prejudiced against bitcoin. But when I was approached by the tax authority while serving in a public position at the Institute of Certified Public Accountants and was asked to comment on a circular that they intended to issue regarding bitcoin, I realized it has potential. That this is what the world needs right now.

Not everyone can calculate crypto taxes from their own home. The regular and familiar calculation method – FIFO (First in First Out) – isn’t so simple to calculate either, but calculating tax in a way that will simultaneously represent the actual activity in coins, prevent double taxation caused by the exchange of altcoins, allow the user to present the whole image, prevent data omission and save tax payments on activity that does not reflect an actual transaction, is a complex task which cannot be performed with Excel or a simple calculator at home.

Is your service aimed at Israeli citizens only or is it global?

The service is currently active in Israel but will soon be exported to the USA and then to Europe.
Our company is currently only listed in Israel, but it is expected to operate internationally.

How does it work – how much is it? Is it simply a self-service calculator or do you have experts that can help clients directly? 

This is how the system works: the user copies their addresses into the system and receives a full overview of their activity.

The users indicate which transactions belong to them, which were forwarded to a third party and which are taking place at the exchange. If the users do not remember certain transactions, the system will make recommendations and attempt to help them remember.

If the users have reached a full overview, the system will warn them of the missing data. The system is unique because of its calculation method. The system does not use the regular and common methods but performs a specific identification of the coins sold and calculates the tax liability accordingly.

This method, patent pending, of which is in the process of being registered, reduces the tax liability by 70-25%, according to the type and scope of activity.

Of course, if the user requires assistance, we are available to guide and assist as much as possible.

What kind of approach does the Israeli government have on cryptocurrency taxes?


The Israeli tax authority treats cryptocurrency as assets and taxes the profits through the capital gains tax. This decision does not come as a surprise – many governments around the world made it, and it is somewhat understandable. Most people don’t use cryptocurrencies at coffee shops and grocery stores, but as instruments for investment and trade.

Once any person would be able to use bitcoin for daily purchases, I believe that most governments will acknowledge it is a tax-free coin.

How many people around the world do you estimate owe cryptocurrency taxes today? In other words, how big is your potential market? 

When examining the activity data from the different exchanges, we are looking at hundreds of millions worldwide.

How many of them currently pay taxes?

Very few. This process will take time, for both the users and the authorities.

Once the coin owners will understand that regulation will result in international adoption of the coins, and the governments will understand how to collect these taxes and how to proactively approach the users, this process will unfold naturally. I expect to see a large increase in the number of reports filed for 2018 in two or three months and an even greater increase in the reports for 2019.

Bitcoin Taxes

A poll in April 2018 revealed most people saying ‘you’ll never catch me’ when it comes to paying taxes on their crypto gains. Is this a problem for the tax agencies? Is it difficult for the gov’t to determine whether an individual owes taxes in this case? 

We’ve heard these statements from the global crypto community, and we can understand them. As a group, we believe in the ideology of a decentralized system and find it difficult to accept that someone else does not view crypto as a coin and demands taxes for it. But today, we can see that the authorities around the world receive the information.

The authorities approach some of the exchanges and demand to receive the data. Many countries grant them the power to do so. Some of the exchanges share the information following the authorities’ request, and once the data is in their hands, it is not difficult to reach the users.

Do you think the bear market of 2018 was partially due to the billions owed in taxes from the previous year resulting in ‘massive selling’ as Tom Lee suggested?

I think that the market’s decline is the positive outcome of people who tried to use crypto in order to make easy money without actual activity backing it, and then left when they realized that the celebration is over. I think that the market is in excellent condition. Those who stayed are the people who truly believe in the future of cryptocurrency and are genuinely interested in developing it.

Considering that 2018 was a downward year for cryptocurrency prices across the board, would filing taxes on crypto losses be particularly recommended this year?

If someone had a profitable activity at the beginning of 2018, through coins or other capital channels, it would be helpful for them to report their losses at the end of 2018. However, it will not be possible to offset losses incurred in 2018 against the huge profits gained in 2017.

What is the best jurisdiction to consider for people who’d like to pay little to no crypto taxes? 

The authority to which crypto-related taxes are paid is determined by the user’s tax residency. The tax residency is determined by, among other things, the number of days spent in the country during the relevant year.

Some countries are friendlier towards cryptocurrency, and I’ve heard of some that even treat crypto as a coin. But will a person leave everything and move to another country simply for tax considerations? Then they must have an abundance of crypto… I would love to meet that person. It’s possible that the entire world has been looking for their identity for the past few years.

What are your predictions for the upcoming year? Do you expect more and more people to start paying cryptocurrency taxes?

I believe that in 2019 we will be looking at a continued effort to closely supervise the crypto market by the authorities, accompanied by an increase in tax payments by the users. What matters now is making sure that the privacy of the tax-paying users will not be affected.

Therefore, we are working on a solution which will maintain the privacy of the users throughout their relationship with the tax authorities, and will only expose the necessary information, addresses and personal data not included.

This solution will be beneficial for both the tax authorities and coin owners around the world because it’ll be worthwhile for the users to report their earnings willingly and not wait for the authorities to locate them.


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Author: Allen Scott
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Cryptocurrency Conferences Continue to Thrive Despite Industry Downturn

Over the last year, cryptocurrency prices have dropped significantly and mainstream attention has been waning in recent months. However, according to recent data, the digital currency and blockchain conference circuit did not see a steady decline during the last six months of 2018.

 

Digital Currency and Blockchain Focused Conferences Are Still Trending

Cryptocurrency and blockchain related conferences did not see a decline in popularity last year. The number of crypto-infused events held was a stark contrast to the many other sectors within the digital asset economy, according to recent data collected by the analysis site Tradeblock. In 2018, cryptocurrency conferences really started heating up and event organizers pulled in millions from steady ticket sales and initial coin offering (ICO) exhibition booths. For instance, last year at Consensus Week (May 11-17) in New York the conference scored a whopping $10.5 million with event tickets being sold for $1,500-2,000 for all 7,000 attendees.

In fact, blockchain conference tickets sold for big money all year long and most of the events in 2018 sold out. The two-day Ethereum Ethereal Summit hosted by Consensys sold tickets for $1,300 a pop, even after Vitalik Buterin publicly spoke out against expensive conference tickets and rampant scams. The Women on the Block conference on Mother’s Day sold for $299-599, and Token Summit on May 17 sold out its early bird tickets at $649 and sold the rest of the seats in the house for $979. Last May, the company Eventbrite was selling NYC Blockchain Tech & Invest Summit tickets for $899-$1,299 per person.

In the face of massive layoffs, the declining cryptocurrency market values in 2018, and tickets selling for hundreds and even thousands of dollars — Blockchain conferences have remained unscathed from the faltering crypto economy. The well known provider of institutional trading tools and digital currency data Tradeblock explained this week that 2018 blockchain event organizers continued to host conferences all around the world.

“Despite the crypto bear market during 2018, the number of industry related conferences did not see a steady decline in the latter half of the year,” the analytical data website Tradeblock detailed on Thursday.

Cryptocurrency Conferences Continue to Thrive Despite Industry Downturn

Pricey Crypto Events See Sold Out Exhibit Halls and Thousands of Attendees

Many of the 2018 blockchain events had upwards of hundreds to thousands of attendees, according to the vast list of conferences held last year. The Paris Fintech Forum saw 2,000 guests, Finovate Europe 1,400, Malta Blockchain Summit 9,500, Cryptocurrency World Expo Berlin 1,600, Blockchain Summit Vienna 2,000, Deconomy South Korea 2,000, Blockchain Conference Moscow 2,000, and the Blockchain Expo Global in London saw 6,000 participants. Blockchain conferences saw appearances from numerous cryptocurrency developers and blockchain luminaries as well, such as Tim Draper, Joseph Lubin, Changpeng “CZ” Zhao, Vitalik Buterin, Charlie Lee, Balaji Srinivasan, and many other speakers.

2019 cryptocurrency and blockchain related conferences are still in full swing as there are many scheduled for the next few months already. There are conferences such as Blockchainge DC, Crypto Investor Show Manchester, TNABC Miami, and the Binance Blockchain Week event. Some of these conferences will host up to 4,500 people depending on the blockchain event. Even though online attention and crypto trends may be dwindling, the general public is still very inquisitive toward cryptocurrency and blockchain focused events.

What do you think about the cryptocurrency and blockchain conference circuit still thriving? Did you attend any blockchain conferences last year? Let us know what you think about this subject in the comments section below.


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Author:  Jamie Redman
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S&P 500 and Stock Markets Worldwide Close Out Worst Year Since 2008

Stock markets worldwide, including Dow Jones, Nasdaq and the S&P 500, have posted disappointing yearly returns, with many indexes being compared to their performance during the financial crisis.

The S&P 500 is down 6.2% for 2018, while the DOW Jones Industrial Average is down 5.6% for 2018. These numbers, compared to the financial crisis, where the indexes posted yearly losses of 38.5% and 33.8% are a new low given the general bull sentiment surrounding markets going into 2018.

While the S&P 500 was up 9% during the first three quarters of 2018, it has marked a new milestone of ending the year in the negative digits at -6.2%. This is the first time the S&P closed negative digits on the yearly after rising for the first three quarters. Similarly, the NASDAQ composite fell 3.9% for 2018.

The main catalyst for this drop is said to be the sell-off that began in October.

There have been widespread concerns of an economic slowdown, along with fears that the Fed is making incorrect decisions with respect to monetary policy.

S&P 500 Down Year Over Year

The S&P 500 was on a great run throughout 2017, opening at around 2240 points and ending the year at 2674 points.

S&P 500 2017 performance

However, 2018 brought with it a lot of volatility, sharp trend reversals along with increased political tensions.

The trade war between US and China has resulted in fluctuating stock markets throughout 2018. However, recent developments indicate that the disputes might soon be resolved, as early as March 2019. This might be a good fundamental catalyst for markets worldwide. A trade agreement being chalked out might come into effect in March 2019.

S&P 500 2018 Performance

Markets in London experienced a similar downturn, with the FTSE 100 index posting a yearly drawdown of 12%. This contrast to the record high of 7859 points that the Index posted earlier this May.

There are several reasons the FTSE dropped severely during 2019. To begin with, trade tensions between US and China have affected stock markets globally. Secondly, the uncertainty surrounding Brexit and concerns regarding US interest rates provoked a selloff within markets in UK.

Asia

Chinese stock markets took the worst hit, with the CSI 300 benchmark dropping nearly 27% at market close on December 27th. The primary cause for this drop is said to be the ongoing trade dispute with the Unites States.

Hong Kong’s HSI Index lost 13.6% this year, its worst since 2011 when it lost 19.97%

Similarly, Japan’s Nikkei 225 Index lost 12.1% during 2018, its worst since the financial crisis.


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Author: Alex T
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5 Types of Cryptocurrency Entrepreneurs Should Know About

Cryptocurrencies are both investment opportunities and new financial instruments of increasing importance to investors and business owners.

 

You can classify every digital currency in existence as one of these five types of cryptocurrency. These distinctions are of the utmost importance for cryptocurrency investors because they determine what exactly you’re investing in, and who can invest in the first place. From coins to tokens, stablecoins to utility and security tokens, here are the main types of cryptocurrency you need to know about.

Coins vs Tokens

The biggest distinction in cryptocurrency is between coins vs tokens. Every cryptocurrency has to be one or the other. Here’s what differentiates coins from tokens: Coins have their own blockchain. Tokens do not.

Most of the big name cryptocurrencies — Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) — are coins. The most important thing to remember about coins is that they have their own blockchain, meaning a decentralized, peer-to-peer network that records transactions on a digital ledger.

By contrast, a token does not have its own blockchain. The Ethereum blockchain is the most popular platform for token creation, though you can theoretically create a token on any blockchain. 0x (ZRX), Maker (MKR) and Basic Attention Token (BAT) are examples of ERC-20 tokens, meaning a specific type of Ethereum-based token. In other words, their protocol exists ‘on top of’ the Ethereum blockchain.

Coins function as currency. Tokens represent access to a product or ‘stock.’

Since coins have their own blockchains, it makes sense that they serve as currency, a means of exchange, within that network. This is why Bitcoin is called digital gold and Ripple is lauded for its fast transactions: Bitcoin is a store of value, like gold, and Ripple facilitates cross-border bank transactions. Furthermore, it’s easier to convert USD to a coin, rather than a token. Investing in a token usually requires exchanging USD for a coin first.

The value of a token is a little more complicated. Tokens are typically released in ICO, which stands for Initial Coin Offering. ICOs are like IPOs for cryptocurrency, meaning that they give the investor access to tokenized services or products, or represent a stake in a cryptocurrency company. This is where tokens get a little confusing: Tokens fall under different SEC regulations depending on what they represent. You can separate tokens into two types of cryptocurrency that represent either a utility or a security.

Utility Tokens vs Security Tokens

Understanding the distinction between these two types of cryptocurrency is paramount to investors, cryptocurrency companies and the government. In other words, the SEC has much stricter regulations for security tokens than it does for utility tokens because, as their name suggests, they’re considered to be digital securities.

Most Tokens Are Utility Tokens.

If you can buy or trade a token on a cryptocurrency exchange without being an accredited investor, then it’s a utility token. In broad terms, a utility token gives an investor access to a service or product. This can mean that a token can represent exclusive access, a discounted rate, or early access. When you hear about smart contracts and DApps, you should assume that a utility token is involved.

Basic Attention Token (BAT) is a utility token that has received a lot of press. It’s a means of exchange for digital advertising attention, hence the name. Integrated with the browser Brave, BAT works in three ways:

  1. Users receive BAT for consenting to view ads.
  2. Content creators receive BAT when users view ads on their site.
  3. Advertisers buy ad space with BAT.

BAT represents attention, not stock or currency, making it a utility token. This means that anyone can trade utility tokens on a cryptocurrency exchange.

Security tokens are securities that exist on the blockchain.

Security Tokens are different. Like securities, security tokens represent part-ownership in a tradeable, real-world asset external to the blockchain. And because security tokens are regulated by the SEC like securities, you have to be an accredited investor to participate in STOs, meaning Security Token Offerings.

The SEC decides whether something is a security token using the Howey Test. In simple terms, the Howey Test determines whether a cryptocurrency investment is ‘speculative’, meaning that the investor makes money based on the labor of a third party.

Investing in security tokens is slightly more difficult. Investors must use a security token issuance platform, like Polymath or Swarm, to buy and trade tokenized securities. Unlike Coinbase or Binance, which are cryptocurrency exchanges that allow anyone to create an account, security token issuance platforms require their users to meet specific requirements. This typically means having your accredited investor status confirmed by a KYC provider. The platform will then create a customized profile that specifies how and how much each investor can trade.

Converging Types of Cryptocurrency

Distinctions between types of cryptocurrency can be obscure. Since companies have access to a much smaller investment pool with security tokens, some try to pass off their security tokens for utility tokens. There is also debate over whether tokens can represent currency, like coins, rather than access to a service. To make matters less clear, stablecoins are often technically ‘stabletokens’.

What is a Stablecoin?

Stablecoins are an increasingly popular type of cryptocurrency, especially in a Bitcoin bear market. This is because stablecoins are “pegged” to traditional assets like fiat (meaning government-backed currency like the US Dollar or Euro) or gold.

For example, the theoretical exchange rate between a stablecoin pegged to the USD and the US Dollar itself is 1 to 1. In theory, the company behind a stablecoin has the same exact amount in assets, stored in bank accounts, as they do tokens.

The advantage of stablecoins is that in a bear market, crypto investors can move their money from volatile cryptocurrency to stablecoins, a more ‘stable’ asset class in theory. This is instead of converting it back to USD, which can be a two-step process that incurs transaction fees. When a bull market returns, investors can convert their stablecoin back into other more volatile currencies at little to no cost.

Historically, however, stablecoins have ‘broken their peg’ in both directions. For example, controversial stablecoin Tether (USDT) has been worth less than a dollar, and Gemini Coin (GUSD) has exceeded the value of a dollar. This highlights another feature of stablecoins: Most have “USD” in their name. But keep in mind that not all do. For example, Maker (MKR), another stablecoin, does not.

Stablecoins Are Generally Tokens.

Despite being called stablecoins, stablecoins are usually tokens, meaning that they don’t have their own blockchain. Maker (MKR) exists on the Ethereum blockchain. Tether (USDT) was built on the Bitcoin blockchain. Similarly, both these “tokens” function as “currency,” which is a characteristic of coins, not tokens. As we develop new applications for digital currencies, distinctions between types of cryptocurrency become increasingly blurred, which makes SEC regulation even more uncertain.

Distinctions between types of cryptocurrency matter.

Why should you care whether something is a coin or a token, a utility token or a security token? Though the world of digital currency appears new and unclear, every prospective investor should know the value of the crypto they’re considering and, above all, how current and future SEC regulation will affect it.

Furthermore, the distinction between coins and tokens represents two potential forks in the evolution of cryptocurrency: cryptocurrency as tokenized securities and cryptocurrency as a payment method. Will crypto replace the stock market, the US Dollar or both? As it stands, both revolutionary applications of cryptocurrency are making headway.


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Author: Scott McGovern
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Report: Top Crypto Exchange Bithumb Faking Up To 94% Of Trading Volume; Bithumb Denies Allegations

Cryptocurrency exchange rating service CER has accused Korea-based Bithumb, the world’s second-largest crypto exchange by volume, of faking much of its trading volume since late summer 2018.

 

Analysis of BTC trade volume on Bithumb shows a significant rise on August 25 and drop on November 12.CER

In September, CER says, Bithumb ranked at the bottom of the top ten global exchanges as measured by CoinMarketCap, at around $350 million in daily trade volume. But by November 11, Bithumb peaked at $4.4 billion, more than 12 times as much. Today, Bithumb ranks second on CMC’s list of crypto exchanges as measured by reported volume at $1.4 billion. (Bithumb does not appear on CMC’s “adjusted volume” ranking.

The reason, according to CER?

Wash trading, or simultaneously selling and buying at the same time to create misleading and artificial activity.

“Judging from our multifaceted investigation on Bithumb charts we see the signs of trade volumes manipulations, specifically, wash trading,” CER marketing lead Gleb Myrko told me via Facebook Messenger. “Having calculated Price-Volume Correlation we came to conclusion that the trade volume performance is not linked to price fluctuation on the exchange.”

One example of odd trading patterns includes a 10X jump in BTC daily trade volume in September, which does not appear to be accompanied by fundamental causal factors.

Other examples include strange activity spikes in the first few minutes of the 11AM hour daily that delivered 95% of the daily total volume, and irregular trade volumes that didn’t align with price moves, CER says.

Trade activity spikes during the first few minutes of an hour delivered 90-95% of daily total volume, says CER.CER

In addition, average transaction size ballooned from .21 BTC in the beginning of the summer to a very significant 5.88 BTC, or $37,600 USD, from October 15 to November 11.

Transaction size grew significantly from earlier in the year.CER

The trades followed an odd pattern, as well. For example, BTC transactions on September 9 totaled an astounding 7,500 in just five minutes. That’s 39% of the day’s total trades, and 94% of the whole day’s volume.

According to CER, other coins showed similar patterns, including LTC, ETC, XMR, ZEC, OMG, and BTG.

One coin, WTC, showed the most intense artificial activity, CER says.

“WTC stands out from all the coins we observed, as it was only listed on the exchange on the last day of August and had the shortest pump period which started on October 28th and lasted till November 11th,” CER states in a document shared with me. “For that reason its pump was one of the most intensive. The inflated daily volume of Waltonchain jumped by 350 times from 348k WTC (on average prior to the pump) to 122.5mln WTC (on average during the pump) only to then drop by by 1,450 times in one day from 206.7mln WTC to 141.8k WTC on November 12th.”

I asked Bithumb about the allegations, and the company dismissed them out of hand.

“Bithumb is doing nothing to inflate trading volume,” an unnamed company representative told me via email. “Bithumb is not selling mining-based coin. Bithumb is trying to get more customers by providing various promotions just like any other company in the world as a normal business.”

CER is a service by Hacken Ecosystem, and Hacken offers a “white hat” community token. Concerned that these allegations might be motivated by business concerns, I asked Hacken if the company had ever tried to list on Bithumb.

The answer?

“No, never.”

Cryptocurrency experts I spoke to did not find this kind of behavior difficult to believe, though they stressed that to evaluate this specific accusation they would need to review the evidence carefully.

That said, there seems to be little trust in the crypto world … perhaps appropriate for currency which is supposed to function in a trustless environment. Or, perhaps not.

“They all inflate numbers,” says Aryeh Altshul, CRO at Hexa Labs, a blockchain consultancy. “It’s the normal practice in crypto.”

All of the non-U.S. exchanges are inflating transactions, agrees Brandon Wirtz, CEO of AI company Recognant, adding that many in the U.S. are doing the same … and using buffers between legitimate buy and sell bids to buy and re-sell coins between the kosher trades.

“It causes volatility and velocity which can be good for 50 percent-plus more traffic,” he said.

Crystal Clare Stranger, founder and CEO of PeaCounts, a blockchain-based payroll payments company, says that this is quite possible and even common.

“In the crypto space it is common to follow the adage of ‘fake it ’til you make it’ and many people grossly exaggerate how successful they are. Many companies have used market manipulators to pump the value of their tokens to look successful, and other exchanges have done this to break into the top ten.”

“It is very easy for a centralized exchange to trade dummy accounts off-chain using bots to pop volume,” Stranger added. “And as the exchange themselves bear little cost for these transactions, essentially just the computing cost, [it becomes] very tempting, especially with so many exchanges opening in the last couple years. It is a very competitive market.”

Another expert suggested that this could be connected to Bithumb’s well-publicized hacks in 2017 and 2018.

“Originally the breach on June 19 was thought to have resulted in the stolen crypto being sent to unknown hacker wallets,” says Morgan Steckler, CEO at iTrustCapital, a digital currency retirement planning company. “However, if this recent fraudulent transaction data proves to be true, and if Bithumb was able to evade detection through multiple recent audits of their security and transaction protocols, it is also entirely possible that the 39 addresses thought to belong to the hackers actually belonged to the exchange itself.”

Several experts did not want to be named.

“Basically, take all the illegal stock trading activites that have been banned over the years and move them into crypto. Why? Because it’s the Wild Wild West,” said one, who manages companies on both the fiat and cryptocurrency sides of finance.

“Ghost orders are huge … it’s where you open a buy and sell at the same time across multiple accounts, then close off one side of all the transactions (example buy) side and then run with your short position (sell side).”

Another expert suggests that Bithumb may have inadvertently contributed to Bitcoin’s continuing price collapse.

“According to data reported by CCN, there is certainly evidence to suggest a strong correlation between the timing of Bithumb’s promotion expiration and the sudden, and for many, shocking plummet that continues to play out across the industry,” says Travis Barker, CTO of Dash Marketing and early adopter and proponent of cryptocurrencies. “So far, I haven’t seen evidence to suggest malicious intent. In other words, I don’t know if Bithumb was intentionally or incorrectly inflating volume numbers, or simply running highly successful promotions to that effect.”

CER representatives seem fairly certain that there was intentional malfeasance.

“Bithumb has mastered a multi-factored approach to conceal its foul play,” says CER’s Myrko. “As far as we are able to judge the manipulations were fulfilled via matching opposite orders with the same price or by simply drawing transactions out of thin air, so-called ‘painting the tape.'”

The goal, CER suggests, may have been to establish Bithumb as a leading global crypto exchange. The result, however, could be extremely negative.

It “undermine[s] the entire image of the blockchain sphere as an environment of trust and transparency,” says Myrko. “Such irresponsible activity makes crypto field less than unwelcoming for the investors and industries who saw blockchain as a new opportunity.”

All that said, it’s important to reiterate that Bithumb denies the accusations.

CER is planning to publish all of its data — over 20 pages of charts, images, and documentation of what it considers to be fraudulent behavior.

At that point Bithumb will be able to respond directly to the accusations and, perhaps, offer an explanation.


Source
Author: John Koetsier
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Cryptocurrency Mining Hardware Maker Turns £1,000 into Over £1 Million in First Year

A 28-year-old cryptocurrency entrepreneur from the UK has managed to turn £1,000 (around $1,500) into over £1 million in just 18 months of trading. Josh Riddett, of Bury, Greater Manchester, has found success manufacturing specialist digital currency mining hardware.

 

Riddett’s company, Easy Crypto Hunter, has expanded from the sale of a single unit, with profits reinvested, into the UK’s largest GPU mining rig manufacturer. The firm also gives educational sessions on the cryptocurrency space, as well as providing accountancy services for investors and traders.

Cryptocurrency Startups Still Proving Profitable, Despite Market Dip

Even though those investing in digital assets have had a pretty rough 2018, that is not to say that all those involved in the cryptocurrency space have lost money through the ongoing bear market. One entrepreneur from Bury, UK, has managed to turn just £1,000 of savings into a seven-figure crypto company in only 18 months.

Josh Riddett started Easy Crypto Hunter in late 2017. He had just graduated from Lancaster University where he studied business entrepreneurship management. Evidently, his choice of course was a strong one since he has managed to make a roaring success of his first venture into the world of business – even despite the surrounding market conditions.

Riddett’s firm specialises in putting together GPU mining rigs, which are designed to secure the networks of various altcoins such as Ethereum, Monero, and Dogecoin. From its humble beginnings, Easy Crypto Hunter today boasts has more than 100 customers. These include business owners, property companies, and retirees. Those buying units hope to earn a side income by using GPU mining rigs to validate transactions on the network they work upon.

Riddett spoke to local news publication Prolific North about his company and the future of cryptocurrency:

“We are absolutely delighted to see the business take off and I strongly believe cryptocurrency is here to stay and is set to become more popular and more mainstream as the likes of BMW, Microsoft and Expedia accept it as a form of payment.”

The entrepreneur went on to state that he was confident that cryptocurrency is already causing massive disruption to the payments and banking industry. In his own words: “Cryptocurrency is the future.”

Riddett’s success was celebrated last month at a local awards presentation. At the Made in Bury Business Awards 2018 event, Easy Crypto Hunter scooped the prize for Technology Business of the Year.

Easy Crypto Hunter Planning Expansion As Others Downsize

The bear market of 2018 has already seen many digital asset startups laying off members of staff. Blockchain-based social network Steemit recently announced that they would be getting rid of as much as 70% of its workforce. Meanwhile, Ethereum’s chat platform Status will be losing 25% of its staff.

Bucking this trend is Riddett’s Easy Crypto Hunter. The Bury-based entrepreneur has stated that he is looking to take on more workers to help it keep up with growing demand for GPU mining units.


Source
Author: Rick D.
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Bears Seize the Stock Markets While Cryptos Add $9 Billion

After ongoing stock market volatility, blamed on technology stocks, interest rate hikes and trade disputes, the bears are calling a possible crash. Meanwhile, as money flows out of the conventional markets, cryptocurrencies are green and gaining. Cryptocurrency market capitalization is now up over $9 billion.

Total Cryptocurrency Market Capitalization Source: CoinMarketCap

For the stock markets, the Dow has fallen 508 points and 2.1%, the S&P 500 is also down 2.1% and at its lowest point this year, and the Nasdaq, though up slightly today is down across 2018. All three markets have fallen 8% in December.

This time healthcare products rather than technology stocks might be the blame for the Dow’s fall. Johnson and Johnson’s stocks fell dramatically over reports of asbestos in the iconic brand’s baby powder. UnitedHealth stocks also fell after part of the Obamacare Affordable Care Act was ruled unconstitutional.  Goldman Sach’s is in the spotlight too, after being accused by the Malaysian government of misleading investors over bond sales underwritten by the Wall Street Giant.

The overriding reasons for the fall are also still much broader and do still point back to the threat of interest rate hikes by the U.S Federal Reserve this week as well as trade and diplomacy issues with China striking again.

A Major Buy Signal – For Crypto?

One “relentless” bear, former congressman Ron Paul, is warning of an epic market collapse. He says a downturn could be “worse than 1929” but if liquidity is allowed it doesn’t have to be a long one. Paul told CNBC:

“Once this volatility shows that we’re not going to resume the bull market, then people are going to rush for the exits.”

Indeed, it appears today stock market investors are doing just that. Maybe they are buying elsewhere…

An American Association of Individual Investor’s survey puts “bullish” market sentiments at their lowest since mid-2016. Yet ever bullish Fundstrat’s Tom Lee believes the bearish sentiment indicates the market is ready for buyers:

“We believe sentiment has reached an extreme bearish level that historically is a major contrarian buy signal.”

After writing that in his note to clients earlier today it seems investors are buying, but not stocks. Money is flowing back into cryptocurrencies. At the time of writing the overall market capitalization is at $113.9 billion and still rising. Bitcoin (BTC) is still up over 8% and has broken the $3,500 threshold. Ripple’s XRP is up 14% and EOS now a massive 26%. CCN reported on its 21% rise earlier today.


Source
Author: Melanie Kramer
Image Credit: Images from Shutterstock and CoinMarketCap.com 

Ethereum (ETH) Network Hits Key Milestone Amid Crypto Bear Market

Ethereum Eclipses 50M Addresses

According to data compiled by The Block from Etherscan.io, the number of unique Ethereum addresses (not wallets) has recently surpassed a key, round number milestone at 50 million — a monumental accomplishment for any network. Interestingly, even amid 2018’s dismal unpredictable bear market, the growth of this figure hasn’t slowed (much), as depicted in the graph below.

Yet, this statistic’s current growth prospects are a far cry from those seen in early-January 2018, which was when ETH surpassed $1,000, and while demand for DApps and Ethereum (token) trading shot through the metaphorical roof. For example, on January 4th, as the altcoin mania was nearing its peak, 352,888 new addresses were created in a single day.

Today, approximately 70,000 new addresses are added to the network each and every day, which is far from a measly sum, to say the least. This could indicate that tens of thousands of consumers still see value in what Ethereum has to offer, as processes have become even cheaper, specifically due to market qualms.

 

It Isn’t All Sunshine And Rainbows 

While the network’s continual growth is a welcome sight, it isn’t all sunshine and rainbows, so to speak. As noted by The Block, the number of active addresses, or accounts that send and receive transactions on the day-to-day, has actually fallen, even while total addresses have been well on the rise. On January 16th, 2018, 719,093 Ethereum addresses sent and/or received transactions, that same figure sits at a dismal 232,085 on Saturday — not the end of the world, but a harrowing sight nonetheless.

Worse yet, active Ethereum addresses only account for 0.46% for all unique addresses in existence, a far cry from the ~3.5% seen in January.

The number of daily transactions on the network has also fallen, from 1,349,890 on January 4th — a seeming important date in Ethereum’s multi-year history — to 551,916 as of yesterday. To give the latter figure some perspective, 551,916 daily transactions amount to 22,996 an hour, 383 a minute, and 6.4 a second — a far cry from what Visa processes.

 

ETH Posts Slight Gain In ‘Sea Of Green’

In spite of the caveats of Ethereum’s current state, Ether has performed relatively well over the past 24 hours. According to Coin Market Cap, the asset is up to $85.5 apiece, while posting a slight gain of 1.2% in the past day. Although ETH is outperforming its rivals in Bitcoin (BTC), XRP, and EOS by less than 1%, it has underperformed a number of other prominent altcoins — Litecoin (+7.61%), Bitcoin SV (+11.09%), and Maker (+7.92%).

At the time of writing, the market capitalization of cryptocurrencies is at $103 billion, with volume backing the market moves amounting to $10.4 billion (unadjusted).


Source
Author: Nick Chong
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