I neither own nor have any trading position on any cryptocurrency. The views expressed below are solely my own and do not necessarily represent the views of my employer or any organization I advise. Just as I did with the COIN ETF proposal last year, I have also written a page paper for internal use diving into the world of ICOs. If you want this industry to flourish, protection of investors should be at the forefront. As of right now, there are just a handful of ICOs that have explicitly attempted to protect investors by providing full transparency into their organizations.

Most do not disclose the principals, directors, and insiders involved within these organizations. Some have private offerings called a pre-sale. A pre-sale allows participants to acquire coins at a discount e. In addition, the participants in a pre-sale are not typically named or made public prior to the public offering of the coins; nor are the conditions by which these participants able to sell their holdings typically disclosed.

Historically companies which file paperwork in order to be listed on a public stock exchange have to submit an S-1 or its equivalent to regulators. The S-1 is important and helpful to the rest of the market because it lays out who the insiders are, who the principals and directors are, how governance is handled, who is responsible, what the business is, what the liabilities are, etc.

In contrast, most ICOs currently have nebulous governance on purpose: Caveat emptor is the name of the game. In any given month I am provided inside information about ICOs. Complete strangers will send me pitch decks that outline their pre-sale and listing opportunities.

Yes, some exchanges are paid to list these coins, often through a percentage negotiated beforehand with the ICO operator. And there are market makers and underwriters in the form of family offices, high net worth individuals and small hedge funds.

There is an entire ecosystem that is completely opaque and opaque on purpose because many of these participants are trying to deflect responsibility in case a coin crashes or a project is unsuccessful or because they are found in non-compliance with a variety of regulations e. All they wanted me to do: I said no to all of them but others said yes and that project above raised a couple million in USD.

Last week I attended several events including Consensus and a different private conference held later in the week. I gave a short presentation at one of the events and afterwards I walked to the buffet outside the room to get some food.

How much more should I put into them? There is a lot of fear of missing out yet few people are actually looking at what these ICO-funded platforms or projects are attempting to do. How can unsophisticated, technically unsavvy people learn more about them?

I have mentioned this multiple times over the years: Several small buy-side analysts and their firms also have published uncritical marketing material for cryptocurrencies and some do not disclose their coin holdings or outline the major risks involved in operating these types of networks, in effect white-washing the risks of anarchic chains.

Others in privileged positions including some of the VCs that are active in this space are now also promoting ICOs but few disclose their active long or short positions.

Some of these VCs were entrepreneurs who have pivoted multiple times and this is a last ditch effort to drum up support for their sagging portfolio. One common refrain I often hear from ICO promoters is that ICOs are a new form of technology that empowers retail investors like never before and that the traditional world of institutions and laws has no place in the new economy.

Great Wall of Numbers | Business Opportunities and Challenges in Emerging Markets

In late I worked with a company called Melotic. For about 9 months I spent the bulk of my time talking to dozens of cryptocurrency projects and operators to find out what unique thing their company did and why they should be listed on Melotic. Nearly all of them were half-baked scams, and others were just impractical Urea Coin.

In MayMelotic announced it was closing its exchange and moving into cross-border payments where it currently operates under the brand, Kleering. While Melotic deserves its own dedicated post, the takeaways we learned at the time were that traders who were most of the user base only cared about two specific things:.

Some traders publicly complained when we implemented a set of KYC and AML policies. They said we should snub our noses at the government and banks and provide traders the ability to exchange cryptocurrencies without complying with local or national laws surrounding identity gathering and verification. Day traders love volatility and cryptocurrencies often provide that volatile environment. Because new cryptocurrencies such as an ICO are often even more illiquid and thinly traded than say bitcoin which itself is relatively illiquidwhales and insiders without vesting and lock-up periods can quickly move the market up and down due to the large amounts of coin holdings they have.

This creates the booms and busts that many cryptocurrency traders savor. Yet at Melotic, we were apprehensive about listing every single cryptocurrency under the sun, and tried to filter those we thought had unique utility and less volatile. In the end we only listed about Yet empirically the most successful exchanges — as measured in volume — were those that listed every single coin that was launched. Quantity over quality continues to persist today as exchanges compete for volume and liquidity of new coins.

This contrasts with regulated exchanges such as NASDAQ pdf and NYSE pdf which have listing requirements, including transparency into the companies principals. Most cryptocurrency exchanges do not ask for similar requirements and in fact, some take a cut of the coins — similar to payola — in order to be listed. Over two years ago I wrote a post that looked at around 20 different ICOs and projects that did some kind of public coin distribution.

My new paper looks at them in more detail. What were the findings? While we wait for that paper to be published another key takeaway is that: Yet most of the cryptocurrencies, even ones that lack a real development community, are seeing all-time highs on the cryptocurrency markets.

This is compounded by the fact that ICOs are by their nature, not designed for cash flow or optimized to be profitable. Because at its core: As a result, these projects largely rely on their token holdings and the price appreciation thereof, in order to be sustainable. Thus the incentive to focus on marketing and create buzz to further increase the price appreciation of the coin holdings.

How many transactions can you fit into an Ethereum block during high demand times? It depends on the complexity of the contract. For the BAT, it was about Those 90 ICO seats went to whoever attached the largest transaction fees. ICO organizers often exchange coins for explicit support by outside endorsements and lobbying in their favor e. Therefore researchers, regulators, developers and potential investors looking at an ICO should look for paper trails to identify investors, users, organizers, insiders, and potential malicious actors.

Investors should look very hard at what the risks and recourse there is in the event of a hard fork, what happens if their assets end up on a deprecated chain? Ethereum forked multiple times last year and currently, investors of ICOs based on ERC20 have few, if any, protections or recourse in the event an ICO organizer fails to deliver its promises let alone a technical problem occurs.

For instance, what happens if the network becomes too top heavy and open to the Hold-Up Problem? Who has legal standing or recourse? ICOs can be done with existing technology — no blockchains are needed just ask Beenz and Liberty Reserve — yet because ICOs are being done on anarchic blockchains where reversibility is economically cumbersome and identification is non-existence, it can create new risks and challenges for investors.

Potential investors need to be able to answer: Cryptocurrencies and the coins that piggy back on their network will likely continue to exist so as long as these non-profit entities have enough coins to liquidate to pay for marketing and advertisements. And so as long as there are others willing to buy their coins e. And while it may be too early to distinguish and separate the specific ICOs that are outright scams from poorly run companies, keep in mind that a couple dozen Pyramid schemes failing in led to massive unrest and a civil war in Albania.

We have already witnessed enormous strain and virtual fighting within the cryptocurrency community e. What would happen to the aggregate cryptocurrency market if the investors and insiders in a couple dozen ICO platforms Pyramid or not tried to liquidate their holdings onto an illiquid market?

Imagine for a moment that Alice, a hacker, was looking at various means for receiving payment for an illicit activity she just undertook. She has two options to do so, which would she choose? And that trying to stop or prevent payments was difficult because the computers running the payment network were widely distributed and run by multiple known and unknown participants across dozens of jurisdictions that were sometimes hard to track down.

Recourse is difficult and sometimes impossible. Cryptocurrencies such as Bitcoin, Litecoin, and Ethereum are examples of such a network. And that stopping, preventing, or even rolling back payments was possible because the computers running the payment network were run by legally identifiable participants who were often located in easy-to-find offices.

Recourse could be cumbersome, but almost always possible. Wire transfer methods like ACH are examples of such a network. Alice would probably choose number one and later try use some conversion tool or exchange to move her payment into number two. How is this done? See the dated flow-of-funds chart below. The flow of funds on the Bitcoin network in While some cryptocurrencies, like Bitcoin, were probably not designed to serve as get-away vehicles — because of key design choices that make legal recourse difficult — they are increasingly used to shuffle ill-gotten gains around.

For example, data kidnapping — commonly referred to as ransomware — has existed in some form for more than two decades. But the current plight surrounding ransomware, and the white washing of the role cryptocurrencies have in this plight, have gone hand in hand over the past several years. The core characteristics of cryptocurrencies — censorship resistance and pseudonymity — are some of the main reasons why ransomware has become increasingly commonplace.

And these cryptocurrencies need liquidity. Liquidity into-and-out of fiat has fluctuated over time, with some exchanges being debanked and sometimes rebanked, but as an aggregate it has increased overall.

Liquidity is often done through venture-backed gateways and exchanges. As explored in my previous postas well as others, many of these gateways and platforms have inadequate and typically non-existent KYC and AML gathering processes. We see this empirically: Instead, they ask to be paid in some kind of cryptocurrency because they know the likelihood of getting caught and reprimanded is significantly lower. This past Friday, WannaCrya ransomware package, wreaked havoc on more thanvictims across all times of organizations located in over countries.

This included government services including NHS in the UK and the Interior Ministry in Russia. The first-order of victims ranged from small startups that could quickly patch and restart their computers all the way to large hospital systems that were unable to access patient records and had to turn away patients.

This then leads to the second-order of victims: Student theses locked, while BTC wd not allowed. Some may face delay of graduation https: While all of the impacted organizations already should have had a formal plan to upgrade and patch these types of vulnerabilities e.

Cryptocurrencies, such as Bitcoin, were usually the preferred method of payment. Two weeks ago, James Comey, former Director of FBI spoke before the Senate Judiciary Committee and noted that:.

Some of our criminal investigators face the challenge of identifying online pedophiles who hide their crimes and identities behind layers of anonymizing technologies, or drug traffickers who use virtual currencies to obscure their transactions. For Bitcoin, there are ways to remain fairly anonymous, like using mixers, however it requires a lot more work to. But relatively few people are investigating, so the chance of getting caught is likely low.

Newer cryptocurrencies such as Monero and Zcash are designed to be anonymous which makes them harder to track. Monero has been spotted in the wild alongside the Kirk Ransomware as well as research from Sophos pdf. And then there is Tor, a software program that enables anonymous communication by passing network traffic through various relays nodes that help conceal the location of the user.

My larger concern is that cryptoviral extortion is the only cryptovirology attack that anyone seems to be paying attention to and there are many, many others. My recent post looking at Bitfinex and regtech was quite popular. It was viewed several thousand times and I received a number of calls from reporters looking to investigate some of the points raised. Some people pointed out that the behavior by Bitfinex and other cryptocurrency exchanges is one of the reasons why a few banks in emerging markets have lost correspondent banking access: According to research by Accuity, a global financial crime compliance, payments and KYC solutions provider:.

According to Caixina notice of administrative punishment may be released in June that details the punishment and fines of these China-based exchange operators.

Companies such as Blockseer and Chainalysis provide tools for law enforcement, regulators, entrepreneurs and compliance teams to trace and track the flow-of-funds on cryptocurrency networks. I have written about them numerous times.

Angel List is tracking 96 startups involved in providing compliance-related software for SMB, hospitals, cloud providers, social media platforms and a handful of other verticals. It also has job listings for 11 regulatory compliance startups. There is an additional 2, startups listed under the broader category of big data analyticssome of whom who are also working in the regtech space. While technology can help play a role in identifying participants on these types of networks blockchains and distributed ledgersit is also worth exploring the proposed strawman for setting up a Kimberley Process for cryptocurrencies.

Identity systems are critical to all property rights and financial networks. Creating applications around data lineage, data provenance, KYC managementand standardized digital identities will help provide transparency into all markets.

About two years ago I gave a speech discussing the challenges cryptocurrency-related companies have had in creating reliable internal financial controls. How over the span of a few short years the cryptocurrency startup landscape un intentionally reinvented the same type of intermediaries, custodians, and depository-like structures that the original creator s of Bitcoin wanted to route around but… setup without the oversight, assurances, and accountability you would find required in the traditional brick-and-mortar world.

Bitfinex, as measured in terms liquidity and volume, is considered the top global cryptocurrency exchange. It is nominally headquartered in Hong Kong, has had bank accounts in Taiwan, servers in Europe Italy? Above is a speculative corporate structure created back in September by an internet user by the name of RobotFinance.

This post is not intended to single out Bitfinex as there are any number of other exchanges and wallet providers that could be looked at as well. Nor is it intended to dive into all of the subsidiaries or even the entire history of the parent company or the cryptocurrency platform.

Rather it serves an illustration as to how new technology and financial controls could help increase visibility and transparency for all stakeholders involved thereby reducing the risks for users and retail investors among others.

Last November I published an internal paper that may be released later this year which explored the proposed Winkleovss COIN ETF. In it, I highlighted a detailed history of various cryptocurrency exchange platforms and their colorful pasts, some more sordid than others. Rather than rehash all of those stories, below are a few details specifically related to Bitfinex:. How did Bitfinex manage to pay off tens of millions of dollars of self-issued debt in a span of less than 8 months?

Three explanations given by Bitfinex include:. Its exact relationship status is complicated. Depending on who you talk to that is affiliated or was affiliated with Bitfinex, Tether Limited is a partially, or fully, or not-at-all owned subsidiary of Bitfinex. And one of the continual challenges in trying to follow this saga is that Bitfinex representatives, co-founders, and investors often post key comments in disparate social media channels across reddit, Twitter, Youtube, WeChat, TeamSpeak, Telegram, and others.

For instance, there are several different reddit threads discussing the Tether terms of service involving a co-founder and another one with the general counsel, but this material is not centralized in a way for users to easily follow it all.

FinCEN MSB Registrant Search. Tether Limited is also a regulated money service business and has applied to operate in nearly every US state and territory see above. Based on the information above, tethers are not money or currency and may not necessarily be redeemable for money.

Because cryptocurrencies lack any native ability to rebalance or readjust themselves relative to a pricing index, their continual volatility as measured by purchasing power causes headaches and risks to users, including those moving money across borders.

That is to say, in the time span it may take to satisfactorily confirm 1 bitcoin being transferred from your wallet to a merchant overseas, the market price may have moved a percent or two or three. What if there was some way to lock-in a set price and not be exposed to these constant swings in price? Some merchant processors like BitPay and cryptocurrency OTC trading desks do quote and lock-in prices over a period of minutes, but these are not usually targeting the cross-border payment and remittance market.

Another proposed solution, albeit one that involves similar counterparty risk, is a stablecoin which is a pegged value guaranteed or at least marketed as being pegged on par to a specific exchange rate. The risk in this case is that the exchange operator might not fulfill his or her end of the deal e.

There have been several theoretical approaches to creating a native stablecoin and a few efforts to actually implement them in the wild. Last year JP Koning chronicled the fate of one of them called NuBits.

So a small army of internet users have pieced together a probable theory and it comes back to how Bitfinex operates. About a week later Bitfinex withdrew its lawsuit but not before people poured through the documents. In summary we learned that Tether which is named in the court documents is a mechanism for enabling cross-border money flows; although we cannot say what the exact purpose was for these money flows is e. Over a span of a few months, tens of millions of USD had been wired through WellsFargo into and out of four different banks in Taiwan which Bitfinex, Tether Limited, and other affiliated subsidiaries had commercial bank accounts with.

At some point this past March or perhaps earlier, someone on the compliance side of WellsFargo noticed this large flow of USD and for one reason or other e. But about a week later retracted its suit. According to a recent post from Mark Karpeles, the CEO who helmed Mt. Gox prior to its infamous bankruptcy, these actions set in motion a type of Streisand Effect: Phil Potter, the CFO of Bitfinex, recently gave an interview and explained that whenever they have lost accounts in the past, they would do a number of things to get re-banked.

Because there is currently no USD exit for Bitfinex users, a price discrepancy has noticeably grown between it and its peers. The spread between exchanges is typically a good indication of how difficult it is to move into and out of fiat in a country as there are boutique firms that spend all day and night trying to arbitrage that difference. This ties back into the challenges Mt. Gox users had in earlyas the ability to withdraw into fiat disappeared, the market price of bitcoins on Mt.

Gox traded at a dramatically different level than other cryptocurrency exchanges. That is not to say that what is happening at Bitfinex is the same thing that happened at Mt.

It and its peers have not. About nine months has passed since the largest as measured by USD single successful attack took place on a cryptocurrency platform.

According to one postMichael Perklin was the Head of Security and Investigative Services at Ledger Labs and part of the team leading this investigation. However in January a press release announced that Perklin was joining ShapeShift as the Chief Information Security Officer; his profile no longer exists at Ledger Labs.

Other questions that remain: Why did Bitfinex redeem the BFX tokens after they knew USD withdrawals were shut down? What was the benefit of redeeming that last batch when they knew they were losing international wire capabilities? It appears after the hack that Bitfinex shifted assets from the Bitinex side of the books to the customer side. Who owned the bulk of both tokens, and what protection are these virtual assets given by not being on the company books?

Or are they still on the books? In terms of them redeeming after the withdrawals were ended, the original lawsuit documents lay out that as of March 31st, Bitfinex were actively emailing WellsFargo about the shutdown. The final BFX redemption was done a couple of days later and the lawsuit was filed shortly afterwards. It was roughly week later that Bitfinex informed the public about this international wire issue. And Tether did not formally announce the issues until a few days ago.

Perhaps it is just miscommunication and only a matter of time before these questions are answered. Nearly two months ago, the SEC rejected a rule change for the COIN ETF to be listed on the BATS exchange. Last week, the SEC said it would review that ruling. Among other comments, the original 38 page ruling pdf gave a number of reasons why the Gemini-listed Winklevoss COIN ETF was being rejected.

First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated. While the Gemini exchange is regulated in New York through a Trust charterthe vast majority of cryptocurrency exchanges and trading venues whose funds flow into and out of Gemini, are not. It is unclear what will happen to Tether holders, if they will ever be made whole.

Or what will happen to Bitfinex and future bank accounts. Maybe these are all bumps in the road. As mentioned at the beginning of the post, the current trend over the past four years is that as Bitcoin intermediaries continue to operate as intermediaries and trusted third parties they increase their chances of regulatory scrutiny and oversight.

This empirical fact versus the original theoretical cypherpunk vision is arguably a type of cognitive dissonance. As Section 1 of the Nakamoto whitepaper explained:. Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments.

While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model.

Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. The Bitfinex hack that occurred in August created measurable amounts of new transactions costs that ended up being mediated through a wide array of social media channels; non-reversibility does not appear to have helped reduce these costs.

And as illustrated with the lawsuit above, by in large, these exchange platforms heavily depend on banking access moreso now than at any other time before. Last summer I proposed a Kimberley Process for Cryptocurrencies: As more cryptocurrency platforms attempt to comply with a variety of regulations including the surveillance collection and sharing requirements e.

For example, if Alice can cryptographically prove the chain-of-custody from her customer to her customers customer, then she may be able to comply with the banks surveillance requirements and maintain her bank accounts — and international wiring access — as she grows her remittance platform. Documentation management, in this case, goes beyond just hashing and timestamping documents to include automatically updating legal agreements and contracts over their entire lifecycle.

Some of it also involves sophisticated data analytic tools created by startups such as Blockseer and Chainalysis. Universities such as UCL are automating regulatory processes. And on the enterprise side, there are companies that have built a shared KYC registry and other identity-related tools for highly regulated financial institutions to comply with a battery of reporting requirements. Whether these will be adopted by the cryptocurrency community is another matter, but these tools will soon exist in full production mode and could help provide better visibility, auditability, and transparency for investors, users, entrepreneurs, law enforcement, compliance teams, and regulators around the world.

There are a number of internal papers we published over the past several months that the R3 research team and I helped manage and edit. It is early into and at fintech events we can still hear a variety of analogies used to describe what blockchains and distributed ledger technology DLT are and are not.

One of the more helpful ones is from Peter Shiau formerly of Blockstack. The Ford Motor Company is well known for its production engineering innovation that gave us the Model T. To this day, the Ford Model T is one of the best selling automobiles of all-time thanks to the sheer number produced and affordability for American middle class families. It was this breakthrough that enabled Ford to build a new car every 93 minutes, far more quickly than any of its competitors.

Carrying the analogy a little further, what is even more powerful about this modern equivalent of the assembly line is that it is not just useful for building cars but also vans and trucks and boats and planes. In just the same way, a blockchain is not just useful for creating a cryptocurrency, but can be applied to a many different processes that multiple parties might rely on to reach agreement on the truth about something.

Less helpful, but all the same plentiful, are the many red herrings and false equivalences that conferences attendees are subjected to. For example, if you want to use a cryptocurrency like Bitcoin, you have to use bitcoin; and if you want to use Ethereum, you have to use ether.

They are not interoperable. You have to use their proprietary token in order play in their walled garden. If you are using a Windows-based PC, open up a Command window. Wait a few seconds and count the hops as your signal traces the route through various network switches and servers until you finally land on your destination.

From my abode in the SF area, it took 10 hops to land at Google and 7 hops to land at Microsoft. If you did this exercise in most developed countries, then the switches and servers your signal zigged and zagged through were largely comprised of privately owned and operated networks called ISPs.

There is also depeeringbut more on that later. According to the Survey of Internet Carrier Interconnection Agreements pdf:.

The Internet, or network of networks, consists of 7, Internet Service Provider ISP or carrier networks, which are interconnected in a sparse mesh. Each of the interconnecting links takes one of two forms: Transit agreements have been widely studied and are not the subject of this report.

Back to topology, each ISP is able to pass along traffic that originated from other networks, even if these external networks and the traffic therein originate from foreign countries, because the physical systems can speak to one another via standardized transport protocols like TCP and UDP and route via BGP. And each year there is inevitably tension between one more ISP and consequently depeering takes place.

A research paper published in identified 26 such depeering examples and noted that while depeering exists:. As noted above, the internet is a cluster of several thousand ISPs that typically build business models off of a variety of service plans in both the consumer and corporate environments. From an infrastructure standpoint, notwithstanding that an intranet could be maintained one or more more servers through Software Defined Networks SDNsit is still a subset of a mash up of ISPs and mesh networks.

A private blockchain or private distributed ledger, is a nebulous term which typically means that the validation process for transactions is maintained by known, identified participants, not pseudonymous participants. Depending on the architecture, it can also achieve the level of privacy that is associated with an intranet while staying clear of the hazards associated with preserving true pseudonymity. For starters, it is not really valid to make a sweeping generalization of all identity-based blockchains and distributed ledgers, as each is architected around specific use-cases and requirements.

For instance, some vendors insist on installing on-premise nodes behind the firewall of an enterprise. Some vendors setup and run a centralized blockchain, from one or two nodes, for an enterprise. Some others tap into existing operational practices such as utilizing VPN connections. And others spin up nodes on public clouds in data centers which are then operated by the enterprise.

There are likely more configurations, but as noted above: And this is where identity comes into play: Similarly, most coffee shops, airports, schools, etc. In short, both the internet and intranet are in effect part of identity and permission-based networks.

There is no such thing as an identity-less internet, only tools to mask the users identity e. Anarchic chainswhich were designed to operate cryptocurrencies like Bitcoin, attempt to create an identity-less network on top of an identifiable network, hence the reason people involved in illicit activities can sometimes be caught.

Interestingly, where the internet analogy does hold up is in how public, anarchic blockchains are no less challenged by the effort and complexity of truly masking identity. I mentioned this in a footnote in the previous postbut it deserves being highlighted once more. Anarchic blockchains inspired by cryptocurrencies such as Bitcoin, used blocks because Satoshi wanted identity-free consensus e.

That implies miners can come and go at will, without any kind of registration, which eliminated the choice of using any existing consensus algorithm. However, PoW is susceptible to collisions e. When a collision occurs you have to wait longer to obtain the same level of work done on a transaction. Thus you want to minimize them, which resulted in finding a PoW on average every ten minutes.

Distributed ledgers such as Corda, use a different design and exist precisely as an identified network, where members cannot just come and go at will, and do have to register.

With Corda, the team also assumes relatively low propagation times between members of a notary cluster. One of the key differences between mere PoW i. It can be tough to do that unless all transactions are visible to everyone and there is a single agreed upon blockchain but if you do not, you will not get enough PoW to yield any meaningful security.

From the standpoint of miner validation, in practice cryptocurrencies like Bitcoin are effectively permission-based: Each miner generates trillions of invalid hashes each week and are rewarded with shares of a reward as the reward comes in. And if you want to change something or possibly insert a transaction, you need hashrate to do so.

Not just anyone running a validating node can effect change. More to the point, nearly all of these pools and many of the largest miners have self-doxxed themselves. They have linked their real world identities to a pseudonymous network whose goals were to mask identities via a purposefully expensive PoW process. As a result, their energy and telecommunication access can be revoked by ISPs, energy companies, and governments. AOL and CompuServe were early, successful ISPs; not intranets. Because of national and supranational laws like General Data Protection Regulation GDPR that impacts all network users irrespective of origin.

And that is what is missing from most fintech panels on this topic: If it is cypherpunks and anarchists, then anarchic chains are built around their need for pseudonymous interactions. If it is regulated enterprises, then identity-based systems are built around the need for SLAs and so forth.

The two worlds will continue to co-exist, but each network has different utility and comparative advantage. I would like to thank Mike Hearn, Stephen Lane-Smith, Antony Lewis, Marcus Lim, Grant McDaniel, Emily Rutland, Kevin Rutter, and Peter Shiau for their constructive feedback. This was originally sent to R3 members on March 31, I was at an event last week and someone pulled me aside asked: Colin Platt and Bitsonblocks.

Inspired by IMF reportpage 8. R3 formerly R3 CEV started out as a family office in David Rutter CEOTodd McDonald COOand Jesse Edwards CFO. During the first year of its existence, R3 primarily looked at early stage startups in the fintech space. Throughoutthe family office kept hearing about how cryptocurrency companies were going to obliterate financial institutions and enterprises.

So to better understand the ecosystem and drill into the enthusiasm around cryptocurrencies, R3 organized and held a series of round tables. The first was held on September 23, in NYC and included talks from representatives of: DRW, Align Commerce, Perkins Coie, Boost VC, and Fintech Collective.

Also in attendance were representatives from eight different banks. The second round table was held on December 11, in Palo Alto and included talks from representatives of: Stanford, Andreessen Horowitz, Xapo, BitGo, Chain, Ripple, Mirror, and myself. Also in attendance were representatives from 11 different banks. By the close ofseveral people including myself had joined R3 as advisors and the family office had invested in several fintech startups including Align Commerce. During the first quarter ofDavid and his co-founders launched two new initiatives.

The first was LiquidityEdge, a broker-dealer based in NYC that built a new electronic trading platform for US Treasurys. The second initiative was the incorporation of the Distributed Ledger Group DLG in Delaware in February By February, the family office had also stopped actively investing in companies in order to focus on both LiquidityEdge and DLG.

This paper was then circulated to various banks that the small R3 team regularly interacted with. The following month, on May 13,a third and final round table was held in NYC and included talks from representatives of Hyperledger the companyBlockstack, Align Commerce and the Bank of England.

Also in attendance were representatives from 15 banks as well as a market infrastructure operator and a fintech VC firm. In addition to the CaaS paper, the specific use-case that was discussed involved FX settlement. The transition from a working group to a commercial entity was formalized in August and the Distributed Ledger Group officially launched on September 1, although the first press release was not until September In fact, you can still find announcements in which the DLG name was used in place of R3.

By the end of November, phase one of the DLG consortium — now known as the R3 consortium — had come to a conclusion with the admission of 42 members. Because of how the organization was originally structured, no further admissions were made until the following spring SBI was the first new member in Phase 2. Because it is a bit of a mouthful to say DistributedLedgerGroup! Blockchains as a whole were designed around a specific use-case — originally enabling censorship-resistant cryptocurrencies.

This particular use-case is not something that regulated financial institutions, such as our members, had a need for. At the end of that same month, I briefly wrote about this view in a post laying out the Global Fabric for Finance G3Fan acronym that unfortunately never took off.

In Octoberboth James Carlyle and Mike Hearn formally joined the development team as Chief Engineer and lead platform engineer respectively. During the fall and winter, in collaboration with our members, the architecture team was consumed in the arduous process of funneling and filtering the functional and non-functional requirements that regulated financial institutions had in relation to back office, post-trade processes. By the end of Q1the architecture team gestated a brand new system called Corda.

On April 5,Richard published the first public explanation of what Corda was, what the design goals were and specifically pointed out that Corda was not a blockchain or a cryptocurrency. Instead, Corda was a distributed ledger. Prior to that date, I had personally spent dozens of hours clarifying what the difference between a blockchain and a distributed ledger was to reporters and at events, though that is a different story. Next year we plan to make things even shorter by removing either the R or 3, so watch out domain squatters!

As of Februarythe R3 consortium is formally split into two groups that share knowledge and resources: I work on the services side, and as described in a get free farm bucks farmville 2 postmy small team spends part of its time filtering vendors and projects for the Lab team which manages several dozen projects at any given time for our consortium members.

The Lab team has completed more than 20 projects in addition to 40 or so ongoing projects. Altogether these involved and in some cases still involve working with a diverse set of platforms including Ethereum, Ripple, Fabric, Axoni, Symbiont and several others including Corda. Since we are member driven and our members are interested in working and collaborating on a variety of different use-cases, it is likely that the services side will continue to experiment with a range of different technologies in the future.

If you are interested in understanding the nuances between what a blockchain, a database, and a distributed ledger are, I highly recommend reading the multitude of posts penned by my colleagues Antony Lewis and Richard Brown.

Distributed ledgers such as Corda, use a different design because it is an identified network, where members cannot just come and go at will, and do have to register. In this instance, Layer 2 refers to a separate network that plugs into a cryptocurrency via off-chain channels. This often comes up what is otc fx options conjunction with conversations surrounding the Bitcoin block size debate: As Wolfgang Pauli might say, this is not even wrong.

Visa is a credit clearing and authentication network, not a settlement network; in contrast no cryptocurrency has credit lines baked-in. And 2if Bob owned the title to a dematerialized security and he is trying to transfer ownership of it to someone else, the security ultimately settles in a central securities depository CSD such as the DTCC or Euroclear. As of this writing, no central bank-backed digital currency CBDC exists.

For instance, at R3 we are currently working on a couple of CBDC-related projects including with the Bank of Canada and Monetary Authority of Singapore. And other organizations are engaged in similar efforts. In short, one of the potential advantages of using a CBDC issued onto a distributed ledger is the enabling of network participants such as financial institutions to settle dematerialized digitized asset transfers without relying on outside reconciliation processes.

However, today if participants on a distributed ledger wanted to settle a trade in cash on a distributed ledger, they could not. As a result, the industry as a whole is attempting to reduce and — if possible — remove frictions such as these post-trade processes.

So how does that tie back in to a hypothetical Layer 2 or 3, 4, 5, connected to a jquery dropdown set selected value network? Cryptocurrencies, as I have written before, are anarchic: In fact, the most accurate description of these add-on networks is that each Lightning implementation requires building completely separate networks run and secured by different third parties: What are the service-level agreements applied to these operators?

What happens if it is no longer profitable or sustainable to operate these nodes? And like most cryptocurrencies, Lightning the generic Lightning is developed as a public good, which — as a recent paper explored — may have hurdles from a fiduciary, governance, and accountability perspective. Assuming the dev teams working on the various implementations solve for decentralized routing and other challenges, at most Lightning will be a clearing network for a cryptocurrency, not electronic cash or securities.

But what about colored coins? Why not just use an existing database to handle these regulated financial instruments then? This is a topic that has and will fill academic journals in the years to come e. But for starters I recommend looking at a previous post from Richard Brown and two newer posts from Antony Lewis. There are real, non-aesthetic reasons why aviation designers and manufacturers stopped building planes with more than two or three wings, namely aerodynamics.

Creative ideas like Lightning may ultimately be built and deployed by cryptocurrency-related companies and organizations, but it is unclear how or why any regulated enterprise would use money exchange rate in indian rupees existing proposals since these networks are not being architected around requirements surrounding settlement processes.

Either way, both worlds will continue to co-exist and potentially learn from one another. I hurricane katrina effects on stock market recently talking with a friend who spent the past decade in an operations role at a large enterprise in the telecommunication sector. He has a matter-of-fact personality that likes to cut through the smoke and mirrors to find the fire.

I explained to him my role of how does drummond ranch make money to filter through the dozens of entities that my market research team at R3 speaks with each month. For instance, because we typically act as the first part of the funnel for our organization, we end up listening to a great deal of startup pitches. The first year alone we looked at and spoke to more than entities, a number that has now reached about Should you seek advice from people who never interface with enterprises or institutions and get all their wisdom from social media?

Or listen to columnists whose only interaction with banks is the ATM or a cryptocurrency meetup? Or to media outlets that do not disclose their coin holdings? I have personally seen dozens of decks from vendors along the entire spectrum of sizes during the current hype cycle.

For instance, there are couple dozen different startups that claim to have somehow built an enterprise-grade blockchain system without having to go through the arduous process of gathering the functional and non-functional requirements from the enterprises they intended to integrate with.

They are not the same buy surplus food stock clearance. If your job is to help filter vendors for financial institutions, governments, investment funds, or other large enterprises, then some of these questions may be helpful in determining whether or not your firm should engage with the vendor:.

We think the number of companies with legs will continue to increase over time but chainwashing will continue to be a noise pollution problem for the next few years in the enterprise world even after production systems have been integrated into institutions. I ended up traveling a lot more than I expected last year, including 9 times just to East Asia.

As of right now there are probably just a small handful of startups in APAC that have the capital, connections, and capability to execute and build the commercial products and applications that are discussed at the plethora of fintech events.

Below are the interviews, events, and presentations I participated in the last few months of Below are a number of events, presentations, panels, and interviews I have participated in over the past three months.

Earlier today our architecture team released its first public whitepaper on Corda. The WSJ covered it here and here. This past Sunday I gave a new presentation at the Palo Alto Ethereum meetup — it was largely based on my previous two blog posts. As mentioned in the previous post: At the time there were lots of celebrations for having done something that flew in contrast to the views prominently held by the Bitcoin Core remington 700 sps tactical 308 replacement stock community: Well, it has been done, but there were also some consequences.

Some intended and others unintended. The biggest consequence — which was touched on in my last post too — was that there were now parallel universes: Ethereum Core ETH and Ethereum Classic ETC. If you owned a coin on pre-hardfork Ethereum, you now own not just the ETH facsimile but also the Classic coin ETC too. Two for the price of one! This also opens up the very real possibility of replay forex signals providers free trial which was also a possibility when Ethereum moved from Olympic to Frontier.

A replay attack predates cryptocurrencies such as Bitcoin and Ethereum:. This is carried out either by the originator or by an adversary who intercepts the data and re-transmits it, possibly as part of a masquerade attack by IP packet substitution. In this case, it is the retransmission of a transaction not IP packet. Or in the Ethereum world, a replay attack would be to take a transaction from nifty future and options Ethereum fork and maliciously or fraudulently repeating it on another Ethereum fork.

SirerRappand Vessenes. At first most of the Ethereum community assumed that Classic would effectively become deprecated and fade away into history much like Olympic. From a technical integration standpoint, while all of the large exchanges initially supported ETH, one altcoin exchange based in Montana — Poloniex — began supporting both personal experience in trading binary option. Traders — seeing a potential arbitrage opportunity — began doing what they do best: In return, some of the miners that had abandoned the original Ethereum chain ETC to mine on the ETH hardfork have now begun mining on both which means that the original ETC network actually has once again bank of thailand exchange rate forecast seeing an increase in its hashrate recall that it had dramatically dropped a week ago.

This is an interesting twist because less than 3 days ago, Chandler Guo an executive at Stock purchase agreement checklist. Chandler later binary options trading strategy trend line he would not carry it out.

Incidentally, it is likely that the noise that was created from how to make a money conjure bag threat actually drew more attention to the Poloniex arbitrage opportunity, creating a type of Streisand Effect.

Above is a line graph that is auto-generated and reflects the past 48 hours of two types of ratios: Price is derived from the two largest exchanges in terms of ether liquidity Bitfinex and Poloneix.

This is actually not surprising behavior, we empirically observe the same type of trend with other cryptocurrencies: Over the past several days there has been much guessing as to which chain will live or die, but rarely do people suggest that both will live on in the long-run.

And I think that is short-sighted. In addition, we have seen for years the continued existence of multiple multipoolswhich automatically direct GPU-miners to the most profitable cryptocurrency usually with a payout in bitcoin.

I cannot predict who which chain outlasts the other. Perhaps bollinger bands strategy forex that ethcore has said it will also support Ethereum Classic, the two or more! This includes both ETH and ETC. Who else gains from this phenomenon? In the short run, anyone interested in trading will probably be able to find some kind of arbitrage — assuming demand grows or at least stays at the same level.

Other cryptocurrency communities that see Ethereum as a competitor could believe they now have an incentive to support multiple forks too, as it draws hashrate and potential 15 minutes binary options trading in the united states away one chain at the expense of the 24 banc de binary option suspended. But maybe this is shortsighted too and will simply enlarge the Ethereum community because they now end up as ETC holders and want it to appreciate in value.

Ignoring the above quasi-illustration of the many-worlds interpretationsurprisingly not much has been discussed regarding the analog world of when fiat currencies are how to buy shares in celtic fc or even removed at certain exchange rates and the unintended consequences earn money writing movie reviews. For instance, in the comedy Good Bye, Lenin!

More recently we have seen multiple Iraqi dinar scamsin which individuals were deceived and conned into acquiring pre-war dinar a deprecated fiat currency with the fraudulent pitch that at some point in the future, the previous pre-war exchange rate would somehow be reached.

However, one of the biggest differences with the Ethereum-based chains above is that cryptocurrencies are anarchic — without terms of service or ties to the legal system. Therefore it is difficult impossible even? Consequently it is unclear if anyone has a legal claim to prevent or create additional forks in the future and because of this, it is hard to see who has liability for past, present or future forks on these chains.

Whether that is a risk organizations and regulated institutions are willing to take is a topic for another post. Perhaps if or when this is done, there will be even more chances to consume warm buttery popcorn as we watch and learn from the trials and tribulations of anarchic blockchains. Yesterday, at block heightmany elements of the Ethereum community coordinated a purposeful hardfork. After several weeks of debate and just over a couple weeks of preparation, key stakeholders in the community — namely miners and exchanges — attempted to create a smooth transition from Ethereum Prime sometimes referred to as Ethereum Classic into Ethereum Core Ethereum One.

Was cual es el mejor apalancamiento en forex hardfork a success?

To answer that question depends on which parallel universe or chain you resided on. Because earning money by watching ads blockchains intentionally lack terms of service, EULA, and service level agreements, therefore it is difficult to say who is legally liable for mistakes or loses. Which party is supposed to provide compensation and restitution?

This whole hardfork exercise visualizes a number of issues that this blog has articulated in the past. Perhaps the most controversial is that simply: The best a cryptocurrency community could inherently achieve is a de facto mainnet. Public blockchains such as Bitcoin and Ethereum, intentionally lack any ties into the traditional legal infrastructure.

The original designers made it a point to try and make public blockchains extraterritorial and sovereign to the physical world in which we live in. In other words, public blockchains are anarchic. However, even in this world there is a debate as to whether or not it is the longest chain or the chain with the most work done, that is determines which chain is the legitimate chain and which are the apostates.

And this is where, fundamentally, it becomes difficult for regulated institutions to use a public blockchain for transferring regulated data and regulated financial instruments. For instance, in March an accidentalunintended fork occurred on what many participants claimed as the Bitcoin mainnet. To rectify this situation, over roughly four hours, operators of large mining pools, developers, and several exchanges met on IRC to coordinate and choose which chain they would support and which would be discarded.

This was effectively, at the time, the largest fork-by-social-consensus attempted e. There were winners and losers. OKPay, a payment processor, lost several thousand dollars and BTC Guild, a large mining pool who had expended real capital, mined some of the now discarded blocks.

In the Bitcoin world, this type of coordination event is slowly happening again with the never ending block size debate.

One team, Bitcoin Classic, is a small group of developers that supports a hardfork to relatively, quickly increase the block size from 1 MB to 2 MB and higher. Another group, dubbed Bitcoin Core, prefers a slower role out of code over a period of years that includes changes that would eventually increase the block size e. Yet as it lacks a formal governance structure, neither side has de jure legitimacy but instead relies on the court of public opinion to make their case.

This is typically done by lobbying well-known figureheads on social media as well as work from home jobs ghaziabad pools directly.

Thus, it is a bit ironic that a system purposefully designed for pseudonymous interactions in which participants were assumed to be Byzantine and unknown, instead now relies on known, gated, and trusted individuals and companies to operate. With this backstory it is increasingly clear that, in the legal sense, public blockchains are not actual distributed ledgers. Distributed, yes; ledgers, no.

As Robert Sams articulates: I think the confusion comes from thinking ukforex rates cryptocurrency chains as ledgers at all. A cryptocurrency blockchain is an attempt at a decentralised solution to the double spending problem cara membuat ea di forex a digital, extra-legal bearer asset.

With a bearer asset, possession of some instrument a private key in the cryptocurrency world means ownership of the asset. With a registered asset, ownership is determined by valid entry in a registry mapping an off-chain identity to the asset. The bitcoin blockchain is a public log of proofs of instrument possession by anonymous parties. As I have discussed previously, public blockchains intentionally lack hooks into off-chain legal identification systems.

Because as Sams noted above: Arguably it is self-defeating to link and tie all of the participants of the validation mining process and asset transfer process users to legal identities and gate them from using or not using the network services. All you have created is a massively expensive permissioned-on-permissionless platform. There are multiple reasons, but partly due to the need to reduce settlement risks: As illustrated with the purposeful Ethereum One hardfork and the accidental Bitcoin fork inpublic blockchains by design, can only provide probabilistic settlement finality.

Sure, the data inside the blocks itself is immutable, sharekhan option trading brokerage the ordering and who does the ordering of the blocks is not. What does this mean? Recall that for both Ethereum and Bitcoin, information usually just private keys are hashed multiple times by a SHA algorithm making the information effectively immutable.

Goldman Sachs | Careers Blog

However, blocks can and will be reorganized, they are not immutable. Public blockchains are secured by social and economic consensus, not by math. As billboards top money makers 2016 consequence, there are some fundamental problems with any fork on public blockchains: And coupled with the lack of hooks for off-chain identity means that public blockchains — anarchic blockchains — are not well-suited or fit-for-purpose for regulated financial institutions.

After all, who is financially, contractually, and legally responsible for the consequences of a softfork or hardfork on a public blockchain? These types of forks also open up the door for sifma stock market game symposium forks: Who is allowed and responsible to make those decisions? If another instance like the successful attack and counter-attack on The DAO takes place, will the community decide to fork again? If 2 MB homework jobs without investment in surat are seen as inadequate, who bears the legal and financial responsibility of a new fork that supports larger or smaller blocks?

If any regulated institution lose assets or funds in this forking process, who bears responsibility? Members benelli supernova aftermarket parts IRC rooms? If the answers are caveat emptorthen that level of risk may not be desirable to many market participants. In the case of The DAO, the attacker allegedly threatened to sue participants acting against his interests because he claimed: Does he have legal standing?

At this time it is unclear what court would have accepted his lawsuit. If you cannot tie your code, chain, or ledger into the legal system, then it might be an unauthoritative ledger from the perspective of courts. We continue to learn earn farmville cash without paying the public blockchain world, such as the consequences of forks, and the industry as a whole should try to incorporate these lessons into their systems — especially if they want anyone of weight to use them.

After all, we are continually bombarded by cryptocurrency enthusiasts each day telling us that exponential growth is occurring. For more background, earning money by watching ads previous posts big w christmas trading hours tuggerah January and April.

Above is a weekly volume chart denominated in USD beginning from March for LocalBitcoins. As discussed in previous postsLocalBitcoins is a site that facilitates the person-to-person transfer of bitcoins to cash and vice versa.

While there is a lot of boasting about how it may be potentially used in developing countries, most of the volume still takes place in developed countries and as shown in other posts, it is commonly used to gain access to illicit channels because there is no KYC, KYCC, or AML involved.

Basically Uber for cash, without any legal identification. For comparison, most VC-backed exchanges do several multiples more in volume during the same time frame. People that like volatility include: What articles and reporters should do in the future is actually talk to consumers and everyday users to balance out the hype and euphoria of analysts who do not disclose their holdings or quick profit in stock market firms futures trades are executed in the pit of cryptocurrencies.

As we can see above, volatility measured relative to both USD and EUR hit a five month high this past quarter. The average user probably would not be very happy technique day trading forex joe ross pdf download having to hedge that debt holder short position put option of volatility, largely because there are few practical ways to do so.

Remington 700 sps tactical 308 replacement stock want boring currencies, not something they have to pay attention to every 10 minutes. And ether ETH was even more volatile during the same time frame: Counterparty is a watermarked token platform that, as shanta gold london stock exchange in previous quarters, has hit a plateau and typically just sees a few hundred transactions a day.

Part of this is due to the fact that the core development team has been focused on other commercial opportunities e. As shown in the chart above, on any given day in Q2 the Ethereum blockchain processed roughly 40, transactions. In Q1 that hovered between 15, transactions. In addition, according to CoinGeckoCounterparty has lost some popularity — falling to 14th from 10th in its tables from last quarter.

Ethereum remained in 2nd overall. Another trend observed in the last quarterly review remains constant: Ethereum has significantly more meetups than Counterparty and is 2nd only to Bitcoin in that measure as well. Organ of Corti — Time period: January 1, — June 27, Perhaps there is genuine growth, but what is the break down?

As we can see from the chart above, while non -long chain transactions have indeed grown over the past quarter, they are still far outpaced by long chain transactions which as discussed in multiple articles, can be comprised of unspendable faucet rewards dustgambling bets and a laundry list of other non-commercial activity.

Furthermore, and not to wade into the massive black hole that is the block size debate: As a consequence some have asked if fee pressure would incentivize moving activity off-chain and onto other services and even onto other blockchains.

This may be worth looking into as the block size reaches its max limit in the future. Or maybe they just pack up and leave the space entirely? Capital gains tax futures trading have looked at wallets here multiple times. What researchers want to know currency foreign forex newforextrading.com trading Monthly Active Users MAU.

To my knowledge no one is willing to publicly discuss their monthly or daily user number. This number is likely tied to the amount of email-based registrations they have had over the past four years circa May 12, But this is a measure of wallets that have been created on the site, not actual users.

Last October Abra launched its GoAbra app and initially rolled it out in The Philippines. This past May, when CoinDesk ran a story about the company, I looked in stock market selloff Google Play Store and it says the app had been downloaded 5, times.

Last week, Abra announced it was officially launching its app into the US. As of this writing, it was still at 5, downloads.

As of this writing, the top 5 Bitcoin wallets in the Google Play Store in order of appearance are:. The Apple App Store does not publicly state how many times an application has been downloaded.

It does rank apps based on a combination forex kolkata salt lake user ratings and downloads. The top 6 on the iPhone in order of appearance:. Interestingly however, the order is slightly different in the App Store on an iPad. The top 6 are:. Bezdepozit on binary option in 2016 may be worth revisiting these again next quarter.

If you want to burn some time, readers may be interested in looking at specific rank and activity via App Annie. Most new cohorts and batches at startup accelerators and incubators usually only stay months.

A typical intake may see companies each get a little bit of seed funding in exchange for a percentage of the equity. During the incubation period the startup is usually provided mentorship, legal advice, office space, access to social networks and so forth. It is common place to hear people of all stripes in Silicon Valley state that 9 out of 10 of these startups will burn out within a couple years — that the incubator relies on one of them having a big exit in order to fund the other duds.

VC, Plug and Play, YCombinator and other incubators have added and removed startups from their websites and how much money does a mary kay director make material based on the traction startups have had. And cryptocurrency startups are not too different from this circle of life. Unfortunately, no one has consistently published user numbers, so it is unclear what the connection between funding and growth is as this time.

In fact, in an odd twist, instead of measuring success by monthly active users, customers, or revenue, many Silicon Valley-based companies are measuring success based on how much money they raised. How many bitcoins did it mine prior to its pivot into consumer hardware? How many 21 computers were sold? How many users have installed 21? And what are its key differences relative to what Jeremy Rubin created in Tidbit?

Again, this is not to single out 21inc, but rather to point out if companies in the public blockchain space were seeing the traction that they generally claim to on social media and conferences — then as discussed in previous posts, they would probably advertise those wins and successes.

With funding comes hiring. Since it is very difficult to find public numbers, there is another way to gauge how fast companies are growing: The last Bitcoin Job Fair was last held in April It is unclear how many people that were hired during that event still work for the companies they worked for. A number of VC-backed companies and large enterprises or head hunters recruiting on their behalf have listed openings in the past month.

Notable startups that are missing altogether: Perhaps they use LinkedIn instead? It is unclear what the root cause s of the volatility were above. Based on process of elimination and the stats in this post, the likely answer does not appear to be consumer usage e. After all, dean witter stock market price BitPay and Coinbase have stopped posting consumer-related stats and they are purportedly the largest merchant processors in the ecosystem.

Extraordinary claims requires extraordinary evidence: For instance, the price of ether ETH has increased 10x over the past 6 months but there is virtually no economy surrounding its young ecosystem.

Mass consumer adoption is not happening as GIF artisans might says. Rather it is likely all speculation based — which is probably the same for all other cryptocurrencies, including Bitcoin. About a year ago we began seeing a big noticeable pivot away from cryptocurrencies to non-cryptocurrency-based distributed ledgers.

After all, why continue building products that are not monetizable samurai forex trading review profitable for a market that remains diminutive? I have spent the past few weeks in East Asia, primarily in China visiting friends and relatives.

Because the connection to the outside world was limited, the upside was that the cacophonous noise of perma cryptocurrency pumpers was relatively muted.

I have had a chance to reflect on a number of ideas that are currently being discussed at conferences and on social media. A type of Kimberley Process but for cryptocurrencies. For instance, the short lived startup CoinValidation comes to mind as having the first-to-market product but was notably skewered in the media.

Yet its modus operandi continues on in about 10 other companies. For those unfamiliar with the actual Kimberley Process, it is a scheme enacted in to certify where diamonds originated from in order to help prevent conflict diamonds from entering into the broader mainstream diamond market. What does this have to do with cryptocurrencies? Why would anyone be interested in enabling this?

For instance, in many countries, most of the on-ramps and off-ramps of venture-backed cryptocurrency exchanges are actively monitored by law enforcement, compliance teams and data analytic providers who in turn look at the provenance of these assets as they move across the globe. On the fiat side, while many jurisdictions in North America and Western Europe currently require domiciled cryptocurrency exchanges and wallets to enforce KYC and AML compliance requirements, several areas of Asia are less strict because the local governments have not defined or decided what buckets cryptocurrencies fall into.

There are some other noticeable gaps in this system involving crypto-to-crypto exchanges. What are some examples of why a Kimberley Process would be helpful to both consumers and compliance free teknik forex sebenar v3 Allegedly two of of the popular use-cases for these cards is: Attaching uniform KYC and legal identities to each asset would aid compliance teams in monitoring where the flow of funds originated and terminated with cryptocurrencies.

And it would help consumers shy away from assets that could be encumbered or were proceeds of crime. This has been the case for long before the existence of computers let alone cryptocurrencies, but it came up several times in profit sharing options pros and cons with friends.

According to my sources, their acquaintances are repeatedly approached and some actually took part in Ponzi schemes that were presented as wealth management products. Similarly, when these illicit virtual assets are re-sold to exchanges, customers of those exchanges such as Alice and Bob, may receive potentially encumbered assets that are then resold to others who make money crafting osrs unaware of the assets lineage much like a stolen motorcycle being resold multiple times.

This creates a massive lien problem. Anyoption unveils real time binary option trading data property theft is not a new or strategies for selling employee stock options problem, why bank of america stock split 2004 it worth highlighting for cryptocurrencies?

Many of the original victims in East Asia are not affluent, so these scams have a material impact on their well being. Thus not only do they lack a cushion from scams but any price volatility — such as the kind we continue to see in cryptocurrencies as a whole, can wipe out their savings.

I am frequently asked how is it possible to know who received potentially encumbered cryptocurrencies? For amateur sleuths, there is a long forum thread which lists out some of the major heists and thefts that occurred early on in Bitcoinland. Above is a video recording of a specific coin lineage: Recall that in Julyapproximately 40, bitcoins were stolen from the Bitcoinica exchange.

Perhaps we will never know, but several users sued Bitcoinica in August for compensation from the thefts and hacks. In short, they do not exist by design. Public blockchains intentionally lack any kind of native consumer protections because an overarching goal was to delink off-chain legal identities from the pseudonymous interactions taking place on the network. Thus, stolen cryptocurrencies often mforex konkurs 2015, even without being mixed and laundered.

Perversely the short answer to that is no. If Bob owns a bunch of the a cryptocurrency that is benefiting from this price appreciation, then he may be less than willing to remove the culprits involved of driving the prices upward. Why remove someone whose activity created new demand for bitcoins? If the end goal of market participants and enthusiasts is to enable a market where the average, non-savvy user can use and trust, then giving them tools for provenance could be empowering.

Ironically however, by integrating KYC and provenance into a public blockchain, it removes the core — and very costly — characteristic of pseudonymous, censorship-resistant interaction. Thus there will likely be push back for implementing a Kimberley Process: And if you basics of online stock trading in india up gating all of the on-ramps and off-ramps to a public chain, you end up just creating an overpriced permissioned-on-permissionless platform.

Despite this, Michael Gronager, CEO of Chainalysisnotes that:. I probably see this as a Nash equilibrium — like in the ideal world all trees would be low and of equal height but there is no path to that otherwise optimal equilibrium. We believe that fighting crime on Blockchains will both build trust and increase their use and value. One way some market participants are trying to help law enforcement fight crime is through self-regulating organizations SRO.

For instance, because we have seen time and time again that the market is not removing these bad actors from the market, several companies have created SROs to help stem the tide.

Perhaps that will change over time. And as one source explained: Even when there is decent evidence, we are not aware of a Bitcoin thief that was actually found guilt of stealing bitcoin, yet. Over the past six weeks, there has been very little deep research on forex trading wiki market prices have risen and fallen.

Usually it is the same unfounded narratives: But no one provides any actual data, least of all the investors financing the startups that make the claims.

For instance, on June 1st they noted that:. Because it was over multiple exchanges and these trades were filled, we are digging into it further.

If there was a standardized Kimberley Process used by journal entry to sell common stock of these exchanges, it would be much easier to sifma stock market game symposium who is involved in this process and if those funds were based on proceeds of illicit activity.

Third parties such as Wedbush Securities and Needham have also published reports on price action, but these are relatively superficial in their analysis as they lack robust stats needed to fully quantify and explain the behavior we have seen.

Strangely enough, for all the pronouncements at conferences about how public blockchains can be useful for data analysis, very few organizations, trade media or analysts are publishing bonafide stats. After all, who are the customers of these virtual currency exchanges?

BitX coordinates with a variety of compliance teams to help block transactions tied to scams and Ponzi hedge forex position. In the past, BitX has managed to help kill off two ponzi schemes and has tried to block MMM Global which has spread to Africa.

As a result, over the course of 8 weeks this exchange did more than 3x volume than BitX during same time frame. Why is MMM so successful? Users stock market entry and exit strategies asked to upload videos onto Youtube of why MMM Global is great and why you should join and swing trading forex ebook then paid barclays stockbroker sipp MMM as a reward.

This becomes self-reinforcing in large part because of the unsavvy victims who are targeted. For instance, in China there have been a variety of get-rich-quick Ponzi schemes that rose and blew up, such as an ant farm scheme in In fact, one how much money does gary bettman make over the past couple weeks is that The DAO attacker placed a short of 3, bitcoin on Bitfinex prior to attacking The DAO which was denominated in ether.

What is the aggregate demand of all of this activity? If it is large, does it impact the market price? And how would a Kimberley Process help provide restitution to the victims of this ransom activity? How can you or your organization get involved in creating a Kimberley Process for cryptocurrencies?

On that last point, Fabio Federici, CEO of Skry formerly Coinalyticsexplained:. In general I believe the biggest unsolved problem is still identity and information sharing. PII stands for personal identifying information.

Similarly, Ryan Straus, an attorney at Riddell Williams and adjunct professor at Seattle University School of Law explained that:.

Identity is central to the legal concept of property. Property systems are information systems: With the sole exception of real currency, possession or control is not conclusive indicia of ownership.

Factual fungibility simply makes it harder to prove that you have a better claim to a specific thing than the person who now possesses or controls it. The hard part about what you have written about is that it is difficult to avoid conflating KYC which involves identity of south african reserve bank rand exchange rate and the Kimberley Process which involves identifying things.

In order to enable participants to share information without being unduly hounded by social media, it was also suggested that the presence of: In addition to implementing additional financial controls and external audits, cryptocurrency exchanges and wallets adopting a Kimberley Process would help provide transparency for all market participants.

While it is probably impossible to remove all the bad actors from any system, reducing the amount of statutory charges in stock market they have to hide could provide assurances and reduce risks to market stock options reporting irs of all shapes and sizes.

However, the trade-off of implementing such a Process is that it negates the core utility that public blockchains provide, turning them into expensive permissioned gateways. And if you are permissioning activity from the get-go, you might as well use a permissioned blockchain which are cheaper to manage and operate and also natively bake-in the KYC, KYCC and AML requirements. But that is a topic for another post as well. This post will look at the difference between a decentralized autonomous organization DAO and a project called The DAO.

The wikipedia entry on DAOs mforex konkurs 2015 not very helpful.

However, Chapters 2 through 5 may be of some use although it is dated information. One way to think of a simple DAO: For instance, let us assume that a small non-profit aid organization whose staff primarily work in economically and politically unstable regions with strict capital controls, set up a DAO — an escrow agent — on a decentralized cloud to distribute payroll each month.

This cloud-based advantages of binary options robot espanol agent was coded such that it would only distribute the funds once a threshold of digital signatures had signed an on-chain contract — not just by staff members — but also from independent on-the-ground individuals who observed that the staff members were indeed doing their job.

Some might call these independent observers as oraclesbut that is a topic for a different post. Once enough signatures had been used to sign an on-chain contract, the escrow agent would automatically release the funds to the appropriate individuals or rather, to a public address that an individual controls via private key.

The purported utility that decentralization brings to this situation is that it makes censoring transactions by third parties more difficult than if the funds flowed through a centralized rail. There are trade-offs to these logistics but that is beyond the scope of this post. Watch out Zenefits, the cryptocurrency world is going to eat your lunch! It is really easy to get caught up in the euphoria of a shiny new toy. For instance, in AugustMike Hearn gave a presentation at Turing Festival see abovedescribing what was effectively a series of decentralized agents that operated logistical companies such as an autonomous car service.

Several months later, Vitalik Buterin published the Ethereum white paper which dove into the details of how to build a network — in this case a public blockchain — which natively supported code that could perform complex on-chain tasks: Over the past year, a group of developers, some of whom are affiliated with the Ethereum Foundation and others affiliated with a company called Slock.

In return for sending ether to The DAO, users receive an asset called a DAO Token which can be used in the future to vote on projects that The DAO wants to fund. That is to say, just as I have argued before that permissioned-on-permissionless is a shortsighted idea, The DAO as it is currently set up, is probably a solution to a problem that no one really has.

Why would this pool of capital provide any better expected return-on-investment than others? Or as Nick Zeeb explained to me:. I also do not think that a committee of over 1, strangers will make wise investment decisions. Most good investment decisions are taken by courageous individuals in my opinion. Anything that can get past a big committee will probably not be the next Google. I think part of it is quite simply: This is a problem that plagues the entire cryptocurrency ecosystem.

Despite all the back-patting at conferences, the market is already filled with lots of different tokens. With The DAO, only the development teams of projects that are voted and approved by The DAO e.

And it is only after they build, ship and sell a product that the original investors may begin seeing some kind of return. Or in other words: In the future there will be various votes as to where that capital goes. All the while some type of profit is sought and dividend returned. Why, I asked another friend, would this pool of capital offer any better risk adjusted return-on-investment than other asset classes?

The return might be high but so is the risk. Always adjust for risk. I think The DAO is better compared to a distributed venture capital firm. Does that make them better VCs? However, The DAO can decide to hire people with actual credentials to manage and select the investments, admitting its own weakness which would then turn into a strength. I think this can go either way but given the regulator is not prepared for any of this it will probably not work out in the short term.

And if so, how productive is that versus alternative investment vehicles? For example, we know that there will be some disbursements to projects such as Slock. And that future DAOs will spend their ether on expenses and development like a normal organization. But we also know that there is a disconnect between what The DAO is, an investment fund, with what many people see it as: Not only does The DAO need to have a large volume of deal flow, but The DAO needs to attract legitimate projects that — as my friend point out above — have a better risk adjusted return-on-investment than other asset classes.

What happens when the operators and recipients of DAO funds eventually confront the problem of securities regulation? So far, most of the proposals that appear to be geared up for funding are reminiscent to hype cycles we have all seen over the past couple of years. Maybe the funds will not all be vaporized, but if a non-trivial amount of ETH ends up being held in this DAO or others, it could be the case that with sluggish deal flow, a large portion of the funds could remain inert.

And since this ether would not touching any financial flows; it would be equivalent to storing a large fraction of M0 in your basement safe, siloed off from liquid capital markets. About 17 months ago I put together a list of token crowdsales. It would be interesting to revisit these at some point later this year to see what the return has been for those holders and how many failed.

Similarly, no one has really probed Bitcoin mining and all POW mining through the lens of a crowdsale on network security. Is every 10 minutes an ICO?

After all, the scratch-off contest ties up capital seeking rents on seigniorage and in the long run, assuming a competitive market, that seigniorage is bid away to what Robert Sams has pointed out to where the marginal cost equals the marginal value of a token.

Earlier this week CoinDesk published a pretty good overview of it. There are currently two popular interrelated narratives on social media surrounding participation of the block making process on a public blockchain. The stories are most pronounced within the Bitcoin community but are also reused by Litecoin, Ethereum and other cryptocurrencies too. This post looks at both of these and show that in practice neither is really true as of April A year ago I reflected on some of the debate surrounding permissioned and permissionless blockchains.

Part of that post involved looking at how the mining market actually evolved in practice; not just based on the generalized claims made by enthusiasts at conferences. Only the first 50 are chronologically included:. Eligius was announced on April 27, In there was no whitelist, blacklist, KYC or KYM know your miner process. That is to say, those wanting to create a block did not need permission from a network administrator. It is not related to developing other platforms that plug into the network.

It is not related to whether the network codebase is open source or not. It is not related to being able to build software products that somehow utilize the network. It is not related to being able to view or not view transactions. Yet due to how the market evolved, today in while everyone is still paying for the high marginal costs to maintain a network designed for pseudonymous and anonymous interaction, few participants, specifically block makers, are actually capitalizing off of that utility.

If instead you acquire the hardware on the second-hand market — in order to remain anonymous — you will still likely leave a paper trail with your legal identity in order to pay for the large energy bill and property taxes. This is one of the reasons why miners in locations such as China do not publicize their fundraising activities or annual revenue: Roughly 10 companies globally provide law enforcement, compliance teams and regulators access to relatively robust analytics tools to track provenance of bitcoins or other cryptocurrencies back to coin generation itself.

And in order to sell these mined bitcoins e. While there are workarounds such as LocalBitcoins and SharedCoin, generally speaking the pseudonymous network itself in has largely become doxxed.

Yet the high costs of maintaining pseudonymity, via proof-of-work, still remain. Above is a pie chart that estimates the hashrate distribution among mining pools over the past 4 days as of late April Above is the pool distribution of the past year based on coinbase data aggregated by Blocktrail.

The 10 largest pools collectively account for roughly There is also a relatively long tail that includes roughly another 60 entities some of whom do sign coinbase transactions that represent the remaining 8. To my knowledge, no one has formally published a thorough explanation for the reasons why.

But one repeated rationale is that pools do so in order to prove to the miners hashers connected to the pool what the provenance of the block reward income is. For those who have never partaken in the mining process before, a quick history lesson: That is to say, the security of network security was outsourced to entities who create proofs-of-work and who are colloquially referred to as miners.

Today, if average Joe buys ASIC mining equipment, he typically does not connect them to his own pool but instead connects them to a pool run by Bob the devops professional. Block signing in theory provides some semblance of transparency: This was allegedly more commonplace prior tobefore the advent of VC financed farms and pools. There are multiple reasons why, but the most important reason boils down to economics. Other reasons for why few decide to become block-makers include: Just as oil producers with the highest marginal costs have been forced to exit the fracking market over the past couple of years, Bitcoin miners with the thinnest margins will likely exit the market immediately.

What this actually results in, at least the short run, is a more concentrated group of larger hashing farms and pools. They may be squeezed, but they do not have to exit the market. Basically, the less efficient players will be squeezed out and the more efficient players will remain. Who is likely be be more efficient? Larger farms in cheaper locations, or smaller pools made up of less sophisticated players with less capital? Maybe, but recall, we have seen this song and dance before and it is likely that the block reward halving is already factored into both the current market price and the hardware replacement cycle and as a result there probably will not be a doubling of the market price of bitcoins.

However, that is a topic for a different post. Above is the distribution of mining pools for Litecoin over the past day. Interestingly, Coinotron — a pool I used when mining 3 years ago — currently represents 2. In AugustLitecoin underwent its first block reward halving.

Contrary to popular belief, its market price did not double. In fact, nine months later the price of a litecoin measured in USD is just fifty cents higher than what it was pre-halving.

Interestingly Ethereum formally launched in August and has seen the same consistent pattern of pools representing the majority of block making activity as other cryptocurrencies have witnessed. Other cryptocurrencies continue to face similar pool centralization. While it does not appear that F2Pool behaved maliciously, the fact that one block maker could potentially rewrite history by doing block reorgs motivated Onename to migrate away from Namecoin. But there are reasons for this.

I contacted a mining operator in China that currently operates about 40 petahashes per second in equipment. This includes two facilities in western Sichuan plus a new Xinjiang site. We want to build larger operations than what we have today, but our goal is to maintain a specific percentage of the entire network. So all it takes is construction materials and labor. We hired 10 people last year.

We intentionally hired more than we needed so we can build a team and send them places. He lives in Sichuan and was originally a hydroelectric operator but now owns his own hydro power station. He learned he could make more money mining than just running the station. In Yunnan, Guizhou and Sichuan there was an overinvestment in hydropower last decade and now there is a surplus of electricity. Instead a miner just pays a small amount of taxes and all the profit is invisible to the law as it stands today.

I also reached out to another mining operator based in southern China who explained that in practice, mining farms that produce 1 PH or more are usually not based in cities:. Instead he listed provinces where they are spread out including: Heilongjiang,Liaoning, Hebei, Sichuan, Tianjin, Anhui, Jiangsu, Ghuizhou, Inner Mongolia, Shanxi, Guangdong. And it normally spreads over lots of sites. One place has nearly sites crossing two provinces; a lot of small ones representing about KW of power each.

They are spread over several hundred kilometers; no economy of scale after a certain point. This type of self-doxxing, quasi-dynamic environment has led to another interesting phenomenon: For example, two days ago, a user sent approximately The community as a whole then began a crowdsourced investigation into who may have sent this fee and the motivations for doing so, with many believing it to be a mistake.

A user affiliated with BitClub has since publicly stated it would like to return the fee to the original entity that sent it, though it is unclear if he is speaking with any authority or if the whole thing was a ruse to begin with.

For instance, the most well-known block reorg occurred in March and it was only resolved when miners, including Slush and BTCGuild, contacted and coordinated with one another via IRC. If the network was more decentralized and pseudonymous, this coordination would have been very difficult to do, and this was by design. I pointed out this irony on Twitter earlier this week as well: And this happens on a regular basis: That type of friction is not what most consumers want.

The cryptocurrency community is learning the hard way why intermediaries exist, why SLAs exist, why legal identities are required for financial transactions, why consumer protection laws arose and so forth.

Pointing out these patterns is not malice or due to a lack of understanding of how cryptocurrencies work, but rather it serves as illustrations for why it has been hard to find real sustainable traction in the space. But that is also a topic for a different post. However, in practice it requires a certain amount of technical knowledge and more importantly, capital, to profitably and sustainably operate a mining farm and pool. And in order to scale this profitably, in practice, most miners at some point reveal their legal identities thereby negating the core characteristic of a public blockchain: Ironically, a substantial increase in cryptocurrency prices may inevitably result in self-doxxing of all major farms.

As market prices increase, miners in turn expend more capital to increase their own hashrate to chase the seigniorage rents. Because of the KYC requirements of utilizing resources like electricity at a hydroelectric dam and the subsequent identity leakage, this turns the block making process itself into a mostly known, permissioned activity. Similarly, while many enthusiasts have been led to believe a block reward halving will somehow re-decentralize the mining ecosystem, the fact of the matter is chip performance as measured in hashrate efficiency is only one factor in the total calculation that professional miners must account for.

Furthermore, semiconductor engineering itself is effectively on a known, mature trajectory and which appears to be lacking any significant leaps in technological improvement. The largest entities, such as Intel, see this relatively static path which is one of the reasons why they have formally abandoned their tick-tock roadmap and now plan to lay off 12, people.

In contrast, energy prices, land prices, labor costs and taxes are among other major components that professional mining operators look at as a whole and decide whether to stay in a market or not. Even if there is some price increase after the halvening, home mining by amateurs outside of China will likely continue to remain unprofitable after July.

Thus a year from now the mining ecosystem will probably look a lot like it does today, with most farms and pools being self-doxxed and relatively centralized. In fact, there is less data today than 3 months ago. For instance, at some point in the past couple of months, Coinbase removed its wallet transaction volume chart from its chart site.

It will take some time to update, but the transition will happen. Interestingly, this somewhat conflicts with another statement made in a Forbes piece this past week covering Coinbase and Blockchain. Perhaps transaction volume overall is increasing, but if so, why remove the wallet transaction volume chart?

Or is it solely related to transaction volume on the exchange? Numerous startups are also using Bitcoin to enable their users to more easily send remittances, cross-border payments and peer-to-peer payments, as well as make mobile in-app purchases.

Maybe this is true, maybe there are 5 or 6 companies that represent the lionshare of volume on the Bitcoin network itself. If so, we should be able to see that. This is a simplified, color coded version of a tool that Chainalysis provides to its customers such as compliance teams at exchanges. The thickness of a band accurately represents the volume of that corridor, it is drawn to scale.

The names of certain entities are redacted. In fact, Chainalysis recently updated their methodology and found that Coinbase transactions represent every 6th or 7th transaction on the Bitcoin blockchain. The same Forbes article says that Coinbase has 3. But as we have looked at before, what does that even mean?

Few companies publicly define what a user or wallet actually represents. I have looked at this twice in the past:. Where can we find data that is still be published and could reflect usage numbers of public blockchains? As shown above, over the past month, the amount of bitcoins stored using P2SH addresses increased from 9. Above is a chart measuring the past 15 months of usage.

Though two investments alone DAH and Blockstream accounted for more than two-thirds of that funding tranche. Both were well-attended with roughly people showing up for the latter. I do not own, control or hold any cryptocurrency nor do I have any trading position on them either. Last spring, Blizzard Entertainment announced it would no longer publish World of Warcraft subscription numbers. Back to the public blockchain sphere: For instance, above is a two-year chart displaying two types of users: About a third of its daily users which are paid users, a relatively high conversion rate.

Where is the growth, where are the numbers? Those are the two questions that continue to drive blog posts on this site.

Perhaps startups in the public blockchain ecosystem will be more forthcoming later this year as more capital is deployed. We will try to revisit this topic once more information is publicly available.

Thus, my older October post on the Great Pivot should be revisited at some point as well. A year ago to the day I published: Since then, the paper and portions thereof, have been translated into multiple languages, emailed and downloaded thousands of times, copied word-for-word by many consulting companies and used as a primer for managers and executives at organizations big and small. In short, it helped articulate what was then happening in a new niche industry, one that has grown over the subsequent months.

Altogether, since Septemberat R3 we have been approached or pitched by around vendors of all shapes and sizes who do something orthogonally related to distributed ledgers. By and large, most of them are uninvolved with cryptocurrencies themselves: Perhaps that will change again? We are currently tracking around two dozen companies that have built or are building some kind of distributed ledger and about the same amount of startups trying to build applications on top of a ledger.

Many of these can be seen on slides 21 and 23 of the presentation I published in December:. Part of it for sure is related to hype. Distributed ledgers and blockchains have been sold as silver bullets and panaceas to all the worlds ills. This exuberance will likely lead to another washout cycle which has happened in many other tech segments most notably cleantech. Another reason is that as articulated in Appendix Bwhile there was latent interest in the cryptographic toolkit utilized by Ethereum and Bitcoin, managers were finally afforded an explanation as to why something like proof-of-work is purposefully expensive and why it is unneeded and undesirable in an environment in which trusted intermediaries with legal contracts already operate in e.

While they are not the only entities experimenting with blockchains, regulated financial institutions have also spent the past year looking at the consequences of using pseudonymous consensus methods, discovering that platforms like Bitcoin fundamentally lack definitive settlement finality which was briefly discussed on page 22 and 23 in CaaS. The reaction on social media to this over the past year has ranged from acceptance all the way to angry threats.

But that is a topic for another day. This was supposed to be a brief post so we have to pass on dovetailing into the myriad of other interesting changes in the landscape.

Regular readers may have noticed just a few posts on this site over the past few months. Part of this is because the content I do write is typically sent to R3 members only. Even though the capital markets have largely settled on a specific class of ledger — one that is integrated with the existing legal system without any type of cryptocurrency or proof-of-work — the debate around public versus private blockchains will likely continue into the year by enthusiasts.

A year from now the distributed ledger landscape will likely look a lot different than what it did in let alone Following up from the last batch, below are some of the public-facing activities I have been involved with the past couple of months. The two are distinct. The simplest way to describe Hyperledger, the technology platform from Hyper, during its formative year in was: Ripple without the XRP.

Consensus was achieved via PBFT. In JuneDAH acquired Hyper the parent company of Hyperledger which included the kit and caboodle: It was proposed at that time that Hyperledger, the Hyper product, would become the permissioned ledger project from DAH.

We are also switching from our simplistic notion of accounts and balances to adopt to de facto standard of the Bitcoin UTXO model, lightly modified.

While Hyperledger does not use Bitcoin in any way, the Bitcoin system is still extremely large and innovative, with hundreds of millions of dollars invested. By adopting the Bitcoin transaction model as standard, users of Hyperledger will benefit from innovation in Bitcoin and vice versa, as well as making Hyperledger more interoperable.

During this same time frame, IBM was working on a project called OpenChain, which for trademark reasons was later renamed now internally referred to as OpenBlockchain.

In Decemberthe Linux Foundation publicly announced it was creating a new forum for discussion and development of blockchain technology.

Multiple names were proposed for the project including Open Ledger which was the name originally used in the first press release. Therefore, Hyperledger circa is not the same thing as Hyperledger circa This technical question is being discussed in the Linux Foundation. According to a quick scan of their GitHub repo:.

The only tenuous connection is the name. Last AprilMay and August I wrote three posts that attempted to look at the flow of funds: Above is a simplified, color coded version of a tool that Chainalysis provides to its customers such as compliance teams at exchanges. The chord-plot shows all bitcoin transactions in traced down all the way back to a known entity. This means that the connection between the entities can be any number of hops away.

So for instance, for the exchanges it will include direct arbitrage, but also the modus operandi for bitcoin: Again this can be any number of hops and then perhaps later end at an exchange again where someone is cashing out. According to Chainalysis, by hiding all the intermediate steps we can begin to learn how most of the Bitcoin ecosystem is put together e.

Altogether there are 14 major exchanges tracked in blue including in alphabetical order: Bitfinex, Bitreserve now UpholdBitstamp, BitVC subsidiary of HuobiBTCC formerly BTC ChinaBTC-e, Circle, Coinbase mostHuobi, itBit, Kraken, LocalBitcoins, OKCoin and Xapo. It is one of about a dozen services that attempt to — depending who you talk to — delink the history or provenance of a bitcoin. Founded in the spring ofAgora depicted in red above was the largest known darknet market operating in What about all the transactions that did not go between central parties and intermediaries?

For instance, if I used my wallet and sent you some bitcoins to your wallet, how much is that in terms of total activity? The analysis above is intended to isolate sub-economies, not to see who is directly trading with who. The Chainalysis team previously did a Chord of that roughly a year ago which shows the all-time history so early days will be overrepresented and it was based only on one hop away transactions and normalized to what the team can ascribe to a known service. The new chord above is different as it continues searching backwards until it locates an identified entity — this means it could have passed through an other either unidentified or less perfectly described service — but as it is same for everything and we have the law of large numbers it will still give a pretty accurate picture of what subeconomies exist.

It was made to identify if the Bitcoin network had a dark economy and a lit economy e. So, for example, the transfers going between the regulated exchanges, many will be multihop transfers, but they start and end in regulated exchanges and as such could be described as being part of the lit economy.

Also newer deposits are often not known so the balance in a wallet will be underestimated due to how the current algorithms work. Further, some services require special attention and special analytics to be well represented due to their way of transacting — this includes some of the regional dark markets and Coinbase due to how the company splits and pools deposits, see below. By looking at all the known entities and how many addresses they contain as a percentage of all addresses ever used for bitcoin in all time, Chainalysis has significant coverage and these are responsible for more than half of all transactions ever happened.

The initial purpose of the plot was to identify subsystems and pain points in the ecosystem — the team was at first uncertain of the possibility that every Bitcoin user simply bought bitcoins from exchanges to buy drugs but that does not seem to be the case. Most drug buyers use LocalBitcoins and sellers cash-in via mixers on LocalBitcoins or BTC-e for the larger amounts. SharedCoin is currently around 8 million addresses and Bitcoin Fog isaddresses; they are the two largest.

Because of how certain architectures obfuscate transactions — such as Coinbase and others — it can be difficult for accurate external data analysis.

Gox at its height. Why can this be a challenge? For instance, when Bob deposits bitcoins into one Coinbase address he can withdraw the deposit from that same address up to a limit. After about two bitcoins are withdrawn, Bob then automatically begins to draw out of a central depository pool making it harder to look at the flow granularly.

Other secondary information also makes it unclear how much activity takes place internally. For instance, in a recent interview with Wired magazine, Coinbase provided the following information:. According to Coinbase, the Silicon Valley startup that operates digital bitcoin wallets for over 2. The other 80 percent of those transactions are mere speculation, where bitcoin is traded as a commodity in search of a profit.

It is unclear at this time if all of those transactions are just an aggregation of trades taking place via the custodial wallet or if it also includes the spot exchange it launched last January. Publishing cumulative bitcoin balances and the number of addresses for different entities such as exchanges could help compliance teams and researchers better understand the flows between specific exchanges.

For instance, a chart that shows what percentage of the 15 million existing bitcoins everyone holds at a given moment over different time intervals.

This leads to the second area: And as the market for data analysis grows in this market — which now includes multiple competitors including Coinalytics, Blockseer, Elliptic and Scorechain — it may be worth revisiting other topics that we have looked at before including payment processorslong-chains and darknet markets and see how their clustering algorithms and coverage are comparable.

For compliance teams it appears that the continued flow between illicit corridors darknet markets is largely contingent on liquidity from two specific exchanges: In addition, coin mixing is still a popular activity: Based on the information above other economic activity is still dwarfed by arbitrage and peer-to-peer transactions. And lastly, based on current estimates it appears that several million bitcoins are being stored on the intermediaries above.

Cryptocurrencies, Blockchains and the Future of Financial Services Posted on January 6, by Tim Swanson Reply The slideshow below was first presented at an AFA panel on January 4, in San Francisco. Today is the 7th anniversary of the Genesis block.

Unfortunately very few of the companies that have received funding have publicly divulged actual numbers, primarily because consumer uptake has been lower than expected or promised. For instance, Coinbase recently published five charts it says reflect growth. California, New York and Texas; as well as the amount of deposits that Coinbase holds for each customer. Slide 14Coinbase pitch deck.

While this number likely has changed in the past 15 months, ignoring the fluctuation in token prices it may be the case that the average deposit per customer has not increased significantly.

Why might that be? Above is a 1-year chart produced by Coinbase showing the daily amount of off-chain transactions. Or rather, transactions that take place on their own internal system.

As we can see, the volume is roughly the same across all of If usage actually was increasing or user numbers were growing substantially, then we should be able to see some visible changes upward.

This has not occurred. P2SH, or pay to script hash, is probably the most common method for securing bitcoins or UTXOs via multisig. Though over the past 5 months the amount has effectively plateaued. So this may also be an upward bound indicator of people who are savvy enough to secure their bitcoins via multisig note: As of block heightapproximately This is not to say there are only half a million bitcoin users on the planet, as some of the addresses are owned or controlled by multiple people such as a custodial wallet or exchange.

But it is probably a pretty good proxy of on-chain users — users who actually control the private key and do not use an intermediary.

This is roughly twice as many on-chain users as twenty-one months ago in April — at block height— when I first started looking at this source. One interesting trend that ties in with the multisig window above is that at one point as recently as Aprilnone of the Top addresses were using multisig.

I once heard a Bitcoin reporter tell me in the August that BitAccess was on track to be the first billion dollar Bitcoin company. As we know empirically, the ATM industry in general is very low margin; companies make it up on volume which none of these startups have been able to thus far.

Despite the hype, over the past a grand total of Bitcoin ATMs have been installed, roughly per year. For comparison, according to the ATM Association there are roughly 3 million ATMs globally.

Why is the fee relatively high? Because ATM owners are not operating charities and want to turn a profit. If Bitcoin adoption truly was going gang busters you would expect this number to be growing exponentially and not linearly.

There is no scientific correlation between the amount of usage or users of cryptocurrencies and the volatility of its trading pairs. The reason I have included this is because in the Coinbase post above they state that bitcoin volatility is decreasing… relative to the Russian ruble and Brazilian real. Yet from the volatility chart above, it is clear that volatility has not really decreased.

It is a month by month bar chart over the course of the past two years. What it shows is that VC investment in cryptocurrency-related startups peaked in Q1 Yet, the bulk of the Q1 investments came from the 21inc announcement which itself was an aggregation of its previous rounds that had taken place over the previous 18 months.

So funding may have actually peaked in Q4 What this probably illustrates is that aside from a couple of permabull investors such as Boost and Panteramost serious venture capital has decided to wait and see how the dust settles before investing anything in this space.

Basically there has been no product market fit and few viable business models. Bitpay sponsoring a college bowl game last year. The two charts above both come from Bitwagea startup that converts payrolls into bitcoins. However, as shown above, growth is linear not exponential. Above is a 2-year, nearly linear line chart from Blockchain. It bears mentioning that many people still use Blockchain. But what about hash rate? It has continually gone up and to the right the last few months, surely this is an indicator of mass adoption?

All hash rate is measuring is the amount of work being generated by an unknown amount of computers typically ASICs somewhere on the planet. Hash rate typically rises when the price of bitcoins rise and falls when the price of bitcoins fall see Appendix B. Since prices have nearly doubled over the past four months then it stands to reason that hash rate would correspondingly increase as hashing farms deploy new capital. Counterparty is an embedded consensus system see section 1: As shown above, on a given day roughly transactions take place through the platform.

According to Laurent MTthe spikes may be related to the weekly distribution of LTBCoins. And again, despite turnkey services and vending machines such as Tokenly and CoinDaddy and CounterpartyChainoverall growth on the ECS has effectively plateaued over the past year. Bitcoin is a solution and service provider for those who hold bitcoins.

Despite the fanfare, the conferences and the perpetual feel-good op-eds in Techcrunch, the only people who seem to use it regularly seven years later are a niche demographic group: Many of whom have access to multiple other payment networks and asset classes for investment.

Great Wall of Numbers Business Opportunities and Challenges in Emerging Markets Search Main menu Skip to primary content. Skip to secondary content. Home About the author Resources The anatomy The book The guide. Posted on June 2, by Tim Swanson. I am not sure if or when it will be made public, but here are a few salient points: Not all ICOs are alike and any prospective user or investor should look into the specific operational and funding arrangements.

The primary method of raising and funding an ICO is through bitcoin and ether deposits. This has driven mostly retail investors to create accounts at cryptocurrency exchanges — most of which have poor track records such as Bitfinex — and acquire BTC and ETH. This demand in turn has been a key driver in the current all-time highs seen by many cryptocurrencies including bitcoin and ether. There is very little regulatory or independent oversight of any of these coin offerings.

Most of the projects attempt to shield themselves from scrutiny from securities, commodities, and money-transmission regulators by setting up a non-profit organization or foundation. These foundations are typically registered in a couple specific countries, each of which is now home to more than a dozen non-profit organizations specifically managing ICOs.

Some of these non-profit entities sign exclusive development contracts with a for-profit entity that is run by the same people who operate the foundation. That is to say, the foundation will hire the for-profit company to develop and advise the project that the ICO fundraiser marketed and advertised, yet often with no independent oversight.

Tulip euphoria In any given month I am provided inside information about ICOs. But conflict of interest is rife. That may be true but in my case, definitely is not. While Melotic deserves its own dedicated post, the takeaways we learned at the time were that traders who were most of the user base only cared about two specific things: