Atomic Action: Will 2018 Be the Year of the Cross-Blockchain Swap?

Atomic Action:
Will 2018 Be the Year of the Cross-Blockchain Swap?

What if there were no exchanges to hack?

As a new generation of crypto users begin to invest in the technology, developers are growing concerned about its infrastructure. They've seen this happen before – new users enter the space attracted by big gains, then suddenly, a catastrophic failure, usually at the very exchanges designed to hold and custody those funds.

But out of adversity, inspiration is taking hold, with high-profile coders turning their focus to atomic swaps, a concept that claims to allow for the direct, peer-to-peer transfer of cryptocurrencies across different blockchains. In the place of the vulnerable exchanges we use today, the idea behind atomic swaps is that these large repositories of customer money could be rendered obsolete by code. And seasoned blockchain developers like Alex Bosworth believe this is all too necessary, especially given that users today need to effectively give up custody of their assets if they choose to hold funds on exchanges.

He siad:

"Putting users in control of their own private keys has the best aggregate track record for security despite individual cases of loss. Funds under centralized control on exchanges have led to the most massive security failures we've seen."

Andrew Gazdecki, CEO and co-founder of Altcoin.io, which recently launched a beta wallet for atomic swapping between crypto tokens, describes the problem in similar terms, arguing that users should be empowered to hold their own private keys (the alphanumeric strings that allow users to unlock, access and spend their funds) without relying on others.

"There are literally billions of dollars being held within these digital honeypots, and it's nearly impossible to find the perpetrators," he said. Early examples of atomic swaps technology emerged in various stages in 2017, and while there's disagreement as to the timeline they'll be available to the public, some believe 2018 will be their year. As Jameson Lopp, a BitGo software engineer,

recently tweeted:

"Nearly instant atomic swaps … are coming sooner than everyone thinks. Definitely not a year away, but mere months."

Atomic swaps already?

In some ways, atomic swaps are already here – depending on the kind of atomic swap you're looking to make. For instance, last year saw swaps between different blockchains built on similar code – the cryptocurrencies decred, litecoin and bitcoin – executed. Meanwhile, atomic swaps between cryptocurrency tokens on the same blockchain became more commonplace, with decentralized exchanges such as 0x and, as mentioned above, Altcoin.io, adding instant trades between tokens on ethereum compatible protocols.

Cryptocurrencies running on blockchains with much different codebases, though, must rely on purpose-built tools to facilitate these kinds of transfers today. Toward this goal, a tool for exchanging zcash for bitcoin called ZBXCAT was developed last year. Described by co-developer Jay Graber as the "walkie-talkie of payments," the tool will soon be accompanied by a simplified web interface.

Indeed, atomic swaps "could always be done manually," Graber said. However, because this requires a degree of technical skill, before atomic swaps see mainstream use, easier to use platforms will need to be developed. At the same time, Lightning Labs, a company devoted to promoting bitcoin's Lightning Network, recently conducted its first off-chain atomic swap on its test blockchain. Completed in November, the transaction saw litecoin and bitcoin swapped on an off-chain payment channel.

Off-chain hurdles

Off-chain atomic swaps of this type are highly anticipated since trading would be automatic, not reliant on the processing times of different blockchains, but the technology needed to implement off-chain atomic swaps – things like the Lightning Network and Raiden Network on ethereum – are still under development. Which is why some, like Lightning Labs CEO Elizabeth Stark, are less optimistic about cross-blockchain atomic swaps. Stark recently discounted the hype, writing on a development channel, "Anyone telling people that Lightning swaps will be ready in months doesn't know what they're talking about."

And in interview with CoinDesk, Stark said:

"There's still a good amount of infrastructure to build."

One website, swapready.net, provides a breakdown of how close each cryptocurrency is to supporting cross-chain atomic swap capabilities – and to date, there's very few that can interoperate. Mirroring Stark's sentiments, Philippe Castonguay, developer relations manager at 0x, which offers on-chain atomic swaps of tokens on ethereum, told CoinDesk that developers looking to create atomic swaps between vastly different protocols are faced with "a lot of challenges." The infrastructure needed to interface between bitcoin and ethereum, for example, is still in development, and "to make it even worse, these cross-chain platforms also need to solve some of the main problems other blockchains are trying to solve, such as scalability," Castonguay said.

Still optimistic

Yet, even with a lot a work still to do, many remain assured advances are close. Bosworth, whose work has focused mostly on developing applications for bitcoin's Lightning Network, for one, made his excitement about a new era public, tweeting: "The atomic age is coming, what cannot be swapped will be left behind." And Castonguay, whose work focuses on ethereum, also remains encouraged by the development happening within that ecosystem. Even if swaps between blockchains with different code bases prove cumbersome, he believes the blockchain could yield other solutions given the expansive capabilities of its code.

"Eventually the ethereum blockchain will be able to communicate with other blockchains," he said. "Once this happens, all the different coins from different blockchains will be representable on the ethereum blockchain." For example, if bitcoin and ethereum blockchains can communicate with each other in a trustless way, then users could have an ERC-20 bitcoin on the ethereum blockchain, pegged one to one with bitcoin on the bitcoin blockchain, he posited. Such short-term solutions, he thinks, could help advance the atomic swaps concept overhaul.

Castonguay concluded:

"I do believe it is possible that some blockchains might be able to interact with one another this year, but I think 2019 through 2021 would be a safer bet."

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Kodak announces its own cryptocurrency and watches stock price skyrocket

Kodak announces its own cryptocurrency and watches stock price skyrocket

Kodak stock jumps 60 percent after the surprise announcement

There’s a growing list of companies that have added language about blockchain

or cryptocurrency into their names and mission statements, and it makes sense. Companies that do so see their stocks rise in value afterward. The latest company to jump on this trend is, unexpectedly, Kodak, which just launched its own KodakCoin, a cryptocurrency for photographers. As soon as the news was announced, Kodak’s stock (KODK) jumped up, and as of this writing, its stock price is $5.02, a 60 percent gain.

KodakCoins will work as tokens inside the new blockchain-powered KodakOne rights management platform. The platform will supposedly create a digital ledger of rights ownership that photographers can use to register and license new and old work. Both the platform and cryptocurrency are supposed to “empower photographers and agencies to take greater control in image rights management,” according to the press release. The digital currency is meant to create a new economy for photographers to receive payment and sell work on a secure platform.

Kodak CEO Jeff Clarke said in a press statement, “For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem.” There’s also a precedent for selling artwork or illustrations through blockchain technology, as the world saw with the Ethereum-based CryptoKitties. CryptoKitties features artwork drawn by Guilherme Twardowski, who drew every single cat and cat feature in the game.

But while Kodak’s proposed blockchain-powered platform and virtual coin sound good on paper, it’s not clear why the photography company needs to use blockchain to achieve its goals, rather than just create another social media platform instead. It appears that Kodak, like the other tea and vape companies that received media attention last month for making the abrupt leap to blockchain, could just be trying to capitalize on the current cryptocurrency mania. KodakCoin’s initial coin offering opens on January 31st, under SEC guidelines as a security token, and it’s open to US, UK, Canadian, and other investors.

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What you should know about North Korea’s new favorite cryptocurrency

What you should know about North Korea’s new favorite cryptocurrency

  • North Korea appears to have taken a liking to monero, the world's 13th largest cryptocurrency by value
  • Researchers found evidence of hackers creating a malicious piece of software that infected computers to mine monero and send it back to North Korea
  • Monero developers claim it's a super anonymous cryptocurrency that can help avoid capital controls

North Korea appears to have taken a liking to monero,

the world's 13th largest cryptocurrency by value. Earlier this week, cybersecurity researchers at U.S. firm AlienVault found evidence of a malicious piece of software that infected computers to mine monero and send it back to North Korea. Mining is the process of solving complex mathematical equations in order to verify a transaction using cryptocurrency; the miner gets rewarded in that cryptocurrency.

What happened?

AlienVault said it found evidence of malware that took over a person's computer and mined monero. The mined currency was then sent back to Kim Il Sung University in Pyongyang. North Korea has been hit by sanctions from the United Nations and by countries including the U.S. "Cryptocurrencies could provide a financial lifeline to a country hit hard by sanctions," the researchers said in a blog post. "Therefore, it's not surprising that universities in North Korea have shown a clear interest in cryptocurrencies." There have been other incidents of North Korean attackers mining monero. A group called Andariel took over a server at a South Korean company last year and used it to mine the cryptocurrency.

What is monero?

Monero is a cryptocurrency built on a different blockchain to bitcoin. The blockchain is the underlying technology behind cryptocurrencies. These blockchains are public ledgers of activities that show all the transactions on a network. But monero's blockchain is purposely made to be more obscure. It works by obfuscating the so-called wallet addresses that people are sending monero from, making it more anonymous.

Why is it attractive to North Korea?

The increased anonymity that the developers of monero claim exists could be a reason it has been so favored by North Korean actors. Monero's website also claims that it is "safe from capital controls" or measures that restrict the outflow of traditional currencies, much like the North Korean won. Given that sanctions have hit North Korea, monero could be an alternative currency. Also, the time it takes for a monero transaction to take place is 21 minutes. For bitcoin, this rises to more than an hour and a half, and on any given day could be several hours.

How big is monero?

Monero is the 13th largest cryptocurrency in the world with a market capitalization of $5.9 billion, according to Coinmarketcap.com, which tracks prices of cryptocurrencies. It's worth noting that Coinamarketcap removed some South Korean exchanges from the way it calculates prices on its website, citing the large divergence in price in the country. This caused the price of some coins on its site to show price declines earlier this week. One monero token was worth just over $378 at around 4:15 a.m. ET on Wednesday, Coinmarketcap data showed.

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Bitcoin ‘fascinating’ because perception of risk and the economy is changing, fund manager says

Bitcoin ‘fascinating’ because perception of risk and the economy is changing, fund manager says

  • M&G Eric Lonergan said that the bitcoin phenomenon was "fascinating" as it demonstrates a new kind of risk perception among consumers.
  • Bitcoin prices rose more than 1,200 percent over the course of 2017 but have fallen steeply since a peak of $19,343.04 in December, according to Coindesk data.

Bitcoin 'fascating' because of risk-taking, fund manager says

People are pouring money into bitcoin and other cryptocurrencies because they are more willing to take risks in a benign economic environment, according to a fund manager. "To me, the big issue in markets is actually we have been in denial as investors globally about how good things are," Eric Lonergan, macro fund manager at M&G, told CNBC on Tuesday.

"But what this is telling you on the ground is people's experience of economic conditions is actually a good one, and so they are willing to take a risk." Lonergan said that the bitcoin phenomenon was "fascinating" as it demonstrates a new kind of risk perception among consumers.

"Ultimately, they have an intrinsic value of zero, and people are willing to change their careers, they're willing to speculate… If you go out to a group of people now where there are more than two or three people present, bitcoin comes up and they ask all of us what's happening with bitcoin or some other cryptocurrency."

Bitcoin prices rose more than 1,200 percent over the course of 2017 but have fallen steeply since a peak of $19,343.04 in December, according to Coindesk data. A number of high-profile business figures and regulators have raised concern about bitcoin, and cryptocurrencies more generally, over their wild volatility and use in illicit activities.

J.P. Morgan CEO Jamie Dimon called bitcoin a "fraud" in September last year, but on Tuesday told Fox Business that he regretted those comments, adding that he is "not interested that much in the subject at all."

China has also taken action to clamp down on virtual tokens, and in 2017 moved to close domestic bitcoin exchanges. The introduction of bitcoin futures contracts by Cboe and CME last year led to optimism from experts hoping more institutional investors would start to participate.

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Jamie Dimon says he regrets calling bitcoin a fraud and believes in the technology behind it

Jamie Dimon says he regrets calling bitcoin a fraud and believes in the technology behind it

  • J.P. Morgan Chase CEO said he regrets calling bitcoin a fraud.
  • "The blockchain is real," Dimon tells Fox Business.
  • Dimon remains concerned about how "governments are going to feel about bitcoin when it gets really big."

Jamie Dimon speaking at the 2017 Delivering Alpha conference in New York

J.P. Morgan Chase Chairman and CEO Jamie Dimon is backpedaling a bit on his earlier criticisms on cryptocurrencies.
In September, Dimon called bitcoin a fraud. "I regret making" that comment, he said Tuesday on Fox Business. "The blockchain is real," Dimon added in the interview. "You can have cryptodollars in yen and stuff like that. ICOs … you got to look at every one individually. The bitcoin was always to me what the governments are going to feel about bitcoin when it gets really big. And I just have a different opinion than other people." ICOs stands for initial coin offerings, a controversial way some cyrptocurrency companies are raising funds. "I'm not interested that much in the subject at all," Dimon added in the interview.

Jamie Dimon: Bitcoin will eventually blow up; it's a fraud

Along with his earlier bitcoin is a "fraud" statement the executive also blasted digital currency investors last year. "If you're stupid enough to buy it, you'll pay the price for it one day," he said in response to a moderator question at an Institute of International Finance conference in October. It is noteworthy how the outspoken CEO repeated his positive stance on the technology backing bitcoin, the so-called blockchain. Blockchain technology eliminates the need for a third party intermediary by creating a permanent, open record of all transactions on a network. As a result a buyer and seller interact directly, while their exchange is recorded on the blockchain ledger.

J.P. Morgan Chase announced in October the launch of a blockchain-based system that will "significantly reduce" the number of parties needed to verify global payments, reducing transaction times "from weeks to hours." Royal Bank of Canada and Australia and New Zealand Banking Group are the bank's partners in the project, called the Interbank Information Network. The price of bitcoin declined 1.4 percent to $14,760 Tuesday, according to data from industry website CoinDesk. The digital currency is up more than 1,500 percent in the past 12 months.

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Telegram plans multi-billion dollar ICO for chat cryptocurrency

Telegram plans multi-billion dollar
ICO for chat cryptocurrency


Encrypted messaging startup Telegram plans to launch

its own blockchain platform and native cryptocurrency, powering payments on its chat app and beyond. According to multiple sources which have spoken to TechCrunch, the “Telegram Open Network” (TON) will be a new, ‘third generation’ blockchain with superior capabilities, after Bitcoin and, later, Ethereum paved the way. The launch will be funded with an enormous Initial Coin Offering, with forthcoming private pre-sales ranging into the hundreds of millions, potentially making it one of the largest ICOs to date. Demand is driven by the fact that rather than the ICO coming from a fresh startup, Telegram is a well-established messaging platform used around the world.

Adopting a homegrown cryptocurrency could give Telegram’s payment system enormous independence from any government or bank — something Co-founder and CEO Pavel Durov is known to covet after investors took over his last company, Russian social network VK. Durov has not responded to TechCrunch’s several attempts to contact him regarding this story. The potential for a cryptocurrency inside a widely adopted messaging app is enormous. With cryptocurrency powered payments inside Telegram, users could bypass remittance fees when sending funds across international borders, move sums of money privately thanks to the app’s encryption, deliver micropayments that would incur too high of credit card fees, and more. Telegram is already the de facto communication channel for the global cryptocurrency community, making a natural home to its own coin and Blockchain.

Selling a TON of cryptocurrency

Telegram is understood to be considering raising as much as $500 million in the pre-ICO sale at a potential total token value in the range of $3 billion to $5 billion. However, those figures could change before the ICO, which could come as soon as March. Those figures would make it possibly the biggest private crypto raise to date after Tezos, which raised over $230 million in July. A pre-sale in an ICO is a minimum cap on investments (sometimes with discounts) to attract big investors (‘whales’) before a wider token sale to retail investors. The public, retail phase of an ICO tends to raise less because there is a long tail of people investing small sums. But front-loading the ICO with institutional investment inspires confidence for retail investors.

Those pre-sale investors may be required to place a minimum buy-in of $20 million if they’re outside of Durov’s inner circle. Sources say that the ICO will require real fiat currency like US dollars for buy-in, not Bitcoin or Ether as others ICOs have to date. Top-tier institutional investment firms have expressed interest, but Durov is said to be wary of accepting their cash. One firm rumored to have pushed for a pre-sale allocation is Mail.Ru Group (formerly DST), founded by Russian emigre Yuri Milner. A spokesperson for DST did not reply to our inquiry about this story. Interestingly, Mail.Ru Group is the fund that ended up buying Durov’s last company VK.

Understanding Telegram Open Network

Durov’s idea is to launch an entirely new blockchain, using the Telegram’s 180 million users as rocket fuel to power forward into mainstream adoption off cryptocurrency and making Telegram, effectively, a kingmaker of other cryptocurrencies, because of its existing scale. According to Telegram’s white paper that TechCrunch has review portions of, its cryptocurrency will be called “Gram” and could potentially gain immediate mainstream adoption by being tied to Telegram’s chat app. Sources say Durov has decided to combine both a centralized and decentralized infrastructure, since a totally decentralized network doesn’t scale as fast as one which has some elements of centralization, hence why Telegram needs to own its own blockchain.

Moving to a decentralized blockchain platform could kill two birds with one stone for Telegram. As well as creating a full-blown cryptocurrency economy inside the app, it would also insulate it against the attacks and accusations of nation-states such as Iran, where it now accounts for 40% of Iran’s internet traffic but was temporarily blocked amongst nationwide protests against the government. Telegram has played a delicate political balancing act to try and retain its users in the country, shutting down some channels for calling for the downfall of the government, while keeping others open.

WeChat But With Crypto

With TON, Telegram aims to develop cryptocurrency-based utility akin to WeChat, which has blossomed into much more than a chat app and acts as default payment mechanism for many in China. While payments can be made very quickly in WeChat for a variety of services, the system remains very centralized. A decentralized platform such as TON could offer more security and resilience. Sources say that Telegram plans to allow users to hold both Telegram’s currency and fiat currency in a forthcoming wallet. There’s also the existing developer ecosystem Telegram has built up around it, where bots and services are offered by third-party developers. Again, here TON could, in theory, underly everything a developer brings to Telegram.

Inside TON

In a 132 page white paper, Telegram has outlined a four-stage plan:

“TON Services” will be a platform for third-party services of any kind that enables smartphone like friendly interfaces for decentralized apps and smart contracts. “TON DNS” is a service for assigning human-readable names to accounts, smart contracts services and network nodes. With TON DNS, accessing decentralized services could be like “viewing a website on the World Wide Web.” “TON Payments” is a platform for micropayments and a micropayment channel network. It aims to be used for “instant off-chain value transfers between users bots and other services”. Safeguards built into the system are designed to ensure that these transfers “are as secure as on-chain transactions”.

The “TON Blockchain” will consist of a master chain and 2-to-the-power-of-92 accompanying blockchains. Its most notable aspect is that it will have an “Infinite Sharding Paradigm” to achieve scalability. Thus, TON blockchains aim to be able to “automatically split and merge to accommodate changes in load”. This would mean new blocks are generated quickly and “the absence of long queues helps keep transaction costs low, even if some of the services using the platform become massively popular”.

It will also consist of “Instant Hypercube Routing” designed so the blockchain can maintain top speed even as it grows. Its proof of stake approach will reach consensus through a variant of the ‘Byzantine Fault Tolerant’ protocol, again increasing speed and efficiency. And it will also use 2-D Distributed Ledgers. This means the TON can grow new valid blocks on top of any blocks that were proven to be incorrect to avoid any unnecessary forks. In other words, TON aims to be ‘self-healing’.

TON’s third generation blockchain will be based on a dynamic ‘proof of stake’ secured by multiple parties with a high degree of fault tolerance. It will also handle storage of ID, payments and smart contracts. So, instead of relying on proof of work to create its currency, Telegram will rely on a new, less energy-hogging way of mining cryptocurrency than the original Bitcoin method. The claim is that it will be capable of a vastly superior number of transactions, around 1 million per second. In other words, similar to the ambitions of the Polkadot project out of Berlin — but with an installed base of 180 million people. This makes it an ‘interchain’ with so-called ‘dynamic sharding’.

 Keeping Control

The white paper also makes clear that four percent of the supply of Grams (200 million Grams) will be reserved for Telegram’s development team with a four-year vesting period. Telegram also plans to retain “at least 52 percent” of the entire supply of the Grams cryptocurrency to protect it from speculative trading and maintain flexibility. The remaining 44 percent will be sold in both the public and private sale.

The currency will be listed on external exchanges

and used inside the Telegram app. Timing-wise, the first quarter of this year will see the launch of the Telegram External Secure ID, followed by an MVP of TON. The launch of the Telegram Wallet is slated for Q4 2018, and the creation of the TON-based economy could launch in Q1 2019. The rest of the TON Services would follow in Q2 2019. Some in the crypto community remain skeptical of TON. “I just think this is the CEO’s way of monetizing Telegram, basically,” says Jackson Palmer, the founder of early cryptocurrency Dogecoin.

The Brothers Durov

Durov and his brother Nikolai Durov, a mathematical genius, were behind the creation of VK, “Russia’s Facebook”, worth an estimated $3 billion, but were effectively forced to sell their stake in the company by oligarch shareholders deeply connected to the Putin-led government. Although Pavel managed to negotiate an exit with a large payoff, he’s known to have harbored a resentment against outside investors ever since. Pavel reportedly left Russia with $300 million and 2,000 Bitcoins and, after buying a citizenship in St. Kitts and Nevis, splits his time between London, Dubai and, where possible, Russia. Telegram’s move into crypto could give him another shot at a massive fortune, while potentially turning the chat app into a vast payment network protected from government interference.

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A parody cryptocurrency just broke $2 billion for its market cap

A parody cryptocurrency just broke $2 billion for its market cap

  • Dogecoin, a cryptocurrency created as a parody after a popular internet meme, saw its market cap crack $2 billion on Sunday
  • The rise of Dogecoin and other bitcoin descendants is due to the fact that they're perceived as being "cheap" compared to bitcoin or ether, according to Dave Chapman from Octagon Strategy
  • One of the Dogecoin founders told a cryptocurrency news site that the token's rise makes him worry about market excess

A cryptocurrency that was created as a parody

and named after an internet meme now has a market value of more than $2 billion. Dogecoin crossed the $2 billion barrier on Sunday, around two weeks after it first touched the $1 billion level on Christmas day. The digital currency traded as high as $0.018773, putting its market capitalization at $2.12 billion, according to CoinMarketCap.

Data from the cryptocurrency site showed dogecoin's current market value is about $1.98 billion — as of Jan. 8, 1:00 p.m. HK/SIN — and traded at $0.017535 per token. That's a roughly 69 percent increase compared to levels seen during Friday's Asian trading session. Last month, the virtual coin rose more than 400 percent and briefly topped $0.0107 in late December. As of Monday, there were a total of 43 cryptocurrencies with a market cap above $1 billion. The largest of those, bitcoin, traded at $15,768.34 as of 1:15 p.m. HK/SIN, according to industry site CoinDesk. That put its market cap at around $264 billion.

Dogecoin is an example of an altcoin, which are peer-to-peer digital tokens that descended from bitcoin. The more popular ones include ethereum, which topped $1,000 for the first time on Thursday, and ripple, which saw a staggering 35,000 percent jump in its value last year. Dogecoin, for its part, was created in 2013 and its mascot is a Japanese shiba inu dog popularized by an internet meme that dates back to 2010. The creators of dogecoin positioned the virtual token as "the internet currency" that can allow users to easily send money online. There are several ways to get dogecoins: Users can buy them at online exchanges, get tipped in the cryptocurrency and even mine them.

The virtual currency's meteoric rise in recent months has the project's creator expressing concern about market excess. Jackson Palmer, the founder of dogecoin who left the team in 2015, told cryptocurrency news site CoinDesk that it was telling that the token saw such a sharp jump in price even when the project hadn't released a software update in over 2 years.

The total value of cryptocurrencies is over $750 billion, according to CoinMarketCap, and bitcoin dominates around 34 percent of that market. "The most significant contributing cause for altcoins to rise so parabolically is owing to the perception of 'cheap' coins," Dave Chapman, managing director at Hong Kong-based commodities and digital assets trading house Octagon Strategy, told CNBC.

"The two most well known cryptocurrencies (i.e. bitcoin and ethereum) are considered too expensive for most new entrants. Despite being able to purchase a fraction of each, there is a real psychological barrier around owning something in its entirety," Chapman added. A buyer, he explained, would feel better knowing they own 2,000 ripple tokens, which would cost a little over $6,000, rather than owning less than half of a bitcoin at the same price. Chapman also said there is a mindset among new investors than they have missed the "upside opportunity with cryptocurrencies that have already demonstrated incredible returns."

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Exponential Growth: Cryptocurrency Exchanges Are Adding 100,000+ Users Per Day

Exponential Growth:
Cryptocurrency Exchanges Are Adding 100,000+ Users Per Day

Major Bitcoin and cryptocurrency trading platforms

within the global market have been adding more than 100,000 users per day. Many of the leading cryptocurrency exchanges such as Coinbase (GDAX), Binance, Bittrex, Bitstamp and Kraken have struggled in dealing with the abrupt surge in demand for cryptocurrencies. Some exchanges have overhauled their systems to improve their scalability, while others have temporarily stopped opening new user accounts.

Unexpected growth rate

This week, Changpeng Zhao, the founder and CEO of Binance, the global market’s largest cryptocurrency exchange with a staggering $9.5 bln daily trading volume, revealed that it has added more than 250,000 users on a single day.

“Sorry guys, servicing existing members is higher priority at this point. Full team working around the clock. Both tech and support. Just too much demand. Added 250,000 new users in the last 24 hours,” said Zhao, referencing the official statement released by the company. On Jan. 4, Binance stated, “due to the overwhelming surge in popularity, Binance will have to temporarily disable new user registrations to allow for an infrastructure upgrade. We apologize for any inconvenience caused.”

In December, both Kraken and Coinbase allocated a significant portion of their resources and capital in improving customer support and the scalability of their platforms. On Dec. 23, Kraken, which has found difficulty in processing account verifications, disclosed that it has implemented major system upgrades and improvements in performance and will continue to develop its trading platform to support new users. The Kraken development team admitted that its current infrastructure is “degraded and unreliable,” and vowed to improve it throughout January.

The company said:

“We have made significant progress in the last week with the system upgrades and have realized moderate improvement in performance. Unfortunately, we were not able to complete all of the upgrades and the most impactful measures are yet to come. For the time being, systems should still be considered degraded and unreliable.”

Regional exchanges such as South Korea’s Bithumb, the world’s second largest cryptocurrency exchange in terms of daily trading volume, have also stopped accepting new users.

Why are large exchanges struggling?

In late 2017, South Korea’s third-largest cryptocurrency exchange Korbit was acquired at a valuation of $140 mln by a $10 bln gaming giant in Nexon. Given the size and the market valuation of Korbit, major exchanges like Bithumb, Bitstamp, Kraken and Binance could be worth more than $1 bln, as Coinbase was valued at $1.6 bln in its latest funding round.

Even with such large market valuation, high-profit margins, and many resources, cryptocurrency exchanges are struggling to address the exponentially increasing demand from investors because of the strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems the companies were forced to implement by the authorities. Each user application must be manually approved and verified. The failure to segregate fraudulent accounts from legitimate users could result in large fines and lawsuits for exchanges. Consequently, the vetting process of users is rigorous and requires significant efforts from the employees of exchanges.

Given that exchanges are adding more than 100,000 users per day, it is likely that exchanges are also receiving more than one mln trading account approval requests per month, at least. That is, if the approval process of accounts take around 10 minutes per account, 166,666 hours on a monthly basis that employees have to cover manually. In the next few months, global cryptocurrency exchanges will make drastic changes to their systems. Until then, users, especially newcomers, will find it difficult to open approved trading accounts.

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New York Stock Exchange Moves on Bitcoin ETFs

New York Stock Exchange Moves on Bitcoin ETFs

The New York Stock Exchange has filed for permission to launch

a number of Bitcoin-related exchange-traded funds (ETF) just one week into 2018. As reported by BusinessInsider, a filing sent to the United States Securities and Exchange Commission shows that the exchange intends to launch five different ETFs offering ‘bull and bear’ futures contracts on the Arca stock exchange. These EFTs will be linked to the price of Bitcoin futures listed on the CME and CBOE exchanges, which launched Bitcoin futures contracts in

December 2017:

“The target benchmark’s value will be calculated as the last sale price published by the CME or the CBOE or any other US exchange that subsequently trades bitcoin futures contracts on or before 11 a.m. E.T.”

Bull Funds

The three ‘Bull Funds’ are categorized as 1.25X, 1.5X and 2X, offering 100 percent, 150 percent and 200 percent returns on the given contract. As stated in the document sent to the SEC, the funds are not intended to be traded any longer than a day – and offer percentage returns based on the given contract entered into:

“According to the Registration Statement, the 1.25X Bull Fund, 1.5X Bull Fund and 2X Bull Fund seeks daily leveraged investment results (before fees and expenses) that correlate positively to either 125 percent, 150 percent or 200 percent the daily return of the target benchmark.” However, investors stand to a chance of facing the same multipliers in loses, should the market move against

their contracts:

“Conversely, its value on a given day (before fees and expenses) should lose approximately 1.25 times, 1.5 times or 2 times, as applicable, as much on a percentage basis as the level of the target benchmark when the benchmark declines.”

Bear Funds

As the name suggests, the ‘Bears Funds’ allow investors the chance to leverage against a decline in the value of Bitcoin. The two funds offered are 1X and 2X, offering 100 percent and 200 percent gains should the contract meet its target on the given day of trading. Once again, should the benchmark rise in value, Bear Fund investors stand to suffer loses compounded by the multiplier (1X or 2X) they’ve agreed to, as per the description of the

2X Bear Fund:

“If the 2X Bear Fund is successful in meeting its investment objective, its value on a given day should gain approximately two times as much on a percentage basis as the level of the target benchmark when the target benchmark declines. Conversely, its value on a given day should lose approximately two times as much on a percentage basis as the level of the target benchmark when the target benchmark rises.” 

Keeping up with the game

Should the NYSE be permitted to launch these ETFs, they will be the third American exchange to offer Bitcoin futures contracts. CME and CBOE have been trading futures since December. Wasting no time in sending their application to the SEC, this move shows that there is plenty of interest in Bitcoin by Wall Street money.

While the likes of Merrill Lynch have denied its financial advisors from offering clients Bitcoin-related investments, exchanges are looking to set up of various offerings. Once a number of ETFs and trading options have been available for a while, there will be more information on how well these options are trading. Given that knowledge, could we see a change in sentiment by financial institutions whose clients are looking to enter the cryptocurrency market?

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Bitcoin.
Interested or have Questions, Call Me, 559-474-4614

U.S. company plans funds that double bitcoin price moves

U.S. company plans funds that double bitcoin price moves

U.S. fund managers are ramping up efforts to tap

into the fever surrounding digital assets, and the latest planned bitcoin products could deliver some head-turning and stomach-churning price movements if they come to market. A Bitcoin logo is seen on a cryptocurrency ATM in Santa Monica, California,

The new idea is to build “leveraged” and “inverse” funds that would rise – or fall – twice as fast as the price of bitcoin on a given day. Direxion Asset Management LLC plans to list such products on Intercontinental Exchange Inc’s NYSE Arca exchange if U.S. securities regulators give the nod, according to a filing by the exchange this week. In the filing, the exchange said the listing “will enhance competition among market participants, to the benefit of investors and the marketplace.”

Bitcoin is a virtual asset that can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government. Bitcoin is one of the wildest trades in the market today, delivering sharp gains and losses that defy explanation. Trading has been expensive and difficult, with brokerages offering limited access and specialist websites like Coinbase reporting regular outages. Top voices on markets from economist Robert Shiller to JPMorgan Chase & Co CEO Jamie Dimon have warned people off buying bitcoin.

Yet asset managers have been racing to design more than 10 proposals for bitcoin funds that are currently before U.S. regulators. New ETFs could make access to bitcoin easier and, in the case of the Direxion product, mean bigger stakes for investors, with a 25 percent gain or loss on one day doubled to 50 percent. So far the U.S. Securities and Exchange Commission has declined or put on hold all the proposals. A spokesman representing Direxion declined to comment on the latest filing as did a representative from NYSE. Bitcoin gained nearly 12 percent on Friday to $16,928 on the Bitstamp exchange.

Chuck Reynolds


Marketing Dept
Contributor

Please click either Link to learn more about Bitcoin.
Interested or have Questions, Call Me, 559-474-4614