AngelList Creator Naval Ravikant Backs S&P-Style Cryptocurrency Fund

AngelList Creator Naval Ravikant Backs S&P-Style Cryptocurrency Fund

 

 

A startup led by former Facebook and Google employees is launching a cryptocurrency index fund.

Backed by AngelList founder Naval Ravikant, Bitwise Asset Management is today coming out of stealth mode to reveal its first product, the Bitwise Hold10 Private Index Fund – a market cap-weighted basket of the top 10 cryptocurrencies by network value. With the launch, investors who participate in the fund will own shares meant to reflect the value of the underlying assets, allowing them to achieve what BitWise argues is a broad exposure to the cryptocurrency market.

The fund's co-founders are Hunter Horsley, a former Facebook and Instagram project manager and Wharton graduate, and Hong Kim, a Google veteran and former Korean military software security expert. One of the key goals of the fund, Horsley said is to create a way for investors to gain exposure to cryptocurrency with the ease and economy of investing in an S&P 500 index fund.

Horsley told CoinDesk:

"We want to create a meaningful and secure way to own a portfolio of cryptocurrency. We feel that, today, it's too hard and it's too expensive."

Bitwise's basic thesis breaks down rather neatly along those lines – particularly the assessment of the founders that existing investing options now present significant challenges to retail investors. According to Horsley, prior to March of 2017, investors could gain broad exposure to the cryptocurrency asset class simply by owning bitcoin, which until then represented 85 percent of the total market value. However, with the rise in the total market capitalization of the various different networks to more than $100 billion, he contends that achieving such exposure now requires more active management and, given the nascent stage of the market, specialized expertise.

Fees and features

But amidst a boom in the number of investment options available, Horsely intends to compete on more than simply market knowledge. Notably, the fund charges just 2 percent on an annualized basis. Further, it does not charge a fee on profits, making it more reasonably priced than alternatives, he claims. By comparison, other funds are charging investors a traditional hedge fund-style "two and twenty" fee, which includes a sizable 20 percent fee charged against any profits the fund generates. While the fund requires investors be both accredited and based in the U.S., the minimum investment is a relatively modest $10,000.

Also, in what he argued puts the fund in contrast to a wave of other hedge funds launched over the summer, Horsley said Bitwise will seek a passive investment strategy. While other funds actively trade crypto assets in an attempt to generate a larger return, he said BitWise will simply hold a portfolio of assets that represents the broader market.

Another advantage, Horsley said, is that retail investors won't have to take ownership of any cryptocurrencies themselves, or to devise a strategy to ensure the security of their investments. "We are 100 percent 'cold storage'," he said, in reference to the way the fund stores its assets in a more secure, offline environment. The only time the assets will come out of cold storage, he added, is when the fund rebalances itself – meaning the times when the fund must buy or sell coins in order to reflect the same relative market capitalizations of the market more broadly.

Horsley explained:

 

"I think for some people it can be feasible to store things in hardware wallets, and do it themselves, but there are, of course, a lot of risks to doing that. I think, from a security perspective, having a titled share – the assets of which are then backed by our storage – is really helpful."

Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
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Dragonchain, Originally Developed at Disney, Opens Limited Supply Initial Coin Offering (ICO)

Dragonchain,
Originally Developed at Disney,
Opens Limited Supply
Initial Coin Offering (ICO)

Dragonchain, the blockchain platform originally developed at Disney
SEATTLE, Oct. 2, 2017 /PRNewswire/ — Dragonchain, the blockchain platform originally developed at Disney, opens its public Initial Coin Offering (ICO) today, the one-year anniversary of Disney releasing it as open source. Running Oct. 2 – Nov. 2, the tokens issued during the ICO (Dragons) will provide access to Dragonchain platform services, project incubation, and professional services to support enterprises, start-ups, and entrepreneurs building applications on the platform.

Dragonchain simplifies the integration of real business applications on a blockchain and provides features such as easy integration, protection of business data and operations, currency agnosticism, and multi-currency support. The company also provides professional services to build-out development and successful tokenization ecosystems with long term value utilizing an incubation model. Please visit and contact us at https://dragonchain.com/.

"Our vision for Dragonchain is a secure and flexible blockchain platform paired with a crowd scaled incubator," said Joe Roets, Founder and CEO of Dragonchain, Inc. "The system is modeled to create feedback loops and accelerate blockchain projects and market success." Dragonchain was originally developed at Disney's Seattle office between 2015 and 2016 under the name "Disney Private Blockchain Platform." The project launched as open-source by Disney on October 2, 2016, and is now maintained by the Dragonchain Foundation.

In addition, Dragonchain officially announces the formation of its Advisory Board to provide strategic guidance on future endeavors. "Dragonchain's context-based approval ushers in a new era of inter-linked blockchain databases, multi-dimensional datastores that scale to customer requirements," said Jeff Garzik, co-founder at Bloq and Dragonchain Advisory Board member. "Joe and the Dragonchain team are bringing a unique solution to market – the latest in blockchain technology, combining ease of integration, cloud scalability and secure grounding in public blockchain networks."

Dragonchain Advisory Board members include:

Jeff Garzik, co-founder, Bloq
A futurist, bitcoin entrepreneur and software engineer, Jeff is co- founder and CEO of Bloq, a code-for-hire service that delivers enterprise grade blockchain technology to leading companies worldwide.

Matthew Roszak, co-founder, Bloq and founding partner, Tally Capital
Co-founder at Bloq and founding partner at Tally Capital, Matthew is an avid supporter and investor in the exciting technology frontier of blockchain.

Ed Fries, tech industry advisor and co-founder of the original Xbox
Ed joined Microsoft in 1986, and as a VP, spent 10 years as one of the early developers of Excel and Word. He left the Office team to pursue his passion for interactive entertainment and created Microsoft Game Studios. Over the next eight years he grew the team from 50 people to over 1200, published over 100 games, co-founded the Xbox Project, making Microsoft one of the leaders in the video game business.

Collin LaHay (Collin Crypto), Gambit founder
Blockchain expert, Bitcoin angel investor, ICO advisor, founder at Gambit, entrepreneur, internet marketer and founder of CollinLaHay.com a search engine marketing business offering.

Tom Bush – former assistant director, FBI CJIS Division
National security, homeland security and law enforcement subject matter expert with over 33 years in federal law enforcement and owner at Tom Bush Consulting.

Chris Boscolo – Founder, lifeID
A specialist in cloud-computing, Amazon Web Services, network security, TCP/IP network protocols embedded systems and Linux kernel drivers, Chris has more than 20 years' experience building commercially successful products. "With increased concerns around security and privacy, blockchain is a transformative technology," said Tom Bush, owner at Tom Bush Consulting and Dragonchain Advisory Board member. "Dragonchain is positioned to be a notable player in this sector."

About Dragonchain
Dragonchain simplifies the integration of real business applications on a blockchain and provides features such as easy integration, protection of business data and operations, currency agnosticism, and multi-currency support. The company also provides professional services to build-out development and successful tokenization ecosystems with long term value utilizing an incubation model.

Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

A Victory For Bitcoin

A Victory For Bitcoin

 

While Bitcoin remains highly speculative

– I think it can continue to strengthen from here.  Bitcoin is so volatile that I want to reiterate my belief that it only belongs in your portfolio as part of your highly speculative allocation (link).  I also think it is worth reviewing my 3 Rules of Bitcoin (link).

The bullish case is that Bitcoin survived the recent bearish case so well.

Back on September 15th it appeared to me as though not only China, but a number of public figures were trying to crack down on Bitcoin (link).  It was successful at first, as Bitcoin continued its decline, dropping from over $5,000 to as low as $3,000.  Bitcoin has rebounded sharply since then. The ‘evangelists’ of bitcoin argue that the fact it isn't controlled by governments is precisely why you should own it.  Bitcoin is meant to be function outside of the realm of central banks and governments.  Bitcoin seems to have navigated this recent crackdown with great success.

By passing the recent test with flying colors, Bitcoin should attract some new investors.  There are many investors who have watched the rally in cryptocurrencies from the sidelines because they have concerns about the ability of cryptocurrencies to deliver as advertised.  It seems likely that some of these investors will dip their toe in the water now – creating new demand for cryptocurrencies in the near term. This additional new demand should help keep prices rising. If there were easier ways for 'mainstream' investors to get involved in Bitcoin (like ETFs) the rally would be even stronger.

The cynic in me, needs to point out that many people have strong incentives to prop up the price of Bitcoin.  Bitcoin miners, in particular, come to mind.  Bitcoin mining remains very profitable at these prices.  In a world where there are no rules (Rule #2 of my 3 Rules of Bitcoin) we have to consider that some of this rebound may be driven by those who have the most to gain.  That incentive and risk of manipulation is always an issue in thinly traded markets, but I think it is an even greater concern in the sometimes murky world of cryptocurrencies.While I still don't have a strong conviction on the long term viability of cryptocurrencies, I do think it is impressive that they recovered from this China crackdown, which is positive for prices in the near term.

Chuck Reynolds


Marketing Dept
Contributor
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Finance Gurus Who Believe Bitcoin May Be Worthless

Finance Gurus
Who Believe Bitcoin May Be Worthless

It may be the year of the cryptocurrency,
but not everyone's a fan.

 

If 2017 goes down in the books as anything,

it'll probably be "the year of the cryptocurrency." Headed by bitcoin, the aggregate cryptocurrency market cap grew by more than 800% at one point this year.  Bitcoin comprises nearly half of the aggregate cryptocurrency market cap by itself. By comparison, it's taken decades for the broad-based

it'll probably be "the year of the cryptocurrency." Headed by bitcoin, the aggregate cryptocurrency market cap grew by more than 800% at one point this year.  Bitcoin comprises nearly half of the aggregate cryptocurrency market cap by itself. By comparison, it's taken decades for the broad-based S&P 500 to deliver a similar return.

Beam me up, bitcoin

Why the sudden surge in digital currencies?

Some would say it has to do with the blockchain technology that underlies most cryptocurrencies. Blockchain is nothing more than the digital decentralized ledger that records transactions without the need for a financial intermediary like a bank. Because these networks are often open source, it's practically impossible to alter data while going undetected, which makes blockchain a potential upgrade in safety and security.

  More than 150 organizations are currently testing out

a version of Ethereum's blockchain network via the Enterprise Ethereum Alliance, and bitcoin recently completed an upgrade to its network known as SegWit2x, which is designed to boost capacity, while lowering transaction fees and settlement times. It should help bitcoin appeal to big business in much the same way Ethereum has thus far.

The falling U.S. dollar has been another catalyst for bitcoin and other digital currencies in 2017. The dollar hit more than a two-year low against the euro, and more than a one-year low against a host of other currencies, in recent weeks. While that's bound to put a smile on President Trump's face, as it should boost U.S. exports, it's bad news for investors who are seeing their cash devalue relative to other currencies. Traditionally, investors seek the safety of a finite resource like gold as a store of value when the dollar drops. Lately, though, some have turned instead to bitcoin, since it, too, is considered to be a finite resource. Bitcoin's protocols limit the number of coins that can be mined to 21 million.

Momentum is another catalyst that can't be overlooked, albeit it's far less tangible than the two other catalysts. Since bitcoin isn't recognized as legal tender by most governments (Japan recognized bitcoin as legal tender earlier this year), financial institutions are often barred from trading or holding it in their investment portfolios. That leaves bitcoin's pricing predominantly up to retail investors, who are far likelier to trade based on emotion than logic. It's quite possible the "don't miss the boat" mentality has been pushing bitcoin higher.

Bitcoin may be worthless according to these well-respected finance moguls

While numerous bitcoin enthusiasts and pundits have come out with price targets of $10,000, $25,000, and even $1 million on bitcoin, other respected finance moguls have taken an exceptionally bearish view on bitcoin. In fact, a few are unsure if it holds any value at all.

Warren Buffett

That's right — the most revered stock investor in the world, and the greatest buy-and-hold investor of our generation, believes bitcoin to be something of a sham. In an interview with CNBC back in 2014,

Here's what Buffett had to say: 

Stay away from it. It's a mirage, basically. It's a method of transmitting money. It's a very effective way of transmitting money, and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money? Just because they can transmit money? I hope bitcoin becomes a better way to do it. But you can replicate it a bunch of different ways. The idea that it has some huge intrinsic value is just a joke, in my view.

Admittedly, Buffett hasn't exactly been correct about bitcoin, with the digital currency significantly increasing in value since his opinion back in 2014. Nevertheless, Buffett raises an exceptionally good point that modes of payment, and even blockchain technology, have a very low barrier to entry. There isn't much to protect these digital currencies against competitors entering the space.

Jamie Dimon

Jamie Dimon, the current CEO of the largest bank in the U.S., JPMorgan Chase (NYSE:JPM), might be bitcoin's biggest critic of all. A few weeks ago, in an interview with CNBC at its annual Delivering Alpha conference, Dimon didn't mince his words when referring to bitcoin as a "fraud." Said Dimon, bitcoin is "just not a real thing." At a separate conference earlier in the day,

Dimon also said:

It's worse than tulip bulbs. It won't end well. Someone is going to get killed. Currencies have legal support. It will blow up.

In addition to this commentary, Dimon noted that if any of JPMorgan Chase's money managers were to trade or hold bitcoin, they would be "fired in a second." It's pretty evident that bitcoin represents a threat to traditional banking if it continues to grow in popularity, but Dimon may also be correct that without any sort of central backing, legitimizing digital currencies like bitcoin may prove impossible.

 Paul Krugman

Lastly, Nobel Prize-winning economist, professor, and New York Times columnist Paul Krugman has had serious doubts about the long-term survival of bitcoin for years. Back in 2013, Krugman penned an op-ed for The New York Times in which

he said:  

So far almost all of the bitcoin discussion has been positive economic — can this actually work? And I have to say that I'm still deeply unconvinced. To be successful, money must be both a medium of exchange and a reasonably stable store of value. And it remains completely unclear why bitcoin should be a stable store of value.

You'll note that while bitcoin has been the asset of choice instead of gold as of late for some investors, it's not a true finite resource like gold. Bitcoin's protocols could always be changed, meaning more than 21 million coins could eventually be mined. Plus, without government backing, there's nothing placing a floor underneath the value of bitcoin. Though all three of these finance gurus have been dead wrong about bitcoin thus far, I'm mostly in agreement with their theses. Bitcoin has been driven higher by emotion, the technology behind it is relatively easily to duplicate, and its decentralized nature makes legitimizing the currency all that much tougher. We very well could be on the verge of a bitcoin bubble.

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Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

Bitcoin Can Fuel Your Retirement

Bitcoin Can Fuel Your Retirement

Can this cryptocurrency add security to your golden years? With most Americans believing their retirement investments are inadequately diversified, it may be high time for them to dip a toe in Bitcoin IRAs.

 

Is Bitcoin In A Bubble? Check The NVT Ratio

Is Bitcoin In A Bubble?
Check The NVT Ratio

 

February of this year,

I tweeted a chart that presented the idea of a PE ratio for Bitcoin, something I temporarily called MTV Ratio before my buddy Chris Burniske suggested the less confusing term of NVT Ratio (Network Value to Transactions Ratio). Later in May, Chris was the first to present NVT Ratio at Token Summit 2017. Subsequently, this ratio has been mentioned in blog and media articles across the web. In my original tweet, I promised an article; it lay unwritten until now.

The Idea Behind NVT Ratio

In traditional stock markets, price-earnings ratio (PE Ratio) has been a long standing tool for valuing companies. It’s simply the ratio of a company’s share price to its equivalent earnings per share. A high ratio describes either over valuation or a company in high growth. What would be the equivalent in Bitcoin-land? We have a price per token, but it’s not a company so there are no earnings to do a ratio. However since Bitcoin at its essence is a payments and store of value network, we can look to the money flowing through its network as a proxy to "company earnings”.

Bitcoin’s Network Value closely tracks the money (Transaction Value) flowing through its blockchain.As you can see the value transmitted on the Bitcoin blockchain is closely tied to its network valuation. The idea that we can use the money flowing through the network as a proxy for network valuation is valid.We can express this as a ratio. I call it NVT Ratio, short for Network Value to Transactions Ratio. Below is a historic chart of Bitcoin’s NVT ratio. A live and interactive chart is available on my site at Woobull.com.Bitcoin's NVT Ratio is its Network Value divided by the Transaction Value flowing through its blockchain.  Estimation of daily on-chain transaction value provided by blockchain.info

How To Use NVT Ratio

A High NVT Ratio Can Indicate High Speculative Value

Networks under high growth exhibit high NVT Ratio.We can see in the early years of the Bitcoin network, growth was very steep. This resulted in the markets valuing the network high in comparison to the actual transaction value flowing through the network. In other words, we're seeing a network growing explosively which then demands a premium valuation based on future potential. This is very similar to what we see in PE ratios in the high growth stages of young companies.

Using NVT Ratio To Detect Bubbles

Predicting a bubble before the fact is rather elusive as a price explosion does not necessarily mean the asset is in a bubble. We can only determine this after the peak when the market reassesses the new valuation and we see if the price  consolidates or crashes. For example Ethereum’s valuation during Q1 of 2016 grew by a factor of 15x from $70 million to well over $1 billion. To the uninitiated, it looked like a bubble, yet there was no crash, its new valuation was sustained, thus it proved not to be. Similarly, NVT Ratio can not reliably determine a bubble ahead of time, but it is very useful for discerning between a crash or a consolidation after the price has peaked. It can determine this relatively quickly.

After an explosive price climb, the price consolidates or crashes.

During a price explosion there’s a short term flurry of trader activity and new users hitting the network which serves to drive transactional value through the network. It’s only after the frenzy has subsided do we see whether the value flowing through the network has kept in tandem with its higher valuation. Sometimes it does (it’s a consolidation), and in other times it does not (hence, a crash). Using the NVT ratio we can detect the difference between consolidation and bubbles very visibly. If the NVT ratio stays within a normal range, we are not in bubble territory. If it climbs above the normal range, it's a sign that the transactional activity is not sustaining the new valuation and we can expect a lengthy price correction.

Bitcoin's two bubble detected by NVT Ratio

The chart above shows the NVT ratio in action detecting two of Bitcoin's historic bubbles. In 2011 and early 2013, Bitcoin exploded in price followed by NVT ratio rising above the normal range. These were deemed bubbles under NVT ratio analysis. Subsequently we saw lengthy 92% and 83% corrections in price.

A Bubble That Wasn’t A Bubble

NVT ratio called out the first "bubble" of 2013 as a consolidation move.Of particular interest is the first rapid price rise of 2013 (highlighted with a rectangle in the chart above). We saw a 83% consolidation from peak to trough. It's interesting as the NVT ratio did not rise high enough to signify a bubble, yet you would think a 83% correction would be fit to be called a bubble, right?

Not so! If we dig into the network’s undergrowth, we find that the value transmitted by the network was high enough to keep the NVT ratio within normal range. Though the markets sold off until the price experienced a sudden dip that was 83% off the peak, that dip was very short lived and the long range chart reveals a pattern more akin to a consolidation which completed quicky. This is a case where the NVT ratio, had it been around back then, was telling the markets it was undervaluing the network at the peak of market fear.

Hey NVT, Are We In A Bubble Today?

At the time of writing, Bitcoin's NVT Ratio suggests we are not in a bubble.Now for the golden moment – let's apply the NVT ratio to test the Bitcoin's market at the time of writing. We've suffered a large pullback from $81b network value to a low of $49b, with market fearing the potential onset of a bear season. As we can see in the chart above, NVT ratio is within normal bounds. NVT ratio is saying this is a price consolidation. The transaction value flowing through Bitcoin's network is perfectly healthy and supports the currenct valuation.

NVT Ratio On Other Crypto-Assets?

The question arises, can NVT Ratio be used as a valuation metric for other crypto-assets? My tentative answer, subject to further study, would be “usually, but not always”. At its essence, Bitcoin’s NVT ratio is a comparison of how much the network is being valued to how much the network is being used. If you’re applying the NVT ratio to a different network, the value transmitted on-chain needs to be a good representation of how much the network is being used. This is not always the case.

Ethereum

Similar to Bitcoin, Ethereum's Network Value closely tracks the money flowing through its blockchain.Ethereum launched in 2015, as a smart contract computing network that's fast become the most popular platform for token sales this year. Since the token sales conducted on Ethereum require payment in Ether, there's a very strong correlation between the transactional value and network value as seen above. Ethereum is only two years old and its high growth phase. It will take some time before its NVT ratio settles into a meaningful long term range for bubble detection.

Currencies That Provide Staking Rewards

Networks like Decred and Dash have transactional activity resulting from staking, a process where stakeholders of a network lock up and collateralise their tokens to provide services to the network in return for revenue. This revenue flowing back to the stakeholders is not reflective of the network’s utility and will skew the results coming from the NVT ratio. For these types of networks it would make sense to provide a corrected NVT ratio which subtracts the transactional value resulting from staking which is numerically predictable.

Fungible Networks

Private and fungible currencies like Zcash and Monero hide some, or all of their value transmitted on-chain so it’s impossible to determine their NVT ratio accurately.

Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

Blockchains: How They Work and Why They’ll Change the World

Blockchains:
How They Work and Why They’ll
Change the World

The technology behind Bitcoin could touch every transaction you ever make

 

Bitcoin was hatched as an act of defiance.

Unleashed in the wake of the Great Recession, the cryptocurrency was touted by its early champions as an antidote to the inequities and corruption of the traditional financial system. They cherished the belief that as this parallel currency took off, it would compete with and ultimately dismantle the institutions that had brought about the crisis. Bitcoin’s unofficial catchphrase, “In cryptography we trust,” left no doubt about who was to blame: It was the middlemen, the bankers, the “trusted” third parties who actually couldn’t be trusted. These humans simply got in the way of other humans, skimming profits and complicating transactions.

Bitcoin sought to replace the services provided by these intermediaries with cryptography and code. When you use a check to pay your mortgage, a series of agreements occur in the background between your financial institution and others, enabling money to go from your account to someone else’s. Your bank can vouch that your money is good because it keeps records indicating where every penny in your account came from, and when.

Bitcoin and other cryptocurrencies replace those background agreements and transactions with software—specifically, a distributed and secure database called a blockchain. The process with which the ownership of a Bitcoin token will pass from one person to another—wherever they are, no matter what government they live under—is entrusted to a bunch of computers.

Now, eight years after the first blockchain was built, people are trying to apply it to procedures and processes beyond merely the moving of money with varying degrees of success. In effect, they’re asking, What other agreements can a blockchain automate? What other middlemen can blockchain technology retire?

Can a blockchain find people offering rides, link them up with people who are trying to go somewhere, and give the two parties a transparent platform for payment? Can a blockchain act as a repository and a replay platform for TV shows, movies, and other digital media while keeping track of royalties and paying content creators? Can a blockchain check the status of airline flights and pay travelers a previously agreed upon amount if their planes don’t take off on time? If so, then blockchain technology could get rid of Uber, Netflix, and every flight-insurance provider on the market.

Satoshi Nakamoto

If the blockchain were a religion, Satoshi would be God. This anonymous hacker is responsible for writing the Bitcoin white paper, releasing the first Bitcoin code, and inspiring legions of blockchain developers. Many have sought to reveal his/her/their identity, but to this day that information remains secret.

Those three proposed applications aren’t hypothetical—they’re just a few of the things now being built on Ethereum, a blockchain platform that remotely executes software on a distributed computer system called the Ethereum Virtual Machine. In the blockchain universe, Ethereum, which has its own cryptocurrency, called ethers, is by far the project that is most open to experimentation. But zoom out and a diverse collection of potentially disruptive innovators floods into view. New groups are pitching blockchain schemes almost daily. And the tech world’s titans don’t plan to miss out: Microsoft is offering its customers tools to experiment with blockchain applications on its Azure cloud. IBM, Intel, and others are collaborating on an open-source blockchain initiative called Hyperledger, which aims to provide the bones for business-oriented blockchains. Meanwhile, many of the largest banks—the very institutions that blockchain pioneers were trying to neutralize—have cobbled together their own version of the technology in an attempt to stay ahead of the curve. And even Bitcoin, which runs on the first and most successful blockchain, is being retrofitted for applications its designers never dreamed of.

Pretty much without exception, these new blockchain projects remain unencumbered by actual mass adoption. No single blockchain concept or strategy has yet revolutionized any industry. Bitcoin itself is used by no more than 375,000 people in the entire world on any given day, according to Blockchain.info. But the investor dollars are pouring in, and proposals are floating and colliding like tectonic plates on a hot undercurrent of hype and intrigue.

When the mantle cools, which blockchain platforms will persist, and which will slowly sink back beneath the surface? To make any kind of prediction, you’ve got to understand what a blockchain really is and what it does. The place to start, logically enough, is with Bitcoin.

How Do Blockchains Work? The Bitcoin Example

 

In 2009, an anonymous hacker

(or group of hackers) going by the name of Satoshi Nakamoto unveiled the first entirely digital currency. The technology worked on the principle that, at its foundation, money is just an accounting tool—a method for abstracting value, assigning ownership, and providing a means for transacting. Cash is the historic means of accomplishing these chores. Simply possessing the physical tokens—bills, coins—equals ownership, and it’s up to the individuals to negotiate transactions among themselves in person. As long as cash is sufficiently difficult to replicate, there is no need for a complete accounting of who owns what portions of the money supply, or for the details of who the various holders were of a single $50 bill going back to when it was printed.

However, if you could piece together a running tabulation of who held every bill, then suddenly the physical representations would become unnecessary. Banks and payment processors have already partially sublimated our physical currency into digital records by tracking and processing transactions within their closed systems. Bitcoin completed the transformation by creating a single, universally accessible digital ledger, called a blockchain. It’s called a chain because changes can be made only by adding new information to the end. Each new addition, or block, contains a set of new transactions—a couple of thousand in late August—that reference previous transactions in the chain. So if Helmut pays Hendrieke a bitcoin, that transaction appears at the end of the chain, and it points to the transaction in which Helmut was previously paid that coin by Helche, which in turn points to the time before that when Helche was paid the coin by Halfrid, and so on.

Bitcoin’s blockchain, unlike the ledgers maintained by traditional financial institutions, is replicated on networked computers around the globe and is accessible to anyone with a computer and an Internet connection. A class of participants on this network, called miners, is responsible for detecting transaction requests from users, aggregating them, validating them, and adding them to the blockchain as new blocks. Shortly after the Distributed Autonomous Organization debuted on the Ethereum blockchain, someone siphoned US $60 million in ethers from this autonomous version of a venture-capital fund. In a bold move, the Ethereum developers rewrote the blockchain code to return the money.

Validation entails both verifying that Helmut actually owns the bitcoins in his transaction and that he has not yet spent them elsewhere. Ownership on the Bitcoin blockchain is determined by a pair of cryptographic keys. The first, called the public key, resides in the blockchain for anyone to see. The second is called the private key, and its owner keeps it safe from view. The two keys have a special mathematical relationship that makes them useful for signing digital messages. Here’s how that happens: Helmut takes a message, combines it with his private key, does some calculations, and ends up with a long number. Anyone who has the original message and knows the corresponding public key can then do some calculations of their own to prove that the long number was in fact created with the private key.

In Bitcoin, transactions are signed with private keys that correspond to the public key most recently associated with coins being spent. And when the transaction gets processed, those coins get assigned a new public key. But the main role of miners is to ensure the irreversibility of new transactions, making them final and tamperproof. The method they use for doing so is thought to be the most significant contribution that Satoshi Nakamoto—whoever he or she is—made to the field of computer science.

Ensuring irreversibility becomes necessary only when you invite anyone and everyone to take part in the curation of a ledger. If the Bitcoin blockchain were being run by a single bank with a set of known validators operating under a single jurisdiction, then enforcing the finality of transactions would be as simple as writing it into company policy and punishing anyone who didn’t follow the rules. But in Bitcoin, there is no central authority to enforce the rules. Miners are operating anonymously all over the world—in China, Eastern Europe, Iceland, Venezuela—driven by a diversity of cultures and bound by different legal systems and regulatory obligations. Therefore, there is no way of holding them accountable. The Bitcoin code alone must suffice. To ensure proper behavior, Bitcoin uses a scheme called proof of work.

Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

This Cryptocurrency Bull Believes Bitcoin Could Hit $1 Million in Less Than a Decade

This Cryptocurrency Bull Believes Bitcoin Could Hit $1 Million in Less Than a Decade

Will bitcoin make investors rich, or leave them disappointed?

If you think marijuana stocks have been on fire this year, then you haven't taken a peek at cryptocurrency returns. At one point earlier this month, the aggregate cryptocurrency market cap topped $161 billion, which represented an 810% increase from where they ended on Dec. 31, 2016. To give this some perspective, the average cryptocurrency over the first nine months of the year has delivered the same return as the broad-based S&P 500 over the past 27 years! Stocks are traditionally the greatest wealth creator, so this is a true eye-opener.

Leading the charge higher have been the two most renowned digital currencies, bitcoin and Ethereum. Bitcoin has risen by nearly 300% since the year began through Sept. 24, 2017, while Ethereum is up better than 3,400%. The duo now sports respective market caps of $61.3 billion and $26.9 billion, which account for well over half the aggregate value of all cryptocurrencies.

 The most bullish bet in bitcoin

Yet, in spite of the massive gains we've already seen, some industry pundits believe cryptocurrencies — and more specifically, bitcoin — could head considerably higher. In May, Saxo Bank analyst Kay Van-Peterson called for bitcoin to hit $100,000 per coin within the next 10 years. Mind you, this is the same analyst that called bitcoin to hit $2,000 back when it was valued at $754 in Dec. 2016. Such a move would imply a 2,650% return still yet to come.

But that's far from the only bullish estimate. Perhaps the loftiest price target for bitcoin comes from Wences Casares, CEO of bitcoin wallet Xapo, and a member of PayPal's board of directors. While speaking at the Consensus 2017 conference in New York earlier this year, Casares suggested that bitcoin could hit $1 million per coin within the next decade. That would be a return of more than 27,300%, assuming Casares' price target on bitcoin was hit. Why such optimism? "The Internet doesn't have a currency and it desperately needs one," said Casares. Nevertheless, he also urged some degree of caution. "The biggest mistake [would] be to buy more bitcoin than you can afford to lose. The big mistake is [also] not to own any bitcoin. Put 1% of your net worth in bitcoin and forget about it for 10 years."

The case for $1 million

But the question we should be asking is this: Could bitcoin really hit $1 million? If you had asked me a year ago if bitcoin $5,000 was possible, I'd probably have laughed hysterically, but bitcoin, with the aid of a little bit of rounding, essentially hit $5,000 per coin in early September. Perhaps the best shot bitcoin would have at $1 million would be if its blockchain technology became the choice of enterprises around the globe. Blockchain is nothing more than the digital decentralized network that underlies bitcoin and records transactions in a secure manner. Because blockchain can be open source, it makes altering data within the network incredibly difficult.

Less than two months ago, bitcoin forked into two separate currencies, bitcoin and bitcoin cash, with the original bitcoin network implementing the SegWit2x upgrade. This upgrade is designed to take some of the information within the bitcoin network off the network in order to improve transaction settlement times, as well as lower fees and improve capacity. The move is directly designed to appeal to enterprises, which are primarily testing Ethereum's network in pilot and small-scale projects. If bitcoin manages to lure those businesses to use its blockchain technology and it continues to gain appeal as a mode of payment with big business, then a lofty price target isn't impossible — albeit $1 million does seem exceptionally unlikely over the next decade.

Why this price target is probably a fantasy

Despite the bullishness surrounding bitcoin, there's also the possibility that it could implode from its current levels. While blockchain could be its most logical source of long-term gains, there's absolutely no guarantee that bitcoin will be the choice of businesses worldwide. We also have no way to accurately value what blockchain is worth, given that the technology is purely nascent at this point. Contending that it could be worth billions, or tens of billions, of dollars is nothing more than a blind dart throw.

There are also concerns about regulation and the decentralization of bitcoin's network. Recent crackdowns on initial coin offerings in China, and the announcement that China will, in due time, shut down its domestic cryptocurrency exchanges, reduces the legitimacy of cryptocurrencies like bitcoin. Without a central trading hub, it can increase volatility and emotions with digital currencies. However, the most dangerous aspect of bitcoin could be that emotional factor. Given that cryptocurrencies aren't backed by any government, financial institutions have largely kept their distance. This has left the pricing of digital currencies to be decided by retail investors, who are far more prone to trade on emotion rather than fundamentals. And once again, even fundamentals are unknown when it comes to cryptocurrencies.

How do we know investors are processing things emotionally rather than logically when it comes to bitcoin? Take a look at both the Bitcoin Investment Trust (NASDAQOTH:GBTC) and First Bitcoin Capital Corp. (NASDAQOTH:BITCF).

The Bitcoin Investment Trust is an ETF run by Grayscale that merely hangs onto bitcoin. As of Aug. 31, 2017, the fund held 172,721 bitcoin, which means that any investor could multiply the current bitcoin price by this figure to determine an accurate net asset value (NAV). As of Sept. 24, this ETFs NAV was $650.5 million. But on Friday, Sept. 22, the Bitcoin Investment Trust ended the trading session with a market cap of $1.13 billion, or a premium of 74%! In other words, investors are paying a premium of 74% over the current value of the ETF's holdings, which makes no sense whatsoever.

By a similar token, in August, investors wound up pushing penny stock First Bitcoin Capital to a nearly $1 billion valuation despite the company having very little in way of tangible cryptocurrencies operations. A look at its balance sheet reveals very little cash, and its only assets are gold-based rights from when the company held gold-mining assets in Venezuela back in 2013 before switching to cryptocurrency operations for good in 2014. Yet, according to investors as recently as August, a company with just over $46,000 in revenue was worth nearly $1 billion. Emotions can only carry an asset so far, and bitcoin looks to be on the verge of a possible bursting bubble.

Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

Do You Need a Blockchain?

Do You Need a Blockchain?

According to a study released this July

by Juniper Research, more than half the world’s largest companies are now researching blockchain technologies with the goal of integrating them into their products. Projects are already under way that will disrupt the management of health care records, property titles, supply chains, and even our online identities. But before we remount the entire digital ecosystem on blockchain technology, it would be wise to take stock of what makes the approach unique and what costs are associated with it.

Blockchain technology is, in essence, a novel way to manage data. As such, it competes with the data-management systems we already have. Relational databases, which orient information in updatable tables of columns and rows, are the technical foundation of many services we use today. Decades of market exposure and well-funded research by companies like Oracle Corp. have expanded the functionality and hardened the security of relational databases. However, they suffer from one major constraint: They put the task of storing and updating entries in the hands of one or a few entities, whom you have to trust won’t mess with the data or get hacked.

Blockchains, as an alternative, improve upon this architecture in one specific way—by removing the need for a trusted authority. With public blockchains like Bitcoin and Ethereum, a group of anonymous strangers (and their computers) can work together to store, curate, and secure a perpetually growing set of data without anyone having to trust anyone else. Because blockchains are replicated across a peer-to-peer network, the information they contain is very difficult to corrupt or extinguish. This feature alone is enough to justify using a blockchain if the intended service is the kind that attracts censors. A version of Facebook built on a public blockchain, for example, would be incapable of censoring posts before they appeared in users’ feeds, a feature that Facebook reportedly had under development while the company was courting the Chinese government in 2016.

I Want a Blockchain!

Do you really need a blockchain? Asking yourself a handful of the questions in this interactive can set you on the right path to an answer. You’ll note that there are more reasons not to use a blockchain than there are reasons to do so. And if you do choose a blockchain, be ready for slower transaction speeds.

However, removing the need for trust comes with limitations. Public blockchains are slower and less private than traditional databases, precisely because they have to coordinate the resources of multiple unaffiliated participants. To import data onto them, users often pay transaction fees in amounts that are constantly changing and therefore difficult to predict. And the long-term status of the software is unpredictable as well. Just as no one person or company manages the data on a public blockchain, no one entity updates the software. Rather, a whole community of developers contributes to the open-source code in a process that, in Bitcoin at least, lacks formal governance.

Given the costs and uncertainties of public blockchains, they’re not the answer to every problem. “If you don’t mind putting someone in charge of a database…then there’s no point using a blockchain, because [the blockchain] is just a more inefficient version of what you would otherwise do,” says Gideon Greenspan, the CEO of Coin Sciences, a company that builds technologies on top of both public and permissioned blockchains. With this one rule, you can mow down quite a few blockchain fantasies. Online voting, for example, has inspired many well-intentioned blockchain developers, but it probably does not stand to gain much from the technology.

“I find myself debunking a blockchain voting effort about every few weeks,” says Josh Benaloh, the senior cryptographer at Microsoft Research. “It feels like a very good fit for voting, until you dig a couple millimeters below the surface.” Benaloh points out that tallying votes on a blockchain doesn’t obviate the need for a central authority. Election officials will still take the role of creating ballots and authenticating voters. And if you trust them to do that, there’s no reason why they shouldn’t also record votes. The headaches caused by open blockchains—the price volatility, low throughput, poor privacy, and lack of governance—can be alleviated, in part, by tweaking the structure of the technology, specifically by opting for a variation called a permissioned ledger.

“I find myself debunking a blockchain voting effort about every few weeks”

In a permissioned ledger, you avoid having to worry about trusting people, and you still get to keep some of the benefits of blockchain technology. The software restricts who can amend the database to a set of known entities. This one alteration removes the economic component from a blockchain. In a public blockchain, miners (the parties adding new data to the blockchain) neither know nor trust one another. But they behave well because they are paid for their work. By contrast, in a permissioned blockchain, the people adding data follow the rules not because they are getting paid but because other people in the network, who know their identities, hold them accountable.

Removing miners also improves the speed and data-storage capacity of a blockchain. In a public network, a new version of the blockchain is not considered final until it has spread and received the approval of multiple peers. That limits how big new blocks can be, because bigger blocks would take longer to get around. As of July, Bitcoin can handle a maximum of 7 transactions per second. Ethereum tops out at around 20 transactions per second. When blocks are added by fewer, known entities, they can hold more data without slowing things down or threatening the security of the blockchain. Greenspan of Coin Sciences claims that MultiChain, one of his company’s permissioned blockchain products, is capable of processing 1,000 transactions per second. But even this pales in comparison with the peak throughput of credit card transactions handled by Visa—an amount The Washington Post reports as being 10 times that number.

As the name perhaps suggests, permissioned ledgers also enable more privacy than public blockchains. The software restricts who can access a permissioned blockchain, and therefore who can see it. It’s not a perfect solution; you’re still revealing your data to those within the network. You wouldn’t, for example, want to run a permissioned blockchain with your competitors and use it to track information that gives away trade secrets. But permissioned blockchains may enable applications where data needs to be shielded only from the public at large. “If you are willing for the activity on the ledger to be visible to the participants but not to the outside world, then your privacy problem is solved,” says Greenspan.

Finally, using a permissioned blockchain solves the problem of governance. Bitcoin is a perfect demonstration of the risks that come with building on top of an open-source blockchain project. For two years, the developers and miners in Bitcoin have waged a political battle over how to scale up the system. This summer, the sparring went so far that one faction split off to form its own version of Bitcoin. The fight demonstrated that it’s impossible to say with any certainty what Bitcoin will look like in the next month, year, or decade—or even who will decide that. And the same goes for every public blockchain.

With permissioned ledgers, you know who’s in charge. The people who update the blockchain are the same people who update the code. How those updates are made depends on what governance structure the participants in the blockchain collectively agree to.

Public blockchains are a tremendous improvement on traditional databases if the things you worry most about are censorship and universal access. Under those circumstances, it might just be worth it to build on a technology that sacrifices cost, speed, privacy, and predictability. And if that sacrifice isn’t worth it, a more limited version of Satoshi Nakamoto’s original blockchain may balance out your needs. But you should also consider the possibility that you don’t need a blockchain at all.

Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614

North Korean hackers’ attempts to steal bitcoin are a huge wake-up call

North Korean hackers’ attempts to steal bitcoin are a huge wake-up call

  • North Korean hackers' attempts to steal bitcoin to finance the Kim Jong Un regime bring a new sense of urgency to the need to rein in the cryptocurrency.
  • One big way to rein in bitcoin would be to treat it like a commodity like gold or oil. Each bitcoin should be accounted for, taxed and insured.
  • Law-enforcement officials in all countries should first aim to catch the big fish — groups like ISIS, North Korea, and terrorists — who are using bitcoin for illegal activity.
     
     
     
     
     

For years, bitcoin critics have warned us

about how the cryptocurrency provides way too much opportunity for criminals to launder money. Even JPMorgan CEO Jamie Dimon slammed bitcoin recently, saying it is a "fraud" that would be shut down at some point. But a recent report that shows North Korean hackers are increasing their attempts to steal bitcoin from South Korea may be the final straw that leads regulators to rein in bitcoin. The report, from cybersecurity firm FireEye, found three attacks against South Korean cryptocurrency exchanges traced to North Korean hackers between May and July of this year.

"The ability of regimes like Kim Jong Un's North Korea to mine or steal cryptocurrencies such as bitcoin is a new reason to be cautious in treating these commodities as currencies," University of Georgia Professor Jeffrey Dorfman said in an email exchange. "While rogue states have practiced counterfeiting even longer than they have been computer hacking, counterfeiters are easier to catch. Once a cryptocurrency is stolen, it is virtually impossible to stop the new owner from spending it, and doing so in untraceable ways." In other words, we're no longer talking about hypothetical and faceless criminals anymore. We've all seen the laughing faces of Kim Jong Un and his generals after every new missile test, including last month's most terrifying launch of an intercontinental

ballistic missile.

"How would the U.S. and other nations rein in bitcoin exactly? And who would do it? The simple answer is for the government to make sure bitcoin is forever treated like a commodity like gold, oil, or even fine art and collectible cars."

Now, imagine if there was evidence Osama bin Laden had used bitcoin to finance the 9/11 attacks and that information came out in the first few days and weeks after those attacks. Remember the sense of urgency and even legal carelessness that characterized the drafting and bipartisan passing of the Patriot Act after 9/11? How would the U.S. and other nations rein in bitcoin exactly? And who would do it? The simple answer is for the government to make sure bitcoin is forever treated like a commodity like gold, oil, or even fine art and collectible cars. Criminals and rogue states could still use bitcoin in many ways, but it would be much more cumbersome to use than physical or online cash.

For example, treating it as a commodity would mean that each bitcoin would have to be accounted for and taxed more accurately like gold bars. Those making the argument that bitcoin exchanges need a reserve requirement are also on the right track. That's because by imposing that reserve requirement, shadier bitcoin markets and exchanges would be forced out of the business. That too would further discourage criminal involvement.

Another commodity-like aspect that should be introduced into the bitcoin world is insurance. Just like you can insure jewelry and valuable art, encouraging bitcoin owners to insure their property would add a level of private scrutiny to the market that should also make criminal use that much harder to achieve. The U.S. Commodities Futures Trading Commission, (CFTC), would be the logical government agency to take on the job of enforcing these changes, but bitcoin is such a major entity now that nothing short of a White House decree with the full backing of the Justice Department and even the Department of Homeland Security could set this process in motion.

"I think digital currency can have a bright future," former CFTC Commissioner Bart Chilton said in an email. "They just have not hit on the correct way to do it with various protections, portability of use, and of security in an underlying value (like commodities do provide)." Making this change would also mean leaning on countries like Japan, that began accepting bitcoin as legal currency in April, to reverse or add new restrictions to that move. The fact that Japan is most squarely in Kim Jong Un's missile cross hairs, should make that argument somewhat easier to make in Tokyo now that we now of Pyongyang's bitcoin maneuvering.

But it would also mean focusing on the big fish first. A study issued in May by the Center for New American Security calls for law enforcement officials in all countries to prioritize their efforts on catching groups like ISIS, North Korea, and terrorists who are using bitcoin and other cryptocurrencies. Doing these things could go a long way toward ensuring those innocent investors who are simply trading bitcoin as a commodity don't lose everything overnight. But let's face it, it could also be a huge disruption to bitcoin investors if the cryptocurrency suddenly ceased to be so accessible to criminal entities. Some major bitcoin bears, like Intellyx president Jason Bloomberg, insist its entire value would be wiped out if criminals could no longer use it easily. This spring, Bloomberg wrote: "the only reason Bitcoin has value to anyone is because of the underlying value as a medium of exchange for lawbreakers. If we could flip a switch and eliminate all illegal uses of Bitcoin, there would be nothing left of the cybercurrency."

Bloomberg may be exaggerating about that; he's at least ignoring the non-criminal advantages of using bitcoin like its very low transaction fees and faster transaction speeds. LIU Post economics professor Panos Mourdoukoutas says the digital currency won't disappear and bitcoin will simply return back to its, "old role: a collectible currency for tech savvy enthusiasts." The words "collectible" and "enthusiasts" sure sound like the terms we use for commodities like rare coins, fine art, and sports souvenirs, don't they? And that brings us back to protecting innocent investors. One could make similar arguments about gold coins or diamonds having a special allure for criminals trying to move their money out of the law's reach. But the market has long put an inherent value on gold and diamonds that transcends whatever nefarious purposes they can sometimes serve.

That doesn't mean bitcoin isn't in a significant bubble right now. And the warnings made to bitcoin investors about the possibility of the bubble bursting have been loud and numerous for some time. But that's a far cry from saying it's worthless as anything but a tool for crooks, terrorists, and rogue dictators. There will be a drop in the value of bitcoin if it were more properly regulated and thought of as commodity, but investors wouldn't lose everything in that process. That seems like a win/win.

Chuck Reynolds


Marketing Dept
Contributor
Please click either Link to Learn more about -Bitcoin.
Interested or have Questions. Call me 559-474-4614