Ethereum May Very Well Leave Bitcoin Eating Its Dust Over the Long Run

Ethereum May Very Well Leave Bitcoin Eating Its Dust Over the Long Run

Ethereum appears to have the preferred blockchain relative to bitcoin, but there's no guarantee either cryptocurrency has staying power.


Since the year began, there's been no hotter investment than cryptocurrencies.

Bitcoin and Ethereum, which are the one-two punch in terms of largest market cap among digital currencies, have returned about 300% and 3,200%, respectively, just since the year began. By comparison, it's taken the S&P 500 decades to return what Ethereum has for its investors in just under nine months.

Cryptocurrencies are skyrocketing for three reasons

Emotions have obviously played a critical role in pushing digital currency prices higher. Since financial institutions have either avoided cryptocurrencies like bitcoin and Ethereum, or are barred by management from trading them, it's left the price movement to the hands of retail investors. John and Jane Q. Investor are substantially more prone to having emotions sway their investment decisions than large investment institutions. Lately, the "don't miss the boat" mentality could very well be driving prices higher.

On a more fundamental basis, there's a lot of excitement surrounding the blockchain that underlies many of the top cryptocurrencies, including bitcoin and Ethereum. Blockchain is a digital decentralized network that records all transactions without the need for a financial intermediary, like a bank. Because these blockchains are often, to some degree, open-source networks, it makes altering data very difficult. Thus, blockchain could become the preferred peer-to-peer and business-to-business channel for transactions in the future for a variety of industries and sectors.

Even the U.S. dollar has given a boost to cryptocurrencies since the year began. The dollar recently hit a more than two-year low against the euro, and well over a one-year low against other major currencies. When the dollar weakens, it tends to lift U.S. exports, which is bound to make President Trump happy. On the other hand, it reduces the value of dollars being held by investors. Usually a falling dollar will send investors to seek a safe-haven store of value, like gold. Lately, though, they've been opting for the safety of bitcoin, the largest digital currency. However, bitcoin's tenure as the cryptocurrency of choice may not last much longer.

Bitcoin could wind up eating Ethereum's dust

With the full understanding that the cryptocurrency model itself has no guaranteed future, it's my suspicion that Ethereum has a better chance of long-term success than bitcoin. In fact, the early evidence suggests that Ethereum could leave bitcoin eating its dust in short order.

The major difference between the two digital-currency powerhouses comes down to their blockchain technology. Ethereum's blockchain has one key advantage over bitcoin's blockchain: its support of smart contract applications. Smart contracts, which, in their simplest form, are computer protocols that help to facilitate, verify, or enforce the negotiation of a contract, help to automate complex physical and financial supply-chain procedures and compliance processes. In plain English, it's a protocol within Ethereum's network geared at big businesses that should allow business-to-business and client-to-business deals to be done securely and efficiently. Ethereum already has a lot of interest in its blockchain, as evidenced by the more than 150 organizations that had joined the Enterprise Ethereum Alliance as of July 2017, including nine well-known brand-name companies. These organizations are testing out a version of Ethereum's blockchain in various pilot and small-scale programs. 

Comparatively, bitcoin is valued more as a payment platform than for its underlying blockchain technology. While there are some well-known businesses that have accepted bitcoin since 2014, its network has been at a distinct disadvantage to Ethereum's. Bitcoin has traditionally had higher transaction costs, long settlement times, and for a while, its capacity was challenged. A recent fork in bitcoin, which saw the digital currency split in two — bitcoin and bitcoin cash — may help close the gap a bit, but that remains to be seen. This fork involved bitcoin's engineers utilizing the SegWit2x upgrade, which lowered transaction costs and settlement times, while boosting capacity by removing some information from its blockchain. A majority of the bitcoin community was in favor of SegWit2x, especially since it would make bitcoin more attractive to big businesses.

However, bitcoin still didn't receive the required 80% support needed to keep it from fracturing into two separate currencies. The remaining minority, which became bitcoin cash, chose to expand capacity within the original blockchain framework. This minority would prefer bitcoin remain a Libertarian's dream currency. It's really as simple as this: Big business currently favors Ethereum's underlying blockchain more than bitcoin's, and that's likely where the long-term value of these cryptocurrencies lies.

Before you get too excited, remember this

However, this writer is still not very excited about the long-term prospects of cryptocurrencies, in general. To begin with, there's absolutely no way of knowing how much blockchain technology will be worth a year, three years, or 10 years from now. Though businesses are testing out the technology, there isn't a large-scale use of blockchain ongoing at the moment outside of digital currencies. Therefore, any valuation of cryptocurrencies based on their underlying blockchain is nothing more than a roll-the-dice guess at the moment.

We also can't overlook the terrifying role that retail investor emotions have played in bitcoin, Ethereum, and other cryptocurrencies. Without the stabilizing force that is Wall Street, emotions have the potential to whipsaw these currencies in the short term, possibly leading to quick and hefty losses for those who aren't prepared, or don't understand how digital currencies work. Building on that last point, the lack of a central trading exchange is another potential issue. While decentralization is critical to the success of cryptocurrencies so as to reduce the likelihood of a cyberattack being successful, it also makes it difficult to legitimize cryptocurrencies. And having around a dozen exchanges can increase price volatility.

Even regulating bitcoin and other cryptocurrencies could be worrisome. While regulation would, in one sense, signify the acceptance of digital currencies as legal tender, some countries, like China, could choose to crack down on digital currencies altogether. China recently barred initial coin offerings and announced that it'll soon be shutting down domestic bitcoin and cryptocurrency exchanges. Long story short, while Ethereum looks the best positioned to succeed over the long run, there's no guarantee that it, or bitcoin, will be around in a few years' time. My suggestion remains that investors steer clear of digital currencies until we have a better understanding of how they'll be regulated, and what their underlying technology is really worth.

Say Goodbye to the Old iPhone: This Could Be 40X Better

iPhone mania is back, and there's potentially billions up for grabs. But if you think Apple is the best way to play the pending iPhone tsunami, think again. One tiny company holds the patents to an invaluable, tiny component inside Apple's newest iPhone — and Apple has to pay up every time it puts this technology in its phones. Don't wait until the name of this company is on everyone's lips.

This Stock Could Be Like Buying Amazon in 1997


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Chuck Reynolds

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


Building Blockchains – Ripe Model for Principal- Agent Problem

Building Blockchains
– Ripe Model for Principal-
Agent Problem


Management theory, in broad terms, deals with the relationship

between managers and business entities. Inherent in this relationship is the principal-agent problem. This problem arises because the interests of a manager (agent) can — and often do — diverge from the interests of the owners of the business (principal) that he or she is managing.

Classic management incentivization: the carrot and the stick

Business organizations mitigate the principal-agent problem by use of incentive games that better align manager and business owner interests.

Example 1 (Reward-Based Game):

A manager is incentivized to generate revenues for a business because this is a performance metric that will influence his or her compensation. Revenues also benefit the business and its owners by increasing a company’s equity value (benefiting shareholders), enabling the company to pay down debt (benefiting creditors), allowing employees to be paid on time, etc.

Example 2 (Deterrent-Based Game):

A manager is deterred from acting in a manner that incurs excessive risk and liability for the business owners. One way this is achieved is through legal mechanisms such as vicarious liability or ‘piercing the corporate veil.’ The former may allow a manager to be held directly liable for the injury, or illegal conduct, of his or her employee; the latter may allow a manager to be held personally and solely liable in the context of fraud, etc.

I would hazard that the modern ‘business organization stack’ is built upon hundreds of different reward and deterrent incentive games, each playing a part in collectively establishing a Nash equilibrium between the ‘players’ within a business (i.e., managers and owners). These games are prevalent at all layers of the stack — e.g., compensation structures, human resources policies, governance policies, laws and regulations, etc. — and each game provides ‘checks and balances’ to the principal-agent problem that are fundamental to the viability of the organization.

Enter the ‘Cryptoeconomic Business Model’

With the advent of Blockchain-based assets — and the exponential influx of capital into the Blockchain industry over the past few years — we have witnessed the birth of a novel business model. This model enables companies to make money in new ways through the creation of open-source protocols and code (an invaluable service for which we once relied upon the altruism, rather than profit motive, of developers to provide).

I refer to this as the cryptoeconomic business model. This can be defined as any business model predicated on making profit by building a cryptoeconomic system, i.e., a peer-to-peer cryptographic network which functions on providing incentive payments to (assumed) adversarial nodes. Virtually all public/permissionless Blockchains today are ‘cryptoeconomic systems’ by this definition.

The cryptoeconomic business model upsets the classic principal-agent equilibrium that is often achieved by using reward and deterrent incentive games. This is done by introducing an entirely new class of stakeholder into the ecosystem — the Keepers of a Blockchain network (e.g. tokenholders and other participants who provide a form of ‘paid labor’ into the network, such as validators, miners, etc.)

If the traditional business has two classes of players (managers and owners), the cryptoeconomic business has three (managers, owners and Keepers). These new entrants complicate the game theory model because, now, instead of the acting only on behalf of owners, there are two sets of stakeholders (owners and Keepers) whose interests depend on the efforts of a manager. What happens when the interests of these different sets of stakeholders diverge? In whose interests would (or should) an agent be motivated to act?

Token offering events & the risk of divergence/dilution

Value creation in a traditional business model is different than value creation in a cryptoeconomic business model. In a traditional business, the final milestone of success is achieving profitability. Managers are incentivized to achieve profitability, and then to perpetually increase profitability, because the fruits of this labor accrue 100 percent to the business entity benefiting both owners and managers. Simple enough. This is not exactly the case for a cryptoeconomic business model. Early in the cryptoeconomic business life cycle, each milestone benefits managers and owners collectively — but upon a company’s token offering event milestone (note: because the term ‘ICO’ is a faux pas) there is a fundamental shift.

Value creation no longer accrues to the business entity, but directly to the product/output of that business (i.e., the cryptoeconomic system)

In a cryptoeconomic business model, the final milestone is not profitability per se, but in the value of the Blockchain network/token, which recent scholarship suggests may be measured as a token’s current utility value (“CUV”) and discounted expected utility value (“DEUV”). CUV/DEUV come into play immediately following the token offering event milestone, concurrently with the introduction of Keepers into the stakeholder set.

So how does this impact our thinking on managerial incentives?

The immediate observation is that managers and owners will only benefit from working to increase a network’s value to the extent that they retain some amount of that network’s native tokens. In practice this amount might be in the ~20–50 percent range for the business entity, which is sizable, but significantly less than the 100 percent value retention model of a traditional business.

In theory, managers have ‘skin in the game’ by virtue of these token holdings and should be motivated to drive growth in the token’s CUV/DEUV with the expectation of selling those retained tokens for a profit at some later date. This outcome would be ideal as it implies an alignment between manager-owner-Keeper interests. But the problem is that the dilution from 100% value retention (in a traditional business model) to ~20–50 percent value retention (in a cryptoeconomic business model) may also dilute a manager’s motivation to create long-term value for the network. Without sufficient reward/deterrent games in place, managers are prone to instances of moral hazard and myopic thinking.

It is plausible, for instance, that this may result in some degree of friction between the profit motive of managers, which incentivizes a manager to retain a significant portion of the tokens for the core business and the interests of the other Keepers/tokenholders who would benefit from those tokens being distributed more broadly thus creating network effects that could increase the CUV/DEUV of the token. This would be an example of misalignment between manager-owner-Keeper interests.

Other challenges in managerial motivation post-genesis block

Another challenge is due to the fact that revenue models (i.e. ‘rent-seeking’) may not be viable in cryptoeconomic systems. If a manager were to extract profit/revenue from a network by coding a centralized fee* into a protocol or dApp (i.e. any type of transaction fee that remits value back to the business), a likely outcome is that the protocol or dApp would either: (i) fail to gain adoption, or (ii) be hard forked by users (or duplicated by a competitor) to remove the fee from its code base thus making the network more cost-efficient.


To clarify my point on centralized fees, certain platforms use sustainable fee models as a feature of the platform’s cryptoeconomic design (e.g,. Factom and Counter-Party, wherein a portion of fees are burned to increase the scarcity of the token). Also, as the use cases for dApps/protocols continue to proliferate, centralized fees may prove to be an accepted business model for certain applications of Blockchain technology.

Here are a few of the other ramifications of this challenge:

Profiting upfront; creating value later:

The creators of cryptoeconomic networks (currently) realize value for the business entity primarily via two streams: (i) the proceeds of token offering events, and (ii) the retention of some amount of the offered tokens. Both of these milestones occur relatively early in the life cycle of a business. Given that the majority of a manager’s compensation/profit is front-loaded, experience has shown that some managers will opt to simply complete a token offering event before ‘jumping ship’ to the next project, rather than working to generate value for their current project.

CUV/DEUV is a bad indicator of managerial competence:

We may not yet have the best tools to evaluate managerial performance in cryptoeconomic business models. CUV/DEUV are inherently different metrics than earnings per share, EBITDA, return on equity, etc. (the latter are some of the tools used to evaluate CEO performance in a traditional business). CUV/DEUV is driven by supply and demand; more fitting for valuing a commodity than equity. To evaluate a manager’s performance on the CUV/DEUV of a token is akin to evaluating a gold company CEO’s performance on the price of gold.

The lack of legal mechanisms to protect Keepers/token-holders:

There exists an elaborate body of corporate, securities and employment law designed to address the principal-agent problem between participants in traditional business structures (e.g., vicarious liability, ‘piercing the corporate veil,’ fiduciary duties owed by directors to shareholders, etc.) These protections do not (yet) exist for the Keepers/token-holders of cryptoeconomic systems. Granted, there is free market mechanism in play by virtue of the Keepers’ ability to hard fork a protocol in retaliation to mismanagement, but this overhaul should only be used as a last resort.

Singular token offering events: 

For traditional start-ups, the process of raising capital occurs in tranches (i.e. Seed, Series A, Series B, etc.) and each tranche is largely tied to a manager’s ability to demonstrate progress towards profitability since the previous tranche. Token offerings — on the other hand — are mostly structured as singular events. This structure alleviates the much needed external pressure on managers to deliver on building their products on time and on budget. It also fails to backstop losses for investors in the event that a manager fails to deliver.

These are just a few examples of how the principal-agent problem can manifest itself in the context of new, cryptoeconomic business models— each of which will eventually be solved by new incentive games designed for the tripartite (i.e., manager-owner-Keeper) environment.I suspect that the study of management theory in the context of cryptoeconomic business models will continue to be an evolving field — and a very relevant one at that.

Chuck Reynolds

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

Criticizing Bitcoin Could Backfire

Criticizing Bitcoin Could Backfire


JPMorgan CEO Jamie Dimon is facing market abuse reports

from algorithmic liquidity provider Blockswater, according to the UK’s biggest financial news publication CityAM. Earlier this month, at a banking conference hosted by Barclays, Dimon offered baseless condemnation on Bitcoin, claiming that the decentralized cryptocurrency is a fraud and that the government will soon close down the network of Bitcoin. Almost immediately after providing a non-factual and inaccurate assessment of Bitcoin, Dimon was heavily criticized by prominent venture capital investor and the owner of the Golden State Warriors, Chamath Palihapitiya. At the conference, in response to Dimon’s comments, Palihapitiya explained that governments are limited in what they can restrict and regulate within the global Bitcoin industry and market. He emphasized that government agencies and financial regulators can control trading activities around Bitcoin but cannot manipulate or censor the peer-to-peer protocol itself. To the Dimon’s labeling Bitcoin as fraud,

Palihapitiya answered:

“Absolutely not. It cannot be a fraud. What countries can constrain today is how it is effectively traded, but it cannot be controlled. It is a fundamentally distributed system that exists peer to peer. And so to the extent that you can basically eliminate the will and the actions of every single person in the world, you can eliminate it. But in the absence of that, the genie is fundamentally out of the bottle.”

Subsequent to the release of Dimon’s condemnation on Bitcoin, the price of the digital currency plunged from over $4,400 to $3,900. Many analysts have clarified that the price drop of Bitcoin most likely was not impacted by Dimon’s comments but rather by the Chinese government’s imposition of a nationwide ban on Bitcoin exchanges. Still, Blockswater pursued a market abuse report against Dimon for his statement that was evidently incorrect and because of the involvement of JPMorgan Securities Ltd. in various Bitcoin investments.

On Sep. 15, trusted sources including Bitcoin developer Andrew DeSantis and respected Bitcoin trader IamNomad published screenshots of four separate purchases of Bitcoin XBT shares by the bank accounts of JPMorgan Securities. Analysts as Tone Vays supposed they are custodian accounts that purchased the shares of XBT Provider, a Nordic Nasdaq-based Bitcoin exchange-traded note (ETN) on behalf of clients. It is highly unlikely that JPMorgan Securities as a company made the decision to invest in Bitcoin XBT. Instead, the clients of JPMorgan likely requested bank transfers to XBT Provider in Sweden in order to invest in Bitcoin through regulated channels.

Florian Schweitzer, managing partner at Blockswater said:

"Jamie Dimon's public assertions did not only affect the reputation of Bitcoin, they harmed the interests of some of his own clients and many young businesses that are working hard to create a better financial system.”

The complaint of Blockswater also noted that Dimon purposely released non-factual information in regards to the structure and legitimacy of Bitcoin with the intent of negatively impacting its price and value.

Chuck Reynolds

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


Is Blockchain Technology Really the Answer to Decentralized Storage?

Is Blockchain Technology Really the Answer to Decentralized Storage?


The Blockchain has become much more than a simple piece of technology.

It has become a symbol for freedom, transparency and fairness. With this being said, it’s no wonder we see projects leveraging Blockchain tech as a “one-size-fits-all” tool to solve all sorts of problems, many of which could not be further from the original purpose of the Blockchain. Nowadays, the words “Blockchain technology” are thrown around alot and sometimes the use of the technology itself is unnecessary. Tim Swanson, Director of Market Research at R3CEV has even coined the term "chain washing" to describe companies/startups that are using or trying to use Blockchain technology in certain areas when in fact, they could be using more advanced technology for the purpose at hand.

This becomes especially evident when it comes to file and data storage. Although the Bitcoin Blockchain is basically a decentralized database for transactions, accounts and balances, keeping that information on a decentralized ledger is already proving to be a challenge due to capacity issues. Nevertheless, several projects and companies insist on looking at Blockchain-based solutions for storage and, while there are clear cases of misguided enthusiasm when it comes to the use of Blockchain technology, there are some projects out there that are worth taking a look at.

Blockchain Technology as an Incentive Layer

When it comes to a mutualistic relation between Decentralized Ledger Technology (DLT) and data storage, the most common use case for the Blockchain is as an incentive layer. This means that data isn’t stored on the Blockchain itself, but the network at hand is able to leverage the Blockchain as a ledger for automatic payments and/or for value exchange, enabling users to pay for storage or access to files. In this case, the advantages for using the Blockchain over any other technology are clear. These include faster settling times, lower transaction fees (which enable microtransactions), higher privacy and the ability for transparent and immutable record keeping. While the Blockchain isn’t being used for data storage, it is providing the foundation on which the decentralized network is built, allowing it to run with no central authority whatsoever.

There are several projects leveraging the Blockchain in such a way. Storj, one of the first and most successful decentralized storage networks on the cryptosphere, comes to mind. The project started out using a Bitcoin-based asset but later moved to an ERC20 token on the  Ethereum Blockchain. This token, the Storj Coin (SCJX), is used by clients to pay for storage and acts as an incentive for nodes that keep part of the client’s files. These files have been previously shredded, encrypted, and distributed to multiple nodes in order to ensure their safety and availability.

Another popular example is Filecoin, a project developed by Protocol Labs, the creators of the InterPlanetary File System (IPFS). In case you aren’t familiar with IPFS, it is an alternative p2p hypermedia protocol that allows files to be stored in a permanent and decentralized fashion. This provides historic versioning for files, removes duplicates and even allows users to save on bandwidth since files are downloaded from multiple computers and not from a single server.

While IPFS provides a basis for the storage of files, Protocol Labs took this one step further with the development of Filecoin which, according to the whitepaper, “works as an incentive layer on top of IPFS.” The system is different from the one used by Storj on many levels. In Filecoin, miners are paid to store and retrieve files, while also receiving mining rewards from their “useful Proof of Work." There is also no set price for file storage. Instead, users and miners place buy and sell orders in a decentralized storage exchange, making Filecoin a competitive marketplace in which prices can adapt to outside conditions.

While Filecoin and Storj focus on providing affordable cloud storage services, a project named Decent is currently working on a decentralized content sharing platform which allows users to upload and monetize/share their work (videos, music, ebooks, etc) without the need to rely on a centralized third party. Users can access content in a much more affordable way by skipping these intermediaries while the nodes that host the content are rewarded with fees. Much like Storj, the files stored by the nodes on the Decent network are shredded and encrypted.

Blockchain for storage? Is it possible?

Storing data on a Blockchain like Bitcoin would be doable, in theory. However, Bitcoin’s current blocksize limit only allows for 1MB of data to be stored every 10 minutes. Even if you remove that limit, nodes will eventually stop being able to maintain a copy of the Blockchain due to its size, resulting in a centralized and easily-disruptable network. Of course, the scalability problem hasn’t deterred developers from trying to use the Blockchain as a storage solution and a project called Archain may just have found a solution. Archain is a cryptocurrency project that wants to address online censorship by creating a decentralized archive for the internet. To do so, Archain will leverage a new Blockchain-derivative data structure, the "blockweave" which according to the whitepaper, allows the network scale to an “arbitrary size."

Once a user submits a page for archiving on the Archain system, it is stored on the blockweave with the fees paid by the user being allocated to the miner that finds the block at hand. Since the  Archain requires miners to store both the current block and a previous block that has been randomly picked from the blockweave, miners have an incentive to store as much as the data as they can without being forced to store the entire blockweave. As such, Archain is able to ensure that content requested by users is always available without the need for it to be stored by every single node on the network. Archain is also able to address download speeds by incentivising users to propagate poorly-mirrored blocks.

Private Blockchains?

You cannot talk about chain washing for too long without talking about private Blockchains. The concept of a private Blockchain is, to a degree, paradoxical as there is really no use for a Blockchain if the network is closed. To put it simply: If a Blockchain network is not immutable, open or transparent, then a regular database will usually be far more efficient than a Blockchain. Yet there is a little known project leveraging a private Blockchain in combination with the public Waves Blockchain to provide clients with the “best of two worlds." We are talking about Sigwo Technologies LLC, a company that focuses on providing dApps and consulting services for legacy businesses that want to integrate Blockchain technology for data storage and disaster recovery.

Although Sigwo Technologies LLC provides a wide range of services, its use of the Jupiter Blockchain, the Mercury token and the Waves Platform caught my attention. Jupiter is a private Blockchain built specifically for encrypted information storage. Different networks are created for different companies, allowing authorized nodes to join in and download the data on the chain. So far, Jupiter is not much different from any other private Blockchain. What makes it stand out is how Jupiter is able to ensure transparency and immutability despite being a private Blockchain.

Once data is stored on Jupiter, the block hashes from the private Blockchain are stored permanently on the Waves Blockchain. This is done by adding the block hash to a Waves transaction. Since Waves transaction can be paid for with a custom token, the Mercury token is used which makes the process affordable.  Since block hashes are stored on the Waves Blockchain, any change made to the private Blockchain will be publically detected. This happens because the hash from a certain block will always vary according to the information contained in the block. What we’re left with is a Blockchain in which large amounts of data can be stored by specialized nodes (unlike public Blockchains) while remaining publicly verifiable.


As we have seen, there are no shortage of projects that are using Blockchain technology and cryptocurrencies to make decentralized storage possible. However, it is also worth noting that DLT is still in its early stages and it is possible that other, more advanced technologies can replace it with respect to specific use cases. In other words, Blockchain may not be the answer for everything.

Chuck Reynolds

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


Unverified Rumor Circulating That Amazon May Accept Bitcoin By October

Unverified Rumor Circulating That Amazon May Accept Bitcoin By October


Rumors are circulating that Amazon may begin accepting Bitcoin

as a payment method this October. The rumors appear to stem from a recent report on, Some surveys have indicated that the company would have a financial reason to do so, but no official announcement has been made.  The article references a mention in investor James Altucher’s newsletter. According to the source, Altucher is an experienced trader who many believe could have pre-announcement information.

The article comments:

“James Altucher has (co)founded more than 20 companies, authored 11 books, and has been a contributor to several major publications.He is a former hedge fund manager and venture capitalist turned activist blogger/podcaster and offers a subscription based mailing list – the source of the Amazon information.”

Such an announcement is a long shot, but isn’t inconceivable. As online retailers begin to embrace Bitcoin, Amazon will likely respond in kind, in order to maintain its dominance. Overstock CEO 

Patrick Byrne said:

“They have to follow suit. I’d be stunned if they don’t, because they can’t just cede that part of the market to us, if we’re the only main, large retail site accepting Bitcoin.”

Following suit

The move would also continue a trend that began with Overstock and has included other enterprise-level tech companies. A recent comment within a Google API tutorial has led many to believe that the online behemoth will also begin accepting Bitcoin within the Google Store, as PayPal and others already do. As recently as this summer, users were petitioning Jeff Bezos, CEO of Amazon, to begin accepting the cryptocurrency. The move may occur as early as October 26th, during the next earnings conference call. It should be reiterated that this is likely only a rumor at this point, and could be swiftly put to rest. Nonetheless, it is interesting to speculate on the possibilities if Amazon does one day integrate Bitcoin. As the adoption of Bitcoin and cryptocurrencies grow, retailers will need to join the progression toward acceptance in order to remain relevant.

Chuck Reynolds

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

Gibraltar’s Financial Regulator Takes Note of ICO Boom, Issues Warning

Gibraltar’s Financial Regulator Takes Note of ICO Boom, Issues Warning


Regulators across the world are waking up

to the fact that there is a serious amount of money changing hands during ICOs.
The latest to issue a statement about ICOs is the Gibraltar Financial Services Commission .

Gibraltar – An established Finance Centre

Gibraltar, a British Overseas Territory located south of Spain, is an established international financial centre. Major international finance firms have established a presence there, to benefit from low taxes, access to the EU single market and an established legal system. Casinos and finance firms are the growth engines of Gibraltar. Experts had previously opioned that Gibraltar could be a great place to set up Bitcoin-based funds. With increasing numbers of ICOs, the Gibraltar Financial Services Commission has issued a statement saying that it is putting in place a regulatory framework for companies which use Blockchain (or distributed ledger technology) to store or transfer value. This framework is expected to be in place by January 2018. It has warned investors that ICOs are highly risky and speculative, and investment is best left to professionals who are experienced in assessing that risk.

USA and then China take Action

The SEC in the United States has periodically issued warnings about the risks posed by investing in ICOs. In July 2017, it came out with a clear announcement that ICO tokens may be securities, in which case ICOs would have to follow all the rules and regulations associated with securities offerings. While it did find that the Ethereum DAO indeed constituted a securities offering, it did not file charges and used this as an opportunity to educate the fledgling industry. China's recent action against ICOs was sudden and abrupt. In September 2017, China banned all ICOs, classifying them as illegal fundraising. China also asked all organizations and individuals to return money raised through ICOs.

Investor Frenzy in 2017

The ICO mania exploded in 2017. From around $250Mn raised through ICOs in 2016, the amount of money raised in ICOs in year-to-date has exceeded $1.5 bln (and there are still three months left in 2017). The ICO mania started in the first few months of 2017, when divisions within the Bitcoin community about scaling resulted in investors looking elsewhere. A deluge of money was poured into altcoins, resulting in their valuations reaching stratospheric levels. This resulted in many companies planning ICOs, issuing tokens to fund their development. Since these tokens tend to jump in price when they get listed on exchanges, investors treated ICOs as speculative vehicles and companies have been able to raise millions of dollars in a matter of minutes.

Is a Balance between Over Regulation and Free-For-All Possible?

Before the ICO boom, early stage companies had few options but to turn to venture capitalists (VCs) to raise funds. This resulted in a system of checks and balances, since VCs did their own due diligence about the viability of a company's business model. VC involvement also imposed discipline by limiting the way these companies could use the funds raised. With the advent of ICOs, companies have a quicker and easier option to raise money.

Unfortunately, any company with a whitepaper and a half-baked business model has also been able to raise significant sums through ICOs. Hence regulators have tried to step in before individual investors lose money in fraudulent ICOs. A balance has to be found, where only select investors such as high net worth individuals (the SEC calls them “accredited investors”) can invest in ICOs. Even then, ICOs should be required to meet basic disclosure requirements. Reasonable solutions must be found that don’t strangle the newborn ICO industry, but that don’t allow too much harm to come to individual investors.

Chuck Reynolds

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

Digital Currency Mining May Look Much Different in 2025

Digital Currency Mining May Look
Much Different in 2025


Digital currency mining has reached the point

where all mining equipment combined uses more electricity than Iceland. However, the cryptocurrency market capitalization is still minuscule in comparison to other traditional markets. Such electricity consumption may soon become unsustainable if the adoption rate of digital currencies continues to grow at its current pace.

Higher mining difficulty

Bitcoin mining difficulty is adjusted every 2016 blocks to remain at roughly 10 minutes per block. As more mining capacity is brought online, the difficulty increases accordingly. Thus difficulty increases proportionally to the increase in computing power of the network. The mining difficulty of both Ether and Bitcoin has increased exponentially since their respective genesis blocks. This trend will likely continue as adoption keeps increasing. Therefore, digital currency  miners will have to constantly acquire more powerful mining equipment. The times where everyone could mine Bitcoin with his/her personal computer are long over.

More centralized

The rising mining difficulty has forced miners to keep buying new and more powerful mining equipment. The problem is that these super-computers are also very expensive, creating a significant barrier to entry that only those with deep pockets can overcome. Mining benefits greatly from economies of scale, which further limits the ability of small-time miners to be competitive. Because of this, mining has become heavily centralized. AntPool claims to be the largest cryptocurrency cloud mining company in the world, controlling 17.82 percent of the hashpower of the Bitcoin network. Most mining companies are located in China due to the low cost of electricity and labor.

Green alternatives

As the hashrate of Blockchain networks keeps increasing, the amount of mining hardware will continue to grow. These mining computers consume vast amounts of energy, and this is with the entire cryptocurrency market being relatively miniscule in size. One can only imagine how much electricity will be used for mining if digital currency becomes mainstream. Unfortunately, the electricity that powers these machines usually comes from non-renewable sources of energy, which contributes to climate change.

Austrian company HydroMiner is one of the few mining companies that are planning to make mining more sustainable and profitable by using renewable energies. Nadine Damblon, CEO at HydroMiner, pointed out in an interview for CoinNoob that there already are companies using solar energy for mining, but that hydroelectric power is probably the better solution since it’s more consistent and because the water can then be used to cool down the mining equipment.

Proof of stake

In a proof of stake (PoS) network, every validator owns a portion of the network. This is much different from Proof of Work (PoW) where every validator needs to own expensive mining equipment. PoS also encourages greater decentralization of the network, since all the currency holders are involved in securing the network in proportion to the amount of currency they own. Additionally, PoS is extremely energy efficient, since there is no need to make computationally difficult calculations. It also enables much faster validations. Proof of stake does have a couple of drawbacks, with the most serious being the “nothing at stake” problem. Imagine that a network which uses PoS is under attack by a hostile actor who is trying to supplant the valid Blockchain with one of his own. It makes economic sense to “mine” on both Blockchains, since it costs you nothing to do so.

In fact, that’s the smart thing to do, just in case the attacker succeeds. With Proof of Work, a miner must instead decide to mine on one chain or the other, since mining equipment can only be used on one network at a time, and burns expensive electricity doing it. Blocks on the Bitcoin Blockchain will always be verified through PoW. However, Ethereum is moving towards PoS with its new “Casper” protocol. If successful, this will enable Ether holders to stake their coins in a smart-contract in exchange for transaction fees. Many are eyeing Ethereum to see if they can in fact solve the heretofore intractable problems with Proof of Stake.

Chuck Reynolds

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

Central Banks and Govts Are Pro-Blockchain, 80% Consider Centralized Cryptocurrency

Central Banks and Govts Are
Pro-Blockchain, 80% Consider Centralized Cryptocurrency


According to a recent study by the Cambridge Centre

for Alternative Finance, central banks around the world are strongly in favor of Blockchain technology. This, in spite of the recent report by the ECB that Blockchain technology is too immature for widespread use. According to the study, central banks surveyed indicated that 20 percent of central banks will be using Blockchain technology by 2019, and 40 percent will have active Blockchain applications within a decade.


Among the respondents, however, many declined to give time frames but indicated that Blockchain technology was high on their priority list. The findings indicate what many market researchers had already been noting, namely, that the banking industry is starting to grasp the power of Blockchain technology.

The central banks who responded indicated that they are most interested in using Blockchain technology for permissions platforms or protocols, but also indicated strong interest in both Bitcoin and Ethereum. Ironically, a large percentage also indicated that they are considering using Blockchain technology to create their own central bank-issued digital currency. In fact, more than 80 percent of the banks surveyed indicated that this was the main reason they were conducting research. The findings represent a new shift in adoption away from government free cryptos to attempts at centralized digital currencies.

Governments embracing crypto?

The use of Blockchain in the government sector has certainly been increasing. From railway lines to mining farms in Russia, Blockchain technology and cryptocurrencies are on government's’ radar. Other applications appear to be coming on line as well, including Blockchain-based data security after the Equifax hack, and Blockchain based voting systems like Horizon State, which has created a platform for fraud-free voting through Blockchain for state use.

Founder Jamie Skella said:

“For the first time in history, thanks for the post-unforgeable characterises of distributed ledger transactions, we have a ballot box that cannot be hacked. When the result of a vote cannot be tampered with, unprecedented trust amongst communities – and indeed companies – is delivered for constituents.”

With central banks around the world embracing Blockchain technology, and governments seeking solutions for data tampering and fraud-less voting, Blockchain technology will continue to gain market share.

Chuck Reynolds

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

Is Bitcoin’s Volatility Such a Bad Thing?

Is Bitcoin's Volatility Such a Bad Thing?


One reason used by Bitcoin opponents,
to attack it is its high volatility.
Is high volatility such a bad thing for Bitcoin after all?

Highly volatile asset class

One reason why traditional investors have shunned Bitcoin is that its price has swung from one extreme to another. Its price increased from around $1,000 at the beginning of the year to a peak of over $5,000 in September 2017 (gain of +400 percent), before crashing to a low of $3,000 (-40 percent from its peak). Even this represents an improvement from the initial days when Bitcoin price crashed from $32 to $2 in 2011 (a drop of 94 percent). There have been periods of low volatility, but these have been few and far between. Bitcoin may be called digital gold, but in terms of volatility, it looks more like stock markets on steroids.

Volatility is an opportunity for traders

For day traders and short-term investors, volatility presents an opportunity for making profits. By correctly predicting the short-term trends in Bitcoin, traders can make substantial profits; much more than investors who have a buy-and-hold strategy. Highly volatile markets also create demand for secondary derivative products like options. As the cryptocurrency market develops, we could see increased trading of derivative products rather than actual trading of Bitcoin. As per the London Bullion Markets Association, it is estimated that 95 percent of gold trading in London is in unallocated metal (which is not settled). Bitcoin is still in its infancy, but as the market develops we could see the same trading characteristics in Bitcoin as well.

Bane for merchants

Merchants, no matter how tech-savvy they are, hesitate to accept Bitcoins for their goods and services. Their core competence lies in providing goods and services, not in managing Bitcoin's volatility. They work on thin margins and hate even the one to two percent transaction fees imposed by credit card companies. The Bitcoin price can move substantially between the time they accept Bitcoins from customers, and they sell these Bitcoins in exchange for their local currency. This price movement can wipe out their entire profitability. This is the reason why most merchants accept Bitcoin only through payment processors like Coinbase, which removes the risk associated with holding Bitcoins. In the end, merchants have to pay their bills using fiat currencies, not Bitcoin.

Volatility inevitable during growth

Bitcoin is a relatively new asset class. Although the level of awareness about Bitcoin among the general population has increased, only a small proportion of them hold significant amount of Bitcoins. Moreover, institutional investors have largely avoided Bitcoin, given its unregulated nature and the risks associated with it. As Bitcoin adoption increases and demand increases, its price can move up rapidly. Similarly, when there is negative news about Bitcoin, like the Chinese shutting down cryptocurrency exchanges, some of the holders of Bitcoin will sell and its price can crash rapidly. Until the holding of Bitcoin becomes widely distributed and its liquidity improves substantially, we will see substantial volatility in Bitcoin price.

Chuck Reynolds

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

China’s Crackdown on Cryptocurrency Trading. A Sign of Things to Come?

China’s Crackdown on
Cryptocurrency Trading.
A Sign of Things to Come?

China’s Relationship with Bitcoin

The Chinese government released a list of 60 initial coin offering trading platforms and instructed local agencies to make sure all platforms were listed and closed down. The delayed crackdown is in line with previous practice in China. The Chinese government often adopts a wait-and-see approach to activities that are largely unregulated until the magnitude of the activity becomes clear. The extent of speculative investment and the risk of losses to investors if the bubble bursts motivated the government to intervene in cryptocurrency trading. In China, the popularity of cryptocurrencies has been boosted by the tightening of controls on money moving out of the country over the past two years. This has lowered the value of the China’s currency, the renminbi, as investors seek assets in different denominations and chase higher yields. Cryptocurrencies are also popular because they can be used to transfer funds offshore and circumvent foreign exchange controls.

The government is particularly concerned with the use of cryptocurrencies and initial coin offerings to perpetrate and disguise fraudulent activity, including money laundering and ponzi type investment schemes. Chinese authorities are anxious to avoid any social unrest in the lead-up to the 19th Party Congress. The effects of the 2015 stock market collapse, where the A-share market lost one-third of its value over a period of one month, are still being felt. In some respects, the regulatory intervention in China is mirrored in other countries that have been dragging their heels in coming to terms with cryptocurrencies. It was only in July this year that the US Securities Commission issued a report determining that DAO tokens were “securities” and must be regulated accordingly.

China’s Own Cryptocurrency

In January last year, the People’s Bank of China issued a notice announcing it would be issuing its own digital version of the renminbi. The notice highlighted the benefits of a government backed digital currency in terms of cost, coverage, convenience and security. In the initial phase, it’s likely that trading in this digital currency will be limited to regulated entities such as banks along similar lines to trading on the conventional foreign exchange markets.

By launching its own digital currency, the Chinese government avoids the risks associated with privately-issued cryptocurrencies and ensuring they are not used as a means of circumventing China’s strict capital and currency controls. The ConversationWhen China introduces its own digital currency (no formal date has yet been announced), the impact on the global economy will be significant. Not only will it challenge the existing global payment systems and establish China as a leading rule maker in this area, it will also enhance the importance of the renminbi as a global reserve currency.

Chuck Reynolds

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