Thursday, November 8, 2018

#102: The fork is going on with Bitcoin Cash?

Chain

Letter

Blockchains, cryptocurrencies, and why they matter

11.08: You can go your own way.

Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies.

To fork or not to fork. If, every now and then, you forget that cryptocurrency is pretty weird, there’s nothing like a contentious hard fork to serve as a reminder. If there is disagreement within a blockchain network about a software upgrade, those who object can keep running the old chain after the upgrade, creating two separate currencies. But as weird as it is, it somehow seems appropriate that Bitcoin Cash, the product of last year’s most high-profile Bitcoin hard fork, is now facing a potential hard fork of its own. The real prospect of a blockchain split, which would happen November 15, has major players in the Bitcoin Cash ecosystem taking sides.

Bitcoin Cash was born just over a year ago thanks to an irreconcilable disagreement between factions in the Bitcoin community over whether and how the network should make technical changes that would make it better at handling large transaction volumes. As part of its roadmap, Bitcoin Cash has scheduled software upgrades every six months. That went fine back in May, but this time it appears the community may have its own irreconcilable disagreement on its hands. Essentially, the developers of the most popular Bitcoin Cash software client, called Bitcoin ABC, have proposed a series of upgrades, including smart contract capability—but have been met with vehement opposition from a small but vocal segment of the community that has the support of one of Bitcoin Cash’s biggest mining pools.

The opposition to Bitcoin ABC’s proposed upgrades is led by Craig Wright, a cryptographer and controversial figure who has claimed (without proof) to be Bitcoin’s creator Satoshi Nakamoto. Wright’s company nChain has joined with mining pool CoinGeek, which controls more than 15 percent of all Bitcoin Cash mining, to develop an alternative upgrade to Bitcoin ABC’s called Bitcoin SV (for Satoshi’s vision), calling ABC’s proposed changes “unnecessary.” Jihan Wu, cofounder of Chinese mining chip maker Bitmain, which holds a substantial stash of Bitcoin Cash, has expressed his support for Bitcoin ABC, lashing out at “Fake Satoshi” Wright on Twitter.

If the two sides end up going their separate ways, Bitcoin Cash holders will suddenly hold the same value in the new coin as they hold in Bitcoin Cash. In preparation, many of the popular exchanges have gone out of their way to clarify their plans in case of the split, in particular how they will make sure their users get their new coins. Yes, it bears repeating: cryptocurrency is weird.

China appears to be stamping out ICO loopholes. The People’s Bank of China has released a new report on financial stability, in which it has identified what it calls a growing crypto-related problem: “disguised” initial coin offerings. To get around the government’s ban on token sales, some firms have moved their projects to other countries, where they use agents to invest on behalf of people in China, the report said. Others are simply giving tokens away, it said.

The tactic, often called an airdrop, is popular in the US as well. Getting tokens into the hands of people actually interested in using blockchain networks can be a challenge, and the idea is that that giving them away for free, usually to a targeted audience, is one way to bootstrap a new blockchain network and grow a community. Stellar, the sixth largest cryptocurrency by market value, announced Tuesday that it plans to airdrop $125 million worth of its cryptocurrency, called lumens, to users of a popular wallet service called Blockchain. Though Stellar is established among speculators, it wants more people to use its smart contract platform.

But airdrops face the same big question that all ICOs in the US face right now: are they securities offerings? So far the SEC has only weighed in once, making it clear via a ruling in August that just because the recipients of airdropped tokens didn’t pay money for them doesn’t mean the tokens aren’t securities.

AI isn’t up and coming. It’s here.

Loose Change

Fill your pockets with these newsy tidbits.

•

Spanish bank BBVA and two partners have used a blockchain to complete a $150 million syndicated loan, a type offered by a group of lenders to a single borrower. The demo shows how the complex process—which still relies on fax machines—can be made faster and cheaper with blockchain. (Financial Times $$)

•

Bitcoin’s price volatility is the lowest it has been in two years, but who knows what that means. (Reuters)

•

Consumers in Singapore can now trade renewable energy credits using a blockchain-based platform. (CNBC)

•

William Shatner defended Vitalik Buterin against a Twitter troll yesterday. (CoinDesk)

•

The US cryptocurrency exchange Poloniex will let users trade both versions of the Bitcoin Cash fork—even before the fork happens. (Finance Magnates)

The Money Quote

“The networks that are live or under development vary greatly and frequently lack key characteristics that many regard as essential components of a blockchain.”

—A new report from Forrester sizes up the landscape of “blockchain” projects, unsurprisingly finding lots of hype and “blockchain washing.” (Fortune)

We hope you enjoyed today's tour of what's new in the world of blockchains and cryptocurrencies. Send us some feedback, or follow me @mike_orcutt.

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When ETF? VanEck CEO Keynoting at Consensus: Invest

To view this email as a web page, go here.

We are 19 days away from Consensus: Invest, our event tailor-built for professional investors.

Tickets increase in price on November 23rd at 11:59PM EST, and there are only a few rooms remaining in our hotel block, so get your tickets now.

When ETF?

More than almost any other topic in the crypto space, the ETF discussion comes up consistently. Time and again, the SEC has rejected proposals.

Money management firm VanEck is one of the companies trying to get one of these bitcoin ETFs approved by the SEC.

But ETFs are just the start of the conversation. And we have two speakers who are joining us at Consensus: Invest to talk about future financial products built around crypto.

Jan van Eck
President & Chief Executive Officer
Van Eck Securities Corporation

Mike Belshe
Co-Founder & Chief Executive Officer
BitGo, Inc.

We're also bringing together leading experts in the futures market to join a discussion on what new financial products are being launched.

Many say that the futures products launched in 2017 halted the parabolic price rises that took place. And these new financial products offer investors the option to bet against the asset, not just for it.

Thomas Chippas
Chief Executive Officer
ErisX

JJ Kinahan
Chief Market Strategist
TD Ameritrade

Juthica Chou
Chief Operating Officer
LedgerX

John Tornatore
Director, Markets, Global Head of Cryptocurrencies
Cboe Global Markets, Inc.

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Regulated becomes Regulator 👮

November 8, 2018

CFTC Chair Claims DLT Can Be Used to Regulate Markets

DLT gets plugged

Speaking Wednesday at the D.C. Fintech Week Conference, Commodity Futures Trading Commission (CFTC) chairman J. Christopher Giancarlo whipped out a new idea to the crowd involving distributed ledger technology (DLT), according to CoinDesk

In his speech, Giancarlo described a process in which market "rulebooks" or laws are digitized - meaning regulators can analyze, track, and enforce potentially fraudulent actions in real-time.

To organize this new process, dubbed quantitative regulation, Giancarlo believes distributed ledger technology will be necessary to help "standardize and distribute data" to both regulators and market participants.

Explaining with speed limits

After a few confused looks from the crowd, Giancarlo went on to explain his vision with a simple illustration using speed limits as an example.

While speed limits are static, like traditional market laws, a digitized system powered by DLT can modify the rules to ensure the best outcome.

Giancarlo explained:

"The two regulatory objectives you're trying to solve for with a speed limit are safety and the efficient flow of traffic. If you actually had a dynamic speed limit that measured road and weather conditions (imagine a digital display), you might be able to slow the speed limit down if it's raining in order to better satisfy the safety objective or increase the speed limit on a sunny weekday afternoon when traffic is light to achieve a safe, but more efficient, flow of traffic."

What's the punch line

Decreasing costs and automating manual processes is the punch line. Just this year the CFTC saw its budget cut by $1 million despite arguing for years that its budget is inefficient.

Now, with a blockchain supporter leading the CFTC, the government agency may be looking to utilize the technology to improve business.

RESEARCH

More Than a Quarter of German Young Adults have Interest in Investing in Crypto

Two states in Germany, Hesse and Saxony, recently conducted a survey polling 1,000 citizens inquiring about their perception of Bitcoin and cryptocurrencies.

As you could've guessed it, young adults were the demographic most interested in cryptocurrency investing. The survey found that 28% of German's between the ages of 18 and 29 say that they view cryptocurrency investing as 'conceivable'. Respondents cited that the potential for profit is what makes cryptocurrency intriguing.

Older generations not sold

While the younger generation reported interest in cryptocurrency investing, the older generations were found to be far less interested in the new asset class.

This survey found that over 50% of Germans between the ages of 30 and 39 view cryptocurrency investing as 'dangerous'. The respondents cited three major reasons for why they felt this way:

Volatility
Lack of physicality
Scare tactics (unclear government regulation)

Education is needed

It is probably best to classify the results of this survey as mixed in terms of promise for cryptocurrencies.

The one thing that is most clear from this survey is the importance of education in the space. Older generations do not understand cryptocurrencies and that creates a perception of 'danger'. Even the younger generation who reports interest in cryptocurrency cites that it is mainly for the profit rather than understanding the possible use cases behind the technology.

OPINION

Crypto is Entering Tech Mainstream, Says Coinbase CTO

Tech space is on the bandwagon

Balaji Srinivasan, the Chief Technical Officer at Coinbase, has been taking note of what is happening around the tech space in America. According to his observations, technology companies are fully embracing blockchain technology.

In response to a Twitter thread summarizing the recent news around crypto, Srinivasan tweeted:

Prices down, awareness up

If you have followed the news during the bear market, you know that more and more companies and individuals are adopting blockchain technologies and cryptocurrencies, even as the price of these assets has been dwindling.

Companies are racing to be at the forefront of the revolution. It may be competitive, but the cryptocurrency community is more democratic than ever. Most projects are developed by communities and open source. Square even recently open sourced its cold wallet solution for all to utilize.

GOVERNMENT

U.S. Midterms See 3 New Pro-Blockchain Governers Elected

Amid the whirlwind of the 2018 midterm elections, three newly elected governers stuck out to the crypto community.

According to the Digital Asset Trade Association (DATA), a blockchain advocacy group, newly elected governers Jared Polis (Colorado), Gavin Newsom (California), and Mark Gordon (Wyoming) all rank high in "crypto-friendliness."

To get a good idea of why, we broke it down for you:

Jared Polis: Has been a member of the Congressional Blockchain Caucus in the U.S. House of Representatives and has pushed to integrate blockchain in the United States in areas like government record keeping and digital voter protection.

Gavin Newsom: Has pushed for clear and progressive regulations in order to attract developers to California.

Mark Gordon: Has supported the exemption of crypto businesses from money transmitter laws as well as slashing sales tax on crypto purchases in Wyoming.

BITS

But wait, there's more...

U.S. financial services company Square revealed it generated $43 million in Bitcoin (BTC) revenue for Q3 2018.
Two principals at a Chinese school got in hot water after installing ethereum miners at the institution, according to a report.
Eighty-seven-year-old Canadian actor and producer William Shatner just made a series of tweets supporting ethereum creator Vitalik Buterin.

GIVEAWAY