Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies. | | Has the shine finally worn off the cryptocurrency industry? The cryptocurrency marketplace had a terrible day yesterday, with most of the top 30 coins losing more than 10 percent of their value. What’s going on? Is the ICO bubble finally popping for real? Are investors giving up on Ethereum? What does it all mean for Bitcoin? Decent questions, but if you are looking for definitive answers, this isn’t the place to find them. Maybe try crypto-Twitter (Warning: has been known to cause cognitive dissonance). And don’t forget the bigger picture: cryptocurrency prices have been taking a beating for months. This year, Bitcoin and Ethereum are down 54 percent and 60 percent, respectively, and many other coin prices have tended to track closely with the market’s two biggest players.
That being said, there may be a few things we can pinpoint, most of which have to do with Ethereum. After all, no platform has done more to catalyze the the initial coin offering craze. Last year, hordes of startups rushed to create Ethereum-based digital tokens and sell them—in exchange for ether, of course—to raise money for their projects. Exuberant investors who backed those projects drove the price of ether from just over $10 in early 2017 to over $1300 this past January. Now it appears that some of those projects are cashing out. Investors may also be spooked by the all-too-frequent instances of fraud and security lapses that have occured in the ICO market. And there are doubts that Ethereum will be able to scale up to handle the transaction volumes that would come along with mainstream applications. That narrative makes some sense. But this is crypto—before we know it, the story will change again. | | The World Bank is betting on blockchain bonds. It’s hired an Australian bank to set up a bond that will be managed via a permissioned version of Ethereum—one of the clearest signs yet that blockchains are going mainstream. A press release describing the project did not say when the new “blockchain operated new debt instrument,” or “bond-i” (apparently named after Australia’s iconic Bondi Beach) will launch, but it claimed that investor interest has been “strong.” The bank, which issues between $50 billion and $60 billion annually in bonds to fund sustainable development in emerging economies, believes that blockchain technology can make the process more efficient by reducing the number of necessary intermediaries.
The idea of using blockchains to manage bonds and other similar financial instruments has been gaining traction. In 2015, Overstock issued a blockchain-based corporate bond. Last year, a company in the UK issued a bond using Ethereum’s public ledger. And the city government of Berkeley, California, is exploring the possibility of issuing blockchain-based municipal bonds. | | A brush with crypto-catastrophe. Bitcoin core developer Cory Fields, a researcher at MIT’s Digital Currency Initiative, has published a detailed Medium post in which he describes his recent discovery of a vulnerability in Bitcoin Cash that “could have been so disruptive that transacting in Bitcoin Cash safely would no longer be possible.” Fields anonymously disclosed the vulnerability, which was promptly fixed and publicly disclosed in May. The whole post is worth reading, but if you are interested in the future of cryptocurrencies, at least take a moment to consider Fields’s sobering takeaway from the episode: “the threat of software bugs is severely underestimated in the cryptocurrency world.” | | Loose Change Fill your pockets with these newsy tidbits. | | | Bitmain holds five percent of all Bitcoin Cash in circulation. (Finance Magnates) | | | | A blockchain company plans to build a 900 MW wind farm to power a computing center in Morocco. (Reuters) | | | | Facebook VP David Marcus, recently named the company’s blockchain research lead, is stepping down from the board of Coinbase to avoid a conflict of interest. (CoinDesk) | | | | The US Financial Crimes Enforcement Network (FinCEN) receives more than 1,500 cryptocurrency-related suspicious activity reports every month. (FinCEN) | | | | MIT researchers have proposed a new cryptographic ledger that uses zero-knowledge proofs to better track public law enforcement data requests without disclosing too much information. (MIT News) | | | | Overstock subsidiary tZero, which will launch a regulated crypto-token exchange, has raised $134 million via its own “security token” sale. (CoinDesk)
+The next generation of ICOs will actually have to follow the rules. (TR) | | | The Money Quote “There are a couple of forces in this market that if they failed, it would be catastrophic. Tether is one of them.” —Ding’An Fei, a managing partner at Beijing-based digital asset investment firm Ledger Capital, to the Wall Street Journal ($). A recent piece in the Journal takes an in-depth look at the mysterious crypto-token, supposedly backed by US dollar reserves, that has become a “cornerstone” of the cryptocurrency market. | | | |
