Top 10 Alternative Currencies IG UK

A Detailed Summary of Every Single Reason Why I am Bullish on Ethereum

The following will be a list of the many reasons why I hold and am extremely bullish on ETH.

This is an extremely long post. If you just want the hopium without the detail, read the TL;DR at the bottom.

ETH 2.0

As we all know, ETH 2.0 phase 0 is right around the corner. This will lock up ETH and stakers will earn interest on their ETH in return for securing the network. Next comes phase 1 where the ETH 2 shards are introduced, shards are essentially parallel blockchains which are each responsible for a different part of Ethereum’s workload, think of it like a multi-core processor vs a single core processor. During phase 1, these shards will only act as data availability layers and won’t actually process transactions yet. However, their data can be utilised by the L2 scaling solution, rollups, increasing Ethereum’s throughput in transactions per second up to 100,000 TPS.
After phase 1 comes phase 1.5 which will move the ETH 1.0 chain into an ETH 2 shard and Ethereum will be fully secured by proof of stake. This means that ETH issuance will drop from around 5% per year to less than 1% and with EIP-1559, ETH might become a deflationary asset, but more on that later.
Finally, with ETH 2.0 phase two, each shard will be fully functional chains. With 64 of them, we can expect the base layer of Ethereum to scale around 64x, not including the massive scaling which comes from layer 2 scaling solutions like rollups as previously mentioned.
While the scaling benefits and ETH issuance reduction which comes with ETH 2.0 will be massive, they aren’t the only benefits. We also get benefits such as increased security from PoS compared to PoW, a huge energy efficiency improvement due to the removal of PoW and also the addition of eWASM which will allow contracts to be programmed in a wide range of programming languages, opening the floodgates for millions of web devs who want to be involved in Ethereum but don’t know Ethereum’s programming language, Solidity.

EIP-1559 and ETH scarcity

As I covered in a previous post of mine, ETH doesn’t have a supply cap like Bitcoin. Instead, it has a monetary policy of “minimum viable issuance”, not only is this is a good thing for network security, but with the addition of EIP-1559, it leaves the door open to the possibility of ETH issuance going negative. In short, EIP-1559 changes the fee market to make transaction prices more efficient (helping to alleviate high gas fees!) by burning a variable base fee which changes based on network usage demand rather than using a highest bidder market where miners simply include who pays them the most. This will result in most of the ETH being paid in transaction fees being burned. As of late, the amount which would be burned if EIP-1559 was in Ethereum right now would make ETH a deflationary asset!

Layer 2 Scaling

In the mean time while we are waiting for ETH 2.0, layer 2 scaling is here. Right now, projects such as Deversifi or Loopring utilise rollups to scale to thousands of tx/s on their decentralised exchange platforms or HoneySwap which uses xDai to offer a more scalable alternative to UniSwap. Speaking of which, big DeFi players like UniSwap and Synthetix are actively looking into using optimistic rollups to scale while maintaining composability between DeFi platforms. The most bullish thing about L2 scaling is all of the variety of options. Here’s a non exhaustive list of Ethereum L2 scaling solutions: - Aztec protocol (L2 scaling + privacy!) - ZKSync - Loopring - Raiden - Arbitrum Rollups - xDai - OMGNetwork - Matic - FuelLabs - Starkware - Optimism - Celer Network - + Many more

DeFi and Composability

If you’re reading this, I am sure you are aware of the phenomena which is Decentralised Finance (DeFi or more accurately, open finance). Ethereum is the first platform to offer permissionless and immutable financial services which when interacting with each other, lead to unprecedented composability and innovation in financial applications. A whole new world of possibilities are opening up thanks to this composability as it allows anyone to take existing pieces of open source code from other DeFi projects, put them together like lego pieces (hence the term money legos) and create something the world has never seen before. None of this was possible before Ethereum because typically financial services are heavily regulated and FinTech is usually proprietary software, so you don’t have any open source lego bricks to build off and you have to build everything you need from scratch. That is if what you want to do is even legal for a centralised institution!
Oh, and if you think that DeFi was just a fad and the bubble has popped, guess again! Total value locked in DeFi is currently at an all time high. Don’t believe me? Find out for yourself on the DeFi Pulse website.

NFTs and tokeniation

NFTs or “Non-Fungible Tokens” - despite the name which may confuse a layman - are a basic concept. They are unique tokens with their own unique attributes. This allows you to create digital art, human readable names for your ETH address (see ENS names and unstoppable domains), breedable virtual collectible creatures like crypto kitties, ownable in game assets like Gods Unchained cards or best of all in my opinion, tokenised ownership of real world assets which can even be split into pieces (this doesn’t necessarily require an NFT. Fungible tokens can be/are used for some of the following use cases). This could be tokenised ownership of real estate (see RealT), tokenised ownership of stocks, bonds and other financial assets (which by the way makes them tradable 24/7 and divisible unlike through the traditional system) or even tokenised ownership of the future income of a celebrity or athlete (see when NBA player Spencer Dinwiddie tokenized his own NBA contract.)

Institutional Adoption

Ethereum is by far the most widely adopted blockchain by enterprises. Ethereum’s Enterprise Ethereum Alliance (EEA) is the largest blockchain-enterprise partnership program and Ethereum is by far the most frequently leveraged blockchain for proof of concepts and innovation in the blockchain space by enterprises. Meanwhile, there are protocols like the Baseline protocol which is a shared framework which allows enterprises to use Ethereum as a common frame of reference and a base settlement layer without having to give up privacy when settling on the public Ethereum mainnet. This framework makes adopting Ethereum much easier for other enterprises.

Institutional Investment

One of Bitcoin’s biggest things it has going for it right now is the growing institutional investment. In case you were wondering, Ethereum has this too! Grayscale offers investment in the cryptocurrency space for financial institutions and their Ethereum fund has already locked up more than 2% of the total supply of ETH. Not only this, but as businesses transact on Ethereum and better understand it, not only will they buy up ETH to pay for their transactions, but they will also realise that much like Bitcoin, Ethereum is a scarce asset. Better yet, a scarce asset which offers yield. As a result, I expect to see companies having ETH holdings become the norm just like how Bitcoin is becoming more widespread on companies’ balance sheets.

The state of global markets

With asset prices in almost every asset class at or near all-time highs and interest rates lower than ever and even negative in some cases, there really aren’t many good opportunities in the traditional financial system right now. Enter crypto - clearly the next evolution of financial services (as I explained in the section on DeFi earlier in this post), with scarce assets built in at the protocol layer, buying BTC or ETH is a lot like buying shares in TCP/IP in 1990 (that is if the underlying protocols of the internet could be invested in which they couldn’t). Best of all, major cryptos are down from their all-time highs anywhere between 35% for BTC or 70% for ETH and much more for many altcoins. This means that they can significantly appreciate in value before entering uncharted, speculative bubble territory.
While of course we could fall dramatically at any moment in the current macro financial conditions, as a longer term play, crypto is very alluring. The existing financial system has shown that it is in dire need of replacing and the potential replacement has started rearing its head in the form of crypto and DeFi.

Improvements in user onboarding and abstracting away complexity

Ethereum has started making huge leaps forward in terms of usability for the end user. We now have ENS names and unstoppable domains which allow you to send ETH to yournamehere.ETH or TrickyTroll.crypto (I don’t actually have that domain, that’s just an example). No longer do you have to check every character of your ugly hexadecimal 0x43AB96D… ETH address to ensure you’re sending your ETH to the right person. We also have smart contract wallets like Argent wallet or the Gnosis safe. These allow for users to access their wallets and interact with DeFi self-custodially from an app on their phone without having to record a private key or recovery phrase. Instead, they offer social recovery and their UI is straight forward enough for anyone who uses a smart phone to understand. Finally, for the more experienced users, DApps like Uniswap have pretty, super easy to use graphical user interfaces and can be used by anyone who knows how to run and use a browser extension like Metamask.

The lack of an obvious #1 ETH killer

One of Ethereum’s biggest threats is for it to be overthrown by a so-called “Ethereum killer” blockchain which claims to do everything Ethereum can do and sometimes more. While there are competitors which are each formidable to a certain extent such as Polkadot, Cardano and EOS, each have their own weaknesses. For example, Polkadot and Cardano are not fully operational yet and EOS is much more centralised than Ethereum. As a result, none of these competitors have any significant network effects just yet relative to the behemoth which is Ethereum. This doesn’t mean that these projects aren’t a threat. In fact, I am sure that projects like Polkadot (which is more focused on complimenting Ethereum than killing it) will take a slice out of Ethereum’s pie. However, I am still very confident that Ethereum will remain on top due to the lack of a clear number 2 smart contract platform. Since none of these ETH killers stands out as the second place smart contract platform, it makes it much harder for one project to create a network effect which even begins to threaten Ethereum’s dominance. This leads me onto my next reason - network effects.

Network effects

This is another topic which I made a previous post on. The network effect is why Bitcoin is still the number one cryptocurrency and by such a long way. Bitcoin is not the most technologically advanced cryptocurrency. However, it has the most widespread name recognition and the most adoption in most metrics (ETH beats in in some metrics these days). The network effect is also why most people use Zoom and Facebook messengeWhatsApp despite the existence of free, private, end to end encrypted alternatives which have all the same features (Jitsi for the zoom alternative and Signal for the private messenger app. I highly recommend both. Let’s get their network effects going!). It is the same for Bitcoin. People don’t want to have to learn about or set up a wallet for alternative options. People like what is familiar and what other people use. Nobody wants to be “that guy” who makes you download yet another app and account you have to remember the password/private key for. In the same way, Enterprises don’t want to have to create a bridge between their existing systems and a dozen different blockchains. Developers don’t want to have to create DeFi money legos from scratch on a new chain if they can just plug in to existing services like Uniswap. Likewise, users don’t want to have to download another browser extension to use DApps on another chain if they already use Ethereum. I know personally I have refrained from investing in altcoins because I would have to install another app on my hardware wallet or remember another recovery phrase.
Overthrowing Ethereum’s network effect is one hell of a big task these days. Time is running out for the ETH killers.

Ethereum is the most decentralised and provably neutral smart contract platform

Ethereum is also arguably the most decentralised and provably neutral smart contract platform (except for maybe Ethereum Classic on the neutrality part). Unlike some smart contract platforms, you can’t round up everyone at the Ethereum Foundation or any select group of people and expect to be able to stop the network. Not only this, but the Ethereum foundation doesn’t have the ability to print more ETH or push through changes as they wish like some people would lead you on to believe. The community would reject detrimental EIPs and hard fork. Ever since the DAO hack, the Ethereum community has made it clear that it will not accept EIPs which attempt to roll back the chain even to recover hacked funds (see EIP-999).
Even if governments around the world wanted to censor the Ethereum blockchain, under ETH 2.0’s proof of stake, it would be incredibly costly and would require a double digit percentage of the total ETH supply, much of which would be slashed (meaning they would lose it) as punishment for running dishonest validator nodes. This means that unlike with proof of work where a 51% attacker can keep attacking the network, under proof of stake, an attacker can only perform the attack a couple of times before they lose all of their ETH. This makes attacks much less financially viable than it is on proof of work chains. Network security is much more than what I laid out above and I am far from an expert but the improved resistance to 51% attacks which PoS provides is significant.
Finally, with the US dollar looking like it will lose its reserve currency status and the existing wire transfer system being outdated, superpowers like China won’t want to use US systems and the US won’t want to use a Chinese system. Enter Ethereum, the provably neutral settlement layer where the USA and China don’t have to trust each other or each other’s banks because they can trust Ethereum. While it may sound like a long shot, it does make sense if Ethereum hits a multi-trillion dollar market cap that it is the most secure and neutral way to transfer value between these adversaries. Not to mention if much of the world’s commerce were to be settled in the same place - on Ethereum - then it would make sense for governments to settle on the same platform.

ETH distribution is decentralised

Thanks to over 5 years of proof of work - a system where miners have to sell newly minted ETH to pay for electricity costs - newly mined ETH has found its way into the hands of everyday people who buy ETH off miners selling on exchnages. As pointed out by u/AdamSC1 in his analysis of the top 10K ETH addresses (I highly recommend reading this if you haven’t already), the distribution of ETH is actually slightly more decentralised than Bitcoin with the top 10,000 ETH wallets holding 56.70% of ETH supply compared to the top 10,000 Bitcoin wallets which hold 57.44% of the Bitcoin supply. This decentralised distribution means that the introduction of staking won’t centralise ETH in the hands of a few wallets who could then control the network. This is an advantage for ETH which many proof of stake ETH killers will never have as they never used PoW to distribute funds widely throughout the community and these ETH killers often did funding rounds giving large numbers of tokens to VC investors.

The community

Finally, while I may be biased, I think that Ethereum has the friendliest community. Anecdotally, I find that the Ethereum developer community is full of forward thinking people who want to make the world a better place and build a better future, many of whom are altruistic and don’t always act in their best interests. Compare this to the much more conservative, “at least we’re safe while the world burns” attitude which many Bitcoiners have. I don’t want to generalise too much here as the Bitcoin community is great too and there are some wonderful people there. But the difference is clear if you compare the daily discussion of Bitcoin to the incredibly helpful and welcoming daily discussion of EthFinance who will happily answer your noob questions without calling you an idiot and telling you to do you own research (there are plenty more examples in any of the daily threads). Or the very helpful folks over at EthStaker who will go out of their way to help you set up an ETH 2.0 staking node on the testnets (Shoutout to u/superphiz who does a lot of work over in that sub!). Don’t believe me? Head over to those subs and see for yourself.
Please don’t hate on me if you disagree about which project has the best community, it is just my very biased personal opinion and I respect your opinion if you disagree! :)

TL;DR:

submitted by Tricky_Troll to CryptoCurrency [link] [comments]

A Detailed Summary of Every Single Reason Why I am Bullish on ETH.

The following will be a list of the many reasons why I hold and am extremely bullish on ETH.

This is an extremely long post. If you just want the hopium without the detail, read the TL;DR at the bottom.

ETH 2.0

As we all know, ETH 2.0 phase 0 is right around the corner. This will lock up ETH and stakers will earn interest on their ETH in return for securing the network. Next comes phase 1 where the ETH 2 shards are introduced, shards are essentially parallel blockchains which are each responsible for a different part of Ethereum’s workload, think of it like a multi-core processor vs a single core processor. During phase 1, these shards will only act as data availability layers and won’t actually process transactions yet. However, their data can be utilised by the L2 scaling solution, rollups, increasing Ethereum’s throughput in transactions per second up to 100,000 TPS.
After phase 1 comes phase 1.5 which will move the ETH 1.0 chain into an ETH 2 shard and Ethereum will be fully secured by proof of stake. This means that ETH issuance will drop from around 5% per year to less than 1% and with EIP-1559, ETH might become a deflationary asset, but more on that later.
Finally, with ETH 2.0 phase two, each shard will be fully functional chains. With 64 of them, we can expect the base layer of Ethereum to scale around 64x, not including the massive scaling which comes from layer 2 scaling solutions like rollups as previously mentioned.
While the scaling benefits and ETH issuance reduction which comes with ETH 2.0 will be massive, they aren’t the only benefits. We also get benefits such as increased security from PoS compared to PoW, a huge energy efficiency improvement due to the removal of PoW and also the addition of eWASM which will allow contracts to be programmed in a wide range of programming languages, opening the floodgates for millions of web devs who want to be involved in Ethereum but don’t know Ethereum’s programming language, Solidity.

EIP-1559 and ETH scarcity

As I covered in a previous post of mine, ETH doesn’t have a supply cap like Bitcoin. Instead, it has a monetary policy of “minimum viable issuance”, not only is this is a good thing for network security, but with the addition of EIP-1559, it leaves the door open to the possibility of ETH issuance going negative. In short, EIP-1559 changes the fee market to make transaction prices more efficient (helping to alleviate high gas fees!) by burning a variable base fee which changes based on network usage demand rather than using a highest bidder market where miners simply include who pays them the most. This will result in most of the ETH being paid in transaction fees being burned. As of late, the amount which would be burned if EIP-1559 was in Ethereum right now would make ETH a deflationary asset!

Layer 2 Scaling

In the mean time while we are waiting for ETH 2.0, layer 2 scaling is here. Right now, projects such as Deversifi or Loopring utilise rollups to scale to thousands of tx/s on their decentralised exchange platforms or HoneySwap which uses xDai to offer a more scalable alternative to UniSwap. Speaking of which, big DeFi players like UniSwap and Synthetix are actively looking into using optimistic rollups to scale while maintaining composability between DeFi platforms. The most bullish thing about L2 scaling is all of the variety of options. Here’s a non exhaustive list of Ethereum L2 scaling solutions: - Aztec protocol (L2 scaling + privacy!) - ZKSync - Loopring - Raiden - Arbitrum Rollups - xDai - OMGNetwork - Matic - FuelLabs - Starkware - Optimism - Celer Network - + Many more

DeFi and Composability

If you’re reading this, I am sure you are aware of the phenomena which is Decentralised Finance (DeFi or more accurately, open finance). Ethereum is the first platform to offer permissionless and immutable financial services which when interacting with each other, lead to unprecedented composability and innovation in financial applications. A whole new world of possibilities are opening up thanks to this composability as it allows anyone to take existing pieces of open source code from other DeFi projects, put them together like lego pieces (hence the term money legos) and create something the world has never seen before. None of this was possible before Ethereum because typically financial services are heavily regulated and FinTech is usually proprietary software, so you don’t have any open source lego bricks to build off and you have to build everything you need from scratch. That is if what you want to do is even legal for a centralised institution!
Oh, and if you think that DeFi was just a fad and the bubble has popped, guess again! Total value locked in DeFi is currently at an all time high. Don’t believe me? Find out for yourself at: https://defipulse.com

NFTs and tokeniation

NFTs or “Non-Fungible Tokens” - despite the name which may confuse a layman - are a basic concept. They are unique tokens with their own unique attributes. This allows you to create digital art, human readable names for your ETH address (see ENS names and unstoppable domains), breedable virtual collectible creatures like crypto kitties, ownable in game assets like Gods Unchained cards or best of all in my opinion, tokenised ownership of real world assets which can even be split into pieces (this doesn’t necessarily require an NFT. Fungible tokens can be/are used for some of the following use cases). This could be tokenised ownership of real estate (see RealT), tokenised ownership of stocks, bonds and other financial assets (which by the way makes them tradable 24/7 and divisible unlike through the traditional system) or even tokenised ownership of the future income of a celebrity or athlete (see when NBA Star Spencer Dinwiddie Tokenized His Own NBA Contract.

Institutional Adoption

Ethereum is by far the most widely adopted blockchain by enterprises. Ethereum’s Enterprise Ethereum Alliance (EEA) is the largest blockchain-enterprise partnership program and Ethereum is by far the most frequently leveraged blockchain for proof of concepts and innovation in the blockchain space by enterprises. Meanwhile, there are protocols like the Baseline protocol which is a shared framework which allows enterprises to use Ethereum as a common frame of reference and a base settlement layer without having to give up privacy when settling on the public Ethereum mainnet. This framework makes adopting Ethereum much easier for other enterprises.

Institutional Investment

One of Bitcoin’s biggest things it has going for it right now is the growing institutional investment. In case you were wondering, Ethereum has this too! Grayscale offers investment in the cryptocurrency space for financial institutions and their Ethereum fund has already locked up more than 2% of the total supply of ETH. Not only this, but as businesses transact on Ethereum and better understand it, not only will they buy up ETH to pay for their transactions, but they will also realise that much like Bitcoin, Ethereum is a scarce asset. Better yet, a scarce asset which offers yield. As a result, I expect to see companies having ETH holdings become the norm just like how Bitcoin is becoming more widespread on companies’ balance sheets.

The state of global markets

With asset prices in almost every asset class at or near all-time highs and interest rates lower than ever and even negative in some cases, there really aren’t many good opportunities in the traditional financial system right now. Enter crypto - clearly the next evolution of financial services (as I explained in the section on DeFi earlier in this post), with scarce assets built in at the protocol layer, buying BTC or ETH is a lot like buying shares in TCP/IP in 1990 (that is if the underlying protocols of the internet could be invested in which they couldn’t). Best of all, major cryptos are down from their all-time highs anywhere between 35% for BTC or 70% for ETH and much more for many altcoins. This means that they can significantly appreciate in value before entering uncharted, speculative bubble territory.
While of course we could fall dramatically at any moment in the current macro financial conditions, as a longer term play, crypto is very alluring. The existing financial system has shown that it is in dire need of replacing and the potential replacement has started rearing its head in the form of crypto and DeFi.

Improvements in user onboarding and abstracting away complexity

Ethereum has started making huge leaps forward in terms of usability for the end user. We now have ENS names and unstoppable domains which allow you to send ETH to yournamehere.ETH or TrickyTroll.crypto (I don’t actually have that domain, that’s just an example). No longer do you have to check every character of your ugly hexadecimal 0x43AB96D… ETH address to ensure you’re sending your ETH to the right person. We also have smart contract wallets like Argent wallet or the Gnosis safe. These allow for users to access their wallets and interact with DeFi self-custodially from an app on their phone without having to record a private key or recovery phrase. Instead, they offer social recovery and their UI is straight forward enough for anyone who uses a smart phone to understand. Finally, for the more experienced users, DApps like Uniswap have pretty, super easy to use graphical user interfaces and can be used by anyone who knows how to run and use a browser extension like Metamask.

The lack of an obvious #1 ETH killer

One of Ethereum’s biggest threats is for it to be overthrown by a so-called “Ethereum killer” blockchain which claims to do everything Ethereum can do and sometimes more. While there are competitors which are each formidable to a certain extent such as Polkadot, Cardano and EOS, each have their own weaknesses. For example, Polkadot and Cardano are not fully operational yet and EOS is much more centralised than Ethereum. As a result, none of these competitors have any significant network effects just yet relative to the behemoth which is Ethereum. This doesn’t mean that these projects aren’t a threat. In fact, I am sure that projects like Polkadot (which is more focused on complimenting Ethereum than killing it) will take a slice out of Ethereum’s pie. However, I am still very confident that Ethereum will remain on top due to the lack of a clear number 2 smart contract platform. Since none of these ETH killers stands out as the second place smart contract platform, it makes it much harder for one project to create a network effect which even begins to threaten Ethereum’s dominance. This leads me onto my next reason - network effects.

Network effects

This is another topic which I made a previous post on. The network effect is why Bitcoin is still the number one cryptocurrency and by such a long way. Bitcoin is not the most technologically advanced cryptocurrency. However, it has the most widespread name recognition and the most adoption in most metrics (ETH beats in in some metrics these days). The network effect is also why most people use Zoom and Facebook messengeWhatsApp despite the existence of free, private, end to end encrypted alternatives which have all the same features (https://meet.jit.si/ for zoom alternative and Signal for the private messenger app. I highly recommend both. Let’s get their network effects going!). It is the same for Bitcoin. People don’t want to have to learn about or set up a wallet for alternative options. People like what is familiar and what other people use. Nobody wants to be “that guy” who makes you download yet another app and account you have to remember the password/private key for. In the same way, Enterprises don’t want to have to create a bridge between their existing systems and a dozen different blockchains. Developers don’t want to have to create DeFi money legos from scratch on a new chain if they can just plug in to existing services like Uniswap. Likewise, users don’t want to have to download another browser extension to use DApps on another chain if they already use Ethereum. I know personally I have refrained from investing in altcoins because I would have to install another app on my hardware wallet or remember another recovery phrase.
Overthrowing Ethereum’s network effect is one hell of a big task these days. Time is running out for the ETH killers.

Ethereum is the most decentralised and provably neutral smart contract platform

Ethereum is also arguably the most decentralised and provably neutral smart contract platform (except for maybe Ethereum Classic on the neutrality part). Unlike some smart contract platforms, you can’t round up everyone at the Ethereum Foundation or any select group of people and expect to be able to stop the network. Not only this, but the Ethereum foundation doesn’t have the ability to print more ETH or push through changes as they wish like some people would lead you on to believe. The community would reject detrimental EIPs and hard fork. Ever since the DAO hack, the Ethereum community has made it clear that it will not accept EIPs which attempt to roll back the chain even to recover hacked funds (see EIP-999).
Even if governments around the world wanted to censor the Ethereum blockchain, under ETH 2.0’s proof of stake, it would be incredibly costly and would require a double digit percentage of the total ETH supply, much of which would be slashed (meaning they would lose it) as punishment for running dishonest validator nodes. This means that unlike with proof of work where a 51% attacker can keep attacking the network, under proof of stake, an attacker can only perform the attack a couple of times before they lose all of their ETH. This makes attacks much less financially viable than it is on proof of work chains. Network security is much more than what I laid out above and I am far from an expert but the improved resistance to 51% attacks which PoS provides is significant.
Finally, with the US dollar looking like it will lose its reserve currency status and the existing wire transfer system being outdated, superpowers like China won’t want to use US systems and the US won’t want to use a Chinese system. Enter Ethereum, the provably neutral settlement layer where the USA and China don’t have to trust each other or each other’s banks because they can trust Ethereum. While it may sound like a long shot, it does make sense if Ethereum hits a multi-trillion dollar market cap that it is the most secure and neutral way to transfer value between these adversaries. Not to mention if much of the world’s commerce were to be settled in the same place - on Ethereum - then it would make sense for governments to settle on the same platform.

ETH distribution is decentralised

Thanks to over 5 years of proof of work - a system where miners have to sell newly minted ETH to pay for electricity costs - newly mined ETH has found its way into the hands of everyday people who buy ETH off miners selling on exchnages. As pointed out by u/AdamSC1 in his analysis of the top 10K ETH addresses (I highly recommend reading this if you haven’t already), the distribution of ETH is actually slightly more decentralised than Bitcoin with the top 10,000 ETH wallets holding 56.70% of ETH supply compared to the top 10,000 Bitcoin wallets which hold 57.44% of the Bitcoin supply. This decentralised distribution means that the introduction of staking won’t centralise ETH in the hands of a few wallets who could then control the network. This is an advantage for ETH which many proof of stake ETH killers will never have as they never used PoW to distribute funds widely throughout the community and these ETH killers often did funding rounds giving large numbers of tokens to VC investors.

The community

Finally, while I may be biased, I think that Ethereum has the friendliest community. Anecdotally, I find that the Ethereum developer community is full of forward thinking people who want to make the world a better place and build a better future, many of whom are altruistic and don’t always act in their best interests. Compare this to the much more conservative, “at least we’re safe while the world burns” attitude which many Bitcoiners have. I don’t want to generalise too much here as the Bitcoin community is great too and there are some wonderful people there. But the difference is clear if you compare the daily discussion of Bitcoin to the incredibly helpful and welcoming daily discussion of EthFinance who will happily answer your noob questions without calling you an idiot and telling you to do you own research (there are plenty more examples in any of the daily threads). Or the very helpful folks over at EthStaker who will go out of their way to help you set up an ETH 2.0 staking node on the testnets (Shoutout to u/superphiz who does a lot of work over in that sub!). Don’t believe me? Head over to those subs and see for yourself.
Please don’t hate on me if you disagree about which project has the best community, it is just my very biased personal opinion and I respect your opinion if you disagree! :)

TL;DR:

submitted by Tricky_Troll to ethtrader [link] [comments]

A detailed summary of every reason why I am bullish on ETH.

The following will be a list of the many reasons why I hold and am extremely bullish on ETH.

This is an extremely long post. If you just want the hopium without the detail, read the TL;DR at the bottom.

ETH 2.0

As we all know, ETH 2.0 phase 0 is right around the corner. This will lock up ETH and stakers will earn interest on their ETH in return for securing the network. Next comes phase 1 where the ETH 2 shards are introduced, shards are essentially parallel blockchains which are each responsible for a different part of Ethereum’s workload, think of it like a multi-core processor vs a single core processor. During phase 1, these shards will only act as data availability layers and won’t actually process transactions yet. However, their data can be utilised by the L2 scaling solution, rollups, increasing Ethereum’s throughput in transactions per second up to 100,000 TPS.
After phase 1 comes phase 1.5 which will move the ETH 1.0 chain into an ETH 2 shard and Ethereum will be fully secured by proof of stake. This means that ETH issuance will drop from around 5% per year to less than 1% and with EIP-1559, ETH might become a deflationary asset, but more on that later.
Finally, with ETH 2.0 phase two, each shard will be fully functional chains. With 64 of them, we can expect the base layer of Ethereum to scale around 64x, not including the massive scaling which comes from layer 2 scaling solutions like rollups as previously mentioned.
While the scaling benefits and ETH issuance reduction which comes with ETH 2.0 will be massive, they aren’t the only benefits. We also get benefits such as increased security from PoS compared to PoW, a huge energy efficiency improvement due to the removal of PoW and also the addition of eWASM which will allow contracts to be programmed in a wide range of programming languages, opening the floodgates for millions of web devs who want to be involved in Ethereum but don’t know Ethereum’s programming language, Solidity.

EIP-1559 and ETH scarcity

As I covered in a previous post of mine, ETH doesn’t have a supply cap like Bitcoin. Instead, it has a monetary policy of “minimum viable issuance”, not only is this is a good thing for network security, but with the addition of EIP-1559, it leaves the door open to the possibility of ETH issuance going negative. In short, EIP-1559 changes the fee market to make transaction prices more efficient (helping to alleviate high gas fees!) by burning a variable base fee which changes based on network usage demand rather than using a highest bidder market where miners simply include who pays them the most. This will result in most of the ETH being paid in transaction fees being burned. As of late, the amount which would be burned if EIP-1559 was in Ethereum right now would make ETH a deflationary asset!

Layer 2 Scaling

In the mean time while we are waiting for ETH 2.0, layer 2 scaling is here. Right now, projects such as Deversifi or Loopring utilise rollups to scale to thousands of tx/s on their decentralised exchange platforms or HoneySwap which uses xDai to offer a more scalable alternative to UniSwap. Speaking of which, big DeFi players like UniSwap and Synthetix are actively looking into using optimistic rollups to scale while maintaining composability between DeFi platforms. The most bullish thing about L2 scaling is all of the variety of options. Here’s a non exhaustive list of Ethereum L2 scaling solutions: - Aztec protocol (L2 scaling + privacy!) - ZKSync - Loopring - Raiden - Arbitrum Rollups - xDai - OMGNetwork - Matic - FuelLabs - Starkware - Optimism - Celer Network - + Many more

DeFi and Composability

If you’re reading this, I am sure you are aware of the phenomena which is Decentralised Finance (DeFi or more accurately, open finance). Ethereum is the first platform to offer permissionless and immutable financial services which when interacting with each other, lead to unprecedented composability and innovation in financial applications. A whole new world of possibilities are opening up thanks to this composability as it allows anyone to take existing pieces of open source code from other DeFi projects, put them together like lego pieces (hence the term money legos) and create something the world has never seen before. None of this was possible before Ethereum because typically financial services are heavily regulated and FinTech is usually proprietary software, so you don’t have any open source lego bricks to build off and you have to build everything you need from scratch. That is if what you want to do is even legal for a centralised institution!
Oh, and if you think that DeFi was just a fad and the bubble has popped, guess again! Total value locked in DeFi is currently at an all time high. Don’t believe me? Find out for yourself at: https://defipulse.com

NFTs and tokeniation

NFTs or “Non-Fungible Tokens” - despite the name which may confuse a layman - are a basic concept. They are unique tokens with their own unique attributes. This allows you to create digital art, human readable names for your ETH address (see ENS names and unstoppable domains), breedable virtual collectible creatures like crypto kitties, ownable in game assets like Gods Unchained cards or best of all in my opinion, tokenised ownership of real world assets which can even be split into pieces (this doesn’t necessarily require an NFT. Fungible tokens can be/are used for some of the following use cases). This could be tokenised ownership of real estate (see RealT), tokenised ownership of stocks, bonds and other financial assets (which by the way makes them tradable 24/7 and divisible unlike through the traditional system) or even tokenised ownership of the future income of a celebrity or athlete (see when NBA Star Spencer Dinwiddie Tokenized His Own NBA Contract.

Institutional Adoption

Ethereum is by far the most widely adopted blockchain by enterprises. Ethereum’s Enterprise Ethereum Alliance (EEA) is the largest blockchain-enterprise partnership program and Ethereum is by far the most frequently leveraged blockchain for proof of concepts and innovation in the blockchain space by enterprises. Meanwhile, there are protocols like the Baseline protocol which is a shared framework which allows enterprises to use Ethereum as a common frame of reference and a base settlement layer without having to give up privacy when settling on the public Ethereum mainnet. This framework makes adopting Ethereum much easier for other enterprises.

Institutional Investment

One of Bitcoin’s biggest things it has going for it right now is the growing institutional investment. In case you were wondering, Ethereum has this too! Grayscale offers investment in the cryptocurrency space for financial institutions and their Ethereum fund has already locked up more than 2% of the total supply of ETH. Not only this, but as businesses transact on Ethereum and better understand it, not only will they buy up ETH to pay for their transactions, but they will also realise that much like Bitcoin, Ethereum is a scarce asset. Better yet, a scarce asset which offers yield. As a result, I expect to see companies having ETH holdings become the norm just like how Bitcoin is becoming more widespread on companies’ balance sheets.

The state of global markets

With asset prices in almost every asset class at or near all-time highs and interest rates lower than ever and even negative in some cases, there really aren’t many good opportunities in the traditional financial system right now. Enter crypto - clearly the next evolution of financial services (as I explained in the section on DeFi earlier in this post), with scarce assets built in at the protocol layer, buying BTC or ETH is a lot like buying shares in TCP/IP in 1990 (that is if the underlying protocols of the internet could be invested in which they couldn’t). Best of all, major cryptos are down from their all-time highs anywhere between 35% for BTC or 70% for ETH and much more for many altcoins. This means that they can significantly appreciate in value before entering uncharted, speculative bubble territory.
While of course we could fall dramatically at any moment in the current macro financial conditions, as a longer term play, crypto is very alluring. The existing financial system has shown that it is in dire need of replacing and the potential replacement has started rearing its head in the form of crypto and DeFi.

Improvements in user onboarding and abstracting away complexity

Ethereum has started making huge leaps forward in terms of usability for the end user. We now have ENS names and unstoppable domains which allow you to send ETH to yournamehere.ETH or TrickyTroll.crypto (I don’t actually have that domain, that’s just an example). No longer do you have to check every character of your ugly hexadecimal 0x43AB96D… ETH address to ensure you’re sending your ETH to the right person. We also have smart contract wallets like Argent wallet or the Gnosis safe. These allow for users to access their wallets and interact with DeFi self-custodially from an app on their phone without having to record a private key or recovery phrase. Instead, they offer social recovery and their UI is straight forward enough for anyone who uses a smart phone to understand. Finally, for the more experienced users, DApps like Uniswap have pretty, super easy to use graphical user interfaces and can be used by anyone who knows how to run and use a browser extension like Metamask.

The lack of an obvious #1 ETH killer

One of Ethereum’s biggest threats is for it to be overthrown by a so-called “Ethereum killer” blockchain which claims to do everything Ethereum can do and sometimes more. While there are competitors which are each formidable to a certain extent such as Polkadot, Cardano and EOS, each have their own weaknesses. For example, Polkadot and Cardano are not fully operational yet and EOS is much more centralised than Ethereum. As a result, none of these competitors have any significant network effects just yet relative to the behemoth which is Ethereum. This doesn’t mean that these projects aren’t a threat. In fact, I am sure that projects like Polkadot (which is more focused on complimenting Ethereum than killing it) will take a slice out of Ethereum’s pie. However, I am still very confident that Ethereum will remain on top due to the lack of a clear number 2 smart contract platform. Since none of these ETH killers stands out as the second place smart contract platform, it makes it much harder for one project to create a network effect which even begins to threaten Ethereum’s dominance. This leads me onto my next reason - network effects.

Network effects

This is another topic which I made a previous post on. The network effect is why Bitcoin is still the number one cryptocurrency and by such a long way. Bitcoin is not the most technologically advanced cryptocurrency. However, it has the most widespread name recognition and the most adoption in most metrics (ETH beats in in some metrics these days). The network effect is also why most people use Zoom and Facebook messengeWhatsApp despite the existence of free, private, end to end encrypted alternatives which have all the same features (https://meet.jit.si/ for zoom alternative and Signal for the private messenger app. I highly recommend both. Let’s get their network effects going!). It is the same for Bitcoin. People don’t want to have to learn about or set up a wallet for alternative options. People like what is familiar and what other people use. Nobody wants to be “that guy” who makes you download yet another app and account you have to remember the password/private key for. In the same way, Enterprises don’t want to have to create a bridge between their existing systems and a dozen different blockchains. Developers don’t want to have to create DeFi money legos from scratch on a new chain if they can just plug in to existing services like Uniswap. Likewise, users don’t want to have to download another browser extension to use DApps on another chain if they already use Ethereum. I know personally I have refrained from investing in altcoins because I would have to install another app on my hardware wallet or remember another recovery phrase.
Overthrowing Ethereum’s network effect is one hell of a big task these days. Time is running out for the ETH killers.

Ethereum is the most decentralised and provably neutral smart contract platform

Ethereum is also arguably the most decentralised and provably neutral smart contract platform (except for maybe Ethereum Classic on the neutrality part). Unlike some smart contract platforms, you can’t round up everyone at the Ethereum Foundation or any select group of people and expect to be able to stop the network. Not only this, but the Ethereum foundation doesn’t have the ability to print more ETH or push through changes as they wish like some people would lead you on to believe. The community would reject detrimental EIPs and hard fork. Ever since the DAO hack, the Ethereum community has made it clear that it will not accept EIPs which attempt to roll back the chain even to recover hacked funds (see EIP-999).
Even if governments around the world wanted to censor the Ethereum blockchain, under ETH 2.0’s proof of stake, it would be incredibly costly and would require a double digit percentage of the total ETH supply, much of which would be slashed (meaning they would lose it) as punishment for running dishonest validator nodes. This means that unlike with proof of work where a 51% attacker can keep attacking the network, under proof of stake, an attacker can only perform the attack a couple of times before they lose all of their ETH. This makes attacks much less financially viable than it is on proof of work chains. Network security is much more than what I laid out above and I am far from an expert but the improved resistance to 51% attacks which PoS provides is significant.
Finally, with the US dollar looking like it will lose its reserve currency status and the existing wire transfer system being outdated, superpowers like China won’t want to use US systems and the US won’t want to use a Chinese system. Enter Ethereum, the provably neutral settlement layer where the USA and China don’t have to trust each other or each other’s banks because they can trust Ethereum. While it may sound like a long shot, it does make sense if Ethereum hits a multi-trillion dollar market cap that it is the most secure and neutral way to transfer value between these adversaries. Not to mention if much of the world’s commerce were to be settled in the same place - on Ethereum - then it would make sense for governments to settle on the same platform.

ETH distribution is decentralised

Thanks to over 5 years of proof of work - a system where miners have to sell newly minted ETH to pay for electricity costs - newly mined ETH has found its way into the hands of everyday people who buy ETH off miners selling on exchnages. As pointed out by u/AdamSC1 in his analysis of the top 10K ETH addresses (I highly recommend reading this if you haven’t already), the distribution of ETH is actually slightly more decentralised than Bitcoin with the top 10,000 ETH wallets holding 56.70% of ETH supply compared to the top 10,000 Bitcoin wallets which hold 57.44% of the Bitcoin supply. This decentralised distribution means that the introduction of staking won’t centralise ETH in the hands of a few wallets who could then control the network. This is an advantage for ETH which many proof of stake ETH killers will never have as they never used PoW to distribute funds widely throughout the community and these ETH killers often did funding rounds giving large numbers of tokens to VC investors.

The community

Finally, while I may be biased, I think that Ethereum has the friendliest community. Anecdotally, I find that the Ethereum developer community is full of forward thinking people who want to make the world a better place and build a better future, many of whom are altruistic and don’t always act in their best interests. Compare this to the much more conservative, “at least we’re safe while the world burns” attitude which many Bitcoiners have. I don’t want to generalise too much here as the Bitcoin community is great too and there are some wonderful people there. But the difference is clear if you compare the daily discussion of Bitcoin to the incredibly helpful and welcoming daily discussion of EthFinance who will happily answer your noob questions without calling you an idiot and telling you to do you own research (there are plenty more examples in any of the daily threads). Or the very helpful folks over at EthStaker who will go out of their way to help you set up an ETH 2.0 staking node on the testnets (Shoutout to u/superphiz who does a lot of work over in that sub!). Don’t believe me? Head over to those subs and see for yourself.
Please don’t hate on me if you disagree about which project has the best community, it is just my very biased personal opinion and I respect your opinion if you disagree! :)

TL;DR:

submitted by Tricky_Troll to ethfinance [link] [comments]

The greatest wealth transfer of this century! An analysis: British-US-Chinese Empires: Gold, Silver, Bitcoin, Ethereum!

"Inflation makes you pay 50 dollars for the 20 dollar haircut you used to get for 5 dollars when you had hair!"
Let's embark on a journey that made the United States the number 1 economy of the world.

1. Despite the British Empire's claim that it would for ever remain the leading empire,history can serve as a harbinger for what's to come...

At the peak of its power, in 1913, "the empire on which the sun never sets", controlled 25% of the planet's land mass and about the same percentage of the world's population. Britain was both the naval an imperial power of the 19th century, and between 1812-1914, its dominance resulted in relative peace in Europe and the rest of the world. The industrial revolution transformed Britain into the workshop of the world.
By the start of the 20th century things changed as both Germany and the United States started to challenge Britain's economic and influential leadership. As often happened during human history such challenging lead to war and although Britain achieved its largest territorial influence after WW1, the war had destroyed much of its economic strength, with losses in industrial and military power marking the begin of its demise.
During WW2, Japan occupied Britain's colonies, and after WW2, India, Britain's most valuable and populous possession, achieved independence. Much of the British Empire's influence is now enshrined in the Commonwealth Charter, stating shared values like democracy, human rights and the rule of law.
The United Kingdom's pound sterling was its world's reserve currency during its reign and by controlling the supply of money, Britain was able to influence its global power.
"Permit me to issue and control the money of a nation, and I care not who makes its laws!" Mayer Amschel Rothschild

2. The US Empire repeats this blueprint by claiming the U.S. Dollar's reserve currency status as its birthright!

The Federal Reserve Act.
The Panic of 1907 triggered many American's belief that The Federal Reserve Act, passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913, was necessary for financial and economic stability. The law created the Federal Reserve System, the central banking system of the United States.
The Bretton Woods System.
The FED ended immobile reserve issues and the inelastic currency problems and successfully internationalized the U.S Dollar as the global reserve currency. The usage of the prior nationally used U.S. Dollar expanded a first time when the Allies agreed to the terms of the Bretton Woods System, establishing the rules for commercial as well as financial regulations among the United States and its allies. Canada, Western Europe, Australia and Japan accepted the U.S. Dollar, which was backed by a gold exchange standard, making the U.S. Dollar "as good as gold". This was only possible because the United States controlled two thirds of the world's gold reserves.
Soviet representatives, who claimed that institutions like the IMF and the International Bank for Reconstruction and Development (IBRD) were Wall Street branches, didn't participate in Bretton Woods and later proved to be right, as the United States printed too much money (not backed by its gold reserves) to wage war on Vietnam, destroying a big part of the value of the U.S. Dollars held by its allies, due to the inflation of the U.S. Dollar money supply.
Yet, the initial demand for U.S. dollars created the American way of life: a consumer driven economy fueled by products made outside the U.S. in return for U.S. Dollars. As the Allied countries couldn't really buy any "Made in America"-products, due to the fact that the United States' elites rather outsourced their manufacturing, they instead invested their hard labor into U.S. Treasuries.
On August 1971, President Richard Nixon announced the unilateral cancellation of the direct international convertibility of the United States dollar to gold, in a response to halt the Allied countries' continuous attempts to exchange their U.S. Dollars for Gold. By 1973, the Bretton Woods system was replaced by the current freely floating fiat currency system.
The petro dollar system.
The second wave of U.S. Dollar adoption was the result of the petro dollar, making the global trade of oil U.S. Dollar denominated. Every country on this planet needed and still needs oil to operate and grow its economy, creating an enormous growth in U.S. Dollar demand and like mentioned before, those dollars had to be earned. Especially China served the United States consumer model by producing almost everything Americans can buy in Wall Mart and other stores. By relying on the U.S. Dollar reserve currency status, the American elites have made the mistake of outsourcing manufacturing to China, as often predicted by Donald Trump in the 1980's. The y figured it was easier to just print wealth.
The tradewar.
President Donald Trump, decided it was time to bring jobs back to the U.S. and started an ongoing trade war with China, the country that supplied the U.S. consumer driven economy, and proud owner of $1.07 trillion in Treasury holdings. The trade war has negatively impacted the economies of both the United States and China and will most likely result in the decoupling of both economies.
What is to come? My personal insights.
I see huge problems for the U.S. and the rest of the western liberal democracies. But especially the United States, who's currency amounts to no less than 60% of all the world's reserve assets, is vulnerable if and when China who only accounts for 1 or 2 %, says it is time for change. Most likely we will experience another banking crisis, with or without Covid-19, and unfortunately a bigger one when compared to the 2008 dissaster. Did you know that the global debt tripled since then? Many economists and politicians advocate the end of the U.S. Dollar reserve currency system and predict a reset. Every financial system has a limited lifespan similar to a human live: it is created, it grows, it matures, and unfortunately, it ages, weakens and dies. It happened to the Brittish Pound Sterling, and I am afraid that the days of this financial hegemony are numbered as well.
And I did write "afraid", why?
History tells us that these transition periods are particularly dangerous and have often led to full-blown military conflicts if not world wars. The current wealth transfer, the result of manufacturing outsourcing to mainland China, impoverished the United States and destroyed its middle class. President Donald Trump's analysis that the U.S. needs a strong manufacturing base is correct, yet without its allies the United States will not be able to turn the tide.
It took China decades to build its manufacturing base, and President Trump doesn't have the privilege of having the political luxury to design five year plans, as the United States capitalistic and political model specializes more on presidential campaigning and less on economic planning, which is exactly China's strength.

3. The Chinese 'digital' empire.

China is ideally positioned to become the new global power: it produces many of our products and dominates most supply chains. It has been hoarding gold and mines most of the Bitcoin. It might just have the right reserve assets to back its DCEP, the digital Yuan, which will be pilot tested during the 2022 Winter Olympics hosted by China. Despite the fact that the United States and other western nations might not want to adopt the Yuan or allow it to be part of the world's reserve assets, China can demand payment in Yuan for its products. It's that simple! This is why outsourcing is such as stupid economic voluntarily yet fatal policy. If you only print money and don't produce goods, how long will the world play ball?
One of the results of Trump's trade war is that China and other countries such as Russia and Iran no longer want to be vulnerable to U.S. sanctions that come in the shape of being denied access to the financial system through Swift. The United States can indeed destroy a big part of Iran's economy, but Iran is now becoming a big cryptocurrency player. In other words, bullying those countries might work in the short-term, but in the long-term they will simply adopt a new standard: and I believe that the Yuan will likely play a major role in the financial system they will adopt.
This trend means that the expansion of the demand in U.S. Dollars will stop and reverse, when countries no longer want to use the currency whose issuer can economically destroy them through sanctions. The alternatives for such countires are cryptocurrencies like Bitcoin, Ethereum and many others, national CBDC's (Central Bank Digital Currencies), and the adoption of the digital Yuan.
This digital Yuan will be attached to the One Belt, One road initiative, finding adoption whilst developing huge infrastructure projects that will lead to a Eurasian trading zone. If the U.S. Military leaves the Middle East, as Trump brings home troops, this will create the right conditions for China to emerge as the victor.

4. Surveillance Capitalism - Insights on the DCEP (Digital Currency Electronic Payment, DC/EP):

  1. This centralized digital financial system works on blockchain and cryptographic principles and aims to increase the circulation of the RMB, in the hope it can become a reserve currency like the U.S. Dollar.
  2. Created and sanctioned by the Chinese Government, it is the only legal digital currency in China.
  3. The system offers Chinese regulators better monitoring abilities and will be an efficient tool against anonymous counterfeiting, money laundering and illegal financing. At the same time it reduces costs involved in maintaining and recycling bank notes and coins.
  4. As mentioned above, China aims to bypass Swift, which it regards to be a U.S. entity, and will be able to collect real-time data related to money creation, bookkeeping, essential information for the implementation of monetary policies.
  5. The pilot institutions for DCEP, China Construction Bank, Agricultural Bank of China, Bank of China and Industrial and Commercial Bank of China, will serve as a production test for China's new currency system, after which the DCEP will be distributed to large fintech companies such as Tencent and Alibaba to be used in WeChat Pay and AliPay. Transfers will not go through bank accounts, but through electronic wallets.
  6. By mandating that all merchants who accept digital payments must accept DCEP, the DECP will become the most accepted digital currency in the world.

5. Sings of hope.

If the United States adopts blockchain and issues a CBDC (Central Bank Digital Currency) backed by Bitcoin, they will have a reasonable chance to offer the western democracies a new type of dollar standard that can be an anchor versus the coming RMB. If not, I fear the worst is yet to come for the U.S. Dollar and its economy.
Many smart American economists and Wall Street goeroe's have finally figured out the remarkable strength of Bitcoin, the world's first and most favorite digital form of gold.
Some of the smartest investment capitalists like Ray Dalio and Warren Buffet have allocated more money into gold, a clear sign of trouble. Bitcoin might be a step too far for Warren Buffet, but rest assure that Wall Street investment management companies have figured it out by now, have you?
You can expect more institutions to allocate a % of their portfolio's wealth into Bitcoin and other cryptocurrencies, as a hedge against the systemic risk in our global financial system, which will inevitable start feeling the effects of the trillions that have been printed.
"Inflation makes you pay 50 dollars for the 20 dollar haircut you used to get for 5 dollars when you had hair!"
submitted by O_My_Crypto to Bitcoin [link] [comments]

How Data Centralization Ends by 2030

Link to Coindesk: https://www.coindesk.com/data-centralization-2030
The next 10 years will witness the systematic manipulation of human life at a scale unrivaled in history. For all the recent controversies over privacy and surveillance, the real threat is ahead of us.
Unless new approaches to online identity and data management take hold, both governments and private actors will move inexorably from knowing you to shaping you. Blockchain-enabled decentralization will develop as the only viable response to the iron logic of data centralization.
Blockchain believers often talk as though today’s early-adopter use cases, such as cryptocurrency trading and decentralized finance, will lead straight to mass market adoption. As the inevitable ‘killer apps’ appear, so the story goes, blockchain-based systems will conquer the mainstream. One might imagine that we’ll all soon be trading digital collectibles and relying on token-curated registries for accurate information. Governments will lose control over money, and blockchain-based smart contracts will replace court-enforced legal agreements. Uber, Facebook and the banks will wither away in the face of tokenized alternatives.
This narrative is wishful thinking. In most markets, intermediaries will endure for the same reasons they always have: they provide value. The Ubers and Facebooks – and yes, even the banks – tame complexity and produce coherent, convenient, de-risked experiences that no decentralized community can ever match. Early adopters use blockchain-based systems for ideological reasons or to get rich on cryptocurrency speculation. The billions behind them in the mainstream will not. The lock-in power of network effects creates high barriers for alternative economic systems. And the need for trust disqualifies decentralized solutions that are havens for criminals, incapable of effective compliance or vulnerable to catastrophic attacks – which, regrettably, means virtually all of them today.
Truly decentralized blockchain systems will reach critical mass not out of hope but out of necessity. Powerful actors and mainstream users will adopt blockchain as a counterbalance to digital behavior-shaping by governments and private platforms. Dramatic innovations such as decentralized autonomous organizations (DAOs), which manage activity automatically through smart contracts, will become significant at the end point of this process, once the foundations are in place.
Big data and artificial intelligence, pitched as freeing us from human frailties, are becoming powerful tools for social control. This is occurring along two parallel tracks: surveillance authoritarianism and surveillance capitalism. Through massive data collection and aggregation, China’s social credit system envisions an airtight regime of perfect compliance with legal and social obligations. Many other governments, including liberal democracies, are adopting similar techniques. The potential for catching terrorists, child predators and tax evaders is simply too appealing – whether it’s the real objective or a cover story.
"WHAT WE NEED IS A TECHNOLOGY THAT ALLOWS FOR SHARING WITHOUT GIVING UP CONTROL. FORTUNATELY, IT EXISTS."
Meanwhile, private digital platforms are using troves of data to shape online experiences consistent with their business models. What you see online is, increasingly, what maximizes their profits. Companies such as Google, Amazon, Tencent and Alibaba can build the best algorithms because they have the most data. And they aren’t interested in sharing.
Regulatory interventions will fail to derail the self-reinforcing momentum for ever more centralized data repositories. They may even accelerate it by creating layers of compliance obligations that only the largest firms can meet. Europe’s General Data Protection Regulation (GDPR) actually increased the market share of Google and Facebook in online advertising, and so it is not surprising to see such incumbents actively welcoming the prospect of more regulation.
The only lasting solution is to change the economics of data, not to impose private property rights; that would accelerate the market forces promoting data centralization. Giving you “ownership” over your data means giving you legal cover to sell it, by clicking “OK” to a one-sided contract you’ll never read. The problem is not ownership, but control. In today’s algorithm-driven world, sharing and aggregating data increases its value, producing better models and better predictions. The trouble is that once we share, we lose control to centralized data hogs.
What we need is a technology that allows for sharing without giving up control. Fortunately, it exists. It is called blockchain. Blockchain technology is, fundamentally, a revolution in trust. In the past, trust required ceding control to counter parties, government authorities or intermediaries who occupied the essential validating roles in transaction networks. Blockchain allows participants to trust the results they see without necessarily trusting any actor to verify them. That’s why major global firms in health care, finance, transportation, international trade and other fields are actively developing cross-organizational platforms based on blockchain and related technologies. No database can provide a trusted view of information across an entire transactional network without empowering a central intermediary. Blockchain can.
Adopting any new platform at scale, along with the necessary software integration and process changes, takes time – especially when the technology is so immature. But today’s incremental deployments will serve as proofs-of-concept for the more radical innovations to come. Chinese blockchain networks are already managing tens of billions of dollars of trade finance transactions. Pharmaceutical companies are tracking drugs from manufacturing to pharmacies using the MediLedger platform. Boeing is selling a billion dollars of airline parts on Honeywell’s blockchain-based marketplace. Car insurance companies are processing accident claims in a unified environment for the first time. These and other enterprise consortia are doing the essential technical and operational groundwork to handle valuable transactions at scale.
The need for transformative approaches to data will become acute in the next five years. Every week, it seems, another outrage comes to light. For instance, users who posted photos under Creative Commons licenses or default-public settings were shocked they were sucked into databases used to train facial-recognition systems. Some were even used in China’s horrific campaign against Uighur Muslims. Clearview AI, an unknown startup, scraped three billion social media images for a face identification tool it provided, with no oversight, to law enforcement, corporations and wealthy individuals. The examples will only get worse as firms and nations learn new ways to exploit data. The core problem is there is no way to share information while retaining control over how it gets used.
Blockchain offers a solution. It will be widely adopted because, behind the scenes, the current data economy is reaching its breaking point. Outrage over abuses is building throughout the world. The immensely valuable online advertising economy attracts so much fraud that the accuracy of its numbers is coming into question. Communities are looking for new ways to collaborate. Governments are realizing the current system is an impediment to effective service delivery.
The technologist Bill Joy famously stated that no matter how many geniuses a company employs, most smart people work somewhere else. The same is true of data. Even giants such as Google, Facebook and Chinese government agencies need to obtain information from elsewhere in their quest for perfect real-time models of every individual. These arrangements work mostly through contracts and interfaces that ease the flow of data between organisations. As Facebook discovered when Cambridge Analytica extracted massive quantities of user data for voter targeting, these connection points are also vulnerabilities. As tighter limits are placed on data-sharing, even the big players will look for ways to rebuild trust.
The blockchain alternative will begin innocuously. Government authorities at the subnational level are deploying self-sovereign identity to pull together information securely across disparate data stores. This technology allows anyone to share private information in a fine-grained way while still retaining control. You shouldn’t have to reveal your address to confirm your age, or your full tax return to verify your stated income. The necessary cryptography doesn’t require a blockchain, but the desired trust relationships do.
Once people have identities that belong to them, not to banks or social media services, they will use them as the basis for other interactions. Imagine a world where you never need to give a third-party unnecessary data to log into a website, apply for a job, refinance a mortgage or link your bank account to a mobile payment app. Where you can keep your personal and professional profiles completely separate if you choose. Where you can be confident in the reputation of a car mechanic or an Airbnb or a product made in China without intermediaries warping ratings for their own gain. The convenience of user experiences we enjoy within the walled gardens of digital platforms will become the norm across the vastness of independent services.
We will gradually come to view access to our personal information as an episodic, focused interaction, rather than fatalistically accepting an open season based on preliminary formal consent. Major hardware companies such as Apple, which don’t depend on targeted advertising, will build decentralized identity capabilities into their devices. They will add cryptocurrency wallets linked behind the scenes to existing payment and messaging applications. Stablecoins – cryptocurrencies pegged to the dollar, pound or other assets – will help tame volatility and facilitate movement between tokens and traditional currencies. Privately created stablecoins will coexist with central bank digital currencies, which are under development in most major countries throughout the world.
Once this baseline infrastructure is widely available, the real changes will start to occur. DAOs will begin to attract assets as efficient ways for communities to achieve their goals. These entities won’t replace state-backed legal systems; they will operate within them. As numerous controversies, crashes and hacks have already demonstrated, software code is too rigid for the range of situations in the real world, absent backstops for human dispute resolution. Fortunately, there are solutions under development to connect legal and digital entities, such as OpenLaw’s Limited Liability Autonomous Organisations and Mattereum’s Asset Passports.
Today, the legal machinery of contracts strengthens the power of centralized platforms. User agreements and privacy policies enforce their control over data and limit individuals’ power to challenge it. Blockchain-based systems will flip that relationship, with the legal system deployed to protect technology-backed user empowerment. Large aggregations of information will be structured formally as “data trusts” that exercise independent stewardship over assets. They will operate as DAOs, with smart contracts defining the terms of data usage. Users will benefit from sharing while retaining the ability to opt out.
"DATA WILL BE TREATED NOT AS PROPERTY BUT AS A RENEWABLE RESOURCE, WITH THE COMPETITION FOR ECONOMIC VALUE IN THE APPLICATIONS BUILT ON TOP OF IT."
Many significant applications require aggregation of data to drive algorithms, including traffic monitoring (and eventually autonomous vehicles); insurance and lending products serving previously excluded or overcharged customer groups; diagnosis and drug dosing in health care; and demand forecasting for economic modeling. Collective action problems can prevent constructive developments even when rights in data are well defined. DAOs will gradually find market opportunities, from patronage of independent artists to mortgage securitization.
The big data aggregators won’t go away. They will participate in the decentralized data economy because it provides benefits for them as well, cutting down on fraud and reinforcing user trust, which is in increasingly scarce supply. Over time, those who provide benefits of personalization and targeting will more and more be expected to pay for it. A wide range of brokering and filtering providers will offer users a choice of analytics, some embedded in applications or devices and some providing services virtually in the cloud. Governments will focus on making data available and defining policy objectives for services that take advantage of the flow of information. Data will be treated not as property but as a renewable resource, with the competition for economic value in the applications built on top of it.
The most powerful benefit of open data built on blockchain-based decentralised control is that it will allow for new applications we can’t yet envision. If startups can take advantage of the power of data aggregation that today is limited to large incumbents, they are bound to build innovations those incumbents miss.
The surveillance economy took hold because few appreciated what was happening with their data until it was too late. And the cold reality is that few will accept significantly worse functionality or user experience in return for better privacy. That is why the blockchain-powered revolution will make its way up from infrastructural foundations of digital identity and hardware, rather than down from novel user-facing applications.
This vision is far from certain to be realized. Business decisions and government policies could make blockchain-based data decentralization more or less likely. The greatest reason for optimism is that the problem blockchain addresses – gaining trust without giving up control – is becoming ever more critical. The world runs on trust. Blockchain offers hope for recasting trust in the networked digital era.
submitted by BlockDotCo to u/BlockDotCo [link] [comments]

Stablecoins Are Not as Safe as You Think. How Your USDT, PAX, BUSD Get Frozen in a Moment

Stablecoins Are Not as Safe as You Think. How Your USDT, PAX, BUSD Get Frozen in a Moment
Being created on the basis of blockchain, stablecoins were considered to be a safe haven for investors… until recently. Why is their immunity elusive and how does the Financial Action Task Force (FATF) plan to control them?
Established in 1989 by the G7, the FATF inter-governmental organization develops policies to resist money laundering and financing of terrorism. It sets standards and implements legal and regulatory measures to combat illegal financial transactions.
They developed recommendations for the monitoring of money laundering and keep revising them regularly. In case of non-compliance, law enforcement is executed via regional financial organizations. As of 2019, there are 39 full members of FATF, including the USA, UK, Australia, most EU countries, Singapore, India and the Russian Federation.
Since 1st July, the FATF organization has been headed by Marcus Pleyer. During the last FATF meeting, the new president expressed his concerns about global stablecoins and organizations that issue them. Although the organization had already dealt with these cryptocurrencies, it highlighted that, “it is essential to continue closely monitoring the ML/TF risks of so-called stablecoins, including anonymous peer-to-peer transactions via unhosted wallets”.
Is it ever possible to control crypto wallets that are not hosted on online exchanges? – you’d ask. We’re used to the fact that cryptocurrencies are outside the reach of banks and governments. However, when it comes to stablecoins, things are different.

It’s in the code

What makes stablecoins special is that they are pegging to fiat currency, for example, 1 TUSD = $1 USD. This means that such assets should be backed up by real money stored in the bank accounts of the issuing organization. Consequently, stablecoin creators need to comply with the requirements of the SEC, FATF and other controlling agencies, if they are to operate in the cryptocurrency sphere and be authorised to sell stablecoins. Transparent reports are not the only requirement, stablecoins must also provide the possibility of account blocking.
Surprisingly, this feature is implemented in each stablecoin. The experts from QDAO DeFi are covering several stablecoin protocols that enable this function.

OMNI-based USDT

Issued by Tether Limited, USDT is a stablecoin that was originally created to be worth $1 with each token backed by a $1 real fiat reserve. The currency was successfully promoted and added to major cryptocurrency exchanges but stayed a controversial asset. Despite the claims of Tether Limited, they failed to provide any contractual right or other legal claims to guarantee that USDT can be swapped for dollars or be redeemed.
In April 2019, Tether’s lawyers explained that each USDT was backed by only $0.74 in cash or equivalent assets. No audit of dollar collateral was done. A month before that, it changed the backing to include loans to affiliate companies. The scandal also involved the Bitfinex exchange that was accused of using USDT funds to cover $850 million in funds lost since 2018. They were also accused of manipulating USDT to push the BTC price.
Tether is available on five blockchains: Omni, Ehereum, EOS, Tron and Liquid. Only the latter does not have a freezing feature. Omni was the first protocol for USDT. Blocking of users’ accounts is possible, thanks to the following piece of code:

https://preview.redd.it/uqho45l33om51.png?width=690&format=png&auto=webp&s=c0feebdae086b0deeccde05278eaf3cc760f9e2b
Apparently, it’s used to blacklist addresses and contracts.

PAX

The concerns about PAX were centered around the notorious MMM BSC Ponzi scheme. Before the widespread adoption of DeFi services, it was the second-largest gas consumer after Ethereum. Out of 25,000 daily transactions, 5,000 were performed by MMM BSC. It was reported to be a scam but none of the accounts were frozen. Does it mean PAX lacked the resources to regulate illicit activities?
Evidently, not. The protocol code has a LAW ENFORCEMENT FUNCTIONALITY function that allows for the freezing/unfreezing of contracts or burning assets on blacklisted accounts. It turns out, anyone risks having their PAX coins destroyed during an investigation process while their accounts stay blocked.

History of frozen accounts

In 2019, the ZCash Foundation and Eric Wall conducted research on the privacy of stablecoins and revealed several frozen addresses. It’s not clear why exactly they were blocked. Most probably, it happened shortly after the exchange withdrawal – users took this action after witnessing platforms being hacked.

https://preview.redd.it/pkbruqm83om51.png?width=838&format=png&auto=webp&s=b068c5b8c5e5439892eaf5feefa3fbc93c694c8c
USDT was implicated at least twice in scandals to do with freezing. In April 2019, about $850 million in Tether dollars sent by Crypto Capital Corp. were frozen by a New York court. Tether and Btfinex were accused of participating in a cover-up to hide about $850 million worth in clients’ funds. By July 2020, Tether had frozen 40 Ethereum addresses with millions of USDT (some of them are shown in the screenshot above).
The Centre Consortium was the next to follow their lead; about a month ago, it blacklisted an address with USDC worth $100,000. That was done in response to law enforcement.
Yet, it’s not only Europe and the USA imposing control over cryptocurrencies. Since June 2020, the Chinese government managed to block several thousands of users’ bank accounts. It was done to resist illicit activities, especially money laundering. On some of those accounts, no activity had been detected for several months. Meanwhile, prior to April 2020, Chinese residents moved over $50 billion worth of crypto outside the country borders – more than is officially allowed (a maximum of $50,000 per person).
The authorities claim that USDT and other stablecoins are often used in illegal activities. Together with the People’s Bank of China (PBOC), they are developing new ways of investigating digital crimes and money laundering operations involving exchanges and crypto wallets. Local financial bureaus and police are working tight-lipped about investigating startups and crypto exchanges. And they are succeeding at it.
In July 2020, Chinese authorities confiscated BTC, ETH and USDT worth $15 million from people who allegedly ran a fake cryptocurrency scheme.
By the way, not only corporate accounts are being closed. One investor claims his account had been frozen after using yuan to purchase crypto. Also, users who transfer illegally obtained money outside of the mainland in large amounts are under suspicion. Does it mean the Chinese government has started tightening the screws on cryptocurrency users?

DAI, USDT on Liquid and USDQ are the main options for stablecoin deposits

So, where can you store your crypto assets? USDT on Liquid and DAI are not the only solutions available. Consider making a deposit in USDQ, the stablecoin of the QDAO ecosystem. Like other stablecoins, it’s 1-to-1 pegged to USD. However, it cannot be frozen by a government, financial organization or anyone from the QDAO team. You can check it yourself by reading our Smart contract and USDQ Audit.
In QDAO, users’ accounts are never frozen by a single person – all account issues are solved by the entire QDAO community, with the help of a QDAO governance token.
In case of blocking (the chances of which are almost non-existent), you can address the QDAO community and get timely help.

Bottom Line

With FATF taking this new course of action, we might witness serious pressure on stablecoin providers. Some projects will resist it, but it’s still not safe to store your assets in popular stablecoins, especially USDT. Your account can be frozen by authorities for dozens of reasons without the possibility of retrieval.
Yet, there are a number of reliable alternatives and USDQ stablecoin is one of them. QDAO DeFi platform users feel free to manage their crypto reserves and make profitable deposits.
Want to be the first to hear QDAO DeFi news and updates? Visit our website and stay in touch with us on social media: Twitter, Facebook, Telegram and LINE (for the Japanese-speaking community).
submitted by QDAODeFi to u/QDAODeFi [link] [comments]

The importance of Fungibility, your future = your choice.

I took notice that there are more and more people interested in crypto and I would like to make them realize that this is a technology that can save us all or enslave us all. Or at least make some people think about fungibility and it’s importance in this “new world” they are being introduced to.
Short example posted above TLDR
First off, what is fungibility?
Taken from https://www.investopedia.com/terms/f/fungibility.asp
If Person A lends Person B a $50 bill, it does not matter to Person A if he is repaid with a different $50 bill, as it is mutually substitutable. In the same sense, Person A can be repaid with two $20 bills and one $10 bill and still be satisfied, since the total equals $50. Conversely, as an example of non-fungibility, if Person A lends Person B his car, it is not acceptable for Person B to return a different car, even if it is the same make and model as the original car lent by Person A. Cars are not fungible with respect to ownership, but the gasoline that powers the cars is fungible.
Hypothetical question:
You have money to buy one Bitcoin and are confronted with two options:
1) You buy it from a regulated reputable exchange. 2) You buy it from your friend who got it as payment from a recent extortion. 
Immediately you are faced with two fundamental problems:
1) Clean BTC should actually be more valuable then dirty BTC, since you would obviously want the BTC that can not be backtraced to any criminal activity. (Note that what China defines as criminal activities for instance may not be the case in another country) 2) BTC could be confiscated at any point in time since it’s origin can be traced, even when it hasn’t been blacklisted straight away. You could be facing serious consequences. 
We see this already today, addresses that hold coins related to criminal activities are closely being monitored. When they move, it gets noticed and all eyes are on them.
https://news.bitcoin.com/bitcoin-worth-282k-from-the-2016-bitfinex-hack-on-the-move/
If you buy OTC or through DEXes how will you know that your BTC is clean?
This is not a post to tell you criminals should get away with their activities because they shouldn’t, i’m trying to explain that you should never be in any position where your money can be confiscated because it suddenly gets tied to those activities. Your money being confiscated could actually be the least of your problems in such a situation anyway. Think about how easy it becomes to imprison someone that your government doesn’t like.
I’m sure the governments would love to fade out regular cash though, because obviously they can just block your account and take away your basic rights. It happens already to people all over the world who use digital money services like PayPall for instance. https://www.elliott.org/blog/banned-from-palpal-account-limitations/
For people like Snowden, or for Wikileaks bitcoin was their solution at that time. Today, there are better alternatives and everyone should think carefully about what world they want to live in.
To bitcoins defense, there are certain things you can do to make your transactions more private. Bitcoin mixing is a thing. Bitcoin's Lightning Network is expected to give users the option to make transactions that will not be recorded on the blockchain.
Optional privacy raises eyebrows though, authorities could be knocking on your door asking you why you made an optional private transaction. Privacy by default is what we need in the future we see in front of us.
You can find tons of information about deanonymization. This is something that China can “easily“ accomplish.
This is taken from here https://blockchain.princeton.edu/papers/2018-10-ben-kaiser.pdf
Deanonymization: Bitcoin is designed to preserve the pseudonymity of its users, meaning that their real-world identity cannot be linked to a Bitcoin address they have used to transact. However, in practice there are complications that make deanonymization attacks possible. China might seek to deanonymize users for two reasons. First, they may wish to enforce laws and regulations; for example, enforcing capital flight restrictions by identifying users purchasing foreign goods or exchanging Bitcoin into foreign currencies. They might also use a deanonymization attack for ideological (or political) ends: to publicly reveal malfeasance by subversives or political opponents or simply to demonstrate the superiority of centralized control as an ideology and discourage enthusiasm for decentralized systems. We identify four attacks that China could use to deanonymize specific users. First, they could use known research techniques to (a) heuristically cluster pseudonymous identities (e.g., connect multiple addresses to the same user) [31,44]. The simplest example of such a heuristic is to cluster addresses that appear as multiple inputs to the same transaction, as they presumably belong to the same user. The only required capabilities are access to the blockchain and marginal compute power to run the analytics, so these attacks are not unique to China; virtually anyone could commit them. Where China has an advantage over typical adversaries is in linking these pseudonyms to IP addresses. One approach would be to covertly (b) monitor Bitcoin network traffic and identify which IP addresses transactions originate from [4,27]. Because Bitcoin traffic is unencrypted, this can be done through deep packet inspection (DPI). China could also use (c) coercion or regulation to covertly compel service providers that deal in Bitcoin, such as merchants or exchanges, to identify their users. Further, it has been shown that when Bitcoin is used for online purchases, enough information is leaked to web trackers that they can uniquely identify the transaction on the blockchain and link it to any identifying information provided by the purchaser [21]. China could covertly (d) intercept this tracking information over the Internet (using DPI) to perform the same attack, compel domestic tracking companies to provide the information (also covertly), or inject their own trackers into Internet traffic to collect similar information themselves. Tracker injection could be detected by anyone specifically monitoring Internet traffic for such attacks, so we note that it would be overt. Finally, China could target users directly using (e) coercion or regulation to compel them to deanonymize themselves or their transaction partners. Again, as long as targets are compelled to keep quiet about orders to reveal information, this attack is covert.
For fungible coins these deanonymization attacks are probably not impossible but a hell of a lot harder.
Just to clarify i am not an expert on the matter. I just feel that to few people are aware about the importance and hope this post maybe sparkle some interesting opinions and conversations along the way.
If you made it this far I applaud you :-), now check how much balance this guy has in his wallet and see how much he earns every month :D
https://moneroblocks.info/search/4AdUndXHHZ6cfufTMvppY6JwXNouMBzSkbLYfpAV5Usx3skxNgYeYTRj5UzqtReoS44qo9mtmXCqY45DJ852K5Jv2684Rge
Example:
Imagine you want to buy a CAR, and your friend needs to sell his CAR. You did some digging in the market to find an agreement on the price and proceed with the transfer. It happens OTC because there is no need for a middleman, it’s your buddy right?! (For clarity, you both sign a contract to change ownership) You are super excited with your new cool ass CAR, never had one before :-) do some drinking and have an accident. You turn up in the hospital and while you pay for your way out you get arrested. Apparently the CAR was stolen and used in a kidnapping affair.
1st point: A lot of people can buy CARs, and since the CAR owners/transactions are all stored somewhere on a ledger... do you think the authorities will let you keep that CAR when they find out it was stolen or maybe something worse?
2nd point: a CAR is a non fungible asset, meaning that you can trace past owners/origin and could end up with a CAR that should actually be worth A LOT less than what you paid for (because it was obviously dirty)
Now go back to the beginning of the example and switch CAR with BTC, then you will know why fungibility matters.
TLDR; to fungible or not to fungible, that is the question and the answer will either save us all or enslave us all.
Edit: added short example
submitted by zwarbo to CryptoCurrency [link] [comments]

Blockchain in the Public Sector – Webcast Q&A

Blockchain in the Public Sector – Webcast Q&A
Link to our website: https://block.co/blockchain-in-the-public-sector-webcast-qa/
Block.co fourth webcast titled "Digital Transformation of the Public Sector & The Upcoming Legislation of Blockchain Technology in Cyprus” was an immense success. We gathered some of the best experts in the field, Deputy Minister Kyriacos Kokkinos, Jeff Bandman, Steve Tendon, and Christiana Aristidou to share their experience and discuss with us the latest updates regarding Blockchain in the Public Sector.
In its fourth series of webcasts, Block.co gathered 281 people watching the event from 41 different countries, for a two-hour webcast where guests answered participants’ questions. Following the impressive outcome and response we received from the audience, Block.co’s team has done its best to address all the questions for which public information is available.
Below is a list of the questions that were made and were not answered due to time constraints during the webcast. For the remaining questions from our audience, the team will reach out to our distinguished guests to receive their comments and feedback. Please note, that the below information is only for informational purposes!
Question 1:
How can asset tracing be accomplished with bitcoins and cryptocurrency? And how can this be regulated?
Block.co Team Answer:
Digital Asset tracing may be accomplished with cryptocurrency intelligence solutions such as Cipher Trace and the ICE cryptocurrency intelligence program. FATF (Financial Action Task Force) embarked on a program of work from summer 2018 to June 2019 to strengthen and update the provisions dealing with virtual assets and virtual asset service providers. FATF updated Recommendations in October 2018 and Guidance in June 2019 include several new obligations that apply to VASPs. The so-called “Travel Rule” FATF announced in October 2019 agreed on the assessment criteria for how it will assess countries’ compliance with the new global standards. Under the Travel Rule, the transmitter’s financial institutions must include and send information in the transmittal order such as Information about the identity, name, address, and account number of the sender and its financial institution Information about the identity, name, address and account number of the recipient. The ”Travel Rule” is effectively being applied to cryptoasset transfers when there is a virtual asset service provider (VASP) involved. The scope of focus has broadened from “convertible” virtual assets to any virtual asset. Countries should make sure businesses can freeze crypto wallet or exchange accounts for sanctioned individuals.
Question 2:
Which kind of software or technical knowledge is required to develop cryptocurrency?
Block.co Team Answer:
It depends on the type of cryptocurrency you wish to create, as well as the preferred functionality and features, and characteristics of the token or coin (i.e. will it be pre-mined, what type of hashing or cryptographic algorithm will be used (i.e. proof of work (POW) or proof of stake (POS) or a hybrid of both), etc. Likewise, it is useful to utilize a programming language that is broadly used and supported by a vast and active development community; more data could be found here: more information could be found here: top programming languages in 2015/2016, published by IEEE here, and TIOBE. Hypothetically, you can utilize any programming language to make cryptocurrency digital money, however, the most widely recognized are C, C++, Java, Python, Perl. The beauty of cryptocurrencies is that you can literally have access to the entire Bitcoin and Ethereum open-source programming scripts, and create your alternate coin (altcoin).
Question 3:
Hello all, I want to know about the current status of the European Union Blockchain initiative in currency or public identity.
Block.co Team Answer:
Please refer to the European Services Blockchain Infrastructure (EBSI) website.
Question 4:
Mining is also the process of confirmation of transactions in the Bitcoin Blockchain. What is the process of confirmation of transactions in the Blockchain of an Organization? How do we call it?
Block.co Team Answer:
That would depend on the specific consensus algorithm used for the confirmation of transactions. The consensus algorithm is part of the blockchain protocol that defines the rules on how consensus is reached on that blockchain. In order to participate, entities on the blockchain must obey and follow the same consensus algorithm. Make sure to check our glossary for more information.
Question 5:
How does a small business implement blockchain into its current non-blockchain software systems? Who do they hire to install it?
Block.co Team Answer:
It is easy when there are APIs to connect the various software. For more information, you can check Block.co API.
Question 6:
What is your opinion on digitizing developing economies like India by using AI and blockchain?
Block.co Team Answer:
Watch a very interesting webinar on the matter by Mr. Prasanna:
Question 7:
Blockchain technologies have been around since 2008. What would you say has been the biggest obstacle in widespread adoption?
Block.co Team Answer:
In our opinion, the biggest obstacles are volatile cryptoasset prices, complicated UIs, undefined blockchain technology standards. Moreover, the legislation around the technologies is still now being developed and does not offer legal certainty for broader adoption.
Question 8:
Limitations to Blockchain Usability in the Public Sector?
Block.co Team Answer:
Blockchain in the Public Sector, like any other innovative concept with big potential, cannot be a solution to every problem. Users and developers are still figuring out technological and managerial challenges. From a technological perspective, some aspects such as platform scalability, validation methods, data standardization, and systems integration must still be addressed. From a managerial point of view, the questions include business model transformation, incentive structure, and transaction scale, and maturity. Read more here.
Question 9:
How can these blockchain initiatives be practical for the African context
Block.co Team Answer:
As long as the internet infrastructure is in place, these blockchain initiatives may have the same benefits for the African region.
Question 10:
What are some compelling use cases you’ve seen lately, and how do they serve to further legitimize blockchain as a solution?
Block.co Team Answer:
You can see the global trends from all around the world when it comes to further legitimization as a solution, with China leading the way. Read more here.
Question 11:
How does digital currency manage the issue of money laundering?
Block.co Team Answer:
Depends under which context you are looking at the term digital currency. A digital currency usually refers to a balance or a record stored in a distributed database, in an electronic computer database, within digital files or a stored-value card. Some examples of digital currencies are cryptocurrencies, virtual currencies, central bank digital currencies (CBDCs), and e-Cash. The Financial Action Task Force (FATF) is an intergovernmental body established in 1989 on the initiative of the G7 to develop policies to fight money laundering. Since 2001 FATF is also looking into terrorism financing. The objectives of FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. FATF is a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF monitors progress in implementing its Recommendations through “peer reviews” (“mutual evaluations”) of member countries. It is the global watchdog for anti-money laundering & counter-terrorist finance. In June 2019, it updated its guidance paper for Virtual Assets Service Providers (VASPs) regarding the transfer of digital assets. There was an insertion of a new interpretive note that sets out the application of the FATF Standards to virtual asset activities and service providers. To apply FATF Recommendations, countries should consider virtual assets as “property,” “proceeds,” “funds,” “funds or other assets,” or other “corresponding value.” Countries should apply the relevant measures under the FATF Recommendations to virtual assets and virtual asset service providers (VASPs). Read more about the FATF recommendations here).

https://preview.redd.it/58tt7mt1pld51.png?width=1920&format=png&auto=webp&s=d24811c4864ebf02cb9aacc8d6b877a1fbc3756b
Question 12:
To what extent can blockchain be used to improve the privacy of healthcare?
Block.co team Answer:
Please refer to our previous webcast, blog, and articles for more information.
Question 13:
What is Blockchain technology in Shipping?
Block.co team Answer:
The shipping sector has been in the hold of phony maritime institutes charging exorbitant fees via agents, issuing certificates to candidates who do not have the imperative attendance, or those candidates who just pay the fees for the course and ask for the certificate. In view of these fake accreditations, the possibility exists that someone could be harmed or killed, and we could face any number of potential ecological disasters. Having the option to easily verify the genuine origin of a certificate by an approved maritime center is foremost for shipping companies to fast-track their operation and streamline their labor.
Question 14:
Different uses of blockchain other than cryptocurrency?
Block.co team Answer:
Please refer to our blog and glossary.
Question 15:
Upcoming trends in Blockchain concerning Advertising, Marketing, and Public Relations in the Public and Private sectors.
Block.co Team Answer:
Regarding the application of blockchain technology to media copyrights, please see Block.co use case proposal during the Bloomen Ideathon.

https://preview.redd.it/48zc8j38pld51.png?width=3622&format=png&auto=webp&s=79987d1dc7eb8d0c8e32dbce8680b17801d0d244
Question 16:
How to create a decentralized blockchain?
Block.co Team Answer:
An excessive number of individuals feel that blockchain is some supernatural innovation that makes up a decentralized system. In truth, this innovation only enables decentralization. Which means, it permits cryptocurrency to work in a decentralized way. Yet, it doesn’t give any guarantees that it will work that way. Along these lines, it’s really, some outer variables that decide genuine decentralization. Technology, itself never really guarantees it. That is the reason it’s a mistake to expect that if it’s a blockchain — it’s decentralized. From a technical perspective, both blockchains, centralized, and decentralized are comparative, as they take work on distributed peer to peer to network. This implies every node is individually responsible to verify and store the shared ledger. Both Blockchains utilize either a proof-of-work or proof-of-stake mechanisms to make a solitary record and they have to give upper and lower limits on the security and productivity of the system. For more information please refer to our infographic.
Question 17:
Dubai government Blockchain implementation progress?
Block.co Team Answer:
You can see more information here.
Question 18:
How Blockchain and IoT can be integrated to secure data being transmitted through IoT devices.
Block.co Team Answer:
You can read more about it here.
Question 19:
How can the Nigerian government use Blockchain to effectively implement its existing launched eGovernment master plan?
Block.co Team Answer:
Perhaps it can draw its attention to the initiatives of Dubai, Estonia, and Malta to prepare an implementation framework.
Question 20:
What impact is blockchain going to have in today world of business especially in the financial sector
Block.co Team Answer:
Please refer to our recent article titled Benefits of Blockchain Technology in the Banking Industry.
Question 21:
Is Blockchain Technology affect individuals?
Block.co Team Answer:
The social effect of blockchain innovation has just started to be acknowledged and this may simply be a hint of something larger. Cryptocurrencies have raised questions over financial services through digital wallets, and while considering that there are in excess of 3,5 billion individuals on the planet today without access to banking, such a move is surely impactful. Maybe the move for cryptocurrencies will be simpler for developing nations than the process of fiat cash and credit cards. It is like the transformation that developing nations had with mobile phones. It was simpler to acquire mass amounts of mobile phones than to supply another infrastructure for landlines telephones. In addition to giving the underprivileged access to banking services, greater transparency could also raise the profile and effectiveness of charities working in developing countries that fall under corrupt or manipulative governments.
An expanded degree of trust in where the cash goes and whose advantages would without a doubt lead to expanded commitments and backing for the poor in parts of the world that are in urgent need of help. Blockchain technology is well placed to remove the possibility of vote-apparatus and the entirety of different negatives related to the current democratic procedure. Obviously, with new innovation, there are new obstacles and issues that will arise, yet the cycle goes on and those new issues will be comprehended with progressively modern arrangements. A decentralized record would give the entirety of the fundamental information to precisely record votes on an anonymous basis, and check the exactness and whether there had been any manipulation of the voting procedure.
Question 22:
As Andreas Antonopoulos often says in his MOOC: ”is a blockchain even needed?” Ie. Are there better methods?
Block.co Team Answer:
In combination with nascent technologies, IoT, distributed computing, and distributed ledger technologies, governments can provide inventive services and answers for the citizens and local municipalities. Blockchain can provide the component to create a safe framework to deal with these functions. In particular, it can provide a safe interoperable infrastructure that permits all smart city services and capacities to work past presently imagined levels. On the off chance that there were better techniques, they would be researched.
Question 23:
Would any of this be also applicable to the educational sector (as part of the general public sector), and if so in which way?
Block.co Team Answer:
Yes, please refer to our Webcast on Education and our blog post.
Question 24:
Will we be able to get a hold of this recording upon completion of the meeting?
Block.co Team Answer:
Yes, here is a link to the recording of our webcast Blockchain in the Public Sector.
Question 25:
Was wondering if there are any existing universal framework in governing the blockchain technology?
Block.co Team Answer:
The short answer is NO, as this framework is currently being prepared in collaboration with the various Member States.
We would like to thank everyone for attending our webcast and hoping to interact with you in future webinars. If you would like to watch the webinar again, then click here!
For more info, contact Block.co directly or email at [[email protected]](mailto:[email protected]).
Tel +357 70007828
Get the latest from Block.co, like and follow us on social media:
✔️Facebook
✔️LinkedIn
✔️Twitter
✔️YouTube
✔️Medium
✔️Instagram
✔️Telegram
✔️Reddit
✔️GitHub
submitted by BlockDotCo to u/BlockDotCo [link] [comments]

Why we won't have a long term bear market, and how to systematically pick your future investments in crypto

With so much uncertainty right now it would be a good time to take some time to go over what happened recently and how to invest moving foward. We've seen a peak bubble at around 850 billion total market cap in the first week of January, consolidated down to $750 billion and have now just experienced a 40% correction.

What's happening now and how bad will it get?

First of all you should realize that there is a January Dip that happens every year, when we see a roughly 20-30% decline around mid January. This year its been much more severe though for several additional factors that have compounded on top.
Different theories exist on why this happens (its actually the mirror opposite of the "January Effect" that happens in the US stock market), but the two major theories are:
1) Asian markets pull into fiat because of Asian New Year spending needs
2) People in the US sell in January to defer their capital gains tax liability an extra year
While this cyclic event has lead to a healthy correction in the last few years, this year we got these new factors making more fear as well:
So in essence we got a storm of scary news along with the usual cyclic downturn. Currently I don't see this as being a systematic crash like Mt.Gox was that would lead to a long term bear market because the fundamental ecosystem is still intact, and I suspect that after about a month we should consolidate around a new low. All the exchanges are still operational and liquid, and there is no breakdown in trust nor uncertainty whether you'll be able to cash out. What range the market trades in will all depend how Bitcoin does, right now we've already broken below 10K but I'm seeing a lot of support at around $8000, which is roughly where the long term MA curve settles. We don't know how bad it will get or what the future will bring, but as of right now we shouldn't be in a bear market yet.
What should you do if you recently entered the market?
If you did buy in the last few months at or near ATH, the very worst thing you can do now is sell in panic and lose your principal. You shouldn't have more money in crypto than you can afford to lose, so it shouldn't be a problem to wait. You have to realize that 30% corrections in crypto are relatively common, just last fall we had a 40% flash correction over more China fears. Unless there is a systematic breakdown like we had during Mt.Gox, the market always recovers.
The other worst thing you can do is unload into Tether as your safety net. If there is one thing that could actually cause a long term destruction of trust within the cryptocurrency investment ecosystem, its Tether having a run up on their liabilities and not having enough reserve to cover the leverage. It would not only bring down exchanges but lead to years of litigation and endless media headlines that will scare off everybody from putting fiat in. I don't know when the next Mt.Gox meltdown will occur but I can almost guarantee it will involve Tether. So stay away from it.
What should long term investors do?
For long term holders a good strategy to follow each year is to capture profit each December and swallow the capital gains taxation liability, park a reserve of fiat at Gemini (whose US dollar deposits are FDIC-insured) and simply wait till around late January to early February to re-enter the market at a discount and hold all year until next December. You can keep a small amount in core coins in order to trade around various Q1 opportunities you anticipate. Others may choose to simply do nothing and just keep holding throughout January which is also a perfectly fine strategy. The cyclical correction usually stabilizes toward late January and early February, then we see a rise in March and generally are recovered by end of April. Obviously this decision whether to sell in December to profit on the dip and pay tax liability or to just hold will depend on your individual tax situation. Do your own math sometime in November and follow suit.
Essentially revaluate your positions and trim your position sizes if you don't feel comfortable with the losses.

How to construct your portfolio going forward

Rather than seeing the correction as a disaster see it as a time to start fresh. If you have been FOMO-ing into bad cryptos and losing money now is a time to start a systematic long term approach to investing rather than gambling.
Follow a methodology for evaluating each cryptocurrency
Memes and lambo dreams are fun and all, but I know many of you are investing thousands of dollars into crypto, so its worth it to put some organized thought into it as well. I can't stress enough how important it is to try and logically contruct your investment decisions. If you follow a set methodology, a checklist and template you will be able to do relative comparisons between cryptocurrencies, to force yourself to consider the negatives and alternative scenarios and also sleep comfortably knowing you have a sound basis for your investment decisions (even if they turn out to be wrong).
There is no ideal or "correct" methodology but I can outline mine:
1) Initial information gathering and filtering
Once I identify something that looks like a good potential investment, I first go to the CoinMarketCap page for that symbol and look at the website and blockchain explorer.
  • Critically evaluate the website. This is the first pass of the bullshit detector and you can tell from a lot from just the website whether its a scam. If it uses terms like "Web 4.0" or other nonsensical buzzwords, if its unprofessional and has anonymous teams, stay away. Always look for a roadmap, compare to what was actually delivered so far. Always check the team, try to find them on LinkedIn and what they did in the past.
  • Read the whitepaper or business development plan. You should fully understand how this crypto functions and how its trying to create value. If there is no use case or if the use case does not require or benefit from a blockchain, move on. Look for red flags like massive portions of the float being assigned to the founders of the coin, vague definition of who would use the coin, anonymous teams, promises of large payouts...etc
  • Check the blockchain explorer. How is the token distribution across accounts? Are the big accounts holding or selling? Which account is likely the foundation account, which is the founders account?
  • Read the subreddit and blogs for the cryptocurrency and also evaluate the community. Try to figure out exactly what the potential use cases are and look for sceptical takes. Look at the Github repos, does it look empty or is there plenty of activity?
2) Fill out an Investment Checklist
I have a checklist of questions that I find important and as I'm researching a crypto I save little snippets in Evernote of things that are relevant to answering those questions:
  • What is the problem or transactional inefficiency the coin is trying to solve?
  • What is the Dev Team like? What is their track record? How are they funded, organized?
  • Who is their competition and how big is the market they're targeting? What is the roadmap they created?
  • What current product exists?
  • How does the token/coin actually derive value for the holder? Is there a staking mechanism or is it transactional?
  • What are the weaknesses or problems with this crypto?
3) Create some sort of consistent valuation model/framework, even if its simple
I have a background in finance so I like to do Excel modeling. For those who are interested in that, this article is a great start and also Chris Burniske has a great blog about using Quantity Theory of Money to build an equivalent of a DCF analysis for crypto.
Here is an Excel file example of OMG done using his model. You can download this and play around with it yourself, see how the formulas link and understand the logic.
Once you have a model set up the way you like in Excel you can simply alter it to account for various float oustanding schedule and market items that are unique to your crypto, and then just start plugging in different assumptions. Think about what is the true derivation of value for the coin, is it a "dividend" coin that you stake within a digital economy and collect fees or is it a currency? Use a realistic monetary velocity (around 5-10 for currency and around 1-2 for staking) and for the discount rate use at least 3x the long term return of a diversified equity fund.
The benefit is that this forces you to think about what actually makes this coin valuable to an actual user within the digital economy its participating in and force you to think about the assumptions you are making about the future. Do your assumptions make sense? What would the assumptions have to be to justify its current price? You can create different scenarios in a matrix (optimistic vs. pessimistic) based on different assumptions for risk (discount rate) and implementation (adoption rates).
If you don't understand the above thats perfectly fine, you don't need to get into full modeling or have a financial background. Even a simple model that just tries to derive a valuation through relative terms will put you above most crypto investors. Some simple valuation methods that anyone can do
  • Metcalfe's Law which states that the value of a network is proportional to the square of the number of connected users of the system (n2). So you can compare various currencies based on their market cap and square of active users or traffic.
  • Another easy one is simply looking at the total market for the industry that the coin is supposedly targeting and comparing it to the market cap of the coin. Think of the market cap not only with circulating supply like its shown on CMC but including total supply. For example the total supply for Dentacoin is 1,841,395,638,392, and when multiplied by its price in early January we get a market cap that is actually higher than the entire industry it aims to disrupt: Dentistry.
  • If its meant to be just used as just a currency: Take a look at the circulating supply and look at the amount that is in cold storage or set to be released/burned. Most cryptos are deflationary so think about how the float schedule will change over time and how this will affect price.
Once you have a model you like set up, you can compare cryptos against each other and most importantly it will require that you build a mental framework within your own mind on why somebody would want to own this coin other than to sell it to another greater fool for a higher price. Modeling out a valuation will lead you to think long term and think about the inherent value, rather than price action.
Once you go through this 3-step methodology, you'll have a pretty good confidence level for making your decision and can comfortably sit back and not panic if some temporary short term condition leads to a price decrease. This is how "smart money" does it.
Think about your portfolio allocation
You should think first in broad terms how you allocate between "safe" and "speculative" cryptos.
For new investors its best to keep a substantial portion in what would be considered largecap safe cryptos, primarily BTC, ETH, LTC. I personally consider XMR to be safe as well. A good starting point is to have between 50-70% of your portfolio in these safe cryptocurrencies. As you become more confident and informed you can move your allocation into speculative small caps.
You should also think in terms of segments and how much of your total portfolio is in each segment:
  • Core holdings - BTC, Ethereum, LTC...etc
  • Platform segment - Ethereum, NEO, Ark...etc
  • Privacy segment - Monero, Zcash, PivX..etc
  • Finance/Bank settlement segment - Ripple, Stellar...etc
  • Enterprise Blockchain solutions segment -VeChain, Walton, WABI...etc
  • Promising/Innovative Tech segment - Raiblocks, IOTA, Cardano...etc
You should also think about where we are in the cycle, as now given so much uncertaintly its probably best to stay heavily in core holdings and pick up a few coins within a segment you understand well. If you don't understand how enterprise solutions work or how the value chain is built through corporations, don't invest in the enteprise blockchain solutions segment. If you are a technie who loves the technology behind Cardano or IOTA, invest in that segment.
Think of your "circle of competence"
This is actually a term Buffet came up with, it refers to your body of knowledge that allows you to evaluate an investment. Think about what you know best and consider investing in those type of coins. If you don't know anything about how supply chains functions, how can you competently judge whether VeChain or WaltonChain will achieve adoption?
This where your portfolio allocation also comes into play. You should diversify but really shouldn't be in much more than around 12 cryptos, because you simply don't have enough competency to accurately access the risk across every segment and for every type of crypto you come across. If you had over 20 different cryptos in your portfolio you should probably think about consolidating to a few sectors you understand well.
Continually educate yourself about the technology and markets
If you aren't already doing it: Read a bit each day about cryptocurrencies. There are decent Youtubers that talk about the market side of crypto, just avoid those that hype specific coins and look for more sceptical ones like CryptoInvestor. If you don't understand how the technology works and what the benefits of a blockchain are or how POS/POW works or what a DAG is or how mining actually works, learn first. If you don't care about the technology or find reading about it tedious, you shouldn't invest in this space at all.

Summing it up

I predicted a few days ago that we would have a major correction in 2018 specifically in the altcoins that saw massive gains in Decemebeearly January, and it seems we've already had a pretty big one. I don't think we'll have a complete meltdown like some are predicting, but some more pain may be incoming.
Basically take this time to think about how you can improve your investment style and strategy. Make a commitment to value things rather than chasing FOMO, and take your time to make a decision. Long term investment will grant you much more returns as will a systematic approach.
Take care and have fun investing :)
Edit March 2018: Lol looking back I'm regretting starting the title with "Why we won't have a long term bear market" now, I was more karma whoring with that catchy title than anything. We recovered up to 11K from this post, but then crashed again hard later in February-March because of a slew of reasons from Tether subpeona to unforseen regulatory issues.
submitted by arsonbunny to CryptoCurrency [link] [comments]

Want to start fresh after the crypto crash? Here is a comprehensive guide on how to invest and prosper over the long term.

Well its happened, the crypto market just experienced the worst crash since 2014, the bubble has burst. The idiocy of newbies FOMO-ing into anything with low nominal value lead to endless twitter timelines like this, and now nobody has any idea where the market settles. What do you do now?
In the following weeks it will be a good time to rethink your investment approach and how you arrive at your decisions. Just buying whatever is shilled on Twitter or Reddit and jumping from one crypto to another isn't going to work like it did these last two months.
The good news is that we're finally back closer and closer to our long term moving average which is much more healthy for entrants, the bad news is that the fear might continue compounding if outstanding issues are not dealt with. Tether is the big concern for me personally for reasons I've stated many times, but some relief in the short term may come if the SEC and CFTC meeting on February 6th goes well. Nobody really knows where the bottom is but I think we're now past the "irrational exhuberance" stage and we're entering a period of more serious inspection where cryptos will actually have to prove themselves as useful. I suspect hype artists like CryptoNick and John McAfee will fall out of favor.
But perhaps most importantly use this as a learning experience, don't try to point fingers now. The type of dumb behavior that people were engaging in that was rewarded in a bull market (chasing pumps, going all in on a shillcoin, following hype..etc) could only ever lead to what we are experiencing now. Just like so many people jumped on the crypto bandwagon during the bull run, they will just as quickly jump on whatever bandwagon is to be used to blame for the deflation of the bubble. Nobody who pumped money into garbage without any use case will accept that they themselves with their own investing behavior were the real reason for the gross overvaluation of most cryptocurrencies, and the inevitable crash.
So if you're looking for a fresh start after the massacre (or just want to get in now), here is a guide:

Part A: Making a Investment Strategy

This is your money, put some effort into investing it with an actual strategy. Some simple yet essential advice that should apply to everyone, regardless of individual strategy:
  1. Slow down and research each crypto that you're buying for at least a week.
  2. Don't buy something just because it has risen.
  3. Don't exit a position just because it has declined.
  4. Invest only as much as you can afford to lose.
  5. Prepare enter and exit strategies in advance.
First take some time to think about your ROI target, set your hold periods for each position and how much you are actually ready to risk losing.
ROI targets
A lot of young investors who are in crypto have unrealistic expectations about returns and risk. A lot of them have never invested in any other type of financial asset, and hence many seem to consider a 5-10% ROI in a month to be unexciting.
But its important to temper your hype and realize why we had this exponential growth in the last year and how unlikely it is that we see 10x returns in the next year. What we saw recently was Greater Fool Theory in action. Those unexciting returns of 5-10% a month are much more of the norm, and much more healthy for an alternative investment class.
You can think about setting a target in terms of the market ROI over a relevant holding period and then add or decrease based on your own risk profile.
Example: Calculating a 2 year ROI target
Lets say you want to hold for 2 years now, how could you set a realistic target to strive for? You could look at a historical 2 year return as a base, preferably during a period similar to what we're facing now. Now that we had a major correction, I think we can look at the two year period starting in 2015 after we had the 2014 crash. To calculate a 2 year CAGR starting in 2015:
Year Total Crypto Market Cap
Jan 1, 2015: $5.5 billion
Jan 1, 2017: $18 billion
Compounded annual growth return (CAGR): [(18/5.5)1/2]-1 = 81%
This annual return rate of 81% comes out to about 4.9% compounded monthly. This may not sound exciting to the lambo moon crowd, but it will keep you grounded in reality. You can aim for a higher return (say 2x of that 81% rate) if you choose to take on more risky propositions. I can't tell you what return target you should set for yourself, but just make sure its not depended on you needing to achieve continual near vertical parabolic price action in small cap shillcoins because that isn't sustainable.
Once you have a target you can construct your risk profile (low risk vs. high risk category coins) in your portfolio based on your target.
Risk Management
Everything you buy in crypto is risky, but it still helps to think of these 3 risk categories:
How much risk should you take on? That depends on your own life situation for one, but also it should be proportional to how much expertise you have in both financial analysis and technology.
The general starting point I would recommend is:
Some more core principles on risk management to consider:
You can think of each crypto having a risk factor that is the summation of the general crypto market risk (Rm), but also its own inherent risk specific to its own goals (Ri).
Rt = Rm +Ri
The market risk is something you cannot avoid, it is essentially the risk that is carried by the entire market over things like regulations. What you can minimize though the Ri, the specific risks with your crypto. That will depend on the team composition, geographic risks (for example Chinese coins like NEO carry regulatory risks specific to China), competition within the space and likelihood of adoption and other factors, which I'll describe in Part 2: Crypto Picking Methodology.
Portfolio Allocation
Along with thinking about your portfolio in terms of risk categories described above, I really find it helpful to think about the segments you are in. OnChainFX has some segment categorization but I generally like to bring it down to:
Think about your "Circle of Competence", your body of knowledge that allows you to evaluate an investment. Your ability to properly judge risk and potential is going to largely correlated to your understanding of the subject matter. If you don't know anything about how supply chains functions, how can you competently judge whether VeChain or WaltonChain will achieve adoption? If you don't understand anything about the tech when you read the Cardano paper, are you really able to determine how likely it is to be adopted?
Consider the historic correlations between your holdings. Generally when Bitcoin pumps, altcoins dump but at what rate depends on the coin. When Bitcoin goes sideways we tend to see pumping in altcoins, while when Bitcoin goes down, everything goes down.
You should diversify but really shouldn't be in much more than around 12 cryptos, because you simply don't have enough competency to accurately access the risk across every segment and for every type of crypto you come across. If you have over 20 different cryptos in your portfolio you should probably think about consolidating to a few sectors you understand well.

Part B: Crypto Picking Methodology (Due Dilligence)

Do you struggle on how to fundamentally analyze cryptocurrencies? Here is a 3-step methodology to follow to perform your due dilligence:

Step 1: Filtering and Research

There is so much out there that you can get overwhelmed. The best way to start is to think back to your own portfolio allocation strategy and what you would like to get more off. For example in my view enterprise-focused blockchain solutions will be important in the next few years, and so I look to create a list of various cryptos that are in that segment.
Upfolio has brief descriptions of the top 100 cryptos and is filterable by categories, for example you can click the "Enterprise" category and you have a neat list of VEN, FCT, WTC...etc.
Once you have a list of potential candidates, its time to read about them:
  • Critically evaluate the website. If it's a cocktail of nonsensical buzzwords, if its unprofessional and poorly made, stay away. Always look for a roadmap, compare to what was actually delivered so far. Always check the team, try to find them on LinkedIn and what they did in the past.
  • Read the whitepaper or business development plan. You should fully understand how this crypto functions and how its trying to create value. If there is no use case or if the use case does not require or benefit from a blockchain, move on.
  • Check the blockchain explorer. How is the token distribution across accounts? Are the big accounts selling? Try to figure out who the whales are (not always easy!) and what the foundation/founder account is based on the initial allocation.
  • Look at the Github repos, does it look empty or is there plenty of activity?
  • Search out the subreddit and look at a few Medium or Steem blogs about the coin. How "shilly" is the community, and how much engagement is there between developer and the community?
  • I would also go through the BitcoinTalk thread and Twitter mentions, judge both the length and quality of the discussion.
You can actually filter out a lot of scams and bad investments by simply keeping your eye out on the following red flags:
  • allocations that give way too much to the founder
  • guaranteed promises of returns (Bitcooonnneeeect!)
  • vague whitepapers filled with buzzwords
  • vague timelines and no clear use case
  • Github with no useful code and sparse activity
  • a team that is difficult to find information on

Step 2: Passing a potential pick through a checklist

Once you feel fairly confident that a pick is worth analyzing further, run them through a standardized checklist of questions. This is one I use, you can add other questions yourself:
Crypto Analysis Checklist
What is the problem or transactional inefficiency the coin is trying to solve?
What is the Dev Team like? What is their track record? How are they funded, organized?
How big is the market they're targeting?
Who is their competition and what does it do better?
What is the roadmap they created and how well have they kept to it?
What current product exists?
How does the token/coin actually derive value for the holder? Is there a staking mechanism or is it transactional?
Is there any new tech, and is it informational or governance based?
Can it be easily copied?
What are the weaknesses or problems with this crypto?
The last question is the most important.
This is where the riskiness of your crypto is evaluated, the Ri I talked about above. Here you should be able to accurate place the crypto into one of the three risk categories. I also like to run through this checklist of blockchain benefits and consider which specific properties of the blockchain are being used by the specific crypto to provide some increased utility over the current transactional method:
Benefits of Cryptocurrency
Decentralization - no need for a third party to agree or validate transactions.
Transparency and trust - As blockchain are shared, everyone can see what transactions occur. Useful for something like an online casino.
Immutability - It is extremely difficult to change a transaction once its been put onto a blockchain
Distributed availability - The system is spread on thousands of nodes on a P2P network, so its difficult to take the system down.
Security - cryptographically secured transactions provide integrity
Simplification and consolidation - a blockchain can serve as a shared ledger in industries where multiple entities previously kept their own data sources
Quicker Settlement - In the financial industry when we're dealing with post-trade settlement, a blockchain can drastically increase the speed of verification
Cost - in some cases avoiding a third party verification would drastically reduce costs.

Step 3: Create a valuation model

You don't need to get into full modeling or have a financial background. Even a simple model that just tries to derive a valuation through relative terms will put you above most crypto investors. Some simple valuation methods that anyone can do:
Probablistic Scenario Valuation
This is all about thinking of scenarios and probability, a helpful exercise in itself. For example: Bill Miller, a prominent value investor, wrote a probabilistic valuation case for Bitcoin in 2015. He looked at two possible scenarios for probabalistic valuation:
  1. becoming a store-of-value equal to gold (a $6.4 trillion value), with a .25% probability of occurring
  2. replacing payment processors like VISA, MasterCard, etc. (a $350 million dollar value) with a 2.5% probability
Combining those scenarios would give you the total expected market cap: (0.25% x 6.4 trillion) + (2.5% x 350 million). Divide this by the outstanding supply and you have your valuation.
Metcalfe's Law
Metcalfe's Law which states that the value of a network is proportional to the square of the number of connected users of the system (n2). So you can compare various currencies based on their market cap and square of active users or traffic. We can alter this to crypto by thinking about it in terms of both users and transactions:
For example, compare the Coinbase pairs:
Metric Bitoin Ethereum Litecoin
Market Cap $152 Billion $93 Billion $7.3 Billion
Daily Transactions (last 24hrs) 249,851 1,051,427 70,397
Active Addresses (Peak 1Yr) 1,132,000 1,035,000 514,000
Metcalfe Ratio (Transactions Based) 2.43 0.08 1.47
Metcalfe Ratio (Address Based) 0.12 0.09 0.03
Generally the higher the ratio, the higher the valuation given for each address/transaction.
Market Cap to Industry comparisons
Another easy one is simply looking at the total market for the industry that the coin is supposedly targeting and comparing it to the market cap of the coin. Think of the market cap not only with circulating supply like its shown on CMC but including total supply. For example the total supply for Dentacoin is 1,841,395,638,392, and when multiplied by its price in early January we get a market cap that is actually higher than the entire industry it aims to disrupt: Dentistry.
More complex valuation models
If you would like to get into more fleshed out models with Excel, I highly recommend Chris Burniske's blog about using Quantity Theory of Money to build an equivalent of a DCF analysis for crypto.
Here is an Excel file example of OMG done by Nodar Janashia using Chris' model .
You should create multiple scenarios with multiple assumptions, both positive and negative. Have a base scenario and then moderately optimistic/pessimistic and highly optimistic/pessimistic scenario.
Personally I like to see at least a 50% upward potential before investing from my moderately pessimistic scenario, but you can set your own safety margin.
The real beneficial thing about modelling isn't even the price or valuation comparisons it spits out, but that it forces you to think about why the coin has value and what your own assumption about the future are. For example the discount rate you apply to the net present utility formula drastically affects the valuation, and it reflects your own assumptions of how risky the crypto is. What exactly would be a reasonable discount rate? What about the digital economy you are assuming for the coin, what levers affects its size and adoption and how likely are your assumptions to come true? You'll be a drastically more intelligent investor if you think about the fundamental variables that give your coin the market cap you think it should hold.

Summing it up

The time for lambo psychosis is over. But that's no reason to feel down, this is a new day and what many were waiting for. I've put together in one place here how to construct a portfolio allocation (taking into consideration risk and return targets), and how to go through a systematic crypto picking method. I'm won't tell you what to buy, you should always decide that for yourself and DYOR. But as long as you follow a rational and thorough methodology (feel free to modify anything I said above to suit your own needs) you will feel pretty good about your investments, even in times like these.
Edit: Also get a crypto prediction ferret. You won't regret it.
submitted by arsonbunny to CryptoCurrency [link] [comments]

#Bitcoin2014 - Feat. Presentation: Bitcoin's Rise and Regulation in China by Bobby Lee Today in Bitcoin (2017-09-04) - China Declares ICOs Illegal - Russia News - Bitmain Investors China's Bet on Bitcoin: Popularity Brings Risk Chinese Yuan CRISIS! - Could China Be Heading For Its BIGGEST Devaluation Yet? BITCOIN ATM OPENS IN HONG KONG - Get your Bitcoin in cash: World's second Bitcoin ATM

By easing regulation around these stablecoins – which are pegged to the U.S. dollar and are under U.S. jurisdiction – the U.S. will be able to use them as proxies to compete with China on the digital currency market. “In 12 to 24 months, I think they could basically greenlight all of these crypto hybrid dollars.” China’s sovereign digital currency could be launched later this year, with the likes of Alibaba’s Alipay and Tencent’s WeChat Pay already popular payment methods. China's central bank, the People's Bank of China (PBOC), has drafted a law to legalize the digital yuan and outlaw digital currencies issued by anyone else competing with it. Meanwhile, the ... Bitcoin cash. Bitcoin cash is not the same cryptocurrency as bitcoin – it is a standalone cryptocurrency, created as a branch of the original in 2017. It operates under its own rules and with its own blockchain.The intended use of bitcoin cash is a usable, electronic currency. It can be spent just like normal money in some locations but fees are much lower and transaction speeds are much faster. Now, China has announced that it’s rolling out its own alternative to Bitcoin, one that will presumably maintain the convenience of a digital currency while removing the aspects Beijing finds ...

[index] [5339] [32216] [43302] [39779] [33399] [4860] [44892] [24635] [23183] [18495]

#Bitcoin2014 - Feat. Presentation: Bitcoin's Rise and Regulation in China by Bobby Lee

Bobby Lee is CEO of BTC China, which was founded in 2011. It is the country’s first and largest exchange for bitcoin – a decentralised virtual currency that has taken the financial world by storm. China was the first major society to use fiat. All fiat currencies have eventually reverted to their true value of zero going back to 1024 AD in China. This time will be no different. However ... Jeffrey Robinson, author of "bitcoin: The Naked Truth," discusses the skepticism about bitcoin, digital currency regulation and the future of cryptocurrencies. The virtual currency has generated lots of media attention in China where investors have helped drive the price up to dramatic highs above $1,000. Customers must choose to either buy or sell Bitcoin. Dec. 10 (Bloomberg) --- The virtual currency, Bitcoin, is on a rocky ride. Demand in China gave the digital money a boost, but prices plunged after People's Bank of China declared it risky and ...

#