Australian Uni Partners With Ripple on Blockchain Law Courses

The Australian National University has partnered with Ripple to develop two Masters courses examining the impact of blockchain on legal disputes.

The Australian National University (ANU)’s law school will roll out two new courses in its Masters program next year exploring the impact of blockchain on the legal field. 

The courses are being developed with the assistance of Ripple’s Blockchain Research Initiative (UBRI) — a program that seeks to collaborate with universities to examine emerging trends and developments in distributed ledger technology, cryptocurrency and digital payments.

ANU already offers undergraduate courses examining the intersection between blockchain and law, as do a number of other Australian universities. The University of Melbourne and The University of Southern Queensland offer courses explicitly concerned with DLT and blockchain, while other institutions incorporate the subject into broader programs.

ANU law school partners with Ripple to launch courses studying blockchain 

Scott Chamberlain, entrepreneurial fellow at the ANU School of Law, will develop and run the university’s blockchain units. The courses will examine whether blockchain and smart contracts can be used to automate and decentralize legal processes and dispute resolution.

He is passionate about its potential: “Imagine an eBay-like platform that can resolve consumer law disputes without engaging the court system,” he said. 

Chamberlain said that many simple legal processes — such as confirming the identities and relationship of the relevant parties, and the rules governing their interactions — could utilise blockchain. 

“[A legal dispute] deals with who are the legal identities that the law recognizes? What are the legal things that the law recognizes existing? What’s the relationship between people and things? And there’s a dispute resolution at the heart of it. When you look at the blockchain smart contract space, there’s projects doing all of those things."

Chamberlain operates the ‘Lex Automagica’ platform at ANU, which is an attempt to solve some of these issues without engaging the middlemen and gatekeepers of the legal industry. In February 2019, Ripple provided Lex Automatica with $1 million in funding.

Legal academics and practitioners are becoming increasingly interested in the potential of blockchain to provide decentralized dispute resolution. Projects already up and running include Jur, Kleros, and Aragon Court.

via cointelgraph.com

Strict Japanese Crypto Laws Discourage Foreign Exchanges … For Now

A new report has found strict cryptocurrency regulations in Japan are discouraging foreign players — but will help the industry in the long run.

A new report has found strict regulations are discouraging overseas exchanges from opening in Japan, but would likely benefit new players in the long term.

Double jump.tokyo, the game developer behind My Crypto Heroes, commissioned a research team at So & Sato Law Offices to carry out a comprehensive report on digital assets in Japan.

Released on March 31, the report covers all aspects of digital assets in the Asian nation, from tokenized securities to crypto derivatives.

Entering the crypto market under strict regulations

Joerg Schmidt and So Saito from So & Sato told Cointelegraph Japan in an interview that local regulations for cryptocurrency exchanges are “far stricter” than in most other countries. However, he said this would be beneficial in the long run because it encourages the traditional finance world to get involved:

“The market is highly regulated in Japan. What seems to be a regulatory overkill, at first sight, is likely to help the market to mature in the mid to long term. This will allow more institutional players to enter the market and to increase their stake in the digital asset space.”

Regulations pertaining to crypto in Japan generally fall under the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA). Amendments passed for both acts tightening existing regulations come into effect today (April 1).

Under the new PSA regulations, crypto exchanges must employ third-party operators to keep hold of their users’ money, separating it from their own cash flow. With fewer tools at its disposal, FIEA has faced an uphill battle regulating Japan’s crypto derivatives market, which accounts for 90% of the total volume.

Foreign-operated crypto exchanges in Japan

Under Japanese law, cryptocurrency exchanges must also obtain a license through the country’s Financial Services Agency (FSA). The report details the requirements:

“To register as a crypto asset exchange [in Japan], companies must meet certain criteria. Local companies must be incorporated as a stock company and have a minimum capital of JPY 10 million. An exchange must further ensure that its net assets do not fall below the amount of users’ funds that are stored in a hot wallet.”

As of today, there are 23 exchanges registered with the FSA, although none of them are yet foreign operated (though U.S. exchange OKCoin was recently granted a license) Saito explains why the regulations discourage overseas exchanges:

“Some Chinese exchanges purchased Japanese licenses for exchanges, so it’s open for foreign exchanges to have licenses in Japan. But under the regulations, if foreign crypto exchanges themselves get Japanese licenses, they need to have similar licenses in their countries under the current regulations. There are not so many similar exchanges in foreign countries.”

The research team concluded that the most likely exchanges to be granted licenses would come from countries such as the United States, where regulations are thorough. 

Getting in on the Japanese crypto market early

While local regulations might not be conducive to foreign exchanges at the moment, the research team concluded that now was the ideal time to enter the crypto market in Japan.

They believe the regulatory measures help make Japan stand out as a safe haven for crypto, rather than the wild west of finance that it’s sometimes known for.

via cointelgraph.com

Economist Jeffrey Tucker: ‘Can You Imagine BTC Price if it Had Scaled?’

Economist Jeffrey Tucker sparked a debate with prominent crypto leaders when he argued the BTC price is depressed because it hasn’t scaled.

American Institute for Economic Research editorial director Jeffrey Tucker reignited the long-running Bitcoin scaling debate with a tweet earlier today.

The economist — who has long been a proponent of Bitcoin (BTC) — suggested the current price is much lower than it otherwise would have been because the underlying technology has not been “properly scaled”.

On March 31, Tucker tweeted:

I'm not unimpressed by a $6K price of BTC. I was blown away when the thing reached $30.00. But can you imagine the price today if the thing had properly scaled?

— Jeffrey A Tucker (@jeffreyatucker) March 30, 2020

The Tweet expands on comments Tucker made earlier this month on RT, during a panel discussion with noted Bitcoin skeptic Peter Schiff. During the debate he said too much time had been wasted on this “ridiculous scaling problem” which had ultimately prevented mainstream adoption:

“Adoption hasn’t gone far enough and it hasn’t come into consumer use like it should and would have if it had been able to scale. Now we’re seeing what happens when Bitcoin was not properly scaled.” 

Tucker said Bitcoin was designed to thrive in times like the current financial crisis, and suggested the reason it hasn’t is due to its scaling problem:

“Bitcoin was innovated to become a safe haven during times just like this. So why aren’t we seeing Bitcoin become the safe haven that it was developed to be, and was for a number of years?”

Vitalik Buterin and Blockstream weigh in

The BTC scaling issue has been one of the most heated debates in cryptocurrency. The base layer network isn’t able to process transactions quickly enough to enable wide scale, mainstream adoption as a currency. The debate over raising the block size as a solution ultimately led to the Bitcoin Cash (BCH) and Bitcoin SV (BSV) forks, while Bitcoin itself adopted the layer two Lightning Network as a scaling solution. 

Tucker’s March 31 tweet sparked a debate among prominent members of Crypto Twitter. Ethereum (ETH) co-founder Vitalik Buterin encouraged the economist to look at the long awaited Ethereum 2.0, which is due to launch this year, stating it will have “high scalability but without the centralization that rely solely on increasing block size.”

This provoked much derision from Bitcoin development company Blockstream’s CEO Adam Back, and CSO Samson Mow, who wrote “Lols” and posted a ‘crying with laughter’ emoji respectively.

Scaling has nothing to do with the price

On chain analyst Willy Woo suggested that scaling has nothing to do with the price or market cap, pointing to gold as an example:

“Gold is $9T. How many transactions per second does gold do? I mean shipping the underlying between vaults. That's BTC main chain. The swaps we do on ETFs and derivatives is Gold's layer 2. That s--t scales, so will BTC's layer 2.”

Bitcoin Advisory founder Pierre Rochard said the price would be the same regardless as scaling is "not the bottleneck for adoption."

Bitcoin proponent Vijay Boyapati argued it was not necessary to imagine a “properly scaled” Bitcoin, as that was Bitcoin Cash: "The price would be $200; the price of BCash. i.e., the market massively discounts what you consider "proper scaling" and greatly values immutability."

Investor and author Tuur Demeester said Tucker's tweet had annoyed him: "Having been in Bitcoin as long as you have you should know better imo — Bitcoin is scaling just fine."

To which Tucker laid down a challenge: “Well, let's get off Twitter and discuss this like gentlemen sometime.”

via cointelgraph.com

Proof of Stake Vs. Proof of Work: Which One Is ‘Fairer’?

This is the first part of a deep dive into the years-long debate between proponents of Proof of Work and Proof of Stake. Which one is better and why?

This is the first of two articles providing a deeper dive into the eternal debate between the Proof of Stake (PoS) and Proof of Work (PoW) consensus algorithms. This part will focus on the basics, while also discussing the issue of wealth concentration and inequality, which is often at the center of any community argument.

Bitcoin (BTC) and many of the original cryptocurrencies were born as pure PoW systems. 

Proof of Stake was first pioneered in 2013 by Peercoin, a project that exists to this day. 

Peercoin’s contribution to the popularity of PoS is likely dwarfed by Ethereum (ETH) and its goal to transition from PoW —  which has turned out to be a very long journey. Projects such as Cardano (ADA) avoided PoW entirely, deciding on PoS after using a formal approach to assess consensus mechanisms. 

The Bitcoin and Monero (XMR) communities remain some of the staunchest proponents of mining and Proof of Work. 

What is a consensus algorithm?

In any blockchain, the consensus algorithm is designed to solve the issue of trust between the participants of a network. Used for payments, the consensus algorithm is the final piece in the complex cryptographic puzzle that makes cryptocurrency work. 

Basic features of a transaction, such as ownership and amount, are easy to verify with the help of public key cryptography, which works through fundamental mathematical properties.

Consensus algorithms exist to mitigate the “double-spend” attack, where a malicious actor is able to spend the same coin twice (or any number of times). Solving this issue requires a deliberate decision on which of the two spends is valid

There are no pure-mathematical solutions to this problem. Instead, consensus algorithms use a combination of cryptography and economic incentives to maintain a functional network.

Bitcoin’s consensus is based on a simple rule — the longest chain of blocks is the only valid one. The system was later termed Nakamoto Consensus, in honor of Bitcoin’s anonymous founder. 

In order to make the concept work, adding blocks to each chain must be relatively difficult. This is where Proof of Work and mining come in. Each block is secured through cryptographic techniques that require miners to commit computing power in order to add blocks. 

As computing power is directly proportional to electricity usage, Bitcoin is secured directly by a fundamental physical quantity — energy.

Under Proof of Stake, the network secures itself through the commitment of a stake — a certain amount of capital in the form of the network’s own tokens. Its security is meant to be derived directly from the perceived economic value of the network — how expensive it is to purchase a majority stake.

But PoW networks also have a close correlation between economic value and security. Miners receive coins as a reward, which means that the higher the value of the coin, the more money they make. 

New miners are incentivized to add more hardware and spend more energy to receive their share of the rewards — which increases security. Over time, the profit for each individual miner trends toward an economic equilibrium dictated by electricity prices. 

As a consequence, the amount of electricity dedicated to mining depends on the coin’s emission rate and market capitalization, while it is largely decoupled from the network’s performance or activity. Many PoS proponents see this as the biggest issue of PoW. 

The energy problem

Cointelegraph spoke with Aggelos Kiayias, the chief scientist of IOHK, one of the entities behind Cardano, to learn more about their decision to use PoS. She said:

“The costs and energy consumption aspects of Proof of Work blockchains were definitely a consideration. It seemed natural to think: ‘is it possible to get a protocol that has a similar type of profile with, for example, Bitcoin’s blockchain, but somehow doesn't have the same energy expenditure?’”

The electricity consumption of Bitcoin mining is significant, with the latest estimate from July 2019 placing it at an annualized value of 70 Terawatt hours. This is close to the total electricity use of a small European country like Austria — although to put that in perspective it is also just 0.28% of the global figure. 

The environmental impact is contested, with a July 2019 report estimating that 74% of Bitcoin mining is done through renewable sources. Proponents of PoW in Monero and Bitcoin often argue that the energy used in mining is not ‘wasted’, as it is necessary to ensure the resilience and decentralization of the consensus algorithm.

Jake Wocom-Pyatt, project lead for Decred, agrees with the environmental concerns but doesn't believe that PoS is necessarily the answer. Speaking with Cointelegraph, he said:

“PoW is indeed environmentally unfriendly. However, it must be considered that it is the first and simplest consensus system proposed. There are surely ways to improve PoW in the future.”

Though Proof of Stake also involves energy consumption for the delegation process, it is generally agreed to be far less energy-intensive than an equivalent Proof of Work solution. However, many argue that it compromises on too many things in order to achieve this.

Trusting PoS history

According to Wocom-Pyatt, pure PoS is reversible, which means that its history can be changed. This is similar to an argument made in a 2015 paper by Andrew Poelstra, a mathematician at Bitcoin development company Blockstream.

Poelstra argued that it is impossible for a user to rely on the proofs of stake to claim that a particular block is valid — because that stake itself depends on previous stakes within that blockchain, which are ultimately based on nothing. He wrote:

“Because there is no universal time (and to new users, no universal history), there is no way to differentiate users who are ‘now’ holding the currency from users who ‘were’ holding the currency.” 

PoW history, by contrast, can be mathematically verified to be correct and can only be counterfeited by recreating its entire mining history. As noted by Poelstra, PoS proponents will argue that as long as short-term history can be secured, changes in old blocks will “contradict the history as remembered by participants of the system.”

This, according to him, “changes the trust model from that of Bitcoin” to one where consensus relies on always-online peers. While he believes that this could theoretically work, he argues that such a trust model is “vulnerable to legal pressure, attacks on ‘trusted’ entities and network attacks” — that it’s less censorship-resistant and decentralized, in short. 

PoS proponents agree that a certain aspect of extra-protocol social coordination and consensus is necessary to maintain its security, but they argue that PoW systems ultimately rely on social consensus as well.

There is no clear winner in this line of argument. It is a philosophical debate that hinges on each individual’s opinion about whether actively relying on social consensus is an acceptable compromise to reduce electricity usage. It is perhaps for this reason that the debate has since moved into other contentious topics. 

Acquiring stake Vs. acquiring work

Economic fairness is an often debated point for both types of consensus. In line with the principle of decentralization, both sides seek to minimize issues such as unfair access to the ecosystem or increasing wealth disparity.

Proof of Stake is often considered to be a system where “the rich get richer” due to the way it rewards the ownership of capital. In a Reddit AMA, Ethereum Foundation representatives argued that the opposite is true:

“In both bases, the owning of an asset allows for seeking gains on that asset. The difference between the two is that in PoS, the mapping of capital to gains is much more direct and fair (i.e. buy token, lock token, perform duties, gain X). Where in PoW, the mapping of capital to gains is highly dependent upon extra-protocol factors.”

In the Cardano network, Kiayias emphasized that PoS makes no distinction between the “rich man’s dollar” and the “poor man’s dollar.” He explained:

“Proof of Work systems, if you look at them, cannot give you a perfectly egalitarian version [of consensus] [...] Whereas in a Proof of Stake system, in principle, you could have a situation where one dollar in the pocket of the poor person would be equal in strength to a dollar in the pocket of a rich person.”

The CEO of Equilibrium, a project designing an algorithmic stablecoin on EOS, also agreed with the Ethereum Foundation’s argument:

“I totally support this assessment. Staking highly fungible tokens doesn't create any entry barriers and doesn't lead to any kind of disparity as long as the given tokens are accessible on the open market.”

They share the opinion that mining increases wealth disparity due to the accumulation of “extra-protocol” factors. Bulk discounts, early or even exclusive access to new hardware — all of these make Proof of Work inherently unfair, according to many PoS proponents.

Alejandro De La Torre, VP at Poolin, currently the largest Bitcoin mining pool, believes the exact opposite — that extra-protocol advantages make Proof of Work fair. Speaking with Cointelegraph, he said:

“In my opinion, the possibility of creating a new chip, accelerating the OS of a mining rig, or literally any other discovery that gives you an advantage in PoW mining is essentially the reason why PoW is the fairer 'cryptoeconomic' protocol. [...] PoS only relies on having the core asset; and the more you have the more you make. There is no other way to improve your situation in PoS mining, barring of course just purchasing more of the underlying staked asset.”

Equality of opportunity is what matters

Cointelegraph also spoke with Campbell R. Harvey, Professor of International Business at Duke University, to learn more about the concept of economic disparity and how it relates to consensus mechanisms. Summarizing his position on the wealth disparity gap in blockchain economics, he said:

“Yes, one critique of PoS is that the rich get richer. In PoW, it is more of a business operation with the miners not needing to hold BTC, ETH, etc. In PoS, you need to hold.”

Harvey argues that the two systems have different economic natures, focusing on the business operation aspect of PoW — where miners can have negative profit, get outcompeted or fail entirely. He explained:

“I don’t think modern mining is an important factor for wealth distribution. Indeed, a large amount of mining becomes obsolete not because of age but because of fluctuations in BTC prices.”

When asked whether bulk discounts contribute toward wealth disparity, he replied that it is a normal economic phenomenon called scale efficiency. Mining is “no different than any other industry” according to him.

Harvey then explained that wealth inequality is generally expected in any free market system due to “differential natural endowment of skill” and luck. He continued:

“We usually focus on inequality of opportunity rather than wealth. In a free market, anyone with a good idea should be able to make it to the top 1%.”

From an opportunity standpoint, Proof of Stake systems are generally fair. Harvey pointed to the model of Delegated Proof of Stake (dPoS) as an example, where “even small holders can participate in the miner rewards by delegating some of their stake.”

Staking pools and delegation models are generally present in any PoS system though, and they could be implemented through extra-protocol measures as well — similar to PoW mining pools.

But De La Torre argues that equality of opportunity applies to the ASIC mining industry as well. He explained:

“Historically, machines last a good three or four years before they are made obsolete — break, difficulty too high, etc. [...] Like we are seeing now, with the ending of the mighty [Bitmain] S9 era, the entire cycle of the mining industry begins again. This cycle is the creation of new miners, new OS [operating systems], the sourcing of cheaper electricity around the globe. This cycle also brings in new participants that want to take advantage of PoW mining.”

Mining is not always the same

Kristy Leigh-Minehan, former CTO of Genesis Mining and one of the creators of ProgPow, believes that many of the equality concerns against PoW are specifically related to ASIC mining. When using consumer hardware to mine, their wide availability diminishes many of the supposedly unfair competitive practices. She explained:

“CPUs and GPUs have existing supply chains that are used to distribute to hundreds of thousands of individuals, every day, all over the world. So when you build a Proof of Work algorithm that takes advantage of that hardware, you're piggybacking on that supply chain and that distribution channel, instead of creating and inventing your own.”

In her view, ensuring that “Alice and Bob have the same capability of earning a coin” is crucial in designing a proper PoW algorithm. She conceded that miners will always tend to specialize and optimize their operations, so the key is to ensure that miners compete fairly “on the CapEx side.”

Capital expenditure (CapEx) for ASICs can be reduced significantly for large players due to scale effects. On the other hand, GPUs and other consumer hardware are much cheaper and easier to source for average people, according to Minehan.

The fundamental contribution of PoW

Minehan is a strong believer in the contribution to network activity from GPU miners — especially early on. She emphasized that “humans don't want to spend their hard-earned fiat on magical internet money”. On the other hand, she believes contributing with already-owned computer power is a much more suitable proposition.

In truth, the concept of an initial coin offering (ICO) is, essentially, spending fiat on “magical internet money.” But this could not have happened by itself — it is the result of the groundwork laid by Bitcoin and Ethereum. 

The former legitimized the entire concept of “magical internet money.” More than 17 months passed between the Bitcoin genesis block in January 2009 and the famous Bitcoin pizza transaction on May 22, 2010 — the first to give BTC a fiat value.

Ethereum built on this by being one of the first ICOs in 2013, and proving that the concept can work.

Distributing the initial Bitcoins would have been essentially impossible in a staking environment. It is only after the network is stabilized, Minehan argues, that the transition to staking can occur.

Wocom-Pyatt also highlighted PoW as a “high quality source of entropy” to ensure a fair distribution of tokens. Peercoin also relied on PoW for the initial distribution.

The systems are different, not necessarily better or worse

In conclusion, debates on the economic equality of Proof of Stake and Proof of Work are perhaps the wrong way to look about it, as Harvey suggested. It is difficult to conclude that one system centralizes wealth more than the other. 

In most PoW systems, the miners can gain unfair advantages over others — but they can also fail and lose their entire investment through no fault of their own, something that is normally impossible in PoS systems.

Wocom-Pyatt, whose project is a hybrid, summarized that “pure PoS is substantially different from pure PoW.”

He argues that hybridizing them allows Decred to benefit from the best of both worlds. The PoW side “works well as a means to gamify timestamping” and thus ensure immutability, but PoS is still needed to align incentives for governance.

Wocom-Pyatt believes that miners’ interests are not as strongly aligned with the cryptocurrency as for stakers, which leads to “shortcomings in the context of governance.”

Decred’s experience may suggest it is misguided to debate PoS in opposition to PoW. Combining both appears to shore up any perceived weaknesses that they may have individually — something that is not applicable to other blockchain debates, such as Ethash versus ProgPow.

But from a governance standpoint, the recent exchange takeover of Steem highlighted that those who control tokens are necessarily the owners of those tokens.

The second part of this series will feature an in-depth examination of how governance works in PoS and PoW.

via cointelgraph.com

What Is Happening to Money?

Money — the magical power it has on people is almost universal. But whether we earn it, spend it or save it, we hardly ever think about the following questions: What is money? Why does it exist? What will money look like in the future? And why should we think too much about it? Our money works. Day in, day out, we use it without much effort. So what’s the problem?

As August Friedrich von Hayek pointed out, we humans constantly use things we don’t know anything about. For example, you don’t need to know anything about internal combustion engines in order to drive a car.  It’s no different with money. We don’t have to think deeply about money in order to use it successfully. This very fact is what makes us such a successful species and indicates how well our market and knowledge society functions.

Given recent developments, more and more people have started pondering the state of today’s money. This is indicative of the fact that strange things are happening in the realm of money.

What the general public is being told right now is that money can be created ad infinitum. With the coronavirus popping the so-called “Everything Bubble,” central banks have been interfering heavily by providing vast amounts of money — in all the different flavors that money or money-like substitutes exist in today’s financial world. On top of that, governments have set up stimulus packages in the trillions of dollars, exceeding anything the world has ever seen by far. 

In the wake of the enormous money tsunami unleashed onto economies and societies, people have begun (rightfully) to start asking the question: What has become of money? Is money even worth anything any longer?

A Battle of Devaluation

Others, among them many bitcoiners, are asking the question: How has money gotten to this point? In order to answer this question one has to go back to 1971, when the dollar, as the last national currency, was cut off from gold. Perhaps surprisingly, government currencies did not crash to zero at that time; rather they moved to a system of free exchange rates. 

Whereas the yellow precious metal had previously served as an anchor of value and price, henceforth a battle of national currencies was unleashed. This battle turned out to be quite costly. The different exchange rates of individual currency pairs led to an increase in currency risks. The latter increased transaction costs for international trade, which continue to weigh heavily on global trade to this day, representing a globally inefficient barter system on a national currency level.

Merchants, companies and politicians reacted to this situation. Within the political sphere, the U.S. dollar developed into the global unit of account for oil and other commodities due to U.S. hegemony being the strongest economic power around the globe. To this day, the U.S. dollar continues to function as an international reserve currency. In this way, the greenback facilitates global trade, but due to its importance it also let the U.S. exploit what is called its “privilège exorbitant.” The sheer dominance of the dollar and the advantages for U.S. markets are impressive. 

Financialization of the World

The entrepreneurial response has been to financialize the world and create derivatives and more and more hedge funds. The former are financial products whose primary objective is the contractual hedging of risks over time and space. The latter, hedge funds, are entities that trade in these financial products in the form of actively managed investment funds. It is, therefore, hardly surprising today that hedging transactions to minimize exchange rate risks account for a considerable proportion of total financial transactions.

Government currencies beget ever greater financialization. It’s the entrepreneurs’ reaction to them. So the ever-increasing number of derivatives used today is ultimately a consequence of the costly effects of this diversity of national currencies. Anyone wishing to send money across national borders today pays hefty fees. The reason: the reality of different currency areas requires the involvement of banking and financial institutions. Countless banks, partner banks and financial service providers from different countries are involved and want their “fair” share. So, ultimately, our current international monetary order resembles a global barter trade based on numerous fiat monies. Legacy systems and regulatory requirements make their efficient and rapid transfer difficult.

The various fintech companies of today are therefore also actors in the entrepreneurial reaction to this state of affairs. The most popular and successful among them are those who want to remove artificial barriers in international payment transactions resulting from this global barter. Upstart companies such as TransferWise or Revolut are making possible those things that banks have barely managed to do. Sending and receiving national currencies is not only becoming faster but also cheaper.

Bitcoin: The Ultimate Reaction

The entrepreneurial reaction in the form of financializing the world has its drawbacks though. It might help investors, entrepreneurs and corporations to deal with the hassle of government currencies, but the system at large is being inflated and becomes ever more fragile. Ironically, this is also the reason why we see central banks floating the markets now. They are reacting toward something that has itself been a reaction to central bank national currencies in the first place. The problem is a closed loop that creates an ever greater problem.

In 2009, a new player entered the stage: bitcoin. In a sense, the crypto asset is the final reaction that aims to break this closed loop of national currencies and financialization. Born at the height of the financial crisis, Bitcoin represents the antithesis to the existing financial order. It is an attempt to wrest money as a force influencing the economy, politics and society from the hands of centrally planned God players. 

Money again should be scarce and decentralized in order to tame the endless appetite of politicians, functionaries and economic giants. In the eyes of its supporters, Bitcoin is a counter-reaction to the shameful misuse of fiat money. Whether fiat money is supported by the state and issued by private banks or even corporations, the problem remains the same: It remains in centralized hands and users cannot keep self-sovereign control of it. 

Digital payment solutions that promise to turn current money into “fiat money 2.0” are merely putting “lipstick on a pig,” according to the argument of Bitcoin aficionados. This would not solve the fundamental problem of monetary socialism that is ailing our current monetary system. Money is still tied to intermediaries and every payment made is recorded in a central database controlled by a third party. Transactions can be censored at any time.

A Real Alternative

For this reason, a distinction must be made between digital currencies and cryptocurrencies. The latter can be exclusively controlled by individuals using cryptographic methods. So-called cryptographic values can thus be held and used directly by their owners and without intermediaries, similar to bearer instruments or material objects. Instead of being managed by an intermediary, cryptographic values are based on a blockchain. This is a distributed database that nobody has sole control over. A blockchain is ultimately a computer protocol, based on programming code. From a technical point of view, this turns the crypto assets into pure information and mathematics.

Consequently, Bitcoin stands for an alternative way of thinking about financial systems. Today, our financial system is a conglomerate of abstract constructs such as contracts, promises and balance sheets. This bears witness to the fact that our economy has been becoming ever more abstract. Money is no exception. The great philosopher and sociologist Georg Simmel already noted this tendency toward ever greater abstraction in his work “The Philosophy of Money.” 

There exists a hierarchy of money in today’s financial system: money in the narrower sense, which is also known as base money; and money in a broader, more abstract sense in the form of bank deposits, shadow banking IOUs, credit cards or mobile payment options. This development toward more abstract forms of money is driven by the financialization of the past decades, which has led to a stronger fusion of the economic and financial worlds. 

This amalgamate requires a financial alchemy that is now based on three basic building blocks: institutions (technology), incentives and human participation. In the existing financial system, the human element predominates. Contracts and promises are framed by institutions, but they are executed and enforced by human hands. 

An uneducated observer might regard Bitcoin as only the latest iteration in this constant evolution toward more abstraction. And although bitcoin truly is an abstract form of money, it is not a mere extension of this hierarchy of money in a seemingly endless game of financialization. It is a new form of base money for a new form of network or institution powered by what is today generally called an open, neutral, borderless, censorship-resistant public blockchain.

As a new form of base money, bitcoin will see financialization occur and with it, ever greater abstraction happening on top of the bitcoin base money. Interestingly enough though, on its most fundamental layer, the Bitcoin protocol reduces the human element to an unprecedented extent and gives technology and incentives more weight.

Incentives to keep the human element in check and technology are becoming more important due to mathematics, cryptography and computer science. A financial alchemy as we know it today, but one based on Bitcoin, is likely to depend less on the human element and more on computers, formulas and code in order to control, execute and enforce it. It’s the hope of bitcoiners that this sort of financial alchemy will be better in an objective sense than what we have today. 

The Endgame Is Upon Us

So let’s come back to the question asked in the beginning. What has become of money? Quo vadis, financial system? It seems obvious that our current financial system can only go down this one path: Ever more money is needed to keep it alive. Helicopter money is imminent in the U.S., another chapter in the tragic but inevitable trajectory of money.

Further reading: Zero Interest, Limitless Repo And QE4: The Federal Reserve’s Market Operations Explained

The ultimate chapter will finally be the adoption of what is referred to today as “modern monetary theory” or MMT. This theory, which ironically is not “modern” at all, holds that the state does not need creditors because it can create funds in its own currency at will. As a monetary sovereign, the state is, therefore, not dependent on borrowing on the market in the form of government bonds. It would much rather create the money itself via the central bank incorporated into it. 

MMT has been growing in popularity, probably because more and more people seem to intuitively feel the inevitable endgame. Other reasons are also more pragmatic: MMT is a blank check for all kinds of political projects such as “jobs,” “education” or “climate protection.” Fewer and fewer people are able to resist financial resources for political “necessities” — after all, the ultimate aim is to enrich society.

Another argument at the heart of MMT is that of justice. Today, bankers and other financial actors seek to enrich themselves in the process of financing of the state, so the argument goes. A few people get richer and richer at the expense of the masses. The fact that MMT wants to end the whole financial circus around interest rates and government bonds by depriving commercial banks of the opportunity to create money is thus met with approval, especially from the political left. The entrepreneurial reaction of financialization will not be made possible anymore; the state will take over all on its own.

Debating whether MMT will be more just than today’s system really doesn’t make any sense, in the end. Once money has lost all its meaning, there’s no point in debating any justice because there won’t be any left. Money will truly be worthless; people will only use it under a state of coercion. 

In the wake of this coronavirus crisis, the great triumvirate of our day and age — governments, central banks and banks — has set out to achieve the following: “Fiat iustitia et pereat mundus” or “Let justice be done, though the world perish.” The problem, however, is that in fiat money, there is really no iustitia left. Without justice, there is only pereat mundus… 

So, as an antithesis to endless growth and the meaningless of money, Bitcoin stands firm: Its network is limited to 21 million bitcoin units only. There will never be more bitcoin. That is the message of it all, and in a world in which “relatively scarce” money in the form of state fiat currencies will soon only be suitable for lame jokes, such a message is more important than ever. 

So if Bitcoin didn’t exist, it would have to be invented: As a psychological elixir of life, so to speak, it will give comfort and confidence to many more people in the light of the crazy money interventions of our times. What would we do without Bitcoin?

This is an op ed contribution by Pascal Hügli. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.

The post What Is Happening to Money? appeared first on Bitcoin Magazine.

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From SARS to COVID-19: Hong Kong’s Path to an Asia Free Health Zone

Bats are a known harbor to a large variety of viruses. Humans rarely interact with bats directly (they are not a common delicacy or pet in China), but other wild animals, such as civets and pangolins, do. Seventeen years before the outbreak of COVID-19, a coronavirus already made the jump to humans, likely starting with a farmer in Guangdong province in Southern China.

2013: SARS

In the case of SARS, it remained locally contained until a fishmonger from the Guangdong region was checked into a hospital in the province’s capital of Guangzhou on January 31, 2003. There, he infected 30 nurses and doctors.

Ten days later, China notified the WHO, but another ten days later, one of the infected doctors traveled to Hong Kong to attend a wedding ceremony. Within a day of his arrival, he felt sick and checked himself into a local hospital, where he died two weeks later.

Shortly after, other hotel guests checked themselves into hospitals in Vietnam, Canada and Singapore. Throughout March and April, SARS spread quickly in Hong Kong, infecting 1,700 people (80 percent of whom were infected directly or indirectly through the Guangzhou doctor), killing 300.

By May, Hong Kong’s number of newly infected cases dropped to the single digits, and by June the area was declared free of any infections. While some researchers infected themselves months later while handling the virus, the outbreak was declared contained in July 2003.

The SARS outbreak shaped Hong Kong forever. The two-week school closures remain vivid in the memory of all students; street markets were dramatically altered in its aftermath; bathrooms were remodelled and plumbing remade (over 300 people were infected in a single block of an apartment building as the virus spread through the pipes). Temperature scanners were installed at border crossings and fever clinics were set up, usually via a separate entrance to a hospital. Many employers, especially those servicing large numbers of customers, made masks available to employees.

2019: A New Virus

When Wuhan doctor Li Wenliang posted in a WeChat group for doctors on December 30, 2019, about SARS having returned, people in Hong Kong opened their ears wide and local media began reporting on it. When the Chinese CDC and the WHO declared in mid-January that there is no evidence this new virus could be transmitted from human to human, Hong Kong did not believe them. The local authorities confirmed their first case by January 23, 2020. On the same day, Wuhan was put under complete lockdown and the over 7 million people of Hong Kong knew the drill. They stocked up on masks, soap and hand sanitizer, cancelled their travel plans or returned from their trips to China. Blockchain meetups began to cancel their gatherings and venues closed their doors to talks and seminars.

Remembering the cover up by Chinese authorities around SARS in early 2003, residents  assumed the worst. They were convinced the virus was already among them and every returnee from China was a potential carrier. With its unusually long incubation time and the possibilities of asymptomatic carriers, the “Wuhan Pneumonia,” as it was then referred to in Chinese and Hong Kongese media, was taken seriously.

Having only recently unionized themselves in response to the 2019 Hong Kong protests, concerned doctors and hospital staff began to strike for border closures. While the government initially rebuked such demands as “discriminatory,” the pressure from losing 40 percent of their medical staff during an emergency became too high; major land and sea crossings were closed and all those arriving had to put themselves into 14-day mandatory quarantine.

Even without any official orders and while authorities at the WHO and China CDC were still playing down the threat, local restaurants and streets became deserted and events were cancelled. The feared epidemic, however, did not materialize. One month after the first case was reported, and as the first cases were officially recovered, only 73 cases were known, most of which had been imported from China.

Moving Toward Greater Surveillance

As the disease began to spread in Europe, Hong Kongers let their guard down. They reappeared in malls and restaurants, congregated under the unusually clear skies in Hong Kong’s country parks and returned to their desks. Europe seemed far away.

Another month later, by March 25, the number of total cases had increased to 350; over 60 percent of cases were recorded just in the past ten days. Throughout March, Hong Kong authorities began to significantly restrict International travel. First, only arrivals from Italy, Korea and Hokkaido were instructed to be quarantined, then arrivals from parts of France and Germany, then the entire Schengen area, then U.S., Ireland and the U.K., finally the entire world. 

As of now, non-residents are not allowed to enter or even transfer through Hong Kong airport. All ferry and cruise ship terminals have been shut. Those arriving from northern Italy are put into a supervised quarantine complex run by the government at a cost of about $25 per day, including board. They are not allowed to leave their room or receive visitors for 14 days.

Everyone else has to put themselves under quarantine at home or in a hotel. Other members of their household are advised not to leave their unit either. Those under quarantine have to wear a simple PVC armband, like the kind you receive at a festival or club. It is sealed and has a printed QR code.

The QR code contains a simple case number. It can be scanned using an app available on the Google Play and Apple App stores and connected to a phone number. It scans nearby Wi-Fi signals and uses their relative strength to determine if an individual has left their home. The “Stay Home Safe” app has been criticized for not working properly and is likely not very functional.

Most of the quarantined travellers are returning students and those who have been on short-term employment in Europe. Unlike in neighboring Taiwan, where those under a quarantine order are strictly surveilled and receive regular visits from the authorities. Hong Kong’s police are unable to follow up with everyone under quarantine. Instead, they are asking the public for help. Telegram channels exist where people can dox anyone violating their quarantine orders. A recently announced version of the wristband will connect to its holder’s smartphone via Bluetooth. If the connection is cut (for example, because the phone is left at home while the holder ventures out) the authorities are alerted.

Consequences of Isolation

Hong Kongers take SARS-CoV-2 seriously, and unlike authorities in Europe and America, the Hong Kong administration will work hard to completely eradicate the disease from the city, as it did during the SARS outbreak in 2003. They believe society cannot “coexist” with shutdowns for too long, and allowing COVID-19 to spread through society threatens modern civilization.

So far, chances seem good that the virus can be eradicated in the city without bringing the economy to a dangerous halt, with frequent temperature checks, voluntary self confinement at home, zero tolerance for leaving home while feeling unwell and facemasks for everyone. Other neighboring countries, such as Korea, Japan, Taiwan and Singapore seem to be on a similar trajectory.

More worrying for now remains the medium-term future. Will travel to Europe and the United States resume this year? With outbreaks so massive, lack of testing and no political will to entirely contain this, it seems unlikely Hong Kong authorities will want to risk a third or fourth wave of imported cases.

It’s entirely conceivable we will see an “Asia Free Health Zone,” a loose union of places that are COVID free, and have policies in places to keep it that way. Tourists and business travelers are able to freely move between these areas, while everyone outside is required to quarantine for 14 days. With testing becoming more reliable and available, maybe this period can be shortened to just five days, in which no daily test is allowed to return positive.

The disruptions of daily life have already far exceeded those of the traumatic SARS outbreak 17 years ago. School closures are scheduled to be six times longer and might be extended beyond that. Even when Hong Kong was hardest hit by SARS, flights remained scheduled.

Cryptocurrency conferences such as Blockchain Week, Token2047 and SPOT are cancelled throughout July, and there is significant uncertainty around whether they can be held in the fall or even in 2021. Hong Kong lives off its massive financial services, accounting and logistics industries. It relies on food and pharmaceutical imports and has close to no domestic industry of its own.

It has a highly skilled and young workforce, but political considerations have made it difficult in the past to reinvent the economy on a more sustainable path. While “virtual commodities” like bitcoin and ether remain unregulated and freely convertible, the cryptocurrency industry is straight-up unwelcome among the multinational banks and local regulators.

Being highly internationally connected, Hong Kong’s fate depends on the economies around it. The efforts to contain COVID-19 cannot be locally isolated but have to be internationally coordinated. Authorities have to produce reliable data and look beyond their own population when implementing policies. Given the rise of isolationist nationalism and tense cross-Pacific relations, all of this seems more difficult than ever.

This is an op ed contribution by Leo Weese. Opinions expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.

The post From SARS to COVID-19: Hong Kong’s Path to an Asia Free Health Zone appeared first on Bitcoin Magazine.

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Libra Rival Celo Announces $700,000 in Grant Funding for 13 Startups

Libra rival Celo has announced its first round of development grant funding, designating $700,000 to 13 companies so far.

Open-source payments network Celo has announced its first round of development grant recipients.

A press release shared with Cointelegraph states that Celo has awarded $700,000 in grants to 13 different companies who are looking to build on top of the network, contribute to the development of the Celo platform, or foster the Celo community.

The project has already received more than 50 grants proposals from teams based in 16 different countries and will continue to accept proposals until May 19.

Celo Awards $700,000 to 13 developers in first round of grant funding

Celo states that the chosen grant recipients "provide building blocks to help strengthen the Celo protocol, provide more access to the financially underserved, and develop programs to help educate and nurture the Celo community.” 

The recipients building products and services on Celo include eSolidar — a charity marketplace platform, Philippine-based digital gift card platform Beam & Co, Brazilian crypto-powered platform for small paid tasks LoveCrypto, payments platform Pay with Mon, and bill remittance platform SaldoMX.

The Blockchain for Social Impact Coalition — a nonprofit for incubating Ethereum and blockchain-based solutions to address the United Nations’ Sustainable Development Goals — is also a recipient of funding from Celo.

The largest cohort of recipients are startups “building blocks to strengthen and scale the Celo platform” — which include Chorus One, Forbole, Gitcoin, Stake.fish, Figment, Gauntlet and Chainsafe.

Grants intended to foster Celo community and ecosystem

Celo announced its community grant program on Dec. 17, 2019, encouraging all “developers, designers, dreamers, and doers committed to building an open financial system” to apply.

The grants sought to foster development in governance and validator tools, on and off-ramps for payments and point-of-sale systems, smart contracts, and community education, in addition to innovative new use cases for the platform.

Libra members join Celo to hedge bets

On March 11, the Celo Foundation revealed the 50 founding members of its “Alliance for Prosperity,” including major tech, investment, payments, and cryptocurrency firms.

Among the alliance are several Libra Association members, including Andreessen Horowitz, Coinbase Ventures, Anchorage Mercy Corps, and Bison Trails.

During April 2019, Celo raised $30 million from noted blockchain investors Polychain Capital and Andreessen Horowitz.

via cointelgraph.com

Bitcoin Hash Rate Drop: Miners, the Halving and Coronavirus Suspected

While a 29% drop in Bitcoin’s hash rate might be due to the miners’ capitulation, analysts point to other factors that could have had a bigger impact.

The Bitcoin (BTC) network hash rate took a steep dive on March 26, dropping by a whopping 15.95%, which is a 45% sink from its peak highs of 2020. The hash rate dipped from 136.2 quintillion hashes per second on March 1 to just 75.7 EH/s on March 26, according to data from Blockchain.com.

Analytics website Coin Dance reported similar findings, with the 2020 peak standing at about 150 EH/s on March 5 and then dropping to 105.6 EH/s 10 days later, thus showing a 29% decrease.

The combined effects of the hash rate decrease and the ensuing outflow of miners from the market have resulted in arguably one of the biggest blows to the Bitcoin network since 2011. The negative impact is difficult to fully assess at this time. However, the reasons for the slump are disputable and are being attributed to a number of factors — from the upcoming BTC halving and the raging coronavirus pandemic to a worldwide recession causing miners to leave the market.

Why is this happening?

The Bitcoin network’s hash rate is designed in such a way that it adjusts the computational difficulty of the mining process after every 2,016 blocks — which happens about every two weeks. The correlation is directly proportional: If the hash rate goes up, so does the computational difficulty and vice versa. The given measure is designed to increase the challenge of mining blocks, making the process more rewarding.

The 15.5% drop has directly impacted the decrease in mining difficulty from a measurement of 16.5 trillion to 13.9 trillion on March 26, meaning that a large number of miners had disconnected from the chain. Such a turn of events was expected after the past month’s turbulent events, which saw Bitcoin roller-coasting to $3,600, showing a 60% decline. As a result, many miners allegedly found it unprofitable to keep mining and running the equipment, which consumes a lot of electricity.

Are miners really leaving the market?

Hash rates and mining difficulty are directly correlated and have historically been the trendsetters of the so-called “miners’ capitulation cycle,” which signifies that mining is profitable as long as the BTC price remains high. As the computation difficulty rises, miners with low-powered equipment are forced to sell off their assets to keep mining, which leads to an increase in the supply of Bitcoin. When miners are unable to compete, they leave the market, and this leads to a decrease in the hash rate.

Walter Salama, the chief compliance officer of mining company Bitpatagonia, told Cointelegraph that he is inclined to think that the departure of the miners has contributed to the decline of the hash rate:

“All miners invest for a long-term business and contribute to blockchain. The medium to small miners, many are closing, we have all made the same mistakes, we have entered the industry with very high costs of the machines and with a Bitcoin that never stopped falling in value and when we had an attractive price to sell and recover, we did not have stock because we were always forced to badly sell to survive.”

Pierce Crosby, the general manager of TradingView, explained to Cointelegraph that a lot of the volatility of the hash rate is based on programmatic price limits set for different mining rigs. Because of the math on hash rate rewards, the lower the price, the lower the margin per computation, so these rigs will likely slow down until the price rebounds and margins expand, Crosby said.

The theory was put into practice on March 26 and led to a reset of the network’s computation difficulty. As the difficulty shifted downward, the miners’ capitulation cycle closed the full circle. This may continue until only the strongest remain, highlighting one of the fundamental flaws of the Bitcoin network.

Related: Bitcoin Halving, Explained

However, many experts disagree that the recent BTC hash rate drop has anything to do with miners capitulating. Donnell Wright, a miner and blockchain compliance consultant, told Cointelegraph:

“Miners could be capitulating, but I don’t think that is what is happening now, especially so close to the BTC halving. Usually, after the halving, we end up seeing a huge spike in price, so based on previous data, it would be detrimental to capitulate.”

Other contributing factors

There could be a number of reasonable explanations, however, as to why the BTC network hash rate has taken a decline, as added by Wright:

“It could be that miners are competing with newer technology, so they may have to shut off current miners to upgrade. It’s also likely that mining operations may be forced to temporarily shut down due to COVID-19, depending on the region. I don’t believe the decline is linked to the halving, which may actually incentivize bigger players to mine — after the fact.”

Vector Moranov, miner and member of the Bitcoin Foundation, noted to Cointelegraph that apart from a direct relationship between the BTC hash rate drop of March 2020 and the Bitcoin price, miners also have fears of an economic crisis that might happen due to the coronavirus pandemic.

A decrease in the hash rate could also be caused by a deficit of miners and the closure of farms and production in China, as well as the rise in the price of the equipment. Over 30% of the mining takes place in China, according to Sidharth Sogani, founder and CEO of Crebaco, a research and intelligence firm focused on blockchain and crypto projects, further told Cointelegraph:

“China being under a lockdown is one of the reasons why the hash rate has reduced because the mining facilities are not operating at its best capacities.”

Sogani added that new ASIC mining machines upgraded specially for the upcoming BTC halving have been affected as well. The pandemic tossed a wrench into the introduction schedule of new mining rigs, resulting in a sell-off of BTC. Considering the immense upgrade of hardware that took place in 2019, the service life of that equipment may be coming to an end, as the almost twofold hash rate increase over the first quarter of 2020 has compressed the operating margins.

In addition, Bitcoin corrected its price by introducing a multiplier effect on low margins, leading to the capitulation of inefficient miners. The monthly production by miners of over 54,000 new Bitcoin every block is also battering the coin’s price, resulting in excess in supply.

The pressure to sell Bitcoin in order to maintain mining equipment is immense, as miners may still try to get significant profit margins. This leads to a “survival of the fittest” situation, as experienced miners with high margins will be accumulating a larger percentage of the newly minted Bitcoin and will not be selling them to maintain their operations.

Despite the technical aspect, the impact of COVID-19 and the sharp drop of the S&P 500 on the BTC’s price are also strong contributing factors that could decrease the interest of miners in the coin. Vincent Poon, a vice president at Bithumb Global, noted the economic situation as the factor that affected BTC’s hash rate most of all. He told Cointelegraph:

“I believe the miners didn’t quit the game, the hash rate drop is due to the global turmoils similar to others assets and the cash out of the Ponzi schemes which there are still a handful of them out there. Historically speaking, halving did increase the price in short term. Miners are well aware of halving and is a calculated risk when they invested in mining machines. Some miners might quit but that also means they got more market share, which is a good thing for the miners in general.”

Possible scenario

Everything depends on BTC’s price and global market conditions, as a significant drop in mining difficulty and the possible rise of BTC above the $6,000 mark could still make older mining equipment like Bitmain’s Antminer S9 profitable. The cryptocurrency mining market and miners are very much active, just operating differently, according to Stephen Gregory, the chief compliance officer of crypto exchange CEX.io U.S. He claimed in an email conversation with Cointelegraph:

“Last week, in addition to a monthly CME settlement date, we saw over 50% of open interest options expired in Bitcoin alone. To me, this shows that perhaps miners may take some machines offline to cut costs but are still very much active in the market using the ever-expanding array of financial instruments to hedge their risks effectively. Although the theory of the ‘miner’s capitulation cycle,’ [...] still has merit; now that miners can hedge with options and futures, means there is more than one route to generating yield.”

Meanwhile, the situation has led many miners to start switching between the Bitcoin and Bitcoin Cash (BCH) networks to remain profitable. However, that may start changing on April 8 when BCH is set to halve its block reward. The same will happen to BTC on around May 15.

The long-term prognosis is that the hash rate will go up as mining is institutionalized, according to Wright. He told Cointelegraph:

“Enterprises will also continue to find innovative ways to mine BTC without using as much energy and power. This alone might introduce new institutional players into the space, which will allow hash to continue to break all-time highs.”

The derivation of the current situation directly shifts to the near future and poses questions about the state of Bitcoin after the halving if miners are the primary source of sell pressure. Matt D'Souza gave a laconic answer to the rhetorical question in his Twitter post: “50% less potential pressure.” In other words, miners with low margins are immensely affected by any negative price movements and will leave the network.

Some miners share this point of view. The Bitcoin Foundation’s Moranov told Cointelegraph that although some miners will shut down their devices in the short term, there will be a big wave of miners abandoning the market in the long run if the decline continues, especially because of Bitcoin’s halving.

However, many experts have also suggested positive scenarios. Miner capitulation has historically been a buy signal, and a bull market always follows periods of recession, as the post-Bitcoin-halving world could see an outflow of miners and a reward redistribution under lower sell pressure — which could potentially result in a Bitcoin price increase.

Sogani told Cointelegraph that although Bitcoin’s price may fall right away. In his opinion, BTC should break its all-time price high in no more than six months time, adding:

“That’s not because of the halving but because of excessive printing of money by the central banks globally to combat COVID-19 and control the recession. Printing of money does help in the short run, but in a few months, we will see that this recession will turn into a depression which will last for over 24 months.”

Wright also shared with Cointelegraph his positive prognosis on post-BTC halving prices, saying that in the long term, the decline in the hash rate will not have an impact and that a price uptrend will accompany volatility after the halving, adding: “The hash rate reached all-time highs in January 2019, and the price was not following, which yielded confusion and then BTC took a trip to $14K shortly after.”

D’Souza gave a more precise prediction, pointing to a period of one year and stating that the “recessions typically suppress most assets — especially risk-on assets, such as Bitcoin. We don’t call bottoms. Historically, during miner capitulation, 12-month returns have been favorable.” However, there are analysts who suggest that the hash rate may further drop. For instance, Crosby opined:

“The deterioration of different coin hash rates is visible to the larger investor community and, behaviorally, creates pessimism about the fundamental value of a currency. If this is ‘acted’ on, then price declines further, and hash rate will further decline as well. Downward spiral.”

via cointelgraph.com

Russia Postpones Its Crypto Law Again, Now Blaming Coronavirus

Anatoly Aksakov, a member of the Russian State Duma, says that the country’s crypto law won’t be adopted before the end of spring 2020.

After facing multiple delays, the adoption of Russia’s major cryptocurrency law will be postponed again, now due to the coronavirus.

Anatoly Aksakov, chairman of the Russian State Duma Committee on Financial Markets, says that the country’s crypto law — the bill “On Digital Financial Assets” — is now finalized but won’t be adopted before the end of the spring 2020.

Russian authorities have been arguing about crypto regulation since January 2018

According to a March 31 report by Russian news agency RBC, Aksakov has admitted that previous delays in the bill’s adoption were caused by disagreement on the new asset type between local authorities. Aksakov, who is also chairman of National Banking Council at Russia’s central bank, reportedly elaborated that the central bank opposed legalization of crypto while the State Duma advocated some crypto initiatives.

However, the long-awaited law is being postponed for another reason now. As Russia shifts its focus to priority actions against the COVID-19 pandemic, all legislative processes have slowed down, Aksakov reportedly noted. As reported by Cointelegraph, the bill has seen a number of delays after first being introduced in January 2018.

Aksakov says that Russia’s crypto law will not hinder operation of local crypto exchanges

Aksakov reportedly added that Russia’s upcoming crypto law will provide a definition of cryptocurrencies and prohibit the use of crypto as payment. Additionally, the law will include the issuance and circulation of digital assets, the official reportedly noted. However, in mid-March, a legal executive at Russia’s central bank said that the bill would ban the issuance and circulation of cryptocurrencies.

Aksakov also emphasized that the new law won’t hinder operation of crypto exchanges in case they won’t be violating it. The official also highlighted that the bill “On Digital Financial Assets” won’t include regulations regarding cryptocurrency mining. However, Aksakov expressed confidence that profits from crypto mining should be taxed, noting that crypto mining is a “type of business that produces value.”

Aksakov’s latest remarks about the new delay in adopting Russia’s upcoming crypto law comes subsequent to Russia recording its biggest one-day rise in coronavirus cases for the sixth day in a row. As reported by Reuters, Moscow’s authorities have already ordered residents to self-isolate, while the nationwide lockdown is being considered.

On March 24, the Ministry of Economic Development of the Russian Federation reportedly released a draft law that would allow the testing of cryptocurrency and blockchain developments within a special regulatory sandbox.

via cointelgraph.com

‘Prime Brokerage’ for Crypto: Apifiny Launches Institutional Platform to Connect Exchange Liquidity

Apifiny’s GlobalX is being released today, and is set to connect global crypto markets to provide a unified liquidity pool and new strategies for institutional investors.

Institutions will now be able to trade on every single crypto market simultaneously thanks to GlobalX, an API platform launched on March 31 by San Francisco-based firm Apifiny. The startup hired former executives of Google X, Kraken and AlphaPoint to promote the service.

Specifically, Josh Li will act as Apifiny’s chief business officer, having previous experience in Google and Google X, Alphabet’s innovation arm. Michael Fertman will lead the B2B marketing efforts as VP Marketing of Apifiny, coming from the security tokens startup AlphaPoint.

Finally, Scott Eilbeck was brought on as VP of strategic partnerships and institutional sales. He recently served as head of Over the Counter (OTC) markets at Kraken, while counting JP Morgan and Bear Stearns under past experiences.

Cointelegraph spoke with Li, Fertman and Apifiny’s CTO, Ashu Swami, to learn more about the GlobalX platform.

Connecting global liquidity

GlobalX works by integrating all of the world’s exchanges into one platform available to institutional traders. The firm opens business accounts with as many exchanges as possible across the entire world, while presenting a unified interface to its clients.

As Swami explained, the immediate reason for this is simple — it allows institutional traders to make large orders without depressing the price on one specific exchange. 

By distributing the order across global markets, the traders tap into global crypto liquidity, instead of just one crypto exchange. But there are other benefits, as he elaborated:

“These quantitative hedge funds are in the business of finding patterns. Even with things like ‘how does the sunrise and clouds affect stock prices?’ Very hypothetical things. And by being able to access the global prices in regional markets, they can create and implement different kinds of new strategies.”

Furthermore, some exchanges also limit the number of orders in a given period of time. Spreading the load between multiple platforms would allow to decrease latency and increase trading frequency, as Swami explained.

The core proposition of GlobalX is “increasing the bandwidth” available for institutional trading desks. As Fertman highlighted, trading on multiple exchanges is complex:

“If you look at before, in order to execute these global strategies, an institutional investor would have to set up accounts on multiple exchanges, globally. In order to execute rapidly, they would need separate sets of APIs to different exchanges. [...] On the front end, it is the equivalent of calling 17 different brokers to execute one trade, and not through one interface.”

GlobalX also provides a function that few institutional trading desks can have on their own — access to all local fiat-to-crypto markets.

Connecting them can also be a way to use crypto for trading opportunities between traditional foreign exchange markets, Swami said.

Is this a crypto broker?

Crypto exchanges are, in traditional terms, a combination of both an exchange and a broker. Generally, only very high-value clients can directly access traditional exchanges, while retail buyers can only do so through brokers.

GlobalX can be seen as reintroducing the concept of a broker, as its clients will not necessarily have accounts with the exchanges they trade on. When asked about this, Li replied:

“I think what we are doing is somewhat unique in that we're trying to really build this new way of doing business. [...] We're not directly competing with exchanges, we see them as strategic partners. We’re trying to help solve this global problem where liquidity pools are isolated to only a specific country or set of customers.”

Swami highlighted that the worlds of crypto and traditional securities are very different. He replied:

“This industry is evolving in an organic fashion. And it's very hard to use the existing securities industry’s labels and slap them on the activities that we are doing. But if you had to draw the closest analogy then I think our role is that of a prime broker.”

In traditional markets, prime brokerage is usually provided by investment banks to hedge funds to satisfy some specialized needs.

GlobalX could be considered as a sign that the crypto industry is maturing as an asset class. Its team stressed that connecting global liquidity could finally bring large institutional investors on board.

via cointelgraph.com

BCH, BSV Block Halvings Will Force Miners to Bitcoin (BTC) — Report

Two halvings in April will spark a month of increasing attention to BTC until its own halving takes place, despite its lack of profitability, says Coin Metrics.

Bitcoin (BTC) miners will continue to capitulate due to low prices, but upcoming events for Bitcoin Cash (BCH) and Bitcoin SV (BSV) will fuel the turmoil, says a new forecast.

In the latest edition of its State of the Network reports on March 31, Coin Metrics argued that Bitcoin was in a spiral of miner capitulation. This, it said, would get worse before it got better.

Coin Metrics expects “pattern of capitulation”

Despite BTC/USD recovering over 70% in two weeks since hitting lows of $3,700, prices are still “almost certainly declined below the breakeven price” for less efficient miners.

This is supported by the recent drop in Bitcoin’s mining difficulty, which at nearly 16% was the largest negative move since 2011. Before the mining sector recovers, more pain is in store.

“We expect miners to follow a cycle of decreased profit margins, increased selling, capitulation, and a culling of the least efficient miners from the network,” the report summarizes. 

“Once this cycle is complete, the miner industry should return to a healthier state that is supportive of future price increases.”

Bitcoin mining difficulty 6-month chart. Source: Blockchain

Bitcoin Cash and Bitcoin SV drop halving bomb

In the short term, however, turbulent times will continue to hit miners and impact Bitcoin. Next month, hard forks BCH and BSV will both undergo a block reward halving — reducing the number of coins awarded to miners each block by 50%.

Bitcoin’s own halving will only occur in mid-May and will halve the supply for miners from 12.5 BTC to 6.25 BTC.

This gives a one-month window during which miners will direct more hash power to BTC, as its block reward will be higher, despite the increased costs, says Coin Metrics.

“When Bitcoin Cash and Bitcoin SV halve their block rewards, this should force miners to direct even more hash power to Bitcoin as it will still have a 12.5 native unit block reward (instead of 6.25) for about a month longer,” the report adds.

“Therefore, we should expect difficulty increases for Bitcoin that should further squeeze profit margins for all miners.”

As Cointelegraph reported, analysts, particularly those who support the stock-to-flow price model for Bitcoin, are keenly awaiting the impact of the halving. At some point in 2021, and until 2024, stock-to-flow states, BTC/USD should trade at an average of $100,000.

via cointelgraph.com