Category: Features


Bitcoin ledger as a secret weapon in war against ransomware


Ransomware, malicious software that encrypts computers and keeps them locked until a ransom is paid, is the worlds fastest-growing cyber threat, according to Coinfirm. Recent attacks on critical national infrastructure, like the Colonial Pipeline incursion that crippled oil and gas deliveries for a week along the U.S. East Coast, have set off alarms. Ransom payments are almost always made in Bitcoin or other cryptocurrencies.

But while many were shaken by Mays Colonial Pipeline attack the Biden administration issued new pipeline regulations in its aftermath relatively few are aware of that dramas final act: Using blockchain analysis, the FBI was was able to follow the ransom payments fund flow and recover about 85% of the Bitcoin paid to ransomware group DarkSide.

In fact, blockchain analysis, which can be further enhanced with machine learning algorithms, is a promising new technique in the battle against ransomware. It takes some of cryptos core attributes e.g., decentralization and transparency and uses those properties against malware miscreants.

While cryptos detractors tend to emphasize its pseudonymity and attractiveness to criminal elements for that reason they tend to overlook the relative visibility of BTC transactions. The Bitcoin ledger is updated and distributed to tens of thousands of computers globally in real time each day, and its transactions are there for all to see. By analyzing flows, forensic specialists can often identify suspicious activity. This could prove to be the Achilles heel of the ransomware racket.

An underused means

The blockchain ledger on which Bitcoin transactions are recorded is an underutilized forensic tool that can be used by law enforcement agencies and others to identify and disrupt illicit activities, Michael Morrell, former acting director of the U.S. Central Intelligence Agency, declared in a recent blog, adding:

Put simply, blockchain analysis is a highly effective crime fighting and intelligence gathering tool.[…] One expert on the cryptocurrency ecosystem called blockchain technology a boon for surveillance.

Along these lines, three Columbia University researchers recently published a paper, Identifying Ransomware Actors in the Bitcoin Network, describing how they were able to use graph machine learning algorithms and blockchain analysis to identify ransomware attackers with 85% prediction accuracy on the test data set.

Those on the frontlines of the ransomware struggle see promise in blockchain analysis. While it may at first seem like cryptocurrency enables ransomware, cryptocurrency is actually instrumental in fighting it, Gurvais Grigg, global public sector chief technology officer at Chainalysis, tells Magazine, adding:

With the right tools, law enforcement can follow the money on the blockchain to better understand and disrupt the organizations operations and supply chain. This is a proven successful approach as we saw in Januarys takedown of the NetWalker ransomware strain.

Whether blockchain analysis alone is enough to thwart ransomware incursions or whether it needs to be joined with other tactics, like bringing political/economic pressure to bear on foreign countries that tolerate ransomware groups, is another question.

Unmasking criminals?

Clifford Neuman, associate professor of computer science practice at the University of Southern California, believes that blockchain analysis is an underutilized forensic tool. Many people, including criminals, assume Bitcoin is anonymous. In fact, it is far from being so in that the flow of funds is more visible on the public blockchain than it is in almost any other kinds of transactions. He adds: The trick is to tie the endpoints to individuals, and blockchain analysis tools can sometimes be used to do this linking.

A valid means for unmasking ransomware attackers? Yes, absolutely, Dave Jevans, CEO of crypto intelligence firm CipherTrace, tells Magazine. Using effective blockchain analytics, cryptocurrency intelligence software the sort his firm produces to track where ransomware actors are moving their funds can lead investigators to their true identities as they attempt to off-ramp their crypto to fiat.

 

 

 

 

David Carlisle, director of policy and regulatory affairs at analytics firm Elliptic, tells Magazine: Blockchain analysis is already a proven valuable technique for enabling law enforcement to disrupt the activities of these networks, as the Colonial Pipeline case made clear.

Within days of the May 8 ransom payment by Colonial Pipeline, Elliptic was able to identify the Bitcoin wallet that received the payment. Further, It [the wallet] had received Bitcoin payments since March totaling $17.5 million, recounts law firm Kelley Drye & Warren LLP. Elliptic was helped by the fact that the malefactors had used no mixers to further obscure their trail. Carlisle adds:

The underlying transparency of Bitcoin and other crypto assets means that law enforcement can often glean a level of insight into money laundering activity that would not be possible with fiat currencies.

A boost from machine learning?

Machine learning (ML) is one of those emerging technologies, like blockchain, for which novel use cases seem to be discovered weekly. Can ML assist too in the war against ransomware?

Absolutely, Allan Liska, a senior intelligence analyst at Recorded Future, tells Magazine, adding further: Given the large number of malicious transactions occurring at any given time and the increasing sophistication of some ransomware groups, money laundering capabilities manual analysis has become less effective and machine learning is required to effectively track tell-tale signs of malicious transactions.

Machine Learning is very promising in fighting crimes, Roman Bieda, head of fraud investigations at Coinfirm, informs Magazine, but it requires a huge amount of data to be effective. It is relatively easy to acquire Bitcoin addresses, which are available in the millions, but a dataset upon which a learning model can be trained and tested also requires a certain number of fraudulent Bitcoin addresses i.e., confirmed ransomware actors. Otherwise, the model will either mark a lot of false positives or will omit the fraudulent data as a minor percentage, says Bieda.

Say you want to build a model that will pull out photos of dogs from a trove of cat photos, but you have a training dataset with 1,000 cat photos and only one dog photo. An ML model would learn that it is okay to treat all photos as cat photos as the error margin is [only] 0.001, notes Bieda. In other words., the algorithm would just guess cat all the time, which would render the model useless, of course, even as it scored high in overall accuracy.

 

 

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In the Columbia University study, researchers made use of 400 million Bitcoin transactions and close to 40 million Bitcoin addresses, but only 143 of these were confirmed ransomware addresses.

We show that very local subgraphs of the known such actors are sufficient to differentiate between ransomware, random and gambling actors with 85% prediction accuracy on the test data set, reported the authors, adding that Further improvement should be possible by improving clustering algorithms.

They added, however, that Getting more data which is more reliable would improve accuracy, making the model more sensitive and avoiding the sort of problem described above by Bieda, presumably.

Along these lines, the United States Department of Homeland Security issued a directive in the wake of the Colonial Pipeline attack requiring pipeline companies to report cyberattacks. Reporting attacks had been optional before. Mandates like these will arguably help to build out a public dataset of fraudulent addresses needed for effective blockchain analysis. Adds Carlisle: Public-private partnerships need to focus on sharing financial intelligence related to ransomware attacks.

Much blockchain analysis is premised on the notion that attackers can be unmasked after an attack takes place. But law enforcement agencies, and especially ransomware victims, would prefer that assaults not happen in the first place. According to Jevans, blockchain analysis can also enable enforcement agencies to act preemptively. He tells Magazine:

While blockchain clustering algorithms typically require someone to make a payment into an address in order to track the funds and identify the owner, advanced tools like CipherTrace can produce actionable intelligence on addresses that have yet to receive funds, as well, such as IP data that can assist investigators.

Necessary but not sufficient?

Some ask, however, whether blockchain analysis by itself is sufficient to eliminate ransomware. Blockchain analysis is an important tool in law enforcements toolkit, but there is no single silver bullet for solving the ransomware problem, says Grigg.

Liska adds: Even the best research and identification tools arent effective unless governments are willing to take access. Stopping ransomware transactions is going to require cooperation between private entities and governments.

Many ransomware attacks originate on the borders of Russia, according to Coinfirm, so some ask if Vladimir Putin can be pressured to shut down those groups operations. Past cases show not much can be done against the countries related to the cyberattacks, even if there are very strong indicators that the hackers are related to the secret services, Bieda tells Magazine.

 

 

 

 

Others question whether blockchain analysis can make any dent at all in the malware problem. It is way too soon to write off cryptocurrency as a vehicle for ransomware, Edward Cartwright, professor of economics at De Montfort University, tells Magazine. While there have been a few good news stories of late, the reality is that ransomware criminals are still routinely using Bitcoin as the easiest and most anonymous way of extracting ransoms.

Moreover, even if Bitcoin becomes too radioactive for malefactors because of its traceability a big if, in Cartwrights view criminals can simply move to currencies that are completely anonymous and untraceable, like Monero and other privacy coins, he says.

We really need to see increased collaboration between the private and public sector to build full profiles of these ransomware groups, says Jevans. Information sharing in these situations can be the silver bullet.

One of the challenges is that ransomware groups are turning to offline methods to move Bitcoin, says Liska. Literally, two people meeting in a parking lot or restaurant with their phones and briefcase full of cash. These types of transactions are much harder to trace, he tells Magazine, but still not impossible with more advanced tracking techniques.

But will malefactors move to privacy coins?

What about Cartwrights point that ransomware actors will simply move to privacy coins like Monero if Bitcoin proves too traceable? Elliptic is already seeing a significant uptick in attempts to obtain payments from ransomware victims in Monero, Carlisle tells Magazine. This has really increased since the time of the Colonial Pipeline case, when the implications of Bitcoins traceability were on clear display for any other cybercriminals watching.

But privacy coins can be traced too, though its more difficult to do because, unlike Bitcoin, privacy coins hide users addresses and transaction amounts. Some jurisdictions, too, have cracked down on privacy coins, or are thinking of doing so. Japan banned privacy coins in 2018, for instance. But theres a practical problem too. Ransomware victims facing a payment deadline often have trouble finding exchanges that will convert their fiat currency into XMR within the required time period to pay their extortionists and unlock their computers, Bieda tells Magazine. Privacy coins arent nearly as well supported by crypto exchanges as Bitcoin. Jevans says Bitcoin is simply the easiest cryptocurrency to acquire, adding:

It is unlikely that ransomware actors will ever completely stop using Bitcoin because of its liquidity and the accessibility of Bitcoin to fiat off-ramps in comparison to other privacy-enhanced cryptocurrencies.

Most regulated exchanges do not offer Monero trading, adds Carlisle. Victims may negotiate with the attackers and persuade them to accept payment in Bitcoin, but attackers will then typically demand a fee of 10%15% for Bitcoin payments above what they would require for a Monero payment which reflects their concern that Bitcoins traceability leaves them vulnerable.

Is banning crypto a solution?

Recently, former Federal Reserve Bank of New York Supervisor Lee Reiners suggested in a Wall Street Journal opinion piece that There is a simpler and more effective way to stop the ransomware pandemic: Ban cryptocurrency. After all, he added, Ransomware cant succeed without cryptocurrency.

This sounds like a solution that would be even worse than the problem, comments Benjamin Sauter, a lawyer at Kobre & Kim LLP. However, it does reflect a perception, particularly among many policy makers in the U.S., that cryptocurrency offers a haven for criminals that needs to be restricted, he tells Magazine.

 

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The profitability for the threat actors that are carrying our ransomware attacks would certainly decrease if cryptocurrency did not exist, as laundering fiat is inherently more costly, Bill Siegel, co-founder and CEO of ransomware recovery firm Coveware, tells Magazine. These attacks would still happen though.

I do not think it makes sense to ban cryptocurrency, Neuman adds. The existing laws that are on the books in the U.S. require information to be collected on certain kinds of payment instruments for transactions over a certain threshold, and we can apply those rules to cryptocurrency as well. If we ban cryptocurrency, criminals will simply shift their payment demands to other instruments.

A cat and mouse game

Moving forward, ransomware groups will have to live with the increasing risk of getting caught by using Bitcoin, says Liska, or decide if they are willing to accept significantly lower ransom payments to better preserve their anonymity.

This remains a game of cat and mouse between the criminals and law enforcement, adds Cartwright, and recent successes of law enforcement are more because the criminals got sloppy or made mistakes [rather] than a fundamental flaw in the [criminals] business model.

A global effort may be required to turn the tide on ransomware. All countries need to regulate crypto exchange platforms, says Carlisle, otherwise attackers will continue to have easy avenues for laundering their proceeds of crime, while Bieda predicts that crypto will continue to be used for ransom payments until stringent global and regional regulations such as harsh penalties for lackluster KYC are introduced.

 

 

 

Its important to put ransomware in context, too. Ransomware is simply the most recent method used by criminals to monetize their exploits, says Neuman. At some point it might cease to be called ransomware, but attacks on computer systems will take other forms. Adds Sauter: Everyone would win if there were an industry-based solution.

In sum, people tend to overestimate Bitcoins anonymity and underestimate its transparency. There will always be bad actors, as Jevans notes, but ransomware groups will realize that crypto payments are traceable, leaving them vulnerable and perhaps even inciting them to find other means by which to pursue their perfidious trade.

Meanwhile, Continued advancements in blockchain analytics will provide investigators with more and even better insights over time, says Carlisle. And as law enforcement agencies become increasingly adept in their use of these analytic tools, We can expect to see more, and bigger, [ransomware] seizures over time.

 

 

 

 


How the crypto workforce changed in the pandemic


The pandemic has put hundreds of thousands of businesses out of action, saw others fold and decimated great swathes of the economy.

But, crypto thrived in this distributed environment. As the world clamped down and everyone was forced to decentralize, the crypto world shone.

Perhaps crypto, born of a crisis, is most at home in one. Working from home is where we all have spent most of this crisis.

Gaurang Tovekar is the CEO and co-founder at Indorse, a blockchain-powered enterprise SaaS platform. He says the company was perfectly placed to ride out the upheaval as the entire team has never been in the same physical location since the companys inception.

Although the pandemic accelerated remote work and the adoption of decentralization in the workforce globally on an unprecedented scale, it was already a norm within the crypto industry well before the pandemic struck.

He points out that although the company once had offices in Singapore and London, hed already swapped them out for hot desks in co-working spaces before the pandemic.

That way, those of us who want to meet up once or twice a week and bond socially can still do so in the office while working from home the majority of the time.

We have adapted our work styles and got used to this new normal in the last year and a half. I am sure that we as a company will not lease swanky office spaces any time soon, but rather provide better flexibility and other perks that make working from home more pleasurable for our team, he concludes.

 

 

 

Office as a luxury?

Stefan Rust, the former CEO of Bitcoin.com and now CEO and co-founder of Sonic Capital, is taking a different approach to remote working. Hes just signed a lease on a swanky office in Hong Kong but at a substantial discount. He intends to use this real estate luxury as a perk to benefit his mostly remote workforce.

I plan on creating large open plan spaces with sofas, TVs, screens and hot desks. I want people to be able to come in and relax, enjoy time with their co-workers, conduct meetings or just chill. The new office has to be a place where people want to come its about choice, explains Rust.

So, perhaps as pandemic restrictions wind back, an office will be seen as a luxury perk for tech and crypto companies, a central clubhouse that people use how and when they want.

Ramadan Ameen, CFO for privacy startup Panther Protocol, reflects that his international team was put in place during the pandemic in Jan. 2021. Not only has his team never all been in the one location, but the majority of the twenty staff also have never met each other in person. For Ameen, a team meetup and bonding session are significantly ahead of company offices, for now.

The co-founders have met, but the team is spread out across North and South America, Asia and Europe. We are looking forward to a team meetup in the fall, depending on Covid restrictions. Right now, our choices are limited, so we are still deciding among a few central locations.

 

 

 

 

Zoom zoom

For the Unique.network, a next-generation NFT chain for Polkadot and Kusama ecosystems, the lockdown was very positive. CEO Alex Mitrovic says his dispersed team put their collective heads down and just worked on the project. They entered a major Hackathon on Kusama to build a blockchain back in January 2020 and won. That set them up for earning more Web 3.0 Foundation grants before being accepted into the accelerator program run by Jamie Burke, CEO of Outlier Ventures, at the start of this year.

Having an internationally dispersed team is normal for me, lockdown just made it tighter, he says. People, often limited to restricted locations, wanted to connect and so we made it work.

The fact that, as lockdown proceeded, we re-entered a bull run didnt hurt at all.

One thing that unites remote workers in crypto is their passion and commitment to the industry Mitrovich says.

To work remotely often requires a degree of self-motivation and discipline. These are the very hallmarks of people in this space. And everyone gets the decentralized approach it is part of the territory.

Mitrovich says that remote work also offers a world of options for skilled workers in the blockchain sector.

People have more choices, he says. If they dont like someone or something, they can leave and move on. They might be restricted in geography but not in choices. I like to quote Jamie when he says Outliers operates a no jerk policy which cracks me up but which is also very cool.

I see my team blossoming in this lockdown. They are more honest about what they can and cannot do. And its my role as CEO to support them. No more top-down management, its all about consensus.

 

 

 

 

The etiquette of Zoom

Mitrovich feels that since the entire world first went into lockdown, people have been looking for ways to connect. Moreover, it had the feeling of democratizing the new workplace the home since few were still working out of boardrooms and offices.

It didnt matter where you were, everyone was reduced to a zoom screen, he says.

Interestingly, he says fewer people are late for meetings anymore.

Ive done 1000s of video calls and everyone turns up on time its like a mark of respect. No one has to travel of course and so its easier to be punctual, he says.

Cultural differences in approaches to video calls have become apparent as Mitrovich raises funds and speaks with investors across Asia.

I have never asked but Asian people tend to keep their videos off, whereas Western people leave theirs on. Maybe its because accessing videos from China for example requires a VPN or maybe its a question of poor connections.

 

 

 

 

Other leaders have actually developed policies on the video on and off question, believing its a way for employees to bond and maintain normal social interactions. Marie Tatibouet, CMO at the crypto exchange Gate.io is quite forceful on this point:

In a company as big as ours, interdepartmental synergy could be a challenge if you are not going to the office and seeing each other every day, she says. To mitigate this, we use online workspaces such as Notion so that everyone knows what everyone else is working on.

We also have a weekly meeting which is half official and half casual, with mandatory Video on. This way everyone knows what the team members look like and can interact with each other and share interesting stories from the market and their daily lives.

Family time

Crypto means juggling different jobs. It is not nine to five, the roles are fluid and people are expected to run with different tasks as demand dictates. There is rarely a single, static job description. Crypto plus remote offers flexibility, especially where families are involved.

Khalid Howladar is head credit & Sukuk advisery at R.J. Fleming & Co, a private bank where he specializes in Islamic Finance. Based in Dubai, he is currently migrating over to chair a startup DeFi protocol and says he has enjoyed working remotely.

My wife and I are lucky in that our children are so young that homeschooling is not a challenge, but I have enjoyed immensely the extra time I can spend with the kids, he says. At the office, I wouldn’t be good at taking breaks but now I take 15 to 30 minutes in the day to hang out.

He also recognizes that as he moves into crypto, he will need to wear many hats. Remote working suits this new juggling act for work.

Also, as someone who tends to work late, I can put my son to bed and get back to work. For my wife having someone around at home for those 10/15 mins you might need to do something or take a break is invaluable.

Retraining laid-off workers

Swathes of less well-paid workers lost their jobs as businesses went under during lockdowns. Retraining for the crypto and blockchain sector may provide them with a way to get back on their feet, especially if they live in an expensive part of the world. After all, the sector has booming demands for skilled personnel, with blockchain job vacancies doubling in recent months. The fact that they can usually work from anywhere opens up a world of employment possibilities.

Educator and executive director of The Blockchain Academy Ryan Williams works with universities and corporates to provide quality blockchain training and accreditation. He has found a home for his skilled courses in Hawaii.

Hawaii is a beautiful spot but its also very expensive to live there. And with the lockdown, the hospitality sector has been slammed. Crypto is one method to get past this issue and indeed provide some long-term employment certainty and income equality.

The Hawaii government had been looking for ways to upskill the local population and set up the Hawaiian Technology Development Corporation or the HTDC. They contacted The Blockchain Academy and agreed to partner with them to provide foundation courses in blockchain.

 

 

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The DAO or Decentralized Autonomous Organization

ADecentralized Autonomous Organization, or a DAO, is another opportunity that can be seized by anyone, anywhere with the requisite skills. A DAO is when a globally distributed community of contributors owns the overarching entity as a cooperative venture with no central leadership. Anyone with a better idea for how to achieve something can join and propose it as a solution, which can supercharge innovation. Decisions get made from the bottom-up (at least in theory), governed by a communityand organized around a specific set of rules enforced on a blockchain. Popularized by blockchain DAOs in DeFi, decisions are made via proposals that the group votes on during a specified period.

Williams is quietly optimistic about the possibilities, and if DAOs fulfill their promises.

Remote may mean we need to learn to be empathetic on purpose, but the inbuilt consensus mechanisms from a DAO means firstly, people have a vested interest in the organization and secondly, they have a say in the culture. Its not from the top down.

 

 

 

 

Mark Cuban, owner of the Dallas Mavericks and a crypto enthusiast, totally agrees.

The benefits from a DAO are trickle up. Trickle down does not reflect how a DAO operates and thats the point.Participants get to control what happens and what doesnt happen, he says. The tokenomics are clearly stated so everyone knows who benefits, how and why. If run successfully, with appropriate tokenomics, the benefit can accrue from the bottom up. Everyone who works there can be given tokens so they can participate in the DAO.

Any business that is community driven would benefit the most from being a DAO. It could be a company that offers healthcare services, it could be a local savings and loan. The value comes from the fact that the business can benefit from integration of the community.

Rust is also experimenting with a DAO as part of his sustainable crypto investing business in Hong Kong.

I have set up a number of entities and registered them as businesses in different jurisdictions, depending on their requirements. However, one business division, Sonto, will be a pure DAO. It will not be incorporated in any jurisdiction but will operate as a truly decentralized entity.

This decentralized thinking will extend to all the remote employees in terms of remuneration.

If half the employees are remote and decentralized, then I am not best placed to see how they are performing. In each case, the allocations will come from team leads not a centralized authority. That makes much more sense to me, adds Rust.

However, while a fan, Cuban is less than optimistic of the granted success of DAOs, especially the early ones.

I also want to make the point that I think many of the early DAOs could fail, he says, stating the lack of experience and possible unequal distribution of participation as reasons.

Some holders are very involved and often try to work to the exclusion of others. The politics of participation in DAOs will also come into play. The dynamics of how people cooperate will be challenging, again, until there is a history of what works and what doesnt work for new entrants to learn from, he concludes.

 

 

 

 


Sell or hodl? How to prepare for the end of the bull run, Part 2


To read Part 1 of How to prepare for the end of the bull run,click here.


So, youve made a million bucks this cycle and youre trying to work out how to transform those life-changing gains into money in the real world before the inevitable crash.
But at the same time, you dont want to sell now and miss out on potential upside. So, what should you do?

For Quantum Economics founder Mati Greenspan, the answer is simple: Be optimistic. Hes not an advocate of trying to time the market.

As somebody who has been trading my entire life I mean, way before cryptocurrencies youll find that it always pays to be optimistic, and pulling out your money from the market has almost never been a good long-term strategy. Not for any market over almost any time frame.

Greenspan points out that even those few people who bought Bitcoin at the top of the 2017 bull run are up 250% just three and a half years later.

Anybody who was wise enough to foresee the crypto winter and took all of their money out, when do you get back in? Nobody can time the markets to a T. The best we can do is to kind of figure out, given the information that we have, what are the best investments to make over time.

 

Mati Greenspan
Quantum Economics founder Mati Greenspan.

 

 

No one can predict the top

Unlike Decentrader analysts Filbfilb and Philip Swift in Part 1, Greenspan doesnt believe its possible to use on-chain indicators to accurately foresee the end of a bull run. He warns that unexpected events like bad regulatory news from China or a tweet from Elon Musk can occur at any moment, sending markets into bear mode.

Filbfilb says that this is why good traders dont just look at one type of data but consider on-chain analysis in the context of sentiment, cyclical data, technical analysis and everything else to gauge where the market is headed.

If youre sort of sitting around waiting for some on-chain analysis to tell you the answer, and we have a black swan event, youre not going to do anything about it in time, says Filbfilb. He adds that even black swan events dont present major issues for sophisticated traders, pointing out that the March 2020 Black Thursday crash had been foreshadowed for weeks:

If that kind of thing were to happen again, as a trader myself, I would have enough time to take action. Im in and out of the market all the time.

For me, its a much more fluid situation. Ive got other tools, like I know how to hedge. Ive got other different ways of managing risk, which means I dont necessarily have to sell my Bitcoin in order to get myself into a position where I can cover any downside risk.

Needless to say, it takes a lot of hard work, time and training to be able to play the market like Filbfilb. What about the rest of us?

Filbfilb recommends taking enough profit to keep yourself happy in the downturn. If youve made life-changing money, consider changing your life a little bit now. For me, I personally have done that Ive taken some money off the table, he says.

What thats allowed me to do is to sort of be able to hold on for the rest of the cycle, potentially to much higher prices.

 

 

Scott Melker
Scott Melker is the Wolf of All Streets.

 

Profit from profit-taking

Scott Melker, also known as The Wolf of All Streets, agrees that taking profits on your trades all the way up is the key to success, whether at predetermined levels or more randomly. People should be taking profit on the way up just as you should be dollar-cost averaging into an asset on the way down, he says.

Im a firm believer that once your investment has doubled, take your initial investment off the table. So, if it was $100,000, now youve got $100,000 to play with, and you have absolutely no risk.

This has the added benefit of reducing the chance that youll make a big mistake by selling too early, too late or too much, when you believe the top has arrived.

You know, when youre taking profits, every time you sell something youre taking the pressure off your future decisions. Which is mentally a very good place to be.

He adds, however, that you are allowed to have diamond hands with your high-conviction, long-term holds. I buy Bitcoin for my kids I am not worried about cycles, he says.

 

 

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The constant process of adjustment

Greenspans approach is to take profits when he needs the money, and he switches his allocations from coins that have had a big run-up to newer projects he believes will perform better in the future. He tends to take profits 10% at a time at various stages back in Bitcoin or to cycle into new investments.

You can limit the downside in your portfolio while maintaining upside potential through diversification, he says.

While hes not convinced its even possible to identify the markets top when it occurs, he points out that its usually fairly obvious when you are in a bear market or bull market so, you should act accordingly.

Prices are going down, and theyre expected to go down: Thats the time to reduce exposure. I dont see any reason to try and pinpoint the top, he says.

We can recognize when were in a bear market thats the time to hunker down. So, take things in, consolidate your portfolio, take off the leveraged bets, he adds.

 

 

 

 

Having witnessed the end of the 2017 bull market, Melker says that peak euphoria and overly bullish sentiment from retail newcomers are the most reliable top signals.

Sentiment will be a better indication than charts, he says. We saw it in 2017 when people who have never heard of crypto before and still dont understand it are telling you how they need to buy it.

He recalls a friends nanny buying shares of Ripples after seeing it on CNBC in 2017. Those are pretty major top signals, he says.

If youre looking at a chart, maybe its a shooting star candle on the monthly where the price went way up and comes all the way back down and had this long wick up on massive volume bigger than anything youve seen previously. Those are the kinds of things you look for. Theres peak euphoria and then the price not being able to advance on that euphoria.

While the excitement around dog tokens like Shiba Inu and memecoins on Binance Smart Chain seemed like top signals a few months ago, Melker believes that crypto is now big enough for bubbles to expand and pop in various pockets of the market without tanking everything. He points to DeFi Summer along with this years rise and fall and rise again of NFTs as examples.

Things like DOGE and Safemoon are their own insular bubbles, in my opinion, but I do not think that theyre indicative of a larger bubble of the entire market, he says. If we see that sort of behavior on Ethereum or Bitcoin, it will be time to take notice.

 

 

BTC market cap since 2013
Bitcoins market cap has gone up and up since 2013.

 

 

Zoom out

Greenspan says the focus on trying to pick the end of the cycle distracts people from the bigger picture. The way he sees it, the market has essentially been in one long bull run since the global financial crisis. Sometimes the price gets a little ahead of itself and pulls back temporarily, but the overall trajectory is up.

What happened in 2014 for Bitcoin, the same thing happened in 2018 it got ahead of itself, he says. I dont think well see another crypto winter like we did those two times.

 

 

 

 

This is actually something on which all of the interviewees for this piece agreed: None of them foresee an 80% drop with a protracted grind along the bottom as was seen in 2018/2019.

I think well see some healthy corrections, but were continuing up, says Melker. Ill be surprised if Bitcoin does not reach well into six figures in this cycle.

 

 

Bobby Lee is the author of The Promise of Bitcoin.

 

 

Bobby Lee, CEO of Ballet and author of The Promise of Bitcoin, believes BTC is on its way to becoming a global reserve asset like gold, silver and bonds that itll be worth millions and held by nation-states. Bitcoin, in my mind, is worth at least one, two or even several million dollars, he explains.

So, if you share this view, if you hodl for long enough youll become a winner. Even if you dont, Lee advises to not give in to the temptation to try and sell out at the top so that you can buy more at the bottom.

 

 

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Its not possible no one can catch the top, he says, adding that not even his brother, Litecoin founder Charlie Lee, picked the exact top in 2017 to sell all of his stash.

If you ask my brother, I dont think he caught the top. […] He unloaded his Litecoin, but he didnt unload all his crypto, he says.

The way to profit is to hodl all the way up to $100 trillion. But most people want to take some money off the table as it goes up. So, the prudent method is to set aside small amounts you must sell at fixed price intervals going all the way up to a million dollars.

This time, its different?

Increasingly, cryptos best and brightest are starting to think that the era of four-year market cycles may be coming to an end and that the market is actually moving into a supercycle as mass adoption arrives. With institutions adding Bitcoin to their balance sheets and central banks embracing modern monetary theory and printing endless dollars as a policy, the industry is certainly entering uncharted waters this time around.

Theres an argument are we going into a supercycle, which means that Bitcoin will effectively become the store of value, Filbfilb says. And if that happens, we may be in a much longer cycle.

If the dollar continues to be debased, etc., then theres no reason why anybody would really start dumping their Bitcoin because theres nowhere for the value to go.

 

 

 

 

Melker also believes that Bitcoin could potentially be in a supercycle and notes that time in the market beats timing the market.

If you believe in Bitcoin one day will be six figures, if you believe its going to a million dollars, […] you just start buying, he says. If you invest money that you can afford to lose, and you do it with a long time frame in mind, then you dont even have to be concerned about the top.

Like any other market in history, the best way to approach it is to slowly put money in that you will never need to touch and let it go to work for you for a long period of time. That’s how people have acquired generational wealth in the stock market since the beginning, and it should be no different with Bitcoin except its accelerated.

 

 

 

 


How to prepare for the end of the bull run, Part 1: Timing


Bobby Lee “blames” his brother Charlie the founder of Litecoin for causing the 2017/2018 Bitcoin price crash.

He’s joking of course. Sort of.

Charlie famously sold the last tranche of his Litecoin holdings in December 2017 for $350 each.

Bobby remembers seeing the news hit Twitter. “I was like, gosh, that probably marks the peak,” he says.

“I said to him jokingly, like you just caused the end of the bull market.”

Of course, Charlie wasn’t the real reason the bull market ended, but it was a stunning piece of market timing, given he sold the last of three tranches of LTC at almost the exact top. It was no fluke either, as Charlie had predicted in early December that a “multi-year bear market” with 90% drawdowns was imminent.

The question is whether ordinary crypto traders and hodlers can follow Charlie’s lead and sell out at the next market peak, allowing them to buy back in and accumulate more at the bottom.

Its a difficult feat to pull off and most people are more likely to follow the footsteps of podcaster Peter McCormack, who famously got caught up in the hype of 2017 and watched his Bitcoin portfolio skyrocket to $1.2 million… and then plunge back to near zero after he was forced to sell his stash to pay the bills in the depths of crypto winter.

 

 

 

 

Some of the biggest brains in crypto have been working on this problem, from onchain analyst Willy Woo to David Puell of Puell Multiple fame and Decentraders Filbfilb and Philip Swift. Around 2018, they began devising metrics and indicators based on historical patterns to help determine when the peaks and troughs will be approaching.

There is a range of views as to whether timing the market is even possible. Bobby Lee swears by the halving price cycles, while Quantum Economics Mati Greenspan and Wolf of All Streets’ Scott Melker believe its best to follow sensible rules on profit taking and portfolio construction that dont require you to predict events in advance.

The unpredictability of markets was in evident while writing this story, which I started writing in April and then had to put it on hold for four months after news out of China and Elon Musks Twitter account nuked the markets and made the bull run seem like a distant memory.

Spoiler alert: All of the commentators interviewed agree that you should try and take profits on the way up. I was lucky enough to heed their advice literally hours before the big crash in May.

 

 

 

 

History lessons: Four more years

Bitcoin hasnt been around long enough to draw any firm conclusions from the historical record, but theres a widespread belief it moves in predictable cycles related to The Halving.

Thats when the block reward Bitcoin miners receive is cut in half almost every fourth year, which reduces the issuance of new Bitcoin. The theory is that less Bitcoin equals higher prices, and during each halving so far, the price has bottomed out in the lead up and hit new all-time highs afterward.

Lee has been a proponent of the idea for almost a decade and presented the concept during a December 2013 talk at Stanford University.

“I’m a simple man,” says Lee, author of the new book ‘The Promise of Bitcoin’. “I can’t predict the future but based on my gut intuition and based on my 10 years of experience on this, I think these price cycles mimic the block reward halving. It’s a true economic lever that happens to Bitcoin, where the production rate goes down by half.”

In each case, the price movement upwards happens on a delayed basis compared to the block reward halving.”

If the theory is correct and while it seems to have worked out so far it only accounts for supply and not demand, meaning that its still not that helpful in determining when markets are set to peak. The first halving saw the price bottom a year before and peak a year after. The second and third halvings saw the price bottom and peak more than 500 days from the halving.

Aprils peak only marked an increase of three times over the previous high, meaning Lee thinks this cycle still has a long way to go.

“In my experience, bull markets don’t end up nearly just three times the previous high, they easily go 10 times, 20 times, even 30 times. So, conservatively, if it goes 15 or 16 times the previous high, that takes us to $300,000.”

Topper and popper

There are two things you can do with this information: You can try and sell out at, or just before, the peak prices. Or you can just hang on, with the expectation that prices will invariably rise even higher in four years time.

The second option is a lot easier. Its particularly tricky to recognize the peak of the market because most people get carried away with euphoria at their stunning portfolio gains. Lee says rapidly inflating prices is actually the best indication that the top has arrived.

“If it doubles within a 24-hour period, then for sure that’s the peak,” he says.

 

 

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Crypto trader Scott Melker, better known as The Wolf of All Streets, agrees. He began investing in Bitcoin in 2016 and had a front-row seat for the 2017 bull market and subsequent crash.

“I don’t think that there was much sentiment among the masses that the music was going to come to an end anytime soon, to be frank,” he says.

“Retail was piling in towards the top, believing that the Bitcoin price was going to $100,000. And obviously, it stopped at around $20K. I think most people failed to make any profit and rode the entire market all the way down through the crypto winter.”

On-chain and technical indicators

The dramatic crash from the 2017 all-time high inspired numerous analysts to devise tools that could help predict the next one, explains Decentrader co-founder Filbfilb. They picked through the blockchain and market data over the past 12 years to determine the relationships between profits, participants, supply and the markets ups and downs.

“There are some really brilliant minds who came up with some fantastic on-chain derivative tools to allow us to try and understand how different market participants might be behaving, he says, adding:

“David Puell, for example, Phil Swift, Murad Mahmudov… we sort of came up with all this stuff in the depths of the bear market to make sure that we’d be able to call the next top.”

Filbfilb says that crypto markets are almost unique in the amount of data thats available to chart, due to the radical transparency of the blockchain.

Do we have all the tools to time the top? We’ve got probably the best amount of insight you could possibly have if you compare us to something like the market for gold, where its just impossible to see that sort of data.”

 

MVRV Z
The MVRV Z-Score (LookIntoBitcoin.com)

Three of the best

There are about a million different tools available, but in Filbfilb’s opinion two of the most important are the Puell Multiple which looks at how in profit miners are and the MVRV-Z score which looks at the current price relative to what each Bitcoin was purchased for. Both of these charts can be explored for free.

“The MVRV-Z score is very good because it tells you how in-profit the investors are,” he explains.

The idea is that if the average price market participants bought Bitcoin when it was at $1000 and the price has now increased to $20,000, they are much more likely to cash out than a market in which most people bought Bitcoin at $15,000.

“If the MVRV-Z score goes up to the upper band, it means that all holders of Bitcoin are in supernormal profits versus the time when they bought the Bitcoin. So, that is something which would lead you to believe that people might be imminently thinking about taking profits and going and buying Lambos.”

While this chart might stop working if we enter a period of hyperinflation, it has been backtested and, so far, it has correctly indicated the top within about a week. So, when your hairdresser or pharmacist starts doling out advice on which coins you should go all-in on, it might be time to start consulting this chart more frequently.

Filbfilb says another very valuable tool is the Puell Multiple, which shows how profitable miners are today versus how they’ve been for the last 365 days.

If they all of a sudden went into this massive supernormal profit basis, then they’re a business at the end of the day and they’re likely to dump their coins, he says. From an investors point of view and from a supply point of view, both of those are very important.”

 

The Puell Multiple (LookIntoBitcoin.com)

Hodlers dont sell cheap

Decentraders other founder Philip Swift adds that the 1yr+ HODL wave chart is another useful indicator thats based on the market psychology of HODLers.

“It is an on-chain tool that shows the proportion of Bitcoin that has been HODLed for at least a year. There is a clear cyclical pattern where the 1yr HODL wave line has trended inversely to price over time. That is because in bear markets, HODLers accumulate and don’t want to sell their BTC at cheap prices. So, the 1yr HODL rate rises.”

As we progress into bull markets, those HODL’ers want to realize their profits as price increases. They start to sell their Bitcoin which we can see by the Bitcoin leaving their wallets. This brings down the 1yr HODL level, he explains.

“The 1yr HODL level is currently sitting at 53% and is likely to be around 47% when we finally top out. So, we have a long way to go before the end of the cycle.”

 

 

 

 

Most people probably wont have time to learn and understand all the other different tools, simply because there are so many. Technical analysis charts include two year MA multiplier, 200-week moving average heatmap, stock to flow model, Pi Cycle Top indicator, golden ratio multiplier, Bitcoin profitable days and BTC logarithmic growth curves.

On-chain indicators include RHODL waves, RHODL ratio, advanced NVT signal, relative unrealized profit/loss, Bitcoin network momentum, reserve risk, active addresses sentiment indicator and spent output profit ratio.

Decentrader has developed a meta-tool called Bitcoin KPI which assigns scores of out of 100 to each chart. “It’s really difficult to go through 50 different charts to get you and then try and consolidate that into actually what’s going on here, says Filbfilb, adding: “So, what we’ve tried to do is create like a high-level view.

“All of these things get pulled into one snapshot. And then you get a score. And you can see how far through the cycle you are. How overheated is the market, he says.

 

 

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A note of caution

Of course, there are a few provisos with these tools. Many are based on the premise that it isBitcoin leading the entire crypto market up and down, which will probably be true, but its within the bounds of possibility that Ethereum might overtake it as the market-leading cryptocurrency.

And, as the China mining FUD and Elon Musks tweets demonstrated in April and May, these indicators wont save your stash from a black swan event that could cause the markets to crash and potentially ushering in a new bear market.

Quantum Economics founder Mati Greenspan points out that history sometimes rhymes but it does not predict the future.

“People like to get confused and say, Oh, well, just because this has happened X amount of times, then just because X has happened then Y will happen afterward.’ It doesn’t always mean anything.”

 

How to prepare for the end of the bull run, Part 2: Sell or Hodl is out next week. Mati Greenspan, Filbfilb, Scott Melker and Bobby Lee give their advice on how one can trade the end of the bull run, and thoughts on whether four-year cycles are coming to an end as mainstream adoption takes off.

 

 

 



Blockchain is as revolutionary as electricity: Big Ideas with Jason Potts


Economics Professor Jason Potts is co-director of the Blockchain Innovation Hub at RMIT University. He sees blockchain technology as a fundamental institutional technology revolution comparable to the emergence of companies and the internet perhaps even as world-changing as the invention of electricity.

 

What’s the last big technological change that had the same sort of impact that you believe blockchain will have?

I think the obvious one is the internet, which was a profound revolution stringing together digital communication networks and computers to basically send the cost of communication and coordination to zero. But, it fundamentally didn’t change any of the economic infrastructures.

You still had to use money in the real world, you still had to use companies in the real world to intermediate and you still had to use contracts that were non digitally native. This is completing the revolution that was started with the internet by bringing the rest of the economy natively digitally online.

Before that, electrification of the economy was a process that took about 50 years. It was an 1860s and 1870s development, but it wasn’t really until, you know, the 1920s and 30s before we saw the full impact of it with electric motors and everything that just disappeared beneath the surface of the economy.

So, I think it is of that kind of class.

 

RMIT in Melbourne is home to the Blockchain Innovation Hub. Also, a very good journalism school that has produced notable alumni like the author (Source: Pexels)

 

Why is blockchain a fundamental infrastructure change rather than just another technology?

Most technologies that we have are industrial technologies for producing things: cars, steel, or whatever. Blockchain is an institutional technology. Instead of organizing matter, energy and things, its a technology for coordinating people.

We have these come along every so often. The joint-stock company invented back in the late Middle Ages was technology for organizing people. Once we had that, the world never looked back, as it fundamentally changed history and gave rise to modern capitalism.

 

 

The first ones were actually in the 16th century when the kings and queens of Spain and the Netherlands created these charter companies to go on these voyages around the world, to set up colonies and so on. The original use of companies was empire-building.

And then, we gradually realized that we could use them for all sorts of things. We can use them for building railways and we can use them for building steel companies, steel plants, and so on. Now, we use companies for almost everything.

So, a company is an institutional technology. Another example is clocks and synchronized time, and that gives us the ability to have timetables. And if we’ve got timetables, we can start scheduling, enabling us to have public transport systems that enable us to have factory days.

These new institutional technologies are relatively rare, but when they happen, they enable millions and millions of people to start to coordinate their actions and the economy.

Blockchain is exactly the same thing. It enables us to coordinate on shared information and truth, and we can all use this technology to figure out who owns a thing, what is the fundamental truth about ownership, who has agreed to buy something, or about identity, which is important for establishing reputation and rights to such things, or just anything else where we need shared agreement about information.

This fundamental institutional technology to enable us to trust information enables us to build a global digital economy on top of that.

This was the key understanding we arrived at. Blockchain technology isn’t just the next generation of the internet, it’s a fundamental way to create shared agreement about the sorts of facts that underpin a modern economy and to represent those in a purely digital form.

 

 

Electricity
The electrical revolution took half a century. (Source: Pexels)

 

We could already do that, of course. The difference is you don’t have a centralized body telling you those things.

This is the breakthrough. We could always do that with a company if it got big enough, we can always do that with a sort of centralized government registry, especially if that registry was big enough, but none of those things scale to the level of the entire world. Any centralized solution to that problem gives whoever or whatever controls that registry an enormous amount of power.

This is the breakthrough that blockchain technology brings. It provides a distributed decentralized way of having that information be trusted, potentially open to anyone but able to be fully distributed.

 

 

As for infrastructure, what possibilities does it open up?

We’ve had huge opportunities for automation, R&D and innovation and development in all the industrial parts of the economy over the last 200 years. But, it came with very little development in the underlying institutional registry.

The huge opportunity that we haveis based upon a whole lot of administrative costs and infrastructural costs that have just simply been around so people can check everyone else’s work, verifying that someone has the right to sell the thing they’re trying to sell and verifying that someone is who they say.

All of that sort of administration, which has significant costs in a modern economy, has the opportunity to be automated, and then to be driven toward R&D and technological change into that domain that we see as a huge opportunity.

That’s what we mean by this is an institutional technology or an infrastructural revolution.

 

Professor Jason Potts (Source: RMIT)

 

Youve done some research into this that estimates about $29 trillion worth of the economy is there simply to enable us to trust that certain things have happened, or that information is accurate.

At the Blockchain Innovation Hub, we tried to estimate the cost of trust in the modern economy. If everyone was perfectly trustworthy, all statements were true and all contracts were effortlessly enforced, what work wouldn’t we need to do?

We went through and just basically classified every single occupation in the U.S. for the amount of time, the percentage of each job and who is involved in creating trust. So, for example, an accountant basically only exists because one party doesn’t trust the numbers. A lot of managerial work is simply monitoring and verifying that someone did what they promised to do. The number we came to was about 35%, which was incredibly high. About a third of the economy is just simply devoted to checking each other’s work.

We argued that the significance of blockchain is a technology that has industrialized trust. That’s the productivity gain that is potentially there to be had, especially if we can industrialize and automate that process of being able to trust and verify the information that’s given to you.

At the moment, 1/3 of the entire global economy is spent doing something that we might not need to do anymore. It’s not going to go to zero. However, it was exactly the same with industrial technologies such as electric motors and petrol engines that replaced agricultural work that was being performed by animals and humans. Once upon a time, 90% of the economy worked in agriculture, and now it’s 3%.

That was a huge source of wealth in the 20th century. People moved off farms and into the cities, freeing up all those resources to do other things. That was the industrialization of work. We’ve got the same opportunity now with the industrialization of trust.

How long do you see this taking? Will the transformation take 50 years like electricity did?

It seems to be speeding up. All previous infrastructural technological changes the big ones: electricity, communications networks and so on were multi-generational transitions.

What has been amazing is how fast this transformation has already happened. There’s a number of reasons for that, but mainly, the internet has spread to most of the economy already and large amounts of the economy have already been digitized. Blockchain can only go where digitization has already gone. So, I think those conditions are very, very right for it to be rapid. We’re 10 years into what I think is probably going to be a 20-year process.

 

 

Another ramification of this revolution that youre predicting is that well see fewer big corporations in the future thanks to the emergence of blockchain as a coordinating force. Can you explain the theory there?

A firm is a large hierarchical structure. It has relatively high overhead costs in administration and running the organization. But, anyone inside the firm can, in principle, trust anyone else. We can make very low-cost agreements inside firms. But, when you’re undertaking large projects, firms have to be very, very large.

What we’ve seen over the past few 100 years is this gradual increase in the size of firms in order to do particular things, whether it’s banking systems, mining operations, or others.

That world of ever-increasing sized firms has all sorts of implications and consequences for society. We have to deal with the fact that they will accumulate not just enormous power but almost as enormous wealth. We have to have very strong countervailing economic, social and political forces to enable us to live in a world with global and very large hierarchical organizations.

Blockchain disrupts the efficiency of very large organizations. It enables people to make deals, contract with each other and form cooperative agreements to do things using peer-to-peer distributed blockchain technologies.

We’ve got a new way for large numbers of people to come together to cooperate, whether it’s really to offset risk, provide insurance for each other, or to sort of channel savings, investments and loans.

It means that we don’t need firms to be as big. If firms don’t need to be as big, then we can spend a lot less time worrying about controlling them. And all sorts of political implications follow from that.

 

 

Cubicle farm
Massive corporations may become a thing of the past. (Source: Pexels)

 

I recall very strongly from the early days of the internet that we all thought it was going to be a magical utopia of happiness and wonder and it turned into a total mess. What are the negative things that blockchain and cryptocurrency could bring about?

The reason that utopia collapsed was because we still didn’t have digital money or companies to provide all of these things. We ended up importing large companies back into the space, which has caused most of the problems that we’re dealing with. How do we control Facebook? How do we deal with the power of those large platforms?

I think the main issue, this time, will be around privacy and the question of whether we can successfully get to pseudonymity.

There are other issues with censorship resistance and the ability of actors, platforms, companies, or governments or just coalitions of other people to censor and control individuals in this space.

 

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The Chinese government seems to love blockchain and they don’t like things they can’t control. So, it seems like it could just turn into Big Brother everywhere.

Yeah. That’s a very illuminating example because where I think we’re headed, is that the global blockchain economy splits into two: There’s more or less a China version and then the everything else version. In the same way that the internet has already done that.

I think that the next version of where we’re headed is that same logic, just extended out to digital economies. Now, that scares me. I don’t like that. Thats not the promise of a free open global economy and a society built on open source platforms. That’s not the promise that a lot of crypto and blockchain pioneers in the cypherpunks had in mind two decades ago.

I worry that we will end up in a bipolar or multipolar world where there’s essentially I hesitate to use the word empires but it does feel like it’s getting back into that. The potential downside to this is that we end up with balkanized global digital empires again.

 

 

Tell me about the RMIT Blockchain Hub in Melbourne

Back in 2017, when we started, we were the world’s first Social Science Research Center on the blockchain. There were lots of other computer science ones but we were the first ones that really grew out of a business school. Four of us started it. I, Chris Berg, Sinclair Davidson and Darcy Allen.

We came together as a group of economists, lawyers and business-school types to really look at this question: What impacts blockchain as an infrastructural technology, and does it have any effects on business models? How would it disrupt different sectors? How is it going to affect jobs, businesses, firms and so on?

That was always the idea: This is a massively important and disruptive technology. We want to try and understand this from the perspective of a business school.

Jason Potts is also the editor of the Journal of Institutional Economics and the author of numerous books about blockchain and contributes to the Mint and Burn podcast.

 

 

 


Shanghai Special: Crypto crackdown fallout and what happens next


The summer of regulatory action has now become a global phenomenon. Lawmakers and politicians are waving their fingers and making threats toward the industrys leading virtual asset service providers a term coined by the FATF to describe exchanges, wallets, custodians and even DeFi platforms.

But when it comes to crackdowns on cryptocurrency, few places do it with the effectiveness and experience of the Chinese government.

Unlike in the United States, Chinas regulators are not having a public discourse about it. Decisions are made behind closed doors, and announcements come swiftly, posted on government websites or in speeches from well-primed officials.

The directives come from the very top and are swiftly reiterated and enforced by lower-level officials in provincial- or city-level government, by state-owned enterprises and by financial institutions. This top-down style of regulation tends to make the “China ban” seem very repetitive and severe. In reality, the same regulation can be repeated dozens of times by different branches, scaring the public but having very little additional impact on the industry.

 

 

 

 

What’s the issue this time around?

Although owning cryptocurrency has never been officially banned, the need for reform in other areas of the industry was probably present. According to Winston Ma, former managing director and head of North America at China Investment Corporation, the Chinese government has pushed the regulations with the aim of protecting consumers, becoming closer to carbon neutrality targets and achieving greater financial stability.

While the last reason is more subjective, theres no denying that Chinas opportunistic mining industry and speculation-heavy retail investors were running largely unchecked at the beginning of the year.

Ma will be among the first to note the effectiveness of the changes taking place, especially for the mining industry, telling Magazine:

So far, the impact from the energy perspective is the most obvious: After the central government initiated the cryptocurrency crackdown campaign in May, major coal-based power producers such as Inner Mongolia and Xinjiang, which were previously the top two cryptocurrency mining hubs in China, have been among the first regions that quickly developed local rules to clean up mining businesses.

This wont be a short-term adjustment. Most large mining firms have moved abroad, and the overall BTC mining hash rate is still down by around 40% from the highs of the spring, prior to the crackdown. Energy and climate policies were the focal point of Chinas all-important five-year plan that was released this spring, cementing the importance of cleaner energy consumption for the foreseeable future.

Despite its significance to the crypto community, mining is not much of a contributor to the national GDP. Revenue for Chinese miners was just shy of $7 billion for the 12-month period leading up to June, a number far too insignificant to move the needle for the government.

The revenue of ride-sharing app Didi was by itself over three times that in 2020, and the Chinese government had very few hesitations about cracking down on it after it emerged that it had provided user data to U.S. regulators. Didi apps were removed from domestic app stores, and now competitors are lining up to fill a massive market share should Didi fail to resolve its legal issues.

 

 

Although Chinese miners were raking in money, it wasn’t anywhere near enough to stave off regulation from the government (data from June 2021)

 

 

Sally Wang, vice president of portfolio marketing at Sino Global Capital, notes that despite Chinese regulators not tolerating risk areas that threaten financial stability, theres been a huge increase in blockchain use cases at national, regional and city levels.

Weve seen miners move out of China, and weve also seen large fintechs, such as Alibaba, experiment with NFTs. Token-less blockchain projects in China have seen huge growth.

This type of development has allowed players to continue contributing to a healthy blockchain ecosystem in China, with local governments supporting major events like the World Blockchain Conference in Hangzhou and the upcoming Shanghai International Blockchain Week in September.

 

 

 

 

Regulator influence on the decline

The original crackdown that banned ICOs and exchanges in 2017 caught the crypto industry at a vulnerable time. The majority of worldwide trading volume at the time originated from China or happened on Chinese exchanges, and the large ones were registered and based within the mainland. This left them at the mercy of authorities and taught the industry a valuable lesson about managing geographic risk.

After that, key industry players such as Binance, Huobi and OKEx began setting up in places like Hong Kong and Singapore, where regulators were more open-minded. Subsequently, these exchanges are now slightly removed from the jurisdiction of the Chinese government, provided they arent too conspicuous when recruiting Chinese users.

 

 

Throwback to 2017: This Cointelegraph graphic shows how fearful the industry was after the future of many large exchanges was thrown in doubt.

 

 

As more and more of the industry shifts overseas, the impact of regulators is lessened. Unfortunately, miners who were keen to take advantage of low-cost energy from Chinas abundant hydropower and coal-powered plants were not as quick to decentralize. That left them in a precarious position, sparking a wave of panic after China cracked down on miners earlier this year. The good news for investors is that miners have now responded by also relocating abroad, reducing the need for any future negative regulation against the mining industry.

Reading the tea leaves with regulators

Retail trading is still a major uncertainty, as large, predominantly Chinese exchanges like Huobi and OKEx make up around 20% of global volumes, according to FTX’s volume monitor. Binance makes up over 50% of global volume and likely has a large percentage of Chinese users as well.

While users cant directly buy cryptocurrency with fiat on these platforms, P2P transactions still make it easy for savvy users to purchase on platforms like Binance, using Chinese bank accounts and commercial payment apps to transact between the yuan and stablecoins.

 

 

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To this point, the government hasnt been successful in slowing this volume, even though bank accounts are occasionally frozen for transacting in P2P markets. The sheer volume of digital transactions makes this tough to monitor, but its possible that the government isnt that interested in eliminating these channels entirely. Completely shutting down exchanges and retail investors might be possible, but it would risk leaving China frozen out, without a horse in the race something China is reluctant to do.

Wang believes that exchanges that have large volumes coming from China will continue to adapt, telling Magazine: We think they are likely to follow the global trend towards stricter compliance, and as weve seen, they have already looked at limiting leverage and reducing the scope of products available for new users. Wang is referencing what occured earlier this year when exchanges like Huobi limited users’ access to futures, a popular but high-risk product that is often more akin to gambling than to investing.

Ma remains less convinced of the short-term future:

Chinas securities and banking regulators have yet to release new regulations on cryptocurrency trading. The uncertainty could mean real, long-term downward pressure on cryptocurrency prices.

Ma is not alone in worrying about what comes next. Many people in the Chinese community, including early entrepreneur Bobby Lee, have voiced similar concerns, especially after seeing regulatorstake aim at so many companies and individuals in China’s private tech sector this summer.

Should more action be taken against retail traders, many Chinese users might worry about their ability to cash out in the future, leading to more fear in the markets. The question then becomes whether or not scandals, scams and social unrest stemming from speculative investments could force the government to take action. The best bet for cryptocurrency holders is an increase in sustainable development that is more focused on technology. Surging prices on meme tokens like Dogecoin and Shiba Inu might be attractive to short-term traders, but they increase the likelihood that the government will put pressure on retail users and the exchanges that service them.

One Chinese proverb to take wisdom from is the idea of killing the chicken to scare the monkey.

In this story, a man slaughters a chicken to teach his prized dancing monkey a lesson. By comparison, Chinas regulators wont balk at squashing a corporation if it means that others will fall into line.

The international crypto community should hope that Chinas leading projects are able to navigate these new policies unscathed and continue building a healthy blockchain ecosystem. Chinese entrepreneurship has consistently produced the largest exchanges and major mining companies like Bitmain and Canaan, not to mention many leading venture captalists and investors who have helped to shape the industry. The next move from regulators might be an important one, as we may find out whether the top players become the chicken or the monkey.

 

 

 


Crypto leaders are obsessed with life extension. Here’s why


Ethereum co-founder Vitalik Buterin is on a mission to make humans immortal. Buterin, 27, proposes the idea that aging is an engineering problem.

He is not alone in his combined interest in Bitcoin and biohacking. Famous biomedical aging researcher Aubrey de Grey, Xanadu architect and Agoric chief scientist Mark Miller, Bitcoin Cash billionaire Roger Ver and former chief technology officer of Coinbase and a16z general partner Balaji Srinivasan, are all fascinated by the pursuit of longevity.

De Grey recently helped launch VitaDAO, a decentralized collective funding longevity research. He says:

“I have been gratified since the beginning of blockchain to see the enormous fanbase that I and the longevity movement have in there.

Miller, alongside his engineering hall-of-fame accomplishments, is a senior research fellow at the Foresight Institute, a not-for-profit founded in 1986 with the aim of advancing technology for the long-term benefit of life.

Im very much involved in this new world of crypto commerce, often referred to as the blockchain sector, he says. Im very hopeful about that as creating an ecosystem in which secure software will dominate because insecure software results in massive losses quickly, with no recourse.

Srinivasans Twitter bio describes his vision as: Immutable money, infinite frontier, eternal life. #Bitcoin. Srinivasan states that the ultimate purpose of technology is to eliminate mortality and life extension is the most important thing we can invent.

Blockchain communities are clearly excited about longevity. But what does cryptocurrency have to do with life extension, and where might this future be headed?

It turns out that the link between crypto and cryogenics stretches back to core contributors, and the Cypherpunks mailing list and its links to transhumanist groups, including the first person to transact Bitcoin with Satoshi, Hal Finney.

 

 

 

 

Crypto people are funding longevity research

Crypto philanthropists are donating significant wealth to this area, which is typically difficult to garner mainstream support for. They may be the only people on the planet optimistic enough to fund tech that currently only exists in sci-fi novels.

According to Buterin, longevity is a battle worth fighting for. Buterin donated $25 million in SHIB cryptocurrency tokens to the Future of Life Institute in June 2021 and has donated over $350,000 to the SENS Research Foundation to reimagine ageing.

He discussed the topic in recent podcast interviews with the likes of Lex Fridman and Tim Ferriss saying that life extension is definitely really important to me.

I think I hope to see the concept of seeing your parents and grandparents die just slowly disappear from the public consciousness as a thing that happens over the course of half a century.

Buterin has emphasized his adherence to the moral philosophy of effective altruism. This value, known to transhumanists as the moral urgency of saving lives, is perhaps what motivated his donations of dog coins to both COVID-19 relief in India and life-extension.

Just even the process of aging turning into something that just becomes reversible and it being a regular thing for people to live one and a half, two centuries and then go even further from there, Buterin states.

Pinned in Buterins Twitter is an essay called The Fable of the Dragon Tyrant by professor Nick Bostrom, director of the Future of Humanity Institute. It argues that allowing death from old age is unethical. If you view aging as a disease, the urgency to support the transhumanist project also makes sense.

 

 

 

 

While we still lack effective and acceptable means for slowing the aging process, we can identify research directions that might lead to the development of such means in the foreseeable future, states Bostrom. The key to freeing humanity from the dragon tyrant of aging, is funding. The new riches from crypto are key.

Bitcoin.com founder Roger Ver has already signed up to be cryogenically frozen. Rather than investing in cryptocurrency stuff, I want to focus on the extreme life extension technologies, because if you die, you cant enjoy your life anymore, Ver told Cointelegraph. Hes so confident in the tech, he even considered being cryogenically frozen as a legitimate alternative to going to prison in 2002.

 

 

 

 

DAOs are also taking part in this life extension renewal. There is a strong overlap of crypto people and longevity people, Vincent Weisser, core team member at VitaDAO tells Cointelegraph. VitaDAO exceeded its token raise funding target of $490,000 in June 2021.

Now, they are working with popular blockchain crowd-funding platform Gitcoin to include a future funding category for longevity and life extension.

Transhumanist philanthropy and funding at scale holds the potential to significantly impact longevity research and the transhumanist project.

What is transhumanism?

Transhumanism is a loosely defined movement that promotes the use of technology to enhance the human condition. This includes information technology, genetic engineering, and artificial intelligence for radical extension of human lifespan, augmentation of physical and intellectual capacities, space colonization, and super-intelligent machines.

The goal is not just life extension, but more, to the point of becoming superhuman. Although the transhumanist pursuit of post-humanity is often thought of as medical, the gambit of transhumanist technologies includes economic and social institutional design and cultural development.

Like crypto communities, transhumanism is grounded in a vision of evolution and individual freedom of choice. In practice, this leads to a sense of personal responsibility for contributing to solutions, such as biohacking or making provisions for being cryogenically frozen and one day hopefully reanimated. The goal of the transhumanist project for society is one based on freedom in determining social arrangements, enabled by self-generating systems and spontaneous order. This description of perpetual, open systems is similar to blockchain.

Not everyone thinks eternal life, or the philosophy underpinning it, is a good idea. Political economist Francis Fukuyama calls transhumanism the most dangerous idea in the world and argues it is a strange libertarian movement whose crusaders want nothing less than to liberate the human race from its biological constraints. He lists the risks of the fraught nature of humankind to want to live forever, the effects on equality between the “haves” and the “have nots,” and that the essence of humanity is mortality. Yet, transhumanism has a long history in crypto communities.

More human than human

Transhumanist values are reflected in the ideological underpinnings of blockchain communities around anarchy and autonomy, self-improvement, and a long-term mindset.

Transhumanist ideas have long existed in the technology communities that pioneered the core tenets of public blockchains. For example, cryptography pioneer Ralph Merkle (inventor of public key distribution and Merkle trees) considered himself a transhumanist, publishing on such matters as The Molecular Repair of the Brain.

Furthermore, there was substantial cross-pollination of ideas between the Cypherpunks mailing list, which discussed ideas on privacy and digital cash throughout the 1990s and 2000s in the lead-up to the invention of Bitcoin in 2008, and the Extropian mailing list.

 

 

 

 

Extropy is “the extent of a systems intelligence, information, order, vitality, and capacity for improvement. According to 1998’s “Principles of Extropy” published by president of the Extropy Institute, Max Moore, extropians are “those who seek to increase extropy. The core principles, refined in “The Extropist Manifesto” in 2010, are “endless eXtension,” meaning perpetual growth and progress in all aspects of human endeavor; transcending the restrictions of authoritarianism, surveillance, or social control; overcoming property rights, including IP and money, by sharing knowledge, culture, and resources; intelligence, including independent thinking and personal responsibility; and smart machines, specifically the attainment of Friendly Artificial Intelligence that exceeds human ability, through funding and favorable legislation.

Extropians advocate and explore the philosophies of transhumanism (technological enhancement), extropy (improving the human condition), and the future. Numerous prominent cypherpunks also subscribed to the Extropian mailing list, including co-founders of the cypherpunk movement Timothy C. May and Eric Hughes.

 

 

 

 

Another active member of the extropians was Hal Finney. Finney was co-developer of the first anonymous remailer, the first person to transact Bitcoin with Satoshi and the first maintainer of the Bitcoin codebase. He was cryogenically frozen when he passed away in the hope of living in the future alongside his wife, Fran, who noted that Hal liked the present. But he looked towards the future. For this community, technologies like digital cash offered a way of long-term thinking about the future of humanity, transhumanism, and solutions and preventions for cryogenics, outer space, and catastrophic environmental or societal collapse.

The cypherpunks’ interest in extropianism, and vice versa, was concerned with building infrastructure today that would sustain the future of human evolution. In some ways, this makes sense.

In order for ones cryogenic suspended animation to be paid for, maintained and reversed to wake them up in the far-flung future where science advances to the point where this aspiration is realized, there needs to be an incentive. In 1994, Wired magazine reported over 27 frozen people (technically 17 frozen heads and 10 entire bodies) at the Alcor Life Extension Foundation, the same company that Roger Ver has signed up with.

Immortality is mathematical, not mystical, stated Mike Perry, their overseer. The hope is that Bitcoin will be a resilient long-term incentive for someone to wake up Hal, Fran and other friends. Herein lies the need for long-term blockchain infrastructure, to last as a secure monetary reward until the century when “unfreezing” is possible.

 

 

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Among the principles of extropianism set out by Moore is intelligent technology, meaning technologies that bring beneficial results, including genetic engineering, life-extending bio-sciences, intelligence intensifiers, smarter interfaces to swifter computers, neural-computer integration, worldwide data networks, virtual reality, intelligent agents, swift electronic communications, artificial intelligence, neuroscience, neural networks, artificial life, off-planet migration, and molecular nanotechnology.

Expect to see more life extension, brain-machine interfaces, limb regeneration, curing deafness, bionic sight and more incredible feats in the next decade, states Srinivasan. Transhumanists predict an inevitable singularity, when technology becomes intelligent, uncontrollable and irreversible, to occur around 2035. Blockchain is part of this technology stack.

Where transhumanism and crypto overlap

The lofty, futuristic ideas of transhumanists depend on resilience and digital infrastructure. This is especially true for the goal of friendly artificial intelligence, which is seen as an enabling condition for rapid development across all other core principles of the project. Thanks to blockchain technology, and blockchain philanthropy, we are beginning to have the resources to do it.

An immutable worldwide computer enables a decentralized autonomous organization to allow our uploaded brain image to automatically coordinate with friendly artificial intelligence in a decentralized, freedom-loving way.

Blockchains immutability makes it the perfect long-term infrastructure. Cypherpunks were paranoid about Orwellian dystopias in which authorities would rewrite history to match state propaganda. The architectural and political decentralization of public blockchains means that no one can tamper with, control or delete the record of history. This makes it the perfect record-keeping infrastructure if we are going to live forever.

This is essential when it comes to your brain image or your Bitcoin balance. In order to document who owns what coins when you are cryogenically frozen and woken up in the next century, you need resilient, long-term, tamper-proof blockchains. The values of independence and immutability are essential to both crypto enthusiasts and transhumanists. Buterin states:

Its great that we have people trying to upload or improve brain scanning. Its also great that we have people including cryonics, so we could just go to sleep in the freezer and eventually, hopefully, sometime in the future […] anyone who gets cryogenically frozen will be able to wake up.

Future making

The combination of transhumanist philosophy, blockchain technology, community obsession and money enable whole new possibilities. The transhumanist-blockchain vision is that we will all be connected, humans and machine intelligence, through decentralized, automatically executing smart contracts and marketplaces.

Blockchains provide a platform infrastructure to enable a host of technologically advanced human-machine futures. One example is a decentralized marketplace for AI, such as SingularityNET by artificial intelligence researcher, transhumanist, and CEO Ben Goertzel. Here, intelligent computational agents buy, sell and barter over work for digital tokens via a blockchain.

 

 

 

 

In The Transhumanism Handbook, Melanie Swan predicts that crypto cloudminds, in which mind node peers interact through multicurrency pay channels of digital denominations, will algorithmically enforce good behavior between humans and machines through the privacy and transparency of blockchains. According to Srinivasan, this could also lead to cloud cities, which allow their members to negotiate with other jurisdictions and crowdfund territories in the physical world.

Transhumanism, like human beings, is only in its early stages of development.

Transhumanism, with its focus on superhumans and longevity instead of an afterlife, can be viewed as something akin to a religious impulse. Although many transhumanists take their worldview to be in opposition to religious outlooks on life, transhumanism may become the religion of blockchainers. Yet, this doctrine does not come without a clear burden of responsibility.

The Engineers Responsibility

While some fear transhumanism, a core tenet is to ensure that technology produces positive outcomes for humanity. Transhumanists advocate that the choice to improve human capacities lies with the individual.

Part of the longevity research agenda is figuring out how to measure the risks of friendly artificial intelligence and make it truly friendly to avoid a catastrophe. Transhumanists want to avoid X risk, which is existential risk to humanity of a hypothetical, global, catastrophic future event that could damage human well-being or destroy human civilization. This is why colonizing outer space is so logical, as Elon and other crypto enthusiasts are pursuing. The “Extropian Principles, v. 3.0” by Max Moore from 1998 emphasizes this, stating that migration into space will immensely enlarge the energy and resources accessible to our civilization. Of course, smart machines will also help us explore space because they can handle more gravitational force than humans as they enter the orbit of other planets.

To a transhumanist, the goal of technology is to amplify our abilities and extend human freedoms. How could we ensure humanity lives forever and life spreads throughout the universe? asks Weisser from VitaDAO. Its all about probabilities and increasing the probability that humanity will survive, he says.

A long-term mindset treats aging as an engineering problem. Now, it remains to be seen if the intersection of blockchain philanthropy, VitaDAOs research collective, and other decentralized, transhumanist pursuits will be cautiously and collectively propelled forwards with the kind of long-termism that will benefit humanity. As Buterin states:

“I hope you guys can […] come to my thousandth birthday party.”

 

 


Is the cryptocurrency epicenter moving away from East Asia?


It probably came as little surprise last year when crypto intelligence firm Chainalysis declared East Asia the worlds largest cryptocurrency market, accounting for 31% of all cryptocurrency transacted during the previous 12 months. The region has a broad base of retail users along with a solid foundation of crypto traders and institutions, and China alone was at the time mining around two-thirds of all the Bitcoin in the world.

In July 2021, Fidelity Digital Assets surveyed 1,100 institutional investors in the United States (408), Europe (393) and Asia (299) between December 2, 2020 and April 2, 2021. The study reinforced this idea, with the firm reporting that digital asset adoption rates are substantially higher in Asia (71%) than in Europe (56%) and the United States (33%). In March 2021, a Statista consumer survey of 74 countries on cryptocurrency ownership and usage determined that the Asian nations of Vietnam and the Philippines are ranked second and third globally, respectively.

But the past is not always a prelude to the future, and there is no guarantee that East Asia will remain the worlds center of gravity for crypto adoption. Chinas attachment to crypto is tenuous at best, and Beijings rollout of its digital yuan could cause reverberations throughout the region.

When asked about the crypto prospects of East Asia, Kim Grauer, head of research at Chainalysis, tells Magazine that the region has recently experienced a major decline in cryptocurrency adoption compared with other regions globally, further adding:

This drop-off is driven by a decline in Chinese activity beginning 6 months ago, which coincided with various crackdowns there including the mining ban and the halting of derivatives trading by major exchanges. We hypothesize that much of this activity has migrated to DeFi, but that hasnt picked up enough that it makes up for the losses in the derivatives market yet.

Chinas dominance in Bitcoin mining made it a natural marketplace for crypto, says Lennard Neo, head of research at Stack Funds. But as reported, many rigs are moving elsewhere, including to Canada, Kazakhstan, Russia and the United States.

Asked if Asia is likely to maintain its crypto dominance, Eloisa Cadenas, CEO of Mexico-based financial services firm CryptoFintech, tells Magazine: It is a difficult question to answer because, when we think of Asia, we automatically focus our attention on China which, as we know, has taken quite restrictive measures in relation to Bitcoin, crypto assets and of course, mining.

 

 

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Chinas digital yuan is likely to have a big impact on the region, Cadenas says. Indeed, she anticipates that other Asian countries will try to replicate the digital yuan model, and It is likely that there is also an intention to block or restrict the market for crypto assets in such a way that only the CBDCs of each country can proliferate.

If that happens, the mass center of crypto adoption could move elsewhere to Latin America or Africa, opines Cadenas. These are two regions where, according to her, there is a greater possibility of adoption, since the economic, social and political context is different.

Asias crypto crown could indeed be in play now, as Latin America and Africa arent the only contenders. Heres who could potentially fill the void if and when Asia falters:

North America

Traditional reticence on the matter of digital assets is the result of three principal factors, according to another report by Fidelity Digital Assets: price volatility, concerns around market manipulation, and the lack of fundamentals to gauge appropriate value. But U.S. respondents appear to be coming to grips with digital assets, despite these shortcomings.

The strength of concerns [in the U.S.] decreased notably vs. last year across most factors, reported Fidelity Digital Assets. Price volatility concern fell 13 points, concerns around market manipulation fell 6 points and lack of fundamentals fell 8 points.

Elsewhere, some of the United States top legacy banks including State Street, BNY Mellon, JPMorgan Chase, Citigroup and Goldman Sachs have been making forays into the crypto space.

On the mining front, the U.S. was already the number-two mining nation before Chinas May crackdown on crypto mining, albeit a distant second. Back in September 2019, China contributed 75.53% of the global Bitcoin hash rate. But more recently, Chinas portion of the hash rate has ebbed to 46.04%, while the U.S. has broadened its share to 16.85% globally. Henri Arslanian, crypto leader and partner at advisory firm PwC, tells Magazine:

The United States is probably the one country that has a lot of momentum now. The regulations are becoming clearer, there are numerous large crypto companies and there is a lot of capital flowing into crypto both from institutional investors and retail.

Meanwhile, north of the U.S. border, Canada has been innovating on the crypto front. The Purpose Bitcoin ETF, North Americas first crypto-based exchange-traded fund, launched in February and has been a big hit by most accounts. It was followed in April by an Ether ETF, with strong volumes reported.

Many believe that its only a matter of time before Canada, with its vast hydroelectric resources, becomes a major player in crypto mining, particularly as more miners seek out renewable energy sources to power their rigs.

Latin America

The Latin American region could become a crypto adoption hotspot, and not only because El Salvador declared Bitcoin legal tender in June when it issued its Bitcoin Law a historic move in the view of some.

Many regional economies are sustained by remittances i.e., money sent home from workers abroad. They account for 23% of El Salvadors gross domestic product, for instance. In Honduras, remittances also exceeded 20% of the gross national product in 2019, according to Pew Research Center. By comparison, Mexico saw only a 3% share of its GDP driven by remittances, but its gross numbers are high $42.9 billion in 2020, according to the World Bank, which is a number behind only China and India. Crypto and blockchain technology potentially offer a more efficient way to transfer overseas payments.

The trend in Latin America is toward retailers and unbanked users because with cryptocurrencies you can create cheaper financial products that, eventually, could promote greater financial inclusion, CryptoFintechs Cadenas tells Magazine.

There is also evidence that El Salvadors dramatic action may be encouraging other countries in the region to devise their own crypto strategies. Paraguayan legislators introduced a cryptocurrency bill to the nations Congress in July, for instance.

Where El Salvador has led, we can expect other developing countries to follow, said Nigel Green, CEO and founder of financial service company deVere Group. This is because low-income countries have long suffered because their currencies are weak and extremely vulnerable to market changes and that triggers rampant inflation,

 

 

 

 

There isnt much CBDC fervor in the region either, which means that Latin American countries are less likely to clamp down on crypto for competing with a governments digital currency. What I do see [in Latin America] is financial institutions creating alliances with crypto-asset companies to facilitate operations through crypto-assets, mainly with stablecoins, Cadenas says.

Stack Funds Neo perceives some similarities between Latin America and Asia. The latter was historically home to a number of restricted currencies that were subject to government controls such as the Chinese yuan, Indian rupee, Indonesian rupiah, Malaysian ringgit and Philippine peso making them difficult to convert. These restrictions encouraged investors to turn to crypto as a hedge against these limitations, explains Neo. Similar tendencies may be emerging in Latin America where citizens increasingly appear to prefer crypto over fiat [currencies], which are exacerbated by political turmoil.

In its 2020 Geography of Cryptocurrency Report, Chainalysis cites Venezuela which ranked third globally out of 154 countries in its Global Crypto Adoption Index as a stellar example of what drives cryptocurrency adoption in developing countries and how citizens use it to mitigate economic instability, adding that Venezuelans use cryptocurrency more when the countrys native fiat currency is losing value to inflation, suggesting that Venezuelans turn to cryptocurrency to preserve savings they may otherwise lose. Chainalysis saw the same pattern in other Latin American countries, as well as those in Africa and East Asia.

Cryptocurrency adoption in the region may not all go according to plan, of course. Eric Anziani, chief operating officer of cryptocurrency exchange Crypto.com, tells Magazine that El Salvador officially accepted Bitcoin as legal tender, but this news is a two-edged sword. If the experiment is successful, then it will promote crypto in the region; otherwise, it could make local governments look at cryptocurrencies with greater skepticism.

Europe

As in North America, institutional interest in crypto is growing in Europe. Today, nearly 80% of institutional investors believe digital assets should be part of a portfolio, according to Fidelity Digital Assets July report. And while this belief is strongest in Asia, it is also strong and growing in Europe: More than three-quarters (77%) of European investors share this belief, up from two-thirds the prior year.

The European Commissions proposed Markets in Crypto Assets (MiCA) regulation, undergoing its first reading in the European Parliament, is expected to create a harmonized European crypto-asset market that will definitely attract more and more large institutional investors hedge funds, pension funds etc. that have been wary of investing in this asset class due to regulatory concerns, says Patrick Hansen, head of blockchain at Bitkom, an association of German companies in the digital economy.

When MiCA is implemented, a crypto firm receiving authorization from any one of the 27 European Union countries will be able to share its services across all the other EU states. Hansen also foresees greater mainstream adoption in the region and among its 450 million residents.

On the flip side, the European Central Bank is moving ahead with plans to introduce a digital euro that could be used by the 19 countries in the eurozone as an alternative to third-party payment services and cryptocurrencies like Bitcoin, reported Deutsche Welle, mainly because Central bankers fear the widespread use of foreign or unregulated currencies could destabilize the economy.

In other words, Europes crypto-wary central bankers could still have something to say about crypto adoption in the region.

Africa

When focusing on retail adoption, regions in the developing world such as Africa cant be overlooked, Monica Singer, ConsenSys South Africa lead, tells Magazine. Nigeria has one of the highest numbers of retail users of Bitcoin, for instance at least on a per capita basis. It ranks first among 74 countries in Statistas March consumer adoption survey. She further adds:

In countries where there is no trust in the fiat currency, and the population is young and mostly all have access to the internet, it is a natural progression that they will use cryptocurrencies to transact, in particular for remittances.

Three African nations Kenya, Nigeria and South Africa made the top 10 in Chainalysis 2020 global crypto adoption index. Remittances are an early use case for this developing cryptocurrency economy, notes the report, adding that many of the regions countries are also plagued by severe currency devaluation and instability, making them ripe for Bitcoin and its fixed, anti-inflationary supply.

Still, many African countries have restrictive policies with regard to currencies not backed by central banks, which could impede adoption, Singer tells Magazine. In early 2021, Nigerias central bank effectively banned commercial banks from providing account services to crypto exchanges.

 

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The dominant mood is optimism, though, as epitomized by Cardano founder Charles Hoskinsons keynote address at Blockchain Africa in which he compared Africas emerging economy to China in the 1980s both offering case studies of new technologies leapfrogging legacy systems. Indeed, Hoskinson predicted: Theres a great potential for that to be African nations not Germany, not France, not England, not the United States, not China or Japan.

East Asia

Of course, there are good reasons that nothing much may change at all and East Asia remains cryptos adoption epicenter. Asian countries have embraced digitalization, while their appetite for crypto was whetted by their early exposure to pioneering crypto firms. Indeed, by the end of 2020, six of the 10 largest crypto unicorns were Asia-based including Bitmain, Binance, OKEx, Huobi, BitMEX and FTX.

Moreover, many East Asian nations that have embraced e-payments are used to public market investing and encourage STEM subjects in their school systems. Charles dHaussy, managing director of the Asia-Pacific region at ConsenSys, tells Magazine that Asias new wealth, as well, is keener to embrace new asset classes, compared with established wealth in the Western World which is more drawn to traditional asset classes. For these reasons, he concludes that Asia has a head start and will remain a leader [in crypto] for the decades to come.

Even without China, Asia may be deep enough with regard to crypto adoption that it wont lose its leadership position. Winston Ma, adjunct professor at New York University School of Law and author of The Digital War: How Chinas Tech Power Shapes the Future of AI, Blockchain and Cyberspace, tells Magazine:

Asian investors are used to inflation risk in their economies and high volatility in trading markets, and they embraced digital assets to hedge against the fiat money printing across the globe.

The lead may shift from China to Southeast Asian countries, as well as other countries with less restrictive regulations and laws with regard to crypto, Yu Xiong, international associate dean at Surrey University and chair of business analytics at Surrey Business School, tells Magazine. In addition, Hansen notes that crypto-favorable regulatory frameworks have emerged in Singapore, Hong Kong and Japan.

Meanwhile, on the institutional front, Regulatory clarity and tax treatment of crypto markets relative to their other options stocks, derivatives, etc. will matter a great deal more than it does for retail investors, says Gina Pieters, assistant instructional professor in the Department of Economics at the University of Chicago. Here again, East Asia often seems further advanced than other regions. Pieters adds:

Japans tax treatment of gains from crypto investment is much simpler than USA tax treatment, and so all else equal it would not be surprising to see higher adoption in Japan by institutional investors compared to the USA.

Overall, if one were to categorize the competition, it would be the history, culture, professional traders, exchanges and first-mover advantage of Asia pitted against the youth and economic needs of Latin America and Africa, the investment capital and entrepreneurial vitality of North America, and the wealth, size and regulatory harmonization of Europe.

Who will prevail?

The case could be for Latin America or Africa, where the need is the greatest and a clear solution seems at hand. But, of course, its really anyones guess.

 

 

 


Crypto City: Guide to Melbourne


This “Crypto City” guide looks at Melbourne’s crypto culture, the city’s most notable projects and people, its financial infrastructure, which retailers accept crypto and where you can find blockchain education courses and there’s even a short history with all the juicy details of famous controversies and collapses.

 

Fast facts

City: Melbourne
Country: Australia
Population: 5.15M
Established: 1835
Language: English

 

Australia’s second-largest city may lack Sydney’s amazing harbor views, but it makes up for it with a focus on art, sports and culture. There are more live music venues here per capita than any other city in the world, and the city has produced heaps of notable acts, including Nick Cave, Men at Work, The Avalanches and Kylie Minogue.

Located on the southern coast of Australia, Melbourne wasn’t founded until almost 50 years after Sydney, but it quickly became the wealthiest place in the world during the Gold Rush, from the 1850s to 1880s. It’s a very multicultural city, with the 10th-largest immigrant population globally. The city also ranks at number 27 on the Global Financial Centers Index and is home to the Australian Rules football code, the Australian Grand Prix and the Australian Open. It was the filming location for the first Mad Max film alongside Chopper and Animal Kingdom. Politically, Melbourne is more left-wing than any other city in the country and is home to the union movement.

 

Melbourne
The Yarra River in Melbourne. Source: Pexels

 

Crypto culture

Melbourne embraced cryptocurrencies early on, and a thriving community was built up through regular meetups including Blockchain Melbourne, Women in Blockchain, Web3 Melbourne and futureAUS. Karen Cohen, deputy chairperson of Blockchain Australia, recalls there being a huge influx of newcomers during the ICO boom in 2017.

“The meetup culture was really exciting. We couldn’t get enough space, so people were watching our meetups on Facebook Live because they couldn’t get into the room because it was so busy.”

Talk & Trademeetups were held every Wednesday from 2015 to 2019 at the Blockchain Centre. Located at the Victorian Innovation Hub in the docklands, the Blockchain Centre was the heart of the community in real life, at least until the coronavirus pandemic struck.

Melbourne has been home to numerous crypto exchanges since 2013, and a plethora of ICOs were also founded in the city in 2017 and 2018, including CanYa, which operates freelancer platform CanWork, and blockchain voting company Horizon State.

While the pandemic has moved most things online for the past 18 months, Blockchain Australia hosted a series of events at YBF Ventures in the Melbourne central business district (CBD) for the national Blockchain Week earlier this year, and Talk & Trade is now held at RMIT, in between lockdowns.

With live events beginning to reemerge as vaccine rates slowly grind up, YBF Ventures will relaunch its blockchain community meetups, supported by Cohen as the expert in residence for blockchain. “2020, sadly, has been hard with COVID, so it’s had to move online,” she says. “But I think if we were able to meet in real life, it would still have very much a meetup culture.”

 

Melbourne Trams
Melbourne has the largest tram network in the world. Source: Pexels

Projects and companies

Melbournites appear very interested in solving the problem of interblockchain communication, with at least three major cross-chain projects having strong ties to the city. CanYa founder JP Thor helped found the cross-chain decentralized liquidity protocol THORChain, and some of the anonymous local devs from THORChain went on to work on a similar project called Sifchain. Melbourne’s Simon Harman founded another cross-chain automated market maker, Chainflip, along with the privacy project Loki, which is now known as Oxen.

Web 3.0 developer studios Flex Dapps and TypeHuman are located here, as is the white-label blockchain services provider Pellar, whose infrastructure processes 10 million requests a day from around the world. Researchers from the government-run Commonwealth Scientific and Industrial Research Organisation and Monash Universityinvented the MatRiCT technology (licensed to Hcash), which protects crypto from being cracked by quantum computers. NFT digital racehorse game Zed Run just raised $20 million from investors including TCG and Andreessen Horowitz. Algorand also has a noticeable presence in Melbourne, including through the Meld gold platform and Algomint.

 

 

Crypto exchanges headquartered in Melbourne include BTC Markets, Cointree, CoinSpot, CoinJar, noncustodial exchange Elbaite and OTC service Caleb and Brown. Major global fiat-to-crypto on-ramp Banxa is also based in the city.

Up-and-coming projects include insurance platform Day By Day, onboarding and fraud protection platform FrankieOne and accounting software AEM. DeFi-focused crypto fund Apollo Capital which is a big investor in Synthetix and Internet Computer, among others is also based in Melbourne. Apollos chief investment officer, Henrik Andersson, co-founded the decentralized pool trading platform dHEDGE and yield platform mStable (and helped out with a few ideas for this guide).

 

Bitcoin ATM
Melbourne only has a dozen or so Bitcoin ATMs. Source: Pexels

Financial infrastructure

The first Bitcoin ATM was installed at the Emporium in 2014, but there are only 13 Bitcoin ATMs dotted around Melbourne, mostly in big shopping centers. Australian banks have a slightly wary approach to crypto while many banks are happy to allow users to send funds to exchanges, plenty of users have reported being suddenly debanked, especially those running crypto-related businesses. “They close accounts at will based on crypto use, and we’ve seen that happen, so they’re still not supportive as an industry,” says Cohen.

The New Payments Platform in Australia is something of a competitor to crypto (at least in terms of payments), allowing instant, 24/7 bank transfers using a phone number or email address. Often referred to as PayID, it was cited by the Reserve Bank of Australia as a reason that a central bank digital currency is not needed in Australia just yet. There are hundreds of retailers here in the Blueshyft network (Synthetix founder Kain Warwicks other project) that accept cash payments over the counter for crypto exchanges.

Where can I spend crypto?

According to Coinmap, you’ll struggle to spend cryptocurrency directly in Melbourne at present, with fewer than 40 retail outlets accepting Bitcoin. (By way of comparison, Ljubljana in Slovenia has half the population but 554 crypto-accepting merchants.) It wasnt always like this, with swathes of Melbourne cafes and businesses accepting crypto a few years ago, but then removing the option after it failed to take off.

Many retailers used the crypto payment service from TravelbyBit; however, it was dropped after the company merged with Travala in mid-2020. Australia’s oldest, biggest board game retailer in the CBD, Mind Games, gladly accepts Bitcoin via the Lightning Network. You can also learn rock climbing at Melbourne Climbing School, get fit at the women’s-only Fernwood Gym in Bulleen, get your computer fixed at Another World Computer Centre in Coburg or grab some raver gear from Ministry of Style in Collingwood.

If you’re relying on Coinmap’s data, note that some retailers featured have since gone out of business (most likely due to the pandemic), including cult book store Polyester Books, gift shop Vera Chan and various cafes.

Approximately 20 small businesses accept Bitcoin Cash, according to Bitcoin.com, including Japanese wellness clinic Sensu Spa and ties and cufflinks merchant Jay Kirby Ties in the CBD.

Despite the lack of merchants accepting direct crypto payments, you can pay for pretty much everything in Melbourne using crypto via intermediary services that transform it into cash. Living Room of Satoshi lets you pay any Bpay biller or bank account using 18 different cryptocurrencies.

 

RMIT boasts the Blockchain Innovation Hub. Source: Pexels

 

Education

RMIT University’s Blockchain Innovation Hub studies the social and business implications of blockchain, while Monash University’s Blockchain Technology Centre provides training and conducts research. There’s a Blockchain Innovation Lab at Swinburne University and Deakin University, both of which conduct research.

Controversies and collapses

Auscoin was perhaps the most controversial project to emerge from the city. Founded by Lambo-driving souvlaki chain-store owner Sam Karagiozis, the token was created to fund the rollout of 1,200 Bitcoin ATMs. The Aussie version of 60 Minutes dubbed it an “$80 million scam” that was built on nothing more than “grandiose promises,” although the ICO only raised $2 million. Auscoin was ordered by AUSTRAC to cease operations after Karagiozis was charged with trafficking 30 kilograms (66 pounds) of drugs via the dark web.

Elsewhere, up to 200 investors lost about $10 million between them when Melbourne-based crypto exchange ACX mysteriously collapsed at the end of 2019. It was operated by Blockchain Global, whose founder Sam Lee was instrumental in setting up the Blockchain Centre.

Another local exchange that mysteriously folded was MyCryptoWallet. Founded in 2017, National Australia Bank froze its accounts in early 2019. The exchange found alternate banking services and recovered temporarily, but later that year, users found they had lost access to their funds. As of April, they had yet to recover their funds, and Australia’s corporate regulator, the Australian Securities and Investments Commission, was said to be looking into it. Huobi Australia launched in Melbourne in 2018 but quickly shuttered due to a lack of business during crypto winter. Horizon State, a promising blockchain-based voting platform, launched in Melbourne and then moved to New Zealand where it was on the verge of doing great things when a mysterious court case back in Melbourne scuppered the entire project. In a happy ending, the community is resurrecting it from the ashes with a crowd equity raise.

 

Notable figures

Ethereum influencer Anthony Sassano;BTC Markets CEO Caroline Bowler;Apollo Capital chief investment officer Henrik Andersson;A. J. Milne of Meld Ventures and Algomint; Blockchain Australia CEO Steve Vallas;Tom Nash and Alex Ramsey of Flex Dapps; Women in Blockchain International manager Akasha Indream;Algorand Foundation chief operating officer Jason Lee;CanYa and THORChain founder JP Thor;“Satoshi’s sister” Lisa Edwards;Blockchain Centre founder Sam Lee (also of the now-defunct ACX); RMIT Blockchain Innovation Hub professor Jason Potts; Joseph Liu, director of the Monash Blockchain Technology Centre and inventor of the tech behind Monero; Oxen chief technology officer Kee Jefferys;Emerging Tech Talent founder Karen Cohen; Ethitech head of education Anouk Pinchetti; TypeHuman director Nick Byrne;Auscoin founder Sam Karagiozis; and blockchain law specialists Joni Pirovich of Mills Oakley and John Bassilios of Hall & Wilcox. Cointelegraph team members and contributors based in Melbourne: Andrew Fenton, Brian Quarmby, Kelsie Nabben.

 

Suggestions for additions to this guide are welcome. Please email: andrewfenton@cointelegraph.com

 


Who takes gold in the crypto and blockchain Olympics?


Every four years (usually), the world comes together in a celebration of sport and competition at the Olympic Games. In the spirit of Tokyo 2020, lets look at countries that are deserving of gold medals across different spheres of the cryptocurrency and blockchain space.

The variety of sports featured at the Olympics have changed over the years, and the current summer Olympics in Japan features a total of 33 different sports. Exciting competitions like skateboarding and surfing were added for Japan as the global showpiece continues to evolve and adopt different sports.

The cryptocurrency and blockchain space is similar in this regard. Many different working parts make for a colorful community both united and divided by their preferences of cryptocurrencies and blockchain platforms.

Lets take a look at which countries and institutions take home gold medals in their respective crypto and blockchain codes.

Gold for Bitcoin adoption goes to El Salvador

Sports often have fans cheering for the underdog and El Salvador has emerged as one of those lesser-known players that have burst onto the global stage in 2021. The Central American country grabbed headlines this year as it officially became the first in the world to recognize Bitcoin as legal tender.

Without delving too deep into the specifics, El Salvadors congress voted to pass President Nayib Bukeles Bitcoin Law which recognizes Bitcoin (BTC) as legal tender alongside the United States dollar, with 62 of a total 84 votes in agreement with the new legislation.

 

 

The law allows citizens to pay for goods and services in Bitcoin, and Bukele also stated that the Salvadoran government will guarantee the convertibility of BTC into USD at the time of any given transaction. The government plans to airdrop $30 worth of BTC to every citizen later this year.

There have been critics of the law change both locally and abroad, but the overall sentiment seems positive for the adoption of Bitcoin and a change of perception toward the preeminent cryptocurrency.

Nevertheless, there are a few final hurdles that lie ahead for the country. Firstly, the International Monetary Fund has issued its own warning about the potential downsides of countries adopting Bitcoin that currently have unstable inflation rates.

Secondly, some citizens of El Salvador have also expressed their skepticism of the move. A survey undertaken at the beginning of July involving 1,233 citizens revealed that nearly half of the respondents knew nothing about Bitcoin. Of the poll takers, 20% agreed with the move, highlighting the need for an educational campaign to complement the progressive move to make BTC a legal tender in the country.

Change is often met with uncertainty and resistance, but in terms of progression and adoption, El Salvador takes the gold medal in this first category.

Switzerland takes silver in the category, thanks to its crypto-friendly laws that have boosted the use of cryptocurrencies and companies working in the space. The USA clinches the bronze medal thanks to the efforts of Miamis Bitcoin-friendly mayor Francis Suarez, whos been driving various initiatives to promote the use of BTC.

China leads the CBDC race, but anti-crypto policies lead to disqualification

China has been a powerhouse at the Olympics over the past two decades with its sporting program producing a fine pedigree of Olympic weightlifters, gymnasts, divers, shooters and martial artists. In the world of cryptocurrencies, the story is quite different.

China has taken a stern stance toward cryptocurrencies and has continued this policy in 2021, with its outright ban of mining completely rebalancing the Bitcoin mining ecosystem as a result.

Interestingly enough, the nation is far ahead of the world when it comes to the race to develop a fully-fledged central bank digital currency, or CBDC. Over the past 18 months, China has piloted and rolled out significant testing of its Digital Currency Electronic Payment, or DCEP.

 

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Colloquially known as the digital yuan, citizens began testing the facility through lotteries that award a small number of participants in various cities with digital yuan, which they could use through a mobile app to pay for goods and services at thousands of participating vendors.

There is no denying that China has blazed the trail for the development, testing and roll-out of its CBDC. In the same breath, the DCEP is a government-controlled program, and the specifics of the technology and systems powering the digital yuan are shrouded in mystery.

However, Chinas recent ban on mining in different regions and its zero tolerance of cryptocurrency exchanges means that despite its well-developed CBDC program, it falls out of the reckoning for a medal. Luckily, a number of other countries have also made significant strides in developing their own CBDCs.

In the world of sports, fans often get behind the underdog, and this is certainly the case with the Bahamas and its Sand Dollar CBDC. The country has made significant strides with the development and testing of its very own CBDC and became the first country to go live in October 2020.

The Sand Dollar ecosystem continues to onboard more local banks and financial institutions, paving the way for widespread adoption of the CBDC and a fully digital payment environment. The Bahamas is the deserving recipient of the gold medal in this category.

Sweden has begun its first trial of pilot testing the e-krona CBDC with a couple of local banks and external participants. As it continues testing its system with local financial institutions, Sweden earns the silver medal in this category.

Cambodia and Ukraine have been credited for their own CBDC development programs by a recent report from PricewaterhouseCoopers, sharing the bronze medal in this category.

North America in the race for gold in Bitcoin mining

China was undoubtedly the gold medal incumbent of Bitcoin mining but this is quickly changing in 2021. Recent estimates saw China account for more than 70% of the global hash rate before various mining operations were forced to shutter in June.

Those firms that were able to quickly look for greener pastures would welcome their mining equipment. While various countries in Asia would be the closest locale to relocate to, North America is quickly becoming the new hub of cryptocurrency mining.

Research from the Cambridge Centre for Alternative Finance shows that the hash rate of American-based miners has steadily been on the rise over the past year and the latest regulatory move in China has only accelerated that point.

The Cambridge Bitcoin Electricity Consumption Index world map has yet to fully reflect the data from Chinas regional mining bans in June, in order to get a better understanding of how the Bitcoin mining hash rates geo-distribution has changed. The latest map shows the distribution as of March 2021.

 

 

 

Nevertheless, from August 2019 to March 2021, the U.S. saw an increase in its contribution to the global hash rate from 4% to 16%, making it second to only China in terms of hash rate. This is largely due to a concerted effort from major mining operators in America steadily increasing their hash rate by acquiring new equipment during this period.

Kazakhstan has also opened its doors to relocate Bitcoin miners from China and has seen its share of the Bitcoin hash rate climb to around 8% of the global rate, according to Cambridges recent report.

Chinas share of the global hash rate has dropped below 50%, while the United States has climbed. This picture, however, has still not factored in the major relocation of mining operations out of China.

It might be too early to give the U.S. the gold medal for Bitcoin mining, but the country seems to be on track to take over in the leaderboards if it continues at the same pace. Chinas mining clampdown results in a disqualification, so the U.S. becomes the new gold medallist in this category.

Kazakhstan swoops in to take silver with its 8% contribution to the global hash rate, while Iran grabs the bronze medal with its 4.6% share. Canada and Malaysia just miss out on the podium in the category.

The regulatory race goes down to a photo finish

When it comes to progressive regulation that is driving cryptocurrency adoption and use, there are a number of countries that are vying for a crypto gold medal and can boast to have developed regulatory parameters that are helping the industry thrive in their locales.

Malta has positioned itself as the blockchain island for a few years now and has attracted a number of the worlds biggest cryptocurrency exchanges and other crypto service providers. The countrys regulatory package is attractive, as crypto holders do not have to pay capital gains, wealth, or inheritance tax on their holdings, but trading is subject to income tax.

Singapore is another country that has established comprehensive laws that have made it clear what cryptocurrency firms and service providers need to do in order to operate in the country. Singapore is also among a handful of countries that has zero capital gains tax on cryptocurrency income.

South Korea has long been a country with an avid cryptocurrency user base and often sees Bitcoin trading at prices far higher than the rest of the world. The country has since developed strict regulatory frameworks but has also driven a number of initiatives to foster various services powered by blockchain technology.

 

 

 

 

Switzerland is another strong contender in this category, given its progressive attitude toward the cryptocurrency and blockchain space. Earlier in 2021, the Canton of Zug finally rolled out its facility for residents to pay taxes in BTC and Ethereum (ETH).

Canada is featured prominently in this race, having become the first country to approve a Bitcoin exchange-traded fund (ETF). The launch of the first Bitcoin ETF in February 2021 was a huge success, with the Toronto Stock Exchanges Purpose Bitcoin ETF seeing nearly $100 million in trade volume on its first day.

All in all, Canada has been hailed for its progressive regulatory environment for cryptocurrency use. Cryptocurrencies are classed as commodities, and their usage for goods or services is treated as barter transactions.

These five countries, therefore, end the crypto and blockchain regulatory race in a photo finish thats hard to call. As we bring up the slow-motion replay, we can confirm that Canada can take the gold in this category for its broad range of crypto-friendly regulations, from ETFs to clear tax laws and favorable mining tariffs.

Malta takes silver, as its status as the Blockchain Island has waned somewhat due to a change in governmental leadership that had initially championed this cause. Singapore and South Korea share bronze in this category.

The U.S. takes gold for institutional adoption

The modern-day United States optimizes a capitalist society, and the disruptive nature of cryptocurrency has led some forward-thinking individuals, companies and institutions to move quickly to leverage the potential of cryptocurrencies and blockchain technology.

Enter MicroStrategy, a global leader in business intelligence services, which in 2020, pioneered a move to convert its fiat-based treasury holdings to Bitcoin. The companys CEO, Michael Saylor, is a fierce Bitcoin proponent and has relentlessly acquired BTC since the firms decision to bank on the preeminent cryptocurrency in August last year.

MicroStrategys move is widely credited for influencing electric vehicle manufacturer Tesla and its founder Elon Musk to decide to begin investing in Bitcoin and, even at one point, accepting the cryptocurrency as a means of payment for its vehicles.

Cryptocurrencies have been touted as a disruptive force in the payments industry, and American firm PayPal looked to gain first-mover advantage by announcing that it would roll out cryptocurrency custody and payment services on its widely used platform.

 

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American investment firms have also led the way in allowing a wider audience various ways to gain exposure to cryptocurrencies. None more so than Grayscale Investments, which has a number of cryptocurrency trusts that are valued at over $33 billion to date. Its flagship Bitcoin Trust is currently valued at over $24 billion alone.

These factors are more than enough to hand America another gold medal in the Crypto Olympics in the race for institutional adoption.

Canada takes silver in this category due to its crypto-friendly regulation and its progressive ETF laws that have seen it overtake its North American neighbor in that regard. Thailand walks away with a bronze medal here, as its oldest banking institution, Siam Commercial Bank, has committed $110 million to invest into the decentralized finance sector through its venture capital arm SCB 10X.

DNFs

A number of countries fall into the disqualification category for their varying stances on cryptocurrency and blockchain technology.

In February 2021, Nigerians were caught off guard as the countrys central bank effectively barred local banks from servicing cryptocurrency exchanges. For a country that still ranks as number one for Googles search of Bitcoin, the move was criticized both locally and abroad. Nigerias Securities and Exchange Commission had been developing crypto regulatory plans which were suspended as a result.

India is another country that has a checkered past when it comes to its attitude toward the cryptocurrency space. The countrys government has long been threatening an outright ban on the use of Bitcoin, but this is slowly changing with talk of asset classification providing proper regulatory frameworks and oversight for the burgeoning industry.

Indias banking sector is still at odds with the cryptocurrency movement, with some of the largest institutions reportedly cautioning customers about acquiring and using cryptocurrencies. Its clear that mixed messages from Indias government and central bank in recent years have created a swathe of uncertainty that can only be addressed by proper education about the sector.

Chinas recent ban on cryptocurrency mining in different regions of the country also sees it feature in this disqualification category, as the move caused major disruptions in the mining ecosystem, forcing operators to close up shop and look for greener pastures abroad.

The Chinese government also issued directives to local banks not to service businesses involved in the cryptocurrency industry, which is cause for greater concern. Cutting off integration with the traditional finance sector means that citizens in the country are robbed of the ability to access and use cryptocurrencies to their full potential.

 

 

 


Is Bitcoin a religion? If not, it soon could be


Hass McCook is a respected Sydney-based civil engineer who has worked on some of the most spectacular buildings in the world, from Munich’s Allianz Arena to Singapore’s Marina Bay Sands.

He also considers Bitcoin to be his religion.

Better known on Twitter as Friar Hass, the 35-year-old had a religious epiphany about Bitcoin in 2017.

In a tale reminiscent of the Bibles The Trials of Job, McCook bought Bitcoin three years earlier at $1,000 a coin and watched it lose 90% of its value. He then lost a substantial proportion of the remaining sum when the Bitfinex exchange was hacked.

“That sent me down into the psychological and spiritual gutter,” he says. “And I came out of that with a religious experience. Hes not being ironic.

“They always say in times of tragedy and trauma, people turn to God. That is sort of what happened with me, it’s tough to describe the experience, but basically, the best way I can describe it is I went to Bitcoin.”

A member of the Bitcoin Mining Council who’s friendly with MicroStrategys Michael Saylor, McCook views Bitcoin as a form of energy. As Einstein was fond of pointing out, when it comes down to it, everything in the universe is energy.

 

 

“It was the culmination of all of my learning, experience and trauma it was the realization that you and I, in long term equilibrium, are just Satoshi,” he says. “Every atom in the universe through heat and energy transfer, one day will become literally Bitcoin. He adds:

“It’s a very, very powerful thing, like we get buried into the ground, we go into the ground, become worm food, circle of life and eventually it ends up in the grid. You literally end up in Bitcoin.”

When this feature was first commissioned it was intended as a fun exploration of the idea that the culture around Bitcoin is metaphorically a bit like a religion. But, it turns out that some people are starting to view it as a literal religion or at least an ideology or a cult that has the potential to turn into one.

It sounds crazy maybe it is crazy but there’s more substance to the idea than you might expect.

 

Hass McCook
Hass McCook

Bitcoin holy capitol

The religious echoes seemed pretty obvious to many observers of the recent Bitcoin 2021 conference in Miami.

The New York Times article was titled Thousands descend on Miami to glorify Bitcoin and quoted the convention centers owner Moishe Mana saying: The more you fight religion, the more holy it becomes and the stronger the movement becomes, he said.

Media outlet Paradox described how a ten thousand plus legion of devoted believers came together with followers of Bitcoin maximalism to listen to the high priests of the movement:

Before thousands of wide-eyed attendees like Joel Olsteen preaching at a megachurch, prophets like Michael Saylor called Bitcoin the apex of human achievement, while architects of the Holy Capitol blatantly acknowledged the asset as a full-fledged religious movement.

And just like followers of a religion, Bitcoiners believe with some justification that theyre on a righteous mission to change the world. Twitters Jack Dorsey told the crowd: I dont think there is anything more important in my lifetime to work on.

Established 2012

The concept dates back to at least late 2012, when Bitcointalk forum user Crazy-rabbit posted:

I’m sure people have noticed how eerily similar to religion Bitcoin is becoming. The mythical founder, the email disciples, the followers… So why doesn’t someone just do it already and register the Church of Satoshi? There is certainly enough philosophy here.

As it happened, a satirical Bitcoin Church had commenced operations a month earlier, urging followers to Praise Bitcoin and Honor the Blockchain. A more sincere effort called The Church of Bitcoin was established in August 2017 by Henry Romp, urging members to “Distribute our scripture, the whitepaper written by Prophet Satoshi Nakamato.”

 

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The chief narrative officer at Qi Capital, Jonny Qi, tells Magazine that as a spiritually inclined person, he began to notice parallels soon after he got into crypto in 2017.

“You have this charismatic leader who disappeared, Satoshi, and then you have a white paper which acts as a holy paper and if you kind of go against it, you’re basically not part of their religion anymore and they’re going to attack you. So all the basic fundamentals to build a religion are there.”

 

Darren Gleason Twitter

 

The commandments

Bloombergs Joe Weisenthal neatly laid the parallels out in an article earlier this year, calling Bitcoin the first true religion of the 21st century.

He noted Bitcoins first block was called the Genesis block and that Satoshi appears to have been self-sacrificing and benevolent, having departed this world before he sold a single coin. He likened the white paper to the Bible, Hal Finney to a saint, Bitcoin Pizza Day and the Halving to religious holidays and the Bitcoin Cash fork to a religious schism. Weisethal also wryly noted that orthodox Bitcoiners adhere to a diet of meat only.

Prophets, apostles, holidays, dietary customs, sacred texts, schisms, sayings and more. Bitcoin isn’t like a religion. This is just what a religion is.

 

Bitcoin and religion
Source: The Passion of the Believers, Hass McCook

 

While the article was tongue in cheek, the metaphor runs surprisingly deep. Bitcoiners go out into the world and proselytize the tenets of the faith: Anti-inflationary hard money, decentralization and uncensorable transactions, which will help good win against evil (bankers). They demonstrate their faith by hodling, participating in rituals such as buying the dip and telling nonbelievers (nocoiners) of the miracles in which the poor transformed pennies into Lambos in Bitcoin’s version of transubstantiation.

Many Bitcoiners believe in an apocalyptic style scenario when the existing fiat-based financial system finally collapses. In a blog, McCook described “judgement day” as a forthcoming period: “viewed by many Bitcoiners as a devastating economic event, the death of fiat.”

Ultimately, this will lead to total civilizational collapse, or, the phenomenon of hyperbitcoinization, effectively, when all global trade is conducted in Bitcoin, and its market capitalization is in the dozens of trillions, if not hundreds.”

Cointelegraph Magazine contributor Elias Ahonen, a former seminarian, wrote an entire chapter about the similarities in his book Blockland.

I actually spent a semester at a Bible college before university, he says. It constantly blows me away how similar crypto and especially the Bitcoin movement is to a charismatic religion. I would dare to say that unless you’ve experienced it, you can’t understand how absurdly similar they are, to the point that they are indistinguishable.

Bitcoin fixes everything

Bitcoin maximalists are the fundamentalists the hardline lay preachers who keep the flock from worshiping those who they believe to be false idols, or blaspheming by purchasing shitcoins. McCook says hes comfortable with the comparison.

“Yes, because we do have fundamentals,” he says. “There are fundamental, ethical and moral principles to Bitcoin.” While many Bitcoiners just think of it as a fun way to make money and maybe stick it to the banks, some maximalists view it more like a righteous crusade. They believe:

Bitcoin fixes this.

By which they mean, Bitcoin fixes everything.

If you’re an actual environmentalist and if you don’t have Bitcoin, you’re not a serious environmentalist. You know, if you want to end poverty and you don’t hold Bitcoin, you’re not serious about ending poverty, says McCook, adding:

Because the root cause of all of our problems is basically money printing and capital misallocation as a result of that. So, the only way the whales are going to be saved, or the trees are going to be saved, or the kids are going to be saved, is if we just stop the degeneracy.”

Qi has an altogether darker view of maximalism, which he believes is a stifling form or moral superiority:

“Morality is the essence of every maximalism, a belief that somehow their system is morally superior to every other system. Bitcoin maximalists are more interested in moral superiority than sound money.”

 

Roger Ver
Roger Ver seeks immortality through cryonics.

 

Bitcoin Jesus himself Roger Ver now the leader of the breakaway BCH sect tells Magazine that Bitcoiners are really the only community in crypto that behaves this way.

“You see that mainly from the BTC camp, he says. They hate every other coin that’s not BTC. Whereas I see the Ethereum guys, they like lots of different coins, the Bitcoin Cash people like lots of different coins. Most coins are okay with other coins, but there just seems to be a pretty large contingent of people that think that BTC is the one and only true religion or one true and only cryptocurrency and I think that’s foolish.”

Define religion then

The Oxford Dictionary defines religion in part as: A pursuit or interest followed with great devotion. While Mirriam-Webster defines it as a personal set or institutionalized system of religious attitudes, beliefs and practices and commitment or devotion to religious faith or observance.

McCook points to those two definitions and says religions dont need to be based around a god, citing Buddhism and Taoism.

Torkel Brekke, a Professor in Religious Studies at Oslo Metropolitan University and the author of Faithonomics: Religion and the Free Market agrees that it’s absolutely reasonable to say that you can have a religion without a strong concept of divine being.

Brekke says that what all religions do share is a strong social aspect. They feel they have a very strong sort of sense of being a community that is something special, different from other communities, and followers perform rituals such as prayer or singing to create strong emotions.

 

 

He notes that many established religions now conduct these gatherings and rituals online. Could Crypto Twitter be the place the Bitcoin faithful congregate to feel the elation as the price rises and the crushing disappointment when it falls? (Technically speaking, hodlers shouldn’t care about short term price movements if they’re not going to sell, but a price increase seems to validate their faith while a price plunge tests it.)

Professor Torkel Brekke

I describe the similarities between Bitcoin and religion to him, along with McCook and Qis perspectives, expecting him to shoot the idea down. But he says some aspects, especially the end of times story where everything is going to collapse in terms of the financial system and they are going to remain as a select group that saw the light makes it seem as if the comparison might actually be plausible.

The more you talk about it now, makes me think that there’s definitely something to this, he says.

No, the whole idea is silly

One person who thinks the comparison is overblown is crypto enthusiast, film maker and speaker Kirby Ferguson (This Is Not a Conspiracy, Everything is a Remix). He says that anyone who worships Bitcoin or follows it religiously is going way too far.

I think it’s super misguided, he says. It’s simply not a religion. There’s nothing metaphysical about it. There’s nothing supernatural about it. Satoshi Nakamoto is just some guy.

It just seems like a real limited religion, if you want to look at it that way. Like I just don’t see aside from value outside of economics and finance and technology I’m just not sure what it can really offer you. I would be surprised if many people think that way. And honestly, I’d be surprised if it grows. It seems like a joke to me.

Decline of religion

One hypothesis, brought up by a number of interviewees, is that the ideology around Bitcoin could be acting as a sort of substitute belief system as traditional religions lose influence. This is an idea gaining traction in relation to a range of different ideologies and movements separate to Bitcoin.

The decline of organized religion has been a seismic transformation across Western cultures but especially so in the traditionally God-fearing United States of America. Twenty years ago, around 70% of Americans belonged to a church, synagogue or mosque. That fell to just 47% in 2020 according to Gallup.

Over the same period, the number of people with no religious affiliation nearly doubled, with the proportion higher among younger age groups, including 31% of Millennials and 33% of Generation Z. These are also the age groups most interested in Bitcoin.

 

Bourbonic plague

 

James M. Patterson, research fellow at the Center for Religion, Culture and Democracy, argued in the National Review that young people are embracing alternative forms of belief. He cited Ross Douthats book Bad Religion as evidence that Attempts to scrub religion from American public life have failed; alternative belief systems have rushed in to fill the void. He suggested that critical social justice movements are one manifestation.

McCook sums the concept up. You have to believe in something, it doesn’t have to be God and points to the popularity of Jordan Peterson’s 12 Rules for Life, at the other end of the political spectrum, to illustrate the same point. He adds:

You need some compass in your life or you’re just going to be lost and destructive.

Even QAnon, with its mysterious prophet Q and its judgement day style prophecies of The Storm could be a way of fulfilling peoples need to believe. People are sublimating, they’re redirecting, they’re channeling these kinds of impulses in other directions and I think QAnon definitely fits the bill there, Ferguson says.

Religion is hardwired

Kirby Ferguson

Many scientists think the human brain is hardwired for religion or at least theres a propensity for people to believe in something bigger than themselves.

I think it’s just really common, even among people who are like hardcore atheists, often they’ll have some other belief system that is really strong, says Ferguson, adding: It certainly could be Bitcoin, but in lots of cases its environmentalism, its progressivism, its libertarianism, its conservatism, whatever.”

What unites these substitute belief systems is that theyre trying to make the world a better place, whether by eliminating racism, sexism, saving the environment, or reforming an unfair and unjust financial system.

The unfortunate flip side of belief systems with such devoted followers was noted by lawyer and civil liberties champion David French recently:

That really animates people and gives them a sense that what they’re doing, they’re on the right side of something really important and really good. But as with so many fundamental isms, it is so entirely intolerant of dissent and so entirely intolerant of disagreement it often ends up oppressing in the name of liberation.

Ideologies or religions?

Apart from QAnon, these movements are more commonly referred to as ideologies rather than religions. But, Ferguson says its sometimes hard to tell where one ends and the other begins.

“Any sort of belief system, whether you’re a libertarian or a progressive or whatever, it’s a bit like a religion. It’s a kind of philosophy, it influences your decisions, it molds your moral take on issues. There’s a kind of blurry boundary.

 

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“Bitcoin I do see as a libertarian style belief system. But clearly its not an actual religion. It’s more of an ideology, adds Ferguson. Brekke meanwhile thinks that it may be less clear cut.

“It has ideological aspects to it, but it has a lot of other aspects that I would say are religious-like they are cult-like. If I was pressed for an answer, I would say, yeah, this looks like a cult with religious dimensions. To say whether or not it is a real religion. I would need to wait another 50 years.

 

Bitcoin Hermit

 

Qi believes the way events are transpiring means Bitcoin, or something like it, could really become a formal religion in future. We have to see it from the aspect of the next 100 years: All spiritual ways will kind of die off and people will be more and more merged with the digital world they’re losing basically the reality part of their life, he says, adding that When you see it from that perspective, you need to have a religion which fits that reality. You need to have a digital religion. Qi concludes:

All these elements are in place to build the first basically worldwide digital religion. I think it’s already there. That’s what I believe: It’s a digital religion. It’s gonna be huge. I don’t think anybody can stop it.

 

 

 


Blockchain fail-safes in space: SpaceChain, Blockstream and Cryptosat


In the 1988 Crypto Anarchist Manifesto, engineer, author and cypherpunk Timothy C. May predicted a social and economic revolution enabled by technological developments, including high-speed networks, personal computers and satellites. Today, former Bitcoin core developer Jeff Garzik now with SpaceChain and others are making this vision a reality. Private crypto companies including SpaceChain, Blockstream, Cryptosat and others are rapidly launching satellites into orbit to offer blockchain validation, multisignature wallets and verifiable time-delay functions from space.

As the cryptocurrency market continues its overall moonward trajectory, the stakes are getting higher for blockchain protocols. Blockchains must not only maintain their security in the technical sense but they need to be able to withstand regulatory setbacks as well. If governments are a potential threat to the visions of unstoppable, decentralized networks on Earth, then putting blockchain validator nodes in space is a backup.

Garzik, the co-founder and chief technology officer of SpaceChain, argues that placing nodes out of human reach, in space, can help address security and vulnerability issues facing centralized land-based servers on Earth, and unfurl new and exciting opportunities for other commercial use cases.

This means that even if nodes fail, or are compromised or shut down or even if the internet is somehow turned off a verifiable copy of the blockchain will persist in space, adding to the immutability and censorship-resistant attributes of this technology. Now, Space is for everyone, states Garzik.

More companies are finding cheaper ways to provide blockchain-oriented space-as-a-service. Nominally, San Francisco-based company Cryptosat is interested in using the properties of space, to benefit blockchain, the co-founders tell Magazine. They are leveraging premade components to launch miniature, coffee mug-sized cubesats and simple on-ground infrastructure deployed on enterprise cloud-web providers for an end-to-end system where anyone can assemble, launch and communicate with a satellite providing blockchain nodes in space.

 

 

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Space infrastructure is offering whole new possibilities for composable, decentralized infrastructure. SpaceChain and Cryptosat are investigating a range of use cases in addition to nodes, including randomness beacons and verifiable delay functions (VDFs). Randomness beacons provide trusted sources of entropy and are a fundamental component for generating an unpredictable result.

In cryptography, for example, the initial trusted setup of key pairs requires a source of randomness. VDFs execute functions after a certain amount of time has passed, for transactions or smart contract functions. With satellites, these cryptographically signed timestamps can be determined by orbits around the Earth and transmitted from space. Its basically like a trusted clock in space, Gil Shotan, co-founder of Cryptosat, tells Magazine. These interact with software interfaces for enterprise clients, such as digital asset management company Nexus Inc. and cryptocurrency exchange Biteeu, for secure in-orbit multisignature transactions.

While SpaceChain and Cryptosat are blockchain-agnostic integrators for space services, Blockstream, which was co-founded by Adam Back one of the original cypherpunks and the inventor of Hashcash, a proof-of-work precursor mentioned in the Bitcoin white paper is specifically focused on using space to expand the capabilities of the Bitcoin network.

The Blockstream Satellite network broadcasts the Bitcoin blockchain around the world, 24/7, to provide connectivity for continual access to the Bitcoin network to mitigate the threat of network interruptions or IP traceability. Anyone can purchase a small satellite antenna and USB receiver to view these blocks to ensure their node is in sync.

How do you get to space?

Getting your node into space is not as difficult as one might think.

The United States National Aeronautics and Space Administration, known by most simply as NASA, reserves spots for commercial launches on each mission. Based on a proposal that emphasized the security use case for blockchains, SpaceChain, which was founded in 2017, was the first blockchain company to launch with NASA.

With the goal to provide open and neutral space infrastructure, SpaceChain launched its first payload (cargo) carrying a node to the International Space Station in 2019. Its fourth node, an Ethereum validator, was launched from NASAs Kennedy Space Center aboard a SpaceX Falcon 9 rocket in 2021. This allows an immutable record of blockchain transactions to be not only global but universal, to further the functionality of decentralized applications in space.

 

 

 

While one might think that the ISS or a satellite is quite the target for attack by anyone that really doesnt like blockchains, SpaceChain is convinced of the opposite.

As long as it doesnt get killed, it will bounce back, states Zee Zheng, co-founder and CEO of SpaceChain. Space infrastructure offers enhanced security properties, as it is freely and continually monitored by every space agency in the stratosphere. While this still doesnt solve the intractable problem of trust in hardware support chains, if tampered with once launched, everyone will know. In fact, governments are quite interested in supporting blockchains in space.

Who pays in space?

Putting blockchains in space is often positioned as an ideological pursuit for decentralization, away from the reach of untrusted intermediaries. Yet, space infrastructure is a highly sought after, often publicly funded and privately provided service. The commercial case for space is quite compelling.

SpaceChain secured approximately $60,000 in funding from the European Space Agency for its first payload, and more recently it received 440,000 British pounds ($605,000) in funding from Enterprise Singapore and Innovate UK to develop Decentralized Satellite Infrastructure (DSI), a real-time blockchain-operated network of satellites.

 

 

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For some like SpaceChains Garzik, Space is not about the dollars, as decentralized currencies surpass the need for terrestrial money. For others like Cryptosat and Loft Orbital, money is a factor. Loft Orbital shuttles payloads for companies, including the recent Ethereum node for SpaceChain, and raised $13 million in a Series A funding round in 2019. There is still money to be made on earth, Yonatan Winetraub, co-founder of Cryptosat, tells Magazine.

Governance and politics in space

Governance in space could go in several directions. Space is known as an arena for geopolitical competition, enhanced by an entanglement of interests between state and private actors.

SpaceChains network of low Earth orbit satellites, known as a constellation, is operated by multiple parties in multiple jurisdictions. It is set to offer a collaborative model where infrastructure is non-territorial and accessible to commercial and government users. While SpaceChain hopes that its infrastructure mediates a collaborative model between numerous countries and commercial entities, attempting to establish resilient, decentralized networks can also create new vulnerabilities.

Commercial interests, mixed with competing players, may result in new rivalries, not least of which includes Elon Musks plan to put literal Dogecoin on the literal moon. In June, Musk declared that a new space race has begun! via Twitter, in response to crypto exchange Bitmex, which vowed to beat Dogecoin to the moon with Bitcoin.

Garzik thanked Musk and SpaceX on Twitter but pointed out that SpaceChain has ALREADY ridden your rockets to space, adding that SpaceChain is an integrator, and happily accepts BTC ETH SPC and now DOGE for customer space missions.

Perhaps the next decentralized autonomous organization, or DAO, will be in outer space?

According to some, the future could involve the multispecies population of multiplanetary systems, with multiple digital currencies. Whether blockchain capabilities enhance space or space enhances blockchain here on earth, Space is closer to us than you think, Winetraub tells Magazine.

 


Bringing contemporary pop art to an NFT metaverse


The realm of metaverses is growing, with gaming, nonfungible tokens and contemporary performance art all contributing to create interactive and immersive digital-only ecosystems. Welcome to Lobsteropolis District of Lobster Land is the welcome notice that greets netizens upon entering Lobsteropolis city.

Existing within the blockchain-based virtual world Decentraland, Lobsteropolis is a digital-only city based on British contemporary artist Philip Colberts Lobster Universe. The ambitious project offers arguably more than a glimpse into the emerging movement at the intersection of art and blockchain technology, more specifically, open-world spaces that allow people to interact with art inside a computer-generated environment.

 

Welcome to Lobsteropolis; Philip Colbert’s digital pop art world set in the Decentraland.

 

Born in Scotland and now living and working in London, Colbert is an alumnus of the University of St Andrews. Before coming about the idea of Lobsteropolis City in a metaverse, Colbert was already a name in the pop art world, with former Vogue editor Andr Leon Talley anointing him the godson of legendary pop art figure Andy Warhol.

Colberts work, steeped in the pop art ethos of high art and low culture, has already attracted praise from major art world figures such as the famous auctioneer and curator Simon de Pury and Iraqi businessman and contemporary art collector Charles Saatchi. Fashion and style bible i-D Magazine once called him the crown prince of pop art.

All are welcome

Nonfungible tokens (NFT) have become significantly more popular in recent times, and NFT art is arguably a ubiquitous term even for those unfamiliar with the crypto and blockchain space. These days, almost anyone can mint an art piece and sell it on an NFT marketplace such as SuperRare.

Disruption was and still is a major buzzword that comes up whenever blockchain is the topic of discussion. Perhaps it is not surprising then to see the novel tech serve as the base layer for innovative approaches to gallery exhibitions.

Lobsteropolis City is home to Colberts first wholly digital art exhibition, with some of his popular works such as Lobster Fountain and Cryptofixtion on display. Visitors will also be treated to a few unseen pieces from Colbert as part of the NFT art auctions hosted by de Pury.

 

Colbert’s lobster persona is ready to welcome visitors to Lobsteropolis

 

One of these unseen NFTs is a hybrid artwork and musical performance titled Lob-Ster De-Vo created in collaboration with the American new wave band Devo. The rock bands theme of devolution has often leaned heavily on multi-media expression that has perhaps become a staple in the emerging narrative of contemporary art in the 21st century.

In Lobsteropolis, Colberts lobster persona is once again an art protagonist in a rendering that seems simultaneously to be an art show and an expression of the artists world. Through my art, Ive been building my own art world where my lobster persona is the key narrator, and the digital space enables me to explore this narrative in a new way, he explains in a conversation with Cointelegraph Magazine.

Colbert calls the digital city, three years in the making, a labor of love:

I have an amazing team who help me with the coding and the uploading to Decentraland, and the Vegas City team have been a huge help with the programming. The digital side of my work has been very much a labor of love I have been building this infrastructure for some time.

Pop art becomes digital

Lobsteropolis features composite elements of Colberts work from several international museum shows and exhibitions including his famous 2020 Saatchi Gallery exhibition. However, the city is not only an art exhibition but an interactive open-world space for digital interaction.

Even before the onset of COVID-19, advancements in both virtual reality and augmented reality have been pushing the boundaries of digital interaction. Immersive gaming landscapes already exist where users can create avatars to experience and explore sprawling digital environments rich with features ranging from real-world digital natives to even more fantastical elements.

Visitors to Lobsteropolis have a plethora of options to explore within the city. One of the attractions is Lobster Lounge: a concert venue for avatar bands and an event space where avatars can hold talks, Colbert says, adding:

Theres a strong gameplay aspect throughout Lobsteropolis City where avatars can interact with other people and create a layer of fantasy.

Set in Decentralands Vegas City, Colberts digital lobster land, of course, plays home to a casino. Theres also a casino, where avatars get given lobster coins, and they can play blackjack and play slot machines and buy digital products in my supermarket, Colbert says.

 

Lobster City casino where visitors can play blackjack and slot machines with lobster coins.

 

Colbert, by his own admission, is obsessed with the crossover of art and music. According to him, the NFT space is creating a platform for the synergistic melding of both art forms in a revolutionary way.

Apart from co-creating the Lob-Ster De-Vo NFT piece, the music band will also perform a live DJ set at the Lobster Land Records store, which is adjacent to the Lobster Land Museum the venue for the auction hosted by de Pury.

Colberts collaboration with the band to create Lob-Ster De-Vo will be a central piece of the inaugural auction event on June 30. According to the artist, the Lob-Ster De-Vo NFT artwork explores the role of digital ideology in the emerging virtual-oriented era of human interaction.

 

 

 

 

For Colbert, the Lob-Ster De-Vo NFT is an examination of the role art plays as humanity appears to be moving toward a more mature digitized space. The piece also pays homage to Devos iconic 1981 hit Through being cool especially the three crucifixions theme.

Colbert recalls his early experimentation with NFTs and how that experience led him toward Lobsteropolis as a digital city: The first NFT I made was called Cryptofixtion. Id been wanting to make a lobster crucifixion sculpture, inspired by studying Dalis paintings and engaging with the idea of technology as a new religion.

 

Venues like Lobster Mart and Lobster Land Records help users to create a layer of fantasy

 

Modern-day philosophy is indeed replete with musings about the entanglement of technology and religion especially within the framework of these advancements perhaps offering an alternative transcendental experience.

With our obsessions with phones as a way of consuming experience, the idea of a cross made out of screens seemed very logical, Colbert says, adding:

I then realized it would work better as a digital world: Some things are more infinite, pure and powerful in digital form. Since then, Ive been following my own process.

Immortality and perfection

This pursuit of infinite, pure and powerful possibilities inevitably led Colbert to the digital world and, inexorably, to NFTs. Forget cubism. This is artistic expression and experience on another level. With the rise of the NFT, the digital art movement is now a tidal wave, and so many ideas are possible.

Colbert is in the camp of those who see novel artforms emerging at the intersection of NFTs and contemporary art, with possibly even new art movements springing forth as more artists begin to interact with blockchain-based metaverses.

The cross and the hybrid is very interesting why be stuck in one box when you can interact between the two? Digital has an immortality in its perfection, and physical art can always be copied in a way that digital art cannot.

With NFTs, artists now have the power to include metadata unique digital attributes alongside their work. This feature could bring an added sense of originality and authenticity to digital art. According to Colbert, There are always questions around authenticity. People are obsessed by authenticity, its the core of our value system.

 

 

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Colberts musings about the immortality and perfection of digital art also likely offer a lens with which to observe his artistic examination of the idea of technology as a new religion. Art as a medium of philosophical commentary perhaps attains an even greater socio-epistemic value within the context of the 21st-century journey toward total digital perpetuation.

As digital art evolves, Colbert says he expects NFT technology to play a major role, especially with the emergence of interactive metaverse environments. According to Colbert, working within a metaverse offers the next wave of possibility to change the way we look at digital art and the way we experience it.

From an artistic point of view, I was inspired by the holistic idea. It offers a way of changing the context. If you change the context, you change the way you look at something, and then that changes, too.

It is, perhaps, often difficult to pinpoint the flip the point where a specific technological advancement emerged. This reality has been true for paradigm-shifting breakthroughs like the electricity revolution of the late 19th and early 20th century as well as the birth of the mobile internet era.

However, it is beginning to look likely that metaverses have grown beyond musings based on science-fiction and could perhaps become the next iterative succession state of the modern world.

 

Colbert says Lobsteropolis is not all about NFT art and music

 

If Colbert is right, and metaverses, with NFT tech as the primer, change perception and context, then the next iterative succession state of the modern world might be on the cusp of emerging. One thing appears certain, and that is metaverses are here, but how long before it becomes fully realized, only time will tell.

 


Retire early with crypto? Playing with FIRE


Finance blogger The FI Explorer didnt invest in cryptocurrency in order to retire early but unlike many of the newly minted crypto rich, he did set out to retire early.

The FI Explorer, also known as Jason, is part of the FIRE community financial independence, retire early where adherents save up to 80% of their income throughout their 20s and 30s in order to either retire early or simply follow their passions.

For most of his 20-year journey toward his FIRE target of $1.64 million (USD) which was chosen to produce $65,000 in annual income for the rest of his life Jason directed his savings toward sensible investments, like exchange-traded funds, shares and gold. But after listening to a Bitcoin-focused podcast in 2015, he decided to chance it and put around $3,000 or 0.5% of his portfolio at the time into the cryptocurrency. Bitcoins astonishing growth since has seen the allocation expand to account for almost a third of his portfolio at its peak and helped him sail past his FIRE target in December 2020, much earlier than expected.

Thats incredible, he tells Magazine. Previously, I had a goal that was laboriously calculated with lots of curves and linear extrapolations, but late last year, I kind of hit it accidentally.

Although crypto has provided some in the FIRE community with a shortcut to reach their goals, it remains controversial seen by some as an illegitimate, risky path to financial freedom when compared with scrimping and saving to invest in index funds.

Stories of windfall gains attract and repel FIRE proponents in equal measure, explains podcaster and blogger Captain FI.

Its insane, and I think thats what drives a lot of the FOMO in the FIRE community, he says. You know, there is jealousy, like holy shit. Of course. Im jealous of people that have built a $1.5 million [portfolio] overnight.

Look, I shouldnt use the word jealous. Im impressed. Im amazed. But Im also highly suspicious, or skeptical, because easy come, easy go. Ive put money into crypto, and Ive seen a net loss so far.

So, can cryptocurrency ever be a sensible part of an early retirement plan?

What is FIRE?

The central concepts of the anti-consumerist movement were first outlined in the 1992 bestseller Your Money or Your Life, but FIRE came to prominence thanks to the popularity of the Mr. Money Mustache blog. Written by Canadian-born Peter Adeney, it inspired millions to follow his lead by detailing how he retired from his job as a software engineer at the age of 30 by cutting his spending to the bone and investing the bulk of his $67,000 salary into index funds.

The theory behind FIRE is pretty simple: Multiply your annual expenses by 25 to work out how much you need to retire (based on the 4% annual withdrawal rule). Someone who spends $50,000 per year will need to amass around $1.25 million. Somewhat ironically, Adeney now earns vastly more from blogging about early retirement than the $25,000 in annual income his retirement savings of $600,000 would have provided.

 

 

FIRE is all about moving sensibly and methodically toward this goal, explains Captain FI, who recently semi-retired at age 30 from his job as a pilot after saving around 80% of his income for years.

Its basically about making a few smarter choices early on in life so that you can reap the benefits later on, he tells Magazine, likening it to saving up to buy your first home. Essentially, what FIRE does is you just keep doing that, maybe for another five to 10 years, so that you can build up assets that have cash flow to cover your cost of living.

While that couldnt be further from the get-rich-quick mentality of some in crypto, the key demographic is pretty much the same:

A lot of people in the FIRE community do tend to be if were going to stereotype 25- to 35-year-old white males that work in tech. I dont know whether were all somewhere on the spectrum

Despite making as much money from Bitcoin as Mr. Money Mustache retired with, Jason understands why FIRE followers are wary. The common take is highly skeptical, he says. I think thats probably healthy in a way. He adds:

The FIRE community has largely been around low-cost, predictable, but well-diversified portfolios, and really has emphasized that issue of dollar-cost averaging and saving over a long period and compounding [returns]. So, I think cryptocurrency is the antithesis of that. It presents at first blush like the kind of get-rich scam that people are forever warning other people about.

FIRE and crypto dont mix

Mr. Money Mustache is dead against cryptocurrency. In March, he wrote a piece about how crypto was just a bubble and how This whole situation is just the age-old game of stock speculation based on price momentum which is in turn just another form of gambling.

Another writer held in high esteem by the Australian FIRE community is the Barefoot Investor, Scott Pape, who also regularly warns against cryptocurrency. In a recent column, he argued that crypto relies entirely on the greater fool theory and that You only win when some greater fool buys in at a higher price.

If youre persuaded to sell your boring index funds and lay down with dogs, I can almost guarantee youll eventually end up with financial fleas, he added.

Financial commentator Tom Ellison used to write Papes Barefoot Blueprint and says theyd discussed crypto internally and decided against it pretty quickly in the interests of consumer protection.

My views probably align with Scott Papes, says Ellison, who subsequently founded his own financial education service called The Naked Investor. And that is: Its not a currency. Its not a financial investment under the terms of the Australian legislation. But theres no doubt that it has created wealth for a lot of people.

Getting rich quickly

There have of course been countless crypto-based get-rich-quick scams, from Bitconnect-style Ponzi schemes to rug pull scams on Uniswap leaving aside the sheer recklessness of inexperienced investors tipping money into memecoins based on the fact that they feature the same breed of dog as Dogecoin.

But what separates crypto from most get-rich-quick scams, however, is that people genuinely do get rich and quick. So rich, in fact, that many find themselves in a position to retire early even without working toward that goal.

 

Words to live by from The Simpsons (Source: FX)

 

This includes former Oracle database product manager Mike Palmeter, who accidentally retired earlier this year. He explains to Magazine that hed been interested in Bitcoin for years but had been put off by the warnings of critics like economist Nouriel Roubini, who has been insisting its a bubble about to pop for years now. But reading Andreas Antonopoulos Mastering Bitcoin in 2017 convinced him there was much more to it.

The very first epiphany that I had is that this is way bigger and way more complex than I can handle. I havent had the time to do nearly enough homework, but the price is moving.

He began investing money as fast as he could until 50% of his portfolio was in Bitcoin and related investments, such as Bitcoin mining companies and payments or trading platforms including Circle, Robinhood and Square.

Hed made a 170% profit when Bitcoins price cratered at the start of 2018, plunging his portfolio to a 50% loss. Palmeter says he was too proud to sell during what came to be known as crypto winter, so instead, he learned as much as possible about blockchain. It left him convinced that Bitcoin was the highest value application of blockchain technology. Although difficult to accurately value, he was confident it would grow in value:

I studied, and my ego and my arrogance and refusal to admit defeat brought me to a place where I actually thought Id accidentally made the right decision. So, I kept it, and then I started buying more because I thought, This is a long-term play.

He also learned his lesson from the 2018 market crash and took profits regularly after each big price increase, rebalancing his portfolio to ensure it was split 50% toward Bitcoin investments and 50% toward stocks providing high dividends. Even with the effects of crypto winter factored in, he has made an average return each year over the past five years of 79.67%.

In March, after rebalancing the Bitcoin proportion from 77% back to 50%, he suddenly realized that the income from his stock dividends was now greater than his salary after taxes, regardless of what Bitcoin was doing. He resigned from Oracle in April.

I had no particular interest in retiring right up until the day I realized that I wasnt enjoying my job enough to justify doing it. Since I didnt need the money, why keep doing it? Why not just not do it? Thats freedom.

Selling up is hard to do

Palmeter is something of an outlier, and anecdotal evidence suggests that while plenty of crypto holders do end up with paper profits that would enable them to retire, few end up realizing those gains. Most hold on, expecting it to go higher or because theyve become so addicted to the game that they dont want to leave the table. Its one of the biggest dilemmas with cryptocurrency: Cashing out means losing out on massive potential upside, but not selling means risking life-changing wealth.

 

 

Curiously enough, Jason The FI Explorer didnt cash in his Bitcoin after he crossed his $1.64 million target for early retirement last year, nor did he retire. (He did, however, revise his target upward to $1.94 million to account for inflation and other factors). He says hes happy in his job and has revised his goal toward financial independence rather than early retirement. But hes also been bitten by the Bitcoin bug:

Its one of the most common questions: Well, why dont you sell out? Or why dont you de-risk? And thats really because I do think its got an exciting future. I dont necessarily want to rely on crypto for my FIRE. So for me, Im sort of interested to follow it and see where it goes.

Jason points out that if hed followed the conventional, sensible financial advice around asset allocation and de-risking, I would have sold out years ago and left about A$500,000 or more on the table.

Captain FI

Captain FI recently hit his personal retirement target and now works just two days per week. The 30-year-old did it the hard way too, by saving more than 80% of his income and dollar-cost averaging into index funds. He reels off stats about how it would take 51 years to retire by saving 10% of your income, and 22 years if you save 20%. Captain FI did it in just 11 years, and as we chat, a moving van shows up to take his stuff from Sydney back to South Australia where hell live his life of leisure. He explains that he used to be a crypto skeptic.

I was very against cryptocurrencies because I didnt understand them, he tells Magazine. My idols in the investment community Warren Buffett, Charlie Munger and Kevin O’Leary were all very dismissive of Bitcoin.

 

 

Curiously enough, it was a bad joke he made about preferring chocolate coins to Bitcoin on a podcast at least you can still eat the chocolate when the price goes to zero that was responsible for his conversion. I thought that was a bit of a funny joke that I got absolutely smashed by all of the crypto people, he laughs. I was like, shit, maybe I better look into it.

He invited Bitcoin proponent Stephan Livera onto his podcast, who helped convince him of Bitcoins potential value and that it was a risk worth taking. He now has a small cryptocurrency portfolio split between Bitcoin and Ether.

Crypto I definitely see it as an asset with an asymmetric risk profile, right? So yes, theres a risk that its going to go to zero. But also, theres a risk that it could, you know, 10x or 100x, which is really cool.

Captain FI intends to eventually allocate around 1% of his portfolio to crypto. If it does go massive, then that will drag the rest of the portfolio up with it, he says, adding further:

Im willing to take a somewhat-educated punt on it. Because it is really interesting. It has solid fundamentals, I can see the application of it.

 

Bitcoin maximalist Stephan Livera joined Captain FI’s podcast.

Retirement plans

The retirement industry itself seems wary of crypto. Apart from a new partnership between ForUsAll and Coinbase, its difficult to find a 401(k) plan in the United States offering crypto investments. In Australia, the equivalent of a 401(k) is called superannuation, and most funds dont want anything to do with crypto. However, crypto fans are able to set up self-managed superannuation funds (SMSFs) to manage their own investments and are doing so in increasing numbers.

BTC Markets CEO Caroline Bowler tells Magazine that the number of SMSF accounts trading on the exchange grew fivefold last year, and balances have grown exponentially too.

Where previously we would have seen investments come in in the tens of thousands of dollars for SMSFs, were now seeing it move into the low hundreds of thousands, she says, adding that the typical user isnt near retirement age.

It would be people in their thirties who are actively taking control because they are crypto conversant theyre familiar with it, theyre comfortable with it.

Dont do it, but if you do …

Ellison is a licensed financial advisor who has spent much of the past two decades advising people on retirement planning and has written two books on the topic. His advice often boils down to spend less than you earn, […] and put aside whats left, and accumulate that over a long period of time in assets that compound in value. He invariably directs people to the four main asset classes stocks, property, cash and fixed interest and believes most investments outside these are risky.

So, he definitely thinks crypto is far too hazardous to gamble your retirement on. In terms of my retirement, its not something I would consider remotely, even if there was a chance that it was going to go up a hundredfold or thousandfold, he says, adding:

If somebody wants to do that, then as Ive written before, thats gambling. Its pure speculation. Whether somebody is prepared to speculate and risk their future retirement, I guess thats a matter for them.

 

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He explains that one of the first things advisers do when they take on new clients is assess their risk tolerance.

With all those risk assessments, nobody really knows how youre going to feel or react when youve lost a lot of money, he says. The only way to actually find out your real risk tolerance is still to lose some money or go through one of those once-in-a-decade activities like the 87 crash or the GFC [global financial crisis], or last years crash.”

Youll find out your risk tolerance pretty quickly with crypto, given that marketwide 30%50% drawdowns happen every few months. The price of Bitcoin peaked at $65,000 in April and has since almost halved to reach its current price, which is closer to $35,000. And individual coins lose and gain more than that every week. So, its only really suitable for investors able to tolerate such a stomach-churning ride.

Ellison explains that a sensible approach for highly risky or speculative investments is to allocate only a certain percentage of a portfolio to it.

For most people, the highly risky, totally speculative part of a portfolio certainly shouldnt exceed 10% and thats for an aggressive investor, he tells Magazine, adding that investors who are more risk-averse might set the limit between 1% and 2%. While he points out that the vast majority of speculative investments fail, if a gamble does pay off, he encourages investors to take profits rather than hold on. Jason gives similar advice:

Never put in more than you can afford to lose, and probably dont rely on it as the vehicle for your FIRE goals because its very speculative. Id never advise anybody to follow that pathway. But I think people are doing that anyway.

He adds that theres a difference between being cautious with money and being closed off to new opportunities:

I think a lot of that is always a sign of a really good financial education being drummed into people over years and years and years. And its maybe just that new possibilities are opening up which you just need to have an open mind about, without necessarily becoming a full-blown believer.

One person who is no longer taking Ellisons investment advice is his son: I put him into a stock two years ago, and he made five times his money on it. And he sold it one cent from the top, and he put it into Dogecoin, Ellison says, referring to Elon Musks favorite memecoin.

Ellisons son now thinks hes an investment genius and that his old man should retire and hand over the reins. He says I should just let him take over, laughs Ellison.

 

 


Rogue states dodge economic sanctions, but is crypto in the wrong?


When the United States first began going after crypto companies for violating its economic sanctions rules, it didnt exactly start with a bang.

In December, the Treasury Departments Office of Foreign Assets Control (OFAC) announced a settlement with crypto wallet provider BitGo after the Palo Alto firm failed to prevent persons apparently located in the Crimea region, Iran, Sudan, Cuba and Syria from using its non-custodial secure digital wallet management service. The penalty for the 183 apparent violations of U.S. sanctions? An underwhelming $98,830.

This was the first published OFAC enforcement action against a business in the blockchain industry, according to law firm Steptoe, though six weeks later, the OFAC reached a similar settlement with BitPay, a payment processing firm, for 2,102 apparent violations of multiple sanctions programs, in which BitPay reportedly allowed persons in the same countries as in the BitGo case but with the addition of North Korea to transact with merchants in the United States and elsewhere using digital currency on BitPays platform even though BitPay had location information, including Internet Protocol addresses and other location data, about those persons prior to effecting the transactions. BitPay agreed to pay $507,375 to resolve its potential civil liability.

But future violators may not be treated so leniently.

Its worth mentioning that economic sanctions are typically applied against countries and groups of individuals, such as terrorists and narcotics traffickers, according to the United States Treasury, typically using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals.

More enforcement actions are coming

The crypto industry should absolutely expect more enforcement actions from OFAC, and it can expect that there will be much larger penalties as well, David Carlisle, director of policy and regulatory affairs at Elliptic, tells Magazine. OFACs first two enforcement actions in this space were fairly simple cases, where the underlying violations were not egregious, and the fines were small. But the next cases could be different, he says, adding:

There will undoubtedly be other cases out there that involve much more serious and egregious violations and we can expect that OFAC will issue fines against crypto businesses that are much larger than those weve seen thus far.

Expect more enforcement actions like those targeting BitPay and BitGo, Doug McCalmont, founder of BlocAlt Consulting LLC, tells Magazine, as well as the expansion of targeted individuals, such as coders linked to the technology.

Sanctions regimes have been applied extensively in recent years by the United States, as well as the European Union and United Nations, often targeting rogue nation-states, such as North Korea and Iran. One of the best-known early crypto cases involved Virgil Griffith, a former hacker, who was arrested in April 2019 after he spoke at a blockchain and cryptocurrency conference in North Korea, in violation of sanctions against that outcast nation, the U.S. charged.

Sanctions violations are a real problem, says David Jevans, CEO of CipherTrace, whose crypto forensics firm recently found that more than 72,000 unique Iranian IP addresses are linked to more than 4.5 million unique Bitcoin addresses, suggesting that sanction violations are likely rampant and mostly undetected by virtual asset service providers, he tells Magazine.

 

 

Its not only U.S. authorities who are concerned about bad actors using the nascent blockchain technology to dodge economic sanctions. Agata Ferreira, assistant professor at the Warsaw University of Technology, tells Magazine that authorities in Europe are becoming more active and more focused. The crypto space is under increasing scrutiny, and I do think this trend will remain and accelerate.

Nor is OFACs recent crypto focus surprising, according to Robert A. Schwinger, partner in the commercial litigation group at Norton Rose Fulbright. The United States government has no choice but to rein in this new, cryptocurrency asset class because not to do so would expose it to the risk that its sanctions regime could be rendered toothless by new financial technology. Players in the cryptocurrency space who ignore the restrictions imposed by U.S. international sanctions are being put on notice that they do so at their peril, he wrote on Law.com.

Is DeFi problematic?

As crypto adoption grows, it seems only inevitable that its decentralized finance (DeFi) networks will push up against more nation-state prerogatives, including economic sanctions. But isnt there something inherently problematic about cracking down on a decentralized exchange (DEX)? Does the exchange even have a headquarters address? Is anyone even home at home? And should it even answer to someone if its truly decentralized?

Enforcing regulations in a decentralized world presents certain challenges, Timothy Massad, former chairman of the U.S. Commodity Futures Trading Commission and now a senior fellow at Harvard University Kennedy School, tells Magazine, but U.S. regulators are trying to figure it out. Might the government eventually put more pressure on developers at DeFi firms, including decentralized exchanges? Yes, they can build into the code some proper procedures… but its a lot easier to go after centralized intermediaries, says Massad.

I think well see DeFi developers come under real pressure to ensure their platforms cant be abused for sanctions evasion for example, by enforcing address blacklisting, says Carlisle, adding, Theres a lot of talk lately about [traditional] financial institutions taking interest in DeFi, but its hard to imagine major institutions participating in DeFi unless theyre confident it can be compatible with sanctions requirements.

DeFi projects are decentralized, disintermediated and borderless everything our legal and regulatory frameworks are not, Ferreira informs Magazine. The latter are built around centralized, intermediated and jurisdiction-based architecture. Therefore, this is a challenge and a learning curve for regulators, and not all proposed solutions will be optimal, Ferreira adds.

 

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The European Union is aware of the DeFi compliance challenge. Its recent Markets in Crypto-Assets (MiCA) regulatory proposal will force DEXs to have legal entities in order to transact with EU citizens, effectively banning fully decentralized exchanges, Jevans tells Magazine. He adds, Many so-called DEXs have very centralized governance, venture capital investors and physical headquarters, causing the FATF to categorize them as VASPs.

Meeting compliance demands for digital service firms like BitPay and BitGo will require some effort. Trying to identify where a counterparty is located in a crypto transaction is inherently difficult due to the nature of the technology, observes Carlisle, but crypto firms need to realize that anytime they undertake a transaction and dont make an effort to identify the source or destination of funds, theyre taking on a major risk of sanctions violations.

Crypto mining, too, carries sanctions-compliance risks. If you process transactions on behalf of participants in a mining pool thats connected to a country like Iran, or pay a fee to an Iranian miner, you could run afoul of OFAC, says Carlisle. There are sanctions risks, too, in handling ransomware payments because some ransomware campaigns have involved cybercriminals in places like North Korea and Iran.

Then, too, the growing use of privacy coins, like Monero and Dash, which hide users addresses and transaction amounts unlike Bitcoin makes the task more difficult, arguably.

Forensic blockchain firms, however, are looking into how to improve sanctions compliance on the part of virtual asset service providers, McCalmont comments. CipherTrace, for example, has developed the ability to track the anonymity enhanced currency (AEC) Monero, once thought to be the gold standard of AECs. He adds:

These [forensic] firms will rise to the occasion and roll out capabilities that will circumvent any compliance speed bumps utilized by decentralized exchanges. It really is somewhat of a regulatory arms race.

And the stakes appear to be rising.

Theres overwhelming evidence at this stage that sanctioned countries are using crypto, says Carlisle, concluding, North Koreas crypto-related cybercrime has raised at least hundreds of millions of dollars. Iran and Venezuela have looked to crypto mining as a method for sanctions evasion and to generate revenue.

 

Related: North Korean crypto hacking: Separating fact from fiction, Cointelegraph Magazine

 

To stay ahead in the regulatory arms race, some crypto companies are now using tools such as blockchain analytics, recounts Carlisle, to identify whether a crypto wallet belongs to a sanctioned party, but even then, staying compliant can be tricky. Not only do you need to screen addresses against the OFAC list, you should have systems that are calibrated to detect more subtle signs of sanctions risk, and your staff must be trained to handle situations that involve possible sanctions issues.

OFAC, too, is operating on the principle of strict liability. You can be held to account even if you were acting in good faith with no wrong-doing intended, adds Carlisle. The crypto industry will need to operate to very high standards of sanctions compliance to avoid run-ins with OFAC.

Part of a larger, global regulatory trend

Recent sanctions activity is just part of a global crackdown that can be expected in the crypto sector, some say. In May, the U.S. Treasury Department announced stricter new rules for Bitcoin and other cryptocurrencies. Crypto transfers worth $10,000 or more will have to be reported to the Internal Revenue Service.

This Treasury Department action is likely to be the first major step towards a global regulation for cryptocurrencies, according to Nigel Green, CEO and founder of deVere Group, in a public statement. This is inevitable as the market grows and matures.

Nor should the crypto community fight it they should embrace it, suggests Green. Proportionate regulation should be championed, he says, further explaining:

It would help protect investors, shore-up the market, fight criminality, and reduce the potential possibility of disrupting global financial stability, not to mention offering a potential long-term economic boost to those countries that introduce it.

In the absence of new crypto legislation and regulatory guidance, the players themselves i.e., the crypto and blockchain industry need to get their house in order, James Cooper, associate dean of experiential learning at California Western School of Law in San Diego, tells Magazine, adding, We have an obligation to create self regulatory organizations. […] The industry has got to push out all the bad actors.

If 95% percent of media stories and the publics conversation about crypto focuses on ransomware or Iranian miners or criminal entities, then something is wrong, continues Cooper, because all the good things, like blockchain for food security or blockchain for vaccine tracing, get pushed out.

A Bretton Woods for crypto?

We need our Bretton Woods moment, opines Cooper, referring to the multi-governmental agreement that set the outlines of international finance after World War II. Something similar is needed for the crypto century.

Not all agree. The Bretton Woods Agreement centralized monetary policy, says Jevans, and it is an approach that is unlikely to be accepted in the decentralized blockchain economy since different projects have wildly varying objectives and governance models.

 

 

More promising in his view are the Financial Action Task Forces recent updated compliance guidelines, which make clear that decentralized exchanges as well as other DeFi platforms do bear responsibility for ensuring compliance with global sanctions as well as Anti-Money Laundering and Counter-Terrorism Financing laws. The solution is for these entities, now classified as VASPs by the FATF, to adopt solutions that enable them to achieve compliance without sacrificing decentralization and user privacy.

Many have called for international collaboration for addressing these new technological developments, like crypto and blockchain, notes Ferreira, but I am not sure how feasible it is. Authorities sometimes act when there is a trigger. Libra was such a trigger and a wake up call for authorities. She adds, Maybe we will see other events in the future that could mobilize authorities to more internationally coordinated action.

Decentralization at odds with the law?

But isnt there an inherent conflict, though, between economic sanctions imposed by sovereign nations, or quasi governments like the U.N. and decentralized finance?

One of the strengths of decentralized finance, according to proponents, after all, is that its a hedge against centralized government corruption, including authoritarianism. Might a blanket ban on Iranian users, for example, also shut out Iranian dissidents looking to transfer money outside the reach of the government? Absolutely, answers McCalmont:

I, a regular Joe guy, can create an account on a decentralized exchange within minutes and immediately transfer funds to North Korea, Syria, Iran completely under the radar and with little effort speaks volumes. If those dissidents have a will, there is without a doubt a way.

All in all, what may be required here is a mean between two undesirable outcomes. A young, evolving sector like the crypto and blockchain industry will inevitably have vacuums that nefarious, non-state actors will seek to exploit until the state comes in and kicks them out, Cooper tells Magazine.

Thats to be expected. But the U.S. has gone through four years of anti-regulation rhetoric, at least at the national level, and now, under a new administration, a danger exists that it may seek to monopolize all digital assets and snuff out innovation.

Doing nothing is bad, continues Cooper, but the U.S. government or any other state monopolizing digital assets, whether through a central bank digital currency or other means, is also undesirable. The challenge is finding the sweet spot.

 

 


We tracked down the original Bitcoin Lambo guy


Jay is the Bitcoin OG who created a meme by buying a Lamborghini with the cryptocurrency. He went from a poverty-level existence to enjoying a well-off lifestyle in a gated community thanks to mining Bitcoin in the early days but not without having to worry for his familys safety.

As BTC first broke the $1,000 milestone in December 2013, former Chair of the U.S. Federal Reserve Alan Greenspan suggested that Bitcoin could not actually be used to buy anything of value.

Thats when Jay (not his real name), then in his early 30s, and with the help of his wife who is also a Bitcoiner, used almost 217 BTC to purchase what is believed to be the original Bitcoin Lamborghini at the Lamborghini Newport Beach dealership. He then provided the evidence on the anonymous imageboard 4chan.

This proved that Bitcoin had real value who would accept fake money for a Lamborghini? A meme was born that launched a million other memes.

Its kind of overwhelming as an individual I created a meme.

An archetypal Bitcoin OG, Jay got his start around 2010. Despite being broke and supporting a family on very low earnings in Southeast Asia, he ended up setting up 20 GPUs, resulting in electricity costs that were six times his rent.

 

 

Lambo BTC
Buying a Lambo with Bitcoin in 2013.

 

“I was really poor I made like $8,500 per year while supporting a family, and babies cost money. I had businesses and savings before, but going to university and starting a family got me damn close to $0,” he recalls, bewildered.

Its amazingly hard to HODL bitcoin when you eat pasta every day and make fuck-all, and spend what you do have on computers and miners. But I had that faith, I knew this was world changing.

 

 

 

Today, Jay lives in a gated community within a small city of under 100,000 in Southeast Asia with his wife, three children, and three dogs one of them a professionally trained and imposing guard dog whom I had no doubt was ready to rip my face off on command when I visited.

His home actually consists of two houses on two streets, discreetly connected in the middle, creating an understated facade. Whereas the front garage contains “normal” luxury vehicles, the back holds none other than Bitcoin Lamborghini 2.0.

Sadly because I was so close to $0 and had kids, I had to sell so much BTC so early because I wanted some safety net. I could add at least one zero to my net worth if I had no family but its a paradox because family is why I do it.

Lambo convention
The Bitcoin Lambo in Texas at a CryptoWomen meetup in 2014. Supplied.

 

Wealth worries

Jays fortune is crowned by a loaded 1,000 BTC Casascius “physical Bitcoin” gold coin of which only a few exist. It is, in fact, the most valuable coin in the world, with a face value of approximately $60 million dollars and a collector premium of many millions more.

This is how we came to meet, as I act as a broker of such rarities and wrote the Encyclopedia of Physical Bitcoins and Crypto-Currencies. For Jay, owning such coins can, however, prove stressful “if someone connects me to holding tens of millions of dollars in what are effectively bearer bonds.” Such coins hold the private key to the stated amount of Bitcoins under a tamper-proof label, making them comparable to bearer bonds, gold or cash.

Such privilege is “difficult to deal with” on the family front, Jay says. Living in a country with a huge wealth disparity, he explains that money can be metaphorically used to build either a bigger wall to separate himself from the masses, or a bigger table in order to bring them to his side. “Honestly, I have to do both, but I want to build a bigger table,” he says. He feels that he faces very real threats, including the kidnapping of family members by international criminals.

I had issues with some Russian oligarchs in the past, but I dont think Im a target now.

 

Casascius coin
A loaded 1,000 BTC Casascius coin, which Jay bought for $5,000

Still, its hard to put worry or paranoia aside states of mind that Jay considers natural to him. Late one night, as we enjoyed beer and burgers on the edge of town, Jays merriness suddenly turned to keen attention as he spied a vehicle loitering near his Lamborghini. “Its been there over 30 seconds,” he said, appearing still nervous after the car drove off. “They were probably just admiring the car but what if?” He was visibly uneasy.

Initiation

Jay describes a normal childhood in an average lower-middle-class family in the U.S. midwest. Money was sometimes tight, but basic needs were covered and school was OK. He excelled in geography, which simply came naturally to him without the need to study.

He started working at the age of 12, stapling large boxes together at a warehouse owned by a family friend. The work was repetitive and it was actually illegal to employ such a young child, but Jay was there willingly and feels that he gained a valuable perspective from socializing with business owners at such a young age.

 

 

 

After high school, Jay enrolled in a university close to home to study international relations and computer engineering. He, however, became disillusioned, believing that “a lot of what the university was teaching me was absolute bullshit” and mostly aimed at making him into “a good wage slave.” As he studied money, “it blew my mind that fiat money was based on nothing it was debt.” He dropped out to run his own book-selling business, which he later sold to a firm that itself went on to be acquired by Amazon.

The realization of the financial system and money being bullshit helped motivate me to drop out of university in the U.S.A. and do my own thing.

Jay used the money to travel, first heading to Mongolia, which he felt might be a “missed gem” and might hold economic opportunities. Later in Kazakhstan, he spent time with a group that “trained golden eagles to hunt wolves,” and he heard high praise of Southeast Asia from other passing travelers knowledge he filed away for later. His money ran low, and he soon returned to the U.S. where he found some success trading oil futures from home.

“When the tsunami hit Southeast Asia on Boxing Day 2004, I realized that sitting around doing the bullshit nothing I was doing was bad and jumped on a plane to help.”

Jay decided to stay and attended a local university, this time choosing to study business administration. Years after graduating and struggling financially, he came across the Bitcoin white paper in 2010 via the infamous Cypherpunks mailing list, where it was discussed in the early days of the cryptocurrency. He had read a book about cryptography before he loved reading and the project caught his eye. He found it brilliant, “but I thought there was a very low chance it could become worldwide money it was too crazy.”

The biggest draw was not the money aspect, but the idea that “this breaks censorship.” He recalls someone putting Bible verses into the blockchain early on forever indelible. With Bitcoin, anyone could write freely on the wall of eternity.

 

Celebrating Bitcoin breaking $100 on April 1, 2013. Supplied.

 

The Bitcointalk Forums

The Bitcointalk forum was an interesting place in the very early 2010s, a time when Jay remembers a collection of seemingly “random people with random ideas.” Bitcoin was then a primarily intellectual pursuit, and it attracted socialists and communists in addition to the libertarians who became more associated with the movements history.

One idea discussed around that time included the canceling and reissuing of coins after two to five years of inactivity at an address, while others suggested that mining rewards could be adjusted based on individual need or national income. As there was no firmly established value, the Bitcoin idea was considered quite malleable and not necessarily set in stone it could become anything.

Jay was confused by some of the discourse. “I wasn’t quite well-read in the philosophy then, so I didn’t really understand what the leftists saw in the idea,” he recalls.

The culture of the forum evolved as waves of discourse and new users followed news coverage of Bitcoin. There was a loose “core group” of enthusiasts who considered each other close to the project; “some new people would be added every now and then, and some would leave.” The culture, however, grew more toxic.

Though he first reasons that the toxicity was due to a “Wild West culture” that naturally forms in a gold rush of sorts, Jay notes that people in the contemporary WallStreetBets community, “seem to be incredibly polite and welcoming.” He adds that while he “does not want to say anything bad about anyone,” he assigns some responsibility for the culture upon the Bitcointalk forums administration.

 

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“I think that the leadership of a community helps shape it. The person running Bitcointalk was quite inexperienced and pretty much fell into the role I wonder if it could have been different.”

By contrast, the early Ethereum community seemed friendlier at the time, possibly due to the credit of Vitalik Buterin acting as a visible community leader. Buterin reached out to Jay during the process of launching Ethereum, but Jay was unimpressed.

I told Vitalik over Skype that Ethereum was going to fail because it was too centralized.

Despite his concerns, Jay owns some Ethereum and is not an extreme Bitcoin maximalist like some of his peers.

“There shouldn’t be people who hold keys to the internet. It should be entirely math-based, because it can be,” he reasons, referring to what he sees as unnecessary centralization and reliance on human figures within the Ethereum community.

Future directions

Already an old-timer, little more than a decade after stumbling upon Bitcoin, Jay is cautious about newer developments, calling DeFi “definitely risky” due to the risk of the leadership of some projects having the power to unilaterally take control of your funds. He has a similar take on NFTs, saying that “99% of them will become worthless, but some might become cult classics,” a line of thinking that was especially prominent regarding ICOs in the 2017 boom.

All considered, Jay is doing well in life and is focused on his family, but there is a certain unease a restlessness about him, even unrelated to physical safety.

As with many people who reach their goal, he has everything he could ever dream of, but its not exactly clear what he should do next, considering he feels that he has enough to financially cover his descendants to the 4th generation. One things for sure hes not looking for fame. “I don’t really want this article out there, but I think overall it is fair and the story should be told,” he says.

I have reached my goal, so now what? I have accomplished my life goals but I’m not dead yet, so I have to do something. No idea what but something

 


Crypto PR: The good, the bad and the shoddy


Like most crypto journalists, Will Foxley has a horror story about a bad encounter he had with a dodgy PR person. The former tech reporter at CoinDesk recalls being embarrassed in his first few days on the job after he relied on bad information fed to him in an announcement.

I got burned by a bad PR agent within, like, two or three weeks on the job, where they gave me false press release information, he says. I didnt quite verify it enough and then got called out by one of the higher industry people. Thats like the quickest way to ruin your relationship with a journalist.

Hes quick to add a disclaimer that there are some great PR people out there, but he estimates the good guys only account for about 20% of the industry. The lower 80% either dont care about, or dont understand the technology, or the fact journalists put their reputations on the line whenever they run a story.

They only have an interest in pumping whatever the coin theyre tasked with pumping and getting whatever company they need into whatever headline, which is really unfortunate. And it leads to a lot of burnout among journalists, and a lot of frustration.

Fortunately, the best crypto PR practitioners understand how to play the game and act accordingly. The most important currency we have is trust, says David Wachsman, founder and CEO of the eponymous PR firm. We have to earn that because the one thing I know for certain is reporters are a cynical bunch, and they know when something feels off.

Its a dangerous game to get wrong because PR agents and sometimes entire agencies can get blacklisted by publications or develop a bad reputation industry-wide, explains Foxley.

If you dont like a PR person, you tell at least everyone that youre working with at your organization, says Foxley, who is now the editorial director at Compass Mining. I saw that quite often. Youre like, Theyre from that firm? Dont talk to them.

Emerging industry

The world of crypto PR is an emerging industry of specialist PR firms that are responsible for a large proportion of the crypto news out there. Co-founding president of the Association of Cryptocurrency Journalists and Researchers Joon Ian Wong says that good PR agents play a much-needed role.

I think PR people in any sector, including crypto, are an important part of the information landscape, he says. Their job is to ensure that information flows easily and freely to the media. He adds: But clearly they work for clients, so, you know, you can have issues with conflicts of interest.

Samantha Yap says PR agencies do a lot of work behind the scenes as the interface between crypto projects and journalists. Half our time is literally educating our client on how the media works, she explains.

We spend a lot of time telling them: Oh, you cant put this promotional angle out because journalists are not going to write about it, weve got to take a more newsworthy angle, or try to fit the story in the context of the wider industry.

She continues: What the journalists see in their inbox is like two weeks of brainstorming work at times it works, at times it doesnt.

Laundry list

Although Foxley is a big fan of Yap and calls her a legend, he has a laundry list of complaints about the vast majority of pitches he receives. But the biggest issue is that in a full-to-the-brim inbox, there are usually only a couple of useful leads among a sea of boring or irrelevant non-news.

So 80% is just dog trash, Foxley says. Ive just seen some horrendous pitches over my years at CoinDesk, and frankly, I dont quite understand why those pitches are made the way they are.

Theyre not helping themselves out.

Some pitches massively oversell the potential benefits of whatever unproven technology theyre pumping, while others appear to have been bulk emailed to every journalist in the world. Many are unfamiliar with the fundamental requirements of journalism (which is that stories need to be newsworthy by being either important, unique or very interesting), but one common issue is a lack of technical understanding.

More often than not, especially as a tech reporter, I saw PR pieces that didnt understand the tech that they were describing, he explains. You get a PR guy or gal who doesnt exactly understand it, and theyre trying to explain what a ZK-Rollup is. No, firstly, you dont know how to describe it, and this is the wrong context.

PR news


This isnt to say crypto journalists always cover themselves in glory either when they receive a newsworthy pitch. Yap sums up up the mission of PR agents simply and eloquently:

The sign and the skill of a good PR person is to pitch journalists the best possible angle in the way we want them to write it.

In an ideal world, of course, journalists would use a story pitch as the starting point, research the background, and speak with outside experts before producing a well-thought-out and balanced article that contributes to better understanding in the cryptosphere.

What actually happens far too often is that press releases are given the barest rewrite before being uploaded.

There are many reasons for this: low rates of pay on some crypto sites and a constant need to feed the beast i.e., the website updated and new content. It leads to what is known as churnalism.

 

 

Foxley concedes that writing four or more news stories a day can be mind-melting, and its very easy just to lean on the press release and the story thats given to you. Its just fodder for the story. But its not good for the industry; its not good for readers.

Thats why Im a fan of less stories per day from a news publication per day because I dont see another way of getting rid of that.

Leslie Ankney has been on both sides of the fence, as a contributor to The Merkle and Forbes, a PR specialist at Ditto PR and communications lead at Anchorage Digital Bank. Im sure there are times when youre under deadline its probably tempting, she says, adding:

Hopefully, as a reporter, you have insights and questions to follow up with, something that the press release didnt cover. But I understand that maybe if you have to turn out five pieces a day you may not have time.

Wong says this is not a problem unique to crypto media. I think you see the same thing with a lot of finance reporting, he says. You see the same thing with listed stocks, penny stocks, and so on. Theres lots of blogs and publications out there that do the same thing.

The ACJR aims to improve standards in crypto journalism, and Wong points out that the more well-resourced a crypto publication is, the more likely the staff has been conditioned to be wary of running any messages a PR person wants to convey:

Based on what I know of the reporters who work at some of these places […] they tend to be more skeptical and more critical about announcements and other notices put out by crypto PR folks, and because they work in crypto media, they are better equipped to actually cut through a lot of the marketing speak or the PR speak and get to the heart of the matter.

Foxley agrees that some journalists always view PR people with suspicion. I had some colleagues at CoinDesk that refused to interact with any PR people because they saw it necessarily tainting their work.

How did we get here?

Wachsman is one of the biggest players in crypto PR, with 80 staff across offices in New York, Dublin and Singapore and clients including Cosmos, Hedera Hashgraph and NEM. The Financial Times recently named it one of the 500 fastest-growing companies in the Americas.

It traces its history back to when David Wachsman bumped into the CEO of Coinsetter in a bar in 2014. This led to Wachsman learning about Bitcoin and taking the exchange (later sold to Kraken) on as a client. He struck out on his own as a crypto specialist in 2015 and quickly signed up clients including Trezor, Slush Pool, Airbitz and the Coinsource Bitcoin ATM network.

Wachsman wasnt the first crypto PR specialist. He credits Michael Terpins Transform PR with that honor, but he says those two firms were pretty much the extent of the crypto PR industry at that time.

It wasnt the wild west; it was non-existent, he recalls. Most of the time it was founders directly emailing reporters. They didnt know the right protocol. Sometimes, they werent very informative; they didnt answer questions appropriately or in a timely fashion.

 

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I remember reporters being thrilled when you could do something like send them a high-resolution headshot, he says.

When crypto firms needed publicity, they sometimes used mainstream PR agencies. Wong recalls how non-specialist often had zero understanding of what it was they were promoting. I often knew a lot more than the PR person about what their client was doing, he says.

Whether it was a PR who was telling me about Bitcoin mining or some esoteric financial thing, a lot of folks at big agencies have no clue whats going on in cryptocurrency.

Wachsman says a critical mass of specialist crypto PR firms didnt appear until after the initial coin offering boom in 20172018. Very few reporters, and consequently PR professionals, were paying attention, he says.

Scams, spam and pay for play

Into the void stepped cryptos infamous guerilla marketing and PR campaigns. Michael Whitlatch is now the creative director at North Equities, which conducts respectable digital marketing and PR campaigns for regulated listed companies.

But during the ICO boom, he fell into a very different job after convincing 300 people in six weeks to use his referral code to buy a coin. I realized I kind of had a knack for this kind of thing, he says.

Whitlatch and his team were responsible for spreading the word on social media about projects. If youve ever interacted with someone on Reddit, Facebook or 4Chan who has a high degree of knowledge about a coin and a very positive attitude toward it, you may have met them. If social sentiment in a projects Telegram group was turning sour, it was the job of Whitlatch and his team to jump in the chat to spread positive vibes and information to help turn it around.

It was a much more sophisticated effort than the infamous bounty campaigns of the era that saw armies of people liking pages and writing spammy tweets about a project, often in broken English, for a handful of coins per task.

Often, I would say bounty campaigns eventually wound up hurting companies, Whitlatch says. Because they did come across with the full shilly force of mistyped posts, he says.

Whitlatchs team stopped working in the area due to increasing regulations. It was looking like it was going to go the way of securities, and we didnt want to get involved with anything illegal, he says.


Astroturfing

Whitlatchs team was at the more respectable end of such endeavors and genuinely believed in the projects it promoted seeing it as a way to invest in them as they were invariably paid in tokens.

But others were much more mercenary. One ICO promotion outfit email doing the rounds in 2018 asked for a $22,000 monthly retainer for astroturfing an entire social media campaign, in which fake posts would be retweeted by fake accounts with fake followers, and entire Reddit threads fabricated by one guy with 10 sock puppet accounts:

I can put you on the front page of any subreddit I want. I can get you a positive reaction from the basement dwellers at /biz (who spend a lot on crypto by the way). I can put you on the front page of Hacker News … I can kindle positive organic discussions about your company in places where other ICOs get torn to shreds.

 

 

Other shady crypto and marketing PR firms openly offered guaranteed placement in publications like Forbes and Huffington Post for a flat fee. TechCrunch reporter John Biggs wrote in 2018 that he was offered payment for posts almost every day and almost all the journalists I talked to reported the same. Most declined, but some did not. I heard about these things, says Ankney, who adds:

I found that really appalling. I was really angry and frustrated because even though I dont have a journalism degree, I still held myself to a high journalistic standard. And I was shocked that others did not.

There are still some echoes of these services today, such as Bitcoin PR Buzz, which bills itself as the Worlds First Crypto PR Agency and claims to have helped 850 clients raise half a billion dollars. It offers the Breakthrough Article Pack for $13,997, which includes the services of a writer to put together a bespoke article thats distributed on a variety of crypto sites including BeInCrypto, Bitcoinist and NewsBTC, among others.

Of course, theres nothing unethical about running a sponsored article as long as its clearly identified as such, and it can only be presumed this is Bitcoin PR Buzzs practice. However, these examples linked on this site are not tagged as sponsored posts.

The professionals

Fortunately, as the industry became more and more professional, the PR and marketing cowboys began to disappear.

I think its professionalized, says Foxley. I was not there in 2017 and 2016, so I wont say anything about that. But I think PR people are more available; they understand the space more; they have an interest in maintaining relationships for the long term.

There were a few false starts along the way. Wachsman explains that the first wave of professional PR specialists emerged in 2018 only to be hit hard by crypto winter toward the end of the year.

 

 

We saw the exit of a number of firms, including global agencies at the time. And not many of them were there for the real ascent of the industry in 2020. Wachsman himself was forced to lay off 16 out of the 110 staff.

It was rough because our team is so tight-knit that it felt like it was ripping out your left arm, he says. But Wachsman survived and has since been joined by a raft of new firms.

One of those firms is Yap Global. Samantha Yap began her career as a broadcast journalist in Asia before jumping the fence to PR and later becoming enamored with crypto. She founded Yap Global in 2018, which has now grown to a team of 10 with clients including FTX, Enjin and Nexo.

One of the most misunderstood things about PR, explains Yap, is that its not just about creating and sending out messages. Its also about carefully cultivating relationships with journalists and editors. People forget that PR is not like advertising and marketing. Its about relationships, she says. Its a two-way street.

At its best, PR and journalism are a mutually beneficial relationship, in which journalists are connected to relevant information and interviewees, while PR agencies are able to get coverage for their clients.

The relationship is important to tend to, as when it goes wrong, it can be very bad indeed. Foxley recalls a long-running feud between a well-known crypto PR agency and CoinDesk after the editors had become unhappy with how some stories had played out and blacklisted them.

Some higher-profile people kept pitching us during it, and I think we stopped taking their stuff, he says. Foxley recalls getting an ear-bashing from the PR firms founder one day.

He just went off on me about how we werent correctly running (the agencys) stories. And I was like, Bro, Ive never talked to you before, and then it ended up just him and (executive editor) Marc Hochstein talking for two hours on the phone and him complaining about CoinDesk and then I think things normalized.

PR on news stories

While PR agents are often tasked with chasing journalists, what is equally important is how they deal with journalists when they start being chased themselves.

Journalists who always need a response by five minutes ago may not appreciate how much work goes on behind the scenes, says Ankney. She works in-house for Anchorage, which in January was given the approval to launch the first federally chartered crypto bank in the United States.

Pretty much everything that we say has to be legally approved, which I think is probably a part of why its hard for reporters if you need a source in two hours, she says. Its definitely difficult sometimes to get things approved in time.

One of the trickiest situations for any PR professional is how to respond publicly during a crisis. One of the biggest bad news stories any crypto PR firm is likely to deal with is an exchange hack, where millions of dollars and millions of unhappy users are involved.

Wachsman has worked with Kraken, Binance, Bitfinex and Bitso over the years and says the first order of business is to prepare a detailed plan on how to respond to a potential hack accounting for all the different stakeholders while keeping one eye on the legal ramifications across multiple jurisdictions.

When you work with an exchange, one of the first things you do is you prepare that playbook, and its quite extensive, he says. Timely and accurate updates are the only way to play it, according to him. You need to go and give them as much information as you can, that you know for certain is accurate, he explains.

Or else, what youre going to do is create Im going to call it the shitstorm.

In the past, plenty of exchanges have attempted to spin a cover story about system maintenance to cover up a hack, but thats playing with fire in a world of crowdsourced fact-checking by highly motivated users on social media.

Everything is found out at some point, says Foxley. Thats just how it goes. Like you cant keep a secret in crypto. Thats, like, the tagline, right: Dont trust, verify. So, I would not do that. I would be honest.

*Thank you to Elias Ahonen for interviewing Samantha Yap for this story.

 

 


Is China softening on Bitcoin? A turn of phrase stirs the crypto world


They were only two seemingly innocuous words: investment alternatives. But when applied to Bitcoin the seminal cryptocurrency by an official from the Peoples Bank of China in a recent panel discussion, they reverberated like a firecracker.

A remarkable step for BTC, Lennix Lai, director of financial markets at OKEx, calls the statement. Michael Peshkam, executive in residence at European business school INSEAD, describes the central bankers remarks as a significant shift in the countrys position on crypto.

To recap: On April 18 at a CNBC event at the Boao Forum for Asia, Li Bo, deputy governor of the PBoC Chinas central bank said: We regard Bitcoin and stablecoin as crypto assets. […] These are investment alternatives. CNBC reporter Arjun Kharpal commented:

Industry insiders called the comments progressive and are watching closely for any regulatory changes made by the Peoples Bank of China.

Yes, I do see a change in tone in China, a softened and more open approach to considering the role of Bitcoin, Kevin Desouza professor of business, technology and strategy at Queensland University of Technology Business School tells Magazine. I still do not see a full embrace of Bitcoin.

This is a very important development, Daniel Lacalle, chief economist at Tressis SV, tells Magazine one that involves a significant change of heart on the part of Chinas government as it separates itself from its former monetary policy.

The government is saying, in effect, that it isnt going to ban or put the brakes on the growth of Bitcoin and other cryptocurrencies, which have been an ever-present risk for both China and other governments, Lacalle suggests.

If so, why now? China is close to rolling out one of the worlds first major central bank digital currencies at scale sometimes referred to as the Digital Currency Electronic Payment, or digital yuan. If it wants a digital yuan that works, it cant ban crypto, Lacalle says. Rather, it needs to show that its DC/EP is as attractive as a crypto alternative.

Connecting the dots: BTC and DC/EP

What exactly, though, is the connection between Bitcoin and Chinas DC/EP? Arent they two different things one an emerging global store of value, like gold, and the other a domestic payment system?

The Chinese yuan, as currently constituted, is used in very few international transactions. It is underutilized globally because China maintains capital controls, Lacalle tells Magazine. China has long feared that if it were to drop these controls, its economy would quickly become dollarized i.e., its citizens would send dollars away from China to the United States.

As things stand today, the rollout of a digital yuan would be an international failure, though it might succeed domestically. Outsiders would assume that the Chinese government wants to control it like it does its traditional yuan.

 

 

But if they open the market for crypto in China, they are signalling that capital controls wont apply to the digital market, including a digital yuan, Lacalle explains. This is arguably an intelligent move on the part of the Chinese government, which like Russia before it now sees benefits in opening its economy to crypto. In fact, cryptocurrencies may eventually albeit, in a distant future hurt Western fiat currencies, authorities speculate. But in the meantime, a new tolerance with regard to Bitcoin can make its digital currency more viable beyond its borders.

A potential currency?

Peshkam tells Magazine that Lis statement goes beyond recognizing BTC as just another investment asset, which is scarcely an earth-shaking revelation. China now sees crypto as a future potential currency in global trade.

Using Google Trends data from 2014 to the present, Peshkam notes that interest in Bitcoin within China i.e., among its domestic population follows a similar pattern as in the U.S., as well as the world at large, as measured by the number of searches for the word Bitcoin. Ignoring this growing interest on the part of its populace might not be economically and financially prudent for the country in the long run, thus the shift in Chinese policy, opines Peshkam.

 

 

Chinas DC/EP will probably become the main means of daily trade from grocery shopping to payment of bills and larger ticket items domestically, Peshkam says. But it is too early to gauge its international impact, including whether or not it will be a threat to the U.S. dollar as the worlds primary trading currency.

Just in case, continues Peshkam, China would like to have BTC on hand to reduce its dependence on the dollar for global trade. A strong BTC could also similarly weaken the dollars hold on Chinas regional neighbors, making them more open to using the new digital yuan. The shift in Chinas position seems to be a strategic move to safeguard its future economic dominance should Bitcoin move from investment alternative to trading currency alternative, says Peshkam.

Who is Li?

Perhaps one is reading too much into a single persons statement? Li, after all, is just one of seven deputy governors of Chinas central bank. Might these remarks on the matter of Bitcoin and cryptocurrencies simply be one bankers opinion?

No, Lacalle tells Magazine. That doesnt happen in China. Not in forums like these. When they want to alert the world about some new [financial] policy, the first comment is often from an analyst in a state-owned bank. Next, typically, is a statement by a central banker. And finally, at a later date, the policy is officially announced, explains Lacalle. This is what happened when China devalued the yuan in 2015, for instance. It is subtle but efficient.

Chinas central bank is not as independent as some of its Western counterparts, including the U.S. Federal Reserve, another source, who wished to remain anonymous, tells Magazine: In his [Lis] place, it would be natural to check whether his statement is in accord with the government view. Or, alternatively, he has been tipped that this is the government view.

 

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So, Li is simply acting as a government spokesperson? It can be viewed this way, says Molly Jane Zuckerman, head of content at CoinMarketCap, in a conversation with Magazine. She adds: The vice governor of the Peoples Bank of China and the former governor of the PBoC both mentioned Bitcoin while explaining the progress of CBDC development in the recent forum. They considered Bitcoin a special asset and said the government would bring it under supervision and regulation. Earlier, the central bank had called Bitcoin a virtual commodity.

But maybe an alternative investment is just an alternative investment and nothing more?

Its hard to be confident, but perhaps PBoC Deputy Governor Li Bos intent is simply to say that Bitcoin is a valid alternative investment, Darrell Duffie, Dean Witter distinguished professor of finance at Stanford Business School, tells Magazine. China probably remains against the use of Bitcoin as a payment medium, which is a different application. This would be consistent with Lis prior remarks, continues Duffie, adding:

As a payment medium, Bitcoin makes it more difficult for the authorities, in any country, to monitor payments for compliance with laws and regulations, such as anti-money laundering. When used as a payment medium, Bitcoin also makes it somewhat easier to bypass Chinas capital controls, which China would not want to see.

Li may have been saying that Bitcoin is all right as a store of value i.e., as gold 2.0 but not as a payments platform. James Barth, finance professor at Auburn University, tells Magazine: Bitcoin, like gold, might be viewed and allowed as an investment with the ability to serve as an inflation hedge. He adds that it makes sense to view Bitcoin as an investment alternative. […] This still allows China to impose restrictions by barring financial institutions within its borders from facilitating transactions involving cryptocurrencies.

The banker also may have simply been describing the current reality. Kevin Werbach, professor of legal studies and business ethics at the Wharton School of the University of Pennsylvania, tells Magazine: Calling cryptocurrencies investment alternatives is a factual statement. It doesnt necessarily imply anything about whether and how those alternatives would be available to Chinese investors.

 

 

Contrary to what some believe, China has never attempted to thwart Bitcoin and blockchain activities. China has never been uniformly hostile to cryptocurrencies, says Werbach, adding: Chinese authorities shut down initial coin offerings and renminbi-to-crypto exchanges in 2017 because they were concerned about excessive speculation, fraud, and capital flight. There has been no indication of that view changing.

Meanwhile, China has tolerated a huge crypto mining industry within its borders and has actively promoted blockchain technology as part of its new infrastructure agenda, adds Werbach. Many of the worlds largest crypto exchanges, such as Binance, Huobi, and OKcoin, have major ties to China, even if officially they are headquartered elsewhere. In summary, Werbach tells Magazine:

My guess is that Li Bo was saying that Bitcoin should be viewed as a speculative investment, not as an alternative currency or payment system. That would be very consistent with Chinas approach. I think the crypto community took the wrong message from his remarks.

Others, however, continue to discern a policy shift behind the bankers statement. For instance, OKExs Lai tells Magazine: The new statement from the PBOC banker gave a very clear stance to the market that BTC would be considered as an alternative investment tool. We think its a remarkable step for BTC and we will likely see BTC regulated with a similar framework as those for other alternative investments.

Distrust of China

Others were quick to see ulterior motives on Chinas part. Chinas latest move softening its position on cryptos should be taken with a healthy dose of skepticism, Pablo Agnese, lecturer in the department of economy and business organization at UIC Barcelona, tells Magazine. He adds: China is and has been for long a big black box, and the old adage beware of Greeks bearing gifts seems as fitting as ever.

But Bitcoin may be getting too big to ignore, even for China, suggests Agnese especially considering it has a market cap that recently surpassed the $1 trillion mark. China will still try to ride the crypto wave just to undermine the power of the USD in international trade transactions which accounts for roughly 60% of foreign exchange reserves as there is a trade war still going strong. As for Chinas own CBDC project, Agnese comments:

Cryptos at large, and BTC in particular, have precisely come to challenge the financial status quo, not only by introducing much needed competition, but also by exposing its long-standing weaknesses.

Yu Xiong, associate dean international at Surrey University and chair of business analytics at Surrey Business School, tells Magazine that the statement by Li only meant that China was starting to pay more attention to cryptocurrencies with the intent of regulating them. This will not mean China will play a softer position toward cryptocurrencies. China will only become soft when the government can really monitor the transactions and cash flows. […] This will not happen in the foreseeable future.

An asset class that should be regulated

In sum, the Chinese government has shown little interest until now in regulating Bitcoin which would be tantamount to acceptance of the cryptocurrency. But last month, a deputy governor of Chinas central bank, presumably with the governments knowledge and approval, signaled that the central bank will not only not block Bitcoin in China but spoke for the first time in positive terms about the digital currency.

This is extremely significant for both domestic institutional investors and high net worth individuals looking to invest in alternative assets such as Bitcoin in the future, Zuckerman tells Magazine.

Lai adds: After years of development, I think all major governments and regulators now including China have recognized BTC as a viable asset class that should be regulated instead of a complete ban.

There is a growing realization in China that the nation could benefit from a rising crypto sector. The electricity that powers crypto mining, after all, is largely based in China. The Chinese already have a stake, too, in many blockchain-based enterprises. And meanwhile, the nation has an ambitious digital currency project underway, so some softening with regard to BTC may also be tied, as Lacalle posits, to its desire to have a [globally] functioning digital yuan.

 


Satoshi Nakamoto saves the world in an NFT-enabled comic book series


There is a Reddit post from August 2013, in which a purported time traveler shared a dystopian future brought on by the proliferation of Bitcoin in the year 2025. Things are looking bleak here, and some of you will carry blood on your hands, the time traveler warned readers, telling them of a world of vast inequality and economic decline. The Bitcoin earlies live in fortified cities, as there are no more governments due to the difficulty of enforcing taxation.

This is the inspiration of the setting created by ENCODE Graphics, a comic publisher committed to expressing the myths of the crypto scene and the metaverse in narrative form.

 

Characters PR1MUS and ONESHOT

 

Part of the vision is to breathe life into the comic book industry, which suffered a crypto blow last month after DC Comics barred its artists from creating NFTs featuring any DC Comics intellectual property. This means that they cannot mint art featuring the likes of Batman, Wonder Woman or Superman.

Despite this, ENCODE is seeing the artists from both DC and Marvel join forces with crypto artists around the world to create a new universe with well-designed characters, which in turn will provide a basis for many more sub-projects. All will be based around the concepts of crypto in a style that might be referred to as cryptopunk. An ENCODE spokesperson tells Magazine:

The vision to establish a comic project that provides a wonderful base for comic artists to make artworks in the spirit of Bitcoin, CryptoArt and our crypto community. This universe, with its beautifully designed characters, offers a potential that goes far beyond the creation of comic literature.

Whos behind the mask?

ENCODE Graphics is headed by an Austrian artist going by the pseudonym PR1MAL CYPHER, who started off as an individual artist but is now better described as the artistic director for his project.

Originally versed in oil painting, he focused on digital CryptoArt with an element of social critique. He has taken an interdisciplinary approach to combine text with digital art on platforms SuperRare, MakersPlace and Nifty Gateway, and has also produced a run of silver coins funded with 0.01 BTC, in a style reminiscent of SATOSH1. His five-part NFT series RIOT DAYS featuring George Floyd is an example of his sociopolitical approach.

According to PR1MAL, the goal of ENCODE is to offer a glimpse into the future a project that still guarantees the professionalism of the old publishers, but wants to live up to the symbols of CryptoArt and the Metaverse with new technologies.

 

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While PR1MAL is clear that there is no intention of competing with the big names in the world of comics, he states that the company is keen to be a pioneer in the field by leveraging the possibilities of blockchain and the digital world in general. We will succeed in that. This could certainly introduce a unique edge in drawing up a new generation of crypto-native comic book fans and collectors.

Though the rest of the lineup of writers and visual artists is not yet completely public, it includes a number of notables within the DC and Marvel experience. Some writers include Eisner Award winner Mike Baron; Chuck Dixon, who is known for Batman and The Punisher; Aaron Lopresti, who has written extensively for both Marvel and DC; as well as Scott Beatty, who has written encyclopedias based on DC Comics characters, in addition to his work for the publisher.

 

The mysterious SATOSH1

 

Comic artists Will Conrad and Mark McKenna are represented on the visual side along with a number of new talents. McKenna is already familiar in the NFT scene, having released digital artworks on MakersPlace in December 2020. Despite the impressive lineup, there are hints of more to come, as the projects organizer states that Many of the already involved artists with rank and name currently remain under secrecy.

The time-traveler title mentioned earlier, otherwise known as 2084, centers on the recently returned Satoshi Nakamoto. Here, SATOSH1 explores a distant dystopian future version of our Earth after the Big Reset, where the big corporations and citadels hold the power, according to PR1MAL. The ongoing series is meant to constitute an epic of CryptoArt set in a fictional, polarizing future, filled with symbols and figures related to the culture around cryptocurrency intended as a recurring theme. 2084 is expected to stay in the production phase until summer 2021.

At the heart of ENCODE is the publication of stories that on the one hand take up the symbols and memes of crypto culture, but also the vision of the present that will be the reality of the future.

Another title, METATALES, is a graphic black-and-white anthology made up of a number of short stories by various artists. Some of these are about crypto, while others are more socio-critical and portray our society in terms of technological developments. Publication is planned for early June.

 

 

Pre-NFT

Distribution of the comics has not yet been announced, but an NFT drop called GENESIS related to 2084 took place on April 17 on Nifty Gateway. The drop of four open edition works featuring SATOSH1 saw 148 sales, bringing in nearly $97,000 for the project.

The GENESIS drops help us with funding. Artists want to get paid, says PR1MAL. A second, related drop is scheduled for June 4.

 

SATOSH1 holding Lady Liberty

 

The Nifty Gateway platform is owned by the Winklevoss twins, and was previously chosen as the main platform for Michael Winkelmann, better known as Beeple, for his drops because it allowed anyone to participate using a credit card or bank transfer, instead of being strictly on-chain.

The launch of the GENESIS NFT series before the launch of the actual comic is interesting from the perspective of crypto history, since the set-up appears to be an echo of the pre-initial coin offering phenomenon that was commonplace in 2017. Pre-ICOs were opportunities for investors to get in on a project at the ground floor, with raised funds being used, at least in theory, to create a valuable product. In this sense, the GENESIS NFT drop was a sort of pre-offer or kick-starter to the art project.

 

 

Helping emerging young artists access the NFT scene is a point of emphasis, according to ENCODE, with PR1MAL explaining that a portion of NFT proceeds will go toward an artists fund to help support young talent, who should be offered a possibility to get access to the NFT scene and to get fair shares from releases within the framework of ENCODE.

We would very much like to provide a scholarship to the Kubert School in Dover for one young talent each year at some point, PR1MAL adds, referring to a New Jersey school for cartooning.

 

 

Visualizing the future

Physical comics are naturally part of the picture but with a modern twist. Some next-generation physical comic books will contain NFCs with ETH keypairs and NFTs that will harmonize with Web 3.0. NFCs refer to near-field communication devices, used in applications like tap-and-go payment cards. The covers of each comic will also be available as NFTs.

According to PR1MAL, This is also a particular goal of ENCODE Graphics the innovative building of bridges between physical works and the new digital possibilities of the blockchain.

The vision of creating comics that represent the 21st century seems to be supported by plans for an exclusive set of 21 founder tokens. The tokens will be like a contract for 3 years. Holders will receive a lot for what they pay, digital items and analog items: all issues and variants, including a special founder variant. Plus partial potential movie rights, limited Founder NFTs, a physical printed yearbook after one year, prints, original art, etcetera, PR1MAL lists in addition to other swag. There are also plans for a trading card game called CITADELS featuring characters from 2084.

 

AVA FROST with 101

 

With so many plans, however, it is worth questioning if launching two recurring publications in such a short time may prove too large of a bite to chew. Despite the workload, PR1MAL says that Everything is on schedule and that Issue #2 of both comics is being worked on.

If ENCODE Graphics does become a success to the point that its characters become representative of the global epic of crypto, the possibilities are quite considerable. In five years, PR1MAL hopes to expand 2084 to such an extent that it would even be ripe for a film adaptation. There is also the potential of integrating the storyline with the actual Metaverse somehow, using platforms like Decentraland or Cryptovoxels to name a few.

PR1MAL concludes that: ENCODE guarantees the professionalism of the old publishers but wants to live up to the symbols of CryptoArt and the Metaverse with new technologies.

 


North American crypto miners prepare to challenge China’s dominance


Springtime is coming to the North American cryptocurrency mining industry. With access to robust capital markets, cheap power, a stable political climate and increasing participation of technological innovators, industrial-grade mining operations are burgeoning in the United States and Canada, providing competition to Chinese mining pools that now control more than half of the worlds hashing power.

These new ventures are acutely aware of the need to minimize minings carbon footprint. In March, when Neptune Digital Assets and Link Global announced they would develop a new five-megawatt Bitcoin mining facility in Alberta, Canada, for instance, Neptune CEO Cale Moodie cited the substantial global pressure to develop sustainable [emphasis added] Bitcoin mining operations around the world adding that the project would be powered by solar, wind and natural gas.

A large investment in North America mining infrastructure is currently taking place, Ethan Vera, co-founder and chief financial officer of Luxor Technologies and of Hashrate Index, tells Magazine, while CoinShares chief strategy officer Meltem Demirors writes in a recent blog post: We have seen over $200M of capital deployed into building onshore mining capacity in the United States alone.

Theres an upwards trend in mining companies looking at the U.S. and North America, Amy Davine Kim, chief policy officer of the Chamber of Digital Commerce, tells Magazine, and there is a growing willingness among some U.S. states to support such crypto mining ventures. Kentucky, for instance, passed two bills in March that give tax breaks to crypto miners, whom the state wants to attract in order to create jobs and energize local economies.

North American capital has been unleashed, Vera explains, adding: Public and private markets are pouring money into Bitcoin mining, and it is all setting the stage for large-scale North American build-out.

What took so long?

Some wonder how and why Western nations allowed China to take such a lead in crypto mining in the first place. China now accounts for 65% of global BTC mining, according to the Cambridge Centre for Alternative Finance. This is compared with only 7.24% for the U.S., which is the second-largest hub, though no one really knows the global distribution with certainty.

Some have pegged the Chinese share to be lower. For example, a 2020 study commissioned by Fidelity Investments estimates that 50% of global mining power capacity is likely in China, with 14% in the United States. Meanwhile, an April 6 paper written by academics from the University of the Chinese Academy of Sciences, Tsinghua University, Cornell University and the University of Surrey in Nature Communications, a peer-reviewed journal, estimates the Chinese share to be much higher: As of April 2020, China accounts for more than 75% of Bitcoin blockchain operation around the world.

The paper goes on to explain that some of Chinas rural areas are considered an ideal destination for Bitcoin mining because of cheaper electricity prices and large tracts of undeveloped land for mining pool construction.

In the early days, the Wild-West nature of the mining industry held back major investments, says Vera, explaining how Bitcoin mining became so geographically skewed. The opaqueness of the ASIC supply chain the application-specific integrated circuits that are specifically designed to perform the hashing calculations demanded of miners and mining pool auditability led capital to be sidelined.

With regard to auditability, he further explains that Most miners didnt know if they were getting underpaid for their hashrate to mining pools. If mining pools quoted them a fee it was very hard to check that was the actual fee being charged. In many cases miners blamed mining pools for underpayment. More recently, however, There has been a large improvement in the mining supply chain professionalism, Vera adds.

Chinas dominance is perhaps better explained in macro terms, suggests Yu Xiong, associate dean international at Surrey University and chair of business analytics at Surrey Business School and one of the authors of the Nature Communications paper. North America is saddled with higher labor costs and energy costs than China, which leads the world with roughly 30% of global hydropower capacity and a 50% share of coal power generation. Those facilitated the mining industry in China, Xiong tells Magazine.

Chase Lochmiller, CEO and co-founder of Crusoe Energy Systems a Colorado company that uses waste gas from oil well sites to power Bitcoin mining rigs tells Magazine that more miners are now migrating to North America, driven by the increased attention paid to BTC by investors and society in general.

Bitcoin mining slammed by environmentalists

Any movement to North America could also invite further scrutiny from environmentalists who have attacked Bitcoins prodigious consumption of energy and its related climate-threatening emissions. The annualized energy consumption of the Bitcoin mining industry in China alone will peak in 2024 at 296.59terawatt-hours, according to the Nature Communications paper, which exceeds the total energy consumption level of Italy and Saudi Arabia in 2016.

In March, Bank of America analysts slammed Bitcoin mining for its environmental wantonness, noting that A single Bitcoin purchase at a price of ~$50,000 has a carbon footprint of 270 tons, the equivalent of 60 ICE [internal combustion engine] cars.

The proof-of-work consensus mechanism used to verify Bitcoin transactions requires would-be miners to compete against each other to solve complicated mathematical puzzles. Computers, such as ASICs, specially built to solve those problems burn through immense amounts of electricity. Miners that solve the puzzle get to form and confirm the next block of transactions, and they receive BTC as a reward for their efforts.

Still, This is a security feature of PoW not a bug, says Vera. If the puzzles to be solved the answers to which are called hashes are too easy to solve, the network invites denial-of-service attacks from hackers.

Lochmiller says that high energy usage in itself is not necessarily a bad thing if it is done right. Crusoe Energy, for instance, has developed a technology that captures the natural gas that is flared into the atmosphere at oil well sites and uses this waste gas to power modular data centers [mining rigs] deployed directly at the wellsite.

When co-locating rigs in this manner as the company has done in Colorado, Montana, Wyoming and North Dakota the result is an overall 71% reduction in CO2 emissions when compared with flaring, Lochmiller tells Magazine. Its a net benefit to the environment, and a net advantage to BTC.

The ecological challenges attached to crypto mining are easily addressable, Clark Swanson, CEO of Blockcap one of the largest Bitcoin mining operations in North America tells Magazine, adding:

The Bitcoin network is the first use of energy that does not require its source of energy to be co-located near the end user population.

Swanson stresses that BTC mining is moving toward making renewables the primary source and perhaps one day the sole source of energy to the Bitcoin network. Even today, Blockcap utilizes power that achieves a nearly 50% carbon-neutral output. We are continuing to drive our carbon-emission target to neutral. At present, however, most Bitcoin mining globally is not powered by renewable energy sources like solar, wind or hydro. According to the Cambridge Centre for Alternative Finance, 39% of hashings total energy consumption comes from renewables.

Not all are impressed by recent measures, however. Alex de Vries, founder of Digiconomist, calls the co-location solution preposterous, telling Magazine: Were not having a climate change problem because fossil fuel extraction is not efficient enough. He adds:

Using a byproduct of fossil fuel extraction still means Bitcoin is running on fossil fuels, and it only adds to the bottom line of fossil fuel companies.

De Vries admits that solar panels provide green energy and are an improvement over using flared gas, but so far the only substantial source of renewable energy going into the Bitcoin network is dodgy hydropower that can only be obtained for just a couple of months per year, as is the case in Chinas Sichuan province the worlds largest BTC mining hub.

Even if the Bitcoin network were to run entirely on renewable energy, continues de Vries, it wouldnt solve all its PoW-related problems. This network runs on highly specialized equipment that cannot be repurposed, and the growing demand for the ASIC machinery already adds to the disruption in the global semiconductor supply chain. The end result will be a substantial pile of electronic waste on top of all that energy consumption. No amount of green energy can fix that.

Optics will become more important, arguably, if the mining industrys center of gravity shifts from China to North America, where regulators and environmentalists might be more sensitive than Chinas energy authorities to the industrys energy consumption and carbon footprint.

A security risk?

Beyond the energy and environmental questions, others see significant security risks in Bitcoins consensus mechanism. Just consider that half of the networks hashrate is physically located in China, says de Vries. Thats a major security risk.

Something similar was suggested by Ripple co-founder Chris Larsen in an opinion piece for The Hill in August 2020. He wrote: At least 65 percent of cryptocurrency mining is concentrated in China, which means the Chinese government has the majority needed to wield control over those protocols and can effectively block or reverse transactions.

 

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In the same vein, former Acting U.S. Comptroller of the Currency Brian Brooks noted in November 2020 that China has captured more than 51% of the mining capacity on the Bitcoin blockchain, “which means that the very first Internet of Money […] is now essentially owned by China. So, as a country, we now face a geostrategic competitiveness issue, which is: Do we in the United States want to own Internet 2.0 in the same way that we own Internet 1.0?

Warnings about a 51% attack on the Bitcoin network from China or elsewhere crop up fairly regularly in the cryptoverse, but the risk is mostly theoretical, writes developer Jameson Lopp in an August 2020 blog post. Irrespective of its scary-sounding name, if such an attack were to come, it would be limited in its effectiveness and unlikely to disrupt network operations for more than a short period of time.

During such an assault, the attacker couldnt actually steal peoples Bitcoin arbitrarily, explains Lopp, and attackers could only double-spend only their own coins. Also, the hackers could neither make invalid transactions valid nor change consensus rules. These limitations, continues Lopp, probably make cryptocurrency exchanges the juiciest targets for 51% attacks. But there are numerous downsides for even these more limited assaults, including the fact that Any exchange with decent liquidity to make them attack-worthy will likely have withdrawal limits. Lopp adds that the threat from China, limited as it is, will further diminish over time:

Over the very long term I expect we will see semiconductor foundries outside of Asia begin producing more mining chips and countries with even cheaper power sources will continue to become more industrialized, thus providing more competition when miners are seeking out new locations to set up shop. Chinas mining dominance is unlikely to last; I expect that this theoretical attack will become less and less likely.

It isnt environmentalists, hackers or even hegemonic nation-states that will eventually doom the PoW mining model, according to Kevin Dowd, professor of finance and economics at Durham University in the United Kingdom its the basic laws of economics.

Dowd argues that Bitcoin mining has the industrial structure of a natural monopoly i.e., where production is cheapest with one producer. There are inherent centralizing tendencies that will eventually undermine its value proposition, Dowd tells Magazine. This problem of excessive centralization isnt going away, even if most BTC mining shifts from China to North America, he asserts.

Is the PoW consensus doomed?

Does the PoW protocol come with its own expiration date, then? After all, Ethereum, which boasts the second-largest cryptocurrency by market capitalization, is moving to a proof-of-stake consensus mechanism that should bring with it significantly reduced energy consumption and a smaller carbon footprint along with increased speed, if all goes well. Does this represent the future of blockchain technology?

Proof-of-work is the only battle tested consensus mechanism, says Vera. While proof-of-stake may work, it is still an experiment. His business believes that Bitcoin will remain attached to a PoW consensus indefinitely and it will only get better with time.

I see value in both consensus mechanisms, Lochmiller tells Magazine. The sheer size of investment required to undertake BTC mining discourages cyberattacks, while PoS is still in its infancy, still being rolled out. Swanson adds that in Bitcoins 12 years of existence, the PoW consensus protocol has successfully thwarted all attacks on the network, stating:

While a proof of stake protocol may be more efficient from the use of power utilization and computational speed, it has inherent deficiencies that make it insufficient as a long-term Bitcoin protocol.

When asked if mining is Bitcoins Achilles heel, Kim answers: I disagree. There are ways to incentivize appropriate energy consumption. Bitcoin mining, as currently constituted, may be wasteful, but other things waste a lot of energy and emit lots of carbon, including the U.S. military. Ecology alone may not be a sufficient reason to abandon PoW mining.

First, we need better data, adds Kim. How much ecological damage is really being done? We also have to look at the benefits of the Bitcoin network, which allows a safe, secure way to transfer value anywhere in the world and can bring millions of unbanked individuals into the worlds financial system for the first time to cite two potential benefits. Ecology is a concern, yes, But its important not just to talk about climate only, says Kim.

A new center of gravity for BTC mining?

Can one really expect Bitcoin mining activity to shift significantly from China toward North America in the next few years? Given its higher energy and labor costs and its stricter regulations, Xiong is doubtful that North America will dethrone China anytime soon. Perhaps, however, Some other countries with more renewable energy, and lower operation costs, could rival China, he tells Magazine.

The U.S. is growing aggressively as a mining venue, says Lochmiller, partly a result of the professionalization of the sector. But all those Chinese mining groups arent going to vanish overnight barring some major regulatory intervention. As such, Lochmiller expects China to still claim 40% to 50% of the worlds BTC mining activity three years hence, with perhaps 30% from North America, 20% from Europe and the remaining 10% from elsewhere.

Regarding minings future configuration, Id love to see it inverted, says Kim, with 65% for the U.S. and 7% for China though that probably isnt likely. The key thing is the U.S. needs a comprehensive policy at both the state and federal levels to attract and keep innovative crypto and blockchain firms.

Kim adds: We want that work here as happened with the Internet and Silicon Valley. Already, states like Kentucky and Texas and cities like Miami are recognizing that blockchain represents the future, So I anticipate seeing some progress on the mining front over the next three years.

North America is on the verge of an explosion of hashrate growth, leveraging robust capital markets, sophisticated energy infrastructure and political climate, says Vera. I expect North America to gain another 10% of global hashrate market share over the next year.

Clearly though, as the North American mining industry develops, it has to be mindful of the ecological costs of growth, and continued movement toward renewable and carbon-neutral energy sources is critical if it is to gain mining share, stresses Vera. As Bitcoin gains mass adoption, this [the environmental impacts] will continue to be the major argument against it.



This is how to make — and lose — a fortune with NFTs


The rise of nonfungible tokens, or NFTs, has been nothing short of astounding this year. Google searches for NFT are up over 600% since mid-February, hitting initial coin offering mania levels, and the top NFT platforms are turning over millions of dollars each day.

In a single 24-hour period earlier in March, sport collectibles platform NBA Top Shot saw sales of more than $7.89 million, art house OpenSea took in $4.88 million, and digital antique NFT project CryptoPunks netted $3.28 million.

The mainstream media is showing more interest in NFTs than it has in crypto for years, with publications from the BBC to The New York Times running explainers and the odd hit piece. Prices certainly look frothy, with Beeples Everydays selling at Christies for almost $70 million, Jack Dorsey auctioning the first-ever tweet for $2.9 million, and an Alien Crypto Punk changing hands for $7.57 million. Established artists including Banksy and Damien Hirst have jumped onto the trend, along with musical acts Kings of Leon, 3Lau and Aphex Twin.



(Alien Crypto Punk, Larva Labs)


At various points, the crypto community thought that either fast, cheap payments; decentralized finance, or DeFi; or the attraction of hard money might bring in the masses it turns out the great unwashed are more interested in owning a JPG.

Colin Goltra, who co-founded the NFT-based Narra Art Gallery in Decentraland, says this is a very good thing, as NFTs are bringing new demographics into crypto, outside of the usual finance and tech types.

Suddenly weve got this fresh blood of people exploring the space with new eyes, says Goltra, who also heads up Binance Philippines, adding: Its refreshing to interact with new community members youre really inspired by the art, you have a lot of fun, and its kind of like a game to collect.

Make sure youre getting some combination of that stuff out of it too because if youre just treating this as financial speculation, honestly, theres probably other games in town for that.

So, how do you get involved? Magazine spoke to some of the leading experts in the field to find out.

 

 

How do you spot value in an NFT?

Unlike DeFi protocols, where you can value a project by comparing its revenue and growth potential to the price of its token and its total value locked, the value of most NFTs is highly subjective, and sentiment can turn in an instant. Earlier this month, CryptoKitties were changing hands for an average price of $1,263. By later in March, that had fallen to $115.

Its also important to understand what youre actually paying for. With digital art, for example, an NFT gives you ownership of a unique token linked to the art, similar to a certificate of authenticity. But you dont own the copyright of the art, nor do you get a physical copy of it, and it doesnt stop anyone else from copying or viewing it.

Australian dance music producer Flume sold a music and animation NFT, Saccade, for $66,000, despite retaining the copyright to the music and leaving it freely available for anyone to watch on YouTube. Castle Island Ventures founder Nic Carter likens buying an NFT to getting an autographed print:

What Im buying is effectively a digitized version of a signed setlist after a gig, or a signed, limited edition album cover. As I jokingly put it, the NFT should be understood as the autograph, not the art.

The blockchain on which the NFT is minted also affects the price, with users paying a premium for Ethereum-based NFTs, given that the network is secure, decentralized and expected to be around for a while. But the choice of blockchain is less of an issue with in-game assets (which may need a faster blockchain) or with something like NBA Top Shot (which uses Flow), as its the only place you can buy licensed NBA memorabilia.

Value drivers

Different categories of NFTs including art, music, in-game items, virtual land and collectibles have different value drivers, explains Andrew Steinwold, managing partner of NFT investment fund Sfermion.

He says that in-game assets derive value from their utility a sword with 10 times the power of the average sword should fetch a higher price, for example while virtual land is priced according to location content and parameters. Crypto arts value is based mainly on an artists reputation, while collectibles derive their value from the narrative that surrounds the asset.

Across all categories, scarcity and uniqueness help drive value provided there is demand, of course. Collectibles often come in various editions which vary by size and have rarity tiers. First editions in a projects series typically command a premium, explains Delphi Digital research analyst Alex Gedevani. Even better if theres historical significance and/or strong narrative behind it like CryptoPunks, the first NFTs.

Alien and Ape Punks are the most prized CryptoPunks. For the blockchain-based game Axie Infinity, where users raise and battle fantasy creatures called Axies, The scarcest, most valuable Axies are Mystic Axies, says Jiho Zirlin, co-founder of Axie creator Sky Mavis. They have rare limited skins and these skins will have a deeper evolutionary tract than other Axie body parts.

On NBA Top Shot, sport Moments with low serial numbers fetch higher prices, as do those where the serial number matches the players jersey number. A collector recently turned down a $1 million offer for a moment with a #1 serial number, which matched player Zion Williamsons jersey number, #1.

 

 

The NFT art scene is perhaps the easiest for newcomers to understand. Just as in the real world, well-known artists with bigger social followings command higher prices than newcomers. Make sure to look at an artists overall volume of work: Someone pumping out 10 NFTs per day may soon saturate the market. Counterintuitively, however, big-name artists can actually launch a lot more work than others.

NFTs can be released in editions of 10, 50 or even hundreds of copies similar to a real-world artist running off 500 prints and hand-signing them or they can be released as unique, standalone one-of-one editions.

As you might expect, the one-of-one editions are the most highly prized, and thats why Goltra focuses almost exclusively on them. I do like the idea that I can be the unique owner of beautiful imagery, or a beautiful piece of art, he says.

What should investors avoid?

A big red flag comes up for projects that are only in it for the money, and Gedevani cautions against carbon copy clones of successful projects like CryptoPunks and Hashmarks along with celebrity NFTs that appear to be quick money grabs off their audiences. He doesnt mention Lindsay Lohan or Paris Hilton by name, but he probably doesnt have to.

Another trap is buying stolen art. Russian artist WeirdUndead was outraged to find her stolen work up for sale on OpenSea after someone automatically tokenized it using Tokenized Tweets. She tweeted:


Its an ongoing problem, given how simple it is to mint NFTs now. Visual artist Rosa Menkman likewise discovered that four of her artworks had been tokenized using another website called MarbleCards and auctioned on OpenSea. Apart from the ethical issues, its hard to see stolen NFT art maintaining value if its creator disavows it.

Even when the art is authentic, Steinwold says its important to assess the background and motivation of the person issuing an NFT:

Are they some famous athlete that learned about NFTs last month? Or are they someone that has been in the NFT ecosystem for years and has thoughtfully crafted assets with a compelling narrative?

Steinwold may be thinking of NFL star Rob Gronkowski, who sold $1.8 million worth of NFT memorabilia on OpenSea.

In the blockchain gaming world, Zirlin recommends steering clear of hyped-up but substance-free new projects, or as he puts it: Chasing the new hot thing, trying to be early to a bad project rather than joining a more established project with potential.

In the art scene, Goltra avoids NFT platforms that arent highly selective about the art they carry, such as OpenSea and Rarible. While he says large open platforms such as these are great for new artists and investors, they present logistical problems.

 


Theres just so much work that you have to sift through to find anything of quality, he says. He prefers platforms with filters, including SuperRare which only offers one-of-one single editions Nifty Gateway and Foundation.

Miko Matsumura, general partner at Gumi Cryptos Capital, recommends avoiding pretty much everything. Almost everything in NFT will be worthless in the future, he says, with limited exceptions for those that can be authenticated as having historical significance, such as CryptoKittes or NBA Top Shot collectibles. Dont buy stuff that has no historical value from sources that have no authority, he warns.

Is a potential financial return the best way to approach NFTs?

In a word, no. Those with whom Magazine spoke agreed that collectors with a genuine interest in a category are the most likely to turn out to be successful in this nascent industry. If someone is heading into a collectibles market with the intention of flipping for profit but doesnt understand the nuances of the project, chances are it may not end well, says Gedevani, adding:

We are still largely in the experimental phase with collectibles across many categories like sports, avatars, game items and more. Its better to focus on niches that genuinely interest you and where you can find an edge.

Gabby Dizon, co-founder of Yield Guild Games and Narra Gallery, says were still so early in the NFT game that its very difficult to gauge potential financial returns. A better strategy is to first buy something you would not mind owning for the next five years, with one eye on factors that might see the value increase, like scarcity, desirability, aesthetics and utility.

That way, even if the market tanks, you still own an NFT you like. For Goltra, The financial stuff is secondary, adding: There are pieces I could purchase as speculative plays but I dont because its not the purpose for me. I just try to buy art that I like or that speaks to me in some way.

 

 

Are some NFTs undervalued/overvalued right now?

Mike Winkelmann, the artist known as Beeple, certainly thinks prices are too high at present, telling Fox News: I absolutely think its a bubble, to be quite honest. I go back to the analogy of the beginning of the internet. There was a bubble. And the bubble burst.

Matsumura believes that All types of NFTs are overvalued right now and likens the space to a lottery, where the winners win really big and get all the publicity while the vast, vast majority of people will be losers, economically speaking.

Goltra is also keenly aware the NFT mania could fizzle out, taking those high price tags with it. I know were not immune to market cycles, the way that the rest of the crypto space is, he says. And so, I know that theres a version of this where any media that were doing right now, you know, whenever this next cycle is over, we all look stupid.

 

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But Yat Siu, CEO of Animoca Brands, believes at least one NFT sector is currently not getting enough love, and thats gaming. Our opinion is that game assets are undervalued because NFTs derive value not just from provenance, scarcity, and general demand, but also from their utility, he says.

If you do wish to acquire NFTs primarily as an investment, then aim for assets that have underlying utility in a scarcity-based game or platform that is likely to grow significantly in terms of users your NFTs will have a better chance to increase in value simply due to demand and supply patterns.

As an example of a wise investment, he notes that crates of NFTs for the Formula One-licenced game F1 Delta Time were released for $500 in 2019, some of which contained sought-after Ferraris that have increased in value to as much as $60,000.

How important is it to understand the secondary sales market?

Steinwold calls secondary sales perhaps the most important indicator of an NFTs longevity, and Dizon cites them as the true test of whether an NFT was worth the initial purchase price.

To better understand secondary markets, Gedevani recommends making use of third-party or community-created analytic tools such as MomentRanks, Intangible.market and Evaluate.market, which help investors gauge the value of NBA Top Shot collections.

Overlooking secondary sales is an easy way to make a mistake of buying an overvalued asset that has already run up substantially in a short time period, he says.

How can you maximize the chances of winning an auction?

While you could learn how to code and use bots, as Steinwold suggests or take a short course in auction game theory the best way to win is to not play the game, says Goltra.

Sometimes you can preempt the auction altogether, he says, suggesting you slide into an artists DMs on Twitter or Instagram and negotiate directly.

I think artists want to know that the collector of the art is appreciating it, and they like knowing who their collector is. To be able to actually strike up a conversation and kind of make friends with the artist is actually a best practice in terms of wanting to win something super rare.

What sort of budget do you need?

A couple hundred dollars is a reasonable budget to begin with in most categories, though given the interest in NFT art at present, a couple thousand might be required to snare a one-of-one edition from anyone with a reputation.

To snag an art bargain on a low budget, you might have to work a little harder. I specialize in buying NFTs of up-and-coming artists who are yet undiscovered and whose NFT artworks are selling for much lower prices than more established artists, explains Dizon. Such gems are more likely to be found on open platforms like OpenSea and Rarible though youll need to spend a bit of time combing through the haystack.

 

 

OpenSea co-founder Alex Atallah says you can turn up hidden gems by looking for artists with few buyers to date but who have strong, unique social media accounts. These are often the ones that will get discovered soon by the NFT community, he says.

Goltra adds that keeping an eye on the upcoming artists with whom better-known artists interact on social media is also instructive. You can kind of tell when theres a new artist thats very prominent, because all the other artists get excited, he says.

Games and collectibles platforms often have very affordable entry points: NBAs Top Shot platform sells common packs for as low as $9, and collector Pranksy claims to have turned $600 into nearly $7 million worth of memorabilia in a few months on the platform.

Siu explains that newer projects sometimes reward early adopters in the community with airdrops and gifts: Getting deeply involved in an NFT project early on is usually a sound strategy because there will often be early adopter drops or gifts for engaged community members, he says, adding: We have given out such rewards in games like F1 Delta Time encouraging players to play more frequently, and some of those rewards ended up becoming quite valuable.

And for those who have no budget at all, you can actually play to earn by raising Axies a pastime that helped numerous Filipino players make it through the pandemic, with some even becoming relatively wealthy in local terms.

There are people making a living playing Axie, says Zirlin. From collectors to play-to-earn grinders in the developing world.

 

 

How do I research the market?

Some of the better-known NFT news sources include Steinwolds Zima Red podcast and newsletter, Delphi Digitals Delphi Daily, Bankless and The Defiant. Art platforms such as SuperRare also feature interviews with artists and other content.

In addition, you can follow as many NFT accounts on Twitter as possible including WhaleShark, DCL Blogger, Loopify, Linda Xie and more and get involved with NFT communities on Discord, such as those of OpenSea and Token Smart. Zirlin says the Axie Infinity community on Discord is the best way to learn how to raise Axies. I suggest becoming a community member by joining the Discord and meeting the other Axie trainers. Talk to other players that have had successful journeys and try to emulate their paths, he says.

Gedevani says your time is well spent browsing social media, listening to podcasts and experimenting with projects. Thats the fastest way to learn, he explains. Follow the builders/investors in the NFT community who have been through all the ups and downs and are best positioned to navigate this market.

Final words of advice

We are still in the early days for NFTs, and no one really knows how the market will develop, so theres an abundance of caution all around. Matsumura notes that in the current bull market, everyone can appear to be winning and making large paper gains, but sentiment can suddenly flip. Some of those things will go to zero and stay at zero forever, he says.

Dizon encourages buyers to do as much research as possible: Do your homework, make sure you love what you are buying and can afford it, then you can pull the trigger. The best time to sell an NFT is when everyone else is FOMOing in. The worst time to sell an NFT is when you need the money.

Steinwold says a long-term mindset is likely the key to success. We are in a frenzied period right now so be thoughtful in what you purchase. Ask yourself: will this NFT be around in two to three years? He concludes:

The NFT zeitgeist only caught on to a wider audience the past few months and this revolution will take many years so always play long-term games with long-term people.


DeFi, derivatives and fixing an antiquated financial system: Kristin Boggiano


Kristin Boggiano, a lawyer and co-founder of the CrossTower digital asset exchange, developed her ethos on protecting the vulnerable while working and living in the Amazon during the 1980s, helping fight for the rights of the Cofn people against the Big Oil companies.

She later worked creating mortgage-based derivatives on Wall Street right before exotic derivatives shouldered part of the blame for causing the global financial crisis, or GFC. In the aftermath, she put her inside knowledge to good use as a regulatory lawyer helping shape market reforms.

It was partly due to the GFC that institutions were slow to adopt Bitcoin in the early 2010s, she says.

I came upon [Bitcoin] from the perspective of a lawyer, because my clients wanted to buy and trade it. I had to figure out what it was and how to trade it, she recalls, looking back on the early days of crypto markets between 2011 and 2013.

Back then, her clients were not ideological types they were institutions that saw opportunities in arbitrage. They didn’t have any philosophical desire to change the world with Bitcoin. They just saw it as an asset class, even as early as 2011 and 2012. One of these clients was Western Union, a financial services business she was representing.

But Bitcoin soon faced a reckoning with the collapse of its primary exchange, Mt. Gox, and the much-publicized arrest of Ross Ulbricht, who was operating the Silk Road darknet market.

As soon as Silk Road happened, and Mt. Gox, I think institutional participation became questionable from a fiduciary perspective. You don’t want to participate in illicit activities.

Seven or eight years later, the institutions are returning in full force. Boggiano considers proper regulation in the name of safety and legality to be critical to integrating the crypto industry with the powers that be. Just as the Cofn people of the Amazon needed environmental regulations to keep their land free of oil waste, she believes retail traders similarly need strong regulations to protect them from financial harm.

 

 

Apart from being the president of the institutionally focused platform CrossTower, Boggiano is also the founder and co-chair of Digital Asset Regulatory & Legal Alliance, whose approximately 90 members are executives, senior legal and compliance officers of financial institutions and blockchain technology companies.

She previously worked as both chief strategy adviser and senior regulatory counsel for Guggenheim Partners, an investment firm with $270 billion dollars under management. The firm has gotten recent press due to its chief investment officer, Scott Minerd, predicting Bitcoin will reach $600,000.

Sounds a little derivative

With her father serving as a doctor in the Air Force, Boggiano grew up on the move. I lived in Texas, California, Taiwan, New Mexico, New Jersey, Colorado and back to New Jersey, she says. When her parents divorced, she then split time living with each of them, until she left to study developing economics at Sarah Lawrence College, graduating in 1992.

After writing a thesis about Texacos work in Ecuador and the adverse human rights and environmental consequences of U.S. foreign policy on developing countries, she received a grant to travel to Ecuador where she worked for a law firm advocating for the rights of Indigenous peoples.

I wound up finding the Cofn people in the upper-Amazon basin, and then wound up living with them on and off for a while, helping them think through how to acquire the title to their land. The difficulty was that the Ecuadorian government owned rights to the oil underneath, which it wanted to extract with U.S. oil companies often assisting in the drilling.

After two years of fighting for Indigenous rights, Boggiano was inspired to apply to law school. She graduated from Northeastern University School of Law in Massachusetts in 1997, also completing an MBA at the same institution in 1996.

In the process of studying, I became fascinated with the derivatives markets.

While still studying, her first job in 1995 was with the enforcement divisions of both the Commodity Futures Trading Commission and the Securities and Exchange Commission in New York, both tasked with regulating the U.S. financial system.

She soon got a job trading or structuring equity and credit derivatives for hedge funds and high-net-worth individuals on behalf of Merrill Lynch in the late 90s.

I was working 18 hours a day, sometimes seven days a week it was just a really crazy market. [Chair of the U.S. Federal Reserve Alan] Greenspan was keeping interest rates really low, and people were really looking for yield at that time. So they were coming up with creative methods of creating products.

I think 81 was the first swap, Boggiano tells Magazine as she explains the early history of derivatives before she entered the game. Shes referring to financial swaps, which are derivatives contracts that allow parties to trade the cash flow of one asset for another. These exploded in popularity because investors were looking for yield after the reduction of bank interest rates.

Foreign exchange derivatives were the early 90s,” she calculates, adding that equity derivatives started to be used around 96, But they were just starting and they republished the definitions in 2002. Working on the trading floor, this put the young Boggiano in the middle of a financial revolution of the time.

That all sounds familiar

In many ways, Boggianos description of the ’90s and early 2000s Wall Street world invites comparisons to the more recent decentralized finance, or DeFi, boom of the cryptocurrency world. Cryptocurrencies like Bitcoin did not initially offer any opportunities for cash flow beyond appreciation, but that is changing with things like Ethereum 2.0 offering staking rewards of several percent per year.

Today, many lenders such as BlockFi and Celsius, as well as various exchanges including Boggianos CrossTower, offer opportunities to earn interest yield on cryptocurrency holdings. Furthermore, DeFi platforms like Ethereums SushiSwap and Binance Smart Chains PancakeSwap allow users to exchange cryptocurrencies through the use of liquidity pools. These liquidity pools act as decentralized cash reserves to which anyone can contribute, with those contributors then earning yield in the form of trading fees.

The concept of DeFi has been called financial Lego, and goes much deeper. The tokens representing stakes in these liquidity pools can themselves be staked on other platforms (or vehicles, as they might have been called in Boggianos early days) to allow for yield farming, often generating tokens in new projects that may vest immediately or over several years.

 

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Just like the 18-hour days Boggiano recounts, there is no shortage of DeFi degens skipping sleep to manage their yield farms across a multitude of newly emerging platforms. FTXs Sam Bankman-Fried famously spends almost every waking moment at his Hong Kong desk and sleeps on an office beanbag.

In 2000, Boggiano left the floor to work at a law firm and help build new products for the new financial ecosystem. It was a wild market. I was doing credit-default swaps on residential mortgage-backed securities, and then putting those into other vehicles, she explains.

In 2007 and 2008, the global financial crisis decimated the market.

Once the market crashed, I became a regulatory lawyer and helped shape regulation from pre-Dodd-Frank [Wall Street Reform and Consumer Protection Act], all the way through rule-making 200-plus rules, Boggiano recounts, recalling the tumultuous era when she worked to create stability by way of regulation and oversight.

It may not be fair to assign all the blame for greed upon the innovators of Wall Street; it was the investors, after all, who demanded returns on their capital despite a difficult economic environment where previously high interest rates had fallen. No longer could you put your money in a bank account and watch it grow as consistently. With the idea that money should earn favorable interest firmly entrenched over generations, the creation of exotic new methods to achieve it seems inevitable.

Bitcoin from the ashes

It was in the fallout of this crisis that many began to question the stability and even legitimacy of the financial system centered largely on Wall Street.

What made this early derivatives market more serious than an anonymous online DeFi casino was that the money flowing through it was not the gambling budget of self-styled degens who aped in to new yield strategies without critical analysis. Instead, the money often represented the life savings and mortgages of average people.

Who better to step into a role as a regulator than someone who understood this crucial area intimately? That person was Boggiano, who retreated from the chaos of the trading floor to a law office where she would work to help rebuild the system in hopes of allowing it to earn back peoples trust.

It was in this position as a lawyer that Boggiano came across Bitcoin in 2011. Major financial institutions she was working with were interested in it, but they were skittish.

The level of scrutiny at the time was very high, not least because the Bernie Madoff Ponzi scheme had recently come to light and the industry was in regulatory flux, Boggiano explains.

Today, things are different.

Were unquestionably seeing the participation and acceptance of Bitcoin from the institutional perspective, Boggiano asserts, listing the likes of Elon Musk, MicroStrategy, Visa and Mastercard, as well as the endowment funds of major institutions like Harvard, Stanford and Yale as recently converted supporters. There is even interest on various national levels, such as China and the United States working on a digital yuan and dollar, respectively.

I think that there’s a natural, healthy competition that Bitcoin has with respect to monetary policy in the United States and elsewhere. That competition is a good thing because it’s forcing countries to think about their economic systems.

We’re gonna see significant adoption and change over the next three to five years it’s going to be a different economy, she says with total confidence.

One question that comes to mind is whether some institutions feel as if they missed the crypto boom, seeing as they were often prevented from making moves in the early years due to the associated uncertainty. Boggiano does not frame this as a missed opportunity but as an appropriate exercise in caution. I think that they’re doing the prudent analysis that they need to do in order to protect their investors. I think you’ve seen more activity from prop desks, who don’t have to report to investors, she says.

I think that the narrative to institutions is that when there’s sufficient adoption, [when] the number of Bitcoin wallets that are being utilized is considerable, it becomes a lot less likely that it’s just going to plummet to zero.

Boggiano says its important to protect retail investors who are playing alongside the institutions. We have a very antiquated financial system and regulatory process I think that there’s a natural struggle that’s happening between innovation, and trying to protect the retail.

Any investment offered to retail, she explains, is more highly scrutinized than those in which only sophisticated investors, like institutions and high net worth individuals, can participate in, as it is assumed that the latter entities are better equipped to understand the investments and manage losses. Those protections are there so there isn’t fraud, there isn’t manipulation.

Still, Boggiano acknowledges, It’s primarily been a retail-driven asset class which is very unusual mostly, asset classes are run by institutions.

More regulation, less privacy?

With respect to Bitcoin, I feel there is a moral obligation to develop a means to encourage privacy, but ensure safety, says Boggiano. While she values privacy, she thinks protecting retail investors and the wider population is a higher priority.

An example of this being beneficial came during the Capitol insurrection, where investigators tracked down Nick Fuentes, who’d received 13.5 Bitcoin from an overseas donor. According to Boggiano, that was a great demonstration of deanonymizing Bitcoin transactions by way of following digital breadcrumbs in the name of public safety.

Coinbase is one company that is said to help authorities follow these digital breadcrumbs by providing crypto surveillance services to U.S. government agencies like the Drug Enforcement Administration and the Internal Revenue Service.

We really need to develop an alternative means of protecting people’s privacy, but also to be able to track down transactions related to human trafficking and drug cartels, because those are not acceptable industries.

Boggiano is, in some ways, the mirror opposite of Erik Voorhees, a previous Journeys interviewee and fellow Bitcoin entrepreneur also running an exchange platform, who said that Institutions and government exist purely to curtail peoples power over money.

Whereas Voorhees viewpoint reflects an individualist ethos of unbridled liberty where collectivist institutions limit the powerful and ambitious, Boggiano instead describes governments and regulations as necessary to protect the vulnerable, like the Cofn people of the Amazon who needed environmental regulations to keep their land free of oil waste.

Left to people’s own devices, you get these imbalances of power and that can be very destructive to people who are in vulnerable positions, she states.


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