Tax dept starts probe into Bitcoin exchanges to ascertain rate they can be taxed under

Tax dept starts probe into Bitcoin exchanges to ascertain rate they can be taxed under

Tax Dept starts probe into Bitcoin exchanges to ascertain rate they can be taxed under.

 

The indirect tax department has launched an investigation into Bitcoin exchanges operating in India to ascertain at what rate they can be taxed under the goods and services tax (GST) regime, two people with direct knowledge of the matter said.

The development comes as the income tax department launched searches on top Bitcoin exchanges including Zebpay, Unocoin and CoinSecure on Wednesday.

According to the indirect tax officers, the investigations began probe about a month back and top executives and promoters of some Bitcoin exchanges were asked to explain their business model and how much indirect tax — either service tax or value-added tax — could be levied on the last financial year's revenue.

"There is ambiguity around how much sales tax is applicable on revenues of these startups as the product they deal in is not defined by the current tax laws," said a person with direct knowledge of the matter. "No satisfactory answer is yet provided by any of these Bitcoin startups."

A senior executive at one of the top seven Bitcoin exchanges in the country confirmed that both direct and indirect tax officials have been questioning the company about its business model and taxability. "While the indirect tax department has been calling senior executives since mid-November, the direct tax officials started reaching out to us two weeks back," the person said.

Bitcoin is the most popular among digital currencies that allow online payments directly from one person to another without any middlemen or going through any financial institution. With many businesses beginning to accept them, there is rising demand for such cryptocurrencies that come without any government control and allow anonymous transactions. More than that, Bitcoin has become a craze among investors, with its value skyrocketing more than 1,200% in 2017 alone. Price of one Bitcoin stood at $17,900, or .`11.46 lakh, on the Luxembourg-based Bitstamp exchange as on Friday evening.

Among other things the tax department wants to know if Bitcoins are currency, goods or services. Tax rates would depend on how the product is defined.

"Bitcoin may not qualify as currency or money as it is not a legal tender for Indian indirect tax laws," said Pratik Jain, national leader, indirect tax, PwC. "Therefore, VAT (value-added tax) or GST implications may arise. In case it is sold to overseas customers from India it may qualify as 'export'." However, if there is a commission or fee earned in the transaction, then the business of Bitcoin exchanges is likely to be viewed as a 'service', Jain said. "There are several grey areas which need to be investigated, in light of the precedence and guidance available under laws of other countries."

Industry insiders said that Bitcoin players, including Indian exchanges, earn their revenue through commission, transaction fees or price arbitrage. There was no response to queries sent to Zebpay and CoinSecure on Wednesday. Unocoin told ET: "Given that we have not received any notice, none of your questions are relevant."

No tax notices have been issued yet. That can happen only after an investigation is concluded and the exact tax applicable is determined.

One person close to the development said the indirect tax department is likely to issue demand orders to Bitcoin exchanges by the first quarter of next year. "The sales tax department and VAT authorities would be well within their rights to issue arbitrary demand orders (for 2016-17, before the implementation of GST)," the person said. GST was put in place on July 1.

According to another person in the know, VAT authorities from Gujarat, Maharashtra and Karnataka have separately initiated an inquiry to determine if Bitcoin exchanges are liable to the tax.

Tax experts said calculating indirect tax on the revenue earned by the Bitcoin startups is causing problems due to lack of clarity around the 'place of supply' provisions.

Income-tax authorities too are on the trail of the Indian Bitcoin sector. ET reported on Monday on an ambiguity in income tax to be paid by Bitcoin holders in India. According to people with direct knowledge of the matter, the income tax authorities wanted access to data on Indian Bitcoin holders and the gains they have made.

The stratospheric rise in Bitcoin valuation has prompted several investors and experts, including Warren Buffet and JP Morgan's Jamie Dimon, to warn that it is a bubble. The Reserve Bank of India (RBI) has so far issued three warnings against Bitcoins — the first in 2013, the second in February this year and the third last week.

There are 1,600 types of cryptocurrencies available across the globe based on blockchain technology. The more common ones include Bitcoin, Ethereum, Ripple, Litecoin and Dash.

"One needs to choose a cryptocurrency wallet and an exchange to trade on the currency," said Vishal Gupta, founder of SearchTrade, a search engine company that uses Bitcoins to pay users every time they search on the platform. "From there it is as simple as filling out a form and waiting for the transaction to process."

Gupta, who also cofounded the Digital Assets and Blockchain Foundation India (DABFI), however, declined to share how players (wallet or facilitators) earn their revenues.

 

Authors: Sachin Dave, Vishal Dutta ET Bureau|Dec 16, 2017, 09.43 AM IST

 

Posted by David Ogden Entrepreneur
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A bubble? We don’t even know how to value Bitcoin

A bubble We don't even know how to value Bitcoin

A bubble? We don’t even know how to value Bitcoin

Bitcoin is a “speculative mania” according to the governor of the Reserve Bank of Australia. But it’s not so easy to say that Bitcoin is a bubble – we don’t know how to value it.

Recent price rises (close to $18,000 in the past three months) may be too great and can’t continue. But the Bitcoin market is only just maturing as an investment and as a currency, and so it may still have room to grow.

A bubble is when the price of an asset diverges from its “fundamentals” – the aspects of an asset that investors use to value it. These could be the income that can be earned from a stock over time, a company’s cash flow, the state of a country’s economy, or even the rent from property.

But Bitcoin does not pay out profits (like shares) or rent (like property) and is not attached a national economy (like fiat currencies). This is part of the reason why it is hard to tell what the underlying value of Bitcoin is or should be.

In the search for fundamentals some have suggested we should look at the supply of Bitcoins in the market (which is regulated by the technology itself), the number of Bitcoin transactions through the market, or even the energy consumed by Bitcoin miners (the computers that validate transactions and are rewarded with Bitcoins).

Diverging from fundamentals

If we take a close look, we can see how the price of Bitcoin may be diverging from these fundamentals. For instance, it is becoming less profitable to be a miner, especially as the energy required increases. At some stage the cost may exceed the price of Bitcoin, making the network less worthwhile to both mine and invest.

Bitcoin may be the best known cryptocurrency but it is also losing marketshare to other cryptocurrencies, such as Ethereum and Litecoin. Bitcoin currently accounts for 59.4% of the total global cryptocurrency market but at the beginning of 2016 it was 91.3%. Many of these other cryptocurrencies have more functionality than Bitcoin (such as Ethereum’s ability to execute smart contracts), or are more efficient and use less energy (such as Litecoin).

Government policy, such as taxation or the establishment of national digital currencies, may also make it riskier or less worthwhile to mine, transact or hold the cryptocurrency. China’s ban on initial coin offerings earlier this year reduced the value of Bitcoin by 20% in 24 hours.

Without these fundamentals the price of Bitcoin largely reflects speculation. And there is some evidence that people are simply buying and holding Bitcoin in the hope it will keep rising in value (also known as greater fool investing). Certainly, the cap on the total number (21 million) of Bitcoins that can exist makes the currency inherently deflationary – the value of the currency relative to goods and services will keep increasing even without speculation and so there is a disincentive to spend it.

Bitcoin still has room to grow

Many big investors – including banks and hedge funds – have not yet entered into the market. The volatility and lack of regulation around Bitcoin are two reasons stopping these investors from jumping in.

There are new financial products being developed, such as futures contracts, that may reduce the risk of holding Bitcoin and allow these institutional investors to get in.

But Bitcoin futures contracts – where people can place bets on the future price of stocks or markets – may also work against the price of Bitcoin. Just like gamblers place bets on horse races rather than buying a horse, investors may simply buy and sell the futures contracts rather than Bitcoin itself (some contracts are even settled in cash, rather than Bitcoin). All of this could lead to less actual Bitcoin changing hands, leading to less demand.

Although the rush to invest is apparently encouraging some people to take out mortgages to buy Bitcoin, traditional banks won’t lend specifically for that purpose as the market is too volatile.

But it is not just on the finance side that the Bitcoin market is set to expand. More infrastructure to support Bitcoin in the broader economy is rolling out, which should spur demand.

Bitcoin ATMs are being installed in many countries, including Australia. Bitcoin lending is emerging on peer-to-peer platforms, and new and more regulated marketplaces are being created.

Many companies are accepting Bitcoin as payment. That means that even if the speculation dies down, Bitcoin can still be traded for some goods and services.

And finally, although the fundamentals of Bitcoin are still up for debate, when it comes to transaction volume through the network there appears to be a lot of room for growth.

It’s good to remember that people have been calling Bitcoin a bubble for a long time, even when the price was just US$35 in 2013.

In the end, this is uncharted territory. We don’t know how to value Bitcoin, or what will happen. Historical examples may or may not apply.

What we do know is that the technology behind most cryptocurrencies is enabling new models of value transfer through secure global consensus networks and that is causing excitement and nervousness. Investors should beware.

Author: Alicia (Lucy) Cameron and Kelly Trinh for the Conversation

 

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

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Bitcoin futures suggest breakneck rise in price to slow

Bitcoin futures suggest breakneck rise in price to slow

Bitcoin futures suggest breakneck rise in price to slow

NEW YORK/LONDON (Reuters) – Newly launched bitcoin futures on Monday suggested that traders expect the cryptocurrency’s blistering price gains to slow in the coming months, even as it blasted above $17,000 to a fresh record high in the spot market.

Chicago-based derivatives exchange Cboe Global Markets launched the futures late on Sunday, marking the first time investors could get exposure to the bitcoin market via a large, regulated exchange.

The one-month bitcoin contract <0#XBT:> opened at 6 p.m. local time (2300 GMT) on Sunday at $15,460. By late afternoon on Monday in New York, it was trading at $18,650, roughly 8 percent above bitcoin’s spot price of $16,900 on the Bitstamp exchange.

Bitcoin earlier hit a record high of $17,270.

Its steep gains and rapid rise have attracted investors around the world as well as intense scrutiny from government regulators, which is the very opposite of what its creators wanted when it first launched bitcoin more than eight years ago.

“The bitcoin founder should be horrified seeing it rise so quickly, as any serious focus on it and its recent explosive move higher will soon end its freedom,” said John Taylor Jr, president and founder of research firm Taylor Global Vision in New York.

Taylor believes that based on his charts, bitcoin has not yet peaked, but as soon as the “upmove ends, it will crash.”

Given bitcoin has almost tripled in value over the past month, and was up more than 15 percent on Monday alone, the futures pricing suggested investors see price increases moderating.

Bitcoin futures were already offered on some unregulated cryptocurrency exchanges outside the United States, but backers said the U.S. market debut would confer greater legitimacy on the volatile cryptocurrency and encourage its wider use.

The CME Group (CME.O) is expected to launch its futures contract on Dec. 17.

VOLATILITY CONCERNS

Although there are hopes that the futures will draw in new investors, most fund managers at larger asset managers and institutional investors said bitcoin remains too volatile and lacks the fundamentals that give other assets value.

“There’s no place for bitcoin in a multi-asset portfolio given the very high volatility,” said Robeco Chief Investment Officer Lukas Daalder.

The two-month contract was trading at $18,750, an 11 percent premium over the spot price, while the three-month contract was changing hands at $18,140, a roughly 12 percent premium.

While modest when compared with bitcoin’s 270 percent increase over the past three months and 230 percent rise in the last two months, those levels still indicated a lack of large “short” positions betting against bitcoin.

“Anyone, especially a professional trading outfit, would be crazy to actually short sell this bull market,” said Nick Spanos, founder of Bitcoin Center NYC. “But just because it doesn’t happen on day one doesn’t mean it won’t in the future.”

Bitcoin was up more than 1,600 percent so far in 2017, having started the year at less than $1,000.

MARCH TOWARDS LEGITIMIZATION’

As of early afternoon trading in New York, 3,951 one-month contracts had changed hands, meaning around $73.1 million had been notionally traded. That compares with daily trading volumes of more than $21.5 billion across all cryptocurrencies, according to trade website Coinmarketcap.

There had been speculation that the futures launch would trigger more gyrations in the market. But while volatile compared with traditional currencies or assets, the rise on Monday was relatively tame for bitcoin.

Bitcoin surged more than 40 percent in 48 hours last week, before tumbling 20 percent in the following 10 hours.

“(Bitcoin futures) will speed up the march towards legitimization of an asset class that only a few years ago many law enforcement agencies would have argued had limited legitimate reasons for people to use,” said Jo Torode, a financial crime lawyer at Ropes & Gray in London.

The futures are cash-settled contracts, allowing investors exposure without having to hold any of the cryptocurrency.

The futures are based on the auction price of bitcoin in U.S. dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs and brothers Cameron and Tyler Winklevoss.

 

DRAMATIC GAINS

Bitcoin was set up in 2008 by an individual or group calling themselves Satoshi Nakamoto, and was the first digital currency to successfully use cryptography to keep transactions secure and hidden, making traditional financial regulation difficult if not impossible.

Central bankers and critics of the cryptocurrency have been ringing the alarm bells over its surge in price and other risks such as whether the opaque market can be used for money laundering.

“It looks remarkably like a bubble forming to me,” the Reserve Bank of New Zealand’s Acting Governor Grant Spencer said on Sunday.

Somebody who invested $1,000 in bitcoin at the start of 2013 would now be sitting on around $1.2 million.

Heightened excitement ahead of the launch of the Cboe futures gave an extra kick to the cryptocurrency’s scorching run this year.

The launch has so far received a mixed reception from big U.S. banks and brokerages.

Several online brokerages, including Charles Schwab Corp (SCHW.N) and TD Ameritrade Holding Corp (AMTD.O), did not allow trading of the new futures immediately.

The Financial Times reported on Friday that JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N) would not immediately clear bitcoin trades for clients.

Goldman Sachs Group Inc (GS.N) said on Thursday it was planning to clear such trades for certain clients.

 

Additional reporting by Chuck Mikolajczak and John McCrank in NEW YORK; Michelle Chen in HONG KONG and Helen Reid in LONDON; Graphics by Ritvik Carvalho in LONDON and Reuters Graphics team; Editing by Meredith Mazzilli

 

 

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

David

Bitcoin cracks $9,600 just hours after breaking $9,000 level

Bitcoin cracks $9,600 just hours after breaking $9,000 level

Bitcoin cracks $9,600 just hours after breaking $9,000 level

  • Bitcoin surged to yet another new record high on Monday
  • The cryptocurrency jumped to an all-time high of $9,671.84 hours after cracking the $9,400 level on Sunday
  • The digital currency has risen some 869 percent year-to-date
  • Bitcoin surged to yet another new record high on Monday, breaking a record set during the Thanksgiving weekend stateside.

The cryptocurrency jumped to an all-time high of $9,671.84 hours after cracking the $9,400 level on Sunday, according to industry site CoinDesk. It later pared some gains to trade at $9,631.21 at 10:00 a.m. HK/SIN, rising some 3.27 percent on the day.

"The move appears to be retail driven," said Brian Kelly, a CNBC contributor and CEO of BKCM, which runs a digital assets strategy.

The largest bitcoin exchange in the U.S., Coinbase, added about 100,000 accounts between Wednesday and Friday — just around Thursday's Thanksgiving holiday — to a total of 13.1 million. That's according to public data available on Coinbase's website and historical records compiled by Alistair Milne, co-founder and chief investment officer of Altana Digital Currency Fund. Coinbase had about 4.9 million users last November, Milne's data showed.

The surge in interest also comes on the back of CME's announcement that it will list bitcoin futures in the second week of December. The launch of a derivatives product for the digital currency will mark another step in establishing bitcoin as a legitimate asset class.

Still, with the digital currency having risen by some 869 percent year-to-date, plenty have taken to pointing out the potential pitfalls of what they see as a price bubble.

JPMorgan Chase CEO Jamie Dimon in October warned that those "stupid" enough to buy bitcoin will ultimately "pay the price for it." He added that he did not comprehend the value of currencies that were not backed by a government and that "[t]he only value of bitcoin is what the other guy'll pay for it."

Still, many others have offered a more moderate assessment for bitcoin and its ascent. Khaldoon Al Mubarak, the head of Abu Dhabi's Mubadala Investment Company, said people ought to be open-minded when looking at the digital currency.

More recently, a poll among chief financial officers on CNBC's Global CFO Council showed 27.9 percent of 43 respondents thought bitcoin was "real but in a bubble" while 27.9 percent thought the cryptocurrency was a "fraud." Just 14 percent of the executives said bitcoin was "real and going higher."
 

Author: Evelyn Cheng

 

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

 

David

Rise of Bitcoins causes stir but questions linger

Anthony Mburu and his fiancée Elizabeth John at Nation Centre on November 22, 2017 for an interview. Mburu paid part of his dowry using Bitcoin

Rise of Bitcoins causes stir but questions linger

Anthony Mburu and his fiancée Elizabeth John who recently attracted curiosity when he paid part of his dowry using Bitcoins, a form of digital currency, in Naivasha Kenya,considers himself a non-conformist.

Having quit university in 2010 after just one semester of his engineering course, 26-year-old Anthony Mburu does not fancy formal education, for instance.

“Formal education is good. It will give you an average life. You’ll eat, have your mortgage, car loan and all that — live an average life; struggle through life to the end,” he opined.

WALUBENGO: Kenya's uneasy dance with Bitcoin

DOWRY

He currently makes a living out of “mining” Bitcoins and he says that is the source of income that has enabled him buy a parcel of land in Naivasha, stay in a rented house and has given him something to buy and maintain his car among other fortunes.

“Everything is Bitcoin. Where I live, Bitcoin; what I drive, Bitcoin; investment, Bitcoin,” he said.

The computer-generated currency, he says, enabled him pay part of his dowry.

On November 11, as he headed to the home of his fiancée Elizabeth Chege in Naivasha, he had already negotiated with his in-laws that the goats portion of his dowry be settled with Bitcoins.

MOBILE APPLICATION

There are some components of the dowry process he paid for in hard cash.

His father-in-law, John Thion’go Chege, a retired KenGen employee, bought the idea.

They helped him download a mobile phone application that works as a Bitcoin wallet.

“We told him, ‘You just receive this and keep it. In a few months, you will have double the dowry. And if you keep [real] goats, they’ll still be the same goats,’” Mr Mburu said.

Ms Chege, the 6th born in a family of nine children, said her parents did not ask many questions despite the fact that Bitcoin is not a well-known concept in Kenya.

“They can’t refuse because they believe in me,” she said.

CBK

Mr Mburu’s unprecedented action has drawn mixed reactions since Bitcoin is a currency the Central Bank of Kenya has told the public to eschew because it is not backed by any regulator.

In a recent interview, Central Bank of Kenya Governor Patrick Njoroge reiterated his disdain for Bitcoin, saying the way the currency’s value has shot up is proof that it could be a Ponzi scheme.

“Our point is that there is risk and it is important that everybody knows that those risks can come back to haunt us and have financial stability concerns,” Dr Njoroge said.

VALUE

Those who are in Dr Njoroge’s school of thought have been criticising the Bitcoin dowry deal.

“Ikicollapse nayo? Give back the bride…” a commentator on NTV’s YouTube channel joked.

Another viewer wrote: “That family better cash in on those Bitcoins. The Bitcoin bubble will burst… Eventually.”

But the currency is fast gaining prominence in Kenya as many people try their luck with this fortune whose value has been sharply rising, much that by Saturday , one Bitcoin was selling for close to Sh900,000 locally.

The value was barely Sh10,000 a year ago.

On the global scale, one Bitcoin was selling at $8,480 (Sh875,984).

SELLERS

On Saturday afternoon on localBitcoins.com, one of the platforms where Bitcoins are sold by Kenyans to other Kenyans, there were at least 10 active sellers.

One in Nairobi was selling 0.150544 of a Bitcoin for Sh140,000, which they wanted to be sent to him via M-Pesa.

Another one in Nakuru wanted Sh250,000 sent to his bank account before he could load any willing buyer’s Bitcoin account with 0.26153363 of Bitcoin.

There are many ways of making money though Bitcoin, and Mr Mburu’s preferred way is through “mining”.

PURCHASE SHARES

He is a member of Bitclub Network, which helps Kenyans and other people across the globe buy shares in the Bitcoin enterprise.

The Kenyan chapter of the club, which has more than 1,000 members, meets in Nairobi every Tuesday, Thursday and Saturday.

Asked what one needs to do to get into mining, Mr Mburu replied:

“Just buy shares. The company dealing with that is Bitclub Network. And one unit is going for $599 (Sh61,876).

"So, you buy Bitcoins worth that much and buy that mining capacity; like you buy a machine. It’s a real machine called Antminer S9.”

He adds: “Once you buy it, it’s stored in our facility in Iceland, and there’s a 30-day period of paying that you’ll not be earning.”

GOATS

Ever since he discovered Bitcoin — which he says brings him at least $5,000 (Sh515,500) per month — he has not looked back and he is planning for a wedding in April 2018. “It will be a Bitcoin wedding,” he said.

Mr Mburu was also dismissive of those who say he might have taken his in-laws for a ride.

“They don’t know what it is. Bitcoin has been there, and it’s going nowhere,” he said.

The Bitcoins he paid were and equivalent of 25 goats. He still has 75 to go “which are yet to be paid in Bitcoins” as he put it.

GROWTH

His fiancée runs a clothes shop in Nairobi and she has also been accepting payment via Bitcoin, though the mode of exchange is yet to gain ground in Kenya.

Mr Michael Kimani, the chairman of the Blockchain Association of Kenya, has been dealing with cryptocurrencies since 2012 and says the field will grow exponentially.

“A lot of opportunities are going to emerge from this and I’m trying to position myself with this industry because I honestly think in the next five years, this is going to be so big that people will forget how we used to live without cryptocurrency,” he said.

 

Author: ELVIS ONDIEKI

 

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

 

David

Is Investing in Bitcoin and Other Cryptocurrencies Worth the Gamble

Is Investing in Bitcoin and Other Cryptocurrencies Worth the Gamble

Is Investing in Bitcoin and Other Cryptocurrencies Worth the Gamble

The Technology Behind Cryptocurrencies

 

The creation of Bitcoin back in 2008 fueled the exponential growth of the cryptocurrency ecosystem, facilitating the creation of a rich diversity of coins and applications that many would deem revolutionary. Those who invested in cheap coins at the outset are reaping huge returns on their capitals, dwarfing the average returns one can acquire in the stock markets. Think about it; if you had bought $1,000 worth of Bitcoin in 2010, you’d be worth a staggering $35 million now. The possibility of earning colossal returns has attracted many to the arena, and this begs a crucial question: Is the hype on cryptocurrencies warranted or it is just a game of Russian Roulette?

The birth of Bitcoin – the first digital cryptocurrency that is decentralized by design – gave rise to a technology with the potential to redefine the very fabric of our status quo. This technology is called the Blockchain, which underpins Bitcoin’s protocol.

“Every informed person needs to know about Bitcoin because it might be one of the world’s most important developments.” — Leon Luow, Nobel Peace Prize nominee

Blockchain is essentially a distributed, digital ledger where every transaction is broadcasted publicly and recorded chronologically. The database is ever growing, expanding in tandem with the amount of transactions made on the network. The decentralized nature of Blockchain technology ensures that transactions are immutable and thus immune to change, offering full transparency for each and every transaction. Add to that the traits of increased security, higher efficiency, error-resistant and reduced transaction costs, it leaves no doubt as to why many are excited about Blockchain’s possible use cases. The utility of Blockchain technology is endless, with an ever-growing list of governments, industries and companies looking to further explore its usage.

Hotbed for Money Making

The birth of a revolutionary technology would always entail those looking to capitalize on its profitability. Blockchain is no different. Investors, traders and speculators can get in on the action by buying cryptocurrencies, which are digital currencies manifesting as variant applications of the Blockchain technology. There are over 900 coins available, with each offering a slightly different approach to solving a range of problems. Many early adopters have made a great sum of money, by buying the coins cheaply at its outset and realizing them much later on. Based on the statistics provided by ICOSTATS, the return on capital of 40 cryptocurrencies since their inception stands at a staggering 6703%! In order for you to earn similar rates of returns in the stock market, it will take you approximately 957 years.

These stellar returns inevitably attract many who are looking to earn multiples over their capital. Given the extreme technicality of cryptocurrencies and the underlying Blockchain technology, many do not fully understand the fundamentals of what they’re investing in. The immaturity of the current infrastructure – stemming from the relative infancy of the cryptocurrency industry — results in an inefficient price discovery mechanism, thereby creating an extremely volatile market environment. This poses huge risks for those looking to invest in a comprehensive list of coins.

Simply entering the market with the hopes of massive short-term gains without understanding the coins and their technology is akin to playing a deadly game of Russian Roulette. The radical volatility of the coins’ prices may significantly put your capital at risk. Just to draw a picture, Bitcoin’s price lost 40% of its value in a matter of days in December 2013, and at the start of this year, Bitcoin lost approximately 34% of its value in a week. While this can spell doom for many, there are those that find gratification by profiting from the intense gyration of prices.

The Verdict?

Nine years after Bitcoin kickstarted the technological revolution, the ecosystem centered around Blockchain technology has flourished and is looking ever so promising. New coins solving real world problems are launched at a tremendous pace, with new functionalities and applications pushing the boundaries of this nascent technology. With increasing user adoption and a keen interest by nations and corporations, it is only a matter of time before Blockchain technology becomes ubiquitous in our lives.

A flip side of this emergent technology is the great risks associated with investing in cryptocurrencies, especially for those with a short-term horizon and an absence of understanding in the coins they have invested in. Truly, the extraordinary volatility unique to cryptocurrencies creates a superficial impression of high stakes gambling in the eyes of many. Armed with the right understanding and knowledge of Blockchain technology, you would begin to appreciate its innate beauty.

 

David Ogden
Entrepreneur

DAvid Ogden Cryptocurrency Entrepreneur

 

Author: Aziz Bin Zainuddin

David

The crypto-currency craze

The crypto-currency craze

The crypto-currency craze

 

In the late 1990s, as investors woke up to the promise of the internet, shares in any company with dot.com after its name soared to giddy heights.

Then the bubble burst.

Now there are warnings of another technology investment bubble – this time related to the fascination with crypto-currencies such as Bitcoin.

On the Tech Tent podcast this week, we examine the phenomenon of ICOs – Initial Coin Offerings – which have seen over $1bn raised so far this year from investors who get little more than a token and a vague promise of involvement in a new business.

The term ICO – designed to mirror the IPO that sees a firm issue shares and float on a stock exchange – seems to mean different things to different people. Early versions were simply ways of getting a new crypto-currency off the ground, but now many are promising to use the blockchain technology that underpins Bitcoin and similar currencies to create businesses.

Among the ICO projects listed by Smith + Crown, which researches the crypto-currency scene, is a business raising money to create the world's most lucrative lottery based on blockchain, and another that promises to rent out high-quality office space using digital tokens.

On Tech Tent, we talk to an entrepreneur who is boldly going into uncharted territory with this new investment technique. Pavlo Tanasyuk is the founder of Spacebit, which aims to create what he calls "a distributed space agency unshackled by state or national sponsorship".

Next month, he will invite investors to take a stake in this venture, which he describes as a crypto version of Elon Musk's Space X. He will only accept payment in Bitcoin, Ethereum or other crypto-currencies and in return backers will get tokens and a role in deciding how the business is run.

But the finance blogger Frances Coppola has compared ICOs to the tulip fever of the 16th Century and other investment bubbles.

"The enthusiasm for ICOs is coming off the back of the Bitcoin and Ethereum booms," she says.

She warns that such schemes are completely unregulated, and fears that many who invest in them simply won't understand what they're getting into.

"There will be scams in this – I'd be astonished if regulators aren't looking at this."

Even Pavlo Tanasyuk concedes there is plenty of risk attached to this kind of investment. "Ninety-five per cent won't deliver – but we will. It's important to set an example. We're doing something real and have a strong management team in place."

When the dot.com bubble burst, it became clear that many investors had not really understood what the firms they were backing actually did or the nature of the technological challenges they faced. Today, the world of crypto-currencies and the blockchain looks even more impenetrable.

Consider this description of one project, Neverdie, which has already raised more than $2m (£1.5m) in an ICO: "A virtual reality infrastructure platform that bridges virtual worlds with popular MMORPGs [massively multiplayer online role-playing games] on the Ethereum blockchain."

Doubtless those who have bought the coins that are meant to fund this vision have read the white paper describing the project, and the disclaimer at the end: "Neverdie Coins and Teleport Tokens do not represent ownership in any real-world companies. These tokens are designed to activate virtual utilities."

Real money is going into a virtual world and if it disappears in a puff of virtual smoke, no regulator will be there to cry foul. Let's hope those who back these kind of ventures are going into them with their eyes open.

 

David Ogden
Entrepreneur

David Ogden Cryptocurrency Entrepreneur

 

Author: Rory Cellan-Jones

David

Russia is looking to regulate bitcoin but still doesn’t see it as a currency

Russia is looking to regulate bitcoin but still doesn't see it as a currency

Russia is looking to regulate bitcoin but still doesn’t see it as a currency

Russia is exploring ways to regulate bitcoin, the country's central bank governor has told CNBC, but sees "doubts" over the benefits of the cryptocurrency and even questions whether it should be considered a virtual currency at all.

In an interview with CNBC, Elvira Nabiullina, governor of the Russian Central Bank, explained that she views bitcoin as a digital asset rather than a currency, and this is the way it should be thought about with regards to regulation.

When asked whether the Russian Central Bank is looking to regulate bitcoin, Nabiullina said that the authority is "analyzing" the possibility and needs to "understand more about this internalization of bitcoin and our regulatory systems." She added that there are "risks" with the cryptocurrency.

"We don't consider that bitcoin can be considered as a virtual currency. It's more digital assets with the regulation of assets," Nabiullina told CNBC in a TV interview.

The central banker did not elaborate on what specific regulation would look like and said she is in no rush to put any policy into place. The governor said that the central bank does have doubts about bitcoin.

"We have some doubts, we don't see some huge benefits from introducing digital assets in our economy," Nabiullina said.

Bitcoin recently hit a record high of $2,791, according to data from industry website CoinDesk, marking around a 180 percent rally year-to-date. There's bullishness in the market with some predicting the price could go as high as $6,000 this year and even $100,000 in a decade.

With surging prices and a market capitalization of around $38 billion, governments are becoming increasingly interested in ways to regulate the digital currency, especially as more retail investors are getting involved in the market.

Japan recently passed a law to legalize payments in bitcoin which helped boost the price, with major trading volumes now coming from the country.

The stance of Nabiullina marks a changed view from Russian authorities who have been trying over the years to ban bitcoin. If Russia somehow regulates bitcoin, this could potentially affect the price, especially if more investors get involved in the asset.

Sean Walsh, a partner at Redwood City Ventures which invests in bitcoin and blockchain companies, said that further regulation could boost the price of the cryptocurrency and get rid of the handful of "bad actors" using it for illegal things.

"I agree with the view that for retail and professional investors greater regulatory structure is very supportive because it adds to the legitimacy of the whole network," Walsh told CNBC in a phone interview.

Taxation plan?

Still, it's unclear where Russia plans to go with bitcoin regulation. The country's Deputy Finance Minister Alexey Moiseev recently said the authorities hope to recognize bitcoin and other cryptocurrencies as a legal financial instrument in 2018 in a bid to tackle money laundering.

"The state needs to know who at every moment of time stands on both sides of the financial chain," Moiseev told Bloomberg in an interview.

"If there's a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations."

The Russian Central Bank's Deputy Chairwoman Olga Skorobogatova has also reportedly revealed plans to tax the cryptocurrency.

"(Digital currencies already circulating in Russia will see) certain regulations with regard to taxes, monitoring and reporting, as a digital commodity," Skorobogatova said, according to news agency Interfax.

Blockchain in focus

Bitcoin has traditionally been known to allow users to make payments and money transfers anonymously. So it may seem that any taxation policy from the authorities could be difficult. But Walsh said some developments in the bitcoin community could make this policy feasible.

Firstly, bitcoin transactions have become slower and more expensive. This makes the practice of trying to split up transactions to cover your tracks very difficult. Secondly, several start-ups have emerged that are able to use algorithms to track transactions on the blockchain – the public ledger of bitcoin activity. This could allow authorities to see who owns bitcoin.

While Nabiullina admitted there were still risks with bitcoin, she expressed the Russian Central Bank's interest in blockchain technology. Because of the way blockchain technology can create a tamper-proof ledger of activity, many major banks are looking into how it can be used for tasks such as trading.

"I think it's more important to understand (the) benefits of new technologies … like blockchain which is on the basis of bitcoin," Nabiullina told CNBC.

David Ogden
Entrepreneur

 

Authors :
Arjun Kharpal Technology Correspondent
Geoff Cutmore Anchor, CNBC

David

The Cryptocurrency Market Is Growing Exponentially

The Cryptocurrency Market Is Growing Exponentially

The Cryptocurrency Market Is Growing Exponentially

Bitcoin dominates over other digital currencies today, but the data suggests its market share will drop significantly in the next few years.
When it comes to the future of money, there is a growing consensus that cryptocurrencies are set to play a major role. One cryptocurrency, in particular, has entered the public lexicon as the go-to digital asset: Bitcoin.

But the cryptocurrency market is significantly more complex than the public lexicon might suggest. And while there have been plenty of studies examining the role and future of Bitcoin, there have been few that explore the broader cryptocurrency market and how it is evolving.

Today that changes thanks to the work of Abeer ElBahrawy at City University in London and a few pals who have examined the cryptocurrency market as a whole and say that it is significantly more complex and mature than many had thought. The evolution of this market even bears a remarkable similarity to the evolution of ecosystems in many other areas, providing some insight into the way the cryptocurrency market might change in the future.

First some background. The big challenge with digital currency is to prevent unauthorized copying. Cryptocurrencies use two mechanisms to prevent this. The first is to publish every transaction in a public record and to store numerous copies of this ledger online in a way that allows them all to be automatically compared and updated. This prevents double spending—using the same bitcoin to buy two different things.

The second mechanism is to protect the ledger cryptographically. Every update collects together a range of new transactions and adds them to the existing ledger. But to do this, the earlier version of the ledger is first frozen and encrypted.

The new version of the ledger—called a block—includes the encrypted copy of the earlier ledger. Anybody can use this encrypted data to generate a number that can be used to check the veracity of the block. However, it is extremely hard to generate this number computationally in an attempt to game the system. It is this feature—that the blocks are easy to check but extremely hard to copy—that secures the system.

Of course, as the ledger continues to be updated, new blocks must be created, piggybacking on the old ones and creating an unbroken chain of blocks. Hence, the term blockchain technology.

Bitcoin is by far the most famous of these cryptocurrencies. It is also among the oldest, having first emerged in 2009. But it is by no means the only cryptocurrency. So an interesting question is how the cryptocurrency market is evolving.

To find out, ElBahrawy and co analyzed the behavior of 1,500 cryptocurrencies that have emerged since 2013 and say that some 600 of them are actively traded today. They say this market has recently entered a period of exponential growth and is currently worth $54 billion. (By comparison, the total amount of money in the world is about $60 trillion.) 

But while this cryptocurrency market is growing rapidly, ElBahrawy and co show that certain aspects of it are stable. For example, the number of active cryptocurrencies has remained about the same since 2013 as has the market share distribution, which follows a well-known power law.

The team also shows how this distribution can be reproduced using a standard model of evolution in which they plug in figures for the rate at which currencies emerge and die away.

This power law distribution occurs in a wide range of systems. For example, the same law describes the size of religions, of languages and even of wars (by number of deaths). In none of these systems is there are any favored religion or language or war. But all things being equal, they all form this type of distribution.

The fact that size distribution of cryptocurrencies follows the same law is significant. It implies that as far as the market is concerned, all currencies are essentially the same. “The fit with the data shows that there is no detectable population-level consensus on what is the ‘best’ currency or that different currencies are advantageous for different uses,” say ElBahrawy and co.

Whether that is true is up for debate. Various critics have pointed out a number of technical limitations associated with Bitcoin, and this has inspired a new generation of cryptocurrencies, such as Ethereum. Whether this will influence the market remains to be seen.

While this exponential growth is ongoing, Bitcoin’s market share is falling. The top five biggest currencies—Ethereum, Ripple, Litecoin, Dash, and Monero—now account for 20 percent of the market. And the trend for Bitcoin is clear. “This would predict Bitcoin market share to fluctuate around 50 percent by 2025,” say the team.

Another factor in the market is that cryptocurrencies aren’t used only as currency. Bitcoin is also widely used for speculation and can also be used for nonmonetary uses such as timestamping.

For many of these applications there is a clear benefit to having a single currency that everyone agrees on. “While the use of cryptocurrencies as speculative assets should promote diversification, their adoption as payment method (i.e., the conventional use of a shared medium of payment) should incentivize a winner-take-all regime,” say Bickell and co.

But experience with other ecosystems suggest that this is by no means certain to happen. For example, a single computer operating system has never been able to outcompete all others, regardless of the ruthlessness of its deployment. Neither has any human language or religion or fashion wiped out all others.  

That’s not to say it can’t happen. But unless there is significant external manipulation of this market, the likelihood is that there will be significant diversity in the cryptocurrency market for the foreseeable future.

David Ogden
Entrepreneur

David

Bitcoin Can Allow Mobile Payment System

Bitcoin Can Allow Mobile Payment System

Bitcoin Can provide mobile payment system

What Bitcoin solves…

The essence of mobile payment systems is to make the life of individuals comfortable. Mobile payments are supposed to offer clients a convenient method of paying for goods and services while on the go. Since mobile payment solutions were introduced, experts have been saying that mobile payment is the biggest innovation in this age and that it is set to change the lives of individuals and businesses alike.

The beauty of mobile payments is that individuals do not have to carry cash whenever they are traveling. As long as people have their smart phones, they can successfully make purchases and pay for services using special applications on their mobile phones.

However, it is instructive to note that the manner in which experts envisioned mobile payment services had not been proven to be accurate. Initially, two giants, Apple and Samsung, were touted as the potential leaders in mobile payments.

Apple introduced its solution, Apple Pay that is based on its proprietary operating system. Samsung, banking on the open Android platform, was keen enough to develop its solution, Samsung Pay. A third competitor, Square, also emerged. Therefore, at first, the mobile payment market was set to be dominated by these three giants: Apple Pay, Samsung Pay and Square.

But the response of the market has not been favorable to the likes of Apple Pay and Samsung Pay. So far, consumers have not embraced these two major mobile payment solutions in a manner that is similar to the way they have embraced their mobile devices. For example, Apple Pay has failed to break into the market and reach its projected rates of growth.

Similarly, Samsung Pay is still struggling to hit its projected numbers. Interestingly, the story is not different when you consider Square. Therefore, all these three major global mobile payment services have failed to create the buzz and excitement that they expected to create in the market.

Cryptocurrencies in general, and Bitcoin, in particular, may be the perfect solution to the problems that consumers experience when they are using the likes of Apple Pay and Samsung Pay. No one can deny that the use of Bitcoin has been growing steadily over the years. To many, Bitcoin is the perfect solution to the problems that they encounter when they would like to pay for goods and services without using cash.

For example, the use of Bitcoin does not involve intermediaries as it is the case with the conventional methods. Besides, individuals can send and receive Bitcoins at the convenience of their homes or anywhere else. Moreover, many people find that using Bitcoins costs much less than what they may have to pay concerning transaction fees when using the conventional mobile payment methods.

Moreover, you do not need to have a bank account to use Bitcoin. In fact, Bitcoin helps you to make and receive payments as an unknown entity. The element of anonymity when using Bitcoin is very attractive to many people who do not like the current model used by global mobile payment services.

Therefore, it is highly likely that Bitcoin is going to be the future of global mobile payments. The anonymity aspect of the payment method, its low transaction fees, and convenience are some of the attributes that make it better than the conventional methods.

David Ogden
Entrepeneur

 

Artical By AliRaza

David