Ethereum Price Drops Below $300 Amid Technical Issues and Cryptocurrency ICO Hype

Ethereum Price Drops Below $300 Amid Technical Issues and Cryptocurrency ICO Hype

Ethereum Price Drops Below $300 Amid Technical Issues and Cryptocurrency ICO Hype

 

 

Things are not looking all that great for Ethereum right now. The popular cryptocurrency suffered a major crash not too long ago and it remains the market is still recovering. The past two days have heralded another downturn for Ether, making it highly doubtful Ethereum will pass Bitcoin in market cap anytime soon. It seems safe to say more volatility is on the horizon for Ethereum holders.

 

WHAT IS GOING ON WITH THE ETHEREUM PRICE?

 

Looking over the Ethereum price charts leaves traders and investors disappointed, as their hopes for challenging Bitcoin’s crown subside. More specifically, the ETH price has taken another beating, as it declined by 7.65% over the past 24 hours. This puts the value of one Ether well below the US$300 mark and it is possible this value will keep heading toward US$270 or lower over the coming days. This momentum is not entirely surprising given Ethereum’s bullish trend throughout the first half of 2017.

 

It is not hard to forget once ETH was worth under US$11 back in early January of this year. Things have certainly picked up over the past few months, culminating in an Ether price peak of nearly US$400, according to Coinmarketcap. Such a spectacular price increase can only be met with future price volatility, which is what we are seeing on a daily basis right now. Even so, the Ether value increase has been nothing short of impressive this year.

 

Ethereum enthusiasts have referred to a phenomenon known as the flippening all year. This trend would occur once Ethereum’s market cap surpasses that of Bitcoin. Although both currencies were only separated by “just” US$8bn, the gap has widened once again. More specifically, Bitcoin’s market cap is close to US$41bn right now, whereas Ethereum’s is only US$26.32bn. The flippening will not be happening anytime soon at this rate.

 

The bigger question is why Ethereum is facing such a setback right now. Shifting market conditions are likely the culprit. Moreover, the Ethereum blockchain and its technology are weighed down by the influx of cryptocurrency ICOs. Transactions are confirmed far slower when a big ICO happens, and smart contracts used by these projects often contain issues which need to be fixed later on. The technology is still premature, yet investors also see this can become a much bigger problem if things aren’t resolved quickly.

 

Speaking of cryptocurrency ICOs, they have quickly become the main use case of the Ether currency. That is not necessarily a positive development either. With so many projects raising funds in Ether, the chances of a market “dump” will increase as well. When teams need funding, they will convert ETH to fiat currency, creating negative pressure across the exchanges. When more projects sell off their raised funds, the price per ETH will undoubtedly continue to go down quite quickly. It is unclear if that is part of the ongoing price drop right now, but it is something to keep in mind.

 

It is unclear what the future will hold for Ethereum right now. The Ethereum price is very volatile, which is only to be expected at this point. However, Ethereum is not a store-of-value by any means. With so many “dumb money” flowing into Ethereum to participate in cryptocurrency ICOs, it is virtually impossible to determine the real value of the existing coin supply. Technical issues are becoming a major problem as well. If this trend keeps up, the flippening may never happen at all. These are interesting times for Ethereum to prove its value, but so far, the project leaves quite a bit to be desired.

David Ogden
Entrepreneur

David Ogden Entrepreneur

 

Author: JP Buntinx

David

Cryptocurrencies Continue Recovery, Resume 2017’s Growth Trend

Cryptocurrencies Continue Recovery, Resume 2017's Growth Trend

Cryptocurrencies Continue Recovery, Resume 2017’s Growth Trend

Cryptocurrencies continued their recovery from last week’s massive price fallout, resuming the upward trend that has characterized 2017. All but 12 of the top 100 cryptocurrenices posted gains in the last 24-hour period.

 

Market leaders bitcoin and Ethereum had the smallest gains the last 24-hour period, with the former adding 0.88 points and the latter 1.15 points and market caps of $45 billion and 31.7 billion, respectively.

Bitcoin’s price reached $2,760.61, attempting to reclaim the record $2,864.85 it set on June 9. The price has hovered in the high 2,700 range after falling to a monthly low near $2,100 last week.
 

Ethereum Recovers From Bottleneck

Ethereum, at $342.27, continued the recovery it began two days ago following two days of losses. Ethereum has been fighting a correction that came from a sudden increase in demand which caused a bottleneck that delayed its transactions.

Despite showing a correction since it peaked at $402 two weeks ago, Ethereum is still showing impressive overall gains this month.

Ethereum has suffered from scaling problems as more new digital currencies opt for the Ethereum platform when holding their initial coin offering (ICO). Status ICO, which raised more than $100 million in Ethereum, caused a demand spike that some exchanges couldn’t handle, causing Ether prices to drop 15% momentarily. This sudden drop also affected other currencies, as nine out of the top 10 registered losses.

 

Third place Ripple rose 9.19 points to $0.294288 in the last 24-hour period, reaching a $12.7 billion market cap, but still below the $0.348079 it hit on May 16.

 

Litecoin Hits A Road Bump

Litecoin, the fourth highest market cap at $2.408 billion, was the only currency with more than $1 billion in market capitalization to show a loss in the recent 24-hour period, losing 2.36 points. Litecoin nevertheless has managed to hold the number four spot, following the activation of the Bitcoin Core development team’s transaction malleability fix Segregated Witness (SegWit), which led to an increase in the demand for Litecoin and a significant surge in development. Within months after the activation of SegWit, Litecoin creator Charlie Lee announced his resignation and his intent to focus on the development of Litecoin full time, which further increased the expectation of the cryptocurrency community and market toward Litecoin.

Within three months, Litecoin’s market cap increased from $200 million to a staggering $2.5 billion, recording a 1,150 three-month increase. In that short period of time, Litecoin surpassed Ethereum Classic, Dash and NEM in market capitalization.

More importantly, the mid-term increase in the market cap of Litecoin, the activation of SegWit, successful testing of Lightning Network on Litecoin, issuance of services by companies such as BitGo and the shift in focus from Litecoin creator Charlie Lee further triggered the currency’s development community.

On June 19, Bitstamp, the eighth largest Litecoin trading platform within the U.S. Litecoin exchange market, announced the integration of BitGo’s Litecoin multi-signature security service. Although the majority of Litecoin trades are processed within the Chinese Litecoin exchange market and Bitstamp only accounts for a fraction of global Litecoin trading, it marked the first case in which a major international digital currency trading platform has integrated BitGo’s security services to secure Litecoin transactions.

 

IOTA Gained The Most

Among those with more than $1 billion in market capitalization, IOTA, number 7, posted the biggest gain as the price hit $0.525929 for a $1.461 billion market cap, a 26.48 point gain. IOTA has continued recovering since suffering one of the largest losses last week, when it dropped 36.5 points in a 24-hour period.

 

David Ogden
Entrepreneur

 

Author: Lester Coleman

David

Bitcoin Will Make Lots of Millionaires Before “Returning Down to Earth”: Economics Professor

http://seriouswealth.net/wp/wp-content/uploads/2017/06/Bitcoin-Will-Make-Lots-of-Millionaires-Before-Returning-Down-to-Earth-Economics-Professor.

Bitcoin Will Make Lots of Millionaires Before “Returning Down to Earth”: Economics Professor
 

Despite its price volatility, Bitcoin is likely to make more millionaires.

Panos Mourdoukoutas, chair of the department of economics at LIU Post in New York City, whose works are published by Forbes and The New York Times, thinks Bitcoin is likely to turn more individuals into millionaires before its price dives again.

Bitcoin recently reached an all-time high of $3,000 this June after a huge correction to $2,682 from $2,957 in the period of two days. This is after tech billionaire Mark Cuban reportedly called Bitcoin's recent price surge a bubble.

However, this is not the case since the cryptocurrency is showing an uptrend, based on its recent price of $2,831 and its continuing upward trend.

Mourdoukoutas shared a partially similar viewpoint to Cuban's. Both had similar claims that Bitcoin's price would drop after a substantial surge, however, he stopped short of calling Bitcoin a bubble.

 

Making more millionaires before it crashes again

Mourdoukoutas mentioned that the digital currency made many "overnight millionaires" – individuals who invested into BTC when it was worth just a portion of its current rate.

He also mentioned that Bitcoin will reach new highs, making more millionaires in the course of the action, before "returning down to earth."

Mourdoukoutas added that one of the reasons for the increased investment in the cryptocurrency is the "ultra-low” rate of interest environment, makings the trade of Bitcoin an enticing proposition.

In addition, there is a growing mistrust in the currencies of several nations, following government policies that have pushed more investors into the cryptocurrency.

 

Price restricted by policies and supply

Mourdoukoutas said that one of these policies is the act by federal governments to provide new treasury bonds at record low rates to cover the old financial obligations with brand-new ones.

For instance, Japan sells treasuries that yield nearly absolutely nothing for the state, however, the nation's debts amount to approximately 250 percent of the country’s GDP. The teacher mentioned that China's treasury yields "something," however, no one knows the specific quantity of the "informal financial obligation".

The fact that there is a substantial quantity of financial obligations linked to the Chinese Yuan and the Japanese Yen diminishes the confidence of investors. Given that there is Bitcoin, a cryptocurrency that has increased its worth by 125 percent in 2016, investors in Asia have taken advantage of the possibility to invest more into the digital currency.

 

The economics professor also highlighted another government policy which might decrease trust in a country's nationwide currency. This relocation is when governments wish to eliminate the old currency notes, as held true in India and Venezuela. Such incidents, according to Mourdoukoutas, is one of the reasons why Bitcoin price has risen.

 

Still better hedge fund than traditional ones

Mourdoukoutas further commented that there are particular advantages which make Bitcoin a much better hedge than traditional ones, such as gold. He added that the millennial generation is one of the greatest supporters of the cryptocurrency as they understand BTC much better than the "baby-boomer generation.”

 

Mourdoukoutas shared:

"Unlike gold, for instance, Bitcoin is a hassle-free medium of payment around the globe.”

 

The economics professor expounded that Bitcoin's supply is anticipated to be restricted to 21 mln. Compared to gold, there is no deficiency of the mineral considering that when the rate of gold rises, it supplies more incentive for gold miners to mine for gold.

Finally, Mourdoukoutas specified that the financier buzz around Bitcoin continuously helps the cryptocurrency to go upwards, as a growing number of financiers are becoming familiar with the digital currency, and can utilize ETFs (exchange-traded funds) to "conveniently participate in the market."

 

David Ogden
Entrepreneur

 

Author: Charles Dearing

David

Teenage bitcoin millionaire can see the cryptocurrency’s value shooting as high as $1 million

Teenage bitcoin millionaire can see the cryptocurrency's value shooting as high as $1 million

Teenage bitcoin millionaire can see the cryptocurrency’s value shooting as high as $1 million

If this teen entrepreneur, high-school dropout and bitcoin millionaire has any predictive powers at all, then we’ve hardly seen the top of the market for the hot cybercurrency.

Meet Erik Finman, who started picking up bitcoin at $12 apiece back in May 2011, when he was just 12, riding a hot tip from hits brother Scott and a $1,000 gift from his grandmother, he told CNBC. He’s now the owner of a reported 403 bitcoins, and while the cybercurrency has been on a bit of a bumpy ride lately, at a Wednesday morning price BTCUSD, -0.48% of $2,773.54 each, the now 18-year-old Idahoan’s stash is worth $1.1 million and change.

“Personally I think bitcoin is going to be worth a couple hundred thousand to a million dollars a coin.”

Erik Finman

 

Finman cashed out his first bitcoin investment back in 2013 and started Botangle, an online education company that provides tools for locating instructors in subjects they need or wish to learn about.

He wasn’t a fan of high school and convinced his parents, both Ph.D.’s, to let him drop out at 15.

His teachers clearly weren’t seeing his potential. “One teacher told me to drop out and work at McDonald’s because that was all I would amount to for the rest of my life. I guess I did the dropout part,” the young bitcoin millionaire said. He didn’t really want to go to college, either, and won a bet with his parents that if he was worth a million dollars by 18, he could skip it. He was, and so he did.

Finman encountered discouragement from an Uber executive, who, instead of listening to his Botangle pitch, told him he should count on college rather than racking up millions. But the teen did end up successfully selling his company’s technology, for a cool price of 300 bitcoin, reportedly. He has said he turned down a $100,000 offer.

Bitcoin prices have soared more than 300% in the span of a year, with the bulk of the gain coming during May and June. Ethereum, one of its chief rivals, has also seen big gains. Bitcoin tapped $3,000 last week, before a pullback last week that saw it shed billions in market cap.
 

David Ogden
Entrepreneur

 

Author: Barbara Kollmeyer
Markets Reporter

David

Ethereum Tokens Are All the Rage. But What Are They Anyway

Ethereum Tokens Are All the Rage. But What Are They Anyway

Ethereum Tokens Are All the Rage. But What Are They Anyway

Ethereum wants to create an ecosystem where everything works together seamlessly as part of its vision for a 'world computer' – and that includes the tokens required to power it.

Launched in 2014 by a band of coders and an upstart teenager, ethereum was designed to make it possible for anyone to code nearly any type of app and deploy that on a blockchain. Many of these decentralized apps (or 'dapps' for short) needed their own token that could, among other things, be sold and traded easily.

To that end, nearly 18 months ago, the ERC-20 token standard was born.

It's hard to overstate how important that interface has been. By defining a common set of rules for ethereum-based tokens to adhere to, ERC-20 allows developers of wallets, exchanges and other smart contracts, to know in advance how any new token based on the standard will behave.

This way, they can design their apps to work with these tokens out of the box, without having to reinvent the wheel each time a new token system comes along.

As a result, almost all of the major tokens on the ethereum blockchain today, including those sold in the recent surge of ethereum-based initial coin offerings (ICOs), are ERC-20 compliant.

 

Tokens 101

Before delving deeper, it's important to spell out what a token actually is and how it differs from ether, the native currency driving the ethereum blockchain.

As they relate to the ethereum network, tokens are digital assets that can represent anything from loyalty points to vouchers and IOUs to actual objects in the physical world. Tokens can also be tools, such as in-game items, for interacting with other smart contracts.

But put simply, a token is nothing more than a smart contract running on top of the ethereum blockchain. As such, it is a set of code (functions) with an associated database. The code describes the behavior of the token, and the database is basically a table with rows and columns tracking who owns how many tokens.

If a user or another smart contract within ethereum sends a message to that token's contract in the form of a 'transaction,' the code updates its database.

So, for instance, when a wallet app sends a message to a token's contract to transfer funds from Alice to Bob, this happens:

First, the token's contract checks that the message was signed by Alice and that Alice has enough funds to cover the payment

Then, it moves funds from Alice's to Bob's account in the database

Finally, it sends a response, letting the wallet know the transaction was a success.

In contrast to tokens, ether is hard coded into the ethereum blockchain. It is sold and traded as a cryptocurrency, and it also powers the ethereum network by allowing users to pay for smart contract transaction fees. (All computations on the ethereum network have a 'gas' cost.)

When you send tokens to an exchange, for example, you pay for that transaction (in this case, a request to the token's contract to update its database) in ether. This payment is then collected by a miner who confirms the transaction in a block, which then gets added to the blockchain.

Early on in ethereum's history, standards were part of the overall plan to create a user friendly and broadly accessible system. But like all standards, ERC-20 took time to evolve over a series of long discussions and careful considerations.

So, sometime before DevCon1, the first big ethereum conference in 2015, Vitalik Buterin, the founder of ethereum, introduced the initial standards token.

Later that year, Fabian Vogelstellar, one of the developers working on ethereum's Mist wallet, took that standard, changed a few things, and proposed it to the community as ERC-20 to initiate a formal conversation around how the standard should be implemented.

Then in April, due to changes in how the Ethereum Foundation was organizing its GitHub, the ERC-20 standard was moved to a Github pull request.
 

What's inside?

ERC-20 defines a set of six functions that other smart contracts within the ethereum ecosystem will understand and recognize.

These include, for instance, how to transfer a token (by the owner or on behalf of the owner) and how to access data (name, symbol, supply, balance) about the token. The standard also describes two events – signals that a smart contract can fire – that other smart contracts 'listen' for.

Together, these functions and events make ethereum tokens work the same almost everywhere within the ethereum ecosystem. As a result, nearly all wallets that support ether, including Jaxx, MyEtherWallet.com and the official ethereum wallet, now also support ERC-20 compliant tokens.

According to Vogelstellar, who spoke to CoinDesk about the importance of ethereum's token standard, this interoperability lays the groundwork for big changes to come.
 

He said:

"I believe we are just at the beginning of tokenizing everything. Maybe in the future, you will be able to buy a share of the chair you are sitting on, the paint inside your house or a fraction of equity in a huge building complex."

 

Bumps in the road

One thing to keep in mind, though, is that ERC-20 is formally a draft, meaning it is not being enforced and still needs to be fully blessed by the ethereum community. Regardless, Vogelstellar said, every new token will likely conform to its set of rules.

He cautioned, however, that the standard is still young, so there will be bumps in the road. One of those bumps is that sending tokens directly to a token's smart contract will result in a loss of money. That is because a token's contract only tracks and allocates money. When you send tokens to another user from a wallet, for example, that wallet calls on the token's contract to update the database.

As a result, if you attempt to transfer tokens directly to a token's contract, the money is 'lost' since the token's contract cannot respond.

So far, $70,000 worth of tokens have been lost in this manner.

But solutions are in the works. As an extension to ERC-20, ERC-223 attempts to resolve the issue by suggesting a token's contract implement a tokenFallback function to prevent the contract from holding tokens sent directly to it accidentally.

Vogelstellar argued this is all just part of developing a solid system, though, saying:

"Driving with these prototypes can be rocky at times, but ultimately they provide the necessary learning that will bring us to the future of blockchain and smart contract interactions."

 

David Ogden
Entrepreneur

 

Author: Amy Castor

 

David

Bitcoin prices likely to continue wild ride

Bitcoin prices likely to continue wild ride

Bitcoin prices likely to continue wild ride

SAN FRANCISCO — What goes precipitously up, often comes crashing down to earth.

So it was with bitcoin on Thursday, when the price of the digital currency plunged 19% — its steepest drop in more than two years — after a record run. The volatility remained on full display late Thursday and, as of Friday evening, bitcoin rebounded to $2,484.59.

The cryptocurrency, which flirted with $3,000 on Monday, sunk as low as $2,076.16 in intraday trading early Thursday amid a confluence of bad omens. Tech stocks have recently taken a thumping over concerns about their lofty valuations. Ominous reports from Goldman Sachs and Morgan Stanley suggested bitcoin was due for a reversal in price and required government regulation. The Federal Reserve hiked interest rates Wednesday.

Compounding worries, digital currency exchange Coinbase experienced an outage Monday because of high-trading volume. Another exchange, Bitfinex, on Tuesday said it was under DDOS attack.

Meanwhile, prices for digital currencies ripple and NEM declined the past week, though Ethereum, the second-largest currency, has soared 20% on speculation it will be the top currency. At $371.36, it lags far behind bitcoin in value.

CryptoCurrency Market Capitalizations

"Bitcoin and other digital currencies are experiencing rapid growth these days," says Guy Zyskind, CEO of Enigma, a start-up in cryptocurrency investing. "For this to be sustainable over time, the market has to correct itself from time to time."

The market's wild ride this week underscores "the ebbs and flows of an entirely new asset class," says Bill Barhydt, CEO of Abra, a peer-to-peer payment service.

"While the bitcoin price will likely recover and continue to rise, what we should see in the future is bitcoin becoming a solid store of value, much like gold," says Mihir Magudia, executive director of LEOcoin Foundation. "It will be relatively easy to liquidate but will not be used to commonly pay for goods and services."

David Ogden
Entrepreneur

 

Author: Jon Swartz , USA TODAY

 

 

David

Bitcoin, Ethereum and a New Direction for Cryptocurrency Investment

Bitcoin, Ethereum and a New Direction for Cryptocurrency Investment

Bitcoin, Ethereum and a New Direction for Cryptocurrency Investment

This week CoinDesk released its State of Blockchain Q1 2017 study, which details recent trends, statistics and sentiment around cryptocurrencies and blockchain technology.

While the entire report is worth a read (there are some surprises), two slides especially caught my attention. When put together and compared with current data, they point to what could be a fundamental shift in market dynamics.

Now, why would investors give up bitcoin to buy into ethereum? Either they believe that bitcoin will soon start heading down – slide 62 shows that almost 45% of respondents are negative on the cryptocurrency – or that it could continue to go up, but that ethereum will increase by even more. Either way, we’re looking at an asset reallocation.

If you take a look at the ether trading volumes today, though, you see a different picture.

The volume of fiat purchases of ether has shot past that of bitcoin to account for approximately 70% of volume (at time of writing). A large part of that growth is due to a jump in interest from South Korea, but US dollar purchases have also increased significantly.

This looks like ‘new money’ is coming into cryptocurrencies and choosing ethereum over other alternatives. Bitcoin’s trading volume is also increasing (and still dwarfs that of ethereum), but not by as much.

What could this mean?

While trading data of a few weeks does not necessarily translate to new market trends, it could hint at a shift in portfolio prominence. While bitcoin has traditionally been the main cryptocurrency holding for both private and institutional portfolios, ether is emerging as a strong contender.

One interesting effect from this will most likely be a change in the conversation. It should move from the 'bitcoin isn't money' diatribe, to one of 'what can ethereum do?'.

Although over 85% of our survey respondents felt that ether could serve as a currency as well as bitcoin could, it has never worn the currency cloak like bitcoin has. Ether has traditionally been positioned more as a ‘digital token’ that can engage with scripts and contracts, and can be used to enable apps across a wide range of sectors.

From an asset allocation and a sentiment perspective, ether’s rise in prominence is encouraging. A shift in focus from threat to innovation would be more constructive for all, and should push development in the cryptocurrency sector even further.

From an asset allocation and a sentiment perspective, ether’s rise in prominence is encouraging. A shift in focus from threat to innovation would be more constructive for all, and should push development in the cryptocurrency sector even further.

David Ogden
Entrepreneur

Article by Noelle Acheson

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

David

The new cryptocurrency gold rush: digital tokens that raise millions in minutes

The new cryptocurrency gold rush: digital tokens that raise millions in minutes

The new cryptocurrency gold rush: digital tokens that raise millions in minutes

 

New York City

About a dozen rain-soaked people were crammed between the revolving doors and security barriers in the lobby of New York University’s Stern School of Business as torrents pelted down outside. All desperately wanted in to the hottest ticket in town, one that promised to make some of them overnight millionaires, if not billionaires. Among them was Dan Morehead, a former Wall Street titan turned bitcoin investor, and a dentist working on a blockchain startup who had flown in from Seoul.

“I don’t really care that you overbooked, it’s not my problem! I don’t care about a refund,” one agitated man seeking entry barked at two T-shirt clad twentysomethings on the other side, one of them clutching a clipboard.

“You can be upset and raise your voice, but we can’t change anything,” one of the gatekeepers replied.

“We have three clients down there!” another man interjected.

The clipboard holder dutifully scribbled down names. When it was my turn, she said NYU wanted to clear out the huddled mass blocking the building’s entrance: “The auditorium holds like 470 people. We have more than 500 people down there right now. NYU is calling security.”

Inside, a conference called “Token Summit” was in full swing. The event was the first to focus on a rapidly snowballing phenomenon called cryptocurrency token offerings—a new fundraising method that allows companies to raise millions of dollars in mere minutes.

The cryptocurrency world has gone mad for token offerings. These launches, popularly known as ICOs or initial coin offerings, have already raised more than $150 million this year, according to research firm Smith + Crown. They are seen as a disruptive new mechanism that could displace traditional venture capitalists from the fund raising process—a view that’s been endorsed by a coterie of brand name VCs themselves—and remake the internet’s business model with decentralized applications and cryptocurrencies. Take an outfit known as Gnosis, a decentralized prediction market, which raised $12 million in under 15 minutes, valuing it at $300 million. Investors had invested based solely on a PDF prepared by its founders (recently a firm called Brave raised $35 million in 30 seconds).

As cryptocurrency prices exploded, ICO fever gripped the over 2,700 blockchain tech enthusiasts who descended on New York in late May for a series of back-to-back industry conferences. Rumors flew about the fortunes being made, as the cryptocurrency ethereum climbed from $127 per unit of ether at the start of the week to $228 by Thursday. The head of an ethereum app development shop was said to hold 6 million ether, meaning he went from being a mere millionaire on Monday to an ether billionaire, holding $1.4 billion worth of the stuff, three days later. “Out of the 2,700 attendees there were at least 500 millionaires, and between zero to five billionaires,” said one longtime observer of the cryptocurrency scene, who wanted to remain anonymous.

Why are tokens a big deal?

The oracles of Silicon Valley say token offerings could reinvent the “freemium” business model of the internet, upending the huge centralized services—think of Facebook or Google—that have emerged. Instead of enticing users with free services, paid for by venture capital, and then eventually turning a profit by showing ads to those users, tokens offer a direct channel for capital to flow between user and the technologist.

The user would pay for a token upfront, providing funds for coders to develop the promised technology. If the technology works as advertised and gains popularity, it should attract more users, thus increasing demand for the token offered at the start. As the token value increases, those early users who bought tokens will benefit from appreciating token prices. Each token offering has different rules around the total supply of tokens and when they are released.

“This is a ‘better-than-free’ business model, where users make money for being early adopters,” write Balaji Srinivasan and Naval Ravikant, a partner at venture firm Andreessen Horowitz and the founder of investing platform AngelList, respectively. Ravikant has launched a platform called CoinList that will help accredited investors put money into token launches.

Token offerings could also correct an imbalance in the way financial rewards are distributed among technologists. Historically, the people who develop foundational technologies, such as protocols, have watched from the sidelines as others—firms that build the applications running atop those protocols—reap the riches. The Google search engine, for instance, is an application that trawls the world wide web, which is made up of a collection of open-source protocols. Yet it’s Google’s founders who are billionaires and not Tim Berners-Lee, who came up with the protocols that made not just Google, but the entire web, possible.

Cryptotokens could change that because protocol creators now have a way to be rewarded for the success of their technology, without having to create a hit application on top of it. “With tokens … the creators of a protocol can ‘monetize’ it directly and will in fact benefit more as others build businesses on top of that protocol,” writes Albert Wenger, a partner at Union Square Ventures.

This is the argument behind the “fat protocol” investment thesis: the protocols of the past were “thin” and unable to accrue financial value. The application layer resting atop those protocols were the ones to reap the rewards. But cryptotokens could enable the protocols of today to become “fat”—creating more wealth and value than even the enormously successful applications of the past. “These new ‘fat protocols’ may eventually create and capture more value than the last generation of Internet companies,” Srinivasan and Ravikant write.

Venture firms who subscribe to this theory have wasted no time putting their money where their mouths are. This is why firms like Union Square Ventures and Andreessen Horowitz have backed funds like Polychain Capital, which invest exclusively in token offerings. While the tokens are being raised for digital services at the moment—things like storage, identity management, or chat room stickers—one can imagine them being used for offline products and services someday in the future, too.

Nor are tokens limited to new projects. The chat platform Kik, with 15 million monthly active users, launched its own token last week at the conference, in the hopes of seeding an “economy built around chat (pdf).” In practice this means Kik users can earn and spend on special stickers, images, or even entry to celebrity chat rooms using the chat app’s Kin token. Unlike traditional loyalty points issued by a merchant, however, the Kin tokens are decentralized because they are issued on top of ethereum (more on that below). The Kin digital currency could exist even if the chat app vanished after issuance—although it probably wouldn’t be used very much and would be worth little.

What are tokens, exactly?

At this stage, an explainer on what tokens are, exactly, is helpful. You can think of a token offering as a hybrid between a Kickstarter campaign and a stock market flotation. On one hand, the launch lets customers reserve a product or service before it’s completed and ready for the market—that’s the Kickstarter part. On the other hand, it also gives those customers a stake in the future of that product or service; if the service gains in popularity, the token should rise in price, enriching the original users, making it a lot like getting in on a hot IPO. However, one of those analogies puts token issuers squarely in the sights of securities regulators, so the distinction is crucial. More on that later when we discuss the legal gray area that tokens occupy.

Like the rest of the cryptocurrency industry, token offerings rely on a basic circular logic: A token has as much value as its users bestow on it, just as bitcoin rises in price so long as demand outstrips supply. But token boosters say their units of digital currency are different from bitcoin in one critical respect: they are programmable, and have been coded to perform various useful functions.

Tokens issued today are built atop ethereum, the second most valuable cryptocurrency on the market. Ethereum is like bitcoin because it is a tradable digital currency, which is called ether. It’s unlike bitcoin because it was designed with its own programming language—a significant departure from, and its creators say, an upgrade over, bitcoin. This language allows people to write “smart contracts” or automatically executed agreements on ethereum. A bond, for instance, might automatically pay out its coupon, without the need for an intermediary or paperwork.

It turns out that ethereum’s programming language is powerful enough that coders can write smart contracts that issue new units of digital currency, bound by their own rules. This is what the tokens offered today are: a series of complicated ethereum smart contracts. The ethereum network itself is being used as a giant token-issuing machine. “Right now ethereum is a token factory,” says Muneeb Ali, co-founder of Blockstack, a startup working on building tools for a decentralized internet.

The circularity of cryptocurrency economics is at play again here: Ethereum itself raised capital from its users by offering ether tokens in 2014, raising $18 million. The ethereum protocol then became a staging ground for experiments in token funding: A vehicle called the Decentralized Autonomous Organization managed to raise $150 million on the promise that it would be a new form of business structure, one that automated away managers using a combination of smart contracts and tokens. It was promptly hacked for millions and flamed out spectacularly.

An ethereum-based token is to ether as a concert ticket is to a US dollar, Peter Van Valkenburgh, director of research at the Coin Center think tank, suggests. “In the real world we often use all sorts of items rather like we use cash,” he writes. “We use tickets, coupons … and a variety of bearer instruments because they entitle the holder to different things.” These customized tokens can be traded on secondary markets, like exchanges, and have their own value, independent of the price of ether.

Orange groves and securities law

While the potential of token launches remains vague, though powerful, almost everyone I spoke to at the New York conferences agreed on one thing: The US government would crack down on the offerings eventually. No one seems to think the good times for ICOs will last.

The legality of tokens hinges on something called the “Howey test,” named after a Florida company in the 1940s that tried to raise capital by selling contracts against its citrus groves—a practice that the US Supreme Court ruled was similar to a stock offering. At the Consensus conference, the debate about whether or not ICOs were like citrus grove contracts was captured by an exchange between Van Valkenburg, who argued that tokens are like products and not securities, and Preston Bryne, a lawyer and founder of a blockchain company called Monax.

“It’s like buying gold … it’s not like buying a security in a gold mine,” said Van Valkenburg. Responded Bryne, “This is complete nonsense. Everybody knows what this is. It’s, in substance and form, the sale of investments that people are purchasing with expectation of profit at a later date.”

Of course, what really matters is the regulator’s opinion. The US Securities and Exchange Commission hasn’t weighed in on the matter yet. But an SEC official who spoke at the Consensus conference, Valerie Szczepanik, who heads its unit looking at blockchain tech, sounded a note of caution, according to Reuters: “Whether or not you are regulated by the SEC, you still have fiduciary duties to your investors. If you want this industry to flourish, protection of investors should be at the forefront.”

Token boosters await official intervention with a mixture of trepidation and relief. Take Stan Miroshnik, who was a veteran investment banker with Morgan Stanley in London. He now runs a firm called Argon that corrals big investors—like cryptocurrency “whales,” adventurous family offices, and hedge funds—into token launches to ensure they’re sold out.

When a group of coders wants to raise money for their project, Miroshnik hits Slack teams, Telegram groups, and gets press in the cryptocurrency trade media to rustle up business. “Having seen the technology boom in the 90s, this is just another emerging capital market,” he says. “It needs institutional grade providers like ourselves who come out of traditional investment banks. One day Fidelity is going to show up and say, ‘I want $4 billion of that token, help me buy it.’ You need someone who can, frankly, speak their language.”

For Miroshnik, the sooner the SEC steps in, the better. “I welcome it,” he says. “It would be helpful to figure out where the boundaries are.”

WRITTEN BY
Joon Ian Wong

David Ogden
Entrepreneur

 

David

Move Over Bitcoin, These 4 Cryptocurrencies are Making Their Mark

Move Over Bitcoin, These 4 Cryptocurrencies are Making Their Mark

Move Over Bitcoin, These 4 Cryptocurrencies are Making Their Mark

 

Just a few years ago if you thought of cryptocurrency you thought of Bitcoin and Bitcoin only.

Bitcoin was propelled into the limelight back in 2013. Around that time The Silk Road was taken down and the U.S. government confiscated hundreds of millions of dollars worth of Bitcoin. Back then, cryptocurrency and Bitcoin was more of an underground thing used mostly for dodgy purposes. But today, the tech and entrepreneurial community has gotten their hands on blockchain and cryptocurrency with the creation of other coins and technology. And now cryptocurrencies such as Ethereum are being used and backed by the biggest companies in the world such as Microsoft, JP Morgan Chase and Samsung to name a few.

Ethereum is leading the pack of the new age cryptocurrencies. The big difference is that these 2.0 and 3.0 versions of digital currencies actually do quite a bit on top of the basic technology that Bitcoin introduced to the world via blockchain. Bitcoin was just the beginning.

Here are 4 cryptocurrencies worth watching this year:

Ethereum (ETH) got popular just a few months ago when the Enterprise Ethereum Alliance was announced. The biggest companies in the world are officially backing and utilizing the new blockchain technology that Ethereum provides, specifically their smart contracts, decentralized applications on the blockchain, the creation of decentralized autonomous organizations and so much more. Ethereum does for code, apps and programming what Bitcion did for peer to peer transactions. Ethereum could eventually, starting with the launch of it’s new web browser Mist, become a complete decentralized internet.

Stratis (STRAT) is a powerful blockchain development platform. They recently got the highest level support from companies like Microsoft. Their aim is to be the one-stop shop for all things blockchain, essentially becoming a Blockchain As A Service (BAAS) platform. They are similar to Ethereum in concept but also very different. Stratis runs on the Bitcoin blockchain. But, where Stratis makes itself unique is that it offers developers the ability to code in C# which opens up a ton of possibilities for app and other developers. Additionally, Stratis is soon to launch their breeze wallet that could revolutionize and redefine transactional privacy. Stratis has a very similar number of circulating supply as Ethereum. So if you wanted to guess where Stratis (STRAT) could be price wise in a short while then look at today’s Ethereum prices.

Ripple (XRP) is a very interesting technology that allows banks to interact with eachother directly without any central point of control or middleman. This could (and is) revolutionize banking. Ripple and it’s token XRP have been critized for not having the technology and the currency truly connected. They also do not currently have their own currency wallet so storing it becomes complicated. But if they were to solve those 2 problems it could be doing very well this year.

Siacoin (SC) is a cryptocurrency and technology that was innovated at MIT at a hackathon in 2013. Siacoin’s blockchain has a technology that allows smart contracts to be created for digital storage. Essentially this could spawn the next Dropbox or Amazon AWS. But instead of Siacoin doing that directly they allow other partners like hosts to connect and compete for the business of consumers via their technology. It is a little early for Siacoin but big developments are already happening. Once they have a few more big use cases things could really take off. Their technology could be backing the next Dropbox or Amazon AWS. And if you have ever paid Amazon AWS hosting or storage costs, you know that needs to be distrupted and made cheaper. Siacoin’s blockchain technology could be the solution.

 

There you have it. These are the 4 cryptocurrencies that I and many others in the community have their eyes on to make big movement in 2017.

Author: Brian D. Evans

 

There is another coin Infinity(XIN) standing in the wings which you will be hearing more about this month so watch this space.

David Ogden
Entrepreneur

David

Is China Waking up to Ethereum

Is China Waking up to Ethereum

Is China Waking up to Ethereum

On May 27, Huobi, one of the three leading bitcoin exchanges in China alongside BTCC and OKCoin, officially integrated support for Ethereum trading. The Huobi development team announced that users will be able to trade Ethereum starting from May 31.

In its announcement, Huobi revealed that the company has come to a consensus to integrate support for Ethereum due to its exponential growth, high market liquidity, stability and increase in the demand toward Ethereum in both China and internationally.

Local sources including CNLedger reported that Huobi’s integration of Ethereum was an important milestone for the Chinese Ethereum community and market as the market liquidity for Ethereum within China was substantially low due to the lack of support from local exchanges.

Previously, exchanges including OKCoin did express their enthusiasm toward Ethereum and hinted at the possibility of integrating Ethereum support in the near future. In fact, OKCoin representatives told CNLedger that OKCoin has been planning to list Ethereum and that the company plans to integrate Ethereum at an appropriate time.

Thus, it is likely that other major bitcoin exchanges such as OKCoin will soon integrate Ethereum support following the footsteps of Huobi, which serves millions of users in China alone.

Although Ethereum has been enjoying an exponential growth in Asian markets including Japan and South korea, Ethereum is relatively unknown to the majority of Chinese cryptocurrency traders that have been investing in bitcoin and Litecoin. Cryptocurrency traders have only begun to take interest in Ethereum after the formation of the Enterprise Ethereum Alliance and the Ethereum Foundation’s visit to the country.

Earlier in May, Consensus Systems (ConsenSys) head of global business development Andrew Keys attended the Global Blockchain Financial Summit with other members of the Ethereum Foundation including Ethereum co-founder Vitalik Buterin. Prior to the Global Blockchain Financial Summit, Keys and the rest of the Ethereum Foundation visited Ethereum communities in Beijing, Shanghai, Nanjing and Hangzhou.

Keys discovered that the Ethereum adoption throughout China has been increasing at a rapid rate. Large conglomerates have started to build applications on top of the Ethereum protocol and universities have been researching into Ethereum’s potential within the finance market.

Even government-owned companies including the Royal Chinese Mint, the subordinate unit of China Banknote Printing and Minting, have started to utilize Ethereum to digitize the RMB. Keys explained that the Royal Chinese Mint is currently utilizing the ERC 20 token standard and Ethereum smart contracts to digitize the RMB.

More to that, CryptoCoinsNews also reported that Ant Financial, the subsidiary company of e-commerce giant Alibaba, is also utilizing the Ethereum protocol to develop various applications and platforms. Ant Financial is the company behind the $60 billion financial network Alipay, which is used by 450 million users in China.

Keys noted:

“The services provided by Ant Financial and its affiliates cover payment, wealth management, credit reporting, private bank and cloud computing. Ant Financial is experimenting with Ethereum technology to improve their global payment platforms.”

The rapid rise in the demand toward Ethereum and the adoption of the Ethereum smart contract technology could allow China to become one of the larger Ethereum exchange markets in the world. At the moment, South Korea is the largest Ethereum exchange market with over 40 percent of the global market share. If China continues to sustain such growth rate, it will see its Ethereum market outpace other regions.

Ethereum Foundation members including Vitalik Buterin are actively encouraging companies and users in China to utilize the Ethereum protocol to build decentralized applications.

 

David Ogden
Entrepreneur

 

Author:Joseph Young

David