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Why does Bitcoin always “pump” in short periods of time? Can we benefit on this type of price action. Are OTC Bitcoin trading volume flows responsible for this type of price action and how do we learn about Over-the-Counter trading.
In this article, we’ll tackle one of the greatest mysteries in the Bitcoin and cryptocurrency investing space – namely why does Bitcoin prices have drastic price movements in short bursts of time. This type of movement is almost commonplace in Cryptocurrency investing, for example just today Bitcoin prices moved from $8150 to $8450, then to $8800 in the space of 4 hours, with two big green candles leading the charge. What’s also surprising is that there is no fundamental reason to cause these movements – they are not triggered by a single world or political event. In this article we’ll look at the must possible reason behind what’s happening.
Let’s get one thing out of the way – sudden Bitcoin pumps are not executed by a large group of people with small amounts of money. If this was the case, this group of people would have to be well organised, and information about such pumps are bound to leak out. We would know well in advance of the event happening. It would be common knowledge – especially considering how fast information spreads.
This leads to the next conclusion – Bitcoin pumps are executed by small groups of people with access to the OTC market. We already know the world has high wealth concentration – 1% of the world has 99% of the wealth. The 1% can easily transact enough fiat to cause these sudden shifts in the price intentionally or otherwise.
This theory is validated by reports of strong OTC volume flow in the past few weeks. This is across all trading desks around the world, especially with strong volume coming out of China and Southeast Asia. Recently reports have surfaced that OTC desks such as Genesis Block are expanding and opening new offices in Thailand to deal with the extra volume.
Cover Protocol ($COVER) is one of those projects that can really have a solid impact on the future of decentralised finance (DeFi). Why? Because users want to sleep well knowing that in case of exploits, they won’t lose their money. Trusting the protocols and the team behind them is not enough anymore.
With the dawn of decentralized finance, more smart contract risks have arisen. Most contracts aren’t audited, and if they are, malicious actors are always on the lookout for a vulnerability in the code. As we have seen in 2020 nothing is really secure, whether it is a protocol built by one of the best developers in crypto space ($EMN) or the code has been audited. Anything can be exploited, and we need to remember it.
Therefore, investors are cautious of interacting with DeFi protocols for fear of losing funds.
Cover Protocol is a blockchain-based peer-to-peer coverage market for decentralized finance. The platform allows DeFi users to hedge against risks due to smart contracts’ fallacies (especially useful when farming or staking). Thanks to fungible cover tokens and letting the market itself set coverage prices, the protocol shifts from the need of relying on a bonding curve to determine the cost of being insured.
Insurance guards against hacks and bug exploits that lead to loss of deposited assets. Notably, Cover doesn’t blindly allow DeFi protocols on their platform. It performs a thorough background check considering its security measures, total value locked and other features, all necessary to determine user risk levels.
Background
The project is led by a team with vast experience in blockchain programming and traditional finance. Among the team members we also find Andre Cronje as their advisor.
Coverage protocols are the solution. These are platforms incentivizing DeFi users and developers to provide decentralized insurance. An excellent example of such a platform is Cover Protocol.
Here we examine how Cover handles insurance in a decentralized industry. In addition, we shall take a look at who’s eligible to use the platform.
How are Fungible Cover Tokens used?
Fungible Cover tokens are minted on the platform, when users interacts with the smart contract. Cover determines the protocols to be covered, type of collateral needed, amount of collateral, and insurance length.
Diagram by Cover Protocol core dev, crypto_pumpkin
Once a deposit is made into the contract, two types of tokens can be created; CLAIM and NOCLAIM. For the moment, Cover only supports DAI as collateral and keeps a 1:1 ratio between collateral provided and the tokens.
The two minted tokens work in opposite ways in the system. The CLAIM token enables its holder to receive a payout once a contention is approved. On the other hand, NOCLAIM enables holders to redeem the collateral when a filed petition fails to go through or the token expires after nothing notable has happened to that particular project within the expiration date.
Each CLAIM-NOCLAIM tokens refer to only one project and provide unique info. Example of denomination (with $CURVE):
Example tokens for a coverage on Curve (has no accepted claim) that expires 12/31/2020:
Symbol for CLAIM token
COVER_CURVE_2020_12_31_DAI_0_CLAIM
Symbol for NOCLAIM token
COVER_CURVE_2020_12_31_DAI_0_NOCLAIM
Usually, one DAI equals to one CLAIM + one NOCLAIM token. As such, it gives its holder exposure to both outcomes during a petition. Depending on theresult of a filed allegation, the values change. If a claim is approved, CLAIM value goes to 1 and NOCLAIM to 0. The opposite is true viceversa. Holders can deposit the two token types on the Balancer pools.
Cover Protocol creates two Balancer pools; one with 80% CLAIM coins and 20% collateral token (DAI) and the second with 98% NOCLAIM and 2% DAI. In this way, IL (Impermanent Loss) is minimized. The pools are created once a new cover is launched on the protocol.
Types of Participants in The Cover Ecosystem
To give life to the platform, Cover encourages the participation of market makers, insurance providers, and insurance seekers.
Market makers – They provide liquidity and hold both types of minted tokens. Market makers receive rewards from fees charged in the respective liquidity pools. Fees charged usually range between 2-3%. Notably, they can liquidate either token at will.
Coverage providers – Unlike market makers, they are insurance providers and only hold NOCLAIM coins. Note that they receive both token types like everyone else when they deposit collateral in the system. However, they can sell CLAIM tokens for a premium and retain NOCLAIM coins.
Coverage Providers (CP) on Cover Protocol
Fees charged on the NOCLAIM pool act as their incentives. Cover encourages teams seeking insurance for their platform to be insurers to boost trust and confidence in their offering. In the event of a claim payout, they would lose all their funds, since NOCLAIM tokens would become worthless.
Insurance seekers – They hold CLAIM coins and insure their deposited funds. Apart from being covered, they’re rewarded for providing liquidity in the CLAIM pool.
How Does Cover Protocol Handle Claims?
Allegations are a normal occurrence in insurance-focused products. The network provides a petition filing window of 72 hours after an incident. Although Cover is a decentralized platform, it handles contentions in four simple steps.
First, a case is brought against an insured product after paying a fee, which Cover calls the Claim File Fee. However, to keep spam attacks and malicious actors at safe distance, the network increases the cost each time a new allegation is filed against an insured product.
The second phase involves a vote from $COVER holders (more on the token later). If the community votes unanimously in favour of the submission, it goes through to the third step.
At the third “level”, the Claim Validity Committee (CVC) or Auditors review the petition to determine whether it meets all the requirements. The CVC also deliberates on the payout percentage , which can be up to 100%.
Note that five auditors review a single contention and half of them must vote in favour of it to be accepted. The last step is for $COVER holders to redeem their payout for the accepted allegation.
Note that if a case is rejected during the community voting phase, it can be re-filed as a Forced Claim, which is much more expensive. A bulldozed submission goes through the first, third, and fourth steps.
Cover Token and Governance
The native currency on Cover Protocol is $COVER. $COVER acts as a governance token and gives access to the Balancer pools. Additionally, as we saw, it allows holders to participate in the claims management subsection.
System users can use COVER tokens to provide liquidity on SushiSwap via interacting with the ETH-COVER liquidity pool. Depositing the platform’s native currency in this pool opens the door to receiving a percentage of fees from traders plus additional $COVER through staking the LPs on Cover Protocol.
What makes Cover different from other Insurance Projects?
Cover Protocol is not the only project users can refer to when looking at ways to protect their investments. The leader in this space is probably still Nexus Mutual.
As the name implies, it acts more like a classic insurance company. A user looking for a coverage should go on their website and find the right one to buy. He can choose how much to cover and for how long. A key difference is that, to be able to complete the process, a KYC is required. Moreover, this is the only way to buy $NXM, as you can’t find them anywhere else. For general investors who believe in the project but don’t need coverage, there is a wrapped version of the token which is normally tradable, $WNXM.
CLAIM/NO CLAIM tokens, unlike $NXM, are just normal tokens and are not connected to any identity (no KYC needed). At will, they can be traded or given to anyone you want. Their utility won’t change.
DEVELOPING STORY: $COVER exploit/hack?
On 28th December 2020 an attacker exploited a bug in the protocol’s smart contracts. The exploit appears to be an abuse of the minting exploit where the attacker managed to mint 40 quintillion COVER tokens and sold around USD$5 million worth of COVER tokens. Several hours later, one of the attackers returned the stolen funds (i.e. 4,350 ETH) with the message “Next time, take care of your own shit.” and burned the remaining tokens.
The Team are still investigating the exploit and mentioned they are looking into providing a new $COVER token and how to return the stolen and returned ETH to affected LP tokens.
Most importantly, the Team are urging people not to buy $COVER tokens. Exchanges such as Binance have stopped trading on $COVER, particularly as a large trading group of 16,000 members had dumped the price to short the token.
Hello everyone, we are exploring providing a NEW $COVER token through a snapshot before the minting exploit was abused. The 4350 ETH that has been returned by the attacker will also be handled through a snapshot to the LP token holders.We are still investigating. Do NOT buy COVER
In a community-driven effort to mitigate the damage, Leo Cheng of CREAM has sent out a “call to action” on behalf of COVER and available developers from the yEarn Ecosystem have come together to lend help and support to the Cover Protocol team.
We are working with multiple teams and individuals within the Yearn Ecosystem. We will provide updates as they come. We can not thank everyone enough for their help in this unfortunate situation. Thank you to @leokcheng the call of action. We will continue to mitigate this. pic.twitter.com/XY3wshQBZe
In the following hours, the Cover team has released a post-mortem article to explain what happened in details and confirming that the exploit affected the minting contract and the token only. The lines of code “incriminated” have been always present in the code and went unnoticed during the audit.
The team acknowledged their fault too in missing the “amplifier”, that allowed for extra rewards to be minted, and announced a snapshot to distribute a new token and the returned funds. The snapshot will will be taken at block 11541218, one block before the first major exploited mint.
Compensation Plan and new Token
Affected users of the attack can check their compensation eligibility on this page. Basically, all $COVER holders and liquidity providers of the /ETH pair could be compensated, even those who were keeping their tokens on a CEX. Unfortunately, unclaimed rewards are impossible to withdraw as as the minting rights from the Blacksmith have been removed.
The team, consequently to brainstorm with advisors including Andre Cronje, has decided to discard the idea of new shield mining. The total supply, with the launch of the new token, will be the same amount that is eligible for migration.
The Cover v2 Core contracts are undergoing an internal review at the moment and the exploit hasn’t affected the core contracts, so the project will continue with its development.
On January the 5th the new $COVER token was made available for claim. All the details can be found on the medium page of Cover Protocol.
Conclusion
With DeFi smart contracts repeatedly experiencing hacks and exploits from malicious actors, Cover Protocol provides a critical service by allowing DeFi users to insure their deposits and not be worried anymore. Furthermore, encouraging a product team to provide coverage offers insights into whether it believes in its own protocol security. Consequently, it boosts DeFi adoption.
Incentivized liquidity provision allows coverage providers, seekers, and market makers to receive trading fees charged on respective pools and rewards while helping other users at the same time.
Updated on January 6
Decentralised Finance (DeFi) series: tutorials, guides and more
With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces
More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Tether is rumored to create a new stable coin “$CNHT” based on the Chinese National Currency, the RMB using offshore accounts. Tether is the creator behind the infamous stablecoin $USDT, which is used on many cryptocurrency exchanges. This could potentially be Tether’s way of beating the People’s Bank of China to issue the first digital version of the RMB. This news was immediately met with mixed reactions. On one hand, it might help with the adoption of cryptocurrencies by allowing for an easier on-ramp to crypto for Chinese. However, this might also been seen as a move to challenge the People’s Bank of China, which is known to have disastrous consequences.
This news has been “leaked” by DGroup founder Dong Zhao, who is a known investor in Bitfinex and Tether.
Challenging the People’s Bank of China?
China maintains a “closed” capital account, meaning companies, banks, and individuals can’t move money in or out of the country except in accordance with strict rules.
State owned People’s Bank of China (PBoC) has always had a tight group on the RMB. RMB transfers out of China are tightly regulated and have to go through government approval before it is sent. If Tether creates a digital version of the RMB, users can freely send the currency in and out of the country on the blockchain – without government oversight. Netizens were quick to point this out, as shown by the following reactions on Chainnode:
Break things first?
Tether has always had a reputation of breaking things first, then figuring out the legal ramifications. Tether and Bitfinex are currently under investigation by the NY attorney General. It is not too difficult for Tether to secure secret offshore bank accounts to hold RMB, then issue the tokens on the blockchain. The technology is already there from USDT – the issue is if they can keep the bank accounts from been frozen by authorities. Funnily enough, members of the chinese crypto communities have called for a boycott of $CNHT
The boycott of Tether’s $CNHT by local Chinese crypto OG already started 👀👀 this one is by Jun DU, former cofounder or Huobi, owner of the biggest Chinese crypto media JINSE and many others
His reason is “It will bring systematic risk to local Chinese crypto ppl and companies” pic.twitter.com/RrSbcPBW4f
— Dovey “Rug the fiat” Wan (hiring) (@DoveyWan) August 21, 2019
Proof of stake (PoS) is a consensus mechanism introduced in 2011 to improve upon the current most popular algorithm in use – Proof of Work (PoW). The main advantage of Proof of Stake two-fold it improves the speed of the Blockchain and also reduces the amount of electrical waste. Instead of consuming vasts amounts of computational power to “mine” for cryptocurrencies, Proof of Stake elects stakeholders to validate transactions. This election processes depends on the amount of cryptocurrency held by a node, hence the name Proof of Stake.
What is Proof of Stake
To truly understand PoS it is easier if we also explain the current system being used by Ethereum, and that is proof of work (Ethereum Mining). So basically when Ethereum is transferred, miners group that up into a ledger called a block chain and to do this they have to solve a puzzle. In creating this blockchain, a lot of computational power is also used. The amount of reward you get for creating a blockchain is a transaction reward. However, this depends on how much work you ie. how fast you can calculate and solve the puzzle.
So this is all going to go away once proof of stake comes along. With proof of stake, you don’t actually solve any puzzles. You remove the puzzle solving element from the system and thus change the way the reward is distributed. So instead of proving how fast you can calculate with hashrate, you need to prove how much Ethereum you own. You do this with something called a master node. When you create a master node, you have to lock up a certain amount of Ethereum to prove that you have it and rewards are distributed according to how much proof of stake you have. One can create multiple master nodes with a lot of Ethereum inside and you’ll earn more through this method.
Will Ethereum adopt Proof of Stake?
So you might have heard that Ethereum is considering changing its distributed consensus system to something called proof of stake. Here, we will try to explain what this is as well as how it may affect you.
So you might have heard that Ethereum is considering changing its distributed consensus system to something called proof of stake. Here, we will try to explain what this is as well as how it may affect you.
How does this affect me?
So that’s going to be extremely interesting for everyone. We’ve seen proof of stake currencies before. Dash is one example where 50% of the rewards is done by mining and the other 50% is done by proof of stake. And there is PIVX which is 100% proof of stake. The advantage of proof of stake is huge. One benefit is that you no longer have to do the calculations which mean you save a lot of computational power. Another one is that you actually lock up Ethereum. By locking up Ethereum you effectively create more scarcity which means the price should go up.
So hopefully, it’s going to happen sometime this year. To do so, the people in charge of Ethereum have to make sure the code is ready and stable. And they also have to make sure they have the support of the miners. That’s going to be an interesting thing to see in the coming months because if the miners don’t support this move then what can happen is that it might break up Ethereum again just like last year.
But there are mechanisms to help along this process. Ethereum actually has kind of a ‘time bomb’ that would blow up if the switch is not made. The switch has always been planned and it’s in a sense been hard coded to happen sometime so that’s kind of interesting to see how this will progress.
Miners also do not need to worry they will be without a job. There are other currencies that can be mined with the current hardware. For example, if you use AMD GPUs, you can start mining Zcash which is also extremely profitable right now. So I do see this as being very exciting for everyone.
The Harmony (ONE) protocol takes on the challenge of scaling blockchain without sacrificing decentralization. This has been the holy grail of challenges because solving scaling usually involves sacrificing decentralization – however Harmony maintains an open-consensus where anyone can join. This is achieved by:
Proof-of Stake – Harmony holders can participate in network consensus and improve network security
Deep Sharding – network is split into different teams or “shards” that work together and increase transaction efficiency
Network Optimized – Network communications are split into small fragments and shared (Kademlia routing)
Harmony protocol has a sharding-based, fully scalable, secure and efficient blockchain. This means that the consensus mechanism can provide the blockchain solution necessary for the future of DApps. Even though Proof of Work networks were initially highly decentralized this element can be diluted with high usage. As such, the consensus mechanism for Harmony ensures it is still decentralized and permission-less. These are critical parts of future relevance and sustainability.
Check out the Boxmining interview with the Co-Founder of Harmony Protocol, Nick White for an introduction to the project.
Interview with Co-Founder Nick White
The
Competitive Scalability Field
Providing scalability is a noble endeavor and unsurprisingly, Harmony will not be first to do it. This is because the field already features an array of running projects that also aim to provide the same solution. These rival projects include: EOS, Zilliqa, Algorand, and others. Harmony distinguishes itself by having a solid proof-of-stake system with state sharding. State sharding splits the network into teams that work together. This allows the network to grow faster as more nodes are added (rather than stay stagnant). Chains and transactions are co-ordinated by a beacon chain.
“Neither of the projects mentioned above has a blockchain which will be performant, scalable, and as low cost as the Harmony blockchain will be.”
Nick White, Co-founder of Harmony
Co-founder Nick White touts the fact that Harmony has advantages over and above typical scalability projects. These are in the form of improved user experience, reduction of costs and the ability to support larger user bases for the decentralized app community. This will in turn draw more developers and projects to be a part of the Harmony project community.
Harmony Protocol Consensus
Needless to say,
the target audience is not only limited to DApps developers but also
established companies with greater user bases who wish to integrate blockchain
technology into their products. White contends that such apps have had the
problem of slow and existing networks. Harmony, on the other hand, makes their
operations possible by efficient and affordable solutions.
The
Challenge of Attracting New Nodes
Attracting new nodes to the network is definitely an issue for the network. To this matter, their Co-Founder and CEO, Stephen Tse stated as follows:
“Harmony is building a robust ecosystem and we
are in talks with every major staking as a service company to bring them on
board and help grow Harmony’s validator ecosystem.”
As such, the project has a proposal to lower the barrier for those who wish to participate in the network. This is in the form of lower resource requirements (specfically, 4GB) for new entrants. In addition, Harmony will write scripts that will make the initial setup simple as well as block rewards for staking. The economic model that underlines that is yet to be clear but stakers have the assurance of rewards for participation.
Binance Partnership
Binance exchange has recently announced the upcoming Harmony Protocol Initial Exchange Offering (IEO). This IEO will take place on 28th May 2019 and aims to raise funds for a project whose operation is a lot like its name. This is because the idea of providing a pertinent demand for cryptosphere, scalability, is something that can draw on collective human collaboration in the innovative platform.
Harmony will be on Binance Launchpad
The Binance IEO has been known to be a boost for its featured projects. This is because of the marketing catalyst as well as investor attraction. As such, Harmony can reach millions more with the Binance partnership. The partnership will also be in line with Harmony’s vision to provide scalability to billions across the world.
White stated that the team has motivation from the global outlook that Binance provides. Blockchain technology has the potential to transform the lives of those both in developed and developing countries. This means that parts of Africa and Latin America, both within the scope of Harmony targets, can also achieve meaningful progress.
With that in mind, the Binance Launchpad will take place on 28th May 2019. Notably, the process will follow the lottery format that is typical of Binance now. The token price is $0.003175 for one Harmony (ONE) token with a hardcap of US$5 million.
Verdict
Harmony Roadmap 2019
In summary Harmony makes a solid stab at tackling blockchain scalablity whilst keeping an open consensus. The highlight of Harmony is the ability to do state sharding rather than simple transactional sharding, allowing more headroom for future scaling without congesting beacon chains.
*Update: Added information about Binance Chain Memos and new withdraw panel
Binance just launched the Mainnet for Binance Chain – and there are significant changes such as a “BNB token swap” that you MUST know about. The Binance Token (BNB) will no longer be on the ethereum chain (ERC-20 Token), instead it will be fully migrated to Binance chain (BEP-2). This means if you hold BNB on an ethereum wallet, you must pay special attention or you might accidentally send it to the wrong address.
Binance has started the token swap for $BNB tokens. In the future, BNB address will begin with “bnb……” format instead of the ethereum “0x…” address.
New BNB withdraw page uses the MEMO feature that is unique to Binance Chain
BNB kept on Binance.com will automatically be swapped – no manual operation required. The new withdraw page will automatically use the Binance Chain address.
To deposit Ethereum based tokens based on the ERC-20 standard, $BNB tokens can be sent to the Ethereum deposit address on the Exchange.
Old ERC20 Binance BNB tokens can be deposited in “Ethereum” address for converstion
Once ERC20 BNB is deposited into the exchange, the token will be automatically swapped.
BNB Token Supply and Functionality
In terms of total supply, the amount of BNB remains the same. The initial supply of BNB will be 200,000,000 and 11,654,398 BNB will be burned on Binance Chain. Binance will burn ERC20 BNB tokens to keep the total supply constant as the token swap takes place
Binance DEX
Binance DEX has officially launched at Binance.org. This Decentralized Exchange is designed for advanced users who want to keep self-custody of their cryptocurrency assets (as opposed to centralized exchanges where funds are kept by exchanges).
Currently Binance DEX support their own token standard, the BEP2 token. For coins to be listed on the DEX, they need to be migrated to the Binance Chain. Whether coins are willing to migrate depends on what features they need:
Faster transactions – Accelerators and small number of Validators mean confirmation times are much faster
Centralized – Validators are pre-authorized and consensus is not open to general public
No smart contract support – Binance Chain is transaction only
Binance to Challenge Ethereum as top Token Issuance Platform?
With the introduction of the BEP2 token standard, Binance Chain can allow projects issue tokens via Initial Coin Offerings (ICO) or Initial Exchange Offerings (IEO). This feature allows BinanceChain to rival the ERC20 standard Ethereum which has been used by many popular projects such as Basic Attention Token (BAT) and OmiseGo (OMG). What sets BEP2 tokens apart is that it has a faster confirmation time and access to Binance DEX.
Whilst many have questioned if the success of Binance Chain would mean the demise of Ethereum, CEO Changpeng Zhao has denied this claim.
CEO Changpeng Zhao doesn’t see Binance Chain as a competitor to Ethereum
Currently Mithril (MITH) has chosen to migrate to be the first token to be migrated to the Binance Chain.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Bitfinex has been in some trouble since 24 April 2019 when the New York Attorney General (NYAG) obtained a Court Order against iFinex, Bitfinex’s parent firm to stop violating New York law and defrauding New York residents. In the Order, iFinex was accused of covering its $850 million losses by borrowing from Tether’s reserve. The NYAG also obtained a preliminary injunction against Bitfinex or Tether from accessing its reserves.
This also caused a stir within the cryptocurrency community as it was essentially revealed that Tether is not fully backed by cash. Rather, it is only 75% backed by cash with the remaining through loans or other securities.
To learn more about Tether (USDT) check out my video below:
https://youtu.be/2XHYkaSemqc
Tether (USDT) Explained-is Tether a scam?
What is the Bitfinex Initial Exchange Offering (IEO)?
Amid a gaping $850 million hole on Bitfinex’s financial books, Bitfinex has released its official white paper indicating its plan to issue an initial exchange offering (IEO).
The white paper states that 1 billion tokens dubbed LEO will be sold to investors. Notably, LEO tokens will be purchased using USDT, a stable coin issued by Tether Ltd which is also owned by iFinex.
To appease investors, the LEO tokens will enable them to enjoy discounts when trading on Bitfinex and EOSfinex. Additionally, the same benefits will be available on other platforms operated or owned by iFinex.
To evade regulations, the tokens will not be available to investors in the United States or any U.S. persons.
Will the Bitfinex IEO save the exchange?
Notably, the exchange is conducting the initial exchange offering to stitch the $850 million hole in its balance sheet.
Whether the amount will be enough to save the troubled exchange is debatable. Firstly, the chance of success is very high since this is not the first time the exchange is raising tokens to cover up for losses. In 2016, Bitfinex pulled a similar stunt to cover losses incurred after a security breach on its platform. As it did then, the exchange is replicating the same scheme; selling ‘temporary tokens’ which it later buys back.
From the outlook, iFinex has a complex but well thought out plan. Since LEO will be purchased with USDT, raising $1 billion will be enough to reinstate the USDTs 1:1 tether to the U.S dollar, plus some change. iFinex can deposit the change into Bitfinex’s account without going against the court order issued by the New York Attorney General. It will then help settle the loan that Tether gave Bitfinex to cover for the loss.
The only reason that Bitfinex will be able to get away with this plan is that virtual currency exchanges do not fall under the same regulatory framework as traditional financial institutions.
Bitfinex CTO confirms rumours that it has raised $1 billion
. @bitfinex is able to raise 1b USDt in 10 days, in a private sale. Private companies, giants in our industry and outside, made investments for > 100m each. A legion of inside and outside users made investments for > 1m each.
Bitfinex’s CTO Paolo Ardoino has confirmed via social media on 13 May 2019 that the Company was able to raise $1 billion USDT by private sales in 10 days.
What happens next? Update: new developments in Court case
The legal proceedings against iFinex by the NYAG are ongoing.
New Court documents were filed on 13 May 2019 where NYAG and Bitfinex are disagreeing on the terms of the injunction.
On the one hand, the NYAG wants to prevent Bitfinex or any of its affiliated entities from accessing Tether’s fund reserves and a 90-day injunction.
On the other hand, iFinex is proposing that its affiliated entities should be able to access the funds, and a shorter period of 45-days for the injunction. However they make this proposal without waiving their previous motion to vacate the NYAG’s previous Court Order entirely.
As both sides cannot come to an agreement on the terms of the injunction, or at all, it is likely that Judge Joel M. Cohen, who oversees this case would want to schedule a hearing. This is so both parties would have a chance to present their arguments and for the Court to come to a determination on these opposing views.
However as CoinDesk reports and as seen from the Court documents filed, it is unclear when this hearing will be.
Court gives Bitfinex room to conduct its business. Bitfinex praises Judge’s decision.
On 16th May 2019, Judge Joel M. Cohen Ordered that the terms of the preliminary injunction should be tailored so that the legitimate business activities of Bitfinex and Tether would not be interfered with.
Specifically the Court ordered that:
Tether can now loan assets to Bitfinex or other parties in its normal course of business;
Tether can only distribute funds from its reserves for payroll, and paying contracts, consultants or vendors;
Bitfinex or Tether must provide the documents asked for in the NYAG’s original subpoena; and
The injunction will expire in 90 days. BUT the NYAG can request for the period to be extended.
Bitfinex considers this a victory. In its statement, Bitfinex repeated that the NYAG’s order was made in bad faith, and says the Court’s decision leaves “no doubt” that Tether and Bitfinex are entitled to continue running their business as normal.
Update: LEO token will list on Exchange starting 20 May 2019
Bitfinex announced on 17 May 2019 that its LEO token will commence trading on 20 May 2019 at 8:00a.m. UTC on Bitfinex.
It is considered that LEO token is a utility token similar to Binance’s BNB token.
The token will be tradable against BTC, USD, USDt, EOS, and ETH.
VeChain ToolChain could bring blockchain technology to the masses. Toolchain allows anyone to use the power of blockchain without complicated programming or engineering. We always hear a lot about blockchain projects including VeChain partnering with big names. Examples being DNVGL, BMW, PwC and others (Click here to find out more about Vechain and its partnerships).
According to statistics from the United Nations, over 90% of firms worldwide are Micro-, Small and Medium-sized Enterprises (MSMEs).
VeChain’s ToolChain seems to recognise their importance and is bringing its blockchain technology to them.
What is VeChain?
VeChain is a blockchain platform which supports the creation of smart-contracts. These are self executing contacts that have a guaranteed outcome without third party trust. This allows for the creation of decentralized applications which is intended to solve enterprise problems such as anti-counterfeiting and cold-chain logistics. To learn more, check out our article VeChain Explained or our VeChain in a Nutshell video below.
ToolChain is VeChain’s latest product. It was announced at the VeChain Summit 2019 (Click here for a recap).
ToolChain hardware kit displayed at VeChain Summit 2019
ToolChain is a kit containing all the necessary hardware, software and service protocols to onboard a business onto the VeChainThor blockchain.
There are 3 Versions of the ToolChain kit: Standard, Developer and Channel Partner. This is so that businesses with any levels of technical capability can use VeChain’s technology.
Standard Version
The Standard Version provides standarized application modules, tools and Internet of Things (IoT) devices. It was designed for MSMEs without the capability to develop their own blockchain-based lifecycle management solution. Businesses can be onboarded onto the VeChainThor blockchain within 30 minutes.
Developer Version
The Developer Version is designed for enterprise customers with stronger technical capabilities. It will allow enterprises to develop various applications based on the VeChainThor blockchain tailored to their needs.
Channel Partner Version
Channel Partners will be able to have independent deployment and multi-dimensional customisation of ToolChain.
VeChain ToolChain at a glance
The ToolChain hardware kit contains:
QR code printer and application software to print QR codes.
NFC writer and software to create digital labels on NFC tags.
IoT devices, RFID chips and sensor devices
Handheld terminal devices which will enable ToolChain apps to bond and activate NFC chips, and transfer the data on them.
In terms of software:
ToolChain Admin Center: this app is a command centre. One of its features is that business owners can use this software to configure NFC and/or RFID chips. The Company can ship these NFC and/or RFID chips directly to businesses.
VeChain Work App: this app allows business owners or third party manufacturers to “bind” the physical product to the NFC/RFID chip. To learn more about this app, check out Bsc44’s article here.
VeChain Pro app: this app is already available to download. It will be pre-loaded onto the NFC scanner. It allows anyone to view the entire story of the product including proof of authenticity and origin.
Description of the ToolChain kit components
Examples of VeChain ToolChain in use
One of ToolChain’s notable users is SBTG Surplus & Co., a custom sneaker artist. SBTG uses NFC chips embedded into its limited edition sneakers. Customers can verify the sneakers’ authenticity, origin and other information by scanning them with the VeChain Pro app.
Best use of blockchain is real life use 🤩 – with @vechainofficial's help, these sneakers are impossible to counterfeit. An NFC tag is sewn into the shoe with a private key that's recorded on Vechain's Blockchain. $VET Now if only they have it in my size….😱😱😱😱 pic.twitter.com/NgFuZrsq5c
SBTG have recently partnered with Adidas and HBO Asia to produce limited edition Game of Thrones sneakers. These sneakers are powered with VeChain Technology.
SBTG x Game of Thrones sneakers with VeChain RFID chips
Problems with authenticity and quality assurance
MSMEs generally lack technical or financial resources. Hence they have difficulty in ensuring their products’ authenticity and quality. They are also vulnerable towards counterfeiters and bad actors in the supply chain. This in turn could seriously damage their reputation.
Even for products from larger corporations, product authenticity and quality assurance is not transparent. We as consumers do not have easy access to information on the supply chain of our products.
Consumers still rely on outdated authentication methods. This is true even for expensive luxury items. As an example, for luxury watches we would compare an items’ appearance or check its serial number. Meanwhile there are official databases of serial numbers. The numbers are only etched onto the watch and counterfeiters can easily copy this.
Thus, authenticating a luxury watch requires significant expertise and experience. Whilst counterfeiters are always trying to make their watches look more authentic.
Can VeChain ToolChain bring mass adoption through MSMEs?
ToolChain can be a simple and cost effective supply chain management solution for MSMEs. ToolChain could finally give MSMEs the same ability as large corporations to ensure product quality.
As mentioned above, most of the world’s businesses are MSMEs. ToolChain could finally bring blockchain to a substantial but overlooked group
Moreover, customers will be able to scan the NFC/RFID chip embedded into the product and see information pertaining to their exact item.
If you want to learn more about VeChain, check out our guide, VeChain explained.
Want to find out more interesting happenings at the VeChain Summit? Check out these videos below!
https://www.youtube.com/watch?v=ZRBuQ96ikPc
Check out our livestream with VeChain’s with Sunny Lu (CEO) and Kevin (COO), and Patrick from Plair
And don’t forget to check out our post VeChain Summit recap video!
Mass adoption is starting through…milk?
On 18th May 2019, VeChain announced that its enterprise partner, Bright Food (Group) Co., Ltd (“Bright Food”) has put its “Cupids Farm” milk on their BrightCode Commodity Confidence Index Platform (“BrightCode Platform”).
Cupids Farm milk
The BrightCode Platform is a blockchain-based commercial ecosystem built upon the Partner Version of VeChain ToolChain. To learn more about the Platform, check out Oliver’s article here.
Bright Food was founded in 2006 and mainly produces milk products, sugar, wine, snacks and canned goods. Bright Food’s products can be found in over 4000 online shops in China. The Company was listed as one of the ten Chinese companies to watch in the international arena by Forbes Magazine in 2015.
When customers can scan the QR code on bottles of “Cupids Farm” milk, they will be directed to the BrightCode Platform. There, key information on the bottle of milk’s lifecycle will be available. For example information on where it was produced, videos of the diary farm, production techniques etc.
VeChain’s other partner, DNVGL will be responsible for verifying the source data and tamper proof technology. So customers can be assured that the information presented is authentic.
Information shown to customers when they scan the QR code
FREE trial now available!
You can now register for a FREE ToolChain trial account by signing up with them! Link Here!
An unknown group of Hackers stole more than 7000 BTC ($41,000,000 USD*) from Binance, the worlds largest cryptocurrency exchange. Binance reported that the hacker used a combination of phishing exploits and gained access to a large number of “API keys, 2FA codes, and potentially other info”. This marks the biggest hack for Binance.
For more information about Binance, check out our Binance Review.
Funds are SAFU
https://www.youtube.com/watch?v=JS_JKELYsHo
Binance was able to immediate respond that “Funds are Safe” – they have an emergency fund that can easily cover the $41 Million that were stolen. In fact, it is reported that Binance made a profit of $446 Million in 2018 alone, so this hack can easy be covered by the exchange.
As a safety precaution, Binance has halted all deposits and withdraws on the exchange for at least 7 days. The purpose of this suspension is to improve exchange security and reduce the impact of the stolen funds. The exchange still has resumed trading at this time.
We strongly recommended is to keep funds off exchanges and in hardware wallets such as the Ledger Nano X. Exchanges are large targets for hackers – ironically the bigger and more reputable the exchange, the more hackers they attract. Having a Cold Wallet (such as the Ledger or Trezor) allows for storage of cryptocurrency on devices that are not accessible to hackers.
CZ formally responds to the hack via Youtube
Decentralized Exchanges to the Rescue?
Decentralized Exchanges might be hard to use, but they offer full custody of funds.
In light of this hack, Decentralized Exchanges (DEX) are becoming more and more promising. With a DEX, users can keep their own funds and be safe from large hacks and suspension in deposit / withdraws. Binance has already been building a Binance DEX, supported by the Binance Chain.
Inside Job?
Various theories have surfaced about the Binance Hack, with some accusing the hack possibly coming for Binance Insiders who know the workings of the exchange and security precautions. Previous Binance talked about their “Big Data” AI which was meant to catch unauthorized withdraws and sim swap attacks
The amount of security efforts going on in an exchange is not easy to imagine. Here is an example of @binance's big data AI system preventing a user who got SIM swapped, email and 2FA both hacked from losing his 46 BTC. stay #safu. pic.twitter.com/NSb2lZIsld
The report showed that Binance had Internal controls for amount sent and manual review. However it seems hacker managed to withdraw amounts that were just under the manual review threshold. It might be possible that the hacker had information about the internal workings of the Binance defense system and how to bypass it. However, there is no conclusive evidence that it was done by someone inside Binance.
No Rollbacks – Bitcoin is Safe!
There was a proposal to rollback the hacker’s transaction on the Bitcoin Blockchain after the hack was initially discovered. This would reverse the transaction and “thwart” the hacker. This drew the ire of the Bitcoin community is it recognized that even with $41 M bounty to do a reversal, it would be extremely dangerous and near impossible to collude more than 51% of the hash-power.
Whilst Binance CEO Changpeng Zhao “CZ” initially humored this idea, it was quickly refuted.
In Crypto, not all trade volumes are visible – in fact “Darkpools” account for a huge amount of crypto trading and has an enormous impact on cryptocurrency prices. Darkpools include peer-to-peer trading, such as on sites like localbitcoins.com and also Over the Counter (OTC) desks. The reason why it’s unreported is because deals are done privately, for example Peer-to-peer trading can be done in person and with cash, leaving virtually no trace of the transaction ever happening. Large volumes are also traded OTC – this is more organised as private buyers and sellers are matched, with some form of escrow to allow the transaction to take place. OTC desk sometimes even require minimum volumes, like $100,000+ USD to up to 1 Million.
First things first. What’s an Over the Counter (OTC) desk?
Traditionally, OTC desks facilitate trading of securities that are not listed on formal exchanges, e.g. the New York Stock Exchange.
The trading of cryptocurrencies on OTC desks is similar to those in traditional markets.
OTC desks have a network of buyers and sellers. The trades themselves are facilitated by OTC broker-dealer who will locate and negotiate directly with prospective buyers and sellers over computer networks or by phone.
This is contrasted from trading over exchanges where the prices and order books are publicly available. For OTC desks, their broker-dealers will negotiate the trade price for you. Trades are also not publicly listed giving the parties privacy.
Therefore, to fully understand what is going on in the cryptocurrency markets it is important to consider what is also happening at OTC desks. This is because large transactions happen on them on a daily basis.
What does a trader at an OTC desk do?
Traders at OTC desks are the broker-dealers mentioned above. Their role is to locate and match buyers and sellers, and negotiate the best deal for all the parties involved.
Part 1: Crypto trading/ Market Manipulation/ OTC Markets
Therefore, it is important for traders at OTC desks to have a keen eye on the cryptocurrency markets and be knowledgable of the market trends.
I had the opportunity to interview Charles Yang, Head Trader at Genesis Block Hong Kong, an OTC desk. In my interviews we discuss what’s really happening at OTC desks away from the public eye. We also discuss his thoughts on the market sentiment.
Is Tether Safe? Will Bitcoin & Ethereum Recover?
Secrets and Insights from an OTC Trader
Here’s a summary of the key points from the interviews with Charles.
There is still interest in cryptocurrencies
Charles observes there is revived interest in cryptocurrencies despite this bear market.
He notes that a lot of the customers from the OTC desk who were previously dormant have recently contacted them wanting to buy and sell cryptocurrencies.
The risk of Tether is exaggerated
Firstly, what is Tether? Refresh your memory with our Tether Explained guide below:
We’ve seen in recent news that USDT is not fully backed by cash. Instead, Tether is around 75% backed by cash, and the remaining 25% by other securities or loans.
Confused with what’s happening in this Tether scandal? Check out our video below which explains what is happening and the latest legal action surrounding Bitfinex.
Despite this, there is still demand for USDT in Asian countries such as China, where they are buying USDT at a premium.
This is because China bans cryptocurrency exchanges, so retail investors cannot buy cryptocurrencies such as BTC. What they do instead is they first buy USDT through peer to peer merchants, and then enter the cryptocurrency market at a later time when conditions are right.
Right now, Bitfinex who is being accused of “losing” customers funds is more at risk. Bitfinex will have to go bust first before people question USDT.
Charles believes that fundamentally short trading would have less losses because if USDT is at 97% and your prediction is wrong, then your loss would only be 3%. Whereas the opposite would be to bet that it goes to 0.
Mining is still profitable
The recent “official news” in China was that cryptocurrency mining has been banned.
Despite this ban, Bitmain is coming up with new models and generally summer is big for mining because electric costs falls.
There may be miners who start accumulating and building to maximize their margins
Charles notes there is news that big players are scrambling to get cheap damaged mining rigs. They are not the newest models but there are still returns from using them to mine cryptocurrencies.
So despite the official news about China banning mining the word on the street is that people are buying rigs and locking in contracts for the summer months.
Bitcoin mining Ban in China 1. Miners will "co-operate" and send in some old gear 2. Government will take photos claiming operation is successful 3. Mining with countinue in China as normal 4. Bitcoin demand will increase because Chinese people like to do opposite of Gov demands pic.twitter.com/d9GACAqd12
Simple guide to the aftermath of the Chinese Bitcoin mining ban
Initial Exchange Offerings (IEOs) are risky, but need not be avoided completely
If you participate and get allocation you would benefit. But ultimately it is the exchanges that benefit because you need to buy their token to participate.
For example Binance requires you to buy into IEOs with their BNB token. Of course it’ll be great for you in the short term if you get allocation and the coin pumps. However your risk is that you would be left with the exchange token if you don’t manage to get any allocation after the lottery.
IEOs are also highly volatile, especially immediately after listing
It may be better to trade with OTC desks than exchanges
Charles notices that there is quieter trade flow, so big players looking to buy or sell cryptocurrencies need to offer better prices. Therefore the margin between the buy and sell price is much less. Bigger players also can offer better quotes because of volume. Therefore it may be cheaper to trade with OTCs who deal exclusively with larger orders than exchanges.
And whilst exchanges require you to have the funds ready at the time of transaction, OTC desks allow you to lock in the prices and settle later. This gives people more flexibility .
However, depending on who you are, one upside or downside of OTCs is that they are not transparent. So while you can try to gauge whether there is a lot of trade flow through an OTC desk by reading their reports (if any), there is no way you can verify if they are being truthful. On the other hand you can conduct trades privately compared to on exchanges.
What coins to hold? Bitcoin Bitcoin Bitcoin (BTC)
Unlike other coins, Bitcoin (BTC) has a 10 year history. There is no founding team or leader. For this reason it is not affected by company politics and is the most decentralised.
We can see the prices for a lot of tokens crash during the Initial Coin Offering (ICO) crash. Some may be due to the project running out of funds, failing to deliver on its promises or in worse cases the founders and key personnel leaving the project altogether. Studies were shown that over 80% of ICOs in 2017 were scams.
I was standing in the same spot glued to my phone for 2 hours when this all went down.
We also see that the ICO game was not fair, some people were able to purchase tokens for a more favourable rate or terms even before the token was listed to the public. This however would never happen with BTC.
Is day trading profitable? No (sorry)
For retail investors, day trading is not profitable even for traditional markets.
This is because retail investors would be bogged down by trading fees, but not all trades are profitable.
Retail investors are also unprotected from market manipulation. This is especially true for cryptocurrency investing, which is generally an unregulated space.
Don’t do this
Conclusion
Ultimately, trading cryptocurrencies requires exercising caution and doing your own research. One can look at OTC desk reports to have a good grasp of what may be quietly happening with some big players, but at the end of the day, question everything. Also, whilst you may stand to gain several times your initial investment by going into highly volatile IEOs, bear in mind it is designed so that exchanges ultimately win. The most prudent thing to do is to never invest more than you can lose.
