Category: Uncategorized

Recently reports have surfaced regarding trouble at Bitmain – with entire research divisions cut and rumors that CEO Jihan Wu will step down. The reason why this is important for the entire crypto field is for 2 reasons:

• Bitmain has a huge effect on the price of Bitcoin Cash and Litecoin – with holdings of up to $600M USD in Bitcoin Cash alone.
• Future of Mining – Bitmain the largest producer of mining equipment (ASICs)

Currently, Bitmain is trying to issue an IPO and raise additional funds. For many, a successful Bitmain IPO will mean good news for Bitcoin Cash, whilst a failed IPO would mean disaster. In this article, we will examine what is known about Bitmain.

Bitmain Holds 1 Million Bitcoin Cash (5% of supply)

Bitmain is responsible for mining and holding a significant amount of Bitcoin, Bitcoin Cash, Litecoin and DASH. It is difficult to track directly on the blockchain how much they own as they control newly minted coins. There is a leaked chart of Bitmain cryptocurrency holdings from the IPO filing in Q1 of 2018:

From what we can see from the chart, Bitmain was has been increasing their supply of Bitcoin Cash from 841,000 BCC (BCH) to 1,021,315 BCC over a 3 month period.

Mining Slowdown

Bitmain’s trouble stems from the fact sales for their ASICs have significantly fallen. This is because their customers, cryptocurrency miners are not making a profit in 2018 due to low profits. Mining companies such as Gigawatt have even filed for bankruptcy. Without a strong demand for ASICs, Bitmain will struggle to main sales and generate revenue. Competitors such as GMO has announced they will exit the cryptocurrency mining business altogether.

Hong Kong Exchange hesitant to approve Bitmain IPO

• 

Hong Kong’s Exchange (HKX) has been hesitant to approve Bitmain’s Initial Public Offering (IPO), casting fear into the future of the company. In order to successfully apply, Bitmain has to justify that they have “sustainable models“.

Bitmain has 6 months to gain regulatory approval from the HKEX and the Securities and Futures Commission (SFC) before the application is considered lapsed. Once the application has lapsed, the application decision needs to be appealed for Bitmain to have any chance of having an IPO. Bitmain’s competitor, Canaan mining’s application for an IPO has already lapsed.

Trouble for Bitcoin Cash?

With Bitmain in hot waters, Bitcoin Cash holders worry that this is bad news for their future. Bitmain has been the biggest vocal supporter and cryptocurrency buyer for Bitcoin Cash. With holdings of 1 Million Bitcoin cash, the own around 5% of the total supply. Bitmain also funds Bitcoin Cash development – and this is under jeopardy as there rumors that this research funding will be cut.

As we tread deeper into the crypto winter, we begin to see the bodies of those who didn’t prepare well. With Ethereum plummeting over 95% from its all-time high, projects left holding Ethereum are left high and dry. 
Research has shown that a significant portion of projects keep their funds in crypto, for example, Golem holds 369,023 ETH (valued at $33 Million)

(Crypto) Winter is here

We are starting to see layoffs at various crypto startups, including those behind top currencies such as Steemit and Ethereum. Many of these companies were not prepared for cryptocurrencies to take such an intense price nosedive.

Here are 5 companies who have announced layoffs/ scale backs. 

1. Consensys – 13% Staff laid off

Consensys, the company backing Ethereum is reducing its workforce by 13%. This New York based company is one of the largest companies in crypto works on real-world solutions using Ethereum. Currently the restructuring is seen as the birth of “Consensys 2.0″, a brand new direction for the company. Whilst this might be the case, one ex-employee took to reddit to voice his grievances in an AMA. 

2. ETCDEV – complete shutdown

ETCDEV, the leading Ethereum Classic development company stopped all development and shut down completely. Its founder and tech-lead Igor Artamonov stated in a tweet that ETCDEV can no longer keep afloat. Whilst this is a strong blow to the Ethereum Classic (ETC) community, the price of ETC has not plummeted to zero – there are other development teams at work on this decentralized project

3. Steemit Inc – 70% of Staff

Steemit Incorporated, laid of 70% of their workforce citing the price of STEEM going below the “worst case scenario“. This restructuring also resulted in a significant cut in the company’s scope – their social media arm being cut completely. Steemit Inc will now focus primarily on the development of the STEEM blockchain rather than its social media website steemit.com. 

4. DASH – Defensive Measures

DASH Core Group (DCG) issued a pre-emptive notice that they will not make any drastic cut backs. However, the group has made cuts to stipends and ad hoc contributors who work on non-essential features. DCG has been under fire over the past year for having a high burn rate of 240,000 USD per month (allocated from by masternode voting). 

5. Bitmain – Axed a research and development centre

• 

Bitmain, the mining equipment manufacturer cut an entire research and development division in Israel with 23 staff. Named BitmainTech, the Israeli division was established in 2016 to work on blockchain technology and artificial intelligence. 

A Fresh New Start?

One recurring theme with this wave of “restructuring” that it marks a new beginning. In many ways, crypto startups, especially those who raised through initial coin offerings were living a fantasy.

During the bull market, the funny (but true) running joke was that if a project mentioned “blockchain” a venture capitalist would come out of the bushes and throw money at it. 

Unfortunately, it is clear that a lot of these companies had no experience in financial management, nor any clue how to generate revenue to sustain long term operations. Whilst it might seem news of layoffs is a signal for doom and gloom in the blockchain space, I consider it a necessary step for the future.

Let’s face it, we don’t live in a fantasy world where the money comes easy and results don’t matter. Crypto startups need to think about how to generate profit in the long term and find a way to sustain their operations. 

• 

Attending Blockshow Singapore, I only have one question in my mind – is the Blockchain scene still alive? Conferences are great for answering this question because unlike fake trade volumes, attendees cannot be faked.

Who’s Attending Blockshow – any new investors?

Upon arriving at the Marina Bay Sands Conference center, I was pleasantly surprised at the number of attendees: more than 3000 blockchainers packed the conference halls. Both conference halls had over 70% of the seats filled, which was a good sign as people were actually listening to the talks. The organizers made some cheeky “optimizations” by booking a smaller venue:  the main conference hall packed around 300 people instead of the usual 600 seen in other conferences. 

I’m watching out for new investors. High numbers of new faces to the blockchain space would mean that the scene is heating up again. It could also potentially signal an end to the year-long bear market. Unfortunately, CEO of Blockshow Addy Crezee stated that there are few new investors coming into this conference. 

Strong Development Focus

You’re going to need different types of people – can’t just be engineers. You’re going to need branding, marketing, financial consultants … everybody

Jeffrey Huang, Co-founder of Mithril

For once in a Blockchain conference, attendees are no longer comparing “top ICO deals” or “hottest altcoin tips“.  Unproductive ICO deal discussion dominated the conversation space at Consensus in New York this year, a conversation topic that breeds unwanted speculation into this space.

Read more about Mithril and Binance Partnerships in Mithril Coin Guide

During Blockshow, discussions matured and revolved around about “what a team is developing?“. In addition critical debates were held over how to advance blockchain technology. This sends a strong positive long-term signal as we are guided towards health growth and advancements in this space. 

Working Products

I was lucky enough to catch a glimpse of the SBTG Shadow Fury with Vechain anti-counterfeit technology. Scanning the trainers with the Vechain Pro app will verify the unique ID on the shoe and match with records on the Vechain blockchain. (Diazepam) The tag is directly sown into the tongue of the shoe and cannot be duplicated due to the strong encryption used. 

Read more about Vechain in our Vechain Coin Guide

I have to say, seeing products in real life is much better than looking at drawings and whitepapers. The next step is to take this technology mainstream and into major brands (Nike is trialing this) and other products such luxury handbags. 

Security Token Offerings (STO)

Security Token Offerings (STOs) have become a hot topic this year, with ICO engineers look to STOs as a way to reignite the fundraising fever. STOs offer direct value to token holders – by offering an equity share of the company, it solves many of the problems of Utility Tokens face. Token holders no longer need to as “what are the tokenomics” or “what makes this token valuable in the long term“.

However, there is catch: extremely limited accessibility, especially in the US. Security tokens can only be traded between accredited investors who have more than $1 Million USD net-worth. 

There will be new terms like Token Security – which I always talk about. (Token Security) has an underlying asset that is a security, which already has an legal entity.

Professor David Lee, Blockasset Ventures

Steemit Inc announced that 70% of their employees were laid-off due to the company restructuring. It is clear that there are major issues at the company. We did some analysis on the reasons for the layoffs and also took a deep dive into the future plans of the company. 

Reasons for the Lay-offs

• Market Collapse – Unfortunately, the price of STEEM dropped 97% (from $7.31 dollars in January 2018 to $0.24)
• Budget Shortcomings – Steemit Inc held substantial amounts of the cryptocurrency STEEM. As employees are paid out in fiat, this meant the company couldn’t cash out enough STEEM to pay for the employees
• Company direction – the company focused on two fronts – blockchain development AND website development. Unfortunately they couldn’t master both. 

Long Term problems

• The company is doing too much blockchain development – developing blockchain features (Database migration, Smart media tokens (ie ICOs on Steem)), Developing DAPP (steemit.com),
• Costs of API maintenance – the company maintains APIs for free (Steem API) which is expensive
• Steemit.com is a full-blown social media project and is hard to maintain.
• they don’t have resources/management skills to manage both sides well

Solutions

• Cut down the scope of new features (Steem Media Token ~ lite edition). 
• Sunset on Steemit.com website / Dapp.
  • Ned said the infrastructure of can never scale to compete vs Instagram 
  •  “Destiny” a new app to solve core issues with steemit.com is now abandoned because of the lack of resources

Future Goals 

• Goals to improve the adoption of blockchain – transfer of value / store of value
• encourage other applications on steemit that further censorship resistance
• Increase usage of Steem as currency. how to grow the currency

Competitors

Various competitors in the social media space have also sprung up this year. One of them is Mithril, an ethereum based social network which focuses on fair-reward for content creators. Other social media services such as Dlive have migrated away from the Steem blockchain in favor of alternatives like Lino. 

Conclusion

Steemit Inc had to make some tough decisions. After setting the core direction of blockchain development, everyone else was cut. Moreover,CEO Ned Scott was unnerved during the livestream Q & A session, especially considering a majority of their employees are leaving leaving. This sets a dangerous precedent at the company and goes to show that financial management and prudence – including not speculating on their own currency is key to the successful running of any company. Questions over how the company can generate income to sustain long-term development remains. 

Summary of the Subcommittee on Capital Markets, Securities, and Investment (Committee on Financial Services) Hearing: “Examining the Cryptocurrencies and ICO Markets” held on Wednesday, March 14, 2018 (10:00 AM)

General summary of the hearing

• The hearing was devoted to discussing cryptocurrencies, initial coin offerings (ICOs), and whether the current regulatory framework adequately protects investors.
• Drawing from a mix of academic and industry witnesses, the hearing highlighted the divergent viewpointson the technology held by some of the members of Congress.
• Ultimately, many subcommittee members expressed a commitment to strike a balance between oversight and the accommodationof technological innovation.

Closing statement by the subcommittee chair, Rep. Bill Huizenga (R-MI)

“I believe this is probably hello, not goodbye.”

Positive viewpoint

• Rep. Tom Emmer (R-MN)
• a member of the cryptocurrency-friendly Congressional Blockchain Caucus
• criticized politicians for calling for new regulations without taking the time to research and develop an adequate understanding of the technology

“I hear elected officials who don’t have any concept of what we’re dealing with here and how exciting it is talking about, ‘Oh my gosh, we’ve got to run in and regulate and create more government infrastructure,’” commented Emmer, adding that although there needs to be modest cryptocurrency regulation, the access to capital that ICOs provide “is something Democrats and Republicans should celebrate.”

• Some twitterers granted him the title of new “cryptodaddy”

Negative viewpoint

• Rep. Brad Sherman (D-CA)
• His biggest contributors are in finance and securities
• Used all the old and regurgitated arguments to bash crypto, really didn’t offer anything new
• Called cryptocurrencies a “crock” and expressed doubt that they can be used to accomplish any social good that cannot be achieved otherwise

“Perhaps we’ll have another hearing after a major terrorist event” is financed using cryptocurrency,” he quipped, adding elsewhere that cryptocurrencies are only “popular with guys who want to sit in their pajamas and tell their wives they’re going to be millionaires.”

• Lots of backlash on twitter

Other views

• Rep. Ted Budd (R-NC)
• Applauded ICOs and other blockchain-related fintech advancements
• Cautioned that the wrong regulations could threaten the US’ status as fintech leader

“Regulation in this space is something that the U.S. has to get right, because poor or rushed policy in cryptocurrencies really threatens our reputation in finance and technology,”

 

• Rep. Carolyn Maloney (D-NY)
• the ranking Democrat on the subcommittee
• working on a cryptocurrency oversight bill that would cover exchanges that offer trading services for digital assets

 

• Rep. Bill Huizenga (R-MI)
• chairman of the Capital Markets, Securities and Investment subcommittee
• declared his intention to pursue some kind of legislative action

“This panel, this Congress is not going to sit by idly with a lack of protection for investors.”

 

Coinbase view (local player in the industry):

• Awesome technology with great potential
• Can only realise this through responsible regulation
• Lack of understanding, and thus, the lack of suitable regulations is harming the space
• Because of this uncertainty, coinbase only operates with 4 cryptocurrencies: BTC, BCH, LTC and ETH
• Coinbase, he said, determined that these digital assets qualify as a “virtual currencies”
• the CFTC’s 2015 guidance that bitcoin and other virtual currencies are commodities,
• a recent ruling that supported the CFTC’s classification of bitcoin as a commodity
• the SEC’s July 2017 DAO report, which referred to Ether as a virtual currency.

Mike Lempres, Chief Legal and Risk Officer at Coinbase wallet and cryptocurrency exchange, stated that the power of the digital currency’s technology can transform “capital formation, innovation and economy,” saying that its “tremendous potential” can be only achieved through “responsible regulation.”

However, at the current stage, the US regulatory system “is harming healthy innovation” due to a lack of understanding of what should be allowed and what should be not, and how digital assets should be considered; either as securities, commodities, property, or money.

For Lempres, the goal is to ensure that potential benefits from new technology are not harmed by uncertainty resulting from “regulatory or legal missteps.” Lempres provided a short review of the main US regulatory bodies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Internal Revenue Service (IRS), the Financial Crimes Enforcement Network (FinCEN), and Federal Trade Commission (FTC)

According to Lempres, the SEC, which is in charge of securities transactions, considers crypto as securities, while the CFTC who fully controls commodity derivatives transactions, claims that tokens are commodities. FinCEN has full authority for Know Your Customer (KYC) and Anti-Money Laundering (AML) matters, and considers tokens to be money. Meanwhile, according to the IRS, the digital coins should be considered as property for tax treatment. According to Lempres, this constitutes an extreme “lack of coordination.”

Answering a question from the Subcommittee chairman Rep. Bill Huizenga, Lempres stated that Coinbase cannot start supporting ICOs until the necessary regulations are adopted.

“We do not support any [ICO] at the current time because we are not sure what the regulatory [treatment] is… We are waiting for the dust to settle between the CFTC and SEC before we electively engage on supporting ICOs.”

 

* The information contained in this article is for education purpose only and not financial advice. Do your own research before making any investment decisions. (cashcofinancial)

 

Resources

Video of the hearing – https://www.youtube.com/watch?v=-CCqCsmCDdw

Strong Words, Little Action: ICOs Draw Fire at US Congress Hearing

Crypto Is a ‘Crock’? Twitter Reacts to House ICO Hearing

At DC Hearing, Coinbase Calls Out Federal Regulators For ‘Harming Innovation’

US Congress Debates ICOs, Cryptocurrency Regulation in House Subcommittee Hearing

An analytical piece on how the hearing relates to and impacts ETH

The past few days have seen a lot of negative and even conflicting news coming out from mainstream media regarding crypto. First published by Reuters and picked up by various media outlets such as The New York Times, there were reports on Jan 10th that “South Korea’s Major Cryptocurrency Exchanges Raided by Police, Tax Authorities“. They alleged that cryptocurrency exchange operators were “raided” by police and tax authorities amid suspicions of tax evasion this week.

After this was published, the values of most cryptocurrencies took a plunge. Bitcoin fell from just over $15k to a low of $13,105 in just a few hours. The market cap as a whole also dropped from over $800 billion to now around $700 billion.

Reports were embellished

Reports from inside South Korea however painted a different picture. They have said that the depiction of the events were not accurate and have been embellished by mainstream media outside the country.

https://twitter.com/iamjosephyoung/status/951366424416567297

FUD continues – clarifications from the government

The bad news did not stop there. Reuters also published today that South Korea plans to ban cryptocurrency trading. The reports state that “Justice minister Park Sang-ki said the government was preparing a bill to ban trading of the virtual currency on domestic exchanges.”

Because of the previous reports and the statements made by the Justice Minister, the government had to actually come out and clarify the issue. The Blue House, the executive office and official residence of the South Korean President, had to announce that there will be no cryptocurrency trading ban in the short-term.

https://twitter.com/iamjosephyoung/status/951428854085689344

Do your own due diligence

As with everything, it is always best to exercise due diligence and do your own research. Even with reports from mainstream media, you never know if they have their own agenda and it is important that you don’t give into the fear and hype. (www.biolighttechnologies.com)

With the Christmas holidays over, might we expect new money to pour into the markets? The past week saw a few dips in the market, with bitcoin falling to 11,000 and 13,000 on two separate occasions. The price has rebounded now back to over 16,000.

https://www.youtube.com/watch?v=vv9fZcN5i8I

 

Crypto as a store of value?

One big vision for crypto was it’s use as an alternative currency. It promoted fast and global transactions, as well as the security of cryptography. However, as we draw to the end of 2017, we’ve found that some cryptos, like bitcoin, have taken on a role as a store of value rather than as a currency. The popularity and high demand of bitcoin has caused transaction fees to sky rocket. As a result, using it for daily spending is very cost inefficient as the transaction fees may very well take up a large percentage of the actual purchase.

Nonetheless, it still works very well as a store of value. It’s accessible all around the world, as long as you have an internet connection you can send and receive it. In nations suffering from hyperinflation, like Venezuela, bitcoin can help people retain some of the value of their currency. It sort of functions like a form of digital gold.

Bitcoin God – more forks?

Forks look like they are here to stay. This year saw the coming of Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond just to name a few. And they all had various levels of success.

Another one on the horizon is Bitcoin God, set to fork at block height 501225. Created by chinese developers, they say they will offer POS mining, large block sizes, smart contracts, and zero-knowledge proof. Only time will tell whether they can deliver on these promises, but all this forking business shows now signs of slowing down.

 

The content here is not financial advice. The above references an opinion and is for information purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.

The newest craze to hit the internet is CryptoKitties. Aiming to appeal to a broader mainstream audience, CryptoKitties packages cryptocurrency into a cute, adorable, kitten-like representation. CryptoKitties is a game centered around breedable, collectible creatures called CryptoKitties. Each cat is unique and fully owned by the user.

One thing that makes CryptoKitties so special is that it is one of the world’s first games to be built on blockchain technology – in this case Ethereum. Users can buy, breed, trade or sell their CryptoKitty and all this information is stored on the ethereum blockchain. Through this sales market, some cats are going for over $100,000 USD.

CryptoKitty Backlash?

However, it seems that it is not all sunshine and rainbows for the new game. Due to it’s unexpected popularity, there is a massive clogging of the ethereum network and transactions have been slowed down as a result. There are currently over 20,000 pending transactions stuck and waiting to be processed at the time of writing. Not only does the increased traffic from CryptoKitties lead to a slow down in the network but it can also increase the cost of using ethereum as well.

The silver lining here is that public attention to ethereum and cryptocurrency in general have definitely increased. And with issues of scalability being highlighted for ethereum and other cryptocurrencies like bitcoin, this might be the tipping point to hasten developers into finding solutions for the problem.

Exchanges have updated their shutdown status and included the word “permanent” into the announcements. This comes at a time where no new announcements have been made by the People’s Bank of China (PBoC), however, there have been rumors that authorities have been talking directly with the exchanges. The circulating document titled “北京互金整治办：比特币交易平台15日晚必须发公告明确停止交易时间” sets a deadline for exchanges to announce their closure by the end of the 15th of September.  Where is an aggregated list of the announcements so far:

BTCC

1/ BTCChina will completely shut down its exchange businesses on September 30th.

— BTCC (@BTCCexchange) September 15, 2017

BTCChina has updated its phrases to say it will “completely shut down” its exchange business (previous “stop all trading“). Seems like they needed to include some finality (at least for now).

YunBi

YunBi has made an official announcement on their customer service zendesk that they will be permanently shutting down “永久性关闭” on the 20th of September.

1. 云币网将于北京时间 2017 年 9 月 20 日 00:00 永久性关闭所有品种交易功能；

ViaBTC

Via has issued an announcement today that they will close their website by the 30th of September. The reason for the shutdown is due to the ICO regulations put forth on the 4th of September, and no new legislation has been quoted on the shutdown notice.

OKCoin

Stopping RMB trading announcement 

Huobi

Stopped RMB trading. 

Will it really be “Permanent”

One of the major cultural differences between the East and the West is that China tends to use stronger language. Hence making something “illegal” or “permanent” doesn’t mean it will always be so. We saw with the ICO ban that after making it illegal, Chinese National TV CCTV-13 had a feature section where a chinese official came out to say the the ICO ban was just a “halt” rather than a “permanent ban”. Currently there is massive pressure to make things look good before the “19th National People’s Congress” on the 18th of October.

Sources

Coindesk