Crypto Investment Archives

Lack Of Bitcoin Regulations See Pyramid Schemes Rising In India

Posted on April 11, 2017 | by [email protected]

Edited by Munpriya Samra

Bitcoin could be one of the hardest cryptocurrencies to regulate but that doesn’t mean it’s impossible to regulate it. In India, Bitcoin pyramid schemes and hyper investment are on the rise due to inadequate regulations to protect consumers.

Most pyramid schemes are not legitimate and do not pay the return on investments users inject in them. They usually are schemes which are only legitimate for some time and soon they fail to sustain the scheme and abruptly close down in most cases leaving many users at a loss. In recent years underdeveloped and developed countries of Asia and Africa have seen a rise of these schemes. There are other schemes which promise an extremely large return on investments sometimes going beyond 100%. Unemployed youth are the most vulnerable groups affected by organized extortion.

Are Some of the Bitcoin Pyramid Scheme Real?

Recently the biggest hyper investment scheme named MMMindia launched in India promising its users a whopping monthly 30% return on investment. Although MMM India is still operating in a lot of countries, including Indonesia and east Africa, the collapse of such scheme would leave hundreds of users at a loss. Brett Russell Founder BIGbtc, Ltd – Bitcoin Integration Group had this to say about the Bitcoin Pyramid scheme.

“Are you referring to HYIP? To be honest I don’t invest a lot of time exploring them, mostly because I don’t have any confidence in them. I have been around bitcoin since 2012 and have seen a lot. As far as HYIP and ICOs, I can only offer “The bitcoin and alt space is home to some really great people and some really bad hombres.” Take care and good luck!”

How are these schemes operated and marketed?

Many governments have failed to protect their citizens from getting exposed to these hyper-investment schemes. A proper understanding and a clear definition of these schemes can be of much help. The most important means of uprooting a bad scheme is by knowing their servers, their location, and how they are marketed. Bitcoin pyramid schemes always use the capabilities provided by social networks such as Facebook and Skype to market the schemes to would be clients so stay aware and go with Bitcoin companies that are known to be legitimate after some research.

How does the scheme sustain itself while paying huge sums of money to its users?

For business to be able to sustain itself a clear definition of the source of income and business plan is paramount. Most of these schemes are lacking in one or two prerequisites of a proper business helping them operate for a short while and collapse so ask lots of questions. The schemers involve themselves in a lot of activities so as to remain operational and win the minds of the masses. Some Bitcoin schemes go up to the extent of mining their own bitcoins so as to pay funds to their customers!

Blythe Masters, Inventor of the Credit Default Swap Believes Bitcoin Can Save Banks & Society Billions

Posted on April 11, 2017 | by [email protected]

Picture credit: Thierry Ehrmann

Blythe Masters is a genius economic engineer.

She began her career studying at the University of Cambridge and then quickly joined JP Morgan Chase. Her education made her an expert on risk. Her talent turned her education into genius. She invented a quick way for banks to handle risk with insurance, ensuring internal resilience for JP Morgan’s systems.

Risk is the chance that a transaction will not be completed. Each of us, as institutional entities, interact with the financial web where we build a reputation. When you settle your debts quickly, you become a trusted actor. When you don’t pay your debts quickly or efficiently, you are high risk.

The equation of risk takes into account the time it takes for a transaction to settle. The more time it takes, the greater the risk. The chances of you defaulting are regularly calculated based on an infinite number of data points calculated by computer software. When collections of these debts are bundled together, the risk is spread across the whole portfolio. Now, imagine, you want to take out insurance that the loans will be paid back.

You’d pay a premium for that insurance, right?

This way of managing risk, in a nutshell, is the credit default swap. Blythe Masters designed them at JP Morgan Chase in a career marked by innovation. Today, JP Morgan is known for managing risk well. While other banks failed from mismanaging risk up to the 2008 crisis, JP Morgan continues to lead. Why? Well, Masters knows how to create tools that work and knows how to wield them well. This ability frees up internal bank capital to be used elsewhere in the institution, which in turn flows into the larger economy as a whole.

However, Masters was ridiculed as “The Woman Who Built Financial Weapons of Mass Destruction” This statement is like saying whoever invented the knife is responsible for all murders caused by knives , while discounting all the nourishing meals that knives help us create. After the dust had settled with the 2008 crisis, Masters thought of ways to undo the damage done by those who had used her tools for evil at less than stellar banks. Naturally, as an economic engineer, she turned to technology to explore these solutions in depth.

Cutting red tape in transactions could free up large amounts of capital for banks to make more loans to society as a whole, open more markets, and create transparency in a largely darkened part of institutional dealing. Instead of transactions marked by slowness of 20 business days, an institution can settle accounts within 10 minutes with previously unknown entities. Can you imagine all the lawyers and escrow services that will no longer be in business?

Blockchain technology, upon which Bitcoin is built, programs trust into the transaction

Like email was to the postal service, so is Bitcoin for the financial system. Masters, after researching this in depth, now runs a firm to create the products banks need to use this technology internally. Now, the tools that Masters and her team create will free up capital more quickly and be used without as much risk.

Instead of mastering risk, banks can focus on performing the function they were mainly created to perform by dispersing money like hearts pumping capital into the arteries of society. Making investments more efficient, quick, and laying out the landscape changes everything for sophisticated actors like banks but also for the average person. Blythe Masters now works to create a stronger immune system for financial markets through distributed technology based on the Internet of finance as Bitcoin. Technology allows us to move into a more collaborative system with incredible resilience through transparency.

The Digital Asset platform uses distributed ledger technology

It allows the mutualization of financial market infrastructure across distinct market participants. It does this while maintaining confidentiality and scalability, both vital for large, regulated markets. The DA Platform eliminates discrepancies between disparate but duplicative siloed data records, reducing the current errors, latency, risk, cost and capital requirements involved in processing financial transactions. Participants in the Platform share a single source of truth which provides continuous data integrity, any desired or mandated degree of transparency and the opportunity for rapid innovation.

The above is an excerpt from the non-technical white paper. You can read it in full here.

Bitcoin May Become Currency of Choice on Mars

Posted on April 10, 2017 | by [email protected]

Edited by Munpriya Samra

Bitcoin companies are taking space exploration to new heights. With the level of support that these companies have pledged, Bitcoin may become new Gallactic currency.

Space exploration is the age old struggle to satisfy our insatiable curiosity to know what lies beyond our planet. For many years, scientists have searched the sky for this reason. The first major breakthrough was in 1969 when Neil Armstrong stepped on the moon’s surface. It seems curiosity grows with every achievement. Fifty years later, the struggle is harder than before. This time space exploration is aiming past the moon, all the way to Mars with an eye towards survival. Basing on how much Bitcoin companies and leaders are backing up space exploration, Bitcoin as a decentralized currency may be used by Martians in years to come to stay connected to our home planet’s reconciliation processes and programmed for smart contracts to power critical communication and economic processes. Space X was the first to join the race on Jan 27^th, 2017 followed by Virgin Orbit as a subsidiary of Virgin Galactic, both promising absolute assistance towards space exploration. Leaders who own these businesses like Richard Branson support the spread of Bitcoin’s decentralized technology. Many wonder if the ticket to and from Mars will be paid in bitcoins or another digital currency.

Is space exploration worth any support?

Like the Space Revolution, space exploration is an escapade to eradicate fear for our survival as well as an opportunity to spread the use of efficient, environmentally friendly technologies throughout our galaxy while inspiring communities to join in on the innovation. Investors are beginning to understand the possibilities and two billionaires, Elon Musk and Jeff Bezos, are reducing the cost of executing space-based business plans currently. As the expenditure on explorations in space decline, the funding from investors will rise and more good ideas will be implemented globally to be spread to the masses. Imagine riding to space, helping do research, and living there for the cost of your first starter home at $200,000. This is one possibility among many.

How are Bitcoin companies supporting space exploration?

These Bitcoin companies help by creating software to power the technology that will be used in space in manufacturing and for garnering donations from the larger public.

How will Transactions be Done on Mars?

Payments will be performed normally just like any other blockchain transaction. The only challenge is that there may be a slight delay of between 10 to 15 minutes in transactions from Mars to Earth. This is due to the effect of distance to the radio signals. All in all, this might become a new exchange methodology just like the one that exists between countries but this time between planets like a Gallactic payments system, if you will.

Watch the video of Elon Musk’s original vision for Paypal and his views on digital currencies here.

Blocksize Debate Part I: UCL Studies Confirm the Need for Increase in Blocksize

Posted on April 10, 2017 | by [email protected]

The debate that saw the Bitcoin community branch off into two groups appears to have reached some kind of compromise. The debate did have prolonged effects on the prices, functionality and the sentiment surrounding the digital currency. Over two years the debate had affected the prices in phases and packed a hopefully final punch in March that took the prices to below $1000 after a couple of months. The prices have now stabilized after the news of the hard fork was confirmed for an increase in blocksize. Let’s dive deep into whether a blocksize increase is the need of the hour and what the studies have revealed:

The time lag in processing the transactions:

A study by UCL Centre for Blockchain Technologies reveals that around 43% of the transactions are still not included in the Blockchain even after 1 hour from the first time they appeared on the network. Even more concerning is the fact that 20% of Bitcoin transactions are still not included on the blockchain even after 30 days. Over three months of the study revealed that in 12,000 unique nodes connected to the network, the confirmation time is inefficient for large value transactions. This exposes the inefficiency that has culminated in Bitcoin networks and why the blocksize debate has come into the picture as so critical to solve.

Reasons for lagging and inefficient transaction processing

The real problem for the non-inclusion of some transactions is due to the fact that there are no mechanisms that ensure that all transactions are actually processed. The miners are free to choose what transactions are to be included in their block. Satoshi did include a mechanism called ‘First Seen’ but it’s not enforceable at a protocol layer. The first seen method is a typical first in, first out method abiding which transactions can actually be processed instantly. However, instead of ‘first seen’, miners are opting for transactions that give them better incentives.

Possible solutions

Having no/fixed incentives for transactions might be a solution as miners would stick to ‘first seen’ transactions while processing once they see incentives aren’t based on the amount being transacted. However, Pappalardo said that:

“What we suggest is that miners have no incentives to include all transactions and therefore some are missed and after a while it becomes increasingly unlikely that a miner will willingly include old transactions. Without any incentive for proper processing and timely recording of transactions, it is unlikely the system will spontaneously invest efforts to become more efficient.”

While blocksize increase seems inevitable, the inclusion of mechanisms to make sure all the transactions are processed in time would be essential to keep the Bitcoin network honest and efficient.

Bitcoin Price Analysis: End of the Sideway Movement and Bitcoin All Set for the Next Big Launch

Posted on April 7, 2017 | by [email protected]

Anyone who has followed the Bitcoin price closely in recently would see a pattern Bitcoin prices have been following. From the second half of 2016, the month over month price of Bitcoin has been increasing steadily, irrespective of the type of negative fundamentals the currency had to deal with. Momentary price dips have been countered effectively to keep the Bull Run going up until the start of the New Year. However, the scenario changed from the start of 2017 with Bitcoin prices remaining predominantly sideways in between the $1000-$1250 range. Irrespective of the fundamental reasons, Bitcoin has consolidated enough in terms of volumes to prepare for a good run. Let’s look into how fundamentally and technically Bitcoin stands in terms of an impending run.

Fundamental Analysis

Bitcoin has been contained between $1000-$1250 by various fundamental factors which include the consecutive ETF rejection and the scalability debate. Now that the Bitcoin community seems to have come to some kind of compromise over the block size, the prices have stabilized. More importantly, the block size increase would now accelerate the transactions and increase the Bitcoin’s utility by a great margin. Things look more favorable now for a Bitcoin bull run owing to the dynamics in Japan and Mexico. Japan has legalized Bitcoin as a digital asset and a valid way of transfer starting from April 1^st. With 260,000 Japanese vendors all set to accept the digital currency, things are looking very bullish for Bitcoin.

In the western part of the world, Mexico has introduced a bill to legalize Bitcoin which would in turn fire up the remittance market and increase cross-border Bitcoin transactions. With strong adoptive fundamental factors driving the prices, Bitcoin looks charged up for the run.

Technical Analysis:

Technically, Bitcoin has been in a trend and has fallen into a temporary sideways pattern. While the market players are testing the $1200 psychological barrier (at the time of writing this article), the Bollinger bands suggest that a breakout can be expected, and, given the trend it can very well be in an upward direction. While the market still has the potential to drop till $1,100 before making a final launch, it would be wise not to short in such a market. Even the RSI Indicator is in the mid region showing that there is still buying potential in the market and it’s not advisable to short recklessly in the market.

You heard it here first.

Social Media Website Based on Bitcoin Prepares to Launch with Off-chain Transactions

Posted on April 6, 2017 | by [email protected]

Bitcoin and its underlying technology have numerous applications and millennials are reaping the comforts of the set-up. One such brilliant innovation has been built over the foundation of Bitcoin technology in a newly launched social media website called ‘Yours.’ The website has been launched on Bitcoin’s testnet to test out micropayments on the social network. The website claims to offer an ‘array of payment models’ that allow users to make money through their content.

How the website works

The website operates on a simple purchase model that is wrapped in a suspenseful way leading people into buying content. Any user who puts up content on ‘Yours’ can post anything as simple as an article, blog piece, pictures or a video and can select the point at which they want a pay wall. For viewing the content past that point, people have to pay the price and in turn, the creators of the content get paid. Ryan Charles, formerly Reddit’s cryptocurrency engineer explains:

“Everybody who posts content to Yours – including articles, video, images, audio – can pick a place in their content to put a pay wall. So, if you write a compelling article with a cliffhanger, you can hide the conclusion behind, say, a ten cent pay wall.”

Tackling the problem of micropayments

The website will offer a micropayments wallet in addition to content pay walls. This has been a technically controversial area for Bitcoin as the transactional costs of the Bitcoin network have gone up in the recent years. However, ‘Yours’ has set out to repair this problem by developing a smart contract similar to Lightning Network but doesn’t utilize Segwit. It is completely dependent on Bitcoin alone and hence is very complicated in design. Yours allows users to possess their private keys and have full custodial control over their funds at all times while being able to participate in off-chain zero fee transactions with other users.

Posting and various payment models

With the ‘Yours’ testnet launched, anybody can pay for content but not everyone can post. One has to do a one-on-one demo with the ‘Yours’ team so that they can get your real-time feedback about the experience. There are numerous models allowing individuals to get paid on Yours in addition to paywalls on content. A classic endorsement model will allow content creators to earn as users pay to upvote their content. Commenters can earn when their comments are upvoted. Individuals can also invest in a creator’s content, and earn returns on the content’s income over time.

How the platform will take off and revolutionize content writing and marketing domain is to be seen.

Japanese Bitcoin Exchanges Implement Stricter KYC Requirements

Posted on April 6, 2017 | by [email protected]

The amended Payment Services Act has long been discussed in Japan, but the date which it would enter into force was not previously set. Recently, the Japanese Financial Services Agency (FSA) finally announced a date on which this act would become law.

As part of Japan’s amended Payment Services Act which would be enforced on April 1^st, the Act on prevention of Transfer of Criminal Proceeds has also been revised. This act requires Japanese Bitcoin Exchanges to Implement a Stricter Know Your Customers (KYC) process. Japanese financial Experts believe that this move would reduce the options of using Bitcoin to finance criminal activities in Japan.

What are KYC requirements

KYC Requirements are guidelines used to prevent banks from being used intentionally or unintentionally by criminal elements for money laundering activities. It also enables banks to better understand their customers and their financial dealings. This way banks or Bitcoin exchanges can investigate any unusual transactions being carried out through the bank. Recently a lot of Bitcoin critics have soiled the image of Bitcoin claiming it’s responsible for funding terrorism across Europe. This claim, however, has been rebuked by a large majority of experts in the Bitcoin ecosystem citing that these claims are baseless and politically motivated.

How KYC applies to Banking and Bitcoin Exchanges

The Japanese law amendment mainly affects Bitcoin exchanges across the country. KYC is a process by which banks obtain information about the identity and addresses of their customers. This ensures that banks’ services are not misused and it is to be completed by the banks while opening accounts. This move might not be a very good news to most Bitcoin users given the fact that many Bitcoin users enjoy the anonymity Bitcoin provides. But that same anonymity greatly hampers a country’s tax base since transaction carried out using Bitcoin are off the grid and basically cannot be taxed. Meanwhile, it’s a known fact that most users of Bitcoin don’t use the currency for any illicit activity but Bitcoin has gained the reputation as the currency of the dark web. Intelligence services across the world believe that a major crackdown on Bitcoin will badly hamper the operation of the dark web known for illegal trades and services.

Is the KYC requirement enforcement a long term solution

The major point of KYC is to prevent money laundering, combat financing of terrorism, to manage risk by creating risk profiles and assigning risk categories to customers. Banks can monitor any possible financial frauds and loan defaults. Additionally, KYC can help to check identity theft. With the current massive development in IT, hackers would be able to bypass these restrictions. Soon, free online tools would be available to carry out Bitcoin transactions undetected on a stochastic scale and the attempt might turn out to be a guard rail, if not a complete masker, for the government authorities.

Forget Winklevoss ETF, here are alternative Exchange Traded Bitcoin backed Instruments to invest

Posted on March 14, 2017 | by [email protected]

Second Week of March witnessed heavy drama in terms of Bitcoin price and swaying fundamentals thanks to Winklevoss ETF that was pending approval. The SEC set the date of verdict on 10^th March, before which the Bitcoin prices rallied anticipating the ETF approval. Nevertheless, Securities and Exchanges Commission decided to reject the proposal owing to the risks the Bitcoin markets possess in terms of hacks, security and the irregularities in monitoring. Nevertheless Winklevoss brothers are persistent over the ETF as few Bitcoin based instruments that are being actively traded over various markets have set the precedent. Let’s delve deep into what these instruments are and how they are faring:

Bitcoin ETI:

Europe has been the forerunner in the standardization of the cryptocurrency assets and providing them a platform that is comparable to mainstream assets. A bitcoin backed Exchange Traded Note (ETN) was approved in 2015 in Sweden followed by the approval of a Bitcoin Exchange Traded Instrument (ETI) which was approved in Gilbraltar. The ETI enables indiviudals to invest in institutional instrument that is representative of digital currency. The ETI trades under the ticker ‘BTCETI’ and is approved by Gilbraltar Stock Exchange. The instrument was also approved by Germany’s Deutsche Borse and has found its place in special investment vehicles (SIV).

XBT Provider:

XBT provider is a publicly traded Bitcoin fund exclusively for Europe. It is designed to track the movements of its underlying asset which is Bitcoin in this case. The fund offers Tracker one(ticker: COINXBT) and Tracker EUR (ticker:COINXBE) in the form of an Exchange Traded Note (ETN). The fund investors have enjoyed good and consistent profits over the period of XBT Provider’s growth.

Bitcoin Investment Trust:

‘Bitcoin Investment Trust’ was launched in 2013 by Barry Silbert, is an open ended trust that is invested exclusively in bitcoin and derives its value solely from the price of bitcoin. It enables accredited investors, with annual incomes greater than $200,000 or assets of more than $1 million, to gain exposure to the price movement of bitcoin for a minimum investment of $25,000 without the challenges of buying and securely storing bitcoin. The price of GBTC shares roughly account for 10% of Bitcoin price and hence people wouldn’t be directly exposed to the risk of Bitcoin. It also gives you additional tax benefits apart from the reduced exposure.

Post ETF rejection, Bitcoin price bounces back; Winklevoss brothers to remain persistent

Posted on March 13, 2017 | by [email protected]

Whenever Bitcoin has set out to breach the market highs from the start of 2017, negative fundamentals surface that stagger the price. It first happened with Chinese authorities looking into Bitcoin exchanges in January, when the market took the first run at the prices. Later when the Bitcoin was stuck sideways between $1000-$1,100, Chinese exchanges stopped withdrawals from the exchange, the prize crashed back to $900 and sprung back up again. Just when the market has consistently traded over $1,100 and was building up organically, the speculation regarding the Winklevoss ETF pushed the prices higher and the speculative volumes pulled out immediately once the ETF was rejected. Let’s dive deep into the dynamics of the ETF rejection and the after effects:

The bets that raged the market:

Market players were betting heavily on the possibility of the approval of the ETF as it would be the first of its kind in USA. With Needham’s report estimating a 25% chance of approval, people were even more interested in the wager. On the off chance that the ETF gets approved, it would attract good investments in the cryptocurrency and push the prices higher. The market was lined up for the chance as we see good amount of investments flowing into the currency and pushing it over the all-time high just before the judgement day.

SEC’s decision and reasons for rejection:

On Friday, March 10^th the Securities and Exchange Commission rejected the Bats BZX Exchange’s proposed rule change to list and trade Coin ETF. The SEC explained that the proposed rule change was disapproved because it was not consistent with “Section 6(b)(5) of the Exchange Act. The Act stipulates that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.

This would mean in order to be consistent with the Exchange Act, the Batz BZX exchange should have surveillance sharing agreements with related markets for Bitcoin or its derivatives trading. Additionally the Bitcoin markets have to be regulated consistently for the ETF to qualify.

Winklevoss brothers will keep trying:

After having a rough day on Friday, Bitcoin did bounce back over the weekend by touching $1,243, a solid 18% increase post the ETF rejection. On a positive side, Winklevoss brothers have announced that they wouldn’t stop pursuing the ETF. They are hopeful that the SEC would come around to working with them in bringing the ETF to the market. They feel that the SEC’s oversight and regulation are critical to the health of the marketplace and hope that the commission would accommodate the ETF in a convenient manner. There are operational Bitcoin ETFs in Gibraltar and Europe that have been profitable for the profile of the currency. An ETF on American soil would tip the scales in the favor of mainstream adoption and give the boost the currency requires for healthy sustenance.

Bitfinex moves out of Washington State citing regulatory problems

Posted on March 7, 2017 | by [email protected]

Regulations, especially not well thought out might be a hindrance to innovation in any form. Such constricting regulations are hindering the development of fintech companies currently in US. The latest state to join this list is the State of Washington where regulations on digital currency startups have made significant impact on businesses. Owing to these regulations many companies have ceased to serve the residents of the respective region and Washington is no different. The latest to join the list of exchanges pulling out of the state would be the Honk Kong based exchange Bitfinex. After suffering a massive hack in August, Bitfinex has managed to reimburse the stolen money to their clients through redemption tokens and was able to re-establish client’s faith in the exchange. Though the strong reason behind this move is still unclear, let’s look into the details of the exit:

The Regulatory debacle:

A Washington based user has revealed on Reddit that Bitfinex has withdrawn from the State owing to a regulatory debacle which it eventually lost. The statement released by the exchange read as follows:-

“Over the past few months, we have been in discussion with representatives of the Washington State Department of Financial Institutions(DFI) about Bitfinex’s business and specifically to provide Washington customers with service. DFI representatives have made it clear that for offering the services, Bitfinex has to acquire a state money transmitter license.”

Bitfinex’s problem:

The exchange underwent a massive hack attack in August 2016, losing more than $70 Million after which there have been facing consistent trouble. The exchange issued blockchain debt tokens to its users in August as a way to pay them back for losses it incurred in a debilitating hack. The exchange announced that it would purchase the tokens at an above-market value of $1 each. This is roughly double the market value when the redemption took place. The exchange has been good on its promise so far but they have experienced a DDOS attack pretty recently which has been fended off.

Regulations and Bitcoin businesses:

Bitfinex notified that it wouldn’t be obtaining the money transmitter license in Washington and, accordingly, will no longer be doing business with verified Washington customers, effective immediately. Washington-based traders have only until Wednesday to withdraw their funds, Bitfinex added. Earlier last week Coinbase suspended its services for customers in Hawaii owing to authorities intervention. Early December last year, Bitstamp also left Washington State citing regulatory reasons. The problems with regulation for cryptocurrency startups started with BitLicense NewYork which saw the mass exodus of the startups from the state. Whether regulations and business would be able to find a middle ground in US where the innovation would get a push rather than hampering is to be seen.