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Dragonchain Great Reddit Scaling Bake-Off Public Proposal
Dragonchain Public Proposal TL;DR:
Dragonchain has demonstrated twice Reddit’s entire total daily volume (votes, comments, and postsper Reddit 2019 Year in Review) in a 24-hour demo on an operational network. Every single transaction on Dragonchain is decentralized immediately through 5 levels of Dragon Net, and then secured with combined proof on Bitcoin, Ethereum, Ethereum Classic, and Binance Chain, via Interchain. At the time, in January 2020, the entire cost of the demo was approximately $25K on a single system (transaction fees locked at $0.0001/txn). With current fees (lowest fee $0.0000025/txn), this would cost as little as $625. Watch Joe walk through the entire proposal and answer questions onYouTube. This proposal is also available on the Dragonchain blog.
Hello Reddit and Ethereum community!
I’m Joe Roets, Founder & CEO of Dragonchain. When the team and I first heard about The Great Reddit Scaling Bake-Off we were intrigued. We believe we have the solutions Reddit seeks for its community points system and we have them at scale. For your consideration, we have submitted our proposal below. The team at Dragonchain and I welcome and look forward to your technical questions, philosophical feedback, and fair criticism, to build a scaling solution for Reddit that will empower its users. Because our architecture is unlike other blockchain platforms out there today, we expect to receive many questions while people try to grasp our project. I will answer all questions here in this thread on Reddit, and I've answered some questions in the stream on YouTube. We have seen good discussions so far in the competition. We hope that Reddit’s scaling solution will emerge from The Great Reddit Scaling Bake-Off and that Reddit will have great success with the implementation.
Dragonchain is a robust open source hybrid blockchain platform that has proven to withstand the passing of time since our inception in 2014. We have continued to evolve to harness the scalability of private nodes, yet take full advantage of the security of public decentralized networks, like Ethereum. We have a live, operational, and fully functional Interchain network integrating Bitcoin, Ethereum, Ethereum Classic, and ~700 independent Dragonchain nodes. Every transaction is secured to Ethereum, Bitcoin, and Ethereum Classic. Transactions are immediately usable on chain, and the first decentralization is seen within 20 seconds on Dragon Net. Security increases further to public networks ETH, BTC, and ETC within 10 minutes to 2 hours. Smart contracts can be written in any executable language, offering full freedom to existing developers. We invite any developer to watch the demo, play with our SDK’s, review open source code, and to help us move forward. Dragonchain specializes in scalable loyalty & rewards solutions and has built a decentralized social network on chain, with very affordable transaction costs. This experience can be combined with the insights Reddit and the Ethereum community have gained in the past couple of months to roll out the solution at a rapid pace.
Response and PoC
In The Great Reddit Scaling Bake-Off post, Reddit has asked for a series of demonstrations, requirements, and other considerations. In this section, we will attempt to answer all of these requests.
A live proof of concept showing hundreds of thousands of transactions
On Jan 7, 2020, Dragonchain hosted a 24-hour live demonstration during which a quarter of a billion (250 million+) transactions executed fully on an operational network. Every single transaction on Dragonchain is decentralized immediately through 5 levels of Dragon Net, and then secured with combined proof on Bitcoin, Ethereum, Ethereum Classic, and Binance Chain, via Interchain. This means that every single transaction is secured by, and traceable to these networks. An attack on this system would require a simultaneous attack on all of the Interchained networks. 24 hours in 4 minutes (YouTube): 24 hours in 4 minutes The demonstration was of a single business system, and any user is able to scale this further, by running multiple systems simultaneously. Our goals for the event were to demonstrate a consistent capacity greater than that of Visa over an extended time period. Tooling to reproduce our demo is available here: https://github.com/dragonchain/spirit-bomb
Source code (for on & off-chain components as well tooling used for the PoC). The source code does not have to be shared publicly, but if Reddit decides to use a particular solution it will need to be shared with Reddit at some point.
Dragonchain’s architecture attacks the scalability issue from multiple angles. Dragonchain is a hybrid blockchain platform, wherein every transaction is protected on a business node to the requirements of that business or purpose. A business node may be held completely private or may be exposed or replicated to any level of exposure desired. Every node has its own blockchain and is independently scalable. Dragonchain established Context Based Verification as its consensus model. Every transaction is immediately usable on a trust basis, and in time is provable to an increasing level of decentralized consensus. A transaction will have a level of decentralization to independently owned and deployed Dragonchain nodes (~700 nodes) within seconds, and full decentralization to BTC and ETH within minutes or hours. Level 5 nodes (Interchain nodes) function to secure all transactions to public or otherwise external chains such as Bitcoin and Ethereum. These nodes scale the system by aggregating multiple blocks into a single Interchain transaction on a cadence. This timing is configurable based upon average fees for each respective chain. For detailed information about Dragonchain’s architecture, and Context Based Verification, please refer to the Dragonchain Architecture Document.
An interesting feature of Dragonchain’s network consensus is its economics and scarcity model. Since Dragon Net nodes (L2-L4) are independent staking nodes, deployment to cloud platforms would allow any of these nodes to scale to take on a large percentage of the verification work. This is great for scalability, but not good for the economy, because there is no scarcity, and pricing would develop a downward spiral and result in fewer verification nodes. For this reason, Dragonchain uses TIME as scarcity. TIME is calculated as the number of Dragons held, multiplied by the number of days held. TIME influences the user’s access to features within the Dragonchain ecosystem. It takes into account both the Dragon balance and length of time each Dragon is held. TIME is staked by users against every verification node and dictates how much of the transaction fees are awarded to each participating node for every block. TIME also dictates the transaction fee itself for the business node. TIME is staked against a business node to set a deterministic transaction fee level (see transaction fee table below in Cost section). This is very interesting in a discussion about scaling because it guarantees independence for business implementation. No matter how much traffic appears on the entire network, a business is guaranteed to not see an increased transaction fee rate.
Dragonchain uses Docker and Kubernetes to allow the use of best practices traditional system scaling. Dragonchain offers managed nodes with an easy to use web based console interface. The user may also deploy a Dragonchain node within their own datacenter or favorite cloud platform. Users have deployed Dragonchain nodes on-prem on Amazon AWS, Google Cloud, MS Azure, and other hosting platforms around the world. Any executable code, anything you can write, can be written into a smart contract. This flexibility is what allows us to say that developers with no blockchain experience can use any code language to access the benefits of blockchain. Customers have used NodeJS, Python, Java, and even BASH shell script to write smart contracts on Dragonchain. With Docker containers, we achieve better separation of concerns, faster deployment, higher reliability, and lower response times. We chose Kubernetes for its self-healing features, ability to run multiple services on one server, and its large and thriving development community. It is resilient, scalable, and automated. OpenFaaS allows us to package smart contracts as Docker images for easy deployment. Contract deployment time is now bounded only by the size of the Docker image being deployed but remains fast even for reasonably large images. We also take advantage of Docker’s flexibility and its ability to support any language that can run on x86 architecture. Any image, public or private, can be run as a smart contract using Dragonchain.
Flexibility in Scaling
Dragonchain’s architecture considers interoperability and integration as key features. From inception, we had a goal to increase adoption via integration with real business use cases and traditional systems. We envision the ability for Reddit, in the future, to be able to integrate alternate content storage platforms or other financial services along with the token.
LBRY - To allow users to deploy content natively to LBRY
MakerDAO to allow users to lend small amounts backed by their Reddit community points.
STORJ/SIA to allow decentralized on chain storage of portions of content. These integrations or any other are relatively easy to integrate on Dragonchain with an Interchain implementation.
Cost estimates (on-chain and off-chain) For the purpose of this proposal, we assume that all transactions are on chain (posts, replies, and votes).
On the Dragonchain network, transaction costs are deterministic/predictable. By staking TIME on the business node (as described above) Reddit can reduce transaction costs to as low as $0.0000025 per transaction. Dragonchain Fees Table
How to run it
Building on Dragonchain is simple and requires no blockchain experience. Spin up a business node (L1) in our managed environment (AWS), run it in your own cloud environment, or on-prem in your own datacenter. Clear documentation will walk you through the steps of spinning up your first Dragonchain Level 1 Business node. Getting started is easy...
Download Dragonchain’s dctl
Input three commands into a terminal
Build an image
More information can be found in our Get started documents.
Dragonchain is an open source hybrid platform. Through Dragon Net, each chain combines the power of a public blockchain (like Ethereum) with the privacy of a private blockchain. Dragonchain organizes its network into five separate levels. A Level 1, or business node, is a totally private blockchain only accessible through the use of public/private keypairs. All business logic, including smart contracts, can be executed on this node directly and added to the chain. After creating a block, the Level 1 business node broadcasts a version stripped of sensitive private data to Dragon Net. Three Level 2 Validating nodes validate the transaction based on guidelines determined from the business. A Level 3 Diversity node checks that the level 2 nodes are from a diverse array of locations. A Level 4 Notary node, hosted by a KYC partner, then signs the validation record received from the Level 3 node. The transaction hash is ledgered to the Level 5 public chain to take advantage of the hash power of massive public networks. Dragon Net can be thought of as a “blockchain of blockchains”, where every level is a complete private blockchain. Because an L1 can send to multiple nodes on a single level, proof of existence is distributed among many places in the network. Eventually, proof of existence reaches level 5 and is published on a public network.
Dragonchain is open source and even though the platform is easy enough for developers to code in any language they are comfortable with, we do not have so large a developer community as Ethereum. We would like to see the Ethereum developer community (and any other communities) become familiar with our SDK’s, our solutions, and our platform, to unlock the full potential of our Ethereum Interchain. Long ago we decided to prioritize both Bitcoin and Ethereum Interchains. We envision an ecosystem that encompasses different projects to give developers the ability to take full advantage of all the opportunities blockchain offers to create decentralized solutions not only for Reddit but for all of our current platforms and systems. We believe that together we will take the adoption of blockchain further. We currently have additional Interchain with Ethereum Classic. We look forward to Interchain with other blockchains in the future. We invite all blockchains projects who believe in decentralization and security to Interchain with Dragonchain.
While we only have 700 nodes compared to 8,000 Ethereum and 10,000 Bitcoin nodes. We harness those 18,000 nodes to scale to extremely high levels of security. See Dragonchain metrics.
Some may consider the centralization of Dragonchain’s business nodes as an issue at first glance, however, the model is by design to protect business data. We do not consider this a drawback as these nodes can make any, none, or all data public. Depending upon the implementation, every subreddit could have control of its own business node, for potential business and enterprise offerings, bringing new alternative revenue streams to Reddit.
Costs and resources
Summary of cost & resource information for both on-chain & off-chain components used in the PoC, as well as cost & resource estimates for further scaling. If your PoC is not on mainnet, make note of any mainnet caveats (such as congestion issues).
Every transaction on the PoC system had a transaction fee of $0.0001 (one-hundredth of a cent USD). At 256MM transactions, the demo cost $25,600. With current operational fees, the same demonstration would cost $640 USD. For the demonstration, to achieve throughput to mimic a worldwide payments network, we modeled several clients in AWS and 4-5 business nodes to handle the traffic. The business nodes were tuned to handle higher throughput by adjusting memory and machine footprint on AWS. This flexibility is valuable to implementing a system such as envisioned by Reddit. Given that Reddit’s daily traffic (posts, replies, and votes) is less than half that of our demo, we would expect that the entire Reddit system could be handled on 2-5 business nodes using right-sized containers on AWS or similar environments. Verification was accomplished on the operational Dragon Net network with over 700 independently owned verification nodes running around the world at no cost to the business other than paid transaction fees.
This PoC should scale to the numbers below with minimal costs (both on & off-chain). There should also be a clear path to supporting hundreds of millions of users. Over a 5 day period, your scaling PoC should be able to handle: *100,000 point claims (minting & distributing points) *25,000 subscriptions *75,000 one-off points burning *100,000 transfers
During Dragonchain’s 24 hour demo, the above required numbers were reached within the first few minutes. Reddit’s total activity is 9000% more than Ethereum’s total transaction level. Even if you do not include votes, it is still 700% more than Ethereum’s current volume. Dragonchain has demonstrated that it can handle 250 million transactions a day, and it’s architecture allows for multiple systems to work at that level simultaneously. In our PoC, we demonstrate double the full capacity of Reddit, and every transaction was proven all the way to Bitcoin and Ethereum. Reddit Scaling on Ethereum
Solutions should not depend on any single third-party provider. We prefer solutions that do not depend on specific entities such as Reddit or another provider, and solutions with no single point of control or failure in off-chain components but recognize there are numerous trade-offs to consider
Dragonchain’s architecture calls for a hybrid approach. Private business nodes hold the sensitive data while the validation and verification of transactions for the business are decentralized within seconds and secured to public blockchains within 10 minutes to 2 hours. Nodes could potentially be controlled by owners of individual subreddits for more organic decentralization.
Billing is currently centralized - there is a path to federation and decentralization of a scaled billing solution.
Operational on-premises capabilities
Operational deployment to any datacenter
Over 700 independent Community Verification Nodes with proof of ownership
Operational Interchain (Interoperable to Bitcoin, Ethereum, and Ethereum Classic, open to more)
Usability Scaling solutions should have a simple end user experience.
Users shouldn't have to maintain any extra state/proofs, regularly monitor activity, keep track of extra keys, or sign anything other than their normal transactions
Dragonchain and its customers have demonstrated extraordinary usability as a feature in many applications, where users do not need to know that the system is backed by a live blockchain. Lyceum is one of these examples, where the progress of academy courses is being tracked, and successful completion of courses is rewarded with certificates on chain. Our @Save_The_Tweet bot is popular on Twitter. When used with one of the following hashtags - #please, #blockchain, #ThankYou, or #eternalize the tweet is saved through Eternal to multiple blockchains. A proof report is available for future reference. Other examples in use are DEN, our decentralized social media platform, and our console, where users can track their node rewards, view their TIME, and operate a business node. Examples:
Transactions complete in a reasonable amount of time (seconds or minutes, not hours or days)
All transactions are immediately usable on chain by the system. A transaction begins the path to decentralization at the conclusion of a 5-second block when it gets distributed across 5 separate community run nodes. Full decentralization occurs within 10 minutes to 2 hours depending on which interchain (Bitcoin, Ethereum, or Ethereum Classic) the transaction hits first. Within approximately 2 hours, the combined hash power of all interchained blockchains secures the transaction.
Free to use for end users (no gas fees, or fixed/minimal fees that Reddit can pay on their behalf)
With transaction pricing as low as $0.0000025 per transaction, it may be considered reasonable for Reddit to cover transaction fees for users. All of Reddit's Transactions on Blockchain (month) Community points can be earned by users and distributed directly to their Reddit account in batch (as per Reddit minting plan), and allow users to withdraw rewards to their Ethereum wallet whenever they wish. Withdrawal fees can be paid by either user or Reddit. This model has been operating inside the Dragonchain system since 2018, and many security and financial compliance features can be optionally added. We feel that this capability greatly enhances user experience because it is seamless to a regular user without cryptocurrency experience, yet flexible to a tech savvy user. With regard to currency or token transactions, these would occur on the Reddit network, verified to BTC and ETH. These transactions would incur the $0.0000025 transaction fee. To estimate this fee we use the monthly active Reddit users statista with a 60% adoption rate and an estimated 10 transactions per month average resulting in an approximate $720 cost across the system. Reddit could feasibly incur all associated internal network charges (mining/minting, transfer, burn) as these are very low and controllable fees. Reddit Internal Token Transaction Fees Reddit Ethereum Token Transaction Fees When we consider further the Ethereum fees that might be incurred, we have a few choices for a solution.
Offload all Ethereum transaction fees (user withdrawals) to interested users as they wish to withdraw tokens for external use or sale.
Cover Ethereum transaction fees by aggregating them on a timed schedule. Users would request withdrawal (from Reddit or individual subreddits), and they would be transacted on the Ethereum network every hour (or some other schedule).
In a combination of the above, customers could cover aggregated fees.
Integrate with alternate Ethereum roll up solutions or other proposals to aggregate minting and distribution transactions onto Ethereum.
Users should be able to view their balances & transactions via a blockchain explorer-style interface
From interfaces for users who have no knowledge of blockchain technology to users who are well versed in blockchain terms such as those present in a typical block explorer, a system powered by Dragonchain has flexibility on how to provide balances and transaction data to users. Transactions can be made viewable in an Eternal Proof Report, which displays raw data along with TIME staking information and traceability all the way to Bitcoin, Ethereum, and every other Interchained network. The report shows fields such as transaction ID, timestamp, block ID, multiple verifications, and Interchain proof. See example here. Node payouts within the Dragonchain console are listed in chronological order and can be further seen in either Dragons or USD. See example here. In our social media platform, Dragon Den, users can see, in real-time, their NRG and MTR balances. See example here. A new influencer app powered by Dragonchain, Raiinmaker, breaks down data into a user friendly interface that shows coin portfolio, redeemed rewards, and social scores per campaign. See example here.
Exiting is fast & simple
Withdrawing funds on Dragonchain’s console requires three clicks, however, withdrawal scenarios with more enhanced security features per Reddit’s discretion are obtainable.
Interoperability Compatibility with third party apps (wallets/contracts/etc) is necessary.
Proven interoperability at scale that surpasses the required specifications. Our entire platform consists of interoperable blockchains connected to each other and traditional systems. APIs are well documented. Third party permissions are possible with a simple smart contract without the end user being aware. No need to learn any specialized proprietary language. Any code base (not subsets) is usable within a Docker container. Interoperable with any blockchain or traditional APIs. We’ve witnessed relatively complex systems built by engineers with no blockchain or cryptocurrency experience. We’ve also demonstrated the creation of smart contracts within minutes built with BASH shell and Node.js. Please see our source code and API documentation.
Scaling solutions should be extensible and allow third parties to build on top of it Open source and extensible APIs should be well documented and stable
Third-party permissionless integrations should be possible & straightforward Smart contracts are Docker based, can be written in any language, use full language (not subsets), and can therefore be integrated with any system including traditional system APIs. Simple is better. Learning an uncommon or proprietary language should not be necessary.
Advanced knowledge of mathematics, cryptography, or L2 scaling should not be required. Compatibility with common utilities & toolchains is expected. Dragonchain business nodes and smart contracts leverage Docker to allow the use of literally any language or executable code. No proprietary language is necessary. We’ve witnessed relatively complex systems built by engineers with no blockchain or cryptocurrency experience. We’ve also demonstrated the creation of smart contracts within minutes built with BASH shell and Node.js.
Bonus Points: Show us how it works. Do you have an idea for a cool new use case for Community Points? Build it!
Community points could be awarded to Reddit users based upon TIME too, whereas the longer someone is part of a subreddit, the more community points someone naturally gained, even if not actively commenting or sharing new posts. A daily login could be required for these community points to be credited. This grants awards to readers too and incentivizes readers to create an account on Reddit if they browse the website often. This concept could also be leveraged to provide some level of reputation based upon duration and consistency of contribution to a community subreddit.
Dragonchain has already built a social media platform that harnesses community involvement. Dragon Den is a decentralized community built on the Dragonchain blockchain platform. Dragon Den is Dragonchain’s answer to fake news, trolling, and censorship. It incentivizes the creation and evaluation of quality content within communities. It could be described as being a shareholder of a subreddit or Reddit in its entirety. The more your subreddit is thriving, the more rewarding it will be. Den is currently in a public beta and in active development, though the real token economy is not live yet. There are different tokens for various purposes. Two tokens are Lair Ownership Rights (LOR) and Lair Ownership Tokens (LOT). LOT is a non-fungible token for ownership of a specific Lair. LOT will only be created and converted from LOR. Energy (NRG) and Matter (MTR) work jointly. Your MTR determines how much NRG you receive in a 24-hour period. Providing quality content, or evaluating content will earn MTR.
Security. Users have full ownership & control of their points.
All community points awarded based upon any type of activity or gift, are secured and provable to all Interchain networks (currently BTC, ETH, ETC). Users are free to spend and withdraw their points as they please, depending on the features Reddit wants to bring into production.
Balances and transactions cannot be forged, manipulated, or blocked by Reddit or anyone else
Users can withdraw their balance to their ERC20 wallet, directly through Reddit. Reddit can cover the fees on their behalf, or the user covers this with a portion of their balance.
Users should own their points and be able to get on-chain ERC20 tokens without permission from anyone else
Through our console users can withdraw their ERC20 rewards. This can be achieved on Reddit too. Here is a walkthrough of our console, though this does not show the quick withdrawal functionality, a user can withdraw at any time. https://www.youtube.com/watch?v=aNlTMxnfVHw
Points should be recoverable to on-chain ERC20 tokens even if all third-parties involved go offline
If necessary, signed transactions from the Reddit system (e.g. Reddit + Subreddit) can be sent to the Ethereum smart contract for minting.
A public, third-party review attesting to the soundness of the design should be available
To our knowledge, at least two large corporations, including a top 3 accounting firm, have conducted positive reviews. These reviews have never been made public, as Dragonchain did not pay or contract for these studies to be released.
Bonus points Public, third-party implementation review available or in progress
Compatibility with HSMs & hardware wallets
For the purpose of this proposal, all tokenization would be on the Ethereum network using standard token contracts and as such, would be able to leverage all hardware wallet and Ethereum ecosystem services.
Minting/distributing tokens is not performed by Reddit directly
This operation can be automated by smart contract on Ethereum. Subreddits can if desired have a role to play.
One off point burning, as well as recurring, non-interactive point burning (for subreddit memberships) should be possible and scalable
This is possible and scalable with interaction between Dragonchain Reddit system and Ethereum token contract(s).
Fully open-source solutions are strongly preferred
Dragonchain is fully open source (see section on Disney release after conclusion).
Whether it is today, or in the future, we would like to work together to bring secure flexibility to the highest standards. It is our hope to be considered by Ethereum, Reddit, and other integrative solutions so we may further discuss the possibilities of implementation. In our public demonstration, 256 million transactions were handled in our operational network on chain in 24 hours, for the low cost of $25K, which if run today would cost $625. Dragonchain’s interoperable foundation provides the atmosphere necessary to implement a frictionless community points system. Thank you for your consideration of our proposal. We look forward to working with the community to make something great!
Disney Releases Blockchain Platform as Open Source
The team at Disney created the Disney Private Blockchain Platform. The system was a hybrid interoperable blockchain platform for ledgering and smart contract development geared toward solving problems with blockchain adoption and usability. All objective evaluation would consider the team’s output a success. We released a list of use cases that we explored in some capacity at Disney, and our input on blockchain standardization as part of our participation in the W3C Blockchain Community Group. https://lists.w3.org/Archives/Public/public-blockchain/2016May/0052.html
In 2016, Roets proposed to release the platform as open source to spread the technology outside of Disney, as others within the W3C group were interested in the solutions that had been created inside of Disney. Following a long process, step by step, the team met requirements for release. Among the requirements, the team had to:
Obtain VP support and approval for the release
Verify ownership of the software to be released
Verify that no proprietary content would be released
Convince the organization that there was a value to the open source community
Convince the organization that there was a value to Disney
Offer the plan for ongoing maintenance of the project outside of Disney
Itemize competing projects
Verify no conflict of interest
Change the project name to not use the name Disney, any Disney character, or any other associated IP - proposed Dragonchain - approved
Obtain legal approval
Approval from corporate, parks, and other business units
Approval from multiple Disney patent groups Copyright holder defined by Disney (Disney Connected and Advanced Technologies)
Trademark searches conducted for the selected name Dragonchain
Obtain IT security approval
Manual review of OSS components conducted
OWASP Dependency and Vulnerability Check Conducted
Obtain technical (software) approval
Offer management, process, and financial plans for the maintenance of the project.
Meet list of items to be addressed before release
Remove all Disney project references and scripts
Create a public distribution list for email communications
Remove Roets’ direct and internal contact information
Create public Slack channel and move from Disney slack channels
Create proper labels for issue tracking
Rename internal private Github repository
Add informative description to Github page
Expand README.md with more specific information
Add information beyond current “Blockchains are Magic”
Add getting started sections and info on cloning/forking the project
Add installation details
Add uninstall process
Add unit, functional, and integration test information
Detail how to contribute and get involved
Describe the git workflow that the project will use
Move to public, non-Disney git repository (Github or Bitbucket)
Obtain Disney Open Source Committee approval for release
On top of meeting the above criteria, as part of the process, the maintainer of the project had to receive the codebase on their own personal email and create accounts for maintenance (e.g. Github) with non-Disney accounts. Given the fact that the project spanned multiple business units, Roets was individually responsible for its ongoing maintenance. Because of this, he proposed in the open source application to create a non-profit organization to hold the IP and maintain the project. This was approved by Disney. The Disney Open Source Committee approved the application known as OSSRELEASE-10, and the code was released on October 2, 2016. Disney decided to not issue a press release. Original OSSRELASE-10 document
It is no doubt Grayscale’s booming popularity as a mainstream investment has caused a lot of community hullabaloo lately. As such, I felt it was worth making a FAQ regarding the topic. I’m looking to update this as needed and of course am open to suggestions / adding any questions. The goal is simply to have a thread we can link to anyone with questions on Grayscaleand its products. Instead of explaining the same thing 3 times a day, shoot those posters over to this thread.My hope is that these questions are answered in a fairly simple and easy to understand manner. I think as the sub grows it will be a nice reference point for newcomers. Disclaimer: I do NOT work for Grayscale and as such am basing all these answers on information that can be found on their website / reports. (Grayscale’s official FAQ can be found here). I also do NOT have a finance degree, I do NOT have a Series 6 / 7 / 140-whatever, and I do NOT work with investment products for my day job. I have an accounting background and work within the finance world so I have the general ‘business’ knowledge to put it all together, but this is all info determined in my best faith effort as a layman. The point being is this --- it is possible I may explain something wrong or missed the technical terms, and if that occurs I am more than happy to update anything that can be proven incorrect Everything below will be in reference to ETHE but will apply to GBTC as well.If those two segregate in any way, I will note that accordingly.
ETHE is essentially a stock that intends to loosely track the price of ETH. It does so by having each ETHE be backed by a specific amount of ETH that is held on chain. Initially, the newly minted ETHE can only be purchased by institutions and accredited investors directly from Grayscale. Once a year has passed (6 months for GBTC) it can then be listed on the OTCQX Best Market exchange for secondary trading. Once listed on OTCQX, anyone investor can purchase at this point. Additional information on ETHE can be found here.
So ETHE is an ETF?
No. For technical reasons beyond my personal understandings it is not labeled an ETF. I know it all flows back to the “Securities Act Rule 144”, but due to my limited knowledge on SEC regulations I don’t want to misspeak past that. If anyone is more knowledgeable on the subject I am happy to input their answer here.
How long has ETHE existed?
ETHE was formed 12/14/2017. GBTC was formed 9/25/2013.
How is ETHE created?
The trust will issue shares to “Authorized Participants” in groups of 100 shares (called baskets). Authorized Participants are the only persons that may place orders to create these baskets and they do it on behalf of the investor. Source: Creation and Redemption of Shares section on page 39 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here Note – The way their reports word this makes it sound like there is an army of authorizers doing the dirty work, but in reality there is only one Authorized Participant. At this moment the “Genesis” company is the sole Authorized Participant. Genesis is owned by the “Digital Currency Group, Inc.” which is the parent company of Grayscale as well. (And to really go down the rabbit hole it looks like DCG is the parent company of CoinDesk and is “backing 150+ companies across 30 countries, including Coinbase, Ripple, and Chainalysis.”) Source: Digital Currency Group, Inc. informational section on page 77 of the “Grayscale Bitcoin Trust (BTC) Form 10-K (2019)” – Located Here Source: Barry E. Silbert informational section on page 75 of the “Grayscale Bitcoin Trust (BTC) Form 10-K (2019)” – Located Here
How does Grayscale acquire the ETH to collateralize the ETHE product?
An Investor may acquire ETHE by paying in cash or exchanging ETH already owned.
Cash: The investor pays the subscription amount in cash and the Authorized Participant will use that cash to purchase ETH.
ETH: The investor transfers the ETH to the Authorized Participant, which will contribute the ETH in-kind to the Trust.
Source: Creation and Redemption of Shares section on page 40 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Where does Grayscale store their ETH? Does it have a specific wallet address we can follow?
ETH is stored with Coinbase Custody Trust Company, LLC. I am unaware of any specific address or set of addresses that can be used to verify the ETH is actually there. As an aside - I would actually love to see if anyone knows more about this as it’s something that’s sort of peaked my interest after being asked about it… I find it doubtful we can find that however. Source: Part C. Business Information, Item 8, subsection A. on page 16 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Can ETHE be redeemed for ETH?
No, currently there is no way to give your shares of ETHE back to Grayscale to receive ETH back. The only method of getting back into ETH would be to sell your ETHE to someone else and then use those proceeds to buy ETH yourself. Source: Redemption Procedures on page 41 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Why are they not redeeming shares?
I think the report summarizes it best:
Redemptions of Shares are currently not permitted and the Trust is unable to redeem Shares. Subject to receipt of regulatory approval from the SEC and approval by the Sponsor in its sole discretion, the Trust may in the future operate a redemption program. Because the Trust does not believe that the SEC would, at this time, entertain an application for the waiver of rules needed in order to operate an ongoing redemption program, the Trust currently has no intention of seeking regulatory approval from the SEC to operate an ongoing redemption program.
Source: Redemption Procedures on page 41 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
What is the fee structure?
ETHE has an annual fee of 2.5%. GBTC has an annual fee of 2.0%. Fees are paid by selling the underlying ETH / BTC collateralizing the asset. Source: ETHE’s informational page on Grayscale’s website - Located Here Source: Description of Trust on page 31 & 32 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
What is the ratio of ETH to ETHE?
At the time of posting (6/19/2020) each ETHE share is backed by .09391605 ETH. Each share of GBTC is backed by .00096038 BTC. ETHE & GBTC’s specific information page on Grayscale’s website updates the ratio daily – Located Here For a full historical look at this ratio, it can be found on the Grayscale home page on the upper right side if you go to Tax Documents > 2019 Tax Documents > Grayscale Ethereum Trust 2019 Tax Letter.
Why is the ratio not 1:1? Why is it always decreasing?
While I cannot say for certain why the initial distribution was not a 1:1 backing, it is more than likely to keep the price down and allow more investors a chance to purchase ETHE / GBTC. As noted above, fees are paid by selling off the ETH collateralizing ETHE. So this number will always be trending downward as time goes on. Source: Description of Trust on page 32 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
I keep hearing about how this is locked supply… explain?
As noted above, there is currently no redemption program for converting your ETHE back into ETH. This means that once an ETHE is issued, it will remain in circulation until a redemption program is formed --- something that doesn’t seem to be too urgent for the SEC or Grayscale at the moment. Tiny amounts will naturally be removed due to fees, but the bulk of the asset is in there for good. Knowing that ETHE cannot be taken back and destroyed at this time, the ETH collateralizing it will not be removed from the wallet for the foreseeable future. While it is not fully locked in the sense of say a totally lost key, it is not coming out any time soon. Per their annual statement:
The Trust’s ETH will be transferred out of the ETH Account only in the following circumstances: (i) transferred to pay the Sponsor’s Fee or any Additional Trust Expenses, (ii) distributed in connection with the redemption of Baskets (subject to the Trust’s obtaining regulatory approval from the SEC to operate an ongoing redemption program and the consent of the Sponsor), (iii) sold on an as-needed basis to pay Additional Trust Expenses or (iv) sold on behalf of the Trust in the event the Trust terminates and liquidates its assets or as otherwise required by law or regulation.
Source: Description of Trust on page 31 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Grayscale now owns a huge chunk of both ETH and BTC’s supply… should we be worried about manipulation, a sell off to crash the market crash, a staking cartel?
First, it’s important to remember Grayscale is a lot more akin to an exchange then say an investment firm. Grayscale is working on behalf of its investors to create this product for investor control. Grayscale doesn’t ‘control’ the ETH it holds any more then Coinbase ‘controls’ the ETH in its hot wallet. (Note: There are likely some varying levels of control, but specific to this topic Grayscale cannot simply sell [legally, at least] the ETH by their own decision in the same manner Coinbase wouldn't be able to either.) That said, there shouldn’t be any worry in the short to medium time-frame. As noted above, Grayscale can’t really remove ETH other than for fees or termination of the product. At 2.5% a year, fees are noise in terms of volume. Grayscale seems to be the fastest growing product in the crypto space at the moment and termination of the product seems unlikely. IF redemptions were to happen tomorrow, it’s extremely unlikely we would see a mass exodus out of the product to redeem for ETH. And even if there was incentive to get back to ETH, the premium makes it so that it would be much more cost effective to just sell your ETHE on the secondary market and buy ETH yourself. Remember, any redemption is up to the investors and NOT something Grayscale has direct control over.
Yes, but what about [insert criminal act here]…
Alright, yes. Technically nothing is stopping Grayscale from selling all the ETH / BTC and running off to the Bahamas (Hawaii?). BUT there is no real reason for them to do so. Barry is an extremely public figure and it won’t be easy for him to get away with that. Grayscale’s Bitcoin Trust creates SEC reports weekly / bi-weekly and I’m sure given the sentiment towards crypto is being watched carefully. Plus, Grayscale is making tons of consistent revenue and thus has little to no incentive to give that up for a quick buck.
That’s a lot of ‘happy little feels’ Bob, is there even an independent audit or is this Tether 2.0?
Actually yes, an independent auditor report can be found in their annual reports. It is clearly aimed more towards the financial side and I doubt the auditors are crypto savants, but it is at least one extra set of eyes. Auditors are Friedman LLP – Auditor since 2015. Source: Independent Auditor Report starting on page 116 (of the PDF itself) of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here As mentioned by user TheCrpytosAndBloods (In Comments Below), a fun fact:
The company’s auditors Friedman LLP were also coincidentally TetheBitfinex’s auditors until They controversially parted ways in 2018 when the Tether controversy was at its height. I am not suggesting for one moment that there is anything shady about DCG - I just find it interesting it’s the same auditor.
“Grayscale sounds kind of lame” / “Not your keys not your crypto!” / “Why is anyone buying this, it sounds like a scam?”
Welp, for starters this honestly is not really a product aimed at the people likely to be reading this post. To each their own, but do remember just because something provides no value to you doesn’t mean it can’t provide value to someone else. That said some of the advertised benefits are as follows:
Access to trading within a tax advantaged retirement account
Institutions can easily and safely get exposure to crypto in a more legal-friendly manner
Ease of use for those who are not very technologically savvy
Ease of access for someone who doesn’t want to set up a Coinbase account
Perceived trust in institutional platforms over something like Coinbase or Kraken
Degen traders who just want access to the volatility ETHE provides that have no interest in crypto beyond that
So for example, I can set up an IRA at a brokerage account that has $0 trading fees. Then I can trade GBTC and ETHE all day without having to worry about tracking my taxes. All with the relative safety something like E-Trade provides over Binance. As for how it benefits the everyday ETH holder? I think the supply lock is a positive. I also think this product exposes the Ethereum ecosystem to people who otherwise wouldn’t know about it.
Why is there a premium? Why is ETHE’s premium so insanely high compared to GBTC’s premium?
There are a handful of theories of why a premium exists at all, some even mentioned in the annual report. The short list is as follows:
ETHE is NOT redeeming shares and as such doesn’t have an effective arbitrage mechanism
ETHE has a 1 year wait to be sold on the secondary market, again negating the ability to effectively arbitrage the premium
People may simply be willing to pay a premium for the benefits stated above.
Why is ETHE’s so much higher the GBTC’s? Again, a few thoughts:
ETHE hasn’t been around as long, so there is less secondary market supply to go around
ETHE was listed at an insanely high premium to begin with
ETHE might simply be more popular at the moment
Could just be sheer stupidity (investors think ETHE is a 1:1 ratio not 1:11)
Are there any other differences between ETHE and GBTC?
I touched on a few of the smaller differences, but one of the more interesting changes is GBTC is now a “SEC reporting company” as of January 2020. Which again goes beyond my scope of knowledge so I won’t comment on it too much… but the net result is GBTC is now putting out weekly / bi-weekly 8-K’s and annual 10-K’s. This means you can track GBTC that much easier at the moment as well as there is an extra layer of validity to the product IMO.
I’m looking for some statistics on ETHE… such as who is buying, how much is bought, etc?
There is a great Q1 2020 report I recommend you give a read that has a lot of cool graphs and data on the product. It’s a little GBTC centric, but there is some ETHE data as well. It can be found here hidden within the 8-K filings.Q1 2020 is the 4/16/2020 8-K filing. For those more into a GAAP style report see the 2019 annual 10-K of the same location.
Is Grayscale only just for BTC and ETH?
No, there are other products as well. In terms of a secondary market product, ETCG is the Ethereum Classic version of ETHE. Fun Fact – ETCG was actually put out to the secondary market first. It also has a 3% fee tied to it where 1% of it goes to some type of ETC development fund. In terms of institutional and accredited investors, there are a few ‘fan favorites’ such as Bitcoin Cash, Litcoin, Stellar, XRP, and Zcash. Something called Horizion (Backed by ZEN I guess? Idk to be honest what that is…). And a diversified Mutual Fund type fund that has a little bit of all of those. None of these products are available on the secondary market.
Are there alternatives to Grayscale?
I know they exist, but I don’t follow them. I’ll leave this as a “to be edited” section and will add as others comment on what they know. Per user Over-analyser (in comments below):
As asked by pegcity - Okay so I was under the impression you can just give them your own ETH and get ETHE, but do you get 11 ETHE per ETH or do you get the market value of ETH in USD worth of ETHE?
I have always understood that the ETHE issued directly through Grayscale is issued without the premium. As in, if I were to trade 1 ETH for ETHE I would get 11, not say only 2 or 3 because the secondary market premium is so high. And if I were paying cash only I would be paying the price to buy 1 ETH to get my 11 ETHE. Per page 39 of their annual statement, it reads as follows:
The Trust will issue Shares to Authorized Participants from time to time, but only in one or more Baskets (with a Basket being a block of 100 Shares). The Trust will not issue fractions of a Basket. The creation (and, should the Trust commence a redemption program, redemption) of Baskets will be made only in exchange for the delivery to the Trust, or the distribution by the Trust, of the number of whole and fractional ETH represented by each Basket being created (or, should the Trust commence a redemption program, redeemed), which is determined by dividing (x) the number of ETH owned by the Trust at 4:00 p.m., New York time, on the trade date of a creation or redemption order, after deducting the number of ETH representing the U.S. dollar value of accrued but unpaid fees and expenses of the Trust (converted using the ETH Index Price at such time, and carried to the eighth decimal place), by (y) the number of Shares outstanding at such time (with the quotient so obtained calculated to one one-hundred-millionth of one ETH (i.e., carried to the eighth decimal place)), and multiplying such quotient by 100 (the “Basket ETH Amount”). All questions as to the calculation of the Basket ETH Amount will be conclusively determined by the Sponsor and will be final and binding on all persons interested in the Trust. The Basket ETH Amount multiplied by the number of Baskets being created or redeemed is the “Total Basket ETH Amount.” The number of ETH represented by a Share will gradually decrease over time as the Trust’s ETH are used to pay the Trust’s expenses. Each Share represented approximately 0.0950 ETH and 0.0974 ETH as of December 31, 2019 and 2018, respectively.
Who the DeFi leaders are and how to earn on Maker, Compound, Aave, Curve, Synthetix and QDAO DeFi
The DeFi ecosystem has already recreated traditional financial instruments in a new ‘unchained’ decentralized structure. This year, a huge number of DeFi-related projects gained the attention of crypto enthusiasts. The leaders of the race are Maker, Compound, Aave, Curve, Synthetix and QDAO DeFi. These projects provide a significant number of opportunities to earn money. So let’s find out what the DeFi market mood is right now and how you can increase your holdings in 2020.
the purchase of tokenized stocks of popular listed companies (e.g. Google, Facebook, Netflix, etc.).
On top of that, QDAO DeFi has its own native cryptocurrencies: USDQ stablecoin (tied to the US dollar). It is also used on the platform and QDAO. QDAO is a cryptocurrency that provides significant bonuses for Deposits, Crypto Loans and other services inside QDAO DeFi. Additional features such as governance of the ecosystem and fee payments within the ecosystem are in the long-term development roadmap. QDAO DeFi offers 17 currencies and the interface is user-friendly and convenient. You can open a Secure Personal QDAO DeFi Account and start earning passive income from the very first day. The interest is paid out daily with no fees. Users can withdraw funds after they reach the minimum withdrawal amount in a specific cryptocurrency. You can open a deposit in just a few minutes, click the link to find out how.
What’s next for DeFi projects?
Earning on DeFi platforms is easy and convenient. The major players offer a great variety of services to help you find the best way to trade, mint and stake. Billionaire Bitcoin bull, Tim Draper says, “The DeFi world is almost as technologically advanced as the dollar and when it is, there will be no one who will want to accept a politically manipulable currency like dollars anymore.” Will DeFi fully replace all the traditional financial instruments? Opinions are divided. However, it can become the basis of a new digital banking system and return the trust to the financial system. Want to be the first to hear QDAO DeFi news and updates? Visit ourwebsiteand stay in touch with us on social media:Twitter,Facebook,TelegramandLINE(for the Japanese-speaking community).
How To End The Cryptocurrency Exchange "Wild West" Without Crippling Innovation
In case you haven't noticed the consultation paper, staff notice, and report on Quadriga, regulators are now clamping down on Canadian cryptocurrency exchanges. The OSC and other regulatory bodies are still interested in industry feedback. They have not put forward any official regulation yet. Below are some ideas/insights and a proposed framework.
Typical securities frameworks will cost Canadians millions of dollars (ie Sarbanes-Oxley estimated at $5m USD/yr per firm). Implementation costs of this proposal are significantly cheaper.
Canadians can maintain a diverse set of exchanges, multiple viable business models are still fully supported, and innovation is encouraged while keeping Canadians safe.
Many of you have limited time to read the full proposal, so here are the highlights:
Effective standards to prevent both internal and external theft. Exchange operators are trained and certified, and have a legal responsibility to users.
Regular Transparent Audits
Provides visibility to Canadians that their funds are fully backed on the exchange, while protecting privacy and sensitive platform information.
Establishment of basic insurance standards/strategy, to expand over time. Removing risk to exchange users of any hot wallet theft.
Background and Justifications
Cold Storage Custody/Management After reviewing close to 100 cases, all thefts tend to break down into more or less the same set of problems: • Funds stored online or in a smart contract, • Access controlled by one person or one system, • 51% attacks (rare), • Funds sent to the wrong address (also rare), or • Some combination of the above. For the first two cases, practical solutions exist and are widely implemented on exchanges already. Offline multi-signature solutions are already industry standard. No cases studied found an external theft or exit scam involving an offline multi-signature wallet implementation. Security can be further improved through minimum numbers of signatories, background checks, providing autonomy and legal protections to each signatory, establishing best practices, and a training/certification program. The last two transaction risks occur more rarely, and have never resulted in a loss affecting the actual users of the exchange. In all cases to date where operators made the mistake, they've been fully covered by the exchange platforms. • 51% attacks generally only occur on blockchains with less security. The most prominent cases have been Bitcoin Gold and Ethereum Classic. The simple solution is to enforce deposit limits and block delays such that a 51% attack is not cost-effective. • The risk of transactions to incorrect addresses can be eliminated by a simple test transaction policy on large transactions. By sending a small amount of funds prior to any large withdrawals/transfers as a standard practice, the accuracy of the wallet address can be validated. The proposal covers all loss cases and goes beyond, while avoiding significant additional costs, risks, and limitations which may be associated with other frameworks like SOC II. On The Subject of Third Party Custodians Many Canadian platforms are currently experimenting with third party custody. From the standpoint of the exchange operator, they can liberate themselves from some responsibility of custody, passing that off to someone else. For regulators, it puts crypto in similar categorization to oil, gold, and other commodities, with some common standards. Platform users would likely feel greater confidence if the custodian was a brand they recognized. If the custodian was knowledgeable and had a decent team that employed multi-sig, they could keep assets safe from internal theft. With the right protections in place, this could be a great solution for many exchanges, particularly those that lack the relevant experience or human resources for their own custody systems. However, this system is vulnerable to anyone able to impersonate the exchange operators. You may have a situation where different employees who don't know each other that well are interacting between different companies (both the custodian and all their customers which presumably isn't just one exchange). A case study of what can go wrong in this type of environment might be Bitpay, where the CEO was tricked out of 5000 bitcoins over 3 separate payments by a series of emails sent legitimately from a breached computer of another company CEO. It's also still vulnerable to the platform being compromised, as in the really large $70M Bitfinex hack, where the third party Bitgo held one key in a multi-sig wallet. The hacker simply authorized the withdrawal using the same credentials as Bitfinex (requesting Bitgo to sign multiple withdrawal transactions). This succeeded even with the use of multi-sig and two heavily security-focused companies, due to the lack of human oversight (basically, hot wallet). Of course, you can learn from these cases and improve the security, but so can hackers improve their deception and at the end of the day, both of these would have been stopped by the much simpler solution of a qualified team who knew each other and employed multi-sig with properly protected keys. It's pretty hard to beat a human being who knows the business and the typical customer behaviour (or even knows their customers personally) at spotting fraud, and the proposed multi-sig means any hacker has to get through the scrutiny of 3 (or more) separate people, all of whom would have proper training including historical case studies. There are strong arguments both for and against using use of third party custodians. The proposal sets mandatory minimum custody standards would apply regardless if the cold wallet signatories are exchange operators, independent custodians, or a mix of both. On The Subject Of Insurance ShakePay has taken the first steps into this new realm (congratulations). There is no question that crypto users could be better protected by the right insurance policies, and it certainly feels better to transact with insured platforms. The steps required to obtain insurance generally place attention in valuable security areas, and in this case included a review from CipherTrace. One of the key solutions in traditional finance comes from insurance from entities such as the CDIC. However, historically, there wasn't found any actual insurance payout to any cryptocurrency exchange, and there are notable cases where insurance has not paid. With Bitpay, for example, the insurance agent refused because the issue happened to the third party CEO's computer instead of anything to do with Bitpay itself. With the Youbit exchange in South Korea, their insurance claim was denied, and the exchange ultimately ended up instead going bankrupt with all user's funds lost. To quote Matt Johnson in the original Lloyd's article: “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.” ShakePay's insurance was only reported to cover their cold storage, and “physical theft of the media where the private keys are held”. Physical theft has never, in the history of cryptocurrency exchange cases reviewed, been reported as the cause of loss. From the limited information of the article, ShakePay made it clear their funds are in the hands of a single US custodian, and at least part of their security strategy is to "decline to confirm the custodian’s name on the record". While this prevents scrutiny of the custodian, it's pretty silly to speculate that a reasonably competent hacking group couldn't determine who the custodian is. A far more common infiltration strategy historically would be social engineering, which has succeeded repeatedly. A hacker could trick their way into ShakePay's systems and request a fraudulent withdrawal, impersonate ShakePay and request the custodian to move funds, or socially engineer their way into the custodian to initiate the withdrawal of multiple accounts (a payout much larger than ShakePay) exploiting the standard procedures (for example, fraudulently initiating or override the wallet addresses of a real transfer). In each case, nothing was physically stolen and the loss is therefore not covered by insurance. In order for any insurance to be effective, clear policies have to be established about what needs to be covered. Anything short of that gives Canadians false confidence that they are protected when they aren't in any meaningful way. At this time, the third party insurance market does not appear to provide adequate options or coverage, and effort is necessary to standardize custody standards, which is a likely first step in ultimately setting up an insurance framework. A better solution compared to third party insurance providers might be for Canadian exchange operators to create their own collective insurance fund, or a specific federal organization similar to the CDIC. Such an organization would have a greater interest or obligation in paying out actual cases, and that would be it's purpose rather than maximizing it's own profit. This would be similar to the SAFU which Binance has launched, except it would cover multiple exchanges. There is little question whether the SAFU would pay out given a breach of Binance, and a similar argument could be made for a insurance fund managed by a collective of exchange operators or a government organization. While a third party insurance provider has the strong market incentive to provide the absolute minimum coverage and no market incentive to payout, an entity managed by exchange operators would have incentive to protect the reputation of exchange operators/the industry, and the government should have the interest of protecting Canadians. On The Subject of Fractional Reserve There is a long history of fractional reserve failures, from the first banks in ancient times, through the great depression (where hundreds of fractional reserve banks failed), right through to the 2008 banking collapse referenced in the first bitcoin block. The fractional reserve system allows banks to multiply the money supply far beyond the actual cash (or other assets) in existence, backed only by a system of debt obligations of others. Safely supporting a fractional reserve system is a topic of far greater complexity than can be addressed by a simple policy, and when it comes to cryptocurrency, there is presently no entity reasonably able to bail anyone out in the event of failure. Therefore, this framework is addressed around entities that aim to maintain 100% backing of funds. There may be some firms that desire but have failed to maintain 100% backing. In this case, there are multiple solutions, including outside investment, merging with other exchanges, or enforcing a gradual restoration plan. All of these solutions are typically far better than shutting down the exchange, and there are multiple cases where they've been used successfully in the past. Proof of Reserves/Transparency/Accountability Canadians need to have visibility into the backing on an ongoing basis. The best solution for crypto-assets is a Proof of Reserve. Such ideas go back all the way to 2013, before even Mt. Gox. However, no Canadian exchange has yet implemented such a system, and only a few international exchanges (CoinFloor in the UK being an example) have. Many firms like Kraken, BitBuy, and now ShakePay use the Proof of Reserve term to refer to lesser proofs which do not actually cryptographically prove the full backing of all user assets on the blockchain. In order for a Proof of Reserve to be effective, it must actually be a complete proof, and it needs to be understood by the public that is expected to use it. Many firms have expressed reservations about the level of transparency required in a complete Proof of Reserve (for example Kraken here). While a complete Proof of Reserves should be encouraged, and there are some solutions in the works (ie TxQuick), this is unlikely to be suitable universally for all exchange operators and users. Given the limitations, and that firms also manage fiat assets, a more traditional audit process makes more sense. Some Canadian exchanges (CoinSquare, CoinBerry) have already subjected themselves to annual audits. However, these results are not presently shared publicly, and there is no guarantee over the process including all user assets or the integrity and independence of the auditor. The auditor has been typically not known, and in some cases, the identity of the auditor is protected by a NDA. Only in one case (BitBuy) was an actual report generated and publicly shared. There has been no attempt made to validate that user accounts provided during these audits have been complete or accurate. A fraudulent fractional exchange, or one which had suffered a breach they were unwilling to publicly accept (see CoinBene), could easily maintain a second set of books for auditors or simply exclude key accounts to pass an individual audit. The proposed solution would see a reporting standard which includes at a minimum - percentage of backing for each asset relative to account balances and the nature of how those assets are stored, with ownership proven by the auditor. The auditor would also publicly provide a "hash list", which they independently generate from the accounts provided by the exchange. Every exchange user can then check their information against this public "hash list". A hash is a one-way form of encryption, which fully protects the private information, yet allows anyone who knows that information already to validate that it was included. Less experienced users can take advantage of public tools to calculate the hash from their information (provided by the exchange), and thus have certainty that the auditor received their full balance information. Easy instructions can be provided. Auditors should be impartial, their identities and process public, and they should be rotated so that the same auditor is never used twice in a row. Balancing the cost of auditing against the needs for regular updates, a 6 month cycle likely makes the most sense. Hot Wallet Management The best solution for hot wallets is not to use them. CoinBerry reportedly uses multi-sig on all withdrawals, and Bitmex is an international example known for their structure devoid of hot wallets. However, many platforms and customers desire fast withdrawal processes, and human validation has a cost of time and delay in this process. A model of self-insurance or separate funds for hot wallets may be used in these cases. Under this model, a platform still has 100% of their client balance in cold storage and holds additional funds in hot wallets for quick withdrawal. Thus, the risk of those hot wallets is 100% on exchange operators and not affecting the exchange users. Since most platforms typically only have 1%-5% in hot wallets at any given time, it shouldn't be unreasonable to build/maintain these additional reserves over time using exchange fees or additional investment. Larger withdrawals would still be handled at regular intervals from the cold storage. Hot wallet risks have historically posed a large risk and there is no established standard to guarantee secure hot wallets. When the government of South Korea dispatched security inspections to multiple exchanges, the results were still that 3 of them got hacked after the inspections. If standards develop such that an organization in the market is willing to insure the hot wallets, this could provide an acceptable alternative. Another option may be for multiple exchange operators to pool funds aside for a hot wallet insurance fund. Comprehensive coverage standards must be established and maintained for all hot wallet balances to make sure Canadians are adequately protected.
Current Draft Proposal
(1) Proper multi-signature cold wallet storage. (a) Each private key is the personal and legal responsibility of one person - the “signatory”. Signatories have special rights and responsibilities to protect user assets. Signatories are trained and certified through a course covering (1) past hacking and fraud cases, (2) proper and secure key generation, and (3) proper safekeeping of private keys. All private keys must be generated and stored 100% offline by the signatory. If even one private keys is ever breached or suspected to be breached, the wallet must be regenerated and all funds relocated to a new wallet. (b) All signatories must be separate background-checked individuals free of past criminal conviction. Canadians should have a right to know who holds their funds. All signing of transactions must take place with all signatories on Canadian soil or on the soil of a country with a solid legal system which agrees to uphold and support these rules (from an established white-list of countries which expands over time). (c) 3-5 independent signatures are required for any withdrawal. There must be 1-3 spare signatories, and a maximum of 7 total signatories. The following are all valid combinations: 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7. (d) A security audit should be conducted to validate the cold wallet is set up correctly and provide any additional pertinent information. The primary purpose is to ensure that all signatories are acting independently and using best practices for private key storage. A report summarizing all steps taken and who did the audit will be made public. Canadians must be able to validate the right measures are in place to protect their funds. (e) There is a simple approval process if signatories wish to visit any country outside Canada, with a potential whitelist of exempt countries. At most 2 signatories can be outside of aligned jurisdiction at any given time. All exchanges would be required to keep a compliant cold wallet for Canadian funds and have a Canadian office if they wish to serve Canadian customers. (2) Regular and transparent solvency audits. (a) An audit must be conducted at founding, after 3 months of operation, and at least once every 6 months to compare customer balances against all stored cryptocurrency and fiat balances. The auditor must be known, independent, and never the same twice in a row. (b) An audit report will be published featuring the steps conducted in a readable format. This should be made available to all Canadians on the exchange website and on a government website. The report must include what percentage of each customer asset is backed on the exchange, and how those funds are stored. (c) The auditor will independently produce a hash of each customer's identifying information and balance as they perform the audit. This will be made publicly available on the exchange and government website, along with simplified instructions that each customer can use to verify that their balance was included in the audit process. (d) The audit needs to include a proof of ownership for any cryptocurrency wallets included. A satoshi test (spending a small amount) or partially signed transaction both qualify. (e) Any platform without 100% reserves should be assessed on a regular basis by a government or industry watchdog. This entity should work to prevent any further drop, support any private investor to come in, or facilitate a merger so that 100% backing can be obtained as soon as possible. (3) Protections for hot wallets and transactions. (a) A standardized list of approved coins and procedures will be established to constitute valid cold storage wallets. Where a multi-sig process is not natively available, efforts will be undertaken to establish a suitable and stable smart contract standard. This list will be expanded and improved over time. Coins and procedures not on the list are considered hot wallets. (b) Hot wallets can be backed by additional funds in cold storage or an acceptable third-party insurance provider with a comprehensive coverage policy. (c) Exchanges are required to cover the full balance of all user funds as denominated in the same currency, or double the balance as denominated in bitcoin or CAD using an established trading rate. If the balance is ever insufficient due to market movements, the firm must rectify this within 24 hours by moving assets to cold storage or increasing insurance coverage. (d) Any large transactions (above a set threshold) from cold storage to any new wallet addresses (not previously transacted with) must be tested with a smaller transaction first. Deposits of cryptocurrency must be limited to prevent economic 51% attacks. Any issues are to be covered by the exchange. (e) Exchange platforms must provide suitable authentication for users, including making available approved forms of two-factor authentication. SMS-based authentication is not to be supported. Withdrawals must be blocked for 48 hours in the event of any account password change. Disputes on the negligence of exchanges should be governed by case law.
Continued review of existing OSC feedback is still underway. More feedback and opinions on the framework and ideas as presented here are extremely valuable. The above is a draft and not finalized. The process of further developing and bringing a suitable framework to protect Canadians will require the support of exchange operators, legal experts, and many others in the community. The costs of not doing such are tremendous. A large and convoluted framework, one based on flawed ideas or implementation, or one which fails to properly safeguard Canadians is not just extremely expensive and risky for all Canadians, severely limiting to the credibility and reputation of the industry, but an existential risk to many exchanges. The responsibility falls to all of us to provide our insight and make our opinions heard on this critical matter. Please take the time to give your thoughts.
Introducing the halvinggame.com: Put your money where your mouth is.
Introducing The Halving Game, a fun platform about anticipating the Bitcoin price. Can you predict the BTC/USDT price on Binance at the time of halving on May 12? Then make your bet and win your share of the pot! It’s 100% anonymous, no email address required. How does it work? Everyone makes one or more bets with their own price prediction. At the time of halving (when block 630,000 hits), those bets within a +/- 2.5% range (target zone) around the Binance price will be paid out their share of the pot. For example, if the price at the time of the halving is 10,000 USDT, you would have your bet(s) placed between 9,750 USDT and 10,250 USDT (-2.5% to +2.5%). The minimum bet size is 1 bit, or 100 satoshi. Weight factor The weight factor spices things up even more and rewards older bets over younger ones, i.e the earlier you bet the greater your weight factor will be. For example, if you bet 14 days before the halving, the weight factor of your bet is 14.0. If you’re in the target zone, your share of the pot will be your bet multiplied by 14, so be quick because a bet only 7 days before the halving will have a weight factor of just 7.0. On the last day of the game, each bet only counts 1x. TL;DR: Bet as early as possible to get the maximum output. Payout calculation After the halving, the pot is distributed to those players whose bets are within the price range. The formula for the payout is: sum of my weighted bets in target zone / sum of all weighted bets in target zone Service fee We’re charging a modest fee of 2% to operate the service and provide support. The service fee is deducted at the time of payout. Good Luck! The game starts today, 14 days before the halving and bets will be allowed until block 629995, 5 blocks until the halving. Check it out at https://halvinggame.com. Follow us on twitter at https://twitter.com/HalvingGame And now we wish you all good luck! Also, any feedback is most welcome!
04-28 11:24 - 'Introducing The HalvingGame.com: Put your money where your mouth is!' (self.Bitcoin) by /u/HalvingGame removed from /r/Bitcoin within 2-12min
''' Introducing The Halving Game, a fun platform about anticipating the Bitcoin price. Can you predict the BTC/USDT price on Binance at the time of halving on May 12?Then make your bet and win your share of the pot! It’s 100% anonymous, no email address required. How does it work? Everyone makes one or more bets with their own price prediction. At the time of halving (when block 630,000 hits), those bets within a +/- 2.5% range (target zone) around the Binance price will be paid out their share of the pot. For example, if the price at the time of the halving is 10,000 USDT, you would have your bet(s) placed between 9,750 USDT and 10,250 USDT (-2.5% to +2.5%). The minimum bet size is 1 bit, or 100 satoshi. Weight factor The weight factor spices things up even more and rewards older bets over younger ones, i.e the earlier you bet the greater your weight factor will be. For example, if you bet 14 days before the halving, the weight factor of your bet is 14.0. If you’re in the target zone, your share of the pot will be your bet multiplied by 14, so be quick because a bet only 7 days before the halving will have a weight factor of just 7.0. On the last day of the game, each bet only counts 1x. TL;DR: Bet as early as possible to get the maximum output. Payout calculation After the halving, the pot is distributed to those players whose bets are within the price range. The formula for the payout [link]3 of my weighted bets in target zone / sum of all weighted bets in target zone Service fee We’re charging a modest fee of 2% to operate the service and provide support. The service fee is deducted at the time of payout. Good Luck! The game starts today, 14 days before the halving and bets will be allowed until block 629995, 5 blocks until the halving. Check it out at [[link]4 .Follow us on twitter at [[link]5 And now we wish you all good luck! Also, any feedback is most welcome! ''' Introducing The HalvingGame.com: Put your money where your mouth is! Go1dfish undelete link unreddit undelete link Author: HalvingGame 1: ha*vinggam*.*o*/ 2: twitter.*om/*al*i**G*me 3: is:sum 4: h*lvi*gg*me.*om]^^* 5: twit*e*.c*m/Ha**ingGame**^2 Unknown links are censored to prevent spreading illicit content.
What’s up everyone! (TL:DR at the end this time, I've learned from my past mistakes haha)
Yep, it’s me again! New case for a new coin that seems to have taken off lately (and for good reason!) I’ve been researching it deeply lately. For those of you wondering (and in a voluntary spirit of being transparent), I do hold nice bags of the coins I post about. However I do not dump them. I’m a HODLER at heart, and love to invest in and hold coins that have a purpose. You know, like, an actual purpose. I have a Phore masternode, which i intend to keep running indefinitely. I also have a decent chunk of COSS, which I also intend to keep for a very long time (3+ years, until they are a full crypto one-stop-solution).
If you’ve missed my previous post, you can find it here:
For those who do not know me, or haven’t read my previous post, here’s my intro: I come from a business & logistics management background. I started investing in cryptocurrencies and trading a little more than six months ago. I am very detail oriented and I’ve been researching all kinds of cryptos, for hours a day, for the past six months. Cryptocurrencies went from a simple hobby to a burning passion during that 6 month period.
I’ve spotted great coins at great prices, and it seems I keep doing so! Firstly, Ethereum at 150$. Then NEO when it was antshares (sub-3$), Gas when it was antcoin (sub-30c), OMG when it was sub-1$, ETP at 1$ (ended up selling at 5$, too many wallet issues and kind of lost faith in it), COSS at 6 cents, that ended up getting a lot of visibility due to my last post (23K+ views), and finally, Phore at 60cents.
It took me less than an hour of research to understand Phore’s potential. I immediately purchased and setup a Masternode after seeing how undervalued it is compared to coins like Dash, PivX, and other privacy/masternode coins. I must admit, i FOMO’ed in really fast, but then kept on researching after I had secured my cheap PHR, and the more I researched, the more I saw the vision.
For those of you that don’t know, Phore is a fork of PIVX. It is a Masternode/Proof of Stake hybrid (MN + PoS), meaning 60% of the block reward goes to Masternodes, 30% to stakers, and 10% is left for the “development fund”.
For the newbs reading this (welcome, by the way!), a masternode is basically a node that you deploy on a virtual server (or on your own computer) and it basically verifies the blockchain and maintains concensus alongside the other nodes. You need to “lock” 10000 phore to deploy a Masternode. Proof of Stake, on the other end, basically means you can purchase coins and “Stake them” (aka put them in your wallet) and they will also be used to validate the blockchain. Both masternodes and staking will give you rewards, in Phore coins. Masternodes more than staking, obviously, as you “lock” a rather high amount of coins to deploy one.
Allright, so, what’s so good about this Phore coin? Isn’t it just a PivX knock-off?
1) Well, first of all, The MN/PoS structure is simply genius IMO. Dash’s value has gone up a lot simply because there is so little in circulation and most of the coins are locked up in masternodes. But Dash is MN/PoW, basically Masternodes + Mining. Miners do not have as big an incentive to hold unlike MN’s, it’s their mining equipment that generates them Dash. In Phore’s Case, yes, we do have the Masternodes locking up most of the supply, but we also have the stakers that are incentivized to lock up their coins to stake, and generate some extra coins.
2) Which brings us to point 2. There is a BIG incentive to buy and hold this coin. Masternodes are being deployed at a rate of 5 to 10 per day. This means 50 to 100k phore are being purchased and locked up, every day. On top of that, people that cannot afford a costly masternode, can still buy a few thousand coins and earn “interests” as they help validating the blockchain too! This basically drains the order book, fast, and skyrockets the price.
3) What happens when the vast majority (65%+) of the coins are locked up in masternodes, and from the 35% remaining, most of it goes into “staking”? Here’s what happens: the supply becomes increasingly low, the demand increasingly high. People that own masternodes or own decent amounts of coins don’t wanna sell, as the “interests” they make double, triple, quadruple in value, incentivizing them even further to hold.
4) What I’ve described in points 1 to 3 is pretty basic stuff. Economics 101. It’s a positive feedback loop: More MN’s/stakers = less coins in circulation = higher price = higher “interests” earned = more people want in = even less coins in circulation = even higher price = even higher “interests”, and it repeats itself until an equilibrium is reached (judging from PivX, equilibrium is at or around 425M market cap). Everybody wants in early on PoS coins, even moreso with MN coins, because of that simple fact. Early dash masternode owners are pretty much laughing right now. Everyone FOMO’s a good masternode coin, and that’s a fact, pure and simple.
5) Alright, now let’s dive into the actual “technical” merits of Phore. Phore is developed by an anonymous team. The same team that created Kryptcoin a few years ago (a coin with a decentralized marketplace). The team performed in a stellar fashion with kryptcoin, as well as their marketplace. Unfortunately, they were way ahead of their time with the marketplace. Most people didn’t even know what a bitcoin was back then. Phore definitely has this “old school, underground project” feel to it, and you will notice a good chunk of its community on discord are crypto believers from well before crypto was even talked about. They are “remaking” Kryptcoin from scratch, with tons of added features, and an even better marketplace. The fact they pulled it off back then only further reassures me that they will pull it off even better this time. This team actually has something under its belt.
6) Phore will have SegWit, as well as Smart Contracts. Yep, you read that right, smart contracts and dApps will eventually be running on PHORE. Zerocoin protocol as well for completely anonymous transactions.
7) Phore is integrating a Decentralized marketplace based on OpenBazaar’s codebase. They aim to have it running smoother, with a better UI and make it very intuitive. If there’s one team you have to believe can pull it off, it’s definitely the Phore dev team (They already did it in the past!) And the best part is that it’s not for late 2018 unlike some other coins. Nope. We are already in the testing phase, and it should launch somewhere in Q1 2018.
8) Although it is obvious, I thought I’d mention it for the less familiar: 10% of each block reward goes to the development fund. This means the project has a constant flow of money to hire new devs, grow the marketing team, grow the project, pay for exchange listing fees, etc. (They’ve already added an extra dev & an extra marketing team member, just this week, and are already hiring right now for another dev position. So, if you are a talented dev, feel free to apply!)
9) They have applied for Binance today. Although this does NOT mean it is guaranteed, at all, it’s good to see them applying to a variety of exchanges. It is currently only available on cryptopia and is skyrocketing. Getting added to Binance, Bittrex and the likes would make it explode in a ridiculous way.
10) Point number 10 will be a little off topic, to put us in context for point #11. Personally, I like to contribute feedback to projects i truely believe in. One example I came up with was a cool idea for COSS and I let Rune (COSS founder) know about it. Basically, when COSS will get FIAT trading, it is impossible for people to get USD and EUR “fee split” from holding COSS, as USD and EUR are not compatible with the DAO, which is an Ethereum Smart Contract.
My way around this was to create a “COSSusd and a COSSeur”, basically an ERC20 token that’s automatically created/destroyed as FIAT is deposited/withdrawn from the exchange. People sending fiat over to COSS would basically be credited with the “COSSusd or COSSeur”, trade with it, and then when they want to withdraw they would exchange their ERC20 for FIAT and withdraw it via wire transfer. The whole thing would be smart-contract powered and transparent so there is always the same number of COSSusd and Real USD on COSS.
Basically, this would result in COSS holders receiving “fiat dividends” as well, and not only “crypto dividends”. Rune is currently in the process of getting legal opinion on this idea as he is an adamant believer in compliance and wants to do everything by the Book.
11) Well, for Phore, I’ve also contributed a few ideas to attempt to make the marketplace go viral. Viral as in mainstream viral, not only viral in the crypto-space. The devs, advisors, marketing team, advisors and even the community were all very impressed and took notes of everything. Now I cannot comment on what will and what won’t be implemented, but overall my feedback was received in an extremely positive manner. Here goes:
Basically an easy gateway that's only fiat > phore. Coded in a way that when you purchase with fiat it automatically sends it to your wallet (and obviously we'd need to have a phore mobile wallet app).
This is how Phore will go mainstream, no way around it, unless we wanna wait 10+ years for every crypto "newbies" coming in to actually go through the lengthy process of learning about crypto, how they work, familiarize themselves, etc. So many newbies flooding in, we definitely need easy one-click fiat > phore solution.
Plus it would be super easy for me or phore marketing team (or both, working together) to put up a small nice and concise "press release kit" and send it out to all the major media outlets (all the big blogs, bloomberg, yahoo finance, lifestyle blogs for the libertarian / marijuana users / all the people that are into the whole “freedom thing” as well as all media outlets targeted to the 18-30 crowd).
Facebook advertising campaigns (targeting 18-35 age range, people interested in crypto, people interested in "online commerce", etc etc.) as well as google advertising campaigns (people search amazon or ebay, and they find our sponsored paid ad on top saying "thinking of trying amazon? Check out the phore marketplace, it's cheaper, blockchain-powered and 100% decentralized".
*Instagram campaigns as well, lots of the 16-30 crowd there. Instagram, google, Facebook and Reddit campaigns and any other viable channels. We can do all these things AND succeed at them quite easily, all we need is 1) an intuitive marketplace, which the devs are busting their asses off to achieve and we KNOW it'll be phenomenal, and 2) a fiat > phore gateway integrated. That second point will make or break it in terms of mainstream adoption, hence why it's indispensable to have it before we tackle "mainstream marketing" via FB, IG, Google, Reddit, Twitter, Blogs & Other Media outlets.
Ideally the fiat > phore gateway would be on the website itself, so people get credited their phore directly on their marketplace account. With a mobile wallet being a nice add-on of course so they can keep the extra phore in there when not in use, and 1-click transfer from marketplace to mobile wallet and vice versa, "a la paypal/dash evolution.
TL;DR for the lazy: Masternodes + PoS // Self-sufficient project due to the “treasury fund” // Stellar team who has ALREADY DONE THIS before // Currently underserved (cryptopia only) // Team applied to exchanges including Binance// Segwit + Smart Contracts + Strong privacy features // Decentralized Marketplace being beta tested as we speak and launching Q1 2018 // Strong incentive to hold as both Masternodes AND stakers dry up the supply for staking purposes, which creates a positive feedback loop (coins get bought, price goes up making the “staking & MN rewards go up”, making more people want a MN or Stake, more people buy, price rises again, “interests” earned go up, rinse and repeat in an endless loop until equilibrium is reached).
Currently, a masternode generates roughly 120phweek. Calculate Phore’s current price multiplied by 120 and you’ll get a pretty solid estimate of the weekly revenue generated from a Masternode.
I’ve been researching privacy coins deeply and feel I’ve reached a sufficient findings to merit sharing my stance re SUMO.
By Taylor Margot. Everyone should read this! THE BASICS SUMOkoin is a fork of MONERO (XMR). XMR is a fork of Bytecoin. In my opinion, XMR is hands down the most undervalued coin in the top 15. Its hurdle is that people do not know how to price in privacy to the price of a coin yet. Once people figure out how to accurately assess the value privacy into the value of a coin, XMR, along with other privacy coins like SUMOkoin, will go parabolic. Let’s be clear about something. I am not here to argue SUMOkoin is superior to XMR. That’s not what this article is about and frankly is missing the point. I don’t find the SUMOkoin vs. XMR debate interesting. From where I stand, investing in SUMOkoin has nothing to do with SUMOkoin overtaking XMR or who has superior tech. If anything, I think the merits of XMR underline the value of SUMOkoin. What I do find interesting is return on investment (“ROI”). Imagine SUMO was an upcoming ICO. But you knew ahead of time that they had a proven product-market fit and an awesome, blue chip code base. That’s basically what you have in SUMO. Most good ICOs raise over 20mil (meaning their starting market cap is $20 mil) but after that, it’s a crapshoot. Investing in SUMO is akin to getting ICO prices but with the amount of information associated with more established coins. Let me make one more thing clear. Investing is all about information. Specifically it’s about the information imbalance between current value and the quality of your information. SUMO is highly imbalanced. The fact of the matter is that if you are interested in getting the vision and product/market fit of a $6 billion market cap coin for $20 mil, you should keep reading. If you are interested in arguing about XMR vs. SUMOkoin, I point you to this infographic Background I’m a corporate tech & IP lawyer in Silicon Valley. My practice focuses on venture capital (“VC)”) and mergers & acquisitions (“M&A”). Recently I have begun doing more IP strategy. Basically I spend all day every day reviewing cap tables, stock purchase agreements, merger agreements and patent portfolios. I’m also the CEO of a startup (Scry Chat) and have a team of three full-time engineers. I started using BTC in 2014 in conjunction with Silk Road and TOR. I recently had a minor conniption when I discovered how much BTC I handled in 2014. My 2017 has been good with IOTA at sub $0.30, POWR at $0.12, ENJIN at $0.02, REQ at $0.05, ENIGMA at $0.50, ITC (IoT Chain) and SUMO. My crypto investing philosophy is based on betting long odds. In the words of Warren Buffet, consolidate to get rich, diversify to stay rich. Or as I like to say, nobody ever got rich diversifying. That being said I STRONGLY recommend you have an IRA and/or 401(k) in place prior to venturing into crypto. But when it comes to crypto, I’d rather strike out dozens of times to have a chance at hitting a 100x home run. This approach is probably born out of working with VCs in Silicon Valley who do the same only with companies, not coins. I view myself as an aggressive VC in the cryptosphere. The Number 1 thing I’ve taken away from venture law is that it pays to get in EARLY. Did you know that the typical founder buys their shares for $0.00001 per share? So if a founder owns 5 million shares, they bought those shares for $50 total. The typical IPO goes out the door at $10-20 per share. My iPhone calculator says ERROR when it tries to divide $10/0.00001 because it runs out of screen real estate. At the time of this writing, SUMO has a Marketcap of $18 million. That is 3/10,000th or 1/3333th. Let that sink in for a minute. BCH is a fork of BTC and it has the fourth largest market cap of all cryptos. Given it’s market cap, I am positive SUMO is the best value proposition in the Privacy Coin arena at the time of this writing. * ROI MERITS OF SUMOkoin So what’s so good about SUMOkoin? Didn’t you say it was just a Monero knock-off? 1) Well, sort of. SUMO is based on CryptoNote and was conceived from a fork of Monero, with a little bit of extra privacy thrown in. It would not be wrong to think SUMO is to Litecoin as XMR is to Bitcoin. 2) Increased Privacy. Which brings us to point 2. SUMO is doing several things to increase privacy (see below). If Monero is the King of Privacy Coins, then SUMO is the Standard Bearer fighting on the front lines. Note: Monero does many of these too (though at the time of fork XMR could not). Don’t forget Monero is also 5.8 billion market cap to SUMO’s 18 million. a) RingCT. All transactions since genesis are RingCT (ring confidential transactions) and the minimum “mixin” transactions is 13 (12 plus the original transaction). This passes the threshold to statistically resist blockchain attacks. No transactions made on the SUMO blockchain can ever be traced to the actual participants. Nifty huh? Monero (3+1 mixins) is considering a community-wide fork to increase their minimum transactions to 6, 9, or 12. Not a bad market signal if you’re SUMOkoin eh? b) Sub-addresses. The wallet deploys disposable sub-addresses to conceal your real sumo wallet address even from senders (who typically would need to know your actual address to send currency). Monero also does this. 3) Fungibility aka “Digital Cash” aka Broad Use Case. “Fungibility” gets thrown about a bunch but basically it means ‘how close is this coin to cash in terms of usage?’ SUMO is one of a few cryptos that can boast true fungibility — it acts just like physical cash i.e. other people can never trace where the money came from or how many coins were transferred. MONERO will never be able to boast this because it did not start as fungible. 4) Mining Made Easy Mode. Seeing as SUMO was a fork, and not an ICO, they didn’t have to rewrite the wheel. Instead they focused on product by putting together solid fundamentals like a great wallet and a dedicated mining app. Basically anyone can mine with the most intuitive GUI mining app out there. Google “Sumo Easy Miner” – run and mine. 5) Intuitive and Secure Wallet. This shouldn’t come as a surprise, yet in this day and age, apparently it is not a prereq. They have a GUI wallet plus those unlimited sub-addresses I mentioned above. Here’s the github if you’d like to review: https://github.com/sumoprojects/SumoGUIWallet The wallet really is one of the best I have seen (ENJIN’s will be better). Clear, intuitive, idiot proof (as possible). 6) Decentralization. SUMO is botnet-proof, and therefore botnet mining resistant. When a botnet joins a mining pool, it adjusts the mining difficulty, thereby balancing the difficulty level of mining. 7) Coin Emission Scheme. SUMO’s block reward changes every 6-months as the following “Camel” distribution schema (inspired by real-world mining production like of crude oil, coal, etc. that is often slow at first, then accelerated in before decline and depletion). MONERO lacks this schema and it is significant. Camel ensures that Sumokoin won’t be a short-lived phenomena. Specifically, since Sumo is proof-of-work, not all SUMO can be mined. If it were all mined, miners would no longer be properly incentivized to contribute to the network (unless transaction fees were raised, which is how Bitcoin plans on handling when all 21 million coins have been mined, which will go poorly given that people already complain about fees). A good emission scheme is vital to viability. Compare Camel and Monero’s scheme if you must: https://github.com/sumoprojects/sumokoin/blob/mastescripts/sumokoin_camel_emission_cal.cpp vs. https://monero.stackexchange.com/questions/242/how-was-the-monero-emission-curve-chosen/247. 8) Dev Team // Locked Coins // Future Development Funds. There are lots of things that make this coin a ‘go.’ but perhaps the most overlooked in crypto is that the devs have delivered ahead of schedule. If you’re an engineer or have managed CS projects, you know how difficult hitting projected deadlines can be. These guys update github very frequently and there is a high degree of visibility. The devs have also time-locked their pre-mine in a publicly view-able wallet for years so they aren’t bailing out with a pump and dump. The dev team is based in Japan. 9) Broad Appeal. If marketed properly, SUMO has the ability to appeal to older individuals venturing into crypto due to the fungibility / similarities to cash. This is not different than XMR, and I expect it will be exploited in 2018 by all privacy coins. It could breed familiarity with new money, and new money is the future of crypto. 10) Absent from Major Exchanges. Thank god. ALL of my best investments have happened off Binance, Bittrex, Polo, GDAX, etc. Why? Because by the time a coin hits a major exchange you’re already too late. Your TOI is fucked. You’re no longer a savant. SUMO is on Cryptopia, the best jenky exchange. 11) Marketing. Which brings me to my final point – and it happens to be a weakness. SUMO has not focused on marketing. They’ve instead gathered together tech speaks for itself (or rather doesn’t). So what SUMO needs a community effort to distribute facts about SUMO’s value prop to the masses. A good example is Vert Coin. Their team is very good at disseminating information. I’m not talking about hyping a coin; I’m talking about how effectively can you spread facts about your product to the masses. To get mainstream SUMO needs something like this VertCoin post: https://np.reddit.com/vertcoin/comments/7ixkbf/vertbase_a_vertcoin_to_usd_exchange/ MARKET CAP DISCUSSION For a coin with using Monero’s tech, 20 million is minuscule. For any coin 20 mil is nothing. Some MC comparisons [as of Jan 2, 2017]:
SUMO: 18 million
ENJIN: 150 million (9x)
Enigma: 465 million (26x)
REQ: 500 million (28x)
POWR: 500 million (28x)
Monero: 5.8 billion (mental maths iz hard)
Let’s talk about market cap (“MC”) for a minute. It gets tossed around a lot but I don’t think people appreciate how important getting in as early as possible can be. Say you buy $1000 of SUMO at 20 mil MC. Things go well and 40 million new money gets poured into SUMO. Now the MC = 60 million. Your ROI is 200% (you invested $1,000 and now you have 3,000, netting 2,000). Now let’s says say you bought at 40 million instead of 20 million. $20 mill gets poured in until the MC again reaches 60 mil. Your ROI is 50% (you put in $1,000, you now have 1,500, netting 500). Remember: investing at 20 mil MC vs. 40 mil MC represents an EXTREMELY subtle shift in time of investment (“TOI”). But the difference in net profit is dramatic. the biggest factor is that your ROI multiplier is locked in at your TOI — look at the difference in the above example. 200% ROI vs. 50% ROI. That’s huge. But the difference was only 20 mil — that’s 12 hours in the crypto world. I strongly believe SUMO can and will 25x in Q1 2018 (400m MC) and 50x by Q4 2018 reach. There is ample room for a tricked out Monero clone at 1 bil MC. That’s 50x. Guess how many coins have 500 mil market caps? 58 as of this writing. 58! Have many of these coins with about ~500 mil MC have you heard of? MaidSafeCoin? Status? Decred? Veritaseum? DRAGONCHAIN ARE YOU KIDDING ME THE ROLE OF PRIVACY I want to close with a brief discussion of privacy as it relates to fundamental rights and as to crypto. 2018 will be remembered as the Year of Privacy Coins. Privacy has always been at the core of crypto. This is no coincidence. “Privacy” is the word we have attached to the concept of possessing the freedom to do as you please within the law without explaining yourself to the government or financial institution. Discussing privacy from a financial perspective is difficult because it has very deep political significance. But that is precisely why it is so valuable. Privacy is the right of billions of people not to be surveilled. We live in a world where every single transaction you do through the majority financial system is recorded, analyzed and sold — and yet where the money goes is completely opaque. Our transactions are visible from the top, but we can’t see up. Privacy coins turn that upside down. Privacy is a human right. It is the guarantor of American constitutional freedom. It is the cornerstone of freedoms of expression, association, political speech and all our other freedoms for that matter. And privacy coins are at the root of that freedom. What the internet did for freedom of information, privacy coins will do for freedom of financial transactions. POST SCRIPT: AN ENGINEER’S PERSPECTIVE Recently a well respected engineer reached out to me and had this to say about SUMO. I thought I’d share. "I’m messaging you because I came at this from a different perspective. For reference, I started investing in Sumo back when it was around $0.5 per coin. My background is in CS and Computer Engineering. I currently research in CS. When I was looking for a coin to invest in, I approached it in a completely different way from what you described in your post, I first made a list of coins with market caps < 20m, and then I removed all the coins that didn’t have active communities. Next, because of my background, I read through the code for each of the remaining coins, and picked the coins which had both frequent commits to GitHub (proving dev activity), and while more subjective, code that was well written. Sumo had both active devs, and (very) well written code. I could tell that the people behind this knew what they were doing, and so I invested. I say all of this, because I find it interesting how we seem to have very different strategies for selecting ‘winners’ but yet we both ended up finding Sumo." — Legal Disclaimer: THIS POST AND ANY SUBSEQUENT STATEMENTS BY THE AUTHOR DO NOT CONSTITUTE LEGAL OR FINANCIAL ADVICE AND IS NOT INTENDED TO BE LEGAL OR FINANCIAL ADVICE OR RELIED UPON. NO REFERENCES TO THIS POST SHALL BE CONSTRUED AS LEGAL OR FINANCIAL ADVICE. THIS POST REPRESENTS THE LONE OPINION OF A NON-SOPHISTICATED INVESTOR.
Stop looking exclusively at the USD value of coins. Look at how much they're worth in BTC or ETH and how that value develops over time to truly understand altcoin market movements.
This is a post mostly for the newbies. For some of you this is all going to be obvious stuff, but there are also lots of new arrivals here and I've gotten the impression this is something worth explaining. A lot of you have ventured into this space using well-established sites like Coinmarketcap and neat little apps like Blockfolio, which are designed to make everything as frictionless as possible for the end user, e.g. by displaying all prices directly in USD. That's good for ease of use, but bad if you want to really understand what's going on. Why? Because a price is always formed by supply and demand in its own market, and many altcoins either aren't directly traded against fiat currency at all, or have only minor trading volume in fiat exchanges – compared to much larger volume in crypto-only exchanges (like Bittrex, Binance, Kucoin) where they're traded against Bitcoin or Ethereum, the "fiat gateways." This means whenever you see a smaller altcoin's price displayed in US dollars, it's not a real price that is actually being traded anywhere – it's just the result of multiplying the altcoin-vs.-Bitcoin (or vs. Ethereum) price with the current dollar price of 1 BTC (or 1 ETH). So when Coinmarketcap once again looks like this on a day when Bitcoin is falling, it's not a sign that the whole market is collapsing, or the result of some huge coordinated effort between different markets. It's the result of simple arithmetic done by the website itself. US dollar charts for altcoins tend to be very confusing for this reason. On the one hand, what you want to see is how your coin performs independently. On the other hand, its own price moves are often totally overwritten by Bitcoin's price moves, making every chart look the same like in the screenshot above. The solution is to stick to the "real data" charts provided by your exchange or to use TradingView, a great charting website where you can check prices from most major crypto exchanges (Kucoin still missing at this time). All you have to do is type the ticker name (e.g. "VENBTC" for the VeChain/Bitcoin pair) and hit enter. You can even overlay different crypto pairs using the "Compare" feature. Sometimes of course it's better for perspective to still look at the calculated USD value, e.g. when Bitcoin rallies and you think your alts are dropping because they aren't worth quite as much in BTC anymore. But generally speaking you're much better off ignoring USD charts. Edit: I admit that I used contradictory phrasing in some parts of this post. Should've been clearer. What I really meant to say is that "fake" USD charts are generally not very helpful and that you need to look at each market separately if you want to understand how and why an altcoin goes up or down, not that you should ignore USD value completely. Here's an example.
Cryptocurrency Terms And Definitions - Common Crypto Words To Know
The blockchain community is not left out when it comes to the use of jargon and phrases. The use of words that look strange to those who are not involved in crypto is totally inevitable. It’s definitely going to be difficult for anyone not in this space to understand words like “ERC20, ICO or gas. So in order to help such people out, we have made a list of the most common cryptocurrency terms and definitions. Please sit back and enjoy your ride. Cryptocurrency Terms And Definitions One can categorize these terms into various parts. First of all, we will deal with general cryptocurrency terms and definitions. Blockchain Blockchains are distributed ledgers which are secured by cryptography. Everyone has access to read the information on every blockchain which means they are essentially public databases but the data update can only be done by the data owners. In the case of blockchains, data doesn’t remain on a single centralized server, they are copied across hundreds of thousands of computers worldwide. Projects such as Ethereum, Vechain, EOS etc. fall under this class of technology. Mining: The means of trying to ‘solve’ the next available block. One needs huge amounts of computer processing power to carry this out effectively. There is always a reward for doing this. Mining rig: A specially designed computer that processes proof-of-work blockchains such as Ethereum. They consist of multiple high-end graphic processors (GPUs) so as to maximize their processing power. Node: This is a computer that has a copy of the blockchain and is working to keep it in a good shape. PoW: The full meaning of this is Proof-of-work. The Ethereum network currently makes use of this algorithm. PoS: Its full meaning is Proof-of-stake. It is the proposed future algorithm for Ethereum. Those that own ETH will be able to lock up all or a portion of their ether for a given amount of time in order to ‘vote’ and generate network consensus instead of mining in its current form. Stakeholders will get rewards in form of ETH by doing so. Fork: This takes places when a certain blockchain splits into two different chains. This usually happens in the crypto space when new ‘governance rules’ are infused into the blockchain’s code. Software wallet: A crypto-currency storage that exists purely on a computer as software files. You can generate these kinds of wallets for free from diverse sources. MyEtherWallet (MEW) is one of the most popular sources around. Hardware wallet: A device that one can securely keep cryptocurrency. People often say that these wallets are the most secure way to store cryptocurrency. Examples of the most common hardware wallet models around are Ledger Nano S and Trezor. Cold storage: This is a way of moving your cryptocurrency from an online wallet to an offline one, as a means of safekeeping them from hack. There are a lot of ways to carry this out. Some methods that are commonly used include: · Using a hardware wallet to store your cryptocurrency. · By printing out the QR code of a software wallet and keeping it somewhere which is safe. · You can also move the files of a software wallet onto an external storage device such as USB drive and keeping it somewhere safe. Trading Related Cryptocurrency Terms And Definitions Exchange: These are websites where people trade (buy and sell) their cryptocurrencies. Some of the popular crypto exchanges we have around include Binance, Poloniex, Bittrex etc. Market order / market buy / market sell: A sale or purchase which is made on an exchange at the current price. A market buy acquires the cheapest Bitcoin available on the order book while a market sell fills up the most high-priced buy order on the books. Limit order / limit buy / limit sell: These are orders which are placed by traders to buy or sell a cryptocurrency when the price reaches a certain amount. They are pretty much like ‘for-sale’ signs you see on goods. Sell wall / buy wall: Cryptocurrency traders are able to see the current limit buy and sell points using a depth chart. The chart’s graphical representation is very much like a wall. FIAT: Refer to a government-issued currency. An example is the US dollar. Whale: A person who owns huge amounts of cryptocurrency. Margin trading: This is an act of increasing the intensity of a trade by using your existing coins. It is very risky for an inexperienced trader to partake in this. Stay safe!! Going long: This is a margin trade that gives profit if the price goes up. Going short: It is a margin trade that gives profit if the price goes down. Bullish: Being optimistic that the price of cryptocurrency is going to increase. Bearish: This is an expectation that the price of cryptocurrency is going to decrease. ATH: This simply means All-Time-High. This is the highest point that has been reached by a particular coin or token. Take for instance, Bitcoin’s ATH is about $20,000 and this was achieved around December 2017 and January 2018. Altcoin: A word used to qualify other cryptocurrencies which is not Bitcoin. Examples of altcoins are Ripple, NEO, EOS, Vechain, Electroneum etc. Tokens: These are ‘currency’ of projects which are hosted on the ethereum network. They raise money by issuing their own tokens to the general public. Tokens have a significant use in the project's ecosystem. Examples of tokens are Enjin Coin (ENJ), Zilliqa (ZIL), OmiseGO (OMG), Augur (REP) etc. ICO: The full meaning is Initial Coin Offering. This is synonymous to an IPO in the non-crypto world. Startups give out their own token in exchange for Bitcoin or ether. Shilling / pumping: An act of advertising another cryptocurrency. It is mostly done in a way that tricks as many people as possible into believing that a coin or token will get to a higher price in the future. Market Cap: This is the total value of a cryptocurrency. To calculate this, one has to multiply the total supply of coins by the current market price. You can get a run-down of several cryptocurrency projects on Coinmarketcap. Stable coin: This is a cryptocurrency which has an extremely low volatility. You can use a stable coin to trade against the overall crypto market. Arbitrage: A situation where a trader takes advantage of a difference in the price of the same coin / token on two different exchanges. FOMO: Simply means Fear Of Missing Out. That overwhelming feeling that one needs to get on board when there is a massive rise in the price of a commodity. This is also applicable in the crypto space. FUD: Fear, Uncertainty, and Doubt. It is a baseless negativity which is spread intentionally by someone or a group of people who want the price of cryptocurrency to decrease. FUDster: A person who spreads FUD. Pump And Dump: This happens when an altcoin gets a ton of attention, leading to a massive increase in price, and likewise followed by a big price crash of that altcoin. ROI: Return on Investment. The percentage profit a trader makes on an initial investment (i.e. A 100% ROI simply indicates that a trader doubled his money). TA: Trend Analysis or Technical Analysis. A way of examining current coin charts so as to make predictions for the next market movement. Next, we will be moving on to crytocurrency terms and definitions that are ethereum related. Dapp: Decentralized Application. It is an application that uses a decentralized peer-to-peer network like Ethereum smart contract as its back-end code. Bagholder: A person who still holds on to a particular altcoin despite having a pump and dump crash. Smart contract: This is a code that is deployed onto the Ethereum blockchain, it often helps with the direct interaction of how money flows from one point to another. The Flippening: A future event showing the capacity of Ethereum’s market cap (or some other cryptocurrency) surpassing Bitcoin’s market cap, making Ethereum the most ‘valuable’ crypto-currency. Gas: It is a measurement of the amount of processing needed by the ethereum network to execute a transaction. More complex transactions like deploying a smart contract onto the network requires more gas than sending ether from one wallet to another which is obviously a simpler operation. Gas price: This is the amount of ether an initiator of a transaction is willing to spend for each gas unit on a transaction. The higher the gas price, then the faster the processing of the transaction. Wei: It is the smallest denomination of ether. Gwei: This is a denomination of ether (ETH). Gwei is the unit for measuring gas prices. 1 Ether = 1,000,000,000 Gwei (109). MEW: MyEtherWallet is a site where users can generate ethereum wallets for free. We also have a handful of cryptocurrency terms and definitions that are memes. See some of them below; Hodl: People use this word when signifying that a person is keeping his coins / tokens for a long period of time. A couple of years back, someone on a Bitcoin forum made a post with a typo HODL in place of HOLD. Ever since then, this term has become one of the most popularly used term in crypto. Mooning: In crypto, this term comes to play when the price of cryptocurrencies move up astronomically. Lambo: This is highly synonymous with crypto. You can't leave out this word when discussing about cryptocurrency terms and definitions. This is the car we’re all goona buy when crypto makes us rich. This is gentlemen: People use this phrase when pointing out positive things that are currently taking place in the cryptosphere. Now that you are conversant with some of the commonly used cryptocurrency terms and definitions, you can now go out there and showcase your new crypto vocabulary to the world.
Hello! My name is Mihail Kudryashev, I am a frontend engineer at Platinum. We are a an international STO/IEO/ICO/POST ICO consulting, promotion and fundraising company with huge experience in STO and ICO marketing and best STO blockchain platform in the world! Learn more about it: Platinum.fund Our company gained popularity after launching the world’s number one online university with only practical knowledge on crypto economics. Now you can learn how to create and develop your own ICO and STO, how to market your campaign and make it super successful. Who are cryptocurrency investors? What drives people to invest in cryptocurrency? Read the extract of the UBAI lesson to get all the answers. Introduction to the Investors §2 In 2017, the total cryptocurrency market capitalization was approaching $850B which begs the question: Why are investors turning to cryptocurrencies? A survey by Blockchain Capital indicated that at least 30% of millennials would rather invest in bitcoin than invest in traditional stocks. Cryptocurrency investors, like traditional investors, expect a return at least proportionate to the risk they take. Due to the fundamental lack of regulation, incredible volatility and astronomical relative risk, many cryptocurrency investors expect to earn meteoric returns. Returns in the ranges of multiples from 200% to 1000%. Let us first begin by examining the kinds of people who invest in cryptocurrency, and then let’s see the reasons why each of them is investing in this relatively new market. Types of Investors The “Newbie” Cryptocurrency Investor This investor is just starting out. They probably have not had any significant experience in any form of investing before and bitcoin is their first experience. They have heard about people making incredible returns from cryptocurrency investing, or some aspect of the entire blockchain and crypto revolution attracts them, and they decide they want to invest too. Unfortunately, most of the newbie investors will end up losing their money, primarily because of one specific misconception; they think cryptocurrency investing is an easy way to make huge profits. “ “Types of Investors §2 “Gambler” or “Get Rich Quick” Investor This is the second class of cryptocurrency investor, and is actually not really an investor at all. This type of person is out to make a fortune as fast as possible. They will fall for whatever sweet-sounding scheme they hear. They love ideas that promise to double or triple their investment quickly. Like the Newbie, they do not understand how cryptocurrencies work, and they don’t care. The difference between this kind of investor and the successful individual or professional investor is that the gambler does not care about the management of risk, or about the timing of trades. They place their money on the table, and they hope it will make a good return. They are gambling rather than creating an investment thesis and executing a well-thought out strategy. They might even have an infectious positive attitude, but unfortunately it is not backed by knowledge or the due diligence required to be a successful investor. A good example of this style of thinking, outside of cryptocurrency, is high yield investment plans (HYIPs) that promise to multiply an investors capital by a certain factor. This is not to say that all HYIP programs are scams, but a good number of them are. Most importantly, the investors who flock into such plans have similar characteristics to that of the Get Rich Quick investor in that they will not take the time to learn about the field in which they are investing. They are just looking for fast money and an overnight success. “ “Types of Investors §3 Short Term Traders (Day/Swing Traders) Short term traders must, without a doubt, be the most knowledgeable investors if they are going to succeed at their chosen profession. They have, or they should have, studied the art and science of trading more thoroughly than other people. This is the kind of investor who has taken the time to learn about cryptocurrencies and the markets on which they trade. Short term traders create deliberate and timed strategies in an attempt to profit from fast market movements. Maybe many of the short term traders started off as Newbies, but these are the individuals who took the time and effort to learn about the market. They wanted to know what they were doing. These are the people who survived and thrived to grow into the type of trader that they want to be. Interestingly, the Day Trader does not attach emotion to any given coin. They do not need to believe in the sustainability/whitepapevision/road map, etc. of the project they are buying into at any particular time. They just need to be confident about the direction and timing of the potential price movement of the coin. “ “Types of Investors §4 Long Term Investors/ Hodlers A great majority of successful cryptocurrency investors can be most properly classified as Long Term Investors, or HODLers in true crypto terminology. These are investors who understand quite a bit about cryptocurrency and blockchain technology and believe in the sustainability of the coins in which they are investing. Think of the first few investors who bought bitcoin in the early days and years, when it was still deep under the radar for most people. These are the people who believed in the blockchain and cryptocurrency revolution. They didn’t sell their bitcoin for fast profit, although they had many chances to do so. They knew what they were doing, holding for the long term. These early investors and HODLers enjoyed astronomical growth all the way up to 2016 and 2017. But to be a long-term holder despite all the bad news and negative factors surrounding this brand new asset class, they must have really believed that bitcoin and the blockchain were going to change the world. This belief can only be established through study and research about the blockchain industry and the specific currencies and tokens in which you are going to invest. Follow up and learn more on www.ubai.co!” “Types of Investors §5 Sophisticated/Professional Investors These are experts in cryptocurrency investing. They most likely have a background in other forms of trading and investing, such as in stocks, bonds or options etc. They may also be earning fees by investing or managing money for other people. The Iconomi fund managers are a good example. Each Fund Manager manages an array of digital assets. Investors might choose Iconomi because it offers a platform for the investor to allocate funds to specific fund managers, with the ability to swap between managers instantly if the investor desires to do so. Each fund manager selects a number of coins in which they wish to trade or invest, with specified time horizons, short or long term. Investors can buy into the array of mutually held coins. This allows investors to utilize the knowledge and experience of professional fund managers to trade an allocated pool of capital, hopefully generating returns greater than the individual investor would be able to produce on his own. The fund managers are motivated by the fees and commissions they earn, and perhaps a performance-linked bonus. You can certainly be properly classified as a Sophisticated Investor without any need to be a fund manager for other peoples’ money. But a professional fund manager has the ability to trade with a larger pool of capital, manage complicated risk, and diversify trading strategy to generate various streams of income. “ “Between Countries A particular country’s participation in cryptocurrencies largely has to do with the legal regulations about blockchain projects and crypto currency investment in that jurisdiction. When China banned the use of cryptocurrency, most Chinese nationals had to withdraw their investments. Many other countries have also placed bans on the use or trade of cryptocurrencies. Countries like Japan that have allowed the use of cryptocurrencies have witnessed a significant rise in cryptocurrency investments as a result. Japan and South Korea are home to several high-traffic cryptocurrency exchanges, meaning that a notable proportion of their population is investing in cryptocurrencies. Another way to look at cryptocurrency investment demographics is to look at the bitcoin ATMs present in each country. The United States of America is the leading country, followed by Canada and then the United Kingdom. According to a report by Google trends, the five top countries interested in bitcoin are: South Africa, Slovenia, Nigeria, Colombia and Bolivia. Remember, cryptocurrency demographics can be a little tricky due to the anonymity involved. Many people may be afraid to participate in surveys, especially when their governments have placed legal restrictions on cryptocurrency investing. The main point the research seems to validate is that the demographics of the cryptocurrency investor base is diverse. While the average investor may be a white or Asian male between the ages of 26-30 with at least a university degree, the entire investor base is so much larger than that. Many big investors are likely to be significantly older, and have connections and businesses in the traditional economy as well. “ “Notable Investors in Cryptocurrency While many people have made fortunes from cryptocurrency investing, a handful of them stand out as being particularly remarkable. We will take a more detailed look at some of the biggest investment success stories to see how they did it and learn about their investing strategy. The Winklevoss Twins After being awarded their settlement from the lawsuit against Facebook, the Winklevoss twins decided to invest a significant portion of their money in Bitcoin. They invested $11million of the $65million they received. At that time, the price of a single bitcoin was about $120. This high-risk investment paid off handsomely and they became the first publicly known Bitcoin Billionaires, perhaps owning more than 1% of the total bitcoin in circulation. In an interview with Financial Times in 2016, the twins jointly said that they consider “Bitcoin as potentially the greatest social network because it is designed to transfer value over the internet”. They also pointed out that compared to gold, bitcoin has equal or greater foundational traits of scarcity and portability. “ “Notable Investors in Cryptocurrency §2 Michael Novogratz A self-made billionaire ex-Goldman Sachs investment banker, Novogratz has invested more than 30% of his fortune in cryptocurrency. In 2015, he announced a $500million cryptocurrency hedge fund, including $150million of his own money. Novogratz believes that “the blockchain, the computer code that underpins all cryptocurrencies, will reshape finance, just as the internet reshaped communication”. The investment thesis of Mr. Novogratz is similar to that of the Winklevoss twins. He has taken and maintains a long-term position while he trades in and out of short term moves, based on his fundamental belief in the potential and likely application of the underlying blockchain technology. By starting an investment fund in addition to his other cryptocurrency related ventures, he is demonstrating a strong fundamental grasp of the technology, including its applicability and impact across so many industries. Slide Barry Silbert In December 2014 after the US Marshal’s office seized 50,000 bitcoins from the Silk Road, Barry Silbert purchased just 2,000 of those bitcoins at $350 per coin. A few years later of course, those coins were worth millions of dollars. Barry is the founder and CEO of the Digital Currency Group (DCG) a cryptocurrency investment firm. Barry also made significant profits from Ethereum Classic, purchasing the coin in its very first days. He has invested in over 75 bitcoin related companies, including CoinDesk. As founder of the Digital Currency Group, Barry endeavors to support bitcoin and blockchain companies and accelerate the development of the global financial system. “ “Directly through Exchanges Step One: Register on a reputable cryptocurrency exchange To start investing, you first need to register on a reputable cryptocurrency exchange where you can buy bitcoin and other cryptocurrencies. Binance is a good exchange to use in this lesson. While it may or may not be the best, it is currently the largest, and they provide a very supportive layout and customer service department. You should remember, to buy most altcoins (cryptocurrencies other than bitcoin), you specifically need to use an exchange like Coinbase or Kraken that allows you to convert fiat currency into cryptocurrency. From there, if you want to trade altcoins not listed on that exchange, you will have to transfer your BTC or ETH to a larger exchange like Binance, and buy the altcoin you want, using whichever trading pair that is best suited (BTC and ETH pairs are most common). As we have already explained, if you are buying Bitcoin or any cryptocurrencies, you should invest in a wallet to safely store your coins. It is not advisable to store your BTC or other crypto on the exchanges for too long, due to hacking and other risks. “ “Directly through Exchanges Step Two: Determine your Strategy There are different ways to invest. You need to find a strategy that works for you and your specific set of skills. The value of a cryptocurrency is not defined by a formula or something out a textbook. If everyone was able to calculate the actual value of a share of stock, for example, or a bond, or other tradeable asset, then the price on an open market exchange would never move. Buyers and sellers would know exactly how much the asset is worth, so there would be no reason to sell lower or buy higher than the actual value. You need to come up with your own ideas and strategies to take advantage of market moves. Sometimes you will have a position that is contrary to the general market. Other times you might be trading in agreement with a majority of other market participants. Investors are basically separable into one of two groups of thinkers. Contrarian investors go against the crowd, swimming against the current; Momentum investors ride the wave feeling secure in the majority. Being different can be good or it can be bad. You do not always want to necessarily get caught up in the most crowded trade. “ “Things to keep in Mind Bitcoin Futures We need to mention the bitcoin futures market as another potential way to invest. Toward the close of 2017, Bitcoin started trading on two fully recognized and well-established futures markets; the Chicago Board Options Exchange (CBOE), and the Chicago Mercantile Exchange CME. The key quote from the exchanges was “because the futures can be traded on regulated markets, it will attract investors, making the market liquid, stabilizing prices and it will not suffer from low transaction speeds of Bitcoin Exchanges.” For a risk averse investor, this offers a safer entry into cryptocurrency investing. A futures contract commits its owner to buy or sell the underlying asset, BTC, at a set price, and at a set date in the future. The investor in the futures contract does not actually own the underlying asset, but rather is trading on fluctuations in the price of the asset over a certain timeframe, as specified in the futures contract. “ “Things to keep in Mind §2 Common Pitfalls We cannot conclude this lesson without one more look at the common pitfalls a new cryptocurrency investor should avoid. The problem areas are: -Falling for scams by failing to carry out due diligence. -Relying solely upon self-acclaimed crypto gurus and experts. If you want to trade, you must understand how to read news and charts for yourself. -Too much Greed. Not taking profit when you should. It is better to take a 20% gain, than wait for a 100% gain, only to lose it all in the end. -Lacking an investment strategy or exit plan. -Not sticking to your investment plan or strategy. -Allowing emotions to rule your decisions. Chasing your losses. -Investing what you cannot afford to lose. And finally, some time-tested wisdom from Wall Street: Bulls make money. Bears make money. Pigs get slaughtered every time. (Don’t be greedy!) We cannot overemphasize the risk involved in cryptocurrency investing. The potential to make huge gains over a short period of time does not come without risk. There is no doubt that significant players in the global financial markets are entering the cryptocurrency markets too. We are likely to witness more and more government authorities trying to regulate cryptocurrencies, hopefully to the overall benefit of a healthy market. It seems safe to say we will see cryptocurrencies become more mainstream due to the intense interest from the traditional financial industry and institutional investing community all over the world. What are better ways to successfully invest in cryptocurrencies? Which pitfalls should you avoid? Learn all on successful ICOs and STOs after reading the full lesson: UBAI.co How to start your STO/ICO campaign in 2019? 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