May 8, 2018 . 7 min read

Crypto Chat #40

Highlights

EOS:

The response to my EOS critique has been overwhelming: close to 1,000 comments across various Reddit threads; over 2,000 likes/upvotes; over 10,000 reads on Medium, and even a reaction from EOS founder, Dan Larimer.

You can find the article here.

ETH Scaling:

Two important updates from the Ethereum developer team regarding scaling.

First, Vitalik Buterin has published a Sharding proof of concept. The PoC is still a bit over my head but Vitalik does a decent job at explaining the design structure in layman terms here.

Second, Vitalik published a memo explaining how to make exiting from a Plasma Cash chain even cheaper. If you haven’t already read up on Plasma Cash, check out this video here.

For more on Plasma, check out Loom Network’s overview of various Plasma use cases.

Bonus: an interview with Dr. Christian Reitwiessner, the founder of Solidity.

ETH/SEC:

The Wall Street Journal reports that a meeting is taking place today behind closed doors between the SEC and CFTC to discuss whether Ether (ETH) and Ripple (XRP) should qualify as securities. If they do then they will be deemed as unregistered securities and both the Ethereum Foundation and Ripple Co. will likely be subject to fines.

The general outlook from the crypto asset community is that the ETH ICO, which took place in 2014, will be regarded as an unregistered securities offering but in its current semi-decentralized state ETH will not be deemed a security. Ripple's prospects look rather less rosy.

Further factors that play into this possible ruling are: the near expiration of the statute of limitations for charging the Ethereum Foundation; the lack of a clear regulatory environment surrounding crypto assets in 2014, and the SEC/CFTC's reluctance to legislate in a fashion that will drive way crypto-asset related entrepreneurs from the United States to more friendly jurisdictions like Germany, Bermuda, and Malta.

It is likely that an announcement will come in the following days.

Market:

prices provided by coinmarketcap.com as of 17:55 EST

BTC:

Bitcoin (BTC) tried and failed to breach $10,000 this week. It has since returned to the $9,300-$9,400 level.

ETH:

Ether (ETH) tried and failed to breach $800 this week. It has since returned to the $750-$760 range, with many analysts expecting consolidation until the SEC/CFTC release a statement regarding ETH’s status as a security.

The ‘Kimchi Premium’, the spread between US and South Korean crypto asset prices, has reappeared, with Korean traders currently paying a 2.5% premium on ETH.

ETH continues to trade up vs. BTC, with the ratio finding a local top at 0.085 before falling back into the 0.079 - 0.080 range.

For a detailed fundamental and technical analysis, check out Josh Olszewicz latest report here.

Meanwhile, Ether Capital has added over 19,000 ETH, worth over $14.6m at today’s prices, to its portfolio in the last 7 days just as reports emerge from Nasdaq Stockholm that institutional clients are favouring ETH over BTC.

Government

Berkeley ICO:

City council officials in Berkeley, California have unanimously voted for the city manager to explore the advantages of using blockchain technology and an ICO to raise funds in lieu of a conventional muni-bond offering.

If the city decides to go ahead, Berkeley would be the first city in the United States to use blockchain technology in public finance for muni-bond issuance. Several reports suggest that the initial offering would be in the $3m range, with plans for further offerings if the trial ICO is successful.

According to Berkeley’s Vice Mayor, Ben Bartlett, the ICO route is attractive because it allows the city to fall below the minimum $5,000 denomination threshold usually required for a muni-bond offering. As such, Bartlett is hoping that the bonds could be offered to a wider pool of citizens and help give locals a chance to build their net worth.

South Korea:

South Korean lawmakers are working on a bill to legalize ICOs.

The bill is based on collaborative research conducted by Rep. Hong Eui-rak of the ruling Democratic Party of Korea and the Korea International Trade Association and is likely to subject projects pursuing the ICO route to strict supervision under the Financial Services Commission and the Ministry of Science.

Enterprise

Goldman Sachs:

Goldman Sachs is moving forward with plans to set up the first Bitcoin trading operation on Wall Street. Goldman will begin using its own money to trade with clients in a variety of contracts linked to the price of Bitcoin.

GS has already shown more initiative than most banks, with the Wall Street behemoth acting as a clearing house for customers who want to buy and sell Bitcoin futures on CME and CBOE.

EEA:

The Enterprise Ethereum Alliance, the largest blockchain consortium in the world, has released the EEA Architecture Stack, which aims to define the building blocks needed to drive the Web 3.0 era of decentralized, connective intelligence.

Until recently, developing an enterprise blockchain solution required organizations to build from the ground up, either using their own enterprise-friendly implementation of Ethereum or other variations of a private-permissioned EEA application.

Ethereum developers will now be able to use a comprehensive suite of tools that enables businesses and developers to experiment within a framework that is entirely interoperable with the Ethereum ecosystem-at-large, but modular enough to fit the unique needs of particular operations.

Ripple:

A class action suit has been filed against Ripple Labs.

The complaint alleges defendants have earned massive profits in violation of state and federal securities laws by selling XRP to the general public. The complaint further alleges that XRP has all the hallmarks of a security and that Ripple tries to obscure its sales of XRP by doing so on exchanges rather than directly.

In other news, Ripple announced that they sold $168m worth of XRP in Q1 2018.

Google:

Sergey Brin alluded to Ethereum in his Alphabet investor letter, noting that GPU-friendly Proof-of-Work consensus mechanisms like that employed by Ethereum were driving demand for computing power.

No word yet on Google’s blockchain strategy.

Music Rights:

Warner Music Group, Warner/Chappell, BMG, and Global Music Rights have joined a pilot for a decentralized music rights database launched by tech startup JAAK.

The pilot aims to create a public record of rights and a fixed audit trail. Seeing as the announcement mentions that partners have the sole authority to insert, update, and remove their own information, it seems likely that the pilot is being run on a private blockchain.

Use cases

Crypto Moats:

Robert Miller of Medical Chain lists the various ways that blockchain projects can protect their advantage from competitors, a particularly difficult feat in the world of open-source.

  1. Superior brand
  2. Superior developers
  3. Partially/fully closed source code
  4. Lindy Effect
  5. Network effects
  6. Good governance

Blockchains For Bad:

The Ethereum community’s favourite pessimist, Vlad Zafmir, has published an article on the potentially harmful consequences of blockchain technology.

  1. Censorship resistant nature of blockchains means that users are not given the right to be forgotten (see GDPR).
  2. Difficulty of governments collecting tax when everyone has a Swiss bank account in their pockets.
  3. Nefarious and immutable applications like assassination markets.

0x:

The team at 0x, a protocol for decentralized exchanges, has published a list of 18 ideas for 0x relayers.

Some of my favourite ideas:

  1. A relayer for stable coins
  2. Locale-focused relayers — particular examples include Russia and India
  3. Dark Pool Relayer
  4. Decentralized orderbooks
  5. Mirror trading
  6. Fiat-to-token relayer

I look forward to watching more and more entrepreneurs build on top of the burgeoning 0x platform. The various existing relayers, including Radar Relay and EasyTrade, are incredibly impressive.

Liquidity.Network:

Liquidity Network is an off-chain decentralized exchange (DEX), which harnesses the throughput advantages of state channels to provide users with superior settlement times and cheaper fees while maintaining the security benefits of on-chain DEXs.

Most decentralized exchanges in their current formats use centralized order books but reconcile each trade on-chain. This opens traders up to front-running, requires transaction fees for each trade, and can lead to settlement delays when the network is congested.

Kyber:

Kyber, another high-profile decentralized exchange, announced this week that they will be adding an Initial Exchange Offering (IEO) feature to their platform.

Cumbersome KYC/AML checks and audits will be eliminated as Kyber will already have a database of existing, verified users. Users will be able to contribute in the token of their choice, with Kyber’s conversion mechanism taking care of all the details behind the scenes.

AmberData:

AmberData is a platform for monitoring, searching, analyzing, and securing public and private blockchains.

The platform provides all the standard block explorer data points in addition to detailed information on each ERC20 token including: token velocity; transaction graphs, and top token holders.

Miximus:

Miximus is an Ethereum Mixer that uses zero knowledge proofs to mask and verify transactions.

SilverWire:

SilverWire is an application that allows users to perform free reversible payments using Ether.

Layered TCR:

A proposal for a layered Token Curated Registry (TCR), which replaces the binary approach of existing TCRs with a gradual step-by-step system that increases the rights and responsibilities of various actors as they add more value and stake to the platform.

IOTA:

A rather pessimistic review of IOTA from the team at shitcoin.com.

Conclusion:

  1. Installing the IOTA wallet was a pain
  2. Sending and receiving IOTA tokens is technically challenging and time consuming
  3. Address reuse can lead to loss of funds
  4. There is no functional IOTA mobile wallet
  5. There is no IOTA hardware wallet support
  6. IOTA cannot be used on Internet-of-Things devices due to the vast amounts of CPU cores, RAM, and network bandwidth required to stay in sync with the network. Oops!

Bskt:

Bskt has released the Ethereum10 Index, which tracks the performance of the top ERC20 tokens weighted by market cap in April 2018.

Like the upcoming {Set} project, the Bskt contract lets anyone create tokens from the 10 underlying tokens.

Decentralized exchange relayer Radar Relay is already offering both ETH/E10 and DAI/E10 pairs.

Livepeer:

Livepeer, a decentralized video broadcasting infrastructure platform, is now live on the Ethereum mainnet.

ICOs

April:

According to TokenData, April was the fifth consecutive month of $1bn+ ICO raises. However, raise volume is down by almost 50% since March, with just $1.14bn raised in the last month.

EOS’s year-long ICO, which has reportedly raised over $3bn, makes up the majority of April’s volume.

Silicon Valley:

Pied Piper, the fictional start-up at the heart of HBO’s Silicon Valley, has joined the dark side, choosing to go forgo a VC-funded Series B in favour of an ICO.

In this clip, Chief Systems Architect, Bertram Gilfoyle, explains the thinking behind Pied Piper’s decision to Bloomberg’s Emily Chang.

N.B. — the majority of crypto assets are pseudonymous, not anonymous as Gilfoyle suggests.

Telegram:

Telegram have officially cancelled their public sale after raising over $2bn in a private pre-sale from accredited investors.

Bacoin:

Oscar Mayer has been issued a cease-and-desist order after Michigan resident Kirk Steele claimed that the cold cut company had copied his Bacoin token concept.

Oscar Mayer’s own version of Bacoin was designed to be redeemed for individual strips of bacon.

Tezos:

The Tezos team has announced that the public mainnet will launched in Q3 2018, over a year after its $232m ICO. I will believe it when I see it.

Resources

Crypto Chat archive

Andreesen Horowitz Comprehensive Resources List

Trading tips and tricks

Beginners guide to crypto assets, including: Bitcoin, Ether, Litecoin, Decred, and Zcash

Ethereum Virtual Maschine illustration

100 crypto assets in 4 words or less

Crowdsourced Ethereum reading list

How blockchains actually work

What is ‘cryptoeconomics’? / Making sense of cryptoeconomics / Beginner’s guide

Decryptionary, an extensive crypto/blockchain glossary

Calendar for upcoming crypto events

ICO statistics

27 resources for cryptocurrency traders

Guardian’s ‘Everything you ever wanted to know about Bitcoin but were afraid to ask’

Quantifying decentralization

ICO picking guide

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