Category Archives: Bitcoin

Francisco Blanch, Bank of Americas head of global commodities and derivatives research, warned that cryptocurrencies have major inherent risks and urged investors against optimism about bitcoins rising value, according to Bloomberg.

He said cryptocurrencies remain prone to fraud, theft, new protocol adoption and lack of acceptance. He also pointed out that it is not legal tender in many parts of the world.

For bitcoin to thrive, he said it needs to become a pledgeable collateral. He further noted that bitcoin must be viewed as safe to become a trusted store of value.

Bitcoin trading, meanwhile, has increased to more than $1 billion daily in recent months. On some days, trading has surpassed $2 billion.

Blanch said bitcoins volatility lessens as it builds liquidity and scale. But its volatility remains higher than emerging market currencies. In addition, he said, cryptocurrencies do not correlate with gold, oil, Group-of-10 currencies or equities.

Cryptocurrency returns rely on price appreciation that will mainly depend on faith from financial institutions, corporations and individuals, he said. Bitcoin currently trades at more than $2,500 per coin, which more than doubles the price at the beginning of the year.

Most regulated financial companies permit clients to borrow against physical and financial assets, but they do not take cryptocurrency as collateral at the present time, Blanch observed. This view matches that of Morgan Stanley analysts who stated in June that government acceptance is needed for cryptocurrency appreciation, coming at the cost of regulation.

Also read: Cryptocurrencies more assets than actual currencies, says Morgan Stanley

Morgan Stanley stated in a white paper in June that both investors and regulators view cryptocurrencies as assets more than actual currencies. The analysts, including James Faucet, stated that bitcoin and other cryptocurrencies, such as Ethereum and Ripple, are more like investment vehicles than fiat currencies that people can spend on products and services. Morgan Stanley analysts added that bitcoin represents a marginally more inconvenient way to pay, and there are only a handful of reasons to use the cryptocurrency instead of a credit or debit card.

Morgan Stanley could only list some guesses about the price increase of bitcoin. According to the report, the analysts do not have a clear reason why the cryptocurrency has been on a massive surge.

Featured image from Shutterstock.

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Bank Of America Warns Against Optimism over Bitcoin - CryptoCoinsNews

Depending on whom you believe, Ted Price of Hatfield is either one of the most audacious cybercriminals to hit the internet in almost a decade or a drug-addled fabulist with delusions of grandeur.

Federal investigators and the unemployed 30-year-old himself say he pulled off one of the largest bitcoin thefts in the short history of the supposedly fraud-proof virtual currency, stealing the equivalent of nearly $50 million.

He also claimed, during a rambling confessionto Homeland Security investigators July 12, to have developed hacking exploits for use by foreign governments and to have plotted his escape with the use of a fake passport and a private jet.

But his lawyer and family contend that the jet-setting expert hacker described in the story Price spun for investigators bears no resemblance to the man they know a jobless addict who they say still relies on his parents for gas money, and who was high on oxycodone and other opioids at the time of those damning admissions.

More details are expected to emerge Thursday, when both sides will ask a federal judge to weigh in on the likelihood that Prices claims are true at a probable cause hearing in Philadelphia. The judges decision onthe strength of the evidence willdetermine the future of what could be one of the most significant cybercrime prosecutions in years one that already has drawn interest from cybersecurity experts.

If this guy actually did what he said he did, thats breathtaking, said Edward McAndrew, a former federal cybercrimes prosecutor who now helps to lead Ballard Spahrs privacy and data security group. If he could actually pick the bitcoin wallets of this many people, that really calls into question the security of the system.

Yet there is reason for doubt, his lawyer Catherine C. Henry said at a hearing in federal court in Philadelphia last week chiefly, that the man who contends he has access to currency worth millions and a private jet to aid his escape initially came to the attention of authorities as a suspect in a string of petty thefts.

A review of Prices history in various online forums for bitcoin enthusiasts and hackers reveals that his screen name, cited in court filings, had relatively little activity in those worlds prior to this spring. It is possible that he used other online monikers in the past.

If he is a millionaire and has a private jet, then of course hes a flight risk, Henry said in court last week while arguing for her clients release. But if thats made up and if, on the other hand, he has no income, lives with his parents, and has a 7-year-old child, then these are just grandiose statements.

Police in Northampton Township, Bucks County,began probing Prices background this month after the parents of an ex-girlfriend accused him of stealing two laptops and a gold necklace from their home.

Officers later recovered the missing items from various resale shops where Price had sold them, according to the arrest affidavit filed in his case. His ex-girlfriend discovered the evidence of his alleged cybercrimes including 105 printed pages listingstrings of alphanumeric code later identified as bitcoin keys in two laptop bags she retrieved from Prices family condo when she went to confront him, the affidavit said.

Authorities concede that theyre not yet sure whether Price has the ability to access the bitcoins he claims to have stolen.

Although they initially charged him July 13 with one federal count tied to his alleged bitcoin thefts, they later withdrew the charge and refiled the case based on charges tied to dozens of stolen credit-card numbers also found in Prices laptop bag that he said hed bought from hackers on the dark web.

Investigators say they have been unable to verify Prices story in other ways, including locating the fake passport Price claimed he obtained to flee the country under the name of Jeremy Renner, an actor he says he admired after seeing him in the 2012 Marvel movie The Avengers.

And yet, said Assistant U.S. Attorney Lesley Bonney, the investigation continues and additional charges could be added by the time Prices case goes before a grand jury.

Most people dont carry around hundreds of pages of bitcoin keys with them, she said at a court hearing July 19.

Bitcoin, a decentralized, virtual currency existing entirely on the internet, quickly drew adherents after its debut in 2009 because it enables anonymous transactions untethered to third-party banks.

The system relies on what experts have described as a fraud-proof public ledger, known as a blockchain, that records every confirmed bitcoin transaction and provides a foolproof way to track currency assigned to the bitcoin wallets ofusers.

A user accesses his or herbitcoin with two strings of complex alphanumeric codes a public key, similar to a bank account number, and a private key, akin to a password or signature that allows the money to be spent or exchanged to a physical form of currency. At the current exchange rate, onebitcoin is worth about $2,600.

But the same qualities that make bitcoin attractive to users have made it a prime target for scammers. Unlike major banks or credit cards, nearly all of which offer some form of fraud protection, bitcoin transactions are irreversible. And although victims of theft might be able to track their stolen funds through the public ledger of the blockchain, the anonymity built into the system makes it nearly impossible to identify the thief.

Price, according to court filings, told investigators this month that he developed a malware program that would surreptitiously divert bitcoins into his own wallet by disrupting the transactions of other users. With the program substituting his own bitcoin keys for those on either end of an exchange, he managed to funnelbetween $40 million and $50 million into bitcoin wallets under his control, he said.

Because the bitcoin wallet address [was] a legitimate address, the user[did] not realize that bitcoin transaction [was] being diverted into a wallet other thantheirs, wrote Emily J. Evans, a special agent with Homeland Security Investigations, in the affidavit drafted for Prices arrest.

Yet now,two weeks after investigators took Priceinto custody, even hisfamily seemsuncertain what to believe. Most of his close relatives either did not respond or declined to respond to requests for comment.

But during a brief conversation outside the condo where he lived with his son, Prices father, Samuel Sr., appeared conflicted.

Its all hearsay, he said when approached by a reporter. The truth will all come out in open court.

Then the elder Price paused.

Did he do what they said, as far as those bitcoins? Probably, he said. But I guess theyre still trying to figure it all out.

Published: July 26, 2017 12:36 PM EDT | Updated: July 26, 2017 3:40 PM EDT

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Feds: Jobless Montco man is no bit player in $50M bitcoin theft - Philly.com

Greek police have arrested one of the central figures in the Bitcoin exchange BTC-e on suspicion of money laundering. Russian citizen Alexander Vinnik was arrested in Greece at the request of US law enforcement, according to a Reuters report.

The BTC-e exchange has long been a favorite of criminals, as its headquarters in Russia places it outside the reach of US and European law enforcement. Recent Google research found that 95 percent of ransomware cash-outs occurred through the BTC-e exchange, although its unclear whether the exchange itself would be liable for those payments.

Those payments have made BTC-e one of the largest bitcoin exchanges, regularly handling more than 3 percent of total Bitcoin transactions. The exchange has been down since Tuesday evening.

Our chief suspect for involvement in the Mt Gox theft

The charges against Vinnik are still sealed, and are likely to remain sealed as prosecutors attempt to extradite him to the US. However, law enforcement officials indicated that as much as $4 billion is suspected to have been laundered through the platform.

Some analysts also believe Vinnik is connected the massive theft that brought down the Mt Gox bitcoin exchange in 2014. In a report released shortly after the arrest, the security firm Wizsec described Vinnik as our chief suspect for involvement in the Mt Gox theft (or the laundering of the proceeds thereof). Analyzing transactions on the blockchain, the group claims to have seen the proceeds from several high-profile Bitcoin thefts pass through wallets listed under Vinniks name.

Mt Gox was the most popular exchange of early Bitcoin users, until it was revealed to be catastrophically insolvent as a result of a long-running theft, which made off with as much as $400 million in bitcoin. The culprit has never been identified, and has remained a subject of intense speculation throughout the bitcoin community.

Previous analysis of the theft indicated the crucial compromise occurred as early as 2011, with subsequent withdrawals going unnoticed until years afterward. BTC-e was founded in July 2011.

Sarah Jeong contributed additional reporting to this article.

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Bitcoin exchange chief arrested amid new questions about Mt Gox theft - The Verge

It's a hedge fund savvy enough to have scooped up Bitcoin when it was free. One of its founders is the well-known CEO of AngelList, Naval Ravikant . It's backed by a roster of Silicon Valley's top venture capital firms, and boasts returns of more than 500%. And you've probably never heard of it.

Meet MetaStable Capital, a stealthy startup hedge fund based in San Francisco that invests only in cryptocurrencies such as Bitcoin and Ethereum. Since its launch in September 2014, MetaStable has delivered such eye-popping performance that it apparently lets the numbers mostly speak for themselves; it shuns publicity and never announced its recent fundraising round.

Still, Fortune has learned many of the details. In the spring, Andreessen Horowitz, Sequoia Capital, Union Square Ventures, Founders Fund and Bessemer Venture Partners all invested in MetaStable, according to several of the VCs and other people close to the fund.

Notably, it's only Sequoia's second investment in a blockchain-related company in that venture capital firm's 45-year history; the first was earlier this year, in Polychain Capital , in a $200 million round in which Andreessen, Union Square Ventures and Founders Fund also participated.

In contrast to MetaStable, though, Polychain has been much more welcoming of press (its founder, Olaf Carlson-Wee, is on the cover of Forbes ' latest issue). It also differs in its strategy: Whereas Polychain specializes in investing in other blockchain companies through what's known as an initial coin offering (or ICO)an investment style that has been likened to venture capitalMetaStable invests directly in digital currencies that it believes could become a new form of money.

Now, MetaStable owns about a dozen different cryptocurrencies, including Bitcoin (which one of the fund's co-founders, Lucas Ryan, originally received for free in 2011), Ethereum, and Monero (of which the fund holds nearly 1%, or about $6 million worth, of all outstanding coins), according to a pitch deck seen by Fortune.

Josh Seims, MetaStable's third co-founder, says the fund takes a value investing approach, "sort of what you imagine a Warren Buffett doing, but its kind of oxymoronic to use these terms in the space because everything is so ephemeral." An example in the pitch deck illustrates the fund's skill in "Bitcoin crisis investing," a Buffett-like concept of investing when others are fearful: When Bitfinex, a major cryptocurrency exchange, was hacked last summer, the price of Bitcoin swiftly plunged more than 20% to under $550, and MetaStable took the opportunity to double its Bitcoin position within the next few hours. The price of Bitcoin has since more than quadrupled.

Rather than try to time the market or buy into the newest blockchain trend, MetaStable looks closely at the real-world use cases of various digital currencies, and aims to make at least decade-long bets on the most "credible candidates," Seims tells Fortune . "There's a handful of, say between five and 10 of these major use cases that could be trillion-dollar blockchains," he says. "Its all very long-term focused, and we think were in super early days right now. It really comes down to which do we think is the strong enough technology, that we think can win." (So far, MetaStable has also exhibited an edge in dodging some of the duds: It skipped The Dao's token offering last year, correctly predicting that it would be hacked; and also steered clear of the cryptocurrency Steem, which has largely turned out to be a flop.)

Through mid-March, MetaStable's flagship fund had returned 539% over its short lifetime, including 86% in the first two-and-a-half months of 2017 (a time period in which the Bitcoin price was up almost 28%).

Since then, though, Bitcoin and Monero have each more than doubled; Ethereum, meanwhile, is worth more than five times what it was four months ago. (Year to date, the Ethereum price has risen more than 2,300%.) That means that MetaStable's returns are actually much, much higher than the ones listed in its March presentation documents. A person close to the fund simply says it has "vastly outperformed Bitcoin;" that puts its 2017 returns at a minimum of 170% and likely far greater. Fortune estimates that MetaStable's returns since its inception now exceed 1,000%.

One caveat is that the fund is likely relatively small by hedge fund standards, which makes it somewhat easier to post outsized return figures. Still, in the fledgling industry of cryptocurrency hedge funds, MetaStable appears to be one of the heavyweights. A recent Forbes report listed its assets at $45 million, but that was before the recent surge in cryptocurrency prices over the last few months. MetaStable's portfolio more than doubled in value in May alone, according to a source close to the fund; on June 23, after a Bitcoin and Ethereum price crash , the hedge fund reported total assets of $69 million in a regulatory filing.

It's not clear how much of those assets are venture capital dollars; typically, when VC firms invest in other funds (the startup accelerator Y Combinator, backed by Sequoia, is one prime example), they can choose to invest in the company itself (or "general partner") or in the actual fund that company manages, or both. In the case of Polychain, for one, Union Square Ventures said it backed the firm but also put some money into the hedge fund.

The abundance of capital is also enticing a slew of other cryptocurrency hedge funds to test the waters for themselves. According to Hedge Fund Alert , there are at least 15 such funds already up and running, but as many as 25 more are in the works.

Investors should expect similar restrictions and high fees as the ones that exist with traditional hedge funds: MetaStable requires a minimum investment of $1 million, and has a "2 and 20" structure for one of its funds, charging a management fee of 2% of assets, and a performance fee of 20% of the profits. A riskier fund has a 1.5% management fee and a 25% performance fee.

Continued here:
Sequoia and Andreessen Horowitz Are Secretly Backing This Cryptocurrency Hedge Fund - Fortune

Bitcoin Cash could easily dissolve into irrelevance the level of support for it is still unclear but the concrete plans to move forward have underscored, once again, how hard it is to govern a decentralized, open-source technology like Bitcoin with no single set of leaders or ownership.

In the long run it will be forced to develop some real political structure to take these kinds of decisions, but it just isnt there yet, so the result has been chaos, said Joseph Bonneau, who has studied Bitcoin and is a fellow at the Electronic Frontier Foundation, which describes itself as a nonprofit defending digital privacy, free speech and innovation.

The Bitcoin divide is part of a wider splintering of the world that has sprung up around virtual currencies.

Many people who initially got excited about the unique technology behind Bitcoin have taken advantage of the public, open-source nature of the technology and created their own new virtual currencies, like Ethereum, Ripple and Litecoin. These other systems run according to different rules than Bitcoin, with some emphasizing more speed and complexity, and some more focused on anonymity and security.

The divisions have, if anything, increased the excitement and the value of all the virtual currencies in the world and banks and governments have announced their own projects to harness the technology.

The price of Bitcoin has recently been at record highs, near $3,000, and several other coins have grown to be worth billions of dollars on their own. A whole class of companies have raised money in recent months by creating and selling their own new digital tokens.

Until now, though, Bitcoin has remained the most valuable digital token of them all, and it has kept its followers united by a single set of rules, despite all the warring behind the scenes.

The divisions, though, appear to have grown too stark to keep everyone on the same blockchain, as the ledger of all Bitcoin transactions is known.

Mr. Ver has been one of the leaders of a contingent that has long wanted to change the rules governing the Bitcoin network so that it can handle more transactions and compete with the likes of PayPal and Visa.

Bitcoin Cash is set to increase the limit on the number of transactions that can be processed by the Bitcoin network every 10 minutes. Currently, the network can process only blocks of transactions that are smaller than one megabyte, which allows for roughly five transactions in a second.

The move to increase the size of the so-called blocks, though, has run up against intense opposition from the programmers who maintain the Bitcoin software.

These programmers, known as the core developers, have said that increasing the amount of data included in each block of transactions would make it harder for individual users to process the blocks and easier for a small number of companies to take control of the Bitcoin network.

It destroys the Bitcoin ethos, which is open and permissionless, where nobody is telling you what to do, said Samson Mow, the chief strategy officer at Blockstream, a company that employs some of the most prominent core developers.

The core developers have come up with their own solution to increase the number of transactions flowing through the system with software known as Segregated Witness, or SegWit. Mr. Ver and others, though, have said SegWit does not expand Bitcoin fast enough to keep up with its recent growth in popularity.

The arguments have given way to vicious mudslinging and hacking attacks against the leaders on both sides, leading some prominent developers to leave the project.

Proponents of increasing the block size, like Mr. Ver, have put forward proposals in the past that have failed to garner majority support in the community, in part because of concerns about the sophistication of the programmers working on the projects.

But the big block camp has not, until now, announced a definite plan to split off from the rest of Bitcoin.

While Bitcoin Cash will not exist until next week, a small number of exchanges have begun trading futures contracts, tied to the expected price of Bitcoin Cash. On Tuesday, it was trading around $450, or a fraction of the $2,600 value of an ordinary Bitcoin.

As recently as last week, it appeared that the major Bitcoin players had found a compromise that would avert a split in the network, or a fork as it is known in Bitcoin world.

Many of the largest Bitcoin companies agreed in May that they would install the SegWit software the core developers created, while also moving toward a doubling of the size of each block of transactions, to two megabytes, in November.

The largest Bitcoin processors had signaled last week that they intended to begin running the new software on Aug. 1. But the developers have suggested that they do not intend to move forward with any increase in the size of the blocks in the coming months.

One of Mr. Vers many investment holdings, Bitcoin.com, announced on Tuesday that it would put all of its resources behind Bitcoin Cash if the block size has not been doubled by November.

To gain traction more broadly, Bitcoin Cash will have to win backing from the broader community of so-called Bitcoin miners.

Bitcoin miners are best known for using specialized computers to unlock, or mine, new Bitcoins. But miners also process Bitcoin transactions and have voting power over any changes to the Bitcoin network in direct proportion to the amount of computing power they dedicate to the network.

Most of the largest mining operations are now in China, thanks to the availability of cheap hardware and electricity.

One significant Chinese mining operation, ViaBTC, has been an outspoken supporter of Bitcoin Cash and has said it will begin backing the system next week.

The largest Bitcoin mining operator in the world, a company known as Bitmain, is a primary investor in ViaBTC. That has led many in the Bitcoin world to expect that Bitmain will also provide backing to Bitcoin Cash. But Bitmain has so far said only that it does not rule out supporting Bitcoin Cash.

When Bitcoin Cash comes into existence, every current holder of Bitcoins will have access to an equivalent amount of Bitcoin Cash, but from that point forward the two systems will diverge.

In the coming weeks, Bitcoin enthusiasts on all sides of the debate will be watching closely to see which big Bitcoin companies offer support for people who want to hold, trade and mine Bitcoin Cash.

A version of this article appears in print on July 26, 2017, on Page B1 of the New York edition with the headline: Some Bitcoin Backers Defect To Create a Rival Currency.

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Some Bitcoin Backers Are Defecting to Create a Rival Currency - New York Times

Bitcoin still has a lot to prove.

As the debate rages on whether bitcoin is a legitimate currency or just imaginary money, one Wall Street analyst stripped down the argument to three simple parameters safety, liquidity and return.

These attributes are the hallmarks of reserve currencies like the U.S. dollar, the euro or gold, according to Bank of America Merrill Lynchs head of global commodities and derivatives research, Francisco Blanch.

For now, bitcoin BTCUSD, -2.13% falls short in making the cut even though it is gaining in popularity among a certain class of investors who believe the cryptocurrency will soon come out of the shadows and claim its rightful place as a legal tender.

See story: SEC concludes initial coin offerings are securities

Safety

Of the three criteria, safety remains the biggest problem as the absence of a central governing authority not only makes the digital currency more vulnerable to chaos but also susceptible to hacking, identity theft and fraud, according to Blanch.

Other issues more specific to the functioning of cryptocurrencies, such as finding an agreement regarding the adoption of certain protocols, are also worth mentioning. For example, should bitcoin split into two digital tokens because miners cannot find common ground, a collapse in confidence and value could follow, writes Blanch.

Bitcoins value nose-dived earlier in July on fears that a possible split could result in multiple versions. That event was averted last week, but investors are now bracing for what is known as a hard fork, which will lead to a splinter blockchain.

Read: Bitcoin, digital currencies retreat from records

The volatile nature of the cryptocurrency also undermines its credibility.

Volatility is the key parameter to understand the concept of safety in a reserve currency, in our view, he said. In that regard, bitcoins score has improved in recent years as volatility has continued to drop.

Even compared to emerging market currencies, bitcoin is viewed as extremely volatile. Some of that, according to Blanch, may be due to the fact that many of these countries China, Malaysia, Pakistan, Philippines and India have repressive capital controls in place.

Nonetheless, as the chart shows, on at least two occasions last year, bitcoins volatility fell below silver, which was for some 400 years the worlds currency.

Liquidity

Interest in digital currencies has soared recently with daily trading volume in the cryptomarket jumping to $2 billion today from $400 million in 2012.

For a digital token to become a currency, it must build to a certain scale, said Blanch. In some ways, this is exactly what has been happening in recent quarters, with the total market value of digital tokens growing exponentially from $1.5 billion to around $87 billion at present. Put differently, cryptocurrencies have built scale rapidly and are now accepted as a means of payment by some corporations and individuals.

At last check, companies like Microsoft Corp. MSFT, +0.80% Expedia Inc. EXPE, -0.03% and CVS Health Corp. CVS, +2.35% are among companies accepting bitcoin.

Returns

Unlike reserve currencies, bitcoin does not have an interest rate that is set by a central bank so it is difficult to quantify its returns. It also does not offer much in the way of diversification given its lack of correlation to other major currencies, precious metals, bonds or equities.

Still, bitcoin has offered phenomenal returns in terms of absolute value that few assets can come close to matching.

But exceptional returns do not make for a fiat currency and bitcoins ultimate test will be whether banks will capitulate and accept it as collateral.

Most regulated financial institutions allow their clients to borrow against financial or physical assets, but we are not aware of any major institution that takes cryptocurrency as collateral at the moment. Thus, in our view, a key step for bitcoin would be for it to become pledgeable collateral, said Blanch.

In other words, bitcoin still has a long way to go.

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This is what it will take for bitcoin to become a legit currency - MarketWatch

Amid the emergence of new currencies, gold has long been a benchmark for international measures of value. The precious metal backed the U.S. dollar for decades, marking a peg for global currencies. But in 1971, President Richard Nixon suspended the ability for the dollar to be converted into the precious metal.

Cryptocurrencies arose during the financial crisis and have demonstrated "a few advantages" over major world currencies, such as the ability to cheaply and instantaneously transfer money around the world, and record all transactions through a digital accounting system known as a blockchain, Blanch said.

In expectation of this potential, many have called bitcoin "digital gold" despite the lack of businesses that accept bitcoin and the often high transaction fees.

Gold itself has stagnated in the last several years. The precious metal leaped from several hundred dollars in the early 2000s to near $2,000 in 2011, and has traded between $1,000 and $1,400 in the last two years.

Fundstrat's Tom Lee said in a report on bitcoin in early July that buyers' shift from gold into cryptocurrencies is a reason why the digital currency's price could rise into the tens of thousands.

Due to higher bitcoin mining costs and a surge of interest, the digital currency's price has climbed in "a pattern similar to gold" and "over a much more compressed time period," Blanch said.

Bitcoin (years in parentheses) vs. gold

Source: Bank of America Merrill Lynch Global Research

To be sure, short-term appearances of similarities among bitcoin, gold and the development of historical currencies don't imply that bitcoin is here to stay.

"There is no certainty that that [similarity to gold] will continue and, most certainly, no way to predict it," Blanch said. "In our view, cryptocurrency returns will mostly depend on the faith placed by individuals, corporations, and financial institutions on this emerging technology."

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Major Wall Street analyst: Here's what needs to happen for the bitcoin boom to keep going - CNBC

Investors will soon have yet another way to bet on or against Bitcoin.

Namely, cryptocurrency traders will now be able to place option bets on digital money via LedgerX. That came after the Commodity Futures Trading Commission granted LedgerX approval to clear derivatives , making it the first federally regulated platform of its kind.

The approval will also give buyers of Ethereum and Bitcoin several regulated ways to lower the risk on their existing cryptocurrency bets which may be welcome or may increase their risk in the hopes of potentially outsized returns. That's possible because derivatives are a varied group that includes options and future contracts.

"Our recently-granted licenses give LedgerX an enormous regulatory advantage for serving our institutional customers," wrote the company's CEO Paul Chou in a blog post after the decision. "LedgerX offers our customers a one-stop shop for tools to buy and sell spot bitcoin, derivatives, and all manner of specialized cryptocurrency swaps."

For more on Bitcoin, watch Fortune's video:

LedgerX, which plans to roll out bitcoin options first starting in the fall, may also make it easier for investors to short cryptocurrencies. While it isn't the first to offer bitcoin options, LedgerX is the first to offer options regulated by the CFTC. In 2015, a San Francisco-based bitcoin options trading platform Derivabit, also known as Coinflip, was asked to cease operations by the CFTC in 2015 for failing to register with the agency.

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LedgerX Just Gave Us Another Way to Bet Against Bitcoin - Fortune

Fortune convened some top cryptocurrency entrepreneurs, venture capitalists, bankers, and others to chat about the future of digital money at Fortunes Brainstorm Tech conference in Aspen, Colo. last week. A select group met at the Aspen Institute for a breakfast roundtable discussion on Wednesday morning.

Headliners on the panel included Balaji Srinivasan , CEO and cofounder of 21.co, a cryptocurrency startup that has raised more in traditional VC funding than almost other one. Another was Peter Smith, CEO and cofounder of Blockchain, a U.K.-based cryptocurrency wallet company that recently raised $40 million from GV , the venture capital arm of Alphabet , parent company of Google ( goog ) . And Kathleen Breitman, CEO and cofounder of Tezos, a blockchain startup that this year raised more than $200 million in an initial coin offering, or ICO, and which counts celeb investors Tim Draper and Mark Cuban among its backers.

The crew of experts weighed in on everything from the longevity of Bitcoin, the original cryptocurrency and blockchain, or cryptographically secured public ledger, to the latest trend of hosting so-called token sales to fund projects, especially on Ethereum , a rival blockchain to Bitcoins, to the future of a decentralized web. Here are some of the predictions we heard.

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Most people who are enthusiastic about cryptocurrency appear to agree that Bitcoin and its newer rival Ethereum have staying power, though they may be more bullish on one versus the other. "In terms of 5 to 10 years, Bitcoin and Ether will be around I bet," Balaji Srinivasan told the room of more than 70 people.

Peter Smith said his company, Blockchain, which was early to Bitcoin, has only just started to warm up to newcomer Ethereum. In contrast, Mike Cagney, CEO and cofounder of SoFi, a personal finance company, said during a separate session on the main stage that he was hotter on the latter technology .

Bitcoin "has some purpose but its application for commercial transaction is limited right now," Cagney said. "The blockchain and Ethereum, on the other hand, have absolutely fascinating infrastructure applications, he continued, mentioning the possibility to overhaul title insurance, which involves policies related to real estate, as one example.

Bitcoin and Ethereum may have stolen the show at this point, but the innovation wont end there. Expect more winners on the horizon.

Kathleen Breitman is hopeful that Tezos, her own blockchain bet, will fill a niche that solves problems with extant blockchains. In particular, she and her projects developers are designing Tezos to automatically push software updates out to the network, thus, in theory, avoiding the divisive feuding over upgrades that has wracked systems like Bitcoin over the past few years.

No one can say how many tokens and coins and blockchain protocols will eventually win out, but the experts seem to think theres room for a multitude. "Its likely that another one or two dominant ones we havent seen yet in the market," Smith projected. "Another really dominant coin could come out this year or next year.

For the time being, token sales might seem like a fantastic way to raise a lot of money quickly and with few questions asked. Will this lead to riches for some? Undoubtedlyindeed, it already has. And rip-offs for others? Almost certainly.

Smith said he presumes that market manipulation and insider dealing is rampant among purveyors of initial coin offerings. Were cautious about it in the short term, Smith said of his company. But you have to temper that with the idea that every new technology is going to be like that in the beginning.

Brad Garlinghouse, CEO of Ripple and a former executive at Yahoo , voiced his less forgiving concerns about the sector on a separate panel. Heavily regulated markets are typically heavily regulated for a reason, he said. Frauds are happening, people are going to jail.

The days of making a pilgrimage to the homes of the holders of purse strings are coming to an end. In a world where anyone can participate as an investor online, physical location matters much less.

It used to be you had to come to Silicon Valley, walk up Sand Hill Road, network with individuals, Srinivasan said about entrepreneurs seeking funding, often strolling up a strip to the west of Palo Alto that long has been associated with venture capital firms. ICOs change all that.

Projects are already getting funded this Kickstarter-like new way. Breitman said she that when she set up Tezos token sale, she aimed to get as many people who wanted to participate in the ecosystem to contribute. The company raised more than $200 million to date and, according to her, more than 30,000 Tezos wallets have been opened.

Elena Kvochko, chief information officer of the security division at Barclays, said that her bank has had many talks with regulators about Bitcoin and its ilk. The rule-sticklers actually dont mind working with Bitcoin, she said. What they do care about is financial institutions obeying know your customer laws, which prevent terrorists and other sanctioned groups from getting financed.

Meanwhile, as governments settle on sets of rules of the road, countries like Switzerland, Singapore, and Estonia are jostling to develop frameworks that easily accommodate the new technology, Srinivasan said. Theyre seeking to displace geographic incumbents and become hubs for a new wave of business financing. If youre a U.S. person or business, you have a good deal to be concerned about, Smith said.

Breitman added that until the rules are agreed upon, its best to be transparent about what one is doing.

As cryptocurrency prices fluctuate wildly, speculators have been having a field day. However, theres reason to believe the markets will become more stable, as Bitcoin gradually has over the past couple of years (despite its still big price swings), Smith said.

In order for these computer coins to catch on big-time, they need a use-case that beats traditional money. Ideally, this ought to be better than merely buying drugs, as Jeff John Roberts, Fortune reporter and the sessions moderator, noted.

Srinivasan proposed one possible scenario. Imagine that all your waking hours are spent in the Matrix, he said, referring to a virtual reality in which everyone is enmeshed in the future. As people from all over the world meet and interact, they will need a medium of exchange. To transact, you cant just hand over a dollar bill, Srinivasan said. You need an international currency for that.

It might take a while but theres going to be more of a need to transact across borders than there is today, he said.

Whenever a consumer swipes or dips a credit card, payment processors charge a fee.

Nicko van Someren, chief technology officer of the Linux Foundation, pointed out that the fee companies like Visa or Mastercard charge exceeds the cost to clear or settle transactions. These businesses can potentially process transactions quicker and cheaper, he contended.

One potential outcome of the adoption of alternate systems, like Bitcoin, is to provide companies with the impetus to improve their services. Bitcoin is good because it will make banks move toward the real cost of handling these transactions, van Someren said. (By extension, in Ethereum's case, one could imagine upstart companies built on it forcing giants like Amazon , Facebook , or Dropbox to reconsider or improve their respective offerings.)

Smith, meanwhile, was less optimistic about incumbents ability to adapt to such change. I dont think be lot of room for banks to simply adjust their price models, he said.

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7 Cryptocurrency Predictions From the Experts - Fortune

Just as the bitcoin world thought it was safe, a new threat to the cryptocurrencys stability has emerged.

Last week, the price of bitcoin rallied near all-time highs as a proposal to increase its transaction capacity was backed by over 97% of the cryptocurrencys miners, reducing the odds of a so-called hard fork. But now, a weird new proposal has emerged that guarantees a split in the currency on Aug. 1. This time, however, the bitcoin world isnt freaking out about it.

Last weeks relief rally came in response to what was called Bitcoin Improvement Proposal (BIP) 91. Nearly all minerswho process transactions and introduce new bitcoins to the money supplybacked it. But BIP 91 stops short of delivering what a vocal faction of the bitcoin world wants: A greatly increased limit on the number of transactions the network can handle, also called the block size limit.

Some quick background on this increasingly messy situation: Bitcoins creator set an arbitrary cap on the block size of 1 megabyte. The so-called civil war in bitcoin over the past few years has centered on whether that limit should be changed, how, and by how much. BIP 91 will double the maximum number of transactions on the bitcoin network but, crucially, without touching the hard-coded 1-megabyte limit. It achieves this with a workaround called Segregated Witness, or SegWit, that cleverly cleaves off chunks of transaction data, freeing up space for more transactions.

Since SegWit doesnt change the block-size limit, some bitcoiners feel that its simply kicking the can down the road. They also fear it could diminish the bitcoin networks importance, as SegWit paves the way for layer two solutions that will allow speedy and voluminous transactions to take place outside the bitcoin network. This creates a scenario in which most transactions take place off the bitcoin network, with the occasional settlement transaction on the network.

Which brings us to the new proposal, which is confusingly named bitcoin cash. It calls for an eight-fold increase in the block-size limit on Aug. 1. Its name alludes to the faction that wants bitcoin to be a payment networkas readily available and easy to use as cashas opposed to the group that sees bitcoin as akin to digital gold.

One exchange has started a futures market for bitcoin cash, since it doesnt actually exist yet. On its first day of trading, on July 23, one unit of bitcoin cash traded for around half a bitcoin. It has slipped to around 0.2 bitcoin per bitcoin cash at the time of writing.

Although bitcoin cash is certain to enact a hard fork in the cryptocurrency, that will matter only if it attracts enough miners to keep it going. Then, bitcoin and bitcoin cash could end up like ethereum and ethereum classic; two separate but viable coins that originated from the same blockchain. If miners ignore bitcoin cash, it will simply fade away as its transactions are rejected by miners.

With a week to go until Aug. 1, the value of bitcoin cash versus bitcoin will gauge the markets confidence in this new rival prevailing in bitcoins raging internal conflict.

Read next: Bitcoins civil war threatens to blow up the cryptocurrency itself

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There's a strange new twist in bitcoin's civil warand a way to bet on the outcome - Quartz