Category Archives: Cryptocurrency

Everyone involved in the cryptocurrency ecosystem is well aware of how bitcoin uses a proof-of-work algorithm. New coins are generated through the mining process, which becomes more difficult over time. However, not all cryptocurrencies in existence can be mined. Below are some of the more popular altcoins that offer no mining incentive, yet are still quite valuable.

The Ripple network works in a rather different manner compared to Bitcoin or even Ethereum. Positioning itself as the global settlement network, Ripple is not your average cryptocurrency by any means. Obtaining Ripple can only be done by buying the currency from various exchanges, as there is no option to generate XRP by mining. A total of 100 billion XRP has been created once the project launched. A few coins are destroyed every time a transaction takes place.

NXT is a popular altcoin that cannot be mined in the traditional sense. It is possible for users to forge new coins, but it doesnt require dedicated hardware to do so. Instead, users need to leave their wallet open assuming it contains a balance and they will earn small amounts of interest in the process. NXT runs a proof-of-stake algorithm, which makes mining in the traditional way obsolete.

Mining WAVES is entirely out of the question as well, since the project makes use of a delegated and leased proof-of-stake algorithm. The entire supply of WAVES tokens was premined, although users will be able to mine tokens in the future using a computer or mobile device. However, the entire token supply will never surpass the 100 million mark. All of the available tokens were issued during the WAVES pre-sale and the teams bounty program.

When Factom was first launched, there was a lot of excitement regarding this project. Considering how the project runs on top of the bitcoin blockchain, it cannot be labeled as an altcoin per se. Factom is something entirely different, although the projects currency called factoids cant be mined directly. One could call this system proof of usage, as users who hold factoids can convert them into Entry Credits to be used within applications using the Factom blockchain.

The network does not support mining, as a Factoid Software Sale was organized once the project was announced. Investors who bought Factoids can either sell them on an exchangeor keep them as a tool to buy Entry Credits. It is also possible to earn Factoids, by sharing computing power and resources with the network. It is quite an intriguing project that anchors data into the bitcoin blockchain. In fact, Bitcoins proof-of-work algorithm ensures all of the data processed by Factom is safe from tampering.

MaidSafe is another one of these projects that does not allow users to mine the native currency. All of the available tokens were issued two years ago, and no more tokens will be generated moving forward. This also makes it somewhat impossible to generate Safecoin right now, although it will be possible to mine the currency in the future. Investors hold 10% of the total supply, with 90% waiting to be rewarded to miners providing resources to secure the system. However, Safecoin is not mined with graphic cards, but rather by users dedicating hard drive space to the project.

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Top 5 Cryptocurrencies That Can't be Mined - The Merkle

People have tried to mine bitcoin on a wide variety of devices in the past. Due to the evolution of mining hardware, most of the older devices have become obsolete for this type of purpose. That hasnt kept users from getting creative, though, as one person has successfully created mining software for a 1985 NES. Quite an intriguing project, although it wont make anyone rich overnight.

Although it may sound unlikely to mine bitcoin on a NES gaming system, it is certainly possible to do so. What started out as an offhanded challenge quickly turned into an intriguing project for the person who developed RetroMiner. Not everyone may see the benefit of this project, though, as it is unlikely the NES is even capable of mining bitcoin at any more than laughable speeds.

Most people do not understand the concept of bitcoin mining. Since it takes dedicated expensive hardware to perform this process efficiently these days, mining bitcoin makes little sense. Showcasing how this process works on a device most people are comfortable with, however, may sway a few peoples minds in the process. Then again, it is unlikely anyone will try to mimic mining bitcoin on a 1985 NES, though.

To put this into perspective, mining bitcoin on an 8-bit game console involves a lot more work than one would assume. Bitcoin mining is a very resource-intensive process and the 1985 NES is not a top-notch machine by any means. For its time, it was revolutionary in every way possible, but things have evolved a lot over the past 32 years. Then again, it is nifty to see someone actively mine bitcoin on such a device, albeit it may not generate any coins in the process.

The NES is not equipped to communicate with the live bitcoin network, or performing SHA-256 hashing. Communication with the bitcoin network proved to be pretty easy to implement once a custom bitcoind version was compiled. Keep in mind this involves using a Raspberry Pi as a proprietary device, though. More detailed instructions on the software involved can be found on the Retrominer website

SHA-256 hashing requires multiple 32-bit operations to take place. The NES, however, can only perform 8-bit tasks, which seemingly makes it incompatible. However, it was possible to create an open implementation of SHA256 that works just fine with 8-bit hardware. The custom ROM including the SHA256 algorithm is sent to the NES through the Raspberry Pi, though. However, in the end, the 8-bit game console is more than capable of doing its job, albeit no one should expect any miracles.

Interestingly enough, the person responsible for the Retrominer project feels there is still a lot of room for future improvements. At the same time, none of these improvements will turn 32-year-old hardware into a money making machine by any means. Eventually, the goal is to move more parts of the mining process to the NES, rather than passing through a Raspberry Pi first. All things considered, this is quite an amazing project, that goes to show old game consoles can be repurposed for other tasks with a bit of tinkering.

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Cryptocurrency Enthusiast Succesfully Mines Bitcoin on a 1985 NES Console - The Merkle

If 2013-2016 was the era of venture investment in bitcoin and blockchain startups - VCs put north of a billion dollars to work, peaking at $290M in the first half of 2016 - then 2017-2020 will in hindsight be seen as the Wall Street era. The startup equity investors have come and - in the absence of unicorn valuations or breathtaking growth - they're starting to move on. But now the bitcoin and cryptocurrency funds have arrived, and they've brought public markets investors with them.

Just about every week I'll discover a new investment fund that gives investors liquid exposure to the cryptocurrency asset class. At latest count, there are at least 5 exchange-listed bitcoin investment products, 3 U.S.-based ETFs under review by the SEC, and hedge funds that cover just about every cryptocurrency asset type and investment strategy. By my estimate, these funds represent roughly 5-10% of the $24B in total that's now invested in cryptocurrencies.

For clarity, I define a cryptocurrency fund as a pool of professionally managed capital, available to outside investors, where the majority of AUM are invested in publicly tradable cryptocurrency assets. Examples of such assets include bitcoin, ethereum, and the 500+ altcoins and 50+ digital tokens listed on Coinmarketcap. Thus venture capital funds who invest in shareholder equity of blockchain startups don't qualify.

I've sorted the different funds into three broad categories and wanted to give a description of each category along with some prominent examples. They are:

Disclaimer: Please consider this information as strictly educational and not meant to represent specific investment advice or recommendations.

1. Publicly traded funds

These funds follow a buy-and-hold strategy and usually focus on a single asset. For now, all of them are bitcoin-only, although I expect publicly traded ethereum funds to come online perhaps as early as this year.

A management fee is charged for the service, which ranges from 1.5-2.5% per year. As more funds enter the space, fees will likely decrease, perhaps to below 1% which is what most vanilla ETFs charge. You may wonder why anyone would invest in a public bitcoin fund when you can just buy bitcoin and hold it yourself, but you could ask the same of gold. The biggest gold ETF - the SPDR Gold Trust - manages $35 billion USD. That's double the bitcoin market cap - all in one ETF. The attractions for investors are varied, from ease of access to peace of mind to lighter regulatory regimes. The consistent price premium of Grayscale's Bitcoin Investment Trust (OTCQX:GBTC) shares over the NAV of its bitcoin holdings is more evidence that such vehicles are desired.

Within the cryptocurrency universe, there are roughly two types of such funds: ETFs and ETNs (what are also called asset backed notes). The main difference is that an ETF's value is collateralized by an equivalent value of its underlying benchmark asset and allows an investor to redeem their ETF shares for the asset.

An ETN doesn't allow redemption and doesn't make the same guarantees about how much e.g. bitcoin it actually holds. An ETN is better thought of as unsecured debt that roughly tracks the price of its benchmark asset but has looser reporting and compliance requirements. Because of these differences, ETNs are a bigger credit risk, and we've already seen this risk manifest when KNC Miner filed for bankruptcy. KNC Miner was the guarantor of the COINXBT and COINXBE ETNs on the Nasdaq Nordic, and the bankruptcy filing forced trading to a halt. Two weeks later, the investment firm Global Advisors stepped in and became the new guarantor and trading was allowed to resume.

Examples of bitcoin ETNs include BTCETI (which is co-listed on the Gibraltar Stock Exchange and the Deutsche Borse) and the above-mentioned Global Advisors' COINXBT and COINXBE.

Thus far no bitcoin ETFs have been approved. There are three U.S.-based funds under review by the SEC. They are, in order of their filing:

GBTC is a hybrid, in that it's currently an ETN which is filing to become an ETF. While it has filed for a $500M IPO on NYSE Arca to become an ETF, it is currently traded on the U.S. OTC exchanges and doesn't allow redemption of shares into bitcoin.

The only ETFs with bitcoin exposure are Ark Investment Management's ARK Innovation ETF (NYSEARCA:ARKK) and ARK Web x.0 ETF (ARKW), but these hardly count as official cryptocurrency ETFs because both hold less than 0.3% of their portfolio in GBTC.

Bitcoin IRA is an interesting outlier in that it's a public bitcoin investment fund, available to any investors who have or want to open an IRA, a type of U.S. retirement savings account. They allow the redemption of bitcoin, but the company is not listed on any publicly traded exchange. You must contact them directly to invest. Bitcoin IRA charge a 15% one-time upfront fee of any money invested.

Finally, while the publicly traded funds are all bitcoin, the ethereum funds are coming. One example is the EtherIndex Ether Trust which filed in July 2016 with the SEC to be listed on the NYSE Arca, but has seen little activity since. Here are my notes on its filing. I have seen some other ethereum-based efforts and I expect at least one will be approved for public trading this year.

2. Private buy-and-hold funds

These differ from public investment funds in that they usually have restrictions either on investment size (e.g., $100K USD and above) or status (e.g., accredited investors only). They're not listed on publicly traded exchanges, without the attendant regulatory requirements and investment disclosures, and you can't use investment software like Bloomberg to obtain quotes and place trades. But otherwise the strategy and product and fees are similar: they offer investors comparatively simple and safe exposure to cryptocurrency and charge an annual fee for the service.

The best known example is probably the Pantera Bitcoin Fund. Pantera Capital is a blockchain investment firm which has multiple funds. One of them specializes in equity investments of blockchain startups. The one relevant for our discussion is a private bitcoin buy-and-hold fund which has over $100M in AUM and charges 0.75% annual management fee and a 1% fee for redemption.

An ethereum example is Grayscale's Ethereum Investment Trust, which has not formally launched but will be a private product that provides qualified investors access to Ethereum Classic.

DLT10 Index is an interesting example of a private buy-and-hold fund which offers a proprietary basket of 10 publicly traded cryptocurrency assets. The index is a mixture of leading cryptocurrencies and digital tokens, with a preference for enduring assets.

3. Hedge funds

Last we have cryptocurrency hedge funds. A hedge fund is a pool of lightly regulated capital that invests in whatever it likes within some broad strategic parameters. They have active trading strategies including e.g., leveraged trading, price arbitrage, and algorithmic trading. In addition to charging a management fee comparable to the above two types of funds, they also charge a performance fee that in this space can range from 15-45%. The performance fee is only paid out when the hedge fund beats an agreed-upon benchmark, such as the price of bitcoin. So if a hedge fund can generate better returns than simply owning bitcoin, they're paid very well for doing so. This benchmark outperformance is called alpha.

Known cryptocurrency hedge funds include:

I believe the above-mentioned funds are all actively seeking outside investment. Coinfund.io is an example of a cryptocurrency hedge fund which is no longer taking outside investors. They focus on digital token investment, what are often called ICOs, and host a knowledgeable and active community chat on Slack.

A final interesting example is the TaaS fund (Token-as-a-Service), which will exist on the Ethereum blockchain and in March will sell up to $100M of their tokens via the ICO process. The fund will keep some proceeds to fund operations and invest the remainder in a proprietary mixture of bitcoin, altcoins, and other digital tokens. Token holders will receive an ongoing percentage of trading profits.

The hedge fund space - of the three categories - is likely to see the most growth and proliferation because of its light regulatory touch, the speed to market, and the chance for fund managers to make outsized profits in a still volatile and developing asset class.

The next 3 years are a window of opportunity for starting and investing in cryptocurrency funds

We've entered a golden era of professionally managed money moving into liquid cryptocurrency assets. The risks that prevented Wall Street investor types from entering the market earlier - lack of liquidity, regulatory uncertainty, China trading centralization, lack of sophisticated financial products - are now reduced enough that those hungry for returns have taken the lead and others are starting to follow.

There's no better time to start a fund or raise one, and there's no better time to take a cryptocurrency position if you manage money, especially when you consider the past price performance of cryptocurrency assets and research that proves bitcoin's lack of correlation with existing asset classes. An approved U.S. bitcoin ETF will only add fuel to the growing fire.

In the coming years, the above-mentioned three funds types will expand and evolve: Hedge funds will grow larger and develop more exotic trading strategies, increasingly blending cryptocurrency with mainstream asset classes like equities and commodities. Private funds will diversify from one cryptocurrency asset to multiple assets and seek listing on exchanges. Finally, publicly traded funds will expand from bitcoin to ethereum and then cryptocurrency indexes, and fees will likely come down as competition grows.

Thanks for reading! A number of people read drafts of this essay and I'm grateful for their feedback. I look forward to your comments and questions.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long bitcoin and altcoins but do not have a personal investment in any of the funds mentioned here.

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The Cryptocurrency Funds Have Arrived, And They're Bringing Wall Street Money - Seeking Alpha

Hong Kong based cryptocurrencies exchange Bitfinex has added support for trading on the privacy-focused cryptocurrency Dash. The venue now enables tradersto buy and sell Dash forUSD and bitcoin (DASH/BTC andDASH/USD).

Dash VP of Business Development, Daniel Diaz said: The partnership is recognition of the way the market has been responding to Dashs vision and roadmap. I am a firm believer that the free market will always recognize true value when growth and performance is sustained over long periods of time. Partnering with Bitfinex is a very important step for Dash as we look to provide good, regulated on and off ramps to the network that really make user applications easier. Dash is in a transition towards the regulated fiat exchanges that will make it a lot easier for users and investors to move in and out of the Dash economy, which will reduce friction and allow Dash to trade directly for fiat currencies in the more popular exchanges in the blockchain industry.

Dash began the year at $11 and is now trading at $44 with a market cap of over $300 million -making it the third most valuable blockchain asset following Bitcoin and Ethereum while its trading volume has also shot up 22 times.

Bitfinex Chief Strategy Officer Phil Potter added, Bitfinex is extremely excited to be adding Dash to our exchange. Dash is currently experiencing its breakout moment right now and we want to be able to provide our growing customer base with seamless access to one of the rising stars in our space. Bitfinex prides itself on being the worlds largest digital asset exchange by USD. We expect an incredibly strong market for Dash and we look forward to a tremendous partnership with their team.

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Hong Kong Based Cryptocurrencies Exchange Bitfinex Adds Dash - Finance Magnates

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Cryptocurrencies are a form of money specifically designed to take advantage of the architecture of the internet. Instead of relying on a standard financial institution to guarantee and verify transactions, cryptocurrency transactions are checked, or "confirmed," by the computers of the users on the currency's network. The computers that verify the transactions usually receive a small amount of currency as a reward. The process of receiving rewards in exchange for verifying transactions is called "mining," and it is the main way that new currency is produced. Mining works differently for different currencies.

Because cryptocurrencies are completely digital, they can be used in ways that ordinary currencies can't; primarily, they are used like the digital equivalent of cash. Unlike credit or debit cards that are issued by banks, you don't need an account or good credit to use cryptocurrencies, yet you can use them to buy goods and services from an increasingly diverse selection of retailers and individuals. For instance, Overstock.com and Newegg.com accept Bitcoin as payment. There is typically a very small fee for almost every transaction, but it's typically much lower than credit card processing fees and interest, and the fees support the network.

Another common practice is to use small amounts of cryptocurrencies to "tip" people on IRC chat, social media and blogs. For instance, independent developers have designed "tipbots" for Reddit, Twitter and other social platforms that allow you to send money to a friend or anybody you feel has made a tip-worthy comment. The amounts you can send can be very small, like fractions of a penny, or quite substantial.

Cryptocurrencies can be converted at lightning speed or used to represent things that aren't normally currencies, such as domain names or consumer goods. Depending on the currency being used, it is also possible to anonymize transactions, turning cryptocurrencies into a form of discreet online cash. Most importantly, cryptocurrencies can be sent anywhere in the world, almost instantaneously, enabling users to deal directly with each other over the internet, rather than through a third-party financial institution, paying currency conversion fees or waiting for a bank to release funds.

While they are not entirely immune from fraud or theft, they are generally safe to use and difficult for malicious hackers to steal. As with cash, you'll need to take some precautions to protect your coins. For one, you'll want to encrypt your wallet with a very strong password and take regular backups, and it's a good idea to keep the backup and a written copy of your password in a remote location. Never give your password or wallet to somebody you don't trust, and keep the wallet software up to date at all times. Just like cash, if it's lost, damaged or stolen, you can't recover the funds. It's also a good idea to keep the bulk of your money offline, either in a "paper" wallet or on a storage device that may be disconnected from the internet when it's not in use. Three of the top cryptocurrencies are Bitcoin, Darkcoin and Nxt.

Cryptocurrencies use a number of different algorithms and are traded in different ways. Here are the main characteristics that you should consider.

Market Capitalization and Daily Trading Volume A cryptocurrency's market capitalization is the total worth of all coins currently in circulation. A high market capitalization can indicate a high value per coin or simply a lot of available coins. Perhaps more important than market capitalization is daily trading volume: the value of the coins that exchange hands every day. A high daily trading volume relative to the market capitalization indicates a healthy economy with many transactions.

Verification Method One of the major differences between cryptocurrencies is their verification method. The oldest and most common method is called proof of work. To gain the right to verify a transaction, a computer has to expend time and energy solving a difficult math problem. The trouble with this method is that it requires a massive amount of energy to operate. Proof-of-stake systems attempt to solve this problem by letting the users with the largest share of the currency verify the transactions. These systems require less processing power to operate and claim faster transaction speeds, but concern over security means that few coins use an entirely proof-of-stake-based system.

Retailer Acceptance A cryptocurrency isn't much use if you can't buy anything with it. That's why it's important to know who accepts a currency before you invest in it. A few cryptocurrencies are widely accepted, even boasting partnerships with major retailers. Most, however, have more limited acceptance, and some can only be exchanged for other cryptocurrencies. Some coins simply aren't designed to be exchanged for goods and are built for other purposes.

Cryptocurrencies are an exciting new development in the world of finance. No one is quite sure yet where the technology will lead, but the fact remains that these new currencies offer possibilities that traditional cash can't.

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The Best Cryptocurrencies of 2017 | Top Ten Reviews

Reality is perceived in models. Or maps, if you will. But the map, observed Alfred Korzybski, is never the territory. Meaning, the best we can do is create effective models that work well with reality yet, with full knowledge that it will never represent the full scope of reality. And will, therefore, need uncompromisable adaptability.

Some maps, then, are more effective than others. And it usually goes that the more mainstream the model, the less effective it works in helping you navigate through the tangled webs of reality.

Looking at politics in terms of partisanship, for example, is a very poor representation of reality. It fails to give you the big picture. It fails to represent politics as politics really works which is, in reality, transcendent of partisanship.

Looking at politics, rather, in terms of centralization vs. decentralization is not perfect, but it is, we think, a much better representation than the latter.

Politicians are generally centralists (there are exceptions but very few). They see a perpetual need for more privileged (AKA powerful, but little-to-no skin in the game) fixers (see:pseudo-experts) to give the plebs what they need. Whether the plebs want it, need it, or ask for it is, of course, entirely irrelevant.

On the other hand, those who see this aforementioned mentality as an enormous and fundamental problem are, generally, decentralists.

One decentralist, Paul Rosenberg of the Freemans Perspective blog, outlines why stacking on more centralization to our over-centralized Jenga Economy is counterproductive in his latest piece:

#1: Centralization disrupts price discovery: Disrupting price discovery that sounds very economic.

What it means is this: Whenever headquarters decides to meddle in business transactions, large sections of the marketplace are thrown out of order. The biggest offenders in this area were the 20th centurys socialist states. Im not sure precisely how many people died (mainly of starvation) from their economic experiments, but the number is in the range of 100 million.

#2: Centralization robs the people: Centralization creates a group of people who eat (and generally grow rich) at the expense of everyone else. Every dollar that goes to politicians for their very fine offices and cars and travel budgets and everything else is money that is stolen from you and your neighbors.

#3: Central bosses enforce arbitrarily in order to gain artificial legitimacy: Did you ever notice that politicians are forever creating new fears? And why? Well, because solving those fears (even if theyre mostly imaginary, as most are) makes them seem necessary.

From this we get any number of disasters, especially wars. Have you noticed that presidents become far more popular when they wage a war? Fear sells, and war is a tremendous spectacle. And it makes the centralizers look necessary. (Too bad about all those dead guys.)

#4: Centralization is limiting.Centralized power solving our fears requires an ever-increasing number of laws, and each law is a restriction of some kind. Pretty soon, you cant do half the things you could a couple of decades before. Theres a law for every problem and a department to solve it. Address it yourself and youre likely to get hurt.

So, to keep us safe from our professionally cultivated fears, your kid cant run a lemonade stand without a license, your older aunt cant watch the neighbor kids, and God help you if you try to give a lost child a ride home.

#5: Centralization kills cooperation: There are rules for everything. So, you can no longer cooperate with your neighbor because you enjoy it. No you cooperate because its commanded by law and youll be punished if you dont.

Have you noticed people yearning for the old days and talking about small, rustic communities where the people still look out for each other? Well, theyre right to yearn for that, because its a very healthy way to live. And its centralization that stole it from us.

#6: Centralization robs you of self-worth: Following on from #5 above: What happens inside you when you help people because you, by yourself, give a damn? I think we all know the answer: You become a better, happier, and more beneficial person. You know you did a good thing. And then you feel good about yourself.

Every time you do the right thing because its mandated by law, you are being robbed of self-worth and self-improvement. And your friends and neighbors are robbed of your improved state.

Decentralization wont happen if the decentralists wait for full permission from the centralizers.

Thats just the truth.

Fortunately, we live in an era where decentralization has a fighting chance because it, ultimately, doesnt need permission. Permissionless innovation truly does have the ability to creatively destroy (and, at the same time, create anew), the forces which hanker for unlimited control and resources to themselves and their cabal.

(Take, for example, this piece in Reuters on how Venezuelans are bypassing backwards currency controls with bitcoin.)

This is precisely why weve spent much time the past year digging deep into the cryptocurrency space. Cryptocurrencies have incredible potential to compete economically with the worlds governments.

Maybe not subvert them completely, as some claim (such as, for example, the author of todays featured article below) but they can certainly, at the very least, whip them into shape.

Today, to explain the broad view, we invite Rick Falkvinge to the show to share his perspective: Cryptocurrency, according to him, will cripple todays centralizing forces. And, unfortunately for them, they wont see it coming.

Read on.

Cryptocurrency will cripple governmental ability to collect taxes, and they wont see it coming. When its already happened, expect major changes to take place in how society is organized on a large scale but also expect governments to act in desperation to retain control.

As bitcoin launched in 2009, most early adopters saw its disruptive potential. While bitcoin has stalled for some time approaching a valid use of the term stagnation, cryptocurrency in a larger context is still just as disruptive. In 2011, I stated that bitcoin (cryptocurrency) will do to banks what email did to the postal services. This is not just true, but it will be even more brutal to governments, and by extension, governmental services.

Now, governments love anything that smells like innovation, because it means jobs, this magic word that smells of magic unicorns to anybody in government. Therefore, people who like innovation are nurturing this bitcoin thing, this cryptocurrency thing, this ethereum thing (as if governments made a difference, but still).

Lots of startups in tip-of-the-spear financial technology means that their government may get a head start over other governments. They have no idea that cryptocurrency will radically scale back the power of government, not just their own one, but also all those other governments over which it seeks a competitive edge.

Individual people in government can also love bitcoin because it gives them something to do. More specifically, it gives them something to regulate. Fortunately, other people in government see that this gives them something to do, which is to hold those government regulators with an overdeveloped sense of order somewhat in check.

Youll hear no shortage of wannabe regulators saying that bitcoin is bad because its being used in crime and contraband trade!, to which I usually respond, well, bitcoin is a currency, so I mean you put it in relation to the US Dollar, which then is not used in crime and contraband trade, is this the argument youre using to support your position?, at which point the discussion generally changes topic.

This completely disregards the observation that bitcoin and cryptocurrency were designed to not submit to regulation in the first place. Well, at least not governmental regulation. It is heavily regulated but by its source code, and by its source code alone.

The reason this will cripple todays governments todays idea of what a government is and does is because todays economy is built on one layer doing actual work and three layers of abstraction on top.

At the first and bottom layer of our economy are the individual people doing all the actual work.

The second layer on top of the first is the abstraction we call corporations, which is a way to organize our economy and optimize transaction costs.

The third layer on top of the second would be banks, which handle money for corporations and individual people in a middleman gatekeeper position.

Finally, the fourth layer is the government, which takes advantage of the banks gatekeeper position to siphon off taxes from money flows in order to fund itself and governmental services. In other words, layer four completely depends on layer three for its operations or at least for the relative simplicity of funding its operations.

Now, what bitcoin and cryptocurrency do is make away with the banks cutting them out of the loop entirely, making them redundant, obsolete, dinosaurified. This resulting absence of anything where banks used to be creates an air gap between the functional part of the economy people and corporations and governments who want funding.

The way governments want to tap all money flows in order to fund itself is not entirely unlike how the surveillance agencies want to tap all information flows in order to have an information advantage.

In this way, the deployment of cryptocurrency is to tax collection what deployment of end-to-end encryption is to mass surveillance. The government can no longer reach into money flows and grab what it wants, but will be dependent on people actively sending it money. The government cant point a gun at a computer and have it give up its money; you can only make a computer operator feel very sorry for not voluntarily producing the keys to that money. So the government is no longer able to collect taxes without the consent even if coerced and forced consent of the people being thus collected.

The deployment of cryptocurrency is to tax collection what deployment of end-to-end encryption is to mass surveillance.

Governments, and individual people in government, have no idea about this bigger picture. Theyre far to wrapped up in things-as-usual to notice. They wont see it coming until its already happened.

When this happens, there will be no shortage of people in government who suddenly want to regulate cryptocurrency only to find out it will be as effective as regulating gravity. When this happens, government as we know it will be redefined from a coercive Colossus able to take what it wants and do what it wants into a construct that actually depends on people wanting to fund it. This will be a very interesting time to live in. While todays governments will see themselves as getting crippled, I suspect most citizens will regard it as unquestionably healthy that governments will actually begin to depend on the approval of the people at large.

Were just beginning to see the changes to society that the Internet brings. This is one of them.

(Note: I write cryptocurrency and not bitcoin on purpose here, just as Id prefer proclaiming the success of social media over the success of Myspace.)

[Ed. note: This article originally appeared on Ricks blog at this link.]

Regards,

Richard Falkvinge Head of Privacy, Private Internet Access

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Cryptocurrency Will Cripple Governments - lfb.org

Back in 2009 when the first Cryptocurrency, Bitcoin, was announced, no one thought this industry would reach these heights. The truth is, the Cryptocurrency community has grown a lot over the past eight years. After Bitcoin was released many developers have come out with new digital currencies. Right now there are hundreds, if not thousands of them, out there. Cryptocurrency users have also increased almost exponentially. At the moment, many industries are accepting digital currencies as forms of payment. Merchants and retailers have also not been left behind, they have realized that Cryptocurrencies can be viable alternatives to fiat currencies.

According to Coin Market Cap, Cryptocurrency Market Capitalization has reached an all-time high of more than US $24 billion. The main drivers to this all-time high milestone are the major coins right now namely Bitcoin and Ethereum. Dashhas also been causing waves lately, as it has gained more than $70 million this week alone, therefore rising to number three among all Cryptocurrencies. Cryptocurrency users, since the beginning of the year, have been on a spending spree and these three coins have benefited a lot from this because they have attracted adoption based on different use cases.

Bitcoin by far dominates the Cryptocurrency Market Capitalization, its market cap is $20,682,061,514 and thats 84.7% of the entire Cryptocurrency market cap. Bitcoin is now viewed by many as an addition to investment portfolios, its uniqueness makes it desirable to many investors since it reduces total risks while at the same time it has a potential to increase gains. At some time this week, Bitcoin surpassedgold parity and this proves how much it has been growing steadily, especially in 2017. This week, major investors have been talking about their optimismon the approval of the first US Bitcoin exchange-traded fund (ETF) by the Securities and Exchange Commission (SEC). This is definitely very good news to Bitcoin users, especially those based in the US. Investors are really waiting on the SEC to give its final decision on this matter because, if approved, Bitcoins price is expected to increase.

Moving on to Ethereum, this coin was released in 2015, so its barely two years old, but it has risen to number two among all other Cryptocurrencies. It has grown so fast both in terms of price and value. Its pricehas almost doubled in the past two weeks i.e. up from around $10 to $19. Its market cap has also risen to more than $1.7 billion which is an all-time high. Ethereum is the second coin to reach the $1 billion mark after Bitcoin. The Ethereum community has always spoken of a flipping the point where its market cap surpasses Bitcoins. These are some bold words to say especially when you compare the numbers, but they argue that what Bitcoin can do, Ethereum can do better. I dont see how the two can be compared because they use different ideologies. Ethereum is concerned with a wider range not just money.

For details on Dash, and the reasons behind its rise read this article. Investingin Cryptocurrency, especially the major coins is something worth a try. Its clear 2017 promises big returns.

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Cryptocurrency: Major Coins Are Booming - Eastern Daily News

The past 48 hours have proven to be quite intriguing for anyone involved in the Dash cryptocurrency. With prices spiking to a new all-time high yesterday afternoon, things got off to a good start. Albeit Dash has seen a small correction ever since, the price per individual coin still hovers around the US$46 mark. Dash is now the third-most valuable cryptocurrency in existence.

People who have been holding onto their Dash for some time were more than happy to see the recent price increase take form. With the value increasing by 450% over the past few days, it is evident the demand for privacy-centric altcoins is bigger than ever before. Dash has been around for several years now, yet never saw such a spectacular price increase up until the past two days.

All of this positive momentum has catapulted Dash to the third rank on Coinmarketcap. To put this into perspective, Dash is now the third-biggest cryptocurrency based on their market cap. At the price of US$46.09 per coin, the total market cap sits at US$328,782 million. That is quite an impressive feat and it allowed Dash to bypass Ripple, which has been the third-largest market cap for quite some time. Dash is still a long way removed from overtaking Ethereum, though, as there is a US$1.5bn gap between the two right now.

It is difficult to explain why the Dash price saw such an impressive price surge all of a sudden. There has been positive news, as Dash has been officially integrated into point-of-sale devices. In doing so, the manufacturers of these devices aim to make cryptocurrency payments more accessible to merchants and more common among consumers all over the world. That news alone would not propel Dash to the third spot on Coinmarketcap, though. It is evident some of the cryptocurrency traders and speculators had a role to play in all of this as well.

One Reddit user explained how the parabolic rise of Dash can be attributed to the Poloniex exchange. On this cryptocurrency exchange platform, users can lend out their Dash balance as a way to generate passive interest once the money is repaid. Using leverage to margin trade has been one of the primary reasons why Poloniex became the number one altcoin exchange in the world today. Users borrow cryptocurrencies from others and bet on which way the market will evolve.

Considering Dash saw a bullish trend, a lot of traders aimed to borrow funds to open long positions on the Dash price. However, some people were betting the Dash price would crash and opened short position, which requires a Dash balance to do so in the first place. With the demand to borrow Dash on the rise a lot of people expected a price crash the number of bitcoin flowing into the market exploded exponentially. It was impossible to open shorts due to lack of Dash, hence the bullish price trend could be maintained without problems.

With shorts no longer being able to match the longs opened on Dash, it was evident something had to give sooner or later. Shorters were forced to buy back into bitcoin at a loss, causing a short squeeze for Dash. A lot of people made good profit and suffered big losses as a result of this unexpected price movement. This is only part of the reason why the Dash price shot up, but it goes to show there was a lot momentum caused by speculators and traders. It is good to see someone explaining the situation in this manner, that much is certain.

In the end, the price momentum for Dahs has somewhat kept its flow going. A lot of people expected a retrace to US$20 per coin or less, yet that has not happened yet. Instead, the price has seemingly found a stable floor for now. Dash remains the third-most valuable cryptocurrency, which will not change anytime soon by the look of things. Whether or not this trend can be turned into long-term momentum for Dash, remains to be seen.

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Dash Becomes Third-Most Valuable Cryptocurrency Based On ... - The Dash Times (blog)

In January 2017, Indonesias anti-money laundering/counter-terrorist finance (AML/CTF) agency provided the first specific, public allegations from a government of terrorists using cryptocurrencies.

According to Indonesian government sources, Bahrun Naim, a member of Daesh (also known as the Islamic State of Iraq and Syria, or ISIS), sent Bitcoin to fellow members across Indonesia to avoid transferring money through the formal financial system.

Is this a sign of a coming wave of terrorist financing using new technology? Is Bitcoin a menace that should be banned, as US Senator Joe Manchin advised in 2014?

The prospect of terrorists relying on cryptocurrencies a subset of privately developed, tradable stores of digital value referred to as virtual currencies has prompted action from a number of jurisdictions.

The EU Parliament is expected to pass measures soon requiring the UK and other member states to bring certain virtual currency service providers within their AML/CTF regulation. These measures do not seek to prevent the use of cryptocurrencies, but will require virtual currency service providers to implement customer due diligence measures, just as banks do now.

Certain features of cryptocurrencies, which are not backed by any government, have no status as legal tender and rely on network protocols and cryptographic techniques to enable counterparties to transact, present illicit financing risks.

Cryptocurrencies enable rapid and borderless transaction settlement on a peer-to-peer basis. This means that network participants can transact directly without relying on a financial institution to process or settle the transaction.

In addition, cryptocurrencies contain various levels of pseudonymity or anonymity. In the Bitcoin network, users are identified not by their name, but by an alphanumeric public key.

Technologies that allow users to make rapid funds transfers outside the formal banking system and using concealed identities might seem to have enormous appeal to Daesh and other global terrorists.

In truth, however, the threat landscape presents a more muted picture; terrorist financing via cryptocurrencies is a risk that could grow with time, but one that warrants a measured response.

Available information on terrorists use of cryptocurrencies is limited and anecdotal. In June 2015, the US charged a Daesh supporter for posting on Twitter about how others might use Bitcoin to fund the terror group. However, in that instance, there is no indication that actual transfers took place.

In August 2016, a former CIA analyst published findings identifying a Palestinian media organisation, the Ibn Taymiyyah Media Center, a Gaza-based online jihadist news agency labelled by the US as having terrorist connections as receiving small-value Bitcoin donations. Otherwise, and with the exception of Indonesias announcement, the public record is unspecific and speculative.

Still, security agencies have focused on the possibility that cryptocurrencies use in terrorism could grow. Terrorists are rapidly becoming more technologically adept. The head of Europol, Rob Wainwright, recently described terrorists as winning the online arms race, relying increasingly on social media and online platforms to generate support faster than law enforcement can keep pace.

As terrorists expand their online presence, security agencies worry their use of cryptocurrencies will expand. Governments are anxious about terrorists use of the dark web or encrypted portions of the web where users interact anonymously and where cryptocurrencies often feature.

Of particular concern to law enforcement agencies is the use of mixers or tumblers. These privacy-enhancing tools obscure the trail of cryptocurrency transactions and can stifle attempts to decipher financial activity.

Still, perspective is necessary. It is not yet clear whether cryptocurrencies will become a major terrorist funding tool, at least in the near-term, and the longer-term picture remains uncertain. Indeed, terrorists already have a number of reliable financing streams, which show little sign of drying up.

As Tom Keatinge and Florence Keen illustrate in a recent RUSI report, lone actor and small cell terrorists fund their activity on a micro scale, using easily accessible financial services. This includes student and payday loans, public benefits, and cash.

These funding methods are often impossible for the financial sector or intelligence agencies to spot ahead of their use in terrorist operations. With such simple funding available, terrorists may not need to rush into cryptocurrencies.

Treating cryptocurrencies as an exceptional threat creates the misleading impression that more conventional financial products are not already equally, or more, vulnerable to terrorist exploitation.

Cryptocurrencies are also not necessarily impenetrable fortresses of secrecy; indeed, as the Indonesian case demonstrates, law enforcement agencies can identify their use. With Bitcoin, which is by far the most widely used cryptocurrency and relies on a public ledger the blockchain to record transactions, law enforcement agencies have a number of methods for uncovering illicit activity.

Whats more, banning Bitcoin or other cryptocurrencies could stifle important innovations that could enhance financial services. While it is still far from clear how significant an impact cryptocurrencies will have, a number governments, including the UKs, are keen to enable innovation in the sector.

Cryptocurrencies have particularly vocal champions among some proponents of financial inclusion, or expanding financial services to the worlds poor. Cryptocurrencies peer-to-peer nature enables transfers to occur at reduced cost compared to credit card transactions and other established payment methods that rely on numerous intermediaries.

Proponents argue cryptocurrencies could play a role in helping the unbanked to access cost-effective financial services.

Virtual currencies therefore offer governments a test case in harnessing the promise of technological innovation while also managing financial crime risks that are still only taking shape.

Countries should pursue a sensible approach. They should ensure their law enforcement agencies have the necessary resources and skills to uncover related illicit activity; and they can work to improve information sharing with their foreign counterparts on joint investigations.

Limited efforts at regulating certain cryptocurrency service providers, such as cryptocurrency exchanges, mark a reasonable initial attempt at oversight.

Countries should take time to monitor and assess the effectiveness of new regulation before rushing into further action.

As with any new technology, awareness of risks is critical. But overreaction and panic in this early stage in cryptocurrencies history would be misguided.

David Carlisle is an independent consultant specialising in devising strategies for combating financial crime.

Banner image: If Bitcoins were real currency, this is perhaps what they would look like.Courtesy of Isokivi/Wikimedia.

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Cryptocurrencies and Terrorist Financing: A Risk, But Hold the Panic - RUSI Analysis

Everyone in the world of bitcoin and cryptocurrency is taking notice of what is happening to the Dash price right now. Contrary to what most people would have expected, the value of Dash is shooting up like a rocket. Whereas some people assumed this would be a brief pump-and-dump at first, things are starting to look more like a legitimate bull run right now.

Looking over the list of altcoins in existence right now, it is clear Dash is enjoying a lot of positive attention. Albeit it is a bit unclear as to why the value is skyrocketing over the past few days, Dash is one of the few altcoins that has been around for multiple years without seeing significant value changes. In fact, some people would argue Dash has been extremely undervalued up until now.

Unlike bitcoin, the Dash developer team has been working on privacy and anonymity traits. Although those features are not important to all cryptocurrency users per se, there are those who wouldnt say no to more privacy and anonymity while using cryptocurrency. Dash seems to check a lot of the right boxes for a lot of people in this regard, which may be attributing to the current price surge. After all, there is no reason to believe bitcoin will be the only cryptocurrency that matters to enthusiasts and investors alike.

It is equally important to take notice of some other factors. Unlike most other altcoins, Dash is not subject to that many people selling their stash while the price is going up. A lot of people run their own master nodes, which are an integral part of the dash ecosystem. To run such a master node, users need to own 1,0000 DASH and keep it locked in the wallet address associated with their master node at all times. Removing these funds will take the node out of the network and remove any rewards users receive from owning a master node in the first place.

Even though Dash has a maximum supply that is similar to bitcoins -= 22 million coins versus 21 million there are only 7.135 million coins in circulation right now. A large amount of blocks is kept in wallets belonging to master node owners, which makes the available supply closer to half of the total supply in circulation. With very few coins to be sold on the market, it is not difficult to see why the Dash price is appreciating so much as of late. The low block reward currently 3.9 coins per block keeps inflation of new coins very low as well.

The charts seem to reflect the demand for a privacy-centric cryptocurrency as well. Dashs price has been on a bullish run since mid-February, yet it has seemingly exploded in the past few days. With 31.7% gains in the past 24 hours alone, it is evident people are taking notice of what Dash brings to the table. Although this price increase has proven to be rather steep, it is possible the rise will carry over for a few more days. The bigger question is whether or not Dash will see a retrace as time progresses, which is always a possibility in the world of cryptocurrency.

Right now, one Dash is worth US$51.94, which is quite a high value. The only altcoin to reach a similar value was Litecoin, which saw a significant pump a few years ago. Once Litecoin hit the US$55 mark, however, the prices started tumbling down again. It is unsure if something similar will happen to Dash moving forward, although the momentum seems very strong right now. Then again, a strong price gain in a brief period of time will always attract some people looking to sell their current supply and buy back in cheaper.

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Dash Price Surges Past US$50, Gains 34% Value in just One Day - The Merkle