🤷 Opinions Thomas Hughes

2018: The Year That Could Have Been But Wasn't

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Cryptomarkets shed billions in market cap over the past year, but traders are still betting on BTC $20,000. Read on for the three catalysts you should look for in 2019
2018: The Year That Could Have Been But Wasn't
Contents

Cryptomarkets shed billions in market cap over the past year, but traders are still betting on BTC $20,000. Read on for the three catalysts you should look for in 2019. 2018 was the year that could have been. It was the year that could have seen BTC reach $20,000, it was the year we could have seen mass adoption of cryptocurrency, it was the year we could have seen ETH overcome its scaling issues, and it was the year we could have seen US regulation. The problem for the market is that it wasn't. 2018 was one big fat dude for cryptocurrency and now only one question remains: Will cryptocurrency markets rebound in 2019?

Bitcoin sold off and sold off again, and again

Depending on how you do your calculations (and which exchange you get your data from), Bitcoin is down more than 80%. BTC is down more than 84% from its peak set in late 2017, it's down more than 81% from January 1st, 2018, and it looks like it could go much lower before hitting its bottom. While the coin, and the market, are showing signs of life at current levels (near $3,750 BTC/USD) the technical picture is not good. BTC has recently fallen below the 23% retracement level of the 2017 bull market and is set to retest a one-year low.

BTC/USD chart
BTC/USD chart

Regulation is the reason traders are wary

No matter how you slice this pie, regulation is the reason why cryptocurrency markets sold off over the last year. Market participants just don't trust the existing framework (there isn't one, really) and have been taking their money and liquidity out of the market in anticipation of what may, or may not, come. The sell-off started late in 2017 when China began its crack-down on crypto, shutting down exchanges and restricting access to Chinese citizens, and that wave of selling was only intensified when South Korea joined the fray.

Since then, we've seen South Korea reverse its stance on cryptocurrency and several other nations begin to embrace it. South Korea had no choice as its tech sector is heavily involved in Blockchain development and its citizens demanded legalization. The problem now is that the world's leading financial nations — the US and EU — have yet to get on board.

The US SEC has hinted at regulation for over a year. The agency has created a cryptocurrency czar to oversee coordination and broad implementation of cryptocurrency regulations, it has allowed the market to believe a BTC or cryptocurrency ETF will be listed, and yet there is still no firm regulation in place.

The biggest hurdle for US regulation is a lack of infrastructure and consumer protections. There is no legal definition of Blockchain assets, there is no “safe” way for US investors to hold the tokens, and there is no clearinghouse to ensure proper exchange and delivery of assets. The creation of the BAKKT platform, a joint venture between the Intercontinental Exchange and industry partners, will help pave the way for regulation but even it is still not active. When it is, it could be a game-changer for crypto. BAKKT will provide a US-compliant atmosphere for handling atomic swaps (a token to token exchange) as well as listing ETFs and futures products based on cryptocurrencies.

Expanding exchange environment

One of the many positives for cryptocurrency over the last year is the expansion of the exchange ecosystem. We did not see many new exchanges appear but what we did see was even better; the old exchanges are improving their operations and expanding the number of tokens that they list. One of the higher-profile exchanges participating in this expansion is Coinbase. The US-based exchange has opened its services from the previous three tokens (BTC, ETH, and LTC) to over a dozen. This means traders in the US and the world have easier access to many of the leading tokens that were previously only available from the source or through shady, unregulated, offshore exchange services.

Ethereum still the most advanced cryptocurrency

Yet another problem the cryptocurrency market faced in 2018 was a lack of progress with the Ethereum network. Ethereum is the most advanced Blockchain allowing cross-border exchange as well as powering smart-contracts and dApps, but it is handicapped by slow transaction speeds, privacy and security concerns.

ETH/USD chart
ETH/USD chart

The ETH team has had multiple upgrades and modifications on tap for over a year — many had been slated to launch in 2018, but setback after setback has prevented it from happening. The goal is for Ethereum to implement concepts — from sharding to sub-chains and ZK-Snarks — that will improve speed and security and help the network switch from POW to POS mining.

The switch to POS mining (proof of stake) is important to ETH as it will lower the cost of use for the system. The way it is now, if there is high demand for the Ethereum network (and there often is), the cost of using it becomes prohibitive for many applications. Ethereum may be the most advanced Blockchain but it's far from viable without major changes.

XRP making Ripples in Blockchain

Ethereum's lack of scalability and other issues have opened a door for other Blockchains like Ripple to step through. While Ethereum's developers are busy trying to solve their scaling issues and become the one Blockchain that can do anything, Ripple has been quietly focusing on a single application and doing a good job of it. Ripple is a cross-border payment platform aimed at large financial institutions. It has partnered with some of the world's largest banks, such as Banco Santander, and is expanding its services every day.

Ripple was not immune to the 2018 market sell-off, but it has survived better than most. The token has been exhibiting support at its August lows even while BTC, ETH, and LTC moved to new lows. The technical picture is still a little shaky; there is a chance that support at 0.2500 will be retested, but the long-term outlook is positive. Ripple is being used by the world’s largest banks and that use will drive adoption of the network by individuals and businesses, and demand for the XRP token will drive its price higher.

XRP/USD chart
XRP/USD chart

Three catalysts that will drive cryptocurrency markets higher this year

There are three catalysts on the horizon that will drive cryptocurrency markets this year. These are regulation, ETH upgrades, and ICOs. The implementation of regulation, specifically from the US, will open a floodgate of new capital to the market. Regulation will provide a “safe” environment for traders that has been sorely lacking and improve acceptance and use of digital Blockchain assets around the world.

After that comes the ETH upgrades. There is still no firm word on when to expect these upgrades but there is some speculation the Constantinople hard fork could happen as early as January. Constantinople is a combination of upgrades that are part of the larger push towards POS and includes five separate EIPs or Ethereum Improvement Protocols. The target date is January 16th — we'll see if they make it.

The final catalyst for 2019 will be ICOs. Industry experts are predicting a resurgence in ICOs this year and that will drive investment in the Blockchain. For one thing, most ICOs are built on an underlying Blockchain like ERC-20 for Ethereum. This means that with each new ICO, the value of the underlying chain will improve, too. If Ethereum is able to successfully implement the Constantinople hard fork, it will only drive the ICO market to new highs.

The final thought for 2018

My final thought for 2018 is that 2019 could be a good year. There are a lot of reasons to be bullish — the only thing now is to wait for the signals. Until then, the market is likely to remain volatile and new lows may be reached in top tokens like BTC, ETH, and LTC. These lows may prove to be the final lows but that may rest on the shoulders of the Ethereum development team; fingers crossed Constantinople launches as planned and is successful. If you aren't already HODLing some crypto, now is a great time to get in. Remember, you can't win it if you aren't in it.

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Are Ripple and XRP Getting Ready to Replace SWIFT?

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SWIFT has long been the go-to for cross border payments, but it is in dire need of an upgrade and Ripple believes they are the ones to do it
Are Ripple and XRP Getting Ready to Replace SWIFT?
Contents

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.

It has been in operation going on 46 years now and has become the global standard in sending money across borders. However, in its time, it has also picked up some undesirable issues, and it is also starting to show its age – now 46 years old.

It is for this reason that the disruptive power of blockchain technology is being touted as the future of cross border payments, but more specifically, Ripple and its XRP token are looking to be the new standard in this regard.

Ripple, in regards to cryptocurrencies, is probably most similar to SWIFT in that they do have a centralised control hub for their XRP token, but they also have a lot of the added benefits of being decentralised and on the blockchain.

SWIFT has become a political tool in the past, especially in relation to sanctions, and it is also totally reliant on the organisation for the continued running of the network. This is where Ripple can offer a lot more for payments across the globe.

Still running

The combination of having a controlling organisation, such as Ripple for the XRP token, while maintaining the decentralised benefits of a blockchain means that Ripple has a few edges over SWIFT that make it far more attractive for today’s financial world.

Ripple sales director Ross D’Arcy explained during a fintech conference in Croatia:

“I think SWIFT is a really interesting example. Because SWIFT, if you think about it, kind of crosses the lines sometimes and plays a bit of a political role. We don’t see our customers’ transactions. Our customers’ transactions go over the internet. So Ripple could shut down as a business tomorrow and our customers could still transact using our software. The same wouldn’t be the case with SWIFT.”

Non-political

Adding onto the statement from D’Arcy, XRP is a decentralised token that operates on a blockchain and because of this, it is not easy to manipulate or utilise as a tool. SWIFT has been controlled by the US government at times, making them exclude certain countries from the network in order to enact their sanctions.

However, with the XRP token, this will be extremely difficult as, even if Ripple Labs was to be coerced into doing the bidding of a government, they only have seven percent control of the validation of transactions.

A decentralised control that is appealing

Ripple’s benefits over SWIFT are quite clear as the outdated system suffers from a lot of legacy issues. But even the XRP benefits make it more attractive as a successor for SWIFT.

Ripple has been looking to appease and welcome regulators and governments, and by extension banks, by playing by the financial rules. This element of control makes XRP more appealing for companies and countries to adopt.

However, in an ever decentralising world, XRP’s blockchain offering means that there can be no monopolisation or manipulation when it comes to cross border payments.

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Despite the Criticism, Ripple Arguably More Decentralised Than Bitcoin

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Many won’t even class XRP as crypto because of Ripple’s control, but they could also argue that the XRP token is more decentralised than BTC
Despite the Criticism, Ripple Arguably More Decentralised Than Bitcoin
Contents

Ripple, and its token, XRP, have faced a constant barrage of criticism relating to their decentralization of the token over the years. Many cryptocurrency purists have criticised their inner workings with Ripple, the company, clearly in charge of the XRP token and its distribution.

However, this allegation has been as equally denied by the those at the head of Ripple; in fact, it has even seen the CEO, Brad Garlinghouse, state that the XRP ledger is in fact more decentralized than both Bitcoin and Ethereum.

This statement alone will get many raring for a fight, but a closer inspection and interpretation of what it means to be decentralised could indicate that Ripple has a point. They could indeed argue that they are more decentralized than the other two major cryptocurrencies, based on the mining pools.

It is well known that controlling the majority of the mining of traditional proof-of-work coins, like Bitcoin and Ethereum, can lead to a 51% attack, which destroys the decentralisation of the blockchain and hands full control to one person, or group, or pool.

Bitcoin has been flirting with the 51% attack recently, and previously, but for Ripple, it is a different story, as they only have seven percent control of the validators. Looking at the interpretation of decentralisation, there technically have been more chances for Bitcoin to be controlled by one group than there has Ripple – so is it less decentralised?

Making claims

To be honest, the idea of decentralisation is really up for debate, and it is also dependant on interpretation, thus the claims being made on their side of these fence are debatable, but it is interesting to hear the thoughts of Garlinghouse.

“It is very clear that the XRP ledger is decentralized,” said the CEO of Ripple. “Ripple runs seven validators, which is about four percent of all public validators.”

He added:

“By almost any measures now, the XRP Ledger is more decentralized than the Bitcoin ledger or Ethereum ledger, where you have a very small number of miners controlling you know well past 50% of mining power.”

It is true that Bitcoin’s mining has almost been monopolised in the past by the likes of Antpool, BTC.com, and ViaBTC, with Bitmain at times having the power to launch a 51 percent attack, but never acting on this. However, it shows just how much the mining has been centralised in Bitcoin.

Ripple’s argument

If one was to base the mining and validation of cryptocurrencies as the key determining factor of their centralisation, then it would be preposterous to say that Bitcoin is decentralized.

Ripple, the company, despite having control in different areas of the XRP token, only controls seven percent of its validation. Thus, on this basis, they have very little control and it should be argued that XRP is decentralised.

cryptocurrency

 

A lot of this argument is also predicated on the algorithms that these two coins use, however.

Bitcoin and Ethereum use proof-of-work algorithms. This system rewards miners for validating transactions by paying a fee for their work. This was a great starting point for a decentralized system that incentivizes complete strangers to contribute to the greater good of a network and make forward progress.

But as time has gone on, clear limitations have manifested. Blockchains that use proof-of-work can be subject to centralized control, where a few miners have significant control over the system.

The XRP Ledger uses a consensus protocol that relies on a majority of validators to record and verify transactions without incentivizing any one party. Validators are different from miners because they aren’t paid when they order and validate transactions.

Today, these validators operate at locations across the globe and are run by a broad range of individuals, institutions, asset exchanges and more.

More to it

As mentioned, this form of argument in regards to decentralisation only takes into consideration one aspect. But in this aspect, indeed, Ripple is superior. However, when it comes to purists and believers in how blockchains should operate, many have an issue with a company having discretion over tokens.

Ripple has been a coin that differs substantially from most of the top 20 coins by market cap – that does not necessarily mean it is wrong, nor right, but it is certainly showing that things can be done in different ways in the blockchain space.

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Ripple Believes XRP Should Be Viewed Just Like Bitcoin

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Most cryptocurrencies are in a legal classification grey area, especially in the US, but Ripple believes XRP should be viewed like Bitcoin.
Ripple Believes XRP Should Be Viewed Just Like Bitcoin
Contents

Regulatory uncertainty surrounding cryptocurrencies has become one of the biggest bugbears of cryptocurrency businesses and users alike. There are very few hard and fast rules or legal frameworks around the digital assets, leaving anyone who operates them in a grey area.

It has led to many lawmakers and regulators to start to try and delve into how these cryptocurrencies can fit into the current legal framework, and in the case of the United States, it has seen the SEC declare Bitcoin at least as not a security.

However, the SEC has more jurisdiction over other cryptocurrencies, declaring a huge swath of ICOs as securities, but leaving the rest of the more established coins, such as Ripple, for example, in the dark.

This has led Ripple to implore the SEC to make a decision on XRP and treat it just as they would Bitcoin. It is a decision that surely needs to be made, but will be more difficult for the SEC in comparison to Bitcoin, as the XRP token differs significantly from the major cryptocurrency.

However, the argument from Ripple is that the XRP token is more suited to not being classified as a security due to its regulatory adherence and US-base.

A policy of uncertainty

The relationship between the cryptocurrency ecosystem and regulators has been a complex and dynamic one. The original face of Bitcoin was one of defiance of the governmental rules and regulation, covering itself in a ‘cypherpunk’ cloak and being used predominantly on the dark web.

However, as it has entered the mainstream, and regulators have found it legitimate enough to put levels of control over it, the cryptocurrency community has understood that in order for digital assets to advance and become accepted, they need to adhere to the rules.

This has now led to many seeking legal classification and clarification, including Ripple.

“The challenge for adoption comes back to policy. The policy uncertainty around some of the assets has limited adoption, particularly here in the US,” said Ryan Zagone, director of regulatory relations.

“And I’m speaking from Ripple and XRP, because we use that asset because it’s a half a cent per payment. It’s basically free. It scales. And it’s efficient, with 1,500 transactions per second and nearly no energy burn. So we’re at a point today where there are real solutions to all of these challenges that already exist.”

According to Zagone, US regulators should treat XRP the way same way they view Bitcoin and Ethereum.

“Today, the policy certainty in the US exists for Bitcoin and Ethereum, despite the fact that those are China-controlled platforms. So activity goes to those platforms. What we need to do from a policy perspective in the US is look at places where there are uncertainty.”

“And one place I’m speaking directly for me here is XRP, where it looks like Bitcoin. It’s decentralized. It’s open-source. We have a small 7% of the validation power on that. Rather small on there. Giving clarity to those ones that are very similar to Bitcoin and Ethereum that have the same characteristics and should be classified the same way. And then we’re creating a level playing field across all the cryptos.”

Difficulty in classification

It is not an easy task for the SEC, and other regulatory bodies across the globe, to determine which cryptocurrencies are securities, or other such entities, and which are not. However, the the process thus far has been slow and bureaucratic.

This is not only hindering the growth and potential of cryptocurrencies, but also making it unattractive for the companies and businesses to adopt and utilize the powerful technologies. For Ripple, this includes major banks which have seen the potential but are unsure of the regulatory standpoint. 

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Big Bitcoin Mining Pools Losing Control as “Unknown” Miners Take Profit

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Bitcoin mining is slowly moving away from the big mining pools, like Bitmain, and ‘unknown’ miners are starting to come in to grab profits
Big Bitcoin Mining Pools Losing Control as “Unknown” Miners Take Profit
Contents

Part of the appeal of Bitcoin and other cryptocurrencies is that their design allows for a decentralised network based on a large network of miners. But in recent times, major mining pools have taken control of the mining arena, limiting the decentralised nature of the cryptocurrency, and making mining unfavourable and unprofitable for the everyday miner.

But there is a change in the air as the major pools, like Bitmain and others, are starting to lose their grip with a surge of “unknown miners” now helping decentralise the cryptocurrency further in what could be a return to profitability for individual miners.

Research has shown that the likes Antpool, BTC.com, and ViaBTC are now validating far less Bitcoin blocks than this time last year. Rather, there is an emerging group of “unknown” or untied miners that are currently validating more blocks than any individual pool.

This group of “unknown miners” could well be individuals flexing their own muscle as they look to profit from the fall in difficulty that has been seen over the past few months in the Bitcoin mining algorithm.

Who is in charge?

Blockchain research unit Diar has published new data that shows the control once held by major mining pools is waning, and is likely being overtaken by the more casual miner. Anonymous, and unknown miners, not tied to any pools, are now finding profit in mining the major cryptocurrency.

Who is in charge?

“Unknown miners closed December having solved a whopping 22 percent of the total blocks, up from 6 [percent] at the start of last year,” reported Diar. “The Bitcoin network is currently less likely to experience an attack given the fact the BTC.com controlled pools have lost dominance over the network.”

Protecting against attack

Not only is it that the casual miner could be profiting from Bitcoin mining again, it is helping accentuate the decentralisation of Bitcoin by diluting the power held by a single mining pool.

It is well known that if a blockchain is controlled by more than 51 percent by one miner or mining pool, that blockchain becomes the target of a 51% attack, which can have devastating outcomes for the cryptocurrency.

Bitcoin has been under threat of a 51 percent attack in the past because of the mining monopoly of Bitmain, but it has never come to fruition, and now, it cannot currently.

Diar reports that in early 2018, Bitmain’s mining pools accounted for 53 percent of Bitcoin’s hash power. Theoretically, this would have allowed them to collude to take control of Bitcoin with a 51 percent attack.

This reduction in their influence is positive for those wary of such an attack. Recently, Ethereum Classic suffered such an attack that led to $1.1 million being stolen from cryptocurrency exchanges.

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Ripple Focusing on Where the Money Is – the MENA Region

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Ripple has seen significant uptake in the MENA region of the Middle East and North Africa, so it is taking its focus there
Ripple Focusing on Where the Money Is – the MENA Region
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The Middle East, despite the strife and conflict, has grown to be a place of vast wealth with the likes of Dubai and Abu Dhabi shining bright in that region as places of immense wealth. This region, along with North Africa, known as the MENA region, is thus a very important place, especially for Ripple.

Ripple has stated that it is focusing a lot of its attention on the MENA region, and it is a two-part approach as it is aware of the potential there, but it has also seen significant interest from the region already.

Not only is the MENA region one of the fastest adopters of Ripple’s product, but they are also friendly to digital assets in terms of a regulatory standpoint. Since October, Ripple has been trying to expand there in a move which is quite smart.

The banking-focused cryptocurrency XRP and its parent company Ripple have been seeking partnerships in the MENA region, and it is starting to show, as they are starting to see traction.

The place to be

Ripple’s Head of Infrastructure Innovation Dilip Rao has spoken on the importance of the MENA region, recently mentioning that it is adopting the distributed ledger technology solutions from Ripple at a rapid rate.

They have been signing up banks in Saudi Arabia and UAE and other countries like Oman and Kuwait.

Rao said:

“The enthusiasm of the regulator, the central banks to also encourage the use of Ripple technology to build new infrastructure for payment rails.”

It makes sense that Ripple has decided to focus its efforts into the Middle East, especially with the interest it has there, and also because of the potential in its expanding and impressive banking system.

Banks showing their interest

For Ripple, it is mostly about partnering with banks so they utilize the blockchain assets of their XRP token in order to make the intra-banking payments easier, cheaper and more efficient.

So far, they have seen strong interest from the banks in the MENA region, and are thus driving deeper in. The banking system in the MENA region, especially in the developing middle eastern countries are far less attached to their legacy banking systems, something that has been a handbrake for the general adoption of blockchain and cryptocurrencies.

Banks in the MENA region are thus far happier to use the XRP token and xRapid product to solve visibility and liquidity problems in global remittances.

There are also far more lenient and open minded regulators in the Middle East which are willing to look into the new and forward-thinking options that are out there. It is because of this that Ripple has decided to pursue this region, and should it be a success, it would be the perfect platform to launch a more global offensive in terms of adoption.

Regulation inclined

Ripple has always been a cryptocurrency which has taken a different path from most others. Its intention is to work with traditional financial structures and help upgrade them rather than replace them, and to this end, it relies heavily on a welcoming regulatory standpoint.

In the MENA region, Ripple has found an open minded general approach to these financial tech rules, and to that end it has seen adoption start taking hold. It remains to be seen if Ripple can totally colonize the MENA region with its solutions, but it is positive that it is focusing in on an area which has an open pathway.

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