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Lost Money on Crypto? Here's How to Recoup at Tax Time

You can recover a substantial amount of money lost during this year’s crypto rout by dropping down federal income tax brackets. Here’s a detailed guide on how it works.
Lost Money on Crypto? Here's How to Recoup at Tax Time
Contents

Last Thanksgiving, Bitcoin was in the middle of a bull run that would result in a record high of $19,511 just before Christmas. Now, Bitcoin is worth just $3,752.

If you bought Bitcoin and other cryptos when their prices were high, there’s a silver lining around the gray state of crypto markets now: any losses you take this year could place you in a lower tax bracket. What’s more, claiming those losses is easier than you might assume.

Read on to find out everything you need to know about how to file your crypto losses.

Filing Your Crypto Taxes 101: How Does it Work?

For the purposes of taxation, the US and most other governments consider cryptocurrencies to be assets. This means that whenever you trade cryptocurrency, the transaction falls into one of two categories: a capital gain or a capital loss.

  • Capital gain. A capital gain occurs when you sell cryptocurrency for more than the amount that you paid to purchase it.

  • Capital loss. If you sell cryptocurrency for less than the amount that you paid for it, this is considered to be a capital loss.

You have to sell or buy an asset to trigger a taxable gain or loss. Once you decide to make a move, tax authorities consider the loss to be “realized.” If your loss is great enough, you may be able to use it to enter a lower tax bracket.

Deducting Your Crypto Losses

One of the biggest benefits of claiming a loss is that you can offset income gained from other sources.

In the US, the IRS lets you deduct up to $3,000 worth of net capital losses each year from the amount of money you’ve earned at your day job. If the amount you lost was greater than $3,000, you can get another deduction of up to $3,000 when you file your taxes next year.  

If you currently make just over $50,000 per year at your job, that $3,000 cryptocurrency loss could place you in a lower tax bracket. This could result in thousands of dollars of tax savings.

What’s more, if you’ve earned some income through stocks or through the sale of property, there’s no limit to the amount you can deduct from those revenues.

Examples

Here’s a look at the 2018 tax brackets for single individuals.

If your crypto tax loss puts you below the $38,700 mark, you’d only have to pay $952.50 plus 12% of any amount over $9,525. But if you made $38,701 or more, you’d have to pay over four times as much in taxes, plus 22% of any amount over $38,700.

In other words, if you fail to deduct your crypto losses and you fall into the third bracket as a result, you’d have to pay at least $4,453.50 to the IRS. But if you do file your losses and make it into bracket two, you’d pay just $952.50.

Total tax savings: $3,501.50.

Tax Single

If you’re married and filing jointly or widowed, moving into a lower tax bracket can result in even more tax savings. If you made $77,402 in 2018, you’d have to pay the IRS $8,907 and change.

Dropping down to the $19,051-$77,400 tax bracket by filing a crypto loss would save you $7,002.

Tax

How Does Crypto Mining Income Affect Taxes?

In addition to cryptocurrency traders, cryptocurrency miners can use deductions to reach lower tax brackets.

A notice that the IRS published in March of 2014 provides some relevant details:

“...when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income.”

If the value of the cryptocurrency you mined decreased and you decide to sell it, then that would mean that you have triggered a capital loss. You can report this loss in the same way that you would if you bought and then sold your coins through an exchange.

IRS analysts told CNBC that electricity costs and other expenses may be written off as well.

Here’s Where It Gets Complicated...

Figuring out how much you’ve made or lost can be a headache, particularly if you haven’t been keeping track of your purchases or if you placed a huge amount of trade orders last year.  

Sorting out how much you lost or earned requires access to historical pricing data. Without that historical data, you won’t be able to determine what the price of your crypto asset was when you bought and sold it.

Cryptocurrency Tax Tools

Fortunately, there is software available that can crunch all your crypto tax data for you.

The tool depicted below, called CoinTracking.info, can import your transactions from all your cryptocurrency wallets and exchanges. The interface walks you through how to do the imports.

At the end of the import process, you can download IRS form 8949. This is the form you need to submit to report your loss.

Other download options include CSV, TaxACT and TurboTax.

Tax-Report

Watch Out for Self-proclaimed “Crypto Accountants”

If you use a crypto tax calculator to do your own taxes, filing your taxes is a straightforward process. All you have to do is take the total from IRS form 8949 and transfer that to IRS form 1040 Schedule D.

In fact, most CPAs that work with crypto traders use CoinTracking and other publicly available software to determine what their clients owe. These tools are not difficult to use. Many have free trials, which let you see how they work for yourself before you commit.

Conclusion

If you lost money in crypto markets last year, you may be able to offset some-- or perhaps even all-- of those losses at tax time. Reporting your capital losses might help you move to a lower tax bracket. If your deductions qualify you for a lower bracket, filing them could save you thousands of dollars when you submit your taxes this year.

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David Dinkins

Media Reports Binance Exchange Ordered to Cease Operations in Japan, Binance CEO Denies

Mainstream media outlets worldwide are reporting that the major cryptocurrency exchange Binance has been asked by Japan’s FSA to cease operations.
Media Reports Binance Exchange Ordered to Cease Operations in Japan, Binance CEO Denies
Contents

A local news outlet, Nikkei, has reported that cryptocurrency exchange Binance was ordered to cease operations in Japan following its unauthorized expansion into the country. Japan’s Financial Services Authority (FSA) is the regulator that oversees the nation’s licensing program for cryptocurrency exchanges. Following a half billion dollar theft from Japan-based exchange Coincheck earlier this year, the FSA has reportedly been cracking down on crypto exchanges.

Shortly after Nikkei ran its story, Binance CEO Zhao Changpeng denied the rumors, tweeting:

Nikkei showed irresponsible journalism. We are in constructive dialogs with Japan FSA, and have not received any mandates. It does not make sense for JFSA to tell a newspaper before telling us, while we have an active dialog going on with them.

— CZ (not giving crypto away) (@cz_binance) 22 марта 2018 г.

Really big deal

Japan and Binance are both extremely important to the cryptocurrency sector. Japan presently has the largest Bitcoin trading volume in the world, with 56% of Bitcoin trades denominated in yen. Meanwhile, Binance is the largest cryptocurrency exchange in the world, by volume, with $1.7 bln in trades over the last 24 hours. Many of the top altcoins are heavily traded on Binance; the exchange is #5 by volume for Ethereum, #7 by volume for Litecoin, and #1 by volume for NEO.

Carrot and stick

Japan seems to be adopting a carrot-and-stick approach to dealing with Bitcoin. Last spring they made Bitcoin a legal payment method, but shortly thereafter began imposing licensing requirements on cryptocurrency exchanges. The strategy seems to be to offer an olive branch, then bring on the regulation. Put differently, Japan’s government seems to have some faith in cryptocurrency, but only so long as it remains within the nation’s existing regulatory framework. “Rogue” Bitcoiners must be shut down with alacrity.

 

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Wikicoin Alex Morris

What is Crypto Pump and Dump: Simply Explained For Beginners

📚 Wikicoin
The article runs about all the peculiarities of pump and dump schemes in the crypto industry
What is Crypto Pump and Dump: Simply Explained For Beginners
Contents

What is pump and dump?  

Crypto pump and dump represents a situation when a group of individuals tries to hugely profit off an asset by pumping it. ‘Pumping’ basically means buying a large amount of crypto (or stocks) in order to artificially increase the price of a specific coin. In such a way, pumpers take advantage of the basic law of supply and demand: if the demand goes up for something, the price would normally increase as well.

Scammers often pump and dump crypto, because, unlike traditional financial assets, it is tightly traded. Moving prices on a single exchange could have a substantial impact on the whole market. Pumpers normally target rather unpopular altcoins that do not need a lot of investments for price manipulations. For example, you would need to pump Bitcoin ad infinitum in order to provoke another bull run, but even $1,000 would be enough to effectively speculate on some new cryptocurrencies.

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How pump and dump works?

There are crypto pump and dump groups of people who buy extremely cheap altcoins and then they want to sell it off at a significantly higher price. Their task is to convince people that the coin is constantly increasing its value. They deploy different means of outreach including spam Twitter accounts, Telegram groups with thousands of active users in order to promote a new coin. Until recently, they would also put additional resources in buying Facebook and Google ads, but the recent crackdown on cryptocurrencies and ICO advertisement now prevents it.

Many inexperienced traders would invest in such a ‘promising’ asset out of fear of missing the boat on another big crypto. People are not generally interested in a plethora of obscure coins, but any cryptocurrency will attract their attention if it starts experiencing a major bullish uptick.

How pump and dump works

Then the pumpers dump the coin to their victims. That dwindles the hype and, subsequently, leads to a major drop in price.    

The food chain

Large pump and dump crypto groups usually have a very complicated structure. They consist of the following layers:  

  • organizers,

  • inner circle,

  • outer rim,

  • rank-and-file pumpers.

Obviously, organizers and some individuals from the inner circle run the whole thing: they decide what kind of coin they would like to choose and how they are going to promote this asset. On top of that, they are also responsible for timing. Being one of the organizers is very pricey and time-consuming, but at the same one get a huge profit in everything goes as planned.   

Members from the inner circle find out what cryptocurrency they are going to pump in a few seconds after the decision. All other members of the community (including the outer rim and last-minute pumpers) find out all the information only in about 30 seconds. After such a period of time, most of the move already takes place, so it is almost impossible for run-of-the-mill pumpers to hugely profit off dumping.   
 

Rank

Timing

Organizers

0

Inner circle

3-5 seconds

Outer rim and ordinarily pumpers  

30-60 seconds  


The process of pumping and dumping

How to pump and dump crypto? First of all, the inner circle decides what kind of currency they would like to choose for promoting. They get the biggest profit due to the fact that they purchase the coin prior to other members of the system. However, there is also a high-risk factor, since may they may experience some bug on the exchanges or some technical issues on their side which may slow down the process (even a few seconds are crucial in P&D schemes). It may also be possible that two or more groups will be operating at the same time creating havoc with the system.

The process of pumping and dumping

Once the pumping starts, the participants should be fully prepared with funds already deposited to their accounts. On top of that, they have to make sure that their computer has enough processing power in order to swiftly conduct a large amount of transactions (the same applies to the speed of their internet connection). Sometimes they deploy a whole bot army, which is capable of purchasing altcoins in a matter of seconds. Once the insiders have cashed out, they inform other lower-level members of pump and dump groups about crypto of their choice.

When it comes to the pumping stage, organizers try to involve as many ordinary folks who from the outer circle who will buy the currency at a higher price. Since the effect is really short-lasting, these investors are going to invest significant losses. The price of the pumped coin will drop like a rock in a couple of days.

The process of pumping and dumping

How to avoid pump and dump?

Here’s a list of things that you want to do if you want to avoid pump-and-dumps:

  1. Do an in-depth research of any coin that you want to invest in (the developers behind the project, mining peculiarities, price volatility).    

  2. Try to ignore cryptocurrencies that see massive gains out of thin air. While there may be other factors leading to a sudden surge in value, this is usually a primal indicator of the fact that the beguiling asset is being pumped by scammers.    
    NB! The majority of pumpers are not sophisticated enough to make it seem like the price is increasing gradually by investing small sums of money from time to time, so it is rather easy to spot them.

  3. Read the recent news about this coin and determine whether they are legit. Pumpers usually lure new victims in a crypto pump and dump (Telegram) with the help of fake news that are spreading around social media.


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Is pump and dump legal?  

Is pump and dump crypto illegal? Such practices of giving a push to companies, which are on the cusp of a major ‘breakthrough,’ is nothing new in the world of finance. The cryptocurrency industry is still going through ‘growing pains’ with little to no regulatory efforts. Even such openly fraudulent activities like pump-and-dump still remain legal on cryptocurrency exchanges. In February 2018, however, CFTC came up with an official warning for inexperienced traders and offered as many as $100,000 for any insider who would expose major pump-and-dump schemes. CTFC also states that up to 80 percent of ICOs may be involved in fraudulent activities, so traders should be exceptionally cautious before making some serious investments.

Wikicoin
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🤷 Opinions Igor Grigorenko

Could Two Sheriffs Share Same Town? Analyst on Role of Bitcoin in Coming Financial Crash

Opinions
Can cryptocurrency replace the US dollar as a protected asset for the XXI century?
Could Two Sheriffs Share Same Town? Analyst on Role of Bitcoin in Coming Financial Crash
Contents

Prosphero Platform’s top analyst on Bitcoin’s role in the impending global monetary crisis.

At the beginning of the year, Bitcoin had a significant fall from its peak value, and its recovery has been slow causing panic every time the price falls below $6,000. According to Bloomberg, altcoins value took a harder hit: about 70 percent of alts lost more than 90 percent of their cost. Amidst strategic uncertainty, every participant of the crypto market is trying to predict what will happen next.

My analysis of the future of Bitcoin’s exchange rate stems from searching for the logic behind crypto's current situation. For the central system of global exchange which is the American economy, the crypto market is a subculture. However, the subculture is not isolated; instead, it relies on the logic of trends that emerge at the global level of macroeconomics.

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A macroeconomics look

The period of “paradise” in the financial markets ended around the beginning of 2018 when a program called quantitative tightening (QT) was launched to correct the balance of the Federal Reserve.

This large pump that drains liquidity led to a devaluation of all peripheral currencies, crypto included.

For several months now, the US has been sweeping the world clean of the dollar, regularly increasing the Fed’s stake, and refusing to refinance previous loans, all of which leads to a rise in the dollar’s value. All other fiat currencies have automatically devalued under the stress of large amounts of commercial debt held in the dollar. Due to the constant outflow of capital and a lack of adequate reserves, it is becoming more and more difficult for nations to pay back debts to their foreign partners.

As a result, the end of the first half of 2018 saw a rise in the US dollar compared to other currencies. Some of those fell short by a small percentage; others were crushed by a significant amount (Turkey’s, for example). It’s useless to compare crypto to some island full of economic-anarchists isolated from the world economy, and that the strong turbulent currents of the market are of no concern to them.

This week the US regulator withdrew another $10 bln from the system. The Federal Reserve’s balance is now $4.305 tln, which is almost $200 bln less than its peak value. In other words, the amount of available liquidity in the system is rapidly falling—there is a compression of credit. What is scarier is that starting July, the Fed will be withdrawing even more money to the amount of $40 bln per month. What this means is that every month the Fed will squeeze more money from the market than the European Central Bank puts into it (30 bln euros), thereby stopping any increase in liquidity, even for other comparative currencies. As a result, the amount of money freely in circulation is getting less and less, which leaves many banks practically suffocating, and the situation is growing worse.

How exactly does this affect the stock market? For the seventh session in a row, the Dow Jones has closed in the red. Recently, 30 US blue-chips have been performing poorly compared to the rest of the pack (S&P500, Nasdaq, Russell). The growth that we have seen in the US exchange is gradually dying out, and there are increasing signs that the bullish market started in March 2009 is coming to an end. In other words, a terrible turn of events is approaching.

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The final hour

When the first big financial institutions fall, the people will ditch the failing stock market in flocks. The fall of these institutions will result from the suffocating effect of rising interest under the Fed’s accelerated pump. Deutsche Bank is one example of a soon-to-fall institution comparable to Lehman Brothers. While the names of the victims may vary, the fact remains that the deflationary spiral of QT will lead to the collapse of several big players considered “too big to fail.”

And now, during this final hour, we arrive at a dramatic showdown—will Bitcoin take the initiative during this time of panic and become the protected asset for investors who are running from the burning stock market? Or is Bitcoin just as destined as other peripheral currencies, like the Turkish Lira or Brazilian Real, to be the first to burn in the fire of the global crisis?

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Cash deficit

This is the key question of this entire layout. The current situation is rather clear: for now, Bitcoin is operating like any other peripheral currency that is moderately weakened by the actions of the American vacuum.

There is no extra cash on the market (for the rise of crypto), and there won’t be any.

This is confirmed by other subtle indicators showing a growing deficit of collateral for debt in the global banking system. So which will blow up faster under such a contradictory economic policy, the stock market, or the rising US national debt?

The next question is, where will the multi-billion dollars of capital find escape in this era of digital postmodernism? The answers to both questions are not clear. That is why when we reach the transformation point of the marginal markets because the Fed’s vacuum, everything can suddenly change. It is this point of bifurcation that will become the moment of truth for Bitcoin, gold, and other currencies—and which of them will become a protected asset for the 21st century?

Crypto as a possible way out

Recently Ron Paul, a former US Congressman who ran for president in 1988, made a sensational statement. He suggested that the US should consider the possibility of replacing the dollar with a combination of two assets—gold and cryptocurrency.

A scenario where the asset is replaced with gold and cryptocurrency is entirely plausible. This alternative would eliminate the shortcomings of the current financial model, which is rapidly approaching a deadlock. Paul blames the government and large corporations for creating the catastrophic economic situation, and he sees Bitcoin’s independence as pivotal in preventing future crashes.

Steve Bannon, multimillionaire and former White House Chief Strategist has also spoken in favor of the launch of an entirely new cryptocurrency that would compete with the US dollar.

Similar ideas that propose replacing the compromised money with cryptocurrency are rampantly spreading; Steve Bannon and Ron Paul are not the first to suggest a complete alternative to the infamously printed US dollar.

The eccentric billionaire and Bitcoin enthusiast John McAfee recently announced the release of his private fiat currency that is backed by other cryptocurrencies. In a Twitter post, he describes the main idea of his project:  

What's odd is that tomorrow night I am going to make an announcement of the new "McAfee Coin", based on a radical new concept: Fiat currencies (collectible) backed by crypto- the reverse of what banks are attempting. Seriously.”

This idea is the same as the Paul’s, who is going to lobby for the release of a similar coin that would be not private, but a federally funded project.

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Growing problems with fiat

Bureaucratic obsession with total compliance and the mania of AML has swept the world, and it is the biggest problem that international trade faces. Curiously, UN data shows that global drug trafficking is at its highest historical point.

In other words, the modern methods of fighting money laundering and financial terrorism are not generating meaningful results, except that they are tremendously lowering the productive work of financial organizations. Transaction costs and problematic payments are becoming a growing avalanche.

Today a tremendous burden is shackling the growing global economy. I would not at all be surprised if the original cause of the looming crisis happens to be this excessive regulation and modern witch hunt. Iran has already officially announced that it will use bitcoin for its trading accounts upon the imposition of new sanctions, and some countries are already doing this unofficially albeit in a very limited amount. The process of distancing from the madness of the regulators is not yet clear, but it is in the making and gaining momentum!

To say anything of Bitcoin’s future in the long term, we must await the imminent monetary crisis that will engulf the market around 2019 and 2020. It is then and only after the fact that the fate of Bitcoin and other cryptos will be decided.

For now, in the short term, Bitcoin is fated to suffer constant pressure (an extended flat period at best), behaving like any other typical peripheral currency of a developing country.

This town ain’t big enough for the both of them: while the dollar rules the world, the volatile and unpredictable Bitcoin will not be considered a viable alternative to US dollar. It will remain a dubious refuge for the speculators, and the many that are marginalized in the global economy.

Moreover, only the end to the grand monetary gridlock that is sadly led by the US will show us which asset will become protected and have its price skyrocket by the hundreds or even thousands.

If I am correct in my prediction, then yes, it could very well be the case that one Bitcoin will be worth one mln dollars. However, it is important to note that those one mln dollars will not be worth the same by then as they are now.  

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🤷 Opinions
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Thomas Hughes

Bitcoin Drops to Support. Bullish Pressure Increases

Bitcoin dominance remains steady at nearly 52% and a clear sign the market is ready to move higher once a catalyst emerges
Bitcoin Drops to Support. Bullish Pressure Increases

On Sunday, Nov. 11, the Government of Singapore announced a major blockchain breakthrough as it successfully deployed a Delivery versus Payment (DvP) mechanism. This is an automated way to perform rapid settlements of tokenized assets between Singapore’s Government and the Singapore Stock Exchange (SGX).

Sopnendu Mohanty, who is fintech chief at the Monetary Authority of Singapore, iterated:

“This project has demonstrated the value of blockchain technology and the benefits it can bring to the financial industry in the short to medium term.”

While this particular development is not directly tied to one cryptocurrency, it solidifies the status of blockchain technology and marks one step closer towards mass adoption. The effect is most likely long-term and will be felt most by the world’s leading cryptocurrency, Bitcoin. Bitcoin dominance remains steady at nearly 52% and a clear sign the market is ready to move higher once a catalyst emerges.

Charts at a Glance

Charts at a Glance

BTC/USD was stagnant over the last 7-day period, posting a negligible change of only -0.69%. It has been lingering close to support without clear direction, especially during the last couple of days, and may continue to do so in the near-term.

It must be noted that the pair has touched a long-term bullish trend line and has shown rejection at 6300 horizontal support (which coincides with the trend line). This price action formed a higher low, which is usually a pattern that predicts a bounce higher from the current location. Of course, technical analysis is not an exact science, and this movement doesn’t indicate 100% that higher prices will follow. However, as long as the trend line and 6300 support remain intact, our bias is bullish.

Support zone: 6300 and the bullish trend line

Resistance zone: bearish trend line (minor resistance) followed by 6465 in the longer term

Most likely scenario: break of immediate resistance and move towards 6465

Alternate scenario: continuation of the current choppy movement, with a possible break of 6300

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Darryn Pollock

Binance’s Exponential Rise Up the Ranks an Impressive Cryptocurrency Feat

Binance has set the precedent for success when it comes to running a cryptocurrency exchange, but how have they gotten so big, so fast?
Binance’s Exponential Rise Up the Ranks an Impressive Cryptocurrency Feat
Contents

Biance, arguably the world’s biggest cryptocurrency exchange, said back in July that it expects to make up to $1 bln in profit for 2018, a year which has been decidedly bearish. This cryptocurrency exchange is also not even two years old yet, but it has climbed the ranks to the top in quick time.

But what is it that has made this exchange such a success, especially in a bear market, and especially in a cryptocurrency space that has become so saturated and competitive in regards to exchanges?

The exchange started out on the right foot, with an innovative idea and a well-timed ICO for the Binance Coin (BNB) but from there, the growth of the company has been aided by its solid foundation. This in itself has allowed Biance to innovate and expand to new areas, including upcoming fiat-to-crypto exchanges.

It is a worthwhile exercise to look at Binance’s route to the top and discover if there is anything for other companies in the market to glean from their journey. In such a competitive market, there have to be competitors that are either looking to innovate, or potentially imitate.

Rocketing to the top

Binance was founded in early 2017 by Changpeng Zhao in China. They quickly moved to launch an ICO for a native utility token called the BNB. This was a timeous decision as July 2017 was when the ICO craze was really starting to take off and it ended up netting Binance $15 mln.

The intention with the BNB was to give its holders 50% off fees on the trading platform, which was an attractive proposition and surely one of the reasons why Binance accumulated so many users so quickly, but also why it’s token became important and embedded down the line.

It took Binance just 143 days from its launch to reach the top three cryptocurrency exchanges globally, and its growth did not slow down. At the beginning of 2018, the exchange boasted about 2 million users, but six months into this year that number swelled to 10 million.

It is for all of these reasons and this astronomical growth, that Binance is predicting its profits to top $1 bln this year.

The BNB’s role

Binance’s own token has surely been key to its growth as a company, but at the same time, the companies growth has also helped establish and expand the use of the utility token. Because it started out simply as a way in which users could lessen their fees, it was well received and attractive to new users.

The BNB thus was heavily traded, very liquid, and well distributed, all aspects that aid and help grow an exchange. Thus, as more people flocked to Binance because of the lessened fees through its token, the company grew, and the BNB expanded its reach and value.

BNB is now more than just a coupon for 50 percent, it has multiple roles on Binance, including being a voting token for Community Coin of The Month which is a way new coins can be chosen and listed on Binance, and it is being used for Binance’s LaunchPad, which aims to help raise funds for worthwhile start-ups.

A model for the future?

Binance is of course not without its faults, and it has been criticised for onboarding a number of cryptocurrencies, and also accused of charging exorbitant rates for doing so as a money making scheme to the determined of the ecosystem.

However, their story of growth — even in a quickly expanding space like Blockchain — is still impressive, and may well be setting a precedent for future exchanges to become established. Binance will face struggles down the line, especially with regards to regulation, and this is why it has already moved operations to Malta, but its foundation is already laid.

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