🎤 Interviews Katya Michaels

NEM Puts Coincheck Behind, Looks Forward to Industry-Changing Catapult Tech: Jeff McDonald

🎤 Interviews
In his exclusive interview, Jeff McDonald explains how NEM is going to get ahead of Ethereum
NEM Puts Coincheck Behind, Looks Forward to Industry-Changing Catapult Tech: Jeff McDonald

 

CryptoComes talks to NEM’s Jeff McDonald about his leaving the foundation, the Coincheck aftermath, the NEM’s future plans and why Ethereum will flip Bitcoin as premier Blockchain.

Katya Michaels: The news is that you are leaving NEM foundation as Vice President - is this true? What motivated this decision and what are your plans now?

Jeff McDonald: I've been working with NEM for four years. I started in February of 2014 and it's been a very awesome ride. I've done a lot of different things- the Apostille protocol, the voting protocol, I helped champion supernodes. I feel like I've been very successful and at the same time, I'm spread very thin right now.

I have two companies that I am invested in, Luxtag and KChain, and I want to focus a little bit more on them now. Both are being built on NEM Blockchain and they have been doing really well lately. We've got multiple contracts with really important names in Malaysia. Kchain in South Korea just recently released their first token- not on an ICO. They have great name recognition and connections in South Korea.

Both of these projects really need me right now, I want to help them and I need a little bit of time for that. I'm leaving the Vice Presidency, but I'm not leaving NEM at all. I continue to be very active speaking for NEM - here at CryptoBlockCon LA, in San Francisco tomorrow, next week in Philippines, at Consensus 2018 in May.

Everything's good with the foundation. I'm really proud of NEM China and the team they built, I'm really proud of NEM Philippines, really proud of NEM Malaysia. All of these have really good teams behind them.

As the new leadership comes in, our hope is that they're going to scale out more countries. NEM US for instance, build up NEM Europe more, NEM Russia. I really want to see all these regional countries grow and be a big part of NEM.

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Coincheck hack aftermath

KM: I have to ask about Coincheck- what is the update on reimbursing victims and finding the perpetrators? Why has NEM foundation stopped tracking the stolen funds?

JM: The police are doing their investigation. We consider that a secular matter, to let the police do what they're doing. As far as tracking the accounts that had stolen funds, we've left a lot of evidence on chain for the police to do a chain analysis and catch the perpetrators.

As far as I know, Coincheck has allowed most everyone, if not everyone, to claim back their funds, which is a really good thing. They've held up their end of the bargain, I think and I'm very happy that they did that. I feel that it was a very sad incident.

We're just moving forward now- Coincheck is mostly in our past and we are looking forward to Catapult now, which is a huge deal.

Regulations: Japan vs. US

KM: Can you talk about regulators in Japan and describe your experience?

JM: Japan is actually a great example of regulation. They have been really bold in going out and making regulatory decisions. I think that overall that is great for the cryptocurrency industry. Other countries don't really know what to think about it, but because Japan is being so clear with its community, it opens the door for big business.

I mean if you look at cryptocurrency, why hasn't Apple made its coin? Why hasn't Google made a coin? Recently in Korea, Kakao, which has near a hundred percent market saturation, mentioned that they're getting into Blockchain. A lot of really big companies want to get into Blockchain, but for one thing, Blockchain technology is not quite good enough to handle the scalability at the levels that these big companies work.

Even if the Blockchain was good enough, though, the regulatory issues are not clear.

Japan has been awesome to say what is legal, what is not legal, and now the doors are open for big businesses in Japan to come in and really roll up Blockchain so that millions of people can be using it for something other than speculation.

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KM: How soon do you think the US will catch up to that kind of regulatory clarity?

JM: It'll still take a couple of years. The good news is that the conversation is happening and the US hasn't just said “It’s illegal!” The US has been very careful and very slow. Of course, I would want more clear and faster regulation, but I'm very satisfied with the happy medium in America right now.

I think that a lot of people won't like that I say this, but I think the SEC is doing a good job. They're going after scammers, and pumpers and dumpers. If you're an honest person and you're making a good project, following best practices, building something on the blockchain for real use - voting, or database security, or tickets- the SEC is totally fine with you.

Let's be realistic. There's only so much you can ask, for a government the size of America to move quickly with all these different agencies. They're all saying something a little bit different, but sooner or later they'll all get on board and become clear. I think that will happen in the next two or three years.

KM: Do you think ICOs will be greatly affected by regulatory activity in 2018 as compared to last year?

JM: ICOs are here to stay at least for another couple of years. ICOs in America might get cut back, but there will be a country somewhere - whether it's Japan or Belarus or Ukraine or Isle of Man- that will fully welcome Blockchain and ICOs and give clear and light regulation. Then, there will be another big boom of ICOs. The cat's out of the bag, the door is open, there is no stopping. There's too much money, it's too easy.

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Japanese investors

KM: What are your impressions of the Japanese investor community?

JM: The Japanese are great because they're actually really interested in the philosophy of the technology. It's really interesting, seeing the different countries and what people focus or don’t focus on.

One of the reasons why NEM is so big in Japan is because the Japanese have taken the time to actually read, study and understand the vision before they invested.

We have these die-hard Japanese fans that are just amazing. We have our own bar in Japan, with a special drink named after the Apostille protocol!

Dethroning Ethereum

KM: A lot of people believe that NEM can dethrone Ethereum as the premiere smart contracts platform. What do you think about that? What are the obstacles to that happening, if any?

JM: I think that our technology has been fundamentally designed as more stable and secure. Literally every day, there are projects leaving Ethereum and coming to NEM. We've lost one project from NEM to Ethereum, and that was for financial reasons. I think that the data on the ground is showing that people who are building applications prefer NEM over Ethereum. Now we need to build on that momentum and scale it out.

If the growth patterns of Bitcoin, Ethereum and NEM continue with the same trajectory, what will happen is Ethereum will flip Bitcoin as the premier Blockchain. That's going to happen later this year, maybe next year, but it’s really just a matter of time.

Ethereum is better than Bitcoin basically in every way you can imagine. It's faster, it has more utility, it’s just better. NEM turns out to be not in every way, but in a lot of important ways better than Ethereum. Sooner or later, people that are building will get this.

Ethereum's always had better marketing - they started off with marketing and then went to development. We started off with development, built a real product and then went to market. So we're still relatively unknown, but there's some technology coming out with Catapult that, for a lot of projects, will make NEM the only option.

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Catapult

KM: Is Catapult coming out soon?

JM: It will be open source next month. We've solved so many problems. For example, private key management, specifically losing your private key, which is a huge issue in Blockchain. We have a great contract coming up with Catapult. Whenever people are setting up an account, they can initiate this contract as an insurance mechanism to solve that.

Also, we have solved the gas problem. Let’s say CryptoComes makes a coin on Ethereum and you send it to all your readers. They say “thanks for the CryptoComes token,” and then they want to spend it, but they don't have any Ether for gas. Now, they have to sign up on an exchange, register and get an ID, send the money and then transfer Ether to the CryptoComes wallet. Only then, they can use CryptoComes to buy some advertising or send to their friends or whatever.

In NEM, we have this new transaction type which is going to allow CryptoComes to sponsor the gas fees. This is a really beautiful transaction because it allows regular users to get the CryptoComes token airdropped into a downloaded wallet, send it to their friends, start sharing it and creating an economy - even if they don’t know anything about Blockchain or Ether.

With Catapult, somebody can make their own app, their own wallet, and have their users or their business using that token without ever having to join an exchange. It’s seamless, frictionless, integrated into the system.

So there's a lot of great technology that's coming with Catapult that's just going to make NEM the only option.

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Crypto Commerce and Its Future: Interview with Uphold’s CEO, J.P. Thieriot

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With the world of Blockchain ever evolving and changing pace, a top level executive lays out his vision for what the future has in store for the crypto market
Crypto Commerce and Its Future: Interview with Uphold’s CEO, J.P. Thieriot

J.P. Thieriot is the CEO of Uphold, a cryptocurrency platform offering a multitude of services, which was launched in 2015. A graduate of Yale University, before going crypto, J.P. Thieriot managed a number of companies in the tech sector, as well as real-estate and agriculture, including Estancia Beef, one of the largest grass-fed beef companies in the United States. Today he agreed to sit down with us to discuss where the crypto business is at, as we’re approaching the New Year.

Why Crypto?

U.Today: Mr Thieriot, tell us a bit about yourself please. You have a substantial amount of experience in many business sectors. How did you find yourself doing what you do today?

J.P. Thieriot: My first exposure to Bitcoin came as a result of having investors’ funds trapped in Argentina in 2013. Despite statements from PWC stating that a given LP’s account was worth $X, attempting to take the money out of the country meant the LP would receive $.5X. It was a perfect example of how a third world country can use monetary games in pursuit of short-term gains, while ultimately thwarting real value creation and holding a populace hostage to incompetence. We tried every conceivable (US legal) way of getting the funds out. That’s when I came across Bitcoin. Unfortunately, we didn’t take the plunge. Seemed too precarious. BTC was at around $15 at the time!

U.Today: Tell us about the company you are currently heading. What services does it offer exactly?

J.P. Thieriot: Uphold is a global digital money platform. We have about 1m users. In some respects, this side of our business could be compared with Coinbase, i.e. not exactly an ‘exchange’, with direct links to legacy money networks like US and EU banking through rails like ACH and SEPA. Where we’re very differentiated is in having a big lead over everyone in the context of our open APIs for third party digital money applications. We do not just ‘list’ tokens like an exchange, we are deeply integrated into some of the ecosystems of the companies behind the tokens, like Brave-BAT, DASH and Cred-LBA. 2019 will be the year that some amazing utility tokens emerge from the rubble of hundreds of silly ICOs. I’d like to think Uphold will be an integral part of those likely to be the most successful.

U.Today: Uphold recently received close to 60 million USD from Greg Kidd, a former Ripple executive. Are you now partners with XRP?

J.P. Thieriot: We have a large XRP community on Uphold. They are passionate and active. We try to make them happy. Certainly, there are a number of possibilities with Ripple down the road.

The DLT Business Today

U.Today: In addition to yours, there are many companies based in San Francisco, among them Kraken, Coinbase, and Blockchain Capital. Has Silicon Valley now conquered the crypto world as well?

J.P. Thieriot: Digital money is an Internet phenomenon. It stands to reason that ‘Internet’ geographies would concentrate Blockchain companies in the early going. Ultimately, I imagine regulatory regimes will skew the array. Hopefully, the US will be able to maintain a light hand and perpetuate its early advantage over other regimes.

U.Today: What do you think it takes to “make it” in the DLT world as an entrepreneur? Is it about the savviness, i.e. the know-how, or simply the right attitude, i.e. being the go-getter type?

J.P. Thieriot:

Perseverance first. Execution second. Blazing insights a distant third. Building the right team is also critical... I have a pretty dim view of humanity :), specifically in that I’d choose to work again with perhaps 10% of the people I’ve worked with.

After four years at Uphold and many purges and reorganizations, we’ve arrived where that number is, for the first time in my work experience, inverted. 90% of the people working at Uphold today are rock stars. Work hours don’t exist; the creativity, initiative, and energy thrown at every problem is unbelievable. It feels more like (an ideal) family than a workplace. We all believe we are doing something important and exciting, and we’re unlikely to come across a similar opportunity in our lifetimes.

U.Today: Are you a believer in decentralization? It seems that this is how the Blockchain got started in the first instance. Yet, according to some, this domain has now become very centralized, from pegging to market dominance by a select few. What are your thoughts?

J.P. Thieriot: ‘Decentralization’ has become the buzzword du jour. Yesterday it was ‘Blockchain’. Obviously, these are novel and important facets of our burgeoning ecosystem, but it’s funny to me how people can get religious and sanctimonious around these banners. The idea here is that an Internet of Money has become possible… ne inevitable.

Decentralized and Blockchain technologies, methods and protocols will likely have a lot to do with the evolution and outcome; however, being theologically absolute, really about anything, strikes me as ridiculous. The Internet is decentralized; Amazon, Google and Apple are not. For this industry to jump the rails into the mainstream, particularly given how money is regulated, is going to require clusterings of human beings doing things like support and marketing for quite some time.

I’m not sure a pure peer-to-peer network, serviced by a distributed automaton is either possible or desirable. In the meantime, the more distributed, less concentrated, more collaborative things become, the better, i.e. less risk, higher output.

U.Today: While some networks openly attack one another, Ethereum and EOS being the prime example, others prefer to unite instead. Uphold is part of Universal Protocol which attempts to do just that. Is it a union created simply in order to increase profits, or is it more than that?

J.P. Thieriot: The UPP is an industry utility, the purpose of which is to mitigate a number of the current restraints on the growth of our ecosystem. We’ve identified those restraints as: 1) the lack of a common language, 2) the lack of conventional user safeguards, and 3) the lack of products built for mass adoption.

The question about Ethereum and EOS goes to the first of the above factors. It does nothing for the benefit of the ecosystem when competing protocols throw mud at each other. It debases outside opinion, puts a grin on the faces of the ossified naysayers—the Dimons and Buffetts of the world—and perpetuates confusion and uncertainty among potential new entrants.

UPP’s purpose is to usher in the next 100 million users of crypto. We can do this by disrupting a hidebound legacy financial system that has been a festering backwater in terms of innovation, soundness, fairness, equal access, and transparency. Bickering amongst ourselves is a destructive waste of time.

Ongoing Crisis and Predictions

U.Today: We simply cannot not ask about the current Bitcoin crisis. Does it complicate business, or can this low tide be treated as an opportunity to dig out whatever gold was left buried in the sand?

J.P. Thieriot: Speculative bubbles always form around the advent of revolutionary technologies. This technology happens to relate directly to money, and it has benefitted from significant Asian participation on the trading front; ergo, the ups and downs are likely to be super-charged.

We’ve been expecting a shakeout. There’ll be a lot less noise in the market. Meanwhile, nothing will deter the inexorable march of the coming Internet of Money.

U.Today: With so much on the market today, what is it that the customers are after exactly?

J.P. Thieriot: Quite simply, quantumly wider and more convenient access to better financial products and services.

U.Today: Can you make any predictions for the future? How is the market going to be different in, say, five or ten years from now?

J.P. Thieriot: 2019 will be the year of “The ICO is dead, long live the STO”. The first real utility tokens will start to show their stuff, foremost Brave’s BAT token. The general market will remain below the $200b mark as the weaker offerings perish and very few strong projects accumulate value. In five years, we will be well into the process of tokenizing/digitizing every single traditional asset class in existence.

In ten years, the use of banknote cash will at least have diminished by 50% from today’s levels… And my guess is―because one way to look at BTC is as a shorting of the monetary system’s status quo―BTC will be above $25k.

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With many HODLers and crypto enthusiasts looking for investment advice, insights from a top expert in the fintech field, Dan Schatt, are sure to come handy
Let’s Talk Stablecoins: Interview with the Co-Founder of Cred and Former GM at PayPal, Dan Schatt

Dan Schatt is the Co-Founder and President of Cred, former General Manager of Financial Innovations at PayPal, and a bestselling author of Virtual Banking: A Guide to Innovation and Partnering. Earlier this week, we sat down with Dan to talk about the crypto market in general and stablecoins in particular.

From Mainstream to Crypto

U.Today: Hi Dan. You had a solid career in mainstream finance, including a leading position within PayPal. Why did you decide to go crypto?

Dan: I became interested in the Blockchain technology and crypto space in 2012, back when I was working at PayPal. While PayPal hoped to become the Internet of Money, my “Aha” moment was that crypto would become the Internet of Value, eclipsing PayPal in every way, i.e. Blockchain would prove more secure, transparent, and allow for the tokenization of all asset classes. It is unbelievable to me how quickly we’ve moved to a legally permissible, tokenized version of the US Dollar!

I believed crypto would also attract a larger developer community than PayPal could ever hope for. You just can’t compete with a world computer or a non-inflationary world currency that can be used by anyone with Internet access.

I later published a book in 2014 called Virtual Banking, with a chapter on Bitcoin and crypto. I’ll never forget my interviews with Wences Casares, who really opened my eyes to the power of Bitcoin.

U.Today: Please tell us a bit about your present company that you, as we understand, also co-founded. What does Cred do exactly?

Dan: What is the best possible loan you can get, other than a free friends and family loan? Probably a home equity line of credit. The problem is most people can’t get a home… Replace the home with crypto and that is essentially what Cred has created: the world’s first Crypto Line of Credit (C-LOC™). We allow people the ability to use their BTC, ETH and XRP as collateral and get cash. Cred has amassed over $300 million in lending capital to provide liquidity against crypto assets. We are set to revolutionize the lending industry by merging an established global lending network, a diverse fintech team, machine learning, and the power of the Blockchain technology.

U.Today: It seems that education, among other fields, is moving onto the Blockchain. The UC at Berkeley now has its own Blockchain, and your company is somehow connected to it through a third entity, is that right?

Dan: Yes! Cred and Blockchain at Berkeley, are two of the founding members of the Universal Protocol Alliance. Howard Wu is Cred’s Chief Scientist and a Founder of Blockchain at Berkeley, the largest US University Blockchain associated in the United States. They have an incredible amount of talent coming through their program and we are lucky enough to benefit from their thought leadership when we created the Alliance, which is dedicated to bringing important pieces of infrastructure to the crypto community and act as a bridge for the next 100 million users of crypto.

Stablecoins and the Current Market

U.Today: What are your thoughts on Bitcoin’s collapse last month? Did it come as a surprise to you? Where does this situation leave us now?

Dan: I guess it all depends on your time horizon. I’m a big believer that crypto assets will become the preferred store of value and means of exchange in the future. As a store of value, just look at BTC and gold in 2011. Gold is down roughly 30% since 2011 while BTC is up ~118,000% but is still just 1% of gold’s market cap. And how many times has BTC “collapsed”?  

Price volatility is massive at this time because wealth is highly concentrated and institutional involvement is still limited. This will evolve as the Internet did. Development of infrastructure and practical applications takes time… You can’t rush a pregnancy to 1 month by adding 9 doctors. It will still take 9 months.

U.Today: Let’s move on to stablecoins. Certain critics claim that some of them, e.g. Tether (USDT), are a disguised form of centralized fiat currency since they are pegged against the USD. How would you rate this assessment?

Dan: For the last few hundred years, governments have legitimized fiat currency by backing it with gold. Eventually, as trust grew in government currencies, there was no longer a need to connect it with gold. The same is now happening with crypto stablecoins. Will it matter at some point if they are “backed” by fiat? Probably not. At some point, the trust will be in the finite supply, greater transparency, stronger security, increased utility and ability for it to travel as far and wide as the Internet. Governments will eventually work to tokenize their own fiat currencies, but there will always be demand for a store of value or means of exchange that cannot be controlled by any government.

U.Today: Do you think businesses should strive to move away from governments? Then isn’t there a dissonance pertaining to how this ideal can be achieved with stablecoins which by default rely on central banks?

Dan: Governments and businesses will increasingly be pulled in a direction by the Blockchain, i.e. a path toward more transparency, inclusion, and the democratization of financial services. It will become increasingly difficult for governments to close their borders, impose capital controls, and attract talent if they do not support crypto. And, crypto communities need to leverage some of the valuable components of the existing financial ecosystem—the role of professional custody and basic investor safeguards—because inheritability and token recoverability are needed if we are to provide crypto services that will appeal to the next 100 million users.

U.Today: For better or worse, do you think the demand for stablecoins is bound to increase since they seem to demonstrate more stability during crashes?

Dan: Absolutely, but not just because they are stable. They will ultimately be used as a better means of exchange, remittance vehicle, and as core component in automated commerce.

But, not all Stablecoins are created equal. They’re more likely to be ‘stable’ if they are pegged 1:1 and verifiable on-chain, and can allow for anyone to review how the value is substantiated, not just a professional auditor.

The Future Talk

U.Today: What are your predictions for 2019? Will we see more widespread adoption of stablecoins? If yes, do you see it as a positive thing?

Dan: We are building to deliver practical use cases. There are many examples of this: an Argentinian who needs to get out of an unstable fiat currency, or a Turkish expat looking to make a remittance more cost effectively. Stablecoins can deliver on these use cases. I may live in a country with an unstable currency, and I’d like to move into something stable as soon as I can. I may not have access to a US bank account, to buy USD, but now I can buy a better version of the US Dollar. There are now lots of opportunities that broaden the use cases and bring more people in… So yes, a very positive thing!

U.Today: Some claim that DLT is the future of commerce: the fintech sector will change the global economy, drastically reshaping how we do business. Your thoughts on this?

Dan:

Commerce needs more than a distributed ledger to function. Cred, for example, is providing low cost credit to be used in commerce. Others are providing core banking services such as payroll for crypto companies. The future of commerce involves a host of next generation financial services. How those ingredients are combined with DLT is the secret sauce.

U.Today: Finally, what advice would you give to those who are thinking about entering the crypto world? How should one behave in order to succeed in this still largely unexplored domain?

Dan: Keep your ear to the ground and listen for real problems that need to be solved. The more specific, the better. Tools and infrastructure are still needed to allow crypto to go mainstream. Think years vs. months. We’re headed in the right direction, so make sure not to get caught up in the hype cycles, whether crypto is on the way down, or on the way up!

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Bitcoin ETF, a Tail Wagging the Dog: Interview with the Founder of Virtuse Exchange, Ras Vasilisin

Rastislav Vasilisin, a native of Slovakia, is the founder and CEO of Virtuse Exchange, a crypto exchange platform based in Singapore. With many years of experience as a trader on Wall Street, Ras sat down with U.Today to talk about the current crypto market situation in general and Bitcoin Exchange-Traded Funds in particular.

Trading and Exchange Platforms

U.Today: Hello Ras, you are now the CEO of a crypto exchange platform. Why did you leave the life of a traditional New York trader behind?

Ras: My personal trading adventure kicked off 23 years ago in New York as a stockbroker on Wall Street and later as a financial analyst at Mitsui. However, I got bored with the capricious corporate lifestyle and together with a friend of mine decided to move back to Prague in 2001. Five years later, I co-founded a brokerage company, which became a predecessor to the Virtuse Group.

U.Today: Nowadays, there are quite many crypto platforms around. What is the attraction of creating one? How challenging is it really? How is yours different?

Ras: After 12 years as one of the largest carbon emissions traders in Europe and China, we decided to bring commodities to the crypto world. Commodity trading had been traditionally the domain of large banks and institutions. Incumbent exchanges are largely exclusive, requiring chunky collaterals, fees, and extensive prior experience in trading. We decided to change that and make the space more inclusive for everyone, not only for the 0.1% of the world population.

There are many challenges associated with running a platform like that, of course. The main ones are rooted in technology, regulations, and liquidity. The tech hurdle we solved by developing our cutting-edge platform with the smart contract for multi asset trading. Liquidity is being facilitated by the world’s top market makers. And the compliance issue we solved by applying for the first crypto-commodity exchange license in the world, residing in Singapore.

In one sentence, Virtuse Exchange is a crypto exchange that bridges crypto markets with trillions of dollars worth of financials, commodities, and physical assets. We facilitate trading of all these assets on one platform, with minimal incremental investments and deposits. In reality, an investor can invest into oil, silver, or coffee with as little as one Bitcoin or Ether. Naturally, no banks or intermediaries are involved.

U.Today: It seems that Asia is currently leading the world by the number of crypto exchange platforms, in terms of how many there are and how big they are. What is the reason for that? And, of course, you chose Singapore, which is in Asia, as Virtuse’s home. Not a coincidence?

Ras: I relocated my family and Virtuse Group’s HQs to Singapore 4 years ago in order to stay near to China, our largest emissions market. Singapore is the 3rd most favorable country for ICOs in the world, and thanks to the light touch on the regulations from MAS, ICOs are able to thrive in Singapore. Since I had already lived in Singapore previously, it was an obvious choice for me in terms of where to launch the platform.

Bitcoin Exchange-Traded Funds

U.Today: What are your exact thoughts on Bitcoin Exchange-Traded Funds (ETFs), which you seem to be quite critical of?

Ras: There’s definitely an enormous market appetite for Bitcoin exchange-traded funds. Bitcoin ETFs are inevitable, but potentially harmful in the long run.

Over the last decades, Wall Street has perfected the art of leverage-based financialization. Global banks and large hedge funds effectively created several times more financial claims to commodities than there are underlying assets, which distorted the price-discovery mechanism.

Sadly, the financial engineering has already infiltrated the Bitcoin markets too. Thanks to the Bitcoin futures and many other exchange-based leveraged products, we can detect the effect of financialization of Bitcoin. Daily liquidity for synthetic versions of Bitcoin is already approximately $15 billion, which is three times more than Bitcoin's daily spot liquidity of approximately $5 billion.

As we move closer to the date of the potential Security and Exchange Commission's approval of ETFs, there is a legitimate uneasiness in relation to what leverage-based financialization might bring to the crypto market.

U.Today: You have said before that a Bitcoin ETF could become absolutely disastrous. Could you elaborate on that?

Ras: Let me take a step back and clarify. It is no secret that the Bitcoin price reached its peak on December 17, 2017, when CoinMarketCap recorded the aggregate price of Bitcoin standing at 19.535.70. Coincidentally, this was the very same day that CME (Chicago Mercantile Exchange), the financial giant, had their Bitcoin futures trading launched.

I warned at the time that artificial Bitcoins in the form of futures are artificial cash settled IOUs (debt acknowledgments) without the physical delivery of Bitcoin. All the institutional money flowing into this “fake Bitcoin” has not been affecting the price of Bitcoin positively. In fact, it’s been affecting it in the opposite way mostly, since this flow dilutes the highly cherished scarcity by artificially creating Bitcoins.

U.Today: How much capital exactly are we talking about here?

Ras: It’s a huge amount. In the third quarter of this year, Bitcoin futures average daily volume rose 41% and open interest was up 19% over the second quarter, according to the CME website. In Q3, on average 757,950 paper Bitcoins were traded per month. Which is about 3.6% of all Bitcoins ever in existence. That amount doubled from the first quarter. The average daily volume on the spot is about $6 billion.

Introduction of cash settled futures in other assets caused the same market price to decline. Take the gold market for example, although numerous other examples can be used.

U.Today: The gold prices were also influenced by CME in this way?

Ras: Gold markets have been in steady decline since 2011, from the peak price of roughly $1,900 to $1,230 /oz. CME runs COMEX, which is the derivatives market where gold futures are traded. COMEX through its clearing banks provides margin trading and on average issues 360x more paper gold than physical gold. It makes Bitmex’s 100x leverage with its socialized losses look like child’s play.

And this all comes at the expense of the gold investors. The large banks and brokerages can technically create 360x more gold out of thin air, while an average retail investor has to come up with hard cash to buy gold at full price.

Bitcoin ETFs might eventually be leveraged in the same manner as the futures contracts. The same financial engineering dynamic as this year might be played out next year, too. This will most probably take the wind out of the sails in 2019.

U.Today: Is there any space left to be optimistic about these funds at all?

Ras: Yes, there is.

The first reason is that HODLers can resist the aforementioned pattern simply by keeping their coins outside of the financial system. Unlike gold or silver, most of the spot holders in Bitcoin markets are already storing their coins away from the system, making it hard for financial institutions to borrow it.

Due to the hard-to-borrow nature of Bitcoin, the magnitude of the impact of ETFs, futures, and other Bitcoin derivatives might be smaller than with commodities derivatives that are mostly settled in underlying assets. Nonetheless, cash-settled derivatives have a lot of potential to affect the price of the underlying coins.

The Crypto Wrap-up

U.Today: We’d better keep our eyes peeled then. But let’s shift our focus. You do a fair bit of travelling attending forums and giving talks. Anything in particular that stood out for you this year?

Ras: I’ve been extremely pleased with the turnout at the largest crypto events in Asia. The tremendous amount of entrepreneurial talent, energy, and funds that are still being poured into the space is mind-boggling. This market has an enormous potential to disrupt and transform the entire economy, particularly financial, healthcare, and government ecosystems.

U.Today: How do you see the future of the crypto market and, perhaps more importantly, Blockchain and DLT in general?

Ras: I believe the DLT and crypto are alongside inventions like the steam engine, computer or Internet, one the most disruptive technologies in history.

Blockchain is set to fundamentally transform the way business is carried out in industries all over the world. I would encourage everybody to start paying attention right now.

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Tech Has Sat on Its Hands Long Enough: Digital Asset Trade Association Speaks Up for Blockchain

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Perhaps it’s time for the tech community to stop waiting for Blockchain technology to speak for itself and take more definitive action.
Tech Has Sat on Its Hands Long Enough: Digital Asset Trade Association Speaks Up for Blockchain

As regulators step up their vigilance and take stringent measures against crypto companies that fail to comply with securities standards, many in the crypto community agree that regulation clarity is the most urgently needed ingredient for bringing stability and growth to the crypto market.

Recently, decentralized exchanges are taking their turn under fire, and while the amount of regulatory action is intensifying, regulatory confusion has not been resolved – if anything, it’s increasing.

Given how essential the resolution of this impasse is becoming for the crypto space, perhaps it’s time for the tech community to stop waiting for Blockchain to speak for itself and take more definitive action. But what forms can such action take?

Brent Cohen, Head of Product at Element Group and co-Founder of the Digital Asset Trade Association (DATA), is one member of the community taking concrete steps to shape the legal discourse around Blockchain and its applications. Having already achieved significant success with crypto legislation in Wyoming, DATA is bringing together enthusiasts, experts and legislators to come up with a common language and best practices that will facilitate the adoption of this technology.

U.Today (Katya Michaels): Advocating for supportive Blockchain and crypto legislation is not your day job. Why did you think this was important, but also feasible, to do?

Brent Cohen: There is a long tradition, both in the United States and elsewhere, of citizen lobbyists who take important issues to their representatives. Uber and Airbnb came to market, disrupted everything and then when the regulators came and shut them down, they went to the users and said – go lobby city hall. So, there are good recent case studies of technology innovators calling on their enthusiasts to lobby for change.

It's also very clear that the crypto world is up against major forces in the banking industry, which is legitimately concerned about a threat to its cash flow. Banks are investing in Blockchain and hedging their bets, but they also like the status quo, and the status quo is set up traditionally to help incumbents.

The Blockchain world is a disruptive force, and we just couldn't let this big of an opportunity go by without engaging directly in the political sphere. It was a business imperative drawn on recent history and a recognition that tech has sat on its hands for a very long time and let government push it around a little bit. Or perhaps, we think that we're outside of the realm of government influence, or that we're on the right side of history.

How does blockchain work?

All of those may be true, but it's not a good way to operate, especially when you're dealing with money, which is very regulated. So, we had to jump in and create something. An opportunity was presented to us in Wyoming, we got some laws passed there and we've just been carrying the ball forward wherever we can all around the world.

UT: Clearly, financial institutions have a lot of lobbying power and endless funding. How can an association like DATA compete?

BC: The key message is always going to be jobs and revenue. It's always going to be about being an innovator, because that attracts business and creates a climate that leads to more innovation and investment. At the grassroots level, you can get governors and state legislators to put money into accelerators, into tax breaks, incentives to energy companies. There are lots of ways you can create a conducive environment at the local level without having to rely on a federal government or an international body.

Having said that, it doesn’t stop at a state line or a country border. The global regulators, and there are more than we care to think about, have no consensus on how to handle this emerging field. That is one place where DATA can clearly play a convener role to bring regulators, legislators and the industry together in conversation, not just in the United States, but around the globe.

UT: California recently passed a bill that redefined electronic signing and electronic transactions to include Blockchain. What is the average policymaker’s level of education and awareness about this technology, in your experience?

BC: There is an old phrase “a mile wide and an inch deep” – well, it’s a mile wide and maybe a millimeter deep. It's just general principles and hearsay and a lot of bad information. When I hear US senators, mayors, congressmen talking about how crypto was used by global terrorists and drug runners, I’m thinking – yes, so is the US dollar and in a much bigger way.

California State Capitol

It's up to us as an industry to counter some of that misinformation, just by showing what we're doing. Let's talk about the best practices, the fact that we are KYC and AML, that we are trying to follow all the relevant guidelines from whatever regulatory body we're working with.

What DATA wants to do is create a framework for understanding the space, for fostering dialogue and consensus among all the parties involved. It's not going to be controlled by any one entity or any one fund. It’s a democratized grassroots organization, which we think will have wide support.

KM: Does advocating at the state level turn out to be a good entry point into wider legislation? As states lead the way, perhaps their decisions will form the groundwork for the federal policy?

BC: Absolutely. Here in the United States there have been three forces shaping the industry: The first is regulators who, as we've just described, don't necessarily have a deep understanding of the space. The second is legislators who are called into action by constituents or by business. The third is courts, specifically plaintiffs’ attorneys and others that may come to bear as the industry goes through its continued corrections.

All of those are out of our control. The only thing that we can do is mobilize our supporters. And the best pressure point is at the state and local level, because you can bring in local business leaders and talk to local legislators who are directly accountable to those.

It's a little harder on the national level – not to say that we're not trying there, and we certainly haven't abandoned talking to all the relevant regulatory agencies, but the states are where the action is right now. We have other players in the industry – Digital Chamber, Coin Center and others – that are working very heavily at the national level, doing a great job of educating and informing.

UT: Are there significant geographic differences among the states in the level of openness and acceptance of Blockchain technology?

BC: Oh, sure. Some states are more technologically progressive, like California, Washington State, New York State. Wyoming is one of the best states in the country to do business right now. There are lots of good reasons why Wyoming wanted to be in front, not the least of which is the small population. How can they generate revenue in that state?

They can bring in this sort of growing business – as a result of their passing Blockchain legislation, company registrations are way up. The University of Wyoming has a big Blockchain lab. I mean, they're all in.

There are other states that need a little encouragement. Perhaps there are just no native players in the Blockchain ecosystem in their states. So, we're being strategic on where we deploy our resources.

UT: What is the best way to deal with getting resistance or a blank stare in response to lobbying efforts?

BC: People tend to glaze over unless they are deeply engaged in our space, so we need to find things to talk about that are relevant and commonly understood: privacy, business, jobs, whatever is of interest to the audience. Once you've reached common ground, you work towards resolving areas of disagreement. I think everybody agrees that there are bad actors in this space. How do we as an industry police ourselves?

UT: You and some of the other board members of DATA come from a background of PR and marketing. Do you feel that a lot of this work is about the proper presentation of the subject?

BC: Without question, it's all how you frame the issues. If I go into a deep dive on Blockchain technology, forget about it, you lost them. It's like me going into a deep dive on how email works or how your credit card works. You whip out your credit card, you pay somebody, you don't think about how the money gets pulled from your account.

So, we have to abstract the technology from the use case. When we're talking about utility tokens, for instance, I explain that a utility token is like going to Chuck E. Cheese’s and buying a bunch of tokens. You can only use those tokens at Chuck E. Cheese’s. You've paid cash or used a credit card to buy those tokens.

Chuck E. Cheese's

Now, if you take those tokens away and you have them in your pocket at home, they're of no use to you unless you have a friend who is going to Chuck E. Cheese’s. That friend may want those tokens, so you can give them to him, or you could sell them to him, and that’s the secondary market. But the primary use is at Chuck E. Cheese’s.

It’s really about explanation. We have too many words that mean the same thing. Every time I see somebody pitch a crypto business, they spend the first three to five minutes defining terms. Just to have a common vocabulary would be progress.

UT: Some terms, like ICO, have acquired a bad reputation.

BC: ICO, crypto – these are words that have loaded meaning to them. Blockchain is definitely preferable because it's benign. It doesn't have any value associated with it, good or bad. A digital ledger technology is another way to describe it. I'd rather just get past all of this and call it digital assets. We're dealing with digital assets in a tokenized universe.

And what does that mean? What are the technologies, what are the processes, what are the regulations that need to be enforced? From the consumer point of view, they don't care – they just want it to work and they want to be protected. If there's a problem, they want to know that they can go to somebody and complain. That's a challenge in a decentralized world, because there's nobody to hold accountable. How do you handle governance and maintain a set of rules in a decentralized space? It's complicated.

UT: This is a relatively new initiative – DATA has been around for about a year. How has the community responded? What are you hopes for the near future?

BC: The immediate support for Wyoming by the crypto community was overwhelming. A call went out and it was answered – people flew to Wyoming and testified. We've managed to keep a good chunk of those people engaged over the period of time it's taken us to set up the nonprofit, to file documentation with the IRS, to get a bank account, lose that bank account because we're a crypto company, and then get that bank account reinstated because we explained – no, we're really a trade association and we're accepting all of our dues legitimately, we've got a paper trail.

We have a board – the founders of DATA that are scattered around the globe. The industry is very supportive, and the regulators are very supportive, surprisingly. They want a conversation, they do want people to come in and not just say “we've got a problem,” but come up with solutions.

UT: Maybe they're relieved to have an intermediary that speaks both languages.

BC: They would be very happy. There is a need for an industry body to speak on behalf of the industry to regulators, to set good standards, determine best practices. The greatest support we've gotten is from the attorneys, the lawyers that are actively working around the globe in this nascent space. Bringing the legal profession into this is critical. The fact that we were able to tap into some of the best minds in the industry around the world, have them donate their time just by asking them – it’s very gratifying. It also showed that they feel the need to convene. People out there in the space are raising their hand saying – pick me, because I want to be involved in this conversation.

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Excavating the Crypto Truth: Interview with the Trade's Top Gun, Eugene Loza aka EXCAVO

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In the times of the crypto crisis, we talk with one of the industry’s top traders, Eugene Loza, who is sharing his thoughts on the current market and its future
Excavating the Crypto Truth: Interview with the Trade's Top Gun, Eugene Loza aka EXCAVO

In the times of uncertainty in the fintech sector, U.Today sat down with Eugene Loza, known by many colleagues and followers as EXCAVO, to have a thorough chat. Being one of the most sought-after experts in the field of crypto trading, we wanted to get the man’s perspective on today’s situation and attempt to excavate some of the deeper buried layers of the crypto truth.

On Becoming a Trader

U.Today: You are the top trader on TradingView and a big expert in the field. Can you please give us your backstory? How did you find yourself trading cryptocurrencies?

EXCAVO: It all started when I got to attend one of Bill Hubbard’s lectures, which made me very interested. After that, I started working at a brokerage firm where I was able to formulate more questions, and my desire to learn how the whole industry works multiplied. I left the company two years later and―having promised myself to spend at least half my life learning the market inside out―entered the Kiev Institute of International Relations.

By then, I already knew quite a bit and started to publish graphs on gold and oil trade, as well as on some American and European indices. At one point, when I was working as a portfolio manager for one Canadian client, he paid my commision using Bitcoin. This is how I first got acquainted with the world of cryptocurrencies and subsequently started to delve into it, which led to where I am right now: running my own analytics company and crypto academy.

EXCAVO
Excavating the Crypto Truth: Interview with the Trade's Top Gun, Eugene Loza aka EXCAVO

U.Today: What should one keep in mind in order to stay sane and not lose one’s earnings in the process? Basically, what are the do’s and the don’ts of cryptocurrency trading?

EXCAVO:

You have to be disciplined and self-organized. Sticking to your own trading plan no matter what is an absolute must. The worst thing one can do is start jumping on a bandwagon following market trends. You need to always stay cool-headed and think twice before acting.

U.Today: What is your advice for anyone wishing to enter the market in the capacity of a crypto trader?

EXCAVO: The most important thing is how you treat the whole process: you must be serious and diligent. And, of course, experience is vital. You need to spend at least 10 000 hours learning the trade before starting to approach an expert like level.

There is such a thing as the “pickle effect”, as it is known where I come from. Everyone is born a fresh cucumber, so to speak, but if a cucumber is put into a jar with pickles and left marinating there, sooner or later, that cucumber will, too, become a pickle. Like the others in the jar. The question is how good of a pickle you are going to be. Find a decent fund or a trading company, roll up your sleeves, and soak in as much juice as you can.

Interpretations of Price and Market Cap Values

U.Today: We have recently covered a research study published by computer scientists from University College London who concluded that Reddit markers could be used to predict cryptocurrency rates. As someone whose very job is to predict crypto movements, can you share your thoughts on this?

EXCAVO: First of all, the market is comprised of people with different emotions and goals, and certainly each one with their own strategy. The crucial thing here is not to let the ground slide from under your feet in the times of hype.

In terms of Reddit, it can definitely be used to predict crypto rates. To my mind, the obvious reason is that shared information is prone to influencing one’s decision making. When large chunks of data are thrown at those involved in the crypto trade, it is bound to affect what is happening in the market.

Consequently, not only can Reddit be used to predict prices, but it can be used to actually change prices. And this is indeed what some individuals do in order that their agendas be pushed forward.

Normally, calendars are used to structure such targeted news―in case of Reddit, the so called sub-reddits―which come out at certain times to meet certain outcomes, including changes in rates, quite similar to, say, how my graphs may influence the others on TradingView.

U.Today: A seemingly trivial question, yet the one many do ask. Why is there often such a big divide between market cap and price values of cryptocurrencies? Some coins occupy virtually the same positions market cap- and unit price- wise, e.g. Bitcoin, Ethereum, Dash, etc. But this isn’t the case with all altcoins. For instance, Maker is currently second only to Bitcoin in terms if its unit value, but it’s not even in the top twenty by market cap. In contrast, some companies like Ripple or IOTA are among global leaders by market cap, yet the coins are valued at around 50 US cents a pop. Why so?

EXCAVO: Well, first of all, we need to understand that most of these statistics are very subjective. Arguably one of the most popular sources is CoinMarketCap, and it is a very one-sided source.

Huge sums of money that flow outside the “official” market, for example Bitcoin to local fiat exchanges on LocalBitcoins, which are often humongous amounts, are not even taken into consideration by CoinMarketCap, since these transactions are not performed by professional traders. So, official stats may not be a good indicator of how things really are.

In terms of why there is such a big divide, well, we are dealing with different parameters. Market cap figures essentially show how much has been invested into a particular currency, how much trust is in it. Price, on the other hand, reflects a) how many coins of a particular brand there are on the market, and b) how it relates to that coin’s market cap representation.

In other words, Bitcoin and Ethereum have high market cap values and high prices because much has been invested into them, and there are not too many of these coins around, comparatively speaking. With Maker, there are also not many coins around, but simultaneously not that much has been invested, hence the high price but the low market cap. With Ripple, it’s the other way around: a lot has been put into the coin by investors, hence its very high market cap figure, but at the same time there are very many coins around (100 billion in total), so the price is not high, nor was it ever planned to be.

Adoption and Latest Developments

U.Today: Are cryptocurrencies going to be widely traded for anything other than fiat currencies any time soon, e.g. gold, oil, bonds, etc? Also, when will mainstream adoption be seen outside the trading circles, as far as readily available crypto payment systems go in public places like hotels, restaurants, shopping centres, etc?

EXCAVO: In terms of trading, yes, it is possible, of course. But the real question is whether the people who are trading gold and oil need it right now. First of all, it’s not even gold, let’s not forget, it’s gold futures, i.e. future prices of gold, that’s how much confidence and capital these folks have. And they are not likely to move away from what they are comfortable with and leap into something unfamiliar and volatile unless they see that there is more opportunity for them in cryptocurrencies. When they see it for a fact, they will surely move in for the kill.

As for oil, it’s a different story altogether. These business sharks―namely Goldman Sachs, JP Morgan, and City Bank―also trade futures, and they are all working under the Federal Reserve system. And, of course, oil trade is based on the USD and USD alone, by its very definition, thanks to Henry Kissinger. So this is a political issue.

The US government simply won't allow any other, non-USD type, exchanges unless these exchanges begin to serve the government’s own interests. So, yes, crypto traders are ready to incorporate other commodities, be it metals or oil, into their exchanges, but it’s mainly the other side that has to reciprocate at this point. Sooner or later, it will probably happen, but not just yet.

As for adoption of crypto payments all across the board, this will absolutely happen, and it is happening already as we speak, as more places are offering crypto payment options in Europe and Asia. Similar to how we all use credit cards and mobile banking, crypto wallets are being incorporated into our lives as well. It is as easy and convenient as traditional banking, but it’s also much safer. In the centralized banking sector, you are likely one day to be told that you cannot withdraw your funds, for one reason or another, as it happened in Greece during their last big financial crisis when you could not take out more that 300 USD of your own money in one go.

With decentralized banking and crypto options, no one can ever tell you how much you can or cannot withdraw, or indeed what you do with your money and how you do it.  This is crypto’s main advantage by far.

U.Today: Can you single out any strong newcomers to the market, be it cryptocurrencies or platforms? Anyone or anything to watch out for?

EXCAVO: I am reluctant to name any particular players, as I am not here to advertise, but I can tell you that security tokens will go a long away. With most altcoins, there is no auditing and hence no dependability, while most big players, understandably, do not want to roll the dice and invest into a black hole.

With a security token, there is much more stability, and it is much more stringently regulated. It is essentially a more secure version of your regular altcoin. As a result, the business is a lot more transparent, and your chances of being swindled are minimized greatly. One platform that specializes in security tokens that I can single out is Polymath, but that’s as far as I am willing to go with dropping names and brands.

To this I can add that information waves are always at play. Right now not too many people know about these security tokens, but as soon as enough people learn about their existence, there will be a rush, surely.

U.Today: You have recently attended the Blockchain Life Forum in St Petersburg, Russia. Were there any memorable moments for you during the event, any highlights?

EXCAVO: Generally speaking, I was very pleased to attend the forum and speak there. I must note that the standard was very high, both the official part and the unofficial after party. There were many decent speakers and experts. One panel I was on voiced an array of different opinions and methods, all with a very high level of professionalism.

Networking was ever present at the forum, which was great, of course. I, for one, even ran into one of my subscribers from TradingView―a fellow Brazilian trader from a Swiss fund―entirely by accident. This just shows how international both the forum and the crypto community at large have grown.

Insights into the Ongoing Bitcoin Crisis

U.Today: What are your predictions as we’re starting to slowly approach the New Year? We are currently going through a crypto crisis with Bitcoin’s price way down. What’s going to happen next?

EXCAVO: I was actually expecting the crisis, to tell you the truth, so to me this didn’t come as a shock. The technical analysis I do and other market pointers were good indicators that this was coming. The cycle was nearing its end.

Make no mistake, this crisis was man-made, like any other one. Certain individuals and companies with vested interests wanted the price of Bitcoin to plummet. When the price is down, you buy cheap and later sell for more when the price climbs back up, which it will at some point. For a big player all that matters is the long term, three to five years, sometimes even ten. As Rockefeller once said: “The way to make money is to buy when blood is running in the streets”.

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As for other cryptocurrencies, before the end of this year other, somewhat smaller players will emerge victorious, and mini bubbles will probably pop up. Those that have proven themselves on the market already, especially the ones with their own blockchains, are more likely to succeed, followed by the previously mentioned security tokens a little ways down the road.

Ripple will grow, surely. So will Japanese NEM. Ethereum is currently down but for reasons very different from Bitcoin’s collapse: they are restructuring and cutting out the unneeded players on its massive platform. Once it’s done, the company will recover briskly.

Bitcoin Cash is in a state of utter mess: this second fork has made the company lose all its claim to the “real Bitcoin” ambition it had previously laid out. It’s still unclear what’s going to happen next, as it is not a financial issue anymore. One thing is clear to me though: Roger Ver must be kicking himself right now.

The Future of Blockchain and DLT

U.Today: What is the future of Blockchain in general? Whereas initially Blockchain was realized in terms of finance mostly, first Bitcoin and then other altcoins, now the tendency has partially shifted toward decentralized social networking sites? What do you think the future will bring?

EXCAVO: Blockchain and DLT will appear in many parts of our lives, from politics to medicine. Imagine, I have to go to a hospital in another country, for argument’s sake. There, they have no idea who I am, what my medical history is, my state of health as a child, etc. All that information is somewhere on the other side of the world, and in another language, with no access to it, let alone instant access. With the Blockchain technology today, this problem is no more. My medical history, universally available, can be accessed and made use of as easily as ordering a cab on your phone.

Of course, the other side of it is privacy, which we will see less and less of. Ironically enough, Blockchain’s decentralized nature from the technical standpoint is more centralized than anything else from the social standpoint, as everything about you is floating there in public space. But that’s the price we have to pay for progress, and it’s pretty much inevitable.

You get an iPhone, let’s say. It’s flashy and new, and you can unlock your screen with a finger tip. Great. But folks at Apple now have your fingerprint along with all your other personal information. We surrender our privacy for the sake of convenience. There are no two ways about it. So, where we ultimately end up is up to whoever is at the steering wheel, be it policy makers or company directors.

On the plus side, once again, it is making and will continue to make our lives easier. Companies like Mars, which are Blockchain’s patent bureaus, are gaining in strength, so the whole game is becoming better organized, more comprehensible to a non-geek, clearer and fairer.

In terms of decentralized social networks, yes, they may be on the rise. Any business works via crests (highs) and troughs (lows). If there is a trough with centralized networks, it can lead to a crest with decentralized ones. Binance, for instance, has come a long way, because at the time it had no real competitors as such. Everyone else was in a downward spiral, so people came to Binance to find a feasible alternative. Likewise, if users find themselves dissatisfied with, say, Facebook, and there is another, decentralized option on the table, they will surely give it a try, and if the new platform lives up to their expectations, they will stick to it, naturally.

All in all, financially, socially, and politically, we are at a crossroads, and more signs point to the fact that, one way or the other, we are going to take the Blockchain/DLT route, or at the very least we aren’t going to drive in the opposite direction, nor head for an early exit.

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