🎤 Interviews Katya Michaels

Next Facebook will be Federation of Decentralized Networks: Bill Ottman of Minds.com

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What can be a strategy for the future of social media?
Next Facebook will be Federation of Decentralized Networks: Bill Ottman of Minds.com

The Cambridge Analytica scandal and Mark Zuckerberg’s Senate hearings brought issues of privacy and data ownership starkly into the public eye, prompting even the least technologically advanced users to give some thought to the way their information is being used by major media companies.

Bill Ottman was quite ahead of the curve, launching Minds in 2011 with the aim of creating a different social network – one that would not only let users post the genius exploits of their pets, but also foster a certain kind of community with a specific set of values.

While Minds has enjoyed slow but steady organic growth over the years, the increasing awareness of decentralized technologies could now put Minds into the spotlight. It might not single-handedly topple Facebook overnight, but that’s not how Bill Ottman sees the future of social media, anyway.

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Katya Michaels: You started Minds in 2011, the web and mobile apps were launched in June 2015. What has been happening since then?

Bill Ottman: We have been constantly growing– over a million users now. It’s mostly steady organic growth, with a few big jumps based around big privacy breaches or changes in algorithms on major social networks. These types of events cause people to search for alternatives.

We considered it very unethical what Facebook did with their algorithm.

It used to be possible to drive a lot of traffic to websites through Facebook, but with algorithm changes, you couldn't even reach your own fans anymore. This really affected the whole media industry.

Now, small to medium sized creators are finding it easier to grow an audience on Minds than on Facebook, even though we are literally a thousandth of the size because we have a way to break out of the void.

When we launched in 2015, we had a point system for boosting posts. This quickly became the most popular feature on the network. Now, our Ethereum-based token system works essentially the same way, but on a Blockchain. We reward people for the engagement that they receive and referrals that they make.

Then, they can use those tokens to boost their posts through the platform or through other users. For example, they can offer another user 100 tokens to share a photo – it’s pure peer to peer advertising with no middleman. An application concurrent with tokens is a crowdfunding tool, so creators can set tiers of rewards and offer monthly subscriptions with exclusive content.

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KM: Where are you with your token? How do you expect it to be affected by regulations?

BO: Currently we're on the Ethereum Link testnet. These are not real tokens yet. We're doing going through extensive security auditing to make sure all of our smart contracts are rock solid and consulting with legal.

Before we implemented crypto over the last six months, users could send each other points or  dollars with Stripe. We took all of that out to focus fully on crypto and our revenue in the future is going to be in tokens.

On day one of any potential token sale, the tokens will be immediately usable. There will be no future products, we're not doing any kind of presales, we're not doing lockup. We're really trying to check off all the boxes to fall into the utility category.

I'm actually glad that we waited because a lot of social apps that have launched crypto over the last year are in a difficult situation now because they did SAFT agreements for future tokens or they didn't have a product.

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KM: When Minds got started seven years ago, there were fewer people who recognized the issues with major platforms like Facebook. Will rising awareness of privacy breaches and Blockchain technologies give decentralized platforms a boost?

BO: Absolutely. Without spending money on marketing, we're seeing fully organic growth directly in line with Cambridge Analytica or similar events. I think that people are becoming much more aware, they're starting to care more.

We think people deserve to be rewarded for their energy. Facebook, Google, Twitter, proprietary social media – they have an extractive model. They're assuming that you're lucky to be using the platform for free and they're going to use your data as your form of compensation.

Now, people are starting to understand that users, influencers, content creators are valuable. The people are actually what constitutes the network. Some of these independent creators on Youtube have more social reach than CNN. They are big brands, and the proprietary networks have to be very careful about driving them away.

Our strategy is the reward mechanism. Earning tokens for your contribution – that's something that everyone cares about, even if you're into Internet freedom, privacy and open source technology.

There’s a learning curve with crypto. First you need to appeal a little to the common human aspect, and as they come to the platform, they are exposed to the other layers of value such as freedom, privacy, transparency.

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KM: Facebook has billions of users and they're not going to offload en masse anytime soon. How does Minds face the adoption challenge? Would you try to get big content creators to come over?

BO: We already have some big Youtubers and Twitter influencers on the platform A lot of our big growth spurts are when a content creator with a million followers says “follow me on Minds” and overnight we will see 25,000 more users.

Certainly, the influencers hold a huge amount of the power. That is where the waves of migration to more decentralized, incentivized networks will come from.

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KM: I feel there would be a self-selection process for decentralized social network adoption, with people who are more concerned about data ownership being more likely to make the switch.

BO: For sure. Probably 90 percent of our current user base are people who are very aware of these issues and personally invested in helping to build solutions. We had an equity crowdfunding round last year, actually setting the record in the US for fastest to raise a million – and it all came from 1500 members of our community. That's a lot of people who are invested in these causes and are willing to become shareholders.

KM: Some new entertainment platforms are trying to change the advertising model to a framework where users choose to engage with advertising and get rewarded for it. Is that something that Minds is considering – third party advertisement for token compensation?

BO: We're certainly looking into having users watch ads and get compensated for that, with a distribution model that will support the creator as well. But we're staying away from third-party ad networks. We actually built our own internal ad network specifically because of issues with surveillance. I would say probably 99 percent of ad networks out there are basically spyware.

KM: With user generated content, there are always going to be issues with content quality control, legal considerations. How is Minds handling that? What is your stance on curation and censorship?

BO: In terms of copyright, we handle it like anyone else. If we get a DMCA request, we take content down, but that hasn't been much of a problem at all. We spent a lot of time over the last year working on our reporting, blocking and filtering tools, so that users can have as much control over their experience as possible.

This is actually one of my main interests right now – content policy and the best strategy for diminishing hate speech online.

Dozens of studies show that censorship amplifies hate speech.

Networks that have extensive hate speech policies think that they're fixing the problem, but what's actually happening is that they aggravate the trolls and the discussions get inflamed. If you look at the rise of political polarization in the last year or two, it is directly related to what's happening on Youtube and Twitter and Facebook.

We're not standing up for free speech just for the sake of it – we believe this is the strategy the Internet needs on a long-term macro basis. We have that larger mission to not polarize politically and create an honest, open and positive tone for the network.

People really appreciate that, even if they have drastically different ideas.

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KM: That’s a very challenging thing to do because it seems like the system selects for extremity, and then it becomes difficult to defend moderate positions.

BO: I can't agree more. It's called the Streisand effect – when you silence something, it makes it louder. If you ban books, it makes people want to read them more. It's certainly tricky, but the right to freedom of speech and First Amendment protection exists for the purpose of defending ideas that most people find controversial. You don't need freedom of speech for things most people agree with.

I do think that we need to start having this conversation with the bigger networks. Reddit knows as much as anyone that the amplification of extremism happens when you censor, but they’ve gone down the rabbit hole over the last couple of years, censoring things arbitrarily. They've fallen away from where they originally were, and so has Twitter. It's very hard because the public pressure to cave is intense.

KM: A lot of these social media companies started out as mavericks, giving users freedom of expression, but years go by, they get big and they become the establishment. Do you think that’s something that can affect crypto and Blockchain companies as well?

BO: Well, look at what just happened to Coinbase– it banned Julian Assange. First he got banned from PayPal and there was a big uproar. Then he started taking donations in Bitcoin, and now Coinbase said no.

That's a perfect example of a crypto company that ends up becoming the establishment, but it’s very nuanced. Nuance for me is the word of the year, if not the last few years.

Obviously Coinbase is essential to the growth of crypto in general and it's a great company, but it’s also fully, totally proprietary. They've had transparency issues a little bit over the years.

Now there are also issues with privacy and Blockchain because Blockchain is immutable and forever. When people talk about publishing things to the Blockchain, but then wanting to delete them – you're getting into a complicated situation. Which would you prefer? The ability to delete or the decentralized power of the blockchain?

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KM: What's the roadmap for Minds over the next months? What are you hoping for?

BO: We're certainly aiming for a token sale this year. I think that we are seeing other examples like Steemit working – the SEC is not taking them down. Also, we are definitely focusing on further decentralization, but balancing that with the nuance of privacy versus the immutability that comes with Blockchain.

Our technology is fully open source and decentralized, so anyone can take our stack and start their own app. That's really important because those apps can be independent, but they can also potentially federate together.

We don't see the next Facebook being a singular centralized entity. It really can't be. Realistically it's going to be some sort of a federation – whether it's a federation of networks or individuals in control of their own data joining networks that are a decentralized.

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KM: So you see the future of media as stepping back from monopolization – being fragmented, but interoperable?

BO: For sure. It’s naive to expect everything in social media to be decentralized all at once. Sure, that's a great goal to have. But pragmatically and realistically, there's a reason that it hasn't been achieved yet. A lot of this tech is still very immature.

There's value in having a big community and making the process easy for everyone. Our strategy is more of centralization moving towards decentralization, as opposed to starting off in a scattered mess and trying to get everyone involved that way.

In order for Blockchain and open source, privacy networks to compete with Facebook, we have an obligation to become competitive functionally.

We're getting much closer. Our mobile apps are much better, we have a lot of the tools that they have. If you look at what's happening with Instagram, Snapchat, Google – all these apps tend to coalesce, they have the same features and compete with each other. What we want to do is provide those services, but with a different set of core values.

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⭐ Features Yuri Molchan

Is Tron Merely Another Pump and Dump Project? An Interview with Crypto Chico, ‘Truth Lover’ and ‘I-Dotter’ Regarding Crypto Projects

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Tyler Swope, also known as Crypto Chico, shares his personal vision of the Tron project on the particular case of the BTT ICO that happened on Binance the other day
Is Tron Merely Another Pump and Dump Project? An Interview with Crypto Chico, ‘Truth Lover’ and ‘I-Dotter’ Regarding Crypto Projects

On Wednesday, Jan. 30, Tyler Swope, nicknamed Crypto Chico, published a YouTube video claiming Tron and Binance plotted to grab some money by launching the BTT token on Binance Launchpad. U.Today prepared a news story, reporting this untypical point of view regarding Tron, Binance and their CEOs.

We have gotten in touch with Tyler Swope and asked him to clarify his position regarding Tron and their marketing strategy in particular.

‘I swear to tell truth, the whole truth and nothing but the truth’

U.Today: Why are there so many crypto communities on Twitter who have a negative opinion about you?

Tyler S.: They have negative opinions on me cause I tell the truth of what goes on in crypto, and the truth hurts the most.

‘Tron is nothing but a pump and dump scheme’

U.Today: Tron has been making a lot of progress recently, having taken on several big games, including TronGoo (formerly EtherGoo) and MMORPG KuaiXiYou. It has managed to advance from beyond the top-ten list of crypto assets inside it pretty quickly, raising its market cap.

On dappradar.com many of the top ten dApps, those that show a great cash flow, are Tron-based, and none are powered by its rival Ethereum, for example.

Is Tron Merely Another Pump and Dump Project? An Interview with Crypto Chico, ‘Truth Lover’ and ‘I-Dotter’ Regarding Crypto Projects

Still, in the video about BitTorrent you poured some harsh criticism on Tron and Binance, along with their CEOs. What is the reason you are publicly criticizing those projects?

Tyler S.: Because it was an obvious pump and dump, marketing ploy and I would like the public to know this.

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‘Justin Sun is no relative of mine’

U.Today: How are you connected with the Telegram channel ‘TRON (TRX) Announcements’, which posted a link to your video and claims that they know what indeed is happening with Tron?

Tyler S.: I have no connection to them and never heard of them before in my life before 30 January 2019.

‘Crypto market is irrational’

U.Today: What do you think the future of Tron is, in light of your video regarding the BTT ICO? Does it have any chance of reaching the list of the top-four coins in 2019, as Justin Sun promised?

Tyler S.: No, I don't believe it does, but who knows, this market is irrational.

‘Deceptive marketing tactics’

U.Today:  How can Tron be so popular with the community and dApp developers if you claim that Tron’s code contains a great number of bugs?

Tyler S.: They used deceptive marketing tactics and any good developer is not building on Tron. I used open source tools SonarCloud and SonarQube, you can check for yourself.

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🎤 Interviews Alexander Goborov

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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Let’s Talk Stablecoins: Interview with the Co-Founder of Cred and Former GM at PayPal, Dan Schatt

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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

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With Bitcoin ETFs being considered for approval, the CEO of Virtuse Exchange, Ras Vasilisin, explains what it might spell for the crypto market
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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