🤷 Opinions Alexander Goborov

Starting a Blockchain Business: DLT 101

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While some bemoan the pains of the bear market, some see it as a big opportunity: here is our short guide on what to consider when starting a Blockchain business
Starting a Blockchain Business: DLT 101
Contents

With the market still down, some less experienced crypto folks may see it as a sign to pack up and head home. We’re done here, they say... In fact, nothing could be further from the truth. To reuse one of John D. Rockefeller’s most famous quotes:

“The way to make money is to buy when blood is running in the streets.”

Now is as good a time as any, or perhaps even better, to invest. And bear in mind (no pun intended) that Blockchain and DLT are not the same as cryptocurrencies. Granted, digital coins are based on the Blockchain technology, but that is not to say you must become a crypto trader in order to become a Blockchain/DLT business owner. One can have a lot to do with the Blockchain and have virtually nothing to do with Bitcoin.

Understand the Technology

The importance of this initial step on one’s journey to success cannot be underestimated. The very first rule of investment is not to invest into anything you don’t know, so before leaping ahead make sure you fully understand what you are getting yourself, your partners, and your customers into.

And remember, just because you happen to own some digital cash, which your friends probably talked you into buying, does not mean you understand the actual technology behind it. One needs to be diligent and do their homework first, only then will there be a feasible chance of success.

Here are some basics to get you started:

Centralized vs. Decentralized network

The image above published in 1964 by American engineer Paul Baran in a research paper which examined distributed communications is probably the first depiction of the decentralized nature of Blockchain/DLT networks. Incidentally, also note that, while some computer scientists may disagree, here we are treating Blockchain and DLT (Distributed Ledger Technology) as being interchangeable terms for simplicity purposes.

In a nutshell, Blockchain/DLT is basically the storing of data in a block which is then linked or “chained” to another block, thereby forming a chain, which becomes almost like a digital conga line. The key feature of this type of technology is that there is no one center as such, and, hence, the network is ”scattered” or “distributed”.

What we have in Blockchain today is the result of three pivotal concepts with their original authors listed in parenthesis:

  1. Public-key, i.e. asymmetric, cryptography (James Ellis, 1970)

  2. Cryptographic hash function, i.e. data mapping (Ralph Merkle, 1979)

  3. Proof-of-work protocol (Cynthia Dwork and Moni Naor, 1993)

All three were synthesized by Satoshi Nakamoto in his groundbreaking 2008 paper, which paved way to Bitcoin. The new payment system proposed to use a digital ledger of records arranged into chunks, i.e. blocks, which would be verified by those involved through proof of work and linked together using crypto validation. And since hash functions are used, any input of data can be represented via an arbitrary 256 character output.

This may be puzzling to a non-computer scientist. But if there is one lesson that should be learnt by everyone here is that Blockchain is not a business model but rather a pioneering method of exchanging and storing data, nothing more.

Recognize What It Can and Cannot Do

What Blockchain/DLT has is this: data are not stored in any one place since there is no network center as such. The whole mechanism thus becomes arguably more transparent and efficient. While some are claiming that Blockchain/DLT is the future of mankind, which in some ways it might be, it is certainly not a universal answer to all of today’s technological obstacles, let alone commercial ones. Nevertheless, surely this technology can be useful in the following ways:

  1. Storage, ease of exchange, and protection of data:

Vast amounts of data can be stored securely, in pretty much any format, and shared only when necessary, only with selected parties, whether a company or individual. Applications can range from filling out and notarizing forms to setting up user accounts. Digital signatures and public/private keys are used to access this information. As a user, you get protection. As a business, you get that, plus you save a great deal of time.

If, for example, some important document gets misplaced along the way, say in an international cargo transportation scenario, it can delay the whole process enormously in a traditional commercial setting. In contrast, this would not pose a problem in a Blockchain setting, as every transaction and contract would have a permanent record, instantly accessible by everyone concerned. Furthermore, because of the aforementioned hashing, the fact that a document has not been tampered with in any way can also be easily verified.  

    2. Payment systems and financial management:

While obviously they have a lot to do with the first notion as well, this is where crypto coins really come in. Paying bills, making exchanges, buying, selling, investing, saving for retirement, you name it, all of that is possible through a tokenized system of altcoins (made by the network itself, with their own value) or stablecoins (which are a pegged in value against fiat currencies, e.g. USD).

Because of the nature of the chain, i.e. each block numerically referencing a previous one, all of the transactions are set in stone with records kept all throughout the network, so the same unit of digital cash can never be spent repeatedly. In other words, you can never send or receive the same digital dollar twice, which makes transactions both fast and secure, and, crucially, without any intermediary looking on, e.g. a bank.

    3. Smart contracts:

These are basically automated business processes, which are currently being developed and fine-tuned. Rather than having to follow through every step by hand, as it were, you let the process run itself completely.

For example, you as a business want to buy 10 tons of blood oranges from Spain. The other party claims that they can find the product and deliver it. You agree on the sum, which has been reserved on the Blockchain, and on the conditions that have to be met in order for them to receive the payment, e.g. exact species of fruit, the weight of each one, form of delivery, due date, etc. The rest is pretty much code. Now the contract does the work. If the conditions are met, the payment is sent; if not, the contract is void.

This is, no doubt, a more efficient way of doing business, which becomes yet more apparent when you consider that many companies have to deal with thousands of such contracts simultaneously.

Find the Right Team

This may come as a surprise to you, but according to one fintech executive:

“The number one issue facing the Blockchain industry today is a lack of talent.”

While salaries offered to developers are going up as these individuals are much sought after, the professionalism of output does not always follow. The reason being is that businesses, especially smaller ones, often hire freelancers or sometimes simply friends of friends to write code for them. So, whereas lucrative offers and individuals willing to take them up are in abundance, at the same time, the number of those who can execute Blockchain type programming truly well is, in fact, comparatively low.

If your business, for example, wants to develop a smart contract to be run on Ethereum or perhaps a dApp (decentralized app), then your programmer must be Solidity literate. While this programming language is syntactically similar to the now ubiquitous JavaScript (i.e. in terms of symbols and commands), it differs from the latter in important ways, in that the architecture of the system itself is different, and the programmers need to be well familiar and experienced with what that difference entails.

According to some experts, in order to get a solid dApp ready―clean, dependable, and fool-proof―a business would need to hire at least two teams (or more) of at least five programmers in each one (or more). That’s already 10 individuals, as an absolute minimum, who must know a whole lot not just about programming but about the Blockchain technology. Finding those can often be a huge challenge, especially on a limited budget.

Take Your Time

If you’ve done a substantial amount of thinking and are now ready to start your Blockchain business, you should not rush. The first thing to do now is to go back and double check that you actually have a clear picture in your mind of what you are going to do, how, and, importantly, why. Another concurrent thing is staying up-to-date: this field is modern and not at all static, so you constantly need to keep your eyes peeled for where the latest developments are being assembled.

At the same time, remember that not everyone in your camp, be they partners or customers, may be on the same page with you, which is especially true of incorporating DLT into existing businesses. What you should absolutely not do is pressurize people. They will come around soon enough, once the picture in their heads is as clear as it is in yours. And if they don’t, perhaps they have their reasons; after all, not every business needs this type of technology. You should be honest with yourself and those around you about your goals and intentions.

Tenacity and patience are also crucial when it comes to executing your goals technologically. Not only should you not trust any third-party software whose origin or indeed true function you can’t distinctly verify, but also, if you are building something of your own, you need to test and retest many a time before proceeding with a launch. And of course, even before that, the team itself has to be put together first, as mentioned earlier, which can take a while. Haste makes waste, no doubt about it. And the repercussions of rushing to drive an underbuilt, three-wheeled car can be very serious.

Conclusion

If you want to start a Blockchain business or re-frame an existing one, you need to understand which processes exactly you want to position onto the Blockchain. This understanding can only come as a result of your understanding of the underlying technology itself. Once you’ve understood what this technology is capable of and which of your business processes can be DLT-based, you need to work out precisely what benefits will be supposedly brought to your business, new or old, in the aftermath of this decision, as opposed to having the whole thing run “traditionally”.

Finally, remember that Blockchain isn't going to solve all your business problems. Some (or even many) issues this technology simply cannot tackle. DLT isn’t some sort of digital magic serum that cures all. At the same time, this technology also has its drawbacks. In certain cases, cyber attacks are actually more likely to penetrate decentralized systems with its smaller digital fortresses compared to one giant fortress of a centralized system with its thicker and taller walls. So, while some types of security are definitely there with the DLT, this technology is not immune to breaches and violations either. Nothing is ever absolute.  

Be that as it may, DLT/Blockchain can certainly be a giant game changer for some businesses and even whole industries, so if you are up to the task, find the right people and the right tools, and go for it.

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CryptoKitties Co-Founder Benny Giang: Spend a Week Understanding Why Crypto Matters to You

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How much psychology is involved in the crypto industry? Do ICOs have a future? What’s the next thing?
CryptoKitties Co-Founder Benny Giang: Spend a Week Understanding Why Crypto Matters to You
Contents

CryptoKitties’ co-founder Benny Giang philosophizes on the kitty’s latest adventures, Vitalik Buterin, cats and wallets, cryptopsychology and incentivizing Blockchain adoption, and revolutionizing ICOs.

Cryptophychology

Cyril Gilson: How much psychology is involved in the crypto industry? I think there is a lot of talk about finance, trading, these kind of things but people underestimate the role of psychology.

Benny Giang: Well really what got me into it was, when I first started to dive deep into Blockchain, it wasn’t necessarily the technical aspects that drew me in, what drew me in was the philosophical approach on why does this matter, why does this technology matter. Then the psychology of it, the whole game theory, incentivizing behavior and trying to solve the classic problems in computer science that have been so difficult to solve, like the Byzantine Fault Tolerance or the general problems.

These things in combination are so interesting to see. I would encourage to listen to a couple of Vitalik’s talks. Vitalik along with a couple other people are really really smart. He is super deep into economics and he is also deep in philosophy and then he talks about the technical aspects.

One of the things I encourage for new people who have no clue what crypto is, is for you to spend the first or second week to try to understand why it matters to you. Why do you care about it? With anything you do in life if you don’t understand why you care about it, then why are you doing it? Besides money. Why is this technology going to change everything?

That took me about two weeks to really just keep asking myself that question and reading more until I found that answer and I was like okay this is the reason why!  

I encourage you to read Naval Ravikant, the founder of Angellist, he has a lot of tweet storms about crypto. Andreas Antonopoulos, he is amazing. He did a talk, and the whole talk wasn’t about Bitcoin it was about why does this matter. It’s about decision making, collective decision making, where a corporation is a group of people making decisions, or back when kings and monarchies when one or two people or family.

Understanding why is so important and then you can dive in the technical aspect. Then you could go to these conferences and network with people. If you don’t then you are coming in for the wrong reasons I think.

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Kitty goes to the market

Cyril Gilson: How are things going with CryptoKitties lately?

Benny Giang: Well we recently just raised 12.6 mln venture funding. We had investors from Silicon Valley and Union Square from New York City. Chris and Fred have been super helpful in really guiding us, we have a bunch of angels as well.

Right now we are focused a lot on growing CryptoKitties to new markets. We are going to be launching the Android version very soon in China. We have been exploring Japan and Korea. We have been talking to lawyers and figuring out the crypto and the gaming laws that exist in those two areas.

But really for CryptoKitties we want to expand this concept of KittyVerse. KittyVerse is third party developers who are building on top of CryptoKitties. So imagine that you buy a CryptoKitty from CryptoKitties ICO, right from the marketplace, and then you can use the same kitty you bought to raise it. You can play a racing game, you can play a battling game, you can put a hat on your cat. And so these experiences are built by third party developers who are part of our community.  We call this the KittyVerse because they play the game as well, they are incentivized to create content and experiences for the kitties. So that’s Kittyverse!

At the core of CryptoKitties is making it easy for people to come in and buy a kitty. Right now if you come into the marketplace there is over 750,000 kitties, so it’s a little bit difficult for you to select the kitty you want or you don’t know which kitty you want to buy.

Imagine Amazon where instead of curating things they suggest you to buy, they had millions of items just displayed in a list and they are like ‘hey go buy it.’ That’s gonna be a huge problem! We are actively solving it on the CryptoKitties side.

On the other side we formed a team to really look at the full UX experience. So that includes everything up until you are interested in CryptoKitties and then you need to buy crypto, you need to buy Ether, and then you need to download metamask to play the game, and then you go to the marketplace. So the team is looking at every single step and seeing what can we do to make it better, make it smoother. What kind of tools can we create to bridge this gap, so the its seamless?

The ideal experience is you have a credit card and you can buy a kitty. But right now you capped your card and you need to buy crypto, then you need to buy a cat. The US is a huge unwrap for us, and we are working on both of these things.

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Not a joke

CG: I was just thinking that you might consider some other project besides CryptoKitties? Because for many people it’s still a joke, for some at least.

BG: Well the funny thing is that CryptoKitties has always been an experiment. We are part of a larger parent company called Axiom Zen based in Vancouver, Canada. Axiom Zen is a five year old company, venture studio, it’s a startup that builds startups. So previous to CryptoKitties, we were building B2B Saas companies. We worked with fortune 500 companies to build ventures and products together, then we took the revenue from these fortune 500 partnerships and then we built our own startups. We spun out two startup companies, and they are both profitable.

Around last summer we started poking around: let’s explore Blockchain, let’s explore what we can do with smart contracts. So we built CryptoKitties and we decided we are not going to do an ICO, because everything last year was the price of Bitcoin, ICOs and the hacks and scams that were happening. That’s really here in Coindesk and Cointelegraph. We were like it just can’t be like this forever, there needs to be more real products that are building their shipping code and building real products. So we didn’t do an ICO, we launched a product, a Blockchain game.

For us it’s always been about education and mainstream adoption. If we can get your mom and dad to think about and get excited about Blockchain and crypto means our mission has gone right. Frankly a lot of people have struggled to explain Bitcoin, Ether, especially smart contracts to your mom and dad or whoever, they just don’t understand or are uninterested.

We had so many emails sent to us like the boyfriend is in crypto, my girlfriend never understands what I do, I tell her about Bitcoin, but she doesn’t care. Then we get an email like I told her about CryptoKitties and she is all like I wanna buy one, and she went through the floor of buying a kitty, and she was like wow now I own this kitty, and she got interested!

For us that’s perfect, that’s what we want. We want a billion people, a billion consumers to be on the Blockchain. We are not targeting a few 100 people who would download a crypto wallet app or a 1,000 people who want to use a fintech investment app. Not everybody in the world are investors, there are more gamers than investors out here.

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Beyond ICOs

CG: Last year was a year of hype but now comes some sobriety, ICOs are becoming more like VC investing, those people from VC are getting more like ICOs in a way. So do ICOs have a future?

BG:So ICOs to be clear are an amazing funding mechanism that allowed people from areas in the world that don’t have access to VC funding to get to raise money to build their own businesses. I have heard many stories of people in Singapore, Indonesia or some place in China, they are just not in Silicon Valley where they could walk to the office of a VC firm and ask for money.  So ICOs are a revolutionizing funding for business and companies.

That being said there were so little parameters around ICOs that there were a few bad players that took advantage of ICOs and just ran away and took the money and bought expensive cars. It’s the mentality that kind of was set by some of the early crypto people, where they spent a lot of their money on Lamborghinis. There was at New York Blockchain week, Consensus 2018, they had a boat party and the Aston Martin Giveaway. We look at it as a team and we are like sure those things are really cool but for us if you think that perspective ‘I want to be at a boat party, I want to win a Lambo’ it’s just really toxic kind of behavior.

CG: It doesn’t help with adoption...

BG: Exactly it doesn’t help with adoption. Then you ask yourself a great funding ICO mechanism to help business around the world to acquire capital, to build business, now people are just taking the money and running. We see people facing the consequences, like those guys in Miami who ran away with $12 mln and then the FCC came after them and now they are in jail. Those are some examples of like you taking advantage of many many many people who invested in your project and ran away with it. You certainly can’t get away with it.

So from my opinion regulation is good for ICOs. There needs to be more proactive regulation that allow for ICOs to happen, but happen in a way where it’s more safe for the normal person who wants to buy into an ICO.

The second thing is, Vitalik Buterin had this concept of a decentralized autonomous ICO, where the community that bought the tokens of your ICO, that they get to control the percentage that is basically given to the team. They are like this month we wanna give five percent of this money to the field of development and the community controls it. Now that’s just one example of kind of taking the ICOs and raising money but then having responsibility in place where people can’t run just run away very easily.

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The next thing

CG: The next thing is another way of tokenization...what do you think?

BG: There are people still building protocols who want to raise money. There are people who are building dapps on protocols who want to have tokens. For us it’s the CryptoKitties they are non-fungible tokens, they are ERC7-21. People are thinking CryptoKitties is a digital asset, it’s a gaming item, but its a digital asset so a lot of people are exploring this space.

Now there is also this hybrid. I have seen these people basically using a hybrid approach of I have a Van Gogh painting and I want to tokenize it, so then multiple people can buy parts of the Van Gogh like a token, and then we lock up the Van Gogh somewhere where nobody or one person or multiple people have access. This kind of hybrid approach of a physical item being tokenized is something that is challenging. You can say the same for real estate or registering your land.

These are physical things that have existing systems in place that people now want to tokenize, but it’s going to take some time to do that. We picked a digital world where you can create a digital item and then you can tokenize it. Everything is digital because in the future there is going to be a combination of physical and digital, as the Internet and the Blockchain get bigger, they allow for digital assets to exist.

Soon enough it will be like Ready Player One or West World where people can live in two worlds and own things in two worlds. It can be just as real as the physical world.

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Kitty and the wallet

CG: So you are interested in arts?

BG: Right now we are focused in three areas. It’s the crypto area, the gaming area and the arts area. We are going to be in an art exhibit in Germany, I forgot the city, it’s a very big exhibit for contemporary art. In September we will be back in Berlin at the Schlinker Pavilion, and we will be doing an exhibit with a very famous contemporary artist. That is to say that this is not only a crypto project, it’s a gaming project and its an art project. That is just building the dialog just think of this as a digital asset, it’s not just one thing.

CG: Is the coming arts project going to be digital art as well?

BG: It’s still early to tell, I think it will be a combination of physical and hardware. Two weeks ago we were in NY and we had an art auction for the Ethereal Summit. We had a Christie’s auctioneer there and we sold a kitty for $140,000. That all went to charity to help artists to fund art projects. It’s not the first time we had Kitties raise lots of money to help charities.

In the beginning, Nick Johnson from the Ethereum Foundation sold one of his Buck hats for $90,000 and he bought a bunch of cows for farms in Africa. A 10-year old girl Bella raised $15,000 and gave it all to Seattle Children’s Hospital in the US. So people are using these Kitties to really solve big problems and help other people and teach other people. It’s more than just the image, it has something deeper to that.

For us the whole art angle, digital asset is very interesting and you can have a hardware wallet. Right now you think of the hardware wallet it looks like a usb stick, now they work but they don’t look that cool. But imagine a Tamagochi, which is a hardware wallet, and you can put your kitty in it. Imagine all the people playing our game, but the normal consumers- maybe your children, will want to carry it around. Its my kitty I own it and it’s in a Tamagochi device. They would want to carry the ledger around then right?

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User experience

CG: How secure is it?

BG: We haven’t built it yet. It’s just an idea. If someone robs you they steal it. If someone robs your ledger they also steal it too, right? When you bring it to the physical world whether its a software or a hardware wallet you always run that risk. Losing your phone, you lose everything right? People have lost millions of dollars.

That actually brings us to the point that user experience for a crypto is really difficult as I mentioned. This one area specifically about decentralized wallets and key management, people can’t even remember their own passwords. People use the same password all the time, so if you tell someone you shouldn’t use the same password, you shake your head ‘yeah that’s true’ but then you still use the same password. Then you go tell a normal person, hey remember your safeword and your private key, and make sure you don’t forget it or you lose all your money. That’s just too much to ask from a normal person.

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10 Reasons Why You Should Avoid Investing in Bitcoin and Other Cryptocurrencies

📚 Wikicoin
Volatility, scams, legality: those are just a few issues that face investors in Bitcoin and altcoins. Remember, invest only what you can afford to lose.
10 Reasons Why You Should Avoid Investing in Bitcoin and Other Cryptocurrencies
Contents

Bitcoin and other altcoins have been making big headlines over the past few years, laced with stories about incredible gains and devastating losses. It’s the losses that are a hard pill to swallow. Many people ask, is Ethereum a good investment or Bitcoin? Let’s look at the top 10 reasons why you should not invest in Bitcoin and other cryptos. Remember, only invest what you can afford to lose.  

1. Volatility

Bitcoin and altcoins are very volatile, meaning that you could lose your shirt and your trousers if you buy high and sell low. In December 2017, Bitcoin hit its highest price at about $20,000. Fast forward to April 2018, when one Bitcoin is worth about $6,700, a 66.5 percent decrease in value. If you bought in the hype of December 2017, you would be out about $14,000 and for many people, that’s big money.

2. Security

In many countries of the world, banks are backed by the government. In the US the FDIC will ensure your bank account up to $250,000. Many exchanges do not insure your funds in crypto. If they are hacked and your proceeds are lost, you just lost all your money, unless the exchange can reimburse affected users.

3. Value or lack thereof

Bitcoin and cryptos are not backed by anything except belief. But then again, fiat currencies are backed only by the belief in the government that controls it, but at least cash is accepted everywhere. Crytpo derives its so-called wealth from mathematic formulae that are only understood by few.

4. Legality

Crypto is still very new, especially to governments. They are not sure how to regulate it or how to tax it. In some countries, there is a call to have it banned. Imagine being vested heavily in crypto and then finding out it is banned. How can you get your money back? Will you face fines and penalties for owning it? It’s not safe to own in a country that is about to place a ban on crypto.

5. Environmentally unfriendly

The power required to run mining rigs draws so much electricity, that it has become an environmental issue, that consumes valuable resources, pollutes the earth and even disrupts time. In China, Bitcoin mining is estimated to use up to four gigawatts of electricity, equivalent to three nuclear reactors' production levels.

6. Scams

Nothing is worse than being scammed out of your hard-earned cash. Scams and Ponzi schemes abound on the Internet with fake exchanges, fake ICOs, and other ways to steal your money. Whatever seems like an amazing way to double, triple, or quadruple your money in a short time, it probably is. You might also face long withdrawal periods to get your gains out of a rigged system. These are all part of Bitcoin investment scams and should be avoided.

7. No understanding of what crypto is

Many people ask if they should invest in Ether because it is not Bitcoin. Yes, it has a different function other than a store of value, but what makes it different is that it has smart contracts which are fuel and executed by “gas” another sub-set currency of Ethereum. Confused yet? As the old adage goes, don’t invest in something you don’t understand. “Can I invest in Ethereum?” you might ask, and sure you can, but don’t do it unless you understand it. More about Ethereum.

8. Decentralization: who do you trust?

Would you give your money to some guy on the street, who is touting a Bitcoin investment plan? I doubt it. Then why would you place your money into a system that has no central authority to regulate the inner workings of your investment and where your money is going? Could a state-backed cryptocurrency be the answer?

9. Anonymous or not

While Bitcoin is supposed to be anonymous, wallets are transparent. For some types of sales, especially in real estate, your funds need to be verified, it is a bit tricky to do with Bitcoin. Also, the US government is working with a firm to try to identify the individuals who may owe capital gains taxes on sales of Bitcoin. If the government can find you, then the promise of anonymity is false. Better not to get caught up in this trap.

10. Use on the dark web

The dark web is a place where all sorts of online crime take place, such as selling drugs, information, human trafficking, etc. Since Bitcoin is an incorruptible ledger system, that coin could be traced back to illegal dealings and might connect you to a crime: dirty money in other words.

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🤷 Opinions Alexander Goborov

Number of Coins and Tokens Listed on Exchange Platforms: HITBTC Has the Most

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Out of major exchanges, HITBTC has the most number of tradable crypto coins and tokens, close to 500
Number of Coins and Tokens Listed on Exchange Platforms: HITBTC Has the Most

Exchange platforms are a major part of the modern fintech sector, where buyers and sellers meet in virtual spaces to trade their crypto fortunes.

Today, based on the stats received from our partners Datalight, we bring you the following chart that outlines some of the major crypto exchange platforms and their corresponding numbers of tradable coin and token types:

Number of Crypto Coins and Tokens on Platforms

The Hong-Kong based HITBTC, founded in 2013, has the most types currently listed, 479. The US-based BITTREX (Seattle, Washington), also founded in 2013, follows with 246 types. The Singapore-based Huobi, established in the very same year, is next with 184 types. Then it’s Binance, founded in China last year, now based in Japan (due to the Chinese ban) with 158 types. Another well-known Hong-Kong based exchange, Bitfinex, founded in 2012, has 109 types listed. And finally, the US-based Coinbase Pro, established in 2012 and headquartered in San Francisco, California, is last with 8 crypto coins currently offered for trade on its exchange platform: clearly they prefer fewer strong players as opposed to many weaker ones.

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

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Can cryptocurrency replace the US dollar as a protected asset for the XXI century?
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Prosphero Platform’s top analyst on Bitcoin’s role in the impending global monetary crisis.

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

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

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A macroeconomics look

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

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

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

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

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

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

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The final hour

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

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

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Cash deficit

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

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

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

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

Crypto as a possible way out

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

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

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

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

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

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

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

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Growing problems with fiat

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

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

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

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

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

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

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

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

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Alexander Goborov

From Mainstream to Blockchain: 10 Business Giants whose People Turned Crypto

In today’s list we present 10 major companies whose employees or investors have left for good to join the Blockchain world
From Mainstream to Blockchain: 10 Business Giants whose People Turned Crypto

Today, we bring you a list of companies, representatives of the mainstream business elite, whose employees or investors have left in order to join the crypto world (displayed in the alphabetical order):
10 Business GiantsLeo Chen of Amazon Web Services recently left the huge corporation to join Harmony, an open infrastructure decentralized platform.

Alok Kothari of Apple, another giant of the mainstream tech world, did the same and moved to Harmony to become its chief engineer.

William Healy of Deutsche Bank recently left one of the biggest banks in the world to join Pantera Capital, a crypto investment firm.

Kahina van Dyke of Facebook left Zuckerberg’s creation to become Ripple’s vice president for corporate development.

The billionaire Michael Novogratz worked at Goldman Sachs for many years before becoming a top level crypto investor of Bitcoin and Ethereum.

Charlie Lee left the giant Google to found one of the crypto pioneers, Litecoin, back in 2011.

Richard Kim worked for JP Morgan for five years before recently leaving the world of mainstream finance to join Galaxy Digital, a Blockchain-based digital investment company.

One more top executive, Emilie Choi, left LinkedIn not long ago to join the well-known crypto exchange platform Coinbase.

Another billionaire on the list, Timothy Draper, was an early investor in Microsoft’s Hotmail and Skype before switching to Bitcoin and multiplying his assets.

And finally, Ryan Lechner of Netflix recently left the online streaming media giant to join the Ethereum-backed Consensys Labs.

We hope you found this list interesting. Stay tuned for more.

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