Crypto Roundup #1

This is the first issue of the HEAT Weekly crypto roundup, brought to you by the Dedicated Crypto Blogger [DCB] of the Team. Enjoy!

The Halvening! It’s Happening!

Last week marked a big news out of Bitcoin. And as Bitcoin goes, so the industry follows, which means the whole industry wants to keep a close eye on these developments.

Bitcoin successfully marked its second reward-halving event. The mining rewards have gone from 50 BTC per block at launch to 25 BTC per block after 210,000 blocks, and now stands at 12.5 BTC per block. Here’s a handy Bitcoin clock to see the network progress.

The change is huge, because Bitcoin doesn’t try to smooth out the rewards and difficulty schedules, unlike some other coins. Industry experts have kept a keen eye on how this second reward halving for Bitcoin will affect its price, but more importantly, how it will affect the miners. After all, if the block subsidy is cut by half, miner profitability falls significantly, and therefore it may appear reasonable to expect a drop in hashrate.

Except, after the halving event, there are no noticeable change in either the price or the hash rate. This only goes to show that the Bitcoin markets have reached the stage where they are fairly efficient. The market participants know and anticipate planned changes built into the protocol like reward halving.

This also goes to show that Bitcoin mining at a huge scale can indeed be profitable. Today, most Bitcoin mining is done via specialized industry-scale mining farms and operations around the world.

mining rigs

Finally, the fact that the halving occurred as scheduled, and without any network disruption (like a rapid drop in difficulty, which would lead to increased transaction times) speaks to the fact that Bitcoin is indeed maturing. The more established mainstream financial institutions can now take bolder steps towards incorporating Bitcoin (and hopefully, by extension, other cryptos as well) into their equations, and start investing.

A Tale of Two ETFs

On the pricing side of crypto, it is no secret that speculation drives price to a large degree. However, the speculation can be justified when there are big players that may jump in the market. And by big players, we mean BIG players, making the crypto-whales appear like goldfish.

If you think ETFs are not a big deal, look at how the gold ETF, GLD, has performed, not just in terms of price, but in making gold accessible as an investment vehicle for ordinary investors. Also, take a look at the assets under management, i.e. how many tonnes of gold this ETF alone holds. Given the limited supply of Bitcoin, and considering the market is significantly smaller than gold, the effects could be significant.

The financial industry has always kept a distance from Bitcoin and other cryptos except as ‘proof of concepts of blockchain’ which doesn’t help the crypto space at all. However, some bold minds are going forward with plans to make Bitcoin mainstream.

Exchange Traded Funds, or ETFs in short, are the primary means of investment in the United States, the world’s largest economy. The Winklevoss twins’ ETF plans are well known. They changed their listing from NASDAQ to BATS in a recent amendment last week, and made several other changes to their filing, with speculation around getting close to gaining regulatory approval.

Now, they got competition, as SolidX has filed its own S-1 with the Securities and Exchange Commission (SEC) with its own plans for a Bitcoin ETF, this time on NYSE. The difference? SolidX has secured insurance for its Bitcoin against events like thefts, which is lacking in the Winklevoss twins’ filing. It will be a battle between COIN and XBTC. May the best fund win.

Clone Wars

Crypto price speculation is fun, though ultimately futile in the long-run. The cryptos with real distinguishing features win, while the pump-and-dumps fade into obscurity after their moment in the sun.

We are seeing some renewed interest in early promising cryptos, but only because their ‘clones’ are doing much better.

See NXT and NEM for example. From a technical frontier, NXT paved the way towards purely proof of stake cryptos that were easy to develop and deploy and provided several additional features like easy tokenization that weren’t possible with then existing technology. NEM cloned most of the code, and now sits ahead of NXT in its market capitalization.

The same story has played out with Bitshares. When founded, it promised digital assets backed only by the market. On the technical front, Bitshares pioneered high-throughput transactions using a delegated proof of stake model. The same technology has been copied by Steemit, which has been on a steady rise throughout the week, threatening to overtake even Litecoin in market capitalization.

To be sure, both NEM and Steemit have their own innovations, and a great community. However, the market seems to discount that long-established cryptos like NXT and Bitshares also hold promise, even though they are old-dogs by crypto standards.

Fork Off Ethereum

Ethereum will set a precedent that will either lead to glory or doom. Or neither, it is hard to tell the short-term impact, but the long-term implications are clear. The community has decided to fork, after the DAO attack. Ethereum can no longer claim to run a ‘decentralized world computer’ (well, sure they can claim anything, but no one is looking at it that way anymore). All the promises of code is law are out the window. The protocol is changing because of one poorly written smart contract.

Many believe the uncertainty might be what is depressing the price and keeping the news out. That’s certainly possible. However, the entire security model is now inverted, and there are more questions than answers. Can this hard-fork happen again? What if my contract holds X ETH and I lose them. Will I get bailed out via a hard-fork too? Can law enforcement try to hardfork ETH used for questionably legal commerce? We’ll have to wait and see.

Some see the hardfork as a positive. Not surprisingly, the founders of who caused the DAO mess in the first place, don’t see an issue with this either. Others disagree. The community seems divided.

On the plus side, Devcon2 has been announced for September, in Shanghai this time.

Hot Off the Oven

Some of the recent ICOs have been hot. Real hot. They have raised tens of millions of dollars worth of Bitcoin for development, so they better deliver.

Lisk, forked from Crypti, promises to be a new DApp platform to rival Ethereum. Only, instead of using Solidity to write smart contracts, developers can use JavaScript. What could go wrong?

Lisk is trading above its initial ICO price, and has made fair returns for the investors, even after a chaotic launch where it was almost impossible to get a hold of Lisk on the day it launched on exchanges. The very early Lisk trades were executed at 100x the current price, but that market quickly smoothed out. The ones who were lucky enough to get their Lisk out at the time of launch made a killing.

Waves is the other recent hot ICO that has now launched. It promises to be an asset issuance token in the crypto space for new projects. We’ll have to wait and see where the value proposition lies - there are several platforms in use today, like NXT, Counterparty, Bitshares, etc. for token issuance.

However, Waves also claim to create an order-matching system on the blockchain, which could provide an interesting service. The usual problem with that is the miners can easily front-run the orders, causing all sorts of issues.

Digitization Trend

A quick note on the digitization trend. Waves obviously caught some tailwinds of this digitization trend, and had a very successful ICO. Tokenization isn’t a new concept. FIMK has had digital asset tokenization and trading for a while now, along with a order-matching system in the form of a ‘virtual exchange layer’. Bitshares is able to create digitized assets without the use of a counterparty. If you are willing to take counterparty risk, any number of platforms, from NXT to XCP can be used.

However, it isn’t the technology that is lacking. Real world uses and applications will now be at the forefront of this trend. How easy would it be to trade private company shares using their tokenized versions?

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