Bits and stuff – March 4, 2018

Leda Glyptis wrote a piece in BankingTech that called out all those that talk about a national cryptocurrency. Her quarrel isn’t with the concept of national currencies based on distributed ledgers. It’s with those who insist that they are cryptocurrencies, when “crypto” is all about decentralization, community and independence.

Pedantic, perhaps, but she’s right in that semantics matters. If we label everything “crypto”, then we fail to see the true nature of the potential, and we misunderstand the implications of national versions.

A similar peeve of mine is when businesses call their application “blockchain” when it’s really a distributed ledger. Not the same thing. But, hey, “blockchain” is sexier.

Enough of the mashing of vocabulary just to get a good soundbite.

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image by Kilian Schönberger, via Colossal
image by Kilian Schönberger, via Colossal

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It’s not because I work for them, but seriously, CoinDesk had the most measured and least sensationalist headline on the SEC probe, and that makes me proud: “SEC ICO Probe Underway, But Stories Conflict on Size of Sweep”

Compare that to:

“Subpoenas Signal S.E.C. Crackdown on Initial Coin Offerings” – New York Times

“SEC eyes crackdown on cryptocurrencies” – Computerworld

“The SEC Is Sending Subpoenas in Expanded ICO Crackdown” – Fortune

“SEC cracks down on cryptocurrency shenanigans, report says” – CNET (I love that the word “shenanigans” is used in a headline! Extra points for that.)

And the list goes on and on… Here’s what most irritates me: there’s no evidence that this is part of a “crackdown”. The SEC has issued subpoenas to gather information. Sure, some slaps on the wrist and probably even fines will follow, but by no means for all. And the initiative is in line with their declaration months ago that they would be “keeping an eye” on the nascent sector. Issuing subpoenas and gathering information is an important step in understanding what’s going on – why are we not celebrating that the SEC is taking a “tell me more” approach?

Some other reputable sources also showed restraint in their headlines:

TechCrunch – “The SEC is reportedly investigating a number of ICOs” – TechCrunch

“Cryptocurrency Firms Targeted in SEC Probe” – WSJ

… but let’s face it, boring in comparison.

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According to a report in TechCrunch, Uber’s co-founder Garrett Kamp is creating a new cryptocurrency that can be used around the world for daily transactions. In other words, “better than bitcoin”. Hunh.

Let’s see how it’s better than bitcoin:

  • It’s not open to everyone – nodes need to be “verified” (another way of saying “selected”). No chance of manipulation there. Who does the verifying?
  • 50% of the initial 1 trillion ECO coins will be given away to anyone who signs up. Akin to “helicopter money”, in which an authority hands out funds to kick-start spending in a region (assuming that it generates economic activity and growth, which will in turn create more money), this could effectively bootstrap acceptance – but would merchants go through the hassle of installing the necessary systems
  • It won’t use the proof of work consensus protocol that bitcoin relies on. Instead it is opting for an as-yet-unnamed alternative that consumes less energy.

On the plus side, it’s thinking about the user experience from the outset, supposedly launching with a simple web and app.

And it does have a good chance of getting a strong ecosystem going, given the founder’s credentials (he’s currently founder of accelerator/venture fund Expa) and the involvement of universities (who apparently will be running the nodes).

Will it be better than, say, litecoin or ethereum? Does the market need another pretender to the cryptocurrency throne? Who will end up actually using this?

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An article by Multicoin Capital’s Kyle Samani produces a bunch of “a-ha!” moments. Such as:

“Running a computation on Ethereum is on the order of 100,000,000x more expensive than running the same computation on Amazon Web Services (AWS).”

Kyle goes on two explain why blockchains can’t have it all:

“The scalability trilemma posits that blockchains in which every node processes every computation and in which every node comes to consensus about the order of those computations can have two of three properties: safety, scalability, and decentralization of block production.”

So, either safety and decentralization (bitcoin), safety and scalability (Cardano, EOS), or scalabiity and decentralisation.

As the Meatloaf song said, two out of three ain’t bad.

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The last time bitcoin transaction volume was this low, the price was around $500…

Also, a year ago, bitcoin’s market capitalization was about 85 percent of the total sector. It’s now around 40 percent.

A lot else has changed since then, too, so…

Anyway, interesting observations from Bloomberg.

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Some CoinDesk stories really worth reading:

8 Ways Telegram Thinks Its Own ICO Could Go Wrong – although it doesn’t mean to be, it’s a statement on all ICOs… to Track Beef Imports Using Blockchain Platform – another large retailer looks at supply chains (move over, Walmart)

Banking Giants Send $30 Million in Securities Over DLT – still just testing, but it’s progress on a fascinating use case

US Regional Banks Begin to Cite Crypto as Business Risk – large and small banks look at the risk more than the opportunity – but then again, they have to spell out all sorts of risks, it’s part of their job – it does not mean that they’re particularly worried.

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Stupid headlines of the week:

The Washington Post: “Bitcoin, move over. There’s a new cryptocurrency in town: The petro.”

The article does go on to explain how the petro is not at all like bitcoin – so, a gimmicky headline that will either mislead or annoy? I do not see the point.

And from Investopedia, who seem to be attempting to pivot towards becoming a cryptocurrency news site: “Montana Will Build $251 Million Cryptocurrency Mining Farm”

No, Montana is not building a cryptocurrency mining far. A private company called Power Block Coin LLC is thinking about building such a farm in Montana. Very different. Implying that a state is behind this is misleading and irresponsible. Apparently this will be the second large mining farm in Montana. That part is interesting – it speaks to the increasing decentralization of mining power as China is starting to remove mining perks.

The Daily Express: “Bitcoin WARNING: EU Commission says crypto is NOT currency ahead of imminent crackdown”

No imminent crackdown threatened – the EU is discussing regulation, but they’re a long way from any actual action, and there’s no indication that it will be a “crackdown”, or that any move will be bad for the market (legitimacy, people!). And, what’s with the shrieking capitals in headlines?

From Metro: “Bitcoin on the up as ‘SegWit takeoff’ causes cryptocurrency price rebound”

It’s not clear that SegWit had anything to do with the price move. SegWit adoption is good news, but Coinbase and Core’s rollout was expected and most likely priced in. A few days later the SEC ICO probe was blamed for a slump in the bitcoin price – again, that makes little sense. And anyway, a Bloomberg article commented on how strong the price was in spite of the SEC news. In other words, nobody really knows why prices go up and down (other than the relative weight of buyers vs. sellers).

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This is sooooo cool. Amazing, almost addictive animation. Click away.

Spook, by Nexus Interactive Arts
Solace, by Nexus Interactive Arts

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