Bits and stuff: June 17, 2018 – bitcoin, banks and bubbles (the real ones)

Earlier this week I was in Dublin, moderating at MoneyConf. Here’s one of my panels (via MoneyConf’s Facebook page), on cryptocurrency exchanges, with Adam White of Coinbase, Marcus Swanpoel of Luno, Nejc Kodric of Bitstamp, and Charlene Chen of BitPesa.

The best part of the event? Catching up with friends and acquaintances, and the wonderful people I got to know (you know who you are).

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Remember all those articles that gleefully pointed out that the bitcoin price was manipulated? One thing is for sure: in statistics, things are never as simple as they at first appear to be.

Aaron Brown in Bloomberg dove into the accusatory paper, and points out that their conclusions are not, well, conclusive. The data is tenuous and the evidence relatively scant. While there may have been manipulation, we can’t assume that it accounts for all (or even most) price movements. And while it is dangerous to make assumptions on which systemic decisions may be based, we do need to continue to dig further, and use the information gleaned as a guide to where to dig next.

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Check out this and 12 more jaw-dropping photos of winged creatures, on National Geographic. They make time stand still.

image by Bret Charman, via National Geographic
image by Bret Charman, via National Geographic

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Bloomberg’s Matt Levine writes about the statement that William Hinman, director of the SEC, made at an event this week, in which he dismissed the notion that ether could be considered a security. Perhaps it was in the beginning, he says, but it isn’t any more.

“There have been reports that the SEC is skeptical of the idea that crypto startups could sell tokens packaged in security wrappers in limited offerings solely to accredited investors, with the promise that those tokens will eventually be unwrapped and usable by everyone. Hinman’s speech suggests that the SEC has gotten over that skepticism.”

Note the word “suggests”. We don’t know for sure. And the subject is still damn complicated. Is ethereum “decentralized”? One could even make the argument that bitcoin is run by a “handful” – does that make it decentralized? What about Ripple’s XRP?

The statement was greeted with glee and astonishment from the opposing factions on Twitter – CoinDesk gave a good summary of the different interpretations.

And some are even rubbing their hands at the increasingly likely prospect of ether futures on a regulated exchange.

My concern is that we are all assuming that Hinman was speaking for the SEC – even though the print version of his remarks carries the disclaimer: “This speech expresses the author’s views and does not necessarily reflect those of the Commission.” Maybe that’s a standard disclaimer that doesn’t mean much. Or maybe it’s a significant detail that was omitted in the spoken version?

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Unrelated, the best part of the previously mentioned Matt Levine newsletter of the 15th was a bit further down, in a section talking about presidential pardons:

“What a sad lot of moral nullities these people are.”

A memorable sentence if ever I saw one.

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There were some surprising announcements from the finance sector this past week. Surprising because they are talking about imminent launches of production-ready blockchains doing useful things.

In South Korea, a national consortium of banks will roll out in July a blockchain system for managing identity.

Suning Bank in China is testing a blockchain platform that will allow several banks to share a database of account holders with bad credit scores. No release date was specified, but it sounds as if launch is relatively imminent.

While not exactly finance, here’s an interesting real-world test: Switzerland’s crypto city of Zug is trialling a voting system based on uPort’s blockchain, in which residents can participate in an online poll which, in beautiful circularity, asks them about the blockchain voting system (and other local matters). It’s not a huge test, and results will not be binding (it’s just a survey), but it is public.

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This was a satisfying takedown of economists pretending they understand crypto and therefore know better than everybody else (because economists are known for their systemic awareness and accuracy, right????).

“At a high level, the flaw in their positions is: ‘I know finance, crypto is finance, so I know crypto.'”

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Bubbles, bubbles and more bubbles: a captivating video of Melody Yang and her art. “A language that anybody understands.”

Bits and stuff: June 10, 2018 – votes, vegetation and vantage points

Switzerland votes today on whether or not to ditch fractional reserve banking. Citizens are being asked if they support the Vollgeld initiative, which would limit money creation to the Swiss central bank.

This is more than a step towards mitigating the threat of bank runs. It tantalizingly dangles the possibility of an entirely new economic model in front of a watching world

It’s worth noting that the central bank does not want this proposal to go through. This is a good sign, I suppose – as with royalty, better to have power thrust upon you, than to actively seek it.

Why is it against the plan? Because it would leave the central bank controlling the money supply, and that, it argues, was shown to be a bad strategy 20 years ago. Also, the central bank would rather not get involved in politics, thank you very much.

A further consideration is the impact it would have on Switzerland’s competitiveness. At a time when dependence on traditional banking services has left the economy fragile, the reduced lending and possibly reduced growth would further put it at risk.

An interesting twist is that the centralization of digital money that this implies – combined with the country’s bid to become a centre for cryptocurrency businesses – seems to further entrench the growing conviction that cryptocurrencies are not money, or at least, are not a threat to central bank money.

Staying with central banks, there was a flurry of blockchain-related announcements this past week that indicates progress on use-case research.

The South Africa Reserve Bank announced the completion of a 14-week trial that managed to settle the country’s approximately 70,000 daily payment transactions within two hours, while preserving anonymity.

The Bank of Thailand is looking into developing a central bank cryptocurrency for interbank settlement.

China’s central bank has finished work on a blockchain-based system that digitizes cheques, which are still a significant tool for domestic business finance.

On a more bearish (or realistic?) note, the Dutch central bank said that it’s blockchain trials indicate that the technology is promising, but not yet practical for payments.

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“Modernity is alienating, and it has been alienating for a great while; look at an Edward Hopper painting if you think this post-industrial misery has come about only since the Internet was invented.”

Andrew Solomon in The New Yorker, trying – like all of us this week – to make sense of the senseless.

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I gave a keynote talk at the OpenExpo 2018 event in Madrid on Wednesday, in which I talked about how blockchain development would go nowhere without open source platforms, and open source platforms are going to depend on blockchain development for growth.

In the talk, I referenced an article from the Financial Times a few weeks ago, that I’ll mention here because it’s so damn intriguing. The opposite of open-source has to be patents, and here are some interesting statistics:

  • In 2017, 406 patents were filed that related to blockchain technology – that’s more than one a day on average.
  • More than half originated in China (which presented more than double the number of US applications).
  • The most prolific patent application presenter in 2017 was MasterCard. Hmm.
  • In 2017, 607 patents were filed that related to cryptocurrencies. On average, that’s way over one a day.
  • The most prolific cryptocurrency patent application presenters over the past five years were IBM, Gemalto and Intel.

On this last point, what do these three companies want with cryptocurrencies? IBM is a strong proponent of open source development – it was one of the original contributors to Hyperledger’s Fabric, and has led development on several Hyperledger tools. Intel is also a prolific Hyperledger contributor.

But those are blockchain platforms, not cryptocurrencies. Again, hmm.

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This is captivating: miniature gardens in trucks (via Colossal).

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An exercise in design, botany and whimsy, this festival is an annual event sponsored by the Japan Federation of Landscape Contractors.

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First of all, who thought of creating gardens in little trucks, more commonly used for construction work?

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Second of all, that person deserves an award for creativity, because gardens in trucks should definitely be a thing. Mobile oases. Contained fantasy. Urban nature.

(Images via Colossal)

Bits and stuff: June 3rd, 2018 – funding, frocks and frills

Given the rush of conferences, airports and hotels over the past few weeks, I didn’t have the time and mental space to update here. I even considered taking a longer break, to catch up with research and longer-form writing. But then I discovered that I missed it, so I’m back, after a useful gap of distance and perspective. No commitments, obviously, because work is getting intense (more on that some other day) and I keep promising myself to find time to read more fiction and watch more old black-and-white movies. But meanwhile, hello, it’s good to be here…

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Whoever said ICOs were going to replace venture capital? This week we saw that venture capital was very much alive and kicking…

Several major venture capital investments were announced, a surprising number for just one week:

CLS, a major forex settlement provider, invested $5 million in R3.

Paxos raised $65 million (wow) in a Series B round.

And supply chain management firm Tradeshift (not technically a blockchain company, but heading there) received $250 million in Series E funding (led by Goldman Sachs and others).

It will be interesting to see what their next steps are. Last week it launched a trade finance platform with blockchain capability (as well as traditional payments, an intriguing hybrid). $250 million is a LOT of money – and one rarely hears of Series F funding, so… are they done fundraising? Will the funded developments go live and generate cash flow any time soon?

And we were told of a handful of new investment funds focusing on blockchain startups:

Huobi announced a partnership with Chinese investment firm NewMargin Capital and South Korean securities firm Kiwoom Securities on the creation of a new investment fund dedicated to blockchain startups in China and South Korea.

On the same day, Binance revealed plans for a $1 billion fund to invest in blockchain projects and in other funds.

And Japanese mobile game maker Gumi launched a $30 million fund to invest in blockchain startups, via both equity and tokens.

This is just based on perception, but it feels like there’s more money than ever pouring into the sector. New vehicles are needed.

Speaking of that, Huobi (who has been particularly busy of late) launched a cryptocurrency ETF (exchange-traded fund) for retail investors – but you can only buy the fund with cryptocurrencies, so I don’t see how it will help encourage retail investors to venture into a market they are already into.

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While I was in New York in May for Consensus 2018 (I’ll post links to my panel videos as soon as they’re up), I spent part of a rainy Sunday at the Metropolitan Museum of Art, one of my favourite places in the world.

Generally I’m predictable and head straight for the Temple of Dendur, the Frank Lloyd Wright and the Tiffany glass collection in the American Wing. This time I took a detour through the medieval galleries and my mind was blown.

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As well as the usual strangely hilarious sculptures and breathtaking windows and grilles, they were hosting an exhibition of Fashion and Catholic Inspiration. Gorgeous dresses and headpieces, with religious iconography, in the middle of the medieval galleries?? A perfect setting. Gautlier, Dior, Dolce & Gabbana, Chanel, Givenchy… modern and traditional, sober and glitzy, all melded with an evocative music piece that made you feel part of something big. It moved me to tears.

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Why? Because it opened a window of understanding of why iconography matters, and why fashion matters. They are both shared languages.

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But what most got me was the exhilarating sense of continuity through the ages. Symbols endure, form matters, and art has always taken many shapes. I’ve never been “into” fashion, but seeing art and fantasy come alive on a female form (or male, sure) broadens the scope of the enjoyable. I am a convert, and I am in awe.

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Vermont added its clamour to the states positioning themselves as blockchain friendly, as its governor signed a bill allowing for the creation of so-called “blockchain-based limited liability companies”. (Does this mean that they can now get bank accounts?)

Wyoming still seems to hold the lead, though, with the first “utility token bill” – which expressly acknowledges the designation as utility token (ie. exempt from SEC regulation) some digital assets that meet certain conditions.

Writing more about this (which I’d love to) would require a full essay rather than a humble blurb, so I’ll leave it at that for now… except to say that we are likely to see much more of this as states realise that getting businesses to domicile in their jurisdiction is profitable, and safe if regulation is passed and followed.

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Bailey Reutzel turned her playful eye to Twitter crypto scams – apparently anyone who’s anyone has had a scam account created in their likeness. They say it’s an even better mark of legitimacy than the elusive blue check mark.

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Ha.

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