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Altcoins: Seven Cryptocurrencies You May Not Have Heard Of

 6 min read / 

Bitcoin may be the most well-known cryptocurrency, being the example that most illustrates a virtual coin. However, Bitcoin is one of many cryptocurrencies and in recent years, ‘alternate coins’ (Altcoins) have been making gains in the peer to peer, decentralised and anonymous currency market.

Many of the Altcoins a built upon the fundamentals and framework provided by Bitcoin, with different coins aiming to provide a different and unique selling point, using Bitcoin’s technology for a unique application like, for example, some coins’ ability to use Smart contracts; software designed to enforce contracts automatically and without error.

Litecoin

Introduced in October 2011, Litecoin can be seen as ‘the silver to Bitcoin’s gold,’ and a close competitor to Bitcoin, with 21 million total Bitcoin in existence and 84 million Litecoin. Based upon Bitcoin’s blockchain and protocol, Litecoin is an open-source software project that uses some improved mechanics from Bitcoin to conduct peer to peer payments.

For example, Litecoin uses a Segregated witness (segwit) mechanism to speed up transaction times and facilitate more transactions.  SegWit is the separation of transaction signatures (witnesses), that being the action by which

‘the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.’

This overcomes the limitation to transactions by the size of the blockchain (limited by the blocks, 1 megabyte in size), as only a certain number of transactions can be added to a block. SegWit attempts to ignore data attached to a blockchain signature and instead move it towards the end of transaction. This means more can be stored on a block, allowing for a greater number of transactions within a given time – an advantage over Bitcoin, which has experienced bottlenecks in the past. A lower memory requirement also allows for effective mining of the currency on consumer-grade computers, bringing the coin to a more accessible format. It was seen as the next best thing to Bitcoin, until Ethereum grew in 2017.

Ethereum

This currency has been making headlines recently, and for good reason. Predicated on being much more than a currency, the digital platform utilises a blockchain that is oriented around facilitating other applications, essentially a programming language if you will. The central innovation, Ethereum Virtual Machine (EVM) makes this possible, enabling the use of smart contracts as well as a currency exchange. These ‘dapps,’ decentralised applications, enable Ethereum to be more versatile than Bitcoin, with Ether (the coin) being used to pay for services, fees or as a currency itself. Due to its applications, Ethereum has more avenues for growth, with the more developers using the EVM, the more the currency will be worth and the more services that can be offered, meaning it could become self-contained.

Peercoin

An August 2012 entrant, it is an inflationary currency due to the lack of upper limit to the amount of coins. Peercoin currently uses a Proof of work system, requiring miners to verify transactions but the platform sought a proof of stake system, one that will increase the chance of mining coins as more coins come into possession. This means that the process of mining is smoother than Bitcoin, since it is more predictable because the rewards that miners receive change gradually, rather than in large steps.

NEO (Formerly Antshares)

Receiving some support from Alibaba, the new smart contract code platform aims to support decentralised commerce and the digitisation of many assets. At a conference at the Microsoft headquarters in Beijing (circa June 22nd 2017), Da Hongfei, the founder of NEO, revealed that the platform is working with Chinese authorities to map real-world assets using the smart contract system, building from the success the platform received when collaborating with start-up partners, including Bancor, Coindash and Binance.

Whilst Ethereum requires the developers to learn the new language, NEO seeks to use any language, greatly increasing the accessibility for companies and users to utilise smart contracts. Using common programming languages, the platform can compete with Ethereum for smart contract usage. Once it sees success with mainstream Chinese companies, perhaps western markets may see applications for the cryptocurrency’s usage.

Golem

A digital token that is part of project to improve our experiences with the existing internet. The project aims to use idle computing power on existing devices, from computers to smartphones, to help speed up processing, software performance and speed on other devices. The devices that are idle are used for their spare power, putting the performance in the hands of someone who can use it. Akin to the stock market, you invest money with a company that can use the capital. Idle device owners are paid in Golem Network Tokens. The network aims to connect machines around the globe and harness idle computing power. The tokens are traded on Ethereum through smart contracts.

This project has some promise, perhaps moving the internet to a more fluid state, allowing individuals to truly access the full potential of their devices, whilst helping others in the process. The applications for cyber security are also interesting, for example DDoS attacks (mass influx of requests to connect to a company’s servers overloads them, similar to a restaurant receiving too many guests) could be stunted since a company under attack could tap into this network and strengthen its reserves.

EOS

Born on the 26th June 2017, EOS is one of the youngest currencies currently available. Whilst it is still a concept without a functioning project as of yet, its prices are rising. Similar to Ethereum’s aim, EOS’ objective is to facilitate decentralised applications, but differentiating itself on the level of technical ability needed to develop ‘dapps.’ Until a service is delivered and the system is seen to be working, Ethereum is safe.

Waves Platform

An open blockchain platform, extending the functionalities of Bitcoin, seeking to maximise the effectiveness of currency exchanges, alongside providing crowdfunding solutions. Waves also seeks to be an anti-money laundering platform, setting it up for strategic partnerships, in both the cybersecurity and banking arena. Recently, ‘Big Four’ Deloitte CIS and Russian blockchain solutions firm Waves have partnered up to provide, ‘comprehensive ICO services’. Waves is keen to exploit this strategic partnership to shape the crypto-regulatory world and serves to show that there is potential for cryptocurrency icons to reshape the legislative environment in their image.

The system allows for the ‘creation, issuance, transfer and Exchange of assets and custom tokens,’ simultaneously allowing for the transfer of fiat tokens, trading fiat over blockchain without any volatility. The system also provides a portfolio to easily keep track of assets.

Conclusion

The recent rise in ICOs, alongside continued growth in the cryptosphere has enabled more currencies to rise, creating more room for opportunity. The breakthrough fostered by Bitcoin has undoubtedly bloomed into something exciting. Whether or not the up and coming projects will continue to go from strength to strength in light of plans for regulation is yet to be seen. How decentralised systems will continue to work once regulation is in place is another difficult question. For now, the Altcoins provide unique applications and a different texture from ‘mainstream’ Bitcoin.

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Cryptocurrencies

NEO Reaches a New High at $51

 2 min read / 

China’s answer to Ethereum has broken past the $40 barrier and is finding new support near the $50 mark. NEO’s latest price surge has been prompted by its developers releasing an ICO template for companies that want to raise finance atop its decentralised blockchain platform. Additionally, NEO’s team also announced a partnership with RegTech specialists Coinfirm and venture platform QRC.

Much like Ethereum, NEO is a platform, not just a cryptocurrency. The platform facilitates the creation of “smart assets” such as self-executing contracts that enables individuals and companies to transfer, trade and store real assets via a decentralised peer-to-peer network free of third-party interference. NEO’s developers hope that their platform will accelerate the global move towards a “smart economy”.

Links to the Chinese State

While other cryptocurrency developers have been partnering with corporations, such as IOTA’s recent partnership with Microsoft, NEO is rumoured to be collaborating closely with the Chinese state. China, NEO’s native market, has banned ICOs and several commentators reckon that the country’s government might soon legalise them exclusively on the NEO platform.

This wouldn’t be the first time the Chinese state has helped domestic companies beat off foreign competition. China famously banned Google from operating in China, which enabled local search engine Baidu to establish an effective monopoly. However, many crypto-enthusiasts might feel that collaboration between the Chinese state and NEO’s developers would significantly undermine the “decentralised” nature of the platform.

Keep reading |  2 min read

Cryptocurrencies

When Will the Bitcoin Bubble Burst?

 4 min read / 

bitcoin bubble burst

Is bitcoin in a bubble? Currently, this is not the most important question for investors. The impressive price volatility suggests a speculative behaviour: current investors seem to be more concerned about speculative profit than about bitcoin’s intrinsic value or blockchain technology’s future.

In the theory of asset pricing, the value of an asset is its expected dividends or interest. Since bitcoin does not provide any dividends or interest and their price is positive, it is either in a bubble or an asset that provides a convenience yield. As pointed out by the economist and Senior Fellow at the University of Chicago John Cochrane, bitcoin phenomenon can be related to both: bitcoin has an intrinsic value but on top of that, a speculative demand in the form of a bubble exists.

The Convenience Yield

American economist Susan Athey said that “if people use bitcoins, they have a value”. Hence, future price appreciation is not the only reason why people hold it. For instance, physical cash gives no dividends and has a lower return than risk-free assets but people still hold it. This is because cash is needed to make transactions and, therefore, there is a “hidden return” called the convenience yield. Bitcoin has a higher convenience yield than cash it is easier to carry, it delivers transactions without physical interaction an is used internationally.

This implies that their financial “overvaluation” should also be higher. However, during the past months, many investors have been buying bitcoin only to benefit from its increasing price trend. This speculative demand has likely raised bitcoin’s price above the equilibrium. As in every rational bubble, a burst is to be expected at some point down the line. Now that bitcoin derivatives are being traded, the focus shifts from bitcoin’s intrinsic value to the timing of this potentially rational bubble.

The Bubble

The political and technical issues surrounding bitcoin have not influenced its speculative demand so far. In fact, the increase in transaction fees, the increasing presence of substitutes and negative opinion of globally trusted leaders have had no relevant impact on the price trend. At some point, the value of bitcoin will recover and this will happen even without the Chinese government’s ban.

So, when will the overvaluation end? Well, since the price is determined by optimists, the answer depends on the ratio between optimists’ risk-bearing capacity and the supply of bitcoins: the price will only collapse when the optimists’ risk-bearing capacity becomes lower than the supply. As a consequence, the current ratio between these two quantities becomes extremely important for the prediction of bitcoin’s future price.

Even though there are a large number of optimists, the current ratio is temporarily influenced by the low tradable supply. According to Bloomberg, 40% of bitcoins are currently held by approximately 1000 people, many of whom are founders or early adopters that do not trade bitcoin, which makes the tradeable supply just 60% of the effective supply. However, “the prospective introduction of bitcoin futures has the potential to elevate cryptocurrencies to an emerging asset class”, as said by Nikolas Panigirtzoglou, a global markets strategist at JPMorgan, because of the increased liquidity.

What the Future Holds

However, this does not help to determine precisely when the reduction in bitcoin’s price because will occur. The reason is that bitcoin’s demand is very difficult to estimate or predict because it is volatile and influenced by a myriad of factors, including the amount of money the Russian mafia wants to bring offshore in any given period.

Overall, it is reasonable to expect continued bitcoin volatility in the short run followed by a sharp decline in bitcoin’s price in the medium run. This does not necessarily imply that Bitcoin will not be used anymore in the future and that its price will collapse to zero. The most likely scenario is that bitcoin’s value will finally converge to its convenience yield value and still be widely used unless other cryptocurrencies demonstrate that they are more efficient and safer. As sovereign debts become more critical and the risk of inflation rises, cryptocurrencies like bitcoin can be seen as a bet against classical currencies and as a store of value.

Keep reading |  4 min read

Companies

Crypto Briefing: Bitcoin Futures, Scams and ICOs

 11 min read / 

Crypto Briefing

 The Week of the Altcoins

This graph show how prices have changed since the midnight December 7th with prices at that point being rebased to 100
Prices as of 11:59 PM UTC 13/12/17 (Source: coinmarketcap)

The cryptocurrency market has seen another week of volatility. Litecoin’s market cap has increased by over 200% as it becomes a popular alternative to bitcoin, as the latter has faced fears of increased regulation. XRP has also been riding the wave, seeing a 50% price hike from last week.

1. Bitcoin Futures Live on Cboe

The Story

Plans to launch bitcoin futures contracts on the Chicago Board Options Exchange have gone ahead as contracts began trading at 23:00 GMT on Sunday. The contracts will allow investors to bet on the future value of bitcoin. On the news bitcoin’s price rose significantly.

Why It’s Important

The contract allows individuals to bet on bitcoin’s price at a specified time in the future. Given bitcoin’s rise of over 1,000% this year, many investors are keen to get in on the action; CBOE’s  Bitcoin futures contract will enable investors to do so without actually owning the cryptocurrency. Additionally, it will be possible to short sell the digital asset for the first time, allowing investors to profit from price falls.

The move suggests the cryptocurrency is now becoming a mainstream investment, however, Bitcoin remains to be traded on unregulated markets. Consequently, its price is likely to remain volatile.

High Volatility

In an effort to ease volatility, the CBOE decided it would suspend trading for two minutes for price fluctuations of more than 10% and five minutes for more than 20%. In the contract’s first session, trading was stopped twice: once for two minutes and once for five minutes. While bitcoin remains traded on largely unregulated markets, it is questionable whether this policy will have any effect on the underlying cryptocurrency’s volatility.

The Future

Bloomberg’s Adam Haigh said the futures contracts was “an incremental step that allows Wall Street and indeed the professional finance community to make a bet either way on bitcoin.” The Chicago Mercantile Exchange is expected to list a similar contract next week, and Nasdaq has announced plans to host such trading too.

Last week Revolut’s decision to facilitate the trading of bitcoin and other cryptocurrencies could increase demand for the underlying asset.

Allegations that 1,000 people own 40% of all bitcoins in circulation suggest its price could be manipulated by a relatively small number of individuals.

2. 1,000 People Apparently Own 40% of Bitcoin

The_Winklevoss_twins

The Winklevoss twins invest $11m in bitcoin back in 2013. (Attribution: By cellanr [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons)

The Story

Roughly 40% of the cryptocurrency is owned by 1,000 people, claims Aaron Brown, head of financial markets research at AQR Capital Management. In such an unregulated market, Brown said large holders of bitcoin could potentially be working together to orchestrate price changes. Given bitcoin’s recent spike, now could be a great opportunity for these users to part with a portion of their bitcoins, locking in the near 1600% price increase since the start of the year.

BTC price

Source: Coinmarketcap.com

Why It’s Important

Bitcoin appears to be making its way into mainstream investing. Last Friday the US regulator gave the CME group and CBOE Global Markets the green light to launch bitcoin futures. Just yesterday, London-based digital banking company Revolut launched Bitcoin, Litecoin and Ether trading for their users.

As the cryptocurrency becomes a more mainstream investment and demand for it rises, these bitcoin ‘whales’ will be able to part with their bitcoins for a hefty profit. This could leave new investors with an asset in the midst of a bubble.

Roger Ver, a well known early adopter of bitcoin said, regarding ‘whales’ working together, “I suspect that is likely true, and people should be able to do whatever they want with their own money.”

While the question of whether Brown’s allegation is true must be approached with scepticism, there is evidence of some very large investors in the space. Bloomberg recently reported that on November 12th, “someone moved almost 25,000 bitcoins, worth about $159 million at the time, to an online exchange.” Bitcoin’s market cap is roughly $270bn at the time of writing, but if this investor was to sell on a single exchange, it could potentially crash the market.

Large Bitcoin Investors

Cameron and Tyler Winklevoss, who gained fame for attempting to take control of Facebook, invested $11m in bitcoin back in 2013. This amount has many times over.

Tim Draper, a billionaire venture capitalist best known for his investment in Skype – during the companies early days – bought 30,000 bitcoins back in 2014. He has since invested in Tezos’ ICO.

Barry Silbert, the founder of the Digital Currency Group, picked up 48,000 bitcoins when the cryptocurrency was worth $350 a piece.

3. Ethereum Wallet Scam Closed Down

The Story

Digital wallet provider myetherwallet.com announced yesterday that it had no affiliation with an iOS-based cryptocurrency wallet app using its name. The app, which became the third most popular on the finance section of the App Store, allows users to import and open a digital wallet to store ether. Fake digital wallets could lose investors their cryptocurrencies permanently, so it is important investors (and app stores) keep an eye out for scams.

Security and Ethereum

In July, a developer error on the ethereum network meant a hacker pocket $31m worth of ether. While the technology is still in its infancy mistakes are bound to be made. However, several digital wallet hacks have emerged since cryptocurrency prices have skyrocketed and users need to take security seriously while safeguards are not in place.

When it comes to cryptocurrencies security, the owness is with the users. Sending ether from a digital wallet means I am responsible for my transfers. If I make a mistake when typing in the amount, or address of the receiver, I cannot call my bank and ask them to void the transaction. Consequently, user’s wallets are being targeted by scammers.

So far there have been no reports that the fake wallet stole from anyone. The company may have simply used the name for its familiarity in the ethereum community.

Myetherwallet.com have since announced the removal of the app from the iOS store.

4. San Francisco ICO Closed Down by SEC

The Story

San Francisco-based restaurant reviewing app Munchee has been forced to stop its initial coin offering (ICO) and reimburse investors after regulators raised concerns over the company’s tokens not meeting securities regulations. Munchee was looking to obtain $15m to “improve an existing iPhone app centred on restaurant meal reviews and create an “ecosystem” in which Munchee and others would buy and sell goods and services using the tokens,” according to the US Securities and Exchange Commission (SEC).

However, “in the course of the offering, the company and other promoters emphasized that investors could expect that efforts by the company and others would lead to an increase in value of the tokens,” they added. The regulator felt investors were led to believe they would gain a return on their tokens, however, the tokens did not meet the authority’s standards. The company was not fined due to its quick response to the SEC’s requests.

Why It’s Important

Last week PlexCoin’s founders were charged with defrauding investors. This was the first time the SEC’s newly established Cyber Unit filed charges. The regulator issued a statement back in July saying ICOs will be subject to US security laws.

Both cases suggest a serious commitment to ensuring investors are not mis-sold securities, particularly in the ICO space.

5. Goldman Sachs: Bitcoin Not A Substitute for Gold

Source: Tradingeconomics.com

The Story

The simultaneous rise of bitcoin and relatively poor performance of gold has provoked many to ask whether the two assets are in competition. The short answer is no, they are not.

“Bitcoin has real potential, if it were to become digital gold it might have tremendous space to grow,” said Gabor Gurbacs, Vaneck Securities Director of Digital Asset Strategy. It is this sentiment which has put the two in contest. However, the investor pool for each is “vastly different”, according to Jeffrey Currie, head of commodities research at Goldman Sachs.

Gold based exchange-traded funds are currently at close to their highest since May 2013, suggesting the metal remains part of investor’s portfolios, and not that investors have not cashed out and moved over to bitcoin. The reason this is not the case lies in comparing the function each asset serves and the investors it attracts.

Comparing Bitcoin and Gold

Bitcoin attracts more speculative investors looking for quick returns, while gold is often held as a portion of investment portfolios to spread risk. In times of economic downturn gold tends to go up in price, balancing any losses from stocks and bonds. The two assets currently serve distinct purposes. Consequently, bitcoin’s price rise is unlikely to have turned investors away from gold.

6. Jamie Dimon Eases Hostility Towards Bitcoin After Futures Contracts Go Live

Source: By Steve Jurvetson (Flickr: Jamie Dimon, CEO of JPMorgan Chase) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

The Story

Source: CNBC

“I remain highly skeptical of it,” said JPMorgan’s CEO Jamie Dimon, when recently asked about bitcoin. “I’m open-minded to uses of cryptocurrency if properly controlled and regulated,” Dimon added. The executive, who famously called bitcoin a “fraud” appears to have softened his opinion just days after the bitcoin-based futures derivative began trading on the Chicago Board Options Exchange.

Why It’s Important

This is the first time Dimon has spoken about bitcoin for two months. The timing of Dimon’s comments might suggest JPMorgan will offer the bitcoin derivative to its clients. The contract would allow clients to take long or short positions on bitcoin’s price.

Similar contracts will trade on the CME and Nasdaq exchanges in the near future.

7. Cryptocurrency as Collateral for Loans 

The Story

A growing number of early cryptocurrency adopters, who have seen astronomical gains, will now be able to use their cryptocurrencies as collateral for loans. London-based Nebeus is helping third-party lenders create loans guaranteed by cryptocurrency collateral. The company created 100 of these loans on its first day and has made 1,000 more since says Nebeus’ Managing Director Konstantin Zaripov.

Given bitcoin’s market cap of almost $300bn, and a total cryptocurrency market cap of over $500bn, the market for these loans could be colossal. However, some worry that these assets are in a bubble, and their collapse makes these loans hugely risky for lenders.

Why It’s Important

Around 40% of all bitcoins are held by 1,000 people, Bloomberg reported last week. Prior to this innovation, these users would only be able to cash in on their gains by selling their cryptocurrencies. “I can see a lending industry in the tens of billions of dollars,” said Aaron Brown, former managing director at AQR Capital Management.

The loans could attract attention from cryptocurrency miners, who earn tokens for processing blockchain network transactions. This group are typically ideologically attached to the idea of decentralised currencies, and such loans could allow them to hold on to their cryptocurrencies while they cover their overheads.

However, bitcoin’s 1700% rise since the start of the year has caused many to stay clear. A collapse of these digital assets would leave lenders in a tough position.

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