Bitcoin to Create a Third Currency
Not long after a hard fork split Bitcoin in two, creating Bitcoin Cash, there are moves to create a third currency from Bitcoin. Agreed in May 2017, a group attempting to combine the efforts of the original platform with the updated block size of the fork currency is seeking to establish this third currency. The new block will be created after block 494,784, which will be sometime in November. Signatories to the agreement include 58 companies located in 22 countries as well as 20.5 million Bitcoin wallets.
The decision to split was borne out of a disagreement in how to solve the transaction capacity issues, either by updating the platform and using segregated witnessing or increasing the size of blocks. The popularity of Bitcoin is what caused such an issue, the blocks simply could not be created fast enough to facilitate the rising popularity of transactions. With more blocks to facilitate greater amounts of transactions – 8mb compared to Bitcoin’s 1mb – Bitcoin Cash solves this fundamental difficulty. Bitcoin proceeded to use an updated SegWit to improve transaction times, by removing unnecessary data from the blocks, freeing up more space for transactions, whereas Bitcoin Cash when for straight up more storage. Comparatively, Bitcoin has 1mb sized blocks and SegWit, Bitcoin Cash has 8mb to play with, whilst not sporting SegWit.
However, a third group decided that entertaining both ideas simultaneously was the optimal route, sparking the Segwit2x/New York Agreement movement, sporting 2mb blocks with SegWit. The New York Agreement was signed in May 2017, attempting to design a “best of both worlds approach,” with the fork being labelled SegWit2x. Whether or not this will be a success depends on market adoption.
According to Saxo Bank analyst Kay Van-Petersen, Bitcoin could be responsible for 10% of the $5trn average daily volume in the foreign exchange market within 10 years. Whilst such a prediction pre-dates Bitcoin’s fork, the currency still leads in market share and the prices remain largely unscathed. With two highs in recent times, $4,483 on August 15, and $4,520 on August 17, Bitcoin prices have now turned toward $4,000. Bitcoin’s market capitalization has also taken a hit, at $67bn, down from $73 billion two days ago.
The fork displays the prowess of Bitcoin, its ability to adapt to change and evolve to continue its decentralised currency platform will enable it to continue existing in adversity. The short-term volatility will not undo 8 years of Bitcoin in the making as the fork has not reduced Bitcoin’s reputation, reliability or convenience. The fork did not tarnish Bitcoin’s $44.4bn market cap at the time of the fork, making it larger than Ethereum (Ether), Ripple, Litecoin, Dash and every other cryptocurrency combined.
Across the aisle, Bitcoin Cash has had recent highs over $900 and currently stands as the third largest by market cap, beating Ripple and coming behind Ethereum. Despite being a month old, the new token is doing remarkably well. What is driving this success?
Greater adoption arises as the benefits of quicker transactions are seen – this creates a cycle; the higher the value, the more miners that will be attracted, making it easier to mine, driving value and repeating the cycle.
More volume – more exchanges trading Bitcoin Cash – the fork new currency did not inherit it’s parents international exchange prowess, with some exchanges even refusing to trade it- however, as value increases, demand for the coin will drive for more volume and more exchanges could see a benefit in exchanging it. Volume across global exchanges has more than tripled on strong trading in the South Korean won.
Which is the true cryptocurrency? A third currency could split the user base even further, calling into question which is the ‘true’ iteration of Bitcoin. The currencies rely on their trading potential to survive, as a result, evolution will take the reigns, with the best one being supported and the rest will die out – the market will decide.
For Bitcoin, independent stock research analyst and founder of Standpoint Research Ronnie Moas foresees Bitcoin surging to $5,000 by 2018, as cryptocurrencies continue to diversify and present a greater range of applications. This can also be attributed to investors and developers seeking refuge in a strong and sustainable, standardised currency. Resultantly, investors will continue to remain with Bitcoin until other platforms prove themselves superior. There is, however, another factor at play. The currencies only have value so long as they are traded. Thus, because Bitcoin is the largest, currently, it commands the most support and therefore will remain the most supported as it has the most value.
Whilst there is clearly a speculative element to investing, this results in Bitcoin being a safer investment than Ripple or Litecoin. Until another currency can break the circle, Bitcoin is under no threat. This is also building upon the major influence that Bitcoin exerts in the crypto sphere, particularly as more regulators more to secure up laws surrounding the exchange of and investment in cryptocurrencies.
Poetically, due to the nature of the blockchain on which all three would run, the two split currencies would carry data from the history of Bitcoin, dating back to 2009, representing, if you will, the DNA of the founding coin.
The move towards creating a third currency comes at an interesting time, with nations like Australia and Japan cracking down on exchanges due to Bitcoin’s capacity to facilitate crime, as well as China creating their own cryptocurrency. Pressure is building in the market and calls that this sphere is experiencing a bubble does not bode well for enthusiastic investors hoping to make a quick cash grab. Still, a third currency could bring more value to the market, increase market cap and make the industry even more valuable. Innovation and invention will succeed.
Crypto Carnage: Blood on the Dance Floor
It is said that ‘Blue Monday’, typically the third Monday of January, is the most depressing day of the year. This has, undoubtedly, been the case for cryptocurrency owners worldwide; from Monday onwards, almost all of the world’s major cryptocurrencies have seen a drastic slump in their prices.
Having reached the $14,000 mark last week, Monday onwards marked a severe fall in Bitcoin’s value. On Wednesday, the dubbed ‘king of cryptocurrencies’ dropped to below $10,000 for the first time since the end of November, before making a small recovery on Thursday. It stands at $11,500 at the time of writing, but the day is still young.
And Bitcoin has only been leading the way. At this point last week, the price of Ethereum, the second most valuable cryptocurrency, was approximately $1,200; a slump on Monday saw it fall to a low of $800 on Wednesday before pushing through the $1,000 threshold again, and reaching $1,030 a day later.
Ripple’s XRP also followed suit; the cryptocurrency has almost halved in value over the past week – from around the $2 mark to a low of $1.20 on Tuesday. Since then, it has marginally recovered in price, to $1.48 at the time of writing.
Monero, IOTA and Cardano were also impacted – since Monday, they have declined in price by 35%, 22% and 21%, respectively. Litecoin now sits at $195, down from $240 at the beginning of the week.
The crash occurred at a time of optimism and hope for cryptocurrency owners. Just earlier this week, US money transfer company MoneyGram announced a partnership with Ripple in the aim of streamlining money transfers. Yesterday also marked the expiration of the first Bitcoin futures contract that had been listed by the CBOE.
Still, China’s offensive rhetoric against Bitcoin and other cryptocurrencies in the last seven days is likely to have stoked fears amongst investors, causing a major sell-off. The country confirmed earlier this week that it was seeking to further clamp down on its restrictions against virtual currencies by eliminating cryptocurrency trading.
It has also recently announced plans to further restrict Bitcoin mining within the country. Recent statements coming from Chinese governmental circles could go as far as to suggest that China wants to eliminate cryptocurrencies outright: the People’s Bank of China (PBoC) vice governor, Pan Gongsheng, purportedly encouraged the state to introduce a total ban on cryptocurrencies.
China is by no means the only country to have espoused hostility toward cryptocurrencies. Russia also partially echoed China’s scepticism – President Vladimir Putin noted this week that “in broad terms, legislative regulation will be definitely required in future”.
South Korea’s unreceptive stance toward digital coins – it was reported earlier this week that its finance minister, Kim Dong-yeon, had stated that the government would be introducing measures to clamp down on the “irrational” cryptocurrency investment rage – may have also played a part in driving prices down.
Still, for every bear, there seems to be a bull. Time shall tell whether increasing restrictions on cryptocurrencies from different governments will further impinge on their price, or if they will find a way to adapt to the new obstacles and prove all those championing them (and making millions in the process) right.
UK Banks Shun Bitcoin
No UK banks have partnered with cryptocurrency exchanges.
Editor’s Remarks: The lack of any relationships between UK banks and cryptocurrency exchanges means that UK investors currently have to move their money through a series of foreign exchange transactions and services before they can cash out their profits. As a result, they incur high fees and often the suspicion of their banks. This is contrary to many European banks, which have partnered with such exchanges. To an extent, this is because the UK retail banking sector is highly concentrated, whereas in Europe and the US the consumer has more options. The UK government is also due to release guidance on how cryptocurrency gains are to be taxed in the next few days.
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Hacks on Cryptocurrency Exchanges Linked to North Korea
A report has linked a hacker group, responsible for targeting crypto-investors and exchanges, to the North Korean state.
The attacks took place against South-Korean crypto-exchanges and included attempts to harvest users’ passwords. The report does not say if the attacks were successful.
The report, by internet technology company, Recorded Future, has identified the attackers as the group Lazarus, known to be associated with the hermit kingdom. The malware was similar to that used against Sony Pictures in 2015, the WannaCry ransomware attack in 2017 as well as the Bangladeshi bank heist in 2016.
Attacks began when cryptocurrencies started to rapidly increase in value. It is believed North Korea favours attacks on cryptocurrency because they are not linked to any bank or government, making attempted heists less politically incendiary.
North Korea has shown a great interest in crypto-currency, potentially as a means for funding itself. In 2017, the elite Pyongyang university started to run courses on the virtual tender.
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