Dub 05

The Vanbex Report: Bitcoin’s Battlefronts

Source: bitcoin

Vanbex Report

April 5, 2016 — Trying to decide if Bitcoin is a currency or an investment is not unlike trying to discern whether light is a particle or a wave. The correct answer of course is, it’s both. Bitcoin faces a multitude of battlefronts that may obstruct it from further pushing into the mainstream, as a universally accepted currency.

The Vanbex Report is a periodic summary of the blockchain industry’s top news stories from the biggest companies, as well as the most promising newcomers.

Bitcoin’s Battlefronts

Whether from within, externally, or fundamentally, through design or accident, Bitcoin is up against the real-world pressures of accommodating to wide-spread use. Most notable is the question of scalability, which, if left unsolved, will almost certainly spell disaster for the invention of Satoshi Nakamoto.

Positive news arrived last week with the announcement of a $900,000 Bitcoin Developer Fund for MIT’s Digital Currency Initiative, the institution’s first foray into the Bitcoin and blockchain world.

The money, which came from a range of Bitcoin-related (or dependent) companies will help fuel the continued work of Bitcoin Core developer Cory Fields, former Bitcoin Core lead maintainer Gavin Andresen and current Bitcoin Core lead maintainer Wladimir van der Laan. The trio arrived under the wing of MIT last August, a saving grace from the funding constrictions as a result of the Bitcoin Foundation’s collapsing profitability.

Motherboard’s Christopher Galmo wrote a good piece on the $900k announcement titled, “To Survive Long Term, Bitcoin Needs a Break from the Real World.”

However, in it Malmo concludes, “Taking it off the line and into the academic realm could just be the shot in the arm that bitcoin needs to move forward with new ideas.” He further states earlier in the article, “To move forward, it may just need a place to grow without these real-world constraints.”

The problem is that the slew of issues — the battlefronts — Bitcoin is up against will not suddenly cease, not to mention a key competitor currently surging in popularity (See Related articles) coupled with backing from a particular tech giant.

The crucial thing, as Van der Laan told CoinDesk in late January, “The time of discussion and planning is over for now and we need to move on with actually realizing the roadmap.”

But let’s first backtrack a bit.

In Cyprus, in 2013, amid the banking crisis, many Greek citizens looked to Bitcoin as a means of placing their money in a place the government could not reach.

Put your feet in the shoes of government then and it’s quite clear why they would be hard pressed to accept an alternate unit of account or exchange as a viable option alongside their own sovereign fiat.

The Cyprus episode catapulted the cryptocurrency to new heights, as Guillaume Babin-Tremblay, executive director of the Bitcoin Embassy in Montreal, Que iterated.

“Bitcoins were growing slowly until Cyprus. Cyprus was the catalyst for the big increase in the price,” said Babin-Tremblay, as quoted by Kitco News.

The price sat at $40 per Bitcoin and then doubled within a couple of days, according to Babin-Tremblay, with Kitco News reporting, “Prices pushed towards $200, but dropped to about $60 after the banking crisis abated.”

Bitcoin offered Cypriots, who were at risk of having assets seized by the Central Bank of Cyprus, a place to put their money outside the reach of governments.

China, Argentina, Iceland and Russia, with their slumping economy the target of international sanctions and duly battered by the collapse in commodity prices, are all home to economies that have fomented a need for investors to seek an alternative vehicle of investment.

Right or wrong, this action, moving currency out of the domestic system, affects economic stability. Growth is also hindered when citizens move funds offshore for the obvious reasons that that money no longer feeds the national economy through taxation, consumer spending or on-hand capital for banks.

This is what investment in Bitcoin is tantamount to and, hence, the opposition to the cryptocurrency and the ensuing legislative battles.

The above example is also demonstrative of how and why a digital currency gains value and can experience intense volatility.

It’s quite circular in nature.

On one hand, it’s about demand, which in turn feeds the purchasing power of a currency. On the other hand, demand for investment in a particular currency oftentimes has to do with its purchasing power or value on the world market, otherwise, why invest?

Venezuela is an interesting example. There is projections its economy could inflate by 700 percent, according to the International Monetary Fund. This is the highest inflation rate in the world. The collapsing economy has driven entrepreneurs to Bitcoin as their preferred payment method.

This type of economic environment feeds demand for the cryptocurrency.

But the cryptocurrency is struggling to make a decisive choice. Relevancy as a legitimate currency, crypto- or otherwise, hangs in the balance with governments bearing down.

Pundits discuss Bitcoin’s prowess with a $6.3 billion market cap, compared to Ethereum’s cryptocurrency which, in second place, makes up just below $900 million in market cap at the time of writing this piece.

However, value, as we’ve seen in Bitcoin’s own history, is relative. Governance is needed; action is needed, as Van der Laan had espoused.

For the digital currency to move forward, beyond its current state of ambiguity the realization that a decentralized currency functioning via a laissez-faire environment or attitude does nothing to produce the most efficient, effective and secure monetary system.

The most talked of issue plaguing Bitcoin at the moment is the block size debate.

At the current 1MB size, by design it was supposed to take around 10 minutes. Under current conditions, this timeframe can stretch to anywhere from 45 minutes to a couple of hours. We know the time it takes in comparison with a credit card and so on.

Whether the delayed transaction time is a result of mining centralization in China is another debatable subject, just as the topic of the centralization of the mining network to the overall goal of Bitcoin itself is subject for discourse.

Bitcoin’s relevancy hangs in the winds of innovation and real-world action.

The $900,000 injection from Bitcoin-based companies is a small price to pay to resuscitate their lifeline, a cryptocurrency that commands billions and in which their enterprises are based, for the most part.

It all can evaporate, diminish just as Blackberry’s North American dominance vanished in the wake of competition.

Returning to Venezuela: Consider why citizens would select Bitcoin versus any of the alternatives. It has nothing to do with computational algorithms of the cryptocurrency; it has everything to do with the current store in value presupposed by demand.

Bitcoin’s core developers must start to fight through the battlefronts, and soon, otherwise Mike Hearn’s parting words will run as true as any tautology ever could.

As we know demand for a product is never guaranteed in this fiercely competitive environment and the items that plague Bitcoin, both internal and external, could spell its decline.

Some news stories from this past week:

U.S., Global Regulators Move Toward Regulatory Framework

FinTech industry gaining traction as agencies seek education, further assessment

The Office of the Comptroller of the Currency (OCC), an independent arm of the U.S. Department of the Treasury responsible for administering the federal banking system, announced the desire to begin building a new FinTech framework that will help foster and develop the fast-growing industry.

On Thursday, the OCC released a whitepaper entitled “Supporting Responsible Innovation in the Federal Banking System,” which outlined the current state of the industry and discussed the development of a framework to “identify and evaluate” financial innovation, part of which involves education and dialogue.

Thomas Curry, U.S. Comptroller of Currency, said, “The OCC will approach innovation with our eyes wide open to the attendant risks, but also an open mind to promising new ideas and new technology.”

This shift in U.S. regulatory mindset comes alongside news global regulators are also looking to better manage the FinTech industry.

The Financial Stability Board meeting in Tokyo on Thursday agreed to examine the industry in components and begin assessing the potential risks within the main pockets of the FinTech ecosystem.

“The important thing for us as members of the FSB is to be moving in parallel with these developments and not be stifling innovation, but being able to apply them in a way that improves the resilience of the system,” said FSB Chairman and governor of the Bank of England, Mark Carney said, as reported by Reuters.

Reuters further reported, paraphrasing Carney as stating, policy intervention by other authorities such as in competition, conduct and consumer protection, would need come before any financial stability considerations.

Also Read: Supprorting Responsible Innovation (Whitepaper)

Hyperledger Project Elects New Leadership, Gains New Members

Elections see Digital Asset CEO and IBM’s Ferris assume key roles as chairpersons

The Hyperledger Project, a collaborative effort created to advance blockchain technology with an aim toward establishing an open-source platform, elected new leadership and gained new investment.

Appointments made by member vote saw Blythe Masters, CEO of Digital Asset Holdings, named as board chair. Additionally, Chris Ferris, engineer and CTO of open technology at IBM, was appointed as chair of the technical steering committee (TSC).

The blockchain initiative also acquired 10 new companies to join in on the collaborative effort, a list which includes Blockstream and Bloq as well as eVue Digital Labs, Gem, itBit, Milligan Partners, Montran Labs, Ribbit.me, Tequa Creek Holdings and Thomson Reuters.

See Hyperledger.org for the list of TSC and Governing Board members.

Israel’s FinTech Hub Finally Gets a Permanent Residence
Based in the heart of Tel Aviv, The Floor lands in Stock Exchange

The Floor, Israel’s first FinTech hub established in 2015, has secure a permanent place of residence, landing in the Tel Aviv Stock Exchange in an 800 square meter leased property.

The hub secured $250 million from the Pando Group last year, a Chinese-backed venture capital fund based in the Virgin Islands.

At the start of March it was also announced Banco Santander had joined with HSBC, Intesa Sanpaolo and RBS to support The Floor, which opens officially this June.

The Floor is dubbed as a place to trade FinTech ideas with a proposed vision of providing partners and members “with value by nurturing innovation capable of delivering brilliant solutions to the global financial industry while securing Israel’s position as a prominent Fintech capital.”

The initiative is an interesting arrangement in that it will connect Israeli FinTech innovation with China.

Also Read: Support the Floor – Santander InnoVentures Press Release

Some Upcoming Events …

Smart Contracts, Blockchain & Data Standards

A free half-day FinTech forum hosted by XBRL US will be held on Apr. 4 in New York City. Speakers from Consensys, ItBit, Markit, Nasdaq, Safeguard Scientifics will be featured. For more information visit:

Money 20/20 Europe

Touted as an “experience for European innovators” and “catalyst for the growth and development of the payments and financial services ecosystem.” To register go to: money2020europe.com/register-2016. Event runs Apr. 4 – 7.

Coinfest 2016

Coinfest, coined as Canada’s crypto-holiday, is celebrating this year’s event across multiple cities worldwide. Events will include geographically decentralized activities such as the International Hangout and the Decentralized Arcade, which allow mass participation on a global scale. The event will be held Apr. 5 – 10. For more information visit Coinfest.org.

Innovate Finance: Global Summit 2016

The Innovate Finance Global Summit will champion and celebrate the latest developments in FinTech at the historical heart of financial services in London. The summit will feature bepsoke sessions, VIP keynotes and more. Conference is Apr. 11 with tickets available through Eventbrite.

Blockchain & Distributed Ledger Technology

The conference will bring together, Apr. 13 – 14, an unparalleled faculty of in-house counsel and compliance professionals, senior executives from industry-leading companies, high-level regulatory and enforcement officials, and top outside counsel. For more information visit, AmericanConference.com.

Press Contact: Kevin Hobbs

Email: K@vanbex.com

Telephone: (604) 379-9032

Written By Brandon Kostinuk

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The Vanbex Report: Bitcoin’s Battlefronts

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Dub 05

Oliver Wyman Principal: Blockchain Exhibiting ‘Kardashian Effect’

Source: bitcoin

Kim Kardashian

Andrew Wiseman, a Swedish-based Principal at Oliver Wyman management consultancy, detailed his views on development trends in blockchain technology at the Money 20/20 conference in Copenhagen on Monday afternoon. Fascinatingly, Mr. Wiseman labeled blockchains as exhibiting a “Kardashian Effect,” in the sense that they are widely discussed and popular, but many who reference them do not understand why this may be the case. Unlike the Kardashian hype cycle, however, Mr. Wiseman believes that the Blockchain hype cycle is about to burst, with October or November 2016 as its likely transition towards a more realistic, calculated, and well-informed approach on strategies to best implement blockchain solutions.

Also read: First Secure DAO Web Marketplace Launches Massive Crowdsale

The Blockchain and Kim Kardashian: More Similar Than you Might Think

Mr. Wiseman sees the rise of “Blockchain” as merely a buzzword, first and foremost, because a definitive use case in the market for blockchain technology has not gone into effect or been widely implemented yet. In order to break into a more scalable and impactful realm, Mr. Wiseman asserts that consortiums of larger players can offer value, similar to the ongoing collaborative efforts as part of the Hyperledger project. Challenges arise, however, due to the nature of participants involved, as cultural and technical capabilities need to match in order to make an impact. Moreover, all efforts should navigate the tension between proprietary innovations and industry-wide adoption standards wisely.

Many organizations who reference blockchain are often risk averse towards implementation due to uncertainty on the regulatory side. The intersection between regulation and technology needs to be further addressed, and Mr. Wiseman believes that impending European regulation and more technically focused discussion will among larger finance circles in Europe will eventually impact “FRITO” (Financial Risk Information Technology Operations) guidelines.

“Now is when the real work starts,” asserted Mr. Wiseman, before presenting eight simple yet valuable bullet points to help guide new entrants in the space. Rather than focusing solely on softer discussion and research, suggestions were given to:

  • Work on concrete proofs of concept.
  • Understand the current needs of customers and anticipate their future needs.
  • Challenge the service providers to innovate.
  • Understand current qualification of operational costs, isolating what distributed ledgers could save.
  • Continue industry-wide engagement, turning hype into collective endeavor.
  • Participate in prototypes and embrace “learn by doing”.
  • Bring the “business mind” to technologist startups.
  • Think through and prepare the narrative for bank regulation and supervisory bodies.

Given the amount of hype surrounding blockchains right now, it was important to hear a respected player in the space provide an alternative perspective. The evolution in the outlook of blockchains right now is not different than the evolution Bitcoin underwent in 2012 and 2013. Emerging technologies typically take time to integrate into business solutions, and rightfully so. Hopefully, Mr. Wiseman’s suggestions inspire a more pointed examination of Blockchains, and don’t continue “Blockchain” as simply a hypnotization or colloquialism, such as is evident through Kim Kardashian’s popularity.

Do you agree with Mr. Wiseman’s analogy? How can Blockchain development take the next step forward? Let us know your thoughts below!


Images courtesy of Reuters, Money 20/20

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Dub 05

Money 20/20: Industry Leaders Weigh in on Blockchain Regulation

Source: bitcoin

Copenhagen

On Monday afternoon at the Money 20/20 conference in Copenhagen, a panel of industry leaders provided an update on their views of the current status of regulation in the Bitcoin and blockchain spaces in Europe. Of primary note was a statement around the short term future of digital currency regulation in Europe. Speaking on issues surrounding attention being placed on Anti-Money Laundering (AML) concerns, Monica Monaco of Trust EU Affairs made a bold yet not-surprising statement, given recent global affairs. “Brussels is paying attention”, asserted Mrs. Monaco. “There will be (European level) regulation between now and summer.”

Also read: Tesla 3 and Bitcoin Make the Difference Locally 

Fascinatingly, many European Bitcoin startups want to be regulated, claims Monaco, “especially the good guys.” Increased regulation helps bring legitimacy to the space, and the industry itself is growing up quickly. Increasingly, across Europe and beyond, digital currency and blockchain initiatives are attracting more experienced serial entrepreneurs who lived through the internet bubble and bring more experience and credibility to the space, which resonates with both investors and regulators alike.

Pioneers in Regulation

One region that has been friendly and will continue to be a leader in digital currency regulation is the Isle of Man. Brian Donegan of the Isle of Man Government wants his small nation to continue to lead the way. “Nothing will change until we have a standard that everyone can realize and work with. It paves the way for global acceptance, and has to happen,” remarked Mr. Donegan. Given the Isle of Man’s work on creating the Designated Businesses Act of 2015, he said that his region is happy to lead the charge and provide experiments on these initiatives.

Money 20/20: Regulating the Blockchain

With regards to blockchain regulation, specifically, Dr. Paolo Tasca of Deutche Bundesbank remarked on the challenges of finding regulation that involves many traditionally disparate parts. “Here, there are elements of payments, monetary transactions, and technology involved,” said Tasca. Mr. Tasca sees parallels with what’s happening now in the blockchain space to what happened in 2002 with home banking and personal finance, and how these presented similar challenges to the regulatory environment. Mrs. Monaco made a valuable point, adding that blockchains also challenge settlement risks and consumer protection concerns. “When you go to decentralized, who controls what, it’s a major shift for regulators. How can you centralize control of something that’s decentralized? Can you? Should you? This is not solved yet.”

Speaking to the general style of how innovation should occur within a blockchain, Veronica McGregor of Hogan Lovells echoed sentiment towards finding empowering yet safe regulatory frameworks.  Rather than having an overarching form of regulation, Mrs. McGregor sees use case specific regulation. For example, the recent R3 settlement test which leveraged blockchain technology will likely lead to further regulation in that realm.

Managing Potential for Anonymity

One topic which garnered significant attention was that of anonymity. Due to concerns of Anti-Money Laundering and potential terrorist financing, this repeatedly is a point of concern for regulators. Speaking to this, Brian Donegan:

“Banks really worry about the financial piece. The identity piece. They have sanctions compliance that they have to adhere to. They have to know who to sanction. The holy grail of the technology is the identity piece” A commonly heard sentiment, it seems to reign true; as soon as the identity piece is solved it’ll likely help regulators get onboard to the technology and Banks will follow quickly if governments get on board. “Banks need to ensure that their relationship with their local regulator isn’t damaged”, Mr. Donegan remarks.

Regulating Ethereum and Smart Contracts

Lastly, addressing a question around Ethereum and smart contracts, the panel seemed to feel that regulators would need to take a similar approach to that taken towards some of the first Bitcoin startups, that being to apply regulation at the entry and exit points. As Mrs. McGregor, “We have to regulate the entry points. In a smart contract, whoever has oversight over those persons will face regulation. Additionally, Mrs. Monaco added, “Smart contracts could be very good for consumers and their use could be very good for society as long as we protect users for their use. Must be compatible on the rules of the country their sitting.”

In summary, the panel today certainly proved to be wide ranging, informative, and stimulating. It seems that, over the past 2-3 years, the increased interest which regulators have taken in Bitcoin and Blockchains has given rise to a much stronger understanding of and valuable discussion around the issues at hand. The views and concerns in America are quite similar to those in Europe, and the two will likely look towards one another for answers and the technologies continue to develop and evolve.

What are your thoughts on the remarks by the panel members above? How does Bitcoin, Blockchain, and smart contractual regulation inter-relate? Will regulators be able to put forth meaningful frameworks without stifling innovation? Share your thoughts below!


Images courtesy of The Telegraph, Money 20/20.

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Money 20/20: Industry Leaders Weigh in on Blockchain Regulation

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