CivicKey CEO on Bitcoin Price: “Good Chance We’re Going to Retest $3,000”

The co-founder of blockchain-based identity management platform CivicKey has weighed in about the current state of the cryptocurrency markets. Amongst other things, Vinny Lingham stated that he feels the Bitcoin price will retest the $3,000 level in the near future.

The South American internet entrepreneur also explained how his own startup had managed to weather the dramatic plunge in cryptocurrency prices better than many of its peers.

Moving to Cash Helped Civic Stay Afloat Despite Falling Bitcoin Price

In an interview with financial news streaming network Cheddar, Vinny Lingham has spoken about his short-term outlook for the Bitcoin price. The CEO and co-founder of the blockchain identity protection firm CivicKey told presenters that a $3,000 was to be expected in the coming weeks. He went on to state that this level was also likely to break to the downside:

“I think there is a good chance we’re going to retest $3,000 as a low. There is a good chance we’ll probably break through that if it heads that low.”

Lingham went on to state that months of sideways trading was also more likely than the parabolic move upwards that almost everyone involved in cryptocurrency is hoping for. The CEO claimed that a price range of between $3,000 and $5,000 seemed realistic before either a “breakout or a breakdown”.

In response to Lingham’s point about a resumption of sideways trading, one of the reporters drew attention to the last time the Bitcoin price remained relatively stable for months at one price point. The journalist reminded Lingham that the price broke to the downside, resulting in the $3,000 to $4,500 trading range we seem to be currently stuck in. He then posited the question if such sideways trading would be good or bad for the market.

Lingham replied:

“Bitcoin particularly has this history of bubbles and busts. When there is upward momentum, the going gets good, everyone gets on board, and it rises to the next level. Sideways trade doesn’t really help us because at this point in time we have more sellers than buyers – people trying to get out from ICOs etc. and that’s a problem. There’s no real momentum into the crypto market right now.”

The conversation then shifted to how the current bear market had impacted Lingham’s own project, CivicKey. The entrepreneur stated that he felt that many other firms in the space had been left much worse off following the rapid decline of prices to their current levels. Thanks to its policy of cashing out most of the crypto raised by ICO in 2017, CivicKey was able to stay afloat much more easily than firms like Steemit, who have been forced to layoff large percentages of their workforce.

The CEO was careful to state that just keeping money in cash rather than cryptocurrency would not guarantee Civic’s survival. He went on to say that it was important for his company and all the others involved in the space to watch their expenses and manage their treasuries effectively.

Finally, he hinted that more companies may be forced to make layoffs or streamline their operation in some way:

“I think more companies in the space have to tighten their belts and make sure that they have enough run way to get their product to market.”

 

Related Reading: Cryptocurrency Bear Market Pressures Shapeshift into Layoffs

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Circle CEO: Crypto Will Have a Bigger Impact than the Web

The latest crypto firm to hold its own AMA (“Ask Me Anything”) session on Reddit is Goldman Sachs-backed Circle. The CEO and other members of the peer-to-peer payments company took questions from the community earlier today.

Whilst largely a PR piece for the firm to lament its successes of 2018, some interesting developments at Circle were hinted at during the session. CEO, Jeremy Allaire, also stated that he fully expects crypto to have a greater impact on the humanity than the invention of the internet.

Circle: Bullish on the Future of Crypto and Bitcoin’s Continued Global Rise in Importance

The AMA session began with an introduction in which the Circle representatives taking part stated the firm’s 2018 achievements. It first acknowledged the launch of Circle Invest – a platform aimed at making investing in digital assets as easy as possible for inexperienced users. It then mentioned the CENTRE Consortium and its launch of the USDC stablecoin, which in its short existence has already received a full audit and hit a market capitalisation of almost $3.5 million. Finally, it touched upon the firm’s intention to acquire SeedInvest, a crowd funding platform for pre-vetted startups.

After discussion about its newest product launches, the Circle AMA introduction went on to talk about the successes its existing interests had enjoyed during 2018. It stated that the OTC wing of the company, Circle Trade, had already executed over 10,000 trades worth more than $24 billion. Finally, Circle Pay and Circle Research were also acknowledged.

Following the introductions, the cryptocurrency community were invited to ask questions to the team of representatives present. Amongst these were the company’s co-founders Sean Neville and Jeremy Allaire.

When asked about the Circle’s “central mission”, Allaire responded at length. The CEO stated that the firm wanted to connect every person to an open financial system and that value will one day flow as freely as does information today.

Allaire then touched upon what drew him to crypto originally. He stated that he had been interested in decentralised systems since the 1990s and was fascinated by their power to democratise society. This was followed by the CEO’s vision for cryptocurrency in the future:

“In my view, crypto is a much more significant and disruptive innovation than the Web, and its impact on society, politics, economics, governance will be far far greater for humanity over time.”

One Reddit user known as “beeef21” asked what the firm was doing to educate global regulators. Allaire responded that Circle was investing “an enormous amount” to increase crypto knowledge amongst regulators and has done since 2013:

“In general, regulators are keen to learn, and we spend a lot of our time trying to get them to understand the benefits of crypto, how it actually works, etc.”

The CEO went on to address what he considers to be the largest regulatory hurdle for a firm like Circle – the lack of direct guidance on how regulators like the SEC classify digital assets. According to Allaire, greater regulatory clarification could “unlock a lot of market activity.”

Perhaps the most interesting question for those wondering whether there is room  in crypto for multiple different coins was posted by user “jjrolls”. They asked if the Circle staff thought crypto would be more used as a store of value or a medium of exchange in 10 years time.

Again, Allaire fielded this question. The CEO stated that Circle expects there to be “millions of different crypto assets” and those that serve different use cases would be able to thrive alongside those tailored for alternate purposes:

“… the short-answer is that we thing [sic.] SOV [store-of-value] assets like Bitcoin will become much much larger and more broadly adopted, and that other crypto assets will be used in an incredibly broad array of everyday transactions.”

Other notable topics touched upon during the AMA session including the regulatory environment surrounding privacy coins such as Monero, the return of the Poloniex “Troll Box”, and plans to allow users to buy USDC using traditional payment methods such as credit cards.

 

Related Reading: Circle’s CEO Allaire: Every World Currency Will Soon Have a Digital Version

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Dark Overlord Group: Keep the Bitcoin flowing, We’ll Keep the Truth Flowing

The Dark Overlord hacker group who last week grabbed headlines when it announced it was prepared to share 9/11 secrets in exchange for Bitcoin has released a second cache of information. The self-proclaimed “financially motivated” cyber criminals have also stated that they will continue to release more “layers” of information as they receive money from the public.

Following the leak of the first group of documents from Dark Overlord, social media accounts associated with the hackers were shut down. Surprisingly, given the cryptocurrency community’s penchant for censorship resistance, one of these was blockchain-based social media application Steemit.

Bitcoin Donations: “Cyber Cash for Cyber Cache”

Last week, the Dark Overlord hacker group demanded a ransom of an unspecified amount to stop the release of documents relating to the September 11 terrorist attack in New York City in 2001. However, after failing to receive said ransom, the group requested Bitcoin donations from the public. It said it would release the documents gradually as certain financial milestones were reached.

It released layer one over the weekend after it was paid $12,000 in the cryptocurrency. Although the second funding target has yet to be reached, the group released “layer 2” of the cache today.

So far, the documents have not contained any particularly damning evidence. They are largely composed of insurance correspondence about who the affected parties could claim damages from. There is some discussion of whether then-President George W. Bush could have known about the attacks before they happened and the potential involvement of the Saudi Royal family. However, sections referencing such details are speculative and provide nothing in the way of evidence.

In an effort to silence the Dark Overlord group, several social media sites have banned accounts linked to the hackers. These include Reddit, Pastebin, Twitter, and Steemit.

Blockchain-based Steemit came under particularly intense fire for terminating their services to the group:

Although members of the cryptocurrency community took issue with the company’s decision to ban Dark Overlord, the files themselves are still available to view via other sites interacting with the Steem blockchain, such as Busy.org.

The group continues to use Busy.org to post to the Steem blockchain. In today’s message it promised to deliver additional secrets when it receives more Bitcoin. The next layer of the three more apparently coming was teased at the bottom of the public disclosure. Dark Overlord claims to have an additional 8,279 files relating to the terrorist atrocity at the turn of the century. The figure in Bitcoin for the disclosure of the third instalment was not mentioned, but the ultimate stated goal of Dark Overlord is to raise $2 million for all parts of its “megaleak”, referred to by the group as “the 9/11 Papers.”

This is not the first time Dark Overlord has demanded a payment in Bitcoin to stop the release of data. In 2017, NewsBTC reported on the story of the demanding payment of 50 Bitcoin (then around £60,000) to not leak ten episodes of the popular Netflix original show Orange is the New Black. After the demand was not met, the group release the stolen media online.

 

Related Reading: Ryuk Ransomware Targets Businesses with Bitcoin Demands, Links to North Korea?

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Are VeriBlock Transactions on the Bitcoin Network Helping or Harming BTC?

According to reports from Bitcoin (BTC) developers, a startling amount of block space is being wasted on the Bitcoin network to secure the blockchains of other cryptos. A company called VeriBlock has been “borrowing” the hashing power of the Bitcoin network to increase security on vulnerable altcoin chains and filling up BTC block space in the process.

VeriBlock works on a process known of “proof-of-proof” whereby the latter “proof” is arrived at using the hash power of the Bitcoin network. According to Forbes, perhaps the most notable contributor to the VeriBlock project is former Bitcoin Core developer Jeff Garzik.

Only a Matter of Time Before VeriBlock’s Impact on Bitcoin Fees is No Longer Trivial

As was highlighted just this week by the Ethereum Classic (ETC) debacle, the risk of 51% attack on altcoins is far greater than it is on the BTC network. This is because there is much less hashing power securing these smaller networks. With less computing power enforcing them, attackers need to command far less computing power themselves to subvert the network’s rules.

A 51% attack allows those behind it to wreak havoc with a cryptocurrency and enrich themselves. This can involve double spending units of the currency – essentially creating money for nothing for the attacker.

To help altcoins with their failing security requirements, a startup called VeriBlock has devised a way to use Bitcoin’s immense hash power to help secure the blockchains of smaller projects. This involves the use of OP_Return transactions added to the Bitcoin blockchain.

VeriBlock is not even fully live on the main net yet but already it is already having an impact on the Bitcoin network. Chief Technology Officer of CasaHODL and long-time Bitcoin developer Jameson Lopp highlighted a few days ago that the startup was currently responsible for 20% of all transactions on the network:

Whilst there is nothing anyone can do to stop VeriBlock from using the Bitcoin blockchain in such a way, its doing so certainly reduces the utility of the network. With 20% of every block being filled with transactions that support networks that divert both economic and literal human interest away from Bitcoin, VeriBlock could be incredibly detrimental for the success of an entire space, largely tied to the current number one digital asset.

VeriBlock will already be having an undesirable impact on the price of transactions on the network. If a large surge in utility occurs on the network again, there may be another “race to the top” situation within transaction fee markets. Last time this occurred, $40 being spent in Bitcoin fees was not uncommon. Such a fee is difficult to swallow when it is caused directly by economic activity benefiting Bitcoin. When it is caused by a group of altcoins supporting essentially zero economic activity and supposedly in direct competition with Bitcoin, most users would find it grossly unacceptable.

Poaching BTC’s hash rate in the way that VeriBlock is doing and filling blocks with data that benefits dying blockchains only serves to delay the inevitable, whilst limiting Bitcoin’s chances of success.

The massive proliferation of cash-grab altcoins and the continued profitability of scams in the space has made digital currency difficult to take seriously for anyone outside of the industry. Many of these altcoins, particularly those needing support from VeriBlock, need to die off entirely before this can change.

It is hard, after all, to imagine a less noble existence than failing to survive off hash power from miners incentivised to secure the network through mining rewards and instead continuing to exist at the expense of potential Bitcoin adoption whilst continuing to give “get-rich-quick”-type investors hope of an impending moon shoot.

 

Related Reading: Coinbase Forced to Suspend Ethereum Classic Trading After 51% Attack

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Cryptocurrency Bear Market Pressures Shapeshift into Layoffs

The ongoing cryptocurrency bear market appears to have claimed yet another victim. The latest digital currency-related firm to announce a restructure is exchange platform Shapeshift.

According to a Medium post by the company’s CEO, 37 of Shapeshift’s employees have been laid off. This represents around one third of the staff at the cryptocurrency startup.

More Cryptocurrency Companies Feel the Pinch

Voorhees’s post details the reasoning behind the restructuring – Shapeshift’s embrace of “substantial exposure to crypto assets”. With so much of the firm’s financial standing relying on the prices of hugely volatile digital currencies, the CEO stated that although it was a conscious decision, it was a substantial risk to take.

He goes on to apologise to the staff he has let go of today, addressing them with what seems like genuine regret for the situation and gratitude for the work they did for the company:

“I am sorry this happened. Your confusion, your sadness, your anger… all of it is understandable, and I am sorry to put you through it. Your contributions — of effort, of personality, of experience — remain part of our fabric. Though it has ended, we are improved by our time with you, and I hope you find yourselves improved by your time with us.”

According to Voorhees, much of the reasoning for the redundancies comes from the crypto firm’s own poor business decisions. The chief of these is “a lack of focus” and a spreading of resources much too thinly.

For the CEO, projects like CoinCap, the firm’s market data platform; KeepKey, its hardware wallet offering; and others still underdevelopment distracted focus from Shapeshift’s central business model:

“… ultimately, the whole of this family of projects was less than the sum of its parts.”

Voorhees states that such diversification came too soon in the company’s short life and it was difficult to focus on how thinly resources were stretched with the bull market of 2017 distorting the firm’s success:

“Everything was going well. Hundred percent growth every month has a way of obfuscating reality.”

Going forward, the Shapeshift executive has pledged that his company will stay truer to the spirit of cryptocurrency. Perhaps inspired partly by Trace Mayer’s recent “Proof-of-Keys” event, Voorhees reiterates the importance of “controlling your own keys” to realise the truly revolutionary qualities of cryptocurrency:

“Among its many virtues, crypto assets enable people (and machines) to store value easily themselves and to transfer value directly to someone else, anywhere on Earth… This power is awesome and unprecedented.”

Finally, he stated that the firm has spent much of 2018 “weaving the new Shapeshift into existence”. This will be revealed at an undisclosed date soon.

Shapeshift Just One of Many Cryptocurrency Firms Making Layoffs

In recent weeks, NewsBTC has reported on many other examples of big cryptocurrency players being forced to let go of staff. Already, we have seen the likes of Steemit, ConsenSys, Bitmain, and Huobi make redundancies (or be rumoured to be in the process of doing so).

These are just the very biggest firms in the space . There will be many more examples of unheard of companies that have simply folded or drastically reduced their own staff size. It seems likely that more companies will follow as the balance sheets of these heavily-crypto-invested firms forces them to rethink their operations to remain financially viable.

 

Related Reading: eToro Executive: Crypto Correction in 2018 is a Blessing in Disguise, Bull Market Expected

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France’s Yellow Vest Bank Run: Could it be Bullish for Bitcoin?

Reports are emerging that the anti-Emmanuel Macron protesters in France, known in English as the Yellow Vests, are planning to stage a bank run this weekend.

Although the changes of such an initiative bringing the government to its knees, as the demonstrators hope, are slim, what may very well be the first ever voluntary bank run in history could still be bullish for the price of Bitcoin.

Could Bitcoin Step in to Save the Wealth of those Impacted by the Yellow Vest Bank Run?

The gilets jaunes, to give the resistance group its correct title, is a group of French demonstrators opposed to President Macron. The movement of largely rural workers originally opposed to proposed tax increase on the price of fuel. The group’s name – the yellow vest in English – is a reference to the high-visibility jackets required by law to be carried in all vehicles in many parts of Europe. These also serve as a uniform for the movement. In recent weeks, the Yellow Vests have managed to obstruct transport all over France causing the nation to grind to halt frequently.

The protests have been ongoing since November last year. The latest escalation of the protest against Macron is a proposed bank run on January 12 at the start of the working day. According to local news outlet Capital, the idea was first proposed on social media by Yellow Vest sympathiser Tahz San. He posted:

“For Act 9, we will scare the state legally and without violence. (…) We all know that the powers of the country are not in the hands of the government but in those of the banks. If the banks weaken, the state weakens immediately. (…) Saturday we will all vote by withdrawing our money to impose the RIC (Referendum citizen initiative) urgently. The operation is scheduled for Saturday, January 12 at 8 am It will be reproduced the following month in case of failure.”

Following the spread of the idea around social media, one of the most prominent media figures of the group reportedly picked it up. Maxime “Fly Rider” Nicolle began promoting the initiative to thousands more followers yesterday.

It is interesting to see a “Tax Collectors’ Referendum”, as the event is being now being billed, being used attempted as a check on the power of government. One Twitter user has used stated this could serve as an ideal opportunity for Bitcoin to prove itself as a stateless store-of-value in the aftermath of a bank run leading to a widespread banking crisis in France.

Unfortunately, it seems that the figures in the above Tweet are grossly overstated. There is nothing to indicate that 70% of the population identifies with the Yellow Vest movement. The report in Capital estimates that 126,000 people marched in support of the Yellow Vest movement last month. According to the publications calculations, even if all these people participated, it is unlikely that they would have the financial clout to put the banks at risk.

The head of macroeconomic research at Saxo Bank, Judge Christopher Dembik, stated of the movement’s latest economic offensive:

“Triggering a bank run requires huge queues at the counters, very honestly I think the strike force of yellow vests is too weak to destabilise the sector even at the margin.”

A Failed Bank Run Could Still be Bullish for Bitcoin

Although experts seem to be in agreement that the likelihood of a French banking collapse this weekend is very low, it would be foolish to discount the fear that such an action instils in those not even aligned with the Yellow Vests. If enough of the moderate French population perceive enough risk posed by the bank run, they could preempt the proposed action and empty their accounts before Saturday morning, dramatically increasing the chances of the Yellow Vest initiative being successful.

However, even if a bank-toppling bank run does not force the French to buy Bitcoin en masse from their local tobacco shop, the threat of such an action could serve similar ends.

Banks have easy and effective ways to limit the impact of surges in demand for money from them. The simplest one is to impose withdrawal limits on accounts. If the fear of Saturday’s action causes a bank to impose a knee-jerk withdrawal limit to stop themselves being forced to reveal their empty coffers, those impacted may start to see the worth of an asset class that is entirely permissionless, trustless, and most importantly for the French Yellow Shirts, nothing to do with their national government. The imposition of such freedom-restricting policies in a Western economy serve to show even greater numbers of people the utility of Bitcoin.

 

Related Reading: Crypto Economist Claims Bitcoin is the “Medicine You Need”

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Analyst: 2019 Will be the Year of 2nd Layer Ethereum Scaling

According to an Ethereum (ETH) network and community analyst, this year’s major trend for the decentralised smart contract platform will be layer two scaling technologies. Proposed upgrades to the network include Plasma and the Raiden Network, amongst others.

It seems that the Ethereum Foundation are aware of the pressing need to scale the network using second layer techniques too. To aid the development of such upgrades, it has granted one of the most active groups of Ethereum developers, Parity Technologies, with $5 million.

It’s No Secret That Ethereum Needs to Scale Fast

Eric Conner, the host of the “Into the Ether” podcast and founder of Ethereum information portal, EthHub.io, Tweeted a prediction for ETH’s 2019 yesterday:

Even more so than the Bitcoin network, the number two cryptocurrency by market capitalisation is in dire need of a workable scaling solution. This was highlighted perfectly in 2017 when the decentralised collectable game CryptoKitties received a sudden influx of users, causing the underlying network to almost grind to a halt.

The goal for the Ethereum network has always been to host decentralised applications that would have the potential to revolutionise just about every industry you can think of. However, its efficacy in doing so is severely limited by the fact that the network cannot even take a few thousand people trading images of digital cats on it.

Clearly, the Ethereum Foundation is well-aware of the need to scale the blockchain sooner rather than later. The few people willing to experiment with decentralised applications at present are migrating over to rival smart contract platform EOS at a startling rate. This shift to a more advanced platform will likely continue too, unless adequate solutions are created fast.

In an effort to push those working on scaling techniques harder, the Ethereum Foundation has just awarded a research grant. According to a blog post by the group, Parity Technologies will receive $5 million to aid their continued experimentation towards scaling and other upgrades to the network.

The post outlined why Parity Technologies had been chosen to be the recipient of the “scalability, usability and security grant”:

“For several years, Parity Technologies has been an invaluable member of the Ethereum ecosystem for their leadership in core development efforts, their Parity Ethereum client and more… By all metrics, Parity is a major technical contributor to the Ethereum project, and they’ve notably done so as a self-financed and open-sourced effort since their founding.”

The Ethereum Foundation went on to list the areas of research it is hoping will be benefited from by the injection of cash. These include: developing Casper, sharding, light clients, developer tools, audits, and infrastructure improvements.

There are big upgrades already planned for 2019 for Ethereum. These include the much-anticipated Constantinople hard fork scheduled later this month.

 

Related Reading: Parity Hack and the Impact on the Ethereum Blockchain

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Number of DApps on Ethereum and EOS Soaring, Yet Usage Lags

The number of new decentralised applications (DApps) being developing on the two most popular smart contract platforms, Ethereum and EOS, is currently at its highest ever rate. There are approximately 180 new offerings each month.

However, there is still a sizeable gulf between DApp development and actual DApp usage. Clearly something is hindering the widespread adoption of decentralised applications, but what?

Total Number of Ethereum, EOS, and Other DApps Reaches 2,432, Yet No Mass Adoption

According to decentralised application monitoring website, StateOfTheDApps.com, the number of new DApps being created every month was the highest it has ever been for the month of December 2018. A total of 179 new DApps went live in the final month of last year.

The Ethereum network continues to be the most popular platform for decentralised app creation with 105 of the total number of new projects being launched on it. This figures since Ethereum still boasts the most active developer community of all such platforms. However, DApps on the network are only being used by just 141,300 users each month.

Meanwhile, despite not hosting quite the same number of projects, the EOS network is by far the most popular with actual users. EOS boasts well over three times the number of users that Ethereum does.

The largest category of decentralised application across all platforms is games. There are a total of 478 decentralised games being used by over 29,000 active monthly users at present. The games category of DApps accounted for 640,900 transactions of the relevant cryptocurrency over the last 30 days. Given the success of CryptoKitties last year and the enduring popularity (and profitability) of mobile games, this is hardly a surprise.

The most popular category with users themselves is storage. Projects such as StorJ, Everipedia, X Cloud, and others were used by 106,420 monthly users.

Interestingly, the highest ranking decentralised application (based on the above metrics and others combined) continues to be the monetised social blogging platform, Steemit. Steemit is hosted on its own network and currently boasts just less than 5,000 users every 24-hours.

DApp Numbers Growing Fast, Usage Not So Much

Evidently, developers around the world are excited by the new opportunities created by decentralised programming architecture. However, the numbers of users of the applications themselves are nowhere near those of more established applications yet. Of course, this is understandable since even the longest running decentralised projects on networks such as EOS and Ethereum are just a couple of years old.

That said, there are other factors hindering the mass adoption of decentralised applications. Primarily, there is currently a large barrier to entry with applications hosted on EOS, Ethereum, or other smart contract-enabled platforms. Users must first own the relevant digital currency to run any of the DApps. It is not as simple as just visiting the Play or Apple store and hitting “download”. To expect an average mobile or computer user to first sign up with a crypto exchange that they may never have heard of and buy some ETH, EOS, or STEEM is frankly unrealistic at present.

Ideally, the process of buying digital currency to use a decentralised application should be entirely hidden from the user. If occurred behind-the-scenes, in the application itself, DApps would be a much less daunting prospect for those still unfamiliar with cryptocurrency.

Other issues facing both decentralised application developers and users are the limitations of the platforms themselves. Since they are created using blockchain networks, DApps are by their very nature inefficient. The user experience still lags behind those found at centralised applications. Given that the EOS network is capable of many more transactions per second than Ethereum, this technical superiority leading to better user experience could be behind the higher number of users on EOS-based DApps.

Meanwhile, Ethereum is much more “battle-tested” than EOS. As a developer, the Ethereum network is a safer option than the newer, smart contract-enabled platforms. With more history of experimentation on Ethereum, there is a far larger pool of resources for developers to draw on when they create their applications. This might explain why developers continue to use Ethereum, despite EOS enjoying far more users.

Related Reading: Biggest Ethereum Development Firm, ConsenSys, May Lay Off 50~60% of Firm’s Workforce

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What Can We Learn From Bitcoin’s Birthday Bank Run?

As most of you will probably know, yesterday marked the 10th anniversary of the mining of Bitcoin’s genesis block. Many Bitcoin proponents mark this as the birthday of the digital asset itself.

To celebrate the occasion, long-time Bitcoin advocate and successful investor Trace Mayer proposed that the community start an annual tradition of a crypto bank run on exchanges – to be known as Proof-of-Keys. The idea was to get as many cryptocurrency users and investors to withdraw all funds from wallets that they did not hold the private key to.

What is Proof-of-Keys?

For many of its earliest advocates, drawn by the promise of sovereign control over wealth, the idea of storing coins on an cryptocurrency exchange is the absolute antithesis of Bitcoin. These original community members have weathered every bear and bull market, every regulatory rumble, and most importantly, every exchange hack.

Trace Mayer forms part of this crowd, having advocated buying and holding BTC since the price was less than a dollar. Part educational mission, part show of force to the exchanges, Trace has spent the last few weeks encouraging his Twitter followers, his podcast listeners, and the audiences of countless crypto-focused YouTube channels he has appeared as a guest on to withdraw all their cryptocurrency from exchanges.

The tradition, according to Trace, would serve two main purposes. Firstly, it would encourage Bitcoin users to exercise the monetary sovereignty made possible by the protocol – the hope being that those not knowing how to securely store Bitcoin would learn. Meanwhile, those that do know could teach.

The second part of Proof-of-Keys supposedly serves to test the trustworthiness of the exchanges. If every single user requested every single coin on the same day, would the exchange be able to pay them all? If it turned out they could not then the platform in question would be not only guilty of deceiving its users but also guilty of artificially inflated the total supply of the currency.

Was Proof-of-Keys a Success?

One of the metrics Trace has used to measure the success of Bitcoin’s first annual Proof-of-Keys event is transaction fees. The billionaire early-Bitcoiner Tweeted yesterday that the mempool was slightly busier than usual, highlighting increased transaction activity on the network:

Today, Trace posted a survey for his followers, asking what they had done as part of the Proof-of-Keys event. Although still to conclude, at the time of writing 64% of the 2,707 respondents stated that they already had their coins secure.

This comes as little surprise since Trace’s long-time followers will have been bombarded by the importance of monetary sovereignty on numerous previous occasions. Meanwhile, the figures for “withdrew all crypto”, “withdrew most crypto”, and “was stupid and reckless” currently stand at 9, 14, and 13 percent respectively.

Although not hugely impressive, several of Trace’s followers replied that they had indeed managed to use the event to spread awareness about the importance of holding your own private keys. Somewhat disturbingly, one even Tweeted that many who he had tried to pass the message on to had no idea what a private key even was:

Issues with Proof-of-Keys?

Throughout yesterday, a few reports on Twitter did emerge of users struggling to make withdrawals from their chosen platforms:

Bitfinex openly admitted that they were having difficulties. However, as the Twitter user who reported the below Tweet to Trace facetiously speculated, this could have actually been a coincidence.

However, many refuted Trace’s list of suspicious exchanges in the comments. Some argued that they themselves had used the exchanges in question to make withdrawals. Meanwhile, in response to the immense negative press surrounding HitBTC’s Proof-of-Keys accusations, the platform Tweeted:

It is quite possible that many of the incidents with exchanges made public on January 3 are indeed coincidental since the reports of issues seem to be the exception, not the rule. However, if anecdotal tales of sudden withdrawal limits imposed and suspicious downtime from the likes of Bitfinex are indeed backed by malice towards the event, this should indeed be cause for concern.

All told, the Proof-of-Keys event is a great way to check the power of exchanges, expose bad ones, and to spread awareness about some of the all-too-often overlooked qualities of Bitcoin. Here’s hoping next year’s is even bigger!

 

Related Reading: Happy Tenth Birthday, Bitcoin: BitMEX, Crypto Community Celebrate

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Analyst Suggests Usage of Crypto Tokens on DApps is Minimal, Raising Concerns

According to research conducted by Digital Asset Research, the very raison d’être of many crypto coins and tokens may be in question. In a report circulated with paid members of the group, the usage of the ZRX token on the 0x decentralized exchange platform was examined.

Quite remarkably, despite the primary purpose of the ZRX token being to pay for the exchange of various ERC-20 tokens, the investigation highlighted that only a tiny percentage of the total transaction fees paid during the platform’s existence were made using the designated token. This forces the question: Do decentralised applications even need their own token?

Is ZRX’s Lack of Use Reflective of All Crypto “Payment Tokens”?

During the ICO boom of 2017, many startups launched their own platforms and generated immense stacks of various digital assets (mostly Ethereum) from investors hoping to get in early on the next big thing. These projects, although disparate in announced intentions, all had one thing in common – a token.

Many of companies behind these projects stated that the tokens sold to the earliest backers would one day be used to power the applications themselves. Thus, it figured that if a project was popular enough, the value of all the tokens in circulation would soar since demand outpaced supply.

Many commentators (particularly those of a Bitcoin maximalist persuasion) have long held this to be unnecessary and saw through these token launches as a way for a brand new startup to generate millions of dollars without pandering to regulation. Without much data, their protestations against the ICO craze and the idea that literally everything would one day be tokenised were difficult to support using hard evidence.

However, the necessary data looks to be finally emerging and the first interesting observation drawn from it does not paint a good picture of the blockchain “payment token” space.

In a report for paid members, Digital Asset Research has disclosed that of a massive $447 million in exchanged value on the 0x platform, just $2,000 of ZRX has been used to pay for transaction fees.

A digital asset researcher for The Spartan Group, BlockCrunch, and Deloitte, Jason Choi, Tweeted:

In response to this, one of Choi’s followers asked how much ETH had been spent on transactions fees in the place of ZRX tokens to which he replied: “too much…”

With the 0x platform being one of the few projects in the crypto space with a sizeable user base, the number revealed by Digital Assets Research should concern all those who have bought into coins and token expecting them to be used uniquely on a given platform to pay for the service they are accessing.

According to a Tweet from another crypto researcher known as Hasu, the Digital Asset Research data about the 0x blockchain is highly damning for much of the ERC-20 token economy, as well as those tokens existing on similar blockchain platforms:

As part of a response to one of the replies to the above Tweet, Hasu stated:

“I don’t see how forcing a token in there can ever benefit the consumer side.”

All that said, some users were keen to remind the two mentioned crypto researchers that the purpose of the ZRX token is not only to pay for exchange fees. It also serves to power the platform’s governance model. However, since this is still under development, just how valuable this function can make the tokens remains to be seen.

Also, whilst ZRX tokens do apparently serve a dual purpose, the same cannot be said for many of the less popular projects out there that also state that their designated tokens sold at ICO would be used exclusively with the platform in question.

Related Reading: About Half of 2017’s ICOs Have Failed Already

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