The Future of Cryptocurrency Looks Bright as Square and Twitter CEO Bets Big on Bitcoin

Apple iPhone X on office desk with icons of social media facebook, instagram, twitter, snapchat application on screen. Social network. Starting social media app.

Volume is increasing, fees are manageable with a median cost of ~$0.23, and the lightning network has more nodes than ever. There are 3,702 nodes on the lightning network at the time of this writing, all according to BitcoinVisuals.com. Additionally, mining difficulty has been slowing rising since January 2019. This means that the cost of mining is expected to increase, which in turn, should increase the bottom price for Bitcoin. Miners will not want to sell Bitcoin for less than what it costs them to mine.

Over the past month, Bitcoin has risen ~$500 and people think it may break through the $4,000 mark.

Along with all of this, Jack Dorsey, the CEO of both Twitter and Square is betting big on it, alluding to buying $10,000 worth of Bitcoin per week in the current market. While Dorsey is a billionaire, this is still not small change, and quite a statement to be had.

It’s worth discussing that Jack Dorsey is the CEO of Square, a payment processing company, which also owns Cash App, an app where you can buy and sell Bitcoin, in addition to loading cash and spending it as you will.

While Dorsey has always been a tech enthusiast, there may be some business reasons for his enthusiasm towards Bitcoin. Payment processing companies have a notoriously low-profit margin with VISA and Mastercard services taking big cuts out of the transactions they process. If blockchain technology and second layer solutions such as the lightning network take hold, then VISA and other middlemen can be cut out of the transaction.

If Dorsey promotes Bitcoin properly, onboard more users through his Cash App, and then has people spending Bitcoin through Square terminals, then he has a lot to gain.

Additionally, if people begin tipping on Twitter more, then Twitter can become a pioneer in the micro-tipping space as a social network. Micro-tipping is not very popular yet across the internet, but people believe it will be very common in the future across the web as cryptocurrencies become the financial backbone of the internet. A micro-tipping example can be simply sending someone $0.0001 cent worth of cryptocurrency for answering a question, or simply creating nice content. If Twitter further integrates easy “tip” buttons that can be tied to a user’s wallet, then both Twitter and Square can act as a leader bridging the traditional world with the cryptocurrency world.

Facebook Coin Expected to Come First Half of 2019

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While different sources are claiming different expectations, Facebook Coin should be rolled out on Messenger, Instagram, and/or WhatsApp, if not all three, hitting a giant user base of over 2.7 billion users.

The release of Facebook Coin is sooner than some would have guessed, considering a December 2018 Bloomberg report which reads:
The company is developing a stablecoin — a type of digital currency pegged to the U.S. dollar — to minimize volatility, said the people, who asked not to be identified discussing internal plans. Facebook is far from releasing the coin, because it’s still working on the strategy, including a plan for custody assets, or regular currencies that would be held to protect the value of the stablecoin, the people said.”

Evidently, the release is not so far away and it’s possible that they felt pressure after banking giant JP Morgan released its stablecoin just this month, as reported by coinz.com.

It is rumored that Facebook’s blockchain department is particularly secret, blocked off from the rest of the organization, but it’s no secret that they are taking blockchain seriously. At the time of this writing, there are 18 open blockchain related positions at Facebook.

JP Morgan and Facebook may the first of major companies to hop on the stablecoin bandwagon. Telegram and Signal may join in on the action as well.

Nathaniel Popper and Mike Isaac at the NYT reported on the matter, with this excerpt:
“The Facebook project is far enough along that the social networking giant has held conversations with cryptocurrency exchanges about selling the Facebook coin to consumers, said four people briefed on the negotiations.

Telegram, which has an estimated 300 million users worldwide, is also working on a digital coin. Signal, an encrypted messaging service that is popular among technologists and privacy advocates, has its own coin in the works. And so do the biggest messaging applications in Korea and Japan, Kakao and Line.

The messaging companies have a reach that dwarfs the backers of earlier cryptocurrencies. Facebook and Telegram can make the digital wallets used for cryptocurrencies available, in an instant, to hundreds of millions of users.”

Overall, this is positive news for the blockchain industry, but at a practical level, blockchain enthusiasts are not very excited about another stablecoin. Tokenizing fiat money is nothing special, and it seems that these companies are using blockchain as a buzzword more than anything else. There’s no reason Facebook can’t use Tether, USDC, Dai, or the other various stablecoins available in their platform. Overall, this seems like a marketing gimmick which may serve the overall blockchain industry well, potentially onboarding millions of new users to the decentralized ecosystem some day.

Will Facebook and these major companies get in on the real, decentralized, trustless system that blockchain offers with Bitcoin and Ethereum? We hope so, but for now, they are acting as expected.

NEO Co-Founder Gives Insights into the Future of the Decentralized World

Crypto NEO gaming

At the beginning of the interview, he was asked which sector he feels will best prime cryptocurrencies for the future. His answer: gaming.

It will happen to the industry that’s already highly digital. It probably will happen to a new industry or economic sector. As you can see with DApps, for now, gaming is the most popular one, gaming is 100 percent virtual, digital. So it is easier to work with something completely new that’s completely digital.”

He then went on to say that he does believe the world will be entirely digital. In China, for example, credit cards did not take off like digital payment options such as WeChat did because credit cards are less simple to use. He continued to mention that you can pay for virtually anything in China using digital means, even giving to homeless people.

“You can even donate to homeless people, they sometimes have a bar code! So, it’s the same for the smart economy, it probably will emerge in some society or area that’s not very good at current infrastructure but are really catching up very fast.”

The biggest issue as he said is getting the proper infrastructure. When asked about this, he acknowledged a long road ahead, but nothing the world hasn’t seen before.

“We think that blockchain will take a similar route as to how the internet developed. It will be layered into different layers. TCPIP is at the bottom and HTTP protocol is on top of TCPIP.

If you are building an internet application, you don’t have to bother about TCPIP these days, you don’t even need to worry about HTTP. You have different middle layers to build on top of that. So blockchain will take a similar road.”

He continued with an analogy for the layers we have currently with web development: “you don’t need to know how to write HTML, you just use WordPress. So, for now, all the decentralized apps are built on top of layer one directly on the blockchain. But we believe that in the future, there will be different layers, a lot of layer 2 solutions. Many (if not all) of these DApps will be built on top of layer two solutions. So we need better or native support for layer two solutions.”

Towards the end of the interview when discussing Ethereum usage, he briefly mentioned, “Ethereum currently has the strongest community of developers, they are like the go-to solution. If you want to study how to do a smart contract, you will probably do it on Ethereum.”

Interestingly enough, this came after a tweet by Justin Sun claiming that Tron has the most total and active dApps users. Many saw this as him throwing shade towards Ethereum since they are still seen as the underdog.

It’s possible that NEO, Ethereum, and Tron can work together in the future, but as of now, they are competing for market share of both users and developers. We wish them all luck as competition generally fosters better products.

JP Morgan Launches JPM Coin – Is This Good for the Cryptocurrency Community?

Despite JP Morgan CEO, Jamie Dimon, speaking badly about Bitcoin in the past, he did note the value that he sees in the underlying blockchain technology, which is exactly what JPM Coin utilizes. Specifically, JPM Coin is based on a distributed ledger platform called Quorum, an Ethereum fork built by JP Morgan and partners.

JPM Coin seems to be the first move, of many, that the firm may take in using blockchain technology for their payments.

Umar Farooq, the head of JP Morgan’s blockchain projects told CNBC: “so anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction,” he said. “The applications are frankly quite endless; anything, where you have a distributed ledger which involves corporations or institutions, can use this.”

JPM Coin still needs to be tested with international payments, but this is arguably one of the largest and most mainstream use-cases the blockchain industry has seen yet. Trials for JPM Coin will take place over the next few months.

If all goes well, it would be no surprise to see blockchain be used by banks to settle security transactions, retail transactions, and more. As Faqrooq mentioned, the opportunities are seemingly endless.

While this is arguably good news, the blockchain community has some reservations.

Is JPM Coin a Cryptocurrency?

Technically, yes, since it uses blockchain technology and uses encryption to secure data to the ledger. But, it’s worth noting that blockchain technology shines the brightest when used in a decentralized manner. JPM Coin, on the other hand, is centralized, used as an IOU to redeem fiat money, and does not use blockchain to replace any third party. Many are referring to JPM Coin as a stablecoin, simply a token backed by USD.

In other words, JPM Coin is hardly a cryptocurrency in the purest sense. Instead, it is a token used within a payment system, which could have been created many years before the blockchain revolution. Some feel that they are using blockchain technology due to the hype.

The purpose of blockchain technology (and Bitcoin, that came along with it) was to offer a peer-to-peer electronic cash system for people to transact individually without the need for a central bank, like JP Morgan. Many argue that Bitcoin was created in direct response to the financial crisis in 2008 given the January 2009 release of Bitcoin. Because of this, most early cryptocurrency adopters are laughing at JPM Coin, noting the direct irony of the situation – cryptocurrencies were made to avoid banks altogether.

Some cryptocurrency adopters are much more practical – acknowledging the need to integrate with existing payment networks. These enthusiasts will most likely take advantage of JPM Coin to boost the blockchain narrative, even for decentralized applications, proving to skeptics that there is real use to the technology.

Image source: https://www.flickr.com/photos/jurvetson/8362210873

Facebook’s Cryptocurrency Division Acquires Blockchain Startup

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Still, it’s helpful to understand Chainspace’s mission. Chainspace is creating a scalable smart contract platform led by a team of researchers. They are focused on ways to open more throughput (transactions per second) on blockchain networks and studying use-cases outside of monetary transactions such as voting.

Evidently, they also plan to keep their work open-source – which is good.

The Chainspace website currently reads:
We’re excited to announce that the team is moving on to something new. Chainspace code and documentation will still be open source, and all previously published academic work remains available.”

According to Cheddar, four of the five researchers listed as authors on their academic whitepaper will be joining the Facebook team. Two in particular – “Alberto Sonnino and George Danezis, already list their employment as blockchain researchers in Facebook’s ($FB) London office on LinkedIn.”

A Facebook spokesperson responded vague and unclear plans for the future:

“Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.”

What we do know is that last year there were reports of Facebook working on a possible stablecoin to be used in their popular chatting platform, WhatsApp. Nothing about this has been released to date, but it would be interesting to see how WhatsApp’s 1 billion daily user base affects the cryptocurrency market. While most people have mixed feelings on Facebook entering the industry, it’s generally agreed upon that this would be great exposure.

More About Community Sentiment

There is a mixed sentiment across the cryptocurrency industry with regards to social media giants entering the general blockchain space.

On one hand, blockchain technology can lend itself to offer a more transparent relationship between the corporation and end user. If properly integrated into their existing systems, there can be live dashboards showing how personal data is being used, ads are being targeted, and real accounts being created – if that can be verified.

On the other hand, corporations can begin profiting off of existing cryptocurrencies simply by integrating them. In the end, they can start to accumulate mass amounts of coins and dominate the industry. Additionally, if they were to release a stablecoin such as “Facebook Coin” to be used towards paying for on-site purchases, then it defeats the purpose of decentralization, which is where blockchain technology shines. There are centralized and permitted-blockchain use-cases, but they are narrower and not fitting for this.

Despite how the community feels, social media giants will continue to research blockchain technology and penetrate the market however they can. Even in a recent Joe Rogan interview, Twitter CEO Jack Dorsey noted his interest in blockchain technology and admitted to being a Bitcoin holder. His mentions went viral amongst the community and can be seen all around Twitter and Facebook groups.

Binance Opens Fiat Gateway: Debit and Credit Cards Accepted

Bitcoin card

To date, Coinbase is the largest fiat onramp for people to enter the cryptocurrency markets, but many speculate that now Binance can become a serious competitor. While this may be a threat for Coinbase, it’s a major upside for the market as a whole. The more fiat onramps that exist in the crypto space, the better.

It is worth noting that some enthusiasts in the cryptocurrency community are against fiat gateways since Binance can now gather personal information, but for the most part, the community is positive.

Along with the announcement, Binance mentioned three primary benefits of accepting credit and debit card payments:
1. Speed. Users can expect an average wait time of only 10-30 minutes before their cryptocurrencies arrive in their wallet.

  1. Low fees. Users can expect fees of only 3.5% or $10 USD – whichever is higher.
  2. Convenience. Visa and Mastercard accepted.

Currently, users can purchase Bitcoin, Ethereum, and Litecoin with fiat on Binance. From there, users can speculate on the hundreds of cryptocurrencies they offer.

Binance CEO, Changpeng Zhao commented on the matter by saying, “The crypto industry is still in its early stages and most of the world’s money is still in fiat. Building fiat gateways is what we need now to grow the ecosystem, increase adoption and introduce crypto to more users.”

Binance enabled debit and credit card payments in partnership with Simplex, “a FinTech company providing guaranteed fraudless payment processing solutions. Simplex processes credit card payments with a 100% zero fraud guarantee – in case of a chargeback, the merchant gets paid by Simplex. The cutting-edge Simplex fraud prevention solution and proprietary state-of-the-art AI technology stops fraudulent transactions and allows more legitimate ones to complete payments with ease and speed while increasing conversion rates and enabling merchants to focus on their business growth,” according to Binance’s press release.

Simplex CEO Nimrod Lehavi also commented on the partnership by mentioning that, “easy and fast credit card payments, for mainstream users, is a key factor in wider adoption of crypto in general. We’re thrilled to partner up with Binance and together enable a much better, fast and easy experience.”

Binance has the largest trading volume and is capable of processing over 1.4 million orders per second, which is partially why they have gained the community’s trust. Most cryptocurrency exchanges cannot handle this amount.

Hopefully in the future, more cryptocurrencies can be purchased with fiat, but for now, the three major ones they listed is a good start. The more cryptocurrencies that are exposed to direct fiat relationships will undoubtedly perform better. Perhaps the reason that Bitcoin, Litecoin, and Ethereum are valued so highly is because they are the main bridges connecting the fiat and cryptocurrency worlds. Users around the world have no choice but to purchase these before investing in other alternative cryptocurrencies (altcoins).

Popular trading app Robinhood gains approval to allow New York residents to trade virtual currencies.

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According to New York’s Department of Financial Services, they have “approved the applications of Robinhood Crypto LLC, a subsidiary of Robinhood Markets Inc., and Moon Inc., dba LibertyX, for virtual currency licenses. DFS has also approved a money transmission license for Robinhood.”

NYDFS is allowing seven cryptocurrencies to be traded on Robinhood, “including Bitcoin, Ether, Bitcoin Cash, and Litecoin.”

Co-CEO Vlad Tenev commented on the matter saying:

“We’re delighted that Robinhood Crypto has been granted a virtual currency license and a money transmitter license in New York. This will complement the larger suite of investment services that New Yorkers already have access to on the Robinhood platform.”

The New York BitLicense was officially introduced in July of 2014 and is commonly seen as an extra, unnecessary burden for cryptocurrency companies to operate in the state. Well known trading exchange, Gemini, ran by Tyler and Cameron Winklevoss received the license in 2015, but it is evident they can afford to go through the motions.

It’s known to be time-consuming and expensive to complete the process. As a result, most cryptocurrency related companies do not allow NY residents to use their application, even though they are permitted to operate in other states of the US. Because of this, it’s been said that the BitLicense actually inhibits innovation for the state.

The DFS mentioned that they have only given out sixteen licenses so far:

“DFS continues to rapidly and responsibly respond to financial services market innovations by licensing technology-based money transmitters under New York’s money transmitter law; online lenders under New York’s banking law; and virtual currency exchanges under New York’s financial services law. To date, DFS has approved sixteen charters or licenses for companies in the virtual currency marketplace.”

Fortunately, the cryptocurrency industry is particularly aware of the downsides to regulation, given the inherent privacy-focused nature of the industry. So far the companies that have been granted the BitLicense say that they are excited to work with regulators to help shape regulatory guidelines for the industry.

Vlad Tenev said, “We look forward to their ongoing guidance as we prepare to launch Robinhood Crypto in New York.”

Attorney Ben Lawsky was one of the main figureheads in 2014 helping to shape the BitLicense. He then left the NYDFS to start his own consulting practice with a focus on the cryptocurrency industry. We hope that NYDFS stays open-minded to regulatory reform that fits this new technology properly, instead of forcing regulation using out-dated mindsets. For now, most companies will be forced to operate outside of NY, which hurts the company as well as the resident of the state.

Beyond this NY BitLicense, cryptocurrency users are keeping a closer eye on cryptocurrency tax reform by the IRS. Currently, each trade is seen as a gain or loss, despite having not sold back to fiat currency. This limits the amount of trading, experimentation, and most likely honest reporting of income by individuals across the entire nation.

Cryptocurrency Exchange Cryptopia Reports Hack with Major Losses

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At the time of this writing, the exchange remains down due to investigations, leaving investors unable to log in or withdraw funds. New Zealand authorities are investigating the matter at Cryptopia’s headquarters in Christchurch.

Surprisingly, and unwittingly, the hackers are moving funds to Binance. Binance CEO Changpeng Zhao tweeted that they are aware of and freezing the stolen Cryptopia funds.

There is limited information on the hacking, and the hackers have not yet been identified. The amount stolen from Cryptopia is detrimental considering the volume that they facilitate. We hope that in the near future the hackers are identified and funds are returned to investors.

Hold your Crypto Off Exchanges

This is yet another valuable learning opportunity for the cryptocurrency community. Experts always suggest keeping no more than is required for trading on exchanges. The rest of your digital assets should be kept in a hardware wallet such as Ledger or Trezor. These devices are disconnected from the internet and can only be accessed by the owner.

A famous motto in the industry is that “if you don’t own your private keys, you don’t own your funds.” Which is true. Exchanges control the private keys to user funds, which is why users have to request to withdraw. On the other hand, if a user takes advantage of a desktop or hardware wallet, then they can withdraw whenever they like and any quantity. Some exchanges will forbid users from depositing or withdrawing more than a certain amount of capital per day – depending on their verification level with the exchange.

Hardware wallets are arguably safer than desktop wallets because if a hacker gains access to a user’s computer, then they can access their wallet. A hardware wallet is a physical device, which can be disconnected from the internet altogether. Paper wallets are another example of cold storage, where users have access to their fund’s stored on the blockchain, but the wallet itself is disconnected from the internet.

To explain a bit more. Technically, coins are not stored in a wallet, they are actually stored on the blockchain. The private and public keys are what allows a user to gain access to the coins stored on the blockchain. This is a common misunderstanding and shows how important private keys are – they allow users to access and withdraw their funds.

We will end this by noting that if you do want to keep a majority of your funds on an exchange, then there are a few that are well trusted in the community, but always susceptible to hackers just like any other technology company. In our opinion, some of the well trusted, highly secure exchanges that exist are Bitfinex, Poloniex, and Bittrex. Bitfinex and Poloniex have actually suffered breaches in the past, but they dealt with it well and are still around today. Ultimately, be responsible for your crypto assets and follow best practices.

Celebrating Bitcoin’s 10 Year Anniversary

Golden Bitcoin

Over the past 10 years, Bitcoin has proven to be resilient and ahead of its time. With legal uncertainty, outspoken skeptics, contentious hard forks, and high volatility, Bitcoin continues to prosper as the most liquid and trusted crypto asset in the market. Today there are thousands of cryptocurrencies, hundreds of competing exchanges, and billions of dollars invested in related projects.

Bitcoin introduced more than just digital cash to the world. It introduced entire new ecosystems which are peer-to-peer and Turing complete – simply look at Ethereum and various decentralized exchanges. It introduced peer-to-peer micro-tipping, which is possible on major platforms such as Twitter and Reddit and ultimately changed the way we interact with money on the web.

Some argue that Bitcoin represents the third progression of the internet. Initially, the internet was meant to act as an educational tool, then it was meant to share information through social media, and perhaps the next step is to share and transact real value, globally, in a peer-to-peer fashion.

Most importantly, it changed the way the people view how currency works and placed a greater emphasis on personal responsibility and privacy.

What Lies Ahead for Bitcoin

10 years is a significant milestone, but Bitcoin is still not where it needs to be. Moving forward the industry needs to focus more on merchant adoption, scalability, and simple user interfaces. After all of the Ethereum ICOs and Bitcoin Improvement Proposals, the industry is ready to see practical value rather than theoretical value. Over the next 10 years we hope to see the Lightning Network come to fruition, ETFs enter the market, and millions of merchants accept Bitcoin as payment.

The Lightning Network is an off-chain scaling solution which will allow Bitcoin transaction to occur instantaneously with negligible fees. There is lots of hype around it and various companies are working to create more volume on the network. As the Lightning Network grows, so should the number of merchants accepting Bitcoin since they should be correlated. Many businesses both large and small will set up payment channels with the Lightning Network directly. At that point, Bitcoin will be a truly global, usable, and peer-to-peer digital cash system.

Lastly, competition will continue to grow amongst blockchain and non-blockchain schools of thought. There are protocols such as DAG and Mimblewimble, which differ completely from blockchain and have major projects behind them such as IOTA. With entirely different schools of thought, the decentralized revolution will continue to grow, and ultimately, more competition fuels more innovation.

As for legal regulation, we believe this will come with time. Many countries acknowledge cryptocurrencies, tax them, and regulate exchanges. While regulation needs to be fine-tuned, it is not what it is holding Bitcoin back at this point.

While the past 10 years have been exciting, we are even more excited for what the next 10 has in store.

Mt. Gox CEO Mark Karpeles States Innocence in Latest Trial

Mark Karpeles. Source: CCN

Mt. Gox was the world’s largest trading exchange until its 2014 collapse after revealing that it had lost 850,000 Bitcoin due to hackers compromising the exchange – worth $450 million at the time. While Karpeles claims this was theft, authorities believe there is more to the story.

With the trial beginning in June of this year, he was charged for embezzling approximately 340 million yen, or ~$3 million. He allegedly transferred “340 million yen belonging to customers from Mt. Gox account to his personal account between September and December 2013.” In response to this, NHK reported that his defense team said this transfer was for business reasons – not personal. Karpeles claims it was for a temporary loan.

He is also charged for manipulating data on the exchange’s interface to inflate balance numbers. Prosecutors are now seeking a 10-year sentence if found guilty, up from the original 5-year sentence he was originally facing. Located in Japan, he has been set free from bail on the premise that he does not leave Japan. According to CCN, a final verdict for the case is set to be made on March 15, 2019.

Regulators have been working to compensate users for lost funds. Meanwhile, Karpeles later found 200,000 Bitcoin in cold storage, which would have been more than enough to repay users considering the price increase of Bitcoin. We hope that all Mt. Gox users receive compensation for their lost funds, but we will have to see.

What Can We Learn from This?

After the fall of Mt. Gox, cryptocurrency investors have become increasingly cautious about where to invest their funds. Since Mt. Gox, other exchanges such as MintPal and Cryptsy have shut down for shady reasons. In fact, Cryptsy founder, Paul Vernon, fled to China to hide from authorities.

When choosing a trusted counterparty to hold your cryptocurrencies, it is important to research the team, the legal jurisdictions they are permitted to operate in, if they are insured, and if there is any history of hackings. For example, Coinbase mentions they are FDIC insured for up to $250,000, much like a regular bank. This makes US investors more comfortable using Coinbase and Coinbase Pro, over an unknown exchange, even if the unknown exchange has more options of altcoins. Additionally, many decentralized exchanges are being introduced to the market, but for now, we recommend avoiding these until they prove themselves to be technically and legally reliable.

Best practice is to never leave your crypto funds on an exchange. Unless you are an active trader who leaves positions open overnight, we recommend sending your cryptocurrencies back to your wallet at all times. This way you stay in control of your funds and get rid of all counterparty risk. After all – personal control of one’s own finances is a major driver behind the cryptocurrency revolution.

To dig one step deeper, we recommend using hardware wallets, such as the Ledger Nano S, even over desktop wallets. Hardware wallets are disconnected from the internet, so there is no way you can get compromised by hackers.