Cryptocurrency

Tough Questions About Libra Cryptocurrency

Posted on by Andy Miller

Facebook’s CEO, Mark Zuckerberg faced a grilling from the US Congress last week over his company’s ‘Libra’ cryptocurrency plans.

Libra

‘Libra’ is Facebook’s new cryptocurrency and global payment system that’s due to be launched in 2020.  Unlike other cryptocurrencies, Libra is backed by a reserve of cash and other liquid assets.  The idea of Libra is that spending the new currency could be as easy and fast as texting as payments can be made by a special phone app and by messaging services such as WhatsApp.  Also, Libra is intended to be of particular value to the one billion+ people around the world (including 14 million in the US) with no access to a bank account, but who could use a mobile phone-based payment system.

Management of the currency, units of which can be purchased via Libra’s platforms and stored it in a digital wallet called “Calibra” will be the responsibility of an independent group of 21 companies and non-profit organisations called the Libra Association, of which Facebook’s subsidiary ‘Calibra’ is a member.

Problems and Criticism

Facebook has, however, found itself coming in for some tough criticism over its involvement with Libra. This includes:

  • Worries about whether Facebook can be trusted with peoples’ financial details in the light of its part in the personal data-sharing scandal with Cambridge Analytica.
  • Concerns from ‘Group of Seven’ democracies finance chiefs about whether Libra could address “serious regulatory and systemic concerns”.
  • President Trump Tweeting that he’s not a fan of Libra, and bank chiefs like Mark Carney also expressing concerns about Libra.
  • Worries that Libra could be used as a means to bypass rules relating to money laundering and tax evasion (which is believed to have led to PayPal leaving the Libra Association recently).
  • Warnings that Libra could be blocked in Europe (especially in France) unless concerns over risks to consumers and to the monetary systems of countries can be addressed.

Congress Grilling

The grilling of Mark Zuckerberg at the US Congress last week at the top of the House Financial Service Committee’s hearing focused on many of the key concerns.  For example:

  • Republican Nydia Velázquez asked Mark Zuckerberg why Facebook should be trusted after the recent privacy scandals and data breaches/data sharing relating to the Cambridge Analytica affair.
  • Republican Joyce Beatty criticised Mark Zuckerberg over an apparent lack of knowledge of diversity and housing advertisement issues and alleged that Zuckerberg hadn’t read her reports.
  • Republican Patrick McHenry criticised the technology industry and highlighted the current anger towards it.

Prepared Statement Covered Many Concerns

Mark Zuckerberg’s prepared statement for the hearing appears have anticipated and answered the main concerns.  For example, as well as stressing how Facebook is committed to strong consumer protections for the financial information they receive, Mark Zuckerberg addressed three main concerns, saying that:

  1. Where people are concerned that Facebook is moving too fast on the Libra project, Facebook is committed to taking the time to get this right.
  2. Where it has been suggested that Facebook could circumvent regulators and regulations with Libra, Facebook won’t actually be a part of launching the Libra payments system anywhere in the world unless all US regulators approve it.
  3. Libra is not an attempt to create a sovereign currency but, like existing online payment systems, it’s simply intended to be a way for people to transfer money.

So What?

Despite the grilling, many commentators have pointed out that the House Financial Service Committee and Congress don’t actually have the power to do much about the introduction of Libra.  Some commentators have also suggested that the hearing was as much about political grandstanding as it was about Libra and that politicians are finding it hard to stay up to speed with information about cryptocurrencies.

No Regulatory Approval = Facebook Leaves the Association

Mr Zuckerberg stressed just how much he intends to play by the rules with Libra by saying that if the Libra Association moved forward without regulatory approval, Facebook “would be forced to leave the Association.”

What Does This Mean For Your Business?

Banks and governments are unlikely to adopt a favourable attitude to a new type of currency that could potentially unbalance monetary systems, and could potentially get around regulations, scrutiny and control, and could even be used for money laundering and tax evasion. That said, the blockchain-anchored Libra is unlikely to suffer many of the huge fluctuations and problems that other cryptocurrencies like bitcoin have because Libra is backed by real assets.  Also, many of the big financial players are part of the Libra Association e.g. Mastercard and Visa, although it’s clear that Facebook needs to make sure that Libra can meet all regulatory requirements and is squeaky clean if the Association wants to keep these important members.

If, as Mr Zuckerberg says, Libra is simply and innocently another way of paying for things that could lead to a more inclusive society e.g. by helping those without bank accounts, this could benefit not just society but whole economies too.  It looks as though Facebook still has some way to go, however, to convince governments, finance chiefs and other critics that it is the right company to be trusted with a new currency and the financial data of those who use it.

PayPal Drops Out of Facebook’s Libra Cryptocurrency

Posted on by Andy Miller

PayPal has announced that it is not going to be a part of the Switzerland-based Libra Association that is overseeing the introduction of Facebook’s Libra cryptocurrency.

What Is Libra?

Libra is a cryptocurrency, designed and coded by Facebook, that will enable payments to be made by a special phone app and by messaging services such as WhatsApp so that spending the new currency could be as easy and fast as texting.  Libra was announced as being targeted at the 1.7 billion adults worldwide who do not have a bank account (unbanked).

Unlike other cryptocurrencies such as Bitcoin, Libra will offer the security from massive value fluctuation by being asset-backed and pegged to other currencies and it will not have a traditional bank ‘middleman’, therefore enabling fast and frictionless transactions.

Units of Libra units can be purchased via Libra’s platforms and stored it in a digital wallet called “Calibra”.

Libra Association

The Libra Association, which PayPal has just left, is a 28-member (now 27) association of multinational companies and non-profits, hoping to grow to 100 or more members.  The Libra Association, based in Switzerland will be responsible for the management of Libra and members of the Association include Mastercard, eBay, Spotify, Uber, Vodafone, and a variety of charities such as Women’s World Banking.

Why Has PayPal Left?

PayPal has not given a clear reason why it has left the Libra Association, but there is speculation among some commentators that it may be due to PayPal wanting to distance its brand from the fact that regulators, particularly in Washington and Brussels, appear to be concerned that the Libra project could be seen as a means to bypass rules relating to money laundering and tax evasion.  There is also speculation that PayPal may have been concerned that Facebook executives haven’t paid attention to PR that could counter much of the initial criticism of Libra.

PayPal has said, however, that “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future”.

Others?

There are also press reports that other Association members such as Mastercard, Visa, and digital payment platform and processor Stripe may be considering leaving the Libra Association due to concerns about the suggestions that Libra could potentially be used for money laundering to tax evasion.

France Says No

In September, France’s finance minister, Bruno Le Maire, said that the development of Facebook’s Libra cryptocurrency will be blocked in Europe unless concerns over risks to consumers and to the monetary systems of countries can be addressed.

Warnings and Concerns

Back in July, finance chiefs from the Group of Seven democracies warned that cryptocurrencies like Libra would have to address “serious regulatory and systemic concerns” before they would be allowed.  Also, President Trump has said in a Tweet that he isn’t a fan of Libra, and central bank chiefs, including Mark Carney have also expressed concerns about Libra.

Some sceptical commentators have also noted that Libra may be less about money and blockchain anyway but more about gathering more information about the identity of clients.

What Does This Mean For Your Business?

Libra is now coming under increased scrutiny, and the mention of phrases like ‘money laundering’ or ‘tax evasion’ appear to be enough to scare some of the big financial brands away from the Libra project, at least until regulators’ questions have been answered and the heat has died down.  The fact that a big name like PayPal has pulled out, with other big names such as Mastercard and Visa looking likely to follow is undoubtedly going to be a big blow to the image and credibility of Libra, although the Libra Association still has 25+ other members and is hoping to grow this to include 100 or so other big names.

Countries and banks are clearly worried by the possible shift in control to big business that Libra could bring, and this shift in control could have a number of effects on the business environment and the economies of countries if Libra proves to be popular.

Even though Libra users are not intended to be businesses, if Libra does help the ‘unbanked’ this could have a knock-on effect in helping that segment of society to buy more goods and services, thereby helping businesses and the economy.

Police Auction Hacker’s £240,000 of Cryptocurrency

Posted on by Andy Miller

The £240,000 of cryptocurrency confiscated from a teenager who was jailed for hacking ISP TalkTalk has been auctioned by police with the proceeds going towards fighting crime.

TalkTalk Hack

Elliott Gunton, (now 19) was jailed for 20 months in August this year for hacking offences, money laundering and for the breach of a Sexual Harm Prevention Order that was issued to him in 2016 for another offence.  The hack on ISP TalkTalk took place when Gunton was 16 years old, and he is reported to have sold the stolen customer data on the dark web to other cybercriminals for £2,469 in bitcoin.

The total amount that police were able to trace that was raised by sales of the stolen data was around £275,000 worth of cryptocurrency, including Bitcoin Ripple and Ethereum.

Hidden

Mr Gunton is reported to have used sophisticated methods to hide the large amount of cryptocurrency under his control but left several key clues which led to his arrest.  These included describing himself on a Twitter account as a “full-time crypto trader”, tweeting about how he had lots of money without people knowing, and telling a police officer that he was dealing in shares and would soon be a millionaire.

Parents

Mr Gunton’s parents were also charged (at a later date) with helping their son to move some of his cryptocurrency, earned from dark web sales, out of a seized police-bitcoin wallet.

Auction First

The auction of the cryptocurrency, via Wilson’s Auctions, by the Eastern Region Special Operations Unit of the police was the first auction of its kind.  Chief Inspector Martin Peters, of the ERSOU Cyber Crime Unit, is reported as saying that the sale would be a way to instil public confidence in the police force’s method of recouping the proceeds of crime in a way that was secure, innovative and transparent.

What Does This Mean For Your Business?

We often hear reports about hacks and dark web sales of data but we rarely hear about convictions or about what happens to the proceeds of crime for those hackers who have been successfully convicted. For many businesses and individuals who have fallen victim to cybercriminals, a report of this kind may offer some kind of reassurance that something is being done, and in a productive way that puts more money into fighting crime.

For those victims of the TalkTalk hack, who may well have been targeted by cybercriminals after having their details stolen and sold by Gunton, they may well have wished for tighter security by TalkTalk in the first place and may hope that ISPs are investing enough of their own money in keeping their cyber defences up to date.

France Says ‘Non’ To Facebook’s Libra Cryptocurrency

Posted on by Andy Miller

France’s finance minister, Bruno Le Maire has said that the development of Facebook’s new Libra cryptocurrency will be blocked in Europe unless concerns over risks to consumers and to the monetary systems of countries can be addressed.

Libra – Announced in June

Announced in June this year and due to be launched in 2020, Libra is Facebook’s cryptocurrency which will enable payments to be made by a special phone app and by messaging services such as WhatsApp so that spending the new currency could be as easy and fast as texting.  Management of the currency, units of which can be purchased via Libra’s platforms and stored it in a digital wallet called “Calibra”.

In addition to Facebook, the Association has 27 other members/partners, all of whom will most likely have to accept Libra, including Mastercard, PayPal, eBay, Spotify, Uber, Vodafone, and a variety of charities such as Women’s World Banking.

For Use By The ‘Unbanked’

Facebook has promoted Libra as being targeted mainly at the 1.7 billion adults worldwide who do not have a bank account, and who use services such as payday loans although 1 million plus of these already have a smartphone, thereby enabling them to use the apps through which Libra can be operated.  This “unbanked” segment of the potential market contains mainly people from developing countries, a large proportion of which are women.

Why Does France Object?

In Bruno Le Maire’s speech at the OECD Global Blockchain Policy Forum 2019 he identified several reasons why France would consider blocking Libra in Europe, the main one being that monetary sovereignty of countries may be at stake from a possible privatisation of money e.g. because Facebook is a sole actor (company) with more than 2 billion users on the planet. Mr Le Maire also expressed concern that Libra’s digital credits could facilitate money laundering and terrorism.

Other concerns about Libra’s introduction include:

  • Possible risks to consumers (their personal data) in the light of Facebook’s sharing of user data with Cambridge Analytica.
  • Consumers may turn to cryptocurrencies like Libra during a time of national crisis, which could make it more difficult for governments to stabilise their economies, thereby making matters worse.
  • The need for Libra to meet regulations for consumer protection, money laundering and financing terrorism.
  • Libra uses blockchain, which many banks still consider to be an emerging technology that should be approached with caution.

Highlights The Need To Work Together

According to the head of policy and communications at the Libra Association, the concerns expressed by Bruno Le Maire highlight the need for the project’s backers to work together with regulators to make the implementation of the Libra project safe, transparent and consumer focused.

What Does This Mean For Your Business?

For Facebook, Libra is an opportunity to monetise another of its services, and an opportunity to diversify.  Even though Facebook has promoted Libra as a currency for use by the 1.7 billion people without bank accounts, it is more likely that Libra will gain more users with bank accounts in developed countries more quickly.  Also, some more sceptical commentators have noted that Libra may be less about money and blockchain but more about gathering more information about the identity of clients.

Even though Libra users are not intended to be businesses, if Libra does help the ‘unbanked’ this could have a knock-on effect in helping that segment of society to buy more goods and services, thereby helping businesses and the economy.

Libra looks set to face more scrutiny and attempts to make sure that it meets the regulation of countries that are worried by the possible shift in control from governments and central banks to big business that Libra could bring. This shift in control could have a number of effects on the business environment and the economies of countries if Libra proves to be popular.

Could Facebook’s Libra Cryptocurrency Be The Future Of Money?

Posted on by Andy Miller

Facebook has announced the launch of its new crypto-currency called ‘Libra’ 2020 which will enable payments to be made by a special phone app and by messaging services such as WhatsApp so that spending the new currency could be as easy and fast as texting.

Libra Association

Management of the currency, units of which can be purchased via Libra’s platforms and stored it in a digital wallet called “Calibra” will be the responsibility of an independent group of companies called the Libra Association.

In addition to Facebook, the Association has 27 other members/partners, all of whom will most likely have to accept Libra, including Mastercard, PayPal, eBay, Spotify, Uber, Vodafone, and a variety of charities such as Women’s World Banking.

Not Like Bitcoin

Libra will be protected from the kinds of wild fluctuations and instability that plagued the Bitcoin crypto-currency because Libra will be asset-backed and pegged to other currencies.

It also has the major payment and credit companies on board as members of its Association which means that it has already been legitimised and is likely to gain widescale practical use in the real world rather than simply be seen as a fast money-making opportunity.

Advantages

One of the major advantages of the Libra currency is that it has no traditional bank ‘middleman’, therefore enabling fast and frictionless transactions. This could help it to eventually become a global currency, therefore enabling easier international spending. It will also have the advantage of being fast and convenient to use.

Target

According to Facebook, the initial main target market for the use of Libra is the 1.7 billion adults worldwide who do not have a bank account, although 1 million plus of these already have a smartphone, thereby enabling them to use the apps through which Libra can be operated.  This “unbanked” segment of the potential market is known to contain mainly people from developing countries, a large proportion of which are women.

Some questions have already been raised, however, about how Libra will be able to meet other challenges such as being able to verify the identity of people in this demographic (many of whom don’t have ID documents), and how Libra can meet compliance challenges.

What’s In It For Facebook?

In addition to being recognised as being the company at the heart of what could potentially become a global currency, Facebook will receive a small commission amount for every transaction.

Security and Trust?

Ever since the Facebook/Cambridge Analytica personal data protection scandal, Facebook has suffered from a lack of trust.  The thought of Facebook overseeing a currency has, therefore, made some commentators raise questions about the governance and security issues of Libra.  In fact, even though Libra is Facebook’s currency, the governance of it will be split between all of the Association members.  Also, the Calibra payments system will have strong protection to keep money and personal information safe by using the same verification and anti-fraud processes that banks and credit cards use.  Also, any money that is stolen from the system will be refunded, thereby providing greater reassurance to users of the new currency.

What Does This Mean For Your Business?

Libra will give Facebook the opportunity to monetise another of its services, and an opportunity to diversify.  The idea that Libra is for use by the 1.7 billion people without bank accounts is also good for PR, but it is more likely that Libra will gain more users with bank accounts in developed countries more quickly.  It is also worth noting that even though the banks will not be middlemen in the use of Libra, banks will still be needed for people to use to buy Libra in the first place.

Many of us are personally unlikely to be regularly using or benefitting from the frictionless cross-border transferring of money, although this may be of real benefit to some businesses.  That said, it is thought that only 12 markets will actually be ready for Libra when it launches, and although Libra is ready to go in the US, some countries e.g. India have restrictions on the use of digital currencies.  Financial commentators have noted that Libra will also need to comply with regulatory structures in order to become a successful global currency.

Libra, however, already has the backing of the big payment and credit companies (who are partners in Libra), plus it offers the reassurance of being asset-backed and linked to other ‘real’ currency values. This may mean that (unlike Bitcoin) it appears to have a low risk for users which could fuel its rapid growth.  Easy payments globally could, therefore, have a beneficial effect for businesses and economies worldwide, if security and regulatory issues can be tackled effectively.

Libra’s introduction also comes at a time when there is a worldwide trend of decline in the use of cash, and Libra may, therefore, be well placed to jump in to fill that gap.

Facebook Crypto Currency

Posted on by Andy Miller

Facebook is reported to be developing its own blockchain-based cryptocurrency that will enable its users to have a PayPal-like experience when purchasing advertised products, as well as providing authentication and an audit trail.

What Is Blockchain?

Blockchain’s Co-Founder Nic Carey describes blockchain as being like “a big spreadsheet in the cloud that anyone can use, but no one can erase or modify”.  Blockchain is the open-source, free technology behind crypto-currencies (like Bitcoin) and is an incorruptible peer-to-peer network / a kind of ledger that allows multiple parties to transfer value in a secure and transparent way.

Facebook’s Cryptocurrency

Exact details of Facebook’s reported move into a blockchain-powered cryptocurrency of its own are scarce and varied, but some commentators believe that Facebook’s own digital ‘coins’ could be sold to users of its WhatsApp messaging platform so that they can send money to contacts. Many believe that Facebook is likely to be looking at using a stable coin network to back it.  This requires operators to keep collateral in a bank so that if $1 billion in digital coins is issued, the same amount must be available in deposit or reserve.

Could Increase Revenue

The fact that its own blockchain-based currency would use distributed ledger technology (DLT) could cut out the need for central bank involvement (for payment processing), and dramatically reduce the time and fees associated with payment, clearance and settlement, thereby making big savings and large amounts of revenue.  This is likely to be the reason why a report from CBNC highlighted a note to Barclays investors from Barclays internet analyst Ross Sandler which said a “Facebook Coin” could bring in as much as $19 billion in revenue to Facebook by 2021.

Enabling users to use Facebook’s own digital ‘coin’ would, for example, make it easier and faster for advertisers on its platform to pay using one click, and would reduce the number of drop-offs that the platform experiences due to the difficulty that mobile users sometimes have when trying to type in their card details.

J.P. Morgan Coin Launch

U.S. mega-bank J.P. Morgan launched its own blockchain-based digital coin, the ‘JPM Coin’ in February with an equivalent value of 1 US dollar.  This currency allows the almost instant transfer and redeeming of funds between institutional accounts, thereby saving time and money while retaining security and transparency.

IBM Too

IBM has also launched a blockchain-backed stable ‘coin’ for international money transfers and has been in discussion with two big US banks with a view to issuing a stable coin for use on its World Wire network.  With this coin running on blockchain it is estimated that IBM could see a huge reduction in overall transfer costs and could see 10% and 20% savings in operational liquidity management.

The overall advantages for IBM of having its own blockchain-backed stable digital coin include trust through increased transparency and immutable transaction history, simplicity from the decreased need for intermediaries thanks to a shared distributed ledger system, and the efficiency provided by near real-time remittance and easy consensus between stakeholders

Challenges

There are still many challenges in the widespread use of blockchain-based currencies and their management, including:

  • Changes will need to be made in international regulatory oversight.
  • Blockchain networks will need to demonstrate that they can perform at scale in a way that at least matches traditional networks e.g. VisaNet.
  • The financial services industry will need to take ownership of blockchain technology and commit resources to it in order to build, use and support of it.
  • Banks may have to commit back-office IT staff to oversee transaction networks to ensure that they are managed properly and securely.
  • More banks need to participate in blockchain transaction validation in order to improve security by having a solid and widespread consensus mechanism that can’t be usurped.

What Does This Mean For Your Business?

With more big names developing their own blockchain-based digital coins, banks and businesses are more likely to see for themselves the savings and the revenue that can be made from them, and this may lead to many of the major challenges being tackled, and more belief in and adoption of securely backed digital currencies. Greater uptake and investment in reducing the barriers to the wider use of such currencies could benefit the wider business community, for example making it easier and faster to buy-in and pay for goods and services, transfer funds and receive funds and payments, especially across borders.

Blockchain is already finding multiple uses beyond just currencies and is particularly useful where things like transparency of a specific delivery chain and provenance of products are needed, thanks the incorruptible nature of the technology.

$180 Million Password Taken To The Grave

Posted on by Andy Miller

115,000 customers of the of Canadian digital platform Quadriga are believed to be owed C$250 million, but C$180 ($137.21 million) in cryptocurrencies have been frozen after the platform’s founder, who was the only person with the password to the platform’s stored funds, died in December 2018.

What Is Quadriga?

QuadrigaCX is a Canadian cryptocurrency exchange/platform, which allows the trading of Bitcoin, Litecoin and Ethereum.  QuadrigaCX, was founded by Gerald Cotten and was Canada’s largest cryptocurrency exchange until 2019 and has 363,000 registered users.

Cold Storage

As part of QuadrigaCX’s security measures, ‘Cold Storage’ was used for most of the Bitcoins within their system. Unfortunately for Quadriga, it is this part of the system, where the bulk of their funds are stored that is ultimately protected by one main password that was known only to the late founder, Gerald Cotton.

Dead

Mr Cotton died aged 30 from complications related to Crohn’s disease while he was volunteering at an orphanage in India.

Widow Under Pressure

With so much money owed to customers, Mr Cotton’s widow, Jennifer Robertson is reported to have found herself under pressure to find the password.  It has been reported that Robertson, who was not involved in Cotten’s business while he was alive and does not have business records for QuadrigaCX, has conducted repeated searches for the password.

Although Robertson has Mr Cotten’s laptop, she has (so far) been unable to access the contents because it is encrypted, and no one has the password or recovery key for it. Additional attempts to decrypt the laptop have also been unsuccessful.

It has also been reported that Robertson has consulted an expert to help recover details from Cotten’s other computer and cell phones, although the expert’s attempts have been reported to have had only ‘limited’ success to date.

QuadrigaCX has now filed for “creditor protection” in an attempt to avoid bankruptcy.

Customers Unable to Withdraw Funds

In the meantime, customers have reported online that they have been unable to withdraw their funds from the platform for months, that they have only received limited information, and that the website was also recently taken down for maintenance.

What Does This Mean For Your Business?

This story highlights some of the risks associated with cryptocurrencies, and a how a lack of regulation and a market that’s still in its relatively early stages can leave investors in unusual, worrying situations such as this one. In many other types of financial business where there is that level of funding involved, it would also be highly unlikely that a single password known only to one person would play such an important role. Some would say that it’s ironic that passwords are often considered now to be much less secure than other security tools, and yet this password-controlled system has confounded even the experts so far.  What is also ironic is that the ‘cold storage’ of funds, in this case, was introduced as a security measure to protect customer funds but has ended up being so secure customers have no access to those funds.

Looking at the size of QuadrigaCX and the number of customers it has, cryptocurrencies clearly still provide a useful and valuable opportunity for trading and investment. They have, however, had a turbulent life to date, making the news for many negative reasons.  For example, just for bitcoin, regulations and restrictions in some countries (e.g. China), hacks, its volatility, a negative image from its use by international criminals and from its use in scams, a lack of knowledge about how to use it, and the fact that the high price of just one bitcoin made it (even more) niche, meant that it became a commodity and a fast-buck opportunity rather than an actual, useful currency, and the over-consumption and over-inflated value of bitcoin lead to its spectacular fall in value.  There have also been well-publicised falls in value for crypto-currencies like Ethereum’s ‘eher’ and Ripple’, and Tether found itself being investigated by the U.S. Department of Justice over possible manipulation of bitcoin prices at the end of 2017.

All this said, many governments and banks would still like a ‘piece of the action’ of cryptocurrencies, and many market analysts see a future for them as a part of a wider ecosystem.

Bitcoin and Other Crypto-Currencies Hit New Lows

Posted on by Andy Miller

After losing 74% of its value so far this year, Bitcoin’s value, and that of other crypto-currencies have continued to fall this month as a sell-off takes place in what some see as the natural course for the market, and as another opportunity to buy crypto-currencies at a low price.

What’s Been Happening?

According to currency commentators, the massive 12% fall in the Bitcoin crypto-currency on Monday, follows a nose-dive that’s been part of downward trajectory for the crypto-currency which recently hit a 14-month low. Many in-the-know believe that the possible reasons for the longer-term fall and the sharp 12% drop in value are likely to be caused by:

  • The extra regulation in the US.
  • A long wait for the January 2019 launch of bitcoin futures by Bakkt, Intercontinental Exchange’s crypto platform. With Bitcoin Futures, investors and sellers make a contract to buy and sell at the agreed-upon price, irrespective of the actual market price at the time the contract is made. This may reduce risk and balance out price fluctuations on investments in portfolios.
  • Investors steering clear of bitcoin because of the price swings, concerns over a lack of regulation, and concerns over the uncharted waters of a new and undeveloped market infrastructure.
  • Investigations by the Securities and Exchange Commission of initial coin offerings and crypto exchanges.
  • Fear caused by hacks and thefts at crypto exchanges.
  • The overconsumption of bitcoin in the first place, which has now led to a market cycle back in the opposite direction as things naturally even out.

Trouble For Other Crypto-Currencies

Bitcoin is certainly not the only crypto-currency that’s been under pressure in recent times. Ethereum’s ‘eher’ has just fallen 7% in value to $106.69, and the value of Ripple’s XRP has fallen 5.6% to only 34 U.S. cents.

Also, in the light of the U.S. SEC ordering civil penalties against Airfox and Paragon Coin over their alleged selling of digital tokens as securities in initial coin offerings, both companies have found themselves having to agree to the return of funds to harmed investors, as well as registering tokens as securities, filing periodic reports with the Commission, and paying penalties.

It has also been reported that crypto-currency Tether is being investigated by the U.S. Department of Justice over possible manipulation of bitcoin prices at the end of 2017.

God Time To Buy While Prices Are Low?

Some investors, however, see the steep fall in values of crypto-currencies as an opportunity to get into viable crypto-currency projects at discounted prices.

What Does This Mean For Your Business?

The rapid rise of bitcoin value and the many problems that it experienced with regulations and restrictions in some countries (e.g. China), hacks, its volatility, a negative image from its use by international criminals and from its use in scams, a lack of knowledge about how to use it, and the fact that the high price of just one bitcoin made it (even more) niche, meant that it became a commodity and a fast-buck opportunity rather than an actual, useful currency.

Now that the huge wave of bitcoin over-consumption and over-inflated value of bitcoin has burst, many market analysts can still see a future for crypto-currencies as a part of a wider ecosystem, and that the fall in the value of bitcoin is simply a natural cycle of things finding their real level again after the boom.

Many would say that the best thing to come out of bitcoin, so far, is the underlying ‘blockchain’ technology.  Blockchain has found multiple useful commercial applications and, as tech companies are now in a race to provide the best ‘blockchain-as-a-service’ offering, businesses will be able to find opportunities to put the technology to good use in innovative ways, creating value and competitive advantages that could start shaking up many markets.

First Blockchain ‘Cryptocurrency’ Smartphone

Posted on by Andy Miller

Taiwanese electronics company Huawei Technologies Ltd. (HTC), and Swiss-based Sirin Labs are both introducing blockchain smartphones.

HTC

HTC’s Exodus blockchain smartphone, which it is believed will be priced at around $1,000, and is reported to have “tens of thousands” of reservations globally. The smartphone, from the world’s third largest phone manufacturer, will be released this year, will come with a built-in (offline) wallet for storing cryptocurrencies, and will act as a computer node in a blockchain network.

What Is Blockchain?

Blockchain is an incorruptible peer-to-peer network (a kind of ledger) that allows multiple parties to transfer value in a secure and transparent way. Blockchain’s Co-Founder Nic Carey describes Blockchain as being like “a big spreadsheet in the cloud that anyone can use, but no one can erase or modify”. Blockchain is the technology at the heart of cryptocurrencies like bitcoin, is open-source, and free.

Why A Blockchain Phone?

Giving a phone a blockchain element means that it has access to blockchain applications such as a crypto wallet, secure exchange access, encrypted communications and a P2P resource sharing ecosystems for payment and apps. It can also be used for cryptocurrency mining.

The built-in wallet for the HTC phone for example, will enable it to store bitcoin, Ethereum and other digital tokens.

Sirin Labs – The Finney Phone

The other blockchain smartphone, which is likely to be launched after HTC’s, is the ‘Finney’, named after the late bitcoin pioneer Hal Finney.

This smartphone, which also has a $1,000 price tag, has been described as an “ultra-secure blockchain smartphone”, and has been specifically designed to get around what Sirin Labs believe to be 2 main obstacles to mass market acceptance – security and user experience.

Sirin Labs even launched an initial coin offering / ICO (crowd funding from early backers of tokens for a new cryptocurrency) to fund the Finney. This resulted in over $157 million being raised.

The Big Advantage – The OS

Sirin claims that its big advantage with the Finney is not so much the phone, but more the Operating System (OS) that it claims, thanks to partnerships it is making, will soon be included in phones by other top OEM phone developers.

Security

In terms of how secure the phones are, the main question will be how both companies will keep sensitive cryptocurrency data secure. For example, unless a phone is in flight mode, there’s always a connection of some kind, and that offers a lot more attack surfaces than something like a USB stick that’s only occasionally connected.

Niche Product For Rich Enthusiasts?

Some critics have said that a blockchain smartphone is too much of a niche product that may just appeal to enthusiasts and speculators rather than a mass market, and that most people may struggle to understand what blockchain is and how / why they should use cryptocurrencies.

What Does This Mean For Your Business?

For HTC, many see this as being a way for the company to find a way back into the smartphone market, where it’s been struggling in recent times, but this time with a differentiated product that is a market first, ahead of competitors.

For Sirin Labs, it could also be a way to get into a new section of the market ahead of the competition, but many are sceptical as to whether the Finney will get the mass market acceptance that Sirin Labs hopes.

Most business people in the UK, for example, may be unlikely to see why they would need a blockchain phone with a crypto-currency wallet as part of their daily working life. If they’re going to spend £1,000+, they may be more likely to opt for new models of more familiar phones with more standard features e.g. iPhone or Samsung Galaxy.