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ICOs Raised $4 Bln in 2017, What 2018 Has in Store

2017 has definitely been a record-breaking year for ICOs: a fiat equivalent of some $4 bln have been raised, and the number of successful token placements have increased to a couple of hundreds globally. Yet, in the same year, traditional IPOs are estimated to have raised $188.8 bln in total of 1,624 deals, according to E&Y IPO Global trends report. Only in third quarter, 2,645 venture capital deals amounted to $42 bln.

ICOs have raised less about two percent of global IPO proceeds, but ICOs not IPOs, and not venture capital deals, are the talk of the street these days. Why?

In one year only ICOs proceeds have surged almost 40-fold, from $96.3 mln in 2016. In 2014- 2015 the amount was microscopic. More than 180 new ICOs are scheduled to launch in 2018, according to ICObench listing.

It would be superficial and arrogant to explain the ICO explosion only by desire of newly-rich crypto-miners to invest their unexpectedly reevaluated digital assets in something productive and to protect themselves against volatility. It may be the case, but it doesn’t explain the whole case. In fact, there are three root causes of ICO success.

The good reason

ICOs and cryptocurrencies exploit fundamental flaws of the traditional funding methodologies. They bring justice and equality to projects from underprivileged geographies, sectors, and don’t rob founders’ share while doing so.

Traditional financing is tilted towards an intermediary, not a creator, and it is designed to lower the risks of that intermediary, not the investor or founder while maximizing intermediary’s yields. It basically works around the principle of Matthew 12:15 – “Whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.” Simply saying, it takes money to get more money.

Classic venture financing is orders of magnitude harder to achieve for those who live outside global hub cities. Most US funds won’t even consider financing an enterprise not domiciled in the US. Venture capitalists normally claim a hefty part of the equity in exchange for the money, so investors, irrespectively of their share, greatly influence the decision making of the founding team, and not always for good.

The first answer to these problems were crowdfunding platforms. ICOs have just made another step towards reducing the friction behind crowdfunding, de-intermediating it further.

The bad reason

Getting venture financing, let alone reaching for IPO afterwards, requires the team to distract themselves from the product development, marketing and promotion. Compliance, legal and due diligence procedures make the auxiliary mission of securing the funds for the project a separate task, as complicated or even more complicated than launching the product itself.

It’s not the only reason behind the ICO triumph.

Despite cyber-anarchists’ wet dreams, states won’t go anywhere anytime soon, and legal norms for ICO didn’t appear out of thin air. As they say in the military, service regulations are written in blood – of those who died to teach others a lesson. Stock exchanges and financial markets are regulated not exclusively to keep the profanes out. It is because most scams, frauds and crashes have already happened there. Sooner or later, ICOs will be regulated. And we should rather be a part of the solution to this problem, not the problem itself.

The ugly reason

In ideal post-Blockchain smart-contract, self-governing, crypto-anarchic world,  imagined by technophiles, we should all be singing “Hosannas” by now, praising human progress and ingenuity.

But we wouldn’t be humans if a life-changing invention weren’t used to cheat, defraud and steal. Cryptocurrencies and subsequently ICOs aren’t an exception, and there are and always will be frauds of course. Traditional financing doesn’t necessarily offer substantially better investor protection. Even the most stringent due diligence doesn’t guarantee against fraud. Crypto investment schemes are especially prone to it because of anonymity.  

ICO segment is still in its infancy, yet this baby is gaining weight alright. Childhood illnesses are many. First and foremost, crypto world has a severe reputation problem. The SEC calls for extreme precaution when investing in ICOs. To gain trust, we should start from within, and establish it first with the community.

Even in the absence of governmental regulations, self-regulation framework of ICOs will inevitably arise. Moreover, to avoid overregulation and unnecessary intervention of governments, it is essential that the community keeps policing itself better than any regulator. That’s exactly where the sector is headed – otherwise, it won’t survive.

What to expect in 2018

In coming year ICOs will offer more projects to serve the broader community, not limiting itself anymore to the Blockchain infrastructure development, payments and speculative trading. It will less much less revolve around purely financial technology. In 2017, we have already seen examples of Blockchain notary public, Blockchain-based real estate investment, loyalty programs, supply chain management, intellectual property rights management and other real-world applications. We’ll see more of that in 2018.

– By Sergi Dromo

Sergi Dromo is a cyber pessimist, techno-philosopher and unorthodox thinker.

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Top Cryptocurrency Choices to look out in 2018

Cryptocurrencies have made it to the headlines in newspapers as the end of 2017 is approaching. For us, this year has been a defining one. We have been hale to help hundreds of crypto investors with their portfolios. Our successful altcoin calls over the years include some of cryptocurrency’s biggest movers, including $TRX, $DGB, $ZCL, $ICX, $NXT, $SALT, $FUEL, $LINK, $TNT, $BNB, $ICX and many many more.

With a lot more first-time investors entering the fray, we get two main questions – which cryptos to invest in and which platform to buy from. We have already answered the latter in one of our previous blogs, and if you’re just getting started, here’s your answer for top crypto coins to invest in this 2018 –

1. Bitcoin

Needless to say, this tops our list. Created by Satoshi Nakamoto, this cryptocurrency was the first in the market and has far surpassed the expectations of investors.  It is available on most of the exchanges.

Current Market Cap: $283 Billion

Markets: Coinbase, Zebpay (Although almost all exchanges allow you to buy it)

Buy Order: up to $18000

Our Prediction: $60,000 – $80,000

2. Ethereum

Ethereum is an open source development platform that allows developers to build and deploy decentralized apps (dapps). A lot of popular projects are launched using the Ethereum blockchain. The platform uses Ether as its token.

Current Market Cap: $76 Billion

Markets: Bittrex, Koinex

Buy Order: upto $800

Our Prediction: 3000$ – 4000$

3. Bitcoin Cash

Forked off Bitcoin in August this year, the fork allows more transactions to be processed because of increased block size i.e. 8 MB. It also offers replay and wipeout protection.

Current Market Cap: $51 Billion

Markets:  Bittrex, Koinex

Buy Order: upto 3500$

Our Prediction: 10,000$ – 20,000$

4. Litecoin

If Bitcoin is gold, then Litecoin is silver. It is also a fork of Bitcoin by Charlie Lee. Along with others, this currency has risen as well during the month of December and is currently the fourth largest cryptocurrency. The creator, Charlie has however sold all his Litecoin.

Current Market Cap: $15.7 Billion

Markets: Bittrex, Koinex

Buy Order: up to 300$

Our Prediction: 1000$- 1500$

5. Ripple

Ripple is an open source digital payment network which is also used by banks such as the bank of Tokyo. Call it the ripple effect, Ripple’s cryptocurrency, XRP has risen a lot as well. The network is extremely fast and payments in XRP take 4 seconds.

Current Market Cap: $48.2 Billion

Markets: Bittrex, Koinex

Buy Order: up to 1.3$

Our Prediction: 5$ – 7$

6. IOTA

It is a cryptocurrency designed for the Internet of Things (IoT). There is no concept of block or blockchain and thus no concept of mining. This also means there are no transaction fees. It uses a different data structure, tangle, which is based on a directed acyclic graph.

Current Market Cap: $11.9 Billion

Markets: Bittrex, Koinex

Buy Order: up to 5$

Our Prediction: 20$ – 25$

7. Cardano

The project aims to establish a smart contract platform which focuses on more advanced features. The team also plans to build a wallet capable of running decentralized apps on the blockchain. The total supply will be fixed at a total of 31 billion tokens.

Current Market Cap: $11 Billion

Markets: Bittrex

Buy Order: up to 0.5$

Our Prediction: 2$-3$

8. EOS

It is a blockchain based decentralized operating system which will enable businesses to build blockchain applications in a way similar to web-based applications. Elimination of transaction fees and scalability are two major features of the software.

Current Market Cap: $5.75 Billion

Markets: Binance

Buy Order: up to 11$

Our Prediction: 40$ – 60$

9. Monero

Monero is an open source cryptocurrency that has a focus on privacy, decentralization, and scalability. It uses cryptography to shield sending and receiving addresses, as well as transacted amounts.  There was even news that websites are using users’ CPU powers to mine Monero.

Current Market Cap: $6.66 Billion

Markets: Bittrex

Buy Order: up to 500$

Our Prediction: 1500$-2500$

10. NEO

Formerly known as Antshares, it is often called the Ethereum of China. It is very much like Ethereum but it also supports decentralized commerce, identification, and digitalization of assets. It also closes loopholes that have caused Ether contracts to be vulnerable to hackers.

Current Market Cap: $4.4 Billion

Markets: Bittrex

Buy Order: up to 75$

Our Prediction: 200$ – 300$

11. Stellar

Stellar is a system for sending and receiving money in any pair of currencies. The transaction fees are really cheap and it is fast. Moreover, it is backed by names like Mozilla, The CEO of WordPress, the director of Apache Foundation etc.

Current Market Cap: $4 Billion

Markets: Bittrex

Buy Order: up to 0.25$

Our Prediction: 1$-2$

12. Lisk

It is a public blockchain platform that provides decentralized apps. Contrary to Ethereum, does not use solidity, and instead uses Ethereum.

Current Market Cap: $2.8 Billion

Markets: Bittrex

Buy Order: up to 27$

Our Prediction: 100$-200$

13. TRON

Tronix(TRX) is the official currency of TRON. TRON aims to be a decentralized entertainment content sharing platform. It will allow creators to cut down middlemen such as the Apple store and Google Play Store.

Current Market Cap: $2.5 Billion

Markets: Binance

Buy Order: upto 0.04$

Our Prediction: 0.15$-0.3$

14. ARDOR

It offers Blockchain as a service. Ardor operates as the Main Chain securing individual and unique child chains. The first child chain is IGNIS.

Current Market Cap: $1.5 Billion

Markets: Bittrex

Buy Order: up to 2$

Our Prediction: 10$-20$

15. ICON

It aims to connect organizations like Government departments, universities, hospitals and financial institutions to connect and interact without any third party networks. This will prevent delay and avoid transaction fees.

Current Market Cap: $1.5 Billion

Markets: Binance

Buy Order:upto 6$

Our Prediction: 40$-50$

16. BitShares

It provides a decentralized asset exchange much like the exchanges in the real world except that these exchanges are for cryptocurrencies. It also provides a token called “BTS”.

Current Market Cap: $1.47 Billion

Markets: Binance

Buy Order: upto 0.6$

Our Prediction: 2$-3$

17. Raiblocks (sleeping giant)

Raiblocks hopes to be an efficient alternative to fiat currencies. Like IOTA it uses a directed acyclic graph algorithm. It uses a concept called block-lattice.

Current Market Cap: $1.43 Billion

Markets: Mercatox

Buy Order: up to 12$

Our Prediction: 40$ – 60$

18. Waves

Waves allow you to create multiple currency wallets and invest in verified crypto assets. This year, it has also partnered with Deloitte to launch the development of a legal framework for wider adoption of blockchain technologies.

Current Market Cap: $1.4 Billion

Markets: Bittrex

Buy Order: up to 15$

Our Prediction: 50$-70$

19. Stratis

Stratis is a powerful and flexible blockchain development platform. It also offers proof if an audit, proof of publication service which can be helpful for establishing ownership rights.

Current Market Cap: $1.37 Billion

Markets: Bittrex

Buy Order: up to 15$

Our Prediction: 50$ – 70$

20. Steemit

Steemit is a social network that looks a lot like Medium but it pays both the content creators and the people who select the best content by upvoting others’ work. It’s free to create an account and the content one writes will be published directly to the site.

Current Market Cap: $800 Million

Markets: Bittrex

Buy Order: 3.5$

Our Prediction: 15$ – 25$

21. Golem

Golem is an innovative idea which aims to decentralize computing power. It is a global, open-sourced supercomputer that anyone can access. Anyone can make money by renting out their computing power or developing and selling software.

Current Market Cap: $650 Million

Markets: Bittrex

Buy Order: up to 0.8$

Our Prediction: 2.5$-5$

22. Kyber

It is a decentralized exchange and payment service which allows instant exchange and conversion of digital assets and cryptocurrencies with high liquidity. It also provides payment APIs that allows a user to pay to a merchant in any token but the merchant will receive payment in his preferred token.

Current Market Cap: $335 Million

Markets: Binance

Buy Order: up to 2.75$

Our Prediction: 10$ – 20$

23. Powerledger

Powerledger enables peer to peer energy trading. If a person has a source of renewable energy at his home, he can trade the excess energy to somebody else and will receive payment as soon as they get energy. This will allow the public to get involved in energy distribution.

Current Market Cap: $325 Million

Markets: Bittrex

Buy Order: up to 1$

Our Prediction: 5$-10$

24. Civic

Civic is a digital identity verification platform very much like KYC. Digital identities are stored on the blockchain and companies can do KYC very quickly. It will also pay identity verifiers i.e banks and other trusted sources.

Current Market Cap: $315 Million

Markets: Bittrex

Buy Order: up to 1$

Our Prediction: 5$ – 10$

25. AdEx

Built on the Ethereum blockchain, AdEx is a decentralized ad exchange which aims to address problems like advertising fraud, privacy and the rise of ad blockers. It aims to be a transparent and more efficient advertising platform.

Current Market Cap: $188 Million

Markets: Bittrex

Buy Order: up to 3.5$

Our Prediction: 15$ – 30$

Coin statistics were collected on 29th December 2017. Rates might differ depending upon the date you’re reading on.

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Culture Shock: Bitcoin a Part of All Walks of Life in 2017

2017 will go down as the biggest year in Bitcoin’s history – with meteoric highs paving the way for the preeminent cryptocurrency bursting into mainstream consciousness.

December will forever be remembered for Bitcoin’s massive price correction after hitting the $20,000 milestone, but a lot happened in the lead up to the climactic end of the year.

Rewind to January 2017. Bitcoin had just broken through the $1,000 barrier and the talk among crypto enthusiasts was that the virtual currency was set for a bullish year. It’s fair to say that no one anticipated an eventual 2,000 percent growth before the market correction, but the statistics will tell a different story.

Google stats

A quick glance at Google Trend’s analytic graph shows that interest in Bitcoin had a small peak in May, while it really started to garner interest worldwide around the time that SegWit2x was postponed and the Bitcoin bull run began.

It was, however, the second most searched news term globally in 2017, while it came up third in the often hilarious ‘how to’ search category.

Top Google Trends 2017

Interestingly enough, the countries where Bitcoin was most often searched were not massive first world economies, but growing ones. South Africa topped the list, followed by Slovenia, Nigeria, Ghana then Australia.

Occupying top spots in Google’s search trends is no mean feat. It tells us that people were searching hard for information on Bitcoin, whether it was for the latest price updates or how to setup a Bitcoin wallet.

Bitcoin also occupied the number one spot for the most searched term on Investopedia – the world’s go-to encyclopedia for financial and economic terms and information.

Miners delight – cards in demand

As interest in Bitcoin and cryptocurrencies grew, the average PC gamer and overclocking enthusiast saw their chance to get in on the action by using their hardware to support the world’s mining operations.

Mining enthusiasts wasted no time getting in on the action which quickly led to a massive surge in demand for graphics cards – which are needed to solve the cryptographic puzzles that are used to validate transactions on cryptocurrency Blockchains.

Just half-way through 2017, graphics card manufacturers AMD struggled to keep up with the demand for cards.

Rivals Nvidia boasted superior stock prices this year and the adoption of Blockchain technologies by the likes of Uber and Airbnb led analysts to predict even greater growth as both chip manufacturers hold the key – hardware.

Nvidia’s stock price even mimicked Bitcoin price for the better part of the year – although the company was uncertain of its future in the market amid regulatory changes in China, which accounts for a large contingent of the world’s mining operations. Proposals were made to manufacture mining specific chips to protect the company from constantly changing consumer needs.

Bitcoin gets celebrity approval

Along with its newfound notoriety, Bitcoin and cryptocurrencies also got a celebrity stamp of approval in 2017.

Boxing superstar Floyd Mayweather grabbed headlines on numerous occasions, as he stepped in to promote a number of ICOs using the Ethereum Blockchain.

Football giant Leo Messi also joined the fray in an endorsement deal with Sirin Labs, which creates hardware to support Blockchain technology.

The list literally goes on and there are some surprising names here. Top of the list is rapper Snoop Dogg, alongside actors Gwyneth Paltrow and Ashton Kutcher.

Luxury items for sale

As Bitcoin boomed, more people looked to take advantage of the appreciation in value which saw some luxury items, from mansions to custom cars, go on sale – not in dollars, but in Bitcoin.

For the right price, people could get their hands on a golden Rolls Royce, a Caribbean island, an upmarket flat in England’s famous Notting Hill, or a mansion in Miami.

Trying to keep up

The explosion of interest in Bitcoin was a boon to the market but it also proved to be a massive stress test for exchanges, their servers, infrastructure and payment systems.

From November onwards, major exchanges like Coinbase, Gemini, Bitfinex and others had to upgrade their systems to meet the massive influx of new users trying to open up wallets on their exchanges.

This caused a major headache for many users due to the slow transaction speed. However, without the massive increase in volume, many of these exchanges may not have upgraded their systems – which is crucial in the development of more efficient exchanges.

Media spotlight

The ever-growing interest in Bitcoin inevitably led to the subject being covered more extensively by mainstream news outlets. The likes of CBNC, Fortune, Bloomberg, CNN and Fox to name but a few ramped up coverage on the subject.

Every other day, these media giants hosted financial analysts, cryptocurrency experts, Blockchain engineers, basically anyone with a wealth of knowledge on the subject to help inform opinion.

As mentioned above, Bitcoin was the second-most searched news term on Google – feeding traffic to these websites and their various interviews.

Financial experts like billionaire hedge fund manager Mike Novogratz and renowned stock analyst Ronnie Moas led the way in terms of price predictions. Meanwhile, traditional financial institutions like JP Morgan, Bank of France, Coutts Bank were staunchly opposed to cryptocurrency adoption – as was reported by numerous mainstream news outlets.

If 2017 was anything to go by, we are in for a bumper new year. The cryptocurrency market valuation is bound to be top of the list, but constant advances in Blockchain tech and new offerings should see crypto garner more media interest in 2018.

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Bitcoin Sign Guy

“If I talk like this, am I loud enough to be heard?”

It’s an ironic statement from a man who became famous without saying anything at all.

Steps from San Francisco’s gleaming City Hall, the internet sensation better known as “Bitcoin Sign Guy” struggles with a microphone as he tries to recall the day when he boldly thrust out a yellow legal pad behind a sitting Federal Reserve chair and became perhaps the crypto world’s most famous meme.

But whereas he made the decision to take out a pen on that now-infamous July day (going from idea to action in little more than 30 seconds, he says), he’s less natural when talking about the particulars.

What was he doing there? Who did he work for? Those are the things the Connecticut native is “trying to speak around” as his first-ever interview begins. And his caution initially shows, on camera at least, in clipped sentences and careful wording.

“I really was not prepared for this,” he says, squinting into a California sun.

Indeed, despite assurances, Bitcoin Sign Guy is still noticeably uneasy about his identity. A recent college graduate (from a university he doesn’t name) and staffer at a crypto hedge fund (that we’re told we can’t disclose), there are specifics about his life he wishes to keep behind the curtain. And he’s not without his reasons.

Given his claim to fame is interrupting a meeting between some of the world’s most powerful people, it’s safe to say it wasn’t exactly well received by all. In addition to feeling compelled to apologize to his then-employer (an undisclosed think tank), he admits he was even escorted out by staffers, an incident caught on C-SPAN, too.

“They actually did apologize, but I’m not sure it was sincere,” he recalls.

But if Bitcoin Sign Guy is unwilling to step fully into the spotlight, one topic lights a spark in the conversation. A self-described anarcho-capitalist, he’s every bit the bitcoin believer the internet could hope for, denouncing monetary policy as an oppressive “instrument of statecraft” and declaring the first and most well-known cryptocurrency destined to resign fiat money to the history books.

Asked directly if there was a larger message to his scribbled sign and its simple statement – “Buy Bitcoin” – Bitcoin Sign Guy is more assured in his answer.

He tells CoinDesk:

“I view cryptocurrencies as a new monetary paradigm that’s here to directly challenge the easy money created by the Federal Reserve. I believe this will have full political and social repercussions.”

Man of the people

But more impressive than his words, written or otherwise, is his resolve to put them to action.

Not yet 25 years old, Bitcoin Sign Guy is not only buying bitcoin, he believes he’s part of a growing number of global citizens in the midst of something that’s never been possible before the advent of cryptocurrencies – rejecting the economic system they were born into.

The Venezuelan bolivar, the Zimbabwe dollar, he believes, are already “falling away into bitcoin,” something he’s convinced will happen to the world’s weaker currencies over time. But if he seems to get carried away at times (we argue whether his perceptions of those countries are accurate), it’s because he’s already living in that future.

While he acknowledges he still uses the U.S. dollar (calling it a better “unit of account”), he estimates he now holds “99 percent” of his net worth in cryptocurrencies.

“I plan to hold my bitcoin long enough so that when I dispense with it, I won’t be converting it back into U.S. dollars,” he contends.

In this way, Bitcoin Sign Guy sees his actions in Washington, D.C. as less of a prank and more of a call to arms he hopes others will follow. A student of politics and philosophy, he places no small emphasis on choice and the ability of people to make it freely.

He tells CoinDesk:

“The sign was definitely an endorsement. Buy it, make the economic and political decision to take your money out of the monetary system.”

The break-in

But if money and politics are intertwined for Bitcoin Sign Guy, we’re soon given a stark reminder of how for some, it’s a more practical concern.

Back at the car, Bitcoin Sign Guy and I are left staring dumbstruck through a hole where the right rear window of his BMW used to be – that is before someone spotted my computer bag, busted the glass and scattered sharp bits across the sidewalk.

Amongst the shards lie two books, “Capitalism, Socialism and Democracy” by Joseph A. Schumpeter and “Anatomy of the State” by Murray N. Rothbard. Both, it seems, attracted little interest from the thief.

“Shows you how popular my political philosophy is,” Bitcoin Sign Guy jokes.

Stuck in solace for my lost belongings, the quip hardly registers, and I barely notice when, growing alarmed, Bitcoin Sign Guy begins frantically fumbling for his own possessions.

The more than 7 BTC he received from proving his act to the Internet? It turns out the private keys to them are in an air-gapped computer in the trunk. In a twist of irony, the thief may have stolen a $1,700 laptop, but they’ve left behind a far bigger score.

But if Bitcoin Sign Guy is nervous about the brush with his financial loss, it’s only temporary.

Before long he’s on the phone with the San Francisco Police Department, pointing out nearby surveillance cameras that might be able to be tapped for evidence.

“I believe you were saying something about the state?” I ask, coming to.

“Well, I was going to suggest we hire a private eye,” he retorts.

Ever the optimist

En route to a nearby police precinct, I listen to the wind rattle through the back glass while Bitcoin Sign Guy puts on a playlist to cheer me up. He’s hardly dissuaded, even as his tank hovers just barely above ‘E’.

Already, it seems, he’s found a silver lining. Though I’m less predisposed to it at the moment, before long he’s talking up bitcoin’s virtues to our cameraman, using it as an example of the cryptocurrency as a form of secure, sound money.

“If the bitcoins in my backpack were stolen, I’d spring to Best Buy, buy a new computer and install the old bitcoin software and recover my wallet,” he explains. “All wouldn’t be lost.”

Maybe it’s the droning synths, the jetlag or the thought I’ll soon have to carry out that same purchase, but as we go on, it seems like Bitcoin Sign Guy and I are in a state of constantly undermining each other’s expectations. He likes Fleet Foxes, I prefer Father John Misty. He’s seen the new “Blade Runner” four times, I hated it.

“Would you die for bitcoin?” he asks me at one point. I’m unsure exactly how to respond.

But if I’m an underwhelming anarcho-journalist, Bitcoin Sign Guy can be an excessive evangelist. Back at the hotel, we’re rearranging chairs for a second video shoot when the inquisitive visitor points out the bitcoin message scrawled on the nearby whiteboard.

Within a few sentences, Bitcoin Sign Guy is calling currency a “collective illusion,” before explaining the gold standard and the dangers of fractional reserve banking.

“Basically, it’s just the faith in the Federal Reserve not to debase the currency by printing it a lot,” Bitcoin Sign Guy tells him. “Have you ever heard of quantitative easing? They just printed a ton of money, devaluing the money that you own …”

On the B-list

But even if Bitcoin Sign Guy isn’t able to convince the hotel employee to break the chains of his current economy, the day isn’t done with its surprises.

We’re finally underway with filming when entrepreneur and author William Mougayar stumbles through the door. There to host the second annual Token Summit, an event focusing on crypto tokens and ICOs, Mougayar initially seems taken aback by the scene.

Nominated in two categories of our “Most Influential,” I have to break the news he wasn’t a winner. And as I talk up the series, I can sense Mougayar, who meets Bitcoin Sign Guy under his real name, seems confused (and maybe a bit offended) by the selection.

We carry on small talk about the conference, its speakers and sponsors, as Bitcoin Sign Guy takes out a piece of yellow paper and begins recreating his big moment for the cameras. And it’s not until then that Mougayar’s attitude seems to change.

“Is that?” he says, putting his hand to his mouth, craning his neck and motioning to his friend. “Ooh. That’s him.”

Smiling and laughing, it seems, Mougayar finally understands, his changing expression an acknowledgement of what made the Bitcoin Sign Guy prank such a rare, uniting moment in a year otherwise defined by hostility, in-fighting and successes that still largely confound industry insiders.

“Nobody cared who I was until I put on the mask, til I held up the sign,” Bitcoin Sign Guy jokes later on. A play on a line from “The Dark Knight Rises,” it seems curiously apt.

Behind the mask

But as we continue, it seems there’s tension between the man and his mask, between a young idealist who wants to make a mark and the symbol that will forever bear his likeness.

Since the hearing, Bitcoin Sign Guy has donned that July day’s outfit (complete with seersucker blazer and pink tie) a few times, helping raise money for what he considers worthy causes (advocacy group Coin Center and ICO project Tezos).

But still, he remains anonymous, in name. And because of that, there are downsides, like Mougayar’s rebuff for one. It cuts to the core of one of the struggles of the day: whether or when Bitcoin Sign Guy will ever reveal himself.

He even seems to go back and forth on the interview we’re conducting, and how it will boost the profile of his already plentiful online persona.

“I just am cautious,” he says. “I should have prepared more for this interview, but I guess my main concern is that I would share these views, and they would be ridiculous.”

It’s a rare moment of self-doubt for someone who throughout the day has remained consistent in espousing and affirming his ideals. But then again, reflection seems on tap as the wind whines again through the window glass.

“I just don’t want to be cornered for the rest of my life as the guy,” he says.

That’s the trade-off, it seems, for the artist and his creation.

But as we trade goodbyes, there’s one thing I’m convinced of – if Bitcoin Sign Guy is conflicted about his past, he’s also the living symbol of its bright future, the embodiment of an audacious next generation of crypto enthusiasts just now emerging and a reminder of the struggles and sacrifices yet in store.

Want more? Hear Bitcoin Sign Guy’s story in his own words:

[embedded content]


Original artwork by Luis Buenaventura II, creator of the CryptoPop website. Click here to view more by the artist, and to check out the official CoinDesk Most Influential T-shirt.

Video by Ali Powell at 40 Thieves Films 

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Kidnapping of Bitcoin Exchange Executive Showed Importance of Financial Privacy

The recent abduction of UK-based Bitcoin and cryptocurrency exchange Exmo Operator Pavel Lerner has demonstrated the importance of financial privacy for cryptocurrency users.

Earlier this week, BBC initially reported that Lerner kidnapped outside of his office in Kiev, Ukraine, on Dec. 28, by a group of individuals who dragged him at knife point to a black Mercedes and drove off the scene. At the time, Anatoliy Larin, the spokesperson of the exchange, stated:

“Despite the situation, the exchange is working as usual. We also want to stress that nature of Pavel’s job at Exmo doesn’t assume access either to storages or any personal data of users. All users’ funds are absolutely safe.”

Within two days after the disappearance of Lerner, Financial Times revealed that Lerner has paid more than $1 mln to an armed gang as a price for his freedom. The advisor to the Ukrainian interior minister Anton Gerashchenko told FT:

“He was kidnapped by an armed gang for the purpose of extorting Bitcoins. We have operative information that he paid more than $1 mln worth of Bitcoins. [After one and a half days, he was] then released in a state of shock. … He got very lucky that he remained alive.”

The Ukrainian National Police has officially opened a criminal case to investigate into the abduction of Lerner and to disclose the identities behind the attack.

While Exmo is a small Bitcoin exchange with only 94,000 active investors and a $125 mln daily trading volume, less than one percent of leading exchanges like Bithumb, Coinbase’s GDAX and Bitfinex, both the company and Ukrainian authorities believe that Lerner became a target of the armed gang because of his involvement in a Bitcoin venture.

Over the past 12 months, the price of Bitcoin has surged from $900 to $14,000, by nearly 14,000 percent. Thus, an increasing number of hackers and criminals have started to target large-scale cryptocurrency businesses and executives of Bitcoin companies.

Importance of financial privacy

During a presentation given at the Coinbase headquarters, Monero Lead Developer Riccardo Spagni, better known to the cryptocurrency community as FluffyPony, emphasized the importance of financial privacy for users and investors of all types.

He noted financial privacy on public Blockchain networks and cryptocurrencies is crucial in preventing sensitive information of users from being used for criminal activities, such as direct attacks, blackmailing, targeted advertising, and unwanted disclosure of assets, wealth and holdings.

In January 2017, when he gave the talk to Coinbase employees, FluffyPony jokingly stated that investors could become kidnapped for purchasing large amounts of Bitcoin at a local exchange.

“If we don’t have financial privacy, there are bad things that can happen. We might end up with targeted advertising based on spending habits. [Another example is] targeted crime against the wealthy. You go to a local Bitcoin exchange and next minute you’re held up at knife point. Even worse, you go and pay with Bitcoin for an item and now, the owner knows your bank balance,” said FluffyPony.

Dumbfoundingly, FluffyPony’s statement became a reality in Kiev, Ukraine, as Lerner became a direct target of an armed gang with a pre-established plan of extorting ransom in Bitcoin from the exchange operator.

However, the lack of privacy measures in Bitcoin also means that the criminals that have abducted Lerner cannot easily spend the money or sell it for cash because the transaction can be traced using the public Bitcoin Blockchain.

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Jamie Dimon

Any publicity is good publicity, the saying goes.

And with a disruptive technology like cryptocurrency, sometimes even negative comments from a powerful incumbent can be bullish signals … particularly if they’re coming out of the right mouth, like the big one belonging to Jamie Dimon, CEO of JPMorgan Chase, the largest bank in the U.S.

A banker lionized in the business press for his leadership during the 2008 global financial crisis; the personification of the Wall Street elite; the bellwether of the Davoisie, with a Queens accent like President Trump’s (and a similar penchant for making provocative, headline-grabbing statements), Dimon regularly talked smack about bitcoin in public appearances throughout the fall of 2017.

It all started on September 12, when Dimon called bitcoin a “fraud.”

Yet, while bitcoin’s price dipped right after he dropped that f-bomb (part of a one-two punch to the market, along with China’s crackdowns on initial coin offerings and exchanges), the largest cryptocurrency by market cap quickly resumed its climb.

In subsequent talks, Dimon called bitcoin “worthless.” He warned that the run-up “will end badly,” and that “stupid” buyers (including his daughter) would “pay the price.” And, he predicted, governments will eventually shut bitcoin down.

All while, of course, paying the obligatory lip service to blockchain technology as something separable from the currency.

Still, the bitcoin price kept rising into five-digit territory, where it remained even after a sharp late-December correction.

For some, this confluence of events was a classic example of the Streisand effect – the phenomenon where attempts to suppress something only bring it more attention.

“I don’t think there was much of a better advertisement for bitcoin than for Jamie Dimon to be denigrating it on public television,” says Daniel Masters, a former JPMorgan commodities trader who defected to the crypto space and now runs Global Advisors Bitcoin Investment Fund PLC in the U.K.

Masters added:

“If he was aiming to undermine the digital asset world, he actually effected the exact opposite.”

Conversation starter

To be sure, correlation is not the same thing as causation, so it’s hard to draw a straight line from Dimon’s remarks to the rally of late 2017.

“I assume that most of the institutional traders involved in cryptocurrency trading today, in late December, were already well aware of what cryptocurrencies were before, during and after his comments,” says Tim Swanson, director of research at Post Oak Labs. “But since none of the exchanges publish any public data on the demographics of their users, it’s really going to be guesswork as to proving his comments brought in new buyers.”

But this much is clear: Dimon got Wall Street talking about crypto this year.

“It made everybody research bitcoin over their weekend, and I think they realized that there’s something here,” says Matthew Rozak, co-founder of the tech startup Bloq and founding partner at Tally Capital, adding:

“Bitcoin and crypto, just by its nature, is this shiny new object that lends itself well to speculation and trading and all the form factors that Wall Street loves.”

And among Dimon’s C-level peers, not all the talk was reflexively negative.

For example, Lloyd Blankfein, Dimon’s counterpart at Goldman Sachs (another surviving icon of the 2008 crisis), expressed a more open-minded view in early October on Twitter.

“Still thinking about #Bitcoin,” he wrote. “No conclusion – not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold.”

Curious Lloyd

For Caitlin Long, who, like Masters, is a bitcoin aficionado and Wall Street escapee, such a nuanced response was a reassuring sign.

“Lloyd was publicly saying, ‘hey, don’t dismiss this so quickly,'” Long, the president and chairman of Symbiont Inc., a vendor of enterprise blockchain technology, says.

Dimon’s comments “touched a nerve for me, personally,” she continued. Four years earlier, when she was running the pension business at Morgan Stanley – but dabbling in bitcoin on the side – “I had to keep my head down because I was afraid I would get fired. I knew there were a lot of people within the compliance department of the bank who were steadfastly opposed to this.”

So when Dimon said he’d fire a JPMorgan employee “in a second” for trading bitcoin, her worst fears about Wall Street’s stance toward crypto were confirmed.

“When Jamie Dimon slammed that door shut and threatened to fire people, what message was he sending to employees about curiosity and innovation?” Long contends.

In that light, for Blankfein to merely refrain from judgment was “quite a statement from Goldman,” she says. It was “a signal to employees that it’s okay to explore the new and different.”

Supporting that take – although Blankfein later indicated unease with bitcoin’s volatility – by late December rumors had resurfaced that Goldman was forming a bitcoin trading desk.

This time is different?

Of course, Dimon has made similar remarks in prior years, but conditions have changed since, for instance, the time he predicted bitcoin’s demise in November 2015.

For one thing, the price of bitcoin had climbed more than tenfold since then, to over $4,000 the day of the “fraud” remark. And the entire market capitalization (admittedly, an imperfect indicator) of all cryptocurrencies had swelled from $5 billion to $141 billion over the same period, according to CoinMarketCap.

But perhaps more importantly, the worldwide cryptocurrency community had blossomed, volatile as ever but resilient and, some say, increasingly self-reliant.

“You’ve created thousands of bitcoin and ethereum millionaires. When they do what they’ve done in the digital asset universe, they do not go back,” Masters says. “People are not cashing out these digital assets back into fiat money,” but rather investing in new blockchain projects through initial coin offerings (ICOs).

“We have this incredible richness and diversity now in the digital asset space,” Masters continues. “This space is jettisoning from the legacy system completely.”

To Masters, it is unsurprising that Dimon would be so hostile to a technology designed to make the legacy financial system redundant.

“This guy is a dinosaur living in the old world,” Masters says of his onetime boss, adding:

“He has a very large walled garden, he’s paid [tens of billions] in fines to maintain his walled garden and he does not want anyone to remake the financial industry, and that’s what’s happening.”

In this interpretation (no doubt shared by many bitcoiners), Dimon and the other “Masters of the Universe” who cast doubt on cryptocurrency, such as Allianz’s Mohamed El-Erian, are the financial services industry’s equivalent of cab drivers lobbying their local governments to ban Uber.

“These people have made and continue to make a lot of money from a captive audience in a very clunky old system,” Masters says.

The enterprise strikes back

But perhaps this is uncharitable. Because, for a centuries-old institution with sprawling global operations cobbled together from countless mergers, JPMorgan Chase is fairly innovative.

From partnering with nimbler fintech startups to using APIs to share data more securely, to embracing public cloud computing, JPMorgan has taken bold steps on Dimon’s watch – again, “bold” by the standards of lumbering, heavily regulated megabanks.

And of course it’s building Quorum, a private blockchain for smart contracts, in a project led by another of CoinDesk’s Most Influential People in Blockchain of 2017, Amber Baldet.

“It’s not as if Chase doesn’t hedge their bets incredibly well,” says Sam Maule, the managing partner for North America at the fintech consulting firm 11FS.

Granted, none of this is likely to impress cryptocurrency users, whose minds are continually blown by truly next-gen fintech advances like ring signatures, atomic cross-chain swaps and time-locked contracts.

But there may be a simpler explanation for Dimon’s bitcoin-bashing than simple reactionary Luddism or rent-seeking.

‘Triggered’

At the Money2020 conference in October, Baldet, JPMorgan’s blockchain program lead, was asked about her CEO’s constant disparaging of the same currency that spawned the technology she’s working on.

She explained it in very human terms.

“What Jamie’s responding to is people on panels who continually ask him, ‘what do you think of bitcoin?’ at an outsized rate to what else is happening out there in the macroeconomic world of finance,” Baldet says. “It can just be a little triggering to be asked the same thing over and over.”

And speaking of triggering, the apoplectic reactions on social media and online forums of some in the bitcoin community to Dimon’s remarks suggest that even trolls can get trolled.

It “shows how much bitcoiners really do care about outside perception, especially from large banks,” Swanson says. “Because deep down bitcoiners want external validation for their worldview, and they can only rely on retail investors for so long. The big surge, to come, is if/when regulated [financial institutions] start trading coins like they trade other wares.”

JPMorgan would not make Dimon available for interviews for this report, but he gets the last word here. Because lost in all the lapel-grabbing, black-and-white headlines were a couple surprisingly nuanced and (for him) appreciative comments about bitcoin.

At the Delivering Alpha conference in September, just before saying that the currency was good for nothing but speculation for people living the U.S., he admitted:

“If you were in Venezuela or Ecuador or North Korea, you’re better off, probably, using bitcoin than using their currency.”

Wait, what was that? Digital currency empowering people living under oppressive regimes?

Not since Citicorp’s Walter Wriston predicted the twilight of sovereignty has a gray-haired New York banker sounded so cypherpunk … even if only for a few seconds.


Original artwork by Luis Buenaventura II, creator of the CryptoPop website. Click here to view more by the artist, and to check out the official CoinDesk Most Influential T-shirt.

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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2017: A Defining Year for Cryptocurrency Regulation

In a year of soaring cryptocurrency prices and countless initial coin offerings, it’s perhaps unsurprising that, over the course of 2017, regulators worldwide stepped in to define how they would oversee what had been to date a legally murky environment.

From China’s crackdown on online exchanges to the SEC’s report on The DAO, 2017 was perhaps one of the most significant years to date on the regulatory front. Indeed, the year saw regulators from many of the world’s leading economies issue investor alerts and cautionary statements about financial use cases for the tech.

The past two months especially have seen growing activity on the ICO funding model, as seen by bans in major Asian countries to enforcement actions in North America.

In this article, we look at some of the big policy shifts from the past twelve months – many of which may have set the stage for further industry-defining developments in the year ahead.

The People’s Bank vs bitcoin

It was the first week of 2017 and China’s “Big Three” bitcoin exchanges – OKCoin, Huobi and BTCC – were being warned by the country’s central bank.

That warning about staying compliant with “relevant laws and regulations” was followed in February by a freeze on withdrawals and the creation of new trading fees – both of which were measures imposed by the People’s Bank of China in a stated effort to curb the risk of money laundering. And after months of waiting, exchanges ultimately returned access to funds to users in late May.

Officials in the world’s most populous nation ultimately ordered those cryptocurrency exchanges to cease trading and shut down in mid-September, which combined with BTCC’s closure effectively ended the “Big Three” ecosystem and pushed trading activities within China to over-the-counter markets.

News of the pending shutdowns came just days after the country stopped ICOs within its borders, saying the campaigns operated by “illegally selling and distributing tokens.”

Where 2018 will head remains to be seen, though commentators on state-owned television in China have said in recent months that OTC cryptocurrency trading may be deemed against the law as well.

The DAO report

Rumors had circulated for months that the SEC would move to define how it would regulate ICOs. Yet the agency played its cards close until late July, when it declared that U.S. securities laws could be applied to some token sales depending on the nature of the token itself and the manner in which it was offered.

The funding model, through which the sale and distribution of cryptographic tokens would be used to kickstart work on a new blockchain network, was at the heart of The DAO, the now-defunct funding vehicle that raised millions of dollars in ethers in 2016 through the sale of DAO tokens. It collapsed later that summer following a debilitating exploit, sparking months of infighting, recovery efforts and, ultimately, a split in the ethereum blockchain.

According to a report published by the SEC in July, the DAO tokens were securities under U.S. law, though the agency said that it had declined to pursue any enforcement action related to the sale.

The SEC wrote at the time:

“…the Commission deems it appropriate and in the public interest to issue this Report in order to stress that the U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular offer or sale.”

The agency’s statements are significant because they sparked a host of similar warnings and publications from other regulators around the world.

The SEC itself would go on to warn about celebrity endorsed ICOs and public-stock scams that use the funding model as a way to entice investors. The agency has also pursued civil lawsuits against ICO organizers since July through a newly-created unit focused on digital investigations.

Putin’s edicts

putin, russia

CoinDesk readers are likely familiar with the long-running saga of cryptocurrency regulation in Russia.

And while recent statements from senior lawmakers suggest that Russia’s State Duma may finally approve rules governing the trade and issuance of cryptocurrencies, statements from earlier this year from president Vladimir Putin are arguably more impactful for the tech’s future in the country.

In late October, the Kremlin published five orders from Putin focused on various uses for the tech. He ordered new registration requirements for cryptocurrency miners, the application of securities laws to the initial coin offering (ICO) funding model and research into how the tech could be used as part of a digital payments ecosystem in the Eurasian Economic Union.

Echoing moves by other countries in the past year, Putin also ordered the creation of a regulatory “sandbox” for companies that use technologies like blockchain to develop new products and services.

While the orders undoubtedly nudged forward the work on legislation around cryptocurrencies, Putin’s edicts have arguably advanced efforts to integrate the tech into the Russian state government infrastructure. They also came months after the Russian leader briefly met with ethereum creator Vitalik Buterin.

Other leaders in Russia have pushed the idea of using blockchain for public-sector purposes as well. Prime minister Dmitry Medvedev, for example, ordered government officials to begin researching uses of blockchain last spring.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in BTCC.

Images via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Investors Still Wary of Bitcoin

Setting aside a massive December price correction, Bitcoin has pushed its way into the minds of ordinary people all over the world.

Google stats for 2017 have Bitcoin as the second most searched news term of the year, as everyone from plucky investors, cryptocurrency newbies and diehard technologists look for the latest news and price updates on the lucrative cryptocurrency.

With a market capitalization of over $11 bln, Bitcoin has made many a millionaire with its rapid appreciation in value this year. Investors flocked to buy Bitcoin during its most recent bull run which started in November which saw the price skyrocket to an eventual high of $20,000.

The almost inevitable correction in the lead up to Christmas sent jitters through the market and many investors will have lamented the dramatic drop in price.

It’s not surprising to hear financial analysts and industry experts describe an apathy towards the market due to the volatility seen in recent weeks. Both big businesses and individual investors still seem wary of putting their money into cryptocurrencies.

Small players

Speaking to CNBC this week, American billionaire Tilman Fertitta, who made his fortune as a restauranteur, believes the average man won’t go near Bitcoin until they have some sort of insurance.

“They don’t have the money. It’s just paper. That’s all Bitcoin is, is paper, but it’s not insured by the FDIC today. And until it’s insured, a lot of people are never going to buy it.”

Nevertheless, the 60-year-old isn’t opposed to the idea of Bitcoin becoming a widely accepted payment method in the future, even by some of his businesses, ranging from casinos, hotels to restaurants.

“I mean, I remember somebody walking into my office and saying, ‘The world’s going to change. There’s this thing called the Internet.’ And that wasn’t that long ago. So we have to remember this. It’s just something new and everything moves at a quicker pace today.”

Big players

Larger financial institutions have already entered the cryptocurrency fray after the launch of Bitcoin futures contracts on CBOE and CME trading exchanges. The NASDAQ and Goldman Sachs are also set to jump onboard in 2018 – paving the way for wider mainstream adoption.

Nevertheless there still seems to be a reluctance for bigger corporate players to invest some serious capital into the market.

In an interview with CNBC this week, head of currency and forex technology company FiREapps Wolfgang Koester said big companies want a less speculative environment,

FiREapps provide insights into the likes of Google and Ericsson, but Koester says big companies will not invest in current cryptocurrencies and are waiting for state-issued digital currencies, backed by regulation.

“They are saying we can’t get involved with Bitcoin, but we like the idea of Bitcoin and others. We like speedy transactions at a lower cost. They are waiting for governments to issue those digital currencies so that they can take advantage.”

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Charlie Lee

Strange as it might seem, Charlie Lee stills pays for parking.

On the sun-streaked streets of San Mateo, California, the man affectionately known as “Satoshi lite” feeds the meter before walking up to the front of the famed early-stage startup incubator Boost VC. The locked glass doors seem not to care they’re reflecting the face of litecoin, the $12 billion cryptocurrency that’s now one of the world’s oldest, largest and most well-known.

Once inside, though, the reception to Lee is much different.

There, venture capitalist, comic book junkie and occasional podcast host Adam Draper is quick to begin picking Lee’s brain on everything from virtual reality’s potential to the success of the viral ethereum app CryptoKitties.

“It’s one of the most impressive products I’ve seen,” Draper gushes.

Leaning back in one of the many chairs that dot the complex, Lee is slower to respond, at last referring to a tweet in which he lauded “crypto collectibles” as a worthy blockchain use case.

It’s the beginning of a pattern with Lee, whose every real-life comment seems to have a digital analog. Over the course of two interviews during the day (one with CoinDesk, the other with Draper), he’ll continue to refer often to social media, where his nearly 500,000 followers have made him one of the most beloved figures in crypto.

But his digital fandom has been all the more remarkable as its grown during a time when the technology’s pantheon of early adopters has largely been torn down, tarred and feathered, or if nothing else, exited the year all the worse for engaging in such public tactics themselves.

Even during the thick of 2017’s scaling debate, with bitcoin supporters at arms in a daily message board war over the technology’s roadmap, Lee seemed to rise above the fray.

That’s not to say he demurred or watered down his opinions – far from it.

Whether he was arguing Ripple isn’t a cryptocurrency, trolling bitcoin’s rival blockchain bitcoin cash or speaking out against speculation in the litecoin market (he would go on to sell all of his holdings), Lee appeared to walk some unseen tightrope of taste.

But if there’s some magic combination, some code of blockchain ethics he’s tapped into, Lee isn’t forthcoming with his secret. Asked just how he gets away with such an outspoken persona, he still seems to have the right answer.

“I get a lot of abuse, too,” he says.

Origin story

Spend some time with Lee, though, and it’s clear what’s endeared him to so many – his clarity of expression, his modesty and his belief in the virtue of work.

Walking past walls lined with Draper’s favorite superhero slogans, it’s perhaps easy to think of these attributes as Lee’s own superpowers. And if that’s the case, Lee’s origin story begins at the end of 2016, when he finally found a purpose for litecoin, a project he seems to have started absentmindedly in 2011 and later, almost abandoned.

Created while he was working as a software engineer at Google, Lee made litecoin by simply copying bitcoin’s code (with some slight modifications designed for merchants).

But if litecoin caught on in those early days, it wasn’t for its tech. Widely heralded as the “silver to bitcoin’s gold,” it was largely the marketing that cemented both litecoin and Lee, as the slogan arguably succeeded better than any targeted toward promoting cryptocurrency (at once defining both the project and its relation to bitcoin).

So, as bitcoin rose to $1,000 at the height of its inaugural mega-bubble in 2013, litecoin followed suit, closely tracking the movement with its own rise to near-$50 a pop.

From there, though, Lee’s magic touch was largely allocated to other projects. Soon after, he would join San Francisco-based bitcoin startup Coinbase, a business that would become so consistent as to have gained recognition as the “blue chip” of the world’s most volatile market.

By mid-2015, litecoin’s future was unclear, and its market, almost inactive.

“I definitely wasn’t paying a lot of attention to [litecoin] during the time I was at Coinbase,” he recalls, believing the decision was due to the nascent state of the market at the time.

Looking back, however, he says that litecoin “wasn’t ready” to grow, and that the most crucial thing he could do for the crypto ecosystem was to help bitcoin succeed.

“I thought the most important thing was to let people own bitcoin and hold bitcoin,” he says.

The archenemy

But like all heroes, Lee was called into action by a foe, and in the world of bitcoin, there perhaps hadn’t been one more sinister than the technology’s struggle over its technical roadmap.

By the start of 2017, the fight that had split the developer community since 2015 had gone from bad to bleak. Almost daily, conspiracy theories seemed to emerge in which industry figures were accused of undermining the cryptocurrency for personal gain.

New funding was non-existent and development was languishing, with the market’s leading solution, a code update called Segregated Witness (SegWit), stuck in a political gridlock and unable to garner consensus.

A somewhat complex and poorly understood concept, SegWit required bitcoin users, businesses and miners to update their software to boost transaction capacity. And despite fits and starts toward approval (due to how the proposal was coded, it required a certain percentage of miners to lead the way in the software change), by the start of 2017, any consensus on the matter was beginning to seem unlikely.

“I saw bitcoin was having this scaling debate and there was all this FUD against SegWit, and I thought it was unfair and that I could do something about it,” Lee recalls.

Step one in that pursuit was quitting Coinbase. What needed to happen next was more difficult – convincing the litecoin community that SegWit was “the path forward” that could boost its market and spark a revival. And there’s reason to believe the community was persuaded.

On the news that litecoin would push through the scaling proposal, the markets responded, breaking out of the sub-$5 doldrums the cryptocurrency had been locked in since 2014 and rising back to $50.

“People bought into that and traders bought into that,” Lee says.

But despite the community buy-in, Lee wasn’t able to convince litecoin’s miners (many of whom were also large bitcoin miners) to embrace SegWit quite so easily. Most notably, the final agreement required what was effectively an eight-hour Skype call with litecoin’s developers and miners.

But in the end, the tactics worked, and within a month litecoin’s code had upgraded to SegWit.

With great power…

But it’s what happened next that appears to have had the largest and most lasting effect on Lee.

With litecoin’s efforts as an example, leading stakeholders soon sought to change bitcoin’s code through a similar effort, with investor Digital Currency Group gathering industry luminaries in New York to strike a deal. What emerged from the meeting of some 50 startups and miners was the controversial “New York Agreement,” an attempt to strike a compromise that would both pass SegWit and upgrade the protocol to allow for 2 MB blocks.

What’s perhaps been undersold about the event, though, is how much it was modeled after Lee’s own approach to scaling litecoin, a fact that’s not lost on Lee given the results in both instances were far from analogous.

While litecoin’s meeting helped galvanize a small and growing community, the New York Agreement divided and angered bitcoin’s user base. The technology’s developers not only boycotted the proceedings, but soon began speaking out against its branding as a kind of coercion.

Like many other developers, Lee describes the attempt in retrospect as tone-deaf to the core philosophies of the bitcoin movement, even if it was well-intentioned.

“They did have a meeting with most of the miners and the businesses, but that is just kind of part of the community. A lot of users follow developers, since developers are doing the job of keeping the network secure and everything. So, it failed because of that,” Lee says.

And as he did on Twitter, in interview, Lee advocates that the meeting exposed bitcoin to a new kind of attack vector, one that could be corrupted as the industry grows (and attracts even more powerful enemies).

“If governments can tell all the miners to change bitcoin into something different and that just works, then bitcoin is too fragile,” he says.

A great responsibility

As a side effect, it appears Lee is now acutely aware of the impact of his work and words. Indeed, during the interview he routinely references past statements, seldom treading on new ground.

Sharpening his chopsticks in a nearby noodle shop, Lee admits he’s erred in judgment in his public statements in the past. He’s been thinking a lot as of late about one particular tweet. Made just before the news China’s regulators had moved to take domestic exchanges offline, he quickly pulled a remark attesting it was true.

However, before the Chinese government made that news public, Lee’s statement led to a stir that some believe pushed down the bitcoin price.

“I was telling the truth, but the truth caused the market to correct. People found out the truth from me first, and they sold,” he says. “A lot of people got hurt.”

As the conversation continues, we settle into a somber pace.

Question. A pause. An answer. A drink of tea, the sound of a cup set down and onto the next. In between, Lee is as careful with his noodles (hovering them cautiously over his spoon before each bite) as he is with the conversation.

But when Lee finally asserts, the topic of choice is compelling – a recent Reddit post in which an unknown user told the story of a man who allegedly committed suicide after selling 10,000 bitcoin too early.

“That’s pretty sad,” Lee says, and, while he’s not sure if it’s true, he seems to find a larger truth in what the story is seeking to convey.

Unlike past topics, he seems to linger on the point.

“I can totally see that though,” he says. “You had, what, 10,000 bitcoin, and you just sold them for whatever reason. Now that’s like $100 million.”

At first, I don’t think much of the remark, although later it occurs to me Lee is finally letting his guard down, at least providing the answer to a question that’s long plagued the interview – namely, why he’s so unwilling to break his constructed narrative.

The answer, revealed then, is that for Lee, cryptocurrency is a serious matter, an issue of life, liberty and death.

“It will always bug you, the fact that you had $100 million and you made the wrong move,” he continues.

Higher calling

In no time at all, though, Lee is back at it again, this time in a Boost VC backroom that seems to double as part storage closet, part recording studio.

Like much of the Draper establishment, the room feels not unlike any friend’s basement you had in college, kegerator in the corner and the floor strewn with Nintendo cartridge games.

Now answering questions for a Boost VC podcast, Lee is back on script, with the conversation retreading again – Lee is concerned about ICO incentives; believes bitcoin is the most important cryptocurrency; and is overall optimistic about the state of the industry.

That said, the conversation isn’t without its new moments. Of note is the tinge of nostalgia now that the bitcoin price is up above $10,000. Although, Draper does most of the talking on the subject.

“Five years ago that wouldn’t be a conversation, it was, ‘My friends might be interested in purchasing some of this.’ This conversation is being well received now, and it’s being had by every crypto person and high net worth person and presidents and prime ministers,” Draper says.

“It’s fascinating,” he continues, as Lee passed an opportunity for response.

Somehow even a conversation about superpowers doesn’t turn up much interest. Lee’s answer? The ability to go back in time to buy more bitcoin.

With the podcast wrapped, the conversation spills into the hall. Lee lingers with Draper, myself and our cameraman for a few moments, just long enough to seem polite.

We’re on the steps when he turns and declares, “I need to go now.” Back sheathed in sunlight and heightened on the stairs, there’s a certainty gravity to the statement.

Quite simply, when Lee turns to leave, you believe he’s needed elsewhere.

Want more? Charlie Lee talks his philosophy toward cryptocurrency.

[embedded content]


Original artwork by Luis Buenaventura II, creator of the CryptoPop website. Click here to view more by the artist, and to check out the official CoinDesk Most Influential T-shirt.

Video by Ali Powell at 40 Thieves Films 

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Where Are All the Quick Wins for Blockchain?

Tom Klein is the founder of BusinessBlock, a consulting firm focused on creating real blockchain value
for organizations and driving operational excellence with early-stage technologies.

The following article is an exclusive contribution to CoinDesk’s 2017 in Review.


Do you really want to wait until 2022 for blockchain to benefit your organization?

In 2017, much of the focus was on vision setting, long-term projects and the sizzle of cryptocurrencies. We also got CryptoKitties, a star of 2017 blockchain usage that is cute and fun, but of limited benefit.

As someone who joined the community because of the technology and social impact, the vision is compelling, but nowhere near sufficient to sustain this ecosystem until 2022-2024, the time when most predictions of meaningful production applications are settling.

The question for 2018, then, is more tangible: How do we get real cost savings? Improve the customer experience?  Increase revenue? Decrease risk? Arrive at stakeholder benefits more quickly?

Bite-sized success

First off, we need to make the entire blockchain ecosystem more actionable, more real, even better – simpler! Maybe because this is a technology-led community, most blockchain discussions get more complicated rather than simpler.

With simpler, quick-win, use cases, there is an opportunity to move organizations from research and into action.

You might think, there are already plenty of use case lists, just get going! True, there are plenty of lists, but they lack actionability. They are too high level – it’d be almost the same as telling a salesperson to “just go sell something” without the context, the training, the experience and the technology underpinnings for them to be successful.

My company is helping to change the process by thinking this way: “What benefit can we bring using existing blockchain technology in 3-6 months?”

Though we certainly don’t have these simpler, quick-win use cases nailed down yet, we have identified four patterns where we believe there can be 2018 value:

  • Decrease digital storage costs while learning blockchain
  • Improve trust and usability of recorded data
  • Next generation business process management and integration
  • Speed up and reduce costs of payments.

The goal of this list is to combine the fundamental values of blockchain, existing technology and real organizational needs. The first pattern on the list is a perfect example. Hardly anyone would say that storage is visionary and while it’s cheap, the continual expansion of data, necessitates better solutions.

With Sia, Storj, and others, you can reduce your costs over AWS – a practical benefit from a blockchain.

Another quick win example is a private equity administration blockchain developed by Northern Trust. In its solution, the company looked at how to leverage the trusted data resulting from using blockchain. Their blockchain leverage turned into reduced costs and duration of transactions along with increased transparency for audit and compliance.

Giving up control

In addition to simplifying the use cases, we need to address the proverbial elephant in the room: everybody wants the benefits of a blockchain but is hesitant to dive in because of competitive and control concerns.

These are valid concerns, and we’ve already seen these issues manifested in the bitcoin community. Since we won’t eliminate the concerns directly with blockchain, a better way to speed adoption is to create a set of patterns to follow.

For example, take a look at a simple hierarchy of business network models:

  • Public data + Own Organization + consumer
  • Vertical value chain with dominant origin or end point
  • Complementary Proprietary Data/Contracts/SLAs + Own Org + consumer
  • Complementary Proprietary Data/Contracts/SLAs + Own Org + Proprietary Data/Contracts
  • Competitors via alliances, consortiums and direct relationships

The model at the top is the easiest way to get started since it has the fewest direct participants while the one at the bottom is the most difficult because these are your numerous, direct competitors.

Not surprisingly, each of these models has examples. Public data is the key to the first model, whether it’s flight departure times or from a governmental entity. The second has many examples (Tencent, Daimler, Cargill, Bloomberg…) where a dominant organization can drive or forestall change within a business network.

The third and fourth are about disruption – both avoiding it, and creating new combinations to improve a customer’s experience. And finally, there is the straightforward combination of direct competitors working to create some sort of new standards.

Like a lot in blockchain these days, these patterns and models are only the beginning.

Feel free to use them as a guide to prioritize your thinking, minimize blockchain readiness objections and get to the nuts and bolts of creating a real blockchain project. Meanwhile, we’re working on enhancing these patterns with specific scenarios to make them even more actionable.

We can see a better world using blockchain. Let’s get there faster by focusing on creating simpler, more practical, use cases. We may even get to the world-changing visions more quickly.

Slow and steady wins the race? CoinDesk is accepting original submissions to its 2017 in Review. Email news@coindesk.com to pitch your idea.

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