The Onion Released a Guide to Blockchain, and It’s Hilarious


Despite the many amazing use cases for public and private blockchain networks, there’s no way around the fact that the word “blockchain” has been misused, misunderstood, and hyped into a state of near-meaninglessness in the last few years.

Money-hungry ICOs have jumped on the chance to put everything from celebrities to board games “on the blockchain,” and there have been multiple cases of the stock value of different companies skyrocketing simply for putting the word blockchain in the company name.

British firm On-line Plc changed its name to On-line Blockchain Plc and saw a 364 percent increase in stock value on the same day. At least the company was tech-related — when Long Island Ice Tea changed their name to Long Blockchain stocks value jumped 200 percent, and, well it’s a company that mostly just makes ice tea!

It’s no wonder that well-known satirical news network The Onion has taken a crack at the hyped up state of cryptocurrency tech, and they certainly make some, well, interesting observations.

The Onion Guide to Blockchain

The guide starts off reasonably enough, pointing out that blockchain is the underlying protocol to cryptocurrencies like Bitcoin, Ethereum, and Dogecoin, before facilitating a little Q&A for the readers. So far so good, right?

Q: How does blockchain work?

A: Do you want to talk science shit or do you want to make some fucking money?

Ah.

The Onion is, of course, referencing the borderline feeding frenzy that was ICO crowdfunding, in which billions were raised for companies with no products to speak of by investors who wouldn’t have understood what the products were for — had there actually been any. ICO fundraising has slowed down a lot in Q4 of 2018, but not before raising well over $13 billion in the first half of the year alone, according to some estimates.

In an unregulated market suddenly opening up investment for more people than ever before, hype tactics by ICO marketing teams made cryptocurrency sound like a magical solution to all the world’s problems, and many invested with no knowledge of what blockchain really even was. Whoops.

Q: Is the system fully secure from hackers?

A: Nothing that bad has happened yet, so we’re just going to say yes

While blockchain is purported to be one of the greatest leaps forward in cybersecurity history, it’s fair to say that further testing is needed to determine exactly how secure it is from attacks. NASA programmer and creator of the XKCD webcomic Randall Munroe had a go at the use of this technology for secure voting software:

The Onion didn’t leave banking applications out of their post, stating that “As long as banks still find a way to exploit the poor, they couldn’t care less,” before moving onto the issue of child pornography allegedly encoded onto the bitcoin blockchain.

Q: Is there really child pornography encoded into bitcoin’s blockchain?

A: Only a little bit!

Ouch. The article speculates on the potential for blockchain to “further entrench us in our dependence on technology without which we would be plunged into a horrifying new dark age,” and of course, took another shot at the efficiency of blockchain technology and its role in the wild west that is cryptocurrency investing.

Q: What is the benefit of using blockchain?

A: Provides a more efficient way for you to lose all your money at once.

In a turbulent and developmental industry, it can be good to poke fun once in a while. Blockchain has already been adopted by the world’s leading shipping firms, banks, and governments while being praised by the likes of the World Economic Forum for its potential to raise trade revenues by trillions of dollars.

Those of us who support cryptocurrency adoption can take The Onion’s guide in the tongue-in-cheek spirit in which it’s intended and wait for the industry to prove itself to the world through merit.

Of course, the final point about cryptoasset investing enabling someone to lose all their money at once probably hits home for a not-insignificant amount of aspiring investors around the world — something put into words quite well by otherworldly Twitter novelty account Crypto Demon:

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How to Mine Litecoin – The Complete Beginner’s Guide to Litecoin Mining

To get started mining your L3+ Litecoin, or other Scrypt coins, watch this video! You can also use it to get paid with BTC, LTC, or just about any other altcoin!

The Risks of ASIC Mining

Some developers don’t like the idea of ASIC (Application Specific Integrated Circuit) manufacturers having a say in their coin development. However, other ASIC developers (such as Bitcoin, Dash, and Sia) are allowing ASIC miners to mine their coins.

For example, Monero developed the Bitmain X3 for ASIC mining. (And many speculate that Bitmain successfully mined Monero with ASICs for many months.) But the Monero development team eventually forked the coin, so that the ASICs would no longer be compatible with it.

Here’s what developers fear: These powerful ASICs could lead to large, centralized mining farms, and could potentially even launch a 51% attack. (This kind of attack occurs when a person or entity controls 51% of the hash power of the network.)  There is some risk involved in buying an ASIC miner to mine a coin, because it can potentially become useless.

However, many ASICs can be quite profitable in the long run.  For example, in Monero’s case, the X3’s were used to mine other CryptoNight coins that haven’t forked yet, and are actually quite profitable.

My Opinion of the Antminer L3 ASIC Miner

The Antmier L3+ mines the Scrypt algorithm, and the primary coin it uses is Litecoin. The L3+ debuted last summer, and it was very profitable for a long time. In fact, it made around $20-$30 per day, even with rising difficulties and network hashrates.

This winning streak was primarily due to the epic price run that Litecoin made in 2017: It went all the way from under $3 at the beginning of the year to over $300 at the height of the crypto market in December.

I desperately tried to get one, but Bitmain was always sold out. I finally bought one on Amazon, and I actually ended up getting scammed. However, Amazon came through for me, and I received a refund.

Here’s the moral of that story: If possible, buy directly from the Original Equipment Manufacturer (OEM).

I did eventually get my hands on some L3’s, but they’re nowhere near as profitable now.

The market has significantly been down since then, and difficulty is still climbing, as more L3’s are sold. So at the time of this writing, profits are back down to around $3 per day.  That said, they’re also much cheaper now. They usually go for less than $600, and you should be able to reduce that price even further by using coupon codes that you can find around the web.

The L3++ is also now available, which is a little faster and a little more expensive than the L3+. (This article is a setup guide that will apply to both models.) Of course, here’s the upside with cheap ASIC miners: If and when crypto prices do take off again, the profitability of miners will go through the roof. So within a single bull-market cycle, you’ll quickly get an ROI many times over.

Setting Up the Miner

Let’s walk through setting the miners up. Then I’ll give you some thoughts about how to optimize their usage to maximize your profits…

Unbox your miner, power supply, and cables.

Hook everything up:

  • All 9 PCI-e connections (2 on each of the 4 hashing boards, and 1 on the controller)
  • The Ethernet cable (from the L3+ to your router)
  • The power cord

Then the miner should power on automatically.

Antminer L3+ cables

After you power it on:

  • Download the free IP Scanner tool (the Angry IP Scanner).
  • Install and run the Angry IP Scanner.
  • Click “Start.”
  • After the scan completes, click the “Go to” dropdown at the top, and choose “Next alive host.” Eventually, you’ll see an Antminer appear.

            (Note: It may not specifically show as an Antminer. If you have a lot on your network scan and cannot                  easily distinguish your networks, you may need to try multiple devices.)

  • Once you find it, right-click on it. Choose “Copy IP.” Then paste it into your browser.

Here’s how the whole process should look:

 

Choosing Your Litecoin Mining Pool

This choice will vary, based on the mine you have and the way you want to be paid out.  For example, you can mine on a Litecoin pool, and directly get paid in Litecoins. Or you can mine on Nicehash, and get paid in BTC.  Even better, mine on ProHashing.com, and get paid in the coin of your choice!

ProHashing

Here’s what I like about the power and flexibility of ProHashing: They automatically mine the most profitable coins for each supported algorithm (such as Scrypt, SHA-256, X11, and Equihash). They then pay you out in the coin you choose.

Even if you only want to use Litecoin with your L3+, you can mine the most profitable Scrypt coins. Then you’ll get paid out in Litecoin, so you’ll likely make more Litecoins than you would have by just mining Litecoin on another pool.  By using ProHashing, you don’t have to make calculations or hunt for profitable pools. Instead, you just mine on ProHashing, and their software takes care of the rest.

For extra profitability, you can select payment in coins that you think have a higher likelihood of increasing in value.  Yes, Litecoin did skyrocket in value last year, but at this point, you have to ask yourself: Which coin(s) are likely to go up 5x, 10x, or even 100x?

With Bitcoin and Litecoin having such large market caps, it takes a very large amount of capital to even dream of making 5x the value.  Meanwhile, you can easily triple your earnings if you get paid $3 a day—in profits, or in the form of other altcoins, which have much smaller market caps.

These odds are especially true during “alt season.” In this season, just about every altcoin gets its 15 minutes of fame (with at least one huge price pump). If you’re just looking to take profit in Bitcoin or USD, you can get paid in one of these coins, then stack your sell orders. Then when these pumps occur, your orders are filled immediately.

But with Prohashing, you don’t have to put all your eggs in one basket.  You can get paid via any number of coins, with any weight you assign. So you can utilize the strategy across multiple coins, or mix in some long-term coins if you prefer.

Note: Make sure you have a wallet address ready for each coin you want to get paid in. You can accomplish this goal by going to Prohashing, and clicking on “Settings” then “Payout Proportions.”

One final word on pool strategies before we get into the details of the Antminer setup: Use multiple pool services, so you have an unrelated failover setup. Then the likelihood of both pools being down at the same time (and your machine being idle and losing money) will be much smaller.

Mining Pool Setup

Go to your Antminer “Miner Configuration” page, and enter the following:

URL:  prohashing.com:3333
WORKER: <enter your ProHashing Account Username here>
PASSWORD: n=<WorkerName>, a=<Algorithm to mine>

Note: Make sure that you remove the brackets.

Actual Example:
URL:  prohashing.com:3333
WORKER: Techman34
PASSWORD: n=myL3, a=scrypt

For your second pool, we’re going to mine on NiceHash and get paid in Bitcoin.

  1. Go to this URL.
  2. In the “SELECT ALGORITHM” dropdown, choose “Scrypt.”
  3. Under “SELECT LOCATION,” choose your region.
  4. Click the “Generate Stratum” button.
  5. Copy the URL, and paste it in your 2nd Pool, under your Antminer Miner Configuration tab.

nicehash configuration

Actual Example:

URL: stratum+tcp://scrypt.usa.nicehash.com:3333
WORKER: 37UPzLMoFE7i41qChPPXh7RxPprXWyMZBy.myL3
PASSWORD: x

Note: Under WORKER, you can use any bitcoin address you control and any worker name. Just put a period between them. Possible servers are .usa, .eu, and .jp. Then in the stratum address, just use the one closest to your location.

For the third and final Pool URL, we’ll use a Nicehash EU server:

URL: stratum+tcp://scrypt.eu.nicehash.com:3333
WORKER: 37UPzLMoFE7i41qChPPXh7RxPprXWyMZBy.myL3
PASSWORD: x

Then hit “Save & Apply” in the bottom-right corner of your Miner Configuration tab, and you’re off and mining with your L3+!

Miner Config Save

If you run into issues, watch the video above. As needed, you can pause it along the way, and work out the various steps. The process I laid out above might seem to involve a lot of steps, but it really only takes about 10 minutes to get completely set up and mining.

That’s it for the beginner’s guide to mining with your L3 ASIC Miner from Bitmain! I hope you’ve found this guide to be useful.

If you run into any issues or have questions, please comment in the field below or in the video comments. Or contact me on Twitter at @cryptocg. However you reach out, I’ll try to help.

If you’re interested in taking your crypto mining to the next level, sign up at Crypto Mining Academy. There, I offer a comprehensive course, which provides massive detail about every step of the mining process.

Happy Mining!

Ian (a.k.a. Techman34 on the Ethereum forums)

Download a handy PDF Version of this L3 Mining Guide here.



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What is Ethereum – A Non-Technical Guide for Beginners

Today we’re going to explain in depth what is Ethereum. Don’t worry, the whole explanation will be non technical and easy to understand.

What you will learn in this video

  • What Ethereum is
  • How Bitcoin contributed to the concept of Ethereum
  • Ethereum’s goal and the centralization of the Internet
  • What smart contracts are, their pros and cons
  • What is Ether – Ethereum’s currency

The Ethereum Concept Started with Bitcoin

Before we get into Ethereum we need to do a quick recap about Bitcoin, since it’s the basis from which Ethereum was born.

By now you probably know that Bitcoin is a form of decentralized money, and if you still have some questions about what that means or how it works, then you might consider revisiting our original video, “what is Bitcoin”.

Before Bitcoin was invented, the only way to use money digitally was through an intermediary such as a bank, or Paypal. Even then, the money used was still a government issued and controlled currency.

However, Bitcoin changed all that by creating a decentralized form of currency that individuals could trade directly without the need for an intermediary. Each Bitcoin transaction is validated and confirmed by the entire Bitcoin network. There’s no single point of failure so the system is virtually impossible to shut down, manipulate or control.

Pretty neat huh?

From Bitcoin to Blockchain

Well, now that we know that money can be decentralized, what other functions of society that are centralized today would be better served on a  decentralized system?

What about voting? Voting requires a central authority to count and validate votes. Real estate transfer records currently use centralized property registration authorities. Social networks like Facebook are based on centralized servers that control all of the data we upload to them.

What if we could use the technology behind Bitcoin, more commonly known as Blockchain, to decentralize other things as well?

The interesting thing about Blockchain technology is that it’s actually a by product of the Bitcoin invention. Blockchain technology was created by fusing already existing technologies like cryptography, proof of work and decentralized network architecture together in order to create a system that can reach decisions without a central authority.

There was no such thing as “blockchain technology” before Bitcoin was invented. But once Bitcoin became a reality, people started noticing how and why it works and named this “thing” blockchain technology.

Blockchain is to Bitcoin what the Internet is to email. A system, on top of which you can build applications and programs. A currency like Bitcoin is just one of the options.

So this got people very excited, and they began to explore what else can we decentralize. However, in order for a system to be truly decentralized it needs a large network of computers to run it. Back then the only network that existed was Bitcoin and it was pretty limited.

Bitcoin is written in what is known as a “turing incomplete” language which makes it understand only a small set of orders (like who sent how much money to whom). If you want to create a more complex system, you’ll need a different programming language, which means a different network of computers.

Imagine for a second you wanted to build your own decentralized program, just like Bitcoin, at home. You’d need to understand how Bitcoin’s decentralization works, write code that mimics the same behaviour, get a huge network of computers to run this code and so on….that’s a lot of work.

Enter Ethereum.

Ethereum decentralizes the Internet

Ethereum was first proposed in late 2013 and then brought to life in 2014 by Vitalik Buterin who back at the time was the co-founder of Bitcoin Magazine.

Ethereum is the Do It Yourself platform for decentralized programs also known as Dapps – decentralized apps. If you want to create a decentralized program that no single person controls (not even you even though you wrote it), all you have to do is learn the Ethereum programming language called Solidity and begin coding.

The Ethereum platform has thousands of independent computers running it meaning it’s fully decentralized. Once a program is deployed to the Ethereum network these computers, also known as nodes, will make sure it executes as written.

Ethereum is the infrastructure for running Dapps worldwide. It’s not a currency, it’s a platform. The currency used to incentivize the network is called Ether but more on that later. Ethereum’s goal is to truly decentralize the Internet.

Wait? The internet is centralized? I thought the Internet already was decentralized and that anyone can start their own site.

While in theory that might be true,in practice Amazon, Google, Facebook, Netflix and other giants control most of the world wide web as we know it. There’s almost no activity on the web that happens without some sort of intermediary or 3rd party.

But once the concept of digital decentralization was demonstrated by Bitcoin, a whole new array of opportunities became available.

We can finally start to imagine and design an Internet that connects users directly without the need for centralized 3rd parties. People can “rent” hard drive space directly to other people and make Dropbox obsolete. Drivers can offer their services directly to passengers and remove “Uber” as the middleman. People can buy cryptocurrencies directly from one another without the need for an exchange that can get hacked or steal your money.

Ethereum allows people to connect directly with each other without a central authority to take care of things. It’s a network of computers that together combine into one powerful, decentralized supercomputer.

Smart Contracts

Ok, So now you know what Ethereum does but we haven’t touched upon HOW it does it.

Ethereum’s coding language, Solidity, is used to write “Smart Contracts” that are the logic that runs Dapps. Let me explain…

In real life, all a contract is, is a sets of “Ifs” and “Thens”. Meaning a set of conditions and actions. For example –  if I pay my landlord $1500 on the 1st of the month Then he lets me use my apartment.

That’s exactly how smart contracts work on Ethereum. Ethereum developers write the conditions for their program or Dapp and then the ethereum network executes it.

They are called smart contracts because they deal with all of the aspects of the contract – enforcement, management, performance, and payment.

For example, if I have a smart contract that is used for paying rent, the landlord doesn’t need to actively collect the money from me. The contract itself “knows” if the money has been sent. If I indeed sent the money, then I will be able to open my apartment door. If I missed my payment, I will be locked out.

However smart contracts also have their downsides. Going back to my previous example, instead of having to kick out a renter that isn’t paying, a “smart” contract would lock the non-paying renter out of their apartment.

A truly intelligent contract on the other hand, would take into account other factors as well, such as extenuating circumstances, the spirit with which the contract was written and it would also be able to make exceptions if warranted. In other words, it would act like a really good judge.

Instead, a “smart contract” in the context of Ethereum is not intelligent at all. It’s actually uncompromisingly letter strict. It follows the rules down to a T and can’t take any secondary considerations or the “spirit” of the law into account like what commonly happens with real world contracts.

Once a smart contract is deployed on the Ethereum network, it can not be edited or corrected, even by its original author. It’s immutable. The only way to change this contract would be to convince the entire Ethereum network that a change should be made and that’s virtually impossible.

This creates a very serious problem since unlike Bitcoin, Ethereum was built with the ability to create really complex contracts, and complex contracts are very difficult to secure.

With any contract, the more complicated it is, the harder it is to enforce as more room is left for interpretations, or more clauses must be written to deal with contingencies. With smart contracts, security means handling with perfect accuracy every possible way in which a contract could be executed in order to make sure that the contract does only what the author intended.

Ethereum launched with the idea that “code is law”. That is, a contract on Ethereum is the ultimate authority and nobody could overrule the contract.

This all came to a crashing halt when the DAO event happened.

When smart contracts go wrong

“Dow” or DAO stands for “Decentralized Autonomous Organization” which allowed users to deposit money and get returns based on the investments that the DAO made. The decisions themselves would be crowd-sourced and decentralized. The DAO raised $150M in Ethereum currency ,ether. when ether was trading at around $20.

While this all sounded very good, the code wasn’t secured very well and resulted in someone figuring out a way to drain the DAO out of money.

Now you could say that the person who drained the DAO was a “hacker”. But some would argue that this was just someone that was taking advantage of the loopholes he found in the DAO’s smart contract. This isn’t very different than a creative lawyer figuring out a loophole in the current law to effect a positive result for his client.

What happened next is that the Ethereum community decided that code no longer is law and changed the Ethereum rules in order to revert all the money that went into the DAO. In other words, the contract writers and investors did something stupid and the Ethereum developers decided to bail them out.

The small minority that didn’t agree with this move stuck to the original Ethereum Blockchain before its protocol was altered and that’s how Ethereum Classic was born (which is actually the original Ethereum).

Ether – Ethereum’s currency

We’ve covered a lot up until now and the last thing I want to talk about is Ethereum as a currency.

We’ve already established that Ethereum is basically a large bunch of computers working together like one super computer to execute code that powers Dapps. However this costs money – Money to get the machines, to power them up, store them and cool them if needed.

That’s why Ether was invented. When people talk about the price of Ethereum they actually are referring to Ether – the currency that incentivizes people to run the Ethereum protocol on their computer. This is very similar to the way Bitcoin miners get paid for maintaining the Bitcoin blockchain.

In order to deploy a smart contract to the Ethereum platform, its author must pay to do so. That payment is made in the form of ether. This is done so that people will write optimized and efficient code and won’t waste the Ethereum network computing power on unnecessary tasks.

Ether was first distributed in Ethereum’s original Initial Coin Offering back in 2014. Back then it cost around 40 cents to buy one Ether. Today, one Ether is valued in hundreds of dollars since the use of the Ethereum network has grown immensely due to the ICO hype that started in 2017.

Still Confused? Don’t worry, we’ll get more into Ether and mining in a later video. Ethereum’s network and Ether are a whole new rabbit whole we’ll cover but I think this will do for now as an intro to Ethereum.

This concludes this week’s episode of Ethereum Whiteboard Tuesday. Hopefully by now you have a better understanding of what Ethereum is – A network of computers working together to replace the centralized model of programs and companies which run the Internet today.

You may still have some questions. If so, just leave them in the comment section below.

Thanks for joining me here at the Whiteboard. For 99bitcoins.com, I’m Nate Martin, and I’ll see you…in a bit.

Special thanks to:

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Bear Market’s Little Helpers? A Guide to Crypto Futures

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Since their triumphant advent in the wake of the December 2017 bull run, Bitcoin futures seem to have occupied an oddly fixed position in the minds of many cryptocurrency buffs. A popular view among those who follow the dynamics of the crypto world rests on a set of established points about BTC futures: they exist since late 2017; they are offered by Cboe and CME, two respectable regulated exchanges; they help manage investment risks and as such are supposed to draw institutional money into the crypto space, mitigating price volatility and lending credence to the underlying asset.

The recent weeks, however, saw a shift in this previously serene mental landscape, as new considerations about crypto futures began to pour into media space with increased frequency. From allegations of massively suppressing crypto prices to a widening range of platforms offering crypto derivatives to a real prospect of Ethereum futures coming about soon, these developments point to the need of revisiting the realm of cryptocurrency-based futures. Now that these derivatives have been around for more than half a year, a more nuanced picture of this asset class’ role in crypto finance is emerging.

The origins

In the simplest terms, a futures contract (or a future) is an agreement to buy or sell a certain product on a fixed date. Futures are used as both an instrument for mitigating risks associated with price volatility of vital commodities, and as a tradable derivative product. A comprehensive Cointelegraph primer timed to the launch of the first regulated BTC futures last December is still there for anyone in need to recapitulate the essentials.

There were many reasons for the crypto community to eagerly anticipate Bitcoin futures’ introduction to regulated derivatives markets. Futures have long been seen as the first stepping stone on the path to reconciling the world of crypto finance with the system of traditional financial institutions. Existing within a well-defined legal and operational framework, futures contracts offer legitimacy and security that judicious Wall Street firms were waiting for in order to finally jump onto the crypto bandwagon.

Some of the collateral perks included increased liquidity of the market and transparent reference prices – in other words, more legitimacy and stability. At the same time, crypto futures held a promise for an alleged horde of retail investors who were interested in crypto assets yet wary of trading them on unregulated spot exchanges. Perhaps the biggest advantage of Bitcoin futures for this category of traders is security: since owning a cash-settled crypto future does not entail touching a coin itself, the scheme does away with fears of hacking and theft of cryptoassets. However, a flipside of not owning an actual coin is that futures traders would not be eligible for free coins in an event of a fork.

As the Chicago Board Options Exchange launched cash-settled Bitcoin futures trading on December 11, and their rivals Chicago Mercantile Exchange followed suit six day later, prices of both BTC derivatives and the coin itself surged amid an unprecedented wave of publicity. Each Cboe contract was for one Bitcoin, while each CME futures represented five. Both enabled traders to take either long (agreement to buy) or short (agreement to sell) positions, meaning that investors could bet on both increase and decline of Bitcoin price.

Cboe capitalized on their partnership with Gemini, a cryptocurrency exchange ran by the Winklevoss brothers, and used their experience with tracking crypto assets’ prices to create a tool called Cboe Gemini Bitcoin Futures Index. CME Group created its own price tracking instruments, CME CF Bitcoin Reference Rate and CME CF Bitcoin Real Time Index, in cooperation with a UK-based firm Crypto Facilities, which has a vast experience with cryptocurrency derivatives.

Playing into bears’ hands?

Despite the tremendous hype, it turned out quite soon that the volume of Bitcoin futures trading is not as impressive as the some enthusiasts could expect, eliciting the first wave of pointed criticisms. The fact that after the initial spike Bitcoin prices went steeply downhill in January did not help the derivatives market’s growth, either.

Mati Greenspan, Senior Market Analyst with a social trading and multi asset brokerage firm eToro finds this dynamic unsurprising:

“The Bitcoin futures have indeed opened up the markets to new investors who wouldn’t otherwise be involved. However, the volumes so far have been rather tepid, which isn’t much of a surprise. Bitcoin’s price has been falling steadily this year and as long as the direction is down, there’s little incentive to jump in.”

While it is enticing to attribute the underwhelming trading volumes to the decline in the underlying assets’ valuation, some observers point out that the two are actually tied in a kind of an egg-and-chicken cycle, mutually influencing each other. As early as in January, when a multitude of versions explaining the crash of Bitcoin price began to emerge in media space, one of the less-visible yet sound considerations was that futures trading had opened the crypto markets to bear investors.

A curious pattern showcasing retail and institutional investors’ diverging strategies with regard to futures trading could serve as indirect evidence to such claims. As a January Wall Street Journal study had uncovered, ‘little guys’ were the ones who were more likely to wager on the rise of BTC prices, while institutional players tended to short.

At the time, however, these concerns seemed to have faded from the mainstream media’s radars. It wasn’t until May that they resurfaced full-blown following the publication of the San Francisco Federal Reserve Bank’s letter suggesting that the advent of Bitcoin futures and the coin’s price decline did not ‘appear to be a coincidence.’ The Fed analysists explained that the rise of crypto futures for the first time gave the ‘pessimists’ a tool to counteract the ‘optimists’ who had previously fueled the growth unimpeded. Another attestation in a similar vein has been Fundstrat’s Thomas Lee’s attribution of falling Bitcoin prices to Cboe futures’ expiration that made rounds in mid-June.

Yet the issue seems to be far from settled towards either of the two poles: those voices who blame Bitcoin futures for declining crypto prices encounter equally robust arguments from the other side.

“I’ve done the math recently and it doesn’t seem to add up,” – says Mati Greenspan, maintaining that the size of the futures market is simply not sufficient to thrust the whole crypto ecosystem into an extended bear cycle.

Rohit Kulkarni, Managing Director and Head of Research for investment platform SharesPost, acknowledges some influence that ‘pessimistic speculators’ have exerted, but attributes the bulk of the blame to the regulatory turbulence of the first half of 2018:

“The subsequent [to December 2017] bitcoin price declines were not caused by the introduction of these futures, but rather the regulatory uncertainty surrounding the cryptocurrency market. In addition, we believe irrational speculation by pessimistic investors has also contributed to the price movement over the past six months. As such, we see the ongoing crypto bear market as clearly cleansing the ecosystem from short-term oriented speculators, which will be good for the crypto ecosystem long-term.”

Further adoption

Over the last half a year, Cboe and CME were not the only entities to have a dig at crypto futures, and Bitcoin was not the only asset underlying these contracts. Since March, UK-based financial institutions were responsible for a steady supply of breaking news in this domain. In March, a British cryptocurrency exchange operator Coinfloor made headlines by announcing the launch of the first physically settled Bitcoin-based futures product.

Also in March, it suddenly emerged that the abovementioned startup Crypto Facilities has been offering futures contracts tied to Ripple’s XRP token since October 2016, without much publicity, for some reason. On May 11, Crypto Facilities exploded another bombshell in the crypto space, revealing ETH/USD futures as their latest offering. And to crown it all, in June the same company unveiled the first regulated Litecoin futures.

Due to regulatory hurdles, staggering cavalry charges like these would hardly be possible across the Atlantic. Some of the established players in the US, who seem to be in a position to join the crypto derivatives race, remain undecided.

Yet this is not to say that the US companies halted their efforts to facilitate crypto-based derivatives trading. During the first week of May, the New York Times reported that both Goldman Sachs and the New York Stock Exchange were briskly moving ahead with their plans to launch crypto trading platforms and products. A few weeks later, a Pennsylvania-based Susquehanna International Group listed Bitcoin futures among their financial products.

The Ides of June saw a regulatory breakthrough that might prove highly consequential for crypto futures in the US, as the SEC Corporation Finance Director William Hinman had shed some light on Ethereum’s status as perceived by the regulator, suggesting that ‘current offers and sales of ether are not securities transactions.’ This statement has energized the industry and prompted Chris Concannon, Cboe’s crypto-savvy president, to speak of futures on ETH as of a settled deal. If Cboe breaks the path with such a product, it’s not difficult to imagine CME catching up quickly, given the firm’s partnership with Crypto Facilities, whose Ethereum derivatives infrastructure is already in place.

Evidently, despite all the challenges, cryptocurrency-based futures have to a significant extent succeeded in facilitating institutional capital’s entry into the cryptofinancial ecosystem. Most experts are positive with regard to further development of this trend, envisioning crypto assets as a legitimate element of the financial system.

“As we approach the anniversary of futures trading, we expect more institutional investors to make big moves with crypto dedicated funds. One recent example of this was the recent announcement of A16Z, a $300 million crypto fund launched by Andreessen Horowitz dedicated to investing in cryptocurrencies and other blockchain-related projects,” – notes Kulkarni.

Shane Brett, Co-founder and CEO of blockchain solutions provider GECKO Governance, appears to be on the same page:

“The emergence of cryptocurrency futures is a definite sign of increased mainstream adoption on the horizon, as it serves to speed up the legitimation and maturation of the market.”

Speaking of the ‘little guy’ retail investor, the direct benefits of the introduction of crypto futures have likely been more modest so far.

“There really isn’t much benefit for Main Street investors to use the Wall Street futures. They can just as easily buy bitcoin directly. As well, the minimum contract size on the futures could be a barrier to entry. The contracts of the CME are set at blocks of 5 BTC each, which is more than most retail customers are used to dealing with. Even the CBOE contracts that are set at 1 BTC each are difficult to deal with for most people,” – concludes eToro’s Mati Greenspan.



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Crypto Trading 101: A Beginner’s Guide to Candlesticks

That kid you know who’s now driving a Lambo because he traded something called dogecoin? He has more in common with Japanese rice traders from the 1700s than you might think.

Besides the ability to brag about their newfound riches, both traders likely analyzed price action and investor emotions by using the candlestick charting style.

Although modernized in the late 1800s by journalist Charles Dow, the core principles of candlestick charting remain intact today. Both the modern and historical technical analysts who swear by the style regard price action as more important than earnings, news or any other fundamental principles.

In other words, all known information is reflected in the price, which is precisely displayed in the candlestick.

Anatomy of a candlestick

A candlestick represents the price activity of an asset during a specified timeframe through the use of four main components: the open, close, high and low.

The “open” of a candlestick represents the price of an asset when the trading period begins whereas the “close” represents the price when the period has concluded. The “high” and the “low” represent the highest and lowest prices achieved during the same trading session.

Every candlestick uses two physical features to display the four main components.

  1. The first feature, known as the body, is the wide midsection of the candlestick and it depicts the open and close during the observation period (most charts will allow you to set the range for the candlesticks)
  2. The close is represented at the top of the body in the green candlestick and at the bottom of the body in the red candle.
  3. On the opposite is true of the open, which forms the bottom of the green candlestick and the top of the red candlestick.
  4. The final two components, the high and low, are represented in the second feature of the candlestick known as the ‘wick.’ Wicks are simply displayed as the thin lines extended above and below the body.

Cryptocurrency traders tend to take advantage of the inherent market volatility by using charts on the intra-day time frames. Each candlestick typically represents one, two, four or 12 hours. (A longer-term trader will likely choose to observe candlesticks that represent a single day, week or month.)

A candlestick becomes “bullish,” typically green, when the current or closing price rises above its opening price. The candlestick becomes “bearish,” typically red, when its current or closing price falls below the opening price.

The money makers

A candlestick rarely keeps its figure for too long in the volatile cryptocurrency market.

For instance, if the 2-hour candlestick opens at a price of $10 and jumps to $13 an hour later, the shape of the candlestick will have drastically changed since opening.

But traders have also come to realize the same candlestick shapes occur at the same stage of a price trend, no matter what is being traded. It can be very lucrative to identify such formations because they can expose clues as to when a trend might reverse, continue or when market indecision is at its peak.

Three of the most useful candlesticks for identifying a potential trend change or for gauging market sentiment are the “doji,” “hammer” and “shooting star.”

The doji is a prime example of what traders mean when they say a candlestick represents human emotion or market sentiment. When the asset price swings in both directions before closing near its opening price, it is clear the market is indecisive about the asset’s true value.The classic doji candle representing an indecisive market comprises equal-length wicks and a very thin, centrally located body. Further, there are several variations of doji, which signal trend exhaustion/trend reversal.

A hammer is the precursor to a potential downtrend reversal and can be a big money maker for the bulls.

Hammers are formed when price sinks below the open only to later return and then close above the open. Such price action signifies that at one point during the trading period sellers temporarily gained control but quickly gave it back and then some, for a bullish close to the candlestick.hammerThe physical features of a hammer consist of only one wick roughly two times the length of the body which is located at the top of the candle.

Last but not least, the shooting star is the exact opposite of the hammer.

The shooting star occurs at the peak of an uptrend when the bulls rally to start the trading period, but eventually lose control to the bears who drag prices to a close below the open.shooting starIt’s important to keep in mind that the longer the duration of the candlestick, the more powerful its effect is on the overarching trend.

For instance, a hammer spotted in a one-hour candlestick will have almost no impact on a 6-month long downtrend, whereas if the hammer formed on a 1-week long candlestick, its reversal impact would be much more significant.

Candlesticks via Shutterstock



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A Guide To US Regulating Bodies

On May 22, 2018  the US Commodity Futures Trading Commission (CFTC) issued an advisory statement for listing virtual currency derivative products. The statement is aimed at providing clarity for exchanges and clearing houses. Previously this week, major US cryptocurrency exchange and wallet Coinbase spoke to regulators about obtaining a federal banking charter.

Those events came in the midst of uncertainty regarding the status of crypto in the US, as federal regulatory bodies still haven’t come up with one definitive scheme to regulate Bitcoin, altcoins and initial coin offerings (ICOs). There are currently a number of federal regulators involved in crypto, and all of those bodies view cryptocurrencies like Bitcoin differently – defining it as a security, money, property or a commodity. Furthermore, on a state to state level, some additional regulations may apply.

With the absence of one definitive regulatory framework at the federal level, cryptocurrencies in the country fall into various categories, all of which must be considered.

In the US, Congress holds supreme power over federal regulatory agencies such as the CFTC and the Securities and Exchange Commission (SEC), enforcing them to comply with the laws it issues. Now that Congress is silent on the matter, each regulatory agency views cryptocurrency from its perspective, which is why it’s possible for different agencies to claim concurrent authority over the same actions… This means that US citizens must abide by the existing regulatory schemes of all the various agencies, even if they conflict.

The SEC: fights against ICOs and leans towards a “balanced approach”

The SEC, which regulates securities transactions, mostly considers crypto as securities. According to the 70 year old Howey Test, which the SEC applies to determine the purview of its jurisdiction, a security involves the investment of money in a common enterprise, in which the investor expects profits primarily from others’ efforts. 

Last year, the agency issued a marker opinion on digital assets, claiming that ICOs can sometimes be considered securities and therefore are subject to strict laws and regulations. Recently, the SEC elaborated on its views regarding crypto and said that it is looking to apply securities laws to everything from cryptocurrency exchanges to wallets.

ICOs appear to be the agency’s primary focus, as in February 2018 the SEC came through with a sweeping probe, issuing subpoenas to shut down a number of “unregistered securities” among ICOs. Prior to that, SEC chairman Jay Clayton accused “many promoters of ICOs and cryptocurrencies” of not complying with securities laws. Whilst he previously recognized ICOs as “potentially efficient fundraising tools”, in a op-ed published by the Wall Street Journal, Clayton also warned that “The SEC will vigorously pursue those who seek to evade the registration, disclosure and anti-fraud requirements of our securities laws.”

In a hearing at the US House of Representatives in April, William Hinman, the director of the SEC’s Division of Corporation Finance, explained why his agency had not completely banned ICOs, hinting that the SEC leans towards “a balanced approach” regarding digital assets and coin offerings, and that the area that “continues to evolve”.

Hinman also followed previous comments from Clayton that most ICOs should be considered securities. According to Hinman, the SEC would be consulting with entities releasing tokens to verify that the offerings were either regulated or not qualified as securities. When asked if he could think of an instance in which an ICO would not be seen as the offering of a security, Hinman replied:

“In theory, there is a time when a coin may achieve a sort of decentralized utility in the marketplace. There are some coins where you wouldn’t have an issuer to regulate…. In theory, there may be coins where that lack of a central actor would make it difficult to regulate… as a securities offering.”

Recently, SEC Commissioner Robert Jackson called the ICO market a prime example of an unregulated securities market in an interview with CNBC:

“If you want to know what our markets would look like with no securities regulation, what it would look like if the SEC didn’t do its job? The answer is the ICO market”

Jackson also said that he hasn’t yet seen an ICO that wasn’t a security and currently, there are no ICOs that registered with the SEC. However, in early March, The Praetorian Group filed with the agency to register their ICO as a security offering; if their application is accepted, they will become the first company to hold an SEC-regulated ICO.

The Securities and Exchange Commission (SEC)

What’s that? An independent federal agency responsible for protecting investors from fraud schemes. Primary overseer of the US securities markets

How does it view crypto? Securities

The Commodity Futures Trading Commission (CFTC)

What’s that? An independent federal agency that protects market participants from frauds. Regulator of futures and option markets in the US

How does it view crypto? Commodities

The Financial Crimes Enforcement Network (FinCen)

What’s that? A bureau of the US Department of the Treasury. Analyzes financial transactions in order to fight money laundering, terrorist financing, and other financial crimes.

How does it view crypto? Money

The Internal Revenue Service (IRS)

What’s that? A government agency that collects taxes and enforces tax laws.

How does it view crypto? Properties

The US Office of Foreign Assets Control (OFAC)

What’s that? An agency of the U.S. Treasury Department. Enforces economic sanctions in support of U.S. national security and foreign policy

How does it view crypto? Money, or fiat currencies

The CFTC: Overall cryptofriendly approach

The CFTC, a body that fully controls commodity derivatives transactions, claims that tokens are commodities. That means that in their view, Bitcoin (BTC) is closer to gold than to conventional currencies or securities, as it is not backed by the government and doesn’t have a liability attached to it. The CFTC’s approach to regulating cryptocurrencies as commodities has been recently backed up by a New York federal judge.

As CFTC Commissioner Brian Quintenz explained, “crypto-tokens offered in a pre-sale can transform. They may start their life as a security regulated under the SEC from a capital-raising perspective but then at some point – maybe possibly quickly or even immediately – turn into a commodity.”

The CFTC has shown some pro-Bitcoin leanings, granting LedgerX the right to create a regulated Bitcoin futures market. Moreover, J. Christopher Giancarlo, chairman of the US Commodities and Futures Trading Commission and self-proclaimed “cryptodad” – that hashtag was briefly featured in his Twitter bio – has gained the reputation of a rather cryptofriendly regulator, although he will leave office in 2019 as his term expires. In February, he said:

“We owe it this new generation to respect their enthusiasm about virtual currencies with a thoughtful and balanced response, not a dismissive one.”

Despite having dissimilar definitions of cryptocurrencies, the CFTC has been collaborating with the SEC. In February, the agencies held a highly anticipated hearing, where they gave credit to the cryptocurrency industry for adding a new paradigm to the financial system, stressed the importance of fair regulatory frameworks and famously said that “if there was no Bitcoin, there would be no blockchain”.

The CTFC also made its priorities clear. The agency stressed its interest in allowing growth for blockchain and cryptocurrencies, while focusing on fraudsters in ICOs. That seems to be the main direction for federal regulators at the moment. After dealing with unlawful ICOs, the various regulatory agencies might proceed to tackle more difficult issues, like what makes a token a security, a commodity, money or a utility.

The FinCen: ICO arrangements vary, but tokens are basically money

The Financial Crimes Enforcement Network (FinCen), a bureau of the Treasury Department that has full authority for Know Your Customer (KYC) and Anti-Money Laundering (AML) matters, considers tokens to be money. In other words, under the FinCen’s jurisdiction, ICO sales are subject to the money transmitter rules under the Bank Secrecy Act, and therefore are required to register with the government, collect information about their customers, and report any suspicious financial activities.

In March, FinCen disclosed in a letter written by its Assistant Secretary for Legislative Affairs Drew Maloney to senator Ron Wyden, that the agency will apply its regulations to ICOs, stating that “an exchange that sells ICO coins or tokens, or exchanges them for other virtual currency, fiat currency, or other value that substitutes for currency, would typically… be a money transmitter”. The regulatory body mentioned that “approximately 100 virtual currency exchanges” are registered with the FinCen, and reminded about their policing action against Ripple Labs in 2015 and BTC-e in 2017.

However, in that letter, FinCen also recognized that “ICO arrangements vary”, and that “certain participants could fall under authority of the SEC, which regulates brokers and dealers in securities, or under the authority of CFTC, which regulates brokers and dealers in security”.

The IRS: make sure to pay taxes, although we know it’s not easy

The Internal Revenue Service (IRS) thinks that cryptocurrencies are not currencies, but properties, meaning that if you sell your cryptocurrencies for a profit you will be subject to a capital gains tax. In 2014, the agency issued guidance on how cryptos should be taxed. According to Notice 2014-21, received or mined cryptocurrencies must be included in computing gross income with fair market value of the virtual currency as of the date it was received.

In an Expert Take for Cointelegraph, Robert W. Wood, a San Francisco-based tax lawyer of Wood LLP, explained the nuances of paying taxes for crypto, reminding that with the agency using software for tracking purposes and the summons of Coinbase, the IRS hunt for cryptocurrency isn’t going away.

On March 23, the IRS released a memo reminding US citizens of the need to report their digital currency earnings on their income tax returns. The agency also highlighted the “inherently pseudo-anonymous aspect” of cryptocurrency transactions.

But, as the stats show, people are hardly paying their taxes on crypto. A couple of days before the taxes deadline in the US, the Credit Karma Tax platform told CNBC that less than 100 people have reported capital gains from crypto investments out of the 250,000 most recent tax filers. In February, at the beginning of tax season, Credit Karma reported the very same numbers, 100 out of 250,000, or 0.04 percent of tax filers reported gains on crypto in 2017. In 2015, the IRS reported that only 802 people in total had crypto gains and losses in their tax filings.

OFAC: blacklisting crypto wallets of sanctioned persons

The US Office of Foreign Assets Control (OFAC), an agency of the US Treasury Department that enforces economic sanctions in support of US national security and foreign policy, seems to treat cryptocurrencies as money, or fiat currencies. In March, the agency updated its FAQ with a section on virtual currency.

Essentially, as an international tax attorney Selva Ozelli explains in an Expert Take for Cointelegraph, under OFAC’s new guidance, US citizens will have the same sanctions compliance obligations regardless of whether transactions involve fiat currencies or cryptocurrencies. In other words, sanctions violations involving crypto are going to be treated similarly to those involving fiat currencies.

Moreover, the Specially Designated Nationals and Blocked Persons List (SDNL) curated by the OFAC is going to be updated with digital currency addresses or wallets of people featured in it. As Ozelli points out, “this would put US persons on notice that doing business with those digital addresses may be prohibited, increasing compliance considerations for businesses delving into the world of virtual currency.”

Thus, the program mechanism looks similar to KYC procedure, which includes sanctions list screening and other relevant measures. Those who fail to comply with OFAC’s regulations may face significant civil and criminal penalties.

Although it’s not completely clear how OFCA will obtain crypto wallets of those on the SDNL, in March, classified documents obtained by Edward Snowden revealed that The US National Security Agency (NSA) managed to create a system to track down and deanonymize cryptocurrency users.

“Chilled market”: rising need for responsible and definitive regulation

In a recent hearing entitled “Examining Cryptocurrencies and ICO Markets” that took place in Washington, Coinbase, one of the largest mainstream wallets and cryptocurrency exchanges, voiced their concerns regarding the patchy state of regulation in the US and how it is “chilling” the market.

Mike Lempres, Chief Legal and Risk Officer at Coinbase, stressed that the “tremendous potential” of the digital currency’s technology can be only achieved through “responsible regulation.”, while at the current stage, the US regulatory system “is harming healthy innovation” due to a lack of understanding of what should be allowed and what should be not, and how digital assets should be considered; either as securities, commodities, property, or money.

“There is so much uncertainty about the definition of a security and the scope of regulatory control that the market is being chilled. This is bad for everyone because the technology won’t stop — it will simply move overseas and we will miss out on the opportunity to cultivate the benefits in the U.S.”

Lempres pinpointed “a lack of coordination” between federal regulators and stated that Coinbase cannot start supporting ICOs until the necessary regulations are adopted.

Defining cryptocurrencies as an asset is indeed tricky: some cryptocurrencies might look like securities, while others act like commodities. It is also fair to suggest that most cryptocurrencies have some qualities of each. The CFTC chairman’s statement echoes that sentiment, as he suggests that despite all complexities, a regulatory framework isn’t coming any time soon.

Nevertheless, the future for crypto in the US might be bright after all. Most US regulators seem to be quite “cryptofriendly” because they don’t want to stifle innovation and would like to keep blockchain businesses in the country, but at the same time they want to protect individuals from bad actors. It’s a difficult balancing act, one that requires pragmatism and time.



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