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Bob The Magic Custodian
Summary: Everyone knows that when you give your assets to someone else, they always keep them safe. If this is true for individuals, it is certainly true for businesses. Custodians always tell the truth and manage funds properly. They won't have any interest in taking the assets as an exchange operator would. Auditors tell the truth and can't be misled. That's because organizations that are regulated are incapable of lying and don't make mistakes. First, some background. Here is a summary of how custodians make us more secure: Previously, we might give Alice our crypto assets to hold. There were risks:
Alice might take the assets and disappear.
Alice might spend the assets and pretend that she still has them (fractional model).
Alice might store the assets insecurely and they'll get stolen.
Alice might give the assets to someone else by mistake or by force.
Alice might lose access to the assets.
But "no worries", Alice has a custodian named Bob. Bob is dressed in a nice suit. He knows some politicians. And he drives a Porsche. "So you have nothing to worry about!". And look at all the benefits we get:
Alice can't take the assets and disappear (unless she asks Bob or never gives them to Bob).
Alice can't spend the assets and pretend that she still has them. (Unless she didn't give them to Bob or asks him for them.)
Alice can't store the assets insecurely so they get stolen. (After all - she doesn't have any control over the withdrawal process from any of Bob's systems, right?)
Alice can't give the assets to someone else by mistake or by force. (Bob will stop her, right Bob?)
Alice can't lose access to the funds. (She'll always be present, sane, and remember all secrets, right?)
See - all problems are solved! All we have to worry about now is:
Bob might take the assets and disappear.
Bob might spend the assets and pretend that he still has them (fractional model).
Bob might store the assets insecurely and they'll get stolen.
Bob might give the assets to someone else by mistake or by force.
Bob might lose access to the assets.
It's pretty simple. Before we had to trust Alice. Now we only have to trust Alice, Bob, and all the ways in which they communicate. Just think of how much more secure we are! "On top of that", Bob assures us, "we're using a special wallet structure". Bob shows Alice a diagram. "We've broken the balance up and store it in lots of smaller wallets. That way", he assures her, "a thief can't take it all at once". And he points to a historic case where a large sum was taken "because it was stored in a single wallet... how stupid". "Very early on, we used to have all the crypto in one wallet", he said, "and then one Christmas a hacker came and took it all. We call him the Grinch. Now we individually wrap each crypto and stick it under a binary search tree. The Grinch has never been back since." "As well", Bob continues, "even if someone were to get in, we've got insurance. It covers all thefts and even coercion, collusion, and misplaced keys - only subject to the policy terms and conditions." And with that, he pulls out a phone-book sized contract and slams it on the desk with a thud. "Yep", he continues, "we're paying top dollar for one of the best policies in the country!" "Can I read it?' Alice asks. "Sure," Bob says, "just as soon as our legal team is done with it. They're almost through the first chapter." He pauses, then continues. "And can you believe that sales guy Mike? He has the same year Porsche as me. I mean, what are the odds?" "Do you use multi-sig?", Alice asks. "Absolutely!" Bob replies. "All our engineers are fully trained in multi-sig. Whenever we want to set up a new wallet, we generate 2 separate keys in an air-gapped process and store them in this proprietary system here. Look, it even requires the biometric signature from one of our team members to initiate any withdrawal." He demonstrates by pressing his thumb into the display. "We use a third-party cloud validation API to match the thumbprint and authorize each withdrawal. The keys are also backed up daily to an off-site third-party." "Wow that's really impressive," Alice says, "but what if we need access for a withdrawal outside of office hours?" "Well that's no issue", Bob says, "just send us an email, call, or text message and we always have someone on staff to help out. Just another part of our strong commitment to all our customers!" "What about Proof of Reserve?", Alice asks. "Of course", Bob replies, "though rather than publish any blockchain addresses or signed transaction, for privacy we just do a SHA256 refactoring of the inverse hash modulus for each UTXO nonce and combine the smart contract coefficient consensus in our hyperledger lightning node. But it's really simple to use." He pushes a button and a large green checkmark appears on a screen. "See - the algorithm ran through and reserves are proven." "Wow", Alice says, "you really know your stuff! And that is easy to use! What about fiat balances?" "Yeah, we have an auditor too", Bob replies, "Been using him for a long time so we have quite a strong relationship going! We have special books we give him every year and he's very efficient! Checks the fiat, crypto, and everything all at once!" "We used to have a nice offline multi-sig setup we've been using without issue for the past 5 years, but I think we'll move all our funds over to your facility," Alice says. "Awesome", Bob replies, "Thanks so much! This is perfect timing too - my Porsche got a dent on it this morning. We have the paperwork right over here." "Great!", Alice replies. And with that, Alice gets out her pen and Bob gets the contract. "Don't worry", he says, "you can take your crypto-assets back anytime you like - just subject to our cancellation policy. Our annual management fees are also super low and we don't adjust them often". How many holes have to exist for your funds to get stolen? Just one. Why are we taking a powerful offline multi-sig setup, widely used globally in hundreds of different/lacking regulatory environments with 0 breaches to date, and circumventing it by a demonstrably weak third party layer? And paying a great expense to do so? If you go through the list of breaches in the past 2 years to highly credible organizations, you go through the list of major corporate frauds (only the ones we know about), you go through the list of all the times platforms have lost funds, you go through the list of times and ways that people have lost their crypto from identity theft, hot wallet exploits, extortion, etc... and then you go through this custodian with a fine-tooth comb and truly believe they have value to add far beyond what you could, sticking your funds in a wallet (or set of wallets) they control exclusively is the absolute worst possible way to take advantage of that security. The best way to add security for crypto-assets is to make a stronger multi-sig. With one custodian, what you are doing is giving them your cryptocurrency and hoping they're honest, competent, and flawlessly secure. It's no different than storing it on a really secure exchange. Maybe the insurance will cover you. Didn't work for Bitpay in 2015. Didn't work for Yapizon in 2017. Insurance has never paid a claim in the entire history of cryptocurrency. But maybe you'll get lucky. Maybe your exact scenario will buck the trend and be what they're willing to cover. After the large deductible and hopefully without a long and expensive court battle. And you want to advertise this increase in risk, the lapse of judgement, an accident waiting to happen, as though it's some kind of benefit to customers ("Free institutional-grade storage for your digital assets.")? And then some people are writing to the OSC that custodians should be mandatory for all funds on every exchange platform? That this somehow will make Canadians as a whole more secure or better protected compared with standard air-gapped multi-sig? On what planet? Most of the problems in Canada stemmed from one thing - a lack of transparency. If Canadians had known what a joke Quadriga was - it wouldn't have grown to lose $400m from hard-working Canadians from coast to coast to coast. And Gerald Cotten would be in jail, not wherever he is now (at best, rotting peacefully). EZ-BTC and mister Dave Smilie would have been a tiny little scam to his friends, not a multi-million dollar fraud. Einstein would have got their act together or been shut down BEFORE losing millions and millions more in people's funds generously donated to criminals. MapleChange wouldn't have even been a thing. And maybe we'd know a little more about CoinTradeNewNote - like how much was lost in there. Almost all of the major losses with cryptocurrency exchanges involve deception with unbacked funds. So it's great to see transparency reports from BitBuy and ShakePay where someone independently verified the backing. The only thing we don't have is:
ANY CERTAINTY BALANCES WEREN'T EXCLUDED. Quadriga's largest account was $70m. 80% of funds are in 20% of accounts (Pareto principle). All it takes is excluding a few really large accounts - and nobody's the wiser. A fractional platform can easily pass any audit this way.
ANY VISIBILITY WHATSOEVER INTO THE CUSTODIANS. BitBuy put out their report before moving all the funds to their custodian and ShakePay apparently can't even tell us who the custodian is. That's pretty important considering that basically all of the funds are now stored there.
ANY IDEA ABOUT THE OTHER EXCHANGES. In order for this to be effective, it has to be the norm. It needs to be "unusual" not to know. If obscurity is the norm, then it's super easy for people like Gerald Cotten and Dave Smilie to blend right in.
It's not complicated to validate cryptocurrency assets. They need to exist, they need to be spendable, and they need to cover the total balances. There are plenty of credible people and firms across the country that have the capacity to reasonably perform this validation. Having more frequent checks by different, independent, parties who publish transparent reports is far more valuable than an annual check by a single "more credible/official" party who does the exact same basic checks and may or may not publish anything. Here's an example set of requirements that could be mandated:
First report within 1 month of launching, another within 3 months, and further reports at minimum every 6 months thereafter.
No auditor can be repeated within a 12 month period.
All reports must be public, identifying the auditor and the full methodology used.
All auditors must be independent of the firm being audited with no conflict of interest.
Reports must include the percentage of each asset backed, and how it's backed.
The auditor publishes a hash list, which lists a hash of each customer's information and balances that were included. Hash is one-way encryption so privacy is fully preserved. Every customer can use this to have 100% confidence they were included.
If we want more extensive requirements on audits, these should scale upward based on the total assets at risk on the platform, and whether the platform has loaned their assets out.
There are ways to structure audits such that neither crypto assets nor customer information are ever put at risk, and both can still be properly validated and publicly verifiable. There are also ways to structure audits such that they are completely reasonable for small platforms and don't inhibit innovation in any way. By making the process as reasonable as possible, we can completely eliminate any reason/excuse that an honest platform would have for not being audited. That is arguable far more important than any incremental improvement we might get from mandating "the best of the best" accountants. Right now we have nothing mandated and tons of Canadians using offshore exchanges with no oversight whatsoever. Transparency does not prove crypto assets are safe. CoinTradeNewNote, Flexcoin ($600k), and Canadian Bitcoins ($100k) are examples where crypto-assets were breached from platforms in Canada. All of them were online wallets and used no multi-sig as far as any records show. This is consistent with what we see globally - air-gapped multi-sig wallets have an impeccable record, while other schemes tend to suffer breach after breach. We don't actually know how much CoinTrader lost because there was no visibility. Rather than publishing details of what happened, the co-founder of CoinTrader silently moved on to found another platform - the "most trusted way to buy and sell crypto" - a site that has no information whatsoever (that I could find) on the storage practices and a FAQ advising that “[t]rading cryptocurrency is completely safe” and that having your own wallet is “entirely up to you! You can certainly keep cryptocurrency, or fiat, or both, on the app.” Doesn't sound like much was learned here, which is really sad to see. It's not that complicated or unreasonable to set up a proper hardware wallet. Multi-sig can be learned in a single course. Something the equivalent complexity of a driver's license test could prevent all the cold storage exploits we've seen to date - even globally. Platform operators have a key advantage in detecting and preventing fraud - they know their customers far better than any custodian ever would. The best job that custodians can do is to find high integrity individuals and train them to form even better wallet signatories. Rather than mandating that all platforms expose themselves to arbitrary third party risks, regulations should center around ensuring that all signatories are background-checked, properly trained, and using proper procedures. We also need to make sure that signatories are empowered with rights and responsibilities to reject and report fraud. They need to know that they can safely challenge and delay a transaction - even if it turns out they made a mistake. We need to have an environment where mistakes are brought to the surface and dealt with. Not one where firms and people feel the need to hide what happened. In addition to a knowledge-based test, an auditor can privately interview each signatory to make sure they're not in coercive situations, and we should make sure they can freely and anonymously report any issues without threat of retaliation. A proper multi-sig has each signature held by a separate person and is governed by policies and mutual decisions instead of a hierarchy. It includes at least one redundant signature. For best results, 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7. History has demonstrated over and over again the risk of hot wallets even to highly credible organizations. Nonetheless, many platforms have hot wallets for convenience. While such losses are generally compensated by platforms without issue (for example Poloniex, Bitstamp, Bitfinex, Gatecoin, Coincheck, Bithumb, Zaif, CoinBene, Binance, Bitrue, Bitpoint, Upbit, VinDAX, and now KuCoin), the public tends to focus more on cases that didn't end well. Regardless of what systems are employed, there is always some level of risk. For that reason, most members of the public would prefer to see third party insurance. Rather than trying to convince third party profit-seekers to provide comprehensive insurance and then relying on an expensive and slow legal system to enforce against whatever legal loopholes they manage to find each and every time something goes wrong, insurance could be run through multiple exchange operators and regulators, with the shared interest of having a reputable industry, keeping costs down, and taking care of Canadians. For example, a 4 of 7 multi-sig insurance fund held between 5 independent exchange operators and 2 regulatory bodies. All Canadian exchanges could pay premiums at a set rate based on their needed coverage, with a higher price paid for hot wallet coverage (anything not an air-gapped multi-sig cold wallet). Such a model would be much cheaper to manage, offer better coverage, and be much more reliable to payout when needed. The kind of coverage you could have under this model is unheard of. You could even create something like the CDIC to protect Canadians who get their trading accounts hacked if they can sufficiently prove the loss is legitimate. In cases of fraud, gross negligence, or insolvency, the fund can be used to pay affected users directly (utilizing the last transparent balance report in the worst case), something which private insurance would never touch. While it's recommended to have official policies for coverage, a model where members vote would fully cover edge cases. (Could be similar to the Supreme Court where justices vote based on case law.) Such a model could fully protect all Canadians across all platforms. You can have a fiat coverage governed by legal agreements, and crypto-asset coverage governed by both multi-sig and legal agreements. It could be practical, affordable, and inclusive. Now, we are at a crossroads. We can happily give up our freedom, our innovation, and our money. We can pay hefty expenses to auditors, lawyers, and regulators year after year (and make no mistake - this cost will grow to many millions or even billions as the industry grows - and it will be borne by all Canadians on every platform because platforms are not going to eat up these costs at a loss). We can make it nearly impossible for any new platform to enter the marketplace, forcing Canadians to use the same stagnant platforms year after year. We can centralize and consolidate the entire industry into 2 or 3 big players and have everyone else fail (possibly to heavy losses of users of those platforms). And when a flawed security model doesn't work and gets breached, we can make it even more complicated with even more people in suits making big money doing the job that blockchain was supposed to do in the first place. We can build a system which is so intertwined and dependent on big government, traditional finance, and central bankers that it's future depends entirely on that of the fiat system, of fractional banking, and of government bail-outs. If we choose this path, as history has shown us over and over again, we can not go back, save for revolution. Our children and grandchildren will still be paying the consequences of what we decided today. Or, we can find solutions that work. We can maintain an open and innovative environment while making the adjustments we need to make to fully protect Canadian investors and cryptocurrency users, giving easy and affordable access to cryptocurrency for all Canadians on the platform of their choice, and creating an environment in which entrepreneurs and problem solvers can bring those solutions forward easily. None of the above precludes innovation in any way, or adds any unreasonable cost - and these three policies would demonstrably eliminate or resolve all 109 historic cases as studied here - that's every single case researched so far going back to 2011. It includes every loss that was studied so far not just in Canada but globally as well. Unfortunately, finding answers is the least challenging part. Far more challenging is to get platform operators and regulators to agree on anything. My last post got no response whatsoever, and while the OSC has told me they're happy for industry feedback, I believe my opinion alone is fairly meaningless. This takes the whole community working together to solve. So please let me know your thoughts. Please take the time to upvote and share this with people. Please - let's get this solved and not leave it up to other people to do. Facts/background/sources (skip if you like):
The inspiration for the paragraph about splitting wallets was an actual quote from a Canadian company providing custodial services in response to the OSC consultation paper: "We believe that it will be in the in best interests of investors to prohibit pooled crypto assets or ‘floats’. Most Platforms pool assets, citing reasons of practicality and expense. The recent hack of the world’s largest Platform – Binance – demonstrates the vulnerability of participants’ assets when such concessions are made. In this instance, the Platform’s entire hot wallet of Bitcoins, worth over $40 million, was stolen, facilitated in part by the pooling of client crypto assets." "the maintenance of participants (and Platform) crypto assets across multiple wallets distributes the related risk and responsibility of security - reducing the amount of insurance coverage required and making insurance coverage more readily obtainable". For the record, their reply also said nothing whatsoever about multi-sig or offline storage.
In addition to the fact that the $40m hack represented only one "hot wallet" of Binance, and they actually had the vast majority of assets in other wallets (including mostly cold wallets), multiple real cases have clearly demonstrated that risk is still present with multiple wallets. Bitfinex, VinDAX, Bithumb, Altsbit, BitPoint, Cryptopia, and just recently KuCoin all had multiple wallets breached all at the same time, and may represent a significantly larger impact on customers than the Binance breach which was fully covered by Binance. To represent that simply having multiple separate wallets under the same security scheme is a comprehensive way to reduce risk is just not true.
Private insurance has historically never covered a single loss in the cryptocurrency space (at least, not one that I was able to find), and there are notable cases where massive losses were not covered by insurance. Bitpay in 2015 and Yapizon in 2017 both had insurance policies that didn't pay out during the breach, even after a lengthly court process. The same insurance that ShakePay is presently using (and announced to much fanfare) was describe by their CEO himself as covering “physical theft of the media where the private keys are held,” which is something that has never historically happened. As was said with regard to the same policy in 2018 - “I don’t find it surprising that Lloyd’s is in this space,” said Johnson, adding that to his mind the challenge for everybody is figuring out how to structure these policies so that they are actually protective. “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
The most profitable policy for a private insurance company is one with the most expensive premiums that they never have to pay a claim on. They have no inherent incentive to take care of people who lost funds. It's "cheaper" to take the reputational hit and fight the claim in court. The more money at stake, the more the insurance provider is incentivized to avoid payout. They're not going to insure the assets unless they have reasonable certainty to make a profit by doing so, and they're not going to pay out a massive sum unless it's legally forced. Private insurance is always structured to be maximally profitable to the insurance provider.
The circumvention of multi-sig was a key factor in the massive Bitfinex hack of over $60m of bitcoin, which today still sits being slowly used and is worth over $3b. While Bitfinex used a qualified custodian Bitgo, which was and still is active and one of the industry leaders of custodians, and they set up 2 of 3 multi-sig wallets, the entire system was routed through Bitfinex, such that Bitfinex customers could initiate the withdrawals in a "hot" fashion. This feature was also a hit with the hacker. The multi-sig was fully circumvented.
Bitpay in 2015 was another example of a breach that stole 5,000 bitcoins. This happened not through the exploit of any system in Bitpay, but because the CEO of a company they worked with got their computer hacked and the hackers were able to request multiple bitcoin purchases, which Bitpay honoured because they came from the customer's computer legitimately. Impersonation is a very common tactic used by fraudsters, and methods get more extreme all the time.
A notable case in Canada was the Canadian Bitcoins exploit. Funds were stored on a server in a Rogers Data Center, and the attendee was successfully convinced to reboot the server "in safe mode" with a simple phone call, thus bypassing the extensive security and enabling the theft.
The very nature of custodians circumvents multi-sig. This is because custodians are not just having to secure the assets against some sort of physical breach but against any form of social engineering, modification of orders, fraudulent withdrawal attempts, etc... If the security practices of signatories in a multi-sig arrangement are such that the breach risk of one signatory is 1 in 100, the requirement of 3 independent signatures makes the risk of theft 1 in 1,000,000. Since hackers tend to exploit the weakest link, a comparable custodian has to make the entry and exit points of their platform 10,000 times more secure than one of those signatories to provide equivalent protection. And if the signatories beef up their security by only 10x, the risk is now 1 in 1,000,000,000. The custodian has to be 1,000,000 times more secure. The larger and more complex a system is, the more potential vulnerabilities exist in it, and the fewer people can understand how the system works when performing upgrades. Even if a system is completely secure today, one has to also consider how that system might evolve over time or work with different members.
By contrast, offline multi-signature solutions have an extremely solid record, and in the entire history of cryptocurrency exchange incidents which I've studied (listed here), there has only been one incident (796 exchange in 2015) involving an offline multi-signature wallet. It happened because the customer's bitcoin address was modified by hackers, and the amount that was stolen ($230k) was immediately covered by the exchange operators. Basically, the platform operators were tricked into sending a legitimate withdrawal request to the wrong address because hackers exploited their platform to change that address. Such an issue would not be prevented in any way by the use of a custodian, as that custodian has no oversight whatsoever to the exchange platform. It's practical for all exchange operators to test large withdrawal transactions as a general policy, regardless of what model is used, and general best practice is to diagnose and fix such an exploit as soon as it occurs.
False promises on the backing of funds played a huge role in the downfall of Quadriga, and it's been exposed over and over again (MyCoin, PlusToken, Bitsane, Bitmarket, EZBTC, IDAX). Even today, customers have extremely limited certainty on whether their funds in exchanges are actually being backed or how they're being backed. While this issue is not unique to cryptocurrency exchanges, the complexity of the technology and the lack of any regulation or standards makes problems more widespread, and there is no "central bank" to come to the rescue as in the 2008 financial crisis or during the great depression when "9,000 banks failed".
In addition to fraudulent operations, the industry is full of cases where operators have suffered breaches and not reported them. Most recently, Einstein was the largest case in Canada, where ongoing breaches and fraud were perpetrated against the platform for multiple years and nobody found out until the platform collapsed completely. While fraud and breaches suck to deal with, they suck even more when not dealt with. Lack of visibility played a role in the largest downfalls of Mt. Gox, Cryptsy, and Bitgrail. In some cases, platforms are alleged to have suffered a hack and keep operating without admitting it at all, such as CoinBene.
It surprises some to learn that a cryptographic solution has already existed since 2013, and gained widespread support in 2014 after Mt. Gox. Proof of Reserves is a full cryptographic proof that allows any customer using an exchange to have complete certainty that their crypto-assets are fully backed by the platform in real-time. This is accomplished by proving that assets exist on the blockchain, are spendable, and fully cover customer deposits. It does not prove safety of assets or backing of fiat assets.
If we didn't care about privacy at all, a platform could publish their wallet addresses, sign a partial transaction, and put the full list of customer information and balances out publicly. Customers can each check that they are on the list, that the balances are accurate, that the total adds up, and that it's backed and spendable on the blockchain. Platforms who exclude any customer take a risk because that customer can easily check and see they were excluded. So together with all customers checking, this forms a full proof of backing of all crypto assets.
However, obviously customers care about their private information being published. Therefore, a hash of the information can be provided instead. Hash is one-way encryption. The hash allows the customer to validate inclusion (by hashing their own known information), while anyone looking at the list of hashes cannot determine the private information of any other user. All other parts of the scheme remain fully intact. A model like this is in use on the exchange CoinFloor in the UK.
A Merkle tree can provide even greater privacy. Instead of a list of balances, the balances are arranged into a binary tree. A customer starts from their node, and works their way to the top of the tree. For example, they know they have 5 BTC, they plus 1 other customer hold 7 BTC, they plus 2-3 other customers hold 17 BTC, etc... until they reach the root where all the BTC are represented. Thus, there is no way to find the balances of other individual customers aside from one unidentified customer in this case.
Proposals such as this had the backing of leaders in the community including Nic Carter, Greg Maxwell, and Zak Wilcox. Substantial and significant effort started back in 2013, with massive popularity in 2014. But what became of that effort? Very little. Exchange operators continue to refuse to give visibility. Despite the fact this information can often be obtained through trivial blockchain analysis, no Canadian platform has ever provided any wallet addresses publicly. As described by the CEO of Newton "For us to implement some kind of realtime Proof of Reserves solution, which I'm not opposed to, it would have to ... Preserve our users' privacy, as well as our own. Some kind of zero-knowledge proof". Kraken describes here in more detail why they haven't implemented such a scheme. According to professor Eli Ben-Sasson, when he spoke with exchanges, none were interested in implementing Proof of Reserves.
And yet, Kraken's places their reasoning on a page called "Proof of Reserves". More recently, both BitBuy and ShakePay have released reports titled "Proof of Reserves and Security Audit". Both reports contain disclaimers against being audits. Both reports trust the customer list provided by the platform, leaving the open possibility that multiple large accounts could have been excluded from the process. Proof of Reserves is a blockchain validation where customers see the wallets on the blockchain. The report from Kraken is 5 years old, but they leave it described as though it was just done a few weeks ago. And look at what they expect customers to do for validation. When firms represent something being "Proof of Reserve" when it's not, this is like a farmer growing fruit with pesticides and selling it in a farmers market as organic produce - except that these are people's hard-earned life savings at risk here. Platforms are misrepresenting the level of visibility in place and deceiving the public by their misuse of this term. They haven't proven anything.
Fraud isn't a problem that is unique to cryptocurrency. Fraud happens all the time. Enron, WorldCom, Nortel, Bear Stearns, Wells Fargo, Moser Baer, Wirecard, Bre-X, and Nicola are just some of the cases where frauds became large enough to become a big deal (and there are so many countless others). These all happened on 100% reversible assets despite regulations being in place. In many of these cases, the problems happened due to the over-complexity of the financial instruments. For example, Enron had "complex financial statements [which] were confusing to shareholders and analysts", creating "off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people could understand them". In cryptocurrency, we are often combining complex financial products with complex technologies and verification processes. We are naïve if we think problems like this won't happen. It is awkward and uncomfortable for many people to admit that they don't know how something works. If we want "money of the people" to work, the solutions have to be simple enough that "the people" can understand them, not so confusing that financial professionals and technology experts struggle to use or understand them.
For those who question the extent to which an organization can fool their way into a security consultancy role, HB Gary should be a great example to look at. Prior to trying to out anonymous, HB Gary was being actively hired by multiple US government agencies and others in the private sector (with glowing testimonials). The published articles and hosted professional security conferences. One should also look at this list of data breaches from the past 2 years. Many of them are large corporations, government entities, and technology companies. These are the ones we know about. Undoubtedly, there are many more that we do not know about. If HB Gary hadn't been "outted" by anonymous, would we have known they were insecure? If the same breach had happened outside of the public spotlight, would it even have been reported? Or would HB Gary have just deleted the Twitter posts, brought their site back up, done a couple patches, and kept on operating as though nothing had happened?
In the case of Quadriga, the facts are clear. Despite past experience with platforms such as MapleChange in Canada and others around the world, no guidance or even the most basic of a framework was put in place by regulators. By not clarifying any sort of legal framework, regulators enabled a situation where a platform could be run by former criminal Mike Dhanini/Omar Patryn, and where funds could be held fully unchecked by one person. At the same time, the lack of regulation deterred legitimate entities from running competing platforms and Quadriga was granted a money services business license for multiple years of operation, which gave the firm the appearance of legitimacy. Regulators did little to protect Canadians despite Quadriga failing to file taxes from 2016 onward. The entire administrative team had resigned and this was public knowledge. Many people had suspicions of what was going on, including Ryan Mueller, who forwarded complaints to the authorities. These were ignored, giving Gerald Cotten the opportunity to escape without justice.
There are multiple issues with the SOC II model including the prohibitive cost (you have to find a third party accounting firm and the prices are not even listed publicly on any sites), the requirement of operating for a year (impossible for new platforms), and lack of any public visibility (SOC II are private reports that aren't shared outside the people in suits).
Securities frameworks are expensive. Sarbanes-Oxley is estimated to cost $5.1 million USD/yr for the average Fortune 500 company in the United States. Since "Fortune 500" represents the top 500 companies, that means well over $2.55 billion USD (~$3.4 billion CAD) is going to people in suits. Isn't the problem of trust and verification the exact problem that the blockchain is supposed to solve?
To use Quadriga as justification for why custodians or SOC II or other advanced schemes are needed for platforms is rather silly, when any framework or visibility at all, or even the most basic of storage policies, would have prevented the whole thing. It's just an embarrassment.
We are now seeing regulators take strong action. CoinSquare in Canada with multi-million dollar fines. BitMex from the US, criminal charges and arrests. OkEx, with full disregard of withdrawals and no communication. Who's next?
We have a unique window today where we can solve these problems, and not permanently destroy innovation with unreasonable expectations, but we need to act quickly. This is a unique historic time that will never come again.
Common sites with HIGHEST payout and STABLE income << 04/10/2020 >>
This is a long post, but please try to read it all and select the most suitable one for you. When you see any sites with good payout and good potential, feel free to create a post. Also when you know site that is scam, please create a post to alert everyone as soon as possible. There're 4 main and common types of task you will encounter when using beermoney sites. You can use all the sites or just pick the most suitable type and site to work with. Using more than one site is recommended, as the number of tasks on one site is not high enough, and the tasks will not appear continuously.
I. MICRO-TASK (or Crowdsourcing task)
The task varies from article assessment, information collection, search-query classification/answer relevance, taking or collecting photo/video, to object identification,... The number of tasks will increase when you complete more tasks. Pros: - The number of tasks is higher and more stable than other types of beermoney task. - The payout is appropriate to your time and effort. You can even make stable income with them. Cons: - Sometimes you will need to pass the training test to access the task. - Your work may not be accepted if it does not meet the guideline. - It can be a little hard in the beginning, there're also not many tasks for you, but BE PATIENT, because they haven't been able to fully assess your ability yet. 1-Toloka Yandex: This is one of my favorite micro-task sites, and is the first on the list when I make beermoney site suggestion. The tasks are mainly in English and Russian. They also have tasks in your mother language too, depend on your setting and location. Don't worry about the language, as you can easily have it to be translated with translate extension (like Google Translate) or with any translation site. The task is easy enough to understand. The minimum withdrawal is $0.02 if you request to withdrawal once a week, and it will be $1 if more than once a week. You can withdraw the money to PayPal, Payoneer, Skrill or Papara. But to be able to withdraw with PayPal, you will need a verified PayPal account. Earnings with Toloka Here are registration links: ref-link and no-ref 2-Clickworker: One of the most popular micro-task sites, you can find many recommendations and good reputation about them. But to make the most if it, you will need to unlock UHRS, as describe here. You definitely shouldn't miss Clickworker and UHRS. Their payout rate is higher than Toloka, however it usually takes a month for your earning to become payable. Depend on your location and language, you can earn a great amount of money here, the highest I've earned in 1 day is $35. Be careful that you'll be considered spam if you complete the task too fast You can receive payment to PayPal account with the minimum of €5. You can choose other payment methods too, like SEPA transfers and Transferwise. (I'll update payment proof when receiving one - still need some days for the earning to become payable T_T) No need to say anymore, here are the links: ref-link and no-ref 3-Remotasks You will need to take part in training (which is quite hard and time-consuming) and pass the test to be able to access the tasks here. The tasks are categorization, text highlighting, image annotation, semantic segmentation,... and well-known Lidar Annotation and Segmentation. Here are registration links: ref-link and no-ref NOTE FOR MICRO-TASK:
It's highly recommended to use all those sites, and maybe other sites if you want, because the tasks are not shown continuously.
Make sure to fully understand the guideline, as you will not be credited if you work fails to meet the requirement, which will waste your time and effort.
If you find any task that has low credit but requires a lot of time and effort, don't do it. If requester can still find worker with such low pay, they will continue to do so. It's not worth your time, just going to other tasks or going to other sites to see if there're any available tasks for you.
II. OFFER WALL TASK
Another way to earn beermoney online is to complete Offer wall tasks. You will be asked to install app on your smartphone, sign up, play game and reach determined level, or watching video,.... Doing survey can also be listed here, but it will be shown in separate section. There're many offer walls for you to choose, with different payout level. Usually each beermoney site will list many offer walls, one offer can appear in more than one site/wall, so make sure to surf around and compare the credit to find the best and highest payout wall/site for that offer. Pros: - Easy to do - Can complete offer many times if you have different kinds of phone (mostly Android and iOS), or using another phone as the tasks are listed on many offer walls. - Can earn money while playing and relaxing, as mostly the offered apps are games. Some apps only requires you to install and open, make it really quick to have some beermoney. Cons: - The payout is not very high. Especially when that offer is going through many walls and sites to reach you. - Some offers take much time to complete. - The number of offers is not high enough to do daily. 1-RewardXP RewardXP has surpassed GG2U to become the highest payout site. They have leveling system, the higher level you reach, the more offer walls you can access and the more benefit you can get. With the minimum of $5, they provide a variety of withdrawal methods for you to choose, like PayPal, Amazon, Steam,... Withdraw with $5 minimum from RewardXP You definitely should try this site. Here are your registration links: ref-link and no-ref. Registration with referral link, you will be given a 5000XP (~$0.5) bonus. 2-GG2U: This is also my favorite site. Their paying rate is one of the highest in the market (if you find any other site which is higher, feel free to make a suggestion :D THE HIGHEST ONE NOW is RewardXP, see above). Aside from installing and registering app, they also have many survey walls for you. The most attractive part is that they will give you $1 bonus right after signing up, and after 5 withdrawal requests, you will have a chance to earn up to $7 bonus. With the bonus program, it's hard to say which is better, RewardXP or GG2U. You can withdraw money to your PayPal account or Coinbase (crypto wallet), with the minimum of $7. Earning with GG2U Here are your links: ref-link and no-ref 3-Cointiply One of the most popular sites, with great community. They will pay you with cryptocurrency like Bitcoin or Doge. You will have many chances to earn coins, by doing offer walls task, rolling the faucet every 1 hour, testing your luck with multiplier or by activating in their packed chat room. You can also earn some coins by clicking Paid-to-click ads. Most of the time, those ads are from Cointiply user with their referral link embedded, so if you register sites when viewing those ads, they will earn some commission. You can try this strategy too :D With their mobile app, it will be much easier to do mobile offers. Make sure to check your email and mobile app to get the user-limited Promotion Codes regularly. Registration links: ref-link and no-ref 4-Swagbucks Sometimes you can earn money by spending less. Swagbucks offers a big number of sites where you can receive cash back when you shop online. If you shop online a lot, it's worth to take a look Here are registration link for shopping: ref-link-shopping and no-ref-shopping Beside the cash back program, Swagbucks also provides offer wall, however the paying rate is not as high as site 1 and 2 above. Anyway, if you want to try, here are your registration links: ref-link and no-ref 5-EarnCrypto If you're into doing offer walls task and earning crypto currency, try this site too. Their paying rate is quite lower than above sites, but they have Data entry task, which is daily. By ranking high on their daily leader board, you will be rewarded with a great amount of coins (can even be higher than your earning from doing the data entry task itself :D). There are many kinds of crypto currency for you to select. Just take a look if you have much free time and have nothing else to do: ref-link and no-ref NOTE FOR OFFER WALL TASK:
Every offerwall has a place to track your activity history, like what offer you clicked, what offer you completed and did you receive credit or not. Every time you're about to do an offer, after entering that offer (usually when you click an offer, a small panel about what offer is appears, there will be a button name 'continue' or 'go to offer', after you click that button, you're entering the offer), make sure that offer appears in your history tab of that offer wall. This will enable you to request support in case you complete the offer and have not received credit yet. If it does not appear in the history list, you will not be credited for that offer, so try to click it again.
To find the history tab, after entering offer wall, you will need to find a button named 'My coin', 'My history', 'Support', or button with question mark,... That button should be easy to be found.
Try to surf around to find the offer wall and site having the highest paying rate for the offer, as the same offer will appear in many offer walls and sites.
When you're about to start to do an offer of installing app (especially game), try to read the comment in appstore/playstore to see whether the offer's requirements can be easily to fulfill or not. For example, the requirements are: 1. install game, 2. open it, 3. reach level 30; and you find some comment about cannot reach level 25, or it takes months to reach level 29, then skip that offer, it's not worth the try.
III. PAY TO SEARCH
You can earn nearly passive income from this type of task. They will give you some query, you will search with that query, entering determined site, leaving that site opened for couple of minutes. Pros: - It's super easy to do. - While leaving the site open, you can do any other thing you want, like doing some micro-tasks. - The paying rate is quite good, especially when you don't need to do much. Cons: - The number of queries is not very high. 1-SerpClix In order to receive more queries to search, make sure to leave the site open and allow the notification. Even though SerpClix recommends you to interact with the website, it's not necessary because SerpClix will automatically navigate to sub page of that page. Another suggestion here is to install adblock extension, because SerpClix will ban you if you click on any ads on the page, so blocking them beforehand is a good move. Earning from SerpClix Here are your registration links: ref-link and no-ref
Probably all offer walls have some kind of surveys there, some surveys are only available through offer walls, some have their own sites. By using their own sites will not guarantee that you will have higher payout though. Make sure to be honest when doing surveys, despite the fact that you will sometime be disqualified from the survey. There are many reasons why you are disqualified, like because your job is not suitable, your demography is not their target, your answer is not persistent,... BE CAREFUL, they will keep track of you, even if you clear your cookie, so being dishonest can lead you to be banned from their sites. Again, BE HONEST, and there will be suitable surveys for you. There will be two types of survey for you: the first one is filling form and selecting answer from their suggestion, the second one is to talk with them directly or via Video call apps. The second one has much much higher earning but the requirement is also higher too. Pros: - Easy to do, just being honest - High payout, especially with the second type of surveys. - Some survey only need 5 minutes to complete with a high reward. Cons: - Some survey can take about 30 minutes to complete, so make sure that you have enough free time. - You will be disqualified if your information is not suitable to their survey's target. 1-SurveyTime One of the best sites out there, my favorite one. They will instantly send you $1 or $0.5 (depend on the survey) to your PayPal or Coinbase account when you complete the survey, so no minimum required to withdrawal. The survey you will do here is the first type, filling in the form and selecting answer. Instant payment from SurveyTime You can register with SurveyTime through some offer walls, as they will give you some more coins when you complete the survey, but make sure to check their conditions. Make sure to turn on Browser notification and Email notification so that you don't miss any survey. Registration links: no-ref 2-Respondent You will need a microphone and/or webcam (built-in or external) as the survey in Respondent is conducted via video calls, phone calls, in-person discussions. Of course, you will receive a huge reward for doing surveys here, from $5 up-to $1000. This's a great deal, one successful survey can get you more credit than doing hundreds of micro-tasks. Don't miss this site. They will recommend suitable survey for you, but if you want to view all available survey, make sure to uncheck the 'Recommended' option in Filter panel. Here're your registration links: ref-link and no-ref NOTE FOR SURVEY:
Sometimes, they will provide the must-select answer in the question to test if your attention. Make sure to read the question carefully. For example, the question is "Do you agree that 1 + 1 = 2? Select option [I do not agree] in the answer", if you select [I agree], you fail.
BE CAREFUL - BE HONEST
When you're doing the first type survey (filling form, selecting answer), be careful not to install any app, or download anything, or upload your social data file when asked. In that case, just contact survey site support and report it.
It's better to use different survey sites to maximum the number of surveys you receive.
Last word, BE PATIENT - earning online can be a little hard in the beginning. Feel free to share your experience when using beermoney sites (and your referral link too :D) or ask question about any beermoney sites by creating new post. Also, creating new post when you know that any site is a scam or becomes scam. P.S 1: In case you need a Crypto wallet, you can use Coinbase, registration links: ref-link and no-ref, or Binance ref-link and no-ref. You can read here for the comparison between Coibase and Binance P.S 2: You can add some email addresses to PayPal account, so you can use many email address to register to beermoney sites if you want P.S 3: If you're confident with your English, and have a computer, microphone and webcam, you can try Usertesting site, you will visit a website that requires you to test, talk about your experience of using that site Here is the link: no-ref
Investing in Bitcoin for the first time! Any tips highly appreciated 🙏
Hello Bitcoiners, I have been in crypto space for a while but have never invested. This is the first time I am going to invest in BTC. I also have some questions. Any answers or tips for me will be highly appreciated. You guys are very friendly and helpful, I am sure I will get the answers to my questions. What I am going to do is, buy 10$ worth of bitcoin every week. Although, this is Lewis's but this is better than nothing and I also can't afford to invest more. As far as i know, this is smth called DCA (but I don't know what it is). 1) I am not going to buy bitcoin because I have a job and I get my payment in ETH. But, I will need to convert those Ethereum to bitcoin. Which exchange do you prefer? I mean is, if I exchange it on Binance, they will take half of the money ($5) as withdrawal fees which is very much. Other thing is, coinbase pro doesn't accept my ID so that i can complete my KYC there. So, where should I exchange it? Are there any other similar websites like coinbase Pro where there is no need of verification? 2) Which day of the week is better for buying? I meant, on which day of the week should I schedule my bitcoin buying process? Or, everyday is good? 3) Is it worth investing in bitcoin right now? What I wanted to tell is, bitcoin is already at 12k and it is not pumping from there. Ethereum has just doubled in a month whereas bitcoin rose up only by 20%. I am getting a bit FOMO'ed in eth and therefore confused whether I should invest in Bitcoin or Ethereum? Any other tips will be highly appreciated from me! I am completely new to investment and doing some researches on it. But, want your opinions on these things. Thank you.
It is no doubt Grayscale’s booming popularity as a mainstream investment has caused a lot of community hullabaloo lately. As such, I felt it was worth making a FAQ regarding the topic. I’m looking to update this as needed and of course am open to suggestions / adding any questions. The goal is simply to have a thread we can link to anyone with questions on Grayscaleand its products. Instead of explaining the same thing 3 times a day, shoot those posters over to this thread.My hope is that these questions are answered in a fairly simple and easy to understand manner. I think as the sub grows it will be a nice reference point for newcomers. Disclaimer: I do NOT work for Grayscale and as such am basing all these answers on information that can be found on their website / reports. (Grayscale’s official FAQ can be found here). I also do NOT have a finance degree, I do NOT have a Series 6 / 7 / 140-whatever, and I do NOT work with investment products for my day job. I have an accounting background and work within the finance world so I have the general ‘business’ knowledge to put it all together, but this is all info determined in my best faith effort as a layman. The point being is this --- it is possible I may explain something wrong or missed the technical terms, and if that occurs I am more than happy to update anything that can be proven incorrect Everything below will be in reference to ETHE but will apply to GBTC as well.If those two segregate in any way, I will note that accordingly.
ETHE is essentially a stock that intends to loosely track the price of ETH. It does so by having each ETHE be backed by a specific amount of ETH that is held on chain. Initially, the newly minted ETHE can only be purchased by institutions and accredited investors directly from Grayscale. Once a year has passed (6 months for GBTC) it can then be listed on the OTCQX Best Market exchange for secondary trading. Once listed on OTCQX, anyone investor can purchase at this point. Additional information on ETHE can be found here.
So ETHE is an ETF?
No. For technical reasons beyond my personal understandings it is not labeled an ETF. I know it all flows back to the “Securities Act Rule 144”, but due to my limited knowledge on SEC regulations I don’t want to misspeak past that. If anyone is more knowledgeable on the subject I am happy to input their answer here.
How long has ETHE existed?
ETHE was formed 12/14/2017. GBTC was formed 9/25/2013.
How is ETHE created?
The trust will issue shares to “Authorized Participants” in groups of 100 shares (called baskets). Authorized Participants are the only persons that may place orders to create these baskets and they do it on behalf of the investor. Source: Creation and Redemption of Shares section on page 39 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here Note – The way their reports word this makes it sound like there is an army of authorizers doing the dirty work, but in reality there is only one Authorized Participant. At this moment the “Genesis” company is the sole Authorized Participant. Genesis is owned by the “Digital Currency Group, Inc.” which is the parent company of Grayscale as well. (And to really go down the rabbit hole it looks like DCG is the parent company of CoinDesk and is “backing 150+ companies across 30 countries, including Coinbase, Ripple, and Chainalysis.”) Source: Digital Currency Group, Inc. informational section on page 77 of the “Grayscale Bitcoin Trust (BTC) Form 10-K (2019)” – Located Here Source: Barry E. Silbert informational section on page 75 of the “Grayscale Bitcoin Trust (BTC) Form 10-K (2019)” – Located Here
How does Grayscale acquire the ETH to collateralize the ETHE product?
An Investor may acquire ETHE by paying in cash or exchanging ETH already owned.
Cash: The investor pays the subscription amount in cash and the Authorized Participant will use that cash to purchase ETH.
ETH: The investor transfers the ETH to the Authorized Participant, which will contribute the ETH in-kind to the Trust.
Source: Creation and Redemption of Shares section on page 40 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Where does Grayscale store their ETH? Does it have a specific wallet address we can follow?
ETH is stored with Coinbase Custody Trust Company, LLC. I am unaware of any specific address or set of addresses that can be used to verify the ETH is actually there. As an aside - I would actually love to see if anyone knows more about this as it’s something that’s sort of peaked my interest after being asked about it… I find it doubtful we can find that however. Source: Part C. Business Information, Item 8, subsection A. on page 16 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Can ETHE be redeemed for ETH?
No, currently there is no way to give your shares of ETHE back to Grayscale to receive ETH back. The only method of getting back into ETH would be to sell your ETHE to someone else and then use those proceeds to buy ETH yourself. Source: Redemption Procedures on page 41 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Why are they not redeeming shares?
I think the report summarizes it best:
Redemptions of Shares are currently not permitted and the Trust is unable to redeem Shares. Subject to receipt of regulatory approval from the SEC and approval by the Sponsor in its sole discretion, the Trust may in the future operate a redemption program. Because the Trust does not believe that the SEC would, at this time, entertain an application for the waiver of rules needed in order to operate an ongoing redemption program, the Trust currently has no intention of seeking regulatory approval from the SEC to operate an ongoing redemption program.
Source: Redemption Procedures on page 41 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
What is the fee structure?
ETHE has an annual fee of 2.5%. GBTC has an annual fee of 2.0%. Fees are paid by selling the underlying ETH / BTC collateralizing the asset. Source: ETHE’s informational page on Grayscale’s website - Located Here Source: Description of Trust on page 31 & 32 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
What is the ratio of ETH to ETHE?
At the time of posting (6/19/2020) each ETHE share is backed by .09391605 ETH. Each share of GBTC is backed by .00096038 BTC. ETHE & GBTC’s specific information page on Grayscale’s website updates the ratio daily – Located Here For a full historical look at this ratio, it can be found on the Grayscale home page on the upper right side if you go to Tax Documents > 2019 Tax Documents > Grayscale Ethereum Trust 2019 Tax Letter.
Why is the ratio not 1:1? Why is it always decreasing?
While I cannot say for certain why the initial distribution was not a 1:1 backing, it is more than likely to keep the price down and allow more investors a chance to purchase ETHE / GBTC. As noted above, fees are paid by selling off the ETH collateralizing ETHE. So this number will always be trending downward as time goes on. Source: Description of Trust on page 32 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
I keep hearing about how this is locked supply… explain?
As noted above, there is currently no redemption program for converting your ETHE back into ETH. This means that once an ETHE is issued, it will remain in circulation until a redemption program is formed --- something that doesn’t seem to be too urgent for the SEC or Grayscale at the moment. Tiny amounts will naturally be removed due to fees, but the bulk of the asset is in there for good. Knowing that ETHE cannot be taken back and destroyed at this time, the ETH collateralizing it will not be removed from the wallet for the foreseeable future. While it is not fully locked in the sense of say a totally lost key, it is not coming out any time soon. Per their annual statement:
The Trust’s ETH will be transferred out of the ETH Account only in the following circumstances: (i) transferred to pay the Sponsor’s Fee or any Additional Trust Expenses, (ii) distributed in connection with the redemption of Baskets (subject to the Trust’s obtaining regulatory approval from the SEC to operate an ongoing redemption program and the consent of the Sponsor), (iii) sold on an as-needed basis to pay Additional Trust Expenses or (iv) sold on behalf of the Trust in the event the Trust terminates and liquidates its assets or as otherwise required by law or regulation.
Source: Description of Trust on page 31 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Grayscale now owns a huge chunk of both ETH and BTC’s supply… should we be worried about manipulation, a sell off to crash the market crash, a staking cartel?
First, it’s important to remember Grayscale is a lot more akin to an exchange then say an investment firm. Grayscale is working on behalf of its investors to create this product for investor control. Grayscale doesn’t ‘control’ the ETH it holds any more then Coinbase ‘controls’ the ETH in its hot wallet. (Note: There are likely some varying levels of control, but specific to this topic Grayscale cannot simply sell [legally, at least] the ETH by their own decision in the same manner Coinbase wouldn't be able to either.) That said, there shouldn’t be any worry in the short to medium time-frame. As noted above, Grayscale can’t really remove ETH other than for fees or termination of the product. At 2.5% a year, fees are noise in terms of volume. Grayscale seems to be the fastest growing product in the crypto space at the moment and termination of the product seems unlikely. IF redemptions were to happen tomorrow, it’s extremely unlikely we would see a mass exodus out of the product to redeem for ETH. And even if there was incentive to get back to ETH, the premium makes it so that it would be much more cost effective to just sell your ETHE on the secondary market and buy ETH yourself. Remember, any redemption is up to the investors and NOT something Grayscale has direct control over.
Yes, but what about [insert criminal act here]…
Alright, yes. Technically nothing is stopping Grayscale from selling all the ETH / BTC and running off to the Bahamas (Hawaii?). BUT there is no real reason for them to do so. Barry is an extremely public figure and it won’t be easy for him to get away with that. Grayscale’s Bitcoin Trust creates SEC reports weekly / bi-weekly and I’m sure given the sentiment towards crypto is being watched carefully. Plus, Grayscale is making tons of consistent revenue and thus has little to no incentive to give that up for a quick buck.
That’s a lot of ‘happy little feels’ Bob, is there even an independent audit or is this Tether 2.0?
Actually yes, an independent auditor report can be found in their annual reports. It is clearly aimed more towards the financial side and I doubt the auditors are crypto savants, but it is at least one extra set of eyes. Auditors are Friedman LLP – Auditor since 2015. Source: Independent Auditor Report starting on page 116 (of the PDF itself) of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here As mentioned by user TheCrpytosAndBloods (In Comments Below), a fun fact:
The company’s auditors Friedman LLP were also coincidentally TetheBitfinex’s auditors until They controversially parted ways in 2018 when the Tether controversy was at its height. I am not suggesting for one moment that there is anything shady about DCG - I just find it interesting it’s the same auditor.
“Grayscale sounds kind of lame” / “Not your keys not your crypto!” / “Why is anyone buying this, it sounds like a scam?”
Welp, for starters this honestly is not really a product aimed at the people likely to be reading this post. To each their own, but do remember just because something provides no value to you doesn’t mean it can’t provide value to someone else. That said some of the advertised benefits are as follows:
Access to trading within a tax advantaged retirement account
Institutions can easily and safely get exposure to crypto in a more legal-friendly manner
Ease of use for those who are not very technologically savvy
Ease of access for someone who doesn’t want to set up a Coinbase account
Perceived trust in institutional platforms over something like Coinbase or Kraken
Degen traders who just want access to the volatility ETHE provides that have no interest in crypto beyond that
So for example, I can set up an IRA at a brokerage account that has $0 trading fees. Then I can trade GBTC and ETHE all day without having to worry about tracking my taxes. All with the relative safety something like E-Trade provides over Binance. As for how it benefits the everyday ETH holder? I think the supply lock is a positive. I also think this product exposes the Ethereum ecosystem to people who otherwise wouldn’t know about it.
Why is there a premium? Why is ETHE’s premium so insanely high compared to GBTC’s premium?
There are a handful of theories of why a premium exists at all, some even mentioned in the annual report. The short list is as follows:
ETHE is NOT redeeming shares and as such doesn’t have an effective arbitrage mechanism
ETHE has a 1 year wait to be sold on the secondary market, again negating the ability to effectively arbitrage the premium
People may simply be willing to pay a premium for the benefits stated above.
Why is ETHE’s so much higher the GBTC’s? Again, a few thoughts:
ETHE hasn’t been around as long, so there is less secondary market supply to go around
ETHE was listed at an insanely high premium to begin with
ETHE might simply be more popular at the moment
Could just be sheer stupidity (investors think ETHE is a 1:1 ratio not 1:11)
Are there any other differences between ETHE and GBTC?
I touched on a few of the smaller differences, but one of the more interesting changes is GBTC is now a “SEC reporting company” as of January 2020. Which again goes beyond my scope of knowledge so I won’t comment on it too much… but the net result is GBTC is now putting out weekly / bi-weekly 8-K’s and annual 10-K’s. This means you can track GBTC that much easier at the moment as well as there is an extra layer of validity to the product IMO.
I’m looking for some statistics on ETHE… such as who is buying, how much is bought, etc?
There is a great Q1 2020 report I recommend you give a read that has a lot of cool graphs and data on the product. It’s a little GBTC centric, but there is some ETHE data as well. It can be found here hidden within the 8-K filings.Q1 2020 is the 4/16/2020 8-K filing. For those more into a GAAP style report see the 2019 annual 10-K of the same location.
Is Grayscale only just for BTC and ETH?
No, there are other products as well. In terms of a secondary market product, ETCG is the Ethereum Classic version of ETHE. Fun Fact – ETCG was actually put out to the secondary market first. It also has a 3% fee tied to it where 1% of it goes to some type of ETC development fund. In terms of institutional and accredited investors, there are a few ‘fan favorites’ such as Bitcoin Cash, Litcoin, Stellar, XRP, and Zcash. Something called Horizion (Backed by ZEN I guess? Idk to be honest what that is…). And a diversified Mutual Fund type fund that has a little bit of all of those. None of these products are available on the secondary market.
Are there alternatives to Grayscale?
I know they exist, but I don’t follow them. I’ll leave this as a “to be edited” section and will add as others comment on what they know. Per user Over-analyser (in comments below):
As asked by pegcity - Okay so I was under the impression you can just give them your own ETH and get ETHE, but do you get 11 ETHE per ETH or do you get the market value of ETH in USD worth of ETHE?
I have always understood that the ETHE issued directly through Grayscale is issued without the premium. As in, if I were to trade 1 ETH for ETHE I would get 11, not say only 2 or 3 because the secondary market premium is so high. And if I were paying cash only I would be paying the price to buy 1 ETH to get my 11 ETHE. Per page 39 of their annual statement, it reads as follows:
The Trust will issue Shares to Authorized Participants from time to time, but only in one or more Baskets (with a Basket being a block of 100 Shares). The Trust will not issue fractions of a Basket. The creation (and, should the Trust commence a redemption program, redemption) of Baskets will be made only in exchange for the delivery to the Trust, or the distribution by the Trust, of the number of whole and fractional ETH represented by each Basket being created (or, should the Trust commence a redemption program, redeemed), which is determined by dividing (x) the number of ETH owned by the Trust at 4:00 p.m., New York time, on the trade date of a creation or redemption order, after deducting the number of ETH representing the U.S. dollar value of accrued but unpaid fees and expenses of the Trust (converted using the ETH Index Price at such time, and carried to the eighth decimal place), by (y) the number of Shares outstanding at such time (with the quotient so obtained calculated to one one-hundred-millionth of one ETH (i.e., carried to the eighth decimal place)), and multiplying such quotient by 100 (the “Basket ETH Amount”). All questions as to the calculation of the Basket ETH Amount will be conclusively determined by the Sponsor and will be final and binding on all persons interested in the Trust. The Basket ETH Amount multiplied by the number of Baskets being created or redeemed is the “Total Basket ETH Amount.” The number of ETH represented by a Share will gradually decrease over time as the Trust’s ETH are used to pay the Trust’s expenses. Each Share represented approximately 0.0950 ETH and 0.0974 ETH as of December 31, 2019 and 2018, respectively.
Binance scammed me 1516 USDT with unethical verification requests! Stay Away from this Scam Exchance!
I woud like here to point how BINANCE scammed me 1516 USD with some bullshit and unethical requests. What happened? On 2019-12-20 I registered a binance account. I choosed to not verify my account as the limits of 2 BTC were more than enough for me! I deposited same day 0.21 BTC and sold it for USDT. Since I didn't use my account. On March 30 I logged in from a new computer. The system sent me an email to authorize the new device. This was done successfully. Later I tried to withdraw around 700 USD worth of BTC. The request was cancelled an the sytem asked me to verify my identiy. What???? What's the purpose of using unverified account????? So whenever I change my machine and login, I will have to submit my documents?? Meanwhile I had some discussion with live support, who tried to help. Finally, I have been told that I have no other choice than doing the full verification. I decided then to do the verification which was done finally successfully. You can see here: https://preview.redd.it/pkqhioutdfs41.png?width=493&format=png&auto=webp&s=fe4b632deb7d6d133d0894f6dfe1ac39b458b463 I spoke again with the support, they told me that I can try again, now that I'm fully verified, I can withdraw my funds. https://preview.redd.it/v0gddx81efs41.png?width=488&format=png&auto=webp&s=fbe27450f5a0a6247080be59d0c0f064c736eb55 So I tried again to withdraw some BTC, first the status for "Waiting for approval" then later it changed "Rejected" with the info "Withdraw rejected. Risk control". What??? I contacted again the support and I have been told that I will receive an email from Binance within few hours. Almost 20hrs passed, nothing from Binance. So I opened a Ticket. u/ilir_binance 2821529 # is Ticket number for reference! Ticket was opened on 03/31/2020 (12 days ago by the time of writing this post). Next day I received an answer from Binance support. And look what these people are asking me:
Dear user, Thanks for reaching out, We apologize for the delay in response due to the high volume of requests. As per checking, we found that the withdraw function was suspended due to the withdrawal risk control. We are willing to help you resume the withdrawal of your account. However, we may need some information to make progress. Security questions:
Account registration date
Account registration IP
So far this is not a problem to provide. I already provided this. Furthermore, they asked me to record a video :
A video of the first deposit you made to your Binance account. The video would contain the login process (do NOT show password) of the platform/wallet where you made this transaction to your Binance account, find the transaction and show us the full TxID, date and amount information.
Seriously?????? These were parts of my answer to them, same day:
Hello guys, Thank you for your reply, but I'm sorry to say that what you are asking is absolutely unethical, but it's okay. Your Kingdom, Your rules. I'm happy to solve this issue, take out my money out and never use again your terrible exchange. [...]
", please provide your withdrawal records and communication records with Binance CS" Where the hell should I get communication records?? I had some chat with your support when my account got locked. But where the hell should I get these communications?? Are you kidding me? You asked for my withdrawal records? Which ones??? One was rejected, the other was cancelled. So there was no withdrawal so far. So why are you asking something that does not exist?? [...]
And finally you wrote:
"A video of the first deposit you made to your Binance account. The video would contain the login process (do NOT show password) of the platform/wallet where you made this transaction to your Binance account, find the transaction and show us the full TxID, date and amount information. " My account was opened on the 20th December 2019! I made my first deposit on the same day, 0.21.. BTC. This has been now now more than 4 months!!!! How should I remember now which wallet I used by that time and what Transaction ID? Are you kidding me?????? It was not a platform, I remember I used a wallet, but I dont remember which one anymore. I checked all my current wallets and I couldn't find this transaction. It was this transaction based on my deposit history:https://www.blockchain.com/btc/tx/....
So they basically are asking me things that they know I can't provide and so would get a way to keep my money. I asked them if it will be enough to provide anything else and close this case.
I will request then to withdraw all my coins and after that I will request you to close my account. I will never use again your service. I look forward to reading you soon, as we can close this case.
I bought $1000 worth of the Top Ten Cryptos on January 1st, 2018 (Jan 2020 Update)
2018 \"Index Fund\" EXPERIMENT - Tracking Top 10 Cryptocurrencies of 2018 - Jan 2020 Update - Down -80% Full blog post with all the tables **NOTE** - I usually like to release the updates a day apart, but I'll be spacing out the Top Ten 2018, 2019, and 2020 a bit more as readers have mentioned they've been removed by the mods (no offence taken, mods - the content is similar, I assume the posts are being removed because they're seen as identical). **END NOTE** tl;dr - Alt-lead rally in January, but Bitcoin still in comfortable overall lead. NEM still in the basement. Dash crushes competition in January. January 2020 was easily the best start to a year since the experiments began in 2018.
Instead of hypothetically tracking cryptos, I made an actual $1000 investment, $100 in each of the Top 10 cryptocurrencies by market cap on the 1st of January 2018. The result? The 2018 Top Ten portfolio ended the year down 85%, my $1000 worth only $150. I thenrepeated the experimenton the 1st of January 2019 with the new 2019 Top Ten cryptos, then again in 2020. Think of the Top Ten Experiments as a lazy man’s Index Fund (no weighting or rebalancing), less technical, but hopefully still a proxy for the market as a whole – or at the very least an interesting snapshot of the 2018, 2019, and 2020 crypto space. I am trying to keep this project simple and accessible for beginners and those looking to get into crypto but maybe not quite ready to jump in yet. I try not to take sides or analyze, but rather attempt to report in a detached manner letting the numbers speak for themselves. This is not investing advice – as a matter of fact, the vast majority of the reports will show that the Top Ten approach under performs other strategies. This is experiment is designed to be documentary in nature, describing a specific period in cryptocurrency history.
Month Twenty-Five- Down 80%
After two straight down months to end last year, 2020 started off with a bang. Every 2018 Top Ten crypto finished the month in the green, a rare event for the 2018 Top Ten and something this grouping hasn’t seen since May 2019. The “worst” performing crypto still gained about +25% in January (XRP).
Ranking and January Winners and Losers
Six out of the Ten Top cryptos were on the move this month, most gaining ground. Bitcoin Cash climbed back to 4th place, up one from last month. Cardano and IOTA both advanced three places to #10 and #20 respectively. Dash made a massive leap this month, gaining 10 places from #26 to #16, the largest month to month move for any coin (in any direction) since this experiment began in 2018. On the other hand, even though they both had great months, Litecoin (+68%) fell one spot and Stellar (+34%) slipped three spots to settle at positions #7 and #14 respectively. January Winners – Dash blew everyone out of the water during the first month of 2020 gaining an astounding +184% and climbing 10 positions in the rankings. Bitcoin Cash and IOTA finished in a virtual tie for second place, both up about +87%. January Losers – XRP under-performed the pack, but still finished January up +24%. And Bitcoin, despite receiving most of the headlines in early 2020, couldn’t keep pace with its altcoin peers “only” gaining +31%. For those keeping score, here is tally of which coins have the most monthly wins and losses in the first 25 months of the 2018 Top Ten Crypto Index Fund Experiment. Most monthly wins (6): Bitcoin. Most monthly losses (5): Stellar. All cryptos have at least one monthly win and Bitcoin now stands alone as the only crypto that hasn’t lost a month (although it came close in January 2020).
Overall update – Bitcoin still with healthy lead, alts recover a bit, NEM still at the bottom
Down -46% just last month, Bitcoin made up a lot of ground in January 2020 and now is down -29% since the beginning of the experiment in 2018. Litecoin is now safely in second place at -68%, then comes Ethereum in third, down -75%. NEM remains stuck at the bottom, down -95% despite a strong +48% gain in January. Cardano and IOTA join NEM as the three cryptos that are down over -90% since January 2018. 40% of the cryptos that started 2018 in the Top Ten have dropped out, specifically NEM, Dash, IOTA, and Stellar. They have been replaced by EOS, Binance Coin, Tether, and BTCSV.
Total Market Cap for the entire cryptocurrency sector:
The overall crypto market gained approximately $67B in January 2020, up about +36%. After two months under $200B, the overall market cap is now back over $250B, a level not seen since September 2019. So, yes a good January 2020, but for some perspective: since January 2018, the total market cap is down -55%.
As could be inferred by its relative under-performance compared to altcoins this month, Bitcoin dominance dropped to 66% in January 2020. It was near this level a few months ago, in early December 2019. For context, the range since the beginning of the experiment in January 2018 has been quite wide: a high of 70% in September 2019 and a low of 33% in February 2018.
Overall return on investment since January 1st, 2018:
The 2018 Top Ten Portfolio gained about $65 in January 2020. If I cashed out today, my $1000 initial investment would return $202, down -80%. Here’s a look at the entire experiment, month by month: As you can see, nothing but red. The closest this group has come to breaking even was after the very first month. The 2019 Top Ten Experiment and the just launched 2020 Top Ten Experiment are both doing much better:
(Yes, this feels like the world’s slowest dollar cost averaging) Taken together, here’s the bottom bottom bottom line: After a $3000 investment in the 2018, 2019, and 2020 Top Ten Cryptocurrencies, my portfolios are worth $3,382. That’s up about 12.7%.
As always, the experiment’s focus of solely holding the Top Ten Cryptos continues to be a losing approach. While the overall market is down -55% from January 2018, the cryptos that began 2018 in the Top Ten are down -80% over the same period. This of course implies that I would have done a bit better if I’d picked different cryptos. At no point in this experiment has this investment strategy been successful: the initial 2018 Top Ten have under-performed each of the twenty-five months compared to the market overall. There are a few examples, however, of this approach outperforming the overall market in the parallel 2019 Top Ten Crypto Experiment and, spoiler alert, the first update of the 2020 Top Ten Crypto Experiment shows that focusing on the Top Ten was a good strategy in January. I’m also tracking the S&P 500 as part of my experiment to have a comparison point with other popular investments options. The S&P 500 is now up +21% since the beginning of 2018. My initial $1k investment into crypto would have yielded about +$210 had it been redirected to the S&P. Taking the same $1,000 per year in January approach with the S&P 500 would yield the following:
$1000 investment in S&P 500 on January 1st, 2018: +$210
$1000 investment in S&P 500 on January 1st, 2019: +$290
$1000 investment in S&P 500 on January 1st, 2020: +$0
Taken together, here’s the bottom bottom bottom line for a similar approach with the S&P: After three $1,000 investments into an S&P 500 index fund in January 2018, 2019, and 2020, my portfolio would be worth $3,500. That’s up about +17% (compared to +12.7% with the Top Ten Crypto Experiments).
After whimpering across the 2019 finish line, crypto has begun 2020 with a roar. A rare all green January for the 2018 Top Ten cryptos is hopefully a good sign for the year to come. Thanks for reading and for supporting the experiment. I hope you’ve found it helpful. I continue to be committed to seeing this process through and reporting along the way. Feel free to reach out with any questions and stay tuned for progress reports. Keep an eye out for my parallel projects where I repeat the experiment twice, purchasing another $1000 ($100 each) of two new sets of Top Ten cryptos as of January 1st, 2019 then again on January 1st, 2020.
"Binance no Longer Mentions Visa as Issuer of its Payment Card" - Must be Cryptocom!
This is all speculation but its definitely a very interesting idea: There is a article titled "Binance no Longer Mentions Visa as Issuer of its Payment Card". Also another that mentions "Binance quietly scrubs Visa mentions from its payment card website" Not sure about rules with links but you can google it. I recently saw a post about someone commenting: "For over a year, ~10k MCO per day were removed from the exchanges. In the last 2 months, 2 million MCO were added (1.5 million net). edit: these were transfered to binance, conspiracy theory: moon stop over, binance will be issuing white label cards." I definitely think this may be worth a discussion in itself. From article: "The blog originally stated: "The Binance Card is issued by Visa and accepted by more than 46 million merchants in 200 regions and territories, which makes shopping with crypto easier than ever before." That specific line is no longer in theblog post, although one closely matching it can be found that reads: "The Binance Card will be accepted by more than 46 million merchants offline and online in 200 regions and territories, which makes shopping with crypto easier than ever before." on another article: "Despite the announcement being live for a month now, Binance has removed the Visa logo from its promotional photos for Binance Card. The exchange likely prematurely added Visa expecting the deal to go through. The Binance Card will likely struggle to be used at most shops without the support of Visa." Clearly I do not see Binance being able to offer anything with cards on its own considering all the regulatory issues they already have. In example, no one even knows the HQ of Binance.. Here are some article titles you can google: "Binance Doesn’t Have a Headquarters Because Bitcoin Doesn’t, Says CEO" "Malta denies Binance ‘HQ’ has license to operate" So I do not see this as a possibility that Binance can have anything to do with VISA on its own, it will have to go through a white label for sure and that means they will not be able to intergrate the card into their ecosystem fully. It means they will need to top up crypto as stated in this article: "Load up your Binance Card and pay with crypto at more than 46 million Visa merchants worldwide," the Binance Card website previously stated" It will still be with VISA but I bet you they will be going through cryptocom for this as we have the best navigation of the crypto regulatory issues. I definitely think this is going to be the first customer of the white label and as such I would definitely say you got nothing to loose to stock up on MCO :) Any thoughts?
AMA AT DETECTIVE ID (25/06/2020) Before welcoming any questions, I would like to briefly introduce STATERA PROJECT. Statera is a smart contract deflationary token pegged to a cryptocurrency index fund. By including STA in an index fund with Link, BTC, ETH, and SNX you can buy one token and access the price action of four of the leading cryptocurrencies. You can also invest directly in the index fund (balancer pool) and receive the benefits of fees and BAL tokens paid to you while also having an automatically balanced fund. Lastly the deflationary mechanics of STA increases the chance for positive price action while decreasing beta (volatility). This is all found in a smart contract that is fully decentralized, the founders can no longer augment the contract in any way and this has been confirmed by a third party code audit through Hacken. Q1 : please explain in more detail about Statera, what is the background of this project? and when was it established? The dev of this project had previously created another deflationary token BURN. When the Balancer Labs released the Balancer Protocol, he had an idea to combine the two, deflationary token and a pool of tokens, making the first deflationary index fund. It started in the end of May and on the 3rd iteration, May 29th - a trustless version was launched that we see today. As briefly explained earlier, STATERA or STA is an Index Deflationary Token built on Ethereum blockchain; Index: Contains a token suite of world class leading crypto assests BTC, ETH, LINK, SNX with STA. Deflationary: On every transaction of STA 1% of the transacted amount is sent to 0x address on ethereum, burned forever, thus reducing the circulating supply of STA Index+Deflationary: STA is mixed with BTC, ETH, LINK SNX in a portfolio, backed by liquidity on a protocol known as balancer (balancer.finance) This platform serves as a market maker for the token suit. The Index suite is of equal rate of 20%, that is 20% of BTC, ETH, SNX LINK and STA, Thus, anytime there is an increase in value of any of those coins or tokens, balancer automatically trade them for STA in order to keep the token suit ratio balanced. And anytime there is an increase in the value of STA, the same process applies. while doing this trade, it enables further burning on every transaction, thus facilitating more token scarcity. In addition to this, Statera was deployed with contract finalised, that is, the index suite can not be altered, It is completely out of Dev's control. Q2 : What are the achievements that have been obtained by Statera in 2020? And what goals do you want to achieve in 2020? By this we assume the questionnaire is asking for a roadmap! First, the project is barely a month old, and within just a month, our liquidity has grown from $50,000 to over $400,000 currently above $300,000. Among the things we have accomplished so far is the creation of market value for STA's Balancer liquidity pool token BPT, which is currently over $1000 per one BPT. Regarding what we set to achieve: The future is filled with many opportunities and potentials, currently, we are working on a massive campaign to introduce our product to the outside world. We have already made contact with different and reputable forums and channels regarding marketing and advertisement offers, some which we are currently negotiating, some which we are awaiting response. All we can say for now is that the Team is working hard to make this the Investment opportunity every crypto enthusiast has been waiting for. Statera has the goal of putting cryptocurrency into every portfolio. We believe we have a product that increases the returns of investing in cryptocurrencies and makes it easier to diversify in this space. We have done so much in June: articles, how to videos, completed the audit, tech upgrades like one token liquidity additions, and beginning our many social communities. We have been hard at work behind the scenes but things like sponsorships, features, and media take time, content makers need days if not weeks to develop content, especially the best of the best. We are working tirelessly, we will not disappoint. We have plans for 2020-2025 and will release those in the next month. They are big and bold, you’re going to be impressed by the scale of our vision, when we say “Cryptocurrency in every portfolio” we mean it. In 2020 more specifically we are focused on more media, videos, product offerings, and exchanges. Q3 : What is the purpose of STA token? How can we get STA? The purpose of STA is an investment in the first deflationary index fund. The whole index's value rises from these aspects: 1. The index funds (WBTC,WETH,SNX,LINK) appreciate in value 2. When the index tokens are traded, the pool receives transaction fees - 1% 3. STA burns on transactions, so it's deflationary nature increases its value as the total supply drops 4. Balancer rewards Index holders with BAL token airdrops every week You can invest via the 'Trade' links in stateraproject.com website. Easiest way is to do it using ETH. The monetary policy of our token is set in stone and constantly deflationary. This negative supply pressure is a powerful mechanism in economics and price discovery. Through the lowering of supply we can decrease your beta (volatility) and increase your alpha (gains). Our token is currently only top 40 in liquidity on Balancer, however our volume is top 10! You want to know why? Because Statera works. Statera increases arbitrage, volume, fees, BAL rewards, and liquidity. Our liquidity miners in our Balancer pool are already making some of the highest BAL rewards on the platform, one user we spoke with made 18% in June, that’s over 150% APY! Our product is working, 100% (or you could say 150%), and when people start to see that, and realize the value, the sky's the limit. Q4 : can we as a user do STA mining? The supply of STA doesn't increase anymore, it only decreases due to the burn feature. So there is no way to mine anymore STA. Only way to acquire the tokens is via an exchange. The monetary policy of our token is set in stone and constantly deflationary. This negative supply pressure is a powerful mechanism in economics and price discovery. Through the lowering of supply we can decrease your beta (volatility) and increase your alpha (gains). Our token is currently only top 40 in liquidity on Balancer, however our volume is top 10! You want to know why? Because Statera works. Statera increases arbitrage, volume, fees, BAL rewards, and liquidity. Our liquidity miners in our Balancer pool are already making some of the highest BAL rewards on the platform, one user we spoke with made 18% in June, that’s over 150% APY! Our product is working, 100% (or you could say 150%), and when people start to see that, and realize the value, the sky's the limit. Q5 : The ecosystem of a public chain has a lot to do with the level of engagement and participation of third-party developers. How does Statera support the developers? Not really. Our project is focusing on investment opportunities for the cryptocurrencies. The cryptocurrency tokens that are not used and are just sitting in a wallet can work for you by being added to an index fund and appreciate in value over time. First off, what we have created is a new asset class, I’ll repeat that, a new asset class. This asset has never existed: “Deflationary Index Fund,” what does that mean for finance? What will developers do with this? It’s hard to give a finite answer. We hope there are future economic papers on our token and what it means to be a deflationary index fund. With the addition of synthetic assets and oracles you can put any asset into the DeFi space: Gold, Nikkei 225, USD, etc. STA can be combined with any assets and bring the benefits of it’s ecosystem and deflationary mechanism to that asset. STA, the token itself, also gives you access to the price action of any asset it is paired with. Put simply STA’s balancer pool(s) give you a benefit in holding them, and STA’s price will reflect it’s inclusion in Balancer Pool(s) (and possibly future financial instruments), so STA is a bet on DeFi as a whole. When we say as whole, we mean as whole: what happens if you include STA in a crypto loan, or package it with a synthetic S&P 500 token, or use it as fee payment in a DeFi platform? Being fully decentralized it is up to our community to make this happen, social engagement and community are key. We are constantly bringing community members onto our team and rewarding those that benefit the ecosystem. in addition, Statera is a fully community project now. Paul who is the current team leader was an ordinary member of the community weeks ago, due to his interest and support for the project, he started dedicating his time to the project. Quite a number of community members are also in the same position, while Statera was developed by an individual, it is being built by the entire Statera community Community Questions (Twitter): Q1 From: @KazimKara35 The project tells us that the acquisition and sale of data between participants is protected by code of conduct and how safe is deployed on the blockchain, but how do you handle regulations while operating on a global scale? Statera is decentralized token, similar to other utility crypto tokens and same regulations apply to it as others. his is actually a benefit of our decentralized nature. This isn’t legal advice, however in the past regulating bodies have ruled that the more decentralized a project is, especially from launch, the less likely they are to be deemed a security (see: Ethereum). This means they can be traded more freely and be available on more platforms. We are as decentralized as you can be. The data itself is all secured through the blockchain which has been shown to be a highly secure medium. We do not store any of your data and as long as you follow best practices in blockchain security there are no added security risks of using Statera. We don’t, and literally can’t, hold anymore personal information than is made available in any blockchain transaction. and that "personal information" is more likely than not just your ethereum wallet address, no "real world" data is included in transactions Q2 from: @Michael_NGT353 What is Mechanism you use On your Project sir? Are you Use PoS,PoW or other Mechanism Can you explain why you use it and what is Make it Different? Our token is an ERC-20 token and it's running on the Ethereum blockchain. The Ethereum's POW mechanism is currently supporting the Statera token We run on Ethereum, so we are currently PoW. With ETH 2.0 we will hopefully be PoS this year (hopefully). We use it because ETH has over 100 million addresses and around a million daily transactions. We are currently at about 1,900 token holders, we are just touching the edge of what is possible in this market. We chose the biggest and the best network available right now to launch our product. We think the upside is huge because of this choice. Being the biggest network it is also one of the most secure, no high risk vulnerabilities have been found in Ethereum or in our code (we've had our code audited by a third party, Hacken, and you can read their audit on our Medium page), so we also have security on our side Q3 From : @Ryaaan_Nguyen Can you list some of Statera outstanding features for everyone here to know about? What are the products that Statera is focusing on developing? As mentioned earlier by GC, First off, what we have created is a new asset class, I’ll repeat that, a new asset class. This asset has never existed: “Deflationary Index Fund,” what does that mean for finance? What will developers do with this? It’s hard to give a finite answer. We hope there are future economic papers on our token and what it means to be a deflationary index fund. With the addition of synthetic assets and oracles you can put any asset into the DeFi space: Gold, Nikkei 225, USD, etc. STA can be combined with any assets and bring the benefits of it’s ecosystem and deflationary mechanism to that asset. STA, the token itself, also gives you access to the price action of any asset it is paired with. Put simply STA’s balancer pool(s) give you a benefit in holding them, and STA’s price will reflect it’s inclusion in Balancer Pool(s) (and possibly future financial instruments), so STA is a bet on DeFi as a whole. When we say as whole, we mean as whole: what happens if you include STA in a crypto loan, or package it with a synthetic S&P 500 token, or use it as fee payment in a DeFi platform? We touched on this a bit in the question on what makes us special compared to other exchanges. We have created a product that synergizes with Balancer Pools creating a symbiotic relationship that improves the outcomes for users (our product can also synergize with future DeFi products). By including STA in an index fund with Link, BTC, ETH, and SNX you can buy one token and access the price action of four of the leading cryptocurrencies. You can also invest directly in the index fund (balancer pool) and receive the benefits of fees and BAL tokens paid to you while also having an automatically balanced portfolio (like an index fund with dividends). Lastly, the deflationary mechanics of STA increases the chance for positive price action while decreasing beta. We want to package Statera with assets across the whole cryptocurrency space, with an emphasis on DeFi. We also want everyday people to be able to invest quickly in crypto while also feeling reassured their investment is set up to succeed. We are focused on developing a name brand that people go to first and foremost when investing in crypto: cryptocurrency in every portfolio. This is all found in a smart contract that is fully decentralized, the founders can no longer augment the contract in any way and this has been confirmed by the third party code audit. This is a feature in and of itself, some argue that Bitcoin’s true value is in it’s network effect, first mover advantage, and immutability. Statera is modeled on all three of those and has those features in spades. The community now owns our token, the power in that, giving finance and power to the people, is why we are here. Q4 From : @futcek What do you think about the possibility of creating new use cases in DeFi space for existing real world assets by using crypto technology? What role do you see in this creation for Statera? I think my answer above actually answers this perfectly, Statera in and of itself is a “new use case”, a “deflationary index fund” has never existed, I’ll copy and paste the other relevant part: “With the addition of synthetic assets and oracles you can put any asset into the DeFi space: Gold, Nikkei 225, USD, etc. STA can be combined with any assets and bring the benefits of it’s ecosystem and deflationary mechanism to that asset. STA, the token itself, also gives you access to the price action of any asset it is paired with. Put simply STA’s balancer pool(s) give you a benefit in holding them, and STA’s price will reflect it’s inclusion in Balancer Pool(s) (and possibly future financial instruments), so STA is a bet on DeFi as a whole. When we say as whole, we mean as whole: what happens if you include STA in a crypto loan, or package it with a synthetic S&P 500 token, or use it as fee payment in a DeFi platform? Being fully decentralized it is up to our community to make this happen, social engagement and community are key. We are constantly bringing community members onto our team and rewarding those that benefit the ecosystem.” Statera is a way to make your investment more successful, and owning Statera let's you benefit from other people using it to make their investments more successful (a self feeding cycle). Q5 From : @Carmenzamorag Statera's deflationary system is based in that with every transaction 1% of the amount is destroyed, would this lead to lack of supply and liquidity in the long term future? How would that be fixed? The curve of supply is asymptote, meaning that it will never reach zero. The idea is that the deflationary process will slowly decrease the supply of STA, which – combined with a fixed or increaseing demand – will result in STA appreciating in value. Evidently, as the STA token increases in value, the amounts of STA being traded will slowly decrease: The typical investor might buy 10.000 STA at the current rate, but in the future (proportional to an increase in the valueation of STA) this number will tend to decrease, hence the future investor might only buy 1000 STA. This of course results in less STA being burned. Additionally, STA is divisible to the 18th decimal, why – even if the supply was to reach 1 STA – there would be a sufficient supply. Well this would be a question for a Mathematician, and luckily we’re loaded with them (as seen above)! I’ll try to illustrate with an example. 1% of 100 million is 1 million, 1% of 10 million is 100,000. As we go down in supply the burn is less by volume. What also happens at lower supply is higher prices (supply and demand economics). So those 1 million tokens burned may be worth $20,000, but by the time overall supply is at 10 million those 100,000 tokens may also be worth $20,000 or even more. This means you transact “less”, if you want to buy 1 Ether now with Statera you need 8,900 STA which would burn 89 tokens. If Statera is worth $100 you only need 2.32 statera (.023 tokens burned). Along with this proportional and relative burn decrease, tokens are 18 decimals long, so even when we get to 1 token left (which mathematically would take decades if not centuries, but that is wholly dependent on usage), you are still left with 10 to the 18th power, or one quintillion “tokens”. So it’s going to take us a while to have supply issues :) Nuked Phase (3rd Part) Q) What is your VISION and Mission? Our working mission and vision: Mission: Provide every investor with simple and effective ways to invest in cryptocurrency. Decrease volatility and increase positive price pressure in cryptocurrency investments. Lower the barrier to entry for more advanced investment tools. Be a community focused and community driven cryptocurrency, fully decentralized by every meaning of the word. Vision: We aspire to put “cryptocurrency in every portfolio”. We envision a world where finance is given back to the people and wealth building strategies withheld only for affluent individuals are given to all. We also strive to create an investment environment based on sound monetary policy and all the power that comes with a sound asset. Q) What are the benefits of STA for its investors in long term? Does STA have Afrika as an important area for its expansion? We have ties to Africa and see Statera as a way for anyone and everyone to invest in cryptocurrency. The small marketcap of statera makes it's price low and it's upside massive. Right now if you wanted to be exposed to the price action of four cryptocurrencies (BTC, ETH, Link, SNX) Statera is a way to gain that exposure in a way that has a huge upside, compared to the other four assets, there are risks in investing in any small cap but with those risk come outsized rewards (not investment advice and all answers are solely my opinions 😊) Q) In the long run, why should we trust and follow STATERA? How do you raise awareness and elimination of the doubts of investors / partners / customers?. You're really asking "How do I trust myself and other crypto investors" The project is FULLY decentralized, it is now in the hands of the community. We would venture a guess that the community wants their investment to succeed and be worth more in the future, so you are betting on people. wanting to make themselves money on their own investment. This is a pretty sure bet. The community being active and engaged is key, and we have short term and long term plans to ensure this happens Q) No one can doubt the strength of #Statera. But can you tell us some of the challenges and difficulties you're presently facing? How can you possibly overcome them? We're swinging outside our weightclass, we don't see litecoin or SNX, or any other crypto product as our competition. Our competition is NASDAQ, Fidelity, etc. We want to provide world class financial instruments that only the wealthy have access to in the traditional world to everyone. Providing liquidity, risk parity, being paid to provide liquidity, unique value propositions, are all things we want to bring to everyone. However we are coming up in a hectic space, everyday their is fud and defamation on the web, but that is the sandbox we chose to play in and we aren't grabbing our ball and going home. We can tell you that we will not disappoint and fighting all the fud that comes along with being a small and upstart project only fuel our fire. Building legitimacy is our largest challenge and looking at our audit, financial report, and some things you will see in the coming weeks, we hope you see we are facing those challenges head on. Q) What is the actual uniqueness of #Statera.??? Can you guys please explain tha advantages of #Statera over other projects.?? When we launched there were no other products like ours. There are now copies, and we wish them the best, but we have the best product, hands down. Over the next couple weeks this will become apparent, if it hasn't already, also a lot of the AMA answers dug deeper into our unique value proposition, especially the benefits we provide to Balancer Pools which shows the benefits we would provide for any index fund. We are a tool to improve cryptocurrency investing Q) Fragmentation, layering and cross-chain are three future solutions for high-performance blockchains. Where is Statera currently? What are the main reasons for taking this direction? We operate on the Ethereum chain, as it upgrades our services and usability will upgrade. We are working on UI and more user friendly systems to onboard people into our ecosystem Q) How STATERA plan to make room and make this project known in the world of crypto, full of technology and full of new projects very good in today's market? We think we have a truly innovative product, which - when first understood - appeals to most investors. Whether you want a high-volatility/medium-risk token like STA or whether you are more conservative and simply just plan on adding to the Statera pool BPT (which is not nearly as volatile but still offers great returns). We plan on making Statera known to the crypto world through a marketing campaign which slowly will be unravelled in the comming days and weeks. If interested, you can check out an analysis of the different investment options in the Statera ecosystem in our first financial report: https://medium.com/@stateraproject/statera-financial-reports-b47defb58a18 Q) Hello, cryptocurrencies are very volatile and follow bitcoin ... and does this apply to Statera? or is there some other logic present in some way? is statera token different from a current token? Are you working on listings on other exchanges? Currently uniswap is somewhat uncomfortable for fees. We are also on bamboo relay, saturn network, and mesa. Statera will be volatile like all cryptocurrency, this is a small and nascent space. But with the deflationary mechanic and balancer pool, over time, as marketcap grows it will become less volatile and more positively reactive to price. Q) Security is one of the most essential characteristics for a project to get reputation. How can #Statera Team assure to their community that users assets and investments will stay safe from unwanted agents? We have been third party audited by the same company that worked with VeChain to audit their code. Our code has been shown to be bulletproof. Unless Ethereum comes up with a fatal security flaw there is nothing that can happen to our contract (there is no backdoor, no way for anyone to edit or adjust the smart contract). Q) Many investors see the project from the price of the coin. Can you give us advantages why Statera is so suitable for long-term investment? and what makes Statera different from other similar projects? Sometimes the simplest solutions are the most effective. A question you can ask is “What if this fails”? But you can also ask, “What if this succeeds”? Cryptocurrency is filled with asymmetric risks, we think if you look into the value proposition you will find that there is a huge asymmetric risk/reward in Statera, and we will make that even clearer in our soon to be released litepaper. You are on the ground floor of a simple but highly effective solution to onboarding people into defi, cryptocurrencies, and investing. Our product reduces volatility and increases gains (decreases beta and increases alpha in investor terms), which is highly attractive in any investment. The down side is there but the upside outweighs it exponentially (asymmetric risk) Q) What your plans in place for global expansion, are Statera focusing on only market at this time? Or focus on building and developing or getting customers and users, or partnerships? Can you explain this? We have reached out to influencers in other countries and things are in the works. We have also translated documents and are working on having them in at least 4 languages by the end of July. We were founded globally, our team is global, and we are focused on reaching all 7 billion people. Q) Now in the cryptofield everyday there are new projects joining in the Blockchain space. They are upgraded, Well-established and coming up with innovative technology. How Statera going to compete with them? What do you think, one day Statera will become useless And will be lost into the abyss of time for not bringing any new technology? We are the first of our kind, no one had a deflationary index fund before us. Index funds will be the future of crypto (look at the popularity of etfs and indexes in the traditional markets). We are a tool to make your index function better and pay you more. As long as people care about crypto index funds they will care about the value STA brings to that. We have an involved and long term plan to reach dominance over a 5 year span, this is not a flash in the pan, big things coming Q1. You say that the weight and proportions of your tokens are constant. So how have you managed to prevent market price speculation from generating hypervolability in your token price? Do you consider yourselves a kind of stablecoin? Q2. How many jurisdictions allow the use of Stratera products and services? Are they available for Latin America? @joloroeowo The balancer ensures an equal ratio of 20% amongst the five tokens included in our fund. This, however, does not imply that the tokens are stable. Rather, the Balancer protocol helps mitigating price fluctuations. Q) How can I as a Statera participant participate in liquidity mining, and receive BAL as reward? What are the use cases of $STA token, and how are users motivated to buy and hold long term? The easiest way is to go to stateratoken.com and click trade then BPT. You can also buy all five tokens and click on portfolio then add liquidity. Balancer is working on a simpler interface to add liquidity with one token, we are waiting on them. I think we explained the use cases above Q) What do you plan have for global expansion, is Statera currently focused solely on the market? Or is it focused on building and developing or acquiring customer and user or partnership relationships? Can you explain it? We are currently working on promoting the project and further develope our product, making it lucrative for more new investors to join our pool and invest in the STA token. Q1) Statera have 2 types of tokens, so can you tell me the differences between STA and STAC ? What are their uses cases? Is possible Swap between them? Q2) Currently the only possible Swap or "exchange" possible is Uniswap, so you do have plans to list the STA token into a more Exchanges? STAC is obsolete, we only have STA and BPT (go to our website and click on trade) stateratoken.com BPT gives you more diversification and less risk, STA gives you more volatility and more chance for big gains. Q2 we are on multiple exchanges (4), bamboo relay, saturn, and mesa we do have plans for future exchanges but the big ones have processes and hoops to jump through that can't be done so quickly Q) What business scenarios can STATERA support now? In which industries can we see the mass adoption of STATERA technology in the near future? Statera increases the effectiveness of your cryptocurrency investments. Specifically it makes cryptocurrency index funds function better, netting you higher returns, which we have already seen in just one month of implementation. Right now, today, you can buy our BPT token and increase the functionality of holding a crypto index fund. In the future we want every single web user to see and use our product Q) Do you plan to migrate to other platforms like Tron, BinanceChain, EOS, etc. if it is feasible?? Migrating our current contract is not. Starting new offerings on those other chains could be possible, they aren't on our radar currently but if the community requests them we are driven by our community Q) ETH Blockchain is a Blockchain have many token based in it, i have used ETH blockchain long time and i see it have big fee and need much time to make a transcation so Why you choose to based STA in ETH blockchain not other like Bep2 or Trc20 ? Simply: 100 million addresses, 1 million transactions a day. The more users we have the more we will benefit our community. We hope ETH 2.0 scaling will fix the problems you mention. Q) No one achieve anything of value on its own, please can you share about Statera present and future partnerships that will drive you to success in this highly congested crypto space? We have a unique product that no one else has (there are people who have copied us). We can't announce our current and future partnerships yet, but they will be released soon. Our future hopes of partnerships are big and will be key to our future, know we are focused on making big partnerships, some you may not even be thinking about. Q) According to the fact that your algorithm causes 1% of each transaction to be destroyed, I would like to know, then, how you plan to finance yourself as a project in the long term? The project is now in the hands of the community and we are a team of passionate people volunteering to help promote and develope the Statera ecosystem. But then, how do we afford running a promo campaign? We have lots of great community members donating funds that goes to promoting the project. In other words, the community helps financing the project. And so far, we have created a fantastic community consisting of passionate and well-educated people! Q) There are many cryptocurrency startups were established by talent teams, but they got problem in raising capital via token sales due to many factors as bear market, bankrupt etc. This leaded their potential startups fail. So how will Statera break these barriers and attract more funds from outside crypto space? We are community focused and community ran. When you look at centralized cryptocurrencies you can see the negative of them (Tron, ADA, etc.) We believe being fully decentralized is the true power position. You the owner of statera can affect our future and must affect our future. This direct ownership means people need to mobilize and organize to push us forward, and it is in their best self interest to do so. It's a bet on our community, we're excited about that bet Q) What business scenarios can STATERA support now? In which industries can we see the mass adoption of STATERA technology in the near future? Statera increases the effectiveness of your cryptocurrency investments. Specifically it makes cryptocurrency index funds function better, netting you higher returns, which we have already seen in just one month of implementation. Right now, today, you can buy our BPT token and increase the functionality of holding a crypto index fund. In the future we want every single web user to see and use our product Q) Why being a hybrid of a liquidity pool and an index fund? What are the main benefits about this? By being a liquidity pool the exchange side of the pool (balancer also functions as an exchange) gives you added liquidity for more effortless, effective, and cheaper rebalancing. You also benefit from getting paid the fee when people use the exchange AND getting paid BAL tokens that are worth $15-20 USD. These are not benefits you get with an index fund, meanwhile the liquidity pool rebalances just like an index fund would Q) Which specific about technology and strategy of #STA that make you believe it will be successful and what does #STA plan do to attract more users in the upcoming time? I think the idea behind Statera is truly ingenious. We have made an index fund, which investors are highly(!) incentivised to invest in, namely because the ROI, so far, has been huge. An increase in the pool liquidity (index fund) indirectly translates into an increase in the price of STA, why we think the STA token - combined with its deflationary nature - will increase in the long run. The mechanism behind this is somewhat complex, but to better get an understanding of it, I suggest you visit our medium page and read more about the project: https://medium.com/@stateraproject
The power players of consumer finance in the 21st century will be crypto-native companies who build with blockchain technology at their core.
The crypto landscape is still nascent. We’re still very much in the fragmented, unbundled phase of the industry lifecycle. Beyond what Genesis Block is doing, there are signs of other companies slowly starting to bundle financial services into what could be an all-in-one bank replacement. So the key question that this series hopes to answer:
Which crypto-native company will successfully become the bank of the future?
We obviously think Genesis Block is well-positioned to win. But we certainly aren’t the only game in town. In this series, we’ll be doing an analysis of who is most capable of thwarting our efforts. We’ll look at categories like crypto exchanges, crypto wallets, centralized lending & borrowing services, and crypto debit card companies. Each category will have its own dedicated post. Today we’re analyzing big crypto exchanges. The two companies we’ll focus on today are Coinbase (biggest American exchange) and Binance (biggest global exchange). They are the top two exchanges in terms of Bitcoin trading volume. They are in pole position to winning this market — they have a huge existing userbase and strong financial resources. Will Coinbase or Binance become the bank of the future? Can their early success propel them to winning the broader consumer finance market? Is their growth too far ahead for anyone else to catch up? Let’s dive in. https://preview.redd.it/lau4hevpm7f51.png?width=800&format=png&auto=webp&s=2c5de1ba497199f36aa194e5809bd86e5ab533d8
The most formidable exchange on the global stage is Binance (Crunchbase). All signs suggest they have significantly more users and a stronger balance sheet than Coinbase. No other exchange is executing as aggressively and relentlessly as Binance is. The cadence at which they are shipping and launching new products is nothing short of impressive. As Tushar Jain from Multicoin argues, Binance is Blitzscaling. Here are some of the products that they’ve launched in the last 18 months. Only a few are announced but still pre-launch.
Binance is well-positioned to become the crypto-powered, all-in-one, bundled solution for financial services. They already have so many of the pieces. But the key question is:
Can they create a cohesive & united product experience?
Binance is strong, but they do have a few major weaknesses that could slow them down.
Traders & Speculators Binance is currently very geared for speculators, traders, and financial professionals. Their bread-and-butter is trading (spot, margin, options, futures). Their UI is littered with depth charts, order books, candlesticks, and other financial concepts that are beyond the reach of most normal consumers. Their product today is not at all tailored for the broader consumer market. Given Binance’s popularity and strength among the pro audience, it’s unlikely that they will dumb down or simplify their product any time soon. That would jeopardize their core business. Binance will likely need an entirely new product/brand to go beyond the pro user crowd. That will take time (or an acquisition). So the question remains, is Binance even interested in the broader consumer market? Or will they continue to focus on their core product, the one-stop-shop for pro crypto traders?
Controversies & Hot Water Binance has had a number of controversies. No one seems to know where they are based — so what regulatory agencies can hold them accountable? Last year, some sensitive, private user data got leaked. When they announced their debit card program, they had to remove mentions of Visa quickly after. And though the “police raid” story proved to be untrue, there are still a lot of questions about what happened with their Shanghai office shut down (where there is smoke, there is fire). If any company has had a “move fast and break things” attitude, it is Binance. That attitude has served them well so far but as they try to do business in more regulated countries like America, this will make their road much more difficult — especially in the consumer market where trust takes a long time to earn, but can be destroyed in an instant. This is perhaps why the Binance US product is an empty shell when compared to their main global product.
Disjointed Product Experience Because Binance has so many different teams launching so many different services, their core product is increasingly feeling disjointed and disconnected. Many of the new features are sloppily integrated with each other. There’s no cohesive product experience. This is one of the downsides of executing and shipping at their relentless pace. For example, users don’t have a single wallet that shows their balances. Depending on if the user wants to do spot trading, margin, futures, or savings… the user needs to constantly be transferring their assets from one wallet to another. It’s not a unified, frictionless, simple user experience. This is one major downside of the “move fast and break things” approach.
BNB token Binance raised $15M in a 2017 ICO by selling their $BNB token. The current market cap of $BNB is worth more than $2.6B. Financially this token has served them well. However, given how BNB works (for example, their token burn), there are a lot of open questions as to how BNB will be treated with US security laws. Their Binance US product so far is treading very lightly with its use of BNB. Their token could become a liability for Binance as it enters more regulated markets. Whether the crypto community likes it or not, until regulators get caught up and understand the power of decentralized technology, tokens will still be a regulatory burden — especially for anything that touches consumers.
Binance Chain & Smart Contract Platform Binance is launching its own smart contract platform soon. Based on compatibility choices, they have their sights aimed at the Ethereum developer community. It’s unclear how easy it’ll be to convince developers to move to Binance chain. Most of the current developer energy and momentum around smart contracts is with Ethereum. Because Binance now has their own horse in the race, it’s unlikely they will ever decide to leverage Ethereum’s DeFi protocols. This could likely be a major strategic mistake — and hubris that goes a step too far. Binance will be pushing and promoting protocols on their own platform. The major risk of being all-in on their own platform is that they miss having a seat on the Ethereum rocket ship — specifically the growth of DeFi use-cases and the enormous value that can be unlocked. Integrating with Ethereum’s protocols would be either admitting defeat of their own platform or competing directly against themselves.
The crypto-native company that I believe is more likely to become the bank of the future is Coinbase (crunchbase). Their dominance in America could serve as a springboard to winning the West (Binance has a stronger foothold in Asia). Coinbase has more than 30M users. Their exchange business is a money-printing machine. They have a solid reputation as it relates to compliance and working with regulators. Their CEO is a longtime member of the crypto community. They are rumored to be going public soon.
Let’s look at what makes them strong and a likely contender for winning the broader consumer finance market.
Different Audience, Different Experience Coinbase has been smart to create a unique product experience for each audience — the pro speculator crowd and the common retail user. Their simple consumer version is at Coinbase.com. That’s the default. Their product for the more sophisticated traders and speculators is at Coinbase Pro (formerly GDAX). Unlike Binance, Coinbase can slowly build out the bank of the future for the broad consumer market while still having a home for their hardcore crypto traders. They aren’t afraid to have different experiences for different audiences.
Brand & Design Coinbase has a strong product design team. Their brand is capable of going beyond the male-dominated crypto audience. Their product is clean and simple — much more consumer-friendly than Binance. It’s clear they spend a lot of time thinking about their user experience. Interacting directly with crypto can sometimes be rough and raw (especially for n00bs). When I was at Mainframe we hosted a panel about Crypto UX challenges at the DevCon4 Dapp Awards. Connie Yang (Head of Design at Coinbase) was on the panel. She was impressive. Some of their design philosophies will bode well as they push to reach the broader consumer finance market.
Early Signs of Bundling Though Coinbase has nowhere near as many products & services as Binance, they are slowly starting to add more financial services that may appeal to the broader market. They are now letting depositors earn interest on USDC (also DAI & Tezos). In the UK they are piloting a debit card. Users can now invest in crypto with dollar-cost-averaging. It’s not much, but it’s a start. You can start to see hints of a more bundled solution around financial services.
Let’s now look at some things that could hold them back.
Slow Cadence In the fast-paced world of crypto, and especially when compared to Binance, Coinbase does not ship very many new products very often. This is perhaps their greatest weakness. Smaller, more nimble startups may run circles around them. They were smart to launch Coinbase Ventures where tey invest in early-stage startups. They can now keep an ear to the ground on innovation. Perhaps their cadence is normal for a company of their size — but the Binance pace creates quite the contrast.
Institutional Focus As a company, we are a Coinbase client. We love their institutional offering. It’s clear they’ve been investing a lot in this area. A recent Coinbase blog post made it clear that this has been a focus: “Over the past 12 months, Coinbase has been laser-focused on building out the types of features and services that our institutional customers need.” Their Tagomi acquisition only re-enforced this focus. Perhaps this is why their consumer product has felt so neglected. They’ve been heavily investing in their institutional services since May 2018. For a company that’s getting very close to an IPO, it makes sense that they’d focus on areas that present strong revenue opportunities — as they do with institutional clients. Even for big companies like Coinbase, it’s hard to have a split focus. If they are “laser-focused” on the institutional audience, it’s unlikely they’ll be launching any major consumer products anytime soon.
Coinbase Wrap Up
At Genesis Block, we‘re proud to be working with Coinbase. They are a fantastic company. However, I don’t believe that they’ll succeed in building their own product for the broader consumer finance market. While they have incredible design, there are no signs that they are focused on or capable of internally building this type of product. Similar to Binance, I think it’s far more likely that Coinbase acquires a promising young startup with strong growth.
Other US-based exchanges worth mentioning are Kraken, Gemini, and Bittrex. So far we’ve seen very few signs that any of them will aggressively attack broader consumer finance. Most are going in the way of Binance — listing more assets and adding more pro tools like margin and futures trading. And many, like Coinbase, are trying to attract more institutional customers. For example, Gemini with their custody product.
Coinbase and Binance have huge war chests and massive reach. For that alone, they should always be considered threats to Genesis Block. However, their products are very, very different than the product we’re building. And their approach is very different as well. They are trying to educate and onboard people into crypto. At Genesis Block, we believe the masses shouldn’t need to know or care about it. We did an entire series about this, Spreading Crypto. Most everyone needs banking — whether it be to borrow, spend, invest, earn interest, etc. Not everyone needs a crypto exchange. For non-crypto consumers (the mass market), the differences between a bank and a crypto exchange are immense. Companies like Binance and Coinbase make a lot of money on their crypto exchange business. It would be really difficult, gutsy, and risky for any of them to completely change their narrative, messaging, and product to focus on the broader consumer market. I don’t believe they would ever risk biting the hand that feeds them. In summary, as it relates to a digital bank aimed at the mass market, I believe both Coinbase and Binance are much more likely to acquire a startup in this space than they are to build it themselves. And I think they would want to keep the brand/product distinct and separate from their core crypto exchange business. So back to the original question, is Coinbase and Binance a threat to Genesis Block? Not really. Not today. But they could be, and for that, we want to stay close to them. ------ Other Ways to Consume Today's Episode:
Bitcoin’s value does stem from users’ belief in it but, unlike tulips, more cannot be grown to satisfy demand. That said, nothing guarantees that investors won’t see Bitcoin as overvalued in the future, causing its own bubble to burst. Closing thoughts. Bitcoin certainly shares most of the features of a store of value like gold. The ... Nakamoto imagined both sides of the *ahem* coin, also writing, “ If Bitcoin remains a small niche, it’ll be worth less per unit than existing currencies. If you imagine it being used for some fraction of world commerce, then there’s only going to be 21 million coins for the whole world, so it would be worth much more per unit.” Today, Bitcoin is well on its way to achieving the latter. Three transactions worth 13,049 BTC ($125.7 million) were sent from the cryptocurrency exchange Binance to anonymous addresses. Another four transfers worth 10,294 BTC ($99.1 million) were made ... The Binance exchange, which stores Bitcoin and other crypto-currencies for members, said hackers took 7,000 bitcoins in one go. Withdrawals have now been suspended on the platform. No surprise, then, that a report published by Chainalysis in January 2020 tracked the movement of $2.8 billion worth of criminal BTC in 2019 to see where it ended up, and found that a staggering 27.5% of that $2.8 billion ended up with Binance—making them the single biggest recipient of illegal BTC in 2019. Profile Profile Settings Account and Billing Referred friends Coins My Support Tickets Help Center Ideas Published Followers Following Dark color theme Sign Out Sign in Upgrade Upgrade now 30-day Free Trial Start free trial Upgrade plan Pay nothing extra Upgrade early
BITCOIN BREAKOUT TODAY!!! Binance Leverage Trading, Will Compete With Bybit & BitMEX
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