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Philippines SEC Warns Against Crypto Scams Onecash Trading and PBB150

Fri, 03/16/2018 - 20:00

The Philippines Securities and Exchange Commission (SEC) has issued a warning about the Onecash Trading platform – an online cryptocurrency service, that promises 200 percent returns on investments in a time span of only eight weeks. The advisory issued by the SEC also noted the company is not registered with it.

Also see: Payza Integrates Dash with a Little Help from BlockCypher

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

OneCash Trading Scam

The Philippines securities regulator decided to look into the matter after receiving reports from the public about an online unregistered trading company that promises 200 percent returns on investments.

The trading firm makes use of Facebook to generate interest through sponsored links and enroll new users on the platform at 1000 pesos ($20).

After enrollment, new members have a choice to either become “investors” with a promise to receive 25 percent return on investment every Thursday at a stretch for eight weeks, or become “builders” by inviting more members directly or indirectly and receive 50 pesos ($1) per invite up to the 10th level.

This model appears similar to classic multi-level marketing (MLM) schemes, which are particularly popular in Philippines and other parts of Southeast Asia.

SEC Cautions Ordinary Investors

After investigating the case, SEC released a cautionary notice on its website concerning OneCash. It said:

The public is hereby warned that such investment schemes whether with the use of money or virtual currencies like Bitcoin, Ethereum, Ripple, Dash, Litecoin, Monero, SIBcoin, Mooncoin and many others are considered as securities subject to the regulatory authority of this commission.

Furthermore, the securities regulator advised its citizens to stay away from such investment schemes and report if they come across similar offers.

It also asked people to inform on people who operate as “builders” for such schemes. According to the SEC’s official announcement, anyone found luring or trying to convince others to invest in the Onecash Trading scheme will face legal action under Section 20 of the country’s Securities Regulation Code.

Manila, Philippines

Under Section 73, the wrongdoer will be fined 5 million pesos ($100,000) or handed 21 years of imprisonment — or both. Individuals still involved in the scheme will be held criminally liable. The names that will come in relation to such schemes will also be reported to the Bureau of Internal Revenue for further necessary action, such as taxation and necessary penalties.

The SEC advisory continued to warn against encouraging others to join, saying:

The recruitment of investor members under the guise of sponsoring a person into the system is likewise considered a form of investment solicitation or a sale of securities. The offering or sale of securities to the public without a permit or license from the commission is a violation of section 8.1 of the Securities Regulations Code (SRC).

Probe Into PBB150 Scheme

At the same time, the Philippines SEC also warned its citizens against another MLM scheme called PBB150 Trading, where there are multiple levels of recruiters in the system and each receives points as they recruit new members.

According to SEC, PBBB150 is a “4th earning system”. In this system, participants purchase digital currency called “Kringles” at 55 pesos. The PBB150 promises that the digital currency will be valued at 80 pesos in a 15 day period. To make the fake scheme look more convincing, the system limits users to only 20 Kringles per account.

The SEC stated, “The public is hereby informed that PBB150 Trading is not registered with the Commission as a corporation or partnership and is not authorized to solicit investments from the public, not having secured prior registration and/or license to solicit investment as prescribed under Section 8 of the Securities Regulation Code (SRC),”

In January this year, the securities regulator issued a cease-and-desist order against Krops, an agriculture Marketplace Crypto Equity ICO. The SEC labeled the ICO illegal as it was selling unlicensed digital token.

Lately, governments around the world have been cracking down on illegal activities and scams in the crypto market. Moreover, most authorities are working to better regulate the crypto industry in order to protect investors. The Philippines SEC is working on its own set of new rules and protections.

Is a regulated crypto market solution to scams in the crypto space? Let us know your views.

Images via Pixabay, transferwise

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Payza Integrates Dash with a Little Help from BlockCypher

Fri, 03/16/2018 - 18:34

Popular cryptocurrency platform Dash is teaming up with online payment provider Payza to bring its availability and services to over 13 million individuals and 100,000 companies. Payza clientele can now send and receive Dash payments from fellow members and exchange it for over 25 different types of currency, including bitcoin.

Also see: How IoT and Blockchain Tech Can Rule a World of Physical Things

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Payza Breaking Out of the ‘Comfort’ Zone

Prior to the integration, Payza had enabled only bitcoin support for its users, but introducing Dash to customers will grant them access to several thousand retailers they otherwise would not have been able to garner goods and services from.

In addition, Dash has recently promoted itself as an enabler of banking and credit services to residents of third-world or under-developed nations.

Payza, while headquartered in the U.K., is also stationed in Asia, the Middle East and South America in countries such as Venezuela, Pakistan, Nepal and Haiti. Dash will give these customers access to low payment fees and authorized financial solutions.

In a press release, Dash Core CEO Ryan Taylor explained the significance of the decision to work with Payza:

“Payza is an exciting partnership for Dash because our respective missions are so well aligned. Payza is supporting underbanked populations in nearly 200 countries, and Dash network’s low-cost instant transactions are ideal attributes for meeting these customers’ needs. Payza is also well regarded in the industry with literally millions of users. Thus far, they’ve refrained from integrating other coins across their platform, and we are truly humbled to be selected as the first digital currency to integrate beyond bitcoin. We look forward to supporting Payza’s growth going forward.”

Bringing Two Worlds Together

The connective tissue between the two companies occurs by way of BlockCypher, a leading blockchain web services and infrastructure provider that seeks to grant both individuals and businesses alike easy access to multiple cryptocurrencies through single steps or platforms.

Head of growth at BlockCypher Karen Hsu stated:

“Payza leads the digital payments market in providing customers with the choice to use Dash and digital currencies, which have become the fastest and most economical way of making cross-border payments for people around the world.”

Payza is promoting the new partnership by giving its users a 10 percent bonus when exchanging fiat currency or bitcoin into Dash up to one coin, and five percent up to five coins.

The move is part of Dash’s push to become an international payments network, and promote itself outside the world’s traditional consumer markets. While it has succeeded somewhat at spreading its message and brand, Dash hasn’t been immune to the crypto asset price collapses that have plagued the industry since the start of 2018 — since hitting a peak just below $1,600 USD just before Christmas, Dash is now worth around $430.

Will Dash’s Payza deal do anything to make it stand out from the crowd? Post your comments below.

Images via Payza, Dash, BlockCypher

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Binance Announces ‘Dexathon,’ Coding Competition with $1 Million Prize

Fri, 03/16/2018 - 16:00

Days ago, rising powerhouse crypto exchange Binance announced its decision to create a new decentralized exchange (DEX) with its own native blockchain, Binance Chain. Now, the exchange has gone one step further and created the “Dexathon” — a coding competition for developing Binance Chain that will see the winners receive $1 million USD. 

Also see: Seattle Cryptocurrency Startup Raises Over $1.6 Million in Seed Funding

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

Come One, Come All

The new Dexathon is the next wrinkle added to the ongoing development of Binance Chain.

Announced in a March 16th Medium post, the competition will be somewhat open-ended and is focused on “merging the best implementation(s) and/or team(s)” into the fold, per the exchange:

“This is an all-hands-on-deck initiative, combining the state-of-the-art technological excellence at Binance and the best of the community to once again push the envelope in blockchain technology.”

“[…] To help facilitate this innovation, Binance will host a coding competition with the clear intent of merging the best implementation(s) and/or team(s) into Binance Chain. On top of this, we will also offer a total prize pool equivalent of $1,000,000 USD, paid in BNB. How does winning a million dollar prize, then joining the Binance team, sound to you?”

The Dexathon Wishlist

In their announcement post, Binance listed out a series of notable “wishes” for competitors to work on. These goals ranged from giving Binance Chain the ability host Initial Coin Offerings (ICOs) “on-chain” to having “No support for smart contracts, virtual machines or turing complete languages.”

Likewise, a desire for “speed and simplicity” was stressed in the new blockchain.

The exchange also clarified to competitors that they “are free to use any consensus algorithm you like; performance is key.”

Willing to Spend to Earn

With its new $10 million bounty fund to mitigate malicious hackers in the space and now the Dexathon, Binance is showing a strong willingness to invest in its own future by investing in the community around it.

It all comes as part of the exchange’s recent efforts to create a bona fide ecosystem for its brand.

Some in the space will question why Dexathon competitors don’t just go start their own DEX ICOs and raise 50x or  100x more than $1 million. Others will say that seven-digit prize and the possibility of being hired on permanently at Binance are reward enough.

Now, let’s see who wins. Entries must “be submitted by June 30th, 2018 23:59 UTC.”

What’s your take? Do you think a competition like this is a good or bad way to try and spur innovation? Sound off in the comments below. 

Images via Changing the Game Project, Irish Tech News

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Fake PayPal ‘Crypto Warnings’ Are Being Sent Out. What Gives?

Fri, 03/16/2018 - 14:00

On March 16th, some cryptoverse denizens awoke to what appeared to be an email from PayPal saying to “cease any activity that results in the trading or transfer of cryptocurrency.” Affected users have called into PayPal to learn that the email is a hoax. The dominant theory for now? Someone is trying to manipulate crypto prices with FUD (“Fear, uncertainty, doubt”). 

Also see: How IoT and Blockchain Tech Can Rule a World of Physical Things

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

A Fake Among Us

A forged email appearing to come from e-payments powerhouse PayPal is making its way through the space. The faux email warns targeted users that PayPal will “be unable to continue offering our services” if the users don’t stop account activities associated with cryptocurrencies.

Reddit’s starting to abound with anecdotes of users receiving the email. One of the firsts was u/HeroicLife, who say they called PayPal’s phone support line and received confirmation the email was fake:

“PayPal confirmed to me over the phone that the email is fake. Paypal is NOT banning accounts with cryptocurrency activity. This is a sophisticated attempt to manipulate the price of Bitcoin.”

Another user, u/CardCollector1, described being similarly targeted:

“I got the same email today. Was really pissed off. But the email was from which is what I first checked. There are no links or anything suspicious, so I suspected it was genuine. Will contact PayPal as well.”

Two things particularly stand out in the fraudulent warning, provided courtesy of u/HeroicLife:

The hoax email in question, via u/HeroicLife.

First off, the email is sent from what appears to be, a nefarious and subtle play on PayPal’s official <> address. 

Secondly, and even more curiously, the hoax email isn’t seemingly part of a direct money-grabbing scam, as it’s not requesting victims to send crypto to a supplied address as has been extremely prevalent on Twitter as of late. Instead, the hoax simply requests the targeted users to stop using PayPal to facilitate cryptoeconomy activities.

A FUD Attack?

With no direct profit venue in the hoax, the most apparent explanation would be that the scammer or scammers responsible are trying to indirectly profit by artificially creating mass sell pressure.

The end goal, then, would be snagging up coins for artificially low prices to maximize gains.

That’s one extraordinarily immoral way to try to make a buck in the cryptocurrency space, to say the least. The takeaway here is that manipulation of all kinds is afoot, and everyone in the ecosystem must remain vigilant and even skeptical.

What’s your take? Does this kind of FUD blitz surprise you? Sound off in the comments below. 

Images via u/HeroicLife, WSJ

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Bitcoin Mining – No Longer Profitable After Price Dumps?

Fri, 03/16/2018 - 12:00

Though it may only be temporary, bitcoin’s value has dropped so significantly that bitcoin mining is no longer profitable, according to Fundstrat’s Thomas Lee. Despite remaining bullish about the cryptocurrency, he feels miners are likely to feel more pain than gain for a little while.

Also see: Money Moves: Coinbase Gets Barclays Account, U.K. E-Money License

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

Where is Bitcoin at Now?

At press time, bitcoin is trading at around $8,200 USD. While a spike above yesterday’s low of $7,800, it remains significantly shy of its price only last week, when it was hovering around $11,000. And it is bitcoin miners that are suffering the most. Lee explained:

“Bitcoin currently trades essentially at the break-even cost of mining a bitcoin based on a mining model developed by our data science team.”

How the Bitcoin Mining Process Works

The model he refers to was released in a new report last Thursday. The data is based on three individual factors: electricity, the cost of equipment, and overhead costs such as maintaining cooling facilities.

Miners earn coins by using equipment to solve complex equations in ways agreed to by the mining network they are working with. The process occurs to build blockchain transactions, and if the equations are solved appropriately, the miners are rewarded with new coins.

The only problem is that bitcoin mining can be an expensive process, and if the monetary rewards in the end are overpowered by overhead costs, miners ultimately lose out.

Right now, the equipment necessary for bitcoin mining can range from anywhere between a few hundred to a few thousand dollars. Combined with the rising costs of electricity, totals come to about where bitcoin’s price currently stands, which means miners aren’t earning any money – they’re simply “getting their money back.”

With Earnings Halved, Miners Are Switching Off

Co-founder and president of Blockchain Intelligence Group Shone Anstey says:

“In some cases, the miners may simply turn off their machines until the prices comes back a bit. Right now, it’s got to be getting to the point that some of them may be losing money.”

Miners’ earnings have dropped by roughly half since bitcoin’s highs of $19,000+ last December. For the most part, myths surrounding the amount of energy necessary to engage in mining have been debunked. But that doesn’t change the fact that the coin remains volatile and vulnerable to sudden price slumps.

Electricity Costs and Governments Add Further Complications

Additionally, mining environments tend to vary around the world. In China, for example, electricity prices are typically lower than they are in the U.S.

The problem, however, is that China is now trying to limit mining operations by reducing miners’ access to cheap electricity, so it is difficult to pinpoint when (and ultimately where) miners can begin to see profits again.

Will bitcoin mining become popular again if the prices rise? Post your comments below.

Images via Pixabay

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Microsoft: Illegal Cryptocurrency Mining an Increasing Threat

Fri, 03/16/2018 - 10:00

Seattle-based tech giant Microsoft has jumped into the debate surrounding illegal cryptocurrency mining, claiming it is a growing threat as more cybercriminals are drawn to mining cryptocurrency as digital asset prices rise.

Also see: Money Moves: Coinbase Gets Barclays Account, U.K. E-Money License

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

Relative Untraceability Aiding and Abetting Illegal Cryptocurrency Mining

According to the company’s Windows Defender Research blog, the dramatic surge in the value of digital currencies over the past year is incentivizing cybercriminals’ increasing involvement in hijacking computer resources to mine cryptocurrencies.

The most common modus operandi is to use ransomware to infect computers to use them as crypto miners. This practice has earned the moniker of “cryptojacking”. Digital currencies’ relatively untraceable nature helps wrongdoers perform such activities unidentified.

Cryptojacking on the Rise

The increase in illegal cryptocurrency mining has actually caused a decline in the more traditional ransomware attacks and other forms of cyber crime. In their stead, cryptojacking has become a more prominent threat, draining victims’ computing resources. Only a fraction of the websites that run such mining scripts inform users, with many mining illegally without the users’ consent.

Some users would likely prefer to have their processing resources used without permission, than have their entire hard drives encrypted and held for ransom. However that doesn’t make the security threat any less serious.

According to Microsoft researchers, the primary attribute of cryptocurrency mining applications is that they tend to go undetected. The elaborate report underlines that, on average, 644,000 computers per month have been affected by crypto mining malware between last September and January this year.

Windows Defender ATP Blocks Mining Malware

Microsoft claimed to have recently blocked a major coin mining attack using Windows Defender Advanced Threat Protection. The report stated:

“In enterprise environments, Windows Defender ATP provides the next-gen security features, behavioral analysis, and cloud-powered machine learning to help protect against the increasing threats of coin miners: Trojanized miners, mining scripts hosted in websites, and even legitimate but unauthorized coin mining applications.”

A different threat to websites with mining applications running in the background, some cryptojacking groups use social engineering, dropper malware, or exploits to distribute and install trojanized cryptocurrency miners.

Enterprises are particularly targeted as they possess significant computing resources. These undetectable miners are notoriously difficult to block. Recently, Tesla’s cloud system was hacked by cryptocurrency mining malware.

It’s a Bird… It’s a Plane… No! It’s Microsoft to the Rescue

Microsoft claims to have helped more than 1,800 enterprise client systems who had enabled the “potentially unwanted application (PUA) protection feature”. It also stated that it is working hard to track down illegal cryptocurrency mining applications.

Microsoft says that unwanted mining applications can be controlled, reduced, and blocked by using “advanced behavioural and machine learning detection libraries in Windows Defender ATP”.

Will Microsoft be successful in protecting enterprises from the threat of unauthorized crypto miners? Let us know your thoughts in the comments section below.

Images via Pixabay

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Seattle Cryptocurrency Startup Raises Over $1.6 Million in Seed Funding

Fri, 03/16/2018 - 08:00

Seattle digital currency startup Strix Leviathan has accumulated over $1.6 million USD in seed funding from a wide range of investors, including VC firms and former NFL players. It’s proof that in a world of volatility, scams and rejection from major players like Google and Facebook, cryptocurrency retains a healthy portion of its popularity.

Also see: How IoT and Blockchain Tech Can Rule a World of Physical Things

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

Here’s a Little History

First arriving on the scene in 2016, Strix Leviathan is looking to introduce a new cryptocurrency trading platform designed strictly for management institutions and similar enterprises. The company is led by Jesse Proudman, a former Blue Box and IBM executive who claims that cryptocurrency exchanges are still “very immature.”

The entrepreneur said that approximately $15-20 billion in cryptocurrency moves through global exchanges each day, but their limited infrastructures can often place barriers on the kinds of coins users can trade.

Strix Leviathan CEO Jesse Proudman

“A single cryptocurrency is listed on tons of exchanges,” he explained. “The challenge is providing a traditional trader a mechanism to trade that same unit across all exchanges efficiently.”

This gave him the idea for Strix Leviathan. The company seeks to provide institutional traders (i.e. Goldman Sachs, JPMorgan, etc.) with “algorithm-powered tools,” so they can trade cryptocurrencies amongst multiple exchanges. Currency data is ingested from several sources, which Proudman claimed could ultimately build stronger trading strategies for clientele.

“We’re building picks and shovels; tools for this space, versus a platform or protocol or token,” he stated. “We are starting to see some level of fatigue in the investor community in those platform, protocol or token pitches, but there is still a ton of opportunity for companies building those pick and shovel types of technology.”

Seattle Part of a Growing Technological Region

Seattle is proving to be a hotspot for blockchain and cryptocurrency-related companies. In February, for example, Reflective Venture Partners – along with blockchain company RChain Cooperative – launched a new enterprise in the Washington city that thus far, has invested nearly $200 million USD in new blockchain startups, panels and meetup groups within the area.

Proudman, already well known in Seattle, believes the city is poised to potentially lead the blockchain revolution in the coming months. He also suggested that digital currency regulation will “crystalize” this year, and feels it could help the cryptocurrency market to adapt, grow and legitimize accordingly.

“That will bring a considerable amount of institution capital into these markets,” he explained. “Our belief is that as that happens, institutional capital will need a technology platform they can use to effectively research their trading strategies and actually implement those strategies and trades.”

Is Seattle set to become the country’s leading blockchain and tech hub? Post your comments below.

Images via Pixabay, YouTube

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How IoT and Blockchain Tech Can Rule a World of Physical Things

Fri, 03/16/2018 - 05:00

Can blockchains set and keep rules for objects in the physical world, as well as digital assets? And if so, how? The first international IoT Blockchain Camp in Valencia, Spain, is a five-day event that looks at potential answers to this question — and explores some of the internet-of-things technology that’ll make it work.

Also see: Senate Move Leads to Talk of Next ’08 Crash. What’s It Mean for Crypto?

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

The Future: Smart Cities, Blockchains, Robots, Smart Contracts and Oracles

Over 70 participants will join IoT Blockchain Camp, which runs from April 11-15th. It will look at five key topics: smart cities, Energy, Tourism, Transport, and Health/Sport. Technologies covered include robotics, A.I. and machine learning, (AIML), embedded systems, smart contracts and oracles, data acquisition and off-chain systems. It will also look at the pros and cons of “permissionless” (i.e. open) and “permissioned” (i.e. private/closed) blockchains.

As well as several technical seminars to explain the technology and how it should work, there will also be a 48-hour non-stop hackathon where attendees can apply their skills to real problems. This sub-event follows the IoT+Blockchain International Hackathon in Frankfurt last August, organized by the same group.

Its organizers believe that blockchain is about much more than buying and selling tokens. Blockchain, they said, will transform our lives for the better — and the way to do this is to connect blockchain to the real world.

Why Is IoT and Blockchain Tech a Match?

Code is law” wrote Lawrence Lessig in the 1990s, referring to the internet’s freedom from human frailties in following its own rules. As long as internet content followed the rules programmed into its software, humans could not corrupt or break them. More recently, Lessig’s maxim has been applied to cryptocurrencies — they represent payment networks and monetary policy defined in distributed code, not by financial institutions or governments with incentives to act in their own, and not the public, interest.

And if blockchains can add transparency and reduce corruption for the crypto tokens transacted on them, they can do the same for physical assets too, right? Food safety and art provenance, logistics and anti-counterfeiting, real estate registries, for example.

Wait a second, though — once you break that connection between blockchain and the asset they govern, there’s a weakness. An immutable blockchain record might say the diamond on your ring or fish on your plate were ethically sourced, but can you cryptographically prove it? How do you know it’s the same object?

These are some of the key problems IoT Blockchain Camp wants to examine, and hopefully solve.

What Technologies Can Make Blockchains Work in the Physical World?

The camp’s IoT theme will look at ways blockchain-based solutions can work in the physical world — robotics and embedded systems being two examples.

That said, a large portion of the development work is on the back-end to make all that possible. Someone needs to create the smart contracts and trusted oracles to adjudicate them; develop the machine learning techniques; and decide when it’s better to work on- of off-chain.

Interview: Enrique Melero on Why Blockchain IoT Is More Interesting Than Finance

Bitsonline spoke to Enrique Melero, a Switzerland-based blockchain consultant with a background in private banking, who’s one of the people behind the IoT Blockchain Camp and hackathon. He explained to us his interest in blockchain technology, and why IoT is the focus for these events, rather than financial solutions.

JS: Why did you choose to focus on IOT for the camp/hackathon?

EM: I believe the blockchain technology is not only cryptocurrencies and payments. When we use IoT to combine the blockchain with the real world we focus on other dimensions of the technology: a public and decentralized registry of any kind of events, an unforgeable, autonomous and unstoppable machine. In fact I see it like this: Those things that are connected to the internet could not deploy all their potential because they could not interact directly with their users. The blockchain adds those “Things” to the financial system, because they can use the blockchain to receive and make payments without a need of a finance department and a bank account.

JS: Your background is in finance — is that still the most interesting application for blockchain tech? Or is the focus changing?

EM: The blockchain has made current finance industry obsolete, but the business cases still remain: payments and wealth management. The blockchain brings new opportunities to increase efficiency of financial processes, to a point that new actors will emerge to compete with the current established financial institutions and banks. That is interesting, but not so innovative. The really interesting cases in my opinion, are in applications outside of finance, those that resolve problems that were not addressed before and will create completely new business models not seen before.

JS: You’re based in Switzerland. Do you recommend it as a place for entrepreneurs to establish a blockchain or cryptocurrency startup? Why?

EM: Switzerland, together with Estonia and perhaps Singapore, has been a leader in crypto regulation since very early. But it is not only the regulators, it is as well the rest of the ecosystem which contributes: lawyers, tax advisors, workforce, even education, (have) come along. Blockchain is as well a natural fit for a country where respect for privacy has been paramount for their success for many years.

Other than that, Switzerland is probably the best place in Europe to fund a startup of any kind, not only blockchain companies. It has a very well developed tradition supporting innovation, a solid legal system and a flexible and skilled labour market.

JS: What industry has the most potential for IoT blockchain apps? (I’m thinking shipping, food safety, etc.)

EM: You are spot on. I think the biggest potential is in the industries where quality management and traceability are key skills to compete: logistics, energy, food and pharma. We had a great response from people coming from those industries. They understand they need to learn and play with the technology to discover how they can best use it to their advantage.

Other sectors that should start considering the use of IoT and Blockchain is that sector that is in charge of looking after public goods and public utilities: water, environment, roads, patrimony, public safety etc. I am obviously talking about the public sector which is still the largest sector in most of the modern economies.

Does the thought of blockchain combined with IoT technology excite you? Tell us why or why not, in the comments.

Images via Pixabay

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Google Bans Cryptocurrency Advertisements, Supposedly for FBI

Thu, 03/15/2018 - 18:00

Search engine giant Google announced it will ban cryptocurrency-related ads starting June this year. According to the announcement, the company is updating its ad policies to ban cryptocurrency ads like those belonging to Initial Coin Offerings (ICOs). 

Also see: Money Moves: Coinbase Gets Barclays Account, U.K. E-Money License

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

Google’s released document reads “cryptocurrencies and related content (including but not limited to initial coin offerings, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice)” will not be permitted to serve on Google’s AdWords platform.

Google and Facebook on the Same Page

Legitimate crypto businesses will no longer be allowed to serve their target audiences through Google’s ad services, which is known to display ads on third-party websites as well as its own websites.

Scott Spencer, Google’s director of sustainable ads told CNBC:

“We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm that it’s an area that we want to approach with extreme caution.”

On January 30th, social media giant Facebook also enacted a ban on cryptocurrency ads as a result of an update in its own policies. To that end, Facebook and Google share a potent rivalry relationship when it comes to ads. Unsurprisingly, Google has seemingly followed Facebook’s lead, then, not wanting to be left behind.

FBI Behind the Bans?

Some are suggesting that Facebook’s and Google’s bans on crypto ads were not self-determined, but a result of constant pressure from security watchdogs. A new report revealed that the Federal Bureau of Investigation (FBI) — the domestic intelligence and security service of the United States — apparently pressured the social media giants to put a ban on crypto-related adverts.

Jason Roy, senior investigator at the Manitoba Securities Commision and chairman of Canada’s Binary Options Task Force, revealed:

“What happened is that Canada’s Binary Options Task Force, as well as the FBI, explained to Facebook what the concerns were and that these types of ads are leading to people becoming victims. We’ve been talking to Google and had similar discussions and are waiting for them to take similar action.”

However, it is equally important to note that scams only make up for a fraction of the activities in the entire crypto space.

What do you think? Is Google’s ban fair to legit crypto businesses? Let us know your views in the comments section.

Images via SCMP, NY Mag

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Rep. Who Called Crypto ‘Crock’ Gets Most Donations from Allied Wallet

Thu, 03/15/2018 - 16:00

During the March 14th U.S. House of Representatives Financial Services Committee hearing on crypto, Representative Brad Sherman (D-CA) read an introductory statement alleging that “cryptocurrencies are a crock.” It won him no fans in the cryptoverse. Curiously, though, Rep. Sherman’s biggest source of political donations in the current election cycle has come from individuals at Allied Wallet, a non-crypto payment processor. 

Also see: Senate Move Leads to Talk of Next ’08 Crash. What’s It Mean for Crypto?

Subscribe to the Bitsonline YouTube channel for more great interviews featuring industry insiders & experts

Sherman: Bitcoin Has ‘No Social Benefit’

As Rep. Sherman spoke fast and clumsily at the beginning of his introductory remarks, it’s difficult to tell whether his most infamous statements during the March 14th crypto hearing were on behalf of, or in the stead of, Rep. Carolyn B. Maloney (D-NY).

Nevertheless, Rep. Sherman’s first read statements caught the attention of the cryptoverse because of their apparent harshness. The California congressman called cryptocurrencies “a crock” that “allow a few dozen men in my district to sit in their pajamas on the couch all day and tell their wives they’re going to be millionaires.”

Ouch. And that was just Rep. Sherman getting started. He later went on to directly assert that cryptocurrencies “hurt the U.S. government.”

But, in light of Rep. Sherman’s leading contributors in the midst of the 2017-2018 election cycle, maybe it’s Allied Wallet that’s really the object of “hurt.”

Help Us Congressman, You’re Our Only Hope?

Courtesy of, if you check Rep. Sherman’s profile summary, you’ll see that his largest source of money in the ongoing election cycle comes from individuals affiliated with Allied Wallet.

And the winner is … Allied Wallet!

Allied Wallet is a self-described “global payment gateway” that lets users digitally accept and transact in 164 different fiat currencies.

In other words, it’s precisely the kind of business model that Bank of America recently noted could be disrupted by cryptocurrencies.

Allied Wallet’s UI even looks like Coinbase’s!

So whether it’s a coincidence that Rep. Sherman bashed crypto or if his remarks were influenced by his donors, we don’t know for sure. But the cryptocurrency space is watching Capitol Hill closely, and the apparent irony isn’t lost on its denizens.

What’s your take? Do you think Sherman’s statements represented a partisan stance toward cryptocurrencies? Sound off in the comments below. 

Images via OpenSecrets, Granite Grok, Allied Wallet

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Senate Move Leads to Talk of Next ’08 Crash. What’s It Mean for Crypto?

Thu, 03/15/2018 - 14:00

On Wednesday, March 14th, the U.S. Senate voted to pare down many aspects of the so-called “Dodd-Frank” rules, legislation that was passed in the aftermath of the 2008 financial crisis to mitigate some of the gross abuses in the banking sector that incubated the crisis in the first place. If these revisions are passed in the House of Representatives, that begs the question: could a similar crisis be fomented again? If so, speculative assets would be hit hard, including crypto. 

Also see: Wyoming Passes Pro-Crypto, Pro-Blockchain Laws

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Round and Round We Go …

This op-ed isn’t concerned with the wider argument of regulation versus deregulation, both in the cryptocurrency space and in the larger financial universe at large. Instead, it just focuses on what may come. And to understand the un-arrived, we first look at what could be bidding the arrival.

In the context of another financial crisis like the world saw in 2008, you may not need look any further than the U.S. Senate’s comfortable 67-31 vote passing of a good ol’ Dodd-Frank slim down.

One of the biggest talking points that came out of the story was along the lines of, My god, Republicans and Democrats actually overwhelmingly joined together on major legislation for the first time in recent memory. 

Cynics, however, are simply regarding it as a testament that the only people really reaching across the aisle are donors and lobbyists from the banking sector. The (R) or (D) next to names matters little.

During the vote, the dissenters dissented, of course, because they see the writing on the wall: stripping down Dodd-Frank could lead to another runaway financial crisis down the road. A crisis wherein the responsible parties again remain largely unscathed and receive fat bonus checks courtesy of bailouts from everyday Americans.

If that happened, markets the world over would be adversely affected, to put it mildly.

Just Asking the Question, No Crash Necessarily Nigh

First off, the Senate’s revisions still have to be approved in the U.S House of Representatives after House Financial Services Committee Chairman Rep. Jeb Hensarling puts forth his own revisions of the bill. As an aside, you may recognize Rep. Hensarling as the congressman who presided over the House’s latest crypto hearing.

If the bill leaves the House alive, then President Trump would have the choice to sign it into law. To that end, CNN reports Trump is amenable to the bill in its current form, making his signature a likely one.

At that point, it could take years, even a decade or more, for problems to come to a head in a similar way as they did in 2008. It’s just a possibility that deserves scrutiny now that the Senate is jockeying to enact the most systemic changes to the banking sector that the U.S. has seen in 10 years.

This is all speculation for now, to be sure. Perhaps the lessening of Dodd-Frank will prove inconsequential to any future crashes. Though that seems highly unlikely.

How This Affects Crypto Users

Well, if history shows us anything, it’s that speculative assets get hit hard during periods of economic downturn. As Investopedia puts it rather surgically, “In a recessionary environment, the worst performing assets are highly leveraged, cyclical and speculative. In these conditions, risk is rejected.”

In other words, investors flee to safer, stabler ground. And as speculative of an asset class as it is for now, crypto shouldn’t be immune to this dynamic. A deep, prolonged cryptocurrency bear market could be possible in such a situation.

So how to proceed safely, then?

Your best bet is to have a “preventative” mindset — don’t wait for a crash of ’08 proportions to start figuring out how to react. Going forward, keep the corner of your eyes peeled on the political arena for legislative developments like the one discussed above as well as on global markets in general.

Simply put, don’t tune out everything that’s going on around you. If something bad is to come, there’s a good chance you might be able to correctly identify the signs beforehand and act accordingly.

With that said, in the cryptoverse, it’s never a bad time to get our ducks in a row. Our crypto ducks — or our CryptoKitties, as it were. So it wouldn’t be a bad idea to test how fast you can send your assets to an exchange in case you needed to cash out in the worst of the worst.

It’s worth considering, in the very least. I come not as a priest of FUD (“fear, uncertainty, doubt”), just a columnist with concerns.

What’s your take? What would you do if the wider economy — not the cryptoeconomy per se — crashed again? Sound off in the comments below. 

Images via YourNewsWire, trend-online

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Wyoming Passes Pro-Crypto, Pro-Blockchain Laws

Thu, 03/15/2018 - 12:00

As other U.S. states contemplate the legal standing of cryptocurrencies and their underpinning technologies, the state of Wyoming has passed five bills in the past few weeks embracing cryptocurrencies and distributed ledger technology.

Also see: The John Oliver Effect? Brock Pierce and Block.One Part Ways

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Wyoming Leads the Crypto Revolution

The western state in the U.S. known for its vast plains and rocky mountains will now also be known as the first jurisdiction in the nation to formally identify cryptocurrencies as a new asset class. Despite, or maybe because of, its wild west pedigree, Wyoming has become a pro-crypto state.

One of the most important bills passed was House Bill 70, as it defines cryptocurrencies. Both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) remain unable to decide if digital tokens are securities or commodities. The CFTC has defined bitcoin and other convertible digital currencies as commodities.

To encourage the development of blockchain-based businesses in the state, the bill exempts “utility tokens” from Wyoming’s securities regulations. The bill was passed on March 6th. Hoping to set the tone for the federal government and other states, Caitlin Long, Co-founder of the Wyoming Blockchain Coalition said:

“The state of Wyoming is the first elected body in the world to define a utility token as a new type of asset class different from a security or commodity.”

Then There Were Four

House Bill 19 exempts digital currencies from Wyoming’s money transmitter laws. The bill will allow cryptocurrency exchanges to operate freely in the state. The Bill passed the state senate with ease on March 2nd. House Bill 101 allows corporations to store records using the revolutionary blockchain technology.

The other bill the Wyoming Senate passed is House Bill 126. HB126 permits the creation of ‘Series LLCs’, allowing companies to create series’ of assets, transfer rights, and distributions to members.

Senate Bill 111, also known as the “The Cryptocurrency Property Tax Exemption Bill”, will exempt digital currencies from any kind of property taxes, akin to gold and silver. However, federal taxes still apply, as the Internal Revenue Service (IRS) considers convertible digital currencies as property.

House Bill 19, House Bill 70, and Senate Bill 111 were all signed by Governor Matt Mead and will be effective from July.

Wyoming Senate Ahead of the SEC and CFTC

Wyoming has not been caught like a deer in headlights. In moves that have been anticipated, these positive legal developments come at a time when the SEC and the CFTC continue to grapple with how to define cryptocurrencies. The SEC considers virtual currencies and tokens as securities. Conversely, Jack Weinstein, a federal judge in the Eastern District of New York declared:

“[V]irtual currencies can be regulated by the CFTC (Commodity Futures Trading Commission) as a commodity.”

Long, a Wyoming native, described the state’s newly enacted laws as:

“[…] very positive for the cryptocurrency community if Congress can break the tie and clarify everything. It’s very exciting that Wyoming is the first state to define what a utility token is, setting an example of how this could become a standard under federal law. I do believe that the Wyoming approach will work under federal securities law and am optimistic the SEC will agree.”

A number of U.S. states now allow taxes to be paid in cryptocurrency, but the Wyoming laws are far broader in reach. The moves will undoubtedly encourage crypto enthusiasts. They may also portend a shift in the U.S., where the cryptocurrency market is sorely in need of clarity, uniformity, and legal certainty.

Will other U.S. states join Wyoming in embracing cryptocurrencies and blockchain technology? Let us know your thoughts in the comments section below.

Images via Pixabay

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India’s Biggest Private Lender Bans Use of Credit Cards to Purchase Bitcoin

Thu, 03/15/2018 - 10:00

India’s biggest private lender, HDFC Bank, has stopped its customers from using their credit cards and prepaid cards to purchase bitcoins. Over the past few months, several global banks have banned the used of credit cards for purchasing volatile digital assets. However rather than protest, some local exchanges are actually welcoming HDFC’s decision.

Also see: Money Moves: Coinbase Gets Barclays Account, U.K. E-Money License

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HDFC Bank joins the league of Indian banks that include Kotak Mahindra Bank and Citi Bank, that have banned the use of their credit/debit cards to purchase bitcoin.

Credit Cards and Debit Cards Are Banned, but Online Banking Still an Option

On March 13th, HDFC Bank broadcast the news by emailing its customers on the ban on credit card use for buying cryptocurrencies. A section of the email read:

Alert: HDFC Bank Credit, Debit and Prepaid Cards not permitted for purchase/trade of Bitcoins, Cryptocurrencies and virtual currencies. You may be aware of the increasing global apprehensions regarding Bitcoins, Cryptocurrencies and virtual currencies. The Reserve Bank of India has also cautioned the public regarding the potential economic, operational, legal and security-related risks associated with dealing with such currencies.

The move is to only stop the use of credit card for purchasing cryptocurrencies — that is, digital assets that are regarded as money-like tokens. Meanwhile, buying other digital assets is still possible via net banking. Once a user’s bank accounts is linked to their exchange account after thorough verification, they will be allowed to purchase digital tokens via online banking.

According to HDFC, the reason for the ban as to ensure the security of its customers. It stated, “To ensure our customers’ security, we have decided to not permit usage of HDFC Bank Credit, Debit and Prepaid Cards towards purchase or trading of such Bitcoins, Cryptocurrencies, and virtual currencies, on merchants suspected to be dealing in crypto-currency or online foreign exchange trading or both.”

Cryptocurrencies are not a legal tender in India (or elsewhere) and the government’s stance on digital currencies is fuzzy. Indian finance minister Arun Jaitley said the government is working hard to eliminate the use of cryptocurrencies in illicit activities. The Central Bank of India has reiterated several times its views on the risks involving in trading volatile digital assets.

Local Crypto Exchanges Welcome the Ban

Surprisingly, HDFC’s decision has been positively received by local crypto exchanges. Rahul Raj, Founder of local exchange Koinex, stated:

“We feel it is a fair move to discourage the use of credit cards for trading in cryptocurrency because the risk of non-payment towards the bank is a pertinent issue. Even the stock market does not allow the use of credit cards to transact.”

Cryptocurrency price volatility is a major reason why lenders are halting or stopping the use of credit cards to purchase bitcoin and its crypto cousins. Even though bitcoin’s market share in the past few weeks has clawed back slightly to 40 percent now, it still remains a volatile asset in value.

However, globally cryptocurrencies are gaining popularity and several financial institutions have linked their businesses to blockchain projects, in one way or the other. It is time for Indian banks get a move on, in order to not lag behind the global trend.

Will HDFC’s decision to ban the use of credit card for buying crypto reflect on the crypto trading volume? Let us know your views in the comments section.

Images via HDFC,

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Universities in Illinois Are Adding a Lot More Cryptocurrency Classes

Thu, 03/15/2018 - 08:00

Illinois is capitalizing on young peoples’ newfound love of bitcoin and cryptocurrency. Several universities within the state now offer digital currency-based classes to registered students.

Also see: Automata Podcast: The Business of Decentralization With Venture Capitalist Alyse Killeen

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Illinois Sure Loves Its Bitcoin

The “Land of Lincoln” has had a positive history with virtual assets. Like Arizona and Georgia, the Prairie State has introduced a new house bill that if passed, would allow users to pay tax bills with cryptocurrency.

But things aren’t stopping there. Younger generations, particularly college students, are growing more accustomed to bitcoin and digital currency trends, and thus want in on the action. Many have lobbied for university courses to include bitcoin in their lesson plans, and for the most part, their wishes are being granted.

A Few New Choices

The Illinois Institute of Technology, for example, will offer its first course on the blockchain this coming summer. In addition, finance department head and professor Gib Bassett is creating a panel discussion in his Chicago Exchanges MBA class in late March. He’s taught the course for over a decade, and now recognizes the need to keep his students in-tune with the growing popularity and trends behind crypto.

“They want to hear about bitcoin,” he explained. “Their parents have told them it’s a tulip bubble, but it’s crazy. It’s ridiculous, and their friends who invested three years ago are millionaires. There’s clearly a generational component to all of this.”

Associate professor at Northwestern University’s Kellogg School of Management Sarit Markovich recently got approval to create a brand-new course that would focus entirely on cryptocurrency applications. The class will be offered to students in the school’s MBA program starting next year.

Markovich is fascinated by blockchain technology, and says its necessary for students to understand so they can stay current and “in the now.”

“It’s not so much about being ahead,” she assures. “It’s making sure that you’re not going to be behind.”

The Students Want More

24-year-old student Johnny Roumanidakis is a master’s student at DePaul’s Driehaus College of Business. He and his assigned group recently wrote a final course paper regarding the “technology driving bitcoin” rather than their original topic, which dealt with CME futures contracts.

He plans to work for his family’s manufacturing business after graduation, and admits their company doesn’t employ blockchain technology, but feels it’s becoming much more important, and thought the paper could potentially serve as a starting point towards future learning.

“We just wanted to see if we could wrap our heads around the technology and what drives the value behind it,” he said. “It seems so controversial, and not many people understand it.”

One More for Good Measure

Assistant professor of electrical and computer engineering at the University of Illinois at Urbana-Champaign Andrew Miller recently started a course dealing with smart contracts and “computer programs that run on cryptocurrency.”

He says the class filled up within hours, and he credits the blockchain for making it “easier” for up-and-comers to enter the financial industry, which is usually barred by excessive certifications and exams.

“A whole lot more seems possible,” he said.

Are we likely to see more blockchain and bitcoin courses offered at national universities? Post your comments below.

Images via Pixabay

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Tether: Helping Fiat Infiltrate Cryptocurrency One Token At a Time

Thu, 03/15/2018 - 05:00

Tether: the token that boasts a peg to the dollar, claiming to cut down on volatility and make cryptocurrency use and investment easier. In reality, though, this token system is a hotbed for cryptocurrency inflation — with proof that lends credit to that claim.

Also read: Hey Idiots: Bitcoin Mining Is SUPPOSED to Be Expensive

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What Tether Is and What It Does

Tether is a blockchain-based token that holds a 1:1 peg with USD, reportedly allowing efficient swaps between cryptocurrency and fiat. This helps traders transfer between the two monetary technologies easily, and has become quite popular since its launch in 2014.

According to the project’s website, it gives you “the joint benefits of open blockchain technology and open currency.” Sounds great, right? Yeah, not so much.

Why Tether Sucks

Essentially, Tether acts as a fiat gateway to cryptocurrency. By having a peg to the dollar, Tether can really inflate its supply infinitely, as long as the company can prove it has reserves matching the supply of its token (even though they’ve done a poor job of that as of late).

Other than that, Tether can inflate its supply at will, for any reason. And that eliminates one of the biggest benefits cryptocurrency provides.

A blockchain-based currency with a potentially unlimited supply removes any possibility of deflation. Plus, with the ability to inflate at will, an economy based on such a token will become rife with boom-bust cycles. Basically, nothing will change from the current, fiat-controlled economy.

Equally bad is the fact that users have to trust Tether to be honest about its dollar reserves, that it really does have enough money to back the supply of its tokens. The requirement of such trust makes for a bad currency all around, and Tether itself has proven that in recent months, as its honesty has come into question.

Bitfinex Controversy: Confirming The Money Printing Fears

In late 2017-early 2018, traders and enthusiasts noticed a huge spike in the supply of Tether, with the company claiming that it held over $2.2 billion USD in reserves. However, it had no proof to support this claim, and people started having suspicions about the company’s honesty and whether or not it had the fiat to back the new coins being printed.

Making the situation even more difficult for Tether is the fact that one of its main exchanges, Bitfinex, shares a CEO with the company, and has been the subject of many controversies in 2017. In response to the community’s accusations of unbacked money printing, both Tether and Bitfinex said they would open themselves to an audit to prove the two companies had enough money in the bank to cover the new coins.

Unfair? But it reflects a common sentiment regarding Tether’s operations

However, that audit never happened, and the firm slated to conduct the review eventually removed all mentions of Bitfinex from its website, suggesting that an audit will never happen — at least not through that firm.

And so, Tether is left minting tokens with abandon, without providing proof it has the dollar reserves to back them up — despite promising that they would always be able to prove they had money in the bank.

I personally warned the community in 2014 that this would happen, back in 2014 when Tether was first announced under the name “Realcoin.” Of course, as a greenhorn journalist at a no-name, now defunct crypto blog, no one listened to me.

But in many cases, economics and history are all you need to see whether or not something is a good idea. And 4 years later, it looks more like Tether is a bad — and very dangerous — idea.

What’s your take on this and “stablecoin” cryptocurrencies in general? Let’s hear your thoughts.

Images via Pixabay, Twitter, Wikimedia Commons

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Playboy to Release Its Own Cryptocurrency Wallet

Wed, 03/14/2018 - 22:00

From tea and juice companies, to vaping houses and even a “camera king” like Kodak, it seems like every enterprise is looking to get a little taste of the crypto action. Now, Playboy is being added to the list as the latest company to begin working on a cryptocurrency project. How serious are they all really?

Also see: The John Oliver Effect? Brock Pierce and Block.One Part Ways

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From Playboy Bunny to Playboy ‘Money’

The adult entertainment empire is currently building a digital currency wallet that it hopes will be complete by the end of 2018. Users will be able to download the wallet and use cryptocurrency to pay for “adult content” and “casual games.”

In a press release, chief commercial officer and head of operations Reena Patel explained:

“As the popularity of alternative payment methods continues to grow around the world, along with the reach of Playboy’s digital platforms, we felt it was important to give our 100 million monthly consumers increased payment flexibility.”

One Coin in Particular…

Among the cryptocurrencies Playboy is slated to accept is Vice Industry Token (VIT), a decentralized asset that monetizes adult videos while “rewarding viewers” for watching them. As the name suggests, it’s geared towards more adult forms of entertainment.

“The innovation gives the millions of people who enjoy our content, as well as those in the future who participate in our casual gaming, AR and VR platforms, more choices for payments,” Patel said of the benefits behind digital currencies. “And in the case of VIT, an opportunity to be rewarded for engaging with Playboy offerings.”

People who watch Playboy.TV will have the opportunity to earn tokens by viewing, commenting and then voting on Playboy’s newest original content. They can use those tokens to pay for future programs.

VIT was launched earlier this year. The token managed to accumulate over $22 million USD within a 24-hour period in February alone.

Slow and Steady Wins the Race?

Though it runs through predominantly decentralized networks and often promises anonymity, cryptocurrency has not been welcomed by most companies featuring adult content. Some, like Wicked Pictures, have toyed with the idea of introducing it to customers over the years, though very few have implemented the necessary plans, but some sources feel Playboy’s integration of VIT could change this.

For now, Playboy representatives state that the process behind incorporating cryptocurrency will be incremental. Things will ultimately start out slow, but the project could get bigger and the payment scope could become wider should digital currency prove popular among customers.

Is Playboy smart to jump on the crypto bandwagon? Post your comments below.

Images via Playboy, VIT

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Automata Podcast: The Business of Decentralization With Venture Capitalist Alyse Killeen

Wed, 03/14/2018 - 19:15

What does decentralization mean in 2018? Increasingly it means the ability to opt in and out of the system, says venture capitalist and startup mentor Alyse Killeen. However, its effectiveness depends on everyone understanding and trusting the technology that allows decentralization, and what it can (or can’t) do, she says. That goes for both users and investors. 

Also see: Automata Podcast: Preston Byrne on What ICOs Need to Do

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Alyse Killeen: ICOs Need to Mature, Decentralization a Key Concept in Technology Today

Alyse Killeen has an impressive resume in the tech industry. She’s a founding partner at Stillmark, an advisory and investment group, and has been a mentor at Plug and Play Tech Center, Alchemist Accelerator, and Springboard Enterprises. She’s also written extensively about cryptocurrencies, blockchain and decentralization, and appeared at numerous conferences and in the media.

“I was one of the first VCs to look at the token space, before they were called ICOs,” Killeen says. Since then the entire concept of ICOs and token sales has divided the VC community, with most still focusing on standard debt and equity rounds. But she predicts the real use of tokens on software platforms will continue to mature — and in ten years, “the right sorts of groups will be issuing tokens”.

Killeen talks to Automata about why decentralization can be a powerful force, and how blockchain technology allows sharing of device-level resources to create networks with no hub that can be shut down. Her examples are FireChat and, more recently, RightMesh, both mobile technologies that empowered ordinary people. How? Listen to the whole episode to find out more.

About the Automata Podcast

“The future is automated.” Automata is a series of brief audio introductions to the projects that will drive the automated economies of the future. Pactum Capital‘s Daniel Cawrey and Bitsonline senior editor Jon Southurst chat with leaders in blockchain, cryptocurrencies, freer markets (and the occasional regulator) to find out where all this is going.

You can find older Automata episodes on Soundcloud, and subscribe to the channel for more.

If you have any requests for future episodes, we’d love to hear them. Post your feedback in the comments below.

Images via Daniel Cawrey, Jon Southurst, Pexels

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No Longer Setting the Trends: Crypto Activity in China Is Increasingly Rare

Wed, 03/14/2018 - 12:00

Once a major player in cryptocurrencies, China has made recent moves to ban ICOs and force out mining operations, as well as engaging in an ongoing struggle to curb cryptocurrency trading. It’s left the former trailblazer with almost no cryptocurrency industry at all. Meanwhile its neighbors continue to warm to digital assets and their potential for growth.

Also see: Thomson Reuters to Launch Bitcoin Sentiment Tracker. Will It Be Respected?

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China Slams the Industry Shut

Last year China banned ICOs and, in a widely anticipated move, shut down domestic cryptocurrency exchange platforms.

It then set its sights on mining. Rather than imposing an outright ban, it took regulatory measures to effectively force the industry offshore, seeking friendlier jurisdictions in Iceland and Canada.

The Chinese government continues to put pressure on investors, warning them to avoid engaging in “illegal cross border activities” (i.e. using exchanges outside the country or investing in ICOs abroad).

From Admired Example to Anomaly… Asia Moves in a Different Direction

Just as the global industrial giant is moving against the cryptocurrency industry, her neighbors are gradually warming to it. South Korea, after a great deal of conjecture and widespread fears of an impending ban, finalized its position on the industry in January. Cryptocurrency exchanges would be legal, regulated, and require Koreans to trade under their real names. It has since been vocally encouraging of the nascent industry.

Japan has long been crypto-friendly. With China no longer competing for trader attention, Hong Kong-based exchanges KuCoin and Binance have become giants in the industry in little time. The Bangkok Post reported yesterday that Thailand had decided to legalize and formalize the industry, classifying virtual coins as digital assets, rather than currency.

Malaysia is thought to be warming to digital currencies, with regulations in place to target money laundering but no outright ban on coins. It has adopted a crypto-tolerant position. Indonesia does not recognize cryptocurrencies as legal tender, but continues to allow exchanges to operate.

China’s Waning Influence

China’s influence over the region has grown exponentially as its economy expanded over the past thirty years. It has become many Asian nations’ most or second-most important trading partner. However it has also created an example for more authoritarian-leaning regimes of how to control the political space.

With the recent and continued softening of approaches toward cryptocurrencies, however, could it be that China’s influence in the region is falling? Perhaps that flagging domination will remain in the digital space. Yet it just might be a sign of growing regional fatigue with China’s emerging superpower status.

What do you think? Is China moving in the wrong direction in cryptocurrencies? Why are they not able to influence the region in the digital space? Let us know your thoughts in the comments below. 

Images via Pixabay

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Hey Idiots: Bitcoin Mining Is SUPPOSED to Be Expensive

Wed, 03/14/2018 - 10:00

Bitcoin has come under fire as of late due its mining algorithm — Proof of Work (PoW)– and its consumptions of large amounts of energy. Mainstream media has published several articles on this topic, warning that continuing to use bitcoin as the world’s primary cryptocurrency could cause a global energy crisis due to this perceived “flaw.” In reality though, that couldn’t be further from the truth. Bitcoin is doing exactly what it’s supposed to, and it is one of the most effective and innovative monetary advancements in human history. Here’s why.

Also see: BIS Says Central Bank Digital Currencies Could Disrupt the Financial Ecosystem

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Believe it or not, we at Bitsonline have debunked the claim that Bitcoin Mining is ruining the world. Really, there are countless industries and technologies that use just as much, if not more, energy than mining.

But just in case that’s not enough, here’s an economic explanation of why this energy consumption is worth it, and why it makes Bitcoin great:

Why Bitcoin Mining is Expensive — and Why it’s Supposed to Be That Way

Bitcoin’s mining algorithm is called “Proof of Work” for a reason: miners that get create new blocks and gain their rewards have proven that they’ve done the work necessary to sustain the network.

And that work put in by miners — which sustains the entire system — is a feat of technological and economic cooperation that deserves the designation of “genius.”

PoW regulates the bitcoin supply growth so it doesn’t outpace demand and create inflation. It also serves to keep mining profitable, ensuring people always have an incentive to keep the network running.

When demand for bitcoin goes up — along with its value — mining difficulty increases and requires more resources to produce blocks. This prevents a massive influx of new miners chasing the high valued bitcoin, and stops the growth in supply from exploding.

Also, when demand goes down — as well as its value — difficulty drops and makes mining cheaper, which incentivizes miners to stay on the network. However, some miners will still turn to more profitable coins during such a price drop, so the lower total hashing power will prevent miners enjoying lower costs from rapidly increasing the supply.

As a result of both kinds of difficulty changes, the growth in supply is dynamic, ensuring a deflationary Bitcoin — barring large demand shocks that break the equilibrium with supply.

Bitcoin Mining Won’t Always Be So Costly

Sure, bitcoin mining costs a lot of money, and uses a ton of electricity. But just because the process is so expensive doesn’t make it automatically bad.

Just like with any other economic process, if people are willing to pay the price — and even more so if they’re still turning profits — then the cost and resource consumption is worth it. It’s providing a net benefit to society.

Beyond theoretical terms, just think about what Bitcoin has done for the world so far, and what it has the potential to do in the future. In the last ten years, Bitcoin has created jobs, made people millionaires, and has become a cheaper remittance solution for many in developing countries.

In the future, the cryptocurrency has the potential to take over the world, fostering sustainable economic growth for all. It can encourage the return of saving — removing us from our unhealthy debt economy. Bitcoin remittances can become even more widespread, and countries without access to the global economy can use the currency to become economic powerhouses.

If Bitcoin can and will change the world — and if it already has in many ways — the financial cost and energy consumption from mining pays off.

Why Other, More Efficient Coins Can Never Beat Bitcoin

Yes, there are alternative mining algorithms that offer a more energy efficient coin production process, Proof of Stake (PoS) being the most popular one. But there’s a reason why they haven’t been able to replace PoW, and why they won’t be able to create a better money that Bitcoin.

These energy efficient algorithms, namely PoS, do not have a symbiotic techno-economic relationship like PoW. Therefore, coins running on these algorithms cannot dynamically control the growth in money supply to prevent shocks that throw purchasing power out of balance.

Under these systems, currencies become more volatile, less reliable, and will fail to foster growth in a cryptocurrency-centric economy.

They can save energy and production costs, but they can’t change the world. That is why Proof of Work is, and always will be, the king of cryptocurrency.

What’s your opinion? Are you a proponent of PoW, or do you think a new consensus algorithm will be the future? Sound off in the comments below. 

Images via TechMagnet, MLSDev

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BIS Says Central Bank Digital Currencies Could Disrupt the Financial Ecosystem

Wed, 03/14/2018 - 08:00

The Bank for International Settlements (BIS) has issued a report stating that digital tokens could be used in the future for settling payments between traditional financial institutions. The Basel, Switzerland-based international financial institution also highlighted that central banks should try to embrace digital currencies. However recognizing them as legal tender is still years away, if it’s possible at all. 

Also see: OpenBazaar’s OB1 Gets a $5 Million Series A Boost for Decentralized Market

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BIS: Cryptocurrency Is Not the Answer to Cashless Society

The report points that the BIS is watchful of central banks issuing their own digital tokens. Moreover, it also cautioned that digital currencies could disrupt the traditional financial ecosystem if offered directly to the public.

Benoit Coeure, executive board member of the European Central Bank, noted, “General-purpose central-bank digital currencies could revolutionize the way money is provided and the role of central banks in the financial system, but these are uncharted waters,”

The BIS report warned that before launching central bank digital currencies (CBDCs), there is still need a crying need for “experimentation and experience”.

At the G20 meeting on March 19-20th March in Bueno Aires, Argentina, finance ministers of the world’s top 20 economies intend to discuss regulating digital tokens, and how it could help the current financial ecosystem.

New technologies have long tried to battle to uproot the traditional financial system. Another BIS opinion piece co-authored by executive board member of the European Central Bank Benoit Coeure and chair of Switzerland’s Bank for International Settlements Markets Committee Jacqueline Loh, stated that cash is not permanent. Something will replace it but it’s not bitcoin, they wrote. It underlined that Bitcoin and its crypto cousins are not the answer to the cashless ecosystem.

Not the latest crypto-token, but the BIS logo Issuing CBDCs Could Amplify a Financial Crisis

Central banks differ over the virtues of issuing their own virtual tokens. According to a Bloomberg report, Bank of England governor Mark Carney and Federal Reserve chairman Jerome Powell highlighted that the idea of issuing CBDCs needs careful considerations.

Meanwhile, world’s oldest central bank, Sweden’s Sveriges Riksbank, is mulling a digital token called “e-krona”.

Even though virtual currencies propose to efficiently perform settlement of securities and derivatives transactions, for now, they haven’t proved to be better than the existing system.

BIS claimed if CBDCs are issued, it would be like adding fuel to fire, as it would augment any crisis in the legacy financial system. People would move from cash to digital tokens, creating an imbalance in the financial ecosystem.

As reported in Bloomberg, the BIS said: “A CBDC could allow for ‘digital runs’ towards the central bank with unprecedented speed and scale. Even in the presence of deposit insurance, the stability of retail funding could weaken because a risk-free CBDC provides a very safe alternative.”

In a nutshell, the BIS urged central banks to experiment with new digital innovations. However, it warned them that issuing CBDCs could be an innovation too far.

Will Central Banks move forward with adopting blockchain endorsed digital tokens? Let us know your thoughts on the same.

Images via Wikimedia Commons

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