Category Archives: Crypto

FB’s Calibra – Foundation for FB’s Financial Ecosystem

Source: The Verge, Jun 2019

… behind Facebook’s ambitions to create a quasi-nation state ruled by mostly corporate interests is a secret weapon, one the company hopes it can use to create another platform used by billions of people — and generate enormous new revenue streams along the way.

It’s called Calibra, and it’s a new subsidiary of Facebook the company is launching to build financial services and software on top of the Libra blockchain.

At first blush, Calibra resembles a fairly standard payments company — but its tight integration with Facebook’s enormous user base could give it a significant advantage over any rivals. Thanks to its proximity to the technical development of Libra, and its ability to leverage WhatsApp, Messenger, and Instagram, Calibra could very well become Facebook’s next big thing.

Calibra is how Facebook intends to make money off Libra, a digital currency it says it does not want to control, despite having created it. More generally, it’s a massive play for Facebook to get into financial services in a way that no other technology company may be able to compete with. Think of it as the Bank of Facebook — an arm of the social network that hopes to do for loans, credit, money transfer, and commerce what its suite of apps has done for online communication.

Libra is the technology that underpins the network. But when it launches, Calibra will likely be how most people interact with the currency until competing wallets arise. In fact, it will likely be the first cryptocurrency wallet that hundreds of millions of people will have access to, by nature of being bundled with Facebook’s massive ecosystem.

With billions of users potentially interacting with Calibra, it will instantaneously have many hundreds of times the user base of the world’s most popular existing wallets from Coinbase and others.

SEC Commissioner Considers Crypto

Source: SEC.gov, Feb 2020

The developers to sell the tokens in a registered offering or pursuant to an exemption from registration. To date, no registered offering of tokens has been conducted in the United States. Many token offerings have proceeded under exemptions from registration, typically Regulation D exemptions that require tokens be sold exclusively to accredited investors with transfer restrictions. Given the limited pool of persons qualifying as accredited investors based on the current wealth and income tests, it can be difficult for these projects’ networks to take off.

Several issuers of tokens have opted for conducting exempt offerings pursuant to Regulation A.[7] However, the costs of conducting one of these so-called “mini-IPOs” can be prohibitive. Even if a team has the financial resources to take this route, once the token is a security, it must trade as a security. A core benefit of a token network is its non-reliance on intermediaries; people transact directly with one another. Having to buy or sell tokens through a registered broker-dealer or on a registered exchange certainly puts a damper on the development of a thriving, decentralized crypto network. Particular problems arise because there are unique challenges related to broker-dealers and exchanges handling digital assets.

the safe harbor would provide network developers with a three-year grace period within which they could facilitate participation in and the development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws, so long as the conditions are met.

This objective is accomplished by exempting

(1) the offer and sale of tokens from the provisions of the Securities Act of 1933, other than the antifraud provisions,

(2) the tokens from registration under the Securities Exchange Act of 1934, and

(3) persons engaged in certain token transactions from the definitions of “exchange,” “broker,” and “dealer” under the 1934 Act.

The initial development team would have to meet certain conditions, which I will lay out briefly before addressing several in more depth. First, the team must intend for the network on which the token functions to reach network maturity—defined as either decentralization or token functionality—within three years of the date of the first token sale and undertake good faith and reasonable efforts to achieve that goal. Second, the team would have to disclose key information on a freely accessible public website. Third, the token must be offered and sold for the purpose of facilitating access to, participation on, or the development of the network. Fourth, the team would have to undertake good faith and reasonable efforts to create liquidity for users. Finally, the team would have to file a notice of reliance.

Money Laundering in Cryptocurrency: How Criminals Moved Billions in 2019

Source: Chainanalysis, Jan 2020

BTC – The Genesis Block

Source: Bitcoin.com, Jan 2020

Hal Finney was the first person to transact with BTC in coordination with Satoshi Nakamoto. The first transaction took place three days after block one and coins were sent to Hal Finney from block nine. Finney told the world a few days earlier he was “running Bitcoin” on Twitter on January 10, 2009. In addition to the very first transaction, Nakamoto had decided to send BTC to other network participants on the same day he sent funds to Finney. The veteran cryptographer Finney told the public in 2013 that he was the first person to mine Bitcoin alongside Nakamoto. “When Satoshi announced the first release of the software, I grabbed it right away — I think I was the first person besides Satoshi to run bitcoin,” explained Finney.

ETH Inflation Rate: 5%

Source: TrustNodes, Jan 2020

an inflation rate of circa 5% a year which will increase a bit further potentially this summer once hybrid Proof of Stake (PoS) launches.

Then onwards it looks probable it will stay around these levels until around September 2021 when the difficulty bomb is to kick-in again.

Around that time full Proof of Stake might launch, at which point the Proof of Work (PoW) chain is set to be discarded.

This 5% inflation from the PoW chain will be discarded with it, leaving an inflation rate of only 0.22%.

These timings however are an estimate as are future inflation levels as packaging the PoW chain into a PoS first shard is very complex and something to be done with great care.

Yet the aim is to eventually get down to this 0.22% inflation level, but in the meantime ethereum’s inflation will stay at 5%.

90% of All ETH Wallets Now ‘Out-of-the-Money’

Source: CoinDesk, Jan 2020

The second-largest cryptocurrency, which powers ethereum’s blockchain, is currently trading at $131, representing a 90 percent drop from the all-time high of $1,431 reached in early January 2018, according to CoinDesk’s ether price index.

The relentless price slide has pushed 90 percent or 31.31 million ether addresses “out-of-the-money,” according to blockchain intelligence firm IntoTheBlock.

An address is said to be out-of-the-money if the current price of ether is lower than the average price at which the coins were acquired or sent to an address.

So, the 31.31 million ether addresses have acquired coins at an average price higher than the ether’s current value of $131.

A major chunk of out-of-the-money addresses purchased coins in the range of $211 to $530. Notably, the biggest cluster, some 4.77 million addresses, is in an average cost range of $262 to $352.

Meanwhile, a mere 8 percent or 2.79 million addresses are “in-the-money” – the cost of acquisition is lower than the current price of ether – and 1.78 percent addresses are “at-the-money,” with an average purchase purchase price almost equal to the current spot price.

The majority of the in-the-money addresses have acquired coins in the range of $0 to $130, while 4,120 addresses have an average cost of $0. These could be early buyers who bought ether in the period between August  2015 and December 2015, when the cryptocurrency was trading in cents.

While the number of addresses in-the-money is small, the volume of ether these addresses are holding is quite significant.

Only 8 percent of addresses are in-the-money, but hold 31.24 percent of the total ether held in all addresses. That amounts to 34.05 million ethers ($4.5 billion).

These investors have already seen their massive profits evaporate in the last 23 months and may offload their holdings if prices find acceptance under $100, adding to bearish pressures around ether.

Out-of-the-money addresses are holding 73.13 million ethers. Clusters of addresses with an average price in the range of $144-$170, $212-$262, or $262-$352 are holding a total of 36.24 million ethers.

A few observers believe ethereum’s persistent scalability issues likely dented investor confidence, leading to a price drop.

Ethereum has consistently missed deadlines for protocol upgrades,” said Connor Abendschein, research analyst at Digital Assets Data, to CoinDesk. “Ethereum 2.0 was supposed to have already gone into effect earlier this year, and it still hasn’t gone through.”

Ethereum 2.0 is a major network upgrade that will shift the blockchain’s current proof-of-work consensus algorithm to proof-of-stake and transfer validation function from miners to special network validators.

Under proof-of-work, miners compete with each other to solve a difficult puzzle (algorithm) to add each block to the chain. Under proof-of-stake, there is no competition as the block creator is selected based on the user’s stake in the project – in other words, ether holdings.

The market is expecting the first upgrade to be rolled out in January 2020. Ryan Selkis, CEO of Messari, however, thinks the transition won’t happen until 2022.

Bitcoin Gained Almost 9,000,000% (90,000X) in the Last Decade (2010-2019)

Source: Bitcoin.com, Dec 2019

Netflix gained +4,177%, Amazon (+1,787%) Apple (+966%), Microsoft (+556%), Disney: (+423%) and Google (+335%), gold only saw a +38% gain. Bitcoin rose by +8.9 million percent between January 2010 up until now.