Category Archives: Personal Finance

Everything You Need to Know About Cryptocurrency Regulation

Originally posted on UpCounsel by Gary Ross.

The meteoric rise of cryptocurrencies has taken the world by storm. Innovators, investors, users, and governments are scrambling to wrap their heads around cryptocurrencies and the blockchain technology that they rely upon. The emergence of a new market and business model has created great opportunities for participants, but it also carries significant risk.

Cryptocurrencies present an inherently unique challenge to governments because of their new technology, cross-jurisdictional nature, and frequent lack of transparency. Governments are struggling to develop new ways to regulate cryptocurrencies, adapt existing regulations, and identify fraudulent schemes. Cryptocurrencies and their regulations are evolving before our eyes, and this article will provide a brief background on cryptocurrencies and an overview of where cryptocurrency regulations currently.

What are cryptocurrencies?

Cryptocurrency is, by any other name, a currency—a medium of exchange used to purchase goods and services. Or, as some have suggested, cryptocurrency is a “peer-to-peer version of electronic cash.” However, this currency has two qualities that distinguish it from traditional bills and coins.

First, cryptocurrency is a virtual currency that is created through cryptography (i.e. coding) and developed by mathematical formulas through a process called hashing. Second, unlike traditional bills and coins that are printed and minted by governments around the world, cryptocurrency is not tied to any one government, and thus is not secured by any government entity. The fact that cryptocurrencies are not secured by a government authority has led to concerns from critics that this is the second coming of Tulipmania, because we are ascribing value to an otherwise valueless item. However, the potential for cryptocurrencies as a medium of exchange remains enormous.

What is blockchain?

Blockchain is the technology at the heart of most cryptocurrencies, and explaining the technology in detail would require a blog post of its own. What is important to know is that blockchain is a record of peer-to-peer transactions categorized into blocks on a distributed ledger. Despite the obtuse terminology, blockchain functions similarly to a local bank authorizing and recording a transaction, but instead of only one party holding the entire ledger book, the transactions are recorded communally by member nodes, with each node being a computer in a peer-to-peer distributed network.

The blockchain can confirm a transaction within minutes, removing errors that exist when trying to reconcile and audit separate ledgers and transactions. Whenever a transaction takes place, the miners on the blockchain develop a new hash and digital signature to update the ledger and create a new “block.” This block, or recorded transaction, is time-stamped and encrypted and will remain on the blockchain for life.

Regulation in the US – Utility Tokens v. Investment Tokens

In the United States, there has been no federal regulation of cryptocurrencies. Instead, cryptocurrencies are often grouped into two non-binding categories: (1) investment tokens that fall under the purview of already existing U.S. securities laws like the Securities Act of 1933 and the Securities Exchange Act of 1934, and (2) utility tokens, which remain largely unregulated (for now).

Security Tokens

Whether the tokens being offered in connection with a particular cryptocurrency are security tokens is decided on a case-by-case basis that even experienced securities lawyers can disagree upon. Tokens are usually analyzed under the four-part Howey Test below to see if the token is in fact a security. Securities must meet the following criteria:

  1. An ​investment of money
  2. in a ​common enterprise
  3. with an ​expectation of profits
  4. predominantly from the efforts of others

Each characteristic of the token is analyzed against this framework to see if the cryptocurrency is in reality functioning as a new-age security. If it is, then regulators treat it as such, and cryptocurrencies must then be registered and handled with all of the same disclosures and precautions as any other security sold in the United States or to U.S. investors.

 

Utility Tokens

Cryptocurrencies can also be categorized as non-security utility tokens. These tokens purport to offer intrinsic utility and value, and are typically instrumental in powering the blockchain technology. These tokens function more like commodities than securities, and while they may act like currency in a fully functional network, they also have other values.

However, having a utility token with a properly formed and functioning network does not preclude said token from being labeled a security by the SEC. In In the Matter of Munchee, Inc., a purported utility token with a non-functioning network was labeled a security by the SEC. While labeling a token without a functioning network as a security – as it has no present utility – is not unexpected, the SEC also concluded that: “even if [Munchee] tokens had a practical use at the time of the offering, it would not preclude the token from being a security.”

After analyzing the Munchee Tokens under the Howey test, the SEC concluded that they were investment contracts because purchasers of the tokens had an expectation of profits predominantly from the efforts of Munchee and its staff. The SEC further concluded that Munchee had primed such expectations through its marketing efforts.

While this new case does not eliminate the distinction between utility and security tokens, it does caution that, when deciding whether a given token is a security, the SEC will look beyond utility at the character of the instrument, and base their conclusion based on the terms of the offer, the plan of distribution, and the economic inducements held out by the token issuer.

State Regulation

So far only the state of New York has issued any kind of regulation specifically regarding cryptocurrencies: the BitLicense. The BitLicense is New York’s attempt to control cryptocurrencies within its borders by requiring cryptocurrency businesses to register and comply with several different disclosure and financial obligations. The regulation has been divisive, and many businesses have rallied against its high costs. While a few companies have applied for and received the license, most other companies have simply left the state or stopped offering services to its residents.

Regulation Abroad – The Ever-Shifting Jurisdictional Question

The United States is not the only country grappling with how best to regulate cryptocurrencies. Many cryptocurrency businesses face daunting questions regarding in which jurisdictions to form and to do business in. In the end, the question is quite difficult and fact-specific, requiring communication between legal counsel in different jurisdictions and taking into account nebulous and piecemeal country-by-country regulations. It is impossible to do a detailed analysis without knowing how a country’s existing securities laws, financial regulations, and banking regulations will operate (or will be adapted to operate) with cryptocurrencies. The fact that cryptocurrency-specific regulations are still developing does little to add clarity, and makes the analysis even more challenging. Yet a few global trends are noticeable:

Suspending Cryptocurrencies

Some notable countries, like China, and South Korea, have suspended cryptocurrencies. These countries have cited the risk of fraud and the lack of adequate oversight in suspending cryptocurrencies and their exchanges, forcing cryptocurrency companies and exchanges to relocate.

 

Regulating Cryptocurrencies

Other countries, like Japan and Australia, have adopted disclosure and regulatory measures, or have companies register with the applicable government authority. Several countries have also tried to implement disclosure or registration regulatory regimes when it comes to cryptocurrencies, but such regimes are cumbersome and expensive to fledging companies.

Cryptocurrencies as Commodities

On the other hand, Switzerland and Singapore, two of the countries at the forefront of the cryptocurrency market, have simply stated that cryptocurrencies are assets not currency, and that they will treat them as such under existing regulations.

Conclusion

Ultimately, cryptocurrency regulation remains in its infancy. Piecemeal regulation has already begun around the world as governments enact new regulations to control and legitimize cryptocurrencies, fold cryptocurrencies into existing regulations, or ban them outright. These splintered attempts at controlling a global phenomenon will keep the cryptocurrency market volatile, and pose a challenge to innovators, investors, and users. They will continue to work in the cryptocurrency space while pushing for legislation and regulation that will remove ambiguity and legitimize cryptocurrencies. At the same time, they must grapple with the possibility that new regulations may be confusing, detrimental, or have negative inadvertent effects.

Don’t Sleep – Robinhood Adding Crypto to Their Popular Mobile App Platform

Robinhood is a mobile stock market trading app. It has gained wide popularity because it allows you to buy and sell stocks and securities for no fees. The platform will soon allow stocks, options, ETFs and cryptocurrencies. I have owned this app, which required me to be on a waiting list for a long time for over two years now, and I am very happy with the integration and progression of the company. The app has a very simple and stylish design with 4 colors total and is completely mobile. A desktop version is coming soon.

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The mobile app has just announced that they will be adding Cryptocurrencies in their new ad “Don’t Sleep” relating to the fact that currencies especially cryptocurrencies trade on a 24/7 global market around the world. This is very different from the American market which runs from 9:30a to 4:00p. According to news outlets and their site they will allow users to track 16 of the top cryptocurrencies and they will allow you to trade the top two “bitcoin” and “Ethereum”. This is largely due to the recent craze among these investment vehicles and gaining popularity around the world. It seems like these days, mobile companies are trying to capitalize and keep up with the times. They will still allow trading to be commission free even on the new cryptocurrencies. This is interesting because lately Bitcoin has been having issues with its high transfer fees and transfer speeds.

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The Sixteen Currencies that you can track include: Bitcoin, Ethereum, Bitcoin Cash, Litecoin, XRP, Ethereum Classic, Zcash, Monero, Dash, Stellar, Qtum, Bitcoin Gold, OmiseGo, NEO, Lisk, and Dogecoin. This implementation will begin in February 2018. Stay Tuned.

 

Sources:

http://blog.robinhood.com/news/2018/1/24/dont-sleep

 

 

Smart-Bridging the Cryptocurrency Gap, What ARK Coin is All About.

Being a college student, the need for money is quite high; however, we want it fast. With Bitcoins $4,882 rise just last week, everyone is pouring there money into the cryptocurrency. Bitcoin this, Bitcoin that; however, the new thing in the world of cryptocurrency investors are alt currencies. These are a set of cryptocurrencies that have specialized features, but are far less known mainstream. The next crypto on the radar of many crypto users is ARK.

ARK is a fork of Lisk, which started out as a cryptocurrency with the goal of creating side chains. ARK still uses the blockchain; however it is utilizing it in a very different way. The potential is very high for ARK because of the ambition behind the team of developers. There is a team of 27 developers that work to fix the problems that mainstream cryptocurrencies have. A few things that the developers have done are increasing speed, the Delegated Proof of Stake, and the notorious SmartBridge.

To start off, the developers of ARK have increased the speed of confirmation time. The confirmation time for ARK is around 8 seconds. The developers were able to achieve this by allowing microtransactions to be done through off-chain processing. This allows the transaction to be much faster because it prevents blockchain bloat. Blockchain bloat is when the blockchain gets filled up with test/fake/small transactions that slow down the network; however, with the use of off-chain processing, this can be avoided.

Another change ARK has made to their cryptocurrency, which is a problem the top cryptos have, is a modified Delegated-Proof-of-Stake. Many cryptocurrencies, like bitcoin, would select people to put together the blocks. However, the same people keep on getting it. With the new DPoS system, 51 active forging Delegates are selected by vote mechanism built into DPoS. These people have voting power; however, it changes each time. This allows the cryptocurrency to be more decentralized. This decision making process makes is very easy to upgrade the currency. This means it is good for investing in because of the continued improvements that the developers are able to do with ease.

ARK is also experimenting with a homogenous codebase. This means that connecting other services off the main code is very easy since it all contains the same “format” of code. “The potential to provide service bridges in the form of Lisk blockchain apps, along with any other additional systems provided by their Blockchain administrators.”

And Finally, the greatest thing ARK has brought to us: the SmartBridge. SmartBridge is the bridge that connects all cryptocurrencies together. To convert cryptocurrencies into a different type you have to use a wallet that has both currency pairs, convert it, and then move it to where you wanted it to go; however, this process is way faster with ARK. For example, a user that has ARK currency and needs to send it to another user that wants bitcoin. The user with ARK can simply send the ARK currency and while on its way it will convert to Bitcoin. This allows all cryptocurrencies to be easily converted. ARK is trying to become the centralized crypto, the one cryptocurrency that connects them all.

Screen Shot 2017-12-12 at 10.08.32 PM

The ambition and drive that the ARK developers have is the biggest asset to the new cryptocurrency. The developers are taking all the small issues that blockchain based cryptos are having and adapting to ARK to avoid similar problems and issues.

Now what everyone wants to talk about, what are the returns on this coin. The crypto currency is trading for $4.16 as of 12/12/2017. ARK started on March 22nd, 2017 and started trading at .03 cents; however, it started to make major gains in August when it started to trade at .85. By September the coin saw a 311% gain and was up at $2.65. Now at the start of December, ARK started at $3.06 and saw a great increase until the 5th of December; however, it is making another climb and is trading at $4.16. That is still a dollar return on the coin within 12 days.

Screen Shot 2017-12-12 at 10.11.00 PM

The potential for this coin is quite high. The future of this coin looks bright.

 

 

Sources:

https://coinmarketcap.com/currencies/ark/

https://ark.io/

 

Bitcoin: Back to Basics, A History And Summary

 This past week Bitcoin reached a high of approximately $19,500. Seems like “bitcoin” is the internets newest mainstream buzz word.

Let me take you back a little:

On May 22, 2010, a developer bought two pizzas using 10,000 units of a then-little-known digital currency called bitcoin” (Price, 2017). A developer, Laszlo Hanyecz, used 10,000 Bitcoins to purchase two large pizzas from a Papa Johns. Although it was a very simple transaction, the event had started the cryptocurrency craze around the world because it showed the idea of cryptocurrency was in fact possible. In the early stages of bitcoin, people were skeptical about the possibilities. To many, it seemed like monopoly money with no true value. The skepticism was about whether Bitcoin and other cryptocurrencies were going to be accepted and if there were truly any benefits.

Bitcoin is the most well-known cryptocurrency in today’s world. “On October 2008, A person, or perhaps a group of people, going by the name Satoshi Nakamoto published a paper outlining a peer-to-peer electronic cash system” (Abridged, 2017). The idea of Bitcoin was born and developers continued to work on making the idea a reality. In 2008 the idea of creating a currency that no government had control over was unthinkable. People from all different demographics shared an equal amount of concern about the digital currency. The bases of currency and money is trust. The two parties participating in a transaction must trust and agree upon the true value of the paper with the number “5” written across the top. In the United States, the citizens all trust and agree upon the value of the money we use; however, many citizens were concerned about how bitcoin was going to change the currency system. The developers continued along with the new idea and by 2010, Bitcoin was able to be used to purchase goods; however, the value of one bitcoin was worth less than one cent and many stores didn’t accept it as a form of currency.  As time went on, the progression of Bitcoin continued.

Bitcoin is part of a larger type of currency called “digital currency” or “cryptocurrency”. With paper currency and money in every country around the world, the government controls it. The government is able to oversee the process of transactions and sets guidelines for the use of the money; however, this is different for cryptocurrency. Cryptocurrency is, “divorced from governments and central banks”(Weller, 2017). With paper money, the government is in charge of regulating the “value” of money and trying to control the economy with it; however, cryptocurrency is very different from that. The idea of cryptocurrency is that there is no government attachment to the currency. No government owns cryptocurrency, this means that there is no third-party regulation of the coin. The one thing that controls the digital currency are the users of it. Cryptocurrency is based on peer-to-peer interaction. The users regulate themselves through technology set in place by the developers like blockchains and smart contracts. To many, cryptocurrency seems to be a useless and corrupting; however, the introduction of cryptocurrency will change how the world handles transactions of money and currency.

The word “cryptocurrency” has a secretive and illegal connotation and the idea of no third-party regulations scares many people from supporting the digital currency; however, the technology behind cryptocurrency, blockchain, allows for peer-to-peer interaction, giving more transparency to the movement of money. Marvin (2017) writes, “Think of blockchain as a historical fabric underneath recording everything that happens exactly as it occurs. Then the chain stitches that data into encrypted blocks that can never be modified and scatters the pieces across a worldwide network”. The Blockchain allows for every transaction to be recorded at the exact moment it happens with no third-party altercations. Meaning no one has complete power over the information being recorded. The Blockchain also has a public ledger that gives everyone the right to see the transactions, increasing the transparency. And finally with the information being stored on different networks all across different networks, there is no single point of failure. If one computer’s information gets hacked, the network removes that computer from the system and reconnects with other computers that are safe. With the implemented technology set into place, third party regulation is no longer needed, restoring the democracy in money.

Blockchain technology has many other uses besides cryptocurrency. Blockchain is simply a way to record any type of digital transaction that exists between two peers. The technology can be incorporated into many other uses, for example banking and accounting. Ittay Eyal, a researcher in the Department of Computer Science at Cornell University, states “The fact that there is a single agreed-upon chain onto which all transactions are placed means that one cannot double-spend the same coin in two conflicting transactions”(Eyal, 2017). Since digital currency is a set of algorithms and codes, there is a chance for counterfeiting that is hard to detect. This is the largest problem with cryptocurrency; however, the blockchain corrects this. When the same bitcoin or digital currency is used again, the blockchain recognizes this since every previous transaction is recorded on one public ledger. There is no confusion because all the information is on a single ledger. Also, the basis of this technology can be incorporated into online banking and accounting. The reason many accounting companies don’t prefer digital accounting is because of the ease of alterations by unauthorized users; however, the blockchain prevents this from happening. Since the blockchain is encrypted and stored on a network of computers throughout the world, there is no single point of access. This protects the business’s accounting information.

There are many pros and cons within the cryptocurrency world. In the video called, “Bitcoin: Pros, Cons and Coins” created by Forbes, both Bitcoin merchants and investors weigh in on the topic of the pros and cons of cryptocurrency. The pros presented throughout the video were ease of transferability. Since cryptocurrency is digital and peer-to-peer, the digital currency doesn’t have to go through a third-party when completing a transaction. This means that there are no fees attached to the transfer of the currency. Also with no third-party control, like countries, there is no need to exchange for a new type of currency when doing a transfer of currency. Another pro to cryptocurrency is developers and hackers are invited to test the limits of the security around the coin. The developers see the flaws in the system and making updates to the technology; however, cons are present. One of the cons of cryptography is the fluctuating prices. The volatility makes it very hard to price and keep track of the values of transactions since the values are always changing. The price constantly changes because of user’s actions. Since the users of bitcoins constantly buy and sell bitcoins, the value changes. The changing values make it difficult to continually update the values of one’s cryptocurrency.Another downfall is security of the currency. In order for the security of the currency to work, the developers must stay ahead of the speed of computers.

The two large pizzas that were purchased with 10,000 units of bitcoin would now be worth $100,000,000. As cryptocurrency becomes increasing popular, many people are taking to investing in it. Since the values of the currency continues to go up because of supply and demand, people purchase the digital currency and hold on to it. Skoyles (2015) writes an article about the process of investing. Skoyles writes, “At the moment the most common approach to investing in bitcoin is to just buy some.” The biggest problem with investing in cryptocurrency is the volatility of the currency. The value of the currency can decrease by a dramatic amount.

The words “bitcoin” and “cryptocurrency” have been thrown around the last few years. Although many people share fear of the idea of a digital currency with no regulations, the introduction of  digital currencies into the new world of technology will have many benefits. In the world of money, peer-to-peer transactions allows for an increase in transparency between the two parties. This is all possible with taking out the third-party and having the blockchain. There is no regulation; however, the blockchain gives the users a secure platform for transactions by recording every transaction at the exact moment and by storing the information on different networks throughout the entire world. The blockchain technology can be implemented into the world of banking and accounting. Digital currencies and the technology behind the currencies will influence the way world controls money.

 

 

Sources.

An Abridged History of Bitcoin (2017, November 19). In New York Times. Retrieved October 30, 2017.

Eyal, I. (2017). Blockchain Technology: Transforming Libertarian Cryptocurrency Dreams to Finance and Banking Realities. Computer (00189162), 50(9), 38-49. doi:10.1109/MC.2017.3571042

Soppe, Taylor. “Bitcoin: Pros, Cons and Coins.” Forbes, 2014. Accessed 13 Nov. 2017.

MARVIN, R. (2017). BLOCKCHAIN: THE INVISIBLE TECH THAT’S CHANGING THE WORLD. (Cover story). PC Magazine, 91-113.

Price, R. (2017, May 22). Someone in 2010 bought 2 pizzas with 10,000 bitcoins — which today would be worth $20 million. In Business Insider. Retrieved October 30, 2017.

Skoyles, J. (2015, Apr). Should I invest in bitcoin? New Statesman, , 21. Retrieved from https://search.proquest.com/docview/1679884099?accountid=14679

Treleaven, P., Gendal Brown, R., & Yang, D. (2017). Blockchain Technology in Finance. Computer (00189162), 50(9), 14-17. doi:10.1109/MC.2017.3571047

Weller, Chris. “Bitcoin is going wild — here’s what the cryptocurrency is all about.” Business Insider, 27 May 2017. Accessed 1 Nov. 2017.

IOTA Moves to the Top 5 in Market Cap Thanks to Microsoft.

I have been fooling around with cryptocurrencies for a while now and a few days ago one really just caught my attention. IOTA. The coin a which is a play off the phase “IoT or Internet of Things” is a coin/cryptocurrencies created to be traded between different machines on the “Internet of Things”. This coin caught my attention because it does not use classic Blockchain technology that we have seen on other very popular cryptocurrencies such as Bitcoin, Ethereum or LiteCoin, instead it uses Directed Acyclic Graph technology, which is a blockless ledger. IOTA refers to its DAG technologie as “tangle”.  Confirmation times are fast and transactions are basically free. As of Dec. 2017. The market cap made it the 4th largest cryptocurrency by market cap, which is around $12 billion. IOTA was created in 2015. These coins are not able to be mined so there was a set amount that was created 2,779,530,283,277,761. In May 2017 IOTA was listed on its first exchange: Bitfinex and is now also listed on Binance as well.

I follow a lot of tech/coin personalities on Instagram and this was getting a lot of attention. At the time the coin was selling for approx. $3 dollars and in a day or two went to $5.5 and has since retracted to mid $3’s. Since I first started trading crypto I had only used the widely popular american exchange “coinbase”. Because this currency doesn’t sell as a fiat currency pair such as IOTA/USD I had to first convert my USD to ETH or BTC and then trade indirectly on a separate exchange “Binance” which is a UK based platform. Binance is one of the top 5 crypto trading platforms in the world according to Coinmarketcap.com.

Another big reason this coin has become popular is because in the past week Microsoft made a big announcement that they were going to collaborate and partner with IOTA coin. This made the currency grow in value with a 90% increase in market cap basically launching it into the 4th position. IOTA has previously partnered with large companies such as Samsung, Cisco, and Volkswagen. Tangle will help with the large process of trading information Business-to-Business between these large corporations using the technology. The tangle system is designed to allow users to create transactions by validation (making sure all transactions are secure, immutable and without fees). The no-fee part of the technology model is huge for information sharing between businesses because tiny micropayments for information between businesses cannot be handled well and complicates the transactions on a large scale. IOTA hopes their technology and the tangle structure will allow a widespread of micropayments for data between companies. This will allow for the transfer of data and information from all kinds of IoT devices with little to no fees to give a greater feeling of interconnectedness between smart technology machines.

Sources:

https://en.wikipedia.org/wiki/IOTA_(technology)

https://coinmarketcap.com/currencies/iota/

https://iota.org/

https://www.cryptocoinsnews.com/iota-price-explodes-after-microsoft-partnership-announcement/

https://cointelegraph.com/news/iota-partners-with-microsoft-fujitsu-others-for-iot-data-monetization

Top 5 Cryptocurrencies by Market Cap

The number one, I’m sure you’ve heard of it is Bitcoin. Bitcoin currently has a market cap of approximately $95 Billion as of today. The one that started it all. Created by the psyudenym Satoshi Yakamoto and released in 2009. Bitcoin is a cryptocurrency that allows for peer-2-peer payment transactions and built on the Blockchain ledger technology, a digital payment system and was the first currency with the ideal of a decentralized monetary platform. There are nodes around the world, mining these bitcoins by recording these transactions on a distributed public ledger called a blockchain. Miners are incentivized with more Bitcoins. Bitcoins can be exchanged for other currencies and in some places other products and services. Bitcoin has been gaining world popularity since the beginning. The currency has seen positive and negative reviews but as of lately has been gaining popularity and value as more companies and leaders are seeing new uses for this technology.

Ethereum has a market cap of approx. $28 Billion, Ethereum has gained wide popularity especially this year. The currency was developed by Vitalik Buterin. A developer who used to work for bitcoin but left when he realized he wanted to create a more app friendly platform that users would be able to build off. Ethereum is open source, which means that the original source code is made freely available and may be redistributed and modified. The reason that this is important is because vitalik wanted other developers to use the ethereum platform to build other tokens and currencies based in the network. The platform is blockchain-based and features a smart-contract functionality that makes this currency widely popular. “Smart contracts are computer protocols intended to facilitate, verify, or enforce the negotiation or performance of a contract.” These enforces that proper inputs result in proper outputs in an exchange within the network. The ethereum blockchain also has its own token called “Ether” which can be traded on all main crypto exchanges. The Ether is also used to reward Ethereum Miners who complete and verify computations and hashes of other users. Ethereum was proposed in 2013 and the development was funded in late 2014 by a crowd sale.

Ripple has a market cap of approx. $9 Billion, which makes it the third largest in terms of market size. Ripple is the name for both a digital currency (XRP) and an open payment network within which that currency is transferred. The platform and currency is still in beta testing. Ripple was created to allow people to transfer money across the system seamlessly, through people, banks, Credit, etc. Many of the creators of the coin have a Bitcoin background. Ripple was Released in 2012, Ripple reports it enables “secure, instant and nearly free global financial transactions of any size with no chargebacks.” The tokens represent value in fiat currency, crypto, and many other units of measurement, even things such as mobile minutes or frequent flier miles. The Ripple network was built on a decentralized Blockchain ledger without a central hub for seamless transfer of currency along the network. Ripple became popular because it was endorse and used by companies such as UBS, santander. Ripple is advantages among other competitors because of its low currency price and its security

Bitcoin Cash is the fourth largest coin in terms of market size with a market cap of Approx. $5 Billion. Bitcoin Cash was created when On July 20, 2017, Bitcoin Cash (BCC) was created when there was a “Fork” or upgrade in the public ledger of the original cryptocurrency. The issue was the scaling of the original Bitcoin’s block size. Bitcoin Cash is a P2P electronic cash. The currency has different rules that were upgraded from the original bitcoin that allows “the continuation of the Bitcoin project as peer-to-peer digital cash. The currency has upgraded consensus rules that allow it to grow and scale differently from the original Bitcoin product.

Litecoin Is coming in at #5 in size with a market cap of $2 Billion. Lite coin is one of the three currencies that is trading on the widely popular exchange, Coinbase. The cryptocurrency is also a P2P  and an open source decentralized platform that was basically inspired by and very similar to that of bitcoin. In terms of differences Litecoin has also adopted SegWit technology and the lightning network. SegWit is the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.These both basically call for a larger number of transactions to happen with much greater speed. One major advantage that LTC has over bitcoin is its fees are close to zero and payment processing is much much faster. LTC was introduced in October 2011 by a man named Charlie Lee, who used to work for Google. As we mentioned earlier LTC became the first of the top 5 largest currencies (in terms of market cap) to adopt the SegWit technology. A few months later, The first lightning network transaction was completed sending 0.00000001 LTC from Zurich to San Francisco in under one second.

 

Sources:

https://en.wikipedia.org/wiki/Litecoin

https://litecoin.org/

https://www.bitcoincash.org/

https://coinmarketcap.com/coins/

https://en.wikipedia.org/wiki/Ethereum

https://ripple.com/

https://www.coindesk.com/10-things-you-need-to-know-about-ripple/

https://en.wikipedia.org/wiki/Bitcoin

. https://en.wikipedia.org/wiki/Ripple_(payment_protocol)

 

The Next Big Thing in Crypto: Asset Tokenization

Last week, I got out of work and I headed over to 3rd ave to the Grant Thornton building to attend a seminar. The event was sponsored by ConsensSys and Balanc3, venture production studios that are focused on building and scaling tools and software products powered by Ethereum. They want to get operating systems around the world using their ethereum platform to innovate and expand business everywhere using Blockchain. I forked over $15 for the ticket because they were serving food and drinks!

The seminar was hosted by the ABC (Accounting Blockchain Coalition), a group whose main objective  is to “educate and empower its members to understand the impact and opportunities that blockchain technology brings to the accounting industry.” I wanted to see how other industries were being impacted by this technology, how they were starting to utilize it, and what this means for business long term. Grant Thornton is not one of the “Big 4” in accounting, but being #6 in the world surely makes them a leader in the industry. They have recently created a subdivision specifically for Blockchain technology and clients of theirs who have started to transact on this currency.

I would like to now summarize some of the main points that I took from the seminar:

Companies are popping up left and right by creating different tokens from the Ethereum open source platform. With these crypto currencies emerging, startups are converting 100% from the start, with protocols that pay employees 100% with crypto currencies instead of regular fiat currencies (dollar, pound, euro), while working on redesigning enterprise resources. One thing that the ABC looks at is how this can affect accounting procedures. One major roadblock will be taxes as people will have to report earnings, in regards to the cost basis and the realized gains and losses. The ABC is set out to help companies and individuals with account for these conversions.

Another point to keep in mind when dealing with digital currencies is that the recorded value of a certain coin is always changing, and therefore must be tracked for use at any given time. That is what the blockchain ledger is for. The value of 10 ETH will fluctuate regularly, so it is very important for accounting to keep track of current value based on a record of prices. Everything purchased needs to be recorded at a certain value so long as we are dealing with multiple currencies (USD/ETH). Things can truly only be streamlined when everything is seamlessly recorded on a permanent ledger. The ledger will help reduce the need for a lot of overhead in the audits.

The next part of the presentation was lead by Balanc3. Balanc3 is like a Quickbooks for the crypto space. They help to maintain a transaction log, similar to a balance sheet, for companies performing regular crytpo transactions. With all transactions recorded in the blockchain ledger, the balance sheet and other financial statements in the program can be constantly updated in real time to give the viewer an accurate representation of the company/token in real time.

Now the main part of the talk/presentation was asset tokenization. This world has a finite number of tangible assets, but there is endless opportunity in the digital space to work with and utilize those assets. Therefore, creators of the Ethereum blockchain have a lot of control. Businesses have started to create tokens and currencies to represent real world assets, in order to trade their value, quicker and easier. When I hear the word “tokens” I picture my 5 year old self at the arcade. In order to play games, I had to cash in  real USD in exchange for the silly arcade tokens that only  worked in the machines. By using these tokens and earning tickets, you had the opportunity to trade their value for prizes. Tokenization is essentially that, the conversion of real tangible and intangible assets to a digital token on a blockchain in order to trade for assets. Assets such as real estate, businesses, art, gold, commodities and many of these assets are hard to split up or convert into shares on a decimal level. Now buyers and sellers of assets trade papers and money that only represent part or all of the asset. Many times there are huge processes involved or red tape that limits access and availability to these assets. Things like paperwork, titles, ownership documents, liens, etc. If we already have the technology such as the blockchain why not switch to digitize the transaction similar to how bitcoin works? Startups, small tech businesses, and even major financial companies are competing to do what bitcoin has done which is basically tokenizing assets similar to what bitcoin did to the fiat currency initially.

There will be a digital footprint of all transactions. In this way fractional pieces of assets can be bought and sold in the form of digital currency or tokens. Transfers will happen quickly on a decentralized platform without the need of a central control.. Ethereum has quickly become the major breeder for tokenization because it was created as an open source platform, allowing businesses to create their own currencies for this specific purpose. Businesses are having “ICO’s” that allow investors to buy in the initial sale of these tokens with their current ETH and the use of “smart contracts”. You can lock in on smart contracts and utilize them for so many different business purposes. These aspects make Ethereum versatile and ready for widespread utilization in the currency marketplace.

 

Soure: http://www.nasdaq.com/article/how-tokenization-is-putting-real-world-assets-on-blockchains-cm767952