Is the crypto community just smoke and mirros?

You’ve probably noticed that ‘community’ is a buzzword in the crypto sphere. There isn’t an ICO that doesn’t refer to building its ‘community’, which is really another way of talking about their investors, because that is what they are. But ‘community’ sounds warm, fuzzy and friendly when compared with the ‘investor’, which instead suggests neutrality, detachment and anonymity.

Why crypto geeks chose ‘community’

In the traditional world of business it is very important to build loyalty among clients and customers; that’s one of the functions of great branding, but the crypto startups focused on the concept of ‘community’ at the start, in my opinion because they were operating on the fringes and therefore wanted to use a word that suggested a coming together of like-minded people, as well as a sense of equality between those who developed the crypto projects and those who basically crowdfunded them.

In the early days of crypto, this rather ‘liberty, equality and fraternity’ approach served a good purpose; it strengthened belief in a new technology by making everyone feel they had skin in the game, even if an individual’s financial commitment to a new project was $100, let’s say. However, as the ICO took off and every project wanted to build followers who would buy into it, what had been a collection of believers turned into, as Michael K. Spencer writes in his article for Medium, “communities more prone to pump and dump” who were never really loyal followers.

Now crypto projects need to get real

Spencer’s argument is, and I agree with him, is that the so-called ‘communities’ built up by ICOs on Telegram and elsewhere are not as useful to projects as they were once thought to be. The reason for this is that the crypto world has moved on significantly since the launch of bitcoin. Crypto projects now need real clients and products with a real world use.

Communities show no loyalty

In short, a project’s community that has come together just for the Airdrop, or whatever freebies a project wants to hand out, is rarely loyal. These marketing tools may build numbers of followers on social media quite rapidly and make a project look as if it has broad support, but most of those people are just there for the giveaways and once they have them, they’ll be off.

Spencer says, “Crypto saying that its community is its best resource, is like Facebook saying it’s valuable because it has over 2 billion users.” Building community is not where crypto projects should be focusing; they should focus more on real world applications, demonstrate utility and by doing so attract loyal clients and investors.

Crypto businesses run away from USA

Image result for Crypto USA

The USA usually takes the lead on new technology: after all it is the land of Apple and Silicon Valley, not forgetting many innovations of the past. However, when it comes to crypto startups it appears to be driving them away, right into the arms of places like Switzerland. It is true that some of the large comaniy’s like Coinbase and Ripple Labs, who are past the startup stage, are US registered, though even Coinbase has spread its wings far beyond the United States.

Jeff Kauflin writing for Forbes recounts a very interesting story about a meeting between Republican congressman Warren Davidson and the CEO of a crypto startup in 2018. The CEO was trying to decide where to locate his company and said to the Congressman, “Look, it’s nothing personal. We just don’t trust that you guys are gonna get this done right. So we’re feeling kind of Swiss.” What he meant was that with all the uncertainty around regulations in the US, they were thinking of going to crypto-friendly Switzerland.

This uncertainty and the slowness of the US regulatory authorities are damaging everyone. As Kauflin says, “most companies that created digital tokens and sold them through ICOs assumed they wouldn’t be deemed securities.” However, once they realised that the regulators, the SEC being the main one, were thinking differently, they knew there was going to be a legal problem. This drove them away from considering locating startups in the USA.

To remedy this, Warren Davidson has introduced a new digital token bill, aimed at removing uncertainty and making the USA more appealing for crypto startups.

Caitlin Long, a former managing director at Morgan Stanley, when interviewed by Kauflin said: “Lawyers right and left were telling clients, ‘Don’t issue tokens to U.S. investors and don’t domicile in the U.S.’”

By contrast, last year Switzerland declared that some ICO tokens are not securities, which went down well with crypto entrepreneurs. So much so that about 420 crypto and blockchain startups are domiciled there. The USA has 2,100 startups, but it also has a population that is 40 times larger than that of Switzerland. Mathematics says that Switzerland is out-performing the USA as a location for technological innovation.

Davidson’s Token Taxonomy Act aims to amend the Securities Act of 1933 and the Securities and Exchange Act of 1934, “to get the regulatory certainty that I feel like the market needs.”

Under the new bill, some of the criteria for exemption from security status are: the blockchain platform the token runs on has already launched; the token’s supply can’t be controlled by a single person or group of people; once finalized, transactions can’t be altered by a single person or group of people; and the token “is not a representation of a financial interest in a company, including an ownership or debt interest or revenue share.”

If this Bill passes it will create a significant change in the US for startups and would ensure that innovation stays in the USA rather than running away to Europe.

Who made it into the Forbes Fintech 50?

The Forbes Fintech 50 2019 reveals that although the crypto markets may be going through a frosty period, investment in the growth of fintech businesses surged in 2018. As Forbes reports, total investment reached $55 billion in 2018, double that of the previous year. The Forbes list of the top 50 finteches also shows that the businesses themselves are getting bigger, with 19 of the 50 firms valued at, or in excess of, $1 billion.

This is only the fourth time that Forbes has published this list and it’s pleasing to see that there are 20 startups that have made the cut for the first time. It is also interesting to see that the sector showing a strong growth in startups is that of payments services, particularly those focused on providing a service to the unbanked. In the case of the USA these people are typically migrants without a US credit history, or people who live hand to mouth on a wage paid weekly. The lack of access to banking and payment facilities is a greater problem in developing countries, but let’s not forget it happens in the first world as well.

Exchanges dominate

There are few surprises at the top of the list, as many of the names are familiar: Axoni, Bitfury, Circle, Coinbase, Gemini and Ripple are all headline makers. Bitfury is the only non-US based of this top six: it is based in Amsterdam. It started off as a bitcoin mining outfit, but then launched its own blockchain plus software designed to help U.S. law-enforcement and others investigate illicit activity using bitcoin. It has a valuation of $1 billion plus and received more than $150 million from Korelya Capital, Macquarie Capital, Dentsu & others.

Axoni may be less famliar than say Coinbase, Circle or Ripple. It uses blockchain-based smart contracts to overhaul the back office of the world’s biggest derivative markets. It received funding from Goldman Sachs, JP Morgan and others to the tune of $59 million.

Circle, with a valuation of $3 billion and Coinbase with a valuation of $8 billion are big hitters; they even sometimes work together. Last year they partnered to launch a stablecoin USDC — a crypto asset using the ethereum blockchain and backed by US dollars.

Payments services present in big numbers

Payments services make up 25% of the Top 50 list. The Forbes list is skewed towards US companies, but it is notable that in the payments sector, it includes Transferwise, a UK registered company, widely used by Europeans when they need to transfer large sums of money across borders. Other payments services listed include Bolt, which is the ‘smallest’ with a valuation of only $20 million, whereas Stripe is one of the largest with a valuation of $685 million.

Forbes predicts that the leaders in the blockchain sphere will stop trying to outrun each other in 2019 and will instead start seeking partnerships within the mainstream world of finance.

Which would you bet on: John McAfee becoming US president, or eating his d**k on TV?

For many years when most people heard the name ‘McAfee’ the software that protected your computer from malware, viruses and Trojans came to mind. But, John McAfee, the man behind the anti-virus software business has given us an entirely different image to conjure up when the name is mentioned.

Who knew that the Anti-Virus King was such a maverick and such an enthusiastic user of Twitter? His announcement this week that he plans to run for President in the 2020 presidential campaign is not a great surprise, and if constant Twitter use is a qualification for the job (the current POTUS seems to think it is) then he might be a shoo in.

Not that John McAfee can actually step foot in the USA. He has fled the country and is sending out messages from his boat, which is somewhere in international waters so that the Internal Revenue Service can’t touch him. He hasn’t filed a tax return in years, so it’s no surprised that the IRS have come after him, especially since he keeps boasting about it. McAfee certainly doesn’t seem to have grasped the concept of ‘going under the radar’.

What else do we know about the man? Well, he’s a cryptocurrency fanatic to start with and he has made a lot of noise in the crypto world and attracted a large swathe of followers. He also has a fairly interesting backstory, including the fact that he was born in the UK, not the USA. His parent moved to Roanoke, Virginia when he was young and his father committed suicide when McAfee was 15.

His career in computing started after he took a job at a firm that coded punch-card systems. He then worked at a few Silicon Valley firms until the first major virus in PCs emerged and that’s when he started his anti-virus company. The company soon became one of the biggest of its type, but McAfee decided to retire in 1994 and keep a low profile.

His shares in the company netted him $100 million and he seemed set for a comfortable future, however in 2008, the financial collapse that affected the whole world also hit McAfee hard and he lost around 96% of his fortune.

And this is when he starts to reveal his maverick nature to a wider audience. He moved to Belize, but started to think he was being followed, and lost his connection with society for a while. He also had to flee the country in 2012 when he became a person of interest in a murder case that involved the death of his neighbour. He was then arrested in Guatemala for illegal entry and repatriated to the USA. And that’s when his love affair with crypto started.

In 2015 he started the Cyber Party and made his first attempt to run for president. He also got involved with MGT Technologies, a rather mysterious firm that was producing games, providing cybersecurity services and manufacturing some drugs. It’s an odd mix that gives off a strong smell of dodginess. He left her to become fully embroiled in the bitcoin world; the leading cryptocurrency being his favourite. He’s made numerous predictions, perhaps most famously his tweet that if bitcoin didn’t reach $1 million by the end of 2020 “I will eat my dick.” Which will happen first: will McAfee become president or will we see him cannibalise himself on Squawk Box at the beginning of 2021?