Tag: crypto

Facebook and Telegram move in on crypto

On By mehranmuslimiblogIn BitcoinLeave a comment

Although it has taken Internet messaging giants a while to join the cryptocurrency scene, it was inevitable that they would become involved at some point. So, it’s no surprise to see a New York Times article by Nathaniel Popper and Mike Isaac discussing how “Facebook, Telegram and Signal, are planning to roll out new cryptocurrencies over the next year that are meant to allow users to send money to contacts on their messaging systems, like a Venmo or PayPal that can move across international borders.”

Facebook’s secretive actions have been much discussed in the last few weeks, as they have been employing blockchain engineers and crypto experts, and has been in talks with crypto exchanges, but as yet haven’t revealed their precise plans. It is believed that Facebook is working on a token for Whatsapp that would allow users to send the tokens to other users almost instantly.

Telegram, the messenger channel used by numerous crypto-related projects, is also working on a digital asset in some form. Meanwhile, Signal, which is a specialist messaging service used by technology specialists and those working on privacy issues, is also said to have a token in the works.

The messenger app advantage

The advantage companies like Facebook and Telegram have over bitcoin and other cryptocurrencies is this: they already have millions and millions of users; Telegram has 300 million worldwide and Facebook has billions. In other words they have a global reach that the crypto projects as yet don’t have and as a result Facebook and Telegram can make the digital wallets used for cryptocurrencies available, in an instant, to hundreds of millions of users.

Eric Meltzer, co-founder of a cryptocurrency-focused venture capital firm, Primitive Ventures, remarked, “It’s pretty much the most fascinating thing happening in crypto right now. They each have their own advantage in this battle, and it will be insane to watch it go down.”

Regulations may be problematic

However, the likes of Facebook and Telegram may face the challenge that existing crypto platforms know all too well — the issue of regulations. Popper and Isaac state that the messaging companies are likely to face many of the same regulatory and technological hurdles that have kept bitcoin from going mainstream

Will it be a crypto token or a stablecoin?

It is likely that Facebook will opt for a stablecoin solution, although it is rumoured that its token will be pegged to a basket of currencies rather than just the US dollar. This will make the token unattractive to speculators, but attractive to consumers who would be able to use the token to pay for goods knowing that it has a stable value. Furthermore, as Popper and Isaac suggest, “Facebook could guarantee the value of the coin by backing every coin with a set number of dollars, euros and other national currencies held in Facebook bank accounts.” As Meltzer say, it is going to be exciting to watch how it plays out with Facebook and Telegram.

Is the crypto community just smoke and mirros?

On By mehranmuslimiblogIn Bitcoin, Blockchain, ICOLeave a comment

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

On By mehranmuslimiblogIn BitcoinLeave a comment
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?

On By mehranmuslimiblogIn Bitcoin, Business, FintechLeave a comment

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.