The Importance of Decentralized Exchanges

If you are not new to the cryptocurrency industry, then your opinion for 2017 – from the perspective of a cryptocurrency community member – would be that it was an excellent year for the industry.

Bitcoin saw an unprecedented rise and continued to go on and achieve higher prices. Ethereum appeared to be one of the top-notch technology solutions, allowing a plethora of new ventures to be launched by its ERC20 functionality. Ripple started off as a new coin, and even with all the criticism it received, it went on to make corporate deals with the likes of Moneygram for payment transfer.

The same goes for blockchain technology, which is the very basis of cryptocurrencies. Last year, blockchain went on to become one of the breakthrough topics of the year for tech giants ranging from IBM to Microsoft. Multiple ventures were launched through the technology in the corporate sector, and financial institutions that were against cryptocurrencies,  more often than not, seemed to be strong proponents of adopting blockchain technologies for their solutions.

That would seem like an excellent year to anyone because it was.

However, there was one issue that persisted throughout the year and made the industry go through significant losses, both regarding financial standing and overall credibility.

We are referring to the ever looming possibility of hacks on cryptocurrency entities that have been going on for a few years.

Multiple hacking incidents took place in 2017 as well, ranging from cryptocurrency exchanges such as Youbit to mining platforms like Nicehash. The attacks continued well into this year, with an online digital wallet called BlackWallet getting hacked recently.

In 2017, the total loss obtained by the affected entities came close to $500 million, causing a few of them to file for bankruptcy and go out of business.

This is just a year’s loss, think back to the past hacks endured by the likes of Bitfinex and the infamous incident of Mt Gox, the latter of which is something that is still affecting the attack’s victims: the exchange’s customers.

This brings the same question to one’s mind that has been plaguing the cryptocurrency industry for the past couple of years.

Can’t anything be done to make these institutions as secure as the cryptocurrencies that they handle for everyone?

The answer is right there in the question

What makes cryptocurrencies so secure? Is it the exchanges that handle them every day?

No, because if that were the case, then those exchanges would not have been that badly affected by those hacking attempts.

Is it someone that fends off the hackers actively on these cryptocurrency networks?

Not always, because most of the time, these networks have public blockchains that allow access to anyone.

It is the blockchain technology, the core of cryptocurrencies, which makes them so secure by the use of decentralized networks.

That is what needs to be adopted by organizations that manage cryptocurrencies every day.

All of these institutions that were hacked had one common factor, the aspect of centralization. While all of them reportedly took all the necessary security steps, they were compromised on the usage of centralized systems, which,  even while having the utmost security solutions implemented, centralized security cannot be compared to a decentralized network by any means.

Chances are that this is not the first time that you are reading something that questions why cryptocurrency exchanges have not adopted blockchain technology themselves, whereas significant banks and stock exchanges are doing so.

It seems that the industry has been thinking about this for a while now, but the downside of this suggestion comes with the time and costs involved to develop decentralized networks for each of these existing entities. They cannot be created overnight, and they require the most efficient of people working on them to deliver the kind of security that one expects out of them.

However, with the amount of revenue that some of the most significant cryptocurrency exchanges generate every month, it will not be a preposterous suggestion to consider that maybe some of that income, even if seems too high for now, needs to be invested in solutions that could act as safeguards for the customers as well as the exchanges themselves.

Decentralized Exchanges

Decentralized exchanges (DEX) are already in the works, and some have even started their operations. In addition to that, decentralized apps (Dapps) are also one of the major divisions of the blockchain technology.

While no one is suggesting one of these exchanges to hire the likes of IBM to develop decentralized networks for them, several new blockchain technology providers specialize in blockchain as a service. Once again, it is not crazy to advise that maybe some of the more significant exchanges such as Coinbase could very easily afford such services.

It is merely an idea for now, but it is certainly gaining traction to the point where it is evident that any of the current exchanges that adopt blockchain technology for its systems will prove to be the trendsetter in the industry.

The emphasis is being provided to older exchanges because they already have the user base and the revenue that justify investing in this technology. While other new exchanges have decentralization from the start, switching to them might not be a viable option for everyday customers, especially when these startup exchanges have a lower number of trading options as compared to more significant exchanges.

The demand for decentralized exchanges is very clearly there, along with sufficient reasons to support it. It just remains to be seen who will be acting upon this solution shortly.

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The Mobile Trading App Robinhood Is Set to Add Crypto

You’ve heard of Robinhood, right? The company that has created a mobile trading app for both IOS and Android, an app which has gained a broad base of users who use the app to trade stocks for free on a regular basis? Well, if you haven’t before, now you know. Robinhood is preferred by many due to its fee-free nature, allowing many to keep more of their gains and add minimize their losses.

The company invites users to join their platform by stating on their website, “Free stock trading. Stop paying up to $10 for every trade. Robinhood is available now! Signing up takes less than 4 minutes.”

Well, guess what? They’re now expanding their platform to introduce the world of cryptos and, yes, they are going to be doing it fee-free. This is significant news for those that frequently participate in trading the cryptoworld, buying and selling Bitcoin and other cryptocurrencies in centralized exchanges like Coinbase, can have users experiencing high fees that range from a varying 1-10% or more

This is certainly a big concern for those in the crypto sector because crypto traders want to make sure that they make every ether and bitcoin count to maximize their gains.

The aspect of Fees & more

The aspect of fees can be high in many aspects of trading and even sending cryptocurrencies across to different accounts.

So, a company like Robinhood, who is jumping into the crypto space and making all sorts of trading more accessible to the average consumer is sure to gain from an action like this, especially in general bull markets like this one.

They will be deploying these new functionalities to trade Bitcoin and Ether onto their mobile platforms within the upcoming month. This move will undoubtedly help to bring in more users to use their present platform as well as their new functionalities.

To make sure that they don’t ruin operations, they will be deploying the new functionalities to customers in specific states in the United States.

They are making sure to tackle two pain points experienced by many traders, the time for processing and the fees associated with each transaction. They’ll be providing quick processing on transactions to make things simple and fast.

Is it a Risky move?

For Robinhood, an experienced industry expert in the field of providing trading for free, this should not be a risky move. They’ve researched the stock markets to understand how they can offer a unique advantage to the marketplace, thus providing a superior service to customers.

The company already collects revenues through several of its services, primarily by offering a service called, Robin HoodGold, which allow for after-hours trading and also by collecting interest on the cash and securities that are placed in the Robinhood accounts, much like banks collect interest on cash deposits.

The firm has been on a roll with their latest moves, one of the interesting features that they have added as of late has been that of options trading, it has also added a web functionalities, in addition to its mobile ones.

In regards to storage of cryptocurrency on their platform, Robinhood will be using the services of another provider, and it seems that the company will be letting users decide which currencies they want to add to the platform. The company might choose which additional cryptocurrencies need to be on the platform by popularity.

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The Japanese Exchange bitFlyer Will Soon Be Operating in Europe

bitFlyer, the popular Japanese cryptocurrency exchange, recently announced that it had been granted the necessary regulatory permission to operate in Europe.

This makes bitFlyer the first and only exchange that has regulatory authority for its operations in three of the most competitive markets: Japan, U.S., and Europe.

bitFlyer obtained its Payment Institution (PI) to conduct business in Europe through a Luxembourg regulatory authority, Commission de Surveillance du Secteur Financier (CSSF).

The move was welcomed by the Luxembourg Minister of Finance, Pierre Gramegna, who praised bitFlyer.

“We’re delighted that one of the most successful Japanese startups chose Luxembourg as their EU platform,” Gramegna said.

bitFlyer has indeed been one of the most successful ventures that have come out of Japan lately. With over 100,000 Bitcoins in volume, it is the most significant Bitcoin exchange in the world.

It is not just its Bitcoin trading volume that the company could boast about. It recorded a trading volume of $150 billion in November-December 2017, which no doubt was due to the boost provided by the incredible rise of cryptocurrencies in the last year. The company generated a trading volume of $100 billion between January-October 2017.

Since then, even with the drop in Bitcoin value,  bitFlyer’s trading volume for this month is clocking around $50 billion so far.

The company is very excited to launch its operations in Europe and will be offering free trading throughout its locations within the region until the end of next month but without any leverage.

That is still a massive move and something that could entice a lot of traders to try bitFlyer’s services, either by switching to the exchange altogether or by having its service as a trial in addition to their primary exchange until they could make a lasting decision.

bitFlyer was founded in Tokyo, in 2014, by Yuzo Kano, a former banker from Goldman Sachs and the current CEO for bitFlyer. Since its inception, the exchange has evolved to be the leading institution for cryptocurrency trading in Japan. The country’s friendly stance towards cryptocurrencies, especially Bitcoin, has only helped fuel the company’s journey towards notable growth.

bitFlyer is excited about the expansion

The company is very excited about its recent developments in Europe. With the currently offered promotion of free trading until the end of February 2018, it aims to target high-volume traders so that they could enhance its user base for its new region.

bitFlyer’s founder and CEO Yuzo Kano explained that his very ambition behind starting bitFlyer was for the venture to go global, as that would help establish cryptocurrency’s future throughout the world.

Kano stated:

“When I set up bitFlyer in 2014, I did so with global ambitions and the belief that approved regulatory status is fundamental to the long-term future of Bitcoin and the virtual currency industry.” 

He further mentioned that he is proud of bitFlyer for its current status as it only provides hopes for the future.

Kano said:

“I am proud that we are now the most compliant virtual currency exchange in the world. This coveted regulatory status gives our customers, our company and the virtual currency industry as a whole a very positive future outlook.”

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Updates and Implementations to Watch for on the Bitcoin Network

The Bitcoin network has been facing numerous problems regarding being able to facilitate timely transactions along with reasonable transaction costs, and many are quick to point out these issues and the other many flaws of the pioneer cryptocurrency.

While it is not arguable that the issues do exist, writing Bitcoin off altogether as a viable cryptocurrency is unfair in the opinion of neutral parties, who, while not supporting Bitcoin for its problems, objectively point out the future adoption of updates that could address the presented issues, including but not limited to the ones regarding transaction time and cost.

Segregated witness (Segwit)

Whenever a list of this sort is put together that talks about important updates on the Bitcoin Network, there are chances that Segregated Witness (SegWit) would be in the top three at the very least.

SegWit had been implemented on the Bitcoin Network in August 2017. Along with fixing other issues, the implementation most essentially updated the network’s block size limit with a block weight limit, which in turn allowed more transactions to be performed throughout the network.

That allowed resolving the delays in transaction time, and as a result, the problem of higher transaction fees.

However, users have not been able to see this update perform in its full capacity because it has not been adopted yet by most wallet and cryptocurrency exchanges (most infamously by Coinbase, which had been accused of doing it deliberately).

Once more institutions and applications start adopting this implementation, users will undoubtedly see a stark difference in the network’s performance.

The Lightning Network

With the Lightning Network making its debut as a test deployment on Bitcoin network, it is apparent that the pre-funded payment channel mechanism is closer to fruition than most people had thought earlier.

The Lightning Network, first proposed in 2015, is supposed to open more payment channels for quicker transactions. Using the network’s capabilities, users can pre-fund these payment channels and have their balances adjusted accordingly.  

A user can then utilize any of the pre-funded payment channels for faster transactions, and their balance will be adjusted as before.

Because these payment channels exist off the blockchain, they allow for faster transactions with lower transaction fees.

The Lightning Network is still in development, but once deployed completely, it is meant to resolve the current issues efficiently.

 Schnorr signatures

Another update, which has not yet been implemented and only proposed, is the adaptation of Schnorr Signatures on the Bitcoin network.

Schnorr signatures are considered as some of the best cryptographic signatures currently utilized. Their use of the Bitcoin network is going to be beneficial for several reasons. Due to their optimal balance of correctness and faster verification, the network transaction verification time will reportedly be cut by more than 30 percent.

This implementation will ensure that the network is using signatures that are immune to malleability but which also make the scalability issues easier to resolve. That, in turn, would work towards solving the overall problems that we have mentioned above.

Tumblebit

While being a truly public blockchain has its benefits, that distinction and achievement also comes with, what some call, the network’s flaws.

One such arguable aspect regarding the Bitcoin network is its lack of privacy since all transactions are posted on the public blockchain where anyone could view them easily.

While this is still posted in a cryptic format, a close analysis by someone who is looking for specific details is enough to reveal information regarding the sender and the beneficiary.

This has caused a few people to feel nervous about their transactions over the network in the past couple of years, and the solution has been proposed as TumbleBit, a coin-mixing protocol.

Proposed in 2016, the solution is aimed towards using a tumbler to create payment channels to and from the users in a single “mixing” session. This essentially renders the actual transaction’s information to be unidentifiable through malicious sources while also using top-level security to ensure that a link between such users is preventable otherwise.

This technology is currently in the works for Bitcoin network and might get released in early 2018.

These are some of the most important updates to watch out for

There are several more updates out there that are either proposed or have already been implemented. We listed the ones above because they seem to be the most necessary updates for issues that the network needs to be resolved promptly.

Most of all, this signifies that the Bitcoin network has not been abandoned. While the Bitcoin’s “digital gold” status is to be celebrated, the people associated with the cryptocurrency want it to flourish in its original capacity as well, and it seems that it will be achievable shortly.

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Bitcoin Trust Is Splitting Its Stock

The recent surge in demand for Bitcoin has not only garnered the interest of cryptocurrency traders, but it has transcended to conventional traders as well,  who usually only stick to stocks and more conservative modes of investment.

It also works the other way around; where cryptocurrency traders are now turning towards any conventional methods of trading that involve cryptocurrency, this phenomenon is evident with the debut of Bitcoin futures and other measures such as the recent rise in demands for Bitcoin exchange-traded funds (ETFs).

Before there were Bitcoin futures, that purpose of additional modes of investment associated with Bitcoin was served by the Bitcoin Investment Trust (GBTC), a fund by Grayscale that grew in demand after the unprecedented rise of Bitcoin in the last quarter of 2017.

The Bitcoin Investment Trust essentially functions as an ETF which holds Bitcoins on behalf of its investors. The pricing for each share is then represented according to the value of Bitcoin.

Recently, the Bitcoin Investment Trust announced that it would be splitting its stock by 91-1, which means that for each share owned by the investors, they would receive 90 more shares.

The shareholders as of the market close of January 22 will be re entitled to the split. The split is reported to occur on January 26.

Why is this being done?

Usually, a stock split occurs whenever the demand for the stock rises beyond the level that it is currently being traded on or when it needs to make the shares more accessible to more investors, raising the stock’s liquidity. In an ideal situation, the share prices drop immediately after a split, allowing more buyers to invest in them.

For instance, at the time of the stock split announcement, each share of the Bitcoin Investment Fund had been trading around $1800, making it out of reach for a regular investor. However, the split would have ideally caused the price to drop to an initial $21, after which the price would have increased again since more people had bought it.

A similar trend will be seen once the stock splits on the planned date.

At this time, every share in the stock represents around .092 bitcoin. Once the split is completed, each share will represent around 0.00101 bitcoin.

However, this does not mean that the current investors will lose anything. Since the value of their current shares will be equally divided within their newly acquired shares, if anything, they are only going to gain from this decision once the price correction is adjusted after a few days of trading and when the share prices go up again.

All in all, it is excellent news for the current investors of the fund as well as anyone who had been looking forward to obtaining some of this stock, as it will be far more accessible in price after the split.

That being said, anyone who is looking to invest in the fund should first perform their due diligence and invest only after vetting all their options thoroughly.

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Global Regulatory Organization Issues an Advisory on ICOs

The International Organization of Securities Commissions (IOSCO) has released an advisory document to warn potential investors about participating in initial coin offerings (ICOs).

IOSCO, which is a consortium of multiple regulatory authorities from all over the world, released the document from its headquarters in Madrid, Spain. The organization comprises of regulatory bodies the likes of the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and the Japanese Financial Service Agency.

In its advisory release, the IOSCO addresses concerns surrounding ICOs, the latest financial phenomenon that has garnered the interest of seasoned and green investors alike.

Most of the time, legitimate startups and even established companies run an ICO to back their business and have the financial resources they need to develop their vision. After being completed, these ICOs start delivering on what they initially said, which of course is beneficial for the investors and consumers alike.

However, the overwhelming interest from potential investors about any ICO that is announced also brings the genuine possibility of malicious people creating intricate schemes to make as much money as possible without having any intention of launching the proposed business.

All that these malicious parties have to do is to set up a few online properties and start their ICO (while typically being based in a country where regulations are scarce), and people immediately begin investing by buying said company’s native tokens – the value of which is only derived through the company itself along with speculative influence – which in turn means that these companies practically have to invest little to no capital to gain a significant amount of funds in terms of investment.

Some of these false companies disappear after completing the ICO, or if the investors are lucky, get apprehended by authorities. Nonetheless, the investors have their funds stuck with them for quite a while, and that is what the authorities want to stop.

The reasons above have inspired these global authorities to issue this brief yet collective advisory release so that more people could be aware of such issues.

What does the advisory release say?

Addressing the issues mentioned above, the document explains how ICOs are not standardized and how their legal and regulatory standing varies on a case to case basis.

It then mentions that investors are putting their whole investment capital at risk by investing in unregulated ICOs. The document explains that some of such ICOs are typically based in different jurisdictions than the investor, which increases the dangers against investor protection.

It tells the investors about the possibility of fraudulent ICOs, and asks them to “be very careful in deciding whether to invest in ICOs.”

The document also refers to a collective meeting of the global members of IOSCO, in which these offerings were discussed at length. It explains that most of its members have already issued multiple notices and advisories to potential investors to warn them about the risks involved with this new mode of investment.

The document concludes by directing readers to those multiple warnings for further information and education on the subject.

The IOSCO also announced the establishment of its ICO Consultation Network, which is going to provide a platform to its member authorities to discuss pertaining points regularly.

Does this hold any significance?

Since it comes from an organization holding notable regulatory authorities from all over the world, it does mean that ICOs and the risks involved with them are being noticed on a global scale.

While the information provided is not new, it certainly holds facts and something which investors need to think about before they invest in a potentially risky ICO.

This does not mean that all ICOs are ridden with fraud, however. As stated above, there have been numerous startups and established companies that have ran their ICOs in the past and have then gone on to establish themselves in legitimate operations.

As with anything else, ICOs are prone to manipulation by harmful actors, and thus it falls upon the investors to practice constant vigilance to keep themselves and their funds safe from such risks.

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