The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.
News Item 1: IOTA Surges Past Ripple
Decrypted: Its official! The cryptocurrency market reached an all-time high reaching $417 billion, based on data from Coinmarketcap,com this Sunday. Their combined market capitalization is getting closer to Facebook and Amazon, while overtaking JPMorgan, that is valued at $367.5 billion.
This week Bitcoin soared over 17,000 with other cryptocurrencies following suit. While Bitcoin price holds the lion’s share in the market, IOTA has been certainly been making its mark on the ecosystem. IOTA’s price has surged to $5.23, passing Ripple, to become the fourth largest cryptocurrency, behind Bitcoin, Ethereum and Bitcoin Cash.
Our take: Since IOTA was released to the public, it has carved out its spot in the crypto top10 list. While very few people knew what was going on behind the scenes, investors have been flocking to the coin, like there is no tomorrow.
As a matter of fact, the price of IOTA has been on a consistent rally for months now. In November, IOTA’s price has increased by more than 900 percent. But the recent rally followed an announcement by the IOTA Foundation, that it partnered with Microsoft, Samsung and Fujitsu on a blockchain-based marketplace, that lets them sell data.
The Data Marketplace is IOTA’s most comprehensive pilot so far. The goal is to enable a truly decentralized data marketplace to open up the data silos that currently keep data limited to the control of a few entities. Data is one of the most imperative ingredients in the machine economy and the connected world.
The future of the IoT is deeply connected with the development of AI, machine learning, predictive analysis. Lots of world-known companies unite their efforts in order to make futuristic concepts of AI a part of our everyday life. And the IOTA Foundation has created a platform which allows changing the way datasets are seen today. The Data Marketplace is like a data lake that can be used for fair buy-sell operations.
Tangle has already gained the accolades from top industry experts. Omkar Naik, Microsoft blockchain specialist, identified the gains of the Distributed Ledger architecture saying:
“This next generation technology will accelerate the connected, intelligent world and go beyond blockchain that will foster innovation real world solutions, applications and pilots for our customers”.
IOTA’s answer to some of the problems with blockchain is Tangle. The main innovation behind Tangle, a revolutionary new block-less distributed ledger which is scalable, lightweight and for the first time ever makes it possible to transfer value without any fees. IOTA has resolved the three major issues of blockchain, fees, scaling limitations and centralization, and built up real-world partnerships and projects with world-leading companies since 2015.
IOTA’s Data Marketplace is just starting out, but it certainly explains the meteoric rise in price. How high will IOTA’s price reach in the days and weeks to come, remains to be seen. But usually anything that rises quickly, eventually will correct.
Decrypted: CoinBase, the most popular crypto exchange, lets you buy and sell into cryptocurrencies (Bitcoin, Litecoin, Ethereum etc). Coinbase is the largest cryptocurrency exchange in the world. Its has over 13.3 million users and 200 staff. In comparison, regular banks like Wells Fargo has 70 million users and 270k staff, and Bank of Amercica 58 million users and 208k staff.
The article we’re referencing mentions “the Coinbase banking system”. Is Coinbase a banking system and what is the future of banking in a cryptocurrency dominated world?
Our take: In a speech by IMF head Christine Lagarde, at a Bank of England conference in September 2017, she said some things that likely sent a lot chills down a few spines in the audience. She explained that cryptocurrency is not a passing fad but a genuine innovation in money. The only remaining barriers to widespread adoption are technical, fixable and likely to be overcome as the sector develops. This, she argued, has profound implications for the future of financial intermediation and central banks:
“In the future, we might keep minimal balances for payment services on electronic wallets. The remaining balances may be kept in mutual funds, or invested in peer-to-peer lending platforms, with an edge in big data and artificial intelligence for automatic credit scoring.”
This puts a big question mark on the banking model as we know it today, with fewer bank deposits and money flowing into the economy through new channels.
Could services like Coinbase, Xapo, Klarna, TenX be the banks of the future?
A few weeks back, Coinbase announced instant purchases and remittance on transactions. Users can buy Bitcoin and withdraw funds from their accounts, just like they would with a bank. They introduced phone support for customers. They added vaults in September for Ethereum and Litecoin. You can spend your crypto using debit card, just like you would with a regular bank. Working with Shift, Coinbase users, can use their Bitcoin anywhere VISA is accepted. Coinbase is FDIC insured up to $250,000, just like any other financial institution.
Does start to sound like a bank to you? It does to me.
The existing banking system, is based on two very important conditions. First, the government must have the monopoly on money. The government prints money, controls its supply, imposes legal tender and regulates against the enforcement of contracts denominated in unofficial currency. Second, most of this money has to be held in some way in the banking system. If these conditions are not met, the central banking system has a serious problem, pursuing any form of monetary planning at all.
Does it start to make more sense, why Bitcoin is a red flag for regular banks. Why Jamie Dimon and banks like JPMorgan, love blockchain and hate Bitcoin.
Bitcoin turns the existing banking system upside down.
Services like Coinbase are adding hundreds of thousands of users every week. All they would need to do, is to add some banking services like checking and credit and instantly, millions of customers to their cryptobanking services.
The existing banking value chain is challenged and monopolies are being shattered. As these new services become more consumer-oriented and provide a smooth customer experience that helps people streamline their financial lives, they pose a real threat. This is a huge opportunity, thats well on its way!
News Item 3: Lightning Protocol 1.0: Compatibility Achieved
Decrypted: Bitcoin’s long wait for the Lightning Network is almost over. Lightning developers have released the first version of Lightning Protocol and now are working further for mainnet beta implementation. This is a major breakthrough in solving Bitcoin’s scalability issues.
Lightning Network is basically a second level network built on the top of the Blockchain network, which basically acts as an off-chain payment layer. Having released the first version, the project’s team is looking for peer feedback and reviews for final specifications.
Our take: The Lightning Network is the next step in the scaling roadmap and is an incredible piece of technology. These successful tests have shown that the project has moved closer to the public launch but still, a lot of work needs to be done.
The official Medium post by Lightning developers suggests that the three teams are now actively working on their individual implementations strongly focusing on two main features, stability and security, while upgrading the network.
The Lightning Network developers announced the implementation of the first in the world Lightning payments, on the Bitcoin mainnet stating that those tests are the first Lightning payments using real Bitcoin. Lightning enables users to send instant, small value payments.
ACINQ, Blockstream, and Lightning Labs are the teams currently working on building a working network, and these tests show that these systems are closing in on mainstream adoption. The teams, along with other members in the Bitcoin community, have also developed a set of standards to follow for any team looking to build their own implementation. The standards ensure that no matter the implementation used, users will all connect to the same network.
Although still in testing phase, the Lightning Network can now be used for atomic swaps, to send transactions across different blockchains. The Lightning Labs development team successfully swapped testnet Bitcoin for testnet Litecoin through a lightning channel. Ownership of the coins changed hands, while no transaction was recorded on either blockchain.
When the Lightning Network is activated, it will drastically lower fees (including zero-fee transactions), allow instant payments and near-infinite cap on transactions (Bitcoin can grow forever).
This is exciting news, because scalability is one of the key requirements for Bitcoin’s blockchain network. This will be revolutionary for all cryptocurrencies, not just Bitcoin. With the Lightning Network Protocol released, everything will be in place for BTC’s unstoppable growth.
With Bitcoin and other cryptocurrencies skyrocketing, there’s no doubt that the US. President and the FED are keeping a close eye on everything.
Gary Cohn, a finance advisor to the White House, in a recent interview said about Bitcoin said: “Right now we don’t think it’s a serious risk, but right now we’re watching it”.
And he’s not the only one. Several officials from various US. government agencies, such as the IRS, the Federal Reserve, and President Trump’s press secretary, all have said they are monitoring cryptocurrencies and Bitcoin’s popularity.
What do you think the US government will do about cryptocurrecnies? What do you think Trump should do? Well, your guess is as good as mine.
The reality is that right now the crypto market is $417 billion, with Bitcoin leading the pack at $262 billion. The total cryptocurrency market is still a drop in the bucket, when you compare to the value of all forms of money in the world, which is around $100 trillion.
For now, it looks like the U.S. government is adopting a wait and see policy.
Its normal for the US to be confident, because the USD has survived for decades as a world currency, even though the Japanese Yen became increasingly popular during the 1980s. Both Chinese Renminbi and Euro are challenging the USD, however, neither can compete strongly with USD.
In the meantime, innovation has been moving out of the US., to places that have been more progressive in their positions about cryptocurrencies, setting up crypto regulations. Switzerland and Singapore are home to many of the startups in this space. Ethereum is headquartered in Switzerland. We are witnessing to greatest wealth transfer in the history of mankind.
So how do you make sure that an asset like Ethereum with $40 billion market cap is not created in another part of the world? How do you ensure that ERC20 tokens are issued by US. based companies?
You certainly don’t sit on out hands. You create a legal framework, so everyone knows the rules of the game.
While the US. is thinking about it, other countries are getting ready. Personally, I don’t think the US will take any drastic measures, and ban Bitcoin or anything like that. The country actually that embraces this new wave has a lot to gain, not just financially.
Ilias Louis Hatzis is a Blockchain entrepreneur who writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.
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