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.
Decrypted: IBM has developed a method for using a blockchain on a network of IoT devices to execute smart contracts. IBM’s solution adjusts the proof-of-work method, by restricting the nonce (an arbitrary number that can only be used once) to a predetermined range of values.
IBM’s patent application says, “the complexity of constructing a PoW (proof of work) can be adjusted dynamically, such that there is no incentive for any IoT device to use computing power beyond a determined threshold to increase its chances of a successful completion of a PoW.“
IoT devices have low computing power and limited amount of energy that they can consume. The proposed solution takes into consideration these limitations and reduces the complexity for IoT devices to compute proof-of-work for smart contracts, and giving all network devices equal chances to to successfully complete the PoW.
IBM is only the latest of several important corporations who have recently filed Blockchain and cryptocurrency related patents. This year alone, several industry giants such as Amazon, Walmart and Paypal have all applied for Blockchain patents.
Our take: IBM is one of the first big organizations to start to develop blockchain technology. They are building up a collection of patents in the industry, positioning themselves to dominate the industry.
IBM’s has focused on Internet of Things applications of blockchain tech. This is a big market, with endless use-cases for IOT blockchains. IBM’s breakthroughs are bringing us one step closer to IOT-enabled blockchains for energy, supply chain, logistics networks, and others.
In January the IBM announced a joint venture with Maersk to optimize the shipping industry with the Blockchain technology. At the end of March, they announced the development of the world’s smallest computer for Blockchain technology.
IBM has been meeting with executives from commodities trading platforms, large corporations, and perhaps most importantly, central banks, to explore how cryptocurrencies can help save them money and generate revenue.
This week, Reuters published results of a survey that indicates that one in every five financial institutions are ready to get involved directly with cryptocurrencies this year. It seems that massive cryptocurrency adoption is around the corner.
Batavia, a blokchain-based trade finance platform developed by a consortium of international banks and IBM, has passed its first live pilot transactions with corporate clients. Jointly developed by Bank of Montreal (BMO), CaixaBank, Commerzbank, Erste Group, IBM and UBS, the initial transactions on Batavia included the trading of cars from Germany to Spain and textiles for furniture production from Austria to Spain.
IBM has unveiled a permissioned Blockchain to let start-ups and developers build their own Blockchain projects. Known as the IBM Blockchain starter plan, the blockchain is in beta and is intended for pilot projects and projects still in the early stages of development.
In 2017, IBM ranked number one among blockchain technology providers based on an enterprise survey by Juniper.
Established companies around the world are pursuing blockchain technology and IBM has been working with multiple parties across industries to push the adoption of blockchain. IBM, as a leader in the legacy world with insights into business across multiple verticals, is well positioned to bring blockchain into the modern enterprise stack. Advanced technologies like the blockchain will define the future of technology companies like as IBM. Lets us see how IBM takes it forward.
Decrypted: EIP0 took place in Toronto this week. A private meeting with some top Ethereum developers to discuss governance and a number of other challenges.
The primary objective of two-day summit was development of decisions for a management by the ecosystem of Ethereum conditioned by expansion of network and appearance of great number of opinions concerning further technical development.
Ethereum’s founder, Vitalik Buterin said that meeting was organized without his permission or even involvement. Vitalik Buterin tweeted to respond to allegations that a secret meeting occurred in Toronto this week which looked to establish a “plutocratic government” over the Ethereum blockchain.
Fun fact for @_Kevin_Pham: I was not at this meeting, it was organized without my permission or even involvement, and I honestly don't really know much about what happened there. https://t.co/T6Ex1zJPXZ
— vitalik.eth (@VitalikButerin) May 8, 2018
Our take: EIP0 was an informal event, where Ethereum researchers and builders met up to discuss the philosophical side of Ethereum governance. Basically, how decisions should be made on the Ethereum blockchain. Parts of the event were offline, while others included input from live stream viewers.
The key takeaways were to find ways to document and improve Ethereum’s governance which include actions like working on a statement of shared values of Ethereum, building tools to collect key signals and metrics from the community, hosting a monthly governance call and organizing a second EIP0 Summit.
Now, the SEC regulators in the U.S. are set to determine the legitimacy of Ethereum project. According to the Wall Street Journal, this is in an attempt to understand whether ETH, and other cryptocurrencies in the future, should come under the same regulatory guidelines that securities do. Up to now we seen statements that the SEC basically believes every ICO is a security.
Can the mother of ICOs be a security?
The implications of Ethereum being declared a security by the SEC could have a significant impact for Ethereum and the larger market, to say the least. If Ethereum is a security, not only does it mean that it should have registered at the time of its ICO, but it would likely mean that many other cryptos will also be labeled securities, practically affecting every ICO.
The majority of ICOs and smart contract platforms depend on ERC20 tokenization. Startups have raised millions of dollars on Ethereum, circumventing the traditional routes for seed funding from accredited investors. The ICO model has grown because of the capabilities of Ethereum’s blockchain and the ease with which Ethereum permits the creation of new coins.
The stakes are high. Data collected by CoinDesk has revealed that ICOs collectively raised more money in the first three months of 2018 than they did throughout all of 2017. So far, ICOs have pulled in more than $6.3 billion, which is equivalent to 118% of total ICO funds raised last year.
If ETH is classified as a security and therefore subject to regulatory jurisdiction as a public company, this could hit hard to the whole crypto world. It would change significantly the future viability of ICOs in the US. It would affect the legality of previous ICOs as well as the ongoing legal status of cryptos.
Developers, investors, and exchanges would be affected. If ETH was declared a security in the US, then the exchanges would come under the radar first. Exchanges would need to be registered with the SEC in order to trade securities and since none of them are, this would cause and end to ETH trading in the US. We would see drastic financial effects, investor panic and huge price drops in the market.
For now ETH hit its highest price point since March. Today, its trading around $726, after going up more than 8% in the last day.
If ETH were to be classified as security in the United States, it would mean new levels of regulation and compliance requirements for ICOs, in order to create and sell new tokens legally in the US. The results could be expansive, with ripple effects to other countries and regions around the world, affecting the entire cryptocurrency landscape and nearly every coin currently in existence. Already, regulators in the European Union are also questioning the securitization of ICOs, and China continues with its ban of ICOs.
News Item 3: Huawei to Offer BTC.com Bitcoin Wallet in App Store
Decrypted: BTC.com, which is owned by China-based cryptocurrency miner manufacturer Bitmain, has made history by becoming the first Bitcoin wallet to debut on Huawei’s recently-launched app store. Huawei is the world’s second largest phone manufacturer according to Counterpoint Research, surpassing Apple.
Many Chinese have struggled in recent months to gain access to Bitcoin wallets, since the government prevents them from accessing these apps through Google’s Play Store or iTunes, making it difficult for many Chinese residents to access mobile cryptocurrency wallets.
The launch of BTC.com on Huawei paves the way for many Chinese smartphone owners to gain first-time access to a mobile Bitcoin wallet.
Our take: Consumers that purchase a new Huawei or Honor smartphone will be able to download the Bitcoin wallet from the AppGallery on their phones. Huawei’s AppGallery will be pre-installed on all new Huawei and Honor phones.
China, which has seen a spate of draconian anti-crypto measures, has not yet outlawed digital currencies. The government tried to dampen enthusiasm last year, when it banned Initial Coin Offerings and implemented regulations designed to drive cryptocurrency exchanges from the country. Earlier this year, the Chinese government even asked local authorities to shut down the country’s Bitcoin mining, directing them to implement an “orderly exit” from that industry.
In new research about the current state of global adoption of cryptocurrencies, the survey revealed that although on average 75% of people globally are aware of cryptocurrencies, in terms of actually understanding what crypto is, only 50 percent of respondents answered positively. China has the lowest cryptocurrency ownership level at 3%, while other countries surveyed hover around 5–6%.
China has started to set up a national standard for blockchain in order to raise the building of a blockchain standard system from the top-level, hoping to complete the process by the end of 2019, according to Chinese state media reports. Chinese authorities are focusing on implementing top-level, or top-down standards to compete favorably in the world market.
China’s investment in decentralized ledger technology has allowed it to register more than 200 patents in the international blockchain. Out of the top 100 companies with the highest number of patents published for blockchain technology, 49 were Chinese and 23 from the United States, according to the Global Blockchain Enterprise Patent Rankings 2017, published by IPRdaily
At a recent seminar held in Beijing, the China Center for Information Industry Development (CCID) announced its inaugural monthly Global Public Chain Assessment Index, a ranking of cryptocurrencies and other blockchain projects that the Chinese government considers to possess technological merit. The CCID is part of the Ministry of Industry and Information Technology, a state agency of the People’s Republic of China.
To understand the Chinese government’s motives, it is important to look at the threat cryptocurrencies pose to their monetary policy. The government is trying to protect their own interests through central control and is doing everything in its power to protect the value of the Renminbi. The Chinese government’s belief in decentralized ledger technology is very strong, which is why it has invested several billion dollars in development, but it is unknown how soon it will pay off or whether it will ease its stance on crypto trading.
Ilias Louis Hatzis is a Blockchain entrepreneur who writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.
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