All posts in “Bitcoin”

How should cryptocurrency be regulated?

Image: Lili Sams/Mashable

Does Facebook know something about blockchain that we don’t?

Probably. If there’s one thing we can all agree on about blockchain tech and cryptocurrency, it’s that most people don’t understand them. Facebook, which recently re-organized itself to make blockchain one of its major focuses, clearly has something up its sleeve with regard to crypto. But even if Facebook revealed what it is, users would likely react with a head scratch.

The financial world is already a mystery to many. Add to that a layer of novel technology involving a digital “immutable ledger” that runs on a peer-to-peer network, decoupling the currency from any central authority, and even an interested person will start to resemble the Confused Lady meme.

To those folks, this week must have been especially troubling. It was Blockchain Week in New York City, headlined by CoinDesk’s Consensus Conference. Besides the Lamborghinis on display and the bizarre crypto-inspired stunts, there was clear progress in bridging the world of cryptocurrency with that of real-world finance, including a new suite of investor tools and a new “stablecoin” for jittery crypto investors. HTC even debuted a blockchain-based phone.

But does any of that matter in light of crypto’s Wild West reputation, with shady startups and scams dominating most of the headlines? How should the field be regulated? And what is Facebook’s crypto team up to anyway?

On this week’s MashTalk podcast, Mashable Senior Editor Stan Schroeder and Tech Correspondent Jack Morse give a status report on the state of cryptocurrency and answer some of the fundamental questions around the space around regulation, energy consumption around “mining,” and whether or not all these tokens will be worthless in the end.

You can subscribe to MashTalk on iTunes or Google Play, and we’d appreciate it if you could leave a review. Feel free to hit us with questions and comments by tweeting to @mashtalk or attaching the #MashTalk hashtag. We welcome all feedback.

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The SEC creates an educational ‘token’ to stop scammers

“Travel is expensive, but we are at the cusp of a revolution that will democratize travel and leisure for everyone,” reads the breathless whitepaper for HoweyCoins. “The Internet was the first part of the revolution. The other part is blockchain technology and cryptocurrencies.”

“I’m all about HoweyCoins – this thing is going to pop at the top!” writes @boxingchamp1934, an official celebrity backer of the token. The website is full of beautiful beaches, features a handsome team of international men and women and the technology is nowhere to be seen, buried under a sea of excitement. The whitepaper is complete and well-written, focusing on the upside that is to come. Riches await if you invest in HoweyCoin, the latest ICO opportunity from trusted folks.

Or do they?

They don’t. All that breathless optimism is a site created by US Securities Exchange Commission to warn investors of scams and issues associated with token sales. The site features all the trademarks of a scammy security token, including tiered pre-sale pricing and an urgent countdown clock.

The site features a number of red flags that the SEC encourages users to watch out for, including, most importantly, claims that tokens can only go up in value. They write:

Every investment carries some degree of risk, which is reflected in the rate of return you can expect to receive. High returns entail high risks, possibly including a total loss on the investments. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can’t miss.”

The SEC also notes that “it is never a good idea to make an investment decision just because someone famous says a product or service is a good investment,” and that it is never a good idea to invest with a credit card.

They also warn against pump and dump language found on many ICO pages. “Our past two pumps have doubled value for the period immediately after the pump for returns of over 225%,” wrote the HoweyCoins “creators,” a giant no-no in the world of investing.

You can read the rest of the red flags here.

While the site is fairly comical, it is sufficiently complete and would fool the casual observer. The SEC also posted a real-looking whitepaper that makes it clear that anyone can string together a few buzzwords and write a passable investment prospectus. That this is now a service available to anyone — for a price — makes things even scarier.

The site is part of the SEC’s outreach efforts to help investors understand ICOs.

“Strong investor protection is part of what makes American markets so strong…and striking the balance, [between innovation and investor protection] is very important,” said Chief of the SEC Cyber Unit Robert Cohen at Consensus this week. During the same panel the SEC claimed its doors were always open for questions.

Ultimately there is little separating the scams from the real token sales. This is a problem. The SEC is framing this problem in their own way based on decades of dealing with pink sheet pump and dumps and bogus get-rich-quick schemes. While HoweyCoins may not be real, there are plenty of scammers out there, and at least something like this bogus website makes it easier to spot the warning signs.

This ‘stablecoin’ gives crypto investors a new way to avoid the tax man

TrueUSD, a cryptocurrency whose value is pegged to that of the dollar, has signed a deal with Binance, one of the world’s largest cryptocurrency exchanges in terms of volume. 

Starting May 18, TrueUSD (ticker: TUSD) will be listed on Binance, allowing traders to exchange it for Ethereum, Bitcoin, or Binance Coin. 

Launched in March by San Francisco-based startup TrustToken, TrueUSD is a so-called stablecoin — a cryptocurrency whose value is pegged to the value of a traditional asset, in this case the U.S. dollar. TrustToken claims that TrueUSD is fully collateralized with fiat money, held in escrow accounts accessible by trusted third-party fiduciary partners. The company says it’ll publish monthly reports on the state of its bank account holdings, and will subject them to ongoing audits. 

“Having U.S. dollars as collateralization held in escrow in addition to our regular accounting reports provides traders with reassurance that they can trust in TrueUSD,” Rafael Cosman, co-founder and CTO of TrustToken, said in a statement.

In other words, every single TUSD should always be redeemable for U.S. dollars, at a 1:1 ratio, with a pretty good degree of certainty that the issuer actually has the dollars to back them up. 

While the idea of a cryptocurrency based on an actually currency sounds ironic — the whole point of crypto was to develop an alternative to real-world, centralized financial systems — the development is important for the space. Stablecoins provide traders and investors with a certain degree of stability in the volatile world of cryptocurrencies, without the need to sell cryptocoins for straight-up cash, an action that often has tax consequences. 

“Having U.S. dollars as collateralization held in escrow in addition to our regular accounting reports provides traders with reassurance that they can trust in TrueUSD.” 

So far, the dominant stablecoin has been Tether (ticker: USDT), which is connected to cryptocurrency exchange Bitfinex. If you ask Tether, the company, USDT is fully backed by fiat currency assets in the company’s reserve account. But there’s a problem with that claim: There are $2.2 billion USDTs in circulation (according to CoinMarketCap), and the company has never been publicly audited. This, in turn, has led to speculation that USDT is not adequately collateralized, and that Tether is printing new USDTs out of nothing.

The notion that Tether might collapse and cause a big disruption in the cryptocurrency market is known in the space as “Tether FUD” (with FUD standing for “Fear, Uncertainty, Doubt).

Now, however, traders on Binance — which is currently the second-largest cryptocurrency exchange (behind OKEx), with $1.8 billion in trading volume in the last 24 hours — have a choice to park their assets into TUSD instead of USDT. This should ease the fear of a possible Tether collapse as well as give traders the option to hedge their bets and diversify across two USD-pegged coins. 

TrueUSD is already available on cryptocurrency exchange Bittrex, where it launched in March. But Binance is approximately seven times bigger than Bittrex in terms of trading volume, and it’s the second largest Tether market, making this new partnership far more important. 

There are currently roughly 12 million of TUSDs circulating, representing an equal amount of collateralized dollars. The demand on Binance will likely be far bigger than that, but Cosman says this won’t be a problem. 

“Right now, there are numerous external parties depositing additional funds into the TrueUSD escrow account to purchase tokens and trade them on the exchanges. The market cap of TrueUSD can grow by millions or tens of millions per day; as soon as the US dollars arrive in the escrow account to collateralize new tokens, we mint those tokens and issue them,” he told Mashable

TrueUSD and Tether aren’t the only stablecoins around, but they’re the biggest ones that took the simple but capital-intensive route of backing the entire token supply with actual fiat reserves. Alternatives such as MakerDAO’s Dai or Havven’s nomin rely on reserves in cryptocurrencies such as ether as well as complex algorithms that keep the price in place. These alternatives are far more decentralized than a solution such as TrueUSD, but they aren’t available on the largest exchanges yet.

There are, however, some powerful competitors on the horizon; just days ago, Circle raised $110 million to launch a stablecoin pegged to the value of U.S. dollar. 

Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC, ETH, MKR, DAI, HAV. The author of this text does not own, or has recently owned, TUSD or USDT. 

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Let the blockchain get you buck wild drunk with this cryptobeer vending machine

Freedom from talking to the guy at the corner store.
Freedom from talking to the guy at the corner store.

Image: Jack Morse/mashable

The blockchain is cool and all, but, and let’s be honest, it’s not like it’d ever get you totally buck wild drunk. Before today, that is. 

Sure, the tech is poised to reshape the fundamental power structures of society and blah blah blah we get it; however, up until now, the supposed benefits have been more promised than delivered. Well, ladies and gentlemen, I am here to tell you those benefits have finally been realized — and they taste like Budweiser. 

The first beautiful sip of our glorious future was poured this week at the Consensus blockchain conference in NYC, where aspiring influencers and likely scammers gathered together in a crowded hotel to herald the oncoming decentralized future. Oh, and to get “cryptobeer” out of a vending machine. 

Download a buzz.

Download a buzz.

Image: Jack Morse/mashable

“[We’re] excited to invite you to try out the world’s first ever blockchain-enabled beer vending machine,” read an email from Civic, the company behind the contraption seemingly designed to ensure that you never have to talk to another human again. 

The idea is straightforward on the face of it, if not on its back. To kick off your boozy adventure into anarcho-capitalism, first download the Civic app, then verify your age and identity, and then use the app at the cryptobeer vending machine to get your Bud. Simple! And if you happen to be at the Consensus conference, then your first beer is free. 

I mean, just think of the possibilities: No pesky bartender asking for ID, and no corner store guy trying to make the thinnest of human connections with a clearly lost soul.

That is, assuming it all works. We hung around the machine for around ten minutes Tuesday and saw exactly one successful attempt (granted, it was before noon and the crowd didn’t appear in a drinking mood yet). 

We did encounter, however, some frustration. 

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At least one person struggled to get his beer, even after confirming that he had uploaded his driver’s license to the system. Another scoffed at the app’s size (241.6MB), while others had complaints of a different nature. 

But still, this is a day for celebration. The blockchain has been shown to actually be good for something — even if that thing is more complicated and time consuming than just handing over an ID and some cash. 

So let’s welcome our boozy future, one blockchain-enabled beer at a time. 

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BRD crowdraises $32 million to build financial services into a mobile crypto wallet

Crypto wallets can’t remain crypto wallets for long. There is so much competition and so many scammers that value-added features like financial services are de rigueur. BRD knows this quite well and is putting $32 million behind the platform to grow out the features and cryptocurrencies supported on their popular app.

Founded by Aaron Voisine, Adam Traidman, and Aaron Lasher, the company started out as a side product called Bread Wallet. BRD, say the founders, was the first iOS bitcoin wallet in the App Store.

The team has 1.1 million users in 170 countries and 76% of those are iOS. They’ve received 71% of their customers in the past year, a fact that attests to the recent popularity of cryptocurrencies. They have $6 billion of crypto assets under protection.

The team has also partnered with Changelly to help transfer more tokens than Bitcoin and Ethereum – including their own BRD token.

How did they raise the money? By token sale, of course. They ran a $12 million presale and a $20 million crowd sale, resulting in a combine Seed and A round that would make most fintech orgs blush.

The team is most proud of their focus on decentralization.

“We’ve made our name around security, first and foremost. That’s what most the miners and dev crowd know us for, as the most secure way to hold and protect all their cryptoassets,” said Voisine. “The assets themselves are not stored in any centralized system within BRD. A transaction on BRD connects directly to the blockchain and are synced in real-time. There is literally nothing to steal from BRD, since we’re not holding a single asset ourselves… even though we have over $6B USD under protection.”

Further, they are offering BRD Rewards that will let BRD users get discounts and other benefits. This is an effort to “bring a much better balance between fees and utilization.”

“We want to be the service for first-time buyers of crypto. We want to be the most popular onramp for consumers into the crypto economy,” he said.

Lasher feels that his mission is far more interesting than just making an iOS wallet. He sees this as a philosophical change that will bring new understanding of the importance of crypto.

“If sending money globally as easily as an email doesn’t impress you, how about the ability to store your life savings in your head, then walking your family across a war-torn border to safety?” he said.