A Monumental Fight Over Facebook’s Cryptocurrency Is Coming

Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.


Given how slowly Washington lawmakers have taken to devise a coherent, informed view of cryptocurrency, the Chair of the House Financial Services Committee’s rapid leap to action last week over Facebook’s ambitious Libra project was remarkably fast.

But let’s reflect not on the details of Rep. Maxine Waters’ (D-Calif.) urgent requests that  Facebook to cease work on Libra until after hearings are held or on how European lawmakers made similar appeals. The important takeaway from these legislators’ actions is that they are able to make such demands at all. since this is not the case with truly decentralized projects.

Unlike with bitcoin, representative in Congress can directly identify and talk to the people in charge of the Libra project. They can subpoena them and, thus, pressure them. They might start with David Marcus, head of Facebook subsidiary Calibra, but, ultimately, it’s Facebook

CEO Mark Zuckerberg who’ll give lawmakers the greatest leverage.

In this case, the buck stops with Zuck.

Now, imagine a Congressional leader calling for a halt in bitcoin development. Who exactly are they going to pressure to end an open-source project involving millions of globally spread mostly unidentifiable developers, miners and users?

This distinction – between one project with a single, identifiable authority figure and another whose governance is distributed and leaderless with a founder who has never revealed their identity – goes to the heart of a crypto community critique that the social media giant’s initiative is not censorship resistant.

When there’s someone in charge, an interested party – a policymaker, a banker, a regulator, a shareholder – can lean on them to make changes. And when the blockchain consensus model is based on a club-like permissioned membership, a coordinated effort to alter, or censor, the ledger is always possible. And if the ledger or its software can be altered by this pressure, the Libra platform can’t unconditionally promise to support open, unfettered access for users and a permissionless innovation environment for developers.

Let’s be clear: Libra’s designers have thought deeply about how to protect their project from Facebook itself, both in a real sense and that of public perception. In its commitment to decentralization, the team has put the code under an open-source license, handed the network’s governance authority to a separate Swiss-based foundation, brought in 27 external partners to work alongside Facebook as independent, permissioned nodes in the network, and verbally committed to transition to a permissionless model over time. There is a structure and roadmap in place for Libra to grow and survive regardless of its genesis as a Facebook project.

All that’s fine. But we’re still at the genesis phase, one that is and will for some time hinge on the centrality of a particularly powerful company.

The culture problem

At the risk of stating the obvious, Marcus and his team are paid by Facebook. Follow the money, as they say. But also, follow the code.

The Libra protocol’s all-important source code is now open-sourced, but it was conceived and gestated inside Facebook. So, whether the project managers and programmers resist or not, the culture of that organization will inherently feed into Libra’s design priorities.

The elephant in the room is that a drumbeat of recent news has revealed Facebook’s corporate culture to be profoundly toxic. The company’s model of surveillance capitalism has turned users into pawns in a global game of data manipulation, cultivated echo chambers of narrow-mindedness, done irreparable harm to the worthy cause of journalism, and deeply undermined our democracy.

This legacy is the unavoidable reason why people, including lawmakers, are alarmed that Facebook might be on the verge of creating a new international model for money and payments. Rightly or wrongly, there’s a fox-in-the-henhouse optic here that’s unhelpful.

Wharton Professor Kevin Werbach argued in the New York Times this week that Facebook’s Libra is a bold effort to win back public trust by leveraging the accountability ingrained in blockchain technology. But at the project’s genesis phase, with no choice but to trust Facebook’s early input, that legacy of prior mistrust could easily become a huge barrier to its progress.

We should support Libra, not Facebook

Notwithstanding all the above, I actually want Libra to succeed. (Note: I also want Facebook to die. That’s not a contradiction; those two outcomes can and should be separate. In fact, it’s the nub of the issue.)  

The Libra team has set its sights on achieving financial inclusion for the 2 billion adults worldwide who don’t have bank accounts. It’s a noble goal, and they are going about in an intelligent way – from a truly international, cross-border, cross-currency perspective. Bring all those people into the international economy and the payoffs could be huge, for them and for the rest of us.

And let’s face it, bitcoin has dismally failed to live up to its advocates’ promises of a financial inclusion solution. Bitcoin’s and other cryptocurrencies’ impact on the $800 billion global remittances market is puny.

Sure, uptake could rise if the off-chain Lightning Network lives up to its promise to enable larger-scale transaction-processing, if stablecoin projects resolve bitcoin’s volatility problem, and if new encryption solutions can improve both security and user experience with crypto wallets. But these solutions will take time. We need to act now.

In the end, it’s not at all clear that global person-to-person payments are a viable use case for bitcoin, perhaps because too many HODLing speculators crowd all the spenders out. And, of course, no other payments-focused cryptocurrency has put a big enough dent in the remittance market.

So, perhaps the recipe for a global broadening in payments lies with a cross-border, low-volatility international stablecoin backed by a basket of leading fiat currencies and developed with the formidable programming and marketing resources of 28 tech and financial giants. Also, when you combine Facebook’s, Instagram’s and WhatsApp’s user count, the number of potential wallets runs to 4 billion. Global network effects. Instantly.

All other things being equal – that is, if we ignore, for now, the genesis problem of Libra inheriting Facebook’s toxic roots – one could also argue that a permissioned, corporate network is the best approach for the Libra blockchain in place of a fully open, permissionless chain such as bitcoin’s or ethereum’s. The heavy lifting needed for early global traction  – the software development, the marketing effort and the public policy outreach – requires that significant corporate resources be deployed in a targeted, coordinated manner that’s hard for open-source blockchain communities to achieve. There are efficiency advantages to be had from centralization.

Over time, as the project grows, Libra hopes to expand the consortium. That could undermine the coordination efficiency, but in a classic centralization-versus-decentralization tradeoff, the addition of new members – more NGOs, some banks, a workers union perhaps, and some public pension funds – will achieve greater diversity and lower collusion capacity. It’s far from perfect but the timed transition brings things closer to censorship resistance at a time in the future when it will matter — if it they get there.

What this means for bitcoin and crypto

As an aside, I also believe Libra’s success would be a positive for bitcoin – and the past week’s price action suggests that the market sees the same.

Here’s why: Currently the one value proposition that holds well for bitcoin is that it will be a more liquid, digitally up-to-date risk-hedging vehicle than gold when people need to preserve value in something immune from political and institutional risk. That argument could be enhanced if Libra succeeds in converting billions of people to digital payment wallets, because it will more broadly establish the power of blockchain-based digital money as the way of the future. At the same time, because of its genesis as a Facebook-initiated, permissioned system, Libra will not shake the perception of being prone to political – i.e. censorship – risks. For many, then, Bitcoin, aka digital gold, will become the obvious alternative.

The currency-basket-backed Libra token is, however, a real competitor to other reserve-backed crypto-tokens, such as USDC, issued by the CENTER coalition initially formed by Circle and Coinbase, GUSD, Gemini’s stablecoin, and PAX, from Paxos.

But we can imagine events working in the latter’s favor. Developing countries like India, for example, may become hostile to a new currency entering circulation that sucks demand away from their local currencies, but they would be more accepting of a digital dollar, given that the greenback already circulates in their economies. Users, also, might be happier holding tokens pegged to single sovereign currencies rather than in a hard-to-measure basket. And if concerns about centralized control undermines trust in Libra or limits innovation, the fact that these tokens are built on truly permissionless blockchains may make them more appealing (even if you still have to trust the reserve-holder to guarantee to the price stability.)

Whatever happens, the world of money flows is mind-blowingly huge. There are $6 trillion a day in foreign exchange transactions alone. That allows plenty of room for different models, different tastes, and different trust systems for coordinating digital value exchange.

Getting our priorities straight

The bigger risk is not that Libra succeeds and enriches Mark Zuckerberg even more but that neither Libra nor one of its crypto competitors ever succeeds in breaking down the barriers to economic participation. Financial exclusion breeds poverty, which in turn breeds terrorism and war.

And if we assume that the technology, if it isn’t yet ready, will ultimately get there, then the biggest threat to that is from a policy mistake.

The subtext of both Waters’ statements and those of European lawmakers was that this private exchange system can’t be allowed to replace national currencies. Thats’ not what Libra intends, but the perception that it is undermining nation states’ sovereignty over money could stoke fears and lead to a ban on Libra. And if that happens, it sets an ugly precedent for or all other competing ideas, whether it’s USDC, GUSD, PAX or DAI or something else.

The projects capacity to foster financial inclusion could also be hurt by the Financial Action Task Force’s, or FATF,  embrace of a new rule for exchanging cryptocurrency.  If ratified by enough countries that could curtail the free flow of cryptocurrency among addresses that haven’t been through a bank-like “know your customer” process. In other words, it could pose a real barrier to Libra’s and everyone else’s dream of financial inclusion for the “unbanked.”

The bottom line: the Libra team has its work cut out, and we all have a lot riding on it. The project’s representatives must face the reality that, for now at least, the buck still stops with Zuck, and that regulators will use that against them.

We should all wish them success in trying to convince policymakers that an open-system to global financial transactions is important. (It’s encouraging that the Bank of England is taking an open-minded view, proposing that tech companies like Libra be allowed to access funds directly from central banks.)

But, by the same token, we must be vigilant against corporate power that could easily convert this important project into something more sinister. Facebook’s own history is a reminder of the risks we face.

I wish it were a different company running with this ball right now. But since it’s not, the need for all of us to take a direct interest in this project is even greater.

We must demand that our representatives provide clear-headed, informed oversight that holds corporations like this to account and curtails their monopolizing powers. But we should also expect smart, open-minded regulation that encourages companies to compete and innovate in an open system that creates opportunities for everyone on this planet.

Image Credit: David Tran Photo / Shutterstock.com

Bitcoin Tests $11.3K With Fresh 2019 Highs

Bitcoin has broken yet another 2019 record, reaching as high as $11,304, before conceding a short-term period of profit taking.

At 21:00 UTC on June 23, the world’s largest cryptocurrency by market capitalization shot upwards on the daily chart, cementing a new high beyond June 22’s peak of $11,215.

The move to another 2019 high comes after bitcoin’s price dropped to as low as $10,416 on June 23 before another surge of buying pressure pushed prices back above $10,750 within the same day.

From then BTC bolstered 6 percent, rising above $11,000 at around 19:00 UTC on Sunday evening and then reaching over $11,300 two hours later. It’s currently changing hands at $10,768 as per CoinDesk’s price data.

BTC’s 2019 bull run has already started off with a bang in recent weeks, a likely a combination of traders buying into their own fear-of-missing-out (FOMO) as well as institutions chasing the tail end announcement of Facebook’s project Libra.

However, large levels of volume failed to accompany the rally, beginning at 97.6 billion traded over a 24-hour period and continued to decrease to as low as 67.5 billion by days end, meaning that the move was unsupported and a small sell-off from that point out, was definite.

Its “Real 10” volume – a metric that takes into account trading volume from exchanges reporting honest volume figures as identified in a report by Bitwise Asset Management – currently stands at $46.17 billion, a large difference, according to Messari.io.

Meanwhile, the rest of the market remains relatively flat today, with but a few in the top 20 posting gains. Cadano (ADA) and UNUS SED LEO (LEO) are the only two in the green within the top 20 at CoinMarketCap and are both posting 0.4-2.4 percent growth, respectively, over a 24-hour period.

In addition, the total market capitalization rose to a high of $331.8 billion, its highest point since July 31, 2018, while the market capitalization for altcoins is down $3.8 billion over a 24-hour period pointing to a preference in holding BTC above all else amongst the trading elite.

Disclosure: The author holds no cryptocurrency at the time of writing.
Bitcoin bull image via Shutterstock

TrendMicro Detects Crypto-Mining Malware Affecting Android Devices

A new cryptocurrency-mining botnet has been detected exploiting Android Debug Bridge ports, a system designed to resolve app defects installed on a majority of Android phones and tablets.

The botnet malware, as reported by Trend Micro, has been detected in 21 countries and is most prevalent in South Korea.

The attack takes advantage of the way open ADB ports don’t require authentication by default, and once installed is designed to spread to any system that has previously shared an SSH connection. SSH connections connect a wide range of devices – everything from mobile to Internet of Things (IoT) gadgets – meaning a lot of products are susceptible.

“Being a known device means the two systems can communicate with each other without any further authentication after the initial key exchange, each system considers the other as safe,” the researchers say. “The presence of a spreading mechanism may mean that this malware can abuse the widely used process of making SSH connections.”

It begins with an IP address.

45[.]67[.]14[.]179 arrives through the ADB and uses the command shell to update the working directory to “/data/local/tmp,” as .tmp files often have default permission to execute commands.

Once the bot determines its entered a honeypot, it uses the wget command to download the payload of three different miners, and curl if wget is not present in the infected system.

The malware determines which miner is best suited to exploit the victim depending on the system’s manufacturer, architecture, processor type, and hardware.

An additional command, chmod 777 a.sh, is then executed to change the permission settings of the malicious drop. Finally, the bot conceals itself from the host using another command, rm -rf a.sh*, to delete the downloaded file. This also hides the trail of where the bug originated from as it spreads to other victims.

Researchers examined the invading script and determined the three potential miners that can be used in the attack – all delivered by the same URL – are:

http://198[.]98[.]51[.]104:282/x86/bash
http://198[.]98[.]51[.]104:282/arm/bash
http://198[.]98[.]51[.]104:282/aarch64/bash

They also found the script enhances the host’s memory by enabling HugePages, which enables memory pages that are greater than its default size, to optimize mining output.

If miners are already found using the system the botnet attempts to invalidate their URL and kill them by changing the host code.

Pernicious and malicious cryptomining drops are continually evolving new ways to exploit their victims. Last summer, Trend Micro observed another ADB-exploiting that they dubbed the Satoshi Variant.

Outlaw, was spotted in the past weeks spreading another Monero mining variant across China through brute-force attacks against servers. At the time researchers hadn’t determined whether the botnet had begun mining operations, but found an Android APK in the script, indicating Android devices may be targeted.

Image courtesy Quinn Dombrowski, Flickr

Howey Schmowey – The Real Answer is to Update Securities Regulations

David Weisberger is co-founder and CEO of CoinRoutes and a veteran of building trading desks and financial technology businesses. The opinions expressed in this article are his own, and do not reflect CoinDesk’s position.

The following article originally appeared in Institutional Crypto by CoinDesk, a free newsletter for the institutional market, with news and views on crypto infrastructure delivered every Tuesday. Sign up here.


This month there have been two SEC enforcement actions that made headlines in the crypto community. One was the case against messaging platform Kik and their Kin token sale; the other was the action against holding company Longfin. In the first case, while investors lost money, it is unclear that Kik misled them about the potential for the Kin token to be used or about its fundamental value proposition. In the second case, however, the allegations are that Longfin committed clear fraud by misrepresenting their crypto business.

There is no doubt the Longfin case was dealing with a security, since the company went public via the arduous and little-used provision of Reg A+. The problem is that the management allegedly made fraudulent claims about their crypto-oriented business. The SEC charged that investors lost money because they were misinformed about Longfin’s business prospects. The fact that they were a security provided almost no protection whatsoever. (Protection will be limited to potential restitution from enforcement or shareholder lawsuits, which will be small and take place well after the fact.)

In the Kik case, they issued a token that, based on the letter of the law, might well be a security, but they did not follow securities laws when selling the token. Purchasers of the Kin token also lost a lot of money, but most of that loss is related to the collapse of the token market at large, rather than issues with the token itself.

Juxtaposing these two cases makes one thing very clear:

Whether or not an asset is deemed a security or not has little to no relationship to the ability of regulators to protect investors against fraud.

The reality is that raising money based on either outright fabrication or by materially misrepresenting the business can be attacked both by criminal prosecution and civil litigation.  Securities laws provide help in that regard in cases where the representations made by the issuer deviate from what is required, and those representations are material to the investment decision. When required disclosures are not relevant to the investment decision, those rules provide little help. This leads directly to the second point:

If tokens issued by corporate entities are to be deemed securities, required disclosures should be updated.

Current required financial disclosures are wholly inadequate to provide investors context for the value of tokens being used by emerging companies for financing. In this case, for example, it is unclear that Kik’s disclosures of the prospects of their token were problematic, but it is very clear that the required disclosures for securities, had they been followed, would have shed little to no light on the investment prospects for the token. Securities disclosures pertain exclusively to the issuer and their finances rather than clarifying the likelihood that the token being issued would gain acceptance. Unfortunately, Kik’s company finances would have provided limited information to the central question that Kin token holders needed to know: whether or not Kin would become highly used, either in their own network or on others.

Lastly, it should be pointed out that there is an inherent double standard in the US securities laws: If a company is already a security (whether OTC or listed), then non-accredited investors can be duped by inadequate disclosures and use of the same techniques that unscrupulous ICO promoters used. On the other hand, law-abiding founders of new companies are restricted from raising capital via tokens from those same investors.

To illustrate, consider the cases of Long Island Iced Tea (which became Long Island Blockchain) and Riot Blockchain (formerly Bioptix). In both cases, moribund public companies changed their name and announced business “pivots” to blockchain technology. In neither case was the future business direction spelled out in detail, nor were there anything resembling the type of disclosures regulators want to see from new companies. In both cases, the hype (in the short term) attracted large numbers of the investing public, propelling the stocks higher. In both cases, there was nothing resembling the sort of disclosures made by principled founders of blockchain products, yet the losses to investors were very real. The sole difference between these examples and the average ICO from 2017 is that both of those companies were already publicly traded.

Sadly, I don’t expect securities laws to undergo an overhaul in the U.S. anytime soon, so we are likely to see America fall behind the rest of the world in terms of capital markets innovation. If, however, U.S. regulators were to take action, a good start might be to create a subclass of securities for utility tokens issued to fund “for profit” enterprises. If such a designation (informally or formally) were established, the SEC could work with the industry to create appropriate disclosures and rules for those assets. I am sure that groups such as the Wall Street Blockchain Alliance or ADAM would be happy to help, as would firms such as Messari, which is building a private marketplace of project disclosures.

This approach would have another benefit, which would be to help ease the SEC into regulation of the exchanges and dealers that trade these tokens. Principles such as “Best Execution” which are sorely lacking in these markets could then be promoted, with the likely result of increased trust (and therefore volumes) in the crypto markets overall.

SEC building image via Shutterstock

Why Ethereum’s Privacy Matters and What’s Being Built to Support It

Mixers. Computational data layers. Zero-knowledge proofs: these are just a few of the technologies being leveraged to enhance privacy on the ethereum blockchain.

Privacy for a public blockchain network is a bit of an oxymoron, given that, by nature of the technology’s design, data must be shared and widely distributed on the network in order to be considered valid. What’s more, for a high-profile public blockchain network like ethereum, several blockchain analytics websites and data scraping services exist to proliferate this data beyond just the users of the network.

Itamar Lesuisse, the CEO and co-founder of crypto wallet tool Argent, describes the matter of privacy on the ethereum blockchain as an issue for even “the most simplest use case” on the platform.

“If you just look at the most simplest use case, if I say, ‘Hey Christine, can you send me ten dollars [worth of ether]? Here’s my wallet address.’ Now, you know how much money I have.” Lesuisse said during an interview with CoinDesk.

By virtue of sharing one’s public ethereum address, the amount of funds being held within that address is easily uncovered. Of course, a user could hold several cryptocurrency wallets with different amounts of ether held within them. However, disclosing the wallet address of one of them may jeopardize the identity of all wallets owned by a user especially if funds had previously been transferred between wallet addresses.

“I’m talking here about friends who I asked to send me some money. They would instantly know how much I have,” emphasized Lesuisse. “It’s so transparent, which is a great picture of blockchain, but for some users, it might scare them away to use it at scale.”

This is why Lesuisse and others are working towards better tools for making private transactions and even private computations in general on the ethereum blockchain. Ultimately, the aim is to encourage greater adoption of the ethereum blockchain by larger groups of people such as enterprise corporations.

Speaking to enterprise use cases on the ethereum blockchain, EY global innovation leader for blockchain Paul Brody said in a past interview with CoinDesk:

“It’s fundamentally essential if you want corporations and large scale investors. If you want them to use public blockchains, you’ve got to provide them with privacy … We believe that without privacy you won’t have a lot of serious enterprise users.”

Getting serious about privacy

There are a number of privacy projects that have newly launched this year.

The blockchain team at EY released code dubbed ‘Nightfall’ last month on GitHub as an experimental solution to enable anonymous transactions on the ethereum blockchain.

It leverages a well-known technology in the crypto space known as zero knowledge proofs (ZKPs) first conceived in the late 1980s by researchers Shafi Goldwasser, Silvio Micali, and Charles Rackoff in a paper titled “The Knowledge Complexity of Interactive Proof-Systems.” Later in 2016, privacy coin Zcash launched on mainnet and became the first widespread application of ZKPs used to send “shielded transactions” anonymizing users across a public blockchain network.

More recently, after the release of Nightfall in May, the developer team at blockchain startup 0xcert has started to iterate on the code release and add new features for its specific implementation with non-fungible ERC-721 tokens.

“An important thing we added to [Nightfall] is selective verification. I’m not going to expose everything if I don’t want to,” explained 0xcert chief strategy officer Urban Osvald. “Nightfall and all the tooling we provide combined really makes a combination of tools and features widely applicable not just for game items and collectibles…but they pave the pathway for large scale enterprise use case.”

Speaking to the motivations behind the initiative, Osvald remarked:

“The biggest goal for us is widespread adoption of non-fungible tokens and obviously blockchain in general … Adoption is slow and we want to expedite it as fast as possible.”

The here and now

Apart from transactional privacy on the ethereum blockchain, another ethereum-based startup called Enigma is dedicated to creating an off-chain computational environment for any type of data privacy.

“When we talk about computational privacy, it’s going beyond the idea that you can protect the anonymity or the amount of a transaction and you’re actually able to do computations on encrypted data,“ said Tor Bair, head of growth and marketing for Enigma,  in a past interview with CoinDesk.

Bair added:

“You could do decentralized credit scoring that protects data from specific users that’s trying to establish their creditworthiness … For gaming, data needs to remain private from certain individuals within the game or you may want to produce random numbers in a secure fashion. These are all potential applications in future for our protocol.”

On Tuesday, Enigma released its second test network solidifying “the developer experience,” according to Bair, of using the protocol which has yet to see a mainnet launch.

In the meantime, Julien Niset, chief science officer at Argent,  argues that a basic privacy tool on ethereum ready for deployment immediately is needed.

“There’s need for a lot privacy solutions on Ethereum addressing different needs and different requirements,” said Niset. “We really tackle the first one and the one needed most today which is how can I send funds from A to B privately.”

Hoping for a more private future

The tool being talked about by Niset is called Hopper. It is a open-source mixer for making private transactions on the ethereum blockchain using a mobile iOS device.

In essence, Hopper is a smart contract that users can deposit notes of 1 ETH to and withdraw funds from privately without revealing any public account addresses. It also leverages ZKPs in order to prove recipients of private transfers.

“Users can deposit notes of 1 ETH into a mixer smart contract and withdraw them later to a different account by only providing a Zero-Knowledge proof (zkSNARK) that they previously deposited a note into the mixer, without revealing from which account that note was sent,” the official GitHub page describes.

While immediately deployable, Niset warns that Hopper is by no means the ultimate privacy solution for ethereum.

“We don’t want to claim that we solved that problem for Ethereum. This is not what it is. This is an open source community,” said Niset. “The thing that is really important is that people collaborate. We used the development of some other people and saw we could make it a viable product for mobile wallet.”

As such, CEO of Argent Itamar Lesuisse emphasized that from his perspective, Hopper is a privacy product solution that “can work today” but will be just one of many in existence in the years to come.

Lesuisse concluded:

“There are many solutions out there that are on the way and will become way more advanced in a few years…From a product perspective, we wanted to solve the problem today but there may be many more solutions in future.”

Lock image via Shutterstock

Staking Isn’t Just a Way to Earn Crypto Money – And It Shouldn’t Be

Jake Yocom-Piatt is the project lead for Decred and the creator of btcsuite — an alternative full-node Bitcoin implementation written in go whose source code has been used in several notable projects.


Staking is money you don’t want to miss out on — simple as that, right?

While most cryptos today are trading 70 -90 percent below their all-time highs, staking is making what looks like easy money, scoring coin holders up to 30 percent rewards. More and more people are paying attention, with staking touted as the best way to make semi-passive returns in a bear market.

Coinbase is launching staking support, and new staking coins are cropping up to compete with the established players like Tezos, Dash and Decred.

It’s not really that simple. Staking is getting attention for all the wrong reasons, and it’s time to re-examine its role.

Misconceptions around how it works and why it exists will have lasting consequences if expectations aren’t set now. Projects that implement any form of proof-of-stake (PoS) need to plan for long-term sustainability, not just the immediate future.

If You’re Going to Stake, Stake Right

Staking is evolving from being a semi-passive reward, to becoming a powerful incentive for participating in governance. Projects that plan for the future will figure out how to incentivize active participation, while those who elect a set of governors based on the quality of their kickbacks won’t last.

Choosing to stake on the right projects for the right reasons is the best way to earn rewards.

Proof-of-Work (PoW) was introduced on bitcoin as a block validation method to timestamp transactions without the need for a trusted third party. PoW has an established track record with bitcoin securing its network using energy. People began exploring PoS as a way to use less energy to do validation “work.”

PoS is more accessible and decentralized, empowering coin holders, who “stake” coins to “forge” blocks by maintaining an online wallet or node.

Staking started as just another method for recording transactions securely, but it’s constantly evolving. Some implementations are a hybrid with PoW, while others add delegates who either receive votes from, or are empowered to act on behalf of, the group.

Staking for Rewards vs. Staking for Participation

As Zaki Manian, co-creator of Cosmos, pointed out in an interview with CoinDesk, “[P]art of the dynamics of proof-of-stake is how frequently do people just vote to give themselves more money?”

In this scenario, coin holders collect exorbitant rewards without putting in any work.

Staking has been erroneously portrayed as the crypto version of a bond. While there are projects that don’t require any more work than staking funds for a reward, this approach is ultimately unsustainable and will get participants who thought they could “park and earn” into trouble.

It’s not unusual for projects to employ a toothless charade for centralized parties to claim they’re not in control. These systems are often overly complicated and characterized by confusing procedures and non-binding voting, which in practice discourage voter participation and lead to voter apathy.

When it comes to participation, several staking projects have voting on treasury spending — projects like Dash, Decred and PIVX are paving the way in governance where the community participates in project-level decision making. Decred’s participatory voting feature, for example, allows token holders to vote on everything from protocol decisions to choosing to hire its PR firm.

Today, staking spans a gamut of implementations beyond locking up funds, from ensuring the security of a blockchain to changes in consensus rules. PoS doesn’t necessarily imply governance, but its incentive structure combined with governance has radical implications for participation.

Staking for Rewards and Power

With the right incentives, staking can not only return rewards, but also give you input on a project’s future direction. When staking your coins, they usually go through a lock-up period while voting — rules on this vary from project to project.

After voting, you get your coins back as well as a staking reward.

If you vote against the project’s interests, while you’ll still get the immediate staking reward, over time you’ll feel the negative market effects of bad decisions like an all-expenses-paid stakeholder’s ski trip to Switzerland. In a system that gamifies decision-making and other processes, voting on decisions has a longer-lasting effect beyond earning an immediate staking reward.

Staking governance is powerful because it embodies a philosophical underpinning of the crypto movement: the belief humanity’s accepted forms of large-scale decision-making aren’t working well.

Staking aims to put that into practice — in crypto in the near term and on a societal scale in the distant future. This means eliminating corrupt intermediaries in favor of peer-to-peer interaction, and shirking representative democracy in favor of direct voting.

Individual sovereignty is tantamount; if you have skin in the game (i.e. are financially invested), you should help determine the direction of that game. But with that comes the responsibility of making informed decisions, and not necessarily trusting anyone else is going to make them for you. If you want to participate in staking long-term, you need to understand a project well enough to stake it.

If you want to have a say in how a project is run, you need to stake one that incorporates your sovereignty as a user. To participate, you need to keep up on changes to its consensus rules and actively vote for what you believe is best for it.

Staking can yield significant rewards, but to simply receive compensation for voting sets up a poor alignment structure. Coin holders must understand the responsibility that comes with locking up their coins and use it wisely — and only then enjoy the fruits of their labor.

Poker chips via Shutterstock

Above $300: Ether Price Clocks 10-Month High

The price of ethereum’s native cryptocurrency ether (ETH) surpassed $300 today to hit ten-month highs.

The world’s second largest cryptocurrency by market capitalization climbed above the psychological hurdle at 01:10 UTC and extended gains further to $306 – a level last seen on August 19, 2018.

As of writing, ETH is changing hands at $304, representing 9.7 percent gains on a 24-hour basis and 129 percent gains on a year-to-date basis, according to data source CoinMarketCap.

Ether has more than doubled this year with the price currently reporting more than 260 percent gains on the low of $82.00 seen in December. The price, however, is still down 78 percent from the record high of $1,431 registered in January 2018.

Further, the cryptocurrency has retraced meager 16 percent of the sell-off from $1,431 to $82. On the other hand, BTC has retraced more than 40 percent of the bear market slide and is currently trading at a 15-month high of $10,800.

Looking forward, ether looks set to extend the ongoing rally, as technical charts are biased bullish.

3-day chart

The 50- and 100-candle price averages on the three-day chart have produced a bullish crossover for the first time since in two years. It is worth noting that prices had rallied by more than 900 percent in three months following the confirmation of the bull cross in May 2017.

So, if history is a guide, then the cryptocurrency looks set to challenge the April 2018 low of $364 in the next couple of months. A break higher would expose resistance at $401 – 23.6 percent Fibonacci retracement of the bear market drop.

Supporting the bullish case is the solid rise in ether’s non-price or on-chain metrics in the last few months. For instance, ETH volumes on decentralized applications (DApps) registered record highs in April, according to crypto analytics firm Diar.

Meanwhile, network activity, as represented by daily gas usage, rose to lifetime highs in May. Gas is the fuel of the ethereum blockchain. The token is required to conduct a transaction on etherum’s network.

Disclosure: The author holds no cryptocurrency at the time of writing

Ether via Shutterstock; charts by TradingView

Bitcoin Price Tops $10K for First Time Since 2018

Bitcoin’s price soared above $10,000 on cryptocurrency exchanges for the first time in 15 months. The price hopped the $10K barrier at 7:35pm Eastern Time.

At press time, the top cryptocurrency by market capitalization is trading at $$10,080.49 – the highest level since March 8, 2018 – representing month-to-date gains in excess of 13 percent, according to CoinDesk’s Bitcoin Price Index.  On a 24-hour basis, BTC is outshining most top 10 cryptocurrencies with 7 percent gains.

The price rise is backed by a 12 percent jump in trading volumes. As per data source CoinMarketCap, $21 billion worth of bitcoins have traded across cryptocurrency exchanges in the last 24 hours. Messari, however, is reporting the “Real 10” volume at $1.4 billion.

With the move above $10,000, bitcoin has erased more than 40 percent of the sell-off seen in twelve months to December 2018.  Further, prices look set to end the second quarter with triple-digit gains. As of writing, BTC is up more than 130 percent on a quarter-to-date basis.

Halving on the horizon

Looking forward, BTC may continue to shine bright as the cryptocurrency is set to undergo mining reward halving sometime in May 2020.

The process designed to curb inflation by reducing the reward for mining on bitcoin’s blockchain is repeated every four years and leads to supply deficit.

The upcoming reward halving may leave a bigger supply deficit if Facebook’s cryptocurrency Libra ends up boosting bitcoin’s appeal and adoption rate as predicted by some observers.

On Tuesday, the social media giant launched the white paper to mixed reviews with pundits it a net positive development for bitcoin and cryptocurrencies in general.

While bitcoin’s long-term prospects look bright, the cryptocurrency may see a pullback in the short-term. After all, prices have rallied more than 140 percent in the last 2.5-months and bulls usually take a breather following such stellar gains.

Disclosure: The author holds no cryptocurrency at the time of writing

Hot air balloon image via Shutterstock; charts by TradingView

‘Don’t Hold Your Breath:’ Australia’s Central Bank Chief Bearish On Libra

The Reserve Bank of Australia (RBA) Chief, Philip Lowe, declared himself to be profoundly skeptical on the impact of Facebook’s new cryptocurrency.

The goal of Libra as a massively adopted digital currency might look good on paper for some, but the regulator doesn’t see it as much of a possibility in the short run.

“There’s a lot of water under the bridge before Facebook’s proposal becomes something we’re using all the time,” Lowe said.

In declarations given during a press conference, Lowe commented that Libra’s outcome is still uncertain. The digital currency proposal is yet to comply with regulatory standards, which is the main concern among regulators at an international scale.

“There are a lot of regulatory issues that need to be addressed and they’ve got to make sure there’s a solid business case,” Lowe said.

The social media platform announcement has already sparked a chain of reactions this week, with distrust being commonplace from regulators and developers alike.

The RBA’s Chief extended his reticence to the use of cryptocurrencies in general, arguing that cryptocurrencies “would not take off” in Australia since the population is already used to digital payments controlled by banks.

“We already have a very, very efficient electronic payments system that allows anyone of us to make bank payments to another person in five seconds just knowing their mobile phone number,” Lowe said.

Libra’s Overview

On the same note, the RBA also published its views on the future of cryptocurrencies in Australia. Unsurprisingly, its conclusions are not very far from its main representative opinions.

According to the institution, centralized digital payment methods leave no room for massive adoption of cryptocurrencies, stating that the use of this form of money requires a control that many are against.

“Many projects generally come at the cost of making a cryptocurrency more centralized, a feature that may not be attractive to crypto-libertarians and in any case makes them more similar to established payment systems,” the RBA said.