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What is Bitcoin?

Bitcoin is a digital crypto-currency with no single point of failure due to its decentralized peer-to-peer architecture. The source code is publicly available and changes to the reference Bitcoin client are made via concensus within the community. Advantages of Bitcoin include irreversible transactions (i.e. no possibility of chargebacks as with credit cards), pseudo-anonymous, limited and fixed inflation, near instant transactions, multi-platform, no double-spend and little to no barriers to entry and more. It was created by an anonymous person known as Satoshi Nakamoto. Find out more at WeUseCoins.com.

Bitcoin Latest News

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Posted on 22 November 2017 | 2:28 pm

Bitcoins worth $100K stolen over public wireless network - CBS News


CBS News

Bitcoins worth $100K stolen over public wireless network
CBS News
VIENNA — Austrian police say cyber thieves transferred Bitcoins worth more than 100,000 euros, or $117,000, from a man's account while he was logged in on a restaurant's public wireless network. A police statement Wednesday says the Bitcoins were ...

and more »

Posted on 22 November 2017 | 12:45 pm

Baseball Great Jose Canseco Predicts $10,000 Bitcoin By 2018

Former Major League Baseball star Jose Canseco is apparently a big believer in blockchain and cryptocurrencies.

Posted on 22 November 2017 | 12:05 pm

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Asset Manager Launches Europe's First Bitcoin Mutual Fund

A French asset manager has announced the launch of Europe's first mutual fund centered around bitcoin.

Posted on 22 November 2017 | 11:05 am

Video Streamers Have More Options with These New Blockchain Startups

videostream.jpg

Innovative technology companies are leveraging blockchain technology to build next-generation business models and Content Delivery Networks (CDNs) for video streaming, a multibillion-dollar industry that continues to grow. According to data revealed by Theta Labs, one of the companies covered below, the video content and streaming market accounts for 67 percent of current internet traffic and could reach 82 percent by 2020. The new players promise to decentralize global video streaming, while at the same time making it more efficient.

LBRY

According to Jeremy Kauffman, co-founder and CEO of the blockchain-based content distribution platform LBRY, blockchain technology could transform the monetization of online content by altering the way that creators get paid, and eventually challenge YouTube.

The LBRY protocol allows creators to publish online, making their content discoverable with a small payment in LBRY’s own cryptocurrency token. Viewers pay creators in LBRY tokens to see their work.

“[Blockchain technology] allows us to build technology that’s owned by the users rather than any one party,” Kauffman said. “That’s the problem that blockchain [technology] solves.”

Kauffman explained that under the LBRY model, creators are paid without an intermediary taking an inappropriately large cut. Since LBRY is a protocol, the company can’t control what gets discovered.

Kauffman said that LBRY recruited 4,000 YouTubers in specifically targeted demographics, several of which have 500,000 or more subscribers, which seems a good first step toward challenging YouTube in its own turf.

Theta Labs

YouTube’s co-founder Steve Chen himself, as well as Justin Kan, co-founder of Twitch, are among the advisors of Theta Labs, a subsidiary of live video streaming company SLIVER.tv, which is announcing a new blockchain-based decentralized video streaming network.

“Theta’s innovation is set to disrupt today’s online video industry much in the same way that the YouTube platform did to traditional video back in 2005,” said Chen. “One of our biggest challenges had been the high costs of delivering video to various parts of the world, and this problem is only getting bigger with HD, 4K and higher quality video streams. I’m excited to be part of the next evolution of the streaming space, helping Theta create a decentralized peer-to-peer network that can offer improved video delivery at lower costs.”

Theta is developing a new blockchain-based network, outlined in the Theta white paper, which could enable users worldwide with unutilized PC bandwidth and resources to cache and relay video streams to others in the network, while mining Theta tokens at the same time, similar to Bitcoin and Ethereum. According to the company, the new peer-to-peer decentralized network will allow for much more efficient, high-quality streaming without the need to develop expensive content delivery network infrastructure.

In December, Theta will implement its first generation of ERC20-compliant tokens on the SLIVER.tv platform. These application tokens can be used for virtual gifting and incentivizing streamers. Eventually, these ERC20 tokens will be 1:1 exchangeable for native Theta tokens when the new blockchain launches at the end of 2018.

“We’ve been on the cutting edge of live streaming technology, and by leveraging blockchain [technology] we will truly be able to transform the video and entertainment industry,” said Mitch Liu, co-founder and CEO of Theta Labs. “Theta will be uniquely built to leverage the incentive mechanisms of the blockchain, enabling end-users to contribute their excess PC bandwidth and resources to relay video streams to others and earn Theta tokens at the same time. It’s a win-win for all stakeholders in the ecosystem.

“We’re committed to solving the challenges of today’s video streaming industry,” Liu told Bitcoin Magazine. “We think there’s a huge opportunity to democratize the video delivery infrastructure, to reward end users with excess PC resources and bandwidth to help stream to their neighbors and friends.”

“I think the Theta team is going to revolutionize video delivery with its new native blockchain,” Theta advisor and G FUEL CEO Cliff Morgan told Bitcoin Magazine. “I’m thrilled to be part of this innovative, organic platform to decentralize streaming. This will impact a number of industries from esports to advertising, benefiting our esports fans as well as influencers and content creators. I can see how Theta’s peer-to-peer mesh network will empower our G FUEL community, rewarding them with Theta tokens when they help stream to others in the network.”

Stream

Another new video platform, Stream, has received $5 million to back its Ethereum-based Stream Token in an advisor round of funding led by blockchain investment firms including Pantera Capital, Fenbushi Capital and CoinFund, as well as individual participants like Jed McCaleb, David Johnston and Andrew Yashchuk.

Founded by Ben Yu, Stream wants to facilitate direct transactions between content creators and consumers with a zero-fee structure. Yu was a successful early cryptocurrency investor who became an internet celebrity with videos that received tens of millions of views. In 2011, Yu left his studies at Harvard and accepted a $100,000 Thiel Fellowship, like Ethereum creator Vitalik Buterin before him, eventually launching Sprayable and Stream.

The Stream Token was designed to allow digital media creators to earn a fair living from their work, without being exploited by streaming platforms that take unreasonably large shares of their revenue. It is also designed to free content creators from the strictures of advertising models that limit creativity and freedom of expression.

“Stream Token is part of the larger Silicon Valley movement to fulfill the original intention of the internet: universal access to information. We can finally reward those who share information without curtailing freedom of expression. Content creation doesn’t have to be a zero sum game,” said Greg Kufera, CTO of Stream. “And we’re ensuring it won’t be.”

The post Video Streamers Have More Options with These New Blockchain Startups appeared first on Bitcoin Magazine.

Posted on 22 November 2017 | 11:02 am

Standard Chartered, Axis Launch Payments Service With Ripple Tech

Standard Chartered and Axis Bank have announced a new cross-border payments platform built on top of technology developed by Ripple.

Posted on 22 November 2017 | 10:00 am

Bitcoin Price Holds Steady As Institutional Investors Reconsider Stance - Investopedia (blog)


Investopedia (blog)

Bitcoin Price Holds Steady As Institutional Investors Reconsider Stance
Investopedia (blog)
At 14:32 UTC, the cryptocurrency was trading at $8,179.33, up 1% in the last 24 hours. Bitcoin Cash, a bitcoin offshoot created after a hard fork in bitcoin's blockchain in August, rose 10.3% to $1,305. Within the last 24 hours, the cryptocurrency also ...
Wealth Managers Being Bombarded With Investor Requests to Buy BitcoinCointelegraph (Bitcoin, Cryptocurrency and Blockchain News)
Uber Hacks and Bitcoin FuturesBloomberg
Can anything stop bitcoin? Price above $8000CNNMoney
CNBC -The Australian Financial Review -Crain's Chicago Business -Wall Street Journal
all 83 news articles »

Posted on 22 November 2017 | 9:21 am

Bitcoin Is 'Not Actually Legal,' Says Zimbabwe Central Bank Chief

The Reserve Bank of Zimbabwe (RBZ) has cast doubt on the legality of bitcoin in the country.

Posted on 22 November 2017 | 8:45 am

Bitcoin Exchange Globitex Granted European Electronic Money License

Globitex.jpg

Globitex, a new bitcoin exchange co-founded by former Bitcoin Foundation Executive Director Jon Matonis, is announcing that its parent Globitex Holding (Latvia) group company NexPay UAB has been granted an Electronic Money Institution (EMI) license by the Bank of Lithuania, a regulatory authority in the European Union, to carry out payment services and e-money issuance in the EU.

The acquisition of the EMI license will allow Globitex to integrate with the Single Euro Payments Area (SEPA) euro payment system directly through the central bank of Lithuania. This will enable NexPay to clear euro payments directly, without the involvement of commercial banks, and to issue IBAN accounts to Globitex clients just as banks issue accounts to their clients, which is could be an important step forward in terms of accessibility.

According to the company, this regulatory development opens the way for the institutional- grade bitcoin exchange to deal with EUR fiat payments globally and sets a new level of legitimacy for the cryptocurrency industry overall. It also represents a significant step toward widespread adoption of Bitcoin as a unit of account suitable for global trade, with no geographic, political or monetary restrictions.

Eventually, Globitex wants to allow producers to purchase exchange-listed products for bitcoin, and trading firms, and speculators to hedge their risks in bitcoin with derivatives trading.

“Globitex is looking to set new cryptocurrency trading standards not only technologically, or by commodities linked product offering, but especially in Globitex’s legal setup, ensuring safe passage to the digital age,” said Liza Aizupiete, Managing Director of Globitex, who recently participated in a panel discussion on the future of blockchain technology and cryptocurrencies at e-com21 in Riga, Latvia.

While Bitcoin offers enormous advantages for international settlement due to its speed and low cost compared to legacy money transfer services, order-book depth and liquidity cannot yet support very large trades; therefore, bitcoin cannot yet serve as a currency of international trade settlement across the world’s financial markets.

Globitex wants to tackle this challenge by dramatically increasing bitcoin trading volumes and facilitating bitcoin’s use across the spectrum of money and commodity markets, thereby allowing financial instruments and commodities like crude oil, gold and coffee to be priced directly in bitcoin.

Physical-Settlement Futures Contracts as Important Enabling Factors

“I look forward to this evolution of digital currency trading platforms that ensure futures contracts with a physical delivery component,” Matonis told Bitcoin Magazine. “Strong connection to the spot markets, including contract limits and physical delivery that is linked to provisioned commodities, will serve as the market standard for price integrity."

Matonis outlined some risks associated with cash-settled bitcoin futures contracts. He pointed out that the price index is too easily gamed, for example, and that there is no physical commodity (private keys) for integrity of short positions, maintenance margins could potentially approach 100 percent so there is no real leverage during volatility, and there is a risk of limit-up, limit-down insolvency for certain smaller members.

According to Matonis, the cash-settled bitcoin futures contract is a precursor to an exchange offering a proper physical-settlement futures contract like Globitex. In fact, decentralized crypto and physical-settlement Bitcoin markets will be more robust, Matonis explained to Bitcoin Magazine, since warehousing, open-contract limits and maintenance-margin calculations all behave differently under a digital assets class with physical settlement.

Globitex is holding a token sale, to be issued on the Ethereum blockchain, for its GBX utility token to fund the scaling of its existing exchange infrastructure into a commodities spot and derivatives exchange for bitcoin.

A short video explainer outlines a future where Bitcoin is the preferred medium of exchange for everything and permits cheaply settling international trades; swapping precious metals and commodities in seconds; and opening new trading options for farmers, manufacturing companies, metal miners, oil refineries and more.

The post Bitcoin Exchange Globitex Granted European Electronic Money License appeared first on Bitcoin Magazine.

Posted on 22 November 2017 | 8:41 am

This Bitcoin Developer Is About to Take on the Mining Hardware Industry

DragonMint

BtcDrak, the most active pseudonymous Bitcoin Core contributor to date, is making a move into the mining hardware industry. The developer, who besides having contributed to the Bitcoin Core repository also maintains bitcoincore.org and the Bitcoin Core Community Slack, told Bitcoin Magazine he helped set up ASIC chip manufacturing company Halong Mining over the past year, and produced an initial batch of mining hardware, with plans to ship to consumers in early 2018.

“We started a mining project with the aim to bring much needed competition to the market,” BtcDrak said. “We want to ‘make SHA256 great again.’”

The Miners

As listed on the company website, Halong Mining is launching a product line that consists of one machine for now: the DragonMint 16T. The miner — its name references the Dragons' Den, an (in)famous private chat channel on the Bitcoin Core Community Slack — is said to be equipped with newly designed chips and can produce a total of 16 terahashes per second. Importantly, BtcDrak claims that the machines are about 30 percent more energy efficient than the most efficient ASIC miner on the market right now, Bitmain’s AntMiner S9.

“The DragonMint will be the most advanced miner to date,” he said.

The main bottleneck to entering the ASIC market is typically capital: developing specialized chips from scratch is expensive. While BtcDrak preferred not to disclose much information about Halong Mining for now, he did note that the machines have been produced by a team with “serious expertise.”

According to the developer, Halong Mining has invested $30 million in research and development so far, with over 100 people involved, including chip designers, electronics hardware specialists and software designers.

“Research and development is not cheap, and we need a lot of diverse skills,” BtcDrak explained.

Halong Mining has now produced a prototype batch of DragonMint machines for testing and fine-tuning, BtcDrak said, but these will not be sold to the public due to risk of reverse engineering. He emphasized that the machines are working, however, adding:

“Other companies that want to enter the ASIC mining industry develop everything in simulations, and then the first presale batch tries to pay for small production. But the NRE [non-recurring engineering] and making wafers is fraught with difficulty; the first run is not easy to do well.”

Halong Mining published a video of a DragonMint on YouTube today. BtcDrak thinks the first mass-produced run of DragonMint miners will happen within about four months and begin to ship in March of 2018.

Apart from the DragonMint machines, he says Halong Mining will also be selling mining chips separately, in bulk.

The Competition

With the introduction of DragonMint miners, Halong Mining should offer an alternative for Bitmain’s mining hardware, which has dominated the market for the past few years. An estimated 70 percent or more of the hash power on the network today is produced by Bitmain machines, and around half of all hash power is pointed to mining pools that are either owned by or closely affiliated with Bitmain, such as AntPool, BTC.com, ConnectBTC and ViaBTC.

“One manufacturer as a monopoly is not good for Bitcoin,” BtcDrak said. “Centralization in mining is a problem regardless of how benevolent you are. If there is a center, then governments and criminals can attack it. Decentralization protects the entire system and all its participants. So I wanted to bring competition.”

Bitmain in particular has also not made itself popular within segments of the Bitcoin community over the past years. The Chinese ASIC manufacturer was at the center of the AsicBoost and Antbleed controversies. And perhaps more importantly, some speculate that the company exerted its influence over the mining ecosystem by allowing or limiting hardware sales based on how hash power from the machines was used. Bitmain has always denied this is the case, however.

Halong Mining wants to distribute ASIC miners “far and wide to help decentralize mining,” BtcDrak said, adding that the company is considering open sourcing its board designs and software. This would help new manufacturers get a foothold in the industry, building on the research already done by Halong Mining over the past year.

BtcDrak concluded:

“There is a lot at stake here. A lot of time and money has been invested … and we have a huge opportunity to bring more diversity to Bitcoin mining, and in turn help secure the network more.”

This article was slightly updated, in part to better reflect the scope (and limits) of our knowledge about Halong Mining and the DragonMint machines.

The post This Bitcoin Developer Is About to Take on the Mining Hardware Industry appeared first on Bitcoin Magazine.

Posted on 22 November 2017 | 8:40 am

Wall Street strategist Tom Lee raises bitcoin forecast, now predicts 40% rise - CNBC


CNBC

Wall Street strategist Tom Lee raises bitcoin forecast, now predicts 40% rise
CNBC
Fundstrat raises its mid-2018 price target for bitcoin to $11,500 from $6,000, representing nearly 40 percent upside to its current level. "In our view, this move to $5,600 cleaned up weak hands and we no longer feel caution is warranted. … We ...
Crypto Bull Tom Lee Doubles Bitcoin Price Target to $11500Bloomberg
One of Wall Street's biggest bears just doubled his bitcoin forecast to $11500Business Insider
It's Been a Wild, Banner Week for BitcoinTheStreet.com

all 8 news articles »

Posted on 22 November 2017 | 8:24 am

How to talk to your mom and dad about Bitcoin on Thanksgiving - Mashable (blog)


Mashable (blog)

How to talk to your mom and dad about Bitcoin on Thanksgiving
Mashable (blog)
Do not start with “Bitcoin is a cryptocurrency,” because you will lose Mom and Dad right there. Defining something unknown with something equally unknown is a big no-no. You can say, instead, “Bitcoins are like regular money or even, in a small way ...

and more »

Posted on 22 November 2017 | 7:00 am

Central Bank of Malaysia Plans Cryptocurrency Reporting Rules

The governor of Malaysia's central bank has provided more detail on upcoming regulations aimed to counter the illicit uses of cryptocurrencies.

Posted on 22 November 2017 | 7:00 am

Mike Novogratz Doubles Down on $10,000 Bitcoin

Billionaire Mike Novogratz has restated his belief that bitcoin will end the year at $10,000, while ethereum could hit $500.

Posted on 22 November 2017 | 5:25 am

Two-Week Rally Pushes Monero to New Record High

Following a two-month period in the doldrums, the price of the privacy-focused cryptocurrency monero has climbed to a new all-time high of over $155.

Posted on 22 November 2017 | 4:35 am

Philippine Regulators Eye New Rules for Bitcoin Exchanges and ICOs

Philippine regulators are eyeing new rules for cryptocurrency exchanges and initial coin offerings (ICOs), according to officials.

Posted on 22 November 2017 | 4:00 am

Nivaura Issues First Regulated Ether Bond

Blockchain startup Nivaura will today initiate its first bond denominated in ether. And, notably, the issuance will be conducted on a blockchain.

Posted on 22 November 2017 | 3:00 am

Tech Giants Can't Beat 25000 Mongolian Bitcoin Machines: Gadfly - Washington Post


Tech Giants Can't Beat 25000 Mongolian Bitcoin Machines: Gadfly
Washington Post
Bitcoin pushed beyond $8,000 this week, a boon to those willing to pour money into a risky and speculative piece of code that's hoarded more than spent. Number of Bitmain machines in Mongolia. 25,000. But the crypto craze is leaving behind the very ...

and more »

Posted on 22 November 2017 | 2:27 am

Banca IMI Bank Explores Ethereum Derivatives

One of Italy's largest banks is re-imagining what the $1.2 quadrillion derivatives market would look like on a public blockchain.

Posted on 22 November 2017 | 1:00 am

Survey: CFOs Think Bitcoin Is 'Real' But Are Divided on Price - CoinDesk


CoinDesk

Survey: CFOs Think Bitcoin Is 'Real' But Are Divided on Price
CoinDesk
Chief financial officers (CFOs) around the world seem to distrust bitcoin, according to a CNBC survey published Tuesday. CNBC received 43 responses from their Global CFO Council to a survey about their views bitcoin, with 12 of these respondents ...

and more »

Posted on 22 November 2017 | 12:02 am

Survey: CFOs Think Bitcoin Is 'Real' But Are Divided on Price

A group of CFOs polled by CNBC are split on whether bitcoin is a bubble, according to newly published results.

Posted on 22 November 2017 | 12:00 am

Enabling or Crippling? The Risks of State-by-State Blockchain Laws

A hodgepodge of state laws intended to sanction blockchain technology could end up making nationwide solutions commercially impracticable.

Posted on 21 November 2017 | 10:00 pm

Warning Signs About Another Giant Bitcoin Exchange - New York Times


New York Times

Warning Signs About Another Giant Bitcoin Exchange
New York Times
But if you want to see where the price of Bitcoin is actually determined in round-the-clock bidding, you have to go to a number of unregulated exchanges that often fly in the face of American and European laws. These days, no exchange is bigger than ...
A Hacker Warning for BitcoinBloomberg
Untethered? Bitcoin Shrugs Off Hack to Push Above $8000CoinDesk
Tether, a startup that works with bitcoin exchanges, claims a hacker stole $31MTechCrunch
CNBC -Fortune -Business Insider -Bloomberg
all 107 news articles »

Posted on 21 November 2017 | 4:56 pm

BitLicense Architect Ben Lawsky Joins Ripple Board

Ben Lawsky, the former New York Superintendent of Financial Services who spearheaded the BitLicense regulatory framework while in office, has joined startup Ripple's board of directors.

Posted on 21 November 2017 | 3:30 pm

Top 5 Tips For New Bitcoin Investors - Forbes


Forbes

Top 5 Tips For New Bitcoin Investors
Forbes
While Bitc0in investing can be intimidating for those just getting their feet wet, there are several tips that newcomers can use to maximize their chances of success. By following the top five tips listed below, investors can boost their chances of ...

Posted on 21 November 2017 | 3:06 pm

Blockchain Data Links Tether 'Attack' to 2015 Exchange Hack

The individual or group behind the alleged Tether attack may have been involved in a previous well-known hack in the bitcoin space.

Posted on 21 November 2017 | 1:00 pm

Hacker Allegedly Siphons $31 Million Out of Tether, Driving Further Speculations About the Cryptocurrency

Hacker Allegedly Siphons $31 Million Out of Tether, Driving Further Speculations About the Cryptocurrency

Tether, a cryptocurrency pegged 1-to-1 to the U.S. dollar, was allegedly hacked today to the tune of $31 million.

Tether functions to convert U.S. dollars to a type of cryptocurrency. The project’s token (USDT) is pegged to the dollar and is used in exchange trading. The idea behind Tether is that instead of having to sell your bitcoin or other token for a fiat currency, you can convert it to USDT, and either hold it in USDT or else transfer your USDT to another exchange and use it to purchase tokens there.

As for the exchanges, USDT allows them to trade in something akin to dollars, without requiring them to have a bank account.

Tether operates on the “Omni Layer Protocol,” which itself operates on top of the Bitcoin network, and uses Bitcoin addresses. According to a blog post on the project’s website, $31 million worth of USDT was sent to an unauthorized Bitcoin address on November 19, 2017.

In the blog post, Tether also noted it released a new version of the Omni Core software used by exchanges and wallets to support USDT transactions, thus implementing a temporary hard fork to the Omni Layer. As a result, the affected tokens are frozen in place, making them essentially worthless to the hacker.

“We strongly urge all Tether integrators to install this software immediately to prevent the coins from entering the ecosystem,” Tether wrote, adding that “any tokens from the attacker’s addresses will not be redeemed.”

Some exchanges, like Kraken, have stopped trading USDT temporarily while they upgrade to the newer software.

The heist was made in three separate USDT transfers out of Tether’s core Treasury wallet in the amounts of 23,000,000; 7,900,000; and 500,000 USDT. It is unclear why the hacker did not move all of the money out at once.

In addition to the other exchanges it trades on, USDT is widely traded on Bitfinex, an exchange that lost 119,756 BTC (worth $72 million at the time) in a hack that took place a year and a half ago.

News of the Tether attack comes at a time when some — notably the blogger “Bitfinex’ed” — are questioning whether USDTs are being issued without backing of actual U.S. dollars. Similarly, there has been growing speculation that Tether is being used in possible market manipulation to drive up the price of bitcoin.

The current market cap value of USDT is around $673 million. If that money is backed by real reserves, as Tether claims, the project would need to have at least that much in its bank account in Taiwan.

Tether publishes a bank account balance on its website’s Transparency page and claims the money is redeemable for U.S. dollars at any time directly through the Tether platform.

The project’s website has been up and down sporadically, since the hack. An archive of the site is available here.

The post Hacker Allegedly Siphons $31 Million Out of Tether, Driving Further Speculations About the Cryptocurrency appeared first on Bitcoin Magazine.

Posted on 21 November 2017 | 12:32 pm

Report Warns SAFT May Increase Legal Risk of Token Sales

Making ICOs compliant while delivering on their disruptive promise may be a harder needle to thread than the SAFT plan anticipates, a new paper says.

Posted on 21 November 2017 | 10:40 am

ECB President Draghi: Cryptocurrency Impact Still 'Limited'

European Central Bank president Mario Draghi reiterated his view that cryptocurrencies are too small to regulate on Monday.

Posted on 21 November 2017 | 9:50 am

Morocco Regulators Warn of Penalties for Cryptocurrency Use

The foreign exchange office of the Moroccan government has stated that the use of cryptocurrencies can lead to penalties under existing rules.

Posted on 21 November 2017 | 8:15 am

Russia Will 'Never' Consider Bitcoin Legalization, Says Minister

The Russian minister of communications and mass media said yesterday that the country will not consider the legalization of digital currencies.

Posted on 21 November 2017 | 7:01 am

Finance chiefs say bitcoin is 'real' but many think it's in a bubble right ... - CNBC


CNBC

Finance chiefs say bitcoin is 'real' but many think it's in a bubble right ...
CNBC
Bitcoin is a "real" asset but it's currently in a bubble, according to a CNBC survey of global finance bosses, with many calling it a "fraud."
30 Percent of CFOs Still Call Bitcoin a Bubble: CNBC SurveyCointelegraph (Bitcoin, Cryptocurrency and Blockchain News)

all 3 news articles »

Posted on 20 November 2017 | 11:25 pm

Op Ed: “We Never Thought of That” — When Venture-Backed Companies Undertake Reverse ICOs

Op Ed: “We Never Thought of That” When Venture-Backed Companies Undertake Reverse ICOs

With well over $3 billion raised this year alone, in very little time initial coin offerings (ICOs) have emerged as a major source of venture finance. Even companies that have already raised conventional venture funding will be tempted to raise additional funds through ICOs. Although not fully intuitive, some have labeled token issuances by entities that previously obtained equity financing as “Reverse ICOs.”

One prominent example of a Reverse ICO has already occurred. Recently, Kik Interactive successfully completed an ICO of nearly $100 million. With over $3 billion raised in ICOs this year alone, ICOs are not unsubstantial. What made the Kik offering far more unusual is that Kik has already raised over $100 million from venture investors.

The standard documents used for angel and venture investing predate the current ICO craze and, not surprisingly, do not expressly address ICOs. Understandably, these documents are all “share-centric.” The question that needs to be addressed, therefore, is: What rights, if any, do existing investors have when their company elects to undertake an ICO?

What makes the analysis particularly difficult is that, broadly speaking, there are three types of ICOs:

  • Equity Tokens — these tokens are essentially digital shares with the issuer specifying equity participation, voting rights and other token/shareholder rights.

  • Non-Equity Security Tokens — these tokens do not grant equity rights but under the Howey test are nonetheless classified as securities.

  • Utility Tokens — these tokens allow the purchaser to buy products or services from the issuer.

Although not the subject of this article, the U.S. Securities and Exchange Commission (SEC) has issued initial guidance with respect to the securities law status of tokens issued in ICOs. The SEC’s Chief Accountant has also put out guidance detailing some of the accounting issues raised by ICOs.

This article will identify several issues raised by ICOs under commonly used SAFE, Convertible Note, Series Seed and Series A documents.

Why Existing Investors Might Object to Reverse ICOs

On the surface, Reverse ICOs would seem to be a net positive for existing investors. Except for equity tokens, ICOs provide non-dilutive financing to companies. Even when tokens are classified as securities, they generally are not issued as equity  —purchasers do not have a share in the issuer, do not receive dividends and do not get voting rights. However, there are several reasons why existing investors might be concerned:

Multiple “Plays” on the Same Company

After a Reverse ICO, a venture-backed company will have both tokens and equity in the hands of investors. Prior to the ICO, the only way an investor could invest in the company was by buying its stock. After the ICO, the investor would have a choice of buying the stock or buying tokens.

At least in the current environment, there is reason to believe that demand for tokens will be greater and drive up relative prices for tokens. Equity holders may find reduced demand for their equity. Further, if the tokens remain outstanding at the time of an exit, it is difficult to predict the impact of outstanding token pools on exit valuations in either an acquisition or IPO scenario.

Impact on Follow-On Venture Funding

Many venture funds make relatively small initial investments, anticipating that they will deploy significantly more capital in subsequent rounds. ICOs may reduce companies’ needs for future equity raises. As a result, venture funds may have reduced opportunities for follow-on funding.

Delay or Elimination of Conversion Events

For holders of Convertible Notes and SAFEs, under most currently used form documents, ICOs typically will not be considered an event that triggers a conversion. In some cases, ICOs may also delay or even eliminate subsequent equity financings. Further, in successful companies, ICOs often will raise the pre-money valuation at which conversion occurs, thereby diluting SAFE/Note holders (although conversion caps in many of these instruments may mitigate the impact).

Avoiding Pre-Emptive Rights

Under the current agreement forms, tokens sold in an ICO would not trigger the pre-emptive rights of existing shareholders — thereby denying them an automatic right of participation in the ICO.

Absence of Transfer Restrictions

Under the current agreement forms, tokens sold in an ICO would not be subject to the rights of first refusal, co-sale rights and the transfer restrictions typically applicable to shareholders in venture-backed companies.

ICOs Do Not Trigger Other Typical Preferred Shareholder Provisions
  • Anti-Dilution Protection. If a company underprices its tokens, its impact on valuation could be similar to a “down round.” However, unless tokens are issued as equity, they would not trigger the anti-dilution protection clauses in the standard forms.

  • Liquidation Preferences. If token holders are given equity participation in an issuer, the issuing documentation will need to specify where they stand in the liquidation stack. For utility tokens, if the claim against the company is viewed as contractual (i.e., the holders of a pre-payment for products/services), token holders may be unsecured creditors instead of shareholders — in which case they would rank ahead of all equity classes.

  • Mandatory Conversion of Preferred Shares. Venture documents typically provide for mandatory conversion of preferred shares in an IPO of a specified minimum amount raised and minimum share price or approval by what is typically a supermajority of preferred shareholders. Several ICOs have raised in excess of $100 million. If these companies go public, it is possible that some may not need additional funding and may do so without a public offering of additional shares (i.e., a direct offering). However, if not all shareholders agree with the decision to go public, the mandatory conversion provision could not be utilized unless approved by a supermajority of the preferred shareholders, which in some circumstances could impede the ability of an IPO to proceed.

Impact on Future Cash Flow

Many ICO issuers are positioning their tokens as “utility tokens” that can be used in the future to buy the issuer’s product or service. As a result, these tokens constitute pre-pays for the future delivery of goods and services. In the future, when the products/services need to be delivered, the venture may experience cash flow issues because no new funds will be coming in to pay for the product or service.

Impact of Regulatory, Tax and Accounting Uncertainty

Currently, the regulatory status of ICOs is unclear. Issuance of tokens in a manner that does not comply with the eventual regulations that emerge could create liabilities for the company and/or limit its ability to issue equity in the future. In addition, the accounting and tax rules for ICOs have not been established, and as a result, there may be ambiguity with respect to several representations and warranties the company typically will need to make in future financings and liquidity events.

Fiduciary Uncertainty

Officers and directors of companies have fiduciary obligations to maximize shareholder value. When companies are insolvent, these duties shift to protection of the interests of creditors. What, if any, fiduciary duties a board has with respect to token holders has not been explored. If a company is facing a decision that would benefit shareholders at a cost to token holders, do board members have any fiduciary obligation to the token holders? Investor representatives on boards of companies that have conducted Reverse ICOs will not only have to deal with uncertainty but also potential conflicts of interest if they have not participated in the Reverse ICO.

Can Investors Prevent a Company from Undertaking an ICO?

While it is difficult to believe that a company would undertake an ICO without board approval, in many early-stage companies, investors do not have control of the board. However, commonly used investment documents may leave shareholders with limited recourse where boards back an ICO. In general, in SAFEs and Convertible Notes, holders do not have protective rights and, as a result, they do not have the ability to prevent an ICO.

The protective provisions in the Certificate of Incorporation for Series Seed financings would not provide Series Seed holders with the ability to prevent an ICO. In the NVCA Series A documents, ICOs do not easily fit into any of the matters for which the investor director’s approval is required. The same applies to the protective provisions for the benefit of preferred shareholders detailed in the Certificate of Incorporation.

What Now?

For blockchain startups, ICOs have become the dominant form of fundraising — far exceeding venture capital financing. Given the strength of the ICO market, “Reverse ICOs” are likely to become even more pervasive. For investors this could be very challenging. Existing form agreements in the venture space are likely to be revised to address the possibility of Reverse ICOs. However, the regulatory, tax and accounting uncertainties around ICOs may not be quickly resolved, leaving uncertainty around some of the concerns raised in this article.

Revising the form agreements will not address the thousands of venture-backed companies that were financed using pre-ICO forms. For existing investors the path forward is more difficult. Where investors control the board or have blocking rights, they will have the ability to prevent ICOs or influence their terms. For other investors, particularly in early-stage ventures with founder-dominated boards, ICOs have the potential to overturn several assumptions under which early investors funded. These investors may have to wait for situations in which their approval is needed for unrelated corporate actions or their funding is necessary and leverage that position to insist upon amendments to existing investment documents to address some of the investor challenges resulting from Reverse ICOs.

This is a guest post by Dror Futter. Views expressed are his own and do not necessarily reflect those of BTC Media or Bitcoin Magazine.

The post Op Ed: “We Never Thought of That” — When Venture-Backed Companies Undertake Reverse ICOs appeared first on Bitcoin Magazine.

Posted on 20 November 2017 | 3:25 pm

Now the SegWit2x Hard Fork Has Really Failed to Activate

The SegWit2x Hard Fork Has Now Really Failed to Activate

In case there were any remaining doubts, it now seems clear that the SegWit2x hard fork will not happen.

The SegWit2x project, a product of the New York Agreement signed onto by a long list of companies and miners in May, had scheduled a hard fork to double Bitcoin’s block weight limit today. And while the controversial effort was suspended by leaders of the project last week, this would not have stopped anyone else from proceeding with it. Companies like Coinbase were indeed taking into account that the SegWit2x hard fork could still happen.

The Fork That Wasn’t

SegWit2x nodes — most notably btc1 — were programmed to fork away from the Bitcoin blockchain this afternoon (UTC) to create the SegWit2x blockchain and a new currency, often referred to as B2X. However, not a single SegWit2x block has been mined since fork point, nor is there any indication that this is likely to happen. For all intents and purposes, there is no SegWit2x — nor a B2X.

Further, software bugs in the btc1 codebase made all btc1 implementations grind to a halt even before it reached the expected fork point. While Bitcoin and SegWit2x nodes were widely expected to share a single blockchain up until block 494783 and then to go their own ways at block 494784, btc1 nodes never made it past block 494782.

This is mainly because the first block on the SegWit2x chain was required to have a “base block” larger than one megabyte. This is how the chain would diverge from the original Bitcoin protocol. But due to what is referred to as an “off-by-one error,” SegWit2x blocks started to reject smaller-than-one-megabyte blocks one block too soon — at block 494,783 instead of 494,784.

Moreover, another btc1 bug prevented miners from mining a big enough block when it was needed. So even if some miners did want to proceed with the fork, they accidentally wouldn’t have done so — at least not automatically. Miners would instead have had to manually configure their block weight settings, but it’s unlikely they knew about this step. Btc1 maintainer Jeff Garzik (while also denying there was a problem) has since released a patch to resolve this issue.

But judging by the absence of any SegWit2x blocks, the patch hasn’t made a difference, most likely because few, if any, miners were interested in mining on the SegWit2x chain in the first place.

NO2X?

Despite the seeming failure of SegWit2x to take off in any way, it should be noted that there is technically no way to declare a fork like SegWit2x officially “dead” or “failed.”

While unlikely, it’s always possible that the SegWit2x hard fork could proceed at some point in the future. In fact, there is no way to tell whether the SegWit2x chain is currently being mined with a little bit of hash power right now, and it is strictly impossible to foresee whether it will be mined later on. Perhaps a SegWit2x block will be found a day from now, a week from now or even ten years from now, at which point SegWit2x and B2X will technically come into existence.

However, since the SegWit2x chain did not include a mining difficulty reset, it will be as hard to mine a B2X block as it currently is to mine a BTC block. Meanwhile, market support for B2X appears to be extremely low, with B2X futures trading below 2 percent of BTC. So even if miners decide to mine B2X blocks, they’d almost certainly be earning far less than they would by mining BTC. Or, more accurately, they’d spend more on electricity bills than they’d be able to earn by mining B2X. The financial incentive to mine the SegWit2x chain just isn’t there.

Alternatively, SegWit2x could see a bit of a rebirth in the form of “BitcoinX” (BTX). This project, supposedly started by disappointed SegWit2x supporters, will take a snapshot of bitcoin balances at block height 494,783 and start a SegWit2x-like altcoin that offers all BTC holders the equivalent amount in BTX. Though, while this coin is arguably more viable than B2X thanks to a mining difficulty reset and more, it really is a new coin — arguably even more so than B2X would have been.

The post Now the SegWit2x Hard Fork Has Really Failed to Activate appeared first on Bitcoin Magazine.

Posted on 17 November 2017 | 2:54 pm

Bitcoin reaches new all-time high: $ 3,000

Posted on 12 June 2017 | 1:06 am

CRYENGINE now accepts Bitcoin

Posted on 29 March 2017 | 1:24 am

Consulting firm EY Switzerland accepts Bitcoin

Posted on 26 November 2016 | 12:47 am

Bitcoin Trading Bots

There have been a wide variety of situations in which algorithmic trading programs have proven to be beneficial for investors. However, investors who only trade a cryptocurrency can also take advantage of bitcoin trading bots. Through bitcoin bot trading, traders can become more flexible and prompt, minimize errors and process information more rapidly. At this… Read More »

Posted on 8 November 2016 | 6:20 pm

Major Magazine Publisher to Accept Bitcoin Payments

Posted on 18 December 2014 | 12:43 pm

Mozilla accepting Bitcoin

Posted on 20 November 2014 | 1:55 pm

PayPal and Virtual Currency

Posted on 23 September 2014 | 9:52 pm

airBaltic - World’s First Airline To Accept Bitcoin

Posted on 22 July 2014 | 11:03 am

Expedia to accept Bitcoin payments for hotel bookings

Posted on 12 June 2014 | 12:41 pm

November 22, 2017 -
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