Day: August 25, 2018

SEC to review rejection of Bitcoin ETFs, community views the move as a positive amid volatility in the market

The positive momentum continues to affect all cryptocurrencies, even though the reasoning behind it remains rather unclear. As long as Bitcoin remains in the green, altcoins continue to thrive. The IOTA price is noting some very solid gains over the past few hours.

IOTA Price is on the Move Again

It is rather interesting to see how all of these markets are evolving as of right now. With the Bitcoin price setting the tone for all other currencies to follow, it is evident there is plenty of excitement affecting the industry as a whole. How long all of this momentum will remain in place, is anybody’s guess at this point in time.

The IOTA price confirms now is the time for altcoins to begin their new rally. After another extended period of setbacks, recovering some of those losses is direly needed. Over the past 24 hours, the IOTA price has risen by 7.44%, pushing the USD value back above $0.54 for the first time in a while.

As one would come to expect from such a price increase, there is a positive development in the MIOTA/BTC ratio as well. Thanks to a nice 4,07% increase in favor of the altcoin, IOTA is slowly making its way back to the five-digit Satoshi mark. For now, staying above 8,000 Satoshi is the first order of business.

Similar to most altcoins suffering from a decline in volume, IOTA fails to escape this negative spiral. The altcoin notes just under $32m in volume in the past 24 hours, which will probably not be sufficient to keep the current price momentum in place for an extended period of time. Even so, it is sufficient to keep speculators happy at this stage, although some profit taking will ensue sooner or later.

Binance continues to show the world why it is the largest cryptocurrency exchange in the world. Its IOTA volume against both USDT and BTC is adding up nicely, albeit it is separated by Bitfinex’s USD pair. OKEx’s USDT and BTC markets complete the top five. A good collection of exchanges and trading pairs, although it remains to be seen how these rankings evolve in the hours to come.

In the cryptocurrency word, there are never any guarantees. For the IOTA price, any positive momentum materializing right now may very well turn into losses before the day is over. Even so, given the current excitement surrounding Bitcoin’s price, it seems unlikely altcoins will see any steep declines anytime soon.

Social network platforms are about much more than serving as glorified photo albums or ways to stay in touch with friends and family. For Twitter, it is also becoming a major platform for cryptocurrency influencers. Below are some users worth following based on their current follower counts. All of these users’ opinions are their own and should be looked at as such.

5. Joseph Young

An analyst, investor, and active contributor to many news sites, Joseph Young has built up a very strong following in the cryptocurrency world. A lot of his tweets pertain to important developments affecting the cryptocurrency industry, particularly in Asia. He also has some interesting opinions on the current financial and technology industries, which are shared with his 84,200 followers.

4. CryptoCobain

Although it would appear CryptoCobain has officially retired from cryptocurrency, his current tweets seem to paint  a very different picture. Although he offers no actual financial advice which anyone should follow, some of his calls have proven to be right on the money over the years. With a strong focus on Bitcoin and altcoins, CryptoCobain has built up a very strong following of over 144,000 people. His memes pertaining to cryptocurrency and the blockchain industry also bring a chuckle to many of his followers.

3. Binance’s Changpeng Zhao

The CEO of Binance has quickly become a cryptocurrency influencer on Twitter and in the real world. With his 212,000 followers, a lot of his tweets are used as information for news articles, among other things. The ongoing success of the Binance exchange has certainly contributed to his popularity, although one could say this works the other way around as well.

2. Vitalik Buterin

Although Vitalik is best known for being one of the co-creators of Ethereum, it is evident he has become a cult figure in the world of blockchain and cryptocurrency. Boasting 803,000 followers on Twitter, Vitalik shares a lot of intriguing views on cryptocurrency, blockchain, and all sorts of events affecting these industries. Some of his thoughts spark very spirited debates regarding various cryptocurrencies, including Bitcoin Cash, Bitcoin, and so forth.  

1. John McAfee

A few years ago, no one would have expected John McAfee to get involved in cryptocurrency in such an active manner. Although his 846,000 followers on Twitter are not just due to his involvement in various cryptocurrencies and ICO projects, it is evident his following continues to swell every single time he shares thoughts regarding these industries.

His price predictions, for example, have become rather legendary among cryptocurrency enthusiasts. Although it seems rather unlikely that his vision of Bitcoin’s price hitting $500,000 or more will come true anytime soon, anything is possible when it comes to the world’s leading cryptocurrency. McAfee is also involved in running a new cryptocurrency market prices website, as well as supporting some of the altcoins on the market today.

The Bank of Thailand (BoT)has said that it has plans to initiate a CBDC which will be primarily aimed at internal bank transactions.

The BoT is partnering with eight financial institutions on the CBDC project – including Bangkok Bank Public, Krung Thai, Siam Commercial Bank, Standard Chartered Bank and HSBC. The bank has suggested that the CBDC could cater for domestic wholesale funds transfers, third-party funds transfers, and cross-border transactions, along with some further applications. The CBDC project is similar to those carried out by other central banks, including the Bank of Canada, the Hong Kong Monetary Authority and the Monetary Authority of Singapore.

Banks using the r3 Corda blockchain have the advantage of completing asset settlements with multiple participants, a reason why Ripple adopted their own system. These tokens cannot be mined as the bank will have complete autonomy as creator and distributor due to the centralized nature of using the r3 blockchain.

The BoT is currently working on the digital currency which will be built on an r3Corda blockchain, an open source blockchain which is very similar to that designed and used by Ripple. Complications could arise for the Thai central bank by choosing this particular system as legal steps have been taken by Ripple against the r3 company over possible patent issues regarding “borrowing” Ripple Labs’ expertise.

Clearly, the centralized nature of such tokens has attracted some critics given the nature of cryptocurrency and the attraction of it being tamperproof due to its decentralized status, an issue which has landed Ripple in deep water over the years.  Not only can such tokens be labeled as securities rather than assets, but as Ripple has discovered users have shown some concern about the system being open to manipulation due to the tokens being issued by one source.

Should the project be launched and CBDC become a reality the BoT have further plans to extend it for what it calls “broader functions”. The first phase of “Project Inthanon” aimed to “enhance the efficiency of the Thai financial market infrastructure” is expected to be completed by the first quarter of 2019.

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The Satoshi Revolution: A Revolution of Rising Expectations
Section 4: State Versus Society
Chapter 10, Part 1
The Key to the Crypto Revolution’s Success is Overlooked
by Wendy McElroy

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

–W.B.Yeats, “The Second Coming”

A political or cultural revolution is a fundamental and often sudden change in how society functions. There are several forms of revolution, including violent, nonviolent, technological, ideological, or issue-driven. Cryptocurrency is an ideological and a technological revolution. It is also trustless, which is why it will continue to succeed.

Those who view crypto as nothing more than an investment or a fiat substitute seem to delight in deriding and denying that crypto is either ideological or revolutionary. They demean or dismiss those who champion the political power of private money, contracts, and communication. To crypto enthusiasts, these characteristics of crypto do not constitute strategies for freedom; they are freedom, and not merely for individuals. The borderless flow of finance, business, and information opens up the world.

Enthusiasts laud many characteristics of the crypto revolution, including its nonviolence and efficiency. But the key to its success is overlooked. Crypto avoids the fatal flaw of most revolutions: relying upon trusted third parties known as “leaders” for success in achieving goals and following through on them. Just as an individual who relinquishes wealth to a central bank also relinquishes economic control, so, too, does an individual who surrenders his political power to representatives surrenders control in that area. The leaders of a revolution act no more honorably with political power than central banks do with economic power. In short, revolutionary leaders embody the trusted third party problem-a choke point of corruption-that bitcoin was created to bypass, keeping power with individuals.

In his book The Bitcoin Standard, the economist Saifedean Ammous observed, “Bitcoin can be best understood as “distributed software that allows for transfer of value using a currency protected from unexpected inflation without relying on trusted third parties.” The crypto revolution can thus be best described as distributed software allowing for a private transfer of wealth , information, and power that is protected from the state by eliminating the latter’s  role as a trusted third party.” The pseudonymous, decentralized, peer-to-peer process is transformative. When the retention of individual power becomes sufficiently widespread, then it becomes a leaderless revolution—a trustless revolution–with no need to depend upon commanders, who never grab power out of selflessness. Users depend, instead, upon pursuing their own self-interests.

Expanding the Perception of Revolution

The stereotypical revolution has individuals rising en masse to reclaim control of political and economic power from elite and oppressive rulers. Such revolutions are “popular” in the sense that they start with a groundswell of popular resistance against the status quo.  That’s how many begin. Then, most of them go horribly wrong. Some have ushered in far greater oppression than was swept away.

The French Revolution is an example. Soul-crushing taxes and a rigid class structure fed the uprising. The Bolshevik Revolution is also an example.  The catastrophic death toll and starvation caused by World War I, more than a commitment to Marxism, was what led Russians to revolt. The trusted third parties called rulers had pushed society too far, and they lost all trust.

The uprisings had long fuses but sudden explosions. Under the banner “Liberté, Égalité, Fraternité” (Liberty, Equality, Brotherhood), the new French officials conducted mass arrests and executions that often targeted average people who violated economic laws, such as by smuggling. The Revolution brought power to blood-thirsty autocrats like Robespierre and St. Just. Under the slogan ”Peace, Land, Bread!,” Russian officials instituted a totalitarian regime of elite power, rather than the workers’ paradise they promised. The Revolution gave rise to “democratic dictators” like Lenin and, eventually, Stalin. This is the common path of many revolutions.

Why? As trusted third parties, revolutionaries become a nouveau upper class who adopt the same basic power structure as before: absolute government that rules through claims of revolutionary legitimacy, intimidation, and raw force. The faces and ideologies change but not the centralization of power, the brutality toward dissidents, and the stark indifference to the populace.  Call the new regime socialist, Islamic, Marxist, democratic, or fill-in-the-blank–they have one thing in common: The rulers impose ideology and policy for their own advantage. That can be trusted.

Why will the anti-state ideology and revolution of crypto produce different results?

Its decentralization and peer-to-peer structure ensure that power is not vested in trusted leaders; it remains with individuals who pursue self-interest, whether self-interest is defined politically, financially, or otherwise. The crypto revolution is the cumulative weight of users who destroy the state’s monopoly, not through violence but by simply not using the system. This both shatters the monopoly and renders it irrelevant. And it cannot arise again. The state ceases to be a trusted third party led by the likes of Robespierre, Lenin, Pinochet, Mao, or Castro. Attempts to reconstruct the state by killing dissenters are doomed because there are no leaders to assassinate, imprison, or corrupt.

Individual freedom and revolution are yet other ways that crypto obviates the trusted third party problem.

The Backlash Against Idealism and Revolution

Those who argue for the status quo of state-controlled finance could be called counter-revolutionaries. Their motives matter. Some newcomers to crypto may be ignorant of bitcoin’s history and, so, shrug off claims that it was born in anarchism. Education may be an appropriate strategy for them. Others may under-estimate the devastation that the state monopoly of money wreaks upon their own well-being. Again, education and reasoned arguments may work best. And, then, there are those who believe in or are otherwise vested in state authority. They regard those who flount it as criminals or at least criminally naïve enough to be dangerous to society. We need to oppose true believers in the  because they actively advocate the imposition of law on peaceful behavior; they want to point guns at crypto users who do not conform to their ideology. They want to return crypto to the politics of trusted third parties.

It does not matter to true believers in the state that the crypto they use would never have existed without visionaries. It does not matter to them that idealism is built into the blockchain through features such as transparency and decentralization. It does not matter to them that the vast majority of users are peaceful people, living their own lives. That is how strong the cult-like habit of trusting third parties has become. Those who are willing to pull guns on peaceful neighbors have no tolerance for choices different from their own.

The passionate scorn directed at idealism is best viewed as a gauge of which phase the crypto revolution has reached. Gandhi famously said, “First they ignore you, then they laugh at you, then they fight you, then you win.” The current reaction to the crypto revolution is somewhere between laughter and pugilism.

The derision will keep pouring out because counter-revolutionaries are correct on one point; idealists do obstruct the mainstreaming of crypto—that is, if the “mainstream” is defined as state sanction and adoption by central banks. In a real sense, the scorn is a lull before the storm.

An Irrepressible Digital Freedom, But How to Weather the Storm?

Crypto needs to return to its roots and acquire a fresh realization of its political strengths.

In the 80s, the cypherpunks used cryptography and other privacy technology to subvert government in areas such as censorship and taxation. The punks’ strategy was rooted in David Chaum’s development of cryptographic anonymity and pseudonymity as described in his 1985 paper, “Security without Identification: Transaction Systems to Make Big Brother Obsolete” [.pdf]. Somewhat later, the cryptoanarchists began to avoid the state and ensure freedom by using cryptography and other privacy technology. Timothy May captured the essence of digital anarchism in his 1988 “Crypto Anarchist Manifesto.” May wrote, ”Computer technology is on the verge of providing the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner…These developments will alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret, and will even alter the nature of trust and reputation.”

But the power of the crypto revolution does not reside in its roots alone. It draws from the clarity of its definition of freedom, which its protocol executes. Moreover, its revolutionary strengths extend far beyond the trusted third parties known as leaders. Which additional characteristics ensure that cryptocurrency will be revolution unlike anything the world has seen?

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters

Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

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Cryptocurrency enthusiasts favor convenient solutions when it comes to buying and selling their preferred coins. In the case of Vertpig, its business model is very different from what one would expect. Despite sharing similarities with ShapeShift, it focuses on Vertcoin first and foremost.

The Vertpig Concept

While Vertpig may not necessarily be the most appealing name for new users, it illustrates what the platform is all about. Its main objective is to make Vertcoin, one of the many altcoins, more appealing to mainstream consumers. This is achieved through support for various conversion options, and more are being added on a regular basis.

How Does it Work?

Some people may draw similarities between ShapeShift and Vertpig. It is a very similar platform on the surface, especially because it is designed to serve as an actual competitor to ShapeShift. Moreover, it appears ShapeShift is currently having some issues with the Vertcoin gateway, although those problems are expected to be resolved in the near future.

Vertpig is primarily focused on Vertcoin, which is to be expected. Anyone looking to get their hands on this altcoin can use this instant conversion service without signing up for an account. The platform supports conversions to and from euros, Bitcoin, Litecoin, and Digibyte. That is a rather limited list, all things considered, although the team has confirmed that GBP support will be enabled fairly soon.

While it remains to be seen how popular this service will become in the long run, it is a worthwhile venture. All cryptocurrencies need to transition to offering native services, rather than rely on major exchanges for support. If all of this can soon be achieved in a decentralized manner, the future will look very interesting for all of the world’s cryptocurrencies.

The Road Ahead

Vertpig’s appeal and usability will always be limited. However, it shows that solutions such as this one can be built for virtually any cryptocurrency, which will eventually lead to even more decentralization. So far, the service seems to have been well-received by VertCoin supporters, as it makes converting to and from various cryptos or fiat currencies very straightforward. With more fiat currency support to be added in the future, Vertpig is well worth keeping an eye on.

This article originally appeared on Bitcoin Magazine.

Event: iBLOCKCHAIN SUMMIT 2018

Date: November 2-3, 2018

Venue: Guangzhou Baiyun International Convention Center, Guangzhou China

The last iBlockchain Summit held on May 18-19 at Shenzhen received great feedback from both our sponsors and audiences. This time, iBlockchain Summit is coming to Guangzhou, one of the biggest cities in China. The event will take place on November 2-3 in Guangzhou Baiyun International Convention Center.

Disclosure: This is a Sponsored Article

Blockchain technology is already disrupting dozens of industries like banking, real estate, health care, education etc. Will your job be safe? What changes is your personal life and career facing? This might sound a little bit irrelevant to you now, but it will be, in a quite near future. Providing the unique political economic environment in China, the Chinese government is also studying this revolutionized technology in order to catch up with the western pace. This market is presenting an unmatched opportunity to all those tech giants as well as start-up firms, to deeper discover the market, to apply cutting-edge technologies to all walks of life, or to eventually leave a name behind in this era.

iBlockchain Summit in Guangzhou is expecting over 4,000 visitors along with exhibiting, keynote & panel sessions, networking and alike activities. It’s a two-day event for fintech companies, blockchain experts, legal advisers, start-ups, currency exchanges, media and investors to share insights and get to know more promising projects.

If you are in this field, you cannot miss iBlockchain Summit. If you think it’s irrelevant to you, you don’t think so any more after you join us.

If you are interested in more details of sponsoring or speaking at iBS, welcome to contact us at [email protected]

Contact details:

Tel: +86 21 3126 1015

Skype: [email protected]

Email: [email protected]

Website: www.iblockchainsummit.com

The Monetary Authority of Singapore (MAS) and the Singapore Stock Exchange (SGX) have announced a collaboration with Nasdaq as a key partner.

MAS, which functions as Singapore’s central bank has partnered with Nasdaq, Deloitte, and Anquan to develop the technology to impart “Delivery versus Payment” (DvP) capabilities for tokenized asset settlement. According to MAS this will allow for;

“…simultaneous exchange and final settlement of tokenised digital currencies and securities assets, improving operational efficiency and reducing settlement risks.”

Further, the project will examine the viability of utilizing smart contracts to automate DvP settlements and report back by this November. The partners plan to use the open source developed solution as a part of phase 2 of Project UBin, a project which began in 2016 with the development of a simple prototype on Ethereum in Phase 1.

The second phase of Ubin (“Re-imagining Interbank Real-Time Gross Settlement System Using Distributed Ledger Technologies) aimed at finding solutions “around the need for transactional privacy and deterministic finality”, and “the ability to perform multilateral netting capabilities in a decentralised manner while preserving transactional privacy.”

MAS Chief FinTech Officer Sopnendu Mohanty commented about the project and how blockchain tech is impacting financial transactions and injecting new energy into business:

“The involvement of three prominent technology partners highlights the commercial interest in making this a reality. We expect to see further growth in this space as FinTechs leverage on the strong pool of talent and expertise in Singapore to develop innovative blockchain applications and benefit from the new opportunities created.”

Ho Kok Yong, Financial Services Industry Leader at Deloitte Southeast Asia shared Mohanty’s optimism regarding the direction of Ubin’s latest phase:

“Using two different open source blockchain technologies to implement and design the Distributed Ledger Technologies (DLT) prototype, we are able to mitigate counterparty risks in DvP (Delivery versus Payment) and achieve DvP settlement finality with clearing members.”

Magnus Haglind, Senior Vice President and Head of Product Management (Market Technology) at Nasdaq views such eclectic collaborations as the key to the success in embarking on such projects in the future:

“In our experience of developing projects to leverage blockchain to improve market and operational efficiencies, the willingness to collaborate by cross-industry parties was – and is – the most essential component for success.”

Nasdaq, the second-largest stock exchange in the world, has suggested that it could foresee opening its own cryptocurrency exchange in the future and has already developed a distributed ledger blockchain system that optimizes the use of securities as collateral for margin calls.

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FCoin is a crypto exchange that began trading in May 2018. It is maybe best known in the US and Europe for crippling the Ethereum network, but it is well known in Asia, and especially China, for its innovative “Trans-Fee Mining” incentive program.

erformance of FCoin’s “Trans-Fee Mining” was so sensational that almost every crypto exchange is now rushing to copy the incentive program. Indeed, within a few weeks after launching the program, FCoin’s 24-hour trading volume reached a whopping $17B on June 26, 2018. To put that into perspective, the combined 24-hour trading volume on the top 10 exchanges is only around $6B. However, the surge did not last long. As reported on CoinMarketCap, FCoin’s 24-hour trading volume dropped to $0.16B on August 12, 2018.

What caused the rapid rise and fall of FCoin? The FCoin “Trans-Fee Mining” incentive program has been controversial since the beginning, but the incentive program actually works and works quite well as demonstrated by the initial surge of daily trading volume. Even though the FCoin team made many missteps in trying to fix the problem after it started, the rapid fall is actually caused by fundamental flaws in its token economics design. The verdict is not fully out there yet, but it appears that FCoin is killed by its bad token economics design!

Token Economics is a new tool that has not existed before in the internet or mobile spaces, but it plays a critical role in any token project. If applied well, token economics helps a project create a new business structure and disrupt existing incumbents. If not, a project will crash and burn. By learning from the mistakes that FCoin made, other projects, especially those crypto exchanges trying to copy FCoin’s model to stay competitive, will have better token economics designs and can successfully transform many businesses into a new era.

“Trans-Fee Mining” – A Great Incentive Design

A good token economics design starts with incentive design since using token as incentive is the new and disrupting force. A good incentive design requires deep understanding of the project’s business.

Based on my conversations with people from exchanges, the most important thing that an exchange cares about is the daily trading volume. This should not be a surprise given that exchanges make money from transaction fees and high volume also generates high liquidity. To increase trading volume, traders (buyers/sellers) should be incentivized. The easiest, and perhaps only, way to provide economic incentives to traders is by discounting the transaction fee.

The founder of FCoin, Jian Zhang, is the ex-CTO of Huobi and a veteran in exchange business. It should not be a surprise that the FCoin team has insights from the crypto exchange business and designs the incentive accordingly. To incentivize traders, FCoin created a new innovative model: “Trans-Fee Mining”, which is described in FCoin white paper:

What is the incentive here? The “Trans-Fee Mining” model creates a perception to traders that they are effectively paying $0 transaction fee. This incentive design is clearly effective, as seen from the huge trading volume surge in such a short period of time. Some argue that this provides wrong incentives in that traders come to FCoin not to do real trades but to mine FT tokens, but opponents of FCoin’s approach have forgotten that the goal is to increase daily trading volume and any trade will increase the trading volume.

“If you provide incentives, users will come”

“If you provide incentives, users will come” is an underlying truth for crypto projects that has played out time after time. Different from the traditional school of marketing thought, token incentives in the crypto world are a customer acquisition tool in and of themselves. FCoin’s “Trans-Fee Mining” is not really new, but it proved again that the idea works well in the crypto space.

80% Revenue Distribution – FCoin’s Fundamental Token Design Flaw

Once a project has a good incentive design, it also needs the right token monetary policy, which addresses token supply, token demand, token circulation, etc. This is critical because it will affect the token price and the token price will impact the effectiveness of the incentive program.

In FCoin, the token supply is generated by the Trans-Fee Mining program. Everyday, new tokens are being minted into the market and cause token inflation. In theory, without token demand or if token demand is smaller than token supply, the token price will go down due to token inflation. The white paper does not describe native token demand from a utility point of view and the reality is that it is hard to create utility demand for an exchange business. Even if you can force utility demand such as requiring projects to buy tokens as escrow to get their token listed, the utility demand will still be much smaller than the “Trans-Fee Mining” token supply.

FCoin does attempt to create incentives for token holders to hold FT tokens and hence to reduce token circulation. The incentive is that 80% of FCoin platform revenue (e.g. trading fees paid by traders and collected by FCoin) will be distributed to FT holders as dividends. The logic here is that FT token holders want to to receive dividends and hence will NOT sell their tokens. By doing this, the token circulation will be reduced, potentially driving up the token price.

Unfortunately, this dividend approach is the fundamental flaw in FCoin’s token economics design. Instead of driving up the token price, it caused the FT token price to collapse. As shown in the chart below, the FT token price surged to about $1.26 within first two weeks after the “Trans-Fee Mining” program was launched and since then dropped to $0.08 in the last 2 months, about 95% from the peak. As the FT token price collapses, the incentive program “Trans-Fee Mining” which depends on FT token price appreciating over time, stops working as well and the trading volume drops quickly as a result.

The Invisible Force – Why FCoin’s Token Price Dropped

As FCoin saw,  paying dividends won’t incentivize token holders to hold FT tokens. This is because paying dividends causes the token price to drop and creates a market perception that the token is losing value. As a result, token holders’ rational reaction is to rush to sell tokens and to sell as fast as possible, which will cause the token price to fall faster. This downward vicious cycle is driven by a market force that is invisible to most people. However, it is not really new and there is an economic theory behind it.

In general, we can categorize all tokens into two types: currency-like token and asset-like token. Most of the time, the two types of token cannot be mixed during token economics design. The price of different types of token is driven by different rules. The price of currency-like tokens is driven by supply and demand. When the demand is larger than supply, the token price goes up; and when the demand is smaller than supply, the price goes down. The price of asset-like tokens is driven by the value of the underlying asset. For example, if the token represents a company’s assets, similar to a company’s stock, the price goes up when the company’s assets increases in value, and vice versa. Different from token supply and demand which sometimes are hard to understand and predict, a company’s assets are well understood and easy to calculate. Hence the intrinsic value and price of asset-like tokens can be easily calculated. Overtime, the market price of asset-like tokens will converge to its intrinsic price based on the underlying asset value.  

By paying dividends to FT token holders, FCoin makes the FT token an asset-like token or asset-backed security (ABS). The invisible force driving the price of ABS is well studied and understood in company stock, which is another ABS. From a corporate finance point of view, when a company is paying dividends, the company’s asset value will go down and hence its stock price will go down; and when a company issues more stock without changes in the company’s asset value (e.g., a stock split), the stock price will go down. In FCoin’s case, dividends are paid out via 80% revenue distribution and new tokens are being minted into the network via Trans-Fee Mining EVERY DAY! Can you imagine the price curve of Apple stock and the market reaction if Apple does a dividend payout and stock split every day?!

By combining these two forces, the FT token price should go down and go down fast. To illustrate the impact of these two forces on token price, let’s do a hypothetical simple modeling of FT token price based on the FCoin model.

The assumptions here are 1) the company has $10 in assets on day 0; 2) the company has 10 tokens in day 0; 3) every day the company generate $10 in revenue. As show in the table above, the price drops 75% in 3 days.

Given that the “Trans-Fee Mining” is designed to incentivize more trading, let’s model a scenario of accelerating revenue by changing assumption 3) to the company generated revenue $10 on day 1, $20 on day 2, $30 on day 3. As shown in the table below, the price drops faster – 86% instead of 75% in 3 days. This is caused by faster token inflation due to higher revenue and lower token price.

For asset-like tokens, when the market price is higher than the token price calculated based on intrinsic value of the underlying assets, the market will correct itself sooner or later and the token’s market price will eventually reach the token’s intrinsic price. Hence the collapse of the FT token price should be considered normal and is expected.

In theory, the new FT token holders who acquire FT tokens via Trans-Fee Mining should not have the urgency to sell their tokens. This is because from a corporate finance point of view, dividends and stock splits don’t reduce the value of the stockholders. As shown in the table below, token holders of each day still hold the same value per token equaling the cost per token in the following days even after dividend payout and token inflation.

However, the FCoin revenue distribution design and token unlocking schedule is more complicated than the simple example above. To make is simple to understand (not 100% accurate), basically Trans-Fee Mining program doubles the token inflation in the market for revenue distribution. This is an understandable design since FCoin also wants to create incentives for token holders of the 49% of “previously issued” tokens to hold tokens as well. Unfortunately, this design changes the economic value of existing token holders (including traders) and creates unexpected incentives for traders to sell tokens acquired via Trans-Fee Mining immediately.

As shown in the table above, the value per token for tokens held by traders dropped immediately after the dividend payouts. This is similar to the scenario where a company issues new stock to acquire an undervalued asset which will dilute the value of existing stockholders. In the crypto space, the basic assumption is that people are rational. Knowing that its FT tokens acquired via Trans-Fee Mining will drop in value and by less than the transaction fees they pay, rational traders will immediately sell the tokens before the price drop instead of holding the FT tokens.

The FCoin revenue distribution design causes the price of FT token to drop and creates incentives for traders to sell immediately instead of holding FT tokens. Even though the price of FT token might be bumped up in the beginning and supported along way, the market force due to these two effects is so strong that it will crash the price support effort and collapse the token price. The market perception of collapsing token price will discourage new investors (speculators) and encourage existing token holders to sell more and faster, forcing the price to drop even further and faster. Once rational traders figure out the market price direction, and that they won’t get their full trading fee back if they cannot sell immediately, the incentive program does not work anymore and trading volume quickly dries up.

Token Economics Design Can Make or Break a Promising Token Project

Token Economics is a new tool that did not exist before in internet or mobile space and applied well, it will play a critical role in decentralizing many businesses and disrupting existing incumbents.  But token economics design is really complex and counter-intuitive. A good token economics design requires not only deep knowledge of the target business domain, good understanding of incentive design, and strong analytical skills to create a network effect, but also profound grasp of the game theory, economic principles, finance theory, and monetary policy that are the invisible forces governing the market.

The collapse of FCoin can be avoided with a different and better token economics design. By paying attention to incentives and gaining knowledge about monetary policy, token project founders can all contribute to improving the quality and success of crypto projects in the future.

Despite the growing popularity of cryptocurrency, some of the industry’s key issues remain in place. Scams and fraudulent projects have become the new normal over the years. Fighting such trends has proven to be very difficult, if not impossible. With the help of Uppward, that situation may come to change fairly soon.

The Uppward Concept

Originally developed by the team behind the Sentinel protocol, Uppward is one of the very few solutions to nip fraudulent cryptocurrency activity in the bud. It is a browser tool designed for consumers. With this Chrome extension, users can protect themselves from cryptocurrency scams and fraudulent projects. Solutions like these are direly needed to keep the average consumer safe from harm in this booming industry.

How Does it Work?

On the surface, Uppward may not look like anything spectacular. Under the hood, however, it can make a world of difference for both novice and advanced cryptocurrency users. The solution is designed to double-check all information pertaining to cryptocurrency. That includes website addresses, wallet addresses, Telegram groups, Twitter accounts, and so forth.

Should a discrepancy be discovered, the Chrome extension will alert users immediately. It also allows users to report previously unmarked sites as potentially dangerous. Community involvement will play an integral role in this project, as it is of the utmost importance that fake sites are reported as soon as possible. Given the vast number of exchange phishing sites and misleading ICOs out there, a tool such as this one can go a long way in the industry.

The wallet address validation aspect of Uppward is of particular interest. There has been an increase in malware designed to alter wallet addresses copied to the built-in Windows clipboard. Uppward will flag suspicious addresses immediately to force users to double-check the information provided. Whether or not it will help reduce the number of wrongfully sent transactions is a different matter altogether.

The Road Ahead

Creating a more safe and secure cryptocurrency ecosystem for everyone will remain an ongoing challenge. There are numerous threats out there which users need to be aware of at all times, and it seems the odds are insurmountable. Even so, solutions such as Uppward show that threat intelligence is a vital aspect of the cryptocurrency industry, and it is well worth looking into further.