Articles tagged by Ethereum
As more financial services firms look for ways to utilise blockchain technology within their infrastructures, Galen Stops examines whether the technology is really as safe as advocates claim, following two high-profile hacks earlier this year.
“Cyber and system security is one of the most important issues facing markets today in terms of integrity and financial stability,” said Commissioner Christopher Giancarlo of the Commodity Futures Trading Commission (CFTC) on September 8, when approving system safeguard requirements for derivatives clearing organisations.
Giancarlo is hardly alone in his concerns.
Galen Stops looks at why demand for cryptoassets has skyrocketed in 2017 and assesses whether they have any future in mainstream financial markets.
The first working implementation of a blockchain that the world had ever seen was in the Bitcoin software released in 2009. Bitcoin the cryptocurrency then rose to prominence in 2013 when, driven in part by a flurry of media attention, its value rose past $1,000 for the first time.
Following that, 2014 represented a long and painful year of price decline for Bitcoin as an asset, but it continued to garner a lot of attention, not always for good reasons. Then in 2015 the narrative began to change as people really started talking about the potential applications of blockchain technology distinct from any digital assets.
It seemed, not for the first time, like the cryptocurrency bubble had burst yesterday, when the price of Bitcoin tumbled 22% and Ether – Ethereum's native cryptocurrency – similarly dropped 23%.
As Profit & Loss previously reported, these cryptocurrencies – the largest two available by market capitalisation – have been trending up rapidly in 2017, reaching record highs at the start of June.
Yet Bitcoin went from a valuation high of $2,823 on Wednesday to a low of $2,189 on Thursday, according to data from Coindesk. Likewise, the data showed that the price of Ether dropped from $395 to $303 over the same period of time.
Profit & Loss talks to John Deters, chief strategy officer and head of multi-asset solutions at CBOE, about the potential for cryptocurrencies such as bitcoin to trade on regulated exchange platforms.
Profit & Loss: You recently announced a deal with Gemini to use its bitcoin market data to develop your own bitcoin derivatives and indices. What was the thinking behind this deal?
John Deters: We’ve been observing the evolution of the cryptocurrency space, and of bitcoin specifically, for some time. In parallel with that, we’ve been thinking about what sort of structures might work well for these products.
Digital currency exchange, Coinbase, has raised $100 million in Series D funding.
The round was led by IVP, with participation from Spark Capital, Greylock Partners, Battery Ventures, Section 32 and Draper Associates. Founded in 1980, IVP has invested in more than 300 companies, 106 of which have gone public. Notable IVP investments include companies such as Dropbox, Netflix, Twitter, Slack and Snap.
“Coinbase experienced unprecedented growth over the last year, and we have now exchanged over $25 billion of digital currency for our customers. We’ll be using this new funding to continue scaling even further,” says Brian Armstrong, co-founder and CEO of Coinbase, in a blog announcing the news.
As P&L’s resident cryptocurrency enthusiast I'm excited by some of the developments that have occurred in this space over the past few months, because it could signal the start of these digital assets moving towards the financial mainstream.
To help explain why I think this is such an interesting time in the cryptocurrency space, I explain how I first became interested in them after joining Profit & Loss, that I refused to buy bitcoin when it was at $1,000 because "it will never go higher than this" (it's now at $4,300) and why recent regulatory developments could have significant implications for financial services firms looking at trading cryptocurrencies.
At the very start of June, Profit & Loss published an article looking at why demand for cryptocurrencies had spiked in 2017, with the price of bitcoin rising over 200% between January and the latter end of May.
Subsequent to that, demand continued to grow, with the price of bitcoin reaching $4,950 by the start of September. Meanwhile ether – the native cryptocurrency of the Ethereum network – went from $8.29 at the start of the year to $388 by September.
Despite a growing desire from some mainstream regulated financial services firms to trade bitcoin and other cryptocurrencies that are based off a public blockchain, there doesn’t seem to be many solutions on the horizon for the Know Your Customer (KYC) challenges this presents.
At the Sibos conference being held in Toronto this week, Elisabeth Rochman, financial services chief technologist at Hewlett Packard Enterprise, noted that a lot of the “BigTech” firms – such as Google and Facebook – are behind the curve compared to banks when it comes to looking at use cases for blockchain.
The schism between the blockchain providers and cryptocurrency users that want to in some way overturn the current financial system and those that want to work within it, was highlighted by comments made at the Swell conference hosted by Ripple this week in Toronto.
On the opening day of the event, former US Federal Reserve chair, Ben Bernanke, made some fairly bearish comments regarding the future of bitcoin. He essentially said that the need for authorities to prevent criminal transactions occurring represents an existential threat to this particular cryptocurrency.
You can read the full Profit & Loss coverage of Bernanke’s speech here, but the key takeaway regarding bitcoin was that he believes it is “working against, rather than with, the regulators”.
The price of bitcoin has dropped significantly following new reports that authorities in South Korea might ban the trading of cryptocurrency exchanges.
As mainstream news outlets started reporting on comments made by the South Korean Minister of Justice, Park Sang-Ki, that a bill is being prepared to ban the trading of cryptocurrencies, the price of bitcoin fell from $14,932 at 12:04am BST on January 11 to $12,884 by 4:20am BST, according to data from CoinDesk.
At the time of writing, 5:55pm BST, the price has recovered to $13,746, which is still a 7.5% decline in the overall value compared to this earlier high.
Other cryptocurrencies will continue to catch up with bitcoin this year, but this is by no means a bad thing for this nascent industry, says Galen Stops.
"Whether it works out or not, the bitcoin story definitely has further to go. And regardless of its success or failure, it seems increasingly likely that virtual currency, in one form or another, is here to stay" - "Does Bitcoin Have a Future?" (Profit & Loss, December 2013).
A lot has changed in the intervening years since Profit & Loss published the above statement in conclusion to its first ever feature length article on bitcoin.
GMEX Technologies has announced that the Blockchain Board of Derivatives will be the latest exchange to implement the firm’s Fusion product, an integrated, centralised and distributed exchange platform solution. BBOD says it is looking to attract multiple diverse participants and provide liquidity by establishing a venue where futures and swaps on Ether and Ethereum-based tokens can be traded. The exchange is partnering with GMEX to deliver a technology solution aimed to attract both retail investors and deliver the scale and functionality to meet the needs of the institutional marketplace, it says.
Bloomberg and Galaxy Digital Capital Management (GDCM), a digital asset management firm founded by Michael Novogratz, have launched the Bloomberg Galaxy Crypto Index (BGCI).
The index is designed to track the performance of the largest, most liquid portion of the cryptocurrency market. The BGCI is market capitalisation-weighted and measures the performance of 10 USD-traded cryptocurrencies, including bitcoin, ether, monero, ripple, and Zcash.
The index constituents are diversified across different categories of digital assets, including stores of value, mediums of exchange, smart contract protocols, and privacy assets.
AirSwap, a decentralised global marketplace for Ethereum tokens (ERC20), launched its peer-to-peer platform on April 25th, and saw $1 million worth of trades made over the platform within the first 24 hours.
AirSwap is a blockchain-based search engine that comprises a bulletin board that uses software known as smart contracts to facilitate direct, peer-to-peer trading of tokens on the Ethereum blockchain.
In 2017, AirSwap developed and released its core technology followed by a $36 million token sale using the platform, led by co-founders Don Mosites and Michael Oved, an algo trader previously at Virtu Financial. Advisors to AirSwap include veteran investor Michael Novogratz, venture capitalist Bill Tai, and co-founder of Ethereum, Joe Lubin.
Michael Oved, co-founder of AirSwap, met with Profit & Loss to discuss his vision for the potential of a decentralised trading platform based on the Ethereum blockchain. Previously an algo trader at Virtu Financial, Oved explains how he took lessons from the FX market and applied them to crypto trading to create a peer-to-peer platform.
Profit & Loss: AirSwap was designed around an Indexer, which acts as a search engine, matching up buyers and sellers, rather than using an order book model. With your background as an algo trader at Virtu Financial, did you look to the FX market for ideas when developing AirSwap?
A Securities and Exchanges Commission (SEC) official explicitly stated today that he does not consider bitcoin and ether (the native cryptocurrency of the Ethereum network), to be securities.
Speaking at the Yahoo Finance All Markets Summit in San Francisco, William Hinman, the
Director of the Division of Corporation Finance at the SEC, gave a speech about whether digital assets should be considered as securities.
Hinman pointed out that the network upon which bitcoin functions has always been decentralised and therefore there is no central third party “whose efforts are a key determining factor in the enterprise”.
In this week's In the FICC of It podcast, P&L's editor Galen Stops tries to rein in a punchy managing editor Colin Lambert. So to find out what is a "social experiment" and what report "is a propaganda exercise" listen in. Along the way there will be more considered opinion and insight on the changing dynamic of the LP-client relationship, including a quick way to identify changing LP behaviour, as well as a look at what is, at face value, a surprising deal involving FXall and 360T.
Today, trueDigital Holdings (TDH), a developer of institutional-grade digital asset trading solutions, announced that it has partnered with 10 liquidity providers and contributors, including Genesis Global Trading, XBTO Group, Circle, DV Chain, Hehmeyer Trading + Investments and Altonomy, to create what it claims are the first market maker based bitcoin and ether pricing indices.
"The launch of the trueDigital bitcoin and ether reference rates sets a new standard for the digital asset market and allays common concerns about the robustness and lack of transparency inherent in retail exchange-based bitcoin pricing composites," says TDH in a release issued today.
The trueDigital reference rates, comprised of bid and offer pricing from top cryptocurrency market makers, include automated anti-manipulation safeguards such as outlier detection and price banding.
Profit & Loss’s latest OnTheBlock series featured a one-one-one discussion with former CFTC staffer Justin Slaughter, now a partner at Mercury Strategies, in which he provided an insider’s perspective on how cryptoassets are being viewed by regulators in Washington, DC.
P&L OnTheBlock: An SEC official recently said that the agency does not view ether[eum] as a security. Does this mean that the issue is settled and the SEC definitely won’t try and regulate it as a security now?
Justin Slaughter: What we are basically hearing is that there isn’t an explicit, major problem with ether as a security. They are not yet saying it's totally, absolutely, not a security.
In this week's In the FICC of it podcast, Colin Lambert and Galen Stops discuss the Mark Johnson trial, pointing out that if the current verdict is upheld despite the ongoing appeal against it and ACIFMA's decision to file an amicus brief in support of the appeal, it could have a very significant impact on both the Global FX Code and how the FX industry operates more broadly. They also look at why crypto regulation is unlikely to move as fast as some people in the industry would like, and why this might not be such a bad thing.
In this week’s podcast Colin Lambert attempts to sound informative on all things crypto, while Galen Stops is informative on all things crypto. They also discuss the shift in FX trading from anonymous to disclosed channels and its impact on last look as well as the latest on pre-hedging from the Global FX Committee. There is also time for one to bang on about a correct prediction (to date) made at the start of the year and they also touch on "de-centralised" crypto trading platforms and realise it's just like the FX options market in the 1980s.
AirSwap, a decentralised global network for Ethereum tokens, is rolling out a private, beta version of its new conversational OTC features today, August 15th.
AirSwap staff and partners gave product overviews and demos at a private event on August 8th at its Brooklyn loft, which featured presentations on the AirSwap Widget, the Developer Toolkit and a new conversational OTC product. Key partner firms also discussed integration and building on AirSwap.
The event kicked off with AirSwap advisor, VC and blockchain enthusiast, Bill “Yoda” Tai, giving an overview of AirSwap’s role in the evolution to frictionless, decentralised, peer-to-peer trading, discoverable by search.
It’s early days, but Ethereum, essentially a decentralised, blockchain-based, world computer, is changing its consensus protocol from Proof of Work to Proof of Stake. Julie Ros speaks with a few crypto traders about what the key differences are between the protocols and what they think of Ethereum’s bold move.
Ethereum, the blockchain-based network that was proposed in 2013 and released in mid-2015 to provide a virtual “world computer” as the base layer for decentralised apps (DApps), has begun steps to move the methodology for confirming transactions from Proof of Work (PoW), whereby miners compete to unlock and upload blocks to the Ethereum blockchain, to a Proof of Stake (PoS) methodology, which establishes validators that stake an investment to participate.
By Bob Bonomo, CEO, Blockchain Innovation Group and President, Bob Bonomo LLC
Blockchains are examples of distributed database technology, since they store transactional data across many computers rather than in a single, centralised system.
In traditional centralised systems, where services run or data is stored on a single server, there is no concern about data synchronisation: all the data is simply present on that one machine.
The distributed nature of blockchains improves data security, since the multiple copies of data make it extremely difficult and costly to tamper with or introduce forged transactions, while also increasing network reliability/uptime, since blockchains are resilient and continue to function if a manageable set of nodes become unavailable.
One of the interesting characteristics of the cryptocurrency markets is that trading in these assets has predominantly been driven by retail players, with proprietary trading firms being the first institutional size firms to start getting involved.
So which firms are likely to enter the market next, and will they propel the mainstream adoption of crypto trading?
“Naturally a lot of prop desks are looking at the space in a discrete but very active way,” says Francisco Portillejo Hoyos, CEO of CRYPTALGO. “The other wave is that a lot of family offices are seeing a very nice diversification on their allocations.”