Ethereum Vs Ethereum Classic Round 3: Trading & Speculation

Eth v Eth Classic Round 3 2

Miners

They thought miners determined hard forks…

Then on one fateful day Poloniex listed Ethereum Clssic and it showed that exchanges alongside speculators , providing there is strong enough sentiment, can decide the fate of a successful hard fork.

This saw the more ethically minded Ethereum followers express their doubts about the ethics of the hard fork by switching to and buying Ethereum Classic, if not only for value speculation.

In a way this only shows how the Ethereum platform, that offers so much potential not yet fully realised, is not currently much more than a vehicle for speculation with some future potential use and value.

Explosion

Ethereum Classic exploded out of the blocks soon after listing and rose so fast so high, as many crypto coins do, that it perhaps also overreached itself. Now as most markets do, price determination has been realised and Ethereum Classic finds itself at the behest of sellers and profit takers and continues its downfall from its highs. This is despite some recent respite as of writing.

As we now see the price of Ethereum a Classic having a large trading range, making it potentially very profitable for the speculatively minded, it does however continue an overall downward trend from the highs.

Market forces 

The buying and previous upward trend has clearly been due to its high profile backers, but now the downward trend and more powerfull selling is most likely coming from original ETH holders , selling their newly acquired positions in ETC .

The large profile ETC backers seem to be doubling down on their positions and this is certainly disruptive to the overall progress of the Ethereum platform but big support for Classic.

Ethereum Wins

Despite this temporary disruption, Ethereum is still by a country mile the number 2 crypto currency and shows no signs of giving way to the Classic any time soon. When Ethereum Classic did edge closer to Ethereum in market cap it didn’t last long and was soon back down. This shows for now that it doesn’t seem a major threat. However miners and investors are a thickle bunch and if the market caps converge significantly it’s not unimaginable that Ethereum Classic takes the crown and everyone jumps on its ship. It will take some news for this turnaround and the next Ethereum hard forks and road map will see how this turns out.

Until that theoretical point and realisation of certain assumptions Ethereum remains the King but with its open source code and freeness to copy it is there for the taking.

Ding, Ding,  Ding ….. Round 3 goes to Ethereum

bitcoin-newsereum ethereum news

#CoinCreate – Is it possible for exchanges to create coins and volume from nothing?

#CoinCreate – 

Is it possible for Crypto Currency exchanges to create coins and trading volume from nothing?

Crypto currency exchanges are starting to trade enormous daily volumes on their crypto currency exchanges.

All the transactions occur ‘off chain’, so they are not recorded on any blockchain or publicly accountable database.

Exchanges take deposits in crypto currency coins and then ‘credit’ your account with that amount ready for trading. For your deposit there is a verifiable blockchain transaction to the exchange but the crediting of your account appears to be just an entry on their database. Likewise, each trade on the exchange is just a ledger change on their own private database.

Exchanges do publish all the reported volume on their platform but how do we know if this volume is real and backed up by real crypto currency deposits? Quite frankly, we don’t know for certain so there is every chance that some of the volume or orders could be fakery. This means the crypto currency exchanges could have the power to act as market manipulators with ‘coins’ on the exchange created from nothing. We are calling this #CoinCreate .

Ponzi 

Sound familiar? Yes, it is exactly like fractional reserve banking or a ponzi scheme. As long as they have enough coins to pay each account holder when customers go to ‘withdraw’ then we are all good. Until of course the tide goes out and we have a ‘run’ on the exchange when everyone withdraws at once. Then we can see who is swimming without any trunks on.

Audit & Accountability

Do the exchanges have auditors or any accountability? All exchanges should be registered businesses, with some even being regulated, so they certainly should have an accountant or even an external auditor. However, as we have seen time and time again, any auditor being paid by the company to check the books often overlooks or doesn’t question crucial information. It takes quite some effort for an auditor to go that extra mile to ensure every check and balance is performed, especially in something like crypto which can be difficult to understand.

Likelihood

It seems like exchanges could certainly do #CoinCreate but are they actually doing it? It would certainly be tempting. History tells us that if someone can cheat they usually will. Cheating often starts small at first and then it becomes addictive and profitable so the temptation to profit further kicks in. Also the more people that become aware of whats going, the more people you have to ‘pay off’.

Incentive to be honest

There is certainly some incentive to be honest and not do this. Crypto is an early stage phenomenon and any bad actors now will potentially compromise themselves becoming an extremely large company in the the future, thus disincentivising gaming the market. Crypto is a passionate and honest space with some of the best minds on the planet ready to campaign and call out any bad actors in this space. Money and their savings is the driver and motivation, as with most things. The more people get ripped off the more angry people you will create. Therefore any short term and dishonest profiteering now risks forgoing long term success for any exchange that could become a very big player in this space.

Of course, the other major incentive is the threat of criminal prosecution from operating a ponzi scheme.

Solution

There are already ‘on chain’ type solutions but the speed, expense and low liquidity means they are underused. It just shows how people are willing to forgoe security for convenience up until the point they lose money. One solution is of course BitSquare but this has next to zero volume on most available markets. Therefore what is really needed for now is an exchange to open up their business ‘Bitcoin Style’ and put all their transactions on a publicly available immutable ledger ready for inspection at any time. Sounds fanciful yes, but this would give trust and assurance that they are not cheating their customers by creating volume and moving markets with proprietary trading from free credits #CoinCreate.

Blockchain Capital ICO

BlockChain Capital ICO

BlockChain Capital completes 10 million USD ICO.

A more traditional style Venture Capital fund has been launched by Blockchain Capital and has raised over the 10 million USD maximum in its first day and will invest all of this in anything but traditional ventures.

In what BlockChain Capital itself dubs a world first they have launched the First Digital Liquid Venture Fund which they say “will disrupt the traditional VC market and create the first of its kind “Digital LP” investment vehicle”.

The difference with this fund, and why it can disrupt, is that it will not only invest in companies associated with Blockchain technologies, such as Bitcoin, Ripple and Ethereum but it will issue a liquid tradeable token, representing value in the fund, that can be bought and sold on an exchange. This means that investors can essentially cash in their investment at any time as opposed to waiting many years like in a more established Venture Capital fund.

This Blockchain Capital token will be issued on the Ethereum Blockchain, and joins an increasing number of ICOs using Ethereum’s easy and straightforward deployment of secure tokens on its network.

Time will tell

We shall certainly see over time whether this fund is able to return value to its investors but with some big names backing it, and a massive treasure trove to pick the best investments from, it certainly has a great chance of retuning investors multiple times their original investment in 5-10 years.

The fund has essentially underwritten the value of the token at 1USD and thus creating a floor at its original par value. This is achieved trough their intent  to buy up any tokens in the event that it falls below this base value.

With the ICO raising finishing so quickly, it would have meant many would-be investors potential missing out on the initial offering. This will create a pent up demand and when the tokens are finally issued on Ethereum and listed for exchange you could see an initial explosion in price built around the hype and opportunity of a more regulated type token, of sorts, amidst a largely speculative and unregulated space.

Honey Pot

Of course now they have created a honey Pot for new and more established Blockchain type companies to request funding from. This makes Blockchain Capital the current ‘Belle of  the Bitcoin Ball’ and thus creating an opportunity to pick and choose from the most alluring suitors. This should at least mean the Fund managers being able to decide on more quality investments and not just any old Blockchain company with a great idea. With this space developing so fast, and there starting to be a number of well established players likley looking to expand their offerings, there will certainly be no shortage of suitors.

Open Blockchain not Permissioned database

If they use the mantra that the word ‘Blockchain’ cannot be replaced by the word ‘Database’ when looking at company pitches then it is likely to be a better type business investment. Many new startups and advisors are creating new closed access, permissioned style databases and calling it ‘Blockchain’ or ‘Distributed Ledger Technology’ and are really suggesting nothing better than an open SharePoint. Unless a company is building technology that resembles all of the main characteristics of Bitcoin such as having an open and permission-less innovation & security model then it will inevitably find it hard to differentiate itself. Any Blockchain investment needs to be disruptive and not just offering small efficiency gains here and there.

What next

It will be fascinating to see how the token trades when it is listed on exchanges and how they will restrict Non-Accredited US investors from buying the tokens. I suspect it will be listed only on a limited number of exchanges who conduct thorough KYC before allowing investors to buy. One such exchange could be the fairly new NYCEX, which looks fairly quiet but well designed and part of the Argon Group that helped launch the ICO on Tokenhub .

Watch this space…

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Eth v Eth Classic Round 3

ETC v ETH round 3: Trading