Tuesday, January 23, 2018

Deal with MoneyGram may help Ripple avoid worst effects of South Korean exchange ban rumou

While talk of South Korea banning cryptocurrency trading has caused the price of top coins such as bitcoin to decline considerably this week, the price of Ripple (XRP) was back over two dollars at least temporarily.
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The performance of Ripple is due to an announced deal with MoneyGram based in Dallas, Texas. MoneyGram shares rose more than six percent following the news.
MoneyGram is the second largest provider of money transfers in the world. The company operates in more than 200 countries with a global network of about 347,000 agent offices. It has a somewhat checkered history. However, it has been a thriving business of late.
MoneyGram will allow customers to send and complete cross-border payments using the token of Ripple XRP instead of fiat currencies such as the dollar. This system will allow real-time foreign exchange settlement through the coin "which gives financial institutions the ability to unlock liquidity and access multiple corridors with one pre-funded originating account".
Jack Ma, chairman of the Chinese giant Alibaba Group Holding and CEO of Ant Financial, was banned from acquiring Texas-based MoneyGram International this month and he gave up trying to buy it.
Ripple's performance
Back on December 1st last year, Ripple was trading at a little under 25 cents but by the beginning of this year it was at $2.21. It reached a high of $3.34 in January . While today it was over two dollars later in the day it dropped and is now trading at $1.92. It would seem that Ripple has not entirely escaped the negative effect of the South Korean announcement that it could ban trading in cryptocurrencies. However, just during the time I have written this, it is now above two dollars once again
South Korea has a high demand for cryptocurrencies so much so that prices of many coins are up to 30 percent higher on South Korean exchanges than those in other countries. The prices are so out of line that Coinbase decided to drop South Korean prices in determining an average price for coins.
From a relatively unimportant and unnoticed coin a few months ago, Ripple has become the third largest coin by market cap after bitcoin and ethereum's ether. Its market cap is now 76,768,530,617 as of Thursday evening. At one time it had surpassed ethereum. Two major venture capital firms Google Ventures and Standard Chartered bank have invested in Ripple.
While governments have been wary of cryptocoins, some of them are proving useful to established institutions creating a situation where governments may have conflicted attitudes about cryptocoins.
The Chinese government has banned initial coin offerings (ICOs) and shut down exchanges at least temporarily and is now cracking down on mining, but at the same time it recently awarded the TRON cryptocurrency developer an award for its technology and it has partnered with the top Chinese audio supplier Peiwo App.
The South Korean government clamp down on cryptocurrency trading and Ripple
Justice Minister Park Sang-ki said the decision to curb trading in cryptocoins is multi-departmental. The decision included members of the Finance Ministry as well as securities regulators. Sang-ki said to Reuters: “There are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges.”
Ripple had already announced last March a pilot program had been signed between two South Korean banks and a consortium of 61 Japanese banks. Ripple has deals with other banks as well. It is not clear how South Korean regulations might impact the Ripple project in South Korea.
Naeem Aslam, chief market strategist for London-based ThinkMarkets said: "Banning cryptocurrencies altogether would be difficult given that the country is one of the biggest markets in the world, especially for bitcoin and ethereum. Keep in mind that this is not the first time that the regulators have gone after the cryptocurrency market. During this week alone, we have seen two headlines emerging from South Korea aimed at bitcoin. There is no doubt that the demand for bitcoin in South Korea is massive and some elements of the public's behavior — when it comes to trading the cryptocurrencies — aren’t far from gambling habits."
Aslam said that traders should note that once the bill about cryptocurrency exchanges is drafted it will require the backing of 297 members of the National Assembly. The process he claimed could take months or even years.
Abhishek Pitti founder of Nucleus Vision a visual data company that uses blockchain technology, thinks that Ripple (XRP) will escape any South Korean ban. He notes that Ripple now has multiple institutional customers who are seriously considering using Ripple for cross border settlements. Pitti said: "I don't think South Korea is banning cryptocurrencies altogether. They are clamping down on unregulated exchanges so that shouldn't effect ripple because their primary users are regulated financial institutions.
More regulation but no bans?
No doubt governments will continue to crack down on cryptocurrencies, including unregulated exchanges, mining, and initial coin offerings. However, as interest in the coins grows and the coins have multi-billion dollar caps there would be a huge backlash against banning exchanges.
However, a new factor in the situation is the emergence of applications of the blockchain technology and cryptocurrency applied to existing financial institutions. Soon we may see some members of the financial establishment objecting to any outright ban on the exchange and use of cryptocurrencies.

Previously published in Digital Journal

Saturday, January 20, 2018

Kodak moves from cameras to cryptocoins with new Kodak Coin and blockchain platform

Venerable camera maker Eastman Kodak (KODK) decided it would stay relevant by entering the cryptocurrency business. After the announcement, its stock price on Tuesday more than doubled.
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KodakOne: managing image rights on a blockchain
Kodak is to team up with WENN Digital a blockchain developer and will launch a cryptocurrency and image licencing tool that the two companies claim will help photographers manage images and image rights.
The two companies will develop the KodakOne platform as a tool to allow photographers to "register and license their work using an encrypted, digital ledger. Users will also be able to accept payment for their work using a new cryptocurrency called KodakCoin."
Jeff Clarke CEO of Kodak said: "For many in the tech industry, 'blockchain' and 'cryptocurrency' are hot buzzwords, but for photographers who've long struggled to assert control over their work and how it's used, these buzzwords are the keys to solving what felt like an unsolvable problem. Kodak has always sought to democratize photography and make licensing fair to artists. These technologies give the photography community an innovative and easy way to do just that."
Kodak sees the new platform as providing photographers with a new means of gaining revenue and protecting their work.
A recent article describes how the system will work: "With the help of blockchain technology, the KODAKOne platform will create adigital ledger where ownership rights will be registered. Both professional and amateur photographers will be able to sell their work confidently on a platform and receive payment in KODAKCoins immediately upon sale. KODAKOne platform provides means of control in order to monitor and protect the IP of the images registered in the system."
WENN Digital CEO, Jan Denecke, said:“Engaging with a new platform, it is critical photographers know their work and their income is handled securely and with trust, which is exactly what we did with KODAKCoin,”
Kodak to launch an ICO to raise funds for project
The new services are to be launched and funds raised by an initial coin offering(ICO) a format used by many crytpocoin startups.
New services will be launched via an ICO, on Jan. 31.
Announcement boosts stock price
Kodak's (KODK) stock has shed almost 70 percent of its value over the last year but by Tuesday afternoon its price had surged 135 percent to $7.32.
At the close on Wednesday, the price had risen even further to $10.70.
Investors appear to be paying little attention to warnings about the riskiness of buying cryptocurrencies or participating in ICOs. The SEC warned investors last December to exercise caution in investing in cryptocoins or ICOs.
Kodak trying to reinvent itself after bankruptcy
Kodak was once a leader in the camera industry, providing film cartridges and paper as well as cameras. Although it produced digital cameras, it did not thrive and eventually went bankrupt six years ago. When it emerged it focused on digital printing and packaging but was still struggling.
No doubt Kodak is embracing cryptocurrencies and the blockchain in part to show it is relevant in these times. It remains to be seen whether this will work but at least the KodakOne platform seems to be related to the company's core interests. Only time will tell whether Kodak will thrive because it has embraced the blockchain technology.

Previously published in Digital Journal

Friday, January 19, 2018

Three firms withdraw applications for ETFs linked to bitcion

(January 10)Several different firms who were seeking to list exchange-traded funds (ETFs) linked to bitcoin withdrew their filings after negative feedback from the Securities and Exchange Commission (SEC).

Three firms withdraw applications for ETFs
Three firms, Direxion Shares ETF Trust, Exchange Listed Funds Trust and ProShares Trust had all filed for permission to create ETFs in the past month. Even though none of the funds would have directly held bitcoins the SEC asked them to withdraw the applications until concerns of the SEC about the liquidity and valuation of bitcoins are resolved.
The price movements of the ETF's would be driven by changes in prices in the two bitcoin futures markets that are now operating, the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME). All three companies recently wrote letters to the SEC withdrawing their applications after feedback from the SEC.
The secretary of Direxion wrote: "On a call with the Staff on January 5, 2018, the Staff expressed concerns regarding the liquidity and valuation of the underlying instruments in which the Fund intends to primarily invest and requested that the Trust withdraw the Amendment until such time as these concerns are resolved. In response to the Staff's request, the Trust respectfully requests withdrawal of the Amendment." "Staff" refers to staff of the SEC.
The letter from ProShares had similar language saying that the letter requesting withdrawal came from a request from the Staff according to Richard Morris, general counsel and secretary for ProShares. However, he also wrote: "The timing of these withdrawals is notable, given that the SEC just released two other rule change proposals which could allow for a bitcoin ETF last week. Those proposals, filed by the Chicago Board Options Exchange (Cboe), would exempt its proposed ETFs from several market manipulation rules which govern traditional assets. The SEC is seeking public input on the proposals." Both of the rule changes noted that bitcoin did not behave like traditional assets.
The SEC has released the CBOE proposals for public comment. However, the SEC has a long history of asking for withdrawals of proposals for bitcoin ETFs. A number of organisations withdrew ETF proposals last year at the request of the SEC. But at least 2 proposals were denied because no bitcoin future contracts were available at the time. Given now two exchanges trade bitcoin futures no doubt many felt that ETF's would now be allowed by the SEC
Some analysts thought now there are bitcoin futures trading there would be ETFs
ProShares announced last September that it wanted to launch bitcoin-based ETFs before there were any exchanges trading bitcoin futures. Industry watchers thought that futures trading would provide the impetus to approve ETFs since this would set a concrete price level to value the funds.
ProShares is the tenth largest ETF provider with $29.5 million under its management within the $3.5 trillion industry.
Direxion Asset Management had proposed a set of ETFs that would allow investors to capture multiples of the performance of bitrcoin futures. The four funds would deliver 1, 1,25, 1.5, and 2 times the return either higher or lower. One strategist called the proposal insane. The firm has almost $13 billion of assets under management.
Futures contracts and ETFs have different regulators
The SEC regulates ETFs, while Commodity Futures Trading Commission (CFTC)regulates futures contracts. The CFTC has been under some pressure to deal with concerns that it did not fully address risks that bitcoin poses to the financial system. Regulators have been struggling with how to deal bitcoin as a new asset class.
Bitcoin can be used to move money around the world quickly and relatively anonymously. There is no need for a central authority such as a bank or government to be involved in the transaction. This no doubt concerns authorities but is also one of the virtues of the system as far as some of its libertarian supporters are concerned.
The volatility of bitcoin's price is seen as a problem by many. Over the last two years bitcoin has lost more than ten percent on a single day 26 different times. Some still expect that there will be bitcoin futures-based ETFs some time this year.
Previously published in Digital Journal

Thursday, January 18, 2018

Cryptocoin Tron's Peiwo App wins Chines government award and approval

(January 9) Tron is a new cryptocoin having been released just last September. Tron intends to build a worldwide free content entertainment system using both blockchain technology and distributed storage technology.

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The Tron protocol allows users to freely publish store and own data. The Tron website says that the protocol, will form a decentralized content entertainment ecosystem.
Tron hopes to undercut its centralised competitors such as Google Play and Apple's App Store, both of which it claims charge high fees.
The TRON team members see their protocol as an asset for people rather than a tool to make profit for a few. The group are followers of Sir Tim Berners-Lee. Berners-Lee is inventor of the World Wide Web and Professor of Computer Science at the University of Oxford.

Tron is based upon the technology used in etherium, the second largest cryptocurrency by market cap.
Tron is a 1982 US science fiction movie written and directed by Steven Lisberger and produced by Walt Disney Productions. Presumably the coin is named after the film.
The coin associated with Tron is called Tronix (TRX).
The TRON Foundation
The team members established the TRON foundation in Singapore as a non-profit organization that operates the TRON network based upon the principles of fairness and transparency. The Foundation supports the TRON development team.
The Foundation is set up with approval from the Accounting and Corporate Regulatory Authority(ACRA) under the supervision of the Company Law of Singapore. Singapore is well known for having a stable and well-established set of laws and financial establishment. Any surplus will be retained to use for the purposes of the foundation and members of the foundation will never obtain a share of any surplus.
Peiwo App and the Chinese government
The first TRON-compatible entertainment app is the Peiwo App with a huge number of users.
Peiwo Huanie Technology Co. (Beijing), the parent of Peiwo APP is in the list of high--tech enterprises identified in 2017 by the Chinese government. This means that Peiwo APP and the online entertainment forms and technologies of its audio content community have been recognized by the government. No doubt its market will expand.
Ironically, this approval is happening just as is reported in a recent Digital Journal article the Chinese government is moving to clamp down on bitcoin mining operations causing a decline in bitcoin and other cryptocoin prices.

The National High-tech Enterprises is a policy of the Chinese government meant to promote rapid development of high-tech enterprises. There are strict standards governing inclusion. Companies that qualify obtain a series of concessions including tax relief to help chosen enterprises to do more independent research and development.
Peiwo APP
Peiwo APP is the largest audio content provider in China, in fact, in the world. It has more than 10 million registered users and over one million active users each month.
Users of Peiwo APP are mostly young people between the ages of 17-25 located in cities in China, but as well in North America, Australia, Japan, Western Europe and other areas.
Justin Sun, founder of TRON and the Peiwo APP said:“Peiwo APP is a leading application of online audio content community and a core member of the TRON Union. This access to the national high-tech enterprise qualification represents significant recognition of the long-term persistence of Peiwo APP. Recently, we also noticed that the popularity of online audio entertainment has been on the rise, and the market is constantly expanding. For Peiwo APP, we can only make progress steadily and provide better Service, so as to live up to everyone’s support.”
The appended video gives more background on Sun who has plenty of experience in cryptocurrencies.
Tron's present price and market cap
As I finish this article on Tuesday evening, Tron's price is at 0.135741 a big drop of almost half from its price on Friday when it reached about 25 cents. However, it is still a huge gain from December 1st last year when it was only .002, a fifth of a cent.
Tron is the tenth biggest cryptocoin by market cap. Its cap is $8,924,725,395.
Tron has faced criticism for possible plagiarism and recently rumours of a sell off by Sun of a huge number of shares may have led to panic selling.

Previously published in Digital Journal

Wednesday, January 17, 2018

Cardano cryptocoin application used to verify academic credentials

The cryptocurrency area is developing quickly with real world applications of the platforms being created. Cardano is a good example of a blockchain application that is already being tested through authentication of academic qualifications in Greece.
Most news about cryptocurrencies concentrates upon a very few coins with bitcoin receiving by far the most publicity. A few others are sometimes mentioned, such as ethereum, ripple, bitcoin cash and litecoin, but there are many other important coins that are rarely if ever mentioned in mainstream news. Cardano, named after the Italian polymath Gerolamo Cardano, is one of these illustrious cryptocoins.
Cardano is a proof of stake(PoS) blockhain
Unlike bitcoin and many other coins that use proof-of-work (PoW), the solution of computational puzzles by miners to validate transactions and create new blocks in the chain, the PoS system uses an algorithm to achieve a distributed consensus. The creator of a block is not chosen by mining and the solution of a computation problem but the creator of the next block is chosen by a combination of random selection combined with other factors (the stake). This system no doubt avoids the expense of mining that increases transactions costs and can slow down transaction times.
Cardano and the IOHK
Cardano was created by the technology company Input Output Hong Kong (IOHK) . The firm has its own website where it describes its mission. The company specializes in blockchain and cryptocurrency development for academic institutions.
READ MORE: Bitcoin market turns bearish as China plans 'orderly exit'
The firm has partnered with both the University of Edinburgh as well as the Tokyo Institute of Technology to bring together academics and students for cryptocurrency and distributed ledger studies.
The coin associated with Cardano is called Ada (ADA).
Cardano now fifth largest cryptocoin by market cap
Cardano is now the fifth largest cryptoin . As I write this Cardano has a market cap of $23,435,867, 965. The price is approximately ninety cents. There are 25,927,070, 538 Ada coins. The price can change quickly so check the link to see what the price is as you read this.
Charles Hoskinson
Charles Hoskinson is an American technology entrepreneur and mathematician. However after industry exposure he became interested in cryptography. Hoskinson has ample experience in cryptocurrency related startups being involved with Ethereum as well as being co-founder of IOHK that launched Cardano. He was also founding chair of the Bitcoin Foundation's education committee. In September of 2013 he found the Cryptocurrency Research Group.
At present, he is concentrating on education on cryptocurrency topics as well as making cryptographic tools easier for the mainstream to use. The Greek employment of the Cardano platform is no doubt an example of this.
The Cardano project in Greece.
The Cardano blockchain launched in September last year although it had been developed over several years.
GRNET, the Greek national research and education network is working on a pilot project to verify student diplomas using the Cardano blockchain.
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This will be the first official use of Cardano which will also soon have a smart contract platform also being developed by IOHK.
Enterprise Cardano
The GRNET app is to be built on Enterprise Cardano. This is a private ledger version of Cardano. Only a restricted set of users can validate block transactions whereas in the public blockchain version anyone could join.
In the pilot project, there will be three Greek universities participating. IOHK will provide the database, while GRNET will provide the web front end and support. Part of the funding for the project comes from Horizon 2020, that is a European program for research and innovation.
Why put diplomas on a blockchain?
Putting the diplomas on a blockchain removes all the paperwork involved in authenticating degrees and simplifies the process of checking on someone's academic credentials.
When a student graduates he or she receives a copy of the diploma signed by the dean and co-signed by the registrar. The students' transcripts and records will be stored in the university database. An employer must check the official degree or call the university to check on the degree. The process is not just labor-intensive, it often results in some unqualified applicants not being detected.
The IOHK chief scientist Aggelos Kiayas said that putting documents and records on the blocklchain eliminated opportunity for fraud and allowed graduates and universities to issue an undeniable proof that a qualification exists. He said:. “This is a point of reference that can be agreed [on] by everyone.”
Panos Louridas, a GRNET consultant and associate professor at the Athens University of Economics and Business said:“We cannot put any plaintext on the blockchain, as diplomas and transcripts are personal information. We only put hashes; we may put entire diplomas and transcripts, but they will always be encrypted."
Last October the Massachussets Institute of Technology also announced a pilot project to verify digital diplomas in the blockchain. However Louridas claims the GRNET project is different in that it stores the entire chain of verification steps on the blockchain. Each step would be its own unchangeable transaction on a separate block of the chain.
Louridas said: “You don’t really need a blockchain to store diplomas: a simple system with some digital signatures by the host institution would do. We want to be able to record that somebody has asked for proof of a degree, that the proof has been granted, that the proof has been forwarded to a verifier, and that the verifier can verify that the degree is valid, and nobody can dispute any of the above steps.”
The three Greek universities involved in the project are: Aristotle University of Thessaloniki, Democritus University of Thrace, and the Athens University of Economics and Business. No doubt if the pilot project is successful the system will be used more widely.
I have appended a long interview with Hoskinson as well as a shorter introduction to Cardona. The introduction has information about scaling and also of Cardona's relation to ethereum.

Previously published in Digital Journal

Tuesday, January 16, 2018

IOTA a new cryptocoin and tangle a new technology

IOTA stands for "Internet of Things Application". The platform is designed to provide secure communications and payments between all the different items on the Internet of Things (IoT). The name also relates to small things communicating within the IoT.

IOTA and the Internet of Things (IoT)
As noted, IOTA, founded in 2015 by David Senstebe, Sergey Ivcanchegio, Dominik Schiener and Dr. Serquei Popov, is designed as a secure payments and communications platform for machines that are part of the Internet of Things.
IOTA does not use the traditional blockchain technology of most coins such as bitcoin, ethereum and many others but a special type of directed acylic graph (DAG) technology called tangle.
The advantages of tangle versus the blockchain
Unlike transactions on blockchains, such as those involving bitcoin, tangle transactions are free regardless of size. Confirmation times are quite fast. The tangle system can handle an unlimited number of transactions simultaneously, unlike bitcoin.
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Iota also has the advantage of not needing any miners, as the authentication process just involves the users linked together in the tangle. This does away with the costs of paying miners in the iota coin for their work in solving mathematical problems to authenticate transactions. Everyone who initiates a transaction must verify two other random transactions.
Compared to a blockchain system, the more people who are using the tangle system, the faster it is. Also, unlike bItcoins, all Iota coins already exist, so mining the currency is not required. However, the supply of Iota coins is huge.
The number of Iota coins and units
There is a fixed supply of 2,779,530,283,277,761 Iota coins.
The smallest unit is the iota named after the ninth letter of the Greek alphabet or 1i. A Kiloiota or one Kiota. Ki, is equal to 1,000 i. A million i or 1 Miota is called a Megaiota 0r 1Mi. A billion is a Gigalota or one GIota, 1Gi. A trillion is a Teraota or 1 Tiota, 1Ti. Finally there is the Petaiota, or 1 Piota, 1Pi. The base unit for trading on excahanges is the Miota (Mi). The symbol on exchanges is MIOTA.
An example of how Iota might work
Consider an electric vehicle (EV) coming into a charging station. The method of payment would be using IOTA. Both the EV and the charging station would be able to understand the IOTA protocol used to facilitate the payment. The EV and the charging station are both items in the IoT and are able to use IOTA to communicate and make payments.
IOTA already has collaboration with Deutsche Telecom, Microsoft and Fujitsu. Obviously, big players in the technical area must see potentiality in the platform.
Present price of Iota

As I write this the present price of Iota (symbol MIOTA) is $4.05. This is down considerably from a high of over five dollars in December of 2017 but is a huge improvement over its price during November when it was just around 39 cents.
Iota is one of the top ten cryptocurrencies rated by market value. It is number ten with a market value of $11,297,289,654

Previously published in Digital Journal

Monday, January 15, 2018

Cryptocoin Stellar has a stellar start to the New Year

What could become the hottest digital coin of 2018 climbed in price from Friday December 29th 2017 more than 65 percent to become the 8th largest cryptocoin by capitalization on Tuesday January 2nd with a market cap of $10 billion.
On the same day, the price rose 17.5 percent to 56.4 cents.
Stellar is an open-source protocol for value exchange. It was founded in 2014 led by Jed McCaleb and Joyce Kim with a number of board members. The protocol is supported by the non-profit Stellar Development Foundation.
Wikipedia describes the design of Stellar as follows:Stellar is an open-source protocol for exchanging money. Servers run a software implementation of the protocol, and use the Internet to connect to and communicate with other Stellar servers, forming a global value exchange network. Each server stores a record of all “accounts” on the network. These records are stored in a database called the “ledger”. Servers propose changes to the ledger by proposing “transactions”, which move accounts from one state to another by spending the account’s balance or changing a property of the account. All of the servers come to agreement on which set of transactions to apply to the current ledger through a process called “consensus”. The consensus process happens at a regular interval, typically every 2 to 4 seconds. This keeps each server’s copy of the ledger in sync and identical.
At its launch Stellar was based on Ripple. However, the protocol was later updated with a new consensus algorithm. The code for the new algorithm was released in April of 2015
The official name of the coin associated with Stellar is lumen, XLM.
Real world applications of Stellar
Several nonprofit organizations and businesses are using Stellar for their financial infrastructure particularly in the developing world
The Praekelt Foundation, has integrated Stellar into Yumi that is an open-source messaging app that allows young girls in sub-Saharan Africa to save money on airtime credits.
Another example is Oradian, a cloud-based banking software company, that is planning to use Stellar to connect microfinance institutions in Nigeria.
In December of last year Stellar announced more partnerships in the Philippines, India and West Africa.
In October of 2017, Stellar announced it had partnered with IBM to increase the speed of global payments. Consulting firm Deloitte is also a partner.
Stellar's transaction speed is very fast
In contrast to coins such as bitcoin, transactions through Stellar take only two to five seconds. Users can quickly exchange government-backed fiat currencies such as U.S. dollars into Euros and vice versa.
Jed McCaleb
McCaleb is an American programmer. He is widely known for creating peer-to-peer technologies such as eDonkey used for sharing files.
He was also involved with the large Japanese bitcoin exchange Mt. Gox but it was later sold to Mark Kapeles. The exchange eventually was closed after many of its bitcoins were stolen and the exchange filed for bankruptcy after scandalously bad if not criminal management problems.
In 2011 McCaleb founded another company Ripple that also focuses on payments and rose considerably in value last year. As a recent Digital Journal article reports Ripple is now the second largest cryptocoin in terms of market capitalization. McCaleb left Ripple in 2013 and went on to lead the development of Stellar in 2014. Ripple is also working with financial institutions in South Korea and Japan using the ripple coin XRP.
McCaleb is now focused on Stellar. The Stellar website claims that it operates on a non-profit basis. It covers operating costs through selling some of its digital currency holdings and through donations.

Previously published in the Digital Journal

Friday, January 12, 2018

Analyzing the cryptocurrency market using factor analysis

A mathematical tool called factor analysis can identify user experiences that appear to be important in determining prices of the more than 3,000 cryptocurrencies.
Price movements of individual coins versus in the total cryptocurrency market
Reporting and discussion of cryptocurrencies is often focused on abrupt large gains or losses of individual coins. Bitcoin's rise of 88 percent from Dec. 1 to Dec. 19 and then its fall of 23 percent by Dec. 30 is a good example. The net return for the month was 44 percent.
However, little attention was paid to the entire cryptocurrency market and what was happening in it. The market value of all non-bitcoin crypto assets rose 153 percent during bitcoin's upswing, and four percent more while bitcoin declined, for a return of 162 percent for December.
Factor analysis of the cryptocurrency market
Traditional financial metrics such as are used to evaluate stocks are of little use in evaluating cryptocurrencies. There are altogether more than 3,000 different cryptocurrencies, each with often overlapping but not identical technical underpinnings. Factor analysis is one way in which the market for these many different coins can be understood.
While hashing power, block size and supply control can provide some tools for evaluating individual coins, factor analysis can identify user experiences that appear important for setting prices according to Aaron Brown in a recent Bloomberg article.
Brown uses statistics to identify the main factors that appear to have driven most of the movement in the prices of cryptocoins during the month of December. The four factors are shown graphically in the article.
The four factors: mainstream, speed, community, ease
Each factor is a portfolio with long and short positions in many cryptocurrencies according to Brown which are determined solely by statistics. Brown chose the names for the four factors.
Brown does not explicitly define what he means by mainstream but it appears to mean the extent to which a coin would be accepted into the mainstream of financial investments. Over the month the factor declined in importance during the first couple of weeks but then recovered importance and became extremely important at the end of December.
The mainstream factor has given positive weights to coins such as Ripple, Cardiano and Stellar, all currencies that are so designed as to get along with regulations and institutions. Ripple has a payments system already used by some banks. Other coins such as Monero , Dash and Zcash are all designed for user privacy and these coins have negative weights in terms of mainstream.
Brown suggests that the mainstream factor declined over the first couple of weeks in the month because it was expected that bitcoin would go mainstream with the launching of the two futures markets. If regulators and institutions accepted bitcoin there would be less need for regulation-friendly currencies and some bitcoin users could switch to more private coins. Personally I don't see the logic in such reasoning. That one major coin bitcoin becomes more mainstream does not change the role of other coins such as Monero being just as useful for nefarious purposes as before and regarded as in need of regulation.
Brown says the factor drifted back up in importance as futures trading did not lead to large bitcoin holders transferring their exposure to financial institutions. He believes the sharp upward spike at the end of the month was based on optimism that bitcoin would remain a currency for libertarians and technophiles leaving the way open for inoffensive alternatives.
Speed and Ease
These factors relate to the convenience of transactions
Litecoin, Ripple, Monero and Ethereum are all positive with respect to the speed factor whereas Litecoin is negative. The high traffic and its failure to enlarge the size of its blocks has resulted in much slower transaction times for bitcoin as compared to many other coins.
Ease is regarded as positive for coins such as Litecoin and Dash which both have low transaction costs and are user-friendly, at least in relative terms.
The importance of the Ease factor drifted downwards until the middle of the month where it remained the rest of the month as the least important factor.
Speed also dropped in significance in the early part of the month but then rose considerably and briefly near the end of the month became the most important factor before the huge spike in the importance of mainstream.
This factor refers to the size, quality, and enthusiasm of the developer and support community associated with a coin. A successful coin needs a broad base of sophisticated users to try the features of the developing platform and provide informed feedback. There needs to be long term capital invested. Bitcoin and ethereum are given the largest weight for this factor. This is not surprising given that they are the 1st and 3rd largest coins. However, one might think that the cohesion of the community is also an important factor as divisions can cause forks that can cause declines at least temporarily.
Ripple and Monero are said to have smaller but positive weights for this factor. Negative weights would apply to coins that have little or no active development or have had hacks or scandals or disputes in their past. Surely bitcoin has had disputes and also scandals at least indirectly connected to the coin. However, this happened in other months than that studied.
For the first half of the month, the importance of community rose to be the most important factor before declining to third place in the latter half of the month. Brown says of the movement of the factor: "My guess is that faith in established cryptocurrency communities was shaken by the sudden dollar flood; kind of like a rock band falling apart after having a hit. Some people fought the intrusion of Wall Street, others took the money and ran. Some felt cheated by how little they had to show for years of work on a group project, when others who had contributed far less were multimillionaires. When visionary idealists collide with big money, the results are hard to predict."
Tools for investing in cryptocurrencies
Brown notes that his analysis is not meant as investment advice. Based on the chart some people may decide to invest in mainstream currencies, while at the same time shorting privacy-linked coins such as Monero. However, to short Monero is probably unwise given its trend line and its usefulness, speed and its attraction to many groups because of its privacy.
Others may see that Ease can be bought cheaply and may buy coins with high Ease ratings hoping that they will increase in importance. However, as Brown puts it, the factors can filter out noise but cannot tell you what will happen in 2018. Indeed, Brown's analysis appears to be more useful at understanding what happened in the past rather than providing a tool for rational betting on the future.
While factor analysis may be of some help in investing rationally, such analysis can always be supplemented by other types of analysis. Technical analysis that can identify trend lines and likely directions of price movements is another such tool, as described in this article.
As well, there are certain facts about both an individual coin and of wider scope that have obvious linkages to the price of coins. The crackdown on cryptocurrency exchanges and initial coin offerings (ICOs) in China is an example of a fact of wider scope. An impending change in blockchain rules is an example of a fact that could have a negative effect on the price of an individual coin. Listing on an important exchange is another.
While there may be no way of assessing the value of cryptocurrencies as one can assets such as stocks, there are still other methods of analysis and many facts that are relevant to determining how prices of coins are liable to move. However, with cryptocoins in particular even the best analysis no doubt will remain uncertain and investment quite risky.

Published previously in the Digital Journal

Thursday, January 11, 2018

North Korea may be creating its own skilled cadre of hackers to steal and mine cryptocurrencies to gain revenue

North Korea may be producing its own hackers and cryptocurrency miners as a means of collecting much needed revenue, as well as perhaps using cryptocurrency as a means of payment for illegal transactions as the country is subject to severe sanctions.

North Korea accused of stealing cryptocurrencies as a revenue source
A group of North Korean hackers called Anadarei are accused of breaching a server in South Korea and stealing 70 Monero coins during last summer according to an analysis carried out by the South Korean government. The coins were valued in total at about $25,000 US.
Collecting ransoms in bitcoin?
North Korea has also been accused by the U.S. of having orchestrated the Wannacry ransom attacks back in May. The attacks crippled more than 300,000 servers and victims had to pay a ransom in bitcoin to gain access to their files.
The UN, often at the urging of the U.S., has continually increased sanctions on North Korea making it difficult for it to earn money through exports . As a result, the country may think it has to resort to illegal means to raise funds and also no doubt to use cryptocurrencies as a means of payment. North Korea is cut off from using regular financial institutions. However, it can make payments anonymously using cryptocurrencies such as Monero.
South Korean concerns about the use of cryptocurrencies as an economic weapon by North Korea may lead the South Korean government to initiate a crackdown on their use.
Monero (XMR) is an open source cryptocurrency created back in April of 2014. The coin focuses on privacy and decentralization. Wikipedia says:
Monero aims to improve on existing cryptocurrency design by obscuring sender, recipient and amount of every transaction made as well as making the mining process more egalitarian.[3]The focus on privacy has attracted illicit use by people interested in evading law enforcement.[4][5] The egalitarian mining process made it viable to distribute the mining effort opening new funding avenues for both legitimate online publishers and malicious hackers who covertly embed the mining code into websites and apps.[6]
Kwak Kyoung-Ju head of the Financial Security Institute in South Korea noted that it is much harder to trace Monero than competitors such as Bitcoin and Ethereum. He said that this makes it easier to use to launder money.
Andarei alleged to use stolen computer power for mining Monero
As a recent Digital Journal article reports, the North Korean hacker group Andarei allegedly used computer power from South Korean servers to mine Monero coins without the South Koreans being aware what was happening.
North Korean hackers looking for funds over government secrets
Kwak said: "Andariel is going after anything that generates cash these days. Dust gathered over time builds a mountain."
Lee Dong-geun chief analyst at the government-run Korea Internet Security Center in Seoul said that the main emphasis of North Korean cyber attacks had changed: "North Korean threats meant attacks on the government and national defense, but now they are looming very large over the private sector. They are primarily after information for financial ends.”
While accusations by South Korea and the U.S. against North Korea about cyberattacks may sometimes lack independent verification, it is plausible, given the strict sanctions against the country, that the North developing a skilled cadre of hackers to raise revenue through hacking and mining cryptocurrencies. It could reasonably also use cryptocurrencies such as monero as an alternative payment system to the international banking system.

Previously published in Digital Journal

Tuesday, January 9, 2018

Canadian attempt to send yaks to far north fails

Back in the fifties and sixties of the last century, Canada had plans to ship yaks into northern Quebec where they would serve to help the Inuit survive the decline of the caribou herd upon which they had depended.
The origin and rationale of the plan
The plan outlined in a paper by David Meren of the University of Montreal was intended to introduce the yaks to the Inuit people of Ungava Bay in the northern part of the province of Quebec.
Meren thinks the plan originated in 1953 with Grant Carman an animal husbandry expert at the Ottawa Experimental Farm. In turn he was considering an idea of Marjorie Findlay a McGill university PhD student who thought that sheep farming could be introduced into the far north as a means by which the Inuit could cope with the rapid decline of the caribou herds upon which they depended.
In her thesis, Findlay compared the Inuit of Ungava Bay to indigenous Greenland residents among whom she had studied. Her plan was to ease the Inuit slowly into mainstream Canadian society as their traditional ways were threatened by the decline of the caribou herds.
Carman thought that yaks would be a better fit for the purpose than sheep. Yaks are able to stand very cold climates.
The connection with India
The Canadian government also sought to use the plan to develop a special relationship with newly-independent India. Then Minister of Northern Affairs and Natural Resources, Jean Lesage even asked Prime Minister Louis St. Laurent to raise the issue with Jawaharial Nehru who was then his Indian counterpart.
In a letter to St. Laurent, Lesage wrote: “There might be some appeal to Mr. Nehru and to the people of India in the idea that it would be possible for them to reciprocate in some measure the assistance that Canada has been providing." However, in the end St. Laurent never got the chance to ask India for some yaks.
Canadians have a history of trying to raise yaks
Diane Latona , a historian with the International Yak Association points out that prior to the plan Canadians had been trying to breed yaks, but with mostly poor results, for about half a century.
As early as 1907 the Canadian governor general Earl Grey wrote to the Secretary of State for the British Colonies noting a plan to import Tibetan yaks into Canada. In 1908 there was a record of a shipment of yaks in November.
For some time, scientists at a facility in Wainwright Alberta tried interbreeding yaks with bison and cows. The interbreeding works but the males are uniformly sterile and the hybrids did not thrive. While yaks can survive cold climes older ones require a great deal of food and shelter to stay warm and survive.
The International Yak Association
Latona runs her own yak farm in the state of Washington. The International Yak Association has its own website.
There are quite a number of yak ranches in the US in states such as Colorado, Michigan, Washington, Minnesota and others. Yaks can stand cold weather and are adapted for mountainous regions but they need lots to eat in the form of grass or hay and shelter to survive.
The Association estimates there are about 7,500 yaks in North America.
Yaks can be raised successfully in Canada
Phil Marsh who farms near McBride BC had a herd of 250 yaks that he put up for sale in the Western Producer in 2014 in order to concentrate on a second business interest he had.
Marsh bought his first yaks in 2006 and slowly expanded his herd. He sold yak meat to a Vancouver wholesale company that resold top cuts to high end Vancouver restaurants. Marsh said it was a good business.
Marsh said that the yaks required minimum maintenance, were easy calvers and did not require special feed nor special fences. They also will not chase you out of the pasture.
Marsh estimated that there are less than a thousand yaks in Canada mostly just four or five animals to a farm.
Canadian government continues to plan to raise yaks
A new plan to send yaks to northern Quebec never came to fruition as the Department of Agriculture citing a fear of hoof and mouth disease vetoed an idea of bringing a herd in from India. However, in 1956 the Canadian government got three yaks from the Catskill Game Farm in New York.
However one turned out not to be fertile and had to be replaced. The idea was to build a herd at the Ottawa Experimental Farm. It was decided that building up a big herd could take decades. Female Yaks have only one calf often every other year. They can live up to twenty years.
Six yaks two males and four females were shipped off by the Canadian government to Al Oeming's Game Farm just outside of Edmonton Alberta. Todd, Oeming's son says that they now have a herd of more than 40 yaks.
It is just as well that the yaks never got to Ungava, where large amounts of hay or other feed would have had to be shipped there somehow to keep the yaks alive over winter, at a huge cost. However, they could serve as a source of meat.

Previously published in Digital Journal

Ethereum reaches a record high at start of the New Year

(January 2)Ether, the coin or token associated with the ethereum platform started 2018 right reaching an all-time high of over $900 this morning January 2.
Ethereum is the third largest cryptocurrency by capitalization after being overtaken by Ripple for second place late last year.
Ether's market capitalization is almost $85 billion. 79 million coins are in circulation.
Ether's capitalization is about $11 billion short of the second largest coin ripple. Ripple is a cryptocurrency that’s meant to be a new payments system for banks and other financial institutions. Ether's capitalization is about $150 billion less than that of bitcoin.
Ether's record rise
Ether started to rise around midnight Coordinated Universal Time (UTC) and had reached a high of $914.83 at 02:30 UTC.
Within the last 24 hours the price of ether has risen 14.52 percent . Another article speaks of the price of bitcoin rising by as much as 19 percent in the last 24 hours but no doubt is referring to a different time period.
Price increases are being accompanied by larger trading volumes. This is particularly true on Asian exchanges in Singapore, Japan, Hong Kong and South Korea.
The cryptocurrency market is generally positive today with their market cap reaching a new high of $645 billion.
Ether and many other cryptocurrencies did well in 2017
Ether performed well in 2017. Over the year its price showed an amazing increase of 9,100 percent. Even at that it was just the sixth best performing cryptocurrency last year. Bitcoin which received most publicity for its increases was just 14th rising 1,318 percent during the year.
Bitcoin's share of market is decreasing
While bitcoin still leads the market, its very success has stirred interest in other coins. This has led to more investment in ethereum, ripple, litecoin, bitcoin cash and many other cryptocurrencies.
Bitcoin's share of the market is now at a historic low of just 36 percent.
The positive cryptocurrency market today
All the ten largest coins rose significantly in value today so far.
Although bitcoin is not leading the charge upward in the New Year, it seems to be in recovery mode. It rose to $14,043, an increase of close to five percent in 24 hours. Its market cap is now $235.6 billion. It is still a long way from a high close to $20,000 in December but many thought it was long overdue for a significant correction in its price before any further rise.
According to this article, Ripple rose 11.48 percent to a new record while Ethereum rose 16.97 percent also a new high. Stellar an eighth place coin rose a humongous 36.03 percent to $665 a record high.
While for the most part there is no special news that has led to the rise in many cryptocurrencies, Ethereum may be benefiting from the launch of a test network for Casper, an Ethereum upgrade as indicated on the appended video.
Many bitcoin competitors have been actively developing projects. Investors may be looking at platforms that are developing useful projects or projects that have potential utility as in Ripple's bank payment system. However, it may not be wise to bet against bitcoin. It could just be in a consolidation process before it takes off upwards again.

Previously published in Digital Journal

Sunday, January 7, 2018

In US there were 375 robocall complaints per month during 2017

In 2017 complaints about automated telemarketing calls (robocalls) in the US rose sharply. Since 2009 they have risen by a factor of five times.
A recent Federal Trade Commission (FTC) report shows there were 375,000 complaints per month about automated robocalls compared with 63,000 per month in 2009. Robocalls are not the only problems, as in 2017 there were also 2.5 million complaints about live telemarketing calls. The total complaints about robocalls during 2017 were 4.5 million.
Why there are more robocalls
Internet calling services and autodiaing are now cheap and easy to access. Spammers are developing more ways to easily hide their identity and location.
Spammers can now make it look as if they are calling locally as they seem to come from a local area code.
Popular robocall subjects
The most popular complaint is about debt reduction calls. Here in Canada, perhaps it is similar. I am constantly getting calls about reducing interest charges on my credit card. My credit card never had a negative balance so I paid no interest.
The are also many calls about vacations and timeshares, prescription medication, and warranties. As well there are "imposter" calls that purport to be from government, businesses, or friends when they are not.
Those making illegal robocalls are facing bigger fines
Most US robocalls are not legal even if the recipients are not on the National Do Not Call Registry. There are exceptions including charities and political campaigns.
Adrian Abramovich, a resident of Miami Florida, auto-dialed hundreds of millions of robocalls to land lines and cell phones both in the United States and Canada. In the last three months of 2016 alone he made almost 97 million robocalls.
Federal regulators say that Abramovich's campaign was one of the largest they have ever investigated. At one point, his calls even overwhelmed an emergency medical paging service.
The Federal Communications Commission (FCC) is proposing he face a fine of $120 million.
More steps being taken to block robocalls
Earlier this year, T-Mobile introduced Scam ID and Scam Block that was later extended to MetroPCS users. Scam Block keeps the robocalls from reaching a phone entirely. They are both free.
As well, the FCC passed a proposal that would allow phone companies to block calls that spoof nonexistent numbers.
However, as the report complaint numbers show, the number of annoying robocalls continues to grow.

Previously published in Digital Journal

Ireland's Data Protection Commissioner investigating Twitter over data privacy concern.

Irish privacy regulators are launching an investigation into precisely how much data Twitter collects from t.co, its URL-shortening system....