Ripple rose on talk of its being listed on Coinbase

(February 17)Ripple did very well in 2017 making far greater gains than the top two cryptocoins Ethereum and Bitcoin. The gains extended into early January.

For a brief period Ripple was even the second largest cryptocoin by market cap after bitcoin as reported in a Digital Journal article.

Ripple's development

Ripple was launched in 2012 and was designed specifically to carry out interbank settlement and payments. Ripple is one of several cryptocoins that looks to be adopted by mainstream financial institutions rather than replacing them or even regarding them as the enemy of cryptocoins.

The developers of Ripple hoped that the present volatility of the cryptocurrency market would be lessened through the use of Ripple and its payment system.

The company claims to have more than 100 banks using its RippleNet platform. A group of Japanese banks is also testing the system. Also involved are RBC, Bank of America and UBS.

Positive news for Ripple

Originally the Ripple team developed 99 billion Ripple coins or XRP. The group raised about $38 billion from global sales. However in May last year the team moved $55 billion XRP into an escrow account, and then released one billion onto the general market. Recent gains show growing confidence in its development.

Talk continues surrounding Coinbase, a widely used exchange operating in over 32 countries, and whether it will announce Ripple as a trading option according to this article. This will no doubt stimulate interest and activity in Ripple trading.

Price of Ripple affordable but variable

There is considerable discussion of Ripple as it is added to the Coinbase roster. When talk of its listing first started the price of Ripple rose to about $2.50. In early January this year Ripple hit levels of $3 to $3.50. A recent article claims that, due to the move increasing the sense of confidence in the design and makeup of Ripple, its price is expected to be about $5 dollars.

The price prediction may be rather optimistic as the price as I write this is just $1.18 and that is up just over four percent on the day.

In January, Ripple even hit levels of $3 to $3.50. However, the price of Ripple (XRP) when it does arrive on Coinbase is expected by some to be around $5, thanks to the inflating sense of confidence around its design and makeup.

I have not found any official announcement that Ripple will be listed on Coinbase but it certainly is high up on the shortlist to be listed and the appended video also accepts that it will be listed. There were earlier rumours in January that it would be listed but it was not bitcoin cash was added instead. One worry about Ripple is that the founders and the company still control about 50 percent of the coins.

Ripple website

On its website Ripple describes itself and its mission:Ripple connects banks, payment providers, digital asset exchanges and corporates via RippleNet to provide one frictionless experience to send money globally. Built on the most advanced blockchain technology that is scalable, secure and interoperates different networks. Provides optional access to the world’s fastest and most scalable digital asset for payments, XRP.

Published previously in Digital Journal

Chinese pig farmers using AI to become more efficient

In China pig-rearing used to be a predominantly a backyard operation. The etymology of the word "home" in Chinese means literally a "house with a pig in it". That is now all changed.

China's "pork miracle"

Since the nineteen eighties China has been modernizing its pork industry and upped production. China now has some 700 million pigs, half of the world population, most on huge farms. To manage such huge numbers China is turning to new technology including artificial intelligence (AI).

AI and pig farming

The Chinese tech giant Alibaba has signed a deal with the pig feed manufacturer Tequ Group and Chinese farming corporation Dekon Group worth tens of millions of dollars

Alibaba Group Holdiings Limited is a huge Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate. As of January 2018, the market cap of Alibaba was $527 billion US. It is one of the 10 most valuable companies in the world.

The aim of the project is to develop a pig-tracking system powered by AI. At present RFID wireless radio frequency tags are used but they are expensive and time-consuming to manage. Each RFID has to be fitted to each pig and scanned individually to track them.

Tequ Group's chief information officer Zhang Haifeng said: “If you have 10 million pigs to raise, you can barely count how many piglets were born on a daily basis when the due date comes.” The existing system causes real bottlenecks.

The AI solution

Machine vision technology is used to identify numbers tattooed onto the pigs' bodies using overhead cameras. The system will be able to count pigs and piglets but it is hoped to also provide more sophisticated analysis.

The system will be able to combine temperature readings from infrared cameras with data on how much each pig moves every day. This will enable the system to estimate the health of each animal. There will be voice recognition as well which can monitor such sounds as pigs coughing.

Zhang Sheng of Alibaba said:“On one hand, we hope to bring down husbandry costs and achieve agricultural reform. On the other hand, we’d like to translate AI technology into safe, tasty pork.”

As the Chinese population demands more and more pork, pig farming will need to become more automated and efficient. AI could be a crucial part of this process. The appended video shows a Chinese pig farm.

Previously published in Digital Journal

Litecoin leads the way in cryptocurrency recovery

(February 16)The crypto market is recovering at least in the short term led by litecoin. The recent cryptocurrency market capitalization was $466 billion its highest level since February 2.

On February 6 the capitalization hit a low of just $276 billion. The new high represents a 68 percent rise from its low.

Reasons behind gains

The chart for litecoin shows that is oversold. The reaction to the Senate hearings on regulation was also positive. As a recent Digital Journal article also points out it looks as if US regulations are not coming for some time.

It may be that the market has already digested the negative signals out of China and South Korea.

Bitcoin is also joining the upward trend breaking through the $10,000 barrier. Ripple, neo, and others are also faring well.

Litecoin's stellar comeback

Litecoin (LTC) has run up 54 percent in one week. From its low of $106.94 on Feb. 6 it is now up by 112.27 percent from that low leading the top ten cryptocoins in the recovery. However, litecoin is still down 2 percent on a yearly basis.

As of writing this litecoin is trading at $228.73 at a 3.50 percent rise so far on the day. Check the link to see the present value. Litecoin is that fifth largest cryptocoin in terms of market value.

Upcoming hard fork may explain litecoin rise

Some investors may see a potential hard fork that would produce another coin as a way of making money even though some question the legitimacy of the entire project

The upcoming fork is called Litecoin Cash no doubt in imitation of Bitcoin Cash. It promises new tokens to existing holders of litecoin at block 1,371,111. Every holder will receive 10 litecoin cash (LCC) for each bitcoin they hold.

Charlie Lee founder of litecoin calls the project a sham designed to confuse litecoin owners. We will have to wait and see whether the fork goes through and what its ultimate effects on the price of litecoin are if it does.

The appended video features Charlie Lee warning about the situation.

Previously published in Digital Journal

In Canada, Shaw Communications 3,300 employees accept buyout offer

Shaw Communications announced that 3,300 of its employees or about one quarter of its total workforce have accepted a buyout offer.

Shaw Communications

Shaw is a Canadian telecommunications company providing telephone, Internet, television and mobile services backed by a fibre optic network. It is headquartered in Calgary, Alberta. It provides most services in the provinces of Alberta and British Columbia but has smaller systems in Saskatchewan, Manitoba, and even northern Ontario. However it also provides mobile service in southern Ontario, BC and Alberta through Freedom Mobile.

In all, Shaw has about 15,000 employees

Numbers leaving far above estimates

The number leaving was far above the company estimate of just 650. The company had previously announced that it intended a transformation of its business over several years.

Those who bought out will leave the company over an 18 month period. Among those leaving will be the chief financial officer Vito Culmone who will be leaving on May 4. He will be replaced by Trevor English who has been with the company two decades.

Shaw had previously estimated that only 10 percent of 6,500 eligible employees would accept the buyout after they were announced two weeks ago.

Company expects operations to continue normally

However, president of Shaw, Jay Mehr said that the numbers still are within scenarios the company had considered. He said he expected the company could continue to operate normally and that there would be no impact on customers' experience.

Mehr claimed that the departures would be managed in an orderly fashion. Most of the departures are in areas where Shaw feels it can optimize its services through the use of new technology and develop a more efficient delivery system.

Costs of the restructuring

Shaw will incur a one time $450 million restructuring charge in the second quarter of this year, mostly related to severance costs. The payments will be spread out over 18 months and will start this April.

Mehr said: “We made the difficult but necessary decision to modernize our wireline and satellite businesses by offering a generous package to those people who helped us build Shaw and chose not to join us in this transformative period of growth. We thank all our employees for the contributions they have made to this organization and we thank each of them for their dedication to our customers.”

Mehr also said: “Shaw has built decades of success by being a company that adapts well and shapes its future. We determine how we can improve, choose a path, and act on it. We are making the necessary changes to better serve our customers through a lean, integrated and more agile workforce..."

Previously published in Digital Journal

Picobrew announces 3 new machines to brew larger batches of beer

Picobrew was co-founded by former Microsoft employee Bill Mitchell. He was tired of the long process of home brewing and the difficulty of repeating a beer recipe once you found one you liked.

In October of 2013 Mitchell put his PicoBreew Zymatic up on Kickstarter. Within a day he was able to meet his $150,000 funding goal.

The PicoBrew Z series

The company is now introducing a PicoBrew Z series of four modular brewing machines that are capable of producing from one to ten gallons of beer or kombucha. Kombucha is fermented black or green tea that is claimed by some to have considerable health benefits.

The new products are designed to aid home brewers or restaurant owners launch larger-scale home brewing productions. The machines cost between $1,499 and $3,999. Devices can be preordered now with shipping beginning in June. The company is offering large discounts on preorders:.. it comes with a pro-grade price tag: the 2.5 gallon unit will cost you $2,500, the 5 gallon model is $4,000, 7.5-gallon capacity is $6,000 and the 10-gallon behemoth will set you back a whopping $8,500. The good news is the company is offering some huge discounts during the pre-order period that reduce cost by half on the 7.5- and 10-gallon options. The limited-time price cut takes $1,000 off the 2.5-gallon model and $4,500 off the 10-gallon stack. And if you splurged for the $1,999 Zymatic, PicoBrew will offer a trade-in program so you can get a break on the latest model.

PicoPaks

The machines can brew from loose grains and hops but also can use the company's proprietary PicoPaks. The company makes these in partnership with breweries. The PicoPaks are basically pods like the Keurig pods for coffee.

Smart technology in PicoBrew brewers

All Z series brewers connect over Wi-Fi allowing users to control the temperature, fluid flow and timing of the brewing. They can also run through recipes.

All of the PicoBrew devices can be monitored from your computer, phone, or tablet. The internet connection also enables you to connect to an extensive library of recipes.

The process

The machine does much of the work. There are clear drawers that hold all of the grain and hops. You simply add the ingredients, select the recipe and hit the start button. The machine has a connected brew keg that acts as both a brew kettle and and a fermentation vessel.

The brewing process is simple. If you input your recipe correctly the machine heats the water, steeps the grains, boils the wort and add the hops for you at the correct time. You simply need to wait a few hours for the process. You then add yeast and the fermentation begins.

The Z series can also use the PIcoPacks if you wish. You simply place them in the drawer. The machine automatically detects them puts in the recipe and does the work.

CNET describes the new series as professional grade models. The discounts are available until March 15. The new series targets serious home brewers, craft breweries and other businesses who will appreciate the ability of the series to produce larger batches than other PicoBrew machines.

Previously published in Digital Journal

Autonomous vehicles will radically change society

While it is still not clear how long it will take, electric cars, robo taxis, and self-driving trucks are bound to radically alter our society, perhaps sooner than we think.

Tests of driverless cars are already taking place

Carlos Ghosn CEO of the Renault Nissan Alliance claims that driverless or fully autonomous cars will be in use everywhere within six years. If such a quick transition takes places it would do more than change just the automobile industry but change our lifestyle and the shape of our activities within cities.

However, as a recent Digital Journal article points out driverless cars may still be far in the future. Many are selling the concept without any actual product being available or even if it were regulations that would allow it to be used need still to be developed. The market just for purely electric vehicles is still relatively miniscule. It remains to be seen if consumers are even anxious to become involved with the new driverless technology.

Declining public transportation

Cheap ride hailing services could reduce the use of and demand for public transportation . According to a recent University of California study people are already using ride hailing apps instead of driving, taking the train, cycling or even walking.

It is hard to see why one would encourage such a trend. It could create new problems as public transport moves huge numbers of people in a few vehicles whereas privatized driverless vehicles would need many more and create its own type of traffic jam. It is not clear why the same type of service could not be provided publicly. Public transportation could use the new driverless technology on its systems making them much cheaper and more efficient than robot taxis.

While removing human drivers from a private hailing system might make it more affordable, the same is true of any public system. If the public system became more efficient and were promoted as are private systems than we would not likely have dwindling passenger numbers. The public system is declining because politicians like to promote and reward the private companies that lobby them and help finance their campaigns.

The decline of air travel over short distances

In the US, people often take short flights between or even within states. However, the autonomous technology could make car journeys a more pleasant and productive technology. A Bloomberg article argues that the effect could be similar to that of bullet trains in Japan.

However, this ignores the fact that the cars would need to go at a similar speed to the bullet trains. The bullet trains are much more efficient as well in that they carry huge numbers in one vehicle.

Finally, the argument ignores the fact that driverless vehicles also includes airplanes. They can take advantage of the same technology as the driverless autos. Aviation consultant Mike Dorion claims that pilotless flights will be available within the next five or ten years.

The link between US popular culture and car ownership will dwindle

Already a University of MIchigan study shows that fewer young people are learning to drive citing the cost and ability to share rides as a key reason. However, there is no reason why car ownership of driveless cars could not become a matter of pride and create a similar link with popular culture. Makers and sellers of driverless cars would promote this linkage.

Yet Microsoft's Doug Seven a leader of the company's connected and driverless car efforts said:“We as Americans associate our identity with our car. When the 20 year-olds become the 40 year-olds and the 40 year-olds become the 60 year-olds, the cultures will shift.”

Driverless trucks

The US is already facing a shortage of drivers and fewer young people want to take on the job. The average age of drivers is now about 49 so within a few years they will retire. More driverless trucks should be good for the industry.

Tesla is producing a driverless semi and several companies have place pre-orders. However, many doubt that Tesla will be able to deliver what is promised and critics point out that considerable advances in battery technology are needed for Elon Musk of Tesla to keep his promises. Musk has been late on delivering promises before so it would not be surprising if the advent of driverless trucks is some time in the future yet.

Companies will test a few units to see how they work before buying the trucks in quantity. GIven their limited range, the new trucks will probably be confined to shorter hauls. An infrastructure of charging stations still needs to be developed.

A Bloomberg artcile discusses other important impacts of the new technology plus winners and losers.

Previously published in Digital Journal

Iceland a paradise for cryptocurrency miners but uses huge amounts of power

Iceland is experiencing a boom in bitcoin mining a boom for the economy but also a huge drain on power resources in the country.

Snorri Sigurbergsson, an employee of the energy company HS Orka, claims the consumption of energy by cryptocurrency miners is likely to double to 100 megawatts this year. This is greater than Icelandic households use according to the national energy authority. There are 340,000 people in Iceland.

Bitcoin mining

Every ten minutes a miner wins a price of 12.5 bitcoins — still worth over a hundred thousand dollars in spite of a huge decline of more than half of bitcoin's value. But this process demands an incredible amount of power.

In Iceland power consumption by mining has overtaken its other productive uses. The reason is simple. Iceland has a great deal of energy with geothermal and electric plants around the island that is has many volcanoes. Miners look worldwide for cheap and plentiful sources of power. The arctic air cools the server rooms instead of expensive air-conditioning as the chips used to mine produce huge amounts of heat.

For now mining facilities are increasing power consumption fast in Iceland

Sigurbergsson said that for now there is exponential growth in energy consumption by mining centers. He does not see this stopping at present. He claims that he is getting many calls from investors wanting to build centers in Iceland. However, there are doubters as to the value to Iceland of the increased mining activity.

Smari McCarthy an MP from the Pirate Party said: "Cryptocurrency mining requires almost no staff, very little in capital investments, and mostly leaves no taxes either. The value to Iceland... is virtually zero."

Previously published in Digital Journal

Ontario Canada's Liquor Control Board will use Shopify platform for online and store sales of marijuana

The Ontario government will use Shopify's e-commerce platform for cannabis sales online and also in stores. The province intends to be the only distributor of legal recreational cannabis.

Online and mobile sales will be through the Ontario Cannabis Retail Corporation (OCRC) a subsidiary of the Liquor Control Board of Ontario (LCBO).

George Soleas, the CEO of the LCBO said: “Our top priority is fulfilling the province’s framework for the safe and sensible retailing of recreational cannabis for when it is legalized by the federal government.”

READ MORE: Blockchain for Canadian cannabis industry

Shopify technology will be used not only online but also to process payments on iPads and to display product and health information in brick and mortar locations.

Another big win for Shopify

Shopify was chosen to provide the sales platform for cannabis sales back in late 2017. The announcement comes as another feather in the cap for Shopify, which has had many things to celebrate in recent years. The company claims that it has more than 500,000 merchants using its program and the total gross merchandise volume the platform handles is more than $45 billion per year.

Loren Padelford vice-president of Shopify Plus, the division the focuses on big clients, said: “Bringing this differentiator to the LCBO on this historic project to consumers of legal age across Ontario is a great example of a made-in-Canada innovation, which we are proud to be a part of,” said Loren Padelford, vice-president of Shopify Plus, the division that focuses on big clients.

Liquor Control Board of Ontario (LCBO)

The LCBO has a quasi-monopoly of liquor sales in Ontario, Canada's most populous province having over 13 million people or about 40 percent of the country's total population. As a result LCBO is one the largest purchasers of alcohol in the world.

As of September last year the LCBO was operating 651 liquor stores.

The cannabis subsidiary OCRC said that Ontarians will have the same access to product information, use guidelines and social responsibility information online and in stores.

OCRC planning to have system ready for July of 2018

The OCRC is in the process of designing the user experience, in the hope of having operations ready for the launch of legalization of cannabis sales in July this year. As well as the online sales the OCRC plans to have 40 stores. This is expected to grow to 150 by the end of the year 2020. Unlike some other provinces such as Alberta and British Columbia sales will only be through the government online or in stores with no private sales.

Legalization bill has already passed the House of Commons

The bill was passed largely along party lines but gained the support of the opposition NDP and also the Green Party. The final vote was 200 MPs in favor as contrasted with just 82 against. One Conservative opposition member, Scott Reid, voted for the bill after polling his constituents and found a plurality favored the bill.

The bill now goes to the Senate for further study and debate.

While the Liberal government expects the bill to be approved before July it recognizes that it may take some provinces 8 to 12 weeks to roll out a system that will allow consumers to purchase legal recreational cannabis.

Previously published in Digital Journal

Russian researchers caught trying to mine cryptocoins with state computers

Russian scientists employed at the secret Federal Nuclear Center in Sarov have been arrested for trying to use the powerful research computers to make themselves some extra money by mining cryptocurrencies.

Sarov

Sarov is one of a number of closed cities that were created in the former Soviet Union(USSR) where nuclear research was carried out. The cities are off-limits to travellers and are not included in Russian maps.

Culprits discovered before any mining happened

Tatiana Zalesskaya, a spokesperson for the Sarov facility said that several researchers were detained after attempting to use the facilities' computer facilities for personal ends including "so-called mining", saying: “Their activities were stopped in time. The bungling miners have been detained by the competent authorities. As far as I know, a criminal case has been opened regarding them.”

Some reports are suggesting the group was attempting to use the supercomputer to mine bitcoin. Mining cryptocurrencies such as bitcoin require huge amounts of power and the supercomputer would have plenty for the purpose. It is common for computer power to be hijacked for mining purposes. As noted in a recent Digital Journal article some porn sites are actually using the power of viewers' computers to mine cryptocoins.

How culprits were discovered

The researchers tried to connect some computers that were kept permanently offline in order to keep them safe from hackers. When the scientists tried to connect them to the internet to mine this caused an alert picked up by the facility's security team who immediately contacted Russia's Federal Security Service.

Zalesskava warned that any similar attempts in future would be dealt with severely and were punishable as crimes.

Bitcoin mining

Bitcoin mining is a process by which transactions on the bitcoin blockchain are verified and blocks added to the public ledger. It is also the means by which new bitcoin is released.

Recent transactions are compiled into blocks and computational puzzles must be solved. The miner who solves the puzzle first gets to put the next block on the block chain and also claim the rewards. The rewards are not only the transactions fees linked to the block but also newly released bitcoin. The process is described briefly in the video below.

Mining bitcoin can use huge amounts of power as noted on the appended video claiming to be of the largest bitcoin mining operation (farm) in Russia.

Wild Wall Street weeks signals stock market correction is here

(February 11)After a wild roller coaster week it appears that a correction is here in the extended bull market. There were wild swings with a decline of 1,000 points and then a recovery of up to 500 points.

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Each day of the week saw wide swings. On Friday ahead of the weekend the Dow Jones Industrial Average (DJIA) dropped by 666 points and futures pointed to more trouble.

Monday February 8th

Exchange-traded products (ETPs) and exchange-traded funds that are linked to volatility sink as there is a flood of sell orders. The DJIA dropped by hundreds of points.

In the afternoon Brian Frank of Frank Capital Partners sensed an opportunity as stocks that were expensive begin to look like better buys as prices tumble. He said today was not just another day at the office or business as usual. Frank said: “You don’t get days like this often. No. 1, we have to capitalize on it. No. 2, we have to protect our clients.”

Later in the afternoon the situation gets worse as the Dow shed 850 points in just 15 minutes. Even Fox News switches from a Trump speech to report about the markets. Trump who has often taken credit in the past for new record highs on US stock exchanges is busy celebrating his tax cut as increasing paychecks and cutting your taxes.

At the close the DJIA ends up with its biggest declne in its 121 year history, 1,175.21 or 4.6 percent.

Tuesday February 6th

In Singapore, Kevin Tay, regional chief investment officer for UBS Wealth Management is busy calming clients' fears after yesterday's crash. He points out that economic fundamentals are still sound and that it is time to look for buying opportunities.

Credit Suisse Group moves to liquidate several investment products. Some are stunned by the speed at which some investments are collapsing. Eric Peters, of One River Asset Management said: “What I don’t know yet is if this is a tremor or if it’s a crash."

However, James Bullard, president of the Federal Reserve Bank of St. Louis said that the sharp correction should have been expected as the market had appeared "frothy" for some time:“This is the most predicted selloff of all time. The market kept going up and up and up. It’s no wondering it’s going down and down and down. What is more interesting is it has been very fast, it’s been possibly aided and abetted by technical trading—algorithmic trading." Others also blame the speed of declines on this type of trading.

Asian and European markets also take a tumble after the US crash on Monday.

The high volatility index with a VIX of 50 now from 17 on Monday creates alarm in many investors.

Wednesday February 7th

Trump finally tweets about the crash lamenting that as the economic news is good the stock market should rise and it was a mistake.

Investors fear to invest now that volatility is high but investors are relieved when the DOW closes at 24,893

Thursday February 8

The market starts out in the green but then wobbles. By noon the indexes are falling again and by 3 PM the drops have reached the level of a 10 percent decline from the high, signaling an official correction.

Advisors are kept busy assuring clients that their money will be fine but hope that there will soon be a rebound to help reassure investors. The DOW is not cooperative as it sinks into a loss at the close.

Friday February 9th

The final day of the week continued the roller coaster pattern. The DOW rose then fell sharply losing about 500 points by 1:30 in the afternoon. It rallied then dropped only to leap into positive territory at the bell being up fully 330.44 at 24,190.90. Still it was the worst week in the markets since January of 2016.

Summary and future concerns

Although there was a positive day on Friday gains for the entire year were wiped out over the week.

Volatility was high all week.

Yields spiked to a four-year high on Treasuries ending the week however at 2.85 percent near where they started.

Commodities including oil, gold, and industrial metals moved down and the dollar, euro, and pound all declined as well.

Traders now look to receive data next week on US consumer prices as during the week the 10 year yield pushed as high as 2.88 percent. Many investors are taking this as a signal that interest rates could rise and inflation gain speed. This could mean that consumer spending power and earnings will be less.

Not just U.S. stocks took a beating. Stoxx Europe 600 had its worst week since 2016 losing almost half of what it had gained this year. China's benchmark also fell the most in almost two years. The MSCI World Index also had its worst weekly drop since 2016.

An article at BNN provides guides as to what to do in this volatile market from a number of different investment professionals.

Previously published in Digital Journal

Former Bush security advisor warns of impending blockchain war

Juan Zarate served the George W Bush administration as a deputy advisor for combating terrorism after 9/11. He is credited with developing financial instruments that put pressure on sanctioned states.

These financial embargoes helped cut off terrorists from being funded. However, now Zarate worries that the new blockchain technology is undermining his creations and allowing sanctioned individuals and states to finance themselves without the banking system. The blockchain can break down borders and empower those outside any traditional banking system.

Zarate said to CoinDesk:"There are nefarious actors out there, including state actors like North Korea and Iran that are looking to the use of digital currencies and related technologies, at a minimum as a way of circumventing the current global order which limits their access to capital. But ‎these capabilities and technologies could also be a way for them to try to undermine global financial commercial systems at some point."

Zarate realizes that blockchain and cryptocurrency technology can give greater autonomy to individuals as well as encouraging commercial activities that are legitimate.

Zarate's present status

Zarate is senior advisor at the Washington DC-based think tank Center for Strategic and International Studies (CSIS) and also chair of the Financial Integrity Network. He was an early advocate of blockchain technology having been an advisor to Coinbase the US-based cryptocurrency exchange.

US dollar domination and success of boycott financial tools

Zarate notes that the success of the tools he developed to keep those sanctioned from using traditional financial markets was dependent on the domination of international finance by the US dollar, the world global reserve currency. Cutting off access to the dollar was a way of ensuring that those subject to boycotts would find it difficult to finance war or use funds to hurt US interests.

However, many countries are reacting to the US moves and the US dollar will no doubt continue to see its dominance decline. Currency such as the Chinese remnibi and Russian rouble are being used more in international trade. Using dollar dominance to keep others out of the international finance system just encourages such a development and is happening independent of any development of the blockchain.

Using blockchain technology to evade sanctions

A Swedish firm has been granted a business license that permits it to build a platform explicitly designed to aid countries evade potential sanctions. The company promises that this will give investors the ability to promote "good, hard-working companies and individuals" in Iran.

North Korea is reported by many cybersecurity firms as amassing bitcoin often by illegal methods such as hacking and theft in order to finance government operations. Many libertarian leaning supporters of the blockchain may be much less concerned about the evasion of any government control over blockchain operations as they intended to develop a system that was not dependent on third party intervention and to replace the existing system.

Zarate appears to defend the status quo and wants to ensure that US dominance of finance is not threatened by the new technology. Zarate says: "Actors that are less invested in the global financial commercial system are likely to be more reliant on technologies or techniques that give them asymmetric capabilities to threaten that very system."

Potential risks of the blockchain

Zarate notes that the value of state-backed fiat currency might be siphoned off into cryptocoins that know no borders and this could limit the ability of fiat money issuers to influence policy. The president of the Federal Reserve Bank of Philadelphia doubts that cryptocoins will ever effect that ability but central banks and legislators around the world are still considering this view.

Some corrupt banks may be exploring the role of the blockchain as a way of evading detection of illegal activities rather than as a way of increasing transparency and gaining international trust. Venezuela has already announced it plans to launch its own oil-backed cryptocurrency specifically designed to get around "financial blockades". Russia also is looking to develop its own cryptocurrency.

Zarate claims:"We have to be very conscious of the fact that there are actors in the system, both state and non-state that may be willing to disrupt that system. They may be willing to use new technologies to actually undermine those very systems to affect the U.S. economy and to affect other economies, and frankly, even to profit from it."

Zarate's responsible adoption of blockchain technology

Zarate is all for adoption of the new blockchain technology but in a way that is mindful of the risks of that technology to the status quo where the present system can control access to finances and use dollar dominance as a weapon to advance US interests.

US lawmakers show considerable concern about the developing technology. They convened a meeting of representatives from the US Securities and Exchange Commission (SEC) and the US Futures Trading Commission (CFTC) in Washington to answer their questions about the new technology. Members of both the SEC and CFTC saw a low risk of cryptocurrencies insofar as creating financial instability was concerned. However, they warned that the cryptocurrency area was still in an early development stage.

While Zarate more of less agrees he is concerned about the future saying: "I'm incredibly optimistic about these technologies, but having witnessed failures in the past of regulation and recognition of risk, and cascading risk, I want to make sure that with adoption comes evaluation of where those risks lie...And a recognition that we need greater transparency and not less, if we hope for these technologies to take hold."

Published previously in Digital Journal

Canadian PM Justin Trudeau demands Facebook address "fake news" problem

Canadian Prime Minister Justin Trudeau warned social networking behemoth Facebook the that it must address its "fake news" problem or it would face stronger regulation by the Canadian government.

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Trudeau's meeting with Facebook executive Sheryl Sandberg

Back in November Trudeau had told Sheryl Sandberg chief operating officer of Facebook that he was concerned that the company was not doing enough to address the problem of misleading information on Facebook.

Trudeau is said to have made the comments during a meeting with Sandberg at the Asia-Pacific Economic Forum in Vietnam last November. The source said that the conversation was constructive. Trudeau was particularly concerned about identifying the origin of partisan "news", posts or ads.

Neither the PM's office nor Facebook would discuss the specifics of the meeting. However, Kevin Chan Facebook's policy chief in Canada said in a statement to the Star newspaper: “We stand with the lawmakers around the world, including in Canada, in their efforts to protect the democractic process.”

Facebook has been under increasing pressure for allowing false information to masquerade as legitimate journalism. Russia has been accused of using ads on Facebook to influence the recent U.S. election that saw Donald Trump win over Hillary Clinton.

Facebook has also faced criticism for lack of transparency as to who is buying ads appearing on it.

The Trudeau government and social media

Trudeau appears to be concerned that there will be material on Facebook designed to influence the upcoming 2019 Federal election.

The federal government, including Trudeau and his cabinet ministers, issue constant Twitter posts, Instagram statements, and announcements on Facebook. At the same time, the government worries about the use of these platforms by opponents and foreign countries to influence Canadian elections using social media.

CSIS concerns

The Canadian Security Intelligence Service (CSIS) that deals with cybersecurity and espionage has warned that it is quite likely that outside groups will attempt to influence the elections.

CSIS even held a workshop for researchers that talked about the possible responses to "information warfare" and disinformation in the fall of 2017. Elections Canada has already taken steps to ensure cybersecurity. Global Affairs has also been taking an interest in the fake news phenomena.

Katrina Gould, Democratic Institutions Minister claimed that social media have plenty of work to do to address the problems of “cybersecurity, hate speech, and the dissemination of misinformation.” Gould said: “We encourage all social media platforms to think critically about their current practices and how they can create spaces for informed public dialogue.”

Facebook's response

Facebook points out that it already employs 10,000 people working on "safety and security" globally and plans to increase the number to 20,000.

The company also launched a "Canadian Election Integrity" initiative late in 2017. It provides a guide to MPs, candidates and parties to prevent "mischief" on line and gives a direct link to Facebook's security team. The company claims it is also providing more transparency as to who buys ads and who they are targeting.

Facebook's head of global policy management, Monika Bickert told the Canadian House of Commons Digital, Culture, Media and Sport Committee that it had deleted thousands of fake accounts in the run-up to 2017 elections in the UK, France, and Germany. Many politicians have little faith that tech and social media companies will address the issues themselves.

Rise of tech media giants creates economic and other issues

Carolyn Wilkins, senior deputy governor of the Bank of Canada said that the rise of giant social media companies has resulted in a relentless appetite for users' data. This raises questions about privacy of the data, security and also intellectual property.

Wilkins said: “If user data are an important source of monopoly rents in the digital age, how should we regulate who owns the data and how they're shared?. We're going to need to judge wisely when it’s best to use public policy tools to manage the risks and when it's best to let private enterprise work its magic.”

The problem of "fake news" Facebook versus Twitter

There are many views of what constitutes fake news. President Trump appears to consider any report fake news if it is critical of him and his administration and he rejects it as not true. Wikipedia describes fake news as follows:Fake news is a type of yellow journalism or propaganda that consists of deliberate misinformation or hoaxes spread via traditional print and broadcast news media or online social media.[1] Fake news is written and published with the intent to mislead in order to damage an agency, entity, or person, and/or gain financially or politically,[2][3][4] often using sensationalist, dishonest, or outright fabricated headlines to increase readership, online sharing, and Internet click revenue. In the latter case, it is similar to sensational online "clickbait" headlines and relies on advertising revenue generated from this activity, regardless of the veracity of the published stories.[2] In

However, what some might consider fake news others might consider basically true if somewhat biased. In propaganda there may be many true statements. Russian ads meant to divide Americans often contain true but perhaps exaggerated accounts of race relations in the US. To expect social media companies to filter out fake news will just increase the power of the powerful to the detriment of free speech and repression of viewpoints that don't fit in with the mainstream views.

Facebook takes the view it has the responsibility to intervene to block fake news. In contrast Twitter has decided that it will not be an arbiter of what is true or of fake news.

The Facebook view

As noted earlier, Facebook already has thousands filtering out fake news from Facebook.

It has also announced a plan to crowdsource credibility ratings for news outlets. It has assembled a team of fact checkers in Italy just ahead of parliamentary elections there next month. Before the French presidential election last year in France, Facebook took out full page newspapers ads that featured tips on identifying fake news.

The Twitter view

Nick Pickles head of Twitter's public policy for the UK said in testimony in Washington said: We are not the arbiters of truth. We are not going to remove content based on the fact this is untrue. The one strength that Twitter has is it's a hive of journalists, of citizens, of activists correcting the record, correcting information.”

Pickles was among executives from Twitter, Facebook, and Google who fielded questions about fake news at George Washington University. The UK held its first ever public hearing outside the UK.

Pickles also said: "I don't think technology companies should be deciding during an election what is true and what is not true, which is what you're asking us to do. I think that's a very important principle.”

Accounts can still be cut off at Twitter if they violate terms of use. Trump seems to stay on even though many argue he constantly violates the terms of use.

Greater transparency as to who places ads and who is targeted seems to me a laudable goal and would help the reader assess the likely veracity of a post.

Previously published in Digital Journal

Blockchain technology set to change traditional banking

Blockchain technology is transforming or has the potential to change drastically many of the ways traditional financial institutions function varying from how payment transactions are made to how money is raised on the private market.

Existing financial institutions have ambiguous attitudes to the cryptocurrency area

Some commentators have described cryptocoins such as bitcoin as a fraud, Ponzi scheme, or a bubble ready to burst. J.P Morgan Chase CEO,Jamie Dimon, said last September that bitcoin was worse than the tulip bulb craze and that it would not end well with someone being killed.

Unlike traditional assets such as stocks, there seems no objective way of determining the value of cryptocoins just the market price, and that is extremely volatile, a regular roller coaster market filled with speculators and no doubt manipulators as well.

Another negative observer Lloyd Blankfein, head of Goldman Sachs also noted that something that moves up or down 20 percent in price in a short time does not seem like a currency but a vehicle to perpetuate fraud.

At the same time, many companies see the value of blockchain technology. The International Securities Association found that 55 percent of companies polled are monitoring, researching, or even developing solutions based on blockchain technology.

Likewise many in the cryptocurrency field see traditional financial features as being replaced by cryptocurrency and the blockchain while many others such as Ripple see their platforms as designed to help financial institutions solve their problems.

Five ways blockchain technology could disrupt traditional financial institutions

A long article at CB Insights discusses five areas in which the blockchain technology will disrupt traditional operations of the financial system.

The five are: payments, clearance and settlement systems, fundraising, securities, loans and credit.

The entire articles is well worth reading. This article will just discuss the payments system as an example.

The Payments system

Trillions of dollars travel around the world in an antiquated system characterized by slow payments and many added fees.

As an example, if you live in San Francisco and want to send money to your family in London UK you could end up paying a flat fee of $25 dollars for a wire and additional fees up to 7 percent. Everyone gets a cut, including your bank and you are charged a hidden exchange rate fee. The bank may not even register the transaction for a week.

This costly inefficient system is profitable for banks but expensive and slow for users. Cross-border transactions, from payments to letters of credit created 40 percent of global payments transactional revenues in 2016.

Blockchain technology will offer a payment system with higher security and lower costs as a way of sending peer-to-peer(P2P) payments and will require no intermediary. There is no need for third parties to verify transactions. The new technology will give people access to cheap, fast, and borderless payments.

While bitcoin is experiencing problems of scale as its use expands it still easily beats the average 3-day time period for processing bank wire transfers. Bitcoin transfers take half an hour up to 16 hours to go through. Coins such as Bitcoin Cash and Litecoin are even much faster, and cheaper. Bitcoin Cash transactions cost about 20 cents each.

Bitcoin transactions rose 118 percent in 2016 alone although much traffic was the result of speculative trading.

BitPesa

BitPesa is a blockchain company that concentrates upon facilitating bank to bank (B2B) transfers in countries such as Kenya, Nigeria and Uganda. It has monthly trade volumes of $10 million. It charges a fee of only 3 per cent compared to the average cross-border payment to Kenya of 9.2 percent.

BitPay

BitPay is a bitcoin payment service that helps merchants accept and store bitcoin payments. Just within the past year, it has grown in volume by a whopping 328 percent and gives merchants more than $110 million per month. BitPay charges just one percent per transaction compared to fees of 2 to 3 percent for credit card transactions.

The antiquated infrastructure of clearance and settlements is also bound to be reformed by blockchain technology.

The future

It will take some time for the new technologies to disrupt the existing system. Much of the new technology is just in the experimental stage but a number of financial institutions are willing to try out the new technology. It appears unlikely that the blockchain technology will replace the existing system.

It is more likely that the new technology will supplement or reform the existing system. While the old system provided a larger profit margin many institutions will no doubt feel that they will gain more customers by adopting blockchain systems since the new technology is quicker and cheaper. Those who resist the new technology may find that their services are less and less in demand and that they actually are losing to those adopting the new technology.

Previously published in Digital Journal

Future of cryptocoins inevitably to be determined by regulators

Inevitably those in the cryptocurrency world will need to interact with regulators. The darker aspects of the cryptocurrency world cause governments to develop policies to regulate the area.

Digital coins are notorious for not fitting into traditional regulations such as for securities. A recent article by Mike Orcutt in the MIT Technology Review argues that what bureaucratic policy makes do to regulate the industry will determine its direction from now on.

The regulation issue is important

Many billions of dollars are on the line. The security of exchanges needs to be ensured so that investors do not lose money through hacks as has already happened several times. Prevention of money laundering through the system and other illegal activities is also a goal of governments. Scam initial coin neofferings (ICOs) need to be caught and prosecuted. ICO's are used to raise money for projects. This may require new regulations.

Even many critics of cryptocurrency still believe that the associated blockchain technology is significant for the future.

Clampdowns are already happening

China has banned any new ICOs and, at least for now, has banned exchanges. It may also clamp down on cryptocoin mining, a big business in China. South Korea has also banned ICOs and threatens further regulatory moves. Japan has introduced a licencing requirement for cryptocurrency exchanges. Japan was where the notorious Mt. Gox exchange fiasco took place in which many investors lost money

However, regulators are still wrestling with how to define cryptocurrencies, and in most countries there is still a noticeable lack of oversight of the whole area.

The situation in the United States

In the U.S., cryptocurrencies are classified as commodities — which puts them under the jurisdiction of the Commodity Futures Trading Commission(CFTC). While the CFTC can regulate futures trading on the two futures exchanges for bitcoin it does not have the power to directly control cryptocurrency exchanges.

J. Christopher Glancarlo the CFTC chair said at a recent U.S. Senate hearing that the CFTC did not have the power to require cryptocurrency exchanges to register with the government, report transactions, or even comply with cybersecuriy checks. In fact, Giancarlo held that under current law no federal agency held such power.

Regulation of the cryptocurrency area is at the state level

This fall-back does not work since cryptocurrency trading inevitably crosses state lines. The state regulations deal with money transmission services. Definitions of what these are vary from state to state. Cryptocoins are more than money and often not very useful as money. The result is confusion. Many technological entrepreneurs are discouraged by the situation. For this reason, many in the cryptocoin area welcome regulation if it suits their needs.

The problem of ICOs

Chair of the SEC Jay Clayton testified to the U.S. Senate that simply calling something a coin did not mean it was outside the jurisdiction of the SEC. He noted that ICOs looked like securities since they are promoted as investment opportunities, with being a medium of exchange very much a secondary characteristic. Yet ICOs have already raised over $4 billion with none being registered with the government.

Regulation is very much a work in progress.

What to expect

The SEC will increase enforcement against suspicious possible sham ICOs. The U.S. Congress may need to pass new legislation according to both Clayton and Giancarlo. Given the Trump administration's negative views on regulations, this may be difficult to pass.

Seven U.S. states have agreed to join forces to regulate exchanges.

France and Germany are pushing for international regulation of the cryptocurrency area at the upcoming G20 summit in March. It remains to be seen if the Trump administration with its U.S. first policy will join in such regulation.

Businesses and governments are beginning to recognize the value of the new blockchain technology. At the same time many in the cryptocurrency area such as Ripple are now stressing their value as platforms to be used by business and governments. Those coins that prove their value for government and business are likely not only to survive regulation but prosper as a result.

Published previously in Digital Journal