Another eventful week in the crypto space has seen an NBA star try to tokenize his $34.4 million contract on the Ethereum blockchain, Binance support the UK’s Cybercrime Unit with investigations into a $51 million phishing scam, Bitmain launch a ‘Tinder for Bitcoin mining’ service to match individual miners with pools, Parity admit prioritizing Polkadot development over Ethereum despite a $5 million grant from the Ethereum Foundation, and decentralized storage network Filecoin announce the date for its long-awaited testnet.
Binance Launches Staking Platform
Binance has capitalized on interest in ‘staking-as-a-service’ business services by launching its own staking platform – and making it available to all its customers. Users can now receive staking rewards for eight assets, including Stellar, Algorand and Stratis, without the need to set up their own nodes or maintain a minimum balance.
Correlation Between Tether Issuance and Bitcoin Price, Research Shows
A newly published academic report has shown strong correlation between the minting of USD-pegged stablecoin Tether and the price of Bitcoin. The paper evidences a ‘decoupling’ in the price relationships between Tether-affiliated Bitfinex and other markets at two distinct points in the last two years. The controversy around the matter lies in ongoing questions over whether the Tether company is running a fractional reserve, i.e. whether it actually has the fiat funds to cover the amount of Tether in existence.
Critical Vulnerabilities Found in Ethereum Gas Guzzler
FairWin, a suspected Ponzi scheme operating out of China, has made crypto headlines in recent weeks as being the culprit for ‘clogging’ the Ethereum blockchain. The betting game has been responsible for 60% of gas usage on the network. A report from Ethereum developers has found flaws in the app’s code, opening it to the risk of funds being drained from the smart contract.
What Impact Will the Missing CryptoQueen Have on Public Sentiment?
The BBC last week launched a new podcast series titled The Missing Cryptoqueen on its popular BBC Sounds app. Currently in the top 10 podcasts streamed on iTunes, the show is now three episodes into an epic tale that will be unfamiliar to many – even those already active in the crypto space.
Journalist Jamie Bartlett investigates the story behind crypto scam OneCoin. Launched in 2016 as the next ‘Bitcoin Killer’, OneCoin quickly gained attention due to its flamboyant founder, Dr. Ruja Ignatova, and an aggressive marketing campaign which even included in-person shows at Wembley Arena.
Investors around the world, many of whom had no prior involvement in crypto, were captivated by the coin’s vision and collectively poured around $4 billion into the project. One investor, interviewed by the BBC, invested her family’s inheritance and encouraged her friends and family to do the same – to the combined tune of £250,000 (around $300,000).
The kicker, of course, is that there was no OneCoin – the blockchain didn’t exist. What did exist was an SQL database, purportedly running in Bulgaria, which produced arbitrary increases in the coin’s price to make investors think their capital was appreciating. At the height of the fanfare around the coin, the creator disappeared without a trace, leaving many investors heavily out of pocket and without recorse.
The moral of the story (which will no doubt be developed further over the remaining episodes) is around the popular delusions that can occur in the early phases of technology booms, where scammers are able to pray on naïve investors. Where there’s lack of understanding on the technology itself, investors will look to the person ‘selling’ the technology and question whether they can be trusted.
All it then takes is for that person to flash some impressive credentials (in Dr. Ignatova’s case, claims of a PhD in Law and several years with McKinsey) to satisfy any reservations the investor might have. The tale serves as good context for what was to come only a year later, when scams like BitConnect – this time with their own blockchain and tradable assets – were able to thrive amid the bull market hysteria.
The question to be considered is what impact the BBC’s recounting of the OneCoin story will have on perceptions towards cryptoassets in general. The BBC clearly has massive reach and only a few weeks ago a different BBC journalist shared his story of having his Ethereum wallet drained. Will this latest podcast confirm latent suspicions that crypto is all froth and swindle, with little real value underneath?
It’s a matter of debate whether such scams are exceptional situations, or whether they are the likely outcome of an industry lacking regulatory oversight. What’s really important is that people – both experienced and new to the crypto space – heed the key message: approach crypto as a get-rich-quick scheme and prepare to get burned.
Yes, Bitcoin, Ethereum and many other assets have delivered remarkable returns to early adopters. Anyone claiming that their shiny new blockchain is going to do the same, however, should instantly be treated with suspicion. As those battle-hardened by the space will be quick to say: Don’t trust, verify.
Tweets of the Week
Eric Wall waves a red rag to crypto purists in his take on Libra’s potential impact:
To people who think Libra will be a flop if it launches:
Libra will likely be more stable than the dollar, cheaper to transfer than almost any competitor, have access to the largest network on the planet, presented by the best UX designers $ can buy? It's the Netflix of Money.
— Eric Wall (@ercwl) September 26, 2019
Ethereum advocate Ryan Sean Adams fires a warning to so-called ETH-killers:
I have some tough news…
If your chain hasn’t launched
And it isn’t money
Then it’s not worth a billion dollars
— Ryan Sean Adams (@RyanSAdams) September 26, 2019
Hans HODL shows reports of Bitcoin’s demise are greatly exaggerated, with the network in rude health:
Apparently some people are worried about Bitcoin? I don't know if I can help, but let's look at some data!
Here's a chart of the 365 daily moving average of the number of transactions on the Bitcoin network. Looks like we're at an all-time high… pic.twitter.com/apvQgthZuJ
— Hans HODL (@hansthered) September 26, 2019
The Week’s Best Content:
Recommendation 1 – Trading Bitcoin Is Hard
Scott Melker shares some practical advice for aspiring Bitcoin traders.
Recommendation 2 – Privacy is a feature not a product
Ryan Gentry explains why privacy is core to censorship resistance.
Recommendation 3 – Secrets of an altcoin trader
Nik Patel shares his views on the altcoin market and the possibility of a fightback against Bitcoin dominance.
Coinscrum: From Tether to the Bank of England
Wednesday 2 October, 6pm
Coinscrum is assembling a panel consisting of experts from Blockchain.com, CoinShares and others to discuss ‘where next for fiat-backed digital currency?’.