Superforecasting cryptocurrencies: Week 8: Flailing towards Byzanthium
21 October 2017
From the commentaries of major analysts you'd think bitcoin had no future. It doesn't do smart contracts, is slow, and is facing resistance to its planned fork to speed up transactions. Yet it continues to rise, reaching over $6000 and only 10% off an increase of 50% from 26 August. It now has a market cap of over $100m, treated by many analysts as a significant psychological point -- which only makes another price (?$6500) as important.
Ethereum's teething troubles with its 'hard fork' seem to have spooked several investors, leading to a 10% loss in price over seven days, with a struggle to maintain itself above $300.
Crypto developments
At last some developments worth scoring.
Ethereum fork has teething troubles
Delayed until a few days before Ethereum's Byzantium fork, the software upgrades have not been adopted by all its network. CoinDesk reported on 18 October that only 45% are running the new software:
25.1 percent of Parity and 58.4 percent of Geth, the most popular ethereum clients.
Previous iterations of the software were retracted due to critical faults that could have exposed the network to denial-of-service attacks, or created incompatibility between nodes, leading to a split of the network, notes Rachel Rose O'Leary.
"As a result, some may be wondering whether ethereum is safe to use, and given the state of affairs, this remains an open question. For one, there are a few types of faulty software clients out there, and several contain a 'consensus bug' which could lead to the inadvertent creation of multiple ethereum blockchains.," she notes.
"For this reason, ethereum core developer Gavin Wood told CoinDesk he would "urge caution" to any major players taking on large-scale projects until the upgrade is deemed to be fully stable."
Score:-1 for Ethereum
Exchange offers ETH2altcoin platform
Most cryptocurrency trading platforms use bitcoin as their default. For ETH they offer a limited number of trading pairs. Some don’t offer any ETH trading pairs at all, observes Cynthia Turcotte on bitcoinist.
Now cryptolocator, a global person-to-person marketplace in tokens, has launched its Ethereum trading platform that adds other altcoins as well as bitcoin.
"Users set the terms of their trades by choosing the payment options and trading pairs that suit them the best and the P2P nature of the platform eliminates the middleman. The end result is faster, more transparent speeds, and lower trade fees," she reports.
She adds:
To thank new users for using their platform, Cryptolocator is rewarding early traders with generous discounts on all transaction fees for the first six months of trading. In addition, there are also bounty programs are in place at both BitcoinTalk.org and BitcoinGarden.org.
Prices can vary by 10% depending on the trader, to judge from a first look, and many countries have no-one willing to trade.
Score: +1 for Ethereum
Bitfinex cuts off U.S.
After several weeks of speculation, the Bitfinex exchange, the largest market for US$/BTC trading, announced on 18 October it would terminate services for individual U.S. customers on 9 November 2017.
It was not unexpected. On 11 August Bitfinex began suspending all new requests for account verification from U.S. individuals.
Samuel Haig of bitcoin.com writes: "The move appeared to be in direct response to the United States Securities and Exchange Commission’s warning that initial coin offering (ICOs) deemed as securities would be subject to existing financial regulations." Bitfinex barred all U.S-based customers from trading ERC20 tokens issued through an ICO within a week of the announcement.
Haig adds:
Bitfinex has come under increasing scrutiny in recent months for the sharp increase in the number of Tether, or USDT, tokens that have been issued. Following Wells Fargo’s suspension of U.S. dollar wire transfers processing services on behalf of Taiwanese banks servicing Bitfinex, speculations have surfaced that the exchange may have used Tether as a means to circumvent liquidity problems – with the number of USDT tokens in circulation having increased by approximately 500% snce Bitfinex's banking issues began.
In view of Bitfinex's trading volumes, I am scoring this as -1 on the validity indicator.
Russia's largest bank joins Ethereum alliance. So does HP
Sberbank, Russia’s largest bank, and Hewlett Packard Enterprise (HPE), are among 48 new members of the Enterprise Ethereum Alliance.
Sberbank’s head of trade finance and correspondent banking, Evgenly Kravchenko, told Coindesk: "The next step for our blockchain team will be operations with foreign-based financial institutions and other banks, to do some international transactions, to see how we can increase the transparency and improve the trust between banks and corporate clients."
Francisco Memoria's CoreMedia report noted that HPE has been working with blockchain technology on the distributed ledger startup R3. The company’s global financial services industry lead, Markus Ogurek, stated: "Joining the EEA is a significant step for Hewlett Packard Enterprise in making blockchain enterprise-ready and accelerating our customers' journey to production."
Score: +1 on the validity indicator for the Russian development
Russian Businesses Urge Government: Approve Only Domestic Cryptocurrencies
The Association of Entrepreneurs for the Development of Business Patriotism (Avanti) sent a proposal to the Federation Council and the State Duma on Monday to legislatively permit only the circulation of domestic cryptocurrencies in Russia, RIA Novosti reported.
Avanti is one of Russia’s leading public associations for entrepreneurs and businessmen. Supported by members of the Russian parliament, the association works with entrepreneurs, officials and regions to promote the idea of business patriotism.
Unscoreable as it stands.
Switzerland awards first official licence to bitcoin company
Payment21 announced on 17 October that its owner Moving Media has been awarded a licence, the first in Switzerland, as a Directly Subordinated Financial Intermediary (DSFI). The third-party processor is now supervised by the Swiss Financial Market Supervisory Authority (FINMA) for compliance with Anti-Money-Laundering (AML) laws and Know-Your-Customer (KYC) rules.
Payment21®’s bitcoin cashier system provides collection and exchange services to e-commerce merchants, multinational corporations, and financial intermediaries. It also operates an exchange office enabling Payment21® to broker Bitcoin by exchanging digital money into legal tender.
Managing Director Bernhard Kaufmann commented: "Government licensing is crucial when establishing a payments business. Official approval in a leading European financial center like Switzerland is a key differentiator in the competitive landscape."
Score: +1 on the validity and governance indicators
Worldcore offers voice verification
The Czech-based Worldcore online payment service provider has announced voice verification for orders. Launched in 2015 with a licence from the Czech National Bank, it offers "a wide range of global payment solutions including access to bank payments, e-currency payments, prepaid debit cards, mass payments, payouts to any Visa/Mastercard/UnionPay credit/debit cards and international payment processing for both individuals and businesses".
At the moment it only works with BTC wallets and offers virtual and plastic pre-paid debit cards with an instant top-up feature.
Score: +1 for bitcoin on the validity indicator
'History suggests cryptocurrencies are likely in a bubble'
A Motley Fool writer on 19 October 2017 rehearsed all the familiar complaints about cryptocurrencies:
"Investors overestimate the potential of new technologies, goods, and services," writes Sean Williams.
- 3D-printing
- Human genome medical developments
- The tulip craze
His main targets are bitcoin and ethereum investors.
Investors may be placing far too much emphasis on bitcoin and ethereum as payment platforms, rather than focusing on their underlying blockchain technology, which is where the value for these digital currencies really lies. Ethereum isn't accepted as payment by any major retailer at the moment, while bitcoin has a handful of brand-name companies that've accepted it since 2014. However, if you were to try to live off bitcoin at the moment, you'd struggle to do so. The high volatility of bitcoin, along with the length of time it takes for transactions to settle, is a deterrent to attracting new merchants.
I can't believe many Motley Fool readers are crypto investors, except perhaps in the Nasdaq-quoted Bitcoin Investment Trust, whose investors pay "an exorbitant 2% annual management fee" for the trust to hold bitcoins. But it is hugely influential and might scare some crypto investors to guess on a run against tokens and try to beat the rush. Still not worth scoring, yet.
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Excel version
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There's also an Excel version of the shorter summary screenshot used above.
Superforecasting
Indicators
I've listed my seven indicators and explanations of what I consider important here.