Trading has officially opened in South Korea on the Beijing-born Huobi crypto exchange, according to Huobi Group’s official announcement March 30.
Huobi’s new South Korean subsidiary supports 100 altcoins and trading on 208 markets (77 ETH markets, 98 BTC markets, and 33 USDT markets).
It also offers an investor protection fund and program to swiftly recompense investors in cases of losses incurred outside of their control.
Huobi Pro global exchange currently ranks second worldwide by trade volume, according to Coinmarketcap as of press time.
The Huobi group launched its Huobi Pro exchange, headquartered in Singapore, after the Chinese government clamped down on ICOs and domestic crypto-fiat exchanges in September 2017. Chinese measures continued to toughen in January and February of this year.
Amid this regulatory onslaught, Huobi is now targeting overseas markets, with a US launch set to follow South Korea. The South Korean context offers its own promises and contradictions.
The country is estimated to have the world’s largest crypto user base after the US and Japan. Such has been the Korean crypto frenzy that altcoins formerly traded 30% above other markets, although this so-called “Kimchi-premium” dissipated earlier this year. The country is reported to have a dozen crypto exchanges.
In December 2017, the Korean government banned anonymous crypto trading, and in January 2018 over 200,000 South Koreans signed a public petition following misinterpreted rumours of an outright national ban on crypto trading.
The South Korean government is reportedly looking to revoke its ban on ICOs, and six major national banks continue to support crypto exchanges.
A taxation framework for the South Korean crypto market is due to be unveiled in June.
Coinprism, an online wallet service for “colored coins” founded in 2014, is closing its doors this weekend.
The startup said in a message on its website that it would shut down on Saturday and advised users to “withdraw your funds and export your private keys before this date.”
Coinprism was arguably ahead of its time. By using the bitcoin blockchain to create tokens representing other assets, its colored coins presaged the rise of ethereum and other networks built explicitly for such use cases.
But as founder and chief executive Flavien Charlon pointed out in an email to CoinDesk, much has changed since 2014, both on the tech and regulatory fronts.
“While we have been one of the first in the area of blockchain tokens, long before ethereum was even released, the ecosystem has since shifted towards ERC-20, which is more flexible and more powerful than bitcoin-based systems,” he wrote, adding:
“The unpredictability of transactions fees and confirmation times in the past couple of years have also made it hard to argue bitcoin is a good platform for this.”
Stepping back, Coinprism is one of a number of companies that sought to focus on colored coins, or bitcoins bearing extra pieces of data that give them a greater degree of uniqueness by way of the protocol’s scripting language.
Colored coins can serve as digitized stand-ins for real-world assets, for example, or represent things like loyalty points.
Yet as Charlon pointed out, work in this area has largely shifted to ethereum and other platforms. Many such tokens in circulation today are based on ethereum’s ERC20 standard.
Charlon also said the long-term business model of Coinprism was problematic, given the growing regulatory scrutiny of the ecosystem and around crypto assets in particular that have been sold through initial coin offerings (ICOs).
He told CoinDesk:
“We didn’t see a business model that would have been viable long term. Regulators are starting to pay attention to the space, and activities around blockchain assets (tokens exchanges, ICO tools and services, etc.) are likely to become heavily regulated in the next 5 years. That means some of these services will have to shut down or restrict their activities, some might go to prison, and only a small number of well capitalized companies will successfully adapt to the regulator’s demands.”
Past that, Charlon said another reason Coinprism was calling it quits is because the limitations of blockchain were becoming apparent.
As he put it:
“In 99% of use cases we’re seeing, blockchain is unfortunately a sub-optimal choice as a technology. Blockchains have many disadvantages in terms of speed, scalability, costs and user experience. Unless censorship resistance is a critical requirement (which it rarely is, especially in the enterprise blockchain space where participants all know each other), blockchain is rarely the right technological choice.”
The blockchain’s vaunted transparency, privacy and cryptographic security can all be achieved “quite easily” with a traditional system, Charlon went on to argue.
“In the end it was about intellectual honesty. I didn’t like having to support projects that were trying to use blockchain for the sake of using blockchain, when I knew a centralized, more boring architecture would actually do a better job,” he concluded.
The biggest bank in Denmark, Danske Bank, has released a report criticising cryptocurrencies over perceived risks and lack of transparency.
In the document released on Sunday, the bank provided three primary reasons why it is overall “negative” towards cryptocurrencies, despite the growing attention they have received from among consumers and investors.
Since cryptocurrencies do not come with central bank backing, the bank states, they lack protections for consumers and investors. Further, high volatility and a lack of pricing transparency provide “very limited insight” into market development and factors affecting prices. And, finally, a lack of regulatory oversight means cryptocurrencies are a target for criminals, it said.
Therefore, it said, “we strongly recommend that our customers avoid investing in cryptocurrencies.”
The report continued:
“For these reasons, it is not possible to trade cryptocurrencies on our trading platforms. However, we monitor the market closely, and if the cryptocurrency market becomes more transparent and mature, we might reconsider this position.”
Danske Bank said it is also phasing out the option of buying financial instruments, such as derivatives or exchange traded notes (ETNs), that are linked to the price of cryptocurrencies. However, general customers will still be allowed to use their credit cards to purchase cryptocurrencies.
While against cryptos for the meanwhile, Danske Bank has been somewhat more keen on blockchain technology.
An early member of blockchain consortium R3, in 2016, the bank took part in trials with other members for a syndicated loan exchange based on the technology. Another trial that year saw it work with R3 and members on a distributed ledger trial focused on applications in trade finance.
And in March 2017, it joined other banks and financial firms in completing the second phase of another blockchain proof-of-concept, also focused on syndicated loans.
Most people have claimed cryptocurrency is in a bubble over the past year. Given the current market sentiment, these claims seem to make some sense. At the same time, the real financial bubble is present in different sectors. It seems the tech industry is still the biggest bubble people need to be scared of right now.
The Tech Sector Bubble is Very Real
While it is true that technology firms are innovating, the money thrown at these companies is quite steep. More specifically, it seems Silicon Valley has given birth to dozens of new future billionaires in the past two years. Innovative products and services are launching virtually every other week. At the same time, these companies would not succeed without sufficient funding either.
We now see startups being valued at $1 billion or more without having a working product. Although this draws similarities to the cryptocurrency ICO sector, it is a bit more worrisome in the tech sector. Unfortunately, all good things must come to an end, even in Silicon Valley. More specifically, software engineers are trying to land jobs with firms whose business model is effectively working out. Most current startups raise a lot of capital only to realize they can’t deliver on their initial promise.
Additionally, various startups are seemingly running out of money. Venture capitalists are becoming a lot more picky as to how they invest in companies. The ‘big bets’ are slowly on the way out, or so one would think. Even so, the graphic above shows the annual tech flows are still incredibly bullish. This year, we may very well surpass the $50 billion mark in this regard.
Putting the Cryptocurrency Bubble to Shame
Comparing this trend with cryptocurrency, it is evident the tech industry is the real bubble. With so much money being thrown around lately and not much to show for it, something has to give. Cryptocurrency, on the other hand, has seen massive improvements over the years. Moreover, some of the biggest improvements have yet to come to fruition.
Interestingly enough, the tech sector in the US is at the same “value” as the total cryptocurrency market cap. According to the NY Times, the tech sector is valued at $299.6 billion. All cryptocurrencies are currently valued at $304 billion. As such, it doesn’t make sense to claim cryptocurrency is in a bubble. The dip from $750bn to $250bn has been quite steep, to say the least. However, the combined US tech and internet sector dropped from $780bn to $560bn between May 2015 and May 2016. Ever since, it has bounced back stronger and is not reaching new all-time highs.
How all of this will pan out, remains to be seen. If the tech sector is in a bubble, the future doesn’t look bright any means. With cryptocurrency, it is safe to say the best has yet to come, although it may not necessarily happen in 2018. Tech companies have high expectations to live up to, as it is almost crunch time. For Bitcoin and consorts, these are still the early stages of development and growth, by the look of things.
So-called “sharding” may still be theoretical, but the promising implications of the concept are becoming more and more real.
At least that’s the case on ethereum, where developers are beginning to see the scaling solution, which would essentially split the blockchain into parts that would run on different servers, as an opportunity to test fundamental assumptions about one of the world’s largest cryptocurrencies.
Although initial roadmaps are just now being discussed, ambitious coders are already jumping to introduce protocol-level redesigns that could be made possible by the upgrade.
“Sharding is a huge, huge change to the network,” said Phil Daian, a researcher at Cornell University’s Initiative for Cryptocurrency and Contracts (IC3). “A lot of people think it provides an opportunity to redesign economic models and other aspects of the system.”
For Daian, the realization comes on the heels of a developer retreat in Taipei, where, sharding, and other speculative changes, were discussed. Now, along with an all-star team of co-founders including Ari Juels, Lorenz Breidenbach and Florian Tramer, he putting his efforts into an initiative aimed to redesign ethereum to work more efficiently, Project Chicago.
The project is trying to identify exactly what commodities are being traded at the core of ethereum today. By isolating a variety of network elements, like its gas, storage and UTXO transaction data, the team plans to implement protocol-level markets for what they call “crypto commodities.”
“We want to look at all of the services and resources the network is providing and say, ‘OK, how do we create a market-based system for price discovery and the incentivization of this,'” Daian told CoinDesk in interview.
The researchers were inspired to create the concept after developing a tool called GasToken, which allows ethereum users to store gas (ethereum’s token for paying fees on the network) when it’s cheap and sell it at a later date when the price is higher.
And while not many people are using the tool yet, it’s effectively shone a light on an incentive flaw within the ethereum system in that, as people look to store GasTokens, it further bogs down the ethereum state – the part of the system that keeps track of all possible computations.
Already, the incentive flaw is reigniting discussions about the need for users to pay so-called “rent” on the amount of time they need their data to be stored on the blockchain. But because GasToken incentivizes people to hoard their tokens, “it’s a clear artifact to point to show people why today’s model is flawed and why rent needs to be introduced,” Daian said.
Still, this isn’t the only thing the researchers at Project Chicago think needs to be redesigned.
And as such, Daian spoke more broadly about sharding, stating:
“It could actually provide a once-in-a-lifetime opportunity to radically redesign the system and reset people’s expectations from scratch.”
Futures market inspiration
That’s because, according to Project Chicago, at its core, a blockchain is a marketplace, one where miners sell resources allowed by the software to users. Focusing on this, Daian last week drafted an incentive scheme for peer-to-peer networks, one that would not only pay participants for routing transactions, but apply the same logic elsewhere.
“These resources can be anything from block space, to CPU on full nodes, to permanent storage on full nodes, etc. So, we sort of came at this from the beginning, questioning the pricing models that blockchains have today,” Daian said.
Created earlier this year, GasToken was the first step in this direction. In practice, it works by exploiting a feature named “gas refund,” which is intended to incentivize users to delete data. But with GasToken, it’s possible to abuse the feature, encouraging users to store and drop contracts, as timely deletions can return higher gas.
Daian described this as a “fundamental mis-pricing” in ethereum, in that it values computation as equivalent to storage. “Because of that, we’ve now created a direct financial incentive for people to bloat the state space and store garbage,” he said.
As well as revealing inefficiencies in ethereum’s incentive structure, GasToken paved the way for a line of inquiry that could be extended deeper into the protocol layer.
“It sort of made us realize that there’s this whole under-researched space of how to deal with these these raw resources that are fundamental to different blockchains today,” Project Chicago’s Tramer told CoinDesk.
By identifying markets for raw resources, Project Chicago intends to pave the way for other financial mechanisms, such as futures. “[We’ll be] looking at different kinds of futures for ethereum, computation, storage and network, and how you can build them,” Daian said.
According to Tramer, by speculating on the availability or scarcity of the underlying resources over time, such markets could potentially mitigate price volatility, just like on traditional markets.
Daian echoed this, telling CoinDesk:
“There are really concrete analogs to the real world here. The Chicago Mercantile Exchange (CME) was our inspiration for Project Chicago. And I think a lot of real-world problems could have been avoided by a nicer economic model.”
However, Daian is aware that by ramping up the markets, such schemes may not prove popular.
For example, an increased number of incentives could lead to centralization, attracting large-scale players to participate in storing or mining the blockchain in exchange for rewards. Daian deflected this though, stating, “My argument would be that you’re essentially saying you’ve introduced an incentive and now it will be vulnerable to economies of scale.”
He continued to say that bigger economies are both positive for security, in increasing the cost of attacks, and an inevitable economic progression, “even if you do fight them,”referring to monero’s recent efforts to defend against large-scale mining.
But there are other potential issues to the mindset, as well. While Project Chicago could provide incentivizes for a host of new participants, such schemes would come at a cost.
For example, rent would mean that token issuers pay a yearly fee to host a smart contract on ethereum, which, failing renewal, could lead the contract to be deleted.
According to Daian, it’s possible that new charges could drive users away. “It is worth saying that for all of these crypto commodities, a big is risk in my mind is that people sort of like the cheaper, subsidized model,” he said.
Plus, in a competitive market for blockchains, new cryptocurrencies could emerge that offer free usage in the short term, “because there’s not that much demand, and perhaps there’s good supply.”
And while the new incentives could be a big improvement for speed, as well as scaling and decentralization, it’s not clear how much those attributes are valued by users.
“I think people are going to have to start valuing decentralization and incentive compatibility and robustness with their wallets. And it’s not really clear to me whether or not they do.”