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Cryptocurrency

The Hutch Report

The 4 Cryptocurrency Opinions To Avoid

By | Cryptocurrency, Money, Psychology, Technology

The level of trading activity in Bitcoin and other cryptocurrencies has begun to attract the attention of the general public. It seems to be everybody’s favorite subject these days. Discussion and debates about Bitcoin are raging at dinner tables across the nation and around the world. In addition, the number of articles outlining Bitcoin’s future trajectory have increased daily. In spite of the number of financial media channels having previously written it off as a mania, now provide its viewers the latest daily quotes.

It is not so much the promise of this new peer-to-peer technology that operates with no central authority or banks. Nor is it interest in the fact that a collective network carries out the issuance of bitcoins and manages the transactions that have captured the attention of the public. There are a number of early adoptors who have become extremely rich off of the increase in value of Bitcoin and the so called alt-coin market. It is the dream of quick riches that is really driving the interest.

Whenever a technology begins to reach fever pitch, as we are seeing with cryptocurrencies,  a large number of self-proclaimed experts begin to appear. They are suddenly gifted with incredible prediction power. They know where the price will be in 3, 5, 10 and even 20 years. They happen to know that no government will be able to control it or stop it. They seem to know that it will eventually take over the world as the primary form of currency for all transactions.

However, these are not the only voices being heard from the rooftops. There are also those with equally impressive predictive powers. Those that seem to know where the top is. The point where Bitcoin ceases to move up, reverses and begins its long slide back towards where it began. Those  that seem to know that no solutions will ever be found to the current technological challenges that a decentralized digital currency currently faces. Those that seem to know that cryptocurrencies will never be a replacement for the platform of fiat currencies on which our economies currently function. They seem to understand all the weaknesses of these digital currencies and where their limits are.

Nassim Nicholas Taleb, author of “The Black Swan,” presents a convincing case on our inability to predict events with hard-edged analysis. At the same time he stresses to protect yourself from highly improbable events. Therefore, the first thing that should be done is to avoid the following 4 outspoken opinionated groups on the subject of Bitcoin. These groups are all supporting their own interests, which don’t always coincide with the interests of the individual.

1) The Financialists

The Central Bankers and their affiliate bankers around the world see themselves as the guardians of the global economy. In addition to providing a variety of services to the public that enable the economy to function rather smoothly on a daily basis, banks are still for-profit institutions and their principle goal is to generate profits. This is often done by way of complicated products with unsusual naming conventions. They control the money transfer and credit system, therefore, they weild a large amount of control towards the stability of the system. For this reason, they will not tolerate any outside technology that threatens their position. The initial reactions to Bitcoin were that of a pure fad. Further analysis sees them now trying to discover ways to regulate it, or create their own digital currency where they have the full control to profit from it. Their opinions are changing daily based on their confidence in how to manage its evolution. They are worried and rightly so as the initial concept of a decentralized digital currency would make many of their services redundant.

2) The Technologists

Bitcoin and the blockchain are based on technology. They have, not surprisingly, attracted the attention of the technology and developer community. They believe because it is based on technology, and they understand technology that it provides them with more powerful forsight. Once the value of Bitcoin began to rise, the startup community began to move into action and started developing a variety of ideas such as wallets, new exchanges, a variety of platforms etc. It has now become the hot area to be involved in. So hot that public companies that have nothing to do with Bitcoin or the blockchain have changed their names to incorporate the term blockchain only to see their shares rise immediately. The technologist are on a crusade and want you to join the crusade. However, it is wise not to forget that at one point there was once a product called a Betamax cassette which was superior to the competing VHS cassette only to lose out and be banished to history. Apple computer produced a much higher quality product and software than the PC and Microsoft option at the time. Apple computer only managed to acquire 5% of the PC market, much to the surprise of the followers who understood the value behind the technology.

3) The Evangelists

The leader of this group and one of the most vocal has been Andreas Antonopoulos. Antonopoulos became involved with Bitcoin in 2012. He has written two books on the subject, describing in detail the technical rules governing Bitcoin in a way that a novice could understand, and has given more than 200 talks (many of them free) about Bitcoin. Antonopoulos obtained his degree in Computer Science and Data Communications and Distributed Systems from University College London. With his help the Bitcoin evangelists have an ever increasing choir. Some of them understand the technology and find its possibilities fascinating. There are the bandwagon jumpers who want to join the club and fit in with the “cool crowd.” There are those that see it as a great way to transfer money around without the peering eye of the government, or truly a new medium of exchange not governed by any central authority.

Then there are also those who have dreams of striking it rich. Ironically, Antonopoulos, after having spent the last five years of his life traversing the globe and educating people about Bitcoin found himself not only NOT taking advantage of the run up but found himself in debt, until a wrath of Bitcoin evangelists donated to his cause. This came just at the moment when he was questioning what he was doing it all for.

4) The Governmentalists

Governments are the farthest from being Bitcoin advocates. This is not because they don’t believe in digital currencies. In fact, they would garner more control by ridding the economy of hard currency and make everything digital. This would enable them to gain tighter control of the money supply or increse their efficiency of tax collecting. What they don’t appreciate is loss of control. The idea of a collective decentralized managing transactions and digital currency issuance is an idea that they will never accept. Why? They require a centralised authority (which is them). We wrote about the ways in which governments could shutdown cryptocurrencies. It is, therefore, no surpise that they are fighting vehemently against the idea.

So who should you listen to? This is one of those situations where you must truly take matters into your own hands. You have to acquire the knowledge necessary, educate yourself and decide for yourself how this new system of digital currency could affect you personally. This means choosing your information sources carefully. If you do listen to any of these groups, be cynical and don’t take what they say at face value. Double check and do your own research. Depending on who you speak to, you will be labelled as blind if you don’t buy into it or labelled as an idiot if you do. In the end, it is the market as a whole who will ultimately decide the fate of cryptocurrencies.

The Hutch Report

Bitcoin and the Bandwagon

By | Cryptocurrency, Money, Psychology

Bitcoin and the blockchain have been around since 2008 when the elusive Satoshi Nakamoto presented his/her white-paper to the world outlining its structure. Since its core is based on cryptography and mathematics, in the beginning it only attracted the attention of those in that area of research. However, because it was proposing a new medium of exchange that could not be altered and promised anonymity, the dark side of commerce quickly joined in. From here, the value of Bitcoin has begun to increase, as has the attention. After 9 years in existence, the mainstream media has begun to chime in and before you know it, Bitcoin charts and quotes have been all over the news.

The other day, my father-in-law asked me if I heard about the action in Bitcoin. He used the term as loosely as he would “Google search,” however I knew that his understanding of what Bitcoin actually was, was severely limited. My neighbor stopped to chat and told me her son (15 years old) was having a friend over. I said, “To watch a movie?” and she told me, “No, to trade Bitcoin.” She had provided her son with a few hundred dollars to trade! Last night I was in a restaurant in town that I know very well. It is a small place with the tiniest kitchen. I popped my head in to say hello to the chef. The first thing he said to me was, “Hey, did you buy any Bitcoin lately?” At that moment I realized the wagon was getting very full.

The chance that people begin to adopt certain ideas or choices tends to increase when they realize that other people have adopted similar ideas and choices. This is a human cognitive bias known as the “Bandwagon Effect.”

In 1848, Dan Rice, at the time a famous and popular circus clown, decided to use his bandwagon (a wagon that carried a band during parades) and its music to gain attention for his political campaign appearances. His campaign became more and more successful and this obviously attracted the attention of other politicians who fought for a seat on the bandwagon, hoping to be associated with his success. Bandwagons eventually became a standard centrepiece in political campaigns and the phrase “jump on the bandwagon” was born.

It is a powerful principle that is used constantly in marketing. The concept describes how the increasing popularity of a product or phenomenon will encourage more people to “jump on the bandwagon.” We see it everywhere. #America’s No 1 choice, #the fastest selling product, #most wished for, #most gifted or the myriad of top 10 lists that we see everyday.

The tendency to follow the actions or beliefs of others occurs because individuals directly prefer to conform, or because individuals derive information from others. Normally, when an individual makes a “rational choice” (see our article on the Rational Price here), it is based on the information they compile from various sources with which to come to a decision. However, as information cascades, or when people start passing on information they assume to be true, but cannot know to be true, based on information on what other users are doing, they will ignore their personal information signals and follow the behaviour of others.

The phenonmenon of Bitcoin and cryptocurrencies does not stop with the bandwagon effect. The speed at which it is moving, where fortunes are being made and lost in the most unlikely areas of society has stirred a variety of other cognitive biases into action.

Closely related to the bandwagon effect, and becoming clearly evident in the cryptocurrency mania, is the “fear of missing out” or FOMO. The fear of missing out is a type of motivation that is described as a drive not to miss current or future opportunities. It’s associated with a fear of missing chances for competitive advantage, rewarding experiences or financial opportunity gains. It is considered a common and strong form of motivation that can explain a wide range of human behaviors. However, as with other similar biases,  the fear of missing out can result in excessive or compulsive behaviour and poor decisions.

Robert Cialdini, author of the widely popular Influence: The Psychology Of Persuasion, popularized the term “Social Proof.” The Social Proof Theory, affirms that a person who does not know what the proper behavior for a certain situation is, will look to other people to imitate what they are doing and to provide guidance for his actions. Uncertainty is the fuel that activates and feeds the mechanisms of social proof. This is especially fitting in the case of cryptocurrencies, as the technology and mathematics behind them is not so simple for the average person to immediately grasp. Therefore, social proof becomes more influential when the surrounding people are perceived as particularly knowledgeable about a situation or are even just slightly more familiar with the situation than the observer is.

As the price of Bitcoin and a thousand other cryptocurrencies have risen to lofty levels, so has the debate around what cryptocurrencies respresent.  Are they a medium of exchange? Do they have true value? Do you have to pay taxes on gains? Are they something else other than a tool for speculation? This debate has come to just about every financial media news outlet; CNBC, FOX, Bloomberg or CNN Money where they present daily their panels of financial experts. So where better to gain an understanding about cryptocurrencies.

The trap that many viewers are falling into is known as the “Authority Bias.” The Authority Bias is a where you defer to any position of authority to either dismiss or confirm evidence. The thought process follows the following reasoning pattern: Person X is an authority in a particular field. Person X says something about a  topic in their respective field. Person X is probably correct because they’re an expert. Because of this reasoning, the Authority Bias maintains that if you don’t know something better yourself you will likely trust the advice or information from someone who is considered an expert in that field.

The Hutch Report has been following Bitcoin and other cryptocurrencies for a while now. We recently completed our current feature report related to Gold Backed Cryptocurrencies, which can be downloaded here. We don’t profess to be experts regarding this technology but we do follow it with interest. We believe that, although a large number of opinions exist about where all these cryptocurrencies will be in the future, nobody really knows. Nobody is even certain about true identity of the originator, Satoshi Nakamoto.

We are currently living in unchartered territory so it is up to each individual to protect themselves, keep their bias in check. Don’t blindly follow and do your best to inform yourselves.

The Hutch Report

The Digitisation of Fraud

By | Cryptocurrency, Law, Money, Technology

Whether we speak about the new economy; the old economy or any economy, fraud is still fraud. It is the wrongful or criminal deception intended to result in financial or personal gain. Yet even though there has been a large amount of publicity surrounding some very high profile cases of fraud nothing seems to change. Auditors and accounting professionals seem to remain impotent when it comes to fraud detection.

The truth is, the audit of traditional financial statements were never designed to detect fraud. The audit is simply a process of checking a company’s math and application of accounting rules. This is probably why it has been so prevalent in large corporations in spite of the fact that they have an army of accountants from the largest auditing firms scouring their books yet no cases of deception to show for it.

According to the findings in the “Report to the Nations on Occupational Fraud and Abuse” study released by the Association of Certified Fraud Examiners in 2014, the higher-ranking the fraudster was, the greater the losses. In addition, financial fraud is more difficult to uncover because the perpetrators have less of an emotional connection to what they are doing than they do for other types of crime. The fact that they are not actually touching money as opposed to fudging documents, they feel less guilty of committing a crime.

There seems to be less leniency towards drug dealers and petty criminals as opposed to, say bankers, but the truth is financial fraud has destroyed just as many or more lives through the theft of millions taken from shareholders and pensions plans.

The report estimated that the typical organisation loses five percent of its revenues each year to fraud. That would work out to a global impact of $3.7 trillion, however, it is also believed that there are so many more cases that are not discovered.

So now we find ourselves living in a digital world with the increasing development of the Internet and our dependence on it. We have seen the introduction of the blockchain with which has come the proliferation of a number of crypto-currencies chief among those being Bitcoin.

With the advent of a new technology that has the capacity to disrupt our financial system, it is not surprising that with it comes a new breed of criminals. Cybercrime is already costing the U.S. economy as much as $120 billion a year and as much as $1 trillion globally, according to a study released in 2013 by McAfee and the Centre for Strategic and International Studies. Seeing that it is so difficult to regulate Bitcoin, it has been the tool of choice for these cybercriminals.

It is not surprising to see so many come out and chastise this new technology, especially those with a weak understanding of its merits. Equally not surprising is the large number of financial industry participants at the forfront of these critisisms. Ironically it is those same participants who have already been responsible for billions of dollars of fraud in our financial system.

The truth is, it doesn’t matter what the weapon is. If you kill somebody using a gun, knife, poison or your own hand, the end result is that they are still dead. If you steal money from someones purse, removed the funds from their bank accounts, knowingly overcharged them for services never rendered or expropriated funds via Bitcoin, the result is the same.

Liberty Reserve was founded in Costa Rica by Arthur Budovsky. Through his website it was possible for anyone to transfer money with very little regulation. The only required details were name, e-mail address, and birthday. Liberty Reserve never actually handled the funds, as it converted the fiat deposits into Liberty Reserve Dollars or Liberty Reserve Euros, whose values were pegged to the value of the US dollar and euro respectively. This made it ideal for funneling criminal funds. The authorities eventually closed in on Budovsky’soperation and shut it down. In January 2016, Budovsky pleaded guilty to money laundering and admitted that he had secretly moved at least $122 million.

When it comes to Bitcoin, the case that is cited the most is that of the Silk Road bust. In the Silk Road case the federal government had seized more than $33 million worth of bitcoin from the computers of the site’s alleged founder, Ross William Ulbricht. It is believed that the operation generated roughly $1.2 billion in sales over three years. Tracing that money and recouperating it would be deemed as next to impossible.

We can compare these two “digital” cases with that of Enron. Enron Corp. was essentially an energy trading company that reached dramatic heights, only to face a dramatic collapse. The story ended with the bankruptcy of one of America’s largest corporations. Enron’s collapse affected the lives of thousands of employees and shook Wall Street to its core. At Enron’s peak, its shares were worth $90.75, but after the company declared bankruptcy on December 2, 2001, they plummeted to $0.67 by January 2002. Enron shareholders filed a $40 billion lawsuit although only ended up receiving limited returns from the lawsuits, despite losing billions in pensions and stock prices. This was the largest bankruptcy in US history until Worldcom a few years later.

The means and methods were different in these cases but the results were the same. Fraud is fraud.

The Hutch Report

Tools for the Crypto Millionaire

By | Cryptocurrency, Money, Technology

With Bitcoin prices and cryptocurrencies surging to all time highs the hype and noise is reaching fever peach.  Unbridled enthusiasm on one side and unbridled doom and gloom on the other side. With that said, those who have not invested are suffering from FOMO – the fear of missing out. Many readers continue to ask us how does one go about investing in cryptocurrencies. We have therefore put together a list of those necessary tools to get you started in building your cryptocurrency investment stash for the future.

We have also heard, firsthand, recent stories of people now placing their entire retirement or IRA savings in Bitcoin. For anyone in their twenties and this amount is small, why not … there is time in life to recover before retirement in the case things do not go as hoped. For anyone in middle age or older – well, this is probably a bit foolish. A common sense advice purported by serious and ardent advocates for crpytocurrencies is to invest 1% of assets into cryptocurrency. If it does well, great. If the whole thing comes crashing down, losing 1% would not be a disaster. As a reminder, “hope” by itself is not a great investment strategy.

In addition, the fact that cryptocurrencies are decentralized means that you are responsible for your cryptocurrency investments. If you should lose or have them stolen, there is no central authority which you can turn to. Therefore, you need to inform yourself on the proper security measures to take in order to protect your cryptocurrency investments. We have therefore provided three of the best hardware wallets on the market to help you to do so.

We would like to remind all readers that this website and content is produced for general interest, is not specific to you, is for entertainment only and is not intended to provide nor constitute financial advice. In full disclosure, the authors may or may not be holding positions in any of the vehicles mentioned. Prior to making any investment decision you should undertake your own due diligence and/or seek the advice of a qualified and registered securities professional. With the preceding in mind, listed below are some of the websites and platforms that some of our readers have indicated they are using:

Market Prices and Market Capitalizations

Coinmarketcap  is probably the most trusted comprehensive index of crypto market prices capitalization ranking as well as which coins are being traded on which exchanges. The nice thing about this site is that you can easily select which fiat currency in which you would like to see the prices compared. Do note that the prices listed are the average prices across exchanges. It is possible on this platform to drill down and see the prices on each specific exchange as well. The astute individual would remark the discrepancy of prices on the different exchanges and see an opportunity for arbitrage. However, in this case one would also want to pay attention to volumes and liquidity which would impact the ability for arbitrage.

Cryptocompare also provides a comprehensive listing of cryptocurrency market caps and prices and allows different currency comparisons.

Cryptocompare USD for a listing of prices as compared to US dollar.

Cryptocompare BTC for a listing of prices as compared to Bitcoin (BTC)

Cryptocompare EUR for a listing of prices as compared to Euros.

Coinvision provides AI-powered alerts for cryptocurrency market news.

Exchanges and wallets

In order to buy a cryptocurrency you have to have an account on one of the exchanges that allows trade in the currency. Cryptocurrencies can be traded similarly to stocks including features such as limit orders. Only a handful of currencies can actually be bought directly with fiat currency such as US dollars or Euros. The most common denominator is BTC. BTC can be bought for US dollars or Euros and then BTC can be used to buy the other currencies.

Some of the exchanges also provide wallet services and vice-versa.

In choosing an exchange we would recommend choosing one that has volumes otherwise you may suffer liquidity issues. Some of the most popular Bitcoin and cryptocurrency exchanges are:

Poloniex : A US based company, Poloniex allows trades in about 107 different cryptocurrency markets, with most volumes from Ripple. Ethereum and Litecoin.

GDAX : GDAX is a US based company, and as of this writing only trades in Ethereum, Bitcoin, and Litecoin. It does facilitate fiat currency purchase in USD, EUR and GBP for Bitcoin.

Kraken :  This is a US based exchange that allows trades in about 40 markets and does facilitate USD and EUR purchases for Bitcoin, Ethereum, Ethereum classic and Litecoin as well as a few other currencies.

Korbit : This is a South Korean based exchange currently only trading in Ethereum, Ethereum Classic, and Bitcoin and allows fiat purchases using South Korean Won.

Bitstamp : This company is based in Slovenia and London and trades in Bitcoin, Litecoin, Ethereum, Ripple and soon Bitcoin Cash.  They facilitate fiat currency purchases in USD and EUR. For purchasing Bitcoin via Bitstamp it works very well for a variety of options including credit card, however, credit card purchase of Bitcoin do carry a 2.5% fee. SEPA (European standard) wire transfers are efficient with Bitstamp.

Bittrex : This is a US based exchange that supports over 190+ cryptocurrencies. This is the platform recommended by many of our readers. Bittrex does not facilitate direct fiat currency purchases. What some of our readers do is they buy Bitcoin on one of the other platforms that allows purchases in fiat currency and then they send the Bitcoins to their Bittrex wallet and then purchase the other currencies using their Bitcoins. The same process would be followed in reverse to extract fiat currency.

Coinbase : A US based company, Coinbase is a wallet for Bitcoin and Ethereum. It also facilitates an exchange and allows purchases for both of these cryptocurrencies in USD. Coinbase also enables the quick purchase of Bitcoin by linking your bank account  or credit card account. Credit card is a more expensive option and you will pay a 2.5% fee for the transaction. Currently, Coinbase only allow a maximum purchase of $50 worth of Bitcoin a week using a credit card so if you want to buy more you would probably need to link your bank account.

Xapo :  A US company, Xapo is also a wallet with exchange services as well as the ability to link a debit card. The debit card feature is pretty cool, it allows you to use your Bitcoin holdings for everyday spend, in USD for example, at any stores that accept normal debit cards. A main feature of Xapo is that it is probably the most secure online wallet in the industry. Their hardware is put together under the eyes of security and their servers are stored in protected vaults hidden in the Swiss mountains.  Xapo is good as a wallet, however, if you want to buy Bitcoin Xapo may be an expensive choice. The minimum purchase amount, whether credit or debit card, that Xapo will allow is $10’000 purchase.

Hardware Wallets

Trezor is a hardware, USB wallet that allows you to easily and securely store your Bitcoin and other supported cryptocurrencies yourself. There are several hardware wallets, Trezor is one of the most popular and has already, in the relatively short life of cryptocurrencies, proven itself at navigating very well the complex world of blockchain forks. In addition they are integrated with many of the major exchanges like Bitstamp (mentioned above) which makes it super easy to securely store your Bitcoin offline but move them back in within a few clicks when you want to trade or transact.

Ledger Nano S is a another hardware wallet that stores Bitcoin, Ethereum and other supported cryptocurrencies.

Digital Bitbox is a minimalist bitcoin hardware wallet packed with security and privacy that allows you safely hold and spend your coins with peace of mind. This is a very easy to use is a plug-and-play wallet also with second-factor authenticator that combines the highest security of cold storage with the convenience of software wallets.

DIY (Do-it-Yourself ) and other Wallets

The bitcoin.org site lists several bitcoin wallet solutions (https://bitcoin.org/en/choose-your-wallet). If you become adept at a specific cryptocurrency you may want to download the wallet specifically for those alternative currencies from the organization directly. For example if you are into PIVX, at https://pivx.org/ you can download the defacto PIVX wallet for your operating system directly. The advantage of using the wallet provided by the organization is that you can potentially also benefit from mining or staking and earn extra coins from the wallet. This is the case with the PIVX wallet which allows you to earn PIVX by keeping your wallet on and keeping PIVX in it. Whatever you do, be sure to make back-ups of your wallet and where possible use 2 or even 3 factor authentication.

A parting word…

You can keep your crypto-money on the exchanges directly or store it in a wallet.  Exchanges are not as secure and may not support forks when they occur.

We hope you have found this article useful. If you did, remember to sign-up for our newsletter by registering via the “subscribe” link at the top and to follow us on Twitter or Facebook just click their icons below. Check out the suggested reading material as well if you are interested in learning more.

The Hutch Report

What Is The New Economy?

By | Business, Cryptocurrency, Economics, Startups, Technology

We often talk about the “new economy” but it is a bit of a misnomer as it can be argued that the economy is always new. It is dynamic and always changing. In spite of that, the name has become a buzzword describing new, high-growth industries that are on the cutting edge of technology and are the driving force of economic growth.

One of the main features of the new economy is the extraordinary rate of productivity improvement. It is not just that computers and software are getting better or that communications are becoming more rapid. They are improving at sustained rates that have never been seen in the recorded economic statistics.

A large part of the new economy – particularly software – is characterized by a cost structure that is peculiar to information: it is expensive to produce but inexpensive to reproduce. Combined with the communications power of the Internet, this means that any digitized information can be reproduced and transmitted around to world in virtually limitless numbers at virtually the speed of light. These are the most powerful economies of scale known to date.

Another aspect identified with the new economy is its strong network characteristics. Networks can have powerful economic impacts in several dimensions. They have strong rates of adoption and a strong tendency toward market dominance or even monopoly.

In order to survive in the new economy it is necessary to understand the changes that are happening and embrace them. Those that resist will be left behind. We have seen it before. When the personal computer was first introduced on the market there were many that refused to adopt it. Their resistance quickly found them segregated from the rest of the market in terms of opportunities and skills.  Now we find ourselves in a world where not a day goes by where we have some kind of interaction with a computer. In fact you can’t avoid it.

To help understand some of the changes and disruptions that are happening in this new economy we look at a few below that are making the biggest impact.

The Sharing Economy

The sharing economy is thought of as an umbrella term which encapsulates a wide variety of ideas. However, there has been a lot of criticism around the idea. Critics have said that it’s not really “sharing” if people have to pay for a service. It might seem like semantics, but the implication is more communal than corporate, and in that sense, misleading. It is also known as the On-Demand Economy, or the Gig Economy. Gig Economy is a fitting term for people interested in supplementing their income by taking small, temporary side jobs. But for workers that do this full-time or even beyond, their work should certainly be considered more than a gig. Especially when companies like Lyft offer incentives to work 50 hours a week, this service has become their livelihood. Calling their work a “gig” is almost reductive.

For argument sake we define the sharing economy as a socio-economic ecosystem built around the sharing of human, physical and intellectual resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations.

To include this in the new economy seems slightly banal considering the fact that sharing is nothing new. Giving someone a ride, having a guest in your spare room, running errands for someone, participating in a supper club—these are not revolutionary concepts. The revolutionary part is the fact that it has become part of the economic structure and for that to happen money has to change hands.

The best current examples of the “sharing economy” include the following:

Airbnb

Airbnb is an online marketplace and hospitality service, enabling people to lease or rent short-term lodging including vacation rentals, apartment rentals, homestays, hostel beds, or hotel rooms. The company does not own any lodging; it is merely a broker and receives percentage service fees (commissions) from both guests and hosts in conjunction with every booking. It has over 3,000,000 lodging listings in 65,000 cities and 191 countries, and the cost of lodging is set by the host. In short, anyone can rent a room out in their house or apartment for a fee. The impact it has had on the hotel/hospitality industry is not to be trivialised in the New economy.

Uber/Lyft/BlaBlaCar

These companies all do essentially the same thing. For consumers looking for a ride somewhere, they are a convenient, inexpensive taxi service. You can hire a private driver to pick you up and take you to your destination by means of an application installed on your smart phone. The nearest driver is often at your pickup location within minutes. Not only is this an on-demand car service, but you can even watch as your driver is en-route to come pick you up. For drivers, these companies provide allow you to be your own boss/set your own hours. Take on fares whenever you wish (work as much or as little as you desire).

Etsy

Etsy is an online buyer and seller community similar to eBay, except it focuses on hand-crafted or vintage goods. Most products sold fall into the category of arts, crafts, jewelry, paper-goods, housewares, and artisan candies or baked goods. Vintage items must be at least 20-years old to qualify and can range from costumes, clothing, jewelry, photos and housewares. In the past, most crafters and artisans sold their goods at fairs, open markets, and on consignment. While the Internet opened doors to reaching consumers beyond their local area, many craftsman didn’t want the hassle of setting up their own website, credit card processor or ecommerce platform in order to sell their goods online.  While eBay and other e-commerce DIY sites helped, Etsy provided a marketplace specifically for crafters. Etsy currently has well over 54 million users registered as members.

TaskRabbit

TaskRabbit is a marketplace that connects people who need help with something, with a network of pre-approved and background checked individuals, who have the time and skills needed to complete the listed task. The company allows people to outsource small jobs and tasks to others in their neighbourhood. Since the inception of TaskRabbit there have been numerous startups following the same model.

Where the Sharing Economy leads only time will tell. Will we live in a world of empowered entrepreneurs who enjoy professional flexibility and independence? Or will we become disenfranchised digital labourers jumping between platforms in search of the next short term gig?

Cryptocurrency

What is cryptocurrency? A Cryptocurrency is simply an online version of money, a digital asset to be precise. The name is derived from the Cryptography, which is used to encrypt transactions and control the production of the currency. It is a strictly monitored process, as it uses the Blockchain Technology.

Blockchain technology is a distributed database that is used to used to manage & maintain a growing list of data blocks, using a peer to peer network collectively. These data blocks may be situated in different locations and not connected to the same Processor. A database is a collection of records. A distributed database is one which may be located in different locations and not be attached to a common Processor – but it may be located in the same or different physical locations and dispersed over a computer network. In a Blockchain, once a piece of data is recorded, it cannot be edited or changed.

There are predictions that the underlying technology of the blockchain is going to impact our world more than the internet has. This is seen as the technology that could democratize the global financial system so everybody has equal access. The peer to peer concept allows online payments to be sent directly from one party to another without going through a financial institution, and cryptocurrencies are considered by their supporters to be a faster, cheaper and a more convenient alternative to other payment mechanisms such as sending payments via banks, transferring money via money transfer operators or buying goods and services over the internet, using a credit card. For this reason, the payments industry players are closely watching these developments, because of the ability that cryptocurrencies have to potentially disrupt and transform the existing global financial infrastructure.

As of June 25, 2017 there were approximately 900 currencies currently available with the most popular being Bitcoin and Ethereum. Yet while world economies, business and consumers have been caught up in the whirlwind of activity surrounding cryptocurrencies, the benefits and risks are still unclear and the future of any one particular cryptocurrency is not yet secured. In addition, there are a number of legal and political interpretations still developing.

Virtual Reality / Augmented Reality

This is by no means the first appearance of virtual reality. It has actually been around since the 1950’s. As technology has become more sophisticated over the years, every so often the dream of experiencing a virtual world is revisited. We are now back here again.

Virtual reality immerses a user in an imagined or replicated world (such as video games, movies, or flight simulators) or simulates presence in the real world. Examples of hardware players in virtual reality include the highly mediatised Oculus, now owned by Facebook, Sony PlayStation VR, HTC Vive, and Samsung Gear VR.

Augmented reality overlays digital imagery onto the real world. Examples of hardware players in augmented reality include Microsoft HoloLens and Google Glass.

The difference between the two is where VR uses an opaque headset (which you cannot see through) to completely immerse the user in a virutal world as opposed to AR which uses a clear headset so the users can see the real world and overlay information and imagery on to it. We recently saw an excellent example of AR with the success of the game Pokeman Go, although for various reasons its user base is in decline.

The promises of Virtual Reality to revolutionize the fields of medicine, marketing or entertainment are many yet there are also a long list of challenges before we see significant adoption. We already know that spending too much time staring at a screen can harm our vision over the long term. VR headsets are essentially a digital display mounted directly in a user’s face, raising real questions about the effects over time. Some people are also prone to nausea, dizziness and vertigo after just a little time spent in VR. For the industry, that motion sickness issue remains a largely unsolved problem.

Virtual Reality has come and gone a few times over the years and has yet to really solidify its mark on society.

Big Data

A large part of the new economy is about information. This is not only about information that we have access to but also our means of acquiring information. Organizations collect data from a variety of sources, including business transactions, social media and information from sensor or machine-to-machine data. These multiple sources makes it difficult to link, match, cleanse and transform data across systems. Data also comes in all types of formats – from structured, numeric data in traditional databases to unstructured text documents, email, video, audio, stock ticker data and financial transactions.

Big data is a term we use in the New economy that describes the large volume of data – both structured and unstructured – that inundates a business on a day-to-day basis. While the term “big data” is relatively new, the act of gathering and storing large amounts of information for eventual analysis is ages old.

The amount of data that is now being created and stored on a global level is almost inconceivable, and it just keeps growing. However, it’s not the amount of data that’s important. It’s what organizations do with the data that matters. At the moment only a small percentage of data is actually analyzed. The promise of big data in the New economy is precisely that, to gain key insights from all kinds of information in the hopes of making key discoveries.

Hyperloop

Existing conventional modes of transportation of people consists of four unique types: rail, road, water, and air. These modes of transport tend to be either relatively slow (i.e., road and water), expensive (i.e., air), or a combination of relatively slow and expensive (i.e., rail).

Enter the Hyperloop. Hyperloop is a new mode of transport that seeks to change this situation by being both fast and inexpensive for people and goods. It is unique in that it is considered an open source transportation concept. The authors encourage all members of the community to contribute to the Hyperloop design process. Iteration of the design by various individuals and groups can help bring Hyperloop from an idea to a reality.

Hyperloop consists of a low pressure tube with capsules that are transported at both low and high speeds throughout the length of the tube. The capsules are supported on a cushion of air, featuring pressurized air and aerodynamic lift. The capsules are accelerated via a magnetic linear accelerator affixed at various stations on the low pressure tube with rotors contained in each capsule. Passengers may enter and exit Hyperloop at stations located either at the ends of the tube, or branches along the tube length.

The goal is to get people from LA to SF (for example) in just about 30 minutes, which is almost three times faster than flying, while producing its own electricity from solar power, with round-trip tickets projected to cost between $40-$60.

Hyperloop One on July 12,  announced that it had conducted a successful first test of a specially designed vehicle to travel in a vacuum environment. In the test, which took place earlier this year, the company achieved controlled propulsion and levitation of a Hyperloop One vehicle at 70 mph on a 315-foot test track in the Nevada desert. The test vehicle reached nearly 2Gs of acceleration during its brief 5.3 second test run on the specially built track.

There are still a number of technical challenges to address with the Hyperloop but it is advancing. Should this project be fully realised it would revolutionise transportation in the new economy.

Artificial Intelligence

Of all the areas of the new economy artificial intelligence (AI) is, without a doubt, the most hyped and the least understood. According to technopedia the definition of AI is “a branch of computer science that aims to create intelligent machines.” More precisely, the term “artificial intelligence” is applied when a machine mimics “cognitive” functions that humans associate with other human minds, such as “learning” and “problem solving.” Otherwise said, machines that can think for themselves and make autonomous decisions and in turn learn from their decisions. All this leads to questioning to what point will machines control humans?

The machines haven’t taken over yet, however, they are seeping their way into our lives, affecting how we live, work and entertain ourselves. From voice-powered personal assistants like Siri and Alexa, to more underlying and fundamental technologies such as behavioural algorithms, suggestive searches and autonomously-powered self-driving vehicles boasting powerful predictive capabilities, there are several examples and applications of artificial intelligence in use today.

What many companies are calling AI are not truely AI. Software outputs due to an algorithm that responds based on pre-defined multi-faceted input or user behaviour can’t be considered AI.

A true artificially-intelligent system is one that can learn on its own, such as neural networks from the likes of Google’s DeepMind, which can make connections and reach meanings without relying on pre-defined behavioral algorithms. True AI can improve on past iterations, getting smarter and more aware, allowing it to enhance its capabilities and its knowledge. That will lead us to give them more responsibility, even as the risk of unintended consequences rises. We know that “to err is human,” so it is likely impossible for us to create a truly safe system.

The Hutch Report

The Blockchain & Smart Contracts – Are They Legal?

By | Business, Cryptocurrency, Law, Technology

Earlier this year there was a lot of press about whether or not Donald Trump asked FBI Director James Comey not to fire Michael Flynn, who was forced to resign in February. According to James Comey’s testimony before congress Trump said, “I hope you can see your way clear to letting this go, to letting Flynn go. He is a good guy. I hope you can let this go.”

One of the keys to that statement from a legal point of view lies in that word “hope.” It is a common word, employable as both a noun and a verb, and it boasts an extraordinary breadth. We may say, “I hope to catch the 6:42 a.m.,” or “I hope the kids don’t catch a cold.”  So where do the hopes that Comey cited, in his own words and in his reports of others’ speech, belong?

This example is not meant to refer to contractual law, but it is intended to present the important part that language plays in law, and lawyers can be very clever about how they use their words and frame their sentences. So what does this have to do with smart contracts and the blockchain? Probably everything because the law is made of words and the interpretation of those words.   Coders and Lawyers don’t speak the same language so if a certain language is coded into a smart contract that is not coherent with legalise, that contract could be tested.

So what is a smart contract?

Smart contract is a term used to describe computer program code that is capable of facilitating, executing, and enforcing the negotiation or performance of an agreement (i.e. contract) using blockchain technology. The entire process is automated can act as a complement, or substitute, for legal contracts, where the terms of the smart contract are recorded in a computer language as a set of instructions.

As explained by Ethereum Founder, Vitalik Buterin, at the DC Blockchain Summit 2016:

Suppose you rent an apartment from me. You can do this through the blockchain by paying in cryptocurrency. You get a receipt which is held in our virtual contract; I give you the digital entry key which comes to you by a specified date. If the key doesn’t come on time, the blockchain releases a refund. If I send the key before the rental date, the function holds it releasing both the fee and key to you and me respectively when the date arrives. The system works on the If-Then premise and is witnessed by hundreds of people, so you can expect a faultless delivery. If I give you the key, I’m sure to be paid. If you send a certain amount in bitcoins, you receive the key. The document is automatically cancelled after the time, and the code cannot be interfered by either of us without the other knowing, since all participants are simultaneously alerted.

A Smart Contract Example

Here is the code for a basic smart contract that was written on the Ethereum blockchain. Contracts can be encoded on any blockchain, but Ethereum is mostly used since it gives unlimited processing capability.

On March 10, 2017, Yale Law School put together a panel for a discussion on the Blockchain: Smart Contracts which included Scott O’Malia, Chief Executive Officer, International Swaps and Derivatives Association who explained that these contracts are all fine when everything is working but when there is a conflict that arises then you need to fall back on traditional legal documents, which are based on many different legal statutes.

Buterin proposed some ideas that appeared in an FT Alphaville article:

Buterin envisages the use cases as follows:

  • Using smart contracts for events that are potentially highly subjective
  • Arbitration in decentralized crowdsourcing and on-demand economy applications
  • Storage or distribution of funds (eg. one use case is a will where you do not want to force the recipient to set up a private key or learn about ethereum unless they actually need to)
  • As an emergency backstop measure to get funds out of a smart contract if they are stuck for a long time

Scott O’Malia took issue with Buterin’s idea that any conflicts that arose could be arbitrated by decentralized crowdsourcing. O’Malia said, “Too much has gone into all of this to really just turn it over to a coder’s dream world.” “There are established standards and codes.”

There is an assumption that the blockchain and smart contracts will replace many legal participants but this is, for the moment, far from the truth. There are already governing bodies, including that of O’Malia’s, that are already looking at solving the problems of how to take legal agreements and turning them into executable code and what the standards around that will be, which documents do you work with first, how to establish common domain standards, protocols etc. The legal community sees the value in smart contracts as being a tool to capture evidence, however they are seen as being valuable for executing only certain points and forms of contracts and therefore limited in their scope.

The idea that programmers and coders will essentially plug a bunch of these smart contracts into the blockchain and do away with a large part of the legal system is not very realistic. A current problem is the fact that contracts and all legal documents are written by people. Computer code is also written by people. It becomes a technological problem when you don’t have a lawyer who has the ability to code, or vice versa. Therefore it will be necessary for lawyers to learn how to code or coders to be trained as lawyers. There is no current effort to accomplish this.

The blockchain is a decentralized entity. It doesn’t recognize borders. How would a smart contract between geographical locations, that abide by different legal systems, be managed? It will take time to fix these things.

There are still very clear advantages to smart contracts. When something needs to be verified you have the cost of verification. This requires an audit which requires resources and can be very costly. The blockchain has the ability to track attributes and data integrity at a very low cost.

In spite of all these issues, the hype cycle often assumes that technology will radically change things overnight, yet they rarely do. Software has bugs and needs to adapt, and although that is not a reason to not adopt the technology it does often take more time than anybody expects. The first email was sent in 1971 and needed 25 years before there was widespread adoption. Now it is an afterthought.

Laws are complex and probably many times more complex than they need to be yet that is how the system has evolved. Technologies like the blockchain and cryptography will hopefully help to simplify many parts of it yet it is hard to imagine how this industry can be easily disrupted.

At the first sign of trouble the place you are most likely to run to is the lawyer’s office!

The Hutch Report

Is India Planning to Regulate Bitcoin?

By | Cryptocurrency, Money, Technology

On June 20, CNBC India announced that the Indian government committee has ruled in favour of regulating Bitcoin and is currently establishing a task force to create various regulatory frameworks with the aim of fully legalising Bitcoin in the short-term.

Back in February of this year Japan recognised Bitcoin as a legal payment method. In April, the Indian government said it would set up an interdisciplinary committee to take a close look at the circulation of crypto currencies in the country, which it did.

Chris Burniske of ARK Invest (crypto expert) , noted that the trading volumes in India had been on the rise prior to the announcement. Burniske previously revealed that the Indian Bitcoin exchange market is responsible for processing around 11 percent of Bitcoin-to-USD trades.

The three largest Indian Bitcoin exchanges include Zebpay, Coinsecure and Unocoin have been operating with self-regulated trading platforms with strict Know Your Customer (KYC) and anti-money laundering systems in place in spite the lack of regulations in the digital currency industry and market.

On Zebpay’s website, under legal (https://www.zebpay.com/legal)  they present this:

Bitcoin is legal as per expert opinion

Nishith Desai Associates, India’s leading international law firm have published a white paper which concludes that bitcoin is legal in India. (where you can find a link to the white paper)

However, if you download the white paper you will see that it has been written in 2015.

They also produce information provided by the CIS, India’s leading Internet organization. The CIS helped Internet remain neutral in India in the 2015 net neutrality fight. They published a research post on their website which also states that bitcoin is not illegal under any existing laws.

However, once again this paper seems to be outdated.

Just below, you can see this cautionary note: “RBI (Reserve Bank of India) cautions users of virtual currencies,” and yet according to Cointelegraph, “Leading Bitcoin exchange Zebpay has revealed that the Indian government committee has ruled in favour of regulating Bitcoin.”

According to Zebpay’s blog post of March 23, they wrote, “Recently, there have been a few media reports that bitcoin has been declared illegal by the Indian government. No, that is not true. Nothing has changed regarding bitcoin’s legal status in India.”

So, is this a repeat situation?

If the Indian Government had truely ruled in favour of regulating Bitcoin I would have expected to see something on either Zebpay, Coinsecure or Unocoin’s website before anybody else. On Unocoin’s press page, the last entry is from December 1, 2016.

My next stop was the Reserve Bank of India website. There was absolutely nothing which I also found strange.

So, did CNBC India jump the gun on this story? Did this information really come from Zebpay or is it “fake news?” Or did they really rule in favour and these other actors are just waiting to get a definitive answer?

If this turns out to be true and India, the world’s second largest populated country,  does take steps to regulate Bitcoin and recognize it as a legal payment method, it will help propel all these cryptocurrencies much higher.  Stay tuned!

The Hutch Report

10 Ways Governments Could Stop Cryptocurrencies

By | Cryptocurrency, Economics, Law, Money

Governments do not react well to threats to their center of control. As of November 2017 there are roughly 1340 cryptocurrencies with a market capitalisation of roughly $450 Billion (when we first published this piece in June it was $114 Billion) of which Bitcoin makes up about 62%. So, it is no surprise that governments are becoming more vocal and putting together tasks forces on how to deal with it.

The bankers seem to be even more worried. They don’t take kindly to non centralised competitors moving in on their turf. After all, they wield an enormous amount of influence and make staggering amounts of profits.

As cryptocurrencies are now gaining more exposure and interest among the general public, bankers are now becoming more fond of government regulators. It is the hope of the bankers that the government will try and regulate the cryptocurrencies out of existence should they become too menacing.

“Virtual currency, where it’s called a bitcoin vs. a U.S. dollar, that’s going to be stopped,” said Dimon. “No government will ever support a virtual currency that goes around borders and doesn’t have the same controls. It’s not going to happen.” — JP Morgan CEO Jamie Dimon

 

So, should the US government, or any other government attempt to take on Bitcoin, Monero, Steemit or any of the large number of cryptocurrencies, what could they actually do?

“Virtual currency, where it’s called a bitcoin vs. a U.S. dollar, that’s going to be stopped,” said Dimon. “No government will ever support a virtual currency that goes around borders and doesn’t have the same controls. It’s not going to happen.” — JP Morgan CEO Jamie Dimon

 

So, should the US government, or any other government attempt to take on Bitcoin, Monero, Steemit or any of the large number of cryptocurrencies, what could they actually do?

  1. Any cryptocurrency is at risk of being made illegal by any government. Owning and operating a money transmitter service in the U.S. is “illegal” unless it is registered with State agencies. This is also true if one uses Bitcoin or any other cryptocurrency to exchange for fiat currency. Bitcoin is not immune from State or Federal laws regulating the flow of money, and agents can track bitcoin transfers over the blockchain.
  2. Regulation to date has been minimal, but history tells us that governments rarely preference light regulation — it just takes them a while to catch up with technology. There are a large number of issues that any government could regulate when it comes to cryptocurrency use among the public. In 2013, the U.S. Senate held the first hearings on Bitcoin. In that same year, FinCEN released the first announcement by any government agency related to the technology. The IRS was also the first tax agency in the world to clarify the tax treatment of Bitcoin and other digital currencies. Additionally, BitLicense in New York was the first licensing regime in the world directed at digital currencies.
  3. Cryptocurrencies do work with an exchange rate, therefore, governments could manipulate the exchange rate of bitcoin, ethereum or other. This is by no means unfamiliar territory for most.
  4. It’s not difficult to imagine the US or the European Union coming up with a new definition for cryptocurrencies as, say, an investment, with all net gains taxed at 30 per cent. For example, the U.S. tax authority, the IRS, has classified cryptocurrencies as “property” for the purpose of federal taxation, whereas the Treasury Department’s FinCEN has classified cryptocurrencies as “value” for the purpose of AML/CFT (Anti-Money Laundering and Countering Financing of Terrorism Act) obligations.Other jurisdictions have taken a different approach, avoiding a formal classification and focusing instead on the nature or type of transaction being conducted.
  5. Governments could exploit the transparency of the blockchain and punish people for holding cryptocurrencies at all. This has been seen in the past as in the case of Gold.
  6. The NSA or some other entity with both the budget and experience create a VLSI (Very Large Scale Integration) project to both develop and deploy an ASIC (application-specific integrated circuit) design that would result in a 51% attack.
  7. International regulation could be developed that significantly inhibits one’s ability to exchange Bitcoins, or other, for local currencies. Essentially forcing the cryptocurrencies underground like a drug cartel thereby adding to de-legitimisation.
  8. It is possible for a mathematician to gain government support in finding a way to break ECDSA (Elliptic Curve Digital Signature Algorithm or ECDSA is a cryptographic algorithm used by Bitcoin to ensure that funds can only be spent by their rightful owners). However, it is very unlikely that this would happen.
  9. The media alongside a covert multi-government effort could conduct several propaganda campaigns to sway public opinion that the cryptocurrencies are either a massive scam or somehow bad. This has already been seen in the example of IMF, government and banking representatives conditioning the public to equate cryptocurrencies with fraud, terrorism financing, money laundering etc.
  10. Regulations could be adopted to monitor and control the crypto exchanges. A government has the purchasing power to buy up large quantities, drive the price up then sell and collapse it, thereby massively increasing volatility. These market fluctuations could be aggravated by a covert government programme of destructive funding and public disinformation. This would make doing business in any cryptocurrency more difficult.

The Treasury Inspector General for Tax Administration commissioned a report last year to study their options. The overall objective of the review was to evaluate the IRS’s strategy for addressing income produced through virtual currencies. It included the following recommendations:

  • IRS management needs to develop an overall strategy to address taxpayer use of virtual currencies as property and as currency.
  • The Deputy Commissioner for Services and Enforcement should request the Large Business and International Division, the Small Business/Self-Employed Division, and Criminal Investigation to develop a coordinated virtual currency strategy that includes outcome goals, a description of how the agency intends to achieve those goals, and an action plan with a timeline for implementation. In addition, the strategy should use the tools available to the IRS and identify how the IRS is going to meet its BSA, criminal investigation, and tax enforcement obligations as related to virtual currencies as well as identify how actions will be monitored and the methodologies used to measure the actions taken.
  • The Deputy Commissioner for Services and Enforcement should take action to provide updated guidance to reflect the documentation requirements and tax treatments needed for the various uses of virtual currencies.
  • The Deputy Commissioner for Services and Enforcement should revise third-party information reporting documents to identify the amounts of virtual currency used in taxable transactions.

So the US IRS is now on the prowl, as I imagine many other international government bodies. Nobody should forget that Bitcoin and all cryptocurrencies are still an experiment. Nobody really knows how this will play out in the future. Stay tuned!

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The Hutch Report

Tools for the Crypto Millionaire

By | Cryptocurrency

We have received some thank you notes from some of our readers who, after purchasing and reading the The Hutch Report: Insights from the Top 50 Wealth Management Institutions, went and followed some of the smart money vehicles mentioned in the report. If you would have happened to have purchased and read The Hutch Report and reviewed some of the Bitcoin (BTC) and cryptocurrency vehicles being looked at by the smart money, you would have read about the OTC vehicle offered by Grayscale under the symbol GBTC.  One of our readers who invested at the time is boasting a nice return of 17% to 20%.  At the time of the report GBTC was trading around $115 to $120. Last week it hit a high of $143 and closed on the 28th of April at $137. BTC itself has surged in both price and market cap. At the time of the report the BTC market cap was about $20bn and last week it hit over $21.5bn with BTC itself breaking past $1300 even as high as $1330. And BTC is not the only one – Litecoin is surging as are most of the top market cap altcoins including Ethereum, Ripple, NEM, and PIVX and several more. Ethereum (ETH) broke out to an all-time high over $60 and as of this writing is now up to $71.32. PIVX which we first wrote about at the start of April hit some peaks over $2.00 and now seems to be maintaining around $1.80 levels. Another reader following the Insights section has sent us a thank you for the 77% return they have made so far on PIVX.

What is driving the growth in all of these? There is no clear answer. Some of the fuel is driven by renewed optimism of potential institutional investment vehicles for cryptocurrencies. Earlier this year, when we published our 2017 edition of The Hutch Report: Insights from the Top 50 Wealth Management Institutions, Bitcoin and other cryptocurrency values were climbing both in market-share and price. Bitcoin (BTC) in particular was climbing as excitement was mounting around the response from the SEC concerning the Bitcoin ETF applications filed by three different companies, SolidX, Gemini and Grayscale. BTC hit new records and exceeded the price of Gold at $1290. The SEC rejected all three applications causing the BTC price to falter as the market assumed the initiative was dead for the next few years.  Recently the SEC has opened the door and approved a review of the Gemini (run by the Winklevoss twins) application. A subsidiary of Grayscale, Digital Currency Group, is looking at creating vehicles for other cryptocoins.

Whatever the reasons are, which may at best only really become known in hindsight, there does seem to be a clear trend and momentum. Some of our readers have asked us how does one go about investing in cryptocurrencies. We would like to remind you that this website and content is produced for general interest, is not specific to you, is for entertainment only and is not intended to provide nor constitute financial advice. In full disclosure, the authors may or may not be holding positions in any of the vehicles mentioned. Prior to making any investment decision you should undertake your own due diligence and/or seek the advice of a qualified and registered securities professional. With the preceding in mind, listed below are some of the websites and platforms that some of our readers have indicated they are using:

Market Prices and Market Capitalizations

Coinmarket cap https://coinmarketcap.com/ provides a great list of almost all cryptocurrencies along with their market cap, average price, amount in circulation and volumes. The nice thing about this site is that the price in US dollar is provided. Do note that the prices listed are the average prices across exchanges. It is possible on this platform to drill down and see the prices on each specific exchange as well. The astute individual would remark the discrepancy of prices on the different exchanges and see an opportunity for arbitrage. However, in this case one would also want to pay attention to volumes and liquidity which would impact the ability for arbitrage.

Cryptocompare also provides a comprehensive listing of cryptocurrency market caps and prices and allows different currency comparisons.

https://www.cryptocompare.com/coins/#/usd for a listing of prices as compared to US dollar.

https://www.cryptocompare.com/coins/#/btc for a listing of prices as compared to Bitcoin (BTC)

https://www.cryptocompare.com/coins/#/eur for a listing of prices as compared to EUR.

Exchanges and wallets

In order to buy a cryptocurrency you have to have an account on one of the exchanges that allows trade in the currency. Cryptocurrencies can be traded similarly to stocks including features such as limit orders. Only a handful of currencies can actually be bought directly with fiat currency such as US dollars or Euros. The most common denominator is BTC. BTC can be bought for US dollars or Euros and then BTC can be used to buy the other currencies. In choosing an exchange we would recommend choosing one that has volumes otherwise you may suffer liquidity issues. Some of the most popular Bitcoin and cryptocurrency exchanges are:

Poloniex (https://poloniex.com): allows trades in about 107 different cryptocurrency markets, with most volumes from Ripple. Ethereum and Litecoin.

GDAX (https://www.gdax.com): only trades in Ethereum, Bitcoin, and Litecoin. It does facilitate fiat currency purchase in USD, EUR and GBP for Bitcoin.

Kraken (https://www.kraken.com): allows trades in about 40 markets and does facilitate USD and EUR purchases for Bitcoin, Ethereum, Ethereum classic and Litecoin as well as a few other currencies.

Korbit (https://www.korbit.co.kr/): only trades in Ethereum, Ethereum Classic, and Bitcoin and allows fiat purchases using South Korean Won.

Bitstamp (https://bitstamp.net): only trades in Bitcoin and Ripple and facilitates fiat currency purchases in USD and EUR.

Bittrex (https://bittrex.com): supports over 190+ cryptocurrencies. This is the platform recommended by many of our readers. Bittrex does not facilitate direct fiat currency purchases. What some of our readers do is they buy Bitcoin on one of the other platforms that allows purchases in fiat currency and then they send the Bitcoins to their Bittrex wallet and then purchase the other currencies using their Bitcoins. The same process would be followed in reverse to extract fiat currency.

Coinbase (https://www.coinbase.com): Coinbase is a wallet for Bitcoin and Ethereum. It also facilitates purchases for both of these cryptocurrencies in USD.

Wallets:  You can keep your crypto-money on the exchanges directly or store it in a wallet. The bitcoin.org site lists several bitcoin wallet solutions (https://bitcoin.org/en/choose-your-wallet). If you become adept at a specific cryptocurrency you may want to download the wallet specifically for those alternative currencies from the organization directly. For example if you are into PIVX, at https://pivx.org/ you can download the defacto PIVX wallet for your operating system directly. The advantage of using the wallet provided by the organization is that you can potentially also benefit from mining or staking and earn extra coins from the wallet. This is the case with the PIVX wallet which allows you to earn PIVX by keeping your wallet on and keeping PIVX in it. Whatever you do, be sure to make back-ups of your wallet and where possible use 2 or even 3 factor authentication.

We hope you have found this article useful. If you did, remember to sign-up for our newsletter by registering via the “subscribe” link at the top and to follow us on Twitter, Facebook, Medium or Youtube just click any of those icons below.

The Hutch Report

PIVX – Why it has grown 2150% in thirty days!

By | Cryptocurrency, Money

Since the start of March, the market capitalization of the cryptocurrency PIVX has grown a whopping 2150% growing from a mere $2M to over $43M in under thirty days. This phenomenal growth caused it to pop up on our radar and really intrigues us as to why it is growing so exponentially. Is there really something here or is this just a pump and dump?

In “The Hutch Report – Volume 1 – Insights from the Top 50 Wealth Management Institutions” we reported that there are hundreds of cryptocurrencies in circulation. There are more being launched all the time. According to coinmarketcap.com, the total market cap of all cryptocurrencies in circulation combined is currently on the order of $25.2B, with BTC (Bitcoin) clearly dominating with 67.1% market share and corresponding market cap of $16.9B.  BTC is followed by Ethereum which has a market cap of $4.5B and Ripple with $721M.  PIVX is now number 17 on the list at about $45M and given the recent pop it is experiencing, may even move up to 16th or 15th place by the time this post is published.

The cryptocurrency market is a fascinating mash-up of technologies, philosophies, economics and ideologies. Most share the concept of privacy and freedom. The reason for the proliferation of cryptocurrencies is probably due not to just one but a variety of forces. In most cases the driving force behind the creation of a cryptocurrencies is that they are iterations and forks (Forking is to take the source code from an open source software program and develop an entirely new program) of others in an attempt to make improvements on prior versions of a cryptocurrency. In some cases, they may also just be launched by folks looking to cash in on a growing trend and execute pump and dumps, however, due to the nature of the communities that get involved in supporting a cryptocurrency it is doubtful that the ones that are not established with a strong charter will ultimately not survive. One should always be vigilant particularly with the lower market cap cryptocurrencies which may be more susceptible to a simple pump and dump scheme. For example, a cryptocurrency with a low market cap of less than $10K could be easily popped up by someone investing $5k into it, all of a sudden the currency has grown 150%. Attracted by the sudden spike, unconscious speculators may jump on the currency, causing it to spike even more. Meanwhile, the original investor then can dump it and leave the later investors holding the bag.

When it was first launched in 2016, PIVX was launched as Darknet (DNET). The community realized that Darknet was associated with a more, sometimes nefarious side of the Internet called darknet which is the hidden internet available through anonymous routing platforms such as Tor. In order to eliminate any confusion, the cryptocurrency was re-branded at the start of 2017 as PIVX (Private Instant Verified Transaction). PiVX is based on the bitcoin core and is a fork branched from Dash which itself was an initial fork from bitcoin. The PIVX manifesto at https://www.pivx.org emphasizes privacy, freedom, technology along with community based and inclusive governance. The key issues which PIVX seems to address are improvements in privacy along with transaction and verification times.

BTC transactions are not anonymous and based on a cryptographic address or pseudonym. All transactions are completely public and include the cryptographic address (or pseudonym). All it takes is for that cryptographic address to be traced to a computer and user and the person can be identified. PIVX apparently provides options to enable transactions with a greater degree of privacy.

A PIVX transaction can take about 60 seconds to complete and verify which is incredibly favorable when compared with Dash transactions which take about 150 seconds. Both PIVX and Dash are much quicker than Bitcoin which can now take several hours to have a confirmed transaction. The growth in the transaction delay is due to the growth in the size of the blockchain and the increasing amount of time and processing power to process blockchain transactions.

Another big difference with PIVX from Bitcoin is that coins are not mined and not based on Proof of Work, but based rather upon Proof of Stake.  This eliminates the resource and hardware intensive dependency on mining and instead members of the PIVX community are rewarded by holding onto a required minimum number of PIVX tokens in a masternode and keeping them connected to the internet. The minimum amount of PIVX to run a masternode is 10’000. At the start of February, the cost to set-up a masternode was about $76. Today, that cost is now approaching $10’000.

Apparently there is also some mathematical limits to the number of masternodes that can be set-up and run each year and the limit for 2017 is calculated to be 2184. With the increased buzz on PIVX it appears that there has also been a bit of a landgrab going on in order to get masternodes set-up. This begs the question of when the great masternode wars will start? What incentives are there for masternode holders not to attack or create DDOS attacks on other masternode owners, in order to both increase their share of PoS processing and rewards as well as staking a masternode spot? We have not yet found the answer to this question yet …

So why has PIVX suddenly increased so much? We think it has to do with increased market awareness as a result of the recent re-branding, the buzz created around this, as well as a probable landgrab around a limited annual supply of masternodes that can be established each year. It still remains to be seen if this is a sustainable trend or if this was just a pop due to the buzz that will then recede and whether or not the PIVX community will turn their servers to other currencies or keep their masternodes and staking wallets. According to pivx.org, the community has some aggressive plans for 2017 to increase security and transaction flexibility. If the PIVX community is successful in these developments it should help to keep up the growth trajectory of PIVX in terms of both market share and mindshare.

Note: We remind you that cryptocurrencies are not legal tender, are not backed by any government and therefore no government protections provided to accounts and value balances. This article is for entertainment and information only and does not constitute an offer to invest nor investment advice.