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What is Bitcoin?

Bitcoin is a digital crypto-currency with no single point of failure due to its decentralized peer-to-peer architecture. The source code is publicly available and changes to the reference Bitcoin client are made via concensus within the community. Advantages of Bitcoin include irreversible transactions (i.e. no possibility of chargebacks as with credit cards), pseudo-anonymous, limited and fixed inflation, near instant transactions, multi-platform, no double-spend and little to no barriers to entry and more. It was created by an anonymous person known as Satoshi Nakamoto. Find out more at WeUseCoins.com.

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Posted on 20 November 2017 | 7:12 pm

Op Ed: “We Never Thought of That” — When Venture-Backed Companies Undertake Reverse ICOs

Op Ed: “We Never Thought of That” When Venture-Backed Companies Undertake Reverse ICOs

With well over $3 billion raised this year alone, in very little time initial coin offerings (ICOs) have emerged as a major source of venture finance. Even companies that have already raised conventional venture funding will be tempted to raise additional funds through ICOs. Although not fully intuitive, some have labeled token issuances by entities that previously obtained equity financing as “Reverse ICOs.”

One prominent example of a Reverse ICO has already occurred. Recently, Kik Interactive successfully completed an ICO of nearly $100 million. With over $3 billion raised in ICOs this year alone, ICOs are not unsubstantial. What made the Kik offering far more unusual is that Kik has already raised over $100 million from venture investors.

The standard documents used for angel and venture investing predate the current ICO craze and, not surprisingly, do not expressly address ICOs. Understandably, these documents are all “share-centric.” The question that needs to be addressed, therefore, is: What rights, if any, do existing investors have when their company elects to undertake an ICO?

What makes the analysis particularly difficult is that, broadly speaking, there are three types of ICOs:

  • Equity Tokens — these tokens are essentially digital shares with the issuer specifying equity participation, voting rights and other token/shareholder rights.

  • Non-Equity Security Tokens — these tokens do not grant equity rights but under the Howey test are nonetheless classified as securities.

  • Utility Tokens — these tokens allow the purchaser to buy products or services from the issuer.

Although not the subject of this article, the U.S. Securities and Exchange Commission (SEC) has issued initial guidance with respect to the securities law status of tokens issued in ICOs. The SEC’s Chief Accountant has also put out guidance detailing some of the accounting issues raised by ICOs.

This article will identify several issues raised by ICOs under commonly used SAFE, Convertible Note, Series Seed and Series A documents.

Why Existing Investors Might Object to Reverse ICOs

On the surface, Reverse ICOs would seem to be a net positive for existing investors. Except for equity tokens, ICOs provide non-dilutive financing to companies. Even when tokens are classified as securities, they generally are not issued as equity  —purchasers do not have a share in the issuer, do not receive dividends and do not get voting rights. However, there are several reasons why existing investors might be concerned:

Multiple “Plays” on the Same Company

After a Reverse ICO, a venture-backed company will have both tokens and equity in the hands of investors. Prior to the ICO, the only way an investor could invest in the company was by buying its stock. After the ICO, the investor would have a choice of buying the stock or buying tokens.

At least in the current environment, there is reason to believe that demand for tokens will be greater and drive up relative prices for tokens. Equity holders may find reduced demand for their equity. Further, if the tokens remain outstanding at the time of an exit, it is difficult to predict the impact of outstanding token pools on exit valuations in either an acquisition or IPO scenario.

Impact on Follow-On Venture Funding

Many venture funds make relatively small initial investments, anticipating that they will deploy significantly more capital in subsequent rounds. ICOs may reduce companies’ needs for future equity raises. As a result, venture funds may have reduced opportunities for follow-on funding.

Delay or Elimination of Conversion Events

For holders of Convertible Notes and SAFEs, under most currently used form documents, ICOs typically will not be considered an event that triggers a conversion. In some cases, ICOs may also delay or even eliminate subsequent equity financings. Further, in successful companies, ICOs often will raise the pre-money valuation at which conversion occurs, thereby diluting SAFE/Note holders (although conversion caps in many of these instruments may mitigate the impact).

Avoiding Pre-Emptive Rights

Under the current agreement forms, tokens sold in an ICO would not trigger the pre-emptive rights of existing shareholders — thereby denying them an automatic right of participation in the ICO.

Absence of Transfer Restrictions

Under the current agreement forms, tokens sold in an ICO would not be subject to the rights of first refusal, co-sale rights and the transfer restrictions typically applicable to shareholders in venture-backed companies.

ICOs Do Not Trigger Other Typical Preferred Shareholder Provisions
  • Anti-Dilution Protection. If a company underprices its tokens, its impact on valuation could be similar to a “down round.” However, unless tokens are issued as equity, they would not trigger the anti-dilution protection clauses in the standard forms.

  • Liquidation Preferences. If token holders are given equity participation in an issuer, the issuing documentation will need to specify where they stand in the liquidation stack. For utility tokens, if the claim against the company is viewed as contractual (i.e., the holders of a pre-payment for products/services), token holders may be unsecured creditors instead of shareholders — in which case they would rank ahead of all equity classes.

  • Mandatory Conversion of Preferred Shares. Venture documents typically provide for mandatory conversion of preferred shares in an IPO of a specified minimum amount raised and minimum share price or approval by what is typically a supermajority of preferred shareholders. Several ICOs have raised in excess of $100 million. If these companies go public, it is possible that some may not need additional funding and may do so without a public offering of additional shares (i.e., a direct offering). However, if not all shareholders agree with the decision to go public, the mandatory conversion provision could not be utilized unless approved by a supermajority of the preferred shareholders, which in some circumstances could impede the ability of an IPO to proceed.

Impact on Future Cash Flow

Many ICO issuers are positioning their tokens as “utility tokens” that can be used in the future to buy the issuer’s product or service. As a result, these tokens constitute pre-pays for the future delivery of goods and services. In the future, when the products/services need to be delivered, the venture may experience cash flow issues because no new funds will be coming in to pay for the product or service.

Impact of Regulatory, Tax and Accounting Uncertainty

Currently, the regulatory status of ICOs is unclear. Issuance of tokens in a manner that does not comply with the eventual regulations that emerge could create liabilities for the company and/or limit its ability to issue equity in the future. In addition, the accounting and tax rules for ICOs have not been established, and as a result, there may be ambiguity with respect to several representations and warranties the company typically will need to make in future financings and liquidity events.

Fiduciary Uncertainty

Officers and directors of companies have fiduciary obligations to maximize shareholder value. When companies are insolvent, these duties shift to protection of the interests of creditors. What, if any, fiduciary duties a board has with respect to token holders has not been explored. If a company is facing a decision that would benefit shareholders at a cost to token holders, do board members have any fiduciary obligation to the token holders? Investor representatives on boards of companies that have conducted Reverse ICOs will not only have to deal with uncertainty but also potential conflicts of interest if they have not participated in the Reverse ICO.

Can Investors Prevent a Company from Undertaking an ICO?

While it is difficult to believe that a company would undertake an ICO without board approval, in many early-stage companies, investors do not have control of the board. However, commonly used investment documents may leave shareholders with limited recourse where boards back an ICO. In general, in SAFEs and Convertible Notes, holders do not have protective rights and, as a result, they do not have the ability to prevent an ICO.

The protective provisions in the Certificate of Incorporation for Series Seed financings would not provide Series Seed holders with the ability to prevent an ICO. In the NVCA Series A documents, ICOs do not easily fit into any of the matters for which the investor director’s approval is required. The same applies to the protective provisions for the benefit of preferred shareholders detailed in the Certificate of Incorporation.

What Now?

For blockchain startups, ICOs have become the dominant form of fundraising — far exceeding venture capital financing. Given the strength of the ICO market, “Reverse ICOs” are likely to become even more pervasive. For investors this could be very challenging. Existing form agreements in the venture space are likely to be revised to address the possibility of Reverse ICOs. However, the regulatory, tax and accounting uncertainties around ICOs may not be quickly resolved, leaving uncertainty around some of the concerns raised in this article.

Revising the form agreements will not address the thousands of venture-backed companies that were financed using pre-ICO forms. For existing investors the path forward is more difficult. Where investors control the board or have blocking rights, they will have the ability to prevent ICOs or influence their terms. For other investors, particularly in early-stage ventures with founder-dominated boards, ICOs have the potential to overturn several assumptions under which early investors funded. These investors may have to wait for situations in which their approval is needed for unrelated corporate actions or their funding is necessary and leverage that position to insist upon amendments to existing investment documents to address some of the investor challenges resulting from Reverse ICOs.

This is a guest post by Dror Futter. Views expressed are his own and do not necessarily reflect those of BTC Media or Bitcoin Magazine.

The post Op Ed: “We Never Thought of That” — When Venture-Backed Companies Undertake Reverse ICOs appeared first on Bitcoin Magazine.

Posted on 20 November 2017 | 3:25 pm

Bitcoin's speculative fever makes rally in stocks look tame - USA TODAY


USA TODAY

Bitcoin's speculative fever makes rally in stocks look tame
USA TODAY
Skeptics warn of froth in U.S. stocks. But a better example of market euphoria and excess is the meteoric rise of the digital currency Bitcoin. The most valuable and best known of the roughly 1,300 cryptocurrencies, Bitcoin topped $8,000 Monday ...
Russian Minister: We Will 'Never' Consider Bitcoin LegalCointelegraph (Bitcoin, Cryptocurrency and Blockchain News)
Survey: Institutional Traders Are Split on Bitcoin's Price, Wary of ICOsCoinDesk
Bitcoin Will Lead to the Rise of State Cryptocurrencies: Citigroup CEOCryptoCoinsNews
Bitcoin News (press release) -The Times -Bitcoinist
all 63 news articles »

Posted on 20 November 2017 | 2:22 pm

Bitcoin is about to grow even bigger, using your money (and you won't even know it) - Mashable


Mashable

Bitcoin is about to grow even bigger, using your money (and you won't even know it)
Mashable
First they ignore you, then they laugh at you, then they fight you, then they invest in you. That's the scene that bitcoin investors and enthusiasts are facing. After years as an underground digital currency and a running joke in the world of finance ...

Posted on 20 November 2017 | 2:20 pm

Square will generate $30 million in annual sales from bitcoin in 2 years, Credit Suisse predicts - CNBC


CNBC

Square will generate $30 million in annual sales from bitcoin in 2 years, Credit Suisse predicts
CNBC
Credit Suisse raises its price target for Square shares because of its opportunity in the digital currency market. "We estimate that if Square can accumulate 10m bitcoin buyers over two years (tracking Coinbase's growth), this could drive an ...
Square's Bitcoin Play Could Offer Legitimacy for Cryptocurrencies: Credit SuisseTheStreet.com

all 7 news articles »

Posted on 20 November 2017 | 1:01 pm

State Bank of India to Beta Test Blockchain Smart Contracts Next Month

The State Bank of India is planning to beta launch smart contracts and blockchain-based know-your-customer processes.

Posted on 20 November 2017 | 12:30 pm

Bitcoin just passed $8000 - TechCrunch


TechCrunch

Bitcoin just passed $8000
TechCrunch
This morning bitcoin shot past ** INSERT PRICE MILESTONE **, and is now hovering around ** INSERT CURRENT PRICE ** — up nearly ** INSERT % ** percent from yesterday. Just kidding. We don't actually use that template, but if you've been following ...
Bitcoin Wallet Bamboozle: Bitcoin.com Offering Bitcoin Cash Wallet, Calling it “BitcoinCointelegraph (Bitcoin, Cryptocurrency and Blockchain News)
What Is Bitcoin Clashic?The Merkle
Bitcoin.org Reveals Record 2.3 Million Visitors Despite Bitcoin.com ThreatBitcoinist
Bitcoin News (press release)
all 18 news articles »

Posted on 20 November 2017 | 11:53 am

Bitcoin is working well for some big-ticket purchases despite its volatility - CNBC


CNBC

Bitcoin is working well for some big-ticket purchases despite its volatility
CNBC
For some recent large transactions, bitcoin let buyers complete transactions far more swiftly than by traditional, government-backed means. A lawyer and some Montessori schools are also accepting bitcoin as a means of payment. One bitcoin advocate paid ...

Posted on 20 November 2017 | 11:27 am

Can anything stop bitcoin? Price above $8000 - CNNMoney


CNNMoney

Can anything stop bitcoin? Price above $8000
CNNMoney
And Saudi Prince Alwaleed, a billionaire whose Kingdom Holding Company owns stakes in Apple (AAPL, Tech30) and Citigroup (C), told CNBC before he was arrested in a sweeping anti-corruption probe that he thought bitcoin was an "Enron in the making" ...
Is now a good time to invest in Bitcoin? Value set to surge 70 percent in 2018Metro

all 5 news articles »

Posted on 20 November 2017 | 11:23 am

$10 Million: Ethereum.com Domain Name Up for Sale

The domain name Ethereum.com is up for grabs, according to reports. The cost? Around $10 million.

Posted on 20 November 2017 | 11:05 am

Standpoint's Ronnie Moas predicts bitcoin will surge another 70% - CNBC


CNBC

Standpoint's Ronnie Moas predicts bitcoin will surge another 70%
CNBC
Standpoint Research raises its 2018 price target for bitcoin to $14,000 from $11,000, representing nearly 70 percent upside to its current price level. "An argument can be made that the good news is still not fully reflected in the current price," the ...
Standpoint Research Raises Bitcoin Target To $14000Benzinga

all 5 news articles »

Posted on 20 November 2017 | 10:50 am

CME's Bitcoin Futures Likely to Start Trading December 11

CME Group's planned bitcoin futures product could start trading on Dec. 11, according to the firm's website.

Posted on 20 November 2017 | 10:00 am

$8,200: Bitcoin's Price Starts Week With New All-Time High

The price of bitcoin has hit yet another all-time high, passing above $8,200 for the first time.

Posted on 20 November 2017 | 8:18 am

Bitcoin Now Processes $2 Billion Worth Of Transactions Per Day, A 10x Increase In 2017 - Forbes


Forbes

Bitcoin Now Processes $2 Billion Worth Of Transactions Per Day, A 10x Increase In 2017
Forbes
2017 has been bitcoin's biggest year yet, with the digital asset reaching another new all-time high above $8,000 over the weekend. In addition to the exploding price, the total value transacted on the network per day has also seen substantial gains ...

Posted on 20 November 2017 | 7:35 am

Ex-Moscow Exchange Exec Emerges as Blockchain Boss

A former executive of the National Depository of Ukraine left because of politics, but found "game-changing" opportunities in blockchain.

Posted on 20 November 2017 | 6:00 am

Rally Fatigue? Low Bitcoin Volumes Could Cap Upside

Bitcoin prices are at their highest ever, but there may be a chink in the cryptocurrency's armor – low volumes.

Posted on 20 November 2017 | 5:15 am

Smart Dubai Office Bags Award for Blockchain Initiative

The Smart Dubai Office won an award for its blockchain initiative at the Smart Cities Expo and World Congress last week.

Posted on 20 November 2017 | 3:00 am

TGEs or ICBMs? Words Might Not Matter for ICOs

The hottest industry term in cryptocurrnecy is proving a doubled-edged sword for the entrepreneurs seeking to enter the market.

Posted on 20 November 2017 | 2:00 am

Survey: Institutional Traders Are Split on Bitcoin's Price, Wary of ICOs

A plurality of respondents to a new survey from brokerage firm Triad Securities said they believe bitcoin is in a bubble that's primed to crash.

Posted on 20 November 2017 | 12:00 am

FUD From All Sides: In Defense of CME's Bitcoin Futures Plan

The CME’s plan to offer bitcoin futures will benefit the futures trading and bitcoin communities alike – notwithstanding hand-wringing in both worlds.

Posted on 19 November 2017 | 11:00 pm

Bitcoin's Price Climbs Above $8,000 to Hit New High

Bitcoin's price rose above $8,100 for the first time on Sunday.

Posted on 19 November 2017 | 8:16 pm

The Gentrification of ICOs Is Underway

The ICO neighborhood, so to speak, is cleaning up, though University of Dublin's Paul Ennis suggests this may not exactly be a future to fear.

Posted on 19 November 2017 | 3:30 am

First Long-Term LedgerX Bitcoin Option Pegs Price at $10,000

The first ever LedgerX long-term bitcoin futures option pegs the cryptocurrency price at $10,000 by next December.

Posted on 18 November 2017 | 2:59 pm

ICOs on Our Terms and Conditions

How to structure token sales that comply with securities laws open participation to a diverse range of purchasers and enhance value for all involved.

Posted on 18 November 2017 | 5:40 am

Now the SegWit2x Hard Fork Has Really Failed to Activate

The SegWit2x Hard Fork Has Now Really Failed to Activate

In case there were any remaining doubts, it now seems clear that the SegWit2x hard fork will not happen.

The SegWit2x project, a product of the New York Agreement signed onto by a long list of companies and miners in May, had scheduled a hard fork to double Bitcoin’s block weight limit today. And while the controversial effort was suspended by leaders of the project last week, this would not have stopped anyone else from proceeding with it. Companies like Coinbase were indeed taking into account that the SegWit2x hard fork could still happen.

The Fork That Wasn’t

SegWit2x nodes — most notably btc1 — were programmed to fork away from the Bitcoin blockchain this afternoon (UTC) to create the SegWit2x blockchain and a new currency, often referred to as B2X. However, not a single SegWit2x block has been mined since fork point, nor is there any indication that this is likely to happen. For all intents and purposes, there is no SegWit2x — nor a B2X.

Further, software bugs in the btc1 codebase made all btc1 implementations grind to a halt even before it reached the expected fork point. While Bitcoin and SegWit2x nodes were widely expected to share a single blockchain up until block 494783 and then to go their own ways at block 494784, btc1 nodes never made it past block 494782.

This is mainly because the first block on the SegWit2x chain was required to have a “base block” larger than one megabyte. This is how the chain would diverge from the original Bitcoin protocol. But due to what is referred to as an “off-by-one error,” SegWit2x blocks started to reject smaller-than-one-megabyte blocks one block too soon — at block 494,783 instead of 494,784.

Moreover, another btc1 bug prevented miners from mining a big enough block when it was needed. So even if some miners did want to proceed with the fork, they accidentally wouldn’t have done so — at least not automatically. Miners would instead have had to manually configure their block weight settings, but it’s unlikely they knew about this step. Btc1 maintainer Jeff Garzik (while also denying there was a problem) has since released a patch to resolve this issue.

But judging by the absence of any SegWit2x blocks, the patch hasn’t made a difference, most likely because few, if any, miners were interested in mining on the SegWit2x chain in the first place.

NO2X?

Despite the seeming failure of SegWit2x to take off in any way, it should be noted that there is technically no way to declare a fork like SegWit2x officially “dead” or “failed.”

While unlikely, it’s always possible that the SegWit2x hard fork could proceed at some point in the future. In fact, there is no way to tell whether the SegWit2x chain is currently being mined with a little bit of hash power right now, and it is strictly impossible to foresee whether it will be mined later on. Perhaps a SegWit2x block will be found a day from now, a week from now or even ten years from now, at which point SegWit2x and B2X will technically come into existence.

However, since the SegWit2x chain did not include a mining difficulty reset, it will be as hard to mine a B2X block as it currently is to mine a BTC block. Meanwhile, market support for B2X appears to be extremely low, with B2X futures trading below 2 percent of BTC. So even if miners decide to mine B2X blocks, they’d almost certainly be earning far less than they would by mining BTC. Or, more accurately, they’d spend more on electricity bills than they’d be able to earn by mining B2X. The financial incentive to mine the SegWit2x chain just isn’t there.

Alternatively, SegWit2x could see a bit of a rebirth in the form of “BitcoinX” (BTX). This project, supposedly started by disappointed SegWit2x supporters, will take a snapshot of bitcoin balances at block height 494,783 and start a SegWit2x-like altcoin that offers all BTC holders the equivalent amount in BTX. Though, while this coin is arguably more viable than B2X thanks to a mining difficulty reset and more, it really is a new coin — arguably even more so than B2X would have been.

The post Now the SegWit2x Hard Fork Has Really Failed to Activate appeared first on Bitcoin Magazine.

Posted on 17 November 2017 | 2:54 pm

Crypto Trading and Traditional Assets: New Options for Investors

cryptotrading.jpg

While trading of crypto-assets is booming, some investors are looking for options to trade traditional assets like stocks via cryptocurrencies. Three new operators are among those developing trading platforms to meet this need, with blockchain-based tokens pegged to the underlying assets.

Ankorus

Ankorus is establishing a platform that will permit trading traditional assets, including stocks, bonds, futures, options, gold, silver, commodities, ETFs, FX and bitcoin futures with cryptocurrency.

“Ankorus will establish an online exchange populated by any financial asset currently available worldwide,” reads the Ankorus white paper. “Various auditing measures will be taken to establish transparency, and customers will be able to validate that tokenised assets are fully backed and held by Ankorus.”

To enable cryptocurrency holders to buy real-world financial assets, Ankorus will create and allocate tokens that are exactly value-pegged to the underlying assets in exchange for cryptocurrency.

Ankorus will hold its “fundraising contribution” or “Token Generation Event” (TGE) between November 25 and December 25. The ANK token will be distributed to contributors during the TGE.

“The ANK is a utility token, used for commissions, for datafeeds, professional technical charting software, webinars, financial education materials and also membership for those who wish,” Ankorus CEO John Cruz told Bitcoin Magazine. “The ANK token will be allocated during our TGE and later listed on exchanges, beginning with EtherDelta. It is an ERC20 token.”

Another token, the Anchor Token, will be the asset value-pegged token, separately created to tokenize specific securities using a yet-to-be-determined technology.

“Anchor Tokens will come later, after we receive the requisite regulatory approval,” said Cruz. “Anchor Tokens will be created for our customers when they wish to tokenize specific assets. For example, if a customer wishes to purchase and tokenize Apple stock, we create an Apple Anchor Token (known as AAPL.A) or simply credit the customer with them if we created one earlier.”

One of the most interesting asset classes that Ankorus is targeting is that of traditional financial instruments based on cryptocurrencies, such as futures and derivatives. A few weeks ago Bitcoin Magazine reported that CME Group, one of the world’s largest derivatives exchanges, will launch a bitcoin futures product before the end of Q4 2017. In a video, Cruz explains why he considers CME bitcoin futures as a breakthrough that could soon push bitcoin’s price up to $50,000, and expresses confidence in Ankorus’s ability to offer CME bitcoin futures trading soon.

It’s worth noting that Ankorus’s offering can be seen as the reverse of CME bitcoin futures: while CME will offer a traditional financial instrument tied to cryptocurrencies to investors that prefer not to hold and trade cryptocurrencies directly, Ankorus wants to make CME bitcoin futures and other traditional financial instruments available to cryptocurrency holders.

One is left to wonder how Ankorus will navigate the compliance minefield, which has blocked similar initiatives before. The Ankorus team insists that they will be totally SEC-compliant and follow all KYC (Know Your Customer), AML (Anti-Money Laundering) and CTF (Counter-Terrorist Financing) regulations. According to the white paper, Ankorus intends to become a fully registered broker-dealer, acquire membership on a large and reputable exchange, follow best practices for insurance and auditing on a regular basis, and establish a compliant trading platform that will bridge the crypto and finance worlds.

“By becoming a broker-dealer entity, we will get SEC blessing,” said Cruz. “Everyone else is trying to tokenize assets by not being a broker-dealer entity; this is where they run into trouble with the SEC.”

“Within the team we have experience of complying with different market regulators’ KYC, AML and CTF requirements for an FX remittance company,” Ankorus COO Haldane Marnoch told Bitcoin Magazine. “PEP [Politically Exposed Persons] lists are vetted and we check against a suite of sanctions lists too. Documents supplied by our customers for proof of identity or proof of address expire and need to be renewed on a regular basis. Source of funds also needs to be proven for larger transactions.

“Our team is familiar with all the provisions required for operating across multiple jurisdictions,” continued Marnoch. “We’ll use as our primary reference the standards set by the SEC and the CFTC, but naturally we’ll be implementing processes to comply with each and every market we trade in, for instance the FCA in the U.K.”

“We will become a division of a Futures Commissions Merchant (FCM), expected early March, and will be able to fill orders for CME bitcoin futures at that time,” added Cruz.

LAToken and Jibrel Network

LAToken (LAT), which recently raised $19.6 million in a token sale, wants to broaden the use of cryptocurrencies in the real economy and allow cryptocurrency holders to diversify their portfolio by getting access to tokens linked to the price of real assets.

The LAT platform is already operational: asset tokens can be created, listed for sale and traded on the LAT platform. At this time, tokens linked to the price of stocks (e.g., Apple, Amazon, Tesla), commodities (oil, gold, silver) and real estate are already being traded on the LAT platform. Tokens linked to artwork are soon to follow.

According to the white paper, the LAT platform provides cryptocurrency holders with transparent price discovery and diversification across multiple asset classes, allowing for the creation or listing of third-party asset tokens compliant with LAToken disclosure and legal structure rules.

Jibrel Network wants to provide currencies, equities, commodities and other financial assets and instruments as standard ERC20 tokens on the Ethereum blockchain.

Jibrel Network’s draft white paper explains that the platform will support tokens, dubbed Crypto Depository Receipts (CryDRs), which represent ownership of an underlying traditional asset held by Jibrel. On release, Jibrel will support six fiat currencies (USD, CNY, EUR, GBP, RUB, AED) and two money-market instruments.

In the future, Jibrel plans offer CryDRs pegged to a wide range of currencies, commodities, securities and derivatives. The project will hold a token pre-sale between November 27 and January 27.

Both LAToken and Jibrel Network expect to be fully compliant with applicable regulations, including KYC/AML rules, and apply for relevant licenses where needed. Full compliance may prevent the companies from targeting customers in certain jurisdictions. For example, the Jibrel token sale will not be available to U.S., Chinese and Singaporean residents.

The post Crypto Trading and Traditional Assets: New Options for Investors appeared first on Bitcoin Magazine.

Posted on 17 November 2017 | 1:34 pm

The Lightning Network Now Supports Transactions Across Blockchains

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Although still in testing phase, the lightning network can now be used to send transactions across different blockchains. The Lightning Labs development team successfully swapped testnet bitcoin for testnet litecoin through a lightning channel this week: ownership of the coins changed hands, while no transaction was recorded on either blockchain.

“Previous atomic swaps that I have done were on-chain, and had the on-chain limitations of slow [transactions] and high transaction fees,” Litecoin creator Charlie Lee told Bitcoin Magazine, referring to an older trick to exchange different types of coins trustlessly. “Off-chain atomic swaps are significantly better. They are instant, [have] low fees, and better protect one’s privacy.”

The successful test paves the way for trustless cryptocurrency exchanges, near-seamless multi-coin payment processors and more.

Bitcoin and Litecoin

The lightning network is the highly anticipated second-layer payment network to be deployed on top of Bitcoin. And as an open protocol, it’s relatively easy to deploy lightning network support for other cryptocurrencies that are forked from Bitcoin’s codebase — like Litecoin.

Interestingly, if the lightning network runs on different blockchains, these chains can effectively be linked together. If one or several peers on the network are willing to take one type of coin and forward another, it’s possible to send bitcoins on one end of a channel that will end up as the equivalent in litecoin on the other end.

In a Medium post published in the first week of 2017, Lee explained that this potential to create these kinds of “bridges” between cryptocurrencies made him throw his weight behind the Segregated Witness (SegWit) soft forks on both Litecoin and Bitcoin.

When SegWit activated on Litecoin last spring, Lee’s vision came one step closer to reality. Because the soft fork had not yet activated on Bitcoin at that time, Lightning Labs decided to add Litecoin support to their LND lightning network implementation. Thus, by the time SegWit activated on Bitcoin last summer, LND was already compatible with both chains.

The testnet versions of these two blockchains are now made interoperable through the lightning network for the first time, allowing users to swap one type of coin for the other.

“The primary advantages over previous solutions are speed, cost and privacy,” Lightning Labs developer Conner Fromknecht told Bitcoin Magazine. “Transfers are more or less instant, and don’t require the cost of an on-chain transaction. Additionally, in the cooperative case, the transactions are never broadcast, and leave no trace on the blockchain, offering privacy benefits. And with any luck, these privacy benefits will only continue to improve.”

The Test (and the Potential)

This week’s specific test was done on a local machine, on which Fromknecht himself created two nodes: “Alice” and “Bob.” These two nodes were modified to be able to monitor both the Bitcoin and Litecoin testnets. Fromknecht then created a single lightning channel that sent testnet litecoin from Alice to Bob and testnet bitcoin back from Bob to Alice at a fixed exchange rate. While still all in an experimental setting, the test was successful; Lightning Labs today published a blog post and a video detailing the results.

In addition to offering a faster, cheaper and more private solution to exchanging coins, the successful test paves the way toward a whole new range of possibilities in the context of the lightning network. For example, peers on the network could eventually act as cryptocurrency exchanges, competing with one another to offer the best exchange rates.

“Arguably the most important benefit of Lightning swaps is the ability to efficiently exchange different currencies without a custodian,” Fromknecht said. “Our ecosystem heavily depends on exchanges to fulfill this role today, but Lightning swaps offer users a choice to get the best of both worlds — instant exchanges without relinquishing control of your money.”

Similarly, such exchangers could act as payment processors: it would be much easier for users to spend litecoin at merchants that only accept bitcoin (or vice versa). And it’s even conceivable that bitcoin-to-bitcoin payments over the lightning network will route via Litecoin hubs, if that’s the cheapest way to get funds from A to B.

For Lee, at least, this is not as unlikely as it sounds, and the successful tests mark another step toward his vision for the lightning network on Litecoin and Bitcoin.

“The Litecoin team is excited to work with Lightning Labs to explore the true potential of instant cross-chain atomic swaps,” he concluded.

For a more in-depth technical explanation of these kinds of atomic swaps, see our previous article “Atomic Scaps: How the Lightning Network Extends to Altcoins” or the blog post and video published by Lightning Labs today.

The post The Lightning Network Now Supports Transactions Across Blockchains appeared first on Bitcoin Magazine.

Posted on 16 November 2017 | 3:48 pm

New “Semi-Decentralized” Cryptocurrency Exchange Navigates Murky Compliance Waters

New “Semi-Decentralized” Cryptocurrency Exchange Navigates Murky Compliance Waters

Tetra, a new entrant in the cryptocurrency exchange sector, describes itself as a semi-decentralized, peer-to-peer exchange with an emphasis on security and usability: “Tetra will help create the next wave of cryptocoin adoption which will benefit all cryptocurrency users from investors to traders to businesses.”

The term “peer-to-peer exchange” tends to suggest the idea of a strong emphasis on privacy and anonymity, as well as a certain level of disdain for Know-Your-Customer (KYC) rules, meddling regulators and authorities. According to Tetra’s blog post announcement, however, it appears that its approach is at odds with this philosophy:

Tetra understands the importance of practices like KYC and has devoted the resources necessary to implement these processes properly. Users will be able to trade safely with the comfort of knowing that due diligence has been enacted to protect them from potential repercussions.

“You may have heard the terrifying accounts of people receiving prison sentences for trading cryptocurrencies on peer-to-peer exchanges,” adds the main Tetra website. “With Tetra, that is a thing of the past. Route your payments through our fully compliant banking network for a legally sound trading process. We're relieving traders of the burden of obtaining expensive licenses and adhering to cumbersome regulations in order to allow people to focus on what matters: their trades.”

While this sounds appealing to compliance-conscious cryptocurrency users and traders, the self-description of Tetra as a “semi-decentralized P2P” raises questions. In a Reddit discussion, a Tetra representative admits that Tetra is a centralized service, but states that the exchange operates using a decentralized transaction model so that the operators never have control over users’ coins directly, and thus hackers do not have access to users’ coins.

In communication with Bitcoin Magazine, Patrick O'Brien and CTO of Tetra Exchange, confirmed this practice.

"Tetra is called a semi-decentralized exchange because Tetra customers maintain control over their own private keys. Customer funds are never stored on our centralized servers, users store their funds in their own client-side wallets which are built into the Tetra software, and transact through our system by utilizing the Bitcoin network's multi-signature transaction architecture.”

He explained that Tetra is described as a peer-to-peer exchange because users are trading with other individuals, and not with Tetra or against a Tetra orderbook as they would in a traditional exchange.

“To elaborate further, this means that when customers are interested in making escrow payments they will participate in a multi-signature transaction, with the third party and ourselves as signing authorities,” continued O'Brien.

“In the event of a dispute we can co-operate with either side to move the funds where they need to go, and in the event of a successful transaction both sides can agree to release the funds. All of this is accomplished without us ever having direct control over the flow of money as would be the case in a traditional exchange.”

International Compliance Issues

Based in British Columbia, Canada, Tetra plans to operate globally with no restrictions, unless forced to by law. When a Reddit user suggested that Tetra is advising traders to flaunt U.S. money transmission laws, the Tetra representative answered that the exchange is not “ignoring U.S. laws and pretending it's Canadian law while intending to operate in the U.S.”

He added that the exchange takes compliance very seriously and stated that Tetra is circling back to their lawyers for advice.

However, as the Reddit thread continues to point out, there still remains a number of compliance and personal privacy concerns related to the company’s KYC measures that U.S. users should be especially wary of, depending on the particular state requirements where they live.

Some states are stricter than others, too. Always [know] one's own jurisdictional rules/laws and not rely on what is "too good to be true." - coin_trader_LBC

User Experience and Security

Leaving aside the P2P interpretation and the potential compliance minefield, it’s worth noting that Tetra emphasizes easy usability and security as strong competitive advantages in the cryptocurrency exchange market.

“[The] Tetra app and web platform will create a simple experience for users,” reads the announcement, adding that users won’t need to know about public key cryptography and smart contracts. “This approach will enable a new generation of users to enter the cryptocurrency space and with that bring new investors, new clients for dapps and crypto-based businesses, and in general make a great stride towards mainstream adoption that will enable the positioning of cryptocurrencies as true world-currencies.”

The Tetra platform uses multisig escrow and intends to automate all aspects of the trading process to provide “incredibly secure and worry-free trading” with 2-of-2 and 2-of-3 P2SH multi-signature transactions, smart contracts and encryption of all communications.

Of course, Tetra is hardly the only exchange to focus on easy usability and security, and, in fact similar measures are adopted by many exchanges today. What really seems to differentiate Tetra from many other exchanges is the fact that Tetra is explicitly targeting professional traders and cryptocurrency trading businesses that need to streamline multiple trades, by offering an easy user experience to their customers and presenting themselves as fully compliant with regulations.

"The goal here is to facilitate the growth of fiat to crypto on-ramps and off-ramps, and we do this by encouraging people to operate trading businesses on our platform," O'Brien told Bitcoin Magazine.

“The features outlined so far culminate to satisfy business needs; by ensuring customers have a completely secure, legally safe, and easy to use platform Tetra will allow businesses to thrive in an otherwise hostile environment,” concludes the announcement.

The first public release of the Tetra platform and apps, currently available to alpha testers, will support Bitcoin, Ethereum, Litecoin and Dash. Other cryptocurrencies that support multisig transactions are planned for the future. The platform will begin its roll out in the U.S., Canada and Australia.

To professional traders and businesses, Tetra offers a paid service dubbed Tetra Prime, with support for online and “brick-and-mortar” business storefronts, as well as trade matching and analytics to optimize trading profiles.

The post New “Semi-Decentralized” Cryptocurrency Exchange Navigates Murky Compliance Waters appeared first on Bitcoin Magazine.

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November 20, 2017 -
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