Ripple price tested the next key support near $0.2920 and later bounced back against the US dollar.Bulls took control and pushed the price above the $0.2980 and $0.3000 resistance levels.This week’s followed key bearish trend line was breached with resistance at $0.3010 on the hourly chart of the XRP/USD pair (data source from Kraken).The pair rallied above the $0.3020 resistance and it may even climb above $0.3065 and $0.3080.Ripple price traded to new weekly lows before rebounding higher against the US Dollar and bitcoin. XRP/USD settled above $0.3000, with a bullish angle and it may accelerate above $0.3065.Ripple Price AnalysisYesterday, we saw a nasty decline below $0.3000 in ripple price against the US Dollar and discussed about more losses. The XRP/USD pair did extend losses below the $0.3000 and $0.2950 support levels. It tested the $0.2920 support area, where buyers emerged. A swing low was formed near $0.2913 and later the price started a sharp upward move. Buyers came into action and pushed the price above the $0.2980 and $0.3000 resistance levels.The upward move was strong as the price climbed above the 61.8% Fib retracement level of the last decline from the $0.3065 high to $0.2913 low. Moreover, this week’s followed key bearish trend line was breached with resistance at $0.3010 on the hourly chart of the XRP/USD pair. The pair is now trading nicely above the 76.4% Fib retracement level of the last decline from the $0.3065 high to $0.2913 low. It is testing the $0.3065 swing high and trading above the 100 hourly simple moving average.In the short term, there could be a downside correction towards the $0.3030 or $0.3010 support levels. On the upside, a break above the $0.3065 might open the doors for more gains. The next key resistance is near $0.3100. It represents the 1.236 Fib extension retracement level of the last decline from the $0.3065 high to $0.2913 low.Looking at the chart, ripple price clearly recovered nicely from the $0.2920 support level. A close above the $0.3000 barrier is positive and has opened the doors for more gains. However, it won’t be easy for buyers to clear the $0.3065 and $0.3080 levels. Once they succeed, the price is likely to surge above the $0.3100 resistance level. On the downside, there are many supports near the $0.3030 and $0.3010 levels, followed by the key $0.3000 support.Technical IndicatorsHourly MACD – The MACD for XRP/USD is placed heavily in the bullish zone.Hourly RSI (Relative Strength Index) – The RSI for XRP/USD climbed higher sharply and moved above the 65 level.Major Support Levels – $0.3030, $0.3010 and $0.3000.Major Resistance Levels – $0.3065, $0.3080 and $0.3100.
Archives for March 26, 2019
ETH price traded to a new weekly low near $131 and later climbed higher sharply against the US Dollar.The price broke a few important resistances near the $133 and $134 levels.This week’s followed major bearish trend line was breached with resistance at $135 on the hourly chart of ETH/USD (data feed via Kraken).The pair is now trading nicely above the $135 level and it may continue to rise towards the $138 resistance.Ethereum price reacted sharply after testing major supports against the US Dollar and bitcoin. ETH jumped above the $135 resistance and it seems like buyers are back in action.Ethereum Price AnalysisYesterday, we saw a sharp decline in ETH price below the $134 support level against the US Dollar. The ETH/USD pair even broke the $132 support and the 100 hourly simple moving average. A new weekly low was formed near $131 and later the price started a fresh upward move. There were a couple of swing moves near the $134 level, but later buyers gained traction and pushed the price higher. There was a decent comeback and the price rallied above the $134 and $135 levels.Moreover, this week’s followed major bearish trend line was breached with resistance at $135 on the hourly chart of ETH/USD. The pair even climbed above the $136 resistance and settled above the 100 hourly simple moving average. It traded as high as $137 and currently correcting lower. An initial support is near the 23.6% Fib retracement level of the recent wave from the $131 swing low to $137 high. The main support is near the $134 level, which acted as a strong resistance earlier.Lastly, the 50% Fib retracement level of the recent wave from the $131 swing low to $137 high is also near the $134 level. Therefore, if the price corrects lower, the $135 and $134 levels are likely to act as strong supports. On the upside, a break above the $137 high might push the price towards the $138 level. However, the main resistances are near the $138 and $139 levels.Looking at the chart, ETH price clearly bounced back after carving a new low near the $131 level. Having said that, there are still many hurdles for buyers near the $137 and $138 levels. Sellers might take a stand near $138 and there may be a bearish reaction. If buyers clear the $138 barrier, there could be more gains above $140.ETH Technical IndicatorsHourly MACD – The MACD for ETH/USD is gaining momentum in the bullish zone.Hourly RSI – The RSI for ETH/USD jumped sharply and it is currently well above the 70 level.Major Support Level – $134Major Resistance Level – $138
After trading within an incredibly tight trading range in between $4,000 and $4,100 for an extended period of time, Bitcoin (BTC) has now broken downwards below its previously established support level at the important psychological level of $4,000.Now, analysts believe that Bitcoin’s inability to stabilize above $4,000 will lead it drop further in the near-term as dip buyers fail to step in and prop the cryptocurrencies price up.Bitcoin (BTC) Breaks Below $4,000 and is Likely to Drop Further At the time of writing, Bitcoin is trading down just over 1% at its current price of $3,970 and is down from its weekly highs of nearly $4,100. Because bulls still do not have enough buying pressure to push the crypto above the low-$4,000 region, it is likely that this price level will persist as resistance for the foreseeable future.Jani Ziedins of the CrackedMarket blog discussed Bitcoin’s recent drop below $4,000 while speaking to MarketWatch, explaining that he expects the cryptocurrency to see further downside in the near future.“Bitcoin cannot escape $4k resistance even after poking its head above it the last week. If dip buyers have not come to the rescue yet, it means they are not coming. An investment that refuses to go up will eventually go down. Bitcoin owners need to be prepared for more near-term weakness,” he said.Ledger Status, a popular cryptocurrency analyst on Twitter, also shared his thoughts recently, explaining that the crypto has multiple strong levels of resistance existing just above its current price.“Tricky spot for $BTC. Under the bband midline again but above a congestion area. Several support areas below, heavy resistance above. Seems a good way to lose money over if leveraged,” he noted.Although Bitcoin has found support around $3,900 so far, if its bulls are unable to push its price back above $4,000 in the near-future, significantly further losses could be in store, and a drop back to its 2018 lows in the low-$3,000 region may be inevitable.Analyst: Bitcoin May Need to Drop to $3,700 Before SurgingDespite its current price action favoring BTC’s bears, the latest drop may be part of a bigger price move that will ultimately send its price into the upper-$4,000 region in the near-future.Flood, another popular cryptocurrency trader on Twitter, spoke about where he sees BTC heading next, explaining that he expects it to drop towards $3,700 before finding buying support that allows the crypto to surge to the upper-$4,000 region.This is my trading plan for the next couple of weeks. $BTC pic.twitter.com/tu8jHsKVAR— Flood [BitMEX] (@ThinkingUSD) March 26, 2019How Bitcoin responds to its recent drop below $4,000 will give traders and analysts alike more insight into where the entire markets are heading next, as continued downwards pressure on BTC will likely hamper the gains that many smaller cryptocurrencies have experienced as of late.Featured image from Shutterstock.
Bitcoin might have taken the financial world by surprise. But regulatory squeamishness ensures that it is still far away from gaining mainstream adoption on Wall Street, according to Terry Duffy.
CME’s Terry Duffy: Regulators Detest Bitcoin’s Finite Supply
The CME Group chairman and CEO told Business Insider that the biggest thing that is keeping governments away from bitcoin is its finite supply. The cryptocurrency’s supply cap does not fit well with modern economic theories, which allow governments to print money at will. With bitcoin providing no such control, Duffy said governments would be unlikely to ever use it themselves.
“The governments can’t run unless they can run on a deficit,” he explained. “I am trying to figure out why they would say, ”Sounds good to me because I want to be responsible and run everything on [an] even-for-even basis. I can’t borrow against anything.”
Duffy added that the only way through which bitcoin can gain adoption on Wall Street is regulatory approval. But they have so far kept cryptocurrencies in the distance as they continue to raise doubts about them.
Stablecoins are a Better Fit for Regulators – and Wall Street
The Securities and Exchange Commission (SEC), for instance, has rejected applications of several bitcoin exchange-traded funds over the years. The securities regulator fears potential price manipulation in a mostly unregulated bitcoin spot market.
Atop that, there are worries about the real-world use cases of cryptocurrencies. A majority of the participants within the cryptocurrency community are speculators, not users.
“Once you get the use of it, the price will take care of itself,” Duffy said. “But the argument has gone only to the price of, say, bitcoin or any other cryptocurrency. No one is talking about, ‘How do I use this asset?’”
According to Duffy, stablecoins – like the one Facebook is secretly working on – are a better fit for everybody, whether it is governments, regulators, or significant financial players. Only currencies backed by stable fiat assets like the dollar or euro could allow these organizations to enjoy a cryptocurrency without inheriting its risks, he concluded.
Developers behind privacy-oriented coin Grin are discussing crucial, potential changes to the cryptocurrency’s hard fork roadmap.
Since plans to keep mining decentralized through a series of system-wide upgrades (more popularly known as “hard forks”) may not pan out quite as well as Grin developers have hoped, they are looking to potentially adjust the upgrade schedule.
Prominent Grin developer John Tromp, who invented proof-of-work mining algorithm Cuckoo Cycle, suggested during a bi-weekly Grin Governance meeting today changes to what will go into the next hard fork currently set for mid-July. Now, developers are putting the matter to a vote in two weeks time.
Tromp argued in conversation with other developers:
“The announcement of single chip ASICs for [Cuckatoo-31] has undermined our phase out schedule… which looks like it won’t be able to serve its original intended purpose of thwarting single chip ASICs in the foreseeable future.”
ASICs are expensive, specialized hardware devices designed to optimize earnings for a specific mining algorithm. Developers think it’s bad that ASICs have come to dominate many cryptocurrencies, since the manufacturers are a centralizing force in what’s supposed to be decentralized cryptocurrencies.
When Grin started off, its developers aimed to prevent a “first-mover advantage” towards ASIC manufacturers, instead attempting to promote healthy competition with manufacturers of GPUs, which are less expensive to run. To keep ASICs at bay, Grin developers agreed to hard fork the network every six months and tweak the mining algorithm slightly for a period of two years.
However, such algorithm adjustments were also deemed to be an unsustainable solution to miner centralization in the long-run. As such, developers agreed that over time the network would gradually transition to an explicitly “ASIC-friendly” variant of Tromp’s Cuckoo Cycle called Cuckatoo31+. This would give ample time for many ASIC manufacturers to optimize for this mining algorithm and hopefully ensure a decentralization of ASIC miners on the network.
But this might not be going as planned. At present, roughly 81 percent of Grin blocks are being mined using the ASIC-resistant and tweakable variant of Tromp’s Cuckoo Cycle called Cuckaroo29. The other 19 percent of blocks are mined using Cuckatoo31+, according to Grin ASIC manufacturer Obelisk CEO David Vorick.
In a phase referred to in Tromp’s statements today as the “Cuckatoo-31,” this ratio continues to gradually decline. As developer Daniel Lehnberg estimates in today’s meeting, Cuckatoo-31 is expected to end August 19 of next year. The following phase – Cuckatoo-32 – will result in a total of 55 percent of Grin blocks mined using Cuckatoo31+. Thereafter, the beginning of Cuckatoo-33 in 2023 marks the phase transitioning to a fully Cuckatoo31+ mined Grin network.
However, this current schedule might lead to problems. Both Tromp and Vorick argue that the present schedule needs to be delayed. If not, Vorick maintains that “it will almost guarantee there will be an [ASIC] monopoly at [Cuckatoo-32],” which is exactly what the Grin developers were trying to prevent.
Vorick told CoinDesk:
“We’ve demonstrated with our single-chip [Cuckatoo-31] miner that multi-chip designs are not competitive, and if the phase-out is not delayed, we will be producing a [Cuckatoo-32] single-chip design as well.”
Helping Grin succeed?
This design “will be expensive and difficult” to build, Vorick adds.
“We believe that the mining ecosystem for Grin would be better if it stayed at [Cuckatoo-31], where costs are lower and it’s easier for new competitors to get involved,” said Vorick to CoinDesk.
In light of this information, Tromp proposes:
“Any change to [Cuckatoo31+] cannot take effect until at least 18 months into the future, unless agreed upon by all affected parties.”
“I’m proposing to proceed with more caution, to take a wait and see approach,” said Tromp. “But also to keep our commitment for the next 18 months as ASIC manufacturers must be able to rely on that for investment decisions.”
Writing on a public Grin forum, Vorick shared his concerns about the phased hard fork roadmap. He explained that while other mining hardware manufacturers “are not upfront about the nature of their hardware,” his motivation for disclosing the matter came down to Obelisk wanting “give the community all the information it needs to make informed decisions.”
“We really would like to see Grin [succeed] and we would like to do so by collaborating with the Grin community and letting them know what’s going on before it happens,” wrote Vorick. “We’re looking forward to your thoughts and discussion.”
Grin image via CoinDesk archives
After almost six years in operation, Dream Market is calling it quits. CCN has confirmed rumors of the shutdown. Since the original message was unsigned, there is some confusion about its derivation. Has law enforcement thoroughly co-opted the platform, and plans to move it to a new market which is a total honey trap? As the poster on Dread says, “Only law enforcement knows.”
Moving to a Partner Market — Or Overtaken By DEA?
Users on the dark web’s version of Reddit initially weren’t sure if the news was real or not.
Dream has been in operation so long, it’s hard to believe they’re giving up now. Unlike most darknet marketplaces, they’re quitting before they get shut down. They’re also not running off with everyone’s money, another point in their favor. As one user on Dread put it:
Well guess they god tired, who can blame them though? They stood out for everyone when all older markets disappeared, exit scammed or seized. Now the markets have competition ha jkk.
No Exit Scam — Or Tracking Funds As They Leave The Market?
Exit scams are a common occurrence in the digital underworld. Multisignature wallets have improved the ability to secure funds, but ultimately these require significantly more work on the part of the marketplaces. Dream had the typical deposit and withdraw model, as does the other popular market at the current time, Wall Street Market.
Six years is a long time on the dark web. Several markets have been taken down as a result of investigations into big time users. The dark net has been a less sensational topic during the downturn of the crypto market. The legalization of marijuana in several jurisdictions since days of the Silk Road has also lowered demand for the Dark Net. Certain types of drugs are still highly sought after, particularly opiates, for which a California woman was recently arrested following a lengthy investigation.
4-Star Ratings, Ending on a Good Note
The “partner market” noted by Dream doesn’t appear to be operational yet. The address given for the partner market doesn’t load anything at this time.
Dream has an average of four stars after more than 1800 reviews at DeepDotWeb, a clear net website devoted to the dark web.
While the view is unpopular, rational arguments have been made that Ross Ulbricht’s Silk Road was the first application to provide real liquidity and demand for Bitcoin. The marketplace moved millions of dollars worth illegal drugs along with counterfeit items. Certain items were banned on Silk Road that other markets have sold in the meantime, including child pornography.
Dread Pirate Roberts’ Legacy
Ulbricht, known in the underworld as Dread Pirate Roberts, never sold any drugs on Silk Road himself. Nevertheless, he was given a life sentence for his role in facilitating a non-violent, digital way for people to buy and sell drugs online. The business model he created has been replicated many times. Dream was founded in the wake of Silk Road’s closure, and has consistently operated ever since.
Its closure is likely to raise questions about the “partner market.” The market has yet to give any official reason for its upcoming closure.
One particularly chilling aspect of the closure, at least to participants, is the DEA’s less publicized news that it made a huge bust today.
The DEA says:
As a result of Operation SaboTor, U.S. and international law enforcement agencies made 61 arrests and shut down 50 Darknet accounts used for illegal activity. Law enforcement executed 65 search warrants, seizing 299.5 kilograms of drugs, 51 firearms, and more than $7 million ($4.5 million in cryptocurrency, $2.48 million in cash, and $40,000 in gold). They also conducted 122 interviews. In addition, participating agencies engaged in public education efforts regarding the dangers of opioid abuse during the operation.
DEA Darknet Bust Shakes Faith
It’s interesting to note that the “accounts” were shut down, but not the markets themselves. This will only further stoke suspicions that the new marketplace is actually funded by the government – a honey trap to end all honey traps. A Dread user pointed this news out and said:
I would suggest running like it was on fucking fire.
Time will tell what becomes of Dream market. At present, users are able to withdraw their funds, and many on the dark web are recommending they do so immediately. This in and of itself may be a risk if done without some degree of anonymity, however, since the DEA could be watching those transactions as well.
Give a law enforcement man a single drug dealer and he will be happy for a day. Give him an entire userbase and he will make his career on it.
The crypto industry has once again bore witness to an exchange being hacked by nefarious actors, with the latest exchange to fall victim being the Singapore-based DragonEx, which announced today that an undisclosed amount of multiple digital currencies have been stolen.The latest hack is now highlighting the importance of cryptocurrency traders and investors utilizing safe and reputable cryptocurrency platforms that heavily utilize cold storage in order to hedge against the on-going risk of being hacked.Another Day, Another Crypto Exchange Falls Victim to Hackers Earlier today, the exchange notified users in its Telegram channel that user’s crypto assets had been stolen and transferred out of the platform on this past Sunday, and that the exchange had already notified authorities in multiple countries about the cybercrime.“On March 24th, DragonEx has encountered attacks from hackers, our users’ crypto assets and Platform crypto assets were transferred and stolen… Several judicial administrations were informed about this cybercrime,” they explained in a telegram notification on their official channel.In the time since the announcement was made, the exchange’s Twitter account was temporarily restricted by Twitter due to a suspicious amount of activity, and there have been no tweets made since March 22nd.Importantly, the exchange also noted in its Telegram message that they have retrieved a portion of the stolen assets already, and that they will update users on the status of their recovery efforts next week.“Part of the assets were retrieved back, and we will do our best to retrieve back the rest of the stolen assets… All platform services will be closed and the…assets loss recovery situation will be announced in a week,” they said, further noting that they will “take responsibility no matter what.”DragonEX Hack Highlights Importance of Using Reputable Exchanges Prior to the latest DragonEX hack, the crypto industry has been caught in the throes of the QuadrigaCX imbroglio that has captivated the industry due to the unusual circumstances surrounding it.Nevertheless, both of these situations, as well as notable exchange hacks in years past, truly highlight the importance of investing in crypto on exchanges that utilize a multitude of security mechanisms to secure user’s assets.Joseph Young, a popular figure within the cryptocurrency industry, was one of many individuals who discussed the importance of using secure exchanges, noting that platforms must utilize better cold storage systems.“A crypto exchange in Singapore was hacked. Hacks/scandals deteriorate the public image of the crypto market, not good for the industry. Better cold storage systems have to be in place. Kudos to exchanges that prioritize security: Kraken, Binance, Coinbase, Gemini, others,” he said.A crypto exchange in Singapore was hacked. Hacks/scandals deteriorate the public image of the crypto market, not good for the industry.Better cold storage systems have to be in place.Kudos to exchanges that prioritize security: Kraken, Binance, Coinbase, Gemini, others.— Joseph Young (@iamjosephyoung) March 26, 2019When DragonEx releases more information regarding their recovery efforts next week, the industry will likely figure out whether or not investors on the platform will be able to have their assets recovered or reimbursed.Featured image from Shutterstock.
In a presentation given at Princeton University earlier today, University of Pennsylvania professor and blockchain author Kevin Werbach has claimed that distributed ledger technology offers humanity an entirely new kind of trust.Rather than being a “trustless” technology as many crypto proponents argue, Werbach instead posits that blockchain both expands trust, whilst simultaneously reducing the level of trust required for a system to serve all parties fairly.Blockchain Tech: An Entirely New Concept of Trust?Professor and author of, The Blockchain and the New Architecture of Trust, Kevin Werbach, has given a presentation for students, faculty, and invited members of the public on blockchain technology and its relationship with the notion of trust. The lecturer on Legal Studies and Business Ethics at the University of Pennsylvania has argued that, contrary to popular believe, the technology backing various crypto assets not only relies on trust but provides humans with an entirely new form of it to boot.To support his thesis, Werbach drew on the recent example of the QuadrigaCX exchange and the millions of dollars supposedly lost following the death of the exchange’s CEO, Gerard Cotten, earlier this year. The professor stated that the example highlighted the fact that distributed ledger technology did indeed rely on numerous different kinds of trust.Users storing funds on QuadrigaCX prior to Cotten’s death certainly trusted the exchange with their funds.Despite how unfamiliar Werbach’s name might be to those interested in either crypto or blockchain technology, the UPenn professor does have the credentials to make his views worthy of consideration. Werbach is described as a “world-renowned expert on emerging technology” in a report by the publication of Princeton’s Center for Information Technology Policy, Freedom to Tinker. The blockchain author reportedly focuses on business and public policy relating to various technologies, such as the internet, big data, and blockchain.Werbach also provided services to the Obama Administration’s Transition Team, as well as insight for President Clinton back when the internet was considered an emerging technology.In today’s presentation, Werbach went on to outline some of the different kinds of trust that exist in society today. He spoke about peer-to-peer trust, based on the relationships between individuals; about Leviathan trust (first detailed by British philosopher John Hobbes) being a social contract between the individual and the state, giving the latter the power to enforce agreements made in private; and intermediary trust, or trust that relies on a central entity to manage various transactions.Werbach argues that blockchain adds to these an entirely new form of trust. Rather than trust in any single actor to validate updates to a ledger recording anything (Bitcoin ownership, for example), instead users of blockchains can trust in the design of the system, which makes censorship of data all but impossible.Blockchain technology interacts with the concept of trust in two ways for Werbach. Firstly, it minimises the requirement of trust through the removal of a single point of failure, reduction of the likelihood of monopolies forming, and making intermediation processes much more efficient.However, blockchain also works to expand trust. The tech achieves this by minimising reconciliation, carrying out automated execution of transactions, and making records publicly auditable.Werbach went on to state that there is a clear conflict of interest between blockchain technology and regulation. This is because blockchains are entirely agnostic towards transactions. Does the Bitcoin blockchain treat coins used to finance the murder of someone any differently than it does those units of BTC that are being transacted for the first time after they were mined? Of course not. Therefore, despite the greater auditability of public blockchains, blockchain-based currencies are prized by criminals for the permissionless nature upon which Werbach elaborates.In concluding today’s presentation, the author stated that there were three main trade-offs all blockchain system designers needed to balance: trust, freedom of action, and convenience. By optimising for one of these qualities – for example, convenience – developers must sacrifice some of one or both of the others. Bitcoin, for example, suffers in terms of convenience thanks to its robust trust model. Conversely, more centralised crypto assets might optimise for convenience (fast transaction times, instant settlement, etc.), at the expense of either trust, freedom of action, or both. Related Reading: Bitcoin Blockchain Costs Approx. $7 million a Day to Stay SecureFeatured Image from Shutterstock.
Sponsy is a failed ICO that attempted to launch in the summer of 2018, according to the Financial Times. The proprietor of the crypto project currently has it listed on eBay for a price of $60,000 and says the firm’s biggest mistake was building a product first. Sponsy was intended to be a decentralized sponsorship platform, but the proprietor also openly says that the decentralized aspect isn’t critical.
21-Year-Old Founder Believes They Should Have Funded Before Building A Product
The founder’s interview with Financial Times seems so over-the-top it could be trolling. Or, the burned-out Belarusian ICO creator, Ivan Komar, has no motivation to be less than honest. If he could go back and do it again, he told FT:
We would not have tried to build a product first, we would have tried to run a token sale as soon as possible, to jump into this crypto craze bandwagon, and raise as much money as possible before building any product. And that’s exactly what others were doing.
Because they fully developed the project, Komar thinks the project still has some value to an investor. He mentioned Bosch to FT as a company who might be interested in buying the whole project. One of the more significant mistakes Sponsy made was hiring a law firm, who advised them against rushing into a token offering. He firmly believes their primary mistake was missing the ICO hype bubble, and though he is probably right, his statements spell out a lot of uncomfortable truths about the year 2017.
0 Bids, 44 Watchers
During that time, it seemed anyone with the ability to write a whitepaper could gain funding in the millions of dollars. The overwhelming majority of ICOs failed to complete a product, or are still in the process of doing so, and most investors have never been made whole. Komar says:
We hired a lawyer and that was a big mistake for us. Because our lawyer basically told us that we should not launch any ICO before we built a real product that might have some users. And I asked him why, because I saw so many ICOs out there who did not have any idea for any product, yet they managed to raise tens of millions of dollars.
The auction includes all the documents you might need to run the ICO yourself legally. It also consists of a pre-built product. Don’t want to use blockchain? No problem. The product will work just fine with a centralized server, as Komar says:
The core business model would run just as well in the centralised world without any tokens or crypto or blockchain… They can easily eliminate the crypto functionality out of this. The core component is a platform — it doesn’t require any crypto or blockchain component to work. Just a typical, centralised server.
Could’ve Been Centralized: An Uncomfortable Truth
Ah, the uncomfortable truth about blockchain products.
Plenty of products designed for decentralized ledger technologies will work just as well in centralized models, if not better. The blockchain is not a cure-all. It’s best for systems where too much trust will get you wrecked: things like exchanges will one day be commonly run on blockchains.
Centralized cryptocurrencies are nowhere near as valuable or sought-after as decentralized ones – you can’t be your bank with someone else’s permission. Products which subvert censorship or the ability to own property on decentralized blockchains are also good uses of decentralized technology. But something as simple as a sponsorship application? The blockchain may hold it back.
To The Winner Goes the Spoiled Goods
If you decided to buy this eBay item, you would get everything from the minimum viable product to the whitepaper. You also get some assessments, coming in at 10s of pages:
Opportunity assessment – 57 pages long, 16k words: Includes competitive analysis, industry challenges, technical description of the solution, business model, biz model innovation, business model canvas, SWOT, market opportunity, traction. Business workflows are depicted visually. Extensive roadmap with detailed milestones and KPIs set. […] Traction of the project – 13 pages long: Describes software development progress with product photos and screenshots, covers social media growth. In text and Excel formats.
You also get 31 pages of market research, 35 pages on the technology, and a legacy of failure. The listing contains an inaccuracy about its social media presence. As FT pointed out, while they boast that “without exception” their posts get likes and retweets, the latest tweet from Sponsy had just one like. Perhaps their Twitter bot subscription expired?
Christine Duhaime, BA, JD, CAMS, practices law with Duhaime Law in Vancouver.
Many of the stories being told about the early operation of the digital currency exchange, QuadrigaCX, are based more on fiction than fact. How do I know? I know because in 2015, I was QuadrigaCX’s regulatory attorney, hired to help their securities attorney in Canada draft a statutory prospectus.
But here’s the thing, and I’m not embarrassed to say it, our firm was terminated after six months. We were terminated because QuadrigaCX executed a management hard fork overnight, which started the company down a path of lawlessness. When I say lawlessness, I mean it solely and only in the regulatory sense.
Before we get into that, let me dispel some myths about QuadrigaCX.
Our firm agreed to act for QuadrigaCX because it was subject to the oversight of several regulatory agencies across Canada. It was registered with FINTRAC, Canada’s FinCEN, and subject to compliance examinations, which are akin to the examinations the IRS conducts on U.S. exchanges with MSB registration; it was a reporting issuer in two Canadian provinces and subject to the oversight of two securities regulators, which is akin to being subject to two SECs supervising its activities; and it was registering in the province of Quebec for anti-money-laundering purposes with that province’s securities regulator.
Not only that, QuadrigaCX had cold storage insurance over its customers’ digital currencies. This was 2015, and if you were in the space back then, you know what a feat it was to secure cold storage insurance for a digital currency exchange.
I believe it may have been the first exchange in the world to have cold storage insurance.
QuadrigaCX had, at that time, four different law firms advising it on different matters, two national law firms and two specialized firms, ourselves included. It had a public chartered accountant who prepared financial statements of all its bitcoin trades, its finances and customer holdings. And it also had an independent auditor from an accounting firm and it had audited financial statements.
In 2015, it was pretty much unheard-of for a digital currency exchange to have an auditor and to prepare audited financial statements that it made available to the public. It was more transparent than many exchanges today.
Back then, QuadrigaCX wanted to launch a blockchain R&D lab and while it barely got off the ground, it did create one project – a refugee payments app that was operational to tackle financial inclusion that would allow the UN and refugees to process payments in bitcoin in areas where banking was inaccessible.
I personally, on my own time and in my personal capacity, jumped in to help QuadrigaCX with that tech because financial inclusion was important to me, as it is important to most digital currency exchanges. I believe QuadrigaCX was the first exchange in the world to launch an R&D lab, and probably the first to develop payments tech for bitcoin acceptance for financial inclusion.
QuadrigaCX’s vision back then was to be the first listed, regulated exchange in the world and dominate the market with superior, self-managing technology. They walked away from the former goal, but considering that, long after my time, they grew to 350,000 customers managed by four employees with a platform built in 2014, they certainly succeeded with the latter, becoming Canada’s largest exchange by a wide margin.
No story of QuadrigaCX is complete without understanding one more fact – six months before we were retained, it had gone through a court-approved plan of arrangement and become three companies, and as a result, it inherited a slew of new shareholders it knew nothing about. (A fourth company was later set up.)
It is my belief that the whole QuadrigaCX team came to believe that the company may have unwittingly become involved in a Vancouver pump-and-dump scheme. Whether it had been drawn into a pump-and-dump is not for me to say because it was before my time, but I can say that QuadrigaCX was run by tech geeks, who were competitive, ambitious and smart but who were unfamiliar with the capital markets ecosystem in Vancouver.
The shareholder question
The QuadrigaCX story has other weird twists.
Our law firm, for example, was recently the target of an extortion event. What happened was that a person demanded, at the beginning of the ongoing creditor protection case in the Nova Scotia Supreme Court, that we give them privileged and confidential information of QuadrigaCX, failing which they would defame us on social media, cause harm to our firm and file a false criminal report against our law firm to law enforcement.
We did not, obviously, give privileged information to strangers but as a result of the extortion of our firm, other people who have relevant information and key documents that could assist with the court process, are now not willing to come forward and be seen as being associated with QuadrigaCX.
I think we all can understand the angst of the loss of our funds, and our firm is one of the larger stakeholders with over $100,000 owed, but I think it’s worth remembering that we’re not each other’s enemy in this process.
If you’ve guessed by now that it’s not accurate, as has been stated, that there are no QuadrigaCX records or documents, you’d be right. There are voluminous records in British Columbia, including court records, accounting records, audited financial statements, bank records, records of contracts, trading volume records, and importantly, records of the cold storage insurance that was still in force a year after our firm exited the client relationship, and still may be.
No party to the proceedings reached out to ask us for the records of QuadrigaCX in our possession, so we wrote to QuadrigaCX’s attorney to let them know what documents we have to assist with the process, and offered to make them available.
People have spilled a lot of ink writing about the shareholders of QuadrigaCX. It is not accurate that there are three QuadrigaCX companies – there are four and therefore, there are four sets of shareholders. It is true that QuadrigaCX re-purchased and canceled much of its issued and outstanding shares up until early 2016.
There were few shareholders left by the time we exited in early 2016, and the shareholder lists publicly available do not appear to be up-to-date. Three shareholders have recently told me that they have never received notice of any annual general meetings and didn’t receive so much as a $1 dividend from QuadrigaCX in three years, despite how profitable it appears to have been.
If that is true, it means shareholders may not have been allowed to vote on QuadrigaCX matters or vote on the direction of the company.
The QuadrigaCX story is by no means over but our bit of the story ended abruptly one morning when its CEO, Gerald Cotten, made the decision that he no longer wanted QuadrigaCX to be a listed company.
On that day, he terminated the professionals that were, in his mind, the “law and order” folks – the accountant, the auditor and me, the regulatory attorney.
From that moment onwards, Mr. Cotten solely took over QuadrigaCX and operated the exchange as if it had no investors, no shareholders, no regulatory agencies and no law that applied to it – no corporate law, no securities law, no anti-money-laundering law and no contract law. I don’t know why Mr. Cotten decided to eschew regulatory law but I never spoke with him after that day. (In January of this year, QuadrigaCX announced he had died a month earlier.)
Like everyone else, there are a lot of other things I don’t know about QuadrigaCX – I don’t know if there is $137 million parked in a few wallets; I don’t know why the bitcoin addresses that were supposed to be holding $92.3 million turned up empty; I don’t know why the wallet address holding $44.7 million of other cryptos can’t be disclosed; I don’t know why no law firm has applied for a Mareva injunction to preserve assets; I don’t know why the litigation is in Nova Scotia when British Columbia Courts have jurisdiction and the witnesses and evidence are in British Columbia; I don’t know why there are statements that there are no records; and I don’t know why the shareholders haven’t tokenized the exchange and made it operational so that customers can start to recover some of their assets.
But I do know this – I’m glad we were let go by QuadrigaCX for being one of the “law and order” folks.
Our legacy with QuadrigaCX covered the period of time when it was as regulated as it was possible to be regulated in Canada in 2015 for a digital currency exchange, when it had Canadian bank accounts and audited financial statements and when customers were protected with cold storage wallet insurance.
Let me end on this note – I didn’t want to write this article but I did it because customer assets held by exchanges must be subject to greater regulation and oversight, and unless we improve the accuracy of the available information by hearing from those who have factual knowledge of QuadrigaCX, to understand what allowed QuadrigaCX to be both heavily regulated yet at the same time to resile from that regulation, we won’t be able to fix gaps, restore consumer trust and move the industry forward.
Gerald Cotten image by Stephen Hui via Christine Duhaime