‘Centralized, Decentralized, Centralized, Decentralized’

The rap battle is on. 

This week’s news encapsulated the way that both centralized and decentralized forces are working in the crypto space, with an anonymous Bitcoin fund launching, but Multicoin releasing a report projecting that Binance could become a one-stop shop for all kinds of crypto financial activity. Coinbase also released a report on proof of work mining, in which it points out the superiority of ASIC mining for security despite its tendency to centralize in other areas. And finally, UMA protocol comes up with a decentralized way to help with a pervasive problem in San Francisco.

Unconfirmed featured a decentralized effort taking advantage of cryptocurrencies: HKmap.live, a real-time map of protests in Hong Kong. And on Unchained, I got to chat with former CFTC chairman Christopher Giancarlo, or, as you may call him, Crypto Dad.

This Week’s Crypto News…

A new anonymous organization going by the name Unknown Fund announced that it will invest in and donate $75 million worth of Bitcoin to startups that “directly or indirectly support the idea of anonymity. Preference will be given to the following niches: protection of personal data, tools for anonymity, cryptocurrency and blockchain.”

The organizers say that they are ordinary people from around the world who met on 4chan.  “We are you, we are your sons and daughters, brothers and sisters, friends and colleagues,” they write. “Our ranks consist of representatives of many countries and nationalities, united by a virtual comradely spirit and the belief that we are fighting for the good of many, and not for the benefit of some. Anonymous is the voice of those who believe in truth, freedom and the right to self-expression.”

The Unknown Fund cites the protection of personal data as one of the big challenges of our time, due to the way it has been used to manipulate people. The examples it gives are what it calls the “ultra-targeted advertising” used in the campaigns for Brexit and the last US presidential election. “one can see how easy it is to manipulate public opinion with enough personal data. However, the manipulation of people occurs not only in big politics, but also in our daily lives. A perfect example is the level of addiction that the general population has to social networks — addiction orchestrated and achieved by corporations.”

Intriguingly, Unknown Fund ended its press release by mentioning that it will start by investing in commercial startups and donations to nonprofits. Then it says, “Investing is just the beginning. Anonymous have developed a number of strategies and methods that will be announced later.”

And then it quotes Edward Snowden: “If you believe in freedom of speech and the media, and most importantly, in a free and accessible Internet, then you are also Anonymous. Our opponents should not doubt our determination or conviction. We will continue to fight as much as necessary to achieve our goal.”

CoinShares released its 2019 crypto trends report, a 134-page behemoth that included data from Gartner, Bloomberg, Electric Capital, The World Bank, The US Federal Reserve and others, and which was presented by Meltem Demirors at the Consensus Invest conference in New York.

The part of the report that I wanted to highlight is the one on business models, in which CoinShares analyzed ICO financing and observed that many crypto foundations are now operating as investment funds. For instance, one chart shows that the EOS VC fund raised $4 billion and has deployed $600 million and the Xpring fund by Ripple, has $12 billion and has deployed $500 million to date. Meltem tweeted, “using a token to bootstrap open source protocol development seems inefficient.” After looking at the various types of business models in the space, calling some scalable and others not, she says, “the market is ripe for M&A activity – lots of spare cash on corporate balance sheets, and 2018 was a strong year for FinTech M&A w/ 2 deals > $10B however, not many attractive M&A targets yet – need stable revenue + free cash flow.”

VC fund Multicoin Capital, which owns BNB tokens, published a report on Binance, saying,  “the Binance team has continued to execute at a phenomenal pace, and they’re not

showing any signs of slowing down. In fact, Binance is expanding to compete with every major

crypto exchange around the world.” Multicoin lists those products:

1. P2P onramp for Chinese retail, which competes with Huobi’s P2P offering
2. Binance.US for US traders, which competes with Coinbase
3. Binance Futures to compete directly with BitMEX, OKEx and other derivatives exchanges
4. Lending and margin trading to compete with Bitfinex and Poloniex
5. Launching Binance stablecoins such as BUSD to compete with Gemini’s GUSD, itBit’s PAX, Bitfinex’s Tether, and Coinbase’s USDC
6. Fiat onramps in the long tail of nations to compete with localized exchange offerings

Multicoin concludes, “The Binance team is making the explicit decision that they want to be the central hub for all crypto-economic activity. They want to own staking, borrowing, lending, options trading, futures trading, asset issuance, venture investing, spot trading, sovereign currency tokenization, and more.”

I’ll let you dive into the report to see how well Multicoin makes its case, but there is no question that Binance is moving quickly on a number of fronts.

Also, side note, The Block’s Steven Zheng tweeted that Binance US makes about $870 per website visitor and his colleague Larry Cermak said Coinbase has been making on average $370 over the last six months.

How Coinbase Thinks About Proof of Work

Coinbase wrote up a blog post this week that explains its decision to change its confirmation requirements for four assets, including lowering confirmations for Bitcoin from six to three. Hopefully if you’ve been a listener of this show and Unchained, you know that one of the main benefits of ASIC mining, despite its tendency to centralize mining, is that it makes the network more secure. That’s the first point that Coinbase makes here: “Coins at the greatest risk of 51% attack are the ones where there exists large amounts of hashpower not actively mining the coin that could begin mining and disrupt the coin’s blockchain.” If you want to understand this more, listen to my Unchained episode with David Vorick of Siacoin and Nebulous.

Then it goes into the benefits of ASIC-friendly consensus algorithms saying, “ASIC-resistance merely raises the barrier to entry into the ASIC market. This results in greater centralization of mining hardware manufacturing — the very situation that the selection of an ASIC-resistant algorithm is meant to avoid!”

Finally, the post concludes: “Every at-scale, professional industry utilizes specialized equipment — it is naive to think that cryptocurrency mining will or should be any different.”

Asia Roundup

• At a conference in Singapore, Changchun Mu, the head of the People’s Bank of China digital currency research institute, confirmed that it will offer anonymity features. Alex Gladstein of the Human Rights Foundation tweeted a response to this news: “Narrator: he was lying.”
• China-based Bitcoin mining company Canaan revised its IPO offering down to $100 million from $400 million in the spring. Dovey Wan, tweeting the news, wrote “Rekt alert” and added that it was valued at $1.6 billion in its most recent valuation but the current expected IPO valuation is $1.5 billion.
• Despite previous denials, Justin Sun confirmed that he is part of the investment group that bought Poloniex. He even did a Periscope from the Poloniex Twitter account.
• Longhash explored why cryptocurrency trading volumes in South Korea are down. It says that even Korea’s largest exchange, Bithumb, has seen volume drop 83% from a year ago.

The BBC reports that Konstantin Ignatov, the brother of Dr. Ruja Ignatova, the founder of OneCoin, who has gone missing, reached a plea deal with the U.S. Department of Justice. Ignatov admitted his role in the OneCoin fraud, which is believed to have raised as much as $5 billion. OneCoin Ltd, which is still in operation in Bulgaria, denies all wrongdoing.

Ignatov is complying with the terms of the plea deal and so will not face further criminal charges except for criminal tax violations, but could be sentenced to up to 90 years in prison.

You may have heard of the so-called “poop patrol” in San Francisco, which has been formed in recent years because of yes, the impossible-to-ignore levels of human feces on the streets of the once-beautiful city. Well, as UMA protocol founder Hart Lambur tweeted, “With @UMAprotocol we created a token that ‘profits’ the more shit is reported.” He has a blog post in which you can read all about it, but if this becomes the first successful real-world use case of tokens, then this will be a crazy way in which my professional world intersects with my real life, because I’ve walked the streets of San Francisco in the last few years, and all I’m going to say here is that it’s not like a walk you take anywhere else.