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The SEC Sets Deadline to File Comments for or Against Bitcoin ETF Applications

The U.S. Securities Exchange Commission (SEC) is getting ready to review its decisions regarding Bitcoin ETF applications. With this in mind, the SEC is inviting parties or persons to file public statements in support of, or in opposition to, Bitcoin ETFs. This review could affect nine Bitcoin ETF applications.


The SEC Gets Ready to Review its Decisions on Bitcoin ETFs

The SEC has set October 26th, 2018, as the deadline for the reception of public comments about the rule change petition to list and trade shares of GraniteShares Bitcoin ETF, and the GraniteShares Short Bitcoin ETF.

The SEC’s Division of Trading and Markets has already disapproved nine Bitcoin ETF applications from three investing companies: GraniteShares, ProShare, and Direxion.

Now, the SEC wants to review these decisions. And to perform the review, the SEC is asking the public to file “statements in support of, or in opposition to, the action by the Division pursuant to delegated authority.”

Optimism for the Approval of Bitcoin ETFs Is Rising

Some experts are optimistically citing reasons why the SEC might approve Bitcoin ETFs this time. One example is the SEC’s request for public comments. Trefis, a team comprising MIT engineers and Wall Street analysts, wrote:

Although the SEC rejected several proposals for Bitcoin ETFs earlier this year, it has softened its stance towards the industry in a series of steps over recent months by having the proposals reviewed again, and by more recently inviting investor opinions about the pros and cons of a Bitcoin-linked ETF.

Optimism is also high for the approval of the SolidX Bitcoin Shares issued by the VanEck SolidX Bitcoin Trust, for which the SEC has already received more than 1,400 comments.

Increasing demand for Bitcoin ETFs might also be a factor that could weight in the SEC’s decision. As CNBC reported, Bill Barhydt, chief executive of Bitcoin payment app Abra, said,

“It’s going to happen in the next year; I would actually make a bet on it,” he added. “There is too much demand for it.”

Another factor could be Bitcoin’s lower volatility. As of this writing, the Bitcoin volatility index for the latest 30-day estimate is 1.71 percent, while the most recent 60-day estimate is 2.43 percent.

Bitcoin’s wild price movements might have been one of the key factors that weighed in on the SEC’s decision to reject ETF petitions. Indeed, in denying the Winklevoss Bitcoin ETF petition, the SEC dismissed assertions that Bitcoin markets were price manipulation resistant. And price manipulation results in high volatility.

Regarding Bitcoin’s recent weeks of low volatility, FXEmpire financial expert Bob Mason wrote in Forbes,

“The low volatility is also a statement that price manipulation has perhaps abated.”

Thus, the SEC might now view this most recent period of low Bitcoin price volatility as one additional favorable factor.

Do you think the SEC is now more likely to approve Bitcoin ETFs? Let us know your thoughts in the comments below!


Images and media courtesy of Shutterstock, Twitter/@ETFtrends.

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There’s A Giant Bitcoin Rat on Wall Street And It’s Staring Down the Fed

There’s a towering inflatable rat on Wall Street and it’s found a temporary home in front of a branch of the world’s most powerful bank.

Claws out, fangs fierce, the art piece installed Tuesday is an homage to the giant rats inflated by union protesters as a way to point a finger at companies for mistreating employees. But this latest rat has been updated for modern times. Instead of a dull brown, it’s covered in colorful code and math equations in an ode to bitcoin.

The massive art piece was just installed as a sort of “protest” designed to get viewers to think critically about the state of economics and money management. “Bitcoin will take you apart,” the rat seems to argue from its perch in front of the Federal Reserve Bank of New York’s iconic stone exterior. On its piercing blue eyes, its pupils spell out the letters “PoW,” short for proof-of-work, bitcoin’s underlying algorithm.

Not a permanent installation, it’s expected to be on display for a few days according to artist and ex-hedge fund manager Nelson Saiers, who wants to use the piece to direct attention to The Fed, perhaps the world’s most powerful bank because it controls the U.S. dollar.

While this control is intended to keep the U.S. economy running smoothly, critics argue that central banks devalue money and that it’s inner-mechanics aren’t as transparent as they should be (an opinion that has a lot of clout in bitcoin circles).

As if a giant rat staring angrily at the Federal Reserve didn’t make this point already, Saiers specifically chose to set loose his creation on Maiden Lane, named after the entity that bailed out the giant companies AIG and Bear Stearns during the 2008 financial crisis.

But while rats have a long history in protest, it arguably carries added symbolism for cryptocurrency enthusiasts. Remember the time Warren Buffet called bitcoin “rat poison squared?”

You could think of the art installation as a kind of commentary on that, too.

Saiers told CoinDesk:

“Warren Buffett called bitcoin ‘rat poison squared’ but if the Fed’s a rat, then maybe rat poison is a good thing.”

Pushing buttons

But if his latest project draws more than a few confused stares this week, know this sort of protest art isn’t exactly new for Saiers.

Actually, the former mathematician has earned the nickname “The Warhol of Wall Street” with paintings that depict the darker side of finance, including the market crashes and other complexities that can impact greatly those who understand it the least.

Saiers’ work has aimed to go beyond critiquing money. He’s also taken a stand against non-violent drug crimes by hanging football jerseys spelling out the first 100 or so digits of pi (the connection, in his mind, being that pi is an irrational number and arresting someone for smoking pot is similarly “irrational”.)

However, this is his first piece related to bitcoin. While at first glance it might look like it, it’s really not an anti-Wall Street art piece. The rat is art, after all, so it’s really up to the viewer’s interpretation.

But Saiers gives viewers a few things to think about. For one, he thinks the rat gets the bitcoin philosophy across in an easy to understand way. “The sculpture’s supposed to kind of reflect the spirit of Satoshi and what he’s trying to do,” Saiers said, adding that bitcoin’s pseudonymous creator seemed to be “against bailouts,” like the one in 2008.

(When he or she first created and launched the cryptocurrency, they stuck a news clip of a bailout in the first block of the bitcoin blockchain, to be stored there forever, which many interpret as a criticism of banking and government ties.)

Saiers sees his art as a way for onlookers to learn about bitcoin and the Federal Reserve – both of them. “They each have their strengths and weaknesses. Satoshi is obviously very talented. The Fed has lots of talented people as well,” he said, not advocating for one or the other, even if they seem like conflicting

In short, he just wants people to just enjoy the silliness of it and maybe learn a thing or two.

“It’s art, so I hope they’re entertained by it. It’s informative, I hope people will learn [and] I’m hoping it’ll at least help people understand bitcoin better and be kind of faithful to what Satoshi would have wanted,” he said.

Rat symbolism

As for whether this could be achieved with a more attractive piece of art, Saiers seems most keen on making an impression. (“Bitcoin has left economics and has entered the public consciousness,” Saiers argued.)

Similarly, people sure seemed curious about the rat, with many passersby snapping selfies with it already. When Saiers and his friends first put up it up, they accidentally put it on private land. The security guards chased them off to the public sidewalk. But they did so kindly, as they all “got a kick out of the rat,” he said.

Again, Saiers isn’t expecting much controversy. Part of the fun (he believes) is that the art is ambiguous. In his mind, it’s unclear whether bitcoin or the Federal Reserve is the rat.

Saiers sees one other interesting connection. Like Satoshi, the famous street artist Banksy is pseudonymous, and he speaks about rats very fondly.

“They exist without permission. They are hated, hunted and persecuted. They live in quiet desperation amongst the filth. And yet they are capable of bringing entire civilizations to their knees. If you are dirty, insignificant and unloved then rats are the ultimate role model,” Banksy wrote in his book “Wall and Peace.”

Saiers thinks bitcoin might prove similar.

“People have been mocking bitcoin, but now it’s a $100 billion entity. It’s been scorned, but will it play a role in dampening the importance of central banks and fiat currencies?” Saiers said, adding:

“I’m not saying it will! But that’s why I chose a rat.”

White rat sculpture image via CoinDesk

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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To Scale Bitcoin, Little Improvements Will Need to Go a Long Way

Kaizen.

The Japanese word for “improvement,” and as it relates to business, it’s the philosophy of continuous improvement on working practices. And with that as the tagline for the fifth edition of bitcoin engineering conference Scaling Bitcoin, it became a perfect way to summarize what’s happening today among the cryptocurrency’s developer ecosystem.

With the scaling debate coming to a head last year – and ending with a group of big block supporting enthusiasts breaking off to form competing cryptocurrency bitcoin cash and bitcoin getting the long-awaited code upgrade Segregated Witness (SegWit) – this year’s Scaling Bitcoin conference just didn’t have the flair that perhaps past events had.

What seemed pulled from another piece of the kaizen philosophy – the notion of eliminating waste for a lean business – many of the talks over the two-day conference held at Keio University in Tokyo revolved around little updates that could make a big difference in terms of efficiency of the network.

From figuring out what to do with the vast amount of so-called dust (an output with tiny pieces of a bitcoin in them, small enough that the fees for sending eclipse the amount sent) on the network to fine-tuning the lightning network, Scaling Bitcoin seemed to present a much more relaxed and focused  developer community.

Jameson Lopp, a bitcoin developer and engineer at bitcoin security startup Casa, agreed.

“Most of the presentations were of small improvements that seem fairly likely to be implemented, which is arguably preferable to huge overhauls that promise significant improvements but add a lot of complexity and would be contentious,” he told CoinDesk, adding:

“Lots of small improvements add up over time too large improvements.”

Still, that doesn’t mean the several hundred developers, academics and Japanese technology enthusiasts in attendance weren’t reminded about the potential of the protocol.

During Keio University professor Jun Murai’s opening keynote, he pointed out that in 2000, only 6 percent of the world population was using the internet, but by 2017, more than 54 percent of the global population was online.

“When you are developing for the bitcoin scale, this is what you have to see and to think,” Murai said.

Sweep up the dust

One area of small improvements that several presentations touched on was the massive amount of UTXOs, or unspent transaction outputs – especially those holding bitcoin dust.

For Sergi Delgado Segura, a cryptocurrency researcher at the Autonomous University of Barcelona, the question is “how many unspent outputs are actually worth spending; how much space is devoted to storing not-worth-spending outputs?”

Looking at the question with 110 satoshi’s per byte in mind, according to Segura, about 50 percent of UTXOs are actually dust – meaning those pieces of bitcoin are unlikely to ever be spent.

“This is nothing new; this has been going on since the beginning of the coin,” he said, although, added: “We are reaching a certain point where this is becoming a real problem.”

For instance, the same research was applied to litecoin and Segura found that almost 80 percent of UTXOs are dust.

This becomes a problem namely for user’s ability to run a full node, especially in low resource devices (like general purpose laptops). By storing all these “unprofitable” UTXOs on the blockchain, full nodes must download and store all this data, even though it’s nearly useless.

As bitcoin attracts more users, Segura said, the amount of dust-based UTXOs will grow, and it will grow unbounded because that’s how the system was built. While Segura said that’s not because anyone did anything wrong, there does need to be some real thought put into the proposals out there to mitigate this.

For one, Segura said, everyone should be consolidating outputs when fees are low – like they are right now. Secondly, a good coin selection algorithm, which decides which bits of date come together to create a user’s bitcoin transaction, will also help.

There are other proposals for this problem as well.

For instance, Benedikt Bunz proposed using RSA accumulators, a cryptographic one-way function that answers a query about something without revealing all the individual data points that were used to come to that answer.

While Merkle trees have been utilized in the past to allow clients to check that an unspent UTXO is being used without sending the client the entire state of the blockchain, RSA accumulators could be a more efficient replacement.

During a Bitcoin Core (the most popular bitcoin software) developer meeting on Monday, October 8, Tadge Dryja, a developer and the co-author of the lightning network paper, proposed a similar thing.

Instead of RSA accumulators – which he said are “unproven” – he’s working on a hash-based accumulator whereby the hash of each UTXO is stored, decreasing the amount of storage by half. Plus, instead of storing all the hashes of every UTXO, Dryja wondered whether storing some “compact representation,” or aggregated bundle of the UTXOs with their proofs would be less cumbersome.

According to Lopp, cleaning up the UTXO architecture has been discussed on and off for about six years, and hopefully, with the concept of accumulators, something can be implemented that’s efficient.

Praise for layer two

As the lightning network gains momentum, it’s no surprise that the layer-two scaling technology for pushing transactions off-chain got a significant amount of time.

On day two of the conference, lightning had its own category – representing three talks that covered rebalancing (or the idea of closing a channel after a number of transactions have been performed) of lightning network channels; lightning benchmarks; and incentivizing watchtowers, the entities responsible for watching lightning channels to make sure no fraud occurs.

But on top of that, other layer-two solutions got attention as well.

For instance, in the incredibly fast-talking style Olaoluwa “Laolu” Osuntokun has become known for, the respected developer and co-founder of Lightning Labs, spoke about payment channels more broadly.

And not only just a one-to-one payment channel but multi-party payment channels and channels upon channels.

One such topic was so-called “channel factories,” which Laolu defined as “a layered set of transactions of intermediate transactions” – so multi-party channels layered on each other, each with their own way of validating transactions.

He also spoke about route tunneling, or the ability to connect to users on other layers of the multi-party channel in order to create a specific channel with them.

Speaking about this idea, Laolu said:

“It’s sort of like a new dimension or a new underworld and you can tunnel them into the third dimension which I think is pretty cool.”

This, he said, could be used if, for instance, “the liquidity wasn’t sufficient for selling stickers or whatever is cool these days, I can advertise shortcut routes that tunnel through channel formation. We are able to create new channels in seconds to satisfy directional flow above ground.”

Other layer-two solutions that were touched on at the conference include statechains and a bitcoin bridge called Niji.

Speaking to another difference between this year’s Scaling Bitcoin and subsequent year’s, Lopp said, it was the focus on lightning and the idea that “in general it is going to be easier to make changes to second layers because changes don’t require the same level of consensus if at all.”

Scaling Bitcoin badge on computer image via CoinDesk

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Report: Oldest UK Crypto Exchange Coinfloor Laying Off Staff

U.K .digital currency exchange Coinfloor is reportedly laying off the greater part of its staff amid a “business restructure.”

British cryptocurrency exchange Coinfloor is laying off the majority of its staff, news outlet Financial News reported Oct. 8.    

Coinfloor is a London-based digital currency trading platform founded in 2013. Coinfloor is reportedly the oldest crypto exchange in the U.K. and is focused on institutional and sophisticated investors. According to CoinMarketCap, Coinfloor’s daily trading volume is around $1 million at press time.

Two people familiar with the matter told Financial News that Coinfloor is laying off the greater part of its approximately 40 employees. The exchange’s CEO Obi Nwosu told Financial News that Coinfloor has “seen significant change in trade volume across the market.” Nwosu added:

“Coinfloor is currently undergoing a business restructure to focus on our competitive advantages in the marketplace and to best serve our clients. As part of this restructure, we are making some staff changes and redundancies.”

Nwosu told Financial News that the exchange has traded $1 billion in Bitcoin (BTC) in the past 12 months.

Last month, there were rumors that crypto exchange Kraken was slashing staff in its unit in Halifax, Canada. However, the exchange subsequently denied the rumors, stating that “we can confirm that we are not shutting down any operations in any specific place…”

News and rumors of layoffs in the crypto space follow a bearish market this year. In the first quarter of 2018, the crypto market fell following the Bitcoin (BTC) price slump by nearly 70 percent from its mid-December 2017 peak of $20,000.

In January, the BTC price dropped to $9,724, which is less than half of where it had been a month previously. In February, BTC was down to $5,922. However, in March, the price broke the $9,000 mark again.

At press time, BTC is trading at $6,681, up 1.56 percent on the day and almost 7 percent over the last month, according to Cointelegraph’s Bitcoin Price Index.

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Sidechains Are Bringing ICOs to Bitcoin And That Might Change Crypto Funding

By the end of the year, an initial coin offering, or ICO, will be launched on bitcoin.

You heard that right – on bitcoin.

While ethereum, the second largest blockchain by market cap, and other smart contract protocols, have been the choice for the majority of entrepreneurs interested in creating new crypto tokens, with a sidechain created by RSK, bitcoin will now have the ability to host the new fundraising mechanism as well.

In fact, the original concept of an ICO was first started on the bitcoin blockchain itself back in 2013 – though with comparatively limited blockchain infrastructure to that of ethereum today – by self-proclaimed inventor of the idea,  J.R. Willett, who raised a total of half a million dollars for the token “mastercoin,” later renamed to omni.

And sometime in late November, Temco, a South Korea-based blockchain startup targeting supply chain management, will take advantage of both the seminal idea and RSK’s technology, launching a public token sale with the goal of raising $19 million.

Stepping back, RSK has been working on its Turing-complete smart contract sidechain for bitcoin since early 2016. The smart contracts are written in the same dominant language as ethereum – that being Solidity. And the network is fueled by a bitcoin-pegged cryptocurrency dubbed “smart bitcoin,” or SBTC.

Still in beta, only a handful of crypto projects are deploying smart contracts on the RSK sidechain currently.

However, given time, Temco’s CEO Scott Yoon and head of business development Joey Cho said they believe bitcoin will soon attract a greater number of blockchain projects and one day have “the same function like ethereum.”

Yoon is adamant that bitcoin possesses the potential to become much more than “just payment cryptocurrency,” seeing the upcoming launch of Temco’s ICO as indicative of this.

Speaking to CoinDesk, Yoon said:

“RSK … will be dominating [the smart contract] ecosystem and [for] bitcoin that will open another era of bitcoin, like ethereum.”

Temco’s token

Temco’s crypto token will be used for a variety of different purposes.

The startup’s main interest is in giving small- and medium-sized enterprises (SMEs) the ability to track products throughout the supply chain, from its origin to its final consumption – a hot use case for the nascent technology today.

According to many enthusiasts, a blockchain will give businesses a cost-efficient and immutable method for storing supply chain data.

In Temco’s case, the token will be used by both vendors and consumers for things like payment for products, storage of data and subscription to business intelligence tools.

In addition, consumers will be awarded points – later converted into these tokens – for general participation, such as tracking their purchases from data stored on the blockchain and reviewing these purchases to ensure product quality, in the ecosystem.

This blockchain architecture, as Cho explains, is an important tool for SMEs that can offer “better insight, better operating system [and] better planning” at minimal overhead costs to vendors without a pre-established infrastructure to monitor product movements.

As such, Cho expects about 40 percent of the money to build the infrastructure to come from the public token sale. The rest of the money needed will be raised in private investment deals – one of which was recently announced: South Korea’s largest venture capital firm, Korea Investment Partners invested an undisclosed amount into the company.

The public sale, which will accept both bitcoin and ether, will be available to investors around the globe, with the exception of people in China and the U.S.

Pointing to “legal risk,” Yoon explained that regulation surrounding token sales in these two countries are either met with hostility (such as China) or is in the process of being fully fleshed out (such as the United States).

A game changer?

All of these details about the upcoming Temco ICO are really no different than if the sale were being conducted on ethereum instead.

They function in exactly the same way, for the same purposes of raising initial funds from the public through a highly fast-moving and largely unregulated fundraising vehicle.

The difference, in the eyes of both Yoon and Cho, is that other blockchains, including ethereum, cannot sustain the creation of “real products” for mass adoption like bitcoin can.

Cho explains, “We believe RSK is one of the best blockchain technology because … if we create our supply chain on top of let’s say ethereum … number one the gas fee is amazingly expensive…which is not ideal for the Temco supply chain since we use lots of smart contract transactions.”

Adding to this, Cho also highlighted that the transactions per second (TPS) speed of the RSK sidechain was on par to that of online payments giant, like PayPal.

Reiterating these sentiments, Yoon added:

“Bitcoin network is really ideal because scalability is number one and you don’t have to worry about hacking. So when smart contract tool is brought to the bitcoin network … everybody’s going to want to come to bitcoin.”

For these reasons, Yoon and Cho anticipate that one day token projects will choose to launch on bitcoin from the get-go and even ethereum-based token issuers will migrate to bitcoin for RSK’s features.

Not there yet

However, at present, the RSK sidechain is still in development.

Having launched the beta version in January, the platform is currently only accessible to a select group of developers, business partners and bitcoin miners. And it’s currently run by a collective group of blockchain companies, dubbed the “federation,” who oversee the value being moved on- and off-chain.

But there are plans not only to open up the sidechain to anyone and everyone but also to decentralize the federation somewhat.

Having secured a reported 80 percent of all bitcoin miner support, RSK announced in May that it was looking to implement significant upgrades that would address the very same scalability issues being tackled by many of the world’s biggest blockchains today.

And Yoon, for one, is optimistic about the promise of smart contracts and blockchains, especially bitcoin to become much more than just what it’s used for today.

Speaking to this, he concluded:

“The reason why we started Temco was we want to see a real blockchain technology actually implementing in the real world and change the society for the better.”

RSK image via Consensus archives 

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.