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The Real Discussion About Ethereum’s Next Hard Fork Is About to Begin

More than two dozen ethereum improvement proposals (EIPs) have been submitted for review and inclusion in ethereum’s next system-wide upgrade or hard fork, dubbed Istanbul.

The list – with 28 official EIPs and at least one other set to be added – include changes to the $27 billion network that impact its mining algorithm, code execution and pricing, data storage, and much more.

About a dozen of these proposals were discussed at length by ethereum core developers during a bi-weekly call on Friday. However, the majority ended up being tabled for further debate, with only one EIP receiving a tentative approval.

“We’ll talk more on the All Core Devs Gitter channel to wrangle in some of these EIPs that are still stuck in proposed and as quickly as possible decide on which ones are being implemented for Istanbul,” said Ethereum Foundation community relations lead Hudson Jameson before ending today’s call.

As noted by Jameson, the hard deadline for all Istanbul EIP submissions passed last Friday and now developers are working to reach agreement  about which proposed EIPs can be deemed officially “accepted.”

Decisions made

The one EIP to receive a tentative approval Friday was EIP 1108, which proposes a minor change to gas fees on the ethereum network. Developers emphasized that this proposal, while approved, requires benchmarking figures that will be presented at the next core developers meeting.

Alternatively, at least two other proposed EIPs look slated for delay.

Developer Rick Dudley explained that EIP 1559 – which introduces a new transaction fee model to ethereum – is “a pretty complicated change.”

Dudley further highlighted that it would most likely not be ready in time for Istanbul, which is scheduled for mainnet activation possibly as early as mid-October.

“[EIP 1559] we should assume that it’s possible that it will make it in [to Istanbul] but it seems unlikely right now,” said Dudley on the call.

The second EIP with a high potential for delay is EIP 1057. It is a proposed change to ethereum’s proof-of-work (PoW) mining algorithm, which since April of last year has been susceptible to mining by specialized computer devices called ASICs. With an estimated $655 million annual market for ethereum’s mining rewards, ASICs outperform graphics cards, or GPUs, which developers worry may lead to a more centralized mining landscape.

EIP 1057 proposes a revamped PoW algorithm known as “Progressive PoW” or ProgPoW in efforts to better leverage GPU-specific computing capabilities.

While approved twice in the last year by ethereum core developers, ProgPoW according to Jameson may face delay due to various logistical issues in organizing a third-party audit of the proposal.

“We ran into issues starting the ProgPoW audit,” explained Jameson in a Ethereum Magicians post yesterday. “We had a hardware partner who specialized in ASICs who was going to work with Least Authority to perform the hardware parts of the audit. They are no longer participating in the audit so we are looking for other auditors for the hardware portion.”

As such, Jameson proposed today that the EIP be held back from being in the approved category of EIPs until further details about the pending audit are sorted.

Looking ahead

The next official deadline for the Istanbul hard fork is merging accepted EIPs into existing versions of ethereum software called clients.

One EIP author, James Hancock, told CoinDesk that this step is akin to getting your code together so it can be fully tested.

“The suggestion is to have reference implementations in two ‘major’ clients,” said Hancock to CoinDesk. “The definition of major is pretty loose.”

Hancock also noted that he has put together an updated spreadsheet with all of the proposed Istanbul EIPs and their relative “readiness” for mainnet activation.

For now, the upcoming “soft deadline for major client implementations” is sometime in mid-July with an eventual mainnet launch slated for mid-October.

However, the envisioned timeline for Istanbul is a rather new creation that has never been replicated by previous ethereum hard forks. It was proposed by former ethereum developer Afri Schoedon and Ethereum Foundation developer Alex Beregszaszi as a way of breaking down hard fork process into “a fixed 9-month cycle.

As such, Ethereum Foundation grant recipient Alexey Akhunov wrote in the Gitter chatroom that everyone should be thinking and iterating upon the new suggested “deadlines.”

“I myself will be questioning all the deadlines from the point of view of ‘what is the purpose of this deadline?’,” said Akhunov. “Because this is the first time lots of these things are introduced, we are here to make sure that what we do is done for the reason and not because “someone says so”

For now, blockchain protocol engineer at Consensys Danno Ferrin affirms that at the very least, the list of proposed Istanbul EIPs “stops growing” and will in all likelihood begin shrinking.

And down the road, the software upgrade itself must be accepted by the nodes that underpin the ethereum network itself when the hard fork event actually occurs.

Ethereum image via Shutterstock 

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Crypto Funds, Lending and Market Manipulation

Noelle Acheson is a veteran of company analysis and a member of CoinDesk’s product team. The opinions expressed in this article are the author’s own.

The following article originally appeared in Institutional Crypto by CoinDesk, a free newsletter for institutional investors interested in cryptoassets, with news and views on crypto infrastructure delivered every Tuesday. Sign up here.

It’s not easy being a crypto fund manager. As well as unruly markets and elusive valuations, there’s the increasing competition and pressure on fees. And performance has been lackluster: Vision Hill’s Q1 report showed that, on average, active funds have underperformed bitcoin so far this year.

The bear market of 2018 triggered the closure of many crypto funds, and a report released last week by PwC and Elwood Asset Management showed that there are far fewer active funds in existence than we had been led to believe.

The report also pointed out that, given a median management fee of 2% and a median fund size of $4 million, operational sustainability is tough: $80,000 recurring income is not enough to cover salaries and other overheads, especially given the likelihood of increasing compliance requirements.

The PwC/Elwood report mentions some steps that funds are taking to boost recurring income, such as market making and advisory roles.

It overlooks one potentially significant source of revenue, however: crypto lending. Funds could lend out the assets they hold, for a fee.

Given the growing demand for crypto lending services, this potential income stream could be enough to give a number of funds a greater chance of survival, as well as inject liquidity and diversity into the sector.

It could also, however, add hidden risk to the market overall.

Heading down

Before we look in more detail at this risk, let’s examine the trend toward lower fees.

According to the PwC/Elwood report, the median (mid-point) fee is 2%. This is in line with typical fees for “traditional” hedge funds. But there are signs that they are coming down. The report states that the average crypto fund fee is 1.72%, which means that many charge significantly less. This is also in line with the traditional sector, where fee pressure is already becoming the subject of headlines.

The pressure is even more acute in mutual and index funds, where fees are moving to zero or even lower. Last year, investment management giant Fidelity offered a mutual fund with no management charge. And earlier this month, the SEC greenlighted a fund from asset manager Salt Financial that promised negative fees.

Meanwhile, demand for crypto lending is growing at an astonishing pace, as the inflow of funds into lending startups and the demand from institutions shows. While there is no concrete data on the extent to which crypto funds lend out their assets, there are signs that this practice is spreading.

This has potential implications for the entire sector, both good and bad.

Heads up

On the positive side, increased lending of crypto assets could increase velocity and, by extension, price discovery as a greater number of transactions makes it easier for a market to express its views.

Furthermore, a growing demand for short selling, facilitated by asset lending, will to some extent enhance liquidity and help to develop a pool of natural buyers – all short sales have to be unwound eventually. This develops a “soft” floor for an asset price.

But “more liquid” does not necessarily mean “liquid,” and here is where the risk of market manipulation could seep in.

Let’s say I manage a crypto fund that has invested in altcoin A, and let’s say that I lend out part of my stake to counterparty A. In traditional finance, most securities loans can be recalled at any time – let’s assume that I can do the same here. I recall the loan of altcoin A, and counterparty A has to scramble to get it back to me. Whether counterparty A used the loan to sell short or lent it on to counterparty B, it will now have to buy the asset back in the market, probably pushing up the price by doing so.

Now, what if I knew that would happen, and used the recall as part of a strategy to boost my fund valuation? True, I probably couldn’t lock in the profit by selling altcoin A without pushing the market back down, but it could serve to fix a higher value on a certain date, which would boost my reported performance, which in turn could encourage more investment in my fund.

Plus, there’s the added benefit of knowing that the short sellers got squeezed, and the glory of my outperformance compared to those with a more negative outlook.

Obviously, if I got a reputation for doing this, no-one would borrow from me. And the drying up of that revenue stream could mean that I may end up having to liquidate my fund – just imagine what my dumping all of my altcoin holdings on the market (after recalling all loans) would do to other funds’ valuations.

Eyes open

One solution could be for investors to insist that the funds they back do not engage in this type of lending activity. But, given the difficulty of covering costs with declining management fees, that could make it less likely that compliant funds survive. And if the returns from lending boost fund performance, am I not obliged to seek the best possible return for my investors? Most investors in crypto hedge funds are themselves institutions, who are also judged by their performance. There is for now little incentive to insist on curbs on lending.

Regulation could come in and establish rules over transparency and oversight, as is happening in traditional finance. But regulators are still getting their heads around the crypto space, and are doing so at a cautious pace.

In the absence of clear rules, it is up to the sector to keep an eye on developments in both crypto fund administration and crypto asset lending. It is, after all, in its own interest to ensure a smooth and robust market.

But self-regulation has its own risks and is hard to execute in as opaque an activity as crypto asset lending. True, blockchain-based transactions are available for all to see – but most crypto asset lending is likely to take place off-chain, as an agreement between two parties.

However, letting the practice spread without some guidance could escalate systemic risk. As the traditional markets saw in 2008, the intertwined web of asset holdings through through opaque lending arrangements left institutions vulnerable and investors grasping at air.

Crypto markets have enough hurdles to overcome to reach mainstream acceptance. We shouldn’t let hidden risks that develop in front of our very noses to be one of them.

Lending image via Shutterstock

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Mike Novogratz: Facebook’s GlobalCoin Won’t Rival Bitcoin

Mike Novogratz: Facebook’s GlobalCoin Won’t Rival Bitcoin

Major Bitcoin bull and former Wall Street exec Mike Novogratz recently discussed the current state of the cryptocurrency industry. The Galaxy Digital CEO explained why he thinks the crypto winter is finally over and why ‘Facebook Coin’ won’t rival Bitcoin.

During his interview, Novogratz reminded that everyone had their own version of Bitcoin and the supply exponentially grew. Bitcoin, he thinks, had really established itself as a store value. He said:

“This is hard to do because there is just one more stored value of this kind. It’s gold. It is hard to be worth something just because it’s worth something. Almost everything else is different. For example, Uber shares are worth something because people are using it. What Bitcoin has done is a unique thing.”

He also referred to Bitcoin’s intrinsic value saying:

“You can take all the gold in history that has been mined and put it in three Olympic swimming pools and it’s worth $8,5 trillions. Why? Because it sits in the vaults.”

Novogratz went to mention that retailers are buying Bitcoin but also the institutions are moving in. There are Yale, Harvard and Stanford endowments.

Microsoft Wanting to Link with Bitcoin Blockchain is a Big Thing

The CEO claims the original Bitcoin boom witnessed around 2016-2017 was influenced by the retail-driven investments by around 98%. This means more companies were buying cryptocurrency at a time when it looked like the future of finance. The recent developments in the crypto world are also affected by ‘credentialing’ according to the CEO especially with the recent move by Microsoft in the industry.

“Also, there is Microsoft, one of the biggest companies in the world that says they want to do identify solution by linking it to the Bitcoin blockchain. Now this is big.”

Microsoft recently announced their initiation of an identity solution to add to the Bitcoin blockchain. As more investments crowd Bitcoin, its value soars higher as witnessed in the recent spike. Microsoft is not the only big organization enabling the ‘credentialization’ of Bitcoin. Not long ago, Facebook lifted all the bans it had imposed on cryptocurrency and any blockchain-related advertisements.

He also mentioned Facebook coin saying that it is really important for the ecosystem.

“Crypto is going to be part of Facebook’s future. However, this coin will be listed to some stable currency and will be used for payyments. Bitcoin on the other hand is not going to be the payment currency – it will be stored vault, just like gold. If you really think bitcoin is gonna win this store of value, everything else needs to be used for something.”

GlobalCoin Isn’t a Threat to Bitcoin

As we’ve already wrote, Facebook’s GlobalCoin will probably be established as a stablecoin, pegged to the dollar or local currencies in the countries that will be allowed to use it. It is also likely to run on a private, centralized blockchain, owned and controlled by the company. Based on this fact, it can not be perceived as a direct competition to Bitcoin or other peer to peer decentralized digital currencies.

Other coins that piqued Novogratz’s interest include Ethereum and EOS. These projects have to encourage developers to build on top of their platforms. Just few days ago he was comparing various cryptocurrencies with chemical elements in the periodic table. He then considered the role of altcoins, hinting that each coin will have “to prove themselves out” in order to provide a certain use case.

On this note, Novogratz argued out that “there’s no one building anything on the Litecoin blockchain,” as opposed to the Ethereum blockchain.

Recently, Novogratz made yet another Bitcoin prediction, claiming that the major cryptocurrency will beat its all-time-high record of $20,000 within the next 18 months.

Mike Novogratz: Facebook’s GlobalCoin Won’t Rival Bitcoin

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Bitcoin Is Back At $8000 – Can It Finally Break-Up The 2019 High? BTC Price Analysis & Overview

On our previous price analysis, we have mentioned the fragility of the $8000 level and that Bitcoin was steady for the past couple of days.

Shortly after, we did see a massive drop below $7500 in Bitcoin’s price. However, following the drop, Bitcoin kept its strength and kept up the $7500 – $7600 significant support level, and since then we saw a bullish move surpassing the $8000 and retesting $8200.

After getting rejected by the $8200 resistance, Bitcoin is back to our previous analysis’ situation, whereas the coin is trading around the $8000 mark.

Total Market Cap: $249.5 Billion

Bitcoin Market Cap: $141.4 Billion

BTC Dominance: 56.7%

Looking at the 1-day & 4-hour charts

– Support/Resistance:
As mentioned, Bitcoin is trading around the $8000 mark. Breaking above and the next barrier is the $8200 and then the 2019 high at $8400 (which got rejected twice so far). The next possible targets or resistance levels are $8500, $8800 and $9000. Further resistance lies at $9600 – $10,000 area.

From below, the closest support lies at this current price level. Below lies the $7800 before getting down to the $7600 support. The next significant support area is at $7200 – $7300. Further below is the $7,000 zone.

– Trading Volume: Following the above, we can see that the volume is not significant. The direction for the coming future hadn’t been decided yet.

– Daily chart’s RSI: The drop below $7500 is reflected on the RSI, as the indicator dropped to 60 where it found support. The RSI is now around 64, which is relatively low compared to 2019, however, still bullish.
A bullish sign might be coming from the Stochastic RSI oscillator, as it was recently crossing over in the oversold area.

– BitFinex open short positions: there are 19 K BTC open short positions.

BTC/USD BitStamp 4-Hour Chart


BTC/USD BitStamp 1-Day Chart


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