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Crypto is for Activists: Why We Need More Cypherpunks, Not Cypherposers

Zach Harvey is the CEO of Lamassu, an early and active provider of cryptocurrency vending machines. 

The following is an exclusive contribution to CoinDesk’s 2018 Year in Review

2018 year in review

Emotions were high during bitcoin’s block size debate (each side believing bitcoin would be damaged by the other’s triumph), and they’re high again in this year’s bear market. People are once again listening to the fortune tellers, who shape their crypto outlook on market sentiment, and while there are many that signal allegiance to the cause, some are just here for the quick rewards, both social and monetary.

It disappoints me to see the toxicity in this small cryptocurrency community, but it doesn’t surprise me.

Specifically on Crypto Twitter, it’s the environment itself that rewards the group-think we’re seeing. Previously independent thinkers are rewarded for conforming and are punished for their dissent. While it’s easier to resist threats in groups, it’s harder to create and progress without being open-minded. We see similar patterns in politics and even in debates about nutrition.

All said, I must say that it is my experience that the Twitter toxicity does not transfer to offline interactions. I have met many bitcoiners from both sides of the block, and I can’t recall one time I felt any toxicity in person. In fact, the opposite is the truth, it’s always a treat. I would mention names, but I don’t want to blow their tough-guy covers.

To quote Ian Mackaye of Fugazi, the tough guys are all “ice cream-eating motherfuckers.” I mean that in the fondest of ways.

Instead of checking the daily graphs, it would better serve most crypto-enthusiasts to revel in cypherpunk writings such as Tim May’s Crypto Anarchist Manifesto and Wei Dai’s b-money paper. Both are great reminders of why we’re here in the first place. (If you’re going to look at a graph, make it the BTC:USD logarithmic graph. It has the best chance of predicting the future.)

Bitcoin is activism, not a get rich quick scheme or a startup platform. The point of bitcoin is to regulate bad laws and to democratize bad policies by way of circumventing harmful enforcement.

Any system, software or hardware, blockchain-based or otherwise, that contributes to these goals is worth paying attention to.

Equally, any software or hardware projects that fail in this manner are only of interest to me once they amend their fragility. In this regard, decentralized exchanges and ICOs are worthless in their current form, but DEX or ICO v2.0 or v3.0 may end up being decentralized and powerful tools for preventing oppression in all of its forms.

Go Gig (and Boring)

In 2012, my brother Josh and I printed up bitcoin postcards to give out at regional Students for Liberty events all over the East Coast. At the time, it was mostly the Libertarians embracing the infant technology and this was our activism.

For the International Students for Liberty Conference in early 2013, we decided to do something a bit wilder, we wanted to show these youngsters how bitcoin works. We built a little orange box that accepted cash notes and sent out bitcoin transactions. Not only was it a huge hit at the conference, it reached social media and we started getting interest from media and potential buyers.

This was our chance to take our passion for bitcoin to the next level. We founded Lamassu and started manufacturing bitcoin ATMs, a machine we like to now call “cryptomats.”

Fast forward almost six years and we’re still going strong, still advocating bitcoin and there’s a booming industry making machines that help people buy and sell bitcoin. From the get-go, our business has always been more about activism than pure short-term profit. The business decisions we make are a mix of what we need to do to succeed and how to stay in line with our techno-libertarian ideals of privacy and decentralization.

Our main goal has always been to introduce as many people to cryptocurrencies as possible. And so our software is free, open source and unlicensed. We don’t charge cryptomat operators any fees for machine usage, and they host their own servers. End-users who use the machines never have their coins stored for them by operators, but are required to actually use bitcoin to get it.

As a whole, the cryptomat industry is quite unlike others in the cryptocurrency ecosystem. There’s been very little drama of late.

We’ve seen healthy, steady growth. And the field is made of quality companies, such as our main competitors Genesis and General Bytes, that have endured radical bear and bull markets. All these are very important for the ecosystem, yet perhaps a bit mundane in terms of the news cycle. No ICOs, no mass hacks and the companies involved have at best millions worth of revenue, not billions.

But at the same time, I feel it’s the kind of boring the cryptoverse needs. Hundreds of thousands of ordinary people around the world are using cryptomats every month to get small amounts of bitcoin or other cryptocurrencies directly to their wallets. No banks, no third party custody, no waiting.

It’s still the easiest way for a first time user to get crypto, and the more cryptomats there are in the world, the more useful and reliable they become. Inch by inch, row by row.

BUIDLers on the Roof

The hardest part for bitcoin was getting to $0.10.

The exponential growth since has become the norm and would take something extraordinary to derail. As such, we have to think about what happens when a growing population of the world starts owning bitcoin. Will the next financial crisis be the one that pushes bitcoin to the mainstream? What if this actually does happen, but there’s still no good user interface to protect people from losing, misusing and failing to protect their funds? Will they end up trusting people to help them?

For me, this is still the biggest question in crypto. I don’t doubt the success of bitcoin and other key cryptocurrencies, but I’m concerned things will get messy when the central banks run out of tricks.

At Lamassu, we have been keeping our heads down, working to improve our corner of the still unsolved UI problem of crypto. We’ve been aggressively hiring coders and customer support staff and expanding our manufacturing facilities.

We have fierce competition, but it’s one of mutual respect. I know our competitors are doing it for the same reasons we are, a deep rooted ideology with bitcoin at its core, to free money and markets from powerful middlemen.

The whole point of bitcoin is for people to help themselves, but it’s our jobs as proponents to make that easy. The sooner people can actually use, store, and secure their own coins, the safer they’ll be when the bank runs hit. Lest we build skyscrapers of blockchains, with no elevators in which to ascend them.

Have a strong take on 2018? Email news [at] coindesk.com to submit an opinion to our 2018: Year in Review.

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Sephora Shoppers Are Getting Their First Bitcoin Using Crypto Startup Lolli

This holiday shopping season, hundreds of women are earning their first bitcoin by buying items online with an in-browser app called Lolli.

Revealed exclusively to CoinDesk, cosmetics chain Sephora has joined the list of retailers where shoppers can earn cash back, in the form of bitcoin, through an app called Lolli. The bitcoin rewards startup says it won over the beauty chain with data: specifically, 30 percent of the app’s thousands of users are women.

“We’ve gone back to a lot of these retailers that previously were not interested but now are coming on-board,” Lolli CEO Alex Adelman told CoinDesk. “One of the biggest ones that just joined us is Sephora, which adds an entire suite of retailers in the beauty category.”

Lolli’s partners, including beauty retailers like Ulta and fashion brands such as Everlane, pay it for customer referrals and give the e-commerce startup fiat, which it converts into bitcoin rewards for shoppers. Despite the broader bear market, or perhaps because of it, this lean 6-person startup is actually gaining traction while other crypto startups face layoffs.

Sephora did not respond to requests for comment, but San Francisco-based marketing consultant Thien-Kim Ngo said she earned her first bitcoin from Everlane and Sephora by using Lolli. Now, Ngo said, she wants to learn more about investing as she acquires more bitcoin.

“I had been kind of interested for a couple of years now,” Ngo told CoinDesk, adding that other ways of acquiring bitcoin felt “complicated” and time-consuming.

“All of the news about that volatility kind of freaked me out. I don’t know much about [crypto],” she said. “Lolli felt super intuitive and lower risk.”

Also notably, the head of Sephora’s Innovation Lab is a bitcoin veteran and co-founder of the SF Crypto Devs Meetup, Nelly Mensah. Travel may be Lolli’s most popular category, but mainstream beauty and fashion retailers are gaining traction across the board.

Beauty and the bitcoin

Challenging the stereotype of cryptocurrency users as awkward men who pay little attention to hygiene or appearance, Adelman said Sephora rival Ulta has already attracted significant traction from Lolli users, and not only women.

“People were requesting Sephora,” Adelman said. “Beauty has been surprisingly big. Men and women have been buying beauty products. Ulta has been an incredible retailer for us.”

To acquire bitcoin with Lolli, users just have to install the app in their Chrome browser, then shop as they normally would on mainstream websites. Adelman said so far 60 percent of Lolli users become repeat shoppers, adding:

“Having places for them to earn bitcoin, and not just investing or mining but also shopping, has opened up a whole new audience.”

Since Lolli launched in September 2018, the company raised $2.35 million and has paid users an average of 0.0029 bitcoin per purchase, roughly $10. However, the rewards vary dramatically depending on the brand and the amount spent. Adelman said one user earned nearly $132 worth of bitcoin through a single travel purchase worth $4,400.

For now, that crypto loot is stored in a Lolli wallet, similar to an in-browser MetaMask wallet. Later this month Lolli will roll out the ability to cash out to users’ separate crypto wallet addresses.

Adelman said holiday shopping has attracted many first timers like Ngo, concluding:

“We doubled our sales in November … I think Sephora is going to add a lot more. We saw an early trend there.”

Sephora image via Shutterstock

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Blockchain Developer Role Tops LinkedIn’s 2018 Emerging Jobs List

The role of blockchain developer has leaped straight to the top of LinkedIn’s emerging jobs list for 2018.

The networking platform for professionals said in a report Thursday that recent increased interest around cryptocurrencies has led to staff with blockchain development skills being in high demand in the U.S, and that related job listings have seen a 33-times increase in just a year.

The most sought-after skills in the blockchain space include those around the Solidity programming language, ethereum, cryptocurrency and node.js, an open-source JavaScript platform, the report indicates.

LinkedIn further notes that IBM, ConsenSys and Chainyard are the top three employers in the space with top locations being San Francisco, New York City and Atlanta, across information technology & services, computer software and internet sectors.

It’s worth noting that Consensys has just announced that it will be laying off 13 percent of staff due to a business “streamlining” effort at the ethereum-focused firm.

Notably, the blockchain developer role was not mentioned in the last year’s LinkedIn report. Guy Berger, chief economist at LinkedIn, said in Thursday’s report:

“Only time will tell if blockchain will be a long-standing trend in the job market.”

Last month, another report from one of the largest jobs sites, Indeed.com, also showed that employer interest in blockchain and cryptocurrency-related roles has increased, with the number of related job postings increasing by 25.5 percent from October 2017 to October 2018.

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UAE Remittance Firm Launching Ripple-Based Payments in Q1 2019

One of the largest remittance firms in the United Arab Emirates, UAE Exchange, is working with Ripple to launch blockchain-based payments to Asia by the first quarter of next year.

According to a report from Reuters on Thursday, the firm’s CEO Promoth Manghat said he expects to go live with support from “one or two banks in Asia” using blockchain-based payments network RippleNet.

With a large number of Asian workers in the UAE, that corridor accounts for the largest portion of its global remittance flow. According to a local news report in May, transfers to India made up 36.7 percent of the remittance total, those to Pakistan 8.8 percent and the Philippines accounted for 6.9 percent.

UAE Exchange says on its website that it is associated with over 140 banks and has a presence in 31 countries, yet it’s taking blockchain adoption slowly. “Blockchain holds tremendous promise for the industry but there is progress to be made before we see it go fully mainstream,” Manghat told Reuters.

The firm’s collaboration with Ripple was first reported back in February, with UAE Exchange aiming to reduce cost and frictions associated with cross-border transactions.

Ripple has signed deals with several financial institutions worldwide for blockchain-based remittances. Its recent partnerships include Malaysian banking group CIMB, South Korea’s crypto exchange Coinone, U.S. banking giant PNC, among others.

Remittances market is expanding. Last year, migrant workers sent $256 billion to their families in the Asia-Pacific region alone, according to the latest United Nations’ International Fund for Agricultural Development (IFAD) report.

And according to World Bank projections, global remittances are expected to grow at $642 billion by end of this year.

UAE coins image via Shutterstock 

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Romper Room to White Linen: Saying Goodbye to Crypto’s Infant Anarchy

Sheila Bair is an advisor to Omniex, a technology company providing services to institutional investors, and a board member of the Paxos Trust, a regulated trust company developing blockchain technology.

She does not own crypto assets. The views expressed are her own. The following is an exclusive contribution to CoinDesk’s 2018 Year in Review

When our children were small, we would take them to a local Mexican restaurant that had an upstairs dining room specially reserved for families with young kids. Entering that dining room was entering a cacophony of crying babies and screaming toddlers, with 40-inch tall humans running amok, perilously circumventing waiters and hiding under tables to evade parental clutches.

Given that our own daughter liked to drink salsa right out of the dipping bowl, while our son typically landed more guacamole on the floor than in his mouth — we loved it. It was meant to be anarchy.

No one cared if our kids failed to follow proper dining etiquette. But as the kids matured and acquired proper table manners, we moved downstairs to the main dining room, where the grown-ups demanded a higher level of service, and behaved accordingly. The proprietors even dared to use white table cloths, which remarkably stayed salsa-stain free.

In their early years, the cryptocurrency trading markets were a bit like that upstairs dining room.

Dominated by adventurous, risk-seeking technology buffs (and some crooks), anarchy prevailed as there were no clear rules around trading, know-your-customer or security standards. Every trader looked out for him or herself.

But as these markets have matured, a few exchanges have now sought regulated status as trust companies, subject to annual examinations by bank regulators, capital requirements and the full panoply of anti-money laundering and cyber security rules.

The recent launch of bitcoin futures products on exchanges regulated by the CFTC have reinforced this trend, prompting the adoption of anti-manipulation policies, better market surveillance, and information-sharing agreements between the crypto spot markets and regulated futures exchanges.

As crypto trading has survived and matured, we now we see institutional investor interest picking up (bitcoin prices notwithstanding). Regardless of which cryptocurrencies ultimately succeed (I tend to think bitcoin will survive as a store of value), the smart money has come to accept crypto as a new, legitimate asset class and is seeking well-regulated venues to invest.

Even Boston Brahmin Fidelity is entering the space, recently announcing the launch of a separate company to handle custody and trade execution for institutional customers.

Hurdle ahead

Still, many institutional investors are reluctant to take the plunge.

It is a testament to the strength of the Security and Exchange Commission’s investor protections that they want a way to take a position in crypto through a product on a regulated securities exchange. Yet, recently the SEC disapproved nine applications it received to list a crypto exchange traded product (ETP).

Still pending is the CboeBZX Exchange’s application to list and trade SolidX Bitcoin Shares issued by the VanEck SolidX Bitcoin Trust. Many viewed this application as having the best chance of getting a nod from the regulator.

However, in recent remarks before the Consensus Invest conference, SEC Chair Jay Clayton seemed to pour cold water on SEC approval of any ETP as he re-iterated SEC concerns about the strength of market surveillance in crypto spot markets as well as protections against “theft or disappearance” of crypto assets.

The SEC is right to focus on protecting investors against market manipulation and the security of their crypto assets. These are core to the SEC’s mission. However, there is not an asset class on the planet where absolute guarantees can be made against cyber-attacks or attempted manipulations. The real question is whether the proposed ETP offers protections that are as strong as those afforded investors for other types of exchanged-traded products that have been approved by the SEC.

With regard to protections against investor loss from criminal activity or operational error, the VanEck trust is providing significant protections. Unlike other ETP applications, when an investor buys the VanEck shares, the fund will buy an equivalent amount of real bitcoins. It will secure the bitcoin by using industry best practice: multi-signature cold storage wallets with backups in geographically diverse locations for disaster recovery purposes.

Adding a belt to these suspenders, it will maintain comprehensive insurance to protect investors against loss.

Striking a balance

However, the strength of market surveillance and anti-manipulation policies varies widely across the many crypto trading markets, and this is a cause for concern. On the plus side, the large number of venues in which bitcoin trades arguably makes it less susceptible to manipulation than spot markets for other assets where trading is more concentrated.

Active arbitrage between the OTC and spot exchanges should also reduce manipulation risk. In addition, there are no insiders or material non-public information on which to trade, and it would be difficult to disseminate false or misleading information about bitcoin because aggregate supply is determined by a public, straightforward algorithm.

But on the negative side, the bitcoin spot market’s thin liquidity and domination by individual investors increases manipulation risk. The conundrum here is that increased institutional participation in these markets – which would be facilitated by the SEC’s approval of the ETP – is probably necessary to achieve greater liquidity.

More generally, the entry of more demanding institutional traders would have a disciplining effect on crypto exchanges to tighten surveillance. The fact that the initial per-share price of the ETP is 25 bitcoins means shares will be traded by institutional and other substantial investors who are better equipped than retail investors to drive greater transparency and anti-manipulation safeguards.

Yet, the SEC has a difficult task in ensuring appropriate investor protections without setting impossibly high standards. By accommodating greater institutional participation in crypto assets, the SEC could force improved standards in the spot markets where retail investors dominate – sometimes at their peril.

Testing an ETP with an institutional investor base could inform future work on a retail product giving individual investors venues to trade under the watchful eye of the SEC. Crypto assets are ready for the white linen treatment of a fully regulated securities exchange.

Let’s hope the SEC can find a careful path forward.

Have an opinionated take on 2018? CoinDesk is seeking submissions for our 2018 in Review. Email news [at] coindesk.com to learn how to get involved. 

Glasses image via CoinDesk archives