The Mess That Was Mt. Gox: Four Years On

Mt. Gox holds its infamous part of Bitcoin’s history as the once biggest cryptocurrency exchange that went under in a cloud of confusion and anger.

February 2014, just over four years ago now, was a worrisome month as the exchange slowly started to capitulate ending in the company filing for bankruptcy. Mt. Gox stated that almost 750,000 of its customers’ Bitcoins, as well as 100,000 of its own Bitcoins, had been stolen. The total loss constituted around seven percent of all Bitcoins available, and worth around $473 mln at the time.

Through the entire Mt. Gox saga, many questions and concerns were raised about Bitcoin, and it took the digital currency a few years to recover from this incident, but still, to this day, there is news emanating about those stolen coins.

The genesis of the world’s biggest exchange

Mt Gox was launched in 2010 by US programmer Jed McCaleb (who later went on to found Ripple) but in March 2011 it was purchased by a French developer and Bitcoin enthusiast Mark Karpelès. The name Mt. Gox stood for “Magic The Gathering Online eXchange.”

Mark Karpelès was involved in a recent radio interview, on March 6, in which he sums up his and his company’s road to fame and fortune.

“It felt like… when you fall from a building and you see the ground getting closer, and you feel like you are about to die. Mt. Gox went from interesting project to being, and I would say, a daily nightmare of dealing with banks, governments, people I never knew existed.”

At that time, something like seven out of every 10 Bitcoin transactions were handled by the exchange.

“I am very sorry that when I was in charge things happened the way they did.”

The first hack

The 2014 Mt Gox hack is known across the crypto community, and its influence is still being felt, but Mt. Gox was hacked back in 2011. It happened most likely as a result of a compromised computer belonging to an auditor of the company.

At that time, the hackers used their access to the exchange to artificially alter the nominal value of one Bitcoin to one cent and then transfer an estimated 2,000 Bitcoins from customer accounts on the exchange.

80 percent dominant

Despite this early setback, Mt. Gox expanded rapidly and by 2013 was the undisputed largest Bitcoin exchange in the world handling as much as 80 percent of all Bitcoin transactions.

While the company was building a considerable presence in the market, internally not all went well.

In 2013, Coinlab, a former business partner of the exchange, sued the company for $75 mln, claiming breach of contract. The contract stipulated that Coinlab would take over the American customers of Mt. Gox, but it never happened.

Additionally, the Department of Homeland Security received claims that a subsidiary of Mt. Gox operating in the US was not licensed and was, therefore, operating as an unregistered money transmitter.

As a result of the investigation, more than $5 mln was seized by the Department from the company’s bank accounts.

The infamous hack

The so-called hack that led to the collapse of Mt. Gox is still to this day shrouded in mystery as the month of February 2014 saw a confusing procession of events.

  • Feb. 7, 2014: Mt. Gox halted all Bitcoin withdrawals due to transaction malleability. “A bug in the Bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of Bitcoins to a Bitcoin wallet did not occur when in fact it did occur,” a statement read.
  • Feb. 17, 2014: Withdrawals were still halted as the company laid out the steps it was taking to address security issues.
  • Feb. 23, 2014: Mark Karpelès resigned from the board of the Bitcoin Foundation. The same day, all posts on its Twitter account were removed.
  • Feb. 24, 2014: All trading was suspended and then the website went totally offline. A leaked internal document claimed that the company was insolvent, after having lost 744,408 Bitcoins in a theft which went undetected for years.
  • Feb. 25, 2014: Mt. Gox reported on its website that a “decision was taken to close all transactions for the time being,” citing “recent news reports and the potential repercussions on Mt Gox’s operations.”
  • Feb. 28, 2014: Mt. Gox filed for bankruptcy protection in Tokyo, then on March 9, filed for bankruptcy protection in the US.

The month of February shook the Bitcoin world as Mt. Gox went down in a heap, leaving thousands of people out of pocket, confused and angry. From February to the end of March,  the value of Bitcoin declined by 36 percent.

Mt.Gox

Image source: Bitcoincharts

The aftermath

The repercussions from the hack affected not only Mt. Gox and its customers, but also Karpelès.

The CEO of Mt. Gox was re-arrested in Japan in August 2015, after being brought in earlier that year, and accused in fraud and embezzlement, charges not related directly to the theft. He was imprisoned until July 2016, when he was released on bail.

Before his arrest, Karpeles admitted that he had ‘found’ 200,000 of the missing Bitcoins in cold storage on his own accord. This drew suspicion and Karpelès reputation in the community started to dive as more allegations emerged; for example, that he spent the embezzled Bitcoin money on prostitutes.

In the middle of 2017, Karpelès was brought before a Tokyo court to answer charges of embezzlement and data manipulation. During the trial, Karpelès admitted to be operating a so-called ‘Willy Bot’ (obligation exchange).

BTC-e

At the same time as Karpelès was in Tokyo, a strange connection was made: another exchange operator was arrested in connection with the stolen Bitcoin from Mt. Gox.

In July 2017, a Russian national named Alexander Vinnik was arrested by US authorities in Greece and charged with playing a key role in the laundering of Bitcoins stolen from Mt. Gox.

BTC-e was raided by the FBI, causing the site to go down. That was the first time a US authority had seized a foreign exchange on foreign soil.

Investigations by Wizsec, a group of Bitcoin security specialists, had identified Vinnik as the owner of the wallets where the stolen Bitcoins had been transferred, many of which were sold on BTC-e.

Still in the news

With the investigation still ongoing, it is not surprising Karpelès, and Mt. Gox, have still been frequenting the news up until now.

Thus, in November 2017, Karpelès suggested conducting an ICO to raise $245 mln to “revive” Mt. Gox.

This week, unofficial investigations alleged that a UK “shell” company was involved in laundering 650,000 BTC from Mt. Gox. The Always Efficient LLP company was said to have participated in processing the funds hacked from the Tokyo exchange.

Furthermore, experts suggested that the recent price drop of Bitcoin to around $6,000 in February 2018 was down to a Mt.Gox trustee “panicking” and selling $400 mln worth of Bitcoin.

Nobuaki Kobayashi has sold over 35,000 BTC and 34,000 BCH (Bitcoin Cash) in order to pay the defunct exchange’s creditors.

Never forget

A lot has happened in the lifespan of Bitcoin, but probably something of the magnitude of Mt. Gox would never happen again. Exchanges are more closely scrutinized and the distribution of transactions are much wider.

But, the echoing effects of this major hack continue to be felt, and probably will continue, for some time. It could serve as an important case for the community, and a stern warning, that the crypto ecosystem needs to be looked after.

Opinion: Bitcoin is Doomed for Success

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Each passing day, it is harder to stay neutral to the overwhelming popularity of crypto world. Governments are taking stances, new converts are boosting market capitalization, ICOs get issued, and new exchange and mining companies appear on the radar.

Still being in a middleware phase, cryptocurrency is adopted and pushed into the day-to-day activity with a hitherto unprecedented speed. It looks like humanity’s adoption and the learning curve is becoming way steeper. Each year we are getting readier to embrace each revolutionary idea.

If we look at the traditional curve of technological adoption innovations’ popularity is very much dependent on the number of its use cases. At the moment there is no a real change and significant improvement delivered by virtual currency.

FOMO

It is fear that drives bitcoin. With the advent of Bitcoin, we are now faced with the modern day example of game theory. And while we are way before any useful and groundbreaking application of Bitcoin, FOMO is the strongest market force behind Bitcoin’s worldwide popularity.

Thus, it is not the acknowledgment of Bitcoin’s usefulness but a fear of missing out on this very usefulness when it comes. You don’t want to be the one banning crypto during its ambiguous phase just to miss out big when crypto shoots high.

The promised benefits of anonymity, breaking loose of the dictate of nation states and the chance to finally build one’s desired American dream look so understandably good. This is why the world unilaterally agreed on Bitcoin’s appeal without any timelines or guarantees.

A Global Angel Investment Exercise in Bitcoin to Stay in the Game for a Potential IPO

China can ban mining and Japan can ban exchanges. Turkey can issue their national cryptocurrency and the USA can impose taxation on crypto investments. All these just to lose out to the next Ireland who will ease the tax burden on crypto companies and reap off a return on a worldwide angel investment.

Truth is, everyone wants to be Ireland and no one wants to miss out.

The price of Bitcoin is already a huge bubble. And the price might grow way more as the world is headed towards the new fad of FOMO fever. But you know what? The price is justified! If people are buying, the price will keep climbing.

Giving up on the promise of crypto will be an acknowledgment of our powerlessness. It’s like saying we are going to die of cancer anyway and we are free to forego decades of extensive research. We will not buy it! The sunk costs are too high. We want to live! And if it means billions in investment, –  let it be. There is no coming back, no acceptance of defeat.

In such a scenario, the only thing Bitcoin can really do is keep growing until a widespread, mainstream real-life application gets introduced wherein millions of adopters get onboard.

And as with computers, AI or virtual reality, the application of crypto will come. It might take another year or a decade. But it will come. And if it does not come to the majority of the world it has clearly arrived to the main stakeholders and crypto ecosystem creators. And they are not ready to give up on the game.

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Bitcoin Drops Below $9K, Top Altcoins Down 16% On Global Regulatory News

Bitcoin (BTC)’s price dropped below $9,000, dropping to $8,539 on Friday, March 9, according to data from CoinMarketCap. At press time, Bitcoin is trading at an average of $8,809, down 9 percent on the day.

Bitcoin Price Chart

After hitting a weekly high of $11,675 on March 5, Bitcoin started dropping, losing almost 27 percent to today’s lows. To compare with yesterday’s downturn of 4-6 percent losses across top cryptocurrencies, today losses among top-10 altcoins on CoinMarketCap reached up to 16 percent.

Chart

Image source: coin360.io

Total market capitalization for all cryptocurrencies hit a monthly low of $344 bln today, currently at $358 bln.

Total Market Capitalization

Among the top ten altcoins in the red, NEO has lost about 34 percent of its value in one week. Worth around $130 on March 2, NEO is currently trading at around $86.

Ethereum (ETH) also hit a monthly low today, dipping below $700 for the first time since Feb. 6. The top altcoin is trading at $686, down about 6 percent to press time.

The market downturn is likely in part caused by the March 7 statement from the US Securities and Exchange Commission (SEC) that all cryptocurrency exchanges trading securities are  required to register with the commission.

Pressure on the cryptocurrency market was also increased by the ‘Punishment Notices’ for 7 cryptocurrency exchanges issued by the Japanese Financial Services Agency (FSA) on March 8.

As Cointelegraph reported on March 8, multiple reports concluded that the current cryptocurrency downturn since late December is a result of a $400 mln sell-off between December and February by the attorney and bankruptcy trustee of Mt.Gox, formerly the largest Bitcoin exchange in the world, before it went bankrupt in 2014, following a major hack.

Cryptocurrency Will Take Power Away from Central Banks: Ex Trump Aide Steve Bannon

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Steve Bannon has made comments putting him firmly behind cryptocurrencies.

He made the statements during a talk in Zurich, Switzerland, referring to cryptocurrencies as an anti-establishment tool to “take power back from the central banks”. According to Bannon, the centralized control and constant deflation of fiat currencies is a form of slavery, keeping citizens spinning on the wheel. The audience was told that “central banks are in the business of debasing your currency”, and he suggested cryptocurrencies as a way to challenge them. Because banks cannot control them, Bannon described cryptocurrencies as the heart of the anti-establishment movement, empowering citizens, companies, and governments alike.

Cryptocurrencies were described as a way to escape from bank’s control of fiat currencies, but Bannon also identified the centralized control of data as a huge issue. Whilst Bannon was less clear here, it seems he understood the potential of decentralized blockchain technology to put data back in the hands of people.

Bannon is well known for serving as White House Chief Strategist during at the beginning of Trump’s presidential term, but he has also worked as an investment banker for Goldman Sachs. He knows the financial system well, and repeated the mantra that was drilled into him and others every single day: “increase shareholder value”. His comments come as part of his strongly anti-establishment political stance.

Whilst some will embrace Bannon’s endorsement of cryptocurrency, others in the space will not be best pleased. Bannon’s political stance is firmly nationalist and considerably right-wing, which flies in the face of many who support cryptocurrency as global and liberal movement seeking to overcome national boundaries. He co-founded Breitbart news, a right-wing publication, and is highly vocal about reducing immigration and strengthening national borders.

The well-known figure is no stranger to virtual currency, with it being reported last year that he had spent $60 million on World of Warcraft currency. He made the move in order to make easy cash gold-farming – boosting accounts with skills and levels. No information has been provided regarding Bannon’s ownership of cryptocurrencies, or what specific projects the figure supports.

Whether or not you agree with Bannon’s political views, he is a well-observed public figure, and his comments will likely draw further attention to cryptocurrencies and blockchain technology.

Featured image from Flickr/Gage Skidmore.

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9 Reasons Blockchain Projects Need a General Counsel: Expert Take

In our Expert Takes, opinion leaders from inside and outside the crypto industry express their views, share their experience and give professional advice. Expert Takes cover everything from Blockchain technology and ICO funding to taxation, regulation and cryptocurrency adoption by different sectors of the economy.

If you would like to contribute an Expert Take, please email your ideas and CV to a.mcqueen@cointelegraph.com.

Imagine that your ICO raised $50 mln and your cryptocurrency is trading at 100x from where you launched. Everyone loves your project, your friends and family are impressed, and you’re the darling of Blockchain. Congratulations and welcome to the big leagues! You now have a significant enterprise to protect, demanding stakeholders to satisfy, and a challenging product roadmap to deliver on. Besides talented engineers and marketers, you need a in-house lawyer on your team. Here are some reasons why.

  1. Corporate Governance: There’s no such thing as a project when it comes to corporate law. Don’t accidentally leave yourself open to unlimited personal liability by failing to create an appropriate entity. Whether you’re a non-profit foundation or a for-profit corporation, you’ll need to observe proper corporate formalities. This means having your paperwork in order, filing with the appropriate federal and state governments, holding proper meetings, and maintaining good business practices. Observing corporate formalities is not something that’s done once and forgotten about. It’s a never-ending process that requires constant time and attention.

  2. Non-profit organizations are highly regulated entities: You can’t just snap your fingers and become a non-profit. Assuming you consulted with legal experts and properly filed your paperwork, there are still many hurdles you’ll need to satisfy to achieve and maintain tax-free status. For starters, a non-profit organization must pursue charitable purposes, like relieving poverty, educating people, advancing religion, or some other purpose that benefits society. Can a Blockchain project meet these requirements? Sure. But having founders walk away with huge windfall gains after an ICO won’t help your cause. Be very careful here, as the Internal Revenue Service (IRS) is watching.

  3. Open Source: All your copyright is open source, so you don’t need a copyright lawyer, right? Wrong. Open source issues are highly technical and can have a huge impact on your project. Every detail matters when it comes to open source, including the license you are using, its compatibility with other licenses, how you manage the works you create and how you choose other open source works to borrow from. A little upfront legal work on these matters can help you avoid a contentious open source license dispute down the road. 

  4. Trademarks: Your project has launched and your 10,000 token holders voted on a name they love. Did you consult with a trademark lawyer to make sure the name was not already taken? Have you registered your mark with the appropriate regulatory bodies? A surprisingly large number of high market cap cryptocurrencies have not bothered to register a trademark, and several are operating under a mark that is confusingly similar to other pre-existing marks. Do some due diligence before it’s too late and you find yourself on the receiving end of a trademark infringement complaint.

  5. Employees/Consultants: As a formal entity, you must have proper documentation in place with your employees and consultants to ensure regulatory compliance and that the intellectual property created by their efforts is properly owned and licensed. While many of the documents used are “boilerplate” the devil is in the details, and these details get more complicated when you are working with developers spread around the world. Don’t be lazy here. Failure to sign the proper paperwork can have significant consequences to your intellectual property.

  6. Regulatory Compliance: The arm of the U.S. government is very long.  Anarcho-capitalist rhetoric can be enticing until you receive your first subpoena from the Securities and Exchange Commission (SEC) or IRS and realize you need to hire a New York City law firm at $1,000/hour to defend yourself against these agencies. You have a fiduciary duty to your stakeholders to be compliant with applicable laws and in a new space like Blockchain this can be extra challenging since nobody knows for certain which laws apply or how they apply. There are banking and money transfer laws to consider, securities and communications laws and even traditional matters like data privacy. Don’t think regulations are just something for venture capital backed software companies to worry about. You have a lot on the line.

  7. Taxes: I could have included taxes in the section above along with securities, banking, money transfer and other regulatory concerns but taxes deserve a special call-out because nothing irks the U.S. government like a group of smart entrepreneurs that beat the system. If you want to know what’s in store for cryptocurrency founders that don’t comply with IRS rules, just read up on what happened to online gaming companies and Swiss banks. Long story short, they were squashed like bugs. Don’t be a bug, and comply with tax regulations.

  8. Contracts: Want to get your cryptocurrency listed on a new exchange? Buy D&O insurance? Enter into a development deal with a consulting firm in India? Or maybe just rent some office space in Zug? All of these transactions will involve legal contracts for you to review, revise and negotiate. Managing the day-to-day legal needs of an enterprise worth $100 mln is a full-time job for a professional. Don’t try and handle all of these matters yourself.

  9. Can’t an external law firm handle all of this? Not really. Just as it wouldn’t be wise to outsource all your engineering needs to an external consulting firm, you shouldn’t outsource all your legal needs to an external law firm. At a certain point you need a dedicated lawyer to manage your legal affairs and deliver valuable strategic advice. Only someone who is intimately involved in the day-to-day business operations can do this. That’s the role a General Counsel plays. Hire one today before it’s too late!

The views and interpretations in this article are those of the author and do not necessarily represent the views of Cointelegraph.

Dean Steinbeck a US corporate lawyer with a focus on data privacy and technology. He is General Counsel for TigerConnect, a clinical communication platform serving over 4,000 US healthcare organizations. He is a Blockchain enthusiast, amateur miner, and full-time hodler.

Harrisburg University Backed Thought ICO Eliminates Traditional Applications

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It’s incredible to witness how rapidly humans have evolved in the last couple of decades. This period in particular has held spectacular advancements in technology, especially when compared to our early history as a species. It took Homo Sapiens tens of thousands of years to come up with the concept of the wheel and another few thousand years to invent the first car in the 19th century.

Now, within the last hundred years, humans have landed on the Moon, we have invented computers, and the Internet. We can take our smartphones, order goods online and have it delivered to our doorstep within a few hours, and we can have video calls with our friends across the planet and connect with millions of people without much effort. All thanks to the Internet.

All of these inventions have caused exponential growth in data, all which is generated by humanity. Around 90% of the world’s data has been produced within the past few years. According to the International Data Corporation, in 2016, humans created around 16.3 ZB (16.3 trillion GB) of data, and by 2025, this number will grow tenfold, to 163 ZB.

To store all of this information, we need massive data storage facilities and powerful computers to analyze and process all of it. Already there are some data centers as large as the Pentagon, and computer transistors the size of a few atoms, reaching the limits of traditional computers. This means that at some point, going further with our current methods will no longer be feasible.

According to International Data Corporation, by the year of 2025, less than one-fifth of the world’s data will be analyzed, and while over 90% of the information requires some level of security, only half of it will be secured.

“All data is created equal until it is sifted and categorized by insight engines. Data is inherently inanimate, and only becomes valuable within the context of an application,” explains Professor Andrew Hacker, the Founder, and CEO of Thought Network, a Harrisburg University backed blockchain and AI start-up, which tackles the problem with ever-growing amounts of data from an entirely new angle.

“Things like the web, different social media platforms, and IoT devices continue to drive exponential data growth, while businesses are creating more and more applications that can use this information. This adds up to a landscape littered with applications, too much data, and insufficient intelligence to handle it.”

“Even with the progress AI and Data Analytics industries have made, they still have to face significant challenges and inefficiencies. Already in 2018, even the most innovative deep learning techniques, which mimic the human brain, struggle to sift through the world’s information.”

Thought Network and Smart Data

Thought Network has gone beyond our current solutions by removing the application layer and embedding smart logic directly into pieces of data. Data will no longer be inanimate; it becomes agile, able to act on its own, directly at the source of creation, distribution, or action.

Otherwise ‘dumb’ data, which needs applications that can process and categorize it to become useful, becomes smart. Smart Data understands its origin and its purpose; it can communicate with other pieces of information and accomplish its goal.

While all of the other companies in the AI and data industries focus on expanding their capability to store, analyze and process larger and larger amounts of data, Thought focuses on handling data more efficiently. By making data able to act on its own, it eliminates the problem with uncategorized data which just sits around – data becomes able to categorize itself and fulfill its purpose straight after its creation.

“Smart Data reduces process latency and can eliminate a gigantic layer of cost and complexity from an organization of any type and any industry. No longer is it necessary to collect data, examine it, and run it through an application. Data can take action immediately and continuously,” says Professor Hacker, who was granted a US patent for his concept of Smart Data.

For example, if a machine in a factory would be about to break down, this information doesn’t have to be sent to the central command system that decides whether to shut the machine down or not. Instead the information gathered from the sensors can decide on its own. This saves precious seconds and spares costly equipment – not to mention people – from unnecessary damage or harm.

If the average power grid would run on Thought, it would be possible to create a self-healing and fully autonomous power grid. Even if an outside party were able to bring down a part of the grid, the network would self-heal and come back online on its own.

“Thought incorporates multiple levels of dynamic encryption on the data layer itself. Being able to secure the smallest units in computing – individual pieces of data – is the Holy Grail of cybersecurity.” explains Andrew Hacker, who’s also a Cybersecurity Expert in Residence at Harrisburg University.

Conclusion

Thought Network’s Smart Data holds great potential in dealing with the exponential growth in data creation and the problems it hides.

“Going forward, the current paradigm will no longer be scalable, extensible, adaptable or smart enough to cope with the massive influx of information generated by our society.” Says Professor Hacker. “Thought solves these challenges by moving artificial intelligence from the application layer to the data layer, making data processing more efficient, intelligent and above all more secure.”

Thought’s Pre-ICO is now live until March 13, 2018, and you can click https://thought.live now and earn a 15% discount on the purchase of THT tokens. The main ICO starts on March 14, giving participants a 10% discount.

Centralized Cryptocurrency Exchanges, Explained

What is a Centralized Cryptocurrency Exchange?

It is an online platform and most common way to trade cryptocurrencies.

 

This includes buying/selling cryptocurrencies with fiat (fiat/crypto paring) as well as buying/selling cryptocurrencies with other cryptocurrencies (crypto/crypto pairing). They can be viewed as an online marketplace for the entire cryptocurrency network.

What does it mean for an exchange to be centralized?

To be centralized means to trust somebody else to handle your money.

 

In the past, the word “centralized” was a given for all institutions that managed finances.
To be centralized means that there is a trusted middleman to handle whatever asset may be in a trade. In a bank, for example, a customer gives their money over to the bank to hold for them. This one institution is now in complete control of the customer’s money.
In many cases, this is much safer than a person finding some way to manage themselves. Banks have many securities and a team to watch over their customers’ money. The bank can also offer a variety of services, such as loans, because the bank has a large amount of money and has created a trust relationship with the customer.

pic

Centralized cryptocurrency exchanges are no different. A user can store their money on the exchange. The currency is now in the hands of the exchange, but the trust of the middleman makes it easy for a customer to recover a lost password or 2FA because that customer has given the exchange full access to their account. This can also take the pressure off of the customer of being 100% in control of their money. There are many stories of investors losing hundreds of thousands of dollars because they lost the private keys to their hardware wallet. If their money were in a centralized exchange, they wouldn’t have to worry about that; recovering would be as easy as showing a passport or verifying identification.

How does centralized exchange differ from a decentralized one?

Cryptocurrencies and blockchain are decentralized by nature, so this allows for the exchanges to also be decentralized.

 

In simple terms, a decentralized cryptocurrency exchange (DEX) cuts out the middleman by creating a highly intelligent “trustless environment.” Deals are made through smart contracts and atomic swaps so that currency never passes through the hands of an escrow service – it’s just peer-to-peer. DEXs are still in infancy and not very popular just yet, but 2018 might see a lot of progress with decentralized exchanges.

Do all centralized exchanges provide fiat/crypto pairings?

No.

 

All exchanges have crypto/crypto pairing (i.e., trading 1 BTC for 9 ETH), but not all have fiat/crypto pairings (i.e., trading $900 for 1 ETH). One of the most popular exchanges that provide fiat/crypto pairings are:

  • Coinbase – most popular in the world- supports Bitcoin, Bitcoin Cash, Litecoin, and Ethereum

  • Gemini – Based out of New York and high regulation standards for the US. Supports Bitcoin and Ethereum

  • Kraken – Kraken has a variety of crypto/fiat pairings with more than just USD and EUR, which can be viewed on their site.

  • Robinhood – a popular trading app provides fiat pairings to Bitcoin and Ethereum.

Is volume important for exchanges?

The more volume there is on an exchange, the less volatility and market manipulation there will be.

 

If Alice is trying to buy 1 BTC for the exchange’s current price of $10,000 and the volume on the site is extremely high, chances are she will buy the 1 BTC almost instantly. If the market price is $10,000 on a very low volume site, she may eat up all of the sell orders that are at $10,000 before she can buy her whole Bitcoin. Then Alice would need to buy the higher sell orders to satisfy her order, losing money and also making the price of Bitcoin go up on that exchange.

Are centralized cryptocurrency exchanges safe?

No centralized exchange is immune to hacks.

 

Many hacks have occurred throughout the course of cryptocurrency history, but in many cases, the exchange went out-of-pocket to pay customers back for the stolen money. DEXs are impossible to hack, but users are much more vulnerable to locking themselves out of their money. Popular centralized exchanges are safe in the way that banks are safe.

Is verification required to open an account on an exchange?

The regulations of each country are still fuzzy, but exchanges around the world require minimum verification to authenticate the account.

 

Many exchanges allow users to open an account without an identity check, but those accounts will have extremely small withdrawal/deposit limits. Basic verification normally requires a picture of the user’s passport/ID, and 2 Factor Authentication enabled. 2FA is a secret password that regenerates every thirty seconds or so that is needed every time a user logs into their account. 2FA is normally kept on the user’s phone.

Which exchanges have the most volume and crypto pairings?

While exchanges are still new and growing more and more popular each day, there have been some over the past 2017 year that have stood out in volume and amount of coins to trade.

 

  • Binance. While Binance has only launched in 2017, it has already begun trading the highest volume of any exchange. This exchange is based out of China and is so popular that most altcoins first move to this major exchange after their ICO. Level two verification allows 100 Bitcoin withdrawal while Level one allows under 2 Bitcoin withdrawal/day.

  • Bittrex. Bittrex has been a long-standing cryptocurrency exchange based out of the United States. While the most popular coins traded are BTC and ETH, Bittrex holds over 250 trading pairs. It is known for its easy interface for crypto beginners.

  • Bitfinex. Located in Hong Kong, Bitfinex is another long-standing cryptocurrency exchange which still lies in the top ten for trade volume.

  • Upbit. While many South Korean crypto exchanges have suffered during the crackdown on crypto in the country, UpBit stayed on top and even broke a record back in January of 2018 for highest trading volume ever.

  • GDAX. The Global Digital Asset Exchange is an extension of CoinBase, one of the most popular exchanges in the world. GDAX is not suitable for beginners but is very useful for margin trading as well as trading crypto/fiat and crypto/crypto. Users are also insured up to $250,000 by the Federal Deposit Insurance Corporation (USA). While offering many more options and features than its sister company Coinbase, Vice President Adam White of Coinbase noted: “Coinbase is designed for retail customers while GDAX is focused on serving sophisticated and professional traders.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Zerocoin Aims to Become a Standard Crypto Currency for Online Gambling – PRE-ICO Open

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There seems to be a sudden surge of ICOs in the gambling space, and Zero Edge has caught our attention. It aims to create a cryptocurrency for the online gambling space and they have an ICO coming up. Zero Edge is a decentralized online casino and an open protocol which aims to offer players 0% house edge casino games, fee-less sports betting and an open source platform for building online games.

Zero Edge will be creating their own token named Zerocoin which is the fundamental part of their business model. Adrian Casey, CEO of ZeroEdge, says, “The Zero Edge Casino model is based on Metcalfe’s law and factual Bitcoin price growth. Casino players, i.e. Zerocoin holders will not only be able to play 0% house edge games, which offer a truly equal odds of winning against the house but will also see their Zerocoin value increase as a result of increased demand and adoption of the token.”

The blockchain use case for Zero Edge is mainly in providing decentralised trust. All games will be publicly verifiable on the Ethereum blockchain without negative effects on user experience during the game session. Furthermore, Zero Edge Casino will have a sophisticated and audited random number generator (RGN) mechanism to ensure complete randomness of its games.

The need

Adrian Casey, the CEO of Zero Edge believes that The main problem with online gambling industry today is that its purely profit-driven enterprise with marginal consideration for consequences of its practices.

He says, “The simple solution to the problem is creating a platform where playing games is “free”. Players are not required to pay any fixed amount of money to be able to play at the casino. This can only be achieved by creating a closed loop economy with its own token where players purchase the token with fiat or crypto. Since the supply of ZERO is limited, its value is directly proportional to demand.”

They claim that their main difference that makes Zero Edge stand out from its competitors is that its business model is based on its token’s value growth rather than the cash flow generated from casino’s games.

The Team and product

The team at Zero Edge is lead by a CEO who has spent 6 years with two of the biggest names in the betting industry, namely William Hill and Centrebet. Adrian is supplemented with a good tech and marketing team, many of whom have had past experiences in the betting industry.

The advisory team is dominated by legal experts, professionals in the betting industry and other entrepreneurs in the blockchain and cryptocurrency space. A good thing to note here is that there isn’t anyone mainstream big name on the team and advisors, but preliminary LinkedIn verification shows a very focused emphasis on the betting industry.

As far as the product goes, you can check out some of the games in the casino section on their website, with some other verticals such as sports betting, are still under construction.

Our Take

An interesting fact I came across recently was that gambling has been part of human life even before written history. The earliest six-sided dice date to about 3000 BC in Mesopotamia. This has translated to a huge betting industry in today’s day and age, where the global online gambling market was 37.91 billion USD in 2015 and is estimated to reach 59.79 billion USD by 2020, at a CAGR of 9.5%

Zero Edge ticks all the boxes when it comes to the market size, the problem it is solving, the team and product. The fact that they have a working product is particularly reassuring. There’s also a good incentive for early investors. The company will organize its early token sale (pre-ICO) in February when the public will be offered to purchase a limited supply of Zerocoins for a discounted price.

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Wall Street Analyst Creates ‘Bitcoin Misery Index’ For Traders

Wall Street strategist and co-founder of Fundstrat Global Advisors Thomas Lee has developed a ‘contrarian index’ that lets investors know how ‘miserable’ Bitcoin (BTC) holders are based on current prices, CNBC reports.

The index is called the Bitcoin Misery Index (BMI) and was designed as a trading tool for investors to take advantage of volatility in BTC exchanges. BMI is calculated on a scale of zero to 100, taking into account factors such as volatility and the number of winning trades out of the total. When the indicator is low, the buying opportunity is at its best, and vice versa.

When the bitcoin misery index is at ‘misery’ (below 27), bitcoin sees the best 12-month performance. A signal is generated about every year,” Lee explained to CNBC in a Friday report. “When the BMI is at a ‘misery’ level, future returns are very good.”

At the moment, the Bitcoin index is at 18.8, which is an absolute minimum since Sept. 6, 2011, the report said.

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Lee’s comments follow a significant cryptocurrency market fall in which BTC lost almost 27 percent just after hitting a weekly high of $11,675 on Monday, March 5. A series of negative news resulted in heightened concerns about more regulations on crypto markets.

On March 7, the US Securities and Exchange Commission (SEC) issued a statement saying that all platforms trading securities are required to register with the agency as an exchange. Additionally, Japanese authorities temporarily halted the activities of two cryptocurrency exchanges and issued “punishment notices” to seven more, as reported on March 8.

Despite Bitcoin currently trading at more than 50 percent of its December 2017 high of over $20,000, Lee has not abandoned his optimistic forecast of $25,000 by the end of 2018.

Tom Lee is known for his bullish outlooks for BTC and as the “only major Wall Street strategist to issue regular reports and formal price targets on bitcoin”, according to C

Crypto Exchange Bittrex: We’re Compliant With SEC’s ICO Rules

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US-based cryptocurrency exchange Bittrex says that it is compliant with federal regulations governing securities trading.

The exchange, which is headquartered in Seattle, issued a statement on Wednesday assuring its customers that its token review process is compliant with rules that prohibit companies from creating trading markets for unregistered securities.

Bittrex said:

“As a U.S.-based digital currency exchange, Bittrex is committed to incubating new blockchain technology projects and offering innovative, compliant digital tokens to our customers. Bittrex uses a robust digital token review process to ensure the tokens listed on the exchange are compliant with U.S. law and are not considered securities.”

The statement was a direct response to an announcement published by the Securities and Exchange Commission (SEC) — also released on Wednesday — that warned it is “potentially unlawful” for cryptocurrency exchanges to list initial coin offering (ICO) tokens, as the agency deems many of these ICOs to be unregistered securities offerings.

The agency signaled that it intends to crack down on cryptocurrency trading platforms that list security tokens, a move that appears to be a bid to coax exchanges to register with the SEC, which would provide regulators with more authority to supervise the nascent cryptocurrency spot trading markets.

Most exchanges are currently licensed at the state level as money transmitter businesses, and US regulators have stated their desire to implement more oversight at the federal level.

Responding to the SEC’s warning, Bittrex noted that as a part of its listing process it typically requires a memorandum or opinion from a US-qualified law firm that “presents the factual and legal basis” that a token “is not a security under applicable securities laws” and that trades of the token “would not be subject to regulation under any applicable laws applicable to trading of commodities.”

“Bittrex is committed to helping advance the United States’ global leadership in this emerging industry, and we look forward to continuing our proactive dialogue with the SEC and other regulators on how to build a secure, fully-regulated environment for blockchain that encourages innovation and economic growth,” the firm concluded.

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