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Report: Blockchain Spending to Hit Nearly $12 Billion By 2022

A new report published by the International Data Corporation expects spending on blockchain solutions to increase annually at a growth rate of nearly 75 percent through 2022. Dubbed the “Worldwide Semiannual Blockchain Spending Guide,” analysts at the firm expect total spending on projects in the blockchain industry to hit $11.7 …

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Ethereum Scaling Solution Raiden Releases Last Testnet Before Launch

A new test network has been launched for Raiden, the ethereum payments channel project. Announced at the Dappcon developer conference in Berlin on Thursday, the release features a minimal implementation of the scaling solution that will allow ethereum tokens to be traded on off-chain payment channels. Notably, this particular testnet …

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Malta Stock Exchange Inks Deals to Build Security Token Exchanges

MSX, the newly launched fintech arm of the Malta Stock Exchange, has inked several new deals aimed at creating new marketplaces for tokenized securities. The newly inked deal sees MSX team up with Neufund, a platform for securities tokenization and issuance, to build a “regulated and decentralized, global stock exchange …

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Bitcoin Exchange Paxful Reveals Plan to Reach Venezuela’s Unbanked

Peer-to-peer bitcoin exchange Paxful is doubling down on developing markets. Revealed exclusively to CoinDesk, the startup plans to open an office in hyperinflation-ridden Venezuela in September and release an Android app, its first for mobile devices, in October. According to Paxful co-founder Ray Youssef, the reason for both moves is …

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Fed Chair: Cryptocurrencies Are ‘Great’ For Money Laundering

Jerome Powell, chairman of the U.S. Federal Reserve, had some harsh words for cryptocurrencies during an appearance before the U.S. Congress. Speaking to the House Financial Services Committee, the head of U.S. central bank said Wednesday that cryptocurrencies have no “intrinsic value” and presented severe risks to investors, as CNBC …

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Democracy of Two: NEO and the Crypto ‘Election’ That Wasn’t

What constitutes an election?

According those backing ethereum competitor neo, just one candidate and two voters.

The public blockchain project, whose tokens are valued at over $2 billion by crypto investors, went so far as to claim in a July 4 blog post that it had entered a "new era" in which its token holders will have a say in how decisions on the network are made, but even insiders are skeptical such assertions are little more than rhetoric.

Case in point, the NEO Foundation, which develops software for neo, announced this month that it had elected the first node to its network, a foundation-funded collective of NEO developers calling themselves City of Zion. Less publicized at the time, however, was that token holders were not allowed to participate in that vote.

As such, even those running the newly elected node aren't exactly convinced that neo is fully committed to running its blockchain with broad participation from users, at least at this time.

"I would personally disagree with calling it an election," Ethan Fast, a member of the City of Zion team, told CoinDesk in an interview. "That's not a word I would choose."

More broadly, such a conclusion is instructive in that neo is one of a growing number of public blockchains seeking to implement a more centralized model for how blockchains can be managed. Called delegated byzantine fault tolerance (dBFT), neo's specific idea is that by consolidating decision-making to a small group of nodes, the software can become faster and more useful.

Its a break from bitcoin's mining model in which any node operator who abides by the rules can compete to approve transactions, and one that has seen a handful of projects including EOS and Tron raise billions with big promises that it can prove viable.

In this way, neo, which has close ties to blockchain solutions company Onchain and the public Ontology project, has adopted technology it believes will address scalability issues — specifically, slow transaction speeds and controversial network upgrades.

"[The] NEO Council values efficiency (quick response and protocol upgrade) over decentralization (sometimes a crypto-political correctness) at this early stage," the project's governing body, now called the NEO Foundation, explained in a May post.

However, neo is perhaps unique in that it hasn't provided much in the way of details on how it aims to do this in a way that will add up to the democratic process its touts.

Neo's white paper and website do not provide a detailed description of its governance model, and further, the foundation has said in blog posts that it plans to maintain "decision-making power" until the "core protocol stabilizes," though it has not defined what criteria constitute stability.

Once the foundation is confident in the strength of the network, it says it "expect[s] to see one to a few dozens of consensus nodes to be elected by NEO holders." But before token holders are able to vote for candidates, the foundation plans to "elect" several private nodes, of which City of Zion is one.

A 'benevolent oligarchy'

That might be one reason why other supporting language issued by the foundation has positioned the election as the first step in a long process to relinquish some of its power to token holders.

Still, the NEO Foundation's use of the term "election" to describe the process by which City of Zion became a node at all has triggered some skepticism.

While "election" would arguably imply that a multiplicity of votes were cast, blog posts suggest that the NEO Foundation is currently the only voting entity in the ecosystem. City of Zion's Fast confirmed that "there was no one from the public that voted in this election besides the NEO Foundation." Likewise, of the foundation, only project co-founders Da Hongfei and Erik Zhang have the authority to make decisions, according to another blog post.

As such, Fast instead described NEO as "a kind of benevolent oligarchy," and said that the community has been frustrated that the foundation has been slow to surrender some of its decision-making power.

"Just a small amount of decentralization in the short term is something CoZ has been pushing for for some time," he said, adding that it "may not be happening as fast as [the community] want[s]."

Dean Eigenmann, founder of blockchain governance startup Harbour, was more critical of the foundation's "election."

"Libya had elections under Gaddafi, too," he said, explaining further of the project:

"It just seems so uninteresting because it's like they aren't even trying to decentralize their governance. They were like, hmm this seems too hard. Let's just keep it centralized."

Degrees of democracy

NEO is not the only project to be criticized for how it is going about the election of nodes.

Ethereum founder Vitalik Buterin warned in March that blockchains that use "coin voting" seem "to lead to a high risk of economic or political failure of some kind." Likewise, Kyle Samani, managing partner at crypto fund Multicoin Capital, wrote on Twitter in June that EOS and Tezos, two other project seeking to compete on governance, are both "plutocracies."

However, Richard Lee, founding partner at crypto fund Global Blockchain Innovative Capital took a more flexible position in an interview with CoinDesk, arguing that "there's different levels of decentralization."

"I think the different consensus protocols, at least right now, there's trade offs in between. Sometimes you have to sacrifice decentralization for speed and efficiency or security," he said, adding:

"Neo's trying to address scalability in a different way than ethereum is... Neo has a more centralized approach for that."

Lee said he interpreted the foundation's use of "election," "as more of, the NEO Foundation does not run all the nodes now," and added, "I don't see anything malicious or deceitful about that."

Some participants in neo community forums were nonetheless skeptical of the election, with one reddit user posting, "Decentralization goes way beyond the amount of nodes. It has to do with governance and decision making. If you still have a central entity deciding new features, etc you cannot become fully decentralized."

However, other comments reflected Lee's conclusion about the election, with many participants greeting the announcement of the election with enthusiasm.

Whether neo will follow through on its promise to empower token holders remains to be seen.

According to a timeline published in a blog post, the foundation plans to elect Dutch telecommunications company and neo partner KPN and Chinese venture capital firm Fenbushi Capital to operate the next privately held nodes in the network by the end of 2018. It intends to allow token holders to both vote for and campaign to become nodes in 2019.

The NEO Foundation did not respond to requests for comment.

Image via Neo Community Facebook

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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Fiat Currencies Are About to Become Essential to Public Blockchains

Paul Brody is a principal and the global blockchain leader at EY.

The following article is the third in a series. Read part one hereand part two here.


Cryptocurrenices ask you to put your trust in math and not in fallible central bankers, but they come with a lot of political baggage of their own.

In particular, cryptocurrency boosters talk a lot about how central bankers have debased currencies over the years and how the printing of money by central banks has done much to impoverish people around the world. In an imagined future world of cryptocurrencies, fallible and politically influenced central bankers are replaced with algorithms and currencies get more valuable over time, not less so.

There are a lot of problems with this narrative, starting with the fact that a little bit of inflation is actually useful and the painful era of stagflation is more than 30 years in the rear-view mirror. Independent central banks are among the most trusted institutions in our economies, and also the most transparent. And while the market capitalization of cryptocurrencies seems large by absolute standards, it's tiny compared to the rest of the global economy. Daily trading of cryptocurrencies is between $5 billion and $6 billion right now. Daily trading on the foreign exchange markets is closer to $5 trillion.

Even if cryptocurrencies continue to grow (and they most likely will), if we want blockchains to deliver upon their promise, we must be able to transact using traditional fiat currencies. There are lots of practical reasons for this, the most important of which is the management of risk for enterprises.

Nearly all business transactions today are done in traditional fiat currencies. Traditional enterprises generate most of their revenue in those currencies and they also handle all their debts and payments in the same currencies.

In order for firms to transact on the blockchain, they will want to transact in those same currencies. If I have a deal to buy a product at a set price in euros, and I execute that contract on a public blockchain, then I also want to settle it in euros, most likely. Every time I move money between currencies or hold substantial amounts of a different currency, I'm adding foreign exchange risk to my business, which serves no purpose if it can be avoided.

One option for companies engaging in smart contracts on blockchains is to arrange payment settlement through the banking system separately and simply record that payment on the blockchain. This option works, but we believe it is a less-than-ideal solution when you start to consider the broader economic ecosystem that you are enabling on a blockchain.

All in one

The best option for companies entering into business contracts on a blockchain is to complete the full exchange of asset tokens within the same blockchain. Asset tokens (representing product) are exchanged for money tokens in the simplest format, but with all the tokens being represented in the same blockchain, more sophisticated options are possible. Companies can borrow against inventory, with loans repaid automatically upon the sale of the inventory, for example.

At EY, we've taken to calling this a "full cycle economic contract" as the gold standard for what enterprises will want to achieve using blockchains for commerce. Full-cycle digital contracts will not only be lower risk, since both assets and liabilities will be transparently managed on the blockchain, but almost any kind of financial service can be delivered against those flows with minimal cost for the transactions.

Ultimately, this means billions of dollars in tokenized fiat currencies must be available on the public blockchains to facilitate these transactions and payments. If this path does come to pass, however, it means that central banks will have to find a regulatory structure or approach that allows for multiple currencies and tokens to co-exist on public blockchains – networks they do not regulate or fully control. It also means that private central-banking blockchains are not necessarily likely to have a big role ahead.

We believe, however, that there are mechanisms for regulators to control their own currencies in decentralized public networks, and I will dive into that and more in my next post.

Fiat currency image via Shutterstock

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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3 Signs Bitcoin’s Move Above $7K Might Just Hold

The world’s largest cryptocurrency by market capitalization exploded in price Tuesday, jumping $600 in 30 minutes to break away from what had been suppressive bear market conditions. But entering Wednesday, bitcoin is changing hands at $7,370 and showing signs it might continue its ascent. In fact, when viewed on longer …

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Bitcoin Price Risks Pullback Before Testing $8K Again

Bitcoin (BTC) could be in for a minor price pullback, having clocked a 39-day high above $7,500 earlier today, technical charts indicate. The leading cryptocurrency rose to $7,562 on Bitfinex at 03:00 UTC and was last seen changing hands at $7,400 – up nearly 10 percent on a 24-hour basis. …

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What to Expect When Congress Talks Crypto (Twice) Tomorrow

It’s a crypto doubleheader on Capitol Hill tomorrow. Two U.S. House of Representatives Committees will be hosting hearings on Wednesday to look at the topic from two distinct angles. The House Committee on Agriculture will focus on the emergence of “digital assets” while the Financial Policy Subcommittee hearing will examine …

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Sequoia China, Polychain Lead Blockchain Startup’s $28 Million Round

Blockchain startup Nervos Network has announced the completion of a $28 million Series A funding round. The company said on Wednesday that major investors in the round included token-focused hedge fund Polychain and venture capital firm Sequoia China, as well as several China-based blockchain startups like wallet services Bixin and …

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Bitcoin Mining Firms Make Unicorn List for First Time

Three bitcoin mining companies have joined a list of “unicorns” – private companies valued at over $1 billion – for the first time. The Shanghai-based Hurun Research Institute published its Q2 Unicorn Index for the Greater China region on Wednesday, which notably included the names of several major bitcoin mining …

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South Korea Plans Tax Perks for Blockchain Startups

The South Korean government has announced a plan to revise the current tax rules to widen benefits for companies that focus on the development of nascent technologies, including blockchain, as part of the country’s push for innovation growth. Announced Wednesday, after a meeting of ministers from eight government agencies working …

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Baidu’s Blockchain Photo App Launches With Its Own Token

Chinese internet search giant Baidu has launched a proprietary token to incentivize users of its new blockchain-based photo validating and sharing service. The firm announced on Wednesday during a press conference in Beijing that the photo sharing platform – called Totem – is now live and features a dedicated token …

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Ethereum Client Parity Drops Wallet Tech in Major Upgrade

Parity, the ethereum software client, has announced some major changes, including the stripping away of its graphical user interface (GUI). In effect, the changes mean that Parity’s “wallet” – that is, its repository of private keys – does not now exist for general, non-technical consumers. All “installers and operating-system specific …

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Mining Malware Now a Bigger Threat than Ransomware, Says Report

Illicit cryptocurrency mining, or “cryptojacking,” has become more popular among cybercriminals than ransomware, according to a report by Skybox Security. In its mid-year update, the firm said that crypto miners now account for 32 percent of all cyberattacks, while ransomware only makes up 8 percent. Cryptojacking utilizes code hidden on …

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