Categories
crypto

Blockchain-based travel would make everything better

Unfortunately, I have not been able to write for the last few weeks because I traveled to Asia and was too busy to properly follow the crypton news; let alone write about it. Travel anno 2022 means lugging along whole folders of documentation and evidence. All these forms of identification and evidence (of nationality, vaccination, insurance, hotel reservations ) could be stored and shared so much more efficiently, securely and cheaply based on blockchain technology.

Travel after a pandemic

This is a list of documents, each for the purpose of proving something of my identity, that were required to enter Singapore:

  • passport
  • visa (not required with an EU passport)
  • vaccination certificates
  • a so-called "arrival card," to be filled out before departure
  • Insurance for any treatment against Covid above SGD 30,000 (about 20,000 Euro)
  • residence permit/work visa
  • negative PCR test
  • proof of home address or residence address (hotel)
[Unvaccinated travel to Asia is virtually impossible unless you can provide medical certificates of serious conditions that prevent you from being vaccinated, and even then they are usually only accepted if you are an immediate family member of a resident with the nationality of the country you want to go to].

The requirements to travel to Indonesia were almost identical. Analyzing the data requested, it appears that two types of data are actually being asked for:

  • proof of identity (nationality, a status that rarely changes and then in 1 other variable)
  • proof of "reputation" (a status that changes quickly, such as whether or not it is infected, residence or domicile address, health insurance coverage)

In the financial world, where you do not control yourself but rather your assets (money), similar stringent requirements apply. Your identity is verified through KYC (Know Your Customer) when you open a bank account. The origin of money is verified as soon as you receive a large sum under AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) regulation.

Knowing the customer is a requirement for banking and also for building trust in transactions in a distributed network. However, this process is cumbersome and expensive. Similar to what happened when I flew on from Singapore to Indonesia and landed in Bali:

  • someone from immigration checked my vaccination certificates, the negative PCR test I had done in Singapore, my insurance and checked my hotel reservation
  • a nurse performed a PCR test on me
  • someone from immigration checked my passport
  • someone from immigration sold me a visa
  • someone from customs asked what was in my suitcase

A zero knowledge proof, a proof of identity and reputation that allows you to travel yourself; but also allows your money to travel from A to B.

Both international travel and financial transactions could be solved very differently, with the possibilities offered by blockchain. There is a need for an open source protocol that helps people and businesses conduct transactions and use services without an intermediary, while proving their trustworthiness without revealing their identity and storing their raw data securely under their own control. A zero knowledge proof, a proof of identity and reputation that allows you to travel by yourself; but also allows your money to travel from A to B.

Think, from the user's perspective, of an app in which I can store my own passport data and "long running data" such as insurance information and vaccination certificates, as well as my "temporary properties" such as the result of my PCR test and my hotel reservation.

Upon departure from the Netherlands, at Schiphol Airport, all the information required by Singapore was already checked by KLM; that could be verification level 1. But a customs officer, a government representative, also checked my passport again. That could be verification level 2. Upon arrival in Singapore, the whole list of requirements I already listed was verified; that could be verification level 3. That level 3 is then defined as: this data, such as identity, vaccination status and insurance status, has been verified by two governments.

Upon arrival in Indonesia, one customs officer would then have only had to scan my app and verify it with my passport, ensuring that I was the right person with the right app. From the app would have retrieved immutable properties stored in the blockchain, such as my nationality, vaccination status, insurance status, negative PCR test and hotel reservation . And the tourist visa I could have purchased online before I left, which could then also be stored in the app.

For renting a car or scooter or apartment through Airbnb or Booking, landlords could then consult the same app. Because my driving license plus the reviews of previous landlords, my reputation in the 'real world,' could be converted to a digital thumbs up. All from a 'central data vault' whose data I manage myself; and whose data I decide which party to share which data with. So that not every scooter renter has a copy of my passport in his desk, with all the possible consequences.

In the financial world, such a zero knowledge proof application would also satisfy all regulators. You could then, when sending large sums of money, give your own permission for your identity to be shared with the relevant government agency. But not with the first intern, as everyone remembers how GGD officials sold forged vaccination certificates and private addresses of Dutch celebrities, including Peter R. de Vries. The result of the wrong approach with a centralized database to which any nerd could gain access. This can and should be done differently.

Categories
crypto

Throwback Thursday for Bitcoin thanks to BlackRock and Goldman Sachs

It was another of those typical crypto days when the angry outside world did not seem to exist and all the news was interpreted positively. Granted, there was also positive news with the letter to BlackRock shareholders and additionally Goldman Sachs using the words cryptocurrencies and Metaverse on its homepage. But the reaction of the market, especially the crypto media, was greatly exaggerated.

BlackRock is the largest fund manager in the world, managing nearly $10 trillion, but that sounds like a lot less than when you write it out: 10 trillion is 10,000,000,000,000 and then I may be a zero off. But it's almost a thousand times a billion. More than 9 million times a million. In short, they plus nicely.

Because what exactly did Blackrock chairman Larry Fink actually write in his letter to shareholders? Search for the words "crypto" or "blockchain" and the result is zero twice, versus 24 times "Russia" and 9 times "Ukraine. In a document with more than 30 paragraphs, as many as one was about digital currencies. The passage that made crypto Twitter go wild was:

"As we see increasing interest from our clients, BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients."

Joh.

It would be heavenly if BlackRock did not keep an eye on a fast-growing 2 trillion market, the size of the entire crypto market. It's less than 20% of what BlackRock manages, of course, but enough to keep an eager eye on. Probably not to take a position yourself, but to try to grab a piece of all the trades.

By the way, I had to shed a tear at this sentence:

"Digital currencies can also help reduce the cost of cross-border payments, such as when foreign workers send income back to their families."

Because if BlackRock cares about anything, it's the fate of the guest worker migrant worker.

As if it were agreed work, the fringe truffle sauce of investment banks, Goldman Sachs, also came up with this sentence on its homepage:

Discover the megatrends reshaping economies, from cryptocurrencies to the metaverse.

Those who click through are greeted with:

The Metaverse & Web 3.0

It feels like your old physics teacher suddenly starts breakdancing in the middle of class. I searched for the words "NFT" and "Bored Ape," but to no avail. They are not that crypto woke at Goldman Sachs.

As if the party couldn't end, Cointelegraph saw on Twitter that Eric Balchunas, Bloomberg analyst, predicted that the SEC could finally approve Bitcoin ETFs in 2023. Only that would require a change in the definition of the term "exchange.

"Once crypto exchanges are compliant, the SEC's main reason for rejecting spot Bitcoin ETFs would no longer be valid, likely paving the way for approval," analysts said.

That is a valid argument, but that change in definition has such a large impact that it is not a certainty that it will be adopted. Bloomberg knows that too, hence the wonderful "could" in their forecast. Like a weatherman saying, "tomorrow it could rain. That does require a change in the cloud cover first.'

Meanwhile, less florid crypto news, such as the recurring discussion about the energy required by Bitcoin mining (with wonderful photos) and the possible change in law in the European Union that could ban Proof of Work, were completely overlooked. Banning Proof of Work, by the way, would be absurd; instead, more nuanced discussion on the subject is needed. Like on anything related to crypto, blockchain and NFTs.

Categories
crypto

Today's NFT and crypto news in 5 links

Okay, it's not all literally news exclusively today, but these are the most notable articles I read today. News for me, that is, actually. Lots of news about NFTs, a new major crypto fund and SushiSwap might get a Swiss foundation; SushiSchwatz?

Airline Qantas launches NFTs

It's not the first airline to do this, but Qantas says it will use the proceeds to combat CO2 emissions. I'm curious to see how measurable this becomes and will try to follow it. A company launching an NFT in a press release is reminiscent of the days when companies proudly announced that they had a website. And the media obediently reported that as news as well. Hello 1995, nice to have you back.

Copyrights of NFTs increasingly problematic

A particularly good long read on who actually owns what in the wonderful world of NFTs. A great quote:

'"Right clickers" store JPEG copies of the illustrations of popular NFTs. The owners of those NFTs say this is copyright infringement. Only one of them can be right.

Building vast NFT worlds.

This particularly nuanced and comprehensive article dates back to March 12 but I just got it via @phitar. The article is special because it considers NFTs from a technical, as well as a practical and even artistic perspective. The author, Simon de la Rouviere, programs, writes, makes electronic music and is a CEO. If he can also dance, I have discovered my homo universalis of NFTs.

Former prosecutor launches $1.5 billion crypto fund

Of course, founder Katie Haun has done much more, but in the blog post introducing herself, this sentence stands out:

"I spent more than a decade at the U.S. Department of Justice prosecuting organized crime, homicides, public corruption, prison gangs, white-collar crime and money laundering."

And now she is going to invest in pictures of monkeys.

A second passage that stands out:

"We have built community participation into our practices from day one. As an early investor in this market, I am proud of the pioneering program I helped develop to delegate governance rights and tokens to community organizations, universities and nonprofits."

As with Qantas, the question is: how? Hopefully we are going to see this noble initiative become a reality.

SushiSwap gets a Swiss foundation

All well and good such a Decentralized Autonomous Organization (DAO), but if it can get you into trouble in terms of liability, a Swiss foundation seems like a good solution. The DAO member of DeFi platform SushiSwap who is proposing this is budgeting $100,000 for set-up and another $100,000 for the foundation's annual costs. That will get you about just about as far as registration in and annual dues to the Swiss Chamber of Commerce in Switzerland.

Categories
NFTs

The maker of Bored Apes and Apecoin is worth $4 billion and that's not expensive

Bored Ape Yacht Club | Yuga Labs

Just yesterday I wrote about the extraordinary way Yuga Labs, the company behind the Bored Ape Yacht Club NFTs and Apecoin, is setting up and organizing its various projects. Just now, the company announced it received a $450 million investment from a group of investors led by leading venture capital firm Andreessen Horowitz. That puts Yuga Labs, which recently acquired the popular CryptoPunks, at $4 billion. And that's very reasonable.

On Twitter a few days back @LeonidasNFT (which, given his handle, does not seem to be an outspoken critic of this sector) shared the extensive pitch deck of no less than 90 pages. Every analyst and investor in the crypto and NFT world is currently plowing through that pitch deck again, trying to understand how such a young company manages to get such a huge valuation.

In the comprehensive presentation, which appears to be authentic, a few things stand out:

  • Bored Apes Yacht Club (BAYC) and Mutant Apes Yacht Club (MAYC) are just the beginning of an entire ecosystem of gaming, apparel and events
  • 46% of Yuga Labs team is female: this must be a record in the technology sector
  • Yuga Labs knows particularly well why people buy Bored Apes, a striking quote reads, "celebrities are buying Apes to signal that they know what's up. So not for the intrinsic value, but for the flex.
  • Apecoin is the first step in the strategy to attract a larger NFT audience for whom Bored Apes are now unaffordable
  • Yuga Labs is not building yet another metaverse, but, note: "the (italics of Yuga Labs) interoperable gaming metaverse - a MetaRPG."
  • The vision of allowing users to create their own NFT characters and in-game assets is a success factor
  • The announced SDK (toolbox) that collections, creatives and developers can work with is also a major success factor. A nice summary of the strategy is:

"SDKs for all the things that matter to our users today and a platform for them to collaborate on what's next."

I foresee a whole wave of bruisers digital nomads who update their LinkedIn profiles like crazy, from social media experts (2015) and ICO experts (2017), they are now becoming Metaverse guides and MetaRPG gurus.

Yuga Labs makes a bold statement, "What we've created combines: storytelling, pop culture, taste, and fun in just the right amounts." But I do agree.

Because if Yuga Labs manages to build out its current market position in accordance with the strategy summarized in the pitch deck, the company will be a giant money machine (or Ethereum machine, if you will). The land drops alone generate revenue of $200 million at Ethereum's current value, with an ROI of, mind you, 77x!

The entire financial forecast reads like a science fiction movie with, in addition to land sales, revenue sources called Mechanical Dogs, Mecha Ape and Goblins, among others. Madness, you may think, but it should lead to annual sales in 2022 of over half a billion dollars and a profit margin of 98.8%!

Given the current success of Yuga Labs, this revenue seems very achievable; it's hard to judge on cost and profit margin. After Consensys' hit, which just raised $450 million on a $7 billion valuation, it is clear that the entire ecosystem around Ethereum is growing in value tremendously fast.

It's nice that Yuga Labs gets the $4 billion valuation from Andreessen Horowitz, the investment firm that Netscape founder Marc Andreessen started with his friend Ben Horowitz. Netscape itself was worth $3 billion in 1995 at the close of trading on the day of the IPO. Analysts fell over each other in their disapproval because while Netscape was the most popular Web browser, it was not yet making a profit. That doesn't bother Yuga Labs, and yet it will rain vinegar in the columns devoted to the company in the days and weeks ahead. As always, the motto is: don't pay attention to the media, but check the blockchain for real transactions within the entire ecosystem that Yuga Labs is developing at breakneck speed.

Categories
crypto NFTs

ApeCoin tests all limits of NFTs

A number of surprising articles have appeared in recent days. First, an exposé of sorts about ApeCoin on Coindesk and yesterday a complete crypto manual by the New York Times, of all places. That manual was already dated at the time of publication given the ApeCoin story, but it's a positive move by the fairly crypto-critical New York Times.

There are doubts about Coindesk's independence since its acquisition by Digital Currency Group (DCG), especially when their journalists write about DCG but meanwhile share in DCG's profits via SARS. Personally, I rate Coindesk Chief Content Officer Michael Casey highly, especially as long as Coindesk continues to publish excellent articles.

In 'What is ApeCoin and who is behind it? the new hype ApeCoin is closely analyzed. The main conclusions: Yuga Labs plays a much bigger role in the ApeCoin ecosystem than it wants to make it appear. A crucial passage:

"In that sense, an NFT can act as a license to print money. Again, Yuga Labs does not claim any responsibility for ApeCoin - it just grabs a significant portion of the profits."

In short, Yuga Labs takes the joys, not the burdens. The question is: How does Yuga Labs do this? In a nutshell, Yuga Labs claims the ApeCoin DAO makes all the decisions.

According to Rohan Gray, a law professor at Willamette University and observer of cryptoregulation, the distinction between ApeCoin DAO and Yuga Labs probably also has to do with something called the Hinman test. It is named after former SEC official William Hinman, who now works at Andreessen Horowitz; Hinman's idea was that if a governing body is "sufficiently decentralized," it is free to issue a token without having to register it as securities. ApeCoin DAO is decentralized (at least in name); Yuga Labs is not.

Precisely because of this crucial position of Yuga Labs, another recent Coindesk article on this company is very interesting, titled, "The First NFT Monopoly. But that aside, back to Professor Gray:

"It's the next iteration of the crypto world's attempts to circumvent securities regulation. First it was coins, and then in 2017 with the [SEC's] ICO report they couldn't do that, so they switched to stablecoins, and then that came to an end, so they switched to NFTs."

According to Grey, ApeCoin amounts to an attempt by the crypto industry "to almost glorify 2017 - they were kicked out of the bar with a fake mustache, now they've come back within a week with a fake nose."

It will be interesting to follow whether NFT projects, often in combination with DAOs, manage to pay profits and dividends without falling under SEC regulations related to securities and equities.

Traditional media have a hell of a job to make the crypto and NFT playing field understandable to their readers. So kudos to the New York Times, which yesterday published a comprehensive guide under the wonderful title "The Latecomer's Guide to Crypto. We are waiting for the first update of this guide on projects such as ApeCoin, where an NFT is combined with a DAO, a company and a foundation. Until then, for the Dutch, Gert Jan Lasterie's unsurpassed book on crypto currencies remains the standard work to consult. If only because of its brilliant subtitle:

How you thought you were late getting into crypto but became more successful than people who didn't read this book

Categories
crypto

Do you believe someone about crypto who sold all his Bitcoins himself?

Now that my first week of blogging about crypto is over, I want to answer the most frequently asked questions I've received. One smart-aleck asked, "why would anyone be waiting for the opinion on crypto and nfts from someone who sold all his Bitcoins years ago for way too little and doesn't own any nfts himself? I answer that question last.

The most frequently asked question I received was: why did you start blogging about crypto?  

I have been following the crypto news for years and talking about it with colleagues and friends. In fact, I've learned the most from their opinions and tips. I now hope to accomplish the same on a larger scale, by hearing feedback from readers/followers, although that will certainly take time. Setting myself the task of writing something about crypto and nfts every business day forces me to stay sharp and look a little beyond my own work at Blue City Solutions and our crypto project Bluenote. I do not expect to ever become as good and relevant as Fred Wilson, but I do hope to inform and preferably inspire those interested in the crypto and nft sector, if you will allow me to be so immodest.

You wrote that you don't buy Bitcoin because it emits too much CO2. That argument has been debunked for years, you really need to learn more about it.

Ok, that's not a question and I'll answer it with a sincere counter question: what percentage of all Bitcoin mining is currently done with renewable energy? I am very interested in researching the energy mix of Bitcoin miners, but solid research still seems to be lacking. I would love to hear any tips and read any links to studies!

By setting aside Bitcoin, you suggest that Proof of Work has no value. But there are many situations where PoW is valuable, or do you think all PoW projects are irrelevant?

I really like the distinction between the energy-hungry aspect of Proof of Work (PoW) and the need for a well-functioning consensus mechanism. The relevance of PoW and the actual status of Proof of Stake (PoS) are two topics I try to follow keenly. And I do find Bitcoin fascinating as a concept, as an investment and as a pioneer of decentralized currencies. Satoshi Nakamoto, the author of the Bitcoin white paper, deserves to get a Nobel Prize in economics someday. But I also think there will be better blockchain projects and crypto-tokens. Only, those will always be conceptually indebted to Bitcoin.

Is it true that you once thought Bitcoin was nothing at all?

Yes, there is even evidence of it, unfortunately 😉 More than 10 years ago, Bitcoin kept coming up on the BNR Digital radio program of tech journalist Herbert Blankesteijn, the Dutch Walt Mossberg, where I was a regular guest. At the time, I lacked the elementary interest to delve into Bitcoin enough, and in my mind I compared it conceptually too much to Linden dollars, the currency from the computer world Second Life. The Mount Gox hack didn't help much. My wrong conclusion then was that a central entity, such as a central bank, is needed to prevent this kind of misery. But Mount Gox had nothing to do with Bitcoin; rather, it was a hack of a single point of failure: an exchange. A central entity.

I had never read the Bitcoin white paper until 2015. Although I wonder if I would have been able to distill the most important aspect of blockchain technology from it: decentralization. Of all the special elements of blockchain technology, I find decentralization the most fascinating.

Incidentally, since then my regular checking question to know how to value someone's opinion on crypto has been, "have you read the Bitcoin white paper?" (And if someone answers that question in the affirmative but you suspect they haven't, it pays to ask the trick question, "did you find it such an impractically thick book too? After all, the Bitcoin white paper covers only 9 pages including 1 page of references).

Did you really sell all your Bitcoins after the Mount Gox hack?

Even though I had never read the white paper, I did buy 1000 Euros worth of Bitcoins about 10 years ago. Actually because of the radio program with Herbert Blankesteijn. Mount Gox was not the only reason I sold the Bitcoins again: I had major knee surgery, people I knew had died aboard MH17 and I was embroiled in a lawsuit with the Dutch government that required time, money and energy. It was simply a rotten time. I think I had something like 30, maximum 35 Bitcoin. I sold them for less than 10,000 Euros. There is a reason I say: I NEVER give investment advice.

Although a former head of trading of a large bank once said to me, 'don't whine, because you still had 10 X returns, more than fine. But: you should only have sold half, not all.'

It wasn't until 2016 that I started looking into blockchain and had to completely revise my opinion of Bitcoin and blockchain. There is proof of that too 😉

So you develop crypto (BNOW, the token of the Bluenote protocol) and put together a portfolio of PoS layer 1 tokens, but own no Bitcoin and no nfts: why should I read what you write?

True, I do not own Bitcoin because of its associated carbon footprint, although I remain hopeful that this problem will be solved. For me no gaming assets or nfts, they are still too difficult and time consuming for me to understand properly. I believe enormously in the potential and transparency of nfts, but I would develop them myself rather than buy them from others. Simply because it takes too much time to properly assess their value and then it still remains a huge gamble.

I have been involved in crypto for over 6 years now from Blue City Solutions and Bluenote is our first crypto project, which is still developing; but only this year I think I have enough to say about it in a way, that other people might have some interest in it. The first signs are positive and it is nice to see that serious media like BNR read my blog. Nevertheless, I'm sure I know a lot more I don't know about crypto, decentralization and nfts, than I do about them. My ambition is to share with others my journey of discovery in this fascinating world.

Categories
crypto

Bitcoin, Ethereum, the stock market and the war

There is a tremendous amount of talk about the value of crypto compared to stock prices and especially since the beginning of the Russian invasion of Ukraine on Feb. 24, three weeks ago today. So I did a comparison of how Bitcoin and Ethereum are doing compared to the S&P 500, and the results are quite surprising.

As the starting date of comparing the two benchmarks of crypto, Bitcoin and Ethereum, with the most widely used gauge of stock markets, the S&P 500, I took the date of Ethereum's IPO on Kraken, Aug. 7, 2015. Completely arbitrary, of course, but I could hardly take a date from before Ethereum existed. To avoid making too long a row, I went on to look at the prices on Jan. 1 of this year, then Feb. 24, which was the day of the invasion three weeks ago, and today's position.

I understand that it is debatable to compare an index of 500 largest stock market funds to two cryptocurrencies. But the S&P 500 constitutes about 70% to 80% of the market value of U.S. exchanges. Bitcoin and Ethereum together represent over 60% of the entire crypto market of nearly $2,000 billion. Hence the choice of Bitcoin, Ethereum and the S&P 500.

First, let's look at Bitcoin:

Bitcoin:

  • August 7, 2015: $276
  • January 1, 2022: $47686
  • February 24, 2022: $35000
  • March 17, 2022: $41000
  • Percent increase between Aug. 7, 2015 and today: 14755%

Anyone who bought Bitcoin for $100 on August 7, 2015, had received 0.36 Bitcoin for it, and those are worth nearly $15,000 today. In short, 150 times your deposit back on every dollar.

Since January 1, Bitcoin has fallen 14%; the day of the humanitarian peace mission, cough, the drop was a whopping 26% compared to the first day of this year, but since then Bitcoin has risen 13% again.  

The second crypto to watch is Ethereum.

Ethereum:

  • Aug. 7, 2015: $2.77
  • January 1, 2022: $3683
  • February 24, 2022: $2336
  • March 17, 2022: $ 2820
  • Percent increase between Aug. 7, 2015 and today: 101705%

Anyone who bought Ethereum for $100 on August 7, 2015 had received over 36 ETH for it, and those are worth over $100,000 today ($101080 to be exact). In short, that's over two thousand times your deposit back on each dollar.

Since Jan. 1, Ethereum has fallen 23%, but has rebounded 13% since the start of the war.  

Finally, we look at the main gauge of stock prices, the Standard & Poor's 500.

S&P 500:

  • Aug 7, 2015: 2000 points
  • Jan. 3, 2022: (because Jan. 1 fell on a Saturday, U.S. stock markets did not open until Monday, Jan. 3, those slackers): 4796 points
  • February 24, 2022: 4225 points
  • March 17, 2022: 4357 points
  • Percent increase between Aug. 7, 2015 and today: 119%

Since Jan. 1, the S&P 500 is down only 9% (compare that to Bitcoin and Ethereum) yet up 3% since the start of the war.  

Conclusions:

  • *opendoor alert* over the long term, think at least 5 years, Bitcoin and Ethereum have proven to be much better investments than traditional stocks - despite all the huge declines in between
  • this calendar year, the S&P 500 remains strong, compared to a 14% decline in Bitcoin and a chilling -23%decline in Ethereum
  • since the start of the war, crypto has risen more than the S&P 500, but 13% rise for cryptos against 3% rise for the S&P 500 is not particularly spectacular
  • the myth that crypto is immune to "normal" economic influences such as interest rate increases, war and rising energy prices has been punctured.

And this despite all the rumors that wealthy Russians have been stepping into crypto en masse in recent weeks, with all the assets they did manage to liquidate.

sources: Coinmarketcap, Google Finance and Yahoo Finance.

Categories
NFTs

Zuckerberg's midlife crisis with NFTs on Instagram

Facebook, sorry, Meta CEO Mark Zuckerberg announced yesterday that in the coming months it will become possible to mine and trade NFTs on Instagram. It is an attempt by Zuckerberg to stay relevant to young people and appease the stock markets, dwarfed by TikTok on the one hand and, on the other, the huge market value of NFT marketplaces like OpenSea.

Engadget reports this about the session with Zuckerberg at the leading festival SXSW:

"We're working on bringing NFTs to Instagram in the near term," he said. He didn't detail exactly how that would take shape, but suggested people would be able to show off their existing NFTs and potentially mint new ones. "I'm not ready to kind of announce exactly what that's going to be today. But over the next several months, the ability to bring some of your NFTs in, hopefully over time be able to mint things within that environment."

It was never a poet.

SXSW has increasingly changed from the springboard where revolutionary tech talents take the axe to the carrot of ruling powers such as the Facebook empire, into a kind of bar-dancing where mom and dad also have a dance after Friday afternoon bingo. That can be a lot of fun, and Uncle Frackers himself has organized regular dings during SXSW. But it was no coincidence that the session with Zuckerberg, who likes to present himself as a great technological visionary, was also open to convention attendees with a film and music badge, with the recommended knowledge level: "beginner.

Level: Beginner

Meta's biggest money-maker was always Facebook, which has now turned into a kind of online SBS6 for people over 50. Instagram is also moving hard in that direction, while Whatsapp remains difficult to monetize. The playful vistas Zuckerberg paints about the Metaverse have already spooked investors: this year, FB (short for Meta, cough) shares fell as much as 43%. That came after Meta estimated revenue figures for 2022 much lower than the market expected, primarily a result of Apple's tightened privacy measures. In short, Apple is making it harder for Meta to track and stalk you everywhere online.

With that have come some new problems for Zuckerberg. First, it is clear that his weapon in the battle for youth, Instagram, is being completely outpaced by TikTok. Every successful feature of TikTok is copied by Instagram while it itself hardly introduces any innovations that TikTok adopts. Instagram also turns out not to yield good conversions for advertisers, in other words: nice for branding like a billboard along a busy highway, but not a marketplace where people make transactions on which Zuckerberg pockets a percentage each time.

But there is a fast-growing marketplace achieving huge revenues and good margins: OpenSea, the marketplace for NFTs that was recently valued at over $13 billion. Zuckerberg has obviously followed the rise of TikTok and OpenSea closely and hopes to kill two birds with one stone with NFTs on Instagram. That desire is not surprising, as young TikTok users are largely crypto users and the primary target audience for NFTs. TikTok is a meeting place for the digital vanguard, just as OpenSea is for traders in NFTs.  

Zuckerberg's announcement about NFTs on Instagram is very reminiscent of the puffed-up marketing copy he churned out about Libra. That was that crypto currency from Meta that was going to be the whole thing and died a quiet death within three years. For as unimaginably long as it seems, Libra was only announced three years ago, in 2019, and has already been buried without fanfare.

It's not to say that NFTs on Instagram are definitely going to fail, just that all the conditions for total failure are there: a poorly converting medium for transactions, an aging target audience that comes for very different things than NFTs, and stronger competitors on the chessboards where it counts: the active youth at TikTok and the NFT merchants at OpenSea. The wait is for TikTok to do something with NFTs. Perhaps in a partnership with OpenSea, the dream scenario for traders who go short on Meta.

No, the more important crypto and NFT news of the past few days was elsewhere than Meta. Singapore announced it was going to impose income tax on NFTs, very pragmatic and logical. It shows how big NFTs already are in Southeast Asia. And Consensys, maker of tools like Metamask, raised $450 million from investors. Now if Consensys would use those tokens to develop user-friendly crypto wallets, the breakthrough of crypto and NFTs to the general public is near.  

Categories
crypto

A lot does go wrong with Binance

Binance was long the exchange of choice for many crypto investors. With a large number of tokens claimed, fast settlement and relatively low fees, it managed to grow into a billion-dollar business. But last month, Binance no longer appeared to be welcome in Israel and Singapore. Two admittedly small markets, widely seen as forerunners, and that sent a very bad signal to the larger global markets. The question is when will Binance finally get serious about cracking down on money laundering?

In December, Binance Singapore customers suddenly received notification that the company would withdraw from Singapore within weeks. Customers were urged to transfer all their funds to accounts elsewhere and close their accounts by mid-February. Binance's PR machine came out with glowing lyrics about renewed focus and strategic rethinking, but it sounded as believable as a school student claiming to be struggling with a flat tire and an open bridge on the way to a test that he would have studied really hard for.

According to insiders, Binance had been admonished by Singapore's National Bank (MAS) to pack their bags because it had no chance of being licensed under the internationally renowned Payment Services Act (PSA), which established Singapore as a global leader in crypto regulation. Two years after the PSA was enacted, only a handful of licenses have been awarded while over 300 applications had been submitted. Even for progressive Singapore, achieving conclusive regulation of the opaque crypto market is difficult.

Within Binance, it maintains that it withdrew its license application in Singapore on its own initiative, as did major players such as Apple, Adyen, Google and Revolut and with them 100 other companies. The difference is that these companies do not have to withdraw from Singapore, but most of them have been made to understand by MAS (especially the parties that do not manage customer assets) that no license is required for them. In fact, Singapore wants to bring in mostly large exchanges. This is precisely why it is wry that Binance has to leave and says it is now focusing on the United Arab Emirates as the location of its new headquarters.

Hired with much drumbeat in August as Binance Singapore CEO, Richard Teng, who had no less than 13 years of experience at MAS and was also Chief Regulatory Officer at the Singapore Exchange, has now been transferred to the Emirates as head of Middle East and Africa. There is no one who believes this was the intention when he was appointed. Teng did, however, just proudly announce that Binance has obtained a license in Bahrain. Nice, but incomparable to a license in Singapore, the business hub of more than a billion people in Southeast Asia.

And with that, Binance is making the exact same feint it made a few years ago. After all, it was less than four years ago that Binance founder Changpeng Zao(CZ for crypto friends) triumphantly announced that Malta would become Binance's new center, after China had radically closed the doors to Binance and all crypto-exchanges and Hong Kong still had to tolerate more influence from China than had been hoped for. But after Malta was told from Brussels to crack down on money laundering, the love between Binance and Malta soon cooled. It remains to be seen how long Dubai will leave the red carpet rolled out for CZ after China, Malta and Singapore.

Because in the same week that Binance had to shut down Singapore, leaving behind only a bare website, Israel also came out with a warning about Binance. And let's not forget Israel is working hard to strengthen economic relations with the Emirates and Bahrain, where crypto is a topic of conversation. It is not likely that Israel will forget to remind its new home friends Abu Dhabi and Dubai of all the international CDD/AML/KYC rules that it does enforce itself. Especially not after Israel announced last weekend that it does not want to be a go-between for assets allegedly originating from Russia.

Reuters was already able to get its hands on internal reports indicating that Binance is taking a dim view of the fight against money laundering:

"In encrypted Telegram messages seen by Reuters, Binance staff, including Chief Compliance Officer Samuel Lim and former Global Money Laundering Reporting Officer Karen Leong, raised worries about weak "know-your-customer" checks aimed at preventing money laundering. Three former senior Binance employees told Reuters they voiced such concerns to Zhao himself but he ignored them."

It is to be hoped for the crypto industry that Binance succeeds in growing into a serious global market player. The company has always been very innovative and had a speed and clout that competitors like U.S.-based Coinbase and Kraken looked at admiringly. As an outsider, it is probably impossible to imagine the enormous obstacles Binance has managed to circumvent in growing from China into an international crypto powerhouse. The question is whether the need for reform and alignment with international anti-money laundering policies permeates CZ.

Meanwhile, the almost equally unregulated FTX is developing into a major competitor and Crypto.com is embarking on massive marketing campaigns. And although Coinbase recently faced a massive security breach, the U.S. company continues to grow strongly, including through a high-profile commercial featuring only a QR code during the Superbowl. Aired exactly on the day Binance closed its doors in Singapore.

Thus, 2022 appears to be the year of truth for Binance. The pioneer needs to get serious about money laundering, because at some point you run out of countries to flee to.

Categories
crypto

Those who cannot take their losses very well should stay out of crypto

The most frequently asked question of 2022 is without a doubt: how much money should I invest in crypto? Over the next few months, I will share how I try to build a balanced crypto portfolio with limited active trading. This is NOT advice. It is mainly to prove that it is possible to invest in crypto without reaching for your phone like crazy every second because you are afraid of missing the next hype or crash in Bitcoin.


In 2017, legendary investor Fred Wilson (Twitter, Tumblr, Zynga, Etsy, Coinbase, etc) gave this answer, based on the investor's profile:


- young, aggressive risk taker - 10% of net worth in crypto
- sophisticated investor seeking a high performing portfolio - 5% of net worth in crypto
- average investor, slightly conservative, but with some appetite for risk - 3% of net worth in crypto
- retiree seeking to preserve portfolio value and generate income - 0% of net worth in crypto

A detailed and careful answer. And, in my opinion, completely unnecessary. Some elderly people are incredibly well able to make a substantial dent because their house is already paid off up to and including the geraniums. While many young, aggressive risk takers have to sell their textbooks and become delivery drivers at Gorilla's when they get their memecoins see evaporate. Because I don't know any young aggressive knuckleheads who manage to limit their crypto gambling to 10% of their net worth, as Wilson advises. (I'd like to see more research on the investment decisions women make; are there still fewer women than men in crypto, or are they really just smarter because quieter about it?)

When people ask me how much to invest in crypto, I always answer with a counter-question: can you stand to see everything you put into crypto go up in smoke? Evaporate to nothing? Binance, Binance, alles ist vorbei? And just as important: will you get into a fight with your partner if you lose everything?

The couple lunatics go-getters who then remain always ask the same follow-up question: which crypto should I buy? To that question, too, Fred Wilson was kind enough reply to give:

"A diverse set of crypto assets would include Bitcoin, Ethereum, the other major layer one blockchains (Solana, Flow, Avalanche, Polkadot, Algorand, etc), the major Defi protocols (Uniswap, Aave, Compound, etc), storage protocols (Filecoin, Arweave, etc), telecommunications protocols (like Helium), some layer two protocols (like Stacks, Polygon, etc), some gaming assets (like Axie, Decentraland, etc), a maybe some NFTs."

Wilson sometimes forgets to indicate which of these companies he himself, or his fund Union Square Ventures, has already invested in. But that doesn't make his answer any less relevant. Previously, Wilson stated that he and his spouse have invested 5% of their assets in crypto, both directly and through funds.

In the coming months, I will share here how I try to put together a crypto portfolio using a more conservative methodology than Wilson. No gaming assets or NFTs for me, those are too difficult and time consuming for me to understand properly. I am in crypto for the long term and want to reduce all costs as much as possible, preferably passive HODL-end.

Summary:

1. I am convinced that "something huge" will come out of crypto innovations. Decentralization and transparency bring an intrinsic new value that cannot be achieved in other ways.

2. I believe strongly in the crypto market, but I don't have the guts to assume I can pick the winners. This has proven difficult with every disruptive advance in technology. The challenge is to identify potential winners early.

The plan is to buy layer 1 tokens in proportion to market cap that are as Proof of Stake as possible, i.e. have lower energy consumption than Bitcoin. It has the disadvantages that Ethereum will be over-represented (well over half of my crypto portfolio) and that I will always get fast-growing hypetokens into my portfolio too late.

Of course, everyone dreams of that one stale token that rises 45 million percent in value, like Shiba Inu did in 2021. Whoever bought SHIB for $100 at 1 minute past 12 on Jan. 1, 2021, and sold them again in December, got to credit over $45 million. But I would then fret about the right time to sell, which is why I avoid these tokens.

My goal is to eventually have at least 100 tokens in my portfolio that each have a minimum market cap of $1 billion. The crypto market is not that big yet. Preferably I will automate all trading through a liquidity pool, but more on that in the coming months. In any case, the goal is to make the portfolio transparent for everyone. And it is explicitly not investment advice. It just needs to make clear that it is possible to invest in crypto without reaching for your phone every second like a crazed neurotic for fear of missing the next bitcoin swing.