“This Week in Crypto” Summary for December 20, 2019
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Crypto Market News Highlights
1) Highest in 2 Years: 65% of Bitcoin Hash Power Is in China, Report Finds
Anybody that has ever read an article about crypto would know that the majority of hash power is in China. What this shows is that Bitcoin is vulnerable in terms of its hash power. Chinese government, as we’ve seen many times, can simply move from one day to the next and say “bye-bye, miners”. If they do that and a big chunk of that mining power went offline, what would happen? Are there other miners around the world that are able to handle the load?
2) VeChain Loses $6.6M in VET Tokens to Hacker in Attack on Buyback Wallet
This is social engineering. Kevin just had a call the other day with a company that does penetration testing as well as vulnerability testing. One of the things that they test is social engineering. Most of these “hacks” are social engineering hacks. They get the information through means of asking or fooling someone.
What needs to be said here is that almost every week there’s a hacking story. But there’s a hacking story in every other industry as well, we just don’t pay attention to them on this show. With that said, there are more and more companies in the crypto space now, and the number of hacks hasn’t increased. That means that the new companies coming in, are following the rules that they should be following.
3) Former Kraken employee sues exchange for “unethical and illegal business tactics”
Employees aren’t necessarily saying the truth. Neither are the employers. It’s word against word and anyone can make a claim. At the end of the day, we will have to see what the judge decides.
4) SEC looks to expand accredited investor classification
It’s not really what everybody is hoping for. They’re looking to expand it in a way such as if you are an employee of a fund and you have some relevant knowledge.
It’s going in the right direction. People complain so much about government entities that control other aspects of their life, but they don’t mind government entities for the most part. That’s because the vast majority doesn’t invest. Not because of the laws, but because they don’t have the education to invest and they leave their money in their bank accounts.
Kevin thinks we aren’t going to see any major reforms in any of these credit/investor classifications, until educators from primary school to secondary school start teaching people how to generate and create wealth, and taking any means to create a better financial future. Unfortunately, this is unlikely to happen anytime soon. It might be something Kevin will be dedicating some of his time to when he gets older.
5) Binance Invests Undisclosed Sum in Crypto Derivatives Platform FTX
Kevin already said this two years ago, that he couldn’t believe that Binance wasn’t doing any acquisitions. Now they’re starting to acknowledge the fact that they can buy things that do something better than they can, and better their service.
What they should be buying is a regulated crypto exchange so that they can reform their main Binance exchange so it doesn’t fall to the wayside when that time comes.
Would you like to read about more market news? Check out our Medium post!
Are market makers in place and operating?
The 27th is the date the market makers gave us, so we’re still waiting on that.
Which cryptos are being reviewed by LHV currently? Any progress with the self-assessment framework?
Kevin hasn’t pestered LHV yet on the self-assessment framework, because they’re going to be in the CoinMetro offices on January 6th for our compliance audit, and Kevin will bring it up with them then.
We are in the process of putting together a new list with 5-6 assets, which will be submitted to LHV before January 6th.
Any updates on Chainlink?
Chainlink reached out but unfortunately Kevin missed the call last week as he was double booked. They reached out again, and will be trying to have a call next week before the holidays.
LINK/EUR is already live and ready for trading!
Is the Airdrop Family idea still on the table?
Yes, it still exists. We need to get a new legal review to understand how we can best make it work under current regulations. Will probably get that done in the beginning of the new year.
What job positions are open?
We’ve got many open positions. Customer service, finance, marketing, head of digital, content, head of marketing. On the development side, Senior and Junior devs, as well as UI/UX.
More information on the job openings will be published on our Careers page very soon, so stay tuned for that.
When are we getting the Dutch IEO?
We’re in touch with them. The IEO would likely be February to March, they have some preparations they need to do on their side, especially from the marketing aspect.
When do you see the debit cards rolling out?
That depends. We’re contemplating right now going after our own Payment Institution license. If we do that, we’ll wait for that license to happen. That’s 6 months from when we submit documentation, which could take 4-6 weeks to put together.
If we decide to go the AR (Authorized Representative License) in the UK, we would have it faster, but also limit our ability and profitability. It’s a good question for about a month from now.
When can we buy the t-shirts?
We’re figuring out how we’re going to do that as well. We might have a T-shirt of the month club, where you pay a fixed fee in XCM to get a new T-shirt. We might just sell them one off. The club makes sense, and we could have a few exclusive T-shirts there.
When is margin posting due?
March-April is likely when margin posting would go live.
If I participate in a TraM, will I be able to see individual trades done by the manager?
Yes, you will see every trade that’s done and your allocation of that trade. 100% transparency.
How come nothing is happening to Binance, when they care so little about legislation?
It’s not that nothing is happening, it’s just that you’ve not seen it. They got out of the US, not because they just one day wanted to. They stopped taking clients from a lot of different countries. They’re definitely getting letters, but they obviously feel that nothing can happen to them.
Kevin thinks they’re somewhat shielded by the Chinese government. Where have you seen a Chinese national that runs a law-breaking company and hasn’t been thrown in jail? Big cases like this, when it’s being looked at by for example the US government, will take 3-5 years usually to come into fruition. Binance hasn’t even been around for 3 years. Patience.
Are you talking with more investors?
We are talking to some investors. No talks close to close, but there’s a constant flow of talks with investors. With our funding round secured, additional fundraising — while ongoing — is no longer as urgent.
With EU AMLD5 coming in January, is CoinMetro the only compliant exchange?
Not the only one, but the list of compliant exchanges is likely 5% or less of all exchanges.
Adding to the washtrade question, would CoinMetro do something like a yearly audit?
As we get more and more regulated, we will have to do audits. Not necessarily wash trade audits. If we’re wash trading, it would become entirely see through in a financial audit, because a large amount of revenue would come from it, and we would have to show transactions.
We have talked about actually doing this, but right now with such low volumes, it’s not so meaningful.
What kind of volume do you expect the two algo traders to bring?
We don’t know yet. We know what volume they do in ratio to how much money they hold on hand, but that’s based on pricing from other sources. So, as Kevin can tell over the years in FX, you can have the same system operate on the same currency pair with two different brokers, they perform dramatically different.
Would you say XCM is spread thinly enough among clients, or do you think there are too many whales?
Kevin doesn’t think there are too many whales. We have roughly 7000 people that own XCM. Only a handful that have what Kevin would consider to be a whale.
Want to work your way towards becoming a whale? Buy some XCM!
Most other exchanges wash trade and report false volumes. Will there be an authority to stop this in crypto?
Regulation is the authority to mitigate that, yes. Wash trading happens in every market. Sometimes it’s caught, sometimes it’s not.
In order to get a license, you need to show you’re a trustworthy person — that you and your team is fit and proper. All those kind of policies are put in place, and mitigates this down to a very, very low percentile.One thing that regulation is good at, in terms of all barriers it puts, is filtering out nonsense and creating a more clean market. Doesn’t mean it’s a fairer market.
Many people can spend more time online during vacation times. Wouldn’t it be logical to push TraM online as soon as possible?
True and not true. From Kevin’s experience in FX, Christmas is dead. It gets extremely volatile as institutions pull their money out — not really the case in crypto. It gets too volatile and retail guys, while on their vacation, don’t want to stare at charts.
So around Christmas and around the summer, volumes usually dwindle. It’s not that we’re delaying it because we think we might get low volumes, or trying to get it out faster because there may be high volumes. We play the long game here at CoinMetro.
When the MVP for the CSD is completed in January, what are the next steps in order to get it fully live?
CoinMetro is still in the application process, we haven’t sent some additional documents that were requested yet. Mainly because we’ve been busy. The CSD will start the application process in the beginning of January, about the same time when the CSD is ready to be tested.
We’re going to coordinate so that CoinMetro and the CSD enter the sandbox at the same time, and then we will launch our first issuance in the CSD, and CoinMetro will start to list tokens. These tokens probably already exist at first, but it’s to show how a regulated MTF would work.
Once we start getting more issuances on the CSD side, the two companies will play together a bit more, in terms of showing how a complete market cycle works from primary to secondary market.
What will be the key drivers of revenue?
Any product we can make multiple revenue streams. On margin, we make interests, swap interest. TraM is traded on margin, and on top of that, we make a percentage of the performance fees generated by the manager.
With payments you can make a good deal of money. Debit cards is FX and payments wrapped into one. If they’re choosing some type of crypto to pay with, that’s an exchange as well.
Once XCM is more stable, will you make it the only way to use TraM?
The goal is definitely to allow XCM in TraM, and be the majority allocation in all aspects of the platform. Maybe we won’t limit it to just XCM. Maybe there would be XCM TraMs with some benefits to them, and BTC/ETH TraMs with less benefits. Costs more to enter, higher fees, or something like that.
Do you think by the end of 2020 CM can be in top 5 exchanges in the world or Europe?
Yes, Kevin thinks that’s possible. Major exchanges that currently exist, won’t be here. The timeframe when that happens, depends on a lot of things. 2021, 2022, we don’t know. The tides will happen.
Europe is definitely an easier “get” for us in this timeframe. Maybe not 2020 in terms of global domination.
Does CoinMetro have a publically available roadmap?
Currently, no. But, it’s part of our plan right now as we reformat a bit after our fundraising round. We have a sharded roadmap internally, and we need to put it all together. Part of the whole transparency angle at CoinMetro is to have a publically available roadmap, so that people can see what we’re doing.
No specific timeline on when we’ll have that out, but we’re looking at it.
How is CoinMetro planning to improve adoption of the exchange?
We haven’t done any marketing yet. The retention rate of people that come to the exchange, is quite high. We just haven’t gotten the word out. The first rule of adoption is awareness.
So, the answer is spending money on marketing. We’re in the process of hiring and expanding our marketing team, and looking for the diamond in the rough to make sure that we hire the people that will bring us to that next step — which is sales and conversions.
Are there plans to improve accessibility to the exchange? I couldn’t do my KYC for 5 months until the process was changed.
Well, there you go — the process was changed. A lot of people came from this idea that crypto was KYC-less, frictionless. We were one of the first guys, if not the first guys, who said that that’s not going to happen. Very soon that wouldn’t be the case. And that’s what happened.
A lot of competitors now need to roll out KYC programs now. Look at BitPanda. Even things like Shapeshift. They’re doing it sloppily. We went through a lot of growing pains with KYC. We’ve been doing KYC for years, but we tried to make a new process for crypto, and that took some time. We’re still making it better.
We have a 1.5 Tier coming out soon, which will allow certain amounts of money movements with minimal identification/verification. Our goal is that a high 90 percentile will be able to get through that process, and we continue to streamline.
Not KYC-verified yet? Get verified today!
“Kevin Explains Crypto” Term: Sharding
Databases can grow so large that even a small process inside that database can take a lot of time to complete. What sharding does, is that it takes pieces — shards — of that database, and puts it in different instances/servers.
When that process needs to run, it’s running small pieces of that database inside of another instance, which makes it faster. In blockchain, it’s the same thing. If you have a huge block size, and every time you run a transaction, you have to deal with that block. If you shard that block, make it much smaller across many different nodes inside the network, then it can actually run faster.
Sharding is nothing new, it’s not going to solve all the issues with blockchain just as it didn’t solve all our traditional database issues in the past.
Interested in learning more? Have a look at the video where Kevin explains “sharding”:
Listen to Last Week’s TWiC on the Go
Get the complete scoop by tuning in to our audio version of last week’s TWiC on SoundCloud. Happy listening!
That’s a wrap for this week’s AMA with CoinMetro Founder Kevin Murcko! Please join us next week on CoinMetro’s Facebook and YouTube Channel at 1 PM (UTC) for another round and make sure you submit your questions to the CoinMetro subReddit!
As always, we’re available to answer any questions you may have on our Telegram Group 24/7.