DECENTRANET NEWS

Blockchain Consensus Algorithms Don’t Have to Be Confusing: PoA, PoWeight, BFT, and DAG (Part 2)

Blockchain technology is a significant technological advancement. Decentralized, peer-to-peer systems are only possible due to consensus algorithms. But what do these consensus mechanisms do, how do they work, and what makes them different? Here’s Part 2 of our series covering all you need to know.

 

Previously, we published Part 1 of this series (Blockchain Consensus Algorithms Don’t Have to Be Confusing: PoW, PoS, and DPoS (Part 1)) to explore some of the most popular consensus algorithms. As we stated in Part 1, due to the energy consumptionrequired to power the network, many are concerned. Even though bitcoin solely exists in ones and zeroes, the network is a massive energy drain. According to the bitcoin energy consumption tracker at Digiconomist, bitcoin currently consumes 66.7 terawatt-hours per year.

Now, many in the cryptocurrency space are discussing possible solutions and implementations for reducing energy usage and improving efficiency for both bitcoin and other cryptocurrencies. Below, we explain all you need to know about PoA, PoWeight, BFT, and DAG.

What is a Consensus Algorithm?

As a primer, and in case you missed our Part 1 series, a consensus algorithm is a process in computer science used to achieve agreement on a single data value among distributed processes or systems. Consensus algorithms are designed to achieve reliability in a network involving multiple unreliable nodes.

With a distributed network of computers, it’s crucial that each participant is on the same page. For a cryptocurrency system, that means ensuring a sufficiently large number of nodes in the network are in agreement about what the transaction history is, and how to validate a transaction. This is what establishes the singular version of the truth that is a blockchain. Additionally, these consensus algorithms make abusing decentralized networks by a singular party incredibly difficult.

https://101blockchains.com/consensus-algorithms-blockchain/#prettyPhoto/0/

Proof-of-Authority (PoA)

As seen in: POA Network, GoChain, GoJoy, and private blockchains.

Proof of Authority, or PoA, is a consensus designed as an optimized Proof of Stake model that utilizes identity on the blockchain as a staking mechanism rather than tokens. Supporters of Proof-of-Authority (PoA) assert that this consensus is a compromise between models aiming at complete decentralization and more efficient, centralized models. “PoA” was coined by co-founder and former Ethereum CTO, Gavin Wood, as the consensus was originally created to mitigate spam attacks on Ethereum’s Ropsten test network.

As Blockonomi states, “The main characteristics of a PoA network are a low requirement of computational power, no requirement of communication between nodes to reach consensus, and continuity of the network is independent of the number of the available genuine nodes since they are pre-approved and verifiably trustable through cross verification in the public domain.”

Using PoA, transactions are approved and blocks are created by specialized approved accounts. While PoA offers high throughput, its centralized nature means you’re likely to only see it in private networks.

https://medium.com/poa-network/proof-of-authority-consensus-model-with-identity-at-stake-d5bd15463256

However, as PoA Network explains:

“The big vulnerability of such a concept, however, is the fact that the same size stake may be valued differently by different actors. For example, take Alice, an early adopter of the blockchain technology with a massive portfolio of digital assets, and Bob, a newbie who is just exploring the emerging token economy. Let’s say they both hold the same stake in a hypothetical network, Elixirium, 1,000 ELX each. In isolation, we could assume that Alice and Bob are equally interested in Elixirium’s success. We cannot be as confident, however, when we take their other holdings into consideration. If 1,000 ELX is only 1% of Alice’s total wealth, while for Bob it represents nearly 50%, their incentives are tough to compare. Alice might care about Elixirium much less than Bob does, even though they have the same stake. Consequently, her desire to act in the interest of the network might also not be as strong as Bob’s.

Is there a way to preserve the staking concept, with scarcity and measurability of stake, while ensuring that all who place that stake value it similarly, regardless of other circumstances? Proof of Authority, an alternative consensus mechanism in which the nodes validating blocks are the ones explicitly allowed to do so, might be an interesting approach to consider. Proof of Authority (PoA) is a modified form of Proof of Stake (PoS) where instead of stake with the monetary value, a validator’s identity performs the role of stake. In this context, identity means the correspondence between a validator’s personal identification on the platform with officially issued documentation for the same person, i.e. certainty that a validator is exactly who that person represents to be.”

Proof-of-Weight (PoWeight)

As seen in: Filecoin and Chia.

Proof-of-Weight (PoWeight) is similar in concept to the PoS system but uses different criteria for determining someone’s likelihood of discovering the next block. As explained in CoinCodex, “Proof-of-weight consensus mechanisms are based on the Algorand consensus model, developed by researchers at the MIT Computer Science & Artificial Intelligence Laboratory. The Algorand protocol facilitates very quick transactions by relying on a Byzantine agreement protocol, which also makes it capable of scaling to many users.

In a network utilizing proof-of-weight, weighted users play an integral role in the process of achieving consensus. Every user is assigned a certain “weight”, which is relative to a selected value that represents a user’s contribution to the network. In order to prevent double-spending attacks and other foul play on the blockchain, the majority (more than two thirds) of the weighted fraction has to belong to honest users.”

In PoS, your chances are dependent on the percentage of coins at stake related to the rest of the network, but PoWeight can use other weighted values to determine the probability.

Byzantine Fault Tolerance (BFT)

As seen in: Stellar, HyperLedger, and Ripple.

Blockchain technology uniquely addresses the classic computing issues, the “Byzantine Generals’ Problem”. As best described at Lisk, this Problem states that, “no two computers on a decentralized network can entirely and irrefutably guarantee that they are displaying the same data. Assuming the network is unreliable, they can never be sure that the data that they communicated has arrived. At its core, the Byzantine Generals’ Problem is achieving a consensus across a distributed network of devices, some of which could be potentially faulty, while also being wary of any attackers attempting to undermine the network. Byzantine Fault Tolerance means that two nodes can communicate safely across a network, knowing that they are displaying the same data.”

A fundamental problem in distributed computing and multi-agent systems is to achieve overall system reliability in the presence of a number of faulty processes. This often requires processes to agree on some data value that is needed during computation.

There are two popular forms of Byzantine Fault Tolerance (BFT):

Practical Byzantine Fault Tolerance (pBFT): Used by HyperLedger, pBFT eliminates the need for transaction confirmations and relies on the assumption that less than ⅓ of the nodes are acting maliciously because of the permissioned, invite-only nature of the system. There’s already a level of trust between parties in the network.

Federated Byzantine Agreement (FBA): FBA is utilized by currencies like Ripple and every Byzantine General is responsible for their own chain and goes through information to establish the truth. In the case of Ripple, these Generals are pre-selected, but for Stellar, anyone can be a validator so you choose whom to trust. Nodes don’t need to be verified ahead of time and system-wide quorums are reached by decisions from individual nodes.

Directed Acyclic Graphs (DAG): Non-Blockchain Consensus

Reaching consensus is important for all distributed systems, not just those that are blockchain-based. Outside of blockchain networks, there are various other implementations of DAG used to keep everyone on the same page mainly asynchronously.

Tangle: The DAG implemented by Iota, Tangle, is a distributed system that doesn’t use a chain, but rather a large web. To complete a transaction successfully, the party in question must first confirm two previous transactions. The advantage here is incredible scalability and security once the network continues to grow.

Block-Lattice: The Nano project (formerly RaiBlocks) utilizes a spin on the classic blockchain model where every address has their own chain that only it can write to and a copy of each chain is held by everyone on the network. Because the entire network doesn’t need to process each transaction, the block-lattice approach is intended to significantly increase transaction time speeds.

SPECTRE: “Serialization of Proof-of-Work Events: Confirming Transactions via Recursive Elections” is a twist on traditional PoW mixed with DAG. With SPECTRE, blocks are mined that point to multiple parent blocks, not just one. The blocks with the most mined children then gain validity, meaning that the network can potentially handle multiple blocks per second. This proposed Bitcoin scaling solution looks not to the longest chain but to the blocks with the most children.

In Conclusion

The blockchain and cryptocurrency space continues to rapidly evolve. Experimentation and implementation of various, divergent consensus models will continue as the ecosystem changes. Over time, we are likely to see more innovation and solutions that are tailored to solve specific problems rather than a one-size-fits-all algorithm.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

Meet Our Advisory Team: Nick Sullivan, Heart-Centered Serial Tech Founder Extraordinaire

DecentraNet continues to expand our advisory team. We’re stoked to welcome Nick Sullivan, a talented, versatile, and heart-centered serial technology entrepreneur.

AUSTIN, TEXAS — August 29, 2019 — DecentraNet is pleased to announce our advisory partnership with Nick Sullivan, a heart-centered technology leader with a legacy of supporting collaboration, innovation, and passionate and fun work environments. Nick will advise DecentraNet and support its efforts to serve its clients and their diverse objectives.

“Nick Sullivan is a good friend and colleague that I deeply respect. Nick has a talent for bringing together teams with a common goal by creating a culture of professionalism, compassion, and grit. He has a gift for conquering the unconventional and leveraging opportunities others may not yet see. I’ve known Nick since 2014 and am honored and delighted that he is now advising our company,” says Matt McKibbin, Founder of DecentraNet

Highlights about Nick:

SELF-STARTER AND CREATIVE AUTODIDACTIC: Starting off his technology career as a copy/paste data entry clerk, Nick taught himself software engineering on the job, teaching himself Unix, web development, Oracle databases, and shell scripting through trial and error. His career developed through a passion for learning, maniacal work ethic, and a quest for success. Throughout several engineering leadership positions over 20 years, the biggest common theme in Nick’s work has been creation — taking an idea and making it real.

TECHNOLOGY LEADER:Driving technology development is what Nick does best, and he believes that is done by focusing on a culture of inspiration, love, emotional intelligence (EQ), and safety, with a particular knack for finding and elevating strong, powerful women to their best calling, and bringing feminine energy to the workplace. Combining these tools with an insatiable appetite for getting things done, Nick has created millions of dollars’ worth of value at multiple companies including ChangeTip (sold to Airbnb in 2016), Krux (sold to SalesForce for $840MM), Wikia (created a product that tripled revenue), and Good Money ($34MM Series A).

SERIAL FOUNDER: As a founder of these companies and an engineering leader to many others, he understands what it takes to build aspirational engineering cultures that attract the best talent. Nick accelerates the velocity of teams with sound decision making, excellence in software development, management practices, and cultural engineering to keep teams happy and motivated.

VERSATILE EXPERT: Nick has correctly positioned himself early in burgeoning industries as they have become digitized, including the Internet (1993), Text Search (1999), Digital Media (2000), AdTech / Consumer Data (2010), and Bitcoin (2013). Now he is positioning himself as an expert in Artificial Intelligence, with a focus on Neuromorphic programming, trusting that humans still play an important part in the ethical development of technology ensuring that we maintain a peaceful coexistence with the machines, fulfilling part of Nick’s dharma/purpose, which is to help define the boundaries between humanity and technology.

COMMUNITY-FOCUSED: Nick knows that individual excellence and team building aren’t enough, and the community and ecosystem need to be developed alongside his work for everyone to collectively improve and involve. To support these efforts, Nick has run several meetups, including SFJS, the largest JavaScript meetup in the world. Nick also serves as a mentor for Hackers & Founders, 500 Startups, and Plug & Play Tech Center, where he takes joy in inspiring founders and providing the occasional founder therapy. Nick advises dozens of startups and has been involved with numerous venture capital vehicles as an investor and decision-maker.

HEART-CENTRIC: As part of his continued dedication to bringing love into a business and empowering the feminine, Nick recently co-created a non-profit organization called Upward Spirals, which serves to unlock the transformative power of love to solve the world’s biggest challenges. Nick focuses personal time on biohacking, neurohacking, meditation, exploring spirituality, travel, and investing in the growth of those around him.

The DecentraNet team welcomes Nick as an advisor to our organization and look forward to his future contributions.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

The Future of Gaming: Get Ready for Tokenizing Ownership and Trade in the Digital World

Tokenizing gaming draws parallels with traditional card games such as Magic the Gathering, or digital based card games like Hearthstone.

Since the initial coin offering (ICO) mania of 2017, many people involved in the blockchain space became familiar with the concept of a utility token. In short, utility tokens are units of account that can be used to access services and/or facilitate the functioning of a network. The tokens could fulfill almost any function imaginable, from voting in an election to placing bets in a prediction market. The ICO mania involved the (over)valuation of these networks and services that suddenly became possible thanks to the ability to create these tokens for almost no cost.

One of the most ubiquitous tokens issued for performing tasks or paying fees in blockchain projects, utility tokens can later be used to purchase a good or service offered by the issuer of the cryptocurrency sold utility tokens as a method of fundraising for the start-up.

There are some interesting use cases for blockchain-based tokens which have received comparatively less attention compared to utility tokens, namely non-fungible and semi-fungible tokens (NFTs and SFTs respectively). So, what assets can such tokens potentially represent, and how can they be used?

What is Fungibility?

Firstly, let’s examine the term ‘fungibility’, as it’s an important defining factor for these tokens. Fungibility is the ease in which an asset may be traded against another unit of that same asset.

In cryptocurrency, this covers the overwhelming majority of tokenized or cryptographic assets. For example, one Bitcoin is always equal to another single Bitcoin, and an ERC-20 token can easily be traded for a token of the same type.

However, not all assets are fungible. In the physical world, artwork is a prime example of non-fungibility. If we were to take a piece of museum-grade fine art, such as the Mona Lisa, and compare it to a child’s painting, we may find some superficial similarities. On the most basic level, they are both paintings, they may use similar materials, and they may be around the same size. But it is other, critical characteristics of those paintings, such as the artist, age, and subjective beauty which make them non-fungible; impossible to meaningfully compare or trade with each other in real life. This is where non-fungible and semi-fungible tokens enter into the equation.

What is a ‘Non-Fungible’ Token?

Instead of tokens which hold or represent identical value, non-fungible tokens (NFTs), may appear similar, but each one represents an item with unique characteristics distinct from other assets. For example, if you own Bitcoin or Ether, you may not care which specific unit you have, as long as you have 1:1 equal units. Non-fungible tokens, however, are unique, so it does matter which one you have.

Credit: media.consensys.net

This has powerful utility when it’s programmed into a token, as it allows items, such as in-game digital assets or collectibles, to be represented as an actual asset for the first time in gaming history.

So, what does this mean for gamers and the future of gaming? By tokenizing their virtual property, it becomes a tangible and immutable asset stored on the blockchain, which means players can prove ownership, trade, and sell their items which they’ve earned in the virtual world. Gamers can then exchange assets with each other or transfer them from game to game, placing a high value on the in-game properties.

Game developers could integrate smart contracts and non-fungible assets to enhance their item infrastructure and generate new streams of revenue. Non-fungible tokens can be used to create transparent digital scarcity, stimulate player engagement, and allow secure and monetizable ownership of assets.” Chris Gonsalves, Hacker Noon

With an increased focus on ‘freemium’ business models, where game developers offer free-to-play games that instead generate revenue through in-game purchases, it’s expected that digital in-game economies will flourish, with 66% of surveyed gamers in the UK already purchasing virtual goods on a regular basis.

Certain games, such as CryptoKitties, the infamous virtual cat-collection game which crashed the Ethereum network, use NFTs to represent differences between collectible ‘cards’, each representing a cat with unique features, rarity, and appearance. This draws parallels with traditional card games such as Magic the Gathering, or digital based card games like Hearthstone.

Credit: Cryptokitties.co

This innovation in the way digital items are represented is giving rise to new marketplaces for the exchange and lending of NFTs and digital goods. EOS based Chintai, for instance, is a fully functional decentralized resource exchange which enables users to lease their digital assets within a peer-to-peer decentralized economy. There is a path forward where gamers who have spent time gaining the best equipment could effectively earn passive income from loaning their in-game items to other players.

“We’re building the decentralized engine for digital items collecting dust to be used by anyone who needs them, and driving passive income to their original owners. Want to lease an item to complete a level, or explore a game in a new way? Chintai will facilitate that process. Activating fun experiences with this potent win-win economy is what we’re after,” says Ryan Bethem with Chintai

What is a ‘Semi-Fungible’ Token?

There are of course assets which exist in a grey zone between fully fungible, and entirely non-fungible. These assets may be incredibly similar or deliver the same end-result or product, but have subtle differences which would be best represented as a semi-fungible token (SFT).

A perfect example of a candidate for SFTs is airline seats. Each airline seat is physically the same, and all the seats aboard a flight obviously arrive at the same destination. However, some passengers may prefer an aisle seat, some may choose more legroom, and some travelers may wish to be seated at the back of the plane.

These are all subtle changes, compared to the differences between two pieces of original artwork for example, but nevertheless, they require greater definition coded into their respective token, and they couldn’t be easily exchanged 1:1 without some compromise. A similar scenario arises with concert seating, and SFTs can also represent the scarcity of a particular asset or group of items.

What Else Could be Tokenized?

As we’ve discussed, art is a prime case for tokenization. Fine art pieces worth substantial sums of money are prized assets for their owners, however, they have traditionally lacked liquidity.

Through tokenization, owners could release equity in their art piece to other investors, who would own a provable stake in that piece of fine art. The same is true for other unique assets, such as vintage wine, premium real estate, or jewelry, and the use cases for NFTs and SFTs are numerous.

The Future of Digital Item Ownership?

As the adoption of NFTs and SFTs grow, the potential for an entirely new class of digital assets is emerging. For gamers, this represents one of the first times they can truly own and transact their hard-earned in-game items via a decentralized network; rather than residing on game providers’ centralized servers, and at the mercy of a third-party provider.

Therefore, digital collectibles, in-game items, and other virtual assets represent one of the most exciting use cases for NFTs, with a host of applications still to be explored. Likewise, it’s expected that as this nascent industry grows, tailored marketplaces for digital asset sales and lending will emerge, to integrate or replace in-game marketplaces, and allow cross-platform transfers of sought-after digital items.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

The Revolution is Now: How “DeFi” is Rocking the Global Financial System

Conventional financial tools built on the blockchain are sparking a blossoming, explosive ecosystem to challenge legacy finance. Here’s why.

TL;DR HIGHLIGHTS

  • DeFi is essentially just conventional financial tools built on a blockchain
  • One of the most active sectors of blockchain in 2019
  • Advances in blockchain technology and a clearer regulatory environment have set conditions for an explosion of innovative finance products
  • It is highly likely that more decentralized financial solutions will be created in the near future

In what has become a fitting rallying cry for blockchain enthusiasts everywhere, ‘DeFi’, a clever portmanteau of ‘decentralized’ and ‘finance’, is seriously shaking up the world of traditional centralized financial services. We adopt the following definition of decentralization proposed by Rohit Khare. “A decentralized system is one which requires multiple parties to make their own independent decisions” In such a decentralized system, there is no single centralized authority that makes decisions on behalf of all the parties.

In theory, decentralized finance offers all of the same services and products as the traditional finance world. However, DeFi uses distributed ledger technology, including blockchain, cryptocurrencies, smart contracts, and decentralized applications, to offer services such as loans, financing, and credit arrangements; often without the need for a centralized authority.

As a result, there’s been an explosion of companies seeking venture capital to fund the next wave of decentralized innovation in the financial services industry. These include crypto-asset lending, crypto-backed loans, token leasing services, and blockchain-based banking operators.

Some of these services are simply decentralized versions of their traditional counterparts, albeit with all the virtues of blockchain, such as borderless transfers of value and low transaction fees.

However, self-sustaining digital economies are also beginning to emerge around new ideas such as crypto lending and tokenization of assets — so what might this mean for the world of decentralized finance? First, let’s explore what some of these new concepts are in practice.

Here’s Why the Decentralized Finance Revolution Has Arrived

Peer-to-peer crypto lending is just like regular peer-to-peer lending services, where those who want to earn passive income on their capital can lend their funds to those looking to take a loan, with the lender earning interest in return.

The major difference is that by virtue of blockchain technology, anyone can now loan their capital in return for digital asset collateral to borrowers worldwide. Collateralized assets could include Bitcoin, Ethereum, stable coins like Tether, or even digital collectibles. Although there’s a certain degree of counterparty risk involved in lending peer-to-peer, as the other party could default on their repayments, lenders could use smart contracts to confer themselves some legal protection.

Similarly, crypto-backed loans offered through regulated platforms are also gaining traction. Many blockchain maximalists have the majority of their capital tied up in digital assets, and with the frequent wild swings in the cryptocurrency markets, some investors may be reluctant to exit their positions.

Instead, crypto investors may now borrow fiat against their digital asset holdings. This means that instead of selling their holdings in the event that they need emergency cash, they can instead borrow against them and pay back funds over time.

The Revolutionary Rise

Perhaps for the first time in history, decentralized finance allows trustless and peer-to-peer lending of financial assets. As a result, many platforms are exploring the concept of ‘token leasing’. Token leasing allows simple lending of digital assets, especially non-fungible tokens such as in-game items or collectibles.

Within digital economies, tokens are regularly used by parties either within a platform such as a decentralized application, a web-3 based game or as a way of paying for or accessing decentralized services.

Token leasing is potentially a lucrative way for token holders to make passive income while they hold their digital assets. For those who want to use an asset just to access a service one time or use for a short period, it may be far more cost-effective to lease that asset, rather than buy it and have to worry about price fluctuations and custody options.

As a result, it’s predicted that the token leasing economy will grow alongside the digital asset markets, especially as more decentralized applications and blockchain-based services emerge.

The Largest DeFi Startups to Date

With the growing acceptance of blockchain technology and a clearer regulatory environment, many companies are looking to offer decentralized finance products of their own. This has resulted in a growing number of companies that have been established to meet the burgeoning crypto lending and decentralized banking markets. The largest and most successful of these companies have closed multi-million dollar funding rounds and are now well on track to becoming industry leaders in this emerging financial sector.

One such company, New Jersey-based BlockFi, has just completed its Series A funding round. BlockFi received over US$18 million in investment, including backing by Valar Ventures, a venture capital company formed by PayPal co-founder Peter Thiel; alongside Winklevoss Capital and ConsenSys. BlockFi, and other crypto leasing companies lend borrowers fiat money in return for their crypto as collateral.

Likewise, SALT, another crypto-backed lending startup based in Denver, offers similar services to BlockFi. With over 80 employees to date, SALT offers loans from $5,000, at rates starting from 5.99% APR. Likewise, SALT also offer customers insurance on their digital assets. According to business data aggregation site Pitchbook, SALT has recently attracted $1.5 million in their latest angel investor deal.

Another area of traditional finance which is ripe for decentralization is online banking. Blockchain startup Crypterium, which big four consultancy firm KPMG describes as ‘one of the most promising fintech companies’, is a decentralized banking services provider. Crypterium allows its clients to pay bills, store funds, and spend their digital assets via a physical debit card, all linked and managed through a single app — just like current digital banking solutions. Crypterium launched with a huge initial coin offering, or ‘ICO’, during 2017, which at the time was one of the largest ICOs ever concluded — raising a massive US$51.6 million.

Source: Fintech Collective

Source: Fintech Collective

Where digital token-based economies are emerging, new marketplaces and exchanges are being developed to facilitate the transfer and lending of these exciting new assets. Chintai, the first 100% on-chain token leasing exchange to be developed, supports the exchange and lease of virtually any digital asset available, including digital collectibles. Owners of digital assets can generate passive income from their holdings, without ever relinquishing control of their tokens. Chintai has proven its utility by integrating with the EOS mainnet, generating 65,000 EOS as interest for its lenders in just one week at its peak. (Disclaimer: Chintai is a client)

A New Paradigm of Finance?

Because of the potential for DeFi to reach a much wider global market, and the relative ease with which blockchain-based solutions can now be deployed, it’s highly likely that more decentralized financial solutions will be created in the near future.

However, whether DeFi will defy traditional financial solutions, and become a major competitor for market share from existing financial incumbents, remains to be seen. What is perhaps more likely, is that once DeFi technology has matured and become more tested in practice, institutions such as banks, insurance companies, and lenders will launch their own offerings which leverage the power of DeFi technology to their advantage — as we’ve already witnessed with JP Morgan Coin for digital payments.

Therefore, DeFi startups will have to outpace traditional financial providers and rapidly gain market share — before they’re beaten at their own game.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

Security First: How to Protect Your Crypto from These 3 Common Attacks

Cryptocurrencies have evolved from an obscure side project to a multi-billion dollar alternative asset class over the past decade. Understand the top three most common attacks and steps that you can take to protect yourself.

While the blockchain was designed for secure transactions, the immutable and online nature of the technology makes it an attractive target for cyberattacks. Proper cyber hygiene is imperative for anyone holding cryptocurrency.

Many criminals use social engineering to trick users into handing over their account credentials or cryptocurrency. Others hack into crypto exchanges and online wallets to steal cryptocurrency. It’s important to understand these attacks and take the right precautions to avoid becoming a victim.

Let’s take a look at three of the most common attacks and steps that you can take to protect yourself.

Hacked Exchanges

Hackers recently stole more than 7,000 bitcoin from Binance, the world’s largest crypto exchange by volume, in May 2019. The attack demonstrates that even the largest exchanges aren’t immune from cyber attacks despite their investment in security.

The sophisticated cyberattack transferred then-$41 million — and now $83 million — worth of cryptocurrency in a single transaction after accessing user API keys, two-factor authentication codes and other information. The attackers are now moving the bitcoin into various accounts in an attempt to launder and cash out their stolen funds.

Binance’s Secure Asset Fund for Users, or SAFU, covered losses from the attack. The SAFU program keeps ten percent of all trading fees generated by the exchange to protect users in the event of an attack. The coins are stored in their own cold wallet to keep them protected in the event of a cyberattack — but not all exchanges have these kinds of policies.

There are several ways to protect yourself from these attacks on exchanges:

  • Insurance: Many exchanges have some kind of insurance policy for users to ensure that their capital is safe even in the event of an attack. For instance, Coinbase has an insurance policy in place and holds less than two percent of customer funds online where it’s exposed to attack.
  • Two-factor Authentication: Many exchanges support two-factor authentication, which requires both a password and a security code to access an account. These security codes are sent via SMS message to a cell phone or can be accessed via a smartphone app, such as Google Authenticator.
  • Unique Passwords: Many people use weak passwords across multiple accounts without changing them on a regular basis, which represents a major security risk. It’s a good idea to ensure passwords are unique for each account and are updated on a regular basis (e.g. every three months).

SIM-Swap Hack

Two-factor authentication has become a popular way to secure crypto accounts from cyber-attacks. Even if a password is stolen, criminals cannot access the account without access to the target’s phone or an authentication app. It’s easy to assume that these measures keep your account safe, but there are some ways that cybercriminals can still gain access.

SIM-swaps occur when attackers pose as the owners of victims’ mobile phone numbers and convince telecom providers to grant them access to their calls and messages with a SIM card. With access to a valid phone number, attackers can bypass two-factor authentication methods by receiving confirmation codes via text message or requesting password resets.

For example, cryptocurrency investor and entrepreneur Michael Terpin recently won a $75 million judgment against Nicholas Truglia, the hacker that used the SIM-swap hack to gain control over Terpin’s account and steal $23.8 million worth of cryptocurrency in 2018. Truglia used the same technique to defraud at least six other victims.

There are several ways to protect yourself from these attacks:

  • Cold Storage: Long-term investors may keep most of their cryptocurrency stored offline in cold storage and only the coins that they need on exchanges or online wallets. For example, the Ledger Nano or Trezor are two popular hardware wallets for safely storing crypto offline.
  • Set a PIN: Many wireless carriers enable users to create a PIN or passcode on their account, which adds another layer of protection against SIM-swap attacks. These PINs or passcodes should be different than the passwords used on other accounts that could be compromised.
  • Alternative Authentication: Authentication apps may be more secure than SMS-based two-factor authentication. Physical two-factor authentication methods, such as Yubikeys, are even more secure since they require attackers to physically steal the USB device to access TFA codes.

Social Engineering

Social engineering occurs when criminals trick victims into transferring cryptocurrency into their wallets or turning over their account credentials — often with the promise of money.

The most common social engineering attack is a pyramid scheme or so-called high-yield investment program, or HYIP. The perpetrators of these schemes ask victims to invest their cryptocurrency into a ‘fund’ that returns a certain percentage each month. The scam works as-advertised until there’s not enough money coming in from new users to pay off old users.

Another common social engineering attack involves free cryptocurrency giveaways. Attackers impersonate companies or celebrities and offer an attractive giveaway, but a small investment is required to facilitate the transaction. For instance, they may request that you send $50 worth of bitcoin to receive $200 worth, so they know your wallet address.

There are several ways to protect yourself from these attacks:

  • Be Skeptical: Most offers for free cryptocurrency or higher than average returns are either high-risk or outright scams. Be wary of any of these offers — especially if they are limited-time offers that require you to act now. If you’re not sure, ask a professional for advice.
  • Regulation and Reputation: Legitimate cryptocurrency funds are regulated by government or industry groups, such as the SEC or FINRA. They also have established reputations among large investors or other funds of funds. If you’re not sure, ask a financial advisor for advice.

The Bottom Line

The dramatic rise in the value of cryptocurrencies has made them an attractive target for cyberattacks. While most attacks are done through social engineering, there are several technical hacks that can be avoided with the proper security precautions. Keep the tips we’ve mentioned in mind to secure your accounts and rest easy knowing that you’re safe from common attacks.

Originally published by our partner, Zen Ledger.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

Meet Our Advisory Team: Introducing Simeon Schnapper — Blockchain Investor, Serial Entrepreneur, Philanthropist, and Futurist

DecentraNet continues to grow our advisory team by inviting industry experts to serve our clients. We’re delighted to welcome Simeon Schnapper, a deeply-experienced blockchain and impact entrepreneur and investor.

Simeon Schnapper has joined the DecentraNet team as an advisor. Having been at the forefront of many trending and emerging industries, Simeon has led several successful startup teams. He brings significant experience and expertise to our team, and we’re honored to have his contributions complement our efforts.

Here are some of his highlights:

  • Founded Youtopia, an engagement and gamification platform and winner of the 4th Annual Digital Media Learning Competition supported by the John D. and Catherine T. MacArthur Foundation and the Bill and Melinda Gates Foundation.
  • As trustee and president of the Hinman Foundation, a nonprofit focused on making grants to community-based organizations he formulated the vision and led all efforts on the ground in Tibet, Nepal, Myanmar, India, Mongolia, and Bhutan.
  • Oversaw grants to the Multidisciplinary Association for Psychedelic Studies (MAPS).
  • As the founder of a multinational trading and manufacturing company, he led sustainability and innovation from Shanghai for 7 years where they shipped some of the world’s first bioplastic products to the largest retailers in the world.
  • Simeon produced, directed, wrote, and starred in DOT, a feature-length critically-acclaimed comedy on Showtime and multi-festival award-winning darling.
  • Founded the world’s first Visionary Art Gallery and Medical Marijuana Dispensary praised as a paradigm shift at the very beginning of the end of prohibition as featured in the Wall Street Journal and Rolling Stone.
  • As a faculty member of the Second City Conservatory, he taught thousands of students over many years.
  • He is a managing partner of the JLS Fund and co-founded the Family Office Funding Challenge located in New York City.
  • Born into a Peace Corps family, his early life was spent on assignment overseas where the ethos of exploration and helping others became deeply ingrained in his belief system.
  • Simeon is also an Aspen Institute Fellow.

Tell us about your background. Where do you hail from and what is your story?

I grew up on the northside of Chicago. Our modest home was always filled with refugees. My folks met in the Peace Corps. We traveled and lived all over the place and when we weren’t abroad, we had a very open-door policy. That lifestyle gave me a perspective that instilled gratitude. I loved acting as a kid and continued theater whenever I could. Eventually, I started my first business in college. As the web exploded, through my love of emerging technologies (and reading tech manuals) I was introduced to everything else I’ve been getting my hands dirty with all of these years.

How did you come to be an advisor at DecentraNet?

I was a fan of DecentraNet since meeting some of the founders a couple of years ago and always look forward to the insightful perspective in their newsletters.

What do you find as your most valuable asset to offer clients and partners of DecentraNet?

Listening.

What accomplishment, to date, are you the proudest of?

That’s a tough one, but probably some of the work I do with my charity overseas or some of the work here in the US in underserved communities.

If you could offer just one piece of general (but oft-forgotten) advice to any startup in disruptive or transformative technology industries, what would it be?

Smell the roses. In the mad dash of simply keeping up with everything, don’t forget to play.

There are many industries undergoing disruption and many new industries emerging. What specific industry is most exciting to you, and why?

Transtech-aided consciousness and nutritional alkaloids powered by blockchain and artificial intelligence.

Where’s your favorite place in the world, and why?

Ghana or The Playa because they all equally feel like home.

Credit: Holly Wilmeth Photography

If you could be any animal, which would you be? And why?

A Dolphin, because click, click, buzz, whistle, squeak… click.

What are you currently watching on Netflix/Amazon/HBO?

Like everything! I defy you to have binged more than me.

What do you hope to be when you grow up?

A decentralized AI.

Why are you looking forward to working with the DecentraNet team?

Humbled and thrilled to be working for DecentraNet to help solve the universe’s biggest problems.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

Blockchain Industry News: DecentraNet Announces Advisory Partnership with Silicon Valley-based GoJoy

Watch out Bezos. This innovative impact-oriented commerce platform just raised $10.3 million in a blind auction. This is just the beginning.

AUSTIN, TEXAS — July 9, 2019 — DecentraNet is honored to announce our partnership with GoJoy, a shared e-commerce platform owned and operated by a global community of shoppers, retailers, and manufacturers. GoJoy is managed by a distributed team of experts with decades of experience in e-commerce. The goal of GoJoy is to connect consumers directly to manufacturers, cut out the middleman to generate consumer savings, and verify manufacturers to keep the platform trustworthy and “fake-free”.

On July 9th, GoJoy announced the successful completion of its inaugural Joy Coin blind auction, in conjunction with its exchange partner CBX. More than 46,000 participants placed bids totaling over $18 million, that raised over $10 million for Gojoy’s expansion and infrastructure buildout. Winning bids can be found at CBXAngel.

Additionally, Joy Coin will be available for public trading under the ticker JOY, on the secure and compliant token exchange CBX, beginning July 10 at Noon Dubai time. JOY will be paired with major cryptocurrencies such as BTC, ETH, and USDT, providing liquidity to Gojoy members and making Joy Coins readily available to investors worldwide.

GoJoy shares the DecentraNet mission of supporting ecosystems, companies, and people dedicated to building a new economy where services are decentralized and everyone has the opportunity to generate wealth for their families. Gojoy’s business model was designed so the entire e-commerce community can own the platform. Additionally, Gojoy members earn “GHU” points on an hourly basis for each purchase. 50% of GoJoy’s profits are redistributed to GHU owners.

“GoJoy offers the first ecommerce platform where every transaction is transparent and visible on blockchain. Goods are cheaper than centralized models and profits are shared with consumers and manufacturers allowing for a flywheel of growth from the ground up — a perfect disintermediation of the traditional e-commerce model,” says Matt McKibbin, Founder of DecentraNet

“GoJoy represents a perfect use case for blockchain technologies. Specifically, it allows us to realign economic incentives to where the profits generated by the platform are shared by those who utilize it- — the end user consumer. No longer does e-commerce have to represent an extractive model, where all value creation flows to a unitary platform owner. In our new world, the rural Chinese mother who purchases baby formula on GoJoy becomes a true owner and shares in the platform’s rewards,” says Ted Moskovitz, Co-Founder of DecentraNet

“We built Gojoy as a rewarding and transparent marketplace where every contributor — shopper, vendor and investor — is rewarded perpetually for their contributions. We are humbled to have given over $2 million to thousands of families in a few short months. Gojoy remains dedicated to its business model and looks forward to distributing millions more dollars to thousands more families,” says Steven Lin, Chief Executive Officer of Gojoy


ABOUT DECENTRANET
DecentraNet is purpose-driven full-service blockchain advisory and investment firm serving entrepreneurs with a suite of expert advice, deep industry partnerships, access to capital, community events, and a network of done-for-you service providers. We specialize in blockchain projects with a global impact as well as companies building the infrastructure to support them. We also produce events, content, and programming, and are evangelists for the potential of blockchain technology.

Learn more: https://www.decentranet.com

ABOUT GOJOY
Gojoy is the only marketplace where every vendor and shopper share in the profits of each purchase, on the hour, every hour. Using blockchain technology, Gojoy created Joy Coin, a digital asset earned by shoppers with each purchase, that can be used to make purchases on Gojoy, redeemed as cash or invested on the CBX exchange. Launched in 2019, Gojoy continues to triple its membership each month with over $2 million distributed to its shopper community. Gojoy is headquartered in Silicon Valley. Gojoy is currently available in China with plans to expand worldwide. For more information visit: https://gojoy.com/en/.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

Blockchain Industry News: DecentraNet Announces Advisory Partnership with Chintai, a Tokenized Asset Leasing Exchange

DecentraNet is honored to announce that we have formalized our relationship with Chintai, a tokenized asset leasing exchange.

Chintai is a live marketplace that hosts a high-performance resource exchange for leasing tokenized assets. While currently it is a primarily EOS-based platform, Chintai has an ambitious roadmap that will lay the foundation for the leasing of nearly any utility token or NFT. This means you can help the blockchain industry scale, while making risk-free passive income.

The native Chintai utility token (CHEX) ties every token leasing market together, enabling users to access the highest passive income returns possible at any given moment. CHEX acts as the intermediary token for the entire platform and unlocks many benefits for users who hold the token. They are currently running a rolling 18 hour auction for CHEX until Dec 4th 2019. Chintai’s early successes have resulted in enhanced end user experience, lower cost barriers for developers, and novel passive income streams.

“Decentranet is an essential ingredient to help Chintai deliver the benefits of token leasing for cryptocurrency holders. Their expertise is the fuel we need to enable next generation passive income streams, and meaningful use cases for cryptocurrency, says Ryan Bethem of Chintai

“Since launching in October 2018, Chintai has grown to be the largest token leasing platform on the EOS mainnet. As advocates for EOS, we believe that Chintai’s continued successes are critical to the health of the EOS ecosystem. Chintai’s aim at Non-Fungible Token (NFT) leasing is a potential killer app for the near exponential growth of NFTs in the future. This has the potential to unleash utility on a global scale for tokens which normally sit underutilized. DecentraNet aims to continue leading professional advisory and consultancy services for transformative technology companies, and we believe this partnership enhances our mutual goals,” says Matt McKibbin, Founder at DecentraNet.

“Chintai is a perfect example of a company taking an essentially wasted resource, and turning it into something valuable. Many investors in PoS protocols don’t have the hardware or time to take advantage of the benefits of staking. Chintai removes the burden, and provides users with value they otherwise never would have captured. And that’s just the start! Where this project truly gets interesting is alongside the rise of non-fungible tokens.” — Ted Moskovitz, Founder at Decentranet.


ABOUT DECENTRANET

DecentraNet is a purpose driven investment and advisory firm specializing in blockchain and other transformational technologies with a global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

Learn more: https://www.decentranet.com

ABOUT CHINTAI

Chintai is the largest token leasing platform on the EOS mainnet. The platform is powered by EOSIO smart contracts for peer-to-peer leasing. The company has an ambitious roadmap that will lay the foundation for the leasing of nearly any utility token or non-fungible token (NFT). The native Chintai utility token (CHEX) ties every token leasing market together, enabling users to access the highest passive income returns possible at any given moment.

To learn more about their company, visit https://chintai.io/.

MEDIA INQUIRIES

Tiffany Madison

tmadison@decentranet.com

(1) 469–730–6703 (US Central)

Meet Our Advisory Team: Introducing Danielle Sunberg, Our Dynamic Phenom, and Fearless Leap Taker

DecentraNet continues to grow our advisory team beyond an exclusive blockchain focus. We’re stoked to welcome Danielle Sunberg, a former corporate attorney and executive turned alignment-catalyst and conscious operations consultant.

A former attorney and tech startup exec, Danielle left the traditional definition of success behind to pursue her true calling as an alignment-catalyst. Danielle blends her legal and operations background with empathy, authenticity, and conscious communication to serve her corporate clients. Her work aligns companies’ systems and structures with the superpowers of the team members. We are delighted she’s joined our team. You can learn more about this dynamic phenom at DanielleSunberg.com.

Tell us about your background. Where do you hail from and what is your story?

While living in Washington, D.C. I practiced as an attorney where I clerked for a judge before joining a firm as a commercial litigator. At the firm, I represented companies and partnerships facing federal regulatory concerns and working through internal disputes. After winning a $6 Billion trial for my client, I left the firm to run operations for a SaaS startup.

This transition afforded me the flexibility to work remotely, and I traveled the world for over a year, visiting 14 countries on 6 continents. Traveling taught me more than I could have imagined about the world and who I am in it.

Now based in Austin, TX, I’ve transitioned my experience and knowledge into a consulting company that advises operations and strategic team functionality for executive teams and startups.

How did you come to be an advisor at DecentraNet?

DecentraNet’s mission to lead societal progress through transformational technology is inspirational! I’ve known the team and offered them friendly advice for years. Apparently, they value my advice because they asked for more of my time and we formalized the relationship! I am honored to advise on the optimization of the DecentraNet team so that they can continue to forge our future.

What do you find as your most valuable asset to offer clients and partners of DecentraNet?

I take a holistic approach to cultivating extraordinary leaders and creating companies that empower their teams to achieve goals previously thought out of reach. By leveraging my experience in the corporate sector with a focus on empathy, collaboration, and conscious communication, I guide companies toward accelerated success. Together, we create operational frameworks and systems that are optimal for both the company and the team members.

What accomplishment, to date, are you the proudest of?

Taking my leap from the corporate sector to entrepreneurship! I left a prestigious career with dependable financial prosperity because I was inspired to redefine success on my own terms. This leap requires an immense amount of self-trust, motivation, competence, and sincerity. I’ve observed a lot of fear around leaving a stable job because we don’t know where we will land, and I am proud of myself for allowing my inspiration to direct my energy and focus instead.

Danielle Sunberg, alignment-catalyst, conscious operations consultant and advisor to DecentraNet.

If you could offer just one piece of general (but often forgotten) advice to any startup in disruptive or transformative technology industries, what would it be?

A tree without roots bears no fruit! We are living in an incredible technological age where the leading edge moves forward every day. Sometimes we may feel as though we are in a technological race to market. Under this pressure, we look to the branches of the tree, hoping they grow ripe, delicious fruit as fast as possible. However, to achieve such a bounty we must turn our focus to the roots. This translates into investing in the groundwork of the company and creating the fundamental systems that support and empowers the team.

There are many industries undergoing disruption and many new industries emerging. What specific industry is most exciting to you, and why?

Companies that are researching and investing in technologies as a tool to promote wellbeing. These companies demonstrate how the frontiers of technology, whether it be blockchain, AI, or genomic precision medicine, foster a deep sense of connection with ourselves and our communities.

Where’s your favorite place in the world, and why?

For a month in 2018, I lived in what was affectionately called the “Cloud Castle,” a rustic cabin in rural Colombia located at a 9,000-foot elevation overlooking the sparkling lights of Medellin. The pace of living in the Cloud Castle was slow in a peaceful, mindful way. There were no buttons — no heat/AC, dishwasher, microwave, oven, or tv — to distract me from being an involved participant in my needs.

Living there mended a feedback loop broken by living in cities where I had forgotten that I am a part of nature and not apart from nature.

If you could be any animal, which would you be? And why?

Hippos have always called to me because of their size, their diet, and their temperament. They are fearsome vegetarians who warn off predators with their giant canines. I always resonated with the idea of being a playful, peaceful creature who isn’t vulnerable to exploitation.

What are you currently watching on Netflix?

The OA. The plot twists on tv shows are usually formulaic but the OA kept me guessing and engaged. It also hits on themes around limiting belief systems and the expansiveness of human consciousness that are fun to explore with the characters.

What’s your secret talent that no one knows about?

My husband and I recently purchased a house, and it turns out I have an eye for interior design! Decorating our home has been a fun, creative outlet for expressing ourselves and using the opportunity to create an inviting, intimate space for friends and family to enjoy with us.

Which four individuals, living or dead, would you like to eat dinner with the most?

  • Ram Dass
  • My grandpa
  • My great, great grandchildren
  • Abraham Hicks

What do you hope to be when you grow up?

An inspiration to people to connect with their purpose and live it out loud. As more folks feel empowered to pursue their dreams, the definition of success will shift from being measured in productivity and busy-ness to self-satisfaction and joy. The ripple effect this will have on society, business, and belief systems and structures are unlimited.


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.

What You Need to Know: The Past, the Present and the Future of Stablecoins

Stablecoins are a type of cryptocurrency which keep their value at a constant ‘peg’, usually a 1:1 ratio with another asset such as a traditional fiat currency. Here’s why this is important.

 

Stablecoins are cryptocurrencies designed to minimize the volatility of the price of the stablecoin, relative to some “stable” asset or basket of assets. A stablecoin can be pegged to a currency, or to exchange traded commodities (such as precious or industrial metals). Most stablecoins in use today are pegged to the U.S. dollar, through what is known as a ‘trust coin’. Trust coins are traded on the basis that the issuing party has sufficient funds in their account to act as collateral against all circulating stablecoins.

However, as the nascent cryptoasset industry evolves side-by-side with traditional financial products, new stablecoins are being created. Newcomers include commodity coins, algorithmic coins, and bank coins. Some long-standing stablecoins are experiencing operational difficulties as new competitors enter the market.

So, what is the state of the stablecoin market today, and where could these useful and stable cryptocurrencies be heading in the future?

Bitfinex and Tether

Those who have been paying close attention to cryptocurrency news in recent weeks have likely read about the unfolding situation with highly-traded U.S. dollar backed stablecoin Tether (ticker symbol: USDT), created and issued by cryptocurrency exchange Bitfinex.

It was found that in contrary to the initial promises of Bitfinex, which read: “Every tether is always backed 1-to-1, by traditional currency held in our reserves. So, 1 USDT is always equivalent to 1 USD.”, Tether later amended their token description to read: “every tether is always 100% backed by our reserves, which include traditional currency and… from time to time, may include other assets and receivables from loans made by Tether to third- parties”, prompting some users to wonder if USDT was backed by tangible assets at all.

This crucial change in terms came after a 23-page document was issued by The New York State Attorney General (NYSAG) on April 24th, 2019, accusing Tether of using their reserves, meant to collateralize circulating USDT, to instead cover a loss of US$850 million, incurred during a suspected abscondment by payment partner Crypto Capital.

Likewise, it has recently emerged that Tether, used primarily by traders to circumvent the volatility of other cryptocurrencies, has in fact been making investments into bitcoin with their reserves, a contrasting strategy to their status as a stablecoin.

Although Bitfinex asserted in a recent press release that the claims brought against Tether are erroneous and that both Bitfinex and Tether are ‘financially strong’, many cryptocurrency experts, including Ethereum co-founder Joseph Lubin, have expressed doubt that Tether will recover; with Lubin adding that other price-stable tokens will likely gain traction because of the Tether situation.

New Stablecoin Competitors

As the cryptocurrency markets mature, and traders require more advanced products to provide stability and safe stores of value in periods of market volatility, many new stablecoins are emerging which seek to challenge Tether’s position in the top 10 cryptocurrencies by market cap.

One such competitor which is gaining serious traction among traders, is U.S. dollar backed Gemini stablecoin (ticker symbol: GUSD), the world’s first regulated stablecoin. The Gemini coin was launched in 2018 by the billionaire Winklevoss twins.

To avoid such debacles as have been unfolding with Tether, the Gemini stablecoin is subject to a monthly third- party audit by public accounting firm BPM LLP, to confirm it still holds its 1:1 peg with the dollar. As a statement on transparency, Gemini has made all their reports publicly available.

In a recent press release, cryptocurrency payment network Flexa announced that it would be partnering with Gemini to enable instant cryptocurrency payments, including the Gemini dollar, in stores and online for a range of huge retail merchants, including international coffee chain Starbucks.

New stablecoins entering the market, which challenge the status quo through strong innovation and partnerships, could seriously challenge USDT’s market share, especially at a time when controversy has Tether and Bitfinex under the spotlight.

Emerging Stablecoin Technology

Other forms of stablecoins are also being experimented with, which don’t simply work on a trust coin model. Bank coins, such as J.P. Morgan’s new ‘JPM coin’, is a type of stablecoin for institutional clients, which is USD-backed like a trust coin, but held in custody in J.P.Morgan accounts and therefore verifiable. These coins are set to facilitate instantaneous cross-border payments via blockchain technology.

Furthermore, algorithmic stablecoins, often abbreviated as ‘algo-coins’, use a novel type of peg to maintain their value. Instead of relying on real assets or fiat to back coins, algo-coins are coded with specific sets of rules which govern their behavior and value.

For example, some algo-coins auto- adjust their supply as demand increases or declines for the stablecoin, which subsequently affects price. The most notable example where this has been tried before is Basis, an algorithmic stablecoin which raised US$133 million that sought to create an inflation resistant stable digital currency.

Unfortunately, the project fell under the scope of US securities regulations, making it prohibitively expensive to be in compliance, and was forced to be shelved in December 2018.

The Future and Limitations of Stablecoins

It seems obvious that there are improvements to be made, especially with trust coins, with verifying that the stablecoin issuer actually has the funds or assets to back their stablecoins on a 1:1 basis.

Issuers like Gemini have realized this and are now competing by implementing independent third-party auditing services to reassure their users that funds are backed. Before, with stablecoins like Tether, it would have been impossible for the average user to verify that Bitfinex held adequate funds.

Likewise, centralization of stablecoin assets is a persistent issue which requires a solution. Many have criticized the JPM coin as being a centralized stablecoin which detracts from the founding principles of decentralized blockchain technology, however, other popular stablecoins such as Tether are also virtually in the sole control of a central issuing authority.

As a means of payment, transacting across borders, and as a ‘safe-haven’ during volatile trading periods, the stablecoin is a valuable tool with a multitude of applications. As the space matures, it’s highly likely that many new innovative stablecoins will emerge to challenge today’s leading coins.

 


Want to Know More About All the Awesome Stuff We Do?

DecentraNet is a purpose-driven investment and advisory firm specializing in blockchain and other transformational technologies with global impact. We also create event experiences and innovative content to bring our clients projects to market and to evangelize the potential of transformational technologies generally.

  1. Click HERE for instant access to our 2019 Market Report. Explore what 30 thought-leaders from dozens of industry verticals had to say.
  2. We are advisors and consultants that work with blockchain companies and other transformational technology projects. If you’d like to connect with us on how we can help your company, please click HERE or send us an email at hello@decentranet.com.
  3. You can also reach out to inquire about any of our current clients or portfolio companies at hello@decentranet.com.