The Daily Bit: August 22, 2018

 

 

 

 

Issue #162 | August 22nd, 2018
 

THE DAILY BIT

 

 

 

 

 

Tweet Of The Day

 

 

 

 


BITCOIN (BTC)  |  3.62%  |  $6,667.85


ETHEREUM (ETH)  |  2.78%  |  $285.15


RIPPLE (XRP)  |  2.70%  |  $0.338234


BITCOIN CASH (BCH)  |  4.06%  |  $546.99


EOS (EOS)  |  5.36%  |  $5.04


STELLAR (XLM)  |  1.69% |  $0.222107

*As of 11:00am

BitMEX went down for maintenance, and Bitcoin immediately shot up – nearly $300 in a single minute. @DonAlt made a fair point… BitMEX could use a competitor. Not a great look to follow a temporary trading break.

*Save The Date: the SEC has until August 23rd to decide whether to approve, delay, or deny two additional Bitcoin ETF proposals. Expect volatility to follow.

 

 

 

WORD ON THE STREET

 

 

 

 

Tearing into Ripple’s AMA
Set your clocks for 6PM EST this afternoon. Why? Ripple CEO Brad Garlinghouse is doing an AMA on Ripple, XRP, and the industry at large. Better yet, the conversation will be moderated by Ripple’s very own Chief Marketing Strategist, Cory Johnson.

As noted in Ripple’s promotional video, Cory “will be asking him [Brad] the tough questions” that are mailed in from the audience. *Sniffs air*…. anyone else smell that?

Here’s the deal. If a company’s CEO is doing an AMA that is moderated by their head of marketing, there aren’t going to be any tough questions. That’s just how the world works. The fact that questions will likely be cherry picked was even suggested by a self-labeled “XRP Holder” in the original AMA thread.

 

 

 

 

Fortunately, there’s Ryan Selkis
Also known as TwoBitIdiot, Selkis is the founder of digital asset research library Messari. He’s also a bit of an outspoken critic of Ripple, namely the company’s lack of transparency regarding their association with XRP tokens.

Yesterday, Selkis published a hypothetical dialogue between himself and Cory. All allegiances aside, these are the types of “tough questions” that you’d want to see during an AMA session. Legitimate concerns are raised about Ripple’s business and the reporting shared on Ripple’s technology that any investor with half a brain would want to know about.

Here are two:

(1) What percentage of Ripple Inc’s revenues come from its gradual liquidation of XRP? The company seems to be uniquely positioned to “rebate” XRP to enterprise customers while liquidating its broader reserve to exchanges that can resell XRP to retail. My back of the napkin has XRP revs at 80-90% of Ripple’s revenues (if not higher). Am I overestimating?

As of December 2017, Ripple held 55 billion XRP tokens in escrow “to create certainty of XRP supply at any given time”. Ripple’s Q2 revenues were $75 million. If Selkis’ bar math is right, that calls into question the sustainability of Ripple’s business model.

(2) Did Ripple Inc pay for the design and branding behind XRP’s new logo? Previous references to XRP included references to Ripple Inc. and a shared logo between the currency and company.

Shortly after Ethereum was labeled not a security (one reason being that Ether was “sufficiently decentralized”), a movement to redesign and rebrand the XRP began. Previously, XRP tokens shared Ripple’s name and fidget spinner logo. 

XRP was rebranded to show that there is no relationship between XRP tokens and Ripple. To us, Ripple Inc paying for the makeover sounds like crypto’s version of hush money.

Takeaways
Ryan’s full post can be found here. It’s worth the read, and it addresses an underlying theme of the industry as a whole: the subpar reporting efforts by many companies operating in the space.

But, as Brendan Bernstein reminds us, cryptocurrencies are money, not equity. Purchasing tokens that power “decentralized” networks don’t give investors access to financials. More on that below.

 

 

 

OTHER NEWS

 

 

 

 

(1) Cryptocurrency prime dealer SFOX had their largest fundraising round to date, completing a $22.7 million Series A led by Trading Capital and Social Capital. Digital Currency Group and Airbnb co-founder Nathan Blecharczyk also got in on the action, whose contributions will go towards the development of an institutional crypto management platform.

SFOX offers black boxed algos for heavy hitters. Since their launch in 2014, they’ve handled north of $9 billion in transaction volume. SFOX’s nine products are optimized by market condition (verbatim “When To Use” suggestions included), so branching into custodial services to retain their broad addressable market sounds like a heads up play.

As an added bonus, the algo names are rather catchy (emojis not included):

  • Polar Bear: Stealth execution
  • Tortoise: Slow, small trades
  • Sniper: Hidden, fast orders
  • Gorilla: Large orders


(2) Swarm released a prospectus for Robinhood Equity Token (RHET), security tokens that will allow accredited investors to gain exposure to changes in Robinhood private share prices.

Private company shares are typically out-of-bounds for the public, but Swarm seems to have found a workaround.

  • Obtain private shares via secondary acquisitions.
  • Launch tokens that track value of said shares.

The investment platform entered the limelight in June after revealing its plan to tokenize shares of Coinbase and Ripple. However, given that both companies were wiped from Swarm’s site, we’re not sold that the pseudo shares won’t disappear quietly into the night as well. 83 days left in the investment window should give Robinhood plenty of time to work the legal tightropes.

(3) Blockchain startup TenX unveiled a new design for their proposed crypto debit cards. While there’s no denying a fascination for fresh decals, we question whether the announcement is anything but a smoke and mirrors play.

After all, TenX hasn’t exactly delivered in the past – the company has been promising a product release since Q1 2018. And tic-toc doc… the end of Q3 isn’t far off. Larry Cermak chews out TenX here, embellishing their lack of execution despite raising $80 million last June and achieving minimal progress with obtaining a license.

In hindsight, are ICOs starting to look like a bad idea? Sure, they opened up investment opportunities to the public at large and shortened the window for capital raises, but there was never any obligation to report financials or ship actual products.

It’s not as if all projects are taking advantage of the oversight gap, but we’ve witnessed the fallout from those that are in recent months.

One Hitters

  • 2.7 million stores accept digital currencies through Coinbase Commerce.
  • SegWit-spending payments broke 42% – a 6.6% boost since August.
  • China swung the ban hammer, revoking WeChat access for blockchain media accounts.
  • Tencent followed SoftBank, denying any involvement with Bitmain’s IPO.
  • 0xfair put rock-paper-scissors on the blockchain – check it out here.

Brain Fuel

  • 5 min read: The Fundamental Assumptions of Cryptosystems (Nathan Chen)
  • 5 min read: Security Tokens Don’t Solve The Regulatory Mess of Utility Tokens (Petros Ring)
  • 6 min read: Security Token 2.0 Protocols: Debt Tokens (Jesus Rodriguez)
  • 10 min read: The Cryptonetwork-and-City Analytical Approach (Mosaic)