By signing up, you agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

It seemed safe. Adam had investigated the coin's development team on LinkedIn, and watched a video of its CEO laying out a roadmap for the coin's future. A newswire piece published on Yahoo touted DeTrade's technology as advanced enough to disrupt cryptocurrency.

Bitcoin is very much back in the zeitgeist. On Tuesday, ahead of CoinDesk's listing on the NASDAQ, it reached an all-time-high of over $63,000, exploding almost 10-times in value compared to the same date last year. But while for many people Bitcoin is synonymous with cryptocurrency, it's not what crypto traders like Adam are interested in. Beneath Bitcoin and Ethereum, the second-best-known currency, is a strange underworld of different cryptocurrencies. 

Called altcoins or, sometimes, "shitcoins," these are essentially penny-stock cryptocurrencies. And they're crazy. Bitcoin tripled its value recently, but many altcoins explode 30, 40 or 50 times over within days. The most famous is Dogecoin, which recently shot up past 10 cents thanks to a potent combination of Reddit and Elon Musk , but there are thousands of altcoins, forming an Indiana Jones-esque Cave of Crypto Wonders. The spoils can be life-changing, but there are traps around each corner. Fortunes can be made and lost in seconds. Cons and fraudsters are everywhere, with traders vulnerable to scams at each step of the process. 

Case in point: Adam's foray into DeTrade. The touted technology behind it wasn't real. Nothing about the project was. The LinkedIn profiles were fake, and the video of its CEO was a deepfake created with AI. It was a scam. Those behind it, operating in the unregulated world of crypto, vanished. Adam lost his $2,500, but he got off easy. In total, those behind the scam took in around $2 million. 

Just a regular day playing with altcoins, says Adam.

Adam got into cryptocurrency last September. When we spoke, it felt like he'd crammed years of trading into two months. He put in $4,000 and lost it in days. Then he turned $3,000 into $90,000. After withdrawing a third of that and then losing just over another third, he now had around $20,000 in crypto. 

Adam had seen some tempestuous trading in the weeks prior to DeTrade. One person managed to flip $2,000 into over $40,000 on two different occasions, but lost it all to scams both times. Another put $150 in a coin and doubled his money in 15 minutes. Decent result, but his $150 would've turned into $28,000 if he'd waited only one more day. He met people in Telegram groups, and was able to track their trades using apps that follow a user's wallet -- a common practice within cryptocurrency circles. 

The community is enthusiastic, but there's a small problem. Right now cryptocurrencies don't really do anything.

Late 2020 saw Bitcoin explode. Bitcoin nearly tripled in price, from $15,000 to over $40,000, in two months. If you invested $1,000 in early November, you could have taken out $2,600 in early February. It's now at over $60,000.

Investing in a stock means ascertaining its value -- based on factors like competition, risks and, above all, profit generation -- and then putting money into ones that are undervalued. If other investors follow you, the stock rises, giving you an opportunity to take profit. 

Speculation is naturally part of this: The Dot-com Bubble was all about pouring money into "pre-profit" companies in the hopes they'd make money someday. Cryptocurrency, however, takes speculation into the stratosphere. For the most part, cryptocurrency is pure speculation. People are investing in technology that produces nothing, and as yet has little or no practical application. As I write this, a coin called Meme is selling for over $2,000. That's a little under 15 times the price of an Apple share. Doge, a coin marketed after the internet slang for "dog," doubled in value in January after a pornstar tweeted about it. After the price settled, it then rocketed once more when Reddit wanted to make it the GameStop of cryptocurrency . 

This disconnect between price and purpose has made many experts understandably skeptical. 

David Gerard is one such skeptic. He became interested in Bitcoin in 2013, when it first hit $1,000, and has since written two books on cryptocurrency. His most recent focuses on Libra, Facebook's ill-fated attempt at digital currency. 

"The driving force of Bitcoin and cryptocurrency is nothing to do with technology," he told me during a Skype call. "It's all about the chance that people might get rich for free. All of this is about the psychology of get-rich-quick schemes." 

In his years working as an IT systems administrator, Gerard's job has been to examine new technology and discern what's useful and what's not. Cryptocurrency, he told me, is not.

"Bitcoin burns a whole country's worth of electricity for the most inefficient payment network in human history," he said.

After launching at around $8 in August, the obscure Meme coin briefly reached a valuation of over $1,750 in September. If, with fantastic luck, you invested $1,000 at $8 and sold at $1,750, you'd be up $217,000. This is the allure of "shitcoins."

That's no exaggeration. Cryptocurrencies are mined using powerful computers, and many enterprising types put together farms of computers used solely for the purpose of mining Bitcoin. As a result, Bitcoin is responsible for more energy consumption than Switzerland. 

Gerard says the only thing you can do with Bitcoin is buy it and sell it. He's even harsher on altcoins.

"They're absolutely useless objects. Even by the standards of Bitcoin, altcoins are useless," he said. 

This is precisely what makes them so fascinating. Seemingly, all they can do is get internet punters to bet on their success. But this enables average people to become rich. That Meme coin I mentioned before? It was listed at just over $1 and hit a high of over $4,000 in March. 

Imagine becoming a millionaire from a joke internet coin. 

Crypto Spider -- who, like most people in the cryptocurrency community, goes by a pseudonym -- has made millions with altcoins. 

He's gained renown in some Telegram groups over the past few months thanks to a "$2K to $1M" challenge, where he endeavored to see how quickly, and with how few trades, he could turn the first number into the second. In cryptocurrency, you can follow someone's portfolio if you have their wallet number, so the community was able to watch this challenge play out in real time.

Within two months, that $2,000 had grown to over $2 million. Much of that money was made off one trade: He chucked $50,000 into a project which, in the space of around a week, magnified 35 times in value, netting him $1.75 million. After passing $2 million, he cashed out. 

"You won't ever see that type of explosive growth if you don't trade in altcoins," he told me, though he also said "95% of these coins are going to be nonexistent in the future." 

Like Adam, Crypto Spider has no background in finance or trading. He lists college courses in game theory, basic algorithmics and some economics as useful to his crypto exploits -- but in essence he's a self-taught amateur. He declined to tell me his specific age, only that he was "20ish" when he first got into cryptocurrency in 2017.

He admits he was attracted by the "pretty numbers," by seeing coins magnify in value 30, 40 and 50 times within a short period. He was enthusiastic enough to start a university club around cryptocurrencies, and how they'd be used in the future. 

Crypto Spider says cryptocurrency will play a "major part in the future of finance," and speaks with the passion of a believer. He breathlessly transitions from how cryptocurrency is a part of the internet's evolution to the possible use cases of blockchain, the technology behind Bitcoin, in the next 10 years. But despite his enthusiasm, I couldn't help but notice how chunks of what he said echoed Gerard. 

Cryptocurrencies are mined using powerful computers. More emissions are produced by global Bitcoin miners than by the entire country of Switzerland. 

For one thing, he looks back at all the projects he was excited about in 2017 and realizes most were almost entirely vaporware, technology that's advertised but never delivered. 

Gerard calls the cryptocurrency community a pool of scammers. Spider notes that people often invest in altcoins they know don't have a function, because there's enough hype around the project to make money. "It's a bubble," he said, "we're literally swapping money from each other. I somehow was able to game all the other people." 

Spider says his performance is 60% luck. He first approached cryptocurrnecy trading with the mentality of, "I'm young, I'm dumb, I can lose all my money and it'll be OK." High risk, high reward, a fair attitude. 

Again though, it reminded me of something Gerard said: "If you're rich enough that your money is your own problem, fine. If you know zero is a number your investment could go to, fine."

"But a lot of people are being ripped off, and that's really bad."

People really are getting ripped off. Difficult to regulate and subsisting largely on hype, cryptocurrencies are particularly prone to scams.

Take OneCoin, a company that, through a presale for a cryptocurrency that didn't exist, stole $4 billion from people around the world before its founder disappeared. Then there's BitConnect, a coin that reached a $2.6 billion valuation by promising a 1% return on investment every day. It was eventually designated a Ponzi scheme by various authorities around the globe, causing it to lose 96% of its value before getting shut down months later. 

Those are two of the biggest instances of crypto-fraud. But millions of dollars are scammed from cryptocurrency markets every day in less dramatic ways. Coins are suddenly discontinued, with owners taking all the money with them in what the community calls "rug pulls." Some have investment contracts, ignored like terms-of-service agreements, that prohibit you from taking your money out of a project. Other times, entire cryptocurrency exchanges -- which sell coins like a stock exchange sells stocks -- vanish.

"I think I've been scammed over 100 times," Crypto Spider said, adding that he lost $250,000 through fraud in December. "Who knows who creates these projects. A lot of people are taking on pseudonyms, because they're almost all money grabs." 

But the deepfake used to scam $2 million adds a new vector. Coming into wider use in recent years, deepfakes are mostly used for pornographic purposes, but as the DeTrade scam shows, deepfakes can also be used in financial scams. 

OneCoin founder Ruja Ignatova at an event for the "revolutionary" cryptocurrency. Ignatova disappeared around the time OneCoin was discovered to be a fraud: The cryptocurrency the company sold didn't actually exist. It's reported to have scammed over $4 billion from people around the world. Ignatova has yet to be found.

Gerard says he's never seen a deepfake used as part of a scam before. Crypto Spider says he's seen it just once.

"We didn't have that problem in 2017, where people would use deepfakes and rug pull like this," he said. "The internet is evolving, but the scammers are also evolving." 

Deepfake technology "is being democratized, and that may not be a good thing," said Julie Inman-Grant. Now commissioner of the Australian government's eSafety Commission, Inman-Grant formerly led public policy teams at Microsoft, Adobe and Twitter. 

"This kind of takes the art out of social engineering," she explained, referring to the techniques usually used by scammers to get you to click a fraudulent link or hand over credit card details. "If they're delivering a video of someone you respect and you really have no way of telling by the naked eye or ear if it's fake or not, the potential for misuse could be devastating." 

Ironically, it's blockchain, the behind-the-scenes technology, that could be the solution to the burgeoning deepfake problem. In cryptocurrency, the blockchain is an unalterable ledger that tracks every transaction. Once it's on the ledger, it can't be altered. That same technology can be used to track anything -- like the creation and distribution of a video, from studio to iPhone screen. There are already startups working toward this, like Truepic. 

When I asked about blockchain's ability to neutralize deepfakes, Inman-Grant wasn't entirely optimistic. 

"It's definitely an arms race, but it's not an arms race we're winning right now." 

When Bitcoin hit $40,000 in December, before its Tesla-induced all-time-high, it was confirmation to enthusiasts that cryptocurrency is the future. For skeptics, a higher peak just means a more precipitous fall. 

"I think they'll become increasingly regulated and less and less interesting," Gerard said of cryptocurrency. That means less of the "pretty numbers" Crypto Spider was attracted to, but hopefully fewer scams.

For Adam, DeTrade actually had a happy ending. One aggrieved victim of the scam analyzed the metadata of the deepfake, which he used to track down the perpetrators. After some naming and shaming across Telegram, the money was returned. 

That unexpected $2,500 return was a big deal, equivalent to a few weeks pay. Good timing too: By the time Adam got it, a bad trade saw his crypto portfolio diminish from $10,000 to $2,000.

Just another day trading altcoins, Adam told me.

Ollie Leech, Coindesk Learn Editor, joined Yahoo Finance Live to break down why he thinks Ethereum is driving a lot of innovation in the crypto space right now.

ADAM SHAPIRO: All right, we've got just a little more than 15 minutes to the closing bell. I want to draw your attention to what's going on with Bitcoin. It's up about 670 bucks right now, $34,629 and change. But there's other cryptocurrencies out there. In fact, Goldman Sachs says pay attention to Ethereum.

We're going to pay attention to Ollie Leech. He's CoinDesk's learn editor. And Ollie, it's good to have you here. Help us understand, if you can, the Goldman call apparently this note leaked that they see Ethereum as potentially overtaking Bitcoin. What does that mean to those people who are buying Bitcoin today at over 34k?

OLLIE LEECH: Well, I mean, it's something to diversify your portfolio for sure. A lot of maximalists will probably fire back at Goldman Sachs for those comments. But they've got a point for sure. Ethereum is driving a lot of the innovation in the space at the moment. They're responsible for the DeFi boom, the NFT boom that we all enjoyed at the start of this year.

But the main problem that they have is they have a lot of competition. And this is where Bitcoin kind of pulls away from Ethereum. It has a low supply, 21 million coins, which many people are aware of. And this is a big driver for its value. But it doesn't have really the same competition Ethereum does. We're seeing a lot of new blockchain projects step up to the NFT space, particularly the DeFi space, and they're all trying to eat Ethereum's lunch. So it's definitely a close call. We'll see how it goes.

SEANA SMITH: Ollie, when we talk about regulation because, of course, that's been a big topic when we talk about not only Bitcoin, but really, crypto at large, and particularly what's going on over in China, I guess how big of a headwind do you see this being? And I know we talked to you about it in the past, but since then, we've gone headline after headline about how it could potentially disrupt the crypto markets going forward.

OLLIE LEECH: Yeah, absolutely. I mean, people have been talking about this kind of new level of enforcement that we're seeing in China right now. And it's true. You know, for the most part, even though these bans came out in 2013, 2017, we're really starting to see them amp up that enforcement now to start targeting these sort of fringe companies, companies that offer and facilitate crypto transactions there in the state indirectly.

So, you know, we go back last year. We were seeing these exchanges getting targeted. But now we're seeing software companies getting targeted as well. And what's interesting is China's stance has always been very, very clear from the get-go. When it started these bans, its message was, you know, do not offer-- facilitate cryptocurrency transactions. Otherwise, we will shut you down. And payment providers, software companies, anyone who engages in these sorts of activities now are going to get shut down.

ADAM SHAPIRO: What about the fact that we keep having these hacks, these cyber attacks on international businesses? And they wish to be paid the ransomware in Bitcoin or in cryptocurrencies. How much longer till the sleeping giants of the world say, OK, enough of this, and that regulatory clampdown begins?

OLLIE LEECH: Yeah, I mean, this is a big problem that Bitcoin is currently facing. And for a long time, we had that issue of Bitcoin being used for Silk Road for nefarious activities. But people also sort of shy away from the fact that through Bitcoin or through blockchain technology, we're actually able to track all of these payments. It's all transparent. Anyone can see where these payments are going. And in fact, through Bitcoin, some huge sort of dark web websites have been taken down purely because they were able to track the Bitcoin payments to them.

So it's kind of a double-edged sword situation. You know, it's not great publicity for Bitcoin. But it does have a traceability element that does help apprehend these sorts of funds. And we've already seen the FBI actually, through some unknown method, actually managed to break into the wallets and get that ransom back. And this may set the precedent for things to come and may even deter people from using Bitcoin in the future.

SEANA SMITH: Ollie, do you look at the performance of Bitcoin during the second quarter? Obviously, there was a lot of volatility in the price of Bitcoin. We saw it significantly pull back from its highs. What do you think that means just in terms of the likely trading action that we'll see from Bitcoin over the remaining six months of the year?

OLLIE LEECH: Yeah, sure. I mean, Bitcoin is very, very seasonal. And August is always-- we're coming up to August. And that's typically the worst time for Bitcoin. And we usually see into the final quarter, November particularly, we've seen spikes in the price. So it could just be a seasonal thing. We've obviously had this crazy first half of the year where we had Wall Street bets. We had this Dogecoin run-up. Bitcoin touched $65,000. NFTs were booming. It was a really exciting start to the year.

And now we've had the Bitcoin energy consumption debate resurface. We're having increased clampdowns from China now. We seem to be entering this kind of regulatory phase at the moment, which is driving prices down. But long term, I think-- you know, I think Bitcoin still has a very bullish case. We still have halvings and things like that to look forward to, which should help to prop up prices as we go forward.

ADAM SHAPIRO: Will we be putting a fork in Dogecoin-- which I prefer to call Doggy coin. But is it about time that this has jumped the shark? What would you say about the trends we saw in the last quarter about where Dogecoin may be headed?

OLLIE LEECH: Yeah, I mean, the big thing for Dogecoin is to be aware of the risks. And I think, you know, in the start of the first half of this year, we saw people getting really excited about it. A lot of people who may have never even engaged in the crypto space were buying Dogecoin because it was available on Robinhood. Everyone was talking about it.

But again, it has some serious underlying risks that people need to be aware of. And I think that as time goes on, and Elon Musk in particularly, he's lost a lot of favor with the crypto community. So that might be hampering prices in its potential to go back to $0.69. Yeah, it's a bit of a risky investment. And again, it doesn't really have the utility to push it forward like Ethereum, like Bitcoin, and like some other projects.

ADAM SHAPIRO: I think we should remember Elon Musk's mother on "Saturday Night Live," the television show, said to him, "Do not [INAUDIBLE] Dogecoin." All right, Ollie Leech, thank you so much for joining us. Ollie is the CoinDesk learn editor.

Celsisus CEO Alex Mashinsky joins Yahoo Finance to discuss the latest in cryptocurrency and why he believes Bitcoin's value will more than triple to end the year.

ADAM SHAPIRO: We got to turn our attention to what's going on in the crypto corner because Bitcoin is trading lower right now but look, it's not far off of the $40,000 mark. But let's talk about what's going to happen in a greater context with crypto and we're going to do that with Alex Mashinsky. He is the CEO of Celsius. And the potential for crypto to be used on different platforms to pay for stuff, not necessarily a pure-play to just buy the crypto coin but to use it do you see that taking on greater relevance?

ALEX MASHINSKY: So crypto's main purpose is a store value, right? It is not an exceptional form of payment I think the dollar is the opposite, right? It's an exceptional form of payment but not very good store of value. So I think there are many, many other cryptocurrencies or digital assets that serve that purpose better. Mostly, Stablecoins and other forms of digital assets. So I don't think you want to take this pristine asset and try to use it to clean the windows or do something else with it. It is very good for one thing, store of value and that's what you should be using it for.

SEANA SMITH: Alex, we're looking at a chart here of Bitcoin right now, it's trading just below $40,000. I guess what do you think is going to be that next catalyst to get it above $40,000? We were briefly there last week, although it didn't hold for too long.

ALEX MASHINSKY: Yeah, so earlier this year I talked about it kind of resisting going below $29,000 and we've seen a big jump since. And I think we are hitting some resistance here in the 40,000 to 45,000 levels. And there is not a lot of resistance above that. So I think we're going to consolidate here and then break to new highs. I still stand by my prediction that this year we will see anywhere between $140,000 and $160,000 per Bitcoin.

ADAM SHAPIRO: I think there are a lot of people cheering what you just said. Your platform, Celsius, deals with so many people who we refer to as the unbanked. Are they going to be able to get in on this, they can via the platform can't they?

ALEX MASHINSKY: Yeah, so most of what we do is enable the average person to earn a yield on their digital assets. We have almost a million customers in 170 countries, just over $17 billion in assets in total assets and we generate yield, we pay 8.8% on Stablecoins for example. So that's 30 to 40 times more than your bank pays you and we pay 6.2% on your Bitcoin.

So what Celsius does better than anyone else is give you that yield, give you that return on your capital. And we do it in three buckets, one is again, Stablecoins, we have 12 different forms of Stablecoins, three different forms of gold. So you can now earn 5.5% gold on gold or you can venture and choose between 32 different digital assets like Bitcoin, Ethereum, Litecoin, and so on. Those are the unique things that Celsius does better than anyone else.

SEANA SMITH: What about the infrastructure bill because it does include new crypto regulations for revenue? I guess do you view this as a headwind or how big of a challenge could this potentially be to crypto going forward?

ALEX MASHINSKY: Look, for those of us who pay taxes and report all of our transactions nothing in that legislation is new or different. I think Treasury and some of the other departments are trying to make sure that they collect all the taxes that are due. And at Celsius, for example, you do get a 1099 at the end of the year that tells you exactly how much you earned in yield and you do have to pay taxes on that. So I don't see-- there's no impact to us and we've been following regulation, we've been doing KYC and AML services since 2017. So none of these new regulatory requirements make any difference. And I think clarity on the regulatory side is a very good thing, it's a positive.

Now I heard some people talk about mining and how it's going to impact mining. Celsius has over $200 million invested in mining. We're one of the largest miners in North America and I can tell you that this new regulation does not hamper or slow down any of our activities. We do have to report income, we're going to pay taxes on it. And we're happy to do it running a profitable business.

(Bloomberg) --

Cryptocurrency Bitcoin SV is under a blockchain attack that appears to have inflicted at least some damage to the network, according to a firm that analyzes system data.

The “51% attack” -- an invasion on a blockchain by miners who gain control of more than half a network’s computing power -- could enable the intruders to prevent new transactions from gaining confirmations, thus giving them the power to stop payments between some or all users or double-spend coins.

A 51% attack was initially identified on the BSV network on Tuesday, Coin Metrics said on Twitter, with the market-intelligence group backed by firms such as Goldman Sachs Group Inc. and Fidelity Investments later adding that “no further reorganization events have been witnessed, but there are still synchronization conflicts taking place on major mining pools.”

Bitcoin SV, a spinoff based on the original “Satoshi Vision” of the world’s best-known cryptocurrency, endured previous attacks in June and July. BSV is the 44th-biggest cryptocurrency according to CoinGecko.com with a market value of about $2.6 billion. It was created as a so-called hard fork off Bitcoin Cash in November 2018, which itself involved a radical protocol change from Bitcoin in 2017.

“There is so much hatred” in the competitive world involving Bitcoin, Bitcoin Cash and Bitcoin SV, said Konstantin Richter, chief executive officer and founder of Blockdaemon, a blockchain infrastructure provider. “It’s a simple ploy to get BSV kicked off exchanges in my eyes.”

Amid the apparent attack, BSV was down about 4% in the 24 hours to 1 p.m. Hong Kong time to $135.47, according to CoinGecko pricing. It’s off more than 70% from its mid-April highs.

“In the immediate term, the attack has seemingly had a somewhat-negligible impact on its current price action,” Adam James, senior editor at cryptocurrency exchange OKEx Insights, said in an email to Bloomberg. “Faith in the proverbial third-place Bitcoin will likely be reduced further following the incident -- which may negatively affect its long-term price prospects.”

The Bitcoin Association, which supports Bitcoin SV, took to Twitter to instruct node operators how to respond.

“Bitcoin Association is aware of an active re-organisation attack on the BSV network,” it said in a post, adding node operators should mark fraudulent chains as “invalid” to lock out attackers.

BSV was created “to restore the original Satoshi protocol, keep it stable and enable it to massively scale,” according to BitcoinSV.com.

(Updates with comment from exchange analyst in seventh paragraph.)

More stories like this are available on bloomberg.com

©2021 Bloomberg L.P.

Bitcoin and cryptocurrency prices have struggled in recent weeks as a brutal crypto crackdown in China worsens (you can get ahead of the market here).

The bitcoin price crashed in May, losing 50% of its value, and has remained under pressure since. Meanwhile, ethereum, the second-largest cryptocurrency after bitcoin, has fallen by more than half, with ethereum price struggling to hold above $2,000 per ether token.

Now, after reports former bitcoin and ethereum miners in China have been dumping GPUs, suggesting at least some of the decommissioned Chinese mining capacity won't return, analysts have warned crypto prices are "in danger."

Sign up now for CryptoCodex—a free, daily newsletter for the crypto-curious that explains the world of bitcoin with brevity. Arriving in your inbox at 7am EDT every weekday

China bitcoin and ethereum miners dumping CPUs "doesn't come as a surprise given the fact that China seriously cracked down on bitcoin mining in the country but the development may be interpreted as fundamentally bearish, nonetheless," Adam James, senior editor at Hong Kong-based bitcoin and crypto exchange OKEx, wrote in his latest analysis, adding "market sentiment has decreased significantly" over the last few days.

Meanwhile, reports have emerged on social media that China has begun blocking access to major cryptocurrency exchanges. This week, users reported that Huobi and Binance briefly required a location-masking VPN to access.

Binance, the world's biggest bitcoin and crypto exchange by volume, has been battling a global regulatory clampdown in recent weeks, with the U.S. and countries throughout Europe ramping up their scrutiny of the exchange.

China's crackdown on bitcoin and crypto mining last month forced those using high-powered computers to secure the bitcoin network and validate transactions out of the country. The expulsion of bitcoin and crypto miners from China sent bitcoin's hash rate, a measure of how much computing power is being directed at the bitcoin network, to a 13-month low over the last two weeks.

The ethereum network was also hit by China's crypto mining ban, seeing its network hash rate drop some 20% since May as miners powered down.

After dipping under $30,000 in recent weeks the bitcoin price has plateaued at just above the psychological level but its failure to meaningfully recover lost ground since its May crash has left many crypto market watchers worried.

CryptoCodex—A free, daily newsletter for the crypto-curious. Helping you understand the world of bitcoin and crypto, every day

"There is a summer lull in the crypto market which may just be the calm before the storm," Alex Kuptsikevich, FxPro's senior financial analyst, wrote in emailed comments, warning that if bitcoin falls under $30,000 it's "likely to trigger a new wave of liquidation."

"If the market is affected by a small number of open positions, then any small storm could turn into a large-scale sell-off, disrupting an avalanche of stop orders. But the most alarming thing for crypto-enthusiasts is that such an outcome will underscore the prolonged nature of the correction, increasing speculation around a new 'crypto winter' like in 2018."

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com. Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies.

Using blockchain technology, initial coin offerings have become an alternative means of acquiring funding for business projects using the new, evolving digital financial market for tokens. In contrast to initial public offerings, which are governed by strict legal regulations, ICOs require only a white paper and some interesting features, such as a lack of barrier to entry, a scope for exponential growth, absence of geographical barriers and easy validation. 

Hence, it may not be surprising that the ICO market experienced extraordinary growth recently. Research shows that from January 2016 to August 2019, ICOs raised nearly $13 billion worldwide.

Despite the appealing benefits of ICOs, investors interested in them as an alternative investment face some dramatic risks. In this regard, a 2018 report from Satis Research Group investigated approximately 1,500 ICOs. From the sample, 78% projects were identified as scams, collectively valued at $1.3 billion.

Related: Crypto Crimes Rated: From the Twitter Hackers to Not Your Keyser, Not Your Coins

Together with my colleagues Niranjan Sapkota and Josephine Dufitinema, I conducted a study that was aimed to explore and answer the following question: What are the various types of scams in the ICO market, and what is the expected monetary loss of the average ICO scam? To investigate this issue, we employed web-scraping and created an intensive data library covering all ICOs launched from August 2014 to December 2019. Our unique, hand-collected data set covered 5,036 ICOs.

We found data of the funds raised for 1,014 ICOs, 576 of which turned out to be scams, totaling $10.12 billion in cumulative losses. The largest loss via scam is the so-called “Petro-scam,” from which investors lost a total $735 million.

Dead, fake, or both

We retrieved ICOs that had been categorized as “listed” by dead-project aggregators DeadCoins and Coinopsy, and analyzed them to identify 13 different ways that investors can be fooled by scammers. If a Bitcointalk forum member identified the ICO with a fake team, fake project, fake wallet, fake social media or fake trading, we categorized the ICO as “fake.”

The classic exit scam

If an ICO failed to pay out promoters who were promised financial rewards (mostly in the form of tokens) for PR activities such as promoting the project on forums, Telegram channels, messengers, translating and localizing documents, posting on social media or on blogs, we categorized it as a “bounty scam.” If the developers and promoters who collected funds for an ICO suddenly disappeared while leaving investors without any information, we categorized those ICOs as an “exit scam.”

Compound scams and exploding airdrops

We observed many ICO scam accusations in which the same group of developers was actively conducting scams in other projects. This type of scam is categorized as “previous scammers” in our study. Next, we defined “airdrop scam” for incidents in which the scammers stole private keys from users. This can happen if scammers create a booby trap and users, expecting to receive free tokens, click on the links, thereby giving away their private information and ultimately losing their coins.

Exchange scams and the copy-pasters

Furthermore, developers intending to deceive investors seemed to prefer launching their ICO at a fraudulent exchange. This type of scam is categorized as an “exchange scam.” We also observed that copying the white paper of a promising ICO and launching it using a similar or different name is another deceptive tactic used among scammers. This type of scam is categorized as “white paper plagiarism scam.” In this regard, we have observed that users are fortunately getting familiar with this type of scam and now report it in the Bitcointalk forum.

The pump and dump

“Pump and dump” is another strategy used by scammers, but it is not always immediately detectable at the beginning of an ICO. In this type of scam, investors and traders rush to buy the token at an early phase when the price is still low, and some even buy at a high price in fear of missing out on an opportunity to make an easy profit. Once the scammers complete the sales, the price drops abruptly and dramatically.

Crypto Ponzi schemes

A “Ponzi scam” is another category of scam observed. This type of scam typically requires that the victims invest in some product(s) or service(s) associated with the ICO and are promised returns at a later stage.

URL scams and phishing trips

We also observed a new tactic of scamming investors that involves the launch websites that are similar in name and design to existing projects. Naive investors that are unaware of the original websites may be fooled by these sites and lose their coins. This category of scam is identified as a “website scam” in our study.

We know what you did last night

We also observed what we describe as a “porn scam,” which seems to be increasingly popular among scammers, whereby an ICO pretends to offer premium access to its porn site (and/or products). Scammers may be employing this type of scam because users are less likely to report it due to pornography being prohibited or looked down upon in many countries.

Market manipulation and pre-mines

Next, we defined another form of fraudulent ICO as a “pre-mine scam,” referring to tokens being shared among developers and/or promoters after the final token sale took place instead of burning the unsold tokens as is appropriate in such cases. This scams investors simply because a higher token circulation supply implies a lower token price. Furthermore, the token’s market can be manipulated if developers retain a large portion of the tokens from the pre-mining phase. Interestingly, another recent study also found that pre-mining activity is linked to cryptocurrency defaults.

Our screening showed evidence that the “phishing and fraud” type of scam is the most common, whereby users receive spam emails, suspicious links and popups, questions for personal and financial details, errors on withdrawals, pending withdrawals, balances disappearing from wallets, and other dysfunctional operations.

Finally, using our plug-in estimator, we found that if an ICO business project turns out to be a scam, we can expect an estimated $54.1 million in losses, which is three times the general sample average of $17.58 million.

Summing up, due to a lack of regulation, developers and/or promoters can employ more than a dozen tactics to fool investors. The money involved in this new, emerging market is overwhelming. We argue that our findings have significant implications, including the need for ICO market regulations from governments and regulatory agencies to protect investors from severe losses.

The development of payment options is not always visible and has taken a variety of forms. From crisp banknotes, humanity has moved on to cheques. Increasingly, one or two compact credit cards are used instead of bulky wallets. Rather than passing cash from hand to hand, we are more frequently sending payments by bank transfer. Previously, it wasn't always possible to keep track of who created these ideas. And the implementation of innovations has sometimes taken decades.

Now, in the age of digitalization, fundamental transformations are taking place in the public eye. For the first time, humanity is close to creating a cryptocurrency that can run globally at the same level as cash, or even replace fiat money. And no less important, the ideological leader and chief visionary behind the project is well-known.

Revival Of Satoshi Nakamoto’s Ideas

Amaury Séchet is a man capable of turning the concept of blockchain's future in the economy upside down. In his project, we can observe the birth of the technology, which is intended to follow the ideals originally laid down by Satoshi Nakamoto.

Relieving the Internet of the need for a banking system for online payments is one of the keystone motives behind the creation of Bitcoin. But when looking at today's cryptocurrency platforms most of them take the path of least resistance and drag Bitcoin's ideals of privacy and security into the realm of ordinary bank payments and accountability to regulators.

However, Amaury believes that principles should come first. He does not compromise his convictions in order to increase his popularity or to align himself with groups of activists. Cryptocurrencies are about anonymity; about encryption; about the inability of governments and banks to stick their fingers in people's wallets. By refusing to support the removal of transactions outside the blockchain network, he has earned a reputation as a man who goes against the system. As he’s said, “You can't betray your values and your users.”

Bitcoin is still popular. But if you ask the average user if he or she wants to pay for goods and services with this cryptocurrency, the answer is likely to be “No” or “No way”. The main reason for that reaction could be the perception that Bitcoin is a speculative tool. Why would you give away something that could increase in price ten times over time? Bitcoin's excessive volatility, huge transaction confirmation time, and difficulties in scaling up has led to throngs of competitors who wouldn’t miss the opportunity to carve out their niche in the market.

Split Up With Bitcoin To Create Something Bitcoin Was Supposed To Be

Amaury created Bitcoin Cash with the 2017 bitcoin fork, and as its lead developer worked to improve it. He explored all the strengths and weaknesses of the project and he faced the reluctance of the managers to address vulnerabilities in the system. Amaury was not the only person who noticed it. But unlike many, he did not put up with this.

It might seem to some that quitting this project was not financially beneficial. But when it comes to the opportunity to create the future of the crypto industry — you can't just look at the money side of things. As Amaury has admitted, leaving Bitcoin Cash was a difficult step, and building his own project was no less of a challenge. After all, it was aimed at breaking the stereotypes of the existing blockchain ecosystem.

90% of a start-up's success depends on who is at the helm. Amaury Séchet has decades of experience in developing the leading cryptocurrency and is an expert in his field. If you add to that the competent development team with a proven reputation and the initiative to put Bitcoin back at the service of ordinary people, rather than individual governments and corporations, you get eCash.

After a recent rebranding, his company is ready to show the world what blockchain technology can really do. Moving away from the well-trodden path of mining, the start-up is ready to redefine the concept of digital money in the minds of its users.

Faster Transactions, Lower Fees, And Energy-Saving Technologies

It took a year to work out all the intricacies of Proof of Stake and protocol management but the result is well worth it. Transaction validation time will be reduced to less than 1 second. In addition, eCash is capable of supporting a huge number of transactions per time unit. Recently, the global community has been concerned about the increasing amount of electricity being consumed by mining, which has a damaging impact on the environment. Truly modern projects are designed to counteract the polluting processes. The result of Amaury's work could circumvent the mistakes of its predecessors thanks to the use of Proof of Stake technology.

The revolutionary consensus algorithm, Avalanche, is particularly noteworthy. It provides increased security and updates without forks. The predecessors of eCash lost a significant part of their followers due to persistent divisions (forks). Avalanche brings technically sound, politically decentralized governance to the eCash protocol.

It has been four years since the split of the Bitcoin network and the formation of Bitcoin Cash. Amaury Séchet went against everyone when he refused to support the removal of transactions outside the blockchain network. He is still adamant in its philosophy and believes that 99% of crypto projects today have nothing to do with what digital money really should be.

Innovative and successful technologies have humble beginnings, as do their designers. The process of formation and development of such technologies is often fraught with challenges and involves the banding together of various groups of like-minded individuals. This is exemplified by Skype with its isolated beginning as a tiny Estonia-based project. Amaury Séchet is one such developer who was exiled from the project he created and is now determined to bring cryptocurrencies back to their roots.

His name is not on the radar of millions of people but Amaury is the man who is dictating the evolution script for blockchain technology. If you met him on the street, you could pass him by without recognizing this extraordinary man. Even in the shadows, he can bring cryptocurrencies back to their origins. History is being made before our eyes. After all, the world has never been so close to forming a publicly available, secure means of payment that is unafraid of government control and censorship. To be silent witnesses of this process or to keep up with the times and join the flow of the first eCash users: the choice is ours.

Image by WorldSpectrum from Pixabay

See more from Benzinga

Click here for options trades from Benzinga

How Bitop Is Helping New Traders Enter The Market With Ease

Exchanges Made Easy: Powering Your Start-Up With bitHolla's HollaEx Kit

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

MarketWatch has highlighted these products and services because we think readers will find them useful. We may earn a commission if you buy products through our links, but our recommendations are independent of any compensation that we may receive.

Investing in crypto may be easier and faster than ever — you can now opt to invest through online brokers like Robinhood and SoFi Invest or crypto exchanges like Coinbase and Gemini— but it’s far from being a foolproof venture. Many of the same risks and pitfalls that vexed crypto pioneers can still cause headaches for those entering the field today. That’s not to say that navigating the crypto universe requires a masters in computer science or finance; rather, it just means that some of the financial resources, protections and patterns investors have come to expect when trading stocks and bonds will be different when trading crypto.  Learning the rules of this new digital investment game is essential and could potentially save you from making mistakes worth thousands, or even millions of dollars. Here are a few mistakes that new crypto investors often make when they get started, as well as some things to consider before taking the plunge.

If you decide to buy Bitcoin, make sure it’s the genuine article. One of the biggest mistakes new investors make is buying the wrong coin. Just because it has ‘Bitcoin’ in its name doesn’t mean it’s a Bitcoin. There’s Bitcoin Cash, Bitcoin Gold, Bitcoin SV, Bitcoin Private and dozens of other direct offshoots of the original cryptocurrency that have the word “Bitcoin” in its name. That’s not to say that these offshoots are bad or scams, it’s just that they aren’t the original Bitcoin that has become widely traded and quoted. But if you do buy the wrong coin, it isn’t the end of the world. You can always sell it back and buy the right one, hopefully at a profit.  

Ready to get into crypto? You can buy Bitcoin, Ethereum and other cryptocurrencies via online brokers like Robinhood and SoFi Invest or crypto exchanges like Coinbase, Gemini or eToro.

You’re going to need nerves of steel if you get into this space because the volatility is extreme. “Compared to the analog world or the traditional finance world, volatility is kind of off the charts,” Theresa Morrison, a certified financial planner in Arizona, told Marketwatch.

Morrison recommends that new investors commit a nominal sum at first, even as low as $50 a month, to an established cryptocurrency they understand, and then to forget about it. The swings in volatility are such that if an investor is constantly eyeing the market it could drive them crazy.  Furthermore, if you’re new to the crypto world, you may want to stick to cryptocurrencies that you know and understand at first. “I like my clients to look at established coins first – the ‘Blue Chips’ of crypto, if you will, namely Bitcoin and Ethereum,” says Erik Goodge, an independent certified financial planner based in Indiana.

Believe it or not, many new and veteran cryptocurrency traders have lost money sending their coins to the wrong place. Unlike a bank wire transfer that can be halted or a check that can be canceled, there’s often no recourse if you make a fat-finger error. 

“I got a good buddy who was trading Stablecoins and he sent USDT to a USDC address and lost $4,000,” Adam Blumberg, a financial planner in Houston, recounted. “He texted me saying that this transaction is two days old and he doesn’t know what’s going on. When he sent me the transaction I told him he had accidentally sent it to a USDC account and asked me if he could call them to fix it and I was like ‘no, it’s gone – you should have called me first before you did this.’”

Ready to get into crypto? You can buy Bitcoin, Ethereum and other cryptocurrencies via online brokers like Robinhood and SoFi Invest or crypto exchanges like Coinbase, Gemini or eToro.

While there will only be 21 million Bitcoins that will ever be mined, less will trade because many of them are simply lost forever as people have forgotten the passwords to their digital wallet. You often can’t call somebody to reset your password, if you forget it or lose it then you’re locked out. Around 20% of the Bitcoins mined so far are lost in stranded wallets, according to Chainalysis, a cryptocurrency data firm. Therefore, how you store your password is critical and needs to be thought out in advance before you start trading. Writing it down on a piece of paper is the first step but even that has its own concerns as it can then be stolen and used by someone else. Also, paper is not the most durable material. “I have clients who wrote down their passwords and kept them in a special place in their house,” Blumberg said. “But a couple of years ago, when Houston was hit with those terrible floods,” many of those carefully hidden passwords dissolved in swamp water.

Blumberg recommends putting the password in a flood-safe and fire-proof container or keeping it in a bank safety deposit box. As an alternative to writing it on paper, he has seen some clients get their passwords stamped on metal that can resist the elements.

Ready to get into crypto? You can buy Bitcoin, Ethereum and other cryptocurrencies via online brokers like Robinhood and SoFi Invest or crypto exchanges like Coinbase, Gemini or eToro.

About the author: Cyrus Sanati has been a financial journalist and columnist for nearly two decades, covering a wide variety of topics from the energy markets to digital currencies. His work can be seen in a variety of publications, including The Wall Street Journal, The New York Times, Fortune Magazine and Breakingviews. He is a graduate of UCLA and earned post-graduate degrees in journalism and business from Columbia University. 

Also see: What you need to know to start investing in cryptocurrency right now

Cryptos are getting increased attention as an asset class. Although it’s still difficult to value most digital tokens fairly, more businesses are now working with crypto assets or incorporating them into their operations or even balance sheets. Meanwhile, the use of decentralized finance (DeFi) applications, which operate without any intermediaries via smart contracts on blockchains, is growing rapidly.

Decentralized finance allows for “censorship-resistant participation in a number of digital markets, expanding the reach of lending [4], stable assets [5, 6], and exchanges [7, 8, 9] past the conventional financial world.” Therefore, as their use increases, we can expect a good number of digital currencies to recover from the recent decline in price and reach new highs in the months ahead.

So today’s article introduces seven cryptos that deserve your attention in July. Despite the recent sell-off in most cryptos, many of theses assets are still up double or even triple digits so far in the year.

According to PricewaterhouseCoopers, “Cryptographic assets, including cryptocurrencies such as Bitcoin, … and the underlying technology, provide opportunities to digitise a variety of ‘real world’ objects. The benefits of digitisation (such as ease of access, transfer, etc) have resulted in cryptographic assets growing from an obscure curiosity to a technology that is proliferating into a variety of business uses.”

As there are currently thousands of altcoins to buy, market participants need to do due diligence before investing their hard earned cash into them. Here are seven cryptos I’m keeping an eye on now:

52-Week Range: $25.97 – $666.86

Originally launched in November 2017 as ETHLend, by Stani Kulechov, this DeFi protocol was later rebranded as Aave. Those who want to lend or borrow cryptos now consider using the Aave network.

Assets on the platform are currently “limited to only ERC-20 tokens. ERC-20 is a standard for Fungible Tokens on Ethereum, i.e. they have a property that makes each Token be exactly the same (in type and value) of another Token.”

Lenders can earn interest by depositing their digital assets into specially designed liquidity pools. On the other side of the equation are borrowers who can then use their cryptos as collateral to take out loans. Aave’s flagship products are “flash loans,” regarded as the first uncollateralized DeFi loan product.

AAVE-USD started 2021 around $87.61. Now it is around $280. That is an eye-popping return of about 220%. That being said, AAVE is currently down about 12% in the past month. With a market cap of $3.6 billion, it is among the top 30 altcoins.

52-Week Range: $0.004532 – $0.2252

Developed in November 2017 by Chandler Song and Ryan Fang, Ankr depends on shared resources to provide blockchain node hosting solutions. As a result, developers and enterprise clients can easily deploy blockchain nodes at cheaper prices compared to public cloud providers.

A recent paper authored by the founders of the Ankr network highlights, “Most blockchain applications use either Proof of Work (PoW) or Proof of Stake (PoS) as the consensus for validating a piece of information (in most cases the information is the ownership of a coin or a token)… [But Ankr’s] Proof of Useful Work (PoUW) allows for a self-sustainable blockchain framework with the potential to unlock idle computing power around the world.”

ANKR-USD began 2021 around $0.0087. Now it trades at $0.073. That is a massive return of about 1,000%. However, in the past month, Ankr is down about 17%. With a market cap of about $500 million, it is among the to 110 cryptos.

52-Week Range: $16.73 – $690.93

Launched in July 2017 by Changpeng Zhao, Binance has become one of the biggest cryptocurrency exchanges globally. The growth has also come with regulatory hurdles. For instance, in June, the U.K.’s Financial Conduct Authority blocked the exchange from operating in the country.

As recent research points out, “BNB is a platform token issued by Binance Exchange and runs on the Ethereum blockchain with the ERC20 standard. BNB has a strict limit of a maximum of 200 million tokens and sold 100 million tokens (50%) to the outside world. The smart contract of BNB is one of the most used ERC20 contracts on the Ethereum platform.”

Put another way, Binance Coin is an integral part of the functioning of the Binance network. BNB-USD began the year around $38.22. Now it trades at $311. That is a staggering return of about 720%. But, in the past month, it is down about 16%. With a market cap of $48 billion, it is among the top 5 altcoins.

52-Week Range: $180.50 – $1,635.15

Next on our list is Bitcoin Cash, not to be confused with Bitcoin. Research led by Yujin Kwon of Korea Advanced Institute of Science and Technology (KAIST), South Korea, highlights, “In Aug. 2017, Bitcoin was split into the original Bitcoin (BTC) and Bitcoin Cash (BCH). Since then, miners have had a choice between BTC and BCH mining because they have compatible proof-of-work algorithms.”

Bitcoin Cash was designed to function as an electronic cash payment system. Regular InvestorPlace.com readers are well versed in Bitcoin’s scalability problem, which Bitcoin Cash aims to address better. It was designed to pack 8MB of data into each block and to process 116 transactions per second on average. That is much faster than Bitcoin.

BCH-USD started 2021 around $354.60. Now it trades at $475.60. That is a return of about 39%. However, in the past month, it is down about 24%. With a market cap of $9.1 billion, it is among the top 15 altcoins.

Readers would be interested to know that “Since all valid transactions are double-entry accounting entries, Holo’s internal crypto accounting functions just like a balance sheet where every transaction keeps the sheet in balance – total credits equal total debits, every credit has an offsetting debit. This system does not require issuance of crypto coins or cryptographic validation of transactions (mining).”

52-Week Range: $10.36 – $140.37

Neo was designed to digitize assets using smart contracts and a programming language, similar to Ethereum. Da Hongfei and Erik Zhang founded the network in 2014. Initially launched under the name Antshares, the project was rebranded as Neo in June 2017.

Most crypto followers realize that “Consensus protocols make distributed participants collectively reach an agreement, which enables the immutability and prevents the forks within blockchain systems. Byzantine fault tolerance (BFT) consensus and its variants (together denoted as BFT-style consensus) tolerate a certain number of Byzantine participants who can misbehave.”

According to the network, “Byzantine Fault Tolerance mechanism is a universal solution for distributed systems. Neo proposes dBFT (delegated Byzantine Fault Tolerance) consensus algorithm based on PBFT (Practical Byzantine Fault Tolerance) algorithm. Algorithm dBFT determines validator set according to real-time blockchain voting, which effectively enhances the effectiveness of the algorithm, bringing block time and transaction confirmation time savings.”

The Neo platform has a dual token mechanism that separates the rights of using the network from governance rights. Of the two, NEO-USD started 2021 around $14.44. Now it trades at $33.18 for a return of about 130%. However, in the past month, it is down about 34%. With a market cap of $2.3 billion, it is among the top 40 altcoins.

52-Week Range: $0.419 – $44.97

Launched in November 2018 by Hayden Adams, Uniswap is a decentralized trading protocol. It aims to keep token trading automated, while improving the efficiency of trading.

By automating the process of market making, the protocol reduces costs for all parties. The mechanism also removes identity requirements for users, and technically anyone can create a liquidity pool for any pair of tokens.

Research by Yuen Lo and Francesca Medda of University of London, UCL, UK, cite, “Liquidity providers (LPs) commit proportionate quantities of two cryptoassets to form the basis of a trading pair. In return LPs receive 0.3% of the value of trades.”

The platform’s native token UNI-USD is used for governance, transactions, and paying fees. It started 2021 around $4.97. Uniswap currently trades at $18.21. That is a return of about 270%. However, in the past month, it is down about 22%. With a market cap of $10.7 billion, it is among the top 10 altcoins.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.  The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan   Gecgil, Ph.D.,  has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

www.majaprgomet.com

www.studiotestudo.com

Zcash founder Zooko Wilcox might seem like an unlikely source to challenge Bitcoin’s ‘third rail’, its controversial, expensive, yet effective method of processing transactions, but in many ways he is the perfect candidate to offer an alternative.

After all, few know Bitcoin better than him.

An early and active participant on Bitcoin message boards, Wilcox frequently communicated and collaborated directly with the pseudonymous founder of Bitcoin, Satoshi Nakomoto. In fact, he authored the very first blog post on bitcoin, which Satoshi linked to on the original Bitcoin.org website. That is the ultimate seal of approval when it comes to crypto. 

However, in an interview with Forbes, Wilcox made it clear that for as far as Bitcoin has come it is far from a fully-formed project in many areas. 

For starters, the pseudonymous nature of the blockchain, which hackers and criminals are slowly finding out is not nearly as private as they hoped, was not the desired end state. As Wilcox tells it, “The fact is, like, to basically 100% of all the early bitcoiners, including Satoshi and Hal (Finney) and Nick (Szabo) and Adam (Back), and everyone…Privacy was like the main value proposition.” 

If nothing else, it was clear that it deserved central billing alongside independence from central banks, the more common narrative of Bitcoin’s origin story.

The proposed solution back in 2010 was something called zk-snarks (Succinct Non-Interactive Argument of Knowledge). In short, zk-snarks can be used in a blockchain to hide not only the identities of the sender and receiver, but transaction amounts as well. Total privacy.

Back when Satoshi was actively developing bitcoin he had hoped to integrate zk-snarks into the network. However, by the time he stepped away in 2011 the technology was not advanced enough to install without slowing Bitcoin down (it is already slow even by crypto standards) or burdening it with too much data.

Zooko Wilcox

Wilcox was part of a team of scientists in 2012 who presented a proposal to integrate zk-snarks on top of Bitcoin at a conference in San Jose, but the core developers told them that the technology had to be proven on another blockchain before receiving serious consideration. 

So that is exactly what Wilcox did – and a couple of years later Zcash was born.

It is also clear in his writings that Satoshi knew that bitcoin, if successful, would have a very large carbon footprint, something that my colleague Chris Helman pointed out in a recent article for Forbes, “It’s the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange. I think the case will be the same for bitcoin. The utility of the exchanges made possible by bitcoin will far exceed the cost of electricity used.” 

It is on this point that Wilcox wants to use Zcash to move crypto forward, starting today. In a forthcoming blog post shared exclusively with Forbes, he is advocating for Zcash to move away from the same energy-intensive ‘proof-of-work’ consensus mechanism as Bitcoin to a more eco-friendly ‘proof-of stake’ approach.

The implications of such a transition could be huge. Zcash is a close cousin of Bitcoin, its code is actually based on Bitcoin, and if successful it could open the door to Bitcoin possibly eschewing mining as well. 

So what exactly is ‘proof-of-stake’? Rather than operating millions of dollars worth of energy-consuming computing hardware racing to solve complicated math problems in exchange for freshly-minted bitcoin, nodes on the network post holdings as collateral at risk of forfeiture should they act dishonorably. Proof-of-stake is lighter, faster, and in the words of Wilcox even more secure than proof-of-work.

“I think proof-of-work has some security flaws, as has been demonstrated by the 51% attacks that have occurred (when a miner controls a majority of computing power on the network and can steal tokens). And I think proof-of-stake can provide a much more powerful kind of security and at lower cost.”  

He also pointed out that under proof-of-work setups users have little recourse if the network gets attacked. However, on a proof-of-stake network the bad actors can be identified and have their tokens revoked so that the rest of the network can go on operating as usual. In fact, this is similar to an argument offered by Ethereum creator Vitalik Buterin, which is also going through an arduous transition from proof-of-work to proof-of-stake, to justify the switch.

When asked why he is advocating for the transition now, Wilcox points to a few key reasons, most notably that the proof-of-stake is ‘proven’ and no longer experimental. As evidence he points to the successful launch of networks such as Algorand, Cardano, Cosmos, and Tezos. 

In fact, environmental concerns do not seem to be a leading justification for the shift, but rather his belief that proof-of-stake is the better all-around approach moving forward. He also recognizes that right or wrong, people are increasingly worried about crypto’s carbon footprint. Switching to proof-of-stake in his mind is then a win for everyone.

That said, while Zcash is based on Bitcoin and shares many of the same characteristics, down to its hard limit of 21 million units, the two networks are in different universes from adoption and scale points of view. ZEC (Zcash’s native token) is currently priced at $111.55, while bitcoin is nearly 350x bigger at $38,709. Bitcoin processes around 250,000 transactions per day, while Zcash hovers around 4,000. Additionally, the bitcoin network’s hashrate of 102,631,000,000,000,000,000 hashes per second is orders of magnitude bigger than Zcash’s 4,992,000,000. 

That said, Zcash has tripled Bitcoin’s returns to investors year to date.

So even if Zcash makes a successful transition, that does not mean that bitcoin could simply follow the same path. Plus, bitcoin’s community has historically been resistant to major change, understandable given its focus on security, and the necessity of proof-of-work has become a hardened part of its ideology.

A final reason why things are moving forward now is because as Wilcox tells it, we are entering an inflection point when it comes to protecting our privacy from governments and corporations alike, “We’re both simultaneously seeing mega corporations and governments seizing more and more control over everyone, both in the east and the west…And we’re simultaneously seeing people worldwide becoming more aware and valuing their privacy more, their autonomy, their human relationships.”

He also believes that the stakes are being raised when it comes to central bank digital currencies (CBDCs) and fears of surveillance capitalism. That said, Wilcox would not be opposed to collaborating with banks around the world if they wanted to integrate Zcash and  zk-snarks, saying “We definitely could help them come up with improved or variants, zero knowledge proof that would serve their purposes. But we would do so only if that one they would feed back into ZEC, which is the engine of our mission, our mission is to empower and free everyone in the world.”

I am director of research for digital assets at Forbes. I was recently the Social Media/Copy Lead at Kraken, a cryptocurrency exchange based in the United States. Before

I am director of research for digital assets at Forbes. I was recently the Social Media/Copy Lead at Kraken, a cryptocurrency exchange based in the United States. Before joining Kraken I served as Chief Operating Officer at the Wall Street Blockchain Alliance, a non-profit trade association dedicated to the comprehensive adoption of cryptocurrencies and blockchain technologies across global markets. Before joining the WSBA, I was the Lead Associate within the Emerging Technologies practice at Spitzberg Partners, a boutique corporate advisory firm that advises leading firms across industries on blockchain technology. Previously I was Vice President/Lead Strategy Analyst at Citi FinTech, where I drove strategic and new business development initiatives for Citigroup’s Global Retail and Consumer Bank business across 20 countries. I also served five years as a Senior Intelligence Analyst at Booz Allen Hamilton supporting the U.S. Department of Defense. I have a B.S. in Business Administration from the Tepper School of Business at Carnegie Mellon University and a M.A. in International Affairs from Columbia University's School of International and Public Affairs. Additionally, I am a Certified Information Privacy Professional (United States, Canada, and the European Union) and a Certified Information Privacy Technologist at the International Association of Privacy Professionals (IAPP).

Coinstelegram – Altcoins Cryptocurrency News ICO growth has been tremendous since it emerged 4 years ago. From frauds to real great projects, we haven’t seen yet any exciting blockchain-based applications that would use the whole potential of the technology. For instance, what do we find if we search for blockchain-based apps? Some sort of articles like this one on medium.com (6 Interesting Blockchain-based Applications and What They Do). What we find inside? All these projects carry beautiful ideas underneath descriptions and wonderful teams of developers and advisors, but there is one point that raises question: neither of these projects can be named “a blockchain-based application”. What ADAMANT is building application indeed. All we see the popularity messengers gain nowadays. Apple added emoji, than animoji, than API for developers to create stickers and games for IMessage. In one if the latest IOS releases they even gave users the ability to send each other money from one apple wallet to another (there are several countries, where this function doesn’t work due to government regulations, but still. Chinese WeChat is another great example. Through years app developed from simply the most popular messenger in China into the app for everything – with over 580 million in-messenger mini-programs announced by WeChat in January [1]. Chinese trade through messengers, find love, pay taxes, transport fees, find cars for rent, read news… simply everything. Messengers are changing our consumption model the same way social networks did one day. So what we have? Two technologies with great potential: blockchain, messengers. And ADAMANT is trying to combine them. So what hides behind the name? These guys are trying to create web messenger (for maximum safety and no information stored on device) with blockchain encryption and large functionality. So here is some info about app and its advantages from company website: We all that range of simple but useful and so needed functions messenger can become a big player on this market. Being the first blockchain messenger and even first indeed blockchain-based app it can be valued as a good investment. Pre-ICO is going to the end and ICO starts on 01/30/2018, lasting for 2 months according to website. Our advice is at least add these guys in your short-list of followed blockchain startups and read whitepaper. Coinstelegram – Altcoins Cryptocurrency News

Lolli Co-Founder and CEO Alex Adelman joins Yahoo Finance to discuss the latest in cryptocurrency and new innovations for his Bitcoin rewards app.

SEANA SMITH: Let's talk about crypto. Because in the crypto, market, the buying momentum returning to Bitcoin this week. We saw Bitcoin cross back above a $40,000, although right now trading just below that level. Let's bring in Alex Adelman. He's the CEO and co-founder of Lolli.

Now, this is a Bitcoin rewards app that we're going to talk a little bit more about in just a second. But Alex, more broadly speaking, the movement that we've seen in Bitcoin over the last seven days, certainly a very different story than what we saw going back to the previous week. I guess, what's your assessment of the moves that we've seen over the last couple of days?

ALEX ADELMAN: Yeah, momentum's good. I think that the world is finally realizing the power of Bitcoin, and they're realizing how anti-fragile it actually is. You know, you have entire countries that are adopting it, corporations that are adopting it. You have, you know, leading investors that are very public about adopting it in their personal holdings. So all of the things that we, you know, predicted about Bitcoin are now coming true. And so yeah, the price is going to continue to go up as more momentum builds, and so far, so good.

ADAM SHAPIRO: Tell us about the platform, though because-- I'm kicking myself because we bought a new mattress set, and one of your partners is Macy's. How does it work? I-- the airlines do this all the time. You use a credit card, you have the deal, and then you get points towards your airline miles. Is the same basic model for cryptocurrency and what you're doing?

ALEX ADELMAN: Very similar. So instead of getting some arbitrary point that you don't know how much is worth, you're getting Bitcoin. So if you don't know, there's only 21 million Bitcoin that will ever be created, and so there is this idea of digital scarcity, or digital real estate, that Bitcoin holds. So when you're earning let's just say 5% back at Macy's or a mattress company, in your case, you are going to be earning Bitcoin back, and that is then your Bitcoin. You can hold your Bitcoin on your own secure wallet. And you can trade it. You can sell it. You can do whatever you want with it.

SEANA SMITH: Alex, when we talk about the future of Bitcoin, I think a lot of that relies on the fact of adoption on Main Street. When you take a look at that, I guess, what's the key factor in driving that adoption on Main Street going forward?

ALEX ADELMAN: Yeah, great question. So the first phase of adoption was mining, and that-- you know, that was back when Bitcoin first started. The next phase was through investing, and that's what really-- like, Coinbase really, like, paved the way for. What we're working on is actually attaching Bitcoin to your everyday life. So everybody shops, everybody spends, and everybody wants rewards when they do that. So we're attaching Bitcoin to every single purchase that you make so that when you shop as you normally would, you're getting Bitcoin back. And you're really, like, dollar-cost averaging into Bitcoin with this free money rewards platform.

ADAM SHAPIRO: I'm looking at some of the partners, top brands-- Chewy, Nike, eBay, Priceline, Groupon, Sam's Club. I could go on-- Staples. But it just occurred to me, since you've got the wallet, might there be growth for you to partner with a Robinhood, where people could then use what's in their wallet to transact on a brokerage?

ALEX ADELMAN: Yeah, you nailed it. So right now, we're really focused on Bitcoin adoption. But as the world starts to transition into this inevitable future of crypto, we believe that by having the wallet and by having the relationships with these incredible merchants and having, you know, consumer adoption on the wallet front, we really are positioning ourselves to give the users the ability to actually spend Bitcoin, spend stablecoins at their favorite merchants.

And you know, as many of us know, crypto, in many ways, especially as a medium of exchange, is a better way of transacting money. There is very, very little fees. It's seamless. You can just send from wallet to wallet. There's very few, if any, intermediaries in order to transact. So you can imagine in the future paying at Macy's or paying at Best Buy with your crypto that is being held in your Lolli wallet and even getting incentivized to do so because you're going to get more back because it's a more efficient medium of exchange and provides cost savings for the merchant which then is passed on to providing cost savings for the consumer.

SEANA SMITH: Alex, what about regulatory concerns? Because that could be a huge challenge here for this sector going forward. I know it's a huge unknown at this point, but I guess, what position could that potentially put your business in?

ALEX ADELMAN: So we're in a great position with that. You know, we are a rewards company that's giving, you know, people Bitcoin. And so where we're at is, like, you know, people aren't taking their money and investing in it. So-- and we're hyper-focused on Bitcoin, which has proven its value to society. And it would be very surprising if Bitcoin was banned and-- you know, and stopped from transacting.

We work with legitimate merchants. We have legitimate consumers. We built a legitimate business. And so yeah, we feel really good about where we're at with that.

As far as incentives go, government doesn't-- if a government, a fiat system chooses to ban Bitcoin, it basically inhibits its population from advancing with society. Crypto is absolutely inevitable at this point in history. There's no stopping it. It connects 4 billion people with an internet connection with secure money and an incredible medium of exchange and store of value.

So if a government chooses to actually ban it, they're actually regressing as a country, as a civilization and a society. And there's no real incentive right now for a lot of these governments to do so, and a lot of governments have really punished their citizens by letting-- by making it illegal or banning it because they haven't let them play a part in this future economy.

ADAM SHAPIRO: Alex, I can't help but notice that behind you on the shelf, you've got the Leonardo da Vinci-- if we can pull up the shot of Alex-- biography by Walter Isaacson. And you know, he created something amazing. You've created something amazing. The book is good. I don't know if you've cracked it yet. I read it two years ago. It's a definite thumbs up.

ALEX ADELMAN: Thank you for noticing. Yeah.

SEANA SMITH: Alex, it's great to speak with you. Alex Adelman, CEO and co-founder of Lolli, thanks so much for taking the time. We look forward to having you back here on Yahoo Finance in the future.

OAK LAWN, IL -- The Children's Museum in Oak Lawn is now accepting cryptocurrency as donations, becoming the first children's museum in the country to accept such donations.

"We learned a lot from being closed most of 2020," the museum's executive director Adam Woodworth said in a news release. "The one thing we learned is that people want to support the museum through donations and volunteering; and we need to be able to meet those supporters where they are."

A cryptocurrency, or crypto, is a digital currency that can be used to buy goods and services, but is secured but uses an online ledger with strong cryptography that makes it nearly impossible to counterfeit or double-spend. The most popular form of cryptocurrency is Bitcoin.

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions, according to NerdWallet.

The children's museum already offers multiple ways that people can contribute, by donating a vehicle, stock, including the museum in your will or as partial beneficiary of your life insurance policy, as well as donating by cash, check or credit card. Cryptocurrency offers another option, especially if you've already purchased some, to support the museum's mission.

"We partnered with Engiven, a platform that helps nonprofits easily accept donations of cryptocurrency," Woodworth said. "Within 24 hours of launch, we received our first cryptocurrency donation. It was exciting."

The cryptocurrency donation immediately goes through an exchange and the museum receives the cash equivalent of the value of that crypto at the time of the donation.

The museum is not accepting cryptocurrency to purchase admissions or memberships, yet, but Woodworth said that he doesn't rule out that possibility in the future.

"Cryptocurrency has been around a while, but it's new to a lot of people," Woodworth said. "I don't think any of us really know where it is heading. What we do know is that it is here, people are investing in it and there is a belief that this will take hold as a viable and well-recognized currency. We thought we should be part of it."

Visit Help-Us-Grow to learn more about supporting and donating to the Children's Museum In Oak Lawn.

Buried in the still-unreleased bipartisan infrastructure package is a sweeping crackdown on cryptocurrency transactions that could generate significant tax revenue for the government and major anxiety in a financial technology industry that thrived during the coronavirus pandemic.

Lawmakers want people facilitating trades in Bitcoin and other digital assets to be subject to reporting rules similar to those governing the sale of stocks and other securities: Brokers would be required to report things like how much people paid for cryptocurrencies.

The proposal is alarming many in the industry, who are expressing fear of being ambushed with a host of new rules they could be stuck with for years.

They see the new reporting requirements as potentially damaging the economic viability of cryptocurrency markets, which have seen a rapid expansion in new users during the pandemic.

Given how much new tax revenue could be at stake and the amount of progress that has been made on the bill, many doubt the language will be eliminated, so they are focused on efforts to make what they see as improvements.

Industry groups including the Blockchain Association, Coin Center and the Association for Digital Asset Markets outlined their opposition to the requirements in statements on Thursday, taking particular note of provisions in the draft version that could lead to targeting of individual users.

Perianne Boring, founder and president of the Chamber of Digital Commerce, said in an interview on Friday that her group proposed amending the bill language to “tighten the definition” of what constitutes brokering activity to exclude cryptocurrency miners and the operators of decentralized finance platforms.

“The idea of shoving this into a congressional mandate or as a as a revenue-generator for something completely unrelated, is not the preferred way or the right way to get the best policy,” Boring said, noting that ADAM and others have repeatedly asked for more guidance from the IRS on how to enforce existing laws.

ADAM's CEO, Michelle Bond, said “it is critically important for the industry to be at the table to provide technical assistance for proposals of this magnitude."

Tax compliance is considered a major problem with cryptocurrencies, and lawmakers are hungry for the $28 billion their proposals are said to raise to help finance their big-ticket spending plans.

The issue is complicated, potentially affecting banking and securities law. It also crosses jurisdictions in Congress, from the tax committees to banking panels.

The move to boost cryptocurrency reporting requirements comes after Republicans killed a plan to boost IRS enforcement by greatly expanding the agency’s budget — something Democrats are expected to tackle in a separate tax-reconciliation package.

IRS Commissioner Charles Rettig has repeatedly asked lawmakers for more power to improve tax compliance in the cryptocurrency industry, where many market participants are unaware of their obligations or are outright cheating.

Though industry officials vow to fight the proposals, they’ll likely face an uphill battle.

The plan is headed for a quick vote in the Senate, and lawmakers will be loath to blow a hole in the infrastructure proposal after struggling for weeks over how to defray its cost of the plan.

The fact that few lawmakers understand cryptocurrencies and their relationship to taxes means that any lobbying effort will require a major educational campaign. Congress’s most expert member on the issue, Sen. Rob Portman (R-Ohio), happens to be one of the main authors of the broader infrastructure package.

Portman spokesperson Drew Nirenberg said in a statement: "This legislative language does not redefine digital assets or cryptocurrency as a ‘security’ for tax purposes, impugn on the privacy of individual crypto holders or force non-brokers, such as software developers and crypto miners, to comply with IRS reporting obligations. It simply clarifies that any person or entity acting as a broker by facilitating trades for clients and receiving cash must comply with a standard information reporting obligation."

Much of the proposal is designed to replicate the reporting regime imposed when people sell stocks in companies like Apple or Ford.

Brokers would be required to report people’s so-called basis, or the price at which they bought cryptocurrencies, as well as their gross proceeds — which would make calculating their tax bills much easier. Studies have long shown that when people know someone else is independently reporting their income to the IRS, they are far less likely to skirt tax obligations.

Lawmakers also want to include anti-money laundering provisions sought by the Treasury Department that would require transactions worth more than $10,000 to be reported to the government.

Behind the scenes, lawmakers have debated language that would expand the definition of broker to include decentralized exchanges, without traditional middle men, and peer-to-peer transactions, though some say the language of the proposal is broad enough to sweep in others like cryptocurrency miners.

“The extension of the definition of ‘broker’ is a surprise,” said Lisa Zarlenga, a partner at the firm Steptoe & Johnson LLP who works on cryptocurrency tax issues.

Another source of contention: provisions that could potentially go beyond cryptocurrencies to other types of digital assets like non-fungible tokens.

The Treasury Department had already been working on rules to tighten reporting requirements on brokers like Coinbase, but having Congress’s imprimatur would help head off any potential legal challenges to the agency’s authority to issue new regulations.

Industry officials are vowing a fight.

Blockchain Association Executive Director Kristin Smith expressed frustration with the last-minute scramble to write the legislation, saying it could impose new requirements on “all sorts of different actors in the ecosystem.”

“We think it would have the effect of potentially driving a lot of these actors and businesses and individuals involved in crypto overseas and really stifling the innovation in this space here in the United States,” she said.

Though the plan is said to raise $28 billion, that’s highly uncertain and the estimate immediately raised some eyebrows.

While Congress’s budget forecasters can predict with confidence the cost of tax changes that are similar to ones lawmakers have made before — such as expanding the child tax credit — they invariably have a harder time for more novel policy proposals.

Cryptocurrencies present a particularly difficult challenge because their valuations can fluctuate wildly, it’s hard to know how many people are buying and selling the assets, and forecasters have to make guesstimates about the tax rates they likely pay.

CORRECTION: This story has been corrected to say that the Chamber of Digital Commerce is pushing for the exclusion of cryptocurrency miners and operators of decentralized finance services in the legislation.