Weekly Roundup: SEC Decision Deadline Looms, Vows ICO Crackdown, BCH Fork Imminent
In this week’s edition we cover some of the items worth paying attention to over the course of the next couple weeks, explain how the SEC is ramping up efforts to tackle the dark underbelly of the ICO industry, and provide an in-depth analysis of an academic study which claims bitcoin miners might be responsible for a dramatic acceleration of global warming.
Markets Pause in Wait for SEC Bitcoin ETF Decision, End Week Slightly Up
As of early Monday morning, with hours to go before the SEC’s self-imposed deadline to bring about a decision of whether or not it would approve future Bitcoin ETF proposals, the price of BTC was a bit choppier than normal, bumped by a last minute pump Sunday evening that helped the charts end the week with a 1.5% gain. Over the last 30 day period, the crypto markets have been unusually stable, during a period when institutional trading activity traditionally picks up steam. Forbes magazine published an article depicting a bullish, a bearish and a moderate scenario for bitcoin prices by Christmas, and renowned Bitmex permabull Arthur Hayes readjusted his usually upbeat forecast, slashing his year-end price prediction some 96%, from $50,000 to potentially $2,000.
A few top tier coins managed to squeeze out 4%+ gains for the week, including Bitcoin Cash (BCH), Stellar (STR) and Dash (DASH). All-in-all it was a positive week for the crypto markets as BTC ended 0.50% in the green and the average of the top 100 coins by market cap with a 1% gain. Trading volumes remained somewhat lackluster as institutional traders remained on the sidelines waiting for a signal from the SEC.
Bitcoin White Paper Turns 10
From October through February, the mother/father of all cryptocurrencies will be celebrating a series of 10th birthdays, and on October 31st it was the 10th anniversary of the Bitcoin white paper. The highly-innovative, 3,000-word paper, published by the still anonymous and highly celebrated Satoshi Nakamoto, is a one-of-a-kind, original piece of work which has spawned countless imitators and captured the imagination of millions. It has been referenced by other white papers, scientific and academic journals over 4,730 times to date, making it not just the cornerstone of the entire cryptocurrency movement, but a bonafide work of intellectual achievement as well.
The 10 year mark for the white paper is being celebrated far and wide, reaching the usual crypto publications like CoinDesk as well as mainstream media outlets like the Washington Post, Barrons and Reuters. It has also been the subject of celebration on social media, with cryptocurrency investment firms like Pantera Capital posting pictures of how they use the white paper as office wall paper and getting a shout out from Coinbase CEO Brian Armstrong, which he calls “one of the most important inventions of the 21st century.”
The email thread started 10 years ago by Satoshi's introducing Bitcoin to his fellow cypherpunks is mind-blowing.
Fixed supply (gold standard), off-chain scaling discussed within 10 days. Surreal foresight.
— Francis Pouliot (@francispouliot_) October 31, 2018
The vision laid out by Satoshi Nakamoto, which he successfully brought to fruition only a few short months later, then nurtured into a full-fledged movement with the help of others interested in the success of the project, has certainly helped transform the way people view money — not only through employing technology unavailable previous to the advent of modern cryptography and peer-to-peer computing, but also through proving that a currency could be run without the aid or control of a centralized source. 10 years after its birth, the Bitcoin white paper is now regarded as not just another project outline but the outline for an entirely new way of thinking about finance, and with that, a revolution against long-standing practices as well.
Sides Drawn Over Bitcoin Cash Fork
Though it was somewhat of another lackluster week for the crypto markets in general, there was one coin in the top 10 that definitively saw positive price action, and that was Bitcoin Cash (BCH), which enjoyed a 7-day gain of 32%. Prices for the bitcoin spinoff rose 10%, or $450 in a matter of hours earlier in the week thanks to some clarifying announcements, helping it to gain a bit of much-needed traction in a year in which it had otherwise slipped some 80% in price. The Bitmain, Jihan Wu-backed Bitcoin ABC side of the impending BCH fork (scheduled to take place on November 15th) was publicly backed last week by mega exchange Binance and Roger Ver’s staple BCH news outlet Bitcoin.com, while the Craig Wright / Calvin Ayres-backed Satoshi’s Vision (SV) alternative is relying on its mining hash power to carry it to victory.
Call them Bitcoin Cash ABC and Bitcoin Cash SV. If @CalvinAyre destroys the ABC chain, we should be able to definitively state that Bitcoin Cash SV is the real Bitcoin Cash. There may be two versions of Bitcoin Cash, one that follows the original roadmap, and one that doesn’t. https://t.co/JmufNzqrek
— Cøbra (@CobraBitcoin) November 4, 2018
A far less talked about alternative exists which hasn’t made the news at all, and that is keeping Bitcoin Cash as-is (fork-free). This 3rd route does not receive the media hype or prominent backing of any particular individual, or set of individuals, but could also be pursued as a route of action for those who do not agree with Bitcoin ABC’s or SV’s proposed changes to the code of the Bitcoin Cash client software. Both ABC and SV support bigger block sizes, however, the importance of this cannot be easily ascertained as the average BCH block size is currently approximately 100 KB, or 1/10th the size of the average BTC block.
SEC Cracking Down on Fraud ICOs
It’s true that Initial Coin Offering (ICO) activity has been on the decline in 2018; part due to a bearish trend in the markets, part due to an oversaturation of the market, but part is also definitely due to the fact that they have caught the eye of the U.S. federal government. Now hundreds of millions of dollars less in the taking since the end of 2017, ICOs have been under increased scrutiny, not only because of their enhanced size and scale but chances for fraud of investors as well.
In their most recent annual report, the SEC clearly states their desire to increase focus on fraudulent dealings within the cryptocurrency space, stating:
“Given the explosion of ICOs over the last year, we have tried to pursue cases that deliver broad messages and have market impact beyond their own four corners…
A poignant example of our impactful approach is the SEC’s enforcement action against the co-founders of a purported financial services start-up. This action, coupled with the Enforcement Division’s joint statement with the Commission’s Office of Compliance Inspections and Examinations urging caution around celebrity promotion of ICOs, brought an almost immediate end to such promotions. Another example is the SEC’s action against an allegedly fraudulent ICO that targeted retail investors to fund what it claimed to be the world’s first ‘decentralized bank.’ We moved quickly to stop the fraud by obtaining a court order, and the action showcased our ability to obtain a receiver over digital assets.”
Among the tools added to the SEC’s arsenal for fraud detection is an increased understanding of blockchain analytics and the development of highly powerful analysis software that can help trace the paths to and from cryptocurrency taken by scammers, an art which is helped by the fact that many scammers (incorrectly) believe themselves to be anonymous through the blockchain. All-in-all, 20 cases have been brought against ICO scammers by the SEC in 2018 so far – a vast increase from 2016, a year which failed to garner a single mention from the federal watchdogs.
Bitcoin and Global Warming
A recently published study from geologists at the University of Hawaii concluded that the Bitcoin Network could indirectly increase global temperatures by an average of 2 degrees Celsius by 3030, contingent on a substantial rise in user adoption, which would correlate with an increase in the network hash rate required to successfully mine new blocks. Currently, the electricity generated that is required to run the Bitcoin Network is estimated to consume 69 million tons of carbon per year – a number that is expected to be on the rise with each passing year.
The study notes that a lot of bitcoin mining is performed in countries which use coal and fossil fuels as the primary means of electricity generation, such as China and other countries in eastern Asia. However, critics of the study noted that its conclusions are based on a lot of assumptions and conclusions of a reality which may not come to pass. Chiefly, they point out that the authors failed to account for a worldwide trend of decreasing reliance on fossil fuels for power generation, a potential migration of mining activity to areas which use cleaner forms of energy (such as hydroelectric or solar power), or the possibility that bitcoin adoption may not be as widespread as the study assumes.
At any rate, the Bitcoin Network still consumes more electricity on a daily basis than many countries around the world – 160 of them to be exact – with its current energy usage (between 58 and 73 terawatts per hour) rivaling that of the country of Austria, which is home to almost 9 million people. Though the amount of electricity consumed has flatlined in the latter half of 2018, it is unlikely that its current rate will ever be diminished, as network hash power tends to go up a lot easier and faster than it goes down. The study did not include other Proof of Work (PoW)-type coins which also require vast amount of electricity to perform huge amounts of computations, such as Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC), though all other PoW coins combined do not come close to equaling the amount of electricity needed to run bitcoin.
Also in the News
- The Winklevoss Twins are in the news again, this time for going after bitcoin’s famed “first felon,” Charlie Shrem, who served a little more than a year in a federal penitentiary for helping users of the original dark net market The Silk Road obtain bitcoin. Cameron and Tyler Winklevoss are accusing Shrem of with-holding about 5,000 bitcoins after they hired him to purchase thousands of bitcoin on their behalf in 2012. At the time, bitcoin were only worth approximately $120, but the Winklevii suspect the funds Shrem used in his recent spending spree (to purchase 6 properties, 2 Maseratis and 2 power boats) were garnered back at the time of their agreement.
- In the bitcoin-unfriendly country of India, an 18 year-old who was reportedly duped out of about $1,000 worth of BTC was arrested by local authorities for threatening to attack Miami International Airport. The swindling must have had U.S. ties because the youth reported called the FBI dozens of times to complain about the wronging committed against him. After failing to achieve the response he had hoped for, he then called the Florida airport to threaten an attack there using AK-47s and grenades, planning on committing a mass killing.
- In another exceptionally clever idea for an ICO, a company by the name of Planetary Resources has teamed up with crypto firm ConsenSys in order to raise funds for a venture dedicated to mining asteroids for resources. Starting out in 2009, the company has already raised $50 million in private investor funds and launched 2 satellites; however, funds have since dried up and it proposes a round of ICO funding in order to help boost business back into orbit.
- Millionaire Jeffry Berns of Blockchains LLC unveiled plans to build a 67,000 acre “blockchain smart city” in a remote region of Nevada, USA, outside of the city of Reno. The vast desertscape is proposed to be centered around the use of cryptocurrency and the blockchain, encompassing a region twice the size of San Francisco. While the plan sounds like a monumental undertaking which may prove hard to sustain due to the incredibly arid nature of the surrounding landscape, Berns has faith that creating a “crypto-friendly” city will draw in thousands of like-minded inhabitants ready to engage in its futuristic potential.
— Blockchains LLC (@BlockchainsLLC) November 2, 2018