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6. 07/10/2019 17:19
Meet the Russian Oligarch Launching a Metal-Backed Crypto Token

The Takeaway

  • Norilsk Nickel, a Russia-based metal company, is launching a palladium-backed token and an exchange for tokenized commodities.
  • CEO Vladimir Potanin, one of the richest industrialists in Russia, told CoinDesk about the project in an exclusive interview.
  • The token is based on Hyperledger Fabric and developed with the support of IBM, Potanin says.
  • Norilsk Nickel is reaching out to a broad range of regulators, setting up entities in Switzerland and the U.S. and starting a pilot with Russia’s central bank, Potanin says.

Vladimir Potanin is used to dealing in hard realities.

The billionaire oligarch started his business empire in the Wild East days of the 1990s, when the assets of the old Soviet Union were up for grabs and opportunistic entrepreneurs could make mega-roubles if they were in the right place at the right time.

The son of a foreign trade official, Potanin authored the infamous loans-to-shares program that allowed a group of businessmen to buy Russia’s key industrial entities cheaply, later becoming the richest people in the country. He went on to build Norilsk Nickel (Nornickel), one of the world’s largest producers of palladium and refined nickel.

Potanin’s wealth is made of metal. But last week, sitting in a luxury New York hotel, his mind was on more immaterial things – like digitized tokens and distributed ledgers.

Looking relaxed in a polo shirt and blazer, Potanin, now 58, discussed how to represent metals as digital assets (built with IBM), streamline his business with distributed databases (built on Hyperledger), and give investors new ways to participate in his business. He wants to get more Russian enterprises thinking about how to use blockchain technology.

Lead from Vitalik

Potanin’s curiosity for blockchain technology partly originated from listening to Vitalik Buterin, ethereum’s creator, the billionaire said.

A curious detail: an avid ice hockey player who is known for playing with Russian President Vladimir Putin in amateur games, Potanin once invested in a hockey analytics startup founded by a friend of Buterin’s father.

While Potanin hasn’t met Buterin in person, he heard Vitalik speak about blockchain and was intrigued, he said:

“The knowledge of what he is doing and what he has achieved, of course, encouraged me that the young generation is moving in that direction. [I thought] I should be aware of what they’re doing and why, and I should benefit from this experience.”

After learning more about blockchain he reasoned that Nornickel could benefit from adopting its principles, for instance using distributed databases for managing internet-of-things data from his smelting operations.

At the same time, Nornickel is also issuing its own token, providing a new, more flexible way of managing sales contracts, Potanin says, and a new way for investors to participate in the company’s operations in Northern Siberia.

Palladium coins

“We are trying to digitize all our sales contracts because it looks more efficient, transaction costs are lower and it adds flexibility for our clients,” Potanin said. Sometimes Nornickel’s clients, like auto companies, might order too much palladium and need to renegotiate their contracts and buy less than they initially ordered. He says that’s easier to manage if the contract is tokenized.

“If you don’t need a certain amount of material you can split a token in parts and sell it to other clients. And for us, nothing changes: we ship palladium and clients get as much as they need.”

The tokens will be backed either by Nornickel’s guarantee to ship the actual tons of metal or by special metal accounts in a bank if a buyer doesn’t need palladium itself, Potanin adds.

This summer, the company joined Hyperledger, a blockchain consortium led by the Linux Foundation. The token is built on Hyperledger Fabric and supported by IBM. (The tech giant was not able to respond to requests for comment by press time).

Nornickel is also planning to launch a marketplace where its token and similar asset-backed tokens issued by other companies would be traded. Potanin says the palladium token will be available not only to funds and asset managers but also to retail investors:

“For example, you see palladium is going up, but you can’t go to Norilsk Nickel and buy palladium for several million dollars,” Potanin said. “Say, you have $500 in your pocket, and you want to bet on the price of palladium. You enter our platform and get a little portion of palladium in a tokenized form.”

Not everyone wants to buy into a company when what they really want is exposure to an underlying commodity, Potanin said:

“Exposure to Norilsk Nickel is an exposure to Russia, to mining, to rouble, to executive management of Norilsk Nickel and other entities. Some people like this because the stock of Norilsk Nickel goes up. But some people just don’t have expertise to evaluate it.”

He used a real estate analogy: “If you want to buy a flat you don’t want to buy a share in the construction company.”

Asset-backed tokens can be especially attractive for traditional businesses as they may attract money from crypto investors, Potanin said.

“It’s an interesting source of capital with very low transaction costs,” he said. “It might be an interesting way to finance working capital.”

Preston Byrne, a lawyer and astute observer of the blockchain and cryptocurrency fields, believes there will be demand for the kind of commodity speculation Nornickel is enabling with its tokenized palladium.

“If you’re buying palladium in a vault versus buying shares in Norilsk Nickel, those are different assets with different risk,” Byrne said. “Especially if palladium is stored in Switzerland instead of Russia where you have seen the extraction of oligarchs if they run afoul of the regime.”

Jurisdiction bets

Nornickel is preparing to launch the token using entities the company is setting up in the U.S. and Switzerland.

“We decided not to take any reputational risks and to be 100 percent regulated,” Potanin explains. “We’re making sure we’re in alliance with the regulators of both countries. We will need both the U.S. regulators’ decision and FINMA’s approval in Switzerland to launch.”

What’s more, Potantin’s plans go beyond metals.

In Russia, Nornickel is in “very advanced discussions” with the central bank to launch a pilot project to tokenize other goods, from airplane tickets to shipping containers. (The Bank of Russia did not respond to a request for comment by press time).

Potanin helped write the legislation for digital assets in Russia as a member of a blockchain working group within the Russian Union of Industrialists and Entrepreneurs, a lobbying group formed by the country’s largest industrial players.

The bill is making its way through Russia’s parliament and Potanin is confident it will pass.

“I hope it will go through the parliament without delay, and I understand that I can start my experiment in Norilsk with the frame of this legislation and under the control of our regulator.”

Risks and hopes

Potanin says he is not particularly interested in cryptocurrencies like bitcoin and ether and didn’t invest in them. He calls bitcoin “a toy” and “a useful souvenir,” but says the issuance of electronic money should be left to central banks.

“I agree with the American regulator that it is a commodity and the quality of this commodity — you really do not know if it’s good or not, you buy it at your own risk,” he added.

But he is enthusiastic about the future of asset-backed tokens like the one Nornickel is preparing, as their usefulness goes beyond speculative value, motivating people to learn about the digitized commodities they will be trading:

“People like different kinds of bets, on football or boxing matches, for example. My idea is to encourage people to bet on something real and to learn something: what’s going on with oil, with metals, with ecological programs, what is the behavior of consumers.”

Given Potanin’s high profile (and government connections), some might wonder if Nornickel token projects are an elaborate way to skirt sanctions imposed on Russia by the U.S. and Europe (on the thinking that the tokenized metals markets are less heavily policed than other financial arenas).

But Potanin dismisses the idea. Neither he nor Nornickel has faced any direct sanctions from the West so far.

“For me personally, I don’t think it’s a good protection because sanctions go much further than your ability to have an account in a bank,” he said, adding:

“What makes me really anxious is that people may change and are already changing their attitude towards Russians. Doesn’t matter if it’s true or not, people start thinking, ‘maybe I shouldn’t deal with a Russian guy because who knows whether he’s under sanctions or what happens to him.”

He added that he doesn’t believe this attitude will stop his blockchain project, though:

“In this system that we have now in the world, digital initiatives, high tech and ecological initiatives are the last ones to be attacked and compromised. It’s not a remedy, but I think it’s good to go in that direction.”

7. 05/10/2019 21:54
Bitcoin Is 2019’s Best-Performing Asset, Even After Recent Price Downturn

The Takeaway

  • Bitcoin prices have more than doubled in 2019, far outpacing the 31 percent return for U.S. tech stocks, which Goldman Sachs deems the best-performing asset class year-to-date.
  • Outsize returns could attract interest from big investors in the yield-starved traditional financial markets.
  • Executives at data firm Messari say bitcoin prices, currently around $8,200, could rally to a new high in the year’s remaining months, topping the $12,902 level reached in June.

Investors would be hard-pressed to name a better-performing asset class so far in 2019 than bitcoin.

Gold? Up 17 percent since Dec. 31. Stocks? The Standard & Poor’s 500 Index returned 21 percent through Sept. 30. Bonds? The 10-year U.S. Treasury bond is yielding just 1.6 percent, close to historic lows.

And bitcoin? Prices for the cryptocurrency finished the third quarter around $8,308 each, according to data provider Messari, up 114 percent on the year. Investors who bought on the last day of 2018 would have doubled their money, and then some.

On Wall Street, one of the chief criticisms of bitcoin is that it was invented only a decade ago (a baby by old-world standards) by a computer programmer (or programmers, nobody really knows), with no real fundamental, underlying value. It’s just a made-up thing, as they say, with a volatile price that only derives from what the next buyer is willing to pay.

But with the global economy slowing and trillions of dollars of government bonds from Europe and Japan trading with negative yields, bitcoin’s price gains this year could conceivably attract a new wave of investors who previously wouldn’t even take a look.

Already there are signs they are. Pantera Capital, one of the earliest cryptocurrency funds, recently scheduled an event in San Francisco for its existing investors featuring cryptographer and digital currency pioneer Nick Szabo. As word trickled out, a number of investors who had never touched the asset class contacted the firm requesting invites, said Paul Brodsky, a partner at Pantera.

“There’s a lot of drama around it all, there’s a lot of energy, there’s a lot of press,” Brodsky said. “We’re getting interest from significant institutional investors of all types.”

Fear of missing out

The year’s price gains might entice big institutional investors like pension funds and endowments, struggling to hit return targets so they can meet obligations to retirees and other beneficiaries, according to executives at the cryptocurrency-focused investment firm KR1.

“Bitcoin’s been around long enough now where people are more familiar with it,” said Keld van Schreven, a director at the London-based firm, adding:

“Yep, it swings wildly, but they might know other people who have bitcoin, and say to themselves, ‘Hey, they’ve done pretty well this year.’ It’s always down to fear of missing out.”

In a report this week, analysts for the Wall Street firm Goldman Sachs ranked information-technology stocks as the best-performing sector year-to-date with a 31 percent return, noting the out-performance versus other asset classes like bonds and gold.

Bitcoin wasn’t mentioned in the report, a reminder that the market remains in its infancy; big Wall Street firms aren’t yet trading digital assets in any significant scale. But year-to-date, bitcoin’s price gains are nearly four times the level of those hottest-of-hot tech stocks.

Many investors first noticed bitcoin in 2017 as prices famously rose more than 20-fold, reaching an all-time high of $20,089 in December of that year. After an abysmal 2018, bitcoin is now 59 percent off that peak, according to Messari, a New York-based provider of data on the crypto markets.

But at the current price, the digital currency is still up more than 10-fold from its level at the start of 2017’s rally.

Store of value

One of the long-term arguments for bitcoin is that, unlike stocks and bonds whose prices are often highly sensitive to the decisions of central banks and governments, the cryptocurrency is independent of sovereign authorities. Instead, it’s governed by fixed policies that are hard-coded into the underlying network, and therefore difficult to change.

Under those rules, the supply of bitcoin is capped at 21 million, so it won’t be prone to inflation like developed-market currencies such as the U.S. dollar, euro and yen might be if their respective central banks resorted to more money-printing as a way of stimulating their economies.

Indeed, President Donald Trump, running for reelection in 2020, has repeatedly called for steeper interest-rate cuts by the Federal Reserve, while accusing China of artificially pushing down the value its currency, the yuan, to get an unfair advantage in international trade.

Many cryptocurrency proponents characterize bitcoin as Gold 2.0 – essentially a newer, technologically improved and more portable form of the precious metal, viewed since ancient times as a reliable store of value.

“Bitcoin is slowly becoming digital gold, but it’s not there yet,” said Qiao Wang, New York-based Messari’s head of product.

No safe haven

For now, though, even professionals in the space acknowledge that bitcoin is highly speculative; many traders are just betting on whether the next series of price ticks will be up or down.

“At the end of the day, bitcoin is still a very speculative asset,” says David Martin, chief investment officer at the cryptocurrency investment firm Blockforce Capital in San Diego. Because of the dramatic price swings in recent years, or even on a daily basis, he says, “it’s not a safe-haven asset.”

Martin noted that prices for bitcoin have declined in recent months, from a 2019 high of about $12,900 on June 26, partly because of waning enthusiasm in the industry over the near-term prospects of a wave of institutional money coming into the market.

Intercontinental Exchange, the owner of the New York Stock Exchange, debuted a new bitcoin-futures contract last month that was tailored to meet the needs of institutional investors. Yet volume in the new contracts totaled just $5 million on the week.

Compare that with the $26.5 billion of corporate bonds that changed hands each day in the U.S. market during the third quarter, and it’s clear institutions have yet to meaningfully invest in bitcoin.

Vital signs

Some of bitcoin’s internal gauges, though, reveal a healthy and growing market.

For example, bitcoin’s so-called hash rate, a gauge of processing power, has increased this year to about 90 exahashes per second (an exahash is a quintillion hashes), from about 40 exahashes at the start of the year.

And some industry executives think bitcoin prices might be setting up for a rally. Catalysts could include an escalation of Trump’s trade war with China.

Wang says he took an informal poll among his coworkers, and the average forecast for the year-end 2019 price was $13,252.

“The number is totally within the realm of possibility,” he said.

There are risks, too, of course, such as the prospect of a regulatory clampdown. “Obviously it could go a lot lower,” Wang said.

8. 04/10/2019 20:00
‘Gold-Backed’ Crypto Token’s Promoter Investigated by Florida Regulators

The Takeaway

  • Florida regulators are investigating Karatbars, a German company that’s been promoting a token tied to a Miami “crypto bank” without any banking license in the state.
  • Karatbars previously issued a cryptocurrency purportedly backed by gold, but CoinDesk has been unable to verify the existence of the mine the company says produced the gold.
  • Before it entered the crypto space, Karatbars sold gold products online through an affiliate marketing system that regulators in three countries warned the public to avoid.
  • CoinDesk interviewed three of Karatbars’ current “affiliates,” who said they passionately believe in the company and its tokens.

A German company that claimed to raise $100 million in a 2018 initial coin offering (ICO) is being investigated by Florida financial regulators, CoinDesk has learned.

Karatbars International GmbH has announced plans to follow its first token sale with another one in December 2019. While the 2018 token sale was for its allegedly gold-backed KaratGold Coin (KBC), this year the company has been promoting a KaratBank Coin connected to a “cryptocurrency bank” in Miami.

The claim about a cryptocurrency bank seems to have landed the firm in hot water with the Florida Office of Financial Regulation (OFR).

“Karatbars is not licensed as a bank with the OFR,” the agency’s director of communications, Katie Norris, told CoinDesk. “The OFR has an open investigation, and so that is all the information I can share at this time.”

Karatbars International GmbH has not responded to CoinDesk’s requests for comment. We will update the article if we hear back.

The Florida investigation is not the first time Karatbars has come under regulatory scrutiny. The company was founded in 2011 by German entrepreneur Harald Seiz, who still heads it.

In 2014, long before Karatbars’ first token sale, Quebec’s Financial Markets Regulator issued a warning for investors to “be cautious” about the company, which offered internet-based purchases of gold to prospective “affiliates.” Karatbars offered these buyers a commission to sign up other affiliates.

Regulators in the Netherlands and Namibia have issued similar public warnings, with the former calling Karatbars’ business a form of multi-level marketing and the latter going so far as to label it a pyramid scheme.

First token

Despite this history, Karatbars’ first token, KBC, trades on more than 30 exchanges including HitBTC and Yobit and has been promoted on Twitter by the likes of John McAfee.

The coin, which runs on the ethereum blockchain, was distributed through an ICO in April 2018, reportedly garnering $100 million. Since the summer of 2018, the token has traded at fractions of a penny, according to CoinMarketCap, which calculates KBC’s current global market capitalization at $92,642,798.

The affiliate marketing strategy of Karatbars’ earlier business carried over to the token issuance, and affiliates interviewed by CoinDesk said much of their buying activity took place on the company’s own platform. Perhaps for this reason, the coins tend to stay put on the public ledger. According to the blockchain data explorer site Etherscan, the first transfer of KBC took place in November 2018, months after the ICO, with 20.9 million tokens now residing in 42 wallets.

Karatbars claims that the gold backing KBC was mined from Fort Dauphin in Madagascar. But CoinDesk was unable to independently verify that such a mine exists, or that Karatbars has any in the country.

In an email forwarded to CoinDesk by a third-party researcher, officials at the Madagascar Chamber of Mines said:

“We regret to inform you that there is no Fort Dauphin gold mine in Madagascar and Karatbars does not hold a mining permit in Madagascar.”

CoinDesk has reached out directly to the relevant authorities in Madagascar and will update the article if we receive more clarity on the matter.

When asked about his posts promoting the company, McAfee told CoinDesk:

“I believe that coins linked to a standard of value will be the foundation of the entire crypto movement. A safe haven without having to exit the crypto world into the world of fiat currencies.”

‘I believe in it’

It might be easy to dismiss KBC but many have seen opportunities in the project.

Florida resident Taylor Richley, a long-time gold bug and current KBC affiliate, launched his own startup to facilitate a point-of-sale service for KBC, called Karatstars Labs, after getting laid off from his factory job. So far, Richley said, two merchants have agreed to accept the tokens as payment for their wares.

“I believe in it enough that I decided to make my own career, a company, building the ecosystem,” Richley said. “In 2018, when they [Karatbars] pivoted from a gold company into crypto, with the help of their affiliate program they became the number one seller of gold bullion in the world.” (Senior executives at three different organizations in the gold bullion market told CoinDesk it would be difficult or impossible to prove such a claim.)

Three KBC-holders interviewed by CoinDesk stated multiple times that Karatbars ran the world’s largest ICO (a title that arguably belongs to Block.One’s $4.1 billion sale for the EOS blockchain), praised the regulated state of the alleged crypto bank in Miami and mentioned purported endorsements from parties as diverse as the Vatican to the Real Madrid soccer team, neither of which responded to requests for comment. However, famed footballer Roberto Carlos did appear on stage at a Karatbars event in Amsterdam.

Likewise, the holders’ belief in this company, they said, was bolstered by real products – swag and small pieces of gold – that affiliates often received as part of their rewards program. Such affiliated products, like an “upcoming” Karatbars-friendly smartphone, are also promoted on sites like CoinTelegraph and VC News Network, a Reuters partner.

One American KBC affiliate, Andrea LaRosa, broke down in tears while telling CoinDesk about how the gold rewards finally offered her financial freedom in late 2018, after years of struggling with an assortment of bootstrapped businesses. After all, she said, the company has shipped her over pieces of real gold.

“It’s based on how many contracts that you can collect. How many transactions that are made, in your business,” LaRosa said. “I’ve been inspired and gotten so much encouragement from other leaders. They don’t want anything from here. They’re really here to help. … I love Dr. Seiz’s mission to help people get out of debt.”

(Affiliates and press materials often refer to Karatbars founder Seiz as a doctor. CoinDesk was not able to independently confirm any such credentials.)

Crypto gateways

Many of these token holders, including LaRosa, came to KBC through the bitcoin community and not through traditional gold bug circles like Richley, who told CoinDesk he did enough research to avoid most ICOs.

LaRosa still holds a little bit of bitcoin and ether herself, although she has moved the majority of her investments into KBC.

“Bitcoin is really backed by nothing. But our KBC is backed by gold, and the [KaratBank Coin] is backed by our assets,” she said of her reasoning. “Eventually the two coins will be merged and come together.”

Likewise, Filipino-American immigrant and KBC affiliate Jose Buco plans to travel back to his homeland in the near future to preach the Karatgold gospel. He told CoinDesk he started by investing $32,000 in this company’s crypto products in 2018, assets which he said public metrics and exchanges now deem to be worth $41,000.

He recently returned from the Netherlands, where hundreds of Karatbars affiliates gathered in August to celebrate their “bridge from the financial system to cryptocurrency,” as Buco put it.

Like the other holders interviewed by CoinDesk, Buco researched Karatbars and bitcoin itself before deciding to prioritize KBC. As someone who felt underserved by the traditional financial system, he said his tangible evidence came from social media and community events, including people he built personal relationships with.

“You can see on YouTube the gold they are stocking up,” Buco said.

9. 03/10/2019 12:56
US Congressmen Ask Fed to Consider Developing ‘National Digital Currency’

Two U.S. lawmakers want the Federal Reserve to consider creating a digital dollar.

In a letter sent to Federal Reserve Chairman Jerome Powell, Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) outline concerns they have about risks to the U.S. dollar if another country or private company creates a widely used cryptocurrency, and ask whether the central bank is looking into creating its own version.

First reported by Bloomberg Law, the letter details how the Fed has the right to create and manage U.S. currency policy.

“The Federal Reserve, as the central bank of the United States, has the ability and the natural role to develop a national digital currency,” the Congressmen wrote, adding:

“We are concerned that the primacy of the U.S. Dollar could be in long-term jeopardy from wide adoption of digital fiat currencies. Internationally, the Bank for International Settlements conducted a study that found that over 40 countries around the world have currently developed or are looking into developing a digital currency.”

Indeed, there have been some calls for the global financial system to move away from the dollar. Most notably, Bank of England governor Mark Carney suggested that a digital currency backed by a basket of other financial instruments might help nations make this shift.

In Monday’s letter, Foster and Hill wrote that cryptocurrencies are currently used for speculative purposes in the U.S., but their use may “increasingly align with that of paper money in the future.”

The U.S. should not rely on private companies to develop digital currencies, they wrote. The letter specifically mentions the Facebook-led Libra stablecoin.

“The Facebook/Libra proposal, if implemented,” the congressmen wrote, “could remove important aspects of financial governance outside of U.S. jurisdiction.”

The letter goes on to mention recent cryptocurrency efforts by J.P. Morgan and Wells Fargo.

Path forward

The letter asks a number of questions, including whether the Fed is currently looking into developing a digital currency, whether there are any contingency plans if digital fiat currencies gain traction, what legal, regulatory or national security issues might prevent the Fed from developing a digital currency, what market risks or other issues might result from a Fed cryptocurrency and what benefits there might be to the project.

Hill and Foster are not the only individuals to suggest that the Fed might benefit from creating its own cryptocurrency. Last year, former Federal Deposit Insurance Corporation Chair Sheila Bair also recommended the Fed look into creating a digital currency as a way of avoiding being disrupted by the private sector or another nation.

The Federal Reserve is also looking to create a real-time payments system, though it is unclear whether there will be a cryptocurrency-like aspect to it.

In the letter, the Congressmen suggest that it might even be an urgent matter for the Fed, writing:

“With the potential for digital currencies to further take on the characteristics and utility of paper money, it may become increasingly imperative that the Federal Reserve take up the project of developing a U.S. dollar digital currency.”

A message left with the Federal Reserve’s press office was not immediately returned.

10. 02/10/2019 19:14
Crypto Token HBAR Is Tanking and Hedera Hashgraph Is Looking for a Fix

In a little over two weeks, Hedera Hashgraph’s HBAR cryptocurrency has dipped from a high of $0.36 cents to around $0.03 as of press time. The blockchain-like network’s CEO now says he will re-evaluate the token’s economic model and potentially change HBAR’s distribution schedule to give the company time to reassess.

“We are thrilled with the technical performance of our platform,” Hedera Hashgraph wrote in an amendment that was shared in the network’s Telegram channel on Monday. “We also believe that there may be an opportunity to make improvements to Hedera’s coin model.”

CEO and co-founder Mance Harmon did note in a blog post last week that 2.2 million transactions had run over the network in its first week, with network usage around 3 or 4 transactions per second and transactions settling in around 2 to 3 seconds. Hedera refused to comment for this story, saying the company does not speculate on HBAR prices.

However, Hedera noted in its post that the startup is working with Harvard-trained economists from consulting firm Prysm Group to re-evaluate the HBAR economic model. The goal: To see if it “has the right incentives for developers to develop on the network.”

SAFT slowdown

In Hedera’s most recent proposal for amending the distribution model for simple agreements for future tokens (SAFT) participants, Hedera has suggested that the subsequent SAFT distributions be quarterly rather than monthly, meaning that SAFT 1 and 2 holders would get their next distribution on Dec. 22 rather than Oct. 22.

The proposal requires agreement between Hedera and “the people holding a majority of the purchase amount for that SAFT series.”

Harmon wrote in the proposal:

“Although we’re very pleased with the volume of early network activity, it may be premature to release the next distribution of SAFT 1 and SAFT 2 coins within a month of the last one … before we receive the results of the Prysm Group’s review. So, the objective of the third proposed amendment is to extend Hedera’s discretion to allow for quarterly coin releases.”

Hedera raised money for the project at a time when altcoins were riding a high speculative wave out of 2017, said Eric Wall, the former blockchain lead at Nasdaq-owned fintech vendor Cinnober.

While Hedera has put together a high-profile governing council – including IBM, Boeing, Deutsche Telekom, Tata, Nomura and bank tech vendor FIS – it has yet to demonstrate high-profile use cases for HBAR, Wall said. Now that HBAR is open for retail exchange, creating retail demand will be crucial for Hedera.

“As more HBAR are released, it will increase selling pressure on HBAR,” Wall said. “For the price to support sell pressure, something needs to attract investors and speculators in this market … because that supply is going to shock the system.”

Wall added that the drop in HBAR price looks somewhat like the initial launch of Zcash which surged to more than $2 million on its first day in October 2016 and fell below $50 in December. On the first day Zcash launched it went from roughly 3,300 BTC at the time to 48 BTC.

Altcoins overall have dropped by around 50 percent in the past year, according to the midcap Bitwise index, while HBAR has decreased around 75 percent since its last SAFT sale in August 2018 valued the coin at 12 cents. Hedera isn’t the only altcoin network that’s adjusting its model either. Stellar just recently decided to eliminate inflation from its protocol.

Finding alignment

It’s not unexpected for HBAR to be undervalued or overvalued while it’s going through a price discovery period, Wall added.

Hedera’s Governing Council has also created a growth committee to look over funds set aside for incentive programs to accelerate adoption, and Hedera is scheduling one-on-one calls with stakeholders to educate them on the company’s efforts.

“While the value of the network will be driven by the applications that developers continue to bring to market on top of it, we were responsible for the creation of both the network and the economic model to catalyze that development,” Harmon wrote, adding:

“If we find mistakes in either, it is our responsibility to fix them. We are committed to doing what it takes to make sure the model is properly aligned to foster widespread developer and user adoption of the platform, and to demonstrating that we deserve the trust you placed in us to get that right.”

Hashgraph participants shouldn’t read too much into randomness, said Steve Wilson, a principal analyst at emerging technologies advisory firm Constellation Research.

“I’m not excited about cryptocurrency movements, especially in the very early days,” Wilson told CoinDesk in an email. “These systems are highly non-linear and highly sensitive. Look at good old Bitcoin: it has never settled into any repeatable or predictable pattern.”



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11/10/2019 21:11
Is Bitcoin a Safe Haven Like Gold? These Four Charts Say Not Yet
Galen Moore is a member of the CoinDesk Research team. The following article originally appeared in Institutional Crypto by CoinDesk, a weekly newsletter focused on institutional investment in crypto assets. Sign up for free here. Investors are beginning to have a clear sense why bitcoin exists: it’s digital gold, a narrative that has emerged clearly as other assets flounder, gasping for air in the muddy water of shallow memes. Ethereum has hopped from story to disjointed story; now it’s “money” (OK). Nobody knows what Ripple, er, XRP is. If bitcoin is... 
10/10/2019 17:43
WATCH: What Drove Bitcoin’s Price Gains Today? We Explore the Pop
The price of bitcoin (BTC) jumped 5.1 percent on Wednesday – its highest point in two weeks. The price rise comes after the Federal Reserve (Fed) said it would print money to expand the size of bank reserves – seen as a move by the U.S. central bank that could spark inflation. Traders said optimism also was buoyed by speculation that the U.S. Securities and Exchange Commission (SEC) might approve a new bitcoin-based exchange-traded fund (it didn’t) and an announcement by UNICEF that it would accept donations of cryptocurrencies. Joe DiPasquale, CEO of the cryptocurrency...