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Big Lawsuits in Crypto Space

Big Lawsuits in Crypto Space

John Martin 6 min read
Lawyers are already actively participating in the legal formation of digital assets, and states are striving to take control of the new technology through crypto regulation and the introduction of new laws. In this material, we will talk about high-profile lawsuits and legal disputes in the cryptocurrency world. 1. The Largest Lawsuit in Cryptocurrency History (Florida District Court) The entire crypto community is actively following the Kleiman v. Wright hearing, which is directly related to the origins of Bitcoin. In 2018, Ira Kleiman, the brother of one of the likely creators of the cryptocurrency, Dave Kleiman, filed a lawsuit after his death to return 1.1 million bitcoins. The accused of the theft was Craig Wright, who took part in the creation of the Bitcoin source code. He is also called the second applicant for the title of creator of electronic currency. Wright believes that the charges are based on a mixture of greed, rumors, contradictions, and speculation. The defendant is trying to prove the lack of direct physical access to the hard disk and the password of Kleiman's bitcoin wallet . The decision in this case may become a precedent in determining the ownership of cryptocurrency. 2. Lawsuit Over Developer Negligence (New York District Court) 70% of cryptocurrency exchanges are vulnerable and unsafe for users. The exchange BitGrail also fell into this number. On April 5, a US citizen filed a lawsuit against the developers of the Nano cryptocurrency. Its representatives were Silver Miller Law Firm. The case is connected with a violation of the law on securities and negligence of developers, which led to the theft of 17 million Nano from the BitGrail exchange. The plaintiff demands to issue a new cryptocurrency and pay fair compensation to all victims. In turn, for Silver Miller, this is not the first large-scale lawsuit against cryptocurrency "instigators." For example, lawyers have already accompanied a class action lawsuit against the Tezos blockchain project, which raised a record $232 million with the help of ICO . The project was accused of violating securities laws and misleading investors. Silver Miller also dealt with lawsuits against cryptocurrency exchanges Coinbase, BitConnect, Monkey Capital, and Giga Watt. Silver Miller has already teamed up with law firm Espen Enger — a representative of nearly 600 BitGrail victims — to help investors. However, it is not yet clear how the court will evaluate the claims of the plaintiffs. After all, Nano can be regarded as unregistered securities. 3. Countries Against Blocking Cryptocurrencies (New York District Court) The ban on advertising cryptocurrency and ICO is a new trend among social networks. The Russian Association of Cryptocurrencies and Blockchain (RAKIB) initiated a lawsuit against Google, Twitter, Yandex, and Facebook in connection with this ban and restriction on the information of potential investors. It has already been supported by leaders of the world blockchain industry from Switzerland, Armenia, and Kazakhstan. A class action lawsuit was filed in New York on behalf of a new association — the Eurasian Cryptocurrency and Blockchain Association. We will find out a couple of months later what this idea will lead to. 4. Investor Class Action (California Supreme Court in San Mateo County) The loss of funds to buy and sell Ripple ( XRP ) tokens — securities — forced American Ryan Coffey to go to court on behalf of all investors in the blockchain startup Ripple. At the beginning of 2018, he, like other co-investors, became the owner of Ripple tokens, the sale of which led to the loss of a third of the funds invested in cryptocurrency. However, in response, they were told that counting user tokens is the prerogative of the US Securities and Exchange Commission. Experts say Ripple may also be unregistered securities. Most likely, Ripple will not be able to prove the opposite, and the project will be forced to return the money to digital assets investors. 5. Bitcoin as Property (Ninth Court of Appeal of Moscow) Another precedent for legislation — in Russia they were allowed to recover cryptocurrency from debtors. As part of the bankruptcy of the defendant, the financial manager learned that the insolvent individual has a "virtual wallet" with bitcoins. The arbitration manager decided that cryptocurrency can be included in the bankruptcy estate. In turn, the debtor argued that Bitcoin assets cannot be taken into account when forming the bankruptcy estate due to the lack of legislative cryptocurrency regulation. Initially, the court decided not to include cryptocurrency in the bankruptcy estate. However, at a meeting in May, the court of appeal completely denied this decision. There were a lot of discussions and disagreements around the case. Although most lawyers supported the idea of ​ ​ including cryptocurrency in the property list. 6. Telegram Blockchain Failed Launch  In May, the founder of the messenger Telegram Pavel Durov announced the cessation of work on the Telegram Open Network blockchain platform and the return of 72% of their investments to investors. The businessman called the decision of the American court the main reason for the closure of the project. The court banned the issuance of Gram tokens, as it recognized them as securities, taking into account the expectations of investors from the sale of an asset in the secondary market. Then the SEC fined Telegram $18.5 million, and the company returned more than $1.2 billion to ICO investors directly or in the form of loans. After that, one of the participants in the Telegram ICO, Vladimir Smerkis, pointed out that most TON investors are inclined to file a lawsuit against Pavel Durov since the number of losses of those who used the services of brokers and funds will exceed 28%. However, so far there has been no information about the lawsuits filed against the head of Telegram. 7. BitMEX and John McAfee Tax Fraud Events that occurred at the beginning of the fourth quarter of 2020: In early October, the owners of the second-largest crypto-derivative exchange BitMEX, including its founder and CEO Arthur Hayes, were under investigation. The U.S. Commodity Futures Trading Commission (CFTC) accuses them of serving an unregistered trading platform and violating CFTC rules, including those related to countering money laundering and identifying customers. The US Department of Justice also accused Hayes, co-founders of Ben Delo and Samuel Reed of violating the bank secrecy law. Reed was arrested but went on bail of $5 million. The company later announced that Hayes was leaving the post of general director, Reed — a technical director, and Ben Delo also leaving the company. Head of Business Development Greg Dwyer went on vacation. The position of interim general director was taken by Vivien Khu. On October 6, US authorities charged John McAfee, founder of antivirus company McAfee, with tax evasion. He was detained in Spain, now he faces extradition. In addition to tax evasion, he is also accused of intentionally failing to submit tax returns. On October 5, the SEC sued the businessman for promoting ICO on Twitter. The plaintiff emphasizes that Makafi misled investors. For each count, he faces a prison term of up to 5 years. 8. Coinbase Investigation The US Securities and Exchange Commission has launched an investigation into the crypto exchange. The regulator believes that the company could trade unregistered securities The U.S. Securities and Exchange Commission (SEC) is investigating the site for trading unregistered securities. A Coinbase spokesman told Reuters that the company does not place securities on its platform. At the same time, the head of the legal department of crypto exchange, Paul Grewal, emphasized that she would cooperate with the SEC. A former Coinbase employee was accused of insider trading. Also in the fraud case are his brother Nihil Wahi and acquaintance Samir Ramani, whom the US Department of Justice accused of making illegal transactions with at least 25 different cryptocurrencies totaling about $1.5 million.
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Crypto Mixers and the Story of Tornado Cash

Crypto Mixers and the Story of Tornado Cash

Ruth Kise 8 min read
All transactions in the network of Bitcoin and many other cryptocurrencies are recorded in the blockchain, so this system is as transparent and public as possible. But at the same time, such transparency is a significant drawback for cryptocurrency holders who want to remain completely anonymous. Bitcoin addresses (to a certain extent) can be tracked and associated with real personalities. Thus, investors risk disclosing their data and tracking their account transaction logs. To solve this problem, mixers were developed. In this article, we will consider the concept of a cryptocurrency mixer, the principles of its work, why it is needed, as well as its vulnerabilities through the example of Tornado Cash . What Is a Crypto Mixer? A crypto mixer or bitcoin tumbler is a service created to increase the privacy of transactions in cryptocurrency networks. When the user makes a transaction through a coin blender, it is divided into tens or even hundreds of small transactions and mixed with the transactions of other users. This is designed to completely hide the original tracking and confuse all subsequent ones as much as possible. In addition, custom logs are automatically and permanently deleted within 24 hours of successful blending. Types of Crypto Mixers All mixers fall into two categories: Centralized. They are managed by a specific person or company. Such mixers are of high quality, and have an excellent design, but alas — the user is forced to be depending on their honesty and the severity of the performance of obligations. They charge large commissions to run the cryptocurrency, roughly 3%. And you have to take into account the chance that the resource can save operation logs for technical purposes. This increases the risk of hacking and leaking transaction data to third parties. That is, there is still a risk to anonymity. Decentralized or peer-to-peer. That is, transactions are mixed without the participation of an intermediary and use only special smart contracts . They guarantee the privacy of users, do not record data, and their creators cannot escape with assets. But technically, they are more difficult to use, especially for beginners. One of the most important conditions for the operation of peer-to-peer crypto blenders is a large number of customers. How the Mixing of Coins and Its Features Take Place The pace of coin mixing depends on several factors, such as the chosen cryptocurrency, for example, Bitcoin, and the amount of the transaction. After you leave the order, your crypto will head to the pool and wait for confirmation from the miners. And then go to the indicated wallets in a cleaned form. The number of bitcoin addresses and the number of transactions should be taken into account. This is 5 – 6 translations. To further increase anonymity, mixers use deferred transaction technology. Almost all mixers, in order to maintain privacy, delete logs after a day, and also allow you to delete them by yourself. The bitcoin address generated by the blender usually works for 24 hours and is applicable only for transfers within the service. Usually, bitcoin mixers prohibit accepting crypto at the previously used address. And of course, KYC verification is not required here. When conducting a transaction, the service gives out various important information: a letter of guarantee, confirming codes, addresses of wallets. It is important here not to accidentally close the tabs with important information, since they will be useful for obtaining currency for other wallets. Already cleared money will go into them. Be careful if the coin number is below the lower threshold for a mixer: it can go to developers as a donation. Why Should I Mix Coins Many people believe that crypto mixers are needed only to launder illegally received money. Of course, there is some truth in this. But there are other reasons, for example, hiding their income from other people. For instance, bitcoin is a cool tool for online purchases and p2p transactions, with which you can make trade transactions bypassing the banking system. But again, all transactions are stored on the blockchain. It turns out that if someone knows the address of your wallet, they can track the movement of the funds. Where is the promised anonymity? Such transparency seems outrageous to many. So bitcoin mixers are a good way to hide data on your wallet. No one will be able to watch your beats.  Talking about legality, the legislation of many countries has not yet reached the cryptocurrency regulation, and even more other projects related to it. Therefore, the use of mixers is now legal there. Crypto Tumbling Cons The story of privacy at the expense of mixers is far from ideal. In 2022, decryption of mixers is possible, yes. Experts have already calculated the likelihood of decrypting the bitcoin tumbler. It is about 95%, and the decoding itself became possible thanks to the analysis of clustering. Two projects Bitfury and Chainalysis have developed algorithms to identify related bitcoin addresses with high accuracy. Of course, this exposes mixer users to certain danger. These algorithms can calculate a person, and besides, demonstrate to the public who uses the coin blender. And another significant problem is a large number of scammers in this sector. In addition to the fact that there are many fake pages and spoof sites, there is a risk that the crypto recipient will get "dirty" coins, as a result of mixing the sender's funds with illegal bitcoins of other customers.  It is the movement of illegal money that attracts the attention of the government. Feeling vulnerable, the state cannot but follow the action in the cryptocurrency market and anyway takes measures to resolve and counteract crime. What Happened to Tornado Cash One of these steps was the imposition of sanctions on the Tornado Cash mixer. On August 8, the US authorities imposed sanctions on a smart contract for a popular privacy application, which launched a real chain reaction and led to the arrest of one of the developers in the Netherlands. TC was considered the safest mixer on the Ethereum blockchain, which gained its popularity among users. What to hide, it was used by both hackers from North Korea and very respected and public personalities. Unlike many other mixers, in terms of communication with the outside world, Tornado Cash was a fairly open and public protocol that positioned itself as a tool for ensuring financial privacy. The founders and developers of TC were also well known in the crypto community . Unfortunately or not, the lack of legislation regarding crypto mixers does not mean that they have some kind of immunity and can exist without regard to regulators. According to the Financial Crimes Enforcement Network of US (FinCEN), mixers are money transmitters under US law and have a number of duties, including in the AML/KYC area. Moreover, there are a number of precedents: October 2020: FinCEN imposed a $60 million fine on the founder and operator of Helix and Coin Ninja mixers. April 2021: The US Department of Justice arrested a 32-year-old citizen of Russia and Sweden, who was the creator of one of the first bitcoin mixers. May 2022: OFAC has sanctioned Blender.io, a TC-like bitcoin mixer. Taking this into account, it is difficult to call the imposition of sanctions on Tornado Cash very unexpected. So the U.S. Department of the Treasury added the TC service and the associated crypto wallet addresses to the sanctions list, justifying its decision by the fact that the platform was used to launder illegal crypto assets. What Was Next Immediately after the publication on the OFAC website, a press release on sanctions was followed by a cascade of events and outbreaks from where they were not expected. First, the site tornado.cash was blocked. Then the open TC repository on GitHub was deleted. The same fate awaited the developers of TC: GitHub blocked their accounts. Then the Discord server and forum on Discourse fell. By and large, at the moment all traces of Tornado Cash on the Internet were erased. The reaction of individual crypto protocols was just surprising, namely recalling that the decentralized Internet and sovereign money are not so decentralized and sovereign. The first to add fuel to the fire was Circle, the operator of the most popular stablecoin USDC , freezing $75,000 in stables. The crypto exchange dYdX did the same, even though the company has always shunned American jurisdiction, and positioned itself as outside its perimeter. Next, MakerDAO got excited. Recalling that his reserve of 50% consists of USDC, one of the founders of MakerDAO, Rune, spoke up about the worsening regulatory climate — and among other things, offered to prepare for a break from the dollar. If so, the guys will have to convert USDC $3.5 billion into ETH . Perhaps it was this news that cheered up this week's ETH course. Examples of Circle and dYdX were followed by other DeFi platforms, which started to add blocked addresses to their blacklists. But the most shocking was the news of August 12 about the arrest of one of the developers of Tornado Cash. After all, it's one thing to impose sanctions on a protocol that, to be cunning, was really used by North Korean hackers, but another thing is to arrest a developer who created this protocol without any criminal intent. A smart contract is a binary code that is stored on the Ethereum blockchain. Anyone who knows the smart contract address can interact with its functions by initiating transactions. The TC smart contract was fully autonomous. There was not a single person who could stop or interrupt its work. In turn, sanctions are usually imposed on criminals or political enemies. This time, sanctions were imposed on a neutral technology or tool. To Sum Up Undoubtedly crypto blenders are a useful tool that advocates the idea of anonymity. However, nothing stands still, and even as it would seem, new technologies become vulnerable to scammers. It is also worth remembering that in addition to honest crypto users, the market is attractive to criminal structures. This means that you are at risk of being with "dirty" crypto on your hands or having a run-in with the law. One way or another, be vigilant.
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XRP vs SEC: A Wild Ride

XRP vs SEC: A Wild Ride

John Martin 6 min read
On September 14, 2021, the U.S. Securities and Exchange Commission (SEC) published a document stating its meetings with representatives of SBI Holdings, FinHub, and CME Group. According to this document published by the SEC in the framework of the case against Ripple, representatives of SBI Holdings (Ripple's main partner) and other companies held meetings with employees of the regulator from 2017 to 2019, at which the XRP token was discussed. The document does not say what exactly the representatives of the companies talked about with civil servants. The SEC claims that the California blockchain company has been selling unregistered securities in the form of XRP tokens to retail investors for seven years. The SEC said that during this period Ripple raised $1.3 billion. What Happened In February 2022, the law firm Perkins Coie, which provided advice to Ripple on the launch of the XRP token, published documents on interaction with the issuer of the cryptocurrency from 2012. It follows from the documents that before the release of XRP, lawyers did not classify the token as a security. However, Perkins Coie warned Ripple that representatives of the Securities and Exchange Commission (SEC) may give a different assessment of the token status . The U.S. Securities and Exchange Commission filed charges against Ripple in late 2020. The regulator accused the company of selling unregistered securities under the guise of XRP tokens for 1.3 billion. XRP is an internal token of Ripple, which is used for cross—border payments. Amid the accusations, many crypto exchanges decided to suspend XRP trading. This brought its price down to $0.17. On September 15, the altcoin is trading at $1.1. In February, the parties were unable to settle the dispute in a pre-trial manner. The SEC insisted that Ripple's management was aware of the status of the XRP token even before its official launch. At the same time, the head of Ripple, Brad Garlinghouse, called the SEC's accusations "unsubstantiated" and stated that the regulator's actions are "a challenge to the entire US crypto industry." On July 13, 2022, Ripple managed to win a tactical victory over the SEC in court — the Commission was denied the opportunity to keep secret the data on the speech of the former head of the SEC's company finance department, Bill Hinman. In 2018, at the Fintech Week conference, Hinman said that the ETH cryptocurrency is not a security. And this is a direct contradiction to the regulator's accusations against Ripple. The XRP vs SEC lawsuit will be considered by the Federal Court of the Southern District of New York. The SEC accuses the defendants of violating the registration provisions of the Securities Act and demands an injunction against further sales, the return of all collected funds with compensation, and payment of civil fines. The price of XRP reacted to the news with a rapid drop. What They Say in Ripple Even before the actual filing, the company's top manager, Brad Garlinghouse, said that it was an attempt by outgoing SEC chairman Jay Clayton to "limit innovation in the bitcoin and Ethereum industry." In one of the documents, Ripple calls itself "the best alternative to bitcoin." In the same place, the company calls bitcoin and Ethereum "virtual currencies controlled by China." In his opinion, Trump administration officials are finally trying to harm the industry. He expects more understanding from the Biden government he was one of the sponsors of his campaign. Stuart Alderoti, Ripple's general counsel, again criticized the Securities and Exchange Commission (SEC) for its desire to control the entire cryptocurrency market. In response to the accusation that "even if some people buy a token for investment purposes, you are in the securities industry," Alderoti replied: "Does every jeweler now book a one-way ticket to the "land of securities" because "part" of their clients "invest" in the oldest the product is gold?!" Alderoti also said that the SEC is abusing its power: The Securities and Exchange Commission is trying to expand its jurisdiction beyond securities, "telling the judges with a straight face that we are the government, so we must be right," he said. "The SEC continues to relegate the CFTC to the kindergarten level. Their regulation with the help of a law enforcement strategy is to attack projects using various resources to expand their jurisdiction beyond the "securities", telling judges with a serious face that we are the government, so we are right." In conclusion, Ripple's general counsel urged cryptocurrency-related enthusiasts to join forces to "protect the abuse of SEC powers." What Will Happen to the XRP Token XRP is a real-time gross settlement, currency exchange, and money transfer system developed by XRP. The system is built on an open source distributed Internet protocol, a consensus registry, and its own token called XRP. The main objective of the XRP system, launched in 2012, is to provide secure, instant, and almost free global financial transactions of any size without chargebacks. XRP token has fallen heavily from the record $3.40 recorded on January 7, 2018. The cryptocurrency has fallen heavily ahead of the charges brought by the Securities and Exchange Commission against the blockchain company for conducting an unregistered securities offering in the United States. According to Coingecko , at the time of publication, XRP is changing hands at a price of about $ 0.40. The ongoing SEC investigation has had an impact on XRP token trading activity since its inception in December 2020. Several American crypto exchanges (for example, Coinbase) suspended trading in the coin, thereby limiting the growth of its price. XRP analysis shows that the coin usually follows broader trends in the cryptocurrency markets. But if Ripple manages to achieve acceptable conditions during the settlement of the lawsuit, then the XRP token rate can overcome the $3 mark. With a favorable settlement of the dispute with the regulator, global financial organizations will again reach out to Ripple, which may now be afraid to enter into partnerships with a team in such a difficult situation. Even with the most unsuccessful completion of the trial for Ripple, the coin is unlikely to sink below 0.6 in the long run, since by and large the negative effect of the SEC lawsuit has already been taken into account in the XRP rate. But the impact of a negative outcome on the value of the XRP token will depend on how tough the sanctions that can be imposed on Ripple will be. XRP Prediction A former official of the US Securities and Exchange Commission (SEC), Joseph Hall, predicted in the Thinking Crypto podcast that the trial with Ripple could drag on for more than one year. According to Hall, the completion of the trial should not be expected in 2022. He claims that the trial will not be completed soon, because the parties are firmly rooted in their positions and will not make a deal. Hall himself supports the issuer of the XRP token in the dispute between the regulator and Ripple. According to the ex-official, the situation looks strange, since the Ripple network worked for years before it was noticed by the SEC and filed a lawsuit. Summary The SEC's more aggressive approach, calling certain tokens securities, is alarming the crypto community , as it may cause problems for the industry. Such a label causes strict requirements for investor protection. Crypto enthusiasts say that many of these restrictions are incompatible with digital assets. Each such case of the SEC's collision with major players in the crypto market is indicative and allows us to understand what the regulation of this market will be in the next few years. Many experts note positive dynamics in the XRP case, but also say that the process is likely to be delayed.
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New EU Crypto Regulation: What's Going On?

New EU Crypto Regulation: What's Going On?

John Martin 5 min read
On the last day of June 2022, the European Union agreed on the main provisions of the law that will regulate the crypto industry. The bill was called Markets in Crypto-Assets, or MiCA. In short, the EU authorities want to oblige all crypto exchanges to provide personal data of customers, including information about transactions. Of course, many users have already begun to express their dissatisfaction. But how terrible is this law in reality? And what will it change radically in general? Europe Crypto Regulation To begin with, MiCA is not a new development. The law first appeared back in 2020, and it took European politicians about two years to finalize it. At the same time, the fact that the EU has agreed on a number of issues does not mean the immediate introduction of Markets in Crypto-Assets into operation. The law will come into force only in 2024 (unless something else happens before then). But what was the catalyst for the process, why did European leaders decide to pay special attention to the crypt right now? Firstly, this is the worst quarter in a decade for bitcoin (minus 56% of the value in the equivalent of the US dollar); secondly, we observed the failure of stablecoins and LUNA from Terra. Against the background of these events, the European regulator intends to introduce additional directives regarding stablecoins. According to the law, now all stablecoins will have to have specific large enough reserves for payments to their citizens. By and large, the EU simply decided to legalize what was stated by the developers themselves. For ordinary buyers, this innovation has positive sides. It will become more difficult for some scam projects to exist on the market. At least in the legal field, not the shadow segment. However, the global correction in the cryptocurrency market may well be considered a good reason to tighten the screws. In the end, no one is going to introduce additional control on the stock market against the background of a correction either (yet). But cryptocurrency regulation is literally called a significant event, which, according to the French Economy Minister, "will put an end to the Wild West" in the crypto industry in Europe. On the other hand, the lack of significant competition in the industry will lead to the fact that the main suppliers of liquidity to the crypto will be literally just several major players who will pass all the requirements. Transactions Tracing The EU Council and the European Parliament have reached an agreement and are on the way to implementing the "travel rules" for the crypto exchange in Europe. AML's "travel rule" is based on the principle that crypto asset service providers must collect and provide access to key data about the sender and beneficiary of transfers, similar to what global banks are currently doing for electronic transfers. Regulators are also going to press exchanges and other crypto platforms. Now the European Securities Market Supervision Authority (ESMA) will be able to interfere and restrict the work of the sites if they do not provide "protection to investors", integration into the market, and financial stability. One of the most essential requirements is the disclosure of personal information to the authorities, including information about transactions. For example, now you will be required to report transfers from an exchange or a crypto wallet if their value in monetary terms exceeds 1,000 euros. By and large, the same thing is happening that happened to the stock market at the beginning of the XX century. The era of relatively free and profitable trade has sunk into oblivion after the state developed more and more laws to restrict this activity. As a result, it is more and more difficult to earn money — for exchanges, increased control carries additional costs. And for citizens, supervision is twofold. On the one hand, in theory, you can turn somewhere if you get caught by scammers. On the other hand, it completely contradicts the concept of the first cryptocurrency, which assumed anonymity and many other useful things. In addition, there are additional risks that your personal data will end up in the hands of intruders since they will be managed by third parties — representatives of state structures (ordinary people also work there, who are not always saints and sometimes use their position for selfish and illegal purposes). Some of the key problems, according to critics, are that EU exchanges can deal with foreign exchanges that do not need to collect such information. The law also requires mining companies to disclose information about the amount of energy consumed. Initially, by the way, they wanted to ban crypto mining in Europe altogether. There is an opinion that all this has nothing to do with ecology, perhaps such a restriction and attempts to ban (taking into account the imminent transition of Ethereum to PoS) are primarily aimed at bitcoin, which is still not the most convenient asset on the blockchain to control the movement of large capitals. NFT NFT was also on the agenda of politicians. Now acts of fraud with digital art objects have become more frequent. In this regard, the EU has been thinking about the limitations of OpenSea-type sites. For now, however, they decided to postpone further decisions on this issue. In the next year and a half, it will be decided whether a separate document regulating non-interchangeable tokens is needed or not. But since they have already thought about it, then obviously the NFT will be regulated — give it time. Let's Summarize The crypto industry is developing, and, of course, the state will try to regulate it. The new legislation will undoubtedly be a shock for a number of EU crypto companies, although major players like Binance or Coinbase are unlikely to be knocked out of the rut. But if you read the White Paper from Satoshi Nakamoto in 2022 with his goals, for which the decentralized electronic cash was created, it becomes clear that the interests of the financial regulator are diametrically opposed. Many consider the proposal to create a new pan-European anti-money laundering body, which is currently headed by the European Banking Authority (EBA), to be the central element of the package. However, the updates still need to be confirmed by the Council and Parliament before they can be officially adopted by the EU member states. The Parliament, the Council, and the European Commission are currently working on the technical aspects of the text. After that, the agreement must be approved by the Committees on Economic and Monetary Affairs, Civil Liberties and Justice, as well as the Parliament as a whole, before it enters into force.
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CBDC vs Cryptocurrency: Are CBDCs a Threat to Crypto?

CBDC vs Cryptocurrency: Are CBDCs a Threat to Crypto?

June Katz 6 min read
The growth of the cryptocurrency market fuels the interest of society and business in the industry and does not allow states to stay on the sidelines. Dozens of countries are developing their digital currencies , and some of them will be launched as early as 2022. In this article, we will help you understand what digital currencies issued by the state are and how their appearance will affect citizens. What is CBDC The CBDC, or central bank digital currency, is a government-issued and government-backed digital analog of fiat money. CBDCs are created using blockchain technology, just like other cryptocurrencies. However, the digital assets of the Central Bank are not the usual cryptocurrency due to the centralized nature of the issue. The CBDC exchange rate is stable and equal to the exchange rate of the state currency in a ratio of 1:1. This is the principle of a stablecoin — a digital analog of the state currency, whose rate is tied to it and secured by it. For example, USDC or USDT are stablecoins tied to the value of USD . The main difference between those coins and CBDC is that the central bank of the country acts as the CBDC’s issuing center, and not a private company or a community of people. Two Ways of Financial Evolution The emergence of CBDC is designed to change the banking systems of all countries and strengthen the role of central banks. There are two points of view on what these changes will be. Supporters of state regulation of crypto believe that all crypto assets, except for the digital currency of the state, should be banned. This is the way that China's central bank cryptocurrency goes. Operations with CBDC will be transparent and will make it possible to track the history of each transaction and each participant in the chain . Banks will only have to work with companies and citizens: to serve customers and improve their products and services. The burden on financial monitoring will disappear. In a sense, the banks even want it. The second option for CBDC development is recognition and regulation. In this model, digital coins and crypto will be equated to shares, considered a digital value or a payment asset. In this case, the cryptocurrency market will develop systematically, and CBDC will be a full participant in the crypto world. This is Singapore's way. How CBDC Works From the point of view of the approach to the issue, the Bank for International Settlements identifies two basic concepts of digital currencies of central banks (combinations are possible): Account-­based (balanced): according to this concept, the creation of a Central securities exchange takes place by opening personalized accounts in the central bank for all economic agents. The features of this concept are the growth of the regulator's costs for maintaining accounts and the risks of disintermediation (reducing the role) of traditional financial intermediaries. Indeed, for commercial banks, the consequences of the emergence of such a retail CBDC can be revolutionary. For example, if individuals and legal entities have the opportunity to receive and store funds in accounts with the central bank, this may provoke a massive outflow of funds from commercial banks. Some European commercial banks are already raising the question of how, in such a system, the central bank will provide funds to banks for lending to the economy. Value token-based concept assumes a digital cash issue (token) distributed through commercial banks, replacing cash. In this case, the central bank relieves itself of a significant part of the costs and risks associated with checking and servicing customers, providing them with additional services, as well as creating and operating technologies. Tokens in such an ecosystem will effectively represent digital versions of cash. However, commercial banks fear that the launch of such digital money may simplify the entry into the financial sphere for large technology companies, which will increase competition in an already low-margin and competitive market, further reducing the industry's revenues. The form in which the Central Securities Exchange will be launched in a particular country can vary greatly from state to state, depending on the specific tasks assigned to the regulator.  When and Where Will the First CBDC Appear If you do not take into account the Sand Dollar issued by the central bank of the Bahamas, no major country in the world has yet reached the stage of launching its own CBDC. As of November 2021, more than 50 countries of the world were developing CBDC. China has come closest to real use, where the digital yuan has been tested for about a year. South Korea, Canada, France, the United Arab Emirates, South Africa, Nigeria, Ghana, and Uruguay are at the pilot testing stage. There is another approach to using crypto as the official currency of the state. This is an example of El Salvador , which in September 2021 recognized bitcoin as a means of payment on a par with the US dollar. Why Do States Need CBDC? One of the main tasks of the Central Bank's digital currencies is the security and transparency of financial transactions. Firstly, the technology underlying CBDC is the most modern means of controlling cash flows. Secondly, central banks strive not to be late for the trend and monitor each other. It is impossible to ignore the development of cryptocurrencies, therefore, to avoid a new round of money flowing into the gray zone, the state needs its digital currency. As they say, if you can't stop them — lead them. For many years, some states have been struggling with the outflow of money to offshore and other jurisdictions that are more favorable from the point of view of taxes and doing business. Previously, this happened with cash, then with non-cash, and now the process has almost entirely switched to cryptocurrencies. There is a threat that people and companies that create stablecoins will control too many processes and resources and will become stronger than some states. Therefore, CBDC for states is also a tool to combat gray financial flows. Are We Moving to Digital Currency? Most likely, a link between CBDC, stablecoins, and crypto will exist and their exchange for cash will be possible for quite a long time. But it is possible that in some countries, cash and digital values, except for their own CBDC, will remain in the gray zone and will be banned. For example, in China. Criticism Writer Dominic Frisby, author of the book "Bitcoin: the Future of Money?", believes that the main disadvantage of CBDC is its programmable capabilities. While fiat currency presupposes certain freedom, digital currency completely excludes it. Governments will also have direct access to users' wallets , which will make it easy to collect taxes or fines — you just need to change a couple of lines of code to do this. The programmable functions of money can be used against certain undesirable persons or as a weapon in an economic war. Integration with social rating systems opens up even wider opportunities for punishments or rewards. Your bank knows almost everything about your spending model, knows where you live, who you work for, and which store you prefer to buy groceries at on Mondays. He is well aware of your financial situation and state of health. Knows what devices you use, and in some cases even has biometric data. All this information opens up great opportunities for analysis, including behavioral analysis. However, information about consumers is of interest not only to the private sector but also to the state. Moreover, central banks are among the first to queue for user data. In the current realities, the introduction of national digital currencies by several countries is a matter of "when", not "if". As with fiat currencies, their strength will be determined by the strength and influence of the central banks behind the issue. A former employee of the NSA and the CIA, Edward Snowden, considers the tool "the newest danger hanging over society."  In a world where CBDCs are a priority means of settlement, including cross-border ones, there will be no room for privacy. After all, a tool that is positioned as a way to increase financial inclusion, in the end, can only tighten the noose around the neck of economic freedom.
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The Drawbacks of Centralized Crypto Exchanges: Binance Russia Case

The Drawbacks of Centralized Crypto Exchanges: Binance Russia Case

June Katz 4 min read
On April 21, Binance released an official statement according to which it will restrict access to its services for users who live in Russia and have assets worth more than $10 thousand. Such clients will no longer be able to deposit additional funds to their accounts or trade on the exchange. They will only be able to withdraw funds. In March, Binance denied that it was preparing to freeze the accounts of Russians, as this contradicts the concept of the cryptocurrency industry. The company said it was not going to impose restrictions on Russian bidders with the words: "Cryptocurrencies are designed to provide greater financial freedom to people all over the world. A decision to unilaterally ban consumers from accessing their cryptocurrencies would be contrary to what this industry exists for". It is worth saying that in the current situation, cryptocurrency is the only financial instrument that allows Russians to try to protect their savings from inflation. A few weeks ago, the Central Bank of the Russian Federation persistently convinced Russians that the cryptocurrency market is extremely risky for private investors and that the only way to save and increase their savings is through the Russian stock market and the national currency. Such news reminds us that one of the biggest problems of cryptocurrencies at the moment is the centralization of services. Blockchain processing requires a lot of computing resources and time. Therefore, ordinary users who just want to transfer a few coins prefer to use centralized services for this. Most Bitcoin users trust blockchain.info, Ethereum users trust myetherwallet, etc. If these popular wallets are compromised, the funds of a huge number of users will be stolen .. Trust in centralized services leads to the appearance of a single point of failure in cryptocurrencies, allows censorship , and endangers user coins. As another example, we can cite the protests of truckers in Canada, when the court froze the protesters' funds in cryptocurrency for millions of dollars. These events have shown us that the state has leverage to carry out censorship in the sphere of cryptocurrencies, which seemed to many before, was beyond their control. Unfortunately, any centralized financial institution can block access of their clients and users to funds: payment systems, banks, classic or crypto exchanges. The problem with crypto exchanges is that they operate based on issued licenses, they have services that are responsive to the regulator and the competent authorities of the countries that issued the license, up to criminal liability. Therefore, at the request of the regulator, a centralized exchange must restrict access or seize its client's funds. Centralization as solution Centralization is increasingly seen as a solution to problems. A large network is slowly synchronized, so many cryptocurrencies offer to use a limited number of trusted "master nodes", "witnesses", etc. to "solve the problem" of too many nodes in the network. The number of these trusted nodes may be different, but by using this method to solve scalability problems, developers are also destroying the decentralized nature of the blockchain, since the result of this will be the formation of a cryptocurrency with one functioning node that processes transactions very efficiently, without delays, confirmations, and forks, but in this case, the blockchain becomes unnecessary. Today, most users do not understand the technical details, so such centralized blockchains will continue to attract them, because centralized services will always be easier to develop and more convenient for the user. Decentralized Exchanges : an Alternative Decentralized exchanges (English Decentralized Exchanges, or DEX) are an alternative to CEX. Here you don't have to trust your assets to someone else. Unlike traditional CEX, transactions and trades on such platforms are automated using smart contracts and decentralized applications, and DEX acts only as a platform that only connects the buyer with the seller who wants to sell their tokens . DEX cannot be closed by any government and regulators, since no organization is responsible for them. But such decentralization has its price. This is a low trading volume, low liquidity, lower transaction speed, and a poor UI, as a result of which it is more difficult to work with such exchanges. Also, the differences between decentralized and centralized exchanges include the fact that some DEX bet on experienced users. For example, they do not have support services, and they also do not use fiat gateways, unlike CEX. Decentralized exchanges are aimed at more experienced users who work only with their wallets and want to fully control their digital assets. At the same time, they sacrifice other benefits provided by centralized exchanges. This is an easier user experience, a large trading volume, and higher liquidity. Examples of DEX’es are Binance DEX, Uniswap , and SwapSpace . Summary We have already written that although governments can't ban blockchain use they can marginalize it and slow down its growth until the necessary tools for control will appear.  If a few years ago the marginalization of cryptocurrencies was facilitated by its widespread use on the black market and opacity , now users' fears of simply losing access to funds due to belonging to any social group or nationality have been added to this. Of course, the listed risks do not outweigh the convenience of CEX for everyone, but it is important to understand that the original essence of cryptocurrency was that an ordinary user could be outside countries, governments, and banks, so attempts to take it away are very alarming.
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Where Is the Crypto World Going: Crypto Censorship Resistance

Where Is the Crypto World Going: Crypto Censorship Resistance

June Katz 2 min read
Financial censorship or cutting off access to the global banking system is one of the most powerful tools that government has to punish their enemies. Whether financial censorship is used for the good cause or not the question is — does a global decentralized monetary system takes this weapon away from authorities? Tendencies For now, a government crackdown on crypto might look quite real: the Biden administration introduces a crypto bill and the Canadian court freezes millions in Convoy protestor funds — including Bitcoin . The situation in Canada also shows us methods of crypto tracing the government already has. Bitcoin may be uncensorable but it's also radically transparent and law enforcement has been remarkably successful at connecting bitcoin addresses to their users. Practice Bitcoin only solves the problem of financial censorship when individuals hold the keys to their own coins. When kept on an exchange the companies in charge maintain custody — just like any other bank.  That means that the government can put pressure on exchanges to freeze the bitcoin accounts which is exactly what happened in Canada where protesters' crypto assets were seized. Without an easy off-ramp into cash, spending the funds became a challenge for protesters. Concerns It should be noted that the anonymity of cryptocurrencies such as Bitcoin, Litecoin , Namecoin and others is understood as pseudonymity, in which a single violation of security measures (for example, the purchase of cryptocurrencies through a regular bank transfer) might lead to the disclosure of the owner's identity. Therefore, cryptocurrencies such as Dash and Zerocoin have been developed to enhance anonymity. Although governments can't ban blockchain use they can marginalize it and slow down its growth until the necessary tools for control will appear. The epicenters of the development of cryptocurrencies in the coming years may be some countries where the state and its financial institutions enjoy an extremely low credit of trust among the population.
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Buying Crypto Without KYC: Why, How, and Where

Buying Crypto Without KYC: Why, How, and Where

Ruth Kise 7 min read
More and more countries are beginning to adhere to the norms of KYC and AML, which have already entered ‌force in the European Union and the US. According to them, financial institutions must know their client (KYC) and resist money laundering, scams , and hacking. According to KYC, these databases are checked against various law enforcement agencies' watchlists . Therefore, identification is used to prove that the trader complies with the law and has the right to make transactions. In addition, verification is a method of insurance. For example, in the event of a cyber-hack or a technical failure, the trader will be able to prove that he owns his account and can get his funds back. KYC: Cumbers and Risks To verify the exchange, users might be required to make a passport photo, a selfie with a passport, a photo with the address of the place of registration in the passport, a driver's license, a TIN, and sometimes even an electricity bill. Verification may be required after account registration and/or at the time of withdrawal. In addition, if the transaction seems atypical or suspicious to the moderators, they will require additional documents from the user, for example, confirmation of the source of income (contract).  Due to this, the process can be inconvenient for users – transaction processes are delayed, traders lose on rate changes during verification, or the exchange may block the account because of formal inconsistencies in documents, although the trader trades honestly. Another point is that the requirement to provide documents contradicts the key principle of cryptocurrency – anonymity, freedom and lack of control over the movement of the financial flow . Moreover, providing data to minimize the likelihood of fraud also carries some risks: data leaks are almost inevitable; your data can be shared with third parties and government agencies; leaked or stolen data can be used in an attempt to steal your coins (phishing). Thus, the desire to keep anonymity is so clear and it is still possible. Privacy is Legal First, let’s say that privacy is one of the internationally fundamental human rights. You don’t break the law if you operate within the imposed limits on cash payments (usually around $10,000). And if some users prefer to remain anonymous, some simply want to start trading as quickly as possible, without wasting time waiting for confirmation from the exchange administration; this does not mean that they are necessarily fraudsters. So if you are one of those who wants to stay anonymous and ready to lake risks – the following information will help you ‌make the right choice and deal with your crypto safely. Where to Go to Avoid KYC Most of the crypto exchanges allow you to operate anonymously, but some have withdrawal limits and can feature partial KYC verification. Let’s overview usable types of exchanging platforms: Altcoin Trading Exchanges Binance To open an account on this world’s largest cryptocurrency exchange, you only need an email address. After it users are free to deposit, withdraw , and trade up to 0.06 BTC per day without KYC verification. Spot trading on Binance doesn’t also need verification. However, users who transact large volumes of BTC will need to complete the KYC procedures so that they can transact on the platform. KuCoin This one also offers a wide variety of coins to choose from, as well to purchase with a credit card. All in all, it is a great alternative to Binance. The blockchain imposes withdrawal limits up to 5 BTC per day without KYC. IDEX This decentralized cryptocurrency exchange is specially designed for trading Ethereum and Ethereum-based tokens ( ERC-20 ). To identify themselves, traders only need their wallet addresses. After unlocking your Ethereum wallet, you need to deposit tokens on the exchange, and you can start trading. Also, we should say that if you are going to trade cryptos for fiat, then you should expect to do KYC as well. But there are some ways to get cryptos without ID. Peer-to-Peer Exchanges P2P exchanges don’t hold users’ funds, but rather connect buyers and sellers. HodlHodl   A noncustodial Bitcoin exchange provides escrow service by creating a multi-signature wallet between the users. They do not force you to fill in KYC details, therefore giving you the option to stay anonymous. HodlHodl has a rate of 0.6% shared between both parties and no limits.  Bisq It is the world’s only fully decentralized p2p exchange with a 0.001 BTC – 0.001 BTC rate. This platform is one of the most advanced in the industry and lets you sell and buy bitcoins for fiat. However, it still has low volume and might be difficult for new users. AgoraDesk This fully non-custodial exchange offers a variety of benefits. However, if you want to buy bitcoins for cash, you can find a person who will sell you bitcoins at a meeting – the exchange supports the purchase and sale of BTC for cash. It even offers cash by mail, no KYC, noJS mode, Tor, and I2P, and not even email are needed for registering.  Instant Swap Exchanges Another way is to use instant swap exchanges, such as the ones offering their services at SwapSpace , where you can avoid KYC and currency limits. Such platforms do not require account creation, and they have a large variety of coins to choose from. Xchange The platform provides competitive rates and high transaction volumes. It also operates both web and CLI versions, and can therefore be utilized inside Tails, or Whonix operating systems. StealthEX StealthEX is a privacy-focused noncustodial cryptocurrency swap exchange. They provide over 300+ assets with limitless trading potential. Additionally, StealthEX swaps can also be done through the Telegram bot. SimpleSwap This platform has an extensive set of over 300 different altcoins to choose from, no signs ups are required. It offers both fixed and floating fees, and unlimited swaps, of course. What can trigger KYC? However, blockchains are still on the lookout for frauds and some transactions can cause random identification requests. So there are few trigger events that can cause selective verification.  Going over the withdrawal limits. Unusual transaction activity. For example, an unusually short period of holding funds or frequent selling of coins at significant losses. Also, larger and unusual transactions in cash form also can seem to suspect exchanges. Rise of suspicion that your tokens have a criminal background. If you are going to operate with big amounts, check your Bitcoins for cleanness.
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El Salvador Adoption of Bitcoin as Legal Tender: Why Is This Exciting and How to Understand It Better

El Salvador Adoption of Bitcoin as Legal Tender: Why Is This Exciting and How to Understand It Better

June Katz 8 min read
For the past few weeks, the crypto world has been abuzz with the news of El Salvador’s official adoption of Bitcoin as legal tender. But why is it such a big deal? Let’s review the regulatory situations concerning digital money, look at why cryptocurrencies are special among them, and in the process find out what makes El Salvador’s case so unique. Types of Digital Money There are many kinds of digital money, many of which differ only in detail. So, for the purposes of this article, they can be roughly divided into three groups: centralized virtual currency, central bank digital currency, and cryptocurrency. Centralized Virtual Currency This is a type of currency that is accepted in some environments, like online game communities. Such currencies have a central authority that has the right to mint them and impose policies — for example, the publisher of the game. Those are not usable in the world outside the community , and there’s no real chance of any government to adopt any of them. Central Bank Digital Currency Central bank digital currency (CBDC) has been widely discussed in several countries for a long time. It’s a fiat currency that’s supposed to be minted digitally, not corresponding with the physical bank reserves but “in parallel” with them. On its face, a digital currency that is accepted as legal tender sounds innocent enough and incredibly convenient, as it’s basically an official endorsement of the touchless payment systems liked by many people already.  However, depending on the country, CBDC can be used as a part of a larger effort to regulate the payments market within its territory. One of the most obvious examples of this is China, whose digital renminbi has been in the works since 2014 and is slated for the country-wide rollout in 2022. At the same time, China has been slowly tightening regulations on cryptocurrencies, banning crypto exchanges, prohibiting financial institutions from dealing with crypto, clamping down on crypto mining . There’s no reason to assume that those regulations will loosen any time soon; if anything, it seems like China is looking to offer its citizens the user experience associated with crypto, but replaced with the CBDC, and drive the crypto community out of the country.  Cryptocurrency Obviously, this is the most interesting (and intriguing) one. After starting out as just a small subgroup of virtual currencies, crypto can be said to have won its unique position among digital money.  As opposed to most virtual money, its use is not limited to one community (even if some opponents claim that the only people using cryptocurrency are criminals and drug lords — we all know it isn’t true). On the other hand, most governments are wary of crypto, and probably rightfully at that, as it’s unregulated (more than that, even if you wanted to regulate it somehow, nobody understands yet how to do it in practice) and can be used to avoid capital control. The cryptocurrency case is a curious one, as it’s been invented with the exact purpose of being a decentralized, non-governmental form of money, but at the same time, crypto developers and users are clamoring for the widespread crypto adoption (and there’s nothing wrong with that, obviously). But the adoption trend contradicts the initial idea of crypto, which is evidenced by the high-profile clashes between the regulators and crypto communities. We will probably see many more of those in the future, although there can always be exceptions.  Regulatory Practices: A Short Overview We have looked at three types of electronic money. Now let’s quickly lay out what people and institutions may or may not be allowed to do with it in general, before talking about what’s being done in reality. Without diving deep into the regulatory waters, we can say that there’s basically a spectrum: the asset (or currency in this case) can be banned outright within a certain country, under the fear of criminal proceedings; it can be fully legal (for currencies — with the status of legal tender); or it can be somewhere in between. A government can ban a class of asset, citing lack of regulation, caring about the citizens, or some traditions prohibiting the use of this asset.  The governments that are open to more nuanced interpretation of the laws may put some partial restrictions, for example, on banking or use as a payment tool, or just discourage the use of an asset without passing formal regulations. Others can allow any use of an asset in the private sphere, while not wanting anything to do with it in public and governmental affairs. And on the extreme end of this spectrum is full adoption of an asset class with the full backing of the government. We mentioned the status of legal tender several times here, so to give a quick definition — to be legal tender means for a currency to be accepted in the settlement, or tender, for all debts within the country. This means that the government fully supports the currency, and because of it it’s usually widely accepted by various institutions and merchants. This is why being legal tender is a big deal. The State of Digital Money Regulation in 2021 In practice, the discussion about the digital money regulatory status can be reduced to the question concerning only cryptocurrencies. As any centralized virtual money existing now is essentially private, it’s obvious that it’s not going to enjoy full legal status anytime soon. Virtual money is not banned in most countries (with some exceptions like Algeria and Morocco, where any form of it is illegal), but at the same time, it’s not accepted outside of its community of origin. Central bank digital currency, as opposed to virtual money, is basically obligated to have a full legal tender status, because anything less defeats its purpose. Cryptocurrency regulation, until very recently, could fall on any point of the spectrum described in the previous section — except being backed by the government. Crypto has been banned fully (like, for example, in Egypt, Bolivia, or Nepal), legal (like in the US, Australia, and most of the EU), or partially regulated, taxed, etc. all around the globe. But only in 2021 it became adopted as legal tender for the first time, in El Salvador. So, What’s the Deal with the El Salvador Bitcoin Law? El Salvador is a small Central American country without its own fiat currency, choosing to use the US dollars instead. This has some consequences for the economy: for example, simply put, the El Salvador government has too much debt and too few reserves — not a good situation for the government to be in. To fix the economy somewhat, El Salvador needs to attract new investors. Many El Salvadorians live and work abroad and send remittances to their families, which is good for the economy, but this process is usually slow and difficult; besides, much of the population is unbanked.  These considerations, among others, led El Salvador’s government to propose officially adopting Bitcoin. This, they argued, would revitalize the economy, bringing the new investments and allowing unbanked citizens to manage, send and spend their money more efficiently. In June 2021, El Salvador President Nayib Bukele put the cryptocurrency adoption law through Congress, and on Tuesday, September 7, it went into effect.  The Bitcoin adoption in this country is surrounded by controversy. For example, El Salvador Bitcoin wallet Chivo, officially endorsed by Bukele, has some corrupt officials on its management team, not to mention the accusations of the El Salvador President of being corrupt himself — or, at the very least, a populist. Many people felt the crypto volatility as well — new Chivo owners in El Salvador received $30 in Bitcoin on signup, only to see it lose more than 15% of its value in one day. These and many other “hiccups” led to El Salvadorans protesting Bitcoin adoption and Bukele personally. One of the biggest protests happened on September 15, when El Salvador is celebrating its independence from Spain. Despite the somewhat botched execution in this case, it doesn’t seem to be fair to summarily reject the idea of the governmental adoption of crypto. Other countries have been carefully expressing their interest in following El Salvador’s suit — although, hopefully, if they do, they will learn from each other’s mistakes. Besides, the El Salvadoran story itself is far from over right now, and the potential good effects of Bitcoin adoption, noted at the beginning of the discussion, may still be realized. So, it seems like we need to watch the situation some more to decide whether it’s going to be a net positive. Final Thoughts El Salvador Bitcoin adoption move, while controversial, is also inspiring. The issues we touched upon in this article show that currently, among all digital currencies , crypto is the biggest headache for regulators all over — but for many people, it’s exciting to see what happens next in this new world. The crypto adoption does seem like the final frontier for now, doesn’t it? We will write more about this topic, as the stories unfold — so stay tuned. 
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What Are AML/KYC For?

What Are AML/KYC For?

June Katz 3 min read
The modern world is increasingly striving to remove anonymity from cryptocurrency circulation. Client identification is a big problem for blockchain companies today. The KYC / AML rules, offering their solution to the problem of identification, ensure the acceptance of cryptocurrencies in society, but on the other hand, they cause a conflict between users and regulators. SwapSpace explains what the contradiction consists of, what the terms are themselves and what is the KYC meaning, how to pass verification on the exchange with AML / KYC requirements, and what cryptocurrency exchangers stay anonymous. What is KYC? Know your customer (KYC) is a term of banking and exchange regulation for financial institutions and bookmakers, as well as other companies working with private money, which means that they must identify the counterparty before conducting a transaction. Such practice prevents money laundering, terrorist financing, and tax evasion. The KYC implementation has led to the gradual prohibition of servicing anonymous bank accounts. KYC procedures are created to help financial institutions better verify their customers and monitor transaction risks. Among them, the main ones can be distinguished: customer identification procedures (obtaining passport data, birth certificate, etc.); transaction tracking; risk management (comparison of data on the quantity, the content of transfers, counterparties, material support, etc.). What is AML? Anti-Money Laundering (AML) is a more extensive term that firstly means anti-money laundering and counter-terrorist financing and counter-weapons of mass destruction financing. The AML process includes: Monitoring of transactions worth more than $10.000; A requirement to report certain types of transactions; Control the movement of coins both abroad and within the country; Obtaining KYC information to confirm a person’s identity and checking whether he or she was involved in illegal activities. These steps should help to identify and seize illegal funds and to prevent scams . AML KYC: similarities and differences Often the terms are confused or used interchangeably, but it’s incorrect. regulatory authorities use the terms AML, viz. anti-money laundering, and terrorist financing; sellers of goods and services often refer to the term “KYC commitment”. Customer identification (KYC) is a component of the AML. You can call KYC a set of procedures and tools, a principle in the framework of the general AML policy. N.B.: the terms KYC and AML are primarily associated with the social responsibility of the business, with protection against fraud risks. Often they are found in contracts of companies from countries with legislative restrictions and state control over business entities. AML/KYC in the crypto sphere Blockchain technology has brought a problem to the financial sector. Most cryptocurrency transactions are made remotely and anonymously. Even though transactions in the traditional system are made open: the appearance and signature of the client can always be compared with the passport data. The advent of cryptocurrencies has expanded the market for financial instruments and brought the necessity of regulation. At first, the cryptocurrency privacy policy was a distinctive feature. However, the necessity of transaction safety led to toughening requirements for the personalization of users. The KYC and AML norms are also the main obstacle to crypto protection, as they contradict one of the fundamental ideas of the blockchain – anonymity. In other words, cryptocurrency transactions must be anonymous and inaccessible for tracking. But since regulators are preoccupied with the problem of cybercrime, now the verification requirement on cryptocurrency exchanges is becoming important. AML/KYC on SwapSpace There are no AML/KYC procedures on SwapSpace itself – we don’t even have the registration field. SwapSpace doesn't process transactions, thus KYC, on its own – however, we are an aggregator that integrates several swap services, and whilst some of them are completely anonymous, others could ask for an ID. Let's say, Changelly uses AML/KYC. ChangeNOW doesn’t require your data, but in particular cases, they could ask you to show your ID document scan or some extra information. You may exchange currencies on anonymous registration-free exchangers or choose the safest way if you think so. Our service provides both – just choose the most suitable way to exchange.
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The Most Interesting NFT Examples: November 2022 Edition
The Most Interesting NFT Examples: November 2022 Edition

The Most Interesting NFT Examples: November 2022 Edition

Ruth Kise 11 min read
The NFT market remains an integral part of the crypto world, and despite some difficulties, it continues to develop and gain the interest of many users. In this article, we will talk about NFT news: today’s market situation, new opportunities, and some fresh NFT examples. Market Decline This year has been a difficult year for the NFT due to the bear market as well as other factors. According to Bloomberg, NFT sales this year have plummeted: in September, these digital assets were sold for $466 million, which is 97% less than the $17 billion that was raised in January. One of the factors in the collapse was the announcement of the bankruptcy of the FTX exchange , which negatively affected the cryptocurrency market in general and the NFT ecosystem in particular. Starting Nov. 7, when FTX customers had withdrawal issues, the NFT market is recording a steady decline in sales volume, market capitalization, daily NFTs traded, number of traders, and many other metrics. A deeper dive into the efficiency of the NFT sector in early November revealed a significant drop in the blue-chip index (Bored Ape Yacht Club, Cool Cats, CryptoPunks, Art Blocks, and CloneX). According to the analytical platform NFTGo, the blue-chip index is calculated by weighing the market capitalization ( ETH / USD ) of the largest NFT collections, which makes it possible to assess their performance. According to NFTGo, since November 7, the total capitalization of the NFT market has fallen by 8%; over the same period, total sales fell by 32%. Only sports fan tokens can boast of outstanding success now, as the trading volumes of those skyrocketed while the market was waiting for the 2022 World Cup. Let It Become Money On November 11, FTX Trading Ltd., Alameda Research, and 130 other affiliated companies began voluntary proceedings under Chapter 11 of the U.S. Bankruptcy Code. Along with this, it was announced that Samuel Bankman-Fried was leaving the post of CEO of the platform. After this news, 1.3 thousand tokens with various images of the ex-head of the problematic exchange were put up for sale. In total, the collection contains almost 7 thousand items. More than 2.1 thousand users purchased NFT from the Bankrupt FTX Yacht Club collection dedicated to the collapse of the exchange. The total cost of the sold NFTs is 187 ETH ($233 000), and the minimum price (the price of the cheapest token in this series) reached 0.1 ETH ($125), but by now it has dropped to 0.0092 ETH ($11).  The collection was posted by the creator of the NFTs - S60SSYe - on the evening of November 11. At the same time as the Bankman-Fried series, he also presented 3.8 thousand tokens called Caroline Town by BFTXYC (Bankrupt FTX Yacht Club) with the image of the head of Alameda Research Carolyn Ellison. These NFTs are less popular. Currently, about 700 users own such items, and the total amount of token sales amounted to 6 ETH ($7.5 thousand). Instagram and Facebook Have the Opportunity to Post NFTs Meta has opened up the opportunity for all US users to post digital collectibles, i.e. non fungible tokens or NFTs, on Facebook and Instagram. On Instagram, this feature is also available to users in over a hundred other countries. To work with the option, you need to connect a crypto wallet to your profile on the social network, after which it will be possible to create publications with NFT objects from this wallet. At the same time, the creator of the object and its owner are automatically marked in the publication.  A special section dedicated to digital assets has now appeared in the application settings, and wallets created on five platforms, including Coinbase, MetaMask and Dapper, can be connected to the profile. Theoretically, this operation is available not only in the mobile application, but also in the web interface — but the authors of assets, The Verge, said that the second option is still malfunctioning. Release and Sell NFT on Instagram: Now You Can Meta announced that it has begun testing the mechanisms for releasing and selling NFTs on Instagram. The first access to new features will be given to "a small group of authors in the United States". The set of options for demonstrating NFT objects on the platform has also expanded. Meta has prepared a set of tools for working with NFT: it will allow you to issue tokens on the Polygon blockchain so that you can then sell them either on Instagram or outside the platform. The developers specified that the Solana network was added to the supported Ethereum , Polygon and Flow blockchains to withdraw NFT purchased elsewhere on Instagram. In addition, there was a download of metadata from the OpenSea marketplace, as it was done on Twitter. Last year, Instagram chief Adam Mosseri said the platform was no longer viewed as a photo-sharing app. Now it is an entertainment venue. Therefore, authors should be able to make money either from advertising or from selling NFTs and gifts from the audience. Buy NFT From the AppStore Recently, Apple Inc. updated the rules for non-replaceable tokens (NFTs) in the App Store. Developers can now sell NFTs hosted at the App Store, but only through the internal payment system. That means content creators will be required to pay Apple a 30% fee on sales. Apple is interested in ensuring that users do not bypass the commission for buying NFTs using cryptocurrency. Therefore, the company introduced even more restrictions. Thus, the new rules prohibit the use of cryptocurrency, crypto wallets , and QR codes to unlock functions in the application. In addition, development companies must have a license to work in the country where the application is sold. And despite criticism of the high commissions, the company's management believes that the possibility of buying NFT from the AppStore for fiat will attract people who consider cryptocurrencies difficult to the market. OpenSea New Tools  Marketplace OpenSea has launched a new tool for royalty fees. So far, it can only be applied to new collections of non-fungible tokens. “There’s been a lot of discussion over the past few months about business models for NFT creators & whether creator fees (“royalties”) are viable. Given our role in the ecosystem, we want to take a thoughtful, principled approach to this topic & to lead w/ solutions”. OpenSea (@opensea) The team reserves the right to collect royalties for authors. From November 8, the platform will begin to charge commissions only from those new collections that use the corresponding tool and run additional options and improvements for fees in new collections. The marketplace team said that they are already thinking about alternatives in order to help the authors of existing collections navigate the changes in the NFT market. For the latter, they promised not to introduce any changes until at least December 8.  Also, the largest trading OpenSea marketplace is preparing a stolen token detection and sales block system on the platform. The developers have prepared a system that will automatically track transactions with stolen tokens and block such sales on the platform. Now the system is in the stage of limited testing. To track suspicious NFTs the system is going to use "many sources of transaction data." In addition, the system itself will check the seller's wallet for suspicious activity, for example, many NFT movements. An important innovation is checking links in ads for possible fraud. Scammers often used the OpenSea platform itself for fraud posting phishing links in ads.The new system will check both the NFT description and the URL link in the description. The developers promise to limit the clicks on suspicious links automatically. Starbucks Unveils NFT-Based Loyalty Program Starbucks has officially unveiled a new NFT-based loyalty program in the virtual world. The Starbucks Odyssey project is the coffee chain's first experience of building a virtual community using web3 technology. The new format combines the classic Starbucks Rewards loyalty program and the NFT platform, where guests can earn digital assets, which can then pay for exclusive services. Starbucks Rewards members will be able to use the services of Starbucks Odyssey through existing accounts, there is no need to re-register. Once in the new virtual space, they will be able to participate in various special projects, which Starbucks called "travel": for example, playing interactive games or taking part in surveys aimed at deepening their knowledge of the Starbucks brand or the coffee business as a whole. As these "travels" are completed, participants will be able to purchase some items from NFT collections. True, here Starbucks deliberately leaves the technical slang and calls these collectibles in the NFT format "road stamps." Despite being hosted on the Polygon blockchain, these NFTs will be purchased with a credit or debit card, no crypto wallet is required. The company believes this will make it easier for consumers to interact with web3 by lowering the entry barrier. It will be possible to swap "stamps" for a virtual class for preparing espresso martini, or access to indoor events at Starbucks Reserve Roasteries, or even a trip to Starbucks Hacienda Alsacia coffee farm in Costa Rica. Items in the NFT collection can be earned, exchanged in the community, or simply bought. Square Enix Fans’ Disappointment Square Enix has officially announced the NFT game Symbiogenesis. It will be released in the spring of 2023 along with the free browser service of the same name. The publisher registered the Symbiogenesis trademark in October. Then the players thought that under this brand a continuation of the sensational Parasite Eve which came out in the late 90s or something related to this series would be released. They came to this conclusion because the word symbiogenesis means the process of combining two separate organisms into one. It is this process that underlies the Parasite Eve plot . Symbiogenesis is a brand-new entertainment project that will take place in an autonomous world, where the symbiosis of many characters can be assembled in a digital art format. In Symbiogenesis, all user-generated content can be used as a profile avatar on social media and as a playable character in a story that takes place in the digital world. The authors promise a lot of plot in the NFT game. Something New From The Sims Creators  The creator of the iconic The Sims and the city-planning simulator SimCity Will Wright has announced his new game called VoxVerse. This is a virtual sandbox consisting of huge cubes in which players can extract resources, own land, and build various structures. Unfortunately for many players, VoxVerse is largely built on NFT technology. Players will be able to trade characters from The Walking Dead and DreamWorks' cartoon Trolls. According to Wright, blockchain technology will help players make "secure transactions." At the same time, the cult developer himself expects that three types of users will be formed around the game: some will simply play, the second will be slightly involved in the project economy, and others will enter VoxVerse exclusively for the purchase and sale of items. However, Will Wright is much more interested in "a million ordinary players than in 10 thousand rich whales" that will bring him money. More Life in the Metaverse There is not yet a single metaverse, and its first versions often cause mixed feelings due to the feeling of artificiality. To "revive" the virtual space, startups offer to add virtual animals to them. The general idea is not new, but the new features imply that the pet will not be limited to specific hardware. Now in the early days of Web3, a new wave of start-ups is attracting investment to bring our furry friends to the metaverse. One of the striking projects is Tiny Rebel Games' Petaverse Network creates virtual cats in an NFT drop format that is promised to be used for decades. To do this, they are trying to ensure that their metapets can be recreated by different development teams working on different platforms, regardless of how the technology changes. Another project, Digital Dogs, is going to "tag" the metaverse and is developing cross-platform AI puppies for virtual worlds, digital games, and social platforms. According to co-founder and CEO Itay Hasid, these dogs are not intended to replace a furry friend. These are rather companions for users of the metaverse, who may become an occasion to start a conversation, which is not enough, in his opinion. ECO -Friendly NFT If you love nature and are worried about the safety of animal species and ancient traditions, now you have the opportunity to curate your own deer. The deer NFT collection containing eight tokens has appeared on the market. The Digital Reindeer Herder project was developed in Yakutia. Also, the republic began to issue futures of supplying deer antlers in a certain number of kilograms. The money from the sale, in particular, will go to the development of reindeer husbandry in Yakutia. "Futures will increase the number of animals and commercialize the antlers market. A similar contract can be used by people who want to help the ecology of the Arctic and contribute to the development of the North, " said the press service of the republic. The Bottom Line NFTs have been more than just pictures with painted stones from the Internet for a long time, sold for a lot of money. Attractive assets with their philosophy are rapidly becoming an integral part of modern culture, opening up new opportunities for monetization of their resources for artists and enthusiasts of the idea of an attractive Metaverse. Large companies one way or another enter the market, wanting to maintain their significance and relevance. Using technology, opening their own marketplaces, or releasing their own collections, large players not only increase their funds but also popularize NFT for the masses. Booms and busts inextricably accompany the development of the young market, presenting opportunities to make good money for experienced participants, and a nice chance to successfully enter the market for beginners. And we at SwapSpace are preparing something in this space ourselves. Stay tuned!
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What Happened to FTX: A Brief Overview
What Happened to FTX: A Brief Overview

What Happened to FTX: A Brief Overview

John Martin 6 min read
Until recently, it seemed that FTX was doing well: FTX founder, Sam Bankman-Fried, one of the most authoritative persons in the crypto-world, raised $400 million from Softbank and others in January, receiving an estimated $32 billion valuation, and last month spoke about the project’s ambitious acquisition plans. However, now FTX is in distress, customers are massively withdrawing funds, and Binance, which volunteered to help the company, refused to buy it. Let's figure out how the crisis unfolded. A Brief Chronology of the Events That Led to the Collapse of the Crypto Exchange November 2017 - Foundation of Alameda Research Alameda was founded in November 2017 by Sam Bankman-Fried (also known as SBF). Alameda and SBF gained fame through arbitration trade on the so-called "Kimchi Premium," which refers to abnormally high bitcoin prices in some Asian countries. Subsequently, Alameda became one of the most influential venture capital companies, trading firms, and market makers in the field of cryptocurrencies. May 2019 - Foundation of the FTX Crypto Exchange FTX was founded by SBF in May 2019 as a centralized cryptocurrency exchange specializing in derivatives and products with credit leverage. December 2019 - Binance Announcement At the end of 2019, the Binance cryptocurrency exchange announced strategic investments in FTX. The investment was approved by SBF, which said it "will help accelerate FTX growth with support and strategic advice from Binance while maintaining independent FTX operations." 2021 - Binance Sells FTX Stocks in Exchange for FTX Tokens and Dollars In 2021, Binance sold its stake in FTX in exchange for $2.1 billion in FTT and dollars. 2022 - FTX Gets in Trouble On November 8, the FTX exchange suddenly suspended the withdrawal of customer funds (for many crypto projects such actions were a precursor to the approach of the disaster), and CEO Binance Changpeng Zhao, known under the pseudonym CZ, announced on Twitter that FTX had turned to his company "for help" and they managed to come to an agreement that would save the crypto exchange. Bankman-Fried published the thread, saying that the customers' money is now safe and withdrawals will be made on time. "CZ has done and will continue to do incredible work to create a global cryptographic ecosystem and a freer economic world," he wrote. This year many events undermined confidence in crypto companies. After the collapse of the Three Arrows Capital hedge fund, the Celsius platform, and the Terra-Luna stablecoin , another loud failure was the last thing the industry needed. It seemed that the FTX barely managed to evade its crisis. But soon after Binance posted a tweet about canceling the deal, citing the results of corporate due diligence and news that FTX mismanaged customers' funds. The Stock Sold by Binance FTX's problems began in July 2021, when Binance, one of its first investors, sold its stake in a competing business for $2.1 billion in FTT - tokens issued by FTX. At that time, this step seemed logical: Bankman-Fried and Zhao had different views on the approach to regulating cryptocurrencies, which led to a split. FTX's problems surfaced only on November 2, 2022, when a report from CoinDesk showed that billions of dollars worth of FTT tokens were on the balance sheet of Alameda Research (a subsidiary of FTX). This raised questions about how much FTX and Alameda are dependent on FTT, which cannot be easily converted into cash. In addition, the specifics of the relationship between Alameda and FTX remained unclear for a long time. In response, CZ published a sensational message on Twitter: Binance will sell all its assets in FTT. According to him, the intention was to conduct the sale "in a way that minimizes the impact on the market." However, this brought down the FTT rate by almost 90% and provoked massive seizures, since FTX customers were concerned about the security of their crypto assets. On November 7, Bankman-Fried denied rumors of insolvency, writing that "a competitor is trying to attack us with false rumors" and "everything is fine with FTX." Later these tweets were deleted, and then it became clear that the company was trying to get financial help. CZ denied intentionally creating a liquidity crisis. On November 7, he wrote on Twitter: "I spend energy on construction, not wrestling." However, Tim Mangnall, whose Capital Block company advised both Binance and FTX, called it a "cunning" business maneuver that would allow Zhao to "buy one of the largest competitors for less than a dollar." CZ, King of the Crypto Binance has now dropped this deal. The crisis in FTX is likely to strengthen its competitor's position as the world's largest crypto exchange. Binance is already bypassing several of the largest venues combined in terms of trading volume - we are talking about companies such as Coinbase, Kraken, OKX, Bitfinex, Huobi, and FTX. Now crypto exchange will probably have more control over common coins. Similarly, Changpeng Zhao, who has already become one of the most prominent figures in the crypto sphere, will strengthen his influence on issues related to politics and regulation. For the part of the community that believes that cryptocurrency should support decentralization, the merger of the two largest world exchanges will also be a cause for concern. Decentralization means evenly allocating power and eliminating individual points of failure, but falling FTX does not contribute to either. After Binance's rescue plan was first announced, Bitcoin and Ether prices fell by more than 10%, causing the market to lose more than $60 billion. The fall may continue. In addition, the collapse of FTX raises questions about how to protect cryptocurrency owners in the future. One of the CZ proposals is to oblige crypto exchanges to provide transparent "evidence of reserves." In other words, they have enough cash to finance the withdrawal of funds by customers. In a tweet, he promised that Binance would "soon" implement this policy. Coinbase CEO Brian Armstrong expressed sympathy for FTX but also pointed to "risky business practices" and "conflicts of interest" that made the company vulnerable. He also hurried to allay concerns that Coinbase could face a similar liquidity crisis. Nevertheless, this situation is another warning about how risky it is to transfer your entire crypto portfolio to an exchange and how important it is to keep the opportunity to manage assets on your own. Can I Get My Money Back From FTX and How? Bitget Exchange created a $5 million Builders Fund to help customers who were affected by theFTX bankruptcy. Those users can apply for financial assistance. However, only FTX-affiliated partners, customers with assets worth more than $50 000, and a monthly turnover of more than $10 million will be able to do this. Later, this fund increased to $300 million, but the requirements for obtaining help are still quite high: it was first created to cover the losses of strong and large traders, to minimize reputation damage, and to drag FTX customers to the Bitget exchange. If you have small deposits, up to $50,000, most likely you have no chance of returning your funds, unfortunately. What Conclusions Can be Drawn From the Bankruptcy of FTX?  The fall of such a large exchange shook the crypto space. FTX and Alameda faced the prospect of bankruptcy with $8 billion in debt, while recipients of FTX Venture investments, such as Solana , are experiencing a huge capital outflow. Never keep large amounts of money on the stock exchange. If you use the investment products of the exchange, distribute the capital so that it is divided into small parts in different exchanges. Keep your assets in cold wallets. Whatever that amount is. Even if you have $100 laying in your account on an exchange, transfer them to a cold wallet . This is not about the amount of money, but about the right capital management skills.
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The Future of Money and the Role of Crypto in It
The Future of Money and the Role of Crypto in It

The Future of Money and the Role of Crypto in It

John Martin 8 min read
Money has changed human society, allowing commercial transactions to take place even between geographical regions at a considerable distance from each other. It makes it possible to move wealth and resources in space and time. For much of human history, however, it has also been the subject of greed and waste. Now money awaits a change that can transform banking, finance, and even the structure of society. Most notably, the era of physical, or cash, money is coming to an end even in low- and middle-income countries; the era of digital currencies is coming. In this text, we’ll discuss different financial future predictions, the role of crypto, and its future. Cryptocurrencies vs Fiat Money Many financiers note that cryptocurrencies can set new financial models — more improved, simplified, and modern. Among the advantages of cryptocurrencies, they note anonymity, speed, lower costs of transactions, cross-border transfers that are not limited by barriers, full ownership of assets, lack of regulation by the state, and payment of taxes. Fiat currency is distinguished by: the mandatory presence of an issue center, which has exclusive rights to issue money (for the dollar it is the Federal Reserve Service); unconditional inflation: the money supply increases and its purchasing power decreases over a long period; the constant increase in operating costs associated with the maintenance of large amounts of cash; increased transaction costs. Cryptocurrencies on blockchain technologies, such as Bitcoin, are fundamentally different: the absence of an emission center: it is programmatically limited when launching cryptocurrency (in particular, there cannot be more than 21 million bitcoins); belonging to a person: cryptocurrency belongs to a specific cryptocurrency account or wallet , while the purchasing properties of the banknote can be changed by the issuer, and the paper money itself is generally withdrawn or prohibited for circulation; reverse inflation model: the more often cryptocurrency is used, the higher its value, as the demand for coins increases while maintaining the volume of currency; lower transaction costs: according to some estimates for Visa, this is $2, and for Bitcoin — $0.35 in medium-term operations.  These differences demonstrate the advantages of cryptocurrencies over fiat money. But for there to be a global transition from centralized to decentralized finance , and for the blockchain to turn from a candidate technology into a new system of work for the world economy, two key conditions must be met. Cryptocurrency should receive the status of a state currency. There are already such precedents: in 2021, in El Salvador , Bitcoin was adopted as a means of payment in the country. Cryptocurrency should begin to conclude interstate trade contracts. The finance industry of the future is at the very beginning of this path. And although the number of transactions over the past few years has noticeably increased, so far cryptocurrency is more of an investment tool with a very weak change function. The real volume of goods and services that are sold and bought for cryptocurrency is still insignificant. We are on the verge of a new era of non-dollar trade. Whether cryptocurrencies can compete for the place of the dollar with other fiat currencies largely depends on large-scale entrepreneurial projects in the field of blockchain. The Problem of Regulating Cryptocurrencies in the World It is very difficult for governments and central banks to regulate digital decentralized systems, which were created to avoid state control and were specifically designed to exclude public authorities and banks from their monetary circulation and confirmation of transactions and rights. It is even more difficult to develop a common approach to cryptocurrencies for countries with different economic and political weights. In the world's largest economies, the assets of traditional banking systems amount to tens of trillions of dollars and significantly exceed the size of the global cryptocurrency market, and in developing countries, the money supply in the national definition is several times or even several tens of times less than the volume of the cryptocurrency market.  Decentralized forms of finance (DeFi) are gaining popularity in developed countries, while peer-to-peer (P2P) platforms are becoming increasingly common in emerging markets. Some central banks see cryptocurrencies as a threat to the financial sovereignty of their countries and risks to traditional banking systems and citizens, including the risks of fraud, theft , and hacking, so they propose a complete ban on them. Other regulators believe that the crypto market is enough to only monitor so that it does not interfere with innovation now, but subsequently apply existing legislation and regulations to this sector of "digital assets." The problem of regulating the crypto market has become a global one, so the coordination of the efforts of regulators to create rules and procedures is beginning to take on global financial management institutions, such as the International Monetary Fund, the Basel Committee on Banking Supervision, the Financial Action Task Force (FATF), the International Organization of the Securities Commission (IOSCO). It is planned that the zone of control of regulators will include operations to exchange traditional fiat currencies for cryptocurrencies, crypto exchanges, intermediaries that provide access to cryptocurrencies and services, as well as any economic entities that accept payments both in traditional currencies and in cryptocurrency.  Payment systems will be standardized and transaction storage and clearing service providers will be certified. Cryptocurrency mining will fall under separate control in several countries, and in others, it will be placed under a ban. CBDC as Transition Before the complete replacement of fiat currencies with cryptocurrencies, the global financial industry will undergo another intermediate stage related to the release and circulation of CBDC, many experts say. CBDC (Central Bank Digital Currency) is the digital currency of central banks. Those currencies are issued centrally and retain all the advantages of the classic fiat model, but they have cheaper transactions, 24-hour access to liquidity for banks, and the possibility of integrating smart contracts into the country's economy. In addition, with the help of this tool, the state retains control over the monetary sphere and can stimulate payment for goods in the national cryptocurrency, increasing its turnover. Since 2017, many countries have been experimenting with CBDC: such cases (in one stage or another — from the pilot to the working project) have been implemented in Thailand, Hong Kong, China, the UAE, Singapore, Canada, Great Britain, France, Cambodia, Uruguay, Russia, El Salvador, and the Bahamas. NFT for a New Level of Financial Confidence Replacing fiat money with cryptocurrency may have another interesting effect — the financial industry reaching a new level of confidence. We can take, as an example, programs based on NFT technologies. When buying NFT, the investor does not just acquire the right to a discount: he can resell it, thereby gaining liquidity. At the same time, one participant in the transaction transfers funds to the other party, as a rule, without any contracts and intermediaries represented by banks. New principles arise — full responsibility for their transactions and the presence of a certain moral component, trust, in contrast to the traditional financial environment, impersonal and mechanized. As a result, the crypto market will gradually fill the established economic culture with new content. Bitcoin Future According to a Chainalysis study, the volume of bitcoins in investors' wallets has increased significantly in recent years, and more interestingly, it has significantly exceeded the volume of coins in traders' "speculative" wallets. About 77% of the "mined" bitcoins (which are not classified as lost) have not changed their current address for five years or longer. According to a Bitstamp survey, 72% of institutional and 73.1% of individual investors plan to increase their investments in crypto assets in the next five years. About 16% of Americans and 10% of Europeans own cryptocurrencies. Among the well-known institutional investors are Grayscale Investments, Square, Microstrategy, Tesla, Meitu, Massmality, etc. Interest in cryptocurrencies is also shown by banks, in particular, Goldman Sachs and Morgan Stanley. Digital coins received special investor attention precisely during the Covid-19 pandemic. In particular, analysts at JP Morgan believe that investors' rejection of gold in favor of Bitcoin during 2021 was associated with an increase in inflationary trends in the world. In such conditions, some even began to call cryptocurrencies a "haven" for investment.  However, it is quite possible that after the drop in the price of Bitcoin by 75% and a three-fold reduction in the capitalization of the crypto asset market, confidence in the safety of this "harbor" will decrease. Conclusion: Is Crypto the Future of Money? In 2018, the capitalization of the cryptocurrency market decreased by more than eight times — to $102 billion. But this did not prevent it from reaching a record $2.9 trillion in November 2021. Therefore, there is no unambiguous answer to the question "what future do cryptocurrencies have?" It all depends on their ability to gain the confidence of settlement participants and investors, effectively performing the functions of money. It is possible that still lies ahead. The cryptocurrency market and ecosystem are dynamically developing, the interest and awareness of individual and institutional investors are growing, and the transparency of issuers and intermediaries is increasing. All this will continue to contribute to the deepening of the market, and a decrease in the manipulability and sensitivity of cryptocurrencies to situational factors and news. In such conditions, over time, the exchange rate fluctuations of cryptocurrencies will decrease. The development of technologies will help solve problems of scalability, the vulnerability of blockchain networks to hacker attacks, irreversibility, and non-environmental transactions. Therefore, probably, the convenience, speed, and security of calculations with cryptocurrencies will continue to gradually improve. Thanks to the formation of the legislative field, comprehensive regulations, and supervision, cryptocurrencies will receive a clear legal status, and market participants will gain the right to legally conduct business and protect their interests. All this will likely contribute to the spread of transactions made using cryptocurrencies, and their share in public savings and investment portfolios will increase. And accordingly, the associated risks will grow.
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Cryptocurrency and the Stock Market: Pros/Cons and What are the Differences Between Them
Cryptocurrency and the Stock Market: Pros/Cons and What are the Differences Between Them

Cryptocurrency and the Stock Market: Pros/Cons and What are the Differences Between Them

John Martin 10 min read
Crypto assets can utilize all investment strategies in the stock market, from dividends to balancing assets between growth and value stocks and IPO analogs:ryptocurrency trading and trading in stock and financial markets at first glance may seem identical. But there are differences in these industries that cannot be ignored since they make their adjustments and can affect the success of trading. In this text, we will try to understand these differences and compare the cryptocurrency and stock markets. With the advent of Bitcoin in 2009, the world first met with digital currency and blockchain technology. Initially, large investors considered cryptocurrencies just a fad. Since then, a lot of time has passed and cryptocurrency markets have grown like yeast. However, this revolutionary technology was not without drama. While some experts expect the cryptocurrency market to be a useful addition to traditional financial markets, others fear that cryptocurrencies may collapse and pull the rest of the market down. One way or another, the impact of digital currencies on financial markets is undeniable. The main purpose of cryptocurrency trading is similar to the purpose of trading traditional stocks: both are used for earnings. Therefore, more and more investors are adding cryptocurrencies to their portfolios. According to a CNBC study, currently, 1 in 10 Americans invests in cryptocurrency. With digital assets, investing becomes easier than ever. High volatility creates greater income potential. And if you add to this the possibility of round-the-clock trading, a high credit shoulder, low fees , and thresholds for transactions, then it will soon become clear why so many novice investors and experienced exchange traders are starting to switch to cryptocurrency. In this article, we will analyze the similarities and differences, as well as the pros and cons of trading in cryptocurrencies and stocks. Is the Purchase of Cryptocurrency Similar to the Purchase of Shares? Yes. After all, buyers exchange funds with sellers of digital assets, and the price of these assets is determined by demand and supply. Transactions are carried out online, and both types of these investments entail certain risks. Cryptocurrencies and stocks behave similarly. If you traded on the stock market or forex, then you will have absolutely no problems with the interface of any cryptocurrency exchange. But it is worth noting, although the fundamental analysis (fundamental analysis is the approach used by investors to determine the internal value of a cryptocurrency...) of a cryptocurrency or token is slightly different from the analysis of shares, the basic trading mechanism, and general technical analytics are almost identical. For example, similar types of orders are available in both markets. Market orders are either bought or sold at the current market price. Limit orders have a set price at which the trader wants to buy or sell the asset. A stop-loss order works on the same principle as a market order: it is carried out only after reaching a certain value of the price. Moreover, intraday stock trading is very similar to spot cryptocurrency trading. In intra-day trading on the stock market, the trader speculates on the securities exchange rate for one trading day. The same short-term trading strategies apply to cryptocurrencies, with the only difference being that cryptocurrency markets never close. Cryptocurrencies apply such day trading strategies as swing trading, range trading, scalping, and arbitration transactions. The cryptocurrency market is characterized by volatility and deep liquidity, but these are the most important conditions for profitable intraday transactions. Main Differences Between Cryptocurrencies and Stocks The growth of the crypto portfolio by more than 1000% in a matter of weeks is not usual in the crypto market, but still, this happens. The ability to generate significant profits in a short time and a low barrier to entry attract more and more investors. The threshold for entering the cryptocurrency market is quite low because you can trade them in tenths and hundredths. However, the higher the potential for substantial earnings, the higher the risk. Cryptocurrency prices (to put it mildly) are not stable, many experts consider cryptocurrency trading a gamble rather than a real investment. Stock markets, by the way, are also volatile, although not so significant. The main differences between cryptocurrencies and stocks are best noticed when considering the following characteristics. Liquidity Liquidity reflects the ability to quickly and freely buy or sell an asset on the market. Crypto markets are inferior to stock markets in this indicator, since stock markets have higher trading volumes, and, as a result, higher liquidity. In the crypto market, there are significantly fewer active traders, respectively, and liquidity is less. But cryptocurrency is different. Bitcoin, for example, is the most liquid digital currency, it is traded by most traders. The low market capitalization of coins, tokens , and small crypto exchanges often creates liquidity problems and makes these assets unfavorable for investment. But when trading shares, similar problems arise. For example, when investing in OTC small stocks or working with brokerage companies with micro capitalization. Possession Buying stock on the stock market makes the investor a shareholder and awards him a share in the company. The shareholder has the right to various privileges, such as capital gains or losses, dividends on profits, as well as the right to vote in solving various issues of the company. However, if the purchase passes through a brokerage company, then technically this means that the broker owns the shares and not the real buyer. Very few investors own shares on their behalf. If you buy cryptocurrency, then you become the sole owner of the purchased coin or token. Usually, cryptocurrencies are traded and stored on exchanges. However, cryptocurrency can also be transferred to a separate electronic device (cold storage), which, as a rule, is safer than an online wallet . And if the secret keys to your wallet are kept safe, then you can not worry about theft . Stock Markets Fluctuate Only During the Trading Day Cryptocurrency markets, in turn, never close and are influenced by other digital assets, events in the crypto space, and changes in world stock markets. Because of this wide range of variables that affect the market around the clock, cryptocurrencies are more volatile compared to stocks. High volatility means less price stability, which can stop corporate investors from investing in cryptocurrencies. It also means that traders have more opportunities to enter and exit trades and make high profits. Non-Stop Trading The work of cryptocurrency exchanges without breaks and weekends gives wide freedom to the trader. If a trader is profiting from short-term speculation, he can plan his time regardless of location, time zone, and schedule, and at any time connect to the market to find interesting transactions. At the same time, it is important to understand what time the bulk of crypto traders of a particular region wakes up and take into account that with the arrival of a large number of new players from a certain region, the price can sharply move in one direction or another. At the same time, the availability of the market 24 hours a day does not indicate that it is necessary to monitor cryptocurrency quotes around the clock High Volatility With the appearance of cryptocurrencies, for the first time in human history, private investors had the opportunity earlier than institutional investors to gain access to a new promising class of assets. Cryptocurrencies are the first market where there is practically no institutional capital, and this, in turn, generates volatility. Volatility creates several factors: private investors have a higher rate of return on capital, the timing of capital placement is shorter, and the competence of participants is lower. Free Cryptocurrency Market Stock markets are regulated by law, and margin requirements are quite strict. Trading derivatives in the cryptocurrency market is much more affordable than margin trading in the stock market. On the leading derivatives exchange, the minimum deposit is only one US dollar. In the stock markets and the memory, they would not hear about such figures. The size of the credit shoulder on leading exchanges of digital assets varies from 2 × up to 100 × (or even more). Pricing In digital assets, the price is formed according to the classic model of the balance of supply and demand, since the amount of a particular currency is limited and, by regulating the number of those coins in circulation, it is possible to form a price. The price in traditional markets consists of many factors: forecasts of analytical agencies, financial indicators of companies, ratings, government regulation, news background, and other dependencies. Crypto exchanges are often accused of inflating volumes to get a higher rating and attract more traders. So far, there are parallel ratings of exchanges and trade volumes showing very different results, but soon indexes will begin to form the current leaders of the traditional market, and they can be more trusted. Protection and Insurance Due to low volatility, investment portfolio insurance is practiced in traditional markets. This financial instrument benefits both insurers and investors, as it helps protect investments in force majeure. This is not practiced in cryptocurrency markets, since movements can be so strong that insurers simply do not have enough funds to cover losses if chaos begins in the market. The insurance market in the field of digital currencies is just beginning to form, and derivatives are already appearing, such as options for Bitcoin and Ethereum . If we talk about the DeFi strategy, then insurance projects appear that take on the function of an insurance agent, that is, they will reimburse funds in the event of unplanned losses, such as protocol hacks, and loss of assets by a smart contract that invests them in the interests of the user. Diversification The goal of diversification is to hold assets that manifest themselves differently in different markets. Stocks have fewer options for diversification, because all stock markets, as a rule, are influenced by the global economy. Stocks and bonds are affected by inflation and monetary and economic policies. The low dependence of Bitcoin and Ethereum on securities and stock market assets makes investing in cryptocurrency an attractive portfolio diversification strategy. Cryptocurrency prices largely depend on the prices of the largest coins, for example, BTC and ETH . Stocks and bonds depend on a variety of economic factors, individual indicators of companies and sectors, as well as on demand and supply within the corresponding indices, industries, and services. Cryptocurrencies or Stocks: What is Better for Short-Term Investments? Cryptocurrency is a promising short-term investment with the potential for both rapid high profits and equally rapid losses. The average yield on the stock market is about 10% per year, but the yield on Bitcoin, which became the most profitable asset of the decade, is 230%. Keep in mind that digital assets can grow greatly in a few hours or collapse in a matter of minutes, as happens when executing the "pump and reset" scheme. Not all transactions bring stable and guaranteed profit. However, the volatile state of cryptocurrency markets makes them an ideal tool for traders who want to make quick money. Cryptocurrencies or Stocks: What is Best for Long-Term Investments? The stability of stock markets attracts many long-term investors. To illustrate traditional market timeframes, the S&P 500 has been watching the performance of the five hundred largest US companies for 46 years, 10 of which were unprofitable according to the index . However, in the long run, portfolios still grew. In addition to the constant risk associated with high volatility, crypto markets also face the influence of authorities, slow implementation in the rest of the world, and cybersecurity threats. Despite these risks, the cryptocurrency market can become a useful tool if you study how it works and act carefully. Regardless of whether you invest in cryptocurrency or stocks, the right way is to play for the long term. If you are not an intraday trader, then it is better to avoid speculation on short-term volatility. In Conclusion When choosing an asset for trading, it is worth building on your experience, trading strategy, and the amount you are going to invest. Stocks are better suited for those looking for predictable, limited investment growth in the long run in the face of low volatility. Cryptocurrencies are better suited for those who want to diversify their portfolio and insure it against inflation and factors that negatively affect financial markets.
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Web3 Trends and Top Projects
Web3 Trends and Top Projects

Web3 Trends and Top Projects

John Martin 10 min read
The Web3 industry is only emerging, but developers are actively working on its mass implementation. Web3 is the next stage in the development of the Internet, which will be controlled by ordinary users and creators. Web3 vs Web2 Unlike Web 2.0, the third version of the Web is focused on improving scalability, security, and decentralization. Interaction between Web 3.0 and metaverse occurs using NFT. Web 3.0 is a group of decentralized applications that can "collaborate" with virtual worlds. Examples include Decentraland Mana and the Land token. Web 3.0 is not hosted on the servers of private users or even Web3 companies, but in separate places. Storage cells are computers, laptops, and other user equipment. Each time information is entered, it is copied to all nodes. As a result, data manipulation is eliminated. Benefits of Web 3.0: lack of central regulation; less censorship ; the ability to express one's thoughts; monetization for presence on the Internet, etc. To switch to Web 3, you need to understand cryptocurrency services, start crypto keys, deliver DApps applications, etc. Web 3.0 is a new concept of the Internet, which is based on decentralization and the absence of a single supervisory authority. It is the next stage after versions 1.0 and 2.0, which opens up more opportunities from the data control position. Web 3.0 crypto meets the declared criteria and is the next step in the hierarchy of digital assets. In this text, we will talk about the current trends in this industry and consider some interesting projects. Web 3.0 Trends Creative DAO The Internet and the simplicity of global communication have provided creative actors with development opportunities. Web3 technologies are also in their interest. In particular, the blockchain provides security, peer-to-peer (P2P) payments, and confirmed ownership. DAO (Decentralized Autonomous Organization) is a type of organizational structure built based on a blockchain. Such an organization unites like-minded people who are working on the long-term success of a project or creator. Within the DAO, participants who own tokens usually have the right to vote. In 2022, creative projects and creative personalities will be surrounded by more and more DAO, which will offer them support and feedback from community members. Stabilizing the NFT Industry Over the past two years, the NFT world has experienced ups and downs. Last year, non-fungible tokens faced an incredible level of growth and caused a great stir around themselves. In 2021, the NFT marketplace OpenSea grew to an incredible level, and the tokens themselves began to appear in pop culture and social networks. However, this year sales have fallen, and some are wondering if the NFT bubble will burst. The downtrend is largely worrying for those industry participants who are looking to make a quick profit. Loyal fans still see value in these tokens. As speculation around technology begins to fade, the industry will enter a new stage in which NFTs will be applied in many areas of our lives. The mechanism of tokens (for example, in the format of patents, loyalty rewards, and in-game assets) will encourage users to own them, and not trade them. Cooperation Between DeFi Protocols Hacker attacks, destabilization, and other incidents in the Web3 sphere will continue to occur both in 2022 and, probably, in 2023. For example, in March there was a loud fall in UST and Luna tokens, due to which investors lost $60 billion. Cryptosphere leaders will unite to find solutions to such incidents and ways to prevent them in the future. In 2022, even "competitors" are likely to cooperate within the framework of a single goal - to build a better future for the internet and a better version of Web3. And as these incidents continue to occur, more DeFi protocols will unite in unstable situations. TOP-5 Web3 Cryptocurrencies by Capitalization Polkadot ( DOT ) Open source multi-purpose protocol. Simplifies the transfer of data and different types of assets. Designed to connect public and private chains, accelerates the exchange of information and transactions.  Created by the Web3 Foundation. The founders are Gavin Wood, Robert Habermeier, and P. Chaban. The network is flexible and adaptive and has a convenient management system and high security. You can customize and adapt the monitoring process to your needs and conditions. The total number of tokens is 1 billion, and initially, this number was 10 million. The network used NPoS mechanisms focused on the selection of validators/nominators for security. The purchase of a token is available on many exchanges, including OKEx, Huobi, and others. The DOT token has a rate of $7.75 and is in 11th place by capitalization among all cryptocurrencies. At the time of writing, the coin is falling in price due to the characteristic bearish trend, which makes the offer attractive to investors. The project is developing and raising the course is a matter of time. Chainlink ( LINK ) A decentralized network designed to link smart contracts to real-world information. Created by S. Nazarov and S. Ellis. The ICO was held in the fall of 2017, during which it was possible to raise $32 million. At the same time, LINK is a cryptocurrency native to Chainlink, used to pay operators. The goal of creating the platform is to link blockchain smart contracts with the rest of the universe. Chainlink oracles (LINK) connect to the Ethereum network, provide external information and start the execution of smart contracts. Network members are rewarded for providing access to API information or other external data. Cryptocurrency rate of Web 3.0 LINK 6.81 $. On January 10, 2022, the price was $27.57, after which there was a gradual decrease. But this does not prevent the token from being in the lead and taking 22nd place in the general list by capitalization. Filecoin ( FIL ) A decentralized Web 3 system designed to store the most important information. The history of the project began in 2017, when already at the first ICO managed to raise $205 million. Initially, the launch was planned for 2019, but it had to be postponed to October 2020. Filecoin (FIL) is created by experienced computer scientist H. Benet, known for the InterPlanetary File System. The essence of the project is decentralized data storage and the application of its security system. It simplifies access to information and complicates censorship. In the Filecoin (FIL) system, users themselves store data and receive a reward for this. The network is based on PoR and PoS. System nodes compete for the transmission of information to customers. Subsequently, a reward is issued from the FIL commission. At the time of the review, the value of Filecoin (FIL) is $5.88, the coin is on the 38th capitalization place regarding all digital assets and in third place among cryptocurrencies on Web 3.0. It has great prospects for development. Theta Network ( THETA ) The blockchain-based network was created for video streaming. Launched in March 2019, it works in the form of a decentralized network. The creators are the co-founder of Twitch — J. Kan, and YouTube — S. Chen. Web 3.0 platform has its own digital asset Theta, performing management tasks. The uniqueness of the project is the decentralization of streaming video. This is a streaming platform that rewards users and gives additional bandwidth. With the help of the program, it is possible to solve problems by showing videos in different parts of the planet and reducing costs. At the same time, quality is at a high level. The Theta token is used to manage the platform. At the moment, its price is $1.16, and the total number of coins in circulation is 1 billion. With a capitalization of $1.15 billion, the token is in the 4th place among Web 3 projects and in the 42nd position among all cryptocurrencies. An additional advantage is the openness of the source code, which allows you to introduce modern innovations and make edits. Helium ( HNT ) Decentralized blockchain network for IoT devices, launched in the summer of 2019. It allows low-consumption wireless devices to share information and send data over the Internet. The role of nodes is performed by an access point providing a combination of a gateway and a mining device. The goal of creating Helium is to improve the communication capabilities of the Internet of Things. And if in 2013, when the company was created, this direction was in its infancy, today the situation has changed. The system is interesting to device owners and users who work with IoT. At the same time, the basis is PoC and a new consensus algorithm. HNT is a system token that is available without restrictions. But there is a monthly limit - no more than 5 million coins can be issued monthly. At the same time, the mining time is from 30 to 60 minutes necessary to unlock the award. The essence of the project is simple: first, the owners of the nodes accumulate NHT to create networks of network infrastructure and then resell the asset. As of June 2022, there are 119.5 million such coins, the exchange rate is $9.07. Taking into account the capitalization of 1.076 billion tokens, HNT ranks fifth in Web 3.0 projects and 44th among all cryptocurrencies. Lesser Known Web3 Projects In addition to the projects discussed above, the following representatives of Web 3 deserve attention: Siacoin ( SC ) is a unique coin on Web 3. Provides information storage in the Dapp cloud. Sia cloud storage costs less than competitors. The token price is 0.004 dollars, the capitalization is 215 million dollars, and the number of coins is 51 billion. Flux (Flux) is a decentralized platform on Web 3.0, offering unique products at the Amazon Web Service level. The use of Flux allows one to operate, place and maintain servers and also to start Web3 applications. Ocean Protocol . A convenient tool for creating Web 3.0 applications. It is aimed at decentralizing the exchange of information and gaining access to the network. It helps you buy/sell data, and manage the community financing process. The value of the token is $0.22, and the capitalization is 44 million. Audius ( AUDIO ) . An interesting project that will appeal to music lovers. This is a streaming platform whose goal is to reduce contact with the record company. For staking cryptocurrency, tokens and fan votes are issued. The presence of coins provides access to control, additional functions, increased security, etc. Radicle ( RAD ) . Decentralized project on Web 3.0, designed to sponsor different projects and participate in management. The token exchange rate is $1.81, and the capitalization - is $55.6 million. In addition to the above, other tokens can be named, including Casper ( CSPR ), NuCypher ( NU ), Chromia ( CHR ), and others. Web 3.0 tokens can be bought through large exchanges. To do this, you need to register, replenish your (for example) USDT account, choose a suitable pair and go to the cryptocurrency purchase section.
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