Korea’s Crypto Exchanges Pledge Market Cleanup
“It was a fantastic year in 2017.”
As stated by Junhaeng Lee, co-founder and CEO of Seoul-based crypto platform Gopax, that’s one simple but accurate summary of the last year for cryptocurrency exchanges in South Korea. Indeed, since earlier last year, crypto trading volume in the country has surged to a point where exchanges from South Korea have topped their global peers in terms of 24-hour trading volume.
Speaking at the Deconomy conference in Seoul on Tuesday, Lee credited the speculative mindset of Korean investors as the key driver. As he put it, when price surged, investors simply flocked in, enticed by big gains.cl
“South Korea market is very, very speculative,” he told CoinDesk.
Yet, that boom has proved transient.
Amid tighter regulatory measures on initial coin offerings (ICOs) and increased scrutiny from financial watchdogs, the domestic cryptocurrency market has seen what appears to be its largest-ever correction. While the total capitalization of all cryptos have seen its all-time high at a whopping $800 billion near the end of last year, it plunged to just below $300 billion within three months in 2018.
Still at this week’s event, one of the largest yet held in the country, those assembled sought to argue that the development was best seen as a “healthy correction,” with representatives from Korean exchanges – including Gopax, Coinone and Korbit – showing optimism during onstage sessions that saw them discuss how to ensure a healthier market.
However, most notably, each exchange said that it will take steps to better their efforts in standardizing practices.
Korbit CEO Tony Lyu told the audience:
“We need to create a healthy market first. If exchanges can’t do that on our own, we will have to turn to the government.”
Still, there was also a willingness by those onstage to support some of the more highly criticized practices in the industry, including the issuing of custom cryptocurrencies by startups for fundraising.
As reported by CoinDesk, South Korea’s regulator Financial Services Commission issued a guideline on Sept. 29 last year to prohibit all forms of ICO domestically. Yet, fundraisers from both Korea and abroad appear not to be not deterred in soliciting Korean investors.
“Many ICOs are still looking for interests in South Korea – with operators from the country but registration in overseas – and wishing to list their tokens in Korean exchanges,” Gopax’s Lee remarked.
Adding to a broader dynamics, Myunghun Cha, CEO of Coinone, said during the panel that the firm has come frequently across requests where projects pitched in with payment offer for the exchange to list their tokens.
In light of that, exchange operators in the country are doubling down on their efforts in reining this speculation drive through more robust vetting methods.
In explaining that, Lee said his firm has established a token review committee with lawyers to have project teams come to its office to verify their technological background and whether the platform design is even feasible.
“There are just too many projects every day and we have to be more conservative on ICOs as investors cannot have enough information so we need to do a lot of filtering for them,” Cha said.
Echoing that, Lyu voiced an even higher level of concern moving forward on listing tokens from ICOs, which will largely be in line with the exchange’s existing offering that limits to trading pairs to more mainstream cryptos such as bitcoin, ether and ripple.
Aside from a more robust vetting system to screen tokens or a more conservative strategy, Korbit refrains from listing ICO tokens, the mandate of know-your-customer verification process is another area that exchanges will see further self-compliance with the regulator.
As reported before, starting from February this year, the FSC has formally banned domestic banks in South Korea from offering virtual accounts for exchanges in a bid to mandate stricter user ID verification process.
In speaking to CoinDesk, Cha said so far Coinone has seen a roughly 20 to 30 percent of its users that have completed the mandate since the exchange currently can only proceed with one bank in South Korea.
Meanwhile, the Shinhan bank-invested Gopax told CoinDesk it has had all users on the platform to complete the process in bid to fully comply with the regulation imposed by the FSC.
To that effort, Lyu from Korbit argues that a better collaboration with financial institutions is imperative, otherwise the industry may see further government weighing-in.
Panel image via CoinDesk
Written by CoinDesk.com
Ethereum ASICs Are Here: What It Means and What’s Next
ASIC-resistant no more?
That’s the question circulating Tuesday in the wake of news that Bitmain, the China-based maker of hardware specialized for cryptocurrency software, had developed a new “ASIC” mining chip designed specifically to process ethereum transactions and claim the protocol’s rewards.
Bitmain confirmed the release of its Antminer E3 chips, which will retail for $800, in a tweet that broke what had been weeks of speculation that it would soon launch such a product, one that ran counter to statements from company officials to CoinDesk even hours before.
Still, for ethereum’s developers and users, the news wasn’t exactly a surprise – it had long been theorized, even in creator Vitalik Buterin’s earliest blog posts, that no algorithm for managing mining rewards would remain immune to ASICs forever.
Over time, Buterin’s argument was that innovations would prevail, try as developers might to keep their code optimized for general-purpose computers.
Yet, ethereum developers have been quietly building defenses for this future, long promoting design choices intended to protect the blockchain against hardware meant to consolidate rewards in the hands of companies or individuals capable of operating at scale.
As such, some have even gone so far as to propose further changes following the day’s news.
Such a step, a radical reworking of the software to render the new hardware unusable, might seem extreme if that weren’t becoming the norm among cryptocurrencies. Already, monero and siacoin, two smaller cryptocurrencies, are taking steps to propose a change to its software that would effectively block efforts by Bitmain to grow its business there.
As for the impact on ethereum, however, much remains unclear at the moment.
For one, there are doubts in the ethereum community that Bitmain’s mining chip is capable of significant performance increases, ones that would, say, be so pronounced they would inspire the widespread adoption of the hardware in the way bitcoin ASICs replaced hobby miners.
Further, there’s the ethereum technical roadmap, which already includes a planned shift away from proof-of-work, the system that today enables mining at all.
Indeed, Buterin has remained silent on the launch, though in his past remarks, he’s mostly focused on the idea that the impact of such an innovation is likely to be short-lived.
Speaking in a developer chat in February, Buterin wrote:
“I’m not convinced it’s worth expending resources caring too much, except to push faster on Casper.”
Poisoning the well
Stepping back, it’s important to understand ethereum’s mining algorithm and the platform’s historical attitudes toward the practice of mining – a mechanism it has always aimed to eradicate entirely.
Prior to the launch of the platform, a method for staving off the use of mining hardware even made it into the ethereum white paper, in which developers were encouraged to seek to analyze ASICs so as to render their ability to more quickly capture protocol rewards moot.
“Engineers can analyze existing ASICs, determine what their optimizations are, and dump transactions into the blockchain that such optimizations simply do not work with,” Buterin wrote.
However, due to security concerns, the initial methods described were spiked. Instead, developers implemented a proof-of-work algorithm similar to the one used in bitcoin.
Named ethash, the algorithm differs from bitcoin’s, though, in that rather than being suited for computationally intensive hardware like ASICs, it requires a lot of memory. This means that regardless of whether its mined on an ASIC or a GPU, both devices are necessarily encumbered by the storage requirements.
This definition is important, as it’s not clear whether Bitmain’s E3 ASIC has broken this fundamental aspect of ethash.
Speaking to CoinDesk, developer Nick Johnson said the ASIC doesn’t seem to have achieved any improvements that would qualify it as having achieved a performance boost much higher than the GPU cards used today.
“It looks like they’re basically just making a whole pile of special-purpose GPUs with a huge amount of memory in a case,” he told CoinDesk.
Still, given the stakes of the shift, there are potentially more aggressive methods to pursue, the most obvious of which would be a change in the ethereum software to block Bitmain’s miners.
Developer sentiment concerning such a change has been heated, if inconclusive, spurred by long-held fears among developers about the profit-seeking behaviors of miners.
In a discussion on Github, a number of potential methods for blocking Bitmain’s ASICs have surfaced, ones which in the coming days are likely to calcify into a formal strategy that could help keep ethereum open to smaller miners and hobbyists.
As one user wrote on Github, citing the centralization of ethereum: “If a hard fork can prevent them from doing so, at least until [proof-of-stake] becomes reality, then my vote is in favor of the hard fork. Brick’em.”
As the comment provides evidence, even with an ethereum protocol change coming soon to potentially abolish mining, a vocal majority of developers would also support a fork that seeks to keep barriers to entry for mining low.
That’s not to say there aren’t those who see the matter differently. Speaking in a blog post, Cornell researcher and ethereum enthusiast Phil Daian warned that efforts to block Bitmain’s participation is akin to “censorship.”
Indeed, this mirrors past counterarguments that large-scale mining is a kind of “co-opetition” that, given its entrepreneurial nature, should be encouraged for the security it provides blockchains, even if it is at odds with the democratized access desired by developers.
Others aren’t as convinced. Indeed, some extreme proposals for preventing ASICs have surfaced, including the possibility ethereum could go so far as to mix multiple algorithms, though these have been largely dismissed as ill-conceived.
One thing’s for sure, however, tensions are high, even if formal action – or indeed even the basic facts of the situation – are still coming into focus.
According to the Bitmain site, the ethereum ASIC mines at 180 million hashes per second – less than conventional GPU miners. However, some ethereum users feel the numbers are flawed, writing on Github that the numbers have been fabricated.
Still, much won’t be known until the units ship.
Said one user:
“Let’s keep the raw paranoia based on no actual numbers and magic under control.”
Ethereum token on circuit board image via Shutterstock
Written by CoinDesk.com
Australian Regulations for Cryptocurrency Exchanges Introduced
Australia Introduces AML/CTF Requirements for Cryptocurrency Exchanges
Australia’s new regulative apparatus pertaining to cryptocurrencies has formally been adopted as law, mandating that digital currency exchange businesses comply with the country’s AML/CTF requirements.
Cryptocurrency exchanges must now register and report to the Australian Transaction Reports and Analysis Centre (AUSTRAC). AUSTRAC has issued a document outlining the primary obligations of digital currency exchanges under the new guidelines.
In addition to “adopting and maintaining an AML/CTF program to identify, mitigate and manage money laundering and terrorism financing risks,” Australian virtual currency exchanges must “identify” and “verify” the “identities of their customers,” keep “certain records for seven years,” and report “suspicious matters” and “transactions involving physical currency of $10,000 or more” to AUSTRAC.
Transitional Registration Arrangements in Place for Existing Exchanges
AUSTRAC states that “A ‘policy principles’ period of six months will be in place from 3 April 2018” – during which “the AUSTRAC CEO can only take enforcement action if a DCE business fails to take ‘reasonable steps’ to comply.”
The six month period will also see “Transitional registration arrangements” made available to “existing businesses to allow them to continue providing services while their registration application being considered.” Existing digital currency exchange businesses will need to register for the transitional registration arrangements by May 14th. AUSTRAC warns that the unregistered provision of digital currency exchange services will suffer “criminal offense and civil penalty consequences.”
Last week, the Australian Taxation Office (ATO) announced that it is seeking public consultation from citizens regarding how the ATO should “approach specific tax events.” The ATO, which has been drafting legislation for the taxation of cryptocurrencies, stated that it has “launched a community consultation to help us understand practical issues experienced when complying with cryptocurrency tax obligations.”
Written by Bitcoin.com
Cryptocurrency Hedge Funds Experience Poor Performance and Shutterings
At Least 9 Cryptocurrency Hedge Funds Have Already Shut This Year
Reports are indicating that cryptocurrency hedge funds have experienced a significant reduction in demand for exposure – with many funds posting losses for 2018 so far, and others closing their doors entirely.
Among those to cease operations, are Crowd Crypto Fund and Alpha Protocol – with Alpha Protocol recently publishing a message informing investors, stating, “Considering the potential regulatory and market risks, Alpha Protocol has decided that the best approach is to refund the private sale contributors.”
In addition to the closures, several industry players have reneged on previous plans – with Sequoia and Andreessen Horowitz-backed Polychain Capital deciding against conducting a Canadian initial public offering in January. Mike Novogratz also opting against launching a cryptocurrency fund in December, instead choosing to work on a merchant bank focused on crypto-related ventures.
Crypto Funds Produce Losses Over 20% in 2018 in Across January and February
According to Eurekahedge’s “Crypto-Currency Hedge Fund Index,” the average performance of crypto hedge funds in 2018 has been a loss of 23.31% as of March, with February alone producing an average loss of 18.75%.
Kyle Samani, the co-founder of Texas-based hedge fund Multicoin Capital, recently told Bloomberg that “New capital has slowed, even for a higher-profile fund like ours.” Multicoin’s fund launched in August 2017, and currently manages approximately $50 million in assets.
2017 Witnessed an Explosion in the Number of Cryptocurrency Hedge Funds
The speculative frenzy surrounding virtual currencies that pervaded throughout 2017 resulted in an explosion in the number of new cryptocurrency hedge funds last year.
According to research published by Autonomous Research LLP, 167 new crypto funds launched in 2017. This comprised a huge spike in the number of crypto hedge funds, with 19 having launched in 2016, 7 in 2015, 10 in 2014, and 2 in 2013. Thus far, 2018 has seen 20 new crypto funds launch.
Lex Sokolin, Autonomous Research LLP’s global director of fintech strategy, has predicted that up to 10 percent of cryptocurrency funds may cease operations by 2019.