CryptoAM: Libra, Hong Kong & Tezos

Happy Tuesday folks! Bitcoin is up, Libra is out and things are rolling.

Three things you need to know:

One: Facebook officially announces its crypto plans

Image result for facebook christmas

Christmas officially arrived early today
as Facebook unveiled the whitepaper for its Libra cryptocurrency. There’s a whole lot to unpack here, so we’ve compiled the best takes we’ve seen so far:

A step-by-step breakdown of the whitepaper:

From the Head of Libra and Calibra, David Marcus:

From Anthony Sassano who is heavily involved in the Ethereum ecosystem:

Criticism from the French Finance Minister:

We’re going to unpack this in a deeper dive for Friday’s edition. In the meantime here’s a question that’s on my mind:

To use the Calibra wallet users will need to be verified via government ID. Given there’s 1 billion people who lack a formal ID, does this significantly impact Facebook’s ability to bank the unbanked with Libra?

Two: Why Hong Kong is important for crypto

Image result for hong kong protests

In case you’ve been living under a rock, there are big things happening in Hong Kong. Democratic protests have seen close to 2 out of 7 of the population out on the streets marching in protest of the city’s government.

99% percentage of the population (aged 15-64) also hold an Octopus card, which can be used to make payments for public transport and at a range of retailers in the city. With such high rates of use, this recent image seemed slightly strange:

Privacy isn’t just a buzzword,
especially when there are real world consequences that can endanger people’s lives. As first reported by Quartz Hong Kong’s Octopus cards can and have been used to identify people involved in crimes. This time however people fear being charged for simply being involved in the protests, which is something that has happened in the past.

Why it matters: The world is heading towards a cashless society, with apps like WeChat and AliPay already being used by billions of people. But this also comes with risks, especially when these apps can be monitored by authoritarian governments. Right now the Hong Kong protestors are using cash to mitigate these risks. There is a unique opportunity for crypto to play this role for future events like this. Whether we end up there is another story however - let’s see how Facebook’s Libra plays out :)

Bonus: Bitcoin volumes in Hong Kong have increased and are trading at a premium compared to other markets. You can make an argument that this is either a) an example of Bitcoin being a safe haven asset in times of crisis or b) merely a result of the increased BTC price worldwide.

Three: Tezos faces upcoming hard fork

Image result for tezos hardfork

Tezos, a top 20 crypto with a market cap of $844 million is staring down a hard fork.

OCamlPro, once a partner of the Tezos foundation and heavily involved in the development of its smart contracts, has announced that it will hard fork the blockchain with the assistance of Starchain Capital. The new fork is to be named the Dune Protocol and is scheduled for September 2019.

Context: Anyone can perform a hard fork of a public blockchain as the source code is all open source. A hard fork changes the fundamental characteristics of a blockchain’s protocol - such as changing the block size or the rewards for block miners. At a specified block number the blockchain splits into two with the original protocol on one side and the new protocol on the other. The community then decides which blockchain it would like to support (see here for a full explanation).

OCamlPro isn’t just some engineering firm. It helped develop and continues to maintain Liquidity, the smart contract language for Tezos as well as TZ Scan, the Tezos’ block explorer. Starchain Capital claims (unverified) that OCamlPro was responsible for 90% of the Tezos code and tools.

Tezos refuted the majority of these claims in a blog post yesterday:

“They did not create OCaml, Fabrice was not the ‘teacher’ of Tezos co-founder Arthur Breitman, and the main Tezos engineers who were originally at OCamlPro are now working at Nomadic Labs, not OCamlPro.”

The reason for the split:

  • OCamlPro wasn’t fully open sourcing its software, which was a condition for being funded by the Tezos Foundation. The Foundation threatened not to renew funding unless this open source criteria was met.

  • Negotiations between the two parties broke down and an agreement couldn’t be reached. The two sides have vastly different views on this situation, with OCamlPro and Starchain’s perspective found here while the Tezos Foundation released a lengthy refute here.

Why it matters: Hard forks can be a messy process and divide communities. The Bitcoin Cash split from Bitcoin in 2017 or the recent Bitcoin SV split from Bitcoin Cash are both testament to this.

The Tezos community is one of the most active and engaged communities in the crypto space. Tezos is no stranger to governance issues, but looked to have turned a corner recently after the successful implementation of its Athens A proposal. It seems as though this recent development is a nuisance, and not a long term threat — but for the traders out there it may be an interesting way to scale into a position if the short term price moves down.

Also in the news:

Market Outlook:

Quick Take

Direction: BTC price was driven up heavily over the last few days as predicted, and the bull market continues to show strength. We flipped 9000 resistance into support and are now trading around ~9100. I do not believe there is much resistance or selling pressure for Bitcoin above 10,000, and once we break the 10k level I believe it’s likely volatility significant increases.

I’m looking for continued holding of the 9000-9100 zone, but I’m currently not trading these levels. Rather, I’m waiting for confirmation we won’t break down from here (>9600) or buying back in sub 8900.

Key Support:  9000, 8950

Key Resistance: 9200, 9600

What I’m thinking today:

The Emergence of Cryptoeconomic Primitives

An old one, but a goody considering the re-emergence of ICO’s as IEOs. In a bull market things tend to get frothy, and one way to avoid investing mistakes is to understand what you’re investing in…

Cryptoeconomics: the combination of cryptography and economics to create robust decentralized P2P networks. Cryptography is used to prove things that happened in the past, and economic incentives are used to encourage desired properties to hold into the future. Code and economics are intrinsically interlinked.”

A Cryptoeconomic Primitive should be a self-sustaining system, and its intrinsic token must be a necessary element of that system. In other words, it shouldn’t require anything other than itself to function and the removal of the token would cause it to fail or work less effectively than the system with a token.”

Some common functions that tokens can provide in a P2P network include governance, financial inventive to keep networks secure, rewards for curation of information, efficient allocation of physical objects or infrastructure, maintaining the value of a stablecoin, etc.

Protocols with solid primitives will likely be adopted and adapted by other projects. With a projects attempting to use tokenized economies for nearly everything now a days, it takes effort to understand the true potential of these new systems, especially when some of these projects have multiple tokens all working together to create a complex ecosystem. Some tokens can be written off immediately, others are flawed in more shaded way. Either way, it is worth doing your due diligence to understand to the best of your ability the legitimate use cases of tokens.

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Nothing written in CryptoAM is legal or investment advice and should not be taken as such. CryptoAM does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.