CryptoAM: Satoshi's Demands, Tokenized Energy, and BNB

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Happy Friday everyone! The next time you open this newsletter, Qubic will have been revealed and EOS will have launched. EOS price is relatively stable, and IOTA has pumped pretty hard. I’m keeping an eye on both through the weekend.


3 things you need to know:

One: Satoshi was a weird dude. According to Laszlo Hanyecz, an early Bitcoin developer, Satoshi Nakamoto would send odd, often demanding requests. Hanyecz had a day job and did not want the onus of having to fix issues with Bitcoin’s code.

  • “He or she or whoever it was never told me anything personal. I asked a few questions, but he always dodged them. Those questions never got answered.

  • My thoughts: I respect Satoshi for not dumping his bags. He has $7.4 Billion worth of Bitcoin. I mean if anyone deserves to cash out, it’s him. Still, if even one bitcoin moved out of his wallet it would likely mean bad things for the price of Bitcoin. Then again, Charlie Lee dumped all his Litecoin at the all time high.

  • Read more…

Two: Catalan government plans to tokenize energy. The government of Catalonia is planning on creating an Ethereum based platform for energy trading. The ION token will be distributed to consumers via airdrop instead of sold through an ICO. The goal is to let consumers sell back their excess energy to the grid.

  • My take: Usually companies are the ones to try and tokenize things! It’s not often that government itself attempts to tokenize an asset. Maybe this is the beginning of a trend that will see upstart governments using blockchain to bootstrap power. I’m no expert on Spanish law, but from what I can ascertain, selling back energy isn’t exactly legal.

Three: Binance labs launches a $1B social impact fund for blockchain projects. Outside of just being an exchange, Binance has quickly become a major player in the cryptocurrency space. They are working diligently to build an entire ecosystem around finance that is self-supporting and self sustained.

  • “Ella Zhang announced that Binance will set up a one-billion-dollar Community Influence Fund and another Binance Ecosystem Fund with 20 future partners. Members of the Binance Ecosystem Fund will be given priority in recommending projects to Binance Labs. All investments will be made in Binance Coin, BNB.”

  • Some thoughts: Binance has made it clear that they are going to prop up the price of BNB by giving it many opportunities to have “value”. One can think of BNB as a supercharged rewards points for the Binance ecosystem, so every step they take towards building it out should give BNB a boost.

  • More thoughts: I normally don’t buy the idea that tokens derive value from having purchasing power in an closed system….but Binance has built such a powerful brand that in this case I believe it holds true. Disclosure: I hold BNB.

  • One last shill: Quick maths tell me that BNB is the least volatile crypto over the past 4 months (even compared to BTC) and has delivered positive return. When looking to flee alts, most people go to BTC (because it’s less volatile). Based on historical volatility and BNB’s return…I might start selling alts into BNB when I sense weakness.

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What I’m reading today:

The Meaning of Decentralization

Vitalik Buterin argues that there are three core types of decentralization

  • "Architectural (de)centralization — how many physical computers is a system made up of? How many of those computers can it tolerate breaking down at any single time?"

  • "Political (de)centralization — how many individuals or organizationsultimately control the computers that the system is made up of?"

  • "Logical (de)centralization— does the interface and data structuresthat the system presents and maintains look more like a single monolithic object, or an amorphous swarm? One simple heuristic is: if you cut the system in half, including both providers and users, will both halves continue to fully operate as independent units?"

Blockchains (when implemented correctly), are architecturally decentralized (tens, hundreds, thousands, or millions of nodes spread around the world, not dependent on any one), politically decentralized (not quite the case for POW coins where a few mining pools control the majority of the hashing power), and logically centralized (a blockchain is a representation of every user that has interacted with the network and every transaction that has happened on the network, you cannot simply cut it in half. The state of the blockchain is the exact same for every person using the network). 

Proof-of-work by nature tends to lead networks into becoming overly politically centralized. Vitalik acknowledges that, and favors a proof-of-stake system over proof-of-work due to the fact that proof-of-work is much harder to decentralize once one player or group has amassed enough mining power. There is a significant barrier to entry because one needs to buy mining equipment, and mining equipment manufacturers can always collude with large pools in order to keep the power in their control (this is likely already happening to some degree). A vanilla proof-of-stake protocol's only barrier to gaining more network power is liquidity, as long as there are tokens to buy, one can amass more network power.

Why does this Vitalik guy care so much about decentralization anyway?

  • "Fault tolerance— decentralized systems are less likely to fail accidentally because they rely on many separate components that are not likely."

  • "Attack resistance— decentralized systems are more expensive to attack and destroy or manipulate because they lack sensitive central points that can be attacked at much lower cost than the economic size of the surrounding system."

  • "Collusion resistance — it is much harder for participants in decentralized systems to collude to act in ways that benefit them at the expense of other participants, whereas the leaderships of corporations and governments collude in ways that benefit themselves but harm less well-coordinated citizens, customers, employees and the general public all the time."

Ethereum is currently considering two solutions to mitigating the above risks, sharding and plasma. Development of these technologies has been slow, and due to the pace not keeping up with the boom in interest in crypto, many investors have turned to solutions that claim they will solve these issues better and in a more timely manner than Ethereum.

Around the corner:

List of upcoming crypto events/releases

Market Outlook:

I will be the first to admit that drawing lines for TA is mostly voodoo. Channels/pitchforks/etc do not factor into our models at all, and we focus mostly on statistical analysis as we’ve found it to be more accurate.

That being said historical support and resistance zones have proven time and time again to be strong indicators of trend. So I’m looking for this consolidation & uncertainty to end with a strong break through either 7k or 7.8k. The former event would signal a run down 6.6k and below. A break above 7.8k would indicate a run to 8.4k and then to 9.8k

We’re neither fearful nor greedy today. This would indicate a fair pricing of the market…and adds to uncertainty. However, our models indicate a 60% chance of a breakdown, and 40% chance of a rally.

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Tell us which crypto hedge fund is the best (Hint, it’s not Pantera). cryptoampm@gmail.com.