Crypto Profile Series: #2 — Brian Armstrong: Founder and CEO of Coinbase

INTRODUCTION

Brian is the founder and CEO of Coinbase, the largest platform for purchasing cryptocurrencies with fiat currencies such as Dollars or Pounds. Born in San Jose, California, Armstrong learned coding and web development at a young age and took this passion for technology into his degree, studying Computer Science and Economics. He finished his masters at Rice University, Houston, Texas, in 2006 and gained an internship at IBM, later finding a more permanent career at top four accountancy firm Deloitte.

UNIVERSITY TUTOR

Whilst at University, Armstrong developed a website that matched students with a wide array of different tutors from across the world. This is very much the ‘Airbnb’ of tutoring, allowing tutors to advertise their work and students and parents to select the tutor that is best suited to them. He remained at University Tutor until he joined Airbnb for just a year before starting work on Coinbase in 2012. This project displayed Armstrong’s entrepreneurial ability to start a successful company that stands the test of time.

COINBASE

Bitcoin spiked Armstrong’s interest in 2010, but prices were very low and the market was in its infancy. Coinbase allows for users to purchase cryptocurrencies with fiat, the first hurdle for anyone who is interested in buying crypto. Coinbase secured significant investment from venture capital firms and they were able to grow fast and develop the product. They have developed a brilliant user interface and purchasing crypto is as easy as it should be! As of November 2017, Coinbase became a ‘Unicorn’ company as its valuation exceeded $1 billion to reach $1.7 billion.

CONTROVERSY

Some people in the crypto space feel that Coinbase represents the traditional banking system they are trying to escape. The argument follows that Coinbase is too centralized and people are encouraged to keep their crypto on the system, thus not keeping control of their own private keys and vulnerable to the Coinbase system being hacked. Now, there is some truth in this argument, yes, it is safer to look after your own private keys as you are responsible for your own funds, however, for many people who want to be involved in crypto but aren’t tech savvy, Coinbase provides an appealing alternative. Additionally, Coinbase claims that 98% of their Bitcoin is stored offline, so protected against hacks. It is a personal choice whether to trust a company such as Coinbase with your funds, but even if you plan to keep your funds on Coinbase you should be aware of the process to safely remove them from the exchange using your private keys.

SUMMARY

There is no doubt that Brian Armstrong is one of the most influential people in the crypto space. Opinions of him aside, the platform he has driven to create is the easiest way for newcomers to get started in buying, trading, and HODLING cryptocurrencies.

Links:

Twitter: here

Coinbase: https://www.coinbase.com/

Crypto Profile Series: #1 — Vitalik Buterin

EARLY LIFE

Born in Russia in 1994, his family emigrated to Canada when he was 6 in search of better opportunities, he found these opportunities as he progressed through school and was singled out as a talented and gifted individual. In 2011 his attention turned to Bitcoin and he eventually co-founded the Bitcoin Magazine and was the lead writer. He also wrote for other publications in return for Bitcoin. In order to pursue his vision of Ethereum, he dropped out of Univesity to focus on crypto full time.

ETHEREUM

Buterin’s whitepaper for Ethereum sparked some interest and he was soon approached by people who wanted to work with him, thus the Ethereum core team was formed with Charles Hoskinson, Joe Lubin, and others. They made the decision that in order to fund the project they’d carry out an ICO (Initial Coin Offering). The sale raised 31,000 Bitcoin, $18 million at the time, approx $124 million today, with this money they were able to focus on the development of Ethereum and create the non-profit Ethereum foundation. You can read more about Ethereum here.

CONTROVERSY

Buterin has not shied away from working on projects in Russia and China, despite their authoritarian leaders. In 2017, Buterin met with Russian President Vladimir Putin and also gave a speech to thousands of people. He has had continued involvement with projects in China even though the Chinese government have not always been welcoming to cryptocurrencies and in particular ICOs. However, Buterin appears to do this whilst keeping the integrity of crypto in mind and the decentalisation and freedom that comes with it. Furthermore, much of the crypto development is happening in Russia and Asia so it is important for Buterin to stay connected.

PROOF OF STAKE

Perhaps the biggest debate in crypto at the moment is how should new blocks be validated and added to the blockchain. Advocates of PoW (Proof of Work), the system at play in Bitcoin, and currently Ethereum, argue it is more secure and argue that PoS (Proof of Stake) is not yet feasible and potentially less secure. Buterin has been a big advocate of switching to PoS and hopes to move Ethereum onto this system when possible. He argues it would save energy as there is no mining involved and will help reduce fees in the system. Critics of Buterin have argued that this shift is not feasible and could reduce the overall security of the network as people have less incentive to directly participate in the network through mining and running nodes.

SUMMARY

At only 23 years old, Buterin proves that age is no barrier in becoming one of the most important people in the Crypto space. He has asserted himself as a key figure and got Ethereum to be the closest runner to Bitcoin over the last few years, a big achievement in itself. As the Ethereum network grows he has admitted that he wants to have increasingly little to do with the core development and hand this over to the community, which is so strong in Ethereum. Buterin remains an eccentric but incredibly important figure in the crypto space.

Bitcoin Exchange-Traded Fund (ETF)

This article will look at something slightly different to normal, the much talked about Bitcoin ETF. Let us know if you enjoy this type of content and want more?

INTRODUCTION

There are 1000s of ETFs, but we are yet to see one for Bitcoin, this is because it requires approval from the U.S. Securities and Exchange Commission (SEC) and they have so far rejected any that have been proposed. So let’s get started in trying to understand what an ETF is and why it is or isn’t, important for the crypto space. An ETF has some similarities with a mutual fund, it is a ‘basket’ of different stocks, shares, commodities etc, but unlike a mutual fund, it can be traded like a stock. So one example may be a precious metal ETF, in this case, a variety of precious metals will be purchased by the fund, then split into shares and these shares are then traded. The price of the shares is very closely tied to the price of the underlying commodities in the ETF. So if the price of precious metals rises, the price of the ETF should also rise. If the ETF can be approved then it is also likely that leveraged positions will be accepted mean investors can invest multiple amounts of their capital with higher risk.

CUSTODY

One thing that may be holding back the growth of Bitcoin and Cryptocurrencies is the difficulty in purchasing and trading them. It isn’t difficult to more experienced people in this space, however, the prospect of buying and holding an asset that can disappear if you lose the key or transfer to the wrong address can be daunting. You can buy and hold Bitcoin on more secure exchanges such as Coinbase, but exchanges have been prone to hacks in the past and just because an exchange is secure doesn’t mean it’s impossible. An ETF could go some way to dealing with these concerns as they would act as the custodian of the Bitcoin so the investor wouldn’t have to deal with the Bitcoin directly. Furthermore, the shares that you hold are insured, so if the ETF’s fund is hacked, your money is guaranteed. This is appealing for people who want to invest and hold Bitcoin but aren’t concerned with holding the Bitcoin themselves.

TAX

The taxation situation in the crypto space is confusing and can cause some problems if you aren’t careful. Certain jurisdictions tax you on each trade, which can be disastrous for some high-volume traders. ETFs are taxed only on the profit made when the shares are sold, this helps to provide a simpler, more transparent taxation system. We are not tax experts so this shouldn’t be taken as advice in any way, just our view of the system.

ARBITRAGE

ETFs use a clever system to keep the baskets price closely aligned to the price of Bitcoin. The ETF is constantly traded so any trader can see when the Bitcoin price moves away from the price of the ETF there is an opportunity to make money. If the Bitcoin price were to move by 2% then investors would look to buy the ETF as there is an arbitrage opportunity because the ETF is now 2% lower than the Bitcoin market price, this should cause the price of the ETF to increase as investors see this opportunity. Hopefully, this will help to keep the price of the ETF in line with the underlying price of Bitcoin.

DOES THE ETF MATTER?

Views on the impact of an ETF on the crypto market are varied, some suggest that it could bring us out of a bear market, others remain very bear on the influence that the ETF would have. It seems more sensible to take the mid-ground here. No, the ETF probably isn’t going to make prices go parabolic, however, it is another tool for investing in crypto and if this helps to bring new money into the space, then it seems difficult to imagine that it won’t contribute at all.

Mining and Proof of Work

INTRODUCTION

Today we’re going to be having a look at Proof of Work- a system originally developed in 1993 and adapted to usage in the crypto industry in 2009, with the launch of Bitcoin. As it was the originator, this article is going to focus mainly on Proof of Work as it is used in the Bitcoin network, but its core concepts are ubiquitous across the multitudes of cryptocurrencies based on the Bitcoin platform.

MINING

In Blockchain technology, users ‘mine’ cryptocurrency by solving extremely complex mathematical challenges. These challenges are designed to group transactions on the Bitcoin network together into ‘blocks’, verify the transactions as legitimate, and then add them to the end of the Blockchain. When the challenges are solved, the user is rewarded with part of a Bitcoin.

Solving these takes a tremendous amount of computing power, which limits the amount that can be solved and thus the amount of Bitcoins released. The challenges’ difficulty can also be altered to become either more or less difficult. Bitcoin adjusts difficulty approximately every 2 weeks, with the goal of keeping the rate of block discovery and coin releases at a constant. (However, the block reward- the amount of bitcoin released with every new block mined- is halved approximately every 4 years in order to ensure the supply is finite and safeguarded against inflation).

PROOF OF WORK

The data obtained when a user has solved one of these challenges is known as a ‘Proof of Work’. This piece of data is associated with the block of transactions, and is difficult to produce yet easy to verify. It proves the legitimacy of a block and prevents illegitimate transactions from taking place. The public nature of the Blockchain- a shared ledger of every transaction taking place- is protected from tampering with Proof of Work. It stops fake blocks from being added to the Blockchain and stops an individual having control over which block is added to the Blockchain next. It’s difficulty to obtain also gives bitcoin some of its value.

DISADVANTAGES

Proof of Work is a multi-purpose concept, and is successful in maintaining a cryptocurrency and validating its transactions. However, many now see it as a limiting factor to the growth of alt coins, because of two main disadvantages.

One is simple. Mining is an extremely energy and time consuming process, considering it is essentially valueless for most of the Miners almost all of the time. If another way to verify transactions and protect against malicious attacks could be found, the amount of computing power involved in generating Proof of Work could be used in much more efficient ways.

The second is concerned with the monopolisation of mining, which would be the opposite of the decentralised and incorruptible currency Bitcoin is supposed to be. In the future, as the rewards for mining decrease, so too will the amount of miners. This would leave the network more susceptible to a 51% attack, in which a miner or group of miners control more than 50% of the computing power on the network. If this was the case, they’d then be able to completely control which transactions are added to the Blockchain, as well as spending their own coins multiple times.