Vitalik Buterin, the founder of Ethereum, replied to a September 3, 2018, report from Techcrunch that claims that the collapse of ETH is inevitable.
No Future for ‘Gas’
According to a report from TechCrunch, the collapse of ETH is inevitable, and we should expect that ETH — the asset, not the Ethereum Network itself — will soon go to zero.
The September 3 report, written by Jeremy Rubin, a technical advisor to Stellar and co-founder of the MIT Digital Currency Initiative, claims that Ethereum as a platform will end up succeeding, despite ETH becoming worthless.
The report aims to explain the mechanism of this downfall by citing Ethereum’s original value proposition.
According to the proposition, Ethereum is a decentralized platform that runs smart contracts: applications that run precisely as programmed without any possibility of downtime, censorship, fraud or third-party interference.
These apps run on a custom built blockchain, an enormously influential shared global infrastructure that can move value around and represent the ownership of property.
Rubin also points out that there is no value proposition for ETH in the official description, and that it’s most likely due to the fact that ETH’s value seems so apparent to the Ethereum Foundation that it is hardly worth mentioning: $ETH fees (dubbed ‘Gas’) is how you pay for all this.
However, Rubin points out that as all kinds of different ERC-20 tokens are built on the Ethereum network, paying for gas in ETH would create substantial risk, third-party dependency, and artificial downwards pressure on the price of the underlying token.
Instead, he proposes paying for gas in non-ETH assets, i.e., the underlying coins. This mechanism is called “economic abstraction.” Simply put, “economic abstraction” is the idea that a blockchain protocol would allow the use of any one of a potentially unbounded number of tokens, rather than a single coin.
Later in the report, Rubin concludes that if all the applications and their transactions can run on Ethereum without ETH, there’s no reason for ETH to be valuable. The only way ETH could retain its value, he said, as if “the miners enforce some sort of racket to require users to pay in ETH.”
He also points out that miners wouldn’t be the only ones looking to get pain in non-ETH assets – risk-averse users would want to minimize their exposure to volatile assets, and token developers would see pricing in their native asset reducing the sell-pressure.
Ethereum Cofounder Disagrees
Despite massive media coverage, Rubin’s report seems to have garnered more criticism than praise. Comments on TechCrunch’sreport point out the fact that economic abstraction relies on an intermediary to accept network token and pay the gas in ETH on behalf of the user. That means that ETH is always required to run a contract or a transaction.
Vitalik Buterin, the founder of Ethereum, replied to the report in a thread on Reddit and was seemingly unimpressed with Rubin’s views.
“I have every incentive to disagree with this, but I think there are quite a few very critical economic and technical details that the article is missing,” he said, adding that “we are likely not doing full “economic abstraction.”
“One could also use intermediate solutions, where third parties create “wrapper transactions” that take the fees for operations from users that are paid in spankchain tokens, and the third parties provide the ETH to the block proposer,” he explained.
Banks Can’t Snub Crypto Startups Thanks to France’s New Blockchain Law
- France’s new crypto law grants blockchain-related projects the right to a bank account, provided they opt in to being regulated
- There’s an optional certification or “visa” for ICO projects as well as crypto services providers such as exchanges and custodians
- The new law paves the way for French life insurance and private equity funds to get more exposure to crypto assets
- All of this is a far cry from the U.S.
Among developed countries, France’s new approach to regulated cryptocurrency and blockchain companies can fairly be described as avant garde.
In perhaps the most striking example, the regulatory framework drafted by Autorité des Marchés Financiers (AMF), the country’s financial markets overseer, aims to remove a longstanding point of contention faced by such startups: banking relationships.
Under the framework, firms that opt in to be regulated are guaranteed a bank account. This is a long way from the U.S., where regulators’ warnings about “reputation risk” have tacitly discouraged banks from providing deposit accounts to digital currency businesses.
According to Domitille Dessertine, head of the fintech, innovation and competitiveness division at AMF, “strong feedback” from crypto players on the need for adequate banking was matched by firm consensus from the French authorities.
The French government and legislators “were very supportive of this right and entitlement to open a bank account as long as you are regulated,” said Dessertine, who has been shepherding the new rules over the past two years.
Under the new law, the burden is now on banks to explain why they won’t serve startups, she explained:
“The relationship between the project and the bank remains contractual, but if the banks refuse then they will need to justify with us why they have refused to open a bank account.”
Dessertine said a parallel can be drawn with crowdfunding a few years ago, where banks were reluctant to open accounts for such platforms because money was coming from the internet. However, today this works fine, she noted, stating that “all types of banks, large and small,” will be subject to the new provision.
But this new requirement is just part of wide-ranging blockchain bill adopted at its final reading in the French National Assembly on April 11. Part of PACTE Law, the government’s plan to create a new legal environment more favorable for growth of small and medium-size enterprises (SMEs), the bill also offers purveyors of initial coin offerings (ICOs), as well as “digital asset service providers” (such as exchanges and custodians), the option to attain a “visa” to operate in France.
Emilien Bernard-Alzias, a partner at law firm Simmons & Simmons in Paris pointed out that the French parliament and particularly its so-called “crypto-deputies” have wanted to make life easier for crypto-entrepreneurs for some time.
He told CoinDesk:
“Before PACTE law this was a struggle for crypto-related businesses to open a bank account with a French bank. But now French banks which refuse to open an account will have to explain their refusal before the French regulators and we can bet they would avoid having this discussion with the French regulators.”
Enthusiasm at the highest levels for France’s new crypto rules has been very clear.
Last week at Paris Blockchain Summit, French Finance Minister Bruno Le Maire proposed that the European Union use the bill as a model “to set up a single regulatory framework on crypto-assets inspired by the French experience.”
While the formal application process for firms to gain optional certification in France will not open until after the summer, there has already been plenty of interest, noted AMF’s Dessertine who said 20 to 30 digital asset service providers, including “large and small exchanges” have been in touch already.
“There has been significant interest in the new license proposed for digital asset service providers, which includes crypto exchanges, be they fiat to crypto or crypto to crypto. So if Huobi, for instance, wants this license it will be possible for them to ask for it.”
Dessertine explained the framework will be operational after the publication of the implementing decrees which will happen over the next couple of months. “We hope this will be enacted by May, or at the latest June,” she said. “We foresee the application process to be operational for ICOs by September and the intermediaries license we expect will be operational by year end, maybe a little earlier.”
The French regulator has also been careful about making the crypto visa optional, so as not to cramp innovation in this fast-moving space, said Dessertine, adding:
“There are some business models that may not fit within a regulatory framework. I’m thinking of fully decentralized projects where you don’t even have an identified corporate issuer, where it’s really a community of people working together.”
It’s a sentiment echoed by Bernard-Alzias, who pointed out the new regulations are not designed to limit or control, but rather to attract.
“Neither PACTE law nor the AMF wants to force people to seek one of the optional licenses but if crypto-related firms want to take advantage of these optional licenses to appear more reliable and gain new clients or partners, they could,” he said. “And quite surprisingly, this works! Dozens and dozens of non-French crypto related firms already want to obtain these optional licenses even though the AMF should not start to grant them before September.”
Another notable change allows France’s roughly $2.5 trillion worth of insurance funds to take on more exposure to crypto assets.
PACTE Law allows the French equivalent of hedge funds – specialized professional funds (FPSs) – greater freedom with regard to investing on behalf of life offices.
However, French legal experts believe such seismic shifts may still be some way off. Hubert de Vauplane, a partner at law firm Kramer Levin Naftalis & Frankel, said life insurance offices may have the possibility to invest in crypto thanks to the new PACTE law, “but honestly, at this time it is theoretical.”
De Vauplane highlighted practical impediments such as a lack of institutional grade custody solution for crypto assets. He also pointed out that certain types of funds under EU regulation (Alternative Investment Funds or AIFs) and French law are allowed to hold assets registered within a blockchain, including crypto assets.
“If a life insurance company wants to sell life product exposed in crypto (which is allowed), it is only possible via an AIF/ FPS fund. No custodian fund in France is yet prepared to accept to ‘keep’ crypto assets. But for sure, the offer will come soon,” he said.
Perhaps preparing to test the waters, a subsidiary of French financial colossus Societe Generale recently issued a covered bond (a traditional European instrument similar to mortgage-backed securities) in the form of a token on the public ethereum blockchain.
Although SocGen itself was the sole investor in the issuance, it is pari passu (“on an equal footing” in terms of repayment priority) with other covered bonds, according to a report from Moody’s Investors Service – suggesting that the lender could sell the bonds in the secondary market later on. SocGen’s issuance took advantage of a 2017 French decree that recognized blockchain as a valid recording system for securities, Moody’s noted.
The new rules also encourage French private equity or VC funds to get more involved in ICO tokens, allowing them to invest in crypto assets up to 20% of their assets under management (AUM).
In its approach to ICOs, France differs dramatically from the U.S., where the definition of a security is broad enough to capture many things. Jay Clayton, chairman of the Securities and Exchange Commission, has famously said every ICO he’s seen is a security.
By contrast, the French definition of a security is narrow and means either a clearly defined financial derivative contract, or an instrument like a stock, bond, or unit share of a fund.
“To us, most of the tokens that were issued by ICOs and cryptos themselves do not fall within our definition of security.”
Two Dark Web Drug Dealers Indicted for Money Laundering in Crypto
In a first, two dark web drug dealers were indicted for running a steroid and controlled substance business that laundered millions of dollars in cryptocurrency and Western Union payments.
The defendants Callaway Crain and Mark Sanchez, were charged with selling their products, which they manufactured, marketed, and shipped, on a website they controlled called “NextDayGear,” and on the dark web. The duo sold injectable steroids and oral steroids, in addition to medications to counteract the effect of steroid use, including Xanax, Valium, and Viagra. On Monday, Crain and Sanchez pleaded guilty to Money Laundering in the 2nd Degree and Criminal Sale of a Controlled Substance in the 5th Degree, with promised sentences of 2 ½ to 7 ½ years in prison. They are expected to be sentenced on July 12, 2019.
Commenting on the judgement, District Attorney Vance said, “These defendants raked in crypto and cash worth millions on their full-service website that sold prescription-free counterfeit steroids and other controlled substances to customers in all fifty states. Online drug sellers who do business in New York should take note: whether you’re operating in plain sight or in hidden corners of the dark web, my Office has the skills and resources to follow the money, shut down your business, and hold you accountable.”
The duo, allegedly, purchased steroids, precursor chemicals, and other controlled substances wholesale from China and other countries. After obtaining the chemicals and substances, they mixed, pressed, and packaged them, often under brand names they created; advertised and sold them online; and shipped them to customers in all 50 states and sixteen countries.
However, this is not the first time, dark web businesses have been shut down by the federal forces. Last year, in a year-long sting involving multiple US agencies including the Secret Service, Drug Enforcement Administration (DEA), ICE’s Homeland Security Investigation (HSI), more than 35 individuals were arrested in a nationwide undercover operation. During the raid, over 23.6 Million was seized out of which $20 million was cryptocurrencies.
At the time, the HSI acting executive associate director Derek Benner had said, “The Darknet is ever-changing and increasingly more intricate, making locating and targeting those selling illicit items on this platform more complicated. But in this case, HSI special agents were able to walk amongst those in the cyber underworld to find those vendors who sell highly addictive drugs for a profit.”
Samsung Invests $2.9 Mn in Crypto Wallet Startup Ledger, Might be Working on its Own Cryptocurrency
Electronics giant, Samsung is getting serious into its cryptocurrency game plan and also rumours in the market about the company developing its own Samsung Coin going strong. There has been no official word on the development but is likely to be true given the company’s recent investments in the crypto sphere and integration of crypto wallets to several of its devices.
Samsung has also made an investment of 2.6 million euro or $2.9 million in hardware cryptocurrency wallet manufacturer, Ledger. The announcement was made on April 24th and no further details have been given out except the initial investment amount.
At the moment it is not clear, whether the investment by Samsung is a part of a larger funding round or is a strategic one. Ledger in 2017 has raised $7 million in Series A round, $75 million Series B in 2018. The latest investment also coincides with Ledger promoting Pascal Gauthier to CEO.
Co-founder Éric Larchevêque confirmed the investment by Samsung in one of his tweets saying:
“We will always need hardware wallets, but to accompany a revolution crypto based on a personal sovereignty accessible to all, the smartphone will actually play a central role.”
The news about Samsung developing its own cryptocurrency came from a news outlet Coindesk Korea, in which an anonymous source told that “Samsung may end up developing a public-private blockchain complete with its own cryptocurrency token.”
It has been also reported that the Samsung Coin is based on ERC20 token and is currently in the process of creating mainnet.