Crypto-digest 04.05 — One of Bitcoin’s biggest investments might finally be paying off; Bitcoin sets sights above $10K after bull breakout; These ICO investors are getting their money back – and it’s not clear why; Ethiopia explores blockchain role in tracking coffee exports; Venezuelan president launches cryptocurrency-funded youth bank; 12 Chinese banks say they deployed blockchain in 2017.
One of Bitcoin’s biggest investments might finally be paying off
Bitcoin appears to finally be making headway with one of its less-appreciated, but critical challenges: recruitment.
Simply put, the number of developers contributing to the cryptocurrency’s open-source code is suddenly on the rise. Sure enough, there have been at least 21 code submissions approved from new contributors over the past 50 days – and that’s no small feat given developers have struggled for years to entice new coders to work on the project.
And while the number of merges over the nearly two-month period didn’t jump up drastically, seeing new names within the Github repository is a welcome sight given that most of the hundreds of contributions to bitcoin over the past several years have been coded by a few dozen veterans.
According to several developers CoinDesk interviewed, there isn’t a direct correlation they can point to explain the increase, though there are likely contributors. Indeed, for some it’s a strong sign serious investments of time and effort in training and academic programs are finally paying off.
“Many educational and training efforts have lately helped to introduce new developers to Bitcoin Core and the bitcoin software ecosystem,” Ferdinando Ametrano, a professor at Politecnico di Milano who has served as a program director at bitcoin developer conferences, told CoinDesk.
Ametrano is, of course, talking about efforts such as Chaincode Labs, which has a residency program in New York where prolific bitcoin developers like John Newbery have been giving their time to helping new recruits.
After attending Chaincode’s first residency in 2016, Newbery has now taught 11 participants from places like Israel and Hong Kong.
Newbery told CoinDesk:
“It feels like we’re busier now than we were six months ago. It’s almost impossible to keep up.”
But Newbery isn’t the only one teaching.
Another possible contributor is Jimmy Song’s Programming Blockchain Workshop, which has found the high-profile developer and Blockchain Capital partner teaching roughly 250 people since the workshop launched (in multiple locations across the U.S.) in September.
And demand has been so high that he’s offering a few more sessions over the next few months.
Of note, though, is that those surveyed believe these programs could do more than boost contributions to the code by expanding and diversifying bitcoin’s pool of contributors.
“One of the things that surprised me is what kinds of people take my class. I expected it to be all developers,” said Song.
But as it turned out, participants ranged from teenage girls to hedge fund managers and retirees.
“Growing the developer team, in numbers and in quality of contributions and everything else, is important because you need a diversity of views,” Song said. “You don’t want it to just be a couple of people that do everything.”
Others agree the current hegemony within the bitcoin developer community could set back the cryptocurrency eventually.
Matt Corallo, a long time Bitcoin Core contributor, tweeted in April about the importance of diversifying the ranks, saying:
“The many studies indicating broader sets of backgrounds and viewpoints add a ton to the quality of decisions made in management should be pretty overwhelming evidence for anyone who cares about evidence-based decision making.”
Song echoed that, noting that bugs can creep in when there are too many developers with the same mindset working on a project.
Newbery continued, explaining that the Chaincode residency and other new educational programs for bitcoin development are touching on one of the key challenges the industry has typically faced – a lack of face-to-face learning opportunities.
He told CoinDesk:
“It’s very difficult if you don’t have that face-to-face interaction with other contributors.”
This seems to have played out with Janey Gak, who recently attended one of Song’s workshops and is now developing a cryptocurrency wallet for users in developing countries like Afghanistan.
Not only did she learn the technical aspects of bitcoin that she needed to be able to build the app, but also plans on bringing what she knows (and learns) about Afghanistan and the developing world to the Core development community.
And this, according to Song will further decentralize the network and benefit the protocol by having a diverse pool of people to check code.
Echoing this, Newbery told CoinDesk, “All bugs are shallow given enough eyes. We all see bugs other people don’t see. Having that wide range of backgrounds and experiences is very beneficial to the quality of the project.”
And adding more developers is particularly helpful given that there are only a few dozen people right now with enough experience to properly review prospective contributions, creating a bottleneck. Currently, fewer than two dozen developers work on bitcoin’s software full-time out of roughly 40 regular contributors.
But according to Gak, it shouldn’t be all that difficult to attract more developers like herself, since experienced bitcoin developers have been so responsive.
Gak told CoinDesk that after Song’s workshop, several developers reached out to her to offer their help on her project.
“The community is full of very supportive people,” she said, adding:
“I’ve never felt so welcomed in my life.”
But still, hurdles stand in the way.
The complexity of the protocol on which billions of dollars in value currently depends makes the onboarding process for new developers no small task.
Plus, many of bitcoin’s developers work on the project on a volunteer basis, not always the most appealing idea. Although, several sponsorships, including ones from the MIT Media Lab, are allowing bitcoin developers to turn their labor of love into a full-time gig.
Yet still, this type of expertise is rare, with demand currently exceeding the supply of capable developers by far.
Although, this is a challenge shared by all open-source endeavors.
“I’m not sure finding people is a bitcoin-specific problem,” veteran bitcoin contributor Michael Ford told CoinDesk. “Any large open-source project will always struggle to find people who are willing to work or give up their own time for free.”
Although, certain idiosyncrasies may compound the issue in bitcoin’s case.
For instance, Newbery said that Bitcoin Core’s rigorous review process can be off-putting for prospective contributors.
“Maybe frustration is a challenge for people,” he said. “It feels like the review burden at Bitcoin Core is very high compared to other projects.”
Indeed, Christopher Coverdale, a developer who recently contributed to Bitcoin Core for the first time, told CoinDesk he noticed it takes an unusually long time to get up to speed on the network’s meticulous standards. And while Coverdale plans to continue participating, he added that it requires perseverance.
“The senior developers and reviewers have far too many pull requests to review and have important projects to work on, so understanding that pull requests might be reviewed a week later is perfectly normal,” Cloverdale said, adding:
“I’ve also found that patience is really important when contributing to bitcoin.”
Bitcoin sets sights above $10K after bull breakout
Following a bull breakout last night, bitcoin (BTC) looks set to test $10,000 and could possibly move higher over the weekend.
Bitcoin closed yesterday (as per UTC) at $9,759 on Bitfinex – the highest daily close since March 7 – signaling the upside break of the week-long narrowing price range we’ve been anticipating.
The cryptocurrency also clocked a two-month high of $9,875 yesterday. At time of writing, BTC is changing hands at $9,776 and remains on the hunt for a big break above the $10,000 mark, as indicated by the bullish setup in the technical charts below.
The chart above shows a pennant breakout (bullish continuation pattern), indicating that the rally from April lows below $6,500 has resumed.
The move has opened the doors for a rise to $10,455-$11,950 (target calculated using two variations of the measured height method).
However, the 4-hour relative strength index (RSI) is close to moving above 70.00, signaling overbought conditions. As a result, a rally to $11,950 looks to be a tough task to achieve and $10,455 may be more realistic.
The ascending, bullish 5-day moving average (MA) and 10-day MA also favor further upside in prices. Meanwhile, the RSI is stationed at 62 – well below 70 (overbought territory), leaving enough room for a rally to $10,400-$10,500.
And, last but not the least, BTC’s bullish breakout yesterday was backed by a 35 percent rise in trading volumes, according to CoinMarketCap. A high volume breakout only validates the argument that the rally has legs.
BTC looks set to test the 200-day MA resistance of $10,015. A close (as per UTC) above that level would strengthen the bull grip and could yield a sustained rally to $10,455 and above.
The outlook remains bullish as long as prices hold above the ascending 10-day MA, located at $9,290.
An unexpected close (as per UTC) below $8,652 (April 26 low, pennant low) would signal a short-term bullish-to-bearish trend change.
These ICO investors are getting their money back – and it’s not clear why
Regulatory uncertainty appears to be arriving late to Washington state.
In what seems like the latest sign concerns are impacting initial coin offerings (ICOs) broadly, Seattle-based Dragonchain is forcing one of its affiliate projects, Norwegian startup Iagon, to return funds it raised from investors back in April – and it’s currently unclear why.
In fact, on April 28, the day its presale was scheduled to end, Iagon published a Medium post explaining to investors that the sale had been paused. Notably, it wasn’t Iagon’s idea; the company had recently joined an incubator backed by Dragonchain, and it was Dragonchain, an enterprise blockchain startup spun out of Disney, that brought the hammer down.
But even Iagon CEO Navjit Dhaliwal said he can’t quite account for the turn of events as the ICO, which had raised approximately $1.3 million in ethereum at that time, was cancelled.
Although, he believes it has something to do with regulation, especially a possible stance from the SEC, Dhaliwal wasn’t exactly forthcoming with a clear answer.
Dhaliwal told CoinDesk:
“It is my understanding that Dragonchain is continuing to tread cautiously as the SEC has been investigating all ICO and blockchain projects that arise.”
He continued, saying that Iagon met with Dragonchain on April 30 to get more details, but “answers remained indirect.” Adding a bit more to the mystery, according to an admin on a public Dragonchain Telegram channel, the Iagon sale was cancelled “per legal guidance.”
The admin went on, telling members to expect a statement from the Dragonchain CEO about its course of action going forward.
Still, there could be a broader problem at play. The Iagon token sale was part of a program Dragonchain created after raising $13.7 million in its own ICO in November. Five token issuers, including Iagon, have been incubated by the company so far, and pre-sales haven’t gone well.
Based on posts in another Telegram channel, investors in the Look Lateral token presale, which ran on Dragonchain late last year, have been asking for refunds, primarily because the team has not launched its scheduled sale.
Another issuer using the platform, LifeID, cancelled its presale based on “legal advice.”
All these instances seem to point to the regulatory uncertainty around crypto tokens as having a significant impact on the industry that’s been built around this new way to raise capital.
And as such, the future of Dragonchain’s incubator in likewise uncertain. Several Telegram channel posts indicate that the incubator has been suspended, but no official announcement has been made.
Dragonchain has not responded to repeated requests for comment.
All told, Iagon, which planned to run a public sale with a cap of $77 million starting on May 10, is now scrambling to revise the timeline and find a new partner platform to execute another presale as well as a later public sale.
But in the current environment that could be challenging.
For some, the question could be: why did it take so long for Dragonchain to act on rumors the SEC and other regulators were investigating the space?
Indeed, many began predicting that the SEC would make a move at the beginning of the year, and in March, it was reported that an SEC crackdown was on its way. SEC subpoenas started arriving, government officials began hinting that guidance was imminent and a handful of token entrepreneurs mulling over ICOs and airdrops began pulling back.
But Dragonchain continued on with the Iagon partnership, whereby the Iagon token would be limited to holders of Dragonchain’s “dragon” tokens.
According to Dhaliwal, Iagon had wanted to collaborate with Dragonchain since the company has a much higher-profile and deeper community than the Norwegian startup.
But, Dhaliwal continued, “It seems as though Dragonchain has made several changes to their legal team (this is an assumption, due to the answers that were given). It seems as though the new Dragonchain legal counsel members have different views regarding the incubator program or the intricacies of the presale.”
Not much is known about the specific reasons why Dragonchain’s new legal counsel is uneasy with the sale, and Dhaliwal would not confirm whether or not unaccredited investors in the U.S. were excluded.
Only allowing accredited investors to buy into a token sale has become standard practice for ICO issuers selling into the U.S. market, primarily because they’re typically using a Regulation D exemption, under the Securities Act, to not be classified as a security.
Speaking to the requirements of Reg D, Joshua Ashley Klayman, co-chair of Morrison & Foerster’s Blockchain + Smart Contracts Group, said, “One of those requirements is that the token seller takes reasonable steps to verify the accredited investor status of purchasers that are US persons.”
Klayman, who is also the chair of the Wall Street Blockchain Alliance Legal Working Group, continued, “In my experience, many token sellers report engaging certain ‘permitted third-party verifiers’ to confirm that such purchasers are, in fact, accredited investors.”
New rules needed?
As the regulatory air starts to clear, though, some believe this situation will become all the more common.
For instance, TokenSoft founder Mason Borda tweeted that the Iagon refund will likely be part of a forthcoming trend whereby ICO issuers that missed a part of the compliance flow would be “cleaning up.”
While there seems to be an increasing interest in designing crypto tokens and the sales to fit under existing regulatory rules, others are pushing for a completely different set of rules to be crafted for the industry.
Dragonchain seems to be interested in the later, writing in a community update, “It should be noted that until a regulatory framework for utility tokens is defined, ‘compliance’ seems to be a moving target to which we will always strive to fulfil our due diligence to not only position ourselves as the business blockchain solution but more importantly, to protect all dragon holders — always.”
The update continued, encouraging community members to pressure lawmakers – specifically asking them to reach out to members of the U.S. House Financial Services Committee and the Senate Banking Committee “to seek regulation standards and voice your opinion to educate legislators and regulators on the value that blockchain offers.”
One supporter of that notion has even made a Change.org petition on the same topic.
While some major institutional investors have already begun lobbying efforts for the crypto token space, these grassroots efforts are likely to continue since so many retail investors are also involved.
Speaking to what it sees as the importance of these grassroots efforts and seeming to hint at the fact that many think U.S. regulations could send entrepreneurs packing for friendlier jurisdictions, Dragonchain said:
“Dragonchain is a proud U.S.-based blockchain company and in the spirit of the American Dream, we seek to provide blockchain capabilities to all humans.”
Ethiopia explores blockchain role in tracking coffee exports
Ethiopia is exploring the use of blockchain technology to track the supply chain for its largest export, coffee.
For the effort, the East African nation has partnered with blockchain research and development company IOHK to develop blockchain applications for coffee shipments and other areas of agriculture.
In a press release, IOHK said it is collaborating with the Ethiopian Ministry of Science and Technology for the project, and will closely work with ministers, entrepreneurs and startups in the country.
Getahun Mekuria, the country’s Minister of Science and Technology said that the research is focusing on using the Cardano blockchain platform as a base for work by Ethiopian developers.
According to Charles Hoskinson, CEO of IOHK, the company’s efforts go beyond the supply chain project.
“We are also training local blockchain developers, some of which we will hire, while the rest will go on to plough their skills into the economy. The first class will be all female, and the goal is to have graduates of that class move on to create ventures in the cryptocurrency space using Cardano technology, the first venture of its kind in Africa.”
Venezuelan president launches cryptocurrency-funded youth bank
Venezuela is launching a youth bank to be funded by the state’s controversial petro cryptocurrency.
Announced Thursday by the country’s president, Nicolas Maduro, the country will set up a bank for students and young people that will begin its operations with 20 million petros, according to news source Telesur.
Speaking during a youth ceremony in the state of Aragua on Thursday, Maduro said that close to $1.2 billion-worth of the cryptocurrency would be given to the new institution to get it up and running, and that the bank would support “productive initiatives.”
During his speech, Maduro also said that every university should have a mining farm to produce cryptocurrencies in order to strengthen the economy of Venezuela.
Launched in February 2018, the petro is a national oil-backed cryptocurrency developed by the government of Venezuela under the direct orders of the president. The move has been widely condemned as away to avoid U.S.-led sanctions against the Latin American country.
Even the country’s own opposition-led congress has condemned the petro, saying before its launch that it was “illegal” and merely borrowing against the country’s assets.
Soon after the launch of the petro pre-sale, President Maduro further announced that he plans a second cryptocurrency to be backed by the nation’s gold reserves.
12 Chinese banks say they deployed blockchain in 2017
Nearly half of the 26 publicly listed banks in China say they deployed blockchain applications in 2017, according to a report.
Chinese banking industry news source CEBNet said Friday that, among the 26 Chinese banks, 12 of them disclosed in their annual filings that blockchain applications were adopted for various use cases over the last year.
The 12 institutions include major state-owned commercial banks such as the Bank of China, China Construction Bank and the Agriculture Bank of China, as well as other privately held ones, including China Merchants Bank and other city-level entities.
The applications that have been adopted range from using blockchain technology to issue invoices and cross-border loans to ID authentication processes.
For example, according to the annual filing from the Agriculture Bank of China, the state-owned entity has developed a decentralized network to offer unsecured loans for agricultural e-commerce merchants that it said offers an automatic loan issuance process.
Similarly, China Construction Bank also disclosed in its financial statement that it has launched a blockchain-based platform that provides cross-bank and cross-border loan issuance for small businesses. The bank further boasts that the platform has so far processed transactions that worth a total of 1.6 billion yuan, or $251 million.
Taking another approach, Bank of China said that it has completed testing for a distributed IT infrastructure to be deployed across its branches for further development of a blockchain-based digital wallet.
The banks’ en masse move to adopt blockchain comes at a time when the country’s banking regulator has also praised the benefit of applying the technology in the financial sector – especially when it comes to improving the efficiency of loan issuance.
Recent patent applications, as reported by CoinDesk, also indicated that China’s state-owned banks have been exploring ways to use blockchain technology to solve data storage issues and to streamline certificate authentication processes.