‘Not My Cup of Tea’: Jamie Dimon Is Still Not a Bitcoin Fan

JPMorgan Chase CEO Jamie Dimon said blockchain will have a pivotal role in the future of finance even if bitcoin, the market-leading cryptocurrency that made blockchain famous, is not his “cup of tea.”

Speaking at the New York Times’ DealBook Conference Wednesday, Dimon reiterated JPMorgan’s support for blockchain technology as a potentially transformative financial mechanism.

“The blockchain itself will be critical to letting people move money around the world cheaper,” he said. (His bank made waves recently with the launch of its “JPM Coin” for wholesale banking payments). “We will always support blockchain technology.”

But Dimon refused to give ground on his opposition to bitcoin.

He repeated his longstanding belief that governments will ultimately more heavily regulate it (something echoed recently by fellow billionaire Ray Dalio). Oversight is inevitable for something so large, he said.

Even so, Dimon acknowledged that “very smart people” are buying into the cryptocurrency in the belief that it will outperform gold, the U.S. dollar and U.S. Treasury bonds.

“Let them do that,” he said. “It’s just not my cup of tea.”

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What Is Cryptocurrency? – Forbes

Cryptocurrency is decentralized digital money, based on blockchain technology. You may be familiar with the most popular versions, Bitcoin and Ethereum, but there are more than 5,000 different cryptocurrencies in circulation, according to CoinLore.

You can use crypto to buy regular goods and services, although many people invest in cryptocurrencies as they would in other assets, like stocks or precious metals. While cryptocurrency is a novel and exciting asset class, purchasing it can be risky as you must take on a fair amount of research to fully understand how each system works.

How Does Cryptocurrency Work?

A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of a cryptocurrency. Instead, these tasks are broadly distributed among a cryptocurrency’s users via the internet.

Bitcoin was the first cryptocurrency, first outlined in principle by Satoshi Nakamoto in a 2008 paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Nakamoto described the project as “an electronic payment system based on cryptographic proof instead of trust.”

That cryptographic proof comes in the form of transactions that are verified and recorded in a form of program called a blockchain.

What Is a Blockchain?

A blockchain is an open, distributed ledger that records transactions in code. In practice, it’s a little like a checkbook that’s distributed across countless computers around the world. Transactions are recorded in “blocks” that are then linked together on a “chain” of previous cryptocurrency transactions.

“Imagine a book where you write down everything you spend money on each day,” says Buchi Okoro, CEO and co-founder of African cryptocurrency exchange Quidax. “Each page is similar to a block, and the entire book, a group of pages, is a blockchain.”

With a blockchain, everyone who uses a cryptocurrency has their own copy of this book to create a unified transaction record. Software logs each new transaction as it happens, and every copy of the blockchain is updated simultaneously with the new information, keeping all records identical and accurate.

To prevent fraud, each transaction is checked using one of two main validation techniques: proof of work or proof of stake.

Proof of Work vs Proof of Stake

Proof of work and proof of stake are two different validation techniques used to verify transactions before they’re added to a blockchain that reward verifiers with more cryptocurrency. Cryptocurrencies typically use either proof of work or proof of stake to verify transactions.

Proof of work. “Proof of work is a method of verifying transactions on a blockchain in which an algorithm provides a mathematical problem that computers race to solve,” says Simon Oxenham, social media manager at Xcoins.com.

Each participating computer, often referred to as a “miner,” solves a mathematical puzzle that helps verify a group of transactions—referred to as a block—then adds them to the blockchain leger. The first computer to do so successfully is rewarded with a small amount of cryptocurrency for its efforts.

This race to solve blockchain puzzles can require an intense amount of computer power and electricity. In practice, that means the miners might barely break even with the crypto they receive for validating transactions, after considering the costs of power and computing resources.

Proof of stake. To reduce the amount of power necessary to check transactions, some cryptocurrencies use a proof of stake verification method. With proof of stake, the number of transactions each person can verify is limited by the amount of cryptocurrency they’re willing to “stake,” or temporarily lock up in a communal safe, for the chance to participate in the process. “It’s almost like bank collateral,” says Okoro. Each person who stakes crypto is eligible to verify transactions, but the odds you’ll be chosen to do so increase with the amount you front.

“Because proof of stake removes energy-intensive equation solving, it’s much more efficient than proof of work, allowing for faster verification/confirmation times for transactions,” says Anton Altement, CEO of Osom Finance.

If a stake owner (sometimes called a validator) is chosen to validate a new group of transactions, they’ll be rewarded with cryptocurrency, potentially in the amount of aggregate transaction fees from the block of transactions. To discourage fraud, if you are chosen and verify invalid transactions, you forfeit a part of what you staked.

The Role of Consensus in Crypto

Both proof of stake and proof of work rely on consensus mechanisms to verify transactions. This means while each uses individual users to verify transactions, each verified transaction must be checked and approved by the majority of ledger holders.

For example, a hacker couldn’t alter the blockchain ledger unless they successfully got at least 51% of the ledgers to match their fraudulent version. The amount of resources necessary to do this makes fraud unlikely.

How Can You Mine Cryptocurrency?

Mining is how new units of cryptocurrency are released into the world, generally in exchange for validating transactions. While it’s theoretically possible for the average person to mine cryptocurrency, it’s increasingly difficult in proof of work systems, like Bitcoin.

“As the Bitcoin network grows, it gets more complicated, and more processing power is required,” says Spencer Montgomery, founder of Uinta Crypto Consulting. “The average consumer used to be able to do this, but now it’s just too expensive. There are too many people who have optimized their equipment and technology to outcompete.”

And remember: Proof of work cryptocurrencies require huge amounts of energy to mine. It’s estimated that 0.21% of all of the world’s electricity goes to powering Bitcoin farms. That’s roughly the same amount of power Switzerland uses in a year. It’s estimated most Bitcoin miners end up using 60% to 80% of what they earn from mining to cover electricity costs.

While it’s impractical for the average person to earn crypto by mining in a proof of work system, the proof of stake model requires less in the way of high-powered computing as validators are chosen at random based on the amount they stake. It does, however, require that you already own a cryptocurrency to participate. (If you have no crypto, you have nothing to stake.)

How Can You Use Cryptocurrency?

You can use cryptocurrency to make purchases, but it’s not a form of payment with mainstream acceptance quite yet. A handful of online retailers like Overstock.com accept Bitcoin, it’s far from the norm. This may change in the near future, however. Payments giant PayPal recently announced the launch of a new service that will allow customers to buy, hold and sell cryptocurrency from their PayPal accounts.

“That’s huge,” Montgomery says. “If PayPal was considered a bank, they’d be the 21st largest bank in the world, and they are giving access to all of their users. They’re going to make it easy for people to send their crypto.”

Until crypto is more widely accepted, you can work around current limitations by exchanging cryptocurrency for gift cards. At eGifter, for instance, you can use Bitcoin to buy gift cards for Dunkin Donuts, Target, Apple and select other retailers and restaurants. You may also be able to load cryptocurrency to a debit card to make purchases. In the U.S., you can sign up for the BitPay card, a debit card that converts crypto assets into dollars for purchase, but there are fees involved to order the card and use it for ATM withdrawals, for example.

You may also use crypto as an alternative investment option outside of stocks and bonds. “The best-known crypto, Bitcoin, is a secure, decentralized currency that has become a store of value like gold,” says David Zeiler, a cryptocurrency expert and associate editor for financial news site Money Morning. “Some people even refer to it as ‘digital gold.’”

How to Use Cryptocurrency for Secure Purchases

Using crypto to securely make purchases depends on what you’re trying to buy. If you’d like to spend cryptocurrency at a retailer that doesn’t accept it directly, you can use a cryptocurrency debit card, like BitPay, in the U.S.

If you’re trying to pay a person or retailer who accepts cryptocurrency, you’ll need a cryptocurrency wallet, which is a software program that interacts with the blockchain and allows users to send and receive cryptocurrency.

To transfer money from your wallet, you can scan the QR code of your recipient or enter their wallet address manually. Some services make this easier by allowing you to enter a phone number or select a contact from your phone. Keep in mind that transactions are not instantaneous as they must be validated using proof of work or proof of stake. Depending on the cryptocurrency, this may take between 10 minutes and two hours.

This lag time, though, is part of what makes crypto transactions secure. “A bad actor trying to alter a transaction won’t have the proper software ‘keys,’ which means the network will reject the transaction. The network also polices and prevents double spending,” Zeiler says.

How to Invest in Cryptocurrency

Cryptocurrency can be purchased on peer-to-peer networks and cryptocurrency exchanges, such as Coinbase and Bitfinex. Keep an eye out for fees, though, as some of these exchanges charge what can be prohibitively high costs on small crypto purchases. Coinbase, for instance, charges a fee of 0.5% of your purchase plus a flat fee of $0.99 to $2.99 depending on the size of your transaction.

More recently, the investing app Robinhood started offering the ability to buy several of the top cryptocurrencies, including Bitcoin, Ethereum and Dogecoin, without the fees of many of the major exchanges.

“It was once fairly difficult but now it’s relatively easy, even for crypto novices,” Zeiler says. “An exchange like Coinbase caters to non-technical folks. It’s very easy to set up an account there and link it to a bank account.”

But keep in mind that buying individual cryptocurrencies is a little like buying individual stocks. Since you’re putting all of your money into one security, you take on more risk than if you spread it out over hundreds or thousands, like you could with a mutual fund or exchange-traded fund (ETF). Unfortunately, crypto funds are currently in short supply.

There is a Bitcoin mutual fund—the Grayscale Bitcoin Trust (GBTC), but it is currently only open to accredited investors, meaning most Americans aren’t eligible to buy into it. There are no Bitcoin or crypto ETFs; however, there are blockchain ETFs.

If you want exposure to the crypto market, you might invest in individual stocks of crypto companies. “As far as crypto-oriented stocks go, Coinbase is expected to have an IPO sometime in 2021,” Zeiler says. “There are also a few Bitcoin mining stocks such as Hive Blockchain (HIVE). If you want some crypto exposure with less risk, you can invest in big companies that are adopting blockchain technology, such as IBM, Bank of America and Microsoft.”

Should You Invest in Cryptocurrency?

Experts hold mixed opinions about investing in cryptocurrency. Because crypto is a highly speculative investment, with the potential for intense price swings, some financial advisors don’t recommend people invest at all.

For example, while Bitcoin has nearly doubled in value over the last year, reaching a price of over $18,000 in November 2020, it’s also drastically lost value in the same year, like when it bottomed out at under $5,000 per Bitcoin. Even Bitcoin’s recent highs, however, are still lower than its 2017 peak of about $20,000 per Bitcoin. All of this is to say, cryptocurrencies, unlike most established currencies, can be very volatile and change value frequently.

That’s why Peter Palion, a certified financial planner (CFP) in East Norwich, N.Y., thinks it’s safer to stick to currency that’s backed by a government, like the U.S. dollar.

“If you have the U.S. dollar in your cash reserves, you know you can pay your mortgage, you can pay your electricity bill,” Palion says. “When you look at the last 12 months, Bitcoin looks basically like my last EKG, and the U.S. dollar index is more or less a flat line. Something that drops by 50% is not suitable for anything but speculation.”

That said, for clients who are specifically interested in cryptocurrency, CFP Ian Harvey helps them put some money into it. “The weight in a client’s portfolio should be large enough to feel meaningful while not derailing their long-term plan should the investment go to zero,” says Harvey.

As for how much to invest, Harvey talks to investors about what percentage of their portfolio they’re willing to lose if the investment goes south. “It could be 1% to 5%, it could be 10%,” he says. “It depends on how much they have now, and what’s really at stake for them, from a loss perspective.”

VanEck Launches Bitcoin Exchange-Traded Note on Deutsche Boerse

VanEck, the New York-based investment management firm with around $50 billion in AUM, has launched a bitcoin exchange-traded-note (ETN) that for trading on the Deutsche Boerse Xetra.

Listed on the Frankfurt, Germany-based trading venue Wednesday, the VanEck Vectors Bitcoin ETN (VBTC) is physically backed by bitcoin and tracks the MVIS CryptoCompare Bitcoin VWAP Close index.

“Bringing to market a physical, fully-backed major exchange-listed bitcoin ETP was a top priority of our firm,” Gabor Gurbacs, director of digital-asset strategy at VanEck, said. “We hope to serve many clients and partners in Europe, Asia, and across the world using our innovative, investment-friendly, and regulatory-conscious access vehicles.”

An ETN is a type of unsecured debt security payable to the bearer that tracks an underlying asset or an index. In effect, they mean, investors can gain exposure to an asset class without owning it.

VanEck has partnered with Liechtenstein-based crypto custodian Bank Frick for secure bitcoin storage services. The total cost associated with managing and operating the instrument, or the total expense ratio, is 2%. The investment product is currently limited to investors from Germany, the Netherlands and the U.K.

There are now three bitcoin ETNs listed on Xetra. ETC Group was first listed in late June, followed by crypto ETP issuer 21Shares in July.

The firm’s decision to launch an ETN comes after several failed attempts to win approval for an exchange-traded fund, or ETF, from the U.S. Securities and Exchange Commission.

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‘BitcoinTuesday’ to become one of the largest-ever crypto donation events

BitcoinTuesday, scheduled for Dec. 1, aims to become one of the largest cryptocurrency fundraisers in history. 

The Giving Block, a crypto donations company, has secured partnerships with over 120 nonprofits and 30 blockchain companies to spearhead BitcoinTuesday — a one-day event that promotes charitable giving via cryptocurrency.

Some of the biggest names in crypto will participate in the event, including Cointelegraph, Gemini, Ledger and Blockfolio. Along with dozens of other blockchain companies, they are stepping up to help over 100 charities collect Bitcoin (BTC) and other cryptocurrency donations before the holidays.

BitcoinTuesday will feature several trivia fundraising events, where HODLers can test their knowledge of the cryptocurrency and blockchain industry. Users are also encouraged to create their own fundraising events, such as live streams or poker tournaments, to support their favorite charity.

The Giving Block tells Cointelegraph that BitcoinTuesday 2020 will see “1,000% growth in nonprofits accepting cryptocurrency donations.” Organizations like Save the Children, No Kid Hungry, and The American Cancer Society are just some of the charities that will participate in this year’s event.

According to The Giving Block:

“All our charities accept more than just Bitcoin. Bitcoin is front and center, but you can donate every crypto currently supported on Gemini.”

A similar event last year successfully onboarded a dozen charities. BitcoinTuesday 2020 is an order of magnitude bigger, signaling a clear shift in how nonprofits view digital assets.

With hundreds of billions of dollars flowing into the cryptocurrency market this year, digital assets offer new fundraising options for charities. The Giving Block tells Cointelegraph that crypto adoption has a positive impact on donations as holders look to offset capital gains taxes by making charitable contributions.

They also believe that nonprofits themselves can aid crypto adoption by offering users the opportunity to donate via digital assets:

“Nonprofits adding crypto as an option across their website and platforms, calling for crypto gifts in their communications, posting about crypto on social. This drives their mainstream audiences into the crypto scene which is invaluable.”

Of course, charitable giving is nothing new for the crypto community. In Dec 2017, an anonymous Bitcoin charity called the Pineapple Fund gave away 5,057 BTC to 60 charities. The Giving Block is looking to replicate the success of the Pineapple Fund and lay the foundation for an even bigger charity drive in years to come. Although there is no set goal for how much BitcoinTuesday can raise, The Giving Block says, “we think raising millions is perfectly reasonable.”

They added:

“It will depend on who steps up and makes a statement!”

Nonprofit charities can participate in BitcoinTuesday by applying directly through The Giving Block. Other companies can participate in the event by becoming a sponsor or promotional partner.

If you are a donor interested in making a large crypto donation, contact The Giving Block to facilitate a conversation between you and the charity of your choice.

What the History of Airlines Tells Us About Blockchain Commerce

We may be nearly 30 years into the internet era but nearly every asset, product and service in the global economy remains an offline asset. From cars to farm tractors to apartments to storage spaces, the truth is the vast majority of the world’s productive economic assets are offline. We don’t know if they’re busy or not, if they need maintenance or if they’re available to be rented. We can’t even find our car keys.

That’s going to end soon. In the coming years, a combination of blockchain, wireless networks and internet of things (IoT) is going to start connecting, digitizing and tracking the world’s stock of productive assets. Every piece of capacity can be represented as a digital token on a blockchain, accessible through smart contracts, and managed and available based on IoT-enabled connectivity. The impact is going to be enormous; some industries are going to be turned upside down overnight, while others might not change much at all. How will we be able to know and predict what will be impacted and how? I suggest a brief study of history.

Paul Brody is EY’s global innovation leader for blockchain. The views in this article are those of the author and do not necessarily reflect the views of the global EY organization or its member firms.

While the possibility of true digitization has been around for about 30 years, we still have a long way to go. One case study worth considering is the airline industry, which was one of the very first to be fully digitized and has had, to put it mildly, a very rough ride along the way.

In the fall of 2005, I remember landing at San Francisco International Airport on a flight from Dallas. Over the PA, the flight attendant thanked us, as usual, for choosing her airline. She concluded her message with a line that made the whole plane laugh: “We know you had a choice of bankrupt airlines for your flight today and we thank you for choosing us.” At the time, nearly every major U.S. airline was under the protection of Chapter 11 bankruptcy. For some of them, it was their second visit in less than a decade.

While the immediate cause of this particular wave of bankruptcies was a combination of the dot-com collapse and the Sept. 11, 2001, terrorist attacks, the financial situation of the major airlines had been dire for a long time. Since airlines were deregulated in 1979 there has been a steady stream of bankruptcies and mergers as the industry consolidates. This isn’t a story about deregulation, however; it’s a story about digitization.

The airline industry offers a unique and interesting real-world experiment in what happens when you digitize an industry. What makes this industry particularly interesting is that it’s possible to look at the impact of digitization as having effectively taken place from one moment to the next. This is because although digitization of the airline industry took more than a decade, regulations that governed where airlines could fly and how much they could charge meant that no real impact on pricing or economics could be seen while the industry was regulated.

Every piece of capacity can be represented as a digital token on a blockchain, accessible through smart contracts, and managed and available based on IoT-enabled connectivity.

never returned. Famous names from the earliest days of aviation disappeared, including Pan Am and TWA. Many of the others merged with the stronger survivors – “strong” being a relative term because nearly all of the industry’s “winners” spent a stint in bankruptcy as well.

See also: Paul Brody – Enterprises Need Third Parties for Oracles to Work

The economics of air travel are challenging for a couple of reasons. First and foremost, the marginal cost of flying an additional passenger on a plane is nearly zero. Selling that ticket for as little as a few dollars is better than leaving the seat empty. And because seats cannot be filled after take-off, there is always a “final sale” going on. This often leads to airlines selling seats that are at the margin, profitable, but are on average far below costs. 

Perhaps most painfully for airlines, and despite decades of work on everything from service quality to scheduling analytics it turns out most consumers buy their plane tickets based on only one major criteria: price. And though at times it may seem like the entire world is addicted to frequent flyer miles, they turn out not to be a strong enough lure to sustain substantially better pricing over a long period of time.

The result: Prices trended towards marginal cost of flying one more passenger (which is nearly zero) and far below the actual average cost whenever the industry has excess capacity. The industry has historically been good at creating excess capacity by both ordering more planes and getting much more efficient at flying those planes. Nor is parking the plane an option, not when they cost up to $100 million each and are purchased with borrowed money.   

Finally, and this is where digitization is so powerful, the structural elements of the ecosystem (high fixed costs, low marginal costs) are amplified by the digital marketplace. Every seat on every flight is instantly visible, making comparison-shopping and capacity-planning very easy. That leaves no quiet, profitable corners of the market hidden from view.

And now as digital rolls forward, there might be many more similar industry experiences in multiple industries. IoT is going to instrument a lot of industrial capacity, much of which is presently both idle and invisible. Just like the airline industry, once a huge amount of idle capacity becomes visible and bookable online, the likely effect is a plunge in pricing. How many idle MRI machines or pieces of mobile, heavy construction equipment are out there? 

Which products and industries are most at risk? Not every product is easily subdivided or shared, but those with capacity that can be shared are at higher risk than others. Industries that have low asset utilization are also at risk. Even before COVID-19, most offices sat idle much of the time. Movie theaters are empty during the week. Classrooms are quiet three months of the year. What if all these facilities and assets could be managed, booked and utilized online?

We’ve learned the hard way in the last few months that we probably pay for much more office space than we really need. What’s next?

a 12% return on invested capital for routes that operated with at least 55% capacity utilization. Airlines often assumed that mid-week flights would run nearly empty and holiday destinations would have weak performance in the off-season. 

In the decades after deregulation, airlines discovered they could fill mid-week flights and off-peak destinations to the brim if the price was right. In 2018, the average U.S. airline had a load factor of 83%. That means, as many have experienced, full planes, seven days a week, 365 days a year. With the proper incentives, we should not be surprised if, a couple of decades from now, new movie theaters or classrooms are easily reconfigured into offices or meeting spaces, and MRI services are open 24 hours a day.  

Can enterprises prepare themselves for this future of digital disruption? They can start by getting a much deeper understanding of their assets, which ones are essential, how much they are really being utilized and how necessary they are for operations. We’ve learned the hard way in the last few months that we probably pay for much more office space than we really need. What’s next?

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