In this issue
- Coronavirus batters crypto markets. Is there no more safe harbor?
- Covid-19 infiltrates Ethereum events in Europe
- Robinhood’s latest woes
- Blockchain voting after the stain of Voatz – yea or nay?
- IOTA limps back after cyber attack
- Smart cities and blockchain regulations in China
Listen to the podcast
Listen to Forkast.News Editor-in-Chief Angie Lau and Senior Editor Sam Reynolds discuss the top blockchain news from around the world.
From the Editor’s Desk
Time to hunker down. It’s a downpour. Covid-19 and coronavirus fears have roiled markets, dampened cryptocurrencies and halted conferences — while the disease continues spreading undetected. Bitcoin prices have fallen to the point where some wonder if toilet paper is a better bet. Funny yes, but in actuality, every market is behaving abnormally under coronavirus concerns… including the U.S. Treasury market.
Nothing will ever be the same after this global, shared event. Perspectives will change, businesses will pivot, and the future is being shaped right now. As the ground shifts from under us, in a way that not even the 2008 financial crisis had, we move towards something different: whether it be a new way to socialise online, global workforces working from home, or taking a collective breath to take care of ourselves and each other. I like to say that Asia lives six weeks in the future. So for the rest of the world, there’s a glimmer of light ahead. As Covid-19 cases appear to stabilize in China, news of smart-city blockchain technology and new rules of engagement for a PBOC-backed digital currency are being implemented.
Still, this is a good time to stay at home. I’d rather not see you today, so we can celebrate together in person tomorrow. For now, let’s connect right here in the safety of this digital space.
Until the next time,
Angie Lau,
Founder & Editor-in-Chief
#1 Bitcoin’s wild ride
By the numbers: Bitcoin — 3,200% increase in Google search volume.
Governments around the world announced stimulus packages to help their economies cope with the Covid-19 pandemic. The efforts were not enough to stop markets from crashing, including that of cryptocurrencies.
- Anti-bitcoin Twitter users quickly seized on this past week’s price drops, praising toilet paper’s value over bitcoin.
- Edward Snowden and Tyler Winklevoss came to bitcoin’s defense.
- @Snowden: “This is the first time in awhile I’ve felt like buying bitcoin. That drop was too much panic and too little reason.”
- @tylerwinklevoss: “Bitcoin was born in 2008, during the winter of our financial discontent. It has already weathered much to be here, and it seems unlikely to give up anytime soon. It will emerge from this current calamity stronger than ever. Decades are not measured in days.”
Forkast.Insights | What does it mean?
Bitcoin’s price has been on a wild ride during the past few weeks. Initially, the value plummeted along with other equities and assets as the markets attempted to price in the impact of the coronavirus pandemic. In fact, in the early days of this market selloff, bitcoin depreciated faster than traditional equities and dropped a painful 50%. Likely, when equities plummeted and margins calls were made, traders had to liquidate something to cover what they owed. While the price didn’t recover as quickly as the markets did later in the week, afterward some signs of recovery appeared — and the price accelerated back to the $5,000 mark —once the Fed injected $1.5 trillion into the repo market to stabilize things. Over the weekend, the Fed announced a $700 billion quantitative easing program, but bitcoin’s price continues to remain stable throughout the week, up by 2.5% by mid-Wednesday.
So what does this tell us about bitcoin as an asset? It’s not quite the safe haven hedge that we thought it was. It is looking more like a traditional asset. The negative correlation between a downward market and the price of gold, with the price of gold rising as the market crumbled, was tested once again and held true. But for bitcoin, which previously followed a pattern like gold, the opposite happened. Yet this season of market volatility is unique, and unlike anything else we’ve seen before. As more stimulus measures are announced around the world, and traditional forex markets remain in flux, we’ll keep an eye on pricing as this pandemic continues.
#2 This is why conferences are canceled
By the numbers: EthLondon — over 5,000% increase in Google search volume
People who recently attended the ETHLondon Hackathon and the Ethereum Community Conference (ECC) in Paris are being urged to get tested for Covid-19 after Torus Labs co-founder and CEO Zhen Yu Yong (@zenzhenyu) tested positive.
- “I fell ill yesterday and have just been diagnosed with #COVID2019. Everybody who had close contact @EthCC_ or @ETHLondon with me should take extra precautions and/or get tested”
- Reports suggest at least 18 confirmed infections from the events (as of March 17).
Forkast.Insights | What does it mean?
Basement dwellers and loners rejoice! It’s going to be awhile until we see another large organized group gathering.
With Covid-19 showing no signs of slowing down, trade shows and conferences are going to be postponed for the foreseeable future. These events, with their confined spaces, recirculated air and thousands of handshakes, are perfect hubs for infectious disease transmission. Governments around the world have banned mass gatherings, and every major tech conference that had been scheduled for the first half of the year has been postponed. Consensus, the grande dame of all the blockchain conferences, has gone online only and will be free of charge this year.
Many media companies — specifically CoinDesk — rely on conferences as a source of revenue. These cancellations are going to hurt their balance sheets, but the pain won’t be unbearable as the online ad market remains strong and is expected to grow by double digits until the middle of the decade. As more people spend the coming weeks at home, this ad market may be especially resilient as traffic increases.
Until the coronavirus pandemic ends, we’ll all be networking and doing our meetings from our computers, in the comfort and safety of our home. Now, to figure out which shirt won’t clash too badly against the home office backdrop for those Zoom calls….
#3 Robinhood down and out
By the numbers: Robinhood — 3,900% increase in Google search volume
Popular “commission-free” trading platform Robinhood have had two more outages this past week, following an outage the previous week that denied users access to portfolios or finalizing transactions.
- Robinhood is already facing difficulties following the outages, which spurred a Florida-based trader to file a lawsuit against the platform.
- Users took to social media by generating various anti-Robinhood accounts on Twitter. The most popular, @ClassRobinHood has already gained 8,000 supporters.
Forkast.Insights | What does it mean?
Robinhood has had a tough time in recent weeks. The investing platform went down on March 2, 9th, and 12th, much to the horror of users. Some traders complained that they weren’t able to pull cash out fast enough during the market declines of March, nor could they put money back in to capitalize on one of the sharpest market recoveries of all time.
In response, one trader has initiated a class-action suit against the company while others are petitioning the Financial Industry Regulatory Authority (FINRA) to revoke Robinhood’s membership.
Traders are right to be angry with the company, especially since the demographics of Robinhood users makes them more vulnerable to the financial consequences of a technical outage. Robinhood is not E*Trade. Its users are predominantly millenial and first-time investors. Hopefully, these young users will be compensated for their losses and won’t lose faith in the market and its potential.
#4 More shade on blockchain voting app
By the numbers: Voatz — 3,900% increase in Google search volume
The blockchain-backed e-voting company Voatz has come under fire again after Trail of Bits performed a “white-box” security assessment of the Voatz platform.
- This follows an announcement from West Virginia that it would ditch the voting app for its Democratic primary.
- Soon after this year’s infamous Iowa Caucus debacle, which spurred discussions about blockchain voting as an alternative, MIT researchers also analyzed Voatz. Their study found multiple security flaws — problems that the Trail of Bits security report also confirmed.
Forkast.Insights | What does it mean?
Online voting with platforms powered by the blockchain means different things for different countries. For young democracies struggling to evolve from dictatorships and oligarchies, it could mean a new era free from vote-tampering and intimidation by the ruling parties thugs. For mature democracies it could mean greater electoral participation by bringing the polling station to your phone or PC. For those with demanding schedules, parents of young kids without child care, or the physically disabled, the idea of a digital ballot box that comes to you can be especially appealing.
While online voting has a lot of potential, there are serious concerns regarding whether the technology is mature enough to be deployed in such an important environment. It’s not a problem with blockchain per se, but rather the apps that interface with the user. Voatz, which has been used in a handful of local elections in the United States, has so far proven to be an abject failure.
It was also an avoidable failure. Voatz’s code should have been scrutinized by technical experts such as Trail of Bits and MIT before it was deployed
It’s also important to remember that while Voatz relied on permissioned blockchains, the failure of Voatz isn’t a failure of blockchain technology to prevent data-tampering. The code behind the app itself was apparently so sloppy, flawed and full of security holes that — as MIT noted in its report — the “ballot was busted before the blockchain.”
Like other aspects of modern life, online voting will likely eventually become an accepted part of democratic processes around the world. Let’s just hope that the failure of Voatz doesn’t soil everyone’s perception of it.
#5 IOTA limps back after hack
By the numbers: IOTA — 1,750% increase in Google search volume
IOTA has finally reopened the Coordinator.
- The open-source distributed ledger had shut down on Feb. 12 after a $2 million hack that drained user wallets.
- Founder David Sonstebo pledged to reimbursing victims of the Trinity wallet hack, according to CoinDesk.
Forkast.Insights | What does it mean?
IOTA once billed itself as something along the lines of the Ethereum of the tokenized economy, given its superior protocols for tokenization. However, the hack and subsequent theft of $1.7 million from the Trinity wallet shattered a lot of confidence in the network’s ability to function.
Although the move by David Sonstebo, the founder of IOTA, to repay those affected via his own holdings, is a good move, a hack of this magnitude this early into IOTA’s life span will likely dampen enthusiasm for its mass adoption. Ethereum certainly had its share of hacks and security incidents, but Ethereum’s scale meant that these problems were quickly patched up and business continued as usual. IOTA took nearly a month to come back online. It’s understandable that the reboot took some time, as they wanted it to be done carefully. But in the blockchain world moves at lightning speed, and in this month of downtime, many may have moved on.
#6 China blockchain news roundup
Following the publishing of blockchain standards, industry insiders believe that blockchain in the financial sector and DCEP will be implemented soon.
- People.cn published a story titled: “With the landing of standards, blockchain in the financial sector will accelerate to implement.” The story mentions recent blockchain updates from the government, including the “Financial Distributed Ledger Technology Security Specification” — said to be the first blockchain standard for China’s financial industry published by China’s central bank, the People’s Bank of China (PBOC).
- PBOC’s research institute on digital currency also published an article named “Development and Management of Blockchain Technology” in China Finance Magazine, praising the unique mechanism of blockchain technology in fostering trust and urging the healthy and orderly development of the blockchain industry in China.
Forkast.Insights | What does it mean?
China’s race to become the first nation to offer a central bank digital currency — it is calling it a Digital Currency Electronic Payment, or DCEP system — comes as the Covid-19 crisis recedes in China and life begins to return to normal. But with the macroeconomic headwinds in the global economy, governments around the world, including Beijing, are going to be busy injecting rounds of stimulus and quantitative easing into the markets.
But as Izabella Kaminska notes in the Financial Times, Deutsche Bank’s George Saravelos wrote in a recent note that there’s a “lack of monetary policy room” to fight off a collapse should the market view the first round of stimulus and QE measures as underwhelming. Kaminska refers to a Bank of England paper that points out how CBDC’s can be used as a “new tool for unconventional [monetary] policy”.
“If interest rates are, and continue to be, low then central banks are likely to be constrained by the lower bound more frequently than historically was the case. A CBDC that could be remunerated at a negative rate could be used to relax that constraint, to the extent that the constraint was caused by the fact that cash pays zero interest….. This could, theoretically, widen the policy options available and avoid the economic costs of having monetary policy hit the effective lower bound, potentially improving economic outcomes,” said BoE.
So when China rolls out its next round of stimulus, don’t expect it to be of the usual variety. Expect it to be issued exclusively on its DCEP system as a way to incentivize adoption. This would also prevent a run on banks and capital flight, as the DCEP would encourage domestic spending and encourage capital repatriation. Should China pull this off, it would solidify the nation’s leadership in DLT (remember, this is unlikely to run on blockchain) while providing the world’s largest case study for the adoption of CBDC.
China Mobile launched “Five Sources Smart City Program” (智慧城市五源計劃), a sustainable smart city operation mode to serve the public.
- The program aims to create five platforms, including a blockchain services online platform, a residential card platform, a business management platform, governmental services platform and an intelligent family platform.
“‘Five Sources Smart City Program’ will cover most of the aspects of people’s daily life,” said Wang Mingsheng, a researcher at the Institute of Information Engineering of the Chinese Academy of Sciences. “In the application of blockchains, it needs to support a large scale of nodes and design an efficient chain structure and consensus mechanism.
Forkast.Insights | What does it mean?
In the West, smart cities are facing heightened scrutiny or downright hostility as they are increasingly viewed as a form ofsurveillance capitalism — the commodification of personal information by data-hungry giants like Google and Facebook. Blackberry founder Jim Balsillie has been leading the charge against smart cities,warning parliamentarians in Canada that, if the trend is to continue, the country needs to consider stricter data privacy laws to protect privacy.
But that’s a product of the West vs. East divide in values and thinking. In China, the government has doubled down on smart cities as a data-driven way to make its rapidly growing urban centers more livable. The vast networks of CCTV cameras that monitor highways and roads in China collect traffic flow analytics to better manage rush hour. But the granular analysis of people’s commuting patterns via their metro cards might make many in the West, particularly in Canada and the United States, uncomfortable.
However, in China, this has arguably led to a higher quality of life for people residing in its major metropolitan areas. The air is cleaner, and the feared rush hour of cities like Beijing is still there but seems more manageable than the commuter traffic in mega cities elsewhere.
China Mobile’s push to further expand its smart city offerings, including a blockchain platform for paying fees to the city and managing government services, will create a new level of efficiency for Chinese cities. But a lot of personal data will be hoovered up by the state in the process. In China, many might see this as acceptable, but in the West, it could be a tough sell.
