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Lack Of Regulation Would Kill The Crypto Market

Philipp Maume and Mathias Fromberger from the Technical University of Munich recently published a paper where they discuss the initial coin offerings market and its regulation. The authors draft that the European law should see tokens launched and promoted via ICOs as securities.

The research named Reconciling US and EU Securities Laws further implies that the EU regulators can simply follow the course set by the US Securities and Exchange Commission. The authors undoubtedly pose that there should be a clear regulatory framework regarding cryptocurrencies and ICOs in the European Union.

An excerpt from the paper reads:

“It is our view that investment tokens (including hybrid tokens with some investment functions) are ‘transferable securities’ under Directive 2014/65/EU on Markets in Financial Instruments.”

Maume and Fromberger note that a token running on a blockchain is considered a security if it is “transferable, negotiable, and standardized,” according to the EU. Blockchains do exactly that – by using public and private keys they transfer tokens between senders and receives.

The EU explicitly gives an answer to the term “negotiable”. In fact, if an exchange lists an investment token it instantly becomes negotiable. Hybrid tokens also fall in this category. The only kind of token that cannot be deemed a security is the one that acts only as a payment method. Having said that, we can easily agree that ICO associated tokens are indeed securities. In addition, we can all agree that developers do use standards when building cryptocurrencies.

Unified crypto regulation

The authors point that if there isn’t one global regulatory framework the market is going to die in the near future. The researchers emphasized that we are already “racing to the bottom”.  This term is often used to describe a situation where different nations are all trying to be at the forefront of something in particular and are ready to drop taxes and regulation in order to attract businesses. However, this usually impacts the quality of the industry in a negative way.

In fact, we are already witnessing companies hopping from one country to another, regardless of whether we are talking about exchanges, ICOs, fintech startups, wallet providers, or cryptocurrency miners. Not to mention that launching a cryptocurrency token is extremely easy. The paper notes that “less than 100 lines of code seem to be typical in the industry,” implying that via platforms like Ethereum everyone can set up their own token.

Should we note that the cryptocurrency industry is full of shitcoins? Should we say again that we need quality, not quantity?

 

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Why 2018 Is Not The Year Of The Bitcoin?

When Bitcoin was just shy of $20,000 in December 2017 everyone was shouting “To the MOON”. However, the events took rather a different turn and large portion of the crypto fortune got wiped off within days. It’s not that experienced crypto traders hadn’t seen the market crash before. 2018 is different because everyone had great expectations and had their pink sunglasses on.

Say that back in December it wasn’t just like that. If somebody had told me then that the crypto market will enter a downward spiral and will crash literally twice a month, I would have laughed my ass off. Well, karma is a bitch they say it this might actually be the truth. But what on earth happened? What got us begging for mercy? Why even the greatest opponents of crypto regulation now deemed it Bitcoin’s last chance? There are certainly many factors that played a role and I might possibly not cover all of them in this article but here are they anyway:

The Immense Hype

Yes, when the market is flourishing and the prices are surging nobody believes things might go the other way. The positive trend kept in November and December and that short two-month period got our perception of reality blurred. What am I talking about? Well, when your parents start talking about viral technology/financial/supposedly revolutionary things, then you know the topic has outgrown itself. I’m talking overhype here. It created the illusion that virtually everyone can become a millionaire overnight. There were people getting loans just to invest some cash in “the next Bitcoin”. Does that ring a bell? Sorry, but overhyping things usually leads to their demise. We collectively pumped the balloon and it eventually burst.

Scams, frauds, and swindles

Fraudster and criminals of all kinds exist since the dawn of humanity and they are capable of doing anything just to get your cash in their pockets. Yes, the crypto world makes no exception. Do you know how much money cyber culprits have snatched from January to June this year? More than $1.1 billion. These include exit-scams, phishing scams, crypto blackmails, physical crypto thefts, exchanges hacks and whatever you can think of. See, the crypto world is by no means a safe place and it’s not even necessary to see the market crashing to lose your investments.

Where are the authorities?

Scams lead us to my next point. The governments are willing to intervene for a variety of reasons – they want to regulate the space and eventually protect victims, solve disputes and so on. Another crucial pain point for the officials is that currently, cryptocurrencies are a great tool to launder money and finance crime organizations. Obviously, it wouldn’t have been that easier for criminals to do so if there were proper regulatory frameworks. Lack of regulation makes tokens volatile apart from just scaring the sh*t out of investors. Especially institutional ones.

Where do we spend cryptos?

Ok, I get it. There are retailers and merchants that do accept cryptocurrency payments. However, ask your uncle to name of few. See, if only crypto geeks know who they are there is no real cryptocurrency adoption. Since we cannot spend digital currencies the way we spend fiat, cryptocurrencies become illiquid. It’s like you have a vault with $10k in it but you don’t have the key. No one would enjoy that. Period. If you are still interested what are your spending options, click right here.

Crypto mining monopoly

Just like cryptocurrency trade, cryptocurrency mining can be very profitable. However, the more time passes by, the harder it gets to mine through a regular hardware. That’s why hardware manufacturers are cashing on the trend by producing ASIC machines, which are specifically designed to mine certain cryptocurrencies. The current industry behemoth is Chinese-based Bitmain. And guess what, it accounts for 85% of the mining rigs sales worldwide. Moreover, its devices don’t come cheap, which means not everyone can afford them. Some say this centralizes the hash power in the hands of the rich. What do you think? Are cryptocurrencies really setting us free from the current financial system? Think twice, it’s alright! Yeah monopoly, really drives off early crypto supporters.

Some of the above-mentioned factors you can control and some you cannot. The good news is that cryptocurrencies are here to stay. However, before we see all their promises come to life, we really have to learn to think in the long-term.

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What If The Cryptocurrency Bubble Bursts?

Financial analysts have long been saying that the cryptocurrency space is in a bubble-like state. Though I fiercely refused to accept their point of view last year, today I am more on their side. In fact, I really hope the bubble bursts.

No, I am not against cryptocurrencies. However, this year we can clearly see that there is something very wrong in the world of crypto finance. Apart from the long list of illicit activities that happen on a daily basis, it is obvious that the interest in digital assets has changed. The investors have changed and the attitude has changed as well. In my opinion, the sooner the bubble bursts the better for the whole cryptocurrency space.

“I want it all and I want it now”

This attitude killed the noble ideas of Satoshi Nakamoto. Cryptocurrencies emerged because they had to. Nakamoto intended to set us free from the corrupt financial system but instead, the crypto community thwarted that by speculating. Yes, I do believe that price speculation destroyed the crypto world. Instead of being independent we turned into robots which buy and sell thousands of worthless coins in an effort to bring something home. If you are still missing the point, the business side of crypto trade is bad for the market in general.

Why the bubble has to burst?

You know the answer to this question – there are way too many tokens, most of which are totally useless. In fact, there are at least 800 dead coins, according to DeadCoins.com.  What does this mean? I mean, everyone is trying to cash in on the crypto trend – developers, average Joes that know nothing of stock trading, digital assets or finance in general, fraudsters, ICO issuers, and most recently – institutional investors.

Let’s face it, the technologies underpinning cryptocurrencies are far from perfect. When something in its infancy draws so much attention and sucks up so much money somehow everyone forgets that it needs tons of improvement. What I am trying to say is, investors and traders are unconsciously forcing the events. The hype is poisoning the crypto environment because it paints a false picture that cryptocurrencies are ready to conquer the world, which they obviously aren’t.

On the other hand, when the bubble bursts we will have a more realistic point of view. Furthermore, all these shitcoins will disappear once and for all, which in turn will strengthen and consolidate the market. Indeed it would be much wiser to use a couple of well-developed tokens that have real-life use cases, that have no scalability issues and which operate under well-thought regulatory frameworks.

In conclusion

It is for the sake of cryptocurrencies to understand that we need to get rid of all these tokens that have no other use apart from speculation. Cryptocurrencies have to make our lives easier, not harder. However, at the moment it’s the opposite. We fail to justify the existence of each and every token, we fail to achieve worldwide adoption, and we even fail to have a clear stance on them. In contrast, a bubble burst will serve just like hitting the restart button. We will have the opportunity to start anew. After all, once the dot-com bubble exploded it didn’t destroy the internet but rather made internet projects more focused.

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Cryptocurrency Regulation Won’t Be The End Of Bitcoin

The world of crypto finance is rapidly evolving and what worked yesterday is outdated tomorrow. Everything is changing so fast that it is hard to tell what is right for the crypto market and what is not. Not only does the market surges and drops a hundred times per day but the investors change by the hour. We see millions and billions raised through initial coin offerings, we see projects fading away, we see institutional investors stepping in, and even the authorities have their eyes set on the crypto world these days.

For years Bitcoin remained on the sidelines. Only a few hundred tech-savvies knew what it is and how it works. Until last year, cryptocurrencies were only for the geeks. However, their prices started to move upwards and this drew the attention of many people how wouldn’t have otherwise been involved in technology or stock trading. The more average Joes joined the party, the higher the prices went. Though this unexpected growth was crucial to the technological development of blockchains we refrain to say it necessarily did well to the sector. Mainly because many people decided to run fake projects just to squeeze some cash from their naïve supporters. Yes, exit-scams are perhaps the single most important thing that made the authorities crack on cryptocurrency projects.

Point of no return

Let’s face it, the authorities are going to regulate the sector sooner or later. The question is, how do we make the most of it? Bitcoin was originally created with noble intentions such as freedom and independence. However, thanks to dark web vendors, cybercriminals, hackers, exit-scamsters, and money launderers Bitcoin and especially privacy-oriented tokens like Monero, Zcash, and DASH are mainly associated with illicit activities.

How do we clear the image of cryptocurrencies then? Well, one way is to try to educate people who are new to them. Check our survival guide, for real-life examples. The other way is to regulate the space. By designing proper regulatory frameworks the authorities can cut down fake projects without completely destroying the decentralized nature of cryptocurrencies.

Think about it for a second, we can stop hacking or at least diminish it if we all migrate to decentralized exchanges. Let’s assume both blockchain experts and lawyers participated in their creation. What if smart contracts have legal bindings as well? I am pretty sure, if someone tries to deceive a smart contract it can automatically reveal his identity. In such case, the officials will know who tried to cheat. Sounds great, doesn’t it? After all, we all think hackers deserve prosecution.

What about the regulators?

Don’t get us wrong, we are in no way supporting centralization. However, the crypto world needs regulation either from the authorities or from its strong community. Otherwise, it will bury itself. Come on, Bitcoin wasn’t meant to launder money or to finance criminal organizations. It was meant to serve the ordinary men. We should stick to that when designing regulatory frameworks. No, it wasn’t meant to make you quick-rich either, it’s not about money all the time. Think about independence and proper governance instead, think about mainstream adoption and real-life use cases.

Of course, those who will be in charge of the changes should be under the strict surveillance of the community. Did you know that Zcash, which usually recognizes itself as a privacy-oriented token is not prioritizing ASIC resistance anymore? Why do you think its governance panel voted against ASIC resistance? We dare to say it is because many members of the crypto community had forgotten why cryptocurrencies emerged in the first place.

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How To Act When Someone Says “Bitcoin Has No Value” During A Family Dinner

We all know how it feels sitting around the dinner table with your family. Everything is just perfect. You are all happy to see each other during these family gatherings. Then all of a sudden someone drops “Bitcoin” and everyone turns their eyes towards you. If you are lucky enough they will just ask you what are these cryptocurrencies, what the hype is all about and so on. Unfortunately, some of us draw the short straw. In this case, you hear some of the elders saying “This is total sh*t! You can’t spend these imaginary tokens, can you?”

Well, we’ve been there and it hurts. That’s why we decided to wrap up a short survival guide for those of you having to defend yourself for being a crypto enthusiast. Of course, you can just try to shut skeptics’ mouths by telling them they don’t understand the complex technology behind cryptocurrencies but, believe me, it won’t do the trick. You will just add fuel to the fire and the chances are you’ll lose your ground. On the other hand, being prepared with an appropriate answer will do you good as you won’t sound like an angry teenager.

Real-life use cases

In reality, you can use your tokens for practically everything. But first things first, you have to eat something right? The easiest thing you can do is search in Coinmap for venues near you that accept Bitcoins. What about grocery stores that do not accept cryptos? You can indirectly spend your cryptos there as well. Here is how – gift and prepaid card vendors such as Gyft and eGifter accept Bitcoin as a payment method, so the only thing you have to do is purchase the cards you need and then spend them in brick-and-mortar stores. Easy-peasy. Not only that, but you can actually make a gift to the crypto skeptic you are talking to by giving him a prepaid card. They’ll love it, I bet my…

Now that you’ve done the first step, the others are listening as well. You’ve made a proper answer to a person who doesn’t know a thing about digital currencies. You’ve just proven him wrong once, which means you can do it again. If they ask you whether you can travel on cryptos, you know the right answer, you can. There are many online platforms where you can instantly book and buy flights with your beloved Bitcoins. BTCTrip, aBitSky, and TravelbyBit allow you to do just that and boy, they offer great user experience. What’s more, the entire shopping area in the Brisbane Airport accepts Bitcoin. In addition, there are crypto ATMs in most major cities across the globe. So yeah, paying with cryptocurrencies for your trip has never been easier.

Even more use cases

Furthermore, the existence of OpenBazaar opens up hundreds of possibilities for you to shop for jewelry, art, music, movies, food & beverage, hardware, software, and practically anything in between. Unlike other e-commerce platforms, OpenBazaar is decentralized, meaning there are no middlemen. Users are directly connected with each other, which makes for a great shopping experience. If your listeners are still not impressed, here’s what you gonna do – show them how you can instantly buy healthcare products from AquaSource. Old people love AquaSource products and you know just how to tease them.

Of course, this is by no means a full list of real-life use cases but hey, it’s more than enough for you to survive the family dinner. Besides, why don’t you share your favorite ways of spending Bitcoin?

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Wozniak: I Like To Think Bitcoin Can Be The World’s Single Currency

Steve Wozniak, Apple’s co-founder, has expressed his interest in cryptocurrencies several times so far. In May he praised Ethereum for its pivotal role in the development of distributed ledger technologies. He even went on to say that he sees Ethereum as the new Apple. Interestingly, he hinted that he likes Ethereum for the platform it is rather than its native token.

Most recently, he seemed positive about Bitcoin’s future as well. During the Money 20/20 conference in Europe Woz said in an interview that he digs the idea of a worldwide cryptocurrency that people can exchange at almost no cost.

“I buy into what Jack Dorsey says, not that I necessarily believe it’s going to happen, but because I want it to be that way, that is so pure thinking,” he said.

As you know, the CEO of Twitter and fintech platform Square, has long been a Bitcoin advocate, stating that in ten years time it will be the one and only currency used on the internet.

“The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin,” Jack Dorsey said.

It looks like Steve Wozniak has not changed his view on Bitcoin despite that he admits he had sold all of his tokens. He noted that cryptocurrency trade took too much of his time. What’s more, he even fell victim to fraudsters who drained his card during a Bitcoin transaction. Woz has often described Bitcoin as “pure digital gold” and “totally decentralized”.

“Bitcoin is mathematically defined, there is a certain quantity of bitcoin, there’s a way it’s distributed… and it’s pure and there’s no human running, there’s no company running and it’s just… growing and growing… and surviving. That to me says something that is natural and nature is more important than all our human conventions.”

It is good to hear some renowned tech gurus endorsing cryptocurrencies in times when the market is in the red once again.

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What Does The Future Hold For Cryptocurrencies?

The world of crypto finance is gradually becoming more mature. While the Wild West days have their charm, times they are a-changing. Oh, boy, how naïve we were to believe cryptocurrencies will disrupt the financial system. As time passes by, we see that digital tokens are heading all in different directions. While this is not necessarily bad, it is not that cool either.

Just a year ago anonymous trade was king. This was the number one reason for Bitcoin and every other altcoin to skyrocket in 2017. Many people got quick-rich in a nick of time. Millionaires were born overnight. Cryptocurrency exchanges grow to billion dollar industries. In just a couple of months, the Bitcoin hysteria took over the world, thus impairing its future. Everything happened so quickly that we thought it’s gonna last forever. I’m not saying cryptocurrencies are dead, I’m saying that we weren’t ready for them. We jumped in, we poured tons of money into something we don’t particularly understand from both technical and financial point of view in hope to cash in on the trend.

Where do we go now?

The trend is still going but this time the watchdogs are ready for it. While cryptos caught them off-guard last year, today the governments are forcing online exchanges to comply with more and more regulations. Take a look at Coinbase, the average Joe made it marketplace number one but today Coinbase cares more about its institutional clients. Doesn’t that ring a bell? Cryptocurrencies are commercial now and popularity destroys them. Only a handful of privacy-oriented tokens like Monero resist ASIC miners and KYC policies. But for how long will they be able to do that? In a matter of time, large cryptocurrency exchanges will care more about their fees rather than decentralization. Then they will ditch privacy tokens and over time it will get harder and harder for us to use them.

Furthermore, central banks in countries like Switzerland, Norway, and England are already exploring the potential effects of state-issued cryptocurrencies on the economy. What will be the difference between an e-franc and a Swiss franc once this happens? Perhaps the most important question we have to ask ourselves is – do we want fast money or do we want free money? Short-term gains are great but they come with a price too. Should we pay that price?

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Ledger Announces New Joint Venture With Nomura And Global Advisors

In a blog post from May 15, Ledger announced its pivotal partnership with Global Advisors and Nomura. More precisely, the three companies had established a new joint venture, Komainu, in an effort to pave the way to digital assets for institutional investors. This move doesn’t come as a surprise since the crypto market is in a desperate need of fresh money.

As per the report, the joint venture aims to bring the best of both worlds – digital assets and traditional investors. The idea is to create a secure marketplace where institutions can invest and trade with cryptocurrencies. By many, this is seen as a way to boost both cryptocurrency adoption but their development and liquidity as well. Moreover, the crypto space is still attractive despite the volatile market. What makes big names from participating is the lack of security and regulation which plague the space. Hopefully, Ledger can fix this problem. Meanwhile, Global Advisors and Nomura will use their best practices and integrate them into the world of crypto assets.

Komainu will also help non-blockchain financial companies comply with the current regulatory frameworks, thus making it easier for them to join the digital currency market. After all, it attracts them for a variety of reasons but many refrain due to lack of knowledge. That’s why we deem Komainu something positive. It will serve as the front door to the rapidly expanding world of crypto finance for institutional investors. However, Komainu is not the first project aiming to do that. Earlier in May Coinbase announced it is launching a plethora of products designed for the same target group. Here is what the head of Ledger, Pascal Gauthier,  had to say, regarding the new venture:

“By bringing together financial industry experts and digital asset security leaders, our new venture will provide, for the first time, services and solutions built for business.”

“Our new partnership will set the required standards that will bring peace of mind to digital asset investors, and provide tools and products to enable better integration with more traditional investment vehicles such as mutual funds,” added Jez Mohideen of Nomura.

Jean-Marie Mognetti, Co-Principal of Global Advisors Holdings Limited, said:

“This partnership is a progressive stepping stone towards the creation of the necessary prerequisites for further growth within the digital asset ecosystem. This will open new and exciting opportunities to global participants and contribute to move digital asset closer to mainstream offerings.”

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Is Zuckerberg About To Launch A Facecoin?

As you may know, the last couple of months have been quite intense for Facebook. The social media giant had a hard time, after the Cambridge Analytica fiasco. Last week, it announced that it is exploring blockchain technologies. It is yet too early to suggest what this might mean for all of us Facebook users but perhaps it has nothing to do with privacy issues.

Facebook screwed up big time and the eventual addition of blockchain technologies to its platforms in the future is unlikely to bring trust to the community. There are however suggestions that Zuckerberg is investigating distributed ledgers not to improve privacy but to launch an in-house cryptocurrency?

Why should you go for it?

If Mark is really to issue a Facebook coin he would make life easier for the better part of his users. Now, let’s assume I owe 100 bucks to a friend of mine who I meet once every couple of months. It would be super convenient to just send him the same amount in Facebook’s native tokens. Furthermore, Zuckerberg is probably about to accept Facecoins as a payment method for sponsored content. In other words, I would be able to promote my band’s Facebook page with Facecoins. Sounds like a piece of cake right? It sure does, but some questions just popped up in my head. Are Facebook tokens going to have a fixed price? Will they be tradable in exchanges? How will we store them? In-house wallet, anyone?

Why are Facecoins a bad idea?

Because we have enough cryptocurrencies and most of them suck anyway. As simple as that. Facebook already knows too much about us anyway, so why would we let it peek at our finances as well. What’s more, who is gonna trust it after the recent data leaks. It would be much wiser to integrate already trusted tokens than creating one from scratch. For example, if Zuck adds Ethereum or Bitcoin support to Messenger or WhatsApp he would really show that he cares about Facebook users. However, he is not going to do that because the authorities are already monitoring him tightly and we know authorities don’t like cryptocurrencies.

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Divide And Conquer: Hardforks Work Against Us

Cryptocurrencies have been around almost 10 years now but the space is largely in its nascent stage. It was only last year that digital tokens gained wide popularity. This affected the market in a positive way but we also have to note that the technology that underpins digital assets caught the eye of developers as well.

While the majority of traders show little interest in the different blockchain technologies, the IT community is somewhat more into developing them. The truth is, the crypto community is can be theoretically divided into two groups.

In for the money

The first group consists mainly of traders from all walks of life- students, physicians, engineers, anyone who is looking for short-term gains with small investments. The guys in this group want to quickly trade digital assets and seamlessly transact their funds from A to B. They are closely following the market for financial reasons and crypto features like decentralization and privacy are not their top priorities. Thanks to this group the financial specialists deem the crypto finance a bubble. Because the average trader would not involve in traditional stock trade, has almost no prior trading experience and is ready to pour his savings into the market. He is there for the money.

Now don’t get me wrong, there is nothing bad about this behavior. In fact, it is the average user that complains about bad UI/UX. This is why developers always listen to what the average Joe has to say. Because his words matter, a lot. If a product (crypto token) is difficult to work with, then it is going to lose popularity over time. Traders want everything to be easy-peasy, I want it too because it saves time, money and nerves.

Technology lovers

As I said, the second-largest group within the crypto space consists of developers, security researchers, people who are not programmers but are into technologies. And of course, those who believe that cryptocurrencies would disrupt the current financial system, the governments, and practically anything else.

The individuals in this group are more likely to neglect the financial aspect of cryptocurrencies. Instead, they focus on the technology. They want to make it faster, more efficient, adaptable, and large-scale compatible. Since everyone knows the major pain points of digital currencies such as high transaction fees and time-consuming transfers the members of this group often discuss these viral topics on Telegram, Reddit and GitHub.

Hard forks suck big time

Needless to say, when it comes to making the space better, smaller groups tend to form, as they all have different opinions on the matter. In 2018 alone a major cornerstone such as ASIC miners managed to divide the community. Some suggest cryptocurrency must remain ASIC-resistant and thus decentralized, while others prefer faster ecosystems over decentralization. As we know ASIC miners come with a cost, which not everyone is willing to pay. I am talking about both money and centralization.

One way to avoid ASIC miners is through a hard fork. Developers are also ready to fork a specific token to make the spin-off a better version of the original one. Unfortunately, the way I see it, hard forks do more harm than good.

Here is why:

– There are enough cryptocurrencies out there. Besides, there are enough good products that do not need a hard fork. I am not saying they are perfect, I am saying that instead of forking them and starting from scratch, the developing teams can execute slight modifications when needed.

Spin-offs fail. It is historically and statistically proven that forked versions have a short lifespan. Some traders like them because of the airdrops. Apart from the easy money made, spin-offs have no value. So far the community has lost interest in every forked token, apart from maybe Bitcoin Cash, which indeed managed to justify the hype.

– Hardforks flood the market. We do not need more tokens, we need a couple of coins that work on large-scale, we need tokens that bring trust and credibility, we need tokens that merchants accept. If we don’t achieve this we are playing with Sims money. Instead of stabilizing the market by investing in credible projects like Bitcoin, Ethereum, Litecoin, Monero or Ripple, we are cashing on obscure forks with the hope of getting quick-rich.

– They distract us from more important things. Whether we like it or not we have to find a way to keep the crypto momentum going, otherwise the market will die because let’s say it like it is – we have a shitload of problems to deal with. Here’s some food for thought – regulation, security, privacy, liquidity, adoption, trust, credibility, worldwide use.

Love it or hate it, this is my opinion on hard forks and their impact on the space. We all enjoy fast money but sometimes we have to think long-term in order to reap the benefits of distributed ledgers.