I'd love to be a fly on the wall in some of the high-level meetings among the world's most influential financial movers and shakers as they discuss the growing global interest in cryptocurrency.
We've seen some interesting reactions from these old-school icons of both Silicon Valley (surprising) and also Wall Street (not-so-surprising). We've also seen some of these comments walked back by those that issued them. While traditional large investors take their time evaluating the lasting power of the crypto market, others are not waiting to take a position in preparation for the fledgling market's growth.
Even with the bear market throughout the Spring of 2018, here's what the annual returns currently look like for cryptocurrency:
- July 23, 2017 total crypto market capitalization: 96 billion.
- July 23, 2018 total crypto market capitalization: 287 billion.
That's a 200% (increase) in the market capitalization of all cryptocurrency in one year's time. And even though these numbers reflect an incredible growth rate, remember that many analysts predict that the crypto market will plateau somewhere in the 'multiple trillion dollar' level; 1 2 thus far, only a small handful of countries have seen any serious mainstream adoption, and it usually reflects a reaction to political or economic instability in specific regions.
The good news is that, despite any nay-saying or doubts expressed from respected icons of Wall Street, governments around the world have woken up to the fact that many of their citizens are now choosing to own and invest their fiat money in a strange new financial instrument. The time of regulation and global acknowledgement of this growing trend is upon us.
General Crypto News
On July 21st and 22nd, the G20 meeting in Argentina focused on the recent headlines regarding trade tensions and international policies.
The G20 released a formal document listing their conclusions and consensus on several issues, including that of cryptocurrency. 3 Here is the salient quote about cryptocurrency for those that haven't yet seen it in various social media outlets:
"Technological innovations, including those underlying crypto-assets, can deliver significant benefits to the financial system and the broader economy. Crypto-assets do, however, raise issues with respect to consumer and investor protection, market integrity, tax evasion, money laundering, and terrorist financing. Crypto-assets lack the key attributes of sovereign currencies.
While crypto-assets do not at this point pose a global financial stability risk, we remain vigilant.
We welcome updates provided by the FSB and the SSBs and look forward to their further work to monitor the potential risks of crypto-assets, and to assess multilateral responses as needed. We reiterate our March commitments related to the implementation of the FATF standards and we ask the FATF to clarify in October 2018 how its standards apply to crypto-assets."
My take on their formal statement within the released communique?
It looks like they are calling on the FATF for guidance. FATF stands for "Financial Action Task Force," and its purpose is to:
"...set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. The FATF is therefore a “policy-making body” which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas."
What I infer from this is that we - the collective 'we' of cryptocurrency owners - will find out about proposed internationally-scoped regulatory enforcement measures in October. Ahead of that point, I predict that the US will act independently to telegraph its direction to this body. Of course, I could be wrong as well, but I don't see the US as playing a wait-and-see role with regards to its own interest in this topic, and we've already seen that Congressional hearings are happening now.
G20 Press Conference
The G20 meetings took place behind closed doors, but Argentina's Treasury Minister Nicolas Dujovne and Argentina's Secretary of Finance and Central Bank President Luis Caputo gave a joint press conference at the conclusion. 4 5 6
Although the focus was clearly on the contemporary issues that seem to be grabbing the most headlines, Nicolas Dujovne and Luis Caputo did touch on the topic of cryptocurrencies. Here is the link to the press conference video, recorded live and posted by "G20 Org" on YouTube:
Under the umbrella of cross-border transfer of value, Nicolas Dujovne noted that the new technical capabilities of moving money easily across borders using digital methods (of course I was visualizing Ripple solutions here). He mentioned that the countries needed to establish taxation cooperation on an international level.
Separately, Luis Caputo noted that investment in financial infrastructure was also important to emerging economies. When I heard this, I also thought immediately of Ripple's products - along with its open-source platform Mojaloop that it developed in cooperation with the Bill and Melinda Gates Foundation.
Further, at 9:15, Luis Caputo talked about the need to make financial contracts "standardized," with the goal of creating a new types of asset classes.
Then at 10:15 Luis Caputo wrapped up his points by saying:
"We talked about the crypto assets, the cryptocurrencies, and the consensus showed that they don't represent a global risk on the financial system.
But of course, as I said before, we really took into account that even though these are technologies that are only beginning; they are at their infancy... we have to really control them and really survey everything that has to do with illegal activities.
Now, regarding the financial inclusion... we have the world's full consensus reached. And of course that financial inclusion contributes to growth, and the improvement of the standard of living of all the citizens. There is full support for this topic, and we focus specially as the minister said on the digitization and the benefits entailed by it, especially in less-developed countries where the informal economies represent an important percentage of the economy. So digitization would be a first step towards formality (conformance to international regulation and inclusion)."
This viewpoint sharpens the G20's take on blockchain technology and its potential for bringing developing nations into the fold at an earlier stage of economic development than would otherwise be possible. I predict that some developing countries might actually take the step of adopting a cryptocurrency as a central bank digital asset at some point; it's a possibility that is still being debated among experts in economics, as well as its implications for national economic policy. Despite the fact that there may be down-sides to creating a central bank-issued digital asset, some smaller nations may make the leap ahead of fully understanding these implications.
Following through on their decentralization roadmap, Ripple recently published a new recommended UNL as part of the default XRP validator configuration. The default recommended unique node list, or UNL for short, is comprised of eighteen validators (Updated from when the following tweet was sent). Out of those eighteen validators, twelve are owned and operated by Ripple and six are now attributed to other XRP ecosystem stakeholders:
DECENTRALIZATION UPDATE for $XRP:#Ripple added 2 new validators to their recommended UNL:— rabbit (@RabbitKickClub) July 24, 2018
2. https://t.co/HMvvQzu5lj (a Mexican #crypto exchange)
The list, which we also use on our XRP validator, now has 13 Ripple & 6 independent validators.
The new recommended UNL serves as objective evidence that Ripple is moving forward with complete decentralization of the XRPL. For more perspective on how this step fits into the overall decentralization path for XRP, please refer to my separate blog on the topic here: Decentralization Blog Post
2018 Quarter 2 XRP Markets Report
Each quarter, Miguel Vias publishes the XRP Markets Report, which details among other things how much money Ripple made from direct XRP sales from its treasury of XRP released from escrow each month, as well as information about the overall XRP market and various statistics such as volume and currency pairing corridors. Ripple published the 2018 quarter 2 report on July 24rth on their Insights page: https://ripple.com/insights/q2-2018-xrp-markets-report/
I will be covering the XRP Markets report in detail in my next blog, but for now, here are the major headlines that Miguel Vias highlighted at the very beginning of the publication:
- $75.53 million XRP sold
- Ripple sales volume accounted for 0.125 percent of global XRP volume
- Three billion XRP released out of cryptographic escrow, 2.7 billion XRP returned to escrow
Once again, Ripple has just listed revenue - solely from one of their multiple income streams - totaling over $75 million dollars. This money, along with the revenue that they make from services and licensing, is quite massive for a Silicon Valley fintech company. Even with the crypto market downturn in quarter 2, their treasury was infused with immense capital.
Long gone are the days of financing rounds for Ripple; now they are the ones with the resources to invest in other ventures - and that's exactly what they've been doing.
XRP Ecosystem News
A friendly reminder to all those closely tracking volume and its sources on the XRP Ledger: DX Exchange goes live July 25th with all cryptocurrency listings, including that of XRP:
We are going live for full registration and KYC on July 2nd. https://t.co/gavrewTi9F platform will go live on July 25th. During the month July we are going to run a beta test with selected registered members.— DX.Exchange (@DXdotExchange) June 21, 2018
When asked about which cryptocurrencies would be supported on the launch date, DX Exchange confirmed with the following tweet:
Phase 1 would be BTC, BCH, LTC, XRP, ETH and soon DGB and XVG. During our phase 2 we are planning to add top 20-25 coins.— DX.Exchange (@DXdotExchange) June 21, 2018
It was further progress expanding the available liquidity endpoints for XRP; the progress of enhancing global liquidity for XRP has been steadily gaining momentum as 2018 unfolds.
Michael Arrington runs the Arrington XRP Capital Fund 7, which is completely denominated in XRP. 8 He started the fund in 2017, and has been outspoken about XRP's potential for adoption and of course, value appreciation.
He recently sat down with a former XRP critic to discuss XRP, and also to provide some frank feedback on the true motivations behind some of that engagement with the massive XRP community (begins at 20:30):
After taking Ran NeuNer to task on his possible underlying motivations for his previous online trolling, Michael Arrington described why he chose XRP to denominate his fund:
"XRP ... is a really, really good way to move money. So we denominate our fund in XRP because it's a fantastic way to move money across borders, very quickly and at almost no cost."
Ran NeuNer then challenged Michael Arrington on specifics, however, the visionary fund manager shot back with insights into the philosophical definitions of 'cash position' and other concepts that are now being challenged by the use of digital assets.
Michael Arrington is, and continues to be, an incredible spokesman for XRP.
Incomplete XRP Vendor Listing
For those interested, an XRP Chat user - @OffGrid - created a vendor listing of businesses that accept XRP at: https://www.xrpchat.com/topic/5679-ripple-xrp-merchants-directory/
It's a long listing of businesses that accept XRP as payment, and the list is growing each week. To submit new entries on the list, reply on the thread.
500 Codius Hosts
It seems like only recently that Stefan Thomas announced that Codius would be one of the cornerstones in his new business - Coil. Since then the number of Codius hosts has exploded, and now the number has exceeded 500 hosts: 10
Even more impressive is the international nature of this hosting. As the number of hosts grows, so does the number of countries with active Codius hosts. Currently, there are thirty-one worldwide countries with Codius hosts... and climbing.
Codius Hosting Profit Calculator
/u/denarioresearch has created a profit calculator for those Codius hosts interested in gauging expected income levels for their hosting activity:
Also, for the curious, he's published the source code here: Codius Profit Calculator at Github
He also created a Reddit thread to document feedback about his calculator: Reddit Post about Codius Profit Calculator
Denario Research has a YouTube Channel for communicating to interested developers about how to go about creating Codius hosts and other fascinating topics such as trading bots.
Estate Planning Via Codius?
One of the most recent - and innovative - ideas proposed for a Codius contract is to create an estate planning application.
If you've followed any of the news stories about Matthew Mellon, you know that there was a lot of speculation around the secret keys for his XRP. While some speculated that the private keys had been lost, other news sources reported that the estate managed to access the cryptocurrency and wished to sell it. In any case, the speculation itself brings up a topic that many in the crypto market have long been asking about; is there a safe way to document instructions for how to pass on secret keys after the death of the owner?
Thus far, there have been some proprietary solutions that attempt to address this; recently, however, a writer on Reddit created a thread proposing the creation of a Codius application to handle estate planning for those with crypto assets: Reddit Codius-related post on Estate Planning
It's an idea worth exploring, and it will be interesting to see if any enterprising developer is able to create an easy-to-use DApp (Distributed Application) that can serve this purpose. My opinion is that any application for this will need to address skepticism by users about trusting any third party application with direct access to account information. Not impossible, but it will be challenging. The first developer - or financial institution or bank - to get it right might be able to profit off of their creation.
Get Ready for a Global Crypto Awakening
There is no putting the genie back in the bottle.
As a comparison, once the Internet started to be used by mainstream groups of computer users, there was no stopping the demand for information-sharing across the globe. The Internet led the way to entirely new business models, modes of shopping and payment, and of course, the ability to share information as fast as the speed of light.
Governments around the world are now facing the reality that cryptocurrency is not just some fad among college kids who want to trade Dogecoin for beer; it's a very serious innovation that can be used to move value across the globe. In one week, we've seen two Congressional hearings and a mention about the topic at the G20 press conference. This latter point is remarkable given the other trade news that the G20 is currently grappling with.
XRP owners are on the cusp of something that sparks the imagination and prompts frenzied speculation among both technologists and investors; what sorts of creations and innovative applications will we regard as ubiquitous services five years from now? Will most worldwide banks be using XRP to move money across borders? What about Internet content creators? Will they be accessing XRP's function to accept micropayments for their services or creations?
From the progress we're observing each day, there's not much time before we see the rise of XRP and its ecosystem components to transform finance and global commerce.
Sources & Credits:
Cover art: Thank you to Robert Bock