Stealth to Health: Crypto in 2019

Hodor

Hodor

I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.

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Using your intuition is almost as important as using data-driven decision making in the cryptomarket.  

You've seen the latest financial statistics on Forbes;  you know the current state of the cryptomarket and its compressed value at the beginning of 2019.   The entire market exited 2018 at the tail end of a bear market that was tough on a lot of blockchain projects, weeding some out and leaving others struggling for continued funding.

In a blog on December 14th of last year, I referenced the findings of an analyst that found, historically, 58 weeks was the longest crypto bear market on record.   At the time I wrote the blog, we had just completed the 51st week of the current stagnant price trend.   That means that as of the writing of this blog, we have now entered uncharted territory, and this is now officially the longest bear market in the history of crypto.  

That's right - we will complete week 59 of the current bear market in two more days.  

Some industry icons have stated - perhaps with an absence of impartiality - that they've noticed a change in the air.   Are they correct?

In 2018, despite the market contraction, we saw major financial players and funds entering the market and establishing their presence in major ways.   Stock exchanges have been adding crypto.   Investment funds have been stepping into the space.   The number of worldwide exchanges has seemingly tripled or quadrupled.  

While the mainstream press focused on the price action, massive investment was being poured into new infrastructure to support trading of crypto-assets, crypto derivatives, and new crypto financial products.   The entire industry was in stealth mode, carefully placing the building blocks for what will become a multi-trillion dollar market by some estimates.  

This stealth mode is almost over.   I know I'm ready for the rest of 2019:  What does your intuition tell you about the remainder of this year?

Ripple News

In 2017, Ripple placed approximately 55 billion XRP into separate escrow accounts on the XRP Ledger.  

The main reason they did this was to provide a cryptographically-locked way to ensure the steady supply of XRP over time, essentially mirroring the release schedule of a POW network.   The schedule looks like this over a thirty-year time frame:

XRP Distribution Curve

Here's the way the escrow works:   Each month, one billion XRP is released from escrow due to the expiration of a date-and-time based crypto condition on the XRP Ledger.   Each escrow is sent as a payment, with a time-based crypto condition.   To release the XRP to its destination, a separate transaction known as an 'EscrowFinish' transaction must occur.  1

That's where this gets interesting.  

Anybody can send this 'EscrowFinish' transaction once the date and time has been reached.   And each transaction on the XRP Ledger can have a specific memo attached to it.   In this case, the person in charge of releasing the transaction sent the following message, which caused some excitement:  2

Crawl...  Walk...  Run...  ;)

Anybody could have put the message there, but the obvious thing to note is that this message reflects a quote from Brad Garlinghouse (sans the emoticon).  3  For XRP fans, it was an inspirational reminder that 2019 may present adoption progress that is a multiple of what's been achieved thus far.  

SBI Update

In previous blogs, I've noted that SBI communicated an updated timeline for adding real-time XRP trading to its virtual currencies exchange.  

While XRP can be traded over-the-counter at SBI, the real-time trading portion was purposefully delayed so that SBI could perform additional security validation on its own platform, in the wake of a high-profile hack at Coincheck in February of 2018.  
In an update to stakeholders in mid-2018, SBI communicated that the new time frame for real-time XRP trading would be "March" of 2019.  

While I'm still not clear on the specifics other than the month - i.e., beginning or ending - the safe bet seems to indicate that real-time trading will be in place and operational by the end of March.  

In relation to this new development schedule, SBI sent out a notification to its users on February 1st that crypto withdrawals would now be enabled for the exchange:

SBI VC Update Tweet

This is an important step in preparation for the go-live of real-time trading, and shows that SBI is consistently progressing along a meaningful deployment plan for the platform.   Enthusiasm by XRP traders is more tempered than it was when the announcement of SBI VC was originally announced, but many - myself included - remain optimistic about the increase in liquidity that it might bring.  

Raised in Space Enterprises (RISE)

Raised in Space Enterprises (RISE) is the name of an investment group that plans on making strategic investments in music industry entrepreneurs that are:   4

"...  creating solutions for the music value chain ..."

and:

"With the traditional music industry in need of innovation across the entire value chain (creation, registration, distribution, fan-engagement, touring/ticketing, monetization), Raised In Space will forge proactive collaboration between music and technology with investments ranging from $500,000 to $5 million."

The investment group is based in Santa Monica, California, and its founder is Zach Katz, a former CEO of BMG, the world's third largest music publisher.  

RISE is founded by Ithaca Holdings, which in turn is owned by Scooter Braun, an industry entrepreneur that has figured prominently in Ripple Xpring investments and other philanthropic collaborations.  

On February 5th, it was announced that Ripple had approved an investment in Raised In Space Enterprises.   Ethan Beard, Ripple's Senior Vice President of Xpring, had this to say:  5

"We're excited about blockchain's potential to solve problems in the entertainment space - from new ways to monetize creative content to innovative fan engagement models that were not previously possible.  Xpring is about empowering the best entrepreneurs to apply technologies like the XRP Ledger in new and novel ways,"

This investment definitely caught me by surprise.  

On the one hand, creative monetization has been a theme for Coil, which was founded by a group of ex-Ripple employees, and is also considered an Xpring project.   So in that respect, further projects that involve artistic monetization shouldn't surprise us.  

While Coil's innovative application is receiving widespread enthusiasm from content creators due to its enabling of direct crypto payments, it will be fascinating to watch how Ripple's new Xpring investment in RISE results in music industry monetization.  

It's exciting for those that own XRP, because the goals of Xpring are quite clear:  6

"Every entrepreneur will use the digital asset XRP and the XRP Ledger, the open-sourced, decentralized technology behind XRP, to solve their customers’ problems in a transformative way."

It's an ironclad statement that ties together Ripple's investment strategy with extending the ecosystem of XRP, the digital asset that it uses in its xRapid cross-border liquidity solution.  

Dharma

On the same day that Ripple's Xpring investment in RISE was announced, Ethan Beard also Tweeted out the official announcement of their investment in Dharma, a blockchain technology company that specializes in tokenized debt instruments:

Tweet from Ethan Beard about the Dharma investment

Dharma may be a sleeping giant.  

Currently, it's a modest start-up that is building a set of tools that enable crypto lending and its associated financial instruments.   That alone is impressive, and it's paving the way for trust-less credit provisioning on the blockchain.  

If you're a crypto holder, the potential is that Dharma's open protocol may one day enable you to lend your crypto to others and receive passive income on your savings.  

But what really makes Dharma a possible revolution in finance is its ability to tokenize the resulting debt instruments.   This blockchain technology-based approach to packaging debt is a necessary step to opening the doors to a new derivatives market.  

In its own words:

"A future in which debt agreements are a tokenized primitive would be a step-function improvement over the status quo, massively lowering the activation energy required to raise debt capital, trade debt instruments, and build credit derivatives.  Moreover, the debt industry is notoriously rife with systemic opaqueness and governance crises, and arguably stands to gain the most from transparent blockchain-native infrastructure."

The project is currently focused on integrating with the Ethereum blockchain. 
Given that it aims to use the Ethereum blockchain to tokenize credit and derivatives, it left me wondering how the investment in Dharma fits into the goals established for Xpring, and how it would impact XRP.  

The answer to this question was not clear, but a blog by Danny Aranda, Ripple's Director of Business Development and Xpring, provided some perspective on the investment, and how it supports Ripple's overall vision for the entire crypto ecosystem.   In the blog, published on February 5th, Danny Aranda states:  7

"Our belief is that crypto can be applied to transform global payments and our conviction about crypto’s potential impact in financial services more broadly has only grown, in sometimes surprising and non-linear ways ...

...  One thing we have learned is that liquidity is the lifeblood of financial products.  

...  Dharma’s development has patterns we recognize, including: work on a protocol / infrastructure layer that coordinates peer-to-peer credit interaction through a network of relayers;  and the recently announced Lever as a solution to package and deliver this liquidity to a target customer and use case.  We are strong believers in the team and their approach.  Their work to solve problems for crypto capital markets with margin lending is well positioned to bootstrap the reshaping of the credit markets."

The article revealed little about how the investment would impact XRP directly, but, like the Xpring investment in Securitize that was announced on November 28, 2018 , Ripple may view this as a precursor to issuing debt instruments or counter-party tokens on the XRP Ledger.  

In the case of the Securitize investment, Vanessa Pestritto, Ripple's Director of Xpring indicated that:  8

"Securitize is able to issue security tokens on public blockchains such as XRP Ledger and Ethereum ..."

If the investment in Dharma follows suit, it may be that Ripple envisages the same blockchain-based debt issuances taking place on the XRP Ledger.   My guess is that Ripple sees this approach as potentially adding liquidity into the XRP ecosystem as Dharma's products mature and are adopted at a greater scale.  

Beetech

During the SWELL conference in 2018, the CEO of Beetech, Fernando Pavani, presented one of the flashtalks in conjunction with Prajit Nanu, the CEO of InstaRem.   They both discussed the speed of implementation of Ripple products into their back-end systems, and we subsequently learned that both of them had implemented xCurrent and xVia.  9

On February 5th, Beetech, in coordination with Remessa Online, released a video of Beetech's cross-border payments service and how it works:

Following up on the video, @LeoHadjiloizou (Twitter Avatar) asked:

"Are you using XRP or plan to start using it?"

Here was the response from Remessa Online:

Remessa Online

Remessa Online is a digital money transmitter in Brazil that uses Beetech & Ripple in the background to settle payments in real-time.   If they are planning on using XRP, most likely they will be expanding their technology stack to include Ripple's xRapid solution.   It's great news, as it would add one more xRapid client to the list.  

We'll put this one in the "To Be Determined" column until we hear more from Remessa Online or Beetech.  

XRP News

The XRP Ledger is constantly being improved by developers from various stakeholder businesses such as Ripple and Coil, and by independent community developers as described in my most recent blog.  

One idea recently put forward for a new change was a configuration file that usually goes with the XRP validator software.  mDuo13 (XRPChat avatar) recently posted about a proposal to change the purpose and content of the file to include information about each validator:  10

"If adopted, I expect this could be a key piece in how validator operators verify their identity, and may also be useful for client applications for various other purposes.  

For example, if the owner of an XRP Ledger address is verified, client apps could show provided contact info or description alongside that address."

Anybody can run a validator on the network, and this update wouldn't do anything to change that;  however, it would provide a voluntary opportunity for operators to indicate information on each of the validators that they're running.   This would support richer network status reporting, and provide greater insight into the various networks of validators.  

I view this as a good proposal, as it may also have some intangible security benefits as well, if stakeholders can access this voluntarily-submitted data.  

If you'd like to weigh in on the proposed change, here is the link to the online thread to capture the discussion points:  XRP Chat Discussion of Proposed Change

Bitwala

We've seen many traditional, large players in the retail banking market shy away from integration points with crypto, with some even placing restrictions on how customers can use their own money.

Bitwala is the opposite of that trend.   It seeks to create a crypto-centric bank for users that wish to closely integrate their banking with crypto trading.   It's a German bank at its core, insured by the German Deposit Guarantee Scheme.  11

When new crypto businesses use a poll to gauge crypto customers' interest in various coin listings, it's always amusing to me what happens when XRP is one of the choices.   Bitwala decided to use a poll for this purpose on February 5th:

Bitwala Tweet

Within hours on Tuesday, the XRP Community had flexed its considerable online muscle, voicing its preference with 90% of the votes.  

As of last count, the poll indicated that XRP was still in the lead with 85 percent of the vote, with over ten thousand people weighing in.   We'll see what Bitwala does next with that information;  it's generally exciting to hear about the new generation of banks that are recognizing crypto's rising prominence in personal finance worldwide.   Perhaps other crypto-centric banks will start to appear in other countries such as the US and the UK.  

Forbes

Thomas Silkjær, an author on the XRP Community Blog, first wrote an article in November of 2018, after Wietse Wind made the entire XRP Ledger history available via Google BigQuery.  

Since then, he's penned a total of six blogs on the community site, all regarding various projects he's independently undertaken to analyze data relationships on the XRP Ledger.   One of them had to do with his extraction of the entire database for the purpose of creating an all-in-one visualization of the ledger;  it was an artistic piece that's been referenced many times on social media since it was published.  

His next project was to extract the entire ledger into a graph database, and he also conducted some analysis on the way, publishing his findings and progress in two parts on December 10th and 20th late last year.   12   13

Thomas has been busy helping the community as well, volunteering his time to help investigators with tracking down fraudulent activity on the XRP Ledger.  

Do you remember all of those attempted scam tweets where a user will pretend to be Ripple, Brad Garlinghouse, or even David Schwartz, and ask for money?   Well, Thomas Silkjær chased the transactions all the way to the specific exchanges and wallets where the XRP was deposited, and notified the exchanges:

Thomas tweet about fraudulent activity

For those investors that have fallen prey to the promises in those Tweets, his detective work provided a certain amount of closure;  hopefully we can help prevent this type of fraud from hurting more people, thanks in part to Thomas Silkjær's community efforts.  

His data analysis work with the XRP Ledger has not gone unnoticed; on February 4th, Forbes published a deep dive into how Google is enabling blockchain data analysis, and they chose to highlight Thomas's work:

"Danish researcher Thomas Silkjaer is using Google's BigQuery to map publicly available information about XRP cryptocurrency addresses.  The craters represent some of cryptocurrency's largest exchanges."

In addition to using his striking XRP Ledger graphical visualizations, they also hosted his third entry in the series about data analysis, providing a potentially larger and more diverse audience for his findings than even the XRP Community Blog:

Thomas Tweet about Forbes blog

His final blog summarized a few of the specific pattern recognition techniques that he's used to manually analyze money flow through the XRP Ledger, and also highlighted his recent investigation into the fraudulent Twitter 'scams' that have consistently tried to defraud XRP investors:   14

"...  as a hobby ledger investigator, there is nothing to be done from this data, other than providing the information to victims and have them take it to authorities and to exchanges for potentially taking action or connecting it to an internal investigation.  

The exchanges used for cashing out (or further trading or distribution) can freeze accounts and block account addresses from further deposits, and with proper KYC maybe even identify involved individuals."

Thomas Silkjær's work with data analysis is a shining example of some of the amazing work that XRP Community developers can do with the available resources;   hopefully his pieces will spark new projects by others in the coming months.  

Trust Your Intuition

It's said that humans' intuitive thinking is closely related to our artistic natures.  

Scientists have provided an oversimplification to describe some of these findings, and conveniently describe this as 'left-hemisphere' or 'right-hemisphere' brain activity.  15

We typically use the left hemisphere of the brain for methodical tasks and mathematics, while the right side tends to be powerful at drawing conclusions with limited data, and seeing a whole picture given just a few pieces.  

When you research cryptocurrency investments, it's critical to activate both styles of thinking, and I like to start any analysis with a 'left-brain' analysis of granular market data.  

What is the current overall market capitalization?   How has the daily trade volume been recently?   How many active posters are on crypto forums?

In the case of XRP, we have even more sets of data to look at:  xRapid partner numbers and volume statistics;  Coil membership;  Xpring project development;  R3 Corda Settler clients;  XRP market capitalization;  and payment volume statistics.  

These items are just examples.  

In some cases, it's difficult for us to get all of the data, however, so that's when we need to be able to 'see the whole picture' based on more than the sum of its parts.   From a subset of these data points, we have to challenge ourselves to visualize how the next year will look from an XRP adoption standpoint, and what we can reasonably expect under a few different scenarios.  

The funny thing?

Each of us does this already, even if we don't realize that's what we're doing.   Each of us is here because we were astute enough to intuit the future direction of financial growth worldwide in the cryptomarket.   There's not many of us here, and when the rest of the guests 'arrive to the crypto party,' will it surprise you?

The wise move is to spend part of your time comparing information, studying financial trends, and then looking at the latest news about the market.   It's also wise to then challenge yourself to draw a conclusion after this research:   When new investors arrive, which crypto-asset do you think they will be drawn to, and why?   Will it reflect the same trend we've seen for the first ten years of crypto, or is the market in store for a shift of vast proportions?
xrp symbol
Sources and Credits:
Cover Art: Thank you to rawpixel

  1. https://developers.ripple.com/escrow.html
  2. https://bithomp.com/explorer/E0DDA6647E50B4A8003B0384CB86F1974A8BAC3579938457E018C6F93C7E6240
  3. https://www.ccn.com/ripple-ceo-brad-garlinghouse-talks-xrp-long-bitcoin
  4. https://raisedinspace.com/
  5. https://www.prnewswire.com/news-releases/raised-in-space-enterprises-launches-with-mission-to-powerfully-unite-music-tech-and-blockchain-industries-zach-katz-named-ceo-300789543.html
  6. https://ripple.com/insights/welcome-to-xpring/
  7. https://medium.com/xpring/investing-in-dharma-854f5bd7b17f
  8. https://medium.com/xpring/investing-in-securitize-e035a8918b9b
  9. https://xrpcommunity.blog/xrp-news-post-swell-edition/
  10. https://www.xrpchat.com/topic/30210-soliciting-feedback-xrp-ledgertoml-file/
  11. https://www.bitwala.com/launch-announcement/
  12. https://xrpcommunity.blog/exploring-relationships-on-the-ledger-part-one/
  13. https://xrpcommunity.blog/exploring-relationships-on-the-ledger-part-two/
  14. https://www.forbes.com/sites/thomassilkjaer/2019/02/05/blockchain-and-graphs-pattern-detection-and-fraud-investigation/#b5cb71e4a6f5
  15. https://www.healthline.com/health/left-brain-vs-right-brain

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Hodor

Hodor

I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.

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