Barter chickens to faster payments
18th January 2021 |
Last week I got an email from Japan.
I only know one person that lives in Japan, my colleague Nick Hubble. And it wasn’t from him.
Usually when I get an email that’s just full of kanji, katakana and hiragana it’s straight through to the spam folder. Not this one.
This email caught my attention, because it was from the, MtGox Bankruptcy Trustee.
That’s important for me at least, because I’m a MtGox creditor. That means, I’m owed some bitcoin from the failure and bankruptcy of the MtGox exchange.
If you’re not familiar with MtGox, here’s the short & curlies of it. Back when bitcoin launched it wasn’t easy to get bitcoin outside of mining it. To get some without mining meant you’d have to somehow find someone with bitcoin, then arrange to exchange their bitcoin for some money or goods or services.
It was in its infancy a very basic system. However, very quickly it was realised there was a market for it. That meant there was an opportunity for an exchange to enable the meeting of buyers and sellers to begin trading and exchanging and buying and selling bitcoin.
One of the earliest exchanges was called MtGox. It became the biggest crypto exchange in the world at rapid pace. It’s estimated that it was handling over 70% of all bitcoin transactions at one point.
It was a significant and central part of bitcoin’s burgeoning ecosystem. It was also the most common place if you wanted to get bitcoin, myself included.
Then, in February 2014 I went to log into my MtGox account. Instead of the usual website and user interface I was greeted with a blank screen displaying the following message,
“Dear MtGox Customers,
In the event of recent news reports and the potential repercussions on MtGox’s operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.
Best regards,
MtGox Team”
That was the last time I had access to MtGox. What they should have said in February 2014 was, ‘we’ve had around 850,000 bitcoin stolen, we’re stuffed.’
That probably would have cut to the quick rather than the statement they put up.
The fact was MtGox was always having problems. They had payment problems, they had deposit and withdrawal problems. They had system outages, there was always something wrong with MtGox.
I had a number of support tickets for problems with deposits, withdrawals, passwords that magically reset themselves. You name it, it was a problem. Then the ultimate problem, they failed, went bankrupt and owed a lot of people a lot of bitcoin that was on the exchange when it failed.
For what it’s worth, I had 0.10324027 BTC in MtGox. Not loads. Still on today’s values that’s £2,634 in bitcoin and about $50 in Bitcoin Cash that I’d like to stack to my sats.
Nonetheless, I’ll probably only ever see a fraction of it when the dust settles sometime in the near (or distant) future.
I bring up MtGox and my experiences with is from more than seven years ago because to me, it’s a stark reminder not necessarily of the risks of crypto, but of the rapid speed in which things have changed.
Over the weekend I got several messages in regard to a Medium article that’s doing the rounds suggesting that Tether is ‘Crypto’s Doomsday Machine.’
The article goes into some detail about the ‘stablecoin’ Tether and how it seems to have been a strange part of the recent moves in bitcoin, the volumes and trading patterns on several exchanges, and that how it may possibly be an enormous house of cards.
I got enough people asking about it, messaging about it, that I thought it worth covering today.
Accusations and reports about Tether are as old as Tether itself. Every time bitcoin’s fiat-converted values go on a bit of a run, Tether always comes around as the primary reason why it happens.
I don’t necessarily buy into that idea. Is Tether 100% clean cut? I don’t know. You’d suspect maybe not, but at the same time, currently there’s little to suggest it is one giant fraud – regardless of what suggestions the articles around it may make.
Has it behaved perfectly in the past? No, it hasn’t. It’s dealt with legal battles for some time. Do the big, centralised exchanges have anything to do with it? No. Coinbase, Gemini to name two don’t have any stablecoins on their platform aside from DAI.
Do other exchanges utilise Tether (USDT) in a number of trading promotions, leveraged crypto trading and complex crypto derivatives? Yes they do.
The leverage that’s used in crypto and that seems to be something rising in popularity is worrying. But it’s worrying in a people getting ‘rekt’ sense, not a systemic sense.
I entered a thread about it all on Sunday afternoon which really sums up my position on Tether and the recent worry about it all. I thought it was worth repeating to you because it explains really how these things, even if true, aren’t the kill switch on crypto and the wider crypto economy.
Here’s what I replied when I was forwarded the article,
Yeah seen it. There’s a few trying to explain/debunk it already.
I agree in principle that there’s still a lot of questionable centralised exchange practices particularly with the leveraged exchanges, that’s a house of cards in a localised sense.
I don’t believe it to be inherently a Tether issue though, but it’s an issue.
Still it’s also right that the legitimised exchanges don’t want a bar of Tether, Coinbase, Gemini, etc. They also don’t deal in any stable coins, except DAI, not even USDC which is an asset backed, Circle issued USD stablecoin, so that again isn’t necessarily a Tether thing either, but more a regulatory thing from my perspective.
Also you’ll find the decentralised exchanges are also a more legitimised move away from the centralised exchange weirdness too. Then there’s the DeFi stuff too, which is a way of building the infrastructure that underpins a thriving economy based on crypto assets.
Tether may be in-part fraudy (although I still don’t buy it) but if it is, it’s not a systemic issue. It’s more like a potentially small-in-part-MtGox moment or Cryptsy moment. A hurdle rather than an end game thing.
Also perspective is needed. When MtGox went under and 2014’s ‘crypto winter’ rolled in, just seven years ago now, it felt like **** was moving fast then.
Seven years later the speed at which the whole ecosystem has changed is RADICAL. Like, imagine going from bartering chickens to faster payments in seven years instead of 700.
The next seven years will iron a lot of this fear, speculation, uncertainty, fakery, fraudyness that continues to linger around. Full global legitimacy is the next evolution of it all. And it will come really, really quickly.
That’s why I bring up the MtGox history. Back then there was loads of speculation about MtGox, ultimately it proved right.
There’s the same kind of speculation about Tether now. Maybe it is right, maybe it’s not, I don’t know. The point is it doesn’t matter if it is right.
The wider crypto economy managed to deal with MtGox, move forward and we now have incredible organisations that have continued to grow and develop the crypto ecosystem, like Coinbase, Gemini, Bakkt, Grayscale, a whole host of development that has built an incredibly diverse and robust system.
Tether could become worthless tomorrow and it doesn’t kill all that. It definitely would present a short term fiat-converted price squeeze, I’m sure of that. But it would be very temporary.
To make moves in or out of the crypto market because of possible fears around Tether in my view would be a grand mistake. I have no doubt many are doing it, however. It’s taking a very short term bout of fear and letting it impact a long term strategy.
That’s a mistake.
My view is if you’re going to be into crypto, be in it for the long haul. There will always be short term trading opportunities. But so far the best strategy above all else has to be in the long game. MtGox and other big exchange failures like Crypsty or Mintpal in the early days were bad. But everything moved on.
We will no doubt see more failures, roadblocks, speed humps, hurdles over the coming years, but the resilience and robustness of the wider system now is far too strong to kill it. Bear that in mind before making any grand decisions regarding anything you come across once again decrying the ‘end of crypto’ – it’s been said before, will be said again, and in my view will always end up wrong.
To stake, bake and earn
Also I just wanted to touch again on Tezos that I introduced to you last update as one of our ‘Crypto to Know’ adding to our watchlist of crypto I think you should take the time to understand and educate yourself on.
Tezos is a one of the blockchains that from the very earliest launch of its blockchain rolled out it’s Delegated Proof-of-Stake. That means, that in order to verify and secure the blockchain, ‘bakers’ stake XTZ rather than ‘mine’ them as you find in bitcoin.
This approach to consensus is something that’s hard to do, but is now widely recognised as an optimum way to operating a blockchain. It means that participants in the network, ‘hodlers’ can stake (or in Tezos’s case, ‘bake’) their XTZ holdings and in doing so earn a reward.
It’s a bit like the block reward bitcoin miners get when they mine a block on bitcoin’s blockchain. Except in the case of something like Tezos, you get a XTZ payout every three days (roughly) based on your holdings.
There’s some great articles about it all on the Tezos link I sent last update, and a very good Medium article here, from Arthur Breitman one of the Tezos founders. Get used to the terminology around it and the idea of delegating and baking crypto to earn a reward.
It’s a method that I think for the long term view is something that has great potential to pay off. It’s also something that you’ll see a lot more as your universe of crypto expands and you see other crypto with the ability to earn rewards through staking.
Regards,
Sam Volkering
Editor, Sam Volkering’s Crypto Network
