After a 2018 lull, blockchain has returned to the public consciousness in force recently thanks in part to Bitcoin’s bull run and Facebook’s announcement regarding GlobalCoin.
In this environment, it’s trendy to work on blockchain. What I’m noticing with a lot of projects, though, is plenty of hype and little substance.
The reality is that blockchain is extremely complicated and requires a lot of time and resources to apply correctly.
Nevertheless, as you survey the blockchain landscape, how can you tell if a project is credible or fake? What are the “tells” of an illegitimate project?
Below is a series of questions to help you separate the wheat from the chaff.
Is a network involved?
Blockchain and cryptocurrency are efficient ways to transfer and measure value in and around networks, where there are buyers and sellers, producers and consumers, or creators and distributors. Consider the value of networks, where network effects make the whole more valuable than the sum of the parts. I call this the network surplus, and it is difficult to quantify. Standard currencies do not account for this dynamic value, which is why blockchain and cryptocurrency can be so transformative in the media industry.
As a separate example, let’s examine Bitcoin. The value of this cryptocurrency is in storing and verifying independent, decentralized, peer-to-peer transactions. The work of verifying the transactions and adding them to the blockchain digital ledger (i.e. mining) is rewarded via bitcoin.
When you evaluate a blockchain project and it’s not clear how the technology is being utilized to connect stakeholders in a marketplace, or why cryptocurrency is being used in place of standard fiat, chances are the project does not make sense.
What are people paying for?
Free is not a business model.
If a blockchain project claims that it is free, it is a waste of time. The truth is, for any legitimate blockchain project to be anchored in reality, it must be supported by an economic model that makes sense. For instance, the value of Ethereum represents the cost of maintaining a network that enables transactions and storage.
Is it a public or private blockchain project?
Blockchain enables independent parties to transact without a “trusted” 3rd party to interfere. Decentralization is a key component since traditional ways to transact require an intermediary – such as a bank – which poses some risks.
Private blockchain (a.k.a. Enterprise blockchain) is a centralized system which defeats the purpose and renders the technology unnecessary. It’s the equivalent of an extremely expensive database.
Is the team legit?
The common thread of sketchy ICOs and shady pump-and-dump schemes is the people behind them are unscrupulous.
Blockchain projects have a high failure rate because they’re tough to pull off and it’s a nascent technology. Absent a strong team with a proven track record and strong business or tech pedigree, the degree of difficulty becomes nearly insurmountable.
Do your homework and ask yourself if the people behind the project are trustworthy or do they seem like hype men for their coin? See: Justin Sun.
Is the goal fundraising?
Plenty of blockchain projects utilize ICOs to enrich themselves and to circumvent traditional fundraising avenues, which require periods of due diligence with professional investors who scrutinize businesses with exacting detail.
Always follow the money. When huge swaths of coins find their way into founders’ digital wallets before their projects have proven anything, that’s a huge warning sign.
Do you buy the concept?
Any legitimate blockchain project has a whitepaper that clearly articulates the specific use case for the technology.
Do your due diligence and read the whitepaper thoroughly. The devil is in the details. Do you understand the vision? Is the vision materializing? Is the team accountable to what is outlined in their whitepaper?
Be careful when the whitepaper conflicts with the reality of the project.
Contributed article by Martin Floreani, Founder & CEO of Rokfin
The post How to know if a company using blockchain is all hype or the next big thing appeared first on CryptoNewsReview.
Whistleblowers level accusations against China’s biggest crypto lender: Babel Finance
Anonymous critics take to social media to claim that Babel Finance has been recklessly speculating with customer funds. The company denies the accusations.
- Anonymous sources who claim to have inside knowledge allege that Babel Finance has been misusing client funds via highly leveraged transactions and without permission.
- The sources have posted an audio recording of a Babel co-founder in which he calls the scheme the “X Plan.”
- The sources say the company got caught short during the March crash but worked out an arrangement with Tether to repay its debt.
- Babel Finance denies the claims, says it has done nothing wrong, and asserts that the tape could be patched together.
Anonymous critics have been leaking to the media and posting to Twitter and YouTube an alleged recording of Del Wang, Babel’s co-founder, in which he apparently admits that the firm has been taking risky, highly leveraged positions with client’s and investors’ funds, without their consent, before and after the March crypto crash.
Flex Yang, Co-Founder, and CEO of Babel, denied the allegations to Decrypt late Sunday night. He said that “the firm never lost clients’ funds, nor faced any liquidation from lenders.” Yang insisted that Babel maintains a “friendly relationship” with its customers and that its business relationship is dynamic and based on market needs.
The company also said that its investment practices were prudent compared to the rest of the industry, where it claimed that leverage ratios approach 10X. By comparison, Babel says it typically leverages in the 3X range.
Separately, a company spokesman who asked not to be named claimed that the audio appears to have been patched together from unrelated recordings of Del Wang.
“This is edited,” he said. In a subsequent call, however, he noted that “this audio is too fragmented from too much editing including the background and everything. We can’t tell [whether it’s real.]”
Yang and Wang, determined not to miss the next “golden era” of Bitcoin, launched Babel in August, 2018. The company now has offices around the world and is registered in Hong Kong. In early March, it closed a Pre-Series A funding round with Dragonfly Capital and Parallel Ventures, and is a portfolio company of NGC, a crypto VC headquartered in Singapore with many partners in China.
Some $750,000 of NGC’s investment, according to the whistleblower, was part of the funds used in the highly leveraged trading.
Babel is considered one of the biggest lenders in crypto and acts as a link between Asia and the west. Reportedly, Genesis Capital, Bitgo, Blockchain.com, Bitcoin.com are among the firm’s better-known clients.
Its business model appears to be no different from most crypto lending firms—it’s essentially a middleman between borrowers and lenders. It claims to have been profitable since day one.
In March—just before Black Thursday—Yang, the company’s co-founder, told Coindesk it had loaned out a record $380 million. One of Babel’s main customers is the mining sector, which borrows money to invest in new rigs and pay for electricity. Babel, in turn, is backed by inter-bank lending from the likes of Genesis and Tether. (Yang told Decrypt last night that roughly $100 million of that amount went to mining-related loans and the rest was to “peer institutions.”)
However, on March 12, when the price of BTC and the rest of the crypto market collapsed, “Scamtosphere,” who is apparently the lead whistleblower and who claims to have inside knowledge of Babel’s workings, alleged that the company was almost wiped out.
Yang said that the claims are flatly untrue: “As a crypto financial institution, we’ve always been carefully monitoring our leverage. We’ve built a solid risk-management system.”
He added: “During 3/12, we were never liquidated nor violated clients agreement.”
In the leaked recording, Del Wang is heard saying that after the crash, Babel reverted to what it termed the “X Plan”—using clients’ funds—to bail itself out.
The “X Plan”
Typically, miners collateralize their BTC with Babel in return for stablecoin or fiat at a Loan-to-Value (LTV) ratio of 50%-65% with an annualized rate of return between 8% and15%.
How does Babel get these stablecoins? The industry collateralizes clients’ BTC to overseas lenders such as Genesis and Tether, at a more favorable Loan-to-Value (LTV) ratio typically larger than 65% and annualized rate of return between 6%-8%. Babel’s profit comes from arbitraging the interest rate differences between miners and oversea lenders.
With all the BTC in their wallets, many crypto lending companies engage in market-neutral, low-risk, and “directionless” derivative trading. After all, they need to safeguard clients’ assets, and having reserves in case of a market crash is an essential risk-management practice.
However, the whistleblower claims that Babel took a more risky route.
Del Wang is heard in the leaked tape (the link goes to a somewhat garbled, audio-only YouTube page in Chinese) saying that the company collateralized client and investor assets and engaged in 3-5 times leveraged trading, and mentions $4 million that was used to great effect.
The anonymous whistleblower claimed to Decrypt that Babel made a fortune by staking that $4 million users funds before the crash, into a $20M Bitcoin long position by borrowing again and again from overseas lenders at 80-90% LTV.
Further, the source claimed that $750,000 of that money was venture capital firm NGC’s investment in Babel. An NGC partner who asked not to be identified said he was unaware of any of its investment being used for speculation.
“At the start we were leveraged 3 times. when markets were going up we added more by using the BTC value to borrow more,” Del Wang is heard saying in audio reviewed by Decrypt.” In fact, when we were in Xinjiang we already levered up more.”
“Using what money?” an unidentified person asks.
“Using client savings…We called this the ‘X Plan,’ ” replied Del Wang.
There is no indication that Babel lost any of NGC’s money, however; indeed, it’s probable that if true, the risky bet paid off as the company grew to be one of the largest crypto banks in China.
“Good Customer and Bad Customer”
In all, Babel manages $300 million in assets, $100 million of which is from its clients. The rest is borrowed the whistleblower claimed.
In March, when the market collapsed, overseas lenders initiated margin calls and Babel got caught short, according to the source. The source said that Babel almost went bankrupt because its LTV to lending partners reached 130%, meaning that the market value of BTC was less than the balance that Babel owed to the lending firms.
However sources claimed that Babel was apparently bailed out by Tether, which granted it a loan repayment program: Rather than paying back the money in 48 hours, it got a month. During that time, Babel launched a series of high-yield financing programs such as its Shark Fin products, which promised a 50-60% APY to miners. That product allowed Babel to collect more BTC to pay back to Tether.
A Tether spokesman declined to comment to Decrypt, citing customer confidentiality.
“Destroy the east wall to make up for the west wall (拆了东墙扑西墙) ,” is a saying in Chinese. Babel was supposedly using the financing product to solve its imminent backyard fire with Tether.
Wang is heard jokingly saying in the audio that Babel itself is a bad customer:
Unidentified person:”So if the money is separated, then when we margin call clients and they top-up then they should be fine, right? I recall you said we got a few thousand BTC in margin top-up the other day.”
Wang: “That’s correct”
Unclear who is speaking: “But we are borrowing ourselves (from outside lenders) also (to speculate). So this time during the market crash we were also in trouble.”
Unidentified person: “But if clients top-up margin but we are overleveraged, then clients would still take a loss. And we would default together?”
Wang: “Yes. this is why Silvano [allegedly an employee of Tether, per a source] said they are good customers and we are bad customers. Good customers are our real customers. The bad customer is ourselves [laugh]”
A continuing problem?
Some industry professionals said that Babel’s behavior was excusable, especially its situation during the March crash.
One source who works at a competing firm told Decrypt:
“Babel’s taking a leveraged position during the market crash is understandable. After all, it is a young startup without much institutional backing. However, when the market returned, Babel continued to take leveraged positions. That is the real problem.”
Meanwhile, Babel is evolving its business model.It’s been expanding into other financial services and has launched a private banking service that targets high networth individuals. It claims to have attracted more than $50 million worth of USDT thus far.
One might wonder if Babel’s clients are alarmed by the stories being circulated about the company. On the contrary, some clients are not worried at all. In fact, one customer told Decrypt that they still want to do business with Babel because “if Babel managed to get out of trouble last time, they can probably do it again.”
ConsenSys Founder Joe Lubin on Ethereum 2.0: ‘It’s Happening’
Blockchain startup ConsenSys has unveiled a new organization dubbed Mesh, which is part of the company’s broader plan to separate its investment and portfolio management business from its software arm. Mesh is the brand under which ConsenSys will oversee its blockchain startups, of which there are more than 100, including the likes of BlockFi, Trustology […]
The post ConsenSys Founder Joe Lubin on Ethereum 2.0: ‘It’s Happening’ appeared first on BeInCrypto.
Blockchain startup ConsenSys has unveiled a new organization dubbed Mesh, which is part of the company’s broader plan to separate its investment and portfolio management business from its software arm.
Mesh is the brand under which ConsenSys will oversee its blockchain startups, of which there are more than 100, including the likes of BlockFi, Trustology and Compound Labs, to name a few. It’s designed to complement the software business.
ConsenSys Founder Joseph Lubin made the announcement on Twitter, explaining that Mesh will continue the company’s pioneering “mission of exploration,” which is to “advance the adoption of decentralized protocols, infrastructure and applications.”
It is that very mission, Lubin said, that motivated him since Ethereum’s earliest days. He also alluded to the launch of the much-anticipated Ethereum 2.0, which the Ethereum co-founder said is an “area of particular interest” for him.
Lubin explained how the core of ConsenSys Mesh’s mission is on open-source technology and the developers who are committed to the goal of building Web 3.0 as well as decentralized infrastructure and apps. Ethereum is already the go-to blockchain for decentralized finance (DeFi) projects, including high-profile protocols like decentralized exchange Uniswap, and it has been a blessing and a curse for the network.
For instance, the rise of DeFi has put the ETH price back in play after it was stuck in the doldrums following its 2018 peak. Now that ETH has found its groove again, thanks to DeFi, the network itself is suffering from record-high gas fees, which has stifled the activity of projects that are directly affected by the ETH gas fees.
For instance, Publish0x, which considers itself the crypto version of Medium, decided to change its payouts from weekly to monthly as a result of the sky-high ETH gas fees.
Ethereum 2.0 Is Happening
This problem has thrust Ethereum 2.0 into the spotlight once again, as the market continues to wait for the network’s upgrade from a proof-of-work to a proof-of-stake system, which will introduce greater scalability and shard chains to the popular blockchain. According to the latest update, Phase 0 of Eth2 is planned for 2020. Joe Lubin assured his followers in his Twitter thread about ConsenSys Mesh that Eth2 is happening, in case there were any doubts.
It wouldn’t be the first time that the crypto community got its hopes up. Though the ConsenSys team does seem confident that it’s a matter of when — not if.
Huobi Guide & Exchange Review: How to Trade Options, Futures, and Perpetual Swaps
Founded all the way back in 2013, Huobi Group is one of the leading blockchain companies in the industry.
It’s safe to say that the company has come a long way since then and it’s currently offering a variety of services for its wide user base. Employing people globally, Huobi offers a myriad of crypto-related services, including digital asset trading, wallet, mining pool, incubation, research, proprietary investment, and so forth.
Cryptocurrency trading has surged in interest throughout the past few years and exchanges such as Huobi have worked hard to expand their offerings. Derivatives products, apart from traditional spot trading, have exploded in interest, and Huobi is doing its best to accommodate.
Among its popular trading products are the futures, perpetual swaps, and options platforms. In this guide, we will take a closer look at how these tools operate and provide a step-by-step explanation of how to use them.
How to Register on Huobi?
Before anything else, however, you’d first have to register for an account. The process is fairly simple. There’s no mandatory Know-Your-Customer (KYC) procedure for spot trading, but if you want to start using the derivatives platforms, the ID verification is obligatory.
This is how the registration screen looks like:
All that is needed here is an email address that has to be verified through a verification code later on.
Once you have your account opened, it’s highly recommended to take a few additional security steps. First, it’s important to enable the Two-Factor Authentication (2FA), using the Google Authenticator app.
In addition, Huobi has taken a few extra steps that protect your account in the event of it being hacked such as email verification codes, phone verification codes, a designated fund password to ensure fiat asset security, and so forth.
If you want to trade on the derivatives platform, you’d have to go through an additional ID verification step which requires you to input your names, a government-issued passport, driving license or ID number, and upload a picture of it.
We’ve completed all the steps and, in our experience, the process was seamless and the KYC took no more than a few minutes to be completed and approved by Huobi’s team.
How to Deposit and Withdraw Funds?
Now that you have your account set up, it’s time to load it with some funds. Depositing is fairly straightforward and users can choose between a myriad of cryptocurrencies, including Bitcoin, ETH, USDT, and many others.
From the top navigation bar, you need to hover over “Balances” and choose the account you wish to fund. Regardless of where you deposit initially, you can easily transfer the funds between the accounts – it’s instant.
After you select the cryptocurrency you want to deposit, all you need to do is click on the “deposit” button, which will pull up this screen. In this case, we’ve deposited the stablecoin USDT.
In any case, regardless of the cryptocurrency you deposit, make sure to correctly select the transaction network (when applicable) – in our case, we used USDT on Ethereum’s ERC-20 standard.
From here, you can make quick, zero-fees transfers between the different internal accounts and fund your derivatives one. All you need to do is open the account, select the currency that you want to transfer, specify the amount, and confirm the operation:
Once this is done, you are ready to begin using the offered derivatives products. Let’s have a look at all of them.
How to Trade Bitcoin Options on Huobi?
Options contracts are one of the most popular derivatives, used constantly in traditional finance. Lately, there’s a huge demand for cryptocurrency options as well. However, keep in mind, derivatives and options are not recommended for beginners as they carry more risk.
Huobi Futures has a dedicated options platform where currently users can trade both Bitcoin and Ethereum options. In this guide, we will focus on Bitcoin.
By definition, an options contract represents an agreement between two parties to facilitate a transaction on the underlying asset (in this case – Bitcoin/USDT index), at a preset price (known as the Strike Price), prior to the expiration date.
Purchasing a CALL option means that the buyer has the right to buy BTC corresponding to the contract face value at the strike price. On the other hand, a PUT option means that the buyer has the right to sell BTC under the same conditions.
In the top left corner is where you select the type of Bitcoin options contract you want to trade with. For this example, we’ve used the Weekly BTC contract with a strike price of $8,500 and expiry on September 18th, and a leverage level of 5x.
Below is the board where you can monitor the prices for the different contracts based on their strike price factor.
As can be seen in this example, our contract costs around $2,400 to buy (bid). Huobi uses a system where traders can open positions based on contracts, where one BTC options contract equals 0.001 BTC or about $10 at current rates, as of writing this guide.
The par-value for a contract of ETH option equals 0.01 ETH, or about $3 at current rates. Unlike other margin exchanges, users can join options trading on Huobi with fairly low entry barriers.
Now, let’s see how to open a CALL position, as we assume the price of Bitcoin will close above the strike price of $8,500 on September 18th.
From the order menu, we’ve selected a price that we want to buy the contract at – it’s $2414 and the number of Contracts that we want to purchase, in this case, it’s the maximum amount of 25 contracts, which is about $250.
As soon as we hit the Buy Call button, our Limit order will be placed and when the Mark price of the contract reaches it, the order will be executed and we will have 25 Contracts ($10 each) giving us the right to buy Bitcoin at $8,500 (strike price) when the contract expires on September 18th.
If the price of Bitcoin is above $8,500, we will realize a profit, if it’s below that, we will lose the options premium.
If you want to close the position, you can specify the price at which you want to close and the overall amount of your position that you want to close.
Now, in this example, we’ve only shown how to buy a CALL option for Bitcoin, but users can also buy PUT options and they can sell contracts as well. For detailed information on how to do those operations, you can check the official guide.
How to Trade Bitcoin Futures on Huobi?
Moving on, Bitcoin futures are also available on Huobi. Here, users can buy these contracts and speculate on whether or not the price of Bitcoin will be above or below the current price on a pre-set date.
From the left pane, users can choose from a verity of the over 60 cryptocurrencies and the available futures contracts. For Bitcoin, Huobi offers weekly, bi-weekly, quarterly, and bi-quarterly contracts, and supports leverage up to 125x.
Basically, if you believe that the price of Bitcoin will be higher than the current price at the expiration date of a given contract, you should open a long (buy) position. If you think it’s going to be lower, you should open a short (sell) position.
How to Trade Bitcoin Perpetual Swaps
Perpetual swaps are probably the most popular cryptocurrency derivative instrument. They are like traditional futures with the exception that they don’t have an expiry date. In other words, traders can open and close them whenever they want to.
It’s worth noting that Huobi even offers USDT/USD perpetual swaps with leverage of 1X -1000X, becoming the industry pioneer in USDT derivatives.
Besides, for the non-stablecoins, traders can use perpetual swaps with extremely high leverage of up to 125X for BTC swaps and 75X for other swaps. In other words, you can open a position worth 125 times the amount you have in your account.
Huobi Futures offers different leverages such as 1x, 3x,5x,20x, 125x, and even 1000x. Users can choose freely according to their needs.
While this brings opportunities for big profits, please be aware that it’s also extremely risky as the slightest movement in the opposite direction of your position can liquidate your position, causing you to lose your capital. Using high leverage is definitely not recommended for inexperienced traders.
Huobi’s overall customer support is very satisfying. From our test experience, the team is very responsive and easy to communicate with.
Elsewhere, the KYC verification process is particularly quick. After we submitted the documents needed for the identity verification, the team took no more than a few minutes to have them checked and approved the account for trading.
Security: Is it Safe to Trade on Huobi Futures?
Huobi is one of the largest cryptocurrency exchanges in the world. It’s an established company with thousands of employees. While it’s never recommended to keep a large amount of crypto in an exchange, Huobi is regarded as being very safe to use.
The team has also added a myriad of additional security features that users can opt in to further protect their accounts. Of course, you should also beware of scam artists and phishing attacks.
Trading Fees on Huobi
When it comes to the trading fees, Huobi has various fees on its platforms, so let’s have a look at a detailed breakdown for individual traders:
- Futures Trading Fees
- Huobi Perpetual Swaps Trading Fees
- Huobi Options Trading Fees
It’s also worth mentioning that Huobi Futures also provides VIP Sharing Program and Market Maker Program to lower big user’s switching costs to Huobi. For example, Huobi options maker fee rebate is as high as 0.003 USDT per contract.
In general, Huobi is one of the most reputable exchanges out there and they live up to the statements. The customer support is quick and easy to communicate with, the exchange offers a range of different tools to accommodate the needs of various traders.
Their Bitcoin Options trading platform is convenient, rather intuitive, and easy to work with. There’s a range of different contracts with various leverage options and expiration dates.
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