New Self-Regulatory Rules for Crypto Exchanges in South Korea Clarified

New Self-Regulatory Rules for Crypto Exchanges in South Korea Clarified

New Self-Regulatory Rules for Crypto Exchanges in South Korea Clarified


The majority of South Korean cryptocurrency exchanges are implementing new self-regulatory rules and performing self-inspection. The industry group in charge of leading the efforts has clarified the differences between the new and old self-regulatory rules for its 23 exchange members.

Also read: Russian Regulators Draft Law to Restrict Crypto Mining, Payments, and Token Sales

Promoting Safe Crypto Trading

New Self-Regulatory Rules for Crypto Exchanges in South Korea Clarified
Jeon Ha-jin’s interview.

The Korean Blockchain Association, known for its efforts to spearhead self-regulation among the country’s cryptocurrency exchanges, has unveiled and clarified its self-regulatory rules.

In an interview with Asia Economic TV on Tuesday, Jeon Ha-jin, chairman of the association’s self-regulatory committee, explained how the group and its exchange members are in the process of implementing self-regulation, adding that in the future:

The role and responsibility of the blockchain association will be significant until a safe and sound cryptocurrency trading culture is formed.

New Self-Regulatory Rules for Crypto Exchanges in South Korea Clarified
Jeon Ha-jin explaining about self-regulation.

The rules were unveiled at a press conference last week by the association and 14 of its exchange members in an effort to “boost transparency of deals and head off money laundering, insider trading and other illegal deals,” the Korea Times reported.

Specifically, the rules suggest that crypto exchanges “(1) manage clients’ digital coins and their own separately (2) cope with abnormal transactions quickly (3) list new crypto with enhanced client protection system (4) hold a minimum equity of 2 billion won [~US$1.85 million] and (5) publish regular audit and finance reports,” the news outlet conveyed, adding:

The association will inspect the system of the 14 exchanges and nine newcomers to see if their systems meet the rules. But the inspection could have a limited impact because the rules are not legally binding.

Inspections will start on May 1 and the association will look into the exchanges’ systems “to check if there are loopholes that could be used for insider trading, price rigging and money laundering,” the publication detailed. “Members are supposed to submit self-inspection reports to the association by May 8.”

New vs Old Rules Clarified

Jeon explained on a show hosted by the same TV station the differences between the new and old self-regulatory rules introduced by the association.

New Self-Regulatory Rules for Crypto Exchanges in South Korea ClarifiedHe believes that “the government is now totally neglecting” small and medium-sized exchanges with the enforcement of the real-name system. Since it was implemented, banks have been reluctant to provide virtual account services to small and medium-sized exchanges, opting to only work with the country’s largest such as Upbit, Bithumb, Coinone, and Korbit.

Describing the association’s approach to self-regulation, Jeon said “First, we examined the differences [of the new rules] from the existing self-regulation.” He then clarified:

In the new self-regulation, the content of strengthening the transparency and security of cryptocurrency exchanges has been added. In order to prevent money laundering by the users of the exchanges, we have added a procedure to verify identity.

Furthermore, he emphasized, “From next year, we will be able to trade [with] only one account per person. It [is] also planned to preserve transparency by keeping transaction records for five years.”

Lawyer Jong Jae-jung said on the same TV show:

Considering the size of the cryptocurrency market, it is necessary to impose a null and void liability in the event of damages caused by hacking or the like. It is desirable to impose an insurance policy on capital adequacy through appropriate capital requirements.

What do you think of the new self-regulatory rules for South Korean crypto exchanges? Let us know in the comments section below.

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Bitcoin in Brief Wednesday: Crypto Leakers, Hackers and Rappers

Bitcoin in Brief Wednesday: Crypto Leakers, Hackers and Rappers

Bitcoin in Brief Wednesday: Crypto Leakers, Hackers and Rappers

The Daily

Today’s collection of Bitcoin in Brief stories from across the cryptosphere showcases how bitcoin is an unstoppable force. Even if one centralized avenue can be pressured by some governments, others will soon pop up to replace it in the decentralized global ecosystem.  

Also Read: 20% of Financial Institutions Examining Starting Cryptocurrency Trading Soon

Wikileaks vs Coinbase

Bitcoin in Brief Wednesday: Crypto Leakers, Hackers and RappersA couple of days after Wikileaks called for a global blockade of Coinbase because the cryptocurrency exchange and payment processor blocked its official swag shop without notice or explanation, the organization has switched to a competing solution. Wikileaks announced that the shop has moved to using Canada’s Coinpayments and that its publishing arm has expanded its own bitcoin and privacy system.

The organization then called out its former service provider again, explaining that: “Coinbase has become an unreliable and even dangerous service, subject to arbitrary, non-transparent actions as it merged with the US banking sector and started to provide information on its customers to the US government. It has become everything that Bitcoin was designed to stop.”

Tellingly, while the US-based Coinbase remained silent on the matter, its competitor Kraken commented and explained the problem with relying on centralized services. The company tweeted: “Thank you all for suggesting Kraken as an alternative for @wikileaks, however, Kraken is also a centralized choke point. Those who require uncensored financial autonomy should control their own private keys and rely only on the blockchain for processing.”

Ripple Seeking Street Cred

If you’ve always considered Ripple to be a boring banking technology corporation riding the coattails of the cryptocurrency revolution, think again because they just got Snoop Dogg to perform at an upcoming event. The 46-year-old rapper, who has been a part of mainstream culture for a couple of decades now, will join a “VIP gathering” in New York next month. While Ripple will limit admission to only those on their invite list and tickets can’t even be purchased, they will offer ten members of the community a chance to enter by wining a trivia and a “Make the Meme” contests. The latter is not an original meme making competition but rather one in which the company will share two images and ask people to add captions for them.

Hackers Shake Down Governments for Bitcoin

Bitcoin in Brief Wednesday: Crypto Leakers, Hackers and RappersWhether ransomware hackers are getting more brazen or just shooting aimlessly in every direction to see what they can hit, they are becoming a nuisance to more government bodies around the world. The latest example comes from the Ukraine where the energy ministry’s website has been blocked with a ransom request for just 0.1 bitcoin. Ukrainian cyber-police spokeswoman Yulia Kvitko reassured the public that: “This case is not large-scale. If necessary, we are ready to react and help. Our specialists are working right now. We do not know how long it will take to resolve the issue.”

While paying off a modest 0.1 bitcoin ransom should not be too difficult for Ukraine, governments aren’t exactly known for efficiency. It was recently revealed in the US that Atlanta’s city government spent about $2.7 million to recover from a ransom demand of just $50k. In fact, city officials paid that sum for communications crisis management alone.

New Crypto VC Fund

Andreessen Horowitz, the Silicon Valley venture capital firm that previously invested in Coinbase, and Cryptokitties, is apparently looking to spin-off a separate crypto-focused fund. While the company hasn’t announce anything publicly yet, it has published wanted ads for a “Finance and Operations Manager, Crypto Assets” and a “Legal Counsel, Crypto Assets” detailing it is planning “a separately managed fund focusing on crypto assets,” spotted by Recode.

Majority Votes Against Restoring Parity’s Lost Ethers

All the votes are in and the motion to restore Parity’s lost ethers has failed. 55% voted against implementing EIP 999 which was meant to patch the contract which was accidentally self-destructed costing users more than half a million ether, worth over $230 million at the time. Now it only remains to be seen if everyone will respect this decision and move on or if another ethereum fork is inevitable.

San Marino Wants Part of Blockchain Action

Bitcoin in Brief Wednesday: Crypto Leakers, Hackers and RappersThe tiny nation of San Marino joins other small locations in the European periphery, like Malta and Switzerland’s Zug, which see themselves potentially benefiting from the recent hype around blockchain.

“We are the world’s oldest Republic and we are proud to begin a transformation lead by technology. We believe this partnership will have an significant impact on the economy, growing the innovation sector which is at the core of our development strategy” explained Andrea Zafferani, Secretary of State for Economic Development. “The Republic will also acquire a state of art set of regulations to become a world-leading blockchain hub.”

“San Marino is ideally placed to become an innovator with this type of technology,” added Sergio Mottola, Executive Chairman of San Marino Innovation. “We are not interested in short term or opportunistic policies to take advantage of the speculation surrounding today’s cryptocurrency world. Rather, we are intrigued by the revolution implicit in the underlying technology: the “blockchain”, which we expect to bring an impact on the global economy greater than what the Internet has”.

What other developments in the cryptoshpere caught your attention today? Share your thoughts in the comments section below.

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PR: Utrum to Launch Innovative Blockchain Platform Solving Trust Problems for Crypto Investors

PR: Utrum to Launch Innovative Blockchain Platform Solving Trust Problems for Crypto Investors

Utrum to Launch Innovative Blockchain Platform Solving Trust Problems for Crypto Investors

This is a paid press release, which contains forward looking statements, and should be treated as advertising or promotional material. does not endorse nor support this product/service. is not responsible for or liable for any content, accuracy or quality within the press release.

Utrum, a decentralized community platform with reputation-based quality reviews of crypto projects and assets, has announced its public token crowd sale to launch May 10, 2018. Utrum will offer OOT, a Privacy Coin and the utility token of the Utrum ecosystem. The crowd sale is the second ever dICO (decentralized Initial Coin Offering) and is being launched on the Komodo Platform (KMD). Komodo is the world leader in Atomic Swap technology and this technology will be utilized in the Utrum dICO App, allowing participants to invest in the ICO in a unique “wallet-to-wallet” transaction, receiving OOT immediately in exchange for their investment with no third-party intermediary.

A grassroots project, Utrum was born out of a Komodo Slack conversation between a few cryptocurrency investors. Founder and Project Lead for Utrum, Sridhar Panasa, had observed the multitude of scams, misinformation, and chaos plaguing the crypto-investment community at large. Having previously run a Threat Intelligence company, Sridhar has a habit of looking at new technologies from a strong security perspective.

“I saw members running around from telegram groups to facebook groups trying to get info about investments…” said Sridhar Panasa, Utrum’s Founder and Project Lead. “There was no clear authority or means by which to sort through the noise. One day I got this idea. How can we stop scams from happening and identify the quality information about cryptos? I brought the idea up to Komodo’s lead developer JL777 and he created a slack channel for us in Komodo’s slack. There I began discussing with Chris (Chris Maarseveen) and Gürkan (Gürkan Aygörmez), and the three of us have been working on the project ever since.”

Cryptocurrency is one of the highest risk markets in which to invest…and arguably the most accessible to anyone. With the increasing difficulty for investors to adequately distinguish between the good and the bad in crypto investing, many well-meaning investors have lost everything in their attempts at supporting the growth of this technology.

Utrum believes that by developing an Artificial Intelligence backed, a community-driven platform which rewards users for their help in reviewing, rating, analyzing and predicting crypto projects, assets, and teams, these problems can be solved. Through the use of blockchain, Utrum is creating an ecosystem of supportive and educational guidance for investors of all caliber, as well as a marketplace for projects and providers to showcase to a targeted investment-rich community. Utrum will also implement community-voted moderators whose job it is to help regulate and manage the ecosystem according to community governance.

The platform utilizes a new token, called OOT, which is used for various utilities and transactions within the community and marketplace, and which will be available on cryptocurrency exchanges in the future. Users who write reviews, perform analysis, and participate in rating crypto-projects or assets, are rewarded OOT based on their activity and reputation within the community.

Utrum has a diverse and growing team of individuals passionate about creating a safer and more rewarding platform, helping users become smarter crypto investors, helping good projects gain visibility and helping the larger crypto-community. The team brings over 30 years combined experience in business development, technology, security, and community management.

This new crypto startup is poised and passionate about developing a powerful community platform for crypto projects, developers, analysts, newbies, and investors to gain access to quality information and reviews. If you’d like to learn more about Utrum, visit their website to read more and join the conversation.

Token Sale starts on 10 May with 30% Bonus

Utrum – Your Crypto Playbook Intro Video


James Lee, AKA “JL777”, is the Lead Developer of Komodo Platform, a leader in Privacy, Decentralization, and Development with a market cap of over $500 Million. He is a strong advocate of privacy and liberty in its true essence. He is the pioneer of decentralized ICOs (dICO) which he developed to curb “whale manipulation” within crowd sales. His brainchild is BarterDEX, a fully functional decentralized exchange, powered by atomic swaps and electrum servers. He also developed the Komodo privacy coin using zk-snarks and Jumblr for anonymity, and innovated dPOW (delayed Proof of Work) which gives Bitcoin security to Komodo and its asset chains.


SuperNet is one of the largest Crypto Investment Funds with a portfolio worth 10,000 BTC recently purchased 1% of OOT (Utrum Token) total supply in a private sale.

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This is a paid press release. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.

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Iceland’s ‘Big Bitcoin Heist’ Suspect Has Been Arrested

Iceland’s ‘Big Bitcoin Heist’ Suspect Has Been Arrested

Iceland’s now-infamous bitcoin miner thief has reportedly been arrested.

A Dutch police spokesperson confirmed that Sindri Thor Stefansson – who is accused of masterminding the theft of $2 million worth of mining hardware in what’s being called the “Big Bitcoin Heist” – was arrested in the Amsterdam on Sunday night.

Prosecutors are now looking to extradite him back to Iceland, the News Observer reported.

Stefansson walked out of a low-security prison and traveled to Sweden last week, as previously reported. In a letter sent to Icelandic news organization Frettabladid, he claimed he was held “for two and a half months … without evidence,” and kept in isolation during his imprisonment. After his order of detention expired, he left the prison and took a taxi to the airport.

“I simply refuse to be in prison of my own will, especially when the police threatens to arrest me without explanation,” he wrote to the newspaper.

Stefansson did say he wanted to return to Iceland and claimed that he had been negotiating with police to arrange his return. He also threatened to use a fake identification to stay hidden from authorities.

In his letter, Stefansson did not address the 600 computers he was accused of stealing, nor have police given any indication that they have located the missing machines. The owner of the bitcoin mining hardware has offered a $60,000 reward.

The computers were stolen across four separate thefts in what is Iceland’s largest crime to date. Last month, police officials said that “everything points to this being a highly organized crime.”

Police car image via Shutterstock

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Quebec Chief Scientist Rejects “Myth” of Widespread Illicit Bitcoin Use

Quebec Chief Scientist Rejects “Myth” of Widespread Illicit Bitcoin Use

Quebec Chief Scientist Rejects


The Chief Scientist of Quebec, Rémi Quirion, has published a document rejecting the popular “myth” that illicit transactions are among those for which bitcoin is principally used. Quebec’s Chief Scientist is closely associated with the Fonds de recherche du Québec (FRQ) – a publicly funded institution dedicated to “providing support for the production and dissemination of knowledge.”

Also Read: 20% of Financial Institutions Examining Starting Cryptocurrency Trading Soon

Quebec’s Chief Scientist Dismisses Claims That Bitcoin is Commonly Used for Illicit Purposes

Quebec Chief Scientist Rejects "Myth" of Widespread Illicit Bitcoin Use
Rémi Quirion, Chief Scientist of Québec

Mr. Quirion asserts that “Bitcoin is often blamed as a good tool for crime or money laundering,” adding that “Even Christine Lagarde, president of the International Monetary Fund (IMF) recently called for more regulation of cryptocurrencies to counter illegal activities.”

Whilst the Chief Scientist acknowledges that bitcoin can be used as a means to achieve greater anonymity whilst conducting transfers, Mr. Quirion states that “the facts do not support the theory” that criminal use of bitcoin is widespread.

“Pseudonymity” Deters Criminals From Widespread Adoption

Quebec Chief Scientist Rejects "Myth" of Widespread Illicit Bitcoin UseQuebec’s Chief Scientist argues that bitcoin offers it’s users “pseudonymity,” rather than total anonymity, which detracts from its potential illicit utility.

According to a rough translation, Mr. Quirion quotes cryptocurrency analyst, associate researcher at the Montreal Economic Institute, Jonathan Hamel – who has argued that the public nature of bitcoin’s blockchain detracts from its anonymity. “Every transaction is transparent and public. They are indeed recorded in a kind of ledger whose copies are distributed among thousands of computers.”

Cryptocurrency analyst, Erwan Joncheres, is also quoted in the document as arguing that “The anonymity of bitcoin is a myth.” Mr. Joncheres has argued that bitcoin is “no more transparent [than] money, because you have to go through a platform where you have to give personal information,” adding that at a bare minimum, information pertaining to “the address of the transmitter and that of the receiver” is recorded by a third party that facilitates the transaction.

Illegal Transactions Comprise Less Than 1% of Bitcoin Circulations

Quebec Chief Scientist Rejects "Myth" of Widespread Illicit Bitcoin UseThe document points to research conducted by the “Center for Sanctions and Illicit Finance of the Defense of Democracies Foundation” that, after analyzing bitcoin transactions executed between 2013 and 2016, found that only 0.61% of trading transactions in the period were deemed to be associated with illegal activities.

The Chief Scientist also points to center’s findings that illegitimate transactions within the bitcoin economy are extremely centralized, further undermining the suggestion that illicit activities pervade the bitcoin economy. Said research indicated that less than 10% of anonymous free markets were responsible for 95% of illicit transactions involving bitcoin between 2013 and 2016.

As such, Mr. Quirion argues that “The claims of recent years that some of the bitcoins would be used to circumvent money-laundering rules must, therefore, be questioned.”

Money Laundering in Crypto “Anecdotal,” Says Researcher

Quebec Chief Scientist Rejects "Myth" of Widespread Illicit Bitcoin UseMr. Quirion similarly rejects associations between tax evasion and bitcoin, quoting Canada Revenue Agency Communications Officer, Karl Lavoie, as stating “It’s just like money and you have to declare what you’re doing with it.”

Mr. Jonchères has also dismissed assertions that bitcoin and money laundering go hand-in-hand, stating “I think that tax evasion and money laundering are anecdotal on cryptocurrency networks. Since bitcoin is transparent, it will be very easy to identify all the people trading on an online exchange or portfolio platform.”

The document concludes that “bitcoin is not above the law, nor is it a magnet for illicit transactions: it forms only a tiny part of the criminal money circulating around the planet” due to it being “less attractive for anyone who wants to make transactions without leaving a trace […] Ultimately, the user must also take responsibility, […] In case of loss or theft, there is no 1-800 number to recover its bitcoins,” Mr. Quirion stated.

Do you agree that mainstream claims that cryptocurrency and criminality go hand-in-hand are unevidenced? Share your thoughts in the comments section below!

Images courtesy of Shutterstock,

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Everything Ex-CFTC Chair Gary Gensler Said About Cryptos Being Securities

Everything Ex-CFTC Chair Gary Gensler Said About Cryptos Being Securities

Editor’s Note: The following transcript comes from Monday’s talk at the MIT Technology Review Business of Blockchain event given by Gary Gensler, former chairman of the Commodity Futures Trading Commission.

Good afternoon, I am going to talk to you about blockchain technology and its real potential. And I believe it does have a real potential in the world of finance.

It’s an innovative way, of course, to verifiably move value or apply code or “dapps” as some people call them on a distributed network, but what’s moving value or code on a distributed network, but really finance because it ties to the essential plumbing of the financial sector which at its core moves and allocates money and risk. So, value and code, money and risk.

It seems, in essence, this is the core to the plumbing of the financial sector. To reach its potential though, and for public confidence, blockchain technology has to be compliant with laws.

It doesn’t mean the laws have to stay exactly the same, but laws that have been established over many, many decades that customers and investors and to make sure that markets work efficiently, that’s called market integrity. So, customer protection, investor protection, market integrity. And to really work I believe blockchain technology needs to come within that public policy framework.

Now this can be done by balancing those protections while at the same time promoting innovation. But as we currently see things, we’re not in a pretty good shape right now.

There really is significant non-compliance with respect to the laws, certainly in this country and in many many other countries as well. Many initial coin offerings probably well over a thousand, many crypto exchanges, probably 100 to 200, are basically operating outside of US law.

And when I say outside, that means non-compliance with the laws right now. So, that’s a lot of this marketplace right now, now I’m an optimist, I want to see this technology succeed, it is in essence about the plumbing of the financial system and it’s a new technology that can really enhance the financial system.

So, I think we need to kind of bring it inside. And there’s gonna be a lot of technical and commercial challenges, and you’ve heard about that during the conference – about scalability, about interoperability, and governance and privacy and the like.

I’m going to just sort of focus on the public policy side, I think ultimately when it does succeed, this innovation has a chance to lower costs, lower risk and yes, in some ways, bore into some of the economic rents of centralized institutions, where they can collect excess and extra rents. The question is then, really, for this new technology, ‘How do we go forward?’ And it is often said that the devil is in the details.

So initial coin offerings. What do we know? $6.5 billion in the first quarter of 2018. Hasn’t slowed down. $6 billion dollars in 2017 which in itself was a 40-fold increase. So maybe this year could we see $25 to $50 billion dollars all year if it keeps ramping up? Is it $20 to $30 billion?

It’s no longer a small market, it surpasses a lot of the VC space and other ways of raising money. But there’s significant frauds and scams in this market as well.

One of my colleagues Christian [Catalini] thinks upwards to 25 percent. Some outside sources have numbers even well in excess of that as well. But this innovative way of crowd funding offers prefunctional, transferrable tokens for use on a future blockchain application.

And it has mixtures of economic attributes, which is both investment and consumption. So you’ve heard this debate – is it a utility token, is it a consumable token or is it investment?

Well kind of the answer is it’s both. I know that’s not an answer that a lot of people like, but that’s kind of where we are right now. The fungible nature of the tokens and the expectation of profits distinguish it from a theater ticket or a personal seat license at a sporting event. It’s fungible and you’re expecting future profits when the network comes together.

The presence of a transferrable usable token and an expectation of profit further distinguishes it from crowd funding on Kickstarter or Gofundme or elsewhere. So, lacking traditional features of equity or bonds, doesn’t pay a dividend, you don’t necessarily get a coupon, you say ‘huh I’m home free.’ Not really, not really. Because the investing public is clearly hoping for possible appreciation based on the efforts of promoters and development teams. And so, this brings me to a very important test in the law – it’s called the duck test.

Riley is not familiar to the rest of you maybe, but when you quack like the duck, when you swim like the duck, when you walk like the duck, Riley 100 years ago said, ‘I think the bird’s a duck.’ So, why is that, why am I talking about that at a blockchain conference? Well, in essence, when investing in any form of finance, whether an ICO or traditional forms like stocks and bonds, the public benefits from full and fair disclosure.

The investing public benefits from prohibitions against fraud and manipulation. And so many years ago, in the 1930s, Congress invented in the securities laws a definition of security. But that definition of security includes something other than just stocks and bonds, it also includes something called an investment contract. This is not arcane law, it’s been tested over and over again at our supreme court as recently in the last 15 years. But in the 1940s, the key test was something called the Howey Test.

So, what is this all about? Well, there was a man named William Howey and William Howey had orange groves in Florida. You might say why am I talking about orange groves? Well this company sold land and gave the buyers an option to lease the land with an affiliated company – it was not stocks, it was not bonds, but guess what – the Supreme Court said it was an investment contract. And what the Supreme Court said is an investment contract is that what you see up on the screen.

Is it an investment of money, is it a money going to a common enterprise, is it a reasonable expectation of profit relying on the efforts of others. Think of those four-part test, it’s all nuanced, it’s all facts and circumstances, but always always recall the duck test as well. And so the Supreme Courts also ruled subsequent to that in 2004 that when they’re talking about profits, the profits don’t have to be dividends. The profits don’t have to be some other right of return. The profits include something that you think is about appreciation and that was in the Edwards case.

The SEC ruled on this last summer in The DAO letter and the Munchee Order and this Centra complaint, but more important than that, SEC Chairman Jay Clayton has spoken about this. And I quote, this was Chairman Clayton, it’s not me, ‘I believe ICO I’ve seen is a security. You can call it a coin, but if the function is a security, it’s a security.’

That sure sounds like you can call it a coin, but if it’s a duck, it’s a duck. But anyway, I tend to agree with the Chairman. I haven’t reviewed all the ICOs. Who could review 1,000 to 2,000? But other than maybe CryptoKitties – which I think CryptoKitties is not a security, I’m not sure it’s an ICO though – I tend to agree with him.

So, the question now is where do we go? What’s next. And I don’t think it’s any longer question of if, I don’t think it’s a question of when, ICOs really must comply with securities, commodities and derivatives laws here in the U.S. and frankly around the globe.

And I should even throw in also anti-money laundering and know your customer because the U.S. Treasury Department is written on that as well. And this is not just because one reason – the economics, with $6.5 billion raised, when one firm – Telegram – raises $1.7 billion, what do we call that? That’s capital formation. Investors protection, consumer protection is worthy in this space. Yes, it’s a utility token, but yes it’s an investment contract.

So, the duck test, the economics, the law, the Chairman, the statement all say this is where we’re headed. So, let’s just talk about what that means. I’m going to go to four general considerations and four specific considerations.

So, four general considerations. Remediation. So, how might regulators bring 1000 past ICOs into compliance? Might be retroactive registration with rescission rights. Some requirements are going to be difficult to sort of put in there. It’s not easy to tuck them all in, particularly beneficial ownership. There’s been a requirement since the 1930s that you know your shareholders – initially to avoid double spending – just like the blockchain. But more recently to comply with anti money laundering laws. Secondly, how do you recover the losses? Can regulators and the courts help?

Well guess what, private citizens have a right under our securities law to bring their own private rights of action.

Whether it’s against ICOs, or exchanges or the like, but the money might not be there. Thirdly, it’s compliance with possible tailoring. Again, laws were written at an earlier stage. I stand here on the stage saying investor protection is important… But I’m also saying that I think we might need to tailor some of these rules and regulations so that they fit into this new technology while still protecting investors.

And lastly a regulator talking to you all, the question is what tools in the regulatory tool kit does a regulator use? Is it some enforcement actions, give a few speeches and expect the market to come into compliance? Is it hoping that private citizens will bring private rights of actions? Or is it also in addition using the rule writing authority? And I think you’ve seen that at the CFTC at the agency I was honored to run, but I think you’ll see that at the SEC at some point too.

So now let’s talk about some specifics about the ICO market.

So, first what you read a little bit about in The New York Times is, OK, the SEC and regulators around the globe need to look at all these tokens. I think that’ll bring clarity to the market. And I think that’s not just the ones we call initial coin offerings, but it’s really critical to go through the top tokens. And so, we did a little analysis, I’ve done this analysis, but with the help of some others on just the big five.

Bitcoin, litecoin, bitcoin cash all strikes that they’re probably not. As a non-lawyer, I get it. People were starting to tweet, you know, is he a lawyer? But bitcoin and so forth, probably not and why do I say that? Because bitcoin came into existence as mining began as an incentive in validating a distributed platform. No initial token offerings, no pre -mined coins, no kind of common enterprise under that Howey Test. And litecoin and bitcoin were both forks off of that.

But what about ether and ripple? And you can go down. I’m not trying to pull these out, it’s just these are the big five. These all seem to have attributes of that Howey Test. Was money given over in 2014 for ether, bitcoin for ether? Was money given to ripple every month they sell another bit of it out of the escrow?

Is there a common enterprise. Ripple labs sure seems like a common enterprise, or the Ethereum Foundation in 2014, I’m talking about. Is it on the expectation of profits, well the Ethereum Foundation offering had an 50 percent appreciation right in the first 42 days written into the offering.

And Ripple even today links to 16 market makers in XRP and they’re doing a lot to enhance the value of XRP for the benefit of holders of XRP for the benefit of their own company because they own 60 or 61 percent of XRP. And is it on the efforts of others? Well, in the Ripple case, that feels to be the case, ethereum sort of evolved into something maybe else. But, the Ethereum Foundation is still quite central, maybe not as central as Ripple Labs.

So, I think there’s a strong case, but it’s not whether I think so. I think there’s a worthy public debate about these issues.

The second issue is token design. Is there possibly a design that’s really about consumption and not about investment? And sort of solely about consumption not investment? It’s gonna be a challenging time because the SEC’s already said in the Munchee order that it will take more than semantics, or more than a token being functional. So, this functional, bit is an important bit but not enough.

Third, how should multi-stage contracts happen. Like, when filecoin raised a quarter of a billion dollars in something called a SAFT. And there’s a lot of debate.

Can you put a packaging around a token, and so the package is a security and so the token later on is not. Is that alright? The SEC has not yet spoken on that, and there’s controversy around it. Let’s call that, that’s yet to be determined.

And then fourth, is a new concept, can a security token transform to be something else. And a group of venture capitalists went into the SEC ten days ago, they’ve circulated paperwork to a lot of people and they’re sort of saying, ‘believe us we get you, we’re with the SEC, but we have a bunch of clients that are going to evolve to be a consumable token.’ I’m kind of don’t think this is going to work. I don’t think there’s any precedent in the law for a security to transform to be something else. But this is an issue on the table and it’s a worthy debate.

So, in conclusion, blockchain technology has a real potential to change the world of finance. It could lower costs, and risks and economic rents but for broad adoption the technology needs to move forward in the public policy sphere. I think basic norms are what’s critical. The basic norms of investor protection, and consumer protection and of course making sure illicit activities can’t occur. But we also need to adapt some of the rules of the road so that this new technology fits in. But I don’t think it means that we just exempt the whole field and say ‘good luck investors’.

Not when the money and the dollars are so big. With over 1,000 of these already launched, good chance it’s going to be a pretty interesting year in 2018. Market participants have a role, have a very real role with regulators and technologists figuring this all out.

But I do think the public will benefit and ultimately reap the benefits and if anybody’s interested I’ll be teaching on Tuesdays and Thursdays next fall this course.

Question and Answer:

I want to start with probably the most controversial statement you made, which is, how can you say CryptoKitties are not a security?

I just… there’s something about CryptoKitties that is wonderful, but I don’t think it’s an initial coin offering. It did have a little airdrop, by the way I think airdrops don’t get you off the hook. But it started that way, but then you have this unique – I think it’s more like a seat license.

That you have a unique asset and you own your kitty rather than like these others. But there’s actually a SEC case long ago, actually a court case called the Weaver Beaver Association, so look that one up, that’s kind of a neat one.

In fact, the controversial statement that you made obviously was that ethereum and ripple might end up being classed as securities. First of all, there’s no reason why you wouldn’t have, but do you have a sense of how long it might take the SEC to come to a ruling on stuff like this?

I don’t know, I think that this is a multi-year process.

The reason I say that is to write a rule, get public comments, to get feedback, finalize that rule, give a period of time for implementation and maybe court challenge is two years at a minimum and possibly three to five years when you really see how things go. I think 2018 and I’ll be speaking more about exchanges later this week, but 2018’s a period of time to try to bring compliance into this sort of 1000 plus tokens.

What ripple and ether, while I think there’s a strong case particularly for ripple or XRP given the centrality and the common enterprise around Ripple Labs, and that they’re selling it every month and so forth. That’s really a discussion between them and the SEC and ultimately the way I would think is if the SEC declares that there’re securities that might end up in court, and so it won’t be the SEC it maybe not even a federal district court but an appellate court, that will decide or the Supremes.

But let me say this, if they decide that they’re not securities, I think that too probably ends up in court and the reason is is because somebody else will say, ‘well why are they getting out of regulation and I’m not.’ So, law is best when applied consistently and we went through the duck test and the Howey Test – a little humorous – but it’s also because for whichever way authorities go they have to have an eye on consistency as well.

So, I think nine months at the least, maybe two to five years at the longest.

So let’s say at some point the SEC rules that a large number of these things are in fact securities, does that have a chilling effect on the whole blockchain space?

I believe that it’s a net positive. So much in our economic life and in our personal lives oscillates so it might have a chilling effect on this frothy ICO market, but I think it’s a positive for blockchain.

We have right now major institutions that want to significantly adapt and adopt, asset managers who want to invest in this space, major exchange companies who want to move into this space.

The unregulated exchanges in aggregate – I’m making an estimate here that the unregulated exchanges in aggregate – make more money, more bottom line than the aggregate regulated spaces in the securities field around the globe right now. So they want to get into the space. Right now the incumbents are making less than the startups.

Well, you might say that that’s bully good, but the incumbents are doing it in part because they’re front running and they’re not treating their customers and investors in a way that probably you’d want.

Does it restrict the kinds of things that can be done with tokens? To simplify grossly, we’re talking about tokens that are issued on blockchains that are trying to be anonymous, decentralized, distributed. Can something that is anonymous and decentralized also be SEC compliant?

I think it’s very challenging.

There’s a number of public policy considerations and this is in 180 countries. But tax authorities don’t want to lose much of their tax base, and none of use want to really promote illicit activities around money laundering or terrorism financing and the like. E

very nation has signed into if you do an offer you know the beneficial owners. That’s not just a US thing that’s around the globe. And yet the technologists in this room would probably tell me it’s a little tricky on a blockchain to know something more than the public key and Monero and others even find a way to put, shall we say, fog on top of the public keys. So, knowing your customer and beneficial ownership is at the heart of nearly every developed country’s securities laws and investor protection laws.

I think that’s going to be, that’s something that if technologists figure it out, that’s going to be a real plus.

Scenario: SEC clamps down on lots of these things, it says a lot of you guys who issued tokens and a lot of you people holding tokens what you were doing was illegal. Well the holder’s not necessarily. The public might have been scammed but they weren’t necessarily breaking the law.

So two classes of people with two classes of problems. The people who issued the tokens, are they criminals? What happens to them? And then the people holding the tokens, were they scammed and how do they get redress?

I think regulators around the globe will sort it through but as you saw in the first of these last summer, the DAO, the SEC chose to write an order but they didn’t actually then have a civil money penalty, they just wrote an order and tried to change behavior.

I think there’s a reasonable case to be made that if you can come into compliance, if the securities and exchange commission gives some number of months and I don’t know that that’s the right period of time, but some number of months or a year or whatever to come into compliance, then they’ll look forward. The challenge is compliance is about disclosure, that’s hard to do but it’s do-able.

Compliance is about the manner of sale. You can’t change the manner of sale from two years ago, but maybe you can change the manner of sale going forward. Compliance is about beneficial ownership, that’s a tricky one. Compliance is about anti-fraud and insider trading rules.

So, I think it’s more like let’s look forward and there’s a thousand plus horses running out on the field that got out of the barn and we’ve gotta kind of bring them into compliance. And even for Ripple and ether, or maybe it’s EOS or NEO or.. but for the big market cap ones, there needs to be clarity in the market and if the clarity in the market is that they’re not securities they might still be commodities, they might still need to comply with all of those laws, but I think it’s a period of time, but if you do an issuance now in April of 2018 do it under the US securities laws.

I think everybody’s on notice now. And Chairman Clayton did that in February pretty clearly, and any law firm advising them I’m sure is telling them we can’t write you an opinion unless you comply with one of the exemptions. There are various exemptions if you only sell to accredited investors or other various ways to package these things. They’d still have some burden, they still have costs and this kind of tricky question of how you figure out who all your beneficial owners are.

Exemptions and selling to accredited investors – the SAFT – which you mentioned do you think that that resolves the problem?

Well I think you’re asking two questions. The first is do I think selling to accredited investors under what’s called Regulation D works. Yes, if you comply with all the exemptions and all the requirements of Reg D. Do I think that a SAFT or a multi-staged where you can one day be a security and a year or two later no be, or in essence, filecoin’s token, not to pick on them but it’s a real case, will filecoin’s token not have to be registered?

I think that’s unlikely but they might be successful. That’s between them and the securities lawyers at the SEC. I think that at the core is the economics. The core is you can be both a consumable token and an investment token and then you need to comply with securities laws. And if somebody’s raising a quarter of a billion dollars as filecoin did or $1.7 billion as Telegram did, and the market is the size that the market is, there’s a lot of investors who are investing and then I think the laws should adapt.

There’s going to be a lot of changes over that over the next two to five years are appropriate. But it’s better to bring it inside of the public policy framework even if there’s a bit of a chill. But to bring it in, to be stronger and reap the benefits later. And I think the internet went through this a bit and other technologies, railroads went through it in the 19th century.

New technologies usually come about outside of a public policy framework and at some point whether it’s a taxing authorities or other authorities, but we still want to achieve something. In this world we want to protect investors and consumers, we don’t want like consumers money to be lost like a half a billion dollars got lost at Coincheck in Japan in January.

I mean we all remember Mt. Gox about four or five years ago. This keeps happening.

So there’s still core public policy goals, and they’re still worthy and sort of adapting the technology and adapting the laws to fit them together.

Gary Gensler image via Flickr

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Crypto Winter or Spring Revival? Take CoinDesk’s State of Blockchain Survey

Crypto Winter or Spring Revival? Take CoinDesk’s State of Blockchain Survey

After a historic 2017, the cryptocurrency markets took a decided downturn in Q1.

Bitcoin, ethereum, litecoin – and most major cryptocurrencies – saw declines in a variety of metrics: exchange volumes, transaction counts, and, of course, price. With it, too, public sentiment on the technology appears to have become more mixed.

Some naysayers, like Nobel Prize-winning economist Joseph Stiglitz, saw the decline as confirmation that 2017 was a mirage and that bitcoin “ought to be outlawed,” while Warren Buffett joined the chorus as prices started to tank and stated that it would “all come to a bad ending.”

Still others, like Twitter & Square CEO Jack Dorsey, ignored lowered prices to suggest “the world ultimately will have a single currency…[and] that it will be bitcoin.” Peter Thiel made similar comments, while Goldman Sachs issued a report that stressed bitcoin’s usefulness as a crisis currency.

Besides the prices, there was more bad news: Coincheck experienced a huge hack of $400 million, while regulators everywhere from South Korea to the U.S. took pointed aim at the industry. Several banks even went so far as to ban crypto purchases with credit cards, and the most heavily trafficked websites in the world (Twitter, Facebook and Google) all banned crypto-related ads.

While these events all spoke to dimmed prospects for the industry, there were other positive signs: the launch of the Lightning Network, the historic Telegram ICO that raised $1.7 billion and Rakuten (the Amazon of Japan) announcing plans to migrate its entire $9 billion loyalty program over to a cryptocurrency.

Where do we go from here? 

Make your voice heard by filling in the survey here:

Create your own user feedback survey

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The results of the survey will be analyzed and published in CoinDesk Research’s forthcoming State of Blockchain Q1 2018 report.

Flowers in bloom image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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James Bond-Like Villain in $2 Million Bitcoin Heist Caught in Amsterdam

James Bond-Like Villain in $2 Million Bitcoin Heist Caught in Amsterdam

James Bond-like Bitcoin Villain in $2 Million Heist Finally Caught in Amsterdam


Amsterdam police have announced the re-arrest of Sindri Thor Stefansson. He was initially arrested days ago in Iceland in connection with a bitcoin hardware mining caper that included 600 computers worth $2 million. In a James Bond-like villain move, after his first capture he managed to escape, reportedly hitching a ride on a plane carrying Iceland’s prime minister.

Also read: Bitcoin in Brief Thursday: ICO Scares Investors with Ghost Prank

Bond-Like Bitcoin Villain Re-Arrested

Mr. Stefansson, after have absconded, wrote to a popular online site to plead his case. “I simply refuse to be in prison of my own free will,” he explained to Frettabladid, “especially when the police threaten to arrest me without explanation. I’m not trying to say that it was the right decision to leave, I really regret it…I didn’t expect an international arrest warrant to be issued against me, as I was legally free to leave, and believed it was out of the question that I would be labelled a fugitive. I would never have done this if I didn’t believe I was a free man.”

James Bond-like Bitcoin Villain in $2 Million Heist Finally Caught in Amsterdam
Sindri Thor Stefansson shown on CCTV while at large

It’s something straight out of a movie. Media outlets are claiming Sindri Thor Stefansson to be a “mastermind”. He, at the very least, was implicated recently in a major crime for the country of Iceland: $2 million in computer mining hardware is missing, believed to be part of an elaborate theft conspiracy, involving a gang of 11 others including Mr. Stefansson’s wife.

Mr. Stefansson escaped what local press refers to as “low-security” confinement after first being arrested. He was held in Sogn, an open prison 59 miles from the country’s international airport (95 km). It’s so loose it doesn’t have a fence, and detainees can even surf the net.

Thought He Could Avoid Capture Indefinitely

The mastermind slipped out through a window. He somehow later made it to the airport, procuring a flight boarding pass under an assumed name (though he paid with his own debit card), and managed to put himself on a flight to Sweden carrying Iceland’s prime minister, Katrín Jakobsdóttir. He wasn’t discovered missing by guards until well after the plane was airbound. An international warrant was soon issued for Mr. Stefansson.

James Bond-like Bitcoin Villain in $2 Million Heist Finally Caught in Amsterdam
Downtown Amsterdam

The Big Bitcoin Heist, as it has been tagged on the frozen island, involved bitcoin mining rigs grabbed in conjunction with four data center break-ins. Iceland has become a magnet for crypto miners due to relatively cheap electricity and its cold climes, helping the notoriously overheated instruments cool as they mine.

Mr. Stefansson’s unorthodox public letter while on the run insisted he could remain elusive to authorities for “as long as I like”. Dutch police disagreed, arresting him downtown without incident and are presently arranging for his extradition back to Iceland. 

Do you think bitcoin mining rigs present a lucrative target to thieves? Let us know in the comments section below.

Images courtesy of Shutterstock. Dutch police.

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Angellist: Number of New Crypto Job Listings Doubled in the Last Three Months

Angellist: Number of New Crypto Job Listings Doubled in the Last Three Months

Angellist: Number of New Crypto Job Listings Doubled in the Last Three Months


Angellist, a popular website that allows startups to raise money from angel investors, has revealed data about new crypto job listings on its platform. The company details the hiring needs of companies in the crypto space and what jobs are in demand.

Also read: Russian Regulators Draft Law to Restrict Crypto Mining, Payments, and Token Sales

Crypto Job Listings Doubled

Angellist: Number of New Crypto Job Listings Doubled in the Last Three MonthsAngellist revealed its new crypto job listing statistics last week. Citing that even though the price of bitcoin has dropped 60% since December of last year, the company wrote:

In the last 3 months, the number of new crypto job listings has doubled.

Angellist: Number of New Crypto Job Listings Doubled in the Last Three Months

Angellist is a U.S. website created in 2010 for startups, angel investors, and job-seekers looking to work at startups. In July 2013, the company partnered with Crunchbase, an online tech company database owned by Techcrunch. Since 2015, the site has allowed startups to raise money from angel investors.

What’s Behind Crypto Hiring Boom

Angellist: Number of New Crypto Job Listings Doubled in the Last Three MonthsAngellist explained the driving forces behind the crypto job boom.

Firstly, “the price run-up of bitcoin and ethereum in 2017 is attracting more people into the space for the first time, and the level of interest from the investor community is also at a record high.” The second factor is the ICO boom.

Successes of startups in raising millions have attracted others to raise money in the same way. “For example, the team behind Filecoin recently broke the record for the largest ICO in history, raising $257M to build a decentralized file storage system,” Angellist elaborated, noting:

The large sums of money going into the cryptocurrency space, from ICOs, to VC financings, and the price appreciation of bitcoin and ethereum, has led to a hiring boom at cryptocurrency startups.

The company emphasized, “as cryptocurrency companies are growing, raising larger amounts of money at higher valuations, so are their hiring needs for finding top talent,” adding that over $3 billion was raised using token sales in March alone.

In Demand Jobs

Not only “experienced engineers who’ve worked on cryptocurrency projects are in high demand, but so are talented engineers with an interest in blockchain technologies,” the company detailed, noting:

There are also open positions needing to be filled in marketing, business development, operations, customer support, and other job functions that don’t require a technical background. Similar to any other high-growth startups, cryptocurrency companies need to hire at job functions across the entire organization, and fast.

What do you think of the rapid rise in the number of job listings in the crypto space? Let us know in the comments section below.

Images courtesy of Shutterstock and Angellist.

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War On Miners? Maybe Not On This $2 Billion Blockchain

War On Miners? Maybe Not On This $2 Billion Blockchain

One of the world’s largest cryptocurrencies could soon put out a welcome mat for more controversial miners – that is, if one of its core developers has his way.

Indeed, amidst what has been broadly called a “war on miners,” with cryptocurrencies including ethereum, monero and siacoin taking aggressive steps to limit the effectiveness of certain types of hardware, developer Cody Burns has published a proposal that would alter ethereum classic’s underlying algorithm to accommodate the technology.

If accepted, the change would make ethereum classic something of an anomaly among major cryptocurrencies, whose communities have largely viewed the powerful mining machines in question – application-specific integrated circuits (ASICs) – as a threat to maintaining an open competition for the rewards on their respective blockchains.

But if there’s a general fear over how ASICs could upset the balance of major cryptocurrencies, it’s not without good reason. In the minds of many crypto enthusiasts, the concerns aren’t just speculation, they’re an inevitability based on historical data.

Case in point is the bitcoin blockchain, which saw less expensive, and less effective, graphic card mining eclipsed by not just ASICs, but by a few large companies that came to dominate their creation, marketing and delivery.

As such, the argument among many developers is that the release of ASICs is so problematic, it’s worth updating the software just to avoid them. (Monero’s developers, for example, went so far as to ask all software users to install new code earlier this month that would resist ASIC mining.)

But Burns sees another way, finding issue with a prevailing view he believes has turned the successful companies that today secure and process cryptocurrency transactions into boogeymen.

Burns told CoinDesk:

“The chief complaint I hear most often is not that ASICs are themselves bad, it is that Bitmain is the sole source of the ASICs.”

And, he believes, the only way to increase competition in the ASIC manufacturing space and keep centralization at bay is by allowing ASICs to run rampant.

As such, his proposal, ECIP-1043, looks to remove a mechanism by which ethereum classic’s algorithm creates random variances in its memory storage requirements, code originally put in place to reduce the effectiveness of ASICs.

Good for GPUs too

But if that sounds controversial, Burns thinks it’s still possible to win support for the idea.

For one, not only will the change allow for ASICs to mine ethereum classic, but as it decreases the need for extra computer storage, it should also lower the cost of GPU mining – something likely to win over existing miners who are reluctant to pay for new and improved hardware.

To do this, Burns wants to delete ethereum classic’s so-called “DAG” function.

One of the aspects that ethereum classic still shares with its rival ethereum is that every 100 hours – or what’s called an “epoch” – the DAG adds random data to the blockchain, which in turn causes the storage requirement for mining chips to grow.

In order to mine ether or ether classic, then, mining hardware must contain sufficient memory, or RAM, to store this graph, as well as backup storage, as the memory requirement increases.

“The thinking behind it was, it is costly to add RAM to an ASIC so we will keep the RAM requirement a moving target,” Burns told CoinDesk. “Anyone developing an ASIC will be creating equipment that will become obsolete very quickly.”

In this way, the DAG on ethereum and ethereum classic has grown from 1 GB to 2.5 GB, which according to Burns, has become a burden on GPU miners as well. And because of the way the DAG is programmed, this burden will only get worse as time goes on.

With the DAG and the memory requirements of the blockchain itself, GPU miners need about 4 GB of memory in order to cope with the data set.

Burns told CoinDesk:

“That is a huge overhead in cost for a card that may or may not last one year.”

While ethereum has always seen miners as a “necessary evil that will be chopped off if possible,” he continued, ethereum classic has allowed miners an opportunity to comment on design choices, since they are viewed as a long-term security measure.

As such, setting up an architecture that might harm miners – like blocking ASICs or keeping the DAG requirement – is considered a bad thing in ethereum classic developers’ eyes.

ASIC risks

But convincing all ethereum classic users to go along with the proposal might not be so easy.

For one, the ethereum classic community, which kept operating an early iteration of the ethereum code abandoned by its original developers, has been steadfast about its driving mantra: “code is law.” As such, it’s questionable whether those transacting over the software would want to change that law now.

Further, the move, if accepted, won’t come without its risks. As it would require a system-wide upgrade, or hard fork, in order to activate, it would need to have unanimous support from the mining community to prevent a split.

Furthermore, because resetting the DAG would encourage ASIC development, there are concerns that the more efficient hardware could overtake the network and make GPU mining obsolete.

Yet, Burns said that, in the long-term, because ASICs are more efficient than GPUs, it might be the better choice for the proof-of-work blockchain.

“If proof-of-work is the long-term goal of ethereum classic, systems need more energy-efficient mining equipment. ASICs are the long-term answer to that need,” he told CoinDesk.

Burns summed up the situation, saying:

“It is less a case of being ASIC resistant as being ASIC competitive.”

Mining equipment image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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