- NEO Criticized For Block Delays and Centralization, Original Vision Holds
- Coinbase Adds Index and Index Fund To Complete Its Product Trifecta (Fiat Gateway, Exchange, Index)
- SEC Subpoenas Investors and Warns Exchanges
- Binance Dances With Hackers and Phishers
NEO Criticized For Block Delays
NEO ($NEO), formerly known as AntShares, is a smart contract platform out of China and top-10 coin by market cap (currently at #6). It uses what NEO calls a delegated byzantine fault tolerance (dBFT) consensus protocol, akin to delegated Proof of Stake — NEO holders stake-weight vote on bookkeeping nodes, which take turns in proposing and confirming new blocks of transactions that become final and immutable. After Ethereum, NEO is one of the most popular smart contract platforms for new tokens (eg. $RPX, $ZPT) due to its high transaction throughput and large developer community CoZ.
The NEO blockchain produces a new block roughly every 30 seconds. On Saturday, the consensus nodes stopped producing blocks for 2 hours (before block, after block), halting the validation of new transactions on the network. Malcolm Lerider from the NEO Council gave a short explanation to the Discord community, which was then picked up and criticized in a blistering tweetstorm by Bitcoin.com columnist Eric Wall. NEO responded: Canesin (founder of CoZ) fired back, Lerider gave a longer explanation , and Da Hong Fei himself (founder of NEO) released an official statement. To Eric’s credit, he retracted his statement and admitted that he did not do sufficient research, but maintained his criticisms for poor documentation and the very low number of nodes.
NEO has been in the spotlight recently, criticized for issues like centralization, while receiving accolades like the only A-class rating from Weiss. From the beginning NEO’s philosophy has been to value “efficiency (quick response and protocol upgrade) over decentralization”, with a plan to steadily increase consensus nodes into the community such as to CoZ, KPN, and Fenbushi this year. The recent block delay is a perfect example of the benefits of trading decentralization in an early stage for the ability to perform swift fixes and protocol upgrades.
A boon for those who trust the stewards of NEO, a bane for those who prefer decentralization for a project this large.
Coinbase Launches Index and Index Fund
Our favorite* fiat gateway Coinbase announced live on CNBC their next big thing: Coinbase Index (CBI) and Coinbase Index Fund based on their listed assets BTC, BCH, ETH, and LTC (official announcement). The CBI starts from 1 Jan 2015 at a nominal value of 100, and as of 8 Mar 2018 is at 4,505 (which means it has grown more than 45x since 2015!). CBI reflects market-cap-weighted values of its constituents (full methodology). At current prices Bitcoin is 62% of the index, Ethereum is 27%, Bitcoin Cash 7%, and Litecoin rounds out the last 4%.
The Index Fund will be managed by a completely separate entity called Coinbase Asset Management and will physically (digitally) hold the underlying crypto-assets reflected by the CBI. Only US-resident accredited investors may invest at this time, with a minimum $10,000 investment and a 30-day notice redemption window. There is however a 2% management fee, which is very high compared to typical “passive” investment indexes (to compare, the S&P 500 ETF $SPY charges <0.1% fee). When a new asset gets added to Coinbase, it will be automatically added to the CBI and consequently the Index Fund.
Coinbase started out by offering a super simple and clean way to buy Bitcoin, Ethereum, and Litecoin with USD. They used their access to liquidity to open an exchange, GDAX, which has become a perpetual top-10 exchange by volume. An index and an index fund now is an easy and natural expansion given their success in the former two. With these three foundations in place, fiat gateway, exchange, and index, the next move will undoubtedly be the addition of new crypto-assets based on their GDAX Digital Asset Framework. And we all know what happens when a coin gets added to Coinbase.
Adoption of CBI will take time (if it ever takes at all) due to the dominance in both market cap and mindshare of Bitcoin. Coinbase’s handling of Bitcoin Cash in particular has been the cause of some disparagement in the community.
Other Notable Events
- SEC Subpoenas ICOs, Investors, and Funds — Part of ongoing efforts by the SEC to gather more information and will likely to continue throughout the year.
- SEC Issues Statement Warning Crypto Exchanges — “If a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.” Bittrex, the top alt-coin exchange in the US, quickly affirms that it does not list “security” tokens.
- Binance Hacker Pump and Dump — Hackers quietly accumulated access to phished accounts over the course of two months. Within a 2-minute period they coordinated a sudden pump and dump on VIA/BTC, which triggered Binance’s alert systems and an immediate suspension of withdrawals. The VIA/BTC trades were busted, but the liquidation of phished account altcoins to BTC were not. Don’t get phished.
See you guys next week —
Crypto Weekly Roundup is for informational purposes only and does not constitute any investment recommendations.