News by Coindesk: Joshua Levitt

Native support for bitcoin cash is coming to HTC’s blockchain phone.

Today, HTC announced its partnership with Bitcoin.com to add bitcoin cash support for its Exodus 1 blockchain phone. The new function will come with Bitcoin.com’s preinstalled wallet and be rolled into the Exodus 1 software update. Bitcoin.com will also sell the Exodus 1 and all future versions.

In a statement, HTC’s chief decentralization officer Phil Chen called the update a natural next step for the phone. “The Zion Vault is happy to support BCH natively in hardware so security goes hand-in-hand in the BCH blockchain as an alternative to dominant payment rails and platforms,” he said.

With the partnership, Zion Vault, the phone’s key management software can now secure BCH transfers by signing off on transactions.

Prior to last February, HTC only accepted major cryptocurrencies bitcoin and ethereum. As of now, the phone is priced at $699.

First announced at Consenses 2018, HTC has regularly updated the Exodus 1 with new blockchain features. An update in May allowed users to directly swap cryptocurrencies within the Zion Vault wallet.

Exodus 1 may soon be replaced by HTC’s second-generation blockchain phone: the newer, cheaper Exodus 1s. Chen has previously told CoinDesk that the $200-$300 phone would ship in the third quarter.

HTC Exodus image courtesy HTC

News by Cointelegraph: Helen Partz

Crypto exchange giant Binance has made its first strategic Chinese investment after leaving China amid the local crypto trading ban back in 2017.

Founded in China in 2017, Binance has participated in a $200 million funding round of Beijing-based Mars Finance, a local crypto and blockchain publication, Bloomberg reported on Sept. 17.

Binance invests in crypto media

According to the report, investors also included Singapore-based Matrixport, recently founded by former CEO of Bitmain, and Beijing-based venture capital (VC) firm Ceyuan Ventures.

Following the news, Binance CEO Changpeng Zhao tweeted to confirm the news, expressing the company’s willingness to support the industry. He wrote:

“Let’s make more news, and less FUD. Invest in the industry.”

Previous investors: OKCoin and Huobi

Mars Finance was established by local entrepreneur Wang Feng in February 2018. According to Bloomberg, the firm previously completed two funding rounds with investors including leading crypto exchanges OKCoin and Huobi, and major American VC firm IDG Capital.

At press time, the Chinese version of Mars Finance, with the domain huoxing24.com, has around 124,000 monthly visits, with a 70,947 rank in China, according to website traffic tool SimilarWeb. The English-language version of the website, however, appears to be relatively inactive since early January 2019.

While China has been remaining negative to cryptocurrencies like Bitcoin (BTC), the People’s Bank of China is reportedly gearing up for its own central bank digital currency (CBDC).

The bank is working on the project with online retail giant Alibaba, Internet giant Tencent, five banking organizations and one unknown entity, according to an unconfirmed report in August.

On Sept. 9, Circle CEO said that no one in the world is closer to launching CBDCs than China.

Electronics giant LG has confirmed that it is considering the release of a blockchain-powered smartphone – confirming earlier reports.

Per a report from media outlet Fn News, an LG spokesperson stated, “We are preparing the necessary technology required to enable the use of blockchain technology on mobile phones.”

The media outlet also said that LG was “positive” about the launch of a blockchain-powered smartphone. LG’s fiercest domestic rival, Samsung, has already released a so-called blockchain phone this month – in conjunction with Kakao subsidiary Ground X. Some of the Samsung devices already support multiple cryptocurrencies and dapps (decentralized apps).

LG also spoke out on the subject of a recent patent application, lodged in the United States, for a cryptocurrency wallet named the ThinQ Wallet. The company stated,

However, the wallet’s name is not insignificant. The company has released a range of flagship ThinQ electrical devices, many of which make use of smart and AI technology. And LG is thought to be keen to make up ground on Samsung, which incorporated a blockchain wallet feature on its Galaxy S10 device, unveiled in February this year.

Watch the latest reports by Block TV.

LG’s IT services arm, LG CNS, has already been working on a number of blockchain-related projects, including a mainnet and a token of some sort – in conjunction with KB Bank. LG and its subsidiaries also occupy three seats on the governance council of Ground X’s Klaytn platform.

Meanwhile, market research firm MarketsandMarkets said recently that the blockchain devices market is expected to grow from USD 218 million in 2019 to USD 1.285 billion by 2024, at a compound annual growth rate (CAGR) of 42.5% in this time period. Moreover, wireless connectivity for blockchain devices is estimated to grow at higher CAGR during the forecast period (2019-2024).

Empowering Blockchain Summit, a platform to find solutions and share insights on the better way of applying the blockchain technology into the overall industry in Indonesia with other Southeast Asian countries, will be held in Jakarta, Indonesia on September 13 and 14.

 

Powered by Chainway, an Indonesia-based blockchain business platform, the inaugural summit will bring major companies’ leaders, founders and developers together to build momentum and to engage in a discussion about the future of blockchain industry.

 

Chainway is a newly founded blockchain enterprise in Jakarta for linking global blockchain businesses with Indonesian blockchain industries and providing business solutions.

 

The summit will feature high-profile figures in global blockchain and crypto asset world. Some of the biggest partners are BINANCE, Samsung SDS, INDODAX, Samsung Electronics Indonesia, QCP Capital, SolidBlock and Gopax Indonesia.

 

On the first day, the most influential global players in blockchain and crypto asset industries will share the outlook of the blockchain industry and the practical ways of applying it to the public and private sectors. There will also be minister-level government officials to speak about the near future industry with blockchain technology and the prospects of the regulation framework.

 

The second day will focus on what is happening in the blockchain market and the survival strategies. Furthermore, BINANCE Super Meetup will take place for discussing and sharing on trading, blockchain technology and other BINANCE features with its distinguished speakers.

 

The summit will be held at Sheraton Grand Jakarta Gandaria City Hotel. The summit is currently receiving registrations for tickets. The standard tickets cost $150 while early bird tickets cost $100. The deadline for early bird registration is September 8.

 

Visit empoweringblockchainsummit.com for more information.

A long weekend looms, but before that, there’s a lot to digest.

Perhaps topping the list is the latest scuttlebutt around trade with China (see more below). Netflix earnings also rank high, with shares down 3% in pre-market trading after a Q4 revenue miss. Automaker Tesla is also in the news after announcing plans to shrink its workforce as it tries to lower product prices and improve its margins.

Amid optimism over China, markets in Europe and Asia all rose more than 1% early Friday, one of those few times when every index is in sync. U.S. stocks also had a positive tone before the opening bell, but whether that can last is a big question. Whichever way the market is going heading into the last hour today, it might be interesting to see if it reverses course if people flatten out their positions in a possible attempt to lessen up on risk ahead of the weekend. Then we’ll have to watch and see what kind of news comes out over the next three days, especially on the China front.

U.S. markets are closed Monday for the Dr. Martin Luther King, Jr. birthday holiday, and Market Update won’t publish that day.

China News Lifts Hopes, But Will It Last?

If investors needed any more evidence of how closely the market is tracking U.S./China negotiations, they arguably got it Thursday. Major indices woke up from a lethargic morning after The Wall Street Journal reported that Treasury Secretary Steven Mnuchin proposed lifting some or all tariffs to advance trade talks and win China’s support for longer-term reforms.

This is far from a done deal, and investors should consider taking it for what it is—likely a trial balloon that could face resistance from harder-line U.S. negotiators. The other thing to consider is that China news can work both ways. There continues to be a lot of rumor and innuendo, and on any given day either positive or negative tidings on the situation could lift or trip up the markets.

Remember, as recently as Thursday morning, moods were sullen as China’s government referred to proposed U.S. legislation against Chinese firms Huawei and ZTE as “hysteria.” At the same time, there was a report that the U.S. was considering new auto tariffs. In other words, things can change on a dime.

That’s one reason volatility remains high, though the Cboe Volatility Index—the market’s main fear indicator, retreated down to near 18 on Thursday from above 30 in the days after Christmas.

On Lookout For Potential Friday Profit Taking

With so much rumor in the air not only about China but also on the government shutdown and Brexit, caution could be the watchword going into the U.S. three-day holiday weekend. As we noted yesterday, recent Fridays have brought some profit taking, especially in weeks where the market has already booked some gains. This trend actually has a name: the “Friday effect.”  If things do remain steady toward the last hour today, the takeaway would probably be bullish. That’s because it could solidify thoughts that people are getting more comfortable with risk after months of “risk-off” trading.

Some risk-on sentiment appeared to show up late this week as 10-year Treasury note yields climbed to 2.75% by the end of the day Thursday, closing in on three-week highs posted earlier this week. Some of the more cyclical sectors drew investor interest Thursday, as well, with the sector leaderboard dominated by industrials, materials, and energy. The possibly softer tone in trade negotiations reported by The Wall Street Journal appeared to help those sectors, with some of the bellwether stocks like Caterpillar and Boeing getting a lift. Some analysts call these the canaries in the coal mine for optimism or pessimism about China tariffs.

Turning On Netflix

Most of the FAANGs, on the other hand, only posted small gains Thursday as investors awaited earnings from Netflix after the close. When the news did come, the Netflix movie appeared to have a bittersweet ending.

Yes, streaming subscriber numbers rose more than expected, climbing by 11.36 million in Q4, and the company’s Q4 earnings per share beat third-party consensus estimates. However, revenue just missed analysts’ expectations. Also, Netflix also continues to spend a lot of money, though it promised its cash burn would peak this year and then go down. Comcast and Disney also have streaming options, so competition is heating up.

In a conference call with analysts, Netflix executives said the company’s spending reflects its move toward more “owned” content and production. Netflix expects 8.9 million global subscribers in Q1, above a pre-earnings third-party consensus of 8.2 million. That growth, it said, is due to the success of original productions like Bird Box.

In one sense, the spending isn’t necessarily a bad thing. If Netflix continues to put its money into successful original productions, it’s arguable that the costs ultimately could pay off in more subscribers. Still, it seems like maybe Netflix has had such an incredible run in the market recently that a lot of the news is already out. The company released viewership numbers a while ago, so what else can it say? It may have run out of bullets on how to excite people, at least for now.

High-end retailer Tiffany is also in the news as it reported holiday results. The company guided toward the low end of its previously-disclosed earnings per share range, and comparable year-over-year sales fell 2% during the holiday season. Much of the company’s sales are related to tourism, so the spat between China and the U.S. might be a pressure point. However, shares bounced back in pre-market trading after being down earlier.

Back to Earth for Financials

Earlier this week, it was like old times as the financial sector helped lead the rally. On Thursday, it looked more like a rerun of 2018, with financials climbing about 0.5% but well down on the sector leaderboard. This came after Morgan Stanley’s (MS) disappointing earnings, though MS shares did claw back a little after dropping sharply early on. Most of the big banks suffered in Q4 from a tough trading environment, and MS arguably had the worst time.

However, the entire sector still faces a potential challenge. If interest rates remain flat, that means they don’t have the spread revenue coming in, conceivably making them more reliant on trading. The financial sector is having a decent start to 2019, but we’re still only a couple weeks in and the interest rate environment doesn’t look particularly favorable, at least not if you’re a bank trying to boost margins.

On the data watch today, University of Michigan Consumer Sentiment is arguably the biggest piece of economic news. Holiday shopping season, which originally had looked pretty impressive, now has some questions surrounding it after Macy’s and Nordstrom reported disappointing sales. The confidence number might help investors glean whether any retail blues might have stemmed from falling sentiment.

Figure 1: 50 And Up: For the first time in about a month, the S&P 500 Index (candlestick) caught up with its 50-day moving average (blue line). This six-month chart shows that it’s been rare for the SPX to be above its 50-day moving average over the last few months, so it might be interesting to see if it can sustain this position. Data Source: S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.DATA SOURCE: S&P DOW JONES INDICES. CHART SOURCE: THE THINKORSWIM® PLATFORM FROM TD AMERITRADE.

Pony Up: With Ford earnings due next Wednesday, maybe it’s a good time to check in on one of the company’s flagships, the iconic Ford Mustang. This April marks the 55th anniversary of the car’s 1964 introduction, and it coincides with F planning to stop production of almost all small- and mid-size cars in the U.S., except for the Mustang. More than 10 million Ford “pony cars” have gone out the door since its debut, but not all is smooth revving in the corral. Mustang sales fell more than 7% in 2018, and are down nearly 40% from 2015, according to auto industry data. One issue is that Mustang sales historically pop when a new model comes out, and F hasn’t introduced a completely new Mustang in four years. Unfortunately for F, a new Mustang appears to be about two years out, automotive media outlets report. The Mustang was the best-selling sports coupe in the world last year, with more than 75,000 rolling out to U.S. customers and thousands more selling abroad. The company also might have a 700-horsepower Mustang in the works that could top 200 miles per hour, Road & Track reported.

Paint Splatters: It’s no secret that the U.S. housing market has been under pressure lately, but the weaker than expected preliminary Q4 results this week from paint maker Sherwin-Williams probably helped send additional shivers through some of the home builder and home improvement companies. In a side note, home construction company PulteGroup received a downgrade Thursday and shares fell, reflecting in part the slowing housing environment as homes grow more expensive. Often when home construction companies suffer, that helps pick up some of the home renovation companies like Lowe’s and Home Depot, the thought being that if people can’t afford a new home, maybe they’ll do a new kitchen or bathroom. However, painting comes with any home project, so it might make some market participants nervous to see Sherwin-Williams’ business hurting. Lowes and Home Depot report later this earnings season, but consider staying tuned for their insights now that Sherwin-Williams has raised concerns about perhaps more weakness in housing.

Technical Picture: Thursday’s late rally pushed the S&P 500 Index above its 50-day moving average of 2626. This week marks the first time in about a month that the S&P 500 has flirted or surpassed a major moving average, and that could potentially help the market from a chart perspective. On another note, the S&P 500 is approaching what technical traders call a “50% retracement” of the gap between its Q4 closing low and its 2018 closing high. The level to consider watching is around 2640, which would mean a 50% comeback from Dec. 24 when the market most recently bottomed. A close above 2640 might signal to some traders that the rally has more legs, and could mean some investors putting money back to work in the market. However, we’ll have to wait and see. Things have come pretty far, pretty fast, and there’s also the risk of profit-taking ahead of the long weekend.

This post credited to Forbes. Image source: Forbes

An arm of Tokyo-listed internet group Digital Garage is working with bitcoin infrastructure startup Blockstream to test the issuance of a Japanese yen-pegged stablecoin.

Crypto Garage, a Digital Garage subsidiary focusing on blockchain and crypto tech, announced Monday that it has launched a new platform dubbed SettleNet that would allow app development on Blockstream’s inter-exchange settlement network Liquid, including the issuance of stablecoins.

The initiative, slated to last for a year, is one of the first proof-of-concept trials authorized under a regulatory sandbox program managed by the Japanese government, Crypto Garage said.

The project aims to let participating members – specifically, crypto exchanges licensed in Japan at this stage – test the SettleNet platform to issue the stablecoin and to provide a settlement service between the stablecoin and crypto assets. Blockstream also participated in building the platform.

Crypto Garage said the JPY-pegged stablecoin would trade against Blockstream’s bitcoin-pegged token, Liquid Bitcoin (L-BTC), over its Liquid network. Liquid is a bitcoin sidechain project that went live in October. For the trial, transactions will be conducted in limited volume.

Atomic swaps will enable the tokens to be swapped “simultaneously,” said Crypto Garage.

The firm continued:

“This will enable rapid, secure and confidential transfer of the crypto assets while eradicating counterparty risk. In addition, SettleNet will provide the regulatory authorities with the functionality to monitor any unlawful trade, including money laundering.”

Digital Garage initially collaborated with Blockstream in November 2017 with an aim of fostering blockchain development in Japan. Blockstream CEO Adam Back had said at the time: “The Japanese market is ready for new business models that blockchain technologies can enable.”

Back in October, Japanese IT giant GMO Internet also announced the plans to issue a yen-pegged stablecoin called GMO Japanese Yen (GJY). The firm said at the time that GJY will be issued to Asian markets in the fiscal year of 2019 via Z.com, its crypto exchange subsidiary.

This post credited to Coindesk. Yen and bitcoin image via Shutterstock 

In the same way all economic movements have done throughout history, blockchain finance challenges our traditional conceptions of ‘value,’ and, in turn, our ideas about identity and freedom. The new digital economy is now being built by a worldwide community who share common goals of decentralization, transparency, and financial inclusion.

My first real job was at Bank One Corporation in the Research and Recovery department, taking pictures of checks saved on spools of microfilm and mailing them out to customers. Flash forward a couple of decades, and technology has obviated and remade my old job many times over. Now I work in the latest iteration of that cycle—cryptocurrency.

Copying checks was my first peek behind the curtain of the global financial system, and it felt empowering. Cryptocurrency—and the fascinating blockchain technology behind it—has the potential to bring that feeling of empowerment to so many others. However, it is still perplexing to the average consumer with most not understanding why it even has value, let alone how to use and secure it. With over half the world’s population online, less than one percent is said to own or use cryptocurrency, signaling that mainstream adoption is not yet within reach.

As teams continue to build the tools and platforms that will redefine the global economy, there are four simple truths we should all keep in mind: keep it transparent, accessible, secure, and human.

Transparency Will Redefine Global Finance

When you break down the barriers to entry for both traditional and blockchain-powered finance, the barriers for the latter currently seem higher. But blockchain financial products only seem more complex, simply because we are witness to its inner mechanics, which is unfamiliar to most because of intricate code and cryptography.

Traditional finance hides similarly complex processes behind easy to use banking apps and ATMs. We can deposit money in a local branch with real people, an interaction that feels familiar and safe. But all of these interactions carry a far greater cost to our financial lives—monthly fees, transaction costs, crippling interest rates, contracts, passive data collection, and, most worryingly, financial exclusion and corruption.

The 2008 financial crisis nearly sank the global economy. However, after ten years, most people are still mystified by terms like “Credit Default Swap” and “Mortgage-Backed Securities” with no idea what role banks and bankers played in the collapse. Banks have barriers made of glass, with the curtains voluntarily drawn.

Blockchain’s transparency, however, enables individuals and businesses to see—in real time—what is happening with every single transaction, investment, fund, and credit, and exactly where they are stored and sent. This transparency, when combined with open source tools, not only has the potential for enhancing technological innovation, but also for elucidating the underlying economic principles of blockchain based financial products.

Maker is one of the most popular and well-respected platforms in the ecosystem precisely for these reasons. Want a loan but don’t understand what a Collateralized Debt Position is? The MakerDAO CDP portal provides a concise explanation. Follow the steps to generate Dai currency and fully understand your interest rate and the terms of repayment. There is no negotiation or contract to sign. A person should not need to be a banker to understand how their loans work, and that is one of the reasons why platforms like Maker are so compelling.

Make Crypto-Finance Easier Than Traditional Finance

One of the greatest barriers to the mass adoption of any groundbreaking new technology is its accessibility—both through its purchase cost and its usability.

But blockchain is not inherently free to run or to use. To be an active user of the blockchain is to pay for it in some way, like through transaction fees. But utilities themselves should be free, otherwise, we sustain a barrier to entry that is too high. Users need to be free to experiment—to learn by doing. As blockchain businesses, we can make our consumer tools free, making cryptocurrency more accessible. Builders of crypto platforms and tools can easily finance themselves through mechanisms such as transactions fees, micropayments, or B2B models.

The process of buying, storing, and transacting in crypto also demands a steep learning curve, so usability and user experience cannot be underestimated. The UX has to be simple and elegant enough to parallel how simple and elegant the blockchain really is, to interact with it, and observe its core functions.

Developing solutions that are intuitive to use and can be integrated with existing technologies, such as mobile phones, will help the world become crypto literate and, by extension, drive its widespread use. In the developed world, 82 percent of adults have both a mobile phone and access to the internet. In developing economies, the number is 40 percent. We can put cryptocurrency in their hands through mobile apps or customized crypto-finance mobile services that are simple to use.

From Security to Safety

The inherent security and immutability of blockchain technology are what makes it superior to traditional finance. But, as some critics have pointed out, what constitutes “security” is subjective. Ethereum Foundation researcher and Casper Protocol project lead, Vlad Zamfir, has said it’s Ethereum’s secure properties that can make it unsafe for users. Immutable and irreversible, blockchain transactions are perilous for naive crypto holders. It’s said that without significant hand-holding, onboarding new cryptocurrency users is “ethically dangerous.”

We need to be those hand-holders. As we develop our blockchain tools, built-in security should be a priority, helping to break the current stigma of the cryptocurrency industry as the ‘Wild West’ of finance.

As we’ve seen time and time again—nothing is unhackable, there are bugs in every system, and various forms of malfeasance cannot be avoided. Fraud is rising in cryptocurrency, and cybercrime evolves as fast as blockchain technology, playing to the biggest weakness of new users—their inexperience. While we must all commit to proactively educating our new users, our core responsibility lies in safeguarding them as the first line of defence.

We can integrate the best security measures proven to mitigate risk, providing as many layers of protection as necessary. This includes hardware functionality, two-factor authentication, MetaMask compatibility, and never requiring users to enter private keys into their browser.

At the end of the day, if we want the average person to move toward crypto-finance and store their rainy-day fund in a crypto wallet, those funds should be respected by offering the best possible security.

Technology Is Inherently Human

Beyond all of these design concepts, it is important to remind ourselves that a blockchain—as a global, decentralized network—is made up of real people. If it’s destined to survive and reshape our global economy, diverse populations should consider the blockchain a place where they belong.

For blockchain to have anything resembling that sentiment, it’s necessary to understand that every node run, every transaction sent, and every contract executed, has its roots in a fundamental human impulse. It means that someone out there is just trying to buy a home, raise a child, get a job, or just relax at the end of the day.

The different ways people are drawn to crypto and blockchain are continuously growing as new use cases tap into the imagination of those who see beyond technical aspects, or beyond the investment opportunities that enticed early adopters. Serving and incorporating diverse and marginalized voices in the creation of this ecosystem is essential to its longevity and broader adoption.

Some rules are not meant to be broken. As the global economy slowly turns digital, hopefully, the teams at the forefront driving this transformation will create new rules which help place cryptocurrency in everyone’s pocket, as well as break some old rules that no longer serve us all.

This post credited to Cryptoslate. Image source: Cryptoslate

On a darknet market called “Dread,” a vendor going by “ExploitDOT” is attempting to sell user data from the know-your-customer (KYC) data top cryptocurrency exchanges ask for, required by most jurisdictions.

According to data shared with CCN, the hacker has an ad that has been online since July 2018, in which he claims to have hacked documents used in KYC checks – including identity cards and drivers’ licenses – from users of top exchanges like Bittrex, Poloniex, Bitfinex, and Binance.

The data is seemingly for sale for $10 per 100 documents or more, with discounts applying for those who buy in bulk, all the way up to $1 per 1,000 for an order of over 25,000. CCN was able to independently verify the ad on the dark web, which is still online. No links to it will be added to avoid promoting the service.

A post on darknet market "Dread" advertising the hacked KYC documents' sale

A cybersecurity expert who contacted CCN and chose to remain anonymous has detailed that after contacting the individual posing as a buyer, he was able to get three free samples out of him as proof that the leaked documents are legitimate.

As proof, the cybersecurity expert got pictures of individuals holding up a piece of paper with the word “Binance” and the date the picture was taken at. In these pictures, their faces are visible, as well as their identity cards or drivers’ licenses.

CCN had access to these images, which appear to be legitimate. Although the sample was small, the vendor selling the hacked data claims it has documents from people in every country cryptocurrency exchanges serve.

An exchange the security expert allegedly had with Binance via email, which couldn’t be independently verified, seems to show the latter found “some inconsistencies” between the data it was presented with and the “samples provided” – presumably the KYC images.

The exchange’s spokesperson allegedly further noted they have their “theories in regards to how this information may have been obtained,” detailing that no signs of unauthorized access to their system had been found. CCN has reached out to Binance to clarify the situation but hasn’t heard back at the present time.

Binance is notably an exchange praised in the cryptocurrency community for its security practices. Recently, It foiled the plans of the Cryptopia hacker by freezing the stolen cryptocurrency, and last year thwarted a large-scale attack that saw Syscoin (SYS) surge on its platform.

Whether the leaked documents are connected to the recent ‘Collection #1’ 87 GB database leak, which includes over 700 million email addresses and 21 million passwords, isn’t clear.

This post credited to CCN. Image source: CCN

Two years after the EU Referendum, investor sentiment towards the UK is subdued despite the recent stock market highs.

Concerns about Brexit and a UK economic slowdown are always present, but is this investor uncertainty justified or are there attractive opportunities for active managers?

On 19 June, the AIC held a media roundtable with investment company managers of large, medium and small-cap strategies investing in the UK. Alastair Mundy, Portfolio Manager of Temple Bar, Georgina Brittain, Co-Manager of JPMorgan MidCap and Neil Hermon, Fund Manager of Henderson Smaller Companies discussed Brexit’s impact, where they see opportunities and risks, and their outlook for the UK.

Their views have been collated alongside those of Simon Gergel, Portfolio Manager of Merchants, Jean Roche, Co-Manager of
Schroder UK Mid Cap and Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust.

Brexit’s impact

Neil Hermon, Fund Manager of Henderson Smaller Companies said: “With the UK economy showing one of the slowest economic
growth rates in the G7 it is hard to argue that Brexit is not having an impact. The uncertainty caused by the drawn-out negotiations is causing consumers to rein in spending with weakness noted in areas such as the second-hand housing market and big ticket purchases such as cars, furniture and carpets. On the other hand, manufacturers are benefiting from the weakness in sterling with exports much more competitive compared to foreign competition. In general, most UK corporates are carrying on and investing for the future, recognising that Brexit carries substantial risks, but aware that life goes on and the world will still keep on turning.”

Georgina Brittain, Co-Manager of JPMorgan MidCap said: “As we had anticipated, the two immediate impacts of the Brexit vote in June
2016 were a rise in inflation and sterling weakness. We positioned ourselves accordingly by emphasizing exporters and overseas earners in the portfolio and going underweight on exposure to the UK consumer. Some two years later both of these themes remain in the fund.”

Alastair Mundy, Portfolio Manager of Temple Bar said: “Two years on from the surprise EU Referendum result UK equities remain very out of favour, particularly with overseas investors. However, difficult as it may be, we have to look beyond any bad news and avoid obsessing over noise and babble. Instead we need to determine (approximately) what the picture will look like when we come out the other side and try to capitalise on the longer-term opportunities.”

Simon Gergel, Portfolio Manager of Merchants said: “The uncertainty around the Brexit process may be partly to blame for weak
UK economic growth in the first quarter of 2018, as companies and individuals may be more hesitant with their spending, although the
economy has performed reasonably well since the referendum. In sentiment terms, Brexit seems to be having a depressing effect on the UK stock market, with UK equities one of the least popular asset classes amongst investors according to Bank of America Merrill Lynch. This is leading to many shares in the UK stock market trading at attractive levels, particularly when compared to their international peers.”

Opportunities and risks

Jean Roche, Co-Manager of Schroder UK Mid Cap said: “We see an ever-faster pace of disruption amongst UK plc, and nowhere is this more keenly felt than on the high street. Companies which are not carrying out the disruption or adapting to take account of this
disruption will themselves be ‘carried out’. There are opportunities for management teams which are nimble and creative to take advantage of disruptive trends. The economy can support this because companies and households continue to spend. And mid-cap UK companies, being smaller by definition than large companies, are most likely to be able to adjust to the new normal – elephants rarely gallop.”

Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust said: “Our investment philosophy focuses heavily on industry change. We believe nearly every industry is undergoing change right now, often disruptive change, and any industry in flux
creates opportunities both from a long and short perspective.

“One aspect of industry change we are drawn to is changes in distribution. The apps on your smartphone illustrate many industries that have been disrupted through changes in distribution, creating pressures for legacy incumbents as well as revealing a wave of exciting emerging companies.

“The power of change within distribution is generally price deflationary and it necessitates incumbents to adapt their business models or
risk being left behind. It can also fundamentally change one’s behaviour as a consumer, for example from ordering take-away food, to binge-watching box-sets, to auto re-ordering food or household goods. We continue to find many opportunities, both long and short, from changes within distribution across consumer services and consumer goods.”

Georgina Brittain, Co-Manager of JPMorgan MidCap said: “We continue to avoid leisure companies such as pub companies and general retailers – with certain exceptions such as a large position in JD Sports Fashion.

“However, we do find pockets of significant value in certain domestically-exposed areas such as the challenger banks and the brick
companies, and we also favour technology companies such as Sophos. We continue to find opportunities in the Mid Cap arena to invest in companies that are exposed to growth areas, or are making their own growth prospects, regardless of the bigger UK picture.”

Neil Hermon, Fund Manager of Henderson Smaller Companies said: “One important source of new investment opportunities is the
IPO market where we see a steady stream of interesting companies. In 2018 we have invested in Integrafin, a B2B platform for IFAs,
and Team17, a software games developer, both of which have risen to substantial premiums to their IPO price.

“In terms of what we don’t like, we typically shy away from those ‘value trap’ type areas such as food producers and industrial transportation. We are also conscious of the structural pressures that legacy companies in areas such as the UK high street are suffering from. The move to online and high property costs are proving major headwinds, as evidenced by recent
announcements from companies such as House of Fraser, Carpetright, Mothercare and New Look.”

that legacy companies in areas such as the UK high street are suffering from. The move to online and high property costs are proving major headwinds, as evidenced by recent announcements from companies such as House of Fraser, Carpetright, Mothercare and New
Look.”

“The best value, though, is among the domestic companies in sectors such as leisure, financials and real estate, where we are finding
opportunities to buy business with strong franchises at attractive prices.”

Alastair Mundy, Portfolio Manager of Temple Bar said: “Our focus, as ever, remains on  searching for out of favour stocks which have
been over-sold. The portfolio has certainly taken on a more UK centric feel in the last 12 months, but as usual retains its strong value bias.”

Outlook for the UK

Neil Hermon, Fund Manager of Henderson Smaller Companies said: “The UK equity market is good value, especially compared to
international markets. It is unloved by international and domestic investors who are very underweight the UK. Although the reasons
for this position are clear – slow economic growth, Brexit and political instability – any change of sentiment to this position could see
the UK equity market rally sharply. In general, UK corporates are performing well and earnings growth is robust.

“Additionally, balance sheets are strong and there is a steady stream of M&A activity, especially from foreign companies, which is
supporting equity valuations. We have a positive medium-term outlook for the UK equity market and especially our portfolio.”

Simon Gergel, Portfolio Manager of Merchants said: “The combination of a reasonable overall valuation for the UK stock market and pockets of very attractive valuations, is supportive for the prospects for UK equities, especially in a context where several other
asset classes are highly valued.

Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust said: “The outlook for the UK domestic economy remains
challenged and the recent evidence would suggest it is deteriorating. This has had a notable impact on the share prices of many
domestic companies with several market participants highlighting the value on offer.

“However, whilst many of these UK consumer shares may appear cheap on valuation metrics like ‘price to adjusted earnings’, this fails to take into account the levels of debt and poor cashflow some of these companies exhibit. In many cases these same investments are also exposed to cyclical pressures (weakening demand, or rising cost pressures impacting corporate profit margins), and/or structural
pressures (digital disruption, or competition from low cost or specialised formats).

“As such we remain cautious on UK domestics in general (there are exceptions!) but remain very positive on the outlook for UK plc. We think the UK is home to many compelling investment opportunities where the revenues and profits are generated outside the UK and the companies have a leading differentiated competitive offering. The outlook for these investments is tied to the global economy which
remains robust. Our universe is well diversified by sector and geography and there are ample opportunities to find well managed, dynamic, differentiated companies that are market leaders competing on a global basis.”

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies said: “It’s good to hear that there
are still many attractive investment opportunities in the UK despite the negative headlines. Clearly there are areas which are experiencing challenges, but one of the biggest benefits of active management is to be able to adapt portfolios accordingly, backing the winners and avoiding the areas under pressure. Despite the potential risks posed by Brexit, it appears to be business as usual for UK investment companies.”

This post credited to The Market Views. Image source: The Market Views.

Like many other ICO success stories and subsequent leaders in their respective market segments, Augur, the preeminent platform for decentralized predictions, faces constant public scrutiny. The latest episode that drew public attention is the allegation, voiced by cryptocurrency hedge fund Tetras Capital partner Alex Sunnarborg, that a developer group behind the platform significantly overstates the volume of trades that Augur processes.

While the real trade volume is an essential metric indispensable for understanding the scale and impact of a given project, it is still a quantitative, rather than qualitative measure. In this regard, a dispute around how much money is staked on Augur at a given moment of time is different from two major previous fracases, which sparked debates about fundamental aspects of decentralized prediction platforms’ usage and governance. Those two episodes concerned the so-called “gimmick markets,” and, earlier, Augur’s capacity to host death pools.

Tricky wagers

When betting money on the outcome of future events, like with any other contract, the rule of thumb is to make sure that you get all the details straight. What exactly is the outcome that liquidates your futures contract at a win or loss? When exactly does it occur? In most cases, these conditions are straightforward enough to go without saying. After all, when you wager on Real Madrid beating Liverpool in the Champions League final, 90 or 120 minutes after the kickoff time, everyone knows who won. And if something goes wrong, you can always appeal to the bookmaker.

This is not quite the case, it appears, when predictions go decentralized. Once everyone can set up a market, the terms of some contracts may become vague — either due to amateur bookmakers’ unintentional lack of phrasing precision or due to malice. And once the bets are in, users have no recourse if they suddenly realize that they were wagering on something different than the market is really about.

The latter likely describes the situation many people involved with the recent Augur political market have found themselves in. The question looked simple: “Which party will control the House after 2018 U.S. Midterm Election?” Anticipating that Democrats will have flipped the House as a result of the midterms, 95 percent of the bettors wagered on them. Indeed, the “blue wave” that pundits predicted yielded the Democratic-majority House post-election. However, the important caveat is that the newly elected members were not to come in until January 3, 2019; as of the market closing date, Dec. 11, the House remained exactly the same as it was before the midterms — that is, Republican-controlled.

The Augur community went abuzz: Those who thought they were betting on the election outcome demanded that the market be called for Democrats, while others — including the alleged creator and designated reporter for the market — insisted that the idea was to measure the state of the House on Dec. 10, which, to be fair, could hardly be different from what it was on the day the market opened. In a Reddit post, the self-avowed creator made this clear by referring to the deal as a “gimmick market” and declared his or her intention to call it for Republicans.

The fact that more than $1.3 million were at stake rendered this conundrum perhaps the toughest test for Augur’s on-chain governance system so far, and definitely made for the platform’s biggest publicity crisis since the summer hype around assassination markets. Despite the fact that these two controversies look quite distinct on the face, they are manifestations of the same deficiencies intrinsic to the nature of decentralized prediction markets.

Markets for death

In an episode of the British techno-dystopian series Black Mirror entitled “Hated in the Nation,” mysterious assassins begin to eliminate public figures, one by one, decided by whomever social media users post the most #deathto hashtags about. Once the bloodthirsty online mob realizes how the death pool works, they readily rush to bid on the next odious MP’s or obnoxious rapper’s demise in order to trigger the murder that mysterious assassins immediately carried out.

As Augur, a blockchain-powered — decentralized prediction market, went live in July 2018 — the media was quick to latch onto the minor yet captivating facet of its functionality: the capacity to enable the creation of so-called “assassination markets.” In the dark spirit of Black Mirror, albeit under a somewhat different mechanism, these arrangements could spell death for those in the public eye. Indeed, it did not take long after the platform’s launch for such markets to appear, with a number of prominent politicians, actors and entrepreneurs put on the spot.

Augur provides a decentralized infrastructure for users to set up bets on whether certain events will or will not take place. Taking advantage of blockchain’s anonymity and the absence of a centralized authority to censor the content on the platform, malicious users could potentially procure a tool for incentivizing other people to “help” certain outcomes occur. For instance, by creating a market on whether politician X dies before the end of their incumbency and staking a huge pot of money on a “no,” someone could effectively put a bounty on the person’s head. Wagering against the massive “no” market and then contributing — to put it gently — to a “yes” outcome, any villain could run off with the money.

Horrendous as it sounds, the scenario was not invented by the Augur community. The idea of a cryptographically anonymized death market has been present in the cypherpunk milieu for a while — at least since cryptographer Jim Bell had formally recorded it in his 1996 essay “Assassination Politics.” He envisioned a market that would predict the deaths of government officials as a means to punish those who indulge in corruption. The Augur subreddit has also been rife with various takes on the death market principle long before the protocol went live.

Larger problem

So, is this what blockchain is for: letting scoundrels ease the remiss bettors of their money or even anonymously order people dead and get away with it? The clamor over the dubious Augur developments jibes quite well with the broader, ongoing debate that concerns platforms’ responsibility for the content their users choose to publish on them. Think Facebook and fake news/streamed deaths, or Twitter and political botnets, or Youtube and videos of dead bodies on popular suicide sites. The centralized social media gatekeepers’ mantra of “we are not publishers, we are merely infrastructure providers” is sounding ever less convincing with each high-profile blunder, forcing corporations behind those platforms to haphazardly design new policies and interventions.

Critics often point out that, in the case of a decentralized, blockchain-powered marketplace for anything, there is no corporation or government to go to if the goods or ideas in question turn out to be immoral or otherwise unacceptable for the majority of users. Furthermore, immutability of distributed ledgers that carry information about transactions renders it impossible to take the content down. This takes us back to a more general problem of blockchains’ capacity to perpetuate the wrong — be it flawed land titles, unjust copyright claims or transferring a scam victim’s money to a con artist’s wallet. Does this mean that a responsible society should avoid using decentralized, permissionless systems to underpin any sensitive sphere of transactions? Not really.

The classic notion of the marketplace of ideas, as John Milton and J. S. Millconstrued it, rests on the assumption that, once all ideas are allowed to clash freely in an open marketplace, the best of them will eventually prevail. Even though such reasoning might not seem indisputable, one need not take this leap of faith in order to be comfortable with blockchain-powered markets. Regardless of whether the natural tendency of good ideas to defeat bad ones is really a thing, there are still other mechanisms to fall back on — namely, governance systems’ design and a broader set of social norms that govern human behavior.

Prediction markets, as well as other blockchain-based idea marketplaces, may — and probably should — incorporate some on-chain mechanisms of community self-regulation. In the case of Augur, the community of REP token holders — who are also called “reporters” — are incentivized by the system’s design to document the correct outcomes of the events in question. The same people have the power to declare a certain bet “invalid,” in which case nobody gets paid after the outcome is decided.

This instrument of community self-policing looks like a relevant tool for stopping morally reprehensible bets from enriching those who might want to use the platform for malicious ends. The “gimmick market” case is a great way to test the system’s capacity to handle situations that are less unambiguously unacceptable than facilitating murder. Assassination pools constitute a marginal fraction of Augur’s overall trade volume, with just a handful of transactions. In contrast, gimmick markets on high-profile, highly bettable events may well become a feature of the Augur landscape, should the community set a precedent that lets the first one be.

In addition to on-chain community governance, there are things happening off-chain, too, that may serve as checks to potential abuse of prediction markets’ infrastructure. Even if we adopt the radical stance and accept that “code is law,” there is a larger ecosystem of constraints that influences human behavior. In the words ofLawrence Lessig, one of the preeminent legal thinkers of the Internet age, there are at least four discrete forces that shape people’s actions online: law, choice architecture, market and societal norms.

Even if the distributed ledgers’ architecture allows people to anonymously sponsor — and subscribe for — lawless action or con markets, and given the demand for them, social norms are still there. These norms suggest that murder is highly unethical, and fooling people into betting on the event that cannot possibly occur is not the best way to make them like you — even if you say sorryafterward. Also, there is a consideration of a perhaps more forceful effect: Both murder and fraud are criminal offences punishable within the legacy legal system, which still exerts a lot of influence over us all. On Augur, bets come in Ethereum, not REP, meaning that payments are very much traceable by law enforcement. And rest assured, the authorities are watching closely.

Regulatory concerns

Most certainly, Augur already has regulators’ close attention, and recent developments are not going to make things better. Since markets that the platform hosts are essentially futures contracts, Augur and other decentralized prediction markets fall under the purview of the United States Commodity Futures Trading Commission (CFTC).

Reports emerged last summer that the agency was scrutinizing Augur for allegedly facilitating illicit gambling activities, since prediction markets as a form of gambling are illegal in the U.S. Those that manage to operate do so with multiple buffers and protections. For example, PredictIt, the largest non-blockchain platform that allows American citizens to wager on political events, is operated by a New Zealand-based, university-affiliated nonprofit and has strict limitations on the amount of money that users can stake.

In his October speech at a technology conference in Dubai, CFTC Commissioner Brian Quintenz raised a question of accountability on blockchain and sketched potential regulatory boundaries in the context of smart contract-powered futures products. In his remarks, Quintenz first demarcated the subset of smart contracts that potentially fall under the commission’s jurisdiction — the ones that manifest essential features of a swap, future or option — and then turned to the parties involved in their creation and operation: core blockchain developers, miners, developers of smart contract code and end users.

Quintenz suggested that it would be impractical to hold the first two categories accountable if some of smart contracts that operate on top of their ledger would be found to be in violation of the CFTC rules. Going after individual users of illegal decentralized futures, while normatively defensible, would likely be what Quintenz calls an “ineffective course of action,” given the pseudonymous and global nature of public blockchains. The only category left to directly target is, therefore, those who create and define the potentially illegal smart contracts.

Albeit Quintenz made sure to present his remarks as personal opinions, he is clearly not the only person on the commission who is pondering the ways to tackle these emergent challenges. Enter million-dollar gimmick markets springing on top of the largest political predictions platform available to U.S. citizens. Clearly, the whole deal looks primed for the regulator to step in and protect the investors — and if Brian Quintenz’s approach is the dominant one within the CFTC, it might be the right time for the Augur core development team to start getting concerned .

Governing with prediction markets

While regulators have yet to figure out how to deal with decentralized idea markets whose operations are apparently in conflict with the standing laws, it is unlikely that prediction platforms are going anywhere anytime soon. Since they essentially represent the pools of aggregate collective wisdom, such markets are often a feature of many projects aimed at creating systems of decentralized governance. Arguably, the most publicized of those is the futuristic form of government — called “futarchy” — that economist Robin Hanson proposed as a framework for enabling citizens to vote for optimal policies. The concept apparently gained traction with Ethereum’s Vitalik Buterin, who, in 2014, had dedicated a grant to support research on the topic.

There are projects that seek to build a versatile governance protocol around a pool of “collective intelligence”, where users determine visibility and prominence of policy suggestions by staking tokens on predicting whether they become a success or not. This way, a prediction market becomes a device for managing collective attention, stimulating members of the community to sift through policy proposals and evaluate their relative worth.

Meanwhile, blockchain-powered prediction markets are doing just fine in their primary capacity as platforms for betting on outcomes of future events. In November 2018, Augur’s trade volume in midterms-related contracts surpassedthat of Predictit, the largest centralized competitor in the domain of political forecasting.

Humankind has had the habit of betting on the future for thousands of years, and the idea of doing it without a middleman for the first time is incredibly appealing. The CFTC seems to be up against an enormous task of wrapping the red tape around an ever-expanding infrastructure that facilitates an activity that many people enjoy.

This post credited to Cointelegraph. Image source: Cointelegraph