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Why do Companies Opt for ICOs?
Initial Coin Offerings are ways for new cryptocurrency or other technology companies to raise capital and put their coins into circulation. For companies too small to attract the attention of a big investment bank, this may be the best option for “going public.” In initial coin offerings, as opposed to using venture capital and initial public offerings of stock in regulated markets, the new company doesn’t actually give up any of their equity (i.e., control) in the company to third parties. Continue reading...
Can I Get Exposure to Virtual Currency Through ETFs, Mutual funds, or Stocks?
While there aren’t that many ways to use institutional-level, regulated vehicles to get exposure to bitcoin and other cryptocurrencies, there are some, and the market will likely expand. Money managers are finding ways to offer managed investments that offer exposure to cryptocurrencies, despite the hurdles presented by regulators and skepticism from large financial companies. On the over-the-counter market OTCQX, you can buy shares of the Bitcoin Investment Trust from Grayscale (Nasdaq: GBTC). This fund has seen massive gains recently but does come with a 2% fee. The Chicago Mercantile Exchange (CME) has stated that it would like to start trading cryptocurrency futures, but it may be a little time before this becomes a reality, due to significant red tape and guidance needed regarding cryptocurrencies. Continue reading...
What is a BitLicense?
A BitLicense is an informal name for the New York state license required of cryptocurrency businesses to operate within the state. While a lot of cryptocurrency transactions can and do happen “off the grid,” many companies working in cryptocurrency choose to register for licenses to do business and to comply with relevant state and federal regulations and reporting requirements. Different states have different requirements for the businesses that operate within them. In New York state, the applicable license has come to be called the BitLicense. Continue reading...
What was the Mt. Gox Incident?
There have been many incidents where cryptocurrency has been stolen, but the Mt. Gox incident is the largest to date Mt. Gox was at one time the largest cryptocurrency exchange on the net, facilitating as much as 80% of global bitcoin trades, according to some sources. And then about 850,000 bitcoin suddenly went missing. At the exchange rate in 2014, when the problem came to light, that many bitcoin were worth about $450 USD. At the time of this writing, with Bitcoin at a high in 2017, that man... Continue reading...
What are Federal Reserve Regulations?
The Fed has been commissioned with upholding the directive of the Federal Reserve Act. The Fed is technically an independent institution from the US Government, even though it works hand-in-hand with the Treasury Department on monetary policy issues. It functions partially as a self-regulatory organization for the banking industry, and the Regulations, which are named with letters of the alphabet, are meant to protect consumers, member banks, and the economy as a whole. The leadership of the Fed is comprised of both government appointees and private sector banking leaders. Continue reading...
Can I Hold Bitcoins and other Cryptocurrencies in an IRA?
It is becoming increasingly popular today to have an IRA just for bitcoin. If you create a Self-Directed IRA, you can hold almost anything you want within it, if you can find a custodian and trustee willing to facilitate it. This isn’t overly difficult to do since many new companies are jumping at the opportunity to facilitate bitcoin and cryptocurrency IRAs. Examples of assets that can be held within a self-directed IRA include real estate, cryptocurrencies, precious metals, intellectual property, private businesses, hedge funds, private equity, tax lien certificates, livestock, and more. Continue reading...
How do Bitcoin Transactions Work?
Two words: blockchain technology. Transactions in bitcoin are encoded, packed into a block of other transactions, and all of these are sent out to thousands of computers running blockchain computations, known as hashes. All of these computers are running similar algorithms designed to force honest work and to take time for the computers to complete. The purpose of this step is merely forcing the blockchain to require time, energy, and effort, and to be randomized and decentralized when it is validating transactions. Whichever computer solves it first receives an incentive reward, and the entire blockchain, comprised of all computers running bitcoin client software, then updates the ledger to include the most recent validated transactions. Continue reading...
What is the commodity futures trading commission?
The Commodity Futures Trading Commission (CFTC) is an independent government agency that regulates the futures market. Futures are not considered securities, so the CFTC has jurisdiction over such exchanges while the SEC does not. The CFTC is the regulatory authority for the futures trade. This includes futures on currency, indexes, and stocks. Futures are not technically considered securities, because a security is defined as a contract that depends on the performance of a third party, while futures contracts only depend on two people. Any options that stem from futures are considered securities, however. Continue reading...
What is Ether?
Ether is the currency that powers the Ethereum network, which is a platform of distributed blockchain computing on which transactions, smart contracts, and distributed applications operate. Ethereum is a blockchain code environment through which distributed applications, smart contracts, and financial transactions using the Ethereum protocol are tested, validated, and added to distributed ledgers by the mining computers acting as nodes in the network. Ether is the currency, or token, in the Ethereum world which is used to pay the miners and transaction fees which are specific to its blockchain. Continue reading...
What Can You Buy with Bitcoin?
With every day that passes, bitcoin is becoming a more usable and accepted form of payment for a variety of goods and services, even those in the mainstream economy. To be sure, it’s arguably a long way off from being able to use bitcoin for small purchases at your local coffee shop or for big purchases like buying a house, but it is not unfathomable. The financial company Visa (ticker: V) has been working with bitcoin wallet services and various cryptocurrency exchanges to make cryptocurrency debit cards easy to acquire and use. These cards are known by names such as the Shift Card, Bitwala, BitPay, and others, partially depending on the region of the world in which they can be used. These cards allow users to transfer funds from Bitcoin wallets and immediately convert them into spendable fiat currency wherever Visa debit cards are accepted. Customers can also withdraw national currencies from Visa debit ATM machines based on bitcoin and cryptocurrency exchange rates, which often fluctuate wildly. Continue reading...
What is Ethereum?
Ethereum is an open-source, public, blockchain-based distributed computing platform. Ethereum provides a cryptocurrency known as ether. Ethereum is a decentralized platform that runs what are known as “smart contracts.” Smart contracts are applications that run on custom built blockchain, which functions on its own accord through rules programmed into the protocol, and which also makes decisions and keeps records based on consensus throughout a peer-to-peer network. A blockchain oversees its own activities without requiring any trust in a central authority or the other parties involved. Continue reading...
What is the Difference Between Public and Permissioned Blockchains?
Blockchain technology does not always have to be implemented in a public peer-to-peer system. Blockchains rely on a network of computers, representing nodes, that collaborate and distribute the information required for the blockchain to function. The nodes in some blockchains can be established by any computer willing to run the client software for the network. Bitcoin and most cryptocurrencies are intended to function this way: as a public, open-source, permission-less, and trust less network. The nodes are used indiscriminately by the rest of the network as long as the node is performing the functions required of nodes, and this is called a proof-of-work system. When Satoshi Nakamoto coded the first blockchain, his intention was to keep the network functioning with only one tier: “one CPU, one vote.” That vision has encountered obstacles in the form of ASIC mining and other unforeseen circumstances that have empowered some nodes and groups of users over others. Continue reading...
What is Bitcoin?
Bitcoin is a digital currency that is secured and maintained by a peer-to-peer network of millions of users online, making it a decentralized, fast, secure, cheap, and efficient as a digital currency. Bitcoin is a digital currency that can be acquired via traditional currency, trades, or work, and can be used for transactions in an ever-expanding network of users and merchants. It is legitimized and maintained by a peer-to-peer network of millions of users online, making it a decentralized, fast, secure, cheap, and efficient digital currency that exists independent of any centralized gatekeepers such as governments, regulated markets, or corporations. Continue reading...
How Can I Buy Bitcoin?
The most common way to buy Bitcoin is through online services such as Coinbase, Bitpanda, Bitquick, Localbitcoins, and Spectrocoin, where customers can use credit cards, bank accounts, and various other payment methods to convert cash into coin. Transfers are based on frequently updated rates of exchange and may involve a combination of flat fees and percentages that go to the service. There are also some physical locations where you can perform these transactions, such as Bitcoin ATM machines and convenience stores that can help you transfer money through the same machines that add funds to prepaid phones. Each of these methods offers different advantages in terms of convenience, anonymity, and security. Continue reading...
Who is Satoshi Nakamoto?
The pseudonymous inventor(s) of bitcoin and blockchain technology, Satoshi Nakamoto, likely walks among us today. Satoshi Nakamoto was the pen-name of the author(s) who anonymously gave the world the design and code for bitcoin and blockchain technology. Penning a white-paper entitled “Bitcoin: a Peer-to-Peer Electronic Cash System,” the author(s) described the need for a decentralized digital currency and proposed blockchain technology as the way to validate digital transactions with a distributed ledger. Continue reading...
What is the SEC?
The Securities and Exchange Commission (SEC) is a governmental regulatory agency established by Congress which polices the practices of the securities industry. Since 1934, the SEC's mission has been to protect investors and the market from malfeasance. FINRA (the 2007 successor to the NASD which was formed in 1939) is a self-regulatory organization in the industry which seeks to keep member firms more than compliant with SEC regulations. Continue reading...
Is Bitcoin Legal?
Bitcoin remains a technology and a currency that primarily exists outside of the influence and control of governments and regulated markets. In most places, it is accepted for what it is. In some countries, it is explicitly banned. Bitcoin is technically illegal in a few parts of the world, but for the most part, it remains in the extra-legal realm, existing outside of the traditional legal system and the regulated markets. Bitcoin was created in large part to be difficult to understand and to pin down, to be part of the fringe and underground that could not be controlled by a central authority. It is open-source, so no one owns the rights to the code, and the community of programmers interested in shaping the future of cryptocurrency frequently attempts to make small upgrades and tweaks to blockchain technology in the interest of creating more efficient, more scalable blockchain cryptocurrency. Continue reading...
What is a Private Placement?
Investing in a private placement opportunity is done off-exchange, and usually involves a small number of investors who are either institutions or accredited private investors. There are many possibilities when it comes to the types of private placement investments that can be made, but the nature of the offering is that it is not public, it is made to a small number of institutional level or individual accredited investors (see Regulation D, Rule 505 and 506), and the offering is not registered with the SEC. Continue reading...
What is NASD?
The NASD stands for the National Association of Securities Dealers. It was a self-regulated, regulatory body that oversaw the NASDAQ market to ensure proper and non-fraudulent operations. In 2007, the NASD merged with the New York Stock Exchanges regulatory body to form the Financial Industry Regulatory Authority, or FINRA. What is Minimum Margin? What is the SEC? Continue reading...
What is a Distributed Ledger?
A distributed ledger is a records system in which the same information is held redundantly across many nodes in a network, and is essential to blockchain technology. Centralized databases used to be the primary way that important records of transaction histories and so forth were held. Databases validate the identity of those requesting access to the records by asking for and retaining personally identifying information. If that office building were to lose power, was hacked, or was destroyed, it is possible for all of the information to be lost or given over to hands of bad actors. Even with cloud storage backups, the security and financial risk to any one of these storage depositories remain a problem. Continue reading...