Bitcoin stable as crypto world looks to EOS success

Bitcoin has stabilised at $7,500 going into the weekend against a background of trade wars and government dysfunction in Italy and Spain.

Whether bitcoin can begin an ascent from the bearish mire of recent months remains to be seen, with regulatory uncertainty still in evidence.

On Thursday, for example, the US Securities and Exchange Commission (SEC) was successful in getting a court order to shut down an allegedly fraudulent initial coin offering (ICO) from Titanium Blockchain Infrastructure Services.

Dan Morehead founder of crypto-focused Pantera Capital sees the regulatory uncertainty creating a buying opportunity. "All cryptocurrencies are very cheap right now", Morehead said in comments to CNBC, suggesting investors should get in ahead of institutional players. However, many market participants will remain wary of talking heads from the crypto industry talking up the price and may prefer to sit it out and wait for the optics on regulations to become clearer.

Nevertheless, Morehead sees positive effects coming from future regulation in the US: "Many institutions are essentially buying the rumour [of potential SEC regulations] and selling the fact. Getting invested now so that in three, four, five months when the institutional, quality-regulated custodians that we're hearing about come online, they'll already have their positions."

EOS $4 billion record token sale

For a change though, all eyes are not so much on bitcoin as blockchain platform EOS, which completes a year-long token sale at midnight (GMT) this Friday and has raised $4 billion. The EOS initial coin offering, as token sales are known, outstrips the largest of the initial public offerings that have taken place in US equity markets in 2018. The EOS network - which is a blockchain platform for running decentralised applications - is expected to go live this weekend.

The blockchain platform has been built by Block.one and when the mainnet launches it will cede control to the EOS token holders who will then be able to vote to elect "block producers", of which there will be 21 in total.

EOS is the largest ICO ever, dwarfing the previous holder of that title, Telegram, the messaging app that raised $1.7 billion in its presale. It is estimated that $6.6 billion was raised in token sales last year and $9.1 billion so far this year. The sheer size of the EOS fundraising effort and the expectations surrounding its prospects, means its success or otherwise could be market-moving for the sector.

Matthew Newton an analyst at global investment platform eToro is bullish about the launch: "Now that the auction is coming to an end, we expect to see hundreds of entrepreneurs get to work on blockchain based, decentralised, apps. We're confident that one or more of these will be able to compete with the 'unicorns' of the future."

The EOS platform only becomes fully operational after the code has been made publicly available, a randomly selected group of "appointed block producers" has tested the chain and it is then opened up to token holders. The first transactional activity is the voting process in which 15% of tokens have to take part, to elect 21 block producers who will have the executive power in EOS's delegated proof-of-stake (dPoS) consensus system which gives the most power to those who control the largest holding of tokens.

Unlike Bitcoin and Ethereum's proof-of-work systems in which computers compete to solve mathematical tasks, dPoW is a much more efficient design. Vitalik Buerin, the inventor of Ethereum, has described the EOS governance system as a plutocracy although the voting on block producers is a continuous process, updated every two minutes, so membership of the group of 21 will change frequently. Token holders can delegate their votes to other members of the network to use.

However, there is a mass of confusion about how to vote. Due to the lack of user-friendly tools for voting, it may not be a straightforward task to get 15% voter turnout. Token holders have until 2 June to register their Ethereum token address with EOS prior to launch.

EOS the Android of the blockchain world?

"Tomorrow is a major moment for EOS as it becomes independent of the Ethereum network. But the mainnet launch represents more than just an upgrade," said eToro's Newton in comments for Interactive Investor.

Newton continued: "EOS is fundamentally trying to change the way in which apps are developed and accessed. Just like Google allowing developers to build on Android, EOS is opening up its blockchain to anyone who wants to write on it. But unlike Google, you need to actually have a stake in EOS to do so."

Block.one stated in a blog post on 20 April that it would not be a block producer and was not backing the efforts of any entities seeking to be block producers. Block.one owns 100 million EOS tokens (10% of total supply). The EOS token sale was not open to investors in the US and China.

The first block producers to be elected will probably be from among the exchanges and mining pools, and among the favourites are Huobi, Bitfinex and Antpool. There is a total supply of 1 billion EOS token and the circulating supply is fairly tightly held, with four whales thought to won 15% of supply. Huobi and Bitfinex are major crypto exchange based in Hong Kong and the US, respectively and both are investors in Block.one.

Early this week Chinese security firm Qihoo360 found a bug in the EOS code, which has since been fixed, but highlights the dangers of untested code with no track record unlike Bitcoin and Ethereum. Dan Larimer, EOS's chief technical officer and the developer behind Steemit and Bitshres, two already successful blockchains, expects there will be some software vulnerabilities exposed in the first couple of weeks or so.

The large amounts of money at stake in block rewards alone, mean fierce competition to become block producers as well as fraudsters hovering around the launch ready to make clones to trick EOS token holders into sending their tokens to illegitimate chains. Investors are already targeted investors with phishing emails, with reports of people losing millions of dollars worth of EOS tokens by being tricked into sending their wallet's private key to fraudulent addresses. Also, Block.one's email support set-up was attacked last weekend, which has added to the security concerns. The official EOS web address is EOS.io.

EOS is the fifth-placed coin with a market capitalisation of $10.9 billion and is currently trading down 1.5% at $12.2, according to Cryptocompare.

EOS has a lot of competition to beat to become the "third-generation" blockchain platform of choice, the first-gen being bitcoin and Ethereum the second-gen. NEO, Cardano, IOTA, Stellar, Qtum, to name a few, all have blockchain platforms up and running or in development aimed at delivering similarly efficient block verification and transactional capacity improvements.

China's President Xi likes blockchain, Bittrex exchange gets a banker

In other crypto news China's leader President Xi Jinping, speaking at the Chinese Academy of Sciences, identified blockchain as a key transformational technology for the new industrial revolution: "Ever since the start of the 21st century, a new generation of industrial revolution is substantially reshaping the global economic structure … with artificial intelligence, internet of things and blockchain constantly making application breakthroughs."

The Chinese government's Ministry of Information Technology recently began ranking 28 blockchains, with Ethereum, Steem, Lisk, NEO and Komodo currently the top five rated projects.

Popular crypto exchange Bittrex has found itself a banking partner - New York commercial bank Signature Bank, with a market cap of $7.6 billion and annual sales of $1.36 billion. The US-based exchange will now be able to offer fiat/crypto trading pairs, although initially only in certain states of the US.

Bill Shihara, chief executive at Bittrex sees the deal as a sign of a maturing sector: "It's been a long path… It's not just about banks being able to trust Bittrex. It's about banks being able to trust crypto in general. And I think it's really showing that crypto is turning the corner in terms of mainstream acceptance."

Lack of access to banking facilities has been a major drag on the development of the crypto ecosystem, with many banks still unwilling to take on the risks associated with the sector in terms of anti-money laundering considerations and the lack of wider regulation.

World Cup lift?

With the World Cup two weeks away, hotels in host city Kaliningrad are accepting bitcoin payments after teaming up with payments provider Free-Kassa. Anna Subbotina from Apartments Malina said of the move: "We have decided that fans should be able to pay for our services with the help of this innovative technology."

Subbotina expects other hotels in the enclave city, the most westerly territory of Russia, to follow its lead in also accepting crypto. She added: "We are seeing increasing interest in cryptocurrencies. They will gradually come into use as a means of payment."

In South Korea where token sales have been outlawed since July last year, a parliamentary committee wants to end the ban by placing crypto on a sound legal footing and encouraging "healthy trading" . The National Assembly's Special Committee of the Fourth Industrial Revolution, said in a statement: "We will also establish a legal basis for cryptocurrency trading, including permission of ICOs, through the National Assembly Standing Committee."

Lastly, bitcoin's bulls were probably not too enamoured by Nobel Prize-winning economist Robert Shiller's musings when he told CNBC earlier this week, "I don't mean to be dismissive of bitcoin, but it looks like a bubble", although balanced that by saying "it's hard to predict these things". Shiller, a Yale University professor, applauded the innovation the crypto sector has unleashed and was not entirely dismissive of future prospects: "There's thousands of them now, so something good may come out of it."