Are They Dublin Their Money?

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Headline:  Why are cryptocurrency firms moving to Dublin?

Body: I remember one time there was a very famous bank robber.  After having been caught, he was asked, “So, why did you decide to rob banks?”   He looked disdainfully at the detective, “Cause, that’s where the money is.”  I suspect that this is why cryptocurrency firms are moving to Dublin.   But, maybe the crypto bros are huge James Joyce fans?   Let’s look at this.

What is going on?

Crypto exchange Gemini has selected Dublin as the headquarters for its European operations, amid a backdrop of crypto companies seeking expansion outside of the United States. Leaders of Gemini, the Winklevoss twins, confirmed this information recently.   When asked why, they cited a good pool of talent and a supportive regulatory system.  And, Gemini is not alone; Both Kraken and Binance have initiated activities there, apparently in response to passage of Markets in Crypto Assets (MICA) regulation within the EU.

Many have asked why this movement is happening.   According to the Winklevoss twins (key officials within Gemini) this is due to the amorphous, yet hostile regulatory environment in the States.   (In various interviews, the Winklevoss twins kept referring to the “war on crypto” within the US. Within Ireland, Gemini is registered as a Virtual Asset Service Provider and it is regulated under MICA.

Why Ireland?

“It’s beautiful and they don’t serve haggis, isn’t that enough?”  This was ostensibly exclaimed by the mayor of Dublin.  The  leaders of Gemini were less motivated by the lack of haggis and more motivated by the deep pool of talent and a community  ready to support their enterprise.  Per the Gemini leaders, Ireland will serve as a great entry point to the EU.

Key to this community is the Central Bank of Ireland Inovation Hub.  In this organization, different fintech firms can immediately discuss innovations with the Central Bank.   This ensures that there are fewer surprises for all parties involved, in the future.  This is somewhat akin to a program used by the IRS.   To head off the reasons for an audit in the future, the IRS  can become pro-active.   (These companies have to be BIG, think defense contractors and the like.)  The IRS will install an office within that company for a certain period of time, and if company personnel are considering a new kind of transaction, they can get an informed opinion on how it is going to be taxed.  In this manner, the need for very expensive audits can be diminished.  The Innovation Hub seems to act in a similar manner.

“What I would say is we are in a very different monetary policy and interest rate environment and, as we know from other discussions, I think our sense from talking to firms, is that there are some changes in the sort of investment and investor appetite for these types of firms as well,” she said. “We’ll be looking out for that this year”.

The Verdict

I don’t  feel good about Gemini’s chances and I’ll tell you why.   First, Mr. Winklevoss keeps referring to the “war on crypto” and yet, he does not define what he means or how he is going to engage.    This is not the outlook of a long-lasting champion in business or any other field. Second, Mr. Winklevoss is quoted as saying that he foresees a “Cambrian explosion of innovation.”  This seems to me overblown.   In my humble experience, Mr. Winklevoss might benefit from a reminder of how many species in this evolutionary period, are now extinct.

REFERENCES

Crypto firm Gemini picks Ireland as European base amid US crypto blues (cointelegraph.com)

Gemini Will Base European Operations in Dublin, Ireland (cryptopotato.com)

Binance News on Binance Feed: Crypto Firm Gemini Picks Ireland As European Base Amid US Crypto Blues | Binance Feed

Cryptocurrency firms still engaging with Central Bank despite downturn – The Irish Times

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

What is a Memecoin?

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Headline: 

Body:    I remember joking around with a group of friends, and saying how one of the guys in the group had saved some orphans in a fire.  I thought this was pretty funny, so I went to the Paint program and dummied up a “newspaper article” remembering Joe as the swashbuckling hero who single-handedly saved 4 orphans from certain death.  I thought it was really funny and I thought I was super clever for having “substantiated” the claim.

Well, it turns out that when you are a multi-millionaire or billionaire, your jokes become so much more complex.    In point of fact, some get so involved that their “jokes” have their own cryptocurrency attached: That’s how we get Dogecoin and others.  These coins that started as a joke among wealthy friends are often referred to as meme coins.

OK, so what ARE meme coins?

Let’s begin by defining what they are NOT.    Bitcoin and Ethereum are occasionally useful for investment purposes.    The meme coins are (with exceptions) worthless because they are so thinly traded.   There is simply not much of a market for them.  In fact, many within the media describe these meme coins as pump-and-dump schemes.  On the other hand, they can act as a fun and enjoyable way to begin or continue a conversation about investing.  On the off-chance that it earns a profit, you could have a homerun.  But, it most likely will not happen that way.  You can buy a variety of meme coins from either centralized or decentralized exchanges.  In fact… you know what….I’m going to start my own cryptocurrency.   Let’s see… dog themes seem to be good.   Some kind of  alliteration or rhyme scheme seems to help.   Aah, I’ve got it.   I will sell canincoin.  (It really can be THAT easy.)  Before you make too much fun of my cryptocurrency, please consider that there is a cryptocurrency called “Australian Safe Shepherd” hereinafter referred to as, well, ASS.

A good joke amongst millionaires, where’s the problem?

The problem is that normal people, people like you and me, don’t have the millions to fall back on.   So, when there is a rug pull, the millionaires simply laugh and clink champagne flutes.  C’est la vie!  But, the normal folk who get caught, lose all of their money, and this is the problem.  Also something to be considered is how incredibly thinly traded these memecoins are.   Basically, there must be a market made for each individual sale.  And, between the buying and the selling, the value of this cryptocurrency can vary dramatically.    Added to all of this, the rate of inflation is unreal because many of these memecoins don’t have the built-in inflation defense of burning.

It gets worse, I’m afraid.   For all of the above-referenced reasons, the pricing of these meme coins is highly volatile.   But, the other important ingredient (read “ingreedient”  perhaps) is that these meme coins are marketed on social media, reaching people who completely lack the wherewithal to understand cryptocurrency as an investment.  Add the small possibility of immense gain (and the flipside of large probability of large loss) with the popularity of social media and you have the recipe for potential financial disaster for many.

The Verdict

Please, please be very careful if you invest in memecoins.

TREFERENCES

Meme Coin Explained (investopedia.com)

What Is a Meme Coin and How Do They Work? | PCMag

Memecoin mania triggers triple-digit gains from Binance Smart Chain-based altcoins (cointelegraph.com)

What Are Meme Coins? Definition and Examples – NerdWallet

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

There is a Difference between Trader and Traitor.

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Headline:  Can you become addicted to trading cryptocurrency?

Body:  I don’t know about you, but there are a few things I probably addicted to.  First, there are bananas.   Love, those bananas.    Then there’s coffee, probably less than pathological addiction to each, but, I will go out of  my way if I am out of these items.  You might have your own addictions, perhaps it’s a cigarette after dinner, maybe it’s going to Thrift stores to find first edition books. Whatever it is, it  makes you feel somehow complete, and if lost, you are left somewhat bereft.    (I am developing an addition to online Scrabble playing  too, so, yeah, I feel your pain.)  These already mentioned are minor, and will not kill you ever, or at least for decades.   But, some addictions have FAR more deleterious effects (e.g. alcohol, drugs, gambling).     As we always hear warnings about these, there is one more I have to add to the list.    It IS possible to become addicted to trading cryptocurrency.  At first I was skeptical, but I think a pretty good case has been made.  But, you be the judge.


What is cryptocurrency trading addiction?

Sternlicht defines cryptocurrency trading addiction as the “persistent or recurrent pathological compulsion and obsession to engage in the behavior of investing in or trading cryptocurrencies despite negative consequences to personal and/or professional areas such as financial loss, disruption to relationships, career problems, mental health issues, and other such negative consequences.”  It seems that the group most at risk is the group of people who consider themselves to be financially knowledgeable.    They feel that they MUST know more than the person next to them, and thus can make REAL money on this trading thing, and only then realize  how vaporous cryptocurrencies can be and how incredibly volatile the pricing can be.

Why is this such a dangerous thing?

This is simply my theory, but it seems to me that trading cryptocurrency can supply (to some) the rudiments of the other addictive behaviors.  That first hit of smack can probably make you feel quite powerful and in control of your environment, and be very exciting at the same time.   Make a good trade on cryptocurrency and you obtain many of the same feelings.   Adrenaline junkies are effectively the same; They will do some pretty dangerous things in search of that BLAST of epinephrine and the elation of not being killed, while doing something that likely very few have ever done.  The price volatility involved in cryptocurrency can serve as a very good stand -in for a cliff or high bridge from which one can bungee jump.  I can hear some arguing that “This is NOT the same!!”  Well, I’m afraid it is, as it has already been repeatedly seen in people who day trade stocks.  What makes cryptocurrency even worse, potentially, is that they can be traded 24/7 and the only apparatus needed is a phone or computer.  (The side effects can include other addictions too.  Many addicts really love the 24/7 action, and many start to use amphetamines to allow themselves to be awake far longer.   This can create its own problems.)

But, wait, there’s more!!  There are now a plethora of stars and celebrities behind the hocking of cryptocurrency.   Matt Damon has promoted Crypto.com and Tik-Tok “Finfluencers” can be found by the score, each one explaining how they became rich using memecoins.   Many of them even have a helpful study course you might purchase from them.   How nice!!

What can be done to prevent addiction?

Cryptocurrency should be seen as an investment activity, and investing SHOULD be boring.  The research done should take a respectable amount of time (commensurate with the amount of money being placed at risk, of course.)  But, in my reading, most of those addicted read about the projects funded by these altcoins, as they were scrolling social media.  This seems to be the maximum extent of the research done by most.   So, I have a few ideas.

  1.  Have an accountability buddy and see if your “investment idea” passes the smell test with them.
  2. Read the whitepaper associated with each currency.
  3. When done reading, sketch out the reason that the currency is being created, and why each member of the management team  is important to its success.
  4. Sleep on it.  If it’s a good investment today, it should be a good investment 1-2 days from now.
  5. Keep most of your cryptocurrency and other digital assets in a cold wallet NOT connected to the Internet.

So, what can be done for the addict?

First, there is a monitoring regimen setup over their access to bank accounts and credit cards.  (Some even have access modified to allow only transactions  permitted by their therapist.)  Counseling sessions (one on one) are useful, but it seems that this is a particularly good use of group therapy techniques.   The group is a particularly powerful paradigm because each group member can have their feelings validated by other members of the group, and the patient can realize that he is certainly not alone.

A word of caution here.   The APA has not yet come up with a diagnosis for crypto trading addiction , so getting coverage from your insurance company could be tricky.   But, it is very much akin to gambling addiction.   The symptoms are very similar, the triggers are nearly identical, and the treatments are largely the same.

The Verdict

This can be a real thing, and cause REAL harm to real people.   But, then again, so can almost anything taken to extremes.  (Did you know that you CAN be killed by too much water in a restricted period of time?   It takes A LOT but, it can be done.)  There is a point of perspective though.   I have taken material from 4 different publications that I find to be credible.   When reading each in depth (don’t do it, it’s not worth it) one quite quickly can see that each article (remember, these are the CREDIBLE sources) always 4/4, mention the same protagonists, a husband and wife therapist.  Ostensibly, as they are positioning themselves as the go-to experts, they are likely  going to see much more revenue in their pockets.   I might be a cynical member of GenX, but, as one reads the literature, this one tidbit should be borne in mind.    The threat is real, for some, but for all, it can be avoided or treated.   In the interim, just do what you can to be observant of the changes in behavior of those you love.  Check in with them, and really find out how they are doing.  And, in Loving Memory of Jerry Springer, Be good to yourselves, and each other.

REFERENCES

https://cointelegraph.com/magazine/cryptocurrency-trading-addiction-what-to-look-out-for-and-how-it-is-treated/

https://www.washingtonpost.com/technology/2022/04/29/crypto-addiction/

https://www.coindesk.com/layer2/2022/05/04/i-totally-obsessed-over-it-how-crypto-addiction-almost-ruined-my-life/

https://www.ft.com/content/f8670d81-2632-498f-8b18-4d2ba14101f7

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

Metaverse Standards

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Headline:

Body:  OK, let’s close our eyes and imagine a scenario, both wonderful, and daunting.   Here we go.  You are running a very successful manufacturing plant in the U.S.   You make heavy pieces of railway infrastructure, and your business is booming.    On a vacation with your family, as you are desperately trying to remember their names, you are  taking in the sites of  Poland., and you see a manufacturing plant doing the same type of work, only better and it turns out cheaper.  You do some investigating with your legal team, and come to find out that there is a new owner, the grandson of the founder, and he wants OUT!!    So, he agrees to license to you for very little, the technology that made his family so fabulously wealthy, and you happily nap later, dreaming about the stacks of cash you will have to find homes for.   Only, there are 2 snags.   First, you forgot that European rails are of one gauge, and the U.S. rails are of a slightly different gauge.  You shrug, figure that your shop foreman can translate, and roll in your slumber.   But then the other shoe drops.   All of their apparatus, tools, procedures, protocols, everything are denoted in metric measurement,   Your people are all trained on U.S. measures.  Your  dreams of profitability might’ve been de-railed.

The different metaverses are somewhat similar.  The local currencies function differently, the character development is very different, and the ability to develop new items are at very different levels of difficulty.  This is why the question of interoperability is so important, so that the currency, characters and items can be ported from one metaverse to another.   But, to do this, there needs to be a common infrastructure underlying all of these items.  Developing this common infrastructure is why the Metaverse Standards Forum exists.  Let’s chug along and  perhaps see the end of the line.  (OK, I’ll stop with the train jokes, but, I really am rolling.)

So, OK, what IS the metaverse?

Simple answer is nobody can really define it: In point of fact, the members of MSF have a very active debate raging on this very elementary principle.  It should be a fully immersive space where one can see and hear (and eventually smell?) things that are not physically in the room with them.  Currently, the environments are not totally immersive but instead, are on a continuum, but each one is very siloed off from one another.   The Internet became so engrained in our lives because it was not walled off from one app to another, so to reach their imagined endpoint, the perfect world would all emanate from one point, and be freely navigated from world to world.  This runs counter to some visions of the future, so, we shall see  (and feel, and smell?)

What is the Metaverse Standards Forum?

OK, just a little reminder.  In this case, Metaverse Standards Forum (MSF) is what we’re talking about, not Medcins sans Frontiers (Translated Doctors Without Borders).   This is important to understand because this very generous organization is also abbreviated MSF.     Our MSF is an organization (of private companies, chiefly) that work together to institute a common infrastructure of code and  protocol, with the aim of accelerating the development of the whole gamut of metaverses.  Activities are sponsored by the Khronos Group.     I won’t bore you with the entire list of projects, but, when it becomes obvious that some standard has to be set for something, MSF starts a project on that area.  For example,  MSF might decide that common protocols have to be set up to take care of Digital Asset Management.    MSF puts together a Working Group to investigate that process, with the end result is a recommended common  protocol.    In their efforts to understand this process, the Working Group might sponsor hackathons to learn about what works and doesn’t work, on an accelerated timeline.  There are some truly HUGE companies supplying talent to MSF, but oddly, Apple has decided not to participate.  But, there must be a reason because, a few other suspects (Roblox and Decentraland among them) have made a similar decision.

All this sounds great!  Where’s the controversy?

Well, it does sound good, but there is politics to consider.   One of the companies to participate in MSF is Huweiwei, the Chinese company that makes 5G components for the Internet, probably really important to the future of metaverses.   But, some think that the company is part and parcel of the Communist government in China, and will not want to participate for that reason.

So, who’s getting the most right, right now?  Who is lagging, right now?

It would appear that, right now, the most immersive environment is the Omniverse, which is an environment designed by Nvidia.  Currently, it is being used to program autonomous vehicles, and will hopefully help to predict weather patterns, especially as they relate to global warming.     Meta, (f.k.a. Facebook)   has made a lot of vague promises, but not too much has come to fruition.

The Verdict

When we first got the “Internet” it was filtered thru the lens of an ISP, either AOL, or one of the other providers.  Unsurprisingly, some of the details of how things were presented were different from network to network, each one was its own “walled garden.”   As the Internet evolved, the different views of it began to be more uniform.  I think the metaverse will likely follow a similar model.   Right now, each one is a siloed area, which is somewhat OK (in many cases) presenting information to the user.   But, in the future, I think that all of these individual metaverses will begin to speak with each other, and the environment of the place will begin to be more and more immersive.  The question I think we have to ask is how immersive do we really want to have this metaverse?  Could it grow and develop to be so convincing ( and attractive) that people don’t want to leave, and eventually forget to eat, or drink water?  Sounds kind of ridiculous, but these are valid questions that we must ask ourselves.  The MSF will likely not approach these very difficult subjects, but they will hopefully, provide us with a language with which we can all better communicate during the intense debates.

REFERENCES

Microsoft, Meta, and others are founding a metaverse open standards group – The Verge

Meta and other tech giants form metaverse standards body, without Apple | Reuters

The Critical Importance of the Metaverse Standards Forum (technewsworld.com)

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

So many Realities… I need an Agent.

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Headline:  A/R versus V/R versus X/R

Body: 

What is “VR” v. “AR” v. “XR?”

Intro: A confession I have to make first, is that I occasionally watch… South Park.  From time to time, their social commentary is so entirely on point, you grimace through the poop jokes to see the larger points.   In one episode, the South Park officials were convening to discuss what should be done to address the threat AI was posing to their community.  One guy, in the South Park Militia, kept shouting, “They took our jobs!!”    Although this was meant to be humorous, it brings up a really valuable point.  The next article I was reading was about VR, AR and the mysterious XR, and I was motivated to learn more about the differences and, sometimes, the ramifications.

V.R.

VR immerses the user in a virtual environment to create believable experiences, whether they immerse the user in a real-life situation or a creative imaginary experience.   Sometimes first responders don these goggles to virtually “walk” thru a building that they were about to enter.  Other people use them to participate in games.   The sexy bit is that your body can be in one environment, and your attention is in a completely different environment.  With headsets, goggles and even haptic feedback, the flow of information to the player, and FROM the player is bi-directional and continuous.

A.R.

Augmented Reality (AR) requires a bit of an explanation.    Goggles and headphones might be both used.  But, as one looks thru the glasses, one will see the world as it physically is, but with extra information superimposed on it.  For instance, a police officer might have goggles on that identify where there are people hidden.  For normal people, you will still see the pizza joint in front of you, but you might also see a rotating sign that says, “FREE Pizza, just leave your opinion on our service.”  In reality, the sign does not exist, but in the goggles, it is very salient, in bright purple.

X.R.

Extended Reality (XR) encompasses both of these and the metaverse.  As the article said, “Think of a 3D internet that you could access from anywhere through a laptop, smartphone or headset.”  One particularly interesting use case of XR is the virtually trying on of clothes.  In the past we pick out 3 or 4 garments we want, into the back to try them on, one by one.   With XR, we can step into a booth, and the computer scans our body to make a hyper-accurate digital model of our body.   Then, with those measurements and the model, the computer can virtually “try on” the clothes and see accurately how the digital clothes mathematically fit on the digital body. 

XR is being used in business.    Some manufacturing plants haver been designed with XR designed into it.    In some manufacturing plants, when a machine is needing maintenance, a virtual orange arrow will appear above the machine, indicating to personnel that attention is required.  When the proper goggles are worn, these orange arrows can be seen.  In the consumer world, probably the best-known example of XR technology is the Occulus Rift headset.  This headset can be used with a variety of entertainment software packages.  Finally, that most annoying cat-filter found on a Zoom call is an example of XR technology.

Summation Table

VRXRAugmented Reality
Fully virtual experience.Umbrella term for A/R, V/R and metaverse.Virtual elements are added to the normally-viewed landscape.
Works through a headset.Works through a headset or smartphone.
You see ONLY the virtual world.You see the real physical world with items floated on top of it.
There are FREE  apps, but they do require a headset.Can be used for Free through mobile apps.






The Verdict

There are an awful lot of new terms we have to define as these new technologies  begin to hit the mainstream, but this is nothing new.  Until the early 1990s, a “CD” was a certificate of deposit that on held at a bank, with the expectation of a decent rate of return.  After this, CD often referred to  a plastic/metallic disk that will either play music or transfer other data.  We will gain comfort with these new labels as time goes on.

REFERENCES

AR, VR, MR, and XR – what they mean and how they’ll transform lives (qualcomm.com)

What is VR, AR & XR? Meanings, Explanations and Examples (verizon.com)

AR vs. VR vs. MR vs. XR: Which Extended Reality Is The Best? (yahoo.com)

What Is Extended Reality (XR) and How Is it Changing the Future? | HP® Tech Takes

AR versus VR versus XR.docx

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REFERENCES

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

Mixers, Blenders, Tumblers & Foggers. Bar? Home Depot? or Cryptocurrency?

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In cryptocurrency, there are businesses that a called “mixers” or “blenders”  on the Ethereum blockchain.  The purpose of these businesses is to help disguise the source and target of funds.   Many people believe that there is no purpose for this service except money laundering, but there might be legitimate reasons.   For instance you might live in a country where your rights are often not enforced, and so, to defend yourself, you would want to re-enforce anonymity.    But, Tornado is accused of laundering a total of $7 Billion.  Specifically, the Treasury Department believes that Tornado Cash was used in several schemes perpetrated by North Korea.

How do mixers work?

Well, you take a quantity of mixer, pour into a glass, add a shot or 2 of vokdka…   Oh, sorry.  Cryptocurrency transactions are indelibly recorded on a blockchain that is publicly available.  Put simply, these mixers will co-mingle transactions, thus making the sources and targets of these funds less clear. 

Are there different kinds of blenders or mixers?

There are both centralized and decentralized exchanges, so it is likely not surprising to find that there are also centralized or decentralized mixers.     A centralized mixer means that there is a centralized  party who plans and executes these transactions.   There are also decentralized mixers (like CoinJoin or Tornado Cash) that require individuals to meet up  and agree to the transaction specifics.  Decentralized mixers charge much lower fees, but do require substantial knowledge of the individuals.

Are blenders and mixers legal?

They are not explicitly illegal.  But, they are often used for illegal purposes.   Per a recent report by Chainalysis report, they are the “go-to tool for cybercriminals dealing in cryptocurrency.”    The rub is that the US government believes that these companies must be registered under the auspices of the BSA.    This is quite complicated, and expensive, so the companies do not want to have to be registered, or abide by the  onerous recordkeeping requirements.

What can be done with non-compliant organizations?

Quite a lot can be done, especially with the help of international partners.  First, any servers used in this illicit activities can be seized by authorities.  They can face sanctions for their participation in international hiding of income.   Finally, they can also face a variety of criminal and civil charges.

Is this really a big deal?

Yes, it is.   In a variety of hacks, the ill-gotten gains were distributed using blenders, mixers or related services.

  1. In March 2022, there was a $620 Million hacking exploit on the online game Axie Infinity.   $20 Milllion of this money was distributed by Blender.io and this caught the attention of  the OFAC.
  2. In October 2020, the founder was ordered to pay $60 Million in civil penalties after his service Helix processed transactions totaling more than 350,000 BTC from 2014 to 2017.
  3. In April 2021, the founder of Botcoin Fog was arrested and stands accused of laundering $336 million USD in Bitcoin over a 10-year period.
  4. Tornado Cash laundered over $96 Million obtained in a combination of attacks on other cryptocurrency systems.  Crypto.com was hacked, and  it seems that 4,600 ETH was  washed using Tornado Cash.

The Verdict

A mixer can be a lot of things.   To some, it is a party so that people on a team meet each other in a social setting.   To others, it is a beverage one can combine with alcohol to improve the flavor of that alcohol.  To still others, it is a service that will help support the anonymous nature of their cryptocurrency transactions, whether illicit or legitimate.  But, one thing we can agree upon is that they exist, and we should then be perhaps a bit more skeptical when we think we know the source of our cryptocurrency transactions.

REFERENCES

Tornado Cash: What Are Crypto Mixers and How Do They Work? (coindesk.com)

Crypto Mixers and AML Compliance – Chainalysis

Mixers, Tumblers, Foggers – CipherTrace

US Treasury imposes sanctions on ‘crypto mixer’ over alleged laundering | Financial Times (ft.com)

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

Currently, Snowden in Russia.

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Headline: What is the connection between Edward Snowden and cryptocurrency?

Body:  It might feel like a lifetime ago, but, just a few years ago, Edward Snowden blew the whistle on many Federal surveillance programs.    I will not opine on whether or not I condone what he did, just that to do so, he had to know a lot about cryptography and computers.   So, it seems appropriate to consider carefully how he might feel about cryptocurrency.  He has gone on record as being against the use of cryptocurrency as an investment.     The question is, why. 

I heard that he DOES use cryptocurrency??

Yes, he does use cryptocurrency to pay for server time.  He uses bitcoin to pay for this service because he can maintain much of his anonymity.  But, he makes a serious distinction between how he uses cryptocurrency, and others want to invest in cryptocurrency.  Just recently, there was a public letter signed by many knowledgeable people decrying  cryptocurrency, but Mr. Snowden seems to think that many of the undersigned were pressured in some way.  He also opined that many of these people know enough about cryptography  to understand that there are ways to ensure fair dealing in cryptocurrency.  Still, Snowden seems concerned about the metadata that accompanies the transaction.

He also seems to be concerned that BTC price structure very much resembles what happened in March 2020.    Despite his concern about investing in Bitcoin, he also indicated that current prices could encourage him to purchase some for future use.  In point of fact, he has already been involved in cryptocurrency.   He and a few other individuals started a cryptocurrency called Zcash.  This cryptocurrency was designed to be entirely anonymous and would remain so, assuming that at least one of the original 6 developers  truthfully destroyed their key used during the development process.  Recently, an engineer developed a way to avoid the trusted set up “ceremony” that was previously required.  In his final parting words, Snowden expresses excitement for the improvements made and the implications it has in moving forward to a more free and private currency.

The Verdict

The lesson here is quite simple, I think. We should use cryptocurrency and avoid being used by it. So, unless you have a smallish amount of money that you can reasonably risk, you should probably not be making investments in it. On the other hand, unlike short selling, the losses are limited to your investment. So, consider your situation carefully.

REFERENCES

https://fortune.com/2022/06/11/edward-snowden-says-use-crypto-dont-invest-in-it-bitcoin-is-what-i-used-to-pay-for-the-servers-pseudonymously/

https://www.coindesk.com/business/2022/06/11/edward-snowden-says-use-crypto-dont-invest-in-it/

https://cointelegraph.com/news/edward-snowden-says-he-feels-itch-to-scale-back-in-to-16-5k-bitcoin

https://www.entrepreneur.com/business-news/edward-snowden-revealed-as-secret-participant-in-the/426323

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

Metaversus?

Uncategorized,

Competition is fierce.    In the natural world, the hyena clans clash with prides of lions, and only the strongest survive.   In a similar vein, the world of gaming has seen a lot of innovation and competitors have come on the scene to knock too-comfortable champions off of their thrones.   Atari competed with Colecovision, in the next generation, Nintendo is in an intense competition with Sony PlayStation.  So, we should probably not be surprised to see that when it comes to online social-gaming, the same competition would be keenly felt.  And, you would be right.

In the beginning, there was Second Life, owned by Linden Labs.  This was a rather clunky, though immersive platform, and it was only 2020 when Linden Labs sold this franchise to other investors.   Other newer, shinier toys beckon from the over-stuffed toy box.    I have done some research and these seem to the largest competitors to Second Life.  For fairness, I am presenting them in alphabetical order.

Avakin Life

Avakin Life is a social game after the example of Second Life, but with more complex functionality.  It was created by Lockwood Publishing (which has a large investment from Tencent.    There are over 200 million users of this platform.  Its success seems to stem largely from the developers’ focus on the phone and mobile computing.   This is the 4th generation of games from the company, and this seems to be the biggest hit they have had.  It is written up in any variety of websites and other publications.

The game was launched in 2013 on Google Play  and was a hit because of the gameplay, but mostly as a result of the social interaction.  It seems that one of the largest hurdles was designing a system for people to pay for things that they could use in-game.    One of the unusual features of this game is that the designers provide everything: There is no user-generated content in the immersive Star Trek and Tron-inspired world.  And, the company seems to be in the space for the long term.   Said one of the co-founders:

We saw how long it takes to develop a world and for the community to form,” Bjornsson said. “We saw how important social is. But we fell into this. Our style has been steady organic growth.”

Club Cooee

Club Cooee was started by a German startup, and recently added a 3D instant messaging service that combines avatars (with changing facial expressions with the ability to send videos and pictures.  These 3D avatars can be highly specialized, and clothing and accessories can be purchased in-game for “Club Cooee credits.”   In addition to gameplay, they can now converse in duos or groups, selecting a venue using in-game items.  The person can pay extra, and get access to premium services.    The founder, Alexander Jorias hinted that the platform was looking to make money with B2B partners.   The advertising will be non-standard making me think that there will be signs up in the game or sponsored activities that occur in-game to promote these partners.

To monetize, the site will allow users to buy extra credits to purchase virtual goods, and will also offer premium services for a fee. Founder Alexander Jorias says that the service is also planning to generate revenue with a number of B2B partners, and that little, if any money will come from standard advertising.

Garry’s Mod

Garry’s Mod (GMod) is a program made by Garry Newman that allows you to change the game of Half Life to your specifications . If you’ve ever searched “Half-Life” on YouTube, you probably have seen a Garry’s mod video, and many people seem quite excited by both the videos and the gameplay.  Besides being a social game, Garry’s Mod also appears to be a wonderful “sandbox” which allows players to create tools that will build spaceships.   There is also a “tool gun” which can help one manufacture vehicles or change the facial expressions of your avatar

Just to be fair, I should warn you that Garry’s Mod (GMod) does contain some blood and gore, so, be mindful.  It does require download of a Source engine game first, but this doesn’t seem like an onerous task.

GoJiyo

GoJiyo was developed by an Indian firm, and the idea is that you (either solo or with a group) can go on quests.  At the completion of these quests, you get points that can be used to buy in-game merchandise or real-world items.   You can do an awful lot, (e.g. greatly customize your character and meet new friends), but there is an impressive list of things that you cannot.  Interestingly, this game too strictly does  not allow for user-generated content.

Jios and Mios are the currencies of this system, and if you collect enough of them, you can earn a real-world trip to Mt. Kilimanjaro.   Users agree, though, that to earn these real-world inducements takes a very long time.

IMVU

This application does a lot of different things.   It has a 3D chat feature where you can have your avatar chatting with friends, and allows the person to shop at many different vendors.  It also allows you to have your own website and customize it to a very high degree.  Credits are the coin of the realm and you can use them to customize the appearance of your avatar.  There are a lot of ways to get credits including getting your friends to sign up for IMVU.  The truly unique thing about this program is the content is 100% user-created.  For an additional fee, you can be in the VIP club which gives you a special badge and removes third party ads.  There is also an Access Pass that is used to ensure that only adults are granted access to the areas that are geared toward adults.

Also unusual among these sites, there is a variety of ways to earn credits while contributing to the community.   There is a peer review function and these people perform a quality control function.   There is also a group for creators, who design new functions and products for the community.

The Sims 4

For 20 years now, we have had multiple editions of The Sims, wherein you create characters with their own life stories, and control them as they interact with your environment.   Up to now, this as been a single-player game.   But, with Sims 4, there seems to be an expansion module that will allow you to in some ways interact with a group of friends.  This is not really meant as an immersive social game, and seems to be a way for the manufacturer to dip their toes into the waters of social play.   But, there are rumors that The Sims 5 will be coming out soon, and combine the ability to control multiple characters and still interact with others.    Currently, this platform does not really fit with the others, but the title is well-known and came up in research again and again.

Twinity

Twinity was developed by Metaversum and run by ExitReality since 2012, and allows its citizens to run around 3-D renderings of historical versions of real-world cities.  Recently, Twinity has been introducing more fantasy-related worlds, probably thanks to its large amount of user-created content.  Twinity allows users to upload pictures of their own face, which is used to create a personalized, identifiable avatar.  (If a different avatar is desired, this is easy to accomplish too.)

The currency of the world is the Global, which can be used to pay for apartments and accessories for their avatar.   Globals can be purchased on their homepage with any major credit card or PayPal.   Globals can be earned by attending virtual events or completing the post-registration “welcome tour.”

Twinity has an interesting mix of professional and user-generated content.  Once a user creates a new piece of content, they can sell this content to other users and earn Globals in this way.  Though the citizens are given a starter apartment, there is a real estate agent who can be used to find other possible real estate for their avatar.   With some noteworthy in-game accomplishments, there are badges that people can display on their profile.

The Verdict

Each game mentioned has its good points and bad.   The point being that there are a plethora of possibilities.   Plus, in the future, I think there will be multiple ways to make these games interoperable.  Said another way, you could build a character in one metaverse and port it to another.  This has the potential to be very exciting

Should Bridges Be Suspended? (or Trussed?)

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Headline: What is a “bridge?”

Body:    Many, many years ago, there was no bridge across the Chesapeake.  The only way to cross it was to take a ferry across the waters.  This was inconvenient for anybody on the Western Shore, but, it did keep the Eastern Shore less built up and more bucolic for a few extra decades.  Said another way, the Bay Bridge made the Eastern Shore more inter-operable with the rest of Maryland, at the price of increased urbanization, and a lower level of safety (both in terms of increased traffic and land value.)  A bridge in cryptocurrency operates in much the same way, and causes much the same advantages and disadvantages.  The bridge allows for more interoperability in currency types, but, as this is a human enterprise, each time you nudge a system, there are always unintended consequences.    Online, these consequences manifest as exploits where a bad actor tries to make a lot of money with a minimum of effort.

What are these bridges?

OK, I am not a coder, so I will try to define it for you.  Before I go to bed every night (This is a goal) I should always put my cell phone on the charger.   But, I cannot plug my cell directly into the wall, so, there is an adapter that goes into the wall, with a USB connection.  This cord connects to my phone through a USB-C connection.   You can think of this adapter as a sort of bridge.   The phone has not been permanently transformed (I hope) but for a limited period, it has been put into a condition where it can receive electricity from the wall.   The bridge sends a currency (say Dogecoin) in a “wrapper” denoting it as an equivalent value of Ethereum.

Is this really a big deal?

Yes.  There have been more than a few exploits to consider.  There was an attack on the Wormhole Bridge in February 2022 that led to a loss of $326 Million. Qubit bridge was hacked for $80 Million. This is a sizable problem.

Are there different types of bridges?

Yes, there are several.   One simple one is the single span, and one very complex one is the wire suspension bridge.   (The assistant whispers in my ear.)  Sorry, but just like  civil engineers, their online brothers and sisters have indeed  developed more than one type of bridge.  The most important distinction is uni-directional or bi-directional.   Before you get confused, think again of the Bay bridge.   (Please consider only 1 of the 2 spans here.)   The span is usually only going from west to east, or east to west.      This is unidirectional, and would allow you to turn one kind of cryptocurrency into another, but, there are “no givebacks” and no way to change back.  But, we have all been involved with the Bay Bridge on a Saturday in the summer.   There is so much traffic flowing east, authorities will turn one or more lanes on the normally west-bound span temporarily into east-bound lanes.   On Sunday evenings this pattern reverses.  This is now a bi-directional bridge, and would allow you to turn cryptocurrency  into another, and back again at will.  As you can probably imagine, it’s a bit dangerous, during the changeover period, to temporarily change westbound lanes into eastbound lanes.   So, it follows that the bi-directional bridge can be much more handy, but somewhat less safe.

Safety is always first on my mind, why do we want bridges to be developed?

Safety is an important thing to consider.   But, bridges do have some considerable advantages too.  For one thing, Ethereum’s blockchain is wonderful for many reasons, but the gas fees can become  onerous.   So, if there was a bridge, somebody could use cryptocurrency denominated in a different more usable currency, but retain the safety of the Ethereum ecosystem, this would be a good thing.

Are there different sizes and kinds of bridges?

Yes, there are different sized-bridges.   In the real world, there are a lot of people who need to transit from one side of San Francisco Bay to the other, so, the Golden Gate is simply HUGE.   But, it would probably be inappropriate and needlessly expensive to build a Golden Gate-sized bridge over the Severn River near Annapolis.  In a similar way there are different sized virtual bridges too, but some get quite large.   Three of the largest appear to be the Wrapped Bitcoin Bridge ($10.2 Billion) Multichain Bridge ($7 Billion) Avalanche Bridge ($6 Billion), There are others too, but the point I am trying to make is that there are serious amounts of money wrapped up in these bridges.

Beyond size, there is another consideration.   There are “Trusted” bridges and “Trustless” bridges.  The difference is whether or not a central authority is involved.   In a Trusted Bridge environment, there is a central authority, and in a “trustles” system, there is no central authority.  The advantages and disadvantages attach logically.  The Trusted Bridge allows you to trust a central custodian (actually requires you to trust them) but the operation  is quite simple from the investor’s point of view.   In comparison, the “trustless” bridge environments do not have this central authority, and are essentially computer code and require some level of skill to operate.

Are there Risks to using bridges?

Yes, there are risks, and they sprout from the Trusted versus trustless consideration above.   In the trustless bridge environment, there is “smart contract risk” and “technology risk.”   The smart contract risk is the risk that the coding behind the bridge has an error of some type.   The technology risk is the risk that somebody will devise a virus or piece of malware that will  effectively attack the bridge.  The Trusted bridge environment adds “censorship risk” and “custodial risk” because you are relying upon the reputation of a third party.  The third party could arbitrarily say that you are not allowed to change your currency into some other kind of currency.   Also, your custodian (the group who hosts your wallet) could just disappear one day, and they take your assets with them.

The Verdict

 Cryptocurrency is still a rather new topic.  In fact, the only sure thing, is that with rapidly evolving rules and best practices, there will be an equally accelerated discovery of poorly protected nodes within the network.  Even though the cryptography is good, each attempt at an improvement will likely have unexpected problems.  Perhaps some consultancy will develop a way to field test these bridges before they are offered to the public?  Often, before the military will accept delivery of a product, they will test it in the context of a wargame.   Perhaps  there could be some equivalent within cryptocurrency.   The question is, Who would certify the results?   How would you decide to believe them or not?  Certainly we will figure these things out, but for now, if we shake the Economics 8-Ball, we keep getting, “The future looks cloudy.”

REFERENCES

https://academy.binance.com/en/articles/three-popular-crypto-bridges-and-how-they-work

https://www.coindesk.com/learn/what-are-blockchain-bridges-and-how-do-they-work/

https://ethereum.org/en/bridges/

https://www.investopedia.com/what-are-cross-chain-bridges-6750848

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

This Might Blow Your Mine!

Uncategorized,

Headline: Does Minecraft have a cryptocurrency?

Body:  Ok, confession time.   I don’t know the first thing about Minecraft.   I think you develop a character, ply a trade and probably join a guild and/or clan. (In truth, there are 2 modes, creative and survival.  In creative mode, you can join vast guilds and design weapons and armor.  In survival mode, you fight more often. This is where my knowledge ends, and I thought my interest too.   But, apparently, there are a few types of cryptocurrency that are associated with Minecraft.   Given how many people are involved with Minecraft this seems really important.  (I was shocked to find that in 2021, there were 140,000,000 users worldwide spending $318,000,000.)  So, let’s take a closer look at this.

Shhh… it’s not REALLY happening… Remember, there IS no spoon.

Minecraft players are not complete newbies when it comes to this type of gaming.   Many of them have built avatars and characters in other metaverses, and they want to take this character and bring it into the Minecraft universe.   Officially, they are not able to do this, but somebody is apparently working on a back door (officially sanctioned or not… who’s to know) so that these players can import the characters they worked so hard to develop.   This entity Enjin(working with a Japanese cryptocurrency exchange, Coincheck)  has developed a plugin which will interact with the programming of Minecraft to allow for this transfer of what is essentially an NFT saved on the Ethereum blockchain.  (This tokenized item will allow one to immigrate an item into a different game on the same blockchain.)    This is not the first time that third parties have attempted to integrate Minecraft and cryptocurrency. Players have created unofficial servers that support Bitcoin payments such as BitQuest, MinecraftCC, PlayMC, and SatoshiQuest. Those servers reward players based on their activity, or reward players for finding items. Third-party developers have also created Minecraft clones such as Cryptovoxels and Craft.cash, which record land ownership on the Ethereum and Bitcoin Cash blockchains, respectively.  I keep reading repeatedly how Minecraft has no official cryptocurrency associated with it. 

(Since there have been so many of these 3rd party attempts at monetization, it sure sounds to me like it was one of the objectives of Minecraft creators to see what kind of currency-related systems would organically evolve.  This may in fact be part of a strategy to get players to become excited and engage even more with the software.   Just my surmise, but, it smells right.)   For the record, designers of Minecraft publicly disagree with me.  Mojang Studios, the developer of Minecraft, one the most popular video games, has just banned NFTs and Blockchain technology, because they are, claims the company, against its values ​​of inclusivity.   “To ensure that Minecraft players have a safe and inclusive experience, blockchain technologies are not permitted to be integrated inside our Minecraft client and server applications nor may they be utilized to create NFTs associated with any in-game content, including worlds, skins, persona items, or other mods,”   Seeing that they deny it so vehemently, makes me even more cynical about their intentions.   nterestingly, in 2014, Mojang was acquired by Microsoft. Would they really spend $2 Billion for the company if they were unhappy with the monetization prospects?

So, what IS Enjin?

Engin  is a plugin for Minecraft.   (Think of a plugin as a smallish piece of software that allows you extra functionalities within the main software.)  In this realm, all players need an Enjin wallet, and then they can securely trade cryptocurrency and digital assets with one another, from wallet to wallet.   It also allows you to port your creations from one area of the game to another.   (Think of this as a form of arbitrage.   Some materials are common in some areas and extremely limited in others.   Thus, in the 2nd area, you can probably sell your creation (made from these “scarce resources) at a price higher than you had to pay for the resources.   In this manner, you can profit.  The drawback is that this plugin must be installed on each individual server.

The Verdict

This one’s tricky, no other way about it.   Whether or not a cryptocurrency catches on, seems to depend upon the number of people who adopt it, and then the number of developers sho put in the effort to develop apps that people like and use.  Make no mistake, we are at the beginning here.  The endgame (as it were) is rather inscrutable.  

REFERENCES

Minecraft Will Get In-Game Cryptocurrency Items with Enjin

https://www.investing.com/news/cryptocurrency-news/minecraft-with-crypto-and-blockchain-the-perks-of-playing-enjincraft-2618612

https://dailycoin.com/minecraft-with-crypto-and-blockchain-the-perks-of-playing-enjincraft/

https://www.thestreet.com/investing/cryptocurrency/the-world-of-nfts-shaken-by-a-surprising-news

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.