CWC Newsletter #3 (Nov. 1, 2019)

By KJ Kingsley, Analyst


Top 10 Updates:

1. President Xi Jinping wants China to be the leader in blockchain. Speaking at the 18th collective study of the Political Bureau of the Central Committee in Beijing, Xi said blockchain technology has a wide array of applications within China and introduced what he called “Blockchain+.” This initiative will be the centerpiece for global blockchain supremacy through the support of Chinese blockchain technologies. In addition, the Chinese government has banned anti-blockchain sentiments following the release that they would issue their own state-backed cryptocurrency. This move by China is alarming to people in the West because (1) Facebook’s Mark Zuckerberg alluded to China’s blockchain supremacy if the US did not authorize the launch of Libra, (2) the miners who secure the bitcoin, Ethereum, and EOS networks are centrally located within China and other Asian countries, and (3) China’s blockchain cryptocurrency could potentially upend the USD global standard and shift monetary policies to the Chinese Communist government.


2. Chinese Central Bank will launch digital currency called DCEP. The Digital Currency Electronic Payment (DCEP) is poised to be the first national digital currency. The Chinese Central Bank has been working on the DCEP since 2014 and it is believed to be a legitimate threat to the global USD standard. With the DCEP, the Chinese Communist government may force its global cryptocurrency onto their ally nations who have taken billions of dollars worth of Chinese loans. Specifically, emerging nations in Africa, Southeast Asia, and the Middle East may also be incentivized to adopt the DCEP in order to strengthen their ties and monetary benefits from the Chinese. For the US, not declaring any plans to create a digital USD cryptocurrency coupled with Congress’ disdain towards Facebook’s Libra cryptocurrency, the introduction of the Chinese DCEP behooves policy makers in DC to act quickly in order to prevent any nation-state defectors who would rather trade in DCEP than the USD, a currency that is currently manipulated heavily by the Federal Reserve.


3. China’s Center for Information and Industry Development (CCID) publishes 14th Crypto Rankings. Thirty-seven projects have been evaluated and ranked overall, with EOS at the top of the overall rankings followed by Ethereum and Tron. Dan Larimer, the creator of EOS, has two of his previous blockchains, Bitshares and Steem, in the top 10. The Chinese rankings evaluated the blockchains based on three areas: basic technology, applicability, and creativity. The CCID describes itself as “a first-class scientific research institution directly under the administration of the Ministry of Industry and Information Technology of China.” The speculation is that, with President Xi Jinping’s declaration, China will strive to be a leader in blockchain technologies and that they will adopt many of the top blockchains in their rankings…hopefully they adopt EOS.


4. Galaxy Digital EOS VC’s latest investments into EOS-based startups. Block.One, the parent company that provides the source code and frequent upgrades to the EOS network, created a venture capital fund in mid-2018 with the goal to finance EOS-based startups. With a war chest of $1 billion, this venture capital fund paired with the guidance of Digital Galaxy, created by billionaire hedge fund manager Mike Novogratz (formerly of Goldman Sachs). The venture capital fund released info about their new investments in Current and Immutable. Current, an online bank that allows app-controlled Visa debit cards and personal checking accounts supervised by parents, secured $20 million from a group of investors, including Galaxy Digital EOS VC Fund. Immutable, a Sydney-based blockchain gaming startup, received $15 million, which also included other notable investors such as Naspers, the largest shareholder of Tencent (read: popular game Fortnite). These latest developments indicate Block.One’s financial commitment to grow the EOS mainnet.


5. Competitor Litecoin is running out of funds for development. The Litecoin Foundation now has, at most, a two-year runway left, and its co-founders are scraping together a business model to generate more revenue. Charlie Lee, Litecoin founder, said Litecoin’s fate is not dependent on the fate of Litecoin Foundation. However, the Litecoin Foundation provides the upgrades and new developments to the Litecoin blockchain. Similar to the leadership of Block.One for EOS, the Litecoin Foundation is the de facto leader for the blockchain. The Foundation currently only has one full time, paid employee with everyone else working as volunteers. This model is unsustainable because other competing blockchains will be more attractive to Litecoin developers in terms of potential profits, without enough developers the Litecoin blockchain becomes susceptible to hacks and attacks, and it will ultimately erode the confidence of token holders and users. Litecoin was previously marketed as Bitcoin’s silver.


6. Blocksburg Conference on Nov.10-12 to Showcase Industry’s Heavy Hitters. Block.One, the parent company of EOS source code, who has an office located in Blacksburg, is hosting a blockchain conference at Virginia Tech called Blocksburg. The speakers consist of powerhouse representatives, such as SEC Commissioner Hester Peirce, John Stevens and John Squeo of Accenture, Ryan Enderby of IBM Blockchain Solutions, and John Fields of Capital One. In addition, the CEO, CTO, and General Counsel of Block.One will also provide talks at the conference. This is an important conference because Block.One also released information that they will construct their headquarters in Arlington, Virginia in order to work closely with the SEC and US government with regulations of blockchain technologies.


7. Tron, an EOS competitor, is a growing threat. Tron is a platform that has many gaming and gambling DApps (decentralized applications) and is a growing competitor to EOS. (1) Samsung will add support for the Tron Network by making it easier for Tron token holders to store their assets on their Samsung phones. (2) A popular EOS DApp called EOS Knights, a game that has seen many daily active users, has decided to create Knight Story on both the EOS and Tron networks due to the favorable support by the creator of Tron, Justin Sun. Although there have been strides in the Tron network, many pundits view Tron with skepticism and point to the fact that Tron is just a clone of the popular blockchains Ethereum and EOS. However, Tron is widely popular in China due to its gambling DApps, and with President Xi’s desires to be the blockchain leader of the world, Tron may be in line for more Chinese government support.

8. Twitter CEO Jack Dorsey backs $10m round for crypto startup Coinlist. Coinlist is planning to launch a cryptocurrency exchange, Coinlist Trade, and a cryptocurrency wallet, among other services. Coinlist expects to be a platform for US-based cryptocurrency companies to launch their tokens. This news comes at a point when other global exchanges, such as rival exchange, Binance, have dominated crypto trading and reaped in hundreds of millions of dollars in profit. Binance issued their own crypto, Binance Coin, to allow cryptocurrency companies around the world to launch their crypto for a hefty issuing fee that allows Binance to monopolize the initial coin offering economy. I speculate that Dorsey understands that crypto exchanges are a “gold mine” that profit from issuing exchange-backed coins to customers. Following on the heels of Facebook’s cryptocurrency dreams, Jack Dorsey’s Twitter signals that the big players in Silicon Valley are immensely interested in entering crypto.


9. In response to FUD (Fear, Uncertainty and Doubt), a Value Proposition for EOS. On Oct. 29, cryptomandate posted a value proposition on eosgo.io/blog to address the wide-spread FUD on EOS by uninformed traders, bloggers, and tweets. Before speaking of EOS’ value, the author lays out three current shortcomings: (1) underlying infrastructure needs upgrades to support mass adoption, (2) governance has minor issue that needs to be resolved, and (3) ecosystem needs more dApps and services to ensure that people don’t switch blockchains. With these shortcomings believed to be resolvable in the near future, the author explains that “most blockchains are mostly just patches of preceding ones with little vision or philosophical presence to justify their long term success. EOS on the other hand is a well-oiled machine that’s being built from the ground up into a massive conglomerate. EOS is valuable not only as a blockchain but as an organization. It is scaling quickly. It’s capable of making quick effective decisions regardless of its diversity and global scale. Users are afforded free transactions on the blockchain. It is by far the cheapest blockchain for developers to build and test their dApps. Despite all these amazing features it isn’t slowing down on innovating and upgrading current system.” The post sums up many of the thoughts in the EOS community that believe in the viability of EOS for the foundation of the new internet. (source: eosgo.io/blog/the-eos-value-chain)


10. Chinese city of Guangzhou to invest $1.4M annually in public blockchain projects. According to an official Chinese government document dated Oct. 28, Guangzhou is issuing up to $1.4 million dollars to blockchain projects that run a public chain or a consortium chain. However, city officials are looking for a blockchain that does not require a token, which is interesting because within blockchain technologies, a token is required in order to keep the blockchain ledger honest due to the velocity of money. In addition, the Guangzhou government seeks to establish a $142 million fund to invest in blockchain-related companies. Last year, governments of Nanjing, Hangzhou, and Shenzhen launched blockchain funds of $1 billion, $1.6 billion, and $80 million, respectively. This is important because it signals the growing interest of Chinese governments to propel blockchain technologies into the public space. With government support, these blockchain companies have the needed resources to create a supremacist lead in comparison to the US. I think of this as how the US government was one of the biggest backers of the internet in the late 20th century. If it weren’t for the enormous resources directed by the US government, many of the public technologies that we enjoy today would not have been created and developed.

Disclaimer: KJ Kingsley is not a financial advisor and holds the digital tokens or cryptocurrencies represented in the content above. This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this post constitutes a solicitation, recommendation, endorsement, or offer by myself to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of any of the author’s employers.

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