Podcast: How meaningful is the market capitalization?

Market capitalization is one of the most recited metrics when it comes to evaluating a crypto currency like Bitcoin. But a closer look shows that this measure is not without it.

You know this: Open your browser and check the market capitalization of the crypto currencies first. After all, the market capitalization pages have experienced at least as much boom as the listed crypto currencies in recent years. What is behind it?

Bitcoin news: Why is there market capitalization for crypto currencies?

The colourful world of cryptos is difficult to follow and it is even more difficult to classify the developments according to Bitcoin news. From the stock world there is the metric of market capitalization. This is calculated by multiplying the number of shares issued by the price of a single share. The net result of this formula is the market capitalisation of the company in question.

Accordingly, the market capitalisation of a crypto currency can be derived. Take the number of issued coins and multiply them by the current price of a coin. This makes it relatively easy to rank the crypto currencies. At first glance it can be seen that Bitcoin is the top. One gets the impression of order in the Wild West of crypto currencies.

What is the problem of Bitcoin formula?

Unfortunately, the market capitalization as calculated does not give a thorough insight into the world of Bitcoin formula crypto currencies. The Bitcoin formula can be manipulated in several ways. To illustrate this, let’s imagine creating an ERC-20 token with a fixed set of tokens that is available right at the beginning – the so-called MarketCapCoin. There are a total of 10,000,000 MarketCapCoins. If I now sell one of these tokens to my unsuspecting neighbor for one euro, my token would have a MarketCap of 10 million euros according to the above formula.

Here it quickly becomes apparent that market capitalisation is a fictitious value and says nothing about the invested capital or the quality of the crypto currency. The BTC-ECHO Podcast will tell you what other difficulties this measure entails and which metrics would be better.

The situation on Wednesday: Bitcoin and the fight against banks

Bitcoin had taken up the challenge to bring some wind into the dusty financial system. But that was more than ready: The bankruptcy of the Lehman Brothers, mistrust in the banking system and the bursting of the real estate bubble were the ideal breeding grounds for a decentralized crypto currency. Now, just nine years later, the situation is somewhat different again. From Bitcoin, banks and the search for decentralization.

It seems as if bridges are currently being built everywhere. They are all owed to the attempt to couple the financial system so often described as „traditional“ with that „new“ cryptoecosystem. Here the idea of decentralization is combined with the idea of a central control of currencies and does not really come together. The situation on Wednesday.

The new Bitcoin formula

Bitwala caused a stir in the crypto community last week: https://www.geldplus.net/en/bitcoin-formula-review/. With their Bitwala Card and the corresponding bank account, they were able to convince 30,000 customers to pre-register for the launch of their Bitcoin formula campaign. They can therefore use their account to switch between crypto currencies and fiat currencies without having to go directly via third-party providers.

A very similar project is currently being carried out on Swiss soil. Here it is the SEBA company that has been able to collect a total of 103 million euros. The aim here is very similar to Bitwala: to offer payment transfers that link crypto currencies with Fiat.

Both dare to do the balancing act between crypto and Fiat and take on the cumbersome task of convincing the regulatory authorities of their intention. But the dimensions are far from exhausted.

Goldman Sachs & Ripple: Transforming the Bitcoin trader payment area

Banking giant Goldman Sachs also recognizes these signs of the times: as a supporter of the Veem platform, they want to abolish nothing less than the SWIFT standard. With 80,000 companies in a total of 96 countries, the Bitcoin trader project certainly has a broad base of customers with whom they are declaring war on the established transfer of payments as seen in this review. However, they are by no means alone in this.

For some experts of the crypto scene are likely to ring a bell when it comes to the buzzwords „abolish the SWIFT standard“ and the associated transformation of the global payment area. It is the well-known „bank coin“, Ripple’s XRP, who has taken up the cause of this project. With the recent go-ahead for xRapid, this goal seems to have come a little closer.

There are many supporters behind Galleon’s figure Brad Garlinghouse. But there are also some who are turning away and looking for decentralized (re)n alternatives. Above all Ripple co-founder Jed McCaleb, who is currently selling a large part of his collected XRP.

StellarX: Decentralized competition
It’s the same JedMcCaleb who was involved in the creation of Stellar at the time. With StellarX, the project’s new GUI, Ripple is currently facing high-caliber competition from the decentralized side. With this project, the Stellar community is not only creating a use case for the platform’s own crypto currency. If you take a closer look, you can also see a liberation blow against the dependency on Bitcoin on the one hand and Ripple on the other.

If StellarX manages to push through its project, the chances are good that it will prevail against the centralized competition from Ripple.

Decentralisation vs. centralisation
This is (still) the current situation in the Bitcoin ecosystem. On the one hand, we have centralised companies trying to build those Bitcoin bridges. Big players like Goldman Sachs or Ripple are trying to abolish the SWIFT standard and revolutionise „international payments“.

On the other hand, we have approaches that (at least apparently) pursue the basic idea of decentralisation. There is no question that these plans are not guided by pure idealism either. But they are, at least in the sense of a decentralization of the global financial system, much closer to the idea behind Satoshi Nakamoto’s Bitcoin.

BTC-ECHO reports from the Blockshow Europe 2017

Two weeks ago we reported about the CeBit, now the next event was coming up, the Blockshow Europe 2017. We were in Munich and as media partner of the Blockshow Europe 2017 we heard many interesting lectures and met Blockchain-Startups.

We were especially happy to meet some of the winners of the raffled tickets to Blockshow Europe – thanks to Kurt Lakner, Matthias Twerdy and Björn Pusch (all together in the photo below), as well as the community.

A big topic of the Bitcoin news were the Initial Coin Offerings

On Thursday, April 6th, various blockchain companies met in the old congress hall in the immediate vicinity of the Theresienwiese Munich (Oktoberfest). But there were also established companies and management Bitcoin news consultancies, such as Deloitte or the largest Russian e-commerce company Ulmart, on site to listen to lectures and pitches and to make contacts like this https://www.forexaktuell.com/en/bitcoin-news-trader-scam/.

These have been overturning lately and it is becoming more and more difficult to keep track of them. Not only Humaniq, who recently launched their ICO very successfully, was there, but also many small, quite unknown startups, who presented their new crypto currency solutions (you can find out exactly what Humaniq does in our article, which we published earlier this week).

These still young startups had the opportunity to hold a pitch with the aim to convince the jury of the Blockchshow Europe and to bag prize money of over 13.000 Euro.

The whole thing was called Bitcoin formula

There was also no shortage of presentations. We particularly liked the presentation by Mika Lammi, Head of IoT Business Development at Kouvola Innovation Oy, a Finnish public logistics company. Lammi reported on the problem that although many logistics companies work highly efficiently themselves in Bitcoin formula conjunction with other companies involved in the supply chain, they are inadequately linked. In short, there is a lack of uniformity and transparency. Accordingly, Kouvola Innovation Oy is in the process of constructing an open blockchain so that the entire logistics network can be optimised as a whole. Soon the blockchain will be used to track merchandise and optimize processes in order to save time and money and obtain greater legal certainty in disputes.

We also liked the presentation by Matej Michalko, CEO of Descent. Michalko had reported that he had deleted a negative hotel rating from a portal. The fact that this way falsified ratings, whether for hotel rooms or restaurants, arise is not secret knowledge. To combat this, Michalko is working on content distribution on a blockchain basis. Among other things, this should prevent bad ratings (e.g. only 1 out of 5 stars) from being deleted. The blockchain can help to prevent this manipulation and thus prevent fake reviews.

Further information about exciting Blockchain companies, which we got to know at the Blockshow Europe, will follow in the next days.

We were also pleased to meet the Cointed team from Austria. Due to the high demand for Bitcoins, the Bitcoin Exchange has set up several Bitcoin ATMs in Austria. This shows that Austrian regulation offers some advantages over German regulation. At present the setting up of Bitcoin ATMs in Germany is associated with such high requirements on the part of BaFin that there are no Bitcoin ATMs in Germany.

For the gamblers among our readers, Beyond the Void might be worth a look. The real-time strategy game uses the Ethereum blockchain. Based on this blockchain, the so-called Nexium tokens are used to process all payment transactions (e.g. purchase of items).

IT providers for stock exchanges hardly dare to approach blockchain technology

More and more companies and institutions are enthusiastic about the blockchain technology. Since blockchain technology can be used to store all kinds of data in a tamper-proof and transparent way, it is used in a wide variety of areas. As Nasdaq reported on June 26, technology companies that provide IT infrastructures for stock markets and stock exchanges tend to hold back in this development. What is behind this?

This is the result of a study commissioned by Nasdaq and conducted by Celent, a market research firm advising financial institutions in the technology sector. For this, Chief Information Officers, Chief Technology Officers and other technology managers from 20 leading market infrastructure companies worldwide were interviewed.

Development at best at an early stage

One would expect that exchanges, custodians and other market infrastructure providers that track complex transactions, investments and trades would gratefully embrace distributed ledger technology. Instead, Celent found that such a development among market infrastructure operators worldwide is at best at an early stage. One fifth of the operators have no plans whatsoever to use the blockchain in the future. 5 percent openly admit that they do not have the necessary expertise for this. Although 70 percent are working on pilot projects, only 5 percent are already using some kind of DLT. According to The Wallstreet Journal, 70 percent of respondents use automated process automation, 40 percent rely on cloud computing and 35 percent even use artificial intelligence. A general rejection of advanced technology cannot therefore be assumed here.

Both banks, large software companies and governments are increasingly relying on blockchain technology. It is used in retail, manufacturing, distribution and other areas and is even referred to as a „must-have“. On June 26, The Wallstreet Journal reported that IT providers for stock exchanges have so far tended to avoid the blockchain rather than benefit from the technology as well.

The reasons

According to the Nasdaq study, there are very different reasons for blockchain sloth. On the one hand, there is a cost problem. For example, the IT budget is already being used for the maintenance of existing systems, leaving hardly any resources for innovations. On the other hand, strict guidelines regarding the IT structure of the stock exchanges put a stop to many blockchain ideas even before they are implemented.

According to Arin Ray, Celent’s senior analyst, strict security regulations inhibit the implementation of blockchain projects. For example, „the prevention of failures, the security and stability of the systems are very important because market participants are highly regulated and play a crucial role in the functioning of the markets“. The introduction of a new technology usually takes some time. In addition, security gaps may occur during this process. The fear of such possible complications when switching old systems to blockchain technology therefore seems to be the main reason why IT operators are reluctant to develop new systems.