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ICO Analysis: Kyber.Network

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Kyber Network wants to enable Ethereum addresses to receive payments from any kind of blockchain. That’s the top deck view of what they intend to do, and perhaps their best offering. Although they appear to believe that the exchange nature of their platform is what is important – and that definitely adds value to their offering, as well. We should open by saying we applaud the academic and informed approached taken by the team behind Kyber.

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Kyber lists “risk of centralization” as one of their chief motivating factors.

However, despite the decentralized and trustless natures of cryptocurrencies and crypto tokens, most of the trades happening on centralized exchanges are vulnerable to internal fraud and external hacking. This is an ongoing concern and a number of hacking incidents has been reported at various exchanges affecting thousands of users and loss of hundreds of million of dollars.

Another is a “lack of instant exchanges.” While not mentioning the several allegedly instant exchanges out there, the point Kyber focuses on is that most exchanges take too much time to execute transactions for the user. Instant trades would be preferable, but these are not possible for most centralized operations like ShapeShift.io or Changelly.com. Both of these efforts would quickly go bankrupt if double-spends were flagrantly allowed, and the only way to prevent against them is to require a certain number of confirmations for each different blockchain. With Bitcoin, for instance, ShapeShift requires at least one, sometimes two confirmations. They utilize a third-party service called BlockCypher to determine the quality of transactions. In a world where Kyber.Network and similar technologies are in play, ShapeShift, BlockCypher, and other centralized exchanges become obsolete for standard users.

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Kyber Network Particpants

Kyber proposes an ecosystem of several layers, including the ability to exchange and make payments in cryptographic tokens in a universal fashion. They want to be able to conduct all the functions currently served by various centralized services in one-click – if a merchant only accepts a certain token, the user will simply pay the equivalent value in the tokens they do have. Rather than maintaining and regulating a global order book which determines exchange rates, Kyber prefers to offer a fair spread across the board and simply horde coins in order to serve orders. The management of these reserves is carried out by a class of network participants called reserve managers, who determine the exchange rates and must all agree on them.

Other roles in the system are mostly related to the maintenance of reserves. Before diving into them, we should note the other two of five roles there are to be played: users and “operators.” Operators are essentially the network miners, responsible for the ultimate officiating of information on the network.

The other three roles in the network are directly involved in the management of reserves. The first is the reserve operator, who takes liquidity from the second, the reserve contributor, who derives part of the network’s profits along with the operator and the third role, the reserve manager. Splitting these roles up among three different groups is presumably meant to ensure that all moving parts work correctly before rates are published and used in the network.

Unlike many cryptocurrency projects, the user needs to only send a transaction. Their transaction is immediately valid, while the reserve components of the network are responsible for moving the numbers around, and the network operator is responsible for ensuring all records make it to the top side of the network.

Kyber already has a working smart contract to fulfill the vision of the network. In the month of August, they intend to create a minimum viable product. The white paper does not mention specific rates that the network will derive for various types of transactions, but this is due to the trustless and decentralized nature of it. One concept that is covered is the idea of “dynamic reserves.” This means that several reserves of, for instance, Ether could exist, some managed by larger entities on the network for larger pairs and some being registered on the network by smaller interests in order to support the trading of less popular pairs. For example, if Aragon network were receiving less volume globally and they wanted to ensure some liquidity in their token, participants of their network could create reserve funds specifically for that pair. Exchange rates would be determined by the triumvirate of reserve personnel. This equates to a form of democracy in the exchange of the equities. Allowing for this all to happen on one chain is important – the multi-wallet functionality alone will make the Kyber Network attractive to veteran crypto traders who want to hold tokens outside of exchanges, everything from Bitcoin to Ripple.

Kyber Team

Everyone in the executive branch of the Kyber Network is a worthy opponent for the industry they intend to disrupt. Beginning with co-founder and CEO, Loi Luu, who is an active researcher in the cryptocurrency and smart contract space. Having someone with this sort of expertise, and immersion, is at the helm of an ICO, is refreshing. It might help explain why they want to be sure they are prepared before they actually do the token launch, which they’ve yet to fully announce.

Aside from Luu, we’ve got Israeli computer science PhD Yaron Velner, who is acting as CTO and is also a co-founder. As a researcher, Velner is a valuable addition – he has several Ethereum flaws to his credit, for which he was compensated under the bug bounty program. Critical infrastructure work of this kidn means he will know what to look for when hiring other talent later on.

The rest of the team appears formidable as well.

The Verdict

Being that we don’t know much about the token distribution or the cost of the tokens, nor what real utility they would play within the network (perhaps they would be used as the base token of exchange, giving them an inert form of value from the start), we have to rate this project purely on the idea.

The idea is there, although it is perhaps misleading to assert there is a lack of “instant” exchanges. For there are plenty, but there is no such thing as actually instant within the cryptocurrency realm of things.

Growth Potential

We believe that several options will emerge over time which will totally subvert the need for centralized exchanges, and that the best of these will be very prosperous endeavors indeed. For token holders to experience this growth, however, the token has to be somehow tied to it. We would prefer to see more tokens which directly compensate their holders with profits from the operations of the company which offered them, rather than speculation thereupon. This is a better, more equitable way for people to comfortably invest – in order to realize their own value, at that point, the companies must perform. If this is the case with Kyber.Network, we can award them an extra point on top of the overall rating which follows.

In terms of growth regardless of the above, we can see that these types of technologies are bound to take off. Kyber intends to release a minimum viable product very soon, and this will be an encouraging sight – more people will take interest in the project when it is demonstrably workable. Being able to send and receive any token at all via a single network, “instantly,” is a great plus. For this novelty and its potential to disrupt the entire exchange industry – being that anyone can really play a role in the ecosystem – we lend 7 points off the top.

Risk

We believe there will be many efforts at creating decentralized networks on which all chains can trade. These efforts will not stop multiplying, and so the market will soon be split. Kyber has a heavy onboard cost in terms of technical investment, and one must remain invested to recoup time invested. As such, we must deduct a full 1.5 points for the possibility that among a sea of competitors, Kyber will just not attract enough people to create the sort of volume that will be necessary across global pairs. For their network to truly function and prosper, they require a lot of volume and activity.

Disposition

All the above outlined, we have a simple equation with Kyber – 7 – 1.5 = 5.5.

Don’t forget the above note wherein we can add a full point if token holders are allowed to profit from the token once it is released. That would be a valuable addition, and give the token an actual value – people would be willing to pay more up front for tokens which promise later revenues. This is the ideal situation and we think ICOs will figure this out more and more moving forward.

Investment Details

Unfortunately, there are no details yet on the Kyber ICO. There will be this year, however, and you can stay tuned with them by subscribing to their mailing list or following them on social media. This is definitely one to watch, and as they engage with the community more, they may improve various aspects, only increasing their potential for being a profitable investment.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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  1. mitchpah

    September 4, 2017 at 2:31 am

    Morning PH, can you tell me what ICO’s you plan to cover in the near future? Looking forward to the next round of analysis

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Analysis

Long-Term Cryptocurrency Analysis: Broad Correction Enters Next Phase

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The overbought BTC-led correction that has been the dominating technical process in the cryptocurrency segment in the last month or so continued in earnest today, amid the intensifying regulatory steps concerning the sector. The three-week-long consolidation that followed the initial mini-crash concluded with a sharp sell-off overnight rearranging the long-term charts, while likely kicking off another volatile period.

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While most of the crash lows held up today in early trading in the majors, especially in the case of the late leaders like Ethereum and NEO, some of the relatively weaker coins are already trading below the December minimums. We expect most of the majors to follow Dash and LTC, the weakest of the largest coins, lower and trade below the previous lows, as sentiment will likely swing to a bearish extreme.

The $11,300 level has been in the center of attention throughout the session today and the most valuable coin experienced heavy trading around the level as expected. As the daily MACD is still in neutral territory, the coin could be in for another leg lower, but after the 40% correction and the rather lengthy consolidation, investors could be looking for entry points during the move near the key support levels at $10,000, $9000, and the stronger levels at $8200 and $7700.

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BTC/USD, Daily Chart Analysis

As Ethereum is in a different part of its cycle the long-term momentum readings are still overbought, and that could mean a more protracted correction for the second largest coin. That said, following a multi-month consolidation like the one in Ethereum before, we still expect the token to outperform BTC from a long-term technical standpoint. ETH is now below the short-term trendline, and it’s likely to dip below $1000, and the prior top at $850. Further key levels are found at $740, $625, $575, and near $500.

ETH/USD, Daily Chart Analysis

Let’s see the outlook for the other major altcoins after today’s bloodbath.

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Crypto Update: Chinese Crackdown Triggers Next Leg of Correction

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The cryptocurrency segment is crashing again, with double-digit losses across the board, and with several coins shedding around 30% in one day amid the widespread and heavy selling. The sell-off was triggered by reports on a new set of measures by the Chinese authorities limiting crypto trading, which added to the still looming South Korea related regulation worries. Bitcoin tested the mini-crash lows at $11,300 today in early trading, dipping slightly below that level before a strong bounce started.

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The most valuable coin is now between two crucial support/resistance lines, with the other ahead at $13,000, and as the downtrend is entering its more mature phase the $10,000 and $9,200 levels could come in play, with a possible dip to the support zone near $7,650.

BTC/USD, Daily Chart Analysis

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Interestingly, the coin is still hovering within the daily range of the crash of December 22nd, and that points to a very active and volatile period ahead near the low at $11,300, as automatic orders will likely get triggered on both sides of the market.

The short-term setup is bearish, and although it’s possible that the primary support level will hold, odds still favor another leg lower, following the exponential run-up at the end of last year that pushed sentiment into bullish extremes.

BTC/USD, 4-Hour Chart Analysis

Altcoins

(more…)

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Music: One Overlooked Use Case

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So far in this year, Ethereum has been the crypto star appreciating over 80% to a recent record of $1402. All this suggests that more and more applications are being created. We know this by the demand for Ether, the gas that drives the Ethereum network.

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The reason behind the explosion of Ether demand was confirmed by Ethereum co founder Steven Nerayoff in a CNBC interview where he claimed the number of Ethereum projects today is more than 10 times year ago levels.

One of those areas is the music business and there are several names appearing on the ICO list to add to your research agenda.

Why The Music Business Needs Help

Music may live forever but the business side has been in trouble for a long while. Over the last decade there have been only three years when the global value of music sales increased. The combination of digital music and outright pirating through peer-to-peer sharing has much to do with the long-term trend.

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Throughout the world there are 69 copyright and royalty societies given the responsibility of documenting, collecting and distributing music royalties. That means collecting a few pennies whenever a song is played on the radio, Internet or anywhere else. Four of the largest of these is in the US, followed by Japan, Germany and Britain. Their operations are truly byzantine.

Experts in the music-publishing field confirm the time between music usage and royalty payment can run close to 24 months. Even then not all royalties are distributed. According to my sources, there are often millions of dollars collected by royalty authorities everywhere that never make it to the entitled recipients. That sort of practice borders on criminal behavior but copyright and royalty societies operate in a sub-rosa manner making it difficult to understand their policies.

In the past just 4 major record labels controlled over 80% of the industry. These giants could afford a full time legal department to pursue royalty issues dominated the music industry. Today, however, independent labels represent almost one-third of the market. This means less democracy in the business with the young independent artist at a particular disadvantage.

Of course, musicians aren’t the only group of artists loosing out on their pay. There are writers, poets and painters that go largely unprotected.

The music business is just easier to track because it has more data. Yet in spite of all the information, the music industry is widely recognized for its lack of transparency. Blockchain technology has the ability to disrupt long-standing industry practices.

ICOs To The Rescue

The number of Ethereum based white knights is starting to appear on the horizon promising to rattle the industry and hopefully restore some democracy on behalf of the independent artist.

One simple business model comes from a startup SingularDTV who is attempting to build their ecosystem on top of Ethereum. Here is the basic value added proposal.

SingularDTV tokenizes the artist work. In doing so the artist is turning their music into a financial asset. Anyone who buys into an artist’s token owns a share of the creation and its income stream. The more people consume an artist creation, the higher goes the token price.

Only time will show if SingularDTV succeeds with this model. The consequence of this model is how it eliminates many of the middlemen and nefarious influences in the industry. Instead of singing on a street corner for bread, an artist could raise money upfront without relying on an advance from a record label.

According to SingularDTV, distributing content via blockchain would allow artists to skirt streaming platforms like Spotify to earn royalties on their own terms. Now that is true democracy.

SingularDTV may stand out a bit in the news due its recent ICO success in raising $8 million but they aren’t the only player in the music game. Names like Voise recently raised $1 million as well as Soundchain, Blokur and Opus to name a few.

I am no longer a registered investment advisor, which means I don’t go around making investment recommendations. So I will only suggest this group to put on your list of late night reading. Next time, I will take a closer look at more of these names.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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