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Vitalik Buterin Gives Sobering Take on ‘Tokens 1.0,’ but Says Next Wave of Cryptos Will Be Better

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Ethereum’s Vitalik Buterin doesn’t have a lot of faith in most ERC20s these days. In fact, he expects most of them to crash and burn sooner rather than later. But the future of cryptocurrency is expected to be much brighter as investors and developers learn from ‘Tokens 1.0’.

“This, basically, is Tokens 1.0”

Speaking at ETHWaterloo, Ethereum’s 23-year-old founder reminded us that 90% of startups fail. The same ratio likely applies to ERC20s. In Buterin’s view, 90% of the tokens currently listed on CoinMarketCap are going to zero. (Props to Jordan Daniell for providing the quote.)

The sobering remarks come as billions pour into initial coin offerings (ICOs), a novel but controversial crowdfunding model that allows startups to raise capital by minting their own cryptocurrency. It is estimated that no less than $2.3 billion flowed into the ICO market in the first nine months of the year, dwarfing traditional funding methods like early stage VC.

Regulators have taken notice, but are struggling to define this enigmatic space. For China and South Korea, ICOs are too problematic to even regulate. That’s why they rushed to ban them recently.

Although Japan has become the epicenter of cryptocurrency trading due to favorable regulations, the same latitude probably doesn’t apply to ICOs. According to a well-known Japanese blockchain entrepreneur, it’s only a matter of time before Japanese authorities clamp down on token sales.

Light at the End of the Tunnel

Naturally, you wouldn’t expect Buterin to be pessimistic about the future of ICOs. Whereas Tokens 1.0 has a grim ending, the next wave of cryptos is going to be much better. He calls this “Tokens 2.0.” This era, which is a lot closer than you think, will see developers build cryptocurrencies that are of significantly higher quality.

In the meantime, the industry still has a lot of work to do to clean up its image. As Buterin says, “there are some good ideas, there are a lot of very bad ideas, and there’s a lot of very, very bad ideas, and quite a few scams as well.”

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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4.6 stars on average, based on 462 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Bithumb Hack Prompts South Korea to Hasten Cryptocurrency Regulation

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South Korea’s second-largest cryptocurrency exchange suffered a security breach on Wednesday, prompting local authorities to hasten their adoption of stricter regulations.

Bithumb Hack

Bithumb confirmed Wednesday that cyber criminals “seized” 35 billion won ($31.6 million) worth of digital cash in an apparent attack targeting user accounts. The exchange halted deposits at approximately 00:53 UTC and began a wholesale transfer of funds to cold storage to prevent further theft.

“We checked that some of cryptocurrencies valued about $30,000,000 was stolen,” Bithumb tweeted Wednesday. “Those stolen cryptocurrencies will be covered from Bithumb and all of assets are being transferring to cold wallet.”

The exchange has confirmed that it will fully compensate affected users.

An earlier update on Bithumb’s Twitter account reveals that a security upgrade was being carried out last week where it transferred to a cold wallet for safe storage. However, it is unclear whether the upgrade is linked to the theft.

In terms of trade volume, Bithumb is the world’s sixth-largest cryptocurrency exchange. The platform processed more than $355 million worth of digital currency transactions in the last 24 hours, according to data provided by CoinMarketCap.

Bithumb is the second South Korean exchange this month to have been hacked. Less than two weeks ago, more than $37 million was compromised in a coordinated attack on Coinrail. The attackers went after the exchange’s coins and lesser-known ERC-20 tokens.

South Korea to Boost Regulation

South Korea’s financial regulators have announced plans to implement stricter guidelines for virtual exchanges, and to do so more expeditiously than previously planned. The announcement, which came on the heels of the Bitthumb attack, follows months of deliberation about whether to regulate cryptocurrency exchanges like banks and other financial institutions.

As CCN notes, cryptocurrency exchanges are presently regulated as “communication vendors,” which means virtually anyone can launch an online trading platform. This designation prevents direct oversight of digital currency exchanges by financial regulators.

New crypto regulations are expected to be rolled out in the coming months, which will put South Korea’s financial authorities on par with their counterparts in the United States and Japan. In those countries, cryptocurrency exchanges must comply with laws pertaining to security and consumer protection.

Park Yong-kin, a committee member of the National Assembly, has championed stricter regulations since last year. According to local media, his views are now being echoed by other government officials.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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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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4.6 stars on average, based on 462 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Chinese President Xi Jinping Comes to Terms With Blockchain

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Chinese President Xi Jinping may not like cryptocurrencies, but he is a fan of the blockchain. For a nation that has cracked down on the cryptocurrency industry more than any other jurisdiction, as evidenced by a ban on initial coin offerings (ICOs) and bitcoin trading in the mainland as well as a target on bitcoin mining, the process by which more coins are created, his acceptance of the blockchain is surprisingly refreshing. He reportedly said:

“A new generation of technology represented by artificial intelligence, quantum information, mobile communications, internet of things and blockchain is accelerating breakthrough applications.”

While President Xi Jinping’s celebration of the blockchain is juxtaposed by the country’s intolerance for cryptocurrencies, it’s a step in the right direction. He said he wants China to “become the global center” for technological innovation.

China has seemingly been able to separate the blockchain from cryptocurrencies considering that in spite of the broader ban in Beijing blockchain startups and government officials have been working together to unlock the potential of the technology in the region, as CNBC reported. Meanwhile, as anecdotal evidence, hundreds of Chinese locals attended a recent blockchain conference in the United States where a pair of sessions were given in Mandarin.

But Bobby Lee, who is the co-founder of China’s maiden bitcoin exchange BTCC, which has since rebranded and whose China trading capabilities have been shuttered, suggests that the lines surrounding blockchain technology often get blurred.

Technological Revolution

President Xi Jinping in his speech to the Chinese Academies of Sciences and Engineering acknowledged the feverish pace at which technological innovation has been unfolding in the 21st century, saying: “A new round of scientific and industrial revolution is reconstructing the global innovation map and reshaping the global economic structure.”

But in key ways, Xi has shut the door to that innovation by clamping down on what once comprising the lion’s share of bitcoin trading. But if you ask Lee, he reportedly believes that at some point, the ban on bitcoin trading will be eased and China could adopt a licensing process, he’s just not sure when.

Blockchain pioneers including the likes of Wences Casares and Joseph Lubin have offered perspective on cryptocurrencies that might serve Xi well, with Lubin recently saying that “cryptocurrencies should remain unfettered” as it relates to regulation. Casares, the CEO of blockchain startup Xapo, once described the harmony in which the blockchain and bitcoin are designed to operate, saying: “If you were to remove the bitcoin, miners would disappear and so would the blockchain.”

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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4.5 stars on average, based on 16 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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Financial Freedom

Considerations For Choosing An Immediate Annuity

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When it comes time to retire, one method for receiving income from your savings is to purchase an immediate annuity. The purpose of an immediate annuity is to provide a regular payment over a certain period of time or over the investor’s lifetime.

 

An immediate annuity can preserve a minimum level of income that you cannot outlive. Allocating a portion of your retirement money to an option that will provide income for life can make sense for many retirees.

So how does an investor decide what immediate annuity to purchase?

The scenarios discussed in this article apply in the United States. Readers are encouraged to consult their accountants about tax considerations related to buying annuities.

It’s also important to consider that when earnings from an annuity are withdrawn, they will be taxed as ordinary income, no matter how long the owner has owned the account.

Different Types Of Immediate Annuities

Steve Vernon, a research scholar for the Stanford Center on Longevity, writing for CBS News’ “Money Watch,” noted that immediate annuities can be fixed, inflation adjusted and variable and guaranteed lifetime withdrawal benefit (GLWB). GLWB combines the features of traditional annuities and systematic withdrawals.

Once you purchase a fixed or inflation adjusted immediate annuity, your payout is locked in, Vernon noted. Your payments will not be adjusted based on changes in capital markets.

The monthly payout on a variable annuity, by contrast, will change based on the annuity’s stock and bond portfolio. The owner can modify the portfolio even after they start receiving payments. Vernon recommends keeping the stock allocation between one third and two thirds.

When shopping for GMWB annuities, Vernon recommends annuities with management fees around 50 basis points or lower, and insurance fees round 100 basis points.

Vernon encourages people to use online annuity purchase services like www.immediateannuities.com and Income Solutions and Immediateannuities.com to compare different immediate annuities.

Immediate Fixed Annuity Considerations

Steve Goldberg, an investment adviser writing in Kiplinger, thinks of an immediate fixed annuity as term life insurance in reverse, the longer you live, the better you do.

The insurance company pools the premiums from thousands of its annuities and invests them primarily in bonds. The company also makes educated guesses about how long its annuity buyers will live. It then makes monthly payments to policyholders each month based upon both expected longevity and expected investment returns.

In today’s low-interest-rate environment, that’s much better than an investor can do in all but the riskiest bonds, according to Goldberg. It’s also likely better than an investor can do if he put all his money into stocks.

But there is a catch: With an annuity, you don’t get your money back, unless the buyer opts for what’s known as a “certain period annuity” or similar option. Additional features, however, usually bring additional costs.

Goldberg believes immediate fixed annuities usually make sense only for retirees. The older the retiree, the fewer years the insurance company will have to pay the benefits – so the bigger the monthly checks.

Immediate annuities seldom make sense for all of an investor’s money, Goldberg notes.

Like Vernon, Goldberg suggests going to ImmediateAnnuities.com to compare different immediate annuities. Plug in the state you live in, your age and your gender, and the website provides quotes from numerous companies.

How Immediate Annuities Are Bought

There are three typical ways to purchase immediate annuities, according to Rich White, a financial writer writing in Investopedia.

One method is the annuitization of a tax-deferred annuity. The purpose of a tax-deferred annuity, unlike an immediate annuity, is to build funds to create an income stream at a later date. Most tax-deferred annuities permit the account to be converted at some point in time to a guaranteed income stream.

Another method is the lump sum payment, in which the investor’s funds are transferred to an insurance company to purchase a revenue stream. Oftentimes, the investor is using cash from a retirement plan distribution, lottery winnings or an award from a personal injury settlement.

A third method is the terminal funding of a retirement plan. Some retirement plans offer annuity payouts. The plan in this case terminates its liability to the participant by transferring the participant’s funds to an insurance company. When retirement plans “pay out” in this manner, a “qualified immediate” annuity of offered for tax efficiency.

These choices all present options. The owner of a tax-deferred annuity who wants to annuitize is not limited to the payout offered by the insurance company, White notes. The policyholder can shop payouts offered by competing companies and conduct a tax-free transfer to the company offering the best terms. This is known as a Section 1035 exchange.

If a retirement plan offers a particular insurance company for terminal funding, the policyholder can shop for others and select the plan they find most suitable.

An annuity payout over a fixed number of years that is purchased with a single sum can be converted to an annual interest rate equivalent, White noted.

If, for example, the policyholder is quoted an annuity of $600 per month for 20 years in exchange for paying a premium of $10,000, an annuity rate calculator will find this payout converts to an annual interest rate of 3.96%. This rate can then be compared to other fixed-period annuity payouts, perhaps over longer or shorter periods, and also to rates available on bonds, money market funds or CDs.

For a lifetime annuity payout, there is no fixed period to evaluate. Death could occur at any time, and the payments would discontinue. White recommends a good starting point is to use the annuitant’s life expectancy as the payout period.

If a 67-year-old female is offered a lifetime payment of $600 per month for a $100,000 premium, her life expectancy would be 17.67 years, based on the 2007 Period Life Table published by the Social Security Administration.

Immediate Annuity Payout Options

One payout option for immediate annuities is income for a guaranteed period, which is also called “certain period annuity,” according to CNN Money, as noted in a previous article on annuities’ role in financial planning. This guarantees a specific payment for a specific time period. If the owner dies before the period ends, their beneficiary receives the remainder of the payments.

Another option is lifetime payments that guarantee a payout for the owner as long as they are alive, but there is no survivor benefit. The payouts can be variable or fixed, depending on the type of annuity selected. The amount of the payout depends on the amount invested and the owner’s life expectancy.

Still another payout option is life with a guaranteed period certain benefit, also known as “life with certain period.” The owner receives a guaranteed payout for life along with a period certain phase. If the owner dies during the certain period, the beneficiary continues to receive the payment for the remainder of that period.

Joint and survivor annuity is one in which the beneficiary continues receiving payments for the rest of their life after the owner dies.

Do Your Homework

It is important to buy an annuity from a company that holds a top credit rating from the three leading agencies of U.S. insurance companies: A.M. Best, Moody’s and Standard & Poor’s.

The considerations for shopping for an immediate annuity are extensive. Investors must spend their time comparing options. Many retirees will find it worth their time to work with a financial adviser.

Those who seek the assistance of an insurance agent must keep in mind that insurance agents are paid commissions by the insurance companies offering the annuities. Investors have the option of working with a non-commissioned financial adviser.

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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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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