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What Will Atomic Swaps Do to Utility Tokens?

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Atomic swaps are the talk of the crypto technology world right now, because what they may mean for the future of the entire sector. Their ability to disrupt the industry and nullify the need for many exchanges could be the next step in blockchain technology’s evolution.

Quick Explainer

First thing’s first – what is an atomic swap? In its most basic sense, an atomic swap is the exchange of one cryptocurrency for another cryptocurrency. These days, this would normally be executed on a trading platform (third-party), but with the implementation of atomic swaps, you would be able to cut out the third-party and trade directly with your counterparty.

In the traditional finance world, a swap is a derivative contract through which two parties exchange financial instruments. Usually the instruments command different types of cash flows (an interest rate swap involves a fixed rate cash flow and a floating rate cash flow). An atomic swap is the crypto-version of this.

One of the main functions of cryptocurrencies is to create a trustless, and therefore more scalable, financial system. Until now, it has been necessary to use third-parties to perform cross-chain trading, because there was no dependable way to perform the transaction securely.

However, with the invention and implementation of the lightning network, an atomic swap became possible. They use something called a hash time-locked contract (HTLC) to ensure the fulfillment of both party’s requirements in the trade. Both parties must acknowledge receipt of their funds by generating a proof of payment, otherwise the funds are returned back to the senders.

The Effects of Atomic Swaps on the Market

At the most basic level, atomic swaps seem to be good for the entire cryptocurrency community. They reduce friction by cutting down on transaction costs, and make it possible to seamlessly transfer money between cryptocurrencies.

On a security level, technologists are still trying to assess whether this would compromise any protocols. People are just getting comfortable with the lightning network, so it may take time before the trust is there for HTLCs.

Thinking about things more philosophically, atomic swaps help to unify cryptocurrencies and create an interconnected set of networks. This network of networks has endless possibilities and a real chance at attaining continual evolution.

Somewhat more controversially, it helps cut out third parties and enables cross-chain transactions. This can be said to be in the spirit of blockchain, since it was originally designed as a way of combating the deficiencies of the global banking and financial network.

Second-Order Effects

The next level of effects is where the difficulty comes in. First of all, by cutting out the exchanges, the amount of liquidity on the market decreases. This means that cryptocurrency isn’t as available to new buyers, and it slows down the speed that money can flow to cryptocurrencies from fiat.

But far more importantly, it creates a world where utility tokens no longer need to be held. If you can quickly transfer your crypto into another cryptocurrency before making a purchase, why would you risk holding it in anything but the currencies you trust?

For one, this makes stablecoins a far more appealing offer. Generally, stablecoins are for the non-speculative investor who believes in crypto but are not keen on the high level of risk.

Cryptoeconomics dictates that the market capitalization of a cryptocurrency is equal to the goods transacted in  a day multiplied by the average holding period. So with a low holding period, it is possible atomic swaps could kill utility tokens by destroying their market capitalizations.

However, there are some cryptocurrencies which are designed to withstand this problem. Coins that depend on proof-of-stake reward the holders of currencies for their investment. In the future, we will probably see a lot more information flowing around the best ways to inoculate utility tokens from being wiped out by atomic swaps.

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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  1. febrocas

    August 1, 2018 at 8:22 pm

    Isn’t market capitalization the price multiplied by the circulating supply?

    “market capitalization of a cryptocurrency is equal to the goods transacted in a day multiplied by the average holding period”

    Apart from that, really nice to read!

    If any token, given a certain volume and liquidity, could potentially always be traded for every other token instantaneously, assuming there are incentives at place so that users are rewarded somehow, this new feature could potentially connect token systems between different platforms.

    Not sure if this makes sense, but love your piece anyhow!

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Why Investors Should Pay Attention to Waves

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Despite the proliferation of cryptocurrencies and ICOs over the last 5 years, the process of undertaking an ICO and getting funding is still not nearly as simple as it should be. There are complex regulations and heavy amounts of friction that make it hard for the “crowdfunding” model of startup financing to occur.

Waves is a platform (with an eponymous token) whose aim is to solve this problem by launching a decentralized cryptocurrency trading platform and opening more gateways between other cryptocurrencies and fiat currencies.

The Waves Team

The team at Waves are planning on changing the crowdsale model to make it much less complicated for companies trying to get funding. The team operates out of Switzerland, but is run by Russians (the CEO, Sasha Ivanov, is a trained physicist with a strong past in the cryptocurrency space).

The Progress Waves Has Made

Waves’ ICO occured in April 2016, with 100 million tokens being issued. 85% of the tokens went to ICO investors, with the remainder going to strategic partners, Pre-ICO bounties, and internal development and marketing.

Since then, there have been considerable advancements in the power of the network. Their DEX launched in April 2017 with various gateways (both fiat and crypto) being unveiled in the following months. This has made it much simpler to get money into the exchange, thus breaking down funding barriers for any protocols issued on the platform.

Understanding the Business Model

Waves is all about helping companies obtain funding for their projects, and all of their work has been focused on this singular goal. Tokens need to have a specific use or utility in order to justify their existence, and the Waves token has been designed to fulfill this condition.

You can either pay a fraction of a WAVES to transfer tokens or buy a token, or you can spend 1 WAVES to create a new token on the network. Additionally, there are rewards on the network for tokenholders based on their balance of WAVES. The incentive structure is clear in this protocol: owning tokens helps you trade or create tokens, which is the purpose of the platform. The tokens may also be used to run smart contracts, which is why many consider WAVES to be a competitor of Ethereum.

The End Result

Waves tokens are currently trading at approximately $1.70, although it has reached peaks above $16.00. This sharp drop-off in price can largely be attributed to the phishing scam that has occurred in the last few days. Last month they were hacked when their CEO’s passport was falsely reproduced and used to obtain access to the domain and obtain the personal information of customers. Although the facts currently being reported make it sound like the fault lies with the domain provider, this is not the sort of issue that should be happening in a trading exchange.

In addition, Waves currently has limited KYC requirements and allows users to trader without submitted extensive identification information. This can be seen as a positive thing or a negative thing, depending on where you are standing. Yes, it is great that there are few barriers to entry for anyone who would like to trade on the DEX, but it is also likely to attract the ire of regulators in the USA. With a token that is strongly linked to this exchange, it is definitely something to pay attention to.

With the goal of creating a network of new tokens that are all interconnected and tradeable, Waves certainly has its worked cut out for it. However, with this recent drop in price due to security issues, it might be a great time to buy some tokens.

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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MB Technology and GoChain Partner to Accelerate Innovation on the Blockchain

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MB Technology has recently announced that it is committed to bringing $500 million USD worth of ICOs to the GoChain platform. MB Technology is an expert ICO advisory firm that has advised blockchain projects with a combined valuation of over $2 billion in several industries. Some of the companies that they advised include Fantom, Origo, GoChain, QuarkChain, CoinSuper, Icon and other top ICOs.

The company is committing $500 million to GoChain because it has already launched it’s mainnet functioning at 100 times the speed of Ethereum while being 1,000 times more energy efficient. GoChain is fully compatible with existing Ethereum wallets, smart contracts, dApps, etc. Two companies have already chosen GoChain to launch their ICOs: Solaster Health and Etherprise with a combined value of $63 million.

GoChain has hit the ground running. While many blockchains are still trying to finish up their technical whitepaper or have yet to launch their mainnet, GoChain is way ahead of the curvey. Although blockchains are competing to deliver the fastest Transactions-Per-Second (TPS), they nothing without the dApps that build on them. While speed is important, most blockchains releasing now are more than capable of handling sufficient TPS for production dApps. The dApp ecosystem built on top of a blockchain is just as important, if not more, than the speed of the blockchain itself.

ICOs struggle to build on new blockchains as there are not many well-defined standards. GoChain’s codebase is 100% compatible with Ethereum so any dApp that can or has been built on top of it will easily port to GoChain. This makes it easy for existing Ethereum apps to move over to GoChain and immediately work 100 times faster. A few blockchains build amazingly fast transacting software yet have no use cases or a dApp ecosystem building strategy.

With MB Technology bringing half a billion dollars to GoChain, the coin is extremely undervalued. Compared to other projects on CoinMarketCap, GoChain should be at least in the $100 million market cap range. Competing blockchains talk about overtaking Ethereum, yet GoChain has a working mainnet with dApps being added at a blinding rate. GoChain is one of the most underestimated and undervalued blockchains at this time. Look for GoChain to grow to five to ten times in the next few months from its current market cap of $19.4 million. GoChain is currently only on Kucoin. Look for it to list on other exchanges as it gains daily trading volume.

MB Technology offers advisory services to bring specific solutions designed to boost a project’s outcomes. They also create global investor awareness through their network of partners, influencers, and media outlets.

Disclaimer: Writer does not own GoChain. 

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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Why Investors Should Pay Attention to VeChain

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Many of the top blockchain technology protocols are based on revolutionary ideas that are likely to change the world and the way we approach business. However, some of these technologies involve creating whole new business models and displacing massive monopolies in order to achieve success.

VeChain, on the other hand, is based around provable improvements to the way supply chain management is executed. Asset transfers are recorded and verified in a way that is secure for all participants. In a way, VeChain works a lot like your standard software as a service (SaaS) company in how it assists companies.

VeChain Foundation and Token Use

Much of the value of the VeChain is in the amount of partnerships they can forge with other enterprises. This is why the VeChain Foundation is so important. Their main role is business development, but they also work to construct the network and perform technological research.

Network nodes are operated by businesses directly using the ecosystem, and they are incentivized by receiving tokens in exchange for their support of the network. VeChain Token (VET) is used for the issuance of new applications, and VeThor tokens (VTHO) are used as GAS (similar to NEO) to run the applications. VTHO tokens are distributed for free to those holding VET tokens and operating network nodes, and VET is currently the 20th highest valued cryptocurrency in terms of market capitalization.

Asset Digitization

Asset digitization is the act of assigning digital identities to assets that then enable them to be tracked much more easily. In the world of asset digitization, VeChain is considered to be a current frontrunner. The main appeal for companies looking to implement asset digitization is the increase in trust from customers that would likely result from it.

Decentralization and transparency adds balance to the commerce of managing inventory, and allows for customers to better understand where their goods have been and that they are of high quality and authenticity.

VeChain assigns a specific VeChain identity using a hash function and then uses RFID, NFC or QR codes to connect that identity with the product in question. A public key is used to identify the owner of a good, and the corresponding private key is used to signify control of said asset. This has value to a wide swath of industries. For example, with the shipment of meats and other foods that are time sensitive in terms of their expiration dates, VeChain’s technology can be used to track the flow of goods to verify the safety of the product for consumption.

VeChain’s Potential

The main reason to watch VeChain is their potential to achieve mass adoption. Recently, VeChain has announced a partnership with the Shanghai government for the tracking and management of drugs and vaccines. NTT Docomo, a Japanese telecommunications company, has also recently announced a partnership with VeChain.

For companies considering moving their supply chain management onto VeChain, there is a large potential risk involved. Adapting to a process is one thing, but with the goal of maintaining credibility, they need to be cautious for any potential technological hiccups that could disrupt their supply chain. The act of having a decentralized technology such as VeChain tracking all of your inventory or assets can also mean the risk of a malfunction that limits your access to assets. This is why trust is paramount and it is essential the VeChain Foundation continues to improve and expand the network.

As for the value of VET, each partnership announcement indicates a higher potential demand for the token. By paying attention to the partnerships and comparing VeChain’s development to its competitors, investors can get a strong idea of the direction of the token’s value over the next few months. This Ethereum for businesses has the potential to revamp entire industries and the way supply chain management is executed.

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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