Wolves not far

Our weekly opinion piece and overview View this email in your browser   CoinDesk Weekly is sponsored by  November 26, 2017 Crying Wolf? Just because bitcoiners sound false alarms doesn't mean you should always ignore them. Dismissing their warnings out of hand could get you eaten. Read more in the THE TAKEAWAY below.         TOP TRENDS ON COINDESK Coming Untethered Tether, issuer of the eponymous, US dollar-pegged blockchain token, claimed that it had been robbed of $31 million worth of them. But since tether isn't exactly a decentralized cryptocurrency, the story doesn't end there, as it usually does in such cases.  Rather, the company said it is taking steps to make the allegedly pilfered coins useless. For one thing, it will refuse to redeem any of them for the real fiat currency it holds in reserve. Moreover, Tether is releasing software for the Omni protocol that effectively blacklists the ersatz greenbacks. Again, since Tether has never claimed to be perfectly decentralized, this fork isn't nearly as controversial as the one in ethereum that reversed the DAO hack. But there's plenty of other controversy surrounding Tether. Despite the theory floated by some observers that issuance of tethers has been inflating the price of bitcoin, the latter was barely affected by news of the hack, powering right through $8,000. Shortly after the story broke, a pseudonymous cyber-sleuth traced the transactions through the public blockchain and concluded that whoever took the tethers may also have been involved in the infamous Bitstamp hack two years ago. This story is, as they say, developing...       Futures Clouded CME Group released some details on its plan to introduce bitcoin futures – then walked back one of them. Initially the exchange operator said on its website that trading would begin on Dec. 11, but shortly afterward it replaced that specific date with the vaguer "Q4 2017." The earlier timeline was posted in error, CME told Reuters. The rescission comes amid controversy about the futures plan, with industry incumbents claiming that allowing a bitcoin-related instrument onto the CME would create systemic risk. However, in a CoinDesk op-ed published this week, William Mallers, a former futures broker and bitcoin believer, calls such arguments a load of FUD.  Worlds Keep Colliding  The week brought more stories of financial industry incumbents crossing over into the public blockchain sphere. An Italian bank is exploring the idea of derivatives run as smart contracts on ethereum, while JPMorgan helped lay the early groundwork that was used for an ether-denominated bond cleared and settled on the open network. That bond issue, floated by retailer LuxDeco with tech provided by startup Nivaura, carried a steep yield: 10%, for a one-week debt instrument. For comparison's sake, seven-day commercial paper for AA-rated corporates hasn't been in the double digits for at least 20 years, according to Federal Reserve data. The premium, of course, compensates investors for the currency risk. Also in finance-meets-crypto news, a French asset manager announced the launch of Europe's first mutual fund centered around bitcoin. See all CoinDesk stories   ⭐ COINDESK SPONSOR ⭐ Custody for your Crypto Assets Protect and secure your assets with itBit, a regulated Trust Company, and Custodian. With itBit, all assets are backed by regulatory capital reserves, and you can verify custody account balance and holdings 24/7 with personalized access and customer support. Learn More   QUOTE OF THE WEEK   "From the earliest stages we've always believed that public blockchains are the way forward." – Avtar Sehra, CEO of Nivaura, which facilitated an ether-denominated bond cleared and settled on a public chain. THE TAKEAWAY  As children, we all heard the story of the boy who cried wolf, and learned that the moral was not to raise false alarms, or else no one will believe it when you report a real emergency. But there's another, less obvious and more unsettling lesson of the fable. It's the takeaway for the recipients of a distress call (the villagers in the story): Even if someone pulled your leg in the past about a supposed clear and present danger, there is still the possibility he might be dead serious this time. So if you write him off because of his track record, there's a chance your sheep will be devoured.  This is a big problem for anyone trying to simply make sense of the crypto space, much less make money in it. Bitcoiners, especially bitcoin maximalists, have a habit of calling anything they find a little dubious, or that they simply don't like, a "scam." It's a serious charge – fraud is a crime, after all, punishable with jail time – but on Twitter and in crypto forums it gets thrown around like high school kids in the locker room calling each other dorks and losers.   To be fair, the "s" word is sometimes used in a way that's unmistakably playful. In a footnote to his hilarious and insightful 2014 essay "Everyone's a Scammer," Michael Goldstein of the Satoshi Nakamoto Institute writes, "'Scammer' is a heuristic, not an accusation." If you believe bitcoin is going to the moon, as Goldstein does, then a merchant who accepts it is a scammer, even if his alpaca socks are as warm and cozy as advertised, and a HODLer seeking to buy it off you is a scammer too, even if the fiat she's offering in exchange is real. A scam, in this broad definition, is any attempt to part you from your bitcoin.      Another way to think about this issue is that perhaps telling mom-and-pop investors "all altcoins and ICOs are scams" is the equivalent of telling kids that porcupines shoot their quills. It's not literally true, but if they believe it, they'll steer clear of a hazard and you'll have done a mitzvah. In crypto, those hazards may include bad ideas pursued in earnest, good ideas poorly executed, and outright scams. Some argue that the first two categories might as well be subsets of the third, for all practical purposes. That's all well and good for the Wild West of crypto, but in civil society, the word "scam" implies an intent to deceive. Calling someone a scammer can damage that person's reputation (unless, of course, the charge is leveled so often, at so many people, that no one gives it much weight any more). Without solid evidence, the label is potentially defamatory.  It's possible to raise doubts about an idea or business model, or a team's ability to execute on it, without jumping straight to scam accusations. (Sometimes those lines of inquiry might eventually lead to the uncovering of fraud; one of the first articles poking holes in Enron's facade merely suggested that the company's business was overly complex and its stock overpriced, understatements in retrospect.)  But a four-letter insult is the easiest way to make oneself heard in the shouting match of online conversation, which I suspect is another reason why it gets used so casually. Plus, if Jamie Dimon can call bitcoin a fraud, while his bank is building a private blockchain based on ethereum (a protocol that probably would never have existed without bitcoin), then why should anyone bother choosing their words carefully?  Getting back to the villagers who ignored the shepherd boy, though, there are a lot of dodgy schemes in this space. Just last week, a startup raised $374,000 through an initial coin offering on ethereum, then disappeared, according to Vice. There's a long list of stories like that. Often the first people to question the operators are the same ones using histrionic language on other topics.  Which means that you can't just shrug your shoulders and roll your eyes when the trolls cry "scam." Sometimes they're right. Sorting the signal from the noise may be harder in this industry than almost anywhere else.     – Marc Hochstein MORE BACKGROUND: Bitcoin Gold Wallet Scam Nets $3 Million in Illicit Earnings Canadian Police Issue Warning Over Bitcoin Tax Scam ICO Scammers Steal $500k in Phony Enigma Project Pre-Sale Launch Warning: Cryptocurrency Scams Are Posing as China's Central Bank SEC Charges ICO: US Agency Takes Action Against Alleged Token Scammer Share Tweet READER COMMENT OF THE WEEK   " We all love bitcoin and know it is the future, but to grow faster than your bone structure can make you disabled." – Roeks Griessel, expressing ambivalence about the CME's plan for bitcoin futures trading. Beyond CoinDesk... OTHERS ARE TALKING ABOUT Oh, ya got trouble, right here in the U.K., with a capital T and that rhymes with B and that stands for bitcoin! Financial Times columnist Izabella Kaminska frets about the growing popularity in Britain of gambling, including contracts for difference linked to cryptocurrencies. The currencies themselves, Kaminska chides, may not be "much more than a zero-sum gambling activity." To be fair, she rightly points out the lameness of celebrity-endorsed investments. The New York Times' Nathaniel Popper explains Bitfinex's troubles for the lay reader, and in the process confirms the bitcoin exchange's long-suspected but previously murky ties to Tether.  "Wealth Managers Are Being Inundated With Calls About Bitcoin," Bloomberg reports. Their advice is cautious: "You don't want more than 5 percent in alternative investments of any kind." UPCOMING EVENTS (see more in our full listing) November 28: Consensus: Invest, New York, NY November 29-30: BlockShow Asia 2017, Singapore November 30: ICO Financing Conference, Berkeley, CA November 30: Tearsheet Hot Topic: Mobile Payments, New York December 1: Free State Blockchain Digital Assets Conference, Portsmouth, NH WHAT WE'VE BEEN UP TO Not much this week  – our US staff was off for the Thanksgiving holiday, and saving their energy for Wednesday, Nov. 28, when we debut the most-anticipated crypto asset event of the year: Consensus: Invest. More than 1,200 people from 47 different countries have registered to attend our conference in New York with a jam-packed agenda. Tickets are sold out, but we'll have a live stream on our homepage and coverage throughout the day on CoinDesk.  Got suggestions on how to make this newsletter better? Want to write an opinion piece for CoinDesk? Need someone to talk to about your trust issues but can't afford a therapist? Email our managing editor, marc@coindesk.com, or tweet @MarcHochstein. And follow us @CoinDesk.  Until next week...   Copyright © 2017 CoinDesk, All rights reserved. You're receiving this email because you subscribed for updates on our website. Our mailing address is: CoinDesk 636 Avenue of the Americas New York City, NY 10011 Add us to your address book Want to change how you receive these emails? You can update your preferences or unsubscribe from this list Received this from a friend? Subscribe here.