What is FUD?

Our weekly opinion piece and overview View this email in your browser   January 21, 2018  Not All Bad News Is FUD Not even in the crypto markets. Sometimes setbacks are real, and shooting the messenger won't make the message untrue.  Read more in the THE TAKEAWAY below.   TOP TRENDS ON COINDESK Market mayhem After a months-long run-up that surely emboldened a few Lambo purchases and steak dinners, the prices of most cryptocurrencies tumbled in the first half of the week. But you probably know that. The important question is, why? We at CoinDesk humbly admit epistemic uncertainty, but editors Bailey Reutzel and Marc Hochstein identified a few plausible theories that would help explain the severity of the sell-off: anxiety over looming regulatory actions from South Korea, which had recently emerged as a trading hub; the triggering of stop-loss orders; and continued service disruptions at the major crypto exchanges, such as Kraken, which was down for several days for a systems upgrade that was supposed to take only a few hours. That last issue probably discouraged institutional investors who might otherwise have smelled buying opportunities. In their minds, "if that can happen, then this market's not ready for institutions," said Michael Graham, an analyst at Canaccord Genuity, an investment bank in New York.   Onward and upward, though: the markets stabilized later in the week and began to show signs of recovery. Meanwhile, two milestones were reached: the first bitcoin futures on the Cboe expired and settled successfully, and the first blockchain ETFs launched on the NYSE and Nasdaq. And speaking of ETFs, the Securities and Exchange Commission outlined the reasons for its reluctance to approve bitcoin-related ones, which could be read as a positive, since it may provide hints on how to get the nod. Never-ending blockchain Those three words aptly describe the ever-increasing data storage requirements of the two biggest cryptocurrencies: bitcoin and ethereum. But the developers of both projects are working on the problem in an effort to allow the respective networks to scale while preserving decentralization. As CoinDesk's Alyssa Hertig reported this week, Bitcoin Core developer Jonas Schnelli has made it his mission to enable Average Joe users to run full nodes from their homes. This is important because it means individuals can validate the transaction history themselves rather than take a third party's word for it that the miners aren't engaging in mischief.  Similarly, our colleague Rachel Rose O'Leary details how ethereum developers have been optimizing the software clients so they don't take so long to synchronize with the network or require so much storage space. You could say they're kicking the can down the road, but long-term solutions such as database "sharding" are still a ways off, so the tweaks perhaps buy some time for ethereum's "world computer" to keep hosting new tokens without consolidating into a handful of server farms. (Of course, some people would say ethereum lost its decentralization card two years ago when the dev team forked the network to bail out the DAO's bagholders, but that's a separate conversation...) In other scaling-related news, several bitcoin developers released a research paper on how Schnorr signatures might be applied to the blockchain, a measure that could save disk space in addition to enhancing security.   Say hello to my lil' friend Keep an eye on Ledger, the maker of pocket-size hardware wallets. This week the company raised $75 million of venture funding in a series B round, which it will invest in R&D and scaling the business. In addition to its flagship handheld consumer wallet, Ledger is working on an institutional-grade crypto storage product for banks and hedge funds called the Ledger Vault.  But perhaps most importantly, Radar Relay, a decentralized exchange startup, has added support for the Ledger wallet. This means that users will be able to trade ether and ERC-20 tokens with one another straight from their storage devices via the 0x protocol, no middleman required.  Announcements like this one offer a glint of hope for a truly peer-to-peer future, notwithstanding the scaling challenges and centralizing forces mentioned above. See all CoinDesk stories   QUOTE OF THE WEEK "Pretty much all the companies in the space are facing the influx of new users … and it's taken a toll on most companies."  – Nejc Kodric, CEO of Bitstamp, explaining the bottlenecks at cryptocurrency exchanges THE TAKEAWAY  Did you hear the one about the crypto day trader who got struck by lightning? He read the weather forecast and heard the thunder but scoffed and said "it's all FUD." The term FUD ("fear, uncertainty and doubt") refers to the spreading of false or misleading information by the foes of a movement or organization, with the intent of undermining members' confidence in the project. It's a close cousin to "gaslighting" and "concern trolling." And it is, as the kids say, a thing. According to La Wik, the acronym dates back to the mid-1970s and may have been coined by Gene Amdahl, a computer architect who quit IBM to start his own eponymous firm, only to have his former employer badmouth the new business.  "FUD is the fear, uncertainty, and doubt that IBM sales people instill in the minds of potential customers who might be considering Amdahl products," Amdahl reportedly said. Not cool, Big Blue, not cool. (Yeah, I know, most of the people working there now weren't born or were in diapers back then. But don't get any smart ideas.) The term is popular in cryptocurrency circles, and for good reason. A lot of the critiques of bitcoin in the mainstream media over the years certainly smack of FUD. Setbacks such as a sharp price correction or a government writing burdensome regulations are often exaggerated as fatal blows. Hey, pajama boy, it's a global, decentralized network. When the IRS issues a ruling that Americans have to pay capital gains taxes every time they buy a cup of coffee with bitcoin, that's a nuisance, a First World Problem – not "the end for bitcoin." The Venezuelans using bitcoin to survive aren't going to care. I'd chalk it up to ignorance if these way-premature obituaries for bitcoin weren't so sneeringly gleeful in tone.      That said, setbacks do happen, and simply reporting incremental bad news or long-term challenges is not spreading FUD. "Thunderstorms expected today" is the weatherman's way of helping us avoid getting drenched or electrocuted; it's not a fiendish plot to trick us into spending the rest of our lives indoors. Yet if you read crypto Twitter, Reddit discussions or some of the comment threads on CoinDesk, you'll see there's a noisy contingent out there who view the world through a lens of bad faith and seldom bother to read an article past the headline.  You're reporting that the coin I invested in just dropped in price? FUD! You must be long a competing digital asset, and trying to tank the price of mine. That's the only possible explanation. The government thinks crypto is being used by terrorists? FUD! Who cares what the government thinks? It's not like they have guns and can seize a business' servers or throw people in jail or anything. And if you "warn" they could do something ... well, it's just obvious you think they should.  "There's a car coming"? FUD! You just don't want me to cross to the other side of the road. That "don't walk" sign flashing red is FUD too. So are all those horns honking.... I will cop to being biased. I've stuck my neck out many a time to argue that cryptocurrency is, all things considered, good for the world. I left one of the oldest and most prominent business publications in the U.S. after 17 years to join CoinDesk. And yes, I HODL a small amount of crypto, mainly bitcoin. I believe this space has a bright future.   But I also know there are going to be bumps along the way. Or, rather, potholes, the kind that can wreck your front tire. Keeping a spare in the trunk is not falling for FUD; it's prudent risk management.  Volatility, scaling difficulties and hostile governments are all real. They can't destroy a truly decentralized network like bitcoin but they can slow adoption and stymie innovation. To simply note that these problems exist or that they are hard to solve does not imply they are insurmountable. And ignoring them won't make them go away. Ask an ostrich.  Bitcoin is often aptly compared to the red pill in "The Matrix." But it seems these days that a lot of people pinning their hopes on short-term price gains in their cryptocurrency of choice just want to take a new kind of blue pill. Good luck with that. – Marc Hochstein Share Tweet Beyond CoinDesk... OTHERS ARE TALKING ABOUT You've probably read that tawdry crypto bros article from last weekend's New York Times (some mitigating context not apparent to the 99.999% of the world who read their news online: in the NYT's dead-tree edition, which your friendly neighborhood newsletter compiler still gets home-delivered, the story ran in the Style section – hence the tawdriness). But make sure you also read the NYT's much more sophisticated long-form appreciation of all that blockchain technology has to offer (in print, it's running in the paper's Sunday magazine, hence the long-forminess). We could nitpick a few things (the writer's claim that "no imperial chief executive calls the shots" in ethereum is perhaps debatable in light of, well, you know), but overall it's a good introduction to the space for noobs. Krugabe still doesn't get it, though.    Another hardy-har-har human interest story, this one in the Wall Street Journal, reports that the spouses and romantic partners of bitcoin investors and fans are "really, really tired of hearing about it." But isn't that in the marriage vows, "to have and to HODL"? WHAT WE'VE BEEN UP TO Tickets are still available for Yahoo Finance's All Markets Summit on cryptocurrencies, Feb. 7 in New York. Nolan Bauerle, our director of research, will be presenting the 2017 State of Blockchain report and the speaker roster includes CFTC Commissioner Brian Quintenz; Elizabeth Rossiello of BitPesa; Peter Smith of Blockchain; Adam Ludwin of Chain; and Balaji Srinivasan of a16z and Earn.com. Register here.  The Japan Society's upcoming blockchain event in New York, featuring bitFlyer CEO Yuzo Kano, is sold out, but the organization will be live-streaming the conversation on its website. Tune in January 30 at 6 p.m. eastern time for the discussion, which will also include Hogan & Lovells attorney Lewis Cohen and CoinDesk advisory board chairman Michael J. Casey. Our managing editor, Marc Hochstein, will moderate (the discussion, that is, not his screeds). Speaking of which, send your FUD accusations and any other feedback on this newsletter to marc@coindesk.com or tweet @MarcHochstein. And of course follow us on Twitter @CoinDesk.  Thanks, as always, for reading. Copyright © 2018 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? 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