Messari's Weekend Reads 😎 - Unqualified Opinions

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Your daily snapshot from our OnChainFX markets dashboard.

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We get it, the crypto markets are, ummm, not great.

Believe us, we’re big, big believers and HODLers at Messari, and are feeling the pain. But we need to be sustainable, which is why we paywalled most of our content. If you’re wondering where your Tues-Thurs UO editions are, then you’ve gotta make the investment!

We’ve missed you, and you’ve missed a lot this week, fam. Some bear market goodies:

  • Re the Basis wind-down: “It’s not really $133 million. A lot of this was earmarked to stabilize the currency at launch. If the team didn’t deliver the protocol, the plan was to refund the collateral all along….This outcome isn’t surprising, either. The [Basis] design was such that private investors I’d spoken with (telegram is gonna get so many people in trouble, man) were openly discussing how it was a no-brainer for the VCs because they could make money early, exit, and have none of the long-term tail risk associated with a stablecoin blow-up.”

    Re Augur’s latest challenge: “A dude with 190 followers and a cat avatar is currently stress testing REP as a prediction market. I shit you not.” We identify the prediction market veteran challenging the REP design on a smart contract technicality, and how it could impact one of the few live and useful decentralized marketplaces.

    Re at least *some* good crypto regulatory news: a SEC commissioner empathizes with us: “We cite the Howey Test for determining whether something is a security as if we expect every crypto-entrepreneur to know what it is and how courts and the Commission have applied it over the years.  Even the securities lawyers many of these entrepreneurs cannot afford are struggling to apply the test…[E]nforcement actions ought not to be the means by which we tell the marketplace what we are thinking.” Usual fire from KWu.

It’s the holiday season, so make sure you help out your less fortunate crypto brethren and give them (or ask Santa for) a gift subscription to Unqualified Opinions.

For every annual gift subscription you share this holiday season, I’ll personally donate $50 to a US-registered charity of your choosing. (Max $20,000, lest some of my whale enemies attempt to bankrupt me.)

Just email me the confirmation, and I’ll make it happen.

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Messari’s Weekend Reads

It’s Friday, which means we’re keeping things light and teeing up our weekend reads and listens.

On our podcast this week, Katherine sits down with Circle Research's Ria Bhutoria to talk about her research process (how long it takes to write her excellent reports, and what the most frustrating parts of the process are), and Circle’s latest report on prediction markets. What are prediction markets, how do they work, what are the advantages and challenges of decentralized prediction markets, and what does current usage look like. (15 min)

Listen and subscribe to all of our podcasts— on Apple Podcasts here, Spotify here, and Google play here.

📚 Messari’s weekend reads:

  • Why Transparency Literally Pays Off - Institutional Investor (Alternative investment funds that offer more transparency to investors also tend to have significantly higher performance - 10 *points* higher IRR, actually.)

  • The Rise of the Stablecoins; Will They Be The Next to Endure Regulatory Scrutiny From The SEC? - Gerald Fenech

  • Reject Nocoiner Orthodoxy - Elaine Ou

  • Lightning's Crazy Fast Growth - LongHash

  • Peer Review: CBC Casper - Muneeb Ali

  • Basecoin (aka the Basis Protocol): the worst idea in cryptocurrency, reborn - Preston Byrne

  • The State of Bitcoin: Long-Term Value Potential & Analysis - Delphi Digital

  • 2nd Global Cryptoasset Benchmarking Study - University of Cambridge

  • The (Future) Most Valuable Company In The World - Andrew Steinwold

Did we miss a topic our broader community should know about? Let us know!

Have a good weekend, y’all.

- The Messari Team

P.S. Share. Subscribe. Tweet at Messari for feedback, comments, or questions.


News & Analyses

Messari Compression Algorithm

Content and thoughts from around the web as summarized by the Messari team.

🏆 [Analysis] Bitcoin and the Promise of Independent Property Rights - Su Zhu and Hasu

In Part 3 of their "Framework for Skeptics" Bitcoin series, Su and Hasu explore why civilizations created corporations and centralized institutions, the requirements for a stable "institutional stack" of protections and assurances, and how Bitcoin can iterate on the inefficiencies and deficiencies of existing centralized institutions. Su and Hasu argue that corporate institutions streamline certain human interactions, but Bitcoin carries those benefits to a more advantageous level by enabling "the highest form of property rights of any socio-economic institution in the history of man." (share or read more)

🌍 [Analysis] Cambridge 2018 Cryptoasset Benchmarking Study

Support for self-regulation, a multi-coin industry future, and decentralized mining is growing and shaping the future of digital assets, according to the University of Cambridge's Judge Business School. They released their second global cryptoasset benchmarking study in December 2018 with data from more than 180 cryptoasset companies and individuals covering 47 countries. This comprehensive analysis offers critical insight into the state of mining, exchange, storage, and payments for digital assets. (share or read more)

Quick Bits (Don't read that, I read it for you)

Choke Points (Exchange News)

  • 🏙 Binance is expanding its venture arm beyond San Francisco. Binance Labs, plans to launch new incubator programs in Berlin, Buenos Aires, Lagos, Singapore, and Hong Kong starting in March 2019. (share or read more)

  • 🤝 Security token platform TokenSoft is launching a FINRA registered broker-dealer in order to expand its advisory services for new token offerings. Under the new entity, TokenSoft will be able to advise, manage, and provide marketing support for new token offerings. (share or read more)

Startup Signals (ICOs, Cryptos, and Startups)

  • 🚀 Approximately $25 million in funding from a December 2017 token sale has been made available to Blockstack. As part of the initial sale, Blockstack structured its funding to only allow access to funds once certain milestones are hit. (share or read more)

  • 💵 Blockchain project Orbs has raised a $15 million round led by South Korean app provider Kakao. Orbs will focus on research and building the technology with a planned mainnet launch in April 2019. (share or read more)

The Powers That Be (Legal/Reg/Policy)

  • 😓 California-based Pantera Capital Management recently told investors that around 25 percent of the blockchain projects they have invested in could be found to be in violation of U.S. securities laws. In that case, Pantera expects that the projects may need to return money to investors. (share or read more)

  • 🗽 A total of 36 BitLicense applications had been received by the New York State Department of Financial Services since 2015. Of those, five were denied and ten had been granted by November of this year. The agency has been approving applications at a more rapid rate after receiving criticism earlier this year. (share or read more)

Did I miss something?

Send me the link, your twitter handle and your best imitation compression algorithm write up. If I like it, I’ll include your bit next issue (with attribution).


Podcast Recap

🎧 ICYMI on the Messari podcast, Katherine discussed decentralization with Zcash Foundation executive director Josh Cincinnati. Josh shared his thoughts on what it means to be decentralized and the utility of non-profit foundations in the cryptocurrency space.

Listen and subscribe to all of our podcasts— on Apple Podcasts here, Spotify here, and Google play here.

Shameless Plugs

We want your feedback!

We know Messari can feel like a couple different products right now, and we're working to unify our features into one overarching whole. To that end, We’ve made a Trello board to take in any and all of the feedback you have for us! Have at it 🛠

We're Hiring:

  • We need data engineers who want to bring transparency to crypto!

  • Join a fast growing team in NYC; work with crypto OGs, and former Bloomberg/Palantir engineers; & access a network that sets you up for the rest of your career. Apply here!

Join Our Community:

  • If you are interested in helping us crowdsource token project details, or want to join our community to share your expertise, we’d love to have you on board! Take a second to fill out an application and we will get back to you soon.

  • Going forward, we’ll be capping new members at 15 each week to keep things running smoothly. If you haven’t heard back, you are probably in the queue.

  • Like what you read? Share it! Hate what you read? Let me know @MessariCrypto.

Tax Loss Selling - Unqualified Opinions

don't add insult to injury, think about your taxes NOW

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Note to “free” subscribers: We’ll be building, and researching, and evangelizing throughout this bear market, regardless of how long it lasts. BUT THIS IS IT!

TODAY is the last day you can subscribe to Unqualified Opinions at the rate of $15/month or $100/year. After that, we’ll be doubling fiat prices, and paywalling 80% of our research content to make it more sustainable and keep it uncorrupted by ads. Benefits to subscribing:

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Some thoughts on tax loss selling in crypto (this isn’t tax advice, but you should ask a professional if this is worth doing given the 2018 markets carnage).

Most of you are are probably sick of and sickened by looking at your crypto portfolio amidst the downdraft, but you might want to take one more look in the coming weeks at what was in your 2017 and 2018 crypto portfolios, unless you want to screw yourself out of thousands of dollars in additional tax liabilities.

Let’s talk about tax loss selling...selling your bags at year-end in order to offset your capital gains.

For illustration, let’s go back to sunnier times in 2017. You bought your first bitcoin and, on a hot tip from a crypto youtuber, a little bit of mooncoin. You spent $21,000 in total, a pretty hefty chunk, but worth speculating with given your conviction on magical internet money and your hot tipz.

You’re a buy and hold guy, and are patient, so you set it and forget it until year end when the hype cycle is in absolutely bonkers high gear. You think, “Shit man, my bitcoin is up 20x, but Mooncoin is up 200x! I knew I was an f-ing prodigy!”

“I’m taking my girlfriend(s) to Cabo. (I can afford to have two girlfriends now btw.) Good run Mooncoin, but Imma sell you for bitcoin and be conservative. (I wonder if the hotel uses BitPay?)” You’ve got a $199k realized short-term gain (go you!), so about $80k in likely taxes.

After returning from Cabo in early January, you remember those Mooncoin gains were taxable. Uncle Sam is going to bite a big chunk out of your ass in April, and so you scrambles to sell some of that bitcoin to cover the $80k in liability, because you don’t like that the BTC price is starting to come back down to earth.

Well, well, well. You settle up in a timely manner with the IRS, which is great. You’ve got a higher average cost basis on your bitcoin now from the December 2017 Mooncoin sale, but now you’ve also got a taxable gain on this new sale in 2018. Nearly $50k in additional capital gains that you forgets about until December, when TBI gently reminds you of your situation.

Your cost basis is now above the holding value of your bitcoin. You don’t want to pay $10-15k in additional taxes next April (in case the bottom completely falls out of the crypto market), and are content to sell another batch of bitcoin…selling $90k will offset most of your gains liability, and ensure you came out WAY ahead in this crypto experiment while still holding 10 BTC for the long-term.

This is a really, really rosy projection by the way.

For many, it will be much worse, and they may already owe more in taxes than they currently hold. The sensible option in that case would be to offset as much of your cash liabilities as possible, by selling bags and offsetting any remaining gains you have from the last bull run.

(And no, you can’t go back and offset this year’s losses against last year’s gains, unfortunately. The IRS is mean like that.)

You can, though, mitigate further damage, and I recommend using something like TokenTax (not a sponsor, that’s just what I used this past year) in the weeks ahead to figure out what your best strategy is before we ring in the new year, and you miss the opportunity.

Don’t say you weren’t warned.

Here’s to a brighter 2019!

-TBI

P.S. Share. Subscribe. Spread the (rational) crypto love. Tweet at me or Messari for requests, feedback, comments, or questions.


Best of the Rest - What We Missed Last Week

Every weekend, we dig through the past week’s posts from crypto’s other great sources of content to see what we missed in our own weekend reads.

Here’s us curating the curators:

On bonding curves and charitable giving - David Truong
(h/t Token Economy)

How can charities create viral network effects that lead to more engaged participants? David Truong believes dynamic bonding curves could hold the answer. Dynamic bonding curves are smart contract-based mechanisms that create and redeem tokens with a price determined by how many tokens a user already holds. Using this system, contributors would receive special tokens whenever they made a donation. As more individuals donate, the value of these tokens increases along with the amount of funds held by the contract, and existing holders get new tokens for each donation. Tokens can be sold back to the contract at any time giving people financial incentives to donate early and evangelize to others as well.

The four horsemen of centralization - Ali Yahya
(h/t Token Daily)

Decentralization means different things to different people. Ali Yahya defines as “the degree to which power and control over a network is distributed across a large, representative base of independent human actors.” In understanding decentralization it is important to first understand those that can exert centralized power over a network or as Yahya calls them, “the four horsemen of centralization.” Gatekeepers that restrict access, Enforcers that enforce rules, Architects that set those rules, and Profiteers that make a profit from the network rules all lead to some degree of centralization. While the goal of decentralization would be to remove these forces there will always be some influence from one or more of these actors and only by clarifying our trust assumptions will we be able to build better crypto networks.

Unpacking Bitcoin’s social contract - Hasu
(h/t NLW)

In part two of The Skeptics Guide to Bitcoin, Hasu explores the social contract that surrounds Bitcoin. Bitcoin is a novel social and economic concept and therefore it is important to not only question it, but to create theories and frameworks to help understand it according to Hasu. One way to view it is as a social contract. In Bitcoin this is defined by the rules that lead to confiscation, censorship, inflation, and counterfeit resistance. Leveraging technology Satoshi attempted to prevent the ability for powerful entities to gain control over Bitcoin as it became more valuable by ensuring that the rules of the social contract were automated and agreed on by consensus. The only way to change the rules is to propose a new social contract, which must be agreed upon by all participants or those that do not agree risk being unable to transact with the network. The protocol is therefore only in place to automate the social contract created by participants and events like forks or reorganizations are only impactful if they are reinforced by the consensus of the users.

Did I miss something?

Send me the link, your twitter handle and your best imitation compression algorithm write up. If I like it, I’ll include your bit next issue (with attribution).


Podcast Recap

🎧 ICYMI on the Messari podcast, Katherine discussed decentralization with Zcash Foundation executive director Josh Cincinnati. Josh shared his thoughts on what it means to be decentralized and the utility of non-profit foundations in the cryptocurrency space.

Listen and subscribe to all of our podcasts— on Apple Podcasts here, Spotify here, and Google play here.

Shameless Plugs

We want your feedback!

We know Messari can feel like a couple different products right now, and we're working to unify our features into one overarching whole. Head over to our new feedback tool and let us know what you think! 🛠

We're Hiring:

  • We need data engineers who want to bring transparency to crypto!

  • Join a fast growing team in NYC; work with crypto OGs, and former Bloomberg/Palantir engineers; & access a network that sets you up for the rest of your career. Apply here!

Join Our Community:

  • If you are interested in helping us crowdsource token project details, or want to join our community to share your expertise, we’d love to have you on board! Take a second to fill out an application and we will get back to you soon.

  • Going forward, we’ll be capping new members at 15 each week to keep things running smoothly. If you haven’t heard back, you are probably in the queue.

  • Like what you read? Share it! Hate what you read? Let me know @MessariCrypto.

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