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<ul><li><keyword id="265395" type="General" weightage="20" keywordseo="jack-dorsey" source="Orion">Jack Dorsey</keyword>’s Square has released the whitepaper, which highlights how its new <keyword id="12084249" type="General" weightage="20" keywordseo="decentralised-exchange" source="Orion">decentralised exchange</keyword> — <keyword id="12574622" type="General" weightage="20" keywordseo="tbdex" source="Orion">tbDEX</keyword> — will work.</li><li>Users will still be able to retain access to their wallets and won’t have to depend on a central custodian wallet.</li><li>Transaction fees on tbDEX will increase or decrease based on the amount of anonymity the parties involved want.</li></ul>Twitter founder Jack Dorsey’s second venture, Square, has finally published the <a href="https://tbdex.io/whitepaper.pdf">white paper</a> on its upcoming decentralised crypto exchange (DEX). Called the tbDEX, it follows some of the aspects of DEXs, but is less decentralised than most others. As a consequence, it’s also much less focused on anonymity than other DEXs, passing the buck onto the participants. <div type="ExtQuote" text="“The protocol [tbDEX] has no opinion on anonymity as a feature or consequence of transactions.”" auname="Excerpt from white paper titled ‘tbDEX: A Liquidity Protocol v0.1"></div> The paper argues that as long as the protocol is interacting with the fiat currency system, no interface can be truly ‘trustless’ — without trusting a third part like a bank, a person or any intermediary. All endpoints, including decentralised exchanges like tbDEX, will ‘always’ be subject to regulation. Hence, to hedge against any upcoming crypto regulation, tdDEX is putting the responsibility of ‘trust’ on wallets and participating financial institutions (PFIs) to figure it out amongst themselves. “The nature of this trust relationship will never be universal,” highlights the whitepaper. Instead, it postulates that trust can vary from jurisdiction to jurisdiction, across different regulations and laws, and between individuals and institutions depending on their risk tolerance, price and other facts. <div type="ExtQuote" text="It would violate the principle of trying to achieve the maximum amount of decentralisation if the negotiation of trust was dictated at the protocol layer, as that would necessarily involve some form of permissioned federation." auname="Excerpt from white paper titled ‘tbDEX: A Liquidity Protocol v0.1"></div> <cmsannotation type="cmsannotation" annotationid="How Dorsey’s tbDEX is looking to solve for the ‘trust’ conundrum" comment="subhead" text="How Dorsey’s tbDEX is looking to solve for the ‘trust’ conundrum">How Dorsey’s tbDEX is looking to solve for the ‘trust’ conundrum</cmsannotation> Unlike centralised exchanges, where a central crypto wallet holds all the tokens in the name of the exchange’s users, DEXs let users control their own wallets. The central wallet in traditional exchanges is called a ‘custodian wallet’, and since users have no option but to trust the holder of this wallet. Simply put, it’s not a ‘trustless’ system. <cmsannotation type="cmsannotation" annotationid="wazirx" comment="wazirx" text="wazirx">wazirx</cmsannotation> Traditionally on DEXs, trades between different wallets are done using a smart contract system called ‘atomic swaps’. Both the crypto assets being traded must be submitted to these smart contracts, which execute the trade. But, Dorsey’s tbDEX works a little differently. Rather than use atomic swaps, it will allow users to transact using a messaging protocol that lets users negotiate between themselves. “The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous,” the <a href="https://bitcoin.org/bitcoin.pdf">whitepaper</a> says. <cmsannotation type="cmsannotation" annotationid="Trust as a function of reputation" comment="subhead" text="Trust as a function of reputation">Trust as a function of reputation</cmsannotation> Wallets and other financial participants will have to negotiate trust directly between each other and may rely on mutually trusted third-parties to vouch for the counterparties. For example, a wallet company can volunteer to publish a ‘sentiment list’ about financial institutions or decentralised identifiers — which ones it believes are good, and which ones aren’t. They can also choose to exclude certain parties, which they find untrustworthy. <div type="ExtQuote" text="Any exchange of value must be fundamentally based on other means of governing trust — particularly reputation." auname="Excerpt from white paper titled ‘tbDEX: A Liquidity Protocol v0.1"></div> Further, the transaction fees on tbDEX will increase or decrease based on the amount of anonymity a user wants. The protocol will allow secure exchange of ‘the minimum necessary identity information’, provided that is acceptable to the parties involved in the transaction — “be they legal, regulatory, or related to any other consideration of risk”. And, the protocol won’t collect any personally identifiable information. <cmsannotation type="cmsannotation" annotationid="So, what’s next?" comment="subhead" text="So, what’s next?">So, what’s next?</cmsannotation> The whitepaper is essentially a proposal for how Dorsey wants the tbDEX to function, but it’s not a done deal. Currently, it has been put out into the public domain for comments and suggestions. Further revisions of the whitepaper are expected to address incomplete elements or any unforeseen challenges. Only once the final design for the protocol behind tdDEX is finalised will the project be developed and published. The company is yet to communicate when that might be. SEE ALSO: <a href="https://www.businessinsider.in/cryptocurrency/news/government-may-change-income-tax-laws-to-tax-cryptocurrency-gains-in-budget/articleshow/87802508.cms">Indian government plans to tax cryptocurrency gains in Budget 2022</a> <a href="https://www.businessinsider.in/cryptocurrency/news/what-is-bitcoin-golden-cross-and-death-cross/articleshow/87796591.cms">Bitcoin investors love the golden cross and death cross — here’s why they matter but there are other factors to keep in mind</a>

Jack Dorsey’s new decentralised crypto exchange doesn’t want to define ‘trust’ amid regulatory uncertainty

<ul class="summary-list"><li>Crypto daily trading volumes plunged 50% following FTX's collapse, per Bloomberg and Kaiko data.</li><li>The fallout of Sam Bankman-Fried's once $32 billion empire FTX is weighing on investor sentiment. </li></ul>Cryptocurrency trading volumes plummeted 50% after the sudden downfall of FTX, the once-$32 billion digital asset empire started by Sam Bankman-Fried.Daily average trading volumes on centralized exchanges declined from $26.7 billion in the week through Oct. 30 down to $13.1 billion in the seven days to Dec. 11, Bloomberg <a href="https://www.bloomberg.com/news/articles/2022-12-16/crypto-s-post-ftx-crisis-is-laid-bare-as-trading-volumes-plummet-by-50?sref=ZTdRrSmf">reported</a> on Friday, citing data provider Kaiko. These include platforms like Coinbase, Binance, Kraken, OKX, and Bitfinex, to name a few. The plunge in trading volumes comes at a pivotal time for the industry, which is enduring a prolonged and brutal bear market. Cryptocurrency's market cap has slashed nearly three-fourths of its value since last year, according to <a href="https://messari.io/">Messari,</a> with bitcoin and ethereum down 75% from record-highs in November of 2021.User trust in exchanges are in question following FTX's downfall as well. "FTX collapse brings us back to reality," Shaban Shaame, founder and CEO of blockchain gaming developer EverDreamSoft, told Insider. "Cryptocurrency is a young industry. It's [the Wild] West where everything is possible but also full of ill-intentioned people and lack of rules."FTX lost <a href="https://www.cftc.gov/PressRoom/PressReleases/8638-22">$8 billion of customer deposits</a> after a Coindesk <a href="https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/">report</a> revealed that the exchange's native token FTT was used to prop up Bankman-Fried's quant trading firm Alameda Research. The trading titan's balance sheet, which once had $14.6 billion in assets, was largely comprised of a coin that its sister company made up — not an independent asset like fiat currency.This rang the alarm bells. Swarms of investors fled the exchange and liquidated their FTT holdings all at once, landing FTX and 130 other associated entities in bankruptcy court last month.Investors may continue to flee other centralized exchanges, Shaame says, and park their assets in non-custodial wallets, or those that allow users to have control of their funds independent of exchanges.Regardless, the industry will go down one of two different paths, he added."Either it will be heavily regulated like the traditional finance industry or it will be more decentralized. Exchanges are like the banks of the old world, people are trusting them with their money and no one audits them," Shaame said. "A trustless solution like decentralized exchanges exists but is not mature enough to support all use cases."Shaame added: "The drop in trading shows that people are getting conscious of the mantra 'not your key not your coin' and move to non-custodial exchanges."FTX contagion could also weed out bad industry players in the future, another blockchain gaming exec predicts, setting up the sector for success for the next market cycle. "Many bull market retail investors have vacated the market causing significant lower trading volumes," Andreas Christensen, the founder of blockchain gaming developer SuperOne, said. "The FUD of investors will remain until the next upwards cycle, which then will be a massive uptake for high quality, transparent and compliant actors."Christensen added: "In such a fragile bear market, a big-time criminal act like SBF did with FTX will have a severe impact on the market sentiment and trading volumes."Phil Wirtjes, head of strategy at digital asset trading platform Enclave Markets, says that given the recent turmoil it's not surprising that investors are "risk off," while they assess how far contagion will spread."Credit lines drying up and lack of trust in centralized venues is causing lower liquidity, but we wouldn't be surprised to see volumes pick up once certainty is reintroduced into markets," Wirtjes added.Finally, institutional and retail investor sentiment will continue to take hits from the FTX fiasco, bringing the credibility of the industry into question, a top economist at BTCM said. "Institutions like Fidelity and BlackRock still slowly but steadily pushing their digital assets initiatives, while majority of the traditional institutions are in 'wait and see' mode," Youwei Yang, chief economist at the publicly-traded crypto mining company, said. He added: "However, most crypto veterans are used to this kind of market drawdown and quietness from previous circles and [are] still hanging in there."

4 crypto experts break down what's next for the industry with trading volumes down 50% since the FTX collapse

<ul class="summary-list"><li>Bitcoin could surge to $100,000 by the end of 2024, according to a Standard Chartered note.</li><li>That's due to bank turmoil, bitcoin halving, and the expected end of Fed rate hikes, among other things. </li></ul>The crypto winter has melted away, and <a href="https://markets.businessinsider.com/currencies/btc-usd">bitcoin</a> is set to flourish, a Standard Chartered note forecasted on Monday.The world's biggest digital currency by market cap could surge to $100,000 by the end of 2024, the bank said, representing a 268% increase from current levels."We see potential for Bitcoin to reach the USD 100,000 level by end-2024, as we believe the much-touted 'crypto winter' is finally over," wrote Standard Chartered's Geoff Kendrick.One of the reasons for the bullish outlook is the turmoil caused by <a href="https://www.businessinsider.com/svb-failure-what-the-hell-happened-2023-3">Silicon Valley Bank's collapse</a> last month. As worries of a banking contagion spread, bitcoin re-established its use case as a "decentralized, trustless and scarce digital asset," according to the note.At the same time, key rivals to bitcoin lost ground, especially stablecoins, some of which lost their peg to the US dollar. In fact, some of the assets that backed their value were held in SVB. "Against this backdrop, Bitcoin has benefited from its status as a branded safe haven, a perceived relative store of value and a means of remittance," Kendrick added.Standard Chartered now sees bitcoin's share of the total crypto market cap rising to the 50%-60% range, up from 45% today and from 40% before the SVB collapse.In addition, the note said bitcoin's recent rebound back above $30,000 also represented a turnaround for <a href="https://www.businessinsider.com/personal-finance/bitcoin-mining#:~:text=Bitcoin%20mining%20involves%20confirming%20transactions,profiting%20from%20Bitcoin%20mining%20difficult.">crypto miners</a>, who previously had seen mining margins get squeezed.Bitcoin has since dipped below $30,000, but Kendrick said if prices remain well above mining costs ($15,000), miners will likely hold onto what they mine instead of selling."This creates price upside, in our view. In addition, with energy prices likely having peaked, the structural profitability backdrop for miners should improve, adding further upside," he wrote.Bitcoin is also set to trade better in the future as the Federal Reserve is <a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-federal-reserve-pause-interest-rates-inflation-moodys-2023-4">nearing the end</a> of its tightening cycle, Kendrick said, noting that its correlation with the Nasdaq suggests the crypto should trade better if risk-on assets improve broadly.Another tailwind is the coin's upcoming halving in 2024, which is when the reward given to miners is cut in half. This is to cap the supply of bitcoins, and has historically led to price increases.Bitcoin could also see upswings thanks to regulatory changes that promote investor access to the market — such as the creation of digital asset ETFs and stablecoin regulation. Already, some proposals that have been passed in Europe hold positive implications on crypto volatility."While sources of uncertainty remain, we think the pathway to the USD 100,000 level is becoming clearer," Kendrick said.

Bitcoin could soar 268% to $100,000 as crypto winter is finally over, Standard Chartered says

<ul class="summary-list"><li>Crypto execs keep whining about basic financial <keyword id="11929846" type="UNKNOWN" weightage="60" keywordseo="regulation" source="Orion">regulation</keyword>.</li><li>It is an exasperating display of the tech world's unique ability to blend ignorance with entitlement.</li><li>Our Founding Fathers never mentioned anything about a basic right to earn interest on your crypto (or any) assets.</li><li>This is an <keyword id="11905565" type="UNKNOWN" weightage="100" keywordseo="opinion" source="Orion">opinion</keyword> column. The thoughts expressed are those of the author.</li></ul>The whining about financial regulation from the crypto executives has got to stop. Not only is it a mind-bending display of entitlement, but it also never fails to demonstrate how little some of these individuals - seeped in the tech world - have bothered to learn about finance.Take Brian Armstrong, CEO of <keyword id="11895315" type="UNKNOWN" weightage="60" keywordseo="coinbase" source="Orion">Coinbase</keyword>, for example. On Tuesday he took to Twitter to accuse the <keyword id="11898794" type="UNKNOWN" weightage="60" keywordseo="securities-and-exchange-commission" source="Orion">Securities and Exchange Commission</keyword> of being "<a href="https://twitter.com/brian_armstrong/status/1435439291715358721">sketchy</a>" for telling his company that it cannot issue a product that the regulator deemed a security, and for launching an investigation into the company. The product the SEC is questioning would allow customers to lend their crypto to <a href="https://blog.coinbase.com/sign-up-to-earn-4-apy-on-usd-coin-with-coinbase-cdad79e5f5eb">Coinbase for a yield of 8 times</a> the national average of high-yield savings accounts. <a href="https://twitter.com/brian_armstrong/status/1435439543692365828">On Twitter</a>, Armstrong explained that his company was cooperative enough to give the SEC a courtesy heads up. That, he figured, should show enough goodwill to keep regulators from asking more questions.What's more, <a href="https://twitter.com/brian_armstrong/status/1435439543692365828">he complained</a>, the SEC should have to explain why they consider the product Coinbase was going to roll out a security and not what the company has argued - that the new feature is "not an investment contract or a note." Lending assets to a company which then packages it, lends it out again, and gives you interest in exchange sounds a whole lot like a bond. And a bond is a very basic financial security and very much regulated by the SEC. Even if it's not quite a bond, as <a href="https://www.bloomberg.com/news/newsletters/2021-09-08/money-stuff-lending-bitcoins-is-tricky">Bloomberg's Matt Levine</a> noted, it could also sound a lot like a savings account - which is subject to even tighter banking regulations. Either way, a CEO who does not appear to understand these connections is just one more aspect of crypto that should worry regulators - and they don't need more reason to be worried.We all know that crypto's opacity <a href="https://www.businessinsider.com/stop-ransomware-attacks-jbs-colonial-pipeline-banning-crypto-ransom-payments-2021-6">has enabled cyber ransom</a>; that the prices of cryptos are volatile and that <a href="https://www.businessinsider.com/cryptocurrencies-bitcoin-blockchain-useless-except-speculators-criminals-cosplayers-2021-5">it's not backed by the US government</a> (or anything, really); and that in an effort to create a "trustless financial system" actors run around the crypto market anonymously.Crypto execs should know that all of these aspects of the product they're building their business on make it dangerous, and they should have enough respect for the rest of us to know that we know it too.<h2>I need you boys to stop crying</h2>Armstrong is hardly the only whiner in the crypto bunch. In statement posted on the <a href="https://blockfi.com/blockfi-founder-and-ceo-zac-prince-on-conversations-with-regulators">company's website</a> in July, BlockFi founder Zac Prince complained about a freeze on its BlockFi Interest Account product <a href="https://www.ft.com/content/3d6c19d4-4848-4c0e-8112-5cff52dd1cbd">by state-level regulators</a>. "BlockFi has a multi-faceted retail and institutional business, but the recent regulatory focus has been on the BlockFi Interest Account (BIA)," Prince said in a statement. "We have been engaged in a productive discourse with regulators to protect your interests and expand accessibility to innovative financial solutions for all. This is our commitment to you - to fight for your rights to earn interest on your crypto assets."I do not recall seeing anything about the right to earn interest on crypto (or any) assets in the Constitution. No, this "right" to earn yield on crypto derives not from American citizenship, humanism, or Enlightenment principles - it derives from a deep and misguided sense of entitlement. Regulators are not required to approve any product these companies want to <a href="https://www.bloomberg.com/news/articles/2021-05-17/bitcoin-interest-is-crypto-savings-account-worth-the-risk">roll out if it is a risk for investors</a> or to the stability of financial <keyword id="11893875" type="UNKNOWN" weightage="60" keywordseo="markets" source="Orion">markets</keyword>.It is misleading to say, as Armstrong did, there is something "shady" going on simply because regulators do not want to approve the product. The SEC's role is not that of a fourth-grade teacher signing off on a science project. Regulators have a society to consider, and we are not all here for your financial experiments.<h2>I will be so annoyed if these guys break the economy</h2>Silicon Valley is in a funk. More than ever it is feeding us <a href="https://www.businessinsider.com/silicon-valley-broken-out-of-truly-transformative-tech-ideas-2021-7">lazy, useless, derivative tech</a> and acting as if consumers and regulators should embrace it without questions. There are reasons embedded in the industry's incentive structure that have caused this dynamic (<a href="https://www.businessinsider.com/silicon-valley-broken-out-of-truly-transformative-tech-ideas-2021-7">I go over them here</a>), and it is hardly limited to crypto. But crypto has seen some of the worst of this cavalier attitude, and the features of its recklessness are especially dangerous in finance.For example, Wall Street is supposed to have <a href="https://www.investopedia.com/terms/k/knowyourclient.asp">"know your customer" requirements</a> so that it does not (in theory) launder money for criminals, or finance illicit activities. While some crypto companies, like (to their credit) <a href="https://help.coinbase.com/en/coinbase/managing-my-account/update-my-account/identity-verification-faq#:~:text=Coinbase%20uses%20Identity%20Verification%20in,and%20use%20of%20fraudulent%20accounts.">Coinbase</a>, have implemented these checks, a significant <a href="https://www.arachnys.com/cryptocurrency-exchanges-and-the-changing-tides-of-kyc-compliance/">part of the crypto world</a> still revels in the anonymity of its actors. But if we require transparency from Wall Street, we should require same for all of crypto. The same bad guys we're trying to keep out of our banks should be <a href="https://www.technologyreview.com/2020/01/16/130843/cryptocurrency-money-laundering-exchanges/">kept away from digital currencies too.</a>Another example - remember 2008? Banks like Bear Stearns and Lehman Brothers vaporized because they didn't have enough cash on hand. Crypto firms are not subject to the same capital requirements <a href="https://www.nasdaq.com/articles/decoding-crypto%3A-are-there-regulations-in-the-u.s.-for-cryptocurrency-2021-08-19">as banks</a>, even though they're handling assets way more volatile than most bank assets. Plus, the capital crypto firms do have is not <a href="https://www.bloomberg.com/news/articles/2021-09-02/crypto-accounts-yielding-7-spur-scrutiny-as-states-warn-of-risk">backed by the Federal Deposit Insurance Corporation</a>. The FDIC was created after the pain of bank runs during the Great Depression, when customers had no recourse for their losses.All of this is to say, if you lose your money in this crypto nonsense I do not feel sorry for you at all. However, if there is a run on some of these massive crypto firms we do not know what it will do to the wider economy. Crypto's overall market cap may not seem like a threat to <a href="https://www.businessinsider.com/reviews/out?u=https%3A%2F%2Fwww.wsj.com%2Farticles%2Fcryptocurrency-crash-no-big-deal-bitcoin-ether-dogecoin-11620332378">the wider economy or financial system now</a>, but it's unclear what could happen as it grows and more people invest in it. Regulators, in an ideal world, are supposed to head off disasters like that before they happen.And yes, I understand that some of the excitement for crypto comes from a disillusionment with traditional financial institutions, but the solution to that is not to make even worse financial institutions with fewer rules run by people who appear to know even less about markets. The solution is more transparency and a greater commitment to the rule of law for everyone.If that still doesn't make sense to you - a crypto genius - at least for the love of God stop whining.

The whining from these crypto execs has got to stop

• <keyword id="219358" type="PERSON" weightage="60" keywordseo="Mark-Cuban">Mark Cuban</keyword> sees decentralized autonomous organizations, or DAOs, as disruptive.• DAOs run on blockchains, democratize decisions, and use smart contracts.• <keyword id="6358963" type="DEFINITION" weightage="60" keywordseo="Warren-Buffett">Warren Buffett</keyword>'s <keyword id="6362665" type="ORGANIZATION" weightage="60" keywordseo="berkshire-hathaway">Berkshire Hathaway</keyword> relies on decentralization and autonomy.• <a href="https://www.businessinsider.com/?hprecirc-bullet">See more stories on Insider's business page</a>.The tech billionaire Mark Cuban expects decentralized autonomous organizations, or DAOs, to transform how companies are built and run. Warren Buffett's Berkshire Hathaway embraced decentralization and autonomy decades ago, paving the way for DAOs.DAOs are "the ultimate combination of capitalism and progressivism," Cuban <a href="https://twitter.com/mcuban/status/1399498071873134592">tweeted</a> on Monday."There are so many features and processes in any given company that can be more efficient and productive using a decentralized, trustless approach. As companies are built on this approach we will see some incredibly disruptive businesses built," the "<keyword id="1417364" type="COMPANY" weightage="60" keywordseo="Shark-Tank">Shark Tank</keyword>" star, <keyword id="218068" type="ORGANIZATION" weightage="60" keywordseo="Dallas-Mavericks">Dallas Mavericks</keyword> owner, and <a href="https://markets.businessinsider.com/currencies/news/mark-cuban-praises-dogecoin-defi-nfts-bitcoin-not-inflation-hedge-2021-3-1030172586">dogecoin champion</a> added.Buffett's company showcases the power of the core ideas that underpin DAOs, and it could even be considered the precursor to this new breed of organization.<h2>What is a <keyword id="786882" type="ORGANIZATION" weightage="60" keywordseo="DAO">DAO</keyword>?</h2>DAOs are digital organizations that provide a fresh way to fund ventures, democratize decisions, and split proceeds. They're "decentralized" because they're hosted on a blockchain and all their stakeholders, not just executives and board members, make decisions. They're "autonomous" because they employ smart contracts that automatically execute actions when certain conditions are met, without requiring human approval.Typically, anyone who owns tokens tied to a DAO can vote on proposals, and their votes are weighted based on the number of tokens they hold - similar to the voting rights attached to shares. If a proposal garners enough votes, a smart contract is triggered, and the approved action is executed."If blockchains, NFTs, smart contracts, DeFi protocols, and DApps are tools, DAOs are the groups that use them to create new things," Packy McCormick explained in his Not Boring newsletter <a href="https://www.notboring.co/p/the-dao-of-daos">earlier this year</a>. "If they're the what, DAOs are the how."McCormick also pointed out that Vitalik Buterin, ethereum's cofounder, highlighted DAOs as a potential blockchain application in ethereum's white paper in 2013.<h2>Berkshire is an analog DOA</h2>The core principles underlying DAOs, decentralization and autonomy, are key elements of Berkshire's corporate structure.Buffett's company owns scores of businesses, including Geico, See's Candies, and BNSF Railway, and it employed 360,000 people at the last count. But only a couple dozen people work at Berkshire's headquarters in Omaha, Nebraska.That disconnect is possible because Berkshire has decentralized its operations into dozens of subsidiaries, which are themselves divided into thousands of smaller business units. It also embraces autonomy, leaving its subsidiaries to run themselves with virtually no interference."We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly - or not at all - because of a stifling bureaucracy," Buffett explained in his <a href="https://www.berkshirehathaway.com/letters/2009ltr.pdf">2009 letter to shareholders</a>.Lawrence Cunningham, a law professor at George Washington University and the author of multiple books about Buffett, highlighted decentralization and autonomy as two of Berkshire's core management principles in "Margin of Trust." He concluded that the company's trust-based culture allowed them to work."Neither decentralization nor autonomy are the primary reasons for Berkshire's success or durability," he wrote. "Trust is. Autonomy is a manifestation of trust; decentralization is a consequence of it."There are clear differences between Berkshire, a sprawling conglomerate of decentralized, autonomous businesses, and DAOs, blockchain-based constructs that rely on smart contracts to strike virtual deals. For one, trust is critical to Berkshire's success, while DAOs enable "trustless" processes - at least in Cuban's view.But it's fair to say Buffett's company is grounded in the approach Cuban sees as key to the beneficial disruption brought by DAOs and could be seen as a forerunner of such organizations.

Mark Cuban predicts DAOs will transform companies. Warren Buffett's Berkshire Hathaway embraced the core ideas behind the latest crypto trend decades ago.

<ul class="summary-list"><li>Cryptocurrencies and <keyword id="8067293" type="UNKNOWN" weightage="60" keywordseo="Stablecoins">stablecoins</keyword> have boomed in 2021, sucking in investors.</li><li>The world's central banks are increasingly looking to create their own digital currencies. </li><li>Insider cuts out the jargon and explains the key differences and what they're used for. </li></ul>Cryptocurrencies and stablecoins have boomed in 2021. And central banks around the world are increasingly keen on their own digital currencies. But how do they all work and what are they used for?<h2>Cryptocurrencies</h2>Cryptocurrencies are basically digital currencies that aren't controlled or issued by a centralized authority, such as commercial or central banks.These coins are sent back and forth on enormous peer-to-peer networks - essentially groups of computers that share data.The innovation of cryptocurrencies is that the "ledger" that keeps track of transactions - known as the <keyword id="6355684" type="PERSON" weightage="60" keywordseo="Blockchain">blockchain</keyword> - is overseen and verified by network users known as "miners." Miners collectively do the work of a central authority, checking people aren't trying to spend coins twice, and earning newly created <keyword id="6354947" type="UNKNOWN" weightage="60" keywordseo="bitcoin">bitcoin</keyword> in return. "What we aim to do with the blockchain is to make this 'trustless' so that nobody has overall control of it," says Ben Edgington, a software developer for the <keyword id="2810876" type="PERSON" weightage="60" keywordseo="ethereum">ethereum</keyword> network. "It's fully democratic [and] it's fully accessible."Bitcoiners say it's 'digital gold'When bitcoin was launched by the anonymous person or group <a href="https://www.businessinsider.com/bitcoin-history-cryptocurrency-satoshi-nakamoto-2017-12">Satoshi Nakamoto</a> in 2008, many thought it could be used for payments. In reality, it's way too volatile.Now, many bitcoiners say its scarcity - only 21 million coins can be mined - means it will hold its value and protect investors against inflation. Others say it's purely speculative.Other cryptocurrencies have different uses. The ethereum network, for example, can be used to build applications like collectible "<a href="https://www.businessinsider.com/non-fungible-tokens-nfts-have-taken-over-heres-why-theyre-important-2021-4">non-fungible tokens.</a>"Cryptocurrencies are highly riskyIn bitcoin and other networks that follow its model, miners verify transactions by using large amounts of computing power to solve complex math problems. Bitcoin's <keyword id="6355267" type="UNKNOWN" weightage="60" keywordseo="mining">mining</keyword> system uses as much electricity annually as <a href="https://cbeci.org/cbeci/comparisons">medium-sized countries</a>. Other cryptocurrencies are <a href="https://markets.businessinsider.com/news/stocks/ethereum-upgrades-crypto-staing-industry-boom-jpmorgan-ether-2021-7">less energy intensive</a>.Cryptocurrencies are largely unregulated and are some of the <a href="https://markets.businessinsider.com/currencies/news/cryptocurrency-volatility-andrew-bailey-bank-england-governor-bitcoin-boe-2021-6">riskiest investments out there</a>. Bitcoin has plunged around 50% since its April record high of close to $65,000.<h2>Stablecoins</h2>Wild volatility has been a huge deterrent for some investors as it can make crypto harder to use. That's where stablecoins come in. Stablecoins maintain a "stable" value with a peg to other assets, like the dollar.For example <a href="https://markets.businessinsider.com/currencies/usdt-usd">Tether</a>, the <a href="https://coinmarketcap.com/">third-biggest cryptocurrency</a> by market cap, is designed to be pegged to the US dollar. It is backed by assets such as dollars and Treasury bills.Traders love stablecoinsInterest in stablecoins has shot up too. They're central to <keyword id="6357017" type="DEFINITION" weightage="60" keywordseo="cryptocurrency">cryptocurrency</keyword> trading, by allowing investors to easily move in and out of more volatile assets like bitcoin.Stablecoins are also commonly used in the world of <a href="https://www.businessinsider.com/defi-decentralized-finance-disruptive-bitcoin-benefits-challenges-bofa-crypto-finance-2021-3">decentralized finance</a> - a booming ecosystem that lets people create financial products without the need for central authorities.Regulators are worriedBut they're <a href="https://www.businessinsider.com/regulators-stablecoins-tether-crypto-lael-brainard-cbdc-letitia-james-2021-6?r=US&amp;IR=TIR=T">facing heavy scrutiny</a>. In May, the Federal Reserve's Lael Brainard <a href="https://www.federalreserve.gov/newsevents/speech/brainard20210524a.htm">raised concerns</a> stablecoins could default and destabilize the financial system. New York also <a href="https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal">banned Tether trading</a> after an investigation found it had overstated its US dollar backing. As with the rest of the cryptocurrency world, a lack of regulation means investors have almost no protection if their stablecoin suddenly collapses.<h2>Central bank digital currencies</h2>Countries are trying to find ways to make it easier to spend and send money - and keep control of payment systems that are increasingly private (think PayPal or Visa). A <a href="https://markets.businessinsider.com/currencies/news/jerome-powell-cryptocurrencies-cbdc-stablecoins-digital-currency-testimony-2021-7">digital currency</a> issued by central banks directly to consumers could be the answer. Right now, private banks and payment companies are the most important players in the everyday use of money. But a <keyword id="6472011" type="UNKNOWN" weightage="60" keywordseo="Central-Bank-Digital-Currency">central bank digital currency</keyword> (or CBDC) would be a digital version of banknotes and coins, letting people hold and make payments in central bank money. China is currently leading the pack out of the world's big economies. But the <a href="https://www.ecb.europa.eu/paym/digital_euro/html/index.en.html">European Central Bank</a> and the <a href="https://www.bankofengland.co.uk/research/digital-currencies">Bank of England</a> are seriously looking into it.CBDCs could make payments saferCBDCs could speed up transactions for individuals and big institutions, Chris Giancarlo, founder of non-profit <a href="https://digitaldollarproject.org/">Digital Dollar Project</a>, told Insider. The DDP plans to test CBDCs in real-world situations."If you can send a photograph to Japan in a second, why can't you send money in a second?" he said.Central bankers also think CBDCs can make the financial system safer. Although unlikely, even a big global payment system could feasibly collapse. Some bankers are concernedOne concern is privacy. Some governments may design CBDCs so transactions are anonymized, like cash, but others won't. Privacy questions have arisen over China's <a href="https://markets.businessinsider.com/news/stocks/china-cbdc-trial-digital-yuan-beijing-lottery-2021-6">trial</a> <keyword id="8641649" type="UNKNOWN" weightage="60" keywordseo="digital-yuan">digital yuan</keyword>."With a CBDC, the government would have direct access to all your spending patterns," Bobby Ong, co-founder of data firm CoinGecko, says.Some bankers are worried CBDCs could remove them from key parts of the financial system. CBDCs could reduce the demand for commercial bank accounts and cut banks out of the business of verifying transactions, although central banks are working on the details.

Cryptocurrencies, stablecoins and central-bank digital currencies are all the rage. We break down what they are and what you need to know about them

<ul class="summary-list"><li>Altcoin is short for "alternative coin" and - as the name suggests - is an alternative <keyword id="11892695" type="UNKNOWN" weightage="60" keywordseo="cryptocurrency" source="Orion">cryptocurrency</keyword> to Bitcoin.</li><li>Altcoins have become a major segment of the cryptocurrency markets, with projects like Ethereum (ETH), Stellar Lumens (XLM), and Uniswap (UNI) distinguishing themselves as platforms with innovative capabilities.</li><li>The altcoin markets are characterized for their volatility and are highly speculative investments subject to speculation.</li></ul>Since the emergence of Bitcoin, the concept of a decentralized, trustless peer-to-peer (P2P) payment network has inspired an entire class of digital assets. The crypto markets are a product of Bitcoin's success, and the fast-growing space consists of more than 9,000 altcoins.Now we have altcoins, which began to emerge in 2011 in an attempt to reinvent Bitcoin, with their own rules and improvements on different features.<h2>What is an altcoin? </h2>Altcoin is a <a href="https://www.businessinsider.com/what-is-cryptocurrency" target="_blank" rel="noopener">cryptocurrency</a> alternative to <a href="https://www.businessinsider.com/what-is-bitcoin" target="_blank" rel="noopener">Bitcoin</a> - its name is a portmanteau of "alternative" and "coin." Since Bitcoin is widely regarded as the first of its kind, new cryptocurrencies developed after are viewed as alternative coins - or altcoins. The emergence of altcoins began around 2011, with the first generation formed using the same blockchain engine as Bitcoin.The first altcoin was Namecoin, which is based on Bitcoin's code and was released in April 2011. Namecoin is integral to the history of altcoins in that it showed that there's enough room in the crypto markets for more than one kind of coin.Blockchains today can run several hundreds of "altcoins," fueling similar currency projects with unique rules and mechanisms. Altcoins like <a href="https://www.businessinsider.com/what-is-ethereum" target="_blank" rel="noopener">Ethereum</a> can provide developers with a toolkit and programming language to build decentralized applications into the blockchain.<h2>Understanding how altcoins work </h2>To understand how altcoins work, it's good to first understand how blockchain technology works - which is where all cryptocurrencies operate. The blockchain network is a distributed ledger that stores data like cryptocurrency transactions, NFT ownership, and decentralized <keyword id="11895316" type="UNKNOWN" weightage="100" keywordseo="finance" source="Orion">finance</keyword> (DeFi) smart contracts. This ledger is often referred to as a "chain" comprising "blocks" of data, which are used to verify new data before additional blocks can be added to the ledger.This network, on which Bitcoin operates, is groundbreaking because it's a decentralized, trustless, P2P payment network that functions without a central authority or entity facilitating transactions. And altcoins function on the exact same premise as Bitcoin: to operate using this blockchain technology. However, there have been some altcoins that have emerged to instead improve on the flaws of Bitcoin or to achieve some other goal. For example, Litecoin was designed by former Google engineer Charlie Lee as a "lite version of Bitcoin."<h2>Understanding forks</h2>A fork refers to an update in network protocol (the open source software blockchains run on). There are two kinds of forks: a hard fork and soft fork. A soft fork is a minor upgrade to the software, and typically means nothing for users. A hard fork is a major change to the network, and requires users/miners to update to the latest software in order to continue mining. If developers decide they do not like the direction a blockchain network is going in, they can do a hard fork and create a new coin. Since 2009, Bitcoin has seen over <a href="https://mapofcoins.com/bitcoin" target="_blank" rel="noopener">400 hard forks</a>. In the news: In the past year, crypto and celebrity influencers have come under fire for promoting cryptocurrencies. Even social media platforms like TikTok have <a href="https://markets.businessinsider.com/news/currencies/tiktok-crypto-bitcoin-investing-trading-ban-sponsored-ad-content-branded-2021-7" target="_blank" rel="noopener">banned crypto promoters</a> from the platform. Here are the two key things to know about altcoins.Altcoins are a highly speculative and volatile investment. <a href="https://www.businessinsider.com/what-is-speculation" target="_blank" rel="noopener">Speculation</a> is a powerful driver of the crypto markets so it's important to do your research before investing in any altcoin. Half-baked whims and trading based on rumors are exactly what the experts advise against."An emerging technology like crypto is going to attract people of ill-repute who are looking to make a quick buck off of the new investor," says Ben Armstrong, founder of <a href="https://bitboycrypto.com/" target="_blank" rel="noopener">BitBoy Crypto</a>. "So it's important to be cautious and not fall for the hype of a slick new project, or get FOMO when you see a crypto asset making new all-time highs." The decentralized, intangible, and often misunderstood nature of cryptocurrencies in general makes predicting the long-term, steady success of an altcoin project difficult to predict. Some altcoins, like Ethereum, have maintained their position in the market through constant innovation and the strength of their community. Speculation has a more dramatic effect on newer altcoins. External factors like public perception, Bitcoin price fluctuation, or a meme on Reddit can oftentimes cause drastic price fluctuations.While the crypto community stands united on its long-term bullish outlook for Bitcoin, the temptation of selling coins for short-term profits is built into the crypto zeitgeist. The crypto community created the term "hodl" in an effort to encourage people to hold on to their crypto assets for the long-term. "Hodl" means "hold on for dear life," and to resist the impulse of selling when the value of their crypto drops or rises.Quick tip: Smart contracts are programs that are stored on blockchain that execute when certain conditions are met.Cryptocurrency takes a toll on the environment. Bitcoin's energy consumption is a well-known flaw. As of August 2021, Bitcoin's energy consumption is 151.57 TWh according to Digiconomist's Bitcoin Energy Consumption Index - that's comparable to what the entirety of Malaysia uses in energy. The culprit for the tremendous costs of energy lies with the "proof of work" (PoW) consensus algorithm, which is how transactions are verified. And as Bitcoin mining has become more competitive, the computing power required to profitably mine new bitcoins is represented in factories loaded with servers all working toward solving the network's algorithms.The PoW consensus mechanism is responsible for driving the competition for faster and more powerful computational processing power. The faster a miner's computer can complete the formula, the higher their odds of winning a block reward. Over time, miners have developed computer hardware with the sole function of processing the PoW consensus algorithm. This has evolved from a miner running a program in the background of their PC to entire mining farms. Miners (or a pool of miners) will buy factories in countries where electricity is cheap and fill them with thousands of mining rigs. The energy required to keep the rigs running 24/7, combined with the fans and coolant systems to prevent overheating and fires, has made crypto mining an environmental disaster.<h3>The emergence of "green coins"</h3>Bitcoin's carbon footprint has provided an opportunity for altcoins with greener consensus mechanisms to market themselves as "green coins." While proof of work is the main culprit for the Bitcoin energy crisis, blockchains like Ethereum and <a href="https://cardano.org/" target="_blank" rel="noopener">Cardano</a> (ADA) operate on proof of stake consensus mechanisms. Compared to the energy-hungry PoW, staking requires no mining in order to participate and earn coins. The success of Ethereum and Cardano prove that people can participate in crypto while being environmentally friendly.Quick tip: Proof of work is the consensus mechanism used by Bitcoin and many other altcoins to audit transactions on the blockchain and "mine" new crypto. Crypto mining is solving computational formulas to audit transactions on the blockchain. Completing the formula means a chance at receiving a newly minted BTC reward. <h3>Types of altcoins</h3>Over time, there have been many altcoins that have come along. And now, there are the main types:<ul><li>Mining-based: Altcoins that are mining-based are created through the process of mining, like Bitcoin. One example of a mining-based coin is Litecoin.</li><li>Stable coins: These types of altcoins are a new subset to the crypto market that's meant to reduce volatility. By design, they're digital assets with their value pegged to fiat and physical assets (off-chain) and crypto collateral (on-chain). Algorithmic stablecoins are not backed by on-chain or off-chain assets, but governed by a smart contract at its core.</li><li>Security tokens: These types of altcoins are a digital or liquid asset that represents an ownership stake in a tangible asset. Stored on a distributed ledger, security tokens are the blockchain-equivalent to shares, but can represent a stake in IP, a car, or property, etc.</li><li>Utility tokens: Once very popular in the 2017 initial coin offering (ICO) boom, utility tokens are not pegged to any currency or tangible value. In exchange for capital in the early stages of an ICO, investors would receive a quantity of utility tokens in exchange for their investment determined by the company or project owner. The utility tokens will serve as a coupon or voucher after funding to purchase goods and services from the issuer.</li></ul>Quick tip: One of the main benefits of blockchain technology is transparency. If something is on the blockchain, it means it is visible, permanent, and accessible to the public. On-chain typically refers to a transaction that is performed and recorded on the blockchain. Off-chain is a transaction not directly recorded on the blockchain.<h2>Staking an altcoin</h2>Staking is the <a href="https://www.businessinsider.com/passive-investing" target="_blank" rel="noopener">passive-investing strategy</a> where an investor holds funds in a cryptocurrency wallet in order to earn rewards over time. When an investor chooses to stake their holdings, the network can use it to forge new blocks on the blockchain. The process of staking supports the process of PoS work because it requires participants to support it. And so stakers are essentially helping to make this happen.Also, staking is incredibly energy-efficient - unlike mining. According to the Ethereum Foundation, the latest switch to a PoS system <a href="https://blog.ethereum.org/2021/05/18/country-power-no-more/" target="_blank" rel="noopener">will reduce energy costs by 99.95%</a>.<h2>7 notable altcoins 2021</h2>While no altcoin has managed to "dethrone" Bitcoin in value, many projects have proved themselves worthy enough to a global community of investors and developers:<h3>1. Ethereum (ETH)</h3><div type="image" title="Ethereum altcoin on green background 2x1" height="835" width="1668" msid="85848268" hostid="261"></div>The second-largest blockchain in crypto, <a href="https://www.businessinsider.com/what-is-ethereum" target="_blank" rel="noopener">Ethereum's</a> evolution has taken it from an asset to an application. Founded by Vitalik Buterin in 2013, Ethereum is a distributed blockchain platform for smart contracts and dApps (decentralized applications). With its native token, ether (ETH), users can interact with the Ethereum platform. Ether can be traded on most crypto exchanges, used to pay transaction fees, or as collateral for ERC-20 tokens, which have DeFi utility. Ethereum's integration with smart contracts via the Solidity programming language has distinguished the project from Bitcoin. A smart contract is a self-executing code that can run on the blockchain.<h3>2. Chainlink (LINK)</h3><div type="image" title="Chainlink altcoin on green background 2x1" height="835" width="1668" msid="85848271" hostid="261"></div>Launched officially in 2019 on the Ethereum blockchain, Chainlink is a decentralized oracle network that's meant to expand on smart contracts. In a nutshell, it connects smart contracts with "off-chain" data and services. The network is built around the LINK network and token and has two parts: on-chain and off-chain.The on-chain component comprises oracle contracts on the Ethereum blockchain, which oversee and process data requests that come in from users. The off-chain component is made up of off-chain oracle nodes that connect to the Ethereum network, which are responsible for processing external requests that are later converted to contracts.<h3>3. Aave (AAVE)</h3><div type="image" title="AAVE altcoin on green background 2x1" height="835" width="1668" msid="85848274" hostid="261"></div>The AAVE is an open-source DeFi lending protocol that allows anyone to loan or borrow crypto without an intermediary. As a lender, you can deposit funds - which are allocated into a smart contract - where you can earn interest based on how Aave is performing in the market. Making a deposit means you can also borrow by using your deposit as collateral.Rebranded from ETHLend following a successful ICO in 2017, Aave switched from a decentralized P2P lending platform into a liquidity pool model. This means loans are acquired from a pool instead of an individual lender. Since 2020, the Aave Protocol has been an open-source and non-custodial liquidity DeFi protocol for earning interest on deposits and borrowing assets. Holders of AAVE can decide on the direction of the project by voting on and discussing proposals.<h3>4. Stellar Lumens (XLM)</h3><div type="image" title="Stellar Lumens altcoin on green background 2x1" height="835" width="1668" msid="85848277" hostid="261"></div>Stellar is an open-source payment network that doubles as a distributed intermediary blockchain for global financial systems, designed so all the world's financial systems can work together on a single network. Stellar began in 2014 when Ripple co-founder Jed McCaleb disagreed with the direction of the Ripple project. The ethos behind Stellar's development is to make international money transfers possible for the everyday person. While Stellar is an open-source network for currencies and payments, Stellar Lumens (XLM) is the circulating native asset on the network. Stellar keeps its ledger in sync using its <a href="https://www.stellar.org/papers/stellar-consensus-protocol" target="_blank" rel="noopener">Stellar Consensus Protocol (SCP)</a>. Instead of relying on a miner network, SCP uses the Federated Byzantine Agreement algorithm, enabling faster transactions.<h3>5. Uniswap (UNI)</h3><div type="image" title="Uniswap altcoin on green background 2x1" height="835" width="1668" msid="85848283" hostid="261"></div>Uniswap is a decentralized exchange ecosystem built on the Ethereum blockchain. Launched in 2018, Uniswap uses an on-chain automated market maker. One of Uniswap's unique features is that anyone can be a market maker by depositing their assets into a pool and earning fees based on trading activity.Uniswap uses an automated market maker protocol that executes trades according to a series of smart contracts. The smart contracts automate price discovery, allowing users to swap one token for another without an intermediary. In traditional finance, market makers are usually brokerage houses with incentives that can cause a conflict of interest.<h3>6. PotCoin ($POT)</h3><div type="image" title="Potcoin altcoin on green background 2x1" height="835" width="1668" msid="85848284" hostid="261"></div>PotCoin is a Canadian-based digital currency that was launched in 2014 to allow consumers to buy and sell legal cannabis products. PotCoin was introduced as a solution for cannabis enthusiasts and the industry looking to legally transact at a time where banks were unable to do so.PotCoin is an open source cryptocurrency forked from the Litecoin core. There are subtle changes to the PotCoin protocol including a shorter block generation time and the increased 420 million max supply of PotCoins. Potcoin switched from a Proof of Work mechanism to Proof of Stake in 2016 to make supporting the network more accessible and less harmful to the environment.<h3>7. Litecoin (LTC)</h3><div type="image" title="Litecoin altcoin on green background 2x1" height="835" width="1668" msid="85848288" hostid="261"></div>One of the first-generation of altcoins made in 2011, Litecoin is a cryptocurrency based off of Bitcoin. Key things that distinguish Litecoin from Bitcoin include blocktime (four times faster block times than Bitcoin), supply (Litecoin has a max supply of 84 million while Bitcoin max supply of 21 million), its hashing algorithm, and distribution.Dubbed the "digital silver" to Bitcoin's "digital gold," Litecoin's goal was to optimize the Litecoin asset while preserving the best parts of Bitcoin.Quick tip: <a href="https://ethereum.org/en/developers/docs/standards/tokens/erc-20/" target="_blank" rel="noopener">The ERC-20 standard</a> is a set of rules applied to smart-contract tokens on the Ethereum blockchain. The flexibility and fungibility of the ERC-20 token allows dApp developers to create utility tokens, security tokens, or stablecoins.<h2>The financial takeaway</h2>Altcoins have come a long way since 2011, and continue to prove themselves as more than just an "alternative to Bitcoin." The crypto space is a fast-moving and increasingly popular point of interest for investors. Thanks to the innovation and integration of crypto into mainstream business, people can safely and legally buy altcoins on their phone or computer.Easy access to the crypto markets doesn't mean it isn't risky. Before investing in an altcoin, ask yourself: have you researched and performed enough due diligence? Would you be able to explain the project to your family or friends at the dinner table? Whether you want to trade altcoins full-time or just "hodl" onto your Bitcoin, the choice is yours. Listening to the experts, evaluating the risks, and assessing your financial goals are keys to investing responsibly.<a data-type="600f72e1fdb68e08982d5365">A bitcoin IRA lets you profit from the cryptocurrency's potential gains in a tax-advantaged way</a><a data-type="5fac1720bf96b9125f748159">How to diversify your portfolio to limit losses and guard against risk</a><a data-type="5fdc12cc3617355d27686ece">How to invest in bitcoin: The major ways to buy, their pros and cons, and the strategies to consider</a><a data-type="5fd1032bbca41b06e2352e87">Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return</a>

Altcoins are the alternative digital currencies to bitcoin - here's what they are and how they work

<ul class="summary-list"><li>A group of internet friends crowdfunded $46 million to try to purchase the US Constitution. </li><li>They got together in what's called a <keyword id="12561214" type="UNKNOWN" weightage="60" keywordseo="dao" source="Orion">DAO</keyword>, a decentralized autonomous organization.</li></ul>They almost did it. A cohort of 17,000 people <a href="https://markets.businessinsider.com/news/currencies/constitutiondao-raises-46-million-buy-rare-copy-us-constitution-auction-2021-11">crowdfunded $46 million</a> over the course of several days to purchase an original copy of the US Constitution, but then they lost the bid. The group, known as <keyword id="12539571" type="UNKNOWN" weightage="60" keywordseo="constitutiondao" source="Orion">ConstitutionDAO</keyword>, started as more of a joke on Twitter after Sotheby's announced the sale of one of 13 remaining copies of the US Constitution, <a href="https://www.cnbc.com/2021/11/16/dao-raises-millions-in-eth-to-bid-on-copy-of-us-constitution.html">CNBC reported</a>. Then it turned into a group of people meeting on a Discord server deciding they could have a serious shot at buying the document. In a plot twist, Ken Griffin, the founder of Citadel Securities at the center of retail-trader anger over the GameStop trading halt in January, was revealed as the winning bidder.The group that formed is what's known as a DAO, a decentralized autonomous organization. It's a fancy term for something that can be summed up as a bunch of internet friends getting together for a common purpose.That's the bare-bones definition. But if you've grasped that concept, let's go a little deeper.Here's how <a href="https://a16z.com/author/ali-yahya/">Ali Yahya</a>, a crypto general partner at the <keyword id="11931413" type="UNKNOWN" weightage="60" keywordseo="andreessen-horowitz" source="Orion">Andreessen Horowitz</keyword> venture capital firm known as <keyword id="12299476" type="UNKNOWN" weightage="60" keywordseo="a16z" source="Orion">a16z</keyword>, puts it: A DAO "enables online communities to form, pool resources, and coordinate towards common goals — all run trustlessly via code."That code runs on blockchain technology and enforces the rules that govern the group. Members can be from all over the globe and even remain anonymous, Yahya said to Insider via email.Plus, it's both cheaper and faster to set up than something like an LLC, he said, noting that a lot of the behind-the-scenes work is automated through the code. The group generally raises capital using an ethereum-based wallet, <a href="https://www.cnbc.com/2021/10/25/what-are-daos-what-to-know-about-the-next-big-trend-in-crypto.html">CNBC reported</a>.DAOs, a16z has said, are going to have an "enormous impact" on the next phase of the internet, aka web3 or the <keyword id="11121339" type="UNKNOWN" weightage="60" keywordseo="metaverse" source="Orion">metaverse</keyword>. And they aren't just limited to buying rare artifacts such as the Constitution. Like companies or venture capital firms, DAOs have different purposes, depending on their goals."Some act like trusts and manage collectively owned property. Some act like investment firms and pool resources to make investments. Some act like associations and oversee the operation of decentralized financial services. And some act like social clubs," Yahya said.One called <a href="https://markets.businessinsider.com/news/currencies/wu-tang-clan-once-upon-a-time-in-shaolin-sold-pleasrdao-2021-10">PleasrDAO</a> purchased a <a href="https://www.businessinsider.com/rza-does-not-regret-once-upon-a-time-in-shaolin-album-bought-by-martin-shkreli-2019-5?utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">one-of-a-kind Wu-Tang Clan album</a> — once owned by Martin Shkreli — from the US government last month for $4 million. Before that, it purchased a non-fungible token of the legendary doge meme that sparked multiple crypto projects.Another called Friends With Benefits operates as an exclusive social club that requires so-called FWB tokens to get in as well as an application and a vote from members, <a href="https://a16z.com/2021/10/27/investing-in-friends-with-benefits-a-dao/">according to a16z</a>.Others are thinking beyond the bounds of the internet. Matthew Gould, CEO and founder of crypto-domain name company Unstoppable Domains, told Insider that ConstitutionDAO showed the "power of new tech to quickly organize thousands of people and tens of millions of dollars for a cause.""Given the scope of problems we are facing globally, from climate change, pandemics and hunger, these new tools show promise for rallying support to important causes and making a true difference," he wrote. "If we can put together $47 million for a copy of the US Constitution, we can surely raise more for major issues. When RainforrestDAO?"

What is a DAO and why did one just try to buy the US Constitution?

<ul class="summary-list"><li>Since Sam Bankman-Fried stepped down as CEO and FTX filed for bankruptcy, a number of unusual details have come to light. </li><li>Recently, it emerged that FTX reportedly told customers to wire money to a little-known, fake electronics retailer website.</li></ul>Both critics and proponents of crypto consider the nascent sector a Wild West, but the collapse of Sam Bankman-Fried's FTX has given new weight to the term.The ties between the pieces of his crypto empire — which included exchange FTX, hedge fund Alameda Research, and scores of smaller subsidiaries — remain complex. Since FTX's November 11 bankruptcy filing, new, bizarre details surrounding the shady finances continue to pop up.One SEC complaint said FTX told customers to wire money to a subsidiary that was a little-known <a href="https://markets.businessinsider.com/news/currencies/ftx-sam-bankman-fried-customer-funds-crypto-north-dimension-website-2022-12">fake online electronics retailer</a>. North Dimension, as it was called, was critical in putting FTX customers' funds to use in Alameda's trading activity. The site's been deactivated, but it was full of misspelled words and what appeared to be wrongly priced items. For example, one electronics item showed a "sale" price of $899, even though it listed a normal price of $410.Revelations only get stranger from there. FTX execs hid $8 billion in liabilities in a customer account that Bankman-Fried referred to as "<a href="https://markets.businessinsider.com/news/currencies/alameda-billion-in-liabilities-in-korean-friends-account-2022-12">our Korean friend's account</a>," a lawsuit from the Commodity Futures Trading Commission alleges. And court filings show that Bankman-Fried and FTX cofounder Gary Wang borrowed $546 million in promissory notes from Alameda earlier this year to <a href="https://markets.businessinsider.com/news/currencies/ftx-sam-bankman-fried-robinhood-stock-crypto-alameda-research-funds-2022-12">buy Robinhood stock</a>. Then, Alameda took out a loan and pledged those same shares as collateral. Bankman-Fried is now stuck in a <a href="https://markets.businessinsider.com/news/currencies/crypto-sam-bankman-fried-ftx-bankruptcy-robinhood-shares-blockfi-emergent-2022-12?utm_medium=ingest&amp;utm_source=markets">four-way legal battle</a> with FTX's new leadership, as well as failed crypto lender BlockFi and creditor Antigua, for control of that Robinhood stake. Meanwhile, the SEC also alleges that FTX used <a href="https://markets.businessinsider.com/news/currencies/ftx-200-million-customer-funds-venture-capital-investments-2022-12">$200 million of user deposits</a> for venture capital investments. Half of that went to fintech company Dave, while half went to Web3 firm Mysten Labs. "FTX was an opaque company that was so centralized it relied entirely on one person," Andrew Yeoh, chief marketing officer of Web3 firm <a href="https://www.nillion.com/" target="_blank" rel="noopener">Nillion</a>, told Insider. "The point of decentralization is to prevent outcomes like FTX where one person can take advantage of trust. I think the public and certainly the industry is waking up to that."<h2>A centralized player in a decentralized environment</h2>The SEC has alleged that Bankman-Fried orchestrated a years-long fraud scheme. He has denied criminal liability and is due to appear in a New York federal court on January 3 for charges of wire fraud and conspiracy.Using customer funds for proprietary trading is a destabilizing practice, according to Jeffrey Blockinger, general counsel at <a href="https://quadrata.com/" target="_blank" rel="noopener noreferrer">Quadrata</a>. The ensuing fallout, he explained to Insider, could end up pushing investors away from similar, rival exchanges.To Darren Sandler, lead counsel at <a href="https://republiccrypto.com/" target="_blank" rel="noopener">Republic Crypto</a>, the entire saga is ironic and highlights the shortcomings of a centralized player in an ostensibly decentralized environment."The point of crypto is that it's fully decentralized and trustless," he told Insider. "Acts of fraud and misappropriation of funds should actually be impossible or extremely difficult to commit. Everyday participants shouldn't have to trust crypto companies blindly or based on reputation."

Sam Bankman-Fried's FTX collapse is a nightmare of shady finances - and these bizarre schemes emerged recently

The World Wide Web, as we know it, has been evolving at a breakneck speed over the years. Yet, it hit the mainstream just 25 years back, and within that period, it has already undergone multiple transformations. What is <keyword id="692030" type="General" weightage="20" keywordseo="web-3-0" source="Orion">Web 3.0</keyword>? The early period of the Internet, or Web 1.0, was when we accessed it through our desktop browsers — laptops were a luxury, Wi-Fi just about getting started, and mobile data non-existent — and visited portals like Yahoo and MSN. The internet was in a ‘Read’ mode and we had limited ability to interact with it. <div type="image" title="Dec 2021 infographic for Business insider 1." height="900" width="1200" msid="88826492" hostid="261" caption="&amp;lt;p&amp;gt;The evolution of web over the years.&amp;lt;/p&amp;gt;"></div> That changed in 2005, the period of <keyword id="68431" type="General" weightage="20" keywordseo="web-2-0" source="Orion">Web 2.0</keyword> when we could start interacting with the Internet. Suddenly blogging, writing reviews on Yelp and commenting on articles became a way of life. And Web 2.0 saw the rise of an exciting new breed of ‘<keyword id="6355103" type="General" weightage="100" keywordseo="social" source="Orion">Social</keyword>’ companies like Orkut, Facebook, Twitter, Insta — I call them Social 1.0 — as well as other platform companies such as Airbnb and Uber. Today, we are in the midst of the evolution of Web 2.0 and many experts believe that it still has a long way to go. So, what’s Web 3.0? Well, depending upon who you ask and the time of the day, you will get answers like Blockchain, Crypto, DeFi, dApps, DAO, NFTs and so on! Fundamentally, it is an obsession around the themes of trust-less computing, decentralisation and, in a very utopian way, deregulation. But was is it really all about? I believe that underlying these technology trends, Web 3.0 is really about assertion for greater control by the two important stakeholders of the Internet — the creators and the consumers — in terms of how they earn $$ on various Social platforms and their data privacy. And not so much about the technological building blocks like NFT and blockchain – that is more of a religious debate within the technology community, while the larger issue is about how can we hand back control to the stakeholders. So, what played out in Social 1.0? The primary currency that you earned in Social 1.0 was your social influence. It was measured in terms of likes, retweets and followers. And there were limited opportunities to monetise on-platform. So, creators focused on building a large social influence and marketing their content or courses to their followers via links to other adjacent platforms like Gumroad. In time, affiliate marketing also caught on and soon the ‘influencers’ started plugging Brands to their followers, earning money for promotion or earning a commission as a percentage of the sales. All this led to a scenario where influencers created “shrill” and “clickbait” content to get more followers, more clicks and more revenue. For us consumers, who were getting a firehose of content, it seemed like a good deal as it was for free. Or was it? We soon realised that we had been paying for the services with our data! Our interests, our social graphs, our preferences weren’t private after all - they were sold to the advertisers with the highest bid. Worse, there was no incentive for the Social 1.0 companies to discourage fake news, trolling, bullying and shaming on their platform — that only meant more visits, more engagement and thereby more opportunity to serve ads to the users! <keyword id="12927406" type="General" weightage="20" keywordseo="social-2-0" source="Orion">Social 2.0</keyword> Social 2.0 is a term that I use for companies that are trying to change the status quo, and are putting the interests of the creators and the consumers front and center. Their focus is on having a flexible and transparent business model for creators to earn, with a huge emphasis on data privacy. It is about companies willing to give the control back to the stakeholders, doesn’t matter whether the company is built on top of Web 2.0 or Web 3.0 technologies. The torchbearer of this revolution is Patreon; it was born when its co-founder, Jack Conte, a musician, had an epiphany: Instead of spending his time, effort and $$ on promoting music videos on YouTube (and earning a measly $180 if he was lucky enough to get a million views), what if he simply focused his energies on identifying his 18 super-fans who would be willing to donate $10 each month to support him? This concept of micro-tipping caught on and today there are more than 250,000 creators on this platform! No wonder then that Patreon, in its latest funding round of $155M, was valued at $4Bn. Similarly, Substack is a Social 2.0 company (built on top of Web 1.0 technologies), which enables writers to start email newsletters and earn via subscriptions. Today, some of the top writers earn close to $500K annually, and seasoned journalists have quit their cushy jobs with institutions like NYT and Buzzfeed to focus on writing on Substack. Subscription is King The subscription-led models of Social 2.0 companies like Patreon, Substack, Twitch and others enable creators to focus on building a steady annuity income and start thinking of Social as a serious business with predictable income-flows. Kevin Kelly, a respected editor of Wired, had predicted in 2008 that a creator needs just a thousand true-fans to earn a living. Today, the power of distribution of the Internet and the proliferation of Social 2.0 companies ensure that any creator can find his true fans from across the globe. More importantly, the focus on narrow-casting, instead of trying to build a fan-base of millions, gives the creators more creative freedom — as long as there are 1000 fans who see value in their creations and are willing to support them, they are free to create what they want and don’t have to worry about conforming to popular taste or the constraints of ad-based, dopamine-led monetisation models. This freedom from AI algorithms, which identify and promote the most “engaging” content is liberating. Creators are in more control of the content, how they wish to price it and, in some cases, about who finally owns the customer. For example, platforms like Substack allow the writer to take his mailing list with him, in case he decides to move his business to another platform. Data Privacy The subscription-led model, where the platforms take a % of the earnings, ensures that they don’t need to store user data and monetise it via ads, leading to better data privacy. Further, not having to rely upon dopamine-based ad models means that platforms are not incentivised anymore to promote sensationalism or fake news just to drive up engagement on the platform, leading to a better overall user experience. Unbundling One of the biggest impacts of Social 2.0 is the unbundling of the Big-Tech — instead of users aggregating to a handful of Social 1.0 companies, creators and their fans are flocking to a multitude of platforms that offers their niche or community the best solution. From game-streaming moving to Twitch, writers to Substack and unbundling of Facebook Groups to paid communities on Slack and Discord channels, we will see Social 2.0 companies proliferating in various forms and shapes that it might be difficult for us to even recognise some of them as ‘Social’. Hustle vs Creating Value Thus, we can see that Social 2.0 is going to create a class of creators who, instead of constantly worrying about having to grow their follower-base, create “clickbait” and “shrill” content, can now focus on creating meaningful content, which they and their fans enjoy, and build a sound business around it. Hustling in front of a million fans is going to give way to creating value for a thousand true fans. And that is going to fundamentally alter the landscape of the Creator Economy. SEE ALSO: <a href="https://www.businessinsider.in/investment/news/facebook-microsoft-and-others-look-towards-the-1-trillion-dollar-metaverse-opportunity-but-that-contradicts-the-base-philosophy-behind-web-3-0/articleshow/87959802.cms" data-type="tilCustomLink">Facebook, Microsoft and others look towards the $1 trillion dollar ‘metaverse’ opportunity — but that contradicts the base philosophy behind Web 3.0</a> <a href="https://www.businessinsider.in/investment/news/bitcoin-ethereum-and-others-have-lost-nearly-40-percent-since-their-record-highs-but-investors-are-still-better-off-than-they-were-a-year-ago/articleshow/88823379.cms" data-type="tilCustomLink">Bitcoin, Ethereum, and others are half-way down from their record highs, but investors are still better off than they were a year ago</a>

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