Crypto Advances in All Directions
Cryptocurrencies and crypto assets remain works in progress from their underlying cryptographic architecture to the new asset classes built on top of them, according to participants of New York City’s Blockchain Week 2019.
“When you see money in the form of software, it is really exciting because you can develop it and improve it and all the time,” Paul Kittiwongsunthorn, founder of TenX told Jill Malandrino, global markets reporter at Nasdaq during a Trade Talks interview. “That is what has happened to bitcoin, ethereum, and a lot of currencies because many people are working on it to make it better every day.”
However, cryptocurrency developers face the challenge of balancing privacy against the ability to audit and control the supply of cryptocurrencies. There are many techniques that blockchain analysis firms can use to de-anonymize someone if the firms have the person’s address, according to Reuben Yap, COO of Zcoin.
“Just because I bought a coffee, the seller might know my net worth, whom I transacted with in the past, or from which exchange I got my bitcoins,” he said during a similar interview. “This is the real problem in blockchain today.”
Two of the most popular methods to address the privacy issue are the adoption of zero-knowledge proofs as well as Monero’s Ring Confidential Transactions. Coins that incorporate zero-knowledge proofs dematerialize from a party and rematerialize with the counterparty without the coin’s transaction history. Coins using Monero RingCTs break up transactions into components, which are then hidden among the components of other transactions.
No matter the approach, Yap recommended that developer keep their cryptographic architecture as simple as possible, which would make it easier to detect potential flaws. “Security through obfuscation isn’t good,” he noted.
In the meantime, Tenx is working to broaden cryptocurrency adoption among retailer and consumers by leveraging the credit card payment system and tying it to the customer’s cryptocurrency holdings. “The merchant doesn’t have to adopt anything because they already know how to use the credit card system,” said Kittiwongsunthorn. “And for the consumers, they already know how to use the card.”
Beyond the basic cryptocurrency transactions, firms like Synthetix are bringing synthetic instruments to the ethereum blockchain that permit ether holders to have exposures to other cryptocurrencies, fiat currencies, precious metals and eventually securities. The firm does not custody the underlying assets, Kain Warwick founder and CEO of Synthetix, told Malandrino.
“There is no financial engineering in the background other than the price feed going into the blockchain,” he added.
The next focal point of the crypto market will be over-the-counter derivatives.
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The venue is the first FCA regulated exchange, brokerage and custodian for digital securities.
Matt Zhang created the bank's spread products investment technologies team.
Coinbase Prime has been working to establish a market leading prime services offering.