Development of blockchain is moving at a quick pace. It could, however, be quicker. In order to spur increased adoption and development of blockchain based services, a new group known as the ‘Crypto Open Patent Alliance (COPA)’ has been formed.
This alliance, which is being championed by Square, essentially represents a group of forward thinking companies, which have decided to share blockchain related patents openly and freely.
In basically every industry, patents play a vital role. Simply put, a patent is a right to exclusivity over a process or intellectual property (IP). Patents are important, primarily for one reason – they protect from theft.
If a visionary inventor were to spend years painstakingly developing a new process or item, but neglected to protect the IP with a patent, a company could simply come along, and use the inventor’s IP to mimic the end product. If the inventor is to be rewarded for their efforts, this IP needs protecting.
Sharing is Caring
Now that we have established what a patent is, and why they are important, is there a downside to them? Yes.
Often, companies with deep pockets will seek out ownership of patents surrounding competing technologies. In this case, the company is not protecting the IP, but rather ‘putting it on ice’ and preventing others from using it. This is a fairly common practice, with a plethora of examples by big corporations ‘patent hoarding’.
It is due to this mindset that the COPA was recently created. In the eyes of the COPA, ‘sharing is caring’. With the blockchain industry in such a nascent stage, growth and development can easily be stymied by patent hoarding. If the industry is to meet the lofty expectations of many, it will require the sharing of knowledge.
The concept of patent sharing is not a new one. While most companies are solely focused on each’s own success, there have been many examples over the years proving otherwise. In these cases, motivation may range from doing what is right for the public, to developing an industry. In the latter case, the mindset is that it is often better to be a small fish in a big pond, rather than a big fish in a small pond.
One of the most well-known examples of patent sharing came 57 years ago, from Volvo. After developing the three-point seatbelt, which is used in just about every modern car around the world, Volvo opted to share its patent.
While the company could have simply kept it to themselves, or licenced it out to rivals, Volvo opted not to. This was done, as the company viewed the IP behind the three-point seat belt as more than a money-maker. Rather, it felt a responsibility to the public at large to share its life-saving device. To date, literally millions of lives have been saved by the decision to selflessly share this IP.
Volvo is also a noteworthy adopter of blockchain, as the company has recently announced its intent to use the technology as a means of monitoring Cobalt supply chains. This is an increasingly important issue, as advent of electric vehicles has put Cobalt in high demand. Unfortunately, much of the world’s Cobalt is mined in unethical conditions – something Volvo is looking to put a stop to.
In the past few years, there are various examples of patent hoarding occurring within blockchain. The following are a few companies often associated with the practice.
It should be noted that the process of ‘hoarding’ patents does not necessarily imply bad acting. In many situations, it simply means that the company being awarded a patent is a true innovator, constantly developing new technologies.
Ideas like the COPA may be appealing on paper, but run the risk of suffering from adoption. To give something away for free requires a forward thinking mind. Often, such alliances rely upon a snowball effect as people will only join once others take the leap first.
This should not be an issue with the COPA. As previously alluded to, payment processing giant, Square, has announced its participation.
Square is putting all of our crypto patents into a new non-profit org we’re calling the Crypto Open Patent Alliance, which will maintain a shared patent library to help the crypto community defend against patent aggressors and trolls. Join us! #bitcoinhttps://t.co/I9VopgtMz9
— jack (@jack) September 10, 2020
Jack Dorsey is one of the most well-known, pro-bitcoin figures around the world. As the CEO of Square, it shouldn’t come as a surprise that COPA was found appealing.
Blockchain and Patents
With blockchain becoming one of the hottest technologies over the past few years, companies have been scrambling to create patents surrounding its use. One company has taken a different approach, though.
Rather than focusing on being awarded blockchain patents, IPWe have decided to develop a blockchain based patent aggregation platform; The goal of which is to bring new efficiencies to the patent industry, which is largely segregated and piece-meal on a global scale.
In Other News
For those interested in learning more about what a blockchain based patent may look like, make sure to check out our past coverage HERE. In this example, we take a look at a recently awarded patent – surrounding digital securities – to none other than Square.
KuCoin Suffers $150M Theft, Becoming Latest in Long Line of Breaches
In the time since this event, crypto-markets have been relatively un-phased. This begs the question, ‘have exchange hacks become so commonplace that their occurrence no longer has an effect on market participants’?
While this sounds like a far-fetched idea, it highlights the need for a change of approach by service providers and clients. Exchanges need to ramp up security efforts to avoid becoming the face of incompetence. Investors need to ramp up due diligence when entrusting funds to service providers.
With this in mind, today we take a look at some of the most prominent hacks totaling $40 million or more that have occurred over the past few years.
At the time of writing Kucoin is the most recent exchange to be hacked. Taking place on September 26th, 2020, a thief gained access and liquidated various ‘hot-wallets‘ owned and operated by KuCoin. Affected assets included BTC, ETH, LTC, XRP, BSV, XLM, TRX, USDT, and various ERC-20 based tokens.
Thankfully, KuCoin has maintained a strong insurance policy for multiple years now. Meaning, in this instance, user funds are expected to be protected.
Total Lost : >$150,000,000 USD
Although some exchanges were able to weather the storm after being hacked, AltsBit was not so fortunate. This hack, which occurred only months after the exchange launched, saw thieves take various assets, including – BTC, ETH, KMD, VRSC, ARRR. In this instance, the event saw hacker group LulzSev claim responsibility.
— The Lulz Boat (@LulzSec) February 8, 2020
Total Lost : >$70,000,000 USD
After a lengthy investigation, the Ontario Securities Commission (OSC) determined in July 2020 that CEO and Founder Gerald Cotten was directly responsible for the loss of assets due to years of fraud and misuse of client funds; the OSC called Quadriga a “ponzi scheme” due to Cotten’s use of client funds to cover his illegal trading losses. When Quadriga initially collapsed, it had been speculated that the funds were simply lost or in inaccessible crypto accounts, unfortunately, that turned out not to be the case. Auditor Ernst and Young were able to recover $45M, resulting in an overall loss of $169M. Unfortunately for its clients, the lost funds were not safeguarded by insurance policies.
Total Lost : >$215,000,000 USD
Most of the hacks to occur are completed through unauthorized access to ‘hot-wallets’ utilized by exchanges. This instance was somewhat unique, as the theft saw hackers steal from UpBits ‘cold-storage’. The only affected asset in this theft was ETH. Client losses were covered by the exchange itself.
Total Lost : >$50,000,000 USD
Binance is one of the world’s largest crypto exchanges, many did not expect this theft to occur. The fact that it did, underscores the risk of leaving assets in the control others. If one of the biggest exchanges is vulnerable, every exchange is vulnerable. In this instance, Binance ensured that any losses would be covered by the exchange.
Total Lost : >$40,000,000 USD
Nobody wants to be associated with one of the greatest thefts of all time. Unfortunately for Coincheck, its decision to store significant amounts of user funds in hot-wallets resulted in the record-setting theft. In this case, the only affected asset was NEM. Sadly for NEM, the events resulted in significant collateral damage crashing its price – despite not being at fault.
Total Lost : >$530,000,000 USD
2018 was a rough year for Japanese based exchanges, this particular hack followed the aforementioned incident involving Coincheck. Here, affected assets were BTC, BCH, and MONA. Similar to most hacks, thieves were able to steal assets through unauthorized access to the exchanges’ hot-wallets. While the hack occurred in 2018, it has recently begun to garner more attention, as Zaif has decided to sue Binance. It claims that Binance aided in laundering stolen funds through insufficient KYC/AML policies.
Total Lost : >60,000,000 USD
Although this theft has since been beaten by Coincheck as the largest of its kind, Mt. Gox is arguably the most well-known hack of its kind. Despite the event occurring in 2014, the ramifications linger to this day. The only affected asset of note was Bitcoin, with a total of 850,000 BTC being stolen.
Total Lost : >$450,000,000 USD
Sadly, this is nowhere near a comprehensive list of exchange hacks. Although there appears to be a common theme involving the use of hot-wallets, this is by no means the only avenue of risk. Thefts have also occurred as the result of inside-jobs, cold-wallet access, and more.
If one thing has been made crystal clear – protect your assets. Do not leave funds on exchanges unnecessarily. As an investor, take a proactive approach to asset security – utilize hardware wallets, utilize respected custodial services, etc. Even the most respected exchange is vulnerable to attacks.
Kraken Becomes First US Licensed Digital Asset Bank
Popular digital asset exchange, Kraken, has been given the green light to form a ‘Special Purpose Depository Institution (SPDI)’. This designation will allow for Kraken to develop a new entity, known as Kraken Financial, which will act as a chartered bank offering comprehensive digital asset services such as deposit-taking, custody, and fiduciary services.
“Kraken’s vision is to become the world’s trusted bridge between the crypto economy of the future and today’s existing financial ecosystem.”
Becoming a Bank
By becoming the first bank of its kind in the US, Kraken Financial is expected to play an important role in continuing the adoption of digital assets. Some other benefits include:
- Kraken Financial gains a first-mover advantage being the first entity of its kind
- Blockchain as a whole will benefit through increased clout, adoption, and prevalence
- The public will benefit through increased access to financial services built for the future
The forward-thinking nature of Wyoming regulators has not gone unnoticed by those responsible for Kraken services. While many States have taken a more cautious approach towards the adoption of cryptocurrencies, Wyoming appears primed to blaze a trail forward through its treatment of FinTech.
“We’re thrilled to work in a state so aligned with our philosophy and values. Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for FinTech companies.” – David Kinitsky, CEO of Kraken Financial
When Kraken Financial first launches, services will be restricted to U.S. based clientele only. The company notes that accessibility will expand over time to include international clients.
The hard work that Kraken put into achieving this goal was not simply for the title. By becoming a chartered bank, it will now legally be able to offer a variety of new services; each of which will help the company achieve its end goal of bridging traditional finance with the world of blockchain and cryptocurrencies. The following are just a few of the services to be supported over time.
- Custodial Services
- FIAT Payment gateways
- Account Management Services
“From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies.”
Along with offering new services, Kraken will also gain the ability to support a wider range of asset classes. Until now, the company has dealt primarily with cryptocurrencies. Moving forward, however, Kraken notes that the possibility remains for securities to be supported. With company roots surrounding digital assets, it would stand to reason that support for securities would include digital securities/security tokens, as well.
While the aforementioned expansion of supported assets and offered services is a definite positive for Kraken, its new designation as a bank also comes with increased regulatory scrutiny.
In addition to now being subject to all the same rules as a traditional bank, it is noted that it will be required to maintain 100% of deposit reserves at all times. This means that the bank will not be taking part in fractional reserve lending – providing its clients with full access to their funds at all times.
Founded in 2020, Kraken Financial is headquartered in Cheyenne, Wyoming. This subsidiary of Kraken will function as a chartered bank, offering a variety of services, tailor-built to bridge traditional finance with blockchain-based assets.
CEO, Dave Kinitsky, currently oversees company operations.
In Other News
Kraken has always been a leader in the world of blockchain. Not only is the company a vocal proponent for digital assets, but it has also taken various past actions to forward the sector. We covered one such instance, as Kraken was a founding member of the ‘Crypto Ratings Council (CRC)’.
The CRC is a self-regulated group – comprised of industry leaders like Coinbase, Circle, Bittrex, and Kraken – which has tasked itself with educating the public on asset classification. To learn more about what the CRC does, and how they do it, make sure to peruse our previous coverage, HERE.
MicroStrategy Cements Bitcoin ‘Whale’ Status, Dave Portnoy Makes an Exit, and Jim Cramer Warms Up to Digital Hedges
While 2020 has brought forth a litany of world issues, it has also been quite kind to digital assets like Bitcoin. We recently highlighted newfound interest in Bitcoin on August 13th, with examples ranging from service providers, hedge funds, and more.
One month later, are these new market entrants happy with their purchase? Will the trend continue?
The headliner in our previous look was undoubtedly MicroStrategy. As the world’s largest intelligence firm, it made quite the splash, with a lump sum purchase of 21,454BTC – which equated to roughly $250M USD.
This, however, was not enough to satiate the forward-looking company, as it just purchased an additional 16,796BTC; Bringing the company’s cumulative BTC holdings to 38,250 – roughly $425M USD. MicroStrategy CEO, Michael Saylor, made the announcement via twitter, stating,
On September 14, 2020, MicroStrategy completed its acquisition of 16,796 additional bitcoins at an aggregate purchase price of $175 million. To date, we have purchased a total of 38,250 bitcoins at an aggregate purchase price of $425 million, inclusive of fees and expenses.
— Michael Saylor (@michael_saylor) September 15, 2020
If the company’s first BTC purchase wasn’t enough of an endorsement, this increased exposure to the asset certainly is.
MicroStrategy, like most companies, experienced hardships due to the effects of COVID. Perhaps coincidental, the company has experienced a significant uptick is share value since its first BTC purchase. As a result, the company has seen its shares attain similar value to pre-COVID.
While MicroStrategy continues to be enamoured with BTC and what the asset has to offer, not all investors have developed this type of affinity. Of our recently covered market entrants, Dave Portnoy stands out as having a bad experience.
Mere weeks after making a high-profile entrance into crypto markets, Dave Portnoy has indicated, via twitter, that he has exited crypto to complete further market research.
DDTG ALERT: I’m out on crypto because coins don’t always go up. Stocks on the other hand continue to always go up. pic.twitter.com/8zfOvNqEVX
— Dave Portnoy (@stoolpresidente) August 21, 2020
This move was attributed to a decision to purchase Chainlink – a purchase which turned out to be ill-timed, as the asset crashed in the following days.
Now that we’ve taken a brief look at each, a positive and negative experience, by recent market entrants, are others still fearful of the asset?
Respected investor and host of ‘Mad Money’, Jim Cramer, has warmed up to Bitcoin, becoming the latest high-profile name to enter the world of digital assets. He recently let his evolving views of Bitcoin be known on a podcast with Anthony Pompliano.
Like many, Jim Cramer has listed fear of inflation as the main reason for attaining Bitcoin. While still an ambassador for gold, he now views Bitcoin as another valid hedge, albeit with more potential upside.
Interestingly, Jim Cramer notes that part of his reasoning for becoming more accepting of Bitcoin is his children. He has recognized that while wealthy/older investors today are still interested in safe-haven assets like gold, this will not be the case for the next few generations, as they grow up in an increasingly digital world. He likens this old-school affinity towards gold as ‘using a typewriter’ in a modern world. Overall, he states, on various occasions, that he ‘needs to do this for his kids’. This is a refreshing attitude and approach, as many focus on the present and how to make themselves wealthy (at the expense of future generations).
While he will not be making a splash to the same extent as MicroStrategy, Jim Cramer has indicated that he will be allocating roughly 1% of his portfolio for exposure to Bitcoin.
Building a Hedge
Although each investor’s intentions may vary, there is one clear motivating factor behind the majority of these new market entrants – hedging. With the world continuing down a path of economic uncertainty, investors worldwide have been flocking to safe-haven assets, such as gold. With continued adoption of BTC, and the development of industry services, the once nascent asset is quickly turning into a legitimate and respectable store of value; A store of value that many believe will one day rival gold and similar precious metals.
- KuCoin Suffers $150M Theft, Becoming Latest in Long Line of Breaches
- Evolving Trends in Token Powered Networks: Part 2
- US Dollar Forex Market Comeback Continues as Stocks Struggle
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- Evolving Trends in Token Powered Networks: Part 1