Know & go
- A closer look: During Apple’s annual WorldWide Developers Conference (WWDC) event this week, privacy was a key theme. Apple announced new privacy-focused products and features targeted at both end users and developers. We provide a closer look at a few of these features and their role in the movement towards better privacy standards.
- Three things to know: (1) Facebook is charging $10 million to operate a node on its cryptocurrency network (2) Block.one announced its EOS-based social media platform, Voice, (3) Tron founder Justin Sun wins a bid to have lunch with Warren Buffet.
- Market snapshot: Total crypto market capitalization is around $244.6 billion at press time (down 3.4% w/w). BTC is trading at $8086 (down 3.6% w/w), ETH is at $256 (down 2.6% w/w). BVOL (the rolling 30-day annualized Bitcoin volatility as calculated by BitMEX) is 89.5%, up from 85.3% last week. (6/7 12:45PM ET)
Weekly market snapshot
A closer look: Privacy goes mainstream
“We at Apple believe that privacy is a fundamental human right” — Tim Cook Keynote
Apple’s announcement and the trend towards privacy
Privacy and data protection are emerging as themes that could be going mainstream. Apple held its annual WorldWide Developers Conference (WWDC) this week. There were many exciting announcements but chatter among crypto enthusiasts centered around the company’s renewed focus on privacy in the form of single sign on that protects rather than leaks user data, improved control and optionality around location sharing and IOT apps and devices, and new tools (CryptoKit) that make it easier for developers to protect user data.
Sensitive, personal data is increasingly being generated at a rapid volume and speed as more aspects of our lives move from the physical to the digital world. As a result, the attack surface grows larger and larger by day as do the attacks that compromise sensitive data and personally identifiable information. This leads to identity theft, stolen funds, and other safety threats that negatively impact users. In the last two years alone, major companies like Reddit, WordPress, Ticketfly, Marriott, Centers for Medicare and Medicaid, British Airways, Westpac, and more have been compromised by hackers. Subsequent regulatory actions and fines, reputational damage and loss of trust negatively impact companies.
Surprisingly (or unsurprisingly?), this hasn’t really led to significant changes in user behavior – the question is, why? And what’s needed to catalyze change? As Tony Sheng highlights in this essay, “Big picture, building and using systems that cannot contribute to the Panopticon seems like the answer (“can’t be evil”).” A key challenge is that users don’t have many privacy-focused options or that alternatives that do provide enhanced privacy and protection trade off convenience and user experience. For the first time, a large tech incumbent that has built an impressive and loyal ecosystem of users and developers (i.e. Apple), may be providing an alternative that checks all the boxes.
Apple’s approach to privacy
User focused announcements: Sign In with Apple
Apple made multiple privacy focused announcements as it relates to protecting end user data at WWDC. The major announcement in the privacy category was Sign In with Apple. Sign In with Apple is a single sign on service that allows users to log into third-party applications using their Apple ID without revealing any personal data to Apple, third party apps or Facebook/Google in the process. To sign in, developers have the choice to allow users to authenticate with some form of biometrics (i.e. Face or Touch ID), with the Apple Watch, or leave the method of authentication open to users.
The only data that is revealed is the user’s name and email address. However, users also have the option to hide their real email address using Apple’s private email relay. In this case, Apple creates a unique dummy email address for each app from which users choose to hide their address that forwards correspondences to users’ real email addresses. Sign In with Apple will be available across all browsers on all devices including the iPhone, Mac, Apple Watch, and iPad. An advantage that Apple highlighted for developers is privacy preserving fraud detection. Sign In with Apple allows developers to more clearly discern real users from fake accounts without employing a cumbersome service like Captcha or more invasive practices.
According to Apple, developers that have built apps on or after the rollout of iOS 13, that also use third party sign in services, will be required to add Sign In with Apple as an option above all the other options (cough Facebook and Google). Reuters highlights that positioning often drives user behavior, all else held equal.
This move by Apple directly challenges the moat that Facebook and Google have created (along with the business models of many applications – see Challenges). Apple differentiates itself by taking the complete opposite stance – protecting user data and putting control in their hands versus collecting user data for targeted advertising and marketing. Unlike Facebook and Google, Apple does not need to monetize user data, as it generates the majority of its revenue through its hardware products, and thus has the ability to compete on privacy – a perk that entities like Facebook and Google likely won’t offer users anytime soon.
Additional notable privacy announcements that Apple introduced include protecting user location data by giving them more optionality when sharing their location and making it easier to make changes to location sharing, and the HomeKit Secure Video API that protects videos taken on HomeKit enabled webcams from third party hardware companies, among other things.
Developer focused announcements: CryptoKit
Apple also announced the upcoming release of CryptoKit, a Swift API that enables developers to carry out basic cryptographic operations (i.e. hashing, key generation, encryption, etc.). The new framework will replace Apple’s previous solution, CommonCrypto, which does not support Swift (Apple’s custom programming language). By supporting Swift, CryptoKit can significantly reduce the code needed to encrypt application data or generate user keys compared to its predecessor. As a result, developers should find it easier to build secure applications without having to resort to more flexible yet granular “lower-level interfaces.” The benefit to developers may also be passed on to users in the form of improved in-app data management and security.
The name CryptoKit alone led many cryptocurrency enthusiasts to speculate if Apple is considering an iOS product that supports digital assets, similar to Samsung’s native crypto wallet released earlier this year. Other crypto community members were less optimistic, claiming CryptoKit does not provide a use for cryptocurrencies based on the project specs. Therefore, it is unlikely iPhones will be able to act as a hardware wallet in the near future.
Apple’s focus on privacy
These announcements are a reminder that Apple has been historically vocal about its commitment to preserving user data privacy and communicating to consumers the reason their data is being collected. At a 2010 conference, Steve Jobs stated “privacy means people know what they’re signing up for, in plain English and repeatedly.” He carried on to say that companies and applications need to be clear about when data is collected and how it will be used. Further, users should be given every opportunity to opt out of supplying personal information to data harvesting companies.
Apple’s stance has reportedly unwavered under current CEO, Tim Cook. In 2016, Cook publicly denied an FBI request to provide a backdoor into iPhones following the San Bernardino shootings, stating the move violates the company’s policy on user privacy and security. The Apple CEO has also been an avid supporter of GDPR, since the European regulatory policy grants people access to personal data and information held by companies and permits users to control how this data can be used. In a keynote presented to the European Parliament, Cook voiced that users should have the rights to minimization, knowledge, access, and security when it comes to personal data, and advocated for other jurisdictions to adopt policies that reflect these “fundamental human rights.”
Despite sufficiently advertising a focus on privacy, recent reports suggest Apple products may have some room for improvement in terms of data security. For instance, current iPhones do not prevent third-party applications from collecting and circulating user information. An observation made by a few Wall Street Journal employees found iOS apps average about four secret third-party trackers each, which extract data from unsuspecting customers and ship it to companies like Facebook for marketing purposes (h/t Maya Zehavi). The act of collecting data is not the core problem, as companies rely on customer information to generate ad revenue so users can access these applications at little to no financial cost. The problem is the lack of transparency and optionality — customers are not always informed about in-app data tracking and are given very few controls to prevent information leakage.
Apple’s new privacy forward solutions – in particular, Sign In with Apple – could help curb the unsavory and undercover extraction of data by limiting the amount of user information available and allowing users to make the decision on what and how much they want to share. Considering the tech giant’s stance on the matter, its move to preserve user data confidentiality at the potential cost of losing developer interest is unsurprising.
While Apple’s focus on privacy at this year’s WWDC is encouraging, it does not come without its challenges. Restricting data flows will have a positive impact for users in terms of privacy, but developers that rely on customer data for ad revenue may be forced to rethink their business models. According to Anthony Pompliano, Sign In with Apple ID poses a greater initial threat to third-party apps that offer freemium services than to ad giants Facebook and Google. With limited access to user information, once “free” products could adopt a pay-to-play model, trading in the familiar data exchange for a financial transaction. This potential added friction may hinder user adoption and acceptance as customers tend to prefer convenience over privacy.
Whenever Apple opts for a different approach, such as these privacy solutions, users and developers are forced to adhere to the new standards. The only alternative is to leave the ecosystem of Apple products. Both developers and users may complain and threaten to choose an alternative solution, but there is precedent that all end up complying – case in point, the removal of the iPhone headphone jack and the added cost of the various dongles needed for Macbook use have done little to deter Apple brand loyalty. An example that perfectly illustrates the relationship between Apple solutions and customers occurred when the iPhone was first unveiled in 2007. A volunteer testing the new phone complained the on-screen keyboard didn’t work – it was too small for his thumbs. Steve Jobs simply replied: “Your thumbs will learn.” Considering the now ubiquitous nature of smartphones, it may be safe to say Jobs was right.
Critics also argue that privacy shouldn’t be a premium service, in reference to the high price point of Apple devices, and the fact that these options are only available to those who have the means to buy Apple products. The tech giant also continues to increase its already high price points y/y, a trend that seems unlikely to end. The most affordable iPhones are 15% more expensive than the 2017 models. Starting prices for other popular product lines increased by 20% in 2019.
The greater privacy movement
So the question is, how could these announcements by Apple impact the crypto industry. Based on the functionality that’s being rolled out right now, there isn’t really any direct or tangible impact (or even any mention of crypto assets). But a key achievement for Apple and win for many in the crypto industry would be increased awareness about privacy as a fundamental right, rather than reserved for those who have something to hide. This could bring users one step closer to increased awareness and, eventually, increased usage of platforms and services that allow for greater data and financial sovereignty, privacy and control. The impact is not limited to non-crypto users – announcements like this are also an opportunity for us to reflect on best practices around privacy and control in the crypto industry. Combine this with potential developer reluctance to handle user data as the costs of compliance and consequences of mishandling the data become increasingly stringent and painful – a topic we touched on in our Microsoft ION piece. And for the first time, we have pressures from both supply and demand sides that may actually distill our complacency towards personal privacy and control.
In other news
- Tron founder Justin Sun announced he submitted the winning bid of $4.57 million to have lunch with billionaire investor Warren Buffet. The lunch is an annual charity event – now in its 20th year – hosted by Buffet in which all proceeds are donated to the Glide Foundation, a charity organization that helps the homeless. Source. Sun hopes to use the opportunity to change Buffet’s stance on cryptocurrencies, which has been overwhelmingly negative to this point. Sun also plans to invite blockchain industry leaders to join him in speaking with Buffet. Source.
- Walmart joined the MediLedger consortium to help track the provenance of pharmaceuticals via a blockchain network. The consortium is led by blockchain firm Chronicled and includes Pfizer and pharmaceutical wholesalers Mckeeson, AmerisourceBergen, and Cardinal Health as participants. The blockchain itself is a private version of Ethereum that features a proof of authority (PoA) consensus mechanism. Walmart is also participating in IBM’s Food trust blockchain network, a Hyperledger Fabric based platform for tracking fresh produce through its supply chain. Source.
- Block.one – the startup that built the EOS blockchain platform and raised over $4 billion dollars in the EOS ICO – announced it will be building a social media platform. The product, dubbed Voice, will run on EOS and promises to preserve user data privacy, in direct opposition to existing social media applications. According to The Block, Block.one spent ~$150 million and a year in development to create a beta version of Voice, which is now available for user sign-ups. Source.
- Binance will block the IP address of users in 29 countries, the US included, from accessing Binance DEX starting July 1st. The decision may be a reaction to the SEC charging the founder of Etherdelta with operating an unregistered securities exchange, though brings into question the extent of the platform’s decentralization. Source.
- Gartner shared research saying that 90% of the current enterprise implementations of blockchain technology will need to be replaced within eighteen months. Reasons they highlighted include a gap in enterprise knowledge about the benefits of and expectations from blockchain technology and the fragmented nature of solutions on the market. Source.
- P2P exchange LocalBitcoins formally announced its removal of in-person, local cash trades driven by changes in Finnish regulation, specifically as it relates to the Act on Detecting and Preventing Money Laundering and Terrorist Financing. Source.
- Crypto exchange Bitfinex is looking to launch its stablecoin Tether (USDT) on the Lightning Network later this year. If Bitfinex is successful, “USDT would be the first mainstream asset to be issued on the Lightning Network” and may help boost network adoption. Tether has already launched on the Omni Layer, Ethereum, and TRON – with a planned issuance on Blockstream’s Liquid sidechain within the next few weeks. Source.
- About one dozen large banks are investing $50 million in a new entity called Fnality that will run the previously announced “utility settlement coin” that aims to create a “digital cash instrument” (essentially another stablecoin) that would improve the process of clearing and settlement. According to Reuters, the research and development phase is complete and the project could launch by 2020. Source.
- 0x and Starkware announced their alpha version of StarkDEX this week on Ethereum’s Ropsten testnet. The alpha will simulate activity by replicating live trades from Binance, batch them off chain, create proofs for the validity of these trades, and verify the proofs on-chain using the StarkDEX verifier smart contract. The team expects to initially settle up to 10 trades per second. Source.
- Blockchain gaming company Lucid Sight – the team behind MLB Champions, the blockchain-based collectibles licensed by Major League Baseball – inked a deal with CBS for the rights to tokenize Star Trek related items. The announcement comes a few months after the startup raised a $6 million round led by Salem Partners, the Galaxy EOS VC Fund, and Digital Currency Group. Lucid Sight’s goal is to eventually offer its collectibles and games on traditional gaming platforms as well as iOS and Android mobile apps. Source.
- AP reported Mark Karpeles – the former CEO of the now defunct Mt Gox exchange – is planning to start a new Bitcoin-related business in Japan. In a follow up conversation with The Block, Karpeles denied the AP report, claiming his new business does not involve Bitcoin or blockchain and is instead focused on building cloud based solutions. In March 2019, Karpeles was found guilty of falsifying data while at Mt Gox and sentenced to 30 months in prison. The sentence came with a four year suspension, meaning no time will be served unless he commits any additional offenses within the next four years. Source.
- In February, Vanguard began quietly testing Symbiont’s blockchain solution to automate the collection of data for seventeen funds from benchmark provider, CSRP – previously a manual process. The key advantages Symbiont claims to provide are timeliness, accuracy, efficiency and cost savings. According to Symbiont’s CEO, Mark Smith, other asset managers are starting to take notice as well. Source.
- Facebook is calling on finance and tech incumbents to join an independent foundation to govern its cryptocurrency, slated to launch later this month. The reasoning behind the foundation is to foster greater trust in the currency versus if only Facebook had oversight. Additionally, the company is seeking partners who would have to pay $10 million to operate a node on the network. Facebook’s cryptocurrency is first being targeted at people around the world that don’t have access to basic financial services or have exposure to volatile fiat currencies. Facebook may also be working on ways to allow users to pay with the cryptocurrency at physical locations. An interesting fact is that Facebook is giving employees working on what is internally dubbed as the Libra project the option to be paid in the cryptocurrency. Source.
- A study released by the Pacific Northwest National Laboratory (PNNL) – and funded by the Defense Advanced Research Projects Agency (DARPA) – found Bitcoin is most discussed cryptocurrency in Reddit chats when compared to Ethereum and Monero. Bitcoin subreddits totaled 3,600 comments per day, far ahead of Ethereum’s 500 and Monero’s 380 average daily comments. The data also showed that Reddit members responded faster to Bitcoin related posts (an average of ~11 minutes to start generating comments), while Ethereum and Monero averaged 20 and 27 minutes respectively. Source.
- North Carolina-based startup Fluree raised a $4.7 million seed round led by 4490 Ventures with participation from Revolution’s Rise and Rest Seed Fund. Fluree intends to combine its custom blockchain with graph database technology to enhance the integrity and security of stored data. Source.
- Bitcoin wallet Samourai Wallet raised its first round of venture funding, a $100k investment from Cypherpunk Holdings. The company features an Android app that provides greater privacy for users transacting in bitcoin. Samourai Wallet intends to use the funding to help it release an updated version of the wallet later this month and to develop a user-friendly bitcoin node built to work with its wallet. Source.
- Blockchain project Polkadot is aiming to raise $60 million dollars through a private token sale at a valuation of $1.2 billion. The funds that have invested, however, did so at a more favorable valuation – dropping Polkadot below the unicorn threshold. The blockchain startup has already sold 70% of the allotted DOT supply and would have to increase the token allocation in order to raise the full $60 million. Polkadot plans to use the proceeds from the sale to test its soon-to-launch mainnet and to create a fund to incentivize developer activity. Source.
- Voatz, a blockchain-based voting platform, has raised a $7 million Series A led by Overstock’s Medici Ventures and Techstars. Additional investors included Urban Innovation Fund and Oakhouse Partners. Voatz will use the funds to improve the accessibility, user experience, and security of its app, which permits users to vote remotely using a “secure” device. The voting startup also recently concluded a pilot effort in Colorado to test absentee voting for deployed military personnel and overseas US citizens. Source.
Global regulatory roundup
- The U.S. SEC announced a lawsuit against Kik, alleging the online messaging company sold unregistered securities as part of its $100 million Kin ICO in 2017. In the suit, the SEC indicates Kik pivoted to a new blockchain-based product, financed by the referenced token sale, after its original business model was never profitable. Kik issued a response stating it was not surprised by the move and intends to take the SEC to court. For a full breakdown of the guidance, we recommend Katherine Wu’s annotated version of the SEC’s complaint against Kik.
- At last week’s FinHUB forum on digital assets, SEC Director of Corporate Finance William Hinman stated digital assets are capable of evolving to a point where the assets may no longer be deemed securities. Hinman singled out TurnKey Jets, which receive a no-action letter earlier this year, as one example, highlighting that TurnKey had a functional token use case and a fully deployed network at the time the letter was issued. Source.
What we’re reading
- Blockchain fees are broken. Here are 3 proposals to fix them. By Haseeb Qureshi
- To avoid bias, hold no coins by Tony Sheng
- Crypto OTC Trading, Explained by Elijah Bradley
- Coin Center Travel Series: Venezuela by way of Medellín, Columbia by Benjamin Dean
- Trusted Brands by Zach Goldstein, Dani Grant, Nick Grossman and Naomi Shah
- A Note on the Bitcoin Rally by Adamant Capital
- Initial Exchange Offerings by BitMEX Research
- 0-1 by Andrew Keys
- A take on Bitcoin’s Gini coefficient by Tamas Blummer
- How Does Cosmos Work Part 1 & Part 2 by Preethi Kasireddy
- June 2019 Bitcoin Mining Report by CoinShares
What we’re listening to
- Word on the Block: Kevin Kelly, Delphi Digital: Are We Ready for Cryptocurrencies as an Alternative Asset Class?
- Unchained: Blockchain CEO Peter Smith on Its Dark Pool, Crypto Lending Operation and Plans to Go Public
- Chain Reaction: Noblebridge’s Tyrone V. Ross: Crypto Wealth Management
- What Bitcoin Did: Jimmy Song on the Bitcoin Revolution Myth
- Off the Chain: Clay Collins, Co-Founder and CEO of Nomics: Identifying Fake Volume & Exchange Data Transparency
- Unconfirmed: Ethereal 2019: DeFi and Paths to Everyday Usage
- Blockchain Insider: Live from Money 20/20: Why tokens might be the future of finance
- Base Layer: Marcos Veremis (Cambridge Associates)
- Decentralize This!: Nathaniel Whittemore: The Internal and External Narratives of Decentralization
Circle in the news
- USDC on-chain transfers surpassed $10 billion as many of the leading Decentralized Finance projects – including Compound, Dharma, and dYdX – announced support for the USD-backed stablecoin. Source.
Where we’ll be in June
- CB Insights: Future of Fintech, New York, 6/11-13
- Fortune Brainstorm Conference, Montauk, NY, 6/19
- MIT Professional Ed – Applied Blockchain Course, Cambridge, MA, 6/24-28