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How One Scrappy Startup Survived the Early Bitcoin Wars

How One Scrappy Startup Survived the Early Bitcoin Wars

  

The girls were dancing on a neon tank,

wearing sequined bikinis lit up by red and green laser light. A strobing fixed-wing aircraft passed overhead like the acid-trip kissing cousin of a Mitsubishi A6M Zero, with more sequined women dangling from it, trapeze-style. Flashing robots had preceded them — wheeling through the room, pumping their fists at the crowd — while the audience, seated on tiers of glittery red plastic swivel chairs, waved glow sticks. As the music throbbed, twin walls of video screens threw up bizarre images. The Technicolor dream machine the women were using as a stage displayed, at the end of its barrel, a rainbow-colored star — just where, on an ordinary tank, the death comes out. But this was no ordinary tank. It was a fixture of the one-hour show that takes place three times a night at Robot Restaurant, a kind of eye-melting Japanese dinner theater, a cabaret show of such migraine-inducing decadence that Las Vegas falls silent before it.

On this hot Tokyo night in July 2013, two Americans, Roger Ver and Nicolas Cary, sat in the crowd. As far as Cary could tell, they were the only gaijin in the place. He was drinking a beer, while Ver, as usual, was abstaining. Their unappetizing bento boxes sat untouched: you don’t go to Robot Restaurant for the food. In the midst of the cartoonish spectacle — earlier, a woman wielding an oversized mace had ridden in on a stegosaurus to battle two heavily armored robots — they had business to discuss. Ver wanted to see if Cary could become the chief executive of Blockchain, a Bitcoin startup in which Ver was the sole investor and majority stakeholder. (The company’s name was a direct nod to the term “blockchain,” the groundbreaking technology that underlies Bitcoin and other cryptocurrencies, making it possible to process and verify transactions transparently without the need for a central authority.) Cary had come highly recommended by Erik Voorhees, an old college friend who was himself a Bitcoin pioneer, and who in turn had given Cary an earful about Roger Ver. Talking to Ver over Skype, Cary had liked what he’d heard enough to hop on a plane from Seattle the following weekend to continue the conversation in person.

Oneworld Publications

Robot Restaurant, which is located in Kabukichō, an entertainment and red-light district in Tokyo’s Shinjuku ward, is Roger Ver’s first choice when it comes to entertaining Western visitors, presenting as it does the spectacle of Japanese eccentricity and excess beyond one’s wildest imagination. He wanted Cary to have a good time, because he wanted to end his search for a CEO. He had been interviewing candidates for weeks and had no strong contenders. He had been relieved when Voorhees reached out one day and said, “I think I know the right guy for you.”

The spectacle was also part of Ver’s self-presentation. Although an American (he has since renounced his citizenship), he had lived in Tokyo for much of the past seven years and was fluent in Japanese. As a teenager, he had read a lot of science fiction — Arthur C. Clarke, the techno-utopian Foundation series of Isaac Asimov, Neal Stephenson’s Cryptonomicon — and for him the language of sci-fi was bound up with Bitcoin and with the libertarian principles it was founded on. At the first Bitcoin conference in New York in 2011, where he had met Voorhees, it had felt as if he were entering the most exciting science fiction novel of all. Having read so much about futuristic systems of money and credit, he found himself thinking, This world-changing invention is finally here.

“Before Bitcoin,” Ver says, “I was just waiting around for the Singularity” — the hypothetical point at which, some people believe, technological progress will reach a sort of event horizon, past which human civilization will change in radical and unforeseeable ways, becoming “post-human.” And now here he was in Tokyo with his digital millions and a Japanese wife, living fifteen minutes into the future. He was living proof, if anyone was, that a new kind of expatriate existence was possible, bankrolled by borderless money.

Even so, most people would have laughed at him. In 2013 Bitcoin was still in its infancy, not yet an asset with a market capitalization of more than $27 billion. Goldman Sachs and the New York Stock Exchange had not yet invested millions in digital currency startups. The technology that powers Bitcoin had not yet made the cover of The Economist. It had not yet given rise, as it has today, to hundreds of new digital tokens that have the potential to transform not only banking and payments but the entire internet.

But Cary, then twenty-eight, with approachable face that telegraphed his openness to the world, wasn’t most people. He listened with interest to what the older man had to say. Ver’s pitch was simple. He painted a picture of a world with no barriers to financial inclusion, the world where people could transact peacefully without government interference. He explained the role that Blockchain could play in building this world. And then he said three words: “We need help.”

The First Wave Crashes

At stake was the best Bitcoin company remaining from the first wave of start-ups. Many of the others had gone down in flames, due to mismanagement or fraud, or had been hacked, taking thousands of bitcoins with them. Some — like Bitcoinica and BitInstant — had even generated lawsuits. Blockchain was different. Despite being the most popular Bitcoin wallet service in the world, it had never suffered a major crisis. Its founder, Ben Reeves, was smart and dedicated. He had already built the website, released iPhone and Android apps, and was handling customer support. “It’s amazing that one human being was able to do all of that,” Ver says. But Reeves, a British programmer who for two years had been running Blockchain as a one-man show, was getting overwhelmed. Roger, who had provided seed funding to Reeves in 2012 in exchange for a majority stake in Blockchain, didn’t have time to run the company himself.

They needed new blood at the top, and Nic Cary seemed like a real go-getter. The other candidates had failed to impress. “They didn’t seem to have a strong enough personality type or they didn’t seem to be in a big enough hurry,” Ver explains. “Bitcoin never sleeps. We need to move quickly and grow quickly and do everything sooner rather than later. I felt that sort of drive and energy and passion from Nic.”

For Cary, the opportunity meant a chance to revitalize himself. After more than six years at his current job, a software company he’d joined only months after graduating from college, he was burned out and looking for an escape hatch. Taking the top job at a Bitcoin start-up would hardly lighten his load, he knew, but it would fill him with new purpose. The world Ver had described was one in which Cary himself wanted to live.

Blockchain was perhaps uniquely suited among Bitcoin startups to make that world a reality. Although the Bitcoin protocol had been designed to eliminate counterparty risk — the risk that comes with giving up custody of one’s money — services had quickly sprung up offering to take this newfound digital wealth, nd the hassles that came with storing and securing it, off people’s hands. Some of these were exchanges; others were wallet services. Several ended up being disasters. In September 2012, an exchange called BitFloor was robbed when an unencrypted wallet backup was accessed by hackers during a manual transfer of data. Around 24,000 bitcoins — then worth about $250,000 — were stolen, causing the exchange to halt operations briefly. (At recent prices, those ill-gotten gains would be worth more than $38 million.) When it reopened, it began slowly recouping users’ losses, but shut down for good on April 19, 2013, after its US bank refused to continue providing it with banking services.

Another flameout was PicoStocks. Launched on Christmas Eve 2012 as an unregulated stock market denominated in bitcoins, and supposedly incorporated in the Marshall Islands, PicoStocks attempted to circumvent federal securities regulations by operating as if PicoStocks itself owned the assets and traders merely purchased dividend streams. According to its founder, the stock market suffered a hack attack in June 2013 in which 1,300 bitcoins were stolen, the result of PicoStocks using duplicate passwords for multiple accounts — a practice the founder himself described as “just extremely stupid” and “clearly our fault.” Five months later, PicoStocks announced that it had been robbed again. This time a total of 5,896 bitcoins were missing from both its “hot” and “cold” wallets. Because cold wallets can’t be accessed in online attacks, the theft may have been an inside job.

Worst of all was Bitcoinica. The brainchild of a seventeen-year-old named Zhou Tong, who lived in Singapore, Bitcoinica launched in September 2011 as a service allowing people to trade digital currency on margin, a high-risk, high-reward strategy that can potentially yield huge profits. The trading platform soon became immensely popular, home to more than $1 million in customer assets. At its peak, Bitcoinica’s trading volume was nearly as high as that of Mt. Gox, then the world’s largest Bitcoin exchange. Its downfall began in March 2012, when its host server was hacked and some 43,000 bitcoins were stolen, an amount then worth about $220,000. Customers’ faith was shaken, but Bitcoinica covered the losses out of its own reserves.

Then disaster struck.

As would later happen with PicoStocks, Bitcoinica was robbed a second time. This time, on May 11, 2012, the hot wallet was hacked, and 18,547 bitcoins — $92,500 worth — were stolen. It was too much. Bitcoinica shut down immediately and started a claims process by which customers could attempt to recover their deposits. But the hacker had deleted the platform’s account registry, making it impossible to verify users’ account balances without making a painstaking examination of the trading records. It was a sobering lesson in what can go wrong when teenagers get their hands on the levers of finance. At the time, Roger Ver himself had 24,841 bitcoins on deposit with Bitcoinica. He didn’t want to see it die. Behind the scenes, he began working on a plan for him, Jesse Powell, and two other men to buy Bitcoinica for enough money to make every customer whole — everyone except themselves.

But the lesson still wasn’t over. Only a few weeks before the second hack attack, Zhou Tong had sold Bitcoinica to a group of investors, who in turn had hired a three-man team with prior digital currency experience to build and manage the service. While the claims process crawled along, one of the team members, Charlie Shrem’s friend Amir Taaki, decided against all reason to publish Bitcoinica’s source code on the Internet. Releasing the code publicly like this — evidently in keeping with the Cypherpunk attitude that software wants to be free — immediately tanked Ver’s proposal to buy Bitcoinica, since whatever value its intellectual property had retained was now destroyed. Worse yet, within the code was the password to an account which, like a digital strongbox, held everything necessary to access Bitcoinica’s account at Mt. Gox.

Realizing this, a thief took advantage on July 13, withdrawing from the Mt. Gox account the maximum amount possible: forty thousand bitcoins and $40,000, worth a total of $350,000 at the time. Bitcoinica — its finances now in shambles, its leadership team no longer communicating or even attempting to issue refunds — went into receivership so that whatever funds remained could be disbursed to former customers. Nobody, including Roger Ver, had any hope of recovering all of their money.

When Zhou Tong had first announced Bitcoinica to the world, a member of a forum had given him a warning: “Systems that work with money are attacked hard and often, by intelligent skilled people… Spectacular failure is your destiny if you don’t work very hard to prevent it. Spectacular failure may be your destiny even if you do work very hard to prevent it. You should plan accordingly.”

“There’s no counterparty risk, there’s no central authority, there’s no merchant processor, there’s no bank, there’s no one telling somebody what they can and can’t do,” Cary says today. That meant no government could freeze your Bitcoin assets if they were stored in a Blockchain wallet. No government could bar you from sending money to whomever you liked — say, a relative in Cuba. And no government could ever force Blockchain to divulge information about customer assets, making it the wallet of choice for Roger Ver and thousands of other privacy-conscious individuals.

The radical notions underlying this business model included taking seriously the power to let users be their own banks, despite the inherent challenges. “The true promise of Bitcoin is to let money move around the world instantly and basically for free, just like email does for information,” Cary says. And in order to do that, you have to trust people with the custody of their own funds.”

When Cary met Ver in Tokyo in 2013, there were only about 350,000 Blockchain wallets, while the market cap of Bitcoin itself, depressed since the popping of the April price bubble, hovered at around $1 billion. A drop in the bucket compared to most of the world’s national currencies. But the potential was there — the potential for it to be much more than simply the coin of the realm for the digital underground. As Alex Waters, a former Bitcoin developer who once worked alongside Erik Voorhees, puts it, “Privatizing Bitcoin for one thing — black markets — is really unfair to humanity.” And Cary is the kind of man who thinks about humanity; who considers, in choosing his personal path, what might be best for the world at large. On this basis, Bitcoin attracted him. “You can let people have universal financial sovereignty. That’s the promise,” he says.

And so he allowed himself to be led through Kabukichō, past maid cafés and blaring pachinko parlors, strip clubs and ramen shops, past kanji climbing skyward up the sides of buildings in a canyon of raw commerce, air thrumming with lust and money, streets full of punters alive to the lure of ancient enticements, a carnival amid which stood the strobing portal of Robot Restaurant. It was the gaudiest thing around in maybe the gaudiest district in all of Tokyo. “Only the Japanese mind could think of this,” Ver says. Even then, on the brink of an epileptic’s nightmare, neither man knew all that much about the other. But they would soon learn.

Cash For the Shadow Economy

Nic Cary was born in Denver, where he grew up loving the cold and the outdoors, a child of three cultures. His mother’s family had emigrated to New York from France in 1946, and his mother, with whom he lived after his parents’ divorce, imparted to him a fluency in her native tongue. His father settled in Chile, where Cary visited him once or twice a year, picking up Spanish while being inducted into the joys of fly fishing and the Hemingway tradition of literate manhood.

At sixteen, enamored of the Internet despite the cratering of the dot-com sector, Cary started a small web design company with a friend, building online storefronts and custom software tools for businesses. Two years later he enrolled in the business leadership program of the University of Puget Sound, a liberal arts college in Tacoma, Washington. A hive of intellectual curiosity, with many interdisciplinary programs, Puget Sound proved to be fertile ground for his development. Students in the international political economics and business leadership programs were pushed to expand their thinking beyond their own narrow fields; they were encouraged to cross-train in the history department. Another student from Cary’s class of 2007 recalls a freshman-level course on the warrior poets of Asia. It was a campus that prized broad-mindedness, intellectual discussion.

It was a fateful choice. There, during his first week of classes, Cary met a fellow transplant from Colorado, a tall blond freshman, likewise majoring in business leadership, named Erik Voorhees. They clicked immediately. It was one of those rare occasions in life when a glancing blow with someone is sufficient to cement a friendship forever. Living across the quad from each other, they developed an incredible rapport. Together they pledged Sigma Chi — a dry fraternity, like all the fraternities on campus — of which Cary eventually became president. Though Voorhees lacked the natural leader’s talent for consensus-building that Cary displayed, he enjoyed playing devil’s advocate, and was more precocious in the formation of his philosophy and politics. “He really challenged my perceptions on politics, on economics,” Cary says. “We used to discuss all kinds of wild things.”

In turn they challenged their fellow students. A fraternity brother, Nick Vasilius, who also shared classes with them, recalls them sticking to their guns and challenging preconceived notions. “One thing they did not like was when people would just read a textbook and then regurgitate it back in class without thinking about the context or the implications,” he says. “You know, the type of person who just read the assigned reading and came to class ready to write it in a test. They really prized people being able to defend their points of view, and they were not shy about doing so.”

AI and Bitcoin Are Driving the Next Big Hedge Fund Wave

One class, The Illicit Global Economy, provided more than its fair share of provocative discussions. Students were asked to analyze the international markets for organs, narcotics, exotic animal parts, weapons, antiquities, and even human beings, seeking to understand how they operated, who was involved, and why the trade in such contraband persists. According to its Fall 2015 syllabus, the class also examines ethical questions arising from “relationships that exist between states, illicit entrepreneurs, criminals, multinational corporations, rebel groups, and consumers.” If any material was going to push Voorhees’s laissez-faire brand of political economics to the breaking point, this was it. Cary, who thought it a good policy to listen more than he talked, found the class enlightening. “Any time that you create a regime to manage a marketplace, you also increase the incentives to break the rules,” he says, explaining the crux of what he learned. “The people that can work around the rules make an incredible amount of money.” In other words, illicit economies arise as a result either of governments outlawing certain desirable commodities or of deficits in their supply.

Class discussions were spirited and produced surprising intellectual bedfellows. Radical feminists found themselves advocating alongside libertarians for the legalization of the sale of organs and other body parts, on the grounds that women have the right to do what they want with their bodies. Nick Vasilius, who took the class with Cary and Voorhees, remembers the War on Drugs providing fodder for one of the most enjoyable classroom discussions he ever had. He recalls it this way: “Basically the viewpoint that Nic and Erik and a few other classical [liberal] guys put forward was, ‘This is something that people want. The market is going to meet these needs, and it’s just going to enrich drug cartels if the government doesn’t acquiesce to the global market.’

“And I remember we had another class member who took kind of an absolute moral viewpoint that drugs are bad, period, and drugs lead to moral decay, period; and it’s the job of the state not only to facilitate life, liberty, and the pursuit of happiness, but to protect us from ourselves… Every time the student who took the absolute moral position would make her case, Erik would counter. She would say, ‘Anything that changes your body chemistry and your emotional state and your perception of reality shouldn’t be allowed, and is bad, and could be abused.’ And Voorhees — this is more of an example than what he actually said — he would say, ‘Well, what about coffee?’ and she would pause and say, ‘What about coffee?’ “Well, coffee has caffeine, it’s a stimulant; coffee can change your perception of time, it can change your mood, it can make you agitated, it can calm you down, depending on how it influences you.’ And she paused and he said, ‘What about cold medicine? Should that be illegal? Should that be tightly controlled? Should that be a Schedule I drug?’… Every time she would make a point he would make a little needle of an argument, deflating the thesis she had built. And that’s, in my mind, very demonstrative of who Erik was.”

Voorhees’s main takeaway from the class was not the depth of human depravity, as evidenced by the perennial existence of black markets — by, for instance, the poaching of animals and the exploitation of the poor. However much he abhorred violence, what stuck with him was the immense scale of the economic activity taking place in the shadows. And then, too, he found the actual mechanisms of the illicit economy worth thinking about. Black and gray markets rely on cash and can only exist because cash exists. But cash is difficult to transport across borders, keeping much of the shadow economy confined to specific geographical regions. Years later, he was struck by the fact that Bitcoin could function like cash while allowing transnational payments. He foresaw the expansion of the illicit economy into the digital realm. “Now the gray market can operate beyond the bounds of anyone’s community,” he says. Mark Williams, a lecturer in finance at Boston University, agrees: “A black market that can exist on fiat currency will only multiply on virtual currency if unchecked.” The tide of history was perhaps on Voorhees’s side. In 2014, both Washington and Colorado passed laws legalizing marijuana for recreational use.

Even outside of class requirements, Cary found himself reading deeply in politics and economics, though his classical liberal tendencies never shaded, as Voorhees’s did, into extreme libertarianism. Nevertheless, they agreed more than they disagreed, making them brothers-in-arms. “With UPS being such a liberal bastion,” Cary says, “we were in battle constantly, debating people on politics, economics, religion, science, everything.” Iron sharpened iron. But there was a key difference between them. If Voorhees was a crusader, Cary was a pragmatist.

From Burnout to Bitcoin

Cary wound up spending most of his twenties working for a software start-up called Pipeline Deals, which required him to move — “with one box and a duffel bag” — from Washington to the East Coast. “I had run out of money, basically,” Cary explains. “I moved to Westchester, Pennsylvania, on a handshake. The role was very simple; I got a one-line email about it. My job description was to ‘grow the company’ … So, what did that mean? It meant everything. I was the janitor. I was the tax guy. I did our product management; I did our sales; I did our customer service; I did design. Everything.” Cary thrilled to the challenge. He was like a tightrope walker working without a safety net, who knew only that he needed to cross the chasm by whatever means necessary. Armed with this simple mandate — and paired with a developer — he flourished; within six months, the company’s founders had made him a partner in the business at the age of twenty-two. “For me, that was a huge endorsement,” Cary says. “I didn’t really care about the money. I cared about the acknowledgment.”

He had once envisioned working for a big software company like Amazon or Microsoft — he felt called to management — but the interviews he went on after college failed to inspire him. He didn’t want a long slow climb up the ladder; he wanted a rapid ascent. That was why he had taken the job at Pipeline Deals. For the next four years, he was married to his job — addicted to the nonstop work, the high stakes, the rapid pace. For four years he took not a single vacation day. He saw the company through its adolescence. But by the end of four years, he was getting restless. After his “tour of duty” in Westchester, he moved back to Seattle, but there, too, he was dissatisfied. This dissatisfaction was eternal with him, a “grass-is-greener-on-the-other-side thing,” as he puts it, that made him a perpetual nomad, always hungry for the next horizon. “It’s one of the things that makes me pretty successful,” he says, “but it’s also one of the things that makes me really hard to live with because I’m just going to constantly want to blow up something and change it and do something new.”

Not long after returning from Tokyo, six and a half years after he’d accepted a position at Pipeline Deals, he sat his bosses down and told them he was tired. At first, they didn’t know what to make of it. Cary was their star employee. His work ethic was unparalleled. What do you mean, you’re tired? “I’m really tired,” he told them.

Granted a three-month sabbatical, Cary headed to Morocco, where his sister, Tatiana, was stationed with the Peace Corps. Though he jokes that his family members get along better when living on separate continents, at this moment he needed his sister’s calming influence, needed to absorb, as if by osmosis, her “even-keeled, Hakuna Matata attitude.” Cary, a born traveler, enters deeply into the places he visits, and Morocco was no exception. (Later, he took with him everywhere a laptop decorated with a yellow sticker bearing the word ESSAOUIRA — the name of a town on Morocco’s Atlantic coast where he’d spent time.) Even so, he couldn’t help but think back to Tokyo — and to Roger Ver’s offer. There was ample cause for reflection. A mysterious chain of cause and effect seemed to be at work. It was a weekend the previous summer that had prepared him to hear Ver’s pitch as the opportunity it was.

After graduating in 2007, Cary and Voorhees had gone their separate ways — Voorhees to Dubai, where he hoped in vain to make his fortune, arriving just in time to watch the property boom grind to a halt, and Cary to India, where he spent four months in what he describes as “an incredibly rural area, where the poorest people on the planet live,” teaching English to rural Dalits — the so-called “untouchables” who fall outside the fourfold Hindu caste system and are discriminated against at every level of Indian society. But the two men remained close; they had stayed in touch since college, had followed one another’s budding careers, and once a year they reunited — with a dozen other college friends, mostly fraternity brothers. “We just pick a new spot in the United States somewhere and everyone flies in and we have a crazy weekend,” Cary explains. In the summer of 2012, Voorhees was moving to New York to take a job at BitInstant, one of the most promising early Bitcoin startups, and Cary invited his friend to stay with him for a couple of days at a small beach house owned by relatives on Long Island’s North Fork. While they fished for flounder in the Long Island Sound, Voorhees, thrilled with his new position, talked nonstop about Bitcoin.

“For forty-eight hours, we’re roasting in the sunshine, I’m plucking out fish from the water, and he’s just constantly going on and on and on about it,” Cary says. “It was like he’d had a religious experience. It was exhausting. We’re on this little tiny dinghy with a shit motor — one of those ones that never starts, you know, and it’s leaking, and he’s talking to me about the future of finance, the Internet for money, how it’s going to change everything, digital property rights systems. He’s like, ‘Nic, this is the perfect form of money, and here are the reasons why.’ I was like, ‘Whew! Well, all right, maybe I should invest some of my money in Bitcoin.’”

Being unable to shut up about Bitcoin “was my affliction ever since I found out about it,” Voorhees admits. “I’m not going to talk about the weather or superfluous stuff when there’s this world-changing technology that I’ve discovered.” (He now serves as CEO of ShapeShift, a cryptocurrency exchange service that emulates Blockchain’s commitment to user privacy and recently raised $10.4 million of venture capital in a Series A round.) Impressed by his friend’s passion, Cary bought some bitcoins through BitInstant on three occasions, when the price was $7, $9, and $13 respectively. At the time, he was earning an annual salary of about $40,000. The most he will say when asked about the value of his bitcoins is that he spent a four-figure amount to acquire them. He stored them in a Blockchain wallet for safe keeping. But even then, he didn’t see his cache of digital currency as a serious investment. It was a vote of confidence in a friend. “You know when you’ve got a buddy who’s, like, a really big sports fan in Denver, so you buy the Broncos jersey? That’s what it felt like to me,” he says.

A year went by burnout, Tokyo, sabbatical. The more he thought about it, the more Cary found Bitcoin irresistible, the “perfect confluence” of things he was passionate about economics, politics, technology. Like Voorhees two years earlier, Cary decided to throw himself into it with all his heart and mind. “To have those three things come together in an opportunity to participate in changing the world,” he says, “for me was like, ‘Oh my God. I’m going to dedicate everything I can to this.’” Roger Ver had found his man.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Bitcoin Value Set to Increase Because of Asian Influence

Bitcoin Value Set to Increase Because of Asian Influence

Bitcoin Value Set to Increase Because of Asian Influence

 

Like it or not, Bitcoin is on the ascent and the cryptocurrency is in no place close to be done climbing. As the coin turns out to be more standard in Asia and finds more noteworthy acknowledgment in Western socioeconomics, its esteem is certain to surge higher in the mid-term. This is as per investigators like Joseph Young, who demand that market endorsement will be Bitcoin’s most noteworthy driver for the following couple of months.

A solitary Bitcoin went for about $425 back in April 2016. A year later, the cryptocurrency has dramatically multiplied in esteem. It hit a high past $1,300 in March 2017. The coin is presently shaking off the impacts of late China and US imperatives, yet skimmed around the $1,200 check for the greater part of April.

Be that as it may, any individual who thinks the shot has gone to make unfathomable increases off Bitcoin will kick themselves later on. Examiner accord is in, and it looks just as more dangerous development anticipates this blasting cryptocurrency. In the east, Japan’s affection for Bitcoin is making the money a value-based top choice. In the meantime, India is demonstrating a ton of fondness to the coin also. In the event that bits of gossip are valid, the nation will see organizations and numerous prevalent retailers start tolerating the cash. Bitcoin exchanging the locale is set to get somewhat more remissed also.

Bitcoin has been required to have a tremendous effect in India throughout recent years. The nation stands to be an enormous coin cash driver because of the country’s poor foundation, monetary stage and broken account management framework. Around 40 percent of India’s working populace, which positions in the billions, is without a ledger. Poor govt. benefit conveyance, casual employments, an absence of occupations all together and poor instruction are recently a portion of the many reasons why such a variety of Indians don’t utilize banks.

The inhabitant is alluding to a current govt. activity that has sent India into monetary turmoil. The entire of India, regardless of whether with a financial balance or without, is attempting to pull back money for day by day exchanges. The nation’s legislature has quite recently demonetized their Rs 500 and Rs 1000 certified receipts, making it harder for banks to meet the day by day monetary necessities of the populace.

The legitimization of Bitcoin as perceived legitimate in India would send it taking off. It would likewise ease a large number of the nation’s fiscal disappointments. Countries like China, Japan and South Korea have broadly done this, pushing up the estimation of the cryptocurrency impressively throughout the years. India going with the same pattern would just send the coin soaring so far another populace in the billions lawfully exchanges and uses Bitcoin once a day.
 

David Ogden
Entrepreneur

 

Source: Coin News Asia.

Alan Zibluk Markethive Founding Member

Blockchain Could Maximize its Potential in the Industry of Trade Finance

Blockchain Could Maximize its Potential in the Industry of Trade Finance

A large number of companies, banks, financial institutions,

Blockchain consortia and even governments have focused on testing Blockchain technology’s potential in the industry of trade finance. Most notably, the Hong Kong monetary authority introduced the development of a Blockchain-based trade finance platform in March. Additionally, IBM announced its long-term strategy to focus its Blockchain development initiative on trade finance.

What is trade finance and why does it need Blockchain?

Trade finance refers to the financing for trade and it always involves a wide range of intermediaries, banks, and third-party services providers that are contracted to facilitate transactions and finance the trade. The most widely utilized method of payment within the industry of trade finance is an open account, in which business partners have their accounts with correspondent banks open for the processing multiple transactions.

Essentially, the aim of banks and companies that are currently utilizing the Blockchain to optimize trade finance operations is to replace traditional and inefficient financial networks with a smart contract-based protocol which can process, update and broadcast transactions in real-time. With Blockchain technology and its ability to secure transactions on a decentralized and immutable ledger, governments and companies are attempting to replace banks and intermediaries with a trustless financial network. Banks are also attempting to develop trade finance platforms based on the Blockchain to cut operating costs and manual verification time.

Joshua Kroeker, the senior product manager for global trade and receivables finance at HSBC, stated:

“As the largest trade finance bank in the world … we were interested in assisting corporates to track transaction flows, reconcile transactions through invoice or purchase order matching and reducing the risk of duplicate financing for the participating banks. This development puts Hong Kong at the heart of a global effort to digitize trade, making it easier, faster and cheaper for businesses.”

More Blockchain use cases

On February 7, the government of Dubai went as far to launch an actual pilot trade finance platform based on the Blockchain with IBM to streamline operations between banks and optimize various operations involved in the trade finance industry.

At the time, Ali Sajwani, group chief information officer for Emirates NBD Group, said:

“The bank has always had a culture of innovation and several of the bank’s most successful products and features can be attributed to this forward-thinking mindset. We are excited to participate in the ecosystem on streamlining the trade finance process using the futuristic Blockchain technology, which has the potential of transforming the way we conduct business between heterogeneous entities.”

At a recent event covered by Global Trade Review, Zach Piester, chief development officer of the Blockchain consultancy Intrepid Ventures, and Connie Leung, financial services industry director at Microsoft, reaffirmed the progress being made by organizations in implementing Blockchain technology on existing trade finance platforms. Leung of Microsoft further emphasized the increasing demand for Blockchain technology to fight financial fraud within the industry of trade finance.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Blockchain Regulations Likely By 2019, Russian Ministry Says

Blockchain Regulations Likely By 2019, Russian Ministry Says

  

Russia's government is said to be moving ahead

with plans to introduce rules for blockchain use by 2019. According to state-owned news service TASS, the disclosure came from a report from the Ministry of Communications, which at press time was not publicly accessible. TASS reports that the documents touch on "the adoption of legal acts" related to the blockchain, positing 2019 as the time frame for the update. Notably, the Communications Ministry was one of the several public institutions in Russia tasked with researching blockchain by Prime Minister Dmitry Medvedev earlier this year. In March, the former president also instructed the Ministry of Economic Development and the Russian Development Bank to research applications of the tech. Medvedev has struck a somewhat bullish tone toward the technology in recent months.

During an investor event in Sochi in late February, he said:

"I'm not against the use of [blockchain] technologies that have become widely circulated and which may thus decisively change our lives. It's quite an interesting story, but so far we do not see results."

What remains unclear is how the regulation might dovetail with efforts in Russia to regulate cryptocurrencies like bitcoin. Recent statements from senior officials of the Russian Finance Ministry suggested that bitcoin could be recognized as a kind of financial instrument next year, yet other Russian officials — namely one of its central bankers — cautioned that any determination is subject to review.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Blockchain Tech is Disruptor for Telecoms: EncryptoTel CEO

Blockchain Tech is Disruptor
for Telecoms:
EncryptoTel CEO

  

Exploration of Blockchain technology

has gone far beyond financial industry. Today many companies in a variety of industries are testing the potential of this innovation to streamline complex processes and transactions, making them faster, cheaper and more transparent. The telecommunication industry is no exception and industry players are now looking into how Blockchain can impact their businesses. Cointelegraph had a chat with Roman Nekrasov, CEO, and Founder at EncryptoTel, an intriguing project offering privacy-oriented encrypted audio and video calling for individuals and groups through secure Blockchain-based communications infrastructure.

Is Blockchain indeed a disruptor for telecoms?

Until quite recently Blockchain technology has been going hand in hand with Bitcoin, its most successful use-case so far. However, the new generation of programmable Blockchains allows going far beyond cryptocurrencies and financial services. It certainly might be very hard to do any prediction concerning the exact forms of change caused by the Blockchain in a very particular industry of telecommunications, or whether it is to cause any change at all. It has already provided us with at least one key benefit — it allows ensuring transparency of transactions.

Nekrasov shares with Cointelegraph how his team is making use of Blockchain:

“Nowadays Blockchain technology is being explored in a number of industries, it is right about the time for the telecom industry to take a closer look at it. The technology offers huge advantages for building decentralized systems. We are planning to integrate this technology at least for enabling verification of outgoing calls, along with ensuring the integrity of the whole network. I am not even mentioning the benefits of payments in cryptocurrencies (anonymity and transparency for both parties). Besides, we are working on the cryptographic protocol deploying Blockchain technology, which is our killer feature. It is still too early to announce any specific solutions, but our developers already have something in store. I am certain that our investors are going to be satisfied with their investments — everything goes according to what we have outlined in the Roadmap.”

Rethinking the role of intermediaries

Telecom providers are connecting people and things to each other, therefore, essentially they are sort of intermediaries, who need to manage databases, back-office systems, and purchase third parties services. Blockchain allows rethinking the roles of intermediaries in the telecom industry,

Nekrasov says:

“With our project, we are trying to eliminate intermediaries in the telecom industry. Possibility to communicate directly and anonymously implies the absence of third parties. In the beginning we would not be able, however, to eliminate middlemen completely. As our customers would need to have a possibility to register a direct phone number with other mobile operators or use a number they already have, we can’t avoid involving third parties, but we are working on it. Another advantage brought by Blockchain technology is that it plays a role of a guard in a sense that it prevents unauthorized intervention of third parties.”

What telecoms are looking for

All efforts in the telecom industry nowadays are directed towards keeping maintenance costs low while exploring new services. The market is growing at an incredible speed and traditional players are forced to look for ways to improve the quality of existing services, maybe even reimagine them, offering innovative approaches and tools which haven’t been available before. Nekrasov believes that Blockchain technology in this sense is like a whiff of fresh air offering new perspectives in the way we think of telecom services. “Technology has a huge potential in building new reliable services allowing to compete with industry giants,” he says. Competition in the telecom industry is heightened, revenue from voice calls is decreasing, while expenses due to the high bandwidth demands are rising, all of which is forcing telecoms to both look for a way to reduce these costs and find new sources of revenue.

Nekrasov agrees:

“Revenues from traditional voice calls are indeed decreasing, however, the market of VoIP services is expanding, especially in B2B sector. It is one of the most fast-growing markets nowadays, and the positive dynamic will remain for upcoming five to 10 years.”

Nekrasov says that offering a free and secured connection with the focus on quality and encryption is among the main priorities at the moment.

He continues by explaining:

“At the moment ensuring privacy and protection from bugging is very important, especially for business. I think that Blockchain technology can shoulder a part of network load, as a result cutting down the expenses for network maintenance. Besides, exploration of cryptocurrency market allows attracting additional investments into business, telecoms mistakenly underestimate this market.”

Nekrasov and his colleagues possess an extensive experience of working in the industry. They have identified what is exactly missing to make customer’s experience better — security, ease of use, user-friendly interface, and affordable pricing.

Where exactly is Blockchain applicable?

According to a report by Deloitte Germany, the telecom industry will see a huge impact of Blockchain in upcoming years. Precisely offering new solutions for fraud management, Identity-as-a-Service and data management, enablement of 5G and building secure IoT connectivity. Fraud detection and prevention are still the hot topics in the industry, mostly due to massive losses annually. The blockchain is believed to offer an effective and sustainable tool for fraud prevention, especially in roaming and in subscription identity management.

5G technology implementation is said to be another example of how the industry can benefit from the deployment of Blockchain in streamlining the process. Thus, to ensure ubiquitous access to the networks through 5G, telecoms would need to handle heterogeneous access nodes and diverse access mechanisms. The central challenge here is expected to be the selecting the fastest access node for every user or machine. Blockchain technology is believed to enable the new generation of access technology selection mechanisms for building sustainable solutions.

Nekrasov agrees:

“Blockchain can indeed offer solutions to tackle fraud — here we talk about smart contracts and the overall transparency of transactions allowed by technology. The combination of solutions built on top of Blockchain and Identity-as-a-Service has a huge potential for identity and access management, allowing for stronger protection from hackers’ attacks. Blockchain is indeed useful for ensuring of communication between IoT devices, they are often more vulnerable to attacks, technology can help solving this problem.”

Remaining challenges

There is still a number of challenges in the industry, which should be addressed. These challenges mostly concern ensuring of security and confidentiality of calls and text messages, prevention of all kinds of attacks and hacks carried aiming at stealing customers’ personal data. There are certain challenges related to the deployment of VoIP, many customers face certain difficulties switching to this type of services. Nekrasov says that EncryptoTel aims at tackling these challenges. EncryptoTel is a complex telecommunication system which can be deployed for establishing simple and more complicated scenarios. The company is building an extensive platform for setting corporate networks for businesses, private customers are not left out of focus.

Nekrasov notes:

“It is actually not so common for PBX systems to be oriented at personal customers. We are trying to simplify the platform to make it available for less tech-savvy customers. Our competitive advantage is that we are trying to take the best out of innovative technologies, including Blockchain technology, and expanding payment methods to cryptocurrencies.”

EncryptoTel is developing encryption protocols deploying Blockchain technology to ensure the security of customers’ personal data. In addition, the team is deploying multilevel authentication system. Centralized storing of data always raises a number of concerns,

Nekrasov explains to Cointelegraph:

“Currently in beta version we are working with a centralized database, however, later we are planning to reconsider it and develop a new approach where we store only minimum amount of data in a centralized way while ensuring encryption.”

Ongoing ICO

EncryptoTel is now in the middle of ICO, Nekrasov shared with Cointelegraph preliminary results. Thus, during the first week of ICO, EncryptoTel saw a huge interest in the project and managed to attract $1,800,000. Nekrasov expressed his gratitude to the community actively supporting the initiative and wishing best of luck to the team, it is certainly a great motivator. Besides, EncryptoTel team wished to thank Waves community, which demonstrated their support, also in the form of extensive investments amounting to over 1,000,000 Waves ($700,000).

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Mauritius: The Tropical Paradise Looking to Become a Blockchain Hub

Mauritius:
The Tropical Paradise Looking to
Become a Blockchain Hub

  

Known as the home of lush tropical beaches,

the world's second-oldest horse racetrack and the now-extinct Dodo bird, the East African island nation of Mauritius is seeking to brand itself as a regional haven for blockchain innovation. Since its independence in 1968, the former Dutch, French and British colony has become one of the most successful economies in the region by building itself up as a technology and financial services hub. Now, Mauritius is looking at blockchain as a catalyst to fortify its competitive advantage and drive continued innovation on the island.

"We are working to take our economy to another level, and these kinds of technologies are very important in our strategy," said Atma Narasiah, head of technology, innovation, and services at the Board of Investment Mauritius, the national investment promotion agency of the island.

He told CoinDesk:

"Blockchain is an area where we will be focusing, building competencies and ensuring that it permeates other sectors of the economy and government."

The island nation has well-established financial services, information, and communications technology industries, so attracting investors and entrepreneurs in blockchain and financial technology could be seen as a logical next step. "Blockchain is one of these technologies we want to drive. We see a window of opportunity here to be able to leapfrog others," Narasiah said.

Open invitation

In its quest to become the blockchain hub of the Indian Ocean, Mauritius has issued an open call for innovators to take advantage of the country's new Regulatory Sandbox License (RSL). The sandbox allows companies operating in areas such as financial, medical and communications technology to start operating despite the absence of a formal legislative or licensing framework. "We've been receiving innovative project [proposals] over the years but couldn't execute them because of the gap in the regulatory framework. We've got a very good legal system, but at the pace at which technology is changing, we haven’t been able to keep pace on the regulatory front," said Narasiah, adding:

"So we came up with Regulatory Sandbox License to be able to catalyze the execution of these projects."

Modeled after similar approaches employed in Australia, Singapore, and the UK, the RSL is open to all innovators, but there's an emphasis on attracting blockchain innovators across all verticals. The expectation is that completed projects will help drive domestic and cross-border commerce and eventually expand into a smart city concept that links to other hub cities. Since launching in November 2016, the RSL has fielded 11 project proposals, with most under the fintech umbrella.

To be considered for approval, applicants must demonstrate their project is innovative, beneficial to the Mauritian economy and it cannot be accommodated in the investor’s home jurisdiction because of legal or regulatory gaps. Qualified applicants can obtain licensure in as little as 30 days, provided that all relevant information is received and risks are properly addressed.

Regional force

So, why should blockchain investors consider setting up in Mauritius? Narasiah points to the nation's strong business and governance environment, which has been internationally recognized as the strongest in sub-Saharan Africa. According to the World Bank's annual "Doing Business" survey, Mauritius has the best business climate of any country in the region and ranks 49th out of 190 countries worldwide. The World Bank's rankings weigh factors such as ease of starting a business, enforcing contracts, obtaining credit, protecting investors and paying taxes.

In its annual competitiveness rankings, the World Economic Forum said Mauritius possesses Africa’s most competitive economy, best infrastructure, and highest-educated workforce. Narasiah also highlighted an ongoing build-up of the country’s communications infrastructure — including projects to roll out free Wi-Fi across the island and install fiber optic connections in every residence — as a key attraction for technology investors.

Bridge to big markets 

Such stability and its geographic location has made Mauritius a popular venue for financial services companies looking to make the jump into new markets on the African continent – where many of the world’s largest unbanked populations exist. "Mauritius is a country that many of the governments of African states would like to emulate. So if you have systems that have been tested properly in Mauritius — it gives a kind of assurance and credibility to that solution when you market it in Africa," said Narasiah.

He added:

"Having done it in Mauritius gives it lots of mileage for you to expand into Africa."

Mauritius also possesses a bilingual workforce speaking both English and French — two of the African continent’s lingua francas — and tax treaties with more than 20 African nations including South Africa, Zambia, Uganda and Rwanda. The island nation also maintains close cultural and economic ties to India — a $2tn economy projected to surpass China as the world’s most populous nation in the next decade. Roughly two-thirds of Mauritians are of Indian descent, and Mauritius has been the largest single source of foreign direct investment into India in recent years because of a favorable double taxation avoidance treaty between the two nations.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Bonding Experience: Can Kenya Pave a Path for Blockchain Change?

Bonding Experience:
Can Kenya Pave a Path for Blockchain Change?

 A country with rickety infrastructure

and a reliance on agriculture could be poised to kickstart mainstream use of blockchain technology. I'm talking about Kenya, where last month, the government issued infrastructure bonds — with a twist. They were only available via mobile phones. In a world first, the general public had access to government debt via an app. The M-Akiba project (akiba is Swahili for 'savings') aims to: 1) broaden participation in public financing, 2) stimulate the savings rate, and 3) raise funds for infrastructure investment. The target was $1.5m, with the minimum investment set as low as KSh3,000 (approximately $30). It was open to all Kenyans with an M-Pesa mobile money account – well­ over half the population. The issue sold out two days ahead of schedule.

Blockchain sweet spot

As CoinDesk reported this week, the World Bank plans to formally support the project with research on, among other things, how blockchain technology could simplify the underlying platform. The use case is appealing. A recent World Bank report pointed out that the two main weaknesses of the bond issue were: 1) the intermediaries between the Treasury and investors, each charging fees, and 2) the lack of a liquid secondary market for the bonds. A blockchain platform connecting the issuer and the buyer could lower costs and enhance yields. And a blockchain-based secondary market could improve liquidity and make the investment more attractive to retail investors.

The Commonwealth Bank of Australia is also looking at the blockchain for issuing bonds, as are Japanese securities firm SBI and French bank BNP. However, comparing M-Akiba to other bonds-on-blockchain projects is missing the point. This isn't about adapting a current system to a new technology – it's about bypassing the current system altogether. In 2007, Kenya’s leading network operator Safaricom started offering M-Pesa mobile banking accounts to anyone with a Safaricom phone number.

For many, the choice wasn't between their current banking system and M-Pesa, it was no banking system and M-Pesa. The lack of a strong infrastructure propelled Kenya into the lead position in global rankings of mobile money use. A similar trend could be happening to public investment in government bonds. While Kenya has one of the most developed bond markets in Africa, it's still relatively new. It is also dominated by foreign and local institutional investors. With a minimum investment of KSh50,000 and significant paperwork requirements, small retail investors are largely excluded.

Opening up

But that could soon change. Offering a 10% tax-free return (almost double that on standard savings accounts) with a low minimum investment and easy inscription, the bond is likely to appeal to a broad demographic, from long-term savers to first-timers. The April issuance was a trial, and the government is planning a much bigger tranche of KSh4.85bn ($48m) on the M-Akiba platform for June. The World Bank research on the blockchain potential is part of a broader initiative, and will not be completed for some time. Meanwhile, the technology will continue to develop, gradually removing obstacles to implementation. And the experience in Kenya shows that the market is eager for a platform that directly connects issuer and investor, and removes access barriers.

If this takes off, it could herald a new form of public financing and private savings.

The system could end up expanding, not only to other countries but also other sectors, bringing in private issuers and offering the public an even broader choice of saving and investment vehicles. If users get accustomed to parking their money with bond issuers accessed via easy-to-use apps on their phones, this could change how they view banking. And, as such, it could change the banking industry. The irony is that a country with a relatively unsophisticated financial infrastructure could end up kickstarting a fundamental reform that might achieve what higher-profile and better-funded projects have yet to pull off: putting the blockchain in the hands of the man on the street. And in the process, improving public finances and private wealth.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Zuckerberg realizes the dangers of the social-media revolution he helped start

Zuckerberg realizes the dangers of the social-media revolution he helped start

In early January, I went to see Mark Zuckerberg at MPK20, a concrete-and-steel building on the campus of Facebook's headquarters in Menlo Park, California. The Frank Gehry-designed building has a pristine 3.6-hectare rooftop garden, yet much of the interior appears unfinished. Many of the internal walls are unpainted plywood. The space looks less like the headquarters of one of the world's wealthiest companies and more like a Chipotle restaurant with standing desks. It's an aesthetic meant to reflect one of Facebook's founding ideologies: that things are never quite finished, that nothing is permanent, that you should always look for a chance to take an axe to your surroundings.

The mood in overwhelmingly liberal Silicon Valley at the time, days before US President Donald Trump's inauguration, was grim. But Zuckerberg is preternaturally unable to look anything other than excited about the future. "Hey, guys!" he beamed, greeting Mike Isaac, a New York Times colleague who covers Facebook, and me.

"Hey, guys!"

  

No one at the company has a private office.

"2016 was an interesting year for us," he said as the three of us, plus a public relations executive sat in a glass-walled conference room. No one, not even Zuckerberg, has a private office. It was an understatement and a nod to the obvious: Facebook had become a global political and cultural force, and the full implications of that transformation had begun to come into view last year.

"If you look at the history of Facebook, when we started off, there really wasn't news as part of it," Zuckerberg went on. But as Facebook grew and became a bigger part of how people learn about the world, the company had been slow to adjust to its new place in people's lives.

The events of 2016, he said, "set off a number of conversations that we're still in the middle of".

   

The News Feed team at Facebook headquarters.

Nearly 2 billion people use Facebook every month, about 1.2 billion of them daily. The company, which Zuckerberg co-founded in his Harvard dormitory room 13 years ago, has become the largest and most influential entity in the news business, commanding an audience greater than that of any American or European television news network, any newspaper in the Western world and any online news outlet. It is also the most powerful mobilizing force in politics, and it is fast replacing television as the most consequential entertainment medium. Just five years after its initial public offering, Facebook is one of the 10 highest market-capitalised public companies in the world.

But over the course of 2016, Facebook's gargantuan influence became its biggest liability. During the US election, propagandists — some working for money, others for potentially state-sponsored lulz [mischief] — used the service to turn fake stories into viral sensations, such as the one about Pope Francis endorsing Trump (he hadn't). With its huge reach, Facebook has begun to act as the great disseminator of misinformation and half-truths swirling about the rest of media. It sucks up lies from cable news and Twitter, then precisely targets each lie to the partisan bubble most receptive to it.

After studying how people shared 1.25 million stories during the campaign, a team of researchers at Massachusetts Institute of Technology and Harvard implicated Facebook and Twitter in the larger failure of media in 2016, finding that social media created a right-wing echo chamber: a "media network anchored around Breitbart developed as a distinct and insulated media system, using social media as a backbone to transmit a hyperpartisan perspective to the world". After the election, former president Barack Obama bemoaned "an age where there's so much active misinformation and it's packaged very well and it looks the same when you see it on a Facebook page or you turn on your television."

Zuckerberg offered a few pat defenses of Facebook's role. "I'm actually quite proud of the impact that we were able to have on civic discourse overall," he said in January. Misinformation on Facebook was not as big a problem as some believed it was, but Facebook nevertheless would do more to battle it, he pledged.

"I'm actually quite proud"

   

It was hard to tell how seriously Zuckerberg took the criticisms

of his service and its increasingly paradoxical role in the world. Across the globe, Facebook now seems to benefit actors who want to undermine the global vision at its foundation. Supporters of Trump and the European right-wing nationalists who aim to turn their nations inward and dissolve alliances, even ISIS with its skillful social-media recruiting and propagandizing — have sought to split the Zuckerbergian world apart. And they are using his own machine to do it.

Since election day Silicon Valley has been consumed with a feeling of complicity. Trump had benefited from a media environment that is now shaped by Facebook — and, more to the point, shaped by a single Facebook feature, the same one to which the company owes its remarkable ascent to social-media hegemony: the computationally determined list of updates you see every time you open the app. The list has a formal name, News Feed. But most users are apt to think of it as Facebook itself.

If it's an exaggeration to say that News Feed has become the most influential source of information in the history of civilization, it is only slightly so. Facebook created News Feed in 2006 to solve a problem: In the social-media age, people suddenly had too many friends to keep up with. To figure out what any of your connections were up to, you had to visit each of their profiles to see if anything had changed. News Feed fixed that. Every time you open Facebook, it hunts through the network, collecting every post from every connection. Then it weighs the merits of each post before presenting you with a feed sorted in order of importance: a hypersonalised front page designed just for you.

Scholars and critics have been warning of the solipsistic irresistibility of algorithmic news at least since 2001, when the constitutional aw professor Cass Sunstein warned, in his book Republic.com, of the urgent risks posed to democracy "by any situation in which thousands or perhaps millions or even tens of millions of people are mainly listening to louder echoes of their own voices". (In 2008, I piled on with my own book, True Enough: Learning to Live in a Post-Fact Society.) In 2011, the digital activist and entrepreneur Eli Pariser gave this phenomenon a memorable name in the title of his own book: The Filter Bubble.

Facebook says its own researchers have been studying the filter bubble since 2010. In 2015, they published an in-house study, which was criticized by independent researchers, concluding that Facebook's effect on the diversity of people's information diet was minimal. When News Feed did show people views contrary to their own, they tended not to click on the stories. For Zuckerberg, the finding let Facebook off the hook.

Then, last year, Facebook's domination of the news became a story itself. In May, Gizmodo reported that some editors who had worked on Facebook's Trending Topics section had been suppressing conservative points of view. To smooth things over, Zuckerberg convened a meeting of conservative media figures and eventually significantly reduced the role of human editors. Then in September, Facebook deleted a post that included the photojournalist Nick Ut's iconic photo of a naked nine-year-old girl, Phan Thi Kim Phuc, running in terror after a napalm attack during the Vietnam War, on the grounds that it ran foul of Facebook's prohibition of child nudity.

Facebook, under criticism, reinstated the picture, but the photo incident highlighted the difficulty of building a policy framework for what Facebook was trying to do. Zuckerberg wanted to become a global news distributor that is run by machines, rather than by humans who would try to look at every last bit of content and exercise considered judgment. "It's something I think we're still figuring out," he told me in January. "There's a lot more to do here than what we've done. And I think we're starting to realize this now as well." It struck me as an unsatisfying answer, and it became apparent that Zuckerberg seemed to feel the same way. A month after the first meeting, Zuckerberg wanted to chat again.

The Zuckerberg who greeted us was less certain in his pronouncements, more questioning. Earlier, Zuckerberg's staff had sent me a draft of a 5700-word manifesto that, I was told, he spent weeks writing. The document, "Building Global Community", argued that until now, Facebook's corporate goal had merely been to connect people. According to the manifesto, Facebook's next focus will be developing the social infrastructure for the community — for supporting us, for keeping us safe, for informing us, for civic engagement, and for an inclusion of all". If it was a nebulous crusade, it was also vast in its ambition.

"There are questions about whether we can make a global community that works for everyone," Zuckerberg writes, "and whether the path ahead is to connect more or reverse course." He also confesses misgivings about Facebook's role in the news. "Giving everyone a voice has historically been a very positive force for public discourse because it increases the diversity of ideas shared," he writes. "But the past year has also shown it may fragment our shared sense of reality."

At the time, the manifesto was still only a draft. When I suggested that it might be perceived as an attack on Trump, he looked dismayed. A few weeks earlier, there was media speculation, fuelled by a post-election tour of America by Zuckerberg and his wife, that he was laying the groundwork to run against Trump in 2020, and he took pains to shoot down the rumors. If the company pursues the aims outlined in "Building Global Community", the changes will echo across media and politics, and some are bound to be considered partisan. The risks are especially clear for changes aimed at adding layers of journalistic ethics across News Feed, which could transform the public's perception of Facebook, not to mention shake the foundations of its business.

The solution to the broader misinformation dilemma — the pervasive climate of rumor, propaganda and conspiracy theories that Facebook has inadvertently incubated — may require something that Facebook has never done: ignoring the likes and dislikes of its users. Facebook's entire project, when it comes to news, rests on the assumption that people's individual preferences ultimately coincide with the public good, and that, if it doesn't appear that way at first, you're not delving deeply enough into the data. By contrast, decades of social-science research shows that most of us simply prefer stuff that feels true to our world view even if it isn't true at all and that the mining of all those preference signals is likely to lead us deeper into bubbles rather than out of them.

After the election, Margaret Sullivan, a Washington Post columnist and a former public editor of the Times, called on Facebook to hire an executive editor who would monitor News Feed with an eye to fact-checking, balance and editorial integrity. Jonah Peretti, the founder of BuzzFeed, told me that he wanted Facebook to use its data to create a kind of reputational score for online news.

Late last year, Facebook outlined a modest effort to curb misinformation. News Feed would now carry warning labels: If a friend shares a viral story that has been shot down by one of Facebook's fact-checking partners (including Snopes and PolitiFact), you'll be cautioned that the piece has been "disputed". But even that slight change has been met with fury on the right, with Breitbart and The Daily Caller fuming that Facebook had teamed up with liberal hacks motivated by partisanship. If Facebook were to take more significant action, such as hiring human editors or paying journalists, the company would instantly become something it has long resisted: a media company rather than a neutral tech platform.

In many ways, the worry over how Facebook changes the news is really a manifestation of a grander problem with News Feed, which is simply dominance itself. News Feed's aggressive personalisation wouldn't be much of an issue if it weren't crowding out every other source. By my second meeting with Zuckerberg, Facebook had announced plans for the Facebook Journalism Project, in which the company would collaborate with news companies on new products. Facebook also created a project to promote "news literacy" among its users, and it hired the former CNN news anchor Campbell Brown to manage the partnership between it and news companies. Zuckerberg's tone towards critics of Facebook's approach to the news had grown far more conciliatory.

"I think it's really important to get to the core of the actual problem," he said. "I also really think that the core social thing that needs to happen is that a common understanding needs to exist. And misinformation I view as one of the things that can possibly erode common understanding. But sensationalism and polarization and other things, I actually think, are probably even stronger and more prolific effects. And we have to work on all these things. I think we need to listen to all the feedback on this."

Still, Zuckerberg remained preoccupied with the kind of problems that could be solved by the kind of hyperconnectivity he believed in, not the ones caused by it. "There's a social infrastructure that needs to get built for modern problems in order for humanity to get to the next level," he said. "Having more people oriented not just towards short-term things but towards building the long-term social infrastructure that needs to get built across all these things in order to enable people to come together is going to be a really important thing over the next decades." Zuckerberg continued, "We're getting to a point where the biggest opportunities I think in the world … problems like preventing pandemics from spreading or ending terrorism, all these things, they require a level of co-ordination and connection that I don't think can only be solved by the current systems that we have." What's needed is some global superstructure to advance humanity.

Zuckerberg is arguing for a kind of digital-era version of the global institution-building that the Western world engaged in after World War II. But because he is a chief executive and not an elected president, there is something frightening about his project. He is positioning Facebook — and, considering that he commands absolute voting control of the company, himself — as a critical enabler of the next generation of human society. His mission drips with megalomania, albeit of a particularly sincere sort. Building new "social infrastructure" usually involves tearing older infrastructure down. If you manage the demolition poorly, you might undermine what comes next. In the case of the shattering media landscape, Zuckerberg may yet come up with fixes for it. But in the meantime, Facebook rushes headlong into murky new areas, uncovering new dystopian possibilities at every turn.

A few months after we spoke, Facebook held its annual developer conference in San Jose, California. At last year's show, Zuckerberg introduced an expanded version of Facebook's live streaming service which had been promised to revolutionize how we communicate. Live had generated iconic scenes of protest but was also used to broadcast a terrorist attack in Munich and at least one suicide. Hours before Zuckerberg's appearance, a Cleveland man who had killed a stranger and posted a video on Facebook had shot himself after a manhunt.

But as he took the stage in San Jose, Zuckerberg was ebullient. For a brief moment, there was a shift in tone: Statesman Zuck. "In all seriousness, this is an important time to work on building community," he said. He offered Facebook's condolences to the victim in Cleveland; the incident, he said, reminded Facebook that "we have a lot more to do". Zuckerberg then pivoted to Facebook's next marvel, a system for digitally augmenting your pictures and videos. The technical term for this is "augmented reality". The name bursts with dystopian possibilities — fake news on video rather than just text — but Zuckerberg never mentioned them. The statesman had left the stage; before us stood an engineer. –

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

The Future of Social Media Marketing

The Future of Social Media Marketing

 

Alan Zibluk Markethive Founding Member

Types of negative SEO to watch out for

Types of negative SEO to watch out for

Is negative SEO real?
Should you be worried?
Is there anything you can do to stay safe?
This post is an attempt to answer these questions.

The threat of negative SEO is remote

but daunting. How easy is it to for a competitor to ruin your rankings, and how do you protect your site? But before we start, let’s make sure we’re clear on what negative SEO is, and what it definitely isn’t. Negative SEO is a set of activities aimed at lowering a competitor’s rankings in search results. These activities are more often off-page (e.g., building unnatural links to the site or scraping and reposting its content); but in some cases, they may also involve hacking the site and modifying its content. Negative SEO isn’t the most likely explanation for a sudden ranking drop. Before you decide someone may be deliberately hurting your rankings, factor out the more common reasons for ranking drops. You’ll find a comprehensive list here.

Negative off-page SEO

This kind of negative SEO targets the site without internally interfering with it. Here are the most common shapes negative off-page SEO can take.

Link farms

One or two spammy links likely won’t hurt a site’s rankings. That’s why negative SEO attacks usually involve building links from a group of interconnected sites, or link farms. Typically, most of these links use the same anchor text. These exact-match anchors may be completely unrelated to the site under attack; or they might include a niche keyword to make the site’s link profile look like the owner is manipulating it.

A while ago, this happened to WP Bacon, a WordPress podcast site. Over a short period of time, the site acquired thousands of links with the anchor text “porn movie.” Throughout 10 days, WP Bacon fell 50+ spots in Google for the majority of keywords it ranked for. This story has a happy ending though: the webmaster disavowed the spammy domains, and eventually, WP Bacon recovered most of its rankings.

How to stay safe: 

Preventing a negative SEO attack isn’t something in your power, but spotting the attempt early enough to reverse the damage is possible. To do that, you need to regularly monitor link profile growth. SEO SpyGlass, for example, gives you progress graphs for both the number of links in your profile, and the number of referring domains. An unusual spike in either of those graphs is reason enough to look into the links you suddenly acquired.

To actually see the links that made up the spike, go to the Linking Domains (or Backlinks) dashboard in SEO SpyGlass and sort the links by Last Found Date by clicking on the header of the column twice. Look for the links that were found around the same time when the spike on the graph appeared.If you’ve no idea where the links are coming from, it’s useful to look at their Penalty Risk. Switch to the Link penalty risk tab, select those suspicious backlinks you just discovered, and click Update Link Penalty Risk.

In a few minutes, the column should be populated with values on a scale from 0 to 100. It’s a pretty accurate metric to tell if the links are coming from link farms, as, among other things, it looks at the number of linking domains that come from the same IP address or C block.Lastly, once you’ve identified the spammy links, you can create a disavow file right in SEO SpyGlass. To do that, right-click the backlink/linking domain and select Disavow (make sure to select Entire domain under Disavow mode). Do the same for all unnatural links you spotted. Finally, go to Preferences > Disavow/Blacklist backlinks, review your disavow file, and export it once you’re happy with it.

Scraping

   

Scraping your content and copying it across other sites is another way a competitor can ruin your rankings. When Google finds content that is duplicated across multiple sites, it will usually pick only one version to rank. In most cases, Google is clever enough to identify the original piece… unless they find the “stolen” version first. That’s why scrapers often automatically copy new content and repost it straightaway.

How to stay safe:

Copyscape is an essential tool if you’re determined to find instances of content duplication. If you do find scraped copies of your content, it’s a good idea to first contact the webmaster asking them to remove the piece. If that’s not effective, you may want to report the scraper using Google’s copyright infringement report.

Forceful crawling

There are examples of desperate site owners trying to crash a competitor’s site by forcefully crawling it and causing heavy server load. If Googlebot can’t access your site for a few times in a row… you guessed it — you might get de-ranked.

How to stay safe: 

If you notice that your site has become slow, or, worse, unavailable, a wise thing to do is contact your hosting company or webmaster — they should be able to tell you where the load is coming from. If you know a thing or two about server logs, here are some detailed instructions on finding the villain crawlers and blocking them with robots.txt and .htaccess.

Negative on-page SEO

Negative on-page SEO attacks are way more difficult to implement. These involve hacking into your site and changing things around. Here are the main SEO threats a hacker attack can pose.

Modifying your content

You’d think you’d notice if someone changed your content, but this tactic can also be very subtle and difficult to spot. As the attacker adds spammy content (usually links) to a site, they often hide it (e.g.: under “display:none” in the HTML), so you won’t see it unless you look in the code.

Another possible negative SEO scenario is someone modifying your pages to redirect to theirs. This isn’t a threat for most small businesses, but if your site enjoys high authority and link popularity, it could be someone’s sneaky way to increase their own site’s PageRank, or to simply redirect visitors to their site when they try to access yours. For the site under attack, such redirects aren’t just a temporary inconvenience. If Google finds out about the redirect before you do, they can penalize the site for “redirecting to a malicious website.”

How to stay safe:

 Regular site audits with a tool like WebSite Auditor are the best way to spot such subtle attacks. To start your first audit, just launch WebSite Auditor and create a project for your site. Whenever you need to re-run the audit, use the Rebuild Project button. As long as you do this regularly, you should be able to spot changes that could otherwise go unnoticed, such as the number of outgoing links on the site or pages with redirects. To look into those links or redirects in detail, switch to the All Resources dashboard and go through the External Resources section. If you see an unexpected increase in the count of these, look through the list on the right to see where those links point to, and the lower part of the screen for the pages they were found on.

Getting the site de-indexed

A small change in robots.txt is one alteration that could wreak havoc on your entire SEO strategy. A disallow rule is all it takes to tell Google to completely ignore your website. There are multiple examples of this online, including this story. A client fired an SEO agency he wasn’t happy with, and their revenge was adding a Disallow: / rule to the client’s robots.txt.

How to stay safe:

 Regular ranking checks will help you be the first to know should your site get de-indexed. With Rank Tracker, you can schedule automatic checks to occur daily or weekly. If your site suddenly drops from search engines’ results, you’ll see a Dropped note in the Difference column.When this happens across a big number of keywords, it usually implies a penalty or de-indexation. If you suspect the latter, check the crawl stats in your Google Search Console account and take a look at your robots.txt.

Hacking the site (per se)

Even if the hacker has no negative SEO in mind, the attack per se can hurt your SEO. Google wants to protect its users, which is why, if they suspect a site has been hacked, they may de-rank it, or at the very least add a “this site may be hacked” line to your search listings.Would you click on a result like that?  Negative SEO aside, stepping up your site’s security should be high on your list of priorities for obvious reasons.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member