Ethereum dislikes Tangle just as much as IOTA hates blockchain

Back in September, Ethereum core developer Nick Johnson penned an interesting piece to sum up some of the reservations he had for up-and-coming cryptocurrency company IOTA and its blockchain-alternative, Tangle.

While he insisted the post was merely intended as a critique addressed at some of the design and architecture flaws he saw in the technology, the situation escalated quickly, ultimately leading up to a minor Twitter argument between Johnson and IOTA co-founder, David Sønstebø.

Unlike standard blockchain solutions, IOTA relies on a slightly different technology to decentralize and distribute its ledger. Contrary to blockchain-based networks which use binary logic, IOTA’s so-called Tangle uses an alternative known as balanced ternary – a numerical system based on three, rather than two digits: -1, 0, and 1.

According to Sønstebø and co-founder Dominik Schiener, Tangle has many benefits over blockchain, including free transaction fees and better scaling opportunities. But Johnson didn’t see things this way.

Among other things, the Ethereum developer argued that, while Tangle sounds great in theory, it is bound to run into a number of practical issues that will prevent the technology from effectively tackling the problems it promises to solve.

“Unfortunately, neither of these are relevant in a practical system,” he noted. “IOTA is by necessity built to run on existing hardware, which is exclusively binary, as are the communication networks it uses. As a result, all of its internal ternary notation has to be encapsulated in binary, resulting in significant storage and computational overhead.”

“Math must either be performed on individual ‘trits’ or first converted from binary-wrapped-ternary encoding into the machine’s native number representation, and back again afterwards — in either case imposing a large computational overhead,” he added.

Almost two months later though, IOTA announced a massive partnership that would see Microsoft, Fujitsu, Samsung, Deutsche Telekom, and a number of other technology giants use its Tangle tech in the first-ever data marketplace built for the Internet of Things .

The news was welcomed with a huge wave of excitement within the larger cryptocurrency community – especially the IOTA community.

Soon after the announcement went live, some Twitter users took digs at Johnson, resurfacing his IOTA critique and juxtaposing it with quotes from IOTA’s new stellar partners.

Back in September when the rivalry between the two companies first started to shape up, Ethereum founder Vitalik Buterin preferred to stay on the sidelines the first time Johnson commented on IOTA. But this time he decided to join the discussion himself.

Responding to one of Johnson’s naysayers on Twitter, Buterin left a vague, but somewhat suggestive remark with regards to Microsoft’s endorsement of IOTA.

While Sønstebø and Schiener have so far avoided engaging in further banter with Johnson, the co-founders recently participated in one of our TNW Answers sessions , where they had a chance to respond to a number of questions from readers and crypto enthusiasts.

As you could expect, several of these touched upon the differences between IOTA and Ethereum, as well as what each technology brings to the table – and it all but seems that the two companies remain equally skeptical of each other.

Asked about their plans to incentivize users to run full nodes in Tangle and the benefits of running one, Schiener said the following:

But the digs at Ethereum and other blockchain-based solutions didn’t quite end there.

“Are you completely confident that Iota will function as intended (free transactions, accelerating scalability, network security) without the coordinator,” one user asked . “Do you think Ethereum will solve these same problems? Do you think their solutions will be as neat? How might a competitor improve on free, scalable, and secure,” he continued.

To which, Sønstebø replied with the following:

IOTA’s co-founders were equally bullish about the the superiority of Tangle over other blockchain-based initiatives.

When asked about the possibility of entering interoperability partnerships with other blockchain-based network solutions, Schiener remained skeptical, saying that “ there are few use cases [he] can think of in blockchain that Tangle can’t do better.”

Interestingly enough, Ethereum made its major break shortly after it revealed it had partnered with over 30 banks and technology giants, including JP Morgan Chase, Microsoft, and Intel. Factoring IOTA’s partnership announcement from this week, it all but seems the company is well on its way to accomplish the same.

I guess time will tell which side made the right bet.

Until then, those curious to see IOTA’s full Answers session can head to this page . We also hosted a session with Ethereum’s Buterin you can skim through here .

BitConnect is shutting down its lending and exchange platform

Following months of red flags, Bitcoin investment platform BitConnect – which has long been suspected of running a Ponzi scheme – has officially announced its platform is shutting down.

In a blog post – titled “Changes coming for the Bitconnect [sic] system – Halt of lending and exchange platform” – released on its official website , the company said that is “closing the Bitconnect [sic] lending and exchange platform.” The website has since gone down.

The statement goes on to suggest that BitConnect will now operate solely “for wallet service, news and educational purposes.”

“We are closing the lending operation immediately with the release of all outstanding loans,” the statement read. “With release of your entire active loan in the lending wallet we are transferring all your lending wallet balance to your BitConnect wallet balance at 363.62 USD [sic].”

This rate has been calculated based on last 15 days averages of the closing price registered on coinmarketcaom,” it continued. “You are free to withdraw your BitConnect coin currently in QT wallets that was used for staking as well. We are also closing BCC exchange platform in [five] days.”

“In short, we are closing lending service and exchange service while BitConneco website will operate for wallet service, news and educational purposes,” it ended.

Those interested to see the full statement can refer to a screenshot captured by independent Twitter sleuth @BCCPonzi, who has been documenting the investment platform’s shady business for months.

Here is also a screenshot of the BitConnect shut-down announcement obtained by TNW:

According to the statement, the company will “continue offering other cryptocurrency services in the future.” The equally questionnable BitConnect X ICO – which was explicitly named in a cease and desist letter served by the Texas Securities Board – will remain “functional.”

BitConnect claims that its BCC coin will still be “listed on outside exchanges” and “merchant websites.” Meanwhile, it has taken a massive dip to $144, as per CoinMarketCap . By comparison, its value fluctuated around the $425 mark less than 10 days ago.

Above its legal trouble and inability to protect itself from continuous DDoS attacks, the company blamed the closing of its lending and exchange services on “bad press.” That is despite the fact that most of this bad press circulated around the severity of their legal troubles.

Prior to this development, the shady Bitcoin investment scheme was mired in a litany of legal troubles, including cease and desist orders from the UK in November, as well as two more from from the US this month – one from the Texas Securities Board and one from the North Carolina Securities Division .

Leading up to the announcement, BitConnect promoters suddenly began distancing themselves from the project . Coincidentally, the website was struggling with a series of server downtime – all of which began shortly after the cease and desist orders rolled in.

Update: The price of BCC has plummeted even further, currently standing at a bit over $43.

Update 2: Minutes later, the price has lost another $14 in value, now down to $29.

Cryptocurrency doesn’t have the same price between countries — here’s why

In the last six months while I’ve been actively writing about blockchain and cryptos, there’s one question that people keep asking me “Why is the price of Bitcoin different between countries? Does that mean I can make money from arbitrage?”

The short answer to that question is, ‘Yes.’ Of course, it’ll entail a lot of work when it comes to correctly reporting your transactions to the tax departments in your country. But that aside, arbitrage is possible because different countries buy and sell Bitcoins at different prices. But why is that?

Because Bitcoin has no international price.

And the reason for that? People don’t seem to have consensus on what Bitcoin really is.

The purpose of Bitcoin

It’s said that, “value is always perceived” — and in the case of Bitcoin, that holds truer than ever. With no widely accepted use case available, everybody has their own reason to buy into Bitcoins. For some, the reason is the belief that the blockchain technology powering Bitcoin will flourish someday. For others, the reason is that the Bitcoin that they would buy now will become usable at some point in time in everyday use. And for yet another group (perhaps most), the reason is pure greed; they want to buy in the hope to sell at a higher price — making a quick buck without much work.

With such varied expectations from Bitcoin’s future, it’s challenging to have a consensus on what Bitcoin’s purpose actually is, and by extension, its value.

Nobody knows. And everybody’s speculating.

Credit: Mohit Mamoria This speculative nature of the market makes it possible for Bitcoin vendors to sell Bitcoin at a price that the buyer is willing to pay. For example, on average in India, Bitcoins are sold with a 20 percent premium compared to the US market. That’s not all, as usually in India, the difference between the buy and sell price is over $1000.

And people are still buying. Why? Well, because they don’t really have a choice if they want to buy crypto.

Basic economics at work

In certain parts of the world, Bitcoins are generally bought from a Bitcoin vendor, instead of peer-to-peer exchanges. P2P exchanges take place on a platform where buyers are matched with sellers. The platform then gets a small commission fee for making that match happen. A vendor, however, is a business that holds a large reserve of Bitcoins and a large reserve of cash. A buyer can buy Bitcoins for cash at the predetermined prices the vendor has set.

Consider a market where two apple vendors are selling apples. Each of them has their own reserves of apples and their own demand in the market. Let’s say both vendors have an inventory of 100 apples but 100 people are waiting in queue to buy from the first vendor and only 30 people are waiting in queue to buy from the second vendor, the first vendor can sell at a higher price.

In such a scenario, the 100 people in the queue for the first vendor will eventually get to know about the second vendor in the market and instead of waiting in the line, some will move to the second vendor to buy apples. With this increase in the demand, the second vendor will increase the prices and eventually the businesses of the two vendors will come to an equilibrium.

The reason for this is that both vendors are competing with each other in the same market, both of them will have a similar demand and similar prices. If a third vendor shows up, but in a different country, he/she will not be influenced by the market conditions of the first two vendors.

Due to geographical and banking limitations, to buy Bitcoins from a vendor in any country, you must have a bank account and an ID in that country. For instance, since Indians cannot buy Bitcoins from Coinbase, they are stuck buying from local vendors. Therefore, the prices of the local vendors are irrespective of the international vendors.

Equilibrium for isolated local vendors

The vendors know that their buyers cannot buy from vendors outside of the country; therefore, the only competition they have is the other local vendors. Also, with the local vendors, there will only be a handful of them at any given time, because procuring a vast reserve of Bitcoins is not an easy task.

That’s why, until international vendors start trading in a country like India, the prices can be higher or lower than the global rates. But that means that it doesn’t take much for the prices to come at par with the international vendors. The only thing that would need to happen is that one vendor would start selling Bitcoin at the lower international price and steal all the demand from the current local vendors.

The entire crypto market is brand new and nobody knows what’s the purpose of Bitcoin or what the future looks like. Everybody has their own version of the story about the future of crypto that they want to believe in. And that makes the following graph, not a graph of disruption, but that of greed.

Don’t get me wrong; I am not a non-believer in the blockchain. I am a huge advocate of the blockchain, crypto, and a decentralized world. I am just saying that not all the money that this market has seen is ‘smart money.’ A lot of it is greedy money that will disappear someday when people have made their desired profit. When that happens, a rational demand will make the prices more or less the same across the world.

Until that day arrives, let’s have an enjoyable ride navigating through the chaos.