Pros and Cons of Decentralized Exchanges

An exchange is an organized market where tradable items are bought and sold. In the world of cryptocurrency, there are online exchange platforms where people can trade different types of cryptocurrency or fiat currency. Decentralized exchanges are what make cryptocurrency truly desirable for those that want a system that doesn’t use a third party intermediary between a buyer and a seller.

Centralized Exchanges vs. Decentralized Exchanges

The best way to understand decentralized exchanges and why they are desirable for cryptocurrency is to compare them to centralized exchanges.

Centralized Exchange: A centralized exchange like Coinbase, Mercatox, etc., centers on a third party that matches two parties that want to transact with each other. The third party holds the funds. These centralized exchange centers have many rules that each party must conform to in order to participate, such as “know your customer” regulations and anti-money laundering laws. This third party becomes the authority on the transaction and if parties don’t meet their requirements, they cannot complete the transaction.

Decentralized Exchange: Unlike a centralized exchange, a decentralized exchange like ForkDelta is a platform that is established directly between both parties. There is no third party to set up rules of trading. Instead, the trade takes place using an automated process. Because there is no central authority on a decentralized exchange, there is no storage of personal information like names or account balances, so parties can keep everything private.

A Look at the Pros and Cons of Each Exchange

There are many pros and cons when it comes to choosing which type of exchange to use. At the end of the day, it’s up to the individual user to decide. Often, it comes down to personal preference and comfort level. Often, people will use a mixture of both, because they appreciate the benefits of each.

Centralized Exchange Benefits:

  • Options for recourse if someone is scammed or hacked.
  • The central authority oversees daily operations like security, maintenance, growth and customer service.
  • Better user experience due to the thoughtful execution of business plans.
  • Easy onboarding for first-time users.
  • Insurance may cover some or all losses.

Centralized Exchange Drawbacks:

  • Because servers are in only a few locations, they are more vulnerable to server downtime.
  • The centralized structure makes it possible for hackers to access information and currency.
  • Vulnerable to hostile takeovers or corrupt governments, causing parties to lose all their privately owned currency.
  • Most third parties charge some kind of transaction fee.

Decentralized Exchange Benefits:

  • The exchange operates outside of any single central authority.
  • Low barrier to entry, so many new tokens and coins are available that might not be list on larger centralized exchanges.
  • Exchanges are hosted on servers spread around the world, instead of one location, boosting security for each party’s data and funds.
  • Parties don’t have to worry about the third party’s honesty or security because the currency is held in their own personal wallet.
  • Parties also don’t have to share their personal information with anyone, so privacy is high.
  • Decentralization thwarts hackers.
  • In many cases there are no transaction fees.

Decentralized Exchange Drawbacks:

  • Many aspects of traditional trade and exchange are not available in a decentralized exchange, such as lending, stop loss, and margin trading.
  • Little to no customer support.
  • Less focus on ease of use, so it can be very confusing or be intimidating for first-time users.

In summary, centralized exchanges are used by those who may be new to cryptocurrency and want more centralized services. Decentralized exchanges are preferred by users with cryptocurrency trading experience who want the anonymity associated with it.

Cryptocurrency Portfolio Tracker

Original Crypto Coin’s Cryptocurrency Portfolio Tracker on Google Sheets pulls data from Coin Market Cap’s API and Live Coin Watch’s API and refreshes as you go.  Big exchanges like Binance and big indexes like Coin Market Cap don’t have every coin, but  keeping track of ALL of your coins can be accomplished through this Google Sheet!  It’s quick, efficient, linked to your Google account, and can be accessed anywhere, anytime.   It is also compatible with Excel and can be exported for additional functions and customization, and increased privacy.

Access the Portfolio Tracker by visiting the following link:

https://docs.google.com/spreadsheets/d/1q7QIcfayrW1svALgOKxIpRH502FE3ibYeOJHkreCXUg/edit?usp=sharing

A unique feature this Portfolio Tracker is that it can track coins NOT listed on CoinMarketCap.com.  We’ve created a function that follows Live Coin Watch market data.  LiveCoinWatch has lower volume and lesser known cryptocurrencies, allowing you to track a wide range of tokens and coins in our Cryptocurrency Portfolio Tracker.

Coin Market Cap requires $100,000 worth of daily volume (the total amount of $’s traded in a day) and Original Crypto Coin (OCC) has not reached $100,000; however, don’t count OCC out because they did reach around $25,000 in trading volume on June 8, 2018!  $25,000 is very impressive for a small coin such as OCC and what we are accomplishing with no ICO.

You can get live data for a coin directly from CMC by following these steps:

  1. Visit the Portfolio Tracker link above and click File -> Make Copy to save to your Google Drive
  2. Visit http://coinmarketcap.com and finding a coin
  3. Find the coin you want to track and copy the coin’s website address: example- http://coinmarketcap.com/currencies/bitcoin/
  4. Paste the following function into your sheet in the under the Market Price Column: “=IMPORTXML(“http://coinmarketcap.com/currencies/bitcoin/”,”//*[@id=’quote_price’]/span[1]”)”

NOTE: Do not include the opening and closing quotation marks in your sheet.

Cryptocurrency trackers are everywhere, but we like to make it simple by using this Google Sheet. Having it all in one place makes it more convenient and accessible to track all of your cryptocurrencies.

Let us know how you like the Google Sheet and if you have any recommendations!

Adding OCC to Blockfolio

Original Crypto Coin (OCC) was recently added to the popular cryptocurrency portfolio tracker Blockfolio.  To get started, you’ll need to install the Blockfolio app from Google Play or the App Store.  Once the app is installed, navigate through the introductory screens until you get to the coin list.  Then select the “Add Coin” button indicated by the blue arrow.

On the next screen, type “original” into the search field and Original Crypto Coin will pop up.

After you click on Original Crypto Coin, you’ll be able to select either the OCC/ETH or OCC/BTC trading pair, and the exchange.  From their you can enter in specific trade details, or select watch to simply track price on a specific exchange.  While OCC is listed on several exchanges, only Mercatox and DDex are currently tracked on Blockfolio.

Hard Forks vs. Soft Forks

The world of cryptocurrency is always changing and thanks to the public and transparent nature of the blockchain, it’s opensource for anyone to see. The strength of cryptocurrency is that it depends upon a blockchain, or the digital ledger upon which cryptocurrency transactions are recorded.

Current blockchain transactions follow the same rules as all of the transactions before them unless a change is made. Changes to the code of a blockchain can create all kinds of issues for participants looking to trade coins and create blocks.  These code changes are categorized as hard forks and soft forks.

What is a Hard Fork?

A hard fork is a major change to the code of a blockchain that results in a permanent divergence.

Just like the word “fork” is used to describe a single path that suddenly splits into two, a fork in the blockchain creates a divergence or split in the path of the blockchain. This allows two blockchains to form from the original, essentially creating two forms of cryptocurrency.

During a hard fork, the blockchain divides to become two forms of the cryptocurrency. One of the forks is the same as the original blockchain, with no changes made. The other fork, however, incorporates the changes. There are two versions or prongs of the original that are no longer identical to each other, and the changes are not backward compatible, meaning miners working on the new chain cannot validate blocks that use the old code. These two codes can, however, coexist comfortably as different cryptocurrencies and different blockchains.

There are several potential outcomes of a hard fork. One possibility is that the new version is picked up by the community and added to, while the old chain is abandoned. The new and elongating blockchain becomes the new standard and the old one is forgotten. Another possibility is that both blockchains remain valid with two different ledgers and are both updated by their respective communities (like Bitcoin and Bitcoin Cash).

But why would anyone want to create a hard fork? The reasons for a hard fork can vary. Sometimes the hard fork is created to test out or implement a significant change to the code’s defining parameters. Other times, it is done to create a new asset that is similar to the original cryptocurrency. In some instances, the hard fork is accidental and quickly resolved.

No matter what the reason, a hard fork in the blockchain is the way to implement change to the way a blockchain functions. Participants must upgrade their software to continue participating in the chain. If they don’t, they are separated and cannot validate any new cryptocurrency transactions. They will only be able to participate in the old chain.

What is a Soft Fork?

A soft fork is a change to the code of a blockchain that remains compatible with older versions.

Unlike a hard fork, which creates a divergence, a soft fork in the blockchain is more of an upgrade to the cryptocurrency. Whenever the code changes within a blockchain, participants must update their software, so their transactions remain viable. With a soft fork, participants remain compatible with both old and new code as they upgrade.

One of the biggest benefits of a soft fork is the convenience for participants. A soft fork can implement upgrades and changes without splitting the community and thereby weakening the value. However, soft fork developments do need to ensure that any new rules fit well with the old rules to ensure this backwards compatibility, unlike a hard fork that doesn’t require compatibility.

Who Creates the Hard Forks and Soft Forks?

The governance of different blockchain’s vary. Implementing a successful hard fork or soft fork requires a large portion of the miners and/or coin holders to agree to the specific changes and manage the updates to the code accordingly. For the changes to the blockchain to really take effect, it needs the support of participants. Without support, the changes won’t be viable and the blockchain will become an orphan.

In theory, just about any participant can create a fork in the blockchain, so what prevents everyone from creating their own version of a cryptocurrency? In reality, not much. Of course, the value of the cryptocurrency comes from the demand for the coin. If a coin does not have high demand or much usage, it doesn’t have much value. The community needs to support a coin to make it valuable, so setting up hard or soft forks without careful planning will result in abandoned segments with no worth.

Summary

It takes a big and active community to support a particular type of cryptocurrency. Like any software, updates and adjustments are necessary for optimal operations. Hard forks and soft forks are an inevitable part of keeping cryptocurrency valuable and workable, so every participant should become familiar with how they work and how they can benefit from them when they happen.

Accredited Investors and Initial Coin Offerings

The U.S. Securities and Exchange Commission sets certain standards that individuals and entities must meet before they can become accredited investors. But what exactly is an accredited investor and how do they factor into the world of cryptocurrency?

The SEC Defines Accredited Investors

In Rule 501 of Regulation D of the Securities Act of 1933, the Securities and Exchange Commission outlines the conditions that people or entities must meet to be considered an accredited investor. These conditions exist because in the wake of the 1929 stock market crash and the resulting Great Depression, the SEC needed a method to distinguish those entities with a certain amount of risk tolerance who can protect their own interests in potentially high risk investments.

An accredited investor can include a financial institution like a bank, non-profits or private business development companies that meet the threshold of total assets. Individuals can also become accredited investors if their net worth exceeds a certain threshold. Those with a trust that contains certain assets can also meet the accredited investor criteria. By meeting these standards, accredited investors have essentially been vetted as verifiably qualified to invest in certain offering types.  Definitions vary by country, with the US setting out the following qualifications for individual accredited investors:

An accredited investor, in the context of a natural person, includes anyone who:

  • earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
  • has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

On the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the other years.

Accredited Investors and Cryptocurrency

In the financial world, companies can to raise money from investors by selling securities using a number of different “offering” types defined by the SEC. These offering types prescribe the registration and disclosure requirements, the maximum amount of money which can be raised, and the types of investors which are eligible to participate.

In the realm of cryptocurrency, accredited investors and offering types are important when structuring an Initial Coin Offering (ICO) or other type of token sale. At this point in time, most ICOs either limit the opportunities to invest to accredited investors, or ban US investors altogether in an attempt to comply with (or avoid being subject to) US securities regulations.  While debates rage within the cryptocurrency community about these regulations, it is clear that the SEC views most ICOs and token offerings as sales of securities.  Even though the rules may seem unfair or exclusionary to people who want to get involved in ICOs, failure to comply with regulations can have a negative impact on projects and their future token values if they come under investigation.

Why Accredited Investors are Interested

Accredited investors are willing to take financial risks to get gains, and even though cryptocurrency is unpredictable and volatile, there is the potential of extremely high returns on that investment. Another attractive feature is that the accredited investor can quickly and easily support a startup company. With just a digital currency wallet, investors have the option to get involved in as many different projects as they want. Accredited investors can also easily offload tokens and coins fairly quickly.

ICOs and Accredited Investors Need Each Other

There’s no doubt that ICOs are a new and innovative method for startup companies to raise funds. The efficiency, speed and global reach are undeniably attractive to accredited investors and blockchain companies. The relationship between accredited investors and cryptocurrency is sure to evolve as improved technology, security issues, incredible returns as well as massive losses and outside regulatory requirements continue to shape the future.

OCC Wins Mercatox Vote! Listing Announced

Thanks so much to ALL of you who voted and helped us get the word out about the Mercatox Exchange voting competition.  Because of our community’s hard work and support, we’re thrilled to announce that our listing at Mercatox is now live using the token symbol OCC1!  This is the exact same token you know as OCC.  We’ve just chosen an alternate symbol for trading because Mercatox already used OCC for another token.

You can find the OCC1/ETH trading pair here, and the OCC1/BTC trading pair here.  If you don’t have an account, please use our affiliate link to get signed up.  OCC will use the commission we earn on your trading activity to support future exchange listings and marketing activities!

The Hunt for OCC is ON! Aircoins App Launched

The pic contest is over for now, but we’d still live to see what you find during your hunt!

The Aircoins augmented reality app is available for download NOW in the Google Play store!  Get your copy so you can go hunt for OCC and other crypto in your neighborhood.  Be the first to post a picture of an OCC coin you find in the app, and you’ll win 10,000 OCC.  Don’t forget to tag @OrigCryptoCoin and use the hashtag #OCC so we see your tweet!  If you’d like to check out the game before you download, visit our video walk-through here.

Get Aircoins and Google Play

The iOS app is coming soon . . .  We’ll run a second coin hunt competition when  it launches.

Overview of KYC/AML Laws

Criminals and terrorists have long sought out ways to legitimize their money so they can apply it toward their goals. Money laundering describes the process by which these groups hide the ownership of their money and pass it through several sources until it has the appearance of legitimacy. The criminals are looking to disguise the original source and cover their tracks as they engage in transactions all over the world. Due to the mostly unregulated aspect of cryptocurrency, many are concerned that suspicious financial activities will thrive there.

Numerous countries and companies are trying to regulate cryptocurrency transactions to prevent money laundering and are applying a number of KYC (Know Your Customer) and AML (Anti-Money Laundering) laws and requirements to various entities in an attempt to be more vigilant in preventing criminal and terrorist financing.

History of Regulation

The idea of money laundering is nothing new, as profiting from black markets, bribes, extortion, and more has always been a priority for those who wanted to remain hidden from the law, tax-collecting governments, and enemies. Money laundering is a descriptive term for taking “dirty” money from a criminal source and passing it through enough layers of financial transactions so it appears “clean.”

For the United States, many of the modern money laundering regulations and laws came into effect in the early 20th century. Countries around the world have their own laws and they work together on an international scale to prevent suspicious activities.

As criminals develop have more sophisticated methods of hiding their money, these laws have extended to all kinds of areas, such as casinos, insurance companies, and merchants. Cryptocurrency is just the latest development to come under scrutiny for anti-money laundering laws and enforcement.

Cryptocurrency and KYC/AML

If there is an exchange between fiat currencies and virtual currencies, the entities facilitating the exchange are required to comply with various KYC/AML regulations. However, there isn’t clear regulation at the moment for exchanges between different virtual currencies. That doesn’t mean cryptocurrency exchanges are a free-for-all of criminal activity. Instead, each individual company takes it upon themselves to perform their due diligence to conform with common-sense KYC/AML requirements.

Many experts believe that it’s only a matter of time before governments across the globe will implement laws and directives upon cryptocurrency exchanges that require them to comply more closely with KYC/AML checks and balances.

What is KYC (Know Your Customer)?

Know Your Customer is an identification process that requires entities to determine the true identity of their customers. In traditional financial transactions, entities like banks are required to ask about the source of income, the nature of the business and verify a customer’s identification, for example. Typical verification might include proof of citizenship, utility bill, other bank statements, and photo ID.

While this verification may cause headaches for legitimate customers, it’s an excellent way to protect the entity from liability.  This in turn protects legitimate customers. Under these laws, an entity is required to report suspicious transactions to authorities, as well as any individuals or groups that they cannot verify or whose purpose is unproven.

Many digital currency exchanges are joining in to help prevent money laundering through their channels. For example, they may ask users to send a clear digital photo of them with a photo ID. Other cryptocurrency companies still do not have any methods of KYC in place.

What is AML (Anti-Money Laundering)?

Like KYC, Anti-Money Laundering or AML is the series of steps outlined by laws and regulations that entities must take to avoid money laundering activities. A financial or economic entity seeks to work with legitimate people and businesses instead of those who want to clean up their dirty money. They take steps to avoid these transactions as well as identify and report suspicious activities.

When it comes to virtual currency transactions, anonymity is both a benefit and a challenge.  While many legitimate people and companies like the privacy benefits of crypto, this feature also increases the risk of terrorist financing and money laundering. Regulation will likely become more strict to ensure that security measures are in place to decrease illegal and unlawful exchanges.

The Future of Cryptocurrency and KYC/AML

Traditional economic and financial institutions are required to comply with various KYC/AML laws, nationally and internationally. Governments and financial institutions require compliance for participation. But the attractive thing about cryptocurrency exchanges is that there is ideally no third-party interference in the transfer of coins. The innovation of cryptocurrency appeals to many precisely because of lighter regulations.  However, it stands to reason that any financial system should not facilitate illegal activities.

Increasingly, countries and governments across the world are enacting KYC/AML laws for cryptocurrency systems, like the United States, United Kingdom, South Korea, Japan and the European Union. As cryptocurrency grows in popularity, accessibility and value, it’s expected that more financial institutions and world governments will keep a close watch and take steps to enact more KYC/AML laws to avoid criminal and terrorist activities.

Contact the TUSC Team

If you have questions, concerns, queries, posers, etc. fill out the form and we’ll respond as quickly as possible.  You can also find us almost 24 hours per day on our Telegram channel. which is the fastest way to have your question answered.

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