UK regulators are reportedly moving forward with efforts that would find blockchain firms exiting a sandbox program aimed at encouraging innovation.

According to a report by The Financial Times, the UK Financial Conduct Authority (FCA) is currently considering whether to approve several blockchain-based products for use by domestic consumers and businesses.

Sources told the news source a "small but significant number" of projects are being reviewed, and that details would be made available in the coming months.

News that the FCA is developing an approval process for blockchain projects comes months after bitcoin payments firm Circle Internet Financial became the first to receive an e-money license in April, a move that enabled it to formally extend services to the UK.

FCA directory of strategy and competition Chris Woolard told the media outlet that the FCA is looking at startups in areas where the regulator may be keen to encourage innovation, and that compliance may be one such sector.

Woolard was quoted as saying:

"We do think [blockchain] has got some potentially interesting applications and we are talking to firms thinking about how to apply that to financial services and how it could benefit consumers or indeed make the business of compliance easier."

The comments come months after the agency indicated its openness toward a light-touch regulatory approach to blockchain startups in the UK. At the time, Woolard said it was "crucial" that regulators give innovators room to create products and services.

Image credit: IR Stone / Shutterstock.com

RegulationUK

Original author: Pete Rizzo

How big is the ethereum market? In light of recent developments, answering this question has become more complex for traders and market observers.

Due to the unintended consequences of the ethereum community's decision to create a new version of its blockchain last month, there are now two ethereum markets representing the value of almost identical platforms.

The planned technical change, which at first had seemed to go off without a hitch, soon got a little strange, as a whole ecosystem of exchanges, miners and traders sprung up around the abandoned blockchain.

At press time, this has resulted in a market for tokens trading on two separate blockchains. Ethereum, the blockchain created in the hard fork, had a total market cap of nearly $900m, while ethereum classic's market cap stood at $141m. Ethereum tokens (ethers/ETH) were worth just over $10, while classic ethers (ETC) were valued at $1.70.

For some time, the fork created a field day for traders.

Chris Burniske, blockchain products lead for investment manager ARK Invest, recalled the sudden rise, telling CoinDesk:

"It initially looked like ETC was going to experience a quick death as it was worth nearly nothing and the vast majority of miners were supporting ETH."

After the hard fork was executed, he said, "big players" in the digital currency trading space starting buying "large amounts" of ETC. Further, as those who owned ETH were automatically credited an equal amount of ETC, trading volume surged as speculators sought gains.

"The markets weren’t very liquid, and so even a small boost in demand was able to boost the price," he added. "Price appreciation drove interest."

However, now that the dust has settled, market observers are beginning to wonder how long ETC and ETH will be able to coexist. Will the ethereum blockchain be abandoned by developers? Will the new chain be embraced? Or will both stubbornly continue to coexist?

For now, it seems, experts aren't really sure.

Ideology drives fundamentals

While the two blockchains are near identical, some market observers believe the ideological differences create separate price dynamics.

Petar Zivkovski, director of operations for leveraged bitcoin trading platform Whaleclub, spoke to how desires for ideological purity helped fuel the creation of ethereum classic.

His argument is that by rejecting the decision to return funds stolen by the so-called DAO hacker, ETC established itself as a blockchain that would preserve the finality of transactions.

"The rise of ETC is a direct testament to the power of a decentralized, non-governed blockchain system, despite its flaws, and a clear rejection of ETH, which is now regarded by some as a centralized, influenceable system governed by a few enlightened developers," he said.

As traders were drawn to this idea, so were other key blockchain players.

Following the hard fork, as trading volume grew, miners saw value in mining the old version of the blockchain.

Demand questioned

Now that ETH and ETC coexist, the more important question is whether this situation is sustainable. Do both markets exhibit the needed fundamentals?

Zivkovski emphasized that the volatility on "ETH-based pairs" remains high, as the ETH currency is just over a year old.

Demand, he said, will be required to keep up this volatility.

"The question that's on every market observer's mind is whether this demand can be sustained," he noted, adding:

"ETH (and ETC) volumes in the recent past have been overwhelmingly speculative, and we all know that speculative demand comes to pass."

Zivkovski asserted that both currencies have yet to define themselves as uniquely as bitcoin, arguing they have limited use as a store of value.

Past that, Arthur Hayes, CEO of bitcoin trading platform BitMEX, emphasized that both markets may be sustained as they have proved profitable for traders.

"Holders of ETH pre-fork have actually increased their wealth since the fork [when you combine] the ETH and ETC prices," he said.

Technical concerns

Still, some market observers point to the potential technical limitations of having twin platforms.

After all, the tokens are meant to power decentralized ethereum applications, and it's not immediately clear what having two versions of ether provides developers.

Calibrated Markets LLC's Jacob Eliosoff has argued that having two markets simply isn't practical for end-users.

"'The more the merrier' is a fine philosophy for ideologues and traders, but for people who actually want to run or build smart contracts, two chains are a mess,” he said.

He also wondered whether the two blockchains will be able to draw enough developer talent to continue.

Here, Burniske said, he sees ETC at a disadvantage.

"While developer support is growing for ETC, I don’t see a cohesive team of rock-star developers moving to support it, in the way that we’ve seen with ETH," he said.

Burniske noted that, while he doesn’t necessarily think ETC will ever "die", he said digital currencies often fade into obsolescence. After all, to remain "alive", the network only requires one mining rig.

Hayes provided the most optimistic view, however, stating that, through clear ideological differences, the two versions of ethereum could continue.

He concluded:

"Both coins can co-exist because they serve different purposes and stakeholders."

Two fencers image via Shutterstock

EthereumEthereum ClassicPrices

Original author: Charles Bovaird

Recent months have seen blockchain innovation professionals departing legacy financial institutions for smaller startups, but the motivations driving this shift in the industry are less than clear.

To date, it’s been one of the less-discussed trends of 2016, given the lack of public dialogue from the major firms affected and the relative quiet of the new startup founders, many of whom are seeking to do business with their former employers.

So far in 2016, BNP Paribas, Deloitte, JPMorgan and State Street have all seen members of their blockchain teams depart. This has given rise to a new wave of lesser-known startups including firms like DPactum, Kadena and Nuco. Still others, like the founder and head of Philips Blockchain Lab, have left without specifying why.

In interviews, representatives of these startups say the departures are more about bringing their enterprise blockchain insights to a wider group of industries. Rather than the result of any cutbacks in spending at major backs, this new generation of founders believes it will be easier to raise more capital, more quickly, outside the firm.

For Stuart Popejoy, who left JPMorgan’s blockchain project in July to found financial services-focused private blockchain startup Kadena, it’s about opportunity and demand.

Popejoy told CoinDesk:

“Our work at JPMorgan established that a scalable blockchain was possible, but somebody still had to push it out to the industry. After all, blockchains are inherently inter-organizational, whereas JPMorgan’s priorities will be to solve problems in the bank.”

But, Popejoy didn’t go alone, as his fellow JPMorgan colleague, developer Will Martino, also made the move to Kadena. The two ex-bank execs want to bring the technology to the broader market, and in their eyes, it’s still early enough to make headway.

Even the high-profile enterprise blockchain groups are having trouble answering basic technical questions – scalability, transaction privacy and the safety of smart contracts – about how blockchain can be implemented, he said.

“When we were at the bank, we simply couldn't find a vendor solution that could provide the necessary performance our use cases demanded without sacrificing the robustness and simplicity of a true blockchain, which is why we ‘rolled our own',” Popejoy said.

Natural progression

Other former finance executives are departing for existing startups.

Jeremy Drane, for example, was previously head of blockchain at ‘Big Four’ accounting firm PwC before joining blockchain startup Libra as its CCO. Drane said he sees the recent run of departures as the natural progression of tech moving from experimentation to pilot phase.

“What you’re seeing is the first round of projects moving ... off the innovation budgets into enterprise evaluation cycles where the processes are more rigid,” Drane said. “There’s a totally different set of rules around how those projects are managed and what flexibility you have.”

This maturation is another possible reason that members of blockchain teams at legacy institutions are moving on, but industry analysts also spoke to its “sex appeal”.

For professionals that are geared towards innovation, moving into production is less appealing. Instead, they’ll take what they learned and build startups that bring the tech to more industries.

“There are probably push-and-pull factors for joining startups. The potential upside is larger in the entrepreneurial space than in managing a team in a large organization,” said Antony Lewis, an independent blockchain consultant.

While there seems to be enough blockchain startups to go around, most of these companies operate in the financial services space. Legacy companies in other industries will need help adopting the technology for their business models. Consumer product companies, entertainment and media businesses, as well as humanitarian and international aid projects, are a few of the industries currently showing interest in blockchain.

Chris Larsen, founder and CEO of Ripple, said this movement signals that blockchain optimism is still on the rise for both banks and startups.

“If anything, I’d say it’s an indication that thing are getting stronger and that [the professionals] see things booming and want to put themselves where the action is,” Larsen said.

Uncertainty Remains

Others have demonstrated more skepticism.

Gideon Greenspan, founder and CEO of blockchain tech specialist Coin Sciences, sees the market for private blockchain solutions contracting. For example, he said that concerns about confidentiality have shaken the faith in use cases such as clearing and settlement that had previously been earmarked for R&D budgets.

“Much of banks' early investments in blockchains were based on this expected use case, rather than more general ideas of shared data storage (for which blockchains are well suited). In that case it would make sense for them cut back on spending in the area,” he said.

However, Greenspan indicated that he hasn’t seen a slowdown in the use of Coin Science’s Multichain platform for big bank pilot programs. So far, he said, Multichain has been used to create a crowdfunding platform, a regulator overview and a shared documentation notarization service.

One reason banks may be pulling back on external equity investment and partnerships with startups could be the overabundance of blockchain startups in the market.

“Banks could be waiting to see which platforms become dominant before developing a project on any particular platform,” Greenspan said.

Many banks, analysts said, simply don’t have the manpower to filter through and vet all these various startups.

For now, it seems the industry will remain stuck in the awkward positioning of its hype cycle. While many are heralding 2017 as the “Year of the Blockchain”, it’s likely that this claim will be valid for years to come.

Libra’s Drane concluded:

“I can understand the skepticism, but these systems take a long time to build.”

Evolution image via Shutterstock

BankingBlockchain TechnologyFinanceStartups

Original author: Bailey Reutzel

Alex Millar is a blogger, podcaster and YouTube publisher, with a degree in Engineering Physics from Queen's University in Kingston, Ontario, Canada.

In this opinion piece, Millar expounds his theory that money is energy, arguing that bitcoin provides a superior alternative to fiat currencies from a purely scientific perspective.

In physics, the definition of "energy" is "that which allows work to be done."

This means that money is energy, since it can be used to do work via payments to people. The energy in money can be thought of as "economic energy". Economists call economic energy "price" and measure it in terms of "euros" or "Kenyan shillings" and so on.

But, these units are abstract because their quantity changes over time. Physicists would prefer to use units such as joules or kilowatt-hours, which have a concrete basis in physical realities of mass (kg), length (m), and time (s).

Since money is energy we can apply the Law of Conservation of Energy, which says: "Energy cannot be created or destroyed, merely transformed.”

You might remember examples of this law from high school science: a toaster transforms electrical energy into thermal energy; a blender transforms electrical energy into mechanical energy.

A $100 bill has significant economic energy. And yet, it was created in an automated process using inexpensive raw materials and an insignificant amount of electrical energy. This invites the question: from where did the economic energy in a $100 bill come from?

The answer lies in economics 101, which says that price (economic energy) is a function of supply and demand.

As the overall supply of a commodity increases, the energy of each unit decreases. Therefore, the energy contained in a new $100 bill was transformed from pre-existing dollars, each of which lost a tiny fraction of its energy. Power is a zero-sum game.

This realization has ramifications for traditional monies such as dollars, proof-of-stake (PoS) monies such as those planned for future versions of ethereum, and proof-of-work (PoW) monies such as bitcoin.

Dollars, euros, etc

As explained above, when authorities create new dollars, they take energy from holders of pre-existing dollars.

The energy equation is simple:

Proof-of-stake coins

Let’s assume a future ethereum is a PoS network that awards new coins to ether holders in proportion to their holdings.

In other words, everyone holding X coins will have Cx coins after the next coin reward, (where C is some constant). Energy is transformed from old coins to new coins, which are held by the same people.

Without a flow of energy it is difficult to see the point of creating new coins in a PoS system. Supposedly the purpose is to find consensus on the growth of a blockchain. This remains to be seen.

Proof-of-work coins

The creation process of PoW coins (like bitcoin) consumes large amounts of electrical energy.

Bitcoin fans might be tempted to assume that this energy is completely transformed into economic energy of new coins and that, therefore, pre-existing coins do not lose energy.

However, the mining process also creates heat. If the energy in the heat is equal to the electrical energy consumed, then the energy in new coins must come from pre-existing coins. Fortunately, this seems unlikely, since machines tend not to be used if energy input is completely lost to heat.

It seems much more likely that economic energy is transformed from electrical energy with some efficiency loss to heat.

Whereas those who store energy in dollars have energy syphoned by economic parasites, those who store energy in bitcoin do not.

Bitcoin miners have found a way to convert electrical energy into economic energy.

As logical people realize that they can store pure economic energy without the drawback of hosting an economic parasite, they will sell their dollars for bitcoin. This will result in a conversion of energy from dollars to bitcoin.

It will also create a positive feedback loop: even people who cannot see the logic of holding a parasite-resistant money will see the economic energy (price) of bitcoin rise due to rising demand.

Later, as the total economic energy in bitcoin approaches that of dollars, people will notice the economic energy of dollars fall due to falling demand. Like a chemical reaction, energy will then transform quickly, and nearly completely (I say "nearly completely" because some people will refuse to stop believing in dollars).

Finally, from a physicist’s perspective, there is an inevitable trend in the universe for entropy (disorder) to increase.

Since PoW coins like bitcoin are the only money that contributes to increasing entropy through heat loss in mining, they are the only money that has a purpose from a universal perspective.

This post originally appeared on Medium and has been republished here with the author's permission.

Newton's cradle via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

bitcoinEthereumScience

Original author: Alex Millar

Demian Brener is founder and CEO of Smart Contract Solutions, a firm working to provide tools to build businesses using blockchain-based software tokens.

In this opinion piece, Brener discusses the different ways startups are seeking to leverage these new creations, and the various business models taking shape in the evolving space. 

Companies we've never heard of are launching IPOs before our very eyes.

But instead of ringing the IPO bell after years of operations, they are going public on day one, and instead of raising money by selling their company stock, they are building distributed networks and selling their own tokens.

This new way of building companies is what Fred Ehrsam ,  founder of Coinbase ,  described as the "decentralized business model".

Yet, many of the established rules about building and investing in businesses don't apply to this new model. What can we learn from the companies going down this road?

Tokens

The mechanics of a token crowdsale are directly related to the kind of token issued.

We identified three types of tokens:

Debt Tokens Equity Tokens User Tokens.

User tokens

User tokens , or 'appcoins' as Naval Ravikant and Balaji Srinivasan have called them, are a form of digital currency needed to access the service provided by the distributed network.

As Union Square Venture managing partner Albert Wenger explains, you can think of these as tokens you buy at a fair to get on a ride.

In ethereum, for example, you need ether to build distributed apps on the platform. In the case of Sia, a distributed storage system, you need to own Siacoins to store files in the network.

User tokens are earned by providing value to these networks.

Contributions can take the form of mining, as in bitcoin, ethereum and Sia, or publishing stories, as in Steemit. Since user tokens are on a blockchain, they can be easily redeemed for any local or cryptocurrency.

Equity tokens

Equity tokens are used to finance the development of the network, but are not needed to access the services provided by the underlying protocol. As its name suggests, we can see 'equity tokens' as cryptographic shares of a network.

In exchange for investment, equity token holders are entitled to "dividends" in the form of revenue sharing or transaction fees in the network. For example, in the case of Sia, 3.9% of all successful storage payouts go to the holders of Siafunds, their equity token.

In many cases, these equity tokens represent shares of a distributed autonomous organization (DAO). A DAO's code is responsible for issuing the tokens, holding the money collected from the token sale, and contracting a company to develop the network.

Besides receiving a pro-rated reward, equity token holders in the form of DAO shares are usually entitled to pledge on proposals for how the investment money will be used.

That's the case of Digix, an asset-tokenisation platform built on ethereum. DGD token holders:

Receive a reward on the transaction fees of the Digix Gold Network Are able to submit and vote proposals on the DigixDAO.

Debt Tokens

A third type of token is the 'debt token'.

We can see these as a 'short term loan' to the network, in exchange for an interest rate on the amount lent. Steemit is one of the few networks with debt tokens, issued in the form of Steem Dollars.

Steem, the cryptocurrency mined by the network, can be used to buy Steem Power or Steem Dollars. Holders of Steem Dollars receive a ~10% interest rate, paid in Steem Dollars.

Steem Dollars are unique to the economics of the Steemit protocol.

Through buying Steem Dollars, people can invest in the network with sufficient liquidity, without committing to the two-year vesting period to which Steem Power holders are subjected.

We see networks with multiple combinations.

These include networks with:

Both user and equity tokens (Sia, Digix) Only user tokens (bitcoin, ethereum) Only equity tokens (Golem, SingularDTV) User, equity and debt tokens (Steemit).

The combination depends on the unique dynamics and economics of the network.

Crowdsales

The type of token typically dictates the mechanics of its crowdsale.

Pre-sale of User Tokens

To sell user tokens, companies tend to:

Publish a white paper defining the specifications of the network and a roadmap for its future development. Publicly announce the token and release the source code prior to creating the first token. Deploy the network and secure user tokens via mining. Alternatively, allocate a portion of the pre-sale tokens to the founding team as a reward for ideating and developing the network. Advertise the network and sell user tokens to anyone, anywhere. Work to grow the number of people using, building apps on top and maintaining the network.

As the network grows, demand for the token increases, leading to a rise in the user token price. This is what we call the 'Nakamoto business model'. Satoshi got its reward not by pre-mining bitcoins, but by being the first believer and supporter of the network.

Steemit followed the Nakamoto business model as well. The company wrote the code to power the Steemit distributed network, announced it to the public and secured ~80% of the initial STEEM via mining. The project plans to keep 20%, sell 20% to raise money and give away 40% to attract users/referrers.

Ethereum’s case is a bit different. Its pre-sale consisted of distributing private keys to buyers as a software access token to use the future network. Ethereum raised over $18m worth of bitcoin in the form of 60m ETH tokens created, where 12m ETH (20%) were retained by the development team.

When ethereum launched, buyers received their ether as the first blocks were mined.

Crowdsale of equity tokens

For equity tokens, companies tend to:

Publish a white paper defining the specifications of the network and a roadmap for its future development. Write a smart contract for a DAO, with a pre-defined number of equity tokens allocated to the company founders. Make the company the provider of the DAO, in charge of developing the network in exchange for a payment. Advertise the DAO crowdsale and sell equity tokens to anyone, anywhere. Use that money to pay the company for their development work. Work to make the network grow to increase the value of the equity token, and collect rewards based on the increased network usage.

Digix reached its $5.5m total within 12 hours by following these steps.

Since DigixGlobal is the company that ideated the network, published the white paper, wrote the DAO smart contract in ethereum and holds a substantial amount of equity tokens, they became the default service provider of the DigixDAO.

Regulation on token crowdsales

The laws that govern the issuance and sale of cryptographic tokens depend on the jurisdiction in which these events take place.

There are countries like Singapore and Switzerland where virtual currencies are not considered securities nor legal tender.

In the US, the Howey test is used to evaluate the sale of securities.

Under the Howey test, an instrument is a security if it A) involves an investment of money or other tangible or definable consideration used in B) a common enterprise with C) a reasonable expectation of profits to be D) derived primarily from the entrepreneurial or managerial efforts of others.

The public sale of securities to US citizens is overseen by the SEC, rendering it illegal to perform such an act without its permission.

Industry thought leaders, like non-profit advocacy group Coin Center and Harvard Berkman's Primavera de Filippi, suggest the issuance of user and equity tokens may constitute the sale of securities under the Howey test. But in reality, the power of these tokens goes beyond our understanding of traditional securities.

We also know the SEC is working on ways to rule blockchains as transfer agents. The actual impact of this regulation on the issuance of tokens is still unknown.

Connecting tokens to the legacy world

We see four different approaches used to carry out a legal and compliant token crowdsale.

The Swiss-based GmbH and Foundation

The ether pre-sale was conducted by the Ethereum Foundation, a non-profit organization registered in Switzerland, whose sole purpose is managing the funds raised from the ether sale in order to best serve the ethereum ecosystem.

To enable US citizens to purchase Ether without being ruled by the SEC, they framed the pre-sale of user tokens as the sale of cryptographic fuel – ether ("ETH") – required to run distributed applications on the Ethereum open source platform.

The initial development of the software was carried out by Ethereum Switzerland GmbH, a Swiss-based LLC.

The Singapore company and DAO

In the case of Digix, the smart contract for the DigixDAO was written by DigixGlobal, a Singapore-based company. This company is then hired by the DigixDAO and gets paid for developing the Digix network. Equity tokens sold represent shares of the DigixDAO.

While the Monetary Authority of Singapore (MAS) does not consider tokens as securities, the legal sale to US citizens depends on the SEC's interpretation of the tokens under the Howey test.

The 'CODE'

A third experimental approach used by Singular-DTV – a blockchain entertainment studio – is the "centrally organized distributed entity".

The ‘CODE’ is a combination of a centrally organized (CO) governance component in the form of a Swiss GmbH – LLC – and a decentralized entity (DE) component in the form of a tokenized ecosystem built on ethereum.

In this case, the GmbH is responsible for spending the ether collected in the Decentralized Entity token sale to build media projects and collect the revenue generated. The ‘CODE’ is supposed to be regulatory and tax compliant, protecting the token holders from potential liability.

The independent company

The last approach is to keep the network and issuance of tokens independent from its creator.

Tokens are allocated via a computer algorithm that does not specify any specific public keys to receive funds. Following the Nakamoto business model, the network creator secures its share of tokens by being the first miner in the public network. Steemit did this as a Delaware C Corp.

The formation of these entities are some of the first approaches tried to legally connect the new model for building companies to the legacy world.

As more companies, lawyers and regulators enter the space, we’ll see how they develop.

Overall, we see 40-plus companies applying the token-based model to finance protocol development. We believe it could be extended to other types of companies as well.

Red tokens image via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

CrowdsalesTokens

Original author: Demian Brener

Convicted Ponzi scheme operator Trendon Shavers is now insinuating the major unidentified debtor cited in his defense against the SEC may have been Mark Karpeles, CEO of the now-defunct bitcoin exchange Mt Gox.

The claims, while veiled, stem from a new interview for the popular industry podcast Bitcoin Uncensored, in which Shavers faced questions about the history of Bitcoin Savings and Trust (BTCST), an investment operation later deemed a Ponzi scheme in multiple court litigations. Investors lost as much as 700,000 BTC through the scheme, which collapsed in late 2012.

In a court deposition, Shavers claimed that BTCST's largest debtor, who was unidentified in public records, defaulted on a 202,000 BTC loan, thereby triggering the capital shortfall that accelerated its demise. However, he would go on to admit that "he has no proof at all of the lending activities he supposedly undertook for BTCST", including the major borrower.

Where does Karpeles factor into this? During the interview, Shavers references the debtor as someone connected to "a very, very big exchange" but stopped short of identifying the figure.

When pressed by co-hosts Chris DeRose and Joshua Unseth, he said the person was a "very well-known" exchange operator.

When asked if the debtor "[has] black hair and a cat" (a reference to both Karpeles’ physical appearance and his cat Tibanne), Shavers began to laugh, and jokingly asked, "Does he speak Japanese?"

At that point, Jason Seibert, Shavers’ attorney, taking part in the interview, intervened. He went on to say that "this is one of the things he can’t talk about".

Seibert declined to comment for this story when reached.

Claims scrutinized

That Karpeles would seek a massive loan seems plausible given that Mt Gox’s money problems predate its collapse by as many as three years.

A 2015 report from security firm WizSec posited that Mt Gox’s bitcoin holdings were far below its estimated liabilities for much of the period between 2011 and 2014. Further, The Daily Beast reported in May that the exchange was short by as much as 80,000 bitcoins by the time that Karpeles purchased it in mid-2011.

Yet, observers have sharply questioned Shavers' suggestion that a major loan default was behind the BTCST collapse.

When reached for comment, WizSec said that there’s no evidence that a major loan was issued in the period claimed by Shavers.

"There are no single transactions anywhere near that size on the blockchain for that time period,” the firm said, adding:

"Shavers' wallet, as best it can be reconstructed, only shows a steady exponentially growing sequence of receives and sends, peaking in July/August 2012, as would be expected from the frantic end of a ponzi scheme."

While it's tempting to suggest that the funds could represent the 200,000 BTC discovered after the exchange’s collapse, WizSec was equally dismissive.

"To be clear, there is absolutely no connection between the 202,000 BTC now held by the Mt Gox trustee and Trendon Shavers," the company said.

Doubling down

When pressed on the claims, Shavers is said to have claimed that the loan was issued by way of a coin mixer or tumbler, a process which obscures the transactive origin of bitcoins by mingling them with other funds.

According to WizSec, this could be true if the funds were distributed in small amounts or if they were collected into an account separate from the known BTCST addresses.

But that second hypothetical would only be valid if Shavers actually possessed the 202,000 BTC he claimed to have loaned, which WizSec doubted the veracity of in comments.

"There's no convincing evidence that Shavers ever even had 202,000 at any single point in time in the first place," the firm said.

Complicating matters is that the alleged personal loan was perhaps unrelated to any funds held on the exchange at the time of its demise.

An analysis of known claimants in the ongoing Mt Gox lawsuit reveals that Shavers is not listed as ever having registered a claim to any lost funds. A list of known claimants spans 1,422 Excel pages.

Listen to the full Bitcoin Uncensored podcast here. Listener discretion advised.

This story was co-written by Pete Rizzo. 

Image via the International Business Times

Bitcoin Savings and TrustMark KarpelesMt GoxTrendon Shavers

Original author: Stan Higgins