This is a new questions coming up in meetings all across the land. Well, all across business meetings in Melbourne anyway – we asked this question because more and more of our clients are requesting Crypto as a form of payment.
Well, the answer to this question is dependent on the agency in question as well as the scope of work that the client is requesting. For instance, if the work can be measured and a KPI can be applied – more specifically, if the work can be measured with a binary decider – eg, ‘are we indexed for more than 100 keywords by date ‘00/00/00’ and the answer is either a ‘yes’ or a ‘no’ then if you accept Ether (Ethereum) – then you can implement a smart contract system.
A smart contract is a binary decision model supported by the Ethereum blockchain.
Something either is, or it is not, and therefore it is a conditional determination.
How does this tie in to the SEO model? Or more specifically (I like specific situations) – how does this tie in with Small Business SEO?
My thoughts on the much talked about crypto token.
Disclaimer: All opinions expressed in this post are my own and are in wo way intended to be financial advice. Please perform your own due diligence prior to making any sort of investment.
I was having a discussion with a friend at a bar the other night about the pros and cons of various different ICOs and coins. One token that that came up time and time again was tether. After I got home that night I got to thinking and decided that a blog post on tether should be the next thing to go up on my site.
Whilst many of you have probably heard of this coin before on various different social media platforms like Facebook and Twitter very few of you probably know exactly what this it’s all about. In this blog post, I’m going to try and do my best to cover some the pros and cons that I see surrounding tether and ultimately answer the big question is tether a scam.
A quick trip to the tether website will easily net you a copy of their white paper (here).
That abstract sums up the currency… “Abstract. A digital token backed by fiat currency provides individuals and organizations with a robust and decentralized method of exchanging value while using a familiar accounting unit. The innovation of blockchains is an auditable and cryptographically secured global ledger. Assetbacked token issuers and other market participants can take advantage of blockchain technology, along with embedded consensus systems, to transact in familiar, less volatile currencies and assets. In order to maintain accountability and to ensure stability in exchange price, we propose a method to maintain a one to one reserve ratio between a cryptocurrency token, called tethers, and its associated real world asset, fiat currency. This method uses the Bitcoin blockchain, Proof of Reserves, and other audit methods to prove that issued tokens are fully backed and reserved at all times.”
On face value everything here reads really well, tether is basically a cryptocurrency that is “pegged” to the US dollar. For those of you that have never heard of the “currency peg” before it essentially means that a currency is held at a constant value relative to another currency. To use tether as an example their token is designed to always be worth one US dollar irrespective of how the US dollar fluctuates or how tether token fluctuates. This pegging is done by tether holding a physical US dollar for every single tether token in circulation allowing them to guarantee the value of every token in circulation. Think of it like a throwback to the gold standard, where once upon a time every US dollar had an equivalent value in real metallic gold (this was back when US dollars had real value) except in the case of tether every single tether token will have a value backed by one US dollar.
This all sounds amazing but ultimately it comes down to the honesty and will of the company in control of tether to actually acquire and then hold the US currency to back the crypto token and this is where a lot of the FUD is coming from, but I’ll get back to that later.
As far as this goes, for a concept for a token I think it’s fantastic! A token that always has a fixed value in US dollars would be an amazingly beneficial asset for cryptocurrency traders. It would give traders the ability to move their crypto assets such as Bitcoin Litecoin or Ethereum into a stable (relative to the US dollar that is) token that they could then transfer and transact with in a way that non crypto investors could understand.
This is where some of the question marks start to come up for me. In order for a pegged currency to work the entire market needs to have faith in the fact that the currency peg will hold. If the market loses faith in the company controlling the currencies ability to maintain the peg then it can cause what is commonly known as a bank run where every investor rushes to convert their pegged currency in to that which it is pegged against ie exchange their tether to USD only to find out that their is not enough USD to cover the withdrawals.
In order to provide the market with the reason to trust the peg, the reserve of currency used to peg the secondary currency should be audited routinely by a third party and the results be publicly released. This is essentially what happened with the US dollar back when the gold standard existed. The world trusted the US dollar and the term “as good as gold” came about because the market could trust the United States to cover every US dollar with its equivalent value in gold. The US government had proven gold reserves large enough to back the currency. Tether is currently attempting to prove to the market that it is capable of the same feet and that it has the currency required to cover the US dollar peg but at this point in time they have cut ties with their auditor and are internally auditing and publishing all figures their own website. This is far from an independent audit and quite rightly the market is very cautious when it comes to these figures.
An in-depth read of the tether token terms of service also unearths a range of protections for the company. Essentially, if you violate any of the terms of service they reserve the right to refuse exchanging your tethers for US dollars. I strongly urge anybody considering using tether as a means of exchanging currency to read the terms of service and only ever buy tether if you fully understand the terms of service and a comfortable with their connotations.
As for whether or not I think it’s a scam, it’s really hard to say… At this point in time I’d have to say no. Do I have any that I’m holding though? Hell no! To me tether seems like an interesting intermediary tool. Something you might use when the need arises and only for a short amount of time. At this point in time though I just don’t have enough trust in Tether International Limited to leave any sort of real amount of money sitting in tether tokens for any sort of extended period of time.
There is value in cryptocurrency, and the market is changing all the time. This is an article about where is might go in the next two years, based on a conversation between Ari Paul, CIO of BlockTower Capital and Sara Silverstein of Business Insider in November 2017. In particular, it considers the current value of cryptocurrency to the world, the benefits of blockchain to other financial assets and when investment in cryptocurrency will go mainstream.
What is the fundamental value of cryptocurrency in our modern world?
Cryptocurrency is used in many different ways. But the largest, most vivid, easy to understand example of how it will change banking is that is can perform the same function as off-shore banking (which aims to protect a person or firm’s wealth) in much, much safer and more secure way. There is huge global demand for what cryptocurrency can offer. Already the current offshore banking market is worth $20 trillion. Offshore banking is not just about tax avoidance. It is used by legitimate people and businesses to protect their assets. Firms like JPMorgan are getting rich providing a service to Apple, Amazon, and the richest people on the planet to keep their wealth offshore in a way that protects it from a single judge in Brussels from freezing their entire asset base. The offshore banking system does a pretty good job of this, but there is always a risk that decisions will get made that result in arduous international legal battles. On the other hand cryptocurrency is able to store value and is much less at risk of being censored or seized.
What are the benefits of a decentralized database for financial products?
One of the most frustrating things about the current banking system is the way that trades and exchanges are made between different traders and different banks throughout the day and it all needs to be reconciled at the end of each day. In one day, the same treasury bond might get traded between 12 banks. And if something goes wrong at one of those banks that day – either accidentally or maliciously – it can take weeks to figure it out, find the cause and fix it. Blockchain, which is the foundation of cryptocurrency is revolutionizing the way institutions can share and use data. It allows for the creation of shared databases which are kept up to date in real time and accessible to all of the banks involved. This would mean that manipulations – either accidental or malicious – are made impossible. It would also mean that everyone knows who owns what and when, potentially eliminating half the need for the back offices in big banks like Goldman Sachs, Credit Suisse and JPMorgan which presents an opportunity for significant cost savings. This is an example of blockchain being used for other financial product beyond stored value or monetary uses.
How is blockchain going to disrupt things in the future? What are the short term implications and what does this mean for cryptocurrency in the long term?
Realistically, blockchain isn’t a fundamentally new concept, and it’s not particularly revolutionary. Essentially it’s just a distributed ledger, or a really effective database. Blockchain technology could and should be used by banks and other organizations in their back office to improve their data storage efficiency, accuracy and effectiveness. This will lead to improvements, but nothing ground breaking.
However, once you make a blockchain publicly accessible and decentralized, that’s when things get exciting. Add money to that equation and you have a cryptocurrency. As per the offshore banking example this then has the potential to be hugely disruptive to the way we do things now. Not just financially and economically, but it also has the power to disrupt how politics and political systems work.
Where did the interest and investment in cryptocurrency originate? What does the future look like for institutional money in cryptocurrency?
Like any new technology, there are different waves of adoption throughout society. Cryptocurrency was originally in the realm of ‘cypherpunks’ and engineers who understood what this was about and were excited by it. Then you had the tech elites getting interested. These were people who did well through a successful exit in Silicon Valley and were up for taking a risk on new technology with the money they made. Next came the more traditional financial types – people with wall street experience or wealthy individuals – who has an interest in tech and were fairly risk tolerant. At this point it is still a fairly marginal area without broad investment. But now we’re at a time when all of the Venture Capital firms are getting into cryptocurrency as ‘the next bit think’ and they’ve really already been playing in the space for a few years. In fact they are directly investing in new cryptocurrencies. The next wave is all the people and firms that currently want to invest in cryptocurrency but can’t. This refers to endowments and pensions who are unable to invest in this type of thing at the moment for regulatory, security and operational reasons. But what they can do is buy future. With CME futures likely to launch in the next month or so, this presents a massive opportunity for new investment steams into cryptocurrency. As this space becomes more mainstream endowments and pensions will get more comfortable and you will definitely see a huge wave of money flow into this asset class soon.
How soon will we see more mainstream investment in cryptocurrency?
Realistically this is going to start soon, but it will start small. We will probably see the a small check written by the first endowment in the next few months, but overall endowments are probably six to twelve months away from really getting into this space. Pensions are further behind. There are a number of regulatory hurdles that we have to get through first as there are fiduciary responsibilities that must be up held and third-party custodians qualified to manage cryptocurrency assets are probably 18 months away. They still need to filter through the system. But they are definitely on their way.