How to Cure a Cancer: Thoughts on Improving Academic Journals

   No comments
So, I currently have a paper that has been under review since last December, coming up on 7 months. A friend of mine recently waited something like 16-17 months at the JME. This is ridiculous. It doesn't seem like it would be that difficult to design a system in which this doesn't happen, or happens only very rarely. It's led me to think about all the ways the academic economics publishing system could be improved. Particularly since economists study incentives, you'd think we could design a good system.  All economists know and believe there are obvious problems in the academic publishing system, and yet, somehow, the profession soldiers on like a drunken sailor.  Thus, here are a few proposals, most of which are obvious and probably not new:

1. A recent positive trend is that many journals pay referees for finishing a report within a certain number of days. I approve. However, my paper is currently at such a journal, which has limit of 4-6 weeks (range given to protect the anonymity of the journal). After that, a referee gets nothing. What I wonder, then, is if a referee misses the deadline, they no longer have any incentive to write a report sooner rather than later. I also wonder if this doesn't make them more likely to delay. If the deadline was 30 days, and you wake up on day 31, and realize you've missed a payday, it seems you might be less likely to submit the report on day 31, feeling like a chump. A phase out of the payment over several months would likely be more effective. Here's another idea, why I'm throwing them out: referees should be given an option to have a larger payoff with a short duration of a referee report -- say, two weeks -- while also agreeing to pay if they don't finish a report within two months, with a fee increasing incrementally each month. And would need to provide their credit card information in advance. The fee for backing out could be set to be even worse than submitting a report at each date, to make this incentive compatible.

2. Another problem is that much research is funded by the government, or by universities paid for by tuition dollars, and yet academic research is not a public good. Academic journals make bank. First, academics write papers and submit them to journals, and not only do they do this free of charge, but they actually pay for the right to have the fruits of their free labor published, for the benefit of the journal owners. We must do this, of course, as our academic careers depend on publishing in fancy journals. Our careers are also helped by prestigious editing positions at journals, which we are also happy to do for free or low wages. Referees then, also, typically work for free or at least below-market wages. Next, the journals charge lots of money to the same universities which pay their professors for access to the same research the universities pay professors to produce. It's a great business to be in, if you can get it. The issue is that the most prestigious journals have near monopolies -- the tradeoff is that one Top 5 publication is seen as being worth 4-5 publications in Top Fields (at least for your first one) -- a crazy ratio, but the profession is obsessed with rank and status. The solution here is some form of collective action. For example, the government should tax academic journal profits, and could use the proceeds to help fund education, or it could regulate the fees that journals charge for libraries or the public to access the research. If the Ivy League, or the UC system were to spell out that only research published in open access journals or which obey some other criterion would result in tenure, this could be a start. The problems and solutions here are so obvious I'm hesitant to write it down. A dream of mine is also to devise a journal ranking system which penalizes journals for bad behavior (e.g., for high fees to libraries, or high submission fees), so that departments could change the ranking system which they use to award tenure and promotion decisions, in order to better incentivize journals. 

3. A third problem is that referees, and even journal editors, have limited incentives to try and do a good job, much less a timely job. One thing I propose here is for journals to ask authors for feedback on how the referee and editorial process went.  Clearly, when someone gets a negative referee report, they will give someone a bad ranking, but overall referee scores could be computed controlling for the recommendation of the report. Partly, I think this would be good for purely therapeutic reasons, even if the journals didn't use this for anything. When you're pissed off after getting yet another clueless report, you now have an outlet -- you can kill them in your referee Eval! However, the journals could band together to create a referee ranking. Editors and other referees could also rate referees. There are certainly cases where referees say crazy things, and this is acknowledged by not only the authors, but the editor and other referees. And yet, the said referee pays no penalty at all. On the contrary, they may receive the benefit of not being asked to referee again for some time. If a system were designed to give feedback to departments: "your professor X has a history of providing unprofessional reports", or simply: "here is the rank of your APs in terms of their prowess writing referee reports", this could change incentives for the better. 
    4. Another problem is that journals have no incentives to publish comment papers, which tend to reflect poorly on the journal, and which also tend to be poorly cited. Thus, in the ranking system I devised above, I would penalize journals that don't accept comment papers on papers published in its own journal. 







    Ingen fest for festerne

       No comments
    Høyesterett bør fratas oppgaven med å definere «rimelig avkastning».

    I følge DN økte festeavgiften til Nannestad kommune fra 200 000 til tre millioner. Grunneier var Opplysningsvesenets fond (OVF). Men kommunen får ikke dekket inn dette fordi den fremfester til privatboliger, hvor avgiften ikke kan overstige tolv tusen per mål. For kommuner og næringsliv finnes derimot ingen øvre grense.

    Nannestad kommune er dermed en av de mange som må betale en særegen og høyst vilkårlig kirkeskatt til OVF. Årsaken er Høyesteretts generøse definisjon av «rimelig avkastning».

    Først bør kanskje nevnes at en «fester» i denne sammenhengen ikke har noen ting å gjøre med hyppig deltakelse på sosiale arrangementer. Festeren er den som leier tomten av grunneieren. Festeren vil vanligvis eie en bygning som står på tomten, og er dermed låst inne i et kontraktsforhold til grunneier.

    Leien justeres ved angitte intervaller, gjerne hvert 25. år. Da beregnes markedsverdien på tomten, og leien settes til en prosentsats av markedsverdien. Prosentsatsen skal gi en «rimelig avkastning» men er dessverre satt alt for høyt. I en dom fra 2014, hvor jeg også var sakkyndig for én av partene, ble forventet avkastning på investeringer med lav risiko i praksis satt til 6,5 prosent, inkludert prisstigning.

    Høyesteretts optimistiske forventninger sammenfaller, kanskje ikke tilfeldig, med oljefondets avkastningsmål. Men oljefondet tar høy risiko, både i obligasjon- og aksjeporteføljene, fordi de har et evighetsperspektiv. Og selv med betydelig risiko sliter oljefondet med å nå målet.

    De faste stabile inntektene fra festeavgifter er derimot så godt som risikofrie, i alle fall mellom hver markedsjustering. Da er det urimelig å kreve høyrisikoavkastning fra festerne.

    OVF kunne i prinsippet lånt penger i pengemarkedet med pant i festeinntektene og tomtene. Slike obligasjoner ville vært tilnærmet risikofrie, så med anslagsvis 2,5 prosent lånerente ville dette gitt en pen risikofri avkastning på fire prosent i året. Høyesterett har altså gitt OVF og andre grunneiere en rett til å trykke penger.

    OVF har selv uttalt at siden markedsverdien bare justeres hvert 20. eller 25. år, så får festerne en rabatt ettersom leien er konstant og ikke justeres for prisstigning i perioden. Dette er ikke riktig. Renten som grunneierne får ta, inkluderer prisstigning.

    La oss si at festerne betaler 6,5 prosent av et fast beløp i evig tid, mens den reelle kapitalkostnaden bare er 2,5 prosent. I så fall tilsier regneregelen vår for slike uendelige inntekter at kontraktens verdi er 6,5 %/2,5 % = 2,6 ganger markedsverdien.

    I tillegg kommer fremtidige oppjusteringer av markedsverdien hvert 25 år. Med dagens rentesatser er altså festerne tvunget til å reelt sett betale flere ganger tomtens markedsverdi til OVF og andre grunneiere. Ingen som er vel bevart vil velge en slik festekontrakt frivillig.

    I et intervju med Nordlys avslører Eiendomsdirektør i OVF Anne Stine Eger Mollestad hvordan fondet tenker. De ønsker ikke å selge Folkeparken i Tromsø til kommunen fordi «ved salg må hele salgssummen legges til fondets grunnkapital, og vi kan kun bruke avkastningen. Festeavgiften fra Tromsø kommune vil være høyere enn avkastningen, noe som betyr at vi taper inntekter ved salg.»

    OVF sier altså at når de kan velge mellom 6,5 prosent rente på festekontrakten og kanskje 2,5 prosent i kapitalmarkedet, ja da velger de førstnevnte. Jeg kan forstå OVF, men jeg forstår ikke Høyesterett som har gjort dette mulig.

    Løsningen er ikke å fjerne grunnlovsbeskyttelsen til OVF, som hindrer departementet å instruere fondet. Løsningen er at slike renter med jevne mellomrom må fastsettes av et ekspertutvalg nedsatt av Regjeringen, i stedet for av Høyesterett.

    Siden det nominelle rentenivået kan variere betydelig over tid, vil en slik løsning gi en fleksibilitet som Høyesterettsavgjørelser ikke har. Dette vil også sikre at kapitaliseringsrenten fastsettes av eksperter med innsikt i saken.

    ICO Analysis: TenX/PAY

       No comments
    TenX/PAY: Upcoming Coin Auction Analysis
    Although I had intended to dive right into preparing my next coin valuation report (which is NOT about TenX or PAY), I find myself taking a slight detour here.

    A couple of days ago I received an email from a reader who asked that I take a look at the TenX coin and its upcoming ICO (initial coin offering). After skimming the white-paper I was intrigued and spent some time thinking about it - which leads me to this report. Considering the fact that the coin auction is so near (and that I have reached some tentative conclusions) I figured I would bump TenX to the front of my queue and share my analysis now.

    DISCLAIMER: The following is my personal take on TenX and the PAY coin which they will be offering in a few weeks. I hope you find it interesting and/or useful. If I get anything materially wrong, I trust that people will let me know to correct me (and which I’d be happy to acknowledge). As it stands, these are just my views and thought processes. All the info I used in this report is accessible either via the TenX website or through the references in my footnotes. You should always do your own work and reach your own conclusions.

    TenX:What is it?

    TenX is a technology (and business) that seeks to enable users to spend their cryptocurrencies at POS (point-of-sale) locations that accept credit & debit cards (i.e., MasterCard, Visa and others).

    The use case is basically as follows:
    (note that I’m probably off with regard to precise details, but the gist of it ought to be ok for our purposes):

    Bob has 1 ETH currently worth $350 in his TenX ETH wallet (which he can access on his phone) and has a physical TenX card that looks exactly like a credit/debit card. It’s linked to his TenX account.

    Bob goes shopping for some new shoes at Harry’s Shoe Store and finds a pair he likes that cost $175. As payment for the shoes, Harry accepts several forms of payment: cash, Visa/MasterCard credit cards, or Visa/MasterCard debit cards. But Bob wants to pay for the shoes using the ETH in his wallet.

    So Bob whips out his TenX card and swipes it through Harry’s credit card reader. Even though it’s not a standard Visa or MasterCard card, it’s compatible with the reader. The transaction goes through, he gets a printed receipt saying he paid $175 from Harry and he’s done. He looks at the TenX ETH wallet on his phone and sees that the balance is now 0.50 ETH.

    So what exactly just happened?

    When Bob swiped his TenX card, it transmitted his account number through the Visa/MasterCard system and synched up with TenX’s network. The TenX network then looked at where ETH was trading relative to US$ (via its own trading platform) and figured out that to pay $175, he would need to spend 0.5 ETH – so it deducted 0.5 ETH from Bob’s ETH wallet. This is why he had only 0.5 ETH left when he checked after the transaction.

    But Harry needs to be paid – so TenX takes that 0.5 ETH, and trades it for $175 – the purchase price of the shoes. It then transfers that $175 into Harry’s Visa/MasterCard accounts… less the usual credit card surcharges (predominantly what are called interchange fees). In case you didn’t know, when you buy something from a store on a credit card or debit (in the U.S.), the merchant actually doesn’t get the full purchase price you pay. He might get only 98% of the purchase price, with the rest going to pay the companies involved in the card network (Visa, MasterCard, banks, etc.). For the purposes of this paper, let’s assume that all card processing charges are 2% of the transaction price (and the merchant foots that bill by receiving less in terms of revenues).

    Seems like a neat transaction, right? Bob was able to quickly and simply use his ETH to buy something in a shop, and the process was just like swiping a credit/debit card.

    The promise of TenX is that it may enable users to spend their Cryptocoins (not just ETH, but presumably dozens if not hundreds of other coins) just this easily at any of the bazillion shops in the world that accept Visa/MC/etc. If Bob didn’t want an actual physicalTenX card, then no problem – they have a solution to do the whole thing just by holding up his phone and swapping some scans.[1]


    How does TenX make money?

    Remember that 2% surcharge that goes to the card processing companies (Visa/MC/Banks)? Well, TenX has negotiated a deal with those companies to let TenX keep part of that, or 0.5% of the total transaction value.

    In Bob’s case, that would be 0.5% of $175, or $0.875 that goes to TenX.[2]


    So how does a COIN and an Initial Coin Offering come into this?

    TenX is looking to raise money to build out their systems/network/business. That’s what the auction is about - they sell coins (which they call PAY coins) in exchange for investors to give them ETH. They will then use the ETH to fund their business plan.

    What’s PAY? A Cryptocoin like BitCoin or ETH?

    As I understand it, not really. While in some ways it may technically be called a cryptocoin (depending on your definition), it’s not really a blockchain asset. It’s basically just a share of stock in the Company (with no voting rights). The main difference (legal and regulatory issues aside) between the PAY token and a share of stock lies in how its economic value is defined.

    Remember when I said that 0.5% (or 87.5 cents) of Bob’s transactions goes to TenX? Well, that wasn’t entirely accurate. It’s actually designed to be evenly distributed amongst all the holders of the PAY tokens.

    TenX management and pre-ICO investors currently own 100% of all PAY tokens, so if Bob did that transaction right now, they would get all of that 87.5 cents. But if YOU own half of all the PAY tokens, then you get half of that  - $0.4375 which will be distributed to you in the form ETH (at $350 per ETH, that means you would receive a distribution of .00125 ETH).  

    To raise funds, TenX is offering (up to) 51% of all PAY tokens that will ever exist to the participants in the upcoming auction. The price they’re asking is 1/350th of an ETH for each PAY token, which assuming they sell hit their ‘sell cap’ of 200,000 ETH (and you assume 1 ETH = $350) means they’re selling a maximum of 70 million tokens for $1 each. That 70 million represents 51% means the grand total of all PAY tokens outstanding is just short of 140 million.  Therefore, at $1 a token, the implied value (at this ‘round’ of financing) of ALL the PAY tokens is roughly $140 million. Remember that number – we’ll be coming back to it.

    So What might PAY tokens be worth?

    Here’s where we come to the heart of the valuation part. We’re going to view it from the perspective of how much a PAY token would be worth, relative to what you paid for it at the ICO ($1). We can do this by estimating a valuation for ALL of the PAY tokens at some future point, and divide that by 140 million.  This will give us the value per token. If for instance the future value is $1.4 billion for all the tokens, then each token you bought at the ICO for $1 would be worth $10.

    Forecast/Valuation Walkthrough

    When I first looked at this, I thought the right approach was to see how big the credit/debit card transaction processing market is and might be. With a little digging[3]I discovered that U.S. debit purchase volumes in 2016 were about $2.5 trillion. If you include credit cards, that number goes to nearly $6 trillion.

    Let's use really rough numbers (and I could be off by factors, but for this exercise it’s ok) and say global volumes are 3x the U.S. volume – so $18 trillion. But this was in 2016 – let’s think about 2020. That $18 trillion could grow at a CAGR of 5% to $21 trillion! Wow!

    If TenX garners 0.1% of that volume (just one in 1000 ‘swipes’), that would be $21 billion in annual TenX transactions. At 0.5% in fees, that would be annual earnings of $105 million. Since this is annual ‘earnings’, let’s use a stock-market type multiple (considering the presumed growth) of a modest 15x. That means all 100% of the PAY coins would be worth 15x $105 million = $1.575 billion. Versus the initial valuation of $140 million, that’s over 11x higher! And what it they get 1% of all transactions??!? Then it would be 10x that or a total return of 110x!! If we also use a higher multiple than 15 then the number goes up further.

    But not so fast.

    Let’s think about this again, but a little differently.

    Does it really make sense to approach this from the perspective of all current credit/debit transactions? When dealing with numbers this big, it’s tempting to do so then assume what seem like ‘easy’ target penetration levels (what’s 0.1% after all between friends?). But this can be as misleading as it is enticing.

    The question to ask is: who are the people that will actually be performing these TenX transactions? Answer: people who own Cryptocoins – no one else.

    As of right now, let’s assume that the total value of all Cryptos is $100 billion – that’s BTC, ETH, XRP, and everything else (even the ones of which I am ‘not a fan’).[4]Let’s also take another step back and think about valuing PAY tokens relative to just investing in, say, ETH or XRP.

    Now we can run some better numbers.

    Let’s assume that the value of all Cryptos goes up 10x in the next 3 years. Whether you think that’s high or low, stay with me. It actually doesn’t matter as we are looking at our PAY valuation relative to Cryptos in general. Doing this though, we now have a base 10x return level to which we can compare PAY token projected returns. Said another way, in a future where all other Cryptos have gone up 10x, then if our estimate for PAY tokens isn’t at least $10 (or 10x the ICO valuation) you’d be better off just buying other coins.

    So in our example, all Cryptos are worth 10 x $100 billion or $1 trillion.

    Now: of that $1 trillion – how much will be earmarked as ‘investment funds’ versus funds that people will want to spend ‘buying stuff’?

    If you’ve got $100,000 in XRP, and 3 years from now it’s worth $1,000,000, are you really going to spend it all on purchases then? After all, it may keep going up. You don’t want to be like the guy who paid 10,000 bitcoins for a pizza several years ago (making it I think the most expensive pizza in human history). So you will likely have at least some reluctance to totally cash out. Let’s say that on average, 35% of the total gets spent, with an annual velocity of spend of 1x/year. I think that’s being generous.

    But how much of those purchases (in terms of aggregate dollar value) are going to be spent via Visa/MC payment systems?

    Most of that 35% (or $350 billion) of purchases will be on big-ticket items – cars, houses, etc. Things you don’t pay for on a credit card. That’s just the way the math works – large numbers skew the average higher. You could of course pay for a house with a credit card in theory, but no seller of a house wants to give a 2% fee to VisaMC when you can just wire the money directly. So let’s say that 80% of all purchases will not be Visa/MC type purchases (meaning 20% may be).

    Now our annual TenX volumes are 20% x $350 billion = $70 billion, or 7% of our theoretical forecast total crypto valuations.

    But there’s more.

    Think about how concentrated most of the crypto wealth at that stage will be. That $70 billion of possible credit/card purchases is not evenly distributed as $10 worth of Cryptos to each person on the planet. It’s instead going to be far more skewed.

    Most Visa/MC type purchases are of a relatively low $ amount (think buying groceries versus buying a house). But if you happen to be a crypto ‘whale’ and have $10 million worth of ETH, are you really going to spend 7% or $700,000 a year on groceries and other things that you’d run through the Visa/MC network? Highly unlikely.

    I think a very reasonable factor to reduce that $70 billion by is 5, so 70 / 5 = $14 billion – or a far more meager 1.4% of the total global crypto value.

    SO – now we have a new estimate for total annual transactions run through the TenX network in 3 years’ time (where Cryptos in general have gone up ten-fold, and assuming TenX gets 100% of this business): $14 billion. Annual transaction fees of 0.5% on that amount come to $70 million. If we apply our same 15x multiple, then all the PAY coins would be worth $1.05 billion[5] - or 7.5x our initial valuation of $140 million.

    But remember, we would have earned 10x just by being invested in the average cryptocoin – so the PAY token in our example underperforms the growth in Cryptos in general by 25%. If our investment in a particular cryptocoin did ‘better than average’ for the asset class as a whole, then the PAY token valuation underperforms by even more.

    But wait – there’s more that needs to be considered.

    I think it's likely that if you are a registered PAY token holder, each of those distributions they send you will be reportable at the very least as personal taxable income. Now this isn’t a problem with regard to valuing all the coins with stock-market-type multiples (as stock distributions and share sales are taxable), but you need to consider how this might compare to your tax burden of just investing in Cryptos (earnings, versus capital gains, versus other considerations[6]).

    You might be saying ‘Hey Izzy, but a 15x multiple is too low! This thing could grow be seen to have enormous growth potential. It should be a 30x multiple!” Well, yes, in that case your return versus Cryptos in general would be (before tax consideration) about 1.5 times. But remember – this assumes that TenX gets 100% of all these purchase transactions, and I don’t think that is likely for reasons I’ll explain in a moment.

    Numbers Above Aside... there could be even bigger inherent problems in the strategy

    First philosophically:  one of the appeals of blockchain technologies (to me at least) is the prospect that it enables people to be free of the financial system constraints[7]that banks, credit card companies, etc. have imposed on participants of modern economies. While TenX makes sense from the perspective of the credit card companies, it seems to me like a thinly veiled attempt for them to ‘hedge their bets’ in a potentially coming ‘crypto world’ and defend their 2% skim off all transactions. Isn’t one of the points of blockchain to enable people to transfer money (whether for purchase or otherwise) without any fees (outside of that required to support verifications)? That they are advertising TenX with the slogan ‘Join the Revolution’ – as though there were something somehow liberating about enabling banks to continue their payment processing oligopoly - is ridiculous to me and frankly I think smacks more of disingenuous marketing than honest Esprit de Corp.

    But more so, from a practical perspective: I see competitive adoption issues of the TenX platform that I don’t think will resolve easily (if at all). After all, if Cryptos do go up in value significantly, won’t even merchantswant to be increasingly paid in the coins themselves (rather than having it converted to fiat currency)? Wouldn’t the merchants want to not pay the 2% fees to the credit card companies and banks if they could just accept the coins directly? And won’t there be more and more technologies enabling merchants to do just that? 'First mover advantage' only holds if the second, third and fourth movers don't offer a service that's better and cheaper with little in the way of switching costs.

    I'm sure there will be dozens of smarter, cooler and less expensive ways to process POS cryptocoin transactions away from TenX.

    Here’s just one scenario I can imagine - picture this: a POS payment system sponsored by Crypto-exchanges (who could be the perfect foil to the whole TenX enterprise). Crypto-exchanges could invest in the technology for a ‘coin payment reader’ that links back to their exchange. Let’s call the Crypto-Exchange company sponsor we use in the example 'Crypto-Ex'.

    Example:

    Bob goes into Harry’s Shoe Store. Bob wants to pay for the $175 shoes with ETH, so he holds up his phone to the ‘coin payment reader’ (CPR) at the register. The CPR flashes a QR code that tells Bob’s phone that the store is requesting 0.5 ETH. It comes up with 0.5 ETH as the right number because it is linked back to Crypto-Ex where the current exchange rate is $350/ETH.

    Bob then looks back at his phone and taps ‘accept’ to allow the transfer to take place. He then holds his phone BACK up to the CPR, displaying a QR code which the CPR reads and uses to effectively transfer 0.5 ETH from Bob’s wallet to Crypto-Ex. At Crypto-Ex, their systems trade the 0.5 ETH for $175, and take out a 0.25% transaction fee, crediting Harry’s Shoe Store’s account with the proceeds of $174.5625 (as opposed to the $171.50 that a 2% TenX transaction would charge).

    That's it. The transaction is done without touching a credit card network and paying their fees.

    In short: the actual payment processing that TenX does is (relatively speaking) easy to duplicate on another platform. It (basically) just seems to entail being connected to both the merchant and a trading exchange for conversions. If we still lived in a world where the extant credit/debit-card processing network was the only way to do this, then TenX would make sense. But given the fact that a) even a modest development team could come up with a competing technology that does the same thing outside of their network, and critically, b) they could offer their services for a fraction of the TenX cost to the merchant (who is the one who ultimately decides what payment systems to use) - the sustainability of the TenX business model seems to me rather dubious. They might have some early wins vis-a-vis adoption (ie, when competitors haven't yet launched), but once people get a smell for the money, competing technologies will make the extant credit-card network for these types of payments irrelevant.


    The Auction

    Needless to say, I don’t think I will personally be participating in the auction. To those who are supporters of TenX and don’t appreciate my analysis, all I can tell you is that it’s not personal - I’m just one guy sharing his opinion when asked. I’m open to other viewpoints and ideas, so feel free to share. Plus, recognize that people are being invited to invest real money (potentially a lot of it) and so those without an agenda should be open to an honest discussion of perceived risks and opportunities. 

    Additional Notes

    Unlike other coins that I’ve written about (well, one in particular) I see nothing fishy or ‘scammy’ about TenX. On the contrary – they seem to be extremely well organized and appear to have made solid progress on their road-map. That being said, I wanted to mention one more thing that struck me about the whitepaper which in my opinion might be unfairly communicating more credibility than is warranted.

    They mention they are backed by some big and well respected names -  like Vitalik Buterin and Fenbushi Capital. Please realize that while this might be amazing, it might also be a non-issue. I’d personally be surprised if Vitalik (and other big names in the crypto world) aren’t approached on a regular basis by start-ups and business ventures that are seeking to let them use his name/face in their marketing materials as an ‘advisor’ to their venture. In exchange for this ‘investment’ of his (i.e., allowing them to use his name, or maybe having a conference call or two) they might grant a substantial stake in the company itself. It could very well be the crypto-version of buying a paid endorsement. From the crypto-celebrity’s perspective, it’s a no-brainer – so long as the venture seems reasonable and legitimate. In exchange for a modest ‘appearance’, he gets a stake in a business model. To the business owners offering him the stake, they probably view it as a quasi-endorsement (or what they hope will be perceived as an endorsement) which is worth the cost.


    Finally, if you appreciated this article, feel free to send an email, a ‘follow’ on Twitter, or a share on Facebook.

    Best Regards,
    Izzy


    [1] The ‘cardless’ feature might work a little differently. I didn’t dig into the mechanics of it as it’s not necessary for this analysis. As I said, the gist of my description ought to suffice.
    [2] There’s also a feature where users of TenX will receive 0.1% of their transaction amounts in the form of PAY tokens as a ‘reward’. I don’t focus on this here as I don’t believe it’s material to the overall analysis.
    [3] I got my numbers from the free issue of the ‘NIlson Report’ dated May 2017.
    [4] I used coinmarketcap.com as a reference. $100 billion might actually be a little low, but not enormously, and round numbers are easier to work with.
    [5] I recognize I’m ignoring money earned ‘along the way’ of growth. Especially considering some of the next points, I don’t think it matters all that much.
    [6]I’m NOT a tax expert. Do your own homework. I’m just flagging it as being potentially different from generic crypto-investing.
    [7]Some would use harsher words than constraints.

    Bitcoin and Crypto Currency - The Evolving Landscape

       No comments
    Do not take this post as Investment advise. At best it is how I see the Crypto space after delving in it everyday for the last 4 years. It is clear now that bitcoin would never go to zero more so as adoption increases worldwide and it becomes more mainstream. Investment is all about value and timing, and of us will have different risk appetite.

    Today (15/6/2017) total market capitalisation of all crypto coins and tokens is 110 Billion USD. It is actually incredible that something that is purely a result of computer hashing has aquired this amount of value. Over time there will be jostling for relevance and position among all the coins and some will increase in value while others will trend to irrelevance. That said it is becoming clearer how the coin landscape will settle.

    The rise of Ethereum, debut of Zcash and finally the resolution of Bitcoin governance will clear the fog. Underlying every coin is it's utility as a currency. Every coin can be used as a currency, as long as there are people out there who are will to accept it in exchange for goods and services. Which coin is used in the transaction will then come down to how well the coins are distributed and how easy it is to transact in that coin.

    The main currency coins are Zcash, Bitcoin, Litecoin and Dogecoin. Ethereum is not designed as a currency but more as a smart contract platform. It currently sits on the second spot in market capitalisation, I am skeptical about Ethereum because is it always just one step away from calamity and disaster. After the DAO, I believe that it would be virtually impossible to recover from another hack, code or user error disaster. That it has found a new use in ICO use is commendable but I really do wonder how that much monetary value can be place on an insecure platform. Quite irresponsible maybe even fraudulent and certainly greedy.

    Bitcoin is the first and most secure platform. No coin can even come close to Bitcoin's security. However it has a serious flaw, which is fungibility. Bitcoin is pseudonymous. If a bitcoin address can be link an owner, all transaction from that address and owner is open for view and analysis. For most transactions this is not a problem but in the competitive commercial and sovereign sphere this is not acceptable. Other coins such as Monero and Dash aim to fill this function but it will find difficulty in gaining adoption partly because of security but mainly because most of the coins are held in very few hands. Zcash in my opinion will win the title of being the fungible coin.

    Bitcoin has a value today of $2600 USD. As the market capitalisation of crypto coins increases and becomes more mainstream this valuation becomes less relevant. Among crypto coins Bitcoin will be the unit of measure and as more people worldwide use crypto rather than fiat the Btc/USD pair will become meaningless as the USD is an inflationary currency and subject to arbitrary devaluations. Bitcoin will become the unit of measure because it is the most secure coin and no other coin can ever come even close to it. Proof of Work (POW) is the only security that matters. Proof of Stake (POS) is just a rich man's game.

    Zcash will be used as the high value transnational coin used by large corporation and nations. If I am right it will achieve a value higher than Bitcoin ie x number of Btc. I see this scenario developing because Zcash is a coin designed with privacy and fungibility foremost in mind. More important is the fact that by the way this coin was introduced no one person holds a large stash. It is very widely and thinly distributed. Zcash is the Platinum to Bitcoin Gold.

    Over time (4 years) Zero Electric Coin Company will be the largest holder of Zcash. By then I can envisage nations and corporations holding shares in this company. In the meantime Zcash is very easy to mine on CPU's and GPU's. This will guarantee widespread mining adoption and even further distribution of the coin.

    Litecoin will prove itself as highly utilised as a development platform. Litecoin is the Silver to Bitcoin gold.

    Dogecoin will be the coin for everyday use. It's value is the number of coins in circulation currently around 109 billion and increasing by 10 billion a year. It has a large number of users and adopters already in place starting as a joke and tip coin.  The younger generation will start with this coin and there are also many lite Dogecoin wallets available on smartphones. Dogecoin is the Copper to Bitcoin Gold.

    Stratis Update

       No comments

    Stratis Update & Clarifications


    In retrospect, considering the nature of my Stratis report (and the prospect that it might ruffle some feathers), I should have more carefully edited the earlier piece. I allowed my tight weekend schedule, ‘wanting to get it out’, and not appreciating the level of scrutiny it would receive affect both my structural crafting and attention to detail. I will endeavor to not make that same mistake again.


    While I stand by the report, for those interested there are a few points which I would like to clarify and address before I (for real!) move on from the topic of this coin.

    1)      I was guilty of 3 misspellings of Stratis

    For those who don’t know, stratus with a u is the name of a cloud type (which is in my MS-word dictionary[1]). It didn’t get picked up on the spell-check nor did I notice it when I proofread. My bad. Dumb mistake which certainly doesn’t help build credibility.

    That being said, as someone interested in facts and ideas, to dismiss someone’s arguments based on typos being present (without regard for the content) is not something I would personally do. In general, I think that both my grammar and sentence structure are of a sufficient grade that you can ‘cut me some slack’.  If you’re of a different mind, that’s entirely your call.

    2)      I focused on the whitepaper and website, rather than exploring the slack/developer community

    This is absolutely true, and was done purposefully.

    The fact that the website is itself a massive sales-pitch for people to buy the coin (rather than for anyone to seriously consider adopting a technology) in my mind puts the onus on the site itself to offer sufficient information to make even a modestlyinformed investment decision. In my experience, whitepapers are not meant to be marketing pieces attempting to baffle an uninformed reader with nonsensical but professional-sounding jargon and name/term-dropping.  Unfortunately, I see the whitepaper and website as little more than a smoke and mirrors pitch attempting to build confidence in the ‘value of the coin’.

    I do not deny that there may be very intelligent people working on the technical aspects of the Stratis blockchain. But this alone is insufficient to warrant people investing in it – especially when no one seems able to articulate why there is or may be value.

    To see this, you need look no further than the ‘interview’ with the CEO.

    https://stratisplatform.com/2016/10/26/stratis-ceo-talks-value-stratis-weekly-2/

    -          He claims It has ‘technical value’ – a term which seems to mean nothing other than there are smart people involved.

    -          He claims It has value because it’s gone up in price. Presented without comment.

    -          He says Stratis is taking ‘first movers advantage’ – of which I see no evidence whatsoever. If there is a function that Stratis has that other coins don’t already have (and that are further along in development) I would like to know. If Stratis is a ‘first mover’ in getting commercial adoption (with apparently no customers and a commercial salesforce consisting of an email submission form) then I would like to know.

    -          He said it has an important value propositions to clients. Much like the whitepaper and everywhere else, he offers zero in the way of support or example.

    3)      On shorting/trading/exchanges

    My carelessness was perhaps most obvious here, as I did a poor job of expressing myself.

    As I’ve mentioned before, I personally like to ask ‘cui bono’? or latin for ‘who benefits?’ when analyzing a fact pattern. I stated that I had not shorted the coin to try and demonstrate that I did not (and do not) have any motivation to opine on Stratis and try to ‘push it down’. I’m not sure the same can be said for those who reacted so vociferously.(While I have a reasonably thick skin, I take no pleasure in receiving angry and epithet laden messages.) 

    As far as I know, there is no ability to short (bet-against) Stratis on the exchanges. Given how thin and volatile crypto-markets can be, I don’t know that I would recommend doing so even if there was. That being said, I find it curious that for a coin with a ‘market cap’ in the hundreds of millions, no holder has invited the exchange to allow them to earn more on their holdings by lending the coins out. Of the top 10 coins by market cap, I count only 2 that are not shortable – Stratis being one. While short-sellers often get a bad rap, they can keep a lid on pump and dump scams as they (at the very least) make it a more capital intensive and riskier exercise to ‘paint the tape’.

    I also basically ignored the obvious action someone might take if they were a Stratis holder and agreed with my viewpoint - and that is to sell their coins. I am reluctant to tell anyone to sell (or buy) anything – not only because I’m not interested in that role but because I felt badly that someone would be ‘on the other side’ of the trade. I see now that my trepidation to address this caused unnecessary confusion.

    There is apparently an investor base eager to willingly and knowingly assume ownership of Stratis coins despite the arguments I (and others) have made. To them I wish good luck. Whether Stratis ultimately goes up or down, they will have earned their returns.

    --------------------------------------

    Finally, I’m very grateful to the many appreciate and supportive messages I received. If you're
    researching Stratis more, I suggest you check out some of the very thoughtful responses and posts 
    people on Reddit shared.

    To people who weren’t so friendly, I ask that we please try and keep it civil. I have no interest in
    censoring anyone over anything, and haven't touched any of the comments. At least for me though,
    when profanity and even racial epithets are used, it’s difficult to focus on any of the qualitative
    aspects to the message.

    I'm looking forward to now getting into the nitty-gritty of my next report which will be a valuation for  a coin  - about which many people have asked me. 

    Best Regards,
    Izzy






    [1] The other main two types are cirrus and cumulus if my grade-school earth-sciences memory is to be trusted.

    Stratis - Red Flags Abound

       No comments

    Stratis Coin – Red Flags Abound

    Note- June 18th: If you're reading this for the first time, please note that while I have left this entire piece largely intact (with the exception of a few typo corrections) I've also issued an update elsewhere on the blog with a few additional thoughts and clarifications. You may want to check that out as well if you have yet to do so. Cheers - Izzy

    In short, it is my opinion that Stratis is a scam, likely perpetrated by the founders and members of the organization. I wouldn’t be surprised if they own most of the coins and have been engaged in a true ‘pump and dump’ of trying to get the price up so they can sell their coins to unwitting investors.

    In this report I go through a discussion of their white-paper, but if you want to skip that section, feel free to jump to the section called ‘Additional’. I only ask that before you do so, you read the short Introduction below.

    Introduction

    I’d like to be very clear about a few things, so please read this short section before continuing.

    I don’t know the true intentions (whether initial, or current) of the founders and proponents of Stratis. It’s possible (albeit given what I’ve seen unlikely) that there is more legitimacy to both the coin and it’s endeavours than that which I’m seeing. Furthermore, while I consider myself technically savvy and have done a fair bit of programming and design work, I do not consider myself a blockchain developer or expert – just someone who tries to use common sense as well as both reductive and deductive logic. That being said, I have enough of a technical understanding to identify what appear to me to be hollow promises and misrepresentations via technical jargon.

    While I personally have strong feelings towards people who in my mind look to defraud others, this article is not meant to be vindictive. I leave it to the reader to determine whether my arguments have merit, and leave it to Stratis supporters and management to respond to the points I will raise here. If additional information is brought to light that adequately addresses the issues I raise here, I would be genuinely happy to admit error, as it would also mean that people whom I suspect of behaving poorly in fact did not. Regardless, I have little interest in a debate or a tit-for-tat on this. With this report of issuing a warning to readers to be more cautious (as well as a few other recommendations in the concluding section) I am keen to move on to my analysis of others coins. In other words, best of luck, and ‘Izzy Out’.

    If you think others may appreciate this report, feel free to re-tweet my post and/or share the link.

    Finally, please don't confuse Stratis for Stellar Coin - their names look similar on some websites. (STRAT for Stratis and STR for Stellar). Stellar is NOT Stratis!

    Stratis Coin – What is it?

    Let’s go straight to the source to answer this question: The Stratis Whitepaper which they list on their site. Wikipedia defines a Whitepaper as:

    “an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.”

    Hopefully this should tell us all we want to know.

    Feel free to download and flip along with me as I run through it.
    They currently have their whitepaper available here: 
    https://stratisplatform.com/files/Stratis_Whitepaper.pdf
    At first glance, the table of contents looks exhaustive and impressive. I count ten different sections. Let’s tick through them together – believe it or not, it won’t take long.


    Section 1 of 10: SUMMARY
    I like to think that very often the sign of a good idea is that it can be simply communicated in summary terms. If the sponsors did a good job, we might have enough in here to satisfy our curiosity.

    Unfortunately, this summary didn’t really tell me much. The first 2 paragraphs talk about what blockchain is. I already know this[1]and don’t personally need a re-hash of this, much less in two paragraphs. Let’s move on.
    The third paragraph talks about using blockchain in cloud computing and how blockchain can work with business cloud computing for as yet undefined benefits – so far, it just sounds like they save on maintenance. Not a homerun, and a bit vague, but OK.

    Final paragraph – I’m a little concerned that they speak about Stratis’ capabilites in the future tense – ie, it will enable organizations to ‘stuff’. Shouldn’t they be saying that Stratis enables companies to do stuff? Or does Stratis need more development before it can be useful? Maybe I’m arguing semantics though. Let’s keep going.

    I’ve read and re-read the rest of the paragraph, but it still doesn’t really tell me what Stratis doesbeyond enabling organizations to provision their own private blockchains. Fair enough, but there are plenty of other coins that do that. For what purpose though?[2]Clearly there must be some functionality that having a private blockchain on Stratis provides? All it really says is that it removes unnecessary ‘overheads’ while providing a ‘solution’. But a solution to what problem? They call their APIs and web-clients ‘powerful’ but I’m in more of a ‘show me’, not just ‘tell me’, frame of mind.  Besides, APIs and web-based clients may sound initially impressive, but when you know what they are they lose their ability to impress just by reference. An API is just a programmatic interface (nothing revolutionary there unless there’s something really novel about theirs) and web-based clients basically just means you can access it over the Web. What can’tyou access over the web these days? Nevertheless, maybe there is something revolutionary or game-changing yet to come – I’m ready for it!

    Unfortunately, we’ve reached the end of the Summary, still with little clarity as to exactly what Stratis does or why it’s different from other blockchains (or why it’s valuable). Not an auspicious start. But maybe that’s ok… let’s continue – there seems to be a lot more in this Whitepaper after all.

    SECTIONS 2 & 3 of 10: ON BLOCKCHAIN AND CLOUD COMPUTING

    Again, I already know what Blockchain and cloud computing are – I don’t need a rehash of these topics as I am actually just interested in what Stratis does. I won’t penalize them for including this, as background information is important for those still learning, but aside from that I don’t see it as relevant to my quest of discovering what Stratis does that makes it special.

    SECTION 4 of 10: ON THE STRATIS PLATFORM

    This looks like we’re about to get into the ‘meat’ of it. Unfortunately, I’m yet again disappointed. Allow me to address each of the 3 paragraphs in the ‘Overview’ (I, ii, and iii). It’s a little bit wordy, but I assure you I speed things up after we get through this section.

    i)                    They open by saying (yet again) that Stratis is powerful and flexible (they seem to like saying this). They speak about how it’s designed for real-world needs for ‘financial services businesses’, but again don’t give any real examples – not even vague ones.

    They talk about how it can be developed in pure C# and can use Microsoft’s .NET framework. As most programmers will tell you, C# is just one of dozens (actually, hundreds) of programming languages. I’ve personally done some coding in C# and quite enjoyed it (at least relative to C++ which I found a bit cumbersome[3]). These days if I had to pick a language I would probably pick Python, but that’s beside the point. The point is, what language an application is in for most of our intents and purposes doesn’t matter all that much. Yes, there are benefits and disadvantages to coding in one language versus another, but generally speaking, all programming languages do the same thing – which is convert the logic of our ‘language’ into machine-code, which is a series of zeros and ones to flip and blip through logic circuits in a computer.[4]

    Any good programmer worth his weight can probably learn an entirely new language in a matter of weeks if not days (at least enough to be functional in it). I’m not sure why they’re so intent on touting C# (which by the way, isn’t exactly ‘new’ as it’s been around for about 17 years now). The only reason I can think of is that to someone who doesn’t know any better, it might sound impressive. Remember this point because it seems to get repeated quite frequently.

    As far as utilizing the Microsoft .NET framework – well, I won’t argue with the intent here as that’s generallya good thing, but hardly a game-changer. If an application is built to be compatible/compliant with .NET, that just means it may be a bit easier and smoother to roll out new functions on computers that run Microsoft operating systems. But it is hardly necessary for a successful application. Again, this sounds to me like someone trying to make something sound impressive that really isn’t. But then again, maybe they’ll give me some examples to sway me.

    The rest of the paragraph more or less repeats what the summary told me – that Stratis makes things fast, easy and secure. They use words like ‘turnkey’ and ‘lifecycle’ and ‘network infrastructure’. Once again, there’s nothing wrong with those words, but I’m still waiting for some substance.

    ii)                   In the second paragraph, they speak again about how they’re developing in C#. I won’t repeat myself but see above for how this is largely a non-issue. They talk again about ‘powerful new features’ but don’t tell me anything about what these might be. They speak again about how Stratis will enable (again, that future tense - as though it doesn’t currently do this?) deployment of sidechains (which again, is not unique to this coin).

    iii)                 In the final paragraph they talk about how Stratis will be open source (again, future tense)  . In case you didn’t know, all the major blockchains are open source – Bitcoin, Ethereum, Ripple, Dogecoin, etc. The only thing remarkable about a coin would be if it wasn’topen source – in which case the crypto-community probably wouldn’t bother with it at all. Worth mentioning sure, but not a unique selling point. They then continue to speak about how they will maintain the NStratis Full Node. Now NODES are something you see a lot of in blockchain-land… suffice it to say though, that what they are saying here, with the exception of it sounding impressive to someone non-technical, isn’t really saying much.

    I won’t go through paragraph by paragraph the next sub-sections : “Architecture and Development”, and “Architecture of the Stratis Bitcoin Full Node” but instead I’ll give you some highlights.

    -          They repeatedly speak in the future tense – that things ‘will be’ built, and there ‘will be’ a Wallet, and development ‘will include’ etc. 

    -          They mention other technologies which they appear to piggyback off of – which is fine in itself, but yet again, with the exception of sounding smart to a neophyte, isn’t saying much in terms of unique functionality.

    -          They list ‘benefits’ which just keep repeating that the language (C#) and implementation is superior (with no functional indications of how or why)

    -          They give an impressive looking chart of layers which again, doesn’t really say anything about what benefits it will have or why (and which to an experienced developer is more fluff than substance)

    -          They continue to talk about Bitcoin, the maturing technology, and issues around consensus and other topics – basically what reads to me like name dropping. The only benefit they really give is near the end where they say that being in C# is better than C++ because C++ programmers are in short supply, and that in other languages like C# “it is harder to make coding mistakes” (I kid you not, that’s a quote).

    -          They finish by proposing that the Stratis Node will be based on a particular framework. Who exactly are they proposing it to? Aren’t they meant to be developing it (or have finished developing it)?

    Section 5: KEY FEATURES (aka, make or break time)

    Unfortunately, the first ‘key feature’ they focus on of private chains doesn’t really tell me anything new. They spend some time talking about issues with Bitcoin, but that’s not only nothing new, but many of those features are either being worked on by massive development teams and/or are already corrected for with other better established coins/protocols.
    We’ve also established that you can make private chains, but for what purpose? And why is this different than other private chain services? Why would you even want a private chain? If they’re trying to get me as a business owner to hire them and their services, it’d probably be a good idea to actually show me a benefit. A straightforward API is generally nice, but that just means I have a nice interface to use it for some purpose. I still don’t know what purpose I’d be using it for – but it’d be nice if maybe they showed me a screenshot of this powerful API GUI[5]? Sadly, there is no API pic, but on the plus side, there’s a nice graphic with 5 circles and some arrows on it.

    They then speak about ‘Blockchain as a service’ or BaaS which is a nice sounding acronym. Many people may already be familiar with SaaS (software as a service). And here is where I question whether the author was beginning to lose focus (and maybe hoped the reader wouldn’t make it this far) as he/she doesn’t even attempt to ‘bring it back’ to Stratis. Instead they talk about the benefits of Bitcoin and Ethereum as though that’s somehow an argument for Stratis .

    I think at this point you get the picture, so I’ll speed through the rest.

    Decentralized app hosting – again, talking about what they will do on top of the Ethereum blockchain (When did Ethereum get into the picture? Well, it enables them to mention the buzzword of ‘smart-contracts’.)

    Bitcoin, Ethereum, LISK node provisioning – to be honest, I’m getting a little spent going through this, so forgive me if I gloss over there a bit. But basically, this reads more like an attempt to name-drop other coins and platforms to presumably trigger recognition in the reader.

    One-Click Deployment – sounds like they are saying you can push a button and it will automatically ‘do stuff’ for you. Sure, why not.

    Fiat gateway integration – At this point, I wonder why they even bother with in-between words. Maybe they should just list words like ‘blockchain’, ‘best-of-both-worlds’, ‘jurisdiction’, ‘speed’, ‘transparency’, and ‘fiat’. There’s even a ‘case study’ for an apparently fictional company called ‘RemitCo’ which takes us elsewhere in the document. Unfortunately, when I click on the ‘read more’ link to this alleged company with trying to help migrant Middle Eastern workers, it takes me to a case-study for a ‘financial services business’ named TradeCorp. The case study itself reads of filler/gibberish, dropping terms and items that may look impressive but actually tell the reader very little (if he can even make sense of it… I mean honestly, are P2P Ports using a JSONs through API even worth mentioning? Or giving port numbers as examples? I consider myself only a decent amateur programmer, and even I know these are not legitimate selling points).

    Three-tier Architecture – slightly descriptive (albeit still a bit repetitive from earlier), but in my opinion still not saying much.

    If you’ve made it this fair, congratulations – stick with me, we’re almost through. There’s just 4 more sections, but we’ll breeze through these.

    SECTION 6: STRATIS CONSULTANCY

    They say how their headquarters will be in London. In case the reader doesn’t know what London is, they inform us that it’s a global financial centre and hub for fintech services. They then talk about how they are thought leaders and as such will(again, future tense) do things like ‘leverage expertise’ and ‘forge key partnerships’.[6]

    Their actual blockchain consultancy gets one short paragraph saying how they will help businesses of all sizes to save money, increase efficiency, etc. etc. Again, no actual specific mentions of what or how – though they do reel it back in a little and admit that blockchain is not a ‘panacea’ that is helpful for all cases. Fair enough – but maybe share one instance where it (and Stratis) IS useful?

    Active Development – again, they will contribute to community and work on ‘key projects’ in the ‘relevant space’. Apparently, doing this will ‘position Stratis as one of the top blockchain companies.’

    Scalability – the first two bulky paragraphs talk exclusively about Bitcoin. The rest of it, well, they go on to explain how using private ledgers will help that, with the ‘remarkable versatility of an extensive 2.0 platform’ which again, means very little.

    Their next paragraph on Proof-Of-Stake makes little sense. Their summary point that businesses who would want to use Stratis or some other coin might (were it not for Proof of Stake) somehow need expensive mining equipment is hogwash.

    They finish by promising ‘a series of measures’ to ‘combat bloat’, which will keep it lightweight.
    I don’t think there’s a need to go through the sections ‘Bitcoin Compatibility’ and ‘Conclusion’, as they’re basically more of the same: vague promises of things to come while offering little to nothing in the way of technical explanations (what a whitepaper is supposed to do!).

    OK - Almost done!

    SECTION 9: Case Studies

    If there were some real-world application for Stratis, either actual or theoretical, this would be the place to shine. If they had A customer who had success, that would be worth touting after all.

    Proof-of-Existence : they are talking about blockchain in general – nothing to do with Stratis.

    Clearing & Settlement: Same, with the exception that they mention dollar amounts that might be saved by the industry as per a ‘reference report’. Still nothing to do with Stratis.

    Creating a Private Blockchain – Not only does it read more like a vague fabricated and theoretical story (and not like a true case study) but as this is the link we were brought to before, aside from a fair bit of technical jargon dropped, no real-world business problem is actually addressed.
    Fiat Gateway – Ah 0 here is their example of a noble company helping migrant middle-eastern workers. Apparently the link to the case-study was simply pointing at the wrong page. ‘RemitCo’ allegedly has engaged Stratis to perform cross-border payments and it is apparently working well!
    Sorry, but I call shenanigans on these companies in the ‘Case Studies’. Yes, if they were real companies they might not want their identities to be shared – but considering the lack of credibility anywhere else in the document (never mind that I see no reason why a company wouldn’t want to be known as doing something smart and noble) the onus is on Stratis to demonstrate that these are real world instances and not make-believe accounts.

    Blitz Sidechain – you know what? It seems like people already suspect shenanigans here.
    https://bitcointalk.org/index.php?topic=1768875.msg17661545

    ADDITIONAL

    If the White-paper walkthrough either didn’t convince you that this is a scam (or if you fell asleep trying to get through it) then consider these additional points.

    The Stratis Website
    • Besides the ‘whitepaper’ (which I’ve hopefully already addressed as hot-air), there is next to nothing of substance about the viability or activity of Stratis. Instead what we have are things that point to a sales-pitch.
    • A whole and main section devoted to selling the ‘Token’, with claims that it’s ‘valued by investors worldwide’. They attempt to use the fact that it is traded on ‘reputable exchanges’ as somehow proof by proxy that the coin itself is reputable. The exchanges make no such guarantees. It’s buyer beware.
    • The token section points you to ‘CoinMarketCap’ which presumably tries to demonstrate credibility by showing it’s market capitalization. If you haven’t yet read my piece on ‘Pump and Dump’ which explains how phony valuations are created, you should consider doing so. Suffice it to say though that market cap by itself is not a sufficient base of credibility. For an amazing real case study in fraud, check out ‘Cynk’ – you can start reading about it here: http://www.huffingtonpost.com.au/entry/cynk-technology-stock_n_5573862
    • Instead of actually trying to demonstrate a use for the token, they literally have a section called ‘Why is it valuable?’ where a smirking photograph of the ‘CEO’ tells you that ‘the sky is the limit’. He continues to tell you that what motivates him most is the ‘value to society’.
    • ‘Stratis Academy’ – in what looks like a transparent attempt to gain credibility, they promise a dedicated ‘Academy’ to be launched in Q2 2017 (note: Q2 ends in approximately 2 weeks.. any announcements yet?). I see no resources listed from the ‘Academy’ except the whitepaper (which we’ve addressed), something which claims in its title to be on programing in C#  (but in actuality is a picture of balloons and empty headlines and diagrams), and a whitepaper on blockchains in general (in India! And nothing to do with Stratis).
    • Their ‘Use Cases’ section is several versions of the same 2 page template. There are those balloons again as well as the same graphic of circles and arrows, which just minor word changes on each.
    • The ‘Team’ – I won’t go through this section in detail as I’m not personally interested in making this about individuals. Suffice it to say though that when I did a bit of googling on the background of several of the members, I found similarly shady websites and references with vague claims and promises.

      To be fair, there may be members of the team that are just doing their job focusing on a particular task at hand. That being said, outside of being paid in Stratis tokens (or the promise of them) I’m not sure what their financial interest could be in the organization – which speaks to the possibility of at least some level of awareness that something shady is/was going on.
    • Business Development/Corporate Headquarters
    Considering that they make no reasonable case anywhere on their website to garner actual business clients (as opposed to just trying to get people to buy their coins), you’d think they must have a very pro-active commercial marketing and development team: actively pitching companies on the benefits of Stratis Consulting and Implementation.
    Instead, they have a web form.


    Well maybe they’re all pounding the phones at Corporate HQ?

    Well, it’s actually a bit difficult to find out where this hub of activity is located, but thankfully, it is at the bottom of their team page.

    Let’s have a look on google-maps to see Corporate HQ @ 20-22 Wenlock Road (London… which in case you didn’t know is a financial hub).




    What’s this ‘Made Simple’?
    Well, google has an answer: ‘Virtual Office: Made Simple”!
    https://www.londonpresence.com/about-us/



    Note the address 20-22 Wenlock Road.
    The downside is that there doesn’t appear to be much activity vis-à-vis a commercial salesforce organizing the launch of the next corporate Stratis customer. The upside is that if you need someone to answer your phones, forward your mail, and provide you with an office address to print on your business cards, they offer packages for as little as 15 pounds a month.

    Summary and Recommendations

    Unfortunately, if you have invested in Stratis coins, it’s my opinion that you have made a mistake. It happens. Try not to beat yourself up over it. Even really smart and experienced people get conned. I don’t know if there will be any recourse to ‘get your money back’, but it’s doubtful that you’ll get anywhere with the exchanges where you bought the coins. They were and are likely under no obligation to support any particular coin.

    That being said, if you believe this report has merit and agree with my conclusions then you would be within your rights to request that those sites halt trading in Stratis coins to prevent others from getting ripped off.

    Also please note that I have not shorted Stratis coins, with the plan to make money on issuing this report.[7]I’ve done this as a PSA (public service announcement) along with a little bit of ‘karmic motivation’ if you will – as I know firsthand what it feels like to get conned in markets.
    If you appreciated this report, please feel free to let me know and/or follow me on Twitter. I am working on another report (far more constructive!) for a coin I really like. I’ll post it and announce it on Twitter when it’s completed.

    Izzy


    P.S. I’ve had several people ask me for trading/investment advice. I am wary about giving this to anyone, but in general do my best to answer honestly with what I see about the current landscape (while at the same time, not opining on work that is in process). To the extent that you have more elaborate questions/situations, please be patient as it does take time to formulate thoughtful responses. I do have many non-crypto responsibilities, so outside of acting as a consulting service (which I’m not sure I want to do), I need to prioritize my time and resources.






    [1] If you haven’t read the whitepaper on Bitcoin by Satoshi Nakomoto, I highly recommend it. In my opinion it’s an inspired work of genius. https://bitcoin.org/bitcoin.pdf
    [2] Other coins I’ve researched that allow for this do offer a good explanation for their private blockchains uses – but alas, no such clarity is to be found here.
    [3] Things called References and Pointers in C++ can be quite a nuisance to grasp for new programmers, but are generally pretty valuable in terms of understanding how the computer memory actually works. This is no doubt one of the reasons that C++ continues to be taught in Computer Science introductory courses to this day.
    [4]There are definitely instances where the computer language is critical, but this is usually reserved for either advanced computational functionality or services where nanoseconds (billionths of a second) matter – ie, High Frequency Trading or HFT. However, If there is a need or use for this in Blockchain, I have yet to see it – never mind the fact that I don’t believe C# is the ‘go to’ in these situations anyway!
    [5]GUI, pronounced ‘Gooey’ is short for Graphical User Interface. It’s basically just the how the programmatic interface ‘looks’. It can range from a simply menu of options, to a novel dashboard layout.
    [7] As far as I know, there isn’t even the ability to do so on the exchanges where it trades, so you needn’t take my word for it.