Today OpenLaw is releasing its second vertical OpenLaw Finance. With OpenLaw Finance creating legally compliant tokenized securities, fixed income products, tokenized real estate, and smart derivatives can be as easy as filling out a simple form. The future of decentralized finance is coming into focus powered by OpenLaw.


Ethereum holds out the potential to serve as the commercial operating system for the globe. Launched only five years ago, Ethereum is rapidly emerging as the spine for a streamlined financial system where existing financial products can be structured and administered more efficiently. Despite the downturn in prices, Ethereum’s growth has accelerated over the past two years. We’ve seen the birth of stable coins, like DAI, and the threads of more advanced financial products like those provided by Dharma and Compound. Ethereum-based trading platforms are beginning to mature, like 0x and Uniswap, creating composable financial legal blocks that enable assets to flow more seamlessly between parties. And decentralized oracles like Chainlink are moving to mainnet, holding out the hope of inputting real-time data into commercial relationships and creating new, more efficient means of commercial transactions.
Traditional finance, of course, has noticed. An increasing number of banks and other “fintech” startups are exploring the use of blockchain technology through the issuance of their own stablecoins and a host of pilot programs ranging from J.P. Morgan’s stablecoin to SWIFT’s instant GPI payments.
The blockchain-world and traditional finance are on a collision course with new tools and approaches rapidly painting a picture of what a more democratized and streamlined financial system could look like — one that is more efficient, transparent, and resilient.

Blockchains Made Legal

OpenLaw is the missing piece between the crypto world and traditional finance, providing easy to use tools to build legally compliant blockchain-based deals and structures. Today, lawyers architect financial transactions, and OpenLaw enables them to port those transactions to the world’s financial operating system — Ethereum. Using OpenLaw’s robust set of open source tools, anyone can manage the entire process of building blockchain-based financial transaction. You can create tokenized assets, tie them to legally binding agreements, pull data related to the transaction, and manage the lifecycle of the agreement. Just how legally compliant exchanges, like Coinbase and Gemini, helped catapult blockchain from the fringes of the Internet to presidential tweets. OpenLaw increases the range of possible blockchain-based applications by enabling tokens to represent real-world rights and obligations in a way that complies with existing financial systems. It’s blockchain made legal.

Introducing OpenLaw Finance

With our release of OpenLaw Finance, we’re taking one step further towards the future of finance. OpenLaw has spent the past year modeling a range of financial products for the blockchain era, including: syndicated loans for the Loan Syndication Trading Association (LSTA), complex credit facilities, tokenized real estate, smart derivatives, tokenized carbon credits, and even M&A escrow relationships.
We’re bringing these early efforts together into one comprehensive offering, enabling anyone using OpenLaw Finance to create and issue security tokens, fixed income products (like bonds and other debt instruments), create smart derivatives, and tokenize commodities like carbon credits. OpenLaw Finance is plugged into 0x’s blockchain-based decentralized exchange to quickly list tokens and has also deployed some basic AML/KYC related tools to ensure that only whitelisted addresses (or addresses not appearing on a blacklist) engage in financial transactions.
Our new vertical is a leap beyond what exists in the market today — with existing blockchain-based financial platforms primarily focused on a narrow swath of the financial services industry (like real estate or security tokens), even though the act of creating and sending a token is about as exciting as sending an email in mid-1990s.
Our initial offerings have some sample transactions, but OpenLaw Finance is infinitely extendable. Adding a new transaction or deal to OpenLaw finance is a snap. We provide generic tools to expand the types of deals involving digital assets.
Importantly, OpenLaw Finance also is not just about blockchains. All of the transactions on OpenLaw Finance are seamlessly tied to binding legal agreements and can be output as structured data (JSON objects), enabling issuers and other professionals to more readily build liquidity by providing the essential substrate to traders and other buy-side firms — data.

Example Transaction of OpenLaw Finance

By way of example, in the video below, we demonstrate how OpenLaw Finance can be used to create and issue tokenized stock on a vesting schedule. Using a simple form, you can create an ERC-20 token for any legal entity authorized by a binding legal document (a board authorization). Once signed by relevant parties, the tokens are automatically generated and placed into a smart contract-based escrow account, managed by the secretary of the company.
Tokenized stock can be transferred with a legally binding restricted stock grant to any recipient on a vesting schedule — all managed via a smart contract. The smart contract automatically releases the stock from escrow to the recipient on a pre-programmed schedule.

OpenLaw Finance – Open Investment Banking from Priyanka Desai on Vimeo.

Once the tokens are transferred the entire cap table related to the transfer of tokenized stock is managed via a blockchain and can be viewed in real-time on OpenLaw Finance. We create a dynamic list (and associated pie chart) showing each transfer and the amount of stock that has been fully vested.
Once generated, any tokenized stock can be automatically listed on a 0x exchange, enabling the token to be instantaneously traded. Parties can submit orders to buy or sell the underlying token. Token marketplaces can be created with a click.

OpenLaw Finance is Flexible and Customizable

The above is just one example of the types of transactions that can be built and orchestrated via OpenLaw Finance. The platform can be customized and is designed to be composable and flexible, providing the tools for anyone to create and manage transactions involving digital assets.
With OpenLaw Finance, you also can plug-in a variety of exchange software, identity services, hardware/software wallets, and even different oracle providers (like Chainlink) to build a variety of financial products.
Below is a rough overview of how the various pieces of OpenLaw fit together.

OpenLaw Finance Infrastructure

OpenLaw Finance Going Forward

The release of OpenLaw Finance is just the beginning. Over the next several months, we’re going to incorporate Ernst & Young’s Nightfall, enabling private token transactions using zero-knowledge proofs. With this integration, every transaction on OpenLaw Finance will be private and managed in a peer-to-peer manner between parties all on mainnet Ethereum. We will also integrate one or more custodial solutions, such as BitGo or Trustology, and begin to partner with various different blockchain projects to create tools for their members (stay tuned).

Token generation, legal processes, and managing commercial workflows are foundational to the success of the burgeoning token economy. OpenLaw’s ease and flexibility in integration can connect other critical components such as identity, custody wallets, exchanges, and oracles, makes OpenLaw a conduit to connect various DeFi projects and assist with the commercial processes, getting us closer in fully realizing what open, transparent financial system can look like.

About OpenLaw

OpenLaw is a blockchain-based protocol for the creation and execution of commercial systems. Using OpenLaw, financial institutions and startups can more efficiently engage in the end-to-end commercial process in a highly secure and efficient manner, all while leveraging next-generation blockchain-based smart contracts.

To learn more about OpenLaw, check out our site and documentation for an overview and detailed reference guides. You can also find us at /"> or tune in in our community Slack channel. Follow our Medium and Twitter for further announcements, tutorials, and helpful tips over the upcoming weeks and months.

OpenLaw is operating on a test environment. No securities or virtual currencies are currently generated from or exchanged on OpenLaw Finance.

1. It needs 2 million deposited Ether to start
We covered previously how a validator would need to submit 32 ether to a deposit contract to join the staking system in Ethereum 2. What isn’t as widely known is that we need 65536 validators for the new chain to start – roughly 2 million ether (65536 validators). That’s exactly 64 validators per planned shard in the system – too little at first (see numbers below).

Cryptocurrencies were supposed to destroy the traditional monetary system. Ten years on, where are we?
Bitcoin has been wildly successful, but as a financial game–not as a medium of exchange.

Source: https://medium.com/@alejandrodiaz

hand-holding guide to the Simple MultiSig Wallet, with plenty of screenshots

In this article I’m going to introduce a typical use-case for a MultiSig wallet, and then walk you through how to execute multisig transactions using Christian Lundkvist’s Simple MultiSig Wallet. I’ll be using the user interface for the Simple MultiSig Wallet that I wrote — it’s completely free to use and available on IPFS:

https://ipfs.io/ipns/simplemultisig.io/wallet

The walk through will have lots of screenshots. I know that format can be tedious for some people — but if you’re setting up a MutiSig Wallet with large sums of ETH it can be re-assuring to actually see how the screens will look.


The Setup

My two business partners and I each have personal stores of Ether that we own, independent of our business together. We know we’re going to need to sell some to finance our business, but we don’t know how much or when. So we agree that we’ll fund a MultiSig Wallet with 300 ETH and we’ll sell the ETH as needed to pay our business expenses. Each of us will deposit 100 from our personal holdings; and any two of us will sign to make a withdrawal from the group wallet. This is akin to the 3 us opening a business bank account that requires at least 2 signatures to write a check or to make a withdrawal.

Note: I’m going to run this example on the Mainnet — just because it’s more exciting with real Ether. But since I don’t have 300 ETH lying around I’ll be using 300 Finney :)…

More >>>

Ausführlicher und schön umfassender Artikel von Nick Paumgarten im New Yorker zum Thema Blockchain und Ethereum im Speziellen:

New Yorker – The Propeths of Cryptopcurrency Survey The Boom And Bust

“The people who were in the space early were there for philosophical reasons, for political or economic reasons not tied to their personal wealth.”

“At a certain point, you break through it, you come to understand it all, and then the door closes behind you, and then you just get it but can’t explain it. All the words you use to explain it are words people on the other side of the door don’t understand.”

Auszug:

Inside the ongoing argument over whether Bitcoin, Ethereum, and the blockchain are transforming the world.

Not long ago, I was in Montreal for a cryptocurrency conference. My hotel, on the top floor of a big building downtown, had a roof garden with a koi pond. One morning, as I had coffee and a bagel in this garden, I watched a pair of ducks feeding on a mound of pellets that someone had left for them at the pond’s edge. Every few seconds, they dipped their beaks to drink, and, in the process, spilled undigested pellets into the water. A few koi idled there, poking at the surface for the scraps. The longer I watched, the more I wondered if the ducks were deliberately feeding the fish. Was such a thing possible? I asked the breakfast attendant, a ruddy Quebecer. He smiled and said, “No, but it is what I tell the children.”

My mind had been marinating overnight—and for more than a year, really—in the abstrusities of cryptocurrencies and the blockchain technology on which they are built. Bitcoin and, subsequently, a proliferation of other cryptocurrencies had become an object of global fascination, amid prophecies of societal upheaval and reform, but mainly on the promise of instant wealth. A peer-to-peer money system that cut out banks and governments had made it possible, and fashionable, to get rich by sticking it to the Man…

Source:

https://www.newyorker.com/magazine/2018/10/22/the-prophets-of-cryptocurrency-survey-the-boom-and-bust

Es hat ein wenig gedauert, bis das Bundesfinanzministerium das Urteil des Europäischen Gerichtshofs zur bundesdeutschen Tatsache gemacht hat. Aber nun ist es soweit. Sorgen, dass es irgendwie doch noch zu einer Verumsatzsteuerung von Bitcoin-Verkäufen kommt, haben sich damit endgültig erledigt.

Nachdem wir vor etwa zwei Wochen die Meldung hatten, dass das Finanzamt Bonn-Innenstadt versucht, von einem Bitcoin-Unternehmer die Umsatzsteuer für den Verkauf von Bitcoin zu verlangen, hat dies für ein gewisses Entsetzen in der Szene gesorgt. Unbestätigten Berichten zufolge hat dies zu Schlaflosigkeit unter Bitcoin-Tradern geführt und in einem extremen Fall sogar eine Psychose ausgelös. Manch ein Trader begann, sich wegen der potenziell hohen Umsatzsteuernachforderung um seine wirtschaftsliche Existenz zu fürchten. Mit ausgelöst wurde die Unruhe etwa durch Berichte des Steuerberaters Rüdiger Quermann sowie des Rechtsanwalts István Cocron.

Experten wie der Steuerberater Diplom-Kaufmann Christian Densch aus Essen, der als „Kryptotaxpert“ Gastgeber einer beliebten Facebook-Gruppe ist, haben von Anfang an energisch darauf hingewiesen, dass hier unnötig Panik verbreitet wird. Die Forderungen des Finanzamtes Bonn-Innenstadt seien in keinster Weise zu halten. Sie seien auch kein Ausfluss einer wie auch immer gearteten Verschwörung der Finanzämter, die nun versuchten, Bitcoin kaputt zu machen und die Bitcoin-Trader zu ruinieren, sondern lediglich das Ergebnis einer gewissen Trägheit der Behörden. Es sei weder notwendig, sich Sorgen zu machen, noch angebracht, Ängste zu schüren oder gar das persönliche Armageddon zu verkünden.

Wie sich bald darauf zeigte, hat der Steuerberater Christian Densch recht. Ihm gelang es im persönlichen Gespräch und einem darauf folgenden E-Mail-Verkehr, eine zur Veröffentlichung freigegebene Einschätzung von Dr. Christian Hufen zu bekommen. Dr. Hufen ist Persönlicher Referent des Parlamentarischen Staatssekretärs des Bundesministeriums für Finanzen, Dr. Michael Meister. Er schreibt, dass sich Kryptotaxperts „Vermutung, dass der Umtausch von Bitcoins in andere Währungen unter eine Umsatzsteuerbefreiung fällt, bestätigt“ hat. Es gilt die Entscheidung des Europäischen Gerichtshofes im Fall Hedqvist. „Danach handelt es sich bei dem Umtausch konventioneller (gesetzlicher) Währungen in Einheiten der virtuellen Währung ‚Bitcoin‘ und umgekehrt um eine Dienstleistung gegen Entgelt, die unter die Steuerbefreiung nach Art. 135 Abs. 1 Buchst. e der Richtlinie 2006/112/EG des Rates vom 28. November 2006 (sog. EU-Mehrwertsteuer-Systemrichtlinie, MwStSystRL) fällt.“

Der Steuerberater Densch hat noch einige weitere Fragen gestellt – etwa zum Mining oder zur steuerlichen Handhabung von Zahlungen mit Bitcoin – auf die der Persönliche Referent interessante, und im großen und ganzen auch erfreuliche Antworten gibt. Aber dazu ein andermal mehr. Hier sollte man feststellen, dass das Thema der Umsatzsteuer für den Verkauf von Bitcoins vom Tisch war.

Ein Schreiben des Bundesfinanzministeriums an die obersten Finanzbehörden der Länder vom 27. Februar, das auf der Webseite des Ministeriums veröffentlicht ist, bestätigt nun auch gegenüber den Behörden die Anwendung des Urteils des EuGH und bestätigt den Inhalt der E-Mail, die “Kryptotaxpert” bereits am 21.02.2018 auf seiner Seite veröffentlicht hat. Beim Umtausch von Bitcoin in Euro handelt es sich um eine „steuerbare sonstige Leistung, die im Rahmen einer richtlinienkonformen Gesetzesauslegung nach § 4 Nr. 8 Buchst. b UStG umsatzsteuerfrei ist.“ Die Grundsätze dieser Anordnung seien in allen offenen Fällen anzuwenden. Wer also sich noch irgendwie von der Umsatzsteuer bedroht fühlt, kann nun offiziell aufatmen.

Warum aber hat das Bonner Finanzamt nun trotz all dem einen Umsatzsteuerbescheid erlassen? Die Antwort darauf dürfte einen interessanten Einblick darin geben, wie deutsche Behörden zu arbeiten verpflichtet sind. Die Hauptsachgebietsleiterin Betriebsprüfung und Gewerbesteuer beim Finanzamt Bonn-Innenstadt verwies im Rahmen eines Telefonats mit Herrn Densch darauf, dass ohne Anwendungsschreiben der vorgesetzten Behörde ein EuGH Urteil nicht unmittelbar durch das Finanzamt umgesetzt werden darf. Unglücklicherweise orientierte sich die Verwaltungsmeinung noch an der Auffassung des BMF die Umsätze mit Bitcoin unterliegen der Umsatzsteuer. Das Finanzamt Bonn-Innenstadt hatte somit keine andere Wahl, als den mißliebigen Bescheid zu erlassen, auch wenn es sich selbst im klaren war, dass dieser nicht rechtens sein kann.

Es wäre interessant, wenn sich der Betroffene auch einmal zu Wort melden würde, bei der Aufregung, die um dieses Thema erzeugt wurde, dürfte ihm das ja nicht entgangen sein.

Source: https://bitcoinblog.de

How to protect your digital assets from fire, flood, phishing, forgetfulness, and other forces of nature.

“Be vigilant and you will thrive.” –Nick Dodson

There’s a “cold room” in Attinghausen, Switzerland — it’s lined with slabs of steel, and it sits some 300 meters down inside a granite mountain in an old, repurposed military bunker. What’s inside? Air gapped hardware with the private keys of high value crypto holders who are looking for a little peace of mind.

These security measures might sound extreme, but the attack vectors are many in the cryptosphere: shams, scams, extortion, friends turning on friends, spoof friends. Users can’t flag fake accounts fast enough:

Fake Vitaliks. Fake Joe Lubins. How hard does anyone really look at social media handles? Someone flying through twitter is prone to miss the “l” in @etlhereumJoseph.

For many users, the bulk of their crypto is still sitting “hot” — in online wallets on centralized exchanges, which have had their share of reckonings over the years: the infamous Mt. Gox hack in 2014, in which hackers made out with approximately 740,000 BTC, and the Bitfinex breach more recently, which drained almost 120,000 BTC from the exchange.

And then of course the age-old threats, fire and forgetfulness (one man accidentally threw out $9 million worth of bitcoin). Attack vectors can be unassuming, furry even:

The problem is, misplaced crypto has a way of altogether disappearing — sometimes across jurisdictions and beyond the reach of the law, sometimes into cryptographic black holes (in 2011, 2,609 BTC vanished on Mt. Gox because of a scripting error). What’s liberating about blockchain is that you can become your own bank. But that can also be a daunting thing for many of us who have grown comfortable letting central institutions manage our lives for us. It’s time we educate ourselves.

Snowden-grade.

Thankfully, Nick Dodson, founder of BoardRoom (now GovernX), just published his GitBook, “Pro Tips for Ethereum Wallet Management,” a security manual for naifs and tin foil hat types alike. Dodson’s personal security measures are admittedly Snowden-grade — we’re talking blanket over the screen and everything — but his mission is to empower users, not scare them off. He acknowledges the tradeoff between convenience and security. Too many security layers and you end up stumping even yourself when trying to access your crypto. Dodson gives you the resources to decide for yourself how sophisticated you want to get.

A word of caution: Compiling these pro tips brings with it the meta-anxiety that any tools or security measures we recommend here will now become the focus of bad actors. So stay sharp. But stay with it. Blockchain isn’t just about surviving. It’s about creating choices for yourself. As Dodson writes, “Be vigilant and you will thrive.”

1. Know the attack vectors.

AKA Know your enemy. Watch out for the proverbial “man in the middle” — someone trying to get in between you and your destination. Spoof sites, malicious websites that mimic other sites, can be picture-perfect nowadays. Make sure you double check URLs. Better yet, bookmark your crypto sites, and stick to your bookmarks (MetaMask also blacklists MyEtherWallet clones for you). Verify software downloads. A copy of Tails OS is no good if it’s infested with spyware. A man-in-the-middle attack can even be literal: one guy lost his life savings to a reseller on Ebay who pulled the recovery seed from a hardware wallet and repackaged the wallet. Always buy your hardware wallet directly from the manufacturer. Now think two steps ahead. Maybe your URLs look good. But how do you know someone hasn’t hacked your Wi-Fi, spoofed the DNS, and redirected you to different IPs? Safe computing is like chess: always assume your opponent is smarter than you.

2. Generate strong passwords.

You should know the drill by now — no birthdays, street addresses, song lyrics, etc. (don’t even get me started on my mom’s passwords). But even if you mash the keys on your keyboard, that’s still not random enough (you are not a good source of entropy). Password-crackers can rifle through 350 billion guesses per second. Use a random mnemonic generator to create a passphrase, or buy a hardware wallet to generate powerful keys and signatures for you. Multiple passwords are better than one. Multi-signature wallets, like Gnosis’, require multiple keys to validate transactions. And use two-factor authentication for everything: email, exchanges, Steam, etc. Heads up: the countdown might be annoying, but app-based two-factor is much more secure than SMS. Let this be your warning.

3. Use cold storage.

You don’t have to go 300 meters underground, but you should keep the majority of your crypto “cold” — that is, air gapped and offline. Only keep an amount in exchanges and online wallets that you are willing to lose. You can either build an air gapped computer by removing the network card from your PC or laptop (Tails is an operating system that you can run offline), or buy a hardware wallet. When generating the seed phrase, plug your hardware wallet into a wall outlet to keep it as cold as possible. Paranoia tips: cover the mic/camera of your laptop and remove any electronic devices from the room.

4. Test everything.

Make small test transactions or practice with a tiny bit of funds on a test network before going full monty. Never manually type out addresses (over 9000 ETH have been lost forever due to typos). Copy and paste, use Ethereum Name Service, or scan QR codes. Make sure your scan app is secure (Pro Tip #1: Know the attack vectors). Double-check the identicon of your target address. Before transferring any crypto onto your hardware wallet, test your seed phrase. If you’re building an air gapped computer, record and re-check the MD5 checksum before and after you load data onto the SD card. For the love of Ethereum, test everything.

A little paranoia is a good thing. Maybe not this much. When’s the last time you got out of the house?

5. Store your seed phrase(s) across different devices and locations.

A standard Bip39 seed phrase is that curious string of 24 words from which you can derive a private key. Manage your seed with utmost care. If you write it down on paper, consider making two copies and storing them in separate locations. SD cards are another storage option, but they rarely last more than five years, and they could be wiped by a pinch (EMP bomb). Use both analog and digital just in case (some people hammer their seed phrases into steel). If you want to level up: store pieces of your seed phrase in separate, safe locations. And remember: meticulously record your steps, so you (or your heirs) can recreate the seed.

6. Maintain plausible deniability.

Plausible deniability in the cryptoverse means the ability to keep certain data hidden. Here’s a helpful public emission guideline: don’t broadcast your holdings, and especially don’t tell the world (over social media) the exchanges where you keep all your crypto (again, this guy). All your crypto shouldn’t be hot anyway (Pro Tip #3: Use cold storage). You can hide accounts under different HD paths on your hardware wallet in case someone comes knocking. Also, minimize your risk exposure by distributing your holdings across multiple wallets.

7. Level up. Help the ecosystem.

Dodson finishes his GitBook by recommending four different levels of wallet setup, Level 4 being for the most rigorous users. It’s your call how sophisticated you want to get. But remember: your security choices affect not only you but the ecosystem. If you don’t use two-factor authentication, and someone seizes your email (that, say, you left open on a library computer), when that bad actor starts phishing your personal network, that’s on you. So challenge yourself to level up. Experiment with hardware wallets, Tails, and multi-sig. Channel your inner Snowden. Learn by teaching. Tell your friends about cold storage, and your mom about strong passwords. Help the community flag spoof sites and fake accounts. Dodson’s “Pro Tips” are a gift to the ecosystem, and something we can pay forward.

Source: https://media.consensys.net

DISCLAIMER: This is not an investment advice or strategy; only an introductory material. If interested in using CDP, you should read more detailed materials involving more detailed descriptions of the liquidation process, fees, etc. Also, always do the math yourself and check your results. Do not trust the provided formulas if you have not checked they apply to your situation. Make sure you understand what you are doing. Be cautious and stay safe.

What is a CDP?

CDP is a Collateralized Debt Position, a smart contract where you store your ETH funds as collateral in order to take out a loan. Maker’s CDP allows you to take out a decentralized loan denominated in DAI stable coin.

As an ETH hodler, why should I care?

Suppose, as a true believer in Ethereum, you have invested all your available fiat into ETH already. Suddenly, there is a market situation such that you would like to “buy the dip” or simply increase your stack of ETH but you cannot since you have no fiat left. Nevertheless, thanks to CDP you can lock your already owned ETH as a collateral, take out a loan in DAI (~USD), and buy more ETH with it. This is called leverage and the principle is the same as margin trading.

What is the catch you are not telling me?

Well, the catch is that you have to repay your money otherwise your CDP gets liquidated and/or you lose your collateral. Please, never let your CDP liquidate! It is way more expensive than repaying.

Can you give an example of a bad loan setup?

Suppose you lock 150 ETH in CDP, Ether price is currently 900 USD. The max collateral/loan ratio of Maker CDP is currently set to 150%. Therefore, you can take out 90 000 DAI (100ETH*price) as a loan. Remember the loan is always in DAI. However, since you borrowed the maximum amount allowed (two-thirds of collateral), your liquidation price is exactly 900. If the price drops to 899.9, your CDP will be liquidated because its collateral is insufficient. Always make sure the liquidation price is sufficiently low.

OK, I see I shouldn’t go too much into debt here. Is that all?

No, there is another case that may arise. Suppose the previous situation, however, you take out only 30k Dai instead of 90k. Since your collateral/loan ratio is now higher, you are protected from liquidation as long as the price of ETH is above the liquidation price of around 300 USD (sounds sufficient). Remember again that the loan is denominated in DAI. If the ETH price goes to 500 USD, nothing changes and you still owe 30k DAI. This may cause issues when investing the borrowed funds. Suppose you invested the whole loan in ETH at the initial price of 900 but now one is worth 500 and you have no other money available. The CDP does not go into liquidation this time. However, you cannot repay the debt and free your collateral (you can partially but it’s still quite bad).

What do you suggest to avoid this?

If you plan to invest the borrowed DAI, never collateralize your entire bag of ETH. Always save an appropriate amount of money (form irrelevant) to be able to pay off the CDP at liquidation prices.

How do I find out how much is “appropriate”?

You need to do the math. I derived some formulas that may be helpful. They apply to the case of leveraging ETH only, i.e. using your bag of ETH to get a loan and invest in ETH again. As have been mentioned, you should have enough ETH left elsewhere to be prepared to repay the debt if the price begins to approach the liquidation price. I assume the purchase of ETH is at the same price as at the time the CDP is opened.

Notation: S = all ETH holdings you have prior to CDP, P = the current price of ETH in USD, LP = your desired liquidation price (yes, this is a parameter you must choose – please be cautious and set it at a safe low level that you consider unlikely to be reached)

Calculating the amount of ETH to deposit as collateral (deposit): D = S/[1-(2LP-2P)/3P]

Calculating the amount of DAI to “draw” from the CDP (loan): L = (2/3) *D *LP

Remember, you must always have S-D amount of ETH available to step in and avoid liquidation of your CDP. That should guarantee you are safe from the liquidation or the need to use additional funds. Nevertheless, it is still possible your investments will not be profitable and you end up losing money.

I am only waiting for the next paycheck and need the funds only temporarily to buy the dip right now. Can I collateralize my whole stack of ETH?

Yes, you can since you know you will get additional funds to repay the debt. However, remember not to go too much into debt to avoid liquidation.

I used the loan to buy ETH. Can I collateralize these funds as well?

Yes, you can but be VERY careful. You’d better do the math right! I would not recommend this since things may get messy and you may lose track of your debt easily.

I want to learn more and maybe get a CDP. What should I do next?

You should check the Maker CDP dashboard (https://dai.makerdao.com/) out and watch their introductory video and terminology guide. There is a couple of advanced things that I omitted and you should look into them (e.g. WETH, PETH). Further, visit the maker subreddit r/makerdao (please read the sad stories of liquidated CDPs) or other of their communities. Make sure you understand what you are doing before creating a CDP. It may be worth it to test the process on the Kovan testnet.

Why did you write this tutorial?

There was no complex material for beginners around that would highlight CDP’s possibilities as well as risks. I hope I introduced the instrument properly and it will get more traction eventually. Also, I am a big fan of the DAI stable coin.

I think there is something wrong in this text or something important is missing.

That is, of course, possible. In such a case, please, comment or pm me. I will be updating this text continuously.

DISCLAIMER: This is not an investment advice or strategy; only an introductory material. If interested in using CDP, you should read more detailed materials involving more detailed descriptions of the liquidation process, fees, etc. Also, always do the math yourself and check your results. Do not trust the provided formulas if you have not checked they apply to your situation. Make sure you understand what you are doing. Be cautious and stay safe.

Source: https://reddit.com

An Intro to TrueBit: A Scalable, Decentralized Computational Court.

or: “An Intro to Panopticomputers: Code Execution Courts for Scalable, Decentralized Computation”.

The Ethereum community never ceases to amaze me. So many smart people working at the fringes of what’s possible. We haven’t really scratched the surface of what’s possible in the current iteration and we are already seeing amazing new opportunities come to the fore.

For the unenlightened, Ethereum can be described as a distributed “world computer” using blockchain technology. It allows developers the ability to upload code to a blockchain, upon which it executes the code when activated to change some information on a shared ledger. In other words, you can apply arbitrarily complex state changes to a shared, public (relatively) immutable ledger. Every node in the p2p network runs these state changes, whilst specific computers (the miners) make sure these state changes are difficult to reverse (by being rewarded the subsidy & fees). In order to execute state changes & computations one pays proportionally with the cryptocurrency of the platform, ether. The more computations you want to do, the more you will pay for it. The amount of computations are measured in a separate unit, called “gas”.

Source: An Intro to TrueBit: A Scalable, Decentralized Computational Court.

Blockchain 2.0

Cryptocurrencies are only the beginning

Launching the Credit Suisse Blockchain Revolution Series: In this in-depth report, we analyse the market implications of blockchain technology in light of the bitcoin boom since our initial cross-sector and cross-border publication, Blockchain: The Trust Disrupter, roughly a year ago. While we make no comment on the valuation of particular cryptocurrencies, we believe the rise of bitcoin and Initial Coin Offerings highlights how transformative the underpinning blockchain technology will be across sectors, with financial services and capital markets at the front of the queue.

Various blockchain projects we discussed in our previous report are arriving at preliminary conclusions, transitioning from Proof of Concept to Pilot and even Production phases of development. To contextualise these over the medium to long term, we once again deliver a collaborative analysis of the following:

Cryptocurrencies and ICOs: Crucially, we see these providing momentum for further blockchain development, even if bitcoin and Initial Coin Offerings continue to encounter challenges to widespread adoption.

Blockchain’s utility: We examine the key advances and diversification of the applications that sit atop blockchain platforms – as well as the theoretical risks to blockchain itself. We also show project timelines to illustrate current and future positioning on the blockchain landscape.

Market implications: Contributions from 23 analysts across three geographies provide us with a cross-sector blockchain window through which we examine the Payments, Security, Banks, Exchanges, Business Services, Leisure, and Real Estate sectors.

Featured stocks include Sophos (Outperform; CS European SMID Focus List), Square (Neutral), LSE (Outperform; CS European Focus List), ASX (Underperform), Equiniti (Underperform), Experian (Outperform; CS European Focus List) and Playtech (Outperform).

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