“What I’ve heard is the OTC market is at least as large as the live recorded volumes. So that is at least 50 percent of volume that is not being reported on CoinMarketCap.”
Crypto volume, explained: “Volume” is the amount of cryptocurrency changing hands on a daily basis. It is typically measured on CoinMarketCap by combining data from cryptocurrency exchanges like Binance, Coinbase, Bitfinex, etc.
OTC Markets: Where the Whales Trade
Traditionally, over the counter markets are those in which trades are made in secret, and not recorded on an order book.
In the case of bitcoin, investors are buying and selling millions of dollars of cryptocurrency directly between one another, avoiding an exchange like Binance completely.
They may also operate through crypto brokers (such as BitStocks or Circle) which require high trading minimums. It allows “whale” investors to move their cryptocurrency without shaking the markets.
As Large as the Exchange Market?
As mentioned above, Changpeng Zhao believes this crypto OTC market is at least as large as the recorded volumes across the major exchanges.
This chimes with a report released earlier this year by research firm TABB. They concluded that the crypto OTC market is at least two to three times larger than reported.
CoinMarketCap is currently reporting a 24-hour volume of $12.5 billion. If Changpeng Zhao’s analysis is correct, the real trading volume across the crypto market is closer to $25 billion.
Why Do “Whales” Trade OTC?
The first reason is liquidity. Crypto whales and institutional investors often trade multi-million figures in bitcoin and altcoins on a daily basis.
Even the largest exchanges don’t often have millions of dollars in liquidity to facilitate such trades. Only by making private trades can they access the necessary buyers.
Furthermore, if a whale suddenly offloaded tens of million in bitcoin on a crypto exchange, it would very likely crash the market.
“We Are Still a Very Healthy Business”
Elsewhere in the interview, Changpeng Zhao reaffirmed that Binance was a healthy business, despite a 90% drop in volume since January’s boom.
Security and protection from hackers have become paramount when using a crypto exchange, but how do you assess the security threat?
Luckily, a prominent cybersecurity firm, Group-IB, has done it for us. In a new report, published in partnership with CryptoIns, every major crypto exchange is ranked based on a variety of security features.
Kraken is the Most Secure Cryptocurrency Exchange
Founded in 2011, Kraken is one of the oldest crypto exchanges out there. In that time, they have developed one of the most impenetrable exchanges.
Group-IB compiled the rankings based on a number of security features including:
Technical security levels.
The reliability of private key storage.
Password requirements and 2FA options.
Protection of customer data.
Know your customer (KYC) and anti-money laundering (AML) procedures.
The exchanges were also submitted to penetration testing and finally ranked according to the relative cost of insuring them.
The exact scores in each of the categories were not released publicly for confidentiality reasons.
Caution: Don’t Keep Your Money on an Exchange for Longer Than You Need To
These rankings are vital for anyone looking to buy or sell cryptocurrencies. However, it doesn’t change the fact that keeping your cryptocurrency on an exchange is incredibly risky.
Hackers deliberately target exchanges and, as you can see above, not all institutions are secure.
The best course of action is to keep your cryptocurrency off the exchange and in a cold-storage wallet (i.e. not connected to the internet).
Exchanges are great for buying, selling, and trading, but don’t keep store your money there for a long period of time. If you don’t have 100% control of your private keys, you don’t have 100% control of your crypto.
A small Canadian bitcoinexchange, MapleChange, was reportedly hacked in the early hours of Sunday morning, which they blamed on a “bug.”
The little-known exchange says it is in “the process of a thorough investigation,” but “they cannot refund anything.”
In other words, if you trusted your money to MapleChange, you may not get that money back.
Hack or Exit Scam?
The suspicious nature of the announcement didn’t go unnoticed by commentators. Joseph Young, a contributor to Forbes and CoinTelegraph, called it an “exit scam.”
Exit scam defined: An exit-scam is a shady technique in the crypto universe whereby a small, unregulated company lures money from people (usually through an exchange or an initial coin offering, ICO) before stealing it and removing all trace of the company.
The red flag came when MapleChange deleted all its social media accounts, an unnecessary move when depositors were desperate for more information.
While the speculation continues over the hack, we thought it best to put together three ways to make sure you never lose your money in an exchange hack or scam.
1. Don’t Keep Your Cryptocurrency on an Exchange, Period
All the biggest bitcoin hacks in recent history have taken place on an exchange. The Mt. Gox hack in 2014 was, of course, the most high-profile. $450 million was stolen by hackers before the exchange went bankrupt. At least four exchanges have been hacked this year alone.
Crypto exchanges are a prominent target for attackers, simply because they hold so much cryptocurrency. Many have security weaknesses that can be easily exploited. Many others are not regulated or protected by the governing authorities.
But most importantly, if you trust your crypto to an exchange, you have no control over those cryptocurrencies. It is entirely at the risk of the exchange and the safety precautions they have taken.
Instead, you should move your bitcoin or crypto off the exchange and into your own, personal cold storage.
Cold storage means keeping your cryptocurrencies offline, so they can’t be hacked. The best option is a specialized hardware device (Ledger or Trezor) are the best-known options.
2. Criteria for Choosing an Exchange: Reputation, Regulation, Insurance
Of course, we can’t stay clear of exchanges entirely. We need them to buy and sell cryptocurrency. But before you transfer any money, do your due diligence and research.
The first step is looking at reputation. Some quick research on MapleChange, for example, would have turned up very little information – a warning sign for investors.
On the other hand, trusting a major, high-profile exchange such as Coinbase or Gemini, while not 100% safe, is a more sensible solution. These giant exchanges are better regulated and have superior security features.
The likes of Coinbase and Gemini also go to great lengths to verify its users, which vastly reduces the likelihood of fraud or security breach.
Some exchanges are now fully insured, too. Gemini recently announced insurance coverage for its exchange and custody services. If you keep your money at Gemini, it is protected should the worst happen.
You’ll probably hear a lot about bitcoin’s safety and security in the wake of this hack. But it’s important to remember that bitcoin and its underlying system, blockchain, has never been hacked.
Hacking and theft only occurs through weak exchanges and poorly maintained wallets. In other words, storing your bitcoin safely is the most important decision you can make.
To sum up, always keep your cryptocurrencies offline, in cold storage, ideally on a hardware device you own, not an exchange. If you do use an exchange, ensure it is reputable, regulated, insured, and offers cold storage options.
Stay safe out there.
Note: this article was edited on 29th October. A previous version claimed that $6 million was stolen in the hack before the exchange in question re-opened communications and confirmed otherwise.
In other words, cryptocurrency insurance is patchy.
Assume Your Cryptocurrency Is Not Insured
If you are currently holding bitcoin online in a custodian service or exchange, your digital assets are more than likely not insured.
We automatically assume our cryptocurrencies are covered, but the harsh reality is they are not in most cases.
Even Coinbase, the largest crypto exchange in the US, only insures 2% of customers’ crypto funds – those held online, the most vulnerable to hacking. The remaining 98% is stored offline in significantly safer cold storage, but uninsured.
That’s Why Gemini’s New Insurance Is Groundbreaking
The Winklevoss twins recently announced that cryptocurrencies on their Gemini exchange and custody services are fully insured.
It’s a huge step for the cryptocurrency industry as it moves towards mainstream integration.
But what other bitcoin insurance options are out there? Who are the biggest players, and do you need a personal cryptocurrency insurance policy?
Do You Need Personal Cryptocurrency Insurance?
The harsh truth here is that buying bitcoin insurance for yourself is going to be wildly expensive and difficult to secure.
Insurance giant Allianz reportedly offers individual insurance to cryptocurrency investors. But there is no mention of such a service on its website. You’ll have to contact an Allianz broker directly to broker a crypto policy.
And that could be very expensive. One expert claims it would cost $200,000 a year in premiums to insure $10 million in crypto assets. (Roughly twice the cost you’d pay to insure other financial products).
And that’s the rate for crypto companies, not individuals.
Unless you’re a crypto millionaire, you’re better off searching for crypto custody services that are already insured, like Gemini.
Or better yet, keep your crypto off exchanges and custody services altogether. Use your own cold storage and secure backups.
But let’s zoom out a little. Why are so many crypto companies not insured?
Too Much Risk, Too Little Revenue
Because of the fluctuating nature of crypto markets, big insurance companies have sat on the fence in regards to entering the cryptocurrency insurance affray.
There are two key issues here: risk and revenue.
Until recently, the crypto industry mainly consisted of volatile exchanges and startup companies. Most are high-risk and didn’t provide large enough revenues to encourage the major insurance players to get involved.
Put yourself in the mindset of a big insurance company. Given the number of hacked exchanges and failing ICOs, does it make any sense to offer coverage? Of course not.
And if they did offer coverage, the premiums would be so high (to compensate for the risk) that startups wouldn’t be able to afford them.
Times and Needs Are Changing
More and more crypto companies are breaking out, bigger players are entering the arena, and revenues are increasing.
As the industry evolves, there is a large gap in the market for insurance and security.
Ironically, the instability of crypto markets is what has kept major insurance companies away from the industry. However, it’s also the defining factor why it is important that crypto startup companies and individual users need insurance in the first place.
So we are currently in a state of limbo in regards to cryptocurrency insurance. The good news is that chaos is a ladder. With so much interest now in crypto, some insurance companies are starting to take a gamble on the crypto industry.
Biggest Cryptocurrency Insurance Companies
Although cryptocurrency insurance plans are being offered by companies, most are keeping it low and under the radar. But here are a handful of highly-trusted companies now offering cryptocurrency insurance protection.
Aon is a professional and global insurance provider that offers a wide range of insurance protection packages. Their latest partnership with Gemini is changing the game with its crypto coverage that complements the existing FDIC deposit insurance laws.
This might well be the main reason why Aon claims it controls 50% of the cryptocurrency insurance marketplace.
One of the most interesting partnerships lately is between the large-scale banking institution Lloyds Bank and the qualified crypto custodian, Kingdom Trust. As a qualified custodian, Kingdom Trust already stores over 30 cryptocurrency token types. Its crypto storage service is now insured courtesy of underwriters in the Lloyds market.
Although Lloyds seems to be keeping a low-profile on the subject and are treading carefully, their underwriting of Kingdom Trust’s service is not to be taken lightly.
Lloyds also reportedly provides insurance coverage for the 2% of Coinbase’s funds held online.
Chubb is now offering its own Cyber Enterprise Risk Management (Cyber ERM) insurance policy to businesses. It covers a wide variety of cybercrimes including some cryptocurrency issues.
As explained, insurance companies are still testing the water with crypto assets. Other name players who are now quietly offering cryptocurrency protection are Allianz, XL Group and AIG, although others will no doubt flock to the market over the coming months
What Should You Do Next?
Unless you’re a crypto millionaire, there aren’t many options out there for individual crypto insurance policies yet. However, we are seeing more insurance players offering coverage to crypto companies and exchanges. The door is opening.
Gemini is hopefully the first of many custodians and exchanges to integrate full insurance, and we’ll see more as we move forward.
As a crypto investor, your best course of action is to check with your current crypto exchange or custodian. What level of insurance do they have, if any?
If you’re still concerned about safety, move your funds to a custodian with better insurance. Or move it into your own private cold storage and keep backups.
In late 2017, cartoon cats appeared all over the blockchain.
Pretty soon, people were breeding these digital cats, swapping them like Pokemon cards, and selling them for over $100,000 dollars.
Cryptokitties became a sensation. It’s the simplest example of a dapp (and easily the most high-profile one out there).
Quick Dapp definition: Dapp is short for “decentralized application.” Think of a mobile app or website application, but hosted on a blockchain. In other words, it can’t be controlled by any one gatekeeper (such as Apple).
Dapps, like Cryptokitties, open up blockchain technology to a mainstream audience. If there’s ever a future where we’re using blockchain on a day-to-day basis, we’ll probably be using dapps.
In this article, we explore the difference between apps and dapps. We also look at ten of the most popular dapps out there.
App vs. Dapp: What’s the Difference?
Traditional Apps – When we think about traditional apps, a single entity typically controls the database and is responsible for determining whether or not that app can exist. For instance, the Apple App Store and Google Play have total control of hosting and maintaining applications.
These companies also charge developers high fees for hosting, and they earn large profits from sales. For example, Apple gets 30% of all revenue from app and in-app purchases.
Dapps – Perhaps the most fundamental difference is the way in which data is stored. While traditional apps use a centralized database, dapps run on blockchains, which are decentralized networks (i.e. no single entity owns or controls it).
From a user standpoint, dapp stores generally offer a much lower fee structure. They also offer more freedom in the sense that a single entity can’t serve as a gatekeeper. Truly decentralized blockchains don’t allow one party to censor users or dapps.
Thus, developers have the ability to more easily release dapps without having to worry about third-party interference or rely upon the approval of the blockchain creators. Some examples of popular dapp stores include Mobius, app.co, and iExec.
Most Popular Dapps in 2018
The following are some of the most popular dapps as of October 11, 2018. Stats were found on DappRadar. Rankings span across four categories (gaming, exchanges, gambling, and high-risk). Also, it’s important to note that rankings could change at any time in the future, especially as new dapps enter the market.
This is not a recommendation list! You might even want to avoid using some of the dapps mentioned here, especially those in the gambling and high-risk category.
When it comes to decentralized application games, CryptoKitties is the clear winner of this category ever since its launch in 2017. It’s a game that allows users to collect unique cartoon cats.
While there have been many popular collectible series in the past, CryptoKitties adds several unique elements thanks to blockchain technology. For instance, each CryptoKitty is represented in the form of a non-fungible ERC-721 token, which allows for each entity to have specific “cattributes”. This means each cat is truly one-of-a-kind. As a result, this has lead to the growing popularity of CryptoKitty auctions.
How popular is this dapp? In December 2017, CryptoKitties accounted for massive congestion on the blockchain. At one point, it cornered 25% of all Ethereum traffic, causing longer transaction times and higher fees.
This dapp is also becoming increasingly mainstream. For example, in March 2018, the company partnered with NBA star Stephen Curry to launch the first celebrity-branded CryptoKitty collectible series.
2. Gods Unchained
The level of support within the blockchain industry (not to mention the amount of venture capital) for this dapp is impressive. Gods Unchained features Coinbase, Nirvana Capital, Continue Capital, and several others in its partners and investors list.
According to the project website, this is the first ever blockchain eSport. Gods Unchained is a multiplayer game where users battle each other as well as trade, sell, and store gaming cards. Smart contracts guarantee the scarcity of everything in the game from creatures to spells to weapons.
According to the future roadmap, there will be a world championship for this game early in 2019. As of October 2018, around $350,000 has been raised to go towards the payouts for this event. The fundraising goal for the tournament is set at $1.6 million. In the future, users can also expect a release of Gods Unchained VR.
According to statistics, IDEX is the most popular Ethereum-based crypto exchange on the market today. While other exchanges like Coinbase/GDAX, Kraken, and Binance are centralized, IDEX is a decentralized exchange, commonly referred to as a DEX.
This means that users have full control over their own funds and own their own private keys. IDEX ranks high in terms of security and customer support. It also features lower fees than centralized exchanges. For example, market makers pay 0.1% fees, and market takers only pay 0.2%. However, fees can be higher at network traffic peak times.
DEX appears to have a massive lead over other exchanged like ForkDelta and Bancor when looking at seven-day trade volume.
ForkDelta only lists ERC-20 tokens (tokens used exclusively on the Ethereum network). Originally, this exchange was called EtherDelta. However, it failed to live up to user expectations and was sold in mid-2017.
Later on, it was rebranded as ForkDelta by a group of traders that launched the exchange. ForkDelta uses smart contracts to complete trades.
Similar to other decentralized exchanges, it offers relatively low fees (0.3% for order executions). While trades are not instantaneously carried out as seen in some centralized exchanges, ForkDelta does offer innovative integrations. For example, it’s possible to connect a Ledger Nano S wallet to the platform.
Compared to other decentralized exchanges on the market, it ranks high in terms of trade volume and liquidity.
The following gambling dapps are not a recommendation and anyone using them does so at their own risk.
Gambling-focused projects are quickly becoming one of the most well-established blockchain use cases. Fomo3D, the top gambling dapp in this space, ironically pokes fun at one of the main issues with blockchain: greedy ICO project teams. According to the dapp website, “it’s your exit scam”.
There are two games: Long Con and Quick Scam. They are built to simulate the standard hype, release, pump, and dump cycles of the countless ICO exit scams across the cryptocurrency space.
Much like a real Ponzi scheme, thousands of gamblers lost Ethereum funds (ETH) playing the game. However, in August 2018, one user actually won $3 million worth of ETH in the first-round jackpot.
Even with a high potential for losing funds and high blockchain congestion, multiple rounds of large jackpots make this dapp one of the most interesting, popular, and controversial gambling options on the market today.
Etheroll is a provably-fair casino game. Unlike traditional online or casino gambling, decentralized blockchain gambling is able to demonstrate the real chances of winning. This is good news for gamblers who might be concerned about falling victim to large house edges. No deposits or signups are required to play this virtual dice rolling game.
Users can not only choose how much ETH they want to bet but also pick their probability of winning. A lower probability of winning presents a higher payout potential. A higher probability of winning presents a lower payout potential. This game is quite simple to get started wagering bets.
Compared to Etheroll and Fomo3D, Zethr provides a larger selection of casino games. Users can purchase and use Zethr tokens to participate in a variety of gambling options on the platform. These include slots, dice, big wheel, and cards. Users can determine their own dividend rates.
Just like Etheroll, Zethr uses a provably fair algorithm for all games on its platform. This project also has a few different sites for game playing guides and platform usage stats. So for those users who might be unfamiliar with how Zethr games work, this information can help to understand more about this popular blockchain-based gambling site.
Technically, Augur is not a gambling dapp. On DappRadar, it is listed in the “other” category. So what is Augur exactly? This dapp serves as a prediction market. In essence, users can bet on the outcomes of future events using ETH or REP (Augur’s native cryptocurrency).
For example, users can bet with each other on which candidate will win an election or even catastrophic events. Unlike gambling dapps where outcomes are part of computer code, Augur makes it possible for users to create their own markets. Augur also utilizes a permissionless protocol and offers automated payouts once an outcome is declared.
Eventually, Augur aims to become more than just a betting system. It is pitching itself as a business and political forecasting tool.
High-Risk Dapps (Proceed With Caution)
9. 333 ETH
333 ETH is listed under the high-risk category on DappRadar. Why is this the case?
The reality is that this dapp does sound like a scam. Even despite this, it has become one of the top decentralized applications on the market. According to the project website, one only has to have contributed 0.001 ETH per day and will earn 3.33% daily interest (paid in ETH).
As you might have heard, there are scams (especially on Twitter) where people impersonate famous crypto influencers or project teams. They ask other users to send smaller amounts of crypto in order to get a larger sum in return.
This is not a recommendation and anyone using 333 ETH does so at their own risk.
10. Crypto Miner Token
The concept behind Crypto Miner Token (CMT) is similar to that of 333 ETH. According to the project website, CMT is used to help miners earn larger profits. In summary, miners that earn 1 ETH, for example, typically let this amount sit idle in their wallets.
By converting it to CMT, miners are (at least according to the website) able to earn more value. The website also mentions 10% transformation and 4% withdraw fees for CMT participants. These are high amounts by any standard and part of what makes this dapp appear fishy.
This is not a recommendation and anyone using Crypto Miner Token does so at their own risk.
Which Blockchain Will Be the Go-to Platform for Dapp Developers?
The ten dapps mentioned above all utilize the Ethereum blockchain. This is likely because Ethereum is the most well-established dapp platform and largest by trade volume on the market today. This momentum means developers continue to utilize this platform.
However, Ethereum faces competition for the most dominant platform for dapps. EOS, NEO, and others are all building similar dapp ecosystems for developers and users alike.
Which will become the most popular? A number of factors like throughput, scalability, and security will determine which platforms are technically prepared for mainstream user adoption in the future.
There are also dapps for a variety of blockchain use cases beyond just those mentioned above. It will be interesting to see how this market changes in the coming years, especially with emerging improvements in blockchain technology.
In conclusion, dapps make it possible for blockchain use cases to move from mere ideas to real-world solutions. We are only now beginning to see the rise of decentralized applications and their potential to positively impact specific industries and drive web 3.0 and blockchain forward.