Insights on how to navigate the new world of cryptocurrencies

Woodbridge corporate and securities lawyer, Joseph Chiummiento, of Core Lawyers, sheds some light on the new world of bitcoin, blockchain and initial cryptocurrency offerings (“ICO”).

Two years ago, blockchain technology was a featured topic at the Canadian Innovation Exchange in Toronto, however, no one could predict the steep rise in demand for cryptocurrencies such as Bitcoin, Ripple, Ethereum and others.

What cryptocurrencies are there?

What is blockchain technology?

From my limited understanding and from rumours heard in coffee shops Blockchain Technology is a means of organizing information over the internet that allows the information to flow faster, more secure and take up less storage space or processor needs. It is said to be the replacement for TCP/IP technology and will allow computer users to do more, faster and with less of an environmental footprint or risk of hacking.

Blockchain allows digital information to be distributed but not copied, and was really envisioned or popularized through its use with bitcoin, purchasing bitcoin and purchasing goods/services with bitcoin over a blockchain technology platform. Built by hackers to thwart hacking? – who knows.

Blockchain is the underlying technology for cryptocurrencies such as bitcoin.

It has been described as a spreadsheet or a document that is duplicated thousands of times over a network of computers. The information held on a blockchain is held and exists as a “shared” on a continually reconciled “database”. The database is hosted by millions of computers which makes it harder to hack as any changes would require changes to be made throughout all the hosted computers simultaneously.

How many Cryptocurrencies Are there?

So now that you understand Blockchain, what do you do if you want to buy bitcoin or other cryptocurrencies? First, determine which cryptocurrency you want to buy. This table illustrates some (not all) of the more popular cryptocurrencies by market capitalization.

For more info see the source at: http://empirica.io/blog/different-types-cryptocurrency/

How do I buy cryptocurrencies?

Based on internet research there exist at least 130 cryptocurrency exchanges where Bitcoin and other currencies can be purchased or used for transactions like buying a bucket of Kentucky Fried Chicken (or KFC as it is known now). Incidentally, KFC sold out of buckets of chicken on the one day it offered via Facebook advertising to accept bitcoin. Two popular exchanges for purchasing cryptocurrencies are:

Coinsquare: https://coinsquare.io/
Coinbase: https://www.coinbase.com/?locale=en

For a more detailed list of other sites see: https://cryptocoincharts.info/markets/info

What is an Initial Cryptocurrency Offering or an ICO?

An ICO is used by companies looking to raise funds and involves selling tokens to investors. Marketing platforms like cofound.it are consulting services that help put entrepreneurs with ideas for blockchain technologies together with experienced people that can help build the business plan for an eventual sale of tokens.

As I understand it (and not that I can say I have it 100% accurate) an owner of bitcoin or ethereum can purchase tokens of a company that entitles them to an ownership interest in the company. The company can exchange the tokens for bitcoin or ethereum or whatever currency is driving the transaction.

All purchasers of tokens are anonymous and either listed as an IP address or that Gmail, Hotmail or Yahoo name they first used to create an email address like ducatidave123@…..com. As a securities lawyer, there are significant legal issues with this approach and securities regulators are trying to keep pace with the changes driven by these transactions.

Joseph Chiummiento can be reached at:
905-851-8180, ext. 2
joseph@corelawyers.ca