Explained: Blockchain Oracles

Oracles feed the smart contract with external information that can trigger predefined actions of the smart contract. This external data stems either from so ware (Big-data application) or hardware (Internet-of-Things). Such a condition could be any data, like weather temperature, successful payment, or price fluctuations. However, it is important to note that a smart contract does not wait for the data from an outside source to flow into the system. The contract has to be invoked, which means that one has to spend network resources for calling data from the outside world. This induces network transaction costs. In the case of Ethereum, this would be “gas.”

There are different types of oracles:

Software Oracles
handle information data that originates from online sources, like temperature, prices of commodities and goods, flight or train delays, etc. The so ware oracle extracts the needed information and pushes it into the smart contract.
Hardware Oracles
Some smart contracts need information directly from the physical world, for example, a car crossing a barrier where movement sensors must detect the vehicle and send the data to a smart contract, or RFID sensors in the supply chain industry.
Inbound Oracles
provide data from the external world.
Outbound Oracles
provide smart contracts with the ability to send data to the outside world. An example would be a smart lock in the physical world, which receives payment on its blockchain address and needs to unlock automatically.
Consensus-based Oracles
get their data from human consensus and prediction markets like Augur and Gnosis. Using only one source of information could be risky and unreliable. To avoid market manipulation, prediction markets implement a rating system for oracles. For further security, a combination of different oracles may be used, where, for example, three out of ve oracles could determine the outcome of an event.
Blockchain Oracles

A blockchain oracle is a third-party information source that has the sole function of supplying data to blockchains which permit for the creation of smart contracts. A smart contract at a fundamental level is simply a self-executing piece of code; smart contracts evaluate incoming data from an oracle and initiate a flow of execution depending on the information received.

To conclude, blockchain oracles are a third-party information source that supply data to smart contracts. They increase the scope of what blockchain protocols can do by providing a means for them to communicate outside of their own network.

Oracles require a level of trust that is contradictory to the trustless and decentralized nature of blockchain-based protocols. As a result, smart contracts require an increased level of complexity, such as, sourcing data from multiple oracles in order to mitigate the amount of trust placed in any one oracle.

Explained: Asset Diversification And Allocation For Cyptocurrency

In the traditional world of finance, the performance of different assets could vary under different market conditions. For example, real estate investment trusts could outperform general equities in a turbulence market, and defensive stocks could disappoint investors when the appetite for risk is heightened. That’s when diversification comes in. The main purpose of exposure to different asset classes is to balance risk and return in a portfolio.

In the cryptocurrency space, diversification could also be one of the ways to manage risk exposure. However, some would argue that it is impossible to diversify a crypto portfolio due to the fact that major altcoins are highly correlated with Bitcoin. However, with a carefully selected basket of altcoins — in conjunction with stablecoins — investors could able to navigate the market more effectively with manageable risk.

There has always been a debate about putting all your eggs in one basket. While in some cases concentrating on only one asset could maximize profitability, this also maximizes the risk exposure. On top of that, a heavy-concentration strategy gives investors no room for any errors in analysis, and it overexposes the investor to unnecessary risks.

However, over-diversification could also hurt investment returns. Some investors believe that the more assets they own, the better return they can have — and that’s not the right concept. It could increase investment cost, add unnecessary due-diligence efforts and lead to below-average risk-adjusted returns.

Asset Allocation

Financial professionals almost universally acknowledged asset allocation as the most critical decision in the entire investment process. Consensus research has proven that 80–90% of a portfolios’ risks and returns can be attributed to asset allocation. However, the allocation process is often the most ad hoc and ignored step in investment decision making.

Many investment advisors want to exclude cryptos from the allocation process as they consider the assets “too risky”. But one must evaluate the benefits of the asset class when combined with more traditional allocations.

4 Types of coins to diversify and allocate

Bitcoin- 25–33% of your portfolio

Bitcoin is currently the largest cryptocurrency based on market cap and makes up over 50% of the entire cryptocurrency world. It would be fair to say that the entire cryptocurrency market is highly correlated to Bitcoin’s price movements. Bitcoin is also the default base currency of the cryptocurrency world. Anyone that wants to buy any other altcoins or tokens, would need to purchase Bitcoin first in order to easily acquire any other coins. This is because local cryptocurrency exchanges usually limit the amount of coins that can be purchased by local fiat money.

Ethereum- 15% of your portfolio

Ethereum is one of the coins that is used alongside Bitcoin as a base currency since it is much faster than Bitcoin. The utility of Ethereum is also correlated to its price; the more developers and projects built on Ethereum, the higher the demand for ETH coins, which will lead to a price increase. Having a portion of your investments in established and credible coins such as Ethereum is vital in stabilizing your portfolio.

Passive Income Provider- 25% of your portfolio

XcelToken Plus is a great passive income provider. ERC20 token on the Ethereum Blockchain Platform, that is painstakingly crafted with the purpose of building, engaging and fostering a large crypto-community within the hospitality, retail and gaming sectors.

By holding a good portion of a passive income earner token, you will be rewarded regularly for keeping faith with the brand. As a keen investor, you want to be in a position of having a mix of risk in your portfolio ranging from high to low. A passive income earning-token is a must-have.

Stablecoins- 35% of your portfolio

Stablecoins are a great way to protect your portfolio from volatility and provide you with much-needed liquidity (or ‘cash’) whenever you have a need. Imagine putting all of your money into cryptocurrencies and the market takes a deep dive; you would lose a major portion of your investments. It is therefore important for you to always keep a portion of your portfolio in stablecoins so that you can cash-out when needed or simply buy more cryptocurrencies when prices take a dive. This action plan will also prevent massive losses in your portfolio.

A well-diversified portfolio goes a long way in ensuring success in the ever-evolving and volatile cryptocurrency markets. There are over 2,000 coins and tokens with varying degrees of risks and characteristics for investors to choose from. Having a balanced portfolio with all the four categories of coins could save you from lots of headache and worry. Lastly, investors should always perform thorough due diligence before investing in any coin.

Weekly Overview: Cryptocurrency

Canada Issues Guidelines For Cryptocurrency Exchanges

Canadian authorities have issued new direction to regulate which digital currency trading platforms fall under derivatives law.

The Canadian Securities Administration (CSA) clarified new provisions in the “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets” published on the 16th of January, 2020.

To know more check out our previous blog.

Canadian Teen Charged For Cryptocurrency Theft

A Montreal resident, age 18 if facing 4 criminal charges connected to a $50 million SIM Swap scam that targeted cryptocurrency holders.

“Eighteen-year-old hacker Samy Bensaci is accused of being part of a crime ring that stole millions of dollars in crypto-currency by gaining unauthorized access to the cell phones of crypto-currency holders in America and Canada.” — Infosecurity Magazine. 17th January, 2020

To know more check out our previous blog.

South Korea Considers Imposing Income Tax on Cryptocurrencies

The Ministry of Economy and Finance of South Korea, is considering levying a 20% tax on the incomes made through cryptocurrency transactions.

According to a news report published by The Korea Times on the 20th of January, 2020, the ministry had reportedly ordered its income office to review cryptocurrency taxation. The Korea Times cited an anonymous official who reportedly said that the ministry has not finalized its plan, but noted that the government may impose a 20% tax on crypto income.

To know more check out our previous blog.

PornHub Adds Tether As A Payment Option

Adult entertainment website Pornhub has added a new cryptocurrency payment option after PayPal had abruptly stopped servicing its models in late 2019.

According to a Jan. 23 blog post, Pornhub now supports Tether (USDT) — a major United States dollar-pegged stablecoin — to allow instant and zero-fee payments via the crypto wallet and browser extension TronLink.

Binance Invests In Taiwanese Startup Numbers

Major cryptocurrency exchange Binance has invested an undisclosed sum in blockchain data monetization startup Numbers.

According to a post published on Binance’s official blog on Jan. 21, Numbers aims to create an open, transparent and traceable data sharing, verification and management system. The firm’s open source application reportedly allows individuals to own and monetize their personal data.

Ether Is The Most Correlated Cryptocurrency To Other Coins

Recent research shows that Ether (ETH) was the cryptocurrency most correlated to the rest of the crypto market in 2019.

In a report published on Jan. 22, the research arm of major cryptocurrency exchange Binance suggests that throughout 2019, ETH had an average correlation coefficient of 0.69.

South Korea Considers Imposing Income Tax on Cryptocurrencies

The Ministry of Economy and Finance of South Korea, is considering levying a 20% tax on the incomes made through cryptocurrency transactions.

According to a news report published by The Korea Times on the 20th of January, 2020, the ministry had reportedly ordered its income office to review cryptocurrency taxation. The Korea Times cited an anonymous official who reportedly said that the ministry has not finalized its plan, but noted that the government may impose a 20% tax on crypto income.

“A government official, who spoke on the condition of anonymity, said the finance ministry has not finalized its plan to tax cryptocurrencies.” stated The Korea Times article.

Some have speculated that the government may categorize gains obtained through cryptocurrency trading as “other income” and not capital gains. The other income category also includes gains made from lectures, lottery purchases and prizes.

A clear scheme for crypto cryptocurrency taxation is much needed in South Korea. This became particularly apparent when, at the end of December, major local cryptocurrency exchange Bithumb announced that it was considering administrative litigation over an $68.9 million tax bill that it believes has no legal basis. More recent reports indicate that the firm decided to follow through and take tax authorities to court.

As an article on Cointelegraph exemplified, South Korea’s cryptocurrency guideline has seen noteworthy progress since Park Yong-jin, a member of the National Policy Committee from the ruling Democratic Party, presented the first-ever taxation policy for crypto in 2017.

In 2019, the National Assembly’s national policy committee approved a bill that would give more legitimacy to digital assets by subjecting them to more scrutiny and government oversight.

Canadian Teen Charged For Cryptocurrency Theft

A Montreal resident, age 18 if facing 4 criminal charges connected to a $50 million SIM Swap scam that targeted cryptocurrency holders.

Among the purported victims were Don and Alex Tapscott, renowned Canadian crypto entrepreneurs and co-authors of the book “Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World.”

“We can confirm that last year a hacker attempted steal crypto assets from our company and its employees,” Don Tapscott said in an email to ‘The Star’. “That attempt was unsuccessful. We cooperated with the police (and) have been impressed with their determination to bring those responsible to justice.”

Bensaci was arrested in Victoria, British Columbia, in November and charged with fraudulently obtaining computer service, committing fraud over $5,000, identity fraud, and illegally accessing computer data. In December, the teen was released on $200,000 bail and ordered to live with his parents in northeast Montreal until his next court hearing.

While staying at his parents’ residence, Bensaci is prohibited from accessing “any computer, tablet, mobile phone, game console, including PS3, PS4, Xbox, Nintendo Switch, or any other device capable of accessing the Internet,” and barred from holding or trading any form of cryptocurrency.

A SIM-swapping attack befalls when the hackers are able to trick the telecom company to transfer the victim’s phone number to the attacker’s SIM card. Though it is possible to do this by imitating the victim with the telecom’s customer service, the companies are overwhelmed by insiders that use their access to facilitate this type of crime. With a SIM-swap, aggressors can evade most authentication and password recovery devices that rely on phone numbers.

Canada Issues Guidelines For Cryptocurrency Exchanges

Canadian authorities have issued new direction to regulate which digital currency trading platforms fall under derivatives law.

The Canadian Securities Administration (CSA) clarified new provisions in the “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets” published on the 16th of January, 2020.

In general, the agency drew a line between trading platforms that make an immediate delivery of a crypto assets to its users, and those that hold the transaction of crypto assets until the user makes a later request.

Following an analysis of trading techniques on different platforms, the CSA concluded that some of them only provide their users with a contractual right or claim to a crypto asset, and do not immediately transfer it to a user. Such crypto trading platforms are subject to securities legislation, and thus fall under derivatives laws.

The CSA will not apply securities laws to crypto exchanges on which the underlying crypto asset is not a security or derivative, and crypto assets are delivered to the user immediately.

Previously, state and provincial securities regulators in the United States and Canada launched probes into potentially fraudulent crypto investment programs as part of the North American Securities Administrators Association’s (NASAA) “Operation Crypto Sweep.” The initiative resulted in hundreds of investigations of initial coin offerings and crypto-related investment products.

In late December 2019, the NASAA said that cryptocurrency investment is among the top five investor threats for 2020.

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