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Last week, I took out a loan without meeting anyone, signing anything, or even interacting with a human being.

I also invested in a variety of assets that earn interest of up to 5.9 percent a year. I did it all on my own, from my computer. All I needed was some cryptocurrency and a knowledge of how these systems work.

The amounts were tiny: The loan was $30, and I had $95 worth of crypto earning interest. But I could've easily done the same with much larger amounts, at those exact same terms.

To do all this, I was using freely available DeFi, or decentralized finance, services based on the Ethereum blockchain. DeFi is one of the key usages of Ethereum, which, besides being a cryptocurrency, is also a decentralized app platform where most of the currently available DeFi apps reside.

DeFi, in general, encompasses financial services which are transparent, decentralized, and trustless. Instead of having to go to a bank to get a loan, provide your ID and credit score, then have a human assess your situation and decide whether you can get the money, with DeFi it's all algorithmic. A smart contract, with an open-source code available to everyone to check, handles everything. All you need is to provide some ether or ETH the currency of Ethereum or another crypto asset as collateral and choose what you want to do. The smart contract takes care of the rest.

Like I said, all of these services are trustless and decentralized up to a degree. Some require you to create an account; with others, you don't even have to enter your email anywhere. Of course, rules apply: You cannot just lend thousands of dollars worth of crypto without any collateral.

It's been possible to do this for quite a while, thanks to startups such as Maker, Compound, Nexo, and others. But the process wasn't always simple for someone who doesn't know much about Ethereum and cryptocurrencies in general.

However, a new Ethereum mobile wallet called Argent removes nearly all the friction from DeFi literally anyone can use it with very little or no prior knowledge. Argent is currently in an invite-only beta, but it's fully functional, and everything I've done with it was real actual cryptocurrency was moved around and locked in smart contracts that provided the functionality described above.

Making a savings account in Argent is dead simple.

Image: stan schroeder/Argent/mashable

Let's say you're a complete newbie when it comes to cryptocurrencies. After installing Argent, which is a regular mobile app (I used the iOS version, but it's also available for Android), you have the option of adding funds via Apple Pay or Card, or a bank transfer, or you can send cryptocurrencies directly from a wallet or exchange. Going through an exchange may be cheaper, but adding funds with Apple Pay is the simpler option.

So you've bought some ETH (you can buy other coins, too, but let's stick to ETH, as it's the basis for the DeFi services covered in this text). Switch to the Finances tab, and you'll be presented with two options: One is Savings, which uses another service called Compound to invest your funds. There really isn't much more to it: You select one of the assets you own, in this case ETH, and Compound will lock it into a smart contract, which will immediately start giving you a return, calculated in real time.

My small portfolio is growing.

Image: stan schroeder/argent/Mashable

Not all assets carry an equal risk and reward, and not all are equally volatile. For ETH, you'll get a tiny, 0.02% yearly interest rate, and since the price of ETH can be very volatile, you should lock your ETH into this contract only if you plan on holding onto it regardless of price changes. On the other hand, DAI is a stablecoin whose value closely tracks with that of the dollar, making it far less volatile. It also currently yields a better return 5.88% annually at the time of writing so if your goal is to protect your principal in dollar terms and earn some money, it's a better option.

Taking out a loan uses a service called Maker, which isn't very easy on its own, but Argent simplifies that process, too. It lets you borrow a loan against collateral in ETH, to a certain point. Your collateral is locked in a smart contract, and will be returned to you when you pay off your loan plus interest (which, for me, was 9% annually).

Getting a loan in DAI requires you to lock some ETH as collateral into a smart contract.

Image: stan schroeder/argent/Mashable

To do this, all you need to do is play with a couple of sliders, which let you adjust your collateral and the amount of money you want to loan. However, you need to know that Maker contracts also include a liquidation price if the price of ETH falls below that price, your collateral will be liquidated to pay off the loan, together with a certain penalty. You don't want that to happen, so you should choose a safe loan-to-collateral ratio which is also clearly laid out in Argent's interface.

Note that this is different from getting a bank loan, which in some cases requires no collateral besides proof of good standing with your employer. But the advantage of decentralized finance is obvious: You can put your money to work, or take out a loan, without asking anyone for permission. Everything is taken care of algorithmically.

In theory, yes. In practice, I wouldn't trust any of these services with large amounts of money just yet. There are several reasons for this: There could be a bug in the smart contract's code that someone could exploit to steal your money. These contracts are often verified by experts, but bugs sometimes do go unnoticed. The volatility of cryptocurrencies ETH, for example, often loses or gains 5% in value in a single day is an issue, as well. Yes, you can use a stablecoin like DAI or USDC to avoid volatility, but in the case of an (unlikely) catastrophic ETH crash, even DAI could become unstable.

Also, note that my "portfolio," as described above, isn't the greatest. I'm paying a pretty high interest rate on my loan while at the same time receiving a paltry interest for my savings. But it was all done just to illustrate the potential of DeFi; I'd do it differently if I wanted to make the most of it.

All of the services I've used are on the Ethereum blockchain. There are a few on competing blockchains, like EOS and Tron, but the vast majority of DeFi services run on Ethereum.

Argent, which was used for this example, is just one of many cryptocurrency wallets you can use and definitely not the only option for DeFi. I've chosen it because it has a nice, clean interface, and it greatly simplifies the process of taking out a loan on Maker. For more options, check out this website.

DeFi is in a nascent stage. Some of these services, like Maker, have been around for years, but were (some still are) too complex even for techies, let alone people who aren't very tech-savvy.

But this is changing. Services like Compound and apps like Argent are making DeFi accessible to everyone. And while I'd always advise learning about how these services work in the background before investing even a cent of your money, the fact that DeFi is getting simpler means more people will get on board.

DeFi is also quickly spreading to cover far more complex financial products. Every week, I hear about new products or services, or even entire new classes of services. A few examples: A service called Rocket allows you to get a loan using collectibles as collateral; PoolTogether is a lottery in which you cannot lose, only win; and Synthetix offers digital assets tokens on the Ethereum blockchain that provide exposure to other assets, such as Tesla stock, or gold.

The examples I've given are just a small taste of what may come in the future.

Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH.

Link:
I took out a loan with cryptocurrency and didn't sign a thing - Mashable

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Tax season is here in the U.K. and its time crypto investors buckled down to file their cryptocurrency tax returns correctly. There have been a lot of indications that the U.K.s Her Majestys Revenue and Customs (HMRC) is starting to take a stern view of crypto tax evaders.

The first cryptocurrency guidance was released back in 2018 after a special report was submitted by the Cryptoassets Taskforce an initiative launched by the HMRC in collaboration with the Financial Conduct Authority (FCA) and Bank of England. These guidelines clarified some important details about how HMRC views cryptocurrencies, which many see as a prelude to a stricter approach toward crypto taxation.

HMRC also sent requests to some major crypto exchanges (including Coinbase) for information about their U.K.-based investors in August of 2019. This is exactly what the United States IRS did before they sent out warning letters to suspected crypto tax evaders.

All this is to say that HMRC looks to be fairly serious about crypto tax evasion which means that tax filings will become especially important this year. Here are some of the most important things you should know about crypto taxes in the U.K.

For all practical purposes, cryptocurrency is a digital currency. However, when it comes to taxation, HMRC looks at cryptocurrency as an asset. This means that disposal of crypto is subject to Capital Gains Tax. This categorization is being widely adopted by tax agencies; even the U.S.s IRS views cryptocurrency as property for tax purposes instead of a currency.

HMRC says that you need to pay capital gains tax on every disposal of cryptocurrency. Disposal here refers to the following:

Its important to keep in mind that charitable donations of crypto are not subject to capital gains tax. Of course, if the donation is tainted or if it the crypto is sold to the charity at a price greater than the acquisition cost, then capital gains tax will apply.

The actual capital gains tax to be paid will depend on your income tax bracket and the marginal tax rate. Keep in mind that there is an exemption limit of 11,700: If your gains are lower than this amount, you dont need to pay any capital gains tax. If you end up selling crypto which is more than four times the exemption limit (or over 46,800), you will still have to report the capital gains in your tax returns even if the actual gains are below the limit.

In the U.K., cryptocurrency gains are calculated using share pooling. Most people are familiar with accounting methods such as FIFO and LIFO when it comes to taxes. However, share pooling is quite different and involves using the average cost of all current assets to determine the cost of the assets being sold.

There are also additional rules like the same-day rule and the 30-day bed and breakfasting rule that are used to prevent tax loss harvesting or the practice of selling assets at a low price and rebuying it afterward to sustain taxable losses.

Crypto transactions also happen in other forms, for instance:

In each of the above cases, you will have to pay income tax and national insurance contributions. When you dispose of the assets, you will also have to pay capital gains tax in a similar manner as discussed before. It is important to separate the source of your crypto assets when preparing crypto taxes in the U.K. as HMRC has specifically classified hard-fork proceeds and airdrops as income.

If you trade cryptocurrencies as part of your business, then trading profits will be subject to income tax. This kind of trade is similar to trading in securities, shares and other financial instruments the HMRC Business Income Manual (BIM56800) deals with these transactions in detail.

HMRC recommends keeping detailed records of all your crypto transactions. Since even crypto-to-crypto trades are taxable, you will need to figure out the value of the crypto at the time of sale which could prove very time consuming if you are running bots.

Another thing to consider is that crypto exchanges dont always provide complete records, so its best to be proactive and keep a log of your trades. Nowadays, there are also tools such as Koinly, Cointracking, Lukka (formerly Libra), BitcoinTaxes and others that can help you with your record keeping for tax purposes.

Given that HMRC has made it a point to clarify regulations around crypto taxes and has also started asking for information about U.K.-based traders from crypto exchanges, its high time to get your affairs in order. If your crypto tax returns arent completely up-to-date, you should use this year to get things sorted even filing amended returns if you need to. The tax returns for the 20182019 tax year are due at the end of January!

This is a guest post by Robin Singh, founder of Koinly, a cryptocurrency tax startup. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc. This article is for information purposes only and should not be construed as financial or tax advice. Consult with a tax professional to properly assess your particular tax situation.

Excerpt from:
Cryptocurrency Taxes in the UK: What You Need to Know - Bitcoin... - Bitcoin Magazine

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Image: Chainalysis

In 2019, hackers have successfully breached 11 major cryptocurrency exchanges and have stolen more than $283 million worth of cryptocurrency, according to blockchain analysis firm Chainalysis.

The 11 hacks represent the highest number of security breaches at cryptocurrency exchange portals recorded in a single year in the last decade, up from six incidents recorded in the previous year, in 2018.

However, despite a rise in the number of reported hacks, attackers didn't make the profits they expected, netting only $283 million. The number is far below the $875.5 million hackers made in 2018 from just six hacks, and the $483 million they made in 2014, from only three breaches.

According to Chainalysis, the sharp rise in the number of successful hacks can be attributed to attackers evolving to use more sophisticated methods for infiltrating cryptocurrency exchanges, which allowed them to carry out more hacks than before.

On the other hand, cryptocurrency exchanges didn't sit idly either. Chainalysis reports that many invested in improved security features and transaction verification systems, which, in turn, reduced the amount of funds hackers managed to steal before being detected and transactions reversed and funds recovered.

But when hacks are successful, Chainalysis reports that "the majority of funds stolen in exchange attacks end up being sent to other exchanges, where they're likely converted into cash."

However, Chainalysis also reports that "a substantial portion of funds sit unspent, sometimes for years."

"In those cases, there may still be an opportunity for law enforcement to seize the stolen funds," researchers say.

Chainalysis experts report that over the course of 2019, they traced more than $2.8 billion in Bitcoin that moved from known criminal entities to a few exchange portals, where they were quickly cashed out into fiat currency.

The $2.8 billion figure, besides funds hacked from cryptocurrency exchanges, also includes other types of illegal transactions, such as ransomware payments, funds from phishing operations, online scams, and funds associated with known criminal and terrorist groups.

Of these $2.8 billion, Chainalysis says that more than 50% of the funds were transferred to accounts on the Binance and Huobi exchange platforms -- two of the internet's largest cryptocurrency exchanges -- where crooks laundered the stolen coins into cash.

"Overall, just over 300,000 individual accounts at Binance and Huobi received Bitcoin from criminal sources in 2019," Chainalysis reported.

"That may come as a surprise given that Binance and Huobi are two of the largest exchanges operating, and are subject to KYC [Know Your Customer] regulations," experts added.

KYC regulations, which are in effect in almost all countries over the world, mandate that companies require customers to authenticate and verify their identities before doing business on their platforms.

However, Chainalysis reports that many criminal groups are skirting this requirement by using entities called OTC (Over The Counter) brokers.

OTC (Over The Counter) brokers are entitites that operate on classic exchange portals and act as intermediaries that can facilitate trades between buyers and sellers who don't want their identity or accunts associated with transactions on open blockchains.

"The problem, however, is that while most OTC brokers run a legitimate business, some of them specialize in providing money laundering services to criminals," the Chainalysis team says.

"OTC brokers typically have much lower KYC requirements than the exchanges they operate on," researchers added. "Many of them take advantage of this laxity and help criminals launder and cash out funds, usually first by exchanging Bitcoin and other cryptocurrencies into Tether as a stable intermediary currency before they presumably cash out into fiat."

But tracking illegal transactions on public blockchains isn't an accurate science. Researchers need to discover and then track the blockchain addresses used today's secretive criminal and terrorist operations.

Of all illegal activities and transactions happening on public blockchains, ransomware payments are the easiest to track, as the ransom payment address is usually included in ransom notes that cyber-security firms can obtain from analyzing malware samples.

The Chainalysis team says that based on their data, in 2019, ransomware gangs received just over $6.6 million in ransom payments, "largely driven by an October surge in attacks carried out using the Bitpaymer, Ryuk, and Defray777 ransomware strains."

However, Chainalysis is the first one to admit that this number is "almost certainly an underestimate" and that ransomware gangs most likely earned a figure larger than the $6.6 million they managed to confirm and track.

More details on the blockchain ecosystem and the criminal underground will be available later this month when Chainalysis publishes its 2020 Crypto Crime Report.

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2019 saw more cryptocurrency hacks than any other year - ZDNet

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Paris Saint-Germain Teams up With Cryptocurrency Exchange Platform CoinCasso - Bitcoin News

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A series of large XRP transfers have crypto traders on alert.

The single biggest transfer sent 49,999,995 XRP worth about $11.6 million to the Luxembourg-based cryptocurrency exchange Bitstamp. The transfer triggered quite a stir, with many traders wondering if the XRP holder is planning to sell.

According to the crypto tracker Whale Alert, the XRP in question was sent from an unknown wallet. However, data from the XRP explorer Bithomp indicates the wallet was activated by the crypto custody giant BitGo.

Bitstamp and BitGo partnered back in October in a move designed to give Bitstamp a safe way to store its customers assets. The fact that the wallet was activated by BitGo suggests the transfer may be a routine shuffle of assets at Bitstamp.

The security of our customers funds is always our highest priority at Bitstamp. With BitGo Custody, Bitstamps assets will be secured on 100% cold storage technology in bank-grade class III vaults and protected by BitGos $100 million (USD) insurance policy.

Meanwhile, the XRP Ledger Monitor is tracking a series of additional million-dollar XRP transfers in the last 24 hours. At time of publishing, the most recent is a movement of 15,000,000 XRP worth $3.5 millionfrom the crypto exchange Binance to another wallet activated by BitGo.

In addition, the South Korean crypto exchange Coinone sent 20,519,000 XRP worth $4.8 million between two internal wallets, and Bitstamp sent 21,990,778 XRP worth $5.2 million between two of its internal wallets.

The payments company Ripple, which holds more than half of the total supply of XRP, recently moved 356,207,423 XRP worth $78.4 million in two separate transactions. Ripple sold significantly less XRP in the fourth quarter of last year, with the purpose of the two transfers in question unknown.

Featured Image: Shutterstock/d1sk

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49,999,995 XRP Sent to Bitstamp Is This Cryptocurrency Giant Behind the Curtain? - The Daily Hodl

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