Universal Coin Wallet Genesis

Ethos announces upcoming Genesis release of Universal Wallet for final testing

Ethos announces upcoming Genesis release of Universal Coin Wallet for final testing

Ethos Universal Coin Wallet

It begins. We’ve all been waiting patiently (and working feverishly!) for the Ethos Universal Wallet to see the light of day. That time is fast approaching. But like most things, we’re doing things our own way. Universal Wallet is an incredibly ambitious project – and ensuring everything is rock solid and secure is our highest priority. So, this is how it’s going to work.

First of all, we want to express our deep gratitude to the entire global Ethos family for your support, encouragement and energy. It has fuelled our growth and been an incredible source of inspiration and energy for our entire team! So, thank you all. You have and will continue to play a role in unlocking the future of finance, and we’re honoured to be serving you. It’s pretty unbelievable what we’ve built in 8 short months! If that’s not people power, we don’t know what is.

Now, it’s time to stick the landing. And we need your help. We are nearing the Genesis build of the app, and it’s beautiful. But before we send it off to hopefully be a part of changing the world, we want to make sure it goes through the rigorous testing required to ensure it meets our high standard for quality and security. To get its feet wet. To warm up. To get even better.

So, the Ethos Universal Coin Wallet release rollout story starts like this.

In the coming week, the app will be go into limited release to some Ethos community members and Pre-Registered users who will be part of our final polish and testing process – so we can make sure the Ethos Universal Coin Wallet is as seamless and flawless as possible when it hits your pockets. This group will include:

  • Ethos Product Council members. They’ve been involved since the beginning and their feedback has been critical to building the app.
  • Top 100 Token Sale Contributors. Their support since day one has helped make this journey possible.
  • A randomly selected group of Pre-Registered community members. There are thousands upon thousands of you, and we love you all! A whole bunch of you are going to receive invites to join our Product Council and be part of the Genesis release. You’ll also need to be an ETHOS token holder to participate. So if you’re on the list, watch out for an invite! And if you’re not already pre-registered, get yourself on the list by clicking here!

Our Genesis release users will be an integral part of making sure the Ethos Universal Coin Wallet is battle-tested and ready for the instant global scale that awaits upon wide release. Genesis release users will also be rewarded for their efforts in finding any bugs or issues we haven’t already worked out – just another way for people power to play a role in building a financial ecosystem that is open, safe and fair for everybody.

You ready? We are.
Let’s go.

Team Ethos

Mom This Is Cryptocurrency

Dear Mom, This is Cryptocurrency

Dear Mom, This is Cryptocurrency by Zachary Dash

We all have that one family member or friend, that no matter how many times we try to explain cryptocurrency, we are met with blank stares of bewilderment or curious questions of concern.

“Is this real money, or just monopoly money?”

“Okay cool, but what can I do with it?”

“You mean that Bitcoin thing?”

For me, this person is my mother. A red-haired, middle-child and grandmother to three; she always has a way of standing out from the norm and thinking differently. Despite this rebellious nature and open-mind, the conversations of cryptocurrency have been a struggle to say the least.

As with many families across the world, the polarizing topic of Bitcoin has become a common dinner table discussion. Although the average age of cryptocurrency supporters seem to skew towards younger generations, it is not uncommon to have demographics in all directions passionately promoting their side of the debate.

As early adopters, it is not our responsibility to change the minds of others; but rather, foster the growth of understanding. Understanding that of which we do not accept is the first step to accepting that of which we do not understand. So mom, this is for you. This is cryptocurrency.


History of Change

In recent months, I have started to feel like a crypto missionary of sorts. Riding my altcoins into the abyss; knocking on every door who will answer. Telling people you are into cryptocurrency has become the new standard of announcing your vegan-ness or personal crossfit records.  It is many times frustrating to not be met with the same enthusiasm and excitement when discussing something you are so incredibly passionate about. But, can you really blame them?

In 1995, the prominent magazine “Newsweek” published an article criticizing the internet with some pretty confident remarks:


Although this sentiment did not represent everyone’s opinion from the 90’s, the value of the internet was not as obvious as it is today. Google hadn’t been invented yet; your computer still made robot noises when connecting online; and this new technology making its way into our homes was still referred to as the ‘information superhighway’.

As the internet continues to revolutionize how we connect, there is another evolution taking place in the financial industry.


Why Does Cryptocurrency Matter?

It is human nature to explain concepts by answering what something is. In my early conversations, I attempted to explain the concept of cryptocurrency with the same wikipedia-laced line of information:


But as humans, we don’t care what something does; we care why it is important. What impact does this have on the world? How does it pertain to me? Although cryptocurrency is still in its early stages, it is already impacting the world as we know it. Here is one my favorite examples of many.

Azraq Refugee Camp

In the heart of a Jordanian desert sits the Azraq Refugee Camp, built for Syrian refugees. While lucky enough to escape the violence and civil war in their homeland, all possessions and goods previously owned have been lost or taken away. Living in conditions and situations many of us cannot fathom, the main sense of normalcy these refugees have involves socializing at a local supermarket. However, instead of paying traditional money, all transactions are utilizing cryptocurrency.

Due to the nature of cryptocurrency, each transaction a refugee makes is locked on an unchangeable digital ledger that can be moved across borders. If there is ever an opportunity to transition back to their home countries, this technology would allow for a smoother transition back into society.

Houman Haddad, the brainchild behind Building Blocks Project added to the importance of how this digital asset will be with them for many years to come. “In the case of refugees, it’s not a document that can be actively taken away from them or something they can be persecuted for stuff on, at the same time they’ll have access wherever they go,”

African Inflation

Although Americans do see inflation of the USD over the years, the problem of over-printing money is a greater and more critical problem in other parts of the world.

“In 2016, a study of 10 African nations with unusual inflationary ratios, indicated that South Sudan had a huge inflation rate of 295%. Egypt had the lowest rate with 12.30%. High inflation and weak African currencies allow Bitcoin and cryptocurrencies to offer African consumers a stable store of value and an inflation hedge.” Source

In traditional financial systems, citizens are dependent on centralized governments and banks to ensure their money holds value over time. In the decentralized systems that cryptocurrency enables, power is put back into the hands of the people.


So, What is Cryptocurrency?

Before we get too far down this rabbit hole, there are three misconceptions that we must clear up.

1) Bitcoin is only a portion of the cryptocurrency industry.

While Bitcoin is inherently a cryptocurrency, not all cryptocurrencies are Bitcoin. Just like in the physical world, there are multiple forms of currency; from the USD and Peso, to the Yen and Euro. Bitcoin just so happens to be the most well-known and media hyped cryptocurrency at this time.

2) Currency takes many different forms.

All the time I hear, “Is this real money?” There are only two things that must be true for something to be used as money. First, two people have to mutually agree it has a value. Second, there has to be something to transfer; like food, paper, or utilities. In the case of cryptocurrency, millions of people mutually agreed it has value, and we transfer ownership to one another as payment. Without this foundation, the idea of digital, cryptographic, “monopoly money” universe is extremely difficult to comprehend.

3) Not all cryptocurrencies are used as currency.

Confusing, I know. If there was one thing I could go back in time and change about the industry, it might be the naming of “crypto-currency”. Although it is possible to use a few coins to buy a cup of coffee, much of the industry is comprised of ‘tokens’ that were made with a sole purpose of performing tasks. Just like hammers, wheels, and the all-important backscratchers; many tokens are used for purpose, not as payment.


How Does Cryptocurrency Work?

Currently, when you want to send money to your uncle in North Dakota, you are probably going to use a third party to accomplish the task. One way you could do this is by transferring some money on PayPal. If you are lucky enough to have the same bank, you might wire him the money. If you are feeling super paranoid, you could even attach some cash to a carrier pigeon and hope he makes it there in time for winter. In all these examples, whether you use Paypal, Chase Bank, or a carrier pigeon, you are putting your trust in another person/entity to successfully transfer your money.

This, is what cryptocurrency changes. There is no middle man but it accomplishes the same task. Although there are many complexities in how this is technically possible, there are only two things you must understand to get your crypto on. Blockchain and Wallets.

1) Blockchain (Bank)

The most common way in which we interact with money in today’s society is through banks. We give our cash and assets over to the bank, and in turn, they promise to keep it safe and easily accessible. While this is an extremely valuable service to provide, the recent innovation of blockchain technology allows for us to get the same safety and accessibility, without using a third-party.

In short, a blockchain is simply a public ledger of transactions. However, instead of one company or entity controlling your funds, the funds are processed and secured by group consensus. Here is a quick analogy to help explain how these transactions are transmitted.

Imagine a room of 10 people; all with an imaginary $10. Everyone knows the rules of this room and how much money everyone else has. When Person A wants to send their imaginary money to Person B, they simply say it out loud. “I, Person A, am sending $5 to Person B”. The entire room hears what just happened and writes it down. When Person C wants to send money to Person D, they follow this same process. Announce their transaction, and everyone writes it down. At any time, we can ask the room how much money any person has, and the room, as a whole should be able to tell you the correct amount. There is no teacher in the middle. There is no principal in the lobby. Everyone has an equal voice and relies on the trust of the group to come to a consensus of what is right.

This is how cryptocurrency works. But instead of trusting in people to write everything down on paper to keep up with these transactions, we put our trust in math.  While it seems like a crazy idea to put our trust in mathematical numbers and formulas, this is something we already do on a daily basis without knowing it. When we set our alarm clock at night, we are trusting in math to wake us up at the right time. When we navigate our way to the top of a skyscraper, we are trusting in the math of architects and engineers to ensure our safety. When we are driving our cars, we are trusting in math to tell us how fast we are going and how much gas we have left in the tank.

I believe a lot of people get scared away from the industry when they first hear the word ‘crypto’. Seems like some made up word from the Da Vinci Code or Legends of the Lost Temple. However, if we simply think of ‘crypto’ as mathematical formulas, it is sometimes easier to comprehend.  While humans have done many amazing things throughout history, we have also proven to be emotional creatures that make mistakes. Cryptocurrency builds itself on the trust, consistency, and the incorruptible nature of numbers.

2) Wallet (Bank Account)

Now that we understand the blockchain can be used as a decentralized bank, we can move on to understanding ‘wallets’. The best analogy when describing a cryptocurrency wallet is similar thinking of your current bank account. This is where you send, receive, and keep your cryptocurrencies. While many people like to imagine their money sitting safely three stories underground in a vault protected by armed guards, most banks now hold a majority of their assets on central computers and servers. If these servers or vaults were to be robbed, your money would be in jeopardy as well.

Cryptocurrency assets, however, sit inside multiple digital ‘vaults’ all over the world. If a hacker or thief were to try and steal your money, it would take much more time, energy and effort to do so. With no central target of attack and a security system that gets stronger as the network grows, cryptocurrency wallets are a decentralized solution to the current banking system.

Here are the five ways in which you can currently store and send your cryptocurrencies in a decentralized manner:

  • Web Based Wallet: A virtual web based wallet is similar to how you currently interact with your bank online. You go to a web page, login, and can access your account.
  • Desktop Wallet: To use this, you must first download a software (similar to downloading iTunes or Photoshop). This is a great alternative to taking the coins into your own hands.
  • Mobile Wallet: Same concept as a desktop wallet, but on your phone. Simply download the mobile app from the app store and you are good to go.
  • Hardware Wallet: These wallets usually come looking like a USB stick, with some extra added tech inside. It seems counterintuitive to move a digital asset onto a physical wallet, but this is one of the safest way to secure your coins.
  • Paper Wallet: Your wallet always has a public and private key. Think of this as your account name and password. A paper wallet allows you to print this information off and take your coins “offline”.

Even as a cryptocurrency advocate, many people believe wallets are currently the largest obstacle holding back the mass adoption of cryptocurrency. While you don’t need technical understanding of the blockchain to gain its benefits, there is still a very high learning curve for sending, receiving and storing cryptocurrencies. It’s like we have baked the best cake in the world, and nobody knows how to use a fork, yet.

Currently, many different coins and tokens require their own wallet or storage system. To counter this, the team at Ethos is building out an easy-to-use mobile application to interact with cryptocurrency without all the confusing stuff. With the Universal Wallet, Ethos puts you in complete control at all times with no need to keep track of multiple wallets and private keys. You can rest easy knowing your assets are safe, secure and right there when you need them. Here is a sneak peek at the mobile app coming soon:


How Does this Affect Me?

Alright, so you have a basic understanding of cryptocurrency, but how does this pertain to you? What are the actual use cases and how can this make your life better?

More Secure

Decentralized platforms over time will be a much more secure network, but why is this? In the past year, there have been many stories of large and credible companies getting hacked.

  • Equifax, a top consumer reporting agency, had over 145M customers’ data and information compromised. [Source]
  • Target, one of the largest retailers, had credit card and debit card data from over 40M accounts stolen. [Source]
  • Uber, the largest ride sharing application, had data from over 57M customers stolen. Oh, and they paid $100,000 to cover it up. [Source]

More than individual entities showing an inability to remain secure, there have been countless examples of entire countries taking advantage of their power. Most recently, the United States experienced the 2008 financial crisis which is considered by many to be the worst financial downturn since the Great Depression. Here is a quick summary of how and why it happened.

  • People wanted to keep their money safe, so they put it in banks.
  • Banks wanted to make money, so they took people’s money and gave it out as loans.
  • These loans were not good loans, and people did not pay them back.
  • The banks declared for bankruptcy and the government stepped in to bail them out.
  • The Government used the people’s tax money to pay off the money that the banks lost.

When there is one point of failure it is easy for negligent, malicious or simply corrupt behavior. Cryptocurrencies on the other hand are not stored in one central location, but on a distributed, decentralized system.

Lower Fees

While Bitcoin has had some growing pains of the last few years with transfer fees, there are many other cryptocurrencies that allow you to send with minimal or zero fees.


You can take cryptocurrency with you anywhere in the world and it retains it’s value. No need to convert it to the local currency. Although there a limited number of vendors who currently accept cryptocurrency, this number is expected to grow exponentially in the very near future.


Some coins offer more anonymity than others. Not sure what you want to be buying with this anonymous money mom, but I will leave that up to you.


This is where we currently are with cryptocurrency; a mystical state of science fiction and awkward teen years. Not quite old enough to drive, but just tall enough to ride every roller coaster at the amusement park. As we try to figure out where this all will end up in our society, cryptocurrency is trying to understand itself and the long term impact it will have on the world.


BlackRock Investments Blockchain Finance Vishal Karir

Vishal Karir joins Ethos as Chief Investment Officer from BlackRock

Ethos is beyond excited to welcome Vishal Karir as its Chief Investment Officer. He is backed by over 17 years of investment and technology experience at Morgan Stanley and most recently BlackRock, where he had $1.5 billion in assets under his management. Vishal will lead our efforts to bring innovative portfolios for the exciting new crypto asset class to the masses, as well as lead the development of our innovative hybrid investing solutions, helping Ethos to continue bridging the gap between digital and traditional finance.

“The paradigms of finance and investing are shifting in favor of individual investors and entrepreneurs – I am thrilled I have a part in expediting the shift,” said Karir of his decision to make the move from BlackRock to Ethos.

Ethos’ mission is to build a financial ecosystem that is open, safe and fair for everybody. The Ethos Universal Coin Wallet allows users to safely and securely store, send and receive a broad range of digital currencies on their mobile device with the same level of sophisticated security often reserved for expensive hardware wallets – available soon as a free app download this Spring. It also gives users the ability to track assets stored elsewhere, giving users a complete digital portfolio management experience in one app, and a host of other features designed to make cryptocurrencies more accessible and foster mass adoption.

While the Universal Coin Wallet is the first step in its mission, Ethos is already hard at work on its project Fiat Gateway – a hybridized investment solution that will make investing in both cryptocurrencies and traditional assets seamless and accessible, integrated with Universal Coin Digital Wallet which empowers user with full custody and control of their digital assets.

“With the entrance of Vishal, Ethos and eventually our Fiat Gateway project are uniquely positioned within the industry to bring the sophisticated investment tools of the traditional economy to a new digital asset class,” said Ethos CEO, Shingo Lavine.

“Today Ethos takes a giant leap forward with the addition of Vishal to the Ethos Family. Vishal’s wealth and breadth of investment knowledge will enable Ethos to deliver institutional quality investment models accessible to all individuals, that up until now, were only accessible by a select few,” added Ethos’ Chief Global Strategist, Stephen Corliss.

The arrival of Karir truly reinforces the Ethos mandate to provide robust, meaningful best-in-class investment advice and financial planning to help unlock the New Economy for everyone.

For more on Vishal’s background, check out his bio here.


Cryptocurrency Guide

Ethos’ Alphabetical Guide to Cryptocurrency Definitions and Metrics

Easily Understand Bitcoin, Blockchain & Cryptocurrency Definitions and Metrics

Welcome to Ethos’ Alphabetical Guide to Cryptocurrency Definitions and Metrics. We know, there are dozens of these guides out there, but this is the one to rule them all. OK, crypto’s complicated. There’s bound to be a load of stuff we’ve missed. Just know, this is only the start. This guide will be updated on a monthly basis with all of the cool happenings in the world of crypto. We’re writing it in plain English, because we want to make everything as clear as possible. Besides, for all the crypto-wizards out there, you probably know it all anyway, right?

It’s for anyone that wants to learn more, and maybe have a go at explaining it to their friends, colleagues, relatives and fellow investors: for those that have been in crypto for a while and want a simple definition of the latest stuff, or the ones just getting into it, and who want to get up to speed. So, find your favourite easy chair, sit back, and relax. It’s about to get technical, yo!


A way of distributing free cryptocurrency or tokens to users. This can occur by simply holding an account with a partnered cryptocurrency exchange or holding a compatible cryptocurrency, such as ETH or Bitcoin, in a specified 3rd party wallet or can even take place in completely public events. Sometimes both apply i.e. an exchange may require you to hold a certain amount of one coin, before you can receive another. It is seen by some as a PR exercise, and by others as a viable option / alternative to ICOs for fairly distributing an asset. Once received, these assets then become transferable and tradeable on the open market. Airdrops can also occur in the form of a hard fork, where the original version of the cryptocurrency is required, and a blockchain ‘snapshot’ of ownership is taken before the owner of the original cryptocurrency receives the new, forked version of cryptocurrency. Learn more about the Ethos Community Airdrop Program by reading our Community Airdrop Guide!



Atomic Swaps

A technology allowing two different users to directly exchange cryptocurrencies belonging to separate blockchains, without any third-party or intermediary e.g. XRP to Ethos. The technology is still in its nascent stages, and while progress is being made, there are associated risks involved. Currently, the only viable alternative is to use an exchange, which requires trading the original cryptocurrency i.e. XRP into a compatible intermediary i.e. Bitcoin, and then trading this cryptocurrency into what you want to purchase i.e. Ethos. This trade incurs fees, which would be negligible using an Atomic Swap. Were you to currently attempt sending a cryptocurrency to an incompatible address, there is a high likelihood that you would lose your funds, and they would be irrecoverable. See the section below on an ‘Address’ for more information.




Composed of a unique, alphanumeric string of characters, an address is a secure identifier enabling an individual or entity to perform a blockchain transaction. A private key is required to access these funds, which is an equally unique string that operates as a password or PIN number. In conventional terms, your address can be seen as your account number and sort code. Bitcoin addresses start with a ‘1’ or a ‘3’. Ethereum addresses start with an ‘0x’. It is important to note, as per the definition above on Atomic Swap technology, that sending a cryptocurrency to an incompatible address is not advised, as it is likely you will lose the funds. Unlike a centralized system, there is often no resource to protect your funds should you make a payment to an incorrect address, so it is important to get it right. If in doubt, always send a small amount of value first, to practice, and then proceed with the main transaction.




Any category of cryptocurrency that isn’t Bitcoin. These alternative coins are made up of currencies and tokens. Many present alternatives to Bitcoin, aiming to be faster and cheaper, while many operate as access tokens for digital goods and services applications (DApps) that operate on a blockchain. Many popular altcoins operate using Bitcoin’s core technology, while others are completely unique. Others, such as Ethos, are built on the Ethereum blockchain and are known to be ERC-20 compliant – a common standard for Ethereum based coins. The original altcoin is considered by many to be Litecoin, as it was based on the Bitcoin source code. As of 19th February 2018, there are 1,544 altcoins available on CoinMarketCap, comprising 62.6% of the entire cryptocurrency market. Altcoins can be stored in compatible wallets and traded with other altcoins via an exchange. The Ethos Universal Wallet can store more than 150+ altcoins, be sure to check out the coin wallet support list for more details!



ASICs – Application Specific Integrated Circuits

Microchips or processors designed and manufactured to perform the highly specific task of mining cryptocurrency. Bitcoin ASICs came into existence in 2013, vastly outperforming existing technology at the time. Many consider the use of ASICs mining to be incompatible with the decentralized vision of cryptocurrency, as it is generally a technology accessible by those with a high degree of technical expertise and funding. Nonetheless, the majority of Bitcoin ‘Proof of Work’ mining is now carried out by these types of processors, which perform well, yet also consume considerable amounts of electricity. Therefore, more sustainable alternatives to generating cryptocurrencies are being developed, including PoS and DPoS protocols. For more information, please refer to the ‘What are ASIC miners?‘ article on the Ethos website.




The original cryptocurrency created by Satoshi Nakamoto in 2009. Allowing for near instant transactions of value in a P2P way, it operates as an decentralized, and thus un-hackable and immutable ledger of value stored on what is known as a blockchain. Bitcoin is not backed by any central government or institution. It exists purely as a distributed network of computers that attest to the uniqueness of any given transaction. Colloquially known as ‘The King of Crypto’ and ‘Digital Gold’ it is the most liquid of all cryptocurrencies, worth $189.76bn in terms of its total market cap, according to CoinMarketCap on 19th February 2018. Bitcoin requires a large amount of computing power to operate, relying on what’s known as a Proof of Work protocol. For more information, please refer to the ‘What is Bitcoin?’ article on the Ethos website.


Blocks / Blockchain

Refers to a public ledger, or database, that in theory cannot be changed without consensus. This immutability allows for data within that database to perform different transactional functions, and the elements of this database are known as blocks. These blocks can represent movements of value, like a currency, or work as an access mechanism or functional utility, for a platform providing goods and services. As more transactions take place on a ledger, new blocks are added to the chain containing the recorded transaction data. There are different ways of generating and managing blockchains. Some are mined, others are pre-minied. Each has a different amount of data it can store, and there are large variations of speed in which the data can be transferred. Some blockchains are managed centrally by specialized parties that run nodes in the network, and might more accurately be termed distributed ledger technology, and others like the Bitcoin blockchain are completely decentralized. There also exists hybrid systems, which aim to combine the benefits of centralisation and decentralisation. For more information, please refer to the “What is Blockchain?” article or learn more about how does blockchain work on the Ethos website.



Block Height

Refers to the number of blocks that have been produced in a specific blockchain, in the case of blockchains which are mined i.e not pre-mined. Starting with what is referred to as a ‘genesis block’ (the first block in a blockchain), these blocks can store and manage multiple types of information like documentation data, yet popularly relay transactional values or functions of utility. The block height on a transactional blockchain like Bitcoin can be accessed publicly via a ‘block explorer’. The speed at which a particular block height is reached depends on the difficulty and inflationary / deflationary model of the respective blockchain.



Block Reward

A payment, in the form of cryptocurrency or fees, offered to the miner of a successfully hashed block on a blockchain. What this reward is will depend on the algorithmic policy of the cryptocurrency: such variables include the age of the blockchain, hashing difficulty, and therefore the inflationary model of said cryptocurrency. For instance, Bitcoin mining currently awards 12.5 Bitcoins for each block that is successfully hashed. After a certain period of time, rewards will decrease as the hashing difficulty is increased. Often, the block reward halves when a certain number of blocks have been mined, every 210,000 in the case of Bitcoin.



A term referring to an organization or system that is controlled by a single group or entity. Governments and corporations are centralized organizations, as are their currencies and shares respectively. Current centralized systems have various advantages that decentralized systems lack, such as regulation, yet conversely decentralized systems have advantages over centralized systems, such as resistance to abuse, attack and failure.


Cold Storage

Describes a method of storing digital data, such as cryptocurrencies, in a way that is not connected to the internet. Popular methods of cold storage include specialized USB enabled ‘hardware wallets’. Due to the lack of user-friendly software, it makes the use of such data more complicated and less likely to be regularly accessed. Additionally, one aspect of such devices is the opportunity for physical damage, loss or theft. However, the advantages of such tools is that they are far less likely to be prone to software theft, commonly known as hacking.




Defined as any agreement by a given majority, often placed at 51%. If 51% of people, or entities on a network, agree to a certain condition, be that a value transaction or change to the system, the result is known as consensus. An important part of the cryptocurrency space, consensus is required to verify the validity of digital transactions on a blockchain. It is also a way of politically managing decentralized systems, for instance whether or not a hard fork should occur.




Any type of currency that is transferred via a blockchain, using decentralized and cryptographic protocols. By using these protocols, the value of the data being transferred is resistant to fraud, and is protected from negative features of traditional fiat currency, such as counterfeiting. This transparency, coupled with its P2P and portable nature is considered one of its many benefits, in addition to the fact that it is theoretically unable to be interfered with by centralized governments and organizations. As of 19th February, the most valuable cryptocurrency in the world is Bitcoin. Other cryptocurrencies include Litecoin, Dash, ZCash, Monero, and Nano. Read more about “What is a cryptocurrency exchange?” on Ethos.



The covert use of a computer to maliciously mine cryptocurrency. Traditionally reliant on a piece of software installed on the computer itself, modern cryptojacking techniques can be managed remotely by simply accessing the computer’s browser. Website owners are essentially hacked, have the rogue software installed on their servers, and then the software activates whenever a user accesses a particular page on that website. It is also possible to cryptojack via display ads on websites, using a similar technique by installing within the advert’s HTML code.



DAO – Decentralized Autonomous Organizations

An organization that operates through rules encoded as smart contracts. Think of it as a financial or crowdfunding program, built on a decentralized blockchain, existing entirely online. They’re designed to be autonomous, yet often require maintenance by specialized individuals who are hired by the DAO’s members to encode elements that cannot be performed autonomously. DAOs are not owned or governed by individuals. Instead, they operate via network of distributed computers, with actions decided by consensus. In many ways, a DAO is effective democratic, financial system with safeguards in place to protect its members. However they cannot be considered infallible or incorruptible, as proven by the Genesis DAO hack of May 2016.



Drawing from the definition given by Vitalik Buterin, founder of Ethereum, the term can be broken into three parts when referring to decentralized blockchains: architectural, political and logical decentralisation. ‘Architectural decentralisation’ is the number of computers on the network. ‘Political decentralisation’ is the number of users of that network. ‘Logical decentralisation’ asks whether two halves of the network could operate independently of one another, were you to split users and providers of the network equally. Blockchains are politically decentralized, as no single entity controls them. They are also architecturally decentralized, meaning they don’t exist on a central server, resulting in a lack of central point of failure. However, they are logically centralized, as there is agreement related to the operational behaviour of the system, for example that users agree Bitcoin will only ever have a total supply of 21M coins. Therefore, anything that definitively breaks that rule (a hard fork) isn’t Bitcoin.



DApp – Decentralized Application

Software applications that run on top of dedicated, decentralized P2P networks. They differ from smart contracts, and therefore are also different from DAOs. Any number of participants from the provider and user sides may interact with these applications, and the function need not be financial, as is the case with a DAO. Like conventional, centralized applications, DApps can be written in a variety of programming languages from Javascript and C# to PHP and Java, and more besides. Ethereum is the most popular DApp platform at the time of writing, primarily using a custom coding language called Solidity. The Ethos Universal Wallet is an Ethereum DApp.



When creating blockchains through the process of hashing, the difficulty determines the amount of computer power required to solve the cryptographic puzzle that adds a block to the chain. Therefore, two factors determine the difficulty or hashpower required: the parameters set by the cryptocurrency, and the number / power of computers on the network trying to solve the puzzle. Typically, the difficulty parameter and reward mechanism of the cryptocurrency is predetermined, so the variable affecting the difficulty is dependent on the number / power of computers on the network. The computer network’s hash power is improved by using ASICs.




A certifiable standard for tokens launched on the Ethereum Blockchain network, that guarantees they work in a predictable and secure way. This allows for the easy transfer of compatible tokens, in the instance of an ICO for example, that would require the exchange of Ether. The benefit of having this benchmark of compliance also means that wallets and cryptocurrency exchanges only need to apply a single smart contract address for Ethereum in order to manage multiple types of token.



ETH – Ether

According to the definition on the Ethereum website, “Ether is a necessary element – a fuel – for operating the distributed application platform Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations. To put it another way, Ether is the incentive ensuring that developers write quality applications (wasteful code costs more), and that the network remains healthy (people are compensated for their contributed resources)”. Developers who intend to build DApps that will use the Ethereum blockchain require Ether, as do users interacting with its smart contracts. Using the platform, transaction fees are measured based on the gas limit and gas price, ultimately paid for in Ether.




The foremost DApp platform at the time of writing, proposed and founded by Vitalik Buterin in 2013. Development was funded by an online crowdsale that took place between July and August 2014. The system went live on 30th July 2015. Ethereum provides a Turing-complete virtual machine, known as the Ethereum Virtual Machine (EVM), that allows for open-source, public and blockchain based distributed computing, using smart contract functionality. The DApps that can be built on the Ethereum platform range widely in use cases, from prediction markets and identity systems, to games and social media platforms. Ethereum is the second largest blockchain by market cap, worth an estimated $91bn on CoinMarketCap as of 19th February, 2018, representing approximately 19% of the entire cryptocurrency market. For more information, please refer to the ‘What is Ethereum?‘ article on the Ethos website.




The speed at which certain cryptocurrencies are created and released, often through the use of airdrops or staggered ICOs. Whether this speed slows or remains constant determines whether the cryptocurrency is based on a deflationary or inflationary model, respectively. Often, a cap will be placed on the emission, so that by default it becomes deflationary after that point, due to physical loss or token burns. This cap is known as the maximum supply. However, there are examples of cryptocurrencies that employ an infinite emission model, so that they will continue to be created and released, though at a lower rate of emission. Such a currency is inherently inflationary, in that the unit value of the currency decreases over time. Emission rates to not necessarily speak to the quality of a cryptocurrency, however from an investment perspective it is worth understanding the concept, as it is a parameter that may dilute your portfolio over time.



Forks – Soft & Hard

A change or upgrade to the software protocol of a blockchain. What determines if it is soft or hard fork depends on a) whether the change can still operate alongside the existing protocol and b) whether there is consensus related to the change. To clarify, soft forks are generally seen as routine maintenance to improve issues related to the blockchain, such as security and scalability. Much like when you download a patch for the operating system on your computer, you are not fundamentally changing the main operating system. With a hard fork, the operating system of a blockchain is being changed i.e. a new record of data begins. This means the new version of the blockchain will disregard the old blockchain completely, and becomes something fundamentally different. This new blockchain will then be maintained independently from the previous one, and will be given a different name. Sometimes, however, the older blockchain is given a different name, as was the case with Ethereum Classic in 2016. After Ethereum was hard forked after the Genesis DAO hack of 2016, the new version maintained the name Ethereum, while it was the old version that changed its name. On various occasions, accidental hard forks have occurred that did not undergo a process of network consensus. Hard forks regularly result in the resulting cryptocurrency being delivered via airdrop to users that hold the ‘pre-fork’ version, as has been the case with Bitcoin Cash, Bitcoin Gold and Bitcoin Diamond.



On the Ethereum platform, each transaction i.e. API call that is performed, costs gas. This small cost pays for the computational resources of the network to process the transaction. The more gas a user pays, the faster the transaction occurs. Think of it as an incentive for the miners on the network to prioritise your transaction, over a user that set a lower gas limit i.e. the maximum amount of gas one is willing to spend on a transaction. Any gas that is unused after a transaction occurs is returned to the user. If a transaction fails for any reason, the user still pays the gas. Gas is calculated by multiplying the gas price or ‘gwei’. gwei is a mathematical term referring to a fraction, also known as a ’shannon’, defined as 1 billionth of a whole. That’s 1:100,000,0000. A typical gas price is 20 gwei, but can be as high as 50 gwei if the Ethereum network is busy. 2 gwei is the minimum required to perform a transaction. A simple USD calculation of your maximum gas price is $ cost of Ethereum / 1 billion x gas limit. If you are performing regular transactions on the Ethereum Blockchain network, it’s worth understanding this formula. For more information, please refer to the ‘What is Ethereum Gas?‘ article on the Ethos website.



Hashing / Hash Function

A computer program, which takes data and converts it into an alphanumeric sequence or code. Hashing allows for faster retrieval of information related to the original data, because hashes are typically shorter and therefore easier to compute. Hashes have the added benefit of scrambling data, so that it becomes unreadable, secret and secure. The difficulty to crack a hash function is therefore what defines the security of a blockchain, as well as contributing to its production.



SHA 256 – Secure Hash Algorithm 256

Originally designed by the US Government’s National Security Agency in 2001, and released under a royalty-free licence, SHA is considered one of the most digitally secure ways to encrypt and protect information. It is used by Bitcoin as the basis of its Proof of Work algorithm, a variation of the Hashcash function invented by British cryptographer Adam Back in 1997. It’s also used in creating Bitcoin addresses, thereby improving security and privacy. It is estimated there are as many solutions to SHA 256 as there are grains of sand on earth, making the economics of trying to crack it using brute force techniques unviable. See the section on ‘Proof of Work’ to learn more about the fundamentals of its application to blockchain technology.



Hashes per Second

Simply the number of hashes a computer can produce in a second. A megahash is measured as 1 million (1,000,000) hashes, therefore a hashrate can be measured as 1 million hashes / second or 1 MH/s. Of course, there are higher hashrate definitions: A gigahash is one factor above a megahash, so 1,000,000,000 hashes. A terrahash is one factor above that, at 1,000,000,000,000 hashes. And a petahash, well that’s 1,000,000,000,000,000 hashes! The Bitcoin mining network is currently performing at approx. 22 PH/S, and growing.


Keys – Private and Public

When performing a cryptocurrency transaction, it is first necessary to have a public and private key. It is the combination of these two keys that allows users to send and receive in a secure way. Each key is represented by an alphanumeric string, a hashed reference to that user’s ownership of a cryptocurrency from a particular blockchain. Think as your private key as your digital ID, or PIN number. Like a conventional bank account, it’s required to spend, withdraw or transfer funds, or carry out functions on the account. A hash algorithm processes your private key, in order to generate your public key. When you make a transfer, your public key is broadcast to the nodes on the blockchain network. Via consensus, the network confirms the validity of that transfer, that is to say that the private and public keys are compatible, and the entity that performed the transfer actually owns the funds. Once confirmed, the transaction is sent to the recipient’s public address. The addresses themselves are generated via the public key, and you can think of your address as an account number and sort code. Although public keys and addresses are generated from a private key, and both the public key and address are visible on the network, trying to reverse the process to find a private key is practically impossible. This is due to the hashing algorithm on the network, which makes trying find the key economically non-viable, due to the cost of the hash power required, which would need to exceed the power of 51% of the entire network. It is important to safeguard your private key. You can always regenerate your public key and address from your private key, but if you lose your private key, you will lose access to your account. See the ‘Mnemonic – Seed Phrase’ reference in this guide for more information on how to remember and protect your private keys. For more information, please refer to the ‘What are private keys and addresses?‘ & “What is a Smart Key?” article on the Ethos website.


Lightning Network

Described in its whitepaper as “Scalable Off-Chain Instant Payments”, the Lightning Network is a theoretical technology that allows for high-speed, high-throughput, low-cost micropayments to occur on the Bitcoin network. Indeed, should it succeed in its vision, the technology could be applied to a range of cryptocurrencies. A much discussed issue with Bitcoin as a payment protocol, aside from the volatility of its price, is the number of transactions that can be made on the network, known as its ‘scalability’. Depending on how busy the network is, the transaction range can be anywhere from 5-20 per second, with the average being around 7. Compare this to the Visa network, which can peak around the 45,000 t/s range, and it’s clear there’s a scaling issue for Bitcoin as a global payment method. Bitcoin Cash (BCH), a Bitcoin hard fork, aims to solve the problem by increasing the amount of data a block can hold from 1MB to 8MB. By contrast, rather that updating Bitcoin’s technology, the Lightning Network will achieve scalability by creating an extra layer of technology that sits alongside the Bitcoin blockchain, in the form of hashed timelock contracts, while still harnessing the same level of security in its transactions. One potential issue is that BTC must be locked in these time locked contracts in order to participate in the Lightning Network.



Miners & Mining

Miners are users, or nodes on a network, that perform the important task of creating cryptocurrency, validating blockchain transactions, and adding them to the public ledger in the form of new blocks. Miners are rewarded transaction fees for the work they carry out, as well as a payment in the form of the blockchain’s cryptocurrency when hashing new blocks. Miners are the entities that decide which version of a blockchain should be mined. The services they provide allow for issuance of new cryptocurrency, and through decentralisation also ensure the security of the blockchain. Anyone with the correct equipment and technological understanding to engage with the process is able to, however due to the cost of both the modern hardware (CPUs, GPUs and ASICs) and electricity required to run a mining rig, in addition to the industrial competition for hash power, many are limited from doing so. Due to these challenges, many miners collaborate in ‘mining pools’ in order to share resources, and the rewards from the cryptocurrency they create. For more information, please refer to the ‘What are miners?‘ article on the Ethos website.



Mnemonic – Seed Phrase

‘Mnemonic’ refers to any system that helps you remember something. It could be a series of rhyming words, abbreviations, a song, or even a journey through an imaginary place. When creating a cryptocurrency wallet, a mnemonic phrase is sometimes generated in order to provide an easier way to remember your private key, instead of having to memorize an alphanumeric string. Also referred to as a ‘seed phrase’, it’s important to keep it somewhere safe. As with any private key you hold, if you lose it means you’ll also lose access to your cryptocurrency. Try not to keep your passwords anywhere that could be destroyed or stolen, and if possible try to keep them separate from other details about your crypto wallet. To be highly secure, keeping your passwords away from internet connected devices is also advised.



This means that more than one private key is required before a transaction can occur. It increases security by decentralizing control, and therefore has a number of benefits from a business perspective. The most common commercial application is escrow. Though the current escrow application does not provide an absolutely trustless environment, it does not require the degree of centralization that traditional escrow services do. For example in a digital marketplace, a buyer will often wish to withhold funds until their delivery arrives. In centralized marketplaces like eBay, the escrow service is at the discretion of eBay. There is a voting system to protect buyers, but ultimately eBay has the final say. Even in cryptocurrency environments, a form of escrow can be deployed with a user acting as a middleman for both parties, however this system is still open to corruption. With a multi-signature wallet, a buyer, seller and middleman can all have private keys, with funds not released from the buyer until all parties agree that the delivery took place. This gives all parties more control, with the only trust being placed on the wallet provider. If the wallet itself is decentralized, the system becomes trustless.



Peer to Peer

Describes any system in which there is no third party or middleman. In cryptocurrency, it is the direct exchange of currency or data from user to user, without any central or external involvement. The decentralized nature of P2P networks can make them more resilient to a single point of failure. The larger a P2P network, the more resilient it becomes. However that does not make it immune to failure, as the network will require nodes to connect users, which could potentially be throttled or shut down using a denial of service (DDOS) attack.



PoB – Proof of Burn

A concept describing the economics of adding value to one cryptocurrency, by destroying the availability of another. Put another way, provably removing liquidity from System A in exchange for System B adds immediate value to System B. This can be done in a variety of ways, typically by sending a cryptocurrency to a wallet, and then destroying the private keys to that wallet. How this act is performed would be decided by consensus. Users that sent value to the ‘burn wallet’ then receive an agreed amount of new cryptocurrency in exchange for burning their old one. Such a process could be managed via a DAO. This model tends to rely on burning Proof of Work currencies, such as Bitcoin, where there is demonstrable economic resources i.e technical expertise, hardware costs and electricity, that went into producing it. In short, PoB works as a practical application of the concept of ‘scarcity’, and is an example of the economics of supply and demand, allowing for the efficient transfer of value between different systems.


PoO – Proof of Ownership

Describes the provable storage of document data on a blockchain. Think of it as a way of immutably proving that a record exists, in a way that other systems cannot. For example, if you wanted to prove that you owned a piece of property, the deed to that property could be stored on the blockchain. Traditionally, that proof would need to be stored in some way on a centralized system, be that digital or analogue, and that centralized method of storage could be open to a range of issues including tampering, loss or destruction, in addition to the fact that the party in charge of that record must be trusted in some way. Proof of Ownership removes elements of fraud associated with the production of ownership certification. Therefore, the model can be used in a range of applications, from wills, real-estate and digital rights’ management, to ID verification, logistics and medical records. It’s a way of maintaining the integrity of important information, and proving without doubt that the owner associated with that record is verifiable.



PoR – Proof of Research

A concept related in many ways to Proof of Work. However, unlike Proof of Work where the value associated with the production of a cryptocurrency is reliant on an arbitrary process of hashing, which despite its provable input cost has no other value output other than the creation of a cryptocurrency, Proof of Research aims to put the hash power of the decentralized network to work on problems that have demonstrable, real world value. There exists a number of companies that are attempting to build globally networked supercomputers, that harness the spare computing power of ordinary, non-technical users, and reward them in cryptocurrency for solving problems on their machines. These problems can range from analysis of weather systems and astronomy, to research into new drugs and artificial intelligence. By offsetting the spare hash power of their computers, participants in the network can benefit from the receipt of a publicly tradable asset, and scientific research teams can access an ad hoc network of computers. For the latter party, this is usually cheaper and easier to access than a traditional, centralized supercomputer, and arguably more dynamic in the ways in which hash power can be managed, making it possible for multiple research teams to use the network simultaneously.



PoS – Proof of Stake

Proof of Stake is an algorithm that aims to solve the intensive energy requirements required by Proof of Work, while allowing non-technical participants to be rewarded for their continued engagement with a network. There are varying models, but the underlying principle is that by owning the cryptocurrency associated with a particular blockchain, you can stake it on the network and be rewarded, rather than having to perform the labour intensive task of mining. Staking coins on the network can offer a range of benefits to the network, including increased
security and liquidity. Think of staking like a lottery, where the chances of winning the lottery increase based on the overall stake you have in the network. A user with 100 coins on the network would, in principle, have a 100 x chance of winning the lottery compared to a user with 1 coin. Naturally, there are issues inherent to this model, such as centralisation of coin value in order to game the system. However, certain parameters can be put in place to prevent abuse of the system, such as placing a limit on the rewards that can be received by an individual. There also exists the concept of Delegated Proof of Stake (DPoS), where users on a network vote for ‘delegates’ who maintain the network, ‘forge’ new blocks on the blockchain, and process transactions. Users can vote for these delegates, based on their value to the network, and receive a proportion of the rewards that those delegates generate in the form of new cryptocurrency, or transaction fees. Again, this system is not perfect, due to the semi-centralisation of political power on the network, which may be open to abuse. However, many developers are working on solving this model to make it as fair and secure as possible.



PoW – Proof of Work

An algorithm that rewards participants, known as miners, for solving a cryptographic puzzle. At its heart, the benefits of PoW are security and economy, in that any attack on the system i.e. blockchain, would be expensive vs. the rewards one would receive from doing so. Bitcoin is an example of a PoW blockchain and cryptocurrency in which dedicated software, powered by energy intensive CPUs, GPUs and ASICs, use the SHA 256 hashing protocol to produce new blocks. The value of Bitcoin and other PoW based cryptocurrencies is therefore derived from the hardware and infrastructure costs associated with its production. Bitcoin’s PoW protocol works by allowing miners to broadcast the computational work they have done to the network, with the network then verifying that work. The work is verified because it is represented as a unique block, which in itself is attached to a chain of unique blocks. These blocks are unalterable by anyone, ensuring the validity and fungibility of the system. Bitcoin’s PoW protocol is based on a system invented in 1997 by British cryptographer Adam Back, who created an algorithm called Hashcash designed to limit email spam. By proving that an email was created by a human, rather than a machine, the algorithm was able to limit the economic returns of spammers who would use computers and bulk delivery, by increasing their cost per email. For more information, please refer to the ‘What is Proof of Work?‘ article on the Ethos website.



Raiden Network

The Raiden Network is to Ethereum what the Lightning Network is to Bitcoin. As per the Raiden Network website, it is an in-development “off-chain scaling solution for performing ERC20-compliant token transfers on the Ethereum blockchain, allowing for the secure transfers of tokens between participants without the need for global consensus”. This is achieved using ‘state channels’ combined with digitally signed and hash locked transfers called ‘balance proofs’. As with Bitcoin’s Lightning Network, the benefits are its ability to perform scalable micro-payments, quickly, and with minimal fees. Gas costs on Ethereum are not related to the size or value of the transaction being made. For mid-large transactions, gas costs are less of a relative issue for the convenience the platform provides, however for smaller transactions the gas cost can end up being a significant proportion of the overall value of the transaction. Payments in the range of fractions of a $ cent can be transferred on the Raiden Network, quickly, and with reduced cost to the sender, making it an effective solution for day-to-day use. Yet users should also understand that networks like these require value to be locked up effectively as ‘collateral’, in exchange for the benefit of instantly transacting on the network.




Named after Satoshi Nakamoto, the anonymous individual or group that invented Bitcoin, the satoshi represents one hundred millionth of a bitcoin. That’s 0.000000001 bitcoin. The unit structure of bitcoins means 1 bitcoin (BTC) is equivalent to 1,000 millibitcoins (mBTC), 1,000,000 microbitcoins (μBTC), or 100,000,000 satoshis. Compare this structure to that of a dollar, for example, which is only divisible by 100 (a cent) and it’s clear that it allows for far greater flexibility as a unit of value. However, due to current costs associated with processing Bitcoin, sending or exchanging less that a certain value becomes uneconomical for the BTC network or its service providers, so that the practicality of sending single satoshis is currently non-viable. Many service providers, such as wallets and exchanges, set a minimum amount of BTC that must be sent to clear a balance. These small values that cannot be processed by current systems are commonly referred to as ‘dust’. It is thought that novel technologies such as the Lightning Network may solve the issue of sending these fractional amounts.




Scalability with regards to a blockchain generally references its speed. When discussing Bitcoin, for example, it is usually the 1MB block size that is brought into question; a parameter designed to limit the occurrence of spam attacks on the early network, yet which has provided usability issues due to network overload as the cryptocurrency becomes more popular. It’s also the case that all transactions on the network must be confirmed by consensus, via globally distributed computers, which in themselves have limits in terms of processing power. Similarly, Ethereum has faced scaling issues for similar reasons, in that all smart contracts and transactions must run through the Ethereum Virtual Machine (EVM). Solutions are being developed, such as Bitcoin’s Lightning Network and Ethereum’s Raiden Network, in addition to a range of solutions like SegWit, sidechains and sharding. However, it remains one of the largest challenges facing the development of blockchain technology, and therefore adoption by the mass-market.



Segregated Witness

First proposed by Dr. Peter Wiulle, Segregated Witness (SegWit) is a scaling solution for Bitcoin. It aims to solve the issues inherent to a 1MB block size, and therefore the speed of transactions on the network. When a transaction happens on Bitcoin’s blockchain, the process of confirming that a sender has enough funds in their balance happens on the blockchain itself. This reference is known as a signature. This signature takes up space on the blockchain, accounting for 65% of the information stored, and it is this additional information that is enough to slow the network. New records are made on the Bitcoin blockchain every 10 minutes, so by segregating the transaction signatures via SegWit and managing them separately, space is freed up, allowing for a higher throughput of recordings and transactions on the network. In order for this to take place, 95% of miners running nodes on the Bitcoin network must agree to the change, by switching to a new Bitcore Core client for a period of at least two weeks. Segwit has been a very controversial proposal within the Bitcoin community due to differing political views on how Bitcoin should scale, which led to the Bitcoin/Bitcoin Cash hard fork.


SPV – Simplified Payment Verification

Similar to what SegWit would do for Bitcoin transaction speed were it implemented, Simplified Payment Verification (SVP) does for the handling of transaction data in a Bitcoin wallet. If you want to receive BTC, you need a wallet to receive the funds. When your wallet receives a transaction, it needs to confirm it’s valid i.e. the BTC is real, and has not been spent elsewhere. How does it do this? Typically, wallets need to check the entire blockchain to confirm that the BTC is available to be spent. This requires downloading and updating the entire blockchain, which is computationally intensive. Assuming you wanted to control your own private keys (which you should), instead of receiving your BTC to a centralized exchange wallet, for example, this would require using a ‘heavyweight wallet’ which would be managed by yourself. This would improve security, but is more resource intensive given the amount of data it needs to handle. A ‘lightweight wallet’ uses SVP to cross reference that the Bitcoin you have received is a viable transaction, confirming against a specific block number, rather than the whole chain. In this way, SVP allows for management of a BTC wallet on lower-powered devices, like mobile phones, which would otherwise struggle computationally to check the entire blockchain.


Smart Contracts

Smart contracts are in many ways like traditional contracts. With a traditional contract, an agreement is made between two parties, and the financial terms of the contract are executed once an event, specified within the contract, occurs. A smart contract operates in the same way, yet instead of requiring a centralized executor to confirm the event took place, and validate a transfer of value, a smart contract is programmed to execute the terms automatically. Because a smart contract exists on a decentralized blockchain, which in itself cannot be tampered with, it operates as an immutable reference to the terms of the agreement. Therefore, in addition to their programmable and automated nature they maintain advantages over traditional contracts. In the event of a disagreement between the parties of a traditional contract, it may require a judge or some other centralized party to confirm a certain event took place, and then order that the terms be executed. This party may be open to corruption, based on a bias towards a party within the contract. With a smart contract, both the terms and the execution are built into the same, impartial program designed around the original agreement. To quote Vitalik Buterin, Co-Founder of Ethereum, which as of 19th February 2018 is the foremost smart contracts platform in existence, “…any contract has its own internal memory containing a code. When an item participates in a transaction, the code gets executed. It may work with data from the memory and create new transactions. Thus one may encode any kind of rules or any sequence of events that have to happen should the rules [be] observed. Programmable contracts managed and protected by blockchain may apply to diverse interactions between parties”. Such interactions can range broadly in terms of real applications. These include decentralized exchanges and prediction markets, to wallets and Decentralized Autonomous Organizations (DAOs), the latter being a method by which funds in the form of cryptocurrency from multiple, globally distributed parties may simultaneously be allocated within in the same smart contract. For more information, please refer to the ‘What are smart contracts?‘ article on the Ethos website.




Decentralized cryptocurrencies, based on blockchain, can in general be defined as trustless due to the method of consensus required to verify transactions on an immutable ledger. Yet to really define what trustless means, it requires a comparison to a traditional, centralized value system like fiat currency. Fiat currency is backed by a national government, which determines issuance of the currency itself, and also a range of financial elements that affect the value of that currency: interest, inflation, debt and trade agreements with other nations, in addition to political control of the economy and interactions with the private sector, by which the value of the currency is backed. These aspects are generally outside of the direct control of the users of the currency, despite being able to decide (within democratic systems) which government is in charge. Therefore trust must be placed in this third party, which includes co-participants in the process of choosing a government and the private sector, to not debase or dilute the value of that currency. With a trustless currency, such as one based on blockchain, it is the P2P nature that determines a currency’s value. A currency is as valuable as the market says it is, without intervention by government. Of course, the value of that currency can be affected by exterior actors, such as private interest and the economy at large, but the system itself cannot be altered from within, without consensus of its users. Additionally, there is greatly reduced potential for fraud and counterfeiting with cryptocurrencies, because transactions are (outside of privacy coins) visible on the blockchain itself, which requires independent verification at scale in order for a transaction to complete. This overall lack of centralized dependence means that, in theory, these currencies become trustless. A user can transfer value to another user, without a government or bank being able to take control of the funds, and the only basis by which the value of that currency can be determined is based on bartering with other users.

Blockchain Finance Disrupting Traditional Financial Frameworks & Enabling Self-Custody

Hey Everyone!

Shingo here this time for the Ethos Educational Series to talk to you a little bit about custody & blockchain finance. On the previous segment of this series, Stephen Corliss talked about many ideas relating to the legal framework of how a “decentralized digital asset based system” fits into the wider capital markets scene from a regulatory perspective. There are a ton of big ideas in that piece, but one of the most important that we will continue to highlight is the issue of custody.

Myself and Stephen engage every day on Telegram and answer big questions relating to the vision and mission of Ethos. We at Ethos believe in community engagement and in educating our audience. In the spirit of Socrates and the format of Telegram, this piece is structured as a dialogue for you to better understand the complex issues that surround the traditional industry and how the crypto industry is poised to change it all.

Scientia sit Potentia – “Let Knowledge be Power”

Hey Shingo, so what is custody?

Well, the legal definition of custody is in rule 206(4)-2(c)(1) which is defined as the following:

“Custody means holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. You have custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services you provide to clients.“

For an example of this we turn to the SEC who states, “advisers have custody where the adviser has possession of client funds and securities or has power of attorney to sign checks on a client’s behalf, to withdraw funds or securities from the client’s account, including fees, or to otherwise dispose of a client’s assets for any purpose other than authorized trading.”

While this is the U.S. definition, OECD (Organisation for Economic Co-operation and Development) jurisdictions, which include many of the world’s developed economies, follow similar definitions. With the legal definition in mind, the concept of custody is quite simple.

Think of a custodian as anyone who holds assets which aren’t theirs. Banks custodize funds that you deposit with them. Your brokerage has custody over the securities you buy. Qualified Custodians are an integral component of existing capital markets and collectively hold very large sums of wealth. It is very likely that unless you hold all of your money in cash or cryptocurrency and live completely detached from the financial system, that you have some percentage of your assets are stored with a custodian.

…and that isn’t necessarily a bad thing! Custodians provide many important services that power traditional capital markets which are unlikely to go anywhere anytime soon.

Ok… so if custodians aren’t going away, then why is custody such an important issue for cryptocurrency?

Thought you would never ask! Custody is one of the most important contemporary issues within the financial industry. The reason there are so many legal controls and regulations around custody is because of all the mishaps that can occur when you entrust another party with your assets. If you have a system where you hope someone will act ethically with zero accountability… well, if human nature has taught us anything, regrettably sometimes they don’t. Understandably, this is an issue that the SEC has had to prosecute and enforce on numerous occasions,,,,,,….. making any solution that can comprehensively tackle this problem quite attractive.

Crypto & Blockchain Finance is exciting in that it enables forms of custody that are impossible in the traditional world. Cryptocurrencies and Distributed Ledger Technology (DLT) disrupt traditional trust paradigms and maintain enforceability. Crypto and DLT can reduce or even eliminate conflicts of interest by disintermediating trust and enabling people to self-custodize their own assets. While one way of reducing conflicts of interest is to separate custodians and advisers, or broker dealers, and ensure “operational independence” (an idea that becomes particularly important when we encounter nontraditional key management schemes), a more ideal way would be to utilize the technology that crypto offers in order to eliminate conflicts of interest altogether and make fraud impossible. When you don’t have access to assets at all, it is impossible for others to utilize them fraudulently or recklessly.

Crypto and DLT are often more open and transparent than existing fiat currency structures, through crypto’s use of public ledgers, an immutable transaction history, and an auditable chain of transaction IDs. This technology has the power to provide everyone additional protections through a regulatory framework that compels individuals and institutions to be more ethical and transparent in an open financial ecosystem – a future that is truly for everyone.

That sounds great! You and Stephen often talk a lot about “self-custody” – how does that fit into these custody issues?

Very broadly, the idea of self-custody is quite simple and familiar. Self-custody is when each individual user is the custodian of their assets rather than an advisor, investment company, broker-dealer, exchange or other qualified custodian. The idea behind self-custody is nothing new; People have hidden money or golden doubloons under their mattresses for centuries before cryptocurrencies and DLT came along. Hiding money or gold under one’s mattress often came with many issues, most notably that it is quite difficult to spend and transact using the money that is hidden under the mattress. In digital self-custody, individuals gain all the benefits of directly owning an asset while being able to remain connected to the wider economy.

This point, as highlighted in the previous educational piece by Stephen, is particularly important as there are many direct and indirect benefits of owning an asset that have been taken away from the individual and moved to the intermediary. This often makes the true “beneficial owner” the institution even if you are the real “owner” of a given asset.

Wait… What do you mean I’m not the beneficial owner? When I put my assets somewhere, I still own them right?

For the most part, you do “own” the asset, but it is a bit more nuanced than that. Every day, you give up the benefits of direct ownership over your assets. When you deposit money with a bank, you are giving that bank permission to lend out your money for a profit so long as they keep your money accessible when you need it. In return, they provide you with all sorts of banking services which include value transfer mechanisms (Wire/ACH), commerce infrastructure (Debit/Credit cards) and loans to finance your own businesses or endeavors. While these services undoubtedly have many benefits, it is an issue when participation in this system is mandatory if one wishes to partake in the wider financial system.

Another way of looking at the issue of the unbanked is to look at people who don’t have access to traditional custody schemes which are currently required to participate in the larger financial ecosystem. A way to solve this issue would be to architect an alternate financial ecosystem that has the ability to service these individuals. This is a philosophical and ethical allure that cryptocurrencies hold and is something that is deeply woven into the mission and vision of Ethos.

Traditional custody has surreptitiously transferred the beneficial ownership of an asset from the individual to the institution with no tangible benefits to the investor whose capital is at risk.

That doesn’t sound too great, but what are these beneficial ownership rights and what happens to them?

This issue is quite complex and not as cut-and-dry as “intermediaries are stealing from us” which is often the narrative pushed by many crypto communities. Intermediaries do, and always will, have a role to play in servicing the investor. Just like you aren’t going to go out and make your own ketchup because Heinz is stealing from consumers, you’re not going to go out and create your own ETF because you want nothing to do with the financial industry. What crypto and DLT can do is make the financial system more transparent, ethical, fair and accessible to the individual.

Paraphrasing Stephen from the previous educational piece:

“Over-intermediation has acted as a transfer mechanism where most benefits of asset ownership have shifted from the consumer to financial industry participants. Consumers and investors have unknowingly lost valuable rights associated with share ownership. The Securities Financing Market is a significant example of how financial intermediaries derive value from customer’s assets on their balance sheet in collateralized transactions. New commingled fund structures transfer shareholder influence away from individual consumers to financial intermediaries. Individual shareholder voices have been muted and replaced by financial intermediaries. It is important to educate the individual and encourage every participant to exercise their rights as this is an extremely effective avenue for large scale, sweeping, corporate change.“


So what happens to the custodians?

The custodians will still be doing what they do best – taking custody of assets. In the new economy, however, custodians, and in particular consumer banks, won’t be a requirement to participate. Each individual will be able to self-custodize their own assets in a digital wallet (like the Ethos Universal Wallet!) and securely transact and participate with the world economy. Commercial banking won’t be going away, but will rather become a service that people can opt into to in order to keep their assets safe with a trusted third party.

Although Stephen will cover this in a follow-on piece, as a society we must not overlook the critical importance of placing our assets back into the economy, rather than keeping them hidden entirely under our mattresses. In capital markets, this process is known as monetary policy transmission and involves the movement of capital from depositors to borrowers through lending that occurs throughout the financial system.

Commercial/Investment banks, clearinghouses and qualified custodians should be largely unaffected by self-custody as they are necessary participants for a sophisticated financial ecosystem. However, the over-intermediation that exists within the financial industry will be eased which should reduce costs for investors and provide consumers with additional rights and privileges that are associated with direct ownership over an asset.

And Ethos?

Ethos is building the infrastructure for this economic ecosystem. Starting from the Universal Wallet which will allow users to self-custodize all their digital assets and expanding out to a robust set of technologies that will power the next generation of financial applications.

At Ethos, our mission is to build a financial ecosystem that is open, safe and fair for everybody, because the future, is for everyone.

Thank you,

Shingo Lavine
Founder and CEO


Decentralized Digital Asset Legal Framework: Crypto, Blockchain & Financial Industry Participants


Part IV of our Strategy Series with Ethos Chief Global Strategist, Stephen Corliss

The concept of a decentralized digital asset based system in global capital markets and financial services has unsurprisingly caused major concerns amongst global lawmakers, regulators, central banks and financial industry participants. Some of this concern is driven by the Crypto and Blockchain Industry itself by continuous and often imprudent appeals for the immediate removal of trusted parties across all industries. However, it appears most of the current concerns stem from a lack of understanding by industry leaders of how these capabilities can be carefully applied to existing market infrastructures. In order to dispel the rumors and misinformation, this continues a series of articles that will provide context on how companies like Ethos are applying Distributed Ledger Technology & Cryptocurrency solutions across global finance and capital markets in a compliant and prudent manner, while also preserving the many benefits to consumers afforded by them.

We begin by first describing how Ethos applies this concept of a “decentralized digital asset based system” on a dynamic platform to create the first hybrid asset financial ecosystem. The Ethos Platform will be an open ecosystem, powered by the ETHOS Utility Token, where dynamic financial products and services involving both traditional and crypto assets are offered and delivered directly to consumer balance sheets in a hybrid self-custodied model. What this means is Ethos delivers a new multi-sided barter protocol, or utility, that enables economic actors, Households, Firms (or Developers) and Governments, to transact in a p2p / p2b / b2b manner. Notice I specifically refer to “consumer balance sheets” as consumers will truly be reaping the rewards of owning and holding an asset.

In this model, rather than relinquishing control of personal assets to financial stewards as part of the current intermediated system, Households maintain control, or rights with regards to traditional assets, over their personal or household balance sheets in a hybrid self-custodied model, allowing asset owners to maximize their own utility. The Ethos platform will enable users to either exchange goods (tangible property) directly with one another via the ETHOS token or exchange goods (tokens or other representational assets) for products and services (intangible property) directly with Producers (or Firms), in both a trustless or trusted manner. This blends the best of both traditional and crypto frameworks into an all-inclusive hybrid solution that can fit every participant’s needs.

Although this may appear complex at first glance, this new paradigm in global finance and capital market structures consists of one central difference, which involves the shift of asset stewardship from financial firms to households. This basic shift is powerful for consumers and society at large, as it maximizes asset owners’ ability to increase their economic utility, recognizable not only from satisfaction associated with consumption of products and services driven by form, time, place and possession – but rather a broad sense of well being stemming from less recognizable “social benefits incidental to financial asset-ownership”.

We will return to this concept of “social benefits incidental to financial asset ownership” in a later more in-depth article, but before moving on it is important to understand some of the motivations for why many consumers, households, or investors desire the ability to have self-custody their own assets. Whether as a result of unintended consequences from the 1960’s Paperwork Crisis, regulation, new products, or competitive forces, it is indisputable that the over-intermediation of the financial industry has acted as a transfer mechanism where most benefits of asset ownership, aside from dividends and price appreciation or depreciation, have shifted from the consumer to financial industry participants. The Securities Financing Market is a basic yet significant example of how financial intermediaries derive value from customers assets held on their balance sheet where intermediaries borrow or lend cash or securities associated with customer accounts (i.e. cash deposits, retail margin accounts, ETF’s & Mutual Funds etc.) in a collateralized transaction. This market has experienced pronounced revenue and volume growth over the last several decades, however, most retail customers receive no direct financial benefits whatsoever from these activities.

More importantly, however, consumers and investors have also unknowingly lost valuable rights associated with share ownership as a result of the tremendous growth of Mutual Funds and Exchange Traded Funds that began in the 1970’s. These new commingled fund structures by virtue of their design caused the transfer of shareholder influence away from individual consumers to financial intermediaries. As a result of these fund structures, individual shareholder voices have been muted and replaced by financial intermediaries who now act as societies social barometer when assuming the role of gatekeeper over proxy voting, corporate board governance and behavior. It is important to educate the individual and encourage every participant to exercise their rights as this is an extremely effective avenue for large scale, sweeping, corporate change.

Whether intended or not, the transformation of the financial industry over the last several decades has resulted in a pronounced shift away from the industry’s primary roles of facilitating the efficient allocation of capital and provision of accessible financial products and services across the world, to a more convoluted, cost-inefficient model involving countless activities unrelated to delivering financial or investment services to the public. This fact pattern cannot be overlooked as it is one of several potential drivers that has caused many consumers to grow disenchanted with the global financial industry, forcing consumers to begin searching for new alternatives.

When we begin to understand why consumers are feeling as they do, it should become easier for all of us to understand why and how the Crypto and Blockchain Industry has caught the imagination and support of many citizens across the globe. We at Ethos have been listening to this global community of citizens desiring a new way forward, and believe that cryptocurrency and distributed ledger technology offers the financial industry a significant opportunity to reimagine how to more efficiently allocate capital and provide essential financial products and services to all of society, rather than just those with means.

With much of the above as our backdrop, it was immediately apparent to us that a Hybrid Multi-Sided Investment Platform could only be viable if it was operated in a safe and sound manner and considered the needs and demands of all constituents on the platform, including consumers, financial intermediaries and other stakeholders. From a consumer perspective, all of our product and service designs begin and end with a few critical themes including consumer protection, privacy, transparency and security. This is essential for many reasons, especially when involving financial related digital products and services.

With regards to financial intermediaries, we also understood that there were many business, legal and regulatory risks we would have to tackle in order to ensure vibrant support and engagement by global financial service providers. To begin solving these complex issues we knew we would have to ensure several critical intermediaries within the standard financial stack could operate in a controlled and compliant manner, including Custodians, Clearers, Investment Advisors & Managers, Investment Companies, Broker Dealers, Exchanges and Central Counterparties (CCP’s). With this list in hand, we immediately began to detail how each of the models associated with a particular intermediary operates today and how it would need to operate on the Ethos Platform. It is important to recognize that traditional financial intermediaries will not be “put out of business” by distributed ledger technology as some may lead you to believe. These financial intermediaries will evolve, through the assistance of progressive crypto firms like Ethos, to better serve the needs of the financial industry as well as the individual investor.

In order for the industry to understand our vision and solutions, we have embarked on this multi-part series of informational articles that we believe will help our industry peers across Financial Services, DLT and Crypto better understand how they can operate and apply this transformative technology in a safe and regulatory compliant manner. Although we are introducing the concept of a hybrid self-custody model that bridges both digital and traditional assets, this series will primarily focus on financial industry applications of blockchain technology, including the concept of a self-custodied first model for cryptocurrencies. In our next article we will focus exclusively on Custody before moving on to Investment Advisory and Investment Company Services.

Thank you,

Stephen Corliss
Chief Global Strategist