Crypto TREND – the fifth edition

As we expected, since the publication of Crypto TREND we have received many questions from readers. In this edition we will answer the most common.

What are the changes that could change the game in the cryptocurrency sector?

One of the biggest changes that will affect the world of cryptocurrencies is an alternative method of checking blocks called Proof of Stake (PoS). We will try to maintain this explanation at a fairly high level, but it is important to have a conceptual understanding of what the difference is and why it is an important factor.

Remember that the basic technology of digital currencies is called blockchain, and most modern digital currencies use a validation protocol called Proof of Work (PoW).

With traditional payment methods you need to trust third parties such as Visa, Interact, a bank or a cash center to pay for your transaction. These trusted structures are “centralized,” meaning they keep their own private ledger that stores the transaction history and balance of each account. They will show you the transaction and you have to agree to the correctness or start a dispute. It is seen only by the parties to the transaction.

With bitcoins and most other digital currencies books are “decentralized,” meaning everyone on the network gets a copy, so no one should trust third parties, such as a bank, because anyone can directly verify the information. This verification process is called “distributed consensus”.

PoW requires “work” to verify a new transaction to log in to the blockchain. In cryptocurrencies, the test is performed by “miners” who have to solve complex algorithmic problems. As algorithmic problems become more complex, these “miners” need more expensive and powerful computers to solve problems that are ahead of all others. Computers for mining often specialize, typically using ASIC chips (integrated circuits), which are more knowledgeable and fast in solving these complex puzzles.

Here is the process:

  • Transactions are combined into a “block”.
  • The miners argue that the transactions in each block are legal by solving a hashing algorithm puzzle known as the “proof of work problem”.
  • The first miner who solved the problem of “proof of operation” of the block, is rewarded with a small amount of cryptocurrency.
  • After verification, transactions are stored in a public blockchain throughout the network.
  • As the number of transactions increases and so does the complexity of solving hashing problems.

Although PoW has helped lift blockchain and decentralized, distrustful digital currencies, it has some real drawbacks, especially in how much energy these miners consume, trying to solve “evidence of work problems” as quickly as possible. According to the Digiconomist Bitcoin Energy Consumption Index, bitcoin miners use more energy than 159 countries, including Ireland. As the value of each bitcoin increases, more and more miners are trying to solve the problem by consuming even more energy.

All of this power consumption-only transaction verification has forced many people in the digital currency space to look for an alternative way to verify blocks, and the main candidate is a method called “Proof of Bid” (PoS).

PoS is still an algorithm, and its purpose is the same as in job validation, but the process of achieving the goal is quite different. There are no PoS miners, but instead we have “validators”. PoS is based on trust and knowledge that all people who check transactions have skin in the game.

Thus, instead of using energy to respond to PoW puzzles, the PoS validator is limited to checking the percentage of transactions that reflects its share of ownership. For example, a validator that owns 3% of the available airtime could theoretically check only 3% of the blocks.

In PoW, the chances of solving a work confirmation problem depend on how much computing power you have. With PoS it depends on how much cryptocurrency you have on the “bet”. The higher your bet, the better your chances of deciding a block. Instead of winning crypto-coins, the winning validator receives a commission for the transaction.

Validators enter their bet by “closing” part of their fund tokens. If they try to do anything harmful against the network, such as creating an “invalid block,” their bet or deposit will be forfeited. If they do their job and do not break the network but do not win the right to confirm the block, they will get their share or deposit back.

If you understand the basic difference between PoW and PoS, this is all you need to know. Only those who plan to be miners or validators should understand all the intricacies of these two verification methods. Most of the general public who wants to own cryptocurrencies will simply buy them through an exchange and will not engage in actual mining or verification of block transactions.

Most in the crypto sector believe that in order for digital currencies to survive long, digital tokens must move to the PoS model. At the time of writing, Ethereum is the second largest digital currency after bitcoin, and their development team has been working on its PoS algorithm called Casper for the past few years. We are expected to see how Casper will be implemented in 2018, putting Ethereum ahead of all other major cryptocurrencies.

As we have seen in this sector, major developments such as the successful implementation of Casper can significantly raise Ethereum prices. We will keep you informed in future issues of Crypto TREND.

Stay tuned!

"Experts" False crypts

Bitcoin peaked about a month ago, on December 17, at nearly $ 20,000. As I write, the cryptocurrency is less than $ 11,000 … a loss of about 45%. It’s more than that $ 150 billion in lost market capitalization.

Include a lot of hand twisting and gnashing of teeth in the crypto-commentator. It’s neck and neck, but I think the “I told you” crowd has an advantage over the “excuses”.

Here’s the thing: if you just haven’t lost your shirt on bitcoins, it doesn’t matter at all. And most likely, the “experts” you can see in the press aren’t telling you why.

In fact, the collapse of bitcoin is great … because it means we can all just stop thinking about cryptocurrencies.

Death of bitcoin …

In about a year people will no longer talk about bitcoin in the queue at the grocery store or on the bus like now. That’s why.

Bitcoin is a product of justified disappointment. Its designer has clearly stated that cryptocurrency is a reaction to the government’s abuse of currencies such as the dollar and the euro. It was to provide an independent, peer-to-peer payment system based on a virtual currency that could not be challenged as there was a finite number of them.

This dream has long been rejected in favor of crude speculation. Ironically, most people care about bitcoin because it seems like an easy way to get more fiat currency! They do not own it, because they want to buy pizza or gasoline with him.

Aside from the awful way to make electronic transactions – it’s painfully slow – the success of bitcoin as a speculative game has made it useless as a currency. Why would anyone spend it when it’s so quickly appreciated? Who will take one if it depreciates quickly?

Bitcoin is also a major source of pollution. To process a single transaction requires 351 kilowatt-hours of electricity, which also emits 172 kilograms of carbon dioxide. That’s enough to feed one American household a year. The energy consumed by all bitcoin mining today can provide nearly 4 million U.S. households a year.

Paradoxically, the success of bitcoin is as old-fashioned speculative game – not provided for by libertarian use – attracted government repression.

China, South Korea, Germany, Switzerland and France have introduced or are considering bans or restrictions on bitcoin trading. Several intergovernmental organizations have called for concerted action to stop the obvious bubble. The U.S. Securities and Exchange Commission, which at one time probably approved bitcoin-based financial derivatives, now seems to be hesitant.

And according to “The European Union is introducing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also examining restrictions on cryptocurrency trading.”

Someday we may see a functional, widely accepted cryptocurrency, but it won’t be bitcoin.

… But the impetus for crypto-assets

Good. Overcoming bitcoin allows us to see where the true value of crypto-assets is. Here’s how.

To use the New York subway system, you need tokens. You can’t use them to buy anything else … though you do could sell them to someone who wanted to use the subway more than you.

In fact, if subway tokens were in limited quantities, a bustling market could arise for them. They can even trade much more than they originally cost. It all depends on how many people I want enjoy the subway.

In a nutshell, this is a scenario for the most promising “cryptocurrencies” other than bitcoins. They are not money, they are tokens – “crypto-tokens”, if you will. They are not used as a common currency. They are good only in the platform for which they were designed.

If these platforms provide valuable services, people will want these crypto tokens and this will determine their value. In other words, crypto-tokens will have value to the extent that people evaluate what you can get for them on an associated platform.

It will make them real assets, s intrinsic value – because with their help you can get what people value. This means that you can reliably expect a stream of revenue or services from owning such crypto tokens. It is critical that you can measure this future return flow against the crypto-token price, as we do when calculating the price / earnings (P / E) ratio.

On the contrary, bitcoin has no intrinsic value. It has only a price – a price set by supply and demand. It can’t bring future revenue streams, and you can’t measure for it anything like a P / E ratio.

One day it will be useless, because nothing real will give you.

Ether and other crypto-assets are the future

The ether of the crypto-token is sure it seems as a currency. It is traded on cryptocurrency exchanges under the code ETH. Its symbol is the Greek symbol “Si”. It is extracted by a similar (but less energy-intensive) process to bitcoins.

But the air is not a currency. Its designers describe it as “the fuel for Ethereum’s distributed application platform. It’s a way customers pay the platform for machines that perform the requested operations.”

Ether markers give you access to one of the world’s most complex distributed computing networks. It’s so promising that big companies are falling for each other to develop practical uses in the real world.

Because most people who trade it don’t really understand and care about its true purpose, in recent weeks the cost of airtime has been bubbling and foaming like bitcoin.

But eventually, ether will return to a stable price depending on the demand for computing services that it can “buy” for people. This price will represent real value which can be estimated in the future. It will have a futures market and exchange traded funds (ETFs) because over time everyone will have a way to estimate its underlying value. Just like we do with stocks.

What will this value be? I have no idea. But I know it will be much more than bitcoin.

My advice: get rid of your bitcoins and buy ether the next time you fall.

How "Crypt" Currencies work – a brief overview of bitcoins, ether and ripples

“Crypto” – or “cryptocurrency” – is a type of software system that provides users with the functionality of transactions over the Internet. The most important feature of the system is them decentralized nature – usually provided blockchain database system.

Recently, blockchain and “cryptocurrencies” have become major elements of the global Zeitgeist; as a result, the “price” of bitcoin increases rapidly. This has forced millions of people to participate in the market, and many of the “bitcoin exchanges” have been under tremendous stress in infrastructure as demand increases.

The most important point to realize about a “crypt” is that while it does serve a purpose (cross-border transactions over the Internet), it provides no other financial benefit. In other words, his “intrinsic value” is severely limited by the ability to do business with other people; NOT in the storage / distribution of valuables (this is what most people see).

The most important thing you need to understand is what “bitcoin” and the like are payment networks – NOT “currency”. This will be considered more deeply in a second; The most important thing to realize is that “getting rich” with BTC is not a case for improving people’s economic situation – it’s just a process of being able to buy “coins” for a low price and sell them higher.

To this end, when considering a “crypt,” one must first understand how it actually works and where “its value” really is …

Decentralized payment networks …

As already mentioned, the main thing to remember about “Crypto” – it’s preferable decentralized payment network. Think of Visa / Mastercard without central processing.

This is important because it highlights the real reason why people have really started to look more deeply at the “Bitcoin” offer; it gives you the ability to send / receive money from anyone around the world as long as they have your wallet address in Bitcoin.

The reason this attributes a “price” to various “coins” is due to the misconception that “bitcoin” will somehow allow you to make money through the “crypto” asset. This is not the case.

ONLY The way people made money with bitcoin was due to the “growth” of its value – buying “coins” at a low price and selling them MUCH higher. While this has worked for many people, it was actually based on a “bigger fool theory” – essentially claiming that if you manage to “sell” coins, it’s a “bigger fool” than you.

This means that if you want to get involved in “crypto” today, you’re basically buying any of the “coins” (even “alternatives”) that are cheap (or inexpensive), and driving on them the price goes up until you sell them later . Since none of the “coins” rely on real assets, it is not possible to estimate when / when / how it will work.

Future growth

For any purpose, “bitcoin” is a expended force.

The epic rally in December 2017 witnessed mass acceptance, and while its value is likely to continue to rise to the $ 20,000 + range, buying one of the coins today will essentially be a huge gamble.

Smart money is already considering most “alternative” coins (Ethereum / Ripple, etc.) that have a relatively small price but are constantly rising in price and acceptance. The key thing to look for in today’s “crypto” space is how different “platform” systems are actually used.

Such a rapid “technological” space; Ethereum & Ripple look like the next “bitcoin” – with a focus on how they can enable users to actually use “decentralized applications” (DApps) on top of their core networks to get functionality to work.

This means that if you are looking for the next level of “crypto” growth, it will almost certainly come from different platforms that you will be able to identify there.

Why there will never be another bitcoin

Well, it’s been a crazy 10 years for bitcoin. In fact it has been more than 10 years since bitcoin was first created by Satoshi Nakamoto. Whoever he was, he or she, they greatly influenced the world. They no doubt predicted that was why they decided to disappear from sight.

So more than a decade later Bitcoin is still alive and stronger than ever. Thousands of other crypto coins have emerged since everyone tried to emulate the King of Crypto. Everyone has failed and will fail. Bitcoin is the only type. What cannot be repeated. If you don’t know why, let me explain.

If you don’t know what bitcoin is, I’ll just give you a few brief key points:

  • Bitcoin is a cryptocurrency on the Internet

  • The maximum offer is 21 million

  • It cannot be forged

  • Not all coins are in circulation yet

  • He is completely decentralized, someone controls him

  • It cannot be censored

  • This is peer money

  • Anyone can take advantage of them

  • Bitcoin has a steady supply that decreases every 4 years

What distinguishes bitcoin?

So how is bitcoin different from all the thousands of other coins that have been invented since then?

When bitcoin was first invented, it began to spread slowly among a small group of people. It grew organically. When people started to see the benefits of bitcoin and how the price would increase due to the constant supply, it started to grow faster.

Bitcoin blockchain is now distributed to hundreds of thousands of computers around the world. It has spread beyond the control of any government. Its creator has disappeared and now it works autonomously.

Developers can update and improve the bitcoin network, but this needs to be done by my consensus across the bitcoin network. No one can control Bitcoin. This is what makes bitcoin unique and impossible to replicate.

Thousands of other cryptocurrencies are now available, but as an example of what distinguishes bitcoin, I will use Ethereum as an example. It is one of the largest alternative coins at the moment and since it was invented by Vitalik Buterin in 2015.

Vitalik runs the Ethereum blockchain and basically has the last word in any development that happens on Ethereum.

Censorship and government intervention

For this example, let’s imagine Iran sending billions of dollars to North Korea to fund a new nuclear weapons program. It’s not a very good situation, but it should show you how much your money is safer in bitcoins!

Anyway .. the first example. Iran uses a standard banking system and converts this North Korean money into US dollars. The US government says we need to wait a minute, we need to freeze these operations and confiscate the money. Easy. They do it right away and the problem is over.

The second example. The same thing is repeated, but this time Iran is using the Ethereum blockchain to send money to North Korea. The US government sees what is happening. A phone call is made.

“Bring Vitalik Buterin here NOW”

The US government is “putting some pressure” on Vitalik, and they are forcing him to roll back the blockchain and cancel Iran’s transactions. (The Ethereum blockchain was actually pumped out earlier when a hacker stole a significant amount of funds).

The problem is solved. Unfortunately, Ethererum’s credibility will be ruined along with the price.

Ethereum is just an example, but it’s true for any other cryptocurrency.

Bitcoin cannot be stopped

So the same thing is repeated. This time Iran is using bitcoin as a payment method. The US government sees this and is unable to stop it.

There is no one to call. There is no one to put pressure on. Bitcoin is uncensored.

Any other cryptocurrency has been created by someone or some company and it will always be a point of failure. They are still centralized.

Another example might be when Vitalik’s family is taken hostage. Bitcoin is beyond all of this, and so it is the safest investment on the planet.

Learn how to use bitcoins

Everyone should own a little bitcoin. However, it is not dangerous. If you are new to bitcoin, you should learn as much as you can before investing. Bitcoin ownership comes with a lot of responsiveness. Learn how to use bitcoins safely.