How Cryptocurrency Works

What Is A Cryptocurrency?

New virtual currency

Bitcoins –  BTC the new virtual money

The world is moving at an incredibly fast pace these days. I don’t mean that time is speeding up although sometimes it feels that way with all the changes that new technology is bringing into our lives. Enter the terms Bitcoin, Cryptocurrency & Blockchain into our vocabulary. If you mentioned these words in a discussion 9 years ago (circa 2007) 99.9% of people would wonder what you were talking about.

However right now in 2018, unless you have been hiding under a rock these terms have become mainstream. The price of BITCOIN has rocketed exponentially over the past 12 months to be currently valued at over $8,000 per. Bitcoin and has been as high as $20,000 (click here for live pricing) at the time of writing. These words are now heard on daily basis and believe me this is a trend that is going to continue for years to come now. Yet the majority of us are still not really sure what the above words all mean and how it all works.

So Please Explain How Cryptocurrency Works:

 A great way to get your head around what & how Cryptocurrency functions is to view Bettina Warburg’s explanation who manages to break it down into 5 levels of difficulty –  watch this.    

We now know that people are talking about it on a daily basis and that that Bitcoins are extremely valuable. There are some shady hackers who have made some serious money out of it and that it is proving a very convenient way for criminal organisations to launder their ill gained fortunes. Governments are scratching their collective heads on how to deal with this new currency. But you are not reading this to hear about government legislation issues – so we will move on to the meaning of cryptocurrencies, and how they work in a way that everyone can gather a basic 101 understanding.

The Beginning Of Cryptocurrency

Cryptocurrency as a theory has existed much longer than most of us are aware of. Attempts at creating a sustainable cryptocurrency were made back in the early 80’s – all of which failed miserably due to the limited technology at that point in time.  However, cryptocurrency as we know it today started with the creation of Bitcoin. In November 2008 a phantom man going by the name of Satoshi Nakatomo posted a research paper where he described his design for a new digital currency called Bitcoin. I have called him a phantom because nobody knew his real name, and until recently no one could prove his existence. However, it is now thought that Satoshi Nakatomo is a pseudonym for a group of people.

Later on, in January 2009 the mysterious Nakatomo “mines” the first blockchain which is called the genesis block (I will explain that in a later article) and puts in motion the whole Bitcoin craze. The initial exchange rate of bitcoin was 1,309.03 BTC to one U.S. Dollar. In other words, one bitcoin was worth about eight-hundredths of a 1 cent. This rate is derived from the cost of electricity used by a computer to generate, or “mine” the currency. For a year or so, this creation remained operated within a tiny group of early adopters. But slowly, word of Bitcoin started to spread beyond this closed circle of cryptography enthusiasts. In 2012 WordPress became the first major company to accept payment in Bitcoin. Others, like Dell, Expedia and Microsoft followed and initiated the expansion of Bitcoin as a certified payment method. Satoshi (the man or group of people) are now reputed to be worth in excess of USD$17B as at November 2017 based on the current market value of Bitcoin.

Although bitcoin is the first and the most significant cryptocurrency, it is important to know that there are now over 1500 other cryptocurrencies like Ethereum, Litecoin, Zcash which are also active and have attained a certain value.

How Does The Blockchain Work In Cryptocurrency?

The main problem that prevented cryptocurrencies from functioning was a little thing called the double-spending problem. That means that if a digital currency is just information, free from a conventional physical structure like paper or metal, nothing can prevent a person to copy and paste it as he wishes. Well, the blockchain is just that, a decentralised database serving as a kind of digital ledger that keeps track of every cryptocurrency transaction. It makes sure that when a digital currency is spent once, it cannot be spent again. It keeps a record of every transaction ever made and allows access to information. On the other hand, it protects any data from being copied or deleted.

Blockchain technology exists as a shared database that is duplicated thousand times on a network of computers. That means that it does not exist in a specific location, which makes its records public and easily verifiable. This computer network is formed by users willing to devote their hardware and CPU power and run a special software that maintains that network. Those people are called “miners”. In that process, Miners will generate cryptocurrency and that way are rewarded for their efforts. The drawback of mining is that cryptocurrencies are designed to have a finite supply, which makes them similar to gold, or other precious metals. It means that miners will receive fewer units as the blockchain is mined deeper towards its final algorithm. (It is currently estimated that Bitcoin has a finite supply of 21 million “coins” – with approximately 16 million now in circulation) That is the main difference between cryptocurrencies and fiat currencies (paper money produced by governments of each country) which supply is, theoretically, unlimited.

How Secure Is Cryptocurrency?

Since blockchain technology serves as a kind of open database, you are probably wondering about security issues. Well, that is one of the best properties of this technology, it is virtually un-hackable. If a hacker wants to hack into a certain block of the blockchain he needs to hack, not only the desired block but all of the preceding blocks. That way he would need to go back to the entire history of the blockchain. He would also need to do this on every ledger on the network. And if that is not enough, he would need to do all that simultaneously. All in all, this makes blockchain technology truly hack-proof.

Advantages

  • Their scarcity and similarity to precious metals make them inflation protected which cannot be said to fiat currencies.
  • Cryptocurrencies offer a reliable way of exchange outside the direct control of national banks. Although it is expected that world governments will need to co-opt cryptocurrencies in the long run.
  • Mining is designed to be a kind of built-in quality control and monitoring instrument for cryptocurrencies. Since miners are paid for their efforts, they have a financial motivation for keeping accurate and up-to-date transaction records. That way they are securing the integrity of the system. It also stabilizes the value of the currency.
  • Privacy protection and anonymity are one of the main advantages of cryptocurrencies. All cryptocurrency users are using pseudonyms that cannot be connected to any information, accounts, or stored data that could identify them.
  • It is impossible for governments to seize or freeze accounts as is the case with fiat currencies. The decentralized nature of cryptocurrencies with all of its funds, transactions, and records stored all around the world makes it immune to these kinds of actions.
  • Transactions re cheaper than with traditional currencies. Their security features eliminate the need for a third-party payment processor needed to authenticate every electronic financial transaction. It is also cheaper to make international transactions since cryptocurrencies treat all transactions as domestic.

Shortcomings

  • Probably the main drawback comes from a feature that makes one of the advantages. The lack of regulation makes them perfect for implementation of illegal transactions on the dark
  • The lack of regulation also attracts tax evaders. Many small employers pay their employees in bitcoin. That way both parties evade paying taxes.
  • Since cryptocurrencies do not exist in any kind of physical form, they have a potential for financial damage due to data loss.
  • Many cryptocurrencies cannot be exchanged directly for fiat currencies. Just those with highest market capitalizations.
  • Although miners are in some way intermediaries for cryptocurrency transactions, they are not responsible for resolving disputes between transacting parties. In one word you have no one to appeal to if you are cheated or not satisfied with a specific cryptocurrency transaction.

Summary:

There is a vast amount of information about cryptocurrencies on the internet. By investing in Bitcoin or other Cryptocurrencies you may be able to make a fortune if you are careful and buy wisely. However the market in cryptocurrencies is extremely volatile and can fluctuate wildly. So be smart and don’t invest more than you can afford to possibly lose.

Follow us for more upcoming articles on cryptocurrency information.

Will CryptoCurrencies Survive The Current Market Crash?

Will CryptoCurrencies Survive The Current Market Crash?

“The sky is falling” cry the masses who quickly adopt the actions of the herd mentality which is a natural human behaviour.

The Big Market Crashes:

Anyone who knows a little bit of financial history will understand with what happened in the following market crashes:

  • The Great 1929 Stock Market Crash – which led into the great depression
  • 1987 Stock Market Crash
  • The DOTCOM Bubble of 2001
  • US Housing Market Crash – which led many governments into bailing out financial institutions who were carrying losses of hundreds of billions of dollars and facing oblivion.

 

In each of these circumstances the markets rose almost uncontrollably in the famous exponential curve. Ultimately the growth in each of the circumstances was unsustainable and was made worse by the availability of “free” or cheap money for investors.

The Fall Of Bitcoin And The Market Capitalization:

The current correction or carnage in the Cryptocurrency market has seen the pioneer of  Cryptocurrencies  (BITCOIN) fall from a high of nearly $20,000 just prior to Christmas 2017 back to to around $6,500 (February 6, 2018). The capitalization of the Cryptocurrency Market has fallen from $830 billion (January 7, 2018) back to $300 billion (February 6, 2018). Overall that’s close to a 64% fall in 1 month.

Panicked by the “bad news” the herd mentality kicked into gear and dumped their crypto investments which in turn caused further selling by those basing their investments on margin lending.

Similarities Between Dotcom Bubble And Cryptocurrency Crash

The current state of the Crypto Currency Market has so many similarities to the DOTCOM Bubble that can be outlined in the following points:

 

  • When the internet was embraced by companies in the early to mid 1990s with a view to offering their products and services online. The market initially was slow to adopt this new way of doing business but it did not stop the believers or early adopters from investing.
  • The NASDAQ was where the tech companies like APPLE, DELL, CISCO, IBM etc were listed. The DOTCOMS also began listing on the NASDAQ to raise funds for their “business models” with ISO (Initial Share Offering) – (sound like ICO?)
  • The DOTCOMs were a mix of companies rapidly thrown together with a ‘business model’ and not a functioning business generating income to sustain it. They are dependent on the investors buying their shares which they did in droves which rapidly drove the share prices up exponentially. (I can even remember a mining company transforming almost overnight into a Dotcom). There were plenty of ‘shonky’ operators cashing in on this investment windfall. (starting to sound familiar yet?)
  • By the mid to late 1990s with cheap money, easy capital and over speculation & way too much confidence venture capitalists not wanting to miss out on a ‘big score’ invested billions of dollars recklessly into many of these Dotcom shams.
  • With the investments of the venture capitalists driving prices ‘to the moon’ money from the general public began to pour into the share market in the belief and hope of a big score in this exploding market.
  • Between 1995 and 2000 the NASDAQ increased five-fold from 1000 to over 5000 points. In the 12 months prior to March 2000 the NASDAQ valuations nearly doubled. (Again does this have a familiar ring except the growth in the Cryptocurrency Market capitalization went from approximately $19 billion dollars (February 2017) to over $825 billion dollars (January 7, 2018) – this was a growth of around 43X.
  • So the DOTCOM Bubble occurred when some of the major tech companies issued massive sell orders on their stock at the top of the market in March. This in turn fuelled further selling which had a snowballing effect in driving the market rapidly down. With this change of market sentiment the capital investment for the DOTCOMs dried up which set off a chain reaction collapse of these ‘business models’. With no further investment and no actual functioning business to generate income their cash streams rapidly dried up causing their ultimate demise. Trillions of dollars of investor’s money was lost in this collapse.

 

From my own perspective the parallels between the DOTCOM Bubble and the Cryptocurrency Crash are uncanny.

Which Cryptocurrencies Will Survive:

Currently there are some 1541 Crypto Currencies listed in this market area. (Check Coinmarket Cap here https://coinmarketcap.com/all/views/all/ for an update on the number of currencies listed and the live individual prices for each coin.

Among the 1541 listings are literally hundreds of crypto currencies that will probably not bring their business idea to an actual working model – let alone begin to turn a profit.

However I wouldn’t be too despondent as out of the ashes of the Dotcom Bubble rose some truly remarkable business giants that now dominate the online world – here a few examples:

 

  • AMAZON
  • Google
  • Face Book
  • Alibaba

 

So my advice is to do some serious research and identify those Cryptocurrencies that have a sound business model and sufficient financial means to bring their model to market successfully. It is my firm belief that there are opportunities to invest in some future financial giants that will net you an enormous financial windfall – if you choose carefully!

You may like this post on the top 10 current cryptocurrencies.

How To Buy Bitcoins & Other Crypto Currencies

 

If you are new to Cryptocurrency and are thinking of buying Bitcoins (or part of a Bitcoin) or another Crypto Currency then we would recommend that you read the information in this article.

Bitcoin A New Payment System

Safe Ways To Store Bitcoins

As a potential investor in Bitcoin or another Crypto Currency, whether you have $1000, $10,000 or $100,000 to invest, the principles will be the same. If you read and apply the following rules then you should not have any problems.

 

Open An Account With A Reputable Exchange

To purchase a Bitcoin or other Crypto Coins you will need to open an account with a reputable Crypto Currency exchange. A reputable exchange will request for you to provide suitable identification (ie. Passport, Drivers License, Proof of Residency etc) to gain account approval. All these exchanges will have fees for purchasing & selling the currency on your behalf. The fees vary from exchange to exchange but it is worth checking them out in advance so that you are fully informed. Once your account is approved you can then commence transferring funds into your account via:

  • Bank transfer of Fiat currency (ie. USD$, Euro etc)
  • Pay Pal
  • Credit Card (be wary of the fees associated with doing it this way)
  • Other means

 

For a list of reputable Crypto Currency Exchanges you will find them in this article.

 

Understand What You Are Buying

Do you understand what Bitcoin does and how it functions? If the same applies to another Crypto Coin you are thinking of investing in then I strongly suggest that you do some research into the product. So many people are taking a “tip” from a friend or relative who tell them “it’s a sure thing….it’s going to the moon!” On this recommendation people are literally throwing their hard earned cash at something they have no idea about. The prices are fluctuating wildly in this market mainly because of a lot of “spin doctors” making predictions without any facts. I have seen forums with over 1500 people on “live” all talking up or down “coins” without any facts to verify their stance. There is so much “chatter” moving so quickly it is difficult to keep pace.

 

So be warned – DO SOME RESEARCH!

 

Be Aware Of Scams

As this article is being penned there are some 1493 currencies (sorry….. by the time this paragraph was completed there are 2 less – 1491 listings) listed on Coin Market Cap (click here for the current live numbers). On the recent fall in the market this number dipped to 1440. There are new ICO’s being released weekly and just as quickly some of them are falling off the radar with their investor’s funds. As this market is still in its infancy there are ICO’s being released with nothing more than an idea and a good social media marketer. They are able to raise millions of dollars of your money with no real obligation to follow through with the project.

 

How To Store Your Bitcoin Safely

When you purchase your chosen currency (let’s use Bitcoin in this example) you are issued with 2 important KEYS. One is a PUBLIC key and PRIVATE key.

Store Bitcoins Safely

Bitcoins if not stored securely are a target for online hackers to steal

What is the difference between a PUBLIC and PRIVATE Key?

To put it simply when you purchase Bitcoin(s) or part of a Bitcoin you are issued with a Public and a Private Key.

 

The Public Key allows you to encrypt your Bitcoin transaction. However the Private Key is the only way to decrypt your transaction to allow you to gain access to it for sale or a transaction for other means.

 

Storing Your Private Key:

If your computer is hacked and your private key is stolen or you are careless and leave it in public view your Bitcoin(s) can be transferred into another persons account and it will be lost forever with no trail to follow. Should you lose your private key your Bitcoin(s) will also be lost forever in cyber space.

 

What you can do to prevent this happening is:

  • Store your keys in an online wallet and then take it offline
  • Make several copies of your KEYS (possible ways: in writing, on a USB, on a card reader, engraved on a piece of metal) Store these in a safe place and try to think of every possible contingency. ie. Fire, water damage, forget where they are). I know of some people who have engraved them onto a metal plate & buried the plate.
  • You could also write it on paper & store it in a watertight container & bury it in your backyard.
  • Lock it up in a bank safety deposit box (but do you trust your banks)

 

If you choose to keep your Bitcoins on the exchange’s site there are risks associated with that (referring to the Mt Gox Exchange)

 

The safest practice is to store it in a wallet and take it offline then securing your keys in a safe place. If you do write your keys on paper do not make the reference for the keys too clear in case someone happened to stumble upon your storage crypt.

Ethereum V Bitcoin

Ethereum V Bitcoin: Which One Do You Buy?

Ethereum Vs Bitcoin

Bitcoin and Etherum are both cryptocurrencies but are totally different

With the extreme rise of the crypto-community in the past couple of years, accompanied by the continuous emergence of new coins, arose the need for endless comparison of those cryptocurrencies. Whether in the terms of sheer value or the functionality of their blockchain technology, their comparison is a constant topic on every site or forum even remotely related to the topic of cryptocurrency. Logically the most common is the comparison between the two with the largest market cap, Bitcoin ($ 236 B) and Ethereum ($ 132 B). (For an instant update on market capitalization click here) So in this article we are going to explain the main differences between these two juggernauts.

The Technology Behind Bitcoin and Ethereum

First and foremost, we will explain and compare the main purposes of these cryptocurrencies as well as the way they use the blockchain technology since there lie the crucial differences between them.

How Does Bitcoin Work:

How Does Bitcoin Have Value

How Does Bitcoin Work

As most of you already know, Bitcoin is the first virtual currency released in 2009 by a phantom Satoshi Nakatomo introducing the blockchain technology to the world. With its main purpose being just that, as well as to serve as an alternative payment method and store of value which is not operated by any centralized authority, unlike fiat currencies. These features got the whole thing going and started the entire cryptocurrency craze. Over the years the acceptance of cryptocurrency concept increased, and Bitcoin became accepted as a formal way of payment by global companies such as Microsoft or Dell.

For an interesting You Tube overview of  how Bitcoin works click here.

Ethereum was introduced in 2015 by Vitalik Buterin. As Bitcoin, it also operates using blockchain technology but uses it for a different purpose.

How Does Ethereum Work:

Ethereum explanation

Ethereum Vs Bitcoin

Unlike Bitcoin, the way that Ethereum works is to use it’s blockchain to enable the creation of Distributed Applications that are not used only for maintaining the Ethereum blockchain. These apps are created without any control, downtime or a need for a third-party interference. In a sense, we might say that Ethereum is not only a platform but a programming language that is running on blockchain technology.

Other Ways Ethereum Works: Ethereum also uses a SmartContract system to facilitate transactions of money, property or anything of value between people while providing the security of using a third party as a control without the need of actually using it. Ethereum can even be used as a platform for other cryptocurrencies. Actually, many other cryptocurrencies are built on or even relying on its technology.

For a brief explanatory video by Ethereum’s founder Vitalik Buterin click here.

As you can see the two cryptocurrencies differ in their main purpose. While Bitcoin is mainly created as an alternative for regular money and used as a payment method and store of value, Ethereum’s main purpose is to serve as a platform that facilitates peer-to-peer transactions and creation of Distributed Applications and monetize the work of developers.

Value and Mining of Ethereum & Bitcoins:

After we went through the technical differences, now we are going to move to a topic that is probably more interesting for the cryptocurrency enthusiasts. Here we will compare their current value and mining potential.

  • By being the most valuable coin on the market Bitcoin is, logically, the better choice as a store of value. Not only it is more expensive ($ 14,068.20 comparing to ETH $1,366.26 – at the time of writing this article), but it is the most recognizable and acceptable one in the world. That makes it easier to obtain, store, sell or use as a direct way of payment. This can be attributed to Bitcoin’s built-in shortage. Namely, Bitcoin is a finite resource and has a predefined final number of 21 million, after which no more Bitcoins will be created. In theory that means that their value will grow the closer, it is to the end.
  • On the other hand, Ethereum will continue to release the same amount of coins forever which makes it supply constant and expanding. Bear in mind that cryptocurrency market is young, highly volatile and still not completely explored, therefore no one can really make any exact predictions on what will happen with any of these coins in the future.
  • When it comes to mining the embedded scarcity of Bitcoin will become ever harder to mine as approaching to that 21 million mark. To explain, it works like this: the reward for mining Bitcoin blockchain block is cut in half after every 211.000 blocks mined. Current block prize is 12.5 Bitcoins per mined block which is a large difference in comparison to starting 50 Bitcoins per block.
  • On the other hand, Ethereum miners are rewarded by its proof-of-work algorithm called Ethash. The reward is 5 ETH for each block mined. Ethash also encourages decentralized and individual mining, unlike Bitcoin where miners need to use more expensive ASICs in order to make a profit.

 

  • Another difference related to this topic is the block confirmation time.
  • Bitcoins average block confirmation time is 10 minutes
  • Ethereum takes it down to 12 seconds. This is enabled by Ethereum’s GHOST protocol which makes confirmations quicker but, at the same time produces more orphaned blocks.
  • As you can see as Bitcoin’s popularity makes it better as a store value, while its finite number and the fact that almost 80% of its resources are already mined makes it harder for new miners to make a profit.
  • Ethereum is currently one of the most profitable coins in terms of mining.

Summary
All in all, although both Bitcoin and Ethereum are called cryptocurrencies and both use blockchain technology, you can see from this article that they are essentially two completely different concepts.

  • While Bitcoin is used as a payment method
  • Ethereum’s main purpose is to serve as a platform that facilitates transactions and enables the creation of Distributed Applications.                                                              To determine which one is “better” you will have to ask yourself “what do I need it for?”. If you want to use it as store value then Bitcoin’s popularity and recognition take the advantage, while its finite supply, built-in scarcity and the fact that almost 80% of its resources make it less profitable for mining. If you are wondering in which one to invest, then your guess is as good as ours. Both have shown an increase in value since their introduction but the volatility and the young age of cryptocurrency market make it practically impossible to provide accurate predictions.
    We strongly suggest that you do your own research and don’t invest more than you can afford to lose!

Where Cryptocurrencies Are Heading In The Future

After a thorough explanation of the cryptocurrency concept, the manner in which they are traded and the process of mining, it is time to analyze the tendencies of cryptocurrencies and try to predict where are they heading in the future. The main focus will be set on the anonymity and lack of regulation which is the main problem that keeps cryptocurrencies from becoming mainstream, and on the other hand, the benefit of the lack of mediator, as well as some other perks that come with cryptocurrencies.

The currency of the Dark Web

It is likely that the majority of us have heard of the Dark Web, but most of you are not sure what it actually is. The Dark Web is a huge set of web sites that you cannot access using a mainstream service like Google. They even require a specific browser to access and offer the ability to participate in a number of illegal and immoral transactions like drugs, prostitution, terrorism, money laundering, and so on. Since cryptocurrencies do not answer to any of the official regulators, it makes them a favorite currency for these illegal transactions.

Another feature that makes them a favorite for illegal transactions is that they provide a high level of anonymity for their users. Although al cryptocurrency transactions are kept on a public ledger known as blockchain, the cryptographic keys and digital wallets that are used to store and keep the funds cannot be linked to any real person. This feature makes it almost impossible for law enforcement to use their main method in determining the identity of those who take part in illegal activities, and “follow the money”.

Bear in mind that, even though these features make cryptocurrencies favorable for illegal activities, they are certainly not used only for this kind of purchases. It is safe to say that global companies like Microsoft, Dell, and Expedia, who accept payments in Bitcoin, are not trading in illegal goods and services.

The elimination of  mediator

After you saw what makes cryptocurrency favorable for bad guys it is time to speak about the features that make them attractive for everyone. Especially when you compare them to fiat currencies. In short, cryptocurrencies provide the convenience of cash without the need of a mediator to check your accounts and identity, no clearing delays, no commission, no extra charges, no different exchange rates. Those features make cryptocurrencies more efficient when it comes to time-saving and more profitable for obvious reasons.

Christine Lagard, the Managing Director of the IMF (International Monetary Fund), touched on this topic in her speech at a London conference that was held recently.  She said that “It’s time for the world’s central banks and regulators to get serious about digital currencies”. According to her words, global financial institutions are taking a risk by not monitoring and trying to understand the ever growing world of cryptocurrencies that are, for some time now, making a huge impact on global payments system.

Ms. Lagarde dismisses the speculation of cryptocurrencies being a fraud or identifying them with Ponzi schemes, saying that there is a lot more in cryptocurrencies than that.

She also points out that it is not impossible for IMF to develop its own cryptocurrency at one point. Where the main focus will be to use the technology to make payment transactions more efficient and reduce the cost of those transactions at the same time.

According to Lagarde’s words at the London conference, development of cryptocurrencies could be the answer for countries with “weak institutions and unstable national currencies”. These economies may experience a growing use of cryptocurrencies since it can prove to be a more efficient and profitable method than adopting a currency of another country like U.S. dollar. She wittily named this process “dollarization 2.0”.

Even though Ms. Lagarde embraces the existence and potential of cryptocurrency, she points out that the official implementation of cryptocurrencies in the global economy is a distant prospect. This is mainly because they are at the time too volatile, risky and energy intensive.

J-Coin

Christine Lagarde is not the only one with the idea of developing a cryptocurrency that is legally regulated. Various banks from different countries are investigating the possibilities of creating their own, personalized cryptocurrencies.

One of them is Mizuho Bank from Japan. Mizuho is hoping to develop a cryptocurrency that is pegged to the Yen, which will be called “J-Coin”. The main goal of this cryptocurrency will be to make payments and transactions via the smartphone app.

This project is still in early stages. There were just study meetings held with the necessary institutions, and they are yet to receive any approval from official regulators. However, people who are leading this project, are hoping that J-Coin would become available in time for the Tokyo Olympics in 2020.

While exploring the cryptocurrency market, Mizuho had shown a particular interest in blockchain technology that serves as a decentralized ledger with a potential to revolutionize the payment and transfer processes in global financial institutions.

This year Mizhuo even attempted and succeeded to complete a trade finance transaction using the blockchain technology. In this process information was sent from Japan to Australia while everything was done on a digital platform based on the mentioned blockchain technology.

Summary

At the end, you can not help but notice the raw potential of cryptocurrency. Even though their properties like anonymity make them a favorite for illegal activities, however in my opinion they can potentially offer more good than bad to the global economy. Especially in the terms of effectiveness and cost-reducing. In other words, if a solution is found for the problems of volatility and lack of regulation, cryptocurrencies can really revolutionize the global economy.

How To Mine For Bitcoins

Mining for Bitcoins

Bitcoin mining requires powerful computers

Bitcoin mining can still be profitable with the right equipment

The next topic in our journey towards a complete explanation of cryptocurrencies is Mining. You probably heard of this expression many times in terms of cryptocurrencies. This is because it presents a vital part of blockchain maintenance and cryptocurrency sustainability. Here we will concentrate on Bitcoin mining since it is the first and the best-known cryptocurrency.

How Does Bitcoin Mining Work?

Bitcoin mining is a process where cryptocurrency transactions are verified and stored in blockchain that serves as a kind of a public ledger. It is also the procedure through which new Bitcoins are released in circulation. This process includes compiling blockchain blocks out of recent transactions and trying to solve a computationally difficult problem. The “miner” who is first to solve the  problem is the one that gets to place the next block on the blockchain. With that, they will collect a reward in the form of transaction fees related to the transactions compiled in the blockchain block, as well as the Bitcoin released during that process.

That amount of newly released Bitcoin with each block is called the block reward. The most important thing you should know about block reward is that it is cut in half after every 210,000 blocks are mined. Bear in mind that the block reward started at 50 Bitcoins in 2009. In 2014 it is halved to 25. In 2016. It is further diminished to 12.5. Current state, at the time of writing this article, is that there are 499,082 total blocks. Therefore, there are 130,918 blocks left until the block reward is halved again. Estimated time for that to happen is 09 Jun 2020, as you can see on this countdown. Here you can also see that the final number of Bitcoins to ever be mined is 21,000,000.

Now you can start to understand why mining for bitcoins gets harder and, what is more important, less profitable over time. This can also be seen on the example of the mentioned problems miners need to solve in order to get the block reward. The difficulty of those problems, hence mining is adjusted every 2016 blocks relative to the computational power employed in mining. The more power employed the more difficult problems are, and opposite. This happens with the aim of maintaining a constant rate of block discovery. In layman terms, this means that the more miners there are, the harder it is to mine.

Is It Profitable To Mine Bitcoins Today?

The good thing about Bitcoin mining is that it can be done by anyone. All you need is a stable internet connection and appropriate hardware and you are ready to go. This hardware needs to be a custom-made PC with multiple powerful GPU’s or a piece of ASIC hardware specially designed Bitcoin mining. But the main challenge is to determine the profitability of Bitcoin mining. To do that you need to take next factors in your calculation:

  • Value of Bitcoin – current value of Bitcoin expressed in USD or other currency
  • Hash Rate – the speed your hardware will resolve those mathematical problems in order to get the reward. The Hash Rate is measured in hashes per second and can be expressed in MH/s (Mega hash per second), GH/s (Giga hash per second), TH/s (Terra hash per second) and PH/s (Peta hash per second).
  • Block reward – number of Bitcoins you will be rewarded for each block. As we said, Bitcoin mining becomes less profitable with time.
  • Electricity Rate – since the mining hardware consumes a lot of power, the cost of electricity in your area is one of the important factors you need to take in the count.
  • Pool fees – if you want to get into Bitcoin mining, you will need to join a mining pool. It is simply a group of miners joined together with a goal to mine more effectively. These mining pools will charge you a certain fee for maintaining their operations.

Since calculating these values manually turns out to be time-consuming, here you can find a handy Bitcoin Mining Calculator where you can put in the mentioned values while some of them, like Bitcoin value and block reward, are already entered and updated live. You can also enter the price of your hardware and recurring costs as a part of Break-Even Analysis.

As an example, we took the ASIC hardware AntMiner S9 with a hash rate of 14 TH/s, and a power consumption of 1375W. As power cost, we took a US average of 12 cents per kWh, and as a pool, we chose Nanopool that charges a 1% fee. When we entered these values at the current value of Bitcoin of around $16400 in the calculator it gave up the monthly profit of $950. It also said that at the approximate price of $5500 for the hardware it will break even in 9 months.

These numbers sound great, but you should always ask yourself what will happen with these numbers during the 9 months period? The volatility of Bitcoin presents the main risk for miners and prevents you from making any long-term profitability plan.

Can you mine for other cryptocurrencies?

Of course, you can. Not only that you can but it is probably more profitable in the long-term. Since bitcoin is the first one to start it is close to its end, while other cryptocurrencies like Ethereum, Litecoin, Monero, and ZCash are much easier to mine. There are also dozens of other altcoins that you can mine, but it is hard to tell which ones are worth investing in. On this site you can find all the information about any cryptocurrency there is and conduct your research on which cryptocurrency you want to mine.

Summary:

As you can see, mining for Bitcoins is currently profitable but the volatility of the market and the time of existence makes it hard to predict if you will make a positive return with your investment. On the other hand, other cryptocurrencies that are younger and less difficult to mine can turn out to be a smarter investment in the long-run.

Follow us for more upcoming articles on cryptocurrency information.

The Top 10 Cryptocurrencies

 

The Top 10 Cryptocurrencies

New virtual currency

Bitcoin stands head and shoulders above the other cryptocurrencies in terms of market capitalization

 

Now it is time to present you with the Top 10 Cryptocurrencies in terms of market capitalization as they stand at the time of writing. Be aware with the rapid price fluctuations in the cryptocurrency world that these  figures could vary greatly not just on a daily basis but on an hourly basis (particularly Bitcoin which hit a price of over $16,600 on December 12, 2017 )

 

Bitcoin (BTC) – Market Capitalization $ 264.50 Billion

As we already mentioned Bitcoin is the first cryptocurrency that actually worked. Created in 2008 by mysterious Satoshi Nakatomo it presented us the blockchain technology and started the global cryptocurrency craze. Since its creation and the initial value of about eight-hundredths of a cent, it recorded a constant growth and it is now worth a record $ 15,811. Bitcoin is also the first cryptocurrency that was accepted as a way of payment by international companies like Dell, Expedia, and Microsoft.

Ethereum (ETH) – Market Capitalization $ 45.56 Billion

The idea of Ethereum was presented in late 2013 by Vitalik Buterin. The main goal of ETH was to develop a new platform with a more general scripting language in order to create decentralized applications. Official development of the ETH project started in early 2014. through a Swiss company Ethereum Switzerland GmbH. The funding was organized by an online public crowdsale in the summer of 2014. where the participants were buying Ethereum value token with bitcoins. In 2016, with the collapse of the DAO project, Ethereum was forked into two separate blockchains. The original version became Ethereum Classic (ETC), while the new continued as Ethereum (ETC). The current value of ETH is around $ 442.76.

Bitcoin Cash (BCC/BCH) Market Capitalization $ 25.00 Billion

This cryptocurrency was presented on August 1. 2017. as a hard fork of Bitcoin blockchain. BCC inherited the complete transaction history of Bitcoin until that date, but all later transactions were separate. The main goal of BCC was to confront the bitcoin scalability problem and resolve a blockchain size limitation that was decreasing the Bitcoin transaction speed. Although some members of the community were convinced that it will favor the ones who wanted to treat Bitcoin as a digital investment instead of a mean of payment. The current value of BCC is around $ 1,405.89.

Exchange Union Coin (XUC) – Market Capitalization $ 22.20 Billion

Exchange Union Coin is developed within a partnership between the Exchange Union, Huiyin Blockchain Venture, the renowned blockchain-focused venture capital fund and the Jinsheng Capital, one of China’s largest private equity management institutions. It was presented in July 2017, and the crowdsale was held in August 2017. The main goal of XUC is to enable more efficient transfer of cryptocurrencies between exchanges. This coin is designed to be universal and widely accepted and circulated. Even if the exchanges do not use the same cryptocurrency, clients can effortlessly make transfers using the XUC. The current value of XUC is around $ 7.37.

Veritaseum (VERI) – Market Capitalization $ 13.56 Billion

Veritaseum was created by Reggie Middleton, an analyst, blogger and self-proclaimed genius. The purpose of VERI is to build blockchain-based, peer-to-peer capital markets on a global scale. This software will effortlessly connect parties where there will be no need for a third party. This concept where anyone with internet access can participate in these capital markets on a peer-to-peer and one-on-one basis is considered to be a scam by a large number of community members. Mainly because of the lack of any valid information about the whole stock exchange idea. Anyway, it has its market share and a current value of around $ 137.00.

IOTA (IOT) – Market Capitalization $ 13.43 Billion

IOTA was founded in 2015, with a focus on providing a secure way of communication and payment between machines on the Internet of Things. Instead of the traditional blockchain technology, IOTA uses direct acyclic graph (DAG) technology. The main properties of IOTA are that the transactions are free regardless of the size, a number of transactions that the system can handle simultaneously is unlimited, confirmation times are fast, and it is easily scalable. The current value of IOTA is around $ 4.68.

Ripple (XRP) – Market Capitalization $ 8.68 Billion

Introduced in 2012 XRP announced its main goal to be enabling of “secure, instant and nearly free global financial transactions of any size with no chargebacks. “Ripple is based on a shared, public database and apart from supporting fiat currency and cryptocurrency it supports any unit of value such as mobile minutes or frequent flier miles. The current value of XRP is around $ 0.2267.

DigitalCash (DASH) – Market Capitalization $ 5.58 Billion

This coin was initially released on January 18, 2014, as XCoin (XCO) and later, on March 25, 2015, renamed as DASH. It is an open source peer-to-peer cryptocurrency. The main goals of DASH are to become the most user-friendly and most scalable in the world. It operates as a self-funding model that enables them to compensate individuals for doing the work that adds value to the network. The current value of DASH is around $ 702.91.

Litecoin (LTC) – Market Capitalization $ 5.43 Billion

LTC was released on October 7, 2011, by Charlie Lee, a former Google employee. LTC is a fork of the Bitcoin blockchain. The main differences are that LTC has decreased block generation time and increased maximum number of coins. On the other hand, LTC is more complicated and expensive to produce. The current value of LTC is around $ 99.97.

Expanse (EXP) – Market Capitalization $ 5.07 Billion

EXP was developed as a first stable fork of Ethereum. It was created as a community-based project without the need for ICO. The main idea is to use blockchain technology to create anything community can imagine. EXP also operates as a Decentralized Autonomous Organization (DAO) and as a self-funding model. The current value of EXP is around $ 640.76.

 

Summary:

This list is of top 10 cryptocurrencies in terms of Market Capitalization. As you can see Bitcoin expectedly dominates the list and will do so for a long time, followed by Ethereum who also seems to have its second place cemented for the time being. On the other hand, since the cryptocurrency market is very volatile, there will certainly be some changes in this list in the future. Especially on the bottom, with cryptocurrencies like Expanse (EXP), EOS and Monero (XMR) being close by.

Follow us for more upcoming articles on cryptocurrency information.