Categories
Cryptocurrencies

Will Adaptive Scaling Problems be the Death of Blockchain?

With all the hype blockchain has generated in the business and technical press, would you believe it that it has one serious limitation that risks rendering it obsolete in the near future?

Blockchain technology has proven to have the potential to disrupt many industries. However, before it is considered a real and viable alternative to the age-old centralized systems that have brought humanity thus far, systems running on it must be able to process transactions way faster than what it is capable now, and scale sufficiently to be useful for both large and small systems.

Even as cryptocurrencies take center stage in the evolution of blockchain technologies, there are still lingering questions as to whether the problem of scalability can be sufficiently addressed without trading off any of the technology’s core features. This concern has brought forward the blockchain scalability trilemma, which dictates that blockchain systems must choose two out of the three main attributes:

☑️Security

☑️Decentralization

☑️Scalability

At present, all major blockchain applications have focused on maximizing the benefits of security and decentralization at the expense of scalability.

To fully appreciate the extent of adaptive scalability in cryptography and in particular, cryptocurrency, we may need to take a step back and understand the history of this revolutionary technology.

History and development of cryptography

Ever since humans could communicate, there has always been a need to communicate selectively. Even before the development of written language, the art of coding messages such that only the intended persons could access the information was common. Unauthorized persons could access the message being transmitted but could not extract or understand it. This is the art of cryptography.

Cryptography, the base technology of cryptocurrency, may seem like a very young technology, but it is not. It is a science and an art that has been used for almost 4,000 years to conceal secret messages in such a way that only the intended recipient can decode it. The earliest known evidence of the use of cryptography was found in inscriptions carved in the tomb of ancient Egyptian Great Chief  Khnumhotep II, back when written language relied on hieroglyphic symbols.

Cryptography has steadily evolved with the advancement of communication technology and only took a major leap with the development of digital media.

With the evolution of computing as a medium of communication, many cryptographic algorithms that use different protocols and apply unique functions have been developed. The only thing that has been constant throughout the ages is the fact that cryptography is not static.

The steady advancement of computing and the invention of new cryptanalysis methods have led to the adoption of newer and stronger algorithms. In the process, these have led to the use of larger key sizes to encrypt and decrypt messages.

More complex cryptanalysis became necessary because the development of better computing technologies render older cryptographic algorithms inadequate to provide the protection they were intended to offer. However, because of the adaptive scaling of cryptography, older algorithms, methods, and functions are often supported in newer ones to ensure backward interoperability and compatibility.

Adaptive scaling in cryptographic algorithms

The primary purpose of cryptography is to offer confidentiality, nonrepudiation, authentication, and integrity of data for communications in private and public networks and storage media.

Cryptography is also the base technology on which cryptocurrency is built. One of the core features of cryptography that makes cryptocurrency possible is adaptive scaling. This is the idea that the cryptocurrency is developed with measures that ensure that it will work, as intended, in both small and large scales.

The epitome application of cryptography in modern technology was the invention of cryptocurrency. Cryptocurrency is a digital asset that is used as a medium of exchange. It relies on strong cryptography for three things:

☑️ To verify the transfer of assets from one user to another.

☑️ To control the creation of additional units.

☑️ To secure financial transactions

Bitcoin’s adaptive scaling problem

One of the greatest challenges that the developers of Bitcoin, the first cryptocurrency, had to deal with was scalability. The scalability problem of cryptocurrency refers to the limits on the number or amount of transactions that the network on which the asset runs, in this case the bitcoin network, can hold.

Bitcoin’s scalability problem was brought on by the fact that the records on the network, aptly referred to as blocs, are limited in both size and the frequency in which they are produced.

A bloc on the bitcoin network is a ledger of transactions that take place within the network. To overcome this adaptability problem, the size of a standard block is limited to 1MB and is produced on average every 10 minutes. These limits are put in place to constrain the bitcoin network’s throughput to make it run efficiently on computing machines with different capabilities.

Bitcoin’s algorithm is designed to adjust after the addition of 2016 blocks to the blockchain. In theory, it takes about two weeks. The mining process (verification of blocks before addition to the blockchain) gets harder or easier depending on how long it takes for the 2016 blocks to be verified and added to the chain.

The spike in the price of Bitcoin in December 2017 brought to light Bitcoin’s major scalability challenge. The explosion of attention and popularity attracted millions of new users and even more transactions, leading to the Bitcoin network reaching the limits of its capacity. Considering that the network limited to about seven transactions per second, it quickly became overloaded. This shows that if Bitcoin was to go mainstream today, it would definitely be bogged down by hefty transaction fees and massive delays that would render it impractical.

Solutions to cryptocurrency adaptive scaling challenges

The limited size of a block of transactions on the bitcoin network was bound to create a performance bottleneck that resulted in the delay of processing transactions that cannot fit into a block and the increase of transaction fees.

To address such a problem in their ‘blockchain 2.0’ cryptocurrency, the developers of Ethereum introduced an adjustable block size feature. The size of a block of smart transactions was determined by the number of gas units that could be spent per block, known as block gas limit. At present, the average Ethereum block size ranges between 20 and 30kb, and miners are accepting blocks with block gas limits of about 10,000,000.

There have been other measures developed to deal with the adaptive scaling problems in cryptographic digital assets. One of the most effective ways is incorporating algorithms that limit the supply of the tokens or coins over time to create scarcity.

Bitcoin’s fundamental appeal is that there will only ever be 21 million coins in circulation. The planned limitation on the potential amount of coins in supply ensures an excellent stock-flow ratio, which naturally makes Bitcoin a great investment.

Another effective solution to the adaptive scaling problems is the use of a reward formula that consistently reduces the rewards awarded to miners for verifying transactions on the network. The bitcoin network halves the reward to miners after every 210,000 blocks are added to the blockchain to ensure that there is a steady supply of Bitcoins.

However, this is only a solution that will work for as long as the 21 million bitcoins have not been mined. Once the limit is reached, the mining rewards will be insignificant, and Bitcoin will have to shift to rewarding its miners with transaction fees instead, as posited by Satoshi Nakamoto in the Bitcoin whitepaper.

Categories
Blockchain and DLT

Avoid the Hype Surrounding Blockchain and Consider Alternatives

For some people, the words blockchain and bitcoin (BTC) are so thoroughly intertwined that the mention of one brings to mind the other. This association is almost natural, considering that it’s the BTC that gave prominence to the term. Yet the fact is that blockchain technology had been researched many years before the advent of bitcoin in 2009. 

The enthusiasm with which the blockchain technology has been received by the business world is easy to appreciate. First, bitcoin has enjoyed great success over the years and, though other cryptocurrencies could only be playing catch up, they too have something to show for their efforts, and this success is attributed to the adoption of the blockchain technology. Secondly, it has been established that the blockchain technology can be adopted in other financial institutions and, in fact, can be greatly useful in many diverse industries.

Proponents of the blockchain technology give the impression that it is infallible and totally secure and that it would provide safeguards against many problems that bedevil many industries today. Its famed data storage potential could, therefore, be exploited by players in many industries, including property rights records, healthcare services, legal services, and supply chain services, among many others.

Blockchain’s Main Selling Points

There are many things that make blockchain attractive to the business community, and one of the things that make business owners enthuse over it is the fact that it allows for the creation of immutable records which can be relied on in the event of a contractual dispute. Such a system, therefore, makes it possible for parties in a dispute to solve their disputes in a transparent and amicable manner without having to involve any third parties. Other people find the technology attractive because data stored there is decentralized, which some people consider a huge positive because such data cannot be manipulated, and this is a further aid to transparency. 

Counter Arguments

While blockchain proponents find the technology attractive for the above reasons, those opposed to it find fertile grounds to counter it for the very same reasons. First, where decentralization is supposed to be positive, most organizations will be averse to it because it makes the company’s private records available to the prying eyes of people from whom it should be kept away. In this category could be people you keep your company’s secrets away from, such as your competitors. 

Secondly, creating and maintaining the immutable records comes at an astronomical cost. Blockchains do not only consume incredible amounts of energy but do so performing simple but heavily duplicated tasks. Contrary to what people have been made to believe, a blockchain is not a distributed system in the true sense of the word. The impression that is created when we hear of a distributed computing system is that all the computers in the system could be performing different operations. The converse, however, is true – whether you have a thousand or even ten million computers in the system, they all perform the same identical task. What then, you might wonder, do you stand to gain by using such a huge capital outlay on machines that are only duplicating each other’s efforts? This is the kind of expense that many businesses cannot afford, and before joining the blockchain bandwagon, it’d be prudent to explore possible alternatives.

Possible and Easy Alternatives to Blockchain

Perhaps the first thing that every prudent business owner needs to think about before employing blockchain technology is its return on investment (ROI). The prohibitive costs we have alluded to above and the redundancy of the computers used means that getting an ROI could prove difficult. Yet there’s no reason why business owners should be in a hurry to invest in technology when there are tried and tested affordable alternatives available. Here are a few:

☑️Using a Centralized Database

Despite the hype surrounding decentralization, companies have nothing to lose (and actually have a lot to gain) by maintaining centralized databases. Such databases do not only maintain privacy but are easier to maintain and are affordable as they do not need to hold duplicate info, as is the case with a blockchain.

☑️Using a Backup Service

Contrary to what blockchain proponents might argue, there’s very little persuasion to back data up on multiple devices at the aforesaid prohibitive expenses. A company that desires to back its data up can do so by simply contracting one of the many contractors providing such services at very reasonable prices. Backup services have been around for some time, and we know they can be relied upon not only to store your data affordably but also safely. By encrypting your data before handing it over to the service providers, you are guaranteed that your company secrets are safe. And saying that such services are affordable is a huge understatement – the cost of storage with a backup service is completely insignificant when compared to the costs on a blockchain.

☑️Using a Distributed Ledger

An easy way to enjoy the benefits that people crave for when investing in blockchain technology is by investing in distributed ledgers. Unlike blockchains, distributed ledgers do not have scalability issues, yet they, too, are decentralized. On top of being transparent, such ledgers offer great security against the threats of cyber attacks as they could be distributed across various sites and locations. Where a blockchain consists of a chain of blocks, distributed ledgers never need to use such a chain, and this is what makes them capable of processing vast amounts of data in very little time and would, therefore, be a more meaningful substitute for blockchains.

Conclusion

Finally, are we arguing that companies should completely keep away from blockchain technology? Of course not! On the contrary, there are good enough reasons why every business owner should keep an eye out on the goings-on in the blockchain industry. By educating themselves on the latest trends and comparing their company needs with what the new technology has to offer, business owners will be in a great position to find out how their businesses could benefit from the technology. Ignoring such developments will ultimately mean that a company might fail to take advantage of them at the opportune time. What every company owner, however, needs to be aware of is that there’s too much hype surrounding the blockchain word, and most of it is driven by ignorance. Given that there are very serious financial implications behind the implementation of this technology, it’d be a grave mistake to invest in it simply to be seen “to be with it.” As with many other forms of technology, there are affordable, appropriate, and more practical options, and that’s what you might consider using.

Categories
Crypto Daily Topic

Tips to Trading Cryptocurrencies

Cryptocurrencies present a world of possibilities. Trading in cryptos can be a thrilling endeavor, not just because of their novelty but also their volatility. Many traders and investors – new and experienced alike, are moving in to try their hand at crypto trading.

While trading in cryptos can be profitable, it’s also really easy to lose your money – thanks in part to their wild volatility and unpredictability. A single mistake in crypto trading can be very costly, and that’s why you should go in with a strategy.

With that, the tips below should set you in the right direction in crypto trading; whether you’re looking to dip your toe in the water or have been in the game for a while. 

Research and Research More

Before diving headfirst into what is usually a murky world of cryptocurrency trading, it’s important to arm yourself with its very basic concepts. This starts with knowing the terminologies mostly thrown around and understanding what they might mean for you. Understand what cryptocurrencies are, the technology powering them (blockchain), how to be safe while trading cryptocurrencies, and so on.

You will also need to read up on the language used in crypto trading, such as limit order, bullish, bearish, market depth, all-time lows, all-time highs, etc. It’ll also be essential to keep tabs on what is happening in the cryptocurrency world. This means knowing new cryptocurrencies, which cryptos are increasing or falling in prices, the market value of different cryptos, etc.

Knowing how different cryptocurrencies have performed in the past, their all-time lows and all-time highs is also necessary. It will help you assess the volatility of cryptos you’re interested in and determine if they’re worth investing in. It might even give you an inkling of their probable future market trends.

Bear in mind that things keep changing in cryptoverse, so one single sitting of research is not nearly enough. What was true six weeks ago may not be true today. The regulation, technology, news, and pretty much everything concerning cryptos is always changing at a fast pace.

Understand Arbitrage

Arbitrage is the difference in the price of the same commodity in two different exchanges – like, say, Bitcoin trading at a slightly lower price on Coinbase than on Binance. Understanding this and acting accordingly can be profitable for you, the trader. But keeping track of the different prices on crypto exchanges is a difficult and time-consuming thing to do.

Other factors that may affect your trading are current volumes of the currencies, variation prices, network fees. To stay on top of these elements, resources such as CoinScanner and other similar tools should be of help. They can help you understand arbitrage better and how to capitalize on it, as well as trade cryptos at the cheapest prices and gain profits.

Be Safe

The first safety rule is to find out the safest places for buying cryptos. The second is to know how to protect them once you’ve bought them. Cryptos, in particular, tend to attract scammers, hackers, phishing attacks, impostors, etc. Take precautions. Always double-check before you enter passcodes/private keys or send money to accounts. Disable any unnecessary extensions in your browser and be careful before opening any URLs.

Protection also means knowing how to store your crypto coins. There are several purpose-built crypto wallets designed with security as a priority. Ledger Nano S, TREZOR, Atomic Wallet, Abra, are some of the most trusted wallets out there.

Crypto Exchanges Are For Just That – Exchanging

Even if you’re a pro at crypto trading, you could lose your money if you’re not careful enough. Cryptocurrency has no insurance, and the responsibility of protecting your coins is yours only.

Many people make the mistake of leaving their fiat holdings on crypto exchanges after they make profitable trades. Yet, exchanges are not a secure place to store your assets. The story of Mt. Gox illustrates this too well. The former world’s leading Bitcoin exchange was put out of business, and thousands of customer coins stolen after a cyber-attack.

The best way to avoid losing your assets on exchanges is to keep your coins in a secure wallet. Also, don’t use the device that contains your assets over public Wi-Fi. Apply other precautions detailed on the safety tip above.

Don’t Ignore the Market Cap

Most inexperienced traders are prone to making trading decisions based solely on the current coin price of a crypto. The reality is the value of a crypto includes the current circulating supply. So when you’re considering whether to buy a cryptocurrency, try to look beyond the current going price and look at the percentage of the total market cap for the currency. The closer a cryptocurrency is to its market cap, the likelier its demand will rise in the near future. 

Beware of Pump and Dump, FOMO and FUD

FOMO is an abbreviation for fear of missing out. FOMO is one of the reasons many crypto traders fail in the art. This a trick that most ‘whales’ use. Whales are people who are holding massive volumes of crypto coins. Some whales buy (pump) the coins in an attempt to show that the currency is in such high demand, only to come and sell it at high prices (dump) after many people have bought the lie. But once they’ve bought it, they may never get the opportunity to trade it for profit, making losses.

When you see a sudden euphoric rush by many traders to buy a crypto, don’t jump in too because of FOMO. Always do your research and rely on your gut to make decisions – following the crowd might cost you big time.

FUD, on the other hand, stands for fear, uncertainty, and disinformation/doubt. Some people deliberately spread FUD with fake news, fake social media accounts, and manipulated facts just to dump some coins. Always verify the sources and intentions of any crypto news before being driven by FUD to make trading decisions.

Invest With Money You Can Afford To Lose

This goes without saying. The first thing to know is: the only predictable thing about crypto prices is their unpredictability. While this might actually be a good thing for crypto trading, it also might mean that nothing’s ever really assured.

Cases abound of many who have emptied their savings in cryptos, took loans, and lost most of those savings. The bottom line: never invest too much money in a very high-risk market (like cryptos).

Diversify Your Portfolio

The reason why it’s important to diversify your portfolio when trading in cryptos comes down to their unpredictability, again. Don’t be tempted to “hold all your eggs in one basket” and invest in one crypto only.

Also, many people think they should spread risk across several cryptos so that in case one tanks, the rest will turn a profit. But what they need to know is all cryptos seem to follow the pattern set by Bitcoin. When Bitcoin decreases in value against the dollar, all other coins almost always follow suit. So, diversifying among different cryptos may not be enough to cushion you against losses. The idea here is to trade in other types of assets as well.

Know Which Altcoins to Trade In

The truth about many altcoins (all other cryptos besides Bitcoin) is they end up losing value over time, sometimes unexpectedly. This means you shouldn’t hold on to an altcoin for too long.

One way to know if an altcoin is ideal for long term investment is to check the daily trading volumes. If a crypto has a high daily trading volume, then chances are it’s a good option for HODLing to sell in the future. Ethereum. Monero, Litecoin, and Dash are some of the currencies that have displayed consistent daily trading volumes.

Also, check regularly the charts of these cryptos and note spikes in price. The patterns can help to identify the perfect time to sell or buy a coin.

Have a Reason for Your Trades

You need to have a purpose for entering any crypto trade. This is because in cryptocurrency trading, someone always wins, and another one always correspondingly loses.

The crypto market is unfortunately controlled by whales who wait for the ‘small fish’ to make a mistake that will land more money on their hands.

Whether you’re a casual or active trader, sometimes it’s better to cool off and not gain anything than rush in and lose. It may seem counterproductive, but sometimes not trading at all is the only way to stay profitable.

Set Profit Targets and Stop Losses

Trading in any asset requires us to determine a point when we’ll exit the market, whether we’re profiting or losing. The target level is an upper limit where you will close the trade after you have reached a certain profit. If you had set a particular profit target and have achieved that target, it’s time to exit the market.

Also, a stop loss level can help you not lose more than you’re willing to lose. A stop-loss is the limit at which you close out your position if the price is falling. For example, if you bought a coin at $600, you can set that as the minimum point you’re willing to trade it. So if the market doesn’t go as expected, you can walk away without losing much. 

The crypto market is exceptionally volatile, and prices can fall any time. Don’t let greed or emotion guide your decision making.

Do Your Due Diligence on Initial Coin Offerings (ICOs)

ICOs offer the public a way to invest in a crypto coin and make a profit when the coin is listed on an exchange. Since they promise high returns, many traders rush in without conducting some due diligence. This is a mistake because some ICOs have turned out to be scams, and many people have lost money this way.

‘‘Trust, but verify’’ is true when it comes to ICOs. Do your own research about the project. Who are the people behind it? Analyze, based on your research, if they really have the ability to deliver on their promise. Analyze, too, the feasibility of the project. Scrutinize the white paper and seek answers where it doesn’t add up. If by the end, you still doubt the credibility of the project, you’d instead give it a pass than sink your money into it.

Don’t Buy Just Because the Price Is Low

Some beginner traders make the mistake of buying a coin just because it has a low price or is “affordable.” But the decision to buy a coin shouldn’t be determined by its affordability, but rather its market cap.

It’s just like with conventional stocks – they’re evaluated with this formula: Current Market Price multiplied by the Total Number of Outstanding Shares. This same formula applies to cryptocurrencies.

Thus, it’s better to determine a coin’s worth based on its market cap than its market price. The larger a coin’s market cap, the more it is worth to invest in.

Find a Community

It can be challenging to keep up with cryptoverse. There is a lot of information about it, and everything is always changing. To stay on top of things, find a reliable group of fellow traders with whom you can share trends, ideas, strategies, and analyses. And whether it’s on Facebook, Reddit, WhatsApp, or Telegram, remember not everyone is worth listening to.

Conclusion

Crypto trading can turn handsome profits, but the opposite is also true. The very aspect that makes cryptocurrencies an attractive trading option is the same one that requires you to tread carefully when dealing with them. Before you invest your hard-earned money in cryptocurrency, remember these cardinal tips. Also, remember trading in any asset requires a cool and sober head – whether you’re winning or losing. Good luck.

 

Categories
Cryptocurrencies

Everything You Need To Know About Crypto Currency Wallets

So you’ve bought your cryptocurrency, what’s next? Unlike fiat currency, cryptocurrency doesn’t have real-world institutions that keep and protect your money. And storing it on the crypto exchange may not be a good idea, especially with incidences of exchanges being hacked or turning out to be a scam. Thankfully, innovative people have come up with brilliant ideas to enable crypto users store their coins safely.

In this article, we’ll discuss what crypto wallets are, types of crypto wallets, and what you should consider before investing in one, and more.

What Is A Cryptocurrency Wallet?

A cryptocurrency wallet is a device, a physical medium, or a software program that stores private and public keys and allows users to transfer, receive, or spend their cryptocurrency. You don’t walk around holding your fiat money, do you? You store it in a bank or some type of wallet to protect it. That’s the same principle with crypto wallets. 

How Do Cryptocurrency wallets Work?

Many people don’t understand how cryptocurrency wallets work mainly because they try to associate them with traditional wallets. Unlike “real world” wallets, crypto wallets don’t store crypto ‘money.’ In fact, cryptocurrencies are not stored in any physical shape or form, so they can’t technically be stored in any single location. What exists is records of transactions stored in a public ledger or – the blockchain.

What crypto wallets store is the public and private keys- which are used to access your public cryptocurrency address and transaction signatures.

Both of these keys are just a combination of random numbers and letters. To better understand public and private keys, we can compare them to our bank account. The public key is like your bank account number – people who know it can send you money. But the private key is like your pin code or password – you’re the only one who knows it. The same logic applies to crypto wallets – people can send you cryptocurrencies, but you will need to use your passcode to access it.  

When someone sends you, let’s say, Bitcoin, they are essentially transferring ownership of the coins to your wallet’s address.

For you to access those coins and spend, store or transfer them to somebody else, your wallet’s private key should be compatible with the public address the coins are assigned to. If the two keys match, the balance in your wallet increases, while the sender’s decreases. There is no real exchange of the currency. The transaction exists in the form of “a transaction on the public ledger” and a change in the balance of both parties.

What are the Types of Cryptocurrency Wallets?

There are several types of crypto wallets that enable you to store and access your crypto coins. ‘Type’ here refers to the medium that the wallet is built on. This could be software, hardware, or paper. Software wallets can be on desktop, web, or mobile

☑️Desktop Wallets: These wallets are usually downloaded and installed on your computer. From then on, they are only accessible from that particular computer. By broad definition, desktop wallets provide more security than their online and mobile counterparts because they don’t rely on third parties for data. However, they are vulnerable to hackers or malware. But these wallets are a good solution for traders of small crypto amounts.

☑️Web Wallets: These wallets are cloud-based and store your private keys on a server. They can be accessed from any internet-enabled device from any location. They are controlled by a third party, too, which renders them susceptible to hacking and theft.  

Different web wallet providers provide different features, some of which can link to mobile and desktop features and sync your addresses across your devices.

☑️Mobile Wallets: These wallets run as an app on your phone. They are great solutions for active users who interact with their crypto coins often. They can be used to pay for goods at e-stores or physical stores by allowing you to scan a QR code.

Since any crypto user requires access to the blockchain network – which is large enough, mobile wallets use a simpler verification technology. This means they utilize small subsections of the blockchain by relying on certain trusted nodes to ensure they get the correct information.

While mobile wallets provide much more convenience, they are also more prone to hacking. And if someone gains entry to your phone, you could lose control of your funds.

☑️Hardware Wallet: these wallets store your private keys on a hardware device like a USB. Hardware wallets are by far the most secure of any wallet because they are immune from malware attacks, hacking, and funds cannot be transferred out of the device in plaintext. Some providers even offer hardware wallets with a screen that can verify and display important details, like a recovery phrase and details of the transaction you wish to make.

Depending on the provider, hardware wallets can be compatible with several web interfaces and support several currencies. You can easily make a transaction by simply plugging the device to an internet-enabled device, enter your passcode, and carrying out your transaction.

☑️Paper Wallet: These wallets are essentially printouts containing a public and private key. They are usually printed as QR codes, meaning you can quickly scan them and transfer them to a software wallet to carry out a transaction. This process is known as ‘sweeping’ and can also involve manually entering the keys on the device. A paper wallet can also be a piece of software that can generate the keys, which are then printed. 

Just like hardware wallets, paper wallets are immune to hacking and malware attacks. Still, you need to take certain precautions, like ensuring no one is watching you when you’re generating a paper wallet and using a printer that is not connected to the internet. Also, you need to keep your paper wallet in a dry and safe place to avoid exposure to water and wear and tear. You could even keep it in a sealed plastic bag or laminate it and store it in a safety deposit box.

How Secure Are Crypto Wallets?

The level of security of a wallet depends on its type and the service provider. Web-based wallets are more vulnerable since hackers could gain access and steal your coins. On the other hand, offline wallets are safer because they are not connected to the internet and don’t rely on a third party. 

The most important thing to remember is regardless of the wallet you’re using, whether online or offline based, your private key is what matters. You lose the private key, you lose your funds. Bear in mind that cryptocurrency transactions are irreversible, so utmost care is necessary. 

That said, here are some measures you can take to secure your online wallet: 

☑️Back up your wallet. This simply means don’t store everything online. Store only small, daily-use amounts online. Store the rest away in a highly secure environment, like a paper or hardware wallet. Offline storage will ensure your currency is safe in case of computer failure or virus attacks. 

☑️Update software. Hackers are usually smart people, and they keep devising new ways to infiltrate security software. So what do you do? You keep up with them. Ensure your software has the latest security enforcements. This applies to both your wallet software and computer, or mobile software. 

☑️Add layers of security. When it comes to online wallets, the more the security layers, the safer they are. This can mean setting long and complicated passwords. Use wallets that enable multi-factor authentication or other extra pin code requirements. You could also choose wallets that offer multi-signature transactions – meaning another user or users must approve before any transaction takes place. 

Can You Store All Your Cryptocurrencies In A Single Wallet? 

Some wallet providers design wallets dedicated to the storage of only type of cryptocurrency. For instance, Armory and Copay are designed to store only Bitcoin. But other providers allow you to keep a variety of cryptocurrencies. Instead of purchasing a wallet that only supports one currency, you may find it more convenient to purchase or signup one that allows you to store, access, and spend your coins from the same location.

Are Crypto Wallets Anonymous? 

Just like how your identity on a cryptocurrency blockchain is pseudonymous, i.e., recognizable by your public address, so are crypto-wallets. Your actual identity will not be there, but your wallet address could be traced back to you.

In addition, to prevent illegal use of cryptos, most exchanges will require your full identity – which means they know your identity is linked to your wallet transactions. 

Which Is The Best Cryptocurrency Wallet?

New crypto wallets are always being introduced. Your decision to pick a specific crypto wallet depends on how you intend to use it. Ask yourself these questions:

Do you need your cryptos for everyday use or for holding as an investment?

Do you need to access your wallet from anywhere or just at home?

Do you plan to use and/or trade several currencies or just one?

What is the security track record of your considered wallet?

What is the reputation of the manufacturer?  

With that, here are some of the tried and tested crypto wallets in the market: Atomic Wallet, Ledger Nano, Trezor, Armory, Mycelium, Bread Wallet, Copay, Electrum, Exodus, and Jaxx. 

Conclusion 

By now, you should have a pretty good idea of what a wallet is, how it works, and probably identified your preferred wallet choice. Remember, the type of wallet you choose should respond to your needs – be it ease of transfer or security from hacking attacks.

Categories
Crypto Daily Topic

The Mess That is Telegram’s $1.7 Billion Token Sale

The unexpected growth and ultimate dominance of messaging apps in the tech world – prime examples being WhatsApp, Facebook messenger, Viber, Telegram, and WeChat – has been phenomenal. Everyone who bought into the craze early enough will probably retire richer than they ever imagined.

Combine this staggering success with the emergence of blockchain technology, in particular, cryptocurrency, and you have a combination that no investment expert will advise against. If you doubt it, ask yourself why Facebook is so adamantly pursuing the Libra – or why a simple search for messaging brings up crypto as a related search.

Considering how privacy-focused the world of crypto is, and seeing how fast the crypto industry is evolving to revolutionize every other industry, it was only a matter of time before it catches up with messaging. This is where Telegram’s messaging app rules.

Telegram may not be the top messaging app in the world by number of users, but it ranks highly. This is largely because of its speed and history of focus on user security and privacy. The app’s enhanced privacy protection is one of the top reasons why it has grown from obscurity to having over 200 million active users in just over five years.

It is an open secret that Telegram enjoys fanatic following and loyalty in the crypto world, and it is for this reason that the company was able to raise over $1.7 billion from private token sales as it prepared to launch its ICO.

Telegram Open Network’s breakthrough private sales

Telegram’s most recent and most controversial endeavor has been the launch of its own token, the Gram or Telegram Open Network (TON). The third-generation blockchain token that promised ‘superior capabilities’ was an instant hit, with demand hitting the roof even before it was official. Telegram’s founder, Pavel Durov, launched the ambitious TON project as a future payment option that would be used outside the global regulatory system, a lot like Facebook’s Libra would have.

TON was supposed to have a record-breaking ICO that would see them develop a blockchain-based one-of-a-kind decentralized messaging internet. In an industry with over 2.5 billion users already and projected to have about 3 billion by the end of 2022, their idea for a new communication platform that is independent from traditional bottlenecks and detractors was grand.

The tightly controlled process the company used to raise funds ended in disarray as its earliest backers sold their tokens too early, earning good profits in the process. While the company initially aimed to raise $1.2 billion through invite-only private sales and public offerings, it extended its target to $1.7 billion, which it raised from private backers before the public sale was canceled altogether.

The trouble with SEC

There is a universal disdain from governments and regulatory bodies for companies and technologies that are outside their reach. This explains why Telegram is always under scrutiny, and unnecessary controversies world over. Shortly after the company raised the funds it needed to bankroll the TON, the United States Securities and Exchange Commission (SEC) abruptly declared that the token offering was illegal.

Telegram had raised the entire $1.7 billion by selling the tokens to qualified investors in two rounds. The company had submitted a Form D, required when selling securities without registering with the SEC, back in February 2018. However, SEC found fault in the process in that qualified buyers of Gram tokens resold their assets in violation of the Form D exemption.

The regulator quickly obtained a court order to stop Telegram from distributing the Gram and outlawing trading in it in the United States. Hearing for the case is scheduled for February 2020.

What does this mean for the buyers, the public with interest in the Gram, and, more importantly, for Telegram?

While the SEC has the authority to stop the sale of Telegram’s tokens in the US, there is little it can do to prevent it from being traded openly in the international market. The whole point of Telegram launching its own token was to beat such regulatory bottlenecks and launch a genuinely open asset that the entire world can use with minimal interference from the bureaucrats. However, the influence of the SEC should not be underestimated, considering how early in its stages of conception, the Gram is.

The move by the SEC has had multiple adverse effects on the investors of TON:

☑️ First, they have been forced to choose between making a guaranteed 23% loss on their investment on the token, or sitting tight and waiting (hoping for) the token’s official launch in April 2020.

☑️ Public investors who bought the TON at $4 will be under pressure to sell it off along with the first and second round private investors who bought it at $0.37 and $1.37, respectively.

☑️ The move by the SEC may have set a precedent that will deter the Gram, or any other such blockchain tokens, from ever successfully raising funds in the US.

Why does the Gram stand out?

There are thousands of crypto tokens in use and being traded in the US today. Despite the TON being launched by a popular messaging company with a strong foundation, what makes it so unique as to attract the wrath of SEC?

In our view, Telegram’s token has three major strengths that makes it stand out:

☑️ Telegram’s TON promises lightning transaction speed – the kind that no other blockchain platform is capable of. It is estimated that TON’s third-generation blockchain platform will be capable of executing over 10,000 transactions every second, a speed which even Ethereum is not capable of.

☑️ Great infrastructure: Telegram promises to deploy massive storage and processing power to the decentralization of TON’s files. The already-popular messenger app will be an added advantage for quick and easier user onboarding.

☑️ The platform is already popular and trusted. Telegram already has over 200,000 loyal and informed users and a brand that sells itself. The Gram does not need to start from scratch, and neither does it have a baggage of distrust like Facebook’s Libra.

There is a vast potential for growth and prosperity of the Gram, despite the mess with the SEC. Early investors have proven that the company has the backing of the crypto world, and the company has shown that it has the tech to deliver on its promises. It is unclear what the way forward is for the Gram, but for now, we just wait.

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Cryptocurrencies

What Can You Buy With Crypto Currencies?

Cryptocurrencies have come a long way. In the not-too-distant past, most people used crypto mainly for speculation, and it is easy to see why. There were countless reports of people who had become overnight millionaires as a result of investing in crypto. Still, such rosy stories were quickly erased from people’s minds when the very opposite started happening. The group that invested after the first windfall was quickly impoverished by making belated and ill-advised decisions. With many and frequent bubbles, the crypto market was beginning to look like a graveyard, but things have since acquired a reasonable measure of stability.

Fast forward to 2019! While speculation was the overriding factor making people invest in crypto, the modern user of cryptocurrencies has other and even more important considerations. People want to know where and how easily they can spend their cryptocurrencies. That is why you’ll find that many online retailers have readily embraced crypto, and there are countless online stores where these currencies are readily accepted. 

One of the leading online retailers that have been accepting cryptocurrencies for a long time is Overstock, whose payments are processed using the third party site Coinbase. Other well-known sites include eGifter, a website that sells online cards, and Fancy.com.

Even when online retailers do not have an in-house system that allows them to accept cryptocurrencies, it is now possible for almost any kind of retailer to make this possible. There are plenty of platforms and apps that make it possible for retailers to accept crypto payments, and some of the leading ones include Square and Shopify. The latter, for instance, has a global clientele and has hundreds of thousands of online merchants using its software platform. This basically means that you are likely to get any product or service from an online seller as long as the business uses the Shopify software. Moreover, where most other platforms are limited to Bitcoin, Shopify makes it possible for merchants to accept payments in a host of other cryptocurrencies.

You Can Still Use Crypto Even When Retailer Site Doesn’t Expressly Say So

Any mention of online shopping must bring the giant retailer, Amazon, to mind, and you must wonder whether it is possible to make purchases using cryptocurrencies. While Amazon does not allow for purchases using cryptocurrencies, you can make an indirect payment using Purse.io. This ability to make use of cryptocurrencies even when the retailer site does not expressly say so is not limited to Amazon.

At the end of the day, what really matters is where you have stored your cryptocurrency, and there are various ways in which you can make the storage to make your shopping hassle-free. If you are in the habit of shopping using your debit card, for example, you have the ability to link your cryptocurrency to a debit card. These cards are usually backed by the leading card companies such as MasterCard, and any location accepting MasterCard will make it possible for you to use the cryptocurrency.

Where Speed and Privacy Are Of the Essence

Players in the hospitality industry were among the first people to embrace the use of cryptocurrencies, and it is easy to see why. In a world where people constantly feel that their privacy is being intruded upon, joining the crypto world ensures, among other things, that the individual’s privacy is protected. That is why one of the leading travel booking companies, Expedia, was one of the first to embrace this kind of currency.

You can, therefore, book for your flight and accommodations on the site using cryptocurrency, thus making the entire travel experience seamless. Another renowned travel site that accepts cryptocurrency is bitcoin.travel. On the site, you can pay for your entire package from travel to accommodation and even attractions at the destination using bitcoins. Other players offering similar services and accepting cryptocurrencies are Travala, Future Travel, and CheapAir.

When it comes to speed of execution, paying using cryptocurrencies eliminates most of the hurdles that were prevalent when non-digital payment methods were used. That is why you’ll find that some of the companies that have embraced crypto include AT&T, one of the leading global carriers. And as if to say that this might be the favorite way to make payments now and in the future, the ever-innovative Virgin Group, through its subsidiary, Virgin Galactic (the company that was expressly created to offer space travel) also accepts payments via cryptocurrencies.

The speed of execution is also what makes payments via cryptocurrencies a favorite for professionals in IT. Many domain creators such as NameCheap (which sells domains) accept crypto. In addition, a leading online retailer of computer hardware, NewEgg, also accepts bitcoin payments, as does the tech giant Microsoft.

Charities and Non-Profits

In addition to the many merchants accepting cryptocurrencies, there are also many charities and non-profits to which you can make a donation using these currencies. One of the most well-known charities that accept such donations is Save the Children, which tries to provide for the basic needs of impoverished children globally. And if you have been enjoying the services provided by Wikipedia and wish to make a donation, you can easily do so using bitcoin.

Crypto Is All-Encompassing

When it comes to cryptocurrency usage in 2019, perhaps the real question should be what you cannot buy rather than what you can buy using cryptocurrencies. Whether you want to pay for your pizza or shop online for your favorite coffee, buy a limo, or even pet food, the chances are that there’s a retailer ready and willing to accept bitcoin or some other cryptocurrency. The acceptance of cryptocurrencies is also global, and that is why you’ll find that on top of online stores, many brick and mortar stores around the world accept cryptocurrencies.

Of course, there’s much that needs to happen to make cryptocurrencies the ideal way to shop. And this will only occur when more companies start accepting cryptocurrencies received directly from the buyer rather than the current trend where most merchants only accept payments made via debit cards or payment processors. When all is said and done, you can buy almost anything using one or other cryptocurrencies.

Categories
Cryptocurrencies

Blockchain – Public, Distributed, Global Ledgers

You have probably already heard the term ‘Blockchain’ in the context of a new technological innovation. You would not be wrong to compare this advancement with other significant innovations such as the Internet because of its far and wide-reaching applications. What makes it so unique?

Consider an online Google document. When you create a document and share it with two other people, the original document remains, but everyone has access to it. The document is considered ‘decentralized’ since it can be accessed and modified by multiple people at the same time. The best part about such an online document is that everyone sees all the changes (and can even track them) when they are made, making it very transparent.

While blockchain is a tad more complicated technology than a Google doc, this analogy lays bare three vital features of blockchain:

☑️It is a digital record of events (transactions) that is distributed among many people. It is not copied or transferred copies.

☑️It is decentralized. This means that multiple individuals have real-time access to the asset and is not ‘owned’ or ‘controlled’ by a single entity or person.

☑️It is transparent. Being a ledger, all the people with access to it can trust the document since all the changes are preserved when made. 

So, what is blockchain?

Blockchain is best described as a distributed database. It is a storage technology where a digital ledger of transactions are stored in groups of transactions or sequence of blocks, chained together and distributed among many users in the network. This is where the term ‘blockchain’ originates.

Because blockchain is a way to keep records of items stored in millions of computers all over the world, it is essential to understand that it is not a device or currency. Think of it as an incorruptible ledger of transactions that are connected to each other such that one cannot be altered without requiring the alteration of all the other linked records.

Blockchain is undeniably an ingenious invention that is already conquering every aspect of modern human life – almost as much as electricity and the Internet did. This technology was the brainchild of one or a group of individuals known by the pseudonym Satoshi Nakamoto. To this day, the identity of Satoshi Nakamoto is still unknown.

Satoshi Nakamoto introduced blockchain to the world sometime in 2009 with the publication of the Bitcoin whitepaper. This innovation was largely inspired by the 2007/8 financial crisis, whose primary cause was the manipulation of the property market by financial banks. Bitcoin emerged as a currency alternative that would be free from manipulation, devaluation, taxation, or control by a central body. However, blockchain, the technology on which it runs, has since then evolved into something much more significant than just money and touching on almost every industry.

The humble beginnings of Blockchain

Contrary to what most people believe today, blockchain technology did not just arise out of nothingness with the publication of the Bitcoin whitepaper in 2008. Before it found its application in cryptocurrency, blockchain was a concept in computer science that had been around since 1979. In particular, it was theorized for use, in its primitive form, in the domains of data structures and cryptography.

With the invention of the hash tree by Ralph Merkle, patented as the Merkle tree in 1979, the first form of blockchain was already in practical use. Back then, the hash tree was used to handle and to verify data transferred between computer systems in peer-to-peer networks. The hash tree proved useful in validating data and ensuring the integrity of the data in the receiving system. This technology also ensured that false data was not transmitted and that users could prove the integrity of information shared using these early computers.

By 1991, the Merkle tree had evolved enough to create a chain of secured blocks of information. The series of data records, designed to be connected to previous blocks in the series, now contained a history of all the chains in the tree. With this addition, blockchain was born.

When Satoshi Nakamoto conceptualized the idea of a distributed blockchain that contained a secure history of all the data exchanged in the network, it gave rise to a world of possibilities that resulted in the invention of Bitcoin. What made this possible was that the security and transparency of transactions in the peer-to-peer network could be timestamped, and each transaction could be verified over the internet. The best part of the new technology was that it could be managed autonomously, and no single entity could claim absolute authority.

But what makes blockchain special?

Blockchain is a string of secured data that cannot be controlled by a single authority. The shared, immutable ledger that the connected chains of data forms has industry-disrupting capabilities for the simple reason that it is an ideal and practical democratized system.

While the information on this system is available for everyone to see and verify authenticity, it is almost impossible to alter, hence trusted. When blockchain is applied to any industry, it brings this nature of transparency with it, making it easy for countless individuals to be involved in it while maintaining accountability for every action or activity on the ledger.

Blockchain was first demonstrated to be practical and effective with the release of the Bitcoin Whitepaper, and it was quickly applied in digital currency. Soon after, the tech community found a lot many useful and practical uses of blockchain, and many more were theorized not so long later. One of the top features of blockchain that stood out almost immediately was that transactions carried out on the network carried no cost whatsoever. However, infrastructural investment was necessary to make it functional.

Benefits of global distributed ledgers

Consider the blocks of information on the blockchain as collections of data, much like records of financial accounts on a ledger. The chain, with all its benefits, is a very simple yet ingenious way to pass the data from one point to another in a secure and verifiable manner. The sender initiates the transaction, which is verified by hundreds, thousands, or even millions of computers that are part of the network.

When a block of transactions is verified, it is added to the chain and safely stored on the network, with a copy being stored on every computer on the network. The copy of the transaction will not only be unique in the record, but also in the history of records within the chain. This means that for a party on the network to alter or falsify the record, they would have to alter all the records in the chain sitting on all the computers on the network at the same time. This is almost impossible because it would take a lot of resources.

Bitcoin was a hugely successful and first virtual currency running on the oldest blockchain network because this format of storing information and conducting transactions could be trusted by all the parties in the network.

In summation, blockchain’s core benefits that make it ideal for use in cryptocurrency are:

☑️Efficiency and speed: Transactions on a blockchain can be completed much faster and more efficiently compared to the paper-heavy traditional processes that often involve a third-party. Considering that record keeping on a blockchain system is carried out on a single digital ledger available in real-time to all the peers in the network, clearing and settlement are super fast.

☑️Enhanced security: Before being recorded, transactions on a blockchain must be agreed upon aforehand. Once approved, transactions are encrypted and linked with previous and next transactions in a way that makes them tamper-proof. This is what makes blockchain ideal for use in any industry where the protection of sensitive data is crucial – from governance and financial services to healthcare and manufacturing.

☑️Great transparency: Since blockchain is essentially a digital ledger technology where all participants keep a copy of all ‘documentation,’ the data on it is not only alter-proof but also consistent and transparent. Data and transactions carried out in a transparent manner can be trusted by anyone who has access to it and can verify authenticity.

☑️Better traceability: Companies that deal in products that are manufactured and traded in complex supply chains often have a hard time tracing items in the market back to their origins to verify authenticity. With blockchain, each product can carry with it a history of transaction data that can go a long way in preventing fraud. To make this practical, manufacturers and distributors would need to record exchanges of the goods on a blockchain in such a way that an audit trail can show every stop and change of hand a product underwent.

☑️Lower costs of transactions: Every business needs to cut the costs of transactions as much as they can to increase their profits. Businesses that adopt distributed ledgers in their operations will need fewer third-parties and middlemen to make guarantees or carry out transactions since this technology builds trust between trading partners. They just need to trust the data on the blockchain to minimize the need to review every trading process or documentation.

The extent of blockchain disruption today

Make no mistake about this: blockchain is a very disruptive technology that is already revolutionizing how the world works – even if you do not ‘feel’ it yet. While you may have already heard of how it is shifting the way we use the internet and how we view money, the global economy is quickly adapting to inevitable takeover by the digitization of assets.

The fundamental shift from the present-day Internet of information to the age of distributed data as assets is a clear sign that the new global economy with no intermediaries is happening, and nobody – not even the biggest banks and multinational tech companies making money off data – can stop it.

Blockchain technology was originally developed to help solve the various economic challenges facing the financial industry. But it has proven that it can achieve much more.

It can be programmed to record and store virtually any other form of data in any industry.

As a result, we have seen the development of different types of Blockchain, each of which is aimed at helping solve more than just financial challenges. Ethereum, for instance, has smart contracts and many other applications, which we will explain later.

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Crypto Daily Topic

Is Ripple a Cryptocurrency?

Ripple has long generated a lot of debate as to whether it’s even a cryptocurrency after all. Crypto enthusiasts and experts have always been at loggerheads on whether Ripple meets the tenets of a “real” cryptocurrency. One of these people is Anatoly Castella, CEO of Elpis Investments, who has gone on record to say Ripple’s XRP is “neither a digital fiat nor a real cryptocurrency,” and that it does not fall under the “purest interpretation of cryptocurrency.”

A crypto exchange – Coinmotion, even warned users about XRP not being a real cryptocurrency. “What one needs to know about XRP is that it is not a cryptocurrency in the strict meaning of the word…What differentiates XRP from other cryptocurrencies is that it is not based on blockchain, it is not mined and it is heavily centralized.”

The 2000+ cryptocurrencies out there all derive inspiration from Bitcoin, the world’s first Bitcoin. Some of these cryptocurrencies strive to remain “true” to what exemplifies Bitcoin, e.g., running on a decentralized blockchain ledger, using cryptography to secure the network, transactions being carried out via mining, a finite supply of coins, etc.  But should a cryptocurrency take after each of bitcoin’s traits to be labeled as such? 

Let’s begin by understanding Ripple

Ripple was released in 2012 as a payment settlement, currency exchange, and money transfer network. Ripple’s goal was to circumvent the lengthy waiting processes and expenses involved in the traditional banking model.

XRP is the native currency for the Ripple platform. The company has issued 100 billion XRP tokens, which the company promises to be the maximum number to ever be in existence, although some in the crypto community think Ripple may not adhere to this vow in the future. The XRP token is meant to be the bridge between currencies. It treats all currencies the same way –from fiat currency to gold to even airline miles, which makes it easier to exchange any currency for another.

As a cryptocurrency, Ripple has only recently achieved “mainstream” popularity. Traders and investors have long kept it at arm’s length, mostly due to its traditional makeup that reconciles crypto with fiat currency. For this reason, among others, some in cryptoverse have refused to recognize it as a real cryptocurrency. The question is, are they right? Let’s review some aspects of XRP that will help us answer this question.

XRP is More Premium on Blockchain

XRP was not designed to be a coin, at least in the sense of Bitcoin, Litecoin, etc. While Bitcoin, for instance, accords the cryptocurrency and the network both equal importance in security, speed, availability to all, and applicability, Ripple does not place too much weight on XRP as an investment-worthy security. Instead, it focusses on making the blockchain as robust and scalable as possible. This enables Ripple to enable seamless processes with its client organizations, e.g., the American Express and Santander Bank.

Ripple doesn’t support mining

Unlike Bitcoin and other comparable cryptocurrencies, there is no mining or miners with Ripple. Most other cryptocurrencies utilize different mechanisms which accord varying levels of power to the miners. Proof-of-Work, Proof-of-Capacity, Proof-of-Stake are just some of the many consensus mechanisms used by cryptos to power transactions. However, Ripple transactions are powered via a “centralized” blockchain. The idea behind the centralized network is to make it more reliable and quick.

Again, with most cryptocurrencies, miners are motivated to conduct network transactions by being rewarded with the currency of the network. For Ripple, however, this is unsustainable. In a service built for the benefit of the banking establishment, it makes no sense to have a separate group with different incentives for running/maintaining the network. 

The idea of mining and making the network open for any interested miners is to aid other cryptocurrencies to remain decentralized – with no central authority making the rules. While this has helped them stay true to the “spirit” of censorship-resistance, freedom from interference by corporates and governments, it also slows them down. This is something Ripple cannot afford. The no-mining aspect bleeds into other Ripple features as well, taking it further apart the standard.

Can XRP Be Minted on Demand?

In the majority of cryptos, miners are rewarded with cryptocurrency. This pretty much sums up how new crypto coins are released: by mining. Ripple has created 100 billion XRP already in circulation, which makes it nonvolatile for its clients.

This has led to some people in the crypto community to conclude the currency can be minted anytime – which is against the deflationary nature of cryptocurrencies. But this has been refuted by David Schwartz – one of the original architects of XRP ledger. In a Twitter post in November 2017, Schwartz stressed: “There was never any way to create additional XRP.”

He noted that the original code was prone to a malicious act that would conceivably allow someone to “violate system invariants” and add more XRP. But, they’ve since added an “invariant checker” that seals this loophole.

In other words, there is currently no functionality of adding XRP in the code. If, for any reason, new XRP needed to be printed, it would require a major amendment to the code and adoption into the whole network of validators.

Centralized Blockchain?

Users have access to a Ripple wallet, but accessing the Ripple network is another matter altogether. In the case of Bitcoin, the blockchain network is controlled by Bitcoin users all over the world. By contrast, the Ripple blockchain is not open for all, because that would create risk for the otherwise sensitive environment.

And while XRP uses cryptography to protect participants, in essence, it’s protecting “trusted” parties registered on the network. This way, the cryptocurrency has the benefits of a blockchain ledger, but in a safer and walled ecosystem that lends it more efficiency and control. We could say Bitcoin is maintained by participants who have an incentive to continue doing so, but still, they could decide to shut off their computers and walk away. This event would put Bitcoin in a sort of a precarious position, something which Ripple has avoided.

Conclusion

Ripple is not a “real” cryptocurrency, at least by the standard definition. It is more of a solution than an asset. While other cryptos may fit in the asset mold – complete with the deflationary qualities of mining and volatility, which makes them attractive to investors – Ripple offers a platform that may, technically, be a “cryptocurrency,” but one which cannot be regarded as such by crypto hardliners.

Categories
Cryptocurrencies

Consensus and Consensus Mechanisms

Cryptocurrencies operate on a blockchain – a decentralized peer-to-peer system with no centralized authority that makes decisions on behalf of the other participants. While this system eliminates arbitrary decision making and corruption, it still presents a problem. How will decisions be made? How will things get done?

For blockchain networks to make decisions, there is a need to come to a consensus. Blockchains use “consensus mechanisms” to secure the network and verify transactions. Consensus mechanisms are protocols that ensure all nodes (devices that support blockchains by validating and relaying transactions) on the chain are harmonized and can collectively approve and add transactions on the blockchain.

Characteristics of a Good Consensus Mechanism

In order to ensure a consensus mechanism is fair and reliable and achieves the function of a “consensus,” it must possess certain qualities, like being:

☑️Agreement Oriented: A consensus mechanism should elicit the highest level of agreement possible from the group

☑️Collaborative: Participants in the group should put the best interests of the group above everything else

☑️Cooperative: Decisions should be made to benefit the group as a whole rather than individuals

☑️Egalitarian: This means the system is fair – every single vote must carry equal weight. No one vote can be more important than the rest

☑️Inclusive: As many people as possible should feel like their vote counts and want to participate in the process, unlike a regular voting process where people are unmotivated to vote because they feel as if their vote won’t count in the long run

☑️Participatory: The consensus mechanism should be designed in a manner that everyone can participate in the process

Consensus Mechanisms Used In Cryptocurrencies

Ever since Bitcoin pioneered the proof of work mechanism, multiple other consensus models have been experimented with and adopted. Some of these mechanisms have been created to sidestep the energy-intensive aspect of proof of work. Others aim to achieve faster and more convenient transactions. With that, here are some of the most common consensus mechanisms used in cryptocurrencies today.  

1. Proof of Work

Proof of work (PoW) is the consensus mechanism used by Bitcoin, the pioneer cryptocurrency. It involves a process known as mining, which confirms transactions and adds new blocks to the chain. To do this, miners usually solve challenging computational puzzles. The first miner to solve the puzzle is the one to add a block and to receive a reward in the form of crypto coins. The computational puzzles have certain unique features. Let’s take a look:

  1. They are asymmetric, meaning they can take a long time to figure out the answer, but it’s very easy to verify if the answer is correct
  2. They are solved with a trial and error method, meaning the only way to solve is to guess and keep guessing 
  3. Their difficulty changes in response to the rate at which blocks are being mined. The quicker the blocks are added, the harder the puzzles become, and the reverse is true

PoW is very effective against fraud, as it makes it almost impossible to alter anything in the blockchain – and that is improbable as it would mean re-mining all successive blocks. Also, no one user can monopolize the process, since both the mining machines and the power required to run them are quite expensive. 

2. Proof of Stake

Proof of Stake (PoS) allows people to validate transactions according to their ‘stake’ – the coins they hold. This means that the more cryptocurrency one has, the more computational or mining power they have. 

PoS was designed as a cheaper alternative to Proof of Work, as the latter uses up excessive power and is therefore very costly. PoS addresses this issue by assigning mining power per the ownership of coins. Instead of using energy to solve difficult puzzles, a PoS miner mines percentage that corresponds with his/her ownership stake. For instance, if a miner owns 2% of the Ether available, they can only mine, theoretically, 2% of the blocks. 

3. Delegated Proof of Stake

This is a special type of PoS. This consensus mechanism is very fast and able to complete more transactions per second (TPS) than PoW and PoS. In a Delegated Proof of Stake (DPoS), crypto coin holders stake their coins to elect a certain number of delegates. The weight of a vote depends on the voter’s stake – e.g., if person A stakes 5 coins for a delegate and person B stakes 2 coins, A’s vote carries more weight than B’s vote. 

Now, these delegates have the power to produce more blocks on the network. Delegates who receive the most votes can create blocks, and be rewarded with coins or a percentage of transaction fees (as is the case with PoW and PoS). The vote is dynamic, so the top delegates can change anytime. Also, the number of delegates depends on the design of blockchain: either a fixed number or all delegates above a certain paygrade. 

 4. Proof of Capacity (PoC)

This is a consensus mechanism that allows miners to utilize empty space on their hard drive to mine crypto coins. It uses a process called plotting, in which solutions to puzzles are pre-stored on digital storages. Once a storage has been filled with solutions, it can participate in creating new blocks. 

The plotting process uses a very slow hash function called Shabal and can take days or weeks. The takeaway is, PoC is a game of space: the more hard drive capacity you have, the more solutions you can store, and the better your chances of mining the next block. Burst coin is the first and only cryptocurrency to use PoC.

5. Proof of Elapsed Time (POET)

Proof of elapsed time is a mechanism that uses a sort of lottery system to choose block producers. Every single node has a fair chance at winning. The idea is to randomly determine who gets to create a new block, based on the time they have waited. 

A POET algorithm works as follows. Each participating node is supposed to wait for a randomly assigned period of time. The node whose designated waiting time ends first gets to create the next block. After this node “wakes up,” they commit to add a new block and then broadcasts the information to the whole network. The process then repeats itself. 

The POET consensus mechanism can only work under three conditions. First, there must be a system in place that ensures no one single person can run multiple nodes and second, that the waiting time is indeed random and third, that the winner actually finishes their waiting time. 

6. Proof of Burn

The proof of burn mechanism works by allowing miners to “burn” or “destroy” the cryptocurrency tokens, which allows them to create blocks in proportion to the coins burnt. 

The idea is that miners should show proof they have burned some coins – that is, sent them to an address where they can’t be spent. The process, unlike proof of work, for example, does not consume too many resources, and it also enables the network to remain quick and agile. Miners can either burn the native currency or coins of an alternative chain, upon which they are rewarded with the currency of the native chain. 

7. Proof of Authority (PoA)

In a PoA consensus algorithm, people stake their identity to become block producers. The blockchain is secured, and transactions are verified by approved accounts known as validators. To become a validator, users disclose their identity, which is then cross-referenced with existing public data. There are three requirements which qualify one to be a validator on a PoA blockchain: 

1. Their identities must be formally identifiable on-chain with the ability to crosscheck it from data available on the public domain

2. Eligibility to become one should be above par – so that the position is filled by people with an honest incentive

3. The process must be uniform and fair across the whole choosing process  

The idea behind the PoA principle is that validators will act in good faith; trust is indeed the foundation of the protocol. 

8. Proof of Importance (PoI)

First introduced by NEM for its cryptocoin -XEM, the PoI consensus mechanism takes into account other qualities more than just the amount of coins one has. It is based on a user’s contribution to the network in all areas, including reputation, frequency of transactions, and overall balance. 

With PoI, the more active a user is, the more they qualify to “harvest” new blocks on the blockchain. This was designed to encourage network participants to actively conduct transactions rather than hoarding coins. 

The technology underlying PoI ensures the mechanism is manipulation-proof – so users can trust that miners’ selection is reliable and fair. 

9. Practical Byzantine Fault Tolerant Mechanism (PBFT)

PBFT is derived from the Byzantine Generals’ Problem, an analogy used in computer science. The Byzantine Generals’ problem is as follows. A group of Byzantine generals is preparing to launch an attack against an enemy. To win, they must attack at the same time. But the problem is, some of the generals might go rogue or act maliciously. So how will they launch a successful attack despite this probability? 

In other words, in any distributed computing system, there is always the possibility that some actors will not be honest or reliable. This is where PBFT comes in. The “fault tolerance” is the ability for a distributed computing network to reach a consensus despite the presence of malicious nodes that might fail to send information or relay the wrong information altogether. The majority of participants (at least 2/3) have to agree and execute transactions at the same time to avoid complete failure.

10. Proof of Activity 

Proof of activity is a hybrid of proof of work and proof of stake that attempts to combine the best qualities of both. The mining process starts with a standard PoW procedure – miners rushing to solve a computational puzzle. When a miner finds a new block, the system switches to PoS, with the block being only a template bearing header information and the miner’s reward address.

Then, a random group of validators is chosen from the network to validate the new block – according to the header information. Being chosen as the signer for a new block depends on the amount of cryptocoins a validator owns. When all validators sign a new block, it becomes a complete block and is then added on to the public blockchain network. 

In cases when some selected validators are not available to approve block, the process proceeds to the next new block, with other validators being chosen to sign on. The system runs in that manner until sufficient validators are available to sign off all produced blocks. In the proof of activity mechanism, mining rewards plus/or transaction fees are split evenly among the signers and the miners.

11. Leased Proof of Stake (LPoS) 

LPoS is an attempt to improve the proof of stake mechanism. PoS only allows users to create a block if they meet a certain minimum balance of coins. Also, not everyone can participate in securing and maintaining the chain or even get rewards. 

LPoS solves this by granting users the ability to “lease” their tokens to different contractors and receive a percentage of the payout as a reward. The more tokens are leased, the bigger the chance for a user to be selected to produce the next block.

In an LPoS environment, users can decide to run a full node or lease their stake to a full node. If the full node is selected to add a new block, the user gets a piece of the total transaction fees. In this way, the system allows everyone to participate in maintaining the network.

Conclusion

The takeaway is that all these mechanisms have the same goal: to reach fair and transparent decisions for all network participants. It’s intriguing to see how various mechanisms have evolved over time, and it certainly will be fascinating to watch as more enter the space, with each being (hopefully) better and more effective than its predecessor.

 

 

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Cryptocurrencies

Cryptocurrencies and Crypto Regulations

Since the debut of the first cryptocurrency only ten years ago, thousands of more cryptos have filled the space, disrupting not just finance but technology itself. And in recent years, cryptos have become especially popular such that they have attracted the attention of governments seeking to exert some form of control over their seemingly unlimited potential.

Cryptocurrencies were discussed in a high-level meeting for the first time ever, in the 2018 G20 summit, about the possibility of introducing regulation of the crypto industry. The G2O countries declared in a statement that they would “regulate crypto-assets for anti-money laundering and countering the financing of terrorism…”

Although the move did not lead to any concrete action on the part of many countries, the discussion at such an influential meeting was a sign that it was no longer business as usual.

Challenges Governments and Regulators Face

Still, most countries of the G2O and indeed the world have yet to effect full regulation of the industry. The sudden emergence of cryptocurrencies and the new technology has caught most regulators off guard, and they still grapple with how to regulate them. This is due to reasons such as:

☑️Most regulators and governments don’t know how to classify Initial Coin Offerings (ICOs)

☑️Most regulators don’t know how to properly classify the sheer cryptos in existence – are they coins, tokens, stable coins?

☑️The fear of stifling innovation by overregulation – where do they draw the line between protecting users and suppressing innovation?

However, while some countries have taken zero notice of cryptocurrencies, others have responded to it with vigor: both receptive and unwelcoming.

In this article, we explore the cryptos regulation space, the widely divergent approaches taken by a selection of countries, key areas for regulation, and the current crypto news dominating political and financial discourse: Facebook’s cryptocurrency project: Libra.

Areas for Crypto Regulation

With the crypto world having various levels – mining, trading, etc., countries have been looking at different areas for regulation. Let’s take a look:

Exchanges, trading, and mining

There’s always the question of how cryptocurrencies should be classified. Are they securities, are they commodities? The category they fall in is the one that determines how they will be regulated. 

Regulators have also weighed the mining aspect – which is verifying transactions and recording them on the blockchain ledger. The process involves designated computers and is known to consume excessive amounts of power. For some governments, this is an area that has occasioned regulation.

Fundraising and ICOs

ICOs are the way crypto startups raise money by issuing crypto coins in exchange for fiat money or other cryptocurrencies.

ICOs represent a potential risk. Some ICO processes have turned out to be fraud, while some companies are looking to fundraise without a solid proposal for an asset.

Investing Instruments

With cryptocurrencies acquiring more clout, investors are looking to get a piece of the action. But the unregulated nature of crypto exchanges plus their susceptibility to malicious attacks render them a risky proposition. This has precipitated a drive to regulate cryptos to make them safer investments.

Governments and Citizens: Warnings about Cryptocurrencies

While governments around the world may issue different warning to citizens about the issue of cryptocurrencies, there’s a common theme running through them. Countries usually alert their citizens about cryptos’ potential weak spots:

☑️The high volatility cryptocurrencies – Cryptos are prone to drastic fluctuations in market prices, which might render them risky investments

☑️Unregulated organizations – Unlike fiat money, cryptos are issued by unregulated entities, which means there’s no one standard, safe, or ethical code of conduct binding them

☑️No legal recourse – Unlike investing in stocks or bonds, investing in cryptos has no legal protection in case of losses

☑️Facilitating illegal activities – Thanks to their anonymous (or pseudonymous nature, in some cases) transactions, cryptocurrencies are a favorite for criminal activities

Cryptocurrencies, Regulations, and Banks

The attitude of the banking system towards cryptocurrencies is wary since they see them as a threat that may cause an eventual bust of the traditional model.

This has seen banks reluctant to support crypto-related businesses, which could significantly limit the potential and growth of these businesses.

In this way, the traditional system could be the wedge that regulators will continue to use to keep the crypto industry in check.

Other sentiments concerning banking and cryptos have come from powerful individuals, perhaps pointing to the increasing and unstoppable power of cryptocurrencies. Some of these comments have come from the president of the United States, who has denounced cryptos and called for them to be regulated “if they want to become banks.”

In a tweet on July 2019, Donald Trump made the comments On Twitter, declaring he is “not a fan of Bitcoin and other cryptocurrencies”, which are “based on thin air” and that cryptocurrencies must “become subject to all Banking Regulations, just like other banks” if they wanted to become banks.

Understandably, such sentiments from the world’s most powerful leader sparked a fresh round of discussion about the regulation of cryptocurrencies. However, it remains to be seen if the president could aggressively go after cryptocurrencies and if those efforts would succeed.

Regulations by Country

Countries all over the world have taken quite disparate approaches to cryptocurrencies: from outright bans to open and liberal approaches to cautious optimism. Let’s take a look at how different countries are handling the crypto phenomenon and how some small nations are already establishing themselves as crypto havens.

United States

In the US, the treasury has classified bitcoin as a convertible decentralized virtual currency. The trading regulatory body: The Commodity Futures Trading Commission (CFTC) has classified bitcoin as a commodity. And the tax body, IRS, recognizes Bitcoin as taxable property. The Securities and Exchange Commission (SEC) considers cryptocurrencies as securities.

Though cryptocurrencies are not legal tender, the government recognizes them as “a medium of exchange, a unit of account, or store of value.” Finally, the Department of Justice is in consultation with both the SEC and CFTC to design legislation for the space.

Canada

Canada deems cryptocurrencies to be securities at the Federal Level. The Canadian Securities Administrators (CSA) directs for existing securities laws to be applied to Initial Coin Offerings and Initial Token Offerings, as well as crypto investment funds and exchanges.

Canada also allows the use of cryptocurrencies, but not as legal tender. The Financial Consumer Agency of Canada directs that “you can use digital currencies to buy goods and services on the Internet and in stores that accept digital currencies. You may also buy and sell digital currency on open exchanges, called digital or cryptocurrency exchanges.”

Canada’s tax laws and rules are also applicable to cryptocurrency transactions.

China

Banks and payment companies are not allowed to facilitate bitcoin transactions. Financial firms also cannot hold or trade cryptocurrencies. On April 1, 2014, the People’s Bank of China, which is the central bank, ordered financial institutions to close bitcoin trading accounts within two weeks. Crypto exchanges and trading platforms were effectively banned in September 2017.

The clampdown on crypto-related activity has precipitated the movement of several exchanges and mining companies setting up operations in other countries, like the mining company Bitmain which has since moved to Singapore.

The UK

The UK has warned citizens about the dangers of investing in ICOs and the speculative nature of cryptocurrencies. Still, the country has taken a cautious approach: neither giving the crypto industry carte blanche nor instituting stringent measures against it.

British lawmakers in 2018 launched an inquiry into digital currencies and blockchain to establish the impact of the cryptocurrencies. At the time, Nick Young, Treasury Committee member, said in a statement: “Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial… ”

As of October 2019, the sale, purchase, and transfer of cryptocurrencies are still unregulated.

Switzerland

In Switzerland, cryptocurrencies are legal. In fact, the country’s economics minister Johann Schneider-Ammann said Switzerland wanted “to be the crypto nation” at a 2018 crypto finance conference.

The Swiss Federal Tax Administration deems crypto to be assets and subject to the Swiss wealth tax. The Swiss Financial Market Supervisory Authority (FINMA) has also published guidelines for ICOs, but to apply existing financial regulation to the fundraising model. FINMA has also stated that regulation will be applied to the crypto industry on a case-by-case basis.

The European Union

The EU’s European Supervisory Authorities released a statement in 2018 warning consumers about the dangers of cryptocurrencies. “VCs (virtual currencies) such as Bitcoin are subject to extreme price volatility and have shown clear signs of a pricing bubble and consumers buying VCs should be aware that there is a high risk that they will lose a large amount, or even all, of the money, invested,” the organization said in a statement.

The European Central Bank classifies bitcoin as a convertible decentralized virtual currency. And the European Banking Authority has advised banks not to deal in cryptocurrencies until regulations are in place.

In 2016, the European Parliament voted with an overwhelming majority to institute a task force for monitoring virtual currencies. It was revealed in 2017 that the proposal would include requirements for crypto exchanges to identify suspicious activity, including fraud and money laundering. As of 2019, one of the most popular crypto exchanges, LocalBitcoins.com, has implemented measures to verify customer identities in compliance with the EU’S 5th Anti-Money Laundering Directive.

Malta

Malta, the small country in the Mediterranean, is another jurisdiction that is seeking to regulate cryptos, blockchain, and distributed ledger technology. In July 2018, the Maltese parliament passed three cryptocurrency and blockchain bills into law, setting up the first regulatory framework for crypto technology in the world.

The first is the Virtual Financial Assets Act, which regulates crypto platforms ranging from ICOs, brokers, asset managers, wallet providers, etc. The second is the Malta Digital Innovation Authority, which established a regulatory body, the Digital Innovation Authority Department, to certify crypto platforms and address legal issues arising out of the crypto space.

The final bill, the Innovative Technology Arrangement, and Services Act, is responsible for registering tech providers and their services.

“I think that blockchain technology, DLT, and cryptocurrency is where innovation is happening right now, and we are very glad that Malta can offer the first jurisdiction in the world to regulate this sector,” said the country’s Prime Minister, Joseph Minister in a statement to Forbes.

Gibraltar

In 2018, Gibraltar, the British Overseas Territory, introduced its Digital Ledger Regulatory Framework to regulate the crypto industry. Per the regulations, any firm using blockchain or DLT for “storing or transmitting value belonging to others” should be authorized by the country’s financial regulator.

The minister of commerce, Albert Isola, told CNBC in an interview that the “purpose of the framework is to create a new form of commercial activity. We are going to regulate it in a safe environment, seeking quality firms to come to Gibraltar in a way not to stifle innovation, but to actively support it.”

Some of the principles of the law are as follows include:

☑️Providing customers with clear and accurate information concerning risks

☑️DLT providers possessing enough resources to ensure they can run in a “safe and smooth” manner

☑️DLT providers taking “all reasonable precautions” to safeguard customer assets against “unexpected eventualities and threats.”

☑️DLT companies applying “adequate” anti-money laundering and counter-terrorist financing protocols.

Bermuda

The island country in the North Atlantic Ocean established its regulatory framework: the Digital Asset Business Act (DABA) to regulate the crypto industry. The set of laws apply to any identity incorporated in Bermuda and engaging in digital assets business – whether within or outside the country, and any similar business incorporated outside Bermuda but operating in its territory. 

The country’s latest regulation delineates the information that a company should provide during an ICO process. This includes a description of the project, how the ICO will be financed, the technical standard of the asset to be issued, and the identity of the fundraiser participants.

The Facebook Case

Perhaps no cryptocurrency project in the world has roused multinational pushback and threatened the traditional banking system as much as Facebook-affiliated Libra. Libra is a stablecoin (cryptos designed to offer price stability and are backed by a reserve asset such as fiat money) proposed by Facebook and whose release is projected to be in 2020. With Facebook’s 2+ billion users worldwide, the project could very well change the face of global finance.  

But before it’s even released, the project has been met with opposition from governments and banks who have voiced concern over its harmful potential: a threat to the global financial system, a gateway for all illegal activities, data privacy abuse, stripping nations of monetary sovereignty, etc.  

The US, UK, EU, France, Germany, and India are some of the countries that have spoken out against the project. The European Union financial services commissioner, Valdis Dombrovkis, responded by promising a new regulatory framework for cryptos, especially Libra. In September, French and German regulators voiced their objections, stating the crypto could threaten the Euro and unlawfully privatize money.  

And the G7, the world’s most powerful countries have warned that cryptocurrencies such as Libra “pose challenges for competition and antitrust policies” and that it mustn’t launch until regulatory concerns are addressed.  

Earlier in 2019, Facebook had released the names of 27 companies that made up the Libra Association – the nonprofit association which is behind the project. However, buckling under the regulatory pressure, several companies have abandoned the project, including MasterCard, eBay, and Visa. Other companies have also announced the intention of departure.  

However, Libra has stated that it doesn’t have the intention of bucking regulation. Dante Disparte, the head of communications for the project, had this to say: “We agree that the Libra project should be appropriately regulated, so calls for regulation are not a ‘setback’ or a ‘blow’ to the project. Responsible financial innovation and regulatory oversight are not in contest.”

The significance of Libra is that it could trigger more stringent and global clampdown on cryptocurrencies. It could be the cryptocurrency that changes the regulatory, and in fact, the cryptocurrency landscape for good.  

Conclusion

A common theme running through governments and regulators is they have yet to figure the potential power of cryptocurrencies, or even what their future looks like. Still, one thing is clear: regulatory scrutiny for cryptos is set to increase.

Thus, crypto-related businesses: issuers, trading platforms, exchanges would do well to establish safe registration practices, robust security for their platforms and customers, and seal any loopholes that might facilitate illegal activities. This will encourage the growth of the industry while continuing to power innovation in the space.

 

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Crypto Daily Topic

Dusting Attack: What is it and How Does it Work?

Since most cryptocurrencies in use today are open and decentralized, anyone can join the network and set up a wallet without providing any personal or identifying information. This is what makes cryptocurrencies somewhat anonymous. But not completely.

Although it is not always easy to find the identity behind a wallet address, each crypto transaction is publicly recorded on the blockchain and open for anyone to see. Therefore, technically, cryptos are not really anonymous but pseudonymous currencies. As such, it leaves users susceptible to a new kind of crypto fraud known as dusting attacks.

What is a Dusting Attack?

A dusting attack is a way in which an attacker steals a crypto user’s anonymity. This is done by analyzing transactions on the blockchain to deanonymize users in a process known as dusting. What may appear as a shower of small amounts of money or ‘dust’ sent to a wallet address could actually be a scam that can help the attackers narrow down on the identity of the user behind a wallet address. Hackers just need a little identifying information such as a pattern of addresses or locations to do a lot of damage on their targets.

What is dust?

In the world of cryptocurrencies, the term ‘dust’ refers to very small amounts of tokens or coins sent to a wallet, often in such insignificant amounts that the wallet’s owner may not notice in his/her balance. For Bitcoin, dust can be multiple amounts as little as 1 Satoshis (0.000000001 BTC). Dust can be hundreds of these tiny amounts sprayed by an attacker throughout the blockchain network with the hope that some of the amounts will ‘get stuck’ on the victim’s wallet.

At the core of cryptocurrency transactions, there is the concept of unspent transactions or UTXO. For every transaction carried out and recorded on the blockchain, there is a record of the input and the output. The output part of the transaction has two elements – the first goes to the recipient of the transaction, and the second returns to the sender as change.

In every successful transaction, the change that goes back to the sender is what makes up the UTXO and automatically becomes a part of the wallet’s UTXO set. The next transaction carried out by the owner of the wallet will include the UTXO from the set.

How a dusting attack works

The next step of the dusting attack is dependent on the victim unknowingly spending the dust. Since the balance amount in their wallet will automatically be a sum of what they had before and after the dust, most victims never realize when they spend it. The attacker will then track the dust funds and eventually deanonymize the owner of the wallet.

Despite how simple it may seem, deanonymizing the identity of a wallet owner is not a straightforward process. The way cryptocurrency wallets work is that a single wallet can generate several addresses when a transaction is initiated. Some tech-savvy and informed users have even set up their wallets such that they use a different address every time they carry out a transaction. The attacker will have a chance to attack only when the wallet owner combines UTXOs from several different addresses along with the dust amounts from those addresses.

By continuously analyzing the addresses on the blockchain network and comparing them with the information from the dust sprayed on the network, an attacker may track back addresses and ultimately find the network of addresses that manage a user’s wallet. The analysis is possible despite the large number of transactions carried out on the blockchain network because the hackers narrow down the transactions using transaction amounts, transaction times, and even exchanges.

The endgame in a dusting attack

What we have covered so far is the preparation stages in a dusting attack. The goal of this form of fraud is to link the dusted addresses with wallets and ultimately single out a wallet address to which they can trace the individual or company operating it. If a dusting attack is successful, the hackers will use this information against their targets, often through elaborate extortion schemes or through old school techniques such as phishing.

In the past, dusting attacks happened only on the Bitcoin cryptocurrency network. Of late, though, there are more of such cases on other cryptocurrencies. Just the other day, a network-wide attack on the litecoin network affected all users who had active addresses at the time of the attack, as reported on the Coin Telegraph. A quick analysis on the LTC blockchain revealed that over 300,000 addresses had been sprayed with dust, showing just how serious this form of attack is growing to be.

Back in October 2018, Bitcoin users who had Samourai wallets were the targets of dusting attacks. Upon noticing the attempts, the developers of the wallet responded in a tweet, alerting their users and explaining how to better protect themselves against the attack, which was still very new then. They then implemented a ‘DO NOT SPEND’ feature that marks suspicious funds sent to its users so that the dust is not included in any future transactions automatically.

The dangers of dusting

While almost all cryptocurrency blockchain networks today are almost impossible to disrupt or hack, users’ wallets are the weak points where attackers are focusing on when carrying out dusting attacks. Dusting and de-anonymizing attacks are not easy to pull off and may not be severe on their own, but it is important that users are educated on the damage that hackers can do when they know who they are.

Since Dusting attackers could use the information they harvest for other more serious attacks such as cryptojacking, phishing, and ransoming, it is important that cryptocurrency users understand the importance of putting in place measures to protect themselves from the moment they choose to open a cryptocurrency wallet. These may include using VPNs every time they access their wallets or the blockchain network, encrypting wallets, setting up different addresses for each transaction, and storing their keys in encrypted folders.

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Crypto Daily Topic

Crypto investor and victim of $24M SIM Swap Fraud Demands Action from FCC in Open Letter

Michael Terpin is a well-known investor in the cryptocurrency industry, but you perhaps know him best as the individual who lost a whopping $24 million in one of the most publicized SIM swap fraud cases in history. In an open letter published by Coindesk on October 21, Terpin is demanding that the Chairman of the United States Federal Communication Commission (FCC) Ajit Pai take decisive action against mobile carriers to put an end to SIM swap fraud once and for all.

A couple of years ago, about $24 million was stolen from Terpin’s accounts in a SIM swap hack in which he blames his mobile carrier, AT&T, for their ‘gross negligence’ that resulted in the hack. He alleges that the carrier had failed to put in place basic security protocols that would have prevented his loss and that criminals continue to take advantage of their failure to steal from unsuspecting users.

Terpin reveals in the letter that he has been approached by over 50 victims of SIM swapping hacks who have lost millions of dollars in these fraud schemes that seem to be happening with more frequency and greater losses to the victims even today. He wonders why the FCC had gone after robocalling with so much vigor yet no one ever lost millions of dollars in them, yet SIM swapping is not considered a ‘top priority’ despite the harm it continues to inflict on mobile users.

“I’m sick and tired of this. This is happening while they [AT&T] deny it,” he said. “There will be no future of a billion people making use of blockchain unless the phone carriers fix this problem.”

Carriers must bolster customer security

Terpin, in his open letter to Pai, recommends that the FCC require all mobile carriers in the United States to take extra measures to secure user passwords and personal identification numbers (PINs) from their employees to better protect the users from these kinds of fraud. He insists that the carriers should also be required to inform their customers of high-security plans they offer, which must include a ‘no port’ option. This option would prevent SIM swapping frauds by requiring that a SIM swap request goes through the fraud department for checks and authorization before SIM information is ported to a new phone.

The open letter to FCC lays bare a number of facts that FCC must consider while revising the rules and regulations that guide customer safety as far as mobile carriers are concerned. One of the most notable is the fact that mobile SIMs are no longer just number cards that identify the user’s phone to the carrier, but also a module tied to the user’s identity and ‘key’ to many other aspects of life including financial services and social media accounts.

To put a stop to sim swapping frauds, or in the least make it more difficult for the scammers, Terpin urges the FCC chairman to consider the effect such cases of fraud have on the future generation of people. This is a group of people who look forward to making all their investments in cryptocurrencies and look forward to the transforming benefits of blockchain in general. However, the fear of ‘getting hacked’ and losing everything is very real, and it is something the FCC is tasked to deal with.

How the SIM swapping fraud works

Terpin’s demands are coming at a time when cases of SIM swapping frauds have become very prevalent all over the United States. Also known as ‘SIM splitting,’ ‘port-out scam,’ or simjacking, this account takeover fraud targets weaknesses in 2-factor authentication (2FA) or two-step authentication.

In many cases, mobile carriers’ ability to easily and seamlessly port a customer’s phone number to a different SIM is all the fraudsters need to exploit to gain access to the victim’s account and money. The fraudsters often pose as the legitimate owner of a mobile phone number to dupe the mobile carrier to authorize the porting of the victim’s number to a new device then use two-factor authentication to fully reset associated accounts.

The problem is bigger than the FCC assumes

In his August 2018 suit against AT&T, Terpin laid blame fully on the network, claiming that they were complicit in the hack because the carrier’s employees played a part in the SIM swap process and subsequent theft that spanned over a period of seven months. He alleges that the company and its employees violated the Federal Communications Act, breached the subscriber contract, and violated a number of other legal regulations. He is seeking compensation to the tune of $23.8 million and $200 million in punitive damages against AT&T.

Just a few months ago, Twitter’s CEO Jack Dorsey’s Twitter account was hacked using this exploit method. This demonstrates just how unsafe everyone is from this new form of crime. Terpin notes that the new generation of sim swappers are actually sophisticated and organized criminals, some of them operating in gangs, and should be dealt with more seriousness than is currently accorded. He suggests that to further help the task force mandated by Homeland Security and FBI to investigate such cases of fraud, FCC should immediately initiate a comprehensive study with recommendations for mandatory reforms by mobile carriers, just as was done for robocalls.

Coincidentally, Terpin’s exclusive open letter to the FCC was published by Coindesk on the same day as another sim swapping fraud victim Seth Shapiro was filing a suit against AT&T for the part the company played in a hack that saw him lose over $1.8 million worth of cryptocurrencies from his exchange accounts.

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Crypto Daily Topic

Is EOS.IO Controlled By The Chinese Government?

EOS has something of a celebrity status in cryptoverse. The cryptocurrency broke into the scene in 2018 after the largest Initial Coin Offering in history – a staggering $4.1 billion. It is also Ethereum’s biggest rival – also supporting smart contracts and decentralized applications. The currency is currently among the largest in the market, taking the number 7 spot with a $2.9 billion in market capitalization.

EOS is based on the EOS.IO network – a type of blockchain technology that its creators maintain is a decentralized system. Founded by the private Cayman Islands-based company block.one, EOS has managed to distinguish itself from other cryptos with unique aspects that have made it one to watch.

First, it is the only cryptocurrency that does not charge transaction fees, although many in the crypto space have wondered if there is more than meets the eye concerning this proposition. Secondly, it claims to circumnavigate the scalability issue faced by the blockchain space. Having a transaction per second (TPS) speed of almost 4000, this makes it a ripe candidate for industrial-scale decentralized applications. Moreover, its Delegated Proof-of-Stake model for verifying transactions is way faster, and not as power-hungry as most cryptocurrencies’ mining procedures.

Background, Criticism, and Controversies

EOS was always rigged with controversy before it even got off the ground. The system was breached by hackers who got away with millions of dollars of investor money. Soon after, it was the subject of a phishing attack, which led to customers losing coins.

Less than a week before the mainnet (main network) launch, a Chinese security firm discovered several vulnerabilities in the EOS system. These vulnerabilities allow hackers to access any EOS node, construct and publish malicious smart contracts, or steal the key to supernodes, manipulate transactions, or acquire sensitive user data, including private keys.

The security firm said it notified EOS about the loopholes and that the network had promised to withhold the launch until the bugs had been fixed. But when the news hit the media, the network disowned the story and maintained that bugs had been fixed, and it was proceeding with the launch. 

For a company that had denied the presence of loopholes, their next move was bewildering. EOS proceeded to announce a Block.one Bounty Program to enlist the help of developers in discovering bugs in the network in return for financial rewards.

Then came EOS’s biggest source of controversy: its 21 block producers – who elicited doubt about the independence of the platform. The crypto community argued that that was too much power in the hands of a few people for such a large platform. The furor intensified when minutes from the 21 delegates meeting showed that they even had the power to “print” new EOS currency. Social media erupted, with the eventual consensus that “this is hardly democratic, let alone decentralized.”

Indeed, EOS has been accused before of colluding and “mutual voting “with Chinese crypto exchange Huobi. In 2018, a leaked Huobi spreadsheet suggested that the network’s supernodes had been colluding with the exchange to maintain power and keep their profits. 

What’s more, blockchain testing company Whiteblock has refuted that the EOS blockchain is truly censorship resistant or decentralized, submitting “the foundation of the EOS System is built on a flawed model that is not truly decentralized.”

China in the Fray

The speculation that EOS is bedfellows with or under the thumb of the Chinese government has been rife for a while. This speculation came to a head in June 2019 when a former member of the block.one and EOS team suggested that EOS was “now governed by a Chinese oligarchy.” This happened during the high-profile Tulip Conference.

And in September 2019, one of the companies that have partnered with EOS since the beginning called it quits. EOS tribe announced, via a blog post on Steemit, that it was stepping away from EOS as a block producer, citing an inability to earn funds for maintaining the blockchain without the support of big token holders.  

Eugene Luzgin of EOS Tribe said in the post: “We At EOS Tribe have never participated in the game of vote-trading and stayed true to our principles, and hence while we leave EOS as Block Producer, we are also free to speak truth and give warnings to the rest.” He added there was “…a vote buying and vote exchange practice” that “went mainstream and wide-spread among BPs” and that one of the “whales” – Bitfinex, had unvoted Western BPs. (For the uninitiated, a whale is an investor holding large amounts of a cryptocoin).

Interesting to note is that a majority of the whales in the EOS network overwhelmingly support BPs located in China. In the EOS Decentralized Proof-of-stake, the 21 nodes exercise all the power over the blockchain. The nodes are chosen by coin holders, who stake EOS coins in a vote for up to 30 BPs. The top 21 BPs are then selected. This vote is dynamic, meaning BPs can lose or gain their top-21 position at any time.

Currently, a majority of the BPs indicate their location to be China. An investigation by Coindesk, the cryptocurrency news site, has established that more BPs are, in fact, located in China, despite outward impressions.

Another factor that has raised eyebrows and led to further speculation is China’s insistence on ranking EOS as the top cryptocurrency whilst ranking Bitcoin, the most valuable and well-known, outside of the top ten. This has led to many in the crypto crowd to characterize EOS as a “censorable blockchain” and “pseudo-decentralized.” As for how the Chinese government arrives at these rankings, that remains a mystery.

What Is The Truth?

After Coindesk published an article that insinuated Chinese influence on EOS, EOS published an article deconstructing the allegation. Luka Percic wrote on Eoswriter (an EOS community website) that “even quoted people are claiming heavy out-of-context quoting…”

He went on to argue that there is no way to check the location of BPs and that most people refute that any BPs are China-based due to fear of the government’s censorship. He renounced the vote-buying as a “lie” and stated vote exchange is standard practice with blockchains, and that there is a democratized access to rewards for both large and small token holders.

Still, according to Coindesk, most of the main BPs on the network did not reply to questions on the controversy surrounding the crypto.

Regarding accusations against the network not being truly decentralized, EOS’s chief technology officer Dan Larimer has since clarified that his firm is not looking to achieve that status. In an interview with YouTube vlog “Colin Talks Crypto” aired on October 3, 2018, Larimer had this to say: “Decentralization isn’t what we are after. What we are after is anti-censorship and robustness against being shut down.”

Conclusion

While the broader crypto community is not privy to the exact inner goings-on of EOS, one thing is clear: long-term supporters of the network are now ambivalent about it while others have abandoned ship outright. Many in the community had hoped the crypto would attract major companies seeking a secure, censorship-free, high-throughput database. That doesn’t seem to be in the cards, at least right now.

Perhaps we should finish by reflecting on this statement to Coindesk by Lugzin: “Any centralized blockchain will be looked down on. I really liked the technology behind it. It’s the governance that’s screwing it now.” Coming from a former EOS insider, that’s pretty telling.

Categories
Cryptocurrencies

What is Ripple? A Complete Guide to the Cryptocurrency

Ripple has undoubtedly made a ripple in the world of finance and the cryptocurrency community. From making headlines for alleged price manipulation to its unusual monetary policy, the currency has firmly made a mark in the finance world. 

Ripple Explained

The first thing to know is that Ripple is both a cryptocurrency and a digital payment and exchange platform. The ripple cryptocurrency – abbreviated as XRP, is the native currency of the Ripple platform.

Ripple is more recognized as a digital payment platform than for its cryptocurrency. Through its Ripple Network (RippleNet), the model circumvents the multiple intermediaries and high fees typical with traditional banking models. 

History of Ripple

XRP was founded in 2012 by Jed McCaleb and Chris Larsen. The model integrated the elements of an earlier payment system called OpenCoin that was designed by decentralization expert Ryan Fugger.

After its launch in 2012, it became the second-oldest crypto after Litecoin. As of October 2019, Ripple is the third-largest cryptocurrency by market cap – after Ethereum and Bitcoin.

Network Design and Security Model

The XRP ledger is to Ripple what blockchain is to, say, Bitcoin. The ledger is a decentralized and peer-to-peer network of servers that powers borderless payments across multiple banking systems across the world. XRP acts as a bridge between currencies, making it easy to exchange any currency for another.

The XRP ledger uses the Ripple Protocol Consensus Algorithm (RPCA) to verify transactions. This algorithm enables the numerous nodes on the network to decide by consensus which transactions will go through, and in what order. These confirmations take only four seconds.

Monetary Policy of XRP

The maximum supply of XRP is 100 billion. The coins were all pre-mined before issuance, and according to Ripple, no other coins can ever be created. 

20 billion coins were given to Ripple founders Chris Larsen, Arthur Britto, and Jed McCaleb. Another 20 billion has been sold to companies and individuals, 7 billion is held by Ripple. In 2017, Ripple placed 55 billion in an escrow account, releasing a billion XRP each month for the next 55 months. At the end of each selling period, all unbought coins will be returned to escrow accounts for issuance beyond the 55 months. To decrease XRP’s supply overtime and prevent its devaluation, Ripple destroys XRP coins after they have been used to facilitate transactions. 

XRP can be divided down into six decimal places, and the smallest unit is known as a drop. This means 1 million drops are equal to 1 XRP. 

Differences between XRP and Bitcoin

Being the native currency for the Ripple ecosystem, XRP significantly differs from other cryptocurrencies in several ways. And since Bitcoin is the pioneer and the most popular of all cryptos, it makes sense to juxtapose the two to understand XRP better. Here is how the two cryptos differ:

☑️Aim of Development: Bitcoin was created as a digital means of exchange, but without the central authority and control exercised over fiat currencies by banks and governments. By contrast, Ripple was created for the banking system as a payment settlement, remittance system, and currency exchange. The idea was to design a system for asset transfers that were quicker, cheaper, safer, and more transparent.

☑️Mining Rewards: Ripple is not designed to be mined, unlike Bitcoin. All 100 billion XRP coins were pre-mined before their release. Only 43 billion are in circulation as of October 2019. On the other hand, Bitcoin has to be mined before being released, and miners get mining rewards in the form of BTC coins. 

☑️Protocol: Bitcoin is enabled by a technology known as blockchain to verify and confirm transactions. XRP is powered by an independent, patented ledger known as Ripple Protocol Consensus Algorithm to process transactions. Also, Bitcoin uses a proof-of-work mechanism to validate transactions, while Ripple relies on a consensus protocol to do so.

☑️Transaction Speed: Bitcoin transactions take 10 minutes on average, while XRP transactions take an incredible 4 seconds.

☑️Approach to the Banking Establishment: Bitcoin and other cryptocurrencies are disruptive to the established monetary system, with the potential to replace it in the future. Conversely, Ripple is cozy with the established system, with its value proposition, in fact, relying on being adopted by banks as a payment and settlement network.

Where to Buy and Store XRP

You can buy Ripple at any of the popular cryptocurrency exchanges, including Coinbase, Bittrex, Kraken, Binance, and Changelly.

For those intending to hold the coin for the long term, it is recommended to store your currency in cold (offline) storage such as a hardware wallet because it’s much safer and invulnerable to hacking attempts. An example of such a wallet is the Ledger Nano S and CoolWallet S, both of which support XRP.

For more active and frequent traders, having a software wallet such as Ripple’s own wallet or Edge and Abra wallets is more appropriate. Also, bear in mind that to store your coins in a Ripple Wallet, you need to deposit a minimum of 20 XRP. 

Should You Invest in XRP? 

XRP offers a quicker way for banks to process transactions faster, which could streamline banks’ operations in a major way and benefit both sides massively. Therefore, the question of whether XRP is a good candidate for investment depends on whether more banks and other financial institutions will adopt it as their payment and settlement infrastructure. Since no one is sure whether Ripple will succeed in its vision, the future value of XRP remains highly speculative for now. 

In any case, there is no such thing as a safe investment, and each decision bears a risk. Therefore, it’s entirely up to you to decide. 

Conclusion 

Being one of the most talked-about cryptocurrency and with its current rank among cryptos, Ripple looks set to continue being dominant in the crypto space. However, its potential for increasing in value hinges very much on the attitude of the banking establishment, something the crypto community is watching keenly. 

 

Categories
Blockchain and DLT

What Problems Do Cryptocurrencies and blockchain Solve?

Most people have heard the term cryptocurrency. But while some are confused by it, most have no inkling about what it means, or what it’s all about.

Cryptocurrency is an internet-based digital currency that utilizes cryptography to secure and facilitate transactions. Cryptocurrencies, sometimes simply called cryptos, leverage a technology known as blockchain – which lends them features like decentralization, immutability, impermeable security, and transparency.

Decentralization means that all participants in the network have equal power to approve transactions without the need for a central authority. Their high degree of security is enabled by the fact that transactions are broadcast across thousands of nodes, which must confirm any change to the system. This makes it impossible for malicious parties to hack the system.

More and more cryptos are entering the space, each with improvement in certain aspects of their predecessor. But is there actual value beyond cryptocurrencies being a means of exchange? Is the technology that powers cryptos applicable outside the world of finance? In this article, we explore the different challenges in our world that cryptocurrency is solving or has the potential to solve – from borderless money transfers to real estate, to centralization, to data privacy, and more.

Intermediation Fees

Cryptocurrencies solve the problem of intermediation charges. In the current money transfer business, there are so many intermediaries involved in the process – all of which contribute to excessive amounts of fees for customers. Also, the current options for sending money are not only expensive but also take days. 

Cryptocurrency has the potential to solve these problems and is already being used in several applications to this end. Take BitPesa, a service currently operating in Nigeria, Kenya, Uganda, Tanzania, Senegal, and the Democratic Republic of Congo. This service uses a blockchain-based system to send money within a day, as opposed to the traditional methods which take days and at a much cheaper rate (1% to 3% cost of transactions).

Another case is the Monetha payment system – which is based on the Ethereum cryptocurrency protocol. The system can carry out transactions five times cheaper and 10,000 faster than conventional systems. 

 Centralization

 One of the most exciting aspects of the technology underlying cryptocurrency is that it’s entirely decentralized – meaning it is not dependent on any authority for control. This essentially removes the need for a central authority while preventing one entity from having too much power over the system. 

Centralized systems have certain inherent weaknesses that make them ineffective in the long run. Firstly, as it has a single point of data control, a centralized system is more susceptible to malicious attacks. Centralized systems are also prone to price manipulation – whose results benefit only those at the top.

Centralization also raises the question of privacy. As digitization becomes the norm in the average person’s life, so is the concern for the safety of their data. The sheer volumes of people’s private data associated with centralized systems, especially with their vulnerability to bad actors, is not a favorable idea for the average person. 

This is where cryptocurrency comes to the rescue. A decentralized structure levels the field for all participants in the network such that no one entity has too much power to manipulate the system. A decentralized, peer to peer network is also secure. This is enabled by the fact that for hackers to successfully gain access to the system, they would have to hack more than half the nodes in the network, which is nearly impossible. 

Privacy

Traditional payment models like banks leave a trace of financial transactions. With cryptocurrency, it’s different. Cryptocurrencies are built with privacy and security that allow you to conceal your identity and transactions. Some like Dash, Monero, Zcash, Verge, Bytecoin, etc. have even been created to provide complete anonymity. 

There are several methods that cryptocurrencies use to conceal user information. Some use high-level encryption tools like The Invisible Internet Project and Tor, while others employ cryptography methods that provide proof of knowledge – without revealing that knowledge.

Double Spending 

Cryptocurrencies also solve the issue of double-spending. Double spending, as the term suggests, is spending the same money more than once – a potential flaw with digital currencies. With physical cash, it’s impossible to spend the same money twice. For example, you go to the ice cream stand and ask for an ice cream cone worth 1 dollar. You pay in cash and hand over the dollar to the cashier. As soon as you hand over the dollar, you can’t spend it again.  

On the other hand, a transaction with digital currency involves broadcasting to all the ‘nodes’ in the network. These nodes have to receive and confirm the transaction, and this takes time. This is where the concern of duplication arises. How can we be sure someone will not copy the transaction and rebroadcast it before it has been received and confirmed?

It’s hard to verify the real owner of a digital token – considering it can be cloned, duplicated, copied, or shared infinitely. Simply put, it’s difficult to confirm if a token has only been spent once.

Cryptocurrency solves this by ensuring users cannot double-spend coins. Blockchain – the technology underlying the currency, has a powerful mechanism that enables all nodes in the network to be aware of every transaction. And since the nodes show the history of the order in which they received a transaction, any attempts to double-spend are pointless.

Unbanked Populations 

Currently, 1.7 billion worldwide are unbanked – without access to financial services like insurance, investment, loans, money transfers, or deposit accounts. The lack of access to financial services makes it impossible for these people to escape the vortex of poverty. Meanwhile, traditional financial institutions like banks do not have the requisite structure to cater to this market segment without incurring losses. 

Blockchain-based solutions offer ways to provide financial services and still make a profit. They eliminate the need for expensive brick and mortar banking infrastructures. 

For example, blockchain technology can decrease the costs of providing microfinancing services. They also remove the need for the manual, multiple verifications that are associated with transferring money to emerging markets. This is made possible by smart contracts that radically cut costs and speed up local and international transfers. 

An example of crypto-based solutions changing lives by providing banking services happens in Venezuela. The collapse of the country’s Venezuela Bolivar currency has resulted in people using cryptocurrencies as an economic lifeline, making them more resilient in an unstable economy. 

Food Fraud

Cryptocurrency based technology also helps to prevent food fraud. One high profile case of food fraud was the horsemeat scandal in parts of Europe when meat advertised as beef in supermarkets was discovered to be horsemeat. 

Food fraud can occur in several forms – including adulteration, which is substituting an ingredient with a cheaper one, and misrepresentation – which includes fashioning a product as organic when it isn’t. These fraudulent practices not only pose health risks to consumers but also cost the food industry billions of dollars each year.  

While there are systems in place to curb food fraud, they aren’t completely tamper-proof, and it’s still very possible to play the system. Blockchain technology can be used to design systems that can track and authenticate every step of the food supply chain. This means that every party that handles food: from the farmer to the manufacturer to the store to the kitchen to your plate, becomes a block in the blockchain. The thing with blockchain is that it’s completely transparent, and its stringent verification process makes it impossible to misrepresent or forge a transaction. 

An example of cryptocurrency in action for food safety is Vietnam-based TE-FOOD, which has created a system in which every step of food production can be traced. Using the blockchain protocol, TE-FOOD provides a transparent and immutable (unchangeable) environment to track thousands of pigs, chickens, and eggs, increasing trust in the food ecosystem. 

Contract Conflicts

Traditional contracts are often the source of many business and legal conflicts arising from miscommunication, poor drafting, etc. It’s also a process that involves a coterie of lawyers, time-consuming negotiations, and a multitude of drafting phases. 

Enter smart contracts, the crypto-based technology that digitally facilitates, verifies, and enforces contract negotiations and performance. This type of contract enables trusted business agreements to happen without the need for third parties, a central authority, or lawyers.

Smart contracts work by self-execution of the negotiations between the parties. The contract is written in lines of code, after which both the code and the agreement are distributed across a blockchain network. This code controls the execution of the contract, and agreements are trackable and irreversible.

The decentralization and transparency of blockchain eliminate the need for an intermediary – saving time, money, and conflict. Besides, the technology is faster, cheaper, and secure, allowing for more reliable contracting. Where traditional contracts need long-winded verification procedures, smart contracts proceed with the utmost speed and efficiency. They set the stage for specific outcomes, removing any confusion or the potential of protracted litigation battles.

Election Fraud

In an era when the integrity of elections is increasingly under the microscope, blockchain can provide solutions for transparent and fair elections. Candidates who lose elections may launch legal battles that can delay the result and hold a country hostage. 

The blockchain digital ledger intrinsically creates an audit trail that not only simplifies the verification process but also minimizes the cost for expensive election apparatus. Furthermore, the process is wholly transparent so that anyone and everyone can verify the integrity of the results.

Crypto technology further provides an irrefutable record of the votes cast – eliminating the possibility for election rigging. Moreover, voters can cast their votes from the comfort of their mobile phones, enabling them to have a say in the process no matter their location.

Internet of Things 

The Internet of Things (IoT) is a concept of creating a network of devices with the internet and each other, including vehicles, home appliances, communication devices, wearable devices, and pretty much everything you can think of. The idea is to make the things we interact with daily to be more valuable to us. For example, your coffee maker monitoring when you wake up and then making coffee, or your shower heating 20 minutes before you reach home. 

The Internet of Things promises increased productivity and enhanced asset utilization to improve our modern lifestyles. But a significant impediment to the adoption of IoT has been the closed ecosystem (a system in which one or two people control the system), which some manufacturers stipulate as a requirement. This locks out other vendors from availing products to consumers, while also being denied a choice to compare and use hardware from different manufacturers. 

Also, IoT raises a lot of security and data privacy concerns, seeing as these devices would be communicating with external networks, rendering them vulnerable to hackers. Cases of connected refrigerators or automobiles being hacked are well documented. Also, IoT devices contain enormous amounts of data, which can lead to massive security breaches.

Blockchain technology can help solve these problems by:  

  1. Decentralizing the IoT to enable devices to connect directly; without manufacturers locking consumers into any particular ecosystem. 
  2. Decentralizing the IoT to prevent attacks – as a hacker would have to target all nodes on the network to obtain data – which is highly improbable   

Lack of an Identity 

Currently, 1 billion people worldwide do not have an identity. A large fraction of this number is refugees. When refugees are forced to flee their homes, many leave behind essential documents such as ID cards, birth certificates, and passports. Being able to prove one’s identity is critical because, without it, it’s difficult to access services that help begin a new life, local integration, or self-sufficiency – like a bank account, healthcare, a SIM card, etc. 

Cryptocurrency technology can come in useful in these contexts. The technology can host and transact infinite amounts of data on its publicly available ledger. Furthermore, identities on the network cannot be falsified, tampered with, and are time stamped.

Governments and charity organizations can use blockchain-based technology to issue digital identification to refugees, which would enable them to prove their identity and that of their loved ones and access financial services, healthcare, and education.

One example of blockchain improving refugee’s life is that of Bitnation, a startup that utilizes the technology to help refugees obtain digitally-enabled ID documents. By verifying a person’s social media presence and linking it to their social security number, passport, and other documents, he/she can prove their identity to the host government.

Arbitrary Asset Freezing

Cryptocurrencies can help citizens living in autocratic jurisdictions retain financial independence in contexts where governments unfairly freeze their bank accounts and assets. When people living in these countries run afoul of powerful individuals, their assets can be frozen or their attempt at transactions in local currency barred. 

Unlike fiat currencies (government-issued currencies), cryptocurrencies are immune from tyrannical whims. Crypto funds and transactions are stored in numerous nodes around the world, rendering government control infeasible. 

Real-Estate 

The cryptocurrency protocol can be used to solve many problems in the real estate industry, among which are fraud, high fees, price barriers, etc. 

Firstly, a cryptocurrency protocol can remove the need for paper-based record trails that are susceptible to manipulation and falsification. Blockchain transactions are tamper-proof and transparent, ensuring all parties transact fairly.   

Secondly, blockchain transactions are time-stamped – allowing for a party to prove without a doubt that a particular transaction took place at a specific date and time. The decentralized and transparent nature of blockchain also means everyone involved can know – and verify ownership details. 

Furthermore, blockchain-enabled smart contracts can help cut costs by eliminating the need for middlemen like banks, lawyers, guarantors, etc.

Blockchain can also enable tokenization (turning things into digital, tradable assets) such that even low-income buyers can own part of the property – while also allowing the seller to at least get a fraction of the total payment on the spot. 

Accountability in Nonprofits

Public trust in charities has dwindled in recent years due to cases of embezzlement and mismanagement coming to light. Blockchain technology can help these organizations achieve financial transparency.

Crypto coins such as AidCoin are designed for this very purpose: to allow transparent donations to legitimate charities. This way, donors can monitor where their money is going, and charities are forced to channel donations to the right purposes. 

An exciting use of this application is by the World Food Programme (WFP) to securely provide thousands of people with cash assistance. In Jordan, refugees can enter a store and simply look at an iris scanner, which then verifies their identity and then expends a food voucher. This system is based on Ethereum, a cryptocurrency.

Conclusion

These uses are just some of the numerous applications of cryptocurrency technology in solving problems in our everyday life. Across the food industry, finance, technology, and other sectors, exciting and innovative uses of cryptocurrency are being discovered every day. Also, more cryptos with real-world applications will keep budding if the current landscape is anything to go by.  

Categories
Cryptocurrencies

EOS Coin Review

EOS is the native cryptocurrency for the EOS.IO blockchain protocol. It is a relatively new player, having launched in 2017 but went to raise a record-breaking $4 billion in its June 2018 ICO. According to the system developers – Block.one – EOSIO seeks to solve the Bitcoin and Ethereum’s inherent problems. These include creating an open and free platform for the development of faster, more secure, and simpler decentralized applications.

The blockchain development startup claims to have been the first to infuse the WebAssembly engine into a blockchain software. The Block.one initiative has even resorted to creating their own blockchain from the ground up dubbed the EOSIO 2 that the company claims to be 16x faster than their original EOSIO version.

But how true are these claims? How viable is the EOSIO project and its EOS cryptocoin? Is it safe for the global web-products development to rely on the blockchain and host their different service son the platform? We look at all these and more in this EOS review.

How does EOS work?

EOS was first created as an Ethereum app on the ERC20 project, migrated to the EOS.IO upon the launch of the EOS Mainnet. The coin and its blockchain platform have, over time, earned the nickname “Ethereum on Steroids” given their speed and efficiency. Developing different applications on this platform, for instance, is free.

And while Ethereum blockchain supports no more than 30 transactional transfers per second, EOS is specially designed to supports millions of such transactions. More importantly, DApps developers don’t need specialized skills. You don’t need to learn a new programming language to start developing apps on this platform as it supports all popular languages that developers “know and love” like C++.

How can you acquire EOS coins?

There are two primary ways in which a crypto trader or investor can lay claim to EOS tokens. One is by way of mining the coins, and the most popular yet is through active trade on different crypto exchanges.

EOS, however, maintains a different coin mining strategy. Unlike most blockchain networks like Bitcoin that use the proof-of-stake consensus protocol that’s open to all, EOS uses the Delegate-proof-of-stake protocol. This implies that there are only 21 block producers that can validate an EOS transaction, and they are elected by the EOS coin-holders. And the higher the number of EOS coins you own, the higher the chance of being elected as a block producer.

The rest of the online crypto trading community can acquire by buying EOS tokens from different exchanges. Several leading and second-tier crypto exchange companies have embraced the coin and provided a platform where it can be openly exchanged for crypto or fiat currencies. Some of the leading markets where you can trade EOS coins include Binance, KuKoin, Huobi, Biftinex, and Kraken.

How safe is EOS?

We aren’t aware of any security or safety concerns with regards to the EOS coins or its anchor blockchain technology. And though the brand has only been around for about two years, it has made significant inroads towards a secure blockchain environment. They haven’t just moved from the Ethereum network to their own Mainnet but have also come up with several security measures. Key among them is the incorporation of WebAuthn Support for secure transaction signing without the need for additional software.

What did we like about the crypto coin?

Speedy transaction processing: EOS was created to solve such problems as speedy transactions – inherent to leading blockchains like Bitcoin, Ethereum, and Litecoin. According to Block.one, the EOS blockchain is infused with several systems and protocols aimed at accelerating the transaction speeds on the platform. While Ethereum will only process 30 transfers per second against Ripple’s – considered the fastest blockchain – 1,500, EOS claims to process millions of transactions, making it the fastest blockchain technology.

Supports the most common programming languages: we are also drawn to the fact that EOS has positioned itself as all-welcoming. Through the creation of the most versatile DApps development platform, it has made it possible for every developer to create an app on the platform using virtually any programming language.

Free of charge for developers: On most blockchain platforms, developers have to pay to host and develop apps on the platform. EOS is, however, different as it is one of the first free blockchain development platforms. Here, developers can access the EOSIO platform and develop different apps using the language of their choice free of charge.

What needs improvement?

Controversial voting process: EOSIO maintains 21 positions for block producers. These producers, according to the company, are voted for by any EOS crypto holder. We, however, find this voting process quite complicated and not as transparent as Block.one may want EOS crypto coin holders to believe.

Exposure to market risk during the three days of staking during a vote: The voting process for the EOS block producers is said to be free and open for all EOS-coin holders. What the blockchain technology company doesn’t overemphasize is the fact that to participate in the vote, you must stake your coins for three days. During this time, the staked coins are locked in and cannot be sold. We feel that such a move, however, exposes these coin-holders to massive risk should the coins lose value during the lock-up period.

No maximum EOS coin supply: Digital currencies were supposed to address some of the inherent limitations of the fiat currencies. The most prominent one being inflations. This explains why most crypto coins have put limits on the number of their tokens in circulation. We, therefore, feel that by having a limitless number of coins, EOS doesn’t address this problem.

Bottom line

EOS coins and their native Blockchain platform EOSIO are revolutionizing the aspect of security and speed when it comes to blockchain transactions. They are also redefining the openness of the blockchain technology by making it possible for virtually everyone to create a decentralized app on their platform using their preferred language. We are, however, more interested in the speed of their transactions. Moving forward, we will continue monitoring the company to see how they address the voting process concerns and the issue of locking up EOS assets for days.

Categories
Cryptocurrencies

Tether Review: How Safe or Stable Is This Stable Coin?

Tether is a pioneer of a hybrid class of blockchain-based crypto coins referred to as Stable coins. These were developed with the sole purpose of addressing cryptocurrency volatilities synonymous with cryptocurrencies such as Bitcoin and Ethereum. The stability of Tether is made possible by the fact that each Tether coin issued is collateralized by traditional fiat currencies on a 1:1 ratio. The most popular stable coin today is the US dollar Tether(USDT). 

But how safe and effective is the pioneer stable coin? Who can use this stable coin? What challenges has it faced to date, and what have been some of its solutions? We address these all in this comprehensive Tether Review.

What is tether, and how does it work?

Tether is a digital currency that seeks to provide you with the benefits of both an open-sourced blockchain technology and traditional fiat currency. According to Tether Limited, their systems convert cash deposits into digital coins whose value is tethered to the price of global currencies like the USD, EUR, and Yen. The company also claims to hold fiat currency in reserves that are equivalent to the Tether coins in circulation today. These Tether coins are then used to facilitate different crypto transactions. For instance, pure crypto-to-crypto exchanges, USDT serves as an alternative to the US Dollar.

Who can use the stable coin?

Like most other cryptocurrencies, there are no restrictions on the use of Tether across the globe. The stable coin has, however, received mass adoption by crypto traders and investors operating in crypto exchanges that do not accept fiat currencies. In this case, the stable coin has been used to load cash in an out of the different markets. Additionally, these crypto industry players have also been using the crypto coin as a hedge against different investments. Note that the increased circulation of these coins has also seen most crypto enthusiasts embrace Tether as a store of value.

How safe is Tether?

Tether derives its stability and safety from the fact that it was designed to always be worth $1.00. The unwritten rules of engagement between Tether and its USDT coin holders are that Tether Limited will, at all times, maintain a cash reserve of $1.00 for every tether issued. The company further promises to regularly audit and make public the company’s financial records.

These would show how much Tethers coins are in circulation at any given time and their cash and cash equivalent backings. While this sounds interesting, it should be noted that there is no contractual agreement between Tether Limited and its clients towards the fulfillment of this or other promises. We address these in detail in the risk and concerns section below.

Risks and concerns:

☑️Lack of proper auditing:

While Tether Limited claims to have backed tether coins 1-to-1 with traditional fiat currencies, they haven’t audited their financial records in more than two years. This didn’t go unnoticed by the crypto community, who demanded to know the ratio with which the company backs its stable coin. In reaction to this, Tether Limited had its lawyers – and not an audit firm  – release a report about the same. Our concerns aren’t just on the lack of proper auditing reports but the qualifying language these lawyers use in drafting this report.

☑️The legitimacy of Tether reserves:

The lack of verifiable and reliable audit reports from Tether Limited makes us question their claim of 1:1 tether to fiat currency reserve. And our concerns are only aggravated by the fact that USDT coin holders don’t have the legal power to demand an audit from Tether Limited. The 1:1 reserve is just a promise that Tether can break anytime.

☑️Bitfinex – Tether collusion:

There were reports and that Bitfinex and Tether – both share common management – were using USDT to manipulate Bitcoin price. These reports that saw Bitfinex exchange Subpoenaed by the New York Attorney General claimed that Bitfinex was creating Virtual USDT and using it to wash trade Bitcoin. In another incidence, the New York Attorney General’s office accused Bitfinex of Using Tether’s funds to cover over $850 million missing funds. Both instances make us question the independence of Tether and its fiat currency reserves.

What we like and don’t like about tether

what we like:

It reduces transaction time: Bank deposits and withdrawals in and out of different crypto exchanges can take between 1 to 4 days to process – or more during weekends. Tether transactions, on the other hand, take no more than a few minutes to complete.

Lowers transaction fees: Having to deposit and withdraw funds in and out of the bank every time you need to enter into a crypto position isn’t just tedious, but it is also expensive. Tether transactions are cheaper and relatively fast.

A safe haven during periods of unsustainable volatility: What happens when your preferred crypto assets hit unsustainable highs? The best move here is to cash out and wait for the coin to dip before making another buy. Tether presents you with the perfect safe-haven for your investments away from risky volatilities and the often-high withdrawal and deposit fees.

Downsides to the use of Tether:

Zero-interest: The fact that Tether will always be valued at $1.00 implies that you don’t stand to gain from price fluctuation of interest. This makes it less attractive than bank deposits.

Riskier than bank deposits: Banks are highly regulated, regularly audited, and deposits therein insured. Tether isn’t regulated and doesn’t live to its promise of transparency through regular audits. Furthermore, should you lose Tether funds, there is no guarantee that you will be compensated.

Where can you trade tether?

Virtually all major crypto exchanges and a significant number of medium-sized exchanges accept USDT trades. The coin’s popularity within the crypto community is evidenced by the fact that it currently appears on the top-ten list of most traded crypto coins.

Final word

Tether has made significant contributions towards taming the crypto industry volatilities. It has provided traders and investors with an inexpensive, safe haven for their coins. It has also significantly cut down on time wastage experienced with bank transactions. There, however, are major concerns with regards to how Tether Limited manages their fiat reserves. These have dented the crypto community’s trust in the stable coin through breach of promise and lack of transparency. You, therefore, need to exercise caution when dealing with this controversy-rigged stable coin.

Categories
Blockchain and DLT

How Is Distributed ledger Technology Different From Blockchain?

What is Distributed Ledger Technology, and how is it different from Blockchain?

Blockchain is becoming more and more accepted as a concept in the world of finance nowadays. The idea of blockchain has been explored by a greater audience every day, with even traditional centralized financial institutions are taking an interest in what blockchain can offer.
However, most of the traditional financial institutions have started to use another term alongside blockchain: the distributed ledger technology. Articles, as well as corporate statements, seem to use terms “blockchain” and “distributed ledger technology” interchangeably. This article will try to explain that there is a difference between the two terms as well as what the difference is exactly.

Distributed ledger technology
Distributed ledger technology, or DLT, as some people may call it, is a database of records that aren’t stored or confirmed by a central body. This database is then spread across several nodes. Each node saves an identical copy of the ledger, therefor making it decentralized. Each participant node of the network works independently from one another.

 

The distributed ledger technology ensures that each node updates independently. The nodes vote on each update to ensure that the majority of the nodes agree with the conclusion reached. This voting process is called consensus. Distributed ledger technology dramatically reduces the cost of trust.
With that being said, distributed ledger technology may sound just like blockchain, but it is not.

Distributed ledger technology offers the implementer to have more control over how it is, in fact, implemented. While distributed ledger technology is technologically decentralized and relies on similar consensus guidelines as blockchain, it offers its owner to dictate its structure, purpose, and function.
This technology can be considered the first step towards a blockchain, but they won’t necessarily make a chain of blocks. A distributed ledger can be stored across many servers, which then communicate to ensure the most accurate and up to date record of transactions is maintained, without the need to create blocks.
Blockchain
Blockchain is, in fact, a form of distributed ledger technology. However, blockchain has very specific technological features.

Blockchain ensures cryptographic signing and linking groups of records of transactions in the ledger.

This way, blockchain forms a chain, which is where it got the name from. Depending on the specifics of a certain blockchain, the public is given the opportunity to give their opinions on how it is structured and where it is headed.
Bitcoin can be considered a true example of a blockchain user. It shows how a blockchain should run. Bitcoin is completely open, and anyone can contribute to its code and give their opinion on how to improve it. Meanwhile, distributed ledger technology only has part of it decentralized. The governing portion of the ledger is completely centralized.
Distributed ledger technology and blockchain are not interchangeable
Even though every blockchain is a form of a distributed ledger, not every distributed ledger can be considered blockchain. The two terms cannot be used interchangeably as they represent similar, but not the same things.

With that said, some organizations, corporations, and institutions may prefer distributed ledger technology over blockchain. The Bank of England is considering distancing themselves from the volatility associated with blockchain by supporting distributed ledger technology. Many corporations also might prefer the idea of a decentralized ledger so they could keep matters in their hands while using the word blockchain to capitalize on the public’s interest.

Categories
Crypto Daily Topic

The Eighteenth Million Bitcoins Will have Be Mined by the of This Week

This week marks a milestone in the life of the world’s first cryptocurrency – Bitcoin. Blockchain.com, the cryptocurrency monitoring platform, reported that the total Bitcoins in circulation had reached 17.72 million by October 14, 2019. It will take the days before next week to mine the remaining amount to 18 million.

It has taken Bitcoin slightly over ten years to expend 85.7 of its total supply, which is quite the metaphorical “drop in the ocean” when compared to the 120 more years it will take for the total number of coins to be mined.

120 Years?

For many people in the crypto community, this seeming discrepancy might prove confusing. How can it take ten years to mine 18 million coins and 120 years to mine the remaining 3 million? The answer is in the network creator’s genius model, which is built to make the currency appreciate as the years go by, rather than devalue.

Now, the number of Bitcoins is finite. There can only be 21 million coins in supply, and when one day all coins are mined, no new ones will be introduced.

Miners get block rewards (free coins) every time they mine new coins. As time goes on, the block rewards are halved – for every 210,000 blocks mined.

When Bitcoin was new, miners could receive 50 coins for every block. The first halving was in 2012, bringing the rewards to 25 coins. The next halving happened in 2016, cutting the rewards to 12.5. The next one will occur on May 2020, making the reward 6.25 coins.

If the Bitcoin protocol remains intact and the halving process remains consistent, Bitcoin will reach the maximum supply cap in 2140.

Bitcoin Investors Are “HODLing” More Than Ever

Meanwhile, the number of addresses hodling 1000+ Bitcoins has increased, as people stockpile on the currency. 

On-chain analyst Glassnode (on-chain refers to transactions that occur on the Blockchain and are only valid when it’s modified to reflect them) has highlighted that the number of Bitcoin wallets holding more than 1000 BTC is now 2100 separate wallets. More wallets are holding bitcoins in the 1,000 – 10,000 bracket more than in any other bracket.

Similarly, the number of bitcoins in wallets with 1000+ wallets has gone from strength to strength: from 6, 919, 950 in September 2018 to 7, 184, 501 in January this year, to 7, 530, 446 as of October 14, 2019. 

These numbers indicate that as we approach the next “halvening,” people are buying Bitcoins in larger volumes, as further indicated by the recent increase in hash-rate discussed in more detail below. 

Bitcoin’s Hash Rate Is at an All-Time High

The hash rate for Bitcoin is also at an all-time high of 110.19 EH/s after being on a steady increase for the last two years – according to the cryptocurrency analysis website Bitinfocharts.com. Hash rate is essentially the rate at which a crypto-miner is working. The faster they are working, the higher the hash rate, and the quicker they can solve the next block and claim their reward.  

Just in July this year, the hash rate was 80 EH/s and has since grown by 37% in that short amount of time. In September, it hit 100 EH/s for the first time ever, with new highs regularly being achieved for the network. A high hash rate indicates surging mining activity on the Bitcoin network. This could be due to more miners scrambling to acquire more block rewards, or simply due to more efficient mining rigs entering the industry. 

Effect of Halving on Miners and a Next-Generation of Mining Rigs

With the next Bitcoin halving event being only six months away, the mining rig industry is rushing to roll out sophisticated and more powerful hardware to meet changing demands. As the reward rate goes down from the current 12.5 bitcoins for each mined block to 6.25, miners will want to mine even faster to get more coins within shorter time frames.

As such, we are witnessing a new wave of mining rigs, each more powerful than its predecessor. Some of the types of equipment are even up to about 500% more powerful than the older models, in terms of hash rate. 

Going by Bitcoin’s previous halving events, the crypto is likely to witness an upswing in the year before and after the event. This is especially likely, considering the currency continues to show strongly this year. Assuming that it remains on that path in the next few months, chances are it will experience an upswing after the next halving.

Bitcoin After 2140

One of the crucial aspects of Bitcoin’s survival is miners – the people who secure the network and verify transactions. Thus, a legitimate question is: what will happen to miners after every Bitcoin has been mined? After all, there won’t be any financial motivation – they will not be able to exchange their block rewards with cash. Will Bitcoin continue to function?

Fortunately, the network’s creator, Satoshi Nakamoto, envisioned this and addressed it with this statement: “Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.” What this means is besides block rewards, the Bitcoin protocol also provides transaction fees as a “compensation” option.

The transaction fees will rise after the maximum supply is reached; hence, mining will not be a loss. The only caveat is: currently, the fees pale in comparison to the reward of Bitcoins. However, as the rewards continue diminishing, the transaction fees will increase. The final result is the transaction fees will become valuable enough so that miners should continue verifying transactions. So, while new Bitcoins cease to enter into circulation, Bitcoin miners still get a payday. 

As these exciting chapters for the world’s pioneer’s currency continue to unfold, we can only wait and see how it holds up. It should particularly be interesting to see the coin prove its mettle after the next “halvening.”

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Cryptocurrencies

Bitcoin Cash (BCH) – Everything You Need to Know

We cannot talk about Bitcoin Cash without understanding the fundamentals of Bitcoin. Bitcoin was created in response to the financial crisis of 2008/2009. Satoshi Nakamoto, the creator of this revolutionary network, envisioned a world where people would transact financially without the need for intermediaries. Bitcoin did not just eliminate intermediaries in financial transactions. It also made transactions more secure, convenient, and faster.

However, scalability issues, slow transaction speeds, and extortionate transaction costs associated with BTC prompted some stakeholders to discuss proactive measures to counter rising resistance from different quarters and competition from emerging solutions. This led to the ultimate birth of BCH – or bitcoin cash.

The Birth of Bitcoin Cash

Bitcoin Cash was launched in August 2017 by the Bitcoin network as its hard fork, with the primary objective of improving scalability. A hard fork is simply an alternative of the original coin – the BTC. And since the alternative – in this case, the Bitcoin cash- could not be accepted by 100% of the users, there was a split. And this led to the birth of the Bitcoin Cash.

In this case, Bitcoin cash is similar to the original bitcoin, but not necessarily identical. Bitcoin cash was born as a result of the recommended updates to the BTC’s protocol that were not agreed upon by everyone.

To understand the need for BCH, we need to pause a little and reflect on some of Bitcoin’s limitations: the block size and scalability issues. Well, as you may know, transactions on the Bitcoin network are confirmed in blocks. And a single block is confirmed every 10 minutes. The maximum size of each block is 1Mega Bite, which can only hold a maximum of 2700 transactions. This, in turn, limits the Bitcoin network to about 2700 transactions every 10 min, which translates to 4.6 transactions per second.

Comparing that to the VISA network that processes 1700 transactions per second, you will understand just why Bitcoin scalability was an issue. As a result, two separate camps emerged with solutions to this scalability. One camp suggested the need to have the block size increased from the current 1mb to 8mb. Such that the network would be eight times faster. The second camp was against the whole idea of increasing the block size and instead looked for solutions to optimize transaction size handling. This debate went on for a while and eventually led to the proponents of a bigger block size creating the Bitcoin cash.

BCH key achievements

☑️Bitcoin Cash has comparatively cheaper transaction fees, estimated at $0.20 per transfer. That means people will save a lot of money, unlike with Bitcoin, which charges around $1 per transaction. It should be remembered that charges once shot up to an all-time high of $30 per transaction on the bitcoin network.

☑️Bitcoin Cash is way faster in processing transfers, so you won’t have to wait for an hour for a transaction to confirm.

☑️With Bitcoin Cash, more people can transact at the same time as it is capable of processing numerous transactions per second – 116 transactions per second. That is not the case with Bitcoin.

The above features have been made possible as a result of the Bitcoin Cash block expanding to 8 times larger than a Bitcoin block. This has consequently made BCH not only cheaper and faster than BTC but also a lot more scalable. That would explain why more people are adopting BCH as their preferred cryptocurrency in a fast-developing digital market.

Valuation of Cryptocurrencies – Bitcoin Cash Vs. Bitcoin

As a novice, you may be wondering where cryptocurrencies derive their actual value. Naturally, cryptocurrencies such as BCH and BTC get their value from their levels of adaptation, and that includes their use and demand.

Analyzing them from the points of growth in value as well as ROI, these two currencies hold substantial value. Bitcoin has been around for much longer and is more valuable, but Bitcoin Cash has been consistently gaining users, and hence, its value has continued to soar.

Bitcoin Cash may be one of the newest entrants into the market, but how it sought to address the drawbacks associated with “established cryptocurrencies” can only suggest good times ahead. First and foremost, scaling issues synonymous with Bitcoin are considered a major turn off to potential investors, and the fact that Bitcoin Cash conclusively addressed them comes as good news from every perspective you look at it.

The projection on the ground spells dark times ahead for Bitcoin unless their developers work harder in fixing the issues pointed out. In the meantime, Bitcoin Cash will continue serving as the popular choice for more people who would wish to transact with reliable cryptocurrency.

Conclusion 

Given how the globe is embracing crypto technology as an alternative to traditional banking and trade, structural advancements on Bitcoin Cash (and other cryptocurrencies) are inevitable. As we grasp with the growth of the digital scene, everything points towards a convenient, cost-effective way of transacting. Whether BCH will eventually attain its goal as the ultimate solution or not, we have already seen and experienced its purpose in wholesome. Save for the wars of recognition, all that seems to matter is how far or how strong BCH will hold on, and how it will push other currencies to follow suit in simplifying money transfer and trade in general for generations to come. 

So far, so good. The lines are being drawn on the distinction between Bitcoin and Bitcoin Cash. It doesn’t matter who produces the goods, but what the world needs is a reliable, consistent currency that puts the interests of the masses first. 

 

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Cryptocurrencies

Binance Coin: All you need to know

Binance coin is a crypto token created by the cryptocurrency exchange platform Binance. The coin is denoted by the symbol BNB. Launched in July 2017, the cryptocurrency initially ran on the Ethereum blockchain until Binance launched its own blockchain – the Binance chain. Binance coin has an overall limit of 200 million tokens.

The Binance Platform

Binance was founded by Changpeng Zhao, also known as CZ by crypto enthusiasts. It’s a global cryptocurrency exchange that’s currently the biggest crypto trading platform, at least by volume.

Users of the platform can use BNB to pay for fees on the Binance platform such as listing fees, exchange fees, trading fees, withdrawing fees, and any other fees. Like any other cryptocurrency, the coin can be traded against other supported cryptocurrencies.

Security Model and Transaction Processing

Binance Chain uses the Tendermint byzantine-fault-tolerant as a consensus protocol. This mechanism uses several types of nodes:

Validator nodes – a selection of the network community who vote to validate transactions

Witness nodes – These nodes witness the consensus mechanism and broadcast transactions to all other nodes  

Accelerator nodes – these nodes speed up the transaction process

Monetary Policy of Binance Coin

BNB’s market cap is at 200 million tokens. At its launch and Initial Coin Offering in 2017, 100 million tokens were released to the public, 80 million to the founding team, and 20 million to angel investors (high-net-worth individuals who provide financing for a startup in exchange for equity in the company).

Binance coin’s first year provided a 50% discount on trades, with the discount reducing by half each following year. The discount will end from the fifth year going forward.

To combat devaluation of the currency, Binance plans to use 20% of its profits to buy back Binance tokens and burn them until only 50% of Binance tokens are remaining in the market. (Coin burning means removing coins from circulation permanently, reducing a coin’s circulation. The burning process is recorded as a transaction on the blockchain, and it’s thus completely transparent)

How is Binance Coin Different from other Cryptocurrencies?

Binance differs from other cryptocurrencies like Bitcoin, Ether, Litecoin, etc. in at least these two ways:

First, It is an integral part and will, in the future, become the native currency of the Binance platform.

And secondly, users of Binance can use the coin to pay for the trading fees of the platform, which is way cheaper than paying the full fees

How to Buy and Store Binance Coin

If you wish to own Binance coins, you can acquire them via a cryptocurrency exchange. Since the Binance platform is a crypto exchange itself, you can get BNB by trading it with over 100 currencies. You can also trade BNB on IDEX, Gate.io, Trade Satoshi, etc. You can also buy it directly from Eidoo, Invest Feed, Kyber Network, etc.

Crypto coins are very soft targets for hackers – so it’s crucial that you safeguard them by securing them in a wallet. Some popular wallets where you could keep your Binance coin are Trust, Trezor, Enjin, Blox, Request, Metal Vault, Jaxx, Ledger, etc.

Uses of Binance Coin

☑️Buying goods and services across various establishments 

Binance coin has enabled various ways of using BNB to pay for products and services in an increasing number of businesses. An example is TravelbyBit, an Australian startup that has unlocked the ability of Binance and many other cryptos to be used by more than 150 establishments.

☑️Paying for trading fees on Binance

Crypto traders can save money by using BNB to cover crypto trading fees in the crypto exchange platform.

☑️Investing in other cryptocurrencies

You can use Binance coins to invest in new and innovative cryptos that are listed on Binance’s token launch program: the Binance Launchpad.

☑️Securing cash when you need it

Binance coins can be used to acquire loans through Nexo – a crypto-based loan platform, or exchange BNB for cash through Dether – a platform that allows people to trade the coin for money.

☑️Paying for certain social media services 

Social media has become an important part of people’s lives all over the world, and BNB is being used for various functions on social networks. For example, the coin can be bought on Investfeed – the crypto social network, or as a gift token on Uplive, a video streaming platform.

☑️Trading as an altcoin

Binance Coin can be traded on several cryptocurrency exchanges, including on the Binance platform. Other exchanges include Komodo, IDEX, kyber.network. 

Should You Invest in Binance Coin?

When deciding whether to buy (and invest) in Binance coin, consider the following facts about the currency:

Binance coin has witnessed unprecedented success and in a short amount of time. In only two years, it has achieved a 2.8 billion market capitalization.

A dedicated and industry-savvy team backs the Binance platform. This team had also enabled the crypto to stave off insecurity issues such as in 2018 when they successfully repelled a malicious attack.

As of October 2019, the price of the coin is $18 – a growth of more than 10,000% since its launch

Its progressive economic model of burning coins should see it continue to increase in demand and token value.

Conclusion

Binance coin has become a force to be reckoned with in the crypto space. Cryptocurrency traders can not only invest in the coin but also use it to duck high fees while trading on the Binance platform. And with the current growth rate of the currency, it is set to increase in value, especially after the launch of its own blockchain. Thus, BNB is a great asset option to add to your portfolio.

 

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Crypto Daily Topic

Cryptocurrency market whales – Market manipulation

Advancements in the IT technology sector globalized almost every single market in the world. People are exposed to more information and content than ever. This brings many opportunities but also false information. Many people have put traditional market trading aside and chose cryptocurrency trading instead. Cryptocurrency markets bring more risk with them due to extreme volatility, but this also means more opportunity. However, most traders do not know how these markets are “playing out” in the real world, and reality hits them only when they lose their hard-earned money.

This article will hopefully shed light on how big market participants can influence the markets in a somewhat shady and secretive way.

Who are the whales?

As we mentioned in the previous articles, whales are people with enormous amounts of capital to invest in cryptocurrencies. They can be financial institutions but also groups of high net worth individuals. Over 40% of Bitcoin is currently owned by a small minority of people (around 1,000). With this much money in their hands, market manipulation can be quite easy.

Why does market manipulation even happen?

The answer is quite simple: Mostly to profit from it. Some people might indicate that a growing Bitcoin is not an ideal thing from the perspective of financial institutions and governments as they want to keep power in their own hands. However, there is no proof that this is the main reason for market manipulation. As with any tradable asset, people are concerned with their portfolios and risk management, and market manipulation maximizes reward potential while minimizing risk.

Two most common ways of whale market manipulation

CFD and manipulation

Many people thought that putting Bitcoin in front of a broader audience would be a good thing. However, not every way of putting it in front of the whales is a good way to do it. With CME launching their Bitcoin futures, people were expecting great things. Little did they know that this would be one of the main contributors to Bitcoin’s manipulated price.

CFD contracts are trading Bitcoin contracts, but are not actually settled in Bitcoin. This has opened a whole new way to manipulate the cryptocurrency markets.

CFD traders would short Bitcoin and then use their immense funds to influence the real Bitcoin market to drop in price. This is extremely profitable as the whales profit both from settling the short-selling contracts and from rebuying Bitcoin at a lower price. This type of market manipulation has become so obvious that, as CME futures are being settled every last Friday of the month, Bitcoin’s price falls dramatically just a few days before that. This has not happened once or twice, though; it has become a monthly occurrence.

Market spoofing

Another way of influencing the price into rising or falling is by controlling the market sentiment. This is what whales use to complement their CFD positions, or just to make a profit from trading directly. Any trader that has large enough capital can affect cryptocurrency prices simply by using a strategy called spoofing. Spoofing can be described as putting an enormous buy and sell orders above or below the current price with no intention of letting the orders fill, but rather than just wanting to “guide” the market in a specific direction. After the market acknowledges the whale position, it moves the opposite way as it sees the order as a buy/sell wall. As soon as it impacts the market, the order is taken down, and the cycle can repeat. This strategy is very cunning, but it is also very effective. But, has order spoofing contributed to Bitcoin going up and down?

The answer is both “no” and “yes.” Yes, spoofing occurred and is currently happening in Bitcoin and altcoin trading. Spoofing is undoubtedly affecting the price to change directions regularly. However, it was never done in such an obvious way that we can undeniably say that spoofing caused a significant market trend to change direction. Spoofing might have impacted the lower time-frame market direction, but to say that it altered the market in a big way would be far-fetched.

Conclusion

Whales control the cryptocurrency market just as they control any other market. As cryptocurrencies are a rather new concept, institutions have not immersed themselves fully into crypto trading. However, the market manipulation that they use is far more effective in this market as traditional markets tend to be far more liquid and less susceptible to manipulation. Traders should consider this whenever they take a position.

On the other hand, not everything is bad. Traders can actually use the knowledge of how markets work and implement the possibility of market manipulation into their strategy. If done correctly, it may bring additional profits or mitigate losses.

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Cryptocurrencies

Understanding Litecoin – A step by step guide

Litecoin is a peer to peer, decentralized digital currency that is based on the Bitcoin protocol. It uses Scrypt as its proof of work (an algorithm for confirming transactions by other network participants). Litecoin (LTC) uses blockchain technology to maintain a public ledger of all transactions. The currency is referred to as Bitcoin’s lighter sibling as it was created using the Bitcoin source code, but it can be mined 4 times faster than Bitcoin (BTC). This, in addition to its lower price, makes it more suitable for faster, everyday purchases.

History of Litecoin 

Litecoin was created in 2011 by Charlie Lee, a former Google employee. It was released on October 7, 2011, via the open-source client GitHub, with the network going live on the 13th of the same month. This makes it the first altcoin – a term used to describe all other cryptocurrencies besides Bitcoin.

Since it was launched, it has experienced stable growth and ranks 7th in market capitalization today. Charlie’s mission was to create a cryptocurrency that had the same tight levels of security like Bitcoin, but more suitable for everyday transactions.

Differences between Litecoin and Bitcoin

Litecoin is, by its creator’s own admission, a clone of Bitcoin. If we are to understand Litecoin, comparison with Bitcoin is therefore necessary. These characteristics set the two cryptos apart: 

☑️Mining Algorithm: Both currencies use a proof-of-work algorithm. Bitcoin uses the SHA-256 algorithm, whereas Litecoin uses Skrypt. The SHA-256 is famous for its complexity and uses more power, while Scrypt is computationally less intensive and uses more memory, but also less power.

☑️Transaction Speed: Litecoin’s block time, i.e., the time it takes to process a block, is 2.5 minutes while Bitcoin’s is 10 minutes. This makes Litecoin 4 times faster and also more capable of processing more transactions in any time frame.

☑️Total Coins: Bitcoin has a market supply of 21 million coins, while Litecoin maxes out at 84 million. While it would appear that Litecoin has more potential, both cryptos have the ability to be broken down and transferred in very tiny amounts (for example, the minimum for BTC being a hundredth million or 0.000 00001). With both currencies being able to be divided down so much, the cost of one full coin is not consequential as it may seem.

☑️Rewards: When someone mines a block, they are rewarded a certain number of coins for their contribution to the network. The current block reward for both BTC and LTC is 12.5. Bitcoin’s rewards are halved after every 210,000 blocks have been mined while Litecoin’s reward halving happens after every 840,000 blocks. Because of the block time difference of 2.5 min and 10min for LTC and BTC, respectively, there is more opportunity for LTC miners to be rewarded. 

Current Litecoin Statistics

Litecoin is currently trading at $55.92, with its market cap being $3.5B. Its 24-hour volume is $2.6B and its circulating supply of 63, 476, 342 with a maximum supply (market cap) of 84 million. Its All-Time High was $375.29 in December 2017 with its All-Time Low being in January 2015 at $1.11. 

Characteristics of Litecoin

Just like with other mineable cryptocurrencies, Litecoin has several familiar elements that differentiate it from other types of digital currencies. Some of these are:

☑️Pseudonymous addresses – meaning users can transact without revealing their personal credentials, but the public address still having the possibility of being linked to them

☑️Blockchain – which is a public ledger where all transactions are recorded  

☑️Block Rewards – people who perform the computational work to effect transactions on the BLockchain are rewarded with a specific number of LTC coins   

☑️Transactions are peer to peer (meaning between two computers, without a regulating authority), and are censorship-resistant (meaning no corporation or government can interfere with them) 

How to Invest in Litecoin 

Investing in Litecoin means swapping your currency for Litecoin currency. For instance, 1 Litecoin is equal to $54.81 today. When the value of Litecoin rises, you can exchange Litecoins back to dollars. To invest in Litecoin, you need a digital wallet. So far, Coinbase is one of the best digital wallets where you can buy/sell and store your Litecoins and other cryptocurrencies.

What are the Risks of Trading Litecoin? 

As with other cryptocurrencies, there is not much history to compare the future performance of Litecoin. Since it’s still so “young”, the question of how you can estimate its future value is difficult to answer. Here are some risks associated with trading Litecoin: 

  • Changes to international capital controls may cause a decline in demand for cryptocurrencies. Countries such as China have laws that regulate the flow of capital out of the country – driving people to invest in cryptocurrencies to circumvent such restrictions. A change in these laws could affect Litecoin’s demand.    
  • Cryptocurrencies are still largely unregulated, rendering them a risky option for some
  • Litecoin is prone to market fluctuations – though many investors regard this is a positive risk 

Uses of Litecoin

Litecoin can function as any fiat currency (money that has been declared by the government as legal tender), and it can be used to pay for goods and services. An increasing number of businesses are accepting Litecoin as a legitimate means of exchange. From pet supplies to jewelry to cars to music to health and beauty, food, and travel, there are many places where the currency can pass.

You can also transfer quickly Litecoin to anyone, anywhere, thanks to its short block time and confirmation rate. 

Also, due to its often wild fluctuations – much like other cryptocurrencies, it is a very attractive investment for investors, who can bet on its exponential increase at any given time.  

Conclusion 

Litecoin has witnessed steady growth since its creation and by the look of things, it will only become stronger. This is due to its impressive processing time, and its adoption by trusted crypto exchange and storing platform, Coinbase. Remember, before investing in Litecoin or any other cryptocurrency; it’s important to do your research.

 

 

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Crypto Daily Topic

Is Blockchain overrated?

Blockchain is a form of distributed ledger technology. It has very specific technological features that differentiate it from other forms of a distributed ledger. Every transaction that blockchain processes is linked into groups of records. This way, blockchain forms a chain of blocks of transactions, which is where it got the name from. Bitcoin is a true example of proper blockchain use. It is entirely open, and anyone can contribute to its code and give their opinion on how to improve it.

This article will hopefully provide insight into how blockchain is used, promoted, and what’s wrong with the marketing industry nowadays.

How is blockchain promoted?

Blockchain seems to have become a magic buzzword when it comes to crowdfunding as of lately.  Many companies proudly state that they have implemented blockchain technology in one of their aspects of business, or that they will extremely soon. Truth be told, this has brought an immense interest to these companies, especially the blue-chip companies that had nothing to do with cryptocurrencies before.

People have started associating blockchain with security, decentralization, immutability, etc. and they are not wrong. However, what many people don’t understand is that most of these companies did not even implement a true blockchain. Instead, they made a centralized version of it.

Pillars of an open blockchain

Andreas Antonopoulos has established that an open blockchain can be described by five attributes: open, borderless, neutral, censorship-resistant, and public. If a company implements anything other than a blockchain that doesn’t have these five attributes, it doesn’t really need a blockchain. It requires a boost in marketing, which it will get through parading the word blockchain.

Open blockchain

Open blockchain means that anyone can participate in it and that everyone can access it without authorization, vetting, or ID checks. An open blockchain does not know or care if you are even human. Both people and software can use blockchain without any restrictions.

Borderless blockchain

Just as the word says, blockchain has no borders. Blockchain is international and does not care where its users are from. It should be a truly international phenomenon.

Neutral blockchain

Neutral means that each part of the information on the blockchain is free. While cross-border money has to sometimes go through security checks, neutral blockchain does not care who the funds or information is traveling from or to, what matters is that they get to the destination.

Censorship-resistant blockchain

Censorship-resistant blockchain means that there is no personal, corporate, or government body that can stop a transaction from occurring. A true open blockchain does not require any authorization, but it also does not get affected by anyone wanting to stop or reverse transactions.

Public blockchain

Public blockchain means, simply put, that every transaction of information or funds through it is entirely transparent and verifiable. It ensures that no one can “cheat” the blockchain.

These five pillars build a truly open blockchain. Anything that does not have these five attributes is not an open blockchain.

What’s wrong with a non-open blockchain

Blockchain has been created as an improved ledger system that can solve many problems safely, quickly, and more transparent. However, most companies are not trying to implement an open blockchain system because they don’t want to. They want to remain centralized and have a closed blockchain governed by the company itself. So, is it so bad that they wish to remain centralized?

No, it is not wrong. Any entity can decide what it wants or does not want. However, using the word blockchain gives false expectations to people. Whenever blockchain implementation has been mentioned, people flock with their money and start buying shares of said company, with expectations of improvement towards decentralization. However, that does not happen.  Even if companies implement something that they call blockchain, it is not an open blockchain, rather a distributed ledger that does not have all of the characteristics of blockchain.

Conclusion

Using blockchain as a buzzword for generating funds is certainly a good marketing move, but it is borderline illegal. People are given false hope, which is allowed and accepted only because most people do not know what a true blockchain is. People associate blockchain with Bitcoin and all its aspects, which is why they decide to invest their money into a promising concept implementation into a big corporation.

 

 

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Cryptocurrencies

Understanding Ethereum – A Step-by-Step Guide

When we thought we had heard it all about blockchain, and what it does, Ethereum sprang up. To many, it was seen as just another Bitcoin, but what most people didn’t know was that the project presented a timely idea, and a life-changing one whose implementation was bound to lead the world to new paths.

I know you’ve probably heard about Ethereum, but you’ve probably dismissed it as just another crypto. But what is it in the first place? Could it be just another crypto? Is it the same thing as ether? And what is it used for? Well, in this article, I’ll be expounding it in detail to answer these and to show you why Ethereum is not just another crypto.

What is Ethereum?

For starters, Ethereum is a software platform that allows developers to generate and deploy decentralized applications that are accessible globally. If you want to create a decentralized application, that not even you can control, then the Ethereum platform is the place to go. All you need to do is understand Ethereum’s programming language – solidity – and begin coding.

In simple words, Ethereum is the infrastructure that lets you run decentralized apps worldwide.

You will find some people using the words Ethereum and ether interchangeably. So is Ethereum and Ether one and the same thing? Well, let’s find out.

Ethereum and Ether – Are they any different?

The concept of Ethereum and Ether can be a little confusing. When we hear Ethereum, we are quick to associate it with other cryptocurrencies like bitcoin. To make it clearer, Ethereum is a platform built on blockchain where developers can build and deploy thousands of applications using smart contracts.

Ether, on the other hand, is the fuel that powers the Ethereum network, and the programmable money sold on cryptocurrency exchanges. 

The same way you’ll need gas for your car, ether is necessary for you to deploy and run applications on the platform. Ether is the power behind smart contracts and running DApps, token generation during ICOs, making payments, and facilitating transactions on the ETH blockchain.

In summary:

Ethereum is the platform; ether is what powers the platform

Ether can be bought and sold, Ethereum cannot

Ethereum has multiple applications; ether has a single application, enabling operations on the parent blockchain.

So, are Ethereum and Bitcoin similar?

Well, the two are similar in that they are both blockchain networks, but there are some significant technical disparities between the two. There is a very substantial difference between Bitcoin and Ethereum in both purpose and capability. While the former track’s ownership of digital currency, the latter’s primary focus is to support decentralized applications. 

In short, we can say that Bitcoin is a peer-to-peer currency that can be transferred instantly between transacting parties securely. Ethereum, on the other hand, supports smart contracts. And if you are wondering to yourself what a smart contract is, then you will be pleased to know that at the core of these Decentralized applications is a smart contract. So, what exactly is a smart contract?

What is a Smart contract in Ethereum?

A smart contract is simply a phrase coined to describe best “a computer code that can veto the exchange of property, money, content, shares, or anything valuable.” In blockchain language, a smart contract is a self-executing computer program that completes whenever certain conditions are met. It is a programmed code that runs without the possibility of third-party influence, fraud, downtime, or censorship.

All blockchains can process code, but most of them are limited. With Ethereum, it becomes different. Instead of allowing for limited operations, Ethereum lets developers create as many applications as they can, something never experienced before.

What are the uses of Ethereum?

The main use of Ethereum is to enable developers to create and deploy decentralized apps where these decentralized apps, also known as DApps, serve particular functions to users. By virtue of being built on a blockchain, decentralized apps are not controllable by any person or central system.

Ethereum can be used to decentralize any centralized service. From the existing intermediary services across a myriad of industries such as bank loans to other seemingly less interesting systems like voting and title registries, Ethereum can be used to get them all decentralized.

Another objective use of Ethereum is in the building of Decentralized Autonomous Organizations (DAO). This is an organization with no apparent leadership, run exclusively by programming code on a variety of smart contracts recorded on the Ethereum blockchain. The code takes the position of organization rules and structures, totally eliminating the need for a centralized control like in a traditional organization. Anyone who purchases tokens becomes a part-owner of a DAO, but instead of converting tokens to equity shares, tokens give people voting rights.

Ethereum is currently being accessed as a reliable platform for launching other cryptocurrencies. Following the ERC20 token standard laid down by the Ethereum Foundation, interested developers can also start their own versions and raise funds through an ICO. Through this strategy, token issuers set the amount of money they intend to raise before offering it in a crowd-sale in exchange for Ether. The last two years alone have witnessed ICOs raising Billions of dollars on the Ethereum platform.

Conclusion

For all the talk of decentralizing the system, Ethereum appears to be the ultimate solution. Its rise is suggestive of a market ready to embrace positive changes, and a platform for development in an area previously shadowed with uncertainties. It presents a bold claim for a futuristic technology unreliant on third-party forces, including social and political interferences. 

 

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Cryptocurrencies

The Features and Uses of Cryptocurrencies

Unless you’ve been living under a rock, you must have heard or seen the buzzword “cryptocurrency” or at least “bitcoin” in financial headlines or somewhere else. The point is, cryptocurrency has captured people’s imagination with its intriguing technology and its potential to become a powerful global currency in the future.

Most people know about the existence of cryptocurrency, but its use remains elusive.  If you’ve been racking your brain with questions like: what’s the use of cryptocurrency? What characteristics define it? Why should I pay attention? We have the answers for you. 

Properties of Cryptocurrencies

In the digital currency space, cryptocurrencies have some inherent features that starkly differentiate them. Here’s what makes Bitcoin, Ethereum, Zcash, NEM, Stellar, and other cryptos special.

1. Free of permission

At the core of cryptocurrencies are open source software and consensus-driven technology. Anyone and everyone can access the software needed to mine, trade in, and to complete transactions using cryptocurrencies. Since it is not regulated by anyone, you do not need permission from any authority to use it. 

2. Immutable

In its simplest sense, immutable means “cannot be changed.” Once a transaction is done, it’s done. This means that it’s impossible for anyone in the entire world to move a cryptocurrency asset apart from the owner of the private key. Also, a transaction cannot be reversed once it’s on public record on the blockchain ledger. 

3. Highly secure 

Not only are cryptocurrencies encrypted with extremely complex algorithmic patterns, but they also have an extra layer of security in the form of blockchain technology. Blockchain’s decentralized and transparent nature is such that even if malicious parties manage to hack the system, there’s nothing of value to steal. 

Also, most cryptocurrencies have servers all over the world with thousands of nodes tracking all activity in the networks. This ensures that even if some servers and nodes fall prey to hackers, the rest of the nodes will continue running the system. 

4. Deflationary

Most cryptocurrencies have a capped market supply, rendering them scarce. For example, Bitcoin has a maximum issue of 21 million coins – and that is the total number that will exist, ever. This makes the currency a prized and attractive asset. As its demand increases, its supply remains the same. This increases its value over time, making it deflationary. Cryptocurrency owners never have to worry about their asset value decreasing. 

5. Anonymous and Pseudo-anonymous 

Since there’s no governing authority on cryptocurrency networks, users do not have to provide proof of identity while transacting on the networks. It’s anonymous in this sense. However, it’s pseudo-anonymous in the sense that when a transaction request is submitted, the decentralized system will verify it and record it on the public ledger. Any person who transacts is linked to a public address, though no one will know the actual name of the address.

6. Trustless 

The decentralized nature of cryptocurrencies is such that nobody has to trust anyone for transactions to occur. Users utilize a technique known as consensus to interact with each other without needing validation from anyone but the system. When a transaction is entered in the network, all nodes will receive it and verify if the digital signature is genuine or not. If it’s genuine, the nodes will record it on the blockchain. If it’s not, the nodes will flag the transaction and discard it.

Uses of Cryptocurrencies

Now that we’ve explored what makes cryptos unique, the curious part is whether they’re worth the hype. 

It turns out cryptocurrencies are very useful in the real world. At least in the areas below:

✅Low-Cost and Fast Money Transfer

Many cryptocurrency enthusiasts and users will acknowledge one of the finer purposes of cryptocurrency is their ability to send and receive money at incredibly fast speeds and impressively low costs. The speed of transactions is a very critical part of any financial system, and cryptocurrency excels at this.

When compared with the traditional payment systems which take several days, even the slowest cryptocurrency is lightning fast – with transactions of minutes, and others mere seconds. What makes this possible is: all that’s needed is for a miner to decipher an encryption, after which a transaction is confirmed.  

✅A Censorship-resistant Alternative to Wealth storage

The freezing of someone’s assets and cash is easier than most people think. This is especially true in jurisdictions with an unfair rule of the law. All it takes is to be accused of financial misconduct or to run afoul of powerful people. In such a scenario, it’s easy to find yourself with no access to cash, even if you are not guilty of any wrongdoing. 

With cryptocurrencies, this can never happen. This is because it’s only the holder of the bitcoin currency who has the key to access their bitcoin wallet.

✅Private Transactions 

Some cryptocurrencies such as ZCash and Monero are inherently privacy-centric – they enable users to make anonymous transactions on their network. This way, individuals do not have to be interrogated by a bank on where their money came from, why they are sending large amounts of funds and who the recipient of the money is.

This also makes them a welcome alternative to the usual labyrinthine process involved when you’re transferring a lot of money – an aspect that causes people on both ends to be stranded for days.

✅Cashless Remittances  

Non-cash remittances are more secure, more convenient, and easier to track. Cryptocurrencies are unparalleled in this regard – especially with their added characteristic of water-tight security courtesy of advanced encryption.  

For instance, Nigeria’s blockchain startup allows users to send money from anywhere in the world to a selection of African nations. Diaspora Africans can buy SureRemit’s tokens and use them within the mobile app version to purchase mobile airtime and pay utility bills for their loved ones in Africa.

Conclusion

Cryptocurrency has revolutionized the finance world with unique offerings which, going by current indications, will render it more dominant in our interactions with money. With its unique security system, cheap costs, and swift transaction speeds, it will continue to find more applications in the real world. 

 

Categories
Cryptocurrencies

Everything You Need to Know About Cryptocurrency and the Rise of Digital Currencies

Cryptocurrency has taken the financial space by a storm. It’s almost impossible to go for a week without hearing of a new cryptocurrency being launched or another one soaring to record highs, sending savvy investors rushing in. For most people, though, the concept remains foggy if not downright complicated. In this article, we break down everything about cryptocurrency, including: is it the same thing as digital currency?

Cryptocurrency is an internet-based medium of exchange. “Crypto” refers to the fact that the currency uses cryptography to secure and verify transactions and regulate the release of new units. One of the most defining features of cryptocurrency is that it relies solely on the internet: it has no issuing or regulating authority, nor is it bound by geographical restrictions.

Cryptocurrency or Digital Currency?

It’s easy to conflate these two terms, especially since financial analysts and the media often use them interchangeably. So what’s the difference after all? The key thing to grasp is that all cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies.

Digital currency is the term for any form of money that’s available only in digital form. This money is not tangible like, say, coins. Digital money can be transferred from one person to another, be traded for another currency, and can be used to transact, just like physical money. It can also be sent to and received in any place in the world.

The defining difference between cryptocurrency and digital currency lies in one word: crypto. Cryptocurrencies are a form of digital currency that is based on cryptography – a technique that combines elements of art, science, and mathematics to convert readable text into unintelligible text so that information is secured from unauthorized parties.

If you’re looking to invest in cryptocurrency and are still confused about what it is or you just want to sound smart when you’re talking about digital currencies, then it helps to know exactly the difference between the two.

Differences between Cryptos and digital currencies

☑️Structure: Digital currencies are centralized, meaning their transactions are regulated by a particular entity, like a bank. Cryptocurrencies are decentralized, meaning regulation within the network is done by the community in the network.

☑️Transparency: Digital currency transactions are confidential. Cryptocurrency transactions are transparent and are in public record, i.e., anyone can see the transactions of any user since transactions are recorded on an open chain – the blockchain. 

☑️Potential for Manipulation: Digital currencies have a centralized system that can exert authority over transactions – like canceling or freezing them at the request of a legitimate party. Cryptocurrencies are not controlled by any authority, and cannot be manipulated. 

☑️Legal Status: Most countries have established a legal framework for digital currencies. For cryptocurrencies, the same cannot be said, at least currently.

Common Cryptocurrency Lingo

You don’t have to be the originator of Bitcoin to understand some of the most common “cryptocurrency speech” around. Here is a definition of some of the most used words to ease you into the world of cryptocurrency.

☑️Blockchain: Every new record in a cryptocurrency network is recorded as a “block.” It’s so-called because it’s resistant to alteration. Blocks are linked together by cryptography – hence “blockchain.”

☑️Mining: This is the process of verifying transactions before they are recorded on the blockchain network. Mining involves solving complex computational puzzles and decrypting codes.

☑️HODL: “Hold On For Dear Life,” meaning holding onto your cryptocurrency coins despite unfavorable market conditions.

☑️Altcoins: This is the name given to all other cryptocurrencies after Bitcoin – the first and most successful cryptocurrency to date.

☑️CAP: This is a shorthand of market capitalization, which means the total number of coins in supply multiplied by the going price.

☑️Peer to Peer: In a peer to peer model, two or more computers interact directly with each other without the intervention or presence of an intermediary.

The Rise and Future of Cryptocurrency

Only years ago, cryptocurrency was an academic concept explored without much success. That was until 2009 when the first cryptocurrency was launched and took the world by storm. Since then, thousands of cryptocurrencies have been launched with varying levels of success. Today, the cryptocurrency model is being explored by institutions: including governments and financial institutions to make processes more efficient and secure 

If the success of Bitcoin, the most popular cryptocurrency, is anything to go by, then the future of cryptocurrencies is bright. Other cryptocurrencies such as Ripple, Ether, Litecoin, and Cardano have commanded a significant share of attention and investment. Initial Coin Offerings (ICOs), akin to the shares of a company, continue to generate excitement and interest in the crypto market.

How Can You Buy and Use Cryptocurrency?

The most important thing is to know how you can benefit from cryptocurrency and how to stay safe while doing so. Whenever you purchase a cryptocurrency, you become the owner of a private key to the wallet address of the coin(s).

With this key, you can access and spend your bitcoin to pay for things or transfer to anyone. Where you place your key is crucial because it means the difference between holding your valuable coins and losing them. So, how do you safeguard your coins? Innovative individuals and companies have come up with crypto wallets that, apart from protecting them from theft, enable you to store, send and monitor their balance. Here are the various types of wallets available today.

Desktop wallets: This type of wallet allows you to send and receive cryptocurrency addresses on your computer. An example is Cryptonator, which enables you to store several cryptocurrencies in one account.

Online wallets: These are web services that allow you to store your cryptocurrencies online. You can access them anywhere, anytime. 

Mobile wallets: These are apps that allow you to encrypt your cryptocurrencies and pay for services right from your phone.

Paper wallets: These are pieces of paper with QR codes on them, one being the public address at which you receive your cryptocurrency, the other being your private address where you send them.

Hardware wallets: These are USB devices that store bitcoin electronically and keeps your private keys.  

Conclusion

By now, you should have a fair understanding of this exciting thing called cryptocurrency. Though a bit daunting at first, it’s an exciting and revolutionary technology with something to discover every day. Remember, like with everything, the more you learn about it, the more you get comfortable and possibly invest in its ever-growing potential.

 

Categories
Crypto Daily Topic

Whale Transfers and Their Influence on Bitcoin Price

If you are a bitcoin enthusiast or trader, you probably know that the markets are prone to price swings triggered by such things as government regulations, market news, and the good old supply and demand.

But are you aware of a lesser-known factor that could cause BTC prices to plummet, spike, or even affect their market value? Whenever you’ve seen a sudden boom or a decline in BTC prices, it’s very likely those movements were caused by a “whale.”

But what are Whales in Crypto Space? 

Whales are known to have an enormous size and sheer strength. In cryptocurrency trading, whales are the biggest and most influential players in the “ocean.”

The reference to whales in crypto trading originates from traditional financial markets and gambling circles. The very term “crypto whales’ should give you a clue of the utter power of these players. It’s not hard to realize that a single transaction made by them is enough to cause waves that will reverberate throughout the cryptocurrency ecosystem.

Who are the Bitcoin Whales?

The forefront question at this point is; just who are these so-called whales? Are they individuals, investment companies, are they even known at all? The answer is yes, and no.

Whales can be people with enormous amounts of capital to invest in cryptocurrencies, or they can be finance institutions like trusts and hedge funds. And yes, some whales are well-known people, beginning with bitcoin’s very creator – Satoshi Nakamoto, who is estimated to own at least a million bitcoins. Whales that are companies include Pantera Bitcoin Fund and Fortress Investment Group.

Currently, 40% of bitcoin is owned by just a thousand people. This means there are many anonymous whales in the market – and their movement could change the entire bitcoin landscape if someone decided to sell large portions of their holding.

How Whales Affect Bitcoin Prices  

The activity of whales can impact crypto markets significantly. Prices can dramatically decline or shoot up, and the market value can increase or decrease. When whales buy or sell a cryptocurrency, they do so in tens or even hundreds of millions, sending prices plummeting or spiking.

When a whale buys out massive volumes of BTC, it will drive the value of BTC high because it sends the signal that it is in demand.  The opposite is true for whale sell orders. BTC prices will drop because it will look like the currency is being disposed of, diminishing its value in the eyes of investors. 

To grasp the impact that whales can trigger on the market, consider when two anonymous whales sold over 13,000 BTC in 2018 (total value of the sell was more than $100 million). This fact caused the price to decline by a whopping $200 in just under 20 minutes.

Whale-Watching: How to Detect Whale Movement

In the crypto trading sea, it’s wiser to swim along with whales than to move in the opposite direction. So if you’re looking to buy or sell bitcoin, why not wait for a whale to emerge first?  Below are some clues that can help you spot whales on the horizon – before they make a big splash. 

Detecting When a Whale Is Buying:

If you’re a “small fish” wishing to buy bitcoin, doing so at the same time as whales can guarantee you good profits with low risks. Here are some tips for detecting when whales are buying:

☑️ Look For an Increase in Volatility and Price When the Markets Are Quiet 

If bitcoin has been trading at roughly the same price and suddenly there’s larger-than-normal volatility and price, there could be a whale or several whales who have entered the market.

☑️ Look Out for Strange Bid Sizes in the Order Book

Keep an eye out for significant increases in order books. If you spot a sudden swell in bid sizes, a whale might be in play. For instance, suppose the usual bid size is 1000 and the ask size 2000. When a crypto whale is trading, the order book will register abnormally high bid sizes.

Detecting When a Whale Is Selling

The very act of whales placing sell orders is risky for traders holding smaller positions because this usually liquidates huge sums of the asset. In this scenario, you don’t want to hold on to your bitcoins very long. Here’s how to track a selling whale:

☑️ Check Abrupt Cancellation of Large Buy Orders

If you just noticed big buy orders quickly vanish from the order book, there is a possibility that a whale or a group of them is about to do a massive offload (selling in large quantities).

☑️ Look Out For a Sudden Uptrend that quickly disappears

Did you notice a sudden surge in price momentum, which quickly disappears as fast as it came? It’s highly unlikely this change was triggered by market news or a disruptive news story. It signals the presence of a whale. 

☑️ Look out for A Strong volume Acceleration 

A rapid increase in volume is another indication a whale is in play. But just how big of a jump should you watch out for? Usually, you want to be on the lookout for more than 3x larger than the routine volume.

Conclusion

The inherent nature of crypto prices is they will always drop and spike from time to time. This is what makes cryptocurrency trading possible (and fun) because investors are betting against future movement of prices. Crypto whales are one of the most powerful price movers. Understanding what they are and when they are going to move could help you make more accurate and profitable trades.

Categories
Cryptocurrencies

Investing in an Early Stage of an ICO

Are projects (ICOs) worth looking at in the early stages?

This article will show you that while investing, one does not have to follow the crowd in order to be successful. During times where market timing is not in the best spot (with the whole crypto market going down) and people not wanting to diversify gains, as they rarely have any, people are scared of investing in ICOs. Most people just follow the crowd and the hype when it comes to ICOs. There are, however, many more factors that need to be included in the analysis. My previous articles have shown that an ICO needs to be looked at from many perspectives (token economics, team, social media, SEO part of the website…). But, what happens when an ICO is in the early stages?

Early-stage ICOs

Investing in the early stages of an ICO might be the way to acquire the best bonuses. But it is also a big risk, as there is usually not enough data for a conclusive analysis. So how do we determine if a project is worth investing in?

1. Project Idea – the most important thing with every ICO is the idea. It’s a problem they are trying to solve and the lifeline of their project. You can always judge the potential acceptance of the idea when it comes to ICOs, no matter how early it is in the project.

2. Team –it’s what makes the idea go from vision to reality. If we are looking at early-stage ICOs, this becomes even more important, as this is one of the few things we can just get it on. Both team and advisory board need to be impeccable.

3. Roadmap – Less value than the first, too, but is used to estimate the investment time frame.

4. Potential social media coverage – this part will probably be non-existent as the project is in the very early stages. However, some influencers might be on it as fast as you are.

5. The X factor – something that will intrigue other people. It is usually some part of the idea or their monetization plan.

What is important and noticeable here is: I didn’t list token economics or Hype/market traction anywhere. This is because we are looking at a potential gem project way too early for them to have these.

Conclusion

Early-stage ICOs are potential moneymakers and can bring you amazing returns. However, we are operating with insufficient data in the ICO analysis, so it brings a lot more risk. This means that compromising on any of the factors analyzed will cost people their investments. I would advise picking only the best of the best ICOs to invest in early on, or just keep an eye on them and wait for the data to present and the investment to be safer (and reliable).