Why should you make yourself familiar with cryptocurrencies and the Blockchain technology? If you already know the answer to this question, please scroll down and continue reading after the chart roughly in the middle of this article, where the Q&A section begins. In case you are interested in some basic information on meaning and purpose of cryptocurrencies please continue reading the following quote from an article published at Medium.com under the headline „Cryptocurrencies are not a bubble, they are here to stay“ on January 9, 2018 (https://web.archive.org/web/20201109025707/https://medium.com/@coinyspace/cryptocurrencies-are-not-a-bubble-they-are-here-to-stay-a140fe5ee2c2).
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„Everyone who has been advocating cryptocurrencies heard millions of times that the whole theme is nonsense, scam, bubble, hype, you name it. Many people are simply bewildered that some “numbers on computers” can become more and more valuable. As a result, there is a popular notion that cryptocurrencies don’t have intrinsic value, they are not “backed” by anything, and therefore their valuation is nothing but a bubble that will eventually burst.
However there is a fundamental flaw in this view. It is based on an assumption that in order to be sound, cryptocurrencies need to be backed by a tangible asset. This is not correct. Traditional currencies like the US dollar or GB pound are not backed by assets, they are backed by governments, i.e. by a social structure. Modern money is an institution, it is a set of rules established and maintained by society (like the army, the police or taxation), and this is how cryptocurrencies should be considered too.
Fiat money is a state institution, it derives its value from a government that enforces a currency as a legal tender. Cryptocurrencies are civil institutions, they derive their value from a mutually agreed consensus of voluntarily cooperating individuals. Fiat is backed by governments, cryptos are backed by independent communities. This is the fundamental difference. Fiat is the police, crypto is neighborhood watch. Fiat is tax — crypto is donation. Fiat is the army — crypto is militia.
Therefore when someone says that crypto has no intrinsic value, they do not really mean that bitcoin is not backed by a commodity like gold, unlike US dollar, because the latter is not backed by a commodity either. What they imply, either willingly or unwillingly, is that the power of communities does not hold the legitimacy to enforce its own currency (hence it is scam), or that the bonds uniting these communities are too weak for a sustainable future (hence it is a bubble).
What the critics are missing is that civil institutions do not pop out of nowhere without solid reasons. For instance, people unite looking for justice when the police are corrupt and ineffective. Militia are formed when a regular army is not capable of performing its duties, and so on.
The rise of bitcoin would not have been possible without the financial crisis of 2008, which highlighted how poorly the global financial system is designed. The continuing success of cryptocurrencies is fuelled by the inability of the establishment to reform the conventional monetary system to meet the demands of the 21st century.
So, the next time you hear that bitcoin is a bubble, and that the entire crypto world is a scam, ask one question: What is the alternative? The debt-based, usurious, speculative, rent-seeking, ineffective, outdated financial system, incapable of delivering peace and prosperity, despite the enormous technological progress humanity has achieved? In fact, the system is so corrupt that it even sees progress as a risk, not an opportunity.“
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The Canadian Entrepreneur and Professor for Management, Don Tapscott, published an excellent article on January 26, 2018, under the headline „Why blockchain is dominating discussions in Davos“ (see: https://goo.gl/VpUq5M). He reminds us once more that it is a big mistake to assess the potential of Blockchain technology just from the perspective of a rich and contented first-world resident – at least for three major reasons:
(1) Blockchain technology bears the potential to bring billions of people, who have no bank accounts and limited access to capital, predominantly in developing and emerging countries into the economy by utilizing cheap SmartPhones with simple Apps.
(2) „70% of the people in the world, who own land, do so under tenuous, disputable titles, with the consequence, that these people can easily be expropriated when corrupt governments or dictators come to power. Proof of land ownership is more important than having a bank account. If you don’t have a valid title to your land, you can’t borrow against it and you can’t sell it. Blockchain technology can change this.
(3) The biggest flow of funds from the developed world to the developing world is not corporate investment or foreign aid. It’s remittances. People, who have left their ancestral lands, are sending money back to their families at home. Today, a significant amount is skimmed off the top by companies such as Western Union or PayPal which process these money transfers. A 10% fee is typical, generating huge profits at the expense of very poor people.
Conclusion: Independently of what you think of the Bitcoin or Crypto Asset hype („bubble“, „fraud“, „Ponzi scheme“, „money laundering“, „arms and drug trafficking“, „tax evasion“), I would definitely recommend everyone to gather practical experience with Crypto Assets as practical use case of Blockchain technology even as a private individual. Therefore, after all the theory let’s now get down to the practical details.
There are obviously many „investors“, who feel attracted by the price of a Crypto Asset – see analysis on the price development of „penny crypto coins“ provided by Kyle Samani via Twitter on January 5, 2018, with regard to the price development of „penny crypto coins“: https://twitter.com/KyleSamani/status/949108948057100288. These speculators or investors overlook the fact, that you can buy fractions of Bitcoins down to the smallest unit „Satoshi“, which is 0.00000001 Bitcoin. Before you invest your money into Crypto Assets, I would in any case recommend to take a close look at the business model of the crypto asset, the team behind the crypto asset, the value add provided by the crypto asset, the development of the crypto asset to date and the market capitalization already achieved.
There are various ways how to buy Crypto Assets such as Bitcoin and there are many potential rookie mistakes, which cause unnecessary fees, e.g. purchasing fees (e.g. for buying Bitcoin at Exchanges or via Bitcoin Credit Cards such as Bitwala, Ten-X, Bitpay or Cryptopay), network transfer fees (for transfer of Crypto Assets between Exchanges) or transaction fees (for purchasing Crypto Assets). Selecting the wrong way can lead to accumulated fees of more than 10% of your committed capital instead of less than 4%.
It’s not recommendable at the moment (= turn of the year 2017/18) to use Bitcoin for money transfers from one Exchange (e.g. Bitfinex, Kraken, Binance, Bittrex) to another, simply since the fees are too high. The transaction fees of Ripple (XRP), Bitcoin Cash (BCH), Litecoin (LTC), Dash (DASH) or Ethereum (ETH) are significantly lower, at the moment than transaction fees of Bitcoin (BTC). In general you should try to avoid transfers of Crypto Assets between Exchanges since they cost money. A German Crypto trader wisdom says „Hin und her macht Taschen leer“, which can roughly be translated as „back and forth makes wallets empty“.
Complementary to my three Blogs which provide comprehensible introductions into Crypto Assets and Blockchain technology I decided to build up a list with the most relevant questions and adequate information sources answering these questions. The list will be continuously enhanced and updated. If you have proposals for additional questions and information sources, please feel free to post a respective comment.
Particularly (but not exclusively) for Crypto Asset rookies I do recommend to take a look into my three Blogs at first:
- „The most important facts and milestones on Bitcoin and Blockchains“ published on August 27, 2017: https://kubraconsult.blog/2017/08/27/the-most-important-facts-and-milestones-of-bitcoin-and-blockchains/ (German version: https://kubraconsult.blog/2017/08/21/die-wichtigsten-fakten-und-meilensteine-zur-bitcoin-kryptowaehrung/)
- „A Letter to Jamie Dimon – and anyone else still struggling to understand cryptocurrencies“ published on November 27, 2017: https://kubraconsult.blog/2017/11/27/a-letter-to-jamie-dimon-and-anyone-else-still-struggling-to-understand-cryptocurrencies/ (German version: https://kubraconsult.blog/2017/11/27/ein-brief-an-jamie-dimon-und-an-alle-anderen-die-noch-immer-mit-dem-verstaendnis-von-kryptowaehrungen-zu-kaempfen-haben/)
- „Why Bitcoin&Co. are by far not the biggest issue in our global financial system“ issued on November 28, 2017: https://kubraconsult.blog/2017/11/28/why-bitcoinco-are-by-far-not-the-biggest-issue-in-our-global-financial-system/ (German version: https://kubraconsult.blog/2017/11/29/warum-bitcoinco-bei-weitem-nicht-das-groesste-problem-in-unserem-globalen-finanzsystem-sind/)
A high level summary of these three Blogs is provided in the following two charts:
THE MOST IMPORTANT QUESTIONS AND INFORMATION SOURCES AROUND CRYPTO ASSETS
- Which crypto assets (coins and tokens) do exist? How many crypto assets do exist? What is the overall market capitalization of all crypto assets? What is the market capitalization per crypto asset? What is the current price per crypto asset? What is the current trading volume per crypto asset? https://coinmarketcap.com/all/views/all/ (same list only for coins: https://coinmarketcap.com/coins/views/all/; same list only for tokens: https://coinmarketcap.com/tokens/views/all/) or or „Eight alternatives to Coinmarketcap“: https://bitzamp.com/8-alternatives-to-coinmarketcap/
- Where do I find a comprehensive comparison of Exchanges for crypto assets including detailed information on the respective Exchange, the current exchange rates of the largest crypto assets, a short description of the Exchange including where their headquarters are located, the current fees, information about the Deposits and Withdrawals and a User Forum? https://www.cryptocompare.com/exchanges/#/crypto
- At which Exchanges/Marketplaces has the biggest crypto asset trading volume been bought/sold within the last 24 hours (trading volume per coin)? https://cryptocoincharts.info/markets/info or https://coinmarketcap.com/currencies/volume/24-hour/
- Which crypto assets have been the biggest winners and losers in terms of trading volume within the last 24 hours? https://coinmarketcap.com/gainers-losers/
- Which crypto assets have most recently been introduced to the market? https://coinmarketcap.com/new/
- Where can I find the cheapest Bitcoin/Altcoin rates? Where can I calculate the conversion rate of crypto assets? http://coinscanner.co or http://changelly.com
- Where can I manage my crypto asset portfolio? http://blockfolio.com or https://altpocket.io or https://getdelta.io
- What are the best news sources for crypto assets? https://www.coindesk.com or https://cointelegraph.com or https://www.reddit.com/r/CryptoCurrency/ or https://bitcointalk.org or http://www.krautreporter.de
- What is a good YouTube channel for crypto assets? https://www.youtube.com/user/PrisonOrFreedom
- What is a reliable research and analysis source across the breadth of Bitcoin, Blockchain technology, digital currency and cryptofinance? https://www.smithandcrown.com
- How many conventional currencies such as US-Dollar or Euro do exist and where do I find a calculator for the current exchange rate of these currencies (note: German source): http://www.laenderdaten.de/wirtschaft/waehrungen.aspx
- Where do I find the most comprehensive statistical information for the Bitcoin Blockchain? How many Bitcoin Wallets do exist? How many transactions are being performed by the Bitcoin Blockchain? How big is the average Bitcoin Block size? How big is the Bitcoin Blockchain Mem Pool with the number of transactions waiting for approval? https://www.blockchain.com and https://blockchain.info/de/charts and https://blockchain.info/stats and https://blockchain.info/markets
- How big is the Bitcoin Blockchain (note: this is the necessary storage, which you need, if you want to install a full Bitcoin Node at the Hard Disk of your computer)? https://blockchain.info/charts/blocks-size
- Which are the top 100 richest Bitcoin addresses? https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html
- Which are the 1,000 richest standalone Bitcoin addresses along with their respective balances rounded to full Bitcoin? Which are the top 1,000 richest (partial) Bitcoin wallets along with their respective balances rounded to full Bitcoin? https://bitcoinprivacy.net/richlist
- Which Bitcoin addresses are linked to each other in a partial Bitcoin wallet? https://bitcoinprivacy.net
- Where do I find a ranking of crypto asset Exchanges/Marketplaces including their market share provided as graphical illustration (on December 23, 2017 still in a beta version)? https://data.bitcoinity.org/markets/rank/2y/USD?c=e&t=ae and https://data.bitcoinity.org/markets/exchanges/USD/30d and https://data.bitcoinity.org/markets/volume/30d?c=e&t=b
- Who accepts Bitcoins as payments (list of Companies, Stores, Shops)? https://99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/ or https://letgocrypto.com/ or https://www.reddit.com/r/CryptoCurrencyStores/
- What does HODL, FOMO and FUD mean in the world of crypto assets? https://coinsutra.com/hodl-popular-cryptocurrency-terms/
- Who are the members of the Bitcoin Core Developer team (note: Bitcoin Core is an open source project which maintains and releases Bitcoin client software called „Bitcoin Core“)? https://bitcoincore.org/en/team/
- How did the Bitcoin price develop in course of the last years? How often has the term „Bitcoin“ been part of Google search inquiries? How does the Bitcoin engagement look like by gender and by age? https://coin.dance/stats
- How many Bitcoin Nodes do exist? https://coin.dance/nodes
- What are the best Bitcoin Hardware Wallets for secure storing of your Bitcoins (such as Ledger Nano S, TREZOR, KeepKey)? https://99bitcoins.com/winners2017-best-bitcoin-hardware-wallet/
- Which are the biggest Bitcoin Mining Pools? https://coin.dance/blocks
- How is the legal status of Bitcoin per country? How are Bitcoins classified in the various countries (e.g. currency, commodity, barter good)? https://coin.dance/poli
- How do traders „pump and dump“ cryptocurrencies? http://www.businessinsider.com/how-traders-pump-and-dump-cryptocurrencies-2017-11 or https://hackernoon.com/crypto-markets-oddities-whales-pumps-and-icos-5307fff92774
- How can you perform short selling for Bitcoin? https://www.bloomberg.com/news/articles/2017-11-27/calling-a-bitcoin-top-here-s-how-you-can-short-the-digital-coin
- Where do I find basic information on ongoing Initial Coin Offerings (ICOs)? http://icoscanner.io/ or http://www.tokendata.io
- Which Initial Coin Offerings (ICOs) are ended? http://icoscanner.io/?page=over
- How has the ICO market volume developed in the last four years since 2013? https://youtu.be/ac1P3GXkFxc
- Why the Bitcoin hype will continue or not?
Other interesting or continuative links for further research or application of Bitcoin
- Official Bitcoin homepage: https://bitcoin.org/en/
- Download of original Bitcoin Client: https://bitcoin.org/en/download
- Download of a Bitcoin Wallet: https://bitcoin.org/en/choose-your-wallet
- How to buy Bitcoins – A complete guide for beginners: https://howtobuybitcoin.io
- Continuative information regarding mining of Bitcoins can be found here: https://www.bitcoinmining.com/
- „Bitcoin Explorer“ is an Open Source web-tool, that allows you to view information about blocks and transactions just generated in the Bitcoin Blockchain: https://blockexplorer.com/
- Homepage of Bitcoin Foundation: https://bitcoinfoundation.org/
- Homepage of „Crypto State“ Bitnation: https://bitnation.co/
- Own Bitcoin-Wiki: https://en.bitcoin.it/wiki/Main_Page
- Bitcoinforum.com (nomen est omen): https://www.bitcoinforum.com/
- WIKI bitcoin is a homepage with a comprehensive list of very good links to extended knowledge: http://wiki-bitcoin.com/
- WeUseCoins.com provides a short video with a comprehensible explanation of the Bitcoin concept: https://www.weusecoins.com/
- Homepage of Bitmain.com, one of the leading producers of bitcoin-mining equipment, which also runs Antpool, a processing pool that combines individual miners from China and other countries, in addition to operating one of the largest digital currency mines in the world: https://www.bitmain.com/
- BitMinter.com is one of the oldest Bitmining Pools, where 450,000 users have been registered since its introduction in 2011: https://bitminter.com/
- Homepage with the 40 best Bitcoin marketplaces based on a user score: https://www.bestbitcoinexchange.io
- Token Classification Framework provided by Untitled Inc: http://www.untitled-inc.com/token-classification-framework/ (background information on this Framework: http://www.untitled-inc.com/the-token-classification-framework-a-multi-dimensional-tool-for-understanding-and-classifying-crypto-tokens/).
- In December 2017, Incrementum AG from Liechtenstein published the „Edition I“ of a detailed „Crypto Research Report“ (CRR) with a lot of important and interesting information on Blockchain technology, cryptocurrencies, initial coin offers, regulation and taxation: http://cryptoresearch.report/wp-content/uploads/reports/Incrementum%20Crypto%20Research%20Report%20-%20Edition%201%20-%20English%20Version.pdf (German version: http://cryptoresearch.report/wp-content/uploads/2017/12/Incrementum-Crypto-Research-Report-Edition-1-German-version.pdf).
- The German site Krautreporter. de regularly publishes very informative articles, of which I would like to highlight the following two by Rico Grimm: „Das Geheimnis des Bitcoins“ from 13.12.2017 (see: https://krautreporter.de/2223-das-geheimnis-des-bitcoins) is aimed more at beginners, whereas „You think you have understood Bitcoin? Let’s think about a crash.“ (see: https://krautreporter.de/2247-du-denkst-du-hast-bitcoin-verstanden-dann-lass-uns-mal-uber-einen-crash-nachdenken) is rather intended for advanced users.
- On the website of Blockology.com you can find the following article under the headline „Cryptocurrency: Beginners Guide 101: How to buy, sell or trade Bitcoin and Cryptocurrency“, which contains a very good graphic on the important question how and where to store your cryptocurrencies best and safest: https://blockogy.com/cryptocurrency/beginners-guide-101-buy-sell-trade-bitcoin-cryptocurrency/
- Jameson Lopp has build up a really excellent Bitcoin website with many useful resources including online trainings, information on Bitcoin’s history, information on Bitcoin security and privacy: http://lopp.net/bitcoin.html
- Preethi Kasireddy raises some considerable technological, organizational and security-related issues around Blockchains in her article „Fundamental challenges with public Blockchains“ published on December 10, 2017 at Medium.com: https://medium.com/@preethikasireddy/fundamental-challenges-with-public-blockchains-253c800e9428
- A speech held by Andreas M. Antonopoulos at the Swedish Internet Days („Internetdagarna“) conference during November 20/21, 2017 in Stockholm is a must see: https://youtu.be/rc744Z9IjhY
- Very interesting data visualization published by Willy Woo on November 3, 2017 under the headline „Data visualisation: 118 coins plotted over time this is why HODL altcoin indexes don’t work“: http://woobull.com/data-visualisation-118-coins-plotted-over-time-this-is-why-hodl-alt-coin-indexes-dont-work/
- Jackson Palmer, an Australian entrepreneur, who introduced the „Dogecoin“ in 2013 as a „joke coin“ describes the development of the cryptocurrency market since 2013, which is from his point of view unfortunate and unhealthy, in this Motherboard.com article published on January 11, 2018: https://motherboard.vice.com/en_us/article/9kng57/dogecoin-my-joke-cryptocurrency-hit-2-billion-jackson-palmer-opinion
As already mentioned at the beginning of this blog, one of the major drivers for the growing attractiveness of Crypto Assets and Blockchain technology is the fact, that many citizens are sick and tired of the global financial system with its continuous immoral, asocial and illegal machinations at taxpayer’s expenses as well as of Central Bank’s experimental policy of zero key interest rates or even negative key interest rates and so called „Quantitative Easing“, which entails considerable disadvantages for citizens with small and medium incomes and assets. Additional information on all of these matters is provided in my Blog published on February 25, 2017 under the headline „Why the global financial industry must be regulated and enchained“: https://kubraconsult.blog/2017/02/25/why-the-global-financial-industry-must-be-regulated-and-enchained/ (German version: https://kubraconsult.blog/2017/04/22/warum-die-globale-finanzindustrie-reguliert-und-in-ketten-gelegt-werden-sollte/).
Furthermore the endless government surveillance programs initiated and/or reinforced after 9/11 under the ideological disguise of „war against terror“ motivate many people to start protecting their privacy (and unlimited access to money/capital is a matter of freedom) as well as companies to protecting their intellectual property. Background information on these matters is provided in my Blog published on August 20, 2017 under the headline „How the US government discredits the US-american IT industry“: https://kubraconsult.blog/2017/08/20/how-the-us-government-discredits-the-us-american-it-industry/ (German version: https://kubraconsult.blog/2017/03/08/wie-die-us-regierung-das-internet-diskreditiert/).
In the speech already mentioned above, which was held at the Swedish Internet Days („Internetdagarna“) conference during November 20/21, 2017 in Stockholm (https://youtu.be/rc744Z9IjhY), Andreas M. Antonopoulos pointed out a couple of important factors, which illustrate, why Blockchain technology has truly disruptive potential:
- Andreas refers in his speech to money as a language to let various tribes effectively communicate and trade with each other, but at the same time as a powerful tool for those instances, which are in control of the money system. Bitcoin is according to Andreas a content type, which can be transmitted by anyone anywhere without central governance, regulation or manipulation based on a decentralized/distributed peer-to-peer protocol. As a consequence, finance will be reduced to an application.
- What sounds boring, will significantly change the balance of power in the world as we know it, since it allows e.g. the inclusion of 6 billion people, who have no access to bank accounts or capital so far into a new „grass root“ financial system based on a cheap SmartPhones with simple Apps at no charge and without central governance and control. Bitcoin will turn the system from head to toe and empower every participant in the network to be his own bank being able to send and receive uncontrolled, unlimited payments from/to other participants.
- In addition, Crypto Assets such as Bitcoin will enable „things“, e.g. cars, to act as corporations by autonomously receiving payments from users for transport services and autonomously paying bills for gas/electricity, parking space, washing systems. As a consequence, corporations without staff just consisting of „things“ connected via protocols will become possible.
- Since Crypto Assets will allow micro payments without costly fees or penal charges (as we know it so far from PayPal, Western Union, AMEX, VISA, …) new business models will become possible leveraging the idea of crowd funding. Example: Millions of people being enabled to transfer 10 Cents directly to the Bitcoin address of any project, person or „thing“, which they believe is an adequate receiver for this money, will change the rules of the game for funding of project or maybe even of earning money as individual.
- Finally Andreas reminds the audience that the world has already introduced a chaotic decentralized system which can hardly be controlled by governments or regulation authorities: It’s the Internet, i.e. we already did it once and Crypto Assets are just the next logical evolutionary step, which will fully prevent censorship. Important note: This debate should not be conducted from the perspective of Western societies, but instead than from the position of citizens of totalitarian, undemocratic or very poor states in which corruption and paternalism are the order of the day.
In case you find the Blogs above useful, you might be interested as well in my blog on „digital business models and platform economy“ published on November 4, 2017: https://kubraconsult.blog/2017/11/04/digital-business-models-and-platform-economy/ (German version: https://kubraconsult.blog/2017/09/06/digitale-geschaeftsmodelle-und-plattformoekonomie/).