Despite China Fears, Year’s Good Bitcoin News Outweighs the Bad
Sometimes it makes sense to step back and assess the big picture, else you can get mired in the daily details and become depressed or listless. Bitcoin is not dying; in fact, it’s doing just fine. The news has recently been full of fear, uncertainty and doubt (FUD), and it’s time to remind everybody of how far we’ve come this year.
What are we so afraid of?
The market has been jittery lately with rumors afoot about what China may or may not do. Those who have been involved in digital currencies for awhile like to joke: “Did China ban Bitcoin again?” Every few months, news comes out that implies China has banned Bitcoin and a minor panic sometimes follows. In retrospect, the perennial Chinese Bitcoin bans have always been much less serious than advertised. Obviously they have never been full bans, and even the restrictions placed on Bitcoin by the government have been able to be worked around.
The biggest news of late is two-fold, and has led to a third rumor. First, the truth. Yes, China has banned initial coin offerings (ICOs). Additionally, yes, China has ordered the shutdown of Bitcoin exchanges in the country. Whether these two “bans” will be permanent or merely placeholders for future regulation remains uncertain.
Now for the rumor. The Internet has been swirling with tales of people who know other people (and so on) who said that China is going to ban Bitcoin mining. This has definitely contributed to some fear in the marketplace. While China’s exchanges represent only about a fifth of the Bitcoin traded globally (down from over 90% a year ago), the vast majority of Bitcoin mining does in fact take place in China.
A government crackdown on exchanges is bad, but not catastrophic. On the other hand, should China’s government order the shutdown (or worse, nationalization) of Bitcoin miners, it would deal the network a solid blow.
From magic Internet money to legal currency
Probably the biggest news of the year was the decision by South Korea and Japan to legalize Bitcoin and other digital currencies, officially classifying them as money. Markets in these two countries have boomed as a result, with Korea’s Bithumb and Japan’s bitFlyer consistently near the top in terms of Bitcoin exchange volume. The best part of that? Besides the new markets that legalization has opened, a huge percentage of Bitcoin’s trading volume shifted away from China as a result.
Links to mainstream financial markets
LedgerX was recently approved by the US Commodities Futures Trading Commission (CFTC) to create a regulated Bitcoin futures market. Such a market will make it easier for institutional investors to receive exposure to Bitcoin. Additionally, the SEC had hinted in their rejection of the Winklevoss exchange traded fund (ETF) that they might reconsider if regulated futures markets are created. An ETF approval, if we get there, would be absolutely enormous.
Who isn’t running a blockchain trial?
Cointelegraph has reported on countless Fortune 500 companies, many of them global powerhouses, that are experimenting with Blockchain. From Walmart to Microsoft to IBM to banks and even government, Blockchain technology is everywhere. While it’s true that this technology can be adopted without necessarily affecting the price of Bitcoin, it’s unlikely the world will soon forget Blockchain’s original use case: Bitcoin.
Celebrities like Floyd Mayweather and Paris Hilton have recently backed projects that deal with digital currency. Okay, I know, these people aren’t exactly Milton Friedman. At the same time, the influence of celebrities with tens of millions of followers cannot be ignored. The world is full of people who follow every move their favorite celebrity makes.
Burger King? Seriously?
Of all the stories about digital currency and Blockchain that have come out lately, the story of WhopperCoin is one of my favorite. As ridiculous as it sounds, this could be really important. Burger King Russia has announced the creation of its own digital token called “WhopperCoin” which will presumably be used as a reward token rather than a currency.
While this sounds like insignificant news, one must remember that the more people are exposed to digital currency/tokens, the more receptive they will be to Bitcoin and other “serious” projects. If we can get digital currency in ordinary people’s hands through schemes like this, it familiarizes them with the concept and makes them more receptive to Bitcoin and other currencies in the future.
On bad news and bubbles
Yes, there has been a spate of bad news lately. China bans. Bankers denouncing Bitcoin. Calls of bubbles abound. I don’t know what the immediate future holds. The price of Bitcoin could keep falling, or it might reverse course and achieve new highs. We are likely in a bubble, yes, but we could be near the beginning of the bubble just as easily as the end.
In any event, it’s virtually certain that digital currency is here to stay. It may happen sooner or may happen later, but the world is changing digital currencies will play a big role in that change.
Story by Cointelegraph
Posts About Cryptocurrency Have Exploded on Reddit This Year
Posts about cryptocurrency have exploded on Reddit, according to dataanalyzed by MarketWatch, prompting yet more speculation that the assets are a bubble about to pop, or entering the mainstream—depending on which side of the fence you stand.
MarketWatch reports that interactions on niche Reddit forums (known as “subreddits”) devoted to cryptocurrency have soared by a massive 930% this year, and that at one point users were joining one of the main bitcoin forums at the rate of 1,300 a day.
One group, “CryptoCurrency,” has seen a 3,017% jump in interactions in 2017, paralleling the wild volatility of the asset class. An Ethereum forum has seen a 405% growth in subscribers this year. The litecoin subreddit saw a 1,652% jump.
Interestingly, traffic on other asset classes seems to have dampened down on Reddit, which lures many speculators, traders and investors. MarketWatch reports that interactions on a leading equities market group were down 2% and down 12% in the group known as “wallstreetbets.”
Written by the Fortune staff
If bitcoin dies, it’ll be from its own missteps
Bitcoin and other cryptocurrencies have been on quite a run over the last year and it has brought out all of the skeptics in full force.
Much like the early to mid-90s, when you could put a dot com after anything and investors poured money in, it seems that today the equivalent is putting a “coin” out and the “investors” flock to it.
With the Chinese government’s recent crackdown on Initial Coin Offerings (ICOs) in the last week the skeptics for crypto currency have been given another arrow to shoot at the “price bubble.” I am not surprised to see the Chinese government step in and ban ICOs and I would expect the SEC to step up its regulations that it began discussing in July 2017.
I would like to take a moment to remind people that ICOs and Bitcoin and other cryptocurrencies are not the same thing. An ICO is a capital raise by a company much like an IPO but significantly more risky. In exchange for your capital, the company gives you tokens which can be traded. I believe that the ICO market needs to be more regulate d or even outlawed because it is too easy for investors to be defrauded or scammed but that doesn’t mean that cryptocurrencies shouldn’t exist.
Critics have been calling for more regulation since almost the beginning and have said that as far back as early 2014. JP Morgan CEO Jamie Dimon is the latest critic of Bitcoin saying its a fraud. He said it was no different than the tulip bulb bubble in the 1600s. While the price movement and crowd mentality may have similarities to the tulip mania I believe that was a glib off hand comment that has little basis in reality.
The only possible real similarity is the lack of intrinsic value and the unhinging of the price to the value of a Bitcoin just like the price of a tulip bulb became unhinged from its intrinsic value. It is also disingenuous on Dimon’s part since JP Morgan holds several patents and has several investments in private blockchain companies that do not use Bitcoin but other alt-coins. He also had similar comments in 2015 so it is fair to say that Mr. Dimon is not a fan of cryptocurrencies in general.
Regulation may be the thing that ultimately does Bitcoin and cryptocurrencies in but Bitcoin has been pronounced dead so many times over the last 4 to 5 years that it is almost impossible to count.
“The very reasons why Bitcoin has taken off today will be major reasons why its value is likely to collapse tomorrow. . . . [dramatic price instability] will cause the ultimate failure of the Bitcoin experiment. . . . Bitcoin will fail because a small number of hoarders control most of the supply.”
This was a quote from a Motley Fool Article on April 5, 2013. They may be right that price instability is something that does Bitcoin in. On the date, this article was written Bitcoin was trading for $180.59. By the end of 2013, it had risen to over $700 in value.
We have seen a tremendous rise in the price of Bitcoin in 2017 rising to $5,013 on September 1, 2017. It began 2017 at $970.17 and over the next two weeks, Bitcoin saw the price fall to $ 3100 on September 14th. Still a tremendous increase for 2017 but also significant price instability. We have seen significant price moves in Bitcoin before in Jan. 2015 we saw a 36% decrease in value over a couple of weeks. This volatility is not anything new and is not uncommon in new ideas and technology.
In 2014, Bitcoin saw its largest exchange Mt. Gox get hacked and cause Bitcoin holders that had their coins stolen and ultimately Mt. Gox declared bankruptcy ultimately leading to $460 million worth of Bitcoins disappearing from its client’s accounts. The headlines at the time were things like Mt Gox Meltdown Spells Doom for Bitcoin and Mt Gox Hack could be the end of Bitcoin (Vice Feb. 2014). Obviously, security is vital for any asset. If it can be stolen from you in just a few keystrokes then it is not something that the everyday people can gain confidence in.
But people should remember that your money and identity can be stolen at any time. We have seen a major rise in cyber crimes and it is understandable that Bitcoin and cryptocurrencies would be a target for the criminals. Regardless it is important to take the necessary steps to protect your identity and assets. Interestingly just recently the authorities have arrested the man they believe is responsible for the Mt Gox hack, so it may be possible for those who had their Bitcoin stolen to get it back but that will take a significant amount of time to investigate.
In 2015 people thought that the increased competition from other cryptocurrencies like Litecoin, Ripple, Ethereum, and others was going to be the thing that did Bitcoin in. So far they have been wrong. If anything it has made the idea of cryptocurrencies and blockchain technology more widely accepted and mainstream. The total cryptocurrency market cap on Jan. 1 2014 was almost $10B and on September 14, 2017 it is almost $115B.
Will Bitcoin die or does it deserve to die?
I think Bitcoin will always play a role in the world of blockchain and cryptocurrency. The question is whether the community will be able to adapt to the new realities it faces. The 51% advantage is starting to become a real concern as miners are collectively steering the project now thanks to the amount of money they’ve put into equipment. (The 51% advantage is a situation where a wealthy individual or nation state could use tremendous mining capabilities to control 51% of the coins available thus controlling what transactions get completed).
While they have made Bitcoin more viable – that schism in power isn’t a good thing. It would be wise for the Bitcoin community to even consider switching to a proof of stake Blockchain model in the future. However, the more likely scenario is projects like tezos will address these challenges head on being newcomers to the space. Only time will tell what is the ultimate outcome for Bitcoin and unlike Jamie Dimon, I believe it has a place and will be around in the future of cryptocurrency and blockchain.
Written by the Thorium Wealth Management
When 95% of all cryptocurrencies are gone Bitcoin will still be there
The Wall Street Journal this week published an article declaring Bitcoin’s value to be “probably zero.” Last week finance and tech outlets discussed JP Morgan CEO Jamie Dimon’s assertion that Bitcoin was “a fraud.” If you’re keeping score, these are two big names in the financial world declaring the world’s most popular crytpocurrency worthless. Is it?
Spoiler alert: It’s not.
Bitcoin has seen some choppy seas of late. Fluctuations related to China’s market-shaking bans on ICOs and the closing of exchanges sent ripples through the community causing the price of a coin to shudder and drop below $3,000 for the first time in months. Over the last week its value has rocked back and forth between three and four thousand dollars (as of writing it’s at $3,616).
The Wall Street Journal article, like many others, points out that Bitcoin is a great currency for drug dealers. The author doesn’t point out that it’s also a great currency for CEOs or janitors. And let’s not kid anyone, the US dollar is still the currency of choice for drug dealers around the world.
Bitcoin makes it easier to deal drugs in the same way that Tesla makes it easier to rob banks.
Someone with a deep understanding of finance might find Bitcoin to be unsustainable; many will point out that there’s a 21 million coin limit and at some point speculation will cease. There’s also a limit on how much money we should print, but the US is overdrawn by trillions of dollars on that account.
You could also point to the cryptocurrency developers who insist that Bitcoin doesn’t play by the same rules as fiat currency. The fluctuations in value don’t bother them because they’re playing with house money and betting blockchain.
Don’t be fooled by sheep in wolves’ clothing though. When JP Morgan’s CEO declares Bitcoin a fraud it’s important to remember that the company has a blockchain department. If you’re investing a dollar in Bitcoin, it represents more than $1.00 lost business to JP Morgan; the implications of any future transactions you perform further cut out middle-men, like JP Morgan.
Bitcoin, in theory, makes any transaction easier — not just the ones that evade taxes or purchase drugs. It’s easy for banks and traders to whip the average person into a frenzy – farmers don’t know why they need Bitcoin yet, but most decent people are pretty sure they don’t want to support darkweb drug markets.
But why would JP Morgan — or anyone else for that matter — want to convince you that Bitcoin is bad but blockchain is good? Bitcoin is as good as the blockchain, according to experts. It might not be the best investment, but calling it a fraud or saying it’s worth zero is a classic case of ‘The lady doth protest too much.’
There’s a lot of smug money tied up in Bitcoin right now. The really smart people in finance want people to start dumping it off because, while they’re convincing you that Bitcoin is a fraud with one hand: they’re trying to sell you a different cryptocurrency with the other.
According to best-selling author and financial expert James Altucher 880 out of the 900 or so cryptocurrencies will ultimately prove worthless. If he’s right, the cryptocurrency market — despite the big players swearing up and down that blockchain is the future — will collapse save a few strong contenders for your e-wallet.
Bank of America, JP Morgan, and Mark Cuban all have stakes in cryptocurrency, perhaps the cryptocurrencies backed by major players will squash all but the oldest and most valuable ones, like Bitcoin and Ethereum.
Is Bitcoin a fraud or a competitor? The answer may be different depending who you ask.
Written by Tristan Greene
Bitcoin Mining Farms Invited to Russian Leningrad Region
Alexander Drozdenko, governor of the Leningrad region in Russia, issued a general invitation to miners to use land in the region for mining farms, per 47news.ru. He has offered to utilize the Leningrad Nuclear Power Plant (LNPP) as a space for new cryptocurrency mining.
The announcement came as part of the third annual small and medium-sized business (SMEs) forum, called Energy of Opportunities. More than 600 business owners and national representatives were present. The governor said:
“For the production of Bitcoins, first of all, large areas for processing and cheap electric power are required. As you know, the construction of LNPP-2 is being completed in Sosnovy Bor, and large areas of the first nuclear power plant are being liberated. The liberated facility of Leningrad NPP can be used as a technopark designed for cheap energy.”
The statements reflect a growing sentiment among the Russian government of adopting cryptocurrency as a means of national growth. Recent announcements of partnership with Ethereum, as well as opening of potential locations for ICOs show the rising embrace of Blockchain and cryptocurrencies.
Written By Cointelegraph
Urbit Is Moving Its Virtual Server Galaxy Over to Ethereum
Urbit, the galactically inspired network of cloud servers, has announced plans to rebuild its infrastructure based on ethereum tech.
A network of P2P personal cloud servers that conceives of itself as “virtual real estate,” Urbit has always borne a certain kinship to blockchain technology, but never deployed a blockchain as part of its infrastructure.
However, the test version of Urbit, which has been online for about a year, will now be upgraded to use ethereum’s smart contracts.
According to a blog post from the company, the smart contracts will be based on ERC20, the formal standard for ethereum tokens, to allow Urbit property owners to cryptographically secure their holdings.
According to the post, which uses the project’s standard space-themed terminology:
“We’ll instantiate a land registry for Urbit address space; an ERC20 “spark” token which is burned to create a generic star; and a voting system for self-governance. We’ll also create template contracts which galaxies can use to auction stars, and stars to distribute planets.”
Going forward, all payments will now occur on the blockchain. Urbit will further create its own web browser forked from ethereum’s code.
By using smart contracts to formalise relationships on the network, Urbit said it can outsource its security measures to the ethereum platform.
However, the decision to integrate ethereum did not come without some doubts. Developers Curtis Yarvin and Galen Wolfe-Pauly state that due to their “bottom-up” approach to development, “depending on Ethereum goes against all Urbit’s instincts.”
Detailing this hesitancy further, the developers argued:
“Ethereum’s user experience is notorious; its governance is suspect and unstable; its dilution rate is unconscionable; its dev environment is full of bugs and misfeatures; in short, it’s a classic MVP. It has only one real goal: success. It seems to be doing pretty well with that.”
In spite of this, the move is going ahead and Urbit is also expected to launch an ethereum-based token sale of its “galaxy” soon.
Galaxy image via Shutterstock
Written by Coindesk
China’s Crackdown on Cryptocurrency Trading – A Sign of Things to Come
The Chinese government’s decision to order several Bitcoin and other cryptocurrencies exchanges to close shows how much of a threat they are perceived to be to financial stability and social order in China.
The decision to also ban initial coin offerings altogether (the unregulated means by which funds are raised for a new cryptocurrency venture) has taken traders and analysts by surprise. China is the world’s largestcryptocurrency market with around 80 percent of Bitcoin transactions taking place in yuan.
The blockchain (a digital ledger in which digital currency transactions are publicly recorded) is poised to have a massive impact on the future of finance. This recent crackdown suggests the Chinese government is determined to cement its place as a leading rule maker and power-broker in the quickly emerging area of cryptocurrency transactions and exchange.
China’s Relationship with Bitcoin
The Chinese government released a list of 60 initial coin offering trading platforms and instructed local agencies to make sure all platforms were listed and closed down. The delayed crackdown is in line with previous practice in China.
The Chinese government often adopts a wait-and-see approach to activities that are largely unregulated until the magnitude of the activity becomes clear. The extent of speculative investment and the risk of losses to investors if the bubble bursts motivated the government to intervene in cryptocurrency trading.
In China, the popularity of cryptocurrencies has been boosted by the tightening of controls on money moving out of the country over the past two years. This has lowered the value of the China’s currency, the renminbi, as investors seek assets in different denominations and chase higher yields. Cryptocurrencies are also popular because they can be used to transfer funds offshore and circumvent foreign exchange controls.
The government is particularly concerned with the use of cryptocurrencies and initial coin offerings to perpetrate and disguise fraudulent activity, including money laundering and ponzi type investment schemes.
Chinese authorities are anxious to avoid any social unrest in the lead-up to the 19th Party Congress. The effects of the 2015 stock market collapse, where the A-share market lost one-third of its value over a period of one month, are still being felt.
In some respects, the regulatory intervention in China is mirrored in other countries that have been dragging their heels in coming to terms with cryptocurrencies. It was only in July this year that the US Securities Commission issued a report determining that DAO tokens were “securities” and must be regulated accordingly.
China’s Own Cryptocurrency
In January last year, the People’s Bank of China issued a notice announcing it would be issuing its own digital version of the renminbi. The notice highlighted the benefits of a government backed digital currency in terms of cost, coverage, convenience and security.
In the initial phase, it’s likely that trading in this digital currency will be limited to regulated entities such as banks along similar lines to trading on the conventional foreign exchange markets.
By launching its own digital currency, the Chinese government avoids the risks associated with privately-issued cryptocurrencies and ensuring they are not used as a means of circumventing China’s strict capital and currency controls.
When China introduces its own digital currency (no formal date has yet been announced), the impact on the global economy will be significant. Not only will it challenge the existing global payment systems and establish China as a leading rule maker in this area, it will also enhance the importance of the renminbi as a global reserve currency.
Written by Andrew Godwin
Digital Currency Mining May Look Much Different in 2025
Digital currency mining has reached the point where all mining equipment combined uses more electricity than Iceland. However, the cryptocurrency market capitalization is still minuscule in comparison to other traditional markets. Such electricity consumption may soon become unsustainable if the adoption rate of digital currencies continues to grow at its current pace.
Higher mining difficulty
Bitcoin mining difficulty is adjusted every 2016 blocks to remain at roughly 10 minutes per block. As more mining capacity is brought online, the difficulty increases accordingly. Thus difficulty increases proportionally to the increase in computing power of the network.
The mining difficulty of both Ether and Bitcoin has increased exponentially since their respective genesis blocks. This trend will likely continue as adoption keeps increasing. Therefore, digital currency miners will have to constantly acquire more powerful mining equipment. The times where everyone could mine Bitcoin with his/her personal computer are long over.
The rising mining difficulty has forced miners to keep buying new and more powerful mining equipment. The problem is that these super-computers are also very expensive, creating a significant barrier to entry that only those with deep pockets can overcome. Mining benefits greatly from economies of scale, which further limits the ability of small-time miners to be competitive.
Because of this, mining has become heavily centralized. AntPool claims to be the largest cryptocurrency cloud mining company in the world, controlling 17.82 percent of the hashpowerof the Bitcoin network. Most mining companies are located in China due to the low cost of electricity and labor.
As the hashrate of Blockchain networks keeps increasing, the amount of mining hardware will continue to grow. These mining computers consume vast amounts of energy, and this is with the entire cryptocurrency market being relatively miniscule in size.
One can only imagine how much electricity will be used for mining if digital currency becomes mainstream. Unfortunately, the electricity that powers these machines usually comes from non-renewable sources of energy, which contributes to climate change.
Austrian company HydroMiner is one of the few mining companies that are planning to make mining more sustainable and profitable by using renewable energies. Nadine Damblon, CEO at HydroMiner, pointed out in an interview for CoinNoob that there already are companies using solar energy for mining, but that hydroelectric power is probably the better solution since it’s more consistent and because the water can then be used to cool down the mining equipment.
Proof of stake
In a proof of stake (PoS) network, every validator owns a portion of the network. This is much different from Proof of Work (PoW) where every validator needs to own expensive mining equipment. PoS also encourages greater decentralization of the network, since all the currency holders are involved in securing the network in proportion to the amount of currency they own. Additionally, PoS is extremely energy efficient, since there is no need to make computationally difficult calculations. It also enables much faster validations.
Proof of stake does have a couple of drawbacks, with the most serious being the “nothing at stake” problem. Imagine that a network which uses PoS is under attack by a hostile actor who is trying to supplant the valid Blockchain with one of his own. It makes economic sense to “mine” on both Blockchains, since it costs you nothing to do so.
In fact, that’s the smart thing to do, just in case the attacker succeeds. With Proof of Work, a miner must instead decide to mine on one chain or the other, since mining equipment can only be used on one network at a time, and burns expensive electricity doing it.
Blocks on the Bitcoin Blockchain will always be verified through PoW. However, Ethereum is moving towards PoS with its new “Casper” protocol. If successful, this will enable Ether holders to stake their coins in a smart-contract in exchange for transaction fees. Many are eyeing Ethereum to see if they can in fact solve the heretofore intractable problems with Proof of Stake.
Written By Cointelegraph
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