Category Archives: Cryptocurrency
Is a cryptocurrency like a stock? This is what the SEC says …
When it comes to regulation, what exactly is a cryptocurrency?
Is it a currency? Is it a piece of software? Is it more like an equity? And if it is an equity, does that mean it should be regulated like any other security?
The U.S. Securities and Exchange Commission (SEC) recently weighed in
How regulators like the SEC define and treat cryptocurrencies is important because it affects both the value of cryptocurrencies, and how likely it is that blockchain technology will thrive in a particular jurisdiction.
For example, if a countrys regulatory body decides that cryptocurrencies should be banned, then this will drag down prices (depending on the size of the country) and blockchain technology companies will avoid setting up shop or investing there they wont feel welcome.
The SEC has been notably quiet on the subject of cryptocurrencies. Other regulatory bodies and governments, primarily in Asia, have been extremely proactive in outlining how they will treat and regulate bitcoin and cryptocurrencies as an asset class.
In May, I told you that the SEC would eventually step into this market. Especially as the financial stakes increase.
Now, it looks like the SEC is on the ball.
Earlier this week, the SEC issued the results of an investigative report into the details surrounding a cryptocurrency initial coin offering (ICO) called the DAO in the first half of 2016.
An ICO is when a new cryptocurrency token is offered for sale to the public, similar to an initial public offering (IPO) in the stock market.
The DAO intended to be a fully decentralised cryptocurrency venture capital fund. It would raise money (in the form of a cryptocurrency called ether), issuing DAO tokens in return. It would then allocate those raised ether funds to various business ventures by way of voting amongst the DAO token holders.
The DAO raised US$150 million worth of ether from some 11,000 investors. But then disaster struck. Despite assertions that the DAOs code had been analysed by one of the worlds leading security audit companies and that no stone was left unturned during those five whole days of security analysis, DAO was hacked. US$50 million of ether was stolen.
The SECs investigative report wasnt about trying to identify the culprit behind the attack. Instead, it was focused on whether or not DAO tokens constituted a security (that is, a stock) and should therefore be regulated under existing securities laws.
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The straightforward answer is maybe. The fact is, every cryptocurrency token has its own attributes.
As the SEC report put it;
U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular [cryptocurrency] offer or sale.
In other words, it just depends. But on what?
To answer that, we turn to the Howey Test, which was created by the Supreme Court as a means of determining whether certain transactions qualify as investment contracts.
[The test refers to a precedent from a case the SEC levied against Florida companies W. J. Howey Co. and Howey-in-the-Hills Service, Inc. that sought to determine whether or not a particular land-related deal constituted an investment contract under the Securities Act of 1933.]
If certain transactions meet the criteria, then they are deemed securities and subject to a raft of regulatory requirements.
Without going through all the checks, Ill just include some of the pertinent ones that the SEC included in its report.
So, investing money (cryptocurrencies included) in a token with an expectation of profit (dividend or simple value increase) derived from the managerial efforts of other people points to a cryptocurrency being a security, and that its required to be regulated as such.
The report was a warning. The SEC stated that charges would not be brought against anybody involved with the DAO. But that the report serves to caution the industry and market participants.
Given that there are no charges to be brought against the DAO, its likely that existing cryptocurrencies are safe from securities regulation for now, although that wont be the case for long. The primary focus of the SEC will be newcomers to the market, with the starting point being the Howey Test criteria, some of which are listed above.
There has been little to no impact on the broader cryptocurrency market from this report from the SEC. As someone whos personally been involved in the cryptocurrency token distribution process, the Howey Test is already a key component of any legal diligence on a cryptocurrency.
However, some cryptocurrencies are flying a little too close to the sun, especially those that specify dividend-style payouts for token holders. The SEC is very clear that just because something is virtual, it doesnt exempt it from being a security.
And when cryptocurrencies inevitably start falling under SEC jurisdiction, investors (particularly U.S. investors) will need to ensure that whatever they are buying is compliant with U.S. securities laws.
So you shouldnt invest in cyrptocurrencies on the assumption that they arent (or wont ever) be deemed securities. And when you evaluate different blockchain companies that issue their own cryptocurrencies, check the characteristics against those Howey Test criteria.
SEC regulation was always expected to occur sooner or later, and this SEC report didnt contain anything out of the ordinary it really just reiterated the criteria with which cyrptocurrencies will be measured with when it comes to regulation.
But I suspect we will start to see more global cryptocurrency offerings that specifically prohibit U.S. investors because nobody likes having to deal with U.S. regulations if they can avoid it.
Still, I dont envision this having any big impacts on general cryptocurrency prices in the immediate future.
Good investing,
Tama
P.S.We recently put together a free report on cryptocurrencies. Inside, youll learn why we still think you should buy bitcoin today and exactly how to buy it, move it and store it. You can download it at absolutely no chargeby clicking here.
Tama Churchouse spent nearly a decade creating and selling financial derivatives for a global investment bank in Hong Kong. As Lead Analyst he brings technical expertise across the entire asset class spectrum, from equities and index products, to interest rates and credit.
Continued here:
Is a cryptocurrency like a stock? This is what the SEC says ...
Bitcoin has split in two, so you can have double the cryptocurrency – The Verge
A little after 8AM ET today, Bitcoin was split into Bitcoin Cash, an alternative cryptocurrency, in a chain split that had been anticipated for months. The split, called a hard fork, comes out of a bitcoin groups desire to combat high transaction fees and a bitcoin size limit that made mining larger blocks invalid.
This has a nuanced implication for Bitcoin owners. If you own Bitcoin and control your private keys, the same private keys can be used to spend your newly minted Bitcoin Cash.
If you own Bitcoin but dont control the keys, then it depends on whether youve chosen to keep your bitcoins on a Bitcoin Cash-friendly platform or digital wallet. Each platform is treating the new Bitcoin Cash differently. To enjoy this extra currency, you should check with your platform and wallet to see what the company policy is.
As a prelude to the split, Bitcoin trading platforms like CEX.io suspended Bitcoin withdrawals beforehand. CEX.io will allow both cryptocurrencies and split the coins for its customers. CEX.io chief marketing officer Eugene Kovalyk says, Whether we will list Bitcoin Cash as a new trading pair depends on the demand. If demand is big we should consider adding it definitely...No one should lose Bitcoin Cash on our platform.
Meanwhile, the worlds most popular cryptocurrency exchange, Coinbase, has rejected the new Bitcoin Cash to some customers chagrin. It argues that their systems cant support Bitcoin Cash without a major system rework that is currently not worth the unknown value of Bitcoin Cash. A spokeswoman for CoinBase says, If this decision were to change in the future and Coinbase was to access Bitcoin Cash, we would distribute Bitcoin Cash to customers associated with Bitcoin balances at the time of the fork. Coinbase would not keep the Bitcoin Cash associated with customer Bitcoin balances. The exchange allowed a brief window of time before August 1st for users who wished to access Bitcoin cash to withdraw their funds from Coinbase.
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Bitcoin has split in two, so you can have double the cryptocurrency - The Verge
New Bitcoin regulations shake up Washington state’s cryptocurrency industry – GeekWire
BigStock Image / Inked Pixels
Bitcoin has been gradually shedding its reputation as a fringe investment, as its value zig-zags into the stratosphere, and it becomes accepted by businesses such as Expedia and Microsoft. But while financiers have been paying more and more attention to cryptocurrencies, so have state governments.
On July 23, Washington became the latest state to regulate the digital currency market, ostensibly to protect consumers. The bill establishing the regulations, passed by the state legislature in April, has prompted both scorn and praise within the cryptocurrency community, and has led some Bitcoin-related businesses to shut down their Washington operations rather than comply.
The bills primary targets are digital exchanges, which allow customers to trade and deposit their Bitcoin, Ethereum, and other currencies. Every exchange with Washington customers must now operate under the states money transmitter laws, which have traditionally applied to businesses like Western Union. That includes an obligation to be licensed by the states Department of Financial Institutions, and to maintain virtual currency reserves equal to the funds they retain on behalf of customers.
In addition, exchanges must agree to third-party security audits of their systems, and post surety bonds of between $10,000 and $550,000, which work as security deposits in the event customers deserve compensation from an exchange.
We had these old regulations for money transmitters in the state, and they were clearly meant for older business models, said Charles Clark, who helped craft the new laws at the Department of Financial Institutions. The virtual currency industry had issue with that. This gives them some clarification and guidance.
Shortly after the regulations were signed into law, exchanges such as Bitfinex, Bitstamp, Kraken, and Poloniex pulled out of the state, and informed Washington customers they needed to take their business elsewhere. In a statement, Kraken said that while revenue continues to grow, operating costs have become prohibitive, primarily due to the high cost of continuing to meet the regulatory compliance requirements imposed by the state. Unfortunately it has become impractical for us to operate in Washington and we must discontinue service for all residents.
Others have taken to Reddit to respond to the regulations, accusing Washington of having a cryptohating legislature and being a very sorry state for any forward-thinking, technology enthusiast individual to reside in.
Clark said hes followed the online conversation and the news of exchange closures. He downplayed the fallout, noting that Washington issued a regulatory guidance paper on virtual currencies in 2014, and that new regulations are similar to those found in states like New York or North Carolina.
This legislation shouldnt have come as a surprise at all, said Clark.
Washingtons new policies were formed through discussions with a range of cryptocurrency industry groups, licensees, trade associations, the Chamber of Digital Commerce, and companies involved in the space, Clark said.
One of the companies participating in these discussions was Coinme, which operates Bitcoin ATMs in Washington, provides wallet services and facilitates the exchange of virtual currencies in 18 states and internationally. Coinme CEO Neil Bergquist praised Washington states approach, calling Washington a leader among the 50 states on regulating virtual currencies, and early on the draw in providing guidance to companies. He predicted the exchanges leaving the state wouldnt make too many waves.
As long as there are still some (exchanges) standing at the end of it, I think it will have a somewhat minimal impact on consumers, said Bergquist, who pointed out that the largest exchange, Coinbase, is still operating in Washington.
The cryptocurrency industry has been a boon to the state economy, Bergquist said, creating high-paying jobs and a number of new millionaires in recent years. But even as it gains in popularity, its still confusing and arcane to many government officials. Lawmakers must recognize the gaps in their knowledge, he said, or risk squashing innovation.
There are some states whose approach is unfortunate, and some are doing a better job because they actually do the work to understand it, Bergquist said. Its important that regulators, entrepreneurs, and customers are all part of that dialogue.
Where some governments have addressed the burgeoning cryptocurrency industry with regulations, others have taken a different approach. This past June, for example, Montana awarded a $416,000 grant to a Bitcoin mining firm, and Nevada passed a law specifically prohibiting Bitcoin transactions from being taxed.
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New Bitcoin regulations shake up Washington state's cryptocurrency industry - GeekWire
Bitcoin has split, and there are now two versions of the popular cryptocurrency – Quartz
Bitcoin has just undergone a contentious hard fork that cleaved it into two separate entities for the first time in the cryptocurrencys nearly nine-year history. In addition to the first version of bitcoin, there is now a new cryptocurrency called bitcoin cash that offers an eight-fold increase in transaction capacity.
For the last several years, the bitcoin infrastructure has been struggling to handle a growing number of transactions, and technical experts have said a new implementation of the currency will solve its back-logging issues.
That is what bitcoin cash promises. Like the original bitcoin, it uses the currencys principal innovation: the blockchain, an immutable ledger of all the transactions ever performed with the cryptocurrency. Now that there are two versions of the ledger, however, there could be some practical problems, like vanishing coins, and philosophical ones, like a communal agreement on which blockchain represents the one, true, bitcoin.
The first bitcoin cash block on its own blockchain was successfully created at exactly 2:12 p.m. ET, and the new currency is already trading at $210 USD per coin.
Read next: Bitcoins civil war threatens to blow up the cryptocurrency itself
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Bitcoin has split, and there are now two versions of the popular cryptocurrency - Quartz
investFeed switch to cryptocurrency token sale brings mainstream demographics on board – Crypto Insider (press release) (blog)
This is a sponsored piece.We encourage thorough due diligencefrom our readers before acting on any given information.
investFeed is a New York based community powered social trading network making the switch from US equities to cryptocurrency. Marketing itself as the worlds first social investment network for the cryptocurrency community, investFeed aims to develop cryptocurrency infrastructure for the industry. This is establishing a much-needed framework ready for the mainstream adoption of cryptocurrency.
Their pivot to digital currencies is described as a key move to cater to an exponentially growing industry, Weve been a social investment platform since 2014 and over the last few months weve had a huge demand from our user-base to integrate cryptocurrencies onto our platform We really see that [cryptocurrencies] are the future going forward, said Ron Chernesky, investFeed CEO on the live Post-Cable Network, Cheddar. Keeping the momentum and buzz around the token sale up, last week the investFeed team announced that they brought on ex-NFL football player, Jovan Haye, as an investor as well as emerging technologies and blockchain-focused VC entrepreneur, Steven Neryaoff, as an advisor.
On the point of corporate interest, one of Crypto Insiders recent pieces noted that there was huge increase in cryptocurrency attention from the Big Four accounting firms. Deloitte, EY, KPMG and PwC reps all stated that both existing and prospective clients are beginning to ask questions about initial coin offerings (ICOs), the process by which public blockchain technologies can be leveraged to create custom cryptocurrencies that are subsequently sold to fund projects. With investFeeds platform supporting cryptocurrency trading infrastructure, it has the potential to appeal to big enterprise looking to jump into the market.
CTO Drew Freeman was quoted on Finextra to have said, The switch from equities to cryptocurrencies will also target a millennial user base that has shown disinterest in traditional investments. So while the big movers of the corporate world are turning their focus to the crypto market and enterprise-facing players, investFeed has the potential to also capture the attention of the sizable youth demographic, empowering them through the decentralization featured in blockchain technology capitalizing on the best of both worlds in the process.
Having been involved in US equities trading since 2008, one thing that can be said for investFeed is that their team has a track record of operating as a cohesive unit which is in sharp contrast to the majority of token sale groups capitalizing on the ICO bandwagon. The platform will introduce old-school and traditional stock traders to the fast-paced world of cryptocurrency market investment in a familiar way through the investFeed skin and tools.Despite the ICO craze slowing down, investFeed has a high possibility of reaching its target they have a solid track record, a detailed whitepaper and a reasonable hard cap at 28,000 ETH. At the time of publishing, investfeed has raised 35% of its limit, and has until August 7th, 2017 when the sale closes out.
Featured image sourced from Wikimedia commons
Is A Cryptocurrency Like A Stock? The SEC Weighs In – Seeking Alpha
When it comes to regulation, what exactly is a cryptocurrency? Is it a currency? Is it a piece of software? Is it more like an equity? And if it is an equity, does that mean it should be regulated like any other security?
The U.S. Securities and Exchange Commission (SEC) recently weighed in. How regulators like the SEC define and treat cryptocurrencies is important because it affects both the value of cryptocurrencies, and how likely it is that blockchain technology will thrive in a particular jurisdiction. For example, if a countrys regulatory body decides that cryptocurrencies should be banned, then this will drag down prices (depending on the size of the country) and blockchain technology companies will avoid setting up shop or investing there they wont feel welcome.
The SEC has been notably quiet on the subject of cryptocurrencies. Other regulatory bodies and governments, primarily in Asia, have been extremely proactive in outlining how they will treat and regulate bitcoin and cryptocurrencies as an asset class. In May, I told you that the SEC would eventually step into this market, "especially as the financial stakes increase". Now, it looks like the SEC is on the ball.
Earlier this week, the SEC issued the results of an investigative report into the details surrounding a cryptocurrency initial coin offering ("ICO") called the DAO in the first half of 2016. An ICO is when a new cryptocurrency token is offered for sale to the public, similar to an initial public offering ("IPO") in the stock market.
The DAO intended to be a fully decentralized cryptocurrency venture capital fund. It would raise money (in the form of a cryptocurrency called ether), issuing DAO tokens in return. It would then allocate those raised ether funds to various business ventures by way of voting amongst the DAO token holders.
The DAO raised US$150 million worth of ether from some 11,000 investors. But then disaster struck. Despite assertions that the DAOs code had been analyzed by one of the worlds leading security audit companies and that no stone was left unturned during those five whole days of security analysis, DAO was hacked. US$50 million of ether was stolen.
The SECs investigative report wasnt about trying to identify the culprit behind the attack. Instead, it was focused on whether or not DAO tokens constituted a security (that is, a stock) and should therefore be regulated under existing securities laws.
The straightforward answer is maybe. The fact is, every cryptocurrency token has its own attributes. As the SEC report put it;
U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular [cryptocurrency] offer or sale.
In other words, it just depends. But on what?
To answer that, we turn to the Howey Test, which was created by the Supreme Court as a means of determining whether certain transactions qualify as investment contracts.
[The test refers to a precedent from a case the SEC levied against Florida companies W. J. Howey Co. and Howey-in-the-Hills Service, Inc. that sought to determine whether or not a particular land-related deal constituted an investment contract under the Securities Act of 1933.]
If certain transactions meet the criteria, then they are deemed securities and subject to a raft of regulatory requirements. Without going through all the checks, Ill just include some of the pertinent ones that the SEC included in its report.
So, investing money (cryptocurrencies included) in a token with an expectation of profit (dividend or simple value increase) derived from the managerial efforts of other people points to a cryptocurrency being a security, and that its required to be regulated as such.
The report was a warning. The SEC stated that charges would not be brought against anybody involved with the DAO. But that the report serves to caution the industry and market participants.
Given that there are no charges to be brought against the DAO, its likely that existing cryptocurrencies are safe from securities regulation for now, although that wont be the case for long. The primary focus of the SEC will be newcomers to the market, with the starting point being the Howey Test criteria, some of which are listed above.
There has been little to no impact on the broader cryptocurrency market from this report from the SEC. As someone whos personally been involved in the cryptocurrency token distribution process, the Howey Test is already a key component of any legal diligence on a cryptocurrency.
However, some cryptocurrencies are flying a little too close to the sun, especially those that specify dividend-style payouts for token holders. The SEC is very clear that just because something is virtual, it doesnt exempt it from being a security. And when cryptocurrencies inevitably start falling under SEC jurisdiction, investors (particularly U.S. investors) will need to ensure that whatever they are buying is compliant with U.S. securities laws.
So you shouldnt invest in cyrptocurrencies on the assumption that they arent (or wont ever) be deemed securities. And when you evaluate different blockchain companies that issue their own cryptocurrencies, check the characteristics against those Howey Test criteria. SEC regulation was always expected to occur sooner or later, and this SEC report didnt contain anything out of the ordinary it really just reiterated the criteria with which cyrptocurrencies will be measured with when it comes to regulation.
But I suspect we will start to see more global cryptocurrency offerings that specifically prohibit U.S. investors because nobody likes having to deal with U.S. regulations if they can avoid it. Still, I dont envision this having any big impacts on general cryptocurrency prices in the immediate future.
Disclosure: I am/we are long BITCOIN.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Excerpt from:
Is A Cryptocurrency Like A Stock? The SEC Weighs In - Seeking Alpha
BlackRock Strategy: Cryptocurrency Speculation Doesn’t Present Systematic Risk – PYMNTS.com
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BlackRock Global Chief Investment Strategist Richard Turnill argued Tuesday (July 11) that loose monetary policy has resulted in a huge run up in cryptocurrency, such as bitcoin, but it doesnt pose a risk to the financial system.
According to a report in Reuters, Turnill said bitcoin price movements could be influenced by easy monetary policies that were instituted by central banks following on the heels of the global financial crisis that started in 2007 and lasted until 2009. The gains in cryptocurrencies could also be a sign the market could be in a bubble.
I look at the charts, and to me that looks pretty scary, Turnill said at a media briefing in New York covered by the newswire. He and his BlackRock colleagues have been telling clients to remain invested in global stocks despite the risk and despite warnings from some strategists that prices are too high. As to the speculations, hes not concerned about the broader implications from the wild movements in the digital currencies.
Theres no evidence that if that price went to zero tomorrow that thered be any broader financial implication over time, but to me it is [an] example of where youre getting some big price movements in the market.
BlackRock isnt the only one to warn about a bubble in cryptocurrencies. Those same concerns have hurt Ethereums price this week. According to a news report, the digital currency has been having a tough go of it lately, falling more than 45 percent since hitting a record high of $400 in mid-June.
There is talk that the cryptocurrency market is reaching a bubble after Mark Cuban said bitcoin, the Ethereum competitor, was already in bubble mode. I think its in a bubble. I just dont know when or how much it corrects, Cuban recently tweeted, noted the report. When everyone is bragging about how easy they are making $=bubble.
Following those speculations, came a statement from Jeffrey Kleintop, Charles Schwabs chief global investment strategist, who, according to the report, also suggested bitcoins price was in a bubble and in one not seen before.
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BlackRock Strategy: Cryptocurrency Speculation Doesn't Present Systematic Risk - PYMNTS.com
Here’s How Entrepreneurs Are Making Cryptocurrency Mainstream And Starting A Revolution – Inc.com
Less than a year ago the average human did not know what Cryptocurrency was. The market was limited mostly to a techy crowd of developers and very early adopters, considering Bitcoin was the only major currency on the block back then. But thanks to a number of really smart entrepreneurs, rising prices, and a powerful community, everything is changing and crypto is going mainstream.
Ethereum, Stratis, Sia, AntShares/NEO, TenX and others are leading the charge of the technological revolution that is blockchain. Cryptocurrency based crowdfunding know as Initial Coin Offerings (ICOs) are also a major player in the revolution. Blockchain startups like TenX have raised $80 million dollars in a matter of literal minutes to solve a big challenge for Cryptocurrency holders, actually spending the currency in the real world.
Entire governments like China are considering utilizing a national digital currency. Even the President of Russia, Vladimir Putin, met with the founder of Ethereum, Vitalik Buterin. All of this good press and positive outlook has caused many billions of dollars to be added to the market in the last 7 months.
The excitement about the Cryptocurrency market has attracted a lot of entrepreneurs that are looking to disrupt big industries through Blockchain technology.
I think of Blockchain disruption as creating disrupters to the disrupters. This new wave of Blockchain startups, such as Sia, are looking to disrupt companies like Dropbox and Amazon AWS. If they are even remotely successful we are looking at many 10s if not 100s of billions of dollars being added to the overall Cryptocurrency market as they continue to grow.
Another example of entrepreneurship at its finest is TenX. They are literally solving the biggest spending issue in Cryptocurrency, actually making the tokens spendable in the real world. They are using debit/credit cards that physically store Cryptocurrency then instantly convert them into Fiat (USD, EUR, YEN, etc.)
Stratis is considered a sleeper Cryptocurrency because of its relative low price compared to its technological advancement. It's a BaaS (Blockchain as a Service) platform that aims to provide enterprise level Blockchains and services to companies like Microsoft. AntShares/NEO is also considered a sleeper Cryptocurrency by many.
Entrepreneurs are making Cryptocurrency mainstream by solving problems ranging from making Cryptocurrency spendable in the real world all the way up to disrupting the largest companies on the planet and offering Blockchain services to the Microsoft's of the world.
The Cryptocurrency market can seem volatile compared to traditional markets. There is more up and down movement, but the general trend line is a strong uptrend. A lot of people believe Ethereum alone will be worth $1,000+ a token in the next year or two. That will drive the prices of many other currency up a lot.
Bitcoin, the oldest of popular Cryptocurrencies and current market leader in terms of market cap but not technology, is facing a potential split on or around August 1st. There are a number of possible scenarios, including breaking Bitcoin into two separate coins. This could cause what is referred to as The Flippening to occur and for Ethereum to rapidly gain in price and for Bitcoin to fall off it's 1st place market share.
If (and most likely when) this event does happen, Ethereum could be more of the market indicator than Bitcoin currently is. Meaning, if Ethereum goes up everything else tends to go up which is moreso the case for Bitcoin recently as it tends to control the market.
The market as a whole though has shown particularly strong in recent weeks. Ethereum was worth as much as $420 a token and as little as the $180 range in the last few weeks. But, the strength of the market really shined when the $180 "drop" happened and it quickly re-tested $200 multiple times and showed that $200 was the current floor price. This creates a sense of security in the market and helps people believe in it more long term when they see these quick rebounds from "drops" in price.
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Here's How Entrepreneurs Are Making Cryptocurrency Mainstream And Starting A Revolution - Inc.com
How Exactly Do You Get Rich of the Hot New Cryptocurrency? – Gizmodo
With the meteoric rise in popularity of Ethereum, cryptocurrencies and blockchains are back in the news again. Graphics card prices have soared with the promise that those who have the computers and know-how to do some serious mining can take home huge sums in a Bitcoin-like gold rush to snatch up as much virtual currency as possible. But how easy is it to make your fortune in cryptocurrency? And is it worth your while getting started?
For the uninitiated, mining for currencies like Bitcoin and Ether means devoting a huge amount of computer processing power to doing accounting sums for the platforms behind them, helping to verify the accuracy of the public blockchain ledgers.
Youre essentially getting rewarded for keeping the books for these platforms, which weve explained in more detail here, and the rise of cryptocurrencies like Bitcoin and others has led to a flood of amateur enthusiasts jumping into the mining businessthe idea of having your computer whirring away making you free money sounds almost too good to be true.
And in reality, it almost isyou can get rich from cryptocurrencies, but you need to put in plenty of work, and have luck on your side. Youre more likely to get a windfall due to market pressures than the quality of your mining rig, which is why its only worth a shot for the most committed and the most adventurous.
Mining for cryptocoin requires some free software tools and a dedicated rig. Turn the clock back several years and you could get away with a powerful home PC and make a few bucks. These days you can waste a weekend and a months wages on building a machine with four graphics cards purring away in a row and still not make a profit.
GPUs are now established as the mining processors of choice in most situationsgraphics cards are even built for and marketed towards miners nowbasically because theyre better at doing lots of laborious, repetitive tasks, whereas CPUs are better suited to switching between many tasks quickly.
The trouble is, the serious players have got whole farms of these computers, and unless youve got a warehouse and some life savings to spare, youre going to be lagging a long way behind. Youre up against huge foreign operations running off cheap electricity and hardware bought wholesale.
Even if you do get yourself a rig set up and find a currency with a bit of a profit margin, youre still putting yourself at the whims of the cryptocurrency marketsmining can start or stop becoming profitably depending on a currencys current value.
There are several profit calculators on the web that will tell you how much computing power and electricity you need to make a certain amount of cash, so you can see exactly how much (or more likely, how little) you could make. Take Bitcoin, for example, which is now just about impossible to mine profitably for average users at homeyoud need thousands of GPUs running before youd get close to getting more back in Bitcoin than youd be paying for electricity.
You can fork out thousands of dollars on specialized kit, if you want to, but even then youre only going to be raking in a handful of dollars a day with Bitcoin. That of course can go up or down as the currency value fluctuates, and whats profitable one day might not be the next if your chosen cryptocurrency dips in value, or gets some bad media coveragethats where the slice of luck we mentioned earlier comes in.
Other options, like Feathercoin and Ether, have a better profit potential than Bitcoin right now, with the caveats weve already mentioned: If youre serious about your mining then you need to keep a very close eye on the market trends, because the situation can change on a weekly or even daily basis. A single Litecoin, another cryptocurrency, has swung from costing you between $10 and $55 this year alone.
For instance, a huge $64m Ether heist carried out last year was severe enough to cause a fork in the Ethereum platform it runs on top of, and a halving in price of Ether itselfif youve got a powerful, expensive, cryptocurrency mining operation going on in your basement then thats a serious hit on your profits through factors completely out of your control. Sure, a swing the other way can make you relatively rich, but its a risk, and the upward trend wont necessarily continue.
Many modern-day miners join a mining pool, combining resources with other users and getting a share of the profits, but the same risks remain. Fork out a few thousand on a mining rig, take the time to study the market trends, go through the process of setting up the programs, join up with a mining pool, and yes you canif the prices stay buoyant and youve picked your cryptocurrency wiselymake a few thousand dollars a year. Whether or not its worth the risk and investment is up to you.
And if your investment isnt already precarious enough, remember the scene is constantly changing: In the near future Ethereum is set to switch from its existing Proof of Work (PoW) system for extending the blockchain to a new Proof of State (PoS) system which is easier to scale and less energy intensive.
Without going too far into the technical details, it essentially makes the mining process more like earning interest on money youve already got: Racks of graphics cards wont be able to generate wealth as they did in the past, which is bad news for miners looking for a profit even if its good news for your electricity bill. Instead, earning money will rely on staking (investing) rather than mining.
In other words, if youre already halfway through building your Ethereum mining machine you might want to pick a new cryptocurrency... at least until the ground rules change on that one too. (Remember what we said about the constant state of flux?) And thats really the only way to squeeze any profit out of cryptocurrency mining operationskeep moving as fast as the market does, and switch up the currencies you target as conditions change.
As soon as one cryptocurrency becomes profitable to mine, as weve seen with Bitcoin and Ethereum, everyone wants a piece of the action and making money gradually gets harder. Its then time to get in early on another currency. In short, if you want to get rich (or at least make a profit), you need to pick and keep picking the right cryptocurrencies, have a serious amount of graphics processing power in hand, hope that your chosen currencies stay secure and keep increasing in value, and put in a lot of time and effort.
Its not impossible, but we can think of easier ways to make a buck. If youre determined to jump in and get involved in cryptocurrency mining, if only for the educational and geek appeal rather than to make any money, your best bet is to immerse yourself in one of the many mining forums out there, which will give you the inside track on the latest news and market trends.
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How Exactly Do You Get Rich of the Hot New Cryptocurrency? - Gizmodo
REcoin is a new Ethereum-based cryptocurrency
Ethereum cryptocurrency code is used, which means the following options:
The technology of blockchain proved itself as perhaps the safest way of keeping records of transactions performed within a certain society, each member of which owns a copy of the database distributed among members of the given society.
Blockchain - a chain built from the formed blocks with records of all transactions. A copy of the Blockchain chain or its part is simultaneously stored on multiple computers and synchronized according to the formal rules for constructing the chain of blocks. The information in the blocks is not encrypted and is available in clear form, but is protected from cryptographic changes through hash chains. Thus, the Blockchain database is distributed (decentralized) and cryptographically protected (https://en.m.wikipedia.org/wiki/Blockchain).
The possibility of mining, which gives the use of the methodology of protection against false data and fraud PoW, is by far the most widespread and reliable crypto currency in the environment.
A proof of work is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated (https://en.bitcoin.it/wiki/Proof_of_work).
The minimum unit is 10^-4, 0,0001 RCN.
The conclusion of the block will occur every 20.5s (Similar to the Ethereum software environment, https://bitinfocharts.com/ru/ethereum/ ). The block volume limit is 12 KBytes.
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REcoin is a new Ethereum-based cryptocurrency