Kryptogenie https://kryptogenie.com Mon, 08 Oct 2018 09:50:18 +0000 en-US hourly 1 https://wordpress.org/?v=5.8.4 https://kryptogenie.com/wp-content/uploads/2018/01/cropped-favicon-32x32.png Kryptogenie https://kryptogenie.com 32 32 Thieves Make off With $58,000 from Troubled Newdex Cryptocurrency Exchange https://kryptogenie.com/blog/thieves-steal-58000-from-troubled-newdex/ https://kryptogenie.com/blog/thieves-steal-58000-from-troubled-newdex/#respond Mon, 08 Oct 2018 09:50:18 +0000 https://kryptogenie.com/?p=581 Over the past couple of weeks, there has been a slew of headlines announcing the latest "hack" of a cryptocurrency exchange. This time the victimized exchange was Newdex, which is a controversial entity in and of itself. This time the thieves (a much more accurate term than “hackers”) stole some $58,000 in cryptocurrency by exploiting […]

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Over the past couple of weeks, there has been a slew of headlines announcing the latest "hack" of a cryptocurrency exchange. This time the victimized exchange was Newdex, which is a controversial entity in and of itself. This time the thieves (a much more accurate term than “hackers”) stole some $58,000 in cryptocurrency by exploiting a vulnerability in the Newdex architecture. They bombarded the exchange with fake EOS tokens and, as Newdex later acknowledged, used them to purchase ADD, BLACK and IQ tokens. In all, there were nearly 12,000 purchase orders executed with the fake EOS tokens, all stemming from a single account.

All Apologies

Once the thieves had purchased the ADD, BLACK and IQ tokens they then used them to purchase real EOS tokens. They then took those real EOS tokens and made for the hills; transferring them to Bitfinex. In all Newdex users were saddled with a loss of approximately $58,000 in the valuations of the day. Newdex security was late in recognizing the charade and didn't shut down the service until the thieves had taken their ill-gotten gains and left. According to exchange managers, repairs were made to the system to prevent a recurrence, and normal operations were resumed about an hour later. Perhaps most curiously Newdex, after apologizing, announced they had no plans to compensate for the losses even though they occurred as a direct result of the system’s technical shortcomings.

Newdex hack scandal

The Problem with Newdex

Even though Newdex uses “dex” in their name, openly implying they are a decentralized exchange, they are not. A fact that has led to accusations of fraud from some in the crypto-verse. To buttress the illusion that they are a decentralized exchange Newdex uses Scatter for login and interface purposes. But it’s only a ruse as smart contracts are not part of their MO like they should be with any true decentralized cryptocurrency exchange today. Instead, orders are processed using a single account reserved for the exchange and matched using an off-chain centralized server. In response to criticisms leveled at it in the wake of the recent theft Newdex, instead of admitting their own deficiencies, laid the problem at the feet of the EOS network.

Small Potatoes

bitcoin and dollars

In the overall scheme of things, and in light of losses incurred by some other cryptocurrency exchanges, the $58,000 in losses incurred by Newdex customers seems like pretty small potatoes (and as we’ll see in a minute, it is). The thing that makes the story newsworthy is that Newdex has been marketing itself as a totally decentralized exchange when it seems clear to anyone with a passing knowledge of how these things work that they are not. The whole fiasco also serves to embolden the regulatory crowd which frustrates crypto-purists to no end.

Putting Things in Perspective

While $58,000 is no doubt a significant loss for those victimized by the Newdex theft, it's not in the same league with the most significant cryptocurrency thefts of the past few years. Here are several of those to provide some perspective:

  • ​NiceHash - In December 2017 mining marketplace NiceHash acknowledged they had been the victim of a sophisticated theft involving an employee’s computer. That computer was targeted by outside entities, compromised and used as a platform to gain entry to the service. The attackers pilfered a total of 4,736 Bitcoins from NiceHash customer wallets and transferred them to a single wallet address, beyond the reach of cybersecurity experts and law enforcement. The total value of the theft was nearly $63 million, using valuations at the time of the event. As of this writing, it seems the thieves are either content to simply sit on th​​​​eir spoils, or they have yet to fashion a foolproof way to unload their take, since the Bitcoins in question are still being held in that single known-but-inaccessible wallet.
failed trading crypto sites
  • ​Mt. Gox - Mt. Gox was a Bitcoin exchange that was launched in 2010. Just three years later it was handling more than 70% of global Bitcoin transactions. It was considered a shining success story and proof of the viability of the Bitcoin model and of Bitcoin itself as a commodity. In 2014 however, it was revealed that thieves had been raiding the Mt. Gox exchange almost since its inception without being detected and had made off with more than 850,000 Bitcoins. Valuations at the time of the theft put losses at $460 million (more than $5.6 billion at today’s valuations). It turns out the theft was made possible by shoddy coding practices at the exchange. So shoddy in fact that coders working on the same file could actually override each other’s changes without being aware of it. And to top things off all changes to the Mt. Gox code, even urgent security changes, had to be personally approved by the company’s CEO. After Mt. Gox management revealed the theft, the exchange was shut down and its website closed. Bankruptcy proceedings were initiated almost immediately and two months after shutting down the company began to liquidate assets.
  • Coincheck - The largest theft in terms of time-of-theft valuations was the Coincheck theft where cybercriminals were able to steal more than 500 million XEM coins valued at the time at more than $534 million. The thieves were able to access what’s called a hot wallet (a wallet connected to the Internet) and siphon its contents off into their own wallet. The company was roundly criticized for keeping the coins in such a vulnerable wallet when far more secure options were available. The Coincheck theft differed from the Mt. Gox theft in one notable way: whereas the value of the Bitcoins lifted in the Mt. Gox theft has increased more than 11-fold, the value of the XEM coins stolen from Coincheck has decreased by some 90% to approximately 9 cents per coin. Nonetheless, Coincheck has stated its intention to compensate customers for their losses at a rate of 83 cents per coin. Though no one is completely sure how they're going to do that.

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Cryptocurrencies Under the Gun – What is Happening? https://kryptogenie.com/blog/cryptocurrencies-under-the-gun/ https://kryptogenie.com/blog/cryptocurrencies-under-the-gun/#respond Tue, 04 Sep 2018 04:32:41 +0000 https://kryptogenie.com/?p=502 Almost from the day, Bitcoin was launched by a shadowy (likely nonexistent) figure back in 2008 cryptocurrencies have been attracting attention for their unregulated nature and their potential to wrest money from the hands of a few powerful bankers and return it to the people. The financial crisis of 2008 (that neatly coincided with the […]

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Almost from the day, Bitcoin was launched by a shadowy (likely nonexistent) figure back in 2008 cryptocurrencies have been attracting attention for their unregulated nature and their potential to wrest money from the hands of a few powerful bankers and return it to the people. The financial crisis of 2008 (that neatly coincided with the launch of Bitcoin) was proof positive to many that the centralized financial system was broken and that the people were running it was merely no longer qualified to have their hands on other people's money.

What Goes Up...

As awareness of Bitcoin and blockchain technology in general slowly spread it began to attract more and more believers until that groundswell of awareness formed a speculative tidal wave in 2017 that saw cryptocurrency valuations go through the roof. By mid-December, one Bitcoin was worth nearly $20,000. To no one's real surprise once enough money was at stake the federal government decided it was time to stick their foot in the door and either get a piece of the action or bring the action to a halt which is precisely what they wound up doing. Just as Bitcoin seemed sure to pass through the $20,000 ceiling word was leaked that Uncle Sam intended to take a look at the goings-on in the  crypto verse. Within weeks the currency was down 50% and by mid-2018 down some 70%.

blockchain image

Hitting the Brakes

Now that officialdom has crypto on the ropes it’s looking more and more like they are determined to finish it off. The Financial Industry Regulatory Authority (FINRA) just issued new guidelines for dealers and brokers that state they must notify FINRA if they participate in or facilitate any digital coin activity. FINRA is vague about what they plan to do with this information, but those attempting to read their obtuse signals don't buy the notion that they’re only concerned with protecting retail investors. In fact, more than a few industry pros sense the heavy hand of the SEC behind the move and believe it to be nothing less than a precursor to full scale, future regulation of the industry.

And That’s a Problem Because…

woman with bitcoin

A lot of people on the outside of the crypto movement don't understand what all the fuss is about. After all banks and stock markets are regulated, and plenty of people still get rich, so why all the fuss about a few regulations on crypto? The answer is simple; cryptocurrencies have currency (so to speak) because they are unregulated. Remove that cornerstone principle, and the whole house of cards collapses.

One of the main, if not the main, attractions of crypto was its potential to establish an alternative financial system where people could go about their business without the banks or the government or anyone else telling them what they could or couldn't do or dipping their hand into the revenue stream. Once regulated. However, crypto becomes just another type of banking, and we're back where we started a decade ago; with a few influential people calling all the shots.

The Loss of Safe Havens

The threat to cryptocurrencies extends beyond the coastline of the US, and this is one more reason the bears are ruling the crypto roost in 2018. While crypto proponents work feverishly to try and drum up renewed enthusiasm smart investors are waking up to the fact that even former safe havens like China are no longer taking a hands-off approach. Late in 2017, the Chinese imposed a total ban on ICOs (initial coin offerings) and shortly after that imposed an equally comprehensive prohibition on trading in all virtual currencies. And as if that wasn't enough the government in Beijing then began tracking down and shutting off the power to the massive server farms that powered Bitcoin miners. The upshot is that it's becoming increasingly clear that there will soon be nowhere left to hide for crypto believers and that the current downturn is more than just a cyclical bump in the road; it's an existential crisis.

The Future is Now

While the threat of regulation in the US and the moves by the Chinese government to kick crypto to the virtual curb have been getting all the press other governments and financial institutions around the world, fearful that cryptocurrencies might pose a danger to the established order, have also moved to rein in the phenomenon.

  • ​In Israel, the government officially declared that Bitcoin was not a currency but instead a hard to define the financial product that posed a risk to both consumers and banks due to its unregulated nature and potential compliance issues.
  • ​In a move few saw coming credit card behemoth VISA abruptly ended its relationship with Wavecrest. VISA had used WaveCrest to convert cryptocurrencies to cash for current debit card transactions. VISA did not explain the abrupt decision other than claiming​ WaveCrest had somehow (not defined) violated VISA operating regulations.
the future is now
  • ​The government of Canada only weeks ago announced that henceforth any business that deals with virtual currencies will be regulated as a "Money Services Business." The new regulations require any such businesses to report any "suspicious behavior" to the relevant authorities immediately. The official pronouncement cited the threat of terrorists leveraging the anonymity of cryptocurrencies as one of several justifications for the move.
  • ​The EU is also busy formulating regulations it plans to implement that will force crypto platforms to carry out due diligence on every customer and to report those who seem like they are trying to skirt the rules or who otherwise engage in suspicious behavior. Treasury in the UK has stated that they aim to bring these exchanges as well as online virtual wallet providers into compliance with anti-money laundering and anti-terrorist financing regulations.​

So while the just-announced FINRA regulations might seem like the leading edge of a future regulatory clampdown, the fact is the leading edge passed through some time ago. The future is, in fact, already here with the global powers that be working overtime as you read this to bring the crypto verse to heel.

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England’s Old Guard Embracing Cryptocurrency https://kryptogenie.com/blog/englands-old-guard-embrace-crypto/ https://kryptogenie.com/blog/englands-old-guard-embrace-crypto/#respond Wed, 25 Jul 2018 05:14:11 +0000 https://kryptogenie.com/?p=513 In a move that has received more than its fair amount of press coverage, the London School of Economics (LSE) has announced that starting August 28 of this year they will offer a new course in understanding and investing in cryptocurrencies. Some see the move as an indication that crypto has become mainstream and by […]

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In a move that has received more than its fair amount of press coverage, the London School of Economics (LSE) has announced that starting August 28 of this year they will offer a new course in understanding and investing in cryptocurrencies. Some see the move as an indication that crypto has become mainstream and by others as an indication of just how out of the loop the mainstream is.

Understanding the Causes of Things

The new LSE course is to be called "Cryptocurrency Investment and Disruption," and it will consist of six modules spread out over 60 hours of class time. The description of the course indicates the aim is to provide students with the skills required to "interact with crypto trading platforms." Besides, the course will cover the basics of the virtual wallet and some guidance on how to evaluate ICOs - "initial coin offerings" - that often amount to little more than crowdfunding for new cryptocurrencies and their architects.

bitcoin book

With 18 Nobel Prize winners to call their own, the LSE has a veneer of respectability few other institutions can match and so when they get on board something it's rather like touching that issue on the shoulder with their collective sword and telling it to "Rise and be legitimate." According to the school, their new interest in cryptocurrencies is based on a desire to explore "the exponential growth and volatility of cryptocurrencies and the distributed ledger technology underpinning them" which LSE contends "has led to the global interest in crypto assets, ICOs and the distribution of digital wealth." That's all very well and good and fits in with the schools’ raison d'etre to "understand the causes of things." But it also seems rather late in the game to be taking notice of an economic movement whose days of exponential growth are likely already behind it and whose impact on individuals, governments and financial institutions worldwide is already waning.

Turning the Titanic

While many have applauded the London School for acknowledging cryptocurrencies, others wonder what took so long. But the fact is like many old guard institutions the LSE is slow to change and slow to recognize the change. Getting them to respond to anything occurring in the contemporary world can be a bit like turning the Titanic. It takes time. But to their credit, they have made that time and indeed, a further look at the course description seems to indicate the school is well-aware that they missed the boat at launch but are now determined to provide a comprehensive overview of the many ways crypto has ingratiated itself into the modern world.

Not the First

cryptocurrency in MIT

While the LSE's crypto class looks interesting, (if perhaps already obsolete), others universities including Imperial College in the UK and New York University in the US have been offering courses on crypto since 2013 or 2014. Many universities in fact, including MIT, began accepting Bitcoin and other cryptocurrencies as legitimate forms of payment at around the same time. A quick check of the current academic landscape reveals that some universities are already offering full degrees in blockchain technology and that graduate level courses on the subject of cryptocurrencies can be found at Cornell, Duke, MIT, Carnegie Mellon and more. But while the LSE may have finally tapped the blockchain on the shoulder and some classes may be filled to overflowing it may all turn out to be too late as we stated above. It is because cryptocurrencies are quickly becoming the regulator's favorite target.

Dropping the Digital Hammer

The fact is that the London School of Economics may not just be late in offering crypto courses, they might be too late. Their first ever cryptocurrency class is scheduled to take place some eight months after what may have been the beginning of the end for the crypto phenomenon as we know it. That event was the news that broke in mid-December of 2017 that the US government was going to take a close look at virtual currencies. That tidbit, coupled with the Chinese government's announcement that they were going to shut down crypto in China effectively sent shockwaves through the blockchain. First, because the main attraction of cryptocurrencies like Bitcoin was their anonymity and second because Bitcoin enthusiasts always assumed that even if the SEC dropped the digital hammer on crypto in the US that China would still be there as a kind of refuge to pick up the slack.

Analyzing the Wake

Once it became apparent that regulations were coming and that there might not be any place to hide from them, digital coin valuations plunged. Bitcoin went from more than $19,900 for a single coin to around $6,000 in just a few months. And no reasonable person expects it to do anything but drop further as more and stricter anti-money laundering and anti-terrorism statues appear on the books. What this means is that the new course at the LSE will likely wind up doing little more than analyzing the wake of the crypto movement rather than helping to shine a light on its future just because there isn't likely to be much of a future for the virtual currencies themselves.

increased demand for BTC

The Future of the Blockchain

While cryptocurrencies seem headed for death by regulation the blockchain technology that made them possible looks like it may have a long and prosperous future. There are already conferences being held where companies are showcasing new and innovative ways to leverage the blockchain for non-crypto purposes that include healthcare services, gaming, job search websites and more.

And in the End

in front of bitcoin

With cryptocurrencies under assault from regulators, the world over their time as a potentially revolutionary instrument for fundamental economic change may have already passed. All that's left now is to find some new and exciting uses for the blockchain technology that made the movement possible in the first place.

So while the class being offered by the renowned London School of Economics may be noteworthy in some academic sense, it nevertheless seems like it will wind up being more of a post-mortem than anything else.

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Is Crypto Mining Really Worth To Get Into? https://kryptogenie.com/blog/is-crypto-mining-really-worth-it/ https://kryptogenie.com/blog/is-crypto-mining-really-worth-it/#respond Tue, 26 Jun 2018 02:24:53 +0000 https://kryptogenie.com/?p=380 Crypto mining sounds like something out of a sci-fi movie: “Planet Bitcoinus 7 was known across the galaxy as a soul-crushing graveyard where miners went to die.” Actually, it's the process by which a cryptocurrency like Bitcoin is able to maintain its integrity while at the same time incrementally increasing the number of coins in […]

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Crypto mining sounds like something out of a sci-fi movie: “Planet Bitcoinus 7 was known across the galaxy as a soul-crushing graveyard where miners went to die.” Actually, it's the process by which a cryptocurrency like Bitcoin is able to maintain its integrity while at the same time incrementally increasing the number of coins in circulation. Crypto mining is essential to the success of the decentralized currency model. Today, however, there are so many coins in circulation and so many high-quality exchanges offering easy, alternative ways of getting your hands on virtual money that some are questioning whether crypto mining is worth the time and effort any more. It’s an important question that could have existential implications for Bitcoin and its myriad copycat cryptocurrencies.

What is Crypto Mining?

A cryptocurrency uses the blockchain concept to produce a distributed encrypted ledger. It is this incorruptible blockchain ledger which ensures the integrity of the coin. But it isn't the type of ledger that automatically updates itself. That updating has to be done by outsiders. These outsiders are known as "miners." Miners voluntarily work to verify transactions.

Each time a transaction is validated the data cluster known as the block is updated, a new block created containing all valid information about the currency and a fraction of a “coin” is released to the miner who performed the validation. The validation process requires enormous computing power and devours equally vast amounts of energy.

dollars and btc

Before we get into the question of whether mining is worth it these days, let’s first look at what any miner’s goals should be and what is needed to be a competitive miner.

Goals

  • ​To provide a type of accounting service to the cryptocurrency. A process known as validating transactions.
  • To earn enough digital assets for your validation efforts to make it worth the trouble.
  • ​To keep overhead as low as possible in order to maximize the chance of turning a profit.

​​​Those are all very standard business goals. Now let’s look at what’s needed to have a chance to achieve those goals.

  • ​The latest mining rig, which is hardware designed and built exclusively to facility crypto mining.
  • ​An advanced GPU or ASIC mining chip. This will do the bulk of the work.
  • ​​​A cool space to set everything up because your computer is going to be working overtime.
  • A digital wallet to hold the public and private keys that make your crypto yours.
  • ​Acceptance into a "mining pool." With a mining pool, you combine computing resources with others in the group to increase your chances of validating enough transactions to make the effort worthwhile for everyone.
  • ​The latest crypto mining software which you will install on your computer.
  • ​Patience, persistence and skilled partners.

​​​​​Once you have all those things, hook up the rig to the computer and get to work.

So What’s the Problem?

using expensive graphics card for mining

In the early days of Bitcoin mining was about the only way to get your hands on a unit of cryptocurrency. Scores of eager computer geeks intent on virtual riches rushed to join the validation fray, and for a while, things might even have been considered fun. Today, however, that has all changed.

Competition amongst miners has increased to an absurd degree, more processing power than ever before is needed to have a chance to make money for your efforts and the rise of the centralized exchange has encouraged the entry of millions of non-miners into the crypto culture, changing it both for better and for worse and bringing it to the attention of government regulators from Shanghai to San Francisco.

Centralized Exchanges

exchange platform for bitcoin

Anyone with the financial resources can start an account with a centralized exchange and buy some Bitcoins - or any other type of cryptocurrency - to call their own. It’s the rise of the centralized exchange and the millions of new investors and speculators they have brought to the table that is largely responsible for the astonishing spike in valuations that have occurred during the past couple of years. A Bitcoin you could buy for less than $10 in 2011 is now worth more than $11,000 (coming off a recent high of nearly $18,000). The success of Bitcoin has also ignited a bonfire of competing cryptocurrencies with each one having its value fuel-injected through trading on centralized exchanges.

As such it’s understandable why some people who may have been considering mining as an occupation would simply opt to pay the fees involved and get some coins through an exchange. Also, purchasing all the equipment outlined above and burning through all the energy required to run trillions of calculations per second to validate transactions is a costly endeavor. Indeed some miners are never able to earn enough crypto to turn a profit. So if we put ourselves in the lonely miner’s shoes then struggling to stay above water through crypto mining is becoming increasingly hard to justify. The hours are long, expenses are high, and payoffs are often small. Why not just sell all the equipment and use the money to open an account on a centralized exchange?

The Future of Mining

It’s a good and valid question and not one with a simple answer because crypto mining has become paradoxical to a degree. And by that, we mean the integrity of the currency depends on the work of miners. Without them, the blockchain grinds to a halt and confidence in the currency plummets. At the same time, however, the very success the miners have helped produce is creating a situation where mining is increasingly looking like the worst way to obtain coins. So what can be done?

top altcoins that are available on the mkning market

Perhaps increasing the amount miners are rewarded for their efforts is the only way for the whole process to move forward. Maybe miners will organize and demand higher compensation under the threat that if their situation isn't addressed, they'll go on strike. Or virtual strike anyway. Maybe the whole thing will find some as yet unanticipated resolution, and we'll all go skipping merrily down the yellow bit road to financial nirvana. Only time will tell.

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How Did Cryptocurrency Start? Learning About its History… https://kryptogenie.com/blog/history-of-how-cryptocurrency-got-started/ https://kryptogenie.com/blog/history-of-how-cryptocurrency-got-started/#respond Mon, 28 May 2018 08:27:15 +0000 https://kryptogenie.com/?p=399 Some people earn money. Some people find money. Some people steal it and some people, like Satoshi Nakamoto, create it out of thin are. Or more precisely, out of computer code. The day was January 3, 2009, when Nakamoto announced to anyone who was listening that he had just invented a new “cryptocurrency" which he […]

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Some people earn money. Some people find money. Some people steal it and some people, like Satoshi Nakamoto, create it out of thin are. Or more precisely, out of computer code. The day was January 3, 2009, when Nakamoto announced to anyone who was listening that he had just invented a new “cryptocurrency" which he named "Bitcoin." This was not your average pocket change, however, because there was nothing to put in your pocket. Just thousands of lines of computer code let loose in cyberspace. Nakamoto was driven by a desire to free money from the claws of governments and central banks who he (and many others) saw as being responsible for the economic meltdown that was still reverberating around the globe in 2009. But what is a cryptocurrency and just how was it possible for this guy to create an entirely new form of money out of nothing but code?

What is the Technology Behind It?

blockchains with btc logo on all sides

Nakamoto’s new form of money depended on something called a blockchain. A blockchain is a form of distributed database which keeps an up to date list of computer records. These data clusters are also known as "blocks." New blocks enter the system sequentially with each new block containing the entire history of the blocks that preceded it and each block being encrypted (hence the term "crypto"). In this way, a chain of verifiable information is created (hence the term block-chain).

The blockchain ledger system is vital to the creation of a cryptocurrency because without it there would be no way to verify the currency’s value. Besides maintaining a running ledger of transactions this technology also eliminates the central administrator. Goodbye Fed!

The Rise of Bitcoin

the emerge of bitcoin

Blocks are created, and new currency is released each time someone verifies a new cryptocurrency transaction. This verification process involves enormous amounts of computer power, but that hasn’t stopped legions of aspiring blockchain billionaires from dedicating most of their waking time to the process of “mining” for Bitcoins (or any of the other cryptocurrencies that exist in cyberspace). As a result of all this mining - and especially because some forward-thinking merchants began to accept it as tender - the value of a Bitcoin started to creep upward whereas a single Bitcoin was worth less than one cent when the currency was launched. That value had risen to nearly $30 by 2011. And while Bitcoin has seen some rocky days recently, it's currently valued at more than $10,000 per unit as of this writing. That's a success story of astonishing magnitude.

Enter the Copycats

They say imitation is the sincerest form of flattery and if that's true then you'd have to say the world has beaten a path to Bitcoin's door to shower it with praise. As of this writing, there are nearly 1,400 cryptocurrencies that have been launched in the wake of Bitcoin’s success with some notable ones being Litecoin, Namecoin, Ethereum Classic, and ZenCash. All of these virtual currencies use blockchain technology and all have seen some form of merchant acceptance, although to be sure the number of merchants that accept cryptocurrencies is still small.

altcoins alter native to the top internet money

How To Transfer it?

value of a bitcoin for exchanges

To understand a cryptocurrency exchange, you need to realize that there are two primary ways to obtain cryptocurrencies like Bitcoin and that the whole process is somewhat like that surrounding gold. Some obtain gold by mining it. Others buy and sell the gold that has already been mined through commodity exchanges and by doing so drive the value up or down. It’s the same with Bitcoin or any other cryptocurrency. There are “miners” whose efforts release new “coins” into cyberspace and exchanges where that new currency can be bought and sold or exchanged for other crypto or fiat currencies like the US dollar.

All this buying, selling and exchanging of cryptocurrencies cause their value to rise and fall.This all sounds very well and good but wouldn’t you know it there’s a fly, or rather a bunch of flies, in the crypto exchange ointment. Those flies are called "hackers." Computer hackers have found a way to break into numerous crypto exchanges in the past couple of years and make off with hundreds of millions in virtual cash. And while the result has been the implementation of more robust security protocols and methods of tracking stolen Bitcoins and other cryptocurrencies the risk is still very real that your savings could be wiped out by a hacker. So one must be aware when dealing with exchanges.

How Do You Store It?

e wallet for storing internet money

Cryptocurrencies never actually leave the blockchain. What happens is that when you obtain ownership of a Bitcoin or other currency, you’re issued a private key which matches a public key. The public key is roughly analogous to a bank account to which others can transfer cryptocurrency. The private key is sort of like a pin number. Without the private key, there is no way to access the funds accumulating in the public key (or account). As such you can probably figure out for yourself that keys are pretty essential and you'll want to keep them somewhere safe.

Wallets then are a way for you to safely store your public and private keys so that you can carry on transactions. There are two types of wallets: “hot” wallets and “cold” wallets. Wallets that are connected to the Internet in some fashion are considered “hot” wallets. While being connected to the Internet makes it easier for you to do business with your cryptocurrency, it also opens you up to potential hacks. “Cold” wallets are not connected directly to the Internet. They’re generally considered safer, but they make transactions more laborious affairs.

Cryptocurrencies have come a long way since Satoshi Nakamoto (if that was his real name, no one is sure) launched Bitcoin 9 years ago. Today they're creating wealth at an astonishing rate and are attracting ever-increasing attention from governments who are starting to see them as an existential threat to their monetary systems. Where it will all go from here is anyone’s guess. 

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Is it Too Late to Get Into Cryptocurrency Nowadays? https://kryptogenie.com/blog/is-it-too-late-to-get-into-cryptocurrency/ https://kryptogenie.com/blog/is-it-too-late-to-get-into-cryptocurrency/#respond Tue, 01 May 2018 05:31:38 +0000 https://kryptogenie.com/?p=386 Cryptocurrencies didn’t explode onto the public stage so much as they crawled onto it while hardly anyone was watching. It took several years following an announcement in 2009 by the elusive Satoshi Nakamoto (Kaiser Söze?) that he had released his new invention “Bitcoin” to the world for the idea to gain traction and valuations to […]

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Cryptocurrencies didn’t explode onto the public stage so much as they crawled onto it while hardly anyone was watching. It took several years following an announcement in 2009 by the elusive Satoshi Nakamoto (Kaiser Söze?) that he had released his new invention “Bitcoin” to the world for the idea to gain traction and valuations to begin their upward turn. Today cryptocurrencies are the hottest commodity on the planet, the source of constant fear amongst guardians of the old financial order and are spreading faster than herpes at a kissing contest, with nearly 1,400 different virtual currencies now in circulation. Is it all just a speculative bubble? Perhaps, though that remains to be seen. For now, the biggest question seems to be: “Have I missed the crypto-boat?”

Has the Crypto-Boat Left the Dock?

instant transfer of internet money around the world

With Bitcoin currently valued at nearly $11,000 per unit, Ethereum at more than $5,000 and even an unknown like Waves valued at more than $40 per virtual “coin” it’s fair to ask where the upside is in the cryptocurrency market. Also, the recent Bitcoin crash has left plenty of people licking their wounds and plenty of others heading for the exits. And no, we’re not talking about the August 2011 crash when a single Bitcoin fell from $13.50 to $7. We’re talking about the crash that began last December when a single Bitcoin fell from $17,549 on December 11, 2017, to $7,964 on February 5, 2018. A fall of nearly $10,000 in 8 weeks.

While the price has rebounded some, there are still days when falls of $700 or $800 have people chewing their fingernails until they bleed. On top of that, there are more than a few signs that regulators are beginning to catch up to the vaunted blockchain and it may only be a matter of time before other countries follow China’s lead and outlaw cryptocurrency exchanges. If enough countries did so, it would effectively nail the coffin shut on crypto as a viable alternative to fiat currencies. But is all the wonder necessary? Has the virtual currency boat really set sail from an investor’s perspective? Or are there reasons for optimism amongst the forest of conflicting signals?

Reasons to be Optimistic

While the recent crypto crash has left heads spinning and lots of glazed eyes staring into nothingness, it doesn't necessarily signal the end of crypto as an investment. After all, any investment that rises more than 1,000% in a short time is bound to be riding a surreal wave.

At some point, that wave has to crash against the shore. Perhaps the most surprising thing is that the fall wasn't more precipitous and that valuations have rebounded nicely; although they're nowhere near their December peak. So why are people still bullish on cryptocurrencies like Bitcoin? For a couple of reasons.

cryptos surge high in market value

The Internet Bubble Lesson

the myth of the cryptocurrency bubble pop

At the beginning of 2000, the NASDAQ was hitting all-time highs every day, and IPOs were more common than true love with 457 in 1999 (117 of which doubled in value the first day of trading). The sky was the limit. Pets.com? Give me 10,000 shares! Who cares about a business plan? In March that year, however, things began to go south, and by April, investors were pulling out of tech like rats from a sinking ship. And a sinking ship it was.

When the dust cleared 18 months or so later, the NASDAQ had lost 78% of its value, and the Internet was declared DOA. But a funny thing happened. The Internet didn’t disappear. It took some solid shots and was counted out but when no one was looking it lifted itself off the mat and left the arena to clean up and fight another day. Today Internet companies like Amazon and Google are amongst the largest corporations in the world, and any company that doesn’t have a viable web presence is considered so 20th century.

The moral of the story? Sometimes a good idea gets taken for a ride by speculators, but that doesn’t mean it’s not a good idea. Sometimes things just need time to find their ideal application. Here are a few sound, old world reasons why cryptocurrencies might just succeed.

  • ​Increasing Acceptance - Every day more merchants hang out their “We Accept Bitcoin” sign. Merchant acceptance hasn’t been negatively affected by the recent correction. And as long a market acceptance continues to expand cryptocurrencies are going to continue to increase, and valuations will continue to rise, although likely not to the extent we saw in 2017.
  • ​A Regulation-Averse Government - The administration of Donald Trump has made it clear from day one that it views regulations as the enemy of a market economy. The notion that a president such as this would go out of his way to slap brand new regulations onto anything is far-fetched. So for at least as long as Trump remains president cryptocurrencies will likely receive little more than a few pokes from the regulatory stick.
  • ​A Substitute Currency - There are a number of failed states in Africa and elsewhere whose currencies have lost most of their value due to incompetent governance and runaway inflation. As a result, most of the bank deposits in these countries are in foreign currencies like the dollar. For such countries, Bitcoin and other cryptocurrencies may present a viable alternative to both native and foreign currencies. A cryptocurrency may also provide an attractive option in countries where the use of foreign fiat currencies is heavily regulated.
pouring altcoins on the market demand

​​​Cryptocurrencies are apparently an idea whose time has come. What we’re seeing now are simply growing pains. It’s impossible to state with any certainty exactly where things will be a year, 2 years or 5 years from now but there seems little doubt that cryptocurrencies will become a larger and larger part of the global economy going forward. For the simple reason that you can’t keep a good idea down. So don’t get too low on the lows or too high on the highs and you should be fine.

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What’s a Blockchain?The Basics of The Technology https://kryptogenie.com/blog/what-are-blockchains/ https://kryptogenie.com/blog/what-are-blockchains/#respond Thu, 19 Apr 2018 07:33:45 +0000 https://kryptogenie.com/?p=392 The rise of Bitcoin and its nearly 1,300 imitators has resulted in a slew of new terms entering the popular lexicon. Words like “fiat currency,” “hard fork,” “bag holder,” and “blockchain.” Of all the crypto-terminology that’s come to the fore, perhaps none is more essential to an understanding of what cryptocurrencies are than “blockchain." Because […]

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The rise of Bitcoin and its nearly 1,300 imitators has resulted in a slew of new terms entering the popular lexicon. Words like “fiat currency,” “hard fork,” “bag holder,” and “blockchain.” Of all the crypto-terminology that’s come to the fore, perhaps none is more essential to an understanding of what cryptocurrencies are than “blockchain." Because without the blockchain there is no Bitcoin, Litecoin or any other imitator or wannabe cryptocurrency. So just what is a blockchain anyway?

A History of the Blockchain

When people hear the word blockchain, their thoughts tend to drift toward those Escher posters where the stairway somehow keeps going up even though it doesn't. In other words, they think they're kind of magical and maybe beyond the ability of non-programmers to understand. In reality though, the idea is pretty simple and we'll get into it in a few moments. First though, a bit of background.

bitcoin four sided black box

It's 2008. The global financial meltdown is in full swing. Credit markets have frozen. Millions of people are having their homes pulled out from under them, and in New York, an extraordinary meeting is taking place. At that meeting, the US treasury secretary tells the men who run the nation's biggest banks that they will accept hundreds of billions of dollars in newly printed money from the federal government in order to cover toxic assets and prevent the entire world from plunging into a depression. No refusals will be tolerated. Sign on the dotted line.

In Japan, a programmer going by the name of Satoshi Nakamoto (to this day no one knows his true identity) is paying attention. To him, the crisis is at least in part the result of currencies being controlled by central banks that enabled the system to be corrupted by a few incredibly powerful players. He longs for a currency that is free to find its own value, free of regulation, free of the possibility of corruption. He puts his mind to work and 31,000 lines of code later, Bitcoin is born in early 2009.

The concept that enabled Bitcoin is called the “blockchain” and Nakamoto was able to use it to solve the biggest problem that had plagued earlier attempts to create virtual currencies: duplicate spending.

developer doing a line of codes

​A virtual currency had never gotten off the ground because programmers hadn’t figured out how to prevent people from spending the same virtual money over and over again. Nakamoto harnessed the power of the blockchain concept to create an incorruptible ledger that kept precise records of every Bitcoin transaction. This eliminated the possibility of double-spending and provided cryptocurrencies the shove out the door they needed.

As of this writing, a single Bitcoin is worth more than $10,000 which is powerful testimony to the effectiveness of Nakamoto's concept.

So What is a Blockchain?

recorded crypto trading and transactions on the system

A blockchain is a digital database, or more accurately a secure digital ledger, that allows for the accurate accounting of a virtual currency like Bitcoin. Every time a transaction occurs that transaction is verified and added to the encrypted data cluster called the block. Each transaction, in fact, creates a new block that includes all previous information about the currency plus the new transaction. This new block in the chain now becomes the block of record and expresses the current state of the currency.

Anyone who tries to re-spend their Bitcoins won't be able to. In essence, it would be like trying to withdraw money from an empty bank account using an ATM card. The transaction will be denied. By solving the double spending problem, Nakamoto freed the concept of the cryptocurrency from the drawing board and set it loose in cyberspace.

Let's assess the situation...

​Pros

  • ​No central control by governments or their proxies.
  • ​Complete confidence in the accuracy of the ledger.
  • ​No central authority means little chance of corruption destroying the currency.
  • ​A high degree of transparency.

​Cons

  • ​Transaction speeds often slowed by the decentralized construct.
  • ​Government regulators are anxious to get their hands on the product and bring it to heel.
  • ​The imposing carbon footprint of the blockchain since vast amounts of energy are required by miners to verify transactions.
  • ​Cryptocurrency exchanges have become prime targets for hackers.
  • ​Profound doubts about whether the blockchain is adequately scalable.
presenting btc stil surging the market

​​​​​As you can see the blockchain comes with a robust set of pros and cons which raise questions about its long-term viability. One of the most credible threats comes from governments with almost unlimited funding behind them and a vested interest in seeing cryptocurrencies fail and their fiat currencies thrive. At first, Bitcoin and its offspring were considered a kind of novelty. But as valuations soared and more merchants began to accept them, cryptocurrencies began to attract the unwanted attention of regulators. They of course state that they're only trying to protect decent folks, but in reality, they're angling for a way to wrest control of cryptocurrencies from the people before the dollars or yen they currently control become worthless.

number of users are getting high in numbers

Another problem is logistical. At the moment there are some 12 million people in possession of Bitcoins and millions more holding other copycat currencies. The number of Bitcoin transactions has grown from a few dozen a day at the start to more than 200,000 per day now - with a high of nearly 500,000 transactions on December 14, 2017. Transaction speed is already an issue but if the currency is to truly go global and become an everyday boundaryless unit of money the blockchain may need to accommodate a billion transactions per day. Maybe more. Is it realistic to think the blockchain can withstand that level of activity? The only real answer is "no one knows."

Blockchain technology has opened eyes, created enormous wealth and pointed the way toward a possible future where money is freed from a corrupt and predatory banking system. Whether it winds up being all that or falls victim to concerted government efforts to kill it remains to be seen.

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First Bitcoin Auction to Be Held for Finland’s Government https://kryptogenie.com/blog/bitcoin-auction-to-be-held-for-finlands-government/ https://kryptogenie.com/blog/bitcoin-auction-to-be-held-for-finlands-government/#respond Fri, 23 Feb 2018 08:06:30 +0000 https://kryptogenie.com/?p=321 After confiscating roughly 2000 bitcoins in drug-related busts, Finland’s government is trying to figure out how to handle these coins. According to Helsinki’s customs office, most of the coins were confiscated in dozens of raids conducted since 2016. Most notably, one of the largest busts was in June 2016 where government officials seized 1666 bitcoins […]

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After confiscating roughly 2000 bitcoins in drug-related busts, Finland’s government is trying to figure out how to handle these coins.

Soldier holding a gunAccording to Helsinki’s customs office, most of the coins were confiscated in dozens of raids conducted since 2016. Most notably, one of the largest busts was in June 2016 where government officials seized 1666 bitcoins from the now-defunct dark web marketplace Silk Road

When cryptocurrency peaked on December 18, 2017, the 2000 bitcoins had a total worth of $40 million. However, at the current market value, the coins now are worth ~ $22 million.

New guidelines were recently released by Finland’s government where it sets out the way on how law officials must handle cryptocurrencies they confiscate.

The guidelines reveal that authorities are not allowed to store the coins on virtual currency exchanges. This forces them to use cold storage options, which also prevents them from selling the seized bitcoins on exchanges. So currently, all 2000 coins are off the internet. They, however, have declined to say how they have been storing the coins until now.

The guidelines also state that authorities cannot view Bitcoin or other cryptocurrencies as currency, but rather as an asset. This means it cannot be used or accepted as a means of payment or investment. Cryptocurrencies that are seized by the Finnish government can only be converted into euros after an appropriate decision has been declared in a court ruling.

Auction of goodsThe treasury department now plans to sell the coins in a series of auctions to achieve the highest value possible. With current market value, the 2000 bitcoins are worth approximately $22 million. Auctions are preferred for the Finnish government as commercial exchanges can be seen as untrustworthy.

Finland won’t be the first government to auction off bitcoins seized in drug-related busts. Back in 2014 and 2015, the US Marshals Service publicly auctioned off 144,336 bitcoins seized in Silk Road-related busts, netting roughly $48 million.

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