Category Archives: Cryptocurrency

Transaction Fee Bubble. Fees 100 times higher in 1 year. Unconfirmed Transactions. I suspect that Bitcoin will burst

Bitcoin is the first cryptocurrency ever made and the first fork of a cryptocurrency protocol. It was the first to introduce the concept of encryption and decentralization of money. Since it was created in 2009, the protocol is now getting obsolete. The fact that about 150'000 transactions are unconfirmed is the evidence. Bitcoin cannot handle an high traffic of users, because most of the people are starting to have transactions not mined (and stuck) for days or weeks. If PoW already showed its negatives with the high energy cost, now the evidence arrives from the quality of service, when the traffic involves more people and the fees attached to transactions increase to get higher priority.

If the traffic would increase even more, with the current level of difficulty the entire system is doomed to burst. There are other cryptocurrecies that solve most of these problems. Bitcoin is now stronger than other cryptocurrencies because it was the first and it has a larger market capital and a larger user base. However, it doesn't mean that its concept is better and that it will survive in the future. In my opinion, Bitcoin will burst when the system will not be able to handle all the transactions. We can see the first symptoms right away. Check this website:

https://blockchain.info/unconfirmed-transactions;

You can see with your eyes that the number of unconfirmed transactions is very high in this moment, and it will increase in the future with the increment of people making transactions. Most of the transactions are not mined because their fees are too low for the miners that are wasting computational power to get the best profit at the least expense. They wasted millions of dollars to create mining farms with powerful ASICs and graphics cards. They want to mine transactions with the higher fees to have a payback and make even more money. As nobody is interested in wasting an outstanding amount of power to mine transations that have lower fees than others, the transactions with lower fees are rejected until they will be eliminated and created again with higher fees, in an infinite loop of speculation that is creating a Transaction Fee Bubble. As you can see from the above chart, the transation fee average incremented from $0.27 to $27, 100 times in just one year. The fees are growing so fast that transactions will be not convenient anymore. People will migrate their money to less expensive currencies, where transactions will not get unconfirmed so easily. For instance, I'm started to do it right now because I had unconfirmed transactions and no decent way to accelerate them without paying mining pools or other fees. And If I'm doing it, I'm sure that in this moment there are other people that are making the same consideration. So, this is the reason why I believe that Bitcoin is doomed to burst in the future.

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The world of cryptocurrency and mining

I think that anyone has heard about cryptocurrency and bitcoin in the past, but I doubt that everybody knows the crazy world behind it. Everybody knows that bitcoin can be used instead of money to do online payments that cannot be traced. But when I talk to people, even if they work in the field of information technology, nobody seems to know the very basics of cryptocurrency, how it works, how much is a bitcoin, how you can buy it, what are altcoins, how you can convert them to money or to different altcoins, how new coins are introduced, the fact that bitcoin increased exponentially in the last year and that it will grow even more.

Every year in informatics is characterized by huge events. Youtube was born in 2005. Facebook started the story of social networks in 2006, followed by Twitter, Instagram and Google+. But 2017 is the year of cryptocurrency. When Bitcoin was launched in 2009, the first transaction was 100 bitcoins to buy a pizza, then other coins were introduced into the system and the value of a single coin improved a lot, even though you could buy bitcoins for way less than one dollar in 2009. Just to make you understand, in this moment, 1 bitcoin is $9500. If in the past you bought 100 bitcoins for 0.30 dollars, now you would have had $950,000, about one million of dollars. Imagine when bitcoins were used mostly to make illegal transactions, mostly in the world of deep web, and imagine that those people, unlike me, knew everything about the world of bitcoins since 2009 and now they are filty rich. But jokes apart, the news that bitcoin improved exponentially is recent and it is spreading all over the world. The latest bitcoin forecasts say that bitcoin should increase even more in the future, but the predictions may diverge. Somebody says that the bubble will explode soon while other people say that, on the base of the current trend, it should reach about $50,000 in 2020. So, even if bitcoin is the heaviest coin on the market of cryptocurrency and it's reaching its maximum saturation in terms of circulating coins, it should increase even more in the future. So bitcoin and cryptocurrency in general are becoming in the understanding of people a great investment to make huge quantity of money. You don't have to do a boring job every day of your life, the only thing that you need to do is: buy $30'000 of bitcoins, wait 2-3 years, make $150'000 of bitcoins: that's it. Another thing to make profits is to exchange from one currency to another, to take advantage from the market fluctuations. In this case, you don't even need that the value improves, but you can make money through wise choices. You could sell altcoins when the value is rapdly decreasing and buy them again when the value is high again, doing what is called "trading". Now that the news is spreading along its huge promises, everybody is buying bitcoins or altcoins to make profits from fluctuations and trading. But that's not all.

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