Category Archives: Cryptocurrency

Why cryptocurrencies are falling down so rapidly?

In the past cryptocurrency was the easiest and safest way to make money. The only thing you needed to do was to buy bitcoins and wait for the price to go up, or mine the cryptocurrency with a laptop. Plain and simple. Only few people took advantage from that because it was almost unknown. For years bitcoin grew exponentially without a significant loss, so the big promise was that the trend should continue without an end, making everybody rich to the eternity. When people started to think that, it was the beginning of the end. People started to buy bitcoin or other altcoins without any logic or strategy, with the false promise of becoming rich. This created a dramatic grow fo the market capital and volume.

When the capital was enough to make rich most of the people that years before invested on it, they started to sell, also because the risk of holding was too high. This created an incredible loss in the market capital against any optimistic forecast. However, this phenomenon is very common and it's known with the term of "consolidation". When the trend grow too much along the volume in a short period of time, the price is doomed to consolidate. As you can see on the above chart, the moment when bitcoin started to grow rapdly is when the mass media have spread the news that bitcoin exists and that it can be bought to become rich in short time. However, buying something when the price or the volume is so high is always a bad idea. People that bought bitcoin when it was $20,000, lost about half of the money in about 1 month. Another false promise is that bitcoin will grow again, reaching a quote of $500,000, making the investment still worth in a long-term. This could be false for different kind of reasons. Bitcoin has an old protocol that is already suffering of unconfirmed transactions because miners want to speculate on the transaction fees. Moreover, other altcoins like ethereum, ripple, dash, litecoin, status, eos and so on, are starting to consolidate in the same way.

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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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UNCONFIRMED TRANSACTION: Why Proof of Work is not good

I don' t know how many people already had important bitcoin transactions stuck into the UNCONFIRMED state for days or weeks. This should happen if you put a low fee into your transaction, but basically it can happen anyways. The fees are taken by miners for the mining work. Mining is the computational power required for the system to survive. The system gives an award to convince people to use powerful machines for mining. Mining has been made difficult on purpose with the PoW (Proof of Work) to avoid that everybody could become rich in a moment with mining (and the currency useless). Basically, to mine transactions your computer must generate hash codes. The system requires a particular kind of hash code, for instance on Bitcoin the system requires a certain number of zeroes inside the code. If the condition is not respected, the code is rejected and you can add a redundant header into the payload, that is called "nonce" and that is used to generate a different hash code from the same content. The code is generated until the system accept it and the miner can get the fee only if the block is mined. The condition that must be satisfied determines the level of difficulty, that is tipically measured with the number of attempts required for an hash code before being accepted. In this moment, the difficulty level of Bitcoin is 1,590,896,927,258. This is the reason why transactions require expensive machines like Antminer S9 or a mining rig of eight GeForce 1080 Ti. Just to make $24 per day you need to generate 14 TH/s with a consumption of 1350 W, just because who created this system had a misconcept of freedom and power. Even if you may find the idea of mining fantastic to make easy money, the mining itself is one of the worst concept ever created in the history of computer science, a total waste of energy and the reason why your transactions may get stuck into an UNCONFIRMED state for days or weeks, because the system is not efficient at all.

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Mining is not the fastest way to make money

If you have just discovered cryptocurrency and you want to buy a powerful machine for mining, abandon the idea because it's a waste of money. First of all, the hardware is too expensive and too loud. You can buy an Antminer S9 for $1700 just to mine $24 of bitcoins per day and it's not even pratical. The machine consumes about 1350W and makes a noise of 75 Db. If you are a normal person living in apartament, just forget it. You should buy a sound-proof server rack for $1000 to reduce the noise and make the machine run day and night. In this conditions, the lifetime of the device is reduced drastically, the machine could die after only 2 years. If you make $24 per day, in one month is $24 x 30 = $720. If you believe that with GeForce 1080 Ti the things get better, you are wrong. In this case, a single GPU can mine less than $4 per day, running day and night. With 8 GPUs you have a decent noise but a power consumption of 250W x 8 = 2000W. You must revise your energy contract to have at least 4.5 kWh if you want to live with other people in your apartament. If you make an investment of $6000, you have to wait 6000 / 32 = 187.5 days, about 6 months to have your money back, and this time can be considered a decade in the cryptocurrency world. Moreover, if you buy hardware to mine cryptocurrency, even if the value can grow, the difficulty will grow at the point to make the mining almost impossibile. It's what happened to Bitcoin in short time. What you could mine in the past with GH/s, now it requires TH/s. So, if you buy an Antminter S9, you have no guarantees that the machine will not break or that it will not become obsolete like its predecessors, the same could happen with the graphics cards that become obsolete in few months. I remember when I bought a GeForce GTX 670 when it was one of the most powerful in that period, and now it can do only 60 H/s with Equihash, where you need 700 H/s to make less than $4. Imagine if the same would happen to your 8 GeForces 1080 Ti, it would be a disaster.

I'm not saying that mining is useless, mining is what maintain most of the cryptocurrencies alive. I'm saying that mining is an investment that requires the right equipment, years of experience and efforts, it's not something that everybody can do at home. I'm reading stories of unexperienced people that are literally wasting their time and money on that. A 21 years old kid said on twitter that ordered five Antminer S9. I hope for him that he doesn't live anymore with his parents but he lives in a house with an energy contract of 10 kWh and a basement without neighbours in a range of 100 meters. It's pretty sad to read bullshits around an argument that is pretty interesting. It's sad to read that people still consider cloud mining like Genesis a good alternative. Genesis was good in the past but not anymore. The company bought machines with the money of people that made convenient contracts to mine bitcoins, and now they bought a shit load of graphics cards (that are easier to maintain) with expensive fees for the customers that are mining. If you make your math, mining with Genesis is not convenient at all. You pay $7200 for a contract of 2 years to make 34 bucks per day with Monero. In the best scenario, you will see your money back in 7 months. During this period, they will give you dollars instead of monero. You have no guarantees that the difficulty will not grow even more. You don't have any guarantees at all. And at this price, you can buy a mining rig of 10 GeForce 1080 Ti to mine whatever you want without a time limit of 2 years, and in the worst scenario you can sell the graphics cards.

With trading you can make actual money in the shortest time possible without an heavy investment. My idea is: if you have money to waste, just do trading. To make a comparison, mining needs a loud machine of $3000 to make only $24. With trading and the same amount of money, you can make $1500 in one day. Yes, you are reading right. The only thing that you need to do is to trade with an increment of 50%, and it's not difficult at all. You have to be patient, smart and intuitive. Bitcoin is stuck to 11000 now. It's not a problem. There are hundreds of cryptocurrencies that you can use for trading that are supported by free trading platforms on the internet, like poloniex. In the last week, IOTA grew of 150%. With $3000, you could have in your wallet $7500 in one week vs. $168 with mining. And it's just one week without trading during the gain and loss. Imagine what you can do with fluctuations of 20% or 50%, day and night. Let's do some math. With $3000, if you guess 10 times an increment of 20%, you can make 3000 * 1.2 ^ 10 = $18575, that is about one month of lazy trading. Mining is a no brainer that can give you a little money after months or years, but with your brain there is no limit in what you can do.

After a fever of $11000, bitcoin is getting a pause. More time to make your decisions?

Yesterday was a crazy day for bitcoin and cryptocurrency in general. After a rapid peak of $11000 it dropped drastically to $9500, then it grew again to $10000 and now it's stable to $10300. Also other cryptocurrencies (except dash and few ones) had a bad day, with a loss from about 5% to 30%. As consequence, bitcoin arrested its crazy run for $100,000 and it didn't reach $12000 as predicted yesterday. Probably this event is not that bad if you need more time to decide how to invest on bitcoin and find the best way to make money.

If bitcoin is too stable for your scope, you can decide to exchange versus other cryptocurrencies that are growing more rapdly in shortest time, making attention to not lose too much during the transaction. Even if bitcoin has an high value, it's not important if you don't have already bitcoins and if you want to make money with trading, the high value will only make it more difficult to buy.

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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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