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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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. This is because mining is the computation power required for the system to survive, the system gives an award to convince people to use powerful machines for mining. To avoid that everybody can become rich with mining in a moment (and the currency useless), mining has been made difficult on purpose implementing the Proof of Work. 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.

Block chains to break the chain

Yesterday bitcoin saw a record of $11,500 and now it dropped down to $9,400 with a fluctuation of $2,100 in two days. Let me say that this event doesn't change my opinion about bitcoin and cryptocurrency. Even better, if bitcoin should collapse even more, it would not change anything. If the waterfall should continue, the only thing to do is to exchange to a more stable cryptocurrency and buy it again when it will start to grow. Let's assume that you have 10 bitcoins, $94,000 and the value is rapdly decreasing. You could exchange to an altcoin that is more constant. Let's say that you exchange the same amount of money to Dash with a little loss during the transaction. After few days, Bitcoin is going to be $4,000 and dash will be the same: you saved about $54,000. Then bitcoin is growing again, from $4,000 to $6,000 in few days: you can have it back. Let's say that in the worst scenario you may end up with $90,000 when bitcoin is still $6000. Then it grows again to $10,000 and your amount is going to be $90,000 * 10/6 = $150,000. This is the beauty of cryptocurrency and trading and that's why I still believe on it. You have the same opportunity of losing and gain at the same time, everything depends on your choices and intelligence. The games are never closed and you cannot say the last word. Even if you lose everything, you have the opportunity to learn from your mistakes and gain what you lost with the interests. There are not banks or government introducing new money to save their butts. Cryptocurrency gives to people the same opportunity to buy online, to make money from money, to not lose with rapid exchange that you can do online without a particular knowledge or action taken by attorneys, and everything is moved by people for people, without taxes. I still understand why most of the economists hope that this bubble will burst and cryptocurrency will die forever. I saw the enthusiasm of poor people becoming rich during a period of crisis for everybody, when the cost of life is at its highest historical level. A system without big corporations is bad for banks and government, that want to make endless money at the expense of people. Economists make jokes on cryptocurrency. They continue to say that bitcoin and cryptocurrency are scam, saying that this system has the same market capital of McDonalds and that at least there will be good cheeseburgers for everybody. They don't understand. They don't consider that cryptocurrency is not a social network like Facebook or another smart idea to make money from people with a capital in the stock market. Cryptocurrency is an idea, and you cannot kill an idea. Cryptocurrency is the idea that people have money and that now they have the technology to protect their money without banks. Think about it. Banks were born in the past because people wanted to store their money in a secure place. This simple concept evolved during the years and made banks the most powerful corporations in the world. Banks want to make money and they don't care how. Banks caused the biggest crises in the history of humanity, they destroyed people and continue to ruin people lives. They take advantage from the cost of houses and lend money to people with a home loan, taking 20% of interests, they want $30'000 in advance with 20 years of home loan while with that amount of money you can invest and make $200'000 in few years and buy the house in cash. The world of cryptocurrency is a big wake up in this direction, you can have a better understanding of money, how trading works, the fact that salary are always too low for the time that you spend at work and that probably you are wasting your actual talent in something boring and repetitive for the rest of your life, to have nothing in return, while you could have a better life made of profit and satisfaction. Think about it.

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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Bitcoin is growing exponentially. Is it safe? Why economists have no idea

In the last two months bitcoin grew exponentially. Probably you already heard the opinions of some economists saying that the bubble will pop one of these days. Maybe in the past you wanted to invest on bitcoin when it was $1000, and you didn't do it because of these people, losing the opportunity to make 10 times the initial investment. And you know what? They don't even have the slight idea of what they are talking about.

They may use their knowledge to predict something that already happened in the past, but cryptocurrency has no historical background. This is the first time in the history of human kind that cryptocurrency has been created as this is the first time in history that we have the technology to do that. In the same way, this is the first time that the creator of cryptocurrency (Satoshi Nakamoto) is totally unknown. It's like cryptocurrency was created from nothing or some artificial intelligence, like the world of machines in the Matrix movie. You cannot attack or blame anybody and, without precedents, you cannot damage anybody to convince people that somebody is wrong or that he or she is having his or her personal interests. This is the reason why I believe that the economists have no idea of what is going on. They always talk about bubble and burst like in the stock market, but they don't understand the importance, the outstading scope of this. I don't want to seem crazy or a fanatic here, but I have good reasons to believe that this event is going to change to world, once and for good. The entire world is moved by money, and if money are going to change, the entire world is going to change too.

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. And do you know why I know? Because I was part of those people and it is one of my best regrets :-)

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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