Now available for pre-order

Now available for pre-order

I’m excited to let you know that my new Ebook is NOW available for pre-order.
Release date is June 14th.

Get your copy now, so you will have all information first!
You don’t know what you don’t know, until you’ve read this.

This is something that was on my bucket list for quite some time.
Now that we are on the threshold of the masses accepting bitcoin it seems
a perfect time to get this on Amazon.

It was written and ‘tested’ by a dear friend, who knew nothing about the subject.
Because, if she would find it adequate and could comprehend it, my 82 year old
Mom could and so can anyone else.

Pre-order now

Yes, I want this!
Cryptocurrencies and Blockchain, Part 6 How To Identify Scams

Cryptocurrencies and Blockchain, Part 6 How To Identify Scams

If you’ve made the decision to get involved in cryptocurrencies you’ll start looking around on the internet and perhaps talk with people from your network to see if they are doing ‘something’ already.

Now, I realize not everyone is going to appreciate what I’m about to share in this blog post with you. It might very well put the business they are involved with in a negative light. It never is my intention to bash an opportunity or an individual. The only intention I have is to educate you, reader of this blog post and to help you avoid the pit falls of the legion of scammers out there.

Red Flags

What are red flags you should be alert on?

Hyping Opportunities 

If an opportunity is hyping it very often means that those marketing it are emphasizing big gains, perhaps even guaranteeing it. If the business concept has no real product involved, or no REAL MINING, it doesn’t matter what currency the opportunity is doing business in: USD, EUR, GBP or Bitcoin, the currency will not make it sustainable nor legitimate.

BS statements by marketers 

It is absolutely shocking to read statements made by many marketers. They simply lack proper knowledge and will use marketing mantras to get you blinded by earning potential. Having enormous amounts in a backoffice doesn’t mean a thing. I can have millions playing Monopoly, it doesn’t make me really wealthy does it?

What promoters are at the top? 

Look who are promoting it heavily and then look at their history. If they have a track record of being involved in scams, the odds are this is another. Get rick quick is what DOES attract these recruiters.

Pump and Dump Alt Coin Schemes 

There are many coins being offered that people are offered to buy into. Packages for absurd amounts in order to get so called tokens. Of course all of them claim to be better than Bitcoin. Some of them claim to have thousands of merchants ready to start accepting them. These are just claims, there is no real proof or documentation there really are.The coins have a value that is determined by the company. Mostly these coins can not be exchanged, or the schemes have their own exchange where there are enough sellers (people who look at thousands and thousands in their backoffice) but there are no buyers. Why would you want to buy coins that you cannot sell nor use.The potential success of any cryptocurrency is in the practical use of it. If there is no practical use, any value attached to it by the company mining it (rarely it’s an open source decentralized blockchain) is wishful thinking and fairy tales.The fact a coin is showing on coinmarketcap.com isn’t proof of it’s future success at all. Many think it is, but they are wrong/ misinformed.

There is a lot more to doing due diligence on online business opportunities, but for cryptocurrency schemes, the ones mentioned above will already help you eliminate the majority of scams.

Now a very important question:

How to identify whether a cloud mining or alleged real mining company is trustworthy?

Unfortunately, there are mining offers available that are scams. Hash Ocean has been a sad example: Millions have been collected and the site and company simply vanished. You don’t want that to happen to your money.

If you start mining you aim to mine real coins, whether that’s bitcoin or an alt coin. Do NOT buy into any hype. Hype is the biggest pitfall for the uneducated masses, who easily get blinded by dollar signs and tend to ignore the red flags waving into their face!

Very often the website that is being used has a hidden identity of the owner. When asked for proof of existence, you’ll get pictures that are simply taken from the internet. Any mining company offering fixed mining results (like 10% per month), that’s a HUGE red flag, since there are no fixed results in mining.

There are cloud mining opportunities that conveniently abuse the name of a real mining farm: they use a derivative of the real mining farm’s name, add a letter or something to give the IMPRESSION it all is real. You will find out when your money is gone, no coins are in your possession and the site has gone black. Or, another convenient untruth, a site owner will communicate it has been hacked.
Either way, the money or bitcoins you have put in that specific mining company is simply gone.

Many will claim to offer cloud mining, but there is no real mining involved. So be very careful when choosing whom to trust and where to pay your money or bitcoins to. Reliable companies will proudly show who they are, proudly show pictures and videos taken on site and preferably have some members visit the mining facility. No real mining company will publish the exact location of their mining facility because of security reasons, this makes perfect sense.

Well, this brings this series to an end.

I hope you’ve found it useful and has helped you understand the power of blockchain and cryptocurrencies and how it can have a huge impact on life as we know it in the coming years and probably decades.

Sign up for the newsletter on this website. We’ll be announcing and launching a Cryptucation course in the coming weeks. A very important part there will also be how to protect and store your mined coins safely. Many have insufficient security and will one day find the coins they had on their smart phone have disappeared. Learn how to minimize the risks and benefit from a trend that is bigger than many realize today.

Part 1, Introduction
Part 2, Blockchain
Part 3, Bitcoin
Part 4, Altcoins
Part 5, Mining

Cryptocurrencies and Blockchain, Part 5 Mining

Cryptocurrencies and Blockchain, Part 5 Mining

In this part we’ll talk about mining of cryptocurrencies. I’ll try to keep it as simple as possible (again, my 82 year Mom should be able to understand it).

For the sake of simplicity, let’s focus on mining of bitcoins.

Bitcoin mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions or blockchain. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Mining is increasing the security of the network.

The list of blocks in the blockchain gets longer and longer and holds all transactions that ever took place.

When a block of transactions is created, miners start a process. They apply a mathematical formula to the information in the block. By doing that they turn it into something else: a sequence of letters and numbers known as a hash. This hash is stored along with the block, at the end of the blockchain at that point in time.

Hashes have some specific properties. It’s not hard to produce a hash from a collection of data like a bitcoin block, but it’s practically impossible to work back to what the data was just by looking at the hash. It may be very easy to produce a hash from a large amount of data, each hash is in fact unique. If you’d change just one single character in a bitcoin block, its hash will definitely change.

Miners don’t use only the transactions in a block to generate a hash, but also another piece of data: the hash of the last block in the blockchain, prior to the one they are mining right now.

It is because each block’s hash is produced using the hash of the previous block, it becomes a digital version of something we can compare with a wax seal. It confirms that this block – and every block after it – is legitimate and unique, because if you tampered with it, everyone would know.

Every time a block successfully is hashed, a reward of 12.5 coins is given. All miners compete to complete a block and get that reward.

Completion of a block and creating the hash isn’t very difficult. With all computer technology theoretically everyone would be able to complete a block in a very short period of time. Intentionally the protocol used to mine bitcoins adds a difficulty to it, which is called proof-of-work.

The bitcoin protocol will not just accept any old hash. It requires a block to have certain specifics. It must have a certain number of zeros at the start. It is impossible to know what a hash is going to look like until you produce it, and as soon as you include a new piece of data in the mix, the hash will be entirely different.

Miners aren’t supposed to mess up the transaction data in a block. However, they must change the data they’re using to create a different hash. They do this using another random piece of data called a ‘nonce’. This nonce is used with the transaction data to come up with a hash. If the hash doesn’t fit the required format, the nonce must be changed, and the hashing is restarted. It can take many attempts to find a nonce that works, and all the miners in the network are trying to do it at the same time. That’s how miners earn their bitcoins.

In the early phase of bitcoins many would start mining at home, using their own hardware and were profitable. But hardware has changed, technology has advanced and with advanced technology electricity required to mine has heavily increased.

It is for this reason that mining at home isn’t profitable any more and that has opened the opportunity for mining farms, cloud mining etc. The combined high volume of hash rate makes bitcoin more favorable, especially when costs of electricity can be kept low or at least in control.

If we’d look around on the worldwide web, we can find numerous mining companies offering their capacity for individuals. How tempting the offers may sound, unfortunately there are a lot of scams, opportunities who claim to offer mining, but no real mining is being done at all.

In the next episode of this series I’ll share with you how to identify scams yourself, so from there on you’d not only have a better understanding of blockchain, bitcoin/altcoins and mining, but also can make more educated decisions.

 

Cryptocurrencies and Blockchain, Part 4 Altcoins

Cryptocurrencies and Blockchain, Part 4 Altcoins

Now that you have an understanding of blockchain and bitcoin, it is a logical next step to look at the so called Altcoins.

Basically any cryptocurrency other than Bitcoin is an altcoin.

In the early part of the previous century the automobile was invented. What we saw happening there is similar to what we see with any new invention: the first prototype triggers others to come up with a better version, faster, more gears, other features.

It is exactly what is happening with the bitcoin blockchain technology. It invited other programmers to come up with versions that could do certain things that the blockchain technology cannot.

If you would look at job vacancies in IT it is very obvious there are massive opportunities for blockchain programmers.

One of the better known Altcoins is Ethereum, which has become very popular amongst software programmers. Monero is one gaining grounds at the moment and Litecoin is one of the more popular altcoins.

To identify which Altcoin has potential and which has not, it is important to look at the protocol that is mining them. Does this protocol have something of value to offer that has a market, a demand for it? That is the key question.

End of October Zcash launched and got enormous attention. The reason for it is that it has been developed for 4 years, had 2 external audits prior to launch AND it has total anonymity. Bitcoin has partial anonymity: your name will not be found in the blockchain, but any transaction can be linked back to you as your bitcoin wallet is registered to your name. Launching a protocol is one thing, creating the market, the demand for it is another. It is up to Zcash now to expand on the use, the demand in the market in order for it to gain momentum and value. In the first 24 hours after launch we saw $2m being paid for 1 coin. At the moment this post is written the value is around $50.

It isn’t easy to see which coins will last and gain market share and which will not. It is quite impossible to predict future value of any coins. I will not even try to do something like it.

If you’d consider getting involved with altcoins it is recommended to read up on each of them. On Coinmarketcap you can access loads of information on over 700 altcoins (and bitcoin of course).

If the protocol used for mining has no new features compared to already existing coins, the odds are not favorable that it will gain market share. There are quite a few bogus coins out there, where it isn’t even clear what protocol is used. Be extremely cautious on those. In a next episode of this series I’ll write about the many scams out there and how to spot them.

Since I’m not a fortune teller, I won’t be able to give you any guidance on which coin has the best outlook. What I do is simply follow people who are knowledgeable on the subject and who are NOT marketers. Marketers have a tendency of telling you what they think will ‘sell’ you and the amount of nonsense being stated is truly frightening.

The founder of the company I’m involved with is one of the experts I carefully listen to and so is our Operational Director of the mining facility. Imagine these two gentlemen talking their “bytes and nodes” and just listening to that conversation…like Alice in Wonderland. 🙂

There is not much more to tell about altcoins that hasn’t already been shared in Part 3 on Bitcoin.

If you haven’t read the previous parts yet, I’d strongly recommend to read these as well.

Part 1, Introduction
Part 2, Blockchain
Part 3, Bitcoin

 

 

Cryptocurrencies and Blockchain, Part 3 BitCoin

Cryptocurrencies and Blockchain, Part 3 BitCoin

Bitcoin is the grandfather of cryptocurrencies as we know them today.

Bitcoin in fact is 2 things: a cryptocurrency and a payment system.

It was invented by a programmer or a group of programmers under the name Satoshi Nakamoto. On October 31, 2008 it was introduced to people on a cryptocurrency mailing list. The open source code (software) was released in 2009.

Cryptocurrencies had been around for some time already, but this was the first time the issue of double spending was solved. A major break through. With bitcoin being released there now was a protocol that ensured that each coin could be spent only once.

It is a peer-to-peer system where transactions take place between users directly, without interference of anyone. All transactions are verified and confirmed by nodes (miners) in a distributed ledger. This distributed ledger is called the blockchain. BitCoin is its units of account. There is no central administrator nor a central ledger. Everything is decentralized.

Bitcoin is the first decentralized digital currency.

Bitcoins are created as a reward in a competition in which users spread all over the world, offer their computing power to verify and record bitcoin transactions into the blockchain. This activity is referred to as mining and successful miners (nodes) are rewarded with transaction fees and newly created bitcoins.

Units of account

Bitcoin is the unit of account of the bitcoin system. Since 2014 it is symbolized with BTC, XBT or ฿, where XBT is the official ISO denominator. To honor Bitcoin’s creator the smallest part of a bitcoin, 0.0000001 is called a Satoshi. That is one hundred millionth of a bitcoin. A microbitcoin is 0.000001 or one millionth and a millibitcoin represents 0.001 or one thousandth of a bitcoin.

Now if we’d compare bitcoin to gold, it is pretty tough to divide a gold bar in one hundred millionths of that very bar isn’t it? With bitcoin that is as easy as blinking your eyes.

Validity of transactions

As in any payment system the validity of a transaction is important. For a transaction to be valid it must be an unspent output of a previous transaction. Each and every transaction must be digitally signed. This is done by using the private key that belongs to a bitcoin wallet. It goes without saying that keeping that private key absolutely private and absolutely safe is very important. Without that private key there is no proof of ownership and any bitcoins in that wallet are simply lost.

Mining bitcoins

Mining is a process of keeping records. Miners (nodes) keep the blockchain complete, consistent, safe and impossible to alter. It is done by repeatedly verifying and collecting new broadcast transactions into a new group of transactions. These groups are called the blocks. As explained in Part 2 of this blog series, each block contains a cryptographic hash of the previous block, thus creating a chain of blocks: the blockchain.

The goal is to get a block accepted by the rest of the network. In order to be accepted a new block must contain what is called a proof-of-work. You can see a proof-of-work with the CAPTCHA code; you often are required to fill in when completing a form online. CAPTCHA is intended for humans, so is easy to complete. For the proof of work in the blocks computing power requires it to be a much more complex process: the difficulty of the blockchain.

The proof-of-work requires miners to find a number, a nonce. It is done in such a way that when a nonce is hashed along with block content, the result is numerically smaller than the network’s difficulty target. Verification of the proof is easy, but it is very time consuming because of the almost endless possibilities, to finally meet the difficulty target.

Every 2016 blocks (approx. 14 days), the difficulty target is increased based on the network’s recent performance. The aim is to keep the average time between new blocks at ten minutes. In this way the system automatically adjusts to the total amount of mining power on the network.

The proof-of-work system combined with the chaining of blocks makes modifications of the blockchain extremely hard. A potential attacker must modify all subsequent blocks in order for the modifications of one block to be accepted. New blocks are mined 24/7/365, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases. It is estimated that it would require half a billion dollar to hack the blockchain for just 10 minutes! I’d call this highly secure.

More on mining in a next part of this series.

Supply of bitcoins

As explained above the miner who finds the block is rewarded with new coins and transaction fees. As per July 2016 the reward is 12.5 coins per block that are added to the blockchain. To claim this reward, a coinbase, a special transaction, is included with the processed payments. All bitcoins that are in existence have been created in coinbase transactions. The bitcoin protocol specifies that the reward for adding a block will be halved every 210,000 blocks (about every four years). Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins will be reached in the year 2140. From that moment on the record keeping will be rewarded by transaction fees only.

Basically it means that bitcoin’s inventor Nakamoto did set a monetary policy based on artificial scarcity. This policy was set at bitcoin’s inception and included the fact that there would never be more than 21 million bitcoins in total.  

Transaction fees

There is a large payment processing industry, charging you to send your own money to another party. The percentages being charged can reach really serious heights. Bitcoin allows people to charge for sending a transaction. Miners can chose to process the higher transaction fees transactions first. Opposite from the almost criminal charges in the ‘normal’ world, bitcoin transaction fees amount from entirely free to 2%. Fees are based on the storage size of the transaction that is generated. The storage size is determined by the number of inputs used to create the transaction. Also, priority is given to the oldest unspent inputs.

Once this series of blog articles have been completed there also will be a small course available, which will also cover the various types of Bitcoin wallets. That is a topic on its own already. Get yourself on the email list so you will be notified when that course is released.

Anonymity

Every bitcoin wallet has an email address and is showing in the blockchain with a unique code. Since the blockchain is a public ledger anyone can see the transaction with that code. However, no one knows who that code belongs to. Most bitcoin wallets will require the well known “Know Your Customer” documents in order for you to process larger transactions (buy/sell of bitcoins). That is where the anonymity then stops. Just recently the IRS has summoned Coinbase to hand over all data (transactions as well as identities of wallet owners) over the period since 2013.

Peaceful anarchy

Bitcoin is a payment system that takes away the heavy influence of authorities, regulators and banks on your payment behavior. If power is taken away, you will see strong objections coming from exactly these parties to influence the masses in trying to stop them from getting involved with these new payment methods. Less power means less control after all.

It is said that cryptocurrency is the ultimate way for people to get out of poverty. Since there is no interest in Bitcoin it is safe to say there are no religious objections from specific groups of people either. Where many can’t get access to a bank account, they can easily access the bitcoin system and create their wallet. Alternative banking to those who have been without up until now.

Value of bitcoin

The value of bitcoin is measured in USD (or any other Fiat currency) is determined by supply and demand. We already saw that supply will never be more than 21 million bitcoins. Demand however is rapidly increasing. With more and more countries embracing demonetization (India, Pakistan, Venezuela), its people will turn towards a currency their government cannot make worthless overnight. Investors will use bitcoin to hedge against their regular investments. This is why bitcoin also is called the Digital Gold.

All in all a lot of information on the best known cryptocurrency Bitcoin.
In Part 4 we will look into Altcoins, all cryptocurrencies that surfaced since Bitcoin.

Part 1, Introduction

Part 2, Blockchain

 

Cryptocurrencies and Blockchain, Part 2 Blockchain

Cryptocurrencies and Blockchain, Part 2 Blockchain

Blockchain and Blockchain Technology, words that become more and more familiar to us because of usage in various media. However, what it actually is, is a mystery to those who are entirely new to this new digital revolution.

A Blockchain, the technology that is creating Bitcoin and other cryptocurrencies, is a shared digital ledger, or a continuously updated list of all transactions. This decentralized ledger keeps record of each single transaction that occurs across a fully distributed or peer-to-peer network, either public or private.

Blockchain is a secure way of online transactions. The decentralized ledger records transactions on thousands of computers spread all over the world. They do it in such a way that no transaction can be altered retrospectively. Each transaction has to be confirmed six times before it is final in the blockchain. This creates a high level of security.

The use of a blockchain confirms that each piece of a digital currency was spent only once. This solves the long time problem of double spending. Blockchain has been around for quite a long time already, but it was the Bitcoin Blockchain technology that first had solved that double spending issue. A real break through in technology. This is why Bitcoin is called the grandfather of cryptocurrencies.

Blockchain Database

The Blockchain database consists of two types of records: transactions and blocks.
Blocks contain batches of valid transactions that are hashed and encoded into a Merkle Tree *).

Each block contains the hash **) of the previous block in the chain, thus linking them together. The linked blocks form a chain: the blockchain. This process confirms the integrity of the previous block as well as the reliability and security of the blockchain. This is because it goes all the way back to the genesis block (the very first block in the blockchain). Each single block is uniquely linked to the next and the previous block.

Decentralization

Because data is being stored across the network the blockchain eliminates the risks that we see when data is stored in one central place. The network has no central points that are vulnerable to exploitation by computer hackers nor has it a central point of failure.

Blockchain security methods use public key cryptography, which means that it uses pairs of 2 keys: one that is public and one that is private and only known to the owner. By this both authentication and encryption are established. The public key is used to verify that the holder of the private key is sent a message/ transaction and the private key is to ensure that the encrypted message can only be decrypted by the owner of that private key. Simply put: the public key is encrypting messages and the private key is like a password to be able to read or open that message.

Every miner (also called ‘node’) in a decentralized system has a complete copy of the blockchain. There is no such thing as a centralized ‘official’ copy and all users are trusted equally. Every transaction is broadcast-ed to the network by use of software. Then the mining nodes validate the transactions and add them to the block they are creating. Once the block is completed the nodes broadcast the completed block to all other miners in the network.

Open or Private

There is a discussion going on whether or not the private systems creating blocks are actual blockchains or not. Those using them claim they are, those who work on public systems claim only these are true blockchains.

Private or permissioned systems are similar to corporate systems and do not support decentralized data verification. The Harvard Business Review defines blockchain as a distributed ledger or database open to anyone.

No Permission

The major advantage to an open network that doesn’t work with permissions is that protection against bad actors is not required and no access control is required . This means that applications can be added to the edge of the network without the approval or trust of others, using the blockchain simply as a layer of transport. This openness allows researchers to examine real-time transaction data in a closed economic system.

The Impact of Blockchain on Society

Blockchain will transform business operating models. Think of medical records (no cover ups of medical screw ups, once reported that report is final), pharmacist administration, insurance administration and transactions that now require a notary. Government ledgers and registers on proprietary ownership of real estate and land. Can you see how many jobs will become redundant in the coming years/decades?

What about voting systems on the blockchain, so no election fraud can ever happen again?

Major applications that we already know of and that are getting increasing interest are of course Bitcoin (cryptocurrency) and Ethereum. More about these coins in the next episodes of this series.

You and Blockchain

It gets more and more obvious that those who don’t get involved with blockchain and cryptocurrencies will find themselves offside soon enough. Those who do get in now will be on the edge of something that will grow bigger than most of us can even begin to imagine.

*) Merkle Tree explained on Wikipedia

**) Hash explained on Wikipedia