Let’s Talk Straight – What is Bitcoin? 1 525

Unless you’ve been living in a cave lately, you’ve heard the B word uttered more than a few times. But what is all this talk of Bitcoin, and why is it causing so much hype? And while we’re on the subject… What is Bitcoin anyway?

Chances are, you’ve asked yourself or someone else that question on more than one occasion, but probably with unsatisfactory results. You know by now that it’s a currency, just like the dollar, except… nothing like the dollar.

You can’t physically hold Bitcoins, as they live only in cyberspace, and you probably wouldn’t be able to hold a handful of them anyway, since each Bitcoin is worth around $10,000.

If you keep hearing about people winning the cryptocurrency lottery and turning a few cents into millions of dollars, you might be tempted to take part.

Until you hear the other stories saying the Bitcoin bubble is about to burst and you decide to hold back.

So, let’s start at the very beginning.

What is Bitcoin?

Bitcoin is a digital currency, otherwise known as cryptocurrency. It was invented under the alias of Satoshi Nakamoto in 2009, with several goals. One, to cut out the middlemen (banks), as transactions can take place online from Bitcoin to Bitcoin with no fees and no delays. Small businesses don’t have to pay credit card transaction fees and we can do business internationally without converting currency.

Sounds pretty smart, right? Yes, but Bitcoin is not without its problems. Its decentralized nature means that no bank or institution controls the level of inflation, which means it’s highly volatile to peaks and troughs in value. What started out as a few cents on the dollar shot to a record high of almost $20,000 in December 2017 and then slumped back down to half of that within a few days.

Clearly, this makes stable business with Bitcoin currently impossible. And you may be asking, if one Bitcoin is so expensive, how are regular people getting involved?

Anyone can buy into Bitcoin because you don’t have to buy a whole Bitcoin; you can buy fractions of a Bitcoin, called Satoshi. Its skyrocketing value has led to many to call it “digital gold,” as most people treat Bitcoin as an investment and not a currency–at least, for now.

Types of Cryptocurrencies

Bitcoin isn’t the only cryptocurrency out there. You probably already know that. What you may not know is that there are now close to 5,000 different cryptocurrencies available! Why? Each cryptocurrency is created for a different purpose. For example, Agrecoin is for agricultural transactions, Audiocoin for buying music, and so on.

But instead of analyzing every coin on this growing list, let’s give you a general idea. Cryptocurrencies can be broken down into three different types:

1. Coins

“Coins,” make up the first group of cryptocurrencies, (albeit digital ones). Coins use encryption techniques to regulate the generation of units of currency and verify fund transfers. The original crypto coin? You guessed it, Bitcoin. Instead of using these as coins though, Bitcoin has become more of an investment vehicle, with people investing and holding, rather than buying and selling.

2. Utility Tokens

If you’re looking to get the real use out of crypto, make a transaction and daily purchases, utility tokens are the best option. Ethereum is the best example of a utility token that helps waiver transaction costs and move money without fees. It still has a volatile value, but markedly less so than Bitcoin.

3. Tokenized Securities

Call them tokenized securities, or security tokens. Basically, the idea is the same. They represent shares in a business. Like buying into a project (such as the two currencies mentioned above, agrecoin and audiocoin).

Coins, utility tokens and tokenized securities, when it comes to investing, are presented to the public as an ICO, or initial coin offering, to raise funds in the same way as an IPO, but with a crypto twist, and, of course, without the regulation.

The Takeaway

You’re probably realizing by now why you haven’t had a straight answer to your question about what is Bitcoin yet. That’s because it isn’t easy to explain! Here are the main things you should know:

  • Bitcoin is a digital currency with no regulatory body and no banks.
  • It’s good for making Bitcoin to Bitcoin transactions
  • Lack of regulation is getting continuingly banned in countries like China
  • It’s extremely volatile and subject to huge fluctuations

So, if you want to jump on the Bitcoin train, are you too late? Some people may think so, others remain quietly confident that it’s not over yet. But one thing you should keep in mind–never invest more than you can afford to lose.

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Christina is a technology and business communicator who has worked with high profile ICOs and blockchain influencers to break industry news.

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There’s an Inflatable ‘Bitcoin Rat’ Staring Down the Fed 92 8701

Someone has put a giant inflatable rat outside the Federal Reserve Bank in New York.

It’s covered in Bitcoin code, printed in rainbow colors, and is apparently a piece of installation art aimed at subverting the federal institution that controls the US dollar. Or is it pale, puffed-up pariah a commentary on Bitcoin bros themselves? Or does it have something to do with Warren Buffett, who earlier this year called Bitcoin “rat poison squared”? According to CoinDesk, who first reported on the inflatable rat, the meaning is intentionally ambiguous.

The artist behind the puzzling prank is Nelson Saiers. He describes his own work as “mystifying” and “singularly original”, notwithstanding the long history of rats being inflated as protests or used as economic and political icons in art and entertainment around the world.

“It’s art, so I hope they’re entertained by it,” he said, apparently implying that art is entertainment. “It’s informative, I hope people will learn [and] I’m hoping it’ll at least help people understand bitcoin better and be kind of faithful to what Satoshi would have wanted,” he added, citing the mysterious pseudonym of Bitcoin’s founder with a touch of reverence.

A $50 Million Artist

Saiers, a phD in theoretical mathematics, was a hedge fund manager who did that thing where you give up all the money to chase your dream of being an artist.

His financial experience includes a stint as managing director at Deutsche Bank’s prop trading desk, before becoming CIO of Saiers Capital, the hedge fund that bears his name. His creative career gives credence to the theory that working as an artist is more and more a privilege of the very wealthy.

CNBC estimated Saiers’s wealth to be around $50 million at the time of he departed from the financial industry to pick up his paintbrushes.

The Rat Joins a Tradition of Sculpture-as-Commentary in FiDi

The Bitcoin rat, which stands on Maiden Lane, isn’t the first pop up sculpture to grace Manhattan’s financial district. Last year, Kristen Visbal’s 50 inch bronze ‘Fearless Girl’ statue made waves by staring down the famous ‘Charging Bull’, to the outrage of ‘Charging Bull’ sculptor Arturo Di Modica. The 3.5 ton ‘Charging Bull’ itself was left on Wall Street in the middle of the night when Di Modica originally created it, obstructing traffic and drawing the curiosity of passers by.

When Saiers placed the Bitcoin rat, he initially set it up on private property and was promptly ushered off by security guards, who he says were good natured about the situation. He expects the sculpture to be more temporary than the aforementioned Wall Street bronzes, and will probably only be around for a few days.

A Critique of the 2008 Bailouts

The placement of the rat on Maiden Lane seems to be no accident, but rather a reference to the Maiden Lane Transactions, more commonly known as that time when the Fed bailed out the big banks after they all caused the 2008 market crash. The Bitcoin crowd’s antipathy towards the Fed and the big banks is palpable in Sairs’s rat sculpture, and while a more specific meaning eludes, perhaps the success of the piece depends upon its ability to start conversations about the state of finance.

We’ll leave it to the viewers to decide who’s the rat—the Federal Reserve, or Bitcoin itself—and what that means for the future of currencies.

DApp Frameworks Will Improve the Blockchain — Here’s How 380 3317

Scalability has always been a problem for blockchains, and it’s the main reason blockchain technology hasn’t reached mainstream adoption. Whether in blockchain fintech—where comparisons of the Bitcoin blockchain’s 10 TPS to Visa’s 24,000 TPS abound—or in other sectors blockchain has touched, this is holding many otherwise promising companies back from delivering new, innovative kinds of value to the public. While larger and better-resourced companies have managed to overcome this problem through sidechaining and/or sharding, there is no substitute for the real thing. DApp scaling frameworks may be a foundation to build widespread solutions to this problem.

What are DApps?

DApps (decentralized apps) use blockchain technology to deliver peer-to-peer value through product offerings, services, or new forms of value. Built on blockchain technology, dApps use its decentralized, trustless, peer-to-peer structure to let users transact between each other without a centralized authority through an encrypted medium (such as NASGO’s platform that we’ve reported on previously).

While this is an otherwise revolutionary solution to the problem of over-centralization, it comes with its own set of baggage. Imagine if every transaction or purchase you made had to be confirmed by a network of other people before completing. This, the consensus protocol—on which Bitcoin, Ethereum, and other leading blockchains are built—is one of blockchain’s greatest strengths, but also one of its greatest weaknesses. For any  blockchain to work as intended, every node participating in it has to confirm every transaction that happens on it.

On the positive side, this massively increases transaction immutability, verifiability and transparency. Unfortunately, it also makes transaction per second (TPS) speed very low. Slow processes usually don’t scale. And without scalability, blockchain technology cannot reach mainstream usage. Right now, only about 8 million people globally use any form of cryptocurrency. To reach mainstream usage, 800 million people must consistently use it.

It sounds like a chicken-and-egg problem, but the blockchain space is already developing resources to overcome this issue. DApp scaling frameworks are one way. They are bundles of code inside blockchain protocols that let distributed apps distribute themselves in a semi-scaled way, letting a blockchain scale improve its TPS and allow more transactions than ever before. Unfortunately, not many developers have access to these, and the few that do have only built the earliest versions of this technology, which brings up the question: is this really a workable solution right now?

What We Have Now

DApps are hard interact with. They’re slow, confusing, and rely on 3rd-party software which only the most sophisticated consumers can readily use. Yet the chief issue here is speed—the key performance measurement of all distributed systems is scalability, and without it, dApps have no real business case or value proposition, let alone any realistic user acquisition strategy. Yet there are fixes for this problem, but little implementation and even less progress on their collective maturation. They exist in five categories, below:

1. Low-Level Optimizations

2. Parallel Blockchains (“sharding”)

3. Homogenous Vertical Scaling

4. Heterogeneous Vertical Scaling

5. Heterogeneous Interconnected Multichains

6. Multilayered dApp development toolboxes

There’s not much to be said for the solutions in the first category. Most of them—consensus algorithms, PoS migrations, parallel processing on transactions and code optimizations in the Ethereum Virtual Machine—are low-level and impermanent band-aids to the deeper problem.

The best of the solutions in the second, third, and fourth categories are at this stage still in the proof-of-concept phase, being built almost exclusively by and for Ethereum and Bitcoin, such as projects like Plasma and the Lightning Network. These are getting the most traction here only because they’re developing out of Bitcoin and Ethereum, but are nontheless still are very early-stage.

The idea behind Plasma is to take smart contracts, give them self-governing alongside self-execution properties to let the Ethereum root chain essentially create buds or “shards”—tiny sidechains each monitoring one aspect of a transaction instead of putting that combined pressure on the root chain—to distribute consensus, letting blockchains dramatically scale their TPS. Lightning Network deals more exclusively with payments—it’s a second-layer payment protocol next to the root blockchain, using a peer-to-peer system to let users make cryptocurrency micro-payments. Both platforms are examples of how some blockchain companies are using secondary and tertiary parallel blockchains to scale their TPS.

Concepts like Polkadot—scalable heterogeneous multichains—provide foundations for later functionality in the area of relay-chains, where the goal is to build validatable, globally connected, frequently-changing data structures on top of these frameworks.

Companies like MenloOne—multilayered dApp development toolboxes—create and deploy digital tools for dApp developers to use when they’re building. They include:

  • A layer for communication.
  • A layer for governance (given lack of server admins to ban malicious users in a decentralized network).
  • A local wallet for smooth transactions (no more MetaMask popups).
  • A core layer, a network of content nodes which cache mirror versions of blockchain data.

These incorporate fragmented systems to make dApp development easier for professionals.

Together, solutions in these categories are working to help top blockchains scale TPS to thousands per second.To become adopted by the mainstream public, these frameworks will need to use a variety of different tools to make transactions effortless for blockchains to process.

What do you think about the scalability of blockchains today? Is it a problem for you or are you unaffected? And, what do you most want to see happen in this area of blockchain technology in the near future? Post in the comments below to let us know!

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