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SMART CONTRACTS

With the closing of 2017 and a successful ICO under our belts, we begin development on the SHA-256 Smart Contract System that will be in place before the closing of 2018. Let us take a brief moment to describe in a simple way how Smart Contracts work:

The term "smart" describes the ability of an electronically signed agreement (contract) to execute itself once the predetermined requirements have been fulfilled. Two parties agree to a task to be completed and an amount of cryptocurrency to be interchanged once that task is done; these are the requirements of the electronic agreement. Automatically, an amount of cryptocurrency is transferred and the Smart Contract fulfils itself. There can be other factors that come into play when designing Smart Contracts such as multiple requirements, multiple payments to be sent at intervals, time limits, etc. It sounds simple but coding for Smart Contracts is intensive.

Smart Contracts may be programmed to be used with many situations including: Property, Financial Services, Credit Enforcement, Copywrite Prevention, and much more!

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THE EVER-CHANGING PRICE

Cryptocurrency prices go up because more people want to buy than sell.  When this happens, they begin to bid higher prices than the cryptocurrency has been currently trading.  On the other side of the same coin (pun intended), cryptocurrency prices go down because more people want to sell than buy.  In order to quickly sell their shares, they are willing to accept a lower price. The same holds true for any commodity of anything valuable since the dawn of trading and is how our stock market has functioned since its inception years and years ago.

With cryptocurrency, almost everything rises and falls like the tide. But what is pulling the tide? Bitcoin (BTC) is the enormous gravitational force behind the ebb and flow. When it pulls upward, most all of the cryptocurrencies (including our beloved ILCoin) get pulled up with it. And when it pushes down, most also get drug down with it.

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WHAT IS A CRYPTOCURRENCY?

Cryptocurrency is money 2.0; or rather a form of digital fiat currency. Why is it like fiat currency? It has no physical value itself; it just represents a value. Even fiat currency has more of a physical value than cryptocurrency. Did you know if you added up all the value of every U.S. penny together, it costs more to produce and use them than all of their value put together? What determines the value of a cryptocurrency (or any fiat currency, for that matter)? Supply and demand… it is worth what people are willing to pay for it.

So why use cryptocurrency and not a traditional, physical fiat currency? It has many advantages over traditional money. To name a few:  there are no central banks determining its value and controlling the flow of its creation; countries are not involved in determining a cryptocurrency value so one nation’s economy cannot affect it dramatically; it has the lowest transfer fees which are unaffected by country borders or distance.

There are even many more advantages to having and using cryptocurrency. Like it or not, cryptocurrency is the future of money. What is the disadvantage? Cryptocurrency is still in its early stages of use and, therefore, is not accepted everywhere. I bet you would be hard-pressed to find someone who hasn’t heard of a US Dollar. But to find someone who hasn’t heard of Bitcoin or ILCoin, you need only ask around on your neighbourhood block.

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IS BITCOIN A SCAM?

At the time of writing this article, http://www.debate.org shows 54% of people say “yes” Bitcoin is a scam.

Imagine for a moment that the government issued a voucher that had a defined value; a fiat currency, if you will. Then, after a time, the government says they do not recognize that fiat currency as having value and anything of value that you were to have traded to obtain the voucher will have been lost. Have you tried entering a bank recently and putting a fistful of fifty-five-dollar Continentals (1) into your bank account?

Now let us consider Bitcoin. No one person controls Bitcoin; it is owned by countless people across a great number of countries. For it to become a scam, each person in every participating country who owns Bitcoin would have to agree that it holds no value; thereby losing all money they invested in Bitcoin. The major difference between the government example and Bitcoin being that the government can control the value of the voucher completely by issuing no money to investors. As long as there is a demand for Bitcoin, there will be value.

(1)    https://en.wikipedia.org/wiki/Early_American_currency#Continental_currency

 

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WHAT MAKES A CRYPTOCURRENCY GOOD?

There is essentially one difference that makes a cryptocurrency stand out among the rest: development. This holds true for every cryptocurrency since the original Bitcoin. Bitcoin is the only different, successful cryptocurrency because it was developed by the community that believed in it and its potential. Remember in 2010 when the first pizza purchased with cryptocurrency was bought for 10 000 Bitcoin? That was a major turning point for Bitcoin because everyone who, before that purchase, only saw Bitcoin as being ones and zeros on a computer screen now realized that cryptocurrency could be used. But it didn’t get to the point of being able to purchase a pizza overnight. It had a whole community of loyal developers who believed in Bitcoin working to make it become something!

Ethereum (ETH) is another great example. You could read the changelog for a very long time to see all of the development that has gone into building the cryptocurrency into what it has become today and, at the time of writing this article, Ethereum (ETH) is worth $750 each.

Here are some links to front-end development of ILCoin:

Website: https://ilcoincrypto.com/

Blockchain Explorer: https://ilcoinexplorer.com/

Official Web Wallet: https://ilcoinwebwallet.com/

Official Android Wallet: https://play.google.com/store/apps/details?id=wallet.ilcoin

Exchanges: https://www.coinexchange.io, https://c-cex.com, https://cryptrader.com/

Cryptocurrency Listing Sites: https://www.worldcoinindex.com/coin/ilcoin, https://coinmarketinfo.com/, https://www.cryptocompare.com/coins/ilc/overview

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WHAT HAPPENED TO e-GOLD?

e-Gold (1), and their competition e-Bullion, were digital currencies operating out of the USA before Bitcoin was created. They were processing more than $2 Billion USD (each!) worth of spends annually before their demise. So how did Bitcoin succeed as a cryptocurrency where e-Gold failed?

Money is power. It always has been. The great rulers of the past knew this and, therefore, controlled the money. They only gave permission to themselves to mint the money, gave wages to insert the money into society, then charged taxes to recover the money back into the royal coffers; thereby, maintaining the power and the control of availability of money. When the USA government saw another entity controlling the power of their kingdom, it was time to cut the head off of the snake. E-Gold had four easily-identifiable leaders; it was just a question of finding a believable, legal way to enact a coup.

The USA Patriot Act gave them the answer they were looking for. It required e-Gold to have a state money transmitter license to continue operations. E-Gold did not fit under this new statute. The US government then stretched the definition even further to include any system that allows transfer of any kind of value from one person to another, not merely national currency or cash. Then, they “proceeded to prosecute the USA-based gold systems, e-gold (and later e-Bullion) under the USA Patriot Act for not having money transmitter licenses, even though these companies had previously been cooperating with regulatory authorities.” (1)

And, thus, the head was severed from the body in one fell swoop of USA’s sword. But Bitcoin isn’t a snake; it is a Hydra. Everyone who has a Satoshi or more is the owner of Bitcoin. Where one head is cut off, two more grow back in its place. More and more Hydra are born with the passing of time; ILCoin is one of them. Bitcoin (and all other cryptocurrencies, such as ILCoin) is giving power to people.

Satoshi Nakamoto, wherever you are, remain anonymous. The governments keep their swords sharpened…

(1) https://en.wikipedia.org/wiki/E-gold

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DE/CENTRALIZATION

“Decentralization is the process of distributing or dispersing functions, powers, people or things away from a central location or authority.” (1)

Centralization is specified in three different ways: Architecturally, Politically, and Logically.

  • - Architecturally: How much of a physical network can be inoperable at the same time yet the network still functions
  • - Politically: How many people control the physical network
  • - Logically: If both the physical network and the people controlling the network are cut in half, will the system still function correctly

Cryptocurrencies, and the Blockchains they operate on, are Architecturally and Politically Decentralized because they don’t need more than one computer to maintain the registry and more than one person to operate that computer. The Bitcoin network is made up of hundreds of thousands of computers run by individuals all over the world. At the time of this article, there have more than 10 million users according to Coinbase.com. You can cut the number of people and computers in half until only one of each remain and the system can rebuild itself as soon as more are reconnected. The Blockchains synchronize in a harmony of Logical Centralization; they share the same rules set and the system behalves like a single computer.

ILCoin is a centralized/decentralized hybrid combining elements from both to create a unique system that:

  • -Eliminates 51% attack risk (Centralized)
  • -Fixes scalability issues (Centralized)
  • -Keeps transaction fees / energy cost low (Centralized)
  • -Anyone can download and check the block history (Decentralized)
  • -Provides a multiple node system, increasing stability (Decentralized)
  • -Offers complete anonymity (Decentralized)
  • -Is without national borders (Decentralized)

(1) https://en.wikipedia.org/wiki/Decentralization

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WHAT IS A BLOCKCHAIN?

The easiest way to describe a Blockchain is to imagine an open ledger (also called a distributed ledger technology). Everyone can view all of the transactions made on the network which the Blockchain resides. As more and more transactions are completed, Blocks are added in a chronological order (chained) as records of those transactions. “Currently, the technology is primarily used to verify transactions, within digital currencies though it is possible to digitize, code and insert practically any document into the blockchain. Doing so creates an indelible record that cannot be changed; furthermore, the record’s authenticity can be verified by the entire community using the blockchain instead of a single centralized authority.” (1)

Actually, the Blockchain is the invention of the 21st century with the most potential thus far. It could be applied with slight differences to be applied to voting systems, registrations, medical and legal records, or ownership certificates for valuables. It is the system on which ILCoin’s Smart Contracts will be built. It will provide an open, transparent way for all parties involved in a Smart Contract’s signing to see the conditions become fulfilled and the contract realized.

“The first blockchain was conceptualized in 2008 by an anonymous person or group known as Satoshi Nakamoto.” (2)

(1) https://www.investopedia.com/terms/b/blockchain.asp

(2) https://en.wikipedia.org/wiki/Blockchain

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CRYPTOCURRENCY ANONYMITY

Using cryptocurrency can be completely anonymous. There are many services, including ILCoin, that do not require any information from the user to create a wallet and to begin trading. Many cryptocurrency exchanges only require an email and a wallet number to begin trading. If you were to look on a cryptocurrency’s Blockchain, you can see the transactions within each block. Each transaction has a lot of information regarding its involvement within the block it was processed, however none of this information is directly pertaining to the sender or the receiver of a transaction except the wallet addresses (sender and receiver) and the amount sent. Unless someone knows you are the owner of a particular address, it is anyone’s guess as to who the address belongs.

How then, can you keep your transactions private once someone knows your address? The number of addresses you can create is practically infinite (296 possible combinations). You could, if you wished, create a new wallet number for each and every transaction. Or, a simpler method would be to create a wallet for each person with whom you do transactions and/or business. Some wallets, such as the ILCoin QT Wallet or the Bitcoin Armory Wallet can create a new address for you automatically each time you receive or send a transaction.

There is a new technology called “bulletproofs” being released that can be implemented into the Blockchain’s code that allows all normal Blockchain information to be viewed except for the amounts being transferred.

ILCoin’s Blockchain is completely anonymous. If you know the wallet address, you can view the transactions. However, if you do not, you can not simply peruse around and see what transactions and quantities go where. Is the anonymity of your addresses compromised? Simply create a new one!

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WHAT IS MINING?

Every day ILCoin employees grab their hardhats, shovels and pickaxes to trudge off into the underbelly of the economic world to haul out carts full of precious ILCoins. But where, exactly, do these ILCoin come from?

Imagine you have an onion with many, many layers. As you peel off the layers, they get harder and harder to peel off. Once you peel off all of the layers, the only layers of that particular onion that will ever exist are already in circulation among the hungry populace. As there are many mouths to feed and the more people that like the taste of your onion, the more valuable each layer will become.

A cryptocurrency’s algorithm is the onion. Peeling off the layers is the mining process which forges the blocks; extracting new coins and allowing transaction processing. Once all of the coins are mined, no more coins may be produced and the computers that once mined simply produce “phantom” blocks with just the transactions but without new coins. The more well developed a cryptocurrency becomes, the sweeter the taste its coins will have.

This is why ILCoin dedicates as much effort as is possible into its development. We want our onion to be your favourite food. But like all cryptocurrencies, you should be patient with sharing that onion; it only gets more delicious over time like a fine wine.

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PROOF OF WHAT?

-Proof-of-Work (POW) – Decentralized. Requires many physical computers and a lot of processing power to decipher the encrypted block to forge the Blockchain. Arguably less corruptible.

-Proof-of-Stake (POS) – “Centralized.” Requires much less resources since you only need to own the coins to ‘stake’ your mine. More price stability due to miners not selling coins. Arguably more secure.

ILCoin uses Proof-of-Work consensus, however, we do not open our doors to let anyone mine. Why? By refuting other miners, we eliminate many of the negative aspects of the normal PoW model.

  • -Cost Effective – Our closed mining network is what allows ILCoin to ease off of the processing power if few transactions are being made and to amp it up in times of high traffic. More power means more blocks being processed in less time. Even during times of low traffic, our transaction processing time doesn’t average more than 15 minutes.

  • -Cost Stability – For that same reason, we do not greedily burn through our mining equipment trying to compete for new blocks and their rewards. Then, take those block rewards and sell them to the highest bidder trying to gain back the money we spent on electricity and equipment maintenance.

  • -51% of What? – One of the biggest debilities of Proof-of-Work is considered the 51% attack. If there are no competing miners, there is no one who can corrupt the Blockchain by using more processing power. Developing and maintaining a cryptocurrency requires a huge investment of time and money. By centralizing the mining, there isn’t a distributed consensus, but to falsify any aspect of a block would be to harm ourselves, our coin, and our investment.

  • -Security – One of the biggest disputes of POW vs. POS involves the security of the cryptocurrency. As mentioned above, without a 51% attack, there isn’t a risk of any entity inserting incorrect information into our data.

As you can see, ILCoin uses a Proof-of-Work consensus algorithm but by restricting mining nodes, we make our cryptocurrency secure, cost effective, and stable. In doing so, we are able to take many of the positive aspects of Proof-of-Stake and apply them to our system of forging blocks.

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SEGWIT AND THE LIGHTNING NETWORK

To understand what SegWit (Segregated Witness) does, you first have to understand the scaling problem of Bitcoin and potentially all cryptocurrencies based off of Bitcoin technology. The scaling problem is explained simply as: Bitcoin wasn’t designed for so many transactions per minute.

Each transaction consists of important data such as: the sender, the recipient, the amount of Bitcoins being transferred, etc. That data takes some space, which is quite insignificant when talking about a single transaction; however, it adds up when there are hundreds of transactions taking place every minute. The signing of a transaction essentially confirms that the person sending an amount has that amount to send and is, indeed, the person who owns that quantity of cryptocurrency.

The SegWit solution has two parts:

  • -It allows for more SegWit transactions per block because it removes (segregates) the signatures from the block and places it separately following each block

  • -It enables the use of a “Lightning Network”

The Lightning Network is a second layer to run on top of the base blockchain layer, hypothetically resolving the scaling problem by enabling virtually unlimited numbers of instant, low-fee transactions to occur "off chain" on a separate channel. Then, once the channel is closed, the final status of the transactions that occurred through the channel is written on the Blockchain.

As of the writing of this article, the Lightning Network is not in use, but is in developmental stages being tested on the Bitcoin’s Test Network.

There was a “SegWit2x” proposed that would have also increased the size of the blocks on the Blockchain to 2MB; further allowing for more transactions to be processed on each block. It did not receive the voting consensus needed to pass.

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FORKING CRYPTO

Forks occur regularly within cryptocurrency and their Blockchains, and there are two main types of forks: hard fork and soft fork. But what causes a fork and what is it?

When the Blockchain is forging blocks and it finds two blocks that have different information, the Blockchain always chooses the block with the most sequential blocks chained behind it as the correct one; this is where the Blockchain forks. Most forks that occur on the Blockchain are automatically solved in this way. Transactions that occurred on the blocks attached to the shorter chain are dropped off. These transactions are usually stuck at “processing” or “waiting for confirmations” for a few days and then the funds are normally recalculated to their sender’s amount. These are called Orphan Transactions.

A hard fork occurs when a different rule set for a Blockchain is implemented. This has inadvertently created new cryptocurrencies as not all of the users of a cryptocurrency have to be in accordance with this new rule set. Examples of this are Bitcoin Classic (BCH) which forked in 01 August 2017, and Bitcoin Gold (BTG) which forked 24 October 2017. The resulting cryptocurrencies are completely legitimate in their own right; they just follow a different rule set and, because of it, have their own consensual Blockchain network for verifying transactions made by the subsequent cryptocurrency. Essentially, everyone who wishes to change to the new rule set (miners, users, and merchants) will have to upgrade to the new code.

With a soft fork, only the miners have to upgrade to the new code. If they do not, and they have less than 51% of the hashing power to create new blocks, they would eventually be overtaken by the chain fork created under the new rule set standard.

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SECURITY

For as long as someone has wanted to hide something (and/or someone) and/or safeguard something (and/or someone), there have been security measures created and constantly improved upon to complete this task. Hiding, guarding, placing behind obstruction, and other methods have been solutions to security both in our daily lives and on our computers. For example, you might hide a file inside of a hidden archive. You could guard information using an antivirus or could keep your information behind obstructions such as firewalls.

Knowing what security is in place would help facilitate an entry to such defences. If you know a house has a fence two meters tall, three guard Dobermans, an alarm system with an average police response time of seven minutes, and a heavy grade safe with the information inside, you could better prepare for the task of obtaining access to such a place. The same holds true for internet security. If access to something restricted was well encrypted, it could take a very, very long time to secure an asset by brute force (the act by which a computer guesses all possible combinations until the correct one is achieved). However, if the combination of characters, symbols, numbers, and letters was known (even without knowing which ones they were) the process to brute force the encryption could be relatively quick. It would be much easier to access a restricted asset if you knew the password had 15 letters, 4 numbers, and 2 characters.

Web application firewalls (malicious script protection), access controls (backdoor protection), bot protection (distinguishing bad bots from good, helpful ones), login protections (two-factor authentication), intrusion protection systems (abnormalities with logins), and secure socket layer (encryption between web server and browser) are all crucial in maintaining a website safe. Most professional websites have all of these and an ace or two up their sleeve. A hacker would want to know exactly which of these products are in place and would prefer to know which service provider is being used. One firewall might have a debility another firewall does not.

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WHICH CRYPTOCURRENCY SHOULD I INVEST IN?

ILCoin (ILC). Invest in ILCoin.

Thanks for reading.

See you next time.

Ok, ok. In all seriousness, this question deserves a bit more attention. There are several factors that one could look at when judging whether or not to invest in a cryptocurrency; technological advances, market cap, supply and liquidity, network security, usability, ect…

There are so many factors when looking at a cryptocurrency, the answer is always the same assured one:

‘I don’t know. No one knows.’

If you are considering investing into a cryptocurrency, you should look at the factors mentioned above. Look also at the movements (present and upcoming) that a company isn’t just planning on making, but rather movements towards beginning or completing. (*nudge* *wink* Smart Contracts *nudge* *wink*)

At the end of the day, its going to come down to a lot of investigating and a bit of luck.

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MINING DIFFICULTY EASILY EXPLAINED

What is mining difficulty? The blocks of a cryptocurrency are encrypted (hence the name cryptocurrency). To overcome that encryption and forge the block, which also produces new coins, a certain amount of processing power must be applied. This processing power is called the hash rate. The difficulty of the block is called the hash. The hash adjusts automatically after a certain number of blocks have been forged depending on how much hash rate is applied to solve the hash of the blocks. The amount of hash rate needed to solve the hash of a block is called the mining difficulty.

As more miners want to mine a cryptocurrency, more computers are connected to the mining node causing an increased hash rate to be applied to solving the blocks. This causes the blocks to be solved very quickly, but also causes the mining difficulty to increase accordingly when it adjusts automatically. As mining difficulty rises, the value of the cryptocurrency needs to rise at the same time so miners can retain the same value for their hashing power. If the value doesn’t raise, miners begin to gain less and less money mining the same cryptocurrency with the same hashing power.

What does this mean for you? Nothing! You use only ILCoin, remember? Sit back and relax: The ILCoin Development Team takes care of this for you because we do not share mining privileges. This is for your information only. However, if you are also using another cryptocurrency, there is some merit in understanding what the mining difficulty does and how it affects the cryptocurrency you use.

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WHAT HAPPENS WHEN ALL BITCOINS ARE MINED?

The short of it is: No one knows.

At this moment, it’s all just speculation. Some argue that the price of Bitcoin will be worth nothing when this comes to pass, while others believe that due to the lack of additional Bitcoins, the value will increase.

The most important thing to keep in mind is that this will not come to pass for roughly 100 more years. Imagine Bitcoin 100 years ago. You can’t. It didn’t exist. There will probably be another technology available for currency exchange in the future and thinking about that time you worried when all the cryptocurrency was mined will make you chuckle at yourself.

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WHAT IS A SIDECHAIN?

A Sidechain can be described as a parallel blockchain element to a blockchain. It allows a safe environment for testing code, running new applications, and for sandboxing new features. It wouldn’t be independent, however. A sidechain would need the blockchain to function. They allow for something called “Non-Interactive Proofs of Proof-of-Work” (1).

Information could be shared between the two with an informatic connection called a “two-way peg”; which is just a fancy way of saying information can be passed between the blockchain and the sidechain at will through a communication portal. While sidechains may be a great advancement in blockchain technology, they are far from perfected. Many see them, in their present state, as security risks. With market values reaching into the billions for some cryptocurrencies, any chance there could be a security issue is too much of a risk to be taking.

1. https://eprint.iacr.org/2017/963.pdf

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ICO RISK

Please consult a financial advisor before making any decisions about investing.

If you look online, you will find a bunch of information that will tell you, “Yes, you should invest in an ICO.” Websites will just give you the positive aspects of investing in an ICO without telling you the risks involved. Then, perhaps they will even go on to give you a short list of ICOs they recommend. ICOs are like any investment risk; you may lose. Whenever looking at an investment of any kind, you always want to look for the ideal standard: Low Risk, High Return of Investment. Even if you were to find a potential investment opportunity that appeared to be in such pristine circumstances, there are still other factors to consider.

Underfunding can, for obvious reasons, cause you investment to become a poor one. If underfunding is extreme, the project will fail. However, there is a hidden benefit to underfunding; if the ICO is successful, less people will receive the tokens which (if the tokens are interchangeable) could drive up the price in the marketplace as few people will possess them. This rarity is the core principle behind the cryptocurrency Unobtainium.

Overfunding can be a bad thing also. An ICO that is too successful could have the opposite effect and could potentially cause the value of each token or coin to reduce as the market could be flooded with everyone wanting to trade massive quantities of a token everyone already owns.

Fraud, while not quite as prevalent in today’s ICO market, is still a factor. Will the company I want to invest my money in complete their end of the deal once the ICO is over? Unfortunately, there were a few bad apples in the beginning of the ICO era. They caused a distrust within the cryptocurrency ICO community that hasn’t, and won’t, go away easily. Trust is a fragile thing; hard to obtain and easy to break.

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MARKET CAP

Please consult a financial adviser before making any decisions about investing.

“Market cap measures what a company is worth on the open market, as well as the market's perception of its future prospects, because it reflects what investors are willing to pay for its stock.”

-Fideliy (1)

Market capitalization, or market cap, for a cryptocurrency is simply how much the cryptocurrency would be worth if you were to add up all of the circulating supply and multiply it by the value of the crypto. For example, Bitcoin stands at $195,353,900,080 USD at the time of writing this article. There are 16,813,025 BTC circulating at this time and each one has a value of about $11,619.20 USD.

What does this information mean for you? The per-share price of a cryptocurrency is thought to convey some sense of value relative to other cryptocurrencies, but nothing could be farther from the truth. The market cap is a rough estimation of a company’s worth, and should, therefore, be a rough starting place when considering doing business based off of financial interests alone. If you believe in a company or a company’s product, that is another reason altogether to invest in a company which looking at market cap might not help.

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THE BENEFIT OF DECENTRALIZATION

“Imagine you lived in Syria right now. Your central infrastructure is destroyed, as is your money. You don’t want the war, but there’s nothing you can do about it. Now your house is gone, your friends and family are dead, your banks are bombed out and you’re cast out, adrift, homeless and penniless. Even worse, nobody wants you. The world has shifted from open borders to building walls everywhere. You’re not welcome anywhere, you can’t stay where you are and you’re broke.

But what if your money was still there, recorded on the blockchain, waiting for you to download and restore a deterministic wallet and give it the right passphrase to restore it?”

  -Daniel Jeffries

Decentralized systems are much harder to attack. It is much easier to uproot a weed if there is a stem attached to the roots. Centralized systems are much easier to destroy with a ‘decapitation’ of the body.

Don’t believe your country would do such a thing? Remember the Australian Craig Wright?

“Police gained entry to a home belonging to Craig Wright, who had hours earlier been identified in investigation by Gizmodo and Wired, based on leaked transcripts of legal interviews and files. Both publications have indicated that they believe Wright to have been involved in the creation of the cryptocurrency [Bitcoin].” (1)

                -The Guardian

But let’s imagine another situation. What if you owned a great deal of cryptocurrency and lived in a country where it became illegal to do so? Before 2014, it was legal to trade cryptocurrencies freely in EVERY country. Last year, many countries banned cryptocurrency usage within its borders. (2) An early investor with 10,000 Bitcoins (or perhaps only a couple thousand, even) would now be sitting on a retirement.

Decentralization, anonymity, without national borders, downloadable public ledger system… These are all favourable points towards using cryptocurrency. Sure, there are also counter arguments; there are always valid points to both sides of a story. This is why fiat currency will never go away. But, that is for another topic!

 

1. https://www.theguardian.com/technology/2015/dec/09/bitcoin-founder-craig-wrights-home-raided-by-australian-police

2. https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory

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MINER’S FEE AND VALIDATION

Mining is needed to ensure fairness and for keeping the network stable, safe and secure. The miner’s fee is a very tiny amount you pay (fractions of a crypto) to perform a transaction. As you make a transfer of money (whether it be from one account to another or to pay for a service), the payment must be verified by a miner to assure that there isn’t any discrepancy.

Through private-key cryptography, the miners are able to assure that the amount sent is from a wallet that approves the transaction. If this process wasn’t included in the transfer, anyone could send coins from your wallet to another wallet just by knowing your public key (wallet address). For this checking process, the mining fee is charged. It is more than a fair trade for keeping your investment safe and making sure no one is spending your hard-earned cryptocurrency.

Most services that receive cryptocurrency as payment require a certain number of verifications before they consider the cryptocurrency to be securely transferred. This is because for every verification, a block has been mined. If a transaction has 6 verifications, 5 blocks have passed after the block that contained the transaction. This assures that the block that contains the transaction wasn’t soft-forked and orphaned (see our post “Forking Cryptos”).

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THE PYRAMID SCHEME

A lot of potential users of cryptocurrency choose not to get involved due to fear that it is eventually a scam and a pyramid scheme. When, in reality, they participate in a pyramid scheme on a daily basis; it just works differently than they are taught. I can’t speak for anyone else, but when I was growing up, I was taught that you go to work and you get paid for doing so: That’s how the world works. …And it does work, to a certain extent. However, there is one catch. Time is a limited resource.

Money works like a pyramid; it starts at the top and flows down to everyone else. In fact, there’s a pyramid on the dollar itself. That’s the irony of it. Printed money is more of a pyramid scheme than cryptocurrency. The money is minted at the top of the pyramid by central banks and then slowly trickles down to everyone else. The problem being, it is well-filtered many times before you receive any. In fact, the only reason you have any money at all is because you had to labour for it or take out a loan (not including illegal methods such as theft).

Think of economics as you would any game in life. You want to maximize the advantages for your team. Those who control the flow of money do nothing different; maximizing the advantages for those on their team and keeping it for as long as possible. This is why every economic system of the world has distributed money from the top down. This means most of the money never really leaves the top. Since money is power and power is an advantage in the game, no one wants to willingly give it up. Today, the richest 1% of the world’s population own more than half of the world’s wealth.

I’m not suggesting a solution. Up until now, this is how life has been and is currently. Don’t believe in the allusion of fiat currency being any more fair than a cryptocurrency.

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SHA-256

SHA is an acronym meaning ‘Secure Hash Algorithm’. It is secure because the input/output is essentially a one-way street. You can enter any value of any length and the encrypted output will always be the same fixed length. This makes it impossible to decrypt and decipher the original input without the hash key. The public key is 256 bits long however it is generally hashed to produce an address 160 bits long for convenience. This is the reason it is named 256.

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