Thanks to Bitcoin’s recent surge in value, thousands of people from every corner of the planet are looking to join the network and start trading with this cryptocurrency to make a profit. It is a well-known fact that Bitcoin can turn average people into overnight millionaires. Everybody wants to turn this dream into reality, and thus most are more than willing to trade with this cryptocurrency.
However, one of the biggest disadvantages that comes with Bitcoin is online scams. Many people fall victim to online scams each day, which is why we wanted to give you a list of the three most common Bitcoin scams that you can come across when trading with it. First, we are going to provide you with details on reputable and safe sites for trading with Bitcoin, and then we are going to list the three most common Bitcoin scams.
Where Do You Trade With Bitcoin?
Trading sites are the platforms where the magic of selling Bitcoins takes place. After you earn a certain amount of Bitcoins, you turn to these professional sites as they can help you sell your assets at the highest possible price, thus making a handsome profit.
Some of the most reputable trading sites have thousands of users from every corner of the planet and even provide the traders with additional services which help them generate massive revenue.
Ponzi Schemes
The Ponzi scheme is one of the most popular schemes of all time. It was invented by Charles Ponzi, one of the most popular scam artists of all time, but some research estimates that it goes far deeper than that. The idea of this scheme is very simple – you offer tremendous amounts of profits, then run off with the money.
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In Bitcoin’s case, you can often see projects and strategies stating how people can be offered returns of up to 10% per month. These offers are definitely Ponzis. With this scheme, scammers are always on the lookout for new investors. When scammers feel like they are close to being identified and the scheme runs out, they just vanish and find new victims.
The Exit Scam
The exit scam has been gaining popularity in the Bitcoin network recently. Here’s how it works. Scammers take the customers’ coins and start trading with them. But they provide the clients with false data on the profits and number of exchanges. They are simply playing the accounting system. Hence, the balance on their wallet does not reflect their real state since the coins are gone. When the clients start requesting withdrawals, they shut up shop and disappear.
The Stop Drive
The last scheme to be on the lookout for is the stop drive. This is a rather sophisticated scam; some scam exchange sites will ramp up the Bitcoin value just so that they can motivate you to invest money. Just before you invest money, they drop the prices, and you lose money. After you’ve made an investment and lost money, they just ramp up the numbers back to normal.
When we speak of altcoins, what we are referring to is essentially anything other than Bitcoin--the largest, oldest and most well-known cryptocurrency on the market. There are many altcoins now, some of which have grown an incredible amount in the last couple of years and have made headlines in major non-crypto-related publications around the world for both good and bad reasons.
Altcoins are created, in many instances, to get in on the bonanza, but most of them have a unique value proposition and purport or show that they serve a market need in ways that other coins don’t or do something better than an existing coin. Below are 6 popular altcoins and their value propositions.
Stellar Lumens
Stellar is a decentralised protocol whose value proposition is that it allows holders to send money to anyone, anywhere in the world, for very little money, circumventing the monopoly that large intermediary institutions have on international transfers. This can be accomplished instantly and in any currency.
Litecoin
Litecoin was created around the same time as Bitcoin and uses the same source code, making it what is often referred to as a Bitcoin fork. Litecoin’s raison d'être and its major value proposition are to provide a coin that transacts faster than Bitcoin (around four times faster). Ease of transaction, even if a coin is not as widely traded and is accepted as a medium of exchange in fewer places, is always going to be an attractive feature for investors, especially those looking to day trade and take advantage of small (and large) price fluctuations.
Litecoin’s raison d'être and its major value proposition are to provide a coin that transacts faster than Bitcoin (around four times faster).
A coin with a slow trade time means it is harder to speculate on. Litecoin is also more abundant than Bitcoin, meaning there are likely more people looking to trade it at any given time. Speed plus the increased liquidity are Litecoin’s major selling points.
Ethereum (Ether)
Ethereum’s value proposition is that it uses blockchain not only to maintain the decentralised mutual ledger payment network that is the defining characteristic of most cryptocurrencies, but it also stores computer code which can also be used to facilitate smart contracts--decentralised financial contracts that are essentially immune to fraud and tampering.
Ethereum’s contracts and applications are transacted with Ether (the protocol's coin) and while it was created as a complement to Bitcoin, rather than a direct competitor, its popularity has made it one on the world’s cryptocurrency exchanges.
Ripple XRP
The value proposition of Ripple, like Ethereum, is that it is much more than just a digital currency. Ripple XRP is mainly known for its digital payment network and protocol, functioning as a payment settlement, asset exchange, and remittance system that functions similar to the banking system SWIFT. Ripple also offers investors an alternative to the blockchain mining concept utilised by Bitcoin. The Ripple network relies on what is called a distributed consensus mechanism that is used to validate transactions.
Instead of awarding the asset to whichever person has completed the blockchain first, Ripple works based on a consensus whereby a poll is conducted that asks the servers or nodes on a network to vote on which transactions are the most valid, which allows for nearly instantaneous verification of contracts and exemplifies the decentralisation principle of blockchain and cryptocurrencies, in the eyes of many investors, much more thoroughly than some of the competitors.
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Chainlink
Chainlink is comprised of a decentralised network of different nodes that relay information and data from offline sources of blockchain to contracts that are on-blockchain using “oracles.” The idea is that this process, along with highly secure hardware, will help eliminate reliability concerns that are often present when there is only one single centralised source. This has made Chainlink the most widely-subscribed-to decentralised data source.
What Chainlink’s technology purports to do is create a feedback loop whereby node operators, based on a token incentive, invest in the infrastructure that will continue to improve delivery and data sources. Without something like Chainlink, coin owners and traders would be dependent on a centralised institution to make the data available that all of the smart contracts rely on.
Cardano
Cardano is now one of the largest coins by market cap, but its value proposition is often misunderstood. Cardano is a unique altcoin because they are not trying to go after the smart contract market in its totality, but rather are attempting to develop a viable decentralised financial system in the developing world. Cardano’s objective is to provide something of value to the developing world by providing an alternative to banking industries that are notoriously and lamentably underdeveloped.
Conclusion
The number of cryptocurrencies that exist in the world is only going to grow as more developers seek to take advantage of the rising popularity of this asset class and respond to gaps and deficiencies in Bitcoin and other important coins. Different coins have different applications and uses, depending on the context, and the above altcoins each come with a unique value proposition that purports to do something different or better than the rest.
The European Commission recently published a proposal that aims to govern the conduct of financial service providers that deal in cryptoassets. The Markets in Crypto-Assets Regulation (MiCA) is defined as a framework of measures that will be implemented to enable and support digital finance in regards to innovation and competition while mitigating risk for all stakeholders. Work on this regulation framework began in 2018 with the end goal of harmonising the EU’s efforts towards regulating currently out-of-scope cryptoassets.
Instead of disregarding the innovation and rising popularity of cryptoassets, the European Commission has been exploring ways through which they can embrace the digital transformation that is currently taking place in economic markets worldwide. The implementation of MiCA is part of a bigger legislation process under the digital finance package, which consists of proposals around cryptoaassets. The main aim of the digital finance package is to facilitate creation, competitiveness and access to innovative cryptoaassets for trading services customers in Europe while ensuring financial stability and customer protection.
A summary of the regulatory objectives
The proposal also intends to create an environment that will foster innovation around cryptoaassets rather than installation of retrogressive guidelines that will stifle the rise of new technologies. Because there has been increasingly independent policing within European countries, it was necessary for the EU to step in and regulate the digital currencies markets.
What is being regulated?
MiCA intends to regulate every digital representation of value which has the capability of being shared using Distributed Ledger Technology (DLT), disregarding financial instruments that are deemed out-of-scope for existing regulatory framework such as MiFID and EMD. They should fall under the below categories:
- E-money tokens – cryptoassets with a stable value that is based on only one fiat currency whose purpose is to serve as electronic money would. Examples of these are Libra, Euro and USDC.
- Utility tokens – which are issued under a non-financial basis for the purposes of providing a third party with access to a predetermined resource or service. An example of this is a FileCoin Token.
- Cryptoassets – for example Bitcoin, Litecoin and Ripple.
- Asset-reference tokens – whose purpose is to maintain a stable value by referencing one or more currencies that are legal tender such as fiat currency. They can be used as a store of value or a means to purchase goods or services. An example of this is Libra Basket Coin.
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What are the new rules that apply to cryptoassets?
Under these proposed regulations, a Crypto-asset Service Provider (CASP) is defined as an entity that is involved in the provision of cryptoasset services to a third party on a professional basis.
Issuers of the cryptoassets are required to publish a definitive white paper and send it to the relevant financial services regulator for review and approval for example the BaFIN in Germany. The issuer of the cryptoasset can only proceed if the proposal is approved.
Service providers that deal with cryptoassets will also be required to seek approval from the relevant regulators in the jurisdiction in which they operate. The regulator requirements include things like minimum capital reserves, security of the infrastructure on which the cryptoasset is offered and corporate governance.
Of course, MiCA also spells out its position regarding issues that affect trading in securities such as insider trading and market manipulation.
Trailblazing in the EU
In essence, MiCA is taking the unbeaten path when it comes to regulation of crypto-assets. While some countries are banning these types of assets, it is commendable to see that the European Union is interested in fostering an environment that will promote innovation and still protect stakeholders. The intended result is to create a transparent and harmonised European crypto-asset market that invites global investors and customers to participate.
Bitcoin and Ethereum fell during Tuesday trading, extending a price decline that began last week, while joke cryptocurrency Dogecoin rallied further after a record surge.
Bitcoin was down 4.6% by 9.20 AM in London, while Ethereum was down around 5.3%. The world’s two most highly valued cryptocurrencies were trading at $54,763.19 and $2,134.70 respectively.
Meanwhile, Dogecoin was up 18% at $0.4075, a jump that coincided with social media attention on 20 April. Supporters of the cryptocurrency are celebrating the date – which is also International Weed Day – as “DogeDay” and are urging fans to buy up the token in a bid to raise its price to $1.
The price of Dogecoin has risen by more than 400% in the past week and by more than 5,000% since the beginning of the year, a rally that has given it the fifth-highest market cap among cryptocurrencies. The total value of its tokens in circulation is now over $52 billion.
Dogecoin has also benefited greatly from the light-hearted support of social media celebrities such as Elon Musk and Snoop Dogg, whose joking references to the token on Twitter preceded an 800% price jump in January.
"Dogecoin has become the new GameStop, with frenzied trading potentially going to deliver a bloody nose to novice investors,” said Nigel Green, CEO of deVere Group.
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Green also suggested that the Dogecoin push is being pitched as a battle of a community-backed cryptocurrency versus existing crypto giants like Bitcoin, echoing the GameStop trading frenzy that took on a narrative of underdog retail investors versus established Wall Street insiders.
Based on previous historical data, Bitcoin has maximised its value. The price of Bitcoin has rallied over $60,000 in March 2021 during its bull market phase, while Bitcoin's market capitalisation exceeded $1 trillion.
This new benchmark has only attracted additional investments from institutional investors but also has made Bitcoin mining more popular. But if you're new to Bitcoin mining, you should know that it is not advisable to work as a solo miner, and most miners work together with other miners in mining pools and farms. In case you also want to join a mining pool, in this article, we explain the advantages of becoming a part of a mining pool.
Bitcoin Mining Process
Bitcoin mining is a process that starts when the miners approve blocks of transactions and add them to the blockchain network. Based on their contribution to the blockchain network, they earn a block reward. The process is complex because it involves solving a numeric problem, and only the first miner who solves it gets the block reward.
In addition, every miner needs to have a state-of-the-art computer system in order to mine, especially because mining is an energy-consuming and time-consuming activity that requires a lot of computing power, also known as hash rate. Also, due to events like Bitcoin halving, the worth of the block reward is getting halved after four years or after a quantity of 210,000 blocks is added to the system. The first reward was 50 BTC, and after the third halving it is 6.25 BTC.
Therefore, miners are working as part of the mining pools in the system. But you can easily get BTC if you don't find mining appealing on exchange sites.
Mining Pool Structure
A mining pool functions as a group of miners who pool their resources on the network to enhance the probability of successfully gaining block rewards while mining. Based on the structure and the methodology of the mining pool, they distribute the tasks and rewards among the miners of the pool.
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The pooling algorithms determine whether the tasks will be evenly shared among participants or the workload might be distributed unevenly. Another option is for the tasks to be assigned to stronger miners that contribute with more computing power to the pool than the others.
Of course, there are some differences regarding the requirements of certain mining pools. Some might require a fee for being members, and others might require specialised mining equipment or maintaining a certain level of internet speed.
How the Rewards Are Shared
If you decide to mine on the blockchain network alone, you will have complete ownership of the block rewards. But, as we mentioned earlier, you need to be aware of the electricity costs and other costs of mining. Otherwise, in mining pools, you have a better chance of gaining the reward while keeping your costs low.
In a pay-per-share pool, each miner receives a payout according to their overall contribution in fining and verifying blocks of transactions. The advantage is that they offer a reward to each participant and it doesn't matter whether the pool obtained a block reward or not.
In proportional mining pools, you're reimbursed based on your contribution based on the collective hash rate. If the pool earns a reward, you're further rewarded based on the shares you hold. It's worth mentioning that generally, larger mining pools have a better chance of getting the block reward due to their hash rate. In conclusion, you should do your own research and, based on your total costs and financial goals, pick a pool.
Coinbase, the US’s largest cryptocurrency exchange, reached a valuation of over $100 billion on its first day of public trading on Wednesday.
The company was valued at $99.6 billion when trading opened, with stocks priced at $381 apiece. This price would later fall to $328.28, but not before reaching the $100 billion milestone.
Coinbase’s stock market debut, and the implications it creates for cryptocurrencies becoming part of mainstream finance, spurred enthusiasm among crypto investors. Bitcoin reached an all-time high of $63,000 on Tuesday ahead of the platform’s listing.
“Today is a big moment for @coinbase as we become a public company,” tweeted Coinbase co-founder and CEO Brian Armstrong on Wednesday. “But it’s also a big one for crypto.”
The value of Bitcoin and other cryptocurrencies has soared over the past year as major firms including Tesla, Mastercard and PayPal have revealed plans to incorporate digital tokens into their business models. Bitcoin itself rose 300% last year and has continued to climb since January.
Smaller currencies have also benefited from the surge. Joke token Dogecoin has risen over 70% in the past year, reaching 13 cents per coin.
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Coinbase was founded in 2012 and had more than 56 million users at the end of March 2021. It also held around $223 billion in users’ assets.
The firm’s market cap has increased more than tenfold since 2018, when investors in a private funding round valued it at $8 billion.
The value of Bitcoin hit a record $62,741 in early Tuesday trading, a surge of more than 4% in the past 24 hours.
This latest extension of the cryptocurrency’s 2021 rally comes one day ahead of the initial public offering of Coinbase, which is set to list on the Nasdaq index on 14 April.
Coinbase is the largest dedicated cryptocurrency trading platform in the US, with around 50 cryptocurrencies listed for exchange. It recently revealed that the number of active users on its platform reached 6.1 million, up from 2.8 million in the fourth quarter of 2020.
On Wednesday, Coinbase will become the first major crypto company to go public, with a valuation that may exceed $90 billion. It will not issue any new stares as part of its IPO, instead selling 114.9 million existing shares via a direct listing.
Cryptocurrency investors are hailing the firm’s IPO as a major step in the continued movement of virtual coins towards mainstream finance despite continued scepticism from regulators and major Wall Street players.
Crypto investors appear to have grown more bullish as the IPO approaches. Bitcoin remains the most highly valued cryptocurrency in the world, and the rest of the broader crypto market is often buoyed by its successes. Its second-place rival, Ethereum, also reached a record high of $2,205 in Tuesday trading.
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After a meteoric rise during 2020 and early 2021, buoyed by the attention of major players such as PayPal and Tesla, Bitcoin fell back as low as $43,000 in late February amid uncertainty over stimulus expectations and how they might affect US bond yields.
Compared to other crypto-based projects, the Ethereum blockchain currently provides a platform for the world’s second-largest digital currency called Ether (ETH). This digital currency is second only to Bitcoin and can serve as a means of payment between two parties without interference from a third party. However, many still have doubts about the Ethereum project and its feasibility in the long term. Others wonder: should I buy Ethereum?
If you are new to the Ethereum project, we urge you to read this article to understand better what the Ethereum blockchain offers. We will begin the article by explaining how a blockchain functions, what the Ethereum project is, and the Ethereum project’s applications.
What is Blockchain?
Blockchains serve as a decentralised register that captures all crypto transactions across a peer-to-peer network. Blockchain technology permits transactions to occur between two parties without the interference of a third party. It is essential to note that cryptocurrencies cannot function without blockchain technology.
For now, the primary application of this technology is for the transfer of cryptocurrencies. However, there are many potential applications for this technology in the future, like voting, settling trades, and many others.
Bitcoin uses its blockchain as a ledger for transactions. Unlike Bitcoin, Ethereum uses blockchain technology in a variety of unique ways. This brings us to our next question: what is the Ethereum project?
What is the Ethereum Project?
Before we consider what the Ethereum project is about, let's take a brief look at the history of Ethereum. Ethereum was officially founded in 2015 by Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, Amir Chetrit, and many others. Its founders’ goal was to create a decentralised platform that functions without third parties controlling other parties’ activities.
Blockchains serve as a decentralised register that captures all crypto transactions across a peer-to-peer network.
According to Investopedia, “Ethereum is an open-source, blockchain-based, decentralised software platform used for its cryptocurrency, Ether.” Like Bitcoin, Ethereum has a digital currency that can serve as a means of exchange between two parties. However, the Ethereum project provides further features to its users.
Users can use the Ethereum platform to create smart contracts between parties. Similarly, this platform supports the creation of Decentralised Applications (Dapps) using the platform’s resources. Dapps design using the Ethereum platform is possible because the Ethereum platform also functions as a programming language that runs on blockchain.
To carry out any task on the Ethereum network, users must transact in Ether (ETH). This is because Ether is the digital currency of Ethereum. All transactions on the Ethereum platform are fueled by Ether, so the transaction fees on this platform are referred to as gas fees. The lower the transaction, the lower the gas fee. Similarly, the higher the transaction, the higher the gas fees.
Etheruem Blockchain Applications
As stated earlier, the Ethereum platform can create smart contracts and Dapps. You may then ask what smart contracts and Decentralized Applications (Dapps) are.
Smart Contracts
A smart contract is a type of contract executed by itself after all required conditions have been met. Usually, a smart contract’s terms and conditions are agreed upon between anonymous parties without the need for a centralised third party such as a bank controlling the transaction.
Similarly, all terms and conditions of a smart contract are written into lines of code and stored on the decentralised Ethereum network. The written code monitors and controls the execution of the smart contract. Similarly, the code monitors and tracks all transactions attached to the smart contract to ensure that all contract conditions are met.
Usually, a smart contract’s terms and conditions are agreed upon between anonymous parties without the need for a centralised third party such as a bank controlling the transaction.
The programming language used for writing the lines of code vary on the Ethereum network. The programming languages for writing smart contracts include Solidity, Vyper, and Bamboo.
When compared to traditional contracts, smart contracts are faster, cheaper, and secure. They also prevent undue influence from third parties. The applications of smart contracts are numerous and can be incorporated to provide decentralised services in financial services, healthcare, insurance, property ownership, and many other sectors.
Decentralised Applications (Dapps)
Another application of the Ethereum blockchain technology is the creation of Dapps.
As the name suggests, decentralised applications do not run on a central server. Instead, these applications run on the Ethereum blockchain which decentralises its servers, preventing the Dapps from having a central source. As a result, decentralised applications are not under the control of a single entity or organisation.
Dapps are software created using the Ethereum programming language known as solidity. This programming language is very similar to Java, C++, JavaScript, and Python.
The application for Dapps is endless as they can be used for creating decentralized solutions in fields like eCommerce, insurance, and online banking.
Conclusion
The Ethereum platform offers users the first decentralised blockchain platform in the world. The Ethereum network is very safe and secure and provides users with the opportunity to enjoy transactions without third parties’ interference.
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When compared to other cryptocurrencies, the Ethereum platform offers a lot to its users. Its blockchain technology is revolutionary. Similarly, the project has a solid team of developers and programmers behind it.
Presently the platform provides a digital currency for making decentralised transactions. Similarly, this platform provides users with the opportunity to enjoy smart contracts and decentralised applications.
In terms of potential the Ethereum platform is likely to see future growth. There are many applications for smart contracts in financial services, healthcare, insurance, property ownership, and many other sectors. Similarly, there are many uses for decentralised applications in fields like eCommerce, insurance, and online banking.
Video games have been popular for years, which means they will continue to grow in the future. The industry's ability to adapt to the trends is what guarantees this. As a result of this ability, gamers all over the world have purchased all kinds of games and upgrades to their gaming devices.
In other words, the gaming industry is a sucker for new trends. It makes sure to incorporate them and satisfy its customers. Bitcoin is one of the current trends nowadays and it has already found a place in the industry. It’s a viable payment method for some gaming sites and it has already inspired game developers with its blockchain technology.
It is because of that that we have a few Bitcoin titles that anyone can play. They come in various shapes and sizes which means that they are in different genres. Moreover, it gives players a fresh taste of familiar types of games and brings then a new kind of game – the crypto game on the gaming market. So, if you’re looking to give these games a try, here are some suggestions:
Bitcoin Hero
This is a Bitcoin trading app that newbie traders will find quite useful. It has a virtual currency that you can use to start trading with. Also, the other players will serve as your competition. Additionally, you’ll have tools to research the market with.
You’ll have plenty of practice with Bitcoin Hero and the best part is that all the assets have real-time prices. Also, you can make as many mistakes as you’d like because you won’t feel the consequences. Naturally, there’s another path you can take if you think you can’t handle the risk of trading Bitcoin. You won’t have to make any important decisions and you’ll just reap the profits.
Video games have been popular for years, which means they will continue to grow in the future. The industry's ability to adapt to the trends is what guarantees this.
The trading platforms represent this option. These platforms make use of advanced algorithms to make the important decisions for you. In other words, they do the heavy lifting and leave none of the hard work for you. Among the many platforms, you’ll come across the Bitcoin Sites. To use them you’ll need to make an account and deposit the minimum amount. Then you’ll need to go over the tutorials and then a demo lesson. Once you’re familiar with the settings then you can try the platform out with a live session. Afterward, you can adapt the settings as much as you like.
Splinterlands
Unlike the previous entry, this isn’t an educational title. Splinterlands is a Bitcoin trading card game that lets you build your deck while defeating various opponents. You have cards from all kinds of factions and earn them as you beat your opponents.
Naturally, you can use Bitcoin to buy new cards and other collectibles to strengthen your deck and improve your chances in the game. In other words, Splinterlands isn’t just a game you can play in your free time, it’s a great way to challenge your decision-making skills.
Bitcoin Blast
Bitcoin Blast is a title that features the ever-popular Bitcoin symbol. It comes in several colors and your job is to match as many of them as you can. You’ll get points for your efforts and the more effort you put in the more points you’ll get.
Also, the prizes are another reasons to play this game. That’s because they’re made up of actual Bitcoin. So, you won’t be just enjoying Bitcoin Blast but you could play it so you could earn some. Similar to the previous entry on this list, Bitcoin Blast is a challenge that can help you win interesting prizes.
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Merge Cats
Merge Cats is a simple title and a simple goal expressed in the title. In other words, you get plenty of cats and you’ll need to match them to get ahead in the game. The more effort you put in the more rewards you’ll get. The game comes with its daily challenges that you can take part in. If you, then you’ll need to complete them to reap the rewards which are in Bitcoin.
Conclusion
The revenue of the industry shows you just much the industry has grown throughout the years. Thanks to the adaptability to trends gaming is going to grow in revenue and Bitcoin will have an important role in the industry in the years to come.
Shane Neagle explores what DeFi is and what it means for the future of the financial services sector.
Throughout humanity's long history, there were not that many thresholds after which nothing remained the same. The first major threshold represented a shift from hunter-gathering to agriculture, which led to the formation of cities, inevitably leading to metallurgy and the industrial revolution. In turn, after each threshold has been crossed, we have seen greater acceleration of innovation and economic growth.
Our modern era has been marked by the most important threshold of them all – digitisation – transforming real word assets into fungible and infinitely replicable bits. As a result, a book can be almost instantaneously downloaded at the speed of light to whoever needs it, effectively for free. This alone represents a far cry from the revolutionary Gutenberg printing press.
However, the world of finance has been missing the key ingredient to fully undergo digitization. Having electronic payment systems to move around representations of money is one thing, but having natively digital money is altogether another problem. One that many believe has been solved by the pseudonymous Satoshi Nakamoto, who ushered in blockchain technology manifested through the world’s first cryptocurrency – Bitcoin (BTC).
Blockchain Tech as a Digital Recreation of Money
Before blockchain came along in 2009, what would it have meant to digitise money? How could it retain value without being attached to some externality? We measure value with money because it is fungible, but how would we make money digital, fungible, and incorruptible? Otherwise, a string of numbers as a digital code would fail to render any meaning, or value.
Blockchain provides those boundaries that wall off potential corruptibility by relying on a decentralized digital record. Spread across a network of computers, blocks represent records of transaction, cryptographically (SHA-256 encryption) linked into chains. Therefore, when a single block is added – transaction conducted - it has to be verified across a majority of the network of thousands of computers holding the complete blockchain ledger.
In turn, every transaction is traceable. Most importantly, with constant verification of the entire network by Bitcoin miners, it is virtually impossible to be hacked. If someone generates a fake transaction, it would fail to generate a solvable hash, which would reveal it to miners. Although this has the effect of consuming electricity comparable to Argentina, it simultaneously made it so that Bitcoin grew to over $1 trillion in market capitalisation, as a leaderless, decentralised, unassailable and deflationary digital money, aka “digital gold”.
Bitcoin (BTC) price over one year, March 2020 - March 2021. (Source: TradingView)
Decentralised Finance as the Final Piece of the Digital Money Puzzle
Bitcoin, as a native digital currency, turned into a massively successful proof of concept. It continues to onboard institutional investors, from MicroStrategy to Tesla, both as a hedge against inflation and as a payment method. However, Bitcoin still exists squeezed within a centralised financial system, dependent on the on/off ramp of fiat currency.
What if the entire financial infrastructure, from banks to clearinghouses and exchanges, can also be digitised in a decentralised manner? Although blockchain technology made digital money possible, not all blockchains are created equal. Bitcoin’s blockchain was designed as secure and conservative, while others are more flexible.
Ethereum is one of them, launched in 2015 by Vitalik Buterin. While Ethereum’s native cryptocurrency (token) – ETH – doesn’t have a hard cap supply like Bitcoin, its value proposition is in utility. Thanks to its programmable blockchain, Ethereum hosts almost the entirety of dApps – smart contracts that are executed when conditions are triggered. This makes it possible to create blockchain games, NFT marketplaces, decentralized exchanges (DEX), and most importantly – DeFi – Decentralised Finance.
Total locked value (TLV) in DeFi, as of March 22, is $43.35 billion. (Source: DeFipulse.com)
Digital Recreation of Financial Products and Services
The scandal involving Citadel hedge fund and Robinhood trading app demonstrated in no uncertain terms the foibles of a financial system dependent on intermediaries.
- Robinhood is free, in large part, because it sells its order flow to hedge funds.
- Citadel constitutes a major source of income for Robinhood.
- Robinhood intercepts the trading of GameStop (GME) stock at the same time as retail investors short squeezed Citadel, most of which were using Robinhood as a “democratising” stock trading app.
Whether you want to trade with large market cap blue-chip stocks or dubious stocks like GME, such a system doesn’t inspire confidence if its underlying mechanisms can be upended with a pulling of hidden levers. Thanks to smart contracts - dApps - decentralised finance eliminates such risks. This means that you can engage in:
- Earning interest rates by lending staked tokens – Yield Farming. (Maker, Compound)
- Borrow assets against a collateral.
- Swap cryptocurrencies on decentralized exchanges. (Uniswap)
- Trade in non-fungible tokens (NFTs) – artworks and digital collectibles.
Alongside smart contracts, the underlying constructs powering DeFi are:
- · Automated Market Makers (AMMs) – As you must be aware, market makers in traditional, centralised finance provide multiple functions – providing liquidity, price stability and serving as sellers and buyers. In turn, market makers gain profits from ask-bid spreads, ending up oiling the entire financial market. In DeFi, AMMs use liquidity pools instead of hedge funds and large exchanges like NYSE.
- · Liquidity Providers (LPs) – smart contracts that act instead of hedge funds and exchanges by using liquidity pools. Any trader who stakes their cryptocurrency into a liquidity pool becomes a liquidity provider. In turn, they gain interest rates based on the stake of locked assets, which generates so-called ‘Yield Farming’.
Moreover, DeFi no longer presents an isolated system reserved for altcoins. The defining trait of DeFi is constant innovation, befitting such advanced digital technology. Just last month, the Synthetix platform made it possible to connect traditional assets like stocks and equities to the DeFi ecosystem. In the coming months, you will start to hear more about such assets - synths or synthetic stocks.
The growth of Bitcoin (BTC) is accompanied by many utility altcoins serving DeFi. (Source: TradingView)
Such bridging assets means that one could start trading with stocks on a DeFi protocol, and even engage in shorting. This was made possible by Chainlink (LINK) – a decentralised oracle protocol that feeds smart contracts with off-blockchain data, including those from the banking infrastructure and stock markets.
DeFi Shortcomings and Outlook
Given that DeFi exploded in value since last summer, it would be more accurate to frame DeFi’s current flaws as birthing pains. As you would guess, much of it stems from security issues – hackings and exploits. CipherTrace estimated that the DeFi market lost $2.7 billion last year due security breaches.
This largely originates from Ethereum’s flexibility as a programmable blockchain. Like smart contracts, it is entirely open-source, which is good for the growth of the space as it allows viable alternatives to emerge, Polkadot being one of the more rapidly growing ones. Although all major smart contracts are regularly audited by professional security companies, they too can miss exploits, as we saw with Yearn.Finance.
However, that doesn’t mean that insurance too cannot be decentralised. Indeed, such solutions are already in full swing: Nsure.Network, CDx, Cook Protocol, Etherisc, and the most popular one so far – Nexus Mutual.
Outside of these technical issues, DeFi has all it takes to fully tokenize and decentralize the world’s financial system if it is allowed to evolve. This may collide with governmental interests, but if we take into account 1.7 billion unbanked adults, and the growing threat of deplatforming in the developed world, this should serve as a strong force to drive DeFi across the new threshold.
Bitcoin fell on Monday morning after reaching a new record-high price over the weekend.
The world’s most highly valued cryptocurrency broke through the $60,000 barrier for the first time during weekend trading, reaching a high of $61,674 on Saturday. However, the price went into retreat at the beginning of the week, falling 4.4% to $57,847 at 9:15 AM in London.
This latest Bitcoin price shock comes amid reports that India will propose a law banning cryptocurrencies altogether, potentially blocking its use in one of the world’s largest markets.
Reuters reported on Sunday that senior officials in India’s government are looking to impose “one of the world’s strictest policies against cryptocurrencies,” which will impose fines on anyone trading or even holding digital assets. Bitcoin miners will also be penalised, sources claimed.
Under the proposed bill, cryptocurrency holders would be given six months to liquidate their digital assets, after which penalties will be levived.
Should the ban become law, India would become the first major economy to ban the use of cryptocurrency altogether.
As normally follows when Bitcoin suffers a price shock, the broader cryptocurrency market also went into retreat on Monday morning. Ethereum, the world’s second-largest cryptocurrency, was trading 5.7% lower against the dollar at a rate of $1,785.49 at the beginning of the week. The cryptocurrency market as a whole declined 4.5% over 24 hours.
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Despite this latest price plunge, the crypto market is still performing markedly better than it was six months ago. Bitcoin has rallied over 400% during this period, owing to interest from established players such as Tesla and Square. Adoption by PayPal has also helped to pull cryptocurrencies closer to the payments mainstream.
Jake Madders, Co-director of Hyve Managed Hosting, weighs the pros and cons of the two distinct types of crypto exchange hosting.
Cryptocurrency has boomed in recent years, helped by people like Elon Musk joining the conversation and increasing the trust in its value, helping it to reach the mainstream. As the number of investors placing their money in cryptocurrency continues to grow, finding a reliable trading platform has never been more important. Hence, the need for crypto exchanges.
The ongoing growth of interest in cryptocurrency and the demand for technological development and maintenance has generated the need for different exchanges. According to a recent study conducted by crypto market data provider cryptocompare.com, cryptocurrency exchanges have increased their market share by 13% since October 2020. Bitcoin gained 13% of the market share from October 2020 to January 2021, going from 61% (USD$347 billion) to 74% (USD$ 1.41 trillion). The study pointed to crypto exchanges increasing their transparency by providing data as well as improved security as reasons for this growth.
Whilst the world of digital currencies continues to bloom, the issue around crypto exchange hosting becomes a challenge. Choosing between cloud vs on-premise hosting might not be an easy decision to make as it depends on the investors' needs. Nevertheless, with exchanges sites having to be active 24/7 in order to offer optimal performance, the cloud could be the ideal option.
Cloud vs on-premise benefits
When it comes to crypto exchanges, performance has always been a key factor. However, there’s a bigger picture that individuals need to look at. With the industry always evolving and technology developing constantly, flexibility is crucial in order for crypto exchanges to adapt. Moving an exchange to another location can be a long and costly process but on the cloud, this process can be done in a matter of hours and at a much lower cost. Speed on the cloud is clearly a valuable benefit, allowing crypto exchanges to set up the infrastructure on a cloud system much faster than on-site hosting.
When it comes to crypto exchanges, performance has always been a key factor.
Customisation is essential in order to meet the requirements of the ever-changing marketplace. The cloud offers the option to scale and implement storage, security and developer tools when required to meet the demands of the market and investors quickly and efficiently. Another benefit that is important to keep in mind when choosing the right hosting is latency. Users using a cloud hosting provider can opt for a data centre near their end-users which will reduce the latency, allowing an exchange to provide instant information directly from the market or from a transaction.
There’s also the environmental aspect of the cloud, which is a benefit that is often overlooked. As the adoption of cryptocurrencies continues to expand, a sustainable and eco-friendly hosting choice feels like something important to consider.
Choosing on-premise hosting
Whilst the cloud seems to tick all the boxes as the perfect space for crypto exchanges, many of these platforms still use on-premise hosting. A key aspect offered by on-premise is the option to have full control and responsibility. For some, this might sound like a great advantage and the reason why on-premise can be the right choice. Still, there are other points to consider. Having full responsibility means being accountable for managing and maintaining the software which can require a fair amount of knowledge and also time. Some users might not have the right level of expertise to manage their cryptocurrencies and might require a specialist to do it for them resulting in an extra cost. On-premise hosting also means that servers could be more vulnerable, whereas data centres are secure environments with 24/7 security and cooling and fire protection measures.
Security, the deciding factor
It is not surprising that, over the last few years, cybercriminals have developed an interest in cryptocurrency. With hundreds of billions of dollars being traded daily on crypto exchange platforms, they are the perfect target for hackers. Cryptocurrencies are not easy to hack, but crypto exchanges are. This is one of the reasons why cryptocurrency owners have worried about choosing the cloud over on-premise hosting. Nonetheless, the cloud has become a safer environment for crypto exchanges. Risks have been minimised thanks to security being increased and improved on the cloud, helping mitigate issues concerning the protection of cryptocurrencies.
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When deciding between cloud and on-premise hosting, there are numerous factors to examine. On top of that, individuals need to keep in mind their investment plan and take into consideration what the future of the market could look like. With technology evolving and cryptocurrencies gaining popularity, finding the right crypto exchange hosting option will continue to be a challenging yet very important decision.
