Decentralization Is the Way Forward for Cryptocurrency Mining – Here’s Why

Cryptocurrency mining – the power behind our decentralized currencies – has reached a fork in the road of its young life. Giga Watt filed for bankruptcy in late November this year, Genesis Mining is facing hard times, and Bitmain’s future is in limbo.

But despite massive depreciation, and miners leaving the cryptocurrency space en masse, it’s not all doom and gloom for cryptocurrency as a whole. Institutional investors are coming into the crypto space, and the recent decline in mining could be good for persistent miners, mining farms and pools worldwide.

 

How Centralized Mining Failed

If there’s one lesson for miners to learn from in this bear market, it is keeping down the cost of mining, with emphasis on efficiency over scaling up. Over the course of the year, mining has been increasingly unprofitable even for some enterprise miners. There are a number of compounding factors for the dry spell such as:

  • recent decline in the cryptocurrency market
  • strict regulations and increased power rates for cryptocurrency mining
  • rapid increase in mining difficulty – faster than market demand and cryptocurrency adoption
  • cost of outlays in running the business increase with size (e.g. bigger facilities, cooling systems, power consumption, hiring more employees for maintenance and upkeep)

Diminishing returns over a period of time (e.g., Bitcoin rewards halve every four years) coupled with volatility in the cryptocurrency markets makes it very risky for miners to scale up beyond a certain threshold. In many cases, mining profitability is only as good as the market conditions. The recent turn of events with the price of cryptocurrency, and the equivalent of approximately 1.3 million Antminer S9 units turning off as of late proves how large-scale miners have become so dependent on cryptocurrency markets in terms of mining profitability.

The arms race towards bigger mining facilities and acquiring more efficient but expensive mining hardware also tends to backfire for some mining businesses who are now struggling to pay off their debts. State regulations have also put a lot of strain to the mining industry by imposing higher rates for cryptocurrency mining. This, along with rapid increase in network hash rate/difficulty, and a long drawn-out bear market spells disaster for many businesses in the cryptocurrency mining industry, particularly those who have overspent with expectation of higher returns through market demand and cryptocurrency adoption.

Enterprise-level miners might have increased their mining power with a large share of the network hash rate which might have previously worked but because of the way proof-of-work cryptocurrencies such as Bitcoin are built large-scale miners are running into difficulties. Miners are finding with increased network hash rate there will come a point where mining and maintenance costs start to eat up their gains unless they find access to abundant or much cheaper energy source as soon as possible, or if cryptocurrency continues to gain widespread adoption. (Imagine if every miner in the world does the same thing and Bitcoin suddenly drops to $1,000. How long can these enterprise miners hold on until Bitcoin goes back up again to $20,000 or until mining difficulty drops significantly lower?)

Lastly, centralized mining puts a lot of strain to the power grid that governments won’t have much of a choice but impose exorbitant rates for mining operations in order to “force” miners to slow down, or run the risk of overloading the grid, severely affecting all other industries in the country. The only option for large-scale miners at this point is scaling down and help redistribute hash power to the cryptocurrency network, e.g. shipping their mining rigs to places with abundant and more affordable energy source. (In Venezuela, it only costs $531 to mine Bitcoin).

 

Why Decentralized Mining Is Crucial for the Cryptocurrency Space

More secure compared to centralized mining. Centralization of mining power misses the whole point of having a decentralized cryptocurrency such as Bitcoin. Cryptocurrency mining was never meant to be a centralized endeavor, but a shared obligation to secure the network where one’s willingness to share computing power to mine transactions and prevent double spend attacks is rewarded with cryptocurrency. Centralization creates weaknesses to an inherently secure decentralized network by establishing a single point of failure and opens up the possibility of double spends and censoring transactions. (This inevitably results in weaker adoption and/or the cryptocurrency’s demise.)

Distributes risks and rewards to miners. Higher hash rates do make a difference who gets the mining reward. But at the end of the day, it all boils down to probability. Suppose every miner in the world mines at exactly the same hash rate. The way Bitcoin’s algorithm was designed meant that there is no particular way to tell who will be the first to find the next hash since they would all be making random guesses at a given rate. Higher hash rates increases the likelihood of being the first to make the right guess, but so is the risk (power consumption = money lost). A better alternative to mining centralization is by using mining pools or by having small mining farms spread out to places where cost of running the mining the business is much cheaper.

 Distributes power consumption. With less centralization in mining power, miners will be able to utilize cheaper electricity instead of relying solely on the power grid. It would also encourage miners to be more creative and explore ways to make cryptocurrency mining a lot greener, or, as mentioned earlier, find places with abundant supply of energy source (e.g. hydroelectric, geothermal, solar, etc.)

 

Final Thoughts

The 2018 bear market has been an eye-opener for all of us, not only in terms of volatility and value of cryptocurrency, but also the dangers and consequences of going beyond what is intended for in cryptocurrency mining – decentralized and cost-effective. Bitcoin was just as secure back when people mined them in their PCs and laptops as it is today with more powerful ASIC miners and GPUs. It’s just a matter of perspective. Hopefully, this year has brought us some important lessons to help us with our journey in cryptocurrency for the year 2019.

Facebook’s Update on Crypto-related Ads – Why Should It Matter?

Facebook hit the news when it back peddled on its decision to ban cryptocurrency ads outright from the social media platform. This has now made technology companies, cryptocurrency and blockchain communities optimistic this move will set off a precedent for other advertisers to follow, particularly Google and Twitter, who earlier warned of a similar ban on cryptocurrency ads.

What are the implications of Facebook’s reversing its view on cryptocurrency, and what are we to expect about the future of blockchain technology?

 

What Changed After the Update?

Facebook now accepts cryptocurrency ads, but only from pre-approved advertisers who filed their cryptocurrency products and services onboarding request. ICOs and promotions associated with deceptive high-yield investment programs are still banned from advertising.

The update took effect after a six-month hiatus in cryptocurrency ads on Facebook. Apparently, the tech giant have found compelling reasons for reversing some of its decision after being dismissive on anything crypto-related. (uhhh… money of course!) There are also some rumblings Facebook plans on stepping into the cryptocurrency space with their own initial coin offering.

So far, legitimate cryptocurrency businesses like Cointelegraph.com have not been able to boost their posts a day after the ban was lifted. It’s very likely that Facebook is implementing more stringent rules and are, indeed, checking on the advertiser’s credentials with painstaking effort. We’ll learn more about the specific details of the screening process as they unfold.

 

Not a Complete Turnabout

Facebook didn’t go all the way, and instead chose to “loosen” some its policy on cryptocurrency advertising. A recent post from the product management director indicates an eligibility check, which takes into account licenses and pertinent documents submitted by each applicant. Facebook wants to avoid another Bitconnect incident or turn it a breeding ground for ICO scams (70% of advertised ICOs failed to materialize).

There’s no guarantee that every cryptocurrency and blockchain businesses would receive their stamp of approval. The least they can do for now is hope they don’t get screened out or send the wrong signal to the management and mistake them for ICOs or HYIPs. Facebook is open to the idea of revising this policy as they see fit and encourages everyone to give their feedback.

 

More KYCs and Background Checks on Advertisers

All advertisers in cryptocurrency must be “pre-approved” before posting ads on Facebook. To do so, they have to disclose information about their company such as:

 

  • purpose and nature of their business
  • Facebook ad account ID
  • website domain
  • licenses and credentials
  • company name
  • business address

You can apply for your pre-approval HERE

 

 

 

 

 

 

Facebook, basically, performs due diligence on advertisers on behalf of its users, which is a good thing for cryptocurrency. Done right, this might actually boost investor confidence. With stricter regulation in place, Facebook hopes to open more opportunities which could further mass adoption for cryptocurrency, and significantly increase ad revenue to the company.

Meanwhile, cryptocurrency and ICO scams might have a hard time after the update, but that doesn’t necessarily mean Facebook won’t have any of those. In fact several cryptocurrency and ICO scams were still able to get through, ironically, even after the ban on cryptocurrency ads.

 

What Changed Their Mind?

Facebook wasn’t so clear about the reason for partially lifting the ban on crypto-related ads. People have their own views and offer some explanation as to why this is the case.

Missing Out On Revenue. At times, Facebook is more worried about optics then revenue. This isn’t necessarily a bad thing but when it comes to crypto, Facebook has constantly missed the boat. This is evident when Facebook took a massive hit in market value recently. One of the main reasons for the price dip is the lack of awareness in its underlying technology; censoring out everything crypto-related from their platform could only serve to aggravate the situation. By encouraging users to learn more about the cryptocurrency through ads and meaningful social interaction, they might as well rack up huge profits along the way.

Facebook’s Launching Its Exploratory Blockchain Group. For a tech company this huge, it’s not difficult to imagine Facebook having its own native currency in the near future. Their announcement about the launching of an exploratory blockchain group has led to some rumours about their future involvement in the cryptocurrency space. If true, then this could mean adoption on a massive scale with its two billion plus users worldwide.

 

Conclusion

Facebook’s decision to lift the ban on crypto-related ads is a statement on cryptocurrency’s future utility as a store of value, or even as a medium of exchange. There’s no denying that cryptocurrency and blockchain technology has become a major force in shaping our current financial system. They might, as well, be a part of it instead of closing doors on an opportunity which could probably give them a decisive edge along the way.

If you’d like to know more about cryptocurrency, blockchain and minning, you can pick up the Living Book HERE

Gone Hunting – How Bounty Hunters Are Pushing Borders for Cryptocurrency

Bounty hunters conjure up images of the Wild West where people search for outlaws to get rewards. (Blame Hollywood for that.) In a decentralized world of cryptocurrencies, bounties are given to anyone who fulfils a given task or solve a particular problem, not with cash but with cryptocurrencies and tokens.

So why talk about bounties when people could just get them through mining contracts or buying from exchanges? We’ll look at the implications of bounty hunting for cryptocurrency and why this could help solve specific problems the industry is currently facing.

 

Bounty Systems in the Cryptocurrency Space

Cryptocurrency goes beyond cashless, decentralized peer-to-peer payment systems by adding a new sector of the cryptocurrency economy. Primarily a mining industry, it quickly grew to include trading, investing, blockchain startups, ICOs, and now, a system of rewarding people for offering their work to the community.

With the arrival of bounty systems in the cryptocurrency space, we might well be seeing a revival of interest in rebuilding a decentralized economy. Bounty hunting invites everyone to participate without spending a dime on expensive mining equipment, or putting investor’s money on the line. All it takes is a range of skills in online marketing, coding, and a little bit of “hunting.”

Bounty hunting programs come in many forms. The most popular ones include signature campaigns, content creation, social media likes and/or posts, debugging, and coding. There are even bounties for tracking down hackers, fraudsters, and cyber-criminals; almost like a bounty hunter in a real sense.

 

 

Building Stronger Communities with Bounties

More people are taking interests in bounty hunting as barriers to entry in the crypto-space become more challenging during the past few months (crackdown on ICOs, mining farms, and cryptocurrency exchanges). Bounty systems provide a clever solution to get around excessive prohibitions and create an environment which could benefit all members of the community using their own resources.

Development teams and startups have benefitted a lot from bounty hunting programs. It accelerated the process of building new applications for blockchain and raising awareness about cryptocurrency by outsourcing some of the best talents in the cryptocurrency community. In return “hunters” are given cryptocurrencies like Bitcoin, Ethereum, or ICO tokens as bounties.

ICOs have saved a lot on marketing campaigns by using their own tokens as rewards. Bancor (BNT), and Iconomi (ICN), are just a few examples of successful ICOs that used bounty system as part of their marketing strategy. Some bounties were also offered for bug fixes. Status (SNT), had been giving away $1 million worth of tokens to anyone who can submit potential solutions to bugs in their software.

 

 

Bounty Hunters Reshaping the Online Industry

Global freelancing sites were among the first to “decentralize” the jobs market, allowing both sides to find the right people for the job, and the most rewarding work aside from the usual 9-5 jobs. Competitive industries such as online marketing, advertising, and software development come to these sites to fill the gaps in their workforce or hire additional personnel on a shoestring budget.

Bounty hunting sites might well become the future of decentralized freelancing for blockchain businesses. Bitcointalk.org, Bounty0x.io are among the few sites which offer bounty hunting programs for tasks like:

 

  • Signature Campaign
  • Content Creation
  • Social Media Posts/Tweets
  • Coding and Debugging Software
  • Translating into Different Languages

 

Majority of bounty hunting programs aims at increasing people’s awareness about a new blockchain project and cryptocurrencies as a whole. Cryptocurrency is pretty much uncharted territory as a niche topic for most content creators. Hence, competition for writers and YouTube creators in the cryptocurrency industry may not be as tough as popular ones. Likewise, bounty hunting can also be an alternative source of income for coders with some background in distributed systems. Finally, people can work as translators for their ICO company’s whitepaper, any cryptocurrency for that matter.

For blockchain companies who bank on Google and Facebook for advertising, this seems to be the best, if not the only recourse, to circumvent their decision to ban cryptocurrency-related advertising on their platforms. But this might only be just the beginning, and cryptocurrency community could come up with more creative ways to grow without them. (Hint: the Internet, by design, is a decentralized network and has no single point of failure).

On the bright side of things, blockchain companies won’t be spending much on paid Google and Facebook ads. Instead, they can allocate their resources as bounties to spread the word about cryptocurrency or about a new startup company.

 

Some Potential Drawbacks to Keep in Mind

Bounty systems are also a potential for misuse, especially ICOs and promoters of cryptocurrencies who might use them for their pump-and-dump schemes. Bounty hunters might not realize they had a hand in spreading FOMO on an ICO or worthless cryptocurrency until it’s too late.

Bounty hunters might also end up with nothing after spending hours fulfilling the bounty task, or their tokens turn out to have very little value after the ICO. Not all bounty hunting programs are legit or turn out as expected. We still have to do our research and due diligence to have a high chance of success.

 

Conclusion

Bounty hunting as a two-way process helps build our cryptocurrency community. It calls on everyone, from every part of the world to participate in a global effort to bring cryptocurrency and blockchain technology into perfection. By doing so, we’re also sharing with everyone the very thing that runs our cryptocurrency economy.

How to Spot a Cryptocurrency Scam

Whenever you see red flags, it’s best to stay away and not get involved. How do you detect so-called red flags? Most often than not, it’s a gut feeling that something is not right or something is off. That’s all great, you might say, but what if you don’t have very good intuition. If that’s the case we’ve put together a list of signs you can watch out for. 

Exaggerated claims or guaranteed payouts. Unfortunately, there’s no such thing as a “guaranteed” payout in most kinds of investments. There’s always the risk of losing. In fact, out of every 10 trades, only one or two of them turn out to be winners. Some investors do get lucky, but they account for less than 1% of the population. To put into perspective, if someone assures you of winning the lottery, you’re pretty sure the game is rigged or the person is a scammer.

Nonexistent businesses or fake photos of their premises. Investment scams are easily caught when doing a fact-check on their base of operations and business offices – you won’t find any. That alone tells you they don’t want to be found by people asking for their money when the scam blows up.

A lot of unverified facts and/or shady past:. Doing a fact-check on these people behind the scams can also raise a red flag. It’s either they don’t exist or they have a previous history of scamming other people and being involved in one of their elaborate displays of opulence and extravaganzas. Remember their names and steer clear from anything that has to do with them.

You see a lot of complaints when you Google search. Scammers are cleverer these days, using the word “scam” as one of their SEO keywords to trick people into clicking these links to know if they really are. Instead, they end up going to one of their landing pages or paid reviews and articles promoting their company or explaining why they are not a scam. This might not always be true with all companies and cryptocurrencies that has the word “scam” in search suggestions, but suffice to say, scammers are using this tactic to get people involved.

Tech-savvy investors can turn the tables on these scammers by using the same tool they trick people with – the Internet. Research and cryptocurrency education are your best allies to thrive in today’s technology-driven world.

That said, we’ll end this blog post with a cryptocurrency investment “hall of shame.” These are companies that have unfortunately scammed people of their money and disappear with the profits.

The Hall of Shame

Gladiacoin – founded in November 26, 2016, this ponzi scheme promised to double Bitcoin in 90 days, which include 2.2% payout dividend. It folded on June 2017 with investors losing millions of dollars. Gladiacoin can no longer be reached in their now-defunct website https://www.gladiacoin.com/. Their coin was never listed in Coinmarketcap.

Onecoin a ponzi scheme which promoted a cryptocurrency with a “private blockchain” and run by people who have been previously involved in these shady investment scams. Authorities began shutting down Onecoin’s offshore offices in 2017 and have people arrested and filed appropriate charges to perpetrators, including the CEO.

Bitconnect generally regarded as a pump-and-dump and ponzi scheme for its high-yield investment program. It reached an all-time high when it was listed as one of the top 20 cryptocurrencies in Coinmarketcap at $460 apiece, and folded in January 2018 at only $5.92. Thousands have lost their savings, retirements, and are now in huge debts for buying cryptocurrencies which is now a little more (or less) than a dollar. It is now ranked 554 in Coinmarketcap at $0.9 apiece.

Should I Invest In Initial Coin Offerings?

Blockchain projects and start-ups open up a new world of opportunities for many cryptocurrency investors and venture capitalists. Initial coin offering allows investors to gain a decisive edge as pioneers and early adopters of new cryptocurrencies, and the latest applications and innovations in blockchain technology.

There’s a lot of success in recent Initial Coin Offerings (ICOs) of 2017, raising more than 3 billion USD in capital investments and token sales. (More about this later.) It became the latest buzz since Ethereum, and today we have more than 600 tokens created through these events – and counting.

However, ICOs recently came under fire and had been thoroughly scrutinized, or banned outright in some countries, due to their mostly unregulated status and reports of unsuspecting investors losing thousands, or even millions of dollars in ICO scams. In fact according to a report by the Wall Street Journal, around $300 million was money raised by coin offerings has gone to fraud or scams.

In this chapter, we’ll look at ICOs from a well-founded, and unbiased point of view, considering both pros and cons to help us come up with our own financial decisions whether or not to invest in them.

 

What are Initial Coin Offerings?

An initial coin offering is the stage or period in the development of a blockchain project where start-up companies or a group of people generate funds through crowdselling – a form of crowdfunding that issues tokens to contributors. Upon completion, creators and organizers of an ICO would launch the project (cryptocurrency, blockchain app, platform, etc.) and distribute tokens to all its participants. Some ICOs have their tokens already listed and traded in exchanges before the network launch to stimulate hype and move its value up through market price actions (e.g., EOS).

Some investors and regulators compare ICOs to initial public offerings (IPOs) because they’re both used to generate funds by issuing financial instruments tradable in a public exchange. However, such reference is made irrespective of the time of their execution.

Unlike IPOS, most ICOs are done when start-up companies have yet to prove themselves, and there’s nothing to back their claims except for several pages of whitepaper outlining their business model or concept. Participants usually buy indirectly through the ICO’s website and receive their tokens at a specified distribution date.

IPOs, on the other hand, are done on a public exchange, after companies have long been established and have already proven their worth. The main goal of an IPO is to raise capital to support its operations and to grow the company on a massive scale.

The financial instruments issued by ICOs and IPOs may also be classified as securities, but they may not exactly be of the same type. Tokens sold prior to, or within an ICO period are considered IOUs or (loosely) bonds with a set face value. After a successful launch, tokens are issued to all the participants, at which point, they may no longer be considered IOUs or bonds, but more like shares in an IPO where their value is determined by the market. But the main purpose of ICOs and IPOs from an investor’s point of view is essentially the same.

Currently, there are no fixed regulations about ICOs. However, there are a few who perform KYC on their contributors. It’s the mostly unregulated status of ICOs that make investing in these blockchain-based ventures extremely high-risk. But on a positive note, they can also be extremely profitable by as much as tenfold compared to other markets. In contrast, IPOs are highly regulated and closely monitored by authorities to protect the rights of investors. Certified investors in an IPO must also meet certain qualifications before they can be allowed to invest on a stock.

ICOs typically last for several weeks and may consist of token sale “rounds.” Prices of tokens increase in value with every round. Some ICOs run for months and had their tokens already listed on exchanges before the project launches. There’s also a pre-sale or pre-ICO where tokens are sold at wholesale prices to institutional investors and some small investors to jumpstart the project. Some pre-ICOs offer perks and exclusive bonuses to early adopters.

ICOs can be a great way to raise funds, and not just for companies looking to create a new cryptocurrency. Anybody from traditional companies, tech companies, and even Venezuela is getting in on the act. However, the United States is trying to block American citizens from purchasing the digital currency issued by Venezuela which, according to President Nicolas Maduro, raised $5 Billion.

In fact, ICOs have become a new mode of crowdfunding, blending investment returns with the possibility of an actual physical product.  Indiegogo, the crowdfunding platform is testing out a new product where you can invest in ICOs and blockchain. The first ICO they helped sell tokens for was called The Fan-Controlled Football League, a fantasy-style league which lets the football audience decide everything in real time. They are selling up to $5 million worth of tokens.