Tag Archive for cryptocurrency

Cryptocurrencies

CryptocurrenciesThe attackers behind last month’s WannaCry ransomware were planning to extort $300 in Monero cryptocurrency to unlock encrypted files. Until this crisis, who had ever heard of Monero? How could you even buy Moneros to unlock your PC, if you wanted to take that chance? More people are probably aware of Bitcoin (BTC). The Visual Capitalist explains that Bitcoin is the original cryptocurrency, and its meteoric rise has made it a mainstay of conversation for investors, media, and technologists alike.

cryptocurrencyDespite its shady history, Bitcoin has spawned over 800 new markets and cryptocurrencies. While Bitcoin is the dominate cryptocurrency, with a market cap of $37.2 billion, the rest of the cryptocurrencies are worth even more, in combination they are worth nearly $40 billion. The leaders of the altcoin movement are:

Ethereum (ETH) launched in 2015, is the second largest by market capitalization. It is also quite different from Bitcoin. The Visual Capitalist explains that while Bitcoin is designed to be a payments protocol first, Ethereum is designed to work as a blockchain-based computing platform for developers to build and deploy decentralized applications, while also enabling smart contracts. The tokens used to power the network are called Ether, but they can also be traded online. At time of writing, Ethereum’s market capitalization is $15.4 billion.

Ripple logoRipple (XRP) is the native currency of the Ripple Protocol – a broader catch-all for an open-source, global exchange according to the Visual Capitalist. Ripple is aiming to be a settlement protocol for major banks, It’s already being used by banks such as Santander, Bank of America Merrill Lynch, UBS, and RBC. Ripple has a market cap of $10.9 billion.

Ethereum Classic (ETC) The Ethereum network actually split into two in 2016.The Visual Capitalist says it’s a complicated situation. You can read about the hack v. hack battle here. Ethereum Classic is based on the original Ethereum blockchain, and has a market capitalization of $1.4 billion.

Litecoin logoLitecoin (LTC) is one of the first altcoins, and it is nearly identical to Bitcoin after being “forked” in 2011. Litecoin aims to process blocks 4x faster than Bitcoin to speed up transaction confirmation time, though this creates several other challenges as well according to the Visual Capitalist. At time of writing, Litecoin’s market capitalization is worth $1.3 billion.

Monero (XMR) is an open-source, privacy-oriented cryptocurrency launched in April 2014. It is the result of a fork of the Bytecoin cryptocurrency According to CoinDesk, Monero is private by default, and it has achieved the widespread adoption of those interested in using cryptocurrencies to remain anonymous. Monero has a market capitalization of $6.2 million.

Coin Market Cap Monero chartThe price of Monero’s XMR has experienced significant volatility at times, climbing more than 1,300% since it began trading on CoinMarketCap. Since its start, the cryptocurrency has fluctuated between roughly $0.25 (in January 2015) and close to $60 (in May 2017).

Monero leverages ring signatures and stealth addresses to obscure the senders and recipients identity. Ring signatures combine or ‘mix’ a user’s account keys with public keys obtained from Monero’s blockchain to create a ‘ring’ of possible signers, meaning outside observers cannot link a signature to a specific user.

Monero logoOriginally, ring signatures obscured the senders and recipients involved in a Monero transaction without hiding the amount transferred. However, an update called RingCT implemented a new ring signature that concealed both the value of each transaction and the senders and recipients identities to make transaction tracking harder.

In addition to leveraging ring signatures, Monero also enhances anonymity through stealth addresses, which are randomly generated, one-time addresses created for each transaction on behalf of the recipient. With this feature, recipients publish a single address and transactions they receive go to separate, unique addresses. As a result, Monero transactions cannot be linked to the published address of the sender or recipient.

By providing a high level of anonymity, Monero offers fungibility, meaning that each individual unit of a currency can be substituted for another. Another way of putting this is that every coin has equal value.

Due to Monero’s untraceable nature, no two coins are distinguishable from one another, and they are both equal in the eyes of merchants. Without this level of fungibility, a vendor that accepts cryptocurrency might refuse a unit of one of these assets because of its past possibly illegal transaction history.

CoinDesk points out that Monero has enjoyed a steady increase in adoption since its release. This adaption seems to be led by Dark web marketplaces like AlphaBay and Oasis which have embraced it, reportedly due to popular demand.

For those who want to purchase Monero’s, to pay a ransom or for other reasons, can purchase them at an exchange. The Monero market operates like that of many other cryptocurrencies. Those interested in buying the cryptocurrency can get it through exchanges including Poloniex, Bitfinex and Kraken.

Bitfinex, offers XMR/USD and XMR/BTC exchanges along with deposits and withdrawals of Monero. Kraken offers the same options as Bitfinex as well as XMR/EUR.

Other cryptocurrencies in the altcoin universe include NEM, Dash, ByteCoin and Golem.

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If the fraudsters who set off the WannaCry crisis were expecting to make a fortune in cryptocurrenncy, it didn’t work. Apparently there have only made approx. BTC 50.91735344 or just under $150,000 on 320 payments world-wide according to a twitter bot actual_ransom from @collinskeith which is watching the bitcoin wallets tied to the ransomware attack.

I dunno know – Until somehow cryptocurrencies break their implied link to illegal activities online, they will be relegated to the black market. 

The value of cryptocurrencies are really hard to pin down because no one really knows how much they should be worth. Unlike a company there are no assets or revenues that can be used to assess a predictable valuation. So they are subject to wide swings in valuations because they operate without any tangible value behind it.

The underlying technology of blockchain seems to have a brighter future

 

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Ralph Bach has blogged from his Bach Seat about IT, careers and anything else that catches his attention since 2005. You can follow me at Facebook and Twitter. Email the Bach Seat here.

 

Visual Capitalist The Coin Universe Keeps Expanding

What is Bitcoin?

What is bitcoin?Bitcoin is the name of probably the best-known cryptocurrency or digital currency or digital gold or virtual money. A cryptocurrency is a medium of exchange, such as the US dollar, but is digital and uses encryption techniques to control the creation of monetary units and to verify the transfer of funds. Blockchain is the technology that enables the existence of cryptocurrency.

Occupy Wall StreetThe cryptocurrency has populist roots. It made its debut in relative obscurity at the start of 2009, when the great recession  financial crisis was still raging. A person or group of people known as Satoshi Nakamoto purportedly created the bitcoin protocol and reference software. The populist ideology behind Bitcoin is to take power out of the hands of the central bankers and governments who usually control the flow of currency.

Bitcoin is both a digital currency and a payment system. The basic idea behind Bitcoin is that you can use it to pay for things without a third-party broker, like a bank or government. The value of a bitcoin depends on the bitcoin market at the time. One bitcoin = 100,000,000 Satoshi like 1 dollar = 100 cents. There are no transaction fees and no need to give your real name. Merchants have to pay a transaction fees on each credit card sale of 2.5% to 3.5% to the likes of Visa, MasterCard or Discover.

Accounting ledgerThink of Bitcoin like one big ledger shared by all the users: When you pay for something with bitcoin, or get paid, then your transaction is recorded on the ledger to ensure there is no double spending of the currency.

Members of the network collectively contribute processing power from their computers to maintain Bitcoin’s integrity. And every time a transaction is made, a record of it is sent out to be recorded in a public ledger where the transactions are effectively set in stone. Anyone can download and install the Bitcoin software for free so these records are distributed permanently across the entire network. This publicly distributed ledger is called the blockchain.

Peer to peerIn order to get more Bitcoins, computers running bitcoin software compete to confirm the transaction by solving complex cryptographic equation, and the winner is rewarded with more bitcoins. Currently, a winner is rewarded with 25 bitcoins roughly every 10 minutes. The process is known as “mining”. Don’t get too wrapped up in Bitcoin mining because only the computer powerhouses get their bitcoins this way.

The Consumerist explains that Bitcoin mining math is complicated and hard to forge, so the block chain stays accurate. Because anyone can download and install the Bitcoin software for free, the payment processing and record keeping for Bitcoin is done in a widely distributed way, rather than on one particular server.

Bitcoin miningWhen block chains are created, so are new bitcoins — but there’s a hard limit to how many will ever exist. The system was designed to create more bitcoins at first, then to dwindle exponentially over time. The first set of block chains each created 50 bitcoins. The next set each created 25 bitcoins, and so on. New block chains are created roughly every 10 minutes no matter what; when more computers are actively mining, the program they’re running gets harder (and therefore slower) to compensate. The Bitcoin FAQ estimates that the final bitcoin will be mined in the year 2140, bringing the permanent circulation to just under 21 million. (Currently, there are roughly 15.8 million bitcoins in the world.)

In order to use Bitcoin You’ll have to install a “bitcoin wallet” app on your phone or computer, and then buy them from a bitcoin exchange. A bitcoin digital wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money via an exchange of public and private security keys. Bitcoin wallets can exist either in the cloud or on a user’s computer. The wallets have all of the risks of any other app on your device or in the cloud. Unlike bank accounts, the FDIC does not insure bitcoin wallets. CNN Money points out some of the risks in using bitcoin.

Bitcoin miningIn order to buy bitcoins you have to use a marketplace called a “bitcoin exchanges” allow people to buy or sell bitcoins using different currencies. These exchanges have dubious history.

Bitcoin exchanges are vulnerable to hacking, collapse or a ”run on the bank.” A run on a bank occurs where customers are scared and demand to withdraw their deposits so fast that the bank makes payments and shutdowns. If something like that happens, good luck getting your money back: This isn’t like an FDIC-insured bank account.

Bitcoin can be used in a few places; Marketwatch says there doesn’t seem to be much rhyme or reason to where you can use Bitcoin:

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Bitcoin in DetroitThe use of bitcoins in Michigan has not really taken off. Last summer, according to the FreeP, there were only a handful of businesses in metro Detroit that took bitcoin included:

Ralph Bach has been in IT for fifteen years and has blogged from his Bach Seat about IT, careers and anything else that catches his attention since 2005. You can follow me at Facebook and Twitter. Email the Bach Seat here.