DApps and the Decentralized Future

Post written on 5th May 2017, since then market cap numbers have greatly changed.

Imagine having your car working away, transporting passengers while you’re at work. Imagine having your computer utilizing its spare capacity to serve businesses and people across the globe. Imagine being paid for browsing the web and taking ownership of your, arguably invaluable, attention.

Imagine a world like that.

That world is not far away.

A paradigm shift in the way we view software models is approaching. When Bitcoin, the first cryptocurrency, made us reassess our definition of Store of Value (SoV)[1], it also revealed a sneak peek of the future: a world running on decentralized applications (Dapps)[2]. These distributed, resilient, transparent and incentivized applications will prove themselves to the world by remapping the technological landscape[3].

Understanding Blockchain

Before we can even fathom what Dapps do, we need to be familiar with its underlying technology—the blockchain[4]. Put simply, a blockchain is a ledger of records organized in ‘blocks’ that are linked together by cryptographic validation. It is a digital storage of consensus truth. The key is to understand that this ledger is neither stored in a centralized location, nor managed by any single entity, hence its distributed-ness. The block validation system results in new transactions being added irreversibly and old transactions preserved forever for all to see, hence its transparency and resilience. Open-source software that leverage on the blockchain technology are called Dapps.

The Birth of Decentralized Applications

As the concept is still in its infancy, there might not be one definition of what a Dapp is. However, there are noticeable common features of Dapps[5]:

1. Open Source. Ideally, it should be governed by autonomy and all changes must be decided by the consensus, or a majority, of its users. Its code base should be available for scrutiny.
2. Decentralized. All records of the application’s operation must be stored on a public and decentralized blockchain to avoid pitfalls of centralization.
3. Incentivized. Validators of the blockchain should be incentivized by rewarding them accordingly with cryptographic tokens.
4. Protocol. The application community must agree on a cryptographic algorithm to show proof of value. For example, Bitcoin uses Proof of Work (PoW)[6] and Ethereum is currently using PoW with plans for a hybrid PoW/Proof of Stake (PoS)[7] in the future.

If we adhere to the above definition, the first Dapp was in fact Bitcoin itself. Bitcoin is an implemented blockchain solution that arose from problems revolving around centralization and censorship. One can say Bitcoin is a self-sustaining public ledger that allows efficient transactions without intermediaries and centralized authorities[8].

The Ethereum Network

While both Bitcoin and Ethereum may be loosely defined as Dapps aimed at solving real world problems, Ethereum has a much bigger plan in mind.

In Ethereum’s white paper, it was stated that the intention of Ethereum is to create an alternative protocol for building decentralized applications with emphasis on development time, security and scaling[9]. You may think of Ethereum as, for the lack of a better analogy, the Mother of Dapps. Armed with its very own language, Solidity, Ethereum enables developers to form smart contacts using the Turing-complete Ethereum Virtual Machine (EVM). With these tools available, developers made Dapps that have real-life use cases, ranging from asset management to resource planning.

Examples of successful Ethereum-based Dapps that have achieved millions of dollars in market cap include Golem, Augur and Melonport. As I mentioned in my previous post, each of them aspire to rewire the economy using blockchain technology, and move us a step closer to a decentralised world[10].

Successful Ethereum-based Dapps

Golem[11]. The Golem project aims to create the first global market for idle computer power. Standing at a remarkable market cap of 220 million USD, Golem will release the first version, Brass Golem, in May. Brass Golem will be tested on its ability to tackle CGI rendering, its first use case. If it turns out to be sustainably successful, CGI artists will be able to rent computing resources from other users to render an image quicker. Likewise, an idle machine can also accept tasks from other users. In light of this, frictionless sharing and pooling of resources may be a reality sooner than we think.

Augur[12]. Augur aims to combine the concept of prediction markets with the power of decentralised network to create a forecasting tool, for potential trading gains. Standing at a market cap above 200 million USD, Augur is currently still under beta test. Eventually, it may be able to feed real world truths into other applications and establish itself as the blockchain of facts.

Melonport[13]. The Melonport protocol is a blockchain protocol for digital asset management. Participants can set up or invest in digital asset management strategies in an open and competitive manner. Using blockchain technology, time and costs are drastically reduced. By building an auditable and visible track record, Melonport enables a never-seen-before competitive environment in asset management.

Status[14]. Status transforms your mobile device into a light client node on the Ethereum Network, and enables you to easily access Ethereum’s entire ecosystem from anywhere. Within their messenger system, users may send smart contracts and payment to each other. Server downtimes is now longer a problem as the app runs on peer-to-peer protocol.

Brave[15] (Upcoming ICO). In a world where consumers struggle to be in control of their attention and privacy, Brave’s value proposition seems rather unique. A shocking 60% of webpage load time is caused by the underlying ad technology. Brave browser makes web browsing fast and safe by shielding you from third party tracking. On top of that, should you choose to support content creators by enabling ads, you may even be monetarily rewarded with tokens. This gives end users an unprecedented level of control.

Aragon[16] (Upcoming ICO). Aragon is another ambitious project. It aims to disintermediate human trade, and allows you to manage entire organizations using the blockchain. By removing geographical borders and paperwork, the Aragon Network aims to act as a digital jurisdiction that is extremely convenient for everyone to operate on.

As seen above, each Dapp intends to apply blockchain technology to its niche and take over their respective industries. Be it investment, technology or governance, blockchain technology will permeate markets; its omnipresence will grace the world.

Being a Part of the Dapp Revolution

The Ethereum ecosystem will continue to expand as Ethereum gets under the mainstream radar. The recent rise in the price of Ether have brought along a new wave of interest in blockchain application.

If you’re a developer, there is no better investment than acquainting yourself with Solidity. Solidity is Ethereum’s programming language for writing executable distributed code contracts (EDCC). As you are reading this, corporations all over the world are scrambling to add blockchain developers to their ranks. Blockchain technology is growing a nascent industry in which opportunities abound.

To kickstart a Dapp project:

1. Create a whitepaper. Your whitepaper should address a problem you wish to solve. It should clearly state the intentions and goals of the Dapp. Describe the plans for your Dapp’s token distribution, and how you intend to go about doing it. Decide on a mechanism for establishing consensus, and recruit your management and development team. Be honest with any technical difficulties you foresee and state your technical requirements clearly.
2. Gain a following. Discuss your plan and form a community. Value feedback and revise your plans accordingly.
3. Start a crowd sale. Once the Dapp has gained enough momentum, decide on a date to receive token funding. The Dapp’s crowd sale website should have all the information that an investor may need.
4. Bring your ideas to fruition. Begin development and welcome new developers and interest groups.

In time, EthAcademy will be Ethereum’s official site for learning to build a Dapp on the Ethereum platform. As at this moment, you may hone your Solidity skills with an abundancy of learning resources available online[17]. A Dapp is basically an application enhanced with smart contracts, so think of a way to involve blockchain and smart contracts in your next project now!

Initial Coin Offerings (ICOs)

The birth of a new member or Dapp in the blockchain community is called an ICO. It is a fundraising event based on token sales that could potentially huge gains for the well-informed and daring investors.

In an ICO, the token value is arbitrarily determined by the start-up team. When the token gets listed on the exchange, the value is then corrected via price dynamics. The eventual value will be settled on by the participants of the network, other than accredited agencies.

No matter the accuracy of an ICO valuation, the fact remains that ICO itself is a driving factor of interest and innovation in the blockchain scene. ICO is the much-needed catalyst in opening a well of possibilities and extending the value that blockchain offers.

How to Participate in ICOs

To engage in an ICO, follow the steps below:

1. Stay up to date. Find out their Slack group, Twitter handle and official website. Keep up with their ICO announcements and plans.
2. Prepare a wallet. Do not use an exchange wallet as the address of an exchange wallet may change without you noticing. Some hardware wallets are not capability-wise ready for ICO tokens. This leaves making a wallet on myetherwallet.com as the best option. Ensure that the wallet has the necessary amount to transfer, including the gas price. For example, if you wish to transfer 10 ETH for the ICO tokens, make sure you have more than 10 ETH inside your wallet to pay the gas fee. Oversights like these are common and will result in failure of purchase.
3. Be on time. Some popular ICOs are over in an hour. To increase your chances of securing ICO tokens, do prepare and make the transfers as early as possible.
4. Safekeep your tokens. Keep your wallet safe. Once the token is listed and available on exchanges, you may transfer your tokens from the wallet to an exchange to start trading.

In choosing the right ICO to invest in, ask yourself the following questions:

1. Are my investments safe? Preservation of capital should be the priority of the investor. Can you trust the dev team with your money? Are you leaving your money with founders who were involved in scams?
2. Is there a long-term plan? Do they have the abilities and the team makeup that the project demands?
3. Is this just a well marketed project? Sometimes all it takes is a professional looking website for inexperienced investors to be sold. Will the team be able to deliver its promises?
4. What is my exit plan? As a high-risk investment, ICOs may require you to define an investment horizon or timeline. At which price point do you intend to exit?
5. Does it hold a unique advantage? As the Dapp scene matures, newcomers with similar value propositions will join the market. What is the edge that this Dapp would have over future competitors?

As it stands, the current ICO scene is massively hyped. To protect yourself from capital losses, perform the necessary research and pick your ICO with care.

A Decentralized Future Awaits

The inevitable onslaught of blockchain adoption will render numerous practices obsolete. It may be a bold and distant conjecture, but services such as banking will be made redundant as the world learns to operate and finance itself by self-sustaining, trust-less and decentralized networks. Large corporations hurrying to secure their place in the blockchain movement is only a testament to that[18].

Perhaps another topic worth giving some thought over: by outsourcing information and value transfer to the blockchain, we increase efficiency by reducing middlemen services, but at what cost? As the services a human can provide decreases and the value of a human erodes, can we say confidently that our lives will improve? No matter the answer to that question, we can only take the leap of faith, with blockchain as the next step forward and towards a world unified by shared data.

Hey there, if you enjoyed my post, I’m accepting donations in Ethereum!

Ethereum Address: 0x31cf8F0106ee3d86d0caD78564B6008DAD632752

 

[1] http://www.investopedia.com/terms/s/storeofvalue.asp

 

[2] http://www.monacofx1.com/SIT/index.php/ethereum/what-are-dapps

 

[3] https://www.safaribooksonline.com/library/view/decentralized-applications/9781491924532/ch01.html

 

[4] https://arstechnica.com/information-technology/2016/11/what-is-blockchain/

 

[5] https://blog.bitnation.co/what-are-dapps/

 

[6] https://en.bitcoin.it/wiki/Proof_of_work

 

[7] https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ

 

[8] https://www.cryptocoinsnews.com/bitcoin-vs-banking-infographic/

 

[9] https://github.com/ethereum/wiki/wiki/White-Paper#ethereum

 

[10] See A Closer Look at the Rise of Ethereum

 

[11] https://golem.network/

 

[12] https://augur.net/

 

[13] https://melonport.com/

 

[14] https://status.im/

 

[15] https://brave.com/

 

[16] https://aragon.one/

 

[17] https://dappsforbeginners.wordpress.com/

 

[18] http://www.bankingtech.com/751302/ex-r3-members-behind-new-blockchain-alliance/

 

48 Cryptocurrency Trading Lingo That You Should Know

It seems to be a matter of time before cryptocurrencies are as common and as well understood as stocks. In anticipation, let us familiarize ourselves with the lingo in cryptocurrency investing and mining, which will prove to be immensely useful (not discounting the entertainment value).

Investing

Cryptocurrency traders share much of the vocabulary used by stock traders and Forex traders. Of course, there are also words that originated from cryptocurrency trading.

1. HODL. A misspelling of ‘hold’ that stuck around to mean ‘keep’. A crypto trader who buys a coin and does not see himself selling in the foreseeable future is called a hodler of the coin.
2. FOMO. Short form for ‘fear of missing out’. As crypto trading is still very much driven by emotions rather than valuation, FOMO is a huge factor to consider when swing trading in crypto.
3. FUD. Short form for ‘fear, uncertainty and doubt’. Traders who stand to gain from the failure of a coin may spread FUD in the coin’s forums.
4. ATH. Short form for ‘all time high’.
5. Whale. Traders with a substantial amount of capital are called whales. Interestingly, ‘Whales’ are often blamed for inexplicable market direction changes or movements.
6. Pump and Dump. Coins which do not seem to have long term prospects may see a huge increase over a short period of time. Such movements are often attributed to low volume, hence the ‘pump’. Traders who pump, buying huge volumes, may wish to invoke FOMO from the uninformed investors and then dump, or sell, their coins at a higher price. Knowing this could be the case, many traders still enter the market hoping to exit before the dump happens.
7. Shill. The act of unsolicited endorsing of the coin in public. Traders who bought a coin has an interest in shilling the coin, in hopes of igniting the public’s interest in that particular coin.
8. Bag Holder. A term to refer to a trader who bought in at a high and missed his opportunity to sell, leaving him with worthless coins.
9. Margin Trading. A term for ‘trading with leverage’. In this instance of trading, you borrow one side of the trading pair at an agreed loan rate and sell it for the other side of the trading pair. Depending on the direction you believe the market to move, you may place a long or a short bet on the trading pair of concern.
10. Long. A position that a trader takes. To take a long position on something is to believe its value will rise in the future.
11. Short. A position that a trader takes. To take a short position on a coin is to believe its value will fall in the future.
12. Limit Order. An order placed at a future price that will execute when the price target is hit.
13. Borrowing Rate. When you open a leveraged position, you will be borrowing coins at a pre-determined rate. This rate will be added to reflect your position’s overall profit and loss.
14. Lending Rate. Some exchanges have lending accounts. You may deposit your coins into these lending accounts to lend your coins for others to execute their leveraged trades. The lending rate fluctuates throughout the day based on the demand for shorting the coin.
15. Fill or Kill. A limit order that will not execute unless an opposite order exceeds this limit order’s amount.
16. Wall. A wall as seen in the depth chart of exchanges is an amalgamation of limit orders of the same price target.
17. Trading Volume. High trading volumes are signals that indicate possibilities of new trends. Low trading volumes result in decreased liquidity and an increased spread.
18. Circulating Supply. The price of a coin has no meaning on its own. However, the price of a coin, when multiplied by the circulating supply, gives the coin’s market cap.
19. Market Cap. A stock’s market cap refers to the market value of the company’s outstanding shares. In the cryptocurrency market, the market cap is used to illustrate a coin’s dominance in the entire cryptocurrency market.
20. DDOS. Short form for ‘Distributed Denial of Service’. A well-timed DDoS attack at exchanges during volatile movements may be devastating as traders will not be able to execute any order manually and will be at the mercy of their pre-set, or the lack of, limit orders.
21. ICO. Short form for Initial Coin Offering. Coins bought during ICOs are usually sold for a profit when the coin first hits exchanges. This is due to the initial hype which increases demand for the coin. On the supply side, ICOs create entry barriers as the buyer has to set up his private wallet to receive the coins from the ICO purchase.
22. Arbitrage. The act of buying and selling on different exchanges to earn the difference in the spread. Arbitrage opportunities occur due to differences in exchange reputation, community coin preferences and ease of bank funding. Take note that fees, limits and prices could change anytime when you are transferring your coins between exchanges, especially during volatile times.
23. Pennant. A common pattern in technical analysis. When a pennant is forming, this shows that the market is consolidating about a price point and a break out in either direction is imminent.
24. Bear Trap. Another common pattern in technical analysis, especially during a bull market. This indicates market manipulation, where traders sell and fool other traders into thinking a downtrend is forming and hence selling theirs, allowing the traders who set the trap to buy in more at a lower price.
25. Bull Trap. The opposite of a bear trap. In a bull trap, traders buy and fool other traders into thinking a uptrend is forming and hence rushing to buy in, allowing the traders who set the trap to sell at a higher price.
26. Cup and Handle. A pattern in technical analysis that happens when traders test the validity of an uptrend.

 

Mining

Mining is the act of validating blockchain transactions. The necessity of validation warrants an incentive for the miners, usually in the form of coins. In this cryptocurrency boom, mining can be a lucrative business when done properly. By choosing the most efficient and suitable hardware and mining target, mining can produce a stable form of passive income.

1. Mining Rig. A rig is a dedicated computer system for mining coins. It usually consists of a motherboard with more than one GPU installed.
2. Hash. The act of performing a hash function on the output data. This is used for confirming coin transactions.
3. Hash Rate. Measurement of performance for the mining rig is expressed in hashes per second.
4. SHA-256. This is a mining algorithm used by cryptocurrencies such as Bitcoin. SHA-256, however, uses a lot of computing power and processing time, forcing miners to form mining pools to capture gains.
5. Scrypt. This is another type of mining algorithm and is used by Litecoin. Compared to SHA-256, this is quicker as it does not use up as much processing time.
6. ASIC. Short form for ‘Application Specific Integrated Circuit’. Often compared to GPUs, ASICs are made for mining and may offer significant power savings.
7. Transaction Fee. All cryptocurrency transactions involve a small transaction fee. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block.
8. Block Reward. A form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.
9. Difficulty. This refers to how easily a data block of transaction information can be mined successfully.
10. Collective Mining. This refers to the act of contracting mining power from third parties. Sometimes, the commitment of resources, especially at the start, may be overwhelming for individuals. To solve this problem, companies that invested in high-end mining hardware may lease their mining capability to individuals for a premium. Block rewards that the company receive will be distributed to individuals based on contracts.
11. Cloud Mining. A form of mining that utilizes a remote datacentre with shared processing power.
12. Mining Pools. When the difficulty of mining increases to a certain level, miners may opt to pool their resources to generate blocks quicker. This is done so for a consistent reward, rather than receiving a big sum randomly once every few years, for example.
13. PPS. The Pay-per-Share approach for mining pool payment. As one of the more popular payment methods, this offers an instant, guaranteed pay out for each share that is solved by a miner. This method allows for the least variance in the miners’ payments by transferring most of the risk to the pool’s operator.
14. DGM. The Double Geometric method for mining pool payment. This form of payment allows the operator to absorb a portion of the risk by normalizing payments through receiving pay outs during shorter rounds and distributing pay outs during longer rounds.
15. Confirmation. The successful act of hashing a transaction and adding it to the blockchain.
16. Mintage Cap. A limit on the eventual total number of coins. Mining generates new coins constantly, a mintage cap enforced may allow for a more stable cryptocurrency.
17. Proof of Work Mining. A form of mining that requires an active role in mining data blocks, often consuming resources, such as electricity. The more ‘work’ you do or the more computational power you provide, the more coins you are rewarded with.
18. Proof of Stake Mining. A form of mining that rewards earnings based on the number of coins you own or hold. The more you invest in the coin, the more you gain by mining with this protocol.
19. TDP. Short form for ‘Thermal Design Power’. It is the maximum amount of heat generated by a GPU that the cooling system is designed to dissipate. TDP limits may be raised to realize the full overclock potential of the graphic cards.
20. PSU. Short form for ‘Power Supply Unit’. The PSU is an important component of your rig that will be put under a lot of stress. Sum up the power consumption of all your GPUs and ensure that your PSU can handle it.
21. Bandwitdth. The higher the hash rate of your rig is, the more bandwidth it will require, as it downloads new work units and returns them faster. Bandwidth however does not affect mining speed for solo miners. The effect of bandwidth is only seen in the pool mining case.
22. PCI-E. Short form for ‘Peripheral Component Interconnect Express’. It is a serial expansion bus standard for connecting a computer to one or more devices. By using a PCI-E, every device that is connected to the motherboard has its own point to point dedicated connection. By not sharing the same bus, the devices will not be competing for bandwidth.

The lists above may provide a timely jumpstart in your knowledge about crypto investing and mining. Being a young and growing niche, blockchain is evolving quickly and many requirements and definitions change over time. Keep yourself up to date of the ever-changing rates by joining investing and mining communities on Reddit forums and CryptoCompare.

 

And if you’re crazy enough, I’m accepting donations here in Ethereum!

Ethereum Address: 0x31cf8F0106ee3d86d0caD78564B6008DAD632752

48 Keywords You Should Know About Blockchain

As expounded upon in my previous post Dapps and the Decentralized Future, blockchain technology presents a once in a lifetime opportunity, be it investment or career wise. At this juncture, we are about to witness the dawn of a new technology paradigm; boundless possibilities await in a decentralized world.

In anticipation, the simplest and the most effective first step is to get acquainted with the commonly encountered vocabulary. This post serves as a simple and yet comprehensive glossary to the refreshing world of blockchain.

51% Attack

When more than half of the computing power of a cryptocurrency network is controlled by a single entity or group, this entity or group may issue conflicting transactions to harm the network, should they have the malicious intent to do so.

Address

Cryptocurrency addresses are used to send or receive transactions on the network. An address usually presents itself as a string of alphanumeric characters.

ASIC

Short form for ‘Application Specific Integrated Circuit’. Often compared to GPUs, ASICs are specially made for mining and may offer significant power savings.

Bitcoin

Bitcoin is the first decentralised, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralised issuer.

Block

Blocks are packages of data that carry permanently recorded data on the blockchain network.

Blockchain

A blockchain is a shared ledger where transactions are permanently recorded by appending blocks. The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain.

Block Explorer

Block explorer is an online tool to view all transactions, past and current, on the blockchain. They provide useful information such as network hash rate and transaction growth.

Block Height

The number of blocks connected on the blockchain.

Block Reward

A form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.

Central Ledger

A ledger maintained by a central agency.

Confirmation

The successful act of hashing a transaction and adding it to the blockchain.

Consensus

Consensus is achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.

Cryptocurrency

Also known as tokens, cryptocurrencies are representations of digital assets.

Cryptographic Hash Function

Cryptographic hashes produce a fixed-size and unique hash value from variable-size transaction input. The SHA-256 computational algorithm is an example of a cryptographic hash.

Dapp

A decentralised application (Dapp) is an application that is open source, operates autonomously, has its data stored on a blockchain, incentivised in the form of cryptographic tokens and operates on a protocol that shows proof of value.

DAO

Decentralised Autonomous Organizations can be thought of as corporations that run without any human intervention and surrender all forms of control to an incorruptible set of business rules.

Distributed Ledger

Distributed ledgers are ledgers in which data is stored across a network of decentralized nodes. A distributed ledger does not have to have its own currency and may be permissioned and private.

Distributed Network

A type of network where processing power and data are spread over the nodes rather than having a centralised data centre.

Difficulty

This refers to how easily a data block of transaction information can be mined successfully.

Digital Signature

A digital code generated by public key encryption that is attached to an electronically transmitted document to verify its contents and the sender’s identity.

Double Spending

Double spending occurs when a sum of money is spent more than once.

Ethereum

Ethereum is a blockchain-based decentralised platform for apps that run smart contracts, and is aimed at solving issues associated with censorship, fraud and third party interference.

EVM

The Ethereum Virtual Machine (EVM) is a Turing complete virtual machine that allows anyone to execute arbitrary EVM Byte Code. Every Ethereum node runs on the EVM to maintain consensus across the blockchain.

Fork

Forks create an alternate version of the blockchain, leaving two blockchains to run simultaneously on different parts of the network.

Genesis Block

The first or first few blocks of a blockchain.

Hard Fork

A type of fork that renders previously invalid transactions valid, and vice versa. This type of fork requires all nodes and users to upgrade to the latest version of the protocol software.

Hash

The act of performing a hash function on the output data. This is used for confirming coin transactions.

Hash Rate

Measurement of performance for the mining rig is expressed in hashes per second.

Hybrid PoS/PoW

A hybrid PoS/PoW allows for both Proof of Stake and Proof of Work as consensus distribution algorithms on the network. In this method, a balance between miners and voters (holders) may be achieved, creating a system of community-based governance by both insiders (holders) and outsiders (miners).

Mining

Mining is the act of validating blockchain transactions. The necessity of validation warrants an incentive for the miners, usually in the form of coins. In this cryptocurrency boom, mining can be a lucrative business when done properly. By choosing the most efficient and suitable hardware and mining target, mining can produce a stable form of passive income.

Multi-Signature

Multi-signature addresses provide an added layer of security by requiring more than one key to authorize a transaction.

Node

A copy of the ledger operated by a participant of the blockchain network.

Oracles

Oracles work as a bridge between the real world and the blockchain by providing data to the smart contracts.

Peer to Peer

Peer to Peer (P2P) refers to the decentralized interactions between two parties or more in a highly-interconnected network. Participants of a P2P network deal directly with each other through a single mediation point.

Public Address

A public address is the cryptographic hash of a public key. They act as email addresses that can be published anywhere, unlike private keys.

Private Key

A private key is a string of data that allows you to access the tokens in a specific wallet. They act as passwords that are kept hidden from anyone but the owner of the address.

Proof of Stake

A consensus distribution algorithm that rewards earnings based on the number of coins you own or hold. The more you invest in the coin, the more you gain by mining with this protocol.

Proof of Work

A consensus distribution algorithm that requires an active role in mining data blocks, often consuming resources, such as electricity. The more ‘work’ you do or the more computational power you provide, the more coins you are rewarded with.

Scrypt

Scrypt is a type of cryptographic algorithm and is used by Litecoin. Compared to SHA256, this is quicker as it does not use up as much processing time.

SHA-256

SHA-256 is a cryptographic algorithm used by cryptocurrencies such as Bitcoin. However, it uses a lot of computing power and processing time, forcing miners to form mining pools to capture gains.

Smart Contracts

Smart contracts encode business rules in a programmable language onto the blockchain and are enforced by the participants of the network.

Soft Fork

A soft fork differs from a hard fork in that only previously valid transactions are made invalid. Since old nodes recognize the new blocks as valid, a soft fork is essentially backward-compatible. This type of fork requires most miners upgrading in order to enforce, while a hard fork requires all nodes to agree on the new version.

Solidity

Solidity is Ethereum’s programming language for developing smart contracts.

Testnet

A test blockchain used by developers to prevent expending assets on the main chain.

Transaction Block

A collection of transactions gathered into a block that can then be hashed and added to the blockchain.

Transaction Fee

All cryptocurrency transactions involve a small transaction fee. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block.

Turing Complete

Turing complete refers to the ability of a machine to perform calculations that any other programmable computer is capable of. An example of this is the Ethereum Virtual Machine (EVM).

Wallet

A file that houses private keys. It usually contains a software client which allows access to view and create transactions on a specific blockchain that the wallet is designed for.

And that’s it, with the above keywords you would be many steps ahead in the blockchain knowledge department as compared to your peers. Hoped you enjoyed it!

I’m opening donations in Ethereum here for the first time, really excited! 🙂 Don’t forget to leave a comment, or drop a note below!

Ethereum Address: 0x31cf8F0106ee3d86d0caD78564B6008DAD632752

The Absolute Beginner’s Guide to Crypto Investing

When I first started taking an interest in crypto I thought I was so lost in this huge sea of unknowns. Where do I start? What are the useful keywords to look up and keep in mind? What are the available helpful resources? This cheat sheet is written so that in just 20 minutes, you would have a sense of what to expect of your upcoming crypto journey, and how to best go about starting it. Enjoy it, it might just be the most exhilarating ride of your life.

Rise of the Cryptocurrencies

As the tech literacy of the population increases, acceptance of crypto as a legitimate store of value follows, and it boomed. Titles along the lines of ‘Bitcoin price hits new all-time high’ and ‘Ethereum price surges’ are starting to perforate the general public’s news feed. What we know for sure is that people who were once sceptical of Bitcoin and the technology behind it are slowly understanding and getting increasingly involved with crypto. As at the time of writing, the market cap of the entire crypto space is at 30.9 billion USD. It was 20 billion just 4 months ago. What would it be 4 months from now?

Current Makeup of the Crypto Space

You would have heard of Bitcoin and the ‘altcoins’. How this naming convention started was because back in the days of 2011, forks of Bitcoin appeared on the markets. The forks, or clones, each aspire to serve a niche area, aiming to be ‘better’ than Bitcoin. Since then countless new crypto have emerged, eroding away Bitcoin’s crypto market cap dominance. These altcoins are gaining market share at an alarming speed. Ten times or more growth has been observed in a time span as short as six weeks (see PIVX, an altcoin).

Crypto, Stocks and Fiat

The currencies we know are referred to as ‘fiat’ by the crypto community. Although having ‘currency’ in its name, cryptocurrencies share more similarities with stocks than currencies. When you purchase some cryptocurrency, you are in fact buying some tech stock, a part of the blockchain and a piece of the network.

Crypto Exchanges

The most common place where people buy and trade crypto is on the exchanges. Exchanges are places where you may buy and sell your crypto, using fiat. There are multiple measures to judge the reliability and quality of an exchange, such as liquidity, spread, fees, purchase and withdrawal limits, trading volume, security, insurance, user-friendliness. Out of all these, I find Coinbase as the best exchange hands down. It has a beginner friendly user interface, and an unbeatable 100% crypto insurance.

After setting up an intermediary bank account and verifying your details with Coinbase, you are only 5 simple steps away from a Bitcoin purchase:

1. Access the ‘Buy/Sell Bitcoin’ tab
2. Select the payment method using the drop-down menu
3. Enter the desired amount
4. Click ‘Buy Bitcoin Instantly’
5. View your credited Bitcoins on your dashboard

When you get acquainted to buying crypto and start to itch for some crypto trading (e.g. BTC/ETH), simply perform an instant transfer from Coinbase to GDAX free of charge and start trading. Think of Coinbase as the place to conveniently buy and store your crypto and GDAX as your margin trading platform. Transfers between the two are instant and free.

As you slowly get familiar with other currencies, you might want to have the option of investing in them. Bittrex and Polo are two exchanges that offer a wide selection range.

When signing up on these exchanges for the first time, do make it a point to verify your account with the required documents early, as you do not want to be caught in the middle of some tedious and slow admin work when the trading opportunity comes. Verification on these exchanges may take days, and purchase/withdraw limits may only increase gradually as you trade.

An additional point to note: if you are using a currency other than USD, do check out the exchange’s ease of funding and withdrawal. You do not want your exchange to come into fiat withdrawal problems, like Bitfinex did recently.

Crypto Wallets

Exchanges like Coinbase have inbuilt online wallets to keep the crypto you purchased. However, for those who heard of the Mt. Gox hack, you might feel uneasy to put on an exchange. If you do not wish to keep your crypto holdings on the exchange, you have the option to either use a paper wallet service like myetherwallet.com, or spend 99 USD on a hardware wallet like KeepKey. Both serve the purpose of removing platform risk, at the cost of taking up the responsibility of keeping your crypto safe.

To transfer your crypto from exchanges to your hardware wallet for long term storage, simply follow these steps, using Coinbase and KeepKey as an example:

1. Plug in your KeepKey USB cable
2. Open your KeepKey Client (on Google Chrome under Apps)
3. Find your wallet address on the KeepKey Client UI
4. Access Coinbase ‘Send/Request’ tab and input your KeepKey wallet address
5. Confirm amount and click ‘Send Funds’

Take note to first send a tiny amount (e.g. 0.0001 BTC) for testing before sending the bulk, lest an error occurred and the transfer amount is lost. A small network transfer fee might be charged.

Personally, I own a hardware wallet, as I love the feeling of a having around a tangible reminder of my crypto holdings. Also, the hardware wallet’s user interface makes it easy to keep multiple coins, which is especially handy when you participate in ICOs (Initial Coin Offering) in the future. 

Show Me the Money!

Now this is where it gets exciting. How do we pick the winner? How do we avoid picking the loser?

Note that crypto is now in a huge bull market and anything could rise over time. Also, do not dismiss the possibility that we may be in a bubble like the dot com boom back in 2000. Still, ask yourself these questions before you decide to invest in a coin:

1. Are my investments safe with the dev team? The first rule of investing should always be preservation of capital. Can you trust the dev team with your money? Are you about to leave your money with founders who have been involved in previous scams[8]? If you see these telling signs, back off immediately. The coin’s price might grow for all you care, but it is just not worth it to put your capital in such risk.
2. Does my coin of interest have a long-term plan? If you cannot understand their yellow paper, at least read their white paper. What are the team trying to achieve? Do they have the means, or have they already worked towards their goals? What are the timelines and milestones?
3. Does my coin of interest seem like a well marketed plan with no backup? Lots of ICOs these days just have a pretty webpage, and then they’re shipped out to sell. Watch out for these: are they able to deliver?
4. How long should I stay in this? Do I have an exit plan? There will be coins where you do not want to hold forever, but wish to flip for some short-term gains. In this case, be sure to set a timeframe, or an exit price, to reduce to effect of emotions on your trades. Stick to your plan and watch your emotions.
5. Does it have a real-world use case? Some coins seem to keep increasing in value simply due to supply demand factors. This trend might not be sustainable. For a coin to have long term supported value it must have a real-world use case eventually. Look out for coins that look too much like a get-rich-quick scheme.

 

Short Term Trading with Margin

Once you get familiarised with crypto, you may want to trade on your ‘stash’ in hopes of increasing it. For the experienced forex traders, this is nothing new. But for the new crypto investor, you may want to brief up on how to make a leveraged trade.

Short-term trading takes advantages of incoming news to make a quick buck. If you foresee good news from an upcoming release of a coin, you may want to open a long and see how it goes. Remember, buy the rumour, sell the news; act fast and be daring if you wish to make a profit with short term trading.

Mining

For those who are more comfortable with a predictable form of reward, mining is the way. Mining involves setting up of a rig, consisting of GPUs or CPUs and an investment in the electricity. Mining is only possible on cryptocurrencies that follow the Proof of Work protocol. It takes some effort to setup and get things running, but it is attractive as a long-term passive income as long as you frontload the work.

Staking

Staking is the Proof of Stake version of ‘mining’. Think of this as making dividends on your stock. The reward rate and staking method differs greatly among Proof of Stake coins, but in general it takes less effort as compared to mining.

Arbitraging

As you get a hand in multiple exchanges, you may wish to buy from one exchange and sell on another to make ‘arbitrage’ gains when you spot an arbitraging opportunity. Take note of two things if you wish to do so: remember to factor in fees, and remember that the price could change when you are transferring your coin between exchanges, especially during volatile times. USD tends to be liquid so this happens less for it, but for other currencies such as CAD (Canadian dollar) and SGD (Singapore dollar), there may exist more arbitraging opportunities to exploit.

Helpful Resources

Check out https://coinmarketcap.com/ for the tabulation of various coins’ market cap and price. Check out https://cryptowat.ch/ for the prices of popular coins across different exchanges. Check out the respective coins’ subreddits for available news and market sentiments. Lastly, check out http://hypecoaster.com/ for how much more crypto you need for a Lamborghini Aventador 🙂

That’s about all I have for now, invest smart and most importantly, don’t forget to have fun!

Click here to to sign up on Coinbase and get free 10 USD (14 SGD) worth of bitcoins from my referral link!

 

Testing the Future of Ethereum

Today I made my first purchase of Ethereum.

Winklevoss brothers’ COIN ETF application was what caught my eye, and got me introduced into the world of cryptocurrencies, and in my previous blog post about Bitcoin I shared about the benefits of them and how they will be significant in our future.

It appears the world turned its attention to cryptocurrencies too. On coinmarketcap.com, all cryptocurrencies are seen to be rising, signalling a huge inflow of capital into this market. Out of which, Ethereum, ranked second in terms of market capital, enjoyed an eye-popping 30% gain in a single day.

I was glued to my Coinbase account dashboard, thinking Bitcoin gained me a fair amount today, only to realize that the gain was due to my 100 SGD share in Ether, which gained 25% to 125 SGD.

Immediately I did my research on Ether, and what I found was a whole new world of potential.

If any cryptocurrency were to be one to dethrone Bitcoin, Ether will be the top contender for this position.

I am getting a bit lazy here so I am just going to summarize (do your fair share of googling!): Ether is backed by a strong coder base, awesome community support, and they have plans to actually make USE of Ether. That’s right, more than just a currency like Bitcoin is intended to be, Ether actually has plans to consume its supply.

 

Don’t forget, use this link to get FREE 14 SGD (10 USD) worth of Bitcoin!