Monthly Archives: November 2019

The Ripple

For a long time, the general populace along with crypto investors failed to distinguish between Ripple and XRP. It caused no harm or challenge till date but The Securities and Exchange Commission wants it separated.

How will it affect XRP?

To begin with, there will be a clear understanding of the differences between Ripple and XRP. Ripple is a San Fransisco based startup owning the cryptocurrency XRP. Such a bifurcation will allow both retail and institutional investors to have a clear idea of what the two are and what they stand for.

The clarity in crypto investment is a major key to success.

What is Ripple?

As aforementioned, Ripple is a fun tech startup, specialising in creating products, that will facilitate a seamless transactional experience. Ripple was originally known as OpenCoin before renaming itself as Ripple Labs in 2015.

It is one of the most successful fintech startups, trusted by some of the biggest names in the financial world. It is a growing list. It is also one of the reasons why Ripple has a spread out geographical reach. Ripple has offices in San Francisco, New York, London, Sydney, India, Singapore, and Luxemburg.

How is Ripple valued?

Ripple Labs earn a large chunk of its revenue from being the creator and major holder of its cryptocurrency XRP. Ripple owns about 60 billion of the 100 billion XRP tokens, in circulation.

Other than XRP, Ripple Labs also owns xCurrent and xRapid.

xCurrent is a network used by banks and financial institutions as a messaging service. This helps them settle cross border payments in real-time.

xRapid is the solution which helps entities transform fiat currencies into XRP, quickly and cheaply.

What is XRP?

XRP is the cryptocurrency developed and owned by Ripple Labs.

It is an independent cryptocurrency created to facilitate transactions on the Ripple Network. XRP has primarily developed to power the Ripple Network and assist people in sending money digitally.

XRP enmeshed the idea of a cryptocurrency with tech to create a superior product. What it did was combine the craziness of Bitcoin and perfect the delivery system. XRP can process transactions in as little as 4 seconds and can handle 1500 transactions a minute.

100 billion XRP tokens are currently powering the Ripple network, creating one of the largest circulations in the history of cryptocurrencies.

With XRP, Ripple Labs has demonstrated the future of financial transactions and the transformative power it has.

Why investing in a Crypto a great gamble?

The stock market has long been the ultimate cradle for money-making. Shares, bonds and their affiliates would make or break careers and livelihoods. Shareholders would peer through giant screens and calculate the day’s loot. The share market has always operated in binaries. A good day or a bad day. However, with the advent of cryptocurrencies coupled with the increase in the risk-taking attitude of the new brigade of investors, good times are herd to stay. You may ask about the volatility of the market. That remains. In fact, it may have increased by a shade too. But then one must remember, with Bitcoin and its brotherhood of Altcoins, the stakes are much higher now.

One must remember that when Bitcoin first appeared in 2007, it was valued at less than a cent. The same cryptocurrency hit the stratosphere in the first quarter of 2017, by touching $20000. The early investors who would have poured money at one cent a unit became millionaires and I dare say, billionaires. The purple patch did not last long though and Bitcoin was down to below $7000, the next quarter. N erosion of almost 75% of its previous value. Currently, it is being traded at a shade below $6000 but has stabilised since. Analysts expect Bitcoin to touch $10000 soon given its popularity.

What about the Altcoins then?

Bitcoin owns more than 50% of the market cap of the entire cryptocurrency universe. So if we have a positive movement in Bitcoin, the entire entourage booms too.

Such has been the confidence on cryptocurrencies that established and legacy institutions like Goldman Sachs and JP Morgan have been putting in a great effort to not miss the bus. In fact, J.P. Morgan Chase Chairman and CEO, Jamie Dimon, regrets calling Bitcoin a fraud once and wouldn’t want to make the mistake of missing it, again.

The other reason for giving Cryptocurrencies a hard look is to divert the overdependence on the FAAMG family. Facebook, Apple, Amazon, Microsoft and Google represent the crème de la crème of tech stocks. And that bursting like it did in 2001 is a lesson no one wants to go through again. 1997 to 2001, was the dream run every tech stock went through before the bubble burst, based on unrealistic business models and reckless investments. $5trillion was lost.

With cryptocurrencies, the idea is to play a waiting game all the while diversifying the portfolio. The returns are amazing only if you have the appetite to be patient.

Why does Bitcoin use so much energy?

One thing that has always puzzled people is the amount of energy required to run Bitcoin and mint new coins. It was almost a spectacle to those outside the cryptocurrency circle, wondering where did all those electricity go.

To put things into perspective, an estimate done by PWC, the current global power consumption for the servers that run bitcoin’s software is a minimum of 2.55 gigawatts (GW), which amounts to the energy consumption of 22 terawatt-hours (TWh) per year—almost the same as Ireland. Ireland is a country. Just saying.

Google, the search engine behemoth, in comparison used 5.7 TWh globally in 2015, to run all its operations. The astonishing point is that Bitcoin miners were consuming more power, around five times more, vis a vis the year before. And there absolutely no sign of a slow down.

So what makes Bitcoin use so much power?

Bitcoin and the myriad cryptocurrencies are founded on the premise of an immutable ledger called the blockchain. This comprises of transfer of value from one user to another. Miners dealing in cryptocurrency seek for results to an algorithmic puzzle, that has to fit in an exclusive set of requirements.

On average, the system finds such an answer and in return, the miner gets rewarded. The current rate is 12.5 bitcoins (worth around $85,000) and about $1,000 in transaction fees.

The solution that the miner found also gets added to the said blockchain. However, the blockchain does not automatically become a part of the ledger. A few more blocks need to be added before the firmer can happen. This is because solutions are found almost simultaneously and the longest and winning solution needs to be identified before it can be declared as the requisite.

Hence, to ensure that coins cannot be minted too quickly, thereby increasing the computational capacity of the system, the bitcoin protocol makes it harder for the successive discovery of solutions. Roughly every two weeks the system is recalibrated. That forces the miners to keep upgrading in order to be ahead of potential competitors and be able to reap rewards.

It is a cycle which seldom slows down. Also, more computing power requires a greater amount of electricity.

Future predictions involve quantum computers being required to fulfil the ever-growing demand of cryptocurrencies.

2019 is expected to be a good year for Bitcoin and its affiliates and would be a good time to invest.

Cryptocurrency 101

Barring a slow 2018, when the crypto market was still licking its wounds, 2019 happens to be a good year. Most of the currencies have bounced back and even though there seems to be the cloud of uncertainty in the distant future, they are holding on as of now.

Bitcoin, the undisputed king of the market, is being traded at a notch below $6000, while the Altcoins are not doing to bad either. Litecoin, Ethereum to name a few of the most important ones, are vying for the rest of the market share, which itself is grappling against the possibility of tighter regulations and government oversight.

Amidst all these speculations one thing we may have missed is the basic question that most of us wanted an answer to is why is cryptocurrency in the eye of a storm?

The answer is that cryptocurrency is a digital currency in which encryption processes are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank or an authorised institution.

It based on the blockchain technology which uses the premise of universal ledger hence increased security.

According to Jan Lansky, a cryptocurrency is a system that meets six criteria:

It is a centralised system and hence there is no regulatory oversight. It is primarily maintained through distributed ledger and consensus.

The system keeps an overview of the ownership of the coins

The system is pro-definition. It will define the conditions under which new cryptocurrency can be created. Once created, the ownership of such a currency will be defined too.

The ownership of crypto can only be proven cryptographically. This makes cryptocurrencies one of the most secure forms of cash.

Ownership of cryptocurrencies can be changed. If two separate changes of ownership are instructed, then the system will adhere to almost, one.

Cryptocurrency is seen as a viable alternative to the conventional mode of transaction but here is where things get muddled. One of the reasons why cryptocurrencies enjoy the stardom is because of its unbridled freedom. That is about to change since money laundering and economic fraud became serious circumstances. Governments will be pushing for legislatures to hold control or partial oversight on cryptocurrency.

That sounds like a death knell.

Caveat Emptor

There is nothing called unadulterated fun. When it comes to the digital world, it is more caution. For a new regime like Cryptocurrencies, this is a must.

The world of cryptocurrencies is choc a bloc with innumerable launches every month. Currencies are being launched by the dozen. Investors are in no mood to relent in spite of the fact that 2018 had been a cruel year. ICOs are the buzzword for newer opportunities and this works both ways. Imagine if an investor is ready to throw money on a highly speculative cryptocurrency, what is the kind of leverage a scam star would get by manipulating the process.

In a world of fraudulent tokens and manipulated ICOs, it becomes pertinent to absorb as much knowledge as possible or even necessary.

However, the digital economy is growing at an incredibly rapid pace. Cryptocurrency in arms with blockchain is not too far behind. For new investors, it becomes quite daunting to fathom the numerous terminologies that he or she faces whilst dealing with tokens. Even though this is still no guarantee towards not falling into a trap, it is certainly advisable that preliminary research is done before diving into crypto indulgence.

Let us quickly go through a checklist which is going be a handy accompaniment for the intrepid crypto-enthusiast.

Research the team

The most important part of investing in a project is knowing who all are at the helm. They are the drivers of the cryptocurrency. The leadership and the admin team are the single most factor differentiating between a successful ICO or a has been. The cryptocurrency space is staffed with notables. Names like Vitalik Buterin of Ethereum can make or break projects. Scammers looking for opportunities end up creating fake biographies and team details to lure unsuspecting investors. The key here is to scourge social media for individual information

The Whitepaper

After the team, if there is anything that can influence the success of the project is the whitepaper. The whitepaper should lay out the background, goals, strategy, concerns, and timeline for implementation for any blockchain-related project. Whitepapers can provide incredible insight. A flashy visual of a project is by no means a sound decision-making example. Pour into it and look for scopes.

Feasibility

A cryptocurrency with strong fundamentals and well-established objectives has the biggest possibility of outlasting the competition. Glitzy launches of ICOs notwithstanding, if the aim has properly been justified, investor interest will soon sputter out.

Bitcoin bonanza

Imagine buying a cryptocurrency valued at less than 1 cent. The year is 2010 and blockchain is the new digital asset for all. Technology is pervasive. No sector is left untouched. However, conventional transaction processes have not changed much. The attitude of the masses suggested that it won’t for some time to come. And then Bitcoin arrives. Valued at less than 1 cent, this cryptocurrency is a precursor an entire industry, that it helps spawn. Today it’s valued at $16000. The rise of Bitcoin (BTC) has been spectacular. Once suspected to be the choice for nerds and drug dealers, it is today the favourite for investors, attracting millions of dollars from hedge funds.

Just how did it turn around?

Before we answer that, let us first find out what is Bitcoin.

Bitcoin is a decentralized network, that allows users to make transacts directly, peer to peer, without a middle man or a third party like a bank to manage the exchange of funds. That would mean unbridled freedom and quick turnaround time.

So where do we use it?

Bitcoin is a digital asset. It is used like other assets in exchange for goods and services. Unlike traditional currencies and assets, bitcoin is easily portable, divisible, and irreversible. Also, it is not physical. You won’t be able to hold it.

How does it help the financial ecosystem?

Since it’s a direct peer to peer transaction, there is no middle payment or taxes levied. As a result of which the cost of financial services drastically comes down. Also, since it is outside the purview of the usual regulatory bureaucracy, the turnaround time is much less.

Bitcoin had the record of touching $20000 in 2018 before it crashed, wiping off 75%  of its value. It has returned hence but is yet to breach the 2018 value.

The entire premise of cryptocurrency stands on the technology of blockchain, which allows every transaction to be extremely secured and with a universal ledger. This allows multiple records to be created. This was one of the main reasons why it could attract millions of dollars. The ease of movement and relative security gave Bitcoin and later Altcoins, a dedicated clientele.

However, with regulations coming into place, cryptocurrencies will no longer enjoy the liberty it enjoyed. Bitcoin would also be a part of this exercise. One of the advantages that Bitcoin provided was interoperability across oceans. That could change in the future.