Cryptography – Is My Information Safe?

Being a web designer, I am always faced with the dilemma of how do I keep my clients data safe from malicious people. I try to educate them about not opening up suspicious links to emails and websites but of course this got me to thinking about just how safe our information is in the crypto world. Turns out: its through cryptography.

It works something like this: Each user has special codes embedded in the transaction which stops their information from being assessed by others. This is called cryptography and its nearly impossible to to hack. It’s also where the crypto part of the definition comes from. Crypto means hidden, so the information is hidden.

I’m not going to go into a long explanation of this ( I will put a video below that explains this in detail) but its pretty much like the process of sending an encrypted message to a business associate or your friend. If they have the same email program you have, you can just encrypt the email before you send it which basically scrambles the words and send it out so that it’s safe from malicious people until it gets to you safe and unaltered in any way.  That’s pretty cool.

When you making money transactions on the internet the last thing you want to think about is if the wrong person is going to intercept the transaction. I know that cryptocurrency is still going through it’s growing stages but I feel much more confident knowing that developers are thinking hard about security and encryption.

What is Blockchain??

Although I wanted to jump right into investing and watching my money just roll in, the logical part of my brain knew that I needed to understand fully what Blockchain was and how it played into the big picture. I started watching a video and I fould a site that explains what Blockchain is in plain English.

What It Is

Blockchain is a public record of transactions. It’s also distributed, so instead of one person controlling everything, there are thousands of computers around the world connected to a network, and these thousands of computers together come to an agreement on which transactions are valid.

Whenever someone makes a transaction, it is broadcasted to the network, and the computers run complex algorithms to determine if the transaction is valid. If it is, they add it to the record of transactions, linking it to the previous transaction. This chain of linked transactions is known as the blockchain. Since the transactions all reference the one before them, you can figure out which ones came first, thus ordering them. Full article here.
Ok, since I have some IT experience and understand networks, this made sense to me. I guess the next question was…How is the Blockchain secured?
I will cover this in my next post on mining and tokens.

Tokens Vs Altcoins

Before I start investing, I wanted to make sure that I understand the difference between Tokens and Altcoins.

Altcoins are basically an alternative coin from Bitcoin. They are a fork of Bitcoin, which is an open source original protocol for generating Bitcoin. With Altcoins, there are changes in the underlying code that can take advantage of a different set of features. Some altcoins are not open-sourced like Bitcoin. They have their own Blockchain and protocol that supports their own currency. Ex: Ethereum. The main thing to remember is that each each altcoin possess its own independent Blockchain where each transaction uses its own coins.

Tokens operate on top of the Blockchain and represent a particular asset or utility. They can represent any asset that is worth value. Tokens are usually made using smart contracts. As an investor you receive tokens when you invest money into a company offering an ICO (Initial Coin Offering). Its pretty similar to a stock with some important differences.

You can read more here. This article also includes useful guides on various exchanges and wallets.

I also learned a great analogy today: Ethereum represents an app store in your smartphone. More on that here.

I also came across a crypto podcast that you can listen to on iTunes: Crypto101. I’ll give my thoughts on the podcast in another post.

 What are Crypto Wallets? Do I need One?

I was at a crypto conference a few months ago and I won a crypto wallet of my very own. Wow! I thought, this will be a great way to get my feet wet and make my first trade. I quickly realized that I had NO idea what to do with this thing.

Ok, before I went any further I had to go backwards…again. I did some research on the wallet and realized that it’s a cold-storage wallet. What is that you might ask? Well it means that I can store my bitcoin or altcoins offline to keep them safe from the internet. The wallet stores the private keys of the bitcoin owner which they need if they are going to make any transactions. I have read that you should never keep large amounts of coins on your account in any any exchange in case the site gets hacked. Cold storage resolves this issue by signing the transaction with the private key in an offline environment. Because the private key does not come into contact with a server during the transaction signing process and is done offline, the risk of hacking goes down substantially.

There are other types of wallets that you can use, each with different risks:

Desktop

Online

Mobile

Hardware

Paper

More on that here.

I also read that there are some risks with cold storage wallets as well, but it does seem to be the best option for the person looking to hold on to their coins for a while and feel a sense of protection while through the learning process. My wallet says that it’s fire and flood resistance so that makes me feel better as well. I think I’m now ready to take the plunge to make my first trade.

CryptoKitties? Let the games begin..

I have to admit it…I’m not a gamer.

I cant imagine sitting down for hours on end playing a game either by myself or with other people. However, I do love animals and the thought of creating and breeding kitties did intrigue me.

But of course the logical side of my brain also wanted to know how buying and breeding kitties would help me learn about cryptocurrency. I decided to visit the site out of sheer curiosity and was surprised that I learned a few things.

First of all, you have to buy the kitties with Ethereum. inside the marketplace on the site. There is a breeding fee that is about 0.008 Ether (approx. $4.69). Ok, that’s not too bad, but you can only play the game on a PC/MAC desktop. You also have to use a Metamask digital wallet. I guess if you are a gamer with a desktop set-up this scenario would be normal for you. I have read reviews that suggest that people are having a great time collecting kitties and “growing their crypto family”.  It seems that you can also make a good deal of money by breeding, mating and selling your kitties. The overall goal is to get a kitty that everyone wants.

If your into gaming, Cryptokitties just might be your entry into the crypto world. I found a site that talks about the possible future of crypto gaming. Maybe I will stick my toe in the water one day just to make myself a virtual kitty.

Bitcoin Mining – The New Gold Rush?

While it is easy to think that you can instantly get rich mining Bitcoin, the reality is much more complex.

Once you factor in the cost of the equipment, maintenance costs and the electricity, you are definitely eating up a large chunk of your profits.

That brought me to my next thought..how do miners make money? I know that they do get Bitcoins and fees as payment but does that still make it worth it in the long run? Upon further research I found out that there is something called “Cloud Mining”.

Cloud Mining takes the approach where a group of individual miners contribute to the generation of a block and then split the reward. The method of this seems easy enough, but again, it’s not without risks. It’s not certain how much money you will ACTUALLY make. It depends on a lot of factors happening at different times. You would definitely have to do your research to make sure that mining is worth your time and energy. Bitcoin.com has a lot of information on mining and offers a cloud mining service if your interested.  If you have some time and want to make some money, mining just might be for you.

The Minefield of Bitcoin

As much as I want to jump right into Bitcoin trading, I know that I must do my due diligence so that I don’t get scammed as a newbie.

Since there is so much news about crytocurrency scams these days, I wanted to know what to look out for, and after a little digging I came across some very good tips.

I won a new crypto wallet last year at a conference and I already knew that the issuing company was reputable but I found out later on that you really do have to do your research to make sure your dealing with good companies right from the start. Check out reviews and talk to others that have dealt with that company directly. As far as exchanges, make sure that you are checking prices and also make sure the site starts with HTTPS which is a sign that the traffic is encrypted. If it sounds too good to be true (and promises the world) – it probably is.

Of course we all know about fake websites that bait and switch visitors but what I didn’t know was that this tactic is being used in the crypto space via social media (See video below). ICO’s – Don’t deposit your coins ANYWHERE until you fully vet the ICO that your thinking of investing with. READ the white paper carefully.

It’s interesting that I was looking into mining just a few weeks ago. Turns out this is also an area where you really have do your homework and be realistic about returns on investment since they will probably go down a little over time and you have to be wary of sites that promise you otherwise.

I’ve ultimately decided that I’m going to read a few crypto articles everyday along with my favorite blogs so that I can start to spot things that would stand out as a red flag right away. I also read Investopedia for all things financial. They have some great articles on crypto as well.

Remember – Knowledge is power!

Altcoin Fantasy…Fun or Fantasy?

Remember the show Fantasy Island? (I’m definitely dating myself here..lol)…but actually that was the first thing I thought of when I heard the name Altcoin Fantasy. Turns out, I wasn’t too far off the mark on this one.

Altcoin Fantasy is a cryptocurrency simulation platform where users learn to trade cryptocurrencies RISK FREE. It’s like your money making fantasies come true!

You get to play with virtual USD cash which you can use to make trades while learning about trading. The best part is that you actually win bitcoin and prizes if you win the contest.

I’m not a big gamer but I’m totally on board with playing the type of game where you don’t lose your own money and your learn something in the process. I cant find any negatives with this one at all. Here is a great article featuring the founders of Altcoin Fantasy where they talk about the motivation behind the company.

I’m going to definitely play this game to learn more about trading before taking the plunge for real. I will update my experience and share my thoughts in future posts.

Happy virtual trading!!

Atomic Swaps

Last weekend I went to a crypto meetup where the topic was atomic swaps. Of course I had no idea what this was so I was totally intrigued.

Atomic swaps are basically a way for 2 parties to swap different cryptocurrencies on their own without the need for an exchange which we all know can come with high fees and wait times. The “swap” on the other hand can be done without the need of an exchange or miners being involved. This kind of swap also has no to low transaction fees and can be done on or off the blockchain. The basic idea is sort of like a 3-way handshake between both parties that want to set up a transaction between themselves. Once they decide what they want to trade, they set up a contract that cannot be broken and only completes when both parties get what they agreed to.

Right now the only catch of these transactions are that:

  • Both currencies support HTLC
  • Both have the same hashing algorithm

This transaction is possible through a process called Hashed Timelock Contracts(HTLCs). Both parties agree to predetermined contract that is set up for them to verify the transaction and trade their coins through a secret channel that only they have access to. A more detailed explanation can be found at Blockgeeks website.

I thought this was pretty cool because this a great way to get something that you want without going through a lot of hassle and paying a lot of money in fees. The technology is still fairly new but there have been successful swaps and I’m definitely looking forward to more news on swaps in the coming year.

The Big Bitcoin Halving is Coming

Ok so we know the bitcoin halving is coming this year but exactly what does that mean to me?

First, lets figure out what bitcoin halving IS.

What is Bitcoin halving?

An event that halves the rate at which new Bitcoins are created. It occurs once every four years.
As many know, Bitcoin’s (BTC) supply is finite. Once 21 million coins are generated, the network will stop producing more. That is one of the main reasons Bitcoin is often referred to as “digital gold” — just like with the yellow metal, there is only a limited amount in the world, and someday, all of it will have been extracted.
Right now, there are around 18 million BTC in circulation, which is roughly 85% of the total cap — but it doesn’t mean that the cryptocurrency is about to reach its limit any time soon. The reason is the protocol, which has been coded into the blockchain from the very start: Every 210,000 blocks, it performs the so-called Bitcoin “halving” or “halvening,” and producing new coins becomes more difficult — just like in gold mining where finding new deposits becomes more challenging over time.
More specifically, the protocol cuts the block reward in half. So, every time a Bitcoin halving occurs, miners begin receiving 50% fewer BTC for verifying transactions.

Ok, so I guess this creates a supply and demand situation which is pretty interesting but what does that really mean as far as the price of Bitcoin in the future?

Will the Bitcoin price change?

Historically, the price has gone up following a halving, but it ultimately depends on the supply/demand ratio.
Essentially, Bitcoin halving cuts down the supply of BTC, making the asset more scarce. If the demand is there, the price is likely to increase. There are also some historical precedents. On Nov. 28, 2012, the day of Bitcoin’s first halving, the cpryptocurrency’s price rose from $11 to $12, and continued to climb up throughout the next year, reaching $1038 on Nov. 28, 2013.
Roughly four years later, a month before the second halving, Bitcoin’s price started to follow a similar, bullish pattern. It surged from $576 on June 9 to $650 on July 9, 2016 — the day the block’s reward was reduced by half for the second time in the asset’s history. Again, BTC continued to accelerate through the next year, albeit with occasional turbulence, and traded at $2526 on 9 July 2017.
Will it be the same next time? Skeptics believe that the halving has already been priced in (remember this year’s epic, but short-lived systematic price increase?). Although, there is no scientific way to verify this.
Moreover, the industry has drastically changed over the last four years, as cryptocurrencies — and Bitcoin in particular — became an essential part of mainstream news coverage. Still, some people might be tempted to take the chance, especially given the previous patterns exhibited around Bitcoin halvings.
Consequently, if history repeats itself and the Bitcoin price starts going up in April 2020, even more traders might start buying the asset out of a fear of missing out, thus stimulating the demand, and, ultimately, the price.

Hmm..well, I personally believe in the success of Bitcoin and crypto currency in general so I’m excited to see what the future has in store. I take the bullish approach and see a strong and upward trend. Curious on your thoughts as always!