This article is from the perspective of investment virtual currency, gambling entertainment is not considered
The recent rise of Bitcoin, along with the rise of other virtual currencies, has given the world another opportunity for wealth freedom. Everyone hates himself for not buying two or three months earlier, or he would be a millionaire by now. However, it seems that now entering the market is not late, this last month also rose 60%, next month not high 20% total should have, the end of the year turn over, although not financial freedom, well-off or can go all out. If you can’t afford bitcoin, there’s ether, litecoin, you name it, and as bitcoin goes up, they’ll go down.
I just want to say that those of you who think above – please wake up. Such thinking is no different from gambling or buying lottery tickets. Although virtual currencies are not quite as good as gambling, they use electricity to mine, and there are only so many of them. But the comparison to shares, which are backed by a company’s performance and backed by its assets, is a bit false. So I think it’s a form of finance somewhere between a lottery and a stock. This article will elaborate personal views on virtual currency.
In fact, I just did the relevant research before this round of bitcoin surge. The reason is that my colleague’s husband mines mines and another colleague’s husband stir-fries coins. So I have a whim for blockchain technology, and even an impulse to coin or mine. I looked at a variety of virtual currencies and judged them by whether or not there were any websites using them as a means of payment. At the same time, it will also use blockchain technology, which has a higher circulation than Bitcoin and is supported by large trading platforms. At that time, it was concluded that bitcoin, Ether, Ethereum, Litecoin, dogecoin (mainly donations) are worthy of attention. But after more than a month of attention, I finally gave up, for unknown reasons… Just recently, my friend mentioned it again and I tried to remember why I didn’t want to invest in virtual currency at that time. A good memory is better than a bad pen, scribble down this log, in case forget.
The technical level
Bitcoin’s blockchain technology is open source and can be downloaded here if you are interested.
Since the source code is open, then the technical people will say, so change the code is not a new currency? Bingo, exactly. And it’s that simplicity that makes derivatives so diverse. Of course, you could use a hash table to create a bunch of so-called coins and let people buy them. That would be a Ponzi scheme or pyramid scheme.
Therefore, there is no mention of how secure bitcoin’s blockchain technology is. The difficulty of issuing new coins is basically zero threshold. So why pay for bitcoin when you can create a new coin for others to buy? (Not ponzi schemes, of course.) So bitcoin uses special technology, but it’s just a publicity stunt, not a reason to invest. There are countless virtual currencies using the same technology.
The value of
Looking at bitcoin approaching the $5000 mark, I can’t help asking why a bitcoin is so valuable. What stands behind it?
The cost price
If you know how virtual currency mining works, the system rewards the first computer to calculate a specific value. This reward is virtual currency. In the case of Bitcoin, a block now rewards 12.5 bitcoins, which means that if your mining machine is the first one to calculate that number, it will get 12.5 bitcoins. A lot of people think it’s an equal distribution based on arithmetic, which is confusing individuals with pool mining. Going back to the example of 12.5 Bitcoins as a reward for long hours of mining, 12.5 Bitcoins is essentially an electricity bill, assuming no equipment wear and tear. On the basis of this assumption, we can estimate the electricity consumption of producing bits under the computing power of the whole network (as shown in the figure above) :
The current computing power of the whole network is: 4,459,277.50 TH/s; Assume that the electricity charge is 0.10 $/KWh; Machine power: estimates 10000 h/s 2600 Watts to the initial value (according to https://www.coinwarz.com/calculators/bitcoin-mining-calculator).
Calculation result (Ref) : $115,941.22 per hour for electricity, 52.60 for Bitcoin and $237,249.32 based on the market price of $4510.08.
The current price of a bitcoin is about twice its cost (electricity), according to the figures above.
However, there is another feature of Bitcoin, which is to control the mining of 2016 blocks every two weeks as far as possible. If 2016 blocks are dug out in less than two weeks, then the Bitcoin network will increase the difficulty of mining. If 2016 blocks need to be dug out in more than two weeks, the Bitcoin network will reduce the difficulty. So as to keep the mining rate as constant as possible. Since the number of bitcoins mined throughout the network is constant over a two-week period, the more machines involved in mining, the more power it consumes. In other words, there is no upper limit to the cost of bitcoin (electricity). The more miners there are, the higher the cost. Conversely, the fewer people involved in mining, the lower the cost.
Based on these characteristics, we can estimate the number of bitcoins produced per hour to be about 75. Compared to the above results, the total network computing power, which theoretically should get all the bitcoins mined, was estimated at 52.60. The current price of bitcoin is about three times its cost (electricity).
The market value
First, virtual currency is hard to use in daily life. Although many major cities have Bitcoin ATMs, the number of atMs is limited, and the number of people who own Bitcoin is also limited. If it’s money, it has to be used for something. The two known markets for Bitcoin are the black market and money laundering.
The black market takes advantage of bitcoin’s anonymity to brazenly conduct illegal transactions without fear of being tracked down. Money laundering is also associated with illegal activities that governments have no way of regulating. Speaking of this, let’s talk more about the anonymity of Bitcoin. Bitcoin is not really anonymous, but it has a special transaction mode, that is, multiple transactions can be recorded in a single transaction. In this way, when a suspicious transaction is found, it requires investigation and a large number of participants increase the difficulty of detection. Therefore, don’t think that the address of bitcoin is a string of unreadable code can not be traced, because of the decentralized nature of everyone can have a set of ledger, can clearly see all the flow of a bitcoin address. Were it not for the all-in-one model, it would be easy to find a bitcoin user.
In addition, virtual currency can be found in some niche markets, such as game item trading, donations, and virtual services. In addition, with the emergence of Bitcoin, business ecology with bitcoin as the core has been derived, such as mining pool, mining machine, trading market and so on. But this ecosystem is limited to the top five virtual currencies, with virtually no market for the rest.
All in all, market value can be ignored except for the more popular virtual currency.
Expected value
People have a value judgment in mind for everything. For example, the value of steamed bread is higher when you are hungry than when you are full. Expected value is formed when most people think something has value. Objects of expected value do not need to be valuable in themselves. For example, gold circulating in the human world for thousands of years has no use value in itself. It is completely out of the instinctive love of human beings. A bubble is formed when people expect it to be worth more than it actually is.
I think the current price of virtual currency reflects its expected value. Everyone wants it to go up, backed up by theory after theory, but eventually it has to come back to market value and use value.
In the market
Look at it $1000, look at it $2000, look at it $4000. We are afraid to buy at any time because we are afraid to go in the opposite direction (see him build a wall, see him turn away guests, see his wall collapse). Bitcoin is now at an all-time high, and other virtual currencies are hitting all-time highs thanks to it. Buffett once said that he “never buys more than the company is worth.” By the same reasoning, the best time to enter a virtual currency is when the cost (electricity) is roughly in line with the price. The other way, of course, is mining, which is also a low-cost way to get to market.
Trading platform
If you choose to buy virtual currency with cash, you need the support of exchange markets, and not all exchange markets support all currencies. And some transactions are to pay fees, and the cost is not low (3%-5%). Compared with the $10-$20 per transaction fees charged on the stockmarket, these platforms are a cash grab. And there are limits on withdrawals, even monthly limits. If you exceed this limit, come back next month. There is, of course, a way to increase the limit by submitting all personal information to an unsupervised and unpublicised website, which would do more harm than good, as the drawbacks of which will be detailed later.
During the study of Bitcoin, it was found that many platforms have stopped the service of us dollar top-up, which means the US government may have to regulate the platform transactions.
Because there are so many platforms, it’s even possible that the price of bitcoin on one platform differs by 3% from the price of bitcoin on another. Although roughly the same, 3% is not a small amount at current prices.
All platforms are unregulated and opaque, making it impossible to know how users’ Bitcoins are held. And a lot of pages made rough, try to trade failure frequently. In short, individuals feel just a little better about these platforms than they do about personal websites.
The issue of submitting personal information mentioned above seems to make transactions more secure, but it is actually from the platform’s point of view. Because half of all trading platforms have been hacked, news reports have focused on the loss of Bitcoin, while the disclosure of personal information has rarely been mentioned. It’s hard to trust yourself with your most important information on such an insecure website.
Transaction volumes vary dramatically between virtual currencies, as well as between platforms. If you happen to enter a cold market, or the market with time difference, there will be want to buy to buy, want to sell to sell out of embarrassment. At present, this incomplete and uneven trading volume, reflects the immaturity of the market, did not form a more unified trading system.
dig
Another way to earn virtual currency is to mine it. As mentioned above, the more people mining, the more difficult mining, so the more popular the currency, the probability of winning the lottery is similar. So you have a pool, where you dig together, and as long as one of you hits it, you split the profits equally according to the proportion of your computing power. In the past, GPU mining machines were allowed to join the mining pool. Now, if not professional mining machines, the mining pool is not allowed to join.
The rate of return can be calculated through this website. Input power, power, electricity, and it will estimate the monthly revenue. Take Bitmain Antminer S7 as an example, 4.73 TH/s of computing power, 1293 watts of power (assuming 80% full load power), the electricity bill is $0.12 Kw/h. Excluding electricity, the final month’s income was $62.24.
This is the case of Bitcoin, while other virtual coins will use different mining machines due to different hashing algorithms, and the difficulty will always be a fixed rate of coins. Entry-level mining machine is also less than $1000, if your computer with GPU, you can also independently mining, use the spare time of the machine.
defects
That says a lot about the difficulty of getting into the market (popular virtual currencies like Bitcoin), but if that doesn’t already scare you off, take a look at these blockchain flaws.
51% attack
Let me give you an example of what a 51% attack is. One feature of the Bitcoin network is that it trusts whoever has the longest ledger. Because everybody keeps an account on oneself account book at the same time, also tell others to record same account book, so this characteristic has no problem.
Let’s say the entire network is A, B, and C. A wants to take all of B and C’s bitcoins by changing their own books, so he writes: “B and C give ALL of A’s Bitcoins to A,” and tells B and C to do the same in their own books. Of course, B and C are not stupid. Let’s do some calculations and find that A’s books are wrong, so A’s books are invalid.
But then A and B say how about we put C’s money on our account, B thinks it’s good, so he agrees to cook the books. So A trades with C, pays C A number of bitcoins, which of course is broadcast to B. So now A, B and C all have “A pays C XXX” on their books. But A and B collude and record another account in their own books, “A pays B XXX”, so A pays B without paying C anything. When C angrily found that he had not received the money from A, he compared his books with A and B and found that his books were fundamentally different. According to the characteristics of the Bitcoin network, it is even necessary to discard the account books in hand and take the account books of A and B as the criterion.
This is a simplified version of a 51% attack, but in reality it’s much more complicated. If that happened, it would greatly reduce the credibility of the bitcoin network, thus destroying the entire Bitcoin financial system.
At this stage, it seems unlikely that a 51% attack will take place, because of the huge computing power of the network, reaching 51% is almost astronomical. Although it is difficult for individuals or organizations to accomplish, it does not mean that countries cannot. The Galaxy 2 supercomputer in Korea alone, though not capable of 51 percent of computing power, can cause a small scale of service outages (DDoS) if it is used to attack the Bitcoin network. What’s more, if the national firewall monitors the bitcoin protocol, isolates the domestic bitcoin network, and then attacks 51% through a supercomputer. When the domestic network is compromised, the firewall is opened, and the broken blockchain spreads to the whole world like a virus.
fraud
The 51% attack idea mentioned earlier can be used in a small scope, namely double payment, which is easy to form fraud. For example, in A transaction between A and B, “A pays B XXX”, but at the same time A broadcasts “A pays B-xxx” to all networks except B. Due to the network delay, B will see the payment confirmation of A first. If the transaction is confirmed at this moment, it will find the information that A has not paid soon.
That’s why bitcoin transactions typically wait for six confirmations, to prevent fraud like this. However, for novices, often not to the main point, once cheated will regret.
Government’s disregard
For now, the government seems to be turning a blind eye to bitcoin, but it’s not ruled out that it already has a lot of bitcoins and is monitoring the Internet (like the FBI). Nowadays, virtual currency can flourish entirely because of the government’s disregard, although control, is only in virtual currency cash transactions, money laundering and other aspects. But once the government decides to take down the Bitcoin network, it can be done easily (as explained in the 51% attack above).
On the other hand, without the supervision of the government and the support of the corresponding laws, there is no place to appeal in case of disputes. For example, the fraud said above, the victim can only eat the dumb coptis.
Rely on third-party platform reputation
All transactions of virtual currency need to be deposited into the account of a third party, which has high credit requirements for third-party platforms. For example, in the early years (about 2012-1014), Mt. Gox (headquartered in Japan), a bitcoin exchange platform opened by an American, was hacked and a large number of users lost bitcoin. In the end, they were sued by Japanese inspectors because they could not recover them. Although the CEO of the company was arrested, but in the end the result seems to be nothing, there is no follow-up progress. The investigation showed that the company had tampered with user accounts, so maybe the hack was just an excuse that was too big to fill.
However, the establishment of third-party platforms does not need any review, any individual as long as the application of a domain name, purchase a server, can build a trading platform. Yet nearly half of the well-known platforms on the web have been hacked, whether it is true or not. At least I wouldn’t put real money on a website that had been hacked.
Investment advice
- Do virtual currency periphery, when gold rush, rich is not digging gold, but selling shovels and jeans.
- Start with mining. Invest in a powerful mining machine now, for the price of one bitcoin, and gain the ability to produce bitcoin over the long term.
- Stop while you’re at it. For example, if the price doubles, you can sell half of your hands, so that you can recoup your costs, and then you can make a profit on everything that goes up or down.
conclusion
From mining bitcoin in 2010, to regretting not saving bitcoin in 2014, to picking up virtual currency three months ago, and then to completely open up today. In fact, it is found that every attention is a small climax of the market, or the early climax, which shows that virtual currency can better reflect the orientation of Internet public opinion, and also advance its virtual characteristics. In short, money is their own, how to play how to play, here only to provide a personal point of humble opinion.
In bitcoin once again popular today, write down this article, suppress the impetuous mood, do their own thing.