Saturday, December 23, 2017

Wild Tale Of An Entity Called Blockchain, Cryptocoin

Dear fellow netizens, please do not get blinded by greed or delusions of becoming rich without earning it yourselves.

When bitcoin and blockchain first got invented, it was originally touted as the world's first decentralized digital currency...as a system that works without a central bank or single administrator.

It was "supposed" to be an alternate form of "money" that could be used to "buy" products and services in real life.
It was "supposed" to be "quick".
It was "supposed" to be "cheap" (in terms of transaction fees incurred).

But come years later, now, thousands of cryptocoins have sprouted.
And these forms of digital "currencies" are instead being passed off as something that you "hodl" (at least in the current mania)?

No, seriously!?

From what measly knowledge that I have "acquired", you need some form of a "wallet" that supports the digital coin(s), an "address" or more than one (that you obtain after creating your wallet), from which you then send and receive (transact) them digital coin(s) with.

Some kind of backend, technical voodoo (proof of work, proof of stake, proof of importance or some hybrid forms of them) then happens and "computers, processors or miners" (that people own) then processes these "transactions" onto the "blockchain" and the digital coin changes hands.

Naturally, for processing these transactions, the "miners" will get rewarded with some "fees" (usually also in the form of the digital coin that they are processing), of course.

Ideally, so long as there are "transactions" to process and "miners" to process these "transactions" (for their "fees"), this sounds like a pretty swell system right?

However, trouble comes when there are too many "transactions" awaiting in queue to be processed onto the blockchain.

In order to be processed, "transactions" have to be written into "blocks" and then passed onto the blockchain to be recognized. But with the current existing technology, there can only be this many "blocks" generated per duration (second/minute), and in turn, that many "transactions" which can "occupy" onto the "blocks" generated.

So what do you do in order to ensure that you get onto a "block" as fast as possible?

You "entice" the "miners" to pick up your "transaction" first.

How?

By paying them more (in terms of "fees"), of course.

And when the digital coin gets increasingly popular, more and more people use them, more and more "transactions" occur and correspondingly, you will need to pay the "miners" more and more of that digital coin in order to get your "transaction" processed first.

Have you noticed that I've not even talked about the price of the digital coin yet?

If we factor that in, then you can more or less guess where the "cost of a transaction" goes right? Yes, up. And all this while, those who can't afford to pay that much will have to wait longer and longer and longer to get their "transactions" confirmed (or worse...never).

Unless this gets solved, there can be no feasible way for us to use them in our daily lives...to pay for our food, coffee and whatnots.

At present, the technology is still too "young" (so as to speak).

Next, let us talk about the "hodlers".

These are people that "buy" into the cryptocoins (as most of them are "limited" in supply) and look at them as some form of an "investment and/or speculative tool" (to further enhance their individual networth). They are neither in it for the technology behind the blockchain, nor for the possibility in enabling the exchange of "assets" across the digital void.

By some way or another, they've amassed a massive amount of these cryptocoins into their "wallets". You can easily identify them (no not their real life identities of course) via their "addresses" in the various blockchains (of the respective cryptocoins).

But the important thing to take note of is that...all they have amassed is a bunch of still "valueless" digital coins. So long as no one "pays" them for those digital coins, they are just regular peeps like you and I. However, once someone does pay them (for whatever fiat value per coin), these "hodlers" will then turn into your "ultra rich", "filthy rich" people.

Now at the same time do remember...our day-to-day lives still revolves around fiat money.

It is presently quite impossible to pay for our healthcare, government income tax and other whatnots using these digital coins. In other words, the cryptocoins are still not recognized by our present countries' governments. Unless and until that changes, they are just a bunch of "valueless" digital coins.

The only way to turn these cryptocoins into fiat...is to "find" someone willing to buy them. This could be either via person-to-person trade or through the various cryptoexchanges currently available.

So now the question becomes...how to "attract" people to buy these cryptocoins?

What better way than to "pump" up the value of one and make sure that the media gets wind of it!

Which is where we are at right now. The present "mania".

Word of advice?

So long as you have not "cashed out" yet, whatever value that you have right now is still "paper value". Be sure that you are not putting in more money than you can afford to lose...for the present technology is still too "young".

So what are you? A user of cryptocoins or a hodler?