Right now we stand at a very critical crossroads in the crypto space.
It’s importance cannot be understated.
We are at the point in time where the masses are starting to discover crypto, and it is critical that they receive solid info.
We are witnessing the decentralized disruption of the finance universe. It’s going to spread to a multitude of industries, at an astonishing rate.
This ride is just getting started. So please make sure your arms and legs are inside the vehicle, use the safety harness and strap on your HODL helmet.
Right now, it can be said that 2017 was the year Bitcoin went mainstream.
Not mainstream in the sense of mass adoption, but mainstream in the fact that it has entered the public psyche and pop culture lexicon.
Everyone has heard of Bitcoin, everyone has something to say about Bitcoin, but 9 out of 10 people do not own any at all.
There are only 3,000,000 wallet addresses at the time of writing this, that own more than a $1000 usd in bitcoin.
There is even less people invested in alts, (and some are growing at a faster rate than bitcoin).
Consider this, in the last year the market has risen from under $100 billion dollars, to over $600 billion, today. Just wait until the rest of the global population starts catching on.
Haters, Hate to See a Playa Shinin’
Bitcoin’s meteoric moonshot rise this year has made people into millionaires, captured headlines, and made every naysayer choke on their foot.
It seems everyone in the media & financial worlds has an opinion on bitcoin, and it’s wrong.
Let me put this in perspective. The media, and financial talking heads have declared bitcoin dead, 217 published times. Yet here we stand at $13, 275 usd, as of right now.
There is real fear in the air, you can almost smell it through your computer screen, the powers that be do not like Bitcoin, and they are in a panic.
At the same time that Bitcoin is fending off enemies from outside, it’s also going through an internal conflict which has been getting more and more outrageous as the days go by.
What Are You? New, or Something?
You see, Bitcoin (& all crypto) is new technology, using the most advanced techniques in applied cryptography, and computer science to achieve the solution to a previously unsolvable problem, and make digital currency a reality rather than just a pipe dream.
I am not going to get into all the technical mumbo jumbo, but basically my point is, scaling a cryptocurrency to the level that everyone could use it as the payment system for everything, has not been figured out yet.
This simple fact coupled with the overwhelming growth in popularity and adoption, and external and internal attacks, has led to congestion and high fees in the bitcoin network.
For the past several years this has been an extremely passionate and heated point of contention in the bitcoin community which has led to two opposing schools of thought on how to scale bitcoin.
More Than One Way to Get There
Second layer solution advocates want to build another secure layer for micro transactions on top of the bitcoin blockchain, which is actualized through the segwit upgrade and the forthcoming lightning network.
This would allow for many smaller payments to take place on a secondary layer, and later be batch settled to the original bitcoin blockchain underneath.
As a bonus this segwit upgrade, reduces fees, alleviates network congestion, and eliminates the asicboost exploit that the large chinese mining pools are using to their advantage to make millions of dollars in additional profits.
This may eventually lead to a degree of mining decentralization once the use of the asic boost exploit is curtailed by wide adoption of the segwit upgrade.
The only problem is segwit is only being used by about 10% of bitcoin wallets after it’s release four months ago. This is partly due to the resistance from backers of the hard fork versions of bitcoin, and also due to actual users not making the switch themselves.
Since segwit ends the miner’s advantage and takes away their ability to game the system for extra cash, they naturally oppose segwit, and also the lightning network second layer solution being constructed on top of the bitcoin blockchain.
The lightning network has been explained as a sort of proof of stake system for bitcoin, where businesses & individual users will be able to open 2 way payment channels, which will create a spider web of channels that any user can use to route any payment amount to any other user on the network through the network’s interlinked payment channels, for micro fees.
Any transactions routed through a users channel would allow them a portion of the micro fees for that transaction.
This is the option being backed by the majority of bitcoin core developers, and experts in the field. My personal favorite segwit wallet is green address
It would still be secure, and also decentralized, like bitcoin is today, but it’s tech that’s been developed, in the 8 years after the publishing of Satoshi’s white paper.
Since it wasn’t invented yet, Satoshi never commented on it before he disappeared, giving opponents an argument, that it goes against his original vision for bitcoin.
However, nobody actually knows what his opinion on it would be, since he is not around to ask.
The opposing view is the big block camp, which has forked away from Bitcoin and has created Bcash an altcoin, based on Bitcoin’s code. The controversial segwit 2x fork was also supportive of a larger block size, but never occurred.
The big block group sees the original suggestion made by Satoshi for scaling, as the solution, which is making the blocks bigger, so that they can hold more transactions.
Satoshi advocated this solution because there wasn’t a better one available at the time.
This solution would alleviate some of the congestion and fees on the network, but only in the immediate short term.
In the long term the increase in block sizes would make running a node too expensive for anyone but institutions, corporations and governments, due to the cost increase of mining bigger blocks.
This centralization is a key reason the Bitcoin developers have stayed away from this solution. Eventually block size increases would become unmanageable and impractical apart from being centralized.
This solution is not viable in my opinion. It simply kicks the can down the road and does not address the underlying issues causing the problem.
Even some proponents of big blocks, admit they will still need a second layer solution at some point in the future, because big blocks alone won’t cut it.
The solution I have read them promoting in the r/btc forum is a scaling upgrade called Graphene, which uses a technology based on bitcoin unlimited’s ultra thin blocks, and some sort of block filtering process.
It’s still in development, it’s being worked on by Gavin Andreson the first developer to work on Bitcoin as a volunteer, directly with Satoshi, back in the very beginning.
It may be an alternate way to scale for Bcash.
Graphene would work with both Bitcoin, and Bcash, even with the different block sizes, on the different chains.
A noted difference is that Graphene would allow for the miners to keep using the asicboost exploit, from what I have read, but I am not a dev, so I may be incorrect on this aspect.
There may be other solutions also that I am not aware of. May the best coin win.
All of this is very important for noobs to understand because it is the root of the disagreements and drama, and has led to the various forks of bitcoin and also the rise of the 1370 or so altcoins that have burst on to the scene.
It doesn’t matter which side of the argument you support, because it was this schism that opened the door for all of these other projects.
Altcoins, the Wishful Hope of Amateur Developers, Emotional Traders, and Those Who Think They Missed out on Bitcoin
Since Bitcoin prioritizes the security and decentralization of the network above all things, many in the crypto community felt frustrated by the developers’ resistance to implementing ideas that pose substantial risk to security or decentralization.
Another point of frustration is that they want to force scaling, when the solution is not finished being developed.
Traders and businesses are whining about the high fees in Bitcoin, but at the same time they refuse to switch to segwit wallets which would provide relief from the very issues they complain of.
It’s like showing a thirsty man where the well is, and listening to him complain because he has to draw the water up to drink it.
This is what caused the tidal wave of altcoins, ICOs and hard forks of Bitcoin itself, into alts such a bcash and bgold.
This has been an amazing explosion of altcoins.
Ethereum set the standard by having the first high profile ICO, which was a smashing success, and allowed them to raise a substantial amount of money for the project.
Realizing how much cash they could make, they decided to franchise the ICO idea and flood the market with a ton of new crypto based tokens, of all purposes and descriptions.
Suddenly everyone that had an idea was releasing a token, which quickly hit the exchanges, and trading ensued.
People were making cash hand over fist and this in addition to Bitcoin’s epic bull run has led to the investor frenzy we are seeing take place right in front of our very eyes.
It’s also what made the regulators start to take notice, they want their piece of the action now too.
Alts have had an amazing run with many of them outperforming bitcoin and making obscene profits of thousands of percent.
Trading alts is my new favorite past time. I take my profits, dump them into bitcoin and make even more.
It’s truly beautiful thing.
Like a Bee is Attracted to Honey, Thieves Are Attracted to Money
The problem is, when people start making boatloads of money they attract thieves.
There has been a lot of criticism about ICOs basically being fraud and pyramid schemes, with several out right scams being exposed and prosecuted recently.
ICO proponents claim they are the future of industry and that blockchain will change the world.
Obviously the truth lies somewhere in the middle. The issue with a lot of these altcoins is that they are not actually decentralized.
They are centralized projects that would probably be better implemented with centralized solutions.
They don’t need a blockchain but they are building one anyway just to have a token sale.
They are marketed using industry buzzwords and a bunch of advisors who do nothing but lend a name to give the project credibility.
They have been quite successful, setting fundraising records. Various ICOs sold out literally in minutes and raised hundreds of millions of dollars.
Others were complete flops, and more recently the tokens have been cheaper once they become tradeable on the exchanges,meaning the initial investors sold at a loss.
Don’t get me wrong there are good projects out there, it’s just a lot of work to find them while sifting through a lot of the garbage.
Either way, regulators weren’t feeling the way these ICOs were basically sidestepping long standing fundraising and securities laws, so next year expect the law to step in and turn off the music, send the DJ home and shut down the party.
ICOs will still be a thing in 2018, they will just be very restricted in places like the US with strong financial oversight.
The US has recently set up a task force to deal with these issues specifically, China has banned ICOs, and various other countries have started implementing varying degrees of regulations.
A Fork In The Road
The coming and current crackdown on ICOs has led to the rise of a curious new phenomenon,
the ever contentious bitcoin hard fork, giving free riches to hodler’s, and crushing the dreams of naive fools who buy into the back story, and invest their funds.
Since people realize prosecutions are coming, but they still want to get cash by the millions and side step securities laws, the new approach seems to be forking bitcoin.
It’s way easier than having an ICO, and there is nobody to prosecute since bitcoin is decentralized.
Since Bitcoin is the first, largest and most successful cryptocurrency, you instantly become a top 5 market cap coin due to the crediting of coins, on the newly forked chain to current bitcoin hodlers, since the new chain honors their holdings on the original chain.
Since bcash has been so successful, and bgold didn’t instantly die, and hodlers love selling their fork coins for more bitcoin, I am betting we will see a lot more forks in 2018.
We already have 5 new ones, already on the way. I plan on selling my fork coins for bitcoin, asap.
Success is the Fabric That Money Clings to
The fact that crypto has upset the finance world, has made it the focus of media attention.
Mainstream media now covers Bitcoin and other top tier cryptos like Ethereum & Dash, on the daily.
We have seen the impact of this attention, in the epic price action this year.
On top of the news actually reporting on Bitcoin now, we also have political chicanery starting to target Bitcoin.
The IRS, Jamie Dimon, the Wolf of Wall St., Ben Bernanke, have all come out to publicly spout asinine statements and half truths about Bitcoin and crypto.
This has actually been an epic backfire for the powers that be because everytime they mention Bitcoin they inadvertently spark a buying frenzy.
They have lost so much credibility that just them positioning themselves against Bitcoin is enough to make the public see it as an endorsement of Bitcoin and crypto.
This coupled with very real problems with the traditional economy has led to an overwhelming enthusiasm for all things crypto.
Retail investors are actually realizing the benefits of trading crypto and reaping the rewards, before wall street, which has never happened.
Wall street has not been able to invest in crypto on a large scale because of its status as an unregulated market.
This has allowed smaller retail investors, cypherpunks and crypto nerds to be the ones getting all the profit for the most part, and not the big money fat cats.
The fat cats are getting in as we speak, and they want to squeeze out all of us little guys, that’s why the best thing to do is simply to hodl. I swear, I can’t get that jingle out of my head.
This year alone 135 Hedge Funds were launched that focus primarily on crypto assets.
This is why we are seeing the announcements for Futures markets, and the filing of ETFs and other financial products based on Bitcoin. I imagine other cryptos will follow suit.
This is also why this year they are actually being taken seriously and approved by regulators.
There is serious pressure from wall street on lawmakers to provide a regulatory framework so they can get in on these markets, and the epic profits.
I suggest you stockpile whatever you can now and hodl, because when these boys come in they will have to bid up a very limited supply which will drive prices a lot higher.
Bitcoin and crypto will be legitimized as a financial asset next year.
How to Prepare For the New Year.
This year has been one of the most amazing years of my life, and I know for a fact that I am simply one of millions of other people who have had their lives changed by cryptocurrency in the last 2–3 years.
After Thanksgiving we had an amazing price rally that drove Bitcoin and alts to new all time highs, that were dizzying.
We are going to have the same kind of reaction again but even more intensified after Christmas.
Those very same families that talked crypto over turkey to their uncles, aunts, grandparents and cousins, who then bought in and saw great gains (or maybe not!), are about to reunite and celebrate again, and talk about all the money they made (or lost!) from crypto since turkey day a couple weeks ago.
Now that they are learning about crypto let’s shift the conversation with them.
The Christmas dinner crypto conversation needs to be about using segwit wallets, about the way the media will report on Bitcoin, about why Bitcoin is so important, about decentralization, about wall street coming in, about why they shouldn’t panic during the swings, and most importantly, to hodl, hodl, hodl. Just like Bitcoin Santa Claus.
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Also published on Medium.