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It’s time we took crypto currency serious. **My FAQ inside


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Crypto/Blockchain FAQ
Disclaimer: The information below is a collection of data, definitions, insights and opinions about the crypto and blockchain industry and is provided for educational purposes only. This should not be considered investment advice.
Recent news
- Square buys $50 million in bitcoin, says cryptocurrency ‘aligns with company’s purpose’ (CNBC)
- MicroStrategy CEO Says Bitcoin Is Safer After Moving Firm’s Cash to Crypto (Bloomberg)
- Public companies hold almost $7B in Bitcoin in heads-up to Grayscale (CoinTelegraph)
- Central banks are considering their own digital currencies (CNBC)
- China hands out $1.5 million of its digital currency in one of the country’s biggest public test (CNBC)
Why should I care about so-called 'crypto'?
1) It’s a significant upgrade to the internet delivering powerful new features and benefits
2) These features and benefits have the ability to disrupt numerous industries, many more than
the original internet disrupted
3) As a bottoms-up technology, starting from grass root efforts, there is much more opportunity
for individuals to contribute to its development and to participate in its rewards
4) It’s truly global and completely borderless endeavor so it has huge scale
5) It has the potential to improve the lives of people all over the world, especially those living in
impoverished and/or oppressive regimes
6) It has the power to counterbalance the power of the internet that has been tipped in the favor
of a relative few large companies
7) It provides a framework for an incentive structure that more evenly benefits all participants
(consumers, developers, contributors)
? It is a hedge against other forms of value that rely on trust in people (whose incentives may not
be in alignment with the general population or who are trading off long-term benefits for short-
term gains)
9) It is a hedge against forms of centralized governance that rely on trust in people who may not
be trustworthy or are otherwise incapable or compromised
What is crypto?
Crypto is a technological construct that uses strong cryptography to control the generation and transfer of digital information units between parties.
What is Bitcoin?
Bitcoin is a peer-to-peer electronic cash system invented by Satoshi Nakamoto which solved the double- spend problem through its use of blockchain, distributed ledger technology and consensus mechanisms.
Why is Bitcoin so revolutionary?
For the first time it provided a way for two parties to exchange a digital item, or the digital representation of a non-digital item, without the need for a trusted intermediary or central authority. It is the invention of digital scarcity.
What is the power of digital scarcity?
     
The power of digital scarcity is that anything finite in the physical world can now be digitized into tokens, protected and allowed to be used and managed more flexibly and efficiently.
- transfer value
- identity management
- asset ownership
- tracking
What are the properties of bitcoin?
1) Finite
2) Fungible
3) Decentralized
4) Permissionless
5) Borderless
6) Immutable
7) Verifiable
? Privacy
9) Censorship resistant
10) Durable
11) Divisible
12) Unconfiscatable (bearer instrument)
What is money?
1) Medium of exchange
2) Unit of account
3) Store of value
Why does money have value?
- Value is simply the belief that something is worth a given price
What forms of value-transfer or money have been used in the past?
- Barter
- Shells
- Gold/Silver
- Coins/paper representing gold/silver
- Paper representing trust in a monetary system (private, federal, public)
What is the value of the US Dollar?
1) It used to be linked to the value of gold, i.e. the gold standard
2) In 1971 the US abandon the gold standard so that it could expand the money supply as it saw fit
by issuing debt
3) Now the value of the US Dollar is based on our belief that our government has the ability to
manage its debt
4) So, it’s really about trust in the US government to manage the country's money and money
supply
5) As the world’s reserve currency, the world has placed its trust in the US government, their
ability to manage their debts and their ability to manage interest rates and the money supply to grow the economy and manage inflation

Why do people believe bitcoin is a better form of money?
1) It’s finite – it has a fixed supply that cannot be changed
2) It’s not subject to centralized control and manipulation
3) It moves more freely between two parties without the need for intermediaries - frictionless
4) It’s inexpensive to move value to any part of the world
5) It can’t be counterfeited
6) It’s very easy to obtain and hold
7) Transactions between parties are settled instantly
? Provides a framework that allows people who don't have access to a bank to have financial
inclusion
How does bitcoin differ from today's electronic payment systems and traditional banks (credit/debit cards, ACH, wires, etc.)?
- All of today's forms of electronic payments rely on third parties to vouch for payment worthiness of those involved in the transaction which costs users time, money and convenience. Bitcoin is a direct payment between two people that is settled in real-time.
- Banks use your deposits to place loans which earns them a yield which you don't receive and are only required to hold a portion of your actual money in their reserves, i.e. fractional reserves. The bitcoin you custody yourself is yours and nobody can do anything with it that you don't allow them to do. Likewise, if you choose to use it for lending then you can earn a yield on it.
- Money held in banks can be easily confiscated. Bitcoin you custody yourself cannot be confiscated.
- The amount of time to move money is dramatically less than through the traditional banking system which can take days when moving larger amounts of money.
- Bitcoin is not subject to fractional banking and other counter-party risks.
Why do people believe bitcoin is a better store of value, i.e. digital gold?
1) It’s perfectly scarce (more cannot be dug up from the ground)
2) It’s easy to handle (as opposed to gold for instance)
3) It’s a better place to hold value than in currencies led by weak, incompetent or corrupt regimes
4) It’s very difficult for many people around the world to obtain and hold US dollars directly
How does bitcoin work?
Bitcoin is a network of computers which run a program that manages the production and accounting of bitcoin generation and usage. The network is pre-programmed to manage a capped supply of bitcoins and to record all bitcoin transactions between two parties. Transactions are captured into sets called blocks, added to the blockchain, and redundantly stored across the network to prevent the double- spending of bitcoins. Miners run computers to generate new blocks and are rewarded with payment in bitcoin (combination of bitcoins production schedule and transaction fees). Bitcoins are stored in digital "wallets" which are cryptographic key-pairs that include a public address used to receive funds and a private key used to send funds. As a fully decentralized network there is no single person, entity, group or government that can turn off the network.
What are the limitations of bitcoin?
1) Scalability
2) Coordination of effort
3) Energy usage
4) Wallets can be lost

Debunking a Couple Myths
- Bitcoin has never been hacked. Centralized parties that people allow to hold their bitcoin have been hacked.
- The currency most used for crime is not bitcoin. It’s the US dollar.
- People were equally skeptical and critical of the internet when it started growing in scale but it
proved to become a foundational element of our society.
Show recent news stories of banks caught up in criminal activity
- Banks Suspected Illegal Activity, but Processed Big Transactions Anyway (New York Times)
- Secret documents show how North Korea launders money through U.S. banks (CNBC)
- Goldman Sachs agrees to a $3.9 billion 1MDB settlement with Malaysia (CNN)
- The fastest way to send criminal cash: money transmitters How companies like Western Union
and MoneyGram play a hidden role in laundering cash from around the globe. (International Consortium of Investigative Journalists)
What is a smart contract?
A smart contract is a set of rules that reside on a blockchain which execute automatically when specified conditions are met.
What is the power of smart contracts?
The power of smart contracts is that they can automate a wide range of activities that currently rely on humans for interpretation and execution such as legal contracts, financial agreements, etc in a tamper resistant and extremely cost-effective manner.
What is Ethereum?
Ethereum was the first open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract (scripting) functionality. It was originally proposed and built by Vitalik Buterin and several other contributors.
What is the power of Ethereum and other smart contract platforms?
The power of smart contract platforms is that they significantly increase the capability of blockchains. Smart contracts can be used to create distributed applications, or DApps, which possess blockchain properties while offering increased functionality.
- Digital signature algorithms
- Securitized tokens
- Digital rights management
- Crowdfunding
- Prediction markets
- Remittance
- Property ownership
- Online gambling
- Social media
- Identity management
- Financial exchanges
- Collectibles
- Entrance tickets
- Decentralized Autonomous Organizations (DAOs)
     
- More...
What are the limits of Ethereum?
1) Scalability
2) Interoperability (check)
3) Governance
4) (check more in comparison to Cardano)
Does Ethereum have competition?
- Yes, there are several competitors who have built off of the initial ideas innovated by ethereum to address its shortcomings including Cardano, EOS, Tezos, NEO, Zilliqa, Solana and more.
What other token types and crypto networks exist other than currency assets like bitcoin or smart contract platforms like ethereum?
- Stablecoins
- Security tokens
- DeFi tokens
- Exchange assets
- Privacy assets
- Yield farming assets
- Governance tokens
- More use cases and token types are invented every day
What are public (open) vs private (permissioned) blockchains?
A public blockchain is one in which anybody can access and use. A private blockchain is one where only those who have been granted access, or permissioned, are able to access and use. The difference is similar conceptually to the public internet and private intranets.
Spectrum of Trust
The impetus of blockchain and distributed ledgers lies in providing an alternative method of trust. Historically, trust is something granted by people to other people or groups of people, i.e. businesses, governments, institutions. Cryptography paired with distributed peer-to-peer computing has provided a method of trust that is based on math rather than people. On one side of the spectrum there are people and on the other side there is math. There are also varying combinations of people and math in the middle which offer hybrid approaches for trust.
Why have people become less trustful of centralized management of anything?
We’ve increasingly been hearing the phrase ‘trust but verify’ which indicates a lack of trust in people
1) Misuse of power
2) Corruption
3) Gridlock
4) Control of their assets
5) Exploitation
6) High cost of intermediaries
7) Conflicts of interest
? Flow of value to a relative few
What can people do with digital tokens and distributed ledgers on blockchains?

- Make payments between two parties that settle instantly
- Send remittance to family members in other countries at minimal expense
- Allow people to have a financial identity without needing a bank account
- Offer micro loans and micro payments
- Tokenize assets (stocks, commodities, etc.) so as to trade/manage them more efficiently
- Offer fractional ownership, and markets, for previously illiquid assets including real estate, small
companies, artwork, collectables, etc.
- Establish new automated metric-based revenue/profit sharing plans (% revenue, % profit,
milestone events, special dividends, etc.)
- Create decentralized financial services that don't rely on a middle-man or broker to execute on
your behalf (asset trading, private/public lending, insurance, etc.)
- Efficiently distribute money directly to constituents rather than having to work through the
banking system and/or company payroll departments
- Track property ownership rights regardless of who is leading the local government
- Easily collateralize assets to issue personal loans to yourself which can be paid back at any time
and on any schedule subject to a given debt ratio
- Control private information by only granting access of specific information to certain people
who need it in return for a service they are providing (medical records, transcripts, financial
information, etc.)
- Provide the ability for information to be verified without even needing to see the specific
information (are you old enough to buy this?, do you have a valid driver's license, etc.)
- Simple, easy, verifiable voting (government elections, proposals, organizations, awards, etc.)
- Create decentralized versions of popular, but centralized, applications (social media, messaging,
search, ride sharing, maps, commerce, etc.)
- Improve the management of intellectual property rights and copyright infringement
- Improve the reliability and source of published information
- Buy and sell digital assets/services in and across games and virtual worlds (fornite, oculus, etc.)
- Eliminate counterfeiting and improve the management of event/attraction ticketing (concerts,
performances, theme parks, reservations, etc.)
- Establish new markets for credit-based systems such as energy credits which can be traded
amongst local communities on microgrids
- Unlock and reward participants for unused resources such as file storage, content delivery,
computing power, etc.
Why should one consider investing in crypto/blockchain technology?
- We are in the early stages of new technology which has powerful network effects
- The crypto/blockchain industry has attracted many thousands of the world's best developers
who are inspired by the potential of the technology to transform the world. Projects that are in
development now will become the Apple's, Amazon's, Google's of tomorrow.
- We are moving closer to the inflection point of the S curve which classically illustrates how new
technologies accellerate from innovators -> early adopters -> early majority -> late majority ->
laggards. It's similar to the early 90s with respect to the internet.
- Unlike most technology whose early access is controlled by large companies and private
institutions, crypto is more readily available to the retail investor (though the big guys are
beginning to come in strong)
- Though individually volatile, bitcoin has shown to actually reduce the volatility and improve the
performance of portfolios due to it being an uncorrelated asset (no direct or indirect relationship to the stock, bond or commodity markets)

- Unlike the internet where there was no way to invest directly into the technical infrastructure (HTML, TCP/IP, FTP, etc.) one can invest directly in crypto-based networks to accrue benefits
- While the internet transformed the information/media industry along with some portion of retail commerce, crypto/blockchain will have a greater impact by transforming the financial, commercial and industrial industries
- An allocation to bitcoin is a hedge against currency debasement which is a major problem in countries around the world and has only gotten worse due to covid. Because we live in a country that manages the world's reserve currency we don't think about this type of issue as much but currency risk everywhere else is a real issue with people losing their life savings when their governments struggle or are corrupt.
- In addition to price appreciation there are a growing number of ways to earn yield on one's ownership of digital assets through staking, lending, providing liquidity, etc.
- Investing in the crypto/blockchain industry contributes to bringing about new systems which will broaden financial inclusion for people in developing nations around the world which will help to pull them out of poverty
Philosophical questions regarding the exploration of crypto/blockchain technology
- Should people have an alternative to money that isn’t managed by central banks?
- Should people who don’t have access to traditional banking services have an alternative for
financial inclusion, activities and benefits?
- Should people who can’t demonstrate that they own property have an alternative for tracking
ownership? And the right to borrow funds against it?
- Should people have an alternative to using internet applications that require them to give up so
many of their rights to their personal data?
- Should there be an alternative that would allow owners of illiquid assets the ability to more
easily sell their asset or portions of it? Art, small company equity, land, collectibles, etc.
- Should there be a way for small investors to participate in startups that today get completely
dominated by large venture capitalist and private equity funds?
How should one approach investing in crypto/blockchain technology?
- Familiarize themself with the industry. This has become a large, diverse and fast-moving industry so just try to understand the high-level concepts at first and don't get bogged down into too much detail.
- Ask questions. Ask a lot of questions.
- Open an account with one or two of the most reputable exchanges (Coinbase, Kraken, etc.),
verify your identity and establish a connection between your exchange account and your bank.
- Seek out sites, newsletters and people who are knowledgeable about the industry and establish
some sort of feed for industry news and developments.
- Make a small investment to get some skin in the game. With investing, nothing seems to focus
the mind for learning better than taking a little action.
How much should one invest in crypto/blockchain technology?
- The historical recommendation was to treat crypto almost like a venture capital investment by allocating 1% of one's investable assets, i.e. something that could provide you with asymmetric upside but wouldn't hurt you if it went to zero.
- More recent recommendations by the likes of Fidelity suggest now that one should consider a 3- 5% allocation.

- The best recommendation though is for people to do their own research (DYOR) and allocate the % they are most comfortable with.
- There are many people in the industry that have portfolios with greater than 50% exposure to bitcoin and crypto-related projects.
What are the risks of investing in crypto/blockchain projects?
- Fear of missing out (FOMO)
- Central banks, regulators and monetary institutions around the world such as the SEC, CFTC,
IMF, PBOC, etc. are still working to get their arms around this new asset class so it's not always clear if a digital token is a security, commodity, currency, etc. whereby it will be subject to local laws and compliance. More and more though we are seeing these bodies recognizing the benefits of the technology and embracing it rather than trying to stop it. Indeed, there is a now a race amongst nations to issue to first national digital currency.
- As an emerging industry there are numerous projects to invest in some of which will flourish while others will fail. In this vein, one should research projects thoroughly and/or consult with those who have and consider a diversified set of investments similar to providing venture capital.
How does one store and protect digital assets?
- Self-custody through the use of digital wallets (hardware, paper wallets, digital wallets)
- Offline and redundant storage of private keys, recovery phrases and passwords
- Trusted third-party custody solutions
- Usage of two-factor authentication (2FA), biometrics and any other form of security that is
feasible and practical
- As a bearer asset anybody in possession of your private keys has access to your assets
- Multi-sig mechanisms are also useful which are those that require multiple keys to gain access
to your assets
How are digital assets taxed?
- Digital assets are treated like any other asset from a tax perspective in that one is personally liable for reporting their trading activity and paying taxes on any net capital gains.
What are some of the resources one can use to learn about and stay up to date about crypto/blockchain?

 


 

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when did you buy into BTC? 
my first bitcoin purchase was somewhere around Summer 2013.  I bought $750 worth when they were $5.50.  I held them for about 2 hours.  My first bitcoin purchase as an investment was in Sept 2007 at around $3500.  I bought and sold several times since.  My last buys were at 10k.

will you ever link wallet to your bank account or keep letting it ride? I link coinbase with my bank account.  I’m currently set to auto buy 5 diff coins each week.

when it your price to get out? I may never get out completely.  I expect to buy and sell forever

how high do you think it will go in 2021? The million dollar question.  I’ll throw out a guess that it crosses    40k in 2021.  I also think you will see drops into the low 20s

what does BTC look like in 2025? The billion dollar question.  I’ll guess 200k.

is there a better long term investment out there? Depends what you mean by better.  Are there safer outs?  Yes.  Will all my eggs be in the crypto basket?  Certainly not.  I have a very diverse investment portfolio.  Do you have a better chance to get rich with cryptos vs stocks?  I would say yes.      Higher risk with higher rewards.

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2 minutes ago, WVU said:

when did you buy into BTC? 
my first bitcoin purchase was in April 2007.  I bought $750 worth when they were $5.50.  I held them for about 2 hours.  My first bitcoin purchase as an investment was in Sept 2007 at around $3500.  I bought and sold several times since.  My last buys were at 10k.

will you ever link wallet to your bank account or keep letting it ride? I link coinbase with my bank account.  I’m currently set to auto buy 5 diff coins each week.

when it your price to get out? I may never get out completely.  I expect to buy and sell forever

how high do you think it will go in 2021? The million dollar question.  I’ll throw out a guess that it crosses    40k in 2021.  I also think you will see drops into the low 20s

what does BTC look like in 2025? The billion dollar question.  I’ll guess 200k.

is there a better long term investment out there? Depends what you mean by better.  Are there safer outs?  Yes.  Will all my eggs be in the crypto basket?  Certainly not.  I have a very diverse investment portfolio.  Do you have a better chance to get rich with cryptos vs stocks?  I would say yes.      Higher risk with higher rewards.

I believe if you are into crypto for the long term some of the Alts are very attractive.Some Alts will definitely have a viable business plans but right now most of the action is in BTC.Wasn’t that long ago BTC dominance was below 40 %

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28 minutes ago, WeinkeToWarrick said:

Bitcoin dominance ATH besides early days, could mean Alt season is coming. Which Alt coin should I buy 

Look at multiple exchanges and examine what common Alts they have listed ,I have a shit ton of Bat Coin and had numerous opportunities to sell At a good profit but unfortunately kept them.Also a interesting note ,has anyone else noticed that Coinmarket Cap has removed their trading pairs(BTC and ETH) and shows trades only in fiat, now not in Satoshi .

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1 hour ago, WVU said:

when did you buy into BTC? 
my first bitcoin purchase was in July 2003.  I bought $750 worth when they were $5.50.  I held them for about 2 hours.  My first bitcoin purchase as an investment was in Sept 2007 at around $3500.  I bought and sold several times since.  My last buys were at 10k.

will you ever link wallet to your bank account or keep letting it ride? I link coinbase with my bank account.  I’m currently set to auto buy 5 diff coins each week.

when it your price to get out? I may never get out completely.  I expect to buy and sell forever

how high do you think it will go in 2021? The million dollar question.  I’ll throw out a guess that it crosses    40k in 2021.  I also think you will see drops into the low 20s

what does BTC look like in 2025? The billion dollar question.  I’ll guess 200k.

is there a better long term investment out there? Depends what you mean by better.  Are there safer outs?  Yes.  Will all my eggs be in the crypto basket?  Certainly not.  I have a very diverse investment portfolio.  Do you have a better chance to get rich with cryptos vs stocks?  I would say yes.      Higher risk with higher rewards.

Ummmmm...BTC wasn’t around in 2003 or 2007...created in 2009.    

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1 hour ago, housepicks said:

What about lite coin? I’ve heard 5k by 2025

Was better at $63 when I told you to buy and posted about buying it here in Nov on PayPal.. lol   Unlike BTC tho,  LTC is not anywhere near its ATH...has room to grow, but I never felt same about it when Charlie Lee (creator) sold out.   Still I have small position about 70 or so... most all  my money in BTC...I’m not convinced That there will be alt season any time soon...hard to tell.  Most all the new institutional money is in bitcoin. PayPal offering the alternative blue chip alts is the only reason I would consider buying them right now..same reasoning as posted previously...people have a psychological desire to own a whole coin rather than fraction of BTC   JMO. 

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1 hour ago, IAG said:

Was better at $63 when I told you to buy and posted about buying it here in Nov on PayPal.. lol   Unlike BTC tho,  LTC is not anywhere near its ATH...has room to grow, but I never felt same about it when Charlie Lee (creator) sold out.   Still I have small position about 70 or so... most all  my money in BTC...I’m not convinced That there will be alt season any time soon...hard to tell.  Most all the new institutional money is in bitcoin. PayPal offering the alternative blue chip alts is the only reason I would consider buying them right now..same reasoning as posted previously...people have a psychological desire to own a whole coin rather than fraction of BTC   JMO. 

I made my first coin purchase on PayPal a couple days ago.  I wish they would trade more coins than they have.  I imagine the list will grow soon?

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