Both have their own roles to play in the future.
I don't think bitcoin will make banks disappear because bitcoin has it own issues and limitations.
Bitcoin and banks both have their limitations and advantages, people are the ones to choose best for themselves.
   

Nothing will happen. we are expecting to have smooth chain split like the previous one we had in last August. If you look back to the recent hard fork that took place August, 1st - that gave birth to bitcoin cash BCH; Nothing bad happened there. And we are hoping to see more better and successful hard forks in the future.

Bitcoin is a digital currency that has huge potential and serious role to play in the future, but bitcoin has it own limitations just like fiat currency for now. with the recent issues arising from bitcoin, the problem where people are complaining about bitcoin higher transaction fees. with certain issues like this it going to be hard for bitcoin to replace the traditional banking system. For bitcoin to be the future of banking new updates must be implemented to solve these issues. 

It is never too late to invest in bitcoin. If you have the capital to invest in bitcoin that is an advantage, but if you don't have one you better focus more on how to get more bitcoins. There are several ways to get bitcoin from selling digital goods on marketplace section to signature ad promotion. That is completely depend on you to make up your mind and pick which one is best for you and start your bitcoin journey; the journey full of adventures.

I use social media a lot, more especially twitter.
I'm a big fan of social media because that is where you can find lots of guys.
In fact, all my friends and relatives are on social media, and that makes it a good place to promote new stuff.
Social media is massive these days because almost everyone is there nowadays and it is good environment to promote things like bitcoin.

Well for me, I first came across word "bitcoin" from one of the YouTube IT guys called "Eli The Computer Guy" I was a subscriber to his YouTube channel and   i used to watch all the latest videos posted by Eli on YouTube. And then in around January 2013 - Eli posted a video on YouTube talking about the digital currency and revolution called bitcoin, yep! that's where i got started with bitcoin.

Bitcoin Price Rebounds From $5,500 to $6,200, Ready For a New Rally?

Over the past 24 hours, the bitcoin price has demonstrated extreme volatility, declining to $5,500 at one point. Since hitting a new weekly low, it has recovered to $6,200.



The recent decline in the price of bitcoin can be wholly attributed to the surge in the value of Bitcoin Cash, and the movement of SegWit2x supporting investors, users, and businesses shifting toward Bitcoin Cash with one unified vision.

Consequently, the price of Bitcoin Cash has increased from $600 to $1,500 in the past week, reaching $2,800 earlier today. As the Bitcoin Cash price plunged from $2,800 to $1,500, the price of bitcoin recovered, from $5,700 to $6,200.


Can Bitcoin Initiate a New Rally?

As Xapo President Ted Rogers stated earlier today, on November 12, the surge in the price of Bitcoin Cash was not sustainable, given that there was no infrastructure, community and active user base to back such trend, even if the SegWit2x supporters have migrated to Bitcoin Cash.

While Bitcoin Cash has become too expensive at this point to obtain for investors, Rogers emphasized that bitcoin has become irresistibly cheap, given that the price of bitcoin peaked at $7,900 last week and it remains just below $6,300.



Like Rogers expected, traders have started to buy the dip, as the bitcoin price rebounded in a relatively short period. But, the question remains, can bitcoin initiate a new rally to recover to its all-time high of $7,900?

There exists several major events to acknowledge in evaluating the mid-term performance of bitcoin. Earlier today, Simon Dixon, the co-founder and CEO of BnkToTheFuture, stated that the bitcoin price will likely increase in the upcoming weeks due to the entrance of large-scale institutional and retail investors through strictly regulated bitcoin futures and derivatives exchanges.

CME Group and CBOE, two of the largest options exchange in the world, alongside LedgerX, will launch bitcoin options, futures, and derivatives targeting institutional investors by the end of 2017. CME Chairman Leo Melamed noted earlier this month that a growing number of hedge funds, investors, and investment firms have begun to consider bitcoin as a new asset class, not merely a digital currency.

Impact of Bitcoin Cash and Price Target by the End of 2017

If SegWit2x supporting businesses and miners from the original NYA / SegWit2x agreement continue to support Bitcoin Cash and build infrastructure around it, it is likely that Bitcoin Cash will co-exist with bitcoin as leaders of the cryptocurrency market.

As bitcoin and security expert Andreas Antonopoulos stated, the two cryptocurrencies can co-exist, as bitcoin and Ethereum have done for the past two years, as they operate with contrasting philosophies, visions, and strategies.

Even with Bitcoin Cash, the entrance of retail investors into the bitcoin sector will likely trigger a rapid increase in the demand for bitcoin as a store of value and safe haven asset, allowing it to achieve new highs in the mid-term.


Source: https://www.cryptocoinsnews.com/bitcoin-price-rebounds-from-5500-to-6200-ready-for-a-new-rally/

Confusion and Euphoria As Bitcoin Cash Surges Past $30 Billion

"BITCOIN CASH IS BITCOIN NOW."

Issued by Li Ang, head of China-based bitcoin mining outfit Canoe Pool, the proclamation may not be distinguishable from typical cryptocurrency banter. However, the difference this time around is the context.

No idle statement, Ang's comment comes amid what can only be characterized as one of the biggest migrations of capital yet seen in the nascent asset class. Billions are on the move in the crypto markets, and it's plainly observable where the funds are headed.

After hitting a record high above $800 on Friday, the price of bitcoin cash, the alternative cryptocurrency forked from the bitcoin blockchain in August, has doubled within 24 hours, hitting a high of $1,856 according to figures from data provider CoinMarketCap. At that price, bitcoin cash is now valued at more than $30 billion, passing ethereum for second-place standing in the market.

The move follows the sudden decision this week by a group of businesses and mining pools to suspend an effort to change the rules of the bitcoin software. Called Segwit2x, or simply "2x" by some, the effort would have increased bitcoin's block size – one way by which its transaction capacity can be measured.

But while bitcoin's developers and technologists lauded the suspension, miners and entrepreneurs lamented what they described to CoinDesk as a decision that would inspire others to migrate to blockchains more accommodating to their ideas and ideals. And if it was unclear at the time which alternatives would win favor, bitcoin cash is already proving the primary beneficiary.

Early and active in migrating support appears to be bitcoin's miners.

According to data from Fork.lol, at roughly 4:30 UTC on Sunday the total amount of mining power backing the bitcoin cash blockchain surpassed that of the bitcoin blockchain.



When asked about the move Jiang Zhuoer, founder of bitcoin mining pool BTC.Top, said simply that "2x fans" are moving both funds and mining hardware to bitcoin cash.

"BTC is going to die," Zhuoer said. Hapio Yang, CEO of mining pool operator ViaBTC, responded similarly, indicating he believes that businesses and investors are now migrating funds to bitcoin cash.

"I think more and more bitcoin holders are starting to understand what is the real bitcoin," he said via WeChat.
Doom sellers

Indeed, spurred by a sudden change in market outlook, bitcoin cash supporters appeared emboldened in their remarks. No doubt part of the equation is the soaring valuation of the protocol, which after debuting at $4 billion in August, hasn't exactly solve some of its more pressing open questions.

Still, Jake Smith, general manager of cryptocurrency web portal Bitcoin.com, owned by investor and block size increase advocate Roger Ver, doubled down on the idea that the new investment dollars represent more than a speculative migration in the market soon to pass.

Smith noted that with the price boost bitcoin cash's value proposition can only now be strengthened by what he categorized as its ultimate performance increases over the bitcoin blockchain.

"I think a positive feedback loop has been created. This is waking people up to the shaky foundations BTC is built on," he said.

Smith went so far as to describe the typical doomsday situation predicted by those supporting larger blocks – that bitcoin's transaction backlog will continue to grow, its transactions will become more expensive, and that these two factors will decrease user experience and force users to migrate.

Other supporters like bitcoin cash developer Juan Garavaglia chalked up the day's price movements to "better planning" by those using the protocol.

"Bitcoin Core is unable to execute, has a poor roadmap [and is] disconnected with market needs," Garavaglia said. "We can execute, we have smooth coordination with key market actors and we address market needs."
Skeptical voices

If those boasts sound familiar, so too was the rhetoric from those who were more apt to read the bitcoin cash price movements with more incredulity.

Jack Liao, the CEO of Hong Kong-based mining firm LightningASIC, for instance, sought to frame the idea that the bitcoin cash price increase represented any real uptick in interest in the project as "total bullshit."

One of the leaders behind the bitcoin gold cryptocurrency, set to launch tomorrow, Liao has been a noted critic of bitcoin's mining operators, in particular, Bitmain – one of the industry's largest sellers of specialized mining chips and the operator of several mining pools.

For those following the scaling debate, Bitmain's conduct has been one of the larger contentious narrative points, and Liao (like others) believes the explosion seen in the bitcoin cash market value is nothing more than an orchestrated bid by the firm (and its supporters) to prop up the market

"Many, many investors just see the change in hash rate," he said. "But they cannot support such a big bitcoin cash price."

Beijing-based over-the-counter Zhao Dong reported a similar sentiment in some circles, crediting the price to manipulation by miners and investors who have supported Segwit2x and bitcoin cash in the past. Bitmain and Ver were both signatories of the agreement that sparked the 2x software.

"They have money, they have hash power, they have everything need to pump the bitcoin cash price," he said.

Indeed, one of the more interesting theories at the moment revolves around an unconfirmed PasteBin conversation that seems to foretell yesterday's market move. (Though this may say more about current paranoia in the industry at large).
Swing states

Still, that's not to say the reaction was broken along partisan lines.

Willy Woo, recently named one of CoinDesk's Top 5 Token Analysts of 2017, sees the price move as perhaps one to watch. In contrast to other alternative cryptocurrencies that he said may lack value propositions, he went so far as to color bitcoin cash as a more nuanced option.

"It's backed by a lot of money from China controlling its price and supporting its network. If you buy bitcoin cash, you are betting that China wants it to dominate. That's a strategic and geopolitical bet," he told CoinDesk.

Bobby Lee, CEO of mining pool and exchange operator BTCC, had a similar reaction. Long a business that supported the Segwit2x proposal to upgrade the blockchain, he reads the price boost in bitcoin cash as an obvious side effect of the decision to block the upgrade.

While he acknowledged that it's yet to be seen whether this weekend's movements amount to anything more than a quick speculative fervor, he still hinted the situation remains one he'll be watching and observing.

Of particular concern for Lee, and others, is the decline in bitcoin's total mining power.

Lee went so far as to suggest that any continuing decline in this metric could cut into an attribute that has traditionally been one of the cryptocurrency's defining characteristics.

Lee concluded:

    "If BTC's hash power continues to fall, then I do think BTC has long-term trouble."



Source: https://www.coindesk.com/confusion-euphoria-bitcoin-cash-30-billion-2000/

Flimsy Floor? Bitcoin Charts Suggest Price Declines Still in Play

The price of bitcoin appears to be stabilizing.

Amid what has been a wild weekend in the crypto markets, BTC is now down just 5 percent in the last 24 hours to a value of $6,102. Yet, that number doesn't tell the whole story, as the cryptocurrency has been in the midst of heavy volatility after hitting a near three-week low below $5,600 earlier today.

As the charts show, the record rally from the September lows below $3,000 now appears to have topped out at $7,850 last week after a decision to abandon a controversial software upgrade triggered an unwinding of trading positions. The move appears to be sparking a migration of funds to alternative protocols, with bitcoin cash emerging as the primary beneficiary – effectively tripling in price since Thursday.

So far, the bitcoin sell-off appears for real as volumes jumped 61 percent yesterday. A high volume sell-off is often considered as a sign of "panic," and the fact that Google search volumes revisited record highs further corroborates this view.

So, the question now is, how low can prices go?

If history is any guide, the current sell-off in bitcoin is likely to run out of steam below $5,000.

Case I: Rally from July low to September high

Bitcoin chart


   - The rally topped out after the confirmation of the bearish relative strength index (RSI) divergence.
   - The sell-off ended around (marked by a circle) – 61.8 percent Fibonacci retracement level ($2,988) and below the 100-day MA.
   - The RSI was oversold as well (marked by a circle).

Case II: Rally from April low to June high



   - Again, the rally ended after the confirmation of the bearish relative strength index (RSI) divergence.
   - The price drop came to a halt around (marked by a circle) – 61.8 percent Fibonacci retracement level ($1,702) & below the 100-day MA. The RSI was oversold as well (marked by a circle).

It is quite clear that:

   - The rally ends with a bearish price RSI divergence.
   - The sell-off comes to a halt around the 61.8 percent Fib and below the 100-day MA.

Where is the floor?

The current retreat in prices looks similar to Case I and Case II as the rally ended with a bearish price RSI divergence.

Bitcoin chart



The RSI is trending lower and well short of the oversold territory. Thus, there is potential for a continued sell-off.

The sharp recovery from the 50-day MA seen today indicates bitcoin could trade sideways for the next couple of days before resuming the drop.

As historical data shows, the current sell-off is likely to leave a major higher low around the 61.8 percent Fibonacci retracement ($4,855.59) and below the 100-day MA ($4,818). Over the next few days, the 100-day MA is seen sloping upwards to $5,000-$5,100 range.

View

    - Prices could trade sideways over the next few days.
    - The current sell-off could come to a halt around $4,900-$5,000.
    - Only a multiple 1-hour closes above $6,500 would warrant caution on the part of the aggressive bears.

Price action discussed below could be considered as a sign of a bullish trend reversal:

    - A solid rebound from near 100-day MA & 61.8% Fibonacci retracement (as history suggests) or
    - The prices close today around $6,200 and tomorrow's candle ends beyond $6,900.


Source: https://www.coindesk.com/bitcoin-price-drops-6000-will-find-floor/

Bitcoin briefly drops 15% in rocky weekend amid controversy over digital currency's future


   - Bitcoin drops almost $1,000 in less than 24 hours, while its offshoot bitcoin cash also loses half its value after soaring to a record high.
   - The high volatility reflects disagreement among developers about which iteration will be the primary version of bitcoin.
   - However, the world's largest futures exchange plans to launch bitcoin futures by the end of the year, potentially allowing traders to
     protect themselves from major losses amid bitcoin's price swings.




High volatility isn't going away for bitcoin, raising questions about whether the digital currency can be a sustainable investment asset.

Late Saturday, the crypto-currency plunged 15 percent from nearly $6,500 to a low of $5,507, before intermittently shooting back up to near $6,400, according to CoinDesk. Bitcoin last traded near $6,060, down about 4 percent on the day.

Trading in a U.S. stock index is typically halted after such an extreme drop, not to mention repeated swings higher or lower. However, more than 120 "cryptofunds" have emerged to invest in bitcoin, other digital currencies and related business projects, according to financial research firm Autonomous Next.

Analysts say a major factor behind bitcoin's seven-fold surge to record highs this year is increased interest from institutional developers.

Bitcoin in the last 24 hours


Source: CoinDesk

Critically, the latest swings in bitcoin also reflect disagreement among digital currency developers about the future of bitcoin. As the original bitcoin tumbled, supporters of offshoot bitcoin cash, took to promoting it over the weekend on Twitter.

Bitcoin has retraced in the last few days, despite initially rising to a record high of $7,879. Last week, developers called off an upgrade called SegWit2x, initially planned for around Nov. 16.

The proposal was an attempt to improve bitcoin's transaction speed and cost. But support for SegWit2x waned in the last few months.

Meanwhile, bitcoin cash soared to a record high of around $2,477 overnight, before crashing about 50 percent to a low near $1,224 Sunday afternoon, according to CoinMarketCap. Trading volume in bitcoin cash over the last 24 hours was around $7.9 billion, versus $8.6 billion for the original bitcoin, according to CoinMarketCap.

Cash and gold enter the fray

Bitcoin cash split off from bitcoin on August 1 after a minority of developers decided to implement an upgrade that increased the block size to eight megabytes from one megabyte. Block size limits transaction speeds, and the SegWit2x upgrade would have raised the block size to two megabytes.

The high cost and slowness of transaction speeds have limited bitcoin's usability as a digital currency. A Bernstein report last week found it cheaper and faster to use more traditional means of sending payments overseas than using bitcoin.

Bitcoin vs. bitcoin cash share of total cryptocurrency market capitalization



Source: CoinMarketCap

Adding to the debate over bitcoin's future, another offshoot called "bitcoin gold" was set to launch Sunday. Bitcoin gold seeks to make the process of "mining," or generating bitcoins, less dependent on the few who have access to specialized technology.

The offshoot was not exempt from the latest volatility. Futures for bitcoin gold plunged more than 40 percent from just over $500 Saturday to below $300 Sunday, according to CoinMarketCap.

That said, CME's planned launch of bitcoin futures by the end of the year is a step towards limiting bitcoin's volatility. CME, the world's largest futures exchange, says on its website the bitcoin futures will have specialized trading limits at 7, 13 and 20 percent.

Digital currency enthusiasts also point out the launch of futures will allow traders to protect themselves from major losses during bitcoin price swings, thereby encouraging more institutional investors to try and profit from the volatility.

"Cryptocurrency volatility is unspectacular relative to other asset classes, as long as you use the right comparisons," said Ari Paul, CIO and managing partner at cryptocurrency investment firm BlockTower Capital. He pointed out that investment assets such as small-cap stocks in emerging markets and agricultural commodities have also experienced similar volatility.

"Many crypto currencies are best through of as Seed or Series A stage equity investments," Paul said. "If VC (venture capital) investments were publicly listed, they would likely see similar swings in valuation."



Source: https://www.cnbc.com/2017/11/12/bitcoin-briefly-drops-15-percent-amid-debate-over-digital-currencys-future.html

Bitcoin rival doubles in price in four days as Bitcoin price slumps

With Bitcoin mired in controversy, a rival called Bitcoin Cash is gaining ground.



One bitcoin is now worth less than $5,900, down 25 percent from Wednesday's high above $7,800. Meanwhile, the currency of a rival, spinoff network called Bitcoin Cash has doubled to more than $1,500 over the same four-day period.

This is good news for one side in Bitcoin's ongoing civil war—the side that sees an urgent need to boost the network's capacity to deal with growing congestion and rising transaction fees. People in this camp have been flocking to Bitcoin Cash after a plan to expand the capacity of the main Bitcoin network fell apart on Wednesday.

"Bitcoin Cash is what I started working on in 2010," tweeted Gavin Andresen on Saturday. "A store of value AND means of exchange." It was a pointed dig to the mainstream Bitcoin network, where slow transactions and rising fees have made it an increasingly unappealing way to make everyday payments.

The endorsement is significant because Andresen was chosen by founder Satoshi Nakamoto to lead the Bitcoin project after Nakamoto faded from the scene in 2011. Andresen was frozen out of the Bitcoin Core development team last year in the midst of a bitter debate over the network's future.

Right now, Bitcoin Cash is still the underdog, as the value of conventional bitcoins is about four times the value of "cash" bitcoins. But supporters are betting that this will change as demand for both networks continues to grow. The Bitcoin Cash network has greater capacity now and it has a community that's committed to expand the network further as needed.

Bitcoin Cash backers believe that with the leaders of the mainstream Bitcoin network stubbornly resisting such capacity increases, it's only a matter of time before these advantages make it the dominant payment network in the Bitcoin world.
Why some have opposed expanding Bitcoin's capacity

Until recently, a hard-coded limit in the Bitcoin software—one megabyte per block—limited the network to processing no more than about seven transactions per second. The big-block faction has argued that this limit should be raised to accommodate further network growth.

But others saw decentralization as the essential attribute of the Bitcoin network. They worried that enabling a flood of transactions would make it too difficult for ordinary people to participate in Bitcoin's transaction-clearing process. They've promoted a hack called segregated witness that helps to squeeze more transactions into each one-megabyte block. But beyond that, they've argued that it's actually healthy for Bitcoin fees to rise over time to prevent the network from getting cluttered with low-value transactions.

The conflict came to a head in recent months. In August, some in the big-block camp split off from the main Bitcoin network to create rival network Bitcoin Cash, which supports blocks up to eight megabytes. This provided an alternative platform for those who were frustrated with the lack of growth in the main Bitcoin network.

Later that month, the main Bitcoin network activated the segregated witness hack, which moves cryptographic signatures outside the one-megabyte block limit. This change has roughly doubled the capacity of the network and brought some temporary relief to congestion that had plagued the network for months.

Under the terms of a May compromise, the activation of segregated witness—long favored by the small-block faction—would be followed by an increase in the block size limit to 2 megabytes. That change was supposed to take place in mid-November. But after segregated witness went into effect in August, the apparent consensus began to evaporate.

By the start of November, the proposal to double the block size had become hotly contested. The Bitcoin network is based on consensus, so it's risky to make changes unless they'll be broadly supported. Last week, the leaders of the effort to double block sizes threw in the towel, announcing that the controversial change would not take place after all.


Bitcoin Cash has deepened polarization in the Bitcoin world

Obviously, the fact that Bitcoin won't get a capacity increase this week doesn't mean it can never get a capacity increase. As congestion in the Bitcoin network gets worse, a consensus might still emerge about the need to allow larger blocks.

But it also might not. Many small-block advocates envision an alternative future for Bitcoin in which Bitcoin itself becomes a low-volume settlement layer for high-value transactions—much as banks once shipped gold bars to each other to settle their obligations.

Small-block fans have pinned their hopes on Lightning, a new type of payment network that allows people to make fast, small Bitcoin payments without having to post every transaction to the Bitcoin blockchain. In theory, Lightning could allow millions of bitcoin-denominated payments to happen every day without changing Bitcoin's one-megabyte block size limit. But Lightning is still in development, and it's far from clear if it will work as well as advocates hope.

In any event, excitement about Lightning has convinced some small-block advocates that block size increases aren't necessary at all. And as more big-blockers flee to Bitcoin Cash, opponents of larger blocks will gain the upper hand in Bitcoin's internal politics. That could leave Bitcoin stuck with one-megabyte blocks indefinitely.

Meanwhile, the big-block faction has broad support from Bitcoin's business community—including well-funded Silicon Valley startups. So far, a lot of these companies have continued focusing on mainstream Bitcoin. But with proposals to upgrade the Bitcoin network stalled, it wouldn't be surprising if these companies have a change of heart, concluding that the future of Bitcoin rests with Bitcoin Cash.

And these companies are the main way that many users interact with Bitcoin. If they made it as easy to use Bitcoin Cash as it is to use mainstream Bitcoin—and if capacity constraints continue to cause slow transactions and high fees on the conventional Bitcoin network—users could start switching over to Bitcoin Cash as their preferred network. Which might be why markets have shifted so dramatically toward Bitcoin Cash in the last four days.


Source: https://arstechnica.com/tech-policy/2017/11/bitcoin-rival-doubles-in-price-in-four-days-as-bitcoin-price-slumps/

Yeah, all the smart bitcoiners know it is an ordinary pump by big whales.
I don't think there is anyone smart bitcoiner that'll risk putting money on BCH unless looking for short time profits, i guess.

Well, this year 2017 is the best for bitcoin ever so far. Bitcoin gained over 600% increase in value this year alone.
We don't know if bitcoin will continue to grow like that every year. But if at least bitcoin can manage to grow by 500% every year - bitcoin will reach higher level in few years.

Prefer saving my bitcoins all the time for the future.
Sell my bitcoins only on desperate measures because that is best for me.

LoL Your friend sounds definitely like my 86 year old grandma.
Oh please, he should be reading more about the latest technologies and inventions.
I see your friend think of bitcoin like a new form of online scam or ponzi scheme, right?
The first question to ask your friend is; Does he really know what is bitcoin? How bitcoin works?
No one will write you this letter knowing what is bitcoin and how it operates with bitcoin fundamental principles.
Bitcoins is currency just like USD but way better because it's digital, fast, secure, decentralized and acceptable worldwide.

Last advice please, consider taking advice from people with knowledge about what they are advising you about.      

Wonderful, I was reading this article yesterday on the web:

$700 Million Stuck in 115,000 Unconfirmed Bitcoin Transactions
https://www.cryptocoinsnews.com/700-million-stuck-115000-unconfirmed-bitcoin-transactions/

And i asked myself, what the hell is going on again? Is this another form of DDoS attack on blockchain or what?
Thank God now since everything will be ok in few days. I first though some lazy punks are trying slow people down, man.

For me, there is no better time to invest like the time when I have the capital. If you see me waiting it's only when I don't have the money.
My friend, it's never too late buy bitcoins and waiting will never do you any good if you are planing to save your bitcoins for long term.

It's obvious that the bitcoin transaction fees are getting higher almost every time. I don't know how the general public will use bitcoin for day to day activities. Now, if you look at the bitcoin competition; bitcoin cash BCH transfer fees is around $0.03 (only 3 cents) and why would someone use bitcoin paying $10-$20 in transaction fee while there is another that accepts only $0.03 for transactions? We all want bitcoin to go mainstream here and to do so we should really fix this issue.   

I don't think it is a good idea to sell your precious bitcoin for altcoin called bitcoin cash because no matter how high the value of BCH gets will always fall. they are using applying new form of pumping the value of altcoins, so don't fall for it or you may have to regret it for the rest of your life

Everything you wanted to know about bitcoin but were afraid to ask


The money has become too much to ignore and so bitcoin and cryptocurrencies are back in the news. You may have heard about Ethereum, a cryptocurrency that has risen in value by more than 2,500% over the course of 2017. Or maybe you’ve heard about one of the many smaller cryptocurrencies that raised hundreds of millions of dollars in the first few days they were on sale, during their “initial coin offering”. Or you’ve just spotted that bitcoin, which made headlines in 2013 for hitting a high of $200, is now worth nearly $7,000 (£5,250), making a lot of people very rich in the process.

Are these cryptocurrencies simply speculative bubbles or will they actually transform our financial system? It’s time to answer a few common questions about this new technology – and assess whether a lot of people have just pulled off the investment of their lifetime or made a huge mistake.

What actually is bitcoin?

Bitcoin is a cryptocurrency, the first and still the biggest example of its type. At its core, it’s a new form of digital asset, created through a canny combination of encryption (the same technology that protects WhatsApp from eavesdropping) and peer-to-peer networking (which allowed music piracy to blossom in the 00s through services such as Kazaa).
 
If you own a bitcoin, what you actually control is a secret digital key you can use to prove to anyone on the network that a certain amount of bitcoin is yours.

If you spend that bitcoin, you tell the entire network that you have transferred ownership of it and use the same key to prove that you are really you. In that respect, your key is similar to a password that allows you access to your money, except with no possibility of resetting your key if you lose it. Anyone else who manages to discover your key would gain total, irreversible control over your cash. The history of all the transactions made is a lasting record of who owns which bitcoin: that record is called the “blockchain”.

What are its advantages over money created by central banks?

Bitcoin advocates will point to a number of possible advantages, from the ability to use the blockchain to track things other than simple money to the built-in support for “smart contracts”, which execute automatically when certain conditions are met.

But the biggest advantage, and the only one everybody agrees on, is that bitcoin is decentralised and so extremely resistant to censorship.

Although it’s possible to observe a bitcoin payment in process, it’s not practicably possible to stop it. That makes it radically different from conventional banking, where banks can, and do, intervene to freeze accounts, vet payments for money laundering or enforce regulations. That has made it a haven for activities from cybercrime and drug trading to enabling international payments to closed economies and supporting radically off-grid living.

Bitcoin ATMs in a shop in Kazan, Russia.

Bitcoin ATMs in a shop in Kazan, Russia. Photograph: Yegor Aleyev/TASS

So will I need to start taking bitcoin to Tesco for my weekly shop?

Unlikely. Bitcoin has one major hurdle to being used at scale for physical transactions: payments are only confirmed once every 10 minutes (and that’s when everything’s working well; in practice, it can take days for confirmation to occur). This means theoretically that it’s possible to spend a bitcoin, then walk next door and spend exactly the same bitcoin at a second establishment. Only one of those transactions will ultimately be confirmed, leaving the other place out of pocket.

More generally, bitcoin has limited advantages for payments between big companies and normal consumers. It’s no easier or quicker than any other mobile payment, it introduces considerable volatility to your daily holdings (or a sizable hedging cost to guard against swings in the value of the currency) and remains a pain to integrate with the conventional banking system.

That hasn’t stopped some large companies experimenting. Microsoft accepts bitcoin for payments on its online store and PayPal offers integration for merchants to offer the cryptocurrency as a payment option.

Is it really the new gold?

Probably not, but the comparison isn’t completely spurious. One of the interesting quirks of bitcoin is that there will never be more than 21m of them in existence. That figure is written into the currency at its source code and is a function of how the network rewards those people who provide the computing power (called “miners” – because of that gold analogy) that keeps it ticking over.

Every 10 minutes, one of the miners is rewarded with a sum of bitcoin. That reward doesn’t come from anyone: it is created out of thin air and added to the bitcoin wallet of the miner. Initially, that reward was 50 bitcoin, but it gets halved every four years, until, midway through the 22nd century, the last bitcoin ever will be produced.

For a certain type of economist, that hard limit is an extremely good thing. If you believe that the key problem with the financial system over the past 100 years has been that central banks print money, creating inflation in the process, then bitcoin provides an alternative ecosystem where inflation is capped forever.

Does it really create more carbon dioxide than Ecuador?

Yup. And then some. Citibank estimates that the bitcoin network will eventually consume roughly the same amount of electricity as Japan. The problem is that the mining process is incredibly wasteful – and deliberately so. Those miners are all competing to be the first to solve an arbitrarily difficult computing problem, one that takes enormous amounts of processor cycles to do and still comes down mostly to luck. The computer that does solve it first, every 10 minutes, gets a sizable reward – currently in the region of £65,000 in bitcoin – but every computer, not just the winner, has had to spend that processing time to do the maths.

The reason for the mining requirement, which is essentially asking a computer to continue rolling a dice until it rolls a few thousand sixes in a row, is that it ensures that no single person can dictate what happens on the network. The proof that the miner has solved the problem is what it uses to claim its reward, but it also becomes the seal that it uses to verify the last 10 minutes of transactions.

“I, miner number 2357398, have solved this problem, and the answer is [extremely long string of digits]. By the authority vested in me by the network, I declare that the following list of transactions to be confirmed:” and then they list every transaction that they have heard about in the last ten minutes.

From that point on, every machine on the network begins solving a new problem, set by the last miner. But, crucially, they only do so if they agree with the miner’s list of transactions. That means that even if you do win the race, it’s not enough to simply insert your own lies in the block, and declare that everyone sent you all their money, because everyone else will simply ignore you and listen to the next miner in the chain.

(The reward itself isn’t really necessary to Bitcoin, but it’s there to ensure that miners have some reason to throw their electricity at the network. In the long-run, the hope is that voluntary transaction fees for quicker confirmations will take over that role.)Because the problem is so processor-intensive and so randomly rewarded, it’s prohibitively expensive – in electricity and computing power – to attempt to fake it. But it’s also a vast use of electricity, worldwide, used to do little other than satisfy an arbitrary requirement for spending money.

Is bitcoin the only cryptocurrency?

Not at all, although it’s still the most valuable. After bitcoin’s creation in 2009, a number of other cryptocurrencies sought to replicate its success by taking its free, public code and tweaking it for different purposes.

Some had a very defined goal. Filecoin aims to produce a sort of decentralised Dropbox; as well as simply telling the network that you have some Filecoins, you can tell it to store some encrypted data and pay Filecoins to whoever stores it on their computer.Why would you want that? Well, it again comes back to censorship resistance. If you store something on your Dropbox that the company doesn’t like, it can just delete the data and ban you. With Filecoin, it’s impossible to tell what’s being stored, and impossible to force the network to block any given user anyway.

Others are more nebulous. Ethereum, now the second biggest name after bitcoin, is essentially a cryptocurrency for making cryptocurrencies. Users can write “smart contracts”, effectively programs that can be run on the computer of any user of the network if they’re paid enough Ether tokens.Think, for instance, of offering a small sum every time someone responds to a particular signal with today’s headlines: you’ve built a decentralised news website, then. Or you could write a small program and reward someone every time it’s run: that way, you’ve created a decentralised cloud computer.

As a category, these new cryptocurrencies are increasingly referred to as “decentralised apps”, or “dapps”, with the focus being not on the specific currency used to make the system work, but on its overall goal.It might even be best not to think of the coins that lie at their heart as “currency” at all: when the token could represent a services contract, a land registry record, or the right to five minutes of computing time, the analogy to pounds and dollars has rather broken down.

Continue reading at:  https://www.theguardian.com/technology/2017/nov/11/everything-you-ever-wanted-to-know-about-bitcoin-but-were-to-afraid-to-ask-cryptocurrencies