I say “playing” because that’s all I’m doing right now. My total investment is $22.00 for $15.00 in bitcoin. Right now my Bittrex account is fluctuating between $40 and $50 dollars. I bought some ripple and sold for a 10 cent profit then I bought digibytes and verge.
It’s hard to buy bitcoin right now without outrageous fees so I plan on buying the minimum amount of ether for a deposit and play around with that when I get paid next week.
Is it all a bubble? Maybe. I don’t know. My thinking is that either I will lose all the money I put into cryptos or some will be adopted as global currencies. There is a lot of fear, from the Austrian perspective, that cryptos aren’t and never will act as a currency. It could be “irrational exuberance” a word Alan Greenspan used to describe an “irrational exuberance is unsustainable investor enthusiasm that drives asset prices up to levels that aren't supported by fundamentals.”
What are the fundamentals of cryptos? I don’t mean to sound like I’m lecturing, I’m writing this to think it out for myself.
For ripple it is a fast and cheap way to transfer a lot of money (this was the case for bitcoin until transaction costs started to rise). Right now the transaction costs (the cost of getting a transaction accepted to the blockchain) is above 15 dollars for bitcoin. This is because the bitcoin program allows for 1 megabyte of data to be coded per block, which translates to 3.3 transactions per second according to Ars Technica.
The second fundamental of cryptocurrency (something that might add value to the world) is the ability to permanently timestamp a hashed proof of something into a blockchain. It’s hard (impossible) to fake the input of a hashed output of something (if you hash a document into some output, it can be hashed again into that same output if done again). If the hashed output is hashed in the form of a wallet address for a certain crypto currency like bitcoin-“A Bitcoin address, or simply address, is an identifier of 26-35 alphanumeric characters, beginning with the number 1 or 3 , that represents a possible destination for a bitcoin payment. Addresses can be generated at no cost by any user of Bitcoin”- (via the Bitcoin Wiki)
-But if transaction fees don’t fall, bitcoin could be in trouble. Something called “segwit” can help solve this problem
How does segregated witness effect the ability of people to do this? Let’s see... a segregated witness (segwit) is the separation of signature data from the data stored in the blockchain. This decreases the amount of inputs that get stored in the blockchain. The signature is the part of the transaction that determines if the sender has enough bitcoin to fulfill the what they are sending to an address. This address is posted to the public ledger but the input also represents data that needs to be stored in the blockchain and therefore represents more expense. Segwit will increase the ability of bitcoin to store transactions. According to one article I read on the subject, it’ll increase block capacity from 1 mb to 4 mb. Segwit will also decrease complications of the lightning network, which will exist to facilitate off-block transactions and thus further decrease the load on the blockchain.
A third fundamental of blockchain themselves include smart contracts for the facility of business. I will write a separate article on this subject so I can learn why such alt-coins as ethereum and a new Chinese ethereum-esque coin have shot up in value. Coins that are built on top of coins. Etc etc.
There is a lot to be learned in this sphere and if it all comes crashing down, that knowledge might be unusable. Maybe it’s all a bubble. Maybe it’s not. Maybe a bunch of grumpy old men are acting the curmudgeon and cursing new technology. There are a lot of scam artists in this space, that is for sure.
I’m going to keep playing around with it. I will invest money I can lose and will keep my job. 20 dollars a week is fine.
If anyone have any good alt-coin pucks that can be purchased on Bittrex, comment below on what they are.