Friday, July 4, 2014

Crypto-Currency Speculation and Discussion

Bitcoin, Darkcoin, & the Crypto-Currency


     Brought to you by Bitcoin poker legend, Dr.Gil

I decided to start this blog as much for myself, as for the 2-3 idiots that are dumb enough to listen to my ramblings. This keeps my "crazy" confined to one central location. 
Here.  Gift.  Blog.

As this is my first attempt at a blog, I feel I should begin by announcing to any readers that I have no formal business training whatsoever.  I'm no stock expert, I don't trade precious metals, and couldn't name you anything ever traded on Forex.  If I didn't learn it 10 years ago in my required, college level micro/macro econ classes, it's probably self-taught bullshit, most likely from a YouTube video.  I assume absolutely no responsibility for financial gains or losses.  

I guess we should start with the rise of the $600 Bitcoin.  I've been into Bitcoin long enough to remember $2 Bitcoins.  The early days saw $20/coin or maybe $50/coin peaks......then the price would fall next to nothing.  It was beginning to appear that Bitcoins had become the "Carnival Arcade Token of the Internet".  Remember, Bitcoin launched in 2009.......roughly around the same time Apple's iPhone was becoming the hottest thing on the planet.  At that time, it was pretty easy to dismiss Bitcoin as just another dot-com bust.  Honestly, next to mainstream titans like Apple and Google....Bitcoin does seem tiny.  I highly doubt even proponents of Bitcoin could have told you 1 coin would cost more than a share of either of those two tech giants.  

I, like many others, gave up on Bitcoin and crypto-currency altogether....until 2013 when I'm informed that my once worthless Bitcoins are suddenly worth $1,000 a piece.  At $2/coin, I was pretty sure I didn't have any Bitcoins left.....but at $1,000/coin, it became an obsession trying to find any "misplaced" coins.  As the $1,000 peak stabilized around $500-$600, I collected the coin fragments I had strewn all over the internet.  I also felt I owed this whole crypto-currency thing another shot.  

Now post graduating college and a few "shit just got real" life events later......I'm feeling a little more (for lack of a better word) "seasoned" going back into Bitcoin.  I already kind of "get it" but with pointless schoolwork no longer staring me in the face, tackling the algorithms behind crypto's became less of a task.  That was when the clouds lifted and I could finally "see it".  Bitcoin isn't some fly-by-night dot-com, fluke.  Setting aside all economic aspects, Bitcoin does exactly what it was intended to do:

"Transfer something of value from one person to another without middlemen needing to make sure that the item is not copied or, in the case of money, spent more than once."

That seems like a reasonable request.  Let person A, pay person B, without some third party like PayPal or VISA needed.  Companies that oversee this simple task have produced some of the highest corporate revenues on the planet.  Those tiny fees, usually invisible to the consumer, have made online financial transaction institutions a lucrative industry.

Interestingly, Bitcoin (as well as other crypto-currency) manages to oversee those same transactions with 100% accuracy.  It does so without a CEO, office building, customer support center, or high-dollar advertisement during the Super Bowl.  There are no employees, board-of-directors, janitors, or account representatives.  This is what blows my mind about Bitcoin.  The program was created so perfectly, that all one had to do was "Press Play".  If you haven't taken the time to learn how this process works yet.....I suggest doing that now.  It took me roughly 5 years to really understand the brilliance behind Bitcoin.  

Future postings from this point are to likely appear even more absurd if you're not yet a believer. I'll probably be jumping around a lot because I don't want to bore everyone with past events, so I'll get up to speed with the last 2 email updates I've compiled for my local "coiner's".  This blog is meant to spark debate, help answer questions, and spread information/ideas throughout the community.  Hope you enjoy and contribute.

Thanks for stopping by!

**7/2/2014 Email bringing friends up to speed on Darkcoin
(Starting from the hardfork/softfork that occurred around June 27th.)

At that time, the wallet was updated again (mostly for the purpose of adding another wave of masternodes as well as raising the masternode payout to 20%).  If you use the previous hardfork (occurred in May) as a guide for what might likely happen to the price during this hardfork, you would assume that a flawless execution of the update should have pushed the price up (Successful Implementation should = confidence in buying market.....i.e. Willing to pay more).  The new wave of masternodes have been successfully paying out for a few days now and for some reason......all these good signs for the coin have resulted in the lowest price drops we've seen for quite a while.  This is the thing that has baffled me and caused me to basically glue myself to the forums until I can find some answers.  

One possibility I've considered is the emergence of numerous other "anonymous" coins....although none of them seem to have the strong community backing that DarkCoin has produced.  You have to remember, 480 masternodes are set up, at 1,000 DarkCoins per node.  That's $10,000 at $10 a DarkCoin or $480,000 total. Now that we're in the $7 range.....masternode owner's are taking one hell of a hit on their investments, if you consider DarkCoin was around $17 not too long ago. These masternode owner's can't sell their 1,000 coins needed to make up the masternode like we can......although they make roughly 1.4 DarkCoins per day, per node.....which they can sell or do whatever with.  My take on this......right after the May hardfork, investors saw that the first round of masternodes went out without a hitch......convincing some skeptics that had been holding out, to go ahead and buy enough DarkCoin to start their own masternode.  Result, the price skyrocketed (we were seeing it around 0.024/BTC or roughly $17) as "investors" scrambled to buy their spot before the price of DarkCoin went any higher.  

In my opinion, DarkCoin got overbought in May and the price had to trend down a little (just to make up for this investor speculation and sudden surge in buying).  I think if there were investors out there.....they bought in during the first round of masternodes and that's why we didn't see such a surge when this second round was implemented.  The developers are doing everything major bumps in the road......everything that has been done with the coin has been right on par with DarkCoin's whitepapers.  In my opinion, there is honestly no way Litecoin should be anywhere close to the price of DarkCoin (as it brings nothing new to the table from Bitcoin aside from a different script). 

Now, in late July.....the last scheduled update to the wallet is going to roll out.  When this happens, the developers are going to remove the 10 DRK minimum to use DarkSend feature.  That basically means people will finally be able to send any amount of money (even very small amounts) anonymously.....the whole reason the coin was invented.  To this point, DarkSend only works on transfers over $100+.  The DarkMarkets (illegal Tor websites) like Silk Road couldn't accept a coin that forced vendors to sell their wares in quantities over $100 (and potentially more if the price went up).  My prediction is that the DarkMarkets pick up DarkCoin shortly after the RC4 release (and it still may take a couple months--kinda why I say don't sell until August or September).  If I'm right......DarkCoin could completely replace Bitcoin on the Darkweb, cementing it's place in the niche market it was created for.  This is the point you want to sell.  

I could sit here all day and propose price marks and speculate trends......but in the end......DarkCoin is really going to boil down to --  Will the DarkMarkets switch? The developers of DarkCoin also created the source code for known as Open Bazzaar (a Silk Road that runs from an executable...there is no one, single server you can shut down to stop it).  Every vendor on OpenBazzaar will be running, through Tor, their portion of the website.  It's pretty apparent the developers of DarkCoin are no slouches....if they say they're going to make a Dark Market, it'll probably happen.  They even stated that they think someone will probably do it before they can get to it (as much of the source code is already out there).  

Oh, almost forgot to mention....Cryptsy opened up US dollar markets today around noon.  The catch is, to put money have to mail them a personal check (at least for a few weeks until they get a better method implemented).  The result, people can sell their coins for USD....but can't buy anything yet unless they already sold coins for USD.  So the price of BTC, DRK, LTC, Doge were, and currently are, selling way under market value.  Give it a few days....when people start mailing in those checks and they get credited.......price will stabilize to the rest of the markets.

**7/2/2014 Email to friends regarding Darkcoin and Proof-of-Stake coins

Ok, I think we've all been in the Darkcoin market long enough to understand that we're probably going to see a few of these price swings as we move closer to the RC4 deployment.  Rest assured, there is immense support behind Darkcoin.  I found this coin around $1.50 and sometimes I find myself questioning whether that move to $17 should have been our get-out point.  No matter what the price does, the sentiment in the forums is pretty clear.....people aren't selling Darkcoin.  When Cryptsy opened up USD/DRK, there were tiny amounts of DRK selling for USD (around $7).....but very little action.  Any transactions were right at or slightly above market value (as per  It will take some time, but eventually the tradebots will come into these new USD markets with their small, incremental buy/sell orders.  That will likely up the trade volume and create some much needed liquidity but it hasn't seemed to affect price in any of the newly opened USD coin markets.  So in a nutshell, my current strategy: Continue to hold out....even if I start getting cold feet when I see price falling.  I do have some future strategies in the works for after my anticipated Darkcoin breakout.....but we'll cross that bridge when we get there.

I'll also touch on a few other things I've been reading into.  Most of it deals with "Proof-of-work" coins vs. "Proof-of-stake" coins.  Simply, POW coins are like Bitcoin/Darkcoin....rewards are based on our machines slamming out hashing functions to prove they are doing the work of the x11 script, or whatever algorithm.  POS coins work somewhat differently.  Proof-of-stake coins are frequently mine-able through the usual POW method......although many times this is allowed for a limited time.  So we'll say I acquire 100 coins this way.  Now, with my 100 coins....I can set those aside (via an option on the coin's wallet).....they can't be moved or sold during this time......and I'm pretty sure you can decide how long to set them aside.  When this predetermined period of time ends, you get rewarded with more coins.....usually a percentage of the set-aside amount.  This percentage typically rises as deposit increases and/or length of time increases.  Let's say I wait 12 hours for a 2.5% stake on my 100 coins, after 12 hours I have 102.5 coins.  This type of interest is called compounding interest and from what I recall from econ class, compounding interest can really start adding up if the turnover times/payout periods occur pretty frequently.  A lot of banks compound my coins would have to wait a year to get the same 102.5 coins before I could set them aside again.  The second compounding period would yield 2.5625 coins if 2.5% stake was reapplied......the third, 2.6265626.......forth, 2.69223.  I'm sure you can see how this continues to grow.  The idea is similar to Darkcoin's masternodes except you can keep putting more coins in.....there is no set 1,000 coin ceiling. While you could certainly acquire another masternode or invest in a pooled masternode at pre-defined increments of 100 or so coins, this method allows the coin holder to reinvest however much and however long they choose. 

A lot of the Proof-of-stake coins are also anonymous like Darkcoin.  They use the set aside coins to somehow make the requested transfers.  I'm not entirely sure how these proof-of-stake algorithms work....but I do know they require our set-aside coins.  So it's similar to acquiring coins mining, but you don't have to mine. Which brings me to the question:  Can I mine something else while I'm setting aside various other coins, making interest on them?  I don't know yet.  I am going to move my CryptCoins from Cryptsy to my new CryptCoin wallet as a first, proof-of-stake trial run.  I downloaded a few other wallets last night before going to bed.  I've set my account at TradeMyBit to keep Darkcoin, Cryptcoin, GuerillaCoin, and TrustPlus (everything else swaps for BTC).  

*TrustPlus was listed as "SPECULATIVE" last night and today (probably because it's not traded on exchanges yet).  The coin launched last night at midnight with the "Proof-of-work" reward around 500 coins.  They have been systematically increasing the reward payout, which will finally land at a 6,400 coin reward for blocks 6,401 through 12,800.  They are considering this Proof-of-work period their "pre-mine".  After that, at 3,439,788 coins produced, it shuts off and the only way to obtain more coins is buy them or Proof-of-stake interest.  I have no idea if this coin will hold any just happened to be the lucky new coin to hit the market at the same time I learned how POS works.  TradeMyBit x11 multipool seems to have been mining it about 45% of the time in the last 24 hours.......and it's only been around since it's getting hit pretty hard by my multipool.  TrustPlus Whitesheet (Check out the POS payout, 18% over 30 days.)
*GuerillaCoin is another POS coin that has been around for a little bit, but touts itself as the evolution of Proof-of-stake, calling it's method Proof-of-Strength.  Interest rates are somehow determined by network strength (which boils down to how long coins sit in your wallet).  I don't really know much about this one, although Cryptsy picked it up yesterday.  I'm pretty sure it's offered in my x11 multipool, so there's a chance I may unintentionally come across some and they'd be easy to sell because I have a Cryptsy account (only reasons I'm involved).  I can tell you, they have the coolest wallet I've seen to date.  Not the typical opensource hy-jacked,  cookie cutter, crap-wallet.  It's got this little status bar that I guess is supposed to show you how much you're getting paid via POS. GuerillaCoin Whitesheet

All I got for now.


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