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Proof of Reserves
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The trading price of the altcoin SNM suddenly rose by over 4,000% to $10.91 on Nov. 20, 5:30 a.m. (ET), while the coin’s 24-hour trade volume stood at just over $720 million. The altcoin’s abrupt price surge has fueled speculation that the altcoin is being targeted by a pump-and-dump group.
Binance Dominates the Altcoin’s Trade Volumes
SNM, an altcoin, which had only previously traded above one dollar on April 30, 2021, went up by more than 4,000% to $6.70 — a new all-time high — on Nov. 20, 5:30 a.m. (ET). According to coingecko.com data, in just under 24 hours SNM’s trade volumes had surged from just over $1.2 million on Nov. 19, at 04:02 a.m. to over $720 million by 8:00 p.m. (ET).
A dead shitcoin that had an ICO in 2017, SNM, suddenly surged nearly 20x on Binance tody. Its official website has not been updated for a long time. The coin is almost exclusively tradable on Binance, but Binance did not delist it. https://t.co/TSaEM36GLg
— Wu Blockchain (@WuBlockchain) November 20, 2022
Before altcoin’s latest price and traded volumes surge, SNM, which debuted with an initial coin offering (ICO) price of $0.16 in 2017, has only been sold above $0.50 on three occasions which are Aug.26 ($0.503), Sep. 12 ($0.707), and Sep. 12 ($0.517). The data also shows that traded volumes also spiked during the same periods.
Although the altcoin, which has a circulating supply of 44.4 million tokens, is listed on five exchange platforms, data shows that Binance accounted for more than 99% of SNM’s traded volumes on Nov. 20.
Pump and Dump Claims
On Twitter, some users speculated that the altcoin’s activity could indicate that a pump-and-dump scheme is underway. Chinese crypto journalist Collin Wu tweeted:
Not sure if it is a contra trading involving stolen coins or a lack of liquidity due to the withdrawal of market makers.
Another user, Andrew Sun, argued that the altcoin’s sudden price and traded volumes surge could be an indication that an identified group had chosen to use SNM for pump-and-dump purposes. Sun tweeted: “A pump and dump group has chosen it. They often find dead coins. Ones with low liquidity and without a perpetual contract that will let people/bot go short on it to do their pump and then dump.”
What are your thoughts on this story? Let us know what you think in the comments section below.
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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
2022 continues to be a year of surprises, with one of the biggest so far being Elon Musk’s decision to acquire social media juggernaut Twitter for a whopping $44 billion. While the takeover has set into motion a whole host of debates — particularly those pertaining to Big Tech censorship — it has also called into question the future of Dogecoin (DOGE), a digital currency of which the billionaire has been a big proponent over the last couple of years.
To put things into perspective, just hours before Musk tweeted that “the bird is freed” on Oct. 27, the price of DOGE was hovering around $0.07. However, by Nov. 1, it had surged to $0.16, bringing the total market capitalization of the so-called memecoin to a sizable $21 billion. And while DOGE is currently trading close to $0.08, its 30-day profit ratio is greater than 40%.
It is also worth noting that every time Musk has tweeted in support of the digital asset, its value has skyrocketed quite dramatically. For example, throughout 2021, he continued to refer to DOGE as the “people’s crypto,” a message that sent the currency’s value flying by a whopping 4,000% over the course of the year.
Moreover, Tesla — an American multinational automotive and clean energy company helmed by Musk — started accepting DOGE as payment for its merchandise in January 2022, including its “Giga Texas” belt buckles and miniature vehicle replicas. Furthermore, Musk’s recently released joke fragrance, Burnt Hair, could also be purchased with DOGE.
A bleak future for DOGE?
To get a better idea of whether Musk’s Twitter takeover and constant support of DOGE stand to make an indelible mark on the digital currency’s financial future, Cointelegraph reached out to Lior Yaffe, co-founder of Switzerland-based blockchain software company Jelurida. Yaffe does not have too much faith in Dogecoin, judging from the poor decision-making displayed by Musk so far, adding:
“From paying too much for Twitter to causing companywide mayhem by firing many good employees and making terrible management decisions such as the blue check episode, I’m not optimistic about either Twitter or Dogecoin.”
Furthermore, he claimed he would be surprised if Musk can bring any real use cases to Dogecoin, noting that even if Musk intends to somehow integrate Twitter with crypto payments — which is a very difficult task — he doubts they will be able to achieve such a dream in the near future. “Even if they do manage to build a payment system around Twitter, there are much better blockchain solutions than Dogecoin to choose from with regards to security, privacy, smart contracts and scaling,” he stated.
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Henry Liu, CEO of cryptocurrency exchange BTSE, told Cointelegraph that after taking into consideration the current macroeconomic environment, he foresees the price of DOGE continuing to remain highly volatile, much in line with the crypto market.
“We expect DOGE to stay speculative in the short run, and there should be reduced liquidity and trading volumes across various platforms. If DOGE can be given new utility regarding its collaboration with Twitter, we may foresee a spike driven by social media communities,” he said.
Not everyone is so skeptical
Nikita Zuborev, chief analyst for cryptocurrency exchange BestChange, told Cointelegraph that while one cannot discount the fact that the growth of meme tokens often happens suddenly and unreasonably, Musk’s recent acquisition of Twitter could potentially boost DOGE’s price, mainly because one cannot rule out the possibility of the asset being integrated into the firm’s social network ecosystem in the future. He added:
“If that happens, then the previously useless memecoin will turn into the platform’s central control token of sorts, reaching a massive audience in the process. Such a transformation will be able to bring the coin several use cases, something that many investors are betting on.”
To further strengthen his argument, Zuborev pointed to the upcoming launch of the SpaceX-backed Doge-1 lunar satellite, which is directly related to the brand of the coin. “These kinds of moves stand to provoke high demand in DOGE’s market and price growth,” he claimed.
That being said, he did concede that as long as the asset’s primary selling point remains rooted in its meme-centric outlook, it would only be wise to add the currency to one’s portfolio just to diversify it. However, as a standalone investment, he does not give much merit to DOGE.
“Besides Dogecoin, Musk has repeatedly spoken quite positively about Bitcoin as well, a crypto that is far more stable and can be integrated into Twitter’s ecosystem easily. One can consider it as an alternative to DOGE, especially to capitalize on Musk’s continued market manipulations,” he said.
DOGE’s utility is still minimal, and that’s a fact
Thanks to Musk’s affinity for Dogecoin and his recent takeover of Twitter, it stands to reason that speculation regarding the asset’s price will run amok, at least for some more time. That being said, the fact remains that Dogecoin as a crypto project is still quite limited in its operational utility, a sentiment echoed by Daniel Elsawey, co-founder and CEO of decentralized exchange TideFi.
Taking a more holistic view of the matter, he told Cointelegraph that cryptocurrencies in the digital asset space today fall into two distinct categories: those with smart contract capabilities and those without. In his opinion, the market as a whole is moving toward the tokenization of items in our day-to-day lives, and this is what stands to tip the adoption curve of digital assets toward one side or the other. He added:
“Given that DOGE cannot directly interact with smart contracts as part of its original design, I would say that unless it’s specifically used as an option for payment, the use cases associated will continue to remain speculative.”
Lastly, given that the crypto industry is still in its relative infancy, it continues to remain heavily dependent on Bitcoin (BTC), tracing its price movements quite heavily. Moreover, volatility continues to pervade the market due to the recent downfall of crypto exchange FTX, something that will have a direct effect on the price of most cryptocurrencies in the near to mid-term. “Dogecoin is no different in this respect. There is still a lot of uncertainty surrounding the asset,” Elsawey concluded.
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As we head into a future driven by a high degree of economic turbulence — across a myriad of financial sectors — it will be interesting to see how the future of Dogecoin plays out moving forward, especially as projects with limited use cases continue to be wiped out from the market seemingly with each passing day.
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Following the highly criticized New York Times article that features commentary from the former CEO of FTX, Sam Bankman-Fried (SBF), the public continues to give the mainstream media flak for publishing “puff pieces” about SBF and the Alameda Research executive Caroline Ellison. A number of articles have been called out for being too lenient on the former FTX and Alameda executives and even going as far complimenting the individuals.
Critics Say Specific FTX-Related Articles Published by Forbes, Washington Post, and the Wall Street Journal Give Praise to FTX and Alameda Execs
On Nov. 15, 2022, Bitcoin.com News published an article about the criticism a New York Times (NYT) article received after it published an article that said the former FTX executive Sam Bankman-Fried (SBF) was sleeping better and playing video games. People were not too pleased with the NYT article, and critics said at the time that the news publication went soft on SBF. The NYT article is not the only editorial that mainstream media (MSM) outlets have published that has caught flak for being soft on former FTX and Alameda executives and even praising the individuals.
For instance, critics slammed the Washington Post’s Dan Diamond for his report called “Before FTX collapse, founder poured millions into pandemic prevention.” Diamond’s report highlights SBF’s significant donations toward initiatives that would prevent another pandemic like Covid-19.
However, when the Washington Post tweeted Diamond’s story, the news outlet was dunked on for giving SBF praise. “Stop making him look noble. He was a crook running a Ponzi scheme,” on individual wrote to the Washington Post (WP). Another person replied to the WP’s tweet and said: “Where is the part that says ‘This Is a Sponsored Post.’”
The economist and trader Alex Krüger also knocked the WP article when he tweeted:
Incredible. The @washingtonpost also decided to write about FTX as if it were the case of a well intentioned charitable entrepreneur, rather than what it is: the most egregious financial fraud of the 21th century. What a disgrace.
Public Opinion Has Spoken: No One Cares That Alameda’s Top Exec Was a ‘Harry Potter Fan’ or So-Called ‘Math Whiz’
Some people called the Washington Post reporters clowns, and numerous people called Diamond’s reporting a “puff piece.” The NYT article and the Washington Post editorial were not the only articles condemned for singing praise to FTX and Alameda executives. A Forbes article was also slammed for propping up the former Alameda Research CEO Caroline Ellison.
At the time, the Twitter account called “Unusual Whales” tweeted: “This is wild by Forbes. Caroline Ellison is called a ‘math whiz’ and a person who ‘takes big risks.’” Unusual Whales added:
Rather than being called an individual who went against FTX’s own terms of services, allegedly used customer funds, and has not faced recourse.
Furthermore, when Forbes shared the article on Twitter, the description said that the FTX story was a “new darling of the alt-right.” One person wrote: “What happened to Forbes? They used to be better.”
“This spin is ridiculous. Caroline is ridiculed by everyone on the right and left,” Wayne Vaughan tweeted in reply to the Forbes’ take on Caroline Ellison. The whistleblower known as “Fatman” also shared his two cents on the MSM stories covering SBF and Alameda’s Ellison.
He also shared a screenshot of a reporter from Forbes that wanted to report on Ellison in a “nuanced way.” “I believe someone is funding a media campaign to influence the narrative around the FTX crew – who should be seen as nothing short of supervillains,” Fatman said. “Here is a Forbes reporter seeking favourable comments from ‘supporters’ instead of reporting on the actual facts.”
The Wall Street Journal (WSJ) has also been grilled for reporting on Alameda’s Ellison in a favorable manner. On the Reddit forum r/cryptocurrency, the Redditor “kindred_asura” shared a WSJ article that concentrates on Ellison. “Front page puff-piece about Caroline Ellison right now at the WSJ. Not ONE mention of fraud or illegal activities,” the Redditor said. The Reddit post got roughly 811 upvotes before r/cryptocurrency moderators decided to removed the post.
“I sure wish I never just ‘find myself’ losing billions of customers’ funds while running a fraudulent business,” the Redditor u/kindred_asura commented. Overall, a great deal of people seem to believe that MSM has purposely dropped the ball when reporting on FTX and Alameda executives.
Moreover, social media and Reddit forum posts arguably indicate that no one cares about SBF donating millions for pandemic prevention. Further, the hundreds of comments on social media and forums suggest that people certainly do not care about Ellison’s so-called “nerdy” behavior and the fact that she likes Harry Potter.
What do you think about the reporting mainstream media has done so far on the FTX scandal? Let us know what you think about this subject in the comments section below.
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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
In the wake of the FTX collapse that came about as a result of the now-bankrupt cryptocurrency exchange funneling user funds to mitigate its own risks, crypto exchanges came up with a transparency solution called proof-of-reserves.
A practice, which was recently endorsed by Binance CEO Changpeng Zhao, offers a way for exchanges to show provide transparency to users in the absence of clear regulations.
All crypto exchanges should do merkle-tree proof-of-reserves.
Banks run on fractional reserves.
Crypto exchanges should not.@Binance will start to do proof-of-reserves soon. Full transparency.— CZ Binance (@cz_binance) November 8, 2022
Proof of reserves (PoR) is an independent audit conducted by a third party that seeks to ensure that a custodian holds the assets it claims to own on behalf of its clients.
This auditor takes an anonymized snapshot of all balances held and aggregates them into a Merkle tree.
A Merkle is a cryptographic commitment scheme in which each “leaf,” or node, is labeled with a data block’s cryptographic hash. Their chief use to is to verify data that has been handled, sent or stored between computers. While invented in 1979, the concept has found extensive use in blockchain peer-to-peer networks.
After taking the snapshot, the auditor obtains a Merkle root: a cryptographic fingerprint that uniquely identifies the combination of these balances at the time when the snapshot was created.
The auditor then collects digital signatures produced by the crypto exchange, which prove ownership over the on-chain addresses with publicly verifiable balances. Lastly, the auditor compares and verifies that these balances exceed or match the client balances represented in the Merkle tree so that the client assets are held on a full-reserve basis.
A total of five centralized exchanges (CEXs) including Kraken, Bitmex, Coinfloor, Gate.io and HBTC have completed their proof-of-reserve audits while the likes of Binance, OKX, KuCoin, Huobi, Poloniex, Crypto.com, Deribit and Bitfinex have announced their plans to do the same.
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The PoR practice made sense and was lauded by many in the crypto community as it seemed like a step toward a more transparent crypto ecosystem. Centralized exchanges can note the liabilities of each account on a public ledger with specific assets held. They would have to publish with a tag that only account owners can know, thereby retaining public anonymity.
Hassan Sheikh, co-founder at decentralized venture capital firm DAO Maker, told Cointelegraph that PoR provides a clear summation of due liabilities that can be matched against assets. He added that good PoR practice could make it very difficult for exchanges to fake liabilities, explaining:
“If liabilities are ever faked, users can publicly raise a red flag. Even if 1% of users ever bother to verify, it’d be impossible for any CEX to which users would fall in that cautious 1%. The larger accounts would almost always verify, and the CEX could at best get away with skipping only a small fraction of small accounts before being detected.”
He added that with publicly released liabilities that retail investors can easily verify, “the asset disclosures which exchanges are making would finally make sense,” adding that the balances presented in these audits only “hold weight under the assumption liabilities are properly presented.”
Ben Sharon, the co-founder at digital asset management firm Illumishare SRG, told Cointelegraph that scammers will try to fake any audit, no matter how reliable proof of reserves are. He added that a proof-of-reserves audit is still a viable step to keep a check on crypto exchanges, but it’s not enough and suggested other measures, such as:
“Having a separate cash reserve, an asset-backed token, or better yet, having both, in addition to a proof-of-reserves certificate would offer investors a far better solution. At the end of the day, the only solution is complete transparency. When a crypto exchange is fully transparent, users should not be afraid to trust it with their assets.”
Showing proof of reserves without the liabilities means nothing
While the practice of PoR is becoming accepted by centralized exchanges with many starting to release PoR audit data, there is still the issue of crypto platforms moving their funds right after the snapshot for the audit was taken.
Crypto.com recently transferred 280,000 Ether (ETH) to Gate.io address after it released its PoR audit, fueling rumors about crypto exchanges potentially faking their reserve audits. Many in the crypto community claimed exchanges were borrowing assets to show a healthy financial book, only to return them back right after the snapshot.
Crypto.com CEO Kris Marszalek came out to clarify that the $400 million ETH transfer was a mistake and was meant to be sent to another cold wallet, raising even more suspicion.
It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address. We worked with Gate team and the funds were subsequently returned to our cold storage. New process and features were implemented to prevent this from reoccurring.
— Kris | Crypto.com (@kris) November 13, 2022
And, while some exchanges give detailed breakdowns of their reserves during a PoR, other firms simply provide quick responses claiming they are in the black. Nexo has simply come up with a one-page snapshot that says they have more assets than customer deposits of around $3.2 billion.
Looking at some of the reserves audits published by exchanges, Philipp Zimmerer, core contributor at decentralized finance protocol Spool.fi, told Cointelegraph that the main issue is that there are no formal rules for what exactly constitutes a proper PoR audit. This means that the procedure will differ between exchanges. He explained:
“Even if implemented in the most good-faith interpretation, a proof of reserves still cannot prove exclusive ownership of private keys or detect any funds that were borrowed to manipulate the outcome of the audit. Generally, the practice is only as trustworthy as the exchange and the auditors were to begin with, and will never constitute 100% proof of anything.”
He further noted that showing assets without showing liabilities is worth nothing. Only ones that can be “trusted to a degree are fully regulated, on-shore banking license holders that undergo regular, complete audits from known and independent firms.” He cited the example of Coinbase, which, as a publicly traded firm, makes its assets and liabilities public information.
Zimmerer also noted Kraken, another exchange registered in the United States, that does regular audits, the results of which it publishes and disseminates to the public.
Stefan Rust, CEO of data infrastructure provider Truflation, told Cointelegraph that looking at early implementation of PoR, it seems it is a good first step forward but in order to gain more trust and better transparency, a wiser approach will be to look at the overall balance sheet and monitor the liabilities while having transparency around capital reserves. It’s not just the reserves but also the exposure that the company has.
In the case of FTX, they had over 130 companies where they had divested the liabilities and the income. The same happened with WeWork and a number of other blowups in corporate land. Rust said:
“Proof of reserve is the first step. Proof of liabilities would be great, and in light of FTX, a must-have edition. Lastly, some sort of proof of incorporation or consolidation across related companies. We need to educate the market and the community on not only how to use these tools, but also the benefits of these tools. It’s important for users to understand why decentralization is really an essential part of not only the crypto ecosystem but the future financial and Web3.”
When asked the most reliable way to keep tabs on crypto exchanges, Don Guillaume, head of PR and communications at Gate.io, told Cointelegraph, “Regulation. Over the last few years we’ve seen positive steps across the world by regulators to ensure crypto exchanges, and really any company operating in the crypto industry, are regulated and following the rules of the law.”
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Overall, the fallout from the collapse of FTX has led to calls for greater regulatory oversight of the crypto market. While key market players continue to offer some form of transparency in order to regain public trust, experts believe proof of reserves alone cannot solely be relied upon.
The independent examiner in crypto lender Celsius’ bankruptcy case has alleged that the company failed to set up “sufficient” accounting and operational controls in its handling of customer funds.
In an interim report released on Nov. 19, examiner Shoba Pillay made a number of stark observations in her court-appointed investigation into the bankrupt cryptocurrency lending platform.
One of the main revelations in Pillay’s report was that Celsius’ “Custody” program was launched “without sufficient accounting and operational controls or technical infrastructure,” which allowed shortfalls in Custody wallets to be funded from its other holdings.
“[…] no effort was made to segregate or separately identify any assets associated with the Withhold accounts, which were commingled in the Main wallets.”
When it was launched on Apr. 15, Celsius’ Custody program allowed users to transfer, swap and use coins as loan collateral. It was introduced after the firm was ordered by the New Jersey security regulators to create a product that was distinguished from Celsius’ “Earn” product, which receives rewards.
This co-mingling of wallets means that there is now uncertainty on which assets belonged to the customer at the time of the bankruptcy filing, said Pillay, noting:
“As a result, customers now face uncertainty regarding which assets, if any, belonged to them as of the bankruptcy filing.”
The interim report has also shed light on what ultimately forced the lending platform to halt withdrawals on Jun. 12.
Pillay said the breaking point came around on Jun. 11, when customers’ Custody wallets became underfunded. By Jun. 24, this fell a further 24% to $50.5 million in underfunding.
The revelation comes as a filing with the New York-based bankruptcy court last week states that Celsius customers must file claims against Celsius by Jan. 3. 2023 in order to be eligible for distributions from the case.
However, customers who agree with Celsius’s scheduling of their claims do not need to submit proof of claim, according to a Nov. 20 Twitter post from Celsius.
Related: Celsius bankruptcy proceedings show complexities amid declining hope of recovery
Pillay said that Celsius’ Custody and Withdrawal programs were created on short notice following “intense regulatory pressure” from New Jersey’s Bureau of Securities, who started an investigation into whether Celsius’ “Earn” accounts constituted securities pursuant to U.S. securities laws in mid-2021.
Other accounting insufficiencies highlighted in the report include a revelation that Celsius, founded in 2017 by Alex Mashinsky and Daniel Leon, didn’t start tracking its balance sheet until after this confrontation with regulators in May. 2021, which it then used Google Sheets.
The collapse of the Terra ecosystem was one of the main factors that led to Celsius’ financial troubles in May. 2022, which saw its native coin, Luna Classic (LUNC), formerly LUNA, and the network’s algorithmic stablecoin TerraClassicUSD, USTC — previously TerraUSD (UST) — fall north of 98% in value.
Celsius also stated on Nov. 20 that its next court date is scheduled for Dec. 5, where they plan on advancing discussions around its Custody and Withhold accounts, among other matters.
One of the biggest factors differentiating Bitcoin (BTC) from fiat currency and most cryptocurrencies is the hard limit of 21 million on its total circulating supply making bitcoin scarcity the problem of the hour. However, the demise of numerous crypto exchanges over the last decade has permanently taken out at least 5.7% (1.2 million BTC) of the total issuable Bitcoin from circulation.
The lack of clarity around a crypto exchange’s proof of reserves came out as the primary reason for their sudden collapses, as seen recently with FTX. Historical data around crypto crashes revealed that 14 crypto exchanges, together, were responsible for the loss of 1,195,000 BTC, which represents 6.3% of the 19.2 Bitcoin currently in circulation.
Bitcoin Scarcity
An investigation conducted by Jameson Lopp, co-founder and chief technology officer of Bitcoin storage platform CasaHODL, revealed that Mt. Gox maintains the top position when it comes to exchanges losing BTC holdings.
While the scarcity of Bitcoin is directly related to its value as an asset, Lopp pointed out that fake Bitcoin offerings currently threaten the ecosystem, adding that “Bitcoin will not be a great store of value if most people are buying fake bitcoin.” Investigations confirm that at least 80 crypto assets have “Bitcoin” in their names, aimed purely to mislead BTC investors.
As a result, investors purchasing fake Bitcoin assets negatively impact the price appreciation of the original Bitcoin.
80+ crypto assets have the word “bitcoin” in their name.
14 have a market cap over $1,000,000.
3 claim to be Bitcoin.
1 is Bitcoin.— Jameson Lopp (@lopp) September 22, 2022
To ensure Bitcoin’s position as sound money, self-custody comes out as the most effective way to reduce reliance on crypto exchanges and corporate “paper Bitcoin” contracts.
Related: Blockstream CEO Adam Back talks Bitcoin over a game of Jenga
Salvadoran President Nayib Bukele announced plans to acquire 1 BTC every day starting from Nov. 17, 2022.
We are buying one #Bitcoin every day starting tomorrow.
— Nayib Bukele (@nayibbukele) November 17, 2022
Public records show that El Salvador currently holds 2,381 BTC at an average buying price of $43,357. However, stagnant Bitcoin performance opened up a window of opportunity for the country to substantially bring down its average price of Bitcoin acquisition.
Bitcoin Price Prediction from famous Tim Draper drops for 2023
Tim Draper’s 2023 Bitcoin price prediction of $250,000 remains unchanged
Despite the current problems in the crypto business, billionaire venture capitalist and serial blockchain investor Tim Draper is sticking with his near-term Bitcoin prognosis. Despite the present crypto crisis by FTX, Draper remains unwavering in his belief that Bitcoin will reach $250,000 in 2023.
Draper had this to say about the recent FTX fiasco, “FTX was centralized, dependent on a single founder… when a currency is centralized, a central bank, for example, has a single point of failure and may also be manipulated”. He further states that since BTC is decentralized as opposed to the nature of the FTX exchange, he has full reasons to believe BTC wouldn’t be affected in the long-term by FTX’s failure.”
“There has been no adjustment to our pricing forecast”, he adds. He still hopes Bitcoin would get to $250,000 in 2023. He also claims that the most recent events have once again exposed the worst weaknesses of centralized finance, and hence the fall FTX will very likely only accelerate the decentralization of crypto. “I think this fiasco is going to bring on a lot more Bitcoin maximalists. Note that your money is not secure in a centralized system, whether crypto or fiat.”
In relevant news, Draper issued his now-famous Bitcoin prediction, saying that BTC will reach $250,000 by the end of 2022 or the beginning of 2023. Despite severe bear markets and the consequences of the bankruptcy of major crypto exchanges and investment organizations, the investor has repeatedly reaffirmed his prognosis.
However, not everyone is as bullish on the future value of Bitcoin as Draper. On November 7, a Bitcoin supporter criticized Draper’s estimate on Twitter, stating that it’s evident Bitcoin won’t touch $250,000 by mid-2023. Referring to the late John McAfee’s incorrect Bitcoin forecast, he urged reflection on the past. Binance’s CEO, Changpeng Zhao, claims that the FTX debacle has pushed the crypto sector back many years and that further regulation is on the horizon.
How to Mine Bitcoin?
Bitcoin mining is the process of creating valid blocks that add transaction records to Bitcoin’s (BTC) public ledger, which is called a blockchain. It is a crucial component of the Bitcoin network as it solves the so-called “double-spend problem.”
The double-spend problem refers to the issue of needing to find consensus on a history of transactions. Ownership of Bitcoin can be proven mathematically through public-key cryptography. However, cryptography alone cannot guarantee that one particular coin hadn’t previously been sent to someone else.
To form a shared history of transactions, one needs to have an agreed-upon ordering that is based on, for example, the time of the creation of each transaction. But any external input can be manipulated by whoever provides it, requiring participants to trust that third party.
How does Bitcoin mining work?
Mining (blockchain mining, in general) leverages economic incentives to provide a reliable and trustless way of ordering data. The third parties ordering transactions are decentralized, and they receive monetary rewards for correct behavior. On the contrary, any misbehavior results in a loss of economic resources, at least as long as the majority remains honest.
In the case of Bitcoin mining, this result is achieved by creating a succession of blocks that can be mathematically proven to have been stacked in the correct order with a certain commitment of resources. The process hinges on the mathematical properties of a cryptographic hash — a way to encode data in a standardized manner.
Hashes are a one-way encryption tool, meaning that decrypting them to their input data is nearly impossible, unless every possible combination is tested until the result matches the given hash. So, how is Bitcoin mined?
This is what Bitcoin miners do: They cycle through trillions of hashes every second until they find one that satisfies a condition called “difficulty.” Both the difficulty and the hash are very large numbers expressed in bits, so the condition simply requires the hash to be lower than the difficulty.
Difficulty readjusts every 2016 Bitcoin block — or approximately two weeks — to maintain a constant block time, which refers to how long it takes to find each new block while mining.
The hash generated by miners is used as an identifier for any particular block and is composed of the data found in the block header. The most important components of the hash are the Merkle root — another aggregated hash that encapsulates the signatures of all transactions in that block — and the previous block’s unique hash.
This means that altering even the tiniest component of a block would noticeably change its expected hash — and that of every following block, too. Nodes would instantly reject this incorrect version of the blockchain, protecting the network from tampering.
Through the difficulty requirement, the system guarantees that Bitcoin miners put in real work — the time and electricity spent in hashing through the possible combinations. This is why Bitcoin’s consensus protocol is called “proof-of-work,” to distinguish it from other types of block-creation mechanisms. To attack the network, malicious entities have no method other than recreating the entirety of its mining power. For Bitcoin, that would cost billions of dollars.
But, how long does it take to mine 1 Bitcoin. One BTC typically takes around 10 minutes to create, although this is only true for strong processors. The Bitcoin mining hardware you use will determine how quickly you can mine.
Why mine Bitcoin?
In many aspects, Bitcoin mining is comparable to mining for gold. Crypto mining (in Bitcoin’s case) is a computer operation that creates new Bitcoin and tracks transactions and ownership of the cryptocurrency. Bitcoin and gold mining are both energy-intensive and can produce significant financial rewards.
Therefore, you can mine BTC to earn profit/rewards. Some BTC miners build Bitcoin mining pools by combining their efforts with other miners. Groups of miners who work together have a more significant chance of earning rewards and splitting the profits. In addition, members of a mining pool pay a fee to be a part of the pool.
If your focus is not on money, you might want to mine Bitcoin if you enjoy playing with computers and learning about this new technology. For example, while doing Bitcoin mining configuration, you can learn how your computer and blockchain-based networks work.
Is Bitcoin mining worth it?
To find an answer to the above question, please conduct a cost-benefit analysis (using web-based calculators) to see whether Bitcoin mining is worth your effort. A cost-benefit analysis is a systematic method that organizations use to determine which actions should be undertaken and which should be avoided.
First, determine whether you are willing to invest the required initial capital in hardware and determine the future value of Bitcoin and the level of difficulty before committing your resources. It’s also crucial to examine the amount of difficulty specific to the cryptocurrency you wish to mine to see if the mining operation would be even lucrative.
When both Bitcoin prices and mining difficulty fall, it usually means fewer miners are mining BTC and that acquiring BTC is easier. Nonetheless, expect more miners to compete for fewer BTC as Bitcoin prices and mining difficulty climb.
Is Bitcoin mining legal?
If you’re wondering whether Bitcoin mining is legal — the answer is yes, considering the acceptance by various jurisdictions. For example, Enigma (based in Iceland) opened one of the world’s most extensive Bitcoin mining operations.
Crypto mining is considered a business in Israel and is subject to the corporate income tax. On the other hand, crypto miners are considered money transmitters by the Financial Crimes Enforcement Network (FinCEN) in the United States, meaning they may be subject to the rules that govern that conduct.
In addition, near the base of the Conchagua volcano, a new “Bitcoin city” will be built in the shape of a coin, as announced by El Salvador’s President Nayib Bukele in November 2021. Bitcoin mining will be powered by geothermal energy throughout the city. El Salvador will raise a billion-dollar “Bitcoin bond” with the help of crypto infrastructure provider Blockstream to commence construction of the city.
However, in Algeria, Nepal, Russia, Bolivia, Egypt, Morocco, Ecuador, and Pakistan, Bitcoin mining is prohibited. You should always check local rules where you live to find out if Bitcoin mining is legal in your jurisdiction.
How are Bitcoin miners paid?
The network recognizes the work conducted by Bitcoin miners in the form of providing rewards for generating new blocks. There are two types of rewards: new Bitcoin created with each block, and fees paid by users to transact on the network. But, how much does a Miner earn?
The block reward of newly minted Bitcoin, amounting to 6.25 BTC as of May 2020, is the majority of the miners’ revenue. This value is programmed to halve at fixed intervals of approximately four years so that eventually, no more Bitcoin is mined and only transaction fees will guarantee the security of the network.
By 2040, the block reward will have decreased to less than 0.2 BTC and only 80,000 Bitcoin out of 21 million will be left up for grabs. Only after 2140 will mining effectively end as the final BTC is slowly mined.
Even though the block reward decreases over time, past halvings have been amply compensated by increases in the Bitcoin price. While this is no guarantee of future results, Bitcoin miners enjoy a relative degree of certainty about their prospects. The community is very supportive of the current mining arrangement and has no plans to phase it out like Ethereum, another major mineable coin. With the right conditions, individual Bitcoin miners can be confident that the venture will turn a profit.
Although mining is a competitive business, starting is still relatively easy. In the early years of Bitcoin, hobbyists could simply boot up some software on their computer and get started right away. Those days are long gone, but setting up a dedicated Bitcoin miner is not as hard as it may seem at first.
How to choose hardware for Bitcoin mining?
If you are curious how you would go about mining Bitcoin, the first thing to note is that for mining BTC, your only option is to buy a Bitcoin mining machine, i.e., an Application-Specific Integrated Circuit device, commonly referred to as an ASIC.
These devices can only mine Bitcoin, but they are highly efficient in doing so. They are so efficient that their introduction around 2013 made all other types of calculating mining devices obsolete almost overnight.
If you are looking to mine with common CPUs, GPUs or more advanced FPGAs, you will need to look into other coins. Although these devices can mine Bitcoin, they do so at such a slow pace that it’s just a waste of time and electricity.
For reference, the best graphics card available just before the rise of ASICs, the AMD 7970, produced 800 million hashes per second. Now, an average ASIC produces 100 trillion hashes per second — a 125,000-fold difference.
The number of hashes produced in a second is commonly referred to as the “hash rate” and it is an important performance measurement for mining devices.
Two other factors should be considered when purchasing a Bitcoin mining device. One is the electricity consumption, measured in watts. Between two devices that produce the same number of hashes, the one that uses the least electricity will be more profitable.
The third measure is the unit cost for each device. It is pointless to have the most energy-efficient ASIC in the world if it takes 10 years to pay itself back through mining.
Bitcoin has a fairly vibrant ecosystem of ASIC manufacturers, which often differ on these three parameters. Some may produce more efficient but also more expensive ASICs, while others make lower-performing hardware that comes at a cheaper price. Before analyzing which device is best suited for your needs, it is important to understand the other factors influencing profits from Bitcoin mining.
The economics of mining Bitcoin
Like the real estate business, Bitcoin mining is all about location, location, location. Different places in the world will have a different average price of electricity. Residential electricity in many developed countries is often far too expensive for mining to be financially viable.
With the price of electricity often ranging between $0.15 and $0.25 per kilowatt-hour, Bitcoin mining in residential areas runs too high a bill to remain consistently profitable.
Professional Bitcoin miners will often place their operations in regions where electricity is very cheap. Some of these include the Sichuan region in China, Iceland, the Irkutsk region in Russia, as well as some areas in the United States and Canada. These regions will usually have some form of cheap local electricity generation such as hydroelectric dams.
The prices enjoyed by these Bitcoin miners will often be below $0.06 per KWh, which is usually low enough to turn a profit even during market downturns. In general, prices below $0.10 are recommended to maintain a resilient operation. Finding the right location for mining is largely dictated by one’s circumstances. People living in developing countries may not need to go further than their own home, while those in developed countries are likely to have higher barriers to entry.
Is Bitcoin mining profitable?
Aside from the choice of hardware, an individual miner’s profit and revenue depend strongly on market conditions and the presence of other miners. During bull markets, the price of Bitcoin may skyrocket higher, which results in the BTC they mine being worth more on a dollar basis.
However, positive inflows from bull markets are counterbalanced by other Bitcoin miners seeing the increased profits and purchasing more devices to tap into the revenue stream. The result is that each miner now generates less BTC than before.
Eventually, the revenue generated trends toward an equilibrium point where less efficient miners begin to earn less than they spend on electricity, thus shutting devices off and allowing others to earn more Bitcoin.
Usually, this does not happen instantaneously. There is a certain lag, as ASICs can sometimes not be produced quickly enough to make up for the increase in Bitcoin price.
In a bear market, the opposite principle holds: Revenue is depressed until miners begin to turn off their devices en masse. To avoid being outcompeted, existing Bitcoin miners must find a winning combination of location and hardware that would allow them to maintain their edge. They must also constantly maintain and reinvest their capital, as more efficient hardware can throttle older miners’ profits completely.
Comparison of mining hardware profitability
There are several calculators online on websites such as AsicMinerValue, CryptoCompare and Nicehash, where the profitability of a mining device can be quickly checked. It’s also possible to estimate profit manually with the following formula:
This is the formula that many of these calculators use, and it simply represents your share of the overall hash rate divided by the network’s total issuance in dollars. The input values required are either fixed parameters (the block time for Bitcoin is 10 minutes, so there are six blocks mined in an hour and 144 in a day), or they can be found on data websites like Blockchain.com or Coinmetrics.
To find the profit, one also needs to subtract the cost of electricity. Thanks to the equivalence between kilowatts and kilowatt hours, this can be as simple as multiplying the device’s power usage by 24 hours in a day and the electricity price per kilowatt hour.
Below is a table illustrating major ASICs currently on the market and their payback period — that is, how long it would take for the investment to break even on current revenues. It’s worth noting that a Bitcoin miner’s profit fluctuates wildly over time, and extrapolating a single day into the future can lead to inaccurate results. Nonetheless, it’s a useful metric to understand the relative effectiveness of each device.
As can be seen in the table, none of the ASICs turn a profit at prices of $0.20 per KWh. The relative performance is mostly the same for each of the new-generation ASICs, while older models can be an attractive proposition if electricity is cheap.
For example, the Canaan AvalonMiner 1066 has low energy efficiency but also a very low price, making it fairly competitive at the low electricity price bracket despite being a fairly old model. The Bitmain S17 Pro, a previous-generation ASIC, still holds its ground due to its lower cost, but quickly becomes unattractive when the reference electricity price rate is raised. MicroBT’s devices appear to have the most balanced performance overall for mining.
One final issue to consider is that this table was compiled in a bull market. Profits may be higher than average, though the halving of 2020 is still fresh and may counterbalance the effect with lower Bitcoin issuance.
Buying and setting up the hardware
Several shops sell ASICs to retail customers, while some manufacturers also allow direct purchases. Though they are more difficult to source than common graphics cards, it is still possible for anyone to buy an ASIC at an acceptable price. It is worth noting that buying mining equipment from shops or manufacturers shipping from foreign countries may result in hefty import dues.
Depending on the manufacturer or the shop, ASICs may be offered without a power supply unit, which will then need to be purchased separately. Some ASIC manufacturers sell their own units, but it is also possible to use PSUs built for servers or gaming computers, though they are likely to require special modifications.
ASICs need to be connected to the internet via an ethernet cable, and they can only be configured through a web browser by connecting to the local IP address, similar to a home router.
Before carrying on, it is necessary to set up an account with a mining pool of choice, which will then provide detailed information on how to connect to its servers. From the ASIC’s web panel, you need to insert the pool’s connection endpoints and account information. The miner will then begin working and generating Bitcoin.
Mining through an established pool is strongly advised, as you will be able to generate constant returns by pooling your hardware with others. While your device may not always find the correct hash to create a block, your mining contribution will still be rewarded.
Considerations and risks of Bitcoin mining
In addition to the financial risk of not turning a profit, there are technical risks involved in managing high-power devices such as ASICs. Proper ventilation is required to avoid the mining equipment burning out components due to overheating. The entirety of the miner’s electricity consumption is dissipated into its environment as heat, and one ASIC is likely to be the single-most powerful appliance in your home or office.
That also means you need to carefully consider the limits of your electrical grid when Bitcoin mining. Your home’s electricity network is rated up to a maximum level of power, and each socket has its own rating too. Exceeding those limits could easily result in either frequent outages or electrical fires. Consult an expert to determine whether your Bitcoin mining setup is safe.
Regular maintenance against dust and other environmental factors is also required to keep the mining devices healthy. While failures are relatively rare, ASICs can go out of commission earlier than expected without proper maintenance.
While single ASICs may fail, the largest threat to their profitability is the prospect that they may become obsolete. More efficient miners will eventually crowd out older devices.
Historic generations of miners like the Bitmain S9, released around 2016, lasted approximately four years before becoming unprofitable under any electricity price configuration (except zero). However, the speed of advances in computing technology is largely unpredictable.
Bitcoin mining is no exception to any other venture. There is potential for rewards as well as risks. Hopefully, this guide provided a decent starting point to further evaluate both.
The FIFA World Cup in Qatar is boosting the value of national soccer team fan tokens despite the cryptocurrency bear market.
World Cup Qatar hype boosts fan token prices
These digital fan tokens are currently rallying despite the cryptocurrency market downturn, securing up to 170% gains from the Nov. 10 lows. At the core of the massive uptrend is the World Cup, which will be held from Nov. 20 to Dec. 18 in Qatar.
Fan tokens are cryptocurrencies that enable fans to engage with and participate in their favorite team’s decisions. Moreover, they create new sponsorship opportunities for sports clubs and national squads outside of traditional revenue sources.
Here’s a brief overview of the top gainers in the fan token sector, alongside their technical outlook during the course of the World Cup.
Spain National Football Team Fan Token (SNFT)
The Spain National Football Team Fan Token (SNFT) emerged as the top gainer in the sports token section, rising 170% to a high of $0.54 on Nov. 19, nine days after bottoming out at $0.20.
SNFT’s outperformance versus other fan crypto tokens may reflect the Spanish football team’s higher odds of winning the World Cup in 2022. But in traditional terms, Spain’s odds of winning the trophy is +800, meaning betting $100 would yield $800, according to Vegas Insider.
From a technical perspective, SNFT trades inside a neutral zone, as confirmed by its daily relative strength index (RSI) at around 58, below its overbought threshold of 70.
In other words, SNFT shows potential to continue its rally during the World Cup and its price should reflect how the Spain National Football team performs.
For instance, back-to-back wins for Spain may stretch SNFT’s valuation above its current resistance level of $0.538 for a potential run-up toward its record high near $0.718, as shown in the four-hour chart below.
Conversely, a pullback from $0.538 could have SNFT eye a correction toward $0.412, down about 18% from today’s price.
Spain will next play Costa Rica on Nov. 23 in the Group E category, followed by a standoff against Germany on Nov. 28.
Brazil National Football Team Fan Token (BFT)
The Brazil National Football Team Fan Token (BFT) appears to be the crypto market’s second favorite fan token. Its price has rallied 130% in just nine days, from $0.45 on Nov. 10 to over $1 on Nov. 19.
Brazil is the favorite to win the World Cup this year with +350 odds in traditional betting circles, meaning a $100 bet would return $350. That could serve as a fundamental factor behind BFT’s growth in the coming weeks, given the token still has room to run based on its neutral daily RSI.
As of Nov. 19, BFT eyes a breakout above $1.05, its current resistance level, toward its short-term upside target at around $1.16. An extended rally could occur if Brazil wins the World Cup on Dec. 18, paving the path toward $1.31, up 25% from today’s price.
Related: Metaverse community with 3M users adds utility with FIFA World Cup 2022™ collaboration
Conversely, a pullback would risk sending BFT toward $0.82, its October 2022 support level.
Brazil’s first match is against Serbia on Nov. 25 in Group G, followed by a standoff against Switzerland on Nov. 28.
Portugal National Team Fan Token (POR)
The Portugal National Team Fan Token (POR) is the third-best performer in the ongoing fan token boom, rising about 100% to $6 on Nov. 19, nine days after hitting lows of $3.10.
Traditional bookies measure Portugal’s odds of winning the World Cup at +1600, meaning betting $100 would yield about $1,600.
POR now tests $6 as its resistance, with its daily RSI near 64, just six points below its overbought threshold. A decisive pullback from the said price ceiling could have POR eye a correction toward $4.80, its support level from September-October 2022.
Conversely, continued success in the World Cup for Portugal may flip the scenario to bullish, leading POR above its $6-resistance to eye a rally toward or above $7.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
