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Ellipal TITAN Review (2020) | Best Air-Gapped Crypto Hardware Wallet?

Is the new Ellipal Titan crypto hardware wallet all hype? Or is it the real deal? How secure is it? Why is it different than the Ledger Nano X or the Trezor Model T? Well, buckle up, because this wallet is far different than anyone I’ve used in a while and in a very good way. In fact, I would go as far as to say that this is probably my favorite hardware wallet of 2019. But why? What makes is so special? I am going to dive into that below in detail and what makes it so securely different than the original and most popular wallets out there today.

Before I jump into the nitty-gritty details of this wallet, I want to point out that in the week or so that I’ve used this wallet, I have actively moved over a handful of my larger holdings from other hardware wallets over to this one. This is for the obvious security advantages and wireless method in which you manage it, which I will explain below. With this cold wallet, you no longer need a computer to manage your offline holdings, and in a predominantly wireless world, this is becoming more and more important. Details will follow below, you will NOT be disappointed.

Let’s get right into the Ellipal Titan Review!

 

 

 

 

ELLIPAL TITAN: WHATS IN THE BOX?

 

 

The Ellipal Titan device comes with the same items in the box as the Ellipal 2.0, with the only difference being that there is a magnetic adapter that connects to the bottom of the device. This adapter includes the charging port and SD card slot port for updating firmware and signing offline transactions. The Ellipal 2.0 device has these on the device itself, whereas the Titan has no ports or openings on it whatsoever, making it stronger and more secure.

 

Box includes:

  • ELLIPAL Titan Cold Wallet
  • Rechargeable battery
  • Charging cable
  • Mnemonics card
  • Warranty card
  • User manual

 

 

 

HOW DO YOU SET UP THIS AIR-GAPPED DEVICE?

 

 

This is very simple. It pairs with a mobile app that is available for iOS and Android. This helps you initialize and setup the device and generate all QR codes needed to transfer your funds from the hot wallet app, onto the cold storage device. This process is identical to the Ellipal 2.0 process, however, you now have access to longer PIN’s and extra security features. Additionally, since the device has a camera, transferring funds off of the device and back onto a mobile wallet is very secure and convenient as well.

The entire process only took me about 7-10 minutes from start to finish, including writing down your mnemonic phrase.

There is a full step-by-step setup guide for both Ellipal devices HERE.

 

 

 

WHAT COINS ARE SUPPORTED?

 

This is always the section I check the most when reviewing hardware wallets, because although functionality and security are important, none of that matters unless it supports the coins you want to store offline. So here is the current list of supported coins and the one that are currently in development listed in the below picture.

 

 

This is the only wallet that supports over 26 different blockchains. With multiple tokens on the EOS, TRX, BNB, and of course ETH blockchain, there is plenty of room for expansion. Some of the unique coins that are supported on this hardware wallet NATIVELY that you won’t find on any other hardware wallet out there include: Cardano (ADA), Decred (DCR), Cyber Miles (CMT), and Smart Cash (SMART).

There are some oldies, but goodies (coins) that are currently in development that technically will work with 3rd party integration with wallets like Ledger and Trezor. I can’t express enough how important (and convenient) having native coin support on a hardware wallet is, especially a wallet as secure as this one. Some of my favorite coins that are coming soon are: Monero (XMR), Tezos (XTZ), SiaCoin (SC), and Nano (NANO). As I mentioned, some of these have 3rd party wallet integration currently elsewhere, but I’m personally waiting for these to be released here to move them over for easier management.

According to their website, they are also adding new coins every month and have consistent firmware upgrades, which is administered from a magnetic puck that is completely disconnected and attaches to the bottom and also has an SD card slot for signing transactions offline. This attachment is also how the device is charged as well. I have used this device for a little over a week now and I have yet to charge it yet.

 

 

 

DECENTRALIZED EXCHANGE + FEATURES

 

 

I will briefly touch on this as it’s definitely worth mentioning. This feature allows you  to not only have direct coin to coin conversion, but it also allows for staking, for instance on the upcoming Tezos support and other POS coins. This is all done in the app and you can swap them offline once you authenticate. Additionally, you can now earn interest on your USDT, for up to 7% annualized when you cold stake it your wallet. You never give up your private keys, so there is no risk. It’s honestly a win-win situation if you have USDT if you have it sitting on your cold wallet.

It connects to Binance DEX, which is a decentralized exchange and looks very promising. Additionally, you will be able to earn interest and manage your staking rewards offline in future firmware upgrades, which is a HUGE selling point for me.

 

 

 

ELLIPAL TITAN – CONCLUSION

 

 

Overall, after using this wallet for only about a week, it’s been my favorite and most secure wallet I’ve used EVER. Now, I still use the KeepKey for trading and offline portfolio management for day to day transactions, and I still love that device (you can read the in-depth review HERE, if you haven’t already). However, I’ve moved a lot of my private keys over to this wallet due to it’s more secure secure nature and bull-proof form factor. The user experience is done exceptionally well, and supports some really unique coins and blockchains that you won’t find anywhere else.

The closest wallet to this in terms of security and form factor is the Cobo Vault, but this is 3X cheaper and holds a lot more coins. The outer shell is IP65 rated and can withstand drops and even getting wet via a splash or even the rain. It’d constructed in a VERY durable way, and feels extremely solid and well built when you hold it in your hand. It’s very satisfying.

Don’t get my wrong, convenience is also important, but Ellipal really brought a unique form of security to the table here by having a very rugged and durable device that has ZERO online connections. You can transfer your crypto funds between its companion hot wallet and vice versa anytime, but the cold wallet never goes online, which is really nice and gives me peace of mind.

For a limited time, you can also get their mnemonic metal recovery seed (a $49 value)  for only $29 when you bundle it with the Ellipal Titan. That means you can secure your crypto and your recovery seed backup for under $200 all in. This is a STEAL, as this is something I practice myself and believe it is absolutely NECESSARY for any person who takes their crypto seriously.

I also wrote a review recently on the Ellipal Mnemonic Metal recovery seed backup device HERE, if you want to educate yourself on why they are so important. I will leave the special referral link below to get this device, and I for one am VERY excited to use it and see how “durable” it really is.

 

 

What do you guys think? Have you ever used a device more secure than this for your crypto? Let me know below!

 

Cheers,

 

The Crypto Renegade

 

NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.

Ledger Wallet Ripple: How To Store Ripple (XRP) On The Ledger Nano S (2020)

In this article, I am going to explain how to store Ripple (XRP) on the Ledger Nano S in the Ledger Wallet Ripple. Most people I speak with talk about whether or not XRP is safe to leave on exchanges for storage. The simple answer is no. Under no circumstances is it safe or even a slightly good idea to leave ANY coins your have on an exchange. “Not your keys, not your crypto” is a statement you’ll hear repeated throughout the crypto ecosystem. If you are unsure about the safest ways to store and secure your cryptocurrency private keys, then grab my free e-book that gives you some in depth resources on how to manage your crypto safely. I also wrote a comparison review of the major differences of hot vs cold wallets, in case you are unsure. ledger wallet ripple

Now, as Ripple is a top 3 market cap coin, it is imperative to know how to properly store it on a hardware wallet, and the one wallet that can easily store this right now is the Ledger Nano S. You can also store it on the newly released successor to this wallet known as the Ledger Nano X, if you want a larger storage capacity and a wallet that is wirelessly capable. Let’s get to it below!

 

WHAT IS RIPPLE (XRP)?

 

Ripple is both a platform and a currency. Let me explain. Ripple itself is platform and open source protocol which is designed for quick and cheap transactions. This was “invested” as a resource for efficient, cross-border payments that is intended to be used by big banks. The Ripple platform is very very cheap and efficient and unlike bitcoin, it is designed as a payment machine and nothing more.

XRP (the token that is represented on the ripple platform) is designed to transfer value across the Ripple platform. The intention behind this is to be able to transfer value from either cryptocurrency or fiat from peer to peer in the fastest way possible. That is it’s only function.

The other noteworthy aspect of this is, there is a predetermined amount and it is not mined or staked, like it is on POW and POS networks. In fact, there is no blockchain for this token at all. This has been the source of a lot of criticism in the ecosystem that this is not really a “crypto” currency, but rather, just a digital version of fiat.

 

HOW DO I BUY RIPPLE (XRP)?

You can buy ripple directly at many OTC exchanges, or other trading exchanges like Coinbase or Binance. When using Coinbase, you can link up your bank account and/or major debit card to process the transaction and if you’re not verified, it can take up to 7-10 business days to process.

If you plan on buying XRP with a credit card directly, you can use either Paxful or Changelly and use this as an OTC exchange to buy it directly (although paying with credit card will incur some extra fees). You can also go through a 2-step process and buy bitcoin with a credit card on Coinmama, and then use one of the above exchanges to swap it.

 

LEDGER WALLET RIPPLE: HOW DO I MOVE RIPPLE TO THE LEDGER NANO S?

 

  1. Open up Ledger Live, and make sure it’s software version is up to date.
  2. Head over to the Manager section on the left side bar, and search on “XRP”, then click on Install.To create an XRP wallet on your Ledger device, we first need to create an “account” for you to be able to have access to your wallet’s XRP address.
    1. Click on the rounded + symbol on the left portion of the Ledger Live app to add an account.
    2. Type in “xrp” on the search bar to easily find XRP on the list, then click on “Continue“.
    3. Open the XRP app on your Ledger device, then click on “Continue“.
    4. Wait for Ledger Live to synchronize.
    5. Choose a name for your wallet. For this example, we’re just going to name our wallet “My XRP Wallet“.
    6. Tick the blue checkbox , then click on “Add account“.
    7. Account successfully added!Click on “Add more” if you want to create more XRP wallets, or if you want to head over to moving your funds to your XRP wallet, just click on the small x on the top right corner of this popup.
    8. Your XRP wallet is now ready. Simply click on the XRP wallet you made on the “Accounts” section on the left, then click on the blue “Receive” button.
    9. Click on “Continue“.
    10. Click on “Verify“.
    11. For security purposes, check if the same wallet address is being shown on the Ledger Live app, and the address shown on your physical Ledger device.If everything’s fine, you can now copy the wallet address shown on Ledger Live, and you can now use that address to move your funds from other XRP wallets, or from the exchange you’re using.

 

WHAT ABOUT THE NEW LEDGER NANO X?

The Ledger Nano X has the same process as above for adding it to your hardware wallet using Ledger Live, the only difference is it is primarily done via the mobile app. You can still plug this device in and manage this the same way as the Ledger Nano S, however, it is able to connect to the app and manage this wirelessly, which is the major advantage.

 

CONCLUSION

 

Bottom line, if you’re in the market to acquire this coin, you will absolutely need to store it on a Ledger device. Keeping all your private keys (of any coin) on a trusted hardware wallet is imperative. Period. I will say that with the Ledger Nano S specifically, is the cheapest and is the best entry level hardware wallet if you want to store ripple at only $59. The one caveat is that you can only store 3 or 4 different coins on the app at once, that’s it. If you plan to grow your portfolio, you may want to spring for the extra money and go for the Ledger Nano X, which can hold up to 100 coins or “apps” at once. I will leave the full review of the Ledger Nano S here.

 

What do you think? Is there a better offline wallet to store your XRP? Let me know in the comments below!

 

Cheers,

 

The Crypto Renegade

 

NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.

Bitcoin Fees: How To Check When You’re Sending A Transaction (2020)

In this article, I’m going to address how to check what the bitcoin fees are for bitcoin and other cryptocurrencies. Not many people think about the “fees” when sending their first bitcoin transaction, as it’s just so exhilarating that you can transact value without permission from a bank or other institution. 

This is really a minute detail, however the fees for sending a bitcoin transaction back in 2017 was upwards of 75$ when it was at it’s peak. This means you need to be able to determine if the fees are a “fair” price at a moments notice and if it will significantly cost you to move your bitcoin.

Luckily, there are a few different resources you can use to check not only what the current bitcoin fees are, but also check out the fees for other cryptocurrencies and Ethereum as well. Additionally, you need to be able to determine what the cost structure is and if you can pay more for a priority transaction. Well, I’m here to break it all down for you. Let’s get started with the #1 resource I use on a regular basis to check the current fees for sending bitcoin in a transaction!

Before I jump down there, I wanted to provide you with a free resource for protecting your cryptocurrency and it’s a free e-book I recently wrote and you can obtain it for free on my website here at the top right corner in an orange button. “5 Best Ways To Secure Your Cryptocurrency” is available to download now! Go grab it!

 

HOW TO CHECK BITCOIN FEES ON BITCOINFEES.INFO

 

Bitcoinfees.info is one of the best resources to check real-time bitcoin fees and what amount of time you would need to wait for your transaction to be confirmed for that fee. For example, it will let you know what the estimated fee is if you want it confirmed in the next block (10 mins), within the next 3 blocks (30 mins), or next 6 blocks (60 mins).

As you wait longer the fees will go down, but not drastically. To provide a frame of reference, the current fees at the time of this writing is $2.17 USD fee for having my transaction in the next block and $0.78 cents in the next 6 blocks.

This varies and fluctuates and is determined by the demand in volume and what specific mining pools are charging and maintaining a competitive marketplace. Why are there fees if they receive a block reward already? Well, to put it frankly, because they can.

Bitcoin miners are the groups of people that use their hash power to ensure the transaction is not only confirmed, but that it’s also safe and secure. It is a necessary component for the network and ecosystem to flourish and maintain economic incentive.

This site also shows your daily, monthly, and yearly averages in the form of charts and graphs to show you how this progresses overtime. They also consider that the average bitcoin transaction is 250 satoshis per byte large for measuring these averages. This also includes the basis of the 1 MB blocks that the current block size represents and would not relate to the fees for the lightning network.

 

HOW TO CHECK BITCOIN FEES ON COINBASE

The fees charged by Coinbase are pretty low. But they can add up, especially if you use the service often. You will see the buying and selling fees we described above.

There may also be fixed and variable fees depending on the amount of the transaction. And when your purchases are smaller, there is a flat fee charged.

 

Here are the flat fees for the smaller transactions:

  • If you are buying or selling in the amount of $10.99 or less, the fee is $0.99
  • If you are buying or selling between $11 and 26.49, the fee is $1.49
  • If you are buying or selling from $26.50 to $51.99, the fee is $1.99
  • If you are buying or selling from $52 to $78.05, the fee is $2.99

 

This is a fairly low and tiered system, but as you can see, this fee is for Coinbase and does not include any miner fees or network fees. So please keep in mind that that you will need to add the two totals together in order to find out what you will actually be paying.

 

HOW TO CHECK ETHEREUM FEES

For ETH, I typically go to ETH Gas Station for this information as it’s the most real-time and accurate in my experience. When sending Ether in a transaction, it uses a component of fees known as “Gas”. What is gas? It’s essentially a fraction of Ethereum that is required to pay for the transaction and is typically much cheaper than bitcoin transaction fees. This also applies to ERC-20 tokens and security tokens as well as they are built on top of the Ethereum network.

This has several other tools to estimate transactions for a specific block and also if you want it applied to s specific smart contract on the network. It includes anything else you may need to know including what mining pools are currently verifying on the network, what the estimated wait time is to have your transaction included in a specific block, and also how full or empty these blocks are.

All in all, this is the only resource I need when trying to estimate how much I will be paying in fees and the only other resource I might use is the specific block explorer I would use in order to verify the status of my transaction. For those of you who do not know what a block explorer is, it is basically a way for you to check the status of your transaction and how many confirmations it’s received before it’s delivered to the recipient.

CONCLUSION

 

Overall, these are the most common resources you will use to check the transaction fees for bitcoin and Ethereum as these are the largest networks by volume and therefore, the most likely to be used when sending crypto. You can also check each individual blockchain if you want to determine what the fees are for, say “Monero” for example.

In the event I want to know what the estimated fees for that example would be to attempt a transaction when sending from my hot wallet, or I would simply use google and include the “coins name + transaction fees” to get the most accurate result. These examples hopefully clarify some of the questions that surround how much you will pay in fees at an given time on these popular coins and networks. Until next time…

 

What are your favorite resources to check crypto transaction fees? Sound off in the comments below!

 

Cheers,

 

The Crypto Renegade

 

NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.

How To Store Your Tezos (XTZ) On The Ledger Nano S (2020)

In this article, I will tell you how to store your Tezos on the Ledger Nano S. As an investor in Tezos since the ICO, I have really studied what makes this a true market differentiator. This has a true consensus and a self-amending ledger, which is really powerful.

This means that no matter what, there will not be a “fork” of the network and will not have to worry about a network split. The downside is, you cannot split off and have people follow you and start a new version of this blockchain. What is built here will be verified by a true democracy and will always stay in tact. However, people will always have the power to leave if they do not like it.

I believe the that being able to contribute to secure a POS blockchain that will allow EVERYONE to participate is very interesting and also pretty powerful. I think they have cracked the code and this may very well become the platform that people will build new dApps on, as it is more scalable than Ethereum in this way.

No matter your use case, if you are going to participate in Tezos it is wise to store your keys securely. The absolute best solution for securely storing Tezos is to use a hardware wallet.

.When you use a hardware wallet such as the Ledger Nano S, the private keys used to access your tokens never leave the device. Ledger hardware wallet owners can manage their tezzies using the Tezos Wallet application within Ledger Live. With Tezos Wallet, you can:

 

  1. Store your Tezos securely
  2. Transfer Tezos to others via secure transaction
  3. Delegate your Tezos for use in baking and voting

 

This guide provides a step-by-step guide on how to install Tezos Wallet on your Ledger Nano S and create a wallet with three different Tezos wallet providers: Galleon, Magnum Wallet, and TezBox. Although you technically have 3 options to do this, I recommend using TezBox as it’s the easiest one to use in my opinion. The user interface is very easy to use and I highly recommend it for baking.

 

WHAT YOU’LL NEED

 

To secure Tezos with a Ledger Nano S, you will need:

  • An initialized Ledger Nano S with the latest firmware installed — currently 1.5.5 (as of May 2019)
  • Ledger Live installed on your machine and ready to use

That’s it!

 

How To Store Your Tezos: INSTALLING TEZOS WALLET THROUGH LEDGER LIVE

Image result for tezos ledger live

To install Tezos Wallet on your Ledger Nano S:

  1. Open Manager in Ledger Live using the Manager button in the left sidebar.
  2. Connect your Ledger Nano S and unlock it using your PIN.
  3. Your Ledger Nano S will prompt you to Allow Ledger Manager? To connect, press the right button on your Ledger device.
  4. Find Tezos Wallet in the app catalog, either by searching for ‘Tezos Wallet’ or scrolling through the available apps.
  5. Click Install on Tezos Wallet’s icon to install the application. Your hardware wallet will display Processing… and Ledger Live will show an installation window.This may take up to 1-2 minutes. Successful installation will be confirmed in Ledger Live when complete.

 

CREATING A WALLET

 

Now that you have Tezos Wallet installed on your Ledger Nano S, you are ready to create a wallet. There are several wallet great providers you can use! Below are the steps to get started with three of them: Galleon, Magnum Wallet, and TezBox.

 

GALLEON (LEAST RECOMMENDED)

 

  1. Visit Galleon’s Website, where you can download a version of the wallet for Windows, MacOS, or Linux.
  2. Open Galleon. You’ll be asked to choose a language, and agree to their Terms of Service.
  3. Connect Galleon to your Ledger device. Plug your Ledger device into your computer, enter your PIN, and open Tezos Wallet. Then, select Connect with Ledger in Galleon.
  4. Create Your Wallet. After clicking Connect with Ledger, Galleon will wait for you to confirm this action on your hardware wallet. This is done by clicking the top-right button on your Ledger device with the green checkmark. Your Ledger device’s screen should alternate between Provide Public Key? and the Public Key Hash you will be using to create your wallet in Galleon. Press the right button on your Ledger device to create it!

You’re Done! For more information on how to use Galleon, see their tutorials!

 

MAGNUM WALLET (MODERATELY RECOMMENDED)

 

  1. Visit Magnum Wallet’s Website using a U2F compatible browser, such as Chrome, Firefox, or Brave. Click Create Wallet to visit their wallet website, where you should click Create a New Wallet to get started.
  2. Create a Password. Magnum Wallet will prompt you to create a password for securing your funds. Once you have entered and confirmed your password, click Next.
  3. Link your Ledger Nano S. After you have created a password, you’ll be brought to Magnum Wallet’s main dashboard, which gives you information of on all the tokens supported. In the top left, click to Link Your Device (outlined in green below).

A modal (pop-up) will appear over the screen with the option to import a wallet. In this case, we want to create a new wallet. Select Create at the top of the modal. Select the token you’d like to create a wallet for (Tezos), that you’d like to Link Hardware Wallet, and that the device you’re using is a Ledger Nano S. Your screen should now look like this:

Click Create to make your wallet!

  1. Verify your address. Now, you’ll be prompted on your Ledger device to Provide Public Key?. You’ll also be shown the Public Key Hash of your wallet. Press the right button on your Ledger Nano S to verify your address and continue.

You’re done! You’ll now be at your wallet’s dashboard within Magnum Wallet, where you can send and receive Tezos or delegate them to a baker!

 

TEZBOX (MOST RECOMMENDED)

 

You can download TezBox for Mac or Windows, use their Chrome Plugin, or use their wallet in the browser! We’ll demonstrate the in-browser application in this guide.

  1. Visit the Tezbox Web Wallet using a U2F (Universal two-factor) compatible browser, such as Chrome, Firefox, or Opera. Here, you’ll be greeted with the option to create a wallet, restore one, or link TezBox to a hardware wallet. Click Link your TezBox.
  2. Link your Ledger device to TezBox by clicking Link TexBox in the as seen in the user interface below.

how to store your tezos

  1. Verify your address. On your Ledger device, you will be prompted to Provide Public Key? and the screen will also show the Public Key Hash with which you are creating the wallet. Press the right button on your hardware wallet to verify. TezBox will confirm a successful linking after this step.
  2. Create a Password. Next, you’ll be asked to create a password to secure your wallet. Enter and re-enter a password, then choose Encrypt Wallet.

That’s It! After entering a password, you’ll be on your wallet’s page, where you can send and delegate Tezos.

 

CONCLUSION

 

As of the time of this writing, only the Ledger Nano S is the only hardware wallet that supports offline Tezos and not even the Ledger Nano X works at this time. It should be noted that there is no “native” app for Tezos via Ledger Live. What does that mean? It essentially means that you are required to use one of the above 3rd party wallets in order to properly secure your Tezos and manage your balances, send, receive, and the ability to manage baking and delegation.

So why would you go through these steps? Because you control the private keys and that is what is important. When a hardware wallet starts supporting this functionality natively, it will have a huge edge over the competition (I’m looking at you KeepKey). Additionally, there has been an influx of more exchanges getting hacked, with no signs of stopping. It is CRUCIAL, that you always maintain control of your private keys at all times. When you send them to an exchange, you technically do not own them anymore, until they decide to send them back to you.

Bottomline: If you own any Tezos, or plan on acquiring any in the near future, I would strongly recommend that you get a Ledger Nano S. At the time of this writing it is only $59, which is the cheapest hardware wallet of the primary market leaders. Tezos is sure to move it’s way into the top 10 market cap very soon and I expect the price to do something similar to what Ethereum did in 2017.

 

CLICK HERE TO BUY A LEDGER NANO S FROM THEIR OFFICIAL SITE

 

What do you think? Would you keep your Tezos keys on a Hot Wallet? Please let me know below in the comments!

 

Cheers,

 

The Crypto Renegade

 

NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.

How To Invest In And Trade Cryptocurrencies (Beginner’s Guide)

In this article, I will go over how to invest in and trade cryptocurrencies. Cryptocurrency is a hot topic these days, especially with volume and steam picking on on price this week picking up over $7,000 per bitcoin. How many times have we heard stories of people becoming overnight millionaires and, at the same time, stories of people who lost hundreds of thousands of dollars hoping to make a quick buck?

So, if you are looking to invest in crypto in a safe manner, then this guide is for you. The purpose of this guide is to help educate individuals as much as possible and to reduce speculation in the market.

 

HOW TO INVEST IN CRYPTOCURRENCIES BASICS:

 

The very fact that you are reading this guide shows us that you are interested in investing in cryptocurrencies. These immutable and exchangeable cryptographic token promise to become a hard and non-manipulatable money for the whole world. Their advocates see a future in which Bitcoin or other cryptocurrencies will substitute Euro, Dollar and so on and create the first free and hard world currency.

Besides what was already said, there are three major good reasons to invest in cryptocurrencies.

First, because you want to hedge your net-worth against the fall of the Dollar, which is assumed by many people to inevitably happen at some time. Second, because you support the social vision behind cryptocurrencies – that of a free and hard money for the whole world. Third, because you understand and like the technology behind it.

However, there are also very bad reasons to invest in cryptocurrencies. Many people fall victim to the hype surrounding every cryptocurrency-bubble. There is always somebody captured by FOMO (fear of missing out), buying massively in at the peak of a bubble, just in hope to make quick money, while not understanding cryptocurrencies at all. That’s a bad reason. Don’t do this. Learn before you invest. Early stage investors in Bitcoin and Ethereum made millions of dollars in pure profits.

In a one-year time span from December 2016 to December 2017, Bitcoin went from $750 to a staggering $20,000! This means that anybody who invested $10,000 in December 2016, would get back a mind-numbing $133,333 in exactly 365 days. In fact, the total market cap of cryptocurrencies went all the way u pto an astounding $500 billion (half a trillion) by end of 2017.

Stories like that flooded the internet and more and more people joined the crypto hype to get a slice of that crypto pie. However, as more and more speculators flooded the market, the inevitable happened.

The market took a huge dip.

With Bitcoin taking a dip, all the other currencies took a dip, and lots of people lost their entire life savings.

In this guide, we are going to show you how you can educate yourself to make an intelligent investment. Having said that, let’s start with our first lesson.

 

BE OK WITH TAKING RISKS

 

Because the volatility of cryptocurrencies  exceeds that of any other investment class, they are not a normal investment. Plus, there is always the risk that your country may outlaw cryptocurrency trading and exchange. If that’s the case, then you should make your peace with not liquidating your crypto assets, or hold them on a hardware wallet until you can use them for transactions.

So, the important takeaway here is to only risk as much money as you can afford. Like Wence Casares, CEO of Xapo, sums it up in an AMA on bitcoin.com:

“I always tell them [my family] that the second most stupid thing they could do right now is to own an amount of bitcoins they cannot afford to lose and the most stupid thing they could do would be to not own any. “

 

DON’T FORGET: THERE ARE OTHER COINS

 

Up until late 2016 Bitcoin was the cryptocurrency, and there was not much besides it. If you wanted to invest in the success of cryptocurrencies, you bought Bitcoin. Period. Other cryptocurrencies – called “Altcoins” – have just been penny stocks on shady online-markets, mostly used to keep miner’s GPUs working, pump the price and dump the coins.

However, this has changed. While Bitcoin is still the dominant cryptocurrency, in 2017 it’s share of the whole crypto-market rapidly fell from 90 to around 40 percent, and it sits around 50% as of September 2018.

There are several reasons for that. While Bitcoin remains the undisputed king of cryptocurrencies, many people have questioned its future utility. Firstly, there were new and exciting cryptocurrencies coming out secondly, Bitcoin was suffering from severe performance issues and it looked like the Bitcoin community were nowhere near to solving this problem. The block-size issue, in particular, was a huge bone of contention in the community, which ultimately led to the creation of bitcoin cash and the splitting up of the community.

So, the question is, what coins can you potentially invest in?

Well, for that you will go to coinmarketcap.com.

This website lists down cryptocurrencies in decreasing order of market cap. Market cap means the value of all token available. It is not a perfect metric, but likely the best we have to recognize the value of a cryptocurrency.

This is the reason why coinmarketcap is a useful tool to have in your hand.

 

WHAT IS THE UTILITY THAT THE COIN IS BRINGING INTO THE SYSTEM? DOES IT “NEED” TO EXIST?

 

So, you have gone through the market caps and decided on the bunch of coins that you wanted to invest in? Awesome job. However, this is where the real work begins.

The first thing that you need to do is to read their whitepapers. Now, we understand that reading PDFs may not be the most exciting of things, however, you absolutely have to put in the work beforehand before you reap any sort of benefits.

Reading the whitepaper itself will give you two tremendous benefits:

  • Firstly, you will be more knowledgeable about the coin itself and learn about the utility that it is bringing into the ecosystem.
  • Secondly, a poorly written whitepaper is often a good sign of knowing whether a project is worth investing or not. If the team itself can’t simply explain the true utility of their token, then it is probably not worth investing into.

A white paper is the bread and butter of any and all ICOs. According to Wikipedia. “A white paper is an authoritative report or guide that informs readers concisely about a complex issue and presents the issuing body’s philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision.” how to invest in and trade cryptocurrencies

In simpler terms, a white paper can tell potential investors everything they need to know about the project. This is the reason why an ICO which doesn’t have a whitepaper should simply be looked over.

Another thing that most ICOs realize is that majority investors simply won’t bother to read through the whitepaper. This is the reason why they simply outsource their whitepapers to cheap freelance writers who end up creating proper works of art. “Art” is being used extremely liberally here of course. Checkout this gem of a whitepaper by “Arbitrage Crypto Trader”.

Here is an extract from the whitepaper:

“However, the arbitration did not die definitively. He again in favor, thanks to the appearance of cryptocurrency. All of us see that right now quotations bitkoyna on different stock exchanges differ from each other by 1-5%. And for some of the Altocums, the difference can sometimes be as high as 50%.”

It’s ok, don’t bother making sense of it.

A well-crafted whitepaper can define a generation. Just look at what Bitcoin’s whitepaper has done to this era. An ICO which doesn’t bother putting in any effort shouldn’t be given any attention.

Having said that, after you read a decently written whitepaper, there are some decisions that you will need to make.

 

1ST CHECK: THE VALUE THAT THE PROJECT IS BRINGING IN

 

Firstly, check the project to see whether the coin is bringing in any real utility into the ecosystem. The perfect example of this is Ethereum. There is a reason why it took of so fast, think of the sheer value that it was bringing in. For the first time, developers around the world had a platform which they could use to build their own dapps on a blockchain.

Along with that, keep in mind of the issues that cryptoworld is desperately looking to solve, mainly: privacy, scalability, and interoperability. A good way to go about your investing is to find the projects which are specifically working on solving the aforementioned problems. Here are some of the projects that are looking to solve each of the three aforementioned problems:

 

2ND CHECK: DOES THE PROJECT NEED TOKENS?

 

So, how do you make sure that you are getting good quality tokens?

You inspect the project and ask yourself the following questions:

  • Does this project need to be on the blockchain?
  • Does this project need to have tokens?

If the answer for any of those happens to be “No”, then those projects don’t need a token and those projects are doing an ICO simply to raise money. There is a way to find out the true utility of the token.

 

DEEP DIVE: WHAT ROLES THAT A TOKEN CAN TAKE UP:

 

Right

By taking possession of a particular token, the holder gets a certain amount of rights within the ecosystem. Eg. by having DAO coins in your possession, you could have had voting rights inside the DAO to decide which projects get funding and which don’t.

Value Exchange

The tokens create an internal economic system within the confines of the project itself. The tokens can help the buyers and sellers trade value within the ecosystem. This helps people gain rewards upon completion of particular tasks. This creation and maintenance of individual, internal economies are one of the most important tasks of Tokens.

Toll

It can also act as a toll gateway in order for you to use certain functionalities of a particular system. Eg. in Golem, you need to have GNT (golem tokens) to gain access to the benefits of the Golem supercomputer.

Function

The token can also enable the holders to enrich the user experience inside the confines of the particular environment. Eg. In Brave (a web browser), holders of BAT (tokens used in Brave) will get the rights to enrich customer experience by using their tokens to add advertisements or other attention based services on the Brave platform.

Currency

Can be used as a store of value which can be used to conduct transactions both inside and outside the given ecosystem.

Earnings

Helps in an equitable distribution of profits or other related financial benefits among investors in a particular project.

So, how does this all help in token utility?

If you want to maximize the amount of utility that your token can provide then you need to tick off more than one of these properties. The more properties you can tick off, the more utility and value your token brings into your ecosystem. If the role of your tokens cannot be clearly explained, or if it doesn’t really tick off more than one of the roles given above, then your token doesn’t have any utility and you can do without it.

Now, why shouldn’t you take useless tokens with little to no utility?

For that, we need to understand the concept of token velocity. Token velocity is an indication of how much people respect the value of that particular token. If people hold on to a token, then it has low velocity. However, if people quickly sell that token for BTC, ETH, or Fiat then that token has high velocity.

If you were to define Token Velocity in strictly mathematical terms, then it would look like this:

Token Velocity = Total Transactional Volume / Average Network Value.

If we were to flip the formula then:

Average Network Value = Total Transactional Volume / Token Velocity.

Now, that leads to two conclusions:

  • More the token velocity, less the average network value.
  • More the transactional volume, more the token velocity.

This is the reason why, you should work for a project whose tokens actually have some utility and gives their users a reason to hold on to them.

Alright, so now that you know what kinds of coins you should invest in, we will now teach you how to look for obvious signs of scams.

 

LOOK OUT FOR OBVIOUS SCAMS

Good coins have a transparent technical vision, an active development team, and a vivid, enthusiastic community. Bad coins are in transparent, promote fuzzy technical advantages without explaining how to reach them, and have a community which is mostly focused on getting rich quick. Maybe the worst kind of cryptocurrencies are the MLM coins, for example, Bitconnect. We will talk more about Bitconnect in a bit. However, what are some of the more obvious signs of scams?

 

#1 THE TEAM

 

It really goes without saying that the success of a project is directly related to the credibility of the team. Let’s put it like this, if you are investing your money into a company, wouldn’t you want to know that the company is in good hands and that your money is going to be appreciated considerably?

Let’s look at one of the most successful projects of all time, OmiseGO. Not only do they have an incredible team, they also count people like Vitalik Buterin and Lightning Network Creator Joseph Poon among their advisors as well. So it is no wonder that they had no trouble getting their funds and their investors are now enjoying a healthy return as well.

Obviously, most of the time it won’t be this obvious to know whether the team is actually garbage or not. In cases like that, you should adopt a more hands on approach.

First, search for the names of the team members on Google. Most of the time they should have a LinkedIn profile. Do a quick search and learn more about the team members. Ask yourself the following questions:

  • Have they been involved in any successful ICO venture before?
  • Have they been involved in a well-reputed company (Google, Deloitte, etc.)?
  • Have they been recommended or endorsed by well known people?

It doesn’t matter if you come across as stalkerish. You must put in this work so that you don’t end up wasting your time and resources later.

Secondly, you should search for the images of the team members on Google. The reasons for this, is again, twofold.

  • Firstly, you want to make sure that you are not getting “catfished”. Meaning, they are not putting up photos of random celebrities or stock photos on their team site.
  • Secondly, the person maybe using the same photo on different websites and projects. So it will give you a good idea about whether the person actually exists or not and, if they do, what the are involved with.

 

#2 PYRAMID SCHEME RESEMBLANCE

According to Wikipedia, “A pyramid scheme (commonly known as pyramid scams) is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products or services. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.”

An ICO that promises “guaranteed returns” on their investment is a scam. Any crypto investor worth their salt will tell you that will tell you that there are no guarantees in the crypto world.

One of the most infamous examples of this is Bitconnect. Let’s take a look at their website and promises.

If you see anything like that in a website, then don’t bother taking any of their bounties. Simple as that.

You don’t want to end up with tokens like these:

 

#3 INACTIVE GITHUB REPOSITORY

 

An active GitHub repository is a good indicator to show how seriously development has been going on in the project.

 

BUYING BITCOIN…WITHOUT BUYING THEM

While some years ago it was a real Odyssey to buy cryptocurrencies, today you have a full scope of options.

Let’s begin with buying Bitcoin. That’s the easiest part. Some people want to invest in Bitcoin without having the trouble of storing them.

All these investment products have in common that they enable investors to bet on Bitcoin’s price without actually buying Bitcoin. While most cryptocurrency-fans think that this takes away the whole fun and sense of it, for many people it is the easiest way to invest in Bitcoin’s success. You can use the investment channels you already are used to, and if something goes wrong, you have your certificate and someone to take to the court.

Currently, no such investment product exists which covers more cryptocurrencies. But there are some in progress, both in the USA and in Europe.

 

BUYING CRYPTOCURRENCIES: THE TWO KINDS OF EXCHANGES

 

The exchange serves one of the most critical functions in the crypto ecosystem. It basically acts as a portal between the Fiat world and the crypto world. There are usually two types of exchanges:

  • Fiat to Crypto.
  • Crypto to Crypto.

 

FIAT TO CRYPTO

Fiat to Crypto exchanges helps you buy Cryptocurrencies in exchange for Fiat money. Coinbase is a perfect example of this kind of exchange. Coinbase helps you buy BTC, BCH, LTC, and ETH in exchange for Fiat currency.

 

CRYPTO TO CRYPTO

 

Then we have the Crypto to Crypto exchanges. These exchanges help you exchange certain cryptos like BTC, ETH, BCH etc. for other cryptocurrencies. Binance is a fine example of a crypto-to-crypto exchange.

While they do offer pretty valuable services, the problem is that they are all centralized, which makes them vulnerable. This is an extremely risky proposition when you consider the sheer amount of money that these exchanges deal with each and every single day.

When it comes to buying crypto from these exchange themselves, it is really not that complicated.

  • First, open up an account at the exchange
  • You then verify your identity – this is required due to Anti-Money-Laundering (AML”) rules in most jurisdictions
  • Fund your account with Dollar or Euro or whatever paper money you use. On some exchanges, like Bitcoin.de, you don’t need to fund your account, but trade directly with other users.

The question, what exchange to use depends mostly where you live. It’s alway better to use an exchange physically close to you. If it is located in the same jurisdiction like you, you have the best chances to get money legally back if some bad things happen. If no exchange is located in your jurisdiction, it is better to use exchanges based in stable countries with a good legal system.

Another factor to decide which exchange you use is some coins you want to buy and your patience. If you want to acquire large sums of Bitcoins quickly, you need to use one of the major exchanges which provide enough liquidity. If you only want to buy small amounts of coins and if you are not in a hurry, you can try to buy them on small exchanges. If your order gets filled, you most likely will get better prices than on big exchanges. Check out the best crypto exchange.

 

IS THERE A GOOD TIME TO BUY?

There is no general rule when to buy cryptocurrencies. Usually it is not a good idea to buy in at the peak of a bubble, and usually, it is also not a good idea to buy it when it is crashing. Never catch a falling knife, as the trader’s wisdom says. Best time might be when the price is stable at a relatively low level.

The art of trading is to decide when a crypto is in bubble mode and when it reached the bottom after falling. What is easy to say in retrospective is a hard question in the present, which can never be answered with absolute certainty. Sometimes a coin starts to raise, and after it passes a mark, where everybody thinks this must be the peak of a bubble, the real rally just begins.

For example, many people did not buy Bitcoin at $1,000 or Ether at $100, because it seemed to be crazily expensive. But some month later these prices appear to have been a good moment to start.

There is only two advice about timing we can give. First, don’t compare crypto bubbles with traditional financial bubbles. 10 percent up is not a bubble but can be daily volatility. 100 percent up can be a bubble, but often it is just the start of it. 1,000 percent might be a bubble usually, but there is no guarantee that it pops.

Second, take some time to watch. Don’t buy in, because there was a dip. There might be another. And don’t buy in, because you fear that it will explode tomorrow. Watch it, get yourself informed, buy it, when you think the timing is good. And, maybe most important: don’t be a weak hand. Don’t sell too early. Hold. The monetary revolution has just started.

 

HOW TO STORE CRYPTOCURRENCIES?

Alright, so you bought your cryptocurrencies, where exactly should you store them? Well first and foremost…

Keep them off the Exchange!

There is absolutely no way that you should keep your coins in an exchange. There is a long history of hacks and bankruptcies in cryptocurrency markets, most famous the hack of Mt. Gox, which sucked up hundreds of millions of customer’s Dollars.

You need a hardware wallet. You can get one buy going to the top of the page under “Crypto Hardware Wallets” and see what we recommend in the drop down menu.

 

WHAT’S THE DEAL WITH TAXES?

 

Disclaimer: We are no tax bureau nor tax consultants. If you have issues with taxes, and if large sums are at stake, you better ask your local tax consultant.

Right now there are only a few tax consultants who know how to deal with cryptocurrencies. But it can be safely assumed that the number is growing quickly and that cryptocurrencies will soon be a standard issue for tax experts like securities, shares, ETFs and real estates are.

All we can provide here is an overview of the typical issues with cryptocurrencies and taxes..

 

No Free Lunch

 

Nothing is for sure, except death and taxes. The same goes on with cryptocurrencies. If you earn money by investing in cryptocurrencies, you likely have to pay taxes. Like it is with everything else.

How you need to tax cryptocurrency investment returns is up to your national tax jurisdiction.

 

The Good News …

 

There is some good news about the topic of cryptocurrencies and taxes. First, in nearly every country of the world cryptocurrencies are VAT exempt. Like with every financial product you don’t need to pay VAT when selling Bitcoin. There have been some ideas of tax authorities in Poland, Estonia, Germany, Australia and Sweden to demand VAT on crypto sales, but after the European Court smashed this down in an important decision, VAT for Bitcoins seems to have become a non-topic.

Another good news is that in some jurisdictions you have to pay nearly no taxes. Amazingly Germany, a country usually known for very high tax rates, has become a tax haven for cryptocurrencies. Like the USA and many other countries, Germany considers Bitcoin not a financial product, but a property. This means that if you earn money by trading it, you don’t pay a flat tax for financial income – which is 25 percent, for example for bank account interest – but you have to tax the profit of buying and selling cryptocurrencies like income.

It’s more as you sold your house than a security.

You bought 10 Bitcoins for 1,000 Euro and sold them for 2,000? Your taxable income increased by 10,000 Euro.

You bought one bitcoin for 100 Euro and ordered a 10-Euro-pizza when the price was 1,000 Euro? Your income increased by 9 Euro. In most cases, the tax rate for this is higher than for financial gains.

However, there is a loophole. If you hold your coins for more than 1 year, you don’t need to pay taxes at all when you sell it. This rule was added to dis-incentivize day trading of other properties and stabilize prices by incentivizing holders. For cryptocurrencies it made Germany, and also the Netherlands, which apply the same rules, to tax havens. Some countries might have similar rules. In doubt, your tax advisor can help you out.

One problem the one year rule poses is that you need to prove that you hold the crypto for this timeframe. Usually, exchanges can help you with prints of your trade history. Also, you can use the public blockchain as a proof of storage. In most cryptocurrencies, it is transparent when coins are received and spent by a particular address. But not in all. For example, Monero uses Ring Signatures and Confidential Transactions, which are great tools to maintain anonymity. But the downside is that they make it more or less impossible to prove that you hold coins more than one year. Maybe you take this into account when selecting coins for your portfolio.

 

The Bad News …

.

If you use a good exchange and keep track of your trades, taxing Bitcoin is possible, but also a pain in the ass. You need to calculate every single profit, not just from trading, but also from using Bitcoins to pay for things.

But that’s just the beginning. Things become really a complicated nightmare if it comes to Altcoins. For the tax authorities, an Altcoin counts like Bitcoin. In most countries, this means it is not a financial product, but a property. If you buy it with Bitcoin and sell it for Bitcoin, you have to tax the difference, but not in Bitcoin, but in Dollar or you national paper money. This means, you not only need to keep track of all your Altcoin trades, but you also need to take into account the price of Bitcoin when buying and selling.

Obviously, this makes things extremely complicated. You can have a bad trade, resulting in getting less Bitcoin back than you invested, but being still, in theory, accountable to taxes, when the price of Bitcoin did soar between your trades. So you lost money in trading but have to pay taxes for it.

At this moment you should accept the fact that cryptocurrencies are something new and that you are no expert in dealing with your financial authorities. Go for a tax consultant, educate him or her about cryptocurrencies and look forward to talking with confused financial authority officials.

 

CONCLUSION:

 

This is an introduction to investing and trading in cryptocurrencies. Even though this was a lot of information, this is just the tip of the iceberg. If you want to follow what trade setup’s I use and what I follow, please follow my YouTube Channel for more insight into this. I am not a financial advisor and you should consult a professional when dealing with these matters, as a disclaimer, but this is valid and helpful information I followed when I got started and understanding this new industry. Good luck on your journey!

What do you think? Is there something you recommend for people getting started? Let me know in the comments below!

 

Cheers,

 

The Crypto Renegade

 

NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.

What are STO’s? [Security Token Offerings] (Beginner’s Guide)

What are STO’s? The massive rise of ICOs throughout 2017 and early 2018 was unprecedented and brought about an entirely new method for raising enormous sums of funding in mere minutes. However, the sheer volume of ICOs that turned out to be scams, didn’t deliver on their promises, or ran out of funding before releasing a product led to the precipitous decline of the ICO in the latter half of 2018.

The power of blockchain-based tokens to create more flexible financial assets and instruments did not dissipate though. Decentralized finance (DeFi) is on the rise, with financial instruments from collateralized debt platforms to decentralized prediction markets materializing left and right.

One of the primary focuses of a DeFi landscape is the transition of conventional financial securities into digital tokens on a blockchain.

Commonly referred to as ‘security tokens,’ these assets are securities representing equity or debt with a digital wrapper around them — designed to provide a suite of advantages and flexibility to the assets.

Following in the footsteps of the ICO, the ‘Security Token Offering’ (STO) has garnered widespread attention as an ecosystem of investors, service providers, exchanges, and more jostle for position in a blossoming market. Security tokens have some intriguing prospects, and the STO presents a valuable tool for companies to issue digital assets on the blockchain.

 

WHAT IS A SECURITY?

A traditional financial security is a fungible instrument that holds value and can represent either debt or equity.

Securities as equity can represent ownership in a company (stock), where owners can profit from capital gains on the asset or even receive dividends payments in specific cases. Equity security holders can either be in public or private companies, and owners are usually entitled to some form of ownership in the company.

Securities representing debt is a representation of borrowed money, which must be paid back and is subject to various loan conditions. There are numerous types of debt securities including:

  • Government bonds
  • Collateralized Debt Obligations (CDOs)
  • Collateralized Mortgage Obligations (CMOs)
  • Corporate Bonds
  • Certificate of Deposits

Debt security holders are typically authorized to receive interest payments on the principal loan amount, and they can be backed by several means — including collateralized and non-collateralized.

Securities play a significant role in finance and are more relevant to STOs in their ability to be leveraged for raising funding. Companies can raise enormous sums via Initial Public Offerings (IPOs) of equity when they go public, and governments can even issue municipal bonds to raise funds.

Public securities are traded on major stock exchanges and can be transferred between investors on secondary markets as assets.

 

SECURITY TOKENS AND SECURITY TOKEN OFFERINGS (STO’S)

Common misconceptions around security tokens are that they are different from securities. Although they exist on a blockchain, they are ostensibly securities, subject to the same regulations and case law precedence as traditional securities.

However, security tokens offer some unique advantages — particularly in improving secondary market liquidity, reduced compliance costs, automating trade restrictions, providing fractional ownership, and enabling asset interoperability.

STOs have opened an opportunity for businesses to raise funds by issuing digital security tokens to investors in a regulatory-compliant manner. The advantages exist for both the investor and the issuer, while also providing much better assurances against fraud compared to an ICO. Issuers can come from a variety of areas, including commercial real estate, venture capital firms, and small and medium enterprises (SMEs).

There is discussion around the semantics of what constitutes a ‘security token’ or a ‘tokenized security,’ but for all intents and purposes, STOs in this context focus on the launching of new security tokens and not tokenizing existing financial assets.

One of the most straightforward and beneficial applications of an STO is with an SME looking to raise funding when they cannot tap into commercial banking services. Parallel with the rise of other DeFi services, SMEs can access open financial services — issuing security tokens for investors to obtain on the blockchain. This has important consequences for lowering barriers to access for retail investors and concurrently providing powerful financial services to SMEs in local and regional areas where they have historically been limited in their financial capacities.

Additionally, SMEs issuing security tokens offer an excellent example for highlighting the multiple participants required in the security token ecosystem.

 

WHO PARTICIPATES IN THE SECURITY TOKEN ECOSYSTEM?

If an SME (i.e., Company A) wishes to issue security tokens representing equity in their company, they can do so with the help of multiple market participants including:

 

  • Issuance Platforms
  • Exchanges
  • Custodians
  • Broker-Dealers
  • Legal/Compliance

 

Company A can formally issue their security token to investors via an issuance platform. Well-known issuance platforms include Polymath and Harbor, which are integrated with service providers like custodians, broker-dealers, and legal/compliance entities to facilitate a secure and regulatory-compliant process.

Developers for issuance platforms also work on standardized token interfaces (i.e., ST-20 for Polymath and R-Token for Harbor) that hard-code regulatory parameters into token contracts such as explicit trading restrictions. Standardized token interfaces for security tokens also enable interoperability of assets, which has positive downstream effects in secondary market liquidity and reduced friction in token trading.

Custodians are popular for storing digital tokens in secure cold-storage –, particularly with institutions. BitGo is one of the most established digital asset custodians, and custodians often partner with exchanges or issuance platforms.

Exchanges exist for investors to trade security tokens, enabling better access to capital, enhanced secondary liquidity, and democratized investor access to securities. tZero is a high-profile exchange that recently went live, backed by Overstock. Company A’s security tokens can trade on exchanges like tZero where investors undergo KYC/AML verification. Some exchanges can even operate as issuance platforms as well.

As an SME, Company A’s security tokens can be offered to retail investors who are largely precluded from SME investment opportunities due to various barriers of entry. However, democratizing such access to security tokens can help SMEs raise funding from local communities, providing a compelling boon for small enterprises and assisting in the growth of local businesses.

Open financial frameworks like Mt. Pelerin even seek to provide SME marketplaces for entities like Company A to tap into broad, open financial services on the blockchain.

Other applications of security tokens — which are already underway today — include commercial real estate investments funds (i.e., REITs) that reduce high investment minimums and even enable concepts like fractionalized ownership to emerge. Harbor has already hosted an STO for a South Carolina residential building with a significantly reduced investment minimum compared to typical rates.

 

STOS VS ICOS

what are sto's

Overall, STOs eliminate instances of fraud with ICOs and offer legitimate securities to a wider range of investors with better efficiency, interoperability, and liquidity than conventional securities. STOs are backed by actual assets while ICOs were primarily predicated on ‘utility tokens,’ with no underlying collateral and were not protected by securities law.

STOs also offer advantages over IPOs. They are cheaper and can encompass a much broader range of assets — such as fractionalized ownership in high-value art pieces or investment funds. Banking and brokerage fees are also drastically reduced via automation with launching an STO compared to an IPO.

It is important to note that although STOs fall under securities laws in the U.S., there are legal nuances to the launching of security tokens as they are based on a novel technology. Several countries outside the U.S. have also already banned STOs — including China and South Korea.

In the U.S., investors are pumping vast sums of money into the security token landscape as the role for participants in the young ecosystem continues to actualize. Evaluating which markets emerge as the most popular in the early stages of security tokens should reveal which sectors STOs afford the best advantages. Both SMEs and REITs are clearcut applications of STOs, but there are numerous other opportunities available for the issuance of security tokens that are practical, cheaper, and regulatory compliant.

 

WHAT ARE STO’s – CONCLUSION

 

ICOs were a novel concept, fueling crazy speculation of altcoins during their prominence at the end of 2017, but the industry has become more discerning since then. As ICOs have faltered, security tokens have emerged as a prudent use case of blockchain technology at the convergence of conventional financial instruments and digital assets.

DeFi is on the rise, and security tokens are poised to play an integral part in the broader transition to an open financial system.

 

What do you think of STO’s? Do you think they are here to stay? Let me know in the comments!

 

Cheers,

 

The Crypto Renegade

 

NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.

Proof Of Work Vs. Proof Of Stake | How Does It Work? (Beginner’s Guide)

What is Proof Of Work Vs. Proof Of Stake | How Does It Work? If you spend enough time in the crypto-community and you’ll witness debates over Proof of Work (PoW) and Proof of Stake (PoS).  Fans of PoW will argue that it’s the transaction system Satoshi Nakamoto had in mind for cryptocurrencies. Those in favor of PoS, on the other hand, will argue that mining is outdated, inefficient, and insecure compared to staking.

So you might be wondering, what’s the difference, is one actually better than the other, and why is it better?  Well like most things here at Bitcoin Lockup, I am not here to give you my unsolicited opinions, but we are here to give you some objective information that might help you determine for yourself which proof has best proven its worth.

 

Proof Of Work Vs. Proof Of Stake | How Does It Work?

 

PROOF OF WORK

 

When Satoshi Nakamoto created Bitcoin in 2008, he envisioned a currency that would rely on a trustless and distributed consensus system.  This would allow Bitcoin to be decentralized both in technological and financial terms. For instance, when you transact money through a trusted system, a third-party (think banks, credit/debit cards, PayPal) handles these transactions in terms of debit and credit.  If Mark sends Sally $100 dollars, the institution will debit Mark’s account $100 dollars and credit Sally with $100. All of the money is handled by and within the third party, so none of the transacted funds belong to either Mark nor Sally until they are withdrawn from the system.

 

Image result for proof of work

Bitcoin differs from traditional financial hubs by being trustless.  This is not to say you can’t trust Bitcoin and blockchain with your money.  In fact, it’s quite the opposite. Bitcoin’s trustless nature allows for a peer-to-peer exchange without the need for a third-party mediator.

The traditional mediators are replaced with miners, and these miners work on behalf of Bitcoin holders to see that transaction are successfully processed.  In order to see that these transactions are approved, miners commit their computer’s processing power to solve the encrypted algorithms within each transaction.  This is what we mean by Proof of Work.

Under a Proof of Work system, miners compete to verify that all the transactions within the candidate block (the block currently being built) are legitimate.  To do this, they must solve the encrypted puzzles that verify the integrity of the transacted coins. The first miner to solve these puzzles receives an amount of the transacted currency, also known as a block reward.  Once the problem is solved, the transactions create a block that is stored as a public ledger on the blockchain, and the miner announces the solution to the entire network.

As you can see, PoW is dictated by competition and computational output.  Imagine an international math competition wherein a previously unsolved proof (the block) is given to the competitors (the miners).  Whoever solves this proof first is awarded a prize (block reward), and the solved proof is then posted on the internet for all to see (the block being established in the blockchain).

 

PROOF OF STAKE

 

Proof of Stake differs entirely from Proof of Work.  Instead of building blocks through work output, the creator of a block is determined by their share, or stake, in a currency.

Under this system, forgers (the PoS equivalent of a miner) are chosen to build blocks based on their stake in a currency and the age of that stake within the blockchain’s network.  For instance, let’s say you hold 500,000 Cardano.  First of all, allow me to hypothetically congratulate you on your fat stacks. Getting back to the example, under the Proof of Stake system, you’d be more likely to create the candidate block than someone with 100,000 ADA. Image result for proof of stake

To go even further, if you had been holding your 500,000 ADA in the same address for a year, you’d be more likely to generate the next block than someone who also has 500,000 ADA but who has been holding it in a network address for half a year.

To give you another analogy, imagine if your odds to win the lottery increased based on a) how much money you put into it and b) how long you had been buying tickets.  Now, you won’t make millions of dollars by staking your favorite PoS currency, but you can make some nice passive income on top of your investment gains.

It’s important to note that, for a stake to be chosen, it must be held on an address within the coin’s network.  So if you were holding Cardano like in the above example, you would need to store it in Cardano’s core wallet. There are also no block rewards in the PoS system.  Seeing as there’s no work-centric incentive to outcompete other miners, forgers are only awarded transaction fees.

There’s also a marked difference between Delegated Proof of Stake and regular Proof of Stake, but that’s for another article at another date.

 

 

PoW Coins:

Bitcoin

Ethereum

Litecoin

Monero

 

PoW/PoS Hybrids:

Dash

Stratis

HShare

Pivx

 

PoS Coins:

Cardano

OmiseGo

QTUM

Tezos

 

KEY DIFFERENCES AND TAKEAWAYS

Proof Of Work Vs. Proof Of Stake

Proponents of PoW will tell you it allows crypto to more effectively function as a currency.  The PoS model, they argue, incentivizes users to stake their coins for extended periods of time, thereby making them inactive.

PoS fans, however, will defend their system’s overall superiority.  For starters, it solves the problem of energy consumption that Bitcoin has created.  As more transactions and users are added to Bitcoin’s network, more computing power will be needed to accommodate growth.   The more computing power that is added to the network, the more the hashrate increases in difficulty. With more difficulty comes an increase in the amount of work a computer must generate to generate blocks, and this increased output leads to greater energy consumption.

 Bitcoin’s growth and mining difficulty are exponentially tied to energy consumption, and critics see this as an unsolvable issue under the PoW model. It’s the reason that Bitcoin’s network alone consumes more energy than 159 countries.

Proof of Stake also defends against 51% attacks on the blockchain.  As we’ve seen with the recent Bitcoin Cash and Bitcoin civil war, disproportionate mining power can lead to de facto centralization of a blockchain’s network.  In order to control a majority of a PoS blockchain, a validator would have to own 51% or more of that crypto’s overall supply. So in order for someone to attack Cardano’s blockchain, for instance, they would have to $609,286,157.643 worth of Cardano to do so.  I really don’t see that happening.

Both PoS and PoW have their ups and downs, and I’ll be excited to see how the market responds to coins that utilize either system or a hybrid of both.  One last thing to keep in mind for PoW, however, is that once all a currency’s coins are minted and circulated, block rewards will cease to exist. This may incentivize PoW coins to update to a PoS model, but only time will tell.

Still don’t have cold storage for your private keys? click HERE for the Ledger Nano S to hold all of the PoW and PoS coins discussed above!

 

What do you think? Do you think PoS will overtake PoW in popularity? Sound off below!

 

Cheers,

 

The Crypto Renegade

 

NOTE: This post may contain affiliate links. This adds no cost to you but it helps me focus on giving as much value as possible in every single post by being compensated for recommending products that help people succeed.

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