Bitshares announced today that it is available on Microsoft Azure. This may or may not seem like huge news to you, but I suspect people are missing the point. Just getting on to Microsoft Azure is a gimmick – everyone and their dog will be doing this soon for the publicity and price pump this is presenting at the moment. It’s an open-source platform (Ubuntu VM) and you just need to submit the right code and scripts to make this pass their automated scripts. Once the checks all pass and the mods are happy, it gets merged into the main branch and will then be available on Azure. Check this out on github to see the process. That’s what other cryptocurrencies like Factom and Emercoin have done too (I don’t want to underestimate the hard work of everyone involved though).
However, specifically in the case of Bitshares, I am cautiously optimistic that this is the right move forward for greater adoption. Bitshares differs from many other cryptocurrencies in its high blocksize and throughput. I don’t want to pretend to know all the attack vectors against its proof of stake (POS) algorithm. However, it has never really been ‘broken’ in the wild so far. Assuming it works and its security will continue to work in the future, Bitshares is an incredibly scalable blockchain solution.
Bitshares blockchain is maintained and validated by witness nodes, and they produce a block every 3 seconds – faster than most other blockchains. Given that the ultimate goal of Bitshares is to be a trading platform, it is possible that each block contains scores or even hundreds of transactions. This means the nodes need some really good computing infrastructure to really make the promise of Bitshares a reality. Hosting a witness node in the cloud, on a scalable solution like Microsoft Azure, is a great move, since it allows anyone to easily spin up a witness node and join the network, without having to worry about how their crappy internet connection at home with their pentinum 4 processor computer will hold up. Also, Bitshares’ presence on Microsoft Azure allows the stakeholders to reduce the block times even further if technology evolves, without risking too many orphan blocks.
The Blockchain-as-a-Service (BaaS) is a great move for Microsoft, and is gimmicky for many other cryptocurrencies, but I think in the case of Bitshares, this is truly a moment when its practical scalability can go through the roof, and this will set the foundation for Bitshares’ future ambitions to be the de-facto crypto-currency exchange for other coins (via its clever incentive scheme and price feeds to maintain price – it is not a true exchange in that it doesn’t hold your private keys to other cryptocurrencies).
Bitshares, the cryptocurrency that introduced Delegated Proof of Stake as its consensus mechanism and issues collateralized assets on the blockchain, called BitAssets, is seeing a comeback in price with high trading volume as it prepares for the launch of its next phase, ‘Bitshares 2.0’. The new release has promised a bunch of new features and is scheduled to be launched next month, although the Bitshares project has been notorious for missing almost all deadlines publicly announced. The upgrade has several improvements, both on the technological front and on the business and features front, so it would be an important evolution for Bitshares.
At the time of this writing, Bitshares had regained it’s 5th position among all the cryptocurrencies tracked by Coinmarketcap. In addition, the price increase has come on a significant increase in trading volume, which has overtaken Ethereum’s trading volume perhaps for the first time since Ethereum’s launch. Even though the overall market capitalization of Bitshares is a fraction of the market capitalization of Ethereum, at its peak, Bitshares had a higher market cap than Ethereum’s current market cap.
Bitshares’ price has languished, falling below the 2000 satoshi mark for several months and has just recently been going up again. Bitshares was touted to be one of the first ‘Bitcoin 2.0’ cryptocurrencies, with several appearances at conferences in the United States. However, this has stopped of late, as older investors have fled the project, especially the initial support from several Chinese community members.
The new release has been widely advertised to have unrealistic performance metrics, like 100,000 transactions per second, which is very implausible for a decentralized consensus-reaching mechanism based on today’s technology. In contrast, Bitcoin has a throughput of around 5-7 transactions per second. However, based on initial tests, several code optimizations have led to an increase in the processing ability of the delegates who add to the blockchain. Since Bitshares uses Delegated Proof of Stake, it is assumed that these delegates will use the latest technologies, including cloud computing resources if necessary, so issues like the blockchain size are not of primary concern to the system.
The new release will also make it easy to create user issued assets, which would compete with other, older technologies like NXT and Counterparty, both of which are the preferred cyrpto 2.0 technologies for issuing new assets, especially for initial-coin offerings in the cryptocurrency community. The details are tracked on the Bitshares forum.
Bitshares has been controversial in how it handled its IPO money and several delayed feature launches over time. It was also controversial for its centralized decision making, where core fundamentals such as inflation were changed to pay the founding team that ran into several costly overruns. The project lost support in the wider community and the price had reflected that for several months, falling almost 90% from its peak, and regaining some in the last week. At its peak, the market capitalization of Bitshares was over $75 million, but has since steadily declined.
With the ongoing Bitstamp saga, where hackers seem to have taken off with a sizable portion of the exchange/consumer funds, the debate is back to the question of how safe centralized exchanges are. After all, you’re trusting your Bitcoins to a third-party that is now in full control of your Bitcoin (and just issues you an IOU). Single points of failure are scary, irrespective of how noble the intentions and how competent the people running the system. It’s likely that Bitstamp customers will not see a loss of funds. However, this brings us back to the question of what the best ways to trade Bitcoin are, without entrusting your private keys to a third-party.
Unfortunately, centralized exchanges are very efficient and easy (relatively) to implement, so the alternatives will always seem to lack something. However, some of you might prefer these alternate routes.
LocalBitcoins: This is perhaps the best and easiest way to get around the problem of central Bitcoin exchanges. Local Bitcoins has grown by leaps and bounds and there are thousands of listings especially in major cities where you can buy and sell Bitcoins. The trades are completed relatively quickly and the persons interact with each other in-person while handling cash and Bitcoin, so the risk is minimal at best. This options depends on your geography of course. If you’re in San Francisco or New York, it’s relatively easy to find people willing to trade here. If you’re in different smaller town in a developing country, it might be much harder.
Bitshares (BitBTC): There are several ideas floating in the cryptocurrency space dealing with making a fiat equivalent of a crypto, but Bitshares seems to be the most promising and has taken the lead in creating a system without counterparty risk. To be sure, Bitshares isn’t a true currency exchange (in that there is no real transfer of Bitcoin or fiat between parties) but instead more akin to a CFD (Contract For Difference) which tracks the price of the underlying (Bitcoin and USD or EUR) through a mixture of market incentives and price feeds. It is still possible to speculate on the currency pair BitBTC/BitUSD which tracks the price of BTC/USD. The main disadvantage is that there is low liquidity in the system right now, but should be improved as more people enter the system. Of course, there is also a high amount of systemic risk inherent to such a new idea, although there isn’t any counterparty risk since all ‘BitAssets’ like BitBTC and BitUSD are fully collateralized up to 150% through Bitshares (BTS), the native currency of the system. One additional advantage of the Bitshares system is that it is possible to short BitBTC, which should track the equivalent of shorting BTC.
Trading Events: Trading events are actually a fun way to meet more Bitcoin enthusiasts, swap stories and trade in-person. There is no centralized exchange, and the transfers happen peer-to-peer. One person hands over cash, the other person transfers Bitcoins directly to the trader’s wallet. No counterparty risk. One example is the New York Bitcoin Center in New York City, right next to the New York Stock Exchange that holds trading events quite often. Of course, the limitation is geography – where you live might not have these types of events.
Decentralized Exchanges: There are several ideas of decentralized Bitcoin exchanges, and some of them seem promising. It is hard to say how successful they will be though. BitSquare is one of the projects that has a working wallet and is currently testing things on the Bitcoin test network. The system is decentralized and if you want to learn more, you should read their whitepaper. Open Bazaar is another project that is coming along nicely, and although it is a marketplace for things, paid for in Bitcoin, there is no reason why it cannot be used to buy fiat currency instead of iPads. The built-in reputation system and dispute handling should be valuable.
These are the best altcoins to invest in, in 2015, in my opinion. Each one has promising prospects that may or may not pan out, but if you’re willing to take the risk, these are worth exploring further. If not, just hold on your Bitcoins! There are many interesting cryptocurrency projects out there. Unfortunately, it’s hard to separate out the best and most promising ones from the rest. In my view, the following are the ones to keep an eye out on, in 2015.
Note: This shouldn’t be taken as investment advice. Please do your own due diligence before putting any money into anything in the cryptocurrency space.
Counterparty is one of the most interesting cryptocurrencies out there, with a large potential reward. The biggest win for this would be if Medici goes live and becomes an actual stock exchange (for those who don’t know, Overstock hired the original Counterparty devs to work on Medici, a blockchain-based stock-trading platform). Even if it lists a single low-value stock, the value proposition would be huge. Also, it would mean it has overcome all the regulatory hurdles associated with such a project, which in and of itself would be a big achievement. The developers are also quite good, and actively work on the project (e.g. they were able to port the functionality of Ethereum on to the Counterparty protocol). It has other advantages, such as being built on top of the Bitcoin blockchain and an initial proof-of-burn instead of ICO/IPO model. Counterparty is definitely something to keep an eye out on, going into 2015.
Bitshares is another ambitious project, which has a lot of potential to do well in 2015 and beyond (in spite of a rich history of missing every deadline and reneging on their original promises several times). At its core, Bitshares provides a way to trade assets like BitUSD and BitGold, which track the value of USD and Gold through a clever mixture of price feeds and prediction-market-style price convergence mechanism (giving incentives for longs and shorts when the price deviates either way). It is also a good way to short, say, BTC, through bitBTC, which should help accelerate the price discovery of Bitcoin itself, assuming it is able to have significant volume.
It also uses a delegated proof of stake mechanism to secure the blockchain. Risk factors include the centralization of decisions (e.g. making a deflationary currency inflationary, which has already been done) that might keep investors up at night and a belligerent community that expels any criticism, thus keeping away many good members of the wider crypto community (such as a whole drama with Adam Levine of Lets Talk Bitcoin). Even then, the project has some good potential and would be interesting to see its growth into 2015 and if the ecosystem can mature. In addition, there are new products planned, especially an auction-style decentralized DNS system which could gain more traction than Namecoin (due to the profit model and disincentives to domain-squat) and a decentralized voting system.
Maidsafe, as a project, goes back to before Bitcoin was even invented. It is probably the most ambitious project of them all, since it isn’t blockchain-based like all other projects on this list, but wants to ‘decentralize the internet’. There is a lot of theory behind how Maidsafe is supposed to work, and it’s not all easy (there’s your big risk factor right there). On the other hand, there is a lot of progress being made, and quite a few developers are already building apps for this system. If the release is successful, expect the coin to rise significantly in value.
Stellar is just like Ripple, but is hoping to have a better distribution model. Also, it is backed by some big names in Silicon Valley, which might give it some edge. Being a more trust-based system than say Bitcoin, Stellar needs connections in its network which will be used to transfer value. Ripple actually made some significant progress on the business front in 2014, and if Stellar can get some banks, especially across continents, to use their network for clearing trades, it would be a significant win. Stellar also has quite a few developers working on apps and gateways for Stellar, which is always encouraging. I am not holding my breath, but Stellar has a lot of potential to grow, especially when you compare Stellar’s marketcap with Ripple marketcap.
NXT is a cryptocurrency that always surprises to the upside, since its launch (remember the initial crowdfunding?) and you never know what 2015 is going to bring. There are many features being implemented, and even though Counterparty is gaining a good deal of traction, several new ‘appcoins’ are being built on top of the NXT network. It has a good developer community, and has had a relatively quiet 2014, so I am definitely looking forward to what 2015 will bring.
Ethereum is perhaps the most talked about altcoin in existence today. Over a period of a few years, its programming language might change the way we look at applications. It is powerful, and it needs a lot of developers building on top of its blockchain. It was arguably the most successful IPO/ICO ever in the space, so be aware of that before you decide to invest. It seems futile to try to predict Ethereum’s success in the short term. Unfortunately, the technology is yet to prove itself in the battlefield, so I’ll defer my comments. It does have a lot of potential though.
“First person to get directly hired by a blockchain!” Sound futuristic? That’s what one of the lead developers of Bitshares, Nikolai, told Reddit. The reason it’s surprising is that this isn’t true, and the developer certainly knows it isn’t true. In fact, almost exactly a year ago, I wrote about how MemoryCoin is trying out something brilliant. And that something brilliant was precisely the blockchain hiring people. Since MemoryCoin was a direct off-shoot of the now defunct protoshares (which in turn was the parent of Bitshares) and the MemoryCoin developer was also the one who implemented protoshares, the Bitshares developers most certainly know about the fact that they are not the first people to be “hired by a blockchain”. Why then, would they want to hide that fact?
I believe the reason is because the experiment ended in a disaster for MemoryCoin, and Bitshares is doing the exact same thing only on a much larger scale (101 potential paid positions instead of just 5). To understand the current Bitshares idea of paying people, it is imperative to understand why MemoryCoin failed in such a dramatic fashion when the idea seemed pretty good – hire 5 people, voted in by the stakeholders (who own MemoryCoin) who will provide some value to the ecosystem. If you think they aren’t doing a good job, fire them immediately (remove your vote) and vote for someone else (or vote for the rewards to be burned).
Firstly, let get some basic things out of the way. The dramatic Reddit title “I turned down an offer from Google to be the first person to get hired directly by a blockchain! #noregrets (yet…)” is misleading indeed. The developers were paid a lot of money by Invictus Innovations, through the funds raised through Angelshares (which is incorrectly referred to by Dan Larimer (bytemaster) as being a ‘donation with no strings attached’). Just yesterday, each one of them, including Nikolai, was paid a bonus of about $50,000. The developers certainly made much more money working on Bitshares than they ever would working at Google, and this had nothing to do with the blockchain paying them – they were paid from investor funds.
Also, Blacksburg is 61% cheaper than Mountain View, and has lower taxes. The developers, in short, were being paid through the millions of dollars raised in the initial IPO/ICO. After the money ran out (rather quickly, one might add), the company backed out of the initial ‘social consensus’ provided to the stakeholders of Angelshares (who gave them millions of dollars) and protoshares. As an additional plan, they made the currency inflationary to pay themselves (thus the ‘Blockchain is hiring!’ part).
Now, back to the question of why this idea failed for MemoryCoin.
As observers know, Bitshares is one of the most centralized serious cryptocurrency system in existence today, with (former) Invictus members holding most of the tokens. It is therefore very easy to influence voting. Worse, the exchanges, Bter and BTC38 that hold most of the coins for traders and small investors, would vote however they are asked for by the core members.
This was the exact problem with MemoryCoin. At one point of time, the original developer, who already had a very high percentage of all MemoryCoins in circulation voted himself for two positions (40% of all inflation rewards). People get greedy all the time, and the founding members of Bitshares have already shown that they can hard-fork the system when it suits them best (e.g. converting a deflationary model to inflationary one to pay themselves, rolling back on their social contracts, etc.)
The small-time holders of either MemoryCoin or Bitshares couldn’t be bothered to vote. Their shares add up though. Most of the petitioning happens in the forums. Problems with forums is they are a perfect example of echo-chambers, and if Dan asks people to vote for a particular delegate, most will. The others, who would oppose such moves, don’t really vote. Many don’t even know they can vote, since they don’t follow up with all the new developments. In addition, the extremely buggy software releases of clients means that only the die-hard fans can actually even access their wallets and vote, since most people would just give up instead of trying to make it work.
This was a little harder with MemoryCoin (but still done by the original dev), but is incredibly simple with Bitshares. There are potentially 101 paid positions, and most of them will obviously go to the Invictus team. However, so far, they’ve been using investor funds to pay themselves, and now that the money has run out, are using inflation. There is nothing stopping them from creating multiple delegates, and voting for each other in the process. Even if they don’t do it right away, it is a very strong possibility in the future. If history is any guide, this is a strong probability.
There are lessons to be learned from MemoryCoin’s failure, even though the idea, in theory, might sound appealing. Bitshares is going down the exact same path, and there are many pitfalls that investors should watch out for. Don’t blindly believe everything you read on echo-chamber forums.
The idea that stakeholders should vote for workers who provide value is a nice theoretical concept, and perhaps can be implemented in a well-defined manner on a smart-contract system like Ethereum. However, just taking a system where 10 friends hold 50% of the voting tokens and asking for voting to be fair just sounds like a disaster waiting to happen, with no checks and controls (and a history of going back on their word several times in the past). Perhaps the next iteration of ‘hiring by Blockchain’ by some other team, would actually make sense.
Here’s a guide on how to buy gold with Bitcoin. You’d be surprised by how many different options you have in converting between Bitcoin and gold/silver, some of them physical gold coins or bars and some of them at an IOU level so you can speculate on the value of gold vs. Bitcoin.
Lots of people who are interested in Bitcoin are also interested in precious metals, especially the early adopters who were disproportionately libertarian in their philosophical and economic thought. Bitcoin, in fact, was and still is, often touted as ‘digital gold’ based on the scarcity of each. Gold has also been used in commerce for thousands of years and has a free market proven vibe to its properties. Both gold and Bitcoin attempt, in small ways, to bypass fiat currencies issued by governments, and both have become a store of value during turbulent economic times when there’s high inflation (think current day Russia, Venezuela, Argentina, etc.)
Here are some options for how to buy gold with Bitcoin, either the physical commodity or just getting the exposure to gold prices through a third-party. I’ll explain the options individually.
Amagi Metals: Amagi is another long-time Bitcoin supporting precious metals seller. They probably have the best pricing for your gold and silver coins if you pay with Bitcoin.
Agora Commodities: Agora is another Bitcoin supporting company that accepts Bitcoin for gold and silver coins and bars. The company is also a long-time supporter of Bitcoin and its community. You can buy your bullion in USD or Bitcoins.
Bitreserve: Bitreserve is a company founded by Halsey Minor (the founder of CNET) and aims to be a convenient currency exchange platform. It is definitely centralized like Coinbase, in that it holds your private keys. In return, you get the ability to seamlessly convert between Bitcoin, USD, GBP, Euro, CNY and yes, also Gold. If you want to get ‘BitXAU’ from Bitreserve, you just send Bitcoins to the ‘Gold’ card on your account, and that’s it. It will be worth a few ounces of gold, depending on how much you send. The gold is held in reserve by Bitreserve (and is therefore fully backed by the physical commodity, not ETFs and use GBI for this). The conversion is instantaneous, and you are effectively buying gold with Bitcoin when you send Bitcoins to your gold card. You can spend it as you would spend Bitcoin, by sending to any Bitcoin address. Do be aware though that there is a transfer fees of 2.4% in and out. The company is promising, has raised about $15 million already, and has a plan for the future. They are trying to add Oil to the mix, which would be quite interesting.
Ripple Singapore: This is a Ripple gateway for gold, silver and platinum. This is an IOU of course, and if you trust this Ripple gateway, you can buy and trade gold and silver throughout the world on the Ripple protocol. Ripple gets strong reactions from people in the Bitcoin community, but this is definitely one of the options. If you want to buy XRP (Ripple tokens), you can try Poloniex or Kraken.
BitGold from Bitshares: This is another interesting idea, using Bitshares. This isn’t an IOU (unlike Ripple) and the price of BitGold on the Bitshares network (one of the BitAssets, along with others like BitUSD, BitCNY etc.) is market determined, and is maintained close to the real price of gold by delegate feeds (101 delegates for the network). This is still a work-in-progress but as more people join the network, the tighter the spreads between BitGold and Gold price should be, and the liquidity is currently poor but hopefully will improve in time. You can buy BTS (Bitshares tokens) on an exchange like Bter.
This is an email that I got from the site Fairpumps. Fairpumps claims to propagate “fair pumps and dumps” on altcoins. They choose one altcoin per week for a pump and dump. This week, it seems like it was Bitshares turn for pump and dump.
Quite surprisingly, the group was able to pump and dump Bitshares quite successfully, as you can see from the price graph from Coinmarketcap. The reason it’s surprising is because fairpumps usually chooses small altcoins that are easy to manipulate. Bitshares had a market cap of over $40 million during the event, and it is much harder to move these altcoins that have such a high marketcap.
Pump and dump schemes are quite common in the altcoin world. The events are announced at Bitcointalk, Twitter, IRC channels, emails etc. The group has been behind several different pumps and dumps in the cryptocurrency world. However, to date, Bitshares was definitely their largest target measured in terms of market capitalization. It is a bit of a concern that the group was able to manipulate the price of a $40 million crypto and the community should be aware of such events.
Lots of people get caught up in pump and dump events, which look like a breakout from the outside and the people who are really involved in that specific crypto think that the world has finally seen light and acknowledged how revolutionary their coin is. Bitshares can be one of the most prominent ‘echo chambers’ for any altcoin, so it shouldn’t come as a surprise if people were affected during this event.
Here’s the full text of the email:
Subject: tonight’s coin pick: Bitshares / BTS
Dear fairpumpers, tonight’s coin is BTS / BitsharesX. Why did we chose this one? – it is relatively new on bittrex, and hasn’t seen a decent pump on there yet. This strategy helped us very well on our last longpump. After we smash a few smaller sell walls on the orderbook, it’s US controlling the limited BTS-market on Bittrex. New investors won’t be afraid, as the price isn’t inflated yet and we can build this up step by step. – this isn’t a quick coin created to rip people off, as it exists for several months now, which is quite a long time in altcoin world – it uses a UNIQUE technology, keywords are Delegated proof of stake (DPOS) and BitAssets. Search the web for these technologys and promote the technology on twitter and other platforms
Further pump development, like target prices and other stragety will be discussed on our forum and in chat as soon as target price is reached, EVERYBODY starts HYPE on twitter to attract new investors. If it drops below 50k, we work with buy walls to stabilize the price.
EVERYBODY PROMOTING BITSHARES ON TWITTER WILL AND POST THE TWEET ON OUR FORUM WILL GET AN EARLY COIN HINT ON OUR NEXT PUMP!
today price-target: 20k and hold week price target: 50k long-term communication: http://fairpumps.net/forum/viewtopic.php?f=7&t=33 tonight’s communication irc: https://kiwiirc.com/client/irc.altcoinweb.com:+6697/#fairpumps bittrex: https://bittrex.com/Market/?MarketName=BTC-BTS
Surprising how many spelling and grammatical errors the announcement was riddled with, yet managed to cause such a big Bitshares pump and dump for that day!