Bitmain is brewing a storm in the state of Washington
The Chinese ban on cryptocurrency mining has led to a flood of hash power exiting the communist empire that has since dominated the mining market. One of the most prominent migrators out of China is a company called Bitmain, which is also the world's largest supplier of ASIC miners. Usually when an exodus like this occurs, companies like Bitmain begin to saturate other economies with their technology. That is happening in the state of Washington in the United States, and the implications might not be so good.
Recently, the port of Walla Walla, Washington approved a large land lease by Bitmain. They are looking to build a massive crypto mining facility in Washington, since the electricity rates are some of the lowest in the United States. However, many residents voiced their concerns over the amount of energy the company will require and how that would affect the local community. These are well known concerns around the world, but the reality is beginning to set in for the average person in Washington.
Here are a few of the biggest issues at hand:
1. Many blockchain projects use Proof-of-Work (PoW) in order to achieve consensus on the blockchain. As a result, this requires large sums of computing power (hash power) and an enormous amount of electricity. This is great for justifying the value of cryptocurrencies like Bitcoin, but the power demand increases the electrical bill for everyone else. In a state like Washington, where electrical rates are generally very low, this can come as a shock to the livelihood of many individuals and businesses that traditionally enjoy these lower rates. The economic effect will not be pretty.
2. Alongside this massive power consumption is the debate over ASICs over-saturating the mining market. Network hash rates are already very high for most blockchain projects, and ASICs make them even higher. Essentially, the higher the network hash rate for a crypto, the more competitive it becomes for a miner to achieve profitability. Most miners frown upon ASIC mining for this reason, but as technology continues to advance, the question will be whether or not it's even avoidable.
3. Lastly, there is the concern over government regulations. Many in congress don't understand blockchain tech just yet, but that won't stop them from creating setbacks in the crypto mining industry. When Bitmain makes moves like this into Washington and funnels ASICs into the market, it's going to create a communal push to restrict mining in general on both the state and federal level. I'm sure that many small mining operations in Washington share this sentiment and would like to avoid losing their business as a result of companies like Bitmain stirring up controversy.
It's important to note the economic and communal effects of Bitmain moving it's operations into a foreign country, like the United States. These seemingly small events can lead to growing tensions that may serve as a catalyst for unfavorable outcomes in the future. As a miner, it's important to understand. As an investor in blockchain, this can make or break your investments. A storm is brewing in the mining community and close attention to key issues is a must.
India will block cryptocurrency, but seeks a digital Rupee
Well, it looks like India is clamping down hard on virtual currency. The Reserve Bank of India doesn't want anything to do with this market. This is going to make it difficult for the people of India to buy, sell and trade crypto for the meantime.
Actually, I'm not very surprised by this move. In fact, I specifically mentioned that this would happen in my book The Satoshi Sequence months ago! I even predicted the Petro in Venezuela. If you haven't read my book yet, I highly encourage you to buy a copy on Amazon!
Anyways, India has gone through a lot of monetary policy changes the last couple years and they are gearing up for their own national virtual currency. Even though individuals and banks can't do much business with blockchain tech right now, the future seems bright as they begin formulating a regulatory body (good luck with that).
This situation isn't all that different from China's take on virtual currency, who has also "banned" it from being used. Oh boy, did that backfire on China. Virtual currency is still very prominent in the socialist empire, albeit under the table. Even mining has been tough to remove from the mainland, with most miners flocking to Honk Kong or migrating to Canada in seek of cheaper power rates. India is going to learn the same lesson. There is no modern way of regulating, banning or eliminating blockchain in the same way that fiat can be.
In regards to my book, I'm 2-for-2. First Venezuela, and now India. Next up would be Russia. Oh wait, they've been pursuing a digital Ruble for a while now. This will be interesting to continue monitoring!
TEch giant IBM is betting big on the future of Stellar Lumens (XLM)
Over the past few months, Stellar Lumens (XLM) has received a lot of attention from IBM. The tech giant is providing 9 global validator nodes to support the XLM network and has frequently mentioned Stellar in their press releases ever since announcing a partnership with the project. So why all the interest?
One reason is that IBM wants to help develop the IoV (Internet of Value). The world is shifting further towards digitalization and there is a growing need to facilitate the transfer of value across the world. Stellar has transaction times as low as 5 seconds, which makes it a highly appealing platform to build upon. Even with their Hyperledger project in the works, IBM could learn a few things from Stellar's platform.
Most of you might not know this, but Stellar is actually a hard fork of the Ripple blockchain, which occurred back in 2014. A core developer from Ripple, named Jeb McCaleb, left the project to work on Stellar. Part of the reason was that Ripple was too centralized and he didn't agree with their philosophy. So you can see why Stellar has transaction times that are nearly identical to Ripple.
Anyways, another highly appealing aspect about Stellar is its Federated Byzantine Agreement, which makes up the foundation of the Stellar Consensus Protocol. So what is this mumbo-jumbo I just mentioned? Well, in essence, the Stellar platform came up with a way to utilize smaller groups of nodes that reach consensus with each other by selecting other "trusted" nodes to take part in their own miniature groups on the network.
The idea is to form trusted groups of nodes that can separate themselves from bad actors that could attempt to influence the Stellar network. This inoculates Stellar from something called a "Sybil Attack". This is a malicious attempt to control multiple nodes in a network, while the network remains unaware that it is compromised. This is also accomplished by creating numerous pseudonymous identities to gain a large influence over the network.
Bottom line, Stellar has a strong built-in mechanism to deal with bad actors, while still pioneering one of the fastest Blockchains in terms of transaction speed. For these reasons alone, it would make sense for IBM to partner with the project. It gives the Stellar platform a huge advantage as it continues its battle with Ripple and other blockchain projects that are attempting to capitalize on the Internet of Value.
Ripple (xrp) set to level up with Cobalt upgrade.
During this ugly downturn in the market, most of us are anticipating that the ball will hit the floor relatively soon and bounce back up. But of all the countless cryptocurrencies that exist in the market today, one continues to quietly make break-throughs and is rising up to join the 3rd generation of Blockchain tech. And of course, it's one of the most despised for its lack of decentralization.
This gem of a crypto is Ripple. I have also discussed Ripple and its native currency XRP on numerous occasions, even before it went from $0.20 to over $3.00 this past winter. I was surprised to see so many people doubt its ability to evolve into a very solid investment. It arguably had the most development, marketing, and innovative technology out of any Blockchain project in 2017, sitting side-by-side with Ethereum. So why did everyone overlook it?
It comes down to the basic fact that Ripple is a company, and a large majority of the Blockchain community doesn't like centralization. So they intentionally overlook its accomplishments. I'm not advocating that Ripple is perfect, but rather trying to point out that Ripple hasn't committed heresy, as the Blockchain zealots want you to believe. I want you to take a closer look. Why can't a centralized company (e.g. Amazon, Google, Facebook) not be a good investment opportunity?
While I have made my case in the past for Ripple as an investment opportunity, I want to highlight something new that most people have not heard about. It's a consensus algorithm update called Cobalt. On February 20th, a whitepaper was published by the Cornell University computer science repository called "Cobalt: BFT Governance in Open Networks".
The new Cobalt update will be applied to Ripple in the near future and will allow for a number of improvements. One of them is faster transactions times. Even though Ripple has been able to send value to any location in the world in 4 seconds, it will be in 1 second. That alone will be a remarkable achievement for any company and a historical moment for the remittance market. Cobalt will also help improve the reliability of the Ripple platform by preventing transmission delays. Instead, the network will simply slow down when a lack of consensus exists. This is a bit technical, but it's a big deal to financial institutions that are eye-balling Ripple.
With the potential partnership with Western Union, being one of the highest traded cryptos in South Korea, looking for a route into the Chinese economy, and being utilized by Santander to create an international money transfer app, I highly doubt Ripple is skipping a beat. If you haven't included Ripple in your investment portfolio already, I would encourage you to take a second look.
The "Velvet Fork" could bring back consensus.
So far, there have been two main ways to upgrade a blockchain: A hard fork and a soft fork. Both are ways to upgrade a blockchain to support rules that are deemed important. Unfortunately, not everyone agrees on these changes.
However, there seems to be another way to achieve the same effect without having all the controversy. The method is called a Velvet Fork and it allows new concepts to be introduced to a permissionless blockchain without needing a consensus of participants to agree on the new concepts. The term was actually coined while computer scientists were working on ways to improve sidechains.
Velvet forks require no modifications to the consensus layer of a blockchain, which prevents miners from being hurt by immediate changes to the rule set. The relative idea is to have blocks (from the main blockchain and the sidechain) living side-by-side in harmony without the threat of a split.
On the other hand, this isn't a perfected method by any means. There is a lot of vulnerability here that still needs to be addressed. A perfect example of this would be "Selfish Mining". This is when a miner is able to hide the fact that he/she has found a block of transactions. If true, the miner could force other miners into searching for that hidden block for an indefinite period of time while he/she gets a head start at finding the next block.
Velvet forks could potentially be exploited in such a way to discover extra blocks and cheat the network. This could also entice other miners to mine newly created blocks over the legacy blocks. Overall, it could be an absolute mess.
There are a ton of potential use cases for Velvet Forks, and they would surely solve many dilemmas and avoid disagreements in the form of soft and hard forks. A lot more research needs to be done to ensure that it doesn't create any vulnerabilities when implemented in a blockchain. If perfected, it would serve as a viable solution and a huge accomplishment for the entire blockchain community.