Posts Tagged: Bitcoin Mining

Up To Four Million Bitcoins Gone Forever

A new study suggests as many as four mln Bitcoins have been lost in different ways.

There are a number of threats to any asset, be it gold, fiat currency or even stocks. Some of these have real-world issues, such as loss, theft or destruction, and Bitcoin is not separate from that.

There is more than enough literature on the theft of Bitcoin, people leaving themselves exposed to cyber criminals, but there are also instances where people are losing their coins.

Just like Gold can be sunk with a pirate ship, or wads of dollar bills burned in a fire, digital currencies can also be lost and never found again on the Blockchain.

Scary numbers

New research by Chainanalysis, a digital forensics firm that studies the Bitcoin Blockchain, showed that 3.79 mln Bitcoins are already lost. This is on the high estimate of the study’s finding, with their low estimate still sitting at an astonishing 2.78 mln. This makes the percentage of lost coins based on what has been mined today to be at between 17 to 23 percent.

Where have they gone?

HOW MANY BITCOINS ARE GONE FOREVER?

According to a breakdown supplied by Chainanalysis, their research seems to be quite thorough and a little more than just speculation.

In their segmentation of coins that have been lost in different ways, they have broken it down into coins mined in 2017 – which they believe are still all intact and available. It makes sense that there would be more caution in 2017 with the value of fractions of coins worth huge amounts.

When they refer to strategic investments, they are looking at people who have been holding their coins for a very long time, and thus are perhaps not lost, rather just growing in a stagnant position.

The Satoshi Coins

Interestingly, and in a big claim by Chainanalysis, they take into consideration the coins that originally belonged to Bitcoin creator, Satoshi Nakamoto. He is estimated to be in the possession of over one mln coins.

However, Chainanalysis have decided to class that collection of coins as lost forever. It is a claim on which their research hinges on as Nakamoto’s coins make up nearly half of their higher estimate of lost coins.

Should, one day, Nakamoto wake like a sleeping giant and bring his coins back into play, this research will be inconsequential and the market will have to front up to a rather large boom in supply.

Does it matter?

Because Bitcoin operates on a promise of a limited supply, missing coins, especially verging on 25 percent, will clearly be playing a big part in determining the market. Supply and demand will be quite skewed if those coins mined are not reflecting on the market.

However, do these missing coins really mean that Bitcoin is more scarce than people assume?

“That is a very complex question. On the one hand, direct calculations about market cap do not take lost coins into consideration. Considering how highly speculative this field is, those market cap calculations may make it into economic models of the market that impact spending activity,” said Kim Grauer, Senior Economist at Chainalysis.

“Yet the market has adapted to the actual demand and supply available – just look at exchange behavior. Furthermore, it is well known monetary policy procedure to lower or increase fiat reserves to impact exchange rates. So the answer is yes and no.”

Nvidia Boosted By Latest Bitcoin High

Nvidia sees growth as Bitcoin smashes $9,000 mark.

A record-breaking fortnight for Bitcoin seems to have been a boon for GPU manufacturers as we enter a new week.

Rivals Nvidia and AMD have had differing successes on the stock market in recent months, with the former enjoying far more success.

A $2,000 rise in value for Bitcoin in as many weeks has seen Nvidia enjoy a two percent increase in their share price.

NVIDIA

Mining up a storm

As the likes of Bitcoin, Ethereum, Bitcoin Cash and their many competitors increase in value, more and more people are looking to get into mining.

For the hobby miner, the easiest way to get into mining is buying and installing a fairly powerful graphics card.

For the more serious miner/businessman, investing in the likes of an Asic miner from Bitmain is a better option. But the layman will almost always buy a conventional GPU – to the benefit of Nvidia and AMD.

Blockchain changes for Ethereum

Another driving factor is the recently announced upgrade to Ethereum’s Blockchain. Co-founder Vitalik Buterin outlined plans to address shortcomings, and scalability is high on the list.

These changes all require workers – so the need for GPUs is only bound to increase which will be a boon to both Nvidia and AMD in the next few years.

Speaking to Nasdaq, RBC Capital’s Mitch Steves says ongoing development to Blockchain technology will positively affect investor sentiment in the sector.

“This is a multi-faceted question; however, we think investors are beginning to realize the value that cryptocurrencies offer. The “cat is out of the bag” so to speak and we wouldn’t be surprised to see more and more institutional money and high net worth individuals invest in the rapidly growing space (now a $300B+ market on a fully diluted basis). The lightning network for Bitcoin has made significant progress, the software development team is working on ring signatures for confidential transactions and the Metropolis update for Ethereum was seen as a confidence booster as well. Overall, the technology is progressing at a rapid rate combined with more institutional interest which is likely driving the prices up.”

Secret symbol № 7: е What is this?

Developers Begin Turning to Hard Forks for Fundraising Rather Than ICOs

Companies wanting to raise money may eschew ICOs, launch forks with premines instead.

Companies who wanted to raise money for developing their projects in the cryptoworld traditionally did so through Initial Coin Offerings. Now another trend has emerged for those wanting to do so – the hard fork

Not strictly a fork

A fork, in its strictest sense, implies a change in the protocol of a cryptocurrency resulting in an old version and a new version. Developers who fork a cryptocurrency have no real monetary advantage, as they only implement a change to the protocol. Holders of the original cryptocurrency (e.g. Bitcoin) retain coins on both branches and can spend them at their will.

This was true in the case of Bitcoin Cash – a true fork of Bitcoin with larger blocks. While the developers increased the block size, they did not benefit monetarily from the creation of Bitcoin Cash. However, other forks such as Bitcoin Gold have an element of premining included. The developers start with the Bitcoin blockchain at a particular point in time, but then mine a certain number of blocks for themselves.

Advantages – established user base

The advantages of doing a split of an existing cryptocurrency is that you inherit an established user base. The users do not have to do anything to claim their coins. This can be a two-edged sword if these users decide to dump their “free” coins. For developers interested in raising money through a combination of premine and fork, this can be a disaster. The price of their mined coins would go to zero. For ideological pure forks – this does not matter. The market determines the relative worth of their coins and they then proceed to promote it.

Regulators should have few problems

ICOs have come under attack from regulators across the world because they raise funds from investors without any safeguards in place. Given that hard forks are actually a free distribution of tokens, regulators should be more accommodating. Of course, investors can still lose money if they buy these coins at exchanges and then the prices crash.

Regulators would be more worried about fly-by-night operators raising money through ICOs and disappearing. The SEC has taken action against multiple ICOs, arguing their tokens constituted securities. Other countries like South Korea have also severely regulated ICOs, while leaving cryptocurrency trading alone.

The many faces of Bitcoin

When you have a choice to fork any cryptocurrency, it makes sense to fork the one with the largest user base and largest market capitalization. The success of Bitcoin Cash has sparked many new imitators – Bitcoin Gold, Bitcoin Silver, Bitcoin Diamond and Super Bitcoin. Imitation might be the best form of flattery, but Bitcoin certainly does not need so many forks. The problem will only worsen if Bitcoin’s price increases and imitators seek to benefit further from the “Bitcoin” brand.

Sol Lederer, Blockchain Director at LOOMIA, agrees:

“These forks are very bad for Bitcoin. We are looking at a possible fork on Oct. 25 with Bitcoin Gold and another one next month for SegWit2x. Saturating the market with different versions of Bitcoin is confusing to users and discredits the claim that there are a limited number of Bitcoins–since you can always fork it and double the supply.”

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