Our Archive

Welcome to your Archive. This is your all post. Edit or delete them, then start writing!

Off-Chain Transactions Explained

Off-Chain Transactions Explained

Off-chain transactions occur outside of a blockchain network and as a result, are generally cheaper and faster than on-chain transactions but do not fully benefit from the inbuilt security offered by a crypto blockchain.

The crypto space is getting busier and ever-popular by the day, transaction volumes are growing at a rapid pace and this inevitably means traffic. 

Not the kind of traffic people want like increased visits to their website, but rather being horribly stuck in slow-moving traffic on a highway. 

The highway in crypto terms of course being a blockchain network like Bitcoin or Ethereum for example.

Continuing with the highway analogy, a blockchain such as Bitcoin has its limitations, just as a highway has a fixed amount of lanes. 

As the number of cars (transaction blocks) using the highway increases this results in a slowdown and this increased demand can lead to a rise in toll fees, or transaction fees in crypto.

In order to try and reduce or even eliminate fees, speed up transaction times and perhaps even maintain greater anonymity some people go off-chain for their transactions. 

 

The benefits of on-chain or simply regular transactions

Before we can look at what off-chain transactions are we should first acquaint ourselves with on-chain or simply regular transactions taking place on the blockchain. 

A blockchain is literally a chain made up of blocks of data. 

These blocks are validated by independent nodes on what is known as a decentralised peer-to-peer network, as opposed to a centralised network. 

This peer-to-peer setup with no central organisation and an extremely robust system of validation makes a cryptocurrency like Bitcoin rock solid. 

In fact, in Bitcoin’s entire existence, it has never been hacked nor has Bitcoin ever been counterfeited or double spent on the blockchain. 

Furthermore, the Bitcoin network is highly resilient with a highly impressive uptime of 99.986% since its inception and 100% uptime since 2013. 

This level of uptime and resilience is hard to match even by the largest tech companies in the world. 

Being so rock solid and secure makes a blockchain and by extension a cryptocurrency like Bitcoin so attractive as a means of holding and transferring value between total strangers. 

Despite these advantages, there are limitations and this has led to the use of off-chain transactions.

 

On-chain transactions also have their downsides

Naturally, on-chain or regular blockchain transactions offer a huge amount of benefits but there are downsides too which have resulted in the growth in demand for off-chain transactions. 

Bitcoin transaction fees are expected to rise as demand for Bitcoin and other cryptos rises. 

For many users, especially those making small transactions the fees can represent a significant or unfeasible cost. 

In addition, getting transactions confirmed on the Bitcoin network could take anything from 10 minutes to several hours. 

Compared to legacy banking this is already a big improvement but for many, it’s simply not fast enough!

 

What are off-chain transactions?

To combat the downsides of on-chain transactions several protocols and services exist enabling off-chain transactions with lower fees and quicker settlements. 

Off-chain transactions deal with values externally from the blockchain and usually come about via several methods. 

These can include two parties having a private transfer agreement, maybe something like the private sale of a vehicle between two parties or a third party may exist that validates and guarantees a transaction.

Think of a 3rd party like Amazon sitting in the middle to ensure that the correct product ordered from party A in the marketplace makes it to party B as promised and on time and the seller gets the appropriate payment minus fees of course. 

Without the Amazon marketplace or a similar 3rd party, the user would be sending money to the seller in the hope that everything will go well. 

A huge company like Amazon with its market strength and dominance provides the required level of confidence just as a blockchain does. 

Amazon however doesn’t do this for free, there are costs involved just as there are transaction fees involved with blockchain transactions.

 

Another off-chain method uses a code-based payment mechanism. 

In this case, one party purchases a redeemable code to exchange against a crypto asset. 

They give this code to a third party who then redeems the code either in the same crypto asset or a different one depending on the service provider.

All of these individual transactions are happening externally and are therefore not restricted by the speed limitations or transaction fee requirements of the blockchain but also do not benefit from the full amount of security benefits afforded by the blockchain. 

There is naturally a trade-off, speed and lower fees in exchange for perhaps a small loss in security.

 

A couple of off-chain transaction providers includes Lightning Network and Liquid Network

One example of an off-chain network is the Lightning Network, a decentralised peer-to-peer network that allows users to transfer Bitcoin off-chain instantly and less transaction fees, so, faster and cheaper than on-chain. 

The Lightning Network is built on top of the Bitcoin network and is known as a layer-2 solution.

Another example is the Liquid Network which also offers speed and cost advantages but uses what is known as a sidechain protocol. 

The primary difference between layer-2 and sidechain solutions is the difference in their security mechanisms. 

Layer-2 relies on the security of the main chain, e.g. the Bitcoin blockchain whereas sidechains have their own security mechanisms. 

However, both have pretty much the same goal, to reduce transaction times and fees.

 

Conclusion

As crypto has exploded in popularity it has inevitably meant an increase in cost and a slowdown in transaction times. 

As a crypto blockchain like Bitcoin is pretty hard-wired, alternative ways to scale are continually being explored. 

Off-chain transactions are one way to reduce the transaction load and offer users a cheaper and faster alternative even if there are a few tradeoffs involved.

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More
TXID - Transaction ID Explained

TXID Explained

A TXID also known as a transaction ID or transaction hash is a unique string of characters given to every single transaction that is verified and added to a crypto blockchain such as Bitcoin or Ethereum.

 

A TXID or transaction ID is a vital piece of information on a blockchain. 

Every single transaction that is verified and added to a blockchain like Bitcoin or Ethereum is allocated a transaction ID or TXID. 

Think of it as something similar to a booking reference number when you book a flight or a hotel room. 

Every booking reference number is unique and allows the airline or hotel to identify your booking and proves that you have paid for the flight or hotel room.

In much the same way a TXID confirms that the desired transaction was correctly processed and recorded on the blockchain network.

There are some very important distinctions to be aware of when comparing the booking of a flight, hotel room, or say a purchase on Amazon to a blockchain transaction. 

In all of the other cases, there are usually customer service departments with people on the other side to talk to in the event that a transaction isn’t processed correctly. 

Usually, with crypto, there is no person on the other side, the blockchain software and logic take care of everything and if something goes wrong it can get tricky or maybe even impossible to set right. 

Secondly, a blockchain transaction could potentially represent a significant sum, maybe thousands, hundreds of thousands or even millions. 

With those values at stake, it’s essential that the mechanism behind the TXID is rock solid and reliable and that transactions are permanently and securely stored.

With this in mind, it’s reassuring to know that blockchains use something known as a double 256-SHA hash. This is a very long string of numbers and letters and are very difficult to hack.

 

What is a TXID exactly?

A TXID or Transaction ID is a string of letters and numbers that is able to identify a particular transaction on a blockchain network. The string is a double of the SHE-256 hash of a transaction.

Whenever a transaction is signed the TXID of that transaction is actually signed. 

This ensures that if any part of that transaction is changed, the transaction ID will change rendering the signature invalid. 

This provides an additional safeguard to ensure that nothing gets tampered with.

This ultra-high level of security combined with transparency makes crypto pretty unique in the world of finance at least.

 

Below are a couple of famous examples of transaction IDs (TXIDs) to see what they look like

The first-ever Bitcoin transaction

One of the most famous TXIDs is the very first Bitcoin transaction between the pseudonymous inventor of Bitcoin, Satoshi Nakamoto and Hal Finney, an early Bitcoin contributor, cryptographer, cypherpunk and developer. 

Hal Finney received 10 Bitcoin on 12 January 2009 at 3.30 am GMT, at that time literally worthless and today would be worth in excess of €2.6 million!

TXID: f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16

You can view this historic transaction on blockchain.com by visiting: https://www.blockchain.com/btc/tx/f4184fc596403b9d638783cf57adfe4c75c605f6356fbc91338530e9831e9e16

 

The world’s most expensive pizzas!

On 22nd May 2010, computer programmer Laslio Hanyecz posted Bitcoin forum, Bitcointalk

“I´ll pay 10,000 bitcoins for a couple of pizzas…Like maybe 2 large ones so I have some leftover for the next day”

Yes, 10,000 bitcoins!

In those early days, 10,000 bitcoins were worth around 41 USD. A bitcointalk user on the forum accepted the challenge and provided a very hungry Laslio with the 2 pizzas netting himself a tidy little profit. 

Today, in 2023, those 10,000 bitcoins would be worth in excess of 260 million EUR! 

Yes, you didn’t read that wrong! Those are two very expensive pizzas! Due to the historic magnitude of this transaction, 22nd May is now known in crypto circles as Bitcoin pizza day.

TXID: cca7507897abc89628f450e8b1e0c6fca4ec3f7b34cccf55f3f531c659ff4d79

You can view the pizza order transaction id here to see what it looks like:  https://www.blockchain.com/btc/tx/cca7507897abc89628f450e8b1e0c6fca4ec3f7b34cccf55f3f531c659ff4d79

 

Conclusion

A transaction ID or TXID is a highly secure identification of a transaction that has been verified on a blockchain network like Bitcoin or Ethereum. 

It is practically impossible to successfully fake transactions on a blockchain and this ultra-high level of security combined with complete transparency makes blockchains very interesting as a highly secure, global, transactional technology. 

For now, though, all you need to know is that a transaction ID or TXID is the confirmation that your transaction was recorded correctly on the blockchain and that everything went to plan. 

In addition to learning about what a TXID is, it’s also worth remembering the pizza story the next time someone offers you virtually worthless crypto for some pizza, who knows, maybe that same crypto could be worth millions in a few year’s time!

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More
Crypto Faucets Explained

Crypto Faucets Explained

A crypto faucet is a website that pays out tiny amounts of crypto in exchange for performing small tasks, such as clicking on links or watching ads.

If you’re not from the United States you may be doubly confused by the term crypto faucet as the word faucet doesn’t actually exist in British English. 

In the UK we would refer to a faucet as a tap, as in a tap where water flows out. 

Okay, so, that clears up what a faucet is for non-Americans, the next question is, what does a faucet or tap have to do with crypto? 

Let’s find out.

In order to understand the term crypto faucet, we can think of a tap or faucet, where generally water, beer or soda flows but in this case crypto drips out. 

Now, imagining the crypto slowly dripping out of the faucet as opposed to flowing out at speed is very important in order to understand the levels of money or rather crypto you are likely to earn on a crypto faucet website. 

 

A crypto faucet is no get-rich-quick scheme! It is however free crypto, although you are still investing your time, and time is money for most people. 

If you have the time and inclination you could earn yourself tiny amounts of crypto without actually paying for it and the beauty is in the fact that the value of that same crypto could rise considerably. 

This wouldn’t necessarily be the same if you were earning the equivalent in a fiat currency like GBP, EUR or USD. 

Let’s imagine you earn a reward of £0.05 each time you click on an advert. 

The value of that 5 pence will not really go up, the value of the 5 pence today will be roughly the same next year or the year after if we ignore inflation.

Now, imagine that that same 5-pence was worth £0.50 or £1 next year. 

This changes things. 

With crypto as it is at this moment, the price can rise and of course, fall quite dramatically in the course of even a few weeks or months. 

This volatility and growth potential makes the earning of rewards in crypto as opposed to a fiat currency potentially more interesting.

 

Early crypto faucets users could possibly have become millionaires

Crypto faucets started out during the early days of Bitcoin as a way to spread awareness of this new thing known as a cryptocurrency. 

As difficult and painful as it may be to imagine today, those early crypto faucet users could be earning one or two bitcoin for clicking on links, it may have been a relatively worthless drip back then, however, today a single bitcoin is worth upwards of €43,000. 

So, in theory, if you had earned as little as 25 bitcoin back then when they were virtually worthless, they would be worth over €1 million! Yes, you would be a millionaire. 

Unfortunately, the Bitcoin opportunity is long gone, today you would earn Bitcoin in what are known as Sats or Satoshis, one Satoshi is one hundred millionth of a Bitcoin or 0.000000001 BTC

 

How does a crypto faucet work?

In the simplest sense, a crypto faucet website pays a reward in exchange for performing a task such as clicking on a link, watching an advertisement, completing a captcha or maybe promotion on social media. 

Crypto faucet websites get paid by their clients for each task and they pass on some of the rewards to the users of the website.

Crypto faucet websites usually have some form of minimum payout threshold, so the little drips of crypto you earn accumulate in a micro wallet on their website until such time that a certain minimum balance is reached, at which point the earned crypto can be paid out to your own personal crypto wallet.

 

What are the downsides of crypto faucets?

There are no major downsides except that you need to invest time earning the crypto, however, there are some potential risks to be aware of. 

It is not impossible that you could be clicking links that could be malicious and end up putting malware on your computer, which in turn could turn out to be disastrous. 

It is therefore essential that you have your wits about you, use some common sense and are careful about what you click. 

Doing research on what are reputable crypto faucet sites will certainly help reduce the risks.

 

Does one need knowledge of crypto to use a crypto faucet?

The great thing is that pretty much anybody can use a crypto faucet, there is no knowledge of crypto required although it is useful to know a little bit in order to know what crypto you would like to earn

 

Can one earn other types of crypto aside from Satoshis (tiny fractions of Bitcoin)?

Yes, although the original crypto faucets were offering Bitcoin it is also possible to earn Ethereum, Litecoin and Monero to name a few. A quick Google search will find you plenty of crypto faucet lists to choose from.

 

Anything else to watch out for?

Sadly, as with many aspects of crypto, even crypto faucets can attract scammers. 

Scams can include simply not paying out once the threshold has been reached or just logging users out. 

This type of scam is akin to making you work and then not paying you, not nice. 

Again, to be safe, do some research and see what the word on the street is before using a crypto faucet.

 

Conclusion

As the well-known saying goes, “There’s no such thing as a free lunch” and it’s true, even with crypto faucets it’s not a free lunch as you still need to do some work but it can allow you to accumulate small amounts of crypto without actually paying out hard cash. 

If you have more time than money or would like to find a financially risk-free way to delve into the world of crypto, crypto faucets could be a place to start. 

You never know, maybe there’s another Bitcoin-size opportunity on the horizon and you could earn a tiny amount now that could be worth a lot more in the future!

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More
Altcoin Explained

Altcoin Explained

An altcoin is any type of crypto that is not bitcoin. The word altcoin is made from the portmanteau of the words alternative and coin

Once upon a time not so long ago there was this one lone cryptocurrency called bitcoin. 

It was a strange new creation by a mysterious person or group of people who went by the name Satoshi Nakamoto. 

Even with the huge amount of interest in crypto and the level of information we have available to us, nobody to this date knows who Satoshi Nakamoto is, that’s pretty astounding! 

For a while, at least, bitcoin was this strange new digital currency that few people really understood or even cared about. 

Fast forward to today and crypto is big business, there are literally thousands of crypto coins and tokens out there and it’s growing by the day.

 

What is an altcoin?

The clue is in fact in the name, altcoin stands for alternative coin. 

Going back to the early days of crypto when there was only bitcoin, the lone cryptocurrency, people began to recognise the potential of blockchain technology beyond what bitcoin was doing or offering. 

So new coins began to appear and these new coins, basically anything that wasn’t Bitcoin began to be referred to as an altcoin or alternative coin to bitcoin. 

 

A simple analogy to understand what altcoins are and how they came about

We can liken the current crypto craze to that of the birth of the internet in the 1990s. 

Let’s imagine the internet starts with a single website, it’s pretty basic compared to today’s websites but functional. 

That one initial website could be thought of as Bitcoin. 

The whole concept is new, there is a basic browser and people can access and use this one site from anywhere. 

So, some people began to see the potential of the internet and its underlying technology and began to create websites of their own, let’s call them “altsites”. 

Now there are an estimated 1.86 billion websites out there or 1.86 billion “altsites” out there.

In much the same way, bitcoin was the pioneer that created the first crypto and its underlying blockchain technology, since those days over 9000 altcoins are out there and this number is going to keep rising as it did with websites.

 

The history of altcoins

In 2009 bitcoin arrived on the scene, what happened next? Well around 2011 the first altcoins appeared running on the bitcoin blockchain.

The very first altcoin was Namecoin. Namecoin was based on Bitcoin’s code and arrived in April 2011. 

Namecoin demonstrated that there was space for more coins beyond bitcoin and from there the race to build more altcoins began.

 

An altcoin is not second best

It may seem obvious but we must also understand that the first is not necessarily the best, just like the first automobile cannot be compared to the automobiles of today. 

The first car simply paved the way for others and validated a need, utility and demand. 

In much the same way, using the internet example again, today’s websites are far superior to the very first websites. 

The first websites indeed played a huge part in the development of the internet but they are not superior. 

This is a very important thing to keep in mind as sometimes we can think of an alternative as maybe being second best. 

This is definitely not the case with altcoins. They are simply alternatives or derivatives of Bitcoin in some way.

If we look at Ethereum, it is an altcoin. 

Ethereum however serves a very different purpose to that of bitcoin. 

Whilst bitcoin is purely a digital currency, a way of holding and transferring value, Ethereum is a cryptocurrency with its own powerful ecosystem capable of a lot more applications such as decentralised finance.

 

Altcoins can be highly experimental and volatile!

If we go back once again to the Internet analogy and think about e-commerce, there are limitless possibilities to sell things online. 

Some make a lot of sense and will take off and succeed like Amazon but there are also millions of others that just won’t make it. 

Putting money into altcoins can be very risky, especially very new ones as there’s no guarantee of success, just like investing in a brand new startup that sounds promising but could eventually implode or of course, become mega-successful. The same with altcoins!

 

The technology behind all altcoins

Just like the core technology behind all websites is basically the same, we can say the same with crypto. 

All cryptos run on something known as a blockchain. Call that the “internet of crypto”. 

Blockchains are literally chains made up of blocks. 

In the case of Bitcoin these blocks are mined using something called proof of work (PoW), validated and added to the chain, each time a new block is added to the chain, the miner receives coins in payment. 

All altcoins use some form of blockchain. 

Ethereum has its own blockchain that currently also works using proof of work although that is likely to change soon but that’s a separate topic. 

For now, though, it’s important to understand that the core technology or principles that drive Bitcoin form the basis or foundation of all altcoins in some way.

 

Conclusion

In summary, the vibrant and diverse world of crypto that we see today started out with a single coin, bitcoin. 

Everything that has followed ever since is referred to as an altcoin. It’s not conceivable that at some point, perhaps even now, the term altcoin will not be very relevant and go out of use. 

For now, all you need to know is that an altcoin is any coin that is not bitcoin, easy enough!

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More

Circulating Supply Explained

Circulating supply is the best approximation of the number of coins or tokens currently active in the crypto market and in the hands of the general public.

 

Supply and demand are at the root of our economies and the businesses and services within them. 

A shortage of workers creates demand for workers. A hot new widget that everybody wants creates demand and businesses frantically make products to meet the demand. 

The amount or rather a scarcity of available workers to fill open positions or the number of widgets available to buy helps to dictate or even elevate the price. 

 

A simple example of supply and demand dynamics

Let’s say you want to sell your car. 

It is a VW Golf GTi, with an average amount of kilometres and is in average condition. 

The demand for your car will be pretty average as there will no doubt be many other cars like yours on sale. 

Now instead, imagine that your VW Golf is in like-new condition and has very few kilometres, this makes your car more valuable as there are fewer cars like yours available to buy and therefore there is greater demand for yours and this will push the price of yours up. 

If more cars like yours enter the used market, the price of yours will come down as buyers have more choices. 

So, what does this have to do with crypto you might ask? 

Well, the price of crypto very much like stocks and shares is driven by demand and supply amongst other things.

 

What is circulating supply in crypto?

Circulating supply is the approximate amount of coins or tokens currently in circulation and in the hands of the public. 

What does this mean exactly? 

Let’s start from the very beginning and use the biggest and best-known crypto, bitcoin as an example. 

When Bitcoin was created, the mysterious Satoshi Nakamoto “hardcoded” the total amount of bitcoins that will ever exist, 21 million Bitcoins to be exact. 

This means that there will never be more than 21 million bitcoins in existence. 

This limit creates scarcity, just like with gold or oil. 

There is only so much oil or gold out there and this keeps the price high and rising as it generally has with bitcoin. 

If we think of an alternative and certainly way more valuable commodity, water, the price is very low, this is because there is so much supply, water is generally available everywhere. 

If this heaven forbid changed, the price would skyrocket as we literally cannot live without it. 

Going back to Bitcoin, the 21 million is not the circulating supply but rather the max supply, the maximum amount there will ever be. 

The circulating supply of bitcoin is 19.4 million in August 2023. This 19.4 million refers to the actual amount of bitcoin in circulation and is potentially available to buy and sell. 

We haven’t yet reached the 21 million as those coins have yet to be mined and are therefore not yet available and not in circulation.

Now that we hopefully understand what circulating supply is we can look in a little more detail at what max supply and total supply are.

 

What is max supply?

The max or maximum supply of a crypto coin or token refers to the maximum amount of coins or tokens that will ever be produced. 

Taking the earlier example of Bitcoin above, the max supply would be 21 million coins. 

No more Bitcoin can ever be produced. 

Those same 21 million coins will make up the total supply globally for eternity. This is very different to fiat currencies like the GBP, Euro or US Dollar where the respective central banks can and do continue to issue more money into the economy and there is no max supply limit.

 

What is total supply?

The total supply is the number of coins or tokens that currently exist, either in circulation or locked up in some way and have yet to be released onto the market. 

This could be for example that they are in some form of escrow or similar situation. 

So, the total supply is the total supply of coins to date minus the total number of coins or tokens that have been burned or destroyed. 

Total supply differs from Circulating Supply in that, the circulating supply does not count coins or tokens that are locked up and not yet in circulation. 

This is one of the reasons why the circulating supply value is approximated, as it’s very difficult to accurately measure the number of coins at any one time that are in some form of escrow or lockup. 

These dynamics are literally changing by the second.

 

Now that we have an understanding of what circulating supply, max supply and total supply are we can go back to the used VW Golf GTi example to see how these three aspects relate to each other.

Let’s begin with the Max supply, So the used VW Golf we are using for the example is a 2010 model year and it is a GTi model. Let’s assume that a total of 10,000 of these 2010 model Golf GTi cars were manufactured. 

This would be the total supply as no more 2010 year model cars can in fact be produced. 

Now let’s look at the max supply. In this example, we would take the 10,000 2010 model Golf GTis produced and subtract the cars that have been written off and no longer exist, let’s say that is 1500. 

This means that the total supply is 8,500. The total 10,000 produced, minus the 1,500 that are now dead. 

Now let’s say, out of the 8,500 remaining cars out there 1,000 are stuck on a transport ship and temporarily unavailable but will soon be available for sale, then the circulating supply would be 7,500 on this given day.

This is of course a very crude example to demonstrate how it works and hopefully explains in a simple way how these three terms, circulating supply, max supply and total supply interrelate and how circulating supply fits into the picture. 

 

Conclusion

The final takeaway, circulating supply is the total number of coins or tokens actually in the hands of the public and potentially available to buy and sell at any given moment.

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More
ERC-20 Ethereum

ERC-20 Explained

ERC-20 tokens are specifically created to work on the Ethereum blockchain platform. ERC-20 is a common standard that allows ERC-20 smart contract tokens to be easily created, shared, exchanged and transferred to a compatible crypto wallet.

Ethereum arrives on the crypto scene in 2015

As the cryptocurrency world continues to evolve at a rapid pace and an ever greater number of developers and crypto entrepreneurs invent new dapps (decentralised apps) it has become increasingly important to find a way to maintain a standard level of interoperability and compatibility.

The original cryptocurrency Bitcoin is relatively basic when we look at the entire crypto world of today. 

The primary purpose of Bitcoin is the holding, sending and receiving of value in a digital world. 

When Ethereum arrived on the scene in 2015 it opened up a great deal more possibilities beyond simply being another cryptocurrency. 

Ethereum created an exciting new crypto eco-system where new decentralised applications (Dapps) and innovative use cases could be developed and the result has been, well, astounding.

How is Ethereum different from Bitcoin?

Before going into any detail about what ERC-20 is we really need to first grasp what Ethereum is and how it fits into the overall crypto world.

We have to give props to Bitcoin, the cryptocurrency that started it all. The vision being a universal, decentralised digital currency that nobody controls, this means no government, corporation or central banking organisation. 

Bitcoin fused cryptography and something called blockchain technology to provide the foundation on which Bitcoin operates. 

As with almost all new technologies, they are relatively basic when compared to later arrivals. Look at the first automobiles that arrived on the scene, whilst revolutionary and certainly paving the way for better cars, they were in relative terms of course way more basic compared to today’s cars. 

Of course, they still perform the same core function, autonomous transportation, however, cars today are way faster, more efficient and superior in just about every way. 

In the world of crypto, something similar happened and is still happening. 

Bitcoin spawned an entire industry and some bright people saw a bigger future. One of these people was Vitalik Buterin, the creator of Ethereum. 

Think of Ethereum as v2 of the automobile. Vitalik saw a use case beyond that of a digital currency and instead saw a platform or eco-system where blockchain technology and smart contracts could be put to use for an almost limitless amount of uses. 

Ethereum was born and has played a pivotal role in the world of crypto ever since and is now the second most valuable cryptocurrency after Bitcoin.

Ethereum and smart contracts

In essence, Ethereum is a blockchain that can record transactions and also a virtual machine that can produce smart contracts. Smart contracts were a game-changer in crypto!

Smart contracts are in very simple terms computer code that perform certain very specific functions whenever a predetermined action takes place. 

A very simple way to imagine a smart contract is a vending machine. The vending machine is programmed to release the specific item the user wants after they have inserted the correct amount of money. 

If the correct amount of money has been inserted the vending machine releases the product. It will also be programmed to give back the correct amount of change. 

A smart contract works in pretty much the same way. It is designed to perform certain functions when certain actions take place, for example, a person pays X in the correct amount of cryptocurrency and the smart contract releases Y to the person, like the deeds to a house or a piece of valuable artwork. 

Of course, smart contracts are way more complex but you get the general idea.

Going back to Bitcoin, there are no smart contracts. It is purely a means of storing and transferring value digitally.

Now, the two core functions of Ethereum, the blockchain and the ability to create smart contracts means that Ethereum is able to support an almost unlimited amount of dapps (decentralised apps) and this is where the ERC-20 token standard comes in very handy.

Depending on the intended use, DAPPs might create ERC-20 tokens to function as an in-game currency, points in a loyalty program, or even ownership of an actual real-world asset like gold, silver, artwork or the deeds to a property.

This is exactly what happened and before long all sorts of new tokens were invented for different purposes. 

In 2023, there are nearly 450,000 different ERC-20 tokens according to the Etherscan website

ERC-20, a standard that developers can use to ensure quick and easy compatibility

With so many ERC-20 tokens around and way more to come, a standard or framework was going to be needed before long.

During the very early days, if two different types of tokens, token A and token B wanted to work with each other, i.e. interoperate, they could each manually write their code to work with the other tokens code and token A and token B could technically work with each other. 

This was okay when there were just a handful of tokens, however, it became unmanageable pretty quickly as the number of new tokens being launched on Ethereum exploded. 

A standard was desperately needed that developers could use as a common framework.

In answer to this, the Ethereum community developed a common standard or specification called ERC-20 to which all compatible tokens must adhere and comply. ERC standards for Ethereum Request for Comment.

Before we get into the technicalities of what ERC-20 is, let’s look at a couple of simple analogies to get an understanding of why ERC-20 was needed and what it actually does in practical terms.

Let’s begin by Imagining a casino environment full of all manner of different gaming machines from different manufacturers. So far so good. 

Now imagine that when you enter the casino, you need to exchange your Euros or Dollars for 20 or 30 different types and shapes of tokens as every machine uses a different type of token. 

That would be completely impractical and frustrating. In answer to this problem, the casino would tell all the gaming machine manufacturers that in order to have their machines in the casino their machines would have to have a certain size and shape of coin so that the same coin could work across all the machines. 

When you get paid out from one machine, you can take those tokens and put them into any other machine or convert all the remaining coins back to a fiat currency at the end of the day. 

This clearly makes things a lot easier and in very simple terms this is what Ethereum created with ERC-20, a specific standard that all compatible tokens have to adhere to in order to be able to interoperate and also be easily and quickly listed on exchanges.

Another way to imagine the ERC-20 standard would be to think about how debit and credit cards work. 

We as consumers can in most cases take any brand of debit card or credit card from any bank to a store and buy whatever we need. 

Each card conforms to a standard and contains some core information. Now if every card used a completely different standard it would be chaotic in store, imagine how many different machines or systems would be needed let alone the delays and confusion. 

Thankfully this isn´t the case and we can very easily swipe or touch the card on a machine and in the majority of cases we´re good to go due to a framework of common payment processing standards.

Now, the above are very simple examples just to demonstrate the problem and solution. Crypto tokens are way more complex than a casino coin or a debit or credit card and can perform a multitude of tasks and hold a whole host of values for different use cases from being a currency to owning a piece of art.

At its core. ERC-20 contains 3 optional and 6 mandatory rules that every token must be compliant with.

The three optional rules of ERC-20

Token Name – This is the name of the token

Symbol – This is the symbol of the token, a bit like a stock symbol like

Decimal (up to 18) – -this the divisibility of the token, 0 would mean it’s not divisible, the decimal value can basically determine how small the fractions of a token can get

The six mandatory rules of ERC-20

TotalSupply – This holds information about the total supply of the token

BalanceOf – This holds information about the account balance of the holders account

Transfer – This executes the transfer of a specific number of tokens to a specific address

TransferFrom – This executes the transfer of a specific number of tokens from a specific address

Approve – This allows a user to withdraw a certain amount of tokens from a specific account

Allowance – This allows a user to return a certain amount of tokens to a specific account

In addition to the above, these functions will trigger up to two events. This would be the transfer event that takes place whenever tokens are transferred and the approval/validation event that takes place whenever approval is required.

ERC-20 tokens have played a big part in the ICO craze and growth in the Ethereum platform of recent years

ERC-20 tokens have played a huge role in the massive amount of ICOs (initial coin offering) that have taken place over the last few years to help developers get funding for their projects. 

As ERC-20 tokens are relatively easy to create and are designed to work on the Ethereum platform they have helped to fuel the IPO boom.

What about the downsides of ERC-20?

Whilst ERC-20 has played a crucial part in the growth of the Ethereum platform and made things much easier for developers and ultimately users, ERC-20 isn’t perfect. 

There are some issues that the ERC-20 token standard does not address

One of these is that tokens could be unintentionally destroyed when they are accidentally used as payment for a smart contract application instead of correctly using ETH, the native currency of Ethereum. 

An estimated $3 million dollars of value has been lost due to this weakness. 

To resolve this problem, the Ethereum community is working on a new standard, ERC-223, however, this standard is not compatible with ERC-20, the dominant standard today so developers are still working primarily with ERC-20 until compatibility exists.

Another issue is what is known as the “batch overflow” bug that could allow an attacker to illegally potentially possess a huge amount of tokens by exploiting a weakness called the classic integer overflow issue. 

We are not going to get into this here but needless to say, it’s a potentially huge security weakness in ERC-20.

Conclusion

As with almost all industries and major technological breakthroughs, there is constant evolution, weaknesses are found, new use cases are discovered and innovation takes place every day. 

In the crypto world, the primary and not to be underestimated breakthrough was Bitcoin and the blockchain technology it uses. 

Bitcoin and blockchain technology paved the way for the likes of Ethereum where a broader use of crypto came about like DeFi (decentralised finance) and much more. 

ERC-20 is a standard that the Ethereum community introduced to provide a standardised means of compliance and ERC-20 has helped to propel Ethereum as a major crypto platform and ecosystem. 

ERC-20 isn’t without its flaws and will no doubt be superseded in time. However, for now, at least it plays a major part in facilitating the creation of compatible tokens that are easy and quick to create, transfer and hold in compatible crypto wallets. 

ERC-20 helped to fuel the ICOs that helped generate huge amounts of startup capital which in turn has helped Ethereum and the broader crypto world get to where it is today.

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More
auroracoin

Auroracoin Explained

Auroracoin (AUR) was launched on January 24th 2014 as an Icelandic peer-to-peer cryptocurrency, Iceland’s alternative to Bitcoin and the Icelandic krona. Quick side note, Auroracoin shouldn’t be confused with the cryptocurrency token Aurora (AUA).

Auroracoin and Bitcoin share the same mysterious origins

Much like Bitcoin where the creator or creators are to this day unknown, the original creator or creators of Auroracoin are also a mystery and go only by the pseudonym Baldur Friggjar Óðinsson. 

Additionally, exactly as with Bitcoin, the total supply of Auroracoin was limited to 21 million coins at inception.

It is understood that Auroracoin was created as an alternative to the government-controlled currency, the Icelandic Krona following the 2008 financial crisis and federal government-backed bank bailouts. 

Additionally, to restrict the outflow of capital the Icelandic government implemented controls that prevented its citizens from moving foreign currency out of the country. 

The second reason was to present an alternative digital currency where the unlimited printing of money was not possible due to the 21 million coin limit and thus reduce or perhaps even eliminate inflationary effects prevalent in most government-issued fiat currencies.

Auroracoin was seen as an answer to financial frustration in Iceland after the 2008 financial crash

The creators of Auroracoin said: “People in Iceland have, for the past five years, been forced to turn over all foreign currency earned to the Central Bank of Iceland. This means that the people are not entirely free to engage in international trade. They are not free to invest in businesses abroad. The arbitrary use of power this entails and the unsustainable debt of the Icelandic government has created uncertainty and risk in all aspects of commerce and the overall effect of government restrictions on the local economy was crippling”.

It has been suggested that Iceland could be seen as the ideal breeding ground for a virtual digital currency due to the limited use of cash, high adoption of electronic finance and an unusually high level of interest in Bitcoin within Icelandic society. 

If you add to this the long-term instability of the Icelandic krona and the foreign exchange controls enforced on citizens it’s easy to see how Iceland could be an ideal environment for a decentralised digital currency such as Auroracoin.

The big Auroracoin “airdrop” in 2014

Initially, half of the total 21 million Auroracoins were pre-mined and allocated for the entire population of Iceland, with some 330,000 Icelandic citizens living in Iceland. 

In what was a first of its kind, a national ID-enforced airdrop began with phase 1 on 25th March 2014 whereby 31.8 Auroracoins were allocated per individual claimant. 

This was followed by two further phases that concluded in 2015 with 318 and 636 Auroracoins available per claimant. 

From these 10.5 million pre-mined Auroracoins, around 40% were claimed, 10% of the coins were gifted to the Auroracoin foundation (M1 fund) and 50% of the pre-mined Auroracoins were verifiably and permanently destroyed or in crypto terms, burned by being sent to the special burning address AURburnAURburnAURburnAURburn7eS4Rf.

In 2016 there was a hard fork to a multi-algorithm proof of work (PoW) code change resulting in a block time change from 10 minutes to 61 seconds thus massively improving transaction speeds. 

There was also an increase in the maximum number of coins to 23.3 million which was adjusted to 17.97 million after 5.345 million Auroracoins were burned.

Auroracoin was based on Litecoin’s proof of work algorithm

Auroracoin was originally based on Litecoin with a script proof of work (PoW) algorithm which relies on a system of miners solving highly complex mathematical puzzles known as hashes. This is the same consensus system used by Bitcoin and currently also Ethereum although this is due to change. On 8th March 2016, a new codebase was released using a multi-algo architecture based on DigiByte, pioneered by Myriadcoin.

Auroracoins value reached a high of $1 billion during the build-up to its launch on the back of rumours that Auroracoin was backed by the government of Iceland. 

However, the airdrop resulted in a massive selloff causing the plummeting of Auroracoin down to just $20 million. 

Auroracoin was viewed by many as a failure or even a scam

For many observers, Auroracoin has been seen as a failed experiment and has also been referred to as a scam. 

This “failure” amongst other things led to the project sitting on the back burner for a period of time until a new team from the Aurora Foundation took over in 2016. 

This team took on the challenge of developing the infrastructure including cryptocurrency wallets and trading exchanges for the coin.

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More
web3 the new technological wave

Web3 and DeFi, the next big technological wave!

The crypto juggernaut is gathering speed and at a breakneck pace. What was once the sole domain of crypto enthusiasts is now entering the mainstream with a vengeance. 

It seems that nowadays everybody is talking about crypto and itching to get in on the action. 

In particular, the focus and excitement is in the explosive areas of Web3 and DeFi. 

In this article, we are going to look at some of the fundamentals and longer-term investment opportunities presented by the major technological shifts taking place in the world of web3 and Defi.

It’s 2009 and Bitcoin arrives on the scene

It all began in 2009 with the arrival of Bitcoin, a revolutionary decentralised digital currency without geographical barriers or any form of central government control. 

The pioneering blockchain technology running under the covers planted the seeds for where we are today. 

Bitcoin itself is still purely a means of holding and transferring value, much like a traditional fiat currency like the dollar or euro or a valuable commodity such as gold. 

Bitcoin does not serve any other extended purpose. The arrival of Bitcoin however introduced a breakthrough technology, the blockchain which has opened up a multitude of possibilities that have the ability to disrupt virtually every industry and in particular finance. 

Welcome to DeFi and Web3…

From its earliest beginnings, the crypto world has evolved at rapid speed and has in recent years spawned an entirely new industry known as decentralised finance or DeFi for short. 

DeFi mainly runs on the second largest cryptocurrency network, Ethereum. Ethereum has gone from being a cryptocurrency like Bitcoin to becoming a broader ecosystem for DeFi projects mainly due to the availability of smart contracts. 

Smart contracts are agreements or contracts written in software that are not open to interpretation, discussion or adjustment. 

They execute exactly as per the instructions written into the smart contract and provide an ideal instrument on which to build sophisticated businesses in a trustless environment. 

In DeFi a smart contract sits in the middle as the authority, as opposed to a centralised institution as is typical in traditional finance and most other businesses.

What is Web3?

Web1 was the original bare-bones internet, simple, informational websites mainly. You can get a taste of Web1 by looking at ancient search engines like Lycos, hotbot and webcrawler that are still lurking around on the internet.

Web2 was commerce-driven and spawned the internet giants we all know today, Google, Amazon, Expedia, Facebook and so on. 

Web3 is the new kid in town and one that is creating quite a ruckus. 

Web3 has the potential to truly shake up and revolutionise the world we live in, create entirely new industries and potentially level the playing field, especially in finance. 

In essence, Web3 is the next major evolution of the internet, one that is decentralised and based on peer-to-peer technologies such as public blockchains. 

Take an organisation like Amazon, which is a centralised profit-driven Web2 business, it provides a centralised platform and infrastructure on which things can be bought and sold on the internet. 

In a Web3 world, there is no centralised Amazon, but rather a highly sophisticated blockchain technology using smart contracts that provide the software protocols and required levels of security needed to enable transactions without requiring a physical intermediary. Sorry, Jeff Bezos!

This Web3 model is extending into banking, trading, insurance and more. Just as there was an explosion in commerce-driven websites during the Web2 phase, we are seeing the same again with Web3 and this is presenting investors and novices alike with opportunities to get in early on the Web3 superstars of tomorrow.

Investing in protocols and the fat protocol thesis

Below every significant technology there are usually key protocols. There has been a fundamental shift in the way protocols are being monetised. 

Our current web technology is dependent on protocols like TCP/IP and HTTP and billions of emails rely on POP/IMAP protocols to enable sending and receiving. 

The crucial protocols that have enabled much of the technology we rely on today have been in effect given away for free by the developers who generously created them on an open-source basis. 

They are free to use and exploit and exploited they have been without a shadow of a doubt and one can argue with good effect. Imagine if every email cost money! (more on that later..)

Thin protocols/fat applications vs fat protocols/thin applications

In Web2, there are what are known as thin protocols and fat applications where the vast majority of the value is in the applications built on top of the protocols, think Google, Amazon and Facebook running on top of the core internet protocols. 

The value in Web2 is on the application side, not the protocol side. 

In Web3 this has fundamentally changed and has been flipped around, the protocol is fat and where the bulk of the value is and the applications running on top are on the thin side. 

Bitcoin’s creators cleverly invented a protocol and system that has an inherent value system and which rewards its participants at the core. 

If we were to look at POP3/IMAP, commonly used to send and receive millions if not billions of emails every day there is no financial reward. 

This on the one hand is great as emails remain free, but those that developed this essential protocol did not make a fortune from it. 

As a crypto investor, investing in protocols should be considered in addition to investing in the individual applications that are running on top of the protocols, a fundamental difference when compared to Web2. 

The name of the game is to be able to identify and invest in the protocols and applications of the future. 

There is something called the fat protocol thesis which says that the total value of all the apps running on top of a protocol such as Ethereum will never exceed the total market value of Ethereum. 

Thus according to this theory, Ethereum should continue to grow in value as the ecosystem it supports grows. 

The fat protocol thesis seems to be holding and provides a reasonable rationale on which to invest in protocols/blockchains for the longer term.

Web3 is the gold rush of the 21st century

One can liken the current Web3 boom to that of the famous gold rush of the 1800s. 

The pursuit then was gold and attracted hundreds of thousands of prospectors to California and South Africa. 

In a similar way, DeFi has exploded onto the scene with almost limitless possibilities, unlike gold however which is limited in quantity, DeFi projects are virtually limitless in scope.

However, not all projects will succeed and could be as useless as a hole in the ground so the secret is to know which tokens to pick and invest in and that isn’t easy even for seasoned crypto investors. 

Web3 money markets and how to earn a passive income from DeFi

Speculation is not the only way to profit in the crypto world. 

Just as with traditional financial markets, it’s also possible to earn a modest passive income by putting crypto assets to work. 

With interest rates still at a historical low there is a need for ways in which one can earn a reasonable passive income in DeFi from crypto assets by way of yield farming, staking, becoming a liquidity provider and through the lending of crypto. 

In very simple terms one can use their crypto assets to earn income in the form of fees or interest rather than profit from the growth of the underlying Web3 asset.

Conclusion

In the simplest terms, imagine having the chance to invest in Amazon, Facebook and Google when they were first starting out. Sadly, that boat has already sailed, however, the next generation of Amazon, Facebook, and Google are on the sidelines, fueling up and ready to make an impact. Just as with the web2 era, only a handful will become major players, the challenge is figuring out who the future DeFi and Web3 giants might be and get in on the action early!

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More
crypto arbitrage

Crypto Arbitrage explained

Cryptocurrencies have grown into a mainstream phenomenon. As with virtually all types of global commodities, opportunities exist to make money but lose it as well.

Bitcoin may not be as well established as other trading assets, but it does have the advantage of being ‘open’ 24 hours a day, 365 days a year and is perhaps a little more accessible to everyday people. 

Bitcoin is global and not bound by borders or national restrictions. Bitcoin and other crypto can also be found on multiple exchanges across the globe whereas traditional assets are much more limited, although generally more robust for trading purposes. 

From futures trading, leverage and margin, to simply buying and holding, people entering into the cryptocurrency space are always looking for sure-fire ways to make their cryptocurrency grow, even beyond what its famed volatility will allow for. 

This is where crypto arbitrage comes in. Due to the volatile nature of cryptocurrencies like Bitcoin, traders can take advantage of price discrepancies across multiple global exchanges. 

Seeing as there are so many crypto exchanges and even more buyers and sellers across these markets, there will undoubtedly come a time when the price of Bitcoin is different from one market to another producing the perfect opportunity for crypto arbitrage. 

So what exactly is crypto arbitrage, and is it as easy as buying low in one place and selling high somewhere else? 

What is Crypto Arbitrage?

Simply put, arbitrage is when a person purchases an asset in one place and sells it in another to profit from a slight deviation in price between markets. 

As an example, if 1 BTC costs $30,000 on Binance but it’s currently also trading at $30,100 on Kraken, there is a $100 opportunity for arbitrage.

In this instance, if you purchase your Bitcoin on Binance and hopefully sell it quickly enough on Kraken you’ll make a $100 profit — easy enough, right? 

Unfortunately, while the mechanics are as easy as that, there is a lot more to consider before jumping fully into crypto arbitrage as a sure way to make quick profits. 

How crypto arbitrage works

As explained above, crypto arbitrage is looking for the same asset selling at different prices and taking advantage of that. 

There are mainly two types of crypto arbitrage: Arbitrage between exchanges and Arbitrage within the exchange.

The former is the most basic way to make crypto arbitrage work for you as different exchanges will have slightly different markets. However, with arbitrage between exchanges, some variations help you take advantage of price differences. 

Once you have identified the two exchanges you want to play off each other, it is time to enact the trades to make a profit. However, one also needs to be aware of the workings that can cause issues in trying to be profitable. 

It takes around 15-20 minutes for major coins to confirm the transaction. If the market price drops within this time frame, you may run a risk of generating less arbitrage profits. 

Factors like geographic location, time of day, and even different news cycles can all move the price of a coin within those 15-20 minutes and destroy your hopes of being successful in an arbitrage trade. 

Can crypto arbitrage be profitable?

Arbitrage is a well-known and established practice in the world of finance. It can be profitable. However, it will require dedication and persistence to succeed. 

Crypto arbitrages are usually quite small. You can earn profits from market differences, from about 0.2 – 2.5% ($10 to $100) every day. If you focus on around ten such spreads every day, you could make upwards of a thousand dollars per week.

However, you need to know what you are doing, and you have to be prepared with the right tools and platforms. 

If you are a day crypto trader, and there is not much market movement, you can always earn some profit from arbitrage. 

If you are persistent and quick to take action on profitable opportunities, it is possible to earn a decent profit from arbitrage. 

It will generally be a factor of just how much money you are able to put to work. Making 2% off of 500€ is nowhere near the same as 2% off of €1 million!

Crypto arbitrage comes down to awareness and speed. It is up to you to recognise the differences across various exchanges, and you need to access multiple listings at once, given that cryptocurrency exchanges operate 24/7/365, it can be very time-consuming.

Pros and Cons of Crypto Arbitrage

As with everything, there are certain pros and cons to crypto arbitrage, and a lot of it depends on you as a trader and what knowledge and access you have. 

There are indeed a lot of pros to crypto arbitrage, but it is not as simple as it sounds and many things need to be considered before jumping in. 

Pros of Crypto Arbitrage

Quick Profits

Because you can buy at one exchange and sell at another in a matter of minutes, the potential for profit in crypto arbitrage is fast. This is much quicker than traditional trading where you buy and hold cryptocurrency to sell at a later date.

A Wide Range of Opportunities

The cryptocurrency space is bursting with new markets, coins and exchanges and all of this gives rise to new potential avenues for crypto arbitrage. 

According to Coindesk, there are more than 391 cryptocurrency exchanges in the world today and these will all have a slightly different price for different cryptos.

The Crypto Market is Growing

Because crypto is still very much in its infancy and has not been totally adopted or accepted, it is not a mature and steady space. 

Due to this, there is quite a bit of irregularity, disjointing, and lack of information transfer between exchanges. There are also a fewer number of crypto traders than in the traditional markets, and thus less competition in the market, which leads to potential price differentials.

Cryptocurrencies are Incredibly Volatile

While volatility is often frowned upon in investing circles, it is the one aspect of crypto that makes it so enticing to risk-takers and traders. 

For crypto arbitrage, it also means more opportunities as there can be huge price changes between exchanges and this makes for a more lively opportunity for bigger arbitrages.

The Cons of Crypto Arbitrage

Anti-Money Laundering Rules and Restrictions

While not really a con, and quite acceptable with crypto, using multiple exchanges will often call for you to adhere to the KYC regulations that are in place. This will involve things like potentially holding a bank account in the same country where the exchange is based

Fees

This can be quite a hidden barrier for arbitrage. Because users are operating with often small profits, any fees for trading crypto, withdrawal fees, network fees or exchange fees, can impact the profitability of arbitrage, or could even lead to a loss. 

High Start-Up Capital

In order to really profit from crypto arbitrage, and make it worthwhile with the tiny profit margins there is a need for a relatively large amount of trading capital to make it worthwhile. 

Withdrawal Limits

With large trades and bigger capital amounts, there also comes an issue of withdrawal limits. Exchanges can have set limits for traders which means you may not be able to get the access you want to your profits right away. 

Slow Transactions

Crypto transactions are also susceptible to market volatility in terms of their speed and accessibility.  When the markets are on the move, the best time for arbitrage, it is not uncommon to have slower transactions, or even downtime on exchanges which could hurt profits. 

 

Things to Know and to Watch Out For

Understanding the pros and cons of crypto arbitrage will help you decide if this is the right option for you, but if you do decide to go down this route, there are a few more things to watch out for. 

A number of pitfalls can trap unsuspecting traders.

Similar Sounding Coins

The cryptocurrency space is large and constantly expanding. New coins are being created and brought to market all the time and they can often have similar-sounding names which can trick traders. 

A good example of this is the project ‘SIA’ which is an application for decentralized cloud storage solution and its symbol is very close to another project called ‘SAI’.

Even when it comes to the different coin tickers there can be issues — such as $HNC (HellenicCoin) and $HNC (Huncoin), or ($BTCS) Bitcoin Scrypt and ($BTCS) Bitcoin Silver.

Scam Coins And “Pump & Dump” Schemes

While the cryptocurrency space is certainly getting better and more regulated, there are still instances where people are being scammed out of their money. 

Many coins can come to the market with the express purpose of stealing money from investors. If you arbitrage such coins, you could get burnt. The same thing happens with pump and dump schemes where projects purposefully inflate the price of their coins only to sell high and collapse the market; this can also be devastating for arbitrage. 

A Lack of Trading Volume

Often when looking for arbitrage opportunities, you may be led to smaller, lesser-known coins with good potential for arbitrage. 

However, these coins can also lack trading volume. This can hamper large trades of the coin and lead to serious consequences such as delisting. You could avoid running into that issue by keeping an eye on the exchange order book and making sure that you see transactions happening or not.

Is Crypto Arbitrage Worth It?

Having considered all of the above, it is time to decide if crypto arbitrage is actually worth pursuing. Certainly, it is a viable opportunity, especially in the cryptocurrency space, but what needs to be understood is that it is not a silver bullet for making easy money. 

Buying a coin low, moving it across to where its price is higher, and selling it on to collect a profit sounds easy, but there are many considerations that need to be looked at. 

Dealing with crypto is still challenging and often lacks an easy user interface. More than that, the lack of full regulation means there are issues surrounding scams and schemes. 

Besides all of that, crypto arbitrage can be difficult to master and requires a lot of prior knowledge and experience, not to mention a decent amount of starting capital to ensure viable profits and some good coding chops if you are hoping to do it on a decent scale because if you are doing it manually, you are not going to be efficient. 

Crypto arbitrage is certainly an option to make money but to be successful it requires access to capital, hard work, a tolerance for risk and a thirst for knowledge. If you’re prepared to put in the work and have some skills it could prove profitable.

Ready to go take your SEO content to the next level? Request our free site audit

Free site content audit
Read More