So, first things first – and this may come as a shock to people who know me, but this is my first official “Blog Post” ever. I’ve been into computer science since before I could read, and as a full-stack developer in my day job, you would think I’d have at least several hundred thousand blog posts by now. For whatever reason, I just never bothered. That brings me to here. I’m delighted to see interest in some of my more, lets say, “non-mainstream” ideas rise to the level where I’m finding myself repeating myself in direct communication. So, I figured it would behoove us all for me to organize these ideas in a single place that’s easy to reference for people. I plan on using the blog to discuss ideas relating to, but not limited to:
- Artificial Intelligence
- Cloud Computing
- Quantum Computing
- Software Development
So, that said, due to popular demand, my first blog post about Cryptocurrencies:
I have been excited recently about the news surrounding Cryptocurrencies, especially Ethereum, and have forecast it’s recent price spike. At this time, everything I read and learn, leads me to believe that the price of cryptocurrencies will continue to rise, long-term. The geopolitical pressures are easing; governments all around the world are warming up to the idea of an inflation-proof digital currency, and the efficiency it would bring to our economic systems. Additionally, more and more large organizations, like Fidelity Investments, JP Morgan, Alibaba, and Samsung are publicly showing their support for blockchain technologies and what kind of future they can bring. (I’ll talk about that in a future post, for sure).
5 years ago I was in a similar position with Bitcoin. It was hovering at a price under $100. I shouted from the rooftops to the annoyance of all my friends that they would be wise to invest a little of their discretionary income in this new idea called Bitcoin, built on this relatively new, but incredibly revolutionary technology called the blockchain. I viewed the blockchain, (and still do), as MORE revolutionary to our society than the mobile phone or the internet. Yet, unlike those technologies, I feel that mainstream adoption hasn’t even BEGUN to take place – so the potential here for profit in mind-boggling, in my opinion. Just as an example – If someone had invested $100 in bitcoin on July 17, 2010, when the price was just $0.05 – would be holding investments worth $5,000,000 today.
Proof: $100 at $0.05/BTC = 2000 BTC. 1 BTC = $2500, so 2000 x $2500 = 5,000,000
So, here we are at a similar position with Ethereum. Under the acronym ETH, Ethereum is a cryptocurrency built on blockchain technology, except it fixes a few of the major problems with Bitcoin, and introduces a very interesting concept: smart contracts. I will certainly go into smart contract into much greater depth in a future post. The TL;DR; of this is that Ethereum is like Bitcoin, but better, and is where bitcoin was 5 years ago.
Is it for Me?
The most common question I get asked about cryptocurrencies is: “Do I need any technical knowledge to invest”. The short answer is no. Purchasing cryptocurrency is very similar to buying any other currency, like Canadian dollars, Euros, or Yen. That said, I completely understand the hesitation, because to the average person, the blockchain isn’t an easy thing to wrap your head around. Yet, when you invest in Apple stock, or Tesla, or Google, you don’t require yourself to have in-depth knowledge of how self-driving electric vehicles work, do you? No, you just see a good potential value.
Other than that, I would say that having a basic understanding of finance/investments is all that’s required. You need to view this as an investment. As with purchasing or investing in anything, while highly unlikely, there still remains a risk of losing your investment.
How do I get involved?
There are two main ways to invest in cryptocurrencies. The first, and most common, is to buy the currencies directly on an exchange, or through an online wallet company (which goes to the exchange for you). I highly recommend Coinbase. They have a very sleek mobile app, and a great desktop site. Their interface is easy to use, and they’re very dependable. So dependable that they’re FDIC Insured. They can easily hook up to your bank account, or even accept credit cards. You simply supply a form of payment, and click “buy”.
If you want to join – simply sign-up here:
Once you signed up, it’s simply a matter of choosing the “right time” – just like with stocks/forex/metals. There is a great recent article about cryptocurrency investments, and the recommended strategy of dollar-cost-averaging:
The second way in which you can invest in cryptocurrencies is to mine for them. Mining, in layman’s terms, is lending your computing power to the network, in hopes that you will be rewarded with a coin. Essentially, you are paying for electricity, and hoping that your machine will mine coins at a rate which their value is more than the electricity cost. Now, this is where some introspection is required. My guidance would be – at least know what cryptocurrencies are, how they work, and why they have potential value. If you’re questioning any of those factors, this opportunity might not be for you. If you get the general idea of how they work, and you might be interested, then you can move to the next phase:
Is mining for me? So – this comes down to your level of comfort with computer parts. If the idea of opening your computer’s case to install a graphics card scares you – then you’re better off just directly investing. Also, they generate a lot of heat, and therefore have a lot of fans – so if the idea of having 20 6-inch fans whirring at 5000 rpms gives you pause, they maybe mining isn’t for you. I would certainly recommend mining only to those who have an area in their basement (safe from water!!!) they can block off to mine in. I will say, though, that being in New England gives us a distinct competitive advantage: Our electricity is cheap, compared to the worldwide average. And it’s cold. Because these miners generate a lot of heat and noise – I keep then in my basement. In the winter, however, I can turn off all the fans, and allow my mining rigs to heat my house! So, is it for you? I can’t be the one to tell you. I will be the first to admit that there is some technical skills required. That said, I’d be happy to assist in that matter if you choose to take the plunge. The reward is certainly greater if you mine. With mining, you’re simply paying for the electricity to run your miners.
I would only recommend mining ETH if the following were true:
- You truly think the price of ETH is going to go up, or at least stay at the current price for at least 5-6 months. Unlike directly investing – once you’ve thrown down $500 on a mining rig, you can’t just open up your phone and sell it back if the price drops below your electricity costs. (for me, that price is about $30, and ETH is at $180 now, so I’ve got plenty of room on the downside to still be profitable). When you invest directly, if the price drops close to your initial investment, you can just safely get out. You’re kinda “locked in” when you make the decision to mine.
- Opening a computer, installing some cards, and configuring a little bit of software doesn’t scare you – and you’re willing to learn (some pretty cool stuff).
How hard is it to REALLY do? At the highest level when you mine, you are lending your computing power to the Ethereum network, in hopes that your machine “solves the problem”, and is awarded with new coins. You download and configure the software the does the mining to send all the coins that have been awarded to your Ethereum address. (When you sign up at coinbase, you automatically are given an ETH address, and you can add as many as you want for free. Think of each address as a bank account – you can send and receive ETH from it). So, when your miner finds a coin, it automatically gets awarded to that account.
How do I get started? My old crappy computer can barely play minesweeper! Buying a machine strictly for the purpose of mining isn’t crazy, in fact – it’s the “thing to do”. The real serious players are building hundreds of mining “rigs” – which are basically scaled down computers, with no monitors, keyboards, cases, etc – just power, CPU, motherboard, and GPU (Graphics Cards). When you mine cryptocurrency, you’re simply doing REALLY difficult math calculations, which, ironically, is the same kind of calculation needed for rending video – so GPUs have been a natural fit. So, you buy a mining rig for about $150, and then throw between 1-6 GPUs in. They typically don’t have cases, so they’re “open air” – because these suckers give off a LOT of heat.
Here’s an amazing example (I wish it were mine):
There is an amazing site: https://www.cryptocompare.com/mining/#/equipment which evaluates the various mining rigs and graphics card to rank them by how much they cost, how much power they run, and how much hashpower they provide (The amount of work they can do to mine). For example – I just bought a mining rig, 1 GPU card, and a power supply (good enough to support 6 GPUs) from gpushack.com for about $450. Running that rig will mine me about .75 ETH a month, and will cost about $30 to run – which at current price of ETH ($180), means it’s making me about $100/month in profit. So, in about 5 months, they will have paid for themselves.
That’s where it gets silly to think about. That previous profitability calculation is at CURRENT PRICE. Long term, personally I see cryptocurrencies going much, much higher. Here’s a few reason why: Cryptocurrency is still in its infancy. Its still new to the average person on the street. This is where I feel I can help give my friends a competitive advantage. Furthermore, aside from lack of widespread knowledge and the fear associated with it preventing widescale adoption (and therefore massive price increase) – the other major blocker preventing mainstream adoption is geopolitical. Due to its ability to become anonymous, criminals have migrated towards cryptocurrencies as a way to avoid detection – giving it a “bad name”, and (in the past) preventing the “stuffy” wall-street types of investment firms from investing heavily. Smart people, on the other hand, like the Winkelvoss twins, Elon Musk, Jeff Bezos, and others have laid down massive, billion-dollar stakes. It is this aspect of which I’m most optimistic – and has been the catalyst for the recent major price moves up. In April, the Bank of Japan (and it’s government), have ruled that Bitcoin and Ethereum are officially “Legal Tender”, and are therefore legal to use in all transactions, including paying taxes, salaries, etc. This is exciting because Japan is a very large player in the crypto space. The other exciting part about that, is the biggest player, China, has announced that they will be following suit soon. This is why I’m “screaming from the rooftops”, because I see this as an amazing opportunity to invest in something that has the potential to skyrocket. If China ever came online, it wouldn’t be surprising to see massive rises. Additionally, among crypocurrencies – Ethereum is about where Bitcoin was 5 years ago. Since then, bitcoin has multiplied its value by a factor of about 25x. Ethereum is also just “better” than bitcoin. Having learned some lessons from bitcoin, the developers of Ethereum “fixed” a lot of bitcoins problems. It is entirely probable that ETH will surpass the 2500% rate of return we’ve seen BTC go through.
Now, all that said – it’s still an investment, and is still volatile. So, it does require paying attention to. Also – it’s a global market – so it’s going 24×7. It also has a much lower volume and market Cap than the stock market – so large price fluctuations are not uncommon.
So, my overall summary of advice would be to setup a coinbase account, and start testing the waters with whatever amount of money you’d be comfortable losing. You can find more information at the following sites:
What is Ethereum?
Online Cryptocurrency Wallet. This is your “online bank” for crypto. FDIC insured and everything. Think of it like “paypal”. Join here: https://www.coinbase.com/join/51bbc7b8db672fda8e00001b
The Ethereum Fondation
If you want to get “REAL” serious in investing – coinbase runs a trading platform – similar to eTrade/Forex, etc:
So I know that’s a lot to digest. I just feel that this is such a revolutionary moment in time, one in which I have a competitive advantage – and I want to help spread that advantage to my friends if I can! 5-6 Years ago I made a similar plea to my friends about bitcoin – and many of them missed out on multiplying their money 25 fold in 5 years… So I’d be remiss if I didn’t scream from the rooftops when I see an even bigger opportunity approaching.
Good luck to all those who bothered to read this far – Let me know if you have any further questions!