Jackson: That brings to mind the recent investor letter which Oaktree's Howard Marks sent out in which he said that Bitcoin and other digital assets aren't real. What do you say to that?

Sacks: Marks isn't wrong to raise an alarm bell about speculation, but he's wrong in saying it's not "real." That's like saying software isn't real. Of course it's real.

Did the U.S. dollar become less real when it stopped being backed by gold? Cryptocurrency is the next step in that same evolution to make currency more virtual.

In its purest form, currency is confidence. It's a network effect around an agreed-upon medium of exchange that has some promise of scarcity. Bitcoin enforces its scarcity through a combination of cryptography and economic incentives ("cryptoeconomics"). A lot of people find that more comforting than relying on the good faith of a government. In math we trust.

People in the U.S. and especially longtime participants in the U.S. financial system have tended to underestimate bitcoin because we have long enjoyed relatively stable political and financial systems. People in parts of the world with less trusted systems have gotten it sooner because almost anything would be preferable to having their life's work trapped in a fiat currency that could collapse or be confiscated at any moment.

Jackson: If the current moment with cryptocurrencies is like the dot-com era, does that make it a bubble, and if so are we in 1995 or 1999?

Sacks: The technology is probably 1995 and the pricing is either 1999 or getting close. It's a combination of something real with a lot of speculation.

What I've been trying to figure out is: Who are the good teams and interesting projects in the space? Also I've been trying to understand the future regulatory environment and invest only in companies that have structured correctly and are likely to survive the inevitable crackdown.

I think the trigger for a big correction is more likely to be regulatory than technical. The SEC provided some important guidance in its DAO report a couple of weeks ago, but we will learn a lot more if there's an enforcement action. That's going to be much more important to the future of this movement than the dreaded bitcoin fork that occurred a couple weeks ago and turned out to be a Y2K-like non-event.

Jackson: So is there going to be a similar three-year nuclear winter when the bubble bursts like what happened after the dot-com boom?

Sacks: Hopefully it will be a soft landing rather than a nuclear winter. It could be a positive thing if all the scammers and pumpers get washed out of the space.

There's going to be a correction though. Many of these ICOs are still just slideware but are getting a Series D type of valuation. They don't deserve that type of valuation at this stage of development. That will rationalize at some point.

Jackson: How are ICOs and future SEC regulation going to mesh?

Sacks: Hopefully the SEC distinguishes between "protocol coins" (which have an actual use in a software ecosystem and should not be viewed as securities) and "asset coins" (which are securities). The public policy think tank CoinCenter has done some excellent work in laying out the legal frameworks and policy rationales for this.

Until now, most of the action in ICOs has been in protocol coins. The better projects have worked hard to structure their tokens so they are not securities.

However, I believe we will soon see the emergence of asset coins (aka traditional asset tokens). These will be securities. It must be done correctly, but it's going to be an exciting area.

Jackson: What securities could tokenize?

Sacks: Almost any illiquid asset today lends itself well to moving onto the blockchain and becoming tokenized. It will create a deeper market with improved price discovery and should increase the value of those assets.

In the long run, even liquid assets like stocks could move onto a blockchain because of the benefits of this platform.

Ultimately this is a technology for maximizing the efficiency of every asset, means of ownership, fluidity of markets, and mechanism of payments. The goal is the optimization and maximization of the world economy. That may make it the biggest revolution of all.

Jackson: Are digital assets and tokenization a long-term threat to traditional venture capital?

Sacks: Yes in two ways.

First, a lot of start-ups that would have sought venture capital can now raise money through an ICO. I've called this "crypto capitalism" in contradistinction to venture capitalism.

The terms of crypto capital are more favorable to entrepreneurs than venture capital. So any start-up that can ICO will ICO. Whether a start-up can ICO will depend on technical and regulatory suitability, but it could ultimately be a very large category of start-ups.

If so, that will certainly challenge VC. Larger VCs who would typically invest after the ICO will have to compete with hedge funds, which is not a great place to be. VCs who want to invest before the ICO will have to compete with angels to offer a real value-add.

Second, at the level of the VC's own investors, I think LP interests are likely to be tokenized, along with most other illiquid assets. The prestige VC firms will resist this, but there are already a few new VC firms at the margins that are tokenizing. Soon, a few more will do it. Then a few more. Eventually, illiquidity will be a competitive disadvantage in fundraising that only the top firms will be able to justify.

All of this being said, the SEC's rulings in this area will have a huge impact on how this plays out. If those rulings support innovation, that will lead to a more competitive world for VCs, whose world is already quite competitive. But that world will also be more frictionless and efficient.

Sacks posted a tweet storm about this idea:

Jackson: What are the biggest challenges that still lie ahead for cryptocurrencies?

Sacks: I see three big areas for concern: scalability, slideware and regulatory.

First, the number of transactions per second that either bitcoin or ethereum can handle is still orders of magnitude less than what PayPal or the Visa network can do. It's been estimated that ethereum, which is the main developer platform for decentralized apps, would need a 250x improvement to run a 10 million user app and 25,000x improvement to run a billion-user app like Facebook. That improvement requires real work and involves some risk. There's a product roadmap, but it's going to take years.

Second, most of the ideas out there today for ICOs are still just white papers, or what we used to call "slideware." There is a lot of execution risk in turning these ideas into usable software that actually gets adopted. One fortunate effect of the crypto boom is that it has been helpful in attracting talent to the space. We will need that migration of talent to continue in order to realize the potential.

Third, as we've discussed, will be the extent and nature of regulatory acceptance. The eventual rules governing the application of securities laws to tokens will have a major impact on adoption and innovation in the space, at least in the United States. There is some risk that if the wrong regulatory regime gets adopted in the U.S., then the center of innovation could move to other countries. If blockchains are the next internet, that would be a very unfortunate development for the U.S.

Jackson: We have bitcoin and ethereum plus a number of smaller, lesser-known currencies out there including the new Filecoin ICO. What lesser-known currencies intrigue you most?

Sacks: I prefer to think in terms of use cases, rather than recommending specific currencies. The most promising use cases to date are: store of value, payments, crowdfunding, file storage, identity management and authentication, prediction markets, escrow, title chains, notary chains, provenance, and supply chains. There are 1,500 ICOs already launched or announced, plus many other blockchain companies, so there's a lot more to come. This is an extremely exciting and fast-moving space.

That said, one admonition I would make to your readers is that most probably shouldn't be investing in ICOs directly. We are seeing white papers for technology that doesn't truly belong on the blockchain or, worse, could be pump-and-dump schemes. Many of the scams originate outside of the United States, so they will be harder to regulate. Just like a lot of retail investors lost money in the dot-com era, the ICO era has the potential to do the same unless people really take the time to understand what they are investing in. A number of professionally managed crypto funds, with real technical expertise to evaluate ICOs, are starting to emerge and may be a safer way to participate than investing directly.

So I would just urge everyone to temper their excitement with sound business judgment. Or does that sound too much like Howard Marks?

Sign up for Eric's monthly Tech & Media Email. You can follow Eric on Twitter @ericjackson .

Original post:
David Sacks: Cryptocurrency fulfills the 'original vision' we tried to build at PayPal - CNBC

News business and finance

The predominant financial information website for Chinese speaking investors in the United States and abroad announced the launch of a cryptocurrency education and trading subscription service.

On August 14, 2017, ChineseInvestors.com, Inc. (CIIX) launched a new subscription-based service that will cover the emerging world of cryptocurrencies. The new service will provide timely news and analysis for cryptocurrencies, like Ether, including pricing and industry trends.

CIIX is a periodical with offices in Los Angeles, New York, and Shanghai serving the Chinese speaking population in the United States and abroad. CIIX offers a variety of subscription services and websites for investment and educational content. Such topics range from basic information about companies listed on US exchanges and real-time analysis and market quotes to trend analysis of market sectors and trading simulations highlighting different trading techniques for instructive purposes. CIIX is renowned for providing its customers with educational content regarding how to evaluate investments using fundamental and technical analysis methodologies.

Cryptocurrencies like bitcoin have become a global phenomenon, stated Warren Wang, founder and CEO of CIIX. Since January 2015, the price of bitcoin has increased 500% from $200 to $1,000 in January 2017, and just spiked to a record high over $4,000 as US-North Korea tensions escalated. Likewise, Ethereum has surged from less than $10 to more than $300 this year.

Asia has been a relative hotbed for cryptocurrencies since their inception in 2008 and implementation in 2009. This move by CIIX serves as an indicator that demand for cryptocurrencies and related information is still growing in Asia. Countries like China, which possesses an estimated 85% market share of bitcoin, along with neighboring nations like Japan, which recently legalized bitcoin as a form of payment, stand to benefit greatly from CIIXs new service. Straightforward explanations of what cryptocurrencies are and how to use them will be included in the newly offered subscription. The news agency will also cater to experienced cryptocurrency users by providing content spanning from mining and blockchain technology to pricing trends and exchange traded funds.

Founded in 1999, CIIX has built a reputation primarily on real-time market commentary, advertising, and public relation related support services. In addition to its financial market services, CIIX also has a foothold in the US cannabis industry, investing in research, development, and distribution of cannabidiol (CBD) medicine and health products.

Jordan Daniell is a writer living in Los Angeles. He brings a decade of business intelligence experience, researching emerging technologies, to bear in reporting on blockchain and Ethereum developments. He is passionate about blockchain technologies and believes they will fundamentally shape the future. Jordan is a full-time staff writer for ETHNews.

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ChineseInvestors.com Launches Cryptocurrency Beat - ETHNews

News world

In Ukraine, cryptocurrency does not have an official status. By the end of August 2017, the Eastern European nation will clarify its position through a meeting of the Financial Stability Council.

On August 11, 2017, the National Bank of Ukraine released a statement by deputy chairman Oleg Churiy. According to Churiy, the Financial Stability Council (FSC) will meet by the end of August 2017 to work out a joint position on the legal status of bitcoin and its regulation.

Although Churiys comments specifically single out bitcoin, it seems likely that the FSCs conversation will encompass additional blockchain-based digital assets. The term bitcoin often functions as a catch-all placeholder for government agencies.

To date, the National Bank of Ukraine has collaborated with many governmental agencies on the topic, including:

Ukraine is clearly taking a broad and holistic approach to its digital asset guidance. A multi-pronged approach is vital because of the many functions of virtual money. The Ukrainian government may consider instances where a digital asset serves as currency, provides utility to consumers, or even grants ownership in a company.

In his statement, Churiy references the diverse cryptocurrency regulatory schemes currently employed by the European Union, Israel, Japan, Australia, Canada, and the Peoples Bank of China. He notes that discordant regulatory schemes around the world have made it difficult to give bitcoin a definite status in Ukraine. The FSCs meeting should generate needed dialogue, if not a resolution.

In the meantime, a lack of government guidance has not prevented Ukrainian involvement in cryptocurrency. For example, a Ukrainian white hat helped rescue funds from wallets that were compromised during Julys Parity hack. More recently, the Kyiv Post reported that a group of Ukrainian entrepreneurs have invested in 150 bitcoin teller machines, to be installed across the country by January 2018.

Matthew is a writer with a passion for emerging technology. Prior to joining ETHNews, he interned for the U.S. Securities and Exchange Commission as well as the OECD. He graduated cum laude from Georgetown University where he studied international economics. In his spare time, Matthew loves playing basketball and listening to podcasts. He currently lives in Los Angeles.

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National Bank Of Ukraine To Clarify Legal Status Of Cryptocurrency - ETHNews

A U.S. economist and businessman known for his work in spearheading the early development offutures contracts is seeking a cryptocurrency patent.

Richard Sandor, a former Chicago Board of Trade chief economist and vice president, advanced the utilization of financial futures back in the 1970s, earning him the moniker "the father of financial futures" and, later, "the father of carbon trading," according to Time.

Notably, perhaps, Sandoris now listed as the first of three inventors for the "Secure Electronic Storage Devices for Physical Delivery of Digital Currencies When Trading" patent application, released on August 10 by the U.S. Patent and Trademark Office.

Sandor is currently the chairman and CEO of Environmental Financial Products LLC, which is listed as the applicant for the patent.The application itself details a hardware concept for the storage of digital currencies tied to derivatives contracts.

It explains:

"The invention relates to a method to facilitate trading of digital currencies, which comprises electronically storing an amount of a digital currency on an electronic storage device or electronic registry; and physically storing the storage device or electronic registry in a secure, physical repository that is not publicly accessible with the storage device or electronic registry available for use in subsequent delivery of the digital currency."

It's the latest submission to focus on cryptocurrency-related derivatives, coming on the heels of news that options exchange CBOE is planning to launch products in this area later this year.

Firms like CME have also moved to obtain intellectual property tied to cryptocurrencies. As CoinDesk previously reported, CME's patent applications reveal an interest in bitcoin mining derivatives.

Richard Sandor image viaJon Lothian News/YouTube

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [emailprotected].

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'Father of Financial Futures' Seeks Cryptocurrency Hardware Patent - CoinDesk

Will Cryptocurrency Replace Other Forms of Payment? To answer that question I look to author Andrew Smith who iscredited with the quote. People fear what they dont understand and hate what they cant conquer. I believe this quote can be applied to many situations and still hold true.

For instance, one area in which this quote may hit the mark is with cryptocurrency. Of course, it may not be fear itself that is driving the cryptocurrency craze. Instead, it could be fueled more by FOMO, or fear of missing out.

This leads me to question whether or not cryptocurrency will replace other forms of payment.

Cryptocurrencyis a form of digital currency that uses encryption to make financial transactions secure. As a result, monetary exchanges are difficult to forge and do not require bank intervention to complete.

You cant hold cryptocurrency in your hand or pocket. The only place it exists is on computers through the exchange of digital currency.

There are a lot of reasons why cryptocurrency is currently making stronggains in popularityand use. When taken together these reasons could be enough to secure cryptocurrencies place in our society and replace other forms of payment in the future.

Cash is heavier, dirtier, easier to steal, and easier to forge than digital currency making it less appealing than its digital replacement. Checks, as an alternative, can also be easily stolen and forged and take up more room than cryptocurrency.

Other forms of payment, such as credit and debit cards, are similarly less appealing in comparison to digital currency because they can be hacked or stolen costing you thousands.

Transaction fees that banks charge for the exchange of money may be lower by using cryptocurrency or even avoided altogether, adding to the appeal.

With all of these reasons behind it you would think cryptocurrency would be the logical next step to replace other forms of payment. But there may be reasons to be wary of its use.

One reason to be cautious of using cryptocurrency as a means of payment is because of thewild changes in its value. Gold values, which are often still used as a comparison, have remained fairly steady over the past seven years. However, cryptocurrency, Bitcoin in particular, has seen values that have remained volatile over the same timeframe.

An additional reason to be cautious in the use of digital currency is legality. Not all countries yet recognize cryptocurrency as a means of payment for goods and services. The U.S., in fact, does not yet distinguish it as legal tender.

Cyber theft is another threat that could deter the widespread use of digital currency. Because cryptocurrency exists only in an intangible form on the internet it is vulnerable to theft by hackers.

Reportedly, some large corporations have used cryptocurrency to legally evade their taxes since the IRS does not recognize it as money. The IRS is trying to put a stop to this. But, as more businesses and citizens catch on to this loophole there could be further tax losses.

Some may fear cryptocurrency and others may embrace its use. But whether or not cryptocurrency will replace other forms of payment in the future is not yet clear. It is likely only time will tell.

This article was originally published on Due.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Will Cryptocurrency Replace Other Forms Of Payment? - Nasdaq

President Trump recently signed a foreign sanctions bill into law that included provisions mandating that governments monitor cryptocurrency transactions. The bill was passed by the U.S congress last month and is directed at Russia, Iran, and North Korea.

Also Read:Homeland Security Injects $2.25 Million Into Distributed Ledger and Blockchain Surveillance Startups

President Trump has signed a controversial foreign sanctions bill into law that mandates the Iranian, Russian, and North Korean governments must monitor cryptocurrency circulations as a measure to combat illicit finance trends.

The bill requires that governments develop a national security strategy to combat the financing of terrorism and related forms of illicit finance. Governments will be required to monitor data regarding trends in illicit finance, including evolving forms of value transfer such as so-called cryptocurrencies.

Although the new legislation indicates the U.S governments desire to monitor cryptocurrencies, at this time making no indication that a more aggressive cryptocurrency crackdown may be imminent.

Yaya Fanusie, a former CIA counter-terrorism analyst for the CIA, has presented a balanced account of the threat posed to anti-terror authorities by bitcoin and alternative cryptocurrencies. The national security concern is not that criminals will use this type of technology they use all technologies, Mr. Fanusie said. The policy question is: How do you deal with something that governments cant control?

Fanusie previously identified the first verifiable instance of bitcoin being used a vehicle for fundraising by a terrorist organization, and continues to conduct analysis for the Center on Sanctions and Illicit Finance at the Foundation for Defense of Democracies. In an interview with the Washington Times, Fanusie recommended that U.S government work closely with cryptocurrencies in order to ensure that they are not used for illicit financing. Bitcoin is like a rebellious teenager, it wants to do its own thing, he said. So what do you do? Do you ban it? No, you want to have a good relationship with it and influence how it develops.

According to the bill, an initial draft strategy is expected to come before Congress within the next year, and will see input made by US financial regulators, the Department of Homeland Security, and the State Department.

Do you think that sanctioned governments will adhered to the U.Ss provision relating to the of monitoring cryptocurrency transactions? Share your thoughts in the comments section below!

Images courtesy of Shutterstock

At News.Bitcoin.com all comments containing links are automatically held up for moderation in the Disqus system. That means an editor has to take a look at the comment to approve it.This is due to the many, repetitive, spam and scam links people post under our articles.We do not censor any comment content based on politics or personal opinions.So, please be patient. Your comment will be published.

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US Foreign Sanctions Bill Mandates That Governments Monitor Cryptocurrency - Bitcoin News (press release)

Bitbay has announced that it will enter the Indian cryptocurrency markets, with the companys Indian exchange expected to be operational before the end of August. Bitbay is Polands largest exchange by trade volume, and is set to become the first international bitcoin exchange operating within Indias cryptocurrency markets.

Also Read:Panel Recommends Indian Government Take Immediate Steps to Stop Bitcoin Use

Bitbay has announced that it will be launching its exchange platform for the Indian cryptocurrency markets. Bitbay will be the first cryptocurrency exchange to offer altcoin trading providing trading pairs for ethereum litecoin, lisk, monero, ash, and gamecredits.

From August 14 Bitbay will offer demo trading that does not involve using real money, before launching full operations on August 24th. In a recent interview with Money Control, Bitbay India Head, Rohit Dahda has stated we are taking all necessary steps to adhere prescribed rules for Bitbay India. In fact, we are offering demo trading for users before using real currency to bring a level of confidence in common people.

At a launch function for the newexchange, Bitbay CEO, Sylwestor Suszek, stated that Bitbay India has been conceptualized to provide innovative services, support and solution for cryptocurrency users in terms of fast and secure transactions. Our team consists of specialists and Bitcoin enthusiasts who are active in crypto community, attend industry conference events and support charity causes via meaningful fund donations to relevant Indian societies. An official press release states that the prime objective of Bitbay India is to remove all misconceptions related to cryptocurrency, drive more people towards digital currencies, attract potential investors from market and offer all round platform to trade as well as exchange multiple cryptocurrencies at Bitbay.

According to Coinmarketcap, Bitbay hosts the largest BTC/PLN market by volume, with Bitbays 24-hour volume sitting around $8.35 million at the time of this articles composition equating to roughly 0.26% of total global bitcoin trade. We are the number one in Eastern-Central Europe with more than 200,000 users. We are number 10 in the world and are in operations since 2014, Suszek told Moneycontrol.

Despite the nations current climate of regulatory uncertainty regarding Indias cryptocurrency markets, Bitbay plans to expand its presence in India over the coming months, including the introduction of up to 17 different altcoins. Very soon, we will be bringing more features on the platform to cater to requirements of common people on a day-to-day basis. We are following a high-security model and following two-fold authentication models for safe transaction, states Rohit Dahda.

What do you think about Bitbays entry into the Indian cryptocurrency markets? Share your thoughts in the comments section below!

Image courtesy of Shutterstock and Bitbay

Need to calculate your bitcoin holdings? Check ourtoolssection.

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Bitbay Exchange Enters Indian Cryptocurrency Markets - Bitcoin News (press release)

The digital currency bitcoin vaulted to a new record high above $4000 on Saturday, boosted by strong Japanese demand on its way to multiplying its value fourfold this year.

Bitcoin hit an all-time high of$4,225.40 early Sunday before slightly paring those gains to trade near $4,000, according toCoinDesk.

The digital currency has now quadrupled in 2017, and is up about 40 percent in August alone. Bitcoin's market value is now around $64 billion, up about $10 billion in the last week.

Bitcoin trade in Japanese yen accounted for nearly 46 percent of global trade volume, up from about a third a day ago, according to CryptoCompare. US-dollar bitcoin trade accounted for about 25 percent, according to CryptoCompare. Bitcoin trade in Chinese yuan and South Korean won accounted for about 12 percent each.

The surge picked up speed in the last week, mirroring gold's climb amid a global selloff in stocks and bonds . Rising worries about North Korea's nuclear threat have sent investors flocking to perceived safe-havens and alternative assets.

"Bitcoin is benefitting from geopolitical tensions - trading in Japan and Korea has increased significantly over the last few months," Brian Kelly, a CNBC contributor and head of BKCM, which runs an digital asset strategy, said in an email. He also attributed price gains to investors buying back bitcoin after the Aug. 1 split and greater attention from the Russian government.

Analysts have also noted increased investor interest, especially from institutional investors, after bitcoin successfully survived an Aug. 1 split into bitcoin and bitcoin cash.

This week, Fidelity launched a feature allowing customers to also view their Coinbase bitcoin holdings. The currency also got a boost from Goldman Sachs, which in a report released this week said it is harder for institutional investors to ignore cryptocurrencies like bitcoin.

That said, bitcoin's future is still uncertain. The digital currency could potentially split again in November, when the second phase of an upgrade proposal called Segregated Witness is implemented.

Chris Burniske, author of the upcoming book, "Cryptoassets: The Innovative Investor's Guide to Bitcoin and Beyond," also noted a sharp pullback in price would not be surprising, given bitcoin's rapid surge.

He noted on Twitter that upticks in the bitcoin price and Google searches have historically led to price corrections.

Bitcoin's offshoot, bitcoin cash, traded little changed near $323, according to CoinMarketCap.

Another digital currency, ethereum, traded nearly 5 percent higher near $315.

More From CNBC

Originally posted here:
Bitcoin boom: Cryptocurrency marks new record above $4K, boosted by Japan and safe-haven buying - Yahoo Finance

In BriefIt's not outlandish to think that our current financial systemwill soon be replaced by cryptocurrency, and the shift will bringabout some big changes to the global economy. The Flippening

For a time, Bitcoin seemed unassailable in its dominance of the cryptocurrency market,being the first digital currency to really take root and establish itself in the mainstream. Since then, a host of worthy competitors have emerged, and theres a real possibility that the balance of power could flip.

Many who have been regularly followingdevelopments in the cryptocurrency market refer to the tipping point where one digital currency supersedes another as the flippening We almost saw this occur in May 2017, when Ethereums market cap approached Bitcoins amid a surge in popularity.

When individuals have significant amounts of money invested in one cryptocurrency over another, its no surprise that tensions run high when they go head to head. However, these squabbles over which coin is best might be distracting us froma more pressing issue.

Some observers would argue that the true flippeningisnt a case of competition between two different forms of cryptocurrency at all. Thesea of change yet to come could have more far reaching consequences, if and when digital currency as a whole becomes more popular than conventional fiat currency.

There would be some major advantages to an all-cryptocurrency future: its value cant be manipulated as easy as fiat currency, and it lends itself to the concept of universal basic income.In fact, several different programs, such as uCoin and Cicada, are already using cryptocurrencyto distribute UBI.

In a future where our transactions with shops and services are likely to be handled by automated systems, cryptocurrency removes many of the intermediaries that would take their own cut. There are many benefits for the individual, but the flippening stands to pose some major challenges for the global economy in its current form.

Should cryptocurrency manage to jump ahead of fiat money in terms of usage, cash wont be able to close the gap. Thats the trick to the flippening once changeover takes place, the losing party loses value and cant do anything about it.

If everyone begins using cryptocurrency, infrastructure would need to bedevelopedwith that in mind. It might not take too long for cash to become incompatible. At this point,it remains to be seen whether established financial institutions could pivot to that new status quo in time.

At the highest level, governments will be hit hard, as they will no longer exercisethe same level of control over the countrys currency. The idea of printing more money has been raised time and time again in response to financial turmoil, but that option disappears once currency has to be mined.

The flip from fiat money to cryptocurrency is a very real prospect, and it could well change the face of how our society spends and saves.

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What Would Happen if Cryptocurrency Became More Popular Than Cash? - Futurism

Image: Getty

With the meteoric rise in popularity of Ethereum, cryptocurrencies and blockchains are back in the news again. Graphics card prices have soared with the promise that those who have the computers and know-how to do some serious mining can take home huge sums in a Bitcoin-like gold rush to snatch up as much virtual currency as possible. But how easy is it to make your fortune in cryptocurrency? And is it worth your while getting started?

Weve all had tech related regrets. Betamax, backing the Zune against the iPod, letting that precious vinyl collection go. No one likes living with regrets, so dont add what you drive to that list. Stop thinking about it and just book a Mustang test drive already.

For the uninitiated, mining for currencies like Bitcoin and Ether means devoting a huge amount of computer processing power to doing accounting sums for the platforms behind them, helping to verify the accuracy of the public blockchain ledgers.

You're essentially getting rewarded for keeping the books for these platforms, which we've explained in more detail here, and the rise of cryptocurrencies like Bitcoin and others has led to a flood of amateur enthusiasts jumping into the mining business the idea of having your computer whirring away making you free money sounds almost too good to be true.

Image: Peter Miller/Flickr

And in reality, it almost is you can get rich from cryptocurrencies, but you need to put in plenty of work, and have luck on your side. You're more likely to get a windfall due to market pressures than the quality of your mining rig, which is why it's only worth a shot for the most committed and the most adventurous.

Mining for cryptocoin requires some free software tools and a dedicated rig. Turn the clock back several years and you could get away with a powerful home PC and make a few bucks. These days you can waste a weekend and a month's wages on building a machine with four graphics cards purring away in a row and still not make a profit.

GPUs are now established as the mining processors of choice in most situations graphics cards are even built for and marketed towards miners now basically because they're better at doing lots of laborious, repetitive tasks, whereas CPUs are better suited to switching between many tasks quickly.

Image: Screenshot

The trouble is, the serious players have got whole farms of these computers, and unless you've got a warehouse and some life savings to spare, you're going to be lagging a long way behind. You're up against huge foreign operations running off cheap electricity and hardware bought wholesale.

Even if you do get yourself a rig set up and find a currency with a bit of a profit margin, you're still putting yourself at the whims of the cryptocurrency markets mining can start or stop becoming profitably depending on a currency's current value.

There are several profit calculators on the web that will tell you how much computing power and electricity you need to make a certain amount of cash, so you can see exactly how much (or more likely, how little) you could make. Take Bitcoin, for example, which is now just about impossible to mine profitably for average users at home you'd need thousands of GPUs running before you'd get close to getting more back in Bitcoin than you'd be paying for electricity.

Market fluctuations in cryptocurrencies. Image: Screenshot

You can fork out thousands of dollars on specialised kit, if you want to, but even then you're only going to be raking in a handful of dollars a day with Bitcoin. That of course can go up or down as the currency value fluctuates, and what's profitable one day might not be the next if your chosen cryptocurrency dips in value, or gets some bad media coverage that's where the slice of luck we mentioned earlier comes in.

Other options, like Feathercoin and Ether, have a better profit potential than Bitcoin right now, with the caveats we've already mentioned: If you're serious about your mining then you need to keep a very close eye on the market trends, because the situation can change on a weekly or even daily basis. A single Litecoin, another cryptocurrency, has swung from costing you between $US10 ($13) and $US55 ($72) this year alone.

For instance, a huge $US64m Ether heist carried out last year was severe enough to cause a fork in the Ethereum platform it runs on top of, and a halving in price of Ether itself if you've got a powerful, expensive, cryptocurrency mining operation going on in your basement then that's a serious hit on your profits through factors completely out of your control. Sure, a swing the other way can make you relatively rich, but it's a risk, and the upward trend won't necessarily continue.

Image: The Ethereum Project

Many modern-day miners join a mining pool, combining resources with other users and getting a share of the profits, but the same risks remain. Fork out a few thousand on a mining rig, take the time to study the market trends, go through the process of setting up the programs, join up with a mining pool, and yes you can if the prices stay buoyant and you've picked your cryptocurrency wisely make a few thousand dollars a year. Whether or not it's worth the risk and investment is up to you.

And if your investment isn't already precarious enough, remember the scene is constantly changing: In the near future Ethereum is set to switch from its existing Proof of Work (PoW) system for extending the blockchain to a new Proof of State (PoS) system which is easier to scale and less energy intensive.

Without going too far into the technical details, it essentially makes the mining process more like earning interest on money you've already got: Racks of graphics cards won't be able to generate wealth as they did in the past, which is bad news for miners looking for a profit even if it's good news for your electricity bill. Instead, earning money will rely on staking (investing) rather than mining.

Image: Asus

In other words, if you're already halfway through building your Ethereum mining machine you might want to pick a new cryptocurrency... at least until the ground rules change on that one too. (Remember what we said about the constant state of flux?) And that's really the only way to squeeze any profit out of cryptocurrency mining operations keep moving as fast as the market does, and switch up the currencies you target as conditions change.

As soon as one cryptocurrency becomes profitable to mine, as we've seen with Bitcoin and Ethereum, everyone wants a piece of the action and making money gradually gets harder. It's then time to get in early on another currency. In short, if you want to get rich (or at least make a profit), you need to pick and keep picking the right cryptocurrencies, have a serious amount of graphics processing power in hand, hope that your chosen currencies stay secure and keep increasing in value, and put in a lot of time and effort.

It's not impossible, but we can think of easier ways to make a buck. If you're determined to jump in and get involved in cryptocurrency mining, if only for the educational and geek appeal rather than to make any money, your best bet is to immerse yourself in one of the many mining forums out there, which will give you the inside track on the latest news and market trends.

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Field Guide: How Exactly Do You Get Rich Off The Hot New Cryptocurrency? - Gizmodo Australia