Blockchain – promises and pitfalls

Hi there,

With the recent hulabaloo re: Bitcoin, Ethereum etc, I thought I’d spend some time getting myself familiar with these concepts and crypto-currencies.

As some-one who has owned a bit of gold for a long time (seen ups and downs) – due to my inherent distrust in governments being able to control their spending – some of the features of crypto-currencies appeal to me.

The benefits :

  • Cryptocurrencies (eg Bitcoin) can be designed to have a cap / limited amount ever to be issued. This means that they should actually be scarce – you know like the resources on this planet – and through that could be good ‘stores of value’ – basically as a currency should be.
  • As a medium of exchange – with the recent Segwit/Bitcoin cash fork, Bitcoin has a chance to become a good medium of exchange – both for micropayments (e.g via the Lightning network) or currency transfers.
  • Programmable blockchains like Ethereum allow for smart contracts to be implemented on the chain. The ‘ethereum computer’ is actually decentralized network of computers that is ‘Turing complete‘ – meaning that it’s pretty much up to you how complex code you want to write on it.
  • Due to the above programmable nature especially of Ethereum – I think we will see many use cases which will be tried – some will fail, some will  succeed. If you are interested in how blockchain could be applied for example in HR BPO – please contact me here.

The pitfalls :

The main pitfall I would say is still that you have to do your own homework on who / what to trust, but I guess that applies in life generally… The other pitfalls still include a truly easy to use user interface / wallet. However I will investigate those more in detail next.

So yesterday I went to a meetup event called ‘Bitcoin and Cryptocurrency Intro How To Make Money Passively From Home’. The event was hosted in a local Panera Bread, with about 15 people attending. The pitch was for a ‘company’ called BitConnect  where the premise is:

  1. You buy their coin (bitconnect coin or BCC) using Bitcoin(BTC).
  2. The BCC is converted back to USD – and using their HFT (high-frequency trading) algorithms they trade USD vs BTC.
  3. Somehow the Bitconnect team are supposedly able to make daily profits (‘interest’) according the presenter/this chart (no down days):
  4. They state that the high market cap (around 786M USD today, August 18th 2017) is proof of the legitimacy of this platform.

OK, call me a sceptic, here’s why:

  • When I asked about the team behind this, the presenter dodged the question, and no information is available that I can find on the bitconnect.co website. No developers who want to have their names publicly associated with it? Hmm. No early investors? Hmm.
  • From the site “Build trust and reputation in bitcoin and cryptocurrency ecosystem with Open-source platform”. There is no information about what is open source, and this code on Github has one contributor..
  • As Steemit writes – it’s too good to be true, no down days, guaranteed returns, referral schemes etc..
  • You are supposed to send BTC to them – but you are ‘locked in’ for up to 299 days. Guess what will happen to your BTC if they run out of new patsies to pay the old ones..

Bottom-line – there is a ton value that can be created on blockchains – but people – pls do your homework. And if you / or some-one you know is considering bitconnect – caveat emptor…

Cheers,

Oskar

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