Why Bitcoin Forks May Be Better Than Stock Dividends

The capital gains of holding onto your precious stocks may be going the way of the dinosaur with the bullish crypto market in 2019. Bitcoin has surged over 4,000% from the start to end of 2019, making it one of the most profitable currency investments in history. One may think that it is a good idea to dump their coins instead of holding for the future, but it can actually be very profitable to hold instead of sell.

With the release of Bitcoin Cash, Bitcoin Gold, and various other copies, it has essentially given Bitcoin holders a share of new altcoins within their Bitcoin addresses. Although many coins may be had only with a few bucks, there are some that have reached hundreds, or even thousands of dollars per coin.

How does a Bitcoin fork or dividend work?

A hard fork of Bitcoin basically takes the source code, a few unique additions (like a larger block size), and a snapshot of the blockchain from a certain date and it is repackaged as a "new" version of Bitcoin. Some may consider this practice to be a cheap pump-and-dump attempt, but some projects actually aim to become a sincere replacement for the core version of Bitcoin.

There are also altcoin projects that serve as "dividends," although they really aren't in the traditional sense, by issuing a certain amount of coins to Bitcoin holders within a certain date range. In the case of CLAMS from 2014, coins were randomly allotted to Bitcoin and Dogecoin holders (even to empty addresses). Projects like Stellar Lumens distribute coins evenly based upon the amount held in each wallet. Within the Bitcoin community, this practice is referred to as "air-dropping".

Examples of Successful Hard-forks

Bitcoin Cash

Bitcoin Cash (BCH) has taken been in the spotlight several times since its release in early August. The project has particularly been popular when Bitcoin transactions have been extremely congested and with high fees since BCH provides much faster and cheaper transactions. It has already the third largest coin in terms of market capitalization, which is just behind Ethereum.

The BCH project claims to be made in the "original vision of Satoshi Nakamoto" with an increased block size to accommodate increased transaction traffic on the network. All users that held onto their Bitcoin on August 1, 2017, had received an identical copy of their wallets on the BCH network. Some have foolishly dumped for a mere few hundred bucks per BTC during the early days while long-term holders have been able to sell off their dividends for well over $3,000 each.

Bitcoin Gold

Although not as big as the Bitcoin Cash launch, Bitcoin Gold has held its price steadily since its launch and is even contending with altcoins like Litecoin. Having forked from the blockchain in November of 2017, Bitcoin holders at the time had received a surprise bonus. It has since made it's way too many of the major exchanges and is still actively traded.

Long-term prospects for BTG or any cryptocurrency is hard to foresee, but many graph watchers notice an overall upwards trend that may extend into 2018, 2019 and beyond.

Examples of Altcoin "Dividends"

Stellar Lumens

The Stellar project had a short window of distributing free lumens to bitcoin holder from its launch in June until August 27, 2017, at the rate of 986 Lumens per Bitcoin. At the end of 2017, Lumens were still being traded at nearly $0.30 per token and it is popular among speculators due to the potential of its distributed exchange technology.

ByteBall

ByteBall had been another giveaway for Bitcoin holders with several opportunities held. Every Bitcoin holder had an opportunity to receive one-sixteenth of a BB for every Bitcoin in their wallet. At the end of the year, it had been traded at around $600 each and it had a steady, upward market trend.

How much could have I gained if I held 1 Bitcoin in 2017?

Assuming that you left your bitcoin and left in your private keys and sold all of your dividends by the end of the year, 1 Bitcoin had the ability to produce at least $4,000-$5,000 in free money. This is assuming that you had collected the major coins, Like BCH, BTG, and lumens, and sold at median prices during the year. Percentage-wise, you could have sold these coins for around 20 to 50 percent for the price of BTC, depending on the wild roller-coaster price of Bitcoin from 2017-2019.

How does this compare to the highest performing stock dividends?

Warren Buffet, who loves to rag on the crypto-markets, regularly shares his investments and offers picks of high-dividend stocks. His earnings are always stable and steady, but it is not quite as exciting as the crypto market.

Some of the highest and stable Dividend stocks on the market included:

As you may deduce from the rates above, only a small handful of shares will have a significant amount of dividends to make the investment worthwhile. You must also consider that the typical dividend yield for other big-name stocks may be 2% or less.

Drawbacks of Investing In Bitcoin & Altcoins for Dividend Yields

There is a reason why it's mostly computer savvy nerds and young millennials getting into crypto-trading. There is a lot of pitfalls if the user does not have any technical knowledge.

The average trader coming from Forex or the stock market may not want to deal with the amount of risk and research involving keeping their cryptocurrency secure. Being able to cash out on the latest Bitcoin forks will involve creating new wallets to backup your coins, downloading the forked Bitcoin client, and importing your private keys. Simple mistakes in this process could result in lost Bitcoins.

Of course, the other drawback is that the crypto market is very young and unpredictable. The trading of securities had started in 1817, so there had been enough time for the market to mature and various regulations implemented to give the market relative stability. The crypto market is still like the Wild West and investing is diving into the unknown.

Be Careful When Dealing With New Forks!

The main problem when new Bitcoin forks or dividends are released is that your old Bitcoin wallet must also be imported into the new client. With a new coin, you never know if the client is just a backdoor phishing scheme out to collect private keys that are stuffed with Bitcoins. Because of this, you must constantly rotate your coins to new wallets to reduce the risk. You must also keep in mind that transferring Bitcoin to a new wallet may incur a significant amount of fees, depending on the current backlog of transactions, so make sure that the new coin is worth the cost as well.

The safe alternative is to wait for your current wallet or exchange to implement support for the new fork. Coinbase and Blockchain.info had eventually come around to implement Bitcoin Cash support, but this had arrived many months after its initial launch.

Final Thoughts

Bitcoin has always maintained an upward growth trend that has been plagued with bubbles and bursts throughout its entire lifespan. Bitcoin price always has its ups and downs on a daily basis, so day trading is incredibly unstable. A purchase of a significant amount of Bitcoin will require patience in the long term, and with even more forks being announced, there is, even more, profit potential if one holds out for months or years before selling.

Cryptocurrency Classes - What Are Privacy Coins and Why Are They Used?

There are more than 2,000 cryptocurrency coins and tokens. While some are designed to be used solely as a transfer of funds, others allow users to create their own blockchain assets. Cryptocurrencies can be broken down into the following basic classes:
• Payment currencies. These are used to pay for goods or services. Examples of payment currencies include Bitcoin (BTC) and Litecoin (LTC).
• Stablecoins are usually tethered to another asset class, like the US Dollar, and eschew the price volatility associated with crypto. Tether (USDT) and USD Coin (USDC) are examples of this type of crypto class.
• Utility tokens can be used to pay for a blockchain-based product or service. Golem (GNT) and Basic Attention Token (BAT) are two better-known examples.
• Blockchain economies, which allow for the creation of assets and applications on their platform. Ethereum (ETH) and EOS (EOS) are the two biggest blockchain economies.
• Privacy coins. These coins place greater onus on privacy, ensuring that only the sender and recipient know of the number of coins in a transaction. Monero (XMR) is an example of a privacy coin.

Why Privacy Is Important

Privacy is often cited as being one of the benefits of Bitcoin and other cryptocurrencies. In reality, however, Bitcoin does not offer the level of privacy that a lot of people believe. There is software, and there are services, that can track Bitcoin transactions.

The problem is that every transaction is recorded on a public ledger, and while personal details are not recorded on this ledger, it is possible, with the right tools, to track a payment to a wallet. If a person has details of a specific wallet, they can then determine all incoming and outgoing transactions made from this wallet.

Consider that many exchanges, including Coinbase, are effectively being forced to share data with government agencies around the world, and it is easy to see that Bitcoin is not the private currency it once was. For this reason, privacy coins were introduced.

How Are Privacy Coins Different?

Privacy coins use the same basic technology as payment currencies, but they obfuscate more information when sending data to the ledger. This makes it theoretically impossible for payments to be tracked back to a wallet or an individual.

Critics of privacy coins would have us believe that they are only used for nefarious transactions, and that only criminals have a genuine use for this type of coin. Studies actually suggest that around three quarters of all illegal transactions are carried out using Bitcoin, rather than privacy coins like Monero, but law enforcement and government agencies want to ban their use regardless.

Supporters of privacy coins counter this argument by pointing to the fact that they offer the same level of privacy as cash, and there are no plans to ban notes and coins. They also point to safety and security being the most important benefit of privacy coins.

Popular Privacy Coins

Whether you wish to increase your own financial security and personal safety, or if you are an investor hoping to benefit from heavier regulation, it is worth looking at some of the biggest privacy coins currently on the market.

Monero (XMR)

Monero was one of the first privacy coins, and it remains one of the most popular today. It emerged as a fork of Bytecoin in 2014. It uses a host of different technologies to keep transaction details private. Unlike many privacy coins, Monero payments are private by default, and every transaction uses the following technology to protect users: • Stealth Addresses. A stealth address is effectively a one-time, disposable payment address. Every transaction uses its own address, rather than a wallet address or an address that has been used for other transactions. • Ring Signatures. Every transaction is split before sending, and each value is combined with a series of decoy transactions. These are called ring signatures and make it almost impossible to determine which transactions are genuine and which are not. • Ring Confidential Transactions. In 2017, Monero introduced an improved version of ring signatures that hides the values of every transaction, including the decoy transactions that are sent, offering another layer of privacy to the transaction. • Split Transactions. When an amount of Monero is sent as a transaction, it is split into different amounts that add up to the original value. Each of these individual transactions gets its own stealth address before being combined with decoy transactions. • Key Levels. Finally, Monero offers both spend keys and view keys. The spend key allows a user to complete transactions on their account. A view key allows a user with appropriate permissions to view the total holdings of an account, but not to make any transactions. This can be used for verification or reporting purposes.

Dash (DASH)

Dash offers some privacy features to its users, but these are optional. Not all Dash transactions are completely private, therefore. The coin uses CoinJoin, which requires multiple users to mix their coins in separate transactions. This makes it much more difficult for third parties to be able to monitor or determine transaction details.

Zcash (ZEC)

Like Dash, Zcash is not designed specifically as a privacy coin, but it offers private transactions to users that want this feature. The private system obscures a large portion of the data that is being sent, but allows some to remain. This remaining data can be used to verify transactions, but critical data is prevented from reaching the public domain. Zcash also uses shielded addresses, which makes it virtually impossible to track a payment to or from a wallet.

Privacy Coins And Their Future

There are arguments for and against privacy coins. As governments and financial institutions attempt to elicit greater control over cryptocurrencies, and monitor payments made using coins like Bitcoin, we are likely to see even greater interest in privacy coins, and especially in coins like Monero that have been set up for this very purpose and that incorporate multiple levels of security into their system.

Why DAI is more than just a stablecoin

The cryptocurrency market has both fascinated and terrified the masses as of late. The constant ups and downs are enough to make any investor lose their lunch, but the potential of a completely free monetary system is still tantalizing.

Cryptocurrency has passed the first hump, but it's clear that something is still needed for it to survive. That thing is a stable currency that can hold its value. Something that puts crypto on par with fiat for our every day uses, but how can it be done?

Earn $6 in DAI for watching some videos about it at Coinbase.

DAI the Decentralized Stable Coin

DAI is a decentralized stable coin. Anyone can create it as long as they have Ethereum, and it's not controlled by any one entity or subject to the whims or regulatory requirements of fiat currencies, like other stable coins such as Tether. It requires no outside accounting to prove its backing, and all transactions and information are stored transparently on the blockchain.

It also does not require outside management. Thanks to smart contracts, everything is kept in check by the system itself. This includes the selling of the collateralized assets in order to maintain the peg. DAI has what is known as a "soft peg" to the US dollar. Unlike other stable coins, it is not backed by US dollars which are held in reserve. Instead, it holds Ethereum in reserve and each DAI is worth the equivalent of one US dollar in Ethereum.

The DAI token is created when a cryptocurrency holder locks up a certain amount of Ethereum inside a smart contract. They can then borrow against that equity to take out a loan for themselves, which is paid out in DAI's stable token. This money can then be used for whatever purpose the loan taker desires, and they can be certain that its value will not fluctuate.

Can a cryptocurrency backed stable coin really work?

Many investors are uncertain about how a decentralized stable coin will fare in catastrophic events. This is a fair concern. Cryptocurrencies are not exactly known for their reliability, and if you put your life savings into Ethereum during the Cryptocurrency heyday, then you're probably eating a lot of beans and rice right now. However, no monetary system is without its flaws and no currency, even those issued by governments, are completely safe from an economic catastrophe.

We've already seen some pretty hard times for cryptocurrencies as of late and DAI has managed to hold its own. The system has worked as intended thus far. Much like trading on margin, DAI has a liquidity threshold for locked equity. The user must make sure that their collateral level does not fall below this threshold or assets will be liquidated to maintain balance in the system.

Most investors don't want to lose their Ethereum, as that would mean selling at a loss. They will either add more collateral in the form of Ethereum to balance the system or they can also pay back some of their DAI to keep this from happening. While in most cases this will be incentive enough to keep things running smoothly, there is also a system in place that will sell the project's other token, MKR, to cover the loss if a point is ever reached where the Ethereum collateral held is not enough to cover lost equity.

What use case is there for DAI?

There's actually a good number of potential use cases for DAI. It's an exciting currency, and it's likely that it will be what finally paves the way for massive retail adoption of cryptocurrencies. Here are a few ways that DAI could be useful for traders, investors, businesses and even everyday users.

Retail purchases and services

Despite being around for near a decade, Bitcoin has yet to really break into mainstream retail purchases the way people thought it would. It does have some very large supporters, like Overstock.com, but adoption is still lacking. The vendors who do accept it tend to use a third-party payment processor, like Bitpay, that automatically converts it to US dollars anyway.

This is because most retailers have razor-thin profit margins, and even small price swings could cause them to be in the red. If DAI is truly successful as a stable currency, it could inspire further adoption from merchants, and they could accept a decentralized currency confident that they would not be at a loss for those sales at the end of the business day.

There's also the fact that DAI is an ERC20 token. This means that when Ethereum finally does move to its new Proof Of Stake system, DAI transactions will be infinitely cheaper, faster and more efficient than using a legacy currency like Bitcoin. This will relieve one of the largest pain points of doing business with cryptocurrencies, and it will also remove the many ecological concerns which surround mining, as Proof Of Stake (POS) is much more energy efficient than Proof of Work (POW).

Tax Deferment

Loans are not taxable events. Investors who lock up their Ethereum into a CDP, otherwise known as a Collateralized Debt Position, are not selling their Ethereum. They are simply taking a loan against it and using it as collateral. This means that investors have access to fast cash to use for purchases, more investments or anything else they may need without needing to pay any taxes like they would with cashing out.

This gives cryptocurrency investors the ability to use their money tax-deferred. The most obvious reason to do this is of course so that you can wait until your investment has passed the twelve-month threshold to be eligible for long-term capital gains rates before selling it. This offers significant savings over short terms capital gains rates come tax time. You could also use it as a means to push those gains into another tax year if you need some cash but you don't want to be jumped into another tax bracket.

This could be very useful if you've made a significant amount of money this year, but you expect to earn less next year. Then again, in this scenario, an investor would never really have to sell at all. As long as they can continue to pay back the loan, they could just keep taking out additional loans without ever selling any of their Ethereum.

Protecting Your Upside Potential

Let's say that you wanted to spend some of your Ethereum on something, but you were afraid that the value would keep going up. You don't want to spend any of your Ethereum just in case that happens, but you still need access to some fast cash. You could instead take out a CDP, and then use a portion of your equity to purchase whatever you wanted with your DAI loan. If you're right and the value of Ethereum continues to rise, then you get to keep that upside.

Your Ethereum didn't go anywhere, but you still got to spend your cryptocurrency. You can now pay back the loan, sell your Ethereum for a larger profit if you want or continue to hold it and just take out another loan. This is not limited to products either; you're free to do whatever you want with your DAI loan, which includes using it for another investment, which could make enough money to pay off the loan and earn a profit for yourself to grow your stack of Ethereum, further strengthening your equity position.

The future for DAI and MKR looks bright, and they have a lot more to offer cryptocurrency enthusiasts in the coming months. This includes their multi-collateral update which will allow a far greater number of Ethereum based assets to be used as collateral, including the Digix token, which is backed by a physical gram of gold. Investors should keep their eye on DAI and the Maker team because DAI is more than just a stable coin. It's a solution to some of the biggest problems that have plagued cryptocurrencies since their inception.