Welcome back to this week’s episode of Ask Doctor Bitcoin. This week, we look at Ripple and why it may be a great investment for banks but a bad investment for individuals. Ripple has recently made the news as banks begin to adopt the messaging protocol to save time and money associated with wire transfers.
Before understanding Ripple, one must understand how bank wire transfers work. Although the process is electronic, there is also a manual component in copying the information and sending it to the person making the wire transfer. Because of the labor and time involved in wire transfers, the transaction fees are high. Banks are looking at Ripple to streamline this process: since the steps are consolidated in the overlay protocol, both the initiating bank and the intermediary bank save time and avoid human error by using Ripple.
Most people view cryptocurrencies as being basically the same in terms of how their market fundamentals work, but Ripple is application-specific. With other cryptocurrencies such as bitcoin, the value of the currency goes up as more people utilize and trade it—i.e. what we think of as supply-and-demand economics. However, since Ripple is used by banks to keep transaction costs low, the demand would decrease if the costs outweighed the savings gained by using the protocol.
Users of most cryptocurrencies have an incentive to want the value to rise, adding wealth to all the users. That is the key difference with Ripple. Its value does not travel through the blockchain, and U.S. dollars are all that is being exchanged using the Ripple protocol. Banks do not use Ripple as currency; instead, they transfer dollars from one bank to another using the Ripple messaging protocol to coordinate the process. Banks pay for the use of the messaging protocol with Ripple tokens.
Ripple is useful for banks to reduce the time and expense required for wire transfers. However, since Ripple is an application-specific token and not a currency like bitcoin, its usefulness and popularity are not an indication that an individual should invest in it the same way they do other cryptocurrencies.
For the latest cryptocurrency news and answers to more of your questions, join us next week for another episode of Ask Doctor Bitcoin.
On this week’s episode of Ask Doctor Bitcoin, we talk about exchanges—where you go when you want to exchange one currency for another kind of currency. We’ll specifically cover centralized and decentralized exchanges.
A cryptocurrency exchange is a place for you to take your money and turn it into other kinds of money. In a cryptocurrency transaction, one person initiates the transaction (which makes a record on the ledger), and the other person accepts the transaction (also making a record on the ledger).
In a centralized exchange, instead of the transaction going from initiator to blockchain to receiver, the initiator sends the transaction to a centralized platform to exchange the currency. For example, the initiator may send bitcoin (via the blockchain) to the centralized platform, which then converts the currency to Ether and records it on the Ethereum blockchain—which the initiator then reads. This process is the antithesis of blockchain technology, because with a centralized platform, you now have a central point of failure and are vulnerable to hackers.
In a decentralized exchange, you are making the transaction by yourself, using smart contracts to broker the process. For example, the initiator sends his bitcoin to a smart contract owned by a decentralized exchange and transfers it to Ether. If the transaction is not completed, the money is sent back to the initiator safely and securely.
Mark shows users how to make a transaction using ShapeShift. In the example, he transfers Dash to Ether using the decentralized platform. Remember to fill in your sender address, so in the event that the transaction does not complete, your money will be returned. Choose the amount you want to exchange, type in the receiving address, and scan the QR code. The example transaction was completed in less than a minute. Changelly works similarly but has a diverse set of currencies it accesses. Both exchanges are decentralized, accessible through website or apps, and are equally secure and recommended for making cryptocurrency exchanges.
For more information on cryptocurrency and for all of your questions, join us each week on Ask Doctor Bitcoin.
The technology behind cryptocurrency and blockchain offers so many world-changing possibilities, and there are many ways companies can use the technology for good. Frustratingly, some persist in using the technology to perpetuate scams. Today, we cover two of those scams and give viewers a few tips on how to spot scam companies and scam coins in the future.
Highlighted this week are two companies making the news for all the wrong reasons: Bitconnect and USI Tech have both collapsed after allegations of fraudulent activity.
Both companies fit the definition of a Ponzi scheme: i.e. “a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.”
Bitconnect and USI Tech both promised insane returns and unrealistic gains via automated trading and cryptocurrency mining. These promises, with no regard to the actual market price of cryptocurrencies, should have been an immediate red flag.
In addition, Bitconnect and USI Tech took custody of people’s currency, defeating the entire purpose of cryptocurrency and blockchain technology, which entails a trustless system.
It is unfortunate that many people were introduced to cryptocurrency by way of scams, so it is important to learn how to spot fraudulent schemes as well as how to recognize valid projects. Unfortunately, events like these are what usually precede government regulations, which can in turn block real, valid uses of the technology.
When you try to find new projects or coins to support, Mark recommends asking yourself the following questions to see if any red flags pop up.
- What do the influencers say?
- What is the company trying to do? (And are they holding your money hostage to do it?)
- Google them.
- Research on GitHub (for a more technical look at their history).
- Who’s on their team?
For more news about cryptocurrency, profiles on (legit) companies, and all your Bitcoin questions, join us each week for Ask Doctor Bitcoin.
This week, Doctor Bitcoin details how to recover a lost bitcoin wallet and discusses the crypto project RaiBlocks XRB.
Most experienced cryptonerds will be able to find recoverable currency information for a ten percent finder’s fee—but before you run to the nearest bitcoin dealer, Mark’s recovery triage may save you the trip.
- If the cryptocurrency was purchased on websites, exchanges or web wallets that no longer exist, your information may be extremely difficult to find and claim.
- If your web wallet still exists and you have the private keys to your wallet, you may be able to recover your information by using the 12–24 word passphrase you created when setting up your wallet. Ask Doctor Bitcoin episode 1 may help you remember the setup process you followed.
- If your web wallet exists and you do not have the private keys to your wallet, you will need to contact the technical support for the web wallet.
- If you purchased and kept your cryptocurrency on your PC, look for a wallet.dat file. If the hard drive has not been altered, damaged, or wiped, the file should still exist on the hard drive and should contain all of your private keys. Once you install the latest version of your wallet, you will be able to access all of your cryptocurrency.
Project RaiBlocks XRB is a form of cryptocurrency that is rising in value and may solve the scaling issues associated with bitcoin. RaiBlocks performs at 7,000+ transactions per second. RaiBlocks is a trustless low-latency cryptocurrency using a block lattice structure. Each wallet is a blockchain unto itself. You can authorize record-keeping to another node. XRB funds are widely distributed and accepted worldwide. RaiBlocks XRB may have untested vulnerabilities, but its potential is promising and its structure may permanently end the scaling problem.
Welcome back to this week’s episode of Doctor Bitcoin, where Mark explains SegWit and how to claim forked currency.
To understand how SegWit works, you must first understand how transfers occur.
What we think of as peer-to-peer transactions is not exactly accurate. Instead, when one person initiates a transfer, it is broadcasted to the blockchain and the other party must then claim it. However, there are often more transactions being broadcasted than space allows, making transaction times longer. SegWit-enabled lightning networks can speed up the process by using smart contracts to make transactions immediate. Your currency becomes spendable immediately, and the lightning network finds a time with fewer transactions to officially process your transfer.
A fork occurs when two developers part ways, creating a fork in the code. This can result in two completely different currencies as we’ve seen recently with Bitcoin and Bitcoin Cash. In the event of a hard fork, you may see two balances: one with the original currency, and one with the new forked currency. If you choose to stay with the original currency, then you will want to claim and transfer your forked coins back.
Mark suggests using Coinomi as the easiest way to collect the forked currency and to transfer it back to the original (if that is what you want to do).
- Take your BIP phrase from whatever wallet you’re using
- Import into Coinomi
- You’ll see your Bitcoin balance
- Choose “Add coins”
- Pick the forked coin of choice
- Go to advanced settings and type in proper derivation pathway
- Hit OK
- Go to exchange process and select your currency of choice
There are other methods to claim forked coins, but this is the easiest way. You can delete the new wallet when you are done with it if you choose.
That’s it for this episode! Check back next week for the latest episode of Doctor Bitcoin.