The main motivation for creating this blog was to inform and warn people about investing into bitcoin or at least to explain why this financial instrument could potentially be a bad decision or even crash. What is happening today on the market. This means to be in general and we are not going to do any analysis when to buy or sell. On the other hand it is good to warn you right now, not because market is going down but more because how. I see do important points what are happening now:
- The Ban from Korea – This is quite negative fundamental information and after that market went down about 20%. If you were on the stock market before you know that only one thing you can say about it is “market is reacting on bad news by going down”. This usually means that prices are not at the bottom. At the bottom it works exactly opposite – market does not react on bad news at all.
- Do not try to catch a falling knife – This is a very simple, this is a sentece which refering current pattern on the bitcoin market. When this happen on a market and you are holding a financial instrument you are in a bad position with literally no advice. If you are not on the market yet then do not care about possible earning money, do not care about anything, just simply do not go to the market neither long nor short.
As you probably already know bitcoin and all other currencies using hash functions to validate coins or more precisely to ensure “proof of work”. If you are not familar with hash functions these functions are mathematical functions with following behaviour:
- Function has one input (text to hash), optionaly second ouput (salt). The second input is to make more options avaliable for us and it is used for security, not in case of bitcoin.
- Function has one output. This output is always with fixed size, for example: 256 bites.
- Function is deterministic. This means that for the same input the output is always the same.
It does not seem to be interesting untill you know others requiriments we have for hash functions:
- It is not possible to get input from the output.
There are two reasons for it. Because input into the function can be as long as you wish, but the output is always the same size. This means that there is limited about of results (but very high number) but unlimited about of inputs. So, there are inputs with the same output (called “collision”). The reason why you cannot get the original from the hashed value is simply that there is unlimited number of inputs which have this value after hashing. The second reason is more interesting: It is easy to calculate hash, but very hard to calculate original for it (for example for 256 bit function it requite 2 power (256) operations). After this huge amount of cpu work (which is currently not avaliable for us) you can get an input which could be a original. As there are many inputs with this output one is enough and it can be any of all of them.
Because there are these collisions there is another task: To have any two outputs which have the same hash value. To be able to calculate this you would need more much less work (but still more than we have avaliable now) .
How is it related to risk on bit coin market and possibly crashes on currecies markets?
Well, the thing is that nothing is perfect. These hashing functions
One of my friends told me a principle a long time ago. I do not remember the name of that principle but I still remember what was it about. The main idea of that principle was that
when society reach some level of development some inventions simply show up and it is not relevant how much effort society put into this. Simply some ideas and inventions will happen
itself, independently on our offert. Unfortunately, when it comes to ideas and inventions which we wish to happen sooner it require a lot of offer or maybe we can even say that we need to have that level of development anyway but we are making it short by put effort into specific areas and research.
How is it relevant to the bitcoin market and cryptocurrencies?
If you reconsider this it is easy to imagine that cryptorcurency is something what had to happened. We were be around for a long time, right? It is actually surprising that t did not happened earlier. There was the right environment for it for so long time and it was not just the internet but also paypal, online shops, vouchers. The most similar to cryptocurrencies are actually micro-transactions in free-to-play games. If you are familiar with the algorithm of bitcoin you know that it is using something called “proof of work”. This has a beautiful analogy in free-to-play games where proof of work are hours you spent by lumberjacking or fighting with enemies.
Close you eyes and imagine our world when most of jobs are done by AI so, people to complete tasks is no more needed. Of course there will be
jobs where it is not easy or even possible to replace humans. But when is most of work done by machines doesn’t make sense that the value of property you have is derived from a computer
power available to you? Of course it does not mean that you have to have these machines it more like an idea that you world share/contribution is determined in computer units
rather than in mandays.
We are a group of investors who are interested in stock market. We have been on stock markets a about 10 years. When you spend this amount of time on stock market you start consider yourself not as someone who is very experienced but more as someone who definitively can speak about investing or speculating if you wish.
Past 4 years we were watching bitcoin market and a few other cryptocurrencies. Honestly, there is no strong opinion on investing in this instrument and we are little sceptic about bitcoin and cryptocurencies. On the other hand we do have part of our money in a few cryptocurrencies, but it is more for our education, testing and experiences. The purpose of this blog is to write our ideas, thinking and maybe go back after some time and re-think.
Even from the name of this blog is obvious that we think that it is maybe some light alternative of Apple shares and not a super rocket from where you can take incredible profit without paying that price by your risk.
We wish you luck with investing, believe or not luck is actually a big player when it comes to stock markets.