Monday, October 30, 2017

Terminology Clarifications: Blockchain, Distributed Ledgers, Bitcoin and more

I have to admit that I am not the most technical person in the world. I don't know any programming languages and the maximum extent of my computing prowess ended with building my own computer.

However, as I learn and study more about crypto, one of the issues that always crops up is the people referring to WRONG definitions, and therefore their argument is literally wrong, though usually the idea that they are trying to convey is clear if you are willing to give a lot of leeway in the meaning of the specific words.

So anyway, let's get down to business.

Ledger = Database = Record / Table of information

"Ledger technology" is not freaking modern crypto magic. Cavemen wrote ledgers to record how many sheep their neighbours owed them. Ledgers are nothing new. Everyone knows how to make and read a ledger, and everyone has multiple ledgers of different things.

Ledgers are really no different from databases. It is just a set of recorded data. Nothing special, nothing unique.

"Distributed Ledger Technology" (DLT)

Distributed Ledger Technology is also NOT blockchain. A lot of people equate DLT to block. DLT IS NOT BLOCKCHAIN. Nothing about blocks and chains here.

Distributed ledgers is a technological improvement, but a very specific one - multiple copies of a ledger are updated independently.

The main benefit? You have redundancy, which means that taking down or manipulating a single copy of the ledger is futile, because there are still multiple copies of the "real" ledger available, and they continue updating to the "true" picture.

Blockchain

This is the term that confuses people a lot and gets wrongly used the most.

A blockchain is simply a chain of blocks. Every new block is able to PROVE that it is linked to the block before it, and that block and prove the link to the block before it, and so on.

This means that a chain can prove that all transactions from the start of its existence until now complies with a certain set of rules and that the data flow and update of changes is uni-directional - only happening in the future.

This is extremely important, because this means all previous transactions are set in stone and can never be manipulated. Changing any transaction, such as editing the value, changing the destination or even removing the transaction, would be detectable and future blocks will recognize that a change has occurred - and will reject that change.

Bitcoin

Bitcoin uses both blockchain AND distributed ledger technology to record down transfer of payments.

This is why bitcoin "technology" and is so powerful. It merges 2 very important technologies together.

No previous transaction can ever be changed - it is final.
Any tampering will the previous transactions will be rejected - manipulation is not possible.
Multiple copies of the ledger makes it impossible to manipulate all the ledgers.

Summary

I still get slightly annoyed when people discuss technicalities but still fumble with public blockchains (bitcoin, ethereum), private blockchains, public and private databases, distributed ledgers, tokens and currency.

Just to be clear, because some people have freaking ridiculous notions of what is possible and impossible - no large / serious nation that understands blockchain will ever issue their own national currency on a public blockchain. Never.

Someone may be appointed to act as custodian or facilitate the private-public cross-chain swap, but it would never be fully on a public blockchain.

Most likely a government would reserve themselves the ability to pre-mine and generate as many tokens as they want, and they would then issue those digital fiat equivalents with a 1:1 ratio with actual circulating currency. As mentioned, anyone that wants to trade such currency of a public blockchain would require a cross-chain swap, or a custodian to facilitate the issuance / guarantee of the tokens convertibility. Of course, if a government body is appointed to do this, it can be low/no cost because it would be non-profit or even subsidized. However, a private body could do this as well and charge a service for it. However, trustless cross-chain swaps between public and private chains could solve this in the near future, so I think there would be no third party required.

Looking at the state of things and how quickly things are being developed, I honestly would not be surprised to see a digital fiat equivalent (DFE) issued by a country within the next few years, even if it is initially not widely used.

Friday, October 27, 2017

What If I Had Invested In Bitcoin For The Past 7 Years

I'm sorry Mr 15HWW, I just saw your posts on the STI and Berkshire and I just had to do this, ehehe!

BTC price data is pulled from here, and I just followed his format, with additional columns for my calculations.

Assumptions:

1. SGD is converted to USD to purchase BTC

2. Transaction Fees include conversion, remittance, deposit fees, large spreads and slippage

3. Initial Fees are a WHOOPING 30%, due to what I think was a very illiquid market initially

4. I gradually adjust fees to be lower to take into account the better market infrastructure

5. My final number of 5% for transaction fees is STILL ridiculously high. I am paying closer to 1% now.

6. I got Gox-ed (lost all my bitcoins during the Mt Gox hacking of Q1 2014)

With those very very heavy penalties (getting Goxed) and conservative assumptions (super expensive fees), here are the results:


The pink highlights are the bitcoins that would have been lost because of the exchange hacking.

So, with $350,000 being deployed every quarter with $12,500, the portfolio would have ended at $2,148,954. If my math isn't wrong, with only about half the time (Q2 2014 onwards), my IRR would have been 51%.

If I hadn't lost my BTCs in the Mt Gox hacking incident (I think most people did though..), the portfolio final value would instead be $315,962,750. If I didn't get Gox-ed and safely kept my BTCs throughout the years, my IRR would have been 252%.

My math regarding the IRR might be wrong though. I'm not really bothering too much. Just know that the returns would have been YUUUGGEEE.

Of course, in retrospect it is easy to see what would have been the best way to have invested in the market.

Anyone crazy and brave enough to have bought huge amounts of bitcoins in the early days when the technology was still developing and still unstable, should and have been handsomely rewarded for taking such risks with something that could very well be nothing. In my opinion, those bitcoin millionaires all deserve it.

Sometimes I wish I had the balls, foresight and understanding to have invested heavily into crypto years ago. I was playing around with mining bitcoins in 2013, but my conclusion was that if its ONLY use is a digital store of value, it is not going to work out. The paradigm shift that blockchain tech is not necessarily only just for money (bitcoin as money is an extremely narrow usage of blockchain technology) is what made me come back to the crypto space and convert myself to a strong believer after finding out more.

The true main point that I am trying to make here isn't that you should invest in bitcoins or other cryptos - NO, THIS IS NOT THE POINT I AM TRYING TO MAKE.

Instead, I think the better learning point here is that as long as you invest in fundamentally sound assets for the long term, you should be making decent returns.

I'm sure a lot of people are gonna be pissed reading this post.

Ponzi.
Bubble.
Fraud.

Magic internet money.


Lol.

Thursday, October 26, 2017

WTF are Smart Contracts and why "Bitcoin" will be huge

I'm always slightly annoyed by the ignorance that all cryptos are lumped together and labelled "bitcoins".

Bitcoin is the first application of distributed ledger technology (DLT) which uses blockchain technology and decentralized distribution principles.

Bitcoin is NOT blockchain.
Blockchain is NOT distributed ledgers.

Bitcoin also is not able to handle smart contracts natively (requires RSK or oracles if I am not wrong). But Ethereum can. There is a recent burst of development of oracles - both centralized and decentralized ones - and their interaction with smart contracts, which are giving rise to more and more ways for external data of state confirmation to enter the blockchain and execute smart contracts. This means that the execution clauses are getting more broad and more easy to coded for execution. And this is a huge leap forward technologically.

The infographic below is an EXTREMELY good primer on what are smart contracts and why they are useful, beneficial and valuable.

Maybe before you read the infographic, let me share this youtube video to show a real use-case application of smart contracts to give you an example for you to reference to:




Three quarters down there is a section called "Another level of complexity".

Bitcoin ONLY operates on the 1st and most basic level.
Ethereum currently operates from the 1st all the way to the 5th level.

The 6th level of DAOs are currently being developed and the first DAO should be launched sometime around the end of this year, or early 2018.

I've long believed that "middle men" will be put out of businesses just simply due to the progress of technology. The power and rise of blockchain makes me even more confident of that happening, and faster too. Property agents and insurance brokers are already slowly showing their way out of the door. Many roles, companies and even industries that rely on being a third party are going to be radically disrupted, to either the point of obsoletion, or be reduced to handle very niche circumstances.

One of the main reasons why I strongly believe that Ethereum will be significantly more valuable than Bitcoin is because of smart contracts, alongside decentralized applications and other decentralized ideas.

Whether I can convince you that the insane technological leaps of blockchain tech is a game changer or not, this train is already steaming full speed ahead. I'm on the train already. Waving at you.

Bye bye.

Monday, October 23, 2017

GMGH Crypto Blackbox Investing (Final)

As mentioned on 8 Aug, I have been doing something called Blackbox investing.

As a refresher what that is all about:
I will not be proving my investment capital
I will not be naming the actual investments
I will not be proving the returns from those invesments
I could make making up the entire thing and you wouldn't know

However, this will be the last update.

Why?

No, I am not losing money, hehe.

1) The bitcoin fork(s) are coming and I need to pull back my BTCs to manage the fork process
2) I am planning to inject more capital into my funds a
nd do some rebalancing

Both of this means that it would be hard for me to continue reporting.

Here are the final updates:


For the past few week, everything went along pretty well, except for an itchy hand mistake I made with my "Steady Turtle" fund. I had thought that BTC was going to bounce off resistance at $4800, so I hedged out my position. Within a few days, it had broke past $5000 and was surging like crazy! I got back in at $5300. That itchy mistake cost me 10% of lost! Overall, it is still up almost 50% in less than 3 months though.

In fact, all my funds have done well. They have all increased in both crypto and in SGD value.


As mentioned, I am not closing these funds. I am just temporarily shutting them down to deal with the BTC forking, after which I will shuffle around my capital and re-allocate.

My funds have been working out very well for me. If I had split my funds evenly, I would be up almost 100% over the past 3 months!

Profit from this blackbox investing experiment over for about the past 3 months? $8327.08 SGD


As mentioned in my last post, this is definitely not my entire portfolio.

I expect a lot of good developments to happen to crypto (especially my portfolio) over the next couple of months.

At the rate I am going, I'm leapfrogging ahead in "investment years" because of all these outsized returns that I am getting. Hopefully by mid 2018 I will be able to report big gains and be a bit more comfortable sharing values of my returns then.

For now, just enjoy my crypto posts from time to time! Remember, if you don't know what you are doing, PLEASE FOR THE LOVE OF GOD DO NOT BUY CRYPTO.

GMGH x PennyWise (Crypto Hardware Wallets)

I understand that it is pretty hard to find information locally, especially since the crypto community is so small, and Singapore is so small too. Since I started my crypto journey, I've joined a local telegram group that talks about crypto and I got to know Jun Yi, the guy behind PennyWise, a local seller of hardware wallets.

I met up with him on one occasion to do a face-to-face deal because I had friends desperate to get their hands on a hardware wallet immediately and he happened to have some in stock. Quick deal, wasn't even 30 seconds!

I'm certain that most of the hardware wallets that the crypto community here is using today has passed through Jun Yi to get into their hands. I'm quite thankful that although crypto is so niche, we have our own local supplier here in SG!

Jun Yi has also written two very good articles on Gemini funding and Gemini withdrawing, which I strongly urge you guys to take a look, rather than emailing me for help. I do what I can, but I'm not Gemini / DBS support! 

Anyway, I have good news to share. I have partnered up with PennyWise to offer readers a very huge steep discount of ONE WHOLE DOLLAR if you key in the "gotmoneygothoney" discount code when checking out your cart.

Sure, it isn't much. But free money, how to complain right? 

As a quick and easy rule of thumb on whether you need to get a hardware wallet:

$0 - $100: exchange wallet without private keys
$100 - $1000: desktop / mobile wallet with private keys
$1000 ++: hardware wallet where you don't even know your private keys

Personally, I've been using the Ledger Nano S to store my crypto. I have no complaints so far. Compared to the Trezor, it seems that the team behind Ledger is more pro-active, especially in adding support for smaller currencies.

Saturday, October 21, 2017

Bitcoin broke $6000 and $100,000,000,000 Market Cap

Source: Marketwatch, CNBC, Coinmarketcap

Okay back to the usual MSM bullshit of cryptocurrencies being a bubble, fraud, scams and ponzis.

I mean, no one ACTUALLY makes money from buying any of these "investments", right? /sarc

Friday, October 20, 2017

EZ Crypto Portfolio

Since I've gone full crypto a while ago, I get plenty of questions regarding investing into cryptos.

Honestly, I think that it is a very, very complicated art. It requires a lot of technical understanding and experience to make better-than-average calls on most of the niche and specialized cryptos.

However, that doesn't mean that if you don't understand it, you can't make money from it.

Take for example the ridiculous US stock market and its insane valuations. Can it go up? Yup. Can you explain why? Nope.

For anyone daring enough to venture into cryptos without first gaining a deeper understanding to the technology begin it and the tons of factors affecting it, I would strong caution them to AVOID alternative coins.

Just buying and holding bitcoins and ethereum would be a simple and easy way for most people to get exposure into crypto without taking on the multitudes of additional risks that are present in smaller crypto that these stalwarts no longer have, or have extremely low risks of suffering from.

I almost like to think of BTC/ETH as being bonds and stocks. Depending on your risk tolerance, you can adjust accordingly.

I'm 100% positive that just a simple portfolio of 50% BTC and 50% ETH will outperform the global stock market and the local stock markets. While there might be volatility, I would expect the mid term (3-5 year) returns to be exceedingly positive.

Let's run an example starting today, shall we?

Assume $10,000 SGD initial capital, USDSGD rate of 1.3600 and frictionless costs, let's start tracking.

Portfolio 1 would be the $SPY, or the S&P 500 ETF. At 255.79 USD, we can get a total of 28.746 units.

Portfolio 2 would be the $ES3, or the STI ETF at 3.38 SGD, we can get a total of 2958.580 units.

Portfolio 3 would be a simple 50/50 split BTC ETH at 5654 USD and 307.50 USD respectively for a total of 0.6502 BTC and 11.956 ETH.

Portfolio 4 (my personal pick), is a skewed 25/75 split of BTC ETH. With the same values, we can get 0.3251 BTC and 17.934 ETH.

Let me give a short primer on my crypto picks.

BTC is the big daddy of all crypto. It has the biggest and best brand name and pretty much everyone has heard of it before, though they might not actually know what it is. It is the one in all the headlines, but most importantly it is the GATEWAY crypto and all other crypto that do not trade directly with fiat will always trade with a price against BTC. This means that it is gets propped up by both fiat inflows and alternative outflows.

ETH in a very simplistic description, an upgraded and programmable BTC. It's faster, cheaper to transact and has many more applications than just simple value transfer. ETH has a large enough userbase as well as developers. I believe that it is a clear and easy pick to succeed. It has the perfect balance of significantly better technology than BTC, and also the community of users and developers to support it and push it forward.

I personally believe that ETH will take over and replace BTC within the next 2 years, especially as the usefulness and applications of ETH expands with all the development surrounding it - both on a protocol basis and dapps being built on top of it. Therefore, I have assigned a larger weight to it. I have done the same in my own actual personal portfolio.

Either way, my personal belief is that cryptos at this stage of time will be massively outperforming the traditional stock market and I have put my money where my mouth is at. I strongly do not suggest anyone to enter without knowing what they are doing. Instead, just monitor this simulated portfolio along with me and we can see how things go!

Additional note: Obviously I'm not providing back tests because it is PAINFULLY obvious (oh, so much regret) that either crypto portfolio would have massively outperformed the traditional ones. Many people believe that cryptos are in a massive bubble and its a giant ponzi scheme / fraud that will be worth nothing... soon. We'll just see about that.

Monday, October 16, 2017

Can Bitcoin be considered a Good Investment?

I have to admit, since I've gone full crypto-tard, I've been spending less and less time reading about the stock market and following local blogs. I've been a zombie for the last few months devouring and learning about the crypto-markets like crazy.

However, I saw these posts by B from 3Fs and Uncle CW8888 about what is a good investment and I'd thought I'd throw in my 2 cents on a particular "investment asset" that people are talking about these days, and one which I consider myself to be more familiar with than 99% of the population.

The basics

No, not the basics of bitcoin. But the basics of what I consider to be a good investment. A good investment has only simple quality in my opinion:

Future value of investment (and all its payouts / divdends) will be higher than current value

Some people are yield focused. Some people are capital gains focused. I'm into total returns. I do have a preference for yield though, but in all honesty, I rather higher total returns.

Therefore are collectible stamps an investment? Gold, silver? Pokemon cards? Autographs of famous people? They have no cashflow. But yes, they are investments. If you don't think so, you're a yield-tard. Take off your bias glasses and admit that though it might not be YOUR most comfortable style of investing, it is a legit investment.

Why Bitcoin

Is Bitcoin a ponzi? No.
Is the value of Bitcoin a ponzi? Maybe.

Bitcoin does not need more and more money pumping into it to stay alive and continue existing. Bitcoin exists, regardless of the value of each coin. It has no idea what it is worth. It just exists.

The value of bitcoins is another thing though. And it keeps going higher and higher and higher. Why?

Bitcoin cannot be tainted or manipulated.

This means that no single authority can suddenly create more bitcoins out of thin air. When people talk about bitcoins, they like to use "scarcity" to justify it's value. I might be disagreeing on technical definition, but to me the value of bitcoins comes from the fact that NO ONE can add more bitcoins into the system that what all users have already agreed on.

This means no QE. No money printing. No magical inflation. None of all that governmental interventionist crap. It is what it is, and no single user can overrule the fundamental rules of bitcoin. The only way to change this is to get the majority of stakeholders to agree to a change. And as stakeholders, you can be rest assured that they will only agree to changes to enrich themselves, NOT to dilute their holdings and end up with less value.

Bitcoin is not governed by governments, officials, central banks, or all these people who have no repercussions or punishment if they screw up with their experimental policies.

Bitcoin is governed by users and therefore everyone is forced to play by the same rules. No special surprises. Level playing field.

Bitcoin is permissionless and unstoppable

You do not need to apply for a bitcoin account.
You do not need to pay a minimum sum to open a bitcoin account.
You do not need to get security clearance or pass some KYC to open a bitcoin account.
You do not need permission to send money.
You do not need to declare when your value transfer is above a certain limit.
You do not need to ask questions when you receive money.
You do not need to justify from whom you received from.
You do not need to get permission to close your account and transfer away all your money.
No one can prevent you from making a transaction.
No one can prevent you from receiving a transaction.
No one needs to know your real identity to make a transaction.
Transactions takes within minutes to successfully be completed.
Transaction fees can cost just cents or dollars.

Is there a value to having a system of value transfer that is permissionless and unstoppable? I think that there is.

My thesis

The world is riddled with plenty of bad currency. It's a rotting and failing system that is going to collapse on its own weight. The idea of honest money is not some crazy and insane notion. It is what we used to have, before fractional banking and phony economics became the permanent feature of modern finance.

Bitcoin WILL be a global currency. Not only that, but it can also be a transitional currency for failing currencies with no backup plan (Venezuela is a key case study of this). A currency that no government can stop, control or manipulate. A currency where owners of it need not worry about hyper inflation or money printing. Along with it, it is also a global payment system with no third party, and all the benefits of peer to peer transactions.

There is value being both a currency and payment system that cannot be tampered with, that is true and honest, for every user, transmitting whether they are transmitting $10 or $10,000,000.

Ending note

While I am a strong believer of Bitcoin, I believe that a few other cryptos offer EVEN more compelling investment cases. I do own some bitcoin, but it is a very, very, very small portion of my portfolio.

Friday, October 13, 2017

Bitcoin is a Fraud and is in a Bubble

Just tweets with no comments.



Merely stating facts.

Bitcoin "Reverse" Crashing

Remember last month how everyone was saying that the sky is falling because China banned crypto exchanges?

The markets had a pretty good -40% correction. Plenty of people were telling me to exit the crypto markets. Lol. I did not listen to them. I doubled down and went in EVEN deeper.

Price peak before the 40% crash? $4980
Price at the bottom of the crash? $2975 (please see this post where I called $3000 ehehe)
Price right now, at 1.38am? $5276

Yup, bitcoin is back to new all time highs. (I'd reckon we're probably a bit lower now, but thus is the nature of cryptos)

Not saying I'm a genius or what. But everyone's reaction to last month's volatility and fear of cryptos is EXACTLY why people like me can make money. Strong hands + big balls. A very dangerous recipe if you're holding onto fundamentally worthless assets. However, I do not believe that is the case for me.

While I am personally skeptical of Bitcoins being adopted as the main crypto of the future (because of fees and scabability issues) and for it to hit the crazy high valuations that a lot of bitcoin maximalists are calling for, I am still a true-believer of cryptos in the long run. That said, I still do believe that bitcoin will continue to grow in valuations, though I think other cryptos have more growth potential, and a handful have the potential to dethrone bitcoin as the largest crypto.

I will now try to refrain from saying cryptocurrencies, because not all crypto are currencies.

On my radar now is Ethereum which has been chilling out at the $300 USD levels for a bit now.

It has it's Byzantium hardfork upgrade, the upcoming DevCon3 and tons of dapps on its network just waiting on the upgrade before pushing out the releases of their projects. All of these should be extremely price positive for Ethereum. I predict a takeover of Bitcoin's marketcap by the end of 2018.

My first BTC I bought was $2574. Today it is $5276. I wonder what it is going to be at the end of the year? A lot higher than now, I'd bet (literally, with my money).

The amount of people discovering, learning and finally understanding the insane potential of blockchain technology is growing every day. While news of bitcoin hitting new all time highs feeds into the overall hype and will send in a lot of new sheep into the crypto world to fill up the slaughterhouses, it isn't all bad. The news will also allow some people to discover and be mindblown by the world of crypto.

Again, as a PSA and friendly reminder, cryptos are risky and dangerous af. If you have no idea what you're doing, it's best just to stick to whatever you know. Buying into something you don't know is the fastest way to lose your money.

You're always welcome to drop in and check up on me to see if I've become a bankrupt or a millionaire.

Monday, October 2, 2017

GMGH Crypto Blackbox Investing (End of Sep 17 Results)

As mentioned on 8 Aug, I will doing something called Blackbox investing.

As a refresher what that is all about:
I will not be proving my investment capital
I will not be naming the actual investments
I will not be proving the returns from those invesments
I could make making up the entire thing and you wouldn't know

I've decided to change up the presentation style a bit from last month, but I think things are still quite clear and easy to read.


Some interesting points to note:

- The crypto market is much lower end of Sep compared to end of Aug
- Due to the lower crypto prices, the FX returns are much lower compared to the end of last month
- Returns in crypto are still nice and positive
- Overall returns are still very good

My "Blue Crazy Dragon" fund is seriously under-performing although it is technically a much more risky investment with a higher expected return. One month's return is too short to tell, but I'm hopefully that it can catch up next month.

If my funds continue to do well (since this is all testing as proof of concept right now), I may open up a "Black Wolf 4" fund, as well as top up my contribution in some other the other funds.

-----------------------------------

The above is just the returns of my Blackbox investing portion of my portfolio that I'm sharing and that is definitely not my entire portfolio.

Investing in crypto is crazy. But the returns are crazy as well.