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People love to compare the bitcoin crash to the dot-com bubble.

I get it. It makes a good headline. At the end of 2018, Bloomberg, CNBC, and Fortune were quick to print stories like this:

The Crypto Crash of 2018 Is Now Worse Than the Dotcom Bust

Crypto’s 80% Plunge Is Now Worse Than the Dot-Com Crash

Bitcoin is unfolding like the dot-com crash, just 15 times faster

If you look at bitcoin’s run-up in 2017, it does look worse than the dot-com bubble.

bitcoin vs dot com bubble chart
Source: WSJ

But these charts ignore one crucial thing:

The dot-com bubble was EIGHT times bigger than crypto

We’ll start with market capitalization.

The market cap of the NASDAQ Composite Index (which tracks tech stocks) during the peak of the dot-com boom was $6.7 trillion.

The crypto market cap at its peak was $828 billion.

In other words, the dot-com bubble was eight times bigger than crypto.

crypto market cap vs nasdaq market cap

The absence of Wall Street

The second big difference between the dot-com bubble and the crypto bubble is a complete absence of institutional traders.

Almost no-one on Wall Street was trading bitcoin in 2017. Most family investment offices and hedge funds didn’t hold crypto either.

Whether it’s a good thing or a bad thing, the “big money” hasn’t come to crypto yet. The two bubbles are completely incomparable when the investor base is so widely different.

Bitcoin was a bubble…

Don’t get me wrong. The bitcoin spike in 2017 was a bubble. A big one.

It had all the hallmarks of a big financial bubble: mania, greed, delusion, and capitulation. And the 80% drop is painful.

But if we’re going to put this in context with historic bubbles, let’s use a relative scale, not percentage drops. 

Bitcoin’s “dot-com moment” may yet be still to come

Bitcoin’s “dot-com moment” won’t happen until we see much bigger volumes of money flowing into it.

This infrastructure is building… Nasdaq and NYSE are launching on-ramps for crypto. A bitcoin ETF may be on the horizon. Institutional-grade custody is coming.

Only when these things are in place will we see the kind of money required for a “dot-com” level run-up.

And if that happens, the fall will be truly enormous when it bursts.

A version of this article appeared in our exclusive newsletter. If you’d like Block Explorer’s cutting-edge analysis in your inbox every Tuesday, sign up now.

bitcoin hack how to avoid

New Zealand based crypto exchange, Cryptopia, was hacked on January 14th.

In a statement released on Twitter, Cryptopia said the exchange “suffered a security breach which resulted in significant losses.”

The platform is currently in “maintenance mode” while the team assesses the full scope of the damages. Although no official figures have been released, Larry Cemark, analyst at The Block, suggests as much as $3.5 million worth of ethereum and CENNZ tokens were stolen.

New Zealand police and the High Tech Crimes Unit are currently investigating the breach.

The news comes after $1 billion in cryptocurrency was stolen in 2018. The full Cryptopia statement is below.

Cryptopia Exchange Hack Statement

cryptopia exchange hack

blockchain developer

The annual salary for a blockchain developer has risen over the last six months, despite the ongoing bear market and crypto layoffs.

According to a new report by Janco Associates, blockchain developers command an extra $4,000 per year compared to six months ago. The average annual salary for a blockchain developer is now $132,000, although some experienced individuals earn as much as $176,000.

“CIOs do not want to lose the talent they have on board. As a result, they have increased compensation for those positions,” Victor Janulaitis, CEO of Janco Associates, explained to Computer World.

Blockchain developers are now among the highest paid IT professionals, period.

However, the pay rise isn’t just isolated to developers. Most blockchain-related jobs are experiencing a rise in salary demand. After the bitcoin price fell more than 70% in 2018, keeping talented individuals in the space requires a larger compensation package.

The news comes as many blockchain startups announce layoffs and restructures. As Block Explorer recently reported, high-profile companies like Bitmain, ShapeShift and ConsenSys have cut staff in recent months.

Perhaps startups are focusing on the core tech rather than ancillary services as the crypto winter takes hold.

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Ethereum hard fork constantinople

Ethereum will execute a hard fork this week named “Constantinople.” It is the first major Ethereum update of 2019.

The hard fork will take place at block number 7,080,000, expected on Wednesday 16th January.

So, what is Ethereum Constantinople? What upgrades will it bring? And do you need to do anything with your ethereum funds?

What is Ethereum Constantinople?

In simple terms, the Constantinople lays the technical groundwork for huge scaling plans in the future. 

Ethereum has a long roadmap, stretching into 2025, that aims to address congestion problems on the blockchain (the network almost ground to a halt at the end of 2017 when users flooded the system).

The Constantinople upgrade is the first step towards larger scaling ambitions. One independent developer referred to it as a “maintenance and optimization upgrade.” In other words, end-users shouldn’t notice too much difference.

Background reading: What is a hard fork in cryptocurrency?

Is it a contentious hard fork?

Hard forks are considered “contentious” when the community disagrees on the proposals. When that happens, there’s a risk that two competing chains emerge simultaneously.

We saw this happen with the Bitcoin Cash hard fork in November. Ethereum had its own contentious hard fork in 2016 when the community disagreed on how to deal with a hack. This hard fork spawned Ethereum Classic.

Constantinople, however, is not expected to be a contentious hard fork.

There is relatively strong support from miners across the board. The vast majority are expected to upgrade their nodes, and we won’t see two competing chains.

What upgrades will it bring?

The upgrade will implement five ethereum improvement proposals (EIPs).  They are as follows:

EIP 145 – Will result in a 91.4% saving in Ethereum gas costs through more efficient information processing methods. It relates to a process known as Bitwise shifting and requires the introduction of a native operation on the Ethereum Virtual Machine (EVM).

EIP 1052 – Makes it cheaper to process large smart contracts that only require a hash.  More specifically, this functionality returns the keccak256 hash of a contract’s bytecode. It improves upon the design of the EXTCODECOPY opcode.

EIP 1283 – This proposal aims to help smart contract developers by reducing gas costs related to changes made to data storage.

EIP 1014Introduces some off-chain transaction solutions to improve scaling possibilities.

EIP 1234 – Delays the “difficulty bomb” and reduces the mining reward from 3 ETH down to 2 ETH.

What is the difficulty bomb and why is it controversial?

The most controversial change in the proposal is the decision to delay the Ethereum difficulty bomb and reduce the mining reward.

The difficulty bomb is designed to progressively increase mining difficulty on the network. Eventually, it will become so difficult to mine Ethereum blocks, we will enter an “ice age.”

That process is designed to force miners away from Ethereum’s current “proof of work” system to “proof of stake.” Proof of stake is a more efficient algorithm that doesn’t require the vast computing power of miners.

The difficulty bomb will trigger the gradual shift towards the new algorithm by de-incentivizing miners.

The shift will also reduce the mining reward from 3 ETH to 2 ETH. It’s a somewhat controversial move as it will put economic pressure on the mining community. There’s also an argument that it will shift more power into the hands of large mining pools, which can afford to bear the economic costs in the short term.

Although some miners aren’t happy with the proposal, mining pools have indicated their broad support for the upgrade.

If you hold Ethereum…

… You won’t need to do anything with your funds. The hard fork should execute seamlessly and you’re unlikely to notice any difference or disruption.

Further reading: What is Ethereum? Absolutely Everything You Need To Know (A Beginner’s Guide)

Bitcoin whales

Bitcoin has been lauded as the “answer to income equality” and “the dawn of the single greatest wealth transfer in history.”

It’s not.

The vast majority of bitcoin in circulation is owned by a tiny elite. Just like the vast majority of global money is owned by the 1%.

It’s time to reassess the idea that bitcoin is a model for redistribution of wealth and equality.

The 1% own 87% of Bitcoin Supply

According to research published in China’s National Business Daily, almost 90% of circulating bitcoin supply is held in just 0.7% of wallets.

The huge concentration of crypto wealth can probably be attributed to cryptocurrency exchanges like Coinbase and Binance. Crypto exchanges hold funds in their wallets on behalf of its users, so that wallet may represent thousands of crypto users.

In terms of monetary value, the 0.7% of wallets control $62 billion in bitcoin (correct on January 7th).

Limited Bitcoin Supply

The research also revealed that 97% of crypto wallets held less than one bitcoin.

The limited bitcoin supply (only 21 million bitcoin will ever be created) means that only a fraction of people on earth can own a full bitcoin. As Jameson Lopp pointed out, there aren’t even enough bitcoins for each Coinbase user.

To become part of the bitcoin 1%, you need only a modest 0.28 BTC, according to one estimate. And that’s before you consider lost and stolen coins.

While bitcoin is a model for economic freedom, it is unlikely to alter existing wealth structures. The 1% will still hold the vast majority of money supply, whether it’s fiat or digital.

Further reading: Who are the Bitcoin Whales? (Criminals, Traders, and Early Adopters)