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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

Bitcoin mining took a big hit in 2018. 

For most of the year, mining activity operated below the threshold for profitability. The biggest name in crypto mining, Bitmain, ended the year by cutting 50% of staff and shelving plans for a stock market launch.

But what will 2019 bring? Will cryptocurrency mining become profitable again? In this article, we present an overview of bitcoin mining for 2019, touching on the biggest trends you need to know if you’re looking to get started.

Is Bitcoin Mining Profitable in a Bear Market? 

The price of bitcoin fell more than 70% in 2018, putting huge pressure on bitcoin miners. Mining profits fell 50% in one month alone (November) with the equivalent of 1.3 million miners going offline.

With cryptocurrency mining currently offering slim or zero economic return, what happens next?

Crypto mining profitability chart
Source: CoinTelegraph

It is definitely more difficult to justify starting a mining operation for most people. However, with fewer miners, there are greater chances to earn mining rewards.

There are a number of tools available that allow you to estimate potential profits or losses (here and here). These can be customized according to factors like crypto prices, electric costs, hardware specs.

Even under poor crypto market conditions, miners could decide to “hodl” any funds earned in hopes of a market turnaround. Clearly, 2019 price trends will go a long way in helping people determine whether or not to mine at all.

Layoffs at Bitmain

Bitmain is the largest cryptocurrency mining company on the planet. It supplies mining hardware and operates various mining pools.

If you’re looking into cryptocurrency mining, you need to know what’s going on at Bitmain.

In December 2018, Bitmain reportedly fired more than 50% of its staff, including its entire Bitcoin Cash (BCH) development team. The combination of huge losses and the major bet on BCH presents big challenges for the company moving forward. US IT firm UnitedCorp sued Bitmain, Kraken, Bitcoin.com, and Roger Ver for allegedly manipulating the BCH network. 

According to numerous reports, Bitmain was unable to liquidate its massive BCH reserves via cryptocurrency exchanges. Moreover, BCH was one of the worst performing cryptocurrencies in 2018. This only exacerbated the struggles of Bitmain. 

The company originally planned to open up a Texas-based data center that would cost $500 million and generate 400 jobs but has decided to put these plans on the backburner. Bitmain has also halted plans for a stock market launch, at least for now. Co-founders Wu Jihan and Zhan Ketuan plan to step down from the CEO position and remain on the board of directors. The likely successor is Wang Haichao, who is currently the product engineering director of Bitmain.

The Rise of Cryptojacking

Cryptojacking is another growing issue in the mining world.

At one point in 2018, cryptojacking replaced ransomware as the most popular form of cyber attack. Essentially, cryptojacking happens whenever person A uses person B’s computing power to mine cryptocurrency without person B knowing about it. In the early days of cryptojacking, it was more difficult to get hacked. This is because doing so required the installation of malicious software on a device.

Now, however, it’s possible to become a victim of cryptojacking just by visiting a website. With options like Coinhive, cryptojacking can be made possible by inserting a snippet of JavaScript code. The rise of cryptojacking presents new challenges for individuals and businesses both involved in the cryptocurrency space and not. Most online threat detection solutions don’t cover cryptojacking protection.

For cybersecurity experts, this has become a new issue to solve moving forward. Some major examples in 2018 included the arrests of 20 individuals in China who allegedly affected over one million computers with cryptojacking software. Additionally, In Japan, 16 individuals were arrested for a Monero (XMR) cryptojacking case.

Lawsuit Against Nvidia

The crypto bear market has weighed heavily on companies that supply chips for cryptocurrency miners. Nvidia, which produces microchips for gaming, AI systems, and crypto mining, had a rocky year in 2018.

In December 2018, Schall Law Firm announced the filing of a lawsuit against Nvidia, for “false and misleading statements to the market”. More specifically, Nvidia allegedly asserted that a decline in demand for GPUs used for cryptocurrency mining would not have a negative impact on the company’s operations or performance due to high demand for GPUs from gamers. 

While the stock market, in general, experienced declines in Q4 2018, Nvidia was hit harder than most. In addition, the timing lines up with its business performance. The day after Nvidia’s Q3 earnings report was released, Nvidia’s stock fell around 19 percent. One commenter said, “Stock went down for external reasons and no stock exchange listed firm can be sued for ‘force majeure’.” Another has said, “Assuming Nvidia made this statement, it could plausibly be grounds for a lawsuit, as it’s clearly in violation of securities rules.” 

No matter whose side you are on in this argument, it’s important to recognize how it could impact the cryptocurrency industry moving forward. What will be the result of this lawsuit? Will Nvidia focus on crypto-specific products moving forward?

Crypto Mining and Gaming: Asus and Quantumcloud 

One emerging trend in the mining community is harnessing the idle power of gaming rigs.

In November 2018, Asus announced a partnership with Quantumcloud. The solution is simple. Currently, there is a major surplus of gamers who use graphics cards only when gaming. For long periods of time, the capabilities of graphics cards are not being utilized. With this partnership, ASUS will allow gamers to be able to make use of idle graphics cards to mine cryptocurrency. There will also be options to cash out earnings through PayPal or WeChat. It’s still unknown which coins will be available as options for cloud mining with Quantumcloud software. We also don’t know if, or how much of the cut from earnings, will go to Asus or Quantumcloud.

Nonetheless, it is cool to see that major tech companies are still working on partnerships that involve the expansion of cryptocurrency mining even in the bear market. Additionally, this could create greater decentralization and egalitarianism to mining operations, and crypto supplies in general, by opening a new potential user base of miners.

The Ongoing ASIC Resistance Battle

ASICs (application specific integrated circuits) are designed specifically for mining cryptocurrencies. The rise of powerful ASICs has made it almost impossible to mine cryptocurrency on a PC or laptop; some crypto projects are fighting back and blocking ASIC mining. 

bitcoin miner

Instead of allowing miners to use ASICS, several projects are developing algorithms to block this possibility. Monero was probably the most well-known case of this in 2018.

Throughout the year, ASIC rigs designed for Ethereum mining started to emerge. In September 2018, it appeared that Ethereum was willing to let this go on without the implementation of a new algorithm in its upcoming release of Ethereum v3.5 (known as Constantinople). This is likely due to the fact that Ethereum is planning to switch from Proof of Work to Proof of Stake, which would eventually make all mining operations, (ASIC, GPU, CPU) obsolete. However, in recent weeks ahead of the January 2019 update, Ethereum developers have begun to implement an ASIC resistant algorithm anyway for Constantinople. 

So where does that leave the cryptocurrency mining community in 2019? There are still a few blockchains which allow ASIC mining to take place. Bitcoin (BTC) is a good example. Additionally, Bitcoin Cash (BCH) mining pools have adopted a protocol known as Asicboost which “can speed up the mining process by a factor of approximately 20 percent by reducing the gate count on mining chips.” 

Essentially, the protocol can be applied to all types of ASIC chips. For now, it appears that the ASIC debate will continue to be relevant throughout 2019 as technologies on both sides become more advanced.

Proof of Stake (PoS) Winning over Proof of Work (PoW)?

If the battle between pro and anti-ASIC sides wasn’t enough to change the landscape of crypto, the decision between PoS and PoW as the go-to consensus algorithm definitely is. As mentioned in our recent Ethereum roadmap article, the world’s second largest cryptocurrency by market cap is moving from PoW to PoS. Along the way, the reduced mining reward from 3 ETH to 2 ETH puts pressure on the miners until the switch to Casper (Ethereum’s PoS). 

The good news is that these changes are planned out pretty far in advance. However, it also presents new big picture questions for crypto projects, miners, and entire communities. If Ethereum’s change is successful in reaching greater scalability and making the network more decentralized, it will be interesting to see which projects follow suit. Ethereum isn’t necessarily a definitive trial test for the capabilities of PoS. 

Other projects (i.e. PIVX, NIX, etc.) have already made this switch in the past. However, none have been completed at this scale or with this degree of attention from the industry. It could ultimately lead to less reliance on PoW and mining. However, at the beginning of 2019, that is still yet to be determined. 

Top Mining Tech Trends to Watch in 2019

FPGA (Field-programmable gate array): In 2018, we saw the clear advantages of new types of mining equipment. As detailed above, ASICs demonstrated the capabilities of faster hash rates. However, they lack versatility and can’t be programmed to keep up with algorithm changes. Meanwhile, GPUs are much slower but a bit more versatile for mining various coins.

Now, FPGAs could emerge and offer a solution that is the best of both worlds. For instance, some FPGAs are 10x the speed of GPUs and can quickly change to different algorithms. Additionally, they are designed to use less electricity to run. 

As of the beginning of 2019, FPGAs have yet to gain user adoption despite being around since the early 2010s. This is mostly due to factors like high price points ($4,000 per card, or $25,000 – $30,000 per rig) and highly technical configuration requirements. Still, it would be interesting to see if new tech will emerge to make FPGAs more accessible to the average miner.

Mobile Mining: There are a few different mobile mining solutions available in 2019. DroidMiner BTC/LTC/DOGE Miner and Electroneum are two such examples for Android devices. Free Bitcoin is an option available for both Android and iOS. However, there is a clear lack of options for iOS and viable apps overall. 

The power of mobile devices simply hasn’t been enough to compete with dedicated mining rigs. Moreover, this type of mining would likely cause you to need to constantly replace mobile phone batteries. As a result, any profits are likely to turn to losses in a short amount of time. Still, it will be interesting to see if or how mobile mining can become more innovative moving forward. 

Conclusion

In summary, cryptocurrency mining operations continue to change along with the overall market. The struggle of everyone from small miners to large-scale enterprises in the past year is evident. However, the fact remains that crypto mining plays an important role in the validation of transactions for the vast majority of blockchains. Along with numerous challenges for miners, it’s also possible to find opportunities that could lead to more innovation.

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HSBC blockchain

HSBC used blockchain technology to settle more than three million forex trades in the last year. 

The trades, worth $250 billion, are a “small proportion” of HSBC’s total trading figures. However, it’s a huge step forward and proof that blockchain can offer real-world solutions.

HSBC said the distributed ledger technology had helped the company lower costs while reducing errors and delays. It has also allowed the bank to automate some processes that previously relied on manual input.

While many banks have experimented with blockchain technology, few have implemented it into existing processes. HSBC is now looking at how blockchain can help global clients improve forex trades.

Source: Reuters

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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