Binance.com is one of the largest cryptocurrency exchanges by volume. Binance launched its blockchain Binance Coin (BNB) back in July of 2017. It seems to be going well for the platform as BNB is already the 7th largest cryptocurrency by market capitalization.
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With a Market Cap of nearly $4.5 billion, BNB is the 7th largest
As you may have already guessed, the name “Binance” is a combination of Binary and Finance.
HODL (Hold on for Dear Life)
Sometime back in 2013 the term “hodl” was introduced. One story I heard about the etymology of the word was it was a misspelling of “hold” and then became a sort of acronym meaning “Hold On for Dear Life”. Which is in reference to the violent downswings (and upswings) cryptocurrencies can experience and that one should hold (or “hodl”) through these periods.
HODLing BNB
BNB coin started out as a way to pay for trading fees. Binance would reduce the trading fees, if they were paid in BNB. I actually owned some BNB fairly early on (as in a couple years ago) simply for this reason.
I wish I’d hodl’d my BNB! Although I had no way of knowing it would go up 27,334% percent.
You better hodl fast (Master & Commander anyone?)
I’m of the old-fashioned belief that a cryptocurrency needs to have some sort of non-speculative use. The value of bitcoin can’t just be (long term) a speculative vehicle. Things eventually return to their non-monetary use value.
That is one of the reasons I like BNB: it has quite a variety of non-speculative uses such as: reducing trading fees on Binance (currently up to 25%) and for posting as collateral for loans. There are many other uses listed on binance.com.
Source: https://www.binance.com/en/use-bnb
I heard (although I can’t cite this) that BNB is going to be used for a distributed exchange at some point.
Imagine Reducing the Currency Supply!
Another reason to like BNB is that they are planning on burning up to 50% of the supply (the exact opposite of price inflation!). So that eventually there will only be 100 million BNB in circulation.
So if you want to speculate on cryptocurrencies, you might want to buy some BNB. But if you do, you better hodl fast.
EOS is a cryptocurrency token, however, what each token represents is a claim on computing resources. Those computing resources can be used to create distributed applications called dAPPS (distributed applications). EOS is a huge, global, distributed computer that can be used by developers to create distributed, global applications.
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That is one of the reasons I like EOS, it isn’t just a vehicle for price speculation–it has non-monetary value.
However, true investments pay a return. One way to get a return on EOS is through REX (Resource Exchange). REX allows you to loan out the computing power of your EOS in exchange for a fee.
How to Buy EOS
You can open a Coinbase account and buy one of the cryptocurrencies listed there. Coinbase does not trade EOS yet. You’ll use your coinbase account to buy a crypto that is good for transactions, such as Litecoin (LTC). You can then transfer LTC to an exchange like Binance where you can buy EOS.
How to Loan EOS Using REX
Once you have some EOS on Binance or the exchange of your choice, you’ll need a wallet. I use scatter. Once you have EOS trasnferred to scatter you can go to https://bloks.io/rex, authenticate with Scatter and loan with REX.
Low Returns with the Opportunity for Growth
Right now, the return is very modest, less than 1% per year as of the time this article was written. But it is 1%. If and when more developers use the EOS platform, and demand for computational resources increase, the amount of interest paid should increase as well.
But if you think EOS is a great platform with long term potential that makes sense to speculate on, loaning the EOS is a great way to earn a small return while waiting for price appreciation.
EOS is down nearly 75% from it’s high in 2018
EOS Price Analysis
At $5.50 EOS is still well below the the $21.46 high attained on 29 April 2018. In my view EOS is undervalued. I think the next several years could see great price appreciation as adoption of the platform accelerates.
I also believe that Coinbase will eventually list EOS. EOS on Coinbase would create even more demand as more people will have easy access to purchase the token.
Investments Pay a Return
Geraldine Weiss said, “If an investment doesn’t pay a return, it’s a speculation.” You can make money by purchasing something in 2 ways, 1) You sell it at a higher price 2) It pays some type of interest or dividend while you hold it
Not everything I buy pays a return. Gold and silver do not pay any type of yield, some of the stocks I buy don’t have a dividend.
However, all else equal, I prefer to be able to win in multiple ways. EOS with REX allows for both price appreciate of the asset as well as interest payments.
Lending EOS through REX is a way to have both yield and an opportunity for price appreciation via an alternative investment.
The EOS mainnet launched on June 10 after robust testing and security audits. Today the 15% voting threshold was passed and the network is now live! Unlike cryptocurrencies like Bitcoin which use energy intensive “mining” (also called proof of work) to add blocks to a blockchain, EOS blocks are generated by 21 block producers.
While perhaps not as secure as Bitcoin’s proof of work, the delegated proof of stake technology behind EOS overcomes the scalability and performance issues inherent in Bitcoin.
Don’t fret if you don’t understand all the crypto-jargon.
The important fact is Bitcoin has significant performance issues if it is going to be used for anything besides buying and holding.
Bitcoin is Slow
Bitcoin is lucky to process 10 transactions per second. Compare that with Paypal which averages over 150 transactions processed per second or VISA, which processes over 1,500 transactions per second.
Some people claim that Bitcoin is a form of digital gold that doesn’t need to be used for transactional payments. If that is the case then I don’t think it has that many advantages over gold and still has several disadvantages such as requiring electricity and the fact that every Bitcoin transaction is public information.
Others put faith in the lightning network that will enable Bitcoin transactions to work faster. Still others believe that any shortcoming in Bitcoin can be solved through forks like Bitcoin Cash which seek to accomplish more and faster transactions.
Subjective Theory of Value
People could continue to value Bitcoin and if they do it will remain a “store of value“. However, I believe that over the long term, any money or currency needs to have non-monetary use.
People aren’t going to value Bitcoin just because they do. They might for a while, years, but not forever.
What is the non-monetary use of Bitcoin? A political statement? Owning a piece of history? Most people hold Bitcoin simply because they believe it will be worth more in the future. It’s not anonymous, it requires significant energy, it isn’t fast and it has very few features.
Contrast that with gold, while subjectively valued just like Bitcoin, this metal has significant non-monetary use, so that even though gold is not currently money (as defined by Mises) people still value the shiny yellow metal for it’s use in jewelry, electronics and dentistry.
Would gold cost less if it weren’t also held as a “store of value”? Sure, it would, however, it has been subjectively valued for thousands of years and the non-monetary use (sometimes called “intrinsic value” something I don’t think actually exists) will almost certainly continue to be valued.
Is gold heavy and difficult to transport or transact with? Yes. Is Bitcoin slow and difficult to transact with? Yes. Are there dozens of cryptocurrencies that would be a better currency that Bitcoin. Yes.
I will cut myself off there to prevent further devolving into a gold versus bitcoin argument which I’ve covered elsewhere, I want to state that Bitcoin has technological limitations that I believe even the most ardent Bitcoin hodler (sic) would at least acknowledge need to be addressed.
Non-Monetary Use
I liked Ethereum from the beginning because this blockchain technology was supposed to allow for distributed applications (dapps) that would make Ethereum have value not just as a speculative vehicle or payment method but as a distributed operating system.
With a few mundane exceptions Ethereum has failed to deliver on that score.
The Ethereum network currently maxes out at 20 transactions per second and something as simple as CryptoKitties brought the network to it’s knees. Similar to the lightning network Ethereum has something called Raiden that will help scale Ethereum using side-chain transactions but is yet to be released.
So perhaps the key to proof of work scalability is side-chains. However, EOS provides performance boosts without the need for side-chains. I’m sure a lot could be said for the benefits and drawbacks of different technical solutions.
As a general rule I like the idea of a technology that is built from the ground up to provide a solution, rather than ad hoc additions to older technology.
Is EOS an Ethereum Killer?
EOS.IO Logo
EOS is still unproven, although the creator of the EOS blockchain software, Chief Technology Officer of block.one, Dan Larimer has two very successful blockchain projects to his name: steemit and bitshares.
So the architect who created the EOS.IO software has a track record of success. Of course that is no guarantee that EOS will be successful in turn.
The EOS initial coin offering raised millions in funding, millions more from venture capitalists and has some significant support behind it including organizations like everipedia and Virginia Tech.
A Buying Opportunity?
The 21 Block Producers are now selected since the 15% target has been reached. Voting is continuous so if another block producer candidate receives enough votes to break into the top 21, they will become a block producer. EOS was trading around $15 per token when voting started dropped to around $10 and has rallied since the chain went live.
I think this is a buying opportunity.
Of course cryptocurrencies are highly risky both in terms of security risk as well as price fluctuation risk, I think EOS has the potential to supplant first generation blockchain technologies like Ethereum and if so holding an EOS token, which is owning a share of the network, could be profitable.
There will be a fair amount of volatility to come, particularly in these early days, so there will be other buying opportunities. One of the big advantages to owning EOS prior to June 1 was that some airdrops are based on EOS token holders at the time of the “snapshot” which occurred around this time. There will certainly be additional airdrops in the future and owning EOS will help ensure you’ll get them.
EOS remains a newborn, if that, and there will be growing pains.
Like all human endeavors I’m confident EOS will encounter issues–be it hacks, forks, exchange robberies, fraud, theft and who knows what in the future. However, I think the EOS community will prove to be robust, largely ethical and as secure a speculation that one can find in the crypto-space.
Even so I think if you want to dabble in cryptocurrencies EOS is as good a bet as any. I like the team behind EOS, the philosophy of Dan Larimer and that EOS isn’t just a speculative vehicle but has use cases that are being implemented.
If you’ve purchased EOS tokens and haven’t yet registered the wallet in which they reside you’re taking a big risk! Up until around June 1 EOS will have only existed as an ERC-20 token on the Ethereum blockchain and with the actual EOS network scheduled to go live on the first of June it’s important to register your EOS tokens.
For a more detailed explanation check out Episode #4 of the Exploring EOS podcast which covers three ways to register your EOS tokens, more specifically moving your ERC-20 tokens to an Ethereum wallet that is registered to receive the actual EOS tokens set to be released in the earliest days of June. I’ve gone with the second option listed in Episode #4.
There will likely be a lot of volatility leading up to and during the launch of EOS. If you are interested in speculating on EOS there could be some good buying opportunities. I believe if EOS does go live successfully that the price will jump up quite a bit.
I expect a number of people have sold their EOS rather than risk with a botched launch or deal with registering their tokens and are waiting to buy back once EOS has successfully launched.
I also think that if/when EOS is available for US and Chinese cryptocurrency speculators that the price will further increase. Currently EOS is not available in these jurisdictions.
Block.One is the company who has created the EOSIO software for which EOS is the token.. Their mission stated as: “Block.one designs free market systems to secure life, liberty, and property by publishing open source software that is free for everyone to use.” EOS cryptocurrency that allows for the creation of decentralized applications. EOS is sometimes said to stand for “Ethereum On Steroids.” EOS is also the greek goddess of the dawn.
Ethereum was intended to be used to create smart contracts and distributed applications. However, to my knowledge Ethereum has never gotten beyond ERC-20 tokens and the DAO was a colossal failure which resulted in Ethereum and Ethereum Classic. Time will tell if EOS is able to actually deliver a “killer app” that thus far has eluded it’s spiritual older sibling.
I want to let you know about an exciting new EOS Podcast. As longtime readers know EOS is one of the Group of Six cryptocurrencies I choose to speculate on.
EOS goes live in early June. EOS is already the fifth largest cryptocurrency by market capitalization and shows a lot of promise. If you’ve never heard of EOS it is a cryptocurrency designed for distributed applications. Platforms like everipedia.org and ono.chat are being built on the EOS platform.
I’ve been listening to an EOS Podcast called Exploring EOS hosted by a man named JP and it is a superb way to learn more about the technology and the projects being built on this platform.
JP recently interviewed Mahbod Moghadam, co-founder of Everipedia. Everipedia is “The online encyclopedia reinvented for the modern age.” Everipedia will run on the EOS platform and have it’s own token IQ, which is intended to encourage the contribution of content.
I spoke with JP to get a sneak peak of who he’ll be interviewing in the upcoming episodes:
Leah Stephens, North American Market Leader of Ono Social, “The world’s largest free, equal value, decentralized social network.” While this project seems to be centered on the Chinese market the idea of a social network where YOU, not Mark Zuckerberg owns your data is exciting and needed.
Myles Snider of Multicoin Capital, an organization whose mission is “to accelerate the transition from the centralized institutions of the industrial age to the decentralized institutions of the internet age”. Chris Coney of The Cryptoverse podcast, “Your regular dose of news and commentary on Bitcoin, crypto-currencies and blockchains”.
Kevin Rose of EOS New York, “a leading block producer candidate for the launch of EOS.IO network in June”. EOS will have 21 elected block producers who will generate and validate blocks.
I’ve greatly enjoyed the first three episodes of this podcast and can’t wait for the next episode to be released.
Don’t use a cloud mining calculator without keeping in mind they are static calculations. You need to remember that mining difficulty almost always goes up as time passes.
But don’t worry. If you’re thinking about cloud mining profitability I have an easy rule of thumb you can use to quickly rule out unprofitable cloud mining contracts.
You simply calculate the profitability using a static calculator and determine if you’d make back the initial amount.
I’ll use hashflare.io as an example, as of 19 March 2018 they are selling 100 KH/s for USD$2.20.
Using a static mining profitability calculator like the one over at etherscan we can see that if network hashing power stays the same, we’ll make a whopping $0.1141 per month or $1.3692 per year. In other words you’ve spent $2.20 to get $1.3692 worth of Ether.
Not smart.
But say the number came back at $3. That would be $0.80 profit per contract. Easy money right?
No.
Don’t Stop with A Static Cloud Mining Calculator
Unfortunately it gets worse, because as I previously mentioned that is using a static network hashrate calculation. As more and more people mine Ethereum the network hashrate increases meaning you’ll mine less.
For example if the network hashrate were to go up to 300000 GH/s you’d only make $0.10 per month.
Network Hashing Power Has Historically Only Gone Up
It’s vital to take into account the growing network hashrate when calculating cloud mining profitability
Is it possible the network hashrate stays the same or goes down?
Yes, but it has never gone down over an extended period of time.
So unless the hashing power of the network stops going up and drops off, there is no way that ethereum cloud mining at hashflare.io will be profitable.
You’re Probably Better Off Just Buying the Cryptocurrency
It’s possible the price of Ethereum goes up and you end up making some money, but you would have made MORE money if you bought ETH directly.
If the mining contract will yield at least the amount you pay, I go to my second rule of thumb. A 50% discount.
I would have to see a cloud mining contract at a 50% discount or more to even consider purchasing buying it. So if hashflare.io was offered 100 KH/s for say $0.65 I would consider it.
With cloud mining you are risking that the network hashrate doesn’t go up too fast and you’re risking that the price of the coin doesn’t go down. I want to be compensated for those risks so I look for a 50% discount.
However, as it stands, ethereum cloud mining at places like hashflare.io is a losing investment, and you’re much better off simply buying the cryptocurrency outright.
I’m not aware of a cloud mining service that has a chance of being profitable. If you know of one please let me know!
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