Sunday, November 23, 2014

Hashcoin's Name Revealed: Paycoin Is Here

This past week or two has been crazy, hence the lack of updates, but I did want to take a moment to cover some of the major news coming out of GAW. The biggest announcement of course is the official name of "the coin formerly known as HashCoin": say hello to Paycoin. So what can we make of this name?
It's actually one of the better names I'd say. Combine a new cryptocurrency with features from Coinbase, mix in a bit of PayPal, then sprinkle in a bunch of other stuff and you get... Paycoin. It's been so long since PayPal launched that I'm not sure most of us remember the early days any more, but it was not an immediate overnight success story. It was something that sounded cool at first but a lot of people were skeptical -- send money via the Internet? What if someone scams you? How do you get the money into your bank account? Why not just pay with a credit card? -- these were all relevant questions, and they were answered over time. And then eBay bought PayPal and the rest is history.

Well, let's just put it bluntly: Josh and the GAW team have far greater ambitions than PayPal. They've looked at the Bitcoin pie and have decided that for one, it doesn't always look so great and needs some better presentation, and while they're reworking things it might not be so bad to improve the quality of the ingredients and hire a professional pastry chef. What we don't know is if they hired the right chef or not, but we should have a better idea in the next couple of weeks. Here's the outline of the Paycoin launch, and if you haven't seen this it can be quite telling:
The first round of the ICO has apparently completed, and tomorrow is the official HashPoint ICO. That will last until December 8, and Zen Hashlets and Prime Hashlets will now be able to mine additional HashPoints for two weeks -- originally the ability to mine HashPoints was going to end at the start of Round 2 of the ICO, but that was extended "due to popular demand". Round 3 is next, which is an invite-only ICO at $10, and then all of the money so far gets split three ways with one third going into the Trust Fund.

Here's where things start to get far more nebulous. You'll not there's still no dates on anything beyond the Round 3 ICO. When does Hashbase launch, and when is the public launch of Paycoin? We don't know. But a bit further out we see the "At-Cost Hash Power" which sounds promising. And then finally, we get to the real meat that will determine whether Paycoin succeeds or not: retailer adoption and credit card processing. And then we end with a lovely "....... Profit!"

GAW has actually fleshed out a lot of things at this stage, and the full Whitepaper is up (though still undergoing minor edits it seems). Perhaps more importantly, they now have officially created a referral system for people to use to get others into cryptocurrency. It's about freaking time they ditched the "email invite only" aspect and made a way for others to directly link to the site!

With all of the announcements and the HashPoints ICO nearly ready to start, I think it's also interesting that Hash Market pricing on the Hashlet Primes and Zen Hashlets has gone up. Zen Hashlets are selling at $12.60 now, though where they go after Round 2 is over isn't exactly clear. Hashlet Prime meanwhile is starting at $40.21, but only in relatively limited quantities -- if you want to purchase $10,000 of Hashlet Prime, you can do so for a price of under $42 per MH, but the next $10,000 would get the price closer to $48, and I'd say there's less than $50,000 total of Primes available for prices people are likely to pay. (Note: I haven't actually added up every Prime for sale, so I might be off a bit, but there are definitely not tens of thousands listed on the market.)

Other Hashlets are taking a beating, though. Genesis is more or less holding steady at around $0.50 per GH, but Multi Hashlet is down to $4, Clever Hashlet is at $6.18, and Waffle Hashlet is at $6.30. None of these are available in large quantities, but they're also down to the point where you're making the "guaranteed" $0.01 per MH per day" in most cases (all have had negative earnings on several days in the recent past that GAW had to correct/subsidize, apparently). Josh has stated there will be a Hashlet upgrade path offered at some point, though, so it's possible you could buy one of these other Hashlets and at some point upgrade to a more useful Zen or Prime for less than the current price of a Prime... maybe. My advice: just stay away from anything that's not a Prime at this point, until we have a real idea of where Zen Pool is going.

The good news is that one way or another, things are moving forward at this point. People will own Paycoins in large numbers starting tomorrow, and by the beginning of next year we might see a decent level of adoption. Or we might see the Coin Adoption Fund fail and the price plummet once Paycoin hits an exchange, but if nothing else it has far more money backing it than any other cryptocurrency. Let's hope it succeeds, as the combination of instant payments, staking, and an enhanced blockchain all sound promising.

Wednesday, November 12, 2014

BTC: Up, Up and Away!

It's interesting to see patterns start to emerge with Bitcoin, and right now after more or less stagnating for the past three or four months, Bitcoin looks to be rebounding. How high will it go this time? I have no idea, but it sure would be awesome if it could break the previous top from last December! I have been hoping something like this would happen, and right on schedule (two weeks before Thanksgiving) we're starting to pick up steam. So here's the question: do you buy BTC now and speculate, or just sit back and watch?

Thankfully, I'm in the position of having some BTC already, so I'm just hanging onto it and seeing where things go -- I'm in this for the long haul at this point. However, I'm also in no hurry to dump thousands of dollars into BTC in hopes that it goes even higher after the investment. Sadly, I just don't have that sort of disposable income hanging around. For those who do, however, I think if you can just dump a few thousand (or a few tens of thousands) into Bitcoin and then turn a blind eye for a couple years, this is about as good a time as any to take that chance -- actually, it was a better time last month when we were at $300 or so, but whatever.

The fact is, more and more businesses are starting to adopt Bitcoin, and I think some of them are going to start saying, "Hey, instead of cashing out 100% to guarantee our profits, we ought to hang on to at least a few percent and see where things go." Can you imagine what would happen if places like Newegg decided to hold just 3% of all Bitcoins they receive? I don't know what sort of BTC volume they're doing, but it's definitely more than zero, and over months they would likely end up sitting on thousands of Bitcoins. If more companies take that same approach -- a calculated risk, so to speak -- supply and demand dictates that there will be fewer Bitcoins in circulation, and thus price will trend up.

It's important at times like this to remember: there will only ever be 21 million Bitcoins. The same coins can be used again and again with no deterioration in quality, yes, but more importantly if big companies start using Bitcoins -- and this is already starting to happen -- then a place that does millions of dollars in business per day will certainly cause some ripples by supporting BTC. In another year, we could easily be looking at five digits for Bitcoin.

I've mined and sold a lot of BTC over the past few years, but I'm glad that I've finally reached the point where I don't need to sell BTC to cover expenses. That means I can join the ranks of the true believers and simply sock away everything I earn going forward. I won't be surprised if 20-30 years from now when I'm retired, most of my retirement savings consist of BTC that I can live off for the remainder of my days. Now if I can just get universities to accept BTC for tuition, I might have my kids' education paid for as well in the coming months.

Monday, November 10, 2014

Hashlet ROI Projections with HashCoin ICO

I had an email from a reader that I just responded to, and after running the calculations I figured this was worth sharing. The first question was easy enough: does the amount invested right now affect the time to ROI? The simple answer is that, generally speaking, the amount invested initially doesn't really change the ROI. Whether you invest $250 or $10,000, if you do the same thing with the money you will hit ROI in the same amount of time. The much bigger factor is the time of investment, difficulty/payout rate from Hashlets, and the current price of Bitcoin (and future price of HashCoin).

These are of course very difficult to predict with any sort of accuracy, so what you end up doing is making a guess. The reader said he had $250 to invest (or "risk" if you prefer), so here are some numbers I put together using the information from the past few posts as well as projections made by GAW. Note that the Hash Market prices can fluctuate quite a bit, so I just took the current minimum prices for Hashlet Prime and Zen Hashlet for these estimates.

Let's say you go and buy six Hashlet Primes right now with $255 on the Hash Market ($42.50 per Prime, though it's been as low as $35 or so in the past week). The hope is obviously not to hit ROI strictly through mining but to get there via Hashbase and HashCoin. Starting with an optimistic forecast, let's say HashCoin really does sell for $4 to early purchasers who mine HashPoints, and then it goes up to $20. In ~30 days when HashCoin is supposed to launch you would have roughly 3000 HashPoints (worth nominally $30 -- note that you might be able to Double Dip on the HashPoints Pool to earn as many as 4500 HashPoints), so you can use those to buy 7.5 HashCoins. Those HashCoins then end up being worth $150 when the fiat ICO takes place. You would have $150 in HashCoins plus your six Primes, and the Primes could very well go up in value also -- maybe to $50 or even $75 each. So best-case, in a month -- more likely two, as I expect HashCoin/Hashbase launch won't happen in exactly 30 days -- you could end up with $450 to $600 off of an initial investment of $255.

As a second alternative, since Zen Hashlets can also do HashPoint and are far cheaper (around $13.50 each on the Hash Market, though I've seen them priced as low as $11 or so in the past week), you could use $256.50 and buy 19 Zen Hashlets. Using the same numbers as before, in 30 days you have ~9700 HashPoints, which you can use to purchase 24.25 HashCoins at $4, and those go up to $20 and so you have $485 worth of HashCoin at that point. You also still have the 19 Zen Hashlets, but I wouldn't expect those to hold value as much so let's say they're worth $12 each; that's another $228, so all told you might get $715 out of the initial $256 investment.

Those are both "best-case" options, however; a less optimistic scenario is that HashCoin's launch is pretty rough and the price doesn't actually stay anywhere near $20 for fiat but drops to $2-$4. With the less successful launch, Primes and other Hashlets are not as viable so they don't hold their value as well -- let's say Primes drop to $25 each and Zens drop to $5 each.

Using these "pessimistic" numbers ("worst-case" as usual is that HashCoin/GAW ends up as a massive failure and you lose everything, but this is highly unlikely), scenario one gives you $15-$30 worth of HashCoin and $150 in Primes, so in one month you would have a potential value of $165-$180 from your $255 investment. Going forward from there, if you continue to make $10-$30 per month, you'd hit ROI in ten months total ($2 HashCoins and $10 per month) or potentially as soon as three and a half months ($4 HashCoins and $30 per month).

Scenario two gives you $48-$96 in HashCoins with $95 in Zen Hashlets, so you're at $143 to $191 in one month, and then $10-$30 per month from continued mining with the 19 Zen Hashlets. ROI would occur in twelve months ($2 HashCoins), but you might hit ROI in as little as two months ($4 HashCoins and $30 per month).

Given the above, "risking" $250 or so isn't a bad idea -- if you can't afford to potentially lose $250 then you've got much bigger problems to worry about, right? I wouldn't necessarily go crazy and invest your life's savings into Hashlets right now, but back in August I had about $7000 worth of cryptocurrency holdings (mostly in Darkcoin at the time) that I ended up exchanging for Bitcoin and buying ASICs and then Zen Hashlets. If I had lost everything, it would have been a bit painful, but I could continue living without too much trouble -- I just wouldn't have any Bitcoin savings left. Instead, I've nearly doubled the value of my investment, and I continue to earn about $400 per month -- and that's if I do nothing but mine for Bitcoin.

By the time HashCoin actually launches, if all goes well I should be able to buy close to 800 HashCoins (give or take). That means in a month I should have at least another $1600 earned (at a value of $2 per HashCoin) and potentially as much as $16000 if HashCoin really hits the "projected" $20 per coin. Not bad for a $7000 investment. And I'm still kicking myself for not buying Hashlets when they first launched at $14.95, back before they became Hashlet Primes. I could have had about 450 Primes, which even now would be worth close to $20,000. Hindsight is always 20/20, though.... :-)

Short summary: if you're interested in getting in on Hashlets, it's not "too late". Estimated returns are lower now than what you would have made if you had the foresight to invest back in August, but you could still easily double (or triple, or even quadruple) your value in the next year. You could also lose everything, yes, but that's very unlikely -- maybe losing half would be a better estimate of the real floor. If you haven't joined already and are interested, drop me a note and I'll send you an invite, and you can get started. I'd love to see some of you take the $250 challenge outlined above and see if you can hit ROI in as little as a month or two, or if it ends up taking six months or more.

Last note: HashCoin is officially supposed to launch in just 14 days. If it really launches at that time and the HashPoints Pool is turned off for Zen Hashlets, that will obviously change the ROI projections outlined above, making Primes a safer bet. HashCoin will start with the ICO (Initial Coin Offering) for HashPoints, then open up to fiat investment. I don't know how long that will actually last, and it's still not clear when precisely HashCoin mining will be opened up to the public. I guess we'll know in a couple weeks! I'm guessing 30 days before it really gets going, which is why I used that figure for the above calculations.

Thursday, November 6, 2014

Further Thoughts on HashCoin and the ICO

Not everyone over on Hashtalk is drinking the cool-aid, though plenty are. Here is a good post for instance that echoes many of my thoughts.

As I noted in the last update, my biggest concern with HashCoin/Hashbase is that there's apparently 8% of 1.2 billion HashCoins being "premined" for the ICO. Only a portion of that is going to be sold to miners for HashPoints at 400 HashPoints per coin (apparently), and the rest is "being valued at $20 per coin". Only according to Josh (GAW's CEO), that's the supposed minimum and it will "probably be a lot higher". I might have some nice beachfront property I'm willing to sell you for a song as well... any takers?

Let me put it this way: 8% of 1.2 billion times $20 is a hell of a lot of money, and $30 million as a reserve to prop up the price won't do jack squat. In fact, $30 million would actually guarantee a price of just $0.3125 per HashCoin, while the value of 8% ICO at $20 is $1,92 billion. And we're also hearing talk of "way more than $20 -- probably $75 per coin in the first year." So we're not saying $1.92 billion, but $7.2 billion in the first year as the market capitalization of the currency.

Realistically, even $4 per HashCoin is probably overly ambitious for a new cryptocurrency with 1.2 billion coins. Maybe in 10 or 15 years it won't be, but at that point the coin will be well established and useful -- or it will be dead and buried.

Counting coins mined and assuming the payout rate will be somewhat similar to other coins (e.g. starting out with higher block rewards and gradually trailing off), we have a target of mining all of the 1.2 billion HC in 15 years. Thus in one year I think it's safe to expect we'll have at least 15-20% of all HashCoin planned already mined, possibly as much as 25%. (That's including the 8% ICO premine.)

At $4 per HC, that would be $720 million to $1.2 billion. Again, how far will a $30 million reserve go in propping up a base price of $4 per HC? And at $20 we would have a market capitalization five times that high (basically matching or exceeding the current valuation of Bitcoin). If there are real companies (e.g. Walmart, Target, Amazon, etc.) on board, the reserve should probably be closer to $250 million, or even $500 million, at the very least -- and $1 billion would make me feel a lot better about things. But who would put that much money into an untested cryptocurrency?

[Crickets]

It sounds a bit too reminiscent to things like GuarantCoin, UroCoin, GPUCoin, and any number of alternative cryptocurrencies that aren't doing so well. Okay, URO isn't dead yet, but their tactics still don't lend much credibility to what they're doing. Anyway, I digress....

I do think that going "all in" on HashPoints is the best bet right now for Hashlets, especially Zen Hashlets, because what else are you going to do? Mining on Zen Pool is generating about $0.1015 per MH, so by switching a Zen Hashlet over to the HashPoints Pool you're only giving up a potential profit of $0.0215 per MH per day. I've got close to 500MH in Hashlets (mostly in Zen Hashlets, plus some Primes I got by converting my Lightning X6 ASICs), and the potential to earn roughly $10 per day compared to $75+ in HashPoints means the only viable options are to sell or mine HashPoints.

Put it another way: if I buy HashCoins at 400 HashPoint per coin, then to match the value of what I would have otherwise made by mining on Zen Pool I only need HashCoin to stay at about $2 or more. That's certainly not an impossibility, especially when you consider all the other people that are likely to buy into HashCoin at $4 per coin (in HashPoints), so rather than selling my Hashlets and "getting out while the getting's good", I'm taking a calculated risk.

Here's another interesting thought: there are probably at least 500,000 Hashlet Primes and another 500,000 Zen Hashlets in existence right now. (There could be more, or perhaps less, but that's at least enough to get us started.) One million Hashlets on the HashPoints Pool means 17 million HashPoints are generated daily (give or take). Let's just assume this goes on for a month; at that point there will be at least 500 million HashPoints available, and if all of that goes into HashCoin we're looking at 1.3 million HashCoins being purchased by miners in the initial ICO. That sounds like a lot at first... until we again recall the 8% premine/ICO, which means 96 million HashCoins will exist.

So if the ICO for HashPoints is only 1% of the total premine, and the actual fiat ICO is at $20 per HashCoin, I'm guessing only a small fraction of the premine will end up being sold. That could mean GAW will hang onto the remaining chunk of the ICO and hopefully use it to prevent inflation (and not sell it on the open market for less than, say, 10% above the current price). But until some big company like Walmart, Target, or Amazon actually comes forward and says, "Yes, we are working with Hashbase and will accept their cryptocurrency -- which definitely doesn't sound like it's a done deal, though there have "been talks" -- this is all pie in the sky talk.

Let's be blunt: when Josh says things like "People that sell their Primes on the Hash Market are going to be very sorry once Hashbase comes online", he sounds like a used car salesman. He might be right, and we definitely don't know everything about what's happening behind the scenes, but then some used car salesmen actually do tell the truth -- and they still sound like liars while they're doing it. Real businesses that are worth hundreds of millions of dollars (or even billions of dollars) don't have to make such grandiose claims in advance. Let's just hope GAW doesn't pull a Zalman/Moneual on us....

Tuesday, November 4, 2014

HashCoin Is Here; Let's Check Out the Whitepaper

After a bunch more talk and hype about how great HashCoin (currently just a code name) is going to be, and how HashBase will revolutionize cryptocurrency, last night there was an eagerly awaited announcement... which turned out to be more hype than substance yet again. Ugh. HashCoin now has a countdown set for 20 days from now (give or take). But at least this time we have the HashCoin Whitepaper, so that's something tangible.

Don't get me wrong: I think GAW has done some pretty interesting stuff, but when they do an interview talking about how they're protecting the miners from the hardware resellers and bringing back profitability to mining, I have to ask: are they talking about profitability for new miners, or only people that started mining several months back? Because right now, if you go and buy a Hashlet, you're not going to be hitting profitability any time soon (until/unless GAW changes something with payouts/maintenance).

Anyway, let's talk a bit about that whitepaper. The key tenet is the idea of better controlling the payout of block rewards, increasing transaction time to be nearly instantaneous, and basically getting the coin adopted by businesses. The latter isn't something we can really say much about until it happens, but Josh Garza basically says everything is in the works... so just trust him I guess.

The instant transactions is actually interesting, but without knowing exactly what's happening and how, what I gather is this: there will be privileged nodes that basically approve transactions (Prime Controllers), and there is no transactional malleability -- a supposed flaw with Bitcoin. My concern is that if there are Prime Controllers, how are these kept functioning in the wake of hacks, government intervention, etc.? Saying a system works and is secure is one thing; building such a system is entirely different. Also, calling these "Prime Controllers" seems to link them to Hashlet Prime and Project Prime, which of course would mean all of the Prime Controllers are in the hands of GAW, so not exactly a decentralized system. I guess we'll have to await further clarifications to really know how the HashCoin system works.

As for the rest of the plan, this is a bit more straightforward. HashCoin will be a SHA256 coin (no surprise there as GAW just purchased 5+ Petahash of SHA256 ASICs), there will be 1.2 billion coins generated over 15 years, and there is an 8% "premine" that will get things going with the ICO -- Initial Coin Offering. Here's where things get a little odd.

GAW is saying users can buy HashCoin with their HashPoints at $4 per coin, and that the backing of HashCoin with fiat will guarantee $20 per coin. If we have an 8% premine that goes into the ICO, and it's split into three "silos", we're still looking at 32 million coins for the HashPoints ICO. At $4 per coin, that's $128 million, and there is apparently a separate reserve of an additional $256 million for R&D, guaranteeing a minimum price, etc.

Given GAW is talking about having a HashCoin value of $20 when the ICO opens up to fiat money, we're actually talking about a premine of $1,920,000,000 worth of HashCoin. That's a bit less than half the value of all Bitcoins currently in existence and more than ten times what all current Litecoins are worth. So either I'm doing some really bad math, or GAW is completely off their rocker when they talk about HashCoin being worth $20 per coin at launch.

It's one thing to buy BTC.com for a bit over a million dollars; we're talking about kick-starting a cryptocurrency with nearly $2 billion. Best guess, right now there are well over 200,000 MH of Hashlet Prime in existence. With a nominal value of $50 each (being generous), the total amount of money invested into Hashlet Prime is between $10 and $25 million. Add up all the other Hashlets and perhaps we're talking $50-$150 million. That's still a drop in the bucket in comparison to the initial valuation of HashCoin that's being claimed, so you can lump me in with the skeptics on this one.

Sure, I'll mine HashPoints and then I'll but some HashCoin at "$4" each, and then I'll hope for the best. It would take some amazingly deep pockets to get HashCoin up to $20 at launch, and to guarantee a floor of even $10 over the next 15 years HashCoin would have to be worth three times the current value of Bitcoin. If that happens, HashCoin could just as well replace Bitcoin, and clearly that's something GAW wouldn't mind doing. Removing the 10-60 minutes transactional delay could help make that a reality, but I'm not going to invest my life savings into HashCoin, that's for sure.

Perhaps more concerning to me is the amount of talk that Josh puts out there is advance of announcements like this. The interview linked above is a prime (*cough*) example, where basically he's making it sound like buying HashCoin at $4 per coin is the smartest thing in the world, as you're "guaranteed" $20 per coin as soon as the fiat portion of the ICO opens up.

If I take all my HashPoints mining between now and 20 days from now, and then I manage to multiply it by 5X shortly thereafter, why wouldn't I? Because it just sounds too good to be true. That's why.

Thankfully I've already got what I need and I'll continue running my Hashlets and hope for the best, but if this whole thing blows up in our faces next month I can only hope people become a bit less trusting and a bit more skeptical. Talk is cheap, and for a business that still struggles with bugs and glitches in their system I can't help but be worried about anyone thinking they're worth $100 million, let alone nearly $2 billion.

Best of luck, GAW and Josh. I really hope you can prove my skepticism wrong and that you can establish a cryptocurrency that rivals Bitcoin. Many other coins have tried (over 600 or so now, by my count), and every single one has failed to come close. Second place (LTC) currently belongs to a coin that has about 1/37 the value of BTC, while third place (DOGE) in total is valued at 1/223 of BTC. If GAW can will into existence a coin that's better than those and make it stick, they deserve all the praise they can get. And if they fail... well, I guess that's why we have words like "hubris".