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litecoin segwit

Litecoin Segwit has been finally approved

Litecoin Segwit has been finally implemented, so this long-debate to change to change the digital currency network can be said to be closed now.

Originally intended to improve the bitcoin blockchain, Segwit – or Segregated Witness – had to solve the so-called block size debate, but it has been used on the lesser known litecoin chain, with some in the community that believes that it will help to finally have a quick implementation on the bitcoin network too.

Litecoin Segwit: how does it work?

Segregated Witness, in fact, is a new system that will allow litecoin to improve its block size, by modifying how transaction data is stored by the blockchain itself.

The change was first locked-in two weeks ago, when the proposal reached the 75% threshold level.

Then, the community had to wait two more weeks (8,064 blocks) to ensure that the upgrade approval was consistent.

After that, yesterday (on May 10th) the change was officially activated at block 1201536.

What does it mean?

Litecoin users can now start using a new kind of network, and there has been at least one transaction so far.

Anyway, several supporters are thrilled about the new techs that can now be created on the Segwit-supported network.

For example, the Lightning Network could boost litecoin transactions by million times; thanks to Segwit it can now be used to move real money.

Developer Loshan T explained to CoinDesk:

“I think today will be a great day for pushing more awesome tech into Litecoin. With SegWit activated on litecoin’s mainnet, I cannot wait until we deploy confidential transactions, Lightning Networks, MAST and Schnorr signatures.”

Unfortunately, these projects are early stage right now, but developers from the Lightning Labs seem thinking that it is too early to talk about sending money over an experimental network, so they plan to continue to develop the chain.

The future is unwritten

It not so clear where the Segwit activation will lead to or what role Litecoin will have in the next future.

Loshan explained that some in the community are skeptical about litecoin needs of the Lightning Network tech because litecoin blocks are not full yet, but they would like to have trustless cross-chain transactions between bitcoin and litecoin as a potential Lightning use case; and developer believes could be a benefit for both the digital currencies.

Anyway, at the moment, the Litecoin blockchain seems to work properly, without any issue, even after the Segwit activation.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio
litecoin segwit

Litecoin Segwit: how it is driving the prices

Maybe because of the recent Litecoin Segwit support, this digital currency price set a new high yesterday, reaching a value of $11.42, its highest price since May 2014.

We cannot define it a cryptocurrency pump, but the market seems to answer to the technical changes in the network.

This price growth, in fact, could be explained thanks to the almost reached the 75% support level needed in order to activatate the Litecoin Segwit (Segregated Witness), or a scaling solution that will improve blocks capacity.

Right now, in fact, just over 70% of miners were giving their support for the Litecoin Segwit.

Even if at press time, Litecoin price declined of about 67%, litecoin traded as high as $11.32 today up nearly 40% in one day, according to CoinMarketCap.

On March 30th, litecoin price increased of about 70% and, always according to Coinmarketcap data, its 24-hour volume passed $250m today.

Litecoin SegWit support

These important new Litecoin highs have coincided with the almost reached support level needed for activating the Litecoin SegWit.

First designed to be used on the Bitcoin blockchain, SegWit would increase the block capacity by modifying how transaction data is stored by the blockchain itself.

Once reached, the support level will have to remain at or above the 75% threshold level for 8,064 blocks (almost two weeks) before SegWit can officially be activated.

The litecoin price reached $50 in late 2013, but it has traded below $20 since early 2014.

Click here to read more about SegWit and a new Bitcoin potential fork.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio

Cryptocurrencies 2016: Bitcoin Alternative charts

Today we want to talk about Cryptocurrencies 2016, as the just ended year has been very exciting for several digital currencies and not only for Bitcoin.

A lot of major open-source currencies, in fact, showed a good growth during 2016 and we hope to see significant expansion in 2017.

Below you’ll read charts of the excited cryptocurrencies 2016, during a period between December 27, 2015 to December 26, 2016.

Source: Coindesk.com

Bitcoin

Market Capitalization (Beginning of Year): $6,161,215,794
Market Capitalization (End of Year): $14,590,356,108
Price (Beginning of Year): $411.99
Price (End of Year): $908.17
Price (Annual High): $909.94

For sure Bitcoin is the king of cryptocurrencies 2016, if we talk about value.

It is the oldest blockchain-based asset as today (January 3rd) it celebrates its 8th anniversary: the genesis block was generated on January 3rd 2009.

While I’m writing of this article, Bitcoin price is still growing, surpassing the value of $1,000 for 1 BTC.

Bitcoin price and trading volume were supported by several global circumstances, including the Chinese yuan devaluation, the UK’s Brexit, and the election of a Donald Trump.

 

 

Ethereum

Market Capitalization (Beginning of Year): $80,339,474
Market Capitalization (End of Year): $638,041,577
Price (Beginning of Year): $2.83
Price (End of Year): $7.31
Price (Annual High): $19.59

2016 saw Ether, or  the digital currencies that powers the Ethereum blockchain – become the best-performing currencies, with a more than 2,000% increase over the first six months of 2016.

The major reason for its instability was the DAO hack, the subsequent failure of the decentralized project, and the creation of ethereum classic. These factors led to a fall of nearly 50% of this altcoin value.

 

Anyway, Ethereum is the favorite network for possible FinTech permissioned distributed ledgers, enterprise software and Internet of Things applications, so 2017 could will probably show a capitalization increase for ether.

Litecoin

Market Capitalization (Beginning of Year): $149,142,004
Market Capitalization (End of Year): $212,469,870
Price (Beginning of Year): $3.41
Price (End of Year): $4.34
Price (Annual High): $5.55

One of the oldest bitcoin alternative, litecoin showed a stable valuation during 2016, closing $2 above its starting price for the year.

Dash

Market Capitalization (Beginning of Year): $16,081.586
Market Capitalization (End of Year): $70,675,107
Price (Beginning of Year): $2.64
Price (End of Year): $9.67
Price (Annual High): $14.42

In 2015, darkcoin decided to end its association with shadow businesses and the DarkNet by changing its name to Dash.

 

This re-branding seemed to work and Dash ended 2016 with pricing nearly three times, and a market capitalization close to four times.

Cryptocurrencies 2016 and their future

As we enter 2017, the future for cryptocurrencies seems bright, as the digital currency market will continue to progress and prove its worth as one of the top-performing commodities available today.

We at HolyTransaction are very happy to work with this top-rated cryptocurrencies, as our wallet can store Litecoin, Dash, Ethereum and Bitcoin within a unique login.

Needless to say, we are proud to have chosen the best and the most profitable cryptocurrencies for our multicurrency wallet you can open here for free.

 

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio

HolyTransaction add-on for cryptocurrencies exchange rates

Recently we at HolyTransaction created a new add-on for the Firefox browser only to see the exchange rates for cryptocurrency pairs.

This add-on allows you to see the exchange rates between the most popular currencies using only a couple of clicks. 
Exchange rates are available between dollar, euro, bitcoin, litecoin, peercoin, dogecoin, dash, blackcoin and gridcoin. 
The add-on’s simplicity provides you an easy way to have all the information you need before selling or buying your favorite cryptocurrencies.
The price is shown on your browser, according to your specific preferences. You can change the displayed number of decimal places in the user settings.

How to dowload the add-on

To download this HolyTransaction add-on, you just have to follow this step-by step guide:
  • Click on the Firefox Menu at the top right of the toolbar;
  • Click on “Add-on”;
  • Write “HolyTransaction” in the search at the top right of the page;
  • Click on “Add-on” on the left menu;
  • Click the “Download” button next to the HolyTransaction add-on. 
  • You will find the exchage rates window at the top right of your toolbar.
You just need to click on the HT logo of HolyTransaction. 

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio

Infographic: Comparing Altcoins

 Comparing Altcoins: what features make each altcoin different?

Open your free digital wallet here to store your cryptocurrencies in a safe place.

jorge

HolyTransaction Telegram Bot for Crypto Conversion

We are excited to announce several new developments that have recently launched at HolyTransaction, in our continued effort to make digital currency easy and accessible for all.
Firstly, full conversion between Tether and our other supported cryptocurrencies is now available.
Tether is blockchain-based smart property built on top of Omni Layer that is backed backed 1-to-1, by traditional currency held in Tether reserves. One TetherUST, for instance, equals one dollar. The value of each Tether never changes, meaning that there is no fear of volatility. Tethers can also be withdrawn and held in any Bitcoin wallet where you control the private key.
Secondly, we are pleased to introduce our new HolyTransaction Telegram Bot, available to users on both the Telegram and GetGems messaging platforms. The HolyTransaction Bot allows users to view up-to-date exchange rates, and get the most recent cryptocurrency news, without ever leaving their chat client. In many countries, a strong and reliable internet connection is not always available.
Our bot will allow users to conduct transactions and inquire about their favorite currencies quickly and without difficulty, all from a single chat. The HolyTransaction bot is available to users on both desktop and mobile platforms. Simply send a message to @HolyTransactionBot via either Telegram or GetGems to begin.
Bot Commands:
/exchange

  • ●  Conduct a trade between any of our supported currencies on the HolyTransaction
    platform.
    /getnews
  • ●  View the most recent cryptocurrency news.
    /rate
  • ●  Receive details on the current price of any of our supported currencies.
    /currencies
  • ●  List currencies available on the platform.
    /help

            ●  List of BOT commands
Lastly, as part of the technology behind the HolyTransaction Telegram Bot, we have released a custom HolyTransaction API. Developers around the world are invited to use this new API to integrate the functionality of the HolyTransaction platform into their own projects. You will find more info to start developing here.
HolyTransaction is a multi cryptocurrency wallet that allows you to use Bitcoin, Litecoin, Dogecoin, Dash, Blackcoin, Tether, Omni Layer and RibbitRewards. We are committed to our users both near and far. Cryptocurrency is international, and so are we. Stay tuned for more news from HolyTransaction!

Open your free digital wallet here to store your cryptocurrencies in a safe place.

Amelia Tomasicchio

HolyTransaction partners with Netki for human-readable address

Wallet addresses are one of the most aggressive barriers to the mass adoption of digital currency. Trying to explain these lengthy, case sensitive, intimidating strings of numbers and letters to the uninitiated is a daunting task. Much of the general population values simplicity over function, and in this regard wallet addresses seem scary and overly complex.

It is with this in mind that we are very excited to announce our partnership with Netki!
Netki makes digital money approachable and intuitive for new and veteran users alike, by transforming long and unwieldy Bitcoin addresses into human-readable wallet names. Additionally, your Netki name separates your identity from public blockchain data, providing you multiple layers of privacy, as well as multiple validations to keep you secure.
When paired with your existing HolyTransaction account, Netki will allow you to use one single Name for all of your wallet addresses. This means that you will be able to send multiple currencies, all to one domain name-like address! As of this writing Changetip is integrated with Netki. Storing your funds, tipping online, building/implementing blockchain applications, and buying, selling, and accepting your desired currency, have all just become as simple as remembering a single name, when used with supported vendors!
Your account will be automatically updated as soon as it’s ready, and the integration will be seamless from your perspective. Once implemented, your wallet name will correspond to your HT username.
Bitcoin, Litecoin, and Dogecoin will be the first coins supported, with more of your favorites coming soon after.
Netki’s solution utilizes both the decentralized Namecoin blockchain at its core and distributed DNSSEC at its edges. This combination allows users to have both control and ownership of the blockchain, while still maintaining their financial privacy. This architecture allows users to easily share their Wallet Name with anyone without having to publish it to the world via a public ledger.
Together, HolyTransaction and Netki aim to transform cumbersome wallet addresses into one shareable, easy to remember name, that will be usable by all your digital currencies. We look forward to working together to continue making the bitcoin experience both friendly and intuitive for all.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

admin

Dogecoin to allow Litecoin merge mining in network security bid

(CoinDesk) The dogecoin development team has announced that it will soon enable auxiliary proof-of-work (AuxPoW), allowing merge-mining with litecoin that will address concerns over the altcoin’s future.
AuxPoW enables the dogecoin block chain to receive work from other scrypt-based networks. Dogecoin miners will still be able to generate blocks and receive DOGE, but now, litecoin miners will contribute hashing power to the dogecoin network.
The move, announced on the dogecoin subreddit, follows a months-long period of community debate focusing on the question of long-term viability in the dogecoin network. Litecoin creator Charlie Lee suggested the idea of merge mining in April, eliciting mixed reactions from both sides of the conversation.
According to the dogecoin development team, the AuxPoW integration will require a hard fork of the dogecoin block chain. No specific integration date has been given, but the development team said that testing will begin soon.
As explained in the original announcement:
“Our topmost priority has always been to provide a stable platform for the currency and its services and of course its users. We hope that with AuxPoW we can achieve that in a better way than what it currently is like. Our hashrate has been on a decline and we hope that we can gain more of it with the acceptance of proof of work from other chains.”
As expected, community members voiced both enthusiasm and concern for the AuxPoW plan. Yet, advocates for the strategy, including Lee, say that the move will ensure the stability and security of the dogecoin network.

Plan to save dogecoin

AuxPoW is not new – several coins already enable work from other mining networks, with namecoin being the most prominent example. This long-standing reputation as a workable proofing system – and the strength of the litecoin network – has gained the idea support in recent weeks.
In a recent community post on /r/dogecoinDogetipbot creator Josh Mohland shared his perspective on the concept, saying that AuxPoW would help solve a key problem with dogecoin: the fact that it was never intended to function as a full-fledged transaction network.
Mohland explained: 
“Dogecoin was built to die quickly – none of us expected it to grow into the absurd entity it is today. With that said, there’s absolutely an easy way to save the coin from its certain death (and by death I mean 51% attacked for the lulz), and that’s AuxPoW.”
He went on to call AuxPoW “a simple change” worth the trouble, owing to the fact that the risk of a 51% attack far outweighs perceived costs.
Other community members expressed concern over the idea, saying that the move enables large litecoin pools to crowd out smaller dogecoin miners. Questions were also raised as to whether or not AuxPoW would actually help prevent a 51% attack.

Dogecoin in ‘dire situation’, says Lee

Litecoin creator Lee hailed the announcement, telling CoinDesk that the development team made the right decision during a “dire situation”.
Lee argued that the move comes at the right time given the long-term threat to the dogecoin network – and, as some have pointed out, its falling price. He added that the move provides increased security for dogecoin without any repercussions, removing a source of concern for the network and enabling broader development in the community.
Lee told CoinDesk:
“[The community] can focus on what dogecoin does best (tipping, donations, wow) instead of worrying about defensive mining and network security.”
Image via DailyDoge

Open your free digital wallet here to store your cryptocurrencies in a safe place.

admin

Litecoin network hashrate tripled in two months

(ForexMinute) At the end of April, mining hardware manufacturing
company started shipping a whole stack of their products. It was the
same time when the Litecoin hashrate was somewhere around 173,225 MH/s.
The increasing exposure of Scrypt ASICs mining machines further
influences other manufactures as well. In just two months since April,
the Litecoin hashrate went up to 200$, while its mining difficulty also
tripled.
The next Scrypt ASICs to hit the market will have the hashing power
between 200 and 400 MH/s; indicating the possible surge in Litecoin
mining difficulty and network hashrate as well. Some companies are also
building hardware that can sustain hashing power up to 650 MH/s. As many
believes, these events will somewhat impact the Litecoin standings in
the market. The question however is, in which way?
The Litecoin community seems to have divided on this question. There
is a section which believes that the increasing hashrate will have a
fruitful impact on Litecoin prices, citing Bitcoin as a key instance;
while another section does not acknowledge any relation between the
Litecoin prices and its hashrate.
Explanations are coming from both sides, each with a unique
perspective. The ones that support the prediction of Litecoin’s
escalation believe it to be the network’s strength that will multiply by
over 1,000 times in future. It is the economics of scale in mining that
will play a major role in boosting the Litecoin’s stand in the market.
On the other hand, there are those who do not support this theory
even in thoughts. They outright rubbish the history that certifies
increasing hashrate proportional to the coin’s market cap. Their logic
dictates a scenario in which miners are faced with increased selling
pressures in order to cover their investments on such expensive mining
hardware. This aims at a lower demand and higher supply rate that will
eventually cause a huge drop in Litecoin prices. They event say that the
current imbalance of Litecoin market is caused by such selling
pressures.
Considering both the sections, we believe that market conditions have
changed a lot since the launch of new cryptocurrencies in the market.
The reason why BTC did so well after the increased hashrate was it being
used only for trading. Litecoin too cashed only because of the bubble
fuelled by China. The moment these coins were introduced to the real
merchant world, its basics changed completely. Seeing today’s scenario,
Bitcoin is backed by multiple major organizations while Litecoin is
still far away from reaching this point. In short, the continual
acceptance of BTC over LTC thickens the latter chances to repeat
history. Hashrate increased or decreased, it won’t hold any meaning
until Litecoin grabs some major investments from big players.

Open your free digital wallet here to store your cryptocurrencies in a safe place.

admin

What Dogecoin must do to survive

Tim Swanson is an educator, researcher and the author of ‘Great
Wall of Numbers: Business Opportunities and Challenges in China’. Here,
he explores the mining systems of dogecoin and litecoin to show how the
dogecoin economy can thrive.
A_touchup_astrodoge
(CoinDesk) The
key ingredient to the success of any decentralized public ledger, such
as bitcoin, is incentivizing its transactional network to simultaneously
secure the network from attackers and process transactions.
In
the case of bitcoin, and in the case of virtually all other
cryptocurrencies, this incentivization process is handled through
seigniorage.  Every 10 minutes (or 2.5 minutes for litecoin, or one
minute for dogecoin) a fixed amount of bitcoins is paid to the labor
force called “miners.”  These miners are computational systems that
perform never-ending mathematical calculations dubbed hashing.  This
hashing in turn creates security for the network; so as long as more
than 50% of the hashrate is maintained by “good” systems, bad actors are
prevented from manipulating the ledger.
The other key role these
miners also fill is processing and including transactions into packages
called blocks.  Every 10 minutes, one miner is rewarded for processing
these blocks with fixed income.  Last month David Evans published a good
overview of how this process looks from a labor input and supply output perspective.
For
some advocates, one of the purported advantages of cryptocurrencies is
that their money supply creation rate is actually deflationary (or
contractionary) in the long run – in the short run, bitcoin’s
expansionary rate is quite high, with inflation at 11.1% this year
alone.  That is to say, it is a hardcoded asymptote, tapering off over a
known time period.  In the case of bitcoin, the wage for the labor
force (miners) is split in half roughly every four years (every 210,000
blocks), for approximately the next 100 years – until its money supply
is exhausted at a final 21 million bitcoins.
Roughly 12.7 million
bitcoins have already been paid to miners.  With dogecoin’s 100 billion
dogecoins, this process is accelerated, with the mining income dividing
in half every two months.  While it took about five and a half years for
about 60% of bitcoin’s total monetary base to be distributed, as of
today 78% of dogecoin’s reward (income) has already been divvied out to its workforce in less than six months.

What now for the workforce?

While
this frenetically fast money supply has provided a psychological
motivation for early adopters to partake in the dogecoin ecosystem,
economic law suggests that this network will probably cease to exist in
its current form within the next six months probably through a 51% attack.
The
reason is simple: with every block reward halving, also called
“halvingday”, the labor force is faced with a 50% pay cut.  The
contractors (laborers) incapable of profitably providing
hashrate at this level can and will leave the work force for greener
pastures.  This same issue has impacted other altcoins in the past, such
as MemoryCoin, which died after nine months due to a combination of
factors including diminished block rewards (it attempted to divvy out
its entire monetary supply in two years).
Early advocates of dogecoin like to point to outlier events such as the Doge bobsled team or sponsored NASCAR driver at Talladega
or even a vaunted tipping economy (which is actually just faucet
redistribution) as goal posts for growth and popularity, yet after two
halvingdays the actual dogecoin block chain has lost transactional
volume each month over the past four months and the labor force has also
left for new employment elsewhere.
This is visualized in the following two graphs.
dogechart1
dogecoin transactions chart
The
first chart shows dogecoin’s collective hashrate.  The black lines
indicate when the “halvingday” or rather “income-halvingday” occurred. 
Because the price level of a dogecoin remained relatively constant
during this time frame, there was less incentive for miners to stay and
provide labor for the network.  If token values increased once again,
then there may be incentives in the short-term for laborers to rejoin
the network.  Yet based on this diagram, roughly 20-30% of the labor
force left after each pay cut.
The second chart shows on-chain
transactional activity.  The first three months are erratic because of
how mining pools (similar to lottery pools) paid their workforce
(miners).  Following the first halving day in February, the network
transaction rate fell to roughly 40,000 transactions per day and then
leveled off to around 20,000 until 28th April 2014, when another
halvingday occurred and the subsequent transactional volume remained
relatively flat to negative. It is currently at 12,850 transaction per
day, or roughly the same level it was during the first week of its
launch five months ago.

Dogecoin’s falling hashrate

Now,
some readers may claim that a lot of the transactional volume such as
tip services and tip bots are being conducted off-chain and thus the
total number of transactions is likely higher.  And they would be
correct.  But that would completely defeat the purpose of having a
block chain in the first place – a trustless mechanism for bilateral
exchange that negates the need for “trust-me” silos (as Austin Hill
calls them).
Also, while this topic deserves its own series of
articles, there is little literature that suggests that tipping can grow
an economy; it is not a particularly good signaling mechanism or way to grow a developing economy (i.e., “China, you need more tipping activity to grow and prosper”).
However
the key issue is this: if the trend continues and the network hashrate
continues to fall 20-30% after each halvingday, then within the next two
to four months it will be increasingly inexpensive for competing
mining pools on other ledgers to conduct a 51% attack on dogecoin’s
network, destroying its credibility and utility.
For instance, the
chart below is the litecoin hashrate over the past six months. 
Litecoin is dogecoin’s largest competitor based on its proof of work
(PoW) mechanism called scrypt:
dogechart3
One
of the reasons the litecoin hashrate is not rising or falling at a
constant rate but is instead jumping up and down erratically is that
miners as a whole are economically rational actors.  When the cost of
producing security is more than the reward (block reward income), the
labor force turns towards a more profitable process
such as another alternative scrypt-based “coin” (note: bitcoin’s
hashing method uses SHA256d whereas litecoin and dogecoin use scrypt). 
The same phenomenon of hashrate jumping up and down occurs with the
bitcoin network.
For the sake of simplicity, the litecoin network
can be viewed as roughly 200 GH/s versus the dogecoin network which is
roughly 50 GH/s.  To conduct a 51% attack on dogecoin today, an entity
would need to control roughly 25-26 GH/s which is roughly one eighth the
processing power of the litecoin network.  The current ‘market cap’ for
dogecoin is $35 million, assuming marginal value equals marginal cost, ceteris parebus on paper it could cost $17.5 million in capital and operating expenses to successfully attack the dogecoin network.
ltcdgecomparison
The
chart above shows both the hashrate of litecoin (in red) and dogecoin
with the vertical black lines representing the dogecoin
“halvingday.”  What this shows is that while dogecoin, for roughly one
month in early 2014 was more profitable to mine than litecoin, the
halvingday led to an exodus of labor.
If current prices and trends
continue, which they may not, in two months the litecoin collective
hashrate may hit 240 GH/s and dogecoins hashrate could shrink due to
halvingday by another 20% to 40 GH/s.  At this rate a successful 51%
attack on dogecoin would require just one twelfth of the hashing power
of litecoin which at the same prices levels would entail less than $10
million in capital and operating expenses to do.

Will dogecoin survive?

While the development team could theoretically switch its proof of work algorithm (to X11 as used in Dash), the doge community is really faced with six options:
  1. Merge mine. Namecoin
    was (and is) an independent block chain, but since block 19,200 about
    80-85% of its network hashrate (and block rewards) are tied to bitcoin
    mining pools through a process called “merged mining.”  The new sidechains project from Blockstream is attempting the same process.  Charlie Lee, creator of litecoin explained how dogecoin could be “merged mined” with litecoin in a series of posts last month.
  2. Transaction
    fees. Both the development team and mining community could agree to
    float or raise transaction fees on the doge network, similar to what
    Mike Hearn has been discussing
    for bitcoin.  In practice however, even if approved, very little actual
    commerce, and therefore transactions, is conducted on the dogecoin
    network. Thus it is unlikely that this will compensate the large drop in
    mining income.  Similarly, as Gavin Andresen pointed out in Amsterdam
    this past Friday, increased transaction fees reduces the participation rate. It is important to note the actual transaction costs are much higher than stated – block rewards (token dilution) are usually not factored in.
  3. Proof
    of stake. There are several variations of proof of stake.  Whereas
    bitcoin, litecoin, dogecoin and most other cryptocurrency experiments
    use a “proof of work” mechanism to protect the network from malicious
    entities, a proof of stake system, such as that used in NXT, will
    randomly assign a “mining node” called a “forger
    – a poor marketing term for sure – to process all the blocks for the
    next minute.  Because all of the other nodes in the network know which
    miner to trust, this lowers the amount of infrastructure needed to
    protect the network.  In theory this sounds amazing.  In practice
    however, most proof of stake systems end up almost immediately
    centralized in one manner or the other. Andrew Miller, Andrew Poelstra
    and Nicolas Houy call it “proof of nothing”.  Perhaps Stephen Reed’s version can work in the future.
  4. Increase
    in market price. This would incentivize the labor force to continue
    providing security of the network with the expectation that the tokens
    they are given in return for their labor will continually appreciate in
    value.  This is betting on hope.  Charlie Lee pointed out the uphill
    task this would require beginning next year when rewards fall to less
    than one tenth what they are today, stating
    last month, “At dogecoin block 600,000, only 10,000 coins will be
    created per block. So in order for dogecoin to keep the same amount of
    security as today, dogecoin price would need to go up by 25 times. And
    dogecoin price would need to gain on litecoin by 50 times in order to
    catch up on litecoin’s security. And assuming everything stays the same,
    the market cap of dogecoin needs to reach $1.5 billion by January of
    next year.”  For comparison, the ‘market cap’ of dogecoin today is
    roughly $35 million (note: it is probably not accurate to call it a
    ‘market cap,’ see Jonathan Levin’s explanation).
  5. Migration.  Dogecoin could also migrate to a platform like Counterparty and become a fully secured altcoin with a dash of proof of transaction
    thrown in to inflate the coin with ongoing usage that this particular
    community likes to embrace. It could be fully protected by the bitcoin
    hashrate with no further need to try to acquire miners to protect it.
  6. Further
    experimentation.  While it is unlikely the dogecoin has the resources
    to create secure production code in the shortened time frame, Robert
    Sams “growthcoin” and Ferdinando Ametrano’s “stablecoin” could provide a mechanism that enables the network to live on in a different manner.
While
any or all of these may be tried out, it may be too little, too late. 
With that said, stranger things have happened.  A rising tide lifts all
boats and thus in the event that “bitlicense” approved exchanges on Wall
Street come online this summer and new capital actually flows into
bitcoin and other alternative ledgers, perhaps similar speculative
funding will flow into dogecoin as well.  However, this is not something
that can be known a priori.
I contacted Jackson Palmer, creator of dogecoin for his thoughts on the situation.  In his view:

“It
is definitely a challenge that dogecoin (and all current-gen crypto
currencies) will face in the future. As we discussed recently, it’s kind
of a sad reality that people are purely profit driven and these
decentralized networks we’ve built are reliant on profit-mongers to
power and secure their viability. I’m very concerned about the impact of
centralized mining and reliance on transaction fees could hold for
bitcoin as it becomes less enticing to mine – really, the network can be
held at ransom to attach hefty transaction fees if the mining pools are
cherry picking as they create blocks.
At the end of the day, I
think the viability of cryptocurrency really hinges on a move away from
PoW-based mining to something new and innovative that doesn’t just
stimulate an arms race and put all the power back into the hands of the
fiat-wealthy. I don’t have a solution unfortunately, but hopefully
someone will find one and bring about a new generation of digital
currencies in the coming five to ten years.
That being said,
cryptocurrency as a space is very unpredictable so it wouldn’t surprise
me at all if dogecoin beats the odds and overcomes these challenges in
some weird, wacky way. It’s in the community’s hands, and they’re
certainly passionate about seeing it reach the moon, as am I.”

Can this happen to bitcoin?

To be balanced, below is the network hashrate for the Bitcoin network following its first halvingday on November 28, 2012:

dogechart last

Source: http://bitcoin.sipa.be

The following two months, from December 2012 through January 2013, the hashrate stayed flat and in some weeks even declined.
There were three reasons why the network did not decline precipitously like dogecoin:
  • Despite
    the fact that very little real commerce actually takes place on the
    bitcoin network, there was some amount that did in 2012 and does today
    (primarily gambling and illicit trading of wares).  Thus there was
    external demand for the tokens beyond miners and tippers.
  • The token prices rose creating appreciation expectations.  The price rose from $12.35 on 28th November 2012 to $20.41 on 31st January 2012.  If miners believe and expect the price to increase in value, they may be willing to operate at a short-term loss.
  • The first batch of ASICs from Avalon shipped and arrived
    to their customers at the very end of January.  These provided roughly
    two to four orders of magnitude per watt in performance than the top
    competing FPGAs and GPUs.  This is equivalent of miners being given
    sticks of dynamite instead of pick axes to tunnel through mountains.
While
more research will be conducted and published in the following months
and years before the next bitcoin halvingday (estimated to occur probably before August 2016),
the bitcoin network faces a similar existential hurdle, though perhaps
less stark once more ASIC processes hit similar node fabrication
limitations.  That is to say, in the next couple of years there will no
longer be performance gains measured in orders of magnitude. They will
likely compete on energy costs.
 Since most participants do not like paying transaction fees,
incentivizing miners to stay and provide security will likely be
problematic for the same income reduction issues.  This scenario will
likely be revisited by many others in the coming months and years.

Nothing personal

From
a marketing perspective Dogecoin has done more to bring fun and
excitement to this sub-segment of digital currencies than most other
efforts – remember, USD can also be digitized and encrypted.  In turn it
brought in a new diverse demographic base to block chain technology,
namely women.  While some of the more outlandish gimmicks will likely
not be enough to on-ramp the necessary token demand which in turn leads
to token appreciation, this project has not gone unnoticed.
For
instance, two weeks ago I had coffee with a bank manager in the San
Francisco financial district.  As we were wrapping up he asked me to
explain dogecoin.  I mentioned that what sets doge apart from the rest
was its community was much more open towards self-ridicule, self-parody,
less elitist and most importantly, women actually attended meetups.
He
quickly surmised, “Oh, so it’s the wingman currency. It’s the friend
you bring to the bar who is willing to look goofy to help you out.”
That is probably a fair enough assessment and it will likely need a wingman to survive.
Astrodoge image via Dogecoin Wiki

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