Since it’s that “slow week” between Christmas and New Year’s Day, I thought I should write about something quite different from what I do here on The Brand Fairy. Also, this is a bit of a long read.
(Obligatory disclaimer pursuant to the Federal Trade Commission rules: When you click on some of the links in this article and sign up for services or products, I will be receiving commission payments in exchange for referrals. Such links will be labeled with “[aff.]” after the hyperlink.)
It all started with Occupy Wall Street
For many years, I have been quite intrigued by the potentials of cryptocurrencies and blockchain technologies. As a long-time cypherpunk, panarchist and libertarian socialist, anything that can empower those the system failed is a good thing as far as I am concerned.
The first time I have ever heard of Bitcoin was at an Occupy Wall Street encampment in October of 2011. As you may remember, the impetus behind the Occupy movement was to fight the “banksters.” Along with the “Audit the Fed” and “Banks have gotten bailed out, we’ve been sold out” slogans, there was a group of activists who were touting the promises of Bitcoin.
In retrospect, I should have bought some Bitcoins back then. Notwithstanding the wild fluctuations inherent in the crypto exchange market, even if I had purchased $5 worth of Bitcoins on Nov. 1, 2011, that would have been worth nearly $5,200 in value today (on Nov. 1, 2011, $5 USD could buy 1.37363 BTC!). So a part of me has been living with regret. Back then, cryptocurrencies were still a new project by idealistic and anarchist-leaning activists who were still reeling from the devastation of the 2008 bank meltdown and the Obama administration’s capitulation to the big banks and Wall Street. Bitcoin was explained to me as a sort of computer simulation to mimic the gold standard economy to get the banksters out of our lives.
From time to time, I come across interesting articles and videos on the potentials of blockchain technology. These days, it is beyond just a means to exchange monetary values: projects such as Bitnation is taking it to a new level, using blockchain to supplant the nation-states. In particular, Ethereum is more than just another digital money; it is also a “smart contract” and decentralized record-keeping platform, opening the doors to decentralized autonomous organizations (DAOs) and decentralized apps (Dapps). Ideally, these innovations can break the financial and technological monopolies and bring the economic, social, and even political powers back to the 99 percent.
This week, I spent a few days exploring ways for ordinary people — or, the “rest of us” — to get into the cryptocurrency world. After some trials and errors and a steep learning curve, I’d like to share with you some low-barrier ways to dip your toes into this wave of the future!
What is a cryptocurrency, and what kinds of currencies are there?
Since Wikipedia does a much better job of explaining, I will simply quote here:
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies are a kind of alternative currency and digital currency (of which virtual currency is a subset). Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.
The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.
Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency. Since the release of bitcoin, over 4,000 altcoins (alternative variants of bitcoin, or other cryptocurrencies) have been created.
Like fiat money, there are many kinds of cryptocurrencies. The best-known ones are also some of the oldest and most established ones, such as Bitcoin (officially referred to as Bitcoin Core, not to be confused with its spinoff variety Bitcoin Cash), Litecoin, Dogecoin, Ether (sometimes mistakenly called “Ethereum”), and Monero. There are many others in circulation today, but they tend to be of very low monetary value and limited acceptance (“limited acceptance” simply means that you will have to exchange them to a major cryptocurrency such as Bitcoin first in order to be able to actually buy things).
How to acquire a cryptocurrency
There are primarily three different ways for you to obtain a cryptocurrency:
- Buy it.
- Earn it.
- Make it yourself.
The first two options are just like any other kind of money. There are many online exchanges where you can purchase most types of digital money. Keep in mind, however, that many financial institutions and credit card companies based in the United States disallow their customers from using their cards to buy cryptocurrencies.
How to buy Bitcoin and other digital money
An easier way to buy Bitcoin is to use Local Bitcoins. This Web site is a peer-to-peer exchange platform (like eBay) where sellers can advertise their sales and buyers can choose from listings based on the best exchange rates. You do not even need to use a credit card. Many sellers accept Amazon gift card numbers, which you can purchase at any supermarket or drugstore at no additional fees over the face values.
Another place where you can turn an Amazon gift card into Bitcoins is a discount shopping Web site called Purse. This company allows shoppers to purchase just about anything from Amazon at a big discount by buying unwanted gift cards from those who would rather like to have Bitcoins.
Of course, another way to make money is to earn it. If you are a blogger, a YouTuber, or any kind of content creator, you can put a “tip jar” on your Web site. One example of a simple tip jar you can embed in your Web site is here (The downside of this tip jar is that visitors will have to have their own Dogecoin wallets and know how to use them, but it is open source and is free for anyone to copy and paste this code). Here is another tip jar generator for Bitcoin (Core) and Litecoin. Again, the downside is that visitors have to have a wallet already loaded with some Bitcoin Core or Litecoin, and they know how to make a payment with it. There used to be a time when a certain business offered a Bitcoin tip jar service where visitors could tip using Visa or MasterCard, but it shut down several years ago.
Of course, you can also sell any goods or services online in order to earn cryptocurrencies. You can easily accept cryptocurrency payments for what you do or make by sharing your wallet address to your customers.
OmniBazaar is new, free software that lets you create your own digital storefront [aff.] and sell anything just like you do on Etsy. I’ve seen people selling their handmade jewelry and artworks using OmniBazaar [aff.]. The user interface is easy to navigate, neatly categorized like online classified ads. Your customers can purchase using Bitcoin Core or Ether. (There is also an older, open-source software of the similar kind called OpenBazaar, which works pretty much the same way.)
Another new online marketplace where you can sell your wares or services is Origin Protocol. Unlike OmniBazaar and OpenBazaar, you don’t have to download special software to buy or sell on Origin Protocol.
Then there are several Web sites called “faucets.”
Coin faucets are Web sites that give away a very small amount of cryptocurrencies such as Bitcoin, typically in exchange for viewing an advertisement or playing a simple online game. In general, payments from faucets are extremely minuscule. Even if you have visited multiple faucets every day of the year, it will take about six months to earn an equivalent of one U.S. dollar. However, since the value of major cryptocurrencies trends upward over the course of several years (as I discussed earlier), it may add up to something substantial if you are patient and persistent.
Some faucet sites issue cryptocurrencies to you at a minimum interval of 15 to 60 minutes (to prevent abuse of the system), but that means you will have to come back to several faucet sites every 15 minutes to an hour all day and night — which can have a significant impact on your productivity and won’t be worth it considering how little money you will make.
The only exception to this is the faucet sites owned by CoinPot, which are all called “Moon (name of a currency).” As their slogan says, “the faucet where YOU decide when to claim!” The coins continue to accumulate based on time elapsed since your last visit to the faucets, so simply log in once a day and you will be able to receive quite a bit of cryptocurrency without wasting lots of your precious time. Even better, the earnings from each of the five faucets are kept in one central “dashboard” for easy management. You will also be able to exchange one currency (for example, Dogecoin) to another (such as Bitcoin Core) within the dashboard so you can consolidate your earnings into one singular cryptocurrency for an easier cash-out.
Links to the CoinPot faucets:
- Moon Bitcoin [aff.]
- Moon Litecoin [aff.]
- Moon Bitcoin Cash [aff.]
- Moon Dogecoin [aff.]
- Moon Dash [aff.]
Beware: Some Bitcoin faucet sites may indicate your earnings using the unit “Satoshi,” and you may see a message such as “You’ve earned 15 satoshis!” In Bitcoin, a Satoshi is the smallest subunit of Bitcoin (like how a penny is the smallest subdivision of the U.S. or Canadian dollar), namely, 1/100th of 1/1,000,000th of 1 Bitcoin. In other words, 15 Satoshis can be written out as 0.00000015 BTC. At an exchange rate of $4,000 USD = 1 BTC, it will take 6,666,666 claims of 15 satoshis to get to 1 Bitcoin (in other words, 1,667 times 15 Satoshis would equal $1 USD at that exchange rate).
Faucets are a fun, no-cost way to dip your toes in the cryptocurrency world and learn about basic concepts such as wallets, addresses, and private keys. And you should not dismiss the possibility of little money adding up over years. In fact, I used to play online games back in early 2015 and earned about 35 cents worth of Bitcoin as prizes; nearly four years later, it is now worth approximately $5.25. It can be a tiny investment you can make for free! (Too bad I have lost the private key of one of my Bitcoin wallets, much of that money is forever inaccessible to me or anyone else. Read on for how cryptocurrency wallets work.)
Become a “miner”: How to generate money with your computer
TL;DR: You won’t make lots of money doing this. Read on if you’re still interested in mining cryptocurrencies for experience and for fun.
Finally, I’d like to talk about generating your own cryptocurrencies using your own computer. This process is called “mining,” and you may have heard of businesses who have leased a warehouse to build a large-scale Bitcoin mining facility.
Let me make my best attempt at explaining what cryptocurrency mining is in a simple term:
Money is basically a way to keep scores. You want a candy bar. You go to a convenience store and you go to the register. The store employee scans the barcode on the candy wrapper, you pay 99 cents using cash or a debit card. You settled the “score” corresponding to the value of the candy bar, which was 99 cents. That transaction is recorded on the store’s central computer as the cashier rang up your purchase. Ultimately, the store makes a bank deposit at the end of the day and that money, along with all the other money received on that day, is recorded on the bank’s central server.
Cryptocurrencies such as Bitcoin are “decentralized ledgers,” that is, financial records are (instead of at big banks or credit card companies, or at the corporate office of the retail giants) held by thousands and maybe millions of computers around the world and they are synchronized and verified in near real-time. This is important because if one recordkeeper says you just spent 99 cents but another one says you didn’t, then you could possibly spend your money twice, which can cause a serious confusion! Each computer acts like an an account auditor and holds the entire records of all financial transactions (which are called blockchains). To make this process fast and automated, computers perform mathematical puzzles (which is kind of like balancing your checkbook but computers do this numerous times per second). Because these “auditors” are computers on the Internet, they aren’t free. It’s only fair that the owners of such computers be compensated for the trouble, or nobody would volunteer to offer such service especially since maintaining reliable computer servers does not come cheap. Therefore, the inventors of cryptocurrencies created a structure by which owners of the computer servers that act as financial auditors are rewarded for their service. This gaining of rewards results in earning of digital money, metaphorically called “mining” digital coins.
Can ordinary people with a normal consumer-grade computer mine cryptocurrencies?
The short answer is yes, but you won’t be rich. You won’t be able to make a living mining “coins.”
Because of the way cryptocurrencies are generally designed, the difficulties in generating new coins increase exponentially as time passes. In 2010, it was indeed possible for a typical desktop computer to mine a Bitcoin. Today, anyone who is seriously considering making a profit from Bitcoin mining would need a server farm with expensive computers designed specifically for that purpose (computers with ASICs, or application-specific integrated circuits). Such Bitcoin mines also consume an insane amount of electricity 24/7, costing mine owners lots of money and even accused of contributing to climate change.
Bitcoin and other so-called “proof-of-work” currencies are extremely resource-intensive.
However, if you’d like to try mining for fun (and as a contribution to the cryptocurrency community), there are a few easy ways to use your current laptop or desktop computers — or even a smartphone.
Some of the newer cryptocurrencies, considering the environmental impact of Bitcoin mining and increased costs, have adopted a different way of generating coins. Two new methods of mining are called “proof-of-stake” and “proof-of-capacity.” The currencies that are mined using these methods consume less electricity and require less expensive computer hardware.
I have done my homework, explored various options, and even gave some of them a try. I recommend these two cryptocurrencies for the ease of mining and low barriers to entry:
- GridCoin (GRC) can be mined using your existing PC (desktop or laptop), as long as you can run the BOINC software.
- Lynx (formerly known as Kittehcoin) – requires an initial hardware investment of about $100, if you don’t already own a Raspberry Pi 3.
All of which can be mined using a computer you may already have. However, these currencies are valued far lower than the big players such as Bitcoin and Ether, and while you will be able to mine Monero, BurstCoin, or GridCoin, you will not be able to generate any “serious” amount of money from doing so. Your computer can probably perform mining process at a speed of 2 to 8 H/s (H/s stands for hash per second, that is, the number of mathematical puzzles your computer solves in one second); professional miners usually would have to go at the speed of several kH/s (kilohashes per second, that is at least a few thousand times faster than your computer!) in order to be profitable.
GridCoin deserves a special mention because mining it helps universities and scientific research centers around the world to process their data. GridCoin was developed as a reward program for volunteers who participate in crowdsourced data processing programs that support projects such as cancer research, AIDS research, astronomy, statistics, and public health. While the value of GridCoin is very low in comparison to other currencies (1 GridCoin is slightly less than one cent), this can be a worthwhile project you might want to participate in.
I’ve been mining Gridcoin since around the New Year’s Day, and I’ve made just over 15 GRC over the course of eight weeks. At the exchange rate on Feb. 19, 2019, that amounts to 7 cents in the U.S. currency, so I am making about a penny a week (still a better outcome than CryptoTab browser, which yielded an equivalent of 1 cent over eight weeks).
As such, I am no longer recommending any Web miner, including CryptoTab Browser (which seems to have been banned from Google Play store a few weeks ago and has also discontinued its Firefox add-on recently).
- To mine GridCoin, you will have to install BOINC and then join the GRC Pool. Once set up, BOINC will run unobtrusively in the background. Tutorial videos are available on the GRC Pool Web site.
Mining contracts: Stay away from scams!
Another way for ordinary people without expensive supercomputers to make a decent amount of money mining crypto is through a mining contract. A mining contract basically works by investing in a share of a mining center. While there are a few well-established and legitimate mining contract programs, 9 out of 10 such offers are scams (Ponzi schemes).
Also, there are no legitimate “bitcoin doublers” or “make xxx BTC using little-known exploits.” They are complete scams that are so obvious I cannot believe anyone can fall for them.
Do your homework before wasting your money.
How to keep and use cryptocurrencies
Like any kind of money, you will need a place to store it and be able to spend or access it when you need to.
Every cryptocurrency, therefore, has a “wallet” software with which you can store, receive, and send your coins.
“Standard” wallet software that can be downloaded from the official Web site of the cryptocurrencies are not something I recommend for beginners or for people with limited computer hardware resources. Unfortunately, these wallets can only function if they downloaded the entire record of blockchains (that is, the transaction history of all crypto users around the world since the beginning of time) and that data remains constantly synchronized and updated. This blockchain data amount to several gigabytes and will only expand as the time passes, which must first be downloaded (which may take a couple of days!) before you can do anything else.
The better options are:
- “Electrum” wallets
- Mobile wallet apps
- Web-based wallets
Electrum wallets overcome the aforementioned problem by simply connecting to a cloud server that already is doing all the synchronizing and storing of blockchain ledger data. They are desktop apps that you can download and use on your computer without taking up a huge (and expanding) disk space. And they will work immediately after you install them.
Mobile wallet apps work on your Android smartphone or iPhone and provide a convenient way to manage your coins, as well as to receive and send them wherever you go. My favorite wallet app for Android (also available for iPhone) is Coinomi after I’ve tried several other apps and got frustrated with their user interfaces. Coinomi lets you hold many different kinds of cryptocurrencies in a single app, and its UI is excellent. It is also integrated with Changelly to let you exchange one cryptocurrency (e.g., Litecoin) to another (e.g., Bitcoin Core) [aff.].
Web-based wallets are just that: wallets that run inside your browser as long as you are connected to the Internet. For Bitcoin Core and Bitcoin Cash, I recommend StrongCoin [aff.], a very stable online wallet that has been around for many years. Monero has its own Web wallet, MyMonero.
Whether you are using an Electrum, a mobile app, or Web wallet, be sure that you write down and keep your private key in a secure place! The apps and Web sites are NOT banks and they do not actually hold your money–they are just software provider that offers a cloud wallet. They have absolutely no access to your funds! You are the ones who hold your coins regardless of what kind of wallet you use. If you lose your private keys, your money is lost forever. Nobody, even the owners of the Web wallet or the wallet app developers, can help you recover it. Furthermore, it is very important to keep your public (public keys are also called “addresses” that people can use to send you money) and private keys so in case any app or Web wallet goes out of business, you will be able to use your key combinations to import your money into another wallet of your choice. You are your own bank! (Some wallets, instead of harder-to-copy private keys, generate a “mnemonic seed” that consists of several words. Write these words down in the exact order of appearance and keep these in a secure place. Mnemonic seeds can be converted into private keys.)
Beware: Stay away from custodial wallets, such as an online “wallet” provided by exchanges such as Coinbase. They are not genuine wallets but work like a bank. The operators of custodial wallet services have the private keys to your money, and withdrawing money from such “wallets” means you will have to pay them an additional fee on top of the standard miner’s fee. Furthermore, custodial wallet services are often targeted by hackers and thieves. For those who are privacy-conscious and are leery of giving away your personal data to some online businesses far away, be aware that these “wallet” companies require you to pass a KYC/AML identity verification (which is often performed by an unidentified third-party contractor). The difference between a genuine wallet app and a custodial “wallet” is that you have full control and possession of your private keys when you’re using a real wallet and also you are fully anonymous to it (though, Web-based wallets do require your email address but nothing else).
But can I actually spend cryptocurrencies?
Though cryptocurrencies such as Bitcoin have gotten a bad rap because of wild fluctuations in exchange rates and some people using them for nefarious purposes (such as drug dealing and committing frauds), most people use them for legal and ethical ends. While many people have come to associate crypto with risky investments, the original and ultimate purpose of crypto remains the same: to make the exchange of values less expensive and more global.
Here is a list of some of the well-known companies that accept Bitcoins for payment. Some non-profit charities, especially those that are Internet-centered and global in their scopes of activities, also take donations of Bitcoins and some other cryptocurrencies. Many international NGOs indeed find cryptocurrencies to be a convenient and reliable tool to transmit their funds abroad especially if they work in third-world countries with corrupt governments, unstable economies, and weak banking systems.
Also, Bitrefill lets you convert your Bitcoin, Litecoin, Dash, Dogecoin, and Ether into prepaid cell phone airtime credits (most U.S. prepaid and no-contract mobile carriers are covered) or a variety of gift cards, including NordVPN, Whole Foods Market, Chipotle, and Walmart. This way, you can spend the coins you earned on your living expenses.
Furthermore, cryptocurrencies would be a great way to send money to your friends while avoiding expensive bank fees or PayPal fees.