> ju8 zz q d)> dq> q · the reason it takes bitcoin transactions anywhere from ten minutes...

CO I NCORNER

NEWSL E T T ER

C O I N C O M P A S S . C O M

APR I L 20 1 9

This month:

CO I NCOMPASS UPDATE S

Summary of PSA

Recommended Exchanges

Wa l lets

Co ld Storage Dev ices

I N DEP TH

The Lightning Network

B I T CO I N B LOCKCHA I N EXP LA I N ED

Block Sizes and Lightning Bitcoin.

CRYP TONOM I C S

Sign if icant economic , techno log ica l , and po l i t ica l

deve lopments in b i tco in and cryptocurrenc ies .

CoinCompass.comDisclaimer: this is not financial advice

Coincompass provides educational material only. 1 April 2019

http://www.coincompass.com/

COINCOMPASS UPDATES

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Summary of PSA



Trezor has responded to recent criticisms that it is susceptible to physical device attacks from its main competitor, Ledger. Currently Ledger and Trezor are the two most popular cryptocurrency cold storage devices. some of the criticism have promptly been patched by Trezor, as expected with any good open source project, yet all attacks are negated by having a 25th seed, including a $5 wrench attack (plausible deniability attacks). More information is available in CoinCompass PSA and ensuing newsletter. SOURCE:https://blog.trezor.io/our-response-to-ledgers-mitbitcoinexpo-findings-194f1b0a97d4

An update to Trezor has been released with new firmware and the added ability for Trezor holders to store more altcoins on their device.CoinCompass is recommending that anyone with a Trezor hardware wallet who accesses it regularly installs this upgrade by:

Trezor update: Optional

Trezor responds to criticisms: No Action Required

ensuring you have your recovery seed on handhttps://wiki.trezor.io/User_manual:Updating_the_Trezor_device_firmware and following the update instructions on screen.

SOURCE: https://blog.trezor.io/latest-updates-bring-new-architecture-to-trezor-one-and-ripple-support-to-model-t-3873ed3693c1

CoinCompass issues PSA (emergency alerts) to CoinCorner

subscribers advising of any threats or impending actions that could

affect your bitcoins.

https://coincompass.com/


https://blog.trezor.io/our-response-to-ledgers-mitbitcoinexpo-findings-194f1b0a97d4

https://blog.trezor.io/our-response-to-ledgers-mitbitcoinexpo-findings-194f1b0a97d4

https://wiki.trezor.io/User_manual:Updating_the_Trezor_device_firmware

https://blog.trezor.io/latest-updates-bring-new-architecture-to-trezor-one-and-ripple-support-to-model-t-3873ed3693c1

CoinCompass Updates

Page 3

Exchanges

If your intent is to accumulate bitcoin over several different purchases we recommend Bitstamp and Binance. Binance does provides anonymity if you have less than 2 bitcoins in your account. If you want to purchase a small amount of Bitcoin, i.e. less than 2, and you wish to do so privately we recommend LocalBitcoins.com Video guides for using exchanges, wallets and getting your coins (private keys) away from exchanges can be found in the CoinCompass members portal.

Exchanges are temporary means

to buy bitcoin. Move them to your

hardware wallet immediately.

Exchange Private Competitive Price

KYC/AML compliant

USA Tax resident

Bitstamp

Binance

LocalBitcoins

The exchanges listed below have been tried and tested by

CoinCompass. Everyone's purchase requirements differ so please

use this as a guide only.

Please note there is a change from our previous edition as we are

no longer recommending Coinbase Pro and have added Binance.


Coincompass provides educational material only. 1 Aplril 2019

https://coincompass.com/members/

https://www.bitstamp.net/

https://www.binance.com/en


https://localbitcoins.com/

https://coincompass.com/members/


CoinCompass Updates

Page 4

Mobile Wallets

Mobile (software) wallets are short term storage solutions for small amounts of bitcoins and cryptocurrencies just like your physical wallet. For long term storage CoinCompass recommends hardware wallets and custom solutions.

Watch our video guides on

using cold storage devices

and extra security protocols.



Wallet Operating system

Bitcoin Altcoins 2FA

Blcockstream Green

Edge

Apple, Android, Linux

Apple, Android, Linux

Hardware Wallets

DeviceBitcoin Storage

Alt-Coin Support

Ledger

Trezor

Desktop Support

Smartphone Support

Alt-coins

9/10

7/10


https://coincompass.com/individual/


https://www.ledger.com/

https://trezor.io/

IN DEPTH

Page 5


The year 2017 marked two very different discourses for Bitcoin. It was the year that the parabolic price appreciation drew major headlines across the world as the price of bitcoin rallied from US$900 to an eventual high of just under US$20,000. Yet what was not a major news story is that within the bitcoin echo chamber 2017 became known as 'the year of the fork.' Even though Bitcoin is open source allowing anyone to fork (create) their own coin, in 2017 key Bitcoin business, entrepreneurs and personalities were behind different initiatives to fork bitcoin due to their frustration of high fees and slower block confirmations, What emanated was 'the New York Agreement' where certain proponents wanted to adopt SegWit (Segregated Witness, a protocol that had been tried and implemented on Litecoin) as well as double the blockchain block weight (size) from 1 megabyte per block to 2 megabytes. Segwit2X, as the New York agreement became known, ended up being cancelled for two reasons. The first is Bitcoin Cash (BCH) was forked from Bitcoin allowing for greater block sizes thus creating a separate coin that had larger block sizes. The second reason was SegWit was implemented on the original Bitcoin blockchain. The implementation of SegWit and the creation of Bitcoin Cash took the steam out of the New York Agreement and their proposal for SegWit2x. SegWit itself allows for the implementation of faster transaction processing and reduction of fees of the Bitcoin blockchain, (the Lightning Network being one of them) thus eliminating the need for forked Bitcoin blockchains (alt coins). Bitcoin has long been criticised because of its slow confirmation times. As we've written about in the Bitcoin Begins booklet, you can send bitcoin from one address to another on the other side of the world and it's settled within the hour and sometimes even within 20 minutes. This is very fast compared to SWIFT yet even five minutes is a very long time to wait if using bitcoin for daily payments.

C i CC i C







The Lightning NetworkWith bitcoin, vendors and exchanges use to require a minimum of 6 confirmations (blocks) on the blockchain. This means the transaction needed to be mined on at least six blocks, with a block being mined on average every ten minutes the minimum time for confirmation, and thus settlement was around one hour. Many vendors, wallets and exchanges have now decreased that to two confirmations, this is due to the fact that as more people use bitcoin the following network effect takes place: more transactions = greater hash power = increased difficulty = more security To explain in plain English, Bitcoin uses cryptography (mathematical algorithms) to mine blocks. If there are very few miners then the difficulty rate of the algorithms is low. As more and more miners join the Bitcoin network, the hash power increases so the difficulty will increase accordingly. The purpose of the difficulty adjustment (on average every two weeks) is to maintain a steady block time of ten minutes (on average) thus allowing time for the blocks to propagate among the Bitcoin network. When there is so much hash power in the network you can depend on two confirmations because those blocks would be very expensive to reverse. The slowness of Bitcoin's block time (10 minutes) is by design as it makes it more robust and secure, as compared to other blockchains that run 30 second block times.

C i CC i C



However 20 minutes is too long a confirmation time to wait for micro-payments. The Lightning Network is a layer 2 scaling solution for Bitcoin. The reason it takes bitcoin transactions anywhere from ten minutes to over an hour to settle is because they need to be confirmed on the blockchain.

Visa undertakes 65,000 transactions per second,

while Bitcoin was managing only seven.

The debate over increasing the block size was an on-chain vs off-chain proposal meaning that transactions would have been processed faster but it would have inflated the block weight (size) and therefore more expensive hardware is required to verify the blockchain (refer to CoinCorner November 2018). The Lightning Network, introduced in 2018 but was in development since 2015, allows you to set up a direct payment channel with another party.






The best analogy to explain the Lightning Network is setting up a tab at your local pub. So it's a Friday night and you walk into your local and put a $100 note on the bar. You order a few drinks throughout the night and when it's time to go home you go to settle your tab. You've accumulated $67 worth of drinks so the barman gives $33 in change. Even though there were several purchases throughout the night there was only one settlement. The Lightning Network is the same process. If you visit the same coffee shop everyday then you can set up a channel with the merchant on the Lightning Network. They provide a receipt in the form of a Lightning address as a QR code you scan with your Lightning wallet. This then deposits 0.05 Lightning bitcoins into it. Over the next month you purchase a coffee every day and you are charged transaction fees that are exceptionally small that would not be possible on the Bitcoin blockchain (they can be smaller than one hundred millionth of a single bitcoin, i.e. 0.00000001 BTC). After 30 days you or the cafe decide to settle the account and close the channel. The Bitcoin blockchain records that you have paid 0.05 bitcoin to another address and even though it was 30 transactions over a month it is recorded as only two transactions on the Bitcoin blockchain, one to open the channel and one to close it. Therefore, the lightning network allows off-chain micro-payments to be separated from the bitcoin blockchain which reduces on-chain transactions.

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Even though multiple transactions

have taken place, the bitcoin

blockchain records only one

withdrawal and one deposit

therefore saving space.





The Lightning Network.

When the lightning network was first released it was a nuisance to set up a channel. The party accepting bitcoins had to set up a channel by funding a small amount of bitcoins into it, and then each customer had to join the channel by adding their bitcoins and then each channel with each customer had to be closed. Whereas now a new customer can automatically join a third-party's open channel which diminishes the need to keep setting up and closing new ones. Let's say one day I walk into the cafe with two friends, Alice and Bob and together we want three separate orders of coffee. I have an open lightning channel with the cafe but Alice and Bob do not. We each want buy a coffee worth 0.001 Bitcoins. I have an open Lightning Channel with the Cafe, Alice has an open Lightning Channel with me and Bob has an open Lightning Channel with Alice.

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Alice

0.001btc

Lightning ChannelMe

0.002btc

0.003btc

Lightning Channel

Bob

So rather than Bob and Alice each opening a new channel with the cafe, Bob sends 0.001 bitcoin to Alice, Alice then sends 0.002 bitcoins to me and I send 0.003 bitcoins to the cafe covering all three coffees. The three separate channels stay open until one of the parties decides to close them.





The lightning network is just one of the many use cases that SegWit has allowed for. Schnor signatures and several other developments will see bitcoin move beyond a store of value to an everyday currency and settlement service while being in a position to technologically compete with credit card services (i.e Visa, Mastercard) and even other payment services such as PayPAl, Venmo, and Apple Pay. The benefits of the Lightning Bitcoin Network to businesses are; If testing the lightning network CoinCompass recommends only using lightning wallets with small amounts (0.003btc or less). CoinCompass instructs both individuals and businesses in setting up Lightning Channels through our workshops and bespoke business services.




receive instant payment and settlementreduce processing fees (especially compared to conventional payment services)no ability for customer charge-backs.

https://coincompass.com/business/



Continuing with the theme of the Lightning Network we're going to look at the Bitcoin blockchain's individual block weight (size); the debate to which led to 'the New York Agreement.' So when the Bitcoin blockchain code was first released by Satoshi Nakomoto it capped each block at 1 megabyte. This was beneficial as it allowed anyone to join the network with a standard computer and mine bitcoin without needing to upgrade or buy specialising hardware. Yet as the network grew those early miners started competing with more powerful, more expensive computers and purpose made ASIC miners. So the risk to reward ratio was skewed towards larger mining operators.



Blockchain Explained

Contrary to popular belief bitcoin is very transparent, if you visit Tradeblock or Coin.dance you can see the blocks being created in real time and analyse each transaction processed. The image above is a screenshot of coinblock revealing the intricate details (transactions, bitcoin amounts, sending and receiving wallet) of each block released. Within each transaction there are messages, even attachments, similar to an email. The more transactions in these blocks the more congested the blockchain gets. In 2016 and 2017 the blocks were very full reaching their 1 megabyte limit. It was the continuous full blocks that led to many proponents calling for a block increase. Yet when SegWit was released the volumes in each block actually decreased.



https://coin.dance/

It was soon discovered that the miners, who were calling for larger blocks, were 'spamming' the network. They were sending each other small quantities of bitcoins with large files filling up the blocks. These parties then argued that the blockchain was bloated and larger blocks were thus the only solution. These larger mining operators, Bitmain being one of them, put their support (hashpower) into Bitcoin Cash, having larger blocks. The Bitcoin blockchain stopped being spammed and overnight the volume in each block decreased. So with the adoption of SegWit and the correlated cancellation of the New York Agreement the block argument came to an end and the Lightning Network was introduced. The chart below from bitcoinvisuals.com reveals the growth of lightning channels from under 1,000 to over 40,000 in the past 12 months.






These channels are not just local connections but intercontinental as well. This live map of open lightning channels is from Acinq.co




Imagine if you could instantaneously send funds to someone overseas and all you need is a smartphone. Don't imagine, with bitcoin and lighting you can do so with very small fees.

https://explorer.acinq.co/



https://explorer.acinq.co/

Prior to reading this section we want to remind you that these are opinions only. CoinCompass is not a financial adviser. We are educators. We are presenting these arguments as a concise summary of bitcoin traders we follow and respect. This is not trade advice, your entry and exit points are your own responsibility. Bitcoin has been undergoing its longest bear market ever recorded, a bear market defined by failure to reach new all time highs. On a sentiment level we could be very near the bottom of the bear market, time-wise but not necessarily price wise. One indicator we came across was the news by the Chicago Board Options Exchange (CBOE). The CBOE launched the first bitcoin futures product on 10 December 2017, Bitcoin was trading at $15,000 USD in full swing of the parabolic bull market that came to an abrupt blow off top just six days later:

BITCOIN PRICE DEVELOPMENTS



Over a year later, on 20 March 2019 the CBOE announced they were discontinuing the bitcoin futures market due to lack of interest in the product. This, we believe is a strong sentimental indicator we are near a bottom, according to time not necessarily price, of the current bear market.



Sentiment indicators are worth watching as they can mark turning points in an asset class. Try and guess when this edition of the Economist was published in correlation to the price of the US dollar on the chart below;

BITCOIN PRICE DEVELOPMENTS..



US Dollar Index

(DXY)






Such indicators are not foolproof but can mark turning points of exuberance or exhaustion in public mood. If you look at the chart below this is of the Brazil ETF, the bottom and absolute best time to be investing in Brazil was 11 January 2016. On the next page have a look at The Economist edition published just one week before;

The above issue of The Economist was published on 2 December 2016, the end of the dollar rally came just four weeks later and it then proceeded to fall 14%.

Brazil ETF (EWZ). 11 January 2016.






These same mood indicators can be applied to Bitcoin as well. We're all familiar with the bow off top that took place in December 2017. Have a look at 'Bitcoin' in Google Trends searches for that period. There is a perfect correlation to the price of Bitcoin at the very top.

Published one

week before

Brazil's economy

took off!






In 2017 Bitcoin appeared as the number five search item in Google News. At time of writing the Google Trend for 'Bitcoin' searches is the lowest it has been since April 2017.

Social indicators are interesting yet they do not lead price, they lag. March has been a very frustrating month for bitcoin traders, $4,200 has been incredibly strong resistance and it has been tested several times. There have been volatile swings in both directions taking out longs and shorts.






Here's the opinions of some analysts that CoinCompass follow through their publications, Medium, Twitter and YouTube channels: Tone Vays (@ToneVays) Believes if the price breaks $4,200 then there's room for a pump to $4,800 USD, which could be followed by a quick retracement to $4,000 or potentially below $3,000 USD. Peter Brandt (@PeterLBrandt) tweeted in late February the symmetry between the 2017-2019 period and 2013-2016.






Peter Brandt also posted the potential triangular bottom, that a breakout above $4,300 is required to complete. This is a view shared by Tone Vays that there is no trend until there is a daily close above $4,200.

You would have noticed there is very little narrative on the actual price of bitcoin in this edition of CoinCorner. We listen to podcasts and watch YouTube videos on a daily basis and we're finding sentiment is at the apathy stage, hence there is very little analysis on the price of bitcoin. It is our opinion that are not at the capitulation stage but in the doldrums. At CoinCompass we do not advocate trading bitcoin but if you were to invest in it long term there is the potential for greater upside than downside from here.



CBOE discontinues bitcoin futuresSee more analysis of this development in the previous section. The Chicago Board Option Exchange (CBOE) was the first exchange to list Bitcoin Futures and has announced they will no longer be offering anymore bitcoin futures after the current ones expire in June. The stated reason for the decision was decreased interest in bitcoin futures.

CRYPTONOMICS

Economic, financial and legal developments in Bitcoin and crypto.



SWISS Federal Council to encourage blockchain developmentIn a bid to sustain and bolster its reputation as a safe financial haven, the Federal Council asserted, "it wants to create the best possible framework conditions so Switzerland can establish itself and evolve as a leading, innovative and sustainable location for fintech and DLT (Distributed Ledger Technology) companies" according to a release from the Federal Department of Finance. It further added, "Among other things, the report showed that Switzerland's legal framework is already well suited today to dealing with new technologies, including DLT".

IBM and Western Union partner with alt-coinsWestern Union, one of the world's largest fiat transfer agents and computer manufacturing giant IBM have partnered with Stellar (XLM) to integrate blockchain settlement into their transfer and payment services respectively. In a move to capitalise on the blockchain revolution large corporations have opted to work with alt-coins such as Stellar and Ripple (XRP) as they are not open source cryptocurrencies but companies running a digital currency.

https://www.forbes.com/sites/jpreissler/2019/03/20/cboe-pulls-out-of-the-bitcoin-futures-market/amp/



https://www.efd.admin.ch/efd/en/home/dokumentation/nsb-news_list.msg-id-74420.html

https://www.efd.admin.ch/efd/en/home/dokumentation/nsb-news_list.msg-id-74420.html

What we do

Bitcoin Basics workshops. Offered both online and in-person, these are interactive and highly practical workshops. Begin with little or no Bitcoin knowledge and walk away with full control of your private keys. Video Guides - Online DIY. We guide you through all the steps from securely buying to storing your bitcoins while improving your security hygiene along the way. Newsletter. Stay informed with the state of Bitcoin and blockchain developments, news and comprehensive summary of price movements from technical and fundamental analysts. Included is access to infrequent but important PSAs (Public Service Announcement- emergency alerts) Helpdesk - In person or online. We offer in-person help desk consulting sessions and at prearranged times online. Contact us first for a quote and if we can't help you we won't charge you but as Bitcoin nerds we think we probably can. Visit CoinCompass.com for more details.

Page 21

CoinCompass is an educator providing up-to-date industry best practices on bitcoin risk mitigation.

We are not a broker nor money transmitter so cannot buy bitcoin on your behalf.

CoinCompass provide you with the knowledge and tools to safely

buy, store and control your own coins through our proprietary

services such as:



https://coincompass.com/individual



Disclaimer

CoinCompass provides educational consulting based upon industry best practices and our extensive expertise. CoinCompass never receives commission for recommending any product or service. We try and test new products and services ourselves before we post an opinion on it. CoinCompass is not a financial adviser and therefore never provides investment advice. Do your own financial research of when and what to buy or sell. CoinCompass is not a money transmitter nor broker so cannot receive any money for buying Bitcoin or any other crypto asset. CoinCompass takes no responsibility for out-of-date information because this industry is new and can change overnight. View our various consultancy packages including emergency alerts, to keep up-to-date. CoinCorner is presented for informational purposes only. The information presented in CoinCorner should NOT be construed as investment advice. Always consult a licensed investment professional before making important investment decisions. The opinions expressed in CoinCorner are those of the participants. CoinCompass, its directors and editors shall NOT be liable for losses resulting from investment decisions based on information or viewpoints presented in CoinCorner.

Page 22/22

CoinCompass.com

1 April 2019

https://coincompass.com/services



> ju8 zz q d)> dq> q · the reason it takes bitcoin transactions anywhere from ten minutes...

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