All I Want Is Bitcoin For Christmas!

What better idea to give for Christmas than Bitcoin! The premier digital asset is a gift to behold. There will only be 21 million BTC in existence, so having at least one or a fraction of BTC will be very valuable. Here are ways on how you can gift your friends, family and loved ones with the number one cryptocurrency in an easy and secure way.

Bitcoin ATM Voucher

Give a voucher to redeem BTC from a Bitcoin ATM (BTM). Go to the BTM to purchase Bitcoin.  A printed receipt will be given that contains the wallet address of the Bitcoin(s) purchased. The BTC can be redeemed at any time. Best to give with a Christmas or holiday greeting card. This is the best way to give Bitcoin to first time holders.

Hardware Wallets

Purchase a hardware wallet (e.g. Trezor, Ledger) for storing a Bitcoin address private key. This in itself is enough for the gift, but you can also add some BTC to the wallet address. Ideal gift for more advanced users who may already have a hot wallet (i.e. online wallet) on an exchange. Hardware wallets allow users to have full custody of their Bitcoin(s).

Direct P2P (Peer-to-Peer)

Gift Bitcoin the way it was intended to be used, peer-to-peer. Just get the recipient’s wallet address and send the Bitcoin from your wallet. This is now simpler thanks to smartphone apps (e.g. CashApp, Coinbase) which have features for sending cryptocurrency like Bitcoin to other users. You can also use Lightning Network apps (e.g. Strike), which makes it faster to send BItcoins.These apps are  easy to use, but do be wary of transaction fees. It could be a little more expensive during the holidays when the network is busier than usual. 


Some crypto companies like Coinbase offer a crypto-gifting service. You must have an account on their platform to do this. This will allow you to choose the cryptocurrency of your choice (choose Bitcoin!) and send it as a gift. Provide the recipient’s e-mail address and instructions will be sent on how to claim their Bitcoin present.

Bitcoin Is A Gift That Keeps On Giving

The overall value of Bitcoin is everlasting. It can be worth more than it is currently priced in the future due to demand and supply. It is even more scarce than gold. It is also something that cannot be easily confiscated or restricted, because of its decentralized nature. Bitcoin’s properties make it a good asset to own for storing value.

The takeaway here is to give Bitcoin(s) responsibly. Recipients should be educated on cryptocurrency in general, not just Bitcoin. Spend some time with them to help them learn. With that understanding, you can make sure they will be responsible enough to never reveal a private key and that once it is lost the Bitcoin might never be recovered.  It is about safety and security first in order to enjoy Bitcoin this holiday season.

Disclaimer: This is not financial advice. The information provided is for reference and educational purposes only. DYOR always to verify any information.

VISA Forges New Connection Between Fiat And Cryptocurrency

Payments giant and credit card company VISA, have announced they are providing support for cryptocurrency payments using the USDC stablecoin starting with partner USDC is an ERC-20 token that runs on top of the Ethereum blockchain network. This makes use of a stablecoin to settle payments using VISA payment products through their partners. At the moment VISA will pilot the payment system with, a cryptocurrency platform and digital exchange, with plans to offer the service to other partners. VISA is going to make using cryptocurrency much more available for payments. This legitimizes cryptocurrency payments for goods and services, since VISA is a financially regulated entity.

This is a bridge between traditional finance with emerging fintechs involved with cryptocurrency and digital assets. VISA had tried to bridge cryptocurrency payments before, but plans fell through. Perhaps VISA is now ready to provide the service with more knowledge and understanding of cryptocurrency. This allows VISA to better understand the new space fintechs are operating from, which involves innovative products that implement digital currency and blockchain technology. Perhaps it is a sign that changes are coming to traditional financial systems. VISA has been warming up to cryptocurrency and other digital currency (non-crypto) as evident from their more recent postings.

Before VISA, payments processors like PayPal and Square have provided support for cryptocurrency. PayPal has paved the way for users to buy cryptocurrency like Bitcoin through their app. Square allows their customers to buy, hold and sell cryptocurrency through their platform, including the Cash app. Prior to that, there were not many mainstream apps other than those provided by digital exchanges like Coinbase that allow their users to purchase cryptocurrency. VISA is different in that it is providing a way for customers to make payments with the cryptocurrency they hold. This is a layer that has been missing and it could accelerate utility of cryptocurrency as a payment method. Using the blockchain may also provide faster settlements compared to the current system, but scaling remains to be seen on blockchain networks like that of Ethereum.

While the purpose of cryptocurrency is for open direct payments system (Peer to Peer), VISA is not exactly that type of platform. It still operates under the traditional financial system, which is highly centralized and permissioned. That means VISA is not exactly an open network, it requires a membership for its customers. That is why the product they offer is more of a bridge between the traditional fiat system and cryptocurrency. The decentralized aspect of a transaction still falls under the blockchain layer, but through a VISA payment gateway. In the case of USDC, the payment is from a user’s digital wallet on the Ethereum blockchain or even a custodial wallet that supports USDC. What VISA provides is a way to make that payment possible to retailers who will accept the transaction. VISA has so many partners in the retail space that they work with, this opens opportunities for cryptocurrency companies like to have access to more traditional financial markets.

VISA could also open another bridge, this time to the DeFI space of the blockchain. Most platforms in DeFi run over the Ethereum network, but other platforms like Binance, Polkadot and Cardano offer their own ecosystems that provide DeFi apps. If there is integration to support VISA, that can bring more users to the DeFi space who are using VISA credit cards or payment applications supported by the VISA network. At the moment, VISA and other credit card companies do allow customers to purchase cryptocurrency from digital exchanges. Opening up to support decentralized exchanges in the DeFi space are more challenging due to regulatory compliance. If this can be resolved, it opens up the space to allow interoperability of dissimilar payment networks to become possible.

This is overall good for the Ethereum network. VISA will not only need to have USDC, but also Ethereum’s native token ETH (ether). In order to process transactions using USDC, small denominations of ETH are used to pay for costs called “gas” which are part of the transaction fees paid to the network. This is for processing transactions that have to be verified and secured on the blockchain. It may also be likely that it will be VISA’s partners who hold the USDC and ETH, while VISA just helps bridge the retail merchants with the cryptocurrency payment as the settlement layer. The main issue with Ethereum has been scaling, but the development community is fast tracking efforts to scale the network.

With VISA’s announcement, other payment companies like Mastercard and American Express should take notice. This introduces a business model that brings cryptocurrency native platforms with the traditional retail space. The predominant form of payment in the VISA network is by credit and debit card. By integrating a cryptocurrency method into the network, it opens up new channels for making payments. The choice of using a stablecoin also makes plenty of sense given that cryptocurrency is very volatile. This changes the narrative that cryptocurrency is trying to replace traditional finance. Before that can happen, it must have greater utility. Perhaps VISA can help bring it to more mainstream adoption, to the point where we can buy toilet paper with cryptocurrency.

(Image Credit: Photo by Tom Fisk)

The Double-Spend That Never Was

On Thursday, January 21, 2021, news outlets began circulating reports of a Bitcoin double spend flaw which led to an 11% drop in the price of the digital asset. This would have been a major exposure of a flaw in the blockchain … except it never was. In fact, what happened or reportedly occurred would be a part of how Bitcoin is supposed to work. It is hard to explain the full details unless you get technical, but let us try to explain it in simpler terms.

First, what is a “double spend“? This was the problem Bitcoin’s creator Satoshi Nakamoto was able to solve for digital currency. Prior to that, it was a problem in computerized electronic payment systems that other developers had proposed solutions for. Since computers are digital, when currency is created it can be easily copied just like a file made in Excel or Word. If you have a file that represents your money in a computer, without any means of control a user can create infinite copies and spend it all they want. It is possible to use the same digital money to purchase two different items, so long as there is no system checking for it.

Nakamoto solves the problem by implementing a blockchain to support provenance and verification. That means that the amount of currency like Bitcoin (BTC) that a user holds, is determined by a mechanism that is verified through a consensus or agreement. In this case it is called Proof-of-Work (PoW) on the Bitcoin blockchain. You have nodes (computers) called miners that run software which run algorithms to try and solve a complex puzzle to discover a block for validation. The block contains transactions that are verified based on cryptographic hashes that can be traced back to what is called a genesis block. If it can be verified, then it is added to the blockchain.

Before a block is added, there is a competition among the miners to try and discover a number called the nonce. This is what is needed in order to validate a block. The miner who discovers it first will become the block validator and will receive a reward in return for their effort. The miners also collect fees for helping to validate transactions on the network. No transaction is ever allowed to pass unless it goes through a consensus among the miners on the network. Double-spends are prevented by the miners through this verification and validation process which also includes confirmations.

Bitmex Research first reported the incident in a tweet of a potential double-spend that occurred in the wild. They were the ones who also pointed out that it was a double-spend, but here is the problem. It was unconfirmed and the researcher who discovered it should have probably waited for what is called a chain reorganization, which is a part of the blockchain’s protocol. It is true that a BTC could appear to be spent two times on different transactions. It must undergo a series of confirmations, usually 6 but it could be more (depends on network activity). This was mentioned by Satoshi Nakamoto in the Bitcoin White Paper.

It is possible for two blocks to be mined simultaneously on the blockchain. This creates a temporary anomaly that can be observed by anyone who has access to the mempool of a Bitcoin node. There is a built-in feature in the code that corrects this problem. It is part of a chain reorganization in which the nodes must add the valid block to the longest chain, or the main network. You can see two transactions that appear to have spent the same BTC, but after the chain reorganization and block confirmation it is resolved. Only one of those blocks that contain the transaction will be valid and added to the blockchain. The other block will be orphaned and not validated.

Many cryptocurrency and blockchain experts like Andreas Antonopoulos, Bitfinex CTO Paolo Ardoino, Coin Metrics Bitcoin Network Data Analyst Lucas Nuzzi and later, even Bitmex Research all agree that it was not a double-spend that occurred. There are counter points though, especially from among the Bitcoin SV (BSV) camp who do have some thoughts of their own. What we know for sure is that only one of the transactions has been verified and validated on a block. The user tried to use a feature called Replace-By-Fee (RBF) in which you can speed up a transaction by paying a higher transaction fee which invalidates a previous transaction that was sent out. What happened here was the lower fee somehow made it to valid block first, perhaps because of the timing. The user had waited too long and by the time the higher paying transaction fee was sent the previous one had already been added to a block on the longer chain which validates it first.

Should we be worried that an actual double-spend can occur? It is always good to be alert and aware of what is happening. While the code does what it is supposed to do, there will be bad actors who may try to exploit these types of attacks to see if they can get past the logic. What will be proof or testament to Bitcoin’s legitimacy as a cryptocurrency is how these measures will stand against the test of time. As long as it is working, it will help the network to remain secure and operational. Until the next news, HODL.

The UTXO Model Explained In Cryptoeconomic Terms

Bitcoin uses the UTXO (Unspent Transaction Output) accounting model for processing transactions. In Bitcoin, a user’s balance is indicated by the unspent amount of BTC that is recorded on the blockchain. A user’s input to a transaction is the output from the last transaction. If the user has no previous transaction, then the input is the output from another user’s transaction. These are processed continuously and written to the blocks which are added to the main chain for immutability. Every transaction on the Bitcoin blockchain has an input and output to prove the transfer and ownership of a digital asset.

There is a misconception that digital wallets store the digital assets. That is actually not the case since the digital assets are always stored on the blockchain. They are just values that indicate the balance or quantity and the ownership by a private key. The digital wallet is really an application that provides users access to their digital assets on the blockchain via a private key. The wallet also contains the public address, which is used to identify the user to the blockchain. Once the wallet is opened, the users can see their digital assets from the blockchain. In Bitcoin, the BTC is always stored on the blockchain. The information is accessed by the user from their wallet with authorization from their private key. Without the private key, a user will not be able to access the information. The private key also creates a digital signature which authorizes a user to send their BTC to another user as a way to transfer the ownership of the digital asset.

When the digital asset is transferred, it is recorded as an output O from the sender. It is then the new input I to the user it was transferred to. It has to always be an input/output relationship for provability. The transactions can be referenced by cryptographic hashes that is called the TxHash (Transaction Hash). Users can view this information on a blockchain explorer like The best way to understand this is that inputs reference outputs when making transactions on the Bitcoin blockchain.

Key concepts to understand:

  • Each input to a new transaction was the output from a previous transaction, which can be referenced by a TxHash.
  • Each output was the result of a transaction from a spent amount.
  • The input from an output is considered an unspent amount.
  • All unspent amounts are considered the balance of the digital asset the user owns.
  • The spent amounts become the unspent amounts of other users who received the digital asset.
  • Only unspent outputs can be used as inputs to a transaction in a Bitcoin network.
  • The sum of all unspent outputs is the total balance available to the user.

Let’s take an example.

Bob wants to pay Alice 5 BTC. Bob has a balance of 100 BTC, while Alice has 30 BTC. According to the protocol, the sender is Bob and the recipient is Alice. Both users have a Bitcoin public address, which is a hexadecimal string. The public address is like the e-mail address, it allows users to identify other users for sending digital assets. Bob will send the 5 BTC to Alice via her public address.

Here is how the process works:

  1. Bob unlocks his unspent outputs using his digital wallet to send 5 BTC to Alice.
  2. Bob’s UTXO of 100 BTC is his input to the transaction. Once Bob indicates from his wallet that he only wants to send 5 BTC to Alice, the 5 BTC is deducted from the 100 BTC. (100 – 5)
  3. The 5 BTC are sent to Alice’s address and the remainder of 95 BTC are sent back to Bob.
  4. Alice’s balance is increased by 5 BTC (30 + 5) for a total of 35 BTC.

This is a simplified overview of how the process works. In reality, the transaction must undergo confirmations in order to be validated to the blockchain. This is another mechanism that uses the PoW (Proof-of-Work) consensus algorithm.

Bob’s output (95 BTC) from the transaction will become his input to his next transaction. Multiple transactions can occur on the network at the same time. Suppose that Carol wanted to pay Bob 20 BTC at around the same time that Bob was sending 5 BTC to Alice. This is possible since transactions can run in parallel, though they are still processed in sequence. While Bob’s transaction with Alice has a UTXO of 95 BTC, Bob’s transaction with Carol is a UTXO of 20 BTC.

Bob’s total balance is the sum of all his UTXO,

∑ ( utxo1 + utxo2 + … + utxon ) = utxo’

where n is the last term of the UTXO. In our example Bob’s total balance would be:

Total Balance = 95 BTC + 20 BTC = 115 BTC

Using blockchain analytics, all of Bob’s transactions can be viewed based on the TXHash. This contains information like the block number, number of confirmations and total fees.

On another note, the sum of the UTXO between Bob and Alice must not change. Before the transaction Bob had 100 BTC and Alice had 30 BTC.

100 BTC + 30 BTC = 130 BTC

At the end of their transaction, not including other UTXO, the sum must still be 130 BTC.

95 BTC + 35 BTC = 130 BTC

If the amount remained the same for Bob after he sent 5 BTC to Alice, then this is an example of a “double spend”.

100 BTC + 35 BTC = 135 BTC

The amount of 135 BTC is not correct since 5 BTC was spent from Bob’s UTXO. It should remain balanced at 130 BTC.

UTXO allows the Bitcoin blockchain to keep track of a user’s balance. Every BTC spent becomes a UTXO for another user. It also helps to prevent “double-spending” of a digital asset through a system of confirmations to verify the UTXO exists. The confirmations are possible because the UTXO is read by nodes on the Bitcoin network for validation. When there is a consensus among the nodes on the network that the UTXO is valid and has not been spent on another transaction, it is recorded on the blockchain. Once it is recorded, the data cannot be modified, changed or deleted unless there is a majority consensus to do so. This means no single entity can reverse or commit a double spend of the same transaction (Note: The exception is if they have the majority control (e.g. hash power), which requires at least 51% of the network). The transfer of ownership of BTC is thus concluded in the transaction.

The DAG Network Model Architecture In Distributed Ledgers

Not all cryptocurrency or digital currency are based on Bitcoin. In fact, some of them don’t even use a blockchain. They are graph-based networks (e.g. DAG, Hashgraph) which arrive at consensus much differently. The notion of a blockchain has become the most synonymous with cryptocurrency, but that is not applicable to all. IoTA, Hedera, Nano and Byteball are examples of graph-based networks. The most common type used is a DAG (Directed Acyclic Graph), which is more scalable network solution than blockchain based distributed systems. A DAG is not a blockchain but both use decentralized cryptographic databases in a sense that a Ferrari is not a lamborghini but are both cars.

A blockchain connects blocks by hashes which can be traced back to a primordial block or “Genesis Block” which is the root of all hashes. It uses a tree topology of nodes called a Merkle Tree, which has leaf nodes that contain the cryptographic hash from child nodes. When these hashes are concatenated, they can be traced back to the Genesis Block in the network. Blockchains use a consensus mechanism to validate the blocks, with PoW (Proof-of-Work) being one example that is used on the Bitcoin network. Consensus is what secures the network by way of validating a block and adding it to the blockchain where it becomes immutable so it is no longer subject to change. This prevents tampering and data manipulation. The consensus requires nodes called miners who must compete with one another by solving a cryptographic puzzle using a probabilistic zero-sum game approach. The miner who solves the puzzle first becomes the block validator and is rewarded with Bitcoin (BTC) for their contribution.

A DAG is a finite graph which is directed forward in one direction with a topological ordering. It consists of vertices that lead to other vertices, which are paths called edges. The vertices are like points in a network. The system uses an “Efficient Teacher Grading” method instead of miners doing PoW. A DAG uses peers to help validate transactions in the network. When a new transaction is made, a new vertice representing the transaction is created and must be validated by other peers on the network. It doesn’t require solving a puzzle, but relies on confirmations as the consensus using a gossip protocol mechanism. When other peers on the network can confirm the transaction as correct, it will be validated.

A DAG network is much faster than PoW since it doesn’t rely on compute intensive puzzles. This allows it to run on lighter devices in contrast to PoW systems that rely on power hungry ASIC devices that perform large numbers of calculations to solve the puzzle. This is rather inefficient, so it requires more energy to produce coins or tokens. A DAG is much faster and scalable since it doesn’t require the same overhead as a blockchain network when it comes to consensus. Costs are lower too because there is no need to purchase expensive equipment that use plenty of electricity. A DAG can utilize mobile devices like smartphones to help confirm transactions on their network. This also makes DAG more suitable for micro-transactions which require instant validation of transactions. DAG offer less barriers to entry because practically anyone can become a peer using their low-energy consuming smartphones while PoW requires more investment in hardware that require a consistent supply of electricity to operate.

Scalability has been the main reason for DAG over blockchains. A blockchain like Bitcoin has scaling issues because of the consensus mechanism it implements and the protocols used on the network. It was not developed for high throughput transactions like the VISA or Mastercard network. VISA claims it can process 1,700 TPS (Transactions Per Second) or 150 million transactions in single business day. Bitcoin’s blockchain can only process between 3 to 7 TPS only. Security has been a consistent strength of the Bitcoin blockchain, as it has never been successfully attacked (e.g. 51% attack) as of this posting since it started in January 3, 2009. DAG have not been in production for that long and have mostly been used on experimental and concept networks. A DAG is mainly used for DLT (Distributed Ledger Technology) implementations while blockchains are used on trustless permissionless public networks.

Ethereum Denominations Explained

Ethereum’s digital asset is Ether (ETH). It is a cryptocurrency whose fiat counterpart would be the Dollar, Euro or Yen. Ether can be spent on electronic payment systems, just like a form of digital medium of exchange. Its balance is then updated on a blockchain, where a digital wallet’s history is maintained that logs all transactions from the beginning to the present. Just like the Dollar, Ether can also be broken down into smaller denominations or fractions of the digital asset. The Dollar can be divided into cents, with denomination in penny (1 Cent), nickel (5 Cent), dime (10 Cent) and quarter (25 Cent). Ethereum also has its own denominations that are a fraction of Ether. Even Bitcoin (BTC) has smaller denominations called Satoshis.

The following table lists the various denominations of Ether, starting with its lowest unit called Wei. The table lists the values in Wei and Ether.

Denominations of Ether

The units are expressed with nicknames taken from pioneers in computing (Ada Lovelace, Charles Babbage, Claude Shannon, Nick Szabo, Hal Finney, Wei Dai) and Ethereum’s co-founder (Vitalik Buterin). The smallest denomination is Wei, which would be written as 0.000000000000000001 Ether for 1 Wei. That is 10 to the negative 18 in exponential form. The more commonly used denomination is Gwei, which is a billionth of a Wei or 10 to the negative 9 in Ether.

To get a better understanding of denominations, here are the values of 1 for each unit in Ether.

1 Wei = 0.000000000000000001

1 Kwei = 0.000000000000001

1 Mwei = 0.000000000001

1 Gwei = 0.000000001

1 Twei = 0.000001

1 Pwei = 0.001

When calculating gas, which is the unit of computation on the Ethereum blockchain, an entire Ether would be too much value. Therefore, like the way a Dollar can be divided into cents or a fraction of the currency, Ether can be denominated into smaller values. That way the cost of computation is kept low for transaction fees that occur during smart contract execution. The default maximum gas value is set to 21,000 gas units, which is in the denomination of Gwei. That would be worth 0.000021 Ether.

Denominations or fractions of a currency are a more fundamental way of dividing into more logical units of cost. Rather than a whole Ether to spend, a smaller denomination can be used as charges for a transaction. This lowers fees, making the system usable for payments and transfers.