(Photo credit should read ANTHONY WALLACE/AFP/Getty Images)
It’s been dubbed digital gold for Millennials and anybody else with a sense for good investments. Virtual currencies like Bitcoin are revolutionizing how we make transactions and interact with our global financial system. These unconventional and futuristic currencies are changing our financial world in ways we are just now beginning to grasp.
Entrepreneur Troy Osinoff thrives on the unconventional, and he has long seen the potential that Bitcoin has on how we do business. Osinoff got his start making websites for local businesses at the age of 10, and continued to build his career creating various startups, such as MakeAGIF.com (acquired). From there, Osinoff has written a book (sold to Fox in late 2017), funded various companies and advised a variety of startups.
His large network of websites and social channels reaches millions of users every month. He follows the Bitcoin and digital currency market closely, sometimes tweeting snippets of advice, such as when dips in the market make it a good time to buy.
Osinoff recently sat down with me to explain why savvy entrepreneurs won’t let the Bitcoin revolution pass them by. His insights crystallize the importance of digital, decentralized currencies like Bitcoin, explaining how they fit into the larger trend of globalized decentralization and how you can better navigate these digital currencies.
Deep Patel: Can you explain Bitcoin, altcoins and blockchain in simple terms for readers?
Troy Osinoff: Bitcoin is essentially a type of currency that is purely digital. It’s decentralized, meaning there is no central authority that regulates a bitcoin’s worth or how many bitcoins exist. Bitcoin’s price is dictated by the market, and the reproduction of bitcoins is built into its programming.
Altcoins is a term used for any coins that are not Bitcoin. A few of the most popular are Ethereum, Litecoin and Ripple. While these coins may have some similarities (mostly their blockchain structure — we’ll get into that in a bit), they largely have different purposes.
Cryptocurrencies such as Bitcoin and other altcoins are built on a “blockchain” structure. This means that their histories, or ledgers, are based on blocks of verified transactions. These transactions are verified by “miners,” who are tasked with solving a complicated math problem to validate the accuracy of a transaction.
Patel: How do you think Bitcoin and blockchain fit into the larger trend of decentralization?
Osinoff: Bitcoin and blockchain are becoming very popular during a time where many industries are becoming increasingly globalized and decentralized. This isn’t purely coincidental — it’s just how markets are evolving.
A decentralized peer-to-peer payment system such as Bitcoin has the potential to transform the world’s economy, and as more people start to use it, it begins to have significantly more power.
Patel: How can Bitcoin fit into fintech and offer opportunities for disruption?
Osinoff: The financial world has come a long way in the past hundred years, and the majority of that growth has happened in the past decade or two. Bitcoin could be viewed as an evolution of the current financial system, and as more blockchain- and Bitcoin-oriented fintech startups come into existence, Bitcoin will be able to make a much larger impact.
Patel: How can people forecast the pricing of Bitcoin and predict spikes and collapses?
Osinoff: Well, they can’t really. Spikes and collapses are largely either (a) a market reaction to new information or (b) the entrance of another big player into the market.
There are certain events that have proven to reveal some of Bitcoin’s sensitivities. For example, when the SEC denied the approval of a bitcoin-based ETP (exchange-traded product), Bitcoin’s price fell 18 percent. Since Bitcoin is largely in a legal gray area, almost any mention of Bitcoin in the United States political system regarding cryptocurrencies as a whole tend to have some impact on Bitcoin’s price.
Bitcoin is currently hovering around a $41 billion market cap. To see a big player make a substantial impact, they would essentially have to trade hundreds of millions or billions to do so. Other cryptos with smaller market caps see huge variations in price. However, if traders see a sudden unexpected dip caused by a big player, they might be inclined to sell their Bitcoins as well. The sudden influx of sell orders attracts more sell orders, and the snowball effect can cause a short-term pullback.
An interesting thing to note is that Bitcoin’s supply is capped at 21 million bitcoins. As more and more people become interested in buying Bitcoin, and since there isn’t a central agency to push out new bitcoins based on market demand, the price is seemingly uncapped. Additionally, people are able to buy small fractions of a Bitcoin and that makes entry into the crypto market very easy for virtually anyone.
Patel: What do ICOs mean for launching a venture?
Osinoff: ICOs are changing how many new ventures think about raising capital. Instead of searching for outside investments through angel investments or venture capital, companies that hold an initial coin offering are able to crowdfund a pool of money. Naval Ravikant talked about this in his article “The Bitcoin Model for Crowdfunding”altcoins can be crowdfunded into existence and achieve liquidity, going public on day one.
This has tons of implications for starting a business. Since ICO prices are largely determined by market demand instead of savvy and meticulous investors, there are a ton of sketchy altcoins popping up all over the place. Just because a company sounds good on paper doesn’t necessarily mean it is, and that’s why there are hundreds of subpar coins trading at high frequencies today.
On the bright side, companies that have an ICO are able to compensate the founding team with “pre-mined” or “early-mined” coins, which are like stock. These coins have the potential to significantly increase in value, and that serves as motivation to build out the product that is backed by the altcoin.
Patel: What are your favorite cryptocurrencies and why?
Osinoff: It’s good to preface this by saying that when picking out a favorite cryptocurrency, it’s important to look at them for their fundamental features instead of purely on their market performance. Some of these cryptos are trying to accomplish amazing things, and it’s worth diving into not only the specific crypto but also understanding the market it is looking to tackle.
That being said, I like Bitcoin, Ethereum and Golem. Bitcoin is the most viable peer-to-peer crypto, and it’s been around long enough to make higher market adoption a reality rather than theory.
Ethereum is very exciting not only because of its explosive growth lately. The Ethereum platform has the potential to disrupt virtually every industry, and the support behind the Ethereum Alliance lends significant credibility.
Golem isn’t as popular as the other two, but is working to accomplish something amazing. It’s the first global marketplace for idle computer power. This means anyone could access a global supercomputer that is made up of the combined power of everything from spare personal laptop computer power to entire data centers.
Patel: Will mining cryptocurrencies ever be a profitable venture?
Osinoff: While mining cryptocurrencies can certainly be profitable for some, it’s becoming much harder. It ultimately comes down to the investment in equipment and time you are willing to make. As more people enter the cryptocurrency-mining industry, it will only become more difficult to mine more coins.
Take Bitcoin, for example. Bitcoin mining was very profitable early on because the only miners were a small number of early enthusiasts. Today, a Bitcoin-mining venture looks more like a warehouse filled with high-powered machinery capable of extracting bitcoins at scale. Mining a bitcoin is still possible; it’s just much less likely due to the number of people trying to mine it as well.
Mining cryptos can get expensive, too. Unless you have the equipment or access to extremely cheap or free electricity, it will be difficult to come out enormously profitable. Altcoins such as Monero and the like provide an opportunity because they don’t have as many miners as Bitcoin, and could potentially be easier depending on their mining procedures.
Patel: How can entrepreneurs navigate the realm of cryptocurrencies?
Osinoff: Google is your friend, but be wary.While there is a lot of good stuff out there, you should use caution. You can’t be completely certain if the information you are reading is reliable or is just promoting a well-disguised pump-and-dump scheme. There’s a lot of artificial hype out there that could lead you to fortune or disaster.
One of the best ways to navigate the crypto world is to surround yourself with trustworthy, intelligent and like-minded people. We started acrypto group on Facebook aimed at creating a community built around a fundamental understanding, rather than speculation.
Forums are also a great place to get information. Reddit has several subreddits, such as r/bitcoin, r/ethereum and r/cryptocurrency.
