Boxmining v2

Category: Glossary

This section is the glossary of cryptocurrency related concepts, with easy to understand explanations for each of them. Understanding these concepts are key to having a solid understanding in cryptocurrencies. Topics can be as easy to understand as Hard Wallets, to advanced concepts like the Lightning Network.

  • Bitcoin Fees

    Bitcoin Fees

    What are Bitcoin Fees

    Bitcoin Transactions are not free, every single bitcoin transfer must include a fee. Here are some facts about Bitcoin Fees:

    • Fees are necessary  – Every Bitcoin Transaction is charged a fee. There is no standard price. Instead the fees are like a tip, the more you pay the faster the transaction is approved.
    • Higher Fees mean faster transactions –  Bitcoin transactions are not instant. Simply said, the more fees you pay, the faster the transaction is processed.
    • Fees are paid by the Sender – The receiver does not have to pay any fees.

    A generous tip (currently around $1 USD) will allow the transaction to be almost instantaneous (10 min) whilst modest tip ($0.05) incur a 10 hour wait time.  In fact, if no tips are included in a bitcoin transaction the transaction time may be infinite! Bitcoin transactions could be considered almost like a ‘tip’.

    Do large transactions mean large fees:

    In short: No. A common misconception is that the more bitcoins are transferred, the greater the fees that are needed. This however is not true, the amount of bitcoin fees that should be included depends on the amount of information relayed by the network. This means accounts with lots of small inputs would need more fees to transfer money out.

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    Cloud Mining generates tons of transaction fees

    One major downside of cloud mining is that the mined bitcoins will cost a LOT of transaction fees. This is because a lot of cloud miners (eg. genesis-mining) will give daily payouts. This means that you wallet will be filled with a lot of small transactions. Whilst this might seem like not a bit deal, when you try to send money out of the wallet the fee for the transaction might be up to 20% of the transferred amount!

    This is because bitcoin transaction fees are based on the number of inputs the wallet has. Because there are daily cloud mining payouts, the number of inputs in the wallet will be extremely high.

  • Segwit in Easy to Understand Terms

    Segwit in Easy to Understand Terms

    Now that Segwit has been locked in for Litecoin. it’s about time to take a closer look at what Segwit is and how it improves Litecoin. Here is a very brief introduction of what Segwit – it is please forgive me if it’s a little bit too simplistic but I want to try to summarize it in very easy to understand terms.

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    What is Segwit?

    If you consider of Bitcoin miners as accountants that process all the transactions that happen on the network and bundles them up into a ledger called the blockchain. Then the Segwit is a change to the ledger.  Think of it as a tax form.  It’s the act of removing of a signature from the form and placing it into a separate form. That’s all it is. Segregation of witness – the removal the signature on a form and placing it elsewhere. By taking out the signature, you create additional room on the ledger to fit more transactions.

    Why Adopt Segwit?

    Segwit is vital for the Bitcoin network where transactions are taking a long time because there isn’t enough room on each ledger (block) to place all the transactions. Litecoin doesn’t have this problem. Instead, Segwit was adopted to allow for technologies such as the Lightning Network.

    Segwit is a technological upgrade, and I can see why miners will go crazy over this. Especially when miners are the ones who decide to adopt this or not. Consider like an association of tax accounts trying to approve a new form. Accountants don’t like each other already, and they must all agree on a substantial change to a tax form. It turns out for Litecoin it was possible to persuade the miners to agree with each other, whilst for Bitcoin, it’s not yet possible as there is much more drama.

    The Post-Segwit World

    Now that Segwit is locked in for Litecoin, there are substantial changes in currency price (generally in the upward direction). Of course, must take this with a slight grain of salt. Litecoin prices are susceptible to financial manipulations such as the good old pump and dump.  Litcoin is getting a lot of media attention. This means there will be a lot of new investors that still don’t understand the consequences of Segwit or how Lightning Networks work. Some will overvalue it while others are indifferent. The most important thing is to understand what Segwit is and learn more about the Lightning Network.