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How Does Inflation Affect Your Savings?

How Does Inflation Affect Your Savings?

September 06, 2018

Many financial experts recommend that you take 10% of your income and deposit it into a savings account. However, the majority of people never know how much they are actually saving. For example, when you deposit the money into your savings account, a dollar buys a loaf of bread, but by the time you withdraw that money, a loaf of bread costs $1.29. This is inflation at work. While you may have received some interest in your savings account, the question is, does it make up for the inflation?

Inflation is Your Enemy

Most people don’t think about or even understand inflation. They simply follow the rules of good money practice by saving and not over-spending. The above illustration showed that you had saved 10% of your income, which is typical of the advice that you will hear growing up. What they don’t tell you is that inflation will eat into your savings. Prices rise over time, wiping out your buying power.

Unfortunately, many people put their money into a savings account that pays a standard interest rate. For example, if you deposit $1,000 in a savings account that pays a 1% interest rate, after a year, you will have $1,010 in your account. Over the same time, if inflation is running at 2%, which, by the way, is the goal of the Federal Reserve, you would need to have a balance of $1,020 to make up for the impact of higher pricing. Since you only have $1,010 in your account, you have actually lost some purchasing power. If your savings don’t grow to reflect the rise of pricing over time, it’s the same as losing money.

You Should Still Save

Because of inflation, saving isn’t as simple as putting money into a savings account. True, you should have some money in a savings account, typically a six-month supply in case of loss of employment or some type of illness. Beyond that, you should then start to look at ways to outpace inflation. Some people do it in a 401(k), while others will do it in an investment account. The whole idea of a 401(k) or retirement account is to outpace inflation over the longer-term. This is why the stock market is a better option than a savings account since, historically, it returns 8% a year. However, that is in the long term, and fluctuations do happen along the way. You also have to pay capital gains tax, which is beyond the scope of this article, but this will also have an effect on how much you can actually pull out of your account. There are a multitude of ways to work around this though.

Multi-tiered Approach

If you wish to beat inflation, and that should be your number one goal, you simply must have a multi-tiered approach to savings. Savings should be thought of as not only cash in the bank, but also investment vehicles. The average financial advisor will suggest stocks, bonds, CDs, real estate, and even a small amount of precious metals, to protect from a falling dollar. By spreading around your savings, you allow for diversification, one of the greatest ways to protect yourself from asset depreciation. For example, if inflation runs at 3% next year, your savings account offering 1% in interest isn’t going to cut it. However, the real estate market might be heating up, and if you own real estate, you may find that you make 10% on your rental property or your home.

This is how savings should work; it should be a mix of cash on hand and investments. If you do not invest, you are sure to have less purchasing power down the road. In fact, most people don’t understand this but when measured in purchasing power, the US dollar has lost almost 98% of its value since 1913!

It Can Be Done

Outpacing inflation isn’t difficult, but it takes a bit of thought. You need to find ways to lower your tax burden, higher interest rates or returns, and the like. While it is necessary to have that emergency cash fund, once you get passed that threshold, you should start looking for ways to make your money work for you. Investing and saving are essentially the same thing, at least in the modern financial world. If your employer has a program that matches your 401(k) contributions, by all means you should max out what you put into it. That is essentially free money for retirement.

Beyond that, start looking for assets that will pay you to own them. Rental properties are a great way to save for retirement. Not only do you have someone else paying for the property through monthly rental payments, but you can also sell the property one day and earn on the sale. Stock market investing is good for the long term, but obviously carries its own risks. The whole idea is you need to start thinking beyond simply stashing cash somewhere and ensure you stay one step ahead of inflation.

Original article posted on Allrates.com

Article reposted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more: http://markethive.com/jeffreysloe

Blockchain and Cryptocurrency Litigation: What to Expect in 2019

Blockchain and Cryptocurrency Litigation: What to Expect in 2019


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2018 was an eventful year in general when it comes to blockchains and cryptocurrencies. Digital currencies such as Bitcoin and Ethereum suffered huge trading losses last year with the former nearing towards the $3,000 mark by the end of the year. Another notable trend from last year is the rise of blockchain and cryptocurrency related lawsuits, triggering SEC chairman Jay Clayton to announce a crackdown on the industry. This is why different industries have called 2019 the make or break year for these technologies. Now what is in store for laws and litigation regarding digital currencies and blockchains then? Let us find out.

Defining Cryptocurrencies as Securities

Over the years, there seemed to be a never-ending debate as to how cryptocurrencies are defined whether as a currency or an investment. These arguments may be nearing an end this year. A landmark federal court ruling has declared that cryptocurrencies, particularly those under initial coin offerings (ICO), may be subject to securities laws. In United States vs. Zaslaviskiy, the grand jury ruled that the cryptocurrency purchases the defendant has persuaded its investors to buy under his companies are considered as investment contracts. This means individuals and companies who purchased cryptocurrencies as funding for a business or enterprise can count it as an investment and is protected by the law. It also legally solidifies the SEC’s stand that the current securities regulations are sufficient enough to cover cryptocurrencies, blockchains and possibly other fintech investments in the future. Finally, this ruling can also lead to a clearer definition of what these technologies are in the eyes of the law.

Pushing for More Regulations

Despite the federal court ruling and SEC’s stand on cryptocurrency investments, the pressure for tougher regulations is still on for 2019. With the trading rate for cryptocurrencies remaining on the lower end and securities lawsuits regarding ICOs increasing, both the government and cryptocurrency institutions need to evolve. Creating a legal framework or adding supporting regulations specific to these technologies, like what France, South Korea and China did, can help with institutionalizing digital assets and similar investments. New laws that protect cryptocurrency and blockchain owners, traders and investors will surely encourage other institutions to adapt these technologies and bring it to more people.

Smart Contracts

Another factor that cryptocurrency and blockchain litigators are looking into this year are smart contracts. This is a type of blockchain technology that converts contracts into a computer code and is stored and managed by a network. It basically simplifies transactions and deals with money, property or any type of asset as it self-executes contract terms, liabilities and penalties.

While some lawyers see smart contracts as a threat, it can be a useful tool for them especially when it comes to documentation and paper trails. The transparent and self-executory nature of these contracts will help them in the event that these transactions are challenged in court.

There are a lot of exciting legal developments to look forward to as more institutions open up to the possibility of adapting cryptocurrencies and blockchain technology. More questions and situations will will eventually come up, but the industry remains positive about the growth of these technologies and the new rules and regulations that will come with it.

In need of expert legal advice? Contact us at Hogan Injury.

None of the content on Hoganinjury.com is legal advice nor is it a replacement for advice from a certified lawyer. Please consult a legal professional for further information.

Original article posted on the Hogan Injury Website

Syndicated article, by permission, posted on Markethive, by Jeffrey Sloe

Visit MarketHive to learn more: http://markethive.com/jeffreysloe

Marshall Island Hires Malta’s Strategic Advisor to Assist in the Issue of an Official Cryptocurrency

Marshall Island Hires Malta’s Strategic Advisor to Assist in the Issue of an Official Cryptocurrency

The government of the Marshall Islands, headed by Hilda Heine, stands firm in its efforts to issue an official cryptocurrency as a mechanism for optimizing financial services and avoiding an exclusive dependence on US Dollars to ensure the proper functioning of banking operations.

“Sovereign” (SOV) is the token that the government of the island created by presidential decree and will circulate together with the U.S Dollar as the official currency of the nation.

 

After the presidential decree was approved, continued pressure from the United States and the International Monetary Fund led a group of congressmen to issue a no-confidence motion against the president in an attempt to make the U.S. currency the only legal tender accepted in the country.

However, the project is still underway, and to ensure fulfillment of the objectives, the government has contracted the services of none other than Mr. Steve Tendon, Managing Director of TameFlow Consulting / ChainStrategies, a firm that provides technical advice and development strategies designed to promote the use of blockchain technologies.

The Marshall Islands Rely on Tendon’s Successful Experience With Malta

According to a Press Release, Dr. Peter Dittus, former Secretary General of the Bank for International Settlements (BIS), Mr. Tendon’s support may be crucial for the Marshall Islands to meet the goal of having an official crypto that meets all the requirements needed for massive adoption:

“With Steve working alongside Neema, we are growing closer every day to support the Marshall Islands with issuing the first digital legal tender and launching a financial services economy around it."

Steve Tendon’s participation and experience were crucial for the Maltese government to become a Blockchain Island. In 2016 he was a strategic adviser for the Ministry of Economy, Investment and Small Business (MEIB) of the Maltese Government, developing Malta’s National Blockchain Strategy which would then be approved by the cabinet of ministers the following year. He then advised the Financial Services, Digital Economy and Innovation (FSDEI) Office of the Prime Minister on matters related to the implementation of Malta’s Blockchain Strategy.

The government of the Marshall Islands, aware of the results obtained from Malta’s experience, gave Tendon some critical responsibilities:

“Steve is one of the foremost experts in blockchain technology and regulations … (He) will assist with the drafting and designing of regulations to develop a blockchain financial services economy out of the Marshall Islands."

Original article posted on Ethereum World News and written by Jose Antonio Lanz

Posted on Markethive by Jeffrey Sloe

Visit MarketHive to learn more: http://markethive.com/jeffreysloe

Cryptocurrency in 2019: Things to Expect

Cryptocurrency in 2019: Things to Expect


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Cryptocurrencies continue to surprise us with their behavior through the years. Amidst all the instability and unpredictability in terms of performance, trading, litigation, regulation, and taxation, miners and investors brave the odds and explore what these cryptocurrencies have to offer. Pessimists and optimists alike have much to say about the future of cryptocurrencies like bitcoin – such as bitcoin’s supposed nearing end because of the consistent drop in bitcoin price after reaching its peak. But it’s more viable to focus on observable trends in order to have an idea on what to expect as far as these cryptocurrencies are concerned. Here are some of them.

The Market

The word “bubble” is thrown around in the finance world, and if you’re wondering what it means, it is simply the cycle created by the fast escalation of asset prices followed by a contraction. The bubble deflates when investors cease to buy at elevated prices and massive sell-offs occur. As for bitcoin, yes it is a bubble, and it indeed popped. The market is expected to calm down a bit after the bubble and cryptocurrency trading will remain profitable.

Cryptocurrency as Payment

Retailers are starting to accept cryptocurrency as payment. At this point in time, including cryptocurrency in the list of payment methods can potentially boost income, in the same way that establishments that accept credit cards do have a wider reach than those who do not. Now you can book flights, purchase household goods, get web domains, buy computer products, and so much more with bitcoin. As of December 2018, more travel services, web services, food, and general merchandise have started to accept bitcoin payments. Those with a Microsoft account, for example, have the “Redeem Bitcoin” option upon checkout and can add up to $100 at a time via Bitpay.

Cybersecurity

In the recent years, crypto traders and holders have seen security threats such as phishing and mining malware. Cryptocurrencies, in theory, are secure; however, we expect that new crypto exchanges and platforms will bring about new cybersecurity threats and challenges.

Blockchain

The blockchain industry has always been associated with cryptocurrency, and in 2019, it is expected to work on its image as an industry that has a lot more to offer. If the industry wants to operate on a larger scale, it needs to be communicated that the blockchain technology has a lot of uses that are unrelated to cryptocurrency.

Taxation and Regulation

2019 is set to be the year of more widespread, formal, and international crypto regulation. In cryptocurrency news this year, Malta became the first country to have a clear regulatory framework for cryptocurrencies. Countries such as Russia and India have also begun to draft national legislation for cryptocurrencies; and we expect other countries to follow suit – giving way for cryptocurrency to become more legitimate. Preventing money laundering, fraud, and terrorist funding is a prime motivation in putting these regulations in place. If cryptocurrencies are safely policed, more and more people will be confident to use and adopt them.

Contact us at Hogan Injury for expert legal advice.

None of the content on Hoganinjury.com is legal advice nor is it a replacement for advice from a certified lawyer. Please consult a legal professional for further information.

Original article posted on Hogan Injury website

Syndicated article, by permission, posted on Markethive, by Jeffrey Sloe

Visit MarketHive to learn more: http://markethive.com/jeffreysloe

Bitcoin Scams and How to Avoid Them

Bitcoin Scams and How to Avoid Them


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Bitcoin has taken the world by storm, and since its introduction in 2008, it has inevitably faced several controversies. Scammers found a gold mine in the digital currency for many reasons. One of them is the fact that only a few people understand it, which makes it easier to make them believe false promises. Another reason is anonymity – cryptocurrency gives scammers relative ease to cover their tracks. Lastly, a major reason is that it is largely unregulated. Bitcoin chiefly operates outside of the conventions of a financial system; and this worries regulators as it has the potential to be linked to money laundering, tax evasion, fraud, and terrorist funding.

What are the most common bitcoin scams and how do you spot them?

Fake Bitcoin Exchanges. One popular example for these would be South Korea's BitKRX, which posed to be a branch of the country's Korean Exchange (KRX) and claimed to be a platform to exchange and trade bitcoin. Ultimately, it turned out to be fraudulent. There are also those that pretend to be connected with well-known exchanges using apps or fake websites; users are scammed when they log in and their account details are given away. When you are directed to a website, make sure that the URL has “HTTPS” rather than just “HTTP.” Without the letter S, it means that the web traffic has no security and encryption.

Ponzi Scams. Someone promises an incredible return of investment using bitcoin and a lot of people buy in it. Before you know it, someone runs off with all of your money. That's basically how Ponzi schemes work. At first, victims will be made to believe that it actually works – say, the digits in their bank account are increasing. This will also make them talk about its “success” and convince others to join in. Eventually, calls to the customer service are unanswered, there are technical problems with the website, or the money will be remitted late – among several excuses while your money disappears for good. If you see ads that sound like, “double your bitcoin overnight,” they're probably scams. How it usually works is you have to send them your money first before they can double it.

Pyramid Schemes. Scammers use bitcoin as a product in pyramid scams. In these schemes, your low initial investment will be multiplied if you invite more people to sign up. After a lot of people have invested their money, the original scammer walks away with all the money.

Malware. Hackers have long been using malware in order to get a hold of other people's login credentials and account details. Now, it's being used to drain Bitcoin wallets that are connected to the Internet.

How do you avoid falling into these scams?

 

  • If the offer is too good to be true, stay away from it.
  • Be vigilant on social media – legitimate bitcoin traders and brokers can be victims of poser accounts or impersonators.
  • Never conduct financial transactions via direct messages on social media platforms.
  • Do your homework and research on services and platforms you encounter; verify their claims and check their legitimacy or whether they are a registered corporation or not.

Contact us at Hogan Injury for expert legal advice.

None of the content on Hoganinjury.com is legal advice nor is it a replacement for advice from a certified lawyer. Please consult a legal professional for further information.

Original article posted on Hogan Injury website

Syndicated article, by permission, posted on Markethive, by Jeffrey Sloe

Visit MarketHive to learn more: http://markethive.com/jeffreysloe

Joseph Lubin: Blockchain Will Permeate Society More Than The Internet

Joseph Lubin: “Blockchain Will Permeate Society More Than The Internet”

He also said Ethereum is "Much Better" than Bitcoin

ConsenSys founder Joseph Lubin once again made clear his optimistic but cautious vision of the future of crypto. In an interview for the German news portal T3N, the also co-founder of Etherum expressed that blockchain technologies can redefine the future of technologies towards a more user-friendly orientation.

Web 2.0 vs Blockchain or Web 3.0

According to Lubin’s vision, nowadays the famous Web 2.0 focuses on protecting the interests of content and technology providers. For Lubin, the current business model looks at consumers as mere products. The blockchain technologies represent a revolution as they imply a necessary philosophical change in the business world:

“These Web2 business models are effectively in control, and as you know, they treat us like a product. They try to get a lot of information out about us so they can charge more for the product. And they have found ways to use man’s evolutionary drives so that they can make us dependent on their system, so that they can sell us more often as a product. Blockchain, on the other hand, enables a self-determined, sovereign identity. We can write our identity on blockchain systems and control it from our side of the browser. Identity will become very important in Web 3.”

For Lubin, it is still too early to talk about the possibility of implementing truly influential applications. Blockchain technologies do not yet have the necessary maturity for this type of development; however, he stressed that it is very possible that these advances will occur in a “not so distant future”:

“There are some projects moving in that direction, but it is extremely early in the development of technology. We build thousands of different components, building blocks, tokens, protocols, exchanges, and tools for identity and reputation. At a point in the not so distant future, when these systems are sufficiently scalable, we will be able to build a decentralized social network.”

 

Jose Lubin: The Future Looks Promising, But It Will Take Some Time

Several experts have considered blockchain technologies as the most important technological breakthrough in history since the appearance of the Internet, however for Lubin it is important to note that although it took more than two decades for the Internet to have the level of social influence it has today, blockchain technologies could take longer because of its high level of complexity:

“Blockchain is growing exponentially: There are hundreds of projects that are already practical for people. And they will enable people to build even more things that will be practical again. That’s how the web was developed. It will probably take a little longer because it’s much more complicated. Also because we work with issues like digital money, Blockchain will penetrate society more than the Internet. Everything will be networked in a Web3.0.”

 

ETH is “Much Better” Than BTC

The interview ended with a small comparison between Ethereum and Bitcoin. As expected, the co-founder of Ethereum considers ETH to be a better choice than the “Crypto King.” He also hopes that in the future the value of the token will be similar to that of Bitcoin:

“(ETH) is also cheaper and faster to transport values with it. It’s much better money than Bitcoin. I assume that it will be used much more than money … We expected it to level off at about the same amount as Bitcoin.”

Original article written by Jose Antonio Lanz and posted on Ethereum World News

Article reposted by Jeffrey Sloe

Visit MarketHive to learn more: http://markethive.com/jeffreysloe

Bitcoin and Cryptocurrency Litigation

Bitcoin and Cryptocurrency Litigation

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Bitcoin and other cryptocurrencies are gaining more attention as days pass. Aside from the advantages that cryptocurrencies have like anonymity and easy international transactions, people are enticed by the fact that it can become a good investment. Apart from trading bitcoins for cash, you can also use bitcoins to buy gift cards, book flights, and hotels, buy furniture, or even buy real estate properties. Bitcoin purchases are not taxed at the moment since there is no way for third parties to identify, track, or intercept transactions that use bitcoins. Transaction fees are considerably lower as well compared to credit card transactions or services like Paypal.

Although there are many advantages in using bitcoin or other cryptocurrencies, just like any other investments, you should always be careful with your transactions. Since cryptocurrency is not regulated, many unscrupulous people have taken advantage of this and incidents of fraudulent cryptocurrencies, and other types of scam related to cryptocurrency have happened. One example of this is Prodeum, a cryptocurrency start-up that scammed its investors in just one weekend.

Because of these scams, law firms have now been involved in helping the victims. Cryptocurrency litigation has now become something that some lawyers specialize in. There are a lot of factors to consider when a cryptocurrency dispute arises. Aside from fraudulent Initial Coin Offering (ICO), lawyers could get involved if the cryptocurrency was used to launder money or hide assets; they could also get involved when there is an issue with the company, commercial, or intellectual property laws being violated in relation to cryptocurrency.

Here are some things that you can do as a cryptocurrency user to avoid being scammed:

1. Research. – Just like with any other investments that you will make, research is essential. When investing in an ICO, make sure to read and dissect their white papers to ensure that you’re working with reliable people. Take time to research the people behind the ICO, their whole team, board members, and other investors. It’s vital for you to learn as much as you can about the company before investing so that there will be no unpleasant surprises.

2. Be vigilant. – Cryptocurrency is still primarily bought and sold at exchanges. Because cryptocurrency is something new and the fuss around it is its value, many people get scammed by the promise of unrealistic prices. If an exchange promises incredible discounts or offers that seem too good to be true, it probably is. Another thing that you can do to avoid bitcoin exchange scams is to check the exchange’s URL. If a website’s address starts with HTTPS instead of just HTTP, that means that the traffic is encrypted and therefore has more protection.

3. Only use trusted sources. – Hardware wallet is a physical device that stores your private keys. Hardware wallets offer more protection from hacking since there is no way for hackers to access them when you’re not online. However, hackers have now found a way around that. Some hackers sell hardware wallets that have a backdoor for them to access all your cryptocurrency and the best way to avoid this is only to accept hardware wallets from trusted sources.

In need of expert legal advice? Contact us at Hogan Injury.

None of the content on Hoganinjury.com is legal advice nor is it a replacement for advice from a certified lawyer. Please consult a legal professional for further information.

Original article posted on the Hogan Injury Website

Syndicated article, by permission, posted on Markethive, by Jeffrey Sloe

Ukraine: Economic Development and Trade Ministry Launches State Policy to Legalize Crypto

Ukraine: Economic Development and Trade Ministry Launches State Policy to Legalize Crypto

The Economic Development and Trade Ministry of Ukraine has initiated a “state policy” for the classification and legalization of crypto-related activities, Ukrainian state information and news agency Ukrinform reported Oct. 26.

The Ministry has reportedly issued an official press release stating that its purpose is to “create understandable conditions for conducting activities in the field of virtual assets and virtual currencies," and to usher in “adoption of the concept of a state policy” for crypto.

To this end, it has proposed establishing legal definitions for key terms, including “virtual currency” (“cryptocurrency,”) “virtual assets,” Initial Coin (or Token) Offerings (ICOs or ITOs), cryptocurrency mining, “smart contracts,” and “tokens.”

Ukrinform reports the concept is expected to be implemented in two stages, and will be completed in 2021.

Although Ukraine has not until now regulated crypto, the first signs the country was on track to its legalization surfaced in mid-May, when a member of the parliament, Alexei Mushak, attached a copy of an apparent draft legislation document for crypto to his public Facebook page.

The document outlined that the legislation aims to create a “free and transparent” digital asset market, outlining rules for storing, using, and exchanging crypto, digital tokens, and smart contracts at a state, entity, and individual level.

In mid-September, the country’s parliament proposed a draft bill that, if signed into law, would levy a five percent tax on individuals’ and entities’ crypto holdings. For businesses’ crypto-related profits, it proposed the basic corporate and personal income tax rate of 18 percent.

An alternative bill proposing specific crypto tax exemptions and a slightly different definition of various types of crypto assets was put forward by a Ukrainian legislator in early October.

As of mid-October, a dedicated working group within the Ministry of Finance has reportedly been working to elaborate the framework for crypto taxation.

In parallel, the National Bank of Ukraine (NBU) is considering a state digital currency tied to the local fiat currency, the hryvnia, which would be centralized and remain under government control.

Original article posted on Cointelegraph

Article written by Marie Huillet

Posted on this site by Jeffrey Sloe

5 Scary Side Effects of a B-12 Deficiency

5 Scary Side Effects of a B-12 Deficiency

B vitamins support normal functions performed by the brain and nervous system, support adrenal function. Vitamin B-12 is also required for critical metabolic processes like DNA synthesis, production of neurotransmitters, energy production and is required for the development of red blood cells.

Vitamin B-12 is found in animal-derived foods such as dairy, eggs, meat, poultry and fish. Diets that limit these foods and/or poor absorption may lead to a Vitamin B-12 deficiency. Prolonged Vitamin B-12 deficiency can lead to serious mental[2] and physical symptoms[1], such as:

  • Fatigue and muscle weakness
  • Irregular heartbeats
  • Personality and mood changes
  • Memory Loss
  • Dementia

Although deficiency can present differently for everyone, there are four basic stages:

Stage 1:

This is the earliest stage, so there are no noticeable signs or symptoms of deficiency. However, low levels can be detected through a blood test.

Stage 2:

Low blood levels of B-12 are detectable, and cellular dysfunction begins to set in. Some symptoms may start to be present.

Stage 3:

Neurological, psychological and gastrointestinal symptoms, such as indigestion and discomfort, may be present in this phase. Also, without sufficient levels of Vitamin B-12, methylmalonic acid (MMA) and homocysteine (HCY) build up in the body. An elevated level of HCY in blood is a risk factor for cardiovascular disease[3] and should be monitored by a physician.

Stage 4:

The final and most severe stage of B-12 deficiency can lead to lasting damage[2] to the nervous system.

Getting Enough Vitamin B-12

You can prevent these devastating side effects by including B-rich foods in your diet, supplementing when necessary with high-quality Vitamin B-12 and having your Vitamin B-12 levels checked as part of your annual physical exam.

References:

  1. https://www.mayoclinic.org/diseases-conditions/vitamin-deficiency-anemia/symptoms-causes/syc-20355025
  2. https://lpi.oregonstate.edu/mic/vitamins/vitamin-B12
  3. https://www.aafp.org/afp/2003/0301/p979.html

Original article written by and posted on Trivita.com

Posted by Jeffrey Sloe on Markethive

What is a Cryptocurrency Crowdsale?

What is a Cryptocurrency Crowdsale?

People are selling mysterious cryptocurrency 'tokens'—but why?

Ideas are cheap. It’s the execution that's valuable. It takes effort and skill to convert an idea into something useful, and both of those things are expensive.

Over the last few years, crowdfunding has emerged as a way to generate the money needed to turn ideas into reality. Websites like Kickstarter and Indiegogo have emerged as ways to crowdsource funding in the form of donations. Now, though, the cryptocurrency world has generated another form of fundraising: the crowdsale.

Crowdselling vs Crowdfunding

Unlike traditional crowdfunding, a crowdsale doesn’t pre-sell a widget or promise to put your name in the credits of a movie. Instead, it sells you something that you might not know what to do with unless you are clued in: a token.

A token is an intrinsic component in a next-generation cryptocurrency 2.0 application. Like bitcoin, it isn’t something that you can physically hold. Instead, it is an electronic record—a kind of digital poker chip—stored on your computer, or mobile device.

Tokens are designed to let you participate in the project that will eventually be launched as a result of the crowdsale. Depending on what service the project offers, the token will serve as a kind of access ticket to that service.

If the project is a software application that lets you find ridesharing partners without the use of a central website, for example, then you might use tokens to pay for your rides. Conversely, if you are the owner of the vehicle and up giving someone a ride, you may be paid tokens by the network. So the tokens are a kind of currency for use within a specific online service.

Why Crowdsales Happen

The crowdsale generally happens before a project has officially launched its service. It is designed to generate funds for the development of the project, helping to pay for software developers, marketing budgets, and all the other things that a startup needs.

It can also be used to measure interest in a particular project. If no one buys the tokens, then the company developing the project might want to reconsider its options.

The really interesting part of a crowdsale is what happens to the tokens later on. In many cases, they will be bought and sold on the open market, gaining their own market value independently of the application that they are used for.

This is another way to encourage early adopters. They may buy tokens because they believe in the potential of a particular online service. If the project becomes as successful as they think, then the tokens might increase in value, turning them a pretty profit later on.

The Legality of Tokens

Therein lies one of the dangers in the crowdsale concept, though. There isn’t yet much accountability. If a company sells a bunch of tokens and then collapses due to bad management—or worse, simply vanishes—what happens to all those poor folks who invested their money?

In the conventional investment world, there are rules governing who can invest in a young startup company. Investors must be accredited, for their own protection. Otherwise, every uneducated, inexperienced investor would be piling their retirement savings into a venture that they were told was a sure bet, only to lose their shirts.

But the rules around crowdsales aren’t yet clear. Regulators have strict rules about issuing financial securities such as shares in a company, for example. There haven’t been many, if any, regulatory investigations of companies engaging in crowdsales.

Crowdsales are still a very new concept, though, with only a few companies having done them. Should tokens be classified as securities, and therefore regulated? The position on this isn’t yet clear, and each case will probably be judged on its own merits.

Crowdsales have been conducted via companies like Swarm, and Koinfy. The same rules apply here as elsewhere, though: understand what you are buying, why you are buying it, and the risk that you are taking in doing so.

Are you buying speculatively? Or are you purchasing tokens simply because you really want to use the application? Are you prepared to accept the loss if the service never launches? Never invest anything that you are not prepared to lose.

Article written by Danny Bradbury

Original article posted on The Balance

Posted on Markethive by Jeffrey Sloe