The act of burning coins aims to reduce the total supply of the cryptocurrency, thereby potentially increasing the scarcity and value of the remaining coins in circulation. Proponents argue that burning supply could lead to price appreciation if demand stays the same or increases.

What is Coin Burning in Cryptocurrency?

Coin burning means the permanent destruction of a certain portion of cryptocurrency coins by sending them to a verifiably unspendable wallet address from which they cannot be recovered. This effectively removes the coins from circulation permanently.Burning coins reduces the total supply of the cryptocurrency. Since cryptocurrencies have a fixed maximum supply, burning coins means that the maximum is reduced and can never be achieved now. The act of burning coins is recorded on the blockchain for all to verify.

Some key points about what coin burning entails:

• Irreversibly destroys a number of digital currency tokens

• The process is publicly recorded on the blockchain

• Reduces the total and circulating supply permanently

• Coins sent to ‘eater addresses’ that have no private keys

• Nobody can ever access or spend the burned coins again

How Coin Burning Works

Technically, coin burning simply involves sending a certain amount of coins to a ‘burn address’, also known as an ‘eater address’. This is a wallet address that no one has the private keys to access. Thus, the coins sent to that address are provably destroyed and can never be retrieved.The act of transferring coins to an inaccessible address is recorded on the blockchain, allowing anyone to verify the burn. Since the blockchain acts as a permanent ledger, this provides transparency and ensures that the coins cannot be recovered.

Some technical points on how coin burning works:

• Coins destroyed by sending to ‘eater address’

• These addresses have no associated private keys

• Recorded on blockchain as a typical send transaction

• Coins provably non-recoverable and unusable

• Reduces total supply as recorded on blockchain

• Anyone can verify burns via block explorers

Differences From Traditional Money Burning

In the traditional fiat money system, burning banknotes or coins removes them from circulation. However, a central bank or government can always print or mint new money later on. This contrasts with cryptocurrency coin burning because it permanently destroys coins with no ability to recreate them.

Some key differences between crypto coin burning versus traditional money burning:

• Cryptocurrencies have fixed maximum supplies

• Burning coins reduces maximum forever

• No central party can recreate burned crypto

• Fiat money can be printed again after burning

• Fed can implement monetary policy like QE

• Cryptocurrency network rules prevent reissuing burned coins

• Burning banknotes doesn’t affect fiat monetary policy tools

So in short, coin burning has a very different impact because cryptocurrency supplies are fundamentally fixed. Burning permanently reduces the total supply according to protocol rules.

The Rationale Behind Coin Burning

There are several reasons why a cryptocurrency project may choose to burn coins. These include increasing scarcity, signaling commitment, maintaining fixed inflation rate, and generating profits for the burning entity.

Increasing Scarcity to Appreciate Value

The most common reason to burn coins is to artificially increase the scarcity of the cryptocurrency. This follows the typical supply and demand theory.By permanently removing coins from circulation, the total supply reduces. If demand remains the same or increases in the future, basic economics suggests that decreasing supply should translate to higher prices. By appreciating value, holders benefit from their coins gaining purchasing power.

Some points on burning to increase scarcity:

• Reduce total and circulating supply via burning

• Scarcity increased with lower supply if demand steady

• Follows basic supply-demand economic theory

• Could translate to higher valuation if successful

• Holders benefit from appreciation in value

So burning aims to reduce sell pressure and artificially engineer digital scarcity. This seeks to benefit holders via price appreciation.

Demonstrating Long-Term Commitment

Burning can represent a strong long-term confidence and commitment to a cryptocurrency from its founders and community.Burning large amounts of coins requires faith that the price will be higher in the future to offset the short-term loss. Projects willing to provably burn coins signals incentive alignment and belief in future growth.

Some points on how burning signals commitment:

• Burning large amounts shows confidence in future growth

• Founders incur short-term costs for long-term benefit

• Aligns incentives between project and coin holders

• Builds trust that founders won’t dump on holders

• Shows founders not focused on short-term profits

This signaling effect can bolster community trust in the cryptocurrency and its founders.

Maintaining a Fixed Inflation Rate

Some cryptocurrencies aim to maintain a fixed rate of annual inflation by burning a certain percentage of coins every year. This helps preserve the original monetary policy and tokenomics of the project.

Examples of how scheduled burning maintains fixed inflation:

• Say 5% annual coin supply increase via inflation

• Burn 5% of coins each year

• Net inflation remains same at 5% annually

• Maintains original monetary policy and incentives

Regular scheduled burns to offset inflation prevents dilution of holdings over time.

Generating Profits for Burning Entities

Some projects give mining fees or portions of taxes to select parties who burn them. This incentivizes the entities to burn coins, profiting from appreciation while reducing supply.

Examples of generating profits from burning:

• Block rewards or fees collected then burned

• Burning entity profits if price increases

• Rewards entities helping project via burning

• Allows profit even if burning coins at current price

In essence, they are trading coins at present value for future anticipated gains from appreciation.

Potential Benefits of Coin Burning

There are some theoretically plausible benefits associated with cryptocurrency coin burning, assuming it achieves its aims. Let’s explore some of these potential pros.

Increasing Scarcity and Value

The main goal of burning coins is to increase scarcity and in turn drive appreciation in the cryptocurrency’s value. By reducing supply, economic theory suggests prices should rise all else being equal.

Some potential benefits of increased scarcity and value from burning:

• May increase coin price if successful

• Higher price benefits investors and token holders

• Enhances attractiveness as investment asset

• Improves perception and narrative around project

There are many examples of price surging after burns (which will be covered later). However, causation is difficult to prove definitively.

Stabilizing and Appreciating Prices

In addition to potentially increasing value, coin burning might also stabilize and support prices during market downturns.With lower circulating supply, large sell-offs may have less impression on price. By limiting downside volatility, burns could aid holder confidence.

How burning might support prices:

• Constrains panic selling impact on price

• Burning reduces available coins to be sold

• Scarcity makes holders less willing to sell

• Supply ceiling removed so sell pressure reduced

• Could limit downside volatility in bear markets

This depends on scale of burning versus market conditions, but it is feasible.

Signaling Confidence and Commitment

As discussed earlier, burning can signal strong confidence in the cryptocurrency from its founders. This builds trust and aligns incentives between leadership and holders.

Further benefits of signaling commitment via burning:

• Shows founders have long-term mindset

• Helps attract buy-in from new investors

• Builds loyalty among existing community

• Narrows gap between holders and core team

Signals of commitment and skin in the game resonate positively with users.

Maintaining Fair Distribution and Inflation

For cryptos with periodic burns to offset inflation, this maintains the intended fairness and distribution. Holders do not suffer from dilution over time, preserving the initial tokenomics.

Benefits of maintaining planned distribution:

• Limits inflationary effects on holders

• Upholds announced monetary policies

• No dilution means holders keep fair share

• Maintains intended tokenomics model

• Contributes to predictability and stability

This is crucial for maximizing trust and transparency for project communities over the long-term.

Risks and Criticisms Associated With Coin Burning

Despite the potential benefits, there are also several risks and criticisms to consider regarding coin burning mechanisms.

Manipulating Prices and Valuations

A common critique of burning is that it allows manipulation of coin prices and market valuations. Since burns directly impact supply, this could enable artificial inflation of prices. Key risks around manipulation of price and valuations:

• Reducing supply does not always impact demand

• If demand is not organic, prices may be artificial

• Could enable small holders to manipulate price

• Blurs line between speculation and utility value

• Harder to model fair fundamental value

The more burning relies solely on reducing supply, the more it risks being a pure price manipulation tool.

Concentrating Holdings and Supply

Although burning coins removes them from circulation entirely, cryptocurrencies generally start with an uneven initial distribution. For example, founders and early investors get a large portion of initial supply.This means if these key entities conduct most of the burning, it further concentrates overall holdings and supply in their hands even more. Risks around concentrating supply:

• Burning often done by founders with large allocations

• Can significantly grow their share of total supply

• Concerning if centralization and control already issues

• Further entrenches their power over project

• Raises questions around decentralization

This issue is most prominent for already centralized or insider-dominated projects.

Reducing Network Security Incentives

Some burns take coins that would otherwise go to staking rewards or mining fees. This could disincentivize securing the network, leading to reduced resilience.How burning could impact network security incentives:

• Burns may take coins from mining rewards

• Lower rewards reduce incentive to mine or validate

• Could open attack vectors if network less robust

• Creates debate around optimizing fees versus burns

• Security should remain priority over deflation

Thus, projects need to ensure burning does not compromise the cryptoeconomics underpinning their blockchain.

Not Guaranteeing Increased Value

Finally, a major critique is burning does not guarantee increased value. The supply reduction could simply be overwhelmed by larger shifts in demand and market conditions in the cryptocurrency space. Reasons burning may not impact value:

• Reduced supply does not force demand up

• Demand drives prices more than scarcity alone

• Other factors like adoption and utility matter more

• Macro conditions in crypto influence prices

• Difficult to isolate and measure effect of burning

• Lag between burning and potential price reaction

Many projects have burned tokens without seeing meaningful lasting price increases. So the impact is not assured.

Examples of Coins That Burn Tokens

To provide concrete examples, let’s look at some major cryptocurrencies that have implemented coin burning mechanisms previously:

Binance Coin (BNB)

Binance conducts quarterly BNB burns based on trading volume on their exchange. They have burned over 13 million BNB so far, worth billions of dollars. Some key points on BNB coin burning:

• Launched in 2017 as native token of Binance exchange

• BNB fees collected by exchange then burned each quarter

• Burning tied to exchange usage and volumes

• Over $1.5 billion worth of BNB burned so far

• Reduces maximum supply from 200 million BNB

Burning is credited for BNB’s strong appreciation versus Bitcoin since launch.

Ethereum (ETH)

The Ethereum network burns a portion of transaction fees via its EIP-1559 upgrade since August 2021. Over 3 million ETH has been burned, worth billions of dollars. Background on ETH fee burning:

• EIP-1559 released in August 2021 as network upgrade

• Part of transaction fees now burned instead of paid to miners

• Reduces ETH issuance and offsets inflation

• Over 3 million ETH burned worth billions so far

• Significantly reduces circulating supply growth

This burn mechanism is a key part of Ethereum’s transition to a deflationary monetary policy.

Cardano (ADA)

The Cardano network burns a portion of transaction fees via its treasury system. The burned ADA is removed from the circulating supply. Details on ADA coin burning:

• Cardano uses Ouroboros Proof of Stake consensus

• Transaction fees split between staking rewards and treasury

• Treasury ADA is burned once used or after several years

• Burning reduces total and circulating supply

• Smaller impact so far but contributes to deflation

This mechanism ensures fees are not just recycled into circulation.

KuCoin Token (KCS)

The KuCoin exchange implements quarterly burns of KCS based on trading volumes on the platform. Over 22 million KCS has been burned since start. Overview of KCS burns:

• KCS is native exchange token of KuCoin exchange

• Launched in 2017 as incentive for exchange users

• Burning done quarterly based on exchange volumes

• Burns offset inflation and total supply expansion

• Over 20% of supply burned historically

The burns have covered the staking rewards paid, effectively maintaining a fixed supply.

Uniswap (UNI)

Uniswap distributed 1 billion UNI via airdrops in 2020. In 2021, they implemented a burning program funded by a portion of protocol fees. Details on Uniswap’s UNI burning:

• UNI is the governance token of the Uniswap DEX

• Launched via airdrops in September 2020 -fee switch implemented in May 2021

• Portion of 0.05% protocol fees burned

• Started with retroactive burning of 7.1 million UNI

• Ongoing burns reduced supply by over 10%

The UNI burns are voted upon by governance, aligning with its decentralized ethos.

The Mechanics of Coin Burning

Now that we have covered examples, let’s take a technical look under the hood at how coin burning works. This covers the blockchain mechanics and logistics involved.

How Burning Is Implemented

As described earlier, coin burning from a technical perspective simply means sending coins to an address that is provably unspendable. This renders the coins permanently irretrievable. On most blockchains, these burn addresses have a clear identifiable pattern.

For example, on Ethereum the burn address is ‘0x000000000000000000000000000000000000dEaD’.

No one controls or stores private keys associated with these addresses. The patterns also mark them clearly as burn addresses rather than normal wallet addresses.When coins are sent to irretrievable addresses, they still continue to exist on the blockchain itself. Everyone can verify on chain that the coins were burned and take them into account for supply calculations. But no one can move or unlock those coins again.

Difference Between Burning and Minting

Burning coins is the opposite of minting new coins. Minting refers to the creation and distribution of new coins on a blockchain according to a set inflation schedule and mechanism. Burning reduces total supply, while minting increases it. Burning also destroys specific coins that already existed, while minting generates entirely new coins. In this way, burning and minting form two sides of managing the total supply - contraction versus expansion.

On-Chain Versus Off-Chain Burning

Some burns happen directly on-chain, recorded permanently via transactions explicitly sending coins to irretrievable addresses. This is the most transparent and verifiable mechanism. Other methods may simply involve taking coins out of recorded circulation off-chain while keeping supply unaffected on-chain. This means the circulating supply is reduced via accounting, but the total supply remains unchanged.On-chain burning permanently reduces total supply via the blockchain itself. Off-chain burning just affects the circulating supply metric.

Frequency and Amounts Burned

Burning mechanisms can vary widely in terms of schedule and quantity burned:

• Schedule can be predictable like quarterly or happen sporadically

• May burn fixed amount, fixed percentage of supply, or variable amount

• Schedule and amounts are configurable parameters

• Some base burning on usage like transaction fees generated

• Others rely on fixed schedules for consistency

There is no standard framework, allowing projects flexibility to design burns tailored to their goals and characteristics.

Relationship With Total Coin Supply

Burning coins essentially cancels out coins previously created and added to total supply. The amount burned is subtracted from total and maximum supply.Since most cryptocurrencies have a finite capped supply, burns make it so that cap can never actually be reached anymore. Future supply growth is permanently dampened by the contraction.Over time, the gap between total supply cap and actual supply widens. Ultimately, the network ends up with a lower maximum than originally specified.

The Effects of Coin Burning on Supply and Circulation

Now that we have covered the mechanics of burning, let’s examine its mathematical impact on cryptocurrency supplies and how this plays out over time.

Reduced Current and Future Supply

Every single coin burn has the effect of decreasing both the current total supply of coins as well as the maximum possible future supply. No burned coins can ever be restored or recreated.Some ways burning decreases supplies:

• Reduces total supply by amount burned

• Also reduces maximum possible future supply

• Less supply created in future due to burn

• Permanently decreases both current and potential supply

This makes the cryptocurrency more scarce relative to its original design.

Impacts on Circulating Supply Metrics

Burning reduces the total supply which is the main cap that matters long term. But in the shorter term, burns also decrease the circulating supply.Some ways this impacts circulating supply:

• Lowers outstanding supply in exchanges and wallets

• Reduces amount readily available for trading

• Decreases liquid coins that can affect price action

• Leads to lower market capitalization valuations

This contracting effect on the circulating supply makes the cryptocurrency more scarce in the active marketplace. All else being equal, decreased circulating supply typically leads to upward price pressure.

Burning Supply Held by Founding Teams

In many cases, most of the coin burning comes from large allocations held by founding teams and early investors. This makes sense since they hold the majority of supply.Consequences of this phenomenon:

• Founders often burn their heavy personal allocations

• Further concentrates overall supply in their hands

• Critics argue this entrenches insider power

• Contributes to centralization over time

• Means impact muted if founders still retain substantial portions

This dynamic is worth considering regarding decentralization and distributions.

Deflationary Effects Over Time

With frequent ongoing coin burning, the cryptocurrency transitions to a deflationary monetary policy over time provided demand remains reasonably steady.Deflationary implications:

• Sufficient burning can surpass new issuance

• Eventually leads to net reduction in total supply

• Deflationary if outpacing minting activities

• Increases scarcity predictably over time

• Contrasts with inflationary policies of printing fiat

This deflationary mechanism is groundbreaking in modern monetary systems.

The Impact of Burning on Cryptocurrency Prices

Now that we have covered the supply implications, let’s examine the possible effects of coin burning on cryptocurrency valuations and prices. This relationship is complex.

Correlations With Increased Prices

There are certainly many examples of prices pumping upwards immediately following burn announcements. This demonstrates a psychological impact. Traders anticipate less supply leading to upwards price pressure.Some evidence of burning impacting prices:

• Prices often surge around burn events

• Shows anticipation of reduced sell pressure

• Follows standard supply and demand curve logic

• Burn announcements are catalysts for momentum

• Implies strong speculative interest and incentives

However, long-term causation is difficult to confirm definitively.

Other Factors That Affect Prices

While burning seeks to directly influence price via supply, many other factors unrelated to burning also drive crypto valuations. These can easily outweigh or nullify the effects of coin burning.Some external factors also driving prices:

• Broader market sentiment and conditions

• Macroeconomic environment

• Adoption and utility of the cryptocurrency

• Perception, hype cycles and narratives

• Monetary policy affecting fiat currencies

• Competition from other crypto assets

So supply is just one variable among many affecting prices.

Critiques of Burning Impact Claims

Given the above, many analysts critique claims that burning mechanisms directly lead to substantial price increases over the long run. Correlation does not necessarily equal causation.Reasons burning may not actually impact prices:

• Just one factor among many affecting valuations

• No guarantee of increased demand due to burn

• Traders can still overwhelm supply effects

• May require accompaniment of other catalysts

• Lag between burn and potential impact varies

• Hard to isolate direct effect quantitatively

Burning leading to consistent rises across crypto markets is debated.

Comparisons to Stock Buybacks

Some compare coin burning to public companies buying back stock to reduce share supply. This aims to boost earnings per share and valuations.But key differences exist:

• Share buybacks don’t affect total shares authorized

• Company can always issue new shares later

• Cryptocurrency burning reduces maximum forever

• Companies must have excess cash to fund buybacks

• Crypto projects burn tokens out of circulation

The permanent supply reduction makes coin burning a very different mechanism.

The Future of Coin Burning in Cryptocurrencies

Given the myriad of approaches so far, let’s now look at where coin burning in crypto may be headed in the future.

Predictions for Greater Adoption of Burning

Based on industry trends, experts predict significantly more projects will incorporate coin burning mechanisms going forward. Reasons for wider adoption:

• Aligns with shift toward deflationary tokenomics

• Crypto community receptive to lower supply

• Helps projects stand out in crowded field

• Easy to implement technically

• Flexible parameters to tune as desired

Burning aligns neatly with the cryptocurrency ethos of provable transparency and auditability.

Use Cases Going Forward

Some projections on optimal and novel use cases for burning coins as adoption increases:

• Deflationary mechanisms for stablecoins

• Driving up virtual land and metaverse valuations

• Governance capabilities via burning votes

• Initial supply distributions done via burns

• Burning to reward verifiable green mining

The flexibility of programmatic money allows room for experimentation.

Questions and Risks Around Burning Coins

Despite the benefits, questions and uncertainty remain around burning models:

• How to determine optimal burn amounts and schedule?

• Avoid overengineering and unwarranted complexity

• Ensure burning aligns with concrete goals

• Prevent centralization of supply in core team over time

• Should burning have on-chain governance?

• Do benefits outweigh potential risks?

Projects need to thoroughly analyze pros and cons of implementing burns.

Alternatives to Supply Reductions

Burning is not the only way to achieve benefits like stabilizing prices and incentivizing holders. Other alternatives might include:

• Directly expanding utility and adoption long-term

• Enabling greater access and distribution of supply

• Limiting whale concentrations via caps

• Smart staking rewards and lockups

• Treasuries and buybacks to support prices

• Governance votes guiding minting and burning

Combined approaches can optimize for sustainability.

Conclusion

In summary, coin burning is an intriguing monetary policy tool used by cryptocurrency projects to provably reduce total supply. By destroying a portion of coins permanently, it aims to increase scarcity and therefore value of the remaining supply based on economic principles. Proponents argue the decreased circulating supply will lead to upwards price pressure and stability, while also signaling confidence in the project’s future appreciation. It aligns with the shift towards deflationary tokenomics. Coin burning is likely to grow in adoption as projects compete on tokenomics creativity and committing to deflation. But its parameters and trade-offs will require careful consideration to balance benefits versus potential downsides.

However, burning also carries risks like enabling price manipulation, concentrating supply, and reducing network security incentives. Its impact on actual cryptocurrency valuations is also debated, given the multitude of factors affecting prices.

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What Is Ethereum Staking?

Staking is the process of validating transactions and securing the Ethereum network by locking up ETH as collateral. It will replace the energy-intensive mining that currently underpins Ethereum's PoW consensus.Ethereum staking requires participants to lock up 32 ETH into a deposit contract in order to become a validator. Validators are responsible for ordering transactions and creating new blocks in a chain.As an incentive to stake their ETH, validators earn block rewards in the form of staking yields estimated between 5-15% annually. However, they also take on the risk of getting their stake slashed if they fail to properly validate blocks.The Beacon Chain is the coordination and staking layer of Ethereum 2.0. It uses the proof-of-stake consensus to manage validators and their stakes. The Beacon Chain will eventually merge with the current Ethereum Mainnet proof-of-work system, making staking the new way network security and transaction validation is handled.

Why Ethereum Is Moving to Proof-of-Stake

There are a few key reasons why Ethereum aims to shift away from PoW mining to a PoS staking model:

• Scalability - PoS is expected to greatly improve transaction speeds and scalability on Ethereum through sharding. This involves splitting the network into smaller shards each with its own group of validators.

• Energy efficiency - Staking is estimated to be 99% more energy efficient than mining. This supports Ethereum's goal of being more sustainable and reducing its environmental impact.

• Security - PoS should help secure the network against 51% attacks by making it much more expensive to control over 51% of validator stakes.

• Economics - Staking creates an opportunity for ETH holders to earn passive income while helping to secure the network. There is also expected to be less systemic risk from miners selling ETH rewards.

Concerns Among ETH Miners

Ethereum miners have invested heavily in mining equipment like GPUs and ASICs optimized for mining ETH. The shift to staking threatens to eliminate the need for mining and renders that investment worthless.Here are some of the biggest concerns being voiced by the mining community:

• Up to $4 billion worth of GPUs used for ETH mining could flood the secondary market as staking makes them obsolete. This could crater the value of that hardware.

• ETH mining revenues will dwindle to zero as the network transitions to staking. Mining could initially continue on a forked PoW Ethereum chain, but rewards would likely be low.

• Large mining firms may have to shut down or pivot their operations if staking dominates. Some may try staking, but individual miners with just a few GPUs have expressed frustration.

• Staking represents further centralization and gives ETH whales with 32+ ETH a big advantage. Mining has arguably been more decentralized.

• There is uncertainty around how quickly the transition to staking will occur and whether any more delays or concessions to miners will happen.

Miner-Friendly Concessions to Delay The Merge

Due to heavy pushback from miners, the Ethereum development team has made some concessions to ease the transition away from mining:

• Delaying The Merge - The shift to PoS and the merger of Mainnet with the Beacon Chain has been pushed back to Q3/Q4 2022. This gives miners more time to profit from PoW mining.

• Allowing temporary mining - After The Merge, there are plans to allow mining to continue on a PoW forked chain as a "shortcut" to withdraw staked ETH. This should give miners an additional 2 years or so of mining before rewards are discontinued.

• No sudden difficulty bomb - The "difficulty bomb" that exponentially increases mining difficulty on Eth 1.0 prior to The Merge has been delayed. This prevents mining from rapidly becoming unprofitable.

• Discussion of fair compensation - Some community members have proposed allocating a portion of transaction fees to reimburse miners after The Merge. No concrete plan is in place but it shows willingness to find an equitable solution.

Prepare for Staking Rewards

While Ethereum mining will inevitably decline in favor of staking, miners do have an opportunity to adapt:

• Slowly build up at least 32 ETH in preparation for staking as a validator. Though this requires a substantial upfront investment, projected yields of 5-15% can be highly lucrative.

• Contribute to staking pools or exchanges that allow users to earn staking rewards with less than 32 ETH. Though yields may be slightly lower, this greatly reduces the barriers to earning passive income through staking.

• Use mining profits to accumulate more ETH and HODL into the staking era. While mining hardware will lose value, ETH holdings should only become more valuable as staking takes over and interest in Ethereum rises.

• Sell specialized mining hardware and reinvest those funds into ETH before The Merge occurs. This can limit losses from hardware devaluation.

• Run GPUs used for mining to mine alternate coins that will remain on PoW like Ethereum Classic. While revenue potential is lower, it avoids GPUs collecting dust.

• Support the growth of Layer 2 networks like Optimism and Arbitrum that offer ETH staking opportunities without needing 32 ETH. The returns may be a bit lower but allow more users to participate in staking.

Life After Mining for Ethereum

Ethereum's shift away from PoW mining will significantly disrupt miners who need to adapt to maintain revenues. But staking should not be viewed as a death knell for miners' profitability.With proper preparation, miners can transition into staking and continue earning block rewards as validators. There are also still opportunities to earn income by mining other coins.While the highly profitable days of mining ETH appear numbered, staking represents the next evolution that will help Ethereum scale and create new ways to earn through securing the network. Rather than resisting this shift, miners should embrace the change and get ready to start staking.

▲Finance

Bank Supervision System

As long as your money is deposited in the bank. In order to ensure the safety of customers' funds, banks naturally include customers' accounts into the bank's regular supervision system. As long as it is a normal business transaction, the bank's supervision system will not be activated, and the normal fund transactions of personal accounts will receive various convenient services provided by the bank.

▲ Deposit

And when there are frequent large-scale money transactions in personal accounts, business accounts, etc., or frequent large-scale transfers from the same account, such accounts will attract the attention of the banking supervision system and start a supervision mode for them. There is always no legitimate reason for the large amount of money to be traded, and this account will be handed over to the bank's manual securities supervision department for investigation. After investigating the possibility of illegal transactions, the money in this account will be frozen, and all the amounts in the account will be frozen. Investors will also be governed by the corresponding department, and they will be required to explain the source of the money for the arrears of abnormal transactions in their own accounts. If the source of the money is not clear, the account owner is a financial crime and will be held accountable according to law. In this way, a system that can not only ensure customer safety but also monitor account abnormalities is the bank's monitoring system.

▲Monitoring system

Abnormalities of various accounts will be monitored and investigated

Routine money transactions are to provide more and better convenience for citizens' lives. However, when the following situations occur, the account will be considered as a suspicious account requiring regulatory investigation. An ordinary account suddenly has a large amount of funds from unknown sources frequently transferred in; the company account cannot explain the specific transaction reason in the capital transaction; a citizen has multiple accounts, and there is no specific transaction reason for the large amount of capital transactions of multiple accounts ;A large amount of foreign funds into a certain domestic account, etc. are all abnormal transaction behaviors of the account, such accounts will be monitored, and the source of funds is still unclear after investigation by the regulatory authorities, such accounts have the potential for money laundering Possibly, the banking supervisory system will report such account holders to relevant departments.

▲Monitoring system

Whether the bank monitors customer accounts is an invasion of personal privacy

As a country's financial institution, banks are permitted by law to have a regulatory system for accounts. Not only banks in our country have such a regulatory system, but foreign banks will also set up a regulatory system to ensure the stability of bank transactions and the legitimacy of fusion transactions.

As long as there is no illegal behavior in the fund transactions of personal accounts, the bank will not spy on any customer's personal information through the supervision system. Stealing customers' personal information from a bank's supervisory system is a serious offense. The personal accounts of law-abiding citizens, just like we walk under the cameras that can be seen everywhere in reality, the purpose of supervision is to prevent crimes. So you don't have to worry about whether your personal privacy will be violated because of the bank's supervision.

▲ Deposit

The bank will monitor the customer's information

The bank's monitoring behavior will be carried out under the strict laws and regulations of the country. Generally, it will monitor customer information, frequently traded objects, business cycle, size of funds, account transaction methods, reasons, etc. It is also through such regular monitoring that abnormal trading accounts are screened out in time for special monitoring. Whether the bank will monitor the cash flow of each account, the answer is yes. Only through appropriate regulatory means can the occurrence of financial crimes be prevented to the greatest extent, and the property safety of ordinary people can be better guaranteed.

NFT Technology Prospects

In terms of technology, the development prospects of NFT digital collections are very broad. With the continuous advancement of technology, innovative applications of NFT digital collections are also emerging. For example, through smart contracts, the transaction process of NFT digital collections will be more automated and intelligent, and the efficiency and security of transactions will be further improved. In addition, the technical application of NFT digital collections will also expand to more fields, such as large-scale sports events, movies, etc., and digital assets in these fields can also be digitized and traded through NFT technology.

NFT application prospect

In terms of application ecology, NFT digital collections have been widely used in fields such as art, music, games and real estate. NFT digital collections not only make asset transactions more open and transparent, but also make it easier to guarantee the authenticity of copyright and identification. In the field of art, NFT digital collections have become the main source of income for some artists, and at the same time, more creative and cultural assets have been digitized and protected. In the field of games, NFT digital collections can increase the fun and interactivity of games, and at the same time bring more benefits to players. In the field of real estate, NFT digital collections can make real estate transactions more open and transparent, and can guarantee the authenticity of real estate rights.

NFT Problems and Crisis

Although NFT digital collections have broad application prospects, there are also some problems and crises.

First of all, the bubble risk of NFT digital collections is relatively high. At present, there are some speculations in the NFT digital collection market. For example, the prices of some NFT digital collections have been greatly hyped, which may lead to market bubbles.

Secondly, there are some technical and risk problems in the NFT digital collection market. For example, copyright and identification issues of NFT digital collections, technical security issues of NFT digital collections, etc. These issues may have a certain impact on the development of the market.

Summarize

Generally speaking, NFT digital collections, as the new darling in the field of Cryptocurrency, have a wide range of application scenarios and unlimited future prospects. However, there are also some potential crises and problems in the NFT market, which require the joint efforts of relevant institutions and market participants to solve them.

Even in the field of blockchain, which is advertised as "open and transparent", it cannot be said that the protection of intellectual property rights is unnecessary or non-existent. For example, for an open source blockchain product, other developers or manufacturers still need to abide by the open source agreement of its source code when using its open source code, and the product will still protect the intellectual property rights of the creator under the premise of being open and transparent on the chain. **However, in the face of massive information and fragmented content, when the interests involved are getting bigger and bigger, the original creators can easily become profit channels for plagiarists. Original works in the network environment have the characteristics of digitization, openness, publicity, and borderless, etc., which make the infringement also evolve into the characteristics of low cost, large quantity, wide range, complex association, strong concealment, and difficulty in proving evidence, which is likely to trigger Numerous willful and repeated infringements. **As an original creator, there are often times in creative collaborations where you don’t want to trust but you have to trust others. At the same time, a large number of texts, codes, pictures, and ideas are deeply mired in piracy and infringement. Revolutionary technologies are often used to slaughter the market instead of protecting copyrights. The wall of trust is broken brick by brick. The 21st century has become a war for intellectual property rights. The technology industry can easily fall into the graveyard of innovation.

1. The intellectual property structure of the part of the Web3 chain

In the Web3 era, the form of intellectual property protection may be different from the past. For example, decentralized applications (DApps) have their own unique intellectual property protection paths. The on-chain and off-chain parts of Web3 products are all developed by people, which means that in the initial stage of product development, the copyright of some codes on and off the chain needs to be registered by the company to participate in Web3 products (such as smart contracts, websites, etc.) , DApps, etc.) Each participant in the development needs to sign a confidentiality agreement and an intellectual property transfer agreement.

Generally speaking, the intellectual property rights on the chain are owned by the company, and the company also reserves the right to publish the subject matter on the chain in the future, such as websites or mobile apps. Partially achieve decentralization and automatic operation. To achieve this, and in order to prevent the part on the chain from falling into the trap of centralization, the intellectual property rights of the part on the chain will be made public, that is, open source code.

Open source code refers to code that has given up proprietary rights and managed it as public property. To do this, regardless of whether the developer is an individual or a business, the software code must be published in an open repository where anyone can access and use the code. An important task before the software code is open-sourced and released is to select an appropriate type of open source license, which is published in the same repository as the software code, and stipulates the conditions and restrictions that the relevant community must abide by when using it. Include rules on how to modify, maintain or improve the code.

2. The intellectual property structure of the off-chain part of Web3

In addition to developing smart contracts operating on the product chain, the interface of the contract also needs to be developed simultaneously. These interfaces are the part where end users interact with the smart contract. The IP elements that make up the interface include icons, domain names, designs, program codes, user Databases, etc. This also depends on the type of Web3 product interaction chosen by the founders. Generally, apps, website browsers, chat robots, etc. are different. Each of these elements needs to obtain independent protection , for example, in order to register software codes and industrial designs, it is necessary to sign an intellectual property transfer agreement to the company, which guarantees that the developer is obliged to transfer the registration rights to the company. Other protection methods include registering a trademark to protect the LOGO, transferring the domain name or re-registering the management right of the domain name so that it belongs to the company, etc.

3. Development laboratories in the entire intellectual property system

Development and testing engineers have always been an important part of the project, and this is no doubt in the Web3 era. Therefore, development labs and the hiring of software engineers play an important role in the overall intellectual property system. Generally speaking, the development laboratory undertakes the following functions:

1. Undertake the necessary operational functions in the product development process of the organization, such as recruiting personnel, selecting office space, subscribing to software, etc.;

2. Accumulate intellectual property rights developed by the project team, such as program codes, industrial design sketches and technologies, etc.;

3. Release some interactive content on the Web3 product chain, such as websites, mobile apps, etc.;

4. Select an appropriate open source license for some relevant IP registrations in the product chain;

4. Build an intellectual property protection system for the Web3 project

All in all, in the Web3 era, the intellectual property protection methods of the on-chain and off-chain parts of the project chain are similar , and the intellectual property protection of the on-chain parts such as smart contracts usually requires the project founders to work hard.

1. Register a development laboratory or company, enterprise and other entities in an IP/IT-friendly region. From a technical point of view, this is necessary and important for the protection of some intellectual property rights on and off the chain;

2. Sign a confidentiality agreement and intellectual property transfer agreement with developers and testers;

3. Publish the source code and the corresponding license in the open source knowledge base, which not only requires the realization of DApp, but also ensures the decentralization of ownership and ensures that the project cannot be changed in a centralized manner.

As for the intellectual property rights under the chain, such as websites, browsers, etc., it cannot be done overnight. It needs to be consistent with the first two items to protect the part on the chain, but in addition, the intellectual property rights and their ownership must be transferred to the development laboratory, such as domain names and databases. , as well as patents, trademarks, LOGO and other related assets registered in the name of the company.

I am more willing to believe in the eternity of human nature than the development of technology. Therefore, protecting intellectual property rights before the next era requires more development.

Spot trading does not add any leverage . The actual price and profit /loss corresponding to a buy and sell are caused by the actual fluctuation ratio of the currency, just like doing normal trading.

Both contract trading and leveraged trading enlarge the capital and are involved in cryptocurrency trading in a small and broad way.

Leveraged trading is also a kind of spot trading, which requires holding a certain amount of cryptocurrency or stable currency, and trading through mortgages and loans. As long as leverage is added, it means that two-way trading is possible.

For example: Leverage is long, you judge that the currency is going to rise, then you borrow more USDT by collateralizing your own currency or USDT, buy more coins at the current price, and wait for it to rise higher. After buying the price, sell the currency, return the borrowed part, and the rest is your own profit.

Leverage is short , you judge that the currency is going to fall, you borrow more coins through mortgage, sell it in advance at the current price to get USDT, after the currency falls, you can buy more coins at a low price, then the amount of extra money is your profit. Return the borrowed amount and take the profit.

Leverage and contract trading multiplier are set by the exchange, we will give a choice when trading, usually 1-100 times, of course, maybe support 125 times leverage . If you are bold enough to have enough money, you can choose to do a high leverage contract.

Next, let’s talk about the contract. The contract is an upgrade of leverage. It is more flexible than leverage. It does not need to borrow or repay the currency. The operation is simple. You can operate with currency or USDT in your position. The contract is divided into two types. One type is a perpetual contract, which means that the position can be held for a long time. The other type is limited-time contracts, which are divided into: current week, next week, and quarter, which means that when the time of the holding contract expires, no matter the profit or loss of the contract you hold, it will be automatically closed for you.

Generally speaking, whether it is leveraged or contract trading, the main purpose is to use small gains, and the risk is naturally reflected in the leverage. If the direction is correct, the return will be much greater than spot trading. Once you do the wrong direction, you can close the position in time. Recover some losses. If it is too late to close the position, there will be a situation of liquidation, but because you increase the leverage, the market will fluctuate a little and the risk is very high.

Leveraged trading and contract trading are actually a type of gambling. Even those who watch the market often have a good sense of the market, and the technical analysis is also very good. There are also times when the market is constantly changing, especially the cryptocurrency itself is extremely volatile. Playing with leverage and contracts is a tightrope walk.

Many people who have just entered the currency circle always want to use leverage or contracts to realize their dream of getting rich overnight. The current crypto market lacks effective supervision. You dare to play contracts. Ask for trouble! Even if the exchange does not do evil, the risk of trading with leveraged contracts is extremely high. Don't think of yourself as a god, stay away from the contract trading for a few more years.

In short: Leverage and contracts will make you rich (you put most of your time and energy into it), and will also let you die fast, so if you don’t have the ability to bear the consequences of investment failure, please stay away from all leveraged investment, So stay away from the leverage trading and live life well.

For the newcomers

First of all, friends who are now entering the market, the high probability is because the popularity of Bitcoin. So is it right or wrong to buy bitcoin now? From a long-term perspective (more than 5 years), it is a high probability to buy Bitcoin now. Because it is proved from the historical price trend of Bitcoin , Bitcoin is best for long term investment.

Secondly, for investment profit, the factor of time is essential. It takes time to learn to recognize and choose investment targets, it takes time to hold high-quality investment targets to make profits, and it takes time to accumulate and polish investment minds. New investors are short of these three types of time. Learning cognition can shorten the time by improving efficiency. However, holding high-quality investment targets to make profits and accumulate and polish investment mentality requires investors to go through at least one completed up and down cycle. This time cannot be shortened by other methods. Although the crypto market is already the most efficient investment market in the world but it will take at least 3-5 years for stabling.

Luck

The investor friends who are now entering the Crypto market will end up in failure with a high probability. The failure mentioned here does not mean that you have not made money, you may have made money, or you may have lost money. The failure I said is that I have made money and I don’t know why I have made it. I have lost money and I don’t know why I have lost money. The high probability is that I make money by luck and finally lose money by my own mistake. When the price drops sharply, you think this is a speculative market. You think that i am Unlucky, followed by various struggles, and finally in this situation many people left the market and in the end people said that this Crypto market is not reliable.

But the real question is that how can newcomers face this bear market?

There is an iron law in the Crypto circle: As soon as you are short of coins, you will fall, or when the coins fall, you will be short of money. This feeling is so bad.

In fact, when you have money and you don’t feel anything when you fall down. When you happen to be short of money and you fall sharply, this situation will make you nervous.

Therefore, continuously improving the ability to make money is the key to success. If your cash flow can last for several years, the continued decline will not have a great impact on your mentality.

In a bear market, people's mentality changes are often very different from market changes. For example, in many Telegram groups, as soon as the price drops, they start to shout that they are going to zero, All kinds of sarcastic and ironic words came out. As soon as the crypto coin rises, it immediately changes to another face, and immediately these peoples said that "we are going to the moon". You will find that there are often the same group of people before and after, and their emotions have changed too much, and they are completely following the market.

Although our emotions will be more or less affected by the market price, we should try not to extreme our emotions and try not to say any bad words. Although it's difficult to be rational, at least don't shout "to zero" or "we are going to the moon" for a while, which is not conducive to the healthy construction of your investment mentality.

The reason why investors do the right thing and make money is because they have invested and held investment targets that have been rising for a long time. This can ensure that investors can "buy low and sell high" and ultimately make money.

Smart Solution for newcomers in crypto market

Diversification of Crypto currency investment

Diversification refers to mixing different financial products in the same investment portfolio. The investment portfolio of different financial products will be more stable than the investment of one financial product. In most cases, a diversified investment portfolio provides investors with higher returns and lower risks; you can diversify assets between different asset classes or within the same asset class.

The best way is to divide your capital into 5 equal parts and invest in 5 different Cryptocurrencies starting from the top 10. These coins should include some old coins and new coins that have passed the test of time. I can choose between Bitcoin, Ethereum, ADA, AVAX , Ripple, etc.

(You can buy these coins at best rate and the spot trading fees on Binance EXCHANGE is lowest)

When we invest, we often have to operate in the opposite direction with most people. Don't follow the crowd, have your own independent thinking. From this perspective, the process of investment is a process that makes us more rational and more perfect.

For newbies in crypto market which crypto exchange is better for buying crypto coins or for perpetual and spot trading. I would advise crypto users to use a Binance exchange because i am also using this exchange for trading.

In short, Life is still long , do not think that you can achieve financial freedom by one or two trading, but accept slowly become rich. Life is a long-distance race, and the competition is tough. There are still many opportunities in the crypto market. Even if you make a wrong decision, you must adjust yourself in time.

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Difficult thing in trading?

You might say that it is the prediction market. Indeed, the prediction market is the most important, but it is not the most difficult, but impossible! Many people are sacrificed in this market. The basis of market existence is uncertainty, not predictability. This is one of the most important trading issues, which is equivalent to philosophical materialism and consciousness. If this problem is not clear, all subsequent efforts will bring about completely different trading results.

Many traders will actively look for other reasons to prove the correctness of their orders after placing an order, such as watching the opinions of a futures expert on television, social media or the comments of other futures investors on the forum, to find reasons in favor of the direction of their positions, in order to get peace of mind. Such peace of mind is of course self-deception, it is the temporary effect of self-made opium, and it will probably bring more anxiety.

A better way is to reassure yourself before placing an order.

Either you have done a lot of analytical work and logical reasoning, and there are good reasons for the selection of futures varieties and the direction of positions. If the reason for buying is sufficient, you will not be afraid that it will not rise or fall, and you will not be uneasy. The reason for the uneasiness is that the reason for buying it is not sufficient, or you are not confident enough in your own analysis. I choose a certain variety because I am the most familiar, clear and sure of its current situation. I choose to do long because there are sufficient factors to prove that it is in short supply or the form of a super high probability of rising pattern.

Either it doesn't matter whether it is right or wrong, and it is fearless of any result. If you are right, you will make a profit, if you make a mistake, you will lose money, you will put your money in your pocket, and you will lose so much when you lose money. I am willing or even willing to accept all the results, because I have sufficient preparation and abundant funds, regardless of the result of this list. Does not affect subsequent operations.

Either there is a adequate plan for any evolution of the market. If a single order is long, the subsequent market may rise or rise slightly, or it may rise directly or consolidate the rise, it may fall and then rise, it may fall and then rise again. It doesn't rise for a while. If you have a full response to any evolutionary path of the market, there is no need to worry about how it will go.

We need to analyze the source of our troubles, whether it is annoying to do it randomly or to do it according to the plan. If it is very annoying to do it randomly, it means that your sense of play is not good, and people with good sense of play will also be very happy to do it randomly. If you don’t have a good sense of discernment, then you should practice discernment.

And if it is annoying to do as planned, it means either the plan is not right or the plan does not suit you. What is wrong plan? For example, in a rising market, but a gradual short-selling plan is made, of course, the more mistakes will be made, the deeper the set. The plan is wrong, indicating that the plan’s makers are not skilled enough, not hard enough, not insightful, and need to be improved. What does it mean that the plan doesn't fit you? For example, I am obviously impatient, but I have to learn from others to make a slow plan, and let myself implement a trading plan that moves once a week or even once a month. Watching the changes in the market, the price goes up and down, and profits are made. It's gone again, and the loss is gradually getting bigger. If this is the case, you can change the plan, that is, change the plan that suit your own personality, change it to a trading method that allows you to move more frequently, or you can hand over the original plan to others to execute, and don't watch the market yourself.

There is a reason for all the anxiety and worries in trading, so ask yourself questions, solve problems, and bring yourself to a place of peace of mind.

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Technical Analysis

Technical analysis originated from the stock market, and later gradually applied it in all trading fields such as futures trading, foreign exchange trading, precious metal trading, and digital currency trading, and established their own systems. Although these systems are different, the core parts are similar.

In stock trading, people first explored the theory of stock investment out of curiosity. Through long-term observation of stock price changes and accumulated experience, they gradually summarized some "laws" related to stock market fluctuations.

After long-term development and evolution, these "laws" have formed many categories, among which Dow Theory and Wave Theory, as well as various technical indicators, such as K-line chart, moving average, MACD, deviation rate , RSI, etc. Moreover, new evaluation indicators are still being produced.

1. Assumptions of technical analysis and matters in use

The fundamental reason why there are so many genres and so many technical indicators is that none of these genres and indicators can be accurately used in any market and in any scenario. In addition, no matter how the indicators and genres are deduced, it is based on the statistical laws given by historical data, and it is assumed that the historical laws will be extended to the future.

But we all know that history often does not repeat itself 100%, and as the global market becomes more and more open, today any investment market is facing interference and influence from various factors, and black swan incidents are endless. Therefore, once explosive news is released, it will completely disrupt the direction of the original technical indicators.

In addition, the drawing and application of technical indicators and various graphics is art rather than science. "Science" means that under the same conditions, only the same result will appear, and it has nothing to do with who or how to calculate it. And "art" means thousands of people, facing the same data, everyone will give different judgments and different analysis.

For example, an investor may draw a different wave chart of the same pattern using the wave theory, as shown in the following image:

In the above figure, some investors will think that this pattern already contains the standard five waves in wave theory , so they have come out of a complete wave pattern; while another part of investors will take these five waves. The small waves are completely ignored, and the entire pattern is regarded as a single main wave , so these five small waves are just episodes and do not represent the complete pattern.

For these reasons, most technical analysts use multiple indicators to make comprehensive judgments.

3. Precautions for using technical analysis in digital currency transactions

The rise of Cryptocurrency trading is not long, so the biggest feature is that the trading volume and total market value can only be considered at an extremely early stage relative to traditional trading markets such as stocks, futures, and foreign exchange. Under such a scale, a slight change in funds can cause violent fluctuations in currency prices.

For traders, it is easy to use relatively small funds to make various beautiful patterns and classic indicators in such a market. Therefore, in addition to looking at technical indicators, investors also need to look at another extremely critical indicator, which is trading volume. An indicator without volume is meaningless.

In the trading volume, the reduced trading volume is more meaningful than the enlarged trading volume. Some market makers can use funds to create the illusion of large trading volume, but small trading volume undoubtedly means that the market is not moving. Large funds are operating.

Most people who make a lot of money through cryptocurrencies buy at the right time, and "technical analysis" can help find a good point to enter the market, and then "hoard coins" through a longer period of time. It may be six months, one year, or two years, depending on the investment target. When studying technical analysis, investors should not hold on to the idea of ​​getting rich overnight, but should learn more and practice more.

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