Obtaining Passive Income with PoW, PoS and STOs

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The entry of cryptocurrencies into our lives has changed not only to money but too many things. This rapid spread of cryptocurrency has not only changed individuals but also changed the policies of companies.

This year, the world’s largest companies such as Microsoft, Starbucks, Amazon and Facebook set out to integrate blockchain technology into their systems.

While the adaptation of the blockchain is spreading rapidly, the demand for cryptocurrencies which is an image of them is increasing day by day. As of this article, the price of Bitcoin is around $ 8,000. This price, which was the beginning of the bull season, had a positive impact on Bitcoin, which dominated 57% of the market right now, and other altcoins.

Over the past period, price increases have started to satisfy the pleasures of cryptocurrency investors. How should we evaluate our investments in these days when we entered the bullish season?

What are the methods of making crypto in the Blockchain world?

1) Being a Trader: Being a Trader is a different line of business that has nothing to do with blockchain technology. The traders in the crypto world are generally groups that aim to make a profit by taking advantage of price speculation and trading accordingly.

This business, which is quite risky, generally appears as a cryptocurrency when the price is low and the price is high. Like the same stock market, it may increase or decrease the price of the cryptocurrency depending on the news, developments, investments and movements of the token holders about that cryptocurrency. This line of business is not a method I personally prefer, such as reading graphics, being alert at all times and looking forward.

10 gold rules that you should avoid when trading.

1) Considering cryptocurrencies trading as a solution to your financial problems.

2) To blindly trusting Twitter calls, Telegram signals, YouTube shills, etc.

3) Halting the learning process.

4) Falling in love with your bags.

5) Becoming arrogant and overconfident.

As in almost every discipline, sharing and compare your ideas with third parties is a good habit. However, it’s necessary to keep in mind a key point: it’s always better to do it in a restricted group of friends that you can trust. This way you will be able to cut the noise of the crowd, bad intentions and uneducated charting.

2) Proof of Work (Mining) (PoS): The mining method is the beginning of the philosophy of obtaining cryptocurrencies. The prize pool, which is obtained for the approval of the blocks in the blockchain, is distributed to those who help this mining.

Before proceeding to the details of this method, it is important to note that Mining is not an easy method of crypto monetization. Because it requires a powerful CPU and GPUs. There is also electricity and time cost. If you’re not sure if you’re doing your job professionally, I can’t say it’s an effective way of making money. So what is the basic logic behind what we call Pos?

To implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof-of-work system similar to Adam Back’s Hashcash, rather than newspaper or Usenet posts.

The proof-of-work involves scanning for a value that when hashed, such as with SHA-256, the hash begins with a number of zero bits. The average work required is exponential in the number of zero bits required and can be verified by executing a single hash.

For our timestamp network, we implement the proof-of-work by incrementing a nonce in the block until a value is found that gives the block’s hash the required zero bits.

Once the CPU effort has been expended to make it satisfy the proof-of-work, the block cannot be changed without redoing the work. As later blocks are chained after it, the work to change the block would include redoing all the blocks after it.

The proof-of-work also solves the problem of determining representation in majority decision making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs. Proof-of-work is essentially one-CPU-one-vote.

The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it. If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains.

To modify a past block, an attacker would have to redo the proof-of-work of the block and all blocks after it and then catch up with and surpass the work of the honest nodes. We will show later that the probability of a slower attacker catching up diminishes exponentially as subsequent blocks are added.

To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they’re generated too fast, the difficulty increases.

To summarize:

How Crypto mining works:

  1. A group of transactions are bundled into a memory pool (mempool).
  2. Miners verify each transaction in the mempool is legitimate by solving a mathematical puzzle.
  3. The first miner to solve the puzzle gets rewarded with newly minted crypto (the block reward) and network transaction fees.
  4. The verified mempool, now called a block, is attached to the blockchain.

Proof of Stake (PoW): Unlike the proof of work system, in which the user validates transactions and creates new blocks by performing a certain amount of computational work, a proof of stake system requires the user to show ownership of a certain number of cryptocurrency units.

The creator of a new block is chosen in a pseudo-random way, depending on the user’s wealth, also defined as ‘stake’. In the proof of stake system, blocks are said to be ‘forged’ or ‘minted’, not mined. Users who validate transactions and create new blocks in this system are referred to as forgers.

The stake is how many coins/tokens one possesses. For example, if one person were to stake 10 coins and another person staked 50 coins, the person staking 50 coins would be 5 times more likely to be chosen as the next block validator.

A key advantage of the Proof of Stake system is higher energy efficiency. By cutting out the energy-intensive mining process, Proof of Stake systems may prove to be a much greener option compared to Proof of Work systems.

Security Token (STO): It is important to distinguish between Utility tokens and Security tokens before clearing the Security tokens. Utility tokens are also referred to as user tokens or application tokens, and are used to access a company’s product or service.

The distinctive feature of Utility tokens is that they are not designed for investment purposes. If properly configured, Utility tokens are not subject to securities laws. The ERC-20 tokens of the Ethereum platform are Service tokens.

Security tokens are supported by real assets such as stocks or commodities of a limited liability partnership. They are also subject to securities laws. Security token will create a radical change in the representation of company shares. In addition, there are intensive studies on the use of Security tokens in the real estate sector.

Companies use this as a way of offering part of their business to investors, in return for a short-term cash injection that can help them to realize their latest goals and plans. Investors can also be entitled to profits, dividends and interest rates.

So, a Security Token is a crypto token which can entitle the owner to either a share of the profits of the business, a stake within the business itself or some other form of reward in exchange for their own money.

A successful STO example: Bitbond

I would like to give an example to you about a Security Token. This German-based token is already a company and has been serving the market for years. The permits taken by BaFin, the German regulatory body, can be examined in the following prospectus

Bitbond was founded in 2013 and is based in Berlin, Germany in equity financing from venture capital funds and business angels worth of SME loans funded in over 80 countries.

Over 3,000 loans have been funded on the platform. Retail and institutional investors finance business loans globally. Germany’s first BaFin regulated blockchain company

Bitbond makes revenue by charging origination fees to borrowers and repayment fees to investors:

The company will issue BB1 tokens having nominal value of €1 and representing a debt instrument (Bond) paying an annual interest of 4%, payable in quarterly installments.

In addition, it will pay a variable interest amount equivalent to 60% of the profits realized by Bitbond GmbH in its business activities (if any). The BB1 tokens will be issued on the Stellar blockchain. The duration of the bond is 10 years.

Token holders receive:

An investment into the BB1 Token carries a risk of loss up to the total invested capital.

  1. 1% of the invested amount 4x per year (4% p.a.)
  2. A variable component paid out annually (60% of the pretax profits of Bitbond Finance)

BB1 RETURN SCENARIOS : The potential value of a €50,000 investment, after 10 years = €94,432

IN CONCLUSION

As a result, blockchain technology has many methods of revenue. A significant part of these methods is the passive income generation method. After making the necessary investment, you can make money without doing anything.

Especially the PoS system is one of my favourite systems. In most PoS systems, you only have the chance to generate revenue by leaving your wallet open. STOs are also one of the favourite investment tools. Not only me, but also many cryptocurrency investors around the world have turned their eyes into STOs.

The fact that the source of the investments and the places where they are spent is much more transparent, more adaptable to the daily life and supported by the important regulatory institutions makes these projects more reliable and preferable in my eyes.

Legal Disclaimer: This paper is for general guidance only and it does not constitute legal advice.

Disclosures: Im not a part of any cryptocurrency or Bitbond. I have not been paid or otherwise hired by Bitbond too. All risks are your responsibility when investing.

Fore further information please visit: https://www.bitbondsto.com/?a=ZLKWCM

SOURCES

  1. https://hackernoon.com/consensus-mechanisms-explained-pow-vs-pos-89951c66ae10
  2. https://hackernoon.com/what-is-proof-of-stake-8e0433018256
  3. https://hackernoon.com/top-10-trading-mistakes-942bf8276ee9
  4. https://hackernoon.com/ico-vs-sto-all-you-need-to-know-about-the-new-fundraising-method-in-the-crypto-world-54a1a43a08d6
  5. Satoshi Nakamoto — Bitcoin: A Peer-to-Peer Electronic Cash System
  6. https://www.bitbondsto.com/
  7. https://www.bitbondsto.com/files/bitbond-sto-lightpaper.pdf
  8. https://uzmancoin.com/utility-security-token-nedir/

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