Expert Says The Best Time to Invest in Bitcoin Is Now

Brian Kelly, the same man who had been accused of plugging Ripple on CNBC by demonstrating its purchase process, recently stated that people should look into buying more Bitcoin while its value allows it to be reachable to potential investors.

Bitcoin’s value is currently dancing around $10,000 to $11,000, which is almost a 50 percent drop from its high in December where it had reached $20,000 at one point.

What did Kelly have to say?

Apart from being in the news about that one Ripple segment, Kelly is also known for being a proficient investment expert and the founder and CEO of BK Capital Management, a digital asset investment firm.

Speaking on CNBC, Kelly mentioned the current negativity and nervousness that has been making rounds across the cryptocurrency industry about Bitcoin and its decreasing value this month.

He stated that despite everyone suggesting that “bitcoin is dead,” this is the opportunity for investors to invest in the cryptocurrency.

“Now’s the time you start looking at it, on the buy side,” Kelly said.

The “hand-off” period

Kelly also mentioned that even with the recent situation that has been developing in China and South Korea, cryptocurrency is currently going through a “hand-off” process where it is going from the Asian traders to the ones in Europe, U.S., and Japan, only to come back to the first region in the circle again.

China is currently in the process of taking stricter measures to reportedly achieve its objective of eradicating cryptocurrency trading from the country altogether. South Korea, on the other hand, recently released a regulatory plan to end the anonymity on cryptocurrency transactions, but is otherwise not in the process of banning the exchanges or trading by any means – after weeks of uncertainty on the situation.

Kelly further mentioned that this is most certainly “not the end of Bitcoin,” but is the other way around. He alluded that it is an excellent situation to be in for investors who want to buy Bitcoin, instead of where the cryptocurrency’s value is so high that it is out of reach and poses a danger to its new investors, due to its volatile prices.

He mentioned that while “everyone is running around being all excited” whenever Bitcoin reaches the value around $20,000, that is the time when people need to be vigilant about their investments and be “a little cautious.”

Kelly also shared a few tips for investors who are interested in Bitcoin, starting by mentioning that since “this is the Internet in 1995,” it is prone to fluctuations and risks.

He advised investors to only put in around 10 percent of their total investment budget into Bitcoin, as that way, even if losses incur due to fluctuation, they would be able to manage them easily.

He also suggested the investors HODL onto their Bitcoins once they have them, and not to sell them right away whenever the value starts going up again. He explained that once Bitcoin prices start going up again, chances are that it will gain traction once more.

Furthermore, he mentioned for investors to have a stable stance about Bitcoin and not drop it if the price fluctuates by 50 percent. He described that daily fluctuations are normal in this asset class and thus, while the price can drop that much in a single day, it can very well go back up and even higher the next day. The key is not to be panicked.

It sounds like Kelly might be on the way to redeem himself in the eyes of Bitcoin supporters, after all.

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What is Proof-of-Work?

You must have heard the phrase proof-of-work quite a few times by now. But the problem is you may still not know what it is and that’s perfectly fine.  Many people who get introduced to the cryptocurrency industry are new to blockchain jargon in general. You’re not alone, proof-of-work is just one of many terms that are widely used without ever truly being explained.

We’re going to break down what it is and why it matters in the cryptocurrency system, and we’re looking to do this as simply as possible.

A Very Simple Explanation

Let’s start from the beginning, and we’ll kick it off by starting with two examples.

1) Sometimes, when you are submitting a form on the internet or trying to login to a site, it asks you to verify a few pictures first or enter a line of text in a box to prove that you are not a bot. This is done to prevent, both spamming or, someone taking uncalled-for advantage of the system.

You select the pictures/enter the given text correctly, your action is verified, and you are then allowed to go through the system and perform your desired activity.

Simply put, that is what Proof-of-Work means in a broader perspective: to perform a simple process for an end result to prevent spamming.

2) Another example of this is someone getting a math equation from a textbook. Even though the final answers are often provided, the process is never shared.  Therefore, they must solve the equation step by step to get the answer.

Once the answer is obtained, they can show their step-by-step solution to their professor as a proof-of-work for the answer.

And that’s very similar to how proof-of-work is utilized in blockchain.

Okay… That was… Simple

Moving forward.

Let’s break it down a little further.  Proof-of-work in the blockchain is needed to confirm transactions and to create new blocks. The people that perform these tasks are called “miners” – and depending on the amount of work done and new blocks that are generated, they can earn tokens.

Proof-of-work is the main consensus algorithm used by Bitcoin and Ethereum, which means that for any transaction confirmation, the “miners” have to go through proof-of-work in the form of a mathematical puzzle.

Since there is a team of miners working on a network at a single time, whoever finds the solution to that problem, can, in a sense, post their answer through the distributed ledger technology (DLT) for everyone to see.

Then – and think of the mathematics analogy here that we described above – the answer is then run through a single check through a system that is used to verify proof-of- work answers.

That system is called a “hash function.”

Bitcoin, for instance, uses the SHA-256 hash function.

If a miner for the Bitcoin blockchain has solved a puzzle to confirm a transaction and has received the answer, they will run their proof-of- work with the hash function.

If the answer is correct, the miner is rewarded, and the process they were working on is confirmed and depending on what the action was, a new block is formed.

That explains proof-of-work… but why is it used again?

As described above, it prevents spamming and ensures that the system is not misused. Miners conduct this work to gain the potential tokens. The work required to process transactions is not easy, this is intentional and prevents misuse of the platform.

Secondly, this system also assists in the prevention of denial-of-service (DoS) attacks on the network performed by hackers.

Several Drawbacks

Like any other technological advancement, proof-of-work also has its limitations and disadvantages.

1) The first one that comes to mind is the high expense that comes with mining activities. Due to the nature of these puzzles that operate on a blockchain, specialized computers are required which themselves are expensive, and also consume a lot of power which amounts to high electricity bills for the miners.

2) Furthermore, the work that these miners do for these complex calculations, which is some exceptional computation on their part, does not serve the purpose of doing anything else than just processing that one specific action for which proof-of- work was required. This suggests that those exceptional computers and heavy equipment could be utilized in a far better manner in an improved capacity.

3) The proof-of-work mechanism can also cause what is called a “51% attack”.  This sort of attack takes place when an individual or a group wrongly consumes the majority of mining power. This causes them to control most events on the network, manipulating the results in their favor since they can hog new pending blocks and prevent other miners from completing them. If the 51% attackers get control of the network for a longer period, they can influence the network. If there is no consensus on new blocks, then a fork is formed within the blocks and divides the miners into “groups.” The group with more blocks eventually remains, and the one with fewer blocks gets discontinued. That is why a 51% attack is one of the most threatening notions to a blockchain. However, 51% attacks are hard to execute since they need an immense amount of mining capabilities. Nonetheless, it is a possible threat that cannot be ignored altogether.

Widely Used

By the looks of it, proof-of-work is here to stay.

While Ethereum might implement another consensus in the future soon, Bitcoin has not rolled out any such plans as of yet. This suggests that the proof-of-work mechanism will remain with Bitcoin users for quite some time.

The other cryptocurrencies are divided between proof-of-work and different versions of consensus, but a significant portion of them remain with proof-of-work for now.

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