Blockchain mass adoption is right around the corner

It has been 9 years since the creation of Bitcoin. It took 3 to 5 years until it became more generally know. And the great media explosion around cryptocurrencies and blockchain only happened in 2015 or 2016. It is still an extremely new technology.

Even after cryptocurrencies went mainstream, the vast majority of people still do not understand them, or the concept behind the blockchain. It is a merge between everything you do not understand about money and everything you do not understand about computers… and although that lack of knowledge does not prevent some from investing in crypto related projects, most people despise (e.g. Warren Buffett) or are still indifferent (many of my friends and family) to the technology.

There is good reason for that.

Human beings are better at understanding use case examples rather than the functionality of things (I have written about this in my first post). This is true, for instance, with regard to the internet – people usually do not have a clue about how HTTP works or about the mechanics of any of the protocols that form the architecture of the internet, but everyone understands its value and what it is useful for.

But blockchain? Why do we need it?

A decent answer to that question is probably too long. I will try a short (less decent) version.

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One of the many things that the internet brought us was the ability to connect to peers in an easier, immediate, costless way. Many established industries have been shaken by this enhanced connectivity. Some few examples are Wikipedia, that replaced a century old industry of encyclopedic knowledge format, or platforms (e.g. the now-defunct Napster) for music/video/content sharing, which revolutionized the way people relate to media, or the services industry (e.g. Airbnb, Uber, among other disruptors), that was extremely impacted by the easiness with which peers currently connect.

Blockchain technology – and the cryptocurrencies enabled by such blockchains – are just one more step into bringing change to a completely interconnected world, with great impact in the financial industry.

Blockchains bring a piece that was missing in the current peer-to-peer revolution – the “trustless” network, where instead of relying on a historically “trusted” individual/entity, like a bank, users will rather rely/trust the decentralized auditing system that embeds the blockchain. If you want more detail on the use of the word “trustless” in the context of blockchain, there is an easy explanation here.

Blockchain technology is even being referred to as Finance 2.0. Still, I am not claiming that the financial institutions will die and a robotic version of them will rise. But in reality, we have to admit that the financial sector has not evolved on the same pace of the technological progression. One may argue: what about all the online tools that banks use and provide their customers with? Although they are a first step, they are really just a veneer that masks the good old 20th century financial industry full of unnecessary bureaucracies and inefficiencies.

However, we have not seen this revolution in the financial sector yet. That is the main reason why so many people struggle with the concepts behind the blockchain – because they have not seen them in use in a massively adopted solution yet. However, this will come, and I guess sooner than later.

In the past 24 months, there was a ton of investment in the blockchain sector. Past the frenzy, and now loaded with cash, these startups are supposed to soon deliver on their promises. We know that many will fail – that is part of the process – yet some will succeed.

Here are some blockchain initiatives you might not have heard of:

The R3 Consortium

The R3 consortium is an initiative with 200+ companies rowing towards developing blockchain technology in a meaningful way.

R3 has a distributed ledger platform intended for businesses, called Corda, with the purpose of being a bridge between various types of industries focusing on the sharing of data and on allowing direct transactions between parties without the need for intermediaries. They have already some small-scale pilot projects that have shown early success.

IBM Hyperledger

The same underlying idea of the R3 consortium but powered by IBM and with the participation of the Linux Foundation. It is also an important player in the market with around 200 companies participating (many of them are also on the R3 consortium) and some projects already being tested/implemented.

And as to banks, a significant portion of the banking industry is actively participating in blockchain initiatives and slowly but surely embracing the concept. As it becomes more and more obvious that the technology has come to stay, it is comprehensible that businesses prefer to surf the wave rather than fight it.

Also, many industries outside the financial sector are exploring blockchain solutions for their businesses, as is the case of the supply chain industry, insurance, real estate,  and telecom. Some examples are:


A blockchain business focused in the supply chain industry, Everledger is currently tracking over 1 million diamonds, and is now targeting fine wine.


Viant focus on asset tracking solutions for the healthcare, oil and gas, and real estate industries.


Provenance is working on a transparent way to trace origin and history of products, in order to easily provide final customers with the whole journey of a product, in a reliable way.


Ubitquity became known as a blockchain company with its first project involving a Land Records Bureau in the city of Pelotas, in the south of Brazil. It is a pilot project that started in 2017 for record keeping of deeds in a safe and reliable way. Sweden has a similar project and many other countries have started testing the concept.

But most importantly, there is a growing race among nations for a prime seat at the blockchain game.

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Several small countries are trying to position themselves ahead of the race, by embracing the blockchain technology and providing regulation in order to allow for a safer environment for investment and growth in this new industry. Bermuda, for instance, has been on the news in recent months for its efforts on this area.

Bermuda has been working on legislation to regulate ICOs and on providing guidance to the Fintech Industry, while at the same time maintaining its high standards in connection with KYC and AML requirements. Bermuda has also partnered with Bitfury to start using the blockchain for the island property deed’s system.

As reported by Coindesk here, this phrase by the Bermuda Premier David Burt encapsulates the whole concept: “Small ships can turn quickly. That’s the beauty of Bermuda”. And Bermuda is not alone. Liechtenstein, Malta, Gibraltar and Papua New Guinea are some examples of nations favoring the new technology and making good use of its ability to quickly turn around new regulation.

It is just a matter of time before one of the big countries jumps in – and then this race will get real traction.

Keep an open eye…

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Want a crash course on cryptocurrencies? Build a mining rig.

At this point in history, a lot of people already know the basics of cryptocurrencies: bitcoin, Ethereum, existence of other coins, the importance of the blockchain, but generally it does not go much further than that.

Again, what is mining?

Many also heard about the concept of “mining”. Mining is the term used for the process of auditing the transactions that were reported on a cryptocurrency network. If the majority of “auditors” agree that since the last audit (each audit happens rather frequently – from seconds to every 10 minutes), a certain person A transferred X amount of a cryptocurrency to person B, then that transaction gets registered in the blockchain and becomes a reality forever.

But how does one become a “miner” or an auditor? All it takes is to download the necessary software into a computer that will do the job and the system (or “mining rig”, as it is called) will do it by itself. So, no, you do not get to sit through thousands of accounting entries to check if they are good or bad. The software does that without much of your interference or knowledge of what is going on.

The software is the same used by thousands of other miners and the idea is that a largely scattered group of auditors will end up creating a trusted network of verification that will make it difficult or too costly for an individual to try to defraud the blockchain.

Some people are familiar with the SETI program that went on for years. This was a NASA sponsored program that at a certain point suggested that everyone that had a computer with internet connection could donate their computer’s idle time / performance to the purpose of analyzing data – from a distance – towards the goal of finding extraterrestrial activity. Many people made their resources available just for the fun of it, or because they found it a noble cause.

This was somewhat the way cryptocurrency mining started. At the time, a few people around the world started dedicating their processing idle time to crypto mining activities – bitcoin, ether, etc., especially since there is a reward attached to it – in the beginning, the reward’s value was not significant, but over time, with the appreciation of the value of tokens like bitcoin or ether, it became a profitable activity. Miners get a reward when they successfully mine a block.

In any case, because the likelihood if getting the reward is directly related to each computer’s performance, mining became a serious business in the last few years, and is currently highly competitive. As competitiveness rises, margins are reduced and all attention goes to cost – cost of electricity devoted to mining (a big component), cost of equipment, maintenance, etc.

Mining Farm (a bunch of mining rigs) in China


And… why is it worth getting into it?

Well, for me, just for the educational aspect. As a hobby, it might be interesting. From a business point of view, nowadays, it is probably not worth it.

In addition to the risks that are faced by every business, the crypto mining business is also specifically affected by:

(i) the number of participants in the industry – there is no barrier to enter and every entrant shares in the limited amount of reward, leading to a tragedy of the commons problem;

(ii) new technologies coming into play – because mining depends on very specific equipment, every threat of a new equipment getting into the market shakes the world of miners, who are usually heavily invested in their current equipment and depending on current outcomes to achieve their expected returns;

(iii) fluctuations in cryptocurrencies, directly impacting the rewards because equipment, energy and still everything else is priced in fiat currency (US dollar, Euro, etc), while the rewards from mining activities are provided in units of the cryptocurrency itself. Therefore, a sudden drop in the cryptocurrency prices (as we are experiencing in these last weeks) makes a huge dent on the business plan of a cryptocurrency mining business;

(iv) regulation; in a still very much unregulated area like the world of cryptocurrency, impending regulation keeps miners awake at night.

In any case, without minding if the venture will be profitable or not, after arming myself with the courage to buy 15 different items from Amazon, I was set for an adventure into a completely new realm of unknown features.

the start of it… I did not know what I was getting into.



As much as I have a passion for technology, I have no IT or tech professional background. The process of building a mining rig actually involves building a computer, that is, buying a motherboard, a CPU, connections, fans, graphic cards (or GPUs), power supply, RAM memory card, etc. There are tons of videos on youtube related to how to build it. I spent quite some time in this learning process.

Just like with a cake recipe, one may have to adapt with what is available – in the absence of white sugar, can I use brown sugar? Or honey? Can I use wheat flour instead or regular flour? How will these small things affect the final outcome? Adapting with computer parts may be more troubling and risky.

I had to adapt a little bit, as the items in the shopping list I got from the youtube lessons were not always available. It worked for the most part, but I had to later replace one item or two, and return another that ended up being unnecessary.

This first mining rig took me a couple of days to build. I am sure that a second (if I ever get to it) would be much easier since I am now more comfortable with the sequence of events, connections, etc., but building it is just the first step.


When it is finally ready to be powered, I found out that the software part was even more complicated than the hardware. Even the “easy” solutions are in fact not so easy if you are not an IT expert.

What I found to be doable was to use I am not sure it is the easiest but since it is widely adopted, there are plenty of videos and reports on how to use the site and how to deal with the different options.

And specifically, the wide variety of options are horrible to deal with. If you do not know what they mean, how can you choose? Should I overclock the memory, or the core, or… what does that mean anyway?

So, I had a lot of trial and error until I got it right. And by the end of the second day, I finally saw a message on the screen indicating that the rig was, after all, mining!


My goal is only educational. I set this rig in order to actually experience this learning curve to become more comfortable with the concepts I still did not understand. I’m getting there. It will still be a while until I fully comprehend the whole process.

If you would like a little more information on the subject, check Mining the Future of Money: Building a GPU Mining Rig by Oscar Lafarga published at,


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It is tax season! Remember to list your crypto activities…

DISCLAIMER: This blog post is not to be considered tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors for the purposes of any actions related to transactions and reporting.

With a lot a new investment entering the cryptocurrency world in the last 2 years, a lot of taxpayers are having to deal for the first time this year with the subject.

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Some crypto investors might even forget about it. They should not.

The Internal Revenue Service has issued guidance in 2014 on the tax treatment of transactions using virtual currencies, such as Bitcoins or other similar currencies.

That should be anyone’s starting point. In essence, the notice provides that “virtual currency” (that was the nomenclature chosen by the IRS) is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency. It is generally the same concept for stocks.


First issue – bitcoin was “used”

Differently from stocks, we sometimes use cryptocurrencies as, well… a currency. Even if it is just for fun, many people (myself included) have bought a coffee or made an internet purchase using bitcoin or some other cryptocurrency, just for the sake of it.

And then many people may fail to report such a transaction on the perception that it was not a buy or a sell. But it is probably considered a sell, since the conversion of X bitcoin into coffee has an implicit conversion of bitcoin to USD, and then from USD to coffee.

That is one situation where some people might fail to accurately report their activities.


Second issue – beware of the reports you get

Another difficulty I noticed with tax reporting is related to Coinbase tax reports. Coinbase is still the major cryptocurrency exchange in the United States, with more than 12 million users. I am unaware of the procedures used by other exchanges but they might present the same situation. It is important to note that Coinbase is not a tax advisor and it is currently not required to provide 1099 forms. But it does provide a “cost bases for taxes”, in beta version, as a way to help out users keep track of their activities.

The problem is that even if a user trades only on Coinbase, such user might (hopefully) be holding the virtual currency in a digital or hardware wallet, and not on Coinbase’s wallet. As a consequence, every time such a user buys coins with Coinbase and sends these coins to the user’s own wallet, such a transaction (sending to wallet) is viewed by Coinbase as a sale – and it could as well be a sale; Coinbase cannot ascertain that.

Accordingly, Coinbase users have to be aware of that and not take that report from Coinbase as their basis for taxes without a deeper look. In some cases, it makes a lot of difference. Other exchanges might have the same issue, since for the exchange, when the user sends coins to an address, the exchange does not know if it is an address owned by the user (not a taxable event) or by a third party (a taxable event).


Third issue – replaced one coin with some other

Yet another interesting aspect that has been the object of heated discussions between tax attorneys, accountants and users, is the “Like-Kind Exchange” Under IRC Code Section 1031.

Essentially, IRC Section 1031 provides an exception and allows a tax payer to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. So, if an investor exchanged Bitcoin for Ethereum, for example, the possible gain from the time the investor acquired the Bitcoin to the time it replaced the Bitcoin for Ethereum could be in theory postponed.

If the IRS will interpret it as applying to exchanges of one cryptocurrency for another it is yet to be seen, but in any case, it will only apply (if at all) to transactions made until December, 31st, 2017.

Congress has approved an amendment to IRC Section 1031 (a)(1) that deleted “property” and replaced it with “real property”. Accordingly, that window of opportunity has closed for transactions after January 1st, 2018.

Fourth issue – the John Doe summons

Adding to all that, we witnessed throughout 2017 a battle between the IRS and Coinbase. The IRS won.

In a nutshell, back in November 2016, the U.S. government filed a civil petition in federal court seeking disclosure of all Coinbase U.S. customers’ records over a three-year period (2013-2015). A legal battle ensued and lasted 12 months – I will delve into the details in a future post. Then, in November 2017, the Federal Court of the Northern District of California granted in part the request by the IRS, ordering Coinbase to produce information for accounts with at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013 to 2015 period.

Accordingly, your information might already be in the hands of the IRS…

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Fifth issue – OK, now, how much do I owe?

Now supposing you have crossed all your Ts and dotted all your Is in relation to buys, sells, uses of cryptocurrencies in 2017 – there is still the question of what accounting method is the most appropriate: First-in First-out? Last-in First Out? Average Cost? Highest-cost First-out? And so on. I will not even venture a suggestion in relation to those options. I will just say that depending on each one’s situation, tax reporting on cryptocurrencies might become an adventure.

But hopefully you are a true hodler (more about “hodling” here) and have never sold or disposed of any of your crypto assets. If that is the case, no reporting required.

Anyway, good luck to us all.


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Bitcoin and other coins. Should I “hodl” ? What does that mean anyway?

The cryptocurrency space is full of interesting jargon.

You have “money” that is not money. You have “currency” that is not actual currency (and according to the IRS is an asset). “Mining” has nothing to do with a pick on the ground or with using explosives to unearth hidden valuables. You are told to hold you “not money” in a “wallet”, but the wallet is “digital”, unlike any wallet you have always used. And even if you happen to use a “hard wallet”, it looks like a pen drive, not a wallet. Plus, you may face a “hard fork” or a “soft fork”, but none of that are used for eating.

So, nothing more adequate than inventing a new word – H O D L – a verb, that is nothing more than a typo for “HOLD” in a message written in 2013. The message became famous and the term hodl is now used to define the decision to hold to the cryptocurrencies and not selling, despite the crazy valuation in 2016 and 2017 and subsequent wild market fluctuations.

Here is the message where it originally appeared:

bitcoin hold hodl hodling crypto

The new term became widely adopted by the crypto community and morphed into a symbol of belief that this new technology (the blockchains and its coins) is eventually going to thrive and be part of our lives, as much as the internet is today.

While it is true that the term has been used in the past few months for memes and internet jokes, like these:

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it is also true that it has become a way to demonstrate an almost religious conviction that cryptocurrencies are here to stay. For those who have fully invested – not only their savings but also their lives – in the crypto world, it seems obvious that the ups and downs are just part of a sure path to success of this new technology. I also believe that, as I becomes clear from my first post “the Blockchain Revolution is inescapable”, where I also argue, though, that no one knows which cryptocurrency is going to be alive and well in the future.

More than anything, the crypto community needs to show some results in the near future.

C'mon do Something

The hype around the blockchain, bitcoin and other currencies is starting to wear off, and a tiny wave of disdain is beginning to move back and forth. It will still be a while before mass adoption, but it needs to start growing soon.


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Have we earned it?


“Have we earned it?” – probably the most important question posed in 2017 in the cryptocurrency community was this one by Vitalik Buterin, the founder of Ethereum.

In December 2017, the much celebrated 23-year-old Russian-Canadian posted the following on Twitter:

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There were many other tweets and explanations given later but, with that opening thought, he was able to encapsulate in a very concise and elegant manner a general feeling that currently permeates the cryptocurrency ecosystem: people are focusing much more on the wealth generated by the extreme valuation of coins than on delivering on the promises of real change and disruption that we have been hearing and/or propagating in recent years.

In Vitalik’s words: “how many unbanked people have we banked? How much value is stored in smart contracts that actually do anything interesting? How many Venezuelans have actually been protected by us from hyperinflation?”

Throughout 2017, many cryptocurrencies had stratospheric valuations, making a lot of early investors sudden millionaires. And, to be fair, this kind of story makes the media headlines a lot more often than, for example, the current efforts of replacing a century old finance industry with blockchain technology. The media frenzy over crypto valuation, predictions about the future and overnight millionaires have occupied much of the space last year.

The vast majority of people (many of whom investing in crypto) still have not fully understood the importance of the blockchain concept and its true potential. Moreover, many do not even care –  as long as whatever coin they bought yesterday continue to increase in price, that is all that matter.

Jeremy Gardner, another major player in the crypto community, made a similar point in his great keynote last week (Jan 19), at The North American Bitcoin Conference, in Miami.

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Gardner criticized the current focus on wealth that is so pervasive nowadays in the crypto community reminding the audience of the days when our parents dropped the protest sign on Wall Street to embrace instead corporate suits and pension plans, and urging the crowd to avoid going down that same path.

The ongoing blockchain revolution has deep social change roots and many in the community are in fact committed to doing something for the common good, irrespective of making money along the way. But their efforts have been shadowed by a growing number of investors/curious whose only focus is on making money fast without any regard to what is the effort about.

In other words, there is still a long way to go before cryptocurrencies will play a major role in society. There are a number of ensuing initiatives that will soon surely flourish but a lot more needs to be done.

One obstacle might be that a lot of the talented people capable of overcoming the challenges in the crypto world is presently devoted to ICOs (Initial Coin Offerings).

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While ICOs are a legitimate way of raising funds for startups, some argue the model is being abused and used for projects that are either nonsense or would not need to be involved in the crypto space. It is an interesting thought but I will leave that for a future post.


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