sorry: for nerds only.

ECDSA - The math behind Bitcoin

The eliptic curve signature

An eliptic curve is drawn by the formula y² = x³ + ax + b (so no magic at all)
And a Point P on the curve is described by two coordinates (p1, p2)

And based on this curve we can now easily compute operations like an addition.

We know that P+Q+R= 0 (because they are all on one line)
So P+Q= -R (because based on P+Q+R = 0 you get P+Q only by subtracting R)

Of course, you can also do multiplication
Scalar multiplication

First let´s do a check:
P + Q + Q = 0 (right? Because they are all on one line)
So, Q + Q or 2Q is -P (2Q= -P; because you need to subtract P from P + 2Q = 0)

Now you have understood the mathematical operation behind ECDSA (or maybe not, because your Brain has a conditioned fear of math, even if it is simple. Thank you school :) ). Of course Bitcoin uses a special algorithm. Just like a cooking-recipe only based on the principles above.

Investment should be simple as f++k

Crypto-Gurus on Youtube often give the (no-)financial advice to "spread capital in order to reduce risk". You simply cant diversify in a highly correlatet market. It does make no sense. Diversifikation is in order to reduce volatility of the whole portfolio. Spreading like scattering in military when using a machine gun, or a fragmentation granate, is to increase the chance of a hit (or of holding a winner in a portfolio).

Those are two different intentions but the same mechanism (spreading). The metaphor of the basket in the saying "dont put all eggs in to one basket", stands for a class of highly corelated assets (like an industry-index, or companies of a certain nation like US-companies or the crypto-market) correlation introduces the risk of high volatility. Therefore you have to avoid allocation directed to highly corellated assets only.

[Coinmetrics]

As you can see, if you hold one asset or many does not make any difference to the volatility of your portfolio. But of course spreading can also reduce risk of ruin. The higher the number of euqal sized positions, the higher the redundancy. You are a multicellular organism, what happens when you loose some cells? Ever overdrunk on vodka :S? :D Nothing big happens, even though you maybe have lost a million cells. Even if you loose one finger or an arm, you can still lead a succesfull life. This is redundancy. But since the tokens are not equaly likely to drop out, the simple 1/n-Heuristic will be a bad move for allocating. So fundamental analysis of the technology and the business in relation to the market does make sense.

Fundamental Analysis of Crypto Businesses

[coinmarketcap.com last year]

Yes you see right 8000% in one week. This means 80x. 80 times the size of your inital position in one week! Sadly only a few got rich. If you bought this token based on a price movement, than your are holding a token with zero value. Congratulations!

[coinmarketcap.com]

This happens when you are ignorant about fundamentals.

Why complex calculations? Why not a simple checklist?

Like Dan Larimer said: Bitcoin can be seen as a payment system or what ever but in first place it is a company! It is a decentralized autonomous community,organisation and company. Yes it differs from a normal company like Coca-Cola... because it is opensource, decentralised and autonomous...so what? Those are advantages in fundamental analysis. You dont need to know if the CEO is taking drugs and is abusing wimen. You dont need to know if there is cheating software in the car. Yes there is the possibility of back doors in the ASIC-Mining but you only need to know "how centralised is it on this specific layer?" At Volkswagen or Coca-Cola it is always centralised. Risk is permanent.

But what is volatility anyway?

You know price? Price is a quantity and first derivative of the quantity is variability and the second order derivative of quantity is volatility. So what is the difference between variability and volatility?

Well imagine you have a water tap: and instead of water there comes price out of the tap. The demand of "water" in the supply-net is effecting the supply (quantity = price) so change in quantity is the variability and an inherent characteristic of the demand right? And the change in variability (second order derivative of quantity and first order derivative of variability) is the volatility.

lokation: speed: acceleration ≙ quantity: varibility: volatility

Why Bitcoin is a Dinosaur resistant to competition

Its realy simple. When you look in evolution of life there are the first tetrapods with a certain phenotype specialised for flatt land at the shore and this phenotype is still valid hundrets of millions of years later. When the use-case does not change, than the phenotype will not change either. Some organisms show no evolution, simple because there is no change in their environment.

Bitcoin is the first land-creature not the first mover, there was life bevor bitcoin, but all those hybrids like digi-cash needed the water of zentralisation. Bitcoin was free to move away from the ocean. It steped into the jungle and new species were evolving (Ethereum, Lightcoin, Monero, Dash, Z-Cash, EOS, Steem, Dodgecoin,...) some of them are strong related and are just a fork of each other. Others are a new implementation of the concept of Bitcoin and some are looking so strange, that you think they are from a nother planet (like Iota).

Bitcoin is technologicaly the best adapted crypto for its usecase {Store of Value/ digital Gold}:

• there is nothing more open than open source,
• there is nothing more public, like a public-Chain,
• there is topologicaly nothing more decentralized than an equal distributed p2p network,
• there is crypto-economicaly nothing more tamper resistant than Proof of Work,
• there is nothin more simple than script and turing incompletenes even though this is an idealsation in most cases
• There is nothing more caped than a garantued suply cap at asymtoticaly 21 Million
• There is nothing more simpe than a one way DAG like the blockchain

there is no superlative of this primitive technologie. From here you can only go more complex. A more complex consensus mechanism like dPOS or a more complex graph like a tangle, a more complex topology like a consortium chain (which is still decentraliced but not as decentralised/redundant as P2P), a more complex language like theoretical turing completeness in Ethereum, Eos and co..

Complexity introduces errors. The more simple a setup, the less heavy errors can occur.

[Horseshoe crab: Von Shubham Chatterjee, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=27667459]

Some concepts of evolution are good as they are, no need for change, since hundrets of millions of years

Sources:
CMG Capital 2015 Understanding Correlation and Diversification

López, J. and Dahab, R. An Overview of Elliptic Curve Cryptography, Technical Report IC-00-10, State University of Campinas, 2000.

Wang 2014 Secure Implementation of ECDSA Signatures in Bitcoin

Burnie 2018 Exploring the Interconnectedness of Cryptocurrencies using Correlation Networks

Picture Sources:
"Dinosaur" 1: By Nobu Tamura (http://spinops.blogspot.com) - CC BY 2.5, https://commons.wikimedia.org/w/index.php?curid=19459339

"Dinosaur" 2: By Nobu Tamura (http://spinops.blogspot.com) - CC BY 2.5, https://commons.wikimedia.org/w/index.php?curid=19459626

"Dinosaur" 3: By Dmitry Bogdanov - [email protected], CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=2728596

This is no financial advice. Its just a reminder that there can be financial disadvice ;) Go for your own approach, there are endless ways.

Now I need to do data analysis. I hate university (some times). Have a wonderfull week end! <3