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Hipgnosis Songs Review

With over half-century in the music industry, Merck Mercuriadis, a music investor from Schefferville, Quebec, has cut himself a niche in the music industry. Using Hipgnosis Songs, he’s one of the few music investors who fight for artists’ rights often shortchanged or exploited by record shops.

Over the years he has had the opportunity to work with legends such as Guns and Roses, Sir Elton John, Beyonce, Terius Nash (the The-Dream) and many others.

What is Hipgnosis Songs?

Hipgnosis Songs is an investment company incorporated and registered in Guernsey and located in a fashionable enclave north of King’s Cross. The company’s main goal is to offer shareholders a fair and viable level of income, potential for capital growth from investment in songs, and related music intellectual property rights.

How it Works

Hipgnosis Songs seeks to obtain 100% of a songwriter’s copyright interest in each song. This will contribute to the writer’s stake, the publisher’s stake and their performance rights. The company also aims to enter into licensing agreements, allowing Hipgnosis Songs receive payments owing to the copyright interest in the songs it owns. These payments will be in the form of license fees, royalties, or advance payments.

Mercuriadis’ role in the company is to offer a listening ear to artists, find out what’s important to them, and keep them focused on the prize. All these is down to the experience gained after the music investor horned his skills in the music industry at his favorite label, Virgin Records, in Canada.

Type of Investment

After working for Richard Branson’s label for several years, Mercuriadis chose to venture solo so he could wholly work for artists and also get good deals for them. Despite a few hiccups that lead to his first float crumbling, including the small number of investors who made the listing unviable, Mercuriadis managed to create Hipgnosis after raising £200 million.

The company shares have held steady at around 100p since its floating and plans are underway to pay the first dividend. Mercuriadis believes his business model of investing in well-established songs and tested songwriters’ has developed a new asset class, marketable as black gold or precious metals.

Hipgnosis Songs Portfolio

The company’s focus is on small catalogues of proven hits and not several songs that may either be a hit or miss. Thanks to Mercuriadis, Hipgnosis signed its biggest contract on listing, buying 75% of Terius Nash (the The-Dream) over 300 songs catalogue. The rapper’s catalogue features divas such as Beyonce’s single lady and Rihanna’s “Umbrella”, all for £18 million. The next project is for the company to duplicate and transition the songs from film and TV adverts to increase revenue.

Risks Associated With Piracy and Counterfeiting

Since the collapse of the first Hipgnosis Songs float, the streaming market has grown exponentially. Affordability of computers and electronic equipment and related technologies has made the unauthorised reproduction of music much easier. Besides, easy access to high-speed internet connections allows users to share or download music, without paying royalties or getting the copyright owner’s authorisation.

This form of piracy damages the fans’ perception of the recording artist and robs the artist of future earnings. The good news is investors trust in Hipgnosis Songs is at an all-time high as everything Mercuriadis predicted has come to pass.

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Nemchange Review

New Economy Movement (NEM) is a cryptocurrency platform that features a proof-of-importance algorithm. It was written from scratch in Java and JavaScript and is the first reputation based algorithm.

Its other features include P2P secure and encrypted messaging system, multi-signature accounts and an Eigentrust++ reputation system. NEM recently went through an impressive increase in price that catapulted it to the apex in market capitalization for crypto. If you intend to buy or recently bought your first XEM, the next step is to send them to your account for storage.

What is Nemchange?

Nemchange is a cryptocurrency exchange for buying and selling NEM tokens called mosaics. The exchange runs on the NEM blockchain, same as ETC20 tokens which run on Ethereum blockchain. Nemchange is the epitome of how users in the NEM fraternity can collaborate to build projects that have the potential to further advance the NEM blockchain. An engineer from Poland and member of the NEM Community called Pavel Polak developed Nemchange,

Nemchange has a simple enough interface which has made it easy to attract over a thousand traders to follow it. Its main selling point from other exchanges is the potential for automatic placement of the NEM mosaic that arrives at the stock exchange purse. It enables traders to buy or sell mosaics before their official listing on any crypto exchanges. A good example includes Loyalcoin (LYL) and ProximaX (XPX) which are both traded for XEM.

Token Pairs to Trade

The NEM platform allows you to trade any available and tradable mosaics created on the platform. Currently, it’s not possible to trade popular crypto coins apart from XEM. In the future, the exchange expects to add popular cryptocurrencies such as Bitcoin, Ethereum, Litecoin, and other coins.

Besides, Nemchange exchange will run a NEM blockchain for future COMSA ICOs. COMSA is a cross-chain router, controller and a conduit for future ICOs that aim to exist in the COMSA system.

Nemchange Withdrawals

Currently, the withdrawals on the Nemchange exchange are operated manually thus it can take longer for a withdrawal to be processed. In the future, the process will be semi-automatic resulting in faster withdrawals. There are no private keys stored on Nemchange servers making it difficult for a hacker to steal your funds. These and other features are some of the benefits of the blockchain.

Every time you make an on-chain transaction, the sender is obliged to pay an additional transaction fee to the mosaic creator. The nature of the mosaic will determine if the fees will be a set percentage or a constant fee. The price is 0.5% anytime you make an order on the exchange. While withdrawing, the price is 3XEM + levy (of mosaic transfer).

What is Levy?

Not all mosaics have a levy in their mechanic. This means that every time a user makes on chain transactions. For example, when withdrawing in Mosaica Exchange or deposit into the exchange, the sender is obliged to pay additional transaction fees to the mosaic creator. But this depends on the mosaic if it’s a percentage fee or a constant fee.

If you have any questions or need to report a bug on the Nemchange exchange, you can contact the creators on the Nemchange Telegram channel.

By Jeff Mwaura, Jeff is Kenyan based freelance writer with focus on technology and finance.

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KYC Processes And ICOs

Crypto investors are now encountering many legal crypto jargons never heard before such as Know Your Customer (KYC). This digital age is making it harder for businesses and individuals to secure investments from fraudulent activities. Many social media pages reveal several warnings about fake pages and links set up for phishing scams, and credit card hacks. Counterfeit IDs and identity theft are also a big worry.

To tackle such issues, governments, regulators, and businesses now need you to identify yourself with a government-issued photo ID and to fill and sign forms. This allows the KYC process to add a layer of protection on specific accounts or transactions.

What is KYC?

KYC (Know Your Customer) refers to the verification and security processes the recipient enforces for an application to confirm the applicant’s identity. The tool allows an individual or company to prove the identity of the applicant. KYC processes not only protect customers from the theft of data and funds but also:

  • Protect institutions from possible legal penalties and fines if they don’t adhere to the policies outlined by the authorities and
  • Prevent money-laundering, terrorist financing, and tax evasion.

Examples of KYC Practices

  • Complicated usernames and passwords that are difficult to hack and need to be changed occasionally.
  • Pre-arranged questions and answers between the two parties for future transactions.
  • Background checks and credit ratings.
  • In the most extreme cases, fingerprint scans.

KYC Concerns

KYC views ICOs or token fraud as a big issue and thus discourages mainstream adoption and investment in ICOs and cryptocurrencies. This is because several crypto scams have made away with millions of dollars in fake ICOs, leaving investors with no recourse for reclaiming their stolen funds. As a result, many credit card companies have banned buying and selling cryptocurrencies.

The anonymity and decentralisation of the blockchain ecosystem make it easier for fraudsters to commit fraud and disappear. Regulators such as SEC (Securities and Exchange Commission) can penalise companies which aid the sale of non-compliant ICOs or launder money via cryptocurrency.

Many ICOs are also searching for a way to put identities on-chain and establish more secure protocols for institutions to authenticate ID info and conduct KYC processes without exposing user data.

Methods ICOs Adopt for KYC Use

KYC mechanisms help ICOs install their own systems to protect from fraudulent contributions. Despite these efforts, the industry lacks a basic standard due to the decentralised space. This is because some ICOs only require an email, name and ETH address to invest, while others need more intensive scrutiny and verification similar to the ones used by financial institutions.

Many moderate countries such the US, EU, and South Korea have now decreed KYC and AML laws as the platform for all digital currency transactions. In conjunction with the European Central Bank, the European Parliament passed legislation requiring KYC and AML rules in the industry. But countries such as France and Japan have been less strict, though implement similar regulations by improving variable KYC laws to local crypto exchanges.

Previously, a crypto trader could join an exchange and leave without verification as KYC was only involved in large financial transactions. But that standard has changed as KYC comes in before a user can trade, whether in volume or not.

 

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Anti-money Laundering Processes And ICOs

Over the past year, businesses have realised that Initial Coin Offerings (ICOs) is an effective new way to raise capital. In exchange for tokens, businesses receive funding in crypto coins such as ether and bitcoin. This mode of funding eliminates the intermediaries that linked investors to companies and have managed to raise billions for early-stage ventures.

Previously, ICOs operated in a regulatory vacuum but since 2017, countries including the US, EU, and South Korea decreed AMC/KYC laws to help regulate token sales, depending on the circumstances of the ICO. These enforcement actions made it a priority for companies to protect contributors and clients funds from any form of fraud.

What is AML?

Anti-Money Laundering (AML) is a due diligence process through which a company can confirm the identity of its clients. This is to ensure the background of the funds they wish to invest is legitimate, and that the client doesn’t belong to a terrorist, criminal or corrupt organisation.

Importance of AML Compliance

Regulators across the globe are now taking interest in ICOs and this has the potential to create uncertainty for cryptocurrency projects and investors. While national legislation sometimes is unclear or absent, complying with KYC/AML regulations has many benefits to both investors and the company. Some of the main advantages include:

  • Voluntary compliance offers a project and its participant’s legitimacy with regulators and financial institutions.
  • Cryptocurrency exchanges are now prohibiting cryptocurrencies that do not install KYC/AML processes. Not implementing such processes poses a long-term risk to a project.
  • Voluntary KYC/AML compliance may help ICOs access a wider global audience and increase the number of jurisdictions in which they can take part.

The Threat of Money Laundering and ICOs

The big question over ICOs concerns anti-money laundering (AML) and counter-terrorism financing regulations. The lack of record keeping in ICOs, the large amounts involved and the speed at which they can occur make them attractive money laundering conduits, especially for money gained from cybercrime. By swapping cryptocurrency for tokens, ICOs issuers could be redeeming cryptocurrency earned from illicit activity for new tokens which the users can sell for Euros, US Dollars, or other fiat currency Anti-Money Laundering/Know Your Customer (AML/KYC) legislation in relation to ICO projects help prevent unnecessary scrutiny from security and financial regulators.

Smart Contracts’ coding associated with AML may be the best way to interface between investors with genuine resources and illicit resources from illegal operations by requesting proof of identity that is digitised and stored in a database. This has the potential to affect the long-term prospects of the ICO community as anonymity is one of the benefits most online entrepreneurs gain from blockchain.

ICO projects that lack an AML application code embedded with the smart contract can discourage token buying, as investor confidence is low in such projects. Luckily, some of the main jurisdictions make KYC/AML compliance easier encouraging ICO activities in the long run. Terms of service are also useful tools that ICOs offer. This is because they’re reliable legal options pending when jurisdictional interest parties will release regulatory standards.

As mature startups and existing businesses continue to embrace ICOs, more organisations will comply voluntarily with AML/KYC directives as this will better their ICO potential, improve credibility with investors and banks, expand their reach, and offer clients better protection.

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The Royal Mint Gold Coin

When in 2017 the price of bitcoin reached parity with gold by an ounce, many gold investors became more interested in this new development. This is because crypto mania has led to increased interest in the concept of gold-backed cryptocurrencies.

As a result, many investors tired with poor returns from low-interest rates are now embracing the chance to invest in gold with the new blockchain-based trading platform from The Royal Mint.

About the Royal Mint

The Queen of England opened the Royal Mint in 1968 with headquarters based in Llantrisant, South Wales. The Mint is government-owned with a workforce of over 900 people. Trained security staff oversee the security of the 35-acre site. With over a century’s experience in trading gold, The Mint supplies roughly 5 billion coins and blanks to over 40 countries every year.

Why Invest in Gold Bullion Coins?

You can invest in four UK gold Bullion coin ranges. They include The Sovereign, Britannia, the Lunar and the Queens’s Beasts range of Bullion. The Mint also offers several international gold coins including the Canadian Maple Leaf, South African Krugerrand, the Australian Nugget, the Austrian Philharmonic, and the American Eagle.

According to a report by the World Gold Council, a market worth £4 billion of bullion remains untapped. But, many potential investors shy away due to the perceived difficulty in finding a reliable broker, a decent price, and safe storage.

The Mint’s Bullion Platform offers ordinary investors a single gold coin such as the 22-carat George & Dragon 2014 Sovereign. The alternative is the 1oz Britannia Gold Bullion or Lunar Gold coin. There is no limit to buying bullion and there’re facilities for special advice and storage services for investors investing over £50,000.

Investors can choose to have the coins delivered to their home, or choose to store them in The Mint’s secure storage vault. The vault is under the protection of the Ministry of Defense. Storage fees charges every year are at 1% inclusive of a VAT of the market value of the gold held. The Mint also buys back gold coins from clients who store with its vault. Smaller gold coins produced by The Mint provide an inexpensive means of investing in the market. Signature Gold, for example, allows you to buy gold for as little as £20, and store it within The Vault.

The rare nature of gold means it’s more expensive to buy than silver. It may appear you get more silver for your money but the reality is more complex. Buying gold in the UK currently doesn’t attract VAT, whereas silver and platinum do. The price of gold tends to move slowly than silver due to its volatile nature and wider use within the industry.

Digital Gold Currency

The idea of a gold digital currency is an appealing option for investors seeking an alternative payment system. After the internet of things went mainstream, E-Gold became the first digital currency backed entirely by gold in 1995. Before its unceremonious shutdown, millions of people around the world were using the E-Gold service.

Later attempts were made to create a digital gold currency, but this was before the debut of Blockchain ecosystem. Since then, blockchain technology revolutionised the industry by helping establish secure accounting methods, with Bitcoin emerging as a popular gold-backed cryptocurrency.

The current “gold rush” in the crypto world has seen several countries look to issue their own gold-based cryptocurrency. The concept involves issuing a token or coin that represents a value of gold (1 gram) equal to 1 coin. You can store the gold in a secure vault or with a trusted third party custodian, and later trade it in with other coin holders.

The price of the coin will always be the same as the current gold value. In case a certain crypto coin uptake increases, the coin or token price has the potential to increase in a value higher than the price of gold. If the crypto-coin doesn’t take off, the value remains the same as the value of 1 gram of gold.

The Royal Mint Gold

The Royal Mint first unveiled the block-chain based Royal Mint Gold (RMG) digital currency project in December 2016. According to data from The Mint’s website, RMG is an alternative option to invest in and trade physical gold. Its main aim is to provide an investment vehicle, similar to the London Gold Market with the transparency of an exchange-traded asset.

To create the digital currency, The Mint partnered with CME Group, the world’s leading derivatives marketplace. Testing of the Blockchain gold trading platform began in April 2017. The Royal Mint is now the first company to allow buyers to hold gold-backed assets on Blockchain.

According to Tom Coghill from The Royal Mint’s RMG division, one RMG coin is equal to one gram of gold. Note that this is real gold you are investing in when you buy RMG. Australia’s Pert Mint is the other country to create a gold-backed cryptocurrency.

Advantages of Investing in Gold

The main economic reason to invest in gold is the ability to maintain its value over time, especially in markets where other securities and investments are prone to inflation. Even when the relative value of currency changes, gold has absolute value. The price may fluctuate, but the number of goods or services an ounce of gold can buy has remained steady over time even during extreme market conditions. Other advantages include:

  • You can hold physical gold in your hands. It’s more of actual physical wealth.
  • You can transfer precious metals or RMG with ease. No need for third-party verification, bank accounts, or transaction fees.
  • Gold has an established, reliable value anywhere in the world. Any person around the globe will accept gold as payment.
  • Gold has no counterparty risk. This means that once you own physical gold, you don’t rely on another party to fulfill a contract to retain its value.

As an investor, you need to understand investing in gold is not clear-cut. Gold is difficult to value, is subject to seasonal demand, and unlike shares and bonds it doesn’t provide regular income for investors. But you can hedge it against calamity, and for this reason, gold prices increase in the aftermath of a financial crisis. The blockchain ecosystem can help manage smaller amounts such as a single ounce of gold. This will lower the entry barrier to many potential gold investors, while also increasing the liquidity of the market.

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Crypto Faucets

The only investment you will need is your time.

One way to get free coins is to visit faucet websites which dispense small amounts of money every time you claim.

You will need to visit the faucets constantly or spend a lot of time online as the rewards are quite small. Faucet websites are also slow as people don’t give away free money that easily. There is a huge list of faucets, some are worth it while others are not.

FreeBitcoin

This is by far the best of the bunch. It has been running for years and allows users to claim a minimum of 13 satoshis and a maximum of 2,515,125 (if you’re super lucky) on every roll. You can claim satoshis every hour. Once you achieve the 30,000 satoshis threshold, you stand a chance to earn a 4% annual interest. For each roll, you receive reward points. Your points grow every time you roll. You can use the reward points to boost your free Bitcoin earnings or activate other bonuses. Avoid the Multiply BTC Hi-Lo game which is the gambling bit of the website. You can lose your Bitcoins so it’s advisable to stick to the risk-free sections of the website which are:

  • The Free Bitcoin for rolling a dice which guarantees you some fraction of winnings and
  • The Earn Bitcoin for gaining interest on top of your bitcoins.

MoonBitcoin

This is another favorite and has been running for some years. The system is designed to peak after one hour, similar to FreeBitcoin. Payout goes to Coinpot though you have to wait until you achieve 5,500 satoshis to make a transfer. You can also transfer your earnings to FreeBitcoin where you can earn a tidy interest. Always login to this faucet every day to maintain your daily bonus percentage.

Fieldbitcoins

This faucet works much like moonbit though a bit slower. It has a payment threshold of 25,000 satoshis to your Bitcoin wallet or 200 satoshis to a Xapo wallet. Note that funds transfer from Xapo to Coinpot are high, so it’s advisable to have enough satoshis to cover the charges. Always login to this faucet every day to maintain your daily bonus percentage.

Bitfun

You earn free satoshis at a much slower rate on this faucet. Payment goes to Coinpot which works well if you can combine it with moonbit. The system is also designed to peak after one hour.

Bonusbitcoin

This is another slow faucet – it transfers earnings to Coinpot. You can make claims every 15 minutes though it’s advisable to wait until one hour elapses. It’s another reliable faucet.

Dailyfreebits

This faucet has been running for years. The experience its owners have gained over time has allowed them to tweak their system to simplify the claiming process. It pays to FaucetHub.

Automatic Claims

Some websites such as Moonbit do some background mining, once you opt-in to that option. The auto-claims are very little and running them all day will generate less than $0.01. They also consume a huge amount of your processor power, so avoid them if you are using a laptop or tablet. CoinPot’s browser is ideal for mining if you’re using a computer. Payments go to FaucetHub which allows you to choose different coins.

Note that you can’t always rely on faucets to earn a good amount of bitcoins. Some of them require much effort for small rewards. Remember the faucets will only pay you cents per hour no matter how long you keep claiming.

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What is a Dapp?

Bitcoin is a pioneer with its open-source, peer-to-peer ecosystem, blockchain, and a limited number of tokens that power the usability of its features.

Dozens of applications have recently been adopting the Bitcoin model in order to succeed.

They include Ethereum which uses its own blockchain and Omni Layer which uses existing blockchains to issue their own tokens. Others such as SAFE Network operate at two layers above an existing blockchain and issue their own tokens.

What is a Dapp?

A Dapp is a relatively new phenomenon thus a single statement definition will not suffice. But in theory, Dapp is an app which is completely decentralized. The true definition of a Dapp will become clearer as 2018 unfolds. The following are some of the features of a Dapp:

· Be wholly open-source and operate independently with no entity in charge of the majority of its currency.

· Cryptographically store all its operation records and data in a public blockchain.

· All its users must approve any protocol changes designed to improve or add value.

· Generate tokens, or currency, which follows a standard cryptographic algorithm.

· Use bitcoin or a currency that’s inherent to its blockchain system and use it for any future contributions to its value from miners.

An application must have the aforementioned features to qualify as a Dapp. Thus it’s correct to say Bitcoin is a Dapp, though not a practical one at it needs lots of protocol layering to offer strong Dapp functionalities. Ethereum can also be classified as a Dapp, although this is an oversimplification of its true nature. Ethereum’s platform allows developers to build their own Dapps. This is how developers using the Ethereum network created popular Dapps such as Aragon, Augur, and Golem.

Classification of Dapps

Decentralised applications are classified in several characteristics. They include:

· Type 1 Dapps – Have own blockchain and are known as Bitcoin, Litecoin plus all the other “altcoins.”

· Type 2 Dapps – Use the blockchain of a Type 1 Dapp, are their own protocols and have tokens to provide the necessary functionality. It’s like a software program and the Omni Protocol is an example of a Type Dapp.

· Type 3 Dapp – It leverages the protocol of a Type 2 Dapp to become their own protocols, and have their own tokens to generate a use. The SAFE Network uses the Omni Protocol to issue safecoins. This specialised software fulfills a unique need or function.

Formation and Development of a Dapp

The following three stages are involved in developing decentralized applications.

1. Create a whitepaper:

Same as Bitcoin, the most common medium by which a Dapp takes form is by the public release of a whitepaper. The whitepaper describes the protocol, its features, and its implementation. After the public release, feedback from the community is important for further development of the Dapp.

2. Start a crowd-sale:

One the Dapp gains sufficient momentum, choose a date to receive a token finding. All the necessary information that investors may need should be the Dapp’s crowd sale website.

3. Actualise your ideas:

Begin development and welcome new developers and interest groups.

With a sizeable number of Dapp projects already ongoing, 2018 has the possibility of seeing many of them enter advanced testing phases. Each individual Dapp project provides exciting potential as they combine to create a more sophisticated digital ecosystem.

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How To Buy Bitcoin In Kenya

Since mining Bitcoin is an expensive and inefficient task, the next best alternative is to buy bitcoin through a coin exchange.

Most of the coin exchanges online do not accept Kenyan traders and the ones that do require much verification that doesn’t work in a Kenyan setting. But for the few that accept Kenyans, below are some of the requirements and procedure:

  • To get started you’ll need a MasterCard or Visa card and a Neteller or Skrill account. Load your Neteller or Skrill account with your desired amount.
  • You can open an account with exchanges such as Remitano, Belfrics Kenya, Bitpesa, Localbitcoins or Paxful. Once you’ve done the verification, within your exchange is the option to deposit via Neteller or Skrill.
  • You can then buy bitcoins instantly. Secure your bitcoins by storing them in a private wallet such as MyEtherWallet. Your wallet will give you an option to exchange your Bitcoin for other cryptocurrencies.
  • Protect your wallet with a strong password and set up a backup mechanism in case you lose your computer.
  • Neteller offers a tool for converting Bitcoin to USD, and it deposits the amount into your Neteller account. You can use Neteller to transfer your money via Mpesa instantly.

Which are the best Bitcoin Exchanges in Kenya?

Remitano

This company just recently entered the Kenyan market. Remitano is a peer-to-peer bitcoin exchange which allows you to buy and sell bitcoin through an escrow service. You’ll need to sign up using your email address to buy bitcoin on Remitano’s platform. After account verification, you can access a list of local buyers and sellers and place orders instantly. Remitano acts as an escrow account to ensure transactional security. Once the transaction is complete, bitcoins will appear on your Remitano wallet.

Belfrics Kenya

This bitcoin exchange and payment gateway charges a 5% fee on transactions and has no minimum limits on buying bitcoins. For account verification and payments, you’ll need to top your account using a bank transfer. Once you complete this process, you can commence trading immediately. Your account will also double up as your wallet.

Bitpesa

Bitpesa provides a bitcoin cross-border payment platform that doubles up as a bitcoin marketplace. This company is the most established and well-funded bitcoin startup in Africa. To trade on the exchange you’ll need to register and go through the standard processes of verification. This exchange requires you upload a picture of your ID for verification. You can then buy bitcoin in Kenya shillings as yourself, a different person or a contact you’ve used before.

In September 2017, Bitpesa introduced a minimum transaction limit of $25,000 for Kenyan clients. It no longer verifies new Kenyan accounts due to the complex regulatory environment in the country. This limits the company’s ability to make payments in Kenya shillings, thus only high net Kenyan traders can use Bitpesa to buy bitcoin.

LocalBitcoins

This company is a world leader in peer-to-peer cryptocurrency exchange that assists over the counter bitcoin trades. After creating an account on the platform, you can proceed to buy bitcoin in Kenya shillings. The platform ranks sellers according to transactional history.

Paxful

Paxful is a peer-to-peer bitcoin exchange that connects buyers and sellers in one central point. The platform also allows traders to buy bitcoin using Kenya shillings. They rate the reputation of sellers same as LocalBitcoins, thus it’s important to choose buyers with high ratings.

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What Is Proof Of Importance Algorithm?

Proof of importance, proof of work, and proof of stake all have one thing in common. They’re all algorithms which when applied to cryptocurrency help maintain the order of blocks selection.

This is important when considering double spending issues. This is when money is spent more than once in a fraudulent manner. Some currencies use verification of each transaction in the blockchain to mitigate against this.

Reputation is relative among people and bears the properties of decentralization. But no monetary system has ever considered reputation, and neither has its value been appreciated as it should.

Nevertheless, the openness and liberate innovations of cryptocurrencies offer services that were non-existent before. New Economy Movement (NEM) is one of these innovations.
Despite a low key image, it has a lot to offer in the altcoin scene, more so by adding reputations to the blockchain with the decentralized algorithm – Proof of Importance (POI).

Proof of Importance

Proof of importance is a new hashing algorithm that is found in cryptocurrencies such as NEM. As blocks are generated, the algorithm time stamps the transactions. POI works fundamentally different from Proof of Work which rewards miners with computing power and Proof of Stake which rewards coin holders. Point of Importance algorithm determines your participation in the network. Thus transactions to and from a wallet, as well as the amount of coins staked gets a reward.

This way, the rich don’t get richer as everyone has a chance to be rewarded based on loyalty and effort of the user. This is a simple way of defining proof of importance, despite it having a more technical complexity.

Importance of POI to NEM

Despite the excitement it’s creating, few understand what this project has to offer. An importance score is assigned to every account on the NEM blockchain. This score will impact how individual users can “harvest” the blockchain. Harvesting on the NEM blockchain is akin to mining on the Bitcoin blockchain. To receive a financial reward, the goal is to add people’s transactions to the blockchain. As your importance score increases, you’ll have a better chance of getting these rewards.

To qualify for the “importance calculation,” you’ll need to have at least 10,000 XEM in your balance. Bearing in mind there’re under 9 billion XEM in circulation, achieving that target is not overly expensive. This method also ensures NEM loyalists will keep funds locked up in what could be referred to as a ‘masternode’ of sorts.

Same as other cryptocurrency blockchains, every NEM transaction is public. This allows onlookers to determine a rating for the importance of individual accounts on the network. This helps keep the network decentralized all the time.

To determine the importance of score, once you own 10,000 NEM or more, there’s a mathematical calculation that takes place. More XEM transactions on the network that link to your account will increase the importance score over time.

Note that NEM’s proof of importance is immune to arbitrary manipulation. The underlying technology helps reduce the likelihood of Sybil and loop attacks. Users are reminded that proof of importance is not proof of stake despite some similarities between them. Having considered the underlying fundamentals, proof of importance is an intriguing system that complements the NEM ecosystem.

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What Is Proof Of Work Algorithm?

In the not distant future, Ethereum plans to switch from Proof-of-Work (PoW) based mining to Proof-of-Stake (PoS) mining.

Both PoW and PoS are algorithms for reaching consensus on the blockchain, but seek results in different ways.

Anyone with enough computational power and electricity can create a block. However, there should be a way everyone can reach a consensus, and agree together what block accurately represents recent transactions across the network. Since there’s no central authority, trust can only be created from consensus algorithms that are difficult to cheat.

What does crypto Proof-of-Work mean?

Proof of work protocol takes place when miners try to solve a difficult math problem. Finding a solution is guesswork, but confirming if it’s correct is easy. It’s difficult to cheat the system as it will consume and waste a lot of computational bandwidth and electricity. POW is a protocol that aims is to deter cyber-attacks such as distributed denial-of-service attacks (DDoS) which intends to send multiple fake requests.

The need for such power means the mining community is shrinking and becoming more exclusive. This is against decentralization and could lead to a potential 51% attack.

What is a 51 Percent Attack in crypto?

A 51% attack is when a miner or mining pool controls 51% of the network’s computational power. With such control, one can invalidate valid transactions and double spend funds. This happens by creating and confirming own fraudulent blocks swiftly, such that genuine blocks from the mining community have their legitimate work invalidated. As a result, the rich would get richer because the more resources you provide, the more coin you’ll mine.

Hence the need for Proof-of-Stake. In case you own 51% of a cryptocurrency, it would be in your best interest to protect something you have a majority stake. It’s likely that nobody would be interested in buying up 51% of a cryptocurrency, due to its high price. Thus individuals with a larger stake in the cryptocurrency would wish to maintain a secure network. Any attack would only destabilize the currency and depreciate the value of your stake. This is why Ethereum wants to turn the tables with the new consensus system of Proof of stake

What does Trustless and Distributed Consensus mean?

A trustless and distributed consensus system is when you want to send and or receive money from someone without the need of trusting in third-party services. When you use traditional methods of payment such as Visa, PayPal or Banks, you need to trust in a third party to process your transaction. These service providers keep their own private register which stores identities, transaction history, and balances of each account.

With most cryptocurrencies such as Bitcoin, Ether, and Litecoin, everyone has a copy of the register (blockchain). Therefore nobody needs to trust in third parties as any individual can directly verify the information written.

With this information, cryptocurrency enthusiasts are now empowered to ask themselves based on the above explanation how the solution achieves distributed trustless consensus. If you are considering using a PoW based system, you now understand that PoW is only useful when trustless consensus is required. Otherwise, it’s expensive and a waste of resources. Iota is one example of a solution that doesn’t use blockchains but still strives to achieve distributed trustless consensus.