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Wealth Formula Episode 187: Ask Buck Part: Part One

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Buck: Welcome back to the show everyone and let's get on with the Ask Buck component of today's show. As a reminder this is part one of two. The next one will be airing next week, but we have lots of questions. I want to make sure we give adequate time and yet not bore the lights out of you by making this into a two-hour show. So the first question from Jeffrey Cattell. Jeffrey asked, hey Buck I had a question about investing with an LLC and mortgages. I had heard that purchasing rental properties inside an LLC limits you to getting a commercial mortgage. Can you discuss the differences between commercial and conventional mortgages and how buying within an LLC affects your options.
Yes I can certainly give it a try and of course remember I am not an attorney and I am not an adviser these are my opinions and there are things that I've done etc so don't hold me to it, I'm just giving you my perspective. So let me start out by reminding you a little bit about you know the different kinds of mortgages and they're kind of obvious right I mean there are two really two kinds of mortgages there's two residential there's a commercial mortgage. Now residential mortgages I mean that's the kind that you get for your house that's the kind that you might get for a 1 to 4 unit house or duplex or triplex or quad but you can get a second or third mortgage etc but those are all considered residential mortgages. Pricing is obviously best when it's the first one and it's your primary home but these other residential mortgages that you get as a second or third etc are generally favorable in terms of pricing and amortization and all that stuff as well. Now if your property is already owned by an entity such as an LLC or you're buying it in the name of an LLC by definition you are no longer in the residential category because you're declaring to everybody in the world that this is an investment property in which case you must obtain a commercial mortgage which the major difference between the two frankly is just that the commercial mortgages are more expensive and have less favorable terms than residential ones. So how can you potentially get around this okay. So I let me give you an example and again this is not advice but I'm gonna talk about experience and the experience of others around me so I've had a couple of houses that I own in Chicago one of them that I lived in for a few years and now I rent them all. I bought those houses in my name and therefore at the time we got mortgages and the mortgages are in my name, my wife and my name in this case, but after they were purchased in personal name and mortgages were issued, I then transferred them over especially after obviously when I moved down and I rented the place out into an LLC. So they are now deeded to an entity each shows actually deeded to a separate entity. The process that used to do this is called a quitclaim deed. So if you want to ask your attorney about doing something like this is called a quitclaim deed. Now theoretically and I emphasize the theoretical here if you do this your mortgage could be called. Why? Because in your mortgage usually it's gonna tell you you you know you you know this is a mortgage on you and that if you make these kinds of changes you gotta let them know. In practice though what I have found and this is the part where I keep emphasizing I am not giving you advice is that everyone does this right everyone does a quitclaim deed everyone does it. My dad has been doing this for 50 years and has never had a problem. I'm doing it now and these are major banks they even know about it they don't seem to care. Anyway as long as the mortgage gets paid it seems like no one cares. So bottom line is what most people do what I've done for these smaller properties, buy them in your own name quitclaim deed, so you can't but in your own name get the good better mortgage and then quitclaim. Am I advising you to do that? No. I'm not advising you on anything just what I do what I've done what my dad's done and a lot of people I know have done. Okay all right so that is the first question. Now I'm going to move over to an audio question because some of you weren't chicken. Just kidding I'm kidding about that but audio questions are fun they're fun to hear from people so let's see the so I got have a question here from Garth. Okay Garth here we go.
Garth: Hello Dr. Joffrey this is Garth in Portland Oregon. I understand the definition of accredited investor which I am not one but I've also heard a term sophisticated investor and I'm wondering if that is different than accredited investor and if so what do I need to do to get that title? Thanks.
Buck: Thanks for the question Garth. So the question really is what is a sophisticated investor? Well first of all why does this matter in the first place it's all accredited sophisticated stuff? Well the answer that, for private placements in real estate a certain kind of offering is frequently used called a Regulation D offering, it's the typical structure. Regulation D, a Regulation D offering allows you to move forward with a private offering without pushing it through the SEC for formal classification as the security. Now why would you not want to file with the SEC? Well there's two reasons really cost in time, it's expensive. But the bigger issue in terms of real estate is a very practical one it's the element of time. So if you're doing an SEC filing and you know on an offering it's gonna take you at least a year to get that through the SEC and contrast that with the fact that when you get a building under contract and you know one of the properties that we do an investor club for example, usually you got some under contract you raise capital you close the building and all that it's happening within three months, so you only usually have a very short period of time, you don't have time to send that to the SEC and let them mess around with it. And the SEC in reality knows this so this is not a new new thing this regulation D, it's been around forever you know but so they provide this as an exception to the rule they say if you're not going to file with the SEC you can still do this legally but it has to be under this kind of exemption Reg D and these are limited, these will be limited to investors that are either accredited which we've talked about before, you make $200,000 a year for two years with a reasonable expectation of doing it again the next year, $300,000 if filing jointly and/or a net worth of $1,000,000 outside of your personal residence. That is an accredited investor. What's a sophisticated investor? Well that's the problem right? So that's that's not very clear, it's not very clear at all and it's a little nebulous and when it's not clear frankly often that becomes the area of abuse. There's no clear definition of a sophisticated investor. Sophisticated investors are supposed to be financially savvy. They're supposed to have experience and knowledge and acumen that makes them more qualified to make decisions about these types of more sophisticated investments than your average Joe. But the problem is that it's essentially up to the fundraiser to determine if an individual is sophisticated or not. Now I have seen situations where people join say a real estate gurus organization and immediately upon paying for the course they are somehow deemed sophisticated and start investing in other students deals within that ecosystem, a bit shady if you ask me but it is what it is. Now that's not to suggest that you in particular are not sophisticated because if you're listening to this show there's a very good chance you are sophisticated, you may you know just understand the language well and you may understand real estate well you may own a bunch of real estate and you want to invest passively in a real estate syndication and in those cases you might be sophisticated, you know. I mean it is a little bit random because you know I run into people who are making you know doctors who are making five hundred thousand dollars a year but they've only made it for eighteen months and so therefore they're not accredited, right? So then you have to make some judgment calls but anyway bottom line is sophisticated is subjective but I think the biggest problem for this terminology is that there really is no safe harbor in my opinion at least that makes it really really difficult to deal with from the side of the operator and therefore in our group in general for investor club it's very rare when we will you know not require the true accredited definition and the reality is most major syndicators won't even consider sophisticated investors who are not accredited for this reason, it just becomes one of those situations you don't want to put yourself in trouble. Okay so let's go to the next question or a couple questions from the same individual so that's fine too, okay from Ron.
Ron: I have a question about Bitcoin. Where do the new bitcoins come from in short I know we are accurate we have and they create blocks in those blocks we store transactions and the miners get a fee for building a block that's 12 Bitcoin I believe so are those 12 bitcoins also getting into relation we'll end up with those 21 million bitcoins in the end or is there something else? So that's my question can you help me with that. Thank you.
Buck: Sure Ron pretty straightforward I mean without getting into too much technical the new Bitcoin you mentioned you know the whole mining basically the new Bitcoin come from doing the mathematical work to solve these complex mathematical problems that's what these supercomputers do those are the miners and then there's a competition whoever gets the answer first as you mentioned gets rewarded with this fee, they get rewarded with Bitcoin and that's weird those Bitcoin are actually generated so that's what it means to mine Bitcoin and you're also right they'll never be more than 21 million Bitcoin you know so that's one of the true values of Bitcoin is that it is a finite thing there’ll never be more than 21 million so the fact that some go out of circulation to get lost etc it's deflationary in that regard. The last thing I guess I would point out is you know what happens after mining is complete with 21 million well basically miners get paid for exchanges transfers etc at that point but it'll be interesting to see how that all turns out at that point. All right I think Ron has another question here and I think it's related.
Ron: Hello there Buck. Ron again here with a question, a what-if scenario. What if my thousand dollar worth of Bitcoin explodes and all of a sudden it's 1 million and I started with storing it on my Ledger Nano S. Is that still a good way to go when it's about a million or maybe 10 million or do I need to have some other methods in place due to spread risks or to be safe? Please let me know. Thank you. Bye bye.
Buck: Alright well a good question you know what Ron is talking about is the Ledger Nano S which is a hardware wallet it basically is something that's stored offline. Now listen that's what makes it so resistant to you know any kind of hacking right so you're not it's you're not online if you're not online no one can get to you, you know a hacker and Russia can't get to you, you know. But so if you suddenly end up with a million dollars of Bitcoin or more the reality is that in terms of the ledger it's just as bulletproof as before. I think the issue becomes when people have you know when they get like several million dollars a Bitcoin or Bitcoin million you know multi millionaires and billionaires or whatever then you know I may become a little nerve-racking just to have this little ledger around here right you may want to have you might want to have a little bit more protection than that in which case you might consider some kind of a custodian service like Gemini etc, but that's you know that's not necessary because one of the things about Bitcoin one of the appeals is that itself the ability to self custodian this stuff right you don't need a bank for this. And so I guarantee you that people are walking around with millions of dollars on their ledgers. Now I will point out that you know Ledger Nano S is just one Hardware wallet and you can get a lot more sophisticated and complicated type things you can even get a like a multi signature wallet Hardware wallet would that would require you know multiple people's keys in order to get to the cryptocurrency which you know I mean if you end up with a ton of money in crypto currency that's you know that's probably something that you might want to do. Okay next question from John Jillette.
Hi Buck love your podcast been extremely helpful in increasing my financial intelligence. There's been talk about impending financial crisis from well-known economist Dent, Rickards and Schiff. What do you believe in the percentage chance that we go into a 2008 like financial crisis in the next couple years? Also as the recession is always coming how much dry powder do you recommend having at this point in the cycle scoop up deals when there's “blood in the streets”? Good question John the problem in my view with those guys that you talked about Harry Dent, Jim Rickards, Peter Schiff all super smart guys right and Harry Dent was on the show recently, is that they've all been predicting the same darn thing for at least four or five years now, right? I mean and it hasn't happened and when there is some sort of pull back because as you said there's always gonna be a recession at some point why is it after you blood in the street, you know? The bottom line is that you know Harry Dent in our last show even said you know I said dude it's hard to predict when right yeah it's hard to predict one I absolutely admit that. So what do you do then because let me give you an example of the counter risk to this whole you know this whole world of fear-mongering, and I'm not saying those guys are just doing that on purpose for that reason, I mean I do think that you know if your whole thing is like the world is coming to an end and you need to buy gold and your major business is selling gold then you know it's a little bit hard to swallow sometimes but let me give you an example of what could happen. So six years ago because you know I said before that Peter and you know all these guys have been talking about for five years at least about how you know everything's going to hell. Six years ago there was a company that we work with now called Western Wealth Capital and Investor Club and they have an investor who has put in twenty five thousand dollars and every deal for the last six years and they have a really unique model of people within our group know a lot about it. The total of seven hundred fifty thousand dollars was invested out-of-pocket during that period of time but the principle is now worth four million dollars. Now those are pretty exceptional numbers right that comes out to you know an annualized return of about a hundred percent and I'm not saying that that is you know what's going to happen in the future, but what I would skew to consider is what if we'd been listening to that advice for five years now? If this person had done that would they have done well? Okay well obviously not because you know if you stopped investing because of because of fear then you didn't make any money. Is it a guarantee that they would have lost money? Absolutely not. I mean listen these deals are really solid they go in there and they start to de-risk these things right away by driving up net operating income and maybe you know maybe wouldn’t have made as much money, but would it have lost a bunch of money? Well personally I just don't I don't think so. Now listen I'm not saying there will not be a recession. As I said eventually there will be. The problem is that we cannot time it and we cannot really quantify the magnitude. As much as people would love to talk about this blood and the street thing I mean the major mainstream economists and ITR Economics who I like don't think it's gonna be that big, they think it's gonna be stuck to the manufacturing and industrial sectors. So what do we do? So what do I do? I should say that I stick to quality assets and quality areas, I create value the moment you know that and then we create value in those assets the moment we acquire them, right? So that helps that whole value add concepts helps de-risk any project by dynamically decompressing cap rates. So think about it you you know you you buy something at a certain cap rate all the sudden you're driving in net operating income and you dynamically decompress your cap rates you have a better margin over your debt burden your risk is significantly lowered and if you can get all of your money out of the deal with a refinance all of your risk is gone okay. So now if there is a downturn and you're in one of these things you want to be in a position where you can ride out the storm with assets you already own and then, and then, this is the important part, lean into the downturn right lots of people freeze up when things go south or but the right thing to do is to be greedy when others are scared. So by continuing to deploy on a regular basis my personal belief is that you can volume average your way through a downturn and get capital preservation and then hopefully pick up some really cheap assets, ride them back up and hopefully it you know you end up in really good shape. That's my own approach to this. I'm not sitting around waiting for zombies to you know erupt out of the ground and start you know only accepting silver dollars, you know from a monster box. I'm just that's just not I just don't see it. As for the current financial climate I'd say the banks are, and I think again most economists would tell you that the banks are in a lot better shape than they were in 2008. I don't think that there's necessarily anything that looks like 2008. I think GDP has grown at a record for a record length of time it's been sluggish but on the other hand you know so in other words there will be some kind of recession eventually but why does it need to be blood in the streets? See we have to remember that before 2008 there was such thing as a recession that you just hear about like three months after it happened right it doesn't always have to be cataclysmic. Now you know talking about these guys you know Peter Schiff himself talks about you know the nature of this crisis that he sees happening and what he describes it as, is a dollar crisis. And if it's a dollar crisis what that means is it's gonna result in inflation. Now inflation is good for real estate. Conversely you've got Harry Dent who's talking about a deflationary recession which I have a harder time believing because of how it affects our own ability to pay you know Treasury holders, US Treasury holders, but you know even Harry thinks in his scenario that well you might as well you know own multifamily real estate because the demographics would suggest that that would be a safe place to be now Harry's a demographics guy. Now listen who knows what'll really happen just because Harry said that and Peter said that and I said this it could be completely something different, but if you do nothing and keep all your money in a bank you're guaranteed to lose money with inflation in my opinion because again I don't think it's gonna be deflationary I've been over that before. And as for dry powder it’s always good to have some obviously right I mean it's always good to have some, so it's hard to quantify how much. The way I have done it is I use as you may know I'm sure you know by now I am an advocate for Wealth Formula Banking because I like the option of you know being able to borrow etc. now for this purpose I use Wealth Formula Banking because it's it's sort of a source of liquidity for me that I can access very quickly that it's out of the banking system but how much dry powder I keep, generally relies on my contribution to the Wealth Formula Banking policy every year. So it's one of the things that sort of keeps me honest right I have to put a certain amount every year in there all the way up to the paid up perdition's and so that's basically circulating as my you know almost like a bond portfolio of liquidity in case I need it, so that's how I do it. But that being said, I'm also in a situation where I am very incentivized to invest rather than to keep my money around or invest in anything that's not real estate so I probably could do a better job with keeping a little bit more dry powder around. Anyway right now, so Wealth Formula Banking that's where my dry powder is and like I said that's where it keeps me disciplined, but I do not have a crystal ball and I don't really I'd really don't foresee myself anything horrible happening so I mean if I did if I was sure of it I'd probably I'm sure I would just you know have a bunch of money sitting around but I don't see any serious indication of that frankly. You know and I should point out I saw today you know Ray Dalio came out and said even about the stock market that he's bullish still right on the stock market, right? I'm not saying I'm bullish on the stock market but the point is there's some still some big names not really like hiding out in shorting markets at this point. So anyway I don't know that I even came close to answering your question but I talked a lot so let's see here. Next question Jason got an audio question.
Jason: Buck, this is Jason Beck from The Rock Arkansas. Wanted to see if you had come across any good ways to utilize raw land investments for a tax-advantaged purpose. I've got some land that is timber and some more land that is pasture that we keep some horses on. I want to see if you had seen anybody utilize either various schedules on their tax returns or creation of entities to try to gain some tax advantage from those type of investments?
Buck: Yeah the big one that comes to mind Jason is conservation easements. Now you know as soon as I say that a lot of people think oh that's that one thing that's kind of like that the IRS hates and they write articles about to try to scare people off of them and that's actually not totally the case the thing that IRS really hates are the syndicated conservation easements even those you know they're totally lawful but what I'm talking about is conservation easements on your own land which really are not controversial for the most part at all. So basically here's how that works okay. Effectively what you do in a conservation easement is you commit your land you still keep it you don't give it but you're giving up certain rights, you remember like yeah if you do any kind of real estate you know there's land rights there's ground rights all that kind of stuff. Anyway, in this case you're giving up the right to develop the land and or or in some cases if it's a mining situation, giving up the right to drill on the land. And if you do that what's interesting is that and what's powerful is that you can if you’ve done it appropriately get a valuation on your lands maximum value if it were to be used for that other purpose. Well let's give a give you an example so it's not so nebulous in other words say the alternative of keeping your horse pasture land was to build a multi-million dollar resort and you had all the plans you had architectural drawings etc. In that case you could theoretically get a valuation of how much that resort would be valued at and take the deduction for the amount of the valuation that you got instead of the value that your land currently has. So as you can imagine that could be an enormous potential tax benefit and so I would probably look into that for sure there's some very famous people who use that, Ted Turner CNN that's why he's got so many Buffalo, people say Donald Trump that's one of the reasons why he has so many golf courses but of course we don't see his tax return so we don't know that for sure. Anyway I know the guy you should speak with and I have already sent you a connection via email.
Okay next question when evaluating a private placement opportunity I should say I don't I for some reason I don't have a name on this one so I apologize, but when evaluating a private placement opportunity, how important is it to you that the general partner has their own personal money invested in the deal? Well the answer is it depends okay. Let's take Ken McElroy for example let's take Western Wealth Capital and those guys for example Ken's be a better example because Western Wealth Capital I know got a couple of million dollars in every deal but let's take Ken. In the past you know where he was I've invested in as a limited partner in companies deals where you know I neither Ken was putting any money in and does that bother me not really. Why? Well listen I know Ken's model and he doesn't really get rewarded unless the asset performs. I also know Ken personally and know that he works hard, has a lot of integrity and takes pride in his work. He's got a tremendous track record and I also know that it takes a lot of work to do what he does, so not getting rewarded financially until the you know property starts to really perform the way he pro formas it out is a type of sweat equity because what you're talking about ultimately is skin in the game. Does the operator have skin in the game? And the question really I think is better termed you know does the operator have skin in the game? Because the skin in the game can also come in the form of sweat equity. Now if Ken in his case doesn't get paid unless investors get paid, I would definitely consider that skin in the game knowing how much work that is. Now the problem these days in my opinion is that there is you know there's everybody and their mother is a syndicator. And you know what I'm talking about right? So you've got all these people I was in here, I'm a full-time software engineer we're 50 hours a week and oh yeah and I just went to a guru course and I'm you know I'm taking down a twenty five million dollar asset would you like to join me? Those people are everywhere now and in those kinds of deals personally I would never invest anyway. However, if you do you should demand heavy skin in the game through cash why because you don't you know you don't know what they're gonna do, they don’t have a huge track record, they've got full-time jobs this isn't just about plugging in a property manager and taking your cut that's BS you know but honestly I would stay away from those deals all together personally you don't want to be part of someone's learning curve.
All right let's see next question I have this via email here, I'm gonna read it. Okay so the next question is from Kenny. Kenny French is asking he says hi Buck I'm a podcast listener and Western Wealth Capital investor as well. I'm currently working with Rod Zabriskie to set up Wealth Formula Banking life insurance policy. So far everything has been going pretty smoothly with one exception. One of the features that I really like about the life insurance policy is it offers a way to have money grow that is protected from creditors and it really gives me a peace of mind to know that I will have a good chunk of money set aside for my family that can't or at least is very difficult for creditors or anyone else to touch. In looking how to hold that policy in a trust LLC personally etc I found out that California, where I live, that's where I live too, has terrible protections for life insurance policies. They only exempt a very small amount less than $20,000 presumably of cash values what we're talking about there, but from the little bit of research I did it looks like a Nevada trust may be the way to go, either way I think this would make for a good podcast topic to do a bit of a dive into so that's why I'm reading that and I got Kenny's okay to do this. So I thought was a good question. So what I did is I actually ran this by Doug Lodmell of Lodmell and Lodmell. Doug is of course my asset protection attorney, very smart guy, all-around good guy. I also want to put a plug in for him if you go to and you go to there's basically some where you can click there and Doug did this really good webinar on asset protection from sort of the very basic to the more complex and he's just really really good so I would highly recommend you consider using him if any of this stuff is relevant to you. So here's the deal, and here's effectively the answer I've got from Doug: life insurance in many states is already a protected asset, so part of the issue is you got to check in your own state like Kenny did, as in some states like Kenny he's talking about California life insurance turns into pretty much just like an asset like any other asset and it has to be put into an asset protected vehicle. But because it is life insurance, there is an additional consideration of what happens when the policy pays out and how that affects the estate and for that reason there's also an additional choice which is an ILIT which stands for irrevocable life insurance trust. So the issue is that life insurance obviously has a death benefit which could impact the size of your estate and this must be a primary driver for where you hold it. If the death benefit will create or increase in estate tax, then the policy should be held by either an ILIT or another type of gift type trust like a dynasty trust. If the death benefit will not affect the estate tax because the total estate is below the exemption then I would suggest using an asset protection trust asset protection structure to hold the insurance if you are not in a state with good protections. He says it also matters if the insured is using life insurance as a savings vehicle and will need it for their retirement, as often we do with these kinds of things. If so then it is better in an asset protection plan. So I know that was a lot. So first of all if you know you're one of these if you have one of these plans I mean Kenny brings up a very good point you you sure look into this if you're looking for the asset protection component of this too. A few thoughts here okay, first of all you know the first thing to do is check your state and see what kind of protections you have. Next you know the ILIT is certainly an option right I mean it's it's just it's not very expensive it is a couple thousand dollars and you can use that, the problem with that it's difficult to to borrow out of. The next thing to consider is okay how big is that life insurance policy right? If it's three four million bucks, may not be a big deal especially if the rest of your estate is sitting outside of your estate or you've got a plan to have it outside of your estate then you can still figure out you know how to keep you know your estate stuff below you know whatever I think it's probably gonna sunset down to five and a half million or something like that for estate taxes. So in that regard, it seems to me that the smart thing to do would be to use like an asset protection trust which is you know certainly an option that that Doug can help you with, and frankly the nice thing about that is that you know you've got the protection from the creditors and it's still available for retirement. Now if you've got a great big you know death benefit on there, the next step really and actually this step that I've got is a dynasty trust, that was a Nevada dynasty trust and I've got one of those. In that situation though you are getting a trustee involved so you're not directly controlling it. Now I can tell you from personal experience that it's actually relatively not that difficult, you know to work with the trustee, but it does make it a little bit more difficult you know to get the cash available for the insured to use so that's the one thing to consider. Now Doug makes the point that you can also in some situations take an asset protection trust that automatically converts to a dynasty trust at death so then it's really the most flexible tool for most people so that might be the way to go. I think based on what I'm hearing and that's actually different from what I did but you know it was before I met Doug but I might have done like an asset protection trust that converted into a dynasty trust later that might have been what I would have done. Anyway complicated question complicated answer and that's kind of where I'll leave it because I've got a little headache from that last one at this point. So that's it for this week and that is just like half the questions we've got. We've been going on for a while. So that's it for me this week on Wealth Formula Podcast for Ask Buck Part One and we'll be back next week with part two.
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[Table] AMA: We are the developers of a new internet currency (DigiByte) similar to Bitcoin! Ask us anything!

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Date: 2014-03-21
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Questions Answers
1) With scrypt ASICs being announced recently (and in development for some time now), what was the reasoning behind using the scrypt algorithm as opposed to something ASIC-resistant, like scrypt-n used by vertcoin and others? 2) It is my understanding that a block time of 2.5 minutes has been a "sweet spot" of sorts in balancing fast transactions without leaving too many orphaned blocks for miners. What drove your decision for a 60 second time? 1st Scrypt is ASIC resistant. Even "if" Scrypt ASICS are delivered on time without issues they will not be delivering anywhere near the jump SHA-256 Bitcoin ASICS did. At most we are talking a 2-3 fold performance incease with a significant reduction in electricty usage. Memory is the bottleneck here. We are not going to see Scrypt ASICS make massive jumps like Bitcoin ASICS do every couple months. Finally most of these other "ASIC resistant" algorithms were not and still have not been tried like Scrypt has when we started development. We are looking into other techs and we are not opposed to changing in the future as technology advances. Biggest difference is the speed at which adjustments are made. KMG "averages" several of the previous blocks and can take awhile to catch up with a major net hash increase. KMG can also get "stuck" for several hours following a major hash decrease. The secret to DigiShield is an asymetrical approach to difficulty. With DigiShield the difficulty is allowed to decrease much faster than it increase. This keeps a blockchain from getting "Stuck" ie not finding the next block for several hours following a major net hash decrease. We spent about 5 days testing about 50 different setups before we found the optimum ratios DigiByte & Dogecoin are now using.
3) Tell us more about DigiShield, and how this differs from KGW, for example. As to Speed, we wanted to make sure DigiByte was fast for every day purchases of goods & services. 60 seconds ensures a merchant can accept DigiByte as payment as the payment transmits within a couple seconds and is confirmed in 60 seconds. DigiShield allows for much larger movements from block to block. This allows DigiShield to counter multi-pools much quicker than KMG. It is all a balancing act. You need to allow the difficulty to increase enough between blocks to catch up to a sudden spike in net hash, but not enough to accidentally send the difficulty sky high when two lucky blocks are found side by side.
Do you ever intend to implement a PoS? For those who are wondering what POS is it refers to Proof of Stake. It essentially means the more coins you hold in your wallet, the more new coins you will recieve as they are generated.
At first POS sounds like a novel idea, but for a real world currency traded for every day goods & services it would not be effective.
Why would people want to spend their coins when they have a stronger incentive to hold on to them?
A POS coin may use less energy, but we want to give people incentive to spend their coins, not hold on to them.
We also believe this technology will never be adopted by a main stream currency.
So as POS currently stands we have no plans of implementing it to DigiByte.
Thank you for detailed and professional reply! +digitipbot 50 dgb.
Alright, you meet someone completely unaware of any cryptocurrency, where do you direct them to teach them about DigiByte? We're talking absolutely no idea, and probably not very good at technology in general either. We are working on developing several new guides for people completely un aware of crypto currency technology. These will be posted on the main DigiByte website.
Our goal is to become a bridge for new people into crypto technology. We have been conducting some focus groups and research with some marketing professionals to find the best way to do this.
We plan on completing this before the Crypto Convention in NY on April 9th.
We are also working on a promotional video that would explain things in visual detail.
How's the promo video coming along? We have lost contact with the original person who was working on it. We are now looking to other people/places to finish what he started. We would like to get this done ASAP.
We have a professional vocie over completed to augment the video.
If you know anyone who would be good at this please let us know. We are looking for a professional video expert who can make something better than the bitcoin video :Link to
Wish I knew someone or could help contribute any skills in that field. Maybe post something in /Digibyte seeing if anyone has the skills? Great idea!
What differentiates DigiByte from all the other e-currencies out there? 1st of you store data in megabytes & gigabytes. Why not store & send money in DigiBytes?
2nd DigiByte has 21 billion coins so it has a nice ratio to Bitcoin of 1:1000.
3rd We have much faster transaction times with 60 second blocks.
4th We were the 1st to develop & implement the DigiShield difficulty adjustment code. Dogecoin has now succesfully implemented it as well.
Thanks for your reply. As there are so many coins, I am looking for ones that have something unique, something different that could be the 'killer feature' that moves a coin into the mainstream. Most importantly with the name "DigiByte" we have one of the most brand-able names out there.
I don't know what your difficulty adjustment code does but if other coins also have it, there does not seem to be anything that would make people choose your coin over all the others. People understand what a megabyte or gigabyte is. According to our focus group research the idea of using a "Digibyte" as a digital unit of payment is an easy extension or idea for the average person to understand and identify with.
What extras add DigiByte in the cryptocurrency world? What is your goal? The most exciting new trading site to adopt DigiByte has been by Moolah. They are just about to add USD/DGB trading.
Check them out here: Link to
DigiByte is to become a billion dollar world-wide payment system that will change the way people of all races, nationalities and backgrounds purchase or sell every day goods and services. Within the next twelve to twenty-four months you will be able to walk into a store and with the press of a button on a smart phone purchase your coffee, groceries or rent a movie.
The mission and vision seems similar to most of the other cryptos. What is your opinion , should coins be more cooperative in this goal? Absolutely, this is why we helped Dogecoin implement DigiShield. There is room for more than 1 crypto just like we have Visa, Mastercard, American Express, Paypal & Western Union.
That is the technical part of helping. Do you think your mission and vision can be accomplished by DigiByte alone? We believe we are all a community, and it is good to have several currencies and new ideas floating around.
We feel it would be narrow minded to say DigiByte will accomplish this all on our own. We are not trying to replace Bitcoin by any means or be the "single" crypto out there. It is likely that different currencies will take root in different parts of the world. So absolutely there will be others to achieve this vision.
As this technology emerges we hope to adapt and improve DigiByte to make it the best we can.
I have been talking to someone on your facebook account about working with sponsored non-profit events/drives but your customer support is lacking. I keep asking questions and proving info but there isnt an effort back to help. How are you going to address customer support moving on, and helping non-profits like other community based coins that are preferred? We apologize for the delay in this. We have been completely swamped and will will look more into it. We receive dozens & sometimes hundreds of messages between Twitter, Facebook, Bitcointalk, DigiByteTalk & Reddit each day. Its a lot to keep on top of while still doing development /promotional work.
Also keep in mind we have been approached by several scammers recently and we like to take time to verify things.
Will you change your mascot? Change as in to something else, or get rid of? What specifically are you referring to?
In your personally opinion what are the odds that a internet currency become so usual to the people as the money in cells? Not sure what you mean by cells?
It is very likely it will become very familiar to common consumers just like money.
1st off crypto technology will save merchants billions each year once they adopt it. With a crypto technology merchants do not have to pay the 3-5% credit/debit card fees. This can equate to billions for some corporations, this alone may be a strong motivation for increased adoption.
2nd, transaction speeds will help encourage adoption. It currently takes several days for Debit or Credit card transactions to clear before a payment receiver can spend the money that has been received. With Bitcoin you can spend money you receive within an hour, with DigiByte it takes 6 minutes.
Finally it is easy to move money around the world. You can move millions around the world in a matter of minutes with no fees or third party involved.
Why should I use DGB over LTC? DigiByte stands a much better chance at being adopted by main stream consumers & merchants. DigiByte is very brandable.
People store data in megabytes & gigabytes. Storing & sending money as DigiByte is very easy for the common person to understand.
Next, DigiByte is much faster than Litecoin. This will make it easier for merchants and consumers to make every day transactions.
Finally, 84 million coins is not enough for a wide spread currency used across the globe. With 21 billion coins DigiByte will eventually have a price of around $1-$10. Perfect for buying low ticket goods & services.
Shibe here. I noticed you guys have a way to buy Digibyte for GBP. I'd like to buy in too, and am in the US. Is the big exchange-train (coinbase->BTC->exchange->digibytes) the only way right now? Are you referring to They should be implementing the USD/DGB trading any moment now.
We were told yesterday that US customers would be the first ones to deposit fiat there. We have not checked in the last few hours if this is the case yet.
With the recent bitcoin travesty, how do you feel about your cryptocurrency's future? We feel it has opened the door for people to begin taking other alt coins seriously. With the upcoming Crypto Currency convention in New York we feel we will be making a big splash and some good headway among some bigger investors.
The key is getting DigiByte tied directly to the USD which we are working very hard on doing. Then all we need is one big merchant and we are off to the big time!
How do I get in on the premined coins? Not sure what you are getting at. The remaining part of the pre-mine is being used for development expenses.
The most recent of which includes paying for a booth at the NY crypto convention on April 9th as well as all the relate expenses including, travel, brochures, stickers, handouts etc.
I wasn't sure what I was getting at either. I skimmed the faqs and read some blurb about premined coins being given away and my lazy ass decided to ask. I guess I'll be seeing you in NY then! Sounds good, make sure to stop by our booth as we will be giving DGB away there! Also you can use the promo code "digibyte" and get half of your ticket to the cryoto convention. $99 instead of $200.
Will there be an android app for storing and/or mining? There already is an android wallet for DigiByte. You can download it here: Link to
There are also several other apps you can mine DigiByte with on a smart phone.
Who is your favorite pokemon? Lol! +digitipbot 100 dgb Not sure how to answer that as I could not tell you the names of any pokemon. Perhaps xploited or politicalwave could help answer this one. :)
I know nothing about this, do you believe that these e-currencies will ever replace/overshadow national currencies, or just supplement them? We do not see them ever "replacing" national currencies as some very bad things would happen before that becomes a reality. We do however see them augmenting traditional currencies. There are several practical uses. Such as increased transaction speeds, ie being able to spend money minutes after you received it. A reduction in merchant fees that would save everyone money in the end. And most importantly the ease of use. What other way could you put millions onto a flash drive? Or send money anywhere on the planet in a few seconds without paying any fees?
Oh. Where is your favorite vacation destination? I have always dreamed of going to the Caribbean and swimming in the crystal clear blue water. So that would be my favorite "dream" vacation and the place where I have never been.
That would be really nice. What do you think happened to that jet that disappeared? Not sure. As a pilot this is really bizare to me. Have not learned the latest, but the last I heard they were looking in Pakistan.
That is a long ways from their intended flight path. Perhaps the plane moved interdimensionaly in a worm hole that opened up?
Perhaps. A random customer at my place of work is pretty convinced aliens have something to do with it. Who is your favorite Muppet? Aliens cannot be ruled out. Definitely Kermit the frog. He is just one cool dude ,who doesn't like him?
Beats me, I don't know how you couldn't! Do you like sushi? Not a fan at all. Meat & potatoes all the way!
What are you doing to try to make the digibyte a standard? Any upcoming online stores? just launch US bank deposits to buy DigiByte! This is a huge step forward! Link to
Also we expect some great connections/networking/deals to come out of the New York Crypto convention on April 9th to help make things happen.
Ask you anything? Okay...Will you send me 1 million of your coin to use and distribute here at my own pleasure? Are you good with making promotional videos? If so we may be able to hook you up with 1 million DGB. :)
I don't have any questions, just wanted to say keep up the good work. +digitipbot 50 dgb
Not a question, but just a quick comment to say I love the name, love the look and love the community here, I think you guys are doing a great job and look forward to seeing you grow and flourish. Thank you for the support! We are doing out best and we are in this for the long haul! DigiByte is the only coin we are working on and we are very committed to taking it to the top!
Good to see an AMA from devs :) Thanks for your support! Feel free to ask us anything!
No question, just a comment: please spend some time cultivating a subreddit opt out list. Many mod teams don't allow crypto currency in their subreddit(s) and view it as spammy. No sure what you mean by an "opt out" list or how that pertains to this AMA.
Last updated: 2014-03-26 05:56 UTC
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