What is a Bitcoin ETF?

Several applications for a Bitcoin (BTC) exchange-traded-fund (ETF) have been sent to the US Securities and Exchange Commission (SEC) for review and approval. The demand for a Bitcoin ETF in the crypto community is also increasing day by day, however, the federal watchdog has rejected many crypto ETF applications due to “significant investor protection issues” and various other regulatory concerns.

The SEC has also cited “liquidity and valuation” issues associated with crypto ETF proposals, which resulted in the denial of such requests. Moreover, almost all Bitcoin ETF applications so far have requested that Bitcoin’s price be tracked through BTC futures contracts offered by financial market companies such as the CME Group and the Cboe.

Due to BTC futures contracts having fairly low liquidity and trading volumes, in addition to such contracts following (instead of leading) volatile spot exchange rates, the SEC has not approved Bitcoin ETFs.

What Is An ETF?

Given all the talk and hype surrounding crypto ETFs, let’s try to gain a better conceptual understanding about them. First of all, what are traditional ETFs? They are basically types of investment instruments and are classified as securities. Most ETFs track real-world assets such as gold, oil, and various other types of commodities.

Investors who acquire ETFs are able to get exposure to a certain asset without actually physically needing to buy it. For example, instead of going through the lengthy process of buying gold, having it get delivered, and safely storing it, you could simply buy an ETF that tracks gold. This way, you can potentially get the same returns from your investment as if you were actually in possession of the gold itself.

An ETF can also be described as a fund whose shares investors can buy while being able to earn dividends or interest from their investment. Additionally, traditional ETFs have been used for many years in traditional financial markets to track benchmark indexes as well. These indexes include the US Dow Jones Industrial Average (DJIA), the NASDAQ-100, and the Standard & Poor’s (S&P) 500.

Indexes (mentioned above) are used by stock market investors as benchmarks to assess how their own investment portfolios are doing compared to the performance of the overall market. Put simply, benchmark indexes are used to gauge “where the market stands.” Asset portfolios, bonds, and commodities are also used as benchmark indexes to determine market performance.

How Traditional ETFs Are Traded

Traditional ETFs are traded on exchanges just like stocks, but with the added advantage of being able to hold a diversified set of funds at the same low cost as holding individual stocks. ETFs can be described as a financial product that consists of a number of diversified securities.

They are also actively traded on a daily basis, and their prices fluctuate throughout the day. One thing in particular that makes ETFs attractive, especially to private investors, is that they can easily trade certain lucrative asset classes in niche markets, which would not otherwise be accessible to them.

Notably, there is no minimum investment amount for ETFs and they mostly track a certain index while also trying to replicate its performance. ETFs work by issuing and redeeming (buying back) shares of stock, however, these types of transactions are not categorized under sales.

Instead, they are considered “in-kind” transactions, which means that capital gains from their trading do not have to be distributed to shareholders. Sometimes though, a minimal amount earned from ETFs trading is given to shareholders. One of the main benefits of this type of trading is that ETFs do not typically have a significant tax liability.

ETFs Are Passive Investment Instruments

Another advantage ETFs have is that they’re passive investment instruments. This means you do not have to pay fees to investment professionals to manage and monitor them. Also, when you purchase ETF shares, you are acquiring shares in a portfolio. This portfolio is linked to a market index and the ETF strictly replicates the performance of its underlying index. Additionally, since ETFs are not managed by a person, there is no risk of a fund manager potentially losing trades against a benchmark index.

What Is A Bitcoin ETF?

So what is a Bitcoin ETF? A Bitcoin ETF would keep track of the bitcoin benchmark index while also replicating its performance, much in the same way as traditional ETFs do. This would let traders with brokerage accounts make investments in Bitcoin (BTC), with the added benefit of not having to go through the technical process of purchasing the cryptocurrency and trying to store it securely.     

Moreover, the types of Bitcoin ETFs proposed so far, such as the one by the Winklevoss Twins, had Bitcoin (BTC) as its underlying asset. Therefore, an investor buying such an ETF would also indirectly be buying Bitcoin. However, instead of holding the actual cryptocurrency in their digital wallets, the investor would have a portfolio with a bitcoin ETF. Despite this, it would somewhat be similar to holding bitcoin itself, since the ETF would be tracking the cryptocurrency price.    

The primary distinction between purchasing Bitcoin (BTC) and acquiring a Bitcoin ETF is that with the latter, the investor would be holding a regulated investment that is tradable on exchanges without having to deal with how to securely store the investment.

How Will A Bitcoin ETF Affect The Price?

With the introduction of Bitcoin ETFs, there’s a good chance that cryptocurrencies could be added to the mainstream investor’s portfolio. Institutional investors prefer to trade and hold regulated assets and crypto ETFs could encourage them to invest in digital currencies.

A number of market analysts believe that Bitcoin ETFs could help increase overall cryptocurrency adoption, while also significantly driving their prices upwards. One of the reasons crypto ETFs could lead to a surge in cryptocurrency prices is because they could potentially increase their scarcity and liquidity. Usually, when an asset or store of value becomes scarce, there’s a substantial increase in its price.

Compared to when Bitcoin futures contracts were launched, it can be argued that with the entry of Bitcoin ETFs into the market, there will be a more sustainable increase in price. The reason for this is that many investors shifted from the physical crypto market to the derivatives market shortly after Bitcoin futures contracts were introduced.

In addition, most crypto traders were not experienced enough to grasp the supply and demand effects of BTC futures contracts, which then partly contributed to the market crash after their launch. However, with Bitcoin ETFs, investors will actually be trading Bitcoin (BTC) itself. This, in turn, could drive prices towards the higher end in the long-term.

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How to choose and connect to a Bitcoin mining pool

Mining solo, while sometimes more profitable, it's usually not the right choice for most miners. When mining solo, you are doing all the work alone which means that you'll receive the entire block reward, the problem is that mining is also based on a luck factor, which means that if your hashpower isn't high enough, you may never see a reward come your way. With pool mining, however, this variance is eliminated and you recieve payments that correspond to the portion of the work that you have done.

If you are deciding to join a Bitcoin or altcoin mining pool there are quite a few considerations to take into account – mainly their method of distributing the block reward and the fees they charge for managing the pool. Pools also try to stop cheating by miners – i.e. for them to swap between pools.l.

Today we want to teach you some aspects of pool mining in the hope that they will help you choose a mining pool that best fits your needs.

You can check out our mining pool list here. Make sure to read the reviews and to check the features carefuly. You will also find a list of servers by locaiton and coin in the pool description.

Pool fee

The main consideration is the fees, which vary according to which model of payment distribution the mining pool is operating and determines which party is assuming the risk – the miners or the mining pool operator. If the mining pool operator is assuming the risk, then the fees are higher, and if the miners assume the risk then fees are lower.

The fees usually range from 0% to 4%. The standard fee for mining pools is usually 1%, so if you spot a pool with a higher fee check its payment method and other features. If there is a pool with similar features and payment method but smaller fee, you'll want to choose the second option.

Sometimes a pool will have a 0% fee. This is very unusual and it most often means that you are dealing with a new pool that has no fee in an effort to attract customers. Some pools, however, actually rely on donations and other methods, so if you find a 0% fee, you'll want to keep an eye on any fee changes.

You can check out our mining pool list here and organize it by fee.

Payment system

The model where the mining pool operator assumes all the risk is when they guarantee a payment per each proof of work – or potential hash solution – that their miners offer. For example if the total network is 100GH, the mining pool operating this Pay Per Share (PPS) method has a hash rate of 10GH, and the block reward is 25 Bitcoins, then the expected return is 2.5 Bitcoins per block.

The pool will give money to their miners even if their pool hasn’t successfully mined the block, meaning the risk of lumpy payments is assumed by the operator, and hence why the fees are at the higher end of the range at 10%. Miners will then only receive an expected return of 2.25 Bitcoins per block distributed proportionally by how much hashing power they have contributed towards the block.

When the miners assume the risk the fees are generally lower as they take on the risk that they might not solve a block for an extended period of time and receive no payment of Bitcoins.

There are varying methods of this with the aim of keeping the pool hashing power stable.

- Proportional – the simplest method whereby for each block, the reward is split between the hashing power contributed proportionally by the miners of the block.
- Pay Per Last N Shares – PPLNS – looks at the last N shares instead of just the last block. This smooth’s the returns for mining rig operators if they haven’t been connected for one reason or another. If they contributed to the majority of Bitcoin blocks 1-6, when a reward was found by their pool in block 7, for which they had become disconnected through no fault of their own, then they are still eligible for payouts depending on the time of N.

There are other inventions and variations that have been implemented. For example the DGM method (Double Geometric Method), where the operator receives some payments over short rounds and distributes them over longer rounds. There are also some other ways where the more recent proofs of work are allocated a higher weighting in terms of the proportion they are eligible for.

Some pools have extra fees on top of PPS (Pay Per Share) schemes – but in generally fees range from 0% for Proportional and PPLNS pool management schemes to 10% for PPS schemes. There also pools that offer the ability to merge mine other SHA-256 coins as well as Scrypt pools that allow you to merge mine other popular crypto currencies such as Dogecoin and litecoin.

Over the time, many different payment systems have been developed. Most altcoin pools use the Prop or PPLNS payment system. However, there are several, including:

• CPPSRB - Capped Pay Per Share with Recent Backpay. 

• DGM - Double Geometric Method. A hybrid between PPLNS and Geometric reward types that enables to operator to absorb some of the variance risk. Operator receives portion of payout on short rounds and returns it on longer rounds to normalize payments. 

• ESMPPS - Equalized Shared Maximum Pay Per Share. Like SMPPS, but equalizes payments fairly among all those who are owed. 

• POT - Pay On Target. A high variance PPS variant that pays on the difficulty of work returned to pool rather than the difficulty of work served by pool 

• PPLNS - Pay Per Last N Shares. Similar to proportional, but instead of looking at the number of shares in the round, instead looks at the last N shares, regardless of round boundaries.

• PPLNSG - Pay Per Last N Groups (or shifts). Similar to PPLNS, but shares are grouped into "shifts" which are paid as a whole.

• PPS - Pay Per Share. Each submitted share is worth certain amoutripnt of BC. Since finding a block requires <current difficulty> shares on average, a PPS method with 0% fee would be 12.5 BTC divided by <current difficulty>. It is risky for pool operators, hence the fee is highest.

• Prop. - Proportional. When block is found, the reward is distributed among all workers proportionally to how much shares each of them has found.

• RSMPPS - Recent Shared Maximum Pay Per Share. Like SMPPS, but system aims to prioritize the most recent miners first. 

• Score - Score based system: a proportional reward, but weighed by time submitted. Each submitted share is worth more in the function of time t since start of current round. For each share score is updated by: score += exp(t/C). This makes later shares worth much more than earlier shares, thus the miner's score quickly diminishes when they stop mining on the pool. Rewards are calculated proportionally to scores (and not to shares). (at slush's pool C=300 seconds, and every hour scores are normalized)

• SMPPS - Shared Maximum Pay Per Share. Like Pay Per Share, but never pays more than the pool earns. 

You will also want to take into account the minimum payout. This defines the minimum amount of coins you are allowed to withdraw (or to receive automatically). Some pools allow you to set a limit above the minimum, which allows you to save money on transaction fees. When choosing a mining pool, you will want to check the minimum payout, the payout period, and weather the pool or the user pays for the transactions fees on withdrawals.

You can check out our mining pool list here and filter it by payment system.

Currency

The first thing you'll have to consider is, of course, the cryptocurrency that you would like to mine. The most popular at the moment are Zcash, Ethereum, and Ethereum Classic, among others. These are currently the most profitable ones. You can always compare your profits with each currency through the calculator tool that we have available. Of course, these numbers are subject to change has the price, mining difficulty, and network hashrate change, so it's advisable that you take these into account and that you check on them regularly.

Some mining pools allow Merge Mining, which means that your can mine two cryptocurrencies at once without losing efficiency in neither. This, however, is only available with some algorithms.

Another type of pool to consider is a multi-pool. These allow you to choose from several cryptocurrencies to mine and converts your profits into Bitcoin automatically. If you are planning to mine an altcoin but want to exchange it for BTC, these may be useful to you. Check out multi.pools here.

You can check out our mining pool list here and filter them by currency.

Location

If you're located in Europe and mining on a Chinese server, you may not get the best results. Check if your pool has a servers in your country/continent and if so, check the URL for those servers. This will allow you to mine more efficiently.

Vardiff

Vardiff stands for Variable Difficulty. It is used to regulate the difficulty of the shares you recieve to work on. This benefits both low hashrate and high hashrate miners as the difficulty will regulate itself to best fit your hashrate. While some mining pools have Vardiff, others will have multiple ports for different difficulties. If your pool has no Vardiff, you may want to test different ports for different difficulty.

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What is Scrypt?

Scrypt is a memory hard key-derivation function.

Memory hard functions require a large amount of RAM to be solved.

This means that a standard ASIC chip used for solving the Bitcoin SHA-256 Proof of Work would need to reserve a certain amount of chip space for Random Access Memory instead of pure hashing power. 

Scrypt just adjusts the number of random variables that need to be stored compared to SHA-256.

Scrypt creates a lot of pseudorandom numbers that need to be stored in a RAM location. The algorithm then accesses these numbers a few times before returning a result. Generating the numbers is computationally intensive and as they are accessed a few times it makes sense to use RAM in conjunction with hashing power rather than generating them on the fly – a time and memory trade off in terms of optimising speed.

The main advantage of scrypt is that it lowers the advantage of ASIC Bitcoin miners in the network. This then means that there should be the possibility of more miners joining the network and contributing sufficiently to make it worth their while. Another possibility is there is less energy use as the total network power is less.

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How to install and use the PandaPool miner

The PandaPool miner is an easy-to-use multi-cryptocurrency GUI, using the servers from PandaPool located in Europe. Users can mine BTG, ZEC, HUSH, MUSIC, KMD, BCN, SUMO, ZCL, ELLA, SIB, XMR, GBS and more. The pool runs on both PPLNS and PPS payment systems and there is a 1.5% fixed fee.

In this step-by-step guide, we are going to install and set up the Panda GUI to mine Electroneum (using a low-end hardware).

Part 1: Create an account on PandaPool

 Step 1: Go to PandaPool website (or click here) and press “Start Mining!” (or click here)

Step 2: Fill the gaps with your email and password and press “Register”

Part 2: Download and install the PandaPool miner

 Step 1: Return to PandaPool website, scroll down until you see Cryptocurrency GUI miner section and press “Download” (or click here)

 Step 2: Once the download is complete double click on .exe file and press “Next”

 Step 3: Choose the destination file and press “Next”

 Step 4: Choose the start menu folder for the shortcut and press “Next”

Step 5: Then click “Next” again to create a desktop shortcut

Step 6: Lastly press “Install”

 Step 7: Once the installation is finished press the “Finish” button

Part 3: Set up the miner

 Step 1: Open the GUI application, and here you have 2 tabs, (this miner can work in 2 modes) In a simple mode everything works automatically (lite), and in a professional you will get more settings (professional version). For this guide we are going to use the lite version, so simply choose a coin, fill the email gap with the same email you had used to create the account on PandaPool and press “Start Mining” 

That's it, now that you are mining you will be able to see your hash speed as the image below

Part 4: Controle your funds

Step 1: Return to PandaPool website (https://pandapool.io/) and press “Start mining”

 Step 2: On “Dashboard” tab, scroll down until you see the coin you are mining, there is all the information you will need about your mining progress

To transfer your funds to an external wallet you only need to go to the “Payments” tab and follow the steps provided by the PandaPool miner.

You can follow this guide switching the currency you want to mine (Part 3, Step 1) to mine all the available coins.

For more information please visit the official website https://pandapool.io.

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Please can someone show me any legit bitcoin mining sites

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