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Are Crypto Faucets Worth Using?

One of the first things people learn about when they start researching crypto currencies (especially when it comes to Bitcoin) are faucets. We often end up being questioned about whether or not they are worth the time, and sometimes we get questions about what they are good for and why they are even created. Through this article I will cover all of these things to help you better understand their importance (or lack thereof) and help make a decision on whether or not they are worth wasting your time on.

What Are Faucets?

Basically, the faucets are sites that give out small amounts of coin. Note that this is a relative term, though. A small amount of Bitcoin would be in the satoshi range, whereas a small amount of Infinitecoin would be in the hundreds to thousands range. The way to determine what a small amount would be is to compare the coins to their value in dollars (which, depending on the coin, may also require a conversion over to Bitcoins first). You should not expect to become rich off the faucets, at least at the current value of the coins you are getting when they are obtained. What you are hedging on is the future value, which we will look at a little later in this article.

Why Are Faucets Made?

This is a question that makes a lot of sense. If the coins that are being given out have value, why would someone just pass them around? This is exactly like just walking down the street and handing out your money to strangers. We do not do this often, do we?

Well, the reason actually goes down a bit deeper than this, and is possibly a big contributor to why the crypto scene is as big as it is now. We all love free things. By passing out small amounts of coin, we are pretty open to downloading a wallet and accepting them. This leads to increased curiosity as to what the coins are and what they are good for, which leads to two things:

  • It brings more people on board with the scene, increasing the size of the community. This could be equated to the sites that offer people a little money just for joining them and becoming a contributing member. Communities are valuable, and the crypto scene is the same way
  • It makes people interested in earning more of them. As more people jump on board, there are more of them spread out among small numbers of people, which means that the value goes up (supply and demand plays a massive role here)

So basically, when it comes down to it, what is happening is that these faucets, while giving out small amounts of coin, are actually increasing the value of their owner's holdings at the same time. A great way to look at it is like this:

  • You have $10 in coins
  • You give away $1 in coins by breaking them down in to very small portions
  • Some of the people who got them are now taking part in the community and are now going for more coins
  • The coins have doubled in value. Now your $9 (since you gave away one of the original $10) is doubled and is now worth $18

In the above scenario, you just earned another $8 by simply giving away a little bit of your money. This is the same concept that most faucets follow, hoping to increase the value by increasing the amount of people the coins are spread out between. Of course, this is not always guaranteed to happen, but so far it has been lucky enough to work. I strongly believe that if Bitcoin was not to have as many faucets as it did, it would not be as wide spread as it is now.

Counting on Future Value

When we look at faucets, it is easy to get caught up in what the earnings are worth right this second. This is the completely wrong way to look at it, as the value they give out does not take in to consideration the fact that Bitcoin is a deflationary currency. As a deflationary form of money, the theory is that its value should, at least in the long term, continue on an uphill trend. Since coins that are lost (via lost wallets, improper addresses, etc.) are never returned, this trend up the hill could continue on forever. Or it could stop at any time and Bitcoin could crash. But in any case, we are counting on the former; that our earnings right now will be worth more later on.

This is stressed further by looking at the history of faucets. For example, there was a point where Bitcoin faucets gave out multiple full coins (this was back when they were worthless, or close enough to not really matter). Then they went down to a single coin. Then down to parts of a coin. Now you are lucky to get one millionth of a coin from a faucet. And while that may not seem like a lot right now, in the future it could be. People are still theorizing that we are looking at a point where a single satoshi could be worth five cents or so. That would put one micro bit (or the amount earned from the average faucet right now) at five dollars. And all that requires is filling out a quick captcha!

But as stated earlier, the value could also go down at any point, even to the point of becoming worthless. If anyone knew for sure what is going to happen in the short or long term, they would be the richest people on earth. But the truth is that there is no way to know, so you are risking your time by doing faucets and risking the missing out on Bitcoins (and tons of money) if you do not do them. The only person that can choose whether or not it is worth it to you is you.

The Era of Advertisers

Now that there are multiple advertising networks out there that deal with the Bitcoin niche, faucets have taken a turn that I would argue is for the worst. They are now popping up all over the place and not to help people or help get the word of Bitcoin out there, but rather to earn cash from advertisements. This is the opposite of what they are good for, and it leads to people running their faucets until they run out of cash and then ditching them, while people can no longer cash out their funds since the faucet is out of money. Because of this, it is important to cash out your funds as often as you can; I have lost a ridiculous amount from not constantly cashing out and then watching one site after another crash and burn. Nothing is worse than spending the time to earn the coins and then seeing them all just disappear because you were waiting until you had a certain amount of them built up before pulling them out. It is better to just make sure you do not get yourself caught up in this situation.

On top of the lack of funds being available, the faucets also have another pretty big problem now. Since they are relying on advertiser money to cover the payouts and (often) profit for the faucet owner, this has led them to overflowing the sites with advertisements. I have seen some faucets with as many as 10 or so advertisements on each page you visit. In cases like this, while the money you are getting is “free” (though technically you are working for it by filling out the captchas), the harassment you have to endure by visiting the sites that do this are just not worth the time. Were the owners to understand the true point behind the faucets and realize that they are not supposed to be created as a get rich scheme, I think things would go a lot better and the faucets would be much more enjoyable. I have no problems with filling out the captchas (as people would exploit the system if there were none) but harassing the users is not the right way to get repeat visits. In fact, on my own faucet rotator I will not accept sites that are annoying. On top of this, my design is set up the way it is to help cover the costs of running the site, without getting in the way of visitors (you will notice that the ads are only along the outside; anything in the middle is from a faucet itself and is something that I have no control over).

Alternative Faucet Types

Faucets have changed quite a bit over the years. They used to be based on visiting a website and entering your address. Then they started adding captchas. Now there are not only these “normal” one (captcha and addresses) but also alternatives. For example, some faucets have games. These include lotteries, dice games, pick a box games, and even a game of bingo. These allow you to possibly win more (as the faucets pay out to less people), and also give the added enjoyment of having some free gambling that costs you nothing but could just pay off!

Using a Faucet Rotator

I would argue that if you are going to be doing faucets, it is best to use a rotator. In my own BTC faucets rotator, I ensure that the list is pruned as I find issues and I also have a support email on the site that people can contact me through with any problems they may experience. The goal of this rotator is not to get a lot of money, but rather to help support both faucets and their visitors by creating an easier to use method for skipping from one to another without detracting from the experience. This makes the earning faster, easier and much more smooth. Not to mention you only need a single bookmark instead of many more (at this point there are around 27 in the rotation). Plus, as more faucets pop up that prove to be paying, they are added to the list!

Understanding Faucet Payments

When people contact me about their lack of being paid, they are usually for the same reasons. First of all, I want to make it clear that CryptoPlace's faucet rotator is not a faucet in itself. Nothing is paid out from it, so I have no control over whether or not a faucet pays. When I find that it does not, however, I do remove it from the list. But this usually requires a report, since some faucets will pay now and might not weeks to months from now.

The other thing to know is that faucets pay out in one of three ways:

  • Instant payments to your wallet address (this one is very rare, and is usually only seen on alternate crypto currencies and not Bitcoin, due to the dust rule)
  • Pooled payments (this one is kind of like a bank, where your payments increase either to a minimum to be paid out or are kept until you tell the site to pay you out – this will depend on the site)
  • Third party services (the only one I am aware of right now is CoinBox.me, which is a site that allows tons of faucets to pay out directly to one merged wallet. It then pays out automatically when you have the minimum required to get your money)

These three mechanisms can get a little confusing because each one is different, and each site can use a different one. You will also find some that do not pay out to a normal wallet address, but something like a Coinbase address instead. It is important to keep a watch out for these, as they are not normal and if you are using your normal wallet address (and that does not happen to be a Coinbase wallet) you can lose your earnings.

Wallets and Dust

Depending on the wallet you are using for your receiving payments, you may run in to issues getting payments sent out without large fees. There is a bit to this part, but it is one of the most important things you need to know when dealing with faucets. Having the funds available means absolutely nothing if your fees are going to encompass your entire wallet's holdings.

To put it in to very basic terms, the cost of sending a transaction is dependent upon the size of the transaction in bytes. This is filled in by taking any incoming transaction addresses and such and adding in that of the outgoing ones. So the more incoming transactions it takes to form your outgoing payment, the more it is going to cost to get it sent off. To help understand, let us use an illustration here:

  • You have 100 pennies and want to send them to your friend. You can have a transaction that encompasses up to two inputs without incurring a fee, and each transaction after that requires one of your pennies to pay for it. So you look at the transactions that added up to that 100 pennies, and you notice that there are 12 transactions. You send off those funds, and your recipient is only able to get 90 of them since you had to pay 10 cents to send it. If you had only gotten two transactions (say 75 and 25) to total up those coins, though, it would have been free to send and you could have sent off the entire 100.

Now, the reason why this is so important is because you are the one paying that fee. If you are buying something that is 1 BTC and you end up only being able to send 0.992 BTC after the fees, you are the one that is responsible for coming up with the other 0.008 BTC to finish up the transaction. And the reason why this is such a big deal is because you can easily buy something that takes up all your current funds, only to find that you do not have enough money to send them out because you have a large fee you have to deal with as well. It is easy to get caught up in this and not realize it, and when dealing with a ton of dust transactions it can cause even more problems (since it takes many more transactions to equal up to whatever it is you are wanting to send out). Also, keep in mind that your client knows which inputs will go to which outputs, and more often than not it requires more work than it is worth to try and figure it out on your own. For this reason, you just want to be aware of how things work, but not necessarily deal with all of the internals to making it happen.

To compensate for this issue, there was a new protocol that requires you to send amounts that are above a certain threshold (it is around 5400 satoshi). While this does help, that is still a pretty small amount when you consider that it takes 100 million satoshi to make up a single Bitcoin. So, while this protocol does definitely help push things in the right direction, it is still up to you to be careful with what you are doing and to understand how things work. While my explanation was a very brief view, hopefully that helps at least follow through with the next section, where we will look at how to keep from running in to problems.

Cutting Down On Transaction Fees

The earlier you start this planning and enacting the plans, the better off you will be in the long run. I read about people all the time that do not know about this, and when they do learn it is too late. So just be sure you start on this now, rather than later.

It is important to understand that this only counts for wallets you have full control over. Things like Blockchain.info and local wallets are fine. Coinbase, however, probably will not work the same way (though they have their own benefits and are highly recommended). Also, any sites that use tumblers or merged wallets do not need this method since your transactions are not the only ones being crafted from your addresses, and therefore your control is very limited.

You should have a basic understanding of how the transactions work (inputs and outputs and how they affect the transaction size) from the last section. If not, you will want to go back over that again, as that is important here.

So what we need to do in order to cut down on the transaction fees is to cut down on the transaction sizes. At this point you should understand that this means cutting down the number of incoming transactions, but how do we go about this? Well, it is probably more simple than you might think.

When we send out a transaction, the client takes the oldest transactions first and keeps adding them up until it has enough money to fulfill the requested amount. After this, it takes anything that is left over and throws it in to a new address so that it is not lost. We will use another example here to break this down and make it easier to understand.

  • You have 10 incoming transactions that are each for 10 BTC
  • You send a transaction to someone for 75 BTC
  • The system takes the first 8 transactions (as 7 would only result in 70 BTC, but you need more) and sends out transactions to two addresses: the first is the one you are sending money to, so it gets 75 and the second is the left overs, which is 5. This takes care of all 80 BTC from those 8 incoming transactions, and now you have your change

So, with the transaction handled, it is time to look at the inputs and outputs. Here we go!

  • You started out with 10 inputs (10 inputs of 10 BTC)
  • You sent out a transaction that took 8 inputs and 2 outputs (8 inputs of 10 BTC became two outputs of 75 and 5 BTC, of which the 5 BTC one is now your input)
  • You now have 3 inputs left (10, 10 and 5)

Hopefully you were able to follow along with that, because now it is time to actually look at how to cut down on the transaction sizes. Essentially what we want to do is break down larger transactions in to smaller ones. Another way to look at it is that we are “compressing” these transactions.

So when we have a ton of dust transactions, how do we go about this? Well, what I have found is that you are safe to have around 100 inputs in a transaction without hitting the size limit (which is 10 kilobytes). So when you get to where you have around 80 inputs, send yourself (to one of your existing addresses if you want) a single payment that encompasses all of the balance you have. If this is going to be less than 0.01 BTC, it is also a great idea to add that much to your wallet and bundle that in as well. By doing this, you can ensure that your transaction will be processed at absolutely no cost. And future merges like this can use your existing coins (ie. when you get back to 80 transactions again, do the same thing, making sure you pull in your entire balance).

It is worth noting that the transactions can take a while if you are doing them with no fee payments (I think my longest transaction took around 36 hours to finally go through), but it will happen eventually. And if you are not in a rush to get your money out and you are getting a lot of dust payments, this is the perfect solution! Just be sure that you are keeping up with your transaction counts and that you do this as often as it is needed. Being that we do have the dust limits from faucets, you should not have to do this too often.

Alternative Crypto Currencies

A lot of people look at the faucets and only consider the value of doing the Bitcoin ones. There are a lot of alternative crypto currencies, and most of them follow the same path Bitcoin once did, offering a lot of coins in the beginning and slowing down as the coin gains traction and value. As an example, one used to be able to get hundreds of Dogecoins in a faucet, but now you are looking at a hundredth of that or so. The point behind this is that if you jump on faucets for alt coins, you can earn quite a bit and ride the wave up. While the amount you are earning at the moment you use the faucet and cash out is pretty low, as the value goes up there is a lot of possibility for profit.

Matching up these alt coin faucets with mining and working for alt coins is a great way to increase your holdings of different coins, helping spread out your investments and lowering the amount of risk you are being subjected to. Cryptoplace's faucet rotator is designed to support multiple different coins, and so jumping on some of these new coins is pretty easy using the site to do it. Not to mention it always hosts the main one, Bitcoin, which can be traded for any other coin you want just about. In any case, I highly suggest doing faucets for many different coins, rather than just picking one. You never know when the few thousand coins you hold of one type are going to explode in value. “To the moon!” And the faucets let you do this quickly, easily and free.

Conclusion

When it comes down to it, whether faucets are worth your time or not is up to you. Different people have different opinions on what is worth it and what is not. I think that it should boil down more to how you feel about the deflationary aspect of the coins. The way I see it, the coins will never increase in number; at the most, they will decrease in number. So what you are earning now could be fractions of a penny, but could be worth tens of dollars down the road. That is something that I do not want to miss, so I go ahead and take part in (and help support) faucets to help increase my holdings. On the other hand, I also fully support the concept behind them (at least the original faucets) and I am grateful for those who put them in action and were willing to sacrifice a little of their own earnings to help boost the value of all of them. Really, my hope at this point is that faucets somehow revert to their old roots and start running for the good of Bitcoin, rather than to make their owners rich (or at least, some feel they are going to become rich).

Faucets


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