Howey Test and Cryptocurrencies: 'Every ICO Is a Security'
What Is the Howey Test?
To determine whether a transaction qualifies as a "investment contract" and thus qualifies as a security, the Howey Test refers to the U.S. Supreme Court cass: the Securities Act of 1933 and the Securities Exchange Act of 1934. According to the Howey Test, an investment contract exists when "money is invested in a common enterprise with a reasonable expectation of profits from others' efforts."
The test applies to any contract, scheme, or transaction. The Howey Test helps investors and project backers understand blockchain and digital currency projects. ICOs and certain cryptocurrencies may be found to be "investment contracts" under the test.
Understanding the Howey Test
The Howey Test comes from the 1946 Supreme Court case SEC v. W.J. Howey Co. The Howey Company sold citrus groves to Florida buyers who leased them back to Howey. The company would maintain the groves and sell the fruit for the owners. Both parties benefited. Most buyers had no farming experience and were not required to farm the land.
The SEC intervened because Howey failed to register the transactions. The court ruled that the leaseback agreements were investment contracts.
This established four criteria for determining an investment contract. Investing contract:
- An investment of money
- n a common enterprise
- With the expectation of profit
- To be derived from the efforts of others
In the case of Howey, the buyers saw the transactions as valuable because others provided the labor and expertise. An income stream was obtained by only investing capital. As a result of the Howey Test, the transaction had to be registered with the SEC.
Howey Test and Cryptocurrencies
Bitcoin is notoriously difficult to categorize. Decentralized, they evade regulation in many ways. Regardless, the SEC is looking into digital assets and determining when their sale qualifies as an investment contract.
The SEC claims that selling digital assets meets the "investment of money" test because fiat money or other digital assets are being exchanged. Like the "common enterprise" test.
Whether a digital asset qualifies as an investment contract depends on whether there is a "expectation of profit from others' efforts."
For example, buyers of digital assets may be relying on others' efforts if they expect the project's backers to build and maintain the digital network, rather than a dispersed community of unaffiliated users. Also, if the project's backers create scarcity by burning tokens, the test is met. Another way the "efforts of others" test is met is if the project's backers continue to act in a managerial role.
These are just a few examples given by the SEC. If a project's success is dependent on ongoing support from backers, the buyer of the digital asset is likely relying on "others' efforts."
Special Considerations
If the SEC determines a cryptocurrency token is a security, many issues arise. It means the SEC can decide whether a token can be sold to US investors and forces the project to register.
In 2017, the SEC ruled that selling DAO tokens for Ether violated federal securities laws. Instead of enforcing securities laws, the SEC issued a warning to the cryptocurrency industry.
Due to the Howey Test, most ICOs today are likely inaccessible to US investors. After a year of ICOs, then-SEC Chair Jay Clayton declared them all securities.
SEC Chairman Gensler Agrees With Predecessor: 'Every ICO Is a Security'
Howey Test FAQs
How Do You Determine If Something Is a Security?
The Howey Test determines whether certain transactions are "investment contracts." Securities are transactions that qualify as "investment contracts" under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The Howey Test looks for a "investment of money in a common enterprise with a reasonable expectation of profits from others' efforts." If so, the Securities Act of 1933 and the Securities Exchange Act of 1934 require disclosure and registration.
Why Is Bitcoin Not a Security?
Former SEC Chair Jay Clayton clarified in June 2018 that bitcoin is not a security: "Cryptocurrencies: Replace the dollar, euro, and yen with bitcoin. That type of currency is not a security," said Clayton.
Bitcoin, which has never sought public funding to develop its technology, fails the SEC's Howey Test. However, according to Clayton, ICO tokens are securities.
A Security Defined by the SEC
In the public and private markets, securities are fungible and tradeable financial instruments. The SEC regulates public securities sales.
The Supreme Court defined a security offering in SEC v. W.J. Howey Co. In its judgment, the court defines a security using four criteria:
- An investment contract's existence
- The formation of a common enterprise
- The issuer's profit promise
- Third-party promotion of the offering
Read original post.
More on Web3 & Crypto

Ben
3 years ago
The Real Value of Carbon Credit (Climate Coin Investment)
Disclaimer : This is not financial advice for any investment.
TL;DR
You might not have realized it, but as we move toward net zero carbon emissions, the globe is already at war.
According to the Paris Agreement of COP26, 64% of nations have already declared net zero, and the issue of carbon reduction has already become so important for businesses that it affects their ability to survive. Furthermore, the time when carbon emission standards will be defined and controlled on an individual basis is becoming closer.
Since 2017, the market for carbon credits has experienced extraordinary expansion as a result of widespread talks about carbon credits. The carbon credit market is predicted to expand much more once net zero is implemented and carbon emission rules inevitably tighten.
Hello! Ben here from Nonce Classic. Nonce Classic has recently confirmed the tremendous growth potential of the carbon credit market in the midst of a major trend towards the global goal of net zero (carbon emissions caused by humans — carbon reduction by humans = 0 ). Moreover, we too believed that the questions and issues the carbon credit market suffered from the last 30–40yrs could be perfectly answered through crypto technology and that is why we have added a carbon credit crypto project to the Nonce Classic portfolio. There have been many teams out there that have tried to solve environmental problems through crypto but very few that have measurable experience working in the carbon credit scene. Thus we have put in our efforts to find projects that are not crypto projects created for the sake of issuing tokens but projects that pragmatically use crypto technology to combat climate change by solving problems of the current carbon credit market. In that process, we came to hear of Climate Coin, a veritable carbon credit crypto project, and us Nonce Classic as an accelerator, have begun contributing to its growth and invested in its tokens. Starting with this article, we plan to publish a series of articles explaining why the carbon credit market is bullish, why we invested in Climate Coin, and what kind of project Climate Coin is specifically. In this first article let us understand the carbon credit market and look into its growth potential! Let’s begin :)
The Unavoidable Entry of the Net Zero Era
Net zero means... Human carbon emissions are balanced by carbon reduction efforts. A non-environmentalist may find it hard to accept that net zero is attainable by 2050. Global cooperation to save the earth is happening faster than we imagine.
In the Paris Agreement of COP26, concluded in Glasgow, UK on Oct. 31, 2021, nations pledged to reduce worldwide yearly greenhouse gas emissions by more than 50% by 2030 and attain net zero by 2050. Governments throughout the world have pledged net zero at the national level and are holding each other accountable by submitting Nationally Determined Contributions (NDC) every five years to assess implementation. 127 of 198 nations have declared net zero.
Each country's 1.5-degree reduction plans have led to carbon reduction obligations for companies. In places with the strictest environmental regulations, like the EU, companies often face bankruptcy because the cost of buying carbon credits to meet their carbon allowances exceeds their operating profits. In this day and age, minimizing carbon emissions and securing carbon credits are crucial.
Recent SEC actions on climate change may increase companies' concerns about reducing emissions. The SEC required all U.S. stock market companies to disclose their annual greenhouse gas emissions and climate change impact on March 21, 2022. The SEC prepared the proposed regulation through in-depth analysis and stakeholder input since last year. Three out of four SEC members agreed that it should pass without major changes. If the regulation passes, it will affect not only US companies, but also countless companies around the world, directly or indirectly.
Even companies not listed on the U.S. stock market will be affected and, in most cases, required to disclose emissions. Companies listed on the U.S. stock market with significant greenhouse gas emissions or specific targets are subject to stricter emission standards (Scope 3) and disclosure obligations, which will magnify investigations into all related companies. Greenhouse gas emissions can be calculated three ways. Scope 1 measures carbon emissions from a company's facilities and transportation. Scope 2 measures carbon emissions from energy purchases. Scope 3 covers all indirect emissions from a company's value chains.
The SEC's proposed carbon emission disclosure mandate and regulations are one example of how carbon credit policies can cross borders and affect all parties. As such incidents will continue throughout the implementation of net zero, even companies that are not immediately obligated to disclose their carbon emissions must be prepared to respond to changes in carbon emission laws and policies.
Carbon reduction obligations will soon become individual. Individual consumption has increased dramatically with improved quality of life and convenience, despite national and corporate efforts to reduce carbon emissions. Since consumption is directly related to carbon emissions, increasing consumption increases carbon emissions. Countries around the world have agreed that to achieve net zero, carbon emissions must be reduced on an individual level. Solutions to individual carbon reduction are being actively discussed and studied under the term Personal Carbon Trading (PCT).
PCT is a system that allows individuals to trade carbon emission quotas in the form of carbon credits. Individuals who emit more carbon than their allotment can buy carbon credits from those who emit less. European cities with well-established carbon credit markets are preparing for net zero by conducting early carbon reduction prototype projects. The era of checking product labels for carbon footprints, choosing low-emissions transportation, and worrying about hot shower emissions is closer than we think.
The Market for Carbon Credits Is Expanding Fearfully
Compliance and voluntary carbon markets make up the carbon credit market.
A Compliance Market enforces carbon emission allowances for actors. Companies in industries that previously emitted a lot of carbon are included in the mandatory carbon market, and each government receives carbon credits each year. If a company's emissions are less than the assigned cap and it has extra carbon credits, it can sell them to other companies that have larger emissions and require them (Cap and Trade). The annual number of free emission permits provided to companies is designed to decline, therefore companies' desire for carbon credits will increase. The compliance market's yearly trading volume will exceed $261B in 2020, five times its 2017 level.
In the Voluntary Market, carbon reduction is voluntary and carbon credits are sold for personal reasons or to build market participants' eco-friendly reputations. Even if not in the compliance market, it is typical for a corporation to be obliged to offset its carbon emissions by acquiring voluntary carbon credits. When a company seeks government or company investment, it may be denied because it is not net zero. If a significant shareholder declares net zero, the companies below it must execute it. As the world moves toward ESG management, becoming an eco-friendly company is no longer a strategic choice to gain a competitive edge, but an important precaution to not fall behind. Due to this eco-friendly trend, the annual market volume of voluntary emission credits will approach $1B by November 2021. The voluntary credit market is anticipated to reach $5B to $50B by 2030. (TSCVM 2021 Report)
In conclusion
This article analyzed how net zero, a target promised by countries around the world to combat climate change, has brought governmental, corporate, and human changes. We discussed how these shifts will become more obvious as we approach net zero, and how the carbon credit market would increase exponentially in response. In the following piece, let's analyze the hurdles impeding the carbon credit market's growth, how the project we invested in tries to tackle these issues, and why we chose Climate Coin. Wait! Jim Skea, co-chair of the IPCC working group, said,
“It’s now or never, if we want to limit global warming to 1.5°C” — Jim Skea
Join nonceClassic’s community:
Telegram: https://t.me/non_stock
Youtube: https://www.youtube.com/channel/UCqeaLwkZbEfsX35xhnLU2VA
Twitter: @nonceclassic
Mail us : general@nonceclassic.org

Farhan Ali Khan
2 years ago
Introduction to Zero-Knowledge Proofs: The Art of Proving Without Revealing
Zero-Knowledge Proofs for Beginners
Published here originally.
Introduction
I Spy—did you play as a kid? One person chose a room object, and the other had to guess it by answering yes or no questions. I Spy was entertaining, but did you know it could teach you cryptography?
Zero Knowledge Proofs let you show your pal you know what they picked without exposing how. Math replaces electronics in this secret spy mission. Zero-knowledge proofs (ZKPs) are sophisticated cryptographic tools that allow one party to prove they have particular knowledge without revealing it. This proves identification and ownership, secures financial transactions, and more. This article explains zero-knowledge proofs and provides examples to help you comprehend this powerful technology.
What is a Proof of Zero Knowledge?
Zero-knowledge proofs prove a proposition is true without revealing any other information. This lets the prover show the verifier that they know a fact without revealing it. So, a zero-knowledge proof is like a magician's trick: the prover proves they know something without revealing how or what. Complex mathematical procedures create a proof the verifier can verify.
Want to find an easy way to test it out? Try out with tis awesome example! ZK Crush
Describe it as if I'm 5
Alex and Jack found a cave with a center entrance that only opens when someone knows the secret. Alex knows how to open the cave door and wants to show Jack without telling him.
Alex and Jack name both pathways (let’s call them paths A and B).
In the first phase, Alex is already inside the cave and is free to select either path, in this case A or B.
As Alex made his decision, Jack entered the cave and asked him to exit from the B path.
Jack can confirm that Alex really does know the key to open the door because he came out for the B path and used it.
To conclude, Alex and Jack repeat:
Alex walks into the cave.
Alex follows a random route.
Jack walks into the cave.
Alex is asked to follow a random route by Jack.
Alex follows Jack's advice and heads back that way.
What is a Zero Knowledge Proof?
At a high level, the aim is to construct a secure and confidential conversation between the prover and the verifier, where the prover convinces the verifier that they have the requisite information without disclosing it. The prover and verifier exchange messages and calculate in each round of the dialogue.
The prover uses their knowledge to prove they have the information the verifier wants during these rounds. The verifier can verify the prover's truthfulness without learning more by checking the proof's mathematical statement or computation.
Zero knowledge proofs use advanced mathematical procedures and cryptography methods to secure communication. These methods ensure the evidence is authentic while preventing the prover from creating a phony proof or the verifier from extracting unnecessary information.
ZK proofs require examples to grasp. Before the examples, there are some preconditions.
Criteria for Proofs of Zero Knowledge
Completeness: If the proposition being proved is true, then an honest prover will persuade an honest verifier that it is true.
Soundness: If the proposition being proved is untrue, no dishonest prover can persuade a sincere verifier that it is true.
Zero-knowledge: The verifier only realizes that the proposition being proved is true. In other words, the proof only establishes the veracity of the proposition being supported and nothing more.
The zero-knowledge condition is crucial. Zero-knowledge proofs show only the secret's veracity. The verifier shouldn't know the secret's value or other details.
Example after example after example
To illustrate, take a zero-knowledge proof with several examples:
Initial Password Verification Example
You want to confirm you know a password or secret phrase without revealing it.
Use a zero-knowledge proof:
You and the verifier settle on a mathematical conundrum or issue, such as figuring out a big number's components.
The puzzle or problem is then solved using the hidden knowledge that you have learned. You may, for instance, utilize your understanding of the password to determine the components of a particular number.
You provide your answer to the verifier, who can assess its accuracy without knowing anything about your private data.
You go through this process several times with various riddles or issues to persuade the verifier that you actually are aware of the secret knowledge.
You solved the mathematical puzzles or problems, proving to the verifier that you know the hidden information. The proof is zero-knowledge since the verifier only sees puzzle solutions, not the secret information.
In this scenario, the mathematical challenge or problem represents the secret, and solving it proves you know it. The evidence does not expose the secret, and the verifier just learns that you know it.
My simple example meets the zero-knowledge proof conditions:
Completeness: If you actually know the hidden information, you will be able to solve the mathematical puzzles or problems, hence the proof is conclusive.
Soundness: The proof is sound because the verifier can use a publicly known algorithm to confirm that your answer to the mathematical conundrum or difficulty is accurate.
Zero-knowledge: The proof is zero-knowledge because all the verifier learns is that you are aware of the confidential information. Beyond the fact that you are aware of it, the verifier does not learn anything about the secret information itself, such as the password or the factors of the number. As a result, the proof does not provide any new insights into the secret.
Explanation #2: Toss a coin.
One coin is biased to come up heads more often than tails, while the other is fair (i.e., comes up heads and tails with equal probability). You know which coin is which, but you want to show a friend you can tell them apart without telling them.
Use a zero-knowledge proof:
One of the two coins is chosen at random, and you secretly flip it more than once.
You show your pal the following series of coin flips without revealing which coin you actually flipped.
Next, as one of the two coins is flipped in front of you, your friend asks you to tell which one it is.
Then, without revealing which coin is which, you can use your understanding of the secret order of coin flips to determine which coin your friend flipped.
To persuade your friend that you can actually differentiate between the coins, you repeat this process multiple times using various secret coin-flipping sequences.
In this example, the series of coin flips represents the knowledge of biased and fair coins. You can prove you know which coin is which without revealing which is biased or fair by employing a different secret sequence of coin flips for each round.
The evidence is zero-knowledge since your friend does not learn anything about which coin is biased and which is fair other than that you can tell them differently. The proof does not indicate which coin you flipped or how many times you flipped it.
The coin-flipping example meets zero-knowledge proof requirements:
Completeness: If you actually know which coin is biased and which is fair, you should be able to distinguish between them based on the order of coin flips, and your friend should be persuaded that you can.
Soundness: Your friend may confirm that you are correctly recognizing the coins by flipping one of them in front of you and validating your answer, thus the proof is sound in that regard. Because of this, your acquaintance can be sure that you are not just speculating or picking a coin at random.
Zero-knowledge: The argument is that your friend has no idea which coin is biased and which is fair beyond your ability to distinguish between them. Your friend is not made aware of the coin you used to make your decision or the order in which you flipped the coins. Consequently, except from letting you know which coin is biased and which is fair, the proof does not give any additional information about the coins themselves.
Figure out the prime number in Example #3.
You want to prove to a friend that you know their product n=pq without revealing p and q. Zero-knowledge proof?
Use a variant of the RSA algorithm. Method:
You determine a new number s = r2 mod n by computing a random number r.
You email your friend s and a declaration that you are aware of the values of p and q necessary for n to equal pq.
A random number (either 0 or 1) is selected by your friend and sent to you.
You send your friend r as evidence that you are aware of the values of p and q if e=0. You calculate and communicate your friend's s/r if e=1.
Without knowing the values of p and q, your friend can confirm that you know p and q (in the case where e=0) or that s/r is a legitimate square root of s mod n (in the situation where e=1).
This is a zero-knowledge proof since your friend learns nothing about p and q other than their product is n and your ability to verify it without exposing any other information. You can prove that you know p and q by sending r or by computing s/r and sending that instead (if e=1), and your friend can verify that you know p and q or that s/r is a valid square root of s mod n without learning anything else about their values. This meets the conditions of completeness, soundness, and zero-knowledge.
Zero-knowledge proofs satisfy the following:
Completeness: The prover can demonstrate this to the verifier by computing q = n/p and sending both p and q to the verifier. The prover also knows a prime number p and a factorization of n as p*q.
Soundness: Since it is impossible to identify any pair of numbers that correctly factorize n without being aware of its prime factors, the prover is unable to demonstrate knowledge of any p and q that do not do so.
Zero knowledge: The prover only admits that they are aware of a prime number p and its associated factor q, which is already known to the verifier. This is the extent of their knowledge of the prime factors of n. As a result, the prover does not provide any new details regarding n's prime factors.
Types of Proofs of Zero Knowledge
Each zero-knowledge proof has pros and cons. Most zero-knowledge proofs are:
Interactive Zero Knowledge Proofs: The prover and the verifier work together to establish the proof in this sort of zero-knowledge proof. The verifier disputes the prover's assertions after receiving a sequence of messages from the prover. When the evidence has been established, the prover will employ these new problems to generate additional responses.
Non-Interactive Zero Knowledge Proofs: For this kind of zero-knowledge proof, the prover and verifier just need to exchange a single message. Without further interaction between the two parties, the proof is established.
A statistical zero-knowledge proof is one in which the conclusion is reached with a high degree of probability but not with certainty. This indicates that there is a remote possibility that the proof is false, but that this possibility is so remote as to be unimportant.
Succinct Non-Interactive Argument of Knowledge (SNARKs): SNARKs are an extremely effective and scalable form of zero-knowledge proof. They are utilized in many different applications, such as machine learning, blockchain technology, and more. Similar to other zero-knowledge proof techniques, SNARKs enable one party—the prover—to demonstrate to another—the verifier—that they are aware of a specific piece of information without disclosing any more information about that information.
The main characteristic of SNARKs is their succinctness, which refers to the fact that the size of the proof is substantially smaller than the amount of the original data being proved. Because to its high efficiency and scalability, SNARKs can be used in a wide range of applications, such as machine learning, blockchain technology, and more.
Uses for Zero Knowledge Proofs
ZKP applications include:
Verifying Identity ZKPs can be used to verify your identity without disclosing any personal information. This has uses in access control, digital signatures, and online authentication.
Proof of Ownership ZKPs can be used to demonstrate ownership of a certain asset without divulging any details about the asset itself. This has uses for protecting intellectual property, managing supply chains, and owning digital assets.
Financial Exchanges Without disclosing any details about the transaction itself, ZKPs can be used to validate financial transactions. Cryptocurrency, internet payments, and other digital financial transactions can all use this.
By enabling parties to make calculations on the data without disclosing the data itself, Data Privacy ZKPs can be used to preserve the privacy of sensitive data. Applications for this can be found in the financial, healthcare, and other sectors that handle sensitive data.
By enabling voters to confirm that their vote was counted without disclosing how they voted, elections ZKPs can be used to ensure the integrity of elections. This is applicable to electronic voting, including internet voting.
Cryptography Modern cryptography's ZKPs are a potent instrument that enable secure communication and authentication. This can be used for encrypted messaging and other purposes in the business sector as well as for military and intelligence operations.
Proofs of Zero Knowledge and Compliance
Kubernetes and regulatory compliance use ZKPs in many ways. Examples:
Security for Kubernetes ZKPs offer a mechanism to authenticate nodes without disclosing any sensitive information, enhancing the security of Kubernetes clusters. ZKPs, for instance, can be used to verify, without disclosing the specifics of the program, that the nodes in a Kubernetes cluster are running permitted software.
Compliance Inspection Without disclosing any sensitive information, ZKPs can be used to demonstrate compliance with rules like the GDPR, HIPAA, and PCI DSS. ZKPs, for instance, can be used to demonstrate that data has been encrypted and stored securely without divulging the specifics of the mechanism employed for either encryption or storage.
Access Management Without disclosing any private data, ZKPs can be used to offer safe access control to Kubernetes resources. ZKPs can be used, for instance, to demonstrate that a user has the necessary permissions to access a particular Kubernetes resource without disclosing the details of those permissions.
Safe Data Exchange Without disclosing any sensitive information, ZKPs can be used to securely transmit data between Kubernetes clusters or between several businesses. ZKPs, for instance, can be used to demonstrate the sharing of a specific piece of data between two parties without disclosing the details of the data itself.
Kubernetes deployments audited Without disclosing the specifics of the deployment or the data being processed, ZKPs can be used to demonstrate that Kubernetes deployments are working as planned. This can be helpful for auditing purposes and for ensuring that Kubernetes deployments are operating as planned.
ZKPs preserve data and maintain regulatory compliance by letting parties prove things without revealing sensitive information. ZKPs will be used more in Kubernetes as it grows.

Ashraful Islam
4 years ago
Clean API Call With React Hooks
| Photo by Juanjo Jaramillo on Unsplash |
Calling APIs is the most common thing to do in any modern web application. When it comes to talking with an API then most of the time we need to do a lot of repetitive things like getting data from an API call, handling the success or error case, and so on.
When calling tens of hundreds of API calls we always have to do those tedious tasks. We can handle those things efficiently by putting a higher level of abstraction over those barebone API calls, whereas in some small applications, sometimes we don’t even care.
The problem comes when we start adding new features on top of the existing features without handling the API calls in an efficient and reusable manner. In that case for all of those API calls related repetitions, we end up with a lot of repetitive code across the whole application.
In React, we have different approaches for calling an API. Nowadays mostly we use React hooks. With React hooks, it’s possible to handle API calls in a very clean and consistent way throughout the application in spite of whatever the application size is. So let’s see how we can make a clean and reusable API calling layer using React hooks for a simple web application.
I’m using a code sandbox for this blog which you can get here.
import "./styles.css";
import React, { useEffect, useState } from "react";
import axios from "axios";
export default function App() {
const [posts, setPosts] = useState(null);
const [error, setError] = useState("");
const [loading, setLoading] = useState(false);
useEffect(() => {
handlePosts();
}, []);
const handlePosts = async () => {
setLoading(true);
try {
const result = await axios.get(
"https://jsonplaceholder.typicode.com/posts"
);
setPosts(result.data);
} catch (err) {
setError(err.message || "Unexpected Error!");
} finally {
setLoading(false);
}
};
return (
<div className="App">
<div>
<h1>Posts</h1>
{loading && <p>Posts are loading!</p>}
{error && <p>{error}</p>}
<ul>
{posts?.map((post) => (
<li key={post.id}>{post.title}</li>
))}
</ul>
</div>
</div>
);
}
I know the example above isn’t the best code but at least it’s working and it’s valid code. I will try to improve that later. For now, we can just focus on the bare minimum things for calling an API.
Here, you can try to get posts data from JsonPlaceholer. Those are the most common steps we follow for calling an API like requesting data, handling loading, success, and error cases.
If we try to call another API from the same component then how that would gonna look? Let’s see.
500: Internal Server Error
Now it’s going insane! For calling two simple APIs we’ve done a lot of duplication. On a top-level view, the component is doing nothing but just making two GET requests and handling the success and error cases. For each request, it’s maintaining three states which will periodically increase later if we’ve more calls.
Let’s refactor to make the code more reusable with fewer repetitions.
Step 1: Create a Hook for the Redundant API Request Codes
Most of the repetitions we have done so far are about requesting data, handing the async things, handling errors, success, and loading states. How about encapsulating those things inside a hook?
The only unique things we are doing inside handleComments and handlePosts are calling different endpoints. The rest of the things are pretty much the same. So we can create a hook that will handle the redundant works for us and from outside we’ll let it know which API to call.
500: Internal Server Error
Here, this request function is identical to what we were doing on the handlePosts and handleComments. The only difference is, it’s calling an async function apiFunc which we will provide as a parameter with this hook. This apiFunc is the only independent thing among any of the API calls we need.
With hooks in action, let’s change our old codes in App component, like this:
500: Internal Server Error
How about the current code? Isn’t it beautiful without any repetitions and duplicate API call handling things?
Let’s continue our journey from the current code. We can make App component more elegant. Now it knows a lot of details about the underlying library for the API call. It shouldn’t know that. So, here’s the next step…
Step 2: One Component Should Take Just One Responsibility
Our App component knows too much about the API calling mechanism. Its responsibility should just request the data. How the data will be requested under the hood, it shouldn’t care about that.
We will extract the API client-related codes from the App component. Also, we will group all the API request-related codes based on the API resource. Now, this is our API client:
import axios from "axios";
const apiClient = axios.create({
// Later read this URL from an environment variable
baseURL: "https://jsonplaceholder.typicode.com"
});
export default apiClient;
All API calls for comments resource will be in the following file:
import client from "./client";
const getComments = () => client.get("/comments");
export default {
getComments
};
All API calls for posts resource are placed in the following file:
import client from "./client";
const getPosts = () => client.get("/posts");
export default {
getPosts
};
Finally, the App component looks like the following:
import "./styles.css";
import React, { useEffect } from "react";
import commentsApi from "./api/comments";
import postsApi from "./api/posts";
import useApi from "./hooks/useApi";
export default function App() {
const getPostsApi = useApi(postsApi.getPosts);
const getCommentsApi = useApi(commentsApi.getComments);
useEffect(() => {
getPostsApi.request();
getCommentsApi.request();
}, []);
return (
<div className="App">
{/* Post List */}
<div>
<h1>Posts</h1>
{getPostsApi.loading && <p>Posts are loading!</p>}
{getPostsApi.error && <p>{getPostsApi.error}</p>}
<ul>
{getPostsApi.data?.map((post) => (
<li key={post.id}>{post.title}</li>
))}
</ul>
</div>
{/* Comment List */}
<div>
<h1>Comments</h1>
{getCommentsApi.loading && <p>Comments are loading!</p>}
{getCommentsApi.error && <p>{getCommentsApi.error}</p>}
<ul>
{getCommentsApi.data?.map((comment) => (
<li key={comment.id}>{comment.name}</li>
))}
</ul>
</div>
</div>
);
}
Now it doesn’t know anything about how the APIs get called. Tomorrow if we want to change the API calling library from axios to fetch or anything else, our App component code will not get affected. We can just change the codes form client.js This is the beauty of abstraction.
Apart from the abstraction of API calls, Appcomponent isn’t right the place to show the list of the posts and comments. It’s a high-level component. It shouldn’t handle such low-level data interpolation things.
So we should move this data display-related things to another low-level component. Here I placed those directly in the App component just for the demonstration purpose and not to distract with component composition-related things.
Final Thoughts
The React library gives the flexibility for using any kind of third-party library based on the application’s needs. As it doesn’t have any predefined architecture so different teams/developers adopted different approaches to developing applications with React. There’s nothing good or bad. We choose the development practice based on our needs/choices. One thing that is there beyond any choices is writing clean and maintainable codes.
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2 years ago
The Errors I Committed As a Novice Programmer
Learn to identify them, make habits to avoid them
First, a clarification. This article is aimed to make new programmers aware of their mistakes, train them to detect them, and remind them to prevent them.
I learned from all these blunders. I'm glad I have coding habits to avoid them. Do too.
These mistakes are not ordered.
1) Writing code haphazardly
Writing good content is hard. It takes planning and investigation. Quality programs don't differ.
Think. Research. Plan. Write. Validate. Modify. Unfortunately, no good acronym exists. Create a habit of doing the proper quantity of these activities.
As a newbie programmer, my biggest error was writing code without thinking or researching. This works for small stand-alone apps but hurts larger ones.
Like saying anything you might regret, you should think before coding something you could regret. Coding expresses your thoughts.
When angry, count to 10 before you speak. If very angry, a hundred. — Thomas Jefferson.
My quote:
When reviewing code, count to 10 before you refactor a line. If the code does not have tests, a hundred. — Samer Buna
Programming is primarily about reviewing prior code, investigating what is needed and how it fits into the current system, and developing small, testable features. Only 10% of the process involves writing code.
Programming is not writing code. Programming need nurturing.
2) Making excessive plans prior to writing code
Yes. Planning before writing code is good, but too much of it is bad. Water poisons.
Avoid perfect plans. Programming does not have that. Find a good starting plan. Your plan will change, but it helped you structure your code for clarity. Overplanning wastes time.
Only planning small features. All-feature planning should be illegal! The Waterfall Approach is a step-by-step system. That strategy requires extensive planning. This is not planning. Most software projects fail with waterfall. Implementing anything sophisticated requires agile changes to reality.
Programming requires responsiveness. You'll add waterfall plan-unthinkable features. You will eliminate functionality for reasons you never considered in a waterfall plan. Fix bugs and adjust. Be agile.
Plan your future features, though. Do it cautiously since too little or too much planning can affect code quality, which you must risk.
3) Underestimating the Value of Good Code
Readability should be your code's exclusive goal. Unintelligible code stinks. Non-recyclable.
Never undervalue code quality. Coding communicates implementations. Coders must explicitly communicate solution implementations.
Programming quote I like:
Always code as if the guy who ends up maintaining your code will be a violent psychopath who knows where you live. — John Woods
John, great advice!
Small things matter. If your indentation and capitalization are inconsistent, you should lose your coding license.
Long queues are also simple. Readability decreases after 80 characters. To highlight an if-statement block, you might put a long condition on the same line. No. Just never exceed 80 characters.
Linting and formatting tools fix many basic issues like this. ESLint and Prettier work great together in JavaScript. Use them.
Code quality errors:
Multiple lines in a function or file. Break long code into manageable bits. My rule of thumb is that any function with more than 10 lines is excessively long.
Double-negatives. Don't.
Using double negatives is just very not not wrong
Short, generic, or type-based variable names. Name variables clearly.
There are only two hard things in Computer Science: cache invalidation and naming things. — Phil Karlton
Hard-coding primitive strings and numbers without descriptions. If your logic relies on a constant primitive string or numeric value, identify it.
Avoiding simple difficulties with sloppy shortcuts and workarounds. Avoid evasion. Take stock.
Considering lengthier code better. Shorter code is usually preferable. Only write lengthier versions if they improve code readability. For instance, don't utilize clever one-liners and nested ternary statements just to make the code shorter. In any application, removing unneeded code is better.
Measuring programming progress by lines of code is like measuring aircraft building progress by weight. — Bill Gates
Excessive conditional logic. Conditional logic is unnecessary for most tasks. Choose based on readability. Measure performance before optimizing. Avoid Yoda conditions and conditional assignments.
4) Selecting the First Approach
When I started programming, I would solve an issue and move on. I would apply my initial solution without considering its intricacies and probable shortcomings.
After questioning all the solutions, the best ones usually emerge. If you can't think of several answers, you don't grasp the problem.
Programmers do not solve problems. Find the easiest solution. The solution must work well and be easy to read, comprehend, and maintain.
There are two ways of constructing a software design. One way is to make it so simple that there are obviously no deficiencies, and the other way is to make it so complicated that there are no obvious deficiencies. — C.A.R. Hoare
5) Not Giving Up
I generally stick with the original solution even though it may not be the best. The not-quitting mentality may explain this. This mindset is helpful for most things, but not programming. Program writers should fail early and often.
If you doubt a solution, toss it and rethink the situation. No matter how much you put in that solution. GIT lets you branch off and try various solutions. Use it.
Do not be attached to code because of how much effort you put into it. Bad code needs to be discarded.
6) Avoiding Google
I've wasted time solving problems when I should have researched them first.
Unless you're employing cutting-edge technology, someone else has probably solved your problem. Google It First.
Googling may discover that what you think is an issue isn't and that you should embrace it. Do not presume you know everything needed to choose a solution. Google surprises.
But Google carefully. Newbies also copy code without knowing it. Use only code you understand, even if it solves your problem.
Never assume you know how to code creatively.
The most dangerous thought that you can have as a creative person is to think that you know what you’re doing. — Bret Victor
7) Failing to Use Encapsulation
Not about object-oriented paradigm. Encapsulation is always useful. Unencapsulated systems are difficult to maintain.
An application should only handle a feature once. One object handles that. The application's other objects should only see what's essential. Reducing application dependencies is not about secrecy. Following these guidelines lets you safely update class, object, and function internals without breaking things.
Classify logic and state concepts. Class means blueprint template. Class or Function objects are possible. It could be a Module or Package.
Self-contained tasks need methods in a logic class. Methods should accomplish one thing well. Similar classes should share method names.
As a rookie programmer, I didn't always establish a new class for a conceptual unit or recognize self-contained units. Newbie code has a Util class full of unrelated code. Another symptom of novice code is when a small change cascades and requires numerous other adjustments.
Think before adding a method or new responsibilities to a method. Time's needed. Avoid skipping or refactoring. Start right.
High Cohesion and Low Coupling involves grouping relevant code in a class and reducing class dependencies.
8) Arranging for Uncertainty
Thinking beyond your solution is appealing. Every line of code will bring up what-ifs. This is excellent for edge cases but not for foreseeable needs.
Your what-ifs must fall into one of these two categories. Write only code you need today. Avoid future planning.
Writing a feature for future use is improper. No.
Write only the code you need today for your solution. Handle edge-cases, but don't introduce edge-features.
Growth for the sake of growth is the ideology of the cancer cell. — Edward Abbey
9) Making the incorrect data structure choices
Beginner programmers often overemphasize algorithms when preparing for interviews. Good algorithms should be identified and used when needed, but memorizing them won't make you a programming genius.
However, learning your language's data structures' strengths and shortcomings will make you a better developer.
The improper data structure shouts "newbie coding" here.
Let me give you a few instances of data structures without teaching you:
Managing records with arrays instead of maps (objects).
Most data structure mistakes include using lists instead of maps to manage records. Use a map to organize a list of records.
This list of records has an identifier to look up each entry. Lists for scalar values are OK and frequently superior, especially if the focus is pushing values to the list.
Arrays and objects are the most common JavaScript list and map structures, respectively (there is also a map structure in modern JavaScript).
Lists over maps for record management often fail. I recommend always using this point, even though it only applies to huge collections. This is crucial because maps are faster than lists in looking up records by identifier.
Stackless
Simple recursive functions are often tempting when writing recursive programming. In single-threaded settings, optimizing recursive code is difficult.
Recursive function returns determine code optimization. Optimizing a recursive function that returns two or more calls to itself is harder than optimizing a single call.
Beginners overlook the alternative to recursive functions. Use Stack. Push function calls to a stack and start popping them out to traverse them back.
10) Worsening the current code
Imagine this:
Add an item to that room. You might want to store that object anywhere as it's a mess. You can finish in seconds.
Not with messy code. Do not worsen! Keep the code cleaner than when you started.
Clean the room above to place the new object. If the item is clothing, clear a route to the closet. That's proper execution.
The following bad habits frequently make code worse:
code duplication You are merely duplicating code and creating more chaos if you copy/paste a code block and then alter just the line after that. This would be equivalent to adding another chair with a lower base rather than purchasing a new chair with a height-adjustable seat in the context of the aforementioned dirty room example. Always keep abstraction in mind, and use it when appropriate.
utilizing configuration files not at all. A configuration file should contain the value you need to utilize if it may differ in certain circumstances or at different times. A configuration file should contain a value if you need to use it across numerous lines of code. Every time you add a new value to the code, simply ask yourself: "Does this value belong in a configuration file?" The most likely response is "yes."
using temporary variables and pointless conditional statements. Every if-statement represents a logic branch that should at the very least be tested twice. When avoiding conditionals doesn't compromise readability, it should be done. The main issue with this is that branch logic is being used to extend an existing function rather than creating a new function. Are you altering the code at the appropriate level, or should you go think about the issue at a higher level every time you feel you need an if-statement or a new function variable?
This code illustrates superfluous if-statements:
function isOdd(number) {
if (number % 2 === 1) {
return true;
} else {
return false;
}
}Can you spot the biggest issue with the isOdd function above?
Unnecessary if-statement. Similar code:
function isOdd(number) {
return (number % 2 === 1);
};11) Making remarks on things that are obvious
I've learnt to avoid comments. Most code comments can be renamed.
instead of:
// This function sums only odd numbers in an array
const sum = (val) => {
return val.reduce((a, b) => {
if (b % 2 === 1) { // If the current number is odd
a+=b; // Add current number to accumulator
}
return a; // The accumulator
}, 0);
};Commentless code looks like this:
const sumOddValues = (array) => {
return array.reduce((accumulator, currentNumber) => {
if (isOdd(currentNumber)) {
return accumulator + currentNumber;
}
return accumulator;
}, 0);
};Better function and argument names eliminate most comments. Remember that before commenting.
Sometimes you have to use comments to clarify the code. This is when your comments should answer WHY this code rather than WHAT it does.
Do not write a WHAT remark to clarify the code. Here are some unnecessary comments that clutter code:
// create a variable and initialize it to 0
let sum = 0;
// Loop over array
array.forEach(
// For each number in the array
(number) => {
// Add the current number to the sum variable
sum += number;
}
);Avoid that programmer. Reject that code. Remove such comments if necessary. Most importantly, teach programmers how awful these remarks are. Tell programmers who publish remarks like this that they may lose their jobs. That terrible.
12) Skipping tests
I'll simplify. If you develop code without tests because you think you're an excellent programmer, you're a rookie.
If you're not writing tests in code, you're probably testing manually. Every few lines of code in a web application will be refreshed and interacted with. Also. Manual code testing is fine. To learn how to automatically test your code, manually test it. After testing your application, return to your code editor and write code to automatically perform the same interaction the next time you add code.
Human. After each code update, you will forget to test all successful validations. Automate it!
Before writing code to fulfill validations, guess or design them. TDD is real. It improves your feature design thinking.
If you can use TDD, even partially, do so.
13) Making the assumption that if something is working, it must be right.
See this sumOddValues function. Is it flawed?
const sumOddValues = (array) => {
return array.reduce((accumulator, currentNumber) => {
if (currentNumber % 2 === 1) {
return accumulator + currentNumber;
}
return accumulator;
});
};
console.assert(
sumOddValues([1, 2, 3, 4, 5]) === 9
);Verified. Good life. Correct?
Code above is incomplete. It handles some scenarios correctly, including the assumption used, but it has many other issues. I'll list some:
#1: No empty input handling. What happens when the function is called without arguments? That results in an error revealing the function's implementation:
TypeError: Cannot read property 'reduce' of undefined.Two main factors indicate faulty code.
Your function's users shouldn't come across implementation-related information.
The user cannot benefit from the error. Simply said, they were unable to use your function. They would be aware that they misused the function if the error was more obvious about the usage issue. You might decide to make the function throw a custom exception, for instance:
TypeError: Cannot execute function for empty list.Instead of returning an error, your method should disregard empty input and return a sum of 0. This case requires action.
Problem #2: No input validation. What happens if the function is invoked with a text, integer, or object instead of an array?
The function now throws:
sumOddValues(42);
TypeError: array.reduce is not a functionUnfortunately, array. cut's a function!
The function labels anything you call it with (42 in the example above) as array because we named the argument array. The error says 42.reduce is not a function.
See how that error confuses? An mistake like:
TypeError: 42 is not an array, dude.Edge-cases are #1 and #2. These edge-cases are typical, but you should also consider less obvious ones. Negative numbers—what happens?
sumOddValues([1, 2, 3, 4, 5, -13]) // => still 9-13's unusual. Is this the desired function behavior? Error? Should it sum negative numbers? Should it keep ignoring negative numbers? You may notice the function should have been titled sumPositiveOddNumbers.
This decision is simple. The more essential point is that if you don't write a test case to document your decision, future function maintainers won't know if you ignored negative values intentionally or accidentally.
It’s not a bug. It’s a feature. — Someone who forgot a test case
#3: Valid cases are not tested. Forget edge-cases, this function mishandles a straightforward case:
sumOddValues([2, 1, 3, 4, 5]) // => 11The 2 above was wrongly included in sum.
The solution is simple: reduce accepts a second input to initialize the accumulator. Reduce will use the first value in the collection as the accumulator if that argument is not provided, like in the code above. The sum included the test case's first even value.
This test case should have been included in the tests along with many others, such as all-even numbers, a list with 0 in it, and an empty list.
Newbie code also has rudimentary tests that disregard edge-cases.
14) Adhering to Current Law
Unless you're a lone supercoder, you'll encounter stupid code. Beginners don't identify it and assume it's decent code because it works and has been in the codebase for a while.
Worse, if the terrible code uses bad practices, the newbie may be enticed to use them elsewhere in the codebase since they learnt them from good code.
A unique condition may have pushed the developer to write faulty code. This is a nice spot for a thorough note that informs newbies about that condition and why the code is written that way.
Beginners should presume that undocumented code they don't understand is bad. Ask. Enquire. Blame it!
If the code's author is dead or can't remember it, research and understand it. Only after understanding the code can you judge its quality. Before that, presume nothing.
15) Being fixated on best practices
Best practices damage. It suggests no further research. Best practice ever. No doubts!
No best practices. Today's programming language may have good practices.
Programming best practices are now considered bad practices.
Time will reveal better methods. Focus on your strengths, not best practices.
Do not do anything because you read a quote, saw someone else do it, or heard it is a recommended practice. This contains all my article advice! Ask questions, challenge theories, know your options, and make informed decisions.
16) Being preoccupied with performance
Premature optimization is the root of all evil (or at least most of it) in programming — Donald Knuth (1974)
I think Donald Knuth's advice is still relevant today, even though programming has changed.
Do not optimize code if you cannot measure the suspected performance problem.
Optimizing before code execution is likely premature. You may possibly be wasting time optimizing.
There are obvious optimizations to consider when writing new code. You must not flood the event loop or block the call stack in Node.js. Remember this early optimization. Will this code block the call stack?
Avoid non-obvious code optimization without measurements. If done, your performance boost may cause new issues.
Stop optimizing unmeasured performance issues.
17) Missing the End-User Experience as a Goal
How can an app add a feature easily? Look at it from your perspective or in the existing User Interface. Right? Add it to the form if the feature captures user input. Add it to your nested menu of links if it adds a link to a page.
Avoid that developer. Be a professional who empathizes with customers. They imagine this feature's consumers' needs and behavior. They focus on making the feature easy to find and use, not just adding it to the software.
18) Choosing the incorrect tool for the task
Every programmer has their preferred tools. Most tools are good for one thing and bad for others.
The worst tool for screwing in a screw is a hammer. Do not use your favorite hammer on a screw. Don't use Amazon's most popular hammer on a screw.
A true beginner relies on tool popularity rather than problem fit.
You may not know the best tools for a project. You may know the best tool. However, it wouldn't rank high. You must learn your tools and be open to new ones.
Some coders shun new tools. They like their tools and don't want to learn new ones. I can relate, but it's wrong.
You can build a house slowly with basic tools or rapidly with superior tools. You must learn and use new tools.
19) Failing to recognize that data issues are caused by code issues
Programs commonly manage data. The software will add, delete, and change records.
Even the simplest programming errors can make data unpredictable. Especially if the same defective application validates all data.
Code-data relationships may be confusing for beginners. They may employ broken code in production since feature X is not critical. Buggy coding may cause hidden data integrity issues.
Worse, deploying code that corrected flaws without fixing minor data problems caused by these defects will only collect more data problems that take the situation into the unrecoverable-level category.
How do you avoid these issues? Simply employ numerous data integrity validation levels. Use several interfaces. Front-end, back-end, network, and database validations. If not, apply database constraints.
Use all database constraints when adding columns and tables:
If a column has a NOT NULL constraint, null values will be rejected for that column. If your application expects that field has a value, your database should designate its source as not null.
If a column has a UNIQUE constraint, the entire table cannot include duplicate values for that column. This is ideal for a username or email field on a Users table, for instance.
For the data to be accepted, a CHECK constraint, or custom expression, must evaluate to true. For instance, you can apply a check constraint to ensure that the values of a normal % column must fall within the range of 0 and 100.
With a PRIMARY KEY constraint, the values of the columns must be both distinct and not null. This one is presumably what you're utilizing. To distinguish the records in each table, the database needs have a primary key.
A FOREIGN KEY constraint requires that the values in one database column, typically a primary key, match those in another table column.
Transaction apathy is another data integrity issue for newbies. If numerous actions affect the same data source and depend on each other, they must be wrapped in a transaction that can be rolled back if one fails.
20) Reinventing the Wheel
Tricky. Some programming wheels need reinvention. Programming is undefined. New requirements and changes happen faster than any team can handle.
Instead of modifying the wheel we all adore, maybe we should rethink it if you need a wheel that spins at varied speeds depending on the time of day. If you don't require a non-standard wheel, don't reinvent it. Use the darn wheel.
Wheel brands can be hard to choose from. Research and test before buying! Most software wheels are free and transparent. Internal design quality lets you evaluate coding wheels. Try open-source wheels. Debug and fix open-source software simply. They're easily replaceable. In-house support is also easy.
If you need a wheel, don't buy a new automobile and put your maintained car on top. Do not include a library to use a few functions. Lodash in JavaScript is the finest example. Import shuffle to shuffle an array. Don't import lodash.
21) Adopting the incorrect perspective on code reviews
Beginners often see code reviews as criticism. Dislike them. Not appreciated. Even fear them.
Incorrect. If so, modify your mindset immediately. Learn from every code review. Salute them. Observe. Most crucial, thank reviewers who teach you.
Always learning code. Accept it. Most code reviews teach something new. Use these for learning.
You may need to correct the reviewer. If your code didn't make that evident, it may need to be changed. If you must teach your reviewer, remember that teaching is one of the most enjoyable things a programmer can do.
22) Not Using Source Control
Newbies often underestimate Git's capabilities.
Source control is more than sharing your modifications. It's much bigger. Clear history is source control. The history of coding will assist address complex problems. Commit messages matter. They are another way to communicate your implementations, and utilizing them with modest commits helps future maintainers understand how the code got where it is.
Commit early and often with present-tense verbs. Summarize your messages but be detailed. If you need more than a few lines, your commit is too long. Rebase!
Avoid needless commit messages. Commit summaries should not list new, changed, or deleted files. Git commands can display that list from the commit object. The summary message would be noise. I think a big commit has many summaries per file altered.
Source control involves discoverability. You can discover the commit that introduced a function and see its context if you doubt its need or design. Commits can even pinpoint which code caused a bug. Git has a binary search within commits (bisect) to find the bug-causing commit.
Source control can be used before commits to great effect. Staging changes, patching selectively, resetting, stashing, editing, applying, diffing, reversing, and others enrich your coding flow. Know, use, and enjoy them.
I consider a Git rookie someone who knows less functionalities.
23) Excessive Use of Shared State
Again, this is not about functional programming vs. other paradigms. That's another article.
Shared state is problematic and should be avoided if feasible. If not, use shared state as little as possible.
As a new programmer, I didn't know that all variables represent shared states. All variables in the same scope can change its data. Global scope reduces shared state span. Keep new states in limited scopes and avoid upward leakage.
When numerous resources modify common state in the same event loop tick, the situation becomes severe (in event-loop-based environments). Races happen.
This shared state race condition problem may encourage a rookie to utilize a timer, especially if they have a data lock issue. Red flag. No. Never accept it.
24) Adopting the Wrong Mentality Toward Errors
Errors are good. Progress. They indicate a simple way to improve.
Expert programmers enjoy errors. Newbies detest them.
If these lovely red error warnings irritate you, modify your mindset. Consider them helpers. Handle them. Use them to advance.
Some errors need exceptions. Plan for user-defined exceptions. Ignore some mistakes. Crash and exit the app.
25) Ignoring rest periods
Humans require mental breaks. Take breaks. In the zone, you'll forget breaks. Another symptom of beginners. No compromises. Make breaks mandatory in your process. Take frequent pauses. Take a little walk to plan your next move. Reread the code.
This has been a long post. You deserve a break.

Alexander Nguyen
3 years ago
A Comparison of Amazon, Microsoft, and Google's Compensation
Learn or earn
In 2020, I started software engineering. My base wage has progressed as follows:
Amazon (2020): $112,000
Microsoft (2021): $123,000
Google (2022): $169,000
I didn't major in math, but those jumps appear more than a 7% wage increase. Here's a deeper look at the three.
The Three Categories of Compensation
Most software engineering compensation packages at IT organizations follow this format.
Minimum Salary
Base salary is pre-tax income. Most organizations give a base pay. This is paid biweekly, twice monthly, or monthly.
Recruiting Bonus
Sign-On incentives are one-time rewards to new hires. Companies need an incentive to switch. If you leave early, you must pay back the whole cost or a pro-rated amount.
Equity
Equity is complex and requires its own post. A company will promise to give you a certain amount of company stock but when you get it depends on your offer. 25% per year for 4 years, then it's gone.
If a company gives you $100,000 and distributes 25% every year for 4 years, expect $25,000 worth of company stock in your stock brokerage on your 1 year work anniversary.
Performance Bonus
Tech offers may include yearly performance bonuses. Depends on performance and funding. I've only seen 0-20%.
Engineers' overall compensation usually includes:
Base Salary + Sign-On + (Total Equity)/4 + Average Performance Bonus
Amazon: (TC: 150k)
Base Pay System
Amazon pays Seattle employees monthly on the first work day. I'd rather have my money sooner than later, even if it saves processing and pay statements.
The company upped its base pay cap from $160,000 to $350,000 to compete with other tech companies.
Performance Bonus
Amazon has no performance bonus, so you can work as little or as much as you like and get paid the same. Amazon is savvy to avoid promising benefits it can't deliver.
Sign-On Bonus
Amazon gives two two-year sign-up bonuses. First-year workers could receive $20,000 and second-year workers $15,000. It's probably to make up for the company's strange equity structure.
If you leave during the first year, you'll owe the entire money and a prorated amount for the second year bonus.
Equity
Most organizations prefer a 25%, 25%, 25%, 25% equity structure. Amazon takes a different approach with end-heavy equity:
the first year, 5%
15% after one year.
20% then every six months
We thought it was constructed this way to keep staff longer.
Microsoft (TC: 185k)
Base Pay System
Microsoft paid biweekly.
Gainful Performance
My offer letter suggested a 0%-20% performance bonus. Everyone will be satisfied with a 10% raise at year's end.
But misleading press where the budget for the bonus is doubled can upset some employees because they won't earn double their expected bonus. Still barely 10% for 2022 average.
Sign-On Bonus
Microsoft's sign-on bonus is a one-time payout. The contract can require 2-year employment. You must negotiate 1 year. It's pro-rated, so that's fair.
Equity
Microsoft is one of those companies that has standard 25% equity structure. Except if you’re a new graduate.
In that case it’ll be
25% six months later
25% each year following that
New grads will acquire equity in 3.5 years, not 4. I'm guessing it's to keep new grads around longer.
Google (TC: 300k)
Base Pay Structure
Google pays biweekly.
Performance Bonus
Google's offer letter specifies a 15% bonus. It's wonderful there's no cap, but I might still get 0%. A little more than Microsoft’s 10% and a lot more than Amazon’s 0%.
Sign-On Bonus
Google gave a 1-year sign-up incentive. If the contract is only 1 year, I can move without any extra obligations.
Not as fantastic as Amazon's sign-up bonuses, but the remainder of the package might compensate.
Equity
We covered Amazon's tail-heavy compensation structure, so Google's front-heavy equity structure may surprise you.
Annual structure breakdown
33% Year 1
33% Year 2
22% Year 3
12% Year 4
The goal is to get them to Google and keep them there.
Final Thoughts
This post hopefully helped you understand the 3 firms' compensation arrangements.
There's always more to discuss, such as refreshers, 401k benefits, and business discounts, but I hope this shows a distinction between these 3 firms.

Ari Joury, PhD
3 years ago
7 ways to turn into a major problem-solver
For some people, the glass is half empty. For others, it’s half full. And for some, the question is, How do I get this glass totally full again?
Problem-solvers are the last group. They're neutral. Pragmatists.
Problems surround them. They fix things instead of judging them. Problem-solvers improve the world wherever they go.
Some fail. Sometimes their good intentions have terrible results. Like when they try to help a grandma cross the road because she can't do it alone but discover she never wanted to.
Most programmers, software engineers, and data scientists solve problems. They use computer code to fix problems they see.
Coding is best done by understanding and solving the problem.
Despite your best intentions, building the wrong solution may have negative consequences. Helping an unwilling grandma cross the road.
How can you improve problem-solving?
1. Examine your presumptions.
Don’t think There’s a grandma, and she’s unable to cross the road. Therefore I must help her over the road. Instead think This grandma looks unable to cross the road. Let’s ask her whether she needs my help to cross it.
Maybe the grandma can’t cross the road alone, but maybe she can. You can’t tell for sure just by looking at her. It’s better to ask.
Maybe the grandma wants to cross the road. But maybe she doesn’t. It’s better to ask!
Building software is similar. Do only I find this website ugly? Who can I consult?
We all have biases, mental shortcuts, and worldviews. They simplify life.
Problem-solving requires questioning all assumptions. They might be wrong!
Think less. Ask more.
Secondly, fully comprehend the issue.
Grandma wants to cross the road? Does she want flowers from the shop across the street?
Understanding the problem advances us two steps. Instead of just watching people and their challenges, try to read their intentions.
Don't ask, How can I help grandma cross the road? Why would this grandma cross the road? What's her goal?
Understand what people want before proposing solutions.
3. Request more information. This is not a scam!
People think great problem solvers solve problems immediately. False!
Problem-solvers study problems. Understanding the problem makes solving it easy.
When you see a grandma struggling to cross the road, you want to grab her elbow and pull her over. However, a good problem solver would ask grandma what she wants. So:
Problem solver: Excuse me, ma’am? Do you wish to get over the road? Grandma: Yes indeed, young man! Thanks for asking. Problem solver: What do you want to do on the other side? Grandma: I want to buy a bouquet of flowers for my dear husband. He loves flowers! I wish the shop wasn’t across this busy road… Problem solver: Which flowers does your husband like best? Grandma: He loves red dahlia. I usually buy about 20 of them. They look so pretty in his vase at the window! Problem solver: I can get those dahlia for you quickly. Go sit on the bench over here while you’re waiting; I’ll be back in five minutes. Grandma: You would do that for me? What a generous young man you are!
A mediocre problem solver would have helped the grandma cross the road, but he might have forgotten that she needs to cross again. She must watch out for cars and protect her flowers on the way back.
A good problem solver realizes that grandma's husband wants 20 red dahlias and completes the task.
4- Rapid and intense brainstorming
Understanding a problem makes solutions easy. However, you may not have all the information needed to solve the problem.
Additionally, retrieving crucial information can be difficult.
You could start a blog. You don't know your readers' interests. You can't ask readers because you don't know who they are.
Brainstorming works here. Set a stopwatch (most smartphones have one) to ring after five minutes. In the remaining time, write down as many topics as possible.
No answer is wrong. Note everything.
Sort these topics later. Programming or data science? What might readers scroll past—are these your socks this morning?
Rank your ideas intuitively and logically. Write Medium stories using the top 35 ideas.
5 - Google it.
Doctor Google may answer this seemingly insignificant question. If you understand your problem, try googling or binging.
Someone has probably had your problem before. The problem-solver may have posted their solution online.
Use others' experiences. If you're social, ask a friend or coworker for help.
6 - Consider it later
Rest your brain.
Reread. Your brain needs rest to function.
Hustle culture encourages working 24/7. It doesn't take a neuroscientist to see that this is mental torture.
Leave an unsolvable problem. Visit friends, take a hot shower, or do whatever you enjoy outside of problem-solving.
Nap.
I get my best ideas in the morning after working on a problem. I couldn't have had these ideas last night.
Sleeping subconsciously. Leave it alone and you may be surprised by the genius it produces.
7 - Learn to live with frustration
There are problems that you’ll never solve.
Mathematicians are world-class problem-solvers. The brightest minds in history have failed to solve many mathematical problems.
A Gordian knot problem can frustrate you. You're smart!
Frustration-haters don't solve problems well. They choose simple problems to avoid frustration.
No. Great problem solvers want to solve a problem but know when to give up.
Frustration initially hurts. You adapt.
Famous last words
If you read this article, you probably solve problems. We've covered many ways to improve, so here's a summary:
Test your presumptions. Is the issue the same for everyone else when you see one? Or are your prejudices and self-judgments misguiding you?
Recognize the issue completely. On the surface, a problem may seem straightforward, but what's really going on? Try to see what the current situation might be building up to by thinking two steps ahead of the current situation.
Request more information. You are no longer a high school student. A two-sentence problem statement is not sufficient to provide a solution. Ask away if you need more details!
Think quickly and thoroughly. In a constrained amount of time, try to write down all your thoughts. All concepts are worthwhile! Later, you can order them.
Google it. There is a purpose for the internet. Use it.
Consider it later at night. A rested mind is more creative. It might seem counterintuitive to leave a problem unresolved. But while you're sleeping, your subconscious will handle the laborious tasks.
Accept annoyance as a normal part of life. Don't give up if you're feeling frustrated. It's a step in the procedure. It's also perfectly acceptable to give up on a problem because there are other, more pressing issues that need to be addressed.
You might feel stupid sometimes, but that just shows that you’re human. You care about the world and you want to make it better.
At the end of the day, that’s all there is to problem solving — making the world a little bit better.
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