Posts Tagged ‘currency’

25
Jan

The 7 Network Effects of Bitcoin

by adminadam in articles

Trace Mayer, J.D., a long-time Bitcoin Guru and Investor in Bitcoin companies such as Armory and Kraken, explains the network effects that will lead to Bitcoin’s continued success.

From his talk hosted by CRYPSA at LaGuardia Community College – June 29, 2015.
Listen to the audio: http://www.bitcoin.kn/2015/06/crypsa-event-with-trace-mayer/

The 7 network effects of Bitcoin are as follows:

  1. Speculation — As a novel, cryptographically-backed asset class with the potential for appreciation and high volatility, Bitcoin is perfect for speculators with a high tolerance for risk.
  2. Merchant Adoption — Merchants will increasingly accept Bitcoin because they can increase their profit margins by avoiding credit card fees and chargebacks.
  3. Consumer Adoption — Consumers can use Bitcoin to save money at certain vendors. For example, getting a 20% discount on Amazon by spending Bitcoin through Purse. Additionally, consumers can buy things with Bitcoin that they cannot buy (easily) in any other way. Consider: An American can buy Persian rugs or Cuban cigars online despite trade embargoes. Bitcoin increases the efficiency of the economy, particularly in niche areas such as these.
  4. Security — Merchant, consumer, and speculator adoption lead to a higher price and thus incentivize more miners to participate and secure the system. The decentralized, immutable transaction ledger also serves as a form of Triple Entry Bookkeeping, wherein Debits plus Credits plus the Network Confirmations of transactions increase trust and accountability across the system.
  5. Developer Mindshare — Bitcoin is a “dumb”, predictable network with simple rules and a publicly-auditable codebase. It is fertile ground for the development of complicated algorithms, machine-to-machine payment protocols, smart contracts, and other tools. Its decentralized nature allows for innovation without permission. Altcoins (such as Litecoin and Ethereum) pose little threat as Bitcoin is already dominant as a store of value and as a medium of exchange in the cryptocurrency space. If you harbor doubts about the importance of this currency network effect — or worry about altcoins overtaking Bitcoin in some other way — I would point you to Daniel Krawisz’ insightful and though-provoking article on the subject: “The Coming Demise of Altcoins“. Ultimately, developers will continue to flock to Bitcoin.
  6. Financialization — Bitcoin will eat up progressively more of the market share of legacy banking institutions in areas such as remittances, micropayments, peer-to-peer lending, and the exchange of stocks and securities. This process has already begun (consider NASDAQ’s support of Open Assets/Colored Coins for the transfer of securities, NYSE’s investment in Coinbase, etc.). Old money risks dying out lest it embrace new protocols such as Bitcoin.
  7. Adoption as a World Reserve Currency — Eventually all transactions will be settled on the blockchain, including house titles, stock purchases, car titles, and other monetary instruments and currencies. Network effects one through six culminate in this final network effect. Any newcomer in the realm of cryptocurrency — or traditional currency, for that matter — would need to beat Bitcoin in all seven of these areas. This is unlikely considering the pace of development in Bitcoin Core, the level of investment in Bitcoin companies around the world, the growth in Bitcoin’s user base, and on and on… Further price increases will only accelerate the process. Finally, a speculative attack could dramatically boost the value of Bitcoin almost overnight.

Bitcoin is a strong currency: it thrives on the internet; it frees its users from 3rd parties; it saves merchants money; it is deflationary; its code can be audited by all; its developers work tirelessly to improve upon it; the list goes on. The above-listed network effects can only serve to strengthen it. Competitors beware.


READ THIS NEXT: Speculative Attack, by Pierre Rochard

An excerpt from the introduction of “Speculative Attack”:

Bitcoin will not be eagerly adopted by the mainstream, it will be forced upon them. Forced, as in “compelled by economic reality”. People will be forced to pay with bitcoins, not because of ‘the technology’, but because no one will accept their worthless fiat for payments. Contrary to popular belief, good money drives out bad. This “driving out” has started as a small fiat bleed. It will rapidly escalate into Class IV hemorrhaging due to speculative attacks on weak fiat currencies. The end result will be hyperbitcoinization, i.e. “your money is no good here”.

22
Jan

Euro Deemed a Failure

by adminadam in videos

“The €uro is a Failure”

Twitter: @AustrianMarkets
YouTube: Austrian Markets

  • ECB to continue quantitative easing and maintain negative-interest rate policy through March, 2017.
  • Stock exchanges primarily dependent on stimulus and tax-payer subsidies.
  • ECB pronounce ‘no limit to the stimulus’.
  • Maintenance of ‘Price Stability’ — Doublespeak for “guaranteed annual consumer price increase of 2%” — the driving force behind negative interest rate and quantitative easing programs.
  • More state spending is advocated to solve problems created by state spending.
  • West-German tax-payers prop up insolvent PIIGS (Portugal, Ireland, Italy, Greece, and Spain), unsustainable.
  • German Chancellor Angela Merkel forces demographic and financial burdens on German people.
  • No plan to restructure or reduce debt; proposed “Austerity”measures merely decreases in increased spending; faux Austerity Theatre.
  • Europeans uncomfortable with the notion of immediate, short-term economic pain from True Austerity; convinced by Academics and Bureaucrats that increased spending will magically solve fiscal problems.
  • Toxic Greek debt a threat to EU Area.
  • Weaker economies leaving EU, returning to own currencies, creating free-trade zones à la HK, seen as only viable path to regain solvency.
  • Minor spending decreases plus large tax increases enables irresponsible countries and bureaucrats at the expense of productive countries and tax-payers.
  • Euro deemed a failure.

 

9
Dec

Current Bitcoin Price & Yearly Price History

by adminadam in home

Weekly Average Bitcoin Prices from Mt. Gox until its collapse in February 2014:


Weekly Average Bitcoin Prices from BitStamp since it opened in September 2011:

Average Monthly Price in October since 2010:

YEAR PRICE EXCHANGE
2010 $0.11 Mt. Gox
2011 $3.53 Avg. Mt. Gox & BitStamp
2012 $11.56 Avg. Mt. Gox & BitStamp
2013 $163 BitStamp
2014 $358 BitStamp
2015 $268 BitStamp
2016 $639 BitStamp
15
Feb

Bitcoin, Extropy, and Market Anarchy

by adminadam in articles, videos

Exponentially expanding hashing power. Fiat money pouring into Bitcoin startups and mining equipment. Digital economies flourishing despite massive QE and the artificial stabilization of the USD and other currencies. And Bitcoin’s in the middle of a period of relatively high inflation itself. And yet… it refuses to die. Bitcoin’s value may be low in terms of dollars and euros and yuan, but what it represents should not be underestimated:

  • The sudden, technological leapfrogging of antiquated payment systems
  • Unchecked divergence from centralized financial control structures
  • A violent tear-away from Keynesian inertia (let them print themselves into bankruptcy, I say)
  • A blossoming of new freedoms, empowering the Average Joe to hold his own money, secure his own stores of value, and hedge independently against insane-and-intentional inflation

Despite the price, all other metrics point to steady growth in adoption: New developers coming on all around the Bitcoin software ecosystem, new users getting wallets, new subscribers to reddit’s r/Bitcoin, and so on… Just since November 2013, we’ve seen 8,000% greater mining hashing power!

bitindexconstituents

See Dan Morehead’s recent talk for more on the adoption metrics and how Pantera Capital puts the BitIndex together.

With all this growth and the increasingly positive attention that Bitcoin is getting, this stark contrast is becoming ever more tangible to people: On the one hand we have our antiquated financial world of centralized, opaque, fiat-based, runaway economies — and on the other — the limitless, novel, and programmable force of innovation that is Bitcoin. Its nature is decentralized, transparent, deflationary, and predictable. Its economics are sane. Its economics are modern (in that they are secure, convenient, fast, and unrestricted).

The free market, an open-source ecosystem of ideas, market anarchy, has produced this technological marvel.

Truly stunning is the notion that through this network — for the first time — not only will you and I be able to converse economically over great distances (and even from space) relatively instantaneously, but also will the devices we use be able to exchange malleable, programmable, and unforgeble assets between each other according to operational limits and supply-and-demand (i.e., machine-to-machine purchases).

The internet of things could grow out of this: one asset class, one identifier per device; one separate asset class and token for permissible actions and permissions for each device interaction. A unit as small as a satoshi serves as a class or identifier in the blockchain; ethereum, bitcoin sidechains, or some other “Bitcoin 2.0” layer encodes and manages and tracks it. When no longer needed, the sidechain is released, its original satoshi returned to the main pool of bitcoins.

moneyprotocol

Mutual exchange of assets, of value, facilitated by open-source, libertarian-inspired software. Opening before us is an agora, a counter-economic, apolitical, parallel construction, forged in the minds of early 90’s e-cash theorists. The Bitcoin Agora is simply the amalgamation of sovereign actors making independent transfers of wealth without permission. Voting to approve of taxpayer money reallocation is not a prerequisite (or a priority) for the agorists of Bitcoin. They will buy and claim and transfer property with any given and legitimately-earned coin they wish — for as long as they want — despite the legal and regulatory mandates of old-world nation states. The extropy, this synergy between open-source software and distributed, digital, programmable money is unprecedented. And we have only just begun to unlock its full potential.

Change is in the air.

16
Oct

Bitcoin: Beyond Mere Money

by adminadam in videos

Bitcoin has many other uses besides just as a currency…

It is a transparent and efficient payment network:

  • Nearly fraud-proof; miners compete to verify transactions.
  • Consensus-based peer-to-peer network prevents the double-spending of coins.
  • All nodes/miners in the network maintain a copy of the open transaction ledger, the Blockchain.

Bitcoins, Millibits, and Satoshi’s are programmable:

  • Coins can used as tokens for any number of physical goods: one barrel of oil, one vote, a share in a company, one kilowatt-hour, the sky is the limit.
  • Coins can be used to record important information for eternity: digital copies of birth/death/marriage certificates, artistic licenses, proof of the existence of almost any document imaginable.

Payments and transactions can be automated, allowing for human-machine and machine-machine interactions:

  • Drones can do automatic identification of users/clients through the Blockchain to deliver packages.
  • Vending machines can do their own inventory tracking and ordering, and even make payments to suppliers.
  • Companies and organizations can programmatically distribute budgets to different departments according to established contracts or constitutions.
23
Apr

Noteworthy Bitcoin News: Spring, 2014

by adminadam in home

A few weeks before tax day, the IRS gave guidance saying (that is, they declared that) Bitcoin is, was, and always has been a commodity in regards to tax burden. Capital gains tax applies each time a transaction is made with this currency commodity (shall we call it a commurrency?), even if it is just a cup of coffee being purchased. If the price of Bitcoin was higher when you bought the Bitcoin than when you made the purchase, then you are liable to pay capital gains tax on that purchase. This is great for institutional investors, not so great for people in the U.S. who are using it as a currency. Personally, I wonder about the IRS’s capacity to enforce and act on this with the growing adoption of Bitcoin. Also, since the ruling is retroactive, all purchases/transactions made with Bitcoin since the beginning of time are fair game. So what if you don’t or can’t know the input and output values of all your coins (including other virtual currencies like Litecoin, Dogecoin, etc.) since 2009, when Bitcoin was released?

There is a clause apparently that says that if you can’t provide this information for some reason, or if you don’t have the records, then you *may* be forgiven of some of your burden for some of your gains if you appeal upon being audited for a given amount. Losses do deduct from total gains, just like you would expect, but I guess I just wonder how the IRS expects to keep track of Bitcoin transactions and audit people going forward. I know a number of people who bought their first Bitcoins through coinbase using a bank transfer. Like most people in this boat, you then transfer those coins to a safer-than-coinbase storage medium, whether that’s a paper wallet or the Bitcoin-Qt Standard Software Wallet which you run on your home computer (hopefully safely encrypted and backed-up — see my guide on doing this here). Each transaction made in order to get these coins under your control in this scenario is a transaction, but note: you haven’t purchased anything, or traded anything of value for your Bitcoins. Ultimately, essentially, all Bitcoin transactions whether purchases or personal fund-movements appear identical to the Bitcoin network. Were there some greater level of willing transparency on this issue from the IRS, we could know if they plan to, say, host their own bitcoin node, download the blockchain themselves just to make sure they understand it, or merely check transfers using an online blockchain (the public ledger), like blockchain.info, for example.

The final obstacle in collecting (and reporting) revenues from cryptocurrencies stems from high-frequency trading — say you bought your Bitcoin on a U.S. exchange, then transferred it to BTC-e in Bulgaria (where it’s counted as a virtual currency, incidentally…), then engaged in a bout of high-frequency Bitcoin/Litecoin/Dogecoin/Peercoin trading. The IRS doesn’t likely have legitimate access to these trades, nor may you have even a decently-complete record of what’s transpired; all you know now is you have more fill-in-the-blank-coins than when you started.

Another complication arises with the arrival (soon: May Day) of dark wallets and (next-gen) seamless coin mixing services. Dark Wallet by Defense Distributed is one such development which will be used to strip coins of their identifying information (i.e. where they came from first/middle/last). Anonymity in cryptocurrency will be possible (more possible than it is now). Add to this the facilitation of anonymous purchases through dark markets and distributed markets, such as BitWasp and DarkMarket (this also from Defense Distributed). Where the Silk Road was shut down, Silk Road 2.0, and others now exist. Add to this these 2 more new projects and project outwards: we are seeing exponential development and evolution in this economic space. Many more black, grey, and unrestricted markets will bloom — expect to hear more about this soon!

In other news, China is still wishy-washy about Bitcoin, but hasn’t outright banned it, and since some time has passed since the last definitely-going-to-be-banned rumors spread, the price has come back up a bit to around $500, from a low of approximately $350. Ultimately, the failure of Mt. Gox brought the value down by half in the early part of 2014, simply because so many people lost their money, and also because of all the FUD (fear, uncertainty, and doubt) spread about by the media; read: “Mt. Gox failed; Bitcoin’s dead!” Such proclamations will likely continue to be heard for a few years to come for a variety of reasons, but whatever happens in one country or region need not happen in another (I’m talking about legislation, FYI…). Finally, I will say I believe Bitcoin’s value will continue to rise as the technology is made more accessible through simple, non-smart phones, as more people learn how to send Bitcoins through SMS, and as more charities and families are able to receive donations and remittances throughout the world with near-0 friction, essentially for free at that.

Lastly, in the news: Sidechain innovation. I’m excited about this for Bitcoin and its future. Basically, instead of creating new alt-coins in the future, it may be possible to update the Bitcoin core to more easily extend Bitcoin into semi-temporary Sidechain-coins with different, varying properties based on people’s needs. Say you need a coin that transacts (or is confirmed) quicker — you simply create a sidechain, put some Bitcoin in escrow to initiate this, and create Side-Quick-Bit-Coins or whatever you wanna call them. Then when or if the need is gone, return the Bitcoins in escrow to the normal Bitcoin network. I’m fuzzy on the details, but stoked about the implications, particularly for Bitcoin’s ability to compete with Ethereum and other Bitcoin 2.0 protocols like Mastercoin and Colored Coins. The bottom line is new functionality and greater scalability with this.

BONUS DARK WALLET PROMOTIONAL VIDEO
23
Nov

Extropy +19: Canadian Polymer Bank Notes

by adminadam in home, videos

Even in this Apple-esque, highly-dramatic presentation of Canada’s new anti-counterfeiting technology can we see the unfolding of the evolution of technology, what I like to call extropy: It is seen in the accumulation of techniques and tools used to create novel products and services, to build something new and improved.

Even in these plastic bills can we see the increasing complexity of technological life, greater levels of complexity and information density. How many different safeguards do these new bills include? How many times is the number 100 written, in how many different fonts and directions?

I am not one to say what the future holds, but could future versions be made of carbon nanotubes, indestructible, spliced with some wild combination of maple-leaf DNA to lend it a deeper, more natural red color, or maybe a unique new leafy texture? Who knows? The specifics are yet to be determined, but the point is that the driving force for change and innovation is there, now built into our society. As an example, compare this new bill with Canada’s first few iterations to taste the unrelenting push of progress, the inertia of extropy (after the jump)…

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