Tag Archives: Blockchain

Bytecoin Speculation

 

bytecoin_logo_b_white_circle_large - Copy

Why is it that the Bytecoin Team seems aloof, almost disinterested in their own potential success? It does not appear that they are abandoning ship, based upon recent Github activities. Someone is updating.

And someone is adding news and blogs to the official Bytecoin.org website after many months.

Still, why the relative quiet, other than within their own forum?  That was, until its recent disappearance and reappearance.

After filling up with advertisements, and after yours truly advised them of such via their website, the Bytecoin Forum seemed to have taken a hiatus. Recently sometime around June 7, 2017, it was back up.

Now I understand the need for anonymity in today’s world. But such anonymity is a double-edged sword. Having cryptocurrency developers retain their privacy certainly keeps them safe from the overzealous government-banksters. (And yes, I’m sure there are good bankers out there — working in a bad environment.)

On the other hand, the Bytecoin Team must know that we the users get a bit antsy when we cannot “read the news” more often. Even if the news is slanted. Why? Because we can read between the lines.

In fact, Bytecoin.org, something seems amiss now that you are talking again. Has your “voice” changed?

Recently — May 17, 2017 — Bytecoin.org added a new blog entry. As usual, their blog was professional and polished or was it? Actually two entries were made. The blog and on May 19, 2017, a news piece. Both were clear, but rather brief. I’ll focus on the May 17th blog entry for now. It has a few oddities, if you read it closely.

 

First:

 

“Cryptocurrency market has been developing drastically, bringing more and more innovations to explore.”

 

That’s the first sentence of the blog. Who starts a sentence like that? Shouldn’t there be a “The” to start that sentence? Okay, no biggie. Let’s move on.

The blog was titled “Untraceable Tokens.” It implied that the cryptocurrency space has been innovating. That there is more to explore. Certainly this is true. Since Bytecoin came along, Monero was born and Bitcoin, as always is experiencing growing pains. And a thousand other cryptocurrencies have been born and have since faded in the no-trade zone.

 

A second oddity in the blog:

 

“…top ten token market capitalization value overgrowing $1.4 billion.”

 

Overgrowing? How about “exceeding” $1.4 billion. Again, this could be a “country” thing.

 

A third issue, that may just be me…

 

“…we promise to give you full detail in the upcoming posts.”

 

Full “detail?” Do they mean full “details?”

Say that with a Russian accent: “Comrade, sit in chair, give full detail in upcoming posts. Bytecoin is not Russian, this you must tell world. And KGB not overgrowing. It dead.”

 

A fourth issue:

 

“Further on we will keep you informed about the development process to make sure you do not miss the opportunity to be in the first line to emit your own untraceable Bytecoin based token.”

 

Is it just me again? “Further on?” Do they mean “from now on?”

And how about “the first in line” part? Do they mean “to be the first in line?”

I hear Russian accent, Comrade. No?

 

In any event, they state that Bytecoin has:

 

“…broken ground on developing a wallet-integrated solution that would allow anyone to create their own Bytecoin based token”

 

I mean, don’t we have enough tokens?

 

Or is this a bit of good news. An untraceable token to represent “assets” on the Bytecoin blockchain. Like Ethereum, in some respects — but more private and secure I gather. The fact that this token system will be wallet integrated is also curious.

Integrated into an easy-to-use wallet, like the one we have now or like the Ethereum system? With Ethereum there is a learning curve. I hope that Bytecoin’s innovations will be more user-friendly, however. Not a bloated giant.

The blog entry also teases us with another upcoming innovation — a new “feature.” We can only speculate here. It could be anything.

 

The last bit of information in the blog entry is the notification that we will be provided more information at some future date, so we can be the first to try their new token based system. Again, it is worded oddly to me.

 

Most of us may not need tokens, if we already have Bytecoin. Some, however, could use a token for creating in-house cryptocurrencies that are more secure and private than Bitcoin. The start-up costs might be minimal, if the backbone (Bytecoin) is already there. Also, more users would likely strengthen the backbone. As this occurs — if it occurs — Bytecoin would become more valuable. It is also possible that the tokens themselves could become more valuable than Bytecoin itself.

On the other “dirty” hand, adding tokens to the system might strain it, if the Bytecoin devs are attempting to create mammoth system. I hope they choose to make things modular, in this sense. So any bad “parts” can be replaced or rejected by users voluntarily.

 

We are teased further with this…

 

“Commencing countdown till the global ICO market revolution.”

 

Personally, I’d like to see a clock ticking down, but I get the picture.

 

Of course, ICO means “Initial Coin Offering,” but what coin or coins? Our own tokens we generate on top of the Bytecoin blockchain? Or their new tokens?

And what market? Token market(s)? Like all those tokens being added on top of the Ethereum Blockchain? Are these the “markets?” Are they talking about another market altogether?

When you think about that for a minute you have to wonder what type of organization would use a private, secure and untraceable token. Not banks. They must comply with regulations. Not investment houses, for the same reasons.

Individuals could use tokens they create, however. And yes, the bad guys too.

Suppose you live in China, for example. You’ve been trying to get your money out of the country for years, but can’t. All of your compatriots don’t trust most cryptocurrencies. They are traceable — much too public. Many of your friends know about Bytecoin, but they trust you, not some unknown system that has been ruthlessly attacked by bloggers and hacker alike. You then decide to create a token on the Bytecoin Blockchain that represents an asset. It could be gold, silver or some other property.

What is the end result of a token that cannot be traced to a sender or receiver? Monetary freedom? Gox in a box?

Don’t forget the flip-side of Bytecoin, however. Nobody is watching the fort. If your newly emitted tokens evaporate into thin air, oh well. At least with the public coins — like Ripple, Stellar Lumens or even Ethereum, you can contact a live human.

With Bytecoin? You can look at nice Bytecoin Team Memes. Hello “PACIFIC_SKYLINE,” do you really exist? How’s the water? Answer? Silence.

I do detect a note of odd grammar in this latest blog. It is as if the poster does not quite have a complete grasp of the language or is writing in a type of shortcut method. It could also be that the writer is not American — perhaps English is a second language. (I am American, but at least my grammar errors are obvious.)

And I am not an English teacher, but I argue with them regularly. They often tell me about my spelling errors on these blogs. But spelling is one thing and grammar is another. We can “hear” the subtle differences.

More ominously, maybe Bytecoin has been bought-out and the new owners are attempting to keep this fact quiet, Da?

Finally, maybe all the original “Team” is present. If that is so, please clean up your latest blog.

And talk to us.

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Is Bytecoin Making a Comeback?

Bytecoin - Copy

Over a year of relative silence and now Bytecoin is making a comeback?

Many cryptocurrency enthusiasts noticed on or about May 17, 2017, when the following “blog” was posted on the Bytecoin website, the value of said currency jumped. This may have been a coincidence, however, since a lot of other cryptocurrencies also surged and then unceremoniously lost over half their gains.

Here was a recent headliner:

Untraceable Tokens

Cryptocurrency market has been developing drastically, bringing more and more innovations to explore. The Bytecoin team understands the importance of keeping a finger on…

The point was: “activity.” We finally had some. But why the delay?

Many of us had written-off Bytecoin when they stopped minding their forum. It became bloated with advertisements and there did not appear to be much activity — or easy to find information.

Others of us have read the profanity laced debates on the other forums about the alleged deeds of the bad Bytecoin developers. Was it true?

Here is the link:

 Blowing the lid off the CryptoNote/Bytecoin scam (with the exception of Monero)

Bytecoin allegedly forged the dates on their whitepaper(s) in order to make it appear as if they had completed a fair release. Meaning, to be fair, you must work hard and allow every “miner” access to your product at the same moment. (Not fair to the developers.)

Bytecoin creators may not have fairly given away their invention and instead, allegedly mined over 80% of their own coins before letting anyone in on their plans. In any event, the coin languished. Relegated to the heap of junk coins, but it never quite died. Just hung out. Waited.

Months went by. Then years of anemic trade. Few if any improvements came. Bytecoin’s Github account was boring. Then lately, after bit of a screw-up — more activity. Somehow a bit of mining software allowed someone to mine extra Bytecoins. This was fixed (allegedly), but still, Bytecoin was accused of not taking action quickly enough.

Actually, the accusations flew.

Monero supporters hinted the Bytecoin developers intentionally mined extra coins using a flaw in their system. Bytecoin supporters then retaliated. Monero supporters knew of the flaw, they said, and took advantage of it. They created more Bytecoins and used that as leverage to expose Bytecoin’s flaws. Why? To sew distrust. Make Bytecoin look bad. Turn the community against them. All of the above.

Once the dust settled, it was back to the business of smear. Monero, with all of its improvements of the CrypotNote or CryptoNight Protocol (Algorithm), against Bytecoin — which dared to rear its scammy head once again. It was the original CryptoNote against the (allegedly) new and improved CryptoNote.

The Bytecoin pre-mine allegations are still there as well.

These days, ICO’s (Initial Coin Offerings) and pre-mines are commonplace. The results are mixed. Some developers fly the coop with the cash and some actually continue to tweak their coins. Some monitor their Github accounts making changes to at least let us know that they are still around.

Monero was not pre-mined, according to their documentation. They were a community driven program, forked originally from Bytecoin and after a some early growth pains  (community internal disagreements) a certain sect ended up with the keys to the code. Today, Monero enjoys a relatively stable existence, enjoying recent valuations, even if they do not have the best “wallets” or mascots.

If Bytecoin did “pre-mine,” within the last week they may have covered their initial expenses. In other words, the pre-mine has helped to support the development of Bytecoin. Unless, like the Monero supporters claim, Bytecoin will simply dump their coins and leave everyone hanging. So far, they appear to sticking to their guns.

Bytecoin has experienced a massive resurgence on one exchange especially: Poloniex. But the trading, other than having lined the pockets of Poloniex, since they charge for the service of trading, is missing something. And that is the ability to deposit or withdraw any Bytecoins. Currently, you can only trade Bytecoins with other cryptocurrencies on Poloniex. All I have been able to verify so far is that Poloniex is performing  “maintencance.”

If Poloniex finally re-enables Bytecoin it could be seen as a vote of confidence. Perhaps we should all realize that Poloniex just wants to earn a profit, however. Keeping the customer happy and the money flowing is a no-brainer. If they think Bytecoin is too much of a distraction they could delist it.

One hopes that Poloniex is watching Bytecoin closely. Certainly they can see who owns the most of Bytecoins on their exchange. If a large player has made some attempt to dump or trade enormous amounts of Bytecoin, they should know about it.

Where will Bytecoin go from here? Your guess is a good as mine. We have a nice, easy to use software wallet.  One which has always worked for me — and apparently renewed interest in the coin itself.

Volatility is an issue now. Bytecoin, if the past is any teacher, may be cutting its teeth on the “whales” right about now. Big ups and downs. Money is certainly changing hands.

The question is, are the users getting pummeled at the expense of the anonymous developers of Bytecoin or are unrelated parties just having fun with all the investors trying to pile on?

As always, time will tell. If privacy and security gains traction, Bytecoin could be sitting pretty.

 

(Note: This author is not associated with Bytecoin.org or any of its developers.)

Bitcoin, Litecoin, Monero, DASH or Aeon. | hubpages

The battle for supremacy. But be wary of the Pumps of Paradise. (Crypto-Commentary)

Source: Bitcoin, Litecoin, Monero, DASH or Aeon. | hubpages

Bitcoin: Intrinsically Speaking

To be Intrinsic or not to be intrinsic. Is that the question?

No. That is “noise.” It is another attempted “nail” from our friendly coffin maker. The one who wants to copy the “block-chain” and deny your private use thereof. The reference by Ayn Rand, perhaps one of the greatest thinkers of our time, is rather concise. It deserves to be explored, even in the face of her other definitions of money.

Why? Because it helps us to understand that cryptocurrency can function as money.


Why is it important, in Fintech, to understand “functional money”?

Because many economists imply or otherwise provide tortured explanations about how cryptocurrencies have or retain an intrinsic value.

Actually, they don’t have such a value. They cannot. But this is not a problem.

Cryptocurrencies do not require an intrinsic value. They are not gold in the rough.

Should one attempt to prove such a value, one often winds up in a trap of reasoning, logical, but unwinnable arguments or the proverbial blind alley. Frustrated. But the faithful preach the gospel. Bitcoin has intrinsic value, they say.

On the other side of that coin, the intrinsic value thinkers advise that there is only one true money—or maybe several. Gold, silver and perhaps copper.

Gold can be an “unconsumed” good. A hard currency. It can be jewelry and so on. Therefore, it is the only money. But we all know that other items can function as money.

Gold is not “backed” by anything. It is simply a sought-after material for its rarity, properties and uses. The old story that gold has been money for 5000 years rings true.


What does this mean as it relates to all cryptocurrencies? Do cryptocurrencies need to be artificially rare?

No. Their number can be infinite. Again, they have no intrinsic value.


 Would cryptocurrencies devalue, if the numbers kept rising?

Not if they were “backed” by “unconsumed goods.” This would not be unlike you having an unlimited number of blank checks. So long as the one you write is “backed,” the check is good.

Blank checks in your desk at home have no face value. Excessive numbers of cryptocurrency “blank checks” are unimportant.

What is important is that the cryptocurrency, like a check, is backed by an “unconsumed good” ; that at least one or more atomic cryptocurrency unit holds title to the “unconsumed good.”

Does this mean that a cryptocurrency cannot hold the title of “functional money?”

Not necessarily. It simply means that any cryptocurrency, is not an “unconsumed good” — in the physical sense. Given this definition, cryptocurrency, with few exceptions, is not functional money, yet. But neither are dollar bills or euros. Dollars, for example, are backed by nothing.

Trust value is transitory and can dissolve quickly, even if governments make their fiat currencies official money during economic disasters, such as what is occurring in Venezuela, where the money remains dysfunctional. It will act like what it is: paper — but be worth even less.

India is another example. Making higher fiat denominations unofficial in a thinly veiled attempt to confiscate the wealth from all of its citizens.


Are cryptocurrencies “goods” in any sense of the term?

Again, does it matter?

But they have no substance.

Litecoin, as an example, is for all intents and purposes, software. Yes, the codes that represent Litecoin can be stored on paper, and paper is a commodity, but the ledger or balances are transmitted electronically.


If a cryptocurrency is not a good, then why are they considered intangible assets or goods?

The legal codes describing digitized music, by way of similarity, as an intangible good or asset, do not lend software music any real substance. These types of laws allegedly justify regulations and taxation. These laws should instead seek to clarify copyright.

But the test here is the consumed part. Let us get back to that.


Can any cryptocurrency, be consumed in the same sense that gold is consumed?

If we “use up” an item, we consume it. But, within economics, if we buy an item, we are also consuming. So yes, you can consume a cryptocurrency, in a sense.


Cryptocurrency as a service?

Some economists will differentiate between goods and services. Digitized music, for example, has no substance and is therefore classified as part service and part good.

Cryptocurrencies do not need to be goods or services. They merely need to function as a medium of exchange. And they do, to a point.


So why did Ayn Rand not simply advise that money had to actually be an “unconsumed good?”

As civilization advances, we no longer need to carry our commodities along with us. This entails risk. Gold coins in a purse attract unwanted attention. So we stored our unconsumed goods at home or in a bank, but again, there are risks involved. Burglary and confiscation, to name a few.

In any event, we used checks (functional money) to transfer title of our goods back and forth. Cryptocurrency can function as money, if it represents, holds title to or is backed by an unconsumed good. Preferably a good like gold, with a stable value.


What is the real issue?

The debate, then, is not the lack of intrinsic value of a cryptocurrency. The debate is how to accomplish and establish, voluntarily — the “backing.”


Why can’t you simply divide the number of atomic units into the total investment amount to arrive at the value of any particular cryptocurrency?

Like dollars or yen, the temporary, constantly fluctuating, value of any currency or good is also a function of supply and demand. In the cryptocurrency sphere, it is rather simple to calculate current base value using this method, and then trade when one sees that the formula indicates undervaluation or just the opposite.

Again, unlike real goods, such as apples, Bitcoin can change in “monetary” value very quickly.

In any case, the idea that monetary inflows lend cryptocurrencies intrinsic value is incorrect for a variety of reasons. These include the inherent price instabilities and potential lack of demand when the next best altcoin hits the market.


Can a cryptocurrency “back” itself?

Cryptocurrencies have many attributes, but in the scheme of ‘money’ they are quite new. A young project on the financial stage.

Untraceable or private cryptocurrencies may be best suited for cash-like use, so long as they are as secure as possible. Attributes, such as these, should increase the perceived value of the currency for now. But perception is not the “intrinsic.”

Bitcoin, on the other hand, is traceable and could decrease in value for this reason — even if it is “tweaked” to “repair” these shortcomings.

In any event, to state, at this stage of the game, that a cryptocurrency can somehow obtain an intrinsic value and all the necessary attributes of money, is unknown.


Which Cryptocurrency will Succeed?

Just which cryptocurrency is on the “Bleeding Edge?” AEON, Monero, Zcash? Will it be those that are currently backed by gold and silver? Will Bitcoin keep its position?

For all the research into Fintech, the ongoing debates about value, the idea of voluntary use and privacy, the search for security through anonymity and trust, we may be witnessing the next best cryptocurrencies to hit the markets since 2009.

But always remember: do your homework. Fintech is a work in progress. You may need to leap to the next best cryptocurrency as you watch this whole thing flower.

Perhaps it’s time to think outside of the box and beyond the blockchain. Perhaps, and until we live in a world were cryptocurrencies aren’t so heavily regulated as to make it nearly impossible to give them the title of “functional money,” we need, in addition to the current technology, something more.

But you have to ask yourself, even if Bitcoin is transparent, does that not make it stronger?

 

Thanks for reading.

 

Photo:Source

Trust-Mining

 

To Pre-Mine or not to Pre-Mine? That is the question.

Is it really?

No. It’s “Trust Mining.”

Pre-mining: To create or mine cryptocurrency in advance of public release.

One of the arguments against any cryptocurrency launch is the idea of a pre-mine. There has been a tremendous amount of discussion about the topic. But these discussions are scattered all over the net. This is an effort to place some of them in one place.

First, before we get into the weeds, we must answer the basic question…

Does a Creator of a Cryptocurrency have a Right to Pre-mine?

This is the first question many seem to overlook. They list numerous reasons against the practice, but gloss over the fact that the decision to pre-mine is the right of the creator of the cryptocurrency. Whether a software application is given away or sold, the creator — the developer — has the option to pre-mine or not to pre-mine.

Whether you agree with that statement or not is immaterial. Facts are stubborn things.

All the calls to make such a thing illegal demonstrates an underlying motive. That motive is to steal another’s idea. If you don’t like the Pre-Mine, change the channel. A developer can do anything he wants with a piece of code, absent making it reach into your bank account or similar.

Remember, cryptocurrencies are “voluntary.” You use them only if you so choose. So stop your whining.

Is it a Good Idea to Pre-Mine?

It depends if your application is open source or not and how it is updated or changed.

Ripple and Stellar are companies and therefore centralized — and Pre-Mined all of their cryptocurrencies. Both have had some reasonable success and have rights to their respective blockchains.

Ripple is integrated with the current financial world, whereas Stellar is attempting to appeal to the masses. Neither has come close to the success of Bitcoin.

Bitcoin was not Pre-Mined, but Satoshi Nakamoto did begin to mine first and then others became interested. This is not the official meaning of a Pre-Mine, however.

If Satoshi had set aside in apparent million “BTC,” before anyone knew what he was doing and then he attempted to release the application to the world, the success of Bitcoin would have been in doubt.

As it was, Satoshi launched a “cooperative” venture and asked anyone who was interested to download and begin mining. And we know the results. Whether Bitcoin will exist long term is another question.

When others began to copy the Bitcoin idea — literally or not — the idea of a Pre-Mine entered the Fintech vocabulary. It has been considered deceptive, if the launch of a cryptocurrency did not advise that a Pre-Mine existed.

If a Pre-Mine was publicized before launch, it was the decision of the people to mine or not.

The “Dump” Risk?

This is perhaps the best argument against Pre-Mining. The fact that at any moment, the creators can flood the market with their own coins — sell at a profit — and essentially crash their own coin. A few days later, they then announce a new coin and the process begins anew.

This scenario appears to diminish with time, however. It’s the early days, where pumps are in hyper mode, when a Pre-Mine Dump would be tempting.

For example, if there was a 10% Pre-Mine that would mean 10% of all the coins ever to be mined are now in someone’s wallet. No big deal right? What a minute. What if only 20% of the total coins have been mined? That would mean the Pre-Mine is currently 50% of the total. If a dump were to occur the ‘coin’ could crash, as the developers cash-in.

Those unlucky enough to be holding their ‘coin’ after a major dump of Pre-Mined coins, are in fact, fleeced. Many such comments litter the net about “Bag Holders” with “dead” coins after a big Pre-Mine dump. AuroraCoin anyone?

But if I Pre-Mine and do a Giveaway, won’t that help?

So far, the answer appears to be “no.”

Closed source coins like Stellar and open source ones like AuroraCoin have tried. Stellar has been trending lower for over a year. Again, their long term success is in doubt.

To give crypto-coins away, as effort mask the fact that you will dump in advance is also a deceptive practice.

Then there are the pure Proof-of-Work Coins. They are or can be 100% Pre-Mined. If you trust the developers fine. Sunny King of Peercoin fame may be onto something, but the old proof is in the pudding, right? Peercoin has been trending lower since the “Great Bitcoin Pump,” but so has Bitcoin.

 If the Developer does other Good Things with the Pre-Mine, won’t that Help?

Maybe.

Stellar uses the Non-Profit angle to assist the uneducated and the alleged, underbanked. If you want to pour your hard earned money down that potential black hole, be my guest. I gave at the office, thanks.

But many other cryptocurrencies use the Pre-Mine for upkeep and updates. The danger here, is that “they” are often in full control of their semi-centralized blockchains. I’m thinking about DASH here. (Not Dashcoin – DSH.)

DASH does have a voting system when proposals are made to change the ‘coin,’ and the system reflects a business-like model. DASH also, allegedly, had a Pre-Mine. And they have been in an uptrend for over six months. Pre-Mining, which DASH developers have explained as a glitch in the early works, has not yet hurt the crypto. But their innovation may have overcome the bad taste of the early coin hoarders. Again, only time will tell if the ‘coin’ has staying power.

What is a Pre-Sale?

Some cryptocurrencies Pre-Mine millions of coins and then sell them off to investors to generate revenues, before the official launch. In other words, the coins are actually released to the public, beforehand. This is not as bad as withholding sale and should not be considered a “pure” Pre-Mine.

But let us not mince words. He who controls a Pre-Mine, even a sale thereof, controls the ‘coin.’ This may be why, among other reasons, that Ethereum now has a partner (okay competitor) called Ethereum Classic. It is also instructive that the original developers of ETH turned their clock backwards to ensure that a funds were not diverted inappropriately, due to a problem with some “code” as it were. If that’s not centralization of monetary power, I don’t know what is. Certainly Janet Yellen noticed.

No Pre-Mine

If you want to have others adopt your private currency, in some meaningful way, then you need cooperation. You need miners if you are going that route. Miners that support your blockchain. Stakeholders in your system. Producers of your coin. Users of your API’s. Investors in the wonderworks. Speculators to drive everyone else mad. And all the rest.

If others feel that you have the investment advantage, your level of cooperation may be diminished. Starting everyone at the same place — at square one — seems to be relatively ‘cooperative.’ It shows that you believe in your product enough to start right alongside everyone else. To get into the fray, for better or worse, with those who you wish to adopt your plan and support your network — your blockchain.

In this sense, the developer is the artist. Everyone is invited to make a copy of his/her/their work and use it. Occasionally, the developers make improvements upon their works. Or they work as a team and use some form of voting system to approve or disapprove changes. There are many variants.

The Pre-Mine with a Side Show

Perhaps a lesser explored reason for Pre-Mining is to show the actual cryptocurrency in operation. The “red herring” idea or “selling the sizzle, not the steak.”

The cryptocurrency enthusiast is curious about all of functions built into the newly designed ‘currency,’ such as faster transaction times, blockchain savings, secret messages, private markets and the like. But when you check the website and the hacker news, you find that there was a huge Pre-Mine. That should be a warning to you — unless you truest the developers.

The Fee-Mine Concept

One way developers avoid Pre-Mining, is to code in a fee based system using the native currency. Each time you send or mine the cryptocurrency the developer receives a small portion of the proceeds, which they can then divvy out among the miners.

Trust Mining

We all know that cryptocurrency has no intrinsic value. It is not necessarily durable. All the aspects of a sound money are certainly not imbedded within. But to come as close as we can to a sound money system might be the ticket.

After all, the dollar is a mere piece of paper. The United States has what many refer to as shadow gold standard. But like a cryptocurrency, if the dollar loses its trust, say when the printing presses shove out “QE4” forever, all bets are off.

Multi-Mining:

In a sense, Ethereum and now Ethereum Classic are attempting to provide an intrinsic-like value to their cryptocurrencies. The do this by having the native “primary” coin function or fuel many other side processes, colored coins, self-executing contracts and applications. The list goes on.

But these “primary” coins only function within their own ecosystems.

In contrast, one of most stable monies and currencies of all time, gold, has uses other than its monetary use and outside of a captive blockchain.

Utility Mining:

Perhaps one of the best ways to establish a cryptocurrency is to allow it more versatility…more utility. A ‘coin” that has more than one use. Like gold has more than one use. A coin that when mined, can be used “outside” of its blockchain for other utilitarian or even decorative purposes. Off blockchain uses that will allow for private transfers as well as public receipts.

Thus far, many seem to focus upon the many blockchain uses. Perhaps it is time to look at another facet. A cryptocurrency that can function off-blockchain or not require a blockchain at all.


Photo Source: By Jericho [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)%5D, via Wikimedia Commons

The Crypto-Magicians

Cryptocurrencies: Freedom Currency


(Updated June 17, 2016)

The outlook for cryptocurrencies? Great. Think private, however. Protect yourself from you know who.

Do you believe that cryptocurrency is money, all by itself? Without a physical backing? Without gold? That Fintech alone creates value?

Currently, you are correct. In a token sort of way.

A few economists actually agree anyway. And they might be right.

With their little red bow ties, wire rimmed glasses, tweed suits and soft handed manners, they are happy to explain.

These new ‘cryptonomic’ or crypto-maniac, if you prefer — economists assert that the old methods – nay they disdain the ancient “gold” backed monies — as just that: the paradigm of the past. Economics of cave people. Move on, they say.

Fed Chairperson Janet Yellen would probably agree. Yellen mines dollars at the Fed. Token currency.

In a ballet of monetary magic, the banks then mine more tokens. Not real money. Keynesian money. Not much different from many a cryptocurrency, except the main part.

Decentralized. That’s the byword of cryptocurrencies. But they are not really all that successful at it.

Now many cryptocurrency developers would agree. They adjust the supply of crypto-tokens with demand, like the Fed. Either at the mining level or “stake” level — the process is a mirror image of top-down National token-politics.

The only difference is that the math — the algorithms — are the dictators in the crypto-world.

And math is not fickle nor does it have agendas. But cryptocurrency developers can be fickle.

In a sense, gold, to the Brethren of Bitcoin, is too centralized. An economy based upon trading pretty colored rocks. Albeit, rocks with many uses. But rocks to be avoided.

It’s the modern age. Act modern. Break out the computers and enter virtual reality…and open an account. Ignore the fact the Fort Knox has a lot of gold. Never mind that your computer is made with gold.

Like pretty rocks, but in a virtual sense, Bitcoins are limited in number. The number of numbers are limited. Virtually. A Fort Knox of Numbers. Please stop.

The nearly ubiquitous and reasonably fast blockchain technology-ledger rules the kingdom. Maybe.

Gold is too heavy to lug around. High insurance fees. Overpriced transfer costs. Government covetousness. And you should have some anyway.

Just rocks. Believe in the virtual-money. Have faith. Or use your brain.

You have no worries now. Computational information can be zipped around in a flash.


 

Flash Money?

And that’s what you have  — a form of ‘flash-money.‘ Not the kind used by police to entice a drug dealer, but the kind that can evaporate in a flash. More basic. Real-unreal. Magic.

Why does it work?

These new economists are zealous, tossing out, in a flash, the entire school of Austrian economics, with the baby. Regression Theorem and all. Or have they?

The debate whether or not cryptocurrencies are “money” has put a spotlight on the Menger-Mises Regression Theorem. As stated, the theorem posits that a non-fiat money must have had value before it became a money. — Peter St. Onge  (12/11/2014)

Source: Cryptocurrencies and a Wider Regression Theorem | Mises Daily

Can cryptocurrency confirm the Regression Theorem, as Peter St. Onge, assistant professor at Taiwan’s Fengjia University College of Business, implies? Only if the Regression Theorem is “liberalized.”

In other words, one must rip away the pillars of the theorem in question — that gold has non-money value. Why? Because cryptocurrency does not. But it’s okay.

Gold is used as jewelry and a million other non-money things. Not cryptocurrency. Does just one thing. Provides a token to make the blockchain go round.

By itself, cryptocurrency is just a collection of coded numbers. Numbers which represent useful information. Numbers that run programs — applications — as well.

Cryptocurrencies are a service. A service paid for with the native token currency.

The scarcity of the programmed numbers is not the value of cryptocurrencies, however. The service provided by cryptocurrencies generates their value.

The fact that people might want the native crypto-tokens, means they might want the provided service. For example, embedded email or chat built into a cryptocurrency platform.

If the crypto-tokens are private, all the better. If there are a limited supply of tokens, better still. Artificial disinflation.

The ability to attach projects and other executable software or contractual records or information to cryptocurrency systems can increase their value.

It is arguable if any intrinsic value is imparted as a result of utility, however. A use value is just one aspect of a good crypto-token money.

The service function of a crypto-token is perhaps it’s best transitory utility. It is not a “useful good,” as Ludwig von Mises would argue. But a useful service?

It’s a tool. A reusable tool. An ever improving reusable tool.

ludwig_von_mises

Ludwig von Mises

Those who can provide wanted computational processing, especially in a private decentralized manner and do it efficiently, will certainly attract willing buyers.

But in the end, these cryptocurrency systems are selling tokens. It’s the price of admission for blockchain enjoyment. The service. Or the promise of a service to come.

Tokens pay for specialized processing and data storage. Why? Because coded cash from the banks is not yet allowed — in most countries.

Cryptocurrencies, a token money, do compete with government token monies.


…computational token monies…

These privatized computational token monies streamlined the costs of token-money transfer and, depending upon the choice of cryptocurrency, eliminated inflation.

Cryptocurrencies also gave one access to services — to a more secure and private economy. Some would term this a ‘Black Market’ on a worldwide scale. Others claim it is a free market.

These computational tokens are very divisible, which is also requirement for money.

They can be saved.

Computational tokens can be artificially rare, within their own systems.

Homogeneous, yes.

Easily stored. Yep.

Perishable? Gold will last a very, very long time, but will cryptocurrency? So long as they are updated. New systems will emerge. Improved forms will come along.

Wide value fluctuations. That is another flaw in the computational token world. In this sense, they are inferior forms of token money, but so is cash. Perhaps they are better speculative vehicles.

Long term cost or price stability is important. If tokens revalue wildly, few will use them regularly. Unless their own national token money is devaluing, broken, corrupt, over-taxed or non-existent.

Tangible. Computational tokens are not tangible. Processing costs money, but you can’t touch a computational token.

And the electricity used to mine cryptocurrency does not transfer to the tokens. For the same reason, your pocket calculator does not lend the numbers on the readout any special electrical powers.

Not a big problem. Many of us never use tangible cash anyway.

Demand

The demand for cryptocurrencies continues.  And that is the crux of it. One must have demand for a cryptocurrency for it to be valuable — even temporarily.

The store of value for savings and long-term planning is still growing. Computational token currencies do not yet qualify as a long term saving vehicle. Even a short-term hedge can be problematic.

The usefulness of computational tokens can me magnified, however. Value added.

Ethereum and Lisk are examples of this technique. Both, unfortunately are currently inflationary. What’s more, neither one is private or cash-like.

Ethereum and Lisk are more closely related to public businesses, albeit with decentralized blockchain (ledgers). In fact, the banking systems have been interested in Ethereum for some time.

Several banks have issues with decentralized blockchains, however. They want security and privacy and a way to keep prying eyes blinded, except for Uncle Sam. Maybe these should be considered “lockchains.”

Look for Eth-Clones, brought to you by banks, in the near future. Or Bitcoin clones with Ethereum-like capabilities. Even Lisk, which uses JavaScript programming language, rather than a new programming language altogether, like Ethereum — could take over this space.

And there is that DAPP problem. These “decentralized applications” are designed to run on either Ethereum or Lisk, but which particular DAPP has become or is becoming so useful that it puts the “service” into the system(s)?

Gambling? Lotteries? Okay.

But what about real life utilitarian DAPP’s that fit the blockchain like the proverbial glove? Something that cannot be found off-chain?

We’re not looking for cool DAPP’s, like self-executing smart contracts. Contract DAPP’s may not be trustworthy. Reputations would need building. Publication of real names a distinct option, for things like real estate.

There are map making DAPP’s or street view DAPP’s. Google Maps are free, but they are watching your every internet move.

There are DAPP’s for art, blogging, identity theft protection and crowd funding.

So far, there are no DAPP’s we can’t live without. A DAPP where we will say afterwards, “how did we get along without this DAPP before?”

That is the key — a highy desired DAPP, but one more thing. A highly desired DAPP on a private blockchain. Again, Ethereum and Lisk? Not private. Result? Neither is your potential ‘service-money.’ Your crypto-token.


Privacy Matters

Monero, on the other hand, is working on DAPP-like features to give their decentralized and private crypto-tokens more zing.

That is the thing about services. One can compete in an open market and offer a service-money (tokens) that is privacy-centric.

Monero is working on private email functions within its cryptocurrency system as well. This has been done before.

DigitalNote has this function, along with a blockchain savings feature.

In any case, no matter the development effort behind the cryptocurrencies or the variety of computational tokens and DAPPS, it boils down to this: unless and until cryptocurrencies are backed by some real substance, their value will probably be transitory and unstable; and fantastic.

Computational processing time has value, but it becomes less expensive each day. So to would any token-money-cryptocurrency. In other words, the DAPP would need to compete against more efficient APPS in the non-blockchain worlds.

Privacy of information is very valuable. This appears, upon examination, to be a great way to monetize crypto-tokens, but are these crypto-tokens unfocused? Trying to sell us the sizzle, tons of cool useless DAPPS and no steak, meaning useful applications?

This is not a game to be sure. Tokens are not real, but token-money has value. Processing power and DAPP’s are ever improving on and off-chain.

The tax picture is confusing for DAPP’s and crypto-tokens. Cryptocurrency tokens are intangible commodities in the United States. They must follow money transmission guidelines to boot.

In any event, cryptocurrencies will continue to thrive, in the current international environment.

Threats include government mandated shutdowns. Or a new gold standard.

Gold as money seems doubtful in the United States since government is addicted to the cheap-money-drug. No different from Greece…except the bigger they are… and you know the rest. The winding-down could be detrimental to one’s assets. That’s polite way to put it.

Cryptocurrencies could be used as virtual gold certificates, if we, in the United States, so chose.

Cryptocurrencies also serve as a buffer against inflation — government devaluation of the currency in circulation. And like in Argentina, Cyprus, Greece and China…and many more nations where money is devalued at the expense of the people, cryptocurrencies act as temporary islands of safety. Safe harbors, where one can regroup…and organize.


Prediction

Cryptocurrencies will continue to gain market share as long as nations deny citizens sound monetary systems.

 

 

 


Sources: Photos/Artwork

Top: By http://www.elbpresse.de (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)%5D, via Wikimedia Commons

Right: By Ludwig von Mises Institute [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)%5D, via Wikimedia Commons