Tag Archives: Ethereum

Is Bitcoin in a Bubble?


The Big Question:

This seems to be the question of the day, if not the decade.

Can cryptocurrencies replace money or are they just another bubble?

The answers vary.

To the optimist, but not necessarily the realist, bitcoin is already money. So, yes, not only will it replace all government fiat cash, but it will free the masses from the tyranny of the state. It will never “bubble” and the way it’s designed, it will only become more valuable with time. Freedom for all forever and all the drugs you want. Gold? It’s a quaint idea. Caveman monetary policy, complete with pretty rocks.

Okay, maybe that was a bit overboard.

To the pessimist, no. Bitcoin is a Ponzi scheme. It is a well-marketed fiat asset trick. Don’t fall for it. It will eventually bubble, crash and burn. In the meantime, it will benefit the criminal element. It must go and/or be regulated as soon as possible. The state should always be the final arbiter of monetary policy, after all.

To the middle-of-the-road folks? Bitcoin can exist along side the current fiat money systems. It should work within the current frameworks of nationalized  monies, however. It can improve things from there. We can create a sound money standard after we iron out all of the regulatory kinks within the new cryptocurrency technology.

Unfortunately, our governments, as they are now designed, will not be able to survive on a diet of sound money and that is why fiat money was created in the first place. To escape the bonds of reality with a legal fiction, all the while, kicking the inflation can down the road.

But why not stop inflation by connecting bitcoin with gold? Make each one represent a certain amount of some rare earth metal? Why not couple gold and cryptocurrency, privately? Because the political environment is fiscally destructive. That’s why.

We know that our centrally planned economies will not allow citizens to derail the inflation machine which keeps our governments in control. It is only when the puppeteers begin to loose control of inflation that the money strings of government unravel, resulting in a revolution against the “evils of money.” Such revolutions do not always end up with a population of free citizens, however.

Cryptocurrency Negatives:

So, let us be cruel to ourselves. Take it on the chin, like a good cryptocurrency enthusiast should.

What is often cited as the main reason that bitcoin (or any cryptocurrency) can never serve as money? There are many reasons actually and here are a few:

  • Unstable Value
  • Trust
  • Fiat
  • Acceptance
  • Taxation
  • Bubble

Now, before we go off spouting all the great things about cryptocurrency, lets define money. I mean, what is this paper stuff we carry in out wallets and what are those electronically recorded digits in our banks? Better yet, let’s just define a good money.

Money:

  • A tool of humans
  • Used when high level of productivity is reached
  • Desire for long-range control over their lives
  • A tool of saving for delayed consumption and later production
  • A material commodity which is:
    • imperishable
    • rare
    • homogeneous
    • easily stored
    • not subject to wide fluctuations of value
    • always in demand among those you trade with

Source: Ayn Rand Lexicon

Few people ever go this deep, however. The dollar, euro, yen, dinar, peso, franc, pound, lira, rupee, krone, zloty, rand, and the shekel are, for all intents, legal notes. It’s money for the masses. Buts it’s not real money. It’s fiat money, which represents nothing but trust. I trust you, do you trust me? Besides, what choice do we have, right? It’s legal tender. It’s easier to use than chunks of silver, which the government wants to value in fiat anyway.

You can, at least in the US, pay your taxes with fiat currency and most of us trust that the currency is money.

We also know everything is becoming more expensive, but few of realize that the root cause of inflation is not the weather, the wealthy or our enemies. It’s simple math. The more fiat notes we print or e-print, the less valuable they become. This holds true for some cryptocurrencies as well. You simply divide the value, in fiat currency, by the current number of altcoins. This gives you a rough estimate of the fiat value of a particular cryptocurrency, at a given moment in time.

So, it’s easier to understand values with cryptocurrencies, since their creation is usually straight forward. There is no Federal Reserve to manipulate alleged M1, M2 and so on. There are no banks to create endless supplies of fiat. The only inflation regulators in bitcoin, for example, is its code base. It is currently programmed to create a finite number of BTC’s. It’s not manipulated to screw the masses, but to retain its spending value.

Paper money used to represent or hold title to gold or silver. That was why it worked. Why it functioned. Once the paper no longer held title to some form of property, it became fiat. It became dysfunctional. At that point, almost always, economies begin their decline. Some economies decline faster than others of course.

Perhaps if our governments set hard long-term limits on fiat numbers, then our fiat monies might stand a chance. But there are no such limits.

High Hopes:

Many hoped that bitcoin could save our failing economies, tame our ever growing governments, and usher in some new global paradigm of wealth, but not without effort.  If this is your thinking, you are guilty of being overly optimistic and just maybe, a bit naive. Don’t worry, I’m rooting for you because I’m a near-convert myself.

What holds us back from becoming “one with the crypto?” History. It is full of examples of ledger based monetary systems that ultimately failed. It is replete with evidence that all of the fiat based systems failed as well. And the gold-backed systems — failed, but after the decoupling of functional money (paper notes) from the metals. The governments enforced these failures, often by confiscating the one form of money that has never become valueless: gold.

So we have to ask ourselves why have all monetary systems failed throughout history? Now, I’m not asserting that gold became worthless–ever. Fiats did. Ledger systems were scrapped or forced out. Seashells were abandoned. But not a single monetary system transcended all governments, in any cohesive fashion. Bitcoin, though an asset, does.

Asked another way. Aside from gold and silver being an asset for thousands of years, what monetary system, fiat or otherwise, has ever existed beyond the constructive control of all governments, simultaneously?

Bitcoin as an Asset:

The latest thinking is that bitcoin (cryptocurrency) is not money, but acts as like an asset. That is Peter Schiff’s thinking. Schiff works with Goldmoney Inc., based in Canada and he lives in Puerto Rico. Goldmoney(tm) is a company that allows you to spend gold, via a debit card, in many countries, for a small fee. You can also store gold in various vaults around the word. And there are other benefits.

You can find out about more about Schiff’s views easily. He has his a radio show, owns several companies, is an author, but to sum up his financial views I would offer this:

He has repeatedly held bullish views on long-term investments in foreign stocks and currencies in countries with sound fiscal and monetary policies, as well as global commodities including physical precious metals and has expressed bearish views on the US economy and the US dollar.

Source: Wikipedia

So what is an asset?

An asset is anything of value that can be converted into cash.

Source: Investopedia

It’s a bit more complicated than this, but for the sake of argument, all cryptocurrencies are assets, since conversions to some other form of trusted money is the fundamental purpose to both buy and hold bitcoins. I mean, that is the allegation, right? Moreover, as Schiff asserts, companies that accept bitcoin in payment for services or products, ultimately convert it to either fiat currency or some other more trusted asset. Sure they do. After all, what real choice do they have? None.

In other words, the companies that will accept your bitcoins direclty just want to sell you stuff. Of course they do and they are held to the regulations requiring them to report their earnings in a nationalized fiat currency format. A government euro. A dollar. One wonders what would happen if companies and citizens were not required to convert to government fiat money? If they were actually free to use the asset of their choosing for all debts, public and private.

But we are not free in this sense. Not completely.

You Must Comply:

Are we to then shrug and comply? I don’t think so. The future is not made by those in the halls of government. That is not the purpose of government. They are present simply to protect and serve the people. They are peace keepers, not currency makers. Currency and money should be denationalized anyway. Things like bitcoin serve as a reminder of who should be in charge. Even if it fails. Even if it is a bubble.

Under the current circumstances, bitcoin, as asserted by Peter Schiff, is untraceable. This, I’m afraid is close, but not the complete cigar. All bitcoin transactions are public. You can see them zip around the network, but they can be obfuscated for privacy and criminal reasons. And your name is not attached to your account. Other cryptocurrencies are much better at retaining your privacy.

A Common Criminal:

Naturally, Schiff keys in on the criminal aspect. We’ve all heard it. A terrorist or crook will send his bitcoin, instead of carrying cash. At some point the bitcoin will be converted into cash to buy or sell something illegal.

One of the main problems with this criminal tactic are the fluctuations in bitcoin prices. The criminal might have a set price for his product and bitcoin is terrible for that reason. Perhaps it would be better to use what is called Tether ™. It’s a bank backed cryptocurrency that is almost pegged at the US dollar. Better yet, use paper dollars or digital fiats. That’s the routine.

I used to work in criminal justice field, just a few years ago. We rarely came across evidence of cryptocurrency use. Maybe it’s more prevalent now. What we did come across were stolen credit cards, emailed cash, fiat bill, drugs, debit card numbers and so on. Criminals wanted dollars just as fast as they could get them. Not gold or silver coins, but paper fiats. They used the banking system and filed false IRS refunds (very lucrative since the IRS does a terrible job of policing their own refund system) as a way to easily subvert the antiquated, government regulated, fiat monetary system.

This is not to say that cryptocurrency is immune to criminal exploitation, but cash is king — by law. And even criminals love to exploit that law. Some even print their own bills. This is next to impossible with bitcoin.

Bubbles:

The comparison of cryptocurrencies to the Dot-com bubble is also interesting, but old. The idea that investing in cryptocurrency is similar to a fad or is speculative, is certainly a strong argument, however. More and more people are becoming aware of the technology and as a result, more money is flowing in. Is this a new opportunity for those who are already versed in their use and speculation? Sure it is. The first comers are on top of that pyramid, right? But can’t this also be said of a new stock? The more people buy the faster the value of the stock increases, right?

One must realize, however, that as cryptocurrencies become more and more popular, they become more and more risky. They are not stocks. There are few barriers to entry and trades are nearly instant. There are few restrictions. You are free to lose and gain and panic. At least with stocks, you have a broker who earns very high commissions by comparison, and you can execute trades reasonably quickly, in most cases. Oh, and you have no privacy. Every transaction is logged for tax and regulatory purposes, to ensure that you are not being cheated. That never happens…

This new injection of funds into the cryptosphere, ostensibly from a broader base — regular people — and not simply from the brokerage houses that fueled the Dot-coms, serves to magnify the potential bubble. This is a given. If such a bubble bursts, the fallout could eclipse a standard market collapse…in the future. Not right now though. Which is why the heat is not all that hot.

Currently, the amount of money in the cryptocurrency system is peanuts compared to the banking sector. Sure, lawsuits and investigations happened after the Dot-coms, the housing bubble — after any number of market implosions. Bailouts are always an option for government to soften the blow of poor investment decisions. But when banks collapse, governments step in and the insurers pay up. Then the arrests come. Fines and Senate Hearings, when the circus comes to town.

Brokerage houses are known entities. The mortgage companies and banks are all around us. If bitcoin fails, the loss is real. It will hurt millions, but in the scheme of things, it will be very small. Currently, if all the cryptocurrencies listed on coinmarketcap here went to zero overnight, it would only be half as bad as the Washington Mutual insolvency in 2008. One bank compared to over 1000 cryptocurrencies.

Diversification:

Diversification may not help. One might be safer with a mutual fund or an ETF but not a cryptocurrency. Why? Because there are few, what I will call base-cryptocurrencies, bitcoin being one. When bitcoin drops in value, nearly all cryptocurrencies lose value. So, loses are often magnified. When bitcoin recovers, so do the others. Tether cryptocurrency is one exception. It usually hovers around one US dollar in value, but it has little upside. Conversely, if say Ripple (tm) devalues, bitcoin may not.

The tie-in with bitcoin and all other cryptocurrencies happens because it was a first comer and trusted. If you want other cryptocurrencies you will often need to trade for them using your bitcoin. If you want to convert back to fiat, it is often best to use bitcoin. This is changing, however. Other coins are slowly earning a type of base-currency status.

Anti-Money:

The Fallout:

What do you suspect will happen to the hundreds of international cryptocurrency market exchanges, when (and if) the bubble bursts? Do we even know where they are? How about the US based exchanges? Will their doors be closed, their assets frozen? Will your bitcoins be stuck in Europe or Asia? Will you keep your BTC at home on your hard-drive or some other device. Will cryptocurrency developers in the US then be shuffled off to prison?

How about the giant bitcoin mining farms in China and the world over? Shut off? Scrapped? Bitcoins Confiscated? What about the cryptocurrencies that do not use the ‘farms?’ The ones like Peercoin ™, which is essentially PC based?

What of the decentralized cryptocurrency exchanges that exist only between you an unknown parties over the internet? Will these applications be shut down and their unknown creators sought?

The fact that Amazon ™ lost 90% of it’s stock value over as many years, as Schiff indicated, is his example of what can happen to bitcoin. The nearly constant ICO’s (Initial Coin Offerings), the new cryptocurrencies popping up like so much graffiti, will not survive, even if they use the latest blockchain technology or some variant of it. There will be a saturation point, no doubt. Already, there is talk that if you are in “blockchain” (your company invests or develops this type of new tech) you don’t make any money.

Some companies can exist in the red for years, but at some point they must turn a profit or fail. The only other option is to ask for a loan. In any event, even Amazon ™ has not failed, but it has real products as well as software. (Bitcoin is software. An intangible asset.)

The Beginning of the End?

Flipping houses before the market imploded was all the rage before 2007. It still happens today, in Florida, where I live, but not nearly at the pace of a decade earlier. When friends quit their jobs back then, bought huge homes, new cars and lived the life, only to be financially destroyed later, it was rough. The house flippers paid the price. After the building boom things slowed and housing prices dropped. We can argue all day about how and why the crisis began. One thing is certain, however, irrational exuberance was the norm.

Is that beginning to happen with cryptocurrencies now? In a sense, flipping cryptocurrencies doesn’t really happen. You can’t buy one, improve it, unless you are the developer, sell it and walk away. You can however, buy one at the bottom, when it’s cheap, then trade it for bitcoin or Tether, when it increases in value. Unfortunately, the tax headaches in some countries makes this type of arbitrage unprofitable. If you ignore the taxes, you are chancing fines or worse.

But what of the P/E Ration? I mean, we can calculate the price to earnings ratio of a stock, but how would you do that with bitcoin? Can we ever know when and if it is overvalued? We can see when underlying government fiat money is devaluing by comparing it to something like gold. When more fiat buys less gold we have inflation or more correctly, currency devaluation. When less bitcoin buys more fiat dollars, what is occurring? Is bitcoin becoming more popular or is it acting like gold? Is it becoming like a peoples’ barometer of their own fiat money — worldwide?

The Aftermath?

After this cryptocurrency bubble bursts, if it does, what might remain? Cryptocurrencies which offer a type of service, like Ethereum ™? Ones that offer fiat trading via third parties, and other services, like Stellar ™? Newer models, such as Iota ™ or Neo ™? It’s your guess.

Worse case? Your country outlaws innovation or co-ops it, then slowly destroys it.

The best case scenario, for now? Bitcoin keeps growing and more nationalized fiat  currencies fail. The cryptosphere becomes indispensable, trusted by people everywhere, and nations begin to compete by adopting sound monetary policies.

In the meantime, don’t fall for the hype. Do your homework if you are curious about cryptocurrencies.

And a parting thought. At some point, technology will be able to create physical items upon demand. If we are then able to create gold by recombining atoms and molecules, an abundant resource nearly everywhere where we look, on the cheap, how will we then design a voluntary, sound monetary system?

 

Good Day,

Jack Shorebird.


 

 

Advertisements

Bitcoin, Ethereum, Litecoin July 19, 2017 — Roundup.


An unbiased and quick look at some big players…

The good news:

  • Litecoin is undergoing major updates to Litecoin Core 0.14.2
  • John Mack, a former CEO at Morgan Stanley venturing into crypto
  • The “dean” has advised that crypto is replacing gold

The bad news:

The “other” news:

  • A rare look inside some of China’s bitcoins “mines

The videos:

  • Jeff Bewick continues his upbeat and wacky video series about bitcoin
  • Andreas Antonopoulos explains the current state of bitcoin

Based upon the last 24 hours of news, the cryptosphere is decidedly negative, with concerns over bitcoin and Ethereum, mounting.


Image: Flickr

Bitcoin to $2,000,000 in Three Years?

 


How to make two million dollars in three years, by purchasing one bitcoin as soon as possible?

At that point you should only be required to pay long term capital gains taxes.

Why not 20 million — if the dollar devalues fast enough? In Venezuela, I estimate that bitcoins are are well over million Bolivares each. Let’s check that math.

The price of bitcoin this second, is about $2300 and dropping — again. This was expected. That is equivalent to 23,000 Venezuelan Bolivares (VEB) — at the official rate. Not bad you say, but wait, there’s less… The official rates are nonsense.

20 Million Boilvares per bitcoin?

The unofficial price you will pay for one bitcoin in Venezuela is about 19,555,000 VEB. Let’s just round that off. To buy a single bitcoin in that Socialist paradise will set you back about 20 million VEB. That’s a big stack of paper and the last I heard, the government there was having trouble obtaining enough paper to print money.

So already, in some countries, you are a rich. Not really. One US dollar is equivalent to about 8500 VEB — street value. (See here for realistic conversions rates.) So you would still have, realistically, about $2300 bucks US. That is if a Venezuelan could really afford to buy a single bitcoin. Bummer.

Maybe the Venezuelan dictator can ask the motorcycle gangs currently stealing sugar from moving trucks in broad daylight, Mad Max style, to swipe a few rolls of paper and pass it along to the printing office. You know, in order to print more money. Wait — bad idea — toilet paper is also at a premium there. Actually, I think they are fresh out — a year ago.

But talk about optimism. John McAfee tweeted that:

Bitcoin would reach $500,000 in value in three years.

…or he will eat his own privates on national TV. Sure he will.

But McAfee might stick to his 10 million dollar bet. Why? Because according to this piece, McAfee is betting on a bitcoin fork. Not bitcoin. Did you catch that? He’s betting on some new type of bitcoin.

I’d say McAfee is going to lose 10 mil and a part of his anatomy. Well, maybe the 10 mil, unless he’s insane. Come to think of it — not the insane part — I want to see that bet. Any evidence he actually made it? That anyone has excepted?

Whether it’s just a publicity stunt we might never know. McAfee does say some pretty relevant stuff though. Take his Google comments. He wants to take them out. Why? For very good reasons. The fact that Google tends to obtain too much information about us. Kind of a errant, business-like, “Big Brother.” One that shares information with Uncle Sam when politely asked.

Don’t worry, your smart phone, computer and talking toy robot are not really watching you…that much. They have no idea that you are a Crypto-Head. And I say this in all seriousness and sarcasm. (Did I mention that the FBI is now warning us about our children’s toy-spies?)

But back to the bitcoin news. Does McAfee have a point? Will he retain his privates? Let’s just take that first question, in general.

Will bitcoin continue to increase in value over the mid to long term — if it does fork?

McAfee — and this guy ain’t no dummy — says yes. In fact, McAfee puts his faith in Bitmain CEO Jihan Wu.

In case you are still confused about a fork or two, look over the graphic provided here. It’s a great way to understand the basic SegWit, SegWit2, and UASF issues is a visual way. Things are definitely confusing this time around. So let’s ditch the acronyms and get back to our $2,000,000 bitcoin. I’m salivating, aren’t you?

Back to Bitmain and Wu. McAfee says Wu is a sharp guy and that the market will follow him with his brand of “bictoin,” whatever flavor that happens to be. The old traditional bitcoin, the one that was developed by Satoshi Nakamoto and supposedly improved by the core teams over the years, will take a nose dive — back to 40 bucks each. At that point, would it even survive? Can you imagine the bag-holders?

But that’s not all. It’s why I brought up the Venezuelan comparisons. McAfee thinks that as a result of his research, this “new” bitcoin will reach prices north of one million dollars. Maybe more than two million each.

Jump Ship?

So how will we, as consumers, jump ship, if Wu forks bitcoin (original flavor)? I’m assuming, but please don’t hold me to this, that we would simply begin using his systems — his wallets —  with our old bitcoin. We’d sort of do a mini-fork.

I’m sure Wu will announce his fork plans and then us little people can then decide for ourselves, which way to go. With Big Daddy Wu or Old Bitcoin core. Maybe I’ll head over to Iota for spell anyway. I just like their style.

This brings up yet another question. Suppose we try Wu’s “New and Improved” Bitcoin (extra crispy flavor) and we don’t like it. Can we then switch our bitcoins back to original flavor? We’ll see.

In the meantime, keep your eyes on Crypto and maybe deal in Litecoin or Ethereum until this Wu thing settles down.

And one more thing — and this is where lowly little me differs with Master McAfee. I think he’s wrong. Why would anyone invest in Wu-Coin if the guy knowing exploited a flaw in bitcoin to speed up mining and make higher profits, at the expense of the community at large?

And one last thing. I hate McAfee’s Antivirus software. Always had trouble with it.

Until next my next post, have a Crypto day.


Image: Flickr

 

 

 

 

Bitcoin Billions at Risk

ball

If I had a tiny crystal ball, I could tell you if the 30 billion dollar bitcoin meltdown will continue. I could predict when to sell, when to buy and when to hold. But I don’t have even the tiniest of magical crystal balls — and neither does any other Bitcoin Jesus.

Bitcoin’s “potential” fork in the road is near. A few weeks, maybe sooner. Experts in the field are uncertain if bitcoin will survive in its current form — or any form. Traditional money-changers will shrug if it collapses. “We told you it was a bubble — it was funny-money.”

If bitcoin fails, billions of dollars could be forever locked away. Those who made their millions from the cryptocurrency will no doubt soldier on, creating new tech and innovating — all because bitcoin opened that door.

In the meantime, say in a few days, the large cryptocurrency exchanges might need to explain that all of their cryotocurrency accounts are okay, but they only have pre-SegWit bitcoins. Outfits like Bitfinex, Coinbase and Poloniex could freeze all bitcoin accounts until the storm blows over. Then the lawsuits would begin. If you think it won’t endanger your back-up crypto, think again. Think about saving your cryptocurrencies offline or in a wallet you completely control. Then hope. And wait. (I am.)

On the scale of things, bitcoin isn’t even a blip — when one focuses on the amount of money being flung around the world each day. It’s chump change compared to JPMorgan Chase or Barclays, but then they don’t get it do they? They don’t understand the idea behind bitcoin at all. The idea behind any cryptocurrency. If they do understand it and wish to keep their wealth, they are busily working to destroy it — or copy it. Thing is, they will always be behind. Innovators are even now working to improve fintech. In a few years the banking industry will again need to re-educate themselves or risk being heaped into the dust bin. Hundreds, if not thousands of years of traditional banking — the stuff that money is made of — is being rewritten.

At first glance, some might think that a back-up cryptocurrency is in order — another cryptocurrency to set aside, while bitcoin goes through its latest convulsions. Litecoin comes to mind. Maybe Ethereum. Perhaps instead, we should focus on the newest developments or what are called “Third Generation” crypto’s. Iota comes to mind. No doubt, the choices are difficult.

But the crypto-markets as a whole are deflating, suggesting that this isn’t over yet.

Colorful personalities such as Jeff Berwick have chimed it on the matter. Comedy seems to be the order of the day. Just another update. Don’t worry. Time to poke fun at the entire process. You can do that when you have loads of pre-halving bitcoin profits.

Berwick is apparently comfortable in the knowledge that all will be well — soon. That bitcoin is the “King of Crytocurrency” — period. At least for now. Oh, and if you do follow this “personality” you might want to check out his latest post about the Moon Landing having been faked. Great, comedy and conspiracies. Is he credible at all?

All joking aside, Bitcoin Magazine might be one of best sources of information. They delve into the specifics. Get in the weeds.

Here’s a recent article from Bitcoin Magazine that will fill you in:

Bitcoin miners at large have missed the first BIP 148 “deadline” to prevent a “split” in Bitcoin’s blockchain.

Source: Bitcoin Miners Miss the First BIP 148 “Deadline”

The article tells us that the first bitcoin deadline — when the miners should have taken action to show “solidarity” — has passed. “The miners at large” have not acted to install the recommended updates. This news helps us understand what is actually happening in the cryptosphere. Obtaining our news from CNBC, at the sound-bite level, can be annoying, if not misleading.

But the digital details may not matter to the “man on the street.” He just wants profits — stability — or a way to stick it to the real man. And that is just a side benefit, for now. Since bitcoin, for all intents and purposes is public and prying eyes are always a concern.

As a result of this apparent bitcoin “miner” inaction and other factors, the value of bitcoin is still dropping as of this posting. It is heading for the $1800 mark. The next psychological level — and you’ll hear about this soon — is the value of one ounce of gold. Once bitcoin touches that number, people will expect a reaction. Either a bounce of affirmation or the other thing. If the other thing occurs, then you will read about bubbles. About bitcoin diving to 30 dollars each, then pennies each, then you won’t hear about bitcoin any longer.

Right now, the 30 billion dollar question is, has the bitcoin community at large already signaled that Bitcoin Core is no longer in touch with the users themselves? If this is true, are we now staring at the “fork of failure?” Or are we reaffirming our trust in the backbone — the miners — of the bitcoin system?

If we follow the miners, where will they take us? Down commercial roads, where large corporations and their Nanny-State governments dictate policy? If we follow Bitcoin Core, will this latest software “patch” suffice until the next critical juncture? Still keeping the community safe from the ever growing centralization of control? It seems that we are damned either way.

What is curious about the article in Bitcoin Magazine is that if bitcoin does fork and the powers that be decide, belatedly, to go ahead and allow the updates to commence — they could reunite the blockchain. In other words, having bluffed and lost, the miners and Bitcoin Core could have a “coming to Jesus” moment after they look into their respective digital wallets and discover that they are holding worthless numbers. But they better not wait long to reunite, because every second they delay, trust is evaporating.

In the event of a temporary fork there will still be significant disruption for the users, of course. It would be like keeping two sets of books. Eventually, if the blockchain is mended, only one set of books would be accepted. And therein lies the problem. The other set of books — all of the transactions, purchases, trades and the like — would be nullified. Users could potentially lose millions. Maybe more. Again, trust would be seriously eroded.

I don’t even want to think what would happen if bitcoin permanently forks. The cascade effect would certainly push many other cryptocurrencies into an unrecoverable downward spiral. We couldn’t really say if both bitcoin blockchains would have value. In such a dual-bitcoin scenario, no doubt both bitcoins would attempt to retain the title of “bitcoin.”

And if bitcoin forks, would not every blockchain born cryptocurrency become immediately suspect? Risky.

The other side of that Crypto-Armageddon is that a new coin could be born. Meaning the old guard — Bitcoin Core — could be left behind as Bitcoin Unlimited, for example, moves on with all of the “customers.”

Eventually, blockchain tech will be replaced. All tech is updated. The question is when?

A prediction would be that bitcoin prices could be touching gold price territory within the week.

Thanks for stopping by.

 


Image: Flickr

 

 

Will Bitcoin Fork on July 21, 2017?

Burn

 

Bitcoin has been steadily devaluing. In fact, most of the major cryptocurrencies on earth are also losing steam. Ethereum, Ripple, Litecoin, Steem, and even Dash are suffering. In some cases losses have exceeded 25% in less than a week.

Is it the end of an era or a readjustment period? A shakeout, if you will?

Many have debated why, as bitcoin dips, does it seem to initiate a larger scale downward trend throughout the cryptosphere. Each time bitcoin sneezes, crypto in general, catches a cold. Today — this week — bitcoin has the flu.

Some have pointed to alleged “Civil War” between the Bitcoin Core Team and the Bitcoin miners as the culprit. Primarily, the accusations are being leveled against the miners who control most of the network. The Chinese.

There is also some bickering within the Bitcore Core Team itself. But the idea that all of the planned changes — the proposed updates — to the code, will cause a rift is also on the debate table. A debate about a potential bitcoin fork — a split of its blockchain. Or perhaps users will use another blockchain. (I will get to that in a moment.)

Let’s face it, most bitcoin users, investors, watchers, writers — do not give a bleep about large conglomerates of miners who are churning out bitcoins and making a tidy profit. They are charging the community for the privilege of using a peer-to-peer system, allegedly designed to reduce the financial friction between willing parties. That is now history. The price of doing bitcoin business is becoming more expensive to the small consumer. Still, aside from the slow processing times, sending large amounts of bitcoin internationally, is cheaper than using the antiquated banking systems of today. In other words, bitcoin seems to be helping those with lots of bitcoin. Not a good sign.

Many of us do care that the Bitcoin Core Team is working to keep the code “bug-free” and that they are attempting to update the system. However, they are not dictators. They do not have the final say. The community must accept the updates. The users of the system are voluntary. If they do not accept the changes — if the miners feel cheated by the prospect of having their profits reduced — we could see a fork. And this could mean the destruction of the most successful private money that has ever existed — maybe.

Such a thing would not only evaporate the wealth housed within the blockchain, but potentially all of the investments tied to the bitcoin ecosystem — worldwide. From ATM’s in Vegas to the Mom and Pop Dress Shops in Morocco. All of that seed money, those start-ups, YouTube preachers — you name it. Adrift in the cosmos of bankruptcy. It would be painful for some.

Is there a silver lining to all of this?

Antpool, the largest bitcoin mining operation on earth, does not want the updates offered by Core — “SegWit.” Bitcoin Core is pushing ahead anyway. It is a Goliath versus Samson battle — all over again. Core holds the sling (the keys to the original code) but Antpool can simply copy the code. If the Antpool Goliath does this, will anyone trust him? Actually, the last I read — and info can be sketchy here — Antpool had a back-up plan. They started mining Bitcoin Unlimited a few months ago. (That’s another story, but suffice it to say it solves many of the problems associated with the current version of bitcoin.)

Philosophical battles aside, the concerns over whether bitcoin (or any cryptocurrency) must decide between the corporate world and somebody’s idea of traditional capital is a red herring. Any money ought to be neutral in that sense, if the developers/community so decide. And therein lies the problem. Any community of anything is going to debate, endlessly. Although, I am not speaking in support of Dash, their governance model does have advantages.

In any event, the fireworks begin in just a few days — July 21, 2017. If 80% of the bitcoin community adopts the updates — SegWit — all should be fine. On the other hand, if the community does not adopt the updates, it is likely that an alternative solution might be employed on August 1, 2017. That is the idea of a “soft fork” employing SegWit as user activated “choice.” By then, Antpool may be off the reservation — employing Bitcoin Unlimited. The tension is palpable.

Let’s add more fuel to that fire, shall we dear readers?

CNBC put out a panic article recently and it does have some rather prescient information. Namely, that the Bitcoin.org community has recommended that everyone — every user of bitcoin — take a “bank holiday” a few days before the proposed changes are to take place. Say on Friday, July 19, 2017 — you know — just to be on the safe side. Did you catch that? Turn off your bitcoin wallets. Now I’m as brave as the next guy, but don’t get between me and my cash. And yet, major players are notifying bitcoin users that they are doing just that. No deposits or withdrawals? No trading for a few days? Be prepared.

Do you know what happens during bank holidays? Panic. Users might find a substitute. Certainly trust will be eroded.

Hence, bitcoin is devaluing. People are cashing out. Waiting on the sidelines.

Now if you are confused, you should be. Hour by hour, bitcoin is still loosing ground. As of this writing, the price of one bitcoin just dropped below $2000, then popped up again. That is over a 30% value reduction in just over a month. Coming from just over $570 each last August (2016), which is amazing in itself, anyone holding the coin, if the blockchain forks, could be left holding thin air.

As some have put it, we are witnessing, once again, a sea of red. Let’s just hope that the entire thing does not go “bleeps up.”

You can check here for up to date valuations:

CryptoCurrency Market Capitalizations.

Thanks for reading. If you have any input, let me know in the comments section below.

(Oh, and thanks RK.)


Image: Flickr

 

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.

Bytecoin versus Monero: “Ease of Use”

Bytecoin - Copy


Ease of use.

One of the aspects of cryptocurrencies which seems to confuse a lot of people is the idea of “atomic units.” The separate parts of the coins, so to speak. Debates rage across the Crypto-sphere.

In other words, just how many actual individual units of a particular cryptocurrency are there and how can this change the value or the perceived rarity of a coin? And does it really matter?

We’ve all read about Bitcoin. At least those of us who find Fintech interesting. No more than — approximately — 21 millions Bitcoins will ever exist.  But the number of actual individual “atomic” units is different.

Bytecoin and Bitcoin used the same definition of what one “coin” should be: 10^8. In actuality, however, Bytecoin has 10^64 atomic units, which is the same as Monero. That is the money supply. The “M1” if you will. Monero simply decided to move the decimal to the left.

All of this is not to stir debate as much as it is to appeal to the human in us. What would you rather have? Whole numbers or fractions of numbers when spending your funds? When investing? More numbers seems better, sure. But fractions of numbers?

As Monero increases in value, each atomic unit becomes more valuable. This is the same with Bytecoin or any cryptocurrency.  The only difference are “whole” numbers. So ask yourself these questions, as a user of cryptocurrency:

What is easier to calculate and understand quickly?

Whole numbers or fractions of numbers?

This can be looked at another way.

If each Monero is the equivalent of $50 and you want to buy a soda, how much would it cost? Say the soda is one U.S. dollar. That would mean 1/50th of a Monero or about .02 (point 02) XMR’s gets you that drink — alcohol is extra. Say a dash of vodka costs .1 (point 1) XMR’s. (I know — cheap vodka.) So .12 (point one two) is your total cost. Well, then there are taxes and other fees. Let’s say your total bill is .1290 with a 7% sales tax and other fees. There, we’re done now. Hand over your fraction.

Bitcoin calculations are similar, but their fees seem higher.

Now let’s try Bytecoin. At about 1/3rd of a cent each, you would need about 300 Bytecoins to buy a one dollar soda and at least 1500 more to add some cheap booze. If Bytecoin continues to increase in value, these numbers will fall. For example, if Bytecoin increases in value to the equivalent of one U.S. penny or .01 cent (one cent), your one dollar soda is now 100 BCN. With vodka? Say 600 BCN. With taxes and fees? Say 650 BCN.

It would  be easy if you were Japanese since one hundred yen is roughly one U.S. dollar. They would “get it.” For those of us in the U.S., it would be nice if BCN could value to about one dollar. In that case, we would “get it.” One BCN for one soda.

My point? What is easier to understand? Fractions or whole numbers? It’s your choice, but do not fool yourself into thinking you are actually spending less money. It’s all relative. Emotionally, we might feel better when we keep to the low numbers, to fractions, but in reality, we are spending the same amount of money.

There is another supply difference as well — between Monero and Bytecoin.  Bytecoin’s money stock recently increased do to a flaw. It added an additional 693 million coins, before the flaw was fixed.

Perhaps Bytecoin learned from Ethereum’s mistakes. They chose to keep the original blockchain intact when faced with a problem. If you recall, after Ethereum corrected their issue, purists then launched a clone: “Ethereum Classic. ” The community then split.