Older article rediscovered and starts another mini-tweat storm

mrees999
By mrees999 on Sat, May 13, 2017 - 5:02pm

It's funny how many times people stumble onto my older articles and start another tweet that sets off another mini tweet storm. This article I've linked has been discovered and rediscovered many times in the almost three years since I wrote it.  I tried to write about topics that I  think that would stay relevant long after I wrote them.

Most articles in the space have a very short life of a day or two with so much new material coming out. They would soon be forgotten.

However, this was one of my favorites and I saw it republished in several languages in the weeks that followed. Here it is - see if you like it,

https://bitcoinmagazine.com/articles/bitcoin-earth-dont-look-now-paradigm-shifting-1406062368/

Note: As the magazine changed ownership - they removed the pictures I had inserted as part of the article. I may reprint it somewhere else at some point with the pictures intact.

 

 

51 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
paradigm changes

Yes, that's a good article - it lays things out in a big picture way that lets people fit whatever-*coin-is into a historical context.

One thing that struck me when thinking about paradigm shifts and innovation: often, the winner isn't the first to market.  I'm probably not the first one with this observation.

Here are some examples (that come to mind) of paradigm shifts, and the winners.

Edison popularized electricity, and built the early DC generating stations to supply the electrons to his customers.  Yet it was Tesla's AC that ended up everywhere.  Tesla followed Edison, but Tesla's tech hit the home run.

Electricity itself was the paradigm shift, yet the struggles between Edison and Tesla were just as vicious as those outside the electricity paradigm itself.

The first cars were electric; lead-acid batteries, and so on.  There were also steam-powered cars; "the Stanley Steamer" is one name I remember.  Yet it was the IC technology that ended up winning the day.  If you bought Stanley stock, you likely had an unpleasant experience.

There is VHS and Beta, there's the Mac and the PC, Alta Vista and (subsequently) Google, and for phones - AMPS, then TDMA, and then CDMA.  Examples go on and on of first gen paradigm shifters that had relatively small market share, and were later trounced by second or third gen implementations that seized the crown.  Even first-gen paradigm shifters can't let go of their initial tech to adopt the follow-on improvement.  Nokia - not long ago they owned the world, and now they're mostly dead.

My conclusion: when you're in the middle of the shift, it is critical to remain flexible (one might even say, agnostic) about the specific implementation you support.

During my career, I have to learn a new computer language every 5 years or so, so I'm actually used to having to change my way of doing business when a better way comes along.  This is relevant because Ethereum comes with/is built using a new programming language for building something.  I haven't seen very much example code, and my brain isn't wrapped around it just yet.  Ethereum looks a little bit like a hammer in search of a nail.  However, if it finds the nail, it could really be something.

At the core, all of these *coin systems are distributed computing + self finance + rapid prototyping + distributed databases.  Whoever gets it right will have a lethal combination because it would solve a ton of really hard problems all at the same time, for a very low cost.  We still aren't sure what the killer app will be.  I don't think it will be currency; currency will be both motivation and an enabler, but it won't be the ultimate killer app.

Here's a thought.  It could involve porn.  That's what did it for VCR, and then the Internet.  I'm kidding...but I'm kind of not kidding at the same time.

During all these paradigm shifts, its important to remain mentally flexible, and at all costs remember not to fall in love with any particular implementation.  If bitcoin starts to look like the Stanley Steamer, its probably time to bail out.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
DaveF up to his old tricks...

Dave is a snake in the grass... he's really smart, and he seems like your friend.. but he is not.  He is here to make you believe there is really no alternative to banker based money. 

Don't believe me?  Let me deconstruct for you what was just said above in response to the post by Mark R.. who is by the way a true friend of PP.com. 

Regarding cryptocurrencies and the blockchain, Dave said,

We still aren't sure what the killer app will be

Really?  Aside from their emergence as money, blockchain-based crypto's are a game changer for accounting, solving the holy grail problem of triple entry accounting.  Don't believe me?  Listen then to Deloitte talk about the revolution that comes with automated triple entry accounting.... 

https://www2.deloitte.com/content/dam/Deloitte/de/Documents/Innovation/B...

Blockchain technology may represent the next step for
accounting:
Instead of keeping separate records based
on transaction receipts, companies can write their trans-
actions directly into a joint register, creating an interlocking system of enduring accounting records. Since all entries are distributed and cryptographically sealed,
falsifying or destroying them to conceal activity is practically impossible. It is similar to the transaction being verified by a notary – only in an electronic way..........
Conclusion
The blockchain technology has the potential to shapeshift
the nature of today’s accounting. It may constitute a way
to vastly automate accounting processes in compliance
with the regulatory requirements. As described above,
there are numerous starting points to leverage blockchain
technology. A cascade of new applications will likely
follow that are built on top of each other, leading way for
new, unprecedented services.
So theres that....
Dave also tells us this;
We still aren't sure what the killer app will be.  I don't think it will be currency; currency will be both motivation and an enabler, but it won't be the ultimate killer app.
So Dave does not think crypto's will be money.. or more specifically currency.  Sorry.. that is already a done deal.. they are. One of the reasons they are so attractive is that they have built in scarcity integrity... we know from the code and the mining or creation mechanism how many will ever exist.. and that the amount of currency will not be effected or manipulated by any elite or banker entity.. and this is huge!  These are (generally) deflationary forms of money, just like Gold and Silver which is a large part of their appeal.  Seigniorage be gone!
 
Finally.. and I really get a kick out of this because it's such a transparent attempt to tarnish the reputation of cryptocurrencies ,  quite akin to insinuating that cash is only used by drug dealers;
Here's a thought.  It could involve porn.  That's what did it for VCR, and then the Internet.  I'm kidding...but I'm kind of not kidding at the same time.
That is really, really slimy Dave.
Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
More reference material; triple entry accounting

TRIPLE-ENTRY ACCOUNTING

 

Some have coined the term “triple-entry accounting” for the new distributed ledger to describe its enhancement of the traditional double-entry general ledger system in which all accounting entries involving outside parties are cryptographically sealed by a third entry, the chain of validated prior transactions. The digital blocks are placed side by side; both parties’ bookkeeping entries for a given transaction are congruent. In separate, unique sets of accounting records, the seller books a debit to account for cash received while a buyer books a credit for cash spent in the same transaction. This feature alone could solve many data integration issues. It could be used not just to prepare accurate financial statements and business analytics in real time but also to enhance productivity through a wide range of applications.

 

For example, virtually every large globally systemically important financial institution (G-SIFI) is experimenting with blockchain technology. Barclays and more than 40 other participants set out to create a new transaction processing, “smart-contract,” accounting, and payment system for OTC derivatives. The Ethereum.org initiative currently lists almost 300 decentralized applications (Dapps) for a wide variety of solutions to problems we didn’t even know we had using a version of blockchain. Consider Democratic Autonomous Corporations (DACs) in which a virtual robot runs a business, sparking innovations in crowdfunding and crowdsourcing, dynamic assignment of renewable energy consumption tokens, identity management, and much more. Some forward-thinking leaders like Don Tapscott say that blockchain technology creates a paradigm shift, as computer and spreadsheets and accounting software changed the very nature of accounting.

http://sfmagazine.com/post-entry/january-2017-get-ready-for-blockchain/

There's that word Mark used.. a few years ago;  paradigm shift.   

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
discussion, evil, and porn

Gotta love that subject line right?

So Jim, its challenging sometimes to have a productive discussion with you because you start out assuming I'm evil.  Don't you get tired of it?  I mean, Chris doesn't think I'm evil, Charles doesn't think I'm evil (or he certainly wouldn't let me stay at his place), and Adam doesn't think so either.  These guys know me a lot better than you know me.  They're smart, intuitive people.  They don't think I'm evil.  SP doesn't think I'm evil either.

All these people - that you appear to respect - are actually able to have discussions with me (either agreeing with me, and/or disagreeing with me) without assuming I'm getting ready to slit their throats when they sleep at night.  Did you ever ask yourself, why this is?

I think you're so bought into your conclusion that "Dave is Evil" that you can't possibly retreat from this position without taking a big hit to your ego.  That's the best I can figure.  So you just double down and double down some more, and it just never stops.

See, I don't think you are evil.  I just think you have committed so completely to the "Dave is Evil" worldview that it has locked it right into your identity so much so that any attempts by me to use rational dialog to alter the situation triggers the trusty old backfire effect.  So even by saying this stuff, I'm actually cementing it in there even harder.

So instead of trying to convince you - all I can do is use you as an object lesson in how rational dialog and facts are completely incapable of modifying a strongly-held belief system.

Anyhow.

Thanks for the reference to triple-entry bookkeeping.  I'm still at the early stages of learning about this stuff, I'm reading through the tech manuals now.  To me, ethereum is a ton more interesting than bitcoin.  It's a platform and the general case, while bitcoin is a hack and a specific case which will quite possibly fade away (like the Stanley Steamer of old) in the fullness of time.  And no, we won't know the killer app until it slaps us in the face.  In spite of your fixation on currency, I don't think its been invented yet.

Hmm.  It would probably be easy to implement Charles's concept of labor-based currency using ethereum.  Wouldn't that be a kick?

As for porn - back in the day when I worked for AOL (when AOL was the big dog in the Internet business), the number of bits pushed by porn sites was greater than what we did at radio by a substantial margin - and radio & video moved a lot of bits.  Porn was always pushing the envelope of technology, much more so than the "mainstream" online services.  So you think I'm being slimy (Dave is Evil!), while I'm just being factual.

Here's evidence - I know you'll discard it (because Dave is Evil - backfire effect!), but others might find it illuminating:

http://www.businessinsider.com/how-porn-drives-innovation-in-tech-2013-7

That’s why bandwidth growth might be porn’s greatest contribution to the Internet since it allowed more material to move around the world at a much quicker rate. Think of the military as the inventor and creator of a product and porn as the entrepreneur who brings the product to the masses.

Porn also shaped other technologies such as library card cataloging systems and the home video market due to its large role during the VCR and Betamax battles. There’s even evidence that erotica helped popularize early printing presses. Even technologies like Snapchat, a mobile app that allows you to send an image that self-destructs after a few seconds, are partially adopted and driven by a desire to send sexy pictures to one another.

It shouldn’t be surprising then that researchers like Barss suggest that any business model for new communications technologies should venture into the porn market during its early days. Even if Google bans it.

 

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Surprise! I'm actually defending Dave!

I have said it before, and I will say it again... I like Dave.  I really do. I tease him, I challenge him because he's smart. He challenges me and my theory and positions to probe for weaknesses in my arguments which make me think. I would rather spend the company of somebody who sees things differently than people who always agree with me as it stimulates my mind.  That goes for everybody as I'm always a learner and need the challenge so I can always learn things from them.  Dave's opinions are useful but sometimes silly. But I'm sure I'm probably in that same boat because I have my biases as does everybody.

I really like Jim as well. I think I've had PM with most of the regulars on this forum and I think I've helped everybody with an early open mind, a LOT of money. It's been pretty hard not to for those who took my Ethereum suggestions early. Hopefully, Jim got in time to see his investment near DOUBLE. and as told him earlier - You ain't seen nothing yet. This thing isn't even two years old. Experts are already measuring Ethereum total market cap in of "Trillions"  Current market cap less than 10 billion?  You might forget about measuring in your wealth in ounces and start using units of "Lambos". cheeky

The fun for me is to change people's biases. I like when the lights go on in people's head when I'm teaching them. When I'm teaching somebody in person, and you can see it in their eyes and facial expressions. Mouth drops open, sometimes a  head shakes in disbelief and they reach that “a-ha” moment I think everybody achieves at some point when explained in person.  Sometimes it takes days – sometimes weeks. In classes that I teach – I’m usually swarmed with questions – sometimes for hours afterward and I’m happy to answer them all. I don’t think I’ve been stumped yet as I’ve heard probably every of the cliché responses from the uninformed that have formed opinions early. They are resistant to change – and the more they’ve preached to their friends against these changes, the more stubborn we are. Ego gets involved and we traditionally want to be consistent with ourselves for fear of loosing credibility. This is natural, especially for men and we subconsciously are always on the lookout for perceived disrespect. When Dave is resistant to my posts - I get it. I don't feel ill-will. If anything - I'm probably too direct. People are more open to listening when they don't have to defend themselves by 'digging in'.

Although Dave has tried to poke holes in the idea of bitcoin in particular – I appreciate it. He’s looking for boundaries. I do the very same thing. For the first year – I spent endless nights looking for the obvious logical breakdown that somebody must have missed somewhere. Even though the smartest guys in the room were slowly drawn to this new phenomenon some still resisted. As I mention in my article that those that are most steeped in the last paradigm are the most stubborn to move to the next as they’ve hitched the wagon to the horse of the last.  Dave has spent years speaking about gold and silver and I appreciate that as I was introduced into “real money’ also obsessively once I learned the true nature of money.

There is a certain sense of satisfaction in being respected for ones’ knowledge in a particular subject matter and Dave is a SME in the markets of gold and silver. This new “Bitcoin” thing and the blockchain invention that goes with it, certainly is a threat to the model he’s become a recognized SME. It attracts me exactly because it is a digital form of precious metals. Having people turn attention to the new thing in a way robs one the pride they took in being the authority of the last paradigm – even if it’s a small following, just having the feeling of being appreciated feels good.

As mentioned in the article I’ve linked – it’s difficult to move to a new paradigm even if it’s staring at you in the face – especially one as complicated as blockchain technology which is a struggle to keep up with for people that live and breathe it every day because it is not humanly possibly any longer. If it were me at this point – I would be like a deer in the headlights. How could I possibly remain a SME in both the past and the present?

I know many “Daves” that meet this criterion.  But, it’s harder for people who have staked their entire family fortune and business model on the previous economic and scientific model.

But Dave is also technical, a programmer, economist, trader, monetary wise, and most of all – a critical thinker, opinionated, sarcastic, and funny.  These are all the trades that I would find in a best friend. That he also isn’t afraid to challenge me – would likely be a best buddy. That’s why I feel like I can tease him although it’s much tougher to do in an internet forum where you only get about 3% of communication is the actual words you use. Body language and tone of voice\pitch \ loudness in about 20% and body language is over 80% and can’t be referenced at all in this format. In this – my physical distance, facial expressions, hand gestures, eye contact, mood- convey all kinds of messages that we subconsciously recognize but impossible to replicate with words.

I am considered much more convincing in person when you can feel my excitement, confidence, mood, sense of humor, passion, and optimism that many people describe as ‘infectious’. This is equally difficult to pull off with something so complex that it is impossible to have polite conversations because 10 or 20 minutes is about the max before somebody non-technical can handle before they want to desperately move onto far easier topics – like politics and religion. cheeky

So Dave’s the type of guy I would likely hang out with in person and given hours to ‘razz’ each other’s point of view. I might steer his thought process in right (my) direction with hours to banter ideas back and forth, and I could make “your momma’ jokes or other ways to challenge his sense of manliness over a beer. Contrary to what you might think, I would have respect because I would identify with all of those attributes.

As far as use-cases for bitcoin today where he thinks shallow, and I to a somewhat understanding can identify with that only in comparison to Ethereum which does so much more. But bitcoin is going to stick around because it represents tokenized truth and it’s backed up by the physical process in the world that requires a limit – namely energy on a massive scale. You simply can’t hack the laws of thermodynamics required to make energy. So when people use the argument “It’s not backed by anything” I find the dumbest comment.  It's backed by the laws of physics and math.  What is gold backed by?  The hard and expensive work of extraction. However, interest and usefulness in upcoming generations are so far removed there's no guarantee when compared by those future decision-makers with no horse in the race. 

Both are a sort of accounting system that was extremely difficult to forge. But bitcoin wins that battle because it is a unit of account that is public to the world and reconcilable down to the eighth decimal spot – leaving a total of 2.1 quadrillion ledger entries possible and can be transferred instantly to any part of the world in a flash. It records ownership that is permanent data to be tied to a ‘tokenized’ trust – including a piece of proof of something tangible in the world quadruplicate with computerized hashing. It is proving itself to become a store of value as witnessed in its meteoric rise from nothing into an accounting system that surpassed the price of gold while still an infant.  This is embarrassingly simple in retrospect. Do I find it the most interesting blockchain technology?  No. But it isn't going away and is still the ONLY one seriously tied to the physical world that is likely unbreakable

One current and expanding (unfortunately) use-case from today's headline. It pays for ransomware. With the NSA tools breakdown – we now have nation-state level exploits that are now released just a few days ago. As I work in healthcare, and even responsible for the Microsoft patching process for nearly 50,000 desktop machines – it is one of my primary responsibilities to see that the entire enterprise remains protected. I have recently advised hospitals on how to purchase and protect bitcoin as part of a contingency to be included in risk assessment and planning for the worst as is practical in all disaster-related possibilities. 

As for porn.  You know that had to be coming. – No pun intended.  There is already a fine use for BITCOIN for that.  Ashley Madison – and many other porn related sites could take bitcoin and not need personal records of people as it is a bearer instrument. Cash from the Central Bank from the Internet. People can pay for their porn addictions with bitcoin rather than having hackers take their personal banking details from the honey-pot of back office records and then blackmail them.

To be clear, I’m NOT advocating for porn, but proving my point by using another use-case for Dave to consider.

So if nothing else – there’s just two of your one sought after use-cases.  Check and Mate?

Let the debates continue my friends.  Hopefully, Dave too will soon get his head around this complex technology - find yourself down the rabbit hole many of us have found. It took my eight months and that was just on bitcoin. It's much more complex with all the directions it's gone. Everybody should feel free to always challenge us to keep the conversation interesting and lively. These threads are the most interesting on this website. I love the passion and strong opinions and even the little 'digs' that keep us on our toes.

For fun, take this test linked below to see what personality test you are. Then post it so we can all tell more about each other that doesn't come across in our debates. This is based on an ancient philosopher who studied human nature and builds a diagram still used today. The Enneagram. You might think it's fun.

https://enneagramtest.net/ 

 

For example - I'm a "5" - known as "The Investigator" 

 

 

 

 

 

thatchmo's picture
thatchmo
Status: Gold Member (Offline)
Joined: Dec 14 2008
Posts: 413
relative value....

Will I be able to someday purchase a big ol' chuck of polar ice with my .233 BTC?  And have it installed up there where it belongs?  Know what I mean?  Aloha, Steve

thatchmo's picture
thatchmo
Status: Gold Member (Offline)
Joined: Dec 14 2008
Posts: 413
double post

double post

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
Strawmen...

First off Dave.. I did not use the word evil.  I find you insincere.. and I point out exactly why I don't trust you using your own words.     

Honestly, since you are the computer engineer.. and I am a chemist, I don't even buy this line from your response to me;

Thanks for the reference to triple-entry bookkeeping.  I'm still at the early stages of learning about this stuff, I'm reading through the tech manuals now.

You didn't know this?  At the early stages?  Sounds like BS to me. 

Ego?  I could care less what anyone thinks of me.  I like myself, and trust myself.  If you write stupid shit that misdirects people away from the very things that can protect their savings, I will call you out on it from time to time.  It's just that simple.         

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
really hard problems

mrees-

Yes I definitely got the sense after your last message we were ok.  Agreed on the difficulty of communicating fully using text.  Jokes especially sometimes just get lost, or taken the wrong way, especially when you don't really know the other party.

I'm much happier having challenging discussions with people when we both come at it from a basis of intellectual honesty and underlying good will, and at this point I'm convinced that's where you come from, so all is well.

Your test scored me as a 1/8/4.  Seems to fit.  I was promoted once because my boss (as he told me) wanted me inside the tent pissing out, rather than outside the tent pissing in.

I agree with the "electricity" underpinning for bitcoin, assuming the algorithm for make-work remains secure.   I just think the lack of scalability and poor architecture will end up limiting its growth.  Dragging the entire blockchain around forever will slowly but steadily force centralization, you know that argument I'm sure.  And they really don't have a fix for the partition issue at all.

This guy says it better than me:

https://tonyarcieri.com/the-death-of-bitcoin

It’s worth noting that unlike Stellar/SCP, the PBFT algorithm Hyperledger is based on, or the DLS algorithm that Tendermint is based on, Bitcoin has no formal proof of correctness. To the contrary, it’s been proved that Bitcoin is broken from a theoretical perspective in that it fails to solve the Byzantine agreement problem and it’s been demonstrated in practice (and is generally known, at least among experts) that Bitcoin breaks in the event of a network partition, or in Bitcoin jargon, a “blockchain fork”. In the event of such a fork, one branch will win and one branch will lose, and transactions in the losing fork are completely lost.

He goes on to point out that "losing transactions" is generally seen to be a disagreeable outcome for people who engage in such things.  He also has some serious crypto complaints - not my area, but I know enough to nod my head at the right parts.

My instinct was correct - bitcoin is a hack.  :)  But a very popular one for sure.  Clearly it is solving a problem people want solved, and that's encouraging for the 2nd gen solutions that will come after.

I'm a platform guy from way back - long ago I was the TCP & comms guy for a p2p realtime trading room system platform which actually survived for maybe 15+ years.  Yay.  If it were still going, I'd have a job for life fixing & extending it, but sadly the company that bought us were a bunch of ignorant peons so I'm on the beach at half-pay.

Anyhow.  As a result of that experience, I know a platform when I see one, and that's what ethereum is.

If they can pull it off, ethereum will have solved some incredibly difficult problems in the hardest possible environment and as a result it really will become the new new thing.

Honestly, even if sharding and POS can't survive the attacks of motivated hackers in the public environment, it might just be interesting enough to revolutionize things inside companies in more cooperative environments.  Built-in fault tolerance, distributed computing, and migration, along with a mechanism that can apportion costs appropriately throughout the org relative to use - that's a platform anyone would be happy with.

That said - sharding is a really hard problem.  Although its not my area, I know enough about the issues that my head exploded just reading the FAQ.  Same for the "point of stake" part, although that was a bit nearer my area.  Making sure this all works in the face of adversaries who will collect a big cash payday if they can break it is a really big challenge.  I'm sure they'll get something working, because its just too much fun not to try.  How many shots will it take until it is relatively secure?  They'll have to deploy the system and see what breaks.  Rinse, repeat.  Meanwhile, the currency will get yanked around like crazy - at least that's my guess anyway.

There are also four underlying challenges that I have from a longer-term perspective.  Since you are now my friendly blockchain SME (and someone who clearly understands security issues), try these on:

1) How do they ensure the EVM remains secure, and that nobody can put in a back door.  Suborning either the equipment or the personnel at this single point becomes progressively more interesting the more value provided by (protected by) the system.  I.e. bribe or otherwise compromise the one guy in charge of the builds, and you own the system.

2) As you well know, securing a general purpose computer is impossible.  (latest ex: WannaCry; its also why those hardware wallets are absolutely required for any coin > $100).  Security for the overall platform relies on - at least in aggregate - a secure "mining" network.  How can we assure security from a provably-insecure set of components?

3) The more value this provides, the juicier the target.  Vulnerabilities that nobody cared to exploit at inception become extremely interesting to attackers - nation-state attackers - when the "Trillion" word starts to appear.  A "Wanna Cry" worm that silently infects all the miners and installs a backdoor in the EVM that gets triggered when specific calls get made - possible?  I'd say, inevitable, once that word "Trillion" appears.

4) Once we become dependent on it - that Trillion word again - it becomes a target for nation-state actor enemies (or terror groups).  That worm scenario again, except this time it simply destroys the blockchain.  Everywhere.

Although I love my work, at my core, I'm a luddite when it comes to tech.  I know just how much can go wrong, and how easy it is to hack things - because when I was a student, that's what I did sometimes for fun until I got bored.  So I avoid smart TVs, smart toasters, I don't want my car talking with anything else, I turn off bluetooth (and I'd snip the wires if I could), I don't like the mic on my laptop, and I tape over the camera.  I assume my phone is already owned by someone else, and so I conduct all my insecure crap on it.

I do think the promise alone of ethereum will make it (or something like it) very successful if they can get the hard parts even close to right.  And I'm ok riding along as a speculation - the currency will be an interesting way to own a stake in a 21st century version of a tech-IPO - but something still attracts me to little gold bars.  Bits are way too ephemeral.   Perhaps it dates back to that time when I accidentally rm -rf on my home directory and had to restore it from backup.  Yay backups.

At the same time, I just can't like bitcoin, because I think the design is lame.  But that could be a blind spot of mine.  Microsoft's architecture was lame for decades, and they did all right, stock-price-wise.  Sometimes all you need is for something to be just barely good enough to work, rather than something that's actually good.

Speaking of which, how are those 50,000 windows boxes of yours doing?  Don't envy you the job of securing them, especially for the OS versions for which MS doesn't send out updates anymore...and the switches, and the routers...all different flavors, all of which always need updating for one reason or another.  And AMT: here's something to make anyone who has a server farm's blood run cold; think of this in conjunction with that worm I was talking about: http://slashdot.org/story/325915

Ultimately, the more we put online, the harder things will fall when things go wrong.  And here at PP we are often focused on the stuff that can go wrong.  Right?

Can you imagine a nation's property trust deeds recorded on ethereum?  If by breaking the system, you could end up owning Trump Tower - or from the other perspective, scrambling the records so its completely unclear as to who owns what.  A la Mr. Robot.

Its all fun & games, until someone loses an eye.  :)

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
a straw man

You didn't know this?  At the early stages?  Sounds like BS to me.

Gee Jim, even when I say thanks, and I'm actually sincere, you attack me.  But you don't think I'm evil.

As evidence: just today you called me very, very slimy, and a snake in the grass.  Do you insult everyone like this?   Are you that big an asshole?  No.  I have it on good authority that you're really a nice guy.  I believe my source (I trust his intuition on this matter) and so I must therefore conclude that you only behave this badly towards people you think are evil, and thus deserve it. What other reason could there be?

Take today.  Mrees convinced me (he's good at that) I should go off and read about ethereum.  So, I've been going off and reading about ethereum in gross gory technical detail, in between training sessions for my latest ML project.  You'll never believe this story, even though its true, because - because I'm evil, and I'm lying to you whenever my lips are moving.  Snake in the grass, slimy, etc.

You may tell yourself that you are just "trusting yourself", but unfortunately, its really something else.  After years of repetition, personal attacks, and name-calling episodes, I suspect that your belief system about who I am and why I'm here are by now so integrated with your own identity, you get hit with the backfire effect every single time any positive contrary evidence about me appears.  You will never, ever be convinced that I'm not evil.

Jim, I happen to be an expert about me, my background, and my motivations for things.  Over the four years here, you have been consistently wrong about who I am, why I'm here, and why I say the things I do.  You are so far off track, its laughable.  You have done a terrible job figuring out who I am.  I mean, its catastrophically awful.

Why is this?

I figured out a while back that you don't really want to know who I am.  You actually prefer for me to remain evil.  The alternative is too scary for you to contemplate.  That's because if you found out for sure that I'm actually NOT evil, it would call into question your own belief in yourself that you "have good intuition" and "are able to figure things out" which are core to your identity.  And then you'd remember the long, long list of stupid, nasty, unnecessary personal attacks you made on me, and you'd feel really bad, because you're actually a nice guy at heart.  The more mean things you say to me, the more evil I have to become in order to justify it all to yourself.

Its just funny how things go.

the five's picture
the five
Status: Member (Offline)
Joined: May 15 2017
Posts: 2
when rings collide

The rings we smoke are not the rings at work. I find psychpathy to be annoying.

A lot of people who might give society "push" are zocked up - how about...

Undoing their bubbles for them. So that thet too can involve an foster.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
A reset...

DaveF said,

Jim, I happen to be an expert about me, my background, and my motivations for things.  Over the four years here, you have been consistently wrong about who I am, why I'm here, and why I say the things I do.  You are so far off track, its laughable.  You have done a terrible job figuring out who I am.  I mean, its catastrophically awful.

As with a lot of responses to my posts.. the actual intellectual point never gets debated, but instead we devolve into pscyhoanalysis... and I realize that I am at least partially at fault here. 

The more mean things you say to me, the more evil I have to become in order to justify it all to yourself.

Dave, it's the things you write that cause me to respond, often in anger, because I feel that you are doing neophytes a great disservice with your POV.  But yes, I am tired of this, and I have had to drastically reduce my time spent posting here because it's so much of an emotional drain to get into these arguments with you.  

Here's what I am going to do for me.  I am going to reset my outlook on you Dave.  No baggage.. no past.. I am going to look at your posts anew starting now, and treat them on a purely intellectual level.  I have great respect for your intellect Dave.  I have the ability to compartmentalize and reset, regardless of what ego constructs you may want to lay on me to explain our past interactions.   

What I am not going to do is stop being a truth warrior.  I don't care if 90% of the folks here think I am an asshole.. I really don't.  

Does anybody want the truth?  The truth about Gold and Silver?  The truth about Bitcoin and cryptos?  Let's talk about it.  Let's talk about the actual truth based on data.

Here.. I'll start us out Dave!

One of the most stunning charts I have seen in the last year;

 

      from:  https://srsroccoreport.com/central-bank-market-rigging-horrified-about-t...

What this chart shows is that the paper market manipulators, who to this day continue to have control over the pricing of Gold and Silver via their ability to print up futures contracts, effortlessly, without backing, in any quantity at any time, have in fact over the long haul ALWAYS, over the last 16 years, kept the Gold price on average just a little over the cost of extraction.  In other words, allow the price just high enough to keep the big mines operational.

Now isn't this an odd thing?  Are we to believe that the pricing mechanism is supply vs demand (it isn't) and the price just happens to always fall just a bit above the cost of extraction.  We can certainly see where the floor lies.  If Chris believes oil will take off in 2018.. what will happen to Gold?  Finally, given the huge float of Gold that exists in the world, and the fact that extraction adds only a tiny fraction to that.. why would extraction cost have any correlation to price whatsoever?  Inquiring minds want to know.  With ~180K tons of Gold in existence, why are those 5-7 tons extracted WW daily so important to price?  The chart says they are important.    

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Accounting for the Intangibles - Faith

That was funny that you referenced an article that was number 76 out of 129 times bitcoin has 'died'.  as found at:  https://99bitcoins.com/bitcoinobituaries/ It was predicted to die 53 times after that. The price was $263 dollars on that day. It has since risen 650%.

It seems to defy reason. Economist hate it. It was never supposed to happen. It is a machine that prints 28 billion dollars worth of money out of nothing. It is the central bank of the internet and nobody in charge. It is madness.  Yet, nobody would be talking about blockchain if it was still only worth 100 million. The whole reason Ethereum exists is because bitcoin opened the door. 

If the world would have listened in May 2015 and just decided to unplug it because it was going to die - would we have counties now legalizing it for regular banking? Or 30,000+ developers working on the projects which were spawned from it?  The UN - distributing food, or people without banking using smartphones to conduct business? It's crazy. No government issuance and backing - some government openly hostile to it - but yet the underground market thrive in corrupt countries by using it. 

A meeting convened at the European parliament a few weeks ago to learn more about this crazy blockchain technology and listened to the excellent speaker.

On your own advice in 2013, we should ignore and steer clear from this crazy idea - would have forfeited all the explosion of technology that followed because it survived. All of the ICOs and "Big Bang" of development and investment that are rushing to the new fresh ideas at a breakneck pace. Many now admit that this is a bigger deal than the internet. All because of this 'stupid script' with 'no real purpose' and destined to fail, as predicted 129 times (and counting). Should we have all packed up our bags in 2011,2012,2013,2015,2016,2017 as it became the investment opportunity of our lives so far.

It cannot scale. It is decentralized currently. With expected but controversial upgrades - it's possible that it could become more decentralized. There is inter-fighting between rival camps. The energy requirements are unsustainable. There are possible forking issues. It can only handle 7 or less transactions per second. There are commonly found a backlog of transactions. The fees for processing transactions continue to rise to get through the bottleneck. It's got a bad reputation. Many still think it is 'drug money' or only exists because of ransomeware. It's "Fake" money - tulip bulbs, a fad, beanie babies. Magic Internet money. Only used by crooks and scammers. The encryption will be broken by quantum computers. It can be hacked someday, Nobody is using it - because it is a joke. It represents less than 1/2 of one percent of Apple Corp cash on hand. Banks hate it. In summary - it's a joke.

Yet, it continues to live. And Grow. It's a Frankenstein mismatch beta experiment not even at a production 1.0 level. And yet it has never gone down. It's been up and running since January 2009 without a downtime and constant upgrades. It has been compared to fixing a 747 jumbo jet while in flight because thousands of companies now rely on it and can't be bothered for a weekend major upgrade like most banks. How is this possible?

It is madness. But slowly the doubters scratch their collective heads as it rewrites the rules. 

As is the power of belief. Belief in any currency requires a collective to decide a thing has value. Rather than being dictated by a governmental power - a grassroots belief system that constantly gains "converts" and with its own evidence creates more gravity as a network effect. This, in turn, creates a self-sustaining economic model. This transcends a technical system and even a logical system. But the alternative is to believe in a government imposed (fiat) system that has proven to fail and rob people of wealth, jobs, homes, and enrich bankers and politicians (for now). As in my article, they sense something is deeply wrong and when they look at blockchain money as an alternative deeply – many choose to believe in a new paradigm because the old one is collapsing.

Reading your enneagram type 1, I think I know where you are coming from. You're likely guided by logic and proof. By this standard bitcoin probably appears silly as it can't possibly work. But belief systems often are completely dissociated from logic. Most religions I have found don't stand up to scrutiny when examined very closely with the viewing lens of logic and may be a reason so many millennials are disassociating from organize religion once exposed to the information provided outside their local communities through the internet.

 

In this light, if it fails, it will be picked up again – patched and made to work. The Genie is out of the bottle. The light is on, the momentum is picking up. Simply put – people need to BELIEVE in something else. Just like they NEED to believe in a religion despite its obvious logical flaws. Whether a god actually exists or not, he is a powerful tool for (most) people to act better to each other and to strive to do good.  The power of positive thinking has been proven in many scientific studies and religious people live longer and have happier lives – at least in the US based on research I’ve done. Remember I am an number 5 –“Investigator”.

 

So I pull together many, sometimes conflicting, bits of information for me to make a mental ‘model’ including plugging in pieces of human conditioning, and mental \spiritual motivations that are difficult to account for in the “machinery’ of computer logic and physics. Faith in a system makes the impossible, possible as no invention I can think of was built by a doubter. They were built by dreamers and visionaries that could imagine a world that existed outside of previous experience. Their motivation was to imagine a world that wasn’t quite provable at that time.

 

I think Ethereum will gain popularity and adoption for the same reason, even if it has some failures. We Need it. So people will find ways to patch it and prop it back up if needed. They won’t all collectively say “Oh well, we tried”. And go back to the way things were before.

I wasn’t surprised when it got punched last summer. I wasn’t surprised it got hacked with spam. I would have been surprised if it hadn’t as it has a large attack surface of being a touring complete programming language. I was impressed how they came together and didn’t panic. They grew stronger and wiser because of it. This gives me much more confidence. It’s powerful positive thinking to go along with experience. These are the ingredients of historical paradigm changes in history.

They will also spawn many copycats. Ethereum Classic and Expanse are just a couple of early ones, I wrote about a ‘scam ico’ a few weeks ago that was another would-be rip-off. They will hard fork again to to their third release schedule this summer for the planned “Metropolis” version so I expect some miners will want to continue to mine the previous version for whatever reason and when they hardfork again when the convert to Proof of Stake, I suspect there will be a band of miners who will be left out and will continue to use the old way. So we might have several splinter groups just like we find in religions.

But I’ll stick to the people that I admire and are proven. Vatalik is the one who started it so I’ll follow him. The unlikely 19-year-old hacker who started it all – and fit perfectly with the typical outsider who starts massive paradigm changes. He began the ethereum crowd sale after my Bitcoin Magazine article I attached earlier where I ‘bet’ one bitcoin on him and for about $500 worth of bitcoin picked up 2,000 ether that equated to 25 cents.  It has peaked so far at $100 each. I expect it to be worth thousands each. It isn’t because of scientific logical properties or amazing ability to represent tangible assets and be required for the Ethereum Virtual Machine – it’s because it represents the intangible that I’ve come to understand as an ‘investigator’ but may be more difficult to model for type one “Reformers”.  People’s faith.

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Jim's postings

Hi Jim, 

As an "investigator" as described as my standard model personality type - I appreciate all opinions and passions. I try not to be judgmental or biased and will sometimes post a 'controversial' posting that I know will illicit a response so I can learn more about people and enjoy the conversation. If it is heated and passionate - that's all the better as long as it doesn't go into personal attacks. I've been a little guilty of straying a little into that area, even though it was a bit of subtle good intention for comic effect, it may have been too far at the expense of others.

So please don't refrain from posting as you are more reliable than most to not just 'lurk' at other people's opinions. I hope and believe we all have something worthwhile to our own opinions. It's good practice to grow tolerant of backgrounds and life-experiences of others that we didn't experience ourselves. 

So please continue and be an example for the others too shy to speak up and let us know them as well. The leaders among us strive to be an example. Hopefully, we can together inspire others to comment and feel that their opinions count as well.

Thanks!

-Mark

 

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
Thank you Mark...

I will continue dollar cost averaging into ETH .. loved the story about betting BTC and getting (2000) Ether.. : )

You said,

 But the alternative is to believe in a government imposed (fiat) system that has proven to fail and rob people of wealth, jobs, homes, and enrich bankers and politicians (for now). As in my article, they sense something is deeply wrong and when they look at blockchain money as an alternative deeply – many choose to believe in a new paradigm because the old one is collapsing.

I have often said exactly this in the context of Gold and Silver.. while we can always think of risks (it can be confiscated, etc) one really can't fully digest the value of alternative money-like assets like Gold, Silver, or Bitcoin/ETH until we understand how bad debt-based fiat currency is.  There is really nothing good about it - because it is loaned into existence, with interest attached, debt always grows faster than the amount of currency in the system, leading to the underlying need for constant, exponential growth.  The power to print corrupts everything else.  The only thing worse than the collection of ostensibly different fiat currencies we have today would be one, single world currency under central control.  Fear that.           

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
resets

Jim-

A reset would be great.  I too don't like all the negative energy we've generated in the past.  It just doesn't feel very nice.  And its not productive for us, or for anyone reading what we write.

So I'm happy to participate.  Going forward, to better help me keep it together, I ask you to avoid the following two things: 1) avoid calling me names (or engaging in related ad-hom attacks), and 2) don't impute any sort of motive to me.  And for your part, is there something you'd like me to avoid doing to better help you keep it together?

It may surprise you, but I too am a searcher for the truth.  At least, that's what I believe I'm doing.

You provide lots of good information.  I enjoy reading it.  I don't read the same sources you do.  There's just not enough time in the day.  If we can keep to this reset, I believe we will both benefit, as will everyone else because there will be more points of view expressed here, and we will all be better informed as a result.

One of the more important facts I recall reading from you - I forget, maybe a year ago now - was that the amount of paper gold at LBMA was vastly larger than that at COMEX.  That always sits in the back of my mind.  Its an irritant to me, because I don't have any numbers on just how much paper they've printed.  I want to know.  Perhaps after all the fuss, COMEX is not where the action is.  Is it possible that COMEX has printed up 110% of annual silver production, and LBMA has done another 5000%?  That would surely be something, if true.

So what's the economic explanation for this chart of yours?  In the most recent podcast (with Leanne Baker), she said that during the next gold rally, for sure the costs will rise along with the price of gold, because "it always seems to do that."  Maybe salary and bonuses go up during times of plenty.  Everyone wants their slice.  Maybe they mine ores with lower grades.   Certainly I recall reading about specific gold mining companies that were restarting old, formerly-unproductive mines when gold hit the 1600s.

Or my observation about stuff: "crap always expands to fill the available space."  Certainly that's true of disk drives & content.  Does anyone remove anything anymore?  Only when they run out of disk space.  Likewise true for costs & mining.

Now let's talk about the market.  Over the long term, price is determined by supply and demand, where supply = paper + physical, and demand doesn't currently differentiate.  Commercials have the ability to print as much paper as they want, a literally infinite supply, while the mines can only produce an amount limited by physics.  Price fluctuates in response to changes in supply.  Can we agree on that basic worldview?

Now then, if we look at the actual data, what really happened with the two supply components over time?  [Warning: this part might make you angry]

COMEX OI in 2000: ~120k contracts

COMEX OI in 2016: ~450k contracts

Net change: +310k contracts over 17 years, or +18k contracts per year.

Gold mined in 2000: 2590 tons

Gold mined in 2016: 3110 tons

Average net change: +2800 tons/year

Since +18k contracts = +56 (paper gold) tons, the +2800 tons of new physical gold mined every year totally dominates the +56 paper tons printed at COMEX each year.

This is what my math shows me.  Before you get angry, can you please tell me where I've gone wrong?

I totally agree that in the short term, paper gold printing can dominate price.  Long term, however, the theoretical ability of the commercials to print an infinite amount of paper gold simply hasn't been used.  It remains theoretical, much like the Fed's theoretical ability to print infinite amounts of money and buy everything.  They could do so - but they haven't.

And perhaps most importantly, I don't believe that short term paper gold printfests end up dominating long term price trends.  This infinite-printing ability is extremely useful of course - what it does do is empower the commercials to execute their periodic "wash & rinse" cycle, allowing them to harvest managed money and run the occasional smash at the London Fix so as to better hose their customers.  But that's not the same thing as allowing them to dominate the longer term trend for decades at a time.

I mean, they certainly could dominate price through their infinite-printing operations, but if they did that, we'd see open interest in the tens millions of contracts by now, rather than the 443k its at today.

Now then.  The math that does work for me is: the vast amount of money printing going on, the extreme levels of debt, our unfunded liabilities, declining ore grades, declining net energy, and the fact that most of this debt will most probably have to be defaulted upon, one way or the other.  That math is pretty hard to refute if current trends remain in place.  Whether its a "capital levy" (savings account confiscation by government) or a banking crisis or massive increases in property taxes, its clear that something bad pretty much has to happen in the future that gold as an asset class will - most likely - hedge against.

To my mind, some stories floating around out there are just fantasies created to explain why someone's pet theory didn't worked out the way they expected it to work.  Other stories I completely agree with - the ones in the previous paragraph, for instance.

For me, the math has to work out.  Some places it does, and some it doesn't.  I'm asking you - don't get angry at me when I challenge you on the stories where the math doesn't appear to work out.  And take me seriously when I do agree with you.  I'm sincere about both positions.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
lots of good points; Fedcoin

mrees-

Lots of good points.  Faith that the dev effort will continue regardless of the bumps in the road is probably the one that I find most convincing.

And yet - my security concerns remain completely unanswered.  :)

At PP here as you know, we like to consider all the potential black swans flapping around even while we're in the middle of living in, and with, the current status quo.

Part of my self-appointed role here is coming up with a catalog of potential critical issues for each area, sorting out what they are, writing them down, and then moving on.

Talk to me about cash, about savings accounts, about IRAs and 401ks, about the equity market, even about gold, there are issues surrounding each of them.  I come up with my list of issues - of danger signs to look for - and then I move on.  I still have a savings account, an IRA, equities, cash, and gold.  But I keep one eye on the exits; there is Cyprus (where they stole people's savings), Poland (where they stole their pensions), and 2008 (where equity prices crash), and 2013 (when gold prices were smashed), and of course the war on cash where if you have cash, you're a criminal.

In that spirit, I've been working on my list of issues.  Under what conditions will a coin lose 80% of its value?  What conditions will it end up on the ash heap of history?   Success takes care of itself; my goal is to avoid catastrophic loss.

You drag up a bunch of things I didn't say against bitcoin and then pooh-pooh them.  I only brought up the issues that make sense to me.  As a favor to me - can you please just respond to me about my specific objections rather than list everyone else's objections that I didn't actually voice, some of which I think are pretty silly too?

The article I quoted wasn't intended to forecast bitcoin dying - it was about network partitions, and how bitcoin will have a very difficult time if one occurs.  Its a specific, major issue I have, something that hasn't happened yet, and if/when a major partition actually occurs, I'd expect the price of bitcoin to be crushed - that 80% drop.  To me, its a major price risk.  Gold and cash don't suffer from this vulnerability.  Partition happens; buck remains the same.  Gold remains the same. That doesn't mean gold has more upside - but it is a lot more resilient on the downside.

I'm pretty good at seeing a design and projecting forward what it can do.  Ethereum platform, if it ever actually works as they intend, will provide amazing value, and I believe that value will make it vastly more difficult to kill off (assuming the central bankers and others might want these coins dead, once they prove out the market), lowering the risk for anyone "storing value" in the currency.  If all bitcoin does is provide a medium of exchange, that's much easier for the big guys to just take out.

Lastly, I've been in markets for quite a while.  Faith is not some new concept to me.  I probably know just as much as you do about how faith moves prices.  I completely understand why bitcoin has a bid right now - and why it loses it sometimes too.

I also agree that the dev teams will keep plugging at the whole effort, because there is so much interest (slash "demand") out there for it.  How much is novelty?  How much is functionality?  How much is greed?  How much is gambling?  That is hard to tease out.

Here's a thought experiment.  Postulate Fedcoin, guaranteed and backed by our Friendly Fed 1:1 by the USD.  You can turn your bank deposits into Fedcoin much as you can withdraw currency.  You can buy things online from Amazon with Fedcoin, Amazon sends your Fedcoin off to the Fed which will eventually turn them into an ACH deposit into Amazon's bank account.  Processing fee: 3 cents.  What would such a thing do to bitcoin?  Nothing?  Would it crush bitcoin?  How much of bitcoin's price has to do with the utility of actually sending currency over the net in real time, and how much is just the excitement of buying into something whose price goes up?

Fedcoin has guaranteed stability.  It won't drop 10% overnight on you.  That's probably more attractive to regular merchants than bitcoin's crazy moves.  You can pay your taxes with Fedcoin.  You can pay your debts with Fedcoin.  It acts in all respects like cash, and is fully convertible back and forth.  Its just a digital version.

[Jim.  I'm not making a political statement about Fedcoin.  I'm not advocating Fedcoin.  It's a thought experiment, intended to provoke discussion.  Please don't ad-hom me.  Instead, explain why Fedcoin (which provides the "sending cash in real time over the net" functionality) won't affect bitcoin.]

Amusingly, one could probably implement Fedcoin fairly easily using Ethereum platform and a raft of servers sitting at the Fed.

If the answer is, Fedcoin crushes bitcoin - at the same time, if ethereum platform is fully functional, it might just leave ethereum mostly untouched.

One other thing I know about faith.  Sometimes, people get bored, or something new happens, or something really bad happens, or a shiny new toy appears and they focus on that.  And the stuff that got all the attention (all of the "eyeballs") - its just gone.

That's why I think the underlying value of a platform is helpful in cushioning the downside risk.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
late to the party

Ok, so I'm late to the party again.  :)

Follows is a two year old article by a VP at the St Louis Fed.

http://www.newsweek.com/fed-should-issue-its-own-bitcoin-lets-call-it-fedcoin-410289?piano_t=1

One exciting development of late is Bitcoin--an algorithmic-based, communally-operated money and payment system. I thought I'd take some time to gather my thoughts on Bitcoin and to ponder how central banks might respond to this innovation.

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 341
OK, what am I missing?
davefairtex wrote:

Now then, if we look at the actual data, what really happened with the two supply components over time?  [Warning: this part might make you angry]

COMEX OI in 2000: ~120k contracts

COMEX OI in 2016: ~450k contracts

Net change: +310k contracts over 17 years, or +18k contracts per year.

Gold mined in 2000: 2590 tons

Gold mined in 2016: 3110 tons

Average net change: +2800 tons/year

Since +18k contracts = +56 (paper gold) tons, the +2800 tons of new physical gold mined every year totally dominates the +56 paper tons printed at COMEX each year.

Are those numbers right, Dave? Or has my brain gone fuzzy?

3110 tons - 2590 tons = a net change of 520 tons over 17 years or +30.5 tons per year as opposed to your 2800 tons/year. That would make paper tons almost double that of physical on an annual basis

(Also, is net change not 330k for paper contracts?)

[Edit: Ignore me, you're looking at new supply made available each year]

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Fedcoin vs BItcoin

Eh.. I see where you are going with this Dave but have to disagree. BTC is decentralized. Fedcoin as you point out is interchangeable $ for $ therefore controlled by the Govt

 

I think bigger picture.. the USDs life is ending as all fiats have before it. This will happen once the full faith and credit of the US government comes into question or the world quickens its pace of going around the USD for oil sales. This will happen sooner rather than later. It should take some time however as two generations of Americans now have grown up and been indoctrinated as to what money is. My generation the millennials and the one before me Xers weren't educated on the difference between money and currency. How they are created and how they are different. This is a HUGE idea I know, but the time is coming.

 

One good thing about Trump being elected is the fact that many are waking up to how much power the government actually possess. I'm not sure that they were OK with Pres Obama, Bush or Clinton having these powers, they just didn't know or care.

 

Back to BTC. Its fixed supply helps with scarcity issues hoping support price. I know you like to tout your coding experience and often point out BTC flaws. I am not a coder, I read the white paper and the IDEA of BTC is fantastic! It fits my personal views; therefore I am an investor/holder, along with other cryptos. I think the infrastructure will accommodate the idea.. I'm sure if you think hard enough you can find flaws in almost everything, innovation helps to fix these flaws.

You and I watch several of the same things...  

Talk to me about cash, about savings accounts, about IRAs and 401ks, about the equity market, even about gold, there are issues surrounding each of them.  I come up with my list of issues - of danger signs to look for - and then I move on.  I still have a savings account, an IRA, equities, cash, and gold.  But I keep one eye on the exits; there is Cyprus (where they stole people's savings), Poland (where they stole their pensions), and 2008 (where equity prices crash), and 2013 (when gold prices were smashed), and of course the war on cash where if you have cash, you're a criminal.

I told you in a previous post I'm kinda "out there" so here’s something to ponder.

 

Shares held in IRAs, 401ks and individual accounts are rehypothecated. There are many multiple claims on the ownership of a share of stock. What happens when the music stops, see the flaw? Not good things.

 

Savings accounts: we have had numerous discussions here about bank-bail ins see the flaw?.. POOF goes the savings account.

 

Gold could possibly be subject to confiscation... again.

 

Cash under a mattress, loses value everyday via inflation although I would argue it does so in a savings account as well.

 

All of these things can happen in tandem when the reset happens. The event that triggers this reset is anyone’s guess. When the reset does happen there will be MAJOR restructuring. It will be a period of suffering for many. The world really will be a different place on the other side. How to position ones portfolio going into the reset is important but even more importantly what will that portfolio look like on the other side? I believe Bitcoin or something similar (not Fedcoin) will have a much greater role to play than shares of apple stock, or shares of Newmont Mining, shares of any company as a matter of fact. What will they be worth on the other side? Depends on how the restructuring goes. 

 

I do know that owning precious metals and cryptos means that you own an asset as opposed to a liability (fiat debt based currency). Again, a share of stock with multiple ownership claims isn't an asset. Another issue with the reset will be LACK of assets and a super tight lending environment. I am preparing my personal portfolio to hold assets I feel will be worth something after the reset. Taking this to the next level, what assets will rise in relation to other assets? What will be the best performing asset? Gee if I only knew.. I would tell you and everyone I know! ;-)

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
Good on the reset

Good Dave.. Thank you for accepting the reset. 

And for your part, is there something you'd like me to avoid doing to better help you keep it together?

I would like us to be able to (try) to settle very specific points sometimes.. without getting distracted.    The first example of this will be the curious nature of the message in the chart I presented above. You acknowledged the point.. and Leanne Baker's acknowledgement of the point, but I don't feel like we really hashed out how odd this really is.  

So what's the economic explanation for this chart of yours?  In the most recent podcast (with Leanne Baker), she said that during the next gold rally, for sure the costs will rise along with the price of gold, because "it always seems to do that."  Maybe salary and bonuses go up during times of plenty.  Everyone wants their slice.  Maybe they mine ores with lower grades.   Certainly I recall reading about specific gold mining companies that were restarting old, formerly-unproductive mines when gold hit the 1600s.

Or my observation about stuff: "crap always expands to fill the available space."  Certainly that's true of disk drives & content.  Does anyone remove anything anymore?  Only when they run out of disk space.  Likewise true for costs & mining.

Dave you said, "what's the economic explanation for this chart...?".  My point would be this:  There is none.  It's impossible outside of the effects of manipulation.  In fact, this data essentially proves that manipulation has, in fact, controlled the price of Gold over at least the last 16 years, and that the control floor has been set in such a way to keep the large miners able to continue extraction economically, which is maybe not so surprising when you think about it.   

In order to understand why the price of Gold should not be tied to, or stated differently, be highly correlated to,  the extraction cost of Gold, we need to think through why the Gold market is unique among all markets:  All the Gold mined in history exists, much of it in tradable form, hence the incremental newly mined Gold should, theoretically, have little effect on price.  Stated just a little differently;  The cost of extraction of incremental newly mined Gold should have little effect on price. 

This is an old article (2009) but the guy tries to make the same (theoretical) point about the Gold market.. i.e. that price formation is NOT effected by new mine supply;

In my article The Myth of the Gold Supply Deficit, I cite the following statistics from the World Gold Council:

 

Total above-ground gold supply:

155,000 tonnes/5 billion ounces

Annual gold mine production:

2500 tonnes/80Moz

This gives us a total LBMA trading volume of a bit less than 30% of the total gold trading volume (also known as the float). Counting other exchanges and small purchases (from coin dealers) would make this number higher. Mine supply contributes about 6% of total LBMA volume.

 

Conclusion: the gold market is a very liquid and deep market with plenty of supply available at or near the market prices. Many buyers and sellers are close to the margin. For those who accept my analysis of price formation but believe that the impact of the gold miner as the marginal seller is nonetheless quite significant, these statistics suggest otherwise.

http://www.24hgold.com/english/contributor.aspx?contributor=Robert+Blume...        

Let's look at the data in another way - via correlation coefficient (Pearson).  Chris has often cited the uncanny correlation (or fit) between money growth and a model exponential curve fit as proof that our debt-based money system is subject to exponential growth.  He does it here (see 0.99 correlation reference);

https://www.peakprosperity.com/blog/91558/when-ends-everybody-gets-hurt

In any event, to those of us in science and engineering, the statistical strength of correlation speaks loudly.  Here is one reference I grabbed on the internet;

 

relationship.png

I eyeballed the data in the SRS Rocco chart, put it in Minitab, and ran a (Pearson) correlation on the 17 paired data points.  Result = 0.98!  What does 0.98 say?  It says that the price... the Market Price for Gold is determined entirely by the cost of extraction of incremental new Gold.   That simply should not be. 

So Dave you said, "what's the economic explanation for this...?".   There is no economic explanation.  The explanation is that the price of Gold is controlled by the leveraged paper futures market, and that this control mechanism has been carefully calibrated over the last 16 years to allow for the cost of mining Gold to be covered (mostly), and that supply vs. demand has almost no influence (for now).  As long as you buy the fact that the Gold market float (being huge) should make moot the cost of extraction of incremental new Gold on the Gold price,  this data, as I see it, refutes your point that manipulation cannot control price in the longer term.. unless you consider 16 years not long term : )        

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
extra supply comes from where

Ok, its a deal.  If you see me getting distracted, maybe just drag me back on point.   Sometimes its not quite clear (at least to me) what the important question you're asking is.  I'm not trying to avoid it, sometimes I just miss it.

Your thesis is - you don't quite know how, but you believe that someone is making sure that the price of gold never goes too far above (or too far below) its cost of extraction.

My thesis is, it simply can't be COMEX.  In all markets, supply & demand drive prices over the long term.  That's one of my articles of faith.  To control the market (as the Fed does with, say, Treasury bonds) there needs to be a consistent bid (to keep prices up) or offer (to keep prices down).  That's the only way it works.

Proof for this thesis?  If that WASN'T the way things worked, if there was some magic spell the Fed knows how to use on markets to move them without using supply & demand, then the Fed would never have purchased 4 trillion dollars of treasury bonds.  They'd have just used the magic spell.  Why risk the balance sheet when you can use magic spells instead?  So since they bought 4 trillion in treasury bonds, this strongly supports my thesis that there is no magic spell to move prices without injecting supply or demand - as the Fed did with QE1-3.

So, to control price, we must have extra supply - either paper, or physical.  And the extra supply is clearly not coming from COMEX, because the OI changes over that time period are completely dwarfed by mine supply.

So where is it coming from?

Mine supply 2000-2016 was 48k tons.  You have stated that mine supply doesn't impact price very much.  Therefore, the "excess supply" (be it physical, or paper) should probably be larger than this amount over that time period.  What are the possibilities I see?  [Add some if you think I've missed any]

It could be paper at LBMA.  Do we think there are 48k tons of paper gold overhang at LBMA?  That's about a factor of 10 more than anything I've heard.

It could be dishoarded central bank gold gold.  Central bank gold is 17.4% of the total, or 31k tons.  If every bit of central bank gold was dishoarded to cap price, it is less than total mine supply over 2000-2016.

I don't believe its jewelry.  Good luck snatching the gold from all those Chinese and Indian women.

It could be private investment, but a lot of that gold really is in private hands - coins, bars in vaults, etc.  Only 800 tons are in GLD, and that's just nothing compared to the 48k tons of mine supply.

Did I miss a source?

I honestly don't see a source for consistently providing extra supply to the market over the 17 year period that is greater than mine supply.  Not COMEX paper, not LBMA paper, not dishoarded central bank gold, and not GLD.  Mine supply was larger than all of those things combined.

Mine supply is the big dog, that's just what the numbers say. Trading volume is neither supply, nor demand.  I know a lot of your sources focus on trading volume, but it means nothing.  Only supply/demand imbalances move price.  If trading volumes are 5000 tons a day, you can't tell me which direction the market will move.  If you were to drop a 5000 ton gold asteroid onto the market, we all know what will happen to price: it will simply crater, because there will not be anywhere near enough buyers at the current price to absorb all that new supply.

So if you are going to convince me that they've successfully manipulated the market long term, you have to tell me where that extra supply is coming from.  And it should probably be substantially larger than mine supply over the same period.

I know I'm not directly addressing your correlations (which I'm told, are not equal to causations), I'm coming at it from the other direction.  Since we know magic move-the-market spells don't work, for your thesis to be true, there must be "extra supply", and the supply has to come from somewhere, and it has to be bigger than mine supply over the same time period.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
core utility question

MJB-

So I understand the not-controlled-by-the-government perspective, but seriously, nobody cares about that outside the goldbug community.

I've put my mainstream marketing hat on now.  You're some foreign worker in Dubai getting rich being a worker for the oil-driven desert city.  You want to send your money back home.  You don't give two shits about "government control" or "the coming cataclysm" or any of that.  You want your money to get to your family, at low cost, instantly.  That's it, end of story.

WU charges you 5% and makes you fill out a nasty form.  And your uncle Bob has to schlep down to the WU store at his end and sign for it.

If you can do this same thing with Fedcoin for $0.50, you'll do it in a heartbeat.  Again, you don't care about government control.  You just want it to work, work fast, and work for cheap.

That's the core utility I'm talking about.

The volatility of bitcoin is actually a massive liability for the core utility function.  Nobody really wants the value to spike $10 up or down while the transfer is in progress.  That's a really disconcerting "feature" for something that's supposed to be acting like cash.

Something that's pegged to a currency and retains a stable value looks a whole lot better to the ordinary man on the street.

So let's say that they do this.  To me, this represents a big threat to bitcoin's core utility.  It takes bitcoin's upside away.  You can use Fedcoin to buy your porn, or your drugs, or to pay your ransomware - same as with bitcoin.  And there's no irritating 10% daily price move to make you nervous.

You try paying for a product with bitcoin sometime.  How much exactly do you have to send?

I don't see this happening this year or next, though, so I think you're safe to roll the dice for the time being.  Fed will probably wait for more widespread adoption to take place - but I'm guessing that they really do want to maintain their monopoly over money, and bitcoin will eventually be seen as a threat.

Another Fedcoin article - this one a bit darker:

https://news.bitcoin.com/fedcoin-u-s-issue-e-currency/

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Good real life example

Good real life example Dave. My thoughts are definitely not the same as the majority/mainstream and appreciate being pulled back to 'reality'

I have recently made my first purchase with BTC, traded it for silver (see earlier post). I was left with a small bad taste in my mouth because the company used BitPay. BitPay is a company that receives BTC on behalf of the customer and then give the merchant USD. I was not thrilled because BitPay's price for a BTC was about $40 less than Coinbase. I could have bought 2 more Silver Eagles with that! As for the transfer itself, it was less than $1 in BTC. This was on an order over 2K so I'd say the 'fee' is still cheaper than a credit card. This is for both parties I assume because I received a 4% discount by using BTC as opposed to using a credit card. Cash, there was a 5% discount.

Any merchant dealing with BitPay is doing it for the convenience of their customers, not because they want BTC exposure. They want to be paid in USD. They do this for a number of reasons, volatility and acceptability as you have pointed out are two main reasons. 

We are still early though! The BTC payment system is part of that future infrastructure I was talking about... Way too nice of margins for BitPay not to have some competition coming soon IMO.

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Physical vs Paper

I don't know if you follow Bill Murphy at Gata, Dave but he has been on a tear lately.. he's piping mad about what he calls the paper manipulation.

My fear in the paper market is that I could see a Force Majeure on deliveries happening quite easily. This is especially true in the silver market. When we see a Force Majeure you will know the game is over, when the physical and paper markets are forced to come together. It won't matter if the COMEX price is $5/ounce, premiums will be $50+ at the local coin shop. You can keep your paper and settle in cash. I'll take physical at these 'manipulated' prices and reasonable premiums.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
I need a timeout...

Dave, you argued against the data using, "Dave's law" which says manipulation simply can't take place over the long haul.  As well, you, a guy who creates and uses sophisticated trading models, which I assume to be some kind of multivariate regression models.. essentially laughed off a 0.98 Pearson on a data set that should not have such a high natural correlation (if any at all) with, " correlation does not imply causation".  Indeed, it does not.     

Yoxa's picture
Yoxa
Status: Silver Member (Offline)
Joined: Dec 21 2011
Posts: 248
Correlation

>> essentially laughed off

FWIW, that's not how it came across to this neophyte reader.

There are points to be explored here so please don't get taken off track by emotional assumptions.

I'd be curious to hear more about possible theories for the high correlation that don't involve manipulation.

 

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
Dave's Law

Jim-

Dave, you argued against the data using, "Dave's law" which says manipulation simply can't take place over the long haul.  As well, you, a guy who creates and uses sophisticated trading models, which I assume to be some kind of multivariate regression models.. essentially laughed off a 0.98 Pearson on a data set that should not have such a high natural correlation (if any at all) with, " correlation does not imply causation".  Indeed, it does not.    

I am not laughing off your data.  I don't have an explanation, because I don't know the mining industry well enough to explain precisely why their costs seem to expand to fit the available income, and then shrink back down again when the price got pounded.  You say its the price that moved, but it could just as easily be the costs that were reacting to price.

Simply pointing at a chart and saying, "its got a good correlation" isn't proof of a specific cause, because there are other explanations that work for me for that chart, but I already got the sense that the only explanation you'd ever accept was the answer you wanted to hear: "its gotta be long term trend manipulation."  That's why I didn't go there.  I'd say tomato, you'd say tomahto, and we'd get nowhere.

So, not wanting to end up arguing about why a mining industry (about which I have no expertise) costs rise and fall, I figured I'd come at it from another angle, one where I do have some expertise.  And so I went with the Dave's Law approach.

And so I agree I'm invoking Dave's Law here, but let me refine it just a bit.

Dave's Law: in order to manipulate the trend, you must use a balance sheet to do it.  Here are three cases in support:

1) Fed & the long term Treasury.  20 year yields are at 2.74%.  Trend successfully manipulated.  Balance sheet evidence?  The 4 trillion dollar Fed balance sheet stuffed with Treasury bills.

2) The gold COT report.  Looking at the COT report "commercials balance sheet" every week, we can effectively predict where the price of gold will go next.  That's because the commercials really are able to (in most cases) move price around by dramatically increasing or decreasing the amount of paper gold out there.  Their increases and decreases are dramatically larger than mine supply; silver paper fell this past few weeks by 20% of mine supply over that same period.  Manipulation works, but it needs a big balance sheet to do it - and the evidence shows, they only do it weeks/months rather than years.

3) The SNB and the EUR/CHF peg.  SNB kept a lid on the CHF by buying a ton of Euros.  Evidence: a balance sheet full of Euros at the SNB.  That worked, right up until they gave up.

Dave's law, corollary 1: there are no substitutes for using the balance sheet.  Using a balance sheet is risky.  None of these orgs would take this approach if there were other options available.  If they could employ a "bot" to achieve the same objective, they would do it in a heartbeat, because bots are risk free.  If such things existed and worked, we'd never see anyone using the balance sheet.

So, according to Dave's Law, to manipulate the gold market over a 17 year period, there must be a big balance sheet somewhere.  How big?  We have a statement from your sources that "mine supply doesn't move the market."  So that gives us a minimum: has to be bigger than mine supply - probably significantly bigger.  The COT case agrees with that too.

So find me the balance sheet that, like the Fed, or the COT, or the SNB, is short an amount of paper gold that's larger than mine supply, and I'll agree that long term trend manipulation via printing paper gold contracts (or selling leased Central Bank gold) was used to keep a lid on the price of gold.

You show me that balance sheet, and you'll have me 100% your side.

We know for sure it cannot possibly be COMEX.

Mine supply (17 years) = about 15 million COMEX GC contracts.

Current COMEX OI (since inception) = about 433k COMEX GC contracts.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
exchange rates, fees, and Fedcoin

Congratulations on using your bitcoin!  You made a good trade, and you're cashing in.  Can't argue with that.

Until you can pay taxes, rent, and debt in BTC, it will always require conversion and a fee to use.  And you'll always be taking "exchange rate risk" when you hold it.

If you have a $1000 rent payment, and 1 BTC, can you - for sure - make your rent payment next month?

No.  If there is some very unpleasant event in the bitcoin world, price could drop 50% and then you'd be evicted.   The only way you can assure making your rent payment is by having $1000.

Even things with "prices in bitcoin" are all just quoting you an implicit exchange rate.  If BTC drops in half, those "bitcoin prices" will double, because the merchant's costs (electric, wages, materials, etc) are in USD.

So when you buy with bitcoin, you have to ask, what exchange rate am I paying?  That's the real fee you are paying.  The nominal $1 you are charged is more or less nothing.

And yeah, its 4%.

There would be no exchange rate with Fedcoin.  And the fee wouldn't be a buck either.  It could be as little as 10 cents.  ACH is down at around 2 cents right now.  Its end-of-day though, not realtime, so perhaps its cheaper.  But still - use the ethereum platform to implement it, and...hmm.   This could be a business.  And it doesn't have to be the Fed doing it.  Hmm.

Merchants would simply love it.  Interchange fees for VISA are 1-2%.  That comes right off their bottom line.  Long time ago I was in the payments business.  Merchants hate VISA, and they love checks - as long as they aren't bad checks.  If they could get something that looked like a check, but didn't have a chance of bouncing, and cost around 10 cents to process, they'd jump for joy.

And that would be the Fedcoin business case.

And it doesn't even need to be the Fed, although they could do it without collateralizing the currency.

VISA would absolutely hate you though.  You'd be eating their lunch.  Same with the banks.  They'd lose that interchange fee.  And that's probably why the Fed isn't running out to implement it right now.

Whoa.  I just talked myself out of Fedcoin!  Only way they do it is if they are ok with throwing the banks credit/debit processing industry under the bus in order to eliminate cash.

Anyone believe the Fed would do that?

 

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Samo Samo - Samo Samo - Samo Samo

I've heard this from Bill Murphy and Gata and the entire story since 2007 when I first started to follow precious metals. He had me really going in 2007 with the price manipulation, and I converted a lot of 401k money into physical PM in early 2008 and avoided the entire banking meltdown. 

 

I figured Bill was right, and the entire world would soon discover he was right. And then 2009 happened and I don't think I missed a podcast I could find where he was interviewed. And I learned about the miners, the Jr Miners. What GATA was, the silver manipulation - and scandals at JP Morgan with the price suppressions.

 

Alan Greenspan talking about manipulating the gold prices. If you think I'm obsessed about crypto now, it all started when I was obsessed about PM and could tell you about credit default swaps and the Bank of International Settlements with quadrillions in outstanding derivatives over the counter default swaps.

 

And 2009 turned into 2010 and the story never changed. Then 2010 turned into 2011, and the story never changed. Week after week, month after month and it was like the story was on a loop. 2011, 2012, 2013… Swap out the year – there they were saying the exact same things. It never changed. Conspiracy, manipulation and ‘any day’ it was going to be exposed. Gerald Selente -  that “Jackass newsletter’. The entire PM talking world – was stuck in . a. loop.

 

So then I turned my attention from the rear-view mirror, to the front facing forward windshield for a breath of fresh air. I recognized something unpleasant in me - and the people that followed PM too closely. It really began to bother me.  For me to come out ahead – and really feel superior that I had actually been right  …the rest of the world would have to suffer.

 

This bothered me. I found myself actually hoping for the gloom that would become the world…for me to be justified in what I was doing. How could I have self-justification at the same time we have a pleasant world that was still heading for a cliff? Was I actually rooting for it?  The thought of this became a perversion to me. I found myself actually investing in the demise of society. And in retrospect - I found it sickening. 

 

I wondered how much difference in the way I was thinking than any troll in the world. Unhappiness seeks out more people were unhappy too. It was like all the PM people created a 'crowd' of insiders that 'knew' the world was about to end.  I found it uncomfortable to actually have hope that governments would all find a way to turn it around before it was too late. Until the discovery of blockchain – I didn’t think that was possible, and it still might not, but blockchain technology finally gave me a way for hope without also hoping for some kind of Armageddon to prove I was right all along.

 

My nature is to find the good qualities about everything if possible. I’m a happier person having hope. I keep enough PM around for insurance without the mistake of considering it an investment. 

 

But Murphy, GATA, Schift (and the dozens more) etc – stay in their loop because that’s what brought them to the dance, and that’s the one they are going home with. But I look back now and then and think "Are they STILL saying that"?

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
same vibe

mrees-

Yeah.  I get the same vibe from the industry that you do.  They're caught in a loop.  And I was caught in that same loop just like you, until I broke out of it.

This makes me unpopular with people who remain in that same state of thinking.  Some imagine I'm working for the other side.  I'm just not in the loop with them anymore.  I think some people might feel betrayed by that.

The system will explode at some point, and we'll have that COMEX default, but that only happens when mainstream confidence shatters.  Man on the street has to be saying, "I don't think the government will make good on its treasury bills", and "I don't trust the banks to hold my deposits."  If such a thing happens, as long as its not out of a clear blue sky (i.e. some EMP detonation), we'll see it coming.  People's confidence is not shattered overnight.

Until then, I'm not focused on COMEX defaults.

Clearly I'm more pessimistic than you are, but I'm open to something interesting happening along the way that derails our date with over-indebted destiny.  I don't think blockchains are a fix, but Steve Keen's modern debt jubilee might just do the trick.  Money is a construct, and if its debt that's the problem, if we are willing to alter the construct, the problem can be solved fairly painlessly.

Problem is, people's habits and the culture's tendencies tend to only change after pain is applied.  Otherwise, people go right back to their old behaviors.

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Catching up.

Yeah Dave, I kind of got off on a tangent there as I was still in 'paradigm changing' thinking mode. Let me catch up and answer your thoughts better. I haven't looked here all day. 

Losing 80% of its value? The loss in faith of the coin itself. It has happened in bitcoin at least three times. 2011, 2012 ($30 to $2) , 2014. (2012 it lost over 90%). In Ether 2016, it hit $20 only to reach six and change for around 70% drop.  I suppose most if not of the other coins I don't follow as close have probably done it. 

I figure it is mostly because this is a new and hardly understood paradigm. People are naturally skittish. Especially if they are just chasing gains and don't understand the technology.  A lot of this is just plain gambling. Traders in China who love to gamble and don't give a lick about the actual technology. They don't really care what it does and it's just a drop in the bucket.  But it sticks around long enough and people start to take it seriously and the skittish hands start to get more confident that every shocking price drop is met with an equally shocking price rebound.  Soon enough it no longer is shocking - and soon after that, the reasons that made the drops and rises, to begin with, are met with wiser and more experienced people who correctly read the value of any 'shocking news' with the appropriate yawns.

To avoid catastrophic loss - don't invest more than you can afford to loose. It's still risky. I've met my original debt and investment a long time ago and if I lose what I have now, it will just be part of the great adventure and one hell of a ride. On the technical level, there might be a lot that can go wrong I suppose but I think the free market will be the ultimate decider of those things because we have massive redundancy with a rich ecosystem of alternatives. There is a lot of experimentation and natural law will likely decide for us. So I like diversifying with small investments in a lot of good technologies that are not obvious scams. 

Like you - I also keep 401k, IRA, PM, Property, etc.  I just find blockchain the most interesting now, and thrilling with returns in the thousands of percent.

The partition splitting issue. It's a technical question I'm not qualified to answer as it gets into the core logic and contingencies. That would be a great topic to either research as it's likely been asked before on the bitcointalk forums, github, reddit or possibly many other places I haven't considered. As it is all open source I wouldn't imagine it would be too hard to find answers to your level of expectations. I do think it is silly to expect one person to be 'the bridge' between to disconnected chain segments and to be able to double spend on both chains while they can't reconcile themselves for a profit.  But I don't invest in must one blockchain technologies I spread among dozens. In a world war scenarios - I have PMs and food\necessities for that contingency that would appeal to our crowd here.  I don't think the assumption that everything else would remain the same in whatever scenario would be bad enough it could segment the bitcoin network - if that is the only one of the hundreds of blockchain tokens you are referring. 

The buck and other national currencies are also going digital so I wonder if 'the buck' being safe is considered once it is blockchain\digital only. Cash is being banned, and a scary version of bitcoin might take its place (Fedcoin I think I read in a headline posting but haven’t read yet)

I don’t think bitcoin as a medium of exchange is its strong point. It is an amazing unit of account, and getting better at ‘store of value’. The transition bottleneck is still a mess – it can’t handle the volume and by the time it can – ether or litecoin (or others) might have already stolen that ball and run with it. But that network thermodynamic thing can’t be beat currently and thousands of computer engineers supposedly continue to build and improve on it. so it can be trusted. As far as I know

As far as I’ve read, there aren’t many bankers outside of small dictatorships that want bitcoin dead. Most are studying it and trying to emulate the parts they like (Surveillance possibilities). Far from wanting to take it out – game theory I can think of will eventually want to compel governments to help it as it can act as a neutral currency and they can all run powerful nodes in sort of a national “Mexican Standoff” where no country trusts the others to not ‘overprint’. They could all have equal standing and trust and running their own nodes prevent the others from getting the upper hand. What is the alternative? Gold’s day is done. The world moved on – in my opinion.

On Faith, you are very much likely correct in the knowing the phycology of markets. But it might be a new concept when applied to the science of blockchains. The point is obvious when looking back. We were trying to run an internet ecommerce on promise to pay with local governments deciding payment and credit laws from a medium that knows no borders? We didn’t have a bearer instrument in a borderless world?  It sounds so dumb after you know we can. Promise to pay, when you can have long distance payment in full instantaneously? We’ll likely think - Duh.

Your comments over fedcoin for payments vs bitcoin – as I said I don’t think bitcoin’s role as a medium of exchange will be its long-term advantage. Fedcoin likely wins, although ACH will no longer be needed as blockchain will replace that (see ripple). Cash doesn’t last much longer. $100s and $50s first. Metal coins probably don’t have much future as the cost is too high for the cost of a cheap cellphone in everybody’s pocket will soon be cheaper and more sanitary. Ones won’t buy much soon. The others will seem quaint in ten years. See the former US Mint General now owns the BitcoinIRA.com.

Fedcoin itself might run as an erc20 token on top of Ethereum (See China currently experimenting with a digital yuan on Ethereum). But many will still have valid fears of a Fedcoin I’ll discuss another time. For many that reasons ‘underground non-federalized coins will still be utilized. 

 

 

 

 

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
"In the Loop"....

Mark said,

But Murphy, GATA, Schift (and the dozens more) etc – stay in their loop because that’s what brought them to the dance, and that’s the one they are going home with. But I look back now and then and think "Are they STILL saying that"?

Mark (and Dave),  I think you are confusing what has happened (we have definitely stayed in this Loop) vs. what is the truth of the Gold and Silver markets.  In other words, you are both essentially looking at price action and taking this as truth, vs. a long term, successful manipulation, or projection of a, "market".  I know, I know.. Dave has made many arguments and I simply have not had the time or energy to respond.. I could and would were I not so well employed.. BUT, I do want to make this fundamental point;  I believe, based on lots of data and research, that the current price of Gold and Silver dramatically undervalues each due to the structure of the paper futures markets.  My research suggests that this is the truth.  My personal mission is to seek the truth about things.. hence I will still argue that Gold and Silver are underpriced.. even though this is clearly and admittedly an old and (mostly) depressing argument.  

I do find the blockchain happenings much more upbeat.. and really, more meaningful than Gold.  Gold is just a dead asset.. .it's only value in my worldview is as a counter to the bad nature of debt-based fiat money.  And yet history says we need it.  BTC and ETH though.. WOW.. these are useful and elegant on multiple levels.  Every time Dave points out the downside of, say, using BTC to pay one's rent, I just think of the many risks associated with fiat currencies historically, and today.  I was really touched watching a video of an old lady in India crying after they demonitized the rupee notes there last year... her stash of cash had been rendered nearly worthless.  The human suffering induced over history by Gov't/central bank fiat is enormous.

So we forge on with our different world views and different views of what is true.  I believe Dave's construct of how Comex works vastly undervalues the psychological/market power behind the ability to create contracts in any amount, in real time.  In other words, while the downward cascades of non-economic selling are the visible trails when the bullion banks start to run the stops... the actual damage is less seen;  The actual damage to the market happens in real time, every day, as the bullion banks throw contracts at the demand.  Think about this.. the supply of contracts is in no way determined by economic sellers of Silver or Gold.. it is under the control of the bullion banks, who see the demand for contracts in real time.  They can and do blunt rising price whenever they want.  Comex OI does not have to rise to inifinity because the Hedge fund and other players keep on playing along with the wash:rinse cycles.  Exactly why some of the most sophisticated market players never learn their lesson is the subject of an essay for another day...              

 

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
Mining costs..

Dave said,

I am not laughing off your data.  I don't have an explanation, because I don't know the mining industry well enough to explain precisely why their costs seem to expand to fit the available income

In his original article from whence the data I cite originated, SRS Rocco makes the case that the mining cost (and hence price too since these co-vary), is highly correlated to the cost of oil;

https://srsroccoreport.com/central-bank-market-rigging-horrified-about-t...

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
Mark - can you comment on Ripple please?

Ripple crypto has had a huge spike in price recently.. from nothing to something.  From the bit of reading I did a year or two ago I was not impressed.. kind of found it to be the MLM scheme of cryptos... is there anything there? 

MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
Good Vibes

Man... amazing how you can hit the nail on the head sometimes Mark... I found myself nodding in agreement to almost the whole post. I say almost because I am late to this party. I have not been able to "turn myself around for a breath of fresh air" yet.

Seeing that you and Dave and Jim have gone through various stages of this thought process makes me think I'm in great company! As for now.. I'm with Jim, I see his truth as the Truth, even if its not a happy one.

Luckily, I've only recently found this.. can't imagine having this feeling for 10+ years, YUCK!

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
LOL MJB...

can't imagine having this feeling for 10+ years, YUCK!

Exactly... LOL.  You gotta be able to laugh about it.. otherwise you cry. 

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Ripple

I think your instincts are good Jim. I see many banks signing up to use the ripple network because it seems like a good alternative to the current system which us ACH transfers of SWIFT. Those payment rails are reconciled on a daily basis vs blockchain type systems which are basically streaming money.

Having said that...what is the value prop for the ripple token? It isn't actually necessary or used to transport money and tiny amounts are 'burned' as a fee for the transaction but are essentially nothing.

So I think that most people don't read into deeply themselves but read headlines and get stuck on the momentum. Positive news about banking relationships + very fast rise in price, they put those two together and assume this is great news for the token - so essentially in my opinion - it's dumb money chasing yield appreciation. I doubt hardly anybody takes the time to actually read the technical papers that define what it is.

It is definitely, most likely, a bubble (IMHO). But it's hard not to resist throwing a little money and sell off a bit at a time to profit from people stupidity - so I through in a few hundred bucks for curiosity. But it's just gambling money to keep it interesting. Perhaps before it reaches a dollar I bail before the rest.

 

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 742
Fedcoin

I just read the article Dave linked above to see if I could get a clue about the Fed's thoughts. This was the meat of the article (with my bolding):

http://www.newsweek.com/fed-should-issue-its-own-bitcoin-lets-call-it-fedcoin-410289?piano_t=1

My own recommendation is for central banks to consider offering digital money services (possibly even a cryptocurrency) at the retail and wholesale level. There is no reason why, in principle, a central bank could not offer online accounts, the same way the U.S. Treasury presently does (www.treasurydirect.gov).

These accounts would obviously not have to be insured. They would provide firms with a safe place to manage their cash without resorting to the banking or shadow banking sector. They would give monetary policy an additional instrument—the ability to pay interest on low-denomination money (possibly at a negative rate). To the extent paper money is displaced, there would be large cost savings as well.

With block chain technology, the government may get the ability to track all transactions for taxing purposes. (That's what the war on cash is all about.) In order for negative interest rates to work, alternative options to keeping money at the Fed need to be unavailable. If bitcoin or another viable escape hatch exists, money will flee to that haven. I can see the government using the "war on terrorism" as a reason to destroy the alternate cryptocurrencies. Ransomware wouldn't exist if there were no way to spend the booty. Then, there is the ever present hunt for taxes. Why couldn't the government just declare all cryptos (except Fedcoin) illegal to transact business with? You can own any of these cryptos, but you can't legally barter with them. What would that do to the perceived value?

Dave has gushed about Etherium's block chain technology and how it would be useful outside of the crypto sphere. Is it patented or have some other form of intellectual property protection? Who owns that technology?

Grover

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
Thank you Mark, re: Ripple

Certainly frothy in the crypto space now... I really like the long term outlook for ETH and I continue buying to the limits of my Coinbase account.  I am almost glad that it's been kind of flat lately... coiling I think.  $500M has moved into the Crypto space since the start of my day : )   

 

bowskill's picture
bowskill
Status: Bronze Member (Offline)
Joined: Mar 16 2012
Posts: 78
Crypto market psychology

Great thread - thanks to all contributors. It is one of the best that I have read on this site.

In partial response to Jims question about Ripple, I would like to share an experience I had while trading on the old Mt Gox exchange while it was in its death throws. I lost a lot of bitcoin when the exchange collapsed and told you all about it at the time even though it was embarrassing and I felt extremely foolish.

However, for a short period of time there was a very unique trading environment on that exchange that was so interesting to observe - it was like a petri dish experiment to see how desperate traders behaved in a closed environment with a zero sum game.

When Mark Karpeles finally realised that something was badly amiss on his exchange (from memory this was around January 2014), his first action was to close off deposits and withdrawals of either fiat or bitcoin currency - but he allowed trading to continue. The exchange was walled off from the outside world but those within it could still trade with each other with whatever credit they had in their account.

During this time, no official news was forthcoming about when and if the exchange would either close completely or reopen. 

The internal price of bitcoin went on a wild rollercoaster ride. If it started to rise, then suddenly everyone was trying to buy it thinking the rest of the market must know something they dont. Then the reverse. For no reason, the price would plummet as everyone jumped on the reverse bandwagon assuming other people must have reason to believe it is better to have dollars than bitcoin in the event of a bankruptcy. The wild price swings occurred several times a day with regular price doublings followed by price halvings. All for no actual reason.

The point of the story is that I think the crypto market is still a bit like this in the way it behaves. While there are some bots at work there are no supercomputers running high frequency trading algos that frontrun the market and smooth out the highs and lows. It is a much more "human" market where traders openly use terms like FOMO and FUD to describe their own emotions as much as anyone elses. In other words, there is a lot of dumb money in the crypto space that is running on emotion. A few good headlines, a sudden large purchase by a whale and away goes the price. Ripple may well be pumping without fundamental reason. It could go on like that for a surprising length of time. Whether it is a great cryptocurrency or not - in the short term doesnt really matter to the market.

As one redditor wrote recently: "Crypto market = Carefully make rational market analysis and apply logic to arrive at decision. Do exact opposite and make big profit."

All this is exactly why Mark tells us to buy mostly Ether and Bitcoin and then HODL. Sprinkle a little else around but only that which you can afford to gamble and lose.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
More on Ripple...

https://coinmarketcap.com/

Thanks to Bowskill for chiming in more on the unique wild West psychology of the crypto markets.  I honestly think the thing that has attracted interest in Ripple is the combination of price action, (it's up large %!) and the continuing low cost per token (now $ 0.38).  And of course the reason for the low price is that there are 38 Billion of those bad boys!!!!  Compare that to the amount of ETH and BTC, and the story becomes more clear.  There is no fundamental reason, either coming from Mark here or any other research I have done, for there to be mass interest in the Ripple tokens... other than the price action itself.  Speculators don't look at fundamentals, or market cap.  Hard to say where the ride stops.. but I would love to be able to short XRP : )

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Don't wear yourself out

Hi Jim,

I don’t disagree with anything  you’ve said.

You are likely spot on.

But end the end, what are you going to do? Fight central banks? Hasn’t that been tried? You and what army?

There are fights you can win, and fights you can't – so picking them is important. You can wear yourself out fighting the system. People can spend their entire lives wasted in pursuits of self-righteousness that fail and they just die tired.

So I found a fight I had a chance to win – and perhaps help change the world in the process.  In my article (I hope you read it), I talk about the breakthroughs come from  ‘break with’ the past. Everything you talk about is important to the old establishment and power structure. They have their power structure and fighting them at their own game is probably a lost cause. The way to beat them is to change the rules. That means you need a paradigm change that makes their entire world…obsolete. This happens in revolutions of the world that upturn the old ways and history is full of them. I think we are just at the beginning of a historic movement and you have a front row seat. 

That’s what I decided to do- and a huge insight into why I do what I do. The technology is cool, the science is fascinating. The idea of disruption is fun. But when it comes down to it – I can help change the game by pulling the rug out from under their feet. And make guys like you and the rest of this gang here on PP wealthy in the process. You’ve (We’ve) all suffered long enough as far as I’m concerned. You don’t beat them at their own game, you invent a new one and get there before they do and take the power for yourself while they still laugh at it with misunderstanding. Of course, they will muscle their ways in and try to buy things out because, at the end of the day, there are a lot of dumb people who will trade assets for paper money that can just be printed into existence to pay for whatever they want...until they can't.  Hence the Matrix meme I posted. At some point - money, as we know it, will lose its meaning and instead of measuring value in terms of the old paradigm... when that time comes - we won't need to. 

It’s a whole new game now – and you see why I stick around on this board and share this new insight because I suffered with you and can relate. It was weird breaking out of that loop of ‘righteous indignation”. But it’s fun when you realize you’re in a new war and you’ve got the element of surprise on your side. Now you can take it to them.  What will you do?

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Welcome to the party Grover

Grover, keep in mind that the article quoted is about 2 years old and that is an eternity in blockchain space. Ethereum wasn't even running when that was written - and Ethereum is changing the rules of everything. Ethereum isn't owned by anybody any more than the Internet is owned by anybody.  Who do you call to get permission to put up a new webpage or blog?

Even if you want to add your own protocol for computers to communicate on top of the Internet protocol, you are free to do it. That freedom has lead to a lot of bad people doing bad things.  Ransomware requires computers. Will the government destroy computers like you expect they will crack down on cryptocurrencies? Which alternative coins should they go after? There are many more being introduced each week.  There are hundreds of them and many of them aren't even currencies. One came out today called Aragon. it is a decentralized way to build companies and organizations on the internet without boundaries and bound by any one nation's laws. It is based on smart contracts which are a construct of Ethereum. One comes out in a couple of weeks that handles Electronic Medical Records with encrypted privacy (Patientory). - Yet can be traded on open market exchanges for value \ even against bitcoin and ethereum. 

Ethereum itself is a network, not based on currency but a commodity called ether used to run the network. 

Do you supposed they will ban the commodity that is digital and used by a grown number of corporations around earth? Who do you suppose would enforce a worldwide protocol \ commodity needed to enforce computer programmable 'smart' contracts?  The world went and made a confusing paradigm change while most of the people on planet Earth were sleeping. It's not so easy when it's not just a currency any longer. Look at application coins like Golem, (Netflix Killer) Singular DTV, Grid computing - (Golem and RLC tokens), Music artist tokens (UJO) that allow for musicians to stream their own music to their own fans and pay for the drummers \ backup singers \ composers and everybody involved to make the song get paid in real-time through streaming rather than an army of middlemen in between milking margins at each point though distribution. The list of uses would fill your day - but it's far too late about trying to put the Genie back in the bottle.

The idea of Fedcoin being possibly used for evil purposes is real in my opinion. The idea that people will escape it is also just as real and likely. What protects is from it is all of these powerful new use-cases that couldn't have been imagined when that article was written. Thanks for posting - it's fun to have new voices heard.

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
Davecoin Startup

As I alluded to, in one of my incarnations I did a payment systems startup.  At its core, we were getting rid of VISA.  The merchants thought this was awesome, but of course VISA was less than pleased.  The b-plan was pretty simple: we'd originate an ACH transfer, charge the merchants $0.10, our costs were $0.02, and we'd remove VISA from the equation; it was all validated using a finger image & a PIN code.  It didn't end up to be too successful (did I mention, "startup"?), but it gave me some real insight into the fee structure of the industry and how payments worked in general, and who the players were, and who paid for it all.

If any electronic cash starts to become real - one that isn't controlled by the banks and their processing machinery - merchants everywhere will be your friend, and banks & card industry will be your enemy.  Card industry makes money from per-transaction fees (https://www.helcim.com/us/pricing/visa-mastercard-interchange-rates/) and association fees.  The processing bank gets most of the interchange, due to the risk of taking on the transaction.  Card transactions can be repudiated (charged-back), after all.  Merchants pay for the whole system through a raft of fees.

However, given the amount of money that merchants have to pay for the current system, any way they can get something similar, but with lower fees, they'll be on board to do.  And if its denominated in USD, that's the best outcome for them, because thats how their P&L statements, costs and liabilities are denominated also.

The genius of the credit card system (from a consumer acceptance point of view) is that it makes the recipient of the money pay, rather than the person doing the paying.  The system is free to the sender, but the receiver pays six ways from Sunday.  A b-plan for a dollar-coin would do well to adopt a similar approach.

So let me try presenting the Davecoin startup.

The Dave-coin system is backed by a massive deposit at the Fed that collateralizes each Dave-coin with $1 (a fully-reserved system), and the system makes money by executing transfers between parties using a public ledger and the ethereum platform to perform all the accounting, the wallet, and the UI.  No need for miners; just have all the miners run by DaveCorp, which can be distributed around the country (Amazon AWS?) connected using a VPN.  AWS servers are cheap cheap.

So, a user buys Davecoin using an ACH transfer from his bank;  it is actually a transfer into the DaveCorp account at the Fed.  Transfer-ins are free.  Once successful, the user gets Dave-coins in his wallet.  Each time he spends any amount of Dave-coins, the recipient receives a nickel less than what the user sends, with DaveCorp pocketing the nickel.   He can always transfer-out Dave-coins to his bank account via ACH; that costs a nickel too, and requires DaveCorp to execute the ACH from DaveCorp's Fed account to his bank account on his behalf.  That happens overnight in a big batch transaction.  Each ACH transfer costs DaveCorp much less than a penny, in volume: https://www.frbservices.org/servicefees/fedach_services_2016_0923.html

Once everyone accepted Davecoin, transfers to ACH would become more and more rare.  Why involve the banking system (and get charged that extra nickel) if you didn't need to?

And DaveCorp would collect IOER on that massive Fed deposit - or it could buy short term treasury bonds, etc. That's where the real money gets made.  DaveCorp makes money on transaction fees AND collects interest!  How cool is that?  And at the same time, this totally takes VISA out of the equation.  Merchants love DaveCoin; there are no charge-backs, no 1-3% interchange fee, no association fee.  It just costs them a nickel.  They manage their Davecoin wallet using standard ethereum software.  They'll think they've died and gone to heaven.  Instant, massive boost to the bottom line.  "Discount for Dave Coin" they'll all say.

And its all implemented on the ethereum processing system.  Distributed, fault tolerant, public ledger, standard protocols.  Anyone accepting ethereum also accepts DaveCoin.  And for DaveCorp, there is no need to maintain an expensive dev team keeping the backend running; that's all done for us by the ethereum dev team.  The only thing we have to add at DaveCorp is scheduling the transfers between ACH and DaveCoin and back again.  That's 10 lines of code.  Ok, its more than that, but Dave Himself could probably do it in a couple of months.

It doesn't sound like a very expensive startup.  The issue (of course) would be selling it to all the merchants.  And the banking license.  The online folks (porn again!) would be first in line.

A coin with a stable value?  Who would buy such a thing?

Anyone who really wanted the "actual digital cash" experience.  It is steady, reliable (minus the usual inflationary complaints from the goldbug crowd), and - something you can pay your debts in.  It might actually be a safe haven in a banking crisis.

its a big, global, shared bank account, stored at the Fed (or in short term Treasury bonds) with realtime, non-repudiable transfers between parties.

With DaveCorp collecting the interest!  Yay!

1% on a trillion bucks of DaveCoin = 10 billion per year.  That's real money for a tiny startup that is (more or less) just using someone else's codebase, a bunch of rented servers at Amazon, and one big deposit account at the Fed.

And that doesn't even count the nickel we charge!  At the VISA transaction rate (2000/s), that's another $2.9 billion per year.  Come to papa!

Valuation on DaveCorp, operating at that scale: probably 50 billion dollars.  You guys can run off and figure out which *coin to buy, while Dave will collect his 50 billion from his stock options.  :)

All right, I know what you're thinking.  You all hate the buck, you think its turning into confetti, its horrible, fiat money, etc etc.  I'm talking a real business service here, whose costs and liabilities are in USD, whose transaction costs are currently quite high.  This system completely disintermediates the banking system, reduces costs for business, and more or less creates Fedcoin without having to wait for the Fed to do it - which it probably won't, for the reasons I laid out above, unless someone puts a gun to their head.

One last thing about DaveCoin.  DaveCorp can implement this system for any currency in the world using the same platform.  DaveDollars, DaveYen, DaveEuros (get 'em while they last), etc.  The only change we need to make is the back-end ACH transfer mechanism, which is (probably) different for each currency and each central bank.

Ancillary products for DaveCorp would be a hardware wallet, possibly protected by a finger image scanner.  Hardware wallets are a must-have; you cannot trust phones or general purpose computers to properly protect your DaveCoin.  While each consumer should have one, each merchant absolutely must have one.

Additionally, DaveCorp could provide a forex service, which would translate your DaveDollars into DaveRupees for a very modest fee (thanks!) using a narrow bid/ask spread driven presumably by large volume.

Ok, I'm sure I've gone too far.  Jim is probably apoplectic at the thought of me corrupting Holy Bitcoin with my potty mouth dollar talk.  But the main selling points are that the currency would match up with the costs and liabilities of the merchants so no conversion would be required, and the transaction costs to the merchants would be very, very small, and the value of the currency would not bounce around like a ping pong ball in a dryer.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 4664
licensing for ethereum

I've done a bunch of patent work in the past; anything past a year after public release is not patentable.

The software license for ethereum is a mix of GPL, LGPL, and MIT licenses, which describe more or less when and how you need to distribute source code to any modifications you make to the ethereum core, as well as in some circumstances, being required to distribute your own company's source code also.

Also - parts of the GPL affect your ability to patent your own software process, use GPL-protected software, and then sell the resulting product.  I didn't go down the rabbit hole too far on that one.

Bottom line: ethereum is a free software system, designed explicitly with the idea that nobody can/will own the source code.

https://en.wikipedia.org/wiki/GNU_General_Public_License

https://en.wikipedia.org/wiki/GNU_Lesser_General_Public_License

https://en.wikipedia.org/wiki/MIT_License

Stuff you add-on, you can own, depending on what you add, and where, and if you end up distributing an actual product vs. providing a service like Fedcoin.

 

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2363
Thought experiments are good Dave!

  Jim is probably apoplectic at the thought of me corrupting Holy Bitcoin with my potty mouth dollar talk.

Actually I am not.  I read your thought experiment with great interest.  If you are a creative, entrepreneurial computer-oriented person, then the possibilities ahead for blockchain can really get your juices flowing.

Here are my comments;

The issue (of course) would be selling it to all the merchants.  And the banking license.

Your business model is to have the FED pay you for your deposit.  This requires you be a bank.  Never happen.  So far TPTB won't even allow for an ETF.

A coin with a stable value?  Who would buy such a thing?

This is a sarcastic reference to the high volatility associated with crypto's today, suggesting that tying it to a, "real" currency like the dollar would stabilize it's value.  Well, it might, but for most of the big crypto's, the net volatility has been in the upward direction (note:  past performance does not guarantee future performance).  I think you are underestimating the free market's appreciation for the fact that most of the big coins have mathematically driven scarcity.  By tying your coin to the dollar.. by making that the source of it's underlying (spendable) value, you are short circuiting this advantage.

Anyway.. those are my thoughts.  In the end.. it's a free market.. and that's the whole point.  There will be more and more ties between the crypto space and the fiat space as the crypto space grows.  Yesterday morning it was $61.5B market cap... today it's $62.4B... we are witnessing the beginnings of the hockey stick phase here I think.  As laid out, Davecoin would be good for Dave if you could pull it off... for me I will keep buying ETH.  

Oh look... my ETH went up 3.6% overnight!  Damn that volatility : ) 

https://coinmarketcap.com/   

 

   

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 742
Watching from the sidelines

Thanks Dave and Mark for trying to answer my questions. It should be obvious to you that my expertise resides in a totally different state. ;-) I'm actually just trying to make sense of the whole crypto thing. I get the idea that it is a way to transfer money instantly without an intermediary. That is something that is valuable ... but how valuable is the question?

Then, there is the protection issue. Do we even know who wrote the program for bitcoin? Is it the first nontrivial software program ever to not have bugs in it? If/when a bug is exploited, faith in bitcoin will fade more like a light bulb exploding than a gradual sunset. Those with visions of retiring on easy street will be holding a virtual bag of bitdust. As Dave pointed out, dragging the entire block chain around for every transaction will limit its usefulness. Unless there is a dev team who can fix the problem, its sunset is coming.

Then there is the issue of its sole value - being able to transfer money instantly without an intermediary. Unless the banks can figure out a way to cash in on this phenomenon, they will become more and more adversarial as time goes. They like being the intermediary. They like generating fees by doing so. The more cryptos are used, the less they like it. Do you think that the government is pleased with not getting their "fair" share of taxes when money transfers aren't recorded? Cryptos also blow holes through a country's capital control plans. If the powerful can't do anything about it, then it isn't an issue. The problem is that they can do something about it. Once governments legally remove cryptos' sole utility, what will that do to the faith of the faithful? [Cue sounds of light bulbs exploding.]

For now, it is still early in the game. I just saw that bitcoin is "valued" at $1900+. It is in one of its mania phases. Are people buying it now because they understand the underlying value and have calculated that it is worth much, much more ... or are they buying with the hope that they'll find some other fool who will pay even more? Are you a buyer or seller at these prices? For those of you reading this, ask yourself which category fits your profile. If you don't have an idea of its real worth, you're not in the value conscious investor category. Good luck with that.

Grover

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
dup

duplicate

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 295
Duplicate

Duplicate

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments