Why Bitcoin Isn't Fiat

mrees999
By mrees999 on Fri, Dec 1, 2017 - 2:46pm

 

 

This is copied from a Medium Post I wrote a few months back:

Fiat is government issued money. The word Fiat is Latin for “Let it be done”. Authorities can declare pretty pieces of paper to be money by issuing a fiat command. They then reserve the power to create debt notes when they see fit in ways that can keep themselves in the authority, but then dilute the purchasing power of ‘the little people.’

Bitcoin and other cryptocurrencies are as similar to Abe Lincoln’s reference to democracy enjoyed by the USA , “…of the people, by the people, and for the people and shall not perish from this land”. Cryptocurrencies are democracy of money. The people’s money is free from government corruption and control and cannot be shut down or stopped by anyone permanently. They evolve (see bitcoin fork to bitcoin cash) when resisted.

They exist everywhere and nowhere at once. They are beyond all single nation’s laws as it knows no nation or border. Stopping them would be like trying to kill a great idea. Victor Hugo remarked that “There is one thing stronger than all the armies in the world, and that is an idea whose time has come.” Nations continue to learn it’s a fool’s game to try. They will have to find a way to adapt.

The best cryptocurrencies are only created on a predictable and unalterable schedule and rise in value as people come to realize this. They are limited, are not created through debt, but through intensive work rooted in laws of laws of thermodynamics, physics, and math. Not by fiat commands formulated through secretive meetings of elites behind locked doors. Unlike fiat, they were never coerced into acceptance by any national figure — ever.

Cryptocurrencies represent freedom from dictators, bad monetary policies, corrupt bankers and give regular people a monetary weapon to fight back around the world. It’s the right to bare fiscal arms. It was built without permission or apologies. The people who use it are exercising their right to free speech and to express themselves how they see fit. It is formed from the ground up — rather than top down from the powerful 1% of 1%.

Some corrupt bankers (See Jamie Dimon) will argue and complain because it threatens to remove their power base. These currencies threaten the need for ‘too big to fail’ banks because people around the world can now route around the banks. Bankers like Dimon would rather you not remember the bailouts or the billions in fines for corruption and money laundering issued to his bank (JP Morgan). They would have you ignore the people living in failed governments around the world (see Venezuela) whose citizens often hang on to bitcoin as a life-line while their government currency has again lost all value. Like hundreds of failed fiat currencies issued by central banks and failed governments before them.

Bitcoin cannot be bailed out. It has come to represent more than just a currency — because of these unalienable properties , it is also a movement. It continues to explode in popularity as people come to realize these key facts. Cryptocurrencies are the idea whose time has come. Some people ask “What backs them up”? Put simply, social consensus. The knowledge that bitcoin blockchain records are immutable and incorruptible, and require no middleman assuring you that it’s still there. The world can see that it is there. Trust in this fact is tokenized — appreciated and wanted. Supply is limited, demand is growing, economic law does the rest.

Why do people value gold and silver? One could argue that it is also trust. However, past arm’s length, it requires trust in someone. The further away, the more strangers one must trust to assure them that it is still there when they can no longer see it themselves. Throughout history — this has proved disastrous. The better question is — what backs up the integrity of a fallible person who is counting your gold and silver when you can’t?

These digital currencies cannot be un-invented. The Genie will never go back into the bottle. Nobody will apologize to those bad governments who will now have to measure themselves against a new kind of standard bearer. We SHOULD expect this to make some of them very uncomfortable. Bitcoin stands up against the bullies. It refuses to go into that good night. See China attempt to ‘ban’ crypto again by closing exchanges.

Soon, exchanges themselves will be unnecessary and the unintended consequence of this action will lead to more underground and private coins that will be untraceable. They will be converted through smart contracts that won’t need to touch a regulated exchange. It challenges the status quo, just like the very best inventions in history. These are some of the reasons why we are at the very beginning of a new paradigm in world history: and you are very lucky to be alive to witness it.

But, is there a place for you in history? Will you join the movement — or are you happy with things the way things were and content with defending it? People’s eyes continue to light up, and their mouths drop when they take in the full nature of this change and what it will mean in the future.

The word “FIAT” may mean “let it be done” Cryptocurrencies — just WILL be done. Because … we the people said so. Without permission. Without Apologies.

 

 

Here's the link to it:

https://medium.com/@mreespublic/why-bitcoin-is-not-fiat-currency-c3d1996a9639

 

19 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5459
fractional ownership

I had an epiphany the other day.

Buying a "coin" is equivalent to buying a share in a software system.

Its like buying a "share" of windows.  Or linux.  Or Microsoft Office.  Or QuickBooks.  Even more interesting, it buys a share in every single one of the descendants of that particular version at that point in time.

Pretend you bought a share of Windows back in 3.1 under this ownership structure.  You would own a share of every derivative system - Windows NT, Windows 7, Windows 8, Windows 10... etc.in perpetuity.  [Ignore for the moment that the NT codebase didn't actually derive from the 3.1 codebase...the software-package-share-ownership structure that the coins provide that effectively makes you an owner of all derivatives of that particular fork.]

A "hard fork" could involve an entire rewrite of the codebase, but if the ownership structure is preserved, that's the important part.

So you don't have "a bitcoin", you are a fractional owner of "that bitcoin software system" that is up and running today.

Without voting rights, unfortunately, but if everyone agrees that having and being able to swap these digital tokens results in a valuable economic ecosystem, then your fractional ownership will have commensurate value too.

So to figure out "the value" of bitcoin, you need to understand the net present value of the overall software system/ecosystem, and any derivative works.   In software, we assume everything will always be revved.   "Oh, that's in version 2."  (Hint: the thing you really want - its always in version 2.)

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5459
dark currencies

Mark-

I saw a reasonably lucid takedown of the current set of supposedly untraceable currencies.  The key observation was that the un-traceability depended entirely on the server not being owned by an entity who was interested in tracing you.  (I.e. if I were the NSA...I'd run off and make a bunch of bitcoin miners for these currencies.  Maybe NSA - or the Chinese government - won't own the network, but for many situations, you only need to uncover a "secret" transaction one time and you've nailed your target.)

What's the current state of thinking about untraceable/anonymous use?  Where are we now, and what sorts of things are afoot to bring us closer to where we want to be?

 

jdsfrisco's picture
jdsfrisco
Status: Member (Offline)
Joined: Feb 11 2016
Posts: 11
Block Chain currencies? Meh.

I just attended the IoT (Internet of Things) convention in Silicon Valley this week. Block Chain (Encrypted everything including BitCoin) was all the rage with speakers and product representatives from IBM to medical systems corporations to marijuana growers all hawking the miraculous powers of this new blah, blah, blah.

My interpretation? Crypto currencies are for people who A) Believe big banks, big corporations, and government regulators are incapable of absorbing and controlling cyber stuff. And B) People who feel that paper money, stocks, and bonds suspended in the electronic ether aren't ephemeral enough and something more abstracted from physical reality is needed. 

It's just the flavor of the month guys. Stick to real hard goods: productive farm land, rental properties, and production facilities - preferablly in a debt free situation.

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 427
Dark Matters

I've heard the same chatter.  I understand that there are some problems with z-cash implementation of zero ring signatures and there may have been NSA plants helping with the development. That wouldn't surprise me if it's an open source project.  

There is a lot of rumor and speculation so it's likely not provable, but the common thought is that the currency 'monero' hasn't been broken. As these projects continuously evolve I'm not sure how much difference it makes when and how they are exposed if so. 

 

At a minimum, I would want it to be very very expensive for a totalitarian oppressive government to do so they would need concentrate the time and effort on the targets big enough to warrant the effort. With the z snark,, from what I understand the sender and receiver have no way of knowing who each other are so owning enough nodes doesn't see to unwind that. 

 

Still, a better alternative to fiat though.

 

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 427
Stick to hard goods like the rock you've been living under?

I've you think this blockchain business is the flavor of the month - where have you been living for the past five years?  I've been told it's the flavor of the month for nearly five year from people like you.  Then I ask if they want to compare their investment ROI over the last five years and start with my 10,000% I hear nothing but crickets.

Probably coming from your productive farmland, rental properties, and production facilities you like. Doesn't sound like you keep up with current events. MEh

 

 

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5459
hard goods

Mark-

Ok, thanks for your assessment of monero et al.  Until it gets anonymous, all these things are potentially a mechanism for the bad guys to track us little people.  I'm rooting for the anonymous part to happen soon.

I understand that this is all a work in progress; since I write the stuff, I know that software is a perennial work in progress.  And all these coins are just shares in a running/deployed software project.  Once I figured that out - how can I not like that?  It puts me right at the center of the world.

Who knew you could monetize free software in such a ridiculously profitable way?

At the same time, I am very grateful for the "hard goods" people.  After all, I can't eat bits.

I also like paper money.  It has this wonderful property of allowing me to buy things even if the power goes out.

Each thing has its place.

Nate's picture
Nate
Status: Platinum Member (Online)
Joined: May 6 2009
Posts: 594
Armstrong

FWIW:

I have to wonder if the government is not behind this entire cryptocurrency phenomenon. Satoshi Nakamoto is the name assigned to this mysterious unknown person or people who designed Bitcoin and created its original reference implementation. Nobody knows who invented this technology. It is entirely possible that this movement is a false flag created by the government to move society to accept the end of tangible money. It is very strange that the person who invented this technology is unknown and has not stepped forward to demand some royalty.

https://www.armstrongeconomics.com/world-news/cryptocurrency/is-cryptocu...

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 427
Jeapordy

I'll take "What a buggy whip maker might say about the Automobile" for $500 - Alex.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5459
agree

I have to agree with Mark that Armstrong's statement makes no sense.  Presumably Mr Satoshi owns a number of bitcoins as a result of his early mining efforts.  As a result, he doesn't need a "royalty", nor does he need to step forward.  If he owns 1m bitcoins, at current prices, that makes him a double-digit billionaire.

At the same time, Armstrong has forgotten more about markets and history than I'll ever know.

 

anastasio's picture
anastasio
Status: Member (Offline)
Joined: Aug 26 2008
Posts: 6
Bitcoin futures - will they allow manipulation?

Are future contracts going to provide a mechanism for manipulation of this and other digital currencies?

(Reuters) - Cboe Global Markets Inc will launch its bitcoin futures contract on Dec. 10, just over a week ahead of rival CME Group Inc, as the exchange operator takes the next step toward launching an exchange-traded fund based on the digital currency.

Tycer's picture
Tycer
Status: Platinum Member (Offline)
Joined: Apr 26 2009
Posts: 610
CFTC is governing body

So the CFTC is the governing body, what is their consistent track record? There is your answer for the derivatives. Who knows about how it may affect price fluctuations. There’s some pretty big whales out there now already moving it.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5459
bitcoin futures

CME/CBOT futures will allow traders to participate that don't have accounts on the other exchanges.

RIght now, my analysis says there is a fair amount of free money floating around on bitcoin that (I'm guessing) will be scooped up by the HFT firms using futures.  I suspect that's why CME (and CBOE) have launched futures - "by popular demand."

My sense is, the "whales" don't have the same level of skill that the HFT firms have.  I mean, if I can see it, and I'm just one guy in a room, so can the firms who already dominate trading on wall street.

Again, I'm guessing - they are salivating at the prospect.

As to what this means for price direction, that I can't say for sure.

Will there be a wash & rinse cycle for bitcoin now?

Markhemp's picture
Markhemp
Status: Member (Offline)
Joined: Nov 29 2013
Posts: 16
Bitcoin

Armstrong's Forcast,

The risk with Bitcoin is that the government could simply change the definition of money. That is what they did to me back in 1980 because I was one of the three main market-makers in gold (perhaps the biggest). It was all a hunt for taxes, not concerning me but my clients. I have explained before why I retired from making markets in gold — the IRS declared me to be a BANK!  When gold was legalized in 1975 and began trading on the COMEX in New York, the New Jersey Senate asked me to write the law on gold to make sure it would not be taxable to buy and sell gold bullion. I worked with Senator Foran and developed the language that “gold was not taxable unless converted to use.”

I was making the market to buy gold scrap from all the stores you see with “WE BUY GOLD” signs. They buy the jewelry and it has to be refined. To do that, you needed a minimum lot of 100 ounces, which was the contract size on COMEX. When gold was $800, that meant one 100 ounce bar was valued at $80,000. The refining period was 6 weeks. Therefore, all of these small operations could not afford the float. If they bought 100 ounces per week, then they would need $560,000 in working capital. That would not work for most of these small shops buying gold.

I made the market. The shops could ship whatever they bought that day and I would buy it at the daily price. I gathered all the gold sold by countless stores. The gold was shipped by armored cars to Englehard for refining (PhiBro or Philipps Brothers who eventually bought Saloman Brothers). I was doing tens of millions per week back then and refined a mountain of gold.

First, the NJ tax authorities walked in and declared me to be a merchant. I said gold was not taxable unless converted to a usable product. They said their “interpretation” was that the “use” was investment.  I refused to pay and opted for a trial. Of course, you do not get a jury, just a judge who rules always for the government. I was not allowed to testify at my own trial for they said whatever the Senate had asked me to write, I may have misinterpreted their intention. Senator Foran was so angry that he demanded to testify at my trial. The government objected and he was allowed to testify ONLYas a private individual citizen. I moved to subpoena the full Senate. The judge denied me, and I lost.

Simultaneously, the Feds walked in and declared me to be a BANK. They then declared that I had to file forms to report when my clients bought or sold more than $10,000. Their interpretation was that gold was NEVER formally declared not to be money in 1971, so I was a BANK. They threatened me saying that the fine was $50,000 up to the full amount of every transaction I failed to report. They said they knew I perhaps did not “realize” I was a BANK and would forego the fines if I would allow them access to audit all my clients. I had no choice. They set up shop in my office. I walked by, noticing that they were pulling out names of those whose transaction were even $5,000, and I asked what was going on. The agent turned to me and said very aggressively, “You have a problem, keep your mouth shut!” The next day in rolled the vans and they took all my business records and began an audit over 3,000 of my clients for the next three years.

That is why I retired. I neither wanted to collect sales taxes on bullion nor be a BANK and report on my clients. Since I was the biggest, they were starting with me. People doing business outside of New Jersey would not have the sales tax problem and the IRS was interested in me because of my size. They would not do the same for small shops. So it was time to get out of the business. Clients wanted the research to continue, so that was spun-off as a new company in 1981.

Now comes Bitcoin. The Judiciary Committee of the United States Senate is currently working on Bill S.1241 that aims to criminalize deliberate concealment of property or the control of a financial account. The bill was submitted in June, and the law would change the definition of “financial account” and “financial institution,” and thus also cover digital currencies and digital exchanges. Who is pushing it? None other than California’s Senator Dianne Feinstein, who maintains that the bill is needed to update existing money laundering laws because of terrorists.

This means that the miners of Bitcoin will become a “bank,” as I was declared. The operators of the trading platform Coinbase were forced by court ruling to notify the IRS of the identity of over 14,000 investors who were trading $20,000 in Bitcoin. Users were affected if their trading volume had exceeded $20,000 at the beginning of 2013 by the end of 2015. So this is NOT a single transaction, but accumulative. The IRS will now “presume” tax evasion. This is what I warned would happen. Been there done that! They can shut down Bitcoin in the blink of an eye by simply defining anyone who is a miner to be a financial institution.

The bill will change the definition of “financial institution” in Section 53412 (a) of Title 31 , United States Code. The text will read:

“An exhibitor, a redeemer or a cashier of prepaid access devices, digital currency or a digital exchanger or a digital currency.”

The regulation will remove the anonymity of Bitcoin and other cryptocurrencies defeating this idea that there is an alternative-financial-universe separate from government.

 

skipr's picture
skipr
Status: Silver Member (Offline)
Joined: Jan 9 2016
Posts: 141
BTC futures and gold

I'm a bit paranoid about these BTC futures. The tool that has been used to drive gold down is now being implemented on BTC.  Personally, I'm moving half my stash over to gold in my vaultoro.com account.  I can always move it back to BTC if my concerns prove to be just that, paranoia.

robbie's picture
robbie
Status: Silver Member (Offline)
Joined: Jul 16 2008
Posts: 100
I’m very interested in

I’m very interested in hearing what others expectations are for the market dynamics surrounding the advent of futures trading. Does anyone expect there to not be an overwhelmingly large institutional short position? Why wouldn’t the institutional objective be to drive the price into the dirt first and then reverse direction? I realize many expect the “gold suppression” playbook to be used but what if it’s not? Many late participants may lack the testicular fortitude to hold should we reach a 30-50%+ correction resulting in a weak to strong hands transfer. Anyone care to query their crystal ball and share their rationale on where the new equilibrium might be on December 11th?  

For Mark-

Other than the possibility of the govt. co-opting the network from within. What other potential near to mid-term price inflection points are you contemplating?

mrees999's picture
mrees999
Status: Gold Member (Offline)
Joined: Aug 16 2013
Posts: 427
Time for a BTC breather

I've called tops before, this may be a top for btc for a while. I share the same concerns about owning 'paper bitcoin'. I don't doubt major shorts will come in and nuke the price so the people that missed out can get in cheap.

If you're a long term HODLer no big deal. This is par for the course and we are used to riding these out. But I'm likely going to pull out and instead of going to gold, I'll switch to ether after a week because it tends to catch a cold when bitcoin sneezes but has its own dynamics and should be an alternative people use when they duck for cover. It's been suppressed for months itself. The crypto whales might decide it's time for it's turn. I think we'll see $1500 ether next year.

Then I have special plans to take advantage of the low bitcoin price to explode with a strategy I've got cooking. possibly 5x returns in the next month possible.

check out Facebook page 'watchmywallets' to get more inside info.

 

 

 

robbie's picture
robbie
Status: Silver Member (Offline)
Joined: Jul 16 2008
Posts: 100
Thank you for your insights

Thank you for your insights Mark. 

Details on the mechanics of expected futures trading:

https://medium.com/@Michael_Spencer/race-to-bitcoin-futures-989403c1c27c?source=emailShare-95b4e8859dd0-1512531453

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5459
calling tops

Heh.  Last time you called the top in ETH perfectly by sending me that skeleton.  I'd feel a lot more comfy if you would just send me the stupid skeleton and make fun of me instead of agreeing with me.  Now I'm worried that maybe we could go up another $10k.  :)

Interesting concept RE: switching to ETH to ride out the storm, and also interesting regarding your expected timing.  I should go look at ETH intraday and see if it is as easy to trade at as BTC.  Maybe its easier, who knows?

Certainly this chart provides some food for thought in terms of relative opportunity.  ETH:  a 3.5-bagger in reverse.  Compared with bitcoin, of course.

And of course...no "CME futures" for ETH.   Hmmmmmmm....

 

Tycer's picture
Tycer
Status: Platinum Member (Offline)
Joined: Apr 26 2009
Posts: 610
ETH charting please!

Dave, 

I know you are a busy man and I can't tell you how much I appreciate all you do here. Thanks. If you decide to chart ETH I would be very pleased.

Kind regards

Tycer

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