ELON MUSK Wrong About Bitcoin Energy Consumption? – powered by ise.media
Elon Musk and Janet Yellen are suddenly ‘concerned’ about Bitcoin’s environmental impact. But is Bitcoin really that harmful? Our interview with Bob Burnet explains just how wrong their statements are and how Bitcoin is actually paving the way for energy efficiency.
(DFN) Recently, Warren Buffet, Bill Gates, and Charlie Munger spoke negatively of cryptocurrencies, but Gary Cohen spoke somewhat positively and there are other signs that institutional money is becoming more keen on cryptocurrencies.
Buffet called Bitcoin a “non-productive asset” and that the “asset itself is creating nothing” when compared to “productive” assets like gold or farms. Buffet also compared cryptocurrencies to the Dutch Tulip Mania. Gates said that Bitcoin’s price relies on the “greater fool theory” of finding another “fool” to sell to at a higher price. Munger hit below the belt by calling Bitcoin “stupid and immoral” and the equivalent of “rat poison”.
However, another financial titan and former Goldman Sachs President, Gary Cohen, said that he’s “not a big believer in bitcoin”, but is “a believer in blockchain technology”. He added that he thinks there will eventually be a “global cryptocurrency”, but that it won’t be “based on mining costs or cost of electricity or things like that”. In addition, the famous Gemini exchange founder, Tyler Winklevoss, recently called out Bill Gates to “put [his] money where [his] mouth is” and referenced numerous trading outlets where one can short Bitcoin after Bill said he “would short [Bitcoin] if there was an easy way to do it”.
Institutional Money is beginning to venture into cryptocurrencies
Despite the big names in finance and tech speaking against crypto, there are signs that institutional investors are venturing into cryptocurrencies. Dash Force News spoke with Chris Rockwell, founder of RSI Advisors (an investment advisory firm in New Hampshire), about this new trend. Mr. Rockwell said that institutional money has been waiting for two things to happen:
“A way to hedge against crypto holdings and qualified custodians to take custody of their crypto holdings. Bitcoin futures contracts by both the CBOE and CME allow investors to hedge and qualified custodians like Kingdom Trust and Coinbase Custody should allow the doors to open for some institutional investors.”
Not all institutional money is the same and thus there are different players at different levels of entry into the cryptocurrency market. Rockwell mentioned that “[c]rypto only hedge funds are the early adopters and already in this space”, but as hedging and custodian market penetration increases, “standard hedge fund[s] will consider dipping their toe in the water”. He said that investment advisory firms and endowments are the next likely cryptocurrency investors, while pension funds and mutual funds “will probably be the last to enter because of unclear regulatory framework”, but Chris does “expect them to invest in crypto currency eventually”. Chris mentioned that banks and insurance companies are a “wild card”.
Chris also added that “[f]irms will get involved in the crypto space because of client demand, because crypto currency is uncorrelated to any other asset class (very unique in investing) and the potential to boost portfolio returns with little downside risk”. Despite the potential upside and the consumer demand, some establishment firms will nevertheless fall into the classic mistake of becoming lethargic in their innovation. Chris summarized this action very eloquently.
“The largest institutions/names in finance want to stay the largest and like the way things are now. They have little incentive to change how they invest. Radical changes scare them. The smaller and hungry firms/names trying to catch up have a lot of motivation to try new things if it gives them an edge. I also think many just don’t understand crypto currency and instead of saying they don’t know or understand they simply denounce and malign it to sound knowledgeable on the subject”
Dash makes institutional investing easier
As the price of Dash has increased drastically from the beginning of 2017 so has the overall price of masternodes. Consumers and investors wanted to invest in masternodes to receive the payout rewards, but did not have the capital to buy a full masternode. The Dash community has demonstrated its commitment to satisfying consumer desires. So naturally, Neptune Dash soon emerged to accommodate these desires. Neptune Dash went public in Canada this past January and raised over $23 million CAD to buy Dash and masternodes that will generate a respective return to those that own its publicly-traded shares. In April of this past year, Neptune Dash became available to EU and US investors as well.
Dash has demonstrated that it has a robust community to recognize and satisfy consumer desires in a multitude of ways. The mixing pot of ideas that is the Dash community encourages and fosters success for entrepreneurs that find quality methods to accommodate desires of consumers. This process benefits the overall Dash community by involving more users and investors, including institutional investors, by lowing the adoption curve and switching costs, which makes it easier for individuals and firms to use Dash. The Dash community brings Dash to individuals rather than waiting for individuals to discover Dash.
Written by Justin Szilard
This article was republished with permission from Dash Force News.
(DFN) The St. Louis Federal Reserve in the U.S. issued a blog post based on a paper written by Berentsen and Schär that draws three main similarities between Bitcoin and other national currencies.
The blog post touches on one, no intrinsic value in either, two, limited supply, and three, no middle man. Berentsen and Schär discussed how Bitcoin has no intrinsic value since it only has the code, computations, and developers behind it, but they also highlighted that “[s]tate monopoly currencies, such as the U.S. dollar, the euro, and the Swiss franc, have no intrinsic value either.” They mentioned how the USD is no longer back by gold and only has the trust of the U.S. government and its status as legal tender to back the currency.
They also discussed that there is a limited supply of Bitcoins – at 21 million coins. They did not mention the limited supply of other coins such as Dash. Importantly, they added that scarcity is what grants value to an item and even though Bitcoin’s price fluctuates a lot, there is still an upper limit to its volume. They also mentioned that the U.S. Federal Reserve technically “does not print money”, but has the ability to “increase or decrease the monetary base.”
The final point discussed that there is no middle man when using Bitcoin since Bitcoins are sent directly between individuals without any “credit relationship aris[ing] between the buyer and the seller.” They added that “[i]n that way, bitcoin was designed to be a lot like cash.”
Money Manipulations
The blog post by the St. Louis Fed based on the paper does reveal that the Fed is recognizing the role that cryptocurrencies are playing as currencies despite their volatility. The second point does deserve to be broken out further in that it relates back to point one. While it is true that the Fed does not physically print money and helicopter drop the money to citizens, it does do something similar via the Federal Open Market Committee (FOMC). The FOMC buys bonds (to inject more money into the economy) or sells bonds (to take money out of the economy) and this is all done electronically so the Fed does not actually print money, but still manipulates the amount of money in the economy (the monetary base). They can also manipulate the money supply via interest rates, minimum reserve ratios, and other tools. These manipulation can relate back to point one about the intrinsic value of Bitcoin and cryptocurrency.
As a prerequisite, the difference between intrinsic value (internal value from the item) and extrinsic value (value applied from an outside party) should be mentioned to be a blurry line. Gold is often said to have intrinsic value because it is more scarce and can be used for jewellery or computer parts, but ultimately, even that value somewhat arises from the extrinsic value that consumers place on the services of gold. So the task then becomes not to look for an intrinsic value, but to find the chief source of the extrinsic value for Bitcoin and other cryptocurrencies. Since many cryptocurrencies have their supplies written into their code, which have not been broken, the extrinsic value of cryptocurrencies when compared to fiat would arise from consumers actively preferring the inability to manipulate the money supply.
Another appeal of cryptocurrencies has not been its similarities to cash, but instead its improvements upon cash. Individuals are now able to store their own wealth for a fraction of the fees typically charged by banks without fear of losing their money through theft or natural disasters (as would be the case if personally storing all cash on hand) or having their money devalued. Some cryptocurrencies are making better improvements upon cash than others.
Dash is maximizing everyday usage
Dash has excelled in making Dash usable in everyday transactions. Dash has so far ensured consistently low transaction fees and fast confirmation times further increasing its similarities and improvements relative to cash. In addition, Dash has been able to increase merchant adoption throughout the world since Dash is more viable in everyday transactions than many other cryptocurrencies. This has led to clusters of active Dash communities like those in New Hampshire and Venezuela.
Dash has been able to accomplish this through its unique governance and treasury system, which has enabled decentralized funding and decentralized coordination of teams to create a spontaneous order of consumer solutions. Dash has been able to seamlessly upgrade its network to maintain low transaction fees and fast confirmation times. The Dash community has created outletsthroughout the world to educate consumers about Dash and cryptocurrency. There have also been numerous online and physical stores beginning to accept Dash as they realize its potential. Dash is leveraging its comparative advantages to create confidence and offer consumers services that the current cash and monetary system do not offer.
Written by Justin Szilard
This article was republished with permission from Dash Force News.
Billionaire venture capitalist Tim Draper claims that Bitcoin could be bigger than the internet.
CNBC reported that Draper recently spoke at the Intelligence Squared U.S. debate presented in partnership with Manhattan Institute’s Adam Smith Society. Regarding the potential of cryptocurrency, he said:
“This is bigger than the internet. It’s bigger than the Iron Age, the Renaissance. It’s bigger than the Industrial Revolution….This affects the entire world and it’s going to be affected in a faster and more prevalent way than you ever imagined.”
Draper is known for his investments in Tesla, Hotmail, and Skype. However, when comparing those investments he said Bitcoin will be “bigger than all of those combined.”
Draper further claimed that Bitcoin’s value will hit $250,000 by 2022, and stated that “in five years you are going to try to go buy a coffee with fiat currency and they are going to laugh at you because you’re not using crypto….I believe that there will be a point at which you will no longer really want any of the fiat currency.”
Draper isn’t the first major investor to make bold Bitcoin predictions. John McAfee, founder of McAfee antivirus software and cryptocurrency advocate predicted in 2017 that Bitcoin would reach $1 million by the end of 2020.
As I predicted, Bitcoin is rebounding and rapidly climbing after Christmas. It is still, by far, the best long term crypto investment, and I firmly stand by my prediction of $1 million by the end of 2020. pic.twitter.com/FaaSIuUS7i
Former Goldman Sachs partner and former Fortress Investment Group hedge fund manager Michael Novogratz predicted late last year that Bitcoin would reach $50,000 by the end of 2018. Twitter and Square CEO Jack Dorsey predicted that Bitcoin will become the world’s single currency over the next 10 years.
Financial Times Managing Editor Gillian Tett argued against claims of Bitcoin’s future domination during the debate, pointing out market volatility and criminal uses as issues preventing it from massive implementation in the future, although some have claimed that volatility will subside upon larger Bitcoin adoption.
Draper insisted he feels “more secure in my Bitcoin than I am in the money that’s sitting there in Wells Fargo.”
Draper told CNBC in December that he bought 30,000 Bitcoins in a 2014 auction and he is still holding those coins today. Those Bitcoins are worth close to $270 million based on current market prices.
Arguing alongside Draper during the debate was Overstock CEO Patrick Byrne. He shared comparable confidence in Bitcoin and cryptocurrency security in general, saying:
“This has been hacked at more than anything in history and has never been defeated…Last I checked, banks get hacked too. And yeah, Bitcoin is used by unsavory characters. Last I checked, they used U.S. dollars too.”
Bitcoin is currently holding 38% of the cryptocurrency market. Bitcoin’s value reached $20,000 in late 2017 and is currently just under $9,000 although this up from $4,400 in August 2017.
(Dash Force News) Tim Draper, the famed investor who once said “the world needs this new kind of currency”, now predicts Bitcoin will reach $250,000 USD by 2022.
Draper unveiled his prediction at his blockchain party and via tweet, even though he mistakenly proclaimed $25K in his first tweet, which was later clarified to be $250K. He even emboldened his prediction in a giant sign displaying “Tim Draper predicts Bitcoin @ 250K by 2022” outside his entrepreneurship program, Draper University. Draper did not expand on his prediction methodology.
Draper, who founded the venture capital firm, Draper Fisher Jurvetson, and also lead successful investments in Skype, Tesla, Twitter, and SpaceX has said that he was attracted to currency not tied to a government, “[s]o when Bitcoin showed up, I was all over it”. Draper is known to have purchased $30,000 in Bitcoin from the U.S. government during their liquidation of confiscated funds from Silk Road.
Price predictions are difficult
Making correct price predictions are already very hard in traditional markets where information is plentiful, but price predictions become vastly more difficult with cryptocurrencies because of the increased possibilities, less behavioral information, and greater assumptions. For example, Murray Stahl of Horizon Kinetics hypothesizes that Bitcoin is worth the sum of all the other currencies in the world – $361,000 USD per Bitcoin. However, this relies on the assumptions that Bitcoin, and no altcoins, will be used by most people in the world and also discounts future monetary policies and economic growth. A correct, or even for that matter a somewhat close-to-correct, price prediction for cryptocurrencies requires an unfathomable calculation of infinite information and knowledge of future actions of individuals and governments. A way to cope with the impossibility of making full-proof price predictions is to instead focus on the economic ordinal direction, rather than economic cardinal magnitude, of price movements over time. An investment analyst will also look at historical movements and decide if an asset or currency will continue along that trend, upwards or downwards, into the future.
A quick way to filter out the noise that surrounds cryptocurrencies’ rapid price movements is to look at the price of Bitcoin, Dash, and other cryptocurrencies in a log scale rather than a liner scale, which focuses on the percent change and is better adept for cryptocurrencies. When this technique is implemented, taking Bitcoin and Dash as examples, both reveal that they have generally been trending upwards over the past few years. There are exceptions in the time series, during small slumps, but the coins have mostly trended upwards and appreciated relative to the USD. However, to aid a price analysis beyond simple extrapolation, which is prone to fallacies and errors, is to focus on the value an item provides to consumers and the potential value it could provide in the future.
Value is derived from services provided to consumers
As people discover the value of a good/service, they will demand more of it and thus increase the price unless met with extra supply. Since most cryptocurrencies have a limit to the amount of coins mined, the way for the price to increase is to increase the coin’s value to users. Dash has been focusing on how to provide value to users the past couple years and has laid out guidelines on how it plans to continuously improve services for users in the future.
In the immediate case, Dash, with its low transaction fees and fast transaction times, has allowed people around the world to use Dash as currency in exchange for goods and services. The citizens of Venezuela have quickly adopted Dash to escape their horrible inflation, but use cases are not limited to hyper-inflationary countries. On the Discover Dash website, current and potential Dash users can locate numerous online businesses and local physical shops all over the world that take Dash. This usability of Dash, in addition to its full cryptocurrency offerings of sound money, security, and privacy demonstrates its value offerings and thus makes Dash one of the better positioned currencies for future economic ordinal price appreciation relative to other currencies.
(Dash Force News) Gina C. Pieters, Ph.D. economist at Trinity University, shows in her paper that a properly adjusted Bitcoin price can shed light on how countries manipulate their exchange rate and/or institute capital controls.
Typically, economists discover the intensity of currency manipulation and capital controls via other international measures, stocks, globally traded commodities, or even the infamous Big Mac Index. She recently presented her work at The Royal Economic Society’s annual conference, although much of her data is for 2014-2015 because of the data availability bottleneck from other countries that institute currency and capital controls. Her study utilizes the fact that Bitcoin is traded 24/7 virtually with all data in the open so researchers would not have to wait for data collection like previous methods. She also emphasizes that Bitcoin’s minuscule transportation costs and separation from nation-states make it less prone than commodity measures to cross-boarder trade price differential and trade barriers imposed by countries.
Pieters acknowledges that Bitcoin’s price does not find parity across exchanges nor countries due to various reasons and thus the price needs to be normalized to be an appropriate gauge to judge other countries’ currency and capital controls. She is then able to use Bitcoin exchange price data to discover currency and/or capital controls and the degree within China, Argentina, South Africa, Poland, and more. Her motivations for the study was that “before access to Bitcoin-pricing data such results would be slow, difficult or impossible to construct. The results of this study provide a new tool with which to detect the presence of capital controls.”
Currency Manipulation and Capital Controls
Free floating exchange rates are market forces that determine the proper price of a country’s currency based on a countless number of variables and interlink with many parts of the macro and micro economy. However, some countries try to manipulate currency exchange rates overtly or covertly with currency pegs/managed exchange rate regimes and/or capital controls. Separating a currency’s price into two parts, one part determined by market forces and the other part determined by government manipulation, is very hard to do and what theses studies attempt to measure.
An important caveat that Pieters mentions earlier in her paper is that Bitcoin could be skewed towards individuals that like “computer programming and illegal activity” along with other correlations and skewed away from others in the country that do not share those interests. Thus a non-normalized Bitcoin price could be an incomplete gauge for currency users in the rest of the desired country. Theoretically, her normalization with USD-EUR exchange rate would eliminate this, but a problem would arise if the demographic ratio of people using Bitcoin to other currency users within a country is inconsistent across countries. This would make a one off normalization incomplete. So even better cryptocurrency data for analyzing government currency manipulation and capital controls would be a cryptocurrency that is used widely within and across countries.
Dash is widely used across many countries for everyday purchases.
In her conclusion, Pieters does recognize that since she completed her initial research many more exchanges and cryptocurrencies have emerged that warrants additional studies. Dash would be able to help solve her concern about Bitcoin being skewed towards particular types of individuals that may not be a consistent demographic ratio across countries in relation to the rest of the population. While all cryptocurrencies possess this problem to a degree since it is a new technology, Dash is making significant steps towards larger adoption across countries and across demographics.
Dash is booming in Venezuela where citizens suffer from massive inflation partially caused from government exchange rate manipulation and capital controls. Dash has teams in countries across Africa, Europe and Asia as well to increase adoption. Dash has very low transaction costs and times, has the consumer in mind when developing advancements, and offers both private and normal blockchain transactions, which makes Dash appealing to all types of individuals. Under Pieters’ methodology, while Dash would most likely still have to be adjusted, Dash would serve as a better gauge for inter- and intra- country currency demand, supply, and pricing.
(Dash Force News) The famous NSA whistle blower, Edward Snowden, thinks Bitcoin’s open and public ledger will ultimately be the downfall of Bitcoin.
Snowden said that “[e]verbody is focused on the transaction rate limitations of bitcoin being its central flaw, and that is a major one, but … the long-lasting flaw, is its public ledger”. Snowden elaborated that “you cannot have a lifelong history of everyone’s purchases” because it does not “work out well at scale.” Snowden admitted that Bitcoin will still have an “enduring value for a long time”, but that the core development team needs to improve their rate of development or they will not be able to compete.
Snowden hinted that he once used Bitcoin to hide his identity when he revealed privacy abuse by the NSA including the NSA spying on Bitcoin users. However, Snowden now prefers Zcash since its techniques to encrypt blockchain data was developed by academic cryptographers.
Quest for privacy
Snowden’s NSA revelations revealed how much governments spy on their own citizens and the importance of privacy. Bitcoin was initially believed to be extremely private because each user was only identifiable via their wallet address, which was a string of cryptographic characters. However, governments eventually developed methods to leverage Bitcoin’s public ledger to track and identify Bitcoin users, which made Bitcoin only psudo-private. As a solution, more cryptocurrencies began to emerge that met the demands for greater privacy and made it much harder to track users.
Snowden prefers Zcash, but Monero is also a major privacy centered cryptocurrency. These coins have seen rapid increases in their price over the past year, which a portion of can be attributed to the demand for privacy centered coins. This demonstrates that there is a demand not only for sound money separate from the current monetary/financial system, but also money that grants more privacy. It has also been shown, contrary to popular belief, the demand for private cryptocurrencies is not primarily for criminal activities. This supports Snowden’s comments that more private cryptocurrencies will win the long term cryptocurrency competition because of the popular and legal demand.
Dash provides a unique risk hedge since it can do both
The advantage of Dash is that its blockchain is structured both as a pseudo-private layer like Bitcoin and as a private layer via PrivateSend. These features allows consumers to have both options within one cryptocurrency without having to initiate an exchange. This dual-feature also adds to the argument that criminal activity is minimal since Dash is being used simultaneously by people who seek privacy and people who use the public ledger. The combination of these features makes Dash a unique risk hedge within the cryptocurrency space.
Whether public or private ledgers win in the crypto marketplace, Dash will occupy both spaces. As governments attempt to regulate privacy-centered cryptocurrencies, Dash provides a soliddefense, with its wide reaching legal and open marketplaces, against many potential arguments of criminal activity. Dash is able to add sustainable privacy to its repertoire of providing sound money alternatives to the current financial and monetary system.
(Dash Force News) The CEO of Square and Twitter, said on Wednesday that “the world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin”.
Dorsey went on to elaborate that he thinks it would happen “probably over ten years, but it could go faster.” However, Dorsey also admitted that Bitcoin “does not have the capabilities right now to become an effective currency” because “it’s slow and it’s costly”. Drosey’s Square app, to much fanfare late last year, started to allow people to buy and sell Bitcoin via the app in many states. Dorsey explained how “there are newer technologies that build off of blockchain and make it more approachable” and said that as more people use Bitcoin, the problems start to go away.
Dorsey also was part of a seed financial round for Lightning Labs last week that raised $2.5 million USD. Lightning Labs, run by CEO Elizabeth Stark, is the company behind the controversial development of the Bitcoin Lightning Network. Some proclaim that the Lightning Network will get rid of the slow transaction times and high transaction fees that have been plaguing the Bitcoin Network. Others say that the Lightning Network is a complicated solution to a problem that can be solved in simpler ways and may even recreate the current financial system within the crypto space.
Solutions to be found through competition of many different cryptocurrencies
Jack seems to believe that he knows how the battle between over one thousand cryptocurrencies will play out. Yes, it can be safely argued that a majority of those cryptocurrencies will fail, but there will also still be a significant amount of solid cryptocurrencies that are vying for the top spot(s). Dorsey recognizes that there are presently problems with Bitcoin that need to be solved so it can scale, but he also seems to believe that Lightning Labs will offer that solution. However, there is far from a consensus that the Lightning Network will do what they claim. In addition, Dorsey’s comments comes days after reports emerged that Twitter will ban crypto related ads on their platform.
Jack’s endorsement of Bitcoin and Twitter’s banning of crypto ads is interesting in that Bitcoin is the name-brand that does not need ads to spread awareness since it already gets free press. A ban on advertising will end up hurting cryptocurrencies with smaller markets that do not presently have the same public awareness. Yes, the ban could stop some scams, but it will also hamper competition among the many top quality coins. This competition is what incentivizes each coin to put their best code forward and act in the interests of the consumers. Without competition and only a “single” world currency, consumers would be very susceptible to sub par products, services, and code.
Bitcoin is approaching nearly a decade in age, of which the majority of that time it faced little to no direct competition. This lack of competition caused Bitcoin to ignore many of its to-be problems until it was too late. The effects of competition on other cryptocurrencies, however, is giving immediately usable products and services to citizens around the world, including third world countries, that simply do not have the capital nor the time to wait for Bitcoin to solve its scaling problems.
Dash is providing competitive solutions right now
Dash has only been around for a few years, but in that time Dash has spreadthroughouttheworld. Dash has done this through developing a great product and marketing campaigns that are possible via its unique governance and treasury system, but also through organic reach from people convincing their friends to use Dash. This has occurred because of the present functionality and reliability of Dash, but also confidence in the Dash community and Dash Core Group to solve issues that arise in the future as demonstrated by their past solutions.
Dash is a prime cryptocurrency competitor that harnesses competitive pressure to create products and services that have the end consumer in mind. Despite challenges that arise or praise given towards other cryptocurrencies, Dash has a worldwide network of users to continue to serve with present day solutions.
A new report from The Intercept reveals that the National Security Agency has been able to track users of the popular cryptocurrency Bitcoin since at least 2013. The revelation is detailed in newly released classified documented obtained by whistleblower Edward Snowden and provided to the The Intercept. The documents show the agency accessing the fiber-optic cables which allow internet traffic to travel around the world in order to gain access to private information of bitcoin users.
“Classified documents provided by whistleblower Edward Snowden show that the National Security Agency indeed worked urgently to target Bitcoin users around the world — and wielded at least one mysterious source of information to “help track down senders and receivers of Bitcoins,” according to a top-secret passage in an internal NSA report dating to March 2013. The data source appears to have leveraged the NSA’s ability to harvest and analyze raw, global internet traffic while also exploiting an unnamed software program that purported to offer anonymity to users, according to other documents.”
An internal NSA report from March 15, 2013 stated that the agency was interested in monitoring traffic for other cryptos; however, “Bitcoin is #1 priority”. Another memo from March 29, 2013 indicated that the NSA collected users’ passwords, internet history, and a unique device identification number known as a MAC address. The memo suggests analysts were also tracking internet users’ internet addresses, network ports, and timestamps. The documents also indicate the use of the NSA’s powerful internal search engine, XKeyScore.
“As of 2013, the NSA’s Bitcoin tracking was achieved through program code-named OAKSTAR, a collection of covert corporate partnerships enabling the agency to monitor communications, including by harvesting internet data as it traveled along fiber optic cables that undergird the internet,” The Intercept wrote. The NSA used a sub-program of OAKSTAR – known as MONKEYROCKET – to gather data from the Middle East, Europe, South America, and Asia.
MONKEYROCKET is also apparently falsely promoted to the public as a tool for anonymity. The documents describe MONKEYROCKET as a “non-Western Internet anonymization service” with a “significant user base” in Iran and China. One document notes that the goal of MONKEYROCKET was to “attract targets engaged in terrorism, [including] Al Qaida” to use the “browsing product,” which “the NSA can then exploit.” This is known as a honey pot in computer security. The NSA deceives users into believing they are secure and anonymous and then uses the program to track the activities of users. The documents do not clarify what type of program or software MONKEYROCKET actually is, but the description aligns with a virtual private network, or VPN, which is designed to encrypt and mask internet traffic.
Matthew Green, assistant professor at the Johns Hopkins University Information Security Institute, told The Intercept that the revelations are “bad news for privacy.” Green also said he is “pretty skeptical” that using Tor, the popular browser which promises anonymity, could escape the eyes and ears of the NSA. Green’s comments are bolstered by recently released documents which indicate that the TOR project is nearly entirely funded by agencies with connections to the U.S. government.
Another disturbing aspect of the latest Snowden revelation is the possibility that this program may have been used to illegally gather information in the Silk Road trial. In that trial, Ross Ulbricht was sentenced to three life sentences after the court was convinced he was the accused mastermind who created the Silk Road website which allowed drugs to be purchased using Bitcoin. Ulbricht’s attorneys attempted to have the charges thrown out throughout his trial because they believed the U.S. government had illegally obtained access to Ulbricht’s computers and property. The judge overruled such objections, and the entire premise was dismissed as a conspiracy. The Intercept noted that “although the documents leaked by Snowden do not address whether the NSA aided the FBI’s Silk Road investigation, they show the agency working to unmask Bitcoin users about six months before Ulbricht was arrested.”
These new documents show that the NSA had access to Bitcoin users around the world around the same time that Ulbricht’s case was heating up, pointing to plausibility that the NSA used this program (or another still secret tool) go gain access to the private documents of Ross Ulbricht. The question remains as to how many other Bitcoin and cryptocurrency users’ information was accessed by the NSA or other agencies of the U.S. government. Until there is a transparent investigation with subpoena power that looks into the hidden activities of the NSA and other intelligence agencies, the American public remains in the dark regarding the depth and nature of the American surveillance state.
A new report from Congress — the 2018 Joint Economic Report, used to assess the nation’s economic status and provide recommendations for the upcoming year— includes an entire chapter dedicated to cryptocurrencies and blockchain technology.
The report called for policymakers, regulators, and industry leaders to cooperate and ensure developers can implement these new blockchain technologies, and even called 2017 “The Year of Cryptocurrencies.”
The comprehensive report illustrates blockchain as a “potential tool for securing America’s digital infrastructure,” and points out how “methods of theft, espionage, and vandalism” are shifting “from physical toward virtual.”
Included within the Blockchain section is a statement that the technology is “not only nearly invulnerable to cyberattack but is revolutionizing the way the world conducts commerce and shares information.”
Blockchain is the distributed ledger technology that underlies digital currencies such as Bitcoin. A ledger is the accounting tool that tracks the movement of money from one person or account to another. Conventionally, such records are stored in central locations like banks, headquarters, and Paypal servers. Blockchain revolutionizes ledger technology with a network of distributed ledgers. Instead of one central, authoritative record of all transactions or information, blockchain creates potentially thousands of identical ledgers in computers and servers all over the world.
In “permissionless” proof-of-work blockchain, people compete to validate each transaction in return for a reward. The protocol rewards users for creating and validating entries into the ledger. This reward creates an incentive for competition and gives these validators (“miners” see Box 9-1) new tokens to use in the system. Users who do not earn tokens by performing verifications, i.e., not “miners,” must buy the tokens. This interplay between miners and purchasers create an ecosystem where people have clear incentives and rewards to maintain the distributed ledger for everyone.
The report tracked cryptocurrency’s massive rise during 2017, noting the significant price growth of leading cryptocurrencies Bitcoin and Ethereum, and that both outpaced the Dow Jones Industrial Average and the S&P 500.
The report shared a critical view of cryptocurrencies as a currently viable form of money and stated that “technical and economic limitations” of Bitcoin “hinder its use as a medium of exchange.” The report went on to acknowledge that “If digital currencies become less volatile in the future, valuing items in those denominations could become easier and individuals might begin using them more frequently as a medium of exchange.”
Regulation concerns were also examined in this report, noting that cryptocurrencies, ICOs and exchanges all pose unique challenges. “Their rapid ascension led to instances of new products running afoul of America’s current regulatory framework,” the report noted. “This demonstrated how certain regulatory environments are simply out of touch with the internet age.”
The report concluded that:
Technology presents evolving challenges and generates new solutions. Blockchain technology essentially stores and transmits data securely, in large volume, and at high speeds. So far, the technology has proved largely resistant to hacking, and given this feature, developers first applied it to digital currencies. Yet blockchain has many more potential applications, such as portable medical records and securing the critical financial and energy infrastructure.
The report offered recommendations to policymakers, regulators, and industry leaders in its conclusion:
— Policymakers and the public should become more familiar with digital currencies and other uses of blockchain technology, which have a wide range of applications in the future.
— Regulators should continue to coordinate among each other to guarantee coherent policy frameworks, definitions, and jurisdiction.
— Policymakers, regulators, and entrepreneurs should continue to work together to ensure developers can deploy these new blockchain technologies quickly and in a manner that protects Americans from fraud, theft, and abuse, while ensuring compliance with relevant regulations.”
— Government agencies at all levels should consider and examine new uses for this technology that could make the government more efficient in performing its functions.
This new report offers an extensive interpretation of the rise and future potential of blockchain technology and cryptocurrencies. Other government acknowledgment this week included the House Capital Markets, Securities and Investment Subcommittee, the House Science, Space and Technology Committee and the Senate Banking, Housing and Urban Affairs Committee.
Binance, a leading cryptocurrency exchange, is offering a bounty equivalent of $250,000 USD in BNB in cryptocurrency for information that leads to the arrest of the hackers involved in a recent phishing attempt. On top of this, they are maintaining a $10 million cryptocurrency reserve for bounties to nab hackers in the future.
In a statement, Binance addressed the importance of going on the offensive against attempted hacks:
To ensure a safe crypto community, we can’t simply play defense. We need to actively prevent any instances of hacking before they occur, as well as follow through after-the-fact. Even though the hacking attempt against Binance on March 7th was not successful, it was clear it was a large-scale, organized effort. This needs to be addressed.
During the attempted scheme, the Viacoin (VIA) to Bitcoin (BTC) market experienced “abnormal trading activity.” Luckily, Binance’s automatic risk management system was flagged, and all withdrawals were halted immediately. After the incident, Binance quickly released a statement announcing all funds were safe.
The security incident involved some irregularities in the use of API keys, which resulted from a phishing campaign lasting a few months. The actual attack took only two minutes. Binance said in one of their statements:
The phishers accumulated user account credentials over a long period of time. The earliest phishing attack seems to have dated back to early Jan. However it was around Feb 22, where a heavy concentration of phishing attacks were seen using unicode domains, looking very much like binance.com, with the only difference being 2 dots at the bottom of 2 characters. Many users fell for these traps and phishing attempts. After acquiring these user accounts, the phishers then simply created a trading API key for each account but took no further actions, until yesterday.
Further suspicion grew when the phishing accounts on Binance started placing a large number of market buys for Viacoin, a low-value cryptocurrency, through Bitcoin. This low volume cryptocurrency quickly increased to a high price, and 31 pre-deposited accounts were there to sell VIA at that high price. It was at this time the Binance system flagged the trading and withdrawals were cut off when the attempted withdrawal was made.
Binance said, “Not only did the phishers fail to steal any coins, their own coins have also been withheld.”
Binance noted the hackers appeared both organized and patient. They gathered their information throughout a couple months’ time, then chose a coin with a smaller market cap to help “maximize their own gains.”
Binance has shown transparency throughout this incident, with further information from the statement:
After a thorough security check by Binance, we resumed withdrawals. Trading functionality was never affected. There are still some users whose accounts whwere phished by these phishers and their BTC were used to buy VIA or other coins. Unfortunately, those trades did not execute against any of the phishers’ accounts as counterpart. As such, we are not in position to reverse those trades. We again advise all traders to take special precaution to secure their account credentials…..Protecting our traders is and has always been our highest priority.
Unless you have been hiding under a rock, you’ve been hearing about cryptocurrency, Bitcoin and dozens of coins as being either the future of currency, or causing the biggest bubble ever.
One of the biggest criticisms of cryptocurrency is that it’s just made up money, that it’s not backed by anything.
But is that true?
What if I told you that crypto, unlike dollars or even gold and silver, has the greatest backing of all: radical transparency.
Let’s give it a Reality Check you won’t get anywhere else.
Radical transparency. In the spirit of radical transparency I should mention once again that Reality Check and Truth in Media are exclusively sponsored by Dash Digital Cash, which is of course, a cryptocurrency.
Cryptocurrencies are in the news every day, from Bitcoin’s meteoric rise in December to over $19,000 a coin, to the drop in February to below $7,000. You’ve heard everything from how crypto is the future, to crypto is a scam. The biggest bubble since the Dutch tulip bubble which burst in the year 1637. Yes, it happened. And yes, that comparison is being made in media.
One of the biggest complaints in media about crypto is that it is simply made up money. It’s not backed by anything.
Not like dollars and gold. But is that true?
The U.S. dollar came off the gold standard in 1933 and then fully abandoned it in 1971 under President Nixon.
By 1973, the U.S. had entered into agreements with Saudi Arabia to create the petrodollar. they agreed to use American dollars for paying against oil contracts.
Oh yes, oil. The “fuel of the future” is what backs the U.S. dollar?
Maybe not. Maybe it’s something completely different. Peter Thiel puts it this way:
“You will not be able to pay your taxes in bitcoin. You have to pay them in dollars. If you don’t pay them with dollars, there will be people who will show up with guns to make you pay them.”
From the Daily Reckoning: “Coercion is what holds the u.s. dollar system together. ‘tax-driven money’ is the phrase that economists use to describe the theory. it applies to all sovereign currencies.”
Though, as we have reported at TruthInMedia.com, three states are now considering state taxes to be paid in crypto.
So what about commodity-backed currency, like gold or silver? At least there is a physical asset there, right?
The use of precious metals as money goes back nearly 3000 years.
According to Ross Ashcroft’s Renegade Inc., the founder and chairman of Goldmoney “James Turk argues for a return to the gold standard because ‘only gold is outside the control of politicians’. That may be true, but it’s not outside the control of mining corporations, whose interests are unlikely to coincide with those of the wider population.”
And while gold has a fixed supply that can’t be inflated, it also hasn’t been easy to audit.
And that brings us to cryptocurrency.
With crypto, you know exactly how much is out there, where it all is, and how often it moves.
Forbes Magazine writes:
“…Vanguard founder Jack Bogle and Nobel Prize winner Professor Joseph E. Stiglitz from Columbia University. They have both attacked bitcoin saying that it’s a “bubble,” comparing it to many dotcom companies that were really shell companies offering little value and not ‘backed by anything.’ Stiglitz actually went so far to say bitcoin should be outlawed and said it doesn’t serve any useful social function.”
No useful social function? That argument is really not true.
Cryptocurrencies like Bitcoin, Dash, Ethereum, Litecoin, Ripple, Bitcoin cash, and many others are backed by blockchain technology. And blockchain creates radical transparency through antifragile decentralization.
In other words, blockchain is a secure digital ledger and a distributed database, tracking transactions anonymously and replicating them to prevent data loss. It’s nothing like the trust we instill in our current financial system, which explains its useful social function.
“The whole point of a secure public ledger for financial transactions was to remove the need for trusting an institution like a bank to not only hold your money, but also maintain an accurate copy of all transactions and not engage in financial trickery.”
Now let that sink in. The power of blockchain, upon which most crypocurrency is built, is to actually be able to securely remove the financial middleman.
The mysterious Satoshi Nakamoto, in his whitepaper, writes:
“The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the ‘tape,’ is made public, but without telling who the parties were.”
The goal of true financial privacy is to break the link between an open and auditable network and true identities of the users.
Blockchain technology is facilitating this, allowing even silver currency transactions to be stored as is done by lodecoin.
It’s the power of blockchain that creates what Valenzuela calls “trustlessness.” For instance, Dash Digital Cash does this by “trustlessly mixing funds with a few other parties so that an anonymized transaction can’t be linked back to you, all the while keeping everything publicly visible. There’s incredible value to being able to maintain privacy while keeping the main advantage of cryptocurrency: trustlessness.”
What you need to know is that word, trustlessness, is a powerful one.
So I’ll say it again… trustlessness. Valenzuela says it better than I can, so I will quote him here.
“You don’t have to trust that the network is being used in a certain way. You don’t have to trust that it’s well-distributed, and no one party (or small group of parties) controls a very small portion of the supply. You don’t have to trust any developers or administrators to tell you that the network is running fine. You can see for yourself.”
Radical transparency.
That’s Reality Check. Let’s talk about that right now on Twitter and Facebook.
Phoenix, AZ— Arizona may become the first state in the U.S. to allow residents to pay their tax bill using Bitcoin or other cryptocurrency after the Arizona state Senate passed SB 1091 on February 8, which would allow Arizona taxpayers to use “a payment gateway, such as Bitcoin, Litecoin or any other cryptocurrency recognized by the department, using electronic peer-to-peer systems,” according to the legislation. The bill now moves on to the Arizona House of Representatives for consideration.
“The bill would allow income taxes to be paid in Bitcoin or other cryptocurrency approved by the Arizona Department of Revenue starting in 2020.
The revenue department would be required to convert such payments to U.S. currency at the prevailing rate, crediting the taxpayer’s account with the converted dollar amount. Therefore, any swing in price that resulted in the state not getting the full payment would be the responsibility of the taxpayer.”
“It’s one of a litany of bills that we’re running that is sending a signal to everyone in the United States, and possibly throughout the world, that Arizona is going to be the place to be for blockchain and digital currency technology in the future,“ Arizona State Republican Rep. Jeff Weninger, who co-sponsored the bill, told Fox News.
Prior to the bill’s Senate approval last Thursday, Arizona State Senate Minority Leader Steve Farley (D-Tucson) aired his concerns to his colleagues.
“The state Department of Revenue is having a hard enough time doing its job with the cuts that have been made to auditors collectors and other people like that,” Farley said. “To give them another task is a difficult thing to do.”
Farley also noted that he believed the volatility of Bitcoin is a point of contention.
“What this does in effect is transfer the volatility risk off the person paying their taxes and onto the Department of Revenue and thus all other taxpayers,” Farley said. “We take American dollars at the Department of Revenue to pay taxes. I think American dollars ought to be good enough.”
Sen. Warren Petersen, R-Gilbert, a co-sponsor of Senate Bill 1091, rebutted Farley’s stated fears, noting that Revenue Department would only credit taxpayers the value of the cryptocurrency after being converted to dollars, thus mitigating any risk to the Department of Revenue and Arizona taxpayers.
“Even if for some reason the state doesn’t receive what was sent, the state will only credit you with what is received,” Petersen said.
During a January 24 Senate Finance Committee hearing, Petersen said the bill would give taxpayers more options, according to AZ Central. “This is all about ease and convenience,” Petersen said. “Here in government, we are here to serve the people.”
“Some of the people saying this is dumb are the same kind of people when the Internet first got going would say it’s dumb,” Petersen said.
In addition to Arizona’s ambitious legislation, Colorado and Wyoming lawmakers have also introduced legislation that supports blockchain technology and the use of cryptocurrency; Senate Bill 86 in Colorado proposes the use of blockchain for governmental data security and two bills in Wyoming aim to relax regulatory control over cryptocurrency trading.
While some countries, like China, are cracking down on the crypto industry, U.S. regulators appear more open to accepting Bitcoin and other cryptocurrencies as financial instruments based upon recent developments. Finance Magnates reports that just last week, Christopher Giancarlo, Chairman of the Commodity Futures Trading Commission (CFTC), expressed support for the crypto market, while the introduction of Bitcoin futures by the CBOE and CME exchanges provides further indication that the U.S. mainstream is beginning to accept crypto as a financial instrument.
Lawmakers in Arizona, Colorado, and Wyoming have all recently taken legislative action that seeks to further support cryptocurrency.
On Thursday, the Arizona Senate passed a bill that would allow residents to pay income taxes using Bitcoin and other cryptocurrencies. This implementation has practical significance, allowing the use of cryptocurrencies as a payment option in a state revenue system legitimizes them as an everyday alternative payment medium.
A provision in the bill mandates that the cryptocurrency payments be exchanged for fiat currency within 24 hours. This provision seeks to address the volatility of cryptocurrency and mitigate state revenue concerns.
Republican Arizona State Representative Jeff Weninger, who co-sponsored the bill, said he wants Arizona to be at the forefront of technological innovation. He told Fox News:
“It’s one of a litany of bills that we’re running that is sending a signal to everyone in the United States, and possibly throughout the world, that Arizona is going to be the place to be for blockchain and digital currency technology in the future.”
Consideration by the Arizona House of Representatives will be the next step for this bill.
In Colorado, a bill was introduced in the Senate proposing the use of blockchain for governmental data security. Senate Bill 86 seeks to use the blockchain ledger feature for its ability to securely record transactions. The bill aims to “control functionality, track transactions, verify identities, support uniformity, resist tampering, enable logistical control for large numbers of participants, protect privacy, and support accountability and auditing.”
Sumana Nallapati, Colorado’s secretary of technology and state chief information officer told StateScoop:
“In Colorado, we try to be a leader in any technology that can transform and enable better government. To be an early adopter of blockchain, our hope is that it will allow Colorado to shape the industry by offering lessons learned, creating jobs, and providing better services to our customers.”
Legislators in Wyoming have introduced two bills, House Bills 19 and 70, that would limit regulatory control over cryptocurrency trading.
Coinbase, the most widely used buying and selling cryptocurrency platform, suspended its services in Wyoming a couple of years ago. Many other platforms followed their decision because the states regulatory burdens have been too costly.
The Wyoming Division of Banking requires cryptocurrency trading platforms to hold an equal value of fiat funds to the aggregate value of funds held by customers. Although Hawaii has the same regulation, this response has not been typical in other states.
Coinbase and other platforms found these regulations to impractical to continue services in the state.
House Bill 19 “would clarify the provision that state regulators are currently relying on to bar the trading” while House Bill 70 “would clarify that traders are not subject to certain other state finance regulations,” according to the Casper Star Tribune, providing the opportunity for platforms to continue services in the State.
Menlo Park, CA – On Tuesday, Facebook announced a new policy banning ads promoting cryptocurrency, as a means of preventing what the company called “financial products and services frequently associated with misleading or deceptive promotional practices.”
This means that advertisers – including companies that operate fully legal businesses – will be banned from the promotion of cryptocurrencies, including bitcoin, the most widely accepted crypto. Additionally, the promotion of initial coin offerings (ICOs) and binary options will be eliminated by Facebook, according to a blog post by the company.
Advertisements that violate the new policy will not only be banned from Facebook’s core app, but also from Instagram and the company’s ad network, Audience Network, which places ads on third-party applications.
In the official announcement by Facebook Product Management Director Rob Leathern, he wrote:
“We want people to continue to discover and learn about new products and services through Facebook ads without fear of scams or deception. That said, there are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith.”
Leathern added, “This policy is intentionally broad while we work to better detect deceptive and misleading advertising practices, and enforcement will begin to ramp up across our platforms including Facebook, Audience Network and Instagram.”
The move comes on the heels of persistent claims of spam-like and fraudulent cryptocurrency ads on the platform. The decision has been largely welcomed by savvy crypto enthusiasts, who recognize that these types of spammy advertisement often do not promote the actual benefits of cryptocurrency, according to Kai Sedgwick, in a report from Bitcoin.com.
The report by Bitcoin.com went on to explain:
Of the myriad places on the web where a person can learn about cryptocurrencies, Facebook is possibly the worst. Its users tend to be less sophisticated than those who frequent other social networks, and are easy prey for scammers, charlatans, and snake oil salesmen.
The moratorium on crypto ads can only benefit the cryptocurrency community. Scams such as Bitconnect and Arisebank are allowed to ferment on platforms such as Facebook, out of the reach of sharp-tongued Twitter traders who would otherwise call them out. Examples of ads that Facebook cites as being in contravention of its new policy include “New ICO! Buy tokens at a 15% discount NOW!”
Just how effective the crypto ad ban will be remains to be seen, as last year, following a report by ProPublica, which revealed Facebook was allowing advertisers to discriminate based on race, the company announced a ban on discriminatory ads. When ProPublica conducted a follow up over a year later, it was still able to purchase discriminatory advertising that would allow advertisements to not be shown to blacks or Jews.
Interestingly, the move has prompted speculation as to whether Facebook is attempting to position itself to launch its own blockchain product, with the implication being that it is removing all conversation around the competition. Although there is no hard evidence to suggest that is the impetus behind the crypto ban, at the beginning of January, Facebook CEO Mark Zuckerberg publicly described cryptocurrency as something that can “take power from centralized systems and put it back into people’s hands.”
In a Facebook post, Zuckerberg wrote:
For example, one of the most interesting questions in technology right now is about centralization vs decentralization. A lot of us got into technology because we believe it can be a decentralizing force that puts more power in people’s hands. (The first four words of Facebook’s mission have always been “give people the power”.) Back in the 1990s and 2000s, most people believed technology would be a decentralizing force.
But today, many people have lost faith in that promise. With the rise of a small number of big tech companies — and governments using technology to watch their citizens — many people now believe technology only centralizes power rather than decentralizes it.
There are important counter-trends to this –like encryption and cryptocurrency — that take power from centralized systems and put it back into people’s hands. But they come with the risk of being harder to control. I’m interested to go deeper and study the positive and negative aspects of these technologies, and how best to use them in our services.
These statements by Zuckerberg may be considered ironic, as the centralization of Facebook has led to the soft censoring of material that runs contrary to the corporate-government narrative. This soft-censorship is achieved by continual tweaks to the Facebook algorithm; the latest of which was rolled out last week under the auspices of limiting the reach of “untrustworthy news sources” while boosting local news outlets and posts from friends and family.
In real time, this equates to large swaths of independent media and citizen journalists being squeezed out of existence, as their reach, and subsequent ad revenue, is decimated as large corporate entities are relatively unscathed.
There will likely be pushback from tech investors and entrepreneurs that believe the wholesale ban punishes an entire sector of technological innovation and crypto-related services and products. In fact, two prominent tech investors — Peter Thiel and Marc Andreessen — sit on Facebook’s board, both of whose firms are strong supporters of the ongoing crypto revolution. Additionally, David Marcus, the head of Facebook Messenger, sits on the board of the mega-popular cryptocurrency exchange Coinbase.
In this video clip, Paul Krugman demonstrates once again that prizes don’t make you an expert on everything. Indeed, his poor prognostications happen so frequently that one wonders if Krugman is an expert on anything. I don’t say that to be unpleasant. If you’re going on TV and enjoying a lavish lifestyle by pretending to know what you’re talking about, shouldn’t you be held to a higher standard?
Let’s pass over for a moment how woefully wrong Krugman was about the Internet. What about the internet of money?
Krugman first says: “At this point bitcoin is not looking too good.”
It is true that investment often follows the Gartner hype cycle. So bitcoin has indeed fallen from great heights and is probably just now making its ascent out of the “trough of disillusionment.”
Image FEE.org
But so what? There is nothing inherently wrong with bitcoin. In fact, some very savvy, patient people are building an unbelievable set of technologies within and around the blockchain. And if you believe Gartner, most really interesting tech goes through this cycle.
Let’s look back at the Internet. When the dotcom bubble and subsequent burst looked like this:
Image FEE.org
Do we conclude that because in 2002 the Internet wasn’t “looking so good” that TCP/IP was not viable? That would have been a very short-sighted thing to say, particularly about a system that is a robust “dumb network“ like the internet.
Bitcoin is also a dumb network. But don’t let the “dumb” part fool you, says bitcoin expert Andreas Andronopoulos. “So the dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace. People interested in even the tiniest of niche applications can create them on the edge.”
Then Krugman goes on to ask, “Why does a piece of paper with a dead president on it have value?” Answering his own question he says “Because other people think it has value.”
And this is not untrue. But the problem with this line of thinking is — subjective value notwithstanding — the value of money is also contingent. You might say the value of fiat money is too contingent — especially upon political whims, upon the limited knowledge of the folks at the Federal Reserve, and upon the fact that its unit of account is no longer anything scarce, such as gold.
By contrast, bitcoin has standard of scarcity programmed into it. So, bitcoin is in limited supply, thanks to a sophisticated algorithm.
In a fully decentralized monetary system, there is no central authority that regulates the monetary base. Instead, currency is created by the nodes of a peer-to-peer network. The bitcoin generation algorithm defines, in advance, how currency can be created and at what rate. Any currency that is generated by a malicious user that does not follow the rules will be rejected by the network and thus is worthless. (To learn more about this algorithm, visit “Currency with a Finite Supply.”)
Perhaps you don’t trust this algorithm. Certainly Paul Krugman does not. That’s okay, because digital currencies compete, so you can find one you do trust. One crypto currency is backed by gold and funnily enough, it’s called “the Hayek” after the Nobel laureate who wrote about competing private currencies.
Now, what shall we make of the magic of the dollar? Krugman says it is “the fact that you can use it to pay taxes.” That’s sort of like saying that the Internet works because of eFile. Let’s just assume Krugman was kidding.
But Krugman thinks, without irony, that bitcoin “levitates.” That is to say, he’s okay with the idea that the dollar has value because other people value it, but he’s not okay with the idea that bitcoin has value because other people value it, which is a rather curious thing to say in the same two-minute stretch. He goes on to argue that bitcoin is built on libertarian ideology, and that it doesn’t do anything that digitizing the dollar hasn’t done.
And that’s when we realize that Krugman doesn’t have any earthly clue about bitcoin.
Open-source currencies have another layer that multiplies these underlying effects: the currency itself. Not only is the investment in infrastructure and innovation shared by all, but the shared benefit may also manifest in increased value for the common currency.
Currency is the quintessential shared good, because its value correlates strongly to the economic activity that it enables. In simple terms, a currency is valuable because many people use it, and the more who use it, the more valuable it becomes.
Unlike national currencies, which are generally restricted to use within a country’s borders, digital currencies like bitcoin are global and can therefore be readily adopted and used by almost any user who is part of the networked global society.
What Krugman also fails to appreciate is that bitcoin and the bitcoin network is disintermediated. That’s a fancy way of saying it’s direct and peer-to-peer. This elimination of the mediating institutions — banks, governments, and credit card companies — means bitcoin transactions are far, far cheaper. But that also means these institutions could be far less powerful over time. And that’s precisely why it’s being adopted most quickly by the world’s poorest people and countries with hyperinflation.
Hey, look, I understand. In many ways, Krugman is a twentieth-century mind. Keynesian. Unhealthy obsession with aggregates and dirigisme. He believes in big central solutions to problems that robust, decentralized systems are far better equipped to tackle. And he’s not terribly plugged into tech innovation. In fact, here’s that well-played Internet quote in case you forgot:
The growth of the Internet will slow drastically, as the flaw in “Metcalfe’s law” — which states that the number of potential connections in a network is proportional to the square of the number of participants — becomes apparent: most people have nothing to say to each other!
By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.
Anthem Vault President/CEO/Director Anthem Blanchard sat down with Truth in Media’s Ben Swann to discuss the financial disaster in Greece and how his Bitcoin-gold hybrid, Hayek, will change how people treat currency.
Greece was basically borrowing money to pay pensioners; there is no more money to borrow and there is a run on the banks.
Blanchard speculated on how Greece will solve its problems: “I think what you’re going to see happen actually is that you’ll see Greece in some sort of IOU Euro currency,” he said.
“I think this is a narrative that you’re going to see spread. It’s basically a form of capital control.”
Greece’s potential fix is referred to as a “haircut.”
“Anything over $10,000 will receive a haircut of 30 percent,” explained Blanchard. “You lose 30 percent of your money over $10,000, basically. The small business owner that keeps more than $9,000 in any account- that’s a 30 percent loss right there.”
And that solution could encourage other countries to follow Greece. If Spain decided to overspend on social programs, for example, there is now the idea that the debt could receive a haircut. “So, it sets a precedent. And that’s really the danger in the real sticky situation that the Euro bank and the Euro government heads really have this conundrum on their hands,” he added.
And when it comes down to it, Greece’s middle class will be affected the most. The wealthy have already removed their money from Greece’s banks.
Blanchard said that we should look at Greece’s bigger picture. “There is all of this light shining on this issue right now. We have to point to silver linings here and solutions instead of getting too caught up in what ultimately is an unwinnable and unsavable situation long term.”
Blanchard explained that a situation like Greece is plausible in all countries who use currency not backed by anything.
“Ultimately having the printing press in the hands of the government is a very dangerous thing. That’s specifically why the founders of the U.S. specifically put into the Constitution about being able to identify gold and silver as being coinable money by the states. They recognized that it’s very dangerous for there to be a fiat money, a dictate money, a currency that the government demands that is has to be paid for all debts to a government or its government or its court system fines. It creates artificial demand and abuse, and you see the fallout right in front of our eyes,” explained Blanchard.
And having currency backed by something is why Blanchard is so excited about Hayek. “It’s a marriage between gold and Bitcoin. It’s payable gold. It is completely free of the systemic risk that exists in the existing centralized global banking structure, so just by nature that’s the way that this system works, so the beautiful thing is that even if there is any kind of fallout or any kind of ‘haircut.’”
“We can spend your gold anywhere. Anywhere that has an internet connection,” he added. “And that’s the power of what our team is building.”
This transforms the idea of buying gold, which is typically purchased to hold onto, not to spend. Blanchard’s view is that you’re still buying gold, but you can spend it using this cryptocurrency.
“The process is quite easy, and it’s getting even easier,” he said. “We’re making that gold more liquid.”
Blanchard is changing gold, and also changing Bitcoin.
“We give Bitcoin the stability and trust of a thousand years of gold.”
Click here to listen to Ben Swann’s complete interview with Anthem Blanchard, who talks more about the U.S. banking system and the future of currency.
In the wake of the rise of bitcoin, an anonymous digital cryptocurrency whose value can not be manipulated by the whims of government-chartered central bankers, many prominent businesses have begun to incrementally incorporate digital currency technology into their business models. According to International Business Times, Citibank is interested in the new craze and is now developing and testing its own cryptocurrency.
Ken Moore, chief of the banking giant’s technological development subsidiary Citi Innovation Labs said earlier this month, “We have up and running three separate systems within Citi now that actually deploy blockchain distributed ledger technologies. They are all within the labs just now so there is no real money passing through these systems yet, they are at a pre-production level to be clear… We also have an equivalent to bitcoin up and running, again within the labs, so we can mine what we call a ‘Citicoin’, for want of a better term. It’s in the labs, but it’s to make sure we are at the leading edge of this technology and that we can exploit the opportunities within it.”
TechCrunch points out the fact that Bitcoin Magazine cited a Dec 2014 presentation by Citigroup wherein company representatives said, “Due to the potential benefits, we believe the adoption of Digital Money is inevitable. While we believe that the use of Digital Money is certain, the future of specific cryptocurrencies such as Bitcoin is less clear.”
Citi Innovation Labs’ Ken Moore said that the fast-paced, international nature of digital currencies, which can cross borders without facing time-consuming regulatory hurdles, is attractive to Citibank, “Because we are a global network, a global bank, we can look for opportunities to use this technology to move money from country to country – country A to country B, across our network.”
Additionally, Citibank officials told International Business Times that cryptocurrencies can benefit banks by helping them transact with people from developing countries who lack bank accounts. “You don’t need a bank account. It goes straight into the mobile phone, it goes into a wallet,” said Ireti Samuel-Ogbu, managing director of Citibank’s Payments and Receivables EMEA.
NEW YORK CITY – Ross Ulbricht, the convicted founder of the Silk Road online marketplace, will appeal his two life sentences, according to court documents filed on Thursday. Ulbricht was sentenced on five different counts in late May – one for 20 years, one for five years, one for 15 years and two for life, with no possibility of parole.
Ulbricht’s attorney Joshua Dratel spoke with TruthInMedia about the decision to appeal.
“The sentence is unreasonable, unjust and unfair, and based on improper considerations that have no basis in fact or law. Of course we will appeal the verdict and the sentence.”
In February, the Silk Road trial concluded as the jury reached a verdict of guilty on seven charges related to distributing narcotics, fraudulent documents, money laundering, and continuing a criminal enterprise. The jury took just three hours to convict Ulbricht on all charges.
At least 97 friends and family members of Ulbricht wrote to the judge asking for the most lenient sentence possible. Ulbricht himself wrote the judge asking her to give him 20 years so he might still have his old age.
Throughout the trial and sentencing, Ulbricht’s attorney objected to the judge’s decisions regarding witnesses, evidence, and other facts they say were kept from the jury. One point of contention comes from the discovery that two former federal agents are accused of stealing hundreds of thousands of dollars during their investigation of the Silk Road. The two defendants are Carl Force, a former special agent for the Drug Enforcement Administration (DEA), and Shaun Bridges, a former Secret Service special agent. Force and Bridges were assigned to a task force based in Baltimore investigating Silk Road. Force was the lead investigator working undercover, and Bridges was a computer forensics expert working on the case.
According to a press release from the Justice Department, Force “served as an undercover agent and was tasked with establishing communications with a target of the investigation, Ross Ulbricht, aka ‘Dread Pirate Roberts.’” Force was authorized to communicate with Dread Pirate Roberts (DPR) online to gather information, but he allegedly went on to create several unauthorized, fictitious online identities.
“The Government’s efforts to keep the Carl Force scandal out of the public eye at trial is in itself scandalous,” said Joshua Horowitz, a defense attorney for Ulbricht. “The recently filed Complaint which names Carl Force as a defendant demonstrates that the Government’s investigation of Mr. Ulbricht lacked integrity, and was wholly and fatally compromised from the inside.””
Whether any of the latest revelations will have any effect remains to be seen.
NEW YORK CITY – On Friday afternoon, convicted Silk Road founder Ross Ulbricht will find out how many years he will spend in prison for his role in the Silk Road online marketplace. With federal mandatory minimum sentences, Ulbricht is facing at least 20 years in prison.
In February, the Silk Road trial concluded as the jury reached a verdict of guilty on seven charges related to distributing narcotics, fraudulent documents, money laundering, and continuing a criminal enterprise. The jury took just three hours to convict Ulbricht on all charges. Now, US District Judge Katherine Forrest will weigh the evidence and decide what length of sentence to give Ulbricht.
At least 97 friends and family members of Ulbricht have written to the judge asking for the most lenient sentence possible. (Ars Technica has posted the letters online along with the court filing of photos of Ulbricht and many family and friends.) Ulbricht himself wrote the judge asking her to give him 20 years so he might still have his old age. The 31-year old tech genius faces prison until at least his early 50’s.
Despite Ulbricht’s defense team continuing to argue that he was not the Dread Pirate Roberts mastermind, but instead was “left holding the bag”, Ulbricht told the judge: “Silk Road turned out to be a very naive and costly idea that I deeply regret.” This marks the first time the public is hearing from Ulbricht directly.
Ulbricht has received support from the Drug Policy Alliance’s nightlife community engagement manager Stefanie Jones. On the Drug Policy Alliance’s blog, Jones asks whether or not putting Ulbricht behind bars will accomplish anything. She says the Silk Road actually was a beneficial market for three reasons:
Silk Road reduced the potential violence associated with buying drugs.
It allowed for better knowledge about content and purity.
It encouraged harm reduction among users.
Will Judge Katherine Forrest take a similar view? Just ten days ago, she asked for a copy of the Silk Road website so she could perform searches for what products were available for sale. The government produced a fully functioning replica of the site from the server.
Although the charges Ulbricht was found guilty of in New York City do not include the controversial “murder-for-hire” charge, the accusation has still weighed heavily in this current trial. Ulbricht will eventually be tried on those charges in a Maryland court but that did not stop the government from mentioning chat logs that detail five murder-for-hire plots. Still, prosecutors filed no charges in New York, possibly indicating a lack of evidence.
Throughout the trial Ulbricht’s supporters, family, and defense team said they were being blocked at every turn. Witnesses were not allowed, evidence was removed from the record, and many believe the jury could not have possibly had a grip on the emerging technologies that played a large role in the trial- namely Bitcoin, the Tor Browser, and the Deep Web.
Another point of contention came in late March after two former federal agents were accused of stealing hundreds of thousands of dollars during their investigation of the Silk Road. The two defendants are Carl Force, a former special agent for the Drug Enforcement Administration (DEA), and Shaun Bridges, a former Secret Service special agent. Force and Bridges were assigned to a task force based in Baltimore investigating Silk Road. Force was the lead investigator working undercover, and Bridges was a computer forensics expert working on the case.
According to a press release from the Justice Department, Force “served as an undercover agent and was tasked with establishing communications with a target of the investigation, Ross Ulbricht, aka ‘Dread Pirate Roberts.’” Force was authorized to communicate with Dread Pirate Roberts (DPR) online to gather information, but he allegedly went on to create several unauthorized, fictitious online identities.
“The Government’s efforts to keep the Carl Force scandal out of the public eye at trial is in itself scandalous,” said Joshua Horowitz, a defense attorney for Ulbricht. “The recently filed Complaint which names Carl Force as a defendant demonstrates that the Government’s investigation of Mr. Ulbricht lacked integrity, and was wholly and fatally compromised from the inside.””
Whether any of the latest revelations will have any effect remains to be seen. The fate of Ross Ulbricht now lies in the hands of Judge Katherine Forrest. Will the effects of this trial have a chilling effect on the internet and stifle new innovation, as some believe?
Ross Ulbricht will be sentenced in New York City at 1:30 pm EST. Derrick Broze will be attending the sentencing and will appear on RT America this evening to discuss the outcome. For the latest updates follow Broze on Twitter @DBrozeLiveFree
