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Posts Tagged ‘bitcoin’

An Uncorrelated Asset

November 22, 2020 Leave a comment

Bitcoin is on yet another volatile, but upward, trajectory. My friends and family insufferably know that I’m a bitcoin champion because of my incessant preaching to them about the virtues of personally-secure money. They also know I’m a long time lover-of-bitcoin, not a skanky shitcoin shill who popped up out of nowhere overnight.

BD00 In Vietnam Tryin’ to out-love the “me so hawny”chick.

I’ve seen smart people describe bitcoin as an “uncorrelated” asset for quite some time now. Until very recently I thought it strange of them to say that. I look up the price of BTC daily and it seems qualitatively clear to me that bitcoin is positively correlated to the S&P 500 index. Every time the index goes up, BTC seems to go up. Every time the index goes down, BTC goes down.

Fidelity Research helped me understand why calling bitcoin an “uncorrelated” asset is quantitatively correct. The effort of Ria Bhutoria (Director of Research at Fidelity Digital Assets) dotted an “i” and crossed a “t” in my previously infallible mental model of the emerging role of bitcoin in the world. I snipped the following elegant table from her latest thesis (“Bitcoin’s Role As An Alternative Asset“) to record the correlation coefficients between the top financial assets in the world.

The first column clearly shows that bitcoin, like honey badger, don’t care about what other assets do. Unlike any of the other listed assets, none of bitcoin’s correlation coefficients cross the .2 threshold. Interestingly, bitcoin is less correlated to its biggest competitor, gold, than it is to stocks.

An uncorrelated asset like bitcoin is the best hedge against a global financial system crash that deflates the value of all other assets except for, perhaps, gold. But there’s no need to worry about that, right?

Honey Badger Don’t Give A Fuck!

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The Morphing….

The next blockbuster horror film coming soon to a theater near you: “The Morphing“. It documents the disastrous transition of a fluid, decentralized, unified, team into a hardened, centralized, divided, team.

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The World Wide Acceptance Threshold

March 26, 2017 Leave a comment

Assume you’re building a radical new financial system from the ground up intended to be useful to every human being on the planet – not just to the rich, powerful, manipulative, greedsters who lord over the current antiquated and rigged system.

In order to survive the continuous offensive onslaughts from those entrenched oligarchs, your goal is to onboard as many everyday users as needed as fast as possible to unambiguously prove that the ground breaking system is not just being used by “criminals, terrorists, pedophiles, drug dealers, and tax avoiders“. You need to surpass the World Wide Acceptance Threshold (WWAT) of, say, 1 billion users.

Satoshi Nakamoto’s Bitcoin “peer-to-peer electronic cash system” is currently the most popular system trying to reach and exceed the magical WWAT. It currently has millions of users, but the usability of the system (high transaction fees, long confirmation times) is deteriorating at an alarming rate due to network saturation triggered by the rate of growth of new users.

There are two solutions out there competing to relieve the pressure on the bitcoin network so that the rate of new user growth doesn’t go to zero (or negative!): SegWit and Bitcoin Unlimited (BU):

The SegWit solution provides a short term, hard limited, pressure relief valve to allow some network breathing room for orderly new user additions. The BU solution provides a dynamically variable pressure relief valve to achieve the same effect. It tries to adapt to the changing new user growth rate over time.

The above graphs indicate that the SegWit solution is agnostic toward the rate of new user growth and halts system progress toward the WWAT goal at some point after its introduction. The BU solution allows the system to gracefully expand in proportion to the rate of new user growth, providing friction toward progress to the goal, but not a hard stop like SegWit.

SegWit is less technically risky because it is a much more conservative approach and it has undergone more peer review and offline network testing than BU. The biggest risk that BU introduces into the system is the concept of an “Emerging Consensus“. The EC rules allow the market to dynamically decide the network saturation level over time.

Neither SegWit nor BU will push the Bitcoin protocol over the WWAT threshold alone. BOTH need another layer of help on top of the base Bitcoin protocol layer to achieve the goal. However, even though it is riskier than SegWit, I think BU allows more time for Bitcoin to grow before users start leaving in droves for alternative cryptocurrencies due to skyrocketing user fees and transaction times. But hey, that’s just my opinion.

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Dubious At Best, Disingenuous At Worst

March 25, 2017 Leave a comment

Adam Back recently claimed on Twitter that the Bitcoin Core development team is “decentralized“.

However, that’s a dubious assertion at best, and a disingenuous one at worst. Mr. Back is the President of Blockstream Inc. His startup company is financed by $70M from traditional bankstas who could give a shit about billions of unbanked/poor people being given the ultimate tool to: bootstrap themselves out of poverty, participate in commerce with merely a cell phone, and dramatically increase the world’s GDP.

Here is a snapshot of some of the most influential and vocal members of the core development team directly employed by Blockstream. The big guns are Adam Back and Greg Maxwell. Interestingly, Mr. Back, who is now an” executive“, but somehow still strangely thought of as a major technical contributor, doesn’t seem to be actively involved in the design/coding effort. That’s because his presidential title makes him responsible for Blockstream’s financial performance over all else.

Admittedly, not all Bitcoin Core developers are paid by Blockstream, but some are contracted out by the private, for-profit, company. But, as the presented evidence shows, the Bitcoin Core development team cannot be claimed to be DECENTRALIZED.

Startup investors, especially bankstas, expect a high ROI on their risky investments ASAP. Regarding Bitcoin, their investment returns can only come from centralized technologies, known as L2 tech, layered on top of Bitcoin. L2 technologies are to Bitcoin like web sites are to the TCP/IP protocol. That’s where real big money is made. By design, Blockstream is an L2 technology product company that must use the Bitcoin protocol to build on top of.

Hence, by implementing and promoting the SegWit improvement to the Bitcoin protocol before a deterministic, time-dependent, dynamically increasing maximum block size policy, raises suspicion in the Bitcoin community that Blockstream is out to freeze Bitcoin L1 on chain scaling growth after SegWit is activated in order to get money-making L2 technologies deployed as fast as possible. Again, suspiciously, there is no unified, visible, commitment from the Core development team as a whole to pursue an on chain scaling improvement next as priority one to relieve network pressure and allow a marginally increased onboarding of a cluster of new, less well off, users. No room to breathe.

Meanwhile, the Bitcoin network is becoming more exponentially saturated as new users (Venezuela, Mexico, Greece, Cypress, China, Japan, Africa, India) try flocking to Bitcoin to use as cash but are turned back by wildly rising transaction fees and confirmation times – a massive decrease in usability to large swaths of people. The flight from Bitcoin to alternative cryptocurrencies resulting from the poor stewardship of the Bitcoin protocol by the Core development team is vividly visible in this market share chart:

Satoshi Nakamoto, the genius creator of Bitcoin, said something to the effect of:

In the future, there will either be massive BTC transaction volume, or zero volume.

Ironically, the anti-fragile Bitcoin system proven to be indestructible by powerful external forces over 8 years of 24 X 7 operation, may end up instantaneously imploding due to internal forces caught in the throes of a bloody death match.

Categories: bitcoin Tags: ,

Electronic Cash Or Electronic Gold?

psa

Here’s my personal take on the SegWit (fixed, small block size) vs. Bitcoin Unlimited (dynamically determined block size) war of attrition that keeps raging on within the Bitcoin community:

  • SegWit => Steers Bitcoin off of the “electronic cash” path Satoshi Nakamoto originally started it on, and towards an “electronic gold” niche that hard-limits the number of people that can use Bitcoin gainfully.
  • Bitcoin Unlimited => Keeps Bitcoin on the “electronic cash” path, providing 2 billion “unbanked” people with the opportunity to bootstrap themselves out of poverty, participate in commerce, and boost the global economy.

 

eleccash

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Three Options

February 12, 2017 Leave a comment

The bitcoin core development team chose to implement the top option. The bitcoin XT, Classic, and Unlimited development teams chose to implement the middle option. Sadly, no team chose to implement the bottom option.

threeoptions

Two years ago, the XT, Classic, and BU camp(s) saw the high Tx fees and long confirmation times we have in place today – it was clear as day. But rather than paying attention to their concerns and incorporating a max block size increase into their SegWit design, the majority of the Core team and their backers chose to ignore, censor, and ostracize anyone who didn’t agree with their chosen path. As a result, we now have an existential crisis going on within the bitcoin community which may lead to the total collapse of the ground-breaking cryptocurrency. Bummer.

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Western Union, Bitcoin, And Mexico

January 28, 2017 Leave a comment
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The Fees Are Too Damn High!

January 11, 2017 Leave a comment

Remember this guy?

highrent

Well, Roger Ver (a.k.a Bitcoin Jesus) has a similar beef:

highfees

I’ve been a fan of Roger Ver ever since I got sucked down into the Bitcoin rabbit hole well over a year ago. His passionate, pro-Bitcoin words and startup investments have helped Bitcoin grow to where it is today. Roger has also been the most vocal Bitcoin celebrity to rage against the Bitcoin Core development team’s refusal to raise the maximum block size above 1MB.

Hard-limiting the maximum block size to 1MB causes more competition among users to get their transactions into a block – which causes the average per-block user fee to rise – which causes fewer people worldwide to use Bitcoin as “money” – which stunts the global growth of Bitcoin. In the worst case, fees may get so high so that we only see wealthy people using Bitcoin in the future.

As Roger has said, the more expensive it is to use a thing, the fewer the people are who will use the thing. Economics 101.

To support Roger’s claim, I submit a relatively recent tweet of his for your perusal:

vertweet

And, if you navigate to the Bitcoin transaction that Roger links to in the tweet, you’ll see this:

transactiondetails

At the time of the tweet, the BTC price was hovering around $1000 USD. Thus, the fee of 72 millibits that his company, Bitcoin.com, paid, translated to around $70+ USD. However, at 89KB in size, it sure is a big ass transaction to stuff into a block. 🙂

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Advice From An Elite For Elites To Avoid Being Ripped Off By Elites

January 9, 2017 Leave a comment

I just finished reading James Rickards’ “The Road To Ruin“. It was an interesting read in that he used: past events (1998 LTCM meltdown, 2008 crash), complexity and chaos theory, “fat tailed” power law distributions, and Bayesian statistics logic to build a fairly compelling case for the next impending global financial meltdown to be catalyzed by global elites. In his view, the US dollar will collapse and be replaced as the world’s reserve currency by the International Monetary Fund’s Special Drawing Rights (SDR) notes.

zerodollar

The fact that Mr. Rickards worked for the LTCM hedge fund when it imploded in 1998 makes him a complicit elite in my eyes. It makes me wonder if he was an unwitting co-architect of that disaster.

rickardsltcm

After building his case that the mother of all financial collapses is on our doorstep, Mr. Rickards states that there are three ways to to financially survive the debacle: buy fine art, land, and gold before your dollars become worthless. What a letdown. Buying art, land, and (less so) gold is not much of an option for the average Joe Schmoe with a modest amount of savings. It’s simply advice from an elite for elites to avoid being ripped off by other elites.

 

starvingbillionaire

Strangely, Mr. Rickards doesn’t ever mention buying cryptocurrencies like Bitcoin as an option to ride out the next collapse – which shows me that he’s a dinosaur who needs to move into the 21st century. Cryptocurrencies are a viable hedge against financial calamity for the average Joe like you and me. Maybe Mr. Rickards will do his research and discover this fact before he pens his next doom-and-gloom book…..

doomgloom

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The Bitcoin Guitar

January 2, 2017 Leave a comment

Tatiana Moroz is a “Bitcoin singer”. As you can see in the photo below, she is curiously sporting a Bitcoin QR code sticker right on her guitar.

btcguitar

In appreciation of Tatiana’s singing a sweet Bitcoin jingle, I decided to tip her $1.00 worth of Bitcoin. To do so, I launched my iphone Coinbase wallet app, selected the “send bitcoin” feature, and focused the phone camera on the QR code in the picture. The wallet app then translated the QR code into the bitcoin address it represents and setup the transaction for me:

tatianatip

I then clicked send, and voila, she received the BTC tip from me!

tipconfirm

Assuming I wanted to tip Tatiana, and Bitcoin didn’t exist, how convenient would the other currently available dinosaur payment options be to me?

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