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Posts Tagged ‘bitcoin’

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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Stunted Growth

December 27, 2016 Leave a comment

More and more of the world’s population is becoming aware of Bitcoin’s blockbuster potential to liberate them from those fiat currencies that are being manipulated and debased by governments and central banks. As a result, more and more people have been entering the Bitcoin ecosystem to employ the virtual currency for any or all of the following use cases:

  1. Use as a domestic commerce payment tool
  2. Use as an international remittance tool
  3. Use as a temporary store of value

The rise in Bitcoin popularity has caused the per-block transaction occupancy to increase and bump up against the 1 MB ceiling arbitrarily burned into the protocol by Satoshi Nakamoto since its inception in 2009…

aveblksize

As more and more transactions contend for entry into each block, the minimum transaction fee that miners will accept for block admittance is increasing….

txfee

Assuming an average cost of 50 cents per transaction, then buying a cup of coffee for $2.50 would result in a 20% Bitcoin network tax!

As fees keep rising due to the constrained maximum transaction block size, the case for using Bitcoin as a domestic commerce tool is becoming more and more uneconomical. In the worst case, bitcoin growth can come to a screeching halt and usage can get stuck in use cases 2) and 3) as listed above.

The dynamic system diagram below models the negative feedback loop that is currently in operation in the Bitcoin ecosystem. Working around the loop clockwise, here is what happens:

  • As more people use bitcoin, the blocks become more saturated (+).
  • As the blocks become more saturated, the transaction fees rise (+).
  • As the transaction fees rise, the transaction confirmation times rise from low proposed-fee transactions being rejected by the miners or from transactions being admitted to blocks long after they’ve been initially submitted by the user. (+)
  • As the fees and transaction times rise, the number of people using Bitcoin decrease. (-)(-)

constrainedgrowthl

The good thing about negative feedback loop systems is that they tend toward stability. A second time around the loop shows the flip in signs:

  • As fewer people use bitcoin, the blocks become less saturated (-).
  • As the blocks become less saturated, the transaction fees decrease (-).
  • As the transaction fees decrease, the transaction confirmation times decrease from all transactions immediately being included by the miners in the very next block to be mined. (-)
  • As the fees and transaction times decrease, the number of people using Bitcoin increase. (+)(+)

The key to stable Bitcoin system growth is to untether the maximum block size and allow it to grow in step with the growth in the user community so that the strength of the two negating influences in the model (fee size and confirmation time) do not drive the new number of users down to zero. The capped 1 MB maximum block size is currently stunting Bitcoin’s growth.

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The $900 Breach

December 24, 2016 Leave a comment

Just three days ago I posted “The $800 Breach“. Well, today we have the $900 breach:

breach900

The news I’m reading implies that the price rise is due to heavy trading in China as investors flee from the yuan and utilize bitcoin as a convenient “store of value” (as opposed to gold). Expect more capital controls from the Chinese government as they attempt to staunch the flow.

When Bitcoin breached the $800 barrier, I thought a modest price pullback would soon follow. I have the same sentiment in mind now that the $900 threshold has been crossed. But hey, in the wild and wacky world of bitcoin you never know what the hell is gonna happen.

Could we soon see the price of BTC eclipsing the $1136 per-ounce value of gold, or could we see an epic crash looming? With so many governments deep in debt and central banks screwing up their economies, I think the former is more likely than the latter. What do you think?

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The $800 Breach

December 21, 2016 1 comment

Bitcoin has breached the $800/BTC price point for the first time in a long time. With failing nation states all over the world recklessly debasing their fiat currencies, imposing negative interest rates, and outlawing the possession of cash, people are increasingly wising up to the financial liberty that the king of cryptocurrency brings to the table.

breach

It’s never too late to buy a Bitcoin or two, or three. Consider investing 1% of your savings in the best hedge ever invented against fiat currency calamity.

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A Hijacked Vision

December 9, 2016 Leave a comment

If you dive into Satoshi Nakamoto’s writings like I have, you’ll quickly discover that his (their?) original vision for Bitcoin was that the network be available as a permission-less, peer-to-peer payment system intended for anyone, anywhere, anytime. And yes, that includes billions of disenfranchised people currently without the ability or opportunity to open a bank account.

In order for Bitcoin to scale to accommodate billions of daily users, the maximum block size currently burned into the network protocol must be increased from the paltry 1 megabyte size that’s been in effect since the birth of bitcoin way back in 2009.

Before disappearing into the ether, Satoshi foresaw the potential growth of bitcoin and had these words to say about the maximum block size:

satoshibloksize

The bitcoin core software development team, most of whom are employed by the for-profit company Blockstream, have hijacked Satoshi’s vision by steadfastly refusing to increase the bitcoin on-chain maximum block size beyond 1 megabyte.

Assuming 200 bytes per transaction, each 1 MB bitcoin block can hold a up to 5000 transactions. Since blocks are validated at 10 minute intervals, that means the network capacity is currently capped at a measly 8 transactions per second (versus Visa/PayPal capacities of hundreds of thousands of transactions/sec).

A quick glance at the home page of Blockchain.info shows that every block is full and confirmations are taking much longer than 10 minutes.

fullblocks

With more and more transactions competing to be added to each block, the per transaction miner’s fee, which originally amounted to pennies, is increasing at such at rate that only large transactions will make economic sense in the near future. In the worse case, people might as well quit trying to enter the Bitcoin ecosystem and revert back to using dinosaur remittance providers like Western Union at 20% per transaction.

As new individual users and businesses attempt to experiment with bitcoin, many of them are not only being turned off by larger and larger transaction fees, they’re increasingly getting annoyed by long confirmation delays – even to the point of having their transactions dropped from the network altogether because of overcapacity at peak usage times.

Of course, the bitcoin core development team (which may as well be called Adam Bach’s Blockstream Inc. team) has a billion technical excuses for keeping the max block size at 1MB, all of which have been debunked by the pro-increase-in-block-size technical community. Everyone knows the real motivation behind core’s uncompromising position: Blockstream’s plan to profit from the side chain products they are developing.

bsproducts

Speaking of the pro-increase-in-block-size technical community, they are on their third valiant try at attempting to put Bitcoin back on track with Satoshi’s original vision:

bitcoincorealts

To hell with the Bitcoin core development team’s self-serving roadmap for Bitcoin, I support Bitcoin Unlimited. So should you.

 

The War On Cash

November 30, 2016 Leave a comment

Let’s see:

The war on cash is in full swing and while the banks are, as usual, winning, the citizenry is losing money and privacy. As physical transactions with cash decrease, electronic transactions with plastic increase, which means that more transaction fees get collected and the banks get richer. In addition, since every transaction is electronically recorded, your privacy can get hacked by criminals and/or your “friendly” government.

The only way I know of for the average Joe Schmoe to fight back is for him to buy, and personally take possession of, precious metals and cryptocurrencies like bitcoin. Taking physical possession of your property is crucial because any asset that you own which resides in an entry on a centralized institutional ledger can be confiscated or frozen by your government in times of a crisis of their own making – even if you are a hard-working, law-abiding, citizen.

Regarding the precious metals and cryptocurrencies, taking possession of, and storing, a physical precious metal is much more costly/risky than doing the same for a virtual cryptocurrency. The larger the amount, the more costly/risky it is….

storage-options

Ah yes, one more thing about precious metals, specifically gold. The government can unconditionally ban the possession of physical gold and demand its return to the US government. It actually has done this before. In 1933, F. D. R. issued executive order 6102, which forbade:

“….the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.”

Notice the use of the word “hoarding” – as if trying to protect your hard earned property from seizure is a bad, immoral, thing.

In the future, governments can forbid the “hoarding” of cryptocurrencies. However, since decentralized networks cannot be shutdown and private keys can be stored on tiny devices, large scale enforcement would be next to impossible.

Categories: bitcoin Tags: ,

The Mother Of All Fiscal Catastrophes?

November 26, 2016 2 comments

In 1998, the U.S. treasury and the federal reserve facilitated a $3.6B bailout of the Long Term Capital Management Fund (LTCM) hedge fund by 16 Wall St. banks. No taxpayer funds were used in the bailout.

Ten years later, in 2008, the U.S. treasury bailed out a slew of Wall St. institutions with 100s of billions of dollars in U.S. taxpayer money.

Famous doom-and-gloomers James Rickards and Peter Schiff predict that the next financial crisis, which will be the mother of all global fiscal catastrophes, will require that the U.S. government be bailed out by the International Monetary Fund. In this black swan scenario, the U.S. dollar will be replaced by the IMF’s SDR (Special Drawing Rights) as the world’s reserve currency and America’s reign as the world’s greatest superpower will come to an end.

dollarcrash

I’m not convinced that Rickards and Schiff are right, but they do make a somewhat compelling case – enough so that it makes me feel “uncomfortable” whenever I see or hear them speak about it. Even if you think they are both batshit crazy, you might want to think of adding a touch of gold, silver, Bitcoin, or some other cryptocurrency to your portfolio…. just in case America fails to become great again.

bsdollar

Simply Brilliant

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