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Posts Tagged ‘Wences Casares’

No Assassins, Please!

January 2, 2016 1 comment

In the long run, Bitcoin can succeed either:

  1. As a convenient global currency of exchange (in parallel with inflation-prone national fiat currencies),
  2. As a store of “perceived” value (serving as a hedge (like gold) against fiat currency devaluation or outright collapse)
  3. Both 1. and 2.

Of course, BTC itself can collapse at any moment to zero; nada; goose-egg-city.

BD00 thinks that if Bitcoin does indeed succeed, the odds are better that it will do so as 2 over 1, or as 2 over both 1 and 2. And if it does, it may steal some market share from gold.

To further explore the assumption of success “as a store of perceived value“, consider the approximate numbers in the box below. Based on these numbers, Bitcoin’s market capitalization is currently a minuscule fraction of gold’s market capitalization: .1 percent.

MarketCap

Next, consider the following table:

GoldVsBTC

If Bitcoin manages to “steal” 5% of the gold market (meaning that 5% of all gold holders decide to exchange their gold for BTC), each $500 BTC you own today will be worth $25,000 when the 5% market share threshold is crossed.

So, what advantages does BTC offer over gold to entice the goldbugs to convert?

  1. BTC is infinitely more transportable than gold, especially in larger amounts, from any location in the world to any other location in the world. All one needs is an internet connection to execute a global transfer much faster, and at a lower cost, than shipping physical gold artifacts.
  2. BTC is much more accurately divisible than gold: 1 satoshi = .00000001 BTC
  3. Even though gold is scarce, BTC is more scarce. After the 21 millionth BTC is minted sometime in the year 2140, that’s it. Fini. No more BTC will be mined.
  4. You can store and guard your BTC yourself (if you choose to) in lieu of paying a “trusted” third party to store and guard your physical gold bars. It’s also much easier to guard a tiny BTC cold storage device in your possession than a cache of weighty gold bars.

Based on reasoning similar to that given in this post, Bitcoin advocate Wences Casares recommends people consider investing 1% of their savings in BTC. As you might surmise, BD00 also recommends the same advice. That way, if you lose your entire BTC investment, you won’t be itching to hire an assassin to inflict a slooow and painful death upon me.

BD00Torture

Categories: bitcoin Tags: , ,

Opening The Gates

December 21, 2015 Leave a comment

Because it’s such a mind-blowing idea, and the first time they hear about it is usually through a short, negative press story, most people are initially repulsed by Bitcoin (like I was!). As you’re about to see, even really smart people fall into the “Bitcoin is evil” trap when the subject is broached.

bitcoinAnger

The following excerpt, which gracefully closes Nathaniel Popper‘s must-read book, “Digital Gold“, shows how uber-philanthropist Bill Gates was initially perturbed when Xapo CEO and Bitcoin advocate Wences Casares suggested that Bitcoin could be used to further the Bill & Melinda Gates Foundation‘s mission to “unlock the possibility inside every individual“:

In the hallway walking to lunch, after the Bezos-Buffett conversation, Wences spotted Bill Gates, who had been notably reticent about Bitcoin. Wences knew that Gates’s multibillion-dollar foundation had been making a big push to get people in the developing world connected financially, and Wences approached him to explain why Bitcoin might help his cause. As soon as Wences broached the topic, Gates’s face clouded over, and there was a note of anger in his voice as he told Wences that the foundation would never use an anonymous money to further its cause. Wences was somewhat taken aback, but this was not the first time he had been challenged by a powerful person. He quickly said that Bitcoin could indeed be used anonymously— but so could cash. And Bitcoin services could easily be set up so that users were not anonymous. He then spoke directly to the work that Gates was doing, and noted that the foundation had been pushing people in poor countries into expensive digital services that came with lots of fees each time they were used. The famous M-Pesa system allowed Kenyans to hold and spend money on their cell phones, but charged a fee each time. “You are spending billions to make poor people poorer,” Wences said. Gates didn’t just roll over. He vigorously defended the work his foundation had already done, but Gates was less hostile than he had been a few moments earlier, and seemed to evince a certain respect for Wences’s chutzpah. Wences saw the crowd that was watching the conversation, and knew he had to be careful about antagonizing Bill Gates, especially in front of others. But Wences had another point he wanted to make. He knew that back in the early days of the Internet, Gates had initially bet against the open Internet and built a closed network for Microsoft that was similar to Compuserve and Prodigy— it linked computers to a central server, with news and other information, but not to the broader Internet, as the TCP/ IP protocol allowed. “To me it feels like you are trying to get the whole world connected with something like Compuserve when everyone already has access to TCP/ IP,” he said, and then paused anxiously to see what kind of response he would get. What he heard back from Gates was more than he could have reasonably hoped for. “You know what? I told the foundation not to touch Bitcoin and that may have been a mistake,” Gates said, amicably. “We are going to call you.” After Wences got back to California, he received an e-mail from the Gates Foundation, looking to set up a time to talk. Not long after that, Gates made his first public comments praising at least some of the concepts behind Bitcoin, if not the anonymity. And so Bitcoin and its believers attracted one more person who was willing to give this new technology a look, and remain open to the possibility that the whole thing wasn’t, at least, entirely crazy.

Volatility Is Good

November 6, 2015 Leave a comment

Before I read this insightful bitcoin.com forum post by Wences Casares, I thought that Bitcoin’s extreme price volatility was an inhibitor to mainstream adoption.

Of all the ways in which Bitcoin could fail the one that worries me most, because I think it has the highest probability of all the bad things that could happen, is a price panic that drives the price to zero, or $15, from which it may be very hard for Bitcoin to recover the public’s trust.

Right now most of the money that is invested in Bitcoin is money people can afford to loose and that makes it safe money. So when Bitcoin goes from $1,200 to $200 there is not a vicious cycle of people who need to sell, because they cannot afford to loose more money, that drives the price to zero.

It is hard to estimate how many people own bitcoins, but it may be somewhere between 13 and 15 million people right now. If Bitcoin is successful we will see hundreds of millions of people own Bitcoin and, eventually, billions. The only way we can get to billions of people owning Bitcoin is by the price going up by several orders of magnitude, let’s say $ 1 million (but this is highly speculative and risky). So, if I am right, and Bitcoin has to go from $390 to $1,000,000 the best way for it to get there without crashing irreversibly is with as much volatility as possible. If bitcoin went up a couple percentage points every week and everybody began to think about it as a “sure” thing, investing money that was destined to pay for kids colleges or for retirement, that is a disaster waiting to happen price wise. Because when Bitcoin corrects those people have to sell because they cannot take more losses, potentially creating a vicious circle which is hard to reverse.

Ironically, we have to thank Bitcoin’s volatility for people not investing money they cannot afford to loose. As long as the Bitcoin price remains highly volatile and perceived as risky, we are OK. Begin to worry when it is perceived as a sure thing that everybody should own a lot of. – Wences Casares

Wences is a staunch Bitcoin advocate and the star character in the book “Digital Gold“. When he speaks, I listen closely.

If you want to help make the world a better place for literally billions of “unbanked” people and you have some money you can afford to lose, then screw blowing that money on casinos and/or lottery tickets. Follow these instructions:

  • Download a desktop computer wallet program (I use the Electrum wallet) and  create an encrypted wallet.
  • Open an account on a bitcoin exchange (I use Coinbase.com)
  • Exchange your “lose-able” fiat currency for bitcoins.
  • When your bitcoins get deposited in your exchange’s online “custodial” wallet, transfer it off of the web and into your desktop wallet.
  • If you’re really paranoid about having your Bitcoins stolen, grok how to move your keys out of your desktop wallet and into a hardware wallet or paper wallet – and then do so.

If you don’t physically possess your private bitcoin keys, you really don’t own any bitcoins. You have to trust whoever has possession of those keys to keep them safe – like you have to trust a bank to keep your fiat money safe. And as we all know too well from the 2008 debacle, third party keepers of “other people’s money” like banks are not to be trusted if there is a viable alternative. Bitcoin is one such alternative, but you have to spend the time to educate yourself and take personal responsibility for your financial well being.

trustus

 

Categories: bitcoin Tags: ,
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