Quantum Entanglement: EPR Paradox

When I was a freshman at Cornell University some decades ago, I had a memorable teaching assistant for CS100, the entry level computer programming course taken by nearly every student in Engineering or Arts & Sciences. Gilles Brassard, a French Canadian, is now a chaired math professor at Université de Montréal and a preeminent cryptographer. He has also been inducted into the Royal Order of Canada. I am told that this is a bit like being knighted. In fact, this highest of civilian honors was established by Queen Elizabeth.

Ellery with Gilles Brassard in 2014

Ellery with Gilles Brassard in 2014

Gilles was a graduate student at Cornell in the mid ’70s. Back then, public key encryption was a radical concept. Named for three MIT professors who described it, RSA is now it is at the heart of every secure Internet transaction. Yet, the new \generation of cryptographers refers to RSA as “classical cryptography”. The radicals have moved on to Quantum Cryptography. Gilles and his collaborator, Charles Bennett, are the pioneers and leaders in this burgeoning field. No one else is even pretender to the throne.

In its simplest terms, quantum cryptography achieves a secure communication channel because it relies on a stream of individual particles or “quanta” to convey information. If information is sent without any fat at all—just the minimum physics that can support the entropy—then any eavesdropping or rerouting of a message can be detected by the recipient. Voila! Perfect authentication, fidelity and security. Communication is secure because any attack can be detected.

But when you begin to experiment with gating individual quanta of anything, you are typically working within a world of minute, elementary particles—things like photons or electrons with properties that change as they are measured. And the issue of measurement doesn’t just invoke Heisenbeg (he demonstrated that measurements change a property being measured), but also superpositioning of states that resolve only when they are observed. Say, Whaaht?!

Perhaps, we are getting ahead of ourselves. The goal of this article is to share with Wild Ducks my fascination over the strange, yet repeatable experimental results achieved by Gilles and by quantum physicists. I am no expert, but given a sufficiently lay explanation, marvel with me at a baffling outcome. It will shakes your perception of reality. It suggests that science and math are not as black and white as you believed.

The EPR Paradox

Albert EinsteinAlbert Einstein worked for years to develop an understanding of entangled particles that was consistent with his earlier work in special relativity. By the mid 20th century, physicist were reasonably certain that information could never be conveyed faster than light. It’s not just the math that convinced them. It was the crazy things that would happen if light is not a universal speed limit…

If information—mass or energy, particle or wave, substantive or pure thought—if any of these things travels faster light, then given the time dilation characteristic of things moving in relation to each other, very unlikely things would be possible. For example:

  • If information travels faster than light. it would be possible to deliver a reply to a message that had not yet been sent
  • If information travels faster than light, it would be possible to send a message back in time and prevent your parents from meeting each other

So the math that imposes a universal speed limit also preserves our concept of reality. Sure, we can accept that energy and mass are fungible. We can even accept that distance and time are malleable. But time paradoxes defy common sense and beg for a solution that preserves our sanity.

The effort to reconcile the two theories or arrive at a unifying model became known as the EPR Paradox, named after Einstein and his colleagues, Boris Podolsky and Nathan Rosen. Given assumptions considered axiomatic, the math suggests that information passes between entangled particles faster than light — in fact, instantaneously and at any distance. Near the end of his life, Einstein reluctantly acknowledged that there must be an error in math, or in assumptions, or that some undiscovered, rational explanation could resolve the paradox. Ultimately, he dismissed the notion of particles synchronously and instantly communicating with each other as “spooky action at a distance”. Just as his another memorable quote, “God doesn’t play dice with the world”, the two phrases are indelibly inscribed onto the great physicist’s epitaph.

Of course, even before humans could travel to the moon (about 1.3 light seconds from earth) researchers tried to test Einstein’s theory. But even with very precise instruments to measure time and distance, it was still difficult in the 1930s and 40s to create, transport and measure characteristics of elementary particles.

Back then, Einstein assumed that we would measure wave collapse positions or particle momentum. Today, scientists measure a particle’s polarization or spin or destruction. These properties are more easily changed and measured. In the 1960s and 70s, the EPR paradox returned to popular inquiry when physicists John Stewart Bell—and later Lamehi-Rachti and Mittig, conducted experiments that supported Einstein’s original thesis. That is, faster-than-light communication seemed to take place.

So, given appropriate experimental methodology, could it actually be possible to receive a package before it was sent?

Probably not. But the experimental result is more shocking than “Yes” and way more interesting than “No”. In fact, the outcome to recent experiments force us to confront our understanding of causality. It makes us wonder if reality is an illusion. It shatters our concept of time and space even more than Einstein’s more famous theory of relativity.

Since measurements made in nanoseconds are difficult to visualize, I shall illustrate the experiment and the surprising results by stretching the distance involved. But this is not a metaphor. Actual results actually play out as described here.          Continue below image…

quantum entangled particlesThe Experiment

Suppose that I create a pair of entangled particles. It doesn’t matter what this means or how I accomplish the feat. I wish only to test if a change to one particle affects the other. But more specifically, I want to separate them by a great distance and determine if a change to the local particle influences the remote particle instantly, or at least faster than accounted for by a light-speed signal between the two of them.

If you could construct such an experiment, it seems reasonable to assume that you would observe one of four possible outcomes. The results should demonstrate that the remote particle is either:

  • not affected at all
  • affected – apparently instantly or nearly in synchrony with the first particle
  • affected – but only after a delay in which a light speed signal could reach it
  • uncorrelated or inconsistently correlated with it’s entangled mate

The actual result is none of these, and it is almost too stunning to contemplate. In fact, the particle is highly correlated, but the correlation is with the observer’s cognition. But again, I am getting ahead of myself. Let’s look at our experimental set up…

I send an astronaut into space with a box that contains an experimental apparatus. The astronaut travels a distance about as far away from Earth as the sun. It takes about 8 minutes for light (or any message) to reach the astronaut. The box contains the “twin” of many paired particles back on earth. Each particle is trapped in a small crystal and numbered. The box also contains an instrument that can measure the polarization of any photon and a noisy inkjet printer that can be heard from outside the box.

Back on the earth, I have the mate to each paired photon. All of my photons exhibit a polarity than can be measured and expressed as a 2-D angle with any value from 0 to 360 degrees. Our test uses polarized filters to measure the angle of polarity and is very accurate. We can record 4 digits of precision. For the purpose of this test, it doesn’t matter if our measurement affects a particle or even if it destroys it, because we can repeat the test many times.

Clocks on the earth and at the spaceship are synchronized, and the ship is not moving relative to the earth. It is effectively stationary. On earth, each numbered photon is disturbed exactly on the hour. At the spaceship, an astronaut measures the polarity of a paired photon one minute before and one minute after each hourly event.

We know that our photons all begin with a polarity of 15.48 degrees as measured relative some fixed and rigid orientation. The astronaut confirms this with each photon tested before the hourly chime. But at each hour (say 3PM in New York), we disturb a photon on earth (radiate it or pass it through a filter). This changes its polarity.

Suppose that the earth lab determines that a photon was changed at 3PM from a polarity of 15.48° to a polarity of 122.6°. (Any new polarization will do).

Recall that the spaceship is 8 light-minutes away. We wish to determine if photon pairs communicate more quickly than the speed of light. Question: If the astronaut tests the polarity of the paired photon at 3:01 PM (just after its mate on the earth has been altered), do you suppose that he will still detect the original spin of 15.48°? Or will he detect the new spin of 122.6°?

The answer is more startling than either outcome. In fact, it leaves most people in disbelief or outright denial. (Yes…You are being set up for a surprise. But what is it?!)

To make things more interesting, let’s say that you cannot see the results. The box is sealed during the experiment, but you can hear the printer within the box as it prints the polarity after each test. Each time you run the experiment, you unplug the printer right after you hear it print a result. Then, you open the box and read the results.

Spookiness at a Distance

If you open the box less than 8 minutes after the hour (that is, less than the time that it takes light to travel from earth to the astronaut), the printout will always show a polarity of 15.48°. If you open the box after 8 minutes, you will always see a polarity of 122.6°. In both cases, the test was completed and the result was printed in the first minute after the photon on earth was shifted to a new polarization.

Wait! It gets better! If you eventually learn to distinguish the different sounds that the printer makes when it records either result, it will always print 15.48°, even if you wait 8 minutes before actually looking at the print out. The fact that you found a way to ‘cheat’ apparently changes the outcome. Or at least, that is the conclusion that a reasonable person would make when presented with knowledge-induced causality. It’s either that—or we are all crazy.

But quantum physicists (and cryptographers like Gilles) have another explanation. They point out that Einstein’s theory of special relativity doesn’t actually prohibit faster than light phenomena. It only prohibits faster than light communication. If the thing that happens instantaneously cannot be pressed into conveying useful information, then it doesn’t violate special relativity! That is, perturbations applied to one part of a quantum entangled pair are apparently instantaneous, but an observation or experiment on the remote twin will not produce a result that allows you to determine the new state until sufficient time for a light beam to pass from one to the other.

Another explanation: Superpositioning (In my opinion it was contrived to support both quantum mechanics and the EPR paradox), is that the paired photon simultaneously existed at both polarities until someone opened the box and peeked at its state.

Or perhaps time is not an arrow and we are not continuously pushed forward at the tip of that arrow. –Or perhaps the stuff we were told about space being folded was true. –Or perhaps… Oh Heck! I’ll go with the first explanation: From our perspective, entangled particles change simultaneously, but mysterious forces of nature don’t allow us to observe the change until the laws of special relativity allow it. Why is that? Because if we could observe information before it was ‘legal’ to do so, then we could change the past.

The take away to this experiment is that just like wave velocity, some things move faster than the speed of light, but useful information cannot do so. For useful information, light is still the speed limit.

Gilles Brassard is not a physicist, but a computer scientist and cryptographer. Yet he has received awards that are typically given to physicists. His experiments and those by scientists around the world render a layperson like me dumbstruck.

Of course, Gilles didn’t ship an inkjet printer into space with half of an entangled pair (my experimental construct). Instead, he measured and recorded a particle state in a way that is self-encrypted. He then he sent the encryption key from the distant particle that had been disturbed. Even though the key is just two bits (too little to contain a measurement of photon spin), the old spin was observed if the key was applied before the time it would have taken to classically transmit and receive the information.

Just as with my experimental setup, results are almost too much to wrap a proverbial brain around. But truths that are hard to believe make great fodder for Wild Ducks. If my non-scientific, jargon free explanation gets across the results of the EPR experiment (actually, it is at the leading edge of my own understanding), then you are now as puzzled and amazed as me.

More reading: Search for “EPR Paradox”, “Bell’s theorem” or “quantum entanglement

Why are Governments Against Bitcoin?

bitcoin_accepted_here-aI contribute to LinkedIN community discussions on Bitcoin and other cryptocurrencies. That’s because in my day job, I am a principal at the standards organization that defines and promotes a framework of best practices and safety valves for this rapidly growing community.

You might think that a digital currency standards organization is comprised of Bitcoin miners, economic anarchists, Geeks and “bleeding-edge” adopters. If you do, then you would be mistaken. Our founders come from a background of compliance, anti-money laundering and Internet services. Interest from prospective members points to a broad cross section of government, academia, banks, brokers and exchanges.

Today, the event host for an industry forum posed this question (abbreviated version):

Why are regulators and governments afraid of Bitcoin?

Based on the elaboration, it seems that he is focused primarily on the US government.

I may be a minority voice in this particular discussion, but for what it is worth, I respectfully disagree with the fundamental assumption in the question…

Certainly, in some countries governments are concerned that Bitcoin presents a threat to banks, the reserve mechanism, commercial and consumer protection, and the centralized control of monetary policy & supply. But the US is not among these countries. The few official policies that have hit the streets advise caution (especially among banks and speculators), but recognize that Bitcoin is an asset—and in some states, even a currency. A few regulators have even suggested that in the long term, cryptocurrency may represent more of an opportunity than a threat.

Banks, card service collaboratives and regulators are warming up to Bitcoin. The evidence is legion. Influential individuals are tentatively embracing Bitcoin or waiting with an intent to jump in when they sense an alignment of interests, education, regulatory guidance and safety mechanisms.

These individuals are among the strongest voices calling for standards and well defined practices. Standards—even ones that are voluntary but verifiable—are the key to safety, and thereby to adoption and growth.

CRYPSA is an independent standards organization gaining attention within business and government. It is moving quickly on a plan that does exclude anyone. In fact, the voluntary standards and applications that CRYPSA’s members are producing will not weaken the allure of Bitcoin to early adopters, including “Libertarians” or those who value privacy above the rule of law. That is, they do not force disclosure or impose rules on P2Ptransactions between trusted parties.

WildWest-3But what CRYPSA and other standards organizations hope to do is offer trust, security, and even insurance to everyone else. They expect to make Bitcoin safe for the rest of us.

It’s not very different from the wild west. Gold, minerals, buffalo and opportunity abounded. But, in the early days, plucking this bounty was limited to the most strident thrill seeker. For all others, the risk of becoming a homesteader was too high. Threats came from all directions: Natives, rattlesnakes, gunslingers, stage coach gangs, and scam artists.

Gradually things change. The wild west was tamed.

The federal government deployed a network of sheriffs and marshals. Risk abated and productivity spread across the west. With Bitcoin, the solution won’t come from the federal government, because one of the key tenants of Bitcoin is a inherent decentralized and personally-empowering architecture. But the government is not blind to this, and a surprising number of politicians even recognize that an empowered consumer can be an asset to national financial health. For this reason, regulators are gradually moving from “wait-and-see” to “How can we help?”

WildWest-1For some, these observations defy the popular conception of government, because governments typically try to consolidate, regulate and enforce. But with Bitcoin, the CRYPSA staff is finding that representatives of government are generally receptive, and even acknowledging that the role of a Federal Reserve or of central banks may be greatly transformed in the next decade.

As with many of the members, I was surprised with the open and friendly nature of discussions. My conclusion is that a popular conception of government with its head it he sand—or one that is unwilling to work with “facts on the ground”—does not apply to US policy makers and regulators. The people in these roles are prepared to embrace change and they want to facilitate the process for everyone’s benefit.

So, the top-line question, “Why are governments (or regulators) against Bitcoin?” is a bit like asking “When will you stop beating your mother?” It is not possible to answer, because in my opinion, the question is based on a false assumption. Bitcoin is gaining steam, and legitimate objections are rapidly falling away.

WildWest-2

Leaving USA? Learn Elvis’ middle name

In the late 1980s, I was between careers. I had an itch to visit the Soviet satellite republics—especially Romania, Czechoslovakia and Poland. Political upheaval was threatening to change the borders and alliances of Eastern Europe. It was shortly before the fall of the Berlin Wall.

I had not yet met the woman that I would marry, and so I trekked through Europe with Sam, a former college buddy. We were seasoned independent travelers. No need for a tour package, hotel reservations or even an itinerary! The tools of conventional tourists were antithetical to our nature. We backpacked across the continent by train and by foot, moving freely between big cities, small hamlets and farms.

We talked our way into schools, homes and offices, gaining a perspective of communist life before the collapse of the USSR. We stayed at hostels or with Gypsies. On one occasion, we stayed overnight at a refugee camp. We chuckled at commentary in Foder’s and Fromer’s travel guides, because their view of political and cultural affairs was laughably distorted. But, we gained respect for The Lonely Planet. That series confirmed our observations and conclusions.

Romania was our last destination; near the end of a 3 month trip. After an eye-opening visit to Transylvania, we made our way to Bucharest to prepare for our separate flights home.

Sam picked up a travel companion along the way, a Canadian woman almost twice our age. She was completing her medical degree in Romania. Realizing that we had backpacked across Eastern Europe, and that we had rarely stayed in a full service hotel with reliable electricity and hot water, she suggested that we visit the US Embassy with her for our last evening on the continent. She explained that the US Embassy welcomed both US and Canadian citizens and that they had American fast food, ATM machines affiliated with our own banks, reliable phone service, and even showers and a disco.

After 3 months of dust and twisted ankles (we spent New Year’s Eve hiking across the frontier from Svidnik Slovakia to Tylawa Poland), and after getting into an altercation with a police officer in the Bucharest city square (he pulled the film from our cameras, because we snapped photos of a bread line), the idea of a Burger King Whopper, clean showers, and a Bank ATM appealed to us. Don’t get me wrong—In each country, we ate and moved about like locals. But in just one more day, we would be greeted in Chicago by my mom’s business partner. I had no desire to greet her in threadbare shorts and unkempt hair!

USEmbassy_RomaniaBack in the day, the US maintained a palatial embassy in Bucharest—practically a city block along each side. But this was the cold war era. Relations with Nicolae Ceaușescu were awkward and tense. And so, the Romanian government cordoned off a city sector for an additional block in all directions. The area, including the US embassy, was 9 square blocks, and was restricted to foreigners with embassy business and locals who worked at the embassy or directly supported the embassy (suppliers, landscapers, maintenance vendors, restaurants, dry cleaners, etc).

Entering the embassy district required visitors to pass two checkpoints: At the perimeter, a Romanian police sought to prevent petitions for asylum, while at the embassy itself, a US Marine guard, verified citizenship, identity and intent. Even though our visit was in the cold war era, this was before 9/11. There was no threat of violence against Americans. And so, I was only mildly amused that a Canadian citizen could access the US embassy for the purpose of dining, banking and recreation. So be it.

guard-booth-1Sam and I were flagged as we passed through the outer perimeter. A Romanian policeman in a snappy uniform waved us to a booth that was situated right in middle of traffic. “Passports please?”. We complied without any words. He looked at our female companion. “You are Canadian. Are you here to dance, eat or shower?” referring to the discotheque, restaurant and changing rooms within the embassy. “All of the above” she responded.

“O.K. my friends. You may pass. Do not talk or trade with Romanians between this checkpoint and the embassy.” We had heard this type of request from hotel proprietors and store keepers, but I was surprised to hear it from an official person with defacto boarder authority. I wondered what difference is there in talking to Romanians inside or outside of the US embassy sector?

HackySack-2aMaking our way through a working class neighborhood, we spied a circle of children playing hacky sack. They weren’t just playing, they were talking—and in English!

In Western Europe, seeing a group of preteens talk in English wouldn’t merit a second glance. Everyone learns English in school and more recently, the Internet spreads English like dandelion seeds in a windstorm. But in the 1980s, Romania had no Internet and few children spoke English. Sam and I looked quizzically at each other. Sensing a mystery, we crossed the street to get a better read on these boys. We weren’t planning to engage them…we just wanted to know what they were talking about.

Still a half minute away from the boys, were could here one boy bark questions with command excitement. Apparently, he was the leader. One by one, the other children responded:

  • “Who won the 1963 World Series?”              “The Dodgers”      “Correct!”
  • “What is Elvis Presley’s middle name?”        “Aaron”                “Correct!”
  • “Who was Richard Nixon’s vice president?”  “Agnew”
                 “Full name please …”                     “Spiro T. Agnew”   “Correct!”

Sam and I were flummoxed. What game requires detailed answers on issues of US cultural minutiae? Momentarily forgetting our instructions to refrain from engaging locals, I addressed the tallest boy. He was about 12. “What is the purpose of this game?”

He stared at me blankly. At first, I thought that he might not be permitted to talk with a foreigner or perhaps he perceived a threat because I was a stranger. But then, in very broken English, he struggled to respond: “Sorry…No speak Ainglish. No understand”. The other boys were even less helpful. They didn’t speak a lick of English, not even the one who posed the questions and responded with the word “Correct!”

Of course, this presented an even bigger puzzle. These boys were playing a word game, and they didn’t even understand the words. Even more bizarre, they responded to each question with a correct answer.

Unable to communicate and with onlookers beginning to take notice, we moved on. During the remainder of our walk, Sam and I speculated on the nature of their play and dreamt up possible explanations—each more bizarre than the other. In truth, we had no idea from where they heard these questions or how they knew the answers.

Eventually, we made our way to the US Embassy. A marine guard snapped to attention and greeted us with military discipline. “Passports please.”

Marine GuardAfter a few seconds of comparing our photos with our faces, he looked each of us from head to toe. Referring to Sam’s friend, but staring directly at us, he said: “I know this woman. She has visited before. But what about you? What is your business with the Embassy?”

I offered the only explanation that I could think of: “We’re at the end of our trip. We are looking for a transition—something familiar and western. We heard that you allow unofficial visits from tourists.”

“That’s correct. And your Canadian friend is welcome too. But, you know, boys—it’s not difficult for some Romanians to acquire an altered or forged passport. I see them frequently, and some are difficult to detect.” Then he asked where each of us was born.

I sympathized with the task of an embassy gate keeper and I was prepared for a delay. I imagined that he would check our airline tickets, verify identities against a computer database, or even call our personal references back in America. “…And so, boys, I’d like to ask you a few questions. Just a little quiz to help me confirm citizenship…”

“Who won the 1963 World Series?”

This set my mind alight…I knew the answer! After all, I heard this question 15 minutes ago. What a coincidence! “I think that it was the LA Dodgers, but I have to confess…”

The marine guard cut me off, mid sentence. “Do I look like a priest? I didn’t ask for a confession or commentary Just answer the questions, please.

Now then: What was Elvis Presley’s middle name?”
        “Aaron—But wait. I just…”

“No talking! I am asking the questions. Who was Richard Nixon’s vice president?”
        “That one I know — It’s Agnew!”

“Full name please …”
        “Now hold on a second!”

The marine wouldn’t permit any interruption. Even if I could tell him about the boys and the game in the alley, I suspect that he wouldn’t care. He had protocol and procedures and was sticking to these methods with military discipline and precision.

Fortunately, Sam and I recalled every question and answer that the hacky sack youths had exchanged. Eventually, we were admitted. We had a fun evening with the embassy staff and a few other tourists. The food wasn’t free, but it was terrific!

This was all before 9/11 and before the Benghazi bombing and a other anti-American incidents at embassy’s around the world. More than twenty-five years have passed. I wonder if the embassy in Bucharest still uses the Trivial Pursuit quiz. I wonder if the locals still rehearse all the answers — and just how many of them enjoy the disco inside the embassy!

Is Islam a Religion of Tolerance?

In my armchair observation of the world’s major religions, they each have scriptures, righteous examples or commandments that seek the destruction or subjugation of other races, infidels or non-believers. In short, among all the talk of love, peace and coexistence, there is inevitably a doctrine, which—if interpreted literally—espouses hate or the smiting of people who are different. Is this the case for every religion? Perhaps an exception is Buddhism and other religions that are associated more with spiritual or political philosophies rather than a deity (e.g. Confucianism is not really a religion).

islam_385x261But here’s the thing: Despite holy scripture that places adherents spiritually or morally above their neighbors, few individuals believe or act on scripture that suggests burning neighbors, cutting off their hands, or raping their daughters. They also leave their neighbors to establish and administer their own political and cultural practices, according to their own set of beliefs. That is, most cultures accept the universal maxims: “Live and let live” and “Treat others as you wish to be treated”.  Adhering to these two simple golden principles of non-interference and cooperation are the keys to living in a multicultural world. Everyone understands this. Everyone lives it! Well, not quite everyone…

islamThe problem with Islam, as I see it, is that a large fraction of followers actually implement an “interference doctrine”. But when an institution combines a nihilistic philosophy with growth and evangelism, it takes the form of a cancer: Constantly pushing out its boarders and consuming anything in the way. Many Islamic adherents (how many?) refuse to accommodate tolerance—at least for those outside of its beliefs, even when an Islamist community is a minority in the homeland of other cultures and philosophies.

I believe in tolerance. Given a connected world with a great many cultures and beliefs, it is the only way to foster peaceful and productive coexistence. The concept of Sharia Law—practiced against non-believers and especially outside of an Islamist homeland—is not only intolerant and abhorrent, it is impossible to reconcile within any framework of coexistence. Therefore, the only philosophy or practice of which we should be intolerant is intolerance itself.

Islam-10

I honestly don’t know the fraction of Islamists who teach hate and who seek to spread intolerance. But I can see that the absolute numbers are staggering. It’s not just growing in the Arab world, in Afghanistan, Pakistan, Mali and Timbuktu. It has taken root in France, Belgium, Germany, Sweden, Finland and even in North America. While I cringe in response to some reader suggestions (“We must destroy Islam. We need to institute a genocide”), I honestly don’t see how to contain a cancer by any means other than destroying it. As with any cancer, there is an urgent imperative to prevent spread and the consumption of surrounding tissue.

Is it possible that Islam can be gently prodded to correct the extremism within its many sects and among its zealous Mullahs? I don’t know. And I don’t know if we have time to engage on such a benign level. Despite my disdain for intolerance, I keep returning to my own maxim: The only thing of which we can be justifiably intolerant is intolerance itself. I believe that if we do not quickly squash intolerance, the haters will consume us.

(Continue below image)390806_257718917664687_371811942_n

That’s my opinion on the growth of a very destructive force from the dark side. My father’s opinion was considerably less tolerant. He once wrote that we should kill captured Taliban or Hammas fighters and send video to their families of their corpses being buried alongside the open carcasses of pigs. He figured that this might be the only way of persuading the next generation from spreading their hate and killing into other cultures. I hold out hope for a more civilized and humane way to encourage tolerance among neighbors.

In response to the titular question: Is Islam a religion of tolerance? It doesn’t appear to promote tolerance at any level. Not from religious leaders and not that I can see from the adherents. If Islam were tolerant, we would see swift condemnation of terrorist acts. We would see acceptance of other cultures and practices. We would sense an acceptance that women can be educated and treated as something other than cattle, and we would see a a peaceful and productive coexistence with the greater communities, both religious and secular.

All 4 photos: http://enriqueiglesias.com

Calculate Bitcoin Value: Modest assumptions

An experienced investor recognizes a speculative instrument or commodity. Depending upon your frame of mind and your opinion about its future, Bitcoin is either a payment instrument or a commodity. But either way, its supply is capped (not by edict, but by an indisputable mathematical formula), and so its value is a product of simple supply and demand economics.

Value: What assumptions are reasonable?

Value: What assumptions are reasonable?

I would never claim the foresight to predict the value of a bitcoin five minutes from now, let alone five years from now. Yet, I am baffled by its dollar exchange value today ($450 as I write this Wild Duck article). A reasonable and conservative calculation suggests that it should be—not $1200, as it was in late November 2013—but rather 100 times its current value.

Let’s consider one way to approach a calculation of the exchange rate necessary to support a low ball likelihood of its future utility…

Conservative Assumptions

  • Let’s say that Bitcoin never achieves the status of a currency—and that eventually, the expectation of enthusiasts that it will become its own “value store” turns out to be wishful thinking. Let’s assume that exchange rate mania was no more than the Dutch tulip-mania.
  • As a result, let us further assume that all speculative “investment” ends. Let’s just say that in 5 years, no one is interested in holding on to a bitcoin based on the expectation that its value will rise.

But, clearly, Bitcoin is very cost effective when used simply to transmit money for a purchase, loan, gift, or exchange. Even if both parties expect to convert back to regional currency after a short time, it reduces cost and leads to increased retained revenue.

Furthermore, it’s cost effectiveness is maximized as users retain their receipts in Bitcoin pending their own purchase of goods and services. In this way, they avoid any cost associated with a round trip exchange.

  • So let’s assume that consumers and businesses eventually hold 10% of their receipts in Bitcoin longer than a day. In this way, a certain amount of “coins” are required just to cover circulation.

Now, for more of our facts & assumptions…

  • Today, 85% of transactions are US dollar denominated.
  • Each day, the world needs about $3 trillion dollars to float current transactions. Additionally, the currency markets require another 3.98 trillion dollars for banks, exchanges, escrows, reserves and other activities driven by currency “markets”.
  • Let’s further assume that these 2010 figures never grow. Despite China’s massive growth and significant recover in the west after the 2010 recession, we will effectively freeze the world economy at 2010 levels.

There is no reliable data on the turnover rate of purchase and settlements, cash reserves—or how long a dollar typically stays in an individual’s pocket.

  • But if we assume that each dollar is turned over twice each day, we still require more than $3 trillion to grease the world’s daily needs. And that’s just US dollars.

Now, let’s make some reasonably conservative assumptions.

• Let’s assume that in 5 years, the faction of global transactions conducted online amounts to about 5% by value. (I believe that it is already far past this, but I am striving to be very conservative).

• Let’s further assume that 5% of these transactions use a new age cryptocurrency built on Satoshi’s model.

• My boldest assumption is that Bitcoin will be the market leader in virtual currencies. If any become viable, Bitcoin will be involved in 90% of digital currency transactions. That’s because it has already attained critical mass as evidenced by media frenzy, attempts at regulatory action, and the comparative market caps for various “coins”.

For these reasons—and the mechanisms of a two-sided market effect, it is unlikely that two parties will find it quick, simple and inexpensive to designate an alternate cryptocurrency for their transaction.

Finally, here is a fact rather than an assumption.

• There are currently 12.6 Bitcoins in circulation (all that have been mined to date, less the few that have been lost). But the total number of Bitcoins that can ever be available is 21 million. That’s it. There will never be inflation. No one can mint additional coins to cover national debts, public works bonds, or war reparations. It simply cannot be done. Bitcoin is product of math and not of monetary policy.

O.K. So, where does this leave us? It leaves us with a fairly straightforward calculation. Let me set up the calculation this way:

If there are eventually 21 million “units” divided amongst a daily liquidity requirement for $6 trillion dollars. And, if we divide the liquidity assumption by our very conservative assumptions, how thin must you slice the unit to buy a house or a hamburger? Or, more specifically, what fraction of a bitcoin will be equivalent to $1 of purchasing power?

If I were to complete the calculation, my Blog subscribers would think that I have lost my senses! The resulting value of Bitcoin dwarfs any speculative assessment that I have seen—even those that don’t restrict their analysis to conservative assumptions. But just because I am copping out of the final numbers crunch, don’t let it stop you! Play with the assumptions and the numbers…Just don’t play with the facts!

Now, it’s your turn to speak up. Where do you think that Bitcoin will be in 5 years?

— Worthless?
— Still around $450/BTC?
— Or very much different?

Others perspectives on the value of a bitcoin:

Disclosure:  AWildDuck and its editors are charter members of the Cryptocurrency Standards Association.
CRYPSA has no currency investments, and no stake in the exchange rate of any digital currency

Malaysia 370: Unexplored possibility

Malasia Air flight 370With nearly a month since the disappearance of Malaysia Air flight 370 with 239 souls on board, the pundits have put forth many theories to explain the mystery of the missing jumbo jet. They explore possibilities such as mechanical failure, terrorist passengers, a mentally unbalanced pilot or copilot, a fire or electrical problem caused by batteries or something stored in the cargo bayand the leading early theory: a plot to steal the plane.

But I have not seen another explanation—one that, to me, seems entirely more likely…

Malasia Air pilot & copilot

Zaharie Ahmad Shah,      Fariq Abdul Hamid

A reasonable explanation for the disappearance of this plane is the accidental lockout of authorized individuals from the cockpit. In the past decade, the cockpits of large planes have been turned into fortresses. The cockpit door has been fortified to withstand attack by axe or explosive. To enter the flight deck, a layered security protocol requires a passcode from the outside in combination with authorization from the inside or 3rd party cooperation. If the flight crew rushed to the doorway due to an innocent event (say the injury of an attendant who was just entering or someone falling as they stood up), or if the crewman remaining in the cockpit was incapacitated by accident or illness, it seems entirely possible that the plane could fly on autopilot while the crew struggles in vain to re-enter the flight deck.

No one at the controls

No one at the controls

Cabin-Ground Communication?

I wonder if Boeing or a jumbo jet pilot can tell us this: If all individuals are locked out of a cockpit as a plane flies on, is there any way to establish voice contact with the flight controllers in Malaysia, Vietnam, or even via satellite? I can imagine that a call might be possible from the cabin phone or perhaps there are Bluetooth-like devices in the galley. But with the recent fortress-like upgrades, I wonder if designers had sufficient foresight to ensure that every plane shipped in any configuration was equipped with cabin-ground capability—and that the all devices were charged and the crew regularly tested on their location and use.

New Topic: Black Box Pinger

While we’re discussing the disappearance of Malaysia Air flight 370, here is something else that I could never figure out.The media informs us that the best batteries we can achieve in a small, indestructible container last for only 30 days. (And that assumes that they are fresh, were recently charged, and stored at the proper temperature!). But this raises a very obvious question (obvious to Wild Ducks, that is)…

“Pings” broadcast from gray cylinder (left)

“Pings” broadcast from gray cylinder (left)

Rather than using a limited reserve to continuously ping for help, why not listen instead? After all, the ping can only penetrate ocean water for a a mile or two. It would consumes far less power to wait in “standby” mode until the unit is interrogated by a roaming device seeking response. In fact, if the pinger was primarily in a passive state until polled, I bet that the designers could budget for a much bigger energy burst on the ping. After all, when sensing an interrogation, someone is getting within range and we saved all the energy we would have spent on thousands of useless pings during past months!

Ellery Davies is a partner at CRYPSA, the Cryptocurrency Standards Association.
He is a frequent contributor to Yahoo News, Forbes and The Wall Street Journal.

CRYPSA foreshadows 2nd wave of Bitcoin adoption

Who Uses Bitcoin Today?

Bitcoin-08Early Bitcoin adoption was driven by by Geeks, anarchists, Libertarians, criminals and speculators. After all, cryptocurrency fascinates bleeding edge techies, anyone suspicious of government, people with something to hide, or those—like me—who simply value privacy.

But even with the indisputable fact that Bitcoin dramatically reduces transaction costs, it will fail to gain more than 2% traction (and this share, only for E-commerce), until certain things happen.

Bitcoin Benefits Mainstream Use (even if it is not a currency)

Even if you don’t accept that Bitcoin has inherent value, like currency backed by gold or a government, it offers as a medium of exchange are indisputable:

  • Inexpensive to pay, receive or transmit
  • Resistant to regulation and intervention because transactions are private and direct
  • Impervious to inflation because the supply is capped
  • Like cash, individual transactions and wealth are quasi-anonymous
  • Unlike cash, it is resistant to forgery
  • Unlike cash, it can be encrypted and backed up with ease
  • Unlike national currency, it cannot be manipulated for political purposes
  • Unlike national currency, redistribution for social purposes requires individual consent of users

Yet, despite the theoretical safety of cryptocurrency, recent, spectacular events suggest that Bitcoin is anything but safe. The biggest exchange has failed, someone loses millions on a discarded hard drive. An investment adviser fleeces his minions in a Bitcoin Ponzi scam. A well known media mogul is hacked. He loses everything.

Are the news sources faulty? Not really. Mechanisms needed to make Bitcoin safe for the average consumer—and especially for the businesses that they trust—are lacking. But even the relative immaturity of tools and techniques is not what is holding back adoption.

What Leads to Mainstream Adoption?

Bitcoin will wither on the vine—or it will gain the legitimization needed for mainstream adoption. What will it take to bring it past early adopters and into the realm of commerce?

—Regulation?  —A deposit insurance fund?  —Crossing an adoption threshold?
—Or do we just need to wait for a reduction in exchange-rate volatility?

Wild Ducks do not believe that these are limiting factors. The obstacle to mainstream adoption is a lack of commercial protocols for safety, security and transparency. Without well-defined standards & practices for those desiring transparency and recourse, Bitcoin will remain the province of early adopters. It must be perceived as safe and practical before it will attract the masses.

Standards and Practices

Early adopters may value the decentralized, model and the privacy afforded by virtual currency transactions. But businesses and consumers need optional user identification, transparency, performance guarantees and recourse (refund, rescission and arbitration). After all, would you use a new form of currency if you could not get a receipt? How could you demonstrate that an insurance policy was paid on time, that you are due a refund for a cancelled flight, that you were overcharged for groceries, or as a cost basis for equity?

crypsa-logo-pr02_lRegulations won’t solve this. But voluntary standards and practices will. Especially, if transactions and transparency-compliance can be tested in real time. That’s why CRYPSA (Cryptocurrency Standards Association) has Gavin’s attention and it is why banks are working with CRYPSA as they quietly prepare to offer Bitcoin services.* They want processes in place that broadcast trust to prospective clients. They want to offer provable security, safety, reserves and mechanisms of recourse. They want standardized methods of bookkeeping & audit.

Mainstream Adoption; A Series of Events

As individuals and businesses begin to trust Bitcoin, adoption will pick up steam. This will be evident as a domino-chain of events. Each event will lead to the next…

  • A growing fraction of sellers leave their bitcoin in their wallets, realizing that they will need to spend it for their own labor and materials.
  • Gradually, wild exchange-rate gyrations diminish—not because fewer people are exchanging money, but because the Bitcoin supply/demand value is driven more by actual commerce than it is by speculation.
  • Sellers begin pricing merchandise in Bitcoin rather than national currency—because they are less anxious to exchange out of BTC immediately after each sale.

When sellers begin letting a fraction of bitcoin revenues ride—and as they begin pricing goods and services in BTC—a phenomenal tipping point will follow…

  • If goods and services are priced in BTC, then everyone involved saves money and engages in transactions more efficiently.
  • Adoption-CoinIf goods and services are priced in BTC, then the public will begin to perceive exchange rate volatility as a changing dollar rather than a changing bitcoin.
  • If buyers also begin to save their BTC (i.e. they do not worry about immediately moving it back to national currency), it means that Bitcoin is being perceived as a stored value—rather than just an exchange chit. This may seem a subtle footnote, but the ramifications are earth shaking. That earthquake is the world gradually moving away from centralized treasury-issued bank notes and toward a unified currency that we can all trust.

Summary

Bitcoin won’t reach the next plateau because of regulation or intervention. Adoption will follow trust. And trust will come when the assurances and guarantees that we expect from a credit card or bank-mitigated transaction become widely available. With tools and a reputable standards organization validating standards & practices, the use of virtual currency will feel right. It will be as safe as days of yore, when we trusted printed slips of paper and a central authority. Even though Bitcoin resists both central control and authority, it can be made safe for business!

Incidentally, CRYPSA launches in April. It has already garnished attention and goodwill from banks, state regulators, and several Bitcoin pioneers. But don’t let the regulators throw you. The organization is all about making Bitcoin safe for Business—but only for transactions in which both parties agree to a transparent and secure environment.

Disclosure: AWildDuck is a charter CRYPSA member.