About the Fuss: Is Bitcoin really so important?

This afternoon, an automated bot at Quora suggested that I answer a reader question. Quora is essentially an “Ask the expert” web site. It is the world’s largest, cataloged and indexed Q&A repository.

This is the question I was asked to answer:

Some pundits believe Bitcoin is a fad, while others seem to feel that it is better than sliced bread. I like sliced bread.* Is Bitcoin really that cool? —Or is it just a lot of Geeky hype?

One other columnist answered before me. Normally, I pass on an invitation, if a question has already been answered. But in this case, the individual answering the question has yet to see the light. He has wandered into the Church of the Blockchain, but he just didn’t realize that the man sweeping the floor is the prophet.

Here then is my answer, regarding Bitcoin, the blockchain and sliced bread…

I respectfully disagree with Jim Euclid. He answered this question too. Perhaps it is arrogant of me to state with confidence that he will change his mind, if he is still around in another 30 or 40 years. So will everyone reading this.

Bitcoin and the blockchain were introduced together in a white paper by a quasi-anonymous developer in October 2008. He or they used a pseudonym, but communicated with a broad group of developers before and after unveiling the solution to an age old problem of math, logistics and cryptography.

Just over 1 year later, Bitcoin began moving between individual owners. And then it began to re-write the history of economics, bookkeeping, consensus, trust and the very democracy that is so precious to us. It is changing what we understand about so many things. But its true contributions have barely even begun.

Bitcoin is as ‘cool’ an invention as there can be. Like the steam engine, vacuum tube, automobile, television and the internet, it is radically transformative. Each of these inventions has (or will) contribute enormously to human progress and happiness.

The problem that Satoshi solved goes back to Aristotle and has profound social implications for the future of humanity. There is no poetic license or potential for overstating the importance of both Bitcoin and the blockchain. It will impact your life—probably in very positive ways—with a punch that matches the rise of agriculture, indoor plumbing or airline travel.

Sorry, Jim. I respect your opinion, but I see the future a bit more clearly than you. The internet is a vehicle. It is certainly important. But it is only the highway. Bitcoin is the marvel that the internet’s instant, inexpensive and ubiquitous communication was meant to spawn.

I have always felt pride over the fact that I was alive when man first landed on the moon. I was a child and I had nothing to do with that achievement—but somehow, I am gratified that this event intersected with my life.

Unlike the moon landing, Bitcoin has no Jules Verne or cave paintings from past generations yearning to conquer something that is tangible. We have only Aristotle’s insight that money was not yet perfect—and his recognition that issues of democracy and governance seem to have insurmountable impediments. But the problems that Bitcoin and the blockchain address are just as real as the moon overhead. And the solutions they will spawn are even more relevant to our civilization.

I have even more pride that I have witnessed the birth of decentralized, permissionless, distributed consensus—and specifically Bitcoin. It will impact my health, wealth and happiness even more than everything that NASA and space technology have spawned.

Am I smug that I recognized the importance of Bitcoin and the blockchain just 4 months after its unveiling? You bet I am! And even if Jim doesn’t recognize it yet, someday I will rub this fact in his face.

(Kidding…but it is personally comforting to be on the right side of history!)


* Note: In America, the expression “sliced bread” refers to something that is really clever, desirable and coveted. It is often paired with the word “since” like this: That new iPhone is the best thing since sliced bread.


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or blockchain consulting.

Does decentralized currency thwart crisis intervention?

Here is another economics/policy question that I was asked to address at Quora.

The US used quantitative easing to deal with one monetary crisis, and a bailout of the automotive and banking industry to deal with another. If nations, economies or individuals begin to embrace a decentralized currency, they will inevitably shift away from government issued money. Won’t this hinder a nation’s ability to intervene in a crisis?

Answering this question goes to the very heart of the ethics and politics of cryptocurrency.

Yes. Without centralized control over monetary policy, government options for intervention in a money crisis would be severely limited. But this fact may lead to a false impression…

First, most money crises begin with government, and so there are likely to be far fewer monetary emergencies.

Here’s how the options would be limited:

  • Governments would have fewer ways to manipulate a public resource. They will still have the ability to budget, tax, borrow, build infrastructure and even wage war. But…
  • Governments could no longer amass debts that outstrip their ability to be accountable. That’s because they can no longer covertly tax via rampant printing of money.
  • They could not “raise the debt ceiling” without demonstrating fiscal responsibility, because they no longer control what everyone uses as money.
  • Government spending (and intervention, such as quantitative easing) would have to be balanced by revenue. Borrowing would be limited to creditors who truly believe in their will and ability to repay debt.

All of these “limitations” are good things—even for the governments and banks involved. It only seems limiting, because our understanding of what is money is tainted by millennia of authoritarian systems.

A capped, open source, transparent, traceable, immutable, decentralized, distributed and permissionless money supply is both fair and more robust than Fiat paper, promises or credit.

Let’s explore that last bullet, above. The point is subtle—yet, it is the key to answering your question…

Every individual, household, business, state and NGO must balance its books. If one cannot cover bills, they must find a creditor who believes in their ability to get back to fiscal health. Even nations are eventually forced to balance their books or seek a bail-out from neighbors.

But, this is not the case for the United States. We have had an ability whitewash our largess and declining industrial productivity by printing more money. How has this been possible while retaining a strong dollar?

The US dollar has been the world’s reserve currency for 47 years. This development was one of the most clever, yet potentially damaging developments of the post war order. It led other nations and consumers to treat it like gold (even though the link to any underlying asset or promise was severed by Richard Nixon in 1972).

Now that other nations are shifting this special status away from the US, we are gradually becoming just as susceptible to a house-of-cards collapse as Venezuela, Argentina, Zimbabwe, or Germany between the wars. Our massive consumer market cannot protect us. Eventually, we must ship the fruit of our sweat and intellectual bounty to serve others. After all, for more than a half century, we have been giving them pieces of paper (dollars or treasury bonds) for their TVs, underwear, sneakers, toys and sheet rock.

This unbalanced trade must be reversed. Building walls at the boarder and stiff tariffs are desperate acts that fail to recognize cause or containment. They are certainly not the way to restore a robust economy. There must be a better way for nations to get their houses in order. Fortunately, there is.

A distributed currency built on math, trust and transparency—rather than the integrity of transient elected officials from one nation is far less susceptible to manipulation, inflation or any form of shock. It won’t solve all problems immediately, be it will prevent us from getting further mired in a debt that blows up like a balloon.

The decoupling of a money supply from government will yield benefits that are difficult to imagine today. Money doesn’t need authoritarian oversight like airline safety. The situation is more analogous to the deregulation telephone and package delivery services. Without those blockbuster decisions of the 1980s, we would not have Smartphones or the internet today.


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or blockchain consulting.

Profit from Bitcoin without Investing or Trading

I find it encouraging that so many people want to know if they should get into Bitcoin. But, I am discouraged when I discover that “getting into” is a euphemism for investing, trading, flipping or HODL (Buy, then hold on for dear life).

Sure, Bitcoin is deflationary. If widely adopted, it is likely to increase in value. But adoption is being thwarted by traders. Today 95% of cryptocurrency transactions are by individuals or organizations buying or swapping cryptocurrency rather than using crypto to buy apples, a new car, or a family vacation.

Many people consider Bitcoin to be risky and not just as an investment! They think its risky to use a payment instrument. The perception of risk is associated with its widely fluctuating exchange rate. In the end, the exchange value won’t matter at all, because Bitcoin will be the money and not the dollar, yen, euro or pound. But, unfortunately, even though the argument for widespread adoption is compelling, it will not occur while we continue to see spikes and plunges on a graph.

If you are waiting for volatility to abate, then we need adoption beyond bleeding edge adopters (so called Geeks and nerds). And I am not referring to traders. We must arrive at a day when the fraction of transactions driven by purchase & sale, debt payment, salaries, memberships, fees, and settlements and big companies quoting grain, oil or ships dwarfs the fraction driven by speculators & investors. This is the only way to trigger the series of reactions that will lead to stability, ubiquity and public trust.

Trading is only one way to profit from the cryptocurrency market—and it is, by far, the most risky. In fact, if you employ the tools and techniques of technical analysis (i.e. you study graphs of performance over time), then you certainly won’t make money. In fact, you will lose your shirt.

I don’t recommend trading as a core strategy for building a career around cryptocurrency. You can make a decent living with a real crypto career, or a consulting sideline. We will get to a few suggestions below. But, if you wish to invest, day trade or HODL, stick to gradual, dollar-cost-averaging instead. Choose a small, monthly budget that doesn’t take food off the table and that you can afford to lose. This is the method of anyone who built great wealth through equities, including Warren Buffet.

Other ways to profit from cryptocurrency

In conference presentations at which I am a speaker, I often dedicate a few slides to eight different ways to derive income from cryptocurrency. I never share my conference slides beyond the presentation. When I need to give information to my sponsor or an attendee, I require non-disclosure and I give them an encrypted link to just a small set of knowledge. After all, my presentation slides are my bread & butter (more about this in Slide #2, below).

But, in response to this question, I will share 2 slides, and I will add an explanation of two bulleted opportunities…

Slide #1, Item 3

The highlighted opportunity in the middle of slide #1, POS Integration, provides a BIG bang for your time, and with little training needed. But, the window of opportunity won’t last long—perhaps just 1½ years.

What you will do is train small-to-medium retail proprietors with the tools and training to accept cryptocurrency as easily as they accept Visa or American Express, but without commission. Little or NO fees at all. A retail cashier doesn’t need much training—he just directs a shopper to a QR code on the cash register.

The process can safely operate through the existing POS receipt printer, so that the cashier knows that a purchase has just been completed. Even the accounting books are updated in real time, and the vendor is paid immediately.

I recommend using your existing relationships and focusing on small, locally owned businesses with 3 to 8 retail outlets. Small, 1-store operations may not be worth your sales & set-up time. Larger operations (like McDonald’s or Walmart) do not make this type of decision at a local level and they have directors and IT departments that dictate and implement policies dealing with handling money.

Ideally, you want a restaurateur, grocery store, professional service (medical, legal, tax prep, seamstress, etc) with More than 1 but fewer than 8 locations. That’s because your going to play “good guy”. Instead of charging them a commission that is small compared to a credit card (say 0.5%), you will charge them a one time fee of $300 for every person in the room. With this method, you can make several thousand dollars in under 2 hours.

Set-up

No alt text provided for this image

Ask the owner to meet at any of his retail sites with one cashier or associate from each store. I prefer to do this on a weekend morning—but its best to avoid a time of heavy customer traffic. You need a check out aisle to be available.

Your training and tools integration can be completed in 20 minutes. The retail sales process is that easy. It’s no different than a credit card. The shopper will know what to do when they see the “Bitcoin Accepted” placard and a QR code. You are simply helping the cashier and bookkeeper that the process is trivial and the company till is even safer than with cash or credit cards.

You will need another 20 minutes to up-sell a nifty floating holographic display of the QR code. And then 30 more minutes for questions from individuals who just don’t believe in the future of Bitcoin or crypto. They want to know more than the only question that matters. “How much will I save”.

But the owner/operator and the numbers guy will definitely get it. Retail stores, and especially grocers deal with a razor thin margin. You will give them the opportunity to pick up business from early adopters and with ZERO fees and even instant conversion to Fiat if they wish. That’s why IGA Supermarkets announced this week that they will accept Bitcoin across all supermarkets this month.

The most common question will be “Doesn’t it cost to switch revenue back to dollars?” –or similarly– “I don’t want Bitcoin. How long must I wait to get dollars?” With just a little analysis of the APIs and services from which you build your consulting tool set, you will learn that the answers are very retail-friendly! In fact, payment processors will give you a much better deal than their own exchange clients, and even better than huge institutional traders. They all want to get their foot into retail, before credit card processors add it to their infrastructure.

I do not plan to provide step by step instructions in this Quora answer. You can begin by googling the companies that offer retail POS tools and then find a clever way to integrate them seamlessly into the most popular accounting tools used by small business (First Data, Veriphone, Square, PayPal, Quicken). If you or the exchange that you integrate into your crypto-processing add-on covers just these providers, you will be able to focus on your sales pitch and relationships. Now go make a killing, tiger!

Why is this opportunity still available?

Why doesn’t First Data, Citibank or Veriphone add Bitcoin to their payment options, along with Visa, Mastercard and Discover?

They will, eventually. But only after you and hundreds of other Bitcoin consultants chip away at their profits.

The card processors know that Bitcoin is almost friction free. For many retailers, it is completely free. With recent addition of Lightning Network, it is also fast. So it undermines the commission that legacy processors get from credit and debit cards. They try to harden their POS printers and accounting reports from out-of network utilization and they put doubt into business owners, telling them that cryptocurrency has no recourse or arbitration.

You will have great answers for each critique and you will win. But do it soon!

Slide #2

Of course, you can do what I do. Study Satoshi, learn a little code, try mining for yourself, research governments and their policies, learn about Aristotle and the evolution of money, dig into the forums for developers, miners and critics. Then make your presence known.

As your stature rises above the background of armchair speculators (without any agenda except to get rich), create a blog and do your best to attract attention. Market yourself as an industry pundit, expert, courseware developer, keynote speaker and a top writer at Quora.

You won’t find a sponsor for every blog post or paper that you publish, but eventually—if you are engaging, knowledgeable and entertaining—you can make a living from live events and on sight training.* Perhaps you can even earn royalties by selling courseware at Udemy or developing courseware for Diginomics.

I was fortunate. I left my career and got involved with Bitcoin shortly after the original whitepaper in 2009. Few people had heard of Bitcoin and even fewer believed it could ever be viable, even as just a payment instrument. I have turned my interest into a career. I don’t make nearly as much as Andreas Antonopoulos, but I am on the short list for paid presentations and am sought by government legislators, legal organizations, and accounting firms. All of these groups urgently need to understand crypto.

Conclusion: Is it too late to get into Bitcoin?

In the late 1930s, many individuals thought that it was too late to get into television. The first Televisor technologies were demonstrated 15 years earlier, in the 1920s. Since then, Philo Farnsworth unveiled what we now call a TV and RCA had already begun broadcasting in big cities. Many people knew someone on their block that had a TV.

Yet, with historical perspective, we can see that all of the major players of the 20th century got involved later. Few people today have heard of these early television manufacturers or the studios that made shows. Have you?

So, is it too late to build a career or a business around a new technology that was demonstrated only 10 or 15 years ago and is already being commercialized? Has that ship already sailed? Of course not! That ship hasn’t even docked. Seats are empty. Opportunities are just beginning. Crypto titans of this century are still in primary school or have not yet been born. (But for opportunity #3 on slide #1 above, get act together quickly


* It’s difficult to get paid by a conference. For a big expo, its almost impossible, even for the headliner. For an educational workshop, it is almost as hard. The host may cover travel and hotel, but typically tries to avoid paying speaker’s a stipend.

Show organizers want you to pay them! They want you to value a few minutes on stage, because they assume that you want to sell something. Just as with attendees, they see you as a customer. With a bit of effort, you can reverse the value proposition.

Convince the organizer or host that you are the product and not a customer. Explain the value that you bring to the conference. You enable them to sell more VIP seats.

Cars, Gold, Houses, Toys & Stock: What gives value?

The title of this post is intentionally misleading. We frequently discuss the traits that lead to value in this Blog. But today, I was asked a more nuanced question: “What things will hold their value?

And there is a ulterior motive in being a Wild Duck contributor. Analyzing the dynamics of durable value leads to some surprising conclusions about the money supply and what a society chooses to use as money. We’ll get to this at end of this post.


We know that value comes from supply and demand. There are no exceptions. But, we have not addressed the properties that make an asset hold value over the long haul. Let’s consider some examples…

Cars

In an affluent, mobile society, most people desire personal, point-to-point transportation — and so there is clearly a demand for automobiles.

But style & technology change rapidly and automobiles deteriorate with use and weather. After 8 to 10 years, their cost and maintenance rise dramatically, and owners lust for a new model. So cars don’t get our award for assets that hold value.*

Popular Toys

In the 1970s, the Cabbage Patch doll from Calico Industries, and later, Tickle Me Elmo in the 1990s created a buyer frenzy that rivaled a lemonade stand in the desert. Shoppers fought each other to grab a limited supply. Clearly, demand was very high. The one shown below is listed at Ebay this week with a starting bid of $5,000. Other, less popular styles can be found for $4.99.

At first, this demand was driven by clever marketing and crying children in the week before Christmas. Demand was driven by a parent’s love. But at the peak of frenzy, demand shifted to buyers without children who felt certain that they could profit from selling the dolls that they snatched up first.

But the demand was not durable. Fads driven by frenzy don’t hold value for the long haul — especially when a manufacturer can simply turn the spigot back on.

Stocks & Bonds

A share of stock represents ownership in a corporation. A municipal bond represents a lien against a city—or the fees generated by an infrastructure project.

In both cases—especially bonds, which are a limited promise—no one expects value to last forever. It is a time-sensitive bet with the intention of expiration, redemption or exchange. So, these things also fail our criteria for durable value.

Houses & Real Estate

Like cars, homes require ongoing maintenance. But, most people weigh the maintenance cost against the benefit of having shelter, rather than comparing it to their gain or loss in value.

On the other hand, real estate value fluctuates in the long run due to things that are difficult to predict — population density, demographics, and quality-of-life issues related to infrastructure: weather, seismic events, politics, and access to health care and education.

Some real estate rises enormously in value over 50 or 100 years. Yet, we have seen boom-and-bust cycles that wipe out substantial wealth. So, real estate does not cut it in our contest for durable value.

Gold

The allure of gold and other precious metals is that their supply is capped — or limited by slow and predictable growth. The asset is difficult to find. It is acquired only from natural phenomena.

So, if we can also make it fungible, divisible, portable and difficult to counterfeit, then it meets most of Aristotle’s requirements for a functional currency. Theoretically, this can lead to widespread demand.

Gold certainly has exhibited its ability to hold value throughout thousands of years. But it is not so easily tested and divided in the field, and the impression that it has intrinsic value is an illusion. That’s because the fraction of gold acquired by investors dwarfs the amount actually needed for dentistry, electronics and even jewelry. In this modern era, even gold is becoming a house of cards, because its value is built upon speculation and emotion.

Oil (aka “black gold”)

With the rise of the automobile and power plants that burn fossil fuel, oil became a reserve currency of the 19th and 20th centuries. But there are two problems with it holding value over the long haul.

First, unlike gold, oil is a consumable in every market. Therefore it is difficult to think of it as an asset. Also, we now live in a century in which energy and transportation is rapidly switching away from oil, while at the same time, new technology is making it cheap to acquire new oil. This (along with a history of violent political theater) dramatically deteriorates its potential as a store of value in coming years.

Money

The supply-demand dynamics of money is widely misunderstood. More than 2,300 years ago, Aristotle defined the properties of a functional currency.

Earlier, we stated that all value comes from supply and demand. But, it is fair to ask “What creates the demand?” or “What backs the expectation of future demand?” Surprisingly, even if we limit our scope to just one country (USA), the value of government-issued currency has been tied to different things over time:

  • Gold
  • Promise of redemption
  • Legal tender (public must accept it for all debts)
  • Settlement of taxes
  • The “good faith and credit” of workers

Ultimately, demand is influenced by oversupply and by public perception more than government promises or laws. The perception that the US dollar has no cap and that its supply can be inflated whenever a body of transient politicians decides to raise the debt ceiling may eventually cause its value to collapse. Although it has not happened yet, at some point consumers (or those holding our debt), will begin to question if Americans have the capacity and will to produce and export the goods & services necessary to balance their mass consumption of the past half-century.

And so, government-issued Fiat does not pass our smell test for durable value. Sooner or later, all national currencies collapse. On a personal level, the only question that matters is if you will be caught by surprise—with a fraction of wealth tied to your favored currency.

What has the potential to meet all
requirements for holding value?

Wouldn’t it be fascinating if we could find an asset that is a product of pure mathematics? A perfect asset would be fair, fungible, immutable, and capped. It could never be inflated or manipulated by politicians. It would decouple governments from monetary policy. It would be politically agnostic.

If correctly designed, it would be capable of absorbing and incorporating improvements developed by any copycat or pretender nipping at its heels. Most important, it would be open source, peer-to-peer, massively distributed, redundant, and completely permissionless.

This perfect asset would derive trust from mathematics and crowd-sourced consensus. It would not require that anyone believe in a government, a bank, a land mass, or the uncertain supply of precious objects. Authenticity could tested easily and its value transmitted instantly. The history of each unit would be completely transparent. With free tools, anyone, anywhere could trace its history of moving from one owner to the next.

Ten years ago, such an asset was unleashed into the wild by a person or team of developers under the pseudonym, Satoshi Nakamoto. It not only meets all of these requirements, it has built-in immunity from competition. It even resolves a technical problem that troubled Aristotle more than two millennia ago.

I won’t name this radical yet natural evolutionary development in this answer—but, I can confidently state that it passes our test for an asset that will hold value over time. Despite a wildly fluctuating exchange rate with Fiat currency, its inherent value has never dropped. Ultimately, you will no longer asses value based on the exchange rate of an anachronistic currency that fails all of the other smell tests. Instead, you will assess value on how many heads of lettuce you can buy or how much that new sailboat costs.


* A classic car avoids the problems associated with use & maintenance—and it can hold value over a long period. But like a Picasso painting, the market for classic cars has a limited audience, especially for the florescent green ’63 Mustang that I found in in my great uncle’s garage. Additionally, it is subject to the whims of popular perception. Styles go in and out of vogue and so we cannot predict how long that car will hold value. (Please call me if you value my uncle’s Mustang at more than $150,000).

Lack of standards prompts new Bitcoin wallet advice

This update is an adaptation of my recent answer to a Quora reader who was in a panic. She asked:

“What can I do after a hard drive crash?
How can I recover my cryptocurrency?”

In the past, I would address the immediate problem of course. (My answer below). But, to prepare for the next unfortunate event, I would recommend a wallet type based on the user’s unique experience, expertise and comfort zone. I would help the reader to weigh trade-offs of the most important criteria: Security, portability, convenience, and quick access to assets).

I had believed that some types of wallets were better for some individuals, but that they required a background in cryptography—or at least a discipline for meticulous practices. As CEO of the Cryptocurrency Standards Association, I had also believed that simple, unified, and popular standards would emerge very soon. I figured that this would enable users to practice safe-wallet maintenance in their own homes.

I was wrong. Most crypto wallets have not sufficiently evolved to counter the risks and complexities of everyday scenarios —not even for expert users. The problem isn’t the fault of any one vendor or hosted online service. It is that all of these gadgets, apps and services have not gotten together behind a single set of risk standards to a point where they become simple, standardized and compliant-friendly in the real world.

The lack of comprehensive standards and best practices dealing with total loss of access can bite anyone in the tush. Expertise and experience be d*mned. Today, I recommend only two types of wallets. All others are simply too risky to play a role in any financial portfolio. They set the stage for losing your wealth and health in so many plausible scenarios:

  • If your electronic device is lost, hacked, stolen or run over by a truck
  • If you become incapacitated or die
  • If you forget a secret, or where you stored it
  • If you have no idea what is “multisig” and don’t care to learn strange new practices
  • If an online cloud service or exchange goes dark or mysteriously disappears

Here is my answer to the reader who urgently needs to recover from a disk drive crash. After dealing with that crisis (it’s not at all pretty), I explain what do do in the future…


Question:How can I recover my cryptocurrency after a hard drive crash?

Bear in mind that your digital wallet doesn’t really hold wealth or coins. It holds a private key that lets you access your wealth on the blockchain. The key is like a password, but you cannot choose your own and it is too complex to remember. And so, you need a place to store it. That’s all a wallet really is.

If you stored this key on an electronic device (or in a software app or even on paper), but with no way to recover it—in case the device is lost, broken, hacked or stolen—then you are screwed! Your bitcoin still exists, but access to it has been lost forever.

Let’s be extra clear: If the device cannot be repaired or recovered, there is absolutely nothing you can do except lick your wounds and learn from your experience.

Now, let’s talk about next time…

A beautiful trait of crypto is that you can back up your wallet easily. The elegant and secure way to do this is by creating a list of 11 or more common dictionary words and placing this list where you and 2 or 3 trusted friends can always find it. The ability to generate this list of words is a Bitcoin standard. It greatly reduces the risk of lossbut only if you are aware of the feature, make use of it, and periodically practice asset recovery.*

But, we’re getting ahead of ourselves. Let’s back up, and describe the way to store your keys…

There are only two ways that you should stash cryptocurrency until we reach a day when standards, best practice and multisig escrow are second nature, trivial and understood by everyone.

You can either (1) trust a custodial exchange, or (2) use a hardware wallet. In a nod to smart phones and software apps, I will describe something that they are good for in these safety tips. But your go-to wallet should never be an app.

1. Trust a custodial exchange like Coinbase or Bitstamp

Despite what your Libertarian friends have told you (“It misses the whole point of owning crypto!”, don’t dismiss this option so quickly. A traditional bank/brokerage model offers several benefits which are important to some individuals. We’ll get to those in the bulleted list below.

Choose an exchange that is compliant (fully licensed and follows regulations for all activities). They must be well capitalized by reputable investors and subject to random, outside audit. The two mentioned above belong to this very small class of exchange-wallet services.

The exchange holds your crypto in their own offline vault and gives you access on demand through an account user interface using two-factor authentication. The process can be frustrating, if you lose your smart phone and haven’t prepared or practiced for such an inevitability. That’s because they must be absolutely certain that access is being made by you or someone that you have authorized

Why would anyone want a service to control their assets? There are good reasons:

  • Since their main business is acting as an exchange, broker or market maker, you can quickly shift assets into Fiat or other cryptocurrencies
  • Their meticulous record-keeping aids your own end-of-year tax reporting
  • A real person can help with confusing or unexpected circumstances
  • Just as with a bank or stockbroker, you can designate heirs, a spouse or co-owner, and your anticipated executor or a relative with power of attorney
  • A reputable custodian makes it difficult to accidentally lose access to wealth

But what about security standards? With all of the exchange failures, the lack of an insurance framework, and many that have simply lost or fled with customer assets, can you trust an exchange to implement security in the very best way?

Ultimately, a reputable exchange that practices security drills, subjects itself to outside audits and has investors with lots to loose is more likely than you to implement, update and rigorously practice safe methodology. This may change in the future, as standards and practices become more clear, unified and easier to follow. But for now, the traditional bank model makes sense for a great many users. I have owned Bitcoin for ten years, and I have only switched from Coinbase to method #2, below, in the last month.

2. Take control of your private keys

A hardware wallet, like the Trezor Model T (left) or Nano Ledger is the safest way to keep your private keys. A hardware wallet offers enhanced security, privacy, control. But it surrenders the advantages of a custodial relationship listed in the bullets above.

Upon configuring the wallet, you can generate a list of 11 or more seed words.* These allow you to completely recreate the wallet in a worst case scenario. Give this list to several scrupulous and indisputably trusted friends.

Some wallet vendors offer to engrave the seed words into steel so that it is likely to survive your house burning down or being run over by a snow plow. (Even better, some will send you a slab of steel and a set of hard metal slugs for each letter of the alphabet. This enables you to bang the words into metal yourself. No one except two or three trusted friends should ever have access to these words).

I prefer to hand-write the seed words, scan it, and then allow two trusted relatives (preferably younger) to encrypt the image and hide it with their preferred stenographic technique. Is this a complex process? Does it require periodic drills to ensure that the seed words can be found and that they still work. Yes, and Yes. Choosing to forgo a custodial relationship adds some cost and complexity to wallet maintenance & safety. With evolving standards and practices, this will change. But, we’re not there yet.

Think of the seed words as your master password to everything that is dear to you.if they become lost, forgotten or stolen, you will lose much more than your wealth. You will lose your child’s education, your marriage, retirement and health.

What about wallets on a computer or phone?

You would never pack all of your life savings, your stocks, bonds and home equity into your billfold before leaving for the grocery store. Likewise, there are no reasonable arguments for walking around with private keys to your wealth on a phone or tablet. These devices are constantly exposed to hazards, both physical and virtual. The same applies to a desktop PC. Even if you adhere to a scrupulous backup protocol, a software wallet exposes you to increased risk of loss, theft, and hacker attacks, especially social engineering cons.

If you need to make purchases or other transactions as you travel, carry an off-line hardware wallet or access keys from a mini-cloud wallet (hosted or your own). It contains a very small fraction of your wealth—the most you would need for impulse spending on a typical day. Anything more should never be attached to the internet.

Earlier, I promised to say something nice about software app wallets…

Sometimes, an app wallet can be very useful. Here is an example that helped me. It doesn’t change my recommendation to avoid them. It simply means that they may offer a specific function that you can still make use of when needed…

Assisting with the BCH / BSV Fork

On November 18, 2018, anyone holding Bitcoin Cash was theoretically entitled to an equivalent amount of Bitcoin Cash SV (it stands for “Satoshi Vision”). Although BSV had some highly visible supporters—notably Craig Steven Wright, who claimed to be the developer behind the pseudonym—it was not clear that it would generate sufficient interest to carry value and sustain a mining ecosystem of its own.

At the time, my BCH was stashed at Coinbase, and that exchange warned clients that they may not support the fork at all. That is, they might not create new online wallets and award users with BSV.

And so, I sent my BCH to a hardware wallet. At the time, I was just beginning to experiment with the new Trezor Model T.

But shortly after the fork, I learned that the Trezor didn’t support BSV. I wondered if there was still a way for me to fork my Bitcoin Cash? Since BSV has no replay protection, there were lots of doubts about the process for individual users to claim their new tokens.

I didn’t have time to deal with the issue for months. During that time, it became clear that the effort would be worthwhile. BSV was not as valuable as BCH, but it was still valued at hundreds of dollars per coin. Ignoring a future windfall makes no sense at all. Even Coinbase eventually announced a plan to give BSV to customers who kept their BCH with them. (This didn’t help me. My BCH was already in a Trezor wallet!).

It turns out that the solution was a bit tricky. It only works if the user has never received additional Bitcoin Cash into the wallet with pre-fork coins, if the later incoming BCH had already been forked. If even one post-fork BCH was sent to the wallet address, the entire BCH balance would be ineligible for forking—ever! And then, there is the replay problem. There was no formal protocol for achieving this. Oy!

Several application wallets found a clever work-around. I chose the Edge wallet (available on Android), because the process appears to be easy—and it was. All a user needs to do is (1) create a BCH wallet on their Android phone, and (2) send pre-fork BCH from a non-polluted wallet, like my Trezor. The sending wallet cannot be at an exchange service, like Coinbase, because these services aggregate user funds both at their facility and when they transmit to the blockchain.


* Seed words are recovery magic for a wallet that has been lost, stolen or destroyed.

The algorithm that maps a complex private key into an ordered list of English words is Bitcoin standard #BIP39 (it stands for Bitcoin Improvement Standard). The emergence of this standard reduces user risk greatly for compliant wallets. In the event of catastrophic loss, theft of destruction, it enables a user to recreate a wallet on their choice of competing platforms: gadgets, software apps, and even some hosted wallets.

If you opt for a hardware wallet that is owned and secured by you (as opposed to trusting an exchange as custodian of your crypto assets, just like a traditional bank), then make sure that your wallet offers BIP39 seed word recovery. Ignoring this safety standard puts you back at high-risk, and invalidates everything that this article conveys!


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or blockchain consulting.

How can Bitcoin be divided into small units?

As with other recent articles, this one was originally published as an answer to a member of Quora, a Q&A site in which I am a cryptocurrency columnist. And just like the previous one in this series (also posted today), this is a Q&A exchange with a newbie—Bitcoin beginner.

The question is simply: “How can Bitcoin be divided into units smaller than one?” While the answer may seem obvious to someone versed in math, statistics or economics, I get this question a lot—or something very similar. It’s difficult to explain that “one” is just a number and not a living thing. And so, I turn the explanation around by asking a nearly identical question; one that the enquirer can probably answer easily.

The goal is to provide the tools to answer the question, in a manner that helps readers recall and make use of the answer in the future. This is my new approach…


Puzzle me this: Can you divide 100 into smaller pieces? Of course you can! You just divvy it up. After all, it’s just a number.

  • Let’s say you divide 100 by 10: You get 10 pieces of 10 each.
  • Now, starting with the same 100, say that you divide it by on hundred. This gives one hundred pieces of ‘1’ each.

Until now, we have been talking about a number—not a real thing. Next, lets say that you start with $100 (a single bill with Ben Franklin on the front). You are in a casino, standing next to a bill/coin change machine. No counterfeit bills; no funny stuff.

Can you divide it into smaller bills? Sure! The change machine gives you one hundred crisp notes with George Washington. on the front.

Now, about your question: You are already down to pieces of just 1 unit each (i.e. one US dollar). Is this the limit of granularity? Is there no way to divide the units any further?

Of course you can! You can exchange each dollar for 4 quarters, or 10 dimes or even 100 pennies. One cent is just another way of saying 0.01 dollars.

And don’t stop there. Just because the government doesn’t bother with coins of a smaller denomination, a processor that deals in micro-payment or a seller that holds credits for small, cumulative purchases (i.e. web visitor clicks) could easily track your credits based on much smaller units—say one millicent, or 1/1000 of a penny.

Example: Suppose that a natural gas pipeline crosses the territory of an indigenous population in the interior of a country. The government enters into an agreement that pays the tribal authorities 1/30 cent for each 500 BTU of gas energy equivalent that passes through the pipeline. Micro payments, contracts and quotations are of this kind are crafted frequently.

Bitcoin is even more flexible than a dollar, because it is a virtual ledger that is stored across many bookkeepers. The ability to deal with small units is simply math. The protocol was designed to support 8 decimal places, but this can be extended to even smaller units.

In fact, the total number of Bitcoin that can ever exist (21 million BTC) could have just as easily been called 1 BTC (or 10 trillion BTC). It really doesn’t matter. That decision was arbitrary. To make things convenient for buyers and sellers, we will all eventually refer to the units that put our everyday purchases in the range of 1-to-100.

Pieces of Eight: Divisibility by design

For example, on the USA east coast, a wrapped head of fresh lettuce costs 0.000166 BTC.* That’s an awfully small number to remember or to work with.

But wait! Bitcoin already has a unit name for (1) one-hundred-millionth of a bitcoin. We call this a “satoshi”. Each satoshi is equal to 0.00000001 BTC.

So, that same head of lettuce costs 16,583 Satoshis. But this is also a difficult number to work with. It sounds more like the amount of money you spend on a car and not a small consumable.

So, if Bitcoin were in wide use today at the grocer and other retailers, we would probably be quoting and comparing units of 1/10,000 BTC. Let’s call each unit 1 DC, for “deci-milli”.

At today’s exchange rate, a head of lettuce costs 17 DC and a basic Toyota Camry without the expensive options will set you back 16,700 DC.*

Will you get used to it? Sure! It’s no different than moving to France. Your intuitive feel for the cost of things will become second nature when vendors begin quoting goods and services in units of bitcoin. Soon, even advertising and catalogs will display prices this way.

When this happens, all sorts of good things follow. For example, the volatility that we perceive today (because we are comparing Bitcoin to the US dollar) will disappear. Prices in BTC (or DC) will seem quite stable, even though the US dollar will seem to have unpredictable spikes and dips.


* Assumptions / Exchange Rate

  • On the USA east coast, a head of lettuce is $1.99. (New York is far from California and Mexico where lettuce is less expensive)
  • At the time of this post, 1 BTC = about $12,000 USD
  • A base model Toyota Camry without tax or extra features sells for about $20,000

Related:


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or blockchain consulting.

Why is it impossible to create more units of Bitcoin?

This article was originally an answer to a member of Quora, a Q&A site in which I am a cryptocurrency columnist. The reader is a “Bitcoin beginner”. If you understand the nature and purpose of a blockchain, the political leanings of Satoshi or the economics of a capped cryptocurrency, then this reviews things that you already know. But sometimes, a recap can be fun. It helps ensure that we are all on the same page…

In a previous post, we have already addressed a fundamental question:

It has nothing to do with how many individuals can own bitcoin or its useful applications. It simply means that—if widely adopted as a payment instrument or as cash itself—the number of total units is capped at 21 million. But each unit can subdivided into very tiny pieces, and we can even give the tiny pieces a new name (like femto-btc or Satoshis). It is only the originally named unit (the BTC) that is capped.

But, this article addresses a more primitive question. (Actually, it is a naïve question, but this adjective has a negative connotation, which is not intended). I interpret the question to be: What prevents me from creating, earning or being awarded an amount that brings the total circulation above 21 million BTC?


The question is a bit like asking Why there are only two solutions to a quadratic equation? — Or (a metaphor): Why can’t you own a new Picasso painting?

In the case of Picasso, it’s because we know the ownership and location of the 1,885 paintings created during his lifetime. The Old Guitarist (shown at bottom) is at the Art Institute of Chicago. Unless there has been a serious error in record keeping, there cannot be any more paintings, because he is no longer around to produce new art.

You cannot create more bitcoin than the 21 million scheduled for release because that’s all the math yields. It is the capped quantity that Satoshi wanted in circulation—because he/she sought to create a deflationary token that could never be gamed by politicians or anyone else.

Consider the alternative. The Zimbabwe dollar had no cap. When the government needed more cash, they simply printed more. (This is exactly what the US does today). Eventually, they had 4 recalls and “official” devaluations. But, of course, the value of a Zimbabwe dollar (just like a US dollar, bitcoin or a Picasso painting) is not established by edict. It floats with supply and demand.

Eventually, 100 trillion Zimbabwe dollars was worth US 16¢. Then, it collapsed completely. You can still find a few 100 trillion dollar notes on Ebay. Ironically, they cost far more than 16¢, because western collectors are fascinated by them. Just as with a Picasso painting, all value boils down to supply and demand.

Of course, no citizen of means used the local currency even before it collapsed. They simply couldn’t trust their treasury. Today, Zimbabwe uses dollars, rands (SA), British pound and euros.

What about the US dollar? Only the most arrogant citizens believe that we control such a vast consumer market (and that we are such a huge debtor) that the world must continue to value or paper. But is this realistic? Is it sustainable? Does U.S. debt ever have to be repaid with real sweat and real products sought by creditor nations? Of course it does. The alternatives are unthinkable: We would go the way of Zimbabwe, the Roman empire—or worse. Think of the Wiemar Republic between world wars.

The US dollar has no cap. A trillion or so new dollars are printed ever year, in a series of emergency measures that transient politicians call “raising the debt ceiling”, or an “emergency requisition”, or humanitarian, infrastructure, disaster relief, military necessity, debt repayment—or whatever. This leaves us 20 trillion in debt and with no path to recovery. Our own president openly asked why we can’t just print even more money to square up with our creditors.

With Bitcoin, we will never face that problem. Will adopting Bitcoin as legal tender interfere with a government’s ability to tax, spend or enforce tax collection? Not at all! But one day, it will decouple governments from control of their money supply. And that will be a marvelous thing—for both individuals, organizations and governments. It will force nations to balance their books—just like every household, business, NGO and municipality.

When this happens, governments can still raise money (from taxes) and they can even borrow. But just as with an individual or corporation, they will need to find:

  • Creditors (or shareholders) who truly believe in the ability to repay
  • This means they are creditors that believe in a nations institutions & ethics
  • And this leads to a conclusion: What better way to move our institutions and ethics in the right direction than through the accountability owned to our creditors.

Bitcoin is the embodiment of radical technology, but it is not a radical concept. It is the simple and functional embodiment of free-market economics. It addresses a market need that Aristotle fervently researched 2050 years ago, but failed to resolve. Gradual adoption is analogous to denationalization of telephony, airlines and package delivery services. Imagine the positive fallout when this occurs! Hopefully, we will around to witness a society in which governments are decoupled from monetary policy & control!

Related:


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or blockchain consulting.

Update: Building (and placing!) a Bitcoin ATM

A new section about Bitcoin ATM business models
has been added. Jump to “UPDATE – July 2019

The good news is that building a Bitcoin ATM is easy and less expensive than you might expect. But, offering or operating them engulfs the assembler in a regulatory minefield! It might just be worth sticking to selling bitcoin on PayPal (visit this website for more information on that). You might also wish to rethink your business model —especially user-demand scenarios. See our 2019 update at the bottom of this article.

A photo of various Bitcoin ATMs appears at the bottom of this article. My employer, Cryptocurrency Standards Association, shared start-up space at a New York incubator with the maker of a small, wall mounted ATM, like the models shown at top left.

What is Inside a Cryptocurrency ATM?

You could cobble together a Bitcoin ATM with just a cheap Android tablet, a camera, an internet connection, and [optional]: a secure cash drawer with a mechanism to count and dispense currency).* A receipt printer that can also generate a QR code is a nice touch, but you don’t really need one. You can use your screen for the coin transfer and email for a receipt.

Of course your programming and user interface makes all the difference in the world. And your ATM must interface with an exchange—yours or a 3rd party exchange.

If your plan is to sell Bitcoin and not exchange it for cash, then you don’t need a currency dispensing component at all. You only need a credit card swipe-reader and an RFI tap reader. Some models are smaller than a cookie and sell for under $30. They can be attractively embedded into your machine. In fact, some bank card processors offer them without cost.

I Have Built a Prototype. Now What?

Desktop ATM. No cash dispensed

Once you have a working prototype, you will need to test it with focus groups (alpha test) and at prospective public sites (beta test). You must also harden the production model against tamper and theft and find paying businesses or property owners, so that you can achieve economies of scale. (A reasonable business model requires that you produce dozens of devices each month).

Parts Cost: Bill of Materials

At scale, you can achieve a unit production cost of less than $200. But that’s for a desktop unit that does not accept or dispense cash. A high-quality and attractive machine that accepts cash and is free standing or ready for outdoor installation into a building exterior might cost you $650. You could sell these for $2,500 plus recurring fees to the property owner, depending on venue, or you might simply lease them, just as Xerox did in the early days of office copiers. (In a hotly competitive market, such as Las Vegas, you may need to pay a portion of your profits to the site, rather than profiting from ‘renting’ the ATM).

Regulations: A Threat to Your Business

But wait! Before you run off and create an ATM venture of your own, with visions of a 350% profit margin, all is not as easy as it seems!…

Cryptocurrency ATMs intersect with a minefield of regulatory licensing and compliance standards. In many regions, they are not even legal for placement in a public area.

In most countries (including all of USA), you must be a registered Money Transmitter. You will need separate state licensing and—since you are moving cash in or out of the banking system—you must be partnered with a federally chartered bank. You will also need to post a hefty insurance bond—perhaps even for each machine and each municipality in which it is placed! These laws convey liability to both your client (a property owner) and to you. Many courts will hold the manufacturer of financial or medical products accountable for ensuring that their customers are licensed and compliant with regulations. That is, you may not be able to legally sell your ATM to organizations that have not demonstrated that they qualify to operate one.

Why is There a Camera in my ATM?

In all cases, you must capture photographs of your user and their state-issued ID, because you are required to know your customer and adhere to a slew of anti-money laundering practices. For example, with transactions larger than $2,000 (from anyone who is not known to you and a regular client), you must generate a Suspicious Activity Report. For transactions larger than $10,000, you must comply with RICO (Racketeer Influenced and Corrupt Organizations Act). This requires a camera, interview, and reporting process. You will be generating forms with data supplied by your user and possibly even a real-time verification of the facts they provide.

If you wonder why you needn’t do these things this when buying or selling your own cryptocurrency, it is because: (a) You are trading your own assets and are not the custodian of customer accounts; and (b) You are a consumer. It is likely that the exchange is required to do all of these things.

With Regulations, Can Bitcoin ATMs Generate Profit?

For the reasons described above, the operational cost of deploying and operating an ATM network (or your equipment for sale or rent) is significantly higher than the up front hardware cost. When you add the need to protect your venture from legal claims arising from process glitches or users that claim they lost cash or Bitcoin, you may arrive at an operational cost that makes your business model unworkable.

Of course, Bitcoin ATMs are profitable in some cases. I have consulted with a few start ups that operate them successfully in Las Vegas casinos, a few airports and race tracks, and at large outdoor fairs. But, for everyday use, the heyday of ATMs is most likely 5 or 10 years off. Before this happens, we need a more uniform and functional regulatory & insurance framework, and a higher volume of users per ATM.

Check out various Bitcoin ATM models below. Few manufacturers turn a profit. In the end, it boils down to location (high volume sites with the right people) and location (legal jurisdiction).


* One ATM startup found inexpensive hardware for dispensing currency by recycling mechanisms from bill-change machines used in game arcades or in hotels next to vending machines. These machines are being discarded, because newer vending machines accept credit cards and smart phone payment. But again, if you only plan to accept a credit or debit instrument for Bitcoin, then you don’t need a cash counter or dispenser.

_____________

UPDATE – July 2019: ATM Business Model Requires Urgency

The economics of Bitcoin ATMs is thoroughly uncompelling, unless you own or administer a public area with high foot traffic. Even with lots of traffic, the business model has a problem…

Bitcoin is easily acquired and exchanged online—both legally and illegally. Often, I urgently need to find a bank ATM, especially when travelling. But, despite being an avid proponent and adopter of cryptocurrency, I can’t imagine needing a crypto ATM. Needing virtual exchange is rarely urgent, and there are better alternatives than standing in front of a machine. After all, we each have a better machine in our pockets.

Online trading is easier and safer than via ATM. Even user anonymity is better online than standing in a public place and using a kiosk equipped with a camera.

Therefore, the business model of placing equipment requires scenarios in which the needs of prospective clients have urgency. Urgency adds significant value to local service. But again, there is a problem…

The problem with using urgency to build a local delivery model for ATMs, is that Bitcoin is a virtual product. Even a seller or exchange in China can deliver an online money exchange instantly.

Consider this reverse analogy…

Suppose that you are responsible for setting up a video projector in a hotel ball-room. The conference is already in progress and hundreds of people are looking toward a blank movie screen. You suddenly discover that your video cable is defective and wireless options will not work . You need an HDMI cable and a thunderbolt adapter immediately. It must be at least 18 feet long and be a recent model to support the audio channels and resolution of your presentation.

QUICK—Find me an exact match!

The local Best Buy store has the cable in stock. It’s $89.99 and the store can have it at the front desk in the next 10 minutes. Your frugal partner finds the same cable online for $29.99 (2-day delivery) or $9.50 shipped from China (about 2 weeks).

Which do you choose? Is it just a cable that you need? No! The value that you require is a compatible cable in your hands within minutes — preferably from a local and experienced vendor, in case there is an installation or application problem.

In almost any scenario—even catering to impulse buyers—a Bitcoin ATM can’t match the value of someone delivering a compatible cable instantly. If it is a commodity that you are selling (Bitcoin is a commodity), then a profitable business model requires that you sell speed, convenience or privacy. Cryptocurrency ATMs lose on all three fronts.

That last paragraph above is my freebie to the next ATM vendor who seeks my consulting services. Test your model, before seeking help in penetrating a market that is tough to define and defend.


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences around the world. Book a presentation or consulting engagement.

 

Whose face appears most on money?

Today, I was asked this question at Quora, a Q&A site that is popular among both experts and lay enthusiasts. It’s a great question for armchair economists. But allow me to suggest a slight rephrasing: Whose face is most recognized on a national currency?…

You might guess Abraham Lincoln, Stalin, Gandhi or Mao. After all, the countries in which these leaders reigned were either very populous (lots of people using currency) or they had massive and relatively stable economies—and so the money extended far beyond the country (e.g. the US dollar).

What about Queen Elizabeth? That’s what other experts suggested. In addition to being the queen of England, she is head of state or ceremonial figurehead to a dozen other nations.

But most recognizable? I doubt it!

Click to enlarge

The population of Zamunda is just under 260,000, and most citizens prefer to use the US dollar or packs of Marlboro cigarettes as barter. But, during Prince Akeem’s visit to Queens New York to find a wife, an image of currency with his engraved portrait appeared on thousands of movie screens across the world. As a result, the 100 pound note (value: ~US $36) became a popular collectible in most countries, according to Ebay. This statistic is still verified by Sotheby auctions and by Amazon sales ranking.

Interesting facts about Prince Akeem and the Trans-Zamundan pound…

▪ The Zamundan pound was introduced in 1956, when the kingdom declared independence from the British Kingdom.

▪ The pound has been recalled and devalued 6 times due to rampant inflation (two more than Zimbabwe, which printed 500 Trillion Dollar notes after its 4th and last devaluation).

▪ The original pound has 1 billionth the value of the newest pound. Since most notes were turned in during recalls, original notes have a collector’s value today of $4 US. In western nations, they are among the top 5 items offered on Ebay.

▪ Prince Akeem also appears on two coins, with face value 1000 £ (gold) and 250 £ (silver). These coins are never used in commerce, because the precious metal has a far higher value than the face value.

▪ The coins are the most trusted and authenticated coinage of gold, silver and–recently–platinum). By 2015, they became even more trusted, traded and used as reserve currency than the Krugerrand (South Africa), the Eagle (USA) and Englehard bullion (bars of precious metal).

▪ Prince Akeem is 58 years old (as of 2019). His birthday, April 3, 1961 is a national holiday in Zamunda and 6 island nations that fall under the Trans-Zamunda treaties.

▪ Prince Akeem’s parents are still alive and healthy: King Jaffe Joffer and Queen Aeoleon. King Joffer was born January 17, 1931. Today, he is 88 years old.

▪ In recent years, the Trans-Zamundan pound has become stable, trusted and has even increased in value. This is attributed to the reign of King Joffer. He is widely considered an astute economist and ethical leader.

▪ The prince’s best friend and sparring partner, Semi, had his own late night television show in the United States from 1989 until mid 1994.

▪ The photo at bottom-left is a 100-pound note that I brought back from Zamunda during a visit to my daughter. She is an exchange student studying the preservation and of rehabilitation of giraffes in the wild.

Bitcoin On a Tear; Ellery’s Updates

June 25, 2019 — Latest Bitcoin Updates

In May and June 2019, Bitcoin’s dollar value rebounded handsomely. In just 3 months, it rose from $3850 to $11,800/BTC. «— and above $13,500 just after publication

Pundits point to Facebook’s release of a whitepaper and framework for Libra, a proprietary coin. They speculate that the Libra announcement legitimizes crypto. It’s possible, but Libra is a very different animal. It’s neither decentralized nor permissionless. In fact, it is not a blockchain coin or even a cryptocurrency).

But, it is folly to attribute this recovery to particular events. Few fundamentals can be identified. This time, there is no ETF or government action that points to fresh investor interest. It could even be increased organic adoption. There are just too many moving parts to gauge short term movement.

The Bitcoin and crypto posts linked below are shorter than articles here at Wild Duck, because they are answers to reader questions. But, this also means that they are simple, clear and digestible…

Conference speakers: Get paid–or pay up!

This week I received an offer to speak at a big, blockchain expo in Switzerland. That’s what I do in a mid-life career transition—or at least, it’s what I aspire to do. Last year, I presented at conferences, workshops, corporate retreats and trade shows on four continents. It’s not yet a full time career. Often, I cannot find paid opportunities to present—and so I teach, write, consult or refine my presentation to keep it relevant.

I hate marketing my presentation, but I’ve done a pretty good job of creating an industry reputation. And so, most of these presentation gigs begin with an offer from the host or producer. But like most presentation offers, this one came with strings attached. (More accurately, a ball, chain and an anchor ware attached!). Below, I have pasted the original invitation that I received—and the conversation that is still in process today.

Surprise! — “Offers” to speak at conferences and expos are not offers at all. Sure, the show needs talented presenters. But their outreach is just a sales pitch. Rather than paying for talent, the owner or producer wants their talent to pay them.

And so, responding to such offers is a carefully crafted form of triage; it’s a bit like trying to revive a gunshot victim who has entered the emergency room without a heartbeat. My ability to earn money as a speaker is on life support, even before receiving an “offer”. Why is this?! Let’s dig in…


Do Conferences Pay for Speakers?

There are two types of speakers: Headliners and techies. But, sometimes the headliner is one of the techies. I prefer to classify speakers as Celebrity or Expert.

Celebrity speakers are bought to create buzz. They deliver the keynote address and they get big fees. But many conferences have no big celebrity. They are typically found at prominent trade shows or events that cater to a television audience. Think of Billy Crystal or Whoopi Goldberg at the Academy Awards – or Mikhail Gorbachev at a corporate or non-profit.

Celebrity speakers get big bucks. Hillary Clinton was never president, yet she pulls in $400,000 to appear at an industry event.

But, what about speakers who bring critical content? These individuals are the meat-and-potatoes of any conference. Along with customer prospects, this is what visitors pay for. If you compare a trade conference to a restaurant, expert speakers are both the chefs and the food itself. They prepare, refine, package and deliver a consumable. But, do they get paid for their work?

To understand the expert speaker, let’s go back to the celebrity speaker for just a moment. These well-compensated speakers are typically an athlete, entertainer, comedian or former politician. Often, their presentation is unrelated to the conference or show venue. Their presence is primarily to create buzz, entertain or ensure eyeballs. The hosts see value because the celebrity fills seats or increases TV audience. This brings in advertising dollars. Of course, having a former president or movie star launch your agriculture expo creates lasting memories which raises awareness of future events. Their value is clear.

But you are not an athlete, comedian or former president. If you are an astronomer, you are probably not Carl Sagan (he’s dead) or Neil deGrasse Tyson. You’re just a darn good expert with wit, charm and an ability to excite a tough audience and help them leave with new ideas.

If you have tried to market your charm and your live presentation, then you have probably come up against the ‘reverse-value’ gambit. It’s like getting punched in the face 3 times:

  1. Most conferences and shows do not pay their speakers
  2. Often, they do not cover the cost of travel or a hotel. But, it gets worse…
  3. They want each speaker to pay big money to appear on stage. I am routinely asked to pay $5000 or $10,000 for the privilege of exposure!

But wait! Aren’t industry experts and pundits the main entrée? After all, we develop and deliver the information that attendees consume. Some–like me–make a living from live presentations. We travel abroad in the hope of making a career from our nuggets of wisdom. We are the raw material of conferences, clinics, expos and trade shows. Why no respect?!

Show producers want the prospective speaker to believe that the show offers visibility and a chance to hawk a related organization, product, service—or a special interest, such as a new standard, perspective or political agenda. At the very least, they want you to accept that it gooses up your career résumé.

Can expert speakers get paid for preparation, packaging and pizazz? Do credentials and communication skills bring credibility to an event? Are we not a critical component of the draw? It certainly isn’t easy. So let’s explore the reason for this difficulty—and the method that I use to overcome it.

Here’s a quick Q&A related to the difficulty in marketing an expert, live presentation as a fair consulting relationship:

Can a non-celebrity academic or industry expert get
paid for expertise, preparation and delivery?
Answer: It’s damn hard!
Do credentials & credibility help to draw an audience? Yes, absolutely!
Do producers recognize content value? Do any start negotiations by offering payment? Rarely. They argue that a stage or audience represents bigger value than your expertise
How can the speaker get a conference to value experience, preparation, travel and presentation? Substantiate & defend the expert value; Participate in promotion

Each time that you solicit a conference or respond to outreach, be prepared for the reverse value gambit. The host or producer positions their stage as a product. No compensation for you. They hope that each speaker will view himself as a client, rather as an asset that produces and delivers expert content.

Solution: Don’t be discouraged. It is not a job offer, just a starting point—just a slick sales pitch. Your goal is to move the value exchange from below the water line to top-of-hill. You can do this, because without you, they do not have a product to offer their real clients.

The value exchange must be flipped and justified. As an expert speaker, you must turn the equation around by marketing your exceptional value to the producer.

MIT Bitcoin Expo with Andreas Antonopoulos

The conference producer has not factored in all that you do. Point out that your value is a critical component to success. Enumerate the things you bring to the table:

  • Expert content
  • Engaging & entertaining delivery
  • Availability to participate in market media interviews and guerrilla marketing
  • Increased likelihood to capture additional sponsors
  • Availability to participate in VIP mixers

All of these things counter a reverse-value proposition. Prepare to argue all of these points eloquently, with the very first hint of reverse value. It won’t work every time, but eventually, you will find producers that value talent and know how to leverage your expert presentation, your reputation and the value of putting you in contact with journalists, TV anchors, sponsors and VIP attendees.

So what about the negotiation that started in the Linked-In messages shown below? Will I present in Switzerland in March? I don’t yet know. That dialog has just begun. Sometimes, I am successful at reversing the value proposition and sometimes I am not. Last year, I was fairly compensated for presentations in South Africa, India, Canada and Dubai, where I gave the keynote speech. But for a larger fraction of opportunities, either my fee proposal is rejected, or the offer fails to meet my minimum requirement.

For now, I don’t get frustrated about accepting a low fraction of speaking gigs. Interest in Bitcoin, altcoins and especially the blockchain is growing rapidly. Although I can only flip a fraction of show producers, there are four or five big shows in my field—somewhere in world—every week. For now, I am happy to land just a few.

Of course, one can organize and host their own show. My business partner Manny and I produced, publicized and hosted The Bitcoin Event in New York. We formed the Cryptocurrency Standards Association, partnered with a university network, recruited our own speakers, and promoted the affair with incentives and office space from the New York state.

That was fun, but I prefer to deliver content and excite an audience from the stage, rather than organize, produce and host a conference. At this stage of my career, I want the certainty of a presentation gig that comes with an airline ticket and a hotel reservation.


Host: [Seeks to have me talk at his conference. But there’s a catch!]

Hello Ellery, Finance World Expo will take place in Zug, Switzerland on 6-7 of March 2019.

Our expo strives to bring you, C-level executives, Founders, and Advisers from the leading companies in the industry, as well as promising and innovative start-ups.

A wide range of speaking opportunities and round panels enable our Sponsor’s to predict and shape the future of Finance. Being a part of our Expo offers a great chance to present your ideas to the wide community and get worldwide brand exposure. Awards are given to the best projects in the categories will enable the Winners to flash in the Finance Sector.

Finally, our beautiful location with facilities and high-level services ensure a perfect atmosphere for networking.

Can I send you some more information?
Use this code for a -20% ticket discount: FWxxxxx

regards, Łukasz Paszkiewicz
Co-Founder of Finance World Expo

_____________________________________

Me: [This is where I hint that the value exchange must be reveresed]

Hi Łukasz,

I am available during March. I would be honored if you consider me a prospective speaker. I charge a fee for speaking at economics conferences, and am qualified to be a keynote. I can bring cryptocurrency and blockchain expertise to your conference in a way that your audience and other speakers will fully understand and many will embrace

~Ellery Davies, bitcoinreferee.com 《 qualifications

_____________________________________

Host: [A horse trade begins. I must convince him that expertise has value. it is an asset—rather than a sales opportunity]

Ellery, Normally we charge for speaking.  Here are our packages for presenters: https://financeworldexpo.com/sponsorship/ We can offer you 25% discount. Additionally if you can introduce us some partners we can offer you free seminar or place in a panel.

Best regards, Łukasz, financeworldexpo.com
Next Step: Review your 
Sponsorship Opportunity  ←  Subtle! It means he wants money

_____________________________________

Me: [Get host to request a quote] …

Yes, Łukasz. I certainly understand that you normally charge your speakers. This is because your speakers seek value in promoting their product, company, ICO or consulting service.

On the other hand, I am more accurately your show talent. I will visit with local news and media before the show to help fill walk-in seats. I will give the audience something that excites them and makes them believe that the show was productive for both their employers and their personal careers. I will give a positive and long-lasting impression of Finance World Expo. In turn, it gives you something that you can take to the bank.

With other speakers (especially at a trade show, clinic or non-academic conference), visitors sometimes feel that they have paid money to be pitched. They can get a pitch at Amazon or Walmart — but at your expo, value comes from being enlightened. Value comes from getting up on their toes and passionately participating with the presenter.

I can do this. I can partner and create value, excitement and a strong impression that your expo exceeded expectations. My role at the event differs from other speakers. For example:

  • I am not selling anything. I will appear at your expo for the sole purpose of exciting and enlightening guests. That’s what I do.
  • I am a versatile speaker on blockchain, Bitcoin adoption, scaling, regulation, economics, banking and government.  I motivate audiences.
  • Bitcoin/Blockchain credentials  ←  Do you stack up? Experts must invite comparison!
  • I have hosted and presented Bitcoin conferences, including The New York Bitcoin Event
  • In the past year, I was keynote or headliner at conferences on 4 continents.
  • I am moderator at the world’s largest Bitcoin community: 50,000 members at LinkedIN
  • As columnist & editor, I fill seats with press coverage: local TV interviews before your event

That’s my pitch. If you consider our exchange from this perspective, you may come to value your speaker as key content, a pull through tool, and a significant revenue opportunity. To add additional value, I will help you work with existing sponsors to cover my stipend. I can wear their shirt, hand out their bling, and talk to visitors about the value that they bring.

~Ellery

BTC plunge: Why I don’t worry

Join me for a quick review of the spikes & dips in the Bitcoin exchange rate. This time, it’s all about one very simple chart. [continue below graphic]…

The chart below shows a history of BTC price spikes, dips and recovery. Click to enlarge, then start at the top—and move down.

      • Consider the percent-pullback after each spike (red label)
      • Think about the stellar rebound after each drop (green label)

This is why I do not get too worked up over the eaxhc plunge in the BTC exchange rate. There are no fundamental flaws in Bitcoin math or mechanisms. The market need for the benefits conveyed by Bitcoin is terrific, and the most popular arguments against Bitcoin are severely flawed. Skeptics and Critics typically say something like this:

“Even if blockchain currencies are beneficial and inevitable, Bitcoin can be displaced by another, better cryptocurrency.”

—Or—

“A viable crypto may emerge—but it will be one that is backed by a tangible asset or issued/sanctioned by government.”

These arguments are false. They are made by individuals who don’t yet fully appreciate the mechanism and its relationship with trust, money, government and free markets.

What Bitcoin currently lacks is education, familiarity, standards, simple commercial tools (built upon clear analogies), definitive best practices, a widespread understanding of multisig & security, and limited recourse for certain commercial & retail transactions. But Bitcoin is still an infant, just like the early TV or the early telephone. All of these are under development—without a hint of significant obstacles. Even the messy process of democracy among the various stakeholders is heading toward harmony (miners, developers, vendors, exchanges and consumers).

Of course, I am bullish on Bitcoin, and this may color my analysis. But, I try hard to keep an open mind. There have been moments in its history where I have questioned the market need or the potential for a setback in politics, legislation, or the mechanism itself. Those doubts are in the past. Bitcoin has demonstrated the elegance and value of the blockchain—and the ability to evolve beyond the blockchain with SegWit and Lightning Network. It has achieved a fluid, robust and growing two-sided market.

No one holding assets likes to see a big price pullback. It’s natural to look at the market as if we each got in at the peak—and then tally the “losses”. But I, for one, am not glancing toward the exit. I see the future and I sleep well at night. I am comfortable participating in the Bitcoin era.

Venezuelan Migrants: Columbia opens homes & borders

With all of the Trump talk on television, American media networks have dropped the ball on newsworthy international events. Here is a humanitarian crisis that we haven’t heard much about lately.

In the 1980s and early 90s, many Colombians fled to Venezuela. At the time, the Venezuelan economy was booming. But now, the country is a poverty stricken dog, due to the colossal mismanagement of strong man, Nicolás Maduro.

Now, Venezuelans are fleeing. Inflation is hitting One Million Percent and the common laborer cannot feed his family. Artists make tote bags out of worthless currency. A hot dog from a street vendor cost the typical worker a month’s wages.

The US and Brazil have taken in 75,000 Venezuelans each. Peru has taken in far more than most countries with 414,000 immigrants. Yet, Columbia has taken in one million so far—and they are granting border crossers legal status. Many Columbian citizens are opening their homes, taking in whole families. Surprisingly, even the overcrowded border town (with massive migration at the port), enjoys booming economic activity.

Sure, there are some violent crimes blamed on new immigrants and one local police chief is trying to stir up Trump-style Xenophobia. But citizens and the national government are not buying it. 200 years ago, Columbia, Venezuela and Ecuador were one country (Gran Columbia, with Bogota as capital). Cross-border migration has been high throughout the past century due to drug wars, the conflict with FARC and various political & economic upheavals. These peoples have shared ancestry. Each country traces its roots to a similar mix of European, African & Native American ties.

Check out this short video. It is a sympathetic look at the current crises, a supportive callout to the people of Columbia and the source of my commentary, above.

Will we all be using a Blockchain currency some day?

At Quora.com, I respond to quetions on Bitcoin and Cryptocurrency. Today, a reader asked “Will we all be using a blockchain-based currency some day?”.

This is an easy question to answer, but not for usual Geeky reasons: A capped supply, redundant bookkeeping, privacy & liberty or blind passion. No, these are all tangential reasons. But first, let’s be clear about the answer:

Yes, Virginia. We are all destined  to move,
eventually, to a blockchain based currency.

I am confident of this because of one enormous benefit that trumps all other considerations. Also, because of flawed arguments behind perceived negatives.

Let’s start by considering the list of reasons why many analysists and individuals expect cryptocurrencies to fail widespread adoption—especially as a currency:

  • It lacks ‘intrinsic value’, government backing or a promise of redemption
  • It facilitates crime
  • Privacy options interfere with legitimate tax enforcement
  • It is susceptible to hacks, scams, forgery, etc
  • It is inherently deflationary, and thus retards economic growth
  • It subverts a government’s right to control its own monetary policy

All statements are untrue, except the last two. My thoughts on each point are explained and justified in other articles—but let’s look at the two points that are partially true:

  1. Indeed, a capped blockchain-based cryptocurrency is deflationary, but this will not necessarily inhibit economic growth. In fact, it will greatly spur commerce, jobs and international trade.
  2. Yes, widespread adoption of a permissionless, open source, p2p cryptocurrency (not just as a payment instrument, but as the money itself), will decouple a government from its money supply, interest rates, and more. This independence combined with immutable trust is a very good thing for everyone, especially for government.

How so?

Legislators, treasuries and reserve boards will lose their ability to manipulate the supply and demand of money. That’s because the biggest spender of all no longer gets to define “What is money?” Each dollar spent must be collected from taxpayers or borrowed from creditors who honestly believe in a nation’s ability to repay. Ultimately, Money out = Money in. This is what balancing the books requires in every organization.

This last point leads to certainty that we will all be using a blockchain based cryptocurrency—and not one that is issued by a government, nor one that is backed by gold, the dollar, a redemption promise—or some other thing of value.

Just like the dollar today, the value arises from trust and a robust two sided network. So, which of these things would you rather trust?

a) The honesty, fiscal restraint and transparency of transient politicians beholden to their political base?

b) The honesty, fiscal restraint and transparency of an asset which is capped, immutable, auditable? —One that has a robust two sided network and is not gated by any authority or sanctioned banking infrastructure

Today, with the exception of the United States Congress, everyone must ultimately balance their books: Individuals, households, corporations, NGOs, churches, charities, clubs, cities, states and even other national governments. Put another way: Only the United States can create money without a requirement to honor, repay or demonstrate equivalency. This remarkable exclusion was made possible by the post World War II evolution of the dollar as a “reserve currency” and the fractional reserve method by which US banks create money out of thin air and then lend it with the illusion of government insurance as backing. (A risky pyramid scheme that is gradually unravelling).

But, imagine a nation that agrees upon a form of cash that arises from a “perfect” and fair natural resource. Imagine a future where no one—not even governments—can game the system. Imagine a future where creditors know that a debtor cannot print paper currency to settle debts. Imagine what can be accomplished if citizens truly respect their government because the government lives by the same accounting rules as everyone else.

A fair cryptocurrency (based on Satoshi’s open-source code and free for anyone to use, mine, or trade) is gold for the modern age. But unlike gold, the total quantity is clearly understood. It is portable, electronically transmittable (instant settlement without a clearing house), immutable—and a precious substance needn’t be assayed in the field.

And the biggest benefit arises as a byproduct directly of these properties: Cryptocurrency (and Bitcoin in particular) is remarkably good for government. All it takes for eventual success is an understanding of the mechanism, incremental improvement to safety and security practices and widespread trust that others will continue to value/covet your coins in the future. These are all achievable waypoints along the way to universal adoption.


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He is Top Writer at Quora and sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or consulting.

You don’t understand Bitcoin because you think money is real

Maria Bustillos is founder of the blockchain supported publication, Popula. I stole the title of this post from her essay at Medium.com (linked below).* I hope that Maria considers it a tribute rather than title-plagiarism. Her article is blocked by a pay wall, so allow me to explain a concept that confounds even a Nobel Prize winning economist. My take on the issue is somewhat different than Ms. Bustillos.

The difficulty understanding or appreciating Bitcoin boils down to a misconception that the dollar is backed by something more tangible, such as gold, guns or the promise of redemption. Not only is this an illusion, but Bitcoin is backed by something far more tangible, intrinsic and durable.

The illusion that “real” value emanates from government coupled with a robust consumer economy has been woven into our DNA for millennia. But, the value we attribute to a Dollar, Euro, or Yuan is a result of conditioning rather than any intrinsic value. That same conditioning has led us to believe that there is something sane and inherent in a nation that controls its money supply and its monetary policy.

Most public works projects—power generation, space ships, or the telephone network—were controlled by government in the past. If not, they were regulated as a licensed monopoly. This creates a choke point, a lack of competition, and a gaping opportunity for inefficiency, mismanagement or graft. It defies a free market economy and it concentrates power in the hands of politicians. But, at one time, it seemed necessary.

You might assume that government controlled these industries because they relate to areas of critical infrastructure and public welfare. That’s part of it, but it’s not the real reason. In each sector, a distributed or free market solution was prevented due to technology limitations or issues of scaling and geography.

Government issued money exists because in the past, we had no mechanism to arrive at a consensus on the value of something that is portable, fungible, secure, anti-forgeable and easily transmitted. Not even Gold fits the bill (pun intended). Prior to 2009, the only thing that met the criteria for money in a modern society was government issued fiat. At least someone, somewhere said that this is money and that this is what we must use to pay our taxes.

Today, there is no more reason for a government to control its money supply than there is for it to control communication networks, space travel or package delivery services. Today, a free and competitive marketplace benefits all of these industries and even government itself. And here’s the kicker: No harm will come to a government that uses a completely trusted, transparent and decentralized currency, rather than firing up a printing press whenever a group of transient politicians spends beyond their means.

The economic order facilitated by the blockchain is not as radical as it seems. Aristotle lamented the lack of an accounting tool that we can now address via the clever combination of encryption and a communications network that is both instant and ubiquitous.

I am not smarter than the average bear, nor am I clairvoyant. Once in a while, I recognize a truth before the masses—and before its time. It’s time to clearly and succinctly illuminate business, banks, consumers, creditors and government:

  1. The value we attribute to the dollar is an illusion
    ..
  2. Bitcoin is not just fair and cost effective. It is tangible and durable. It is good for consumers and good for governments.

Bitcoin ushers in an era of accountability and more fairness. It does not facilitate crime, nor interfere with a government’s ability to tax, spend or enforce tax collection.

Bitcoin is a cryptocurrency with a firmly capped supply. Will it lead to deflation? Could governments lose control over their own monetary policy? Yes to both questions…

But, these are each good things. Capping the money supply and decoupling a nation from monetary policy not only eliminates inflation—it increases access to capital, retires debt more quickly, reassures creditors, imposes transparency and honesty—And it accelerates economic growth, rather than retarding commerce.

Dispelling three millennia of conditioning can be confusing and unsettling. I hate understanding something before my peers. Let’s please get ahead of the curve on this one. I want to enjoy the benefits of using real money in my lifetime.


Related Reading:

* I wrote the first article more than 7 years ago. It is a simple explanation of a geeky, new economic mechanism. Bitcoin had not yet entered mainstream media nor gained attention of Wall Street investors. But consider the similarity to Maria’s tutorial in the 2nd article. Perhaps Maria and I think alike!

Getting into Bitcoin? 2 subtle points…

Andreas Antonopoulos releases a new talk on his YouTube feed several times each week. If you are still a Bitcoin doubter, watch his latest video with an open mind. It highlights two subtleties of utility and adoption that can overcome the gap between early adopters and doubters.

Early Adopter: I do not refer to an investor, but one who embraces Bitcoin as both a payment instrument and a currency. Someone who realizes that is very likely to become a stateless currency some day.

Doubters: These are individuals who see Bitcoin as either risky, unnecessary, susceptible to hacking & scams, or fueled by libertarian anarchists. In general, they do not perceive a fundamental or compelling benefit to a stateless currency—or they believe that Bitcoin is not backed by something real, tangible or enforceable. They question a currency without some form of central authority, clear backing or point of redemption.

In particular, Antonopoulos helps his audience reconcile the relationship of a decentralized currency with a community or government that does not fully embrace the benefits or fears the downside (crime, tax dodging, deflation, loss of control over the monetary supply).

Below, I have added notes related to two key points below. These are the very same points that I focus on in my conference presentations. Andreas is very articulate and we are certainly on the same page about these subtle but critical issues:

1. Resist the urge to regulate or control
Timestamp 10:34

— Governments or trusted, established banks (e.g. Merrill Lynch) may try to persuade you that blockchain-backed currencies have potential, but that certain ‘safeties’ must be added to the to make them compliant and commercially viable. They will say that this is needed to encourage compliance & reporting—or to thwart criminal activity.

For example, the treasury, IRS or other fiscal bureaucracy might ask the community to respect a list of assets that are tainted by criminals and to seamlessly substitute new coins for the tainted coins. This seems like a small change. In fact, it seeks only to overlay a law-and-order framework on top of Bitcoin. But, don’t be misled by good intentions.

This is exactly what you don’t want to do! Fiddling with the legitimacy of outstanding wealth undermines the entire purpose and benefit of migrating to a decentralized, stateless currency. The architecture must remain open, permissionless, resistant to censorship, and resistant to manipulation by any authority, whether good or bad. There is already a mechanism for distributed consensus—one that does not vest any central authority with the power to annul a user’s wealth by edict.

Ironically, even the US treasury recognizes the critical importance of unit fungibility. It guarantees the exchangability of every issued dollar for any other—no matter what its history.

2. Don’t just save—Use it in your business
Timestamp 12:12

— How do I get started with Bitcoin (or some other cryptocurrency). Help me get started with an exchange so that I can buy my first crypto coin…

No, no, NO! Don’t start with an exchange account. Learn how to set up a wallet in your home or online. One that you control. Rather than hoard Bitcoin, accept and spend it. This is critical if we hope to see eventual adoption of a transformative economic mechanism in our lifetimes.

— Buying cryptocurrency should not be your first step into the game. Don’t think of crypto as an investment asset. Think of it as a currency that you accept and spend.

Bitcoin will not be relevant in your lifetime, until the fraction of trades fueled by purchase & sale, salaries, fees and loan payments dwarfs the number of transactions fueled by speculators, investors, HODL and even sector funds or ETFs. All of these trades retard the day that Bitcoin will be stable, fluid, fungible and useful. Currently that first set of transactions represents 98% of all activity. To spur adoption, we must change push the fraction of investor transactions and currency exchange below 30%. It’s a tall order, but it is gradually beginning to happen.


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He advises The Disruption Experience in Singapore, sits on the New Money Systems board of Lifeboat Foundation and is a top Bitcoin writer at Quora. Book a presentation or consulting engagement.

Ric Edelman: Bitcoin will become asset class

Kudos to WallStreet analyst and advisor, Ric Edelman. He drank the Kool-Aid, he understands a profound sea change, and he sees the ducks starting to line up.

Check out the clearly articulated interview, below, with Bob Pisani at the New York Stock Exchange and legendary Wall Street advisor, Ric Edelman, (Not my term…That’s what CNBC anchor, Melissa Lee, calls him). Read between the lines, especially the last words in the video, below.

Ric Edleman has just joined Bitwise as both investor and advisor. This lends credibility and gravitas to the organization that created the world’s first cryptocurrency index fund. Bitwise benefits from Edelman’s affiliation, because the US has been slow (some would say “cautious”) in recognizing the facts on the ground: Cryptocurrency is already an asset class.

Edelman fully embraces a strong future for Bitcoin—not just as a currency or payment instrument, but as a legal and recognized asset class; one that is at the starting line of a wide open racetrack. He explains that the SEC sets a high bar for offering a Bitcoin ETF, but that this will be  achieved. It will pave the way for large institutions, pension funds, etc to allocate a portion of money under management for blockchain products.

At timestamp 3:39, Melissa asks Edelman “Why wait for an ETF?” and “If you believe this strongly, why not advise clients to invest a portion of assets into Bitcoin right now?

Edelman’s response is stunning. He explains that he is frustrated, because this is what he wants to advise. But, his firm is bound by the Investment Act of 1940—and so, they cannot tell a client “Go to Coinbase” or “Invest in a private fund such as Bitwise—that I am such a big fan of. We don’t have that ability in our practice.” [i.e. until the SEC recognizes Bitcoin as an asset].

In my opinion (and in the opinion of Edleman), SEC recognition of Bitcoin as an asset can’t be far off…

  • It’s already happening in other countries. Reputable exchanges and index funds exist today.
  • Unlike a traveler’s check or Amazon gift card, it is inherently a store of value, whether or not you believe that its value is intrinsic;
  • The IRS already considers it an asset for tax purposes (What an odd schism in definition & treatment!)
  • It is legal to pay staff in Bitcoin and use it to settle debts, for any recipient that accepts it. For employees and consultants, it is a wage or stipend, just like FIAT. They can convert into cash immediately—or retain crypto it to pay their own bills)

It’s not difficult to read between the lines. Edleman makes a clear recommendation, although he can not yet advise this—certainly not on the record. His personal forecast for long term adoption and appreciation, especially of Bitcoin, matches my own analysis. His new affiliation with Bitwise (a pretty bold move) demonstrates certain commitment.

This ends my analysis of Edelman’s strong endorsement. But it raises another important question:

If large financial institutions are likely to offer Bitcoin products and services—and if credible analysts & advisors are chomping at the bit to recommend this new asset class—shouldn’t we invest in Bitcoin now?!

Ironically, I do not recommend hording or investing in cryptocurrency, even as a collectable. Why?! Because of the big “Investment Catch-22”. I don’t discourage investing in Bitcoin because I fear that its value will lessen. It is for a completely different reason. And so, my advice against investing is half-hearted.

Currently, Bitcoin and altcoins are widely misunderstood. Many people have these false impressions…

  • It is not backed by anything
  • It interferes with tax collection
  • Cryptocurrency facilitates crime
  • Governments will never allow it
  • They do not convey compelling benefits over government-issued currency
  • They water down the overall money supply
  • Their deflationary nature threatens economic growth
  • They are easier to lose and subject to scams & hacking
  • They do not facilitate refunds, rescission, recourse and customer claims
  • They interfere with a government’s ability to control its monetary supply

All of this is untrue, except the last item—and that one is a tremendous benefit.

Additionally, blockchain currencies fluctuate widely in real market purchasing power, many altcoins and all ICOs are scams, and acceptance is far from being ubiquitous. Clearly, widespread adoption requires stability, infrastructure, trust and ubiquity.

This cannot happen until two things occur:

  1. The fraction of transactions in normal business and retail commerce (purchases, salaries, debt payment and settlement) must significantly dwarf the fraction that is driven by investors, hoarders and speculators.
  2. A significant number of established brands, services or retailers must begin publishing prices in Bitcoin and honoring those prices throughout a defined sale period (e.g. until the next catalog is published or until the next production run).

Things are beginning to change, but for such a positive and transormative mechanism, that change is frustratingly gradual.

A series of falling dominos is already in process. But, the end game is retarded by those of us who invest in Bitcoin, because we are removing a limited resource from circulation and contributing to volatility. We do this, because we realize that—in the long run—Bitcoin can only go up in value. Yet, our investment at such an early stage (before consumer adoption) makes the infant sick.


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He advises The Disruption Experience in Singapore, sits on the New Money Systems board of Lifeboat Foundation and is a top Bitcoin writer at Quora. Book a presentation or consulting engagement/.

Disruption Experience Nails It

The Disruption Experience this Friday in Singapore is a blockchain event with a difference. With apologies to the Buick commercial, this is not your grandfather’s conference

I know a few things about blockchain conferences. I produced and hosted the first Bitcoin Event in New York. My organization develops cryptocurrency standards and practices. We help banks and governments create policy and services. And as public speaker for a standards organization, I have delivered keynote presentations at conferences and Expos in Dubai, Gujarat India, Montreal and Tampa, New York and Boston.

Many individuals don’t yet realize that both Bitcoin and the blockchain are as significant as the automobile, the transistor and the Internet. I was fortunate to grasp Bitcoin and the blockchain early in its history. It is never boring to help others understand the blockchain.

And so, I am an evangelist for both a radically improved monetary system and a transformative tool. During the past eight years, I have honed the skill of converting even the most profound skeptic. Give me 45 minutes in front of any audience—technical, skeptical or even without any prior knowledge—and I will win them over. It’s what I do.

An Atypical Conference Venue

As Bitcoin and altcoins begin the process of education, adoption and normalization, the big expos and conference events have begun to splinter and specialize. Today, most blockchain events market their venue to specific market sectors or interests:

For me, Smart Contracts are one of the most exciting and potentially explosive opportunities. As a groupie and cheerleader, I am not alone. Catering to the Smart Contract community is rapidly becoming a big business. Until this week, I thought it was the conference venue that yielded the biggest thrills. That is, until I learned about the Disruption Experience…

Few widely promoted, well-funded events address the 600 pound elephant in the room: What’s the real potential of blockchain trust, blockchain economy or blockchain AI? Take me beyond tokens and currency (please!). How can an international event help us to realize the potential of a radical new approach to accounting, trust and arbitration? Let’s stop arguing about Bitcoin, Ethereum or ICOs…

How can we unleash the gorilla—and grease—
a fundamental change that benefits mankind,
while providing leapfrog technologies for us?

—At least, that’s my spin on the potential of an unusually practical venue.

That question is slated to be answered on Friday at a big event in Singapore. And get this—It is modestly called a “Sneak Peak”. This is what I have been waiting for. The Disruption Experience premiers on September 28 at the V Hotel Lavender in Singapore. But don’t show up at the door. This event requires advance registration. (I do not offer a web link, because I hate being a conference huckster. If you plan to be in the area at the end of this week, then Google the event yourself).

What’s the big deal?

The Disruption Experience team is populated by blockchain developers, educators and trainers who take issue with existing events that focus on monetization. The purity of intention was overrun by greed. And so, they set out to form an event with a more altruistic purpose: Build technology, relationships, mechanisms and educational tools that better mankind. The focus at this event and the conferences that follow is to educate, expose and innovate. The focus is squarely on disruptive technology.

With their team of blockchain innovators focused on benefits and progress, I suspect that attendees will get what we have been searching for: Education, investment opportunities, an edge on new technologies and job opportunities.

Cusp of a Breakout Year

As an analogy, consider the race to understand Bitcoin and consider the engines & motors.

Bitcoin and the blockchain were introduced simultaneously in a 2009 whitepaper. It’s a bit like explaining the engine and the automobile together—for the very first time. One is a technology with a myriad of applications and the potential to drive innovation. The other is an app. Sure, it’s useful and important, but it’s just an app.

For 8 years, Bitcoin was a radical and contentious concept. Of course, there was the mystery of Satoshi and an effort to pinpoint his or her identity. And, a great debate raged about the legitimacy and value of decentralized, ethereal money. But, the interest was reflected primarily on the pages of Wired Magazine or at Geek-fests. Bitcoin was complex and costly to incorporate into everyday purchases and there were questions and gross misconceptions about hacking, regulation, taxes, criminal activity. The combined audience of adopters, academics, miners and geeks was limited.

That changed last year. With serious talk of exchange traded funds, a futures and derivatives market began to take shape. A critical operational bottleneck was addressed. Ultimately, 2017 was a breakout year for Bitcoin. You may not be using it today, but the smart money is betting that it will enhance your life tomorrow—at least behind the scenes.

Likewise, 2019 is likely to be the breakout year for blockchain applications, careers, products and—perhaps most importantly—public awareness, understanding and appreciation. Just as motors and engines are not limited to automobiles, the blockchain has far more potential than serving as an engine for decentralized cash. It is too important to be just a footnote to disruptive economics. It will disrupt everything. And we are the beneficiaries.

What is Interesting at The Disruption Experience?

The Friday event in Singapore covers many things. The presentations and tutorials that quicken my pulse relate to:

  • AI
  • Smart Contracts
  • Serious insight into blockchain mechanics, applications, adoption, scalability and politics
  • There’s even an exciting development in ICOs…

If you read my columns or follow my blog, then you know I am not keen on initial coin offerings (ICOs). That’s putting it mildly. They are almost all scams. But a rare exception is the Tempow ecosystem which encompasses three functional tokens. Stop by their exhibit and meet the officers of a sound economic mechanism that facilitates decentralized trading while overcoming the efficiency paradox.

What can I do at Disruption Experience?

The September 28 event is a preview for January’s Inaugural Event.

  • Listen and learn what Disruption is all about
  • Experience the first Virtual Reality Expo
  • Get to know the speakers and founders of Disruption
  • Hear about the Disruption Utility Token (DSRPT Token)
  • Meet the Disruption Team
  • See Disruption Expos

… and much, much more.

If you get to the big event, be sure to find the organizer and host, Coach Mark Davis. Tell him that I sent you. His passion and boundless enthusiasm for the blockchain and especially for transformative disruption is quite infectious.

Related reading:


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation and is a top Bitcoin writer at Quora. Book a presentation or consulting engagement. He is also an unpaid advisor to The Disruption Experience.

Uber & Lyft fight drivers over caps NYC

New York legislators are close to deciding an issue driven by Uber and Lyft drivers. They are demonstrating in the streets and demanding a cap on the number of authorized ride-share vehicles.

Mainstream media began covering this dust storm two weeks ago, but the pending decision is putting international attention on the issue of licensing a sector that was credited with eliminating nanny-state legislation. After all, licensing should be confined to the singular issues of transportation safety and not overall commerce.

A cap? What is a cap?! Does this mean that a person with a clean car, a good driving record and no criminal complaints will need a special license or medallion to participate in a ride sharing service? How ironic! Don’t glance in your rear-view mirror, because that is exactly what we used to grant taxi services until…Well, until sometime next year. It’s an old school, anti-free-market concept that we surmounted 10 years ago!

Legacy drivers claim that we need a cap of 80,000 entrepreneur-drivers, ostensibly for two reasons:

  1. They want economic protection. (Duhh!). Drivers who were early to the party are cruising the streets in cars that are empty 42% of the time. They are waiting for their next guest. This quite ironic, because these are the same drivers that disrupted the protections afforded to taxi companies.
  2. They claim that capping ride-share cars will reduce congestion on crowded Manhattan streets, along with pollution and commuter frustration.

But the ride share companies are not backing their drivers. They are lobbying anyone who will listen that we must avoid legislative restrictions.

A Wild Duck Opinion…

Uber and Lyft are absolutely right in championing the fight against a legislative cap and thereby removing free-market economics from the transportation sector. These drivers are owner-operators. There is already effective vetting of safety and criminal records. They are not employees of a municpal service. They are entrepreneurs exploiting a smart-phone app to sell their own services. It is no different than programmer who uses an app to write and distribute his own software.

Putting legislative caps on the number of participants in a new-era, free enterprise service, or limiting hours of operation is antithetical to a democratic and empowered free market constituency. It smacks of a Communist mind set. The armchair economics of protestors (drivers who feel threatened by newer drivers) and even well-researched data of credentialed economists) plays no role in an organic, facts-on-the ground growth industry.

I am not suggesting that an unlicensed or criminal driver should get away without vetting. But attempting to impose restrictions that are unrelated to health, safety or the environment will have unintended consequences, such as:

  • Underground apps that do the same thing with even less restrictions
  • Pushing innovation and profits off shore — or —
  • Ceding the market to foreign countries

Licensing has always been intended to serve the public good and not thwart innovation, growth and individual entrepreneurs. Unfortunately, it is often used to protect early entrepreneurs and exclude newcomers. That’s not how it should work—certainly not in a free country.

If you can’t take the heat of fair market competition, then innovate.

 

How Will Bitcoin Work When Mining Rewards Run Out?

Let us frame the question, by reviewing what miners really do…

Miners play a critical role in the Bitcoin network. Their activity (searching for a nonce) results in assembling an immutable string of blocks that corroborate and log the universal transaction record. They are the distributed bookkeepers that replace old-school banks in recording and vouching for everyone’s purchase or savings.

From the perspective of a miner, there is no obvious connection between their activity and the worldwide network of bitcoin transactions and record keeping. They are simply playing an online game and competing against thousands of other miners in an effort to solve a complex and ongoing math problem. As they arrive at answers to small pieces of the problem, they are rewarded with bitcoin, which can be easily translated into any currency.

What is the Problem?

One day, mining for rewards will no longer be possible. The fundamental architecture of Bitcoin guarantees that mining will end. The pool of rewards that were held in abeyance as incentives is small and will run out in 2140—about 120 years from now. So, this raises the question: How will we incentivize miners when there is no more reward? (Actually, they won’t really be miners anymore…They will more accurately be bookkeepers or ‘validators’)

Is there a Solution?

Fortunately, there are many ways to offer incentives to those who validate transactions and maintain the books. Here are just a few:

  1. There is a current mechanism in which transactions bid for priority (speed of validation). Today, this mechanism augments the mining reward—particularly during periods of network performance. For example, the extra payments rose to $30 and more for individual transactions just before lightning network was adopted. In the future, it could replace the reward as the basis of a reward system.
  2. At the 2015 MIT Bitcoin Expo, Andreas Antonopoulos proposed a reputation ranking & reward system based on gaming theory. The ideal is that would result in a sufficient reward to maintain continuous network operation. Reputation points are not just a bragging point, but is likely to translate into real-world gravitas and financial opportunities.
  3. I believe that, one day, every user will be a micro-miner, and this will address the issue of incentives. For example, if users can avoid all mining fees by validating one transaction for every 10 of their own, we might see the widespread adoption of wallets that are full or partial nodes, rather than limited to the function of key storage.In this vision, micro mining will be achieved on a phone, a wristwatch, or a linked device at home. It will not result in an escalating race for increased power consumption…

I believe in this last solution and I have proposed it as the path forward at crypto/blockchain conferences.

Today, this idea seems implausible, because of the memory and computational requirements for running a full node. But, there have been big advancements in the effort to support micro-mining—which does not require such resources. Additionally, it is likely that the current proof-of-work mechanism used to arrive at a distributed consensus will be replaced by another mechanism that does not result in a competition to see who can consume the most electricity.

More about the sunset of mining incentives:


Ellery Davies co-chairs CRYPSA, hosts the New York Bitcoin Event and is keynote speaker at Cryptocurrency Conferences. He sits on the New Money Systems board of Lifeboat Foundation. Book a presentation or consulting engagement.