Is it Too Late to Get into Bitcoin and Blockchain?

At Quora, I occasionally play, “Ask the expert”. Several hundred of my Quora answers are linked at the top right. Today, I was asked “Is it too late to get into Bitcoin and the Blockchain”.

A few other Bitcoin enthusiasts interpreted the question to mean “Is it too late to invest in Bitcoin”. But, I took to to mean “Is it too late to develop the next big application—or create a successful startup?”. This is my answer. [co-published at Quora]…


The question is a lot like asking if it is too late to get into the television craze—back in the early 1930s. My dad played a small role in this saga. He was an apprentice to Vladamir Zworykin, inventor of the cathode ray tube oscilloscope. (From 1940 until the early 2000s, televisions and computer monitors were based on the oscilloscope). So—for me—there is fun in this very accurate analogy…

John Logie Baird demonstrated his crude mechanical Televisor in 1926. For the next 8 years, hobbyist TV sets were mechanical. Viewers peeked through slots on a spinning cylinder or at an image created from edge-lit spinning platters. The legendary Howdy Doody, Lucille Ball and Ed Sullivan were still decades away.

The Baird Televisor, c.1936

But the Televisor was not quite a TV. Like the oscilloscope and the zoetrope, it was a technology precursor. Philo T. Farnsworth is the Satoshi Nakamoto of television. He is credited with inventing TV [photo below]. Yet, he did not demonstrate the modern ‘cathode ray’ television until 1934.

Farnsworth demonstrates TV

The first broadcast by NBC was in July 1936, ten years years after the original Baird invention. (Compare this to Bitcoin and the blockchain, which are only 7 years old).

Most early TV set brands died during the first 10 years of production: Who remembers Dumont, Andrea and Cossor? No one! These brands are just a footnote to history! Bear in mind that this was all before anyone had heard of Lucille Ball, The Tonight Show or the Honeymooners. In the late 1950s, Rod Serling formed Cayuga Productions to film the Twilight Zone in New York. Hollywood had few studios for dramatic television production, and the west coast lacked an infrastructure for weekly episode distribution.

Through the 1950s (25 years after TV was demonstrated), there was no DVR, DVD or even video tape. Viewers at home watched live broadcasts at the same time as the studio audience.

The short answer to your question: No! It’s not too late to get into Bitcoin and the blockchain. IIn fact, we’re still in the very early era. The ship is just pulling into the dock and seats are mostly empty. The big beneficiaries of blockchain technology (application, consulting, investing or savings) have not yet formed their first ventures. Many of the big players of tomorrow have not yet been born.

Ellery Davies is co-chair of Cryptocurrency Standards Association. He is also a frequent contributor to Quora and editor at A Wild Duck.

Diminishing Bitcoin Mining Rewards

By now, most Bitcoin and Blockchain enthusiasts are aware of four looming issues that threaten the conversion of Bitcoin from an instrument of academics, criminal activity, and closed circle communities into a broader instrument that is fungible, private, stable, ubiquitous and recognized as a currency—and not just an investment unit or a transaction instrument.

These are the elephants in the room:

  • Unleashing high-volume and speedy transactions
  • Governance and the concentration of mining influence among pools, geography or special interests
  • Privacy & Anonymity
  • Dwindling mining incentives (and the eventual end of mining). Bitcoin’s design eventually drops financial incentives for transaction validation. What then?

As an Op-Ed pundit, I value original content. But the article, below, on Bitcoin fungibility, and this one on the post-incentive era, are a well-deserved nod to inspired thinking by other writers on issues that loom over the cryptocurrency community.

This article at Coinidol comes from an unlikely source: Jacob Okonya is a graduate student in Uganda. He is highly articulate, has a  keen sense of market economics and the evolution of technology adoption. He is also a quick study and a budding columnist.

What Happens When Bitcoin Mining Rewards Diminish To Zero?

Jacob addresses this last issue with clarity and focus. I urge Wild Ducks to read it. My response, below touches on both issues 3 and 4 in the impromptu list, above.


Sunset mining incentives—and also the absence of supporting fully anonymous transactions—are two serious deficiencies in Bitcoin today.
I am confident that both shortcomings will be successfully addressed and resolved.

Thoughts about Issues #3 and #4: [Disclosure] I sit on the board at CRYPSA and draft whitepapers and position statements.*

Blockchain Building: Dwindling Incentives

mining-incentive-02Financial incentives for miners can be replaced by non-financial awards, such as recognition, governance, gaming, stakeholder lotteries, and exchange reputation points. I am barely scratching the surface. Others will come up with more creative ideas.

Last year, at the 2015 MIT Bitcoin Expo, Keynote speaker Andreas Antonopoulos expressed confidence that Bitcoin will survive the sunset of miner incentives. He proposed some novel methods of ongoing validation incentives—most notably, a game theory replacement. Of course, another possibility is the use of very small transaction fees to continue financial incentives.

Personally, I doubt that direct financial incentives—in the form of microcash payments— will be needed. Ultimately, I envision an ecosystem in which everyone who uses Bitcoin to buy, sell, gift, trade, or invest will avoid fees while creating fluidity—by sharing the CPU burden. All users will validate at least one Blockchain transaction for every 5 transactions of their own.

Today, that burden is complex by design, because it reflects increasing competition to find a diminishing cache of unmined coins. But without that competition, the CPU overhead will be trivial. In fact, it seems likely that a validation mechanism could be built into every personal wallet and every mobile device app. The potential for massive crowd-sourced scrutiny has the added benefit of making the blockchain more robust: Trusted, speedy, and resistant to attack.

Transaction Privacy & Anonymity

Bitcoin’s lack of rock-solid, forensic-thwarting anonymity is a weak point that must ultimately be addressed. It’s not about helping criminals, it’s about liberty and freedoms. Detectives & forensic labs have classic methods of pursuing criminals. It is not our job to offer interlopers an identity, serial number and traceable event for every transaction.

Anonymity can come in one of three ways. Method #3 is least desirable:

  1. Add complex, multi-stage, multi-party mixing to every transaction—including random time delays, and parsing out fragments for real purchases and payments. To be successful, mixing must be ubiquitous. That is, it must be active with every wallet and every transaction by default. Ideally, it should even be applied to idle funds. This thwarts both forensic analysis mining-incentive-03and earnest but misguided attempts to create a registry of ‘tainted’ coins.
  2. Fork by consensus: Add anonymizing technology by copying a vetted, open source alt-coin
  3. Migrate to a new coin with robust, anonymizing tech at its core. To be effective, it must respect all BTC stakeholders with no other ownership, pre-mined or withheld distribution. Of course, it must be open, transparent and permissionless—with an opportunity and incentive for all users to be miners, or more specifically, to be bookkeepers.

That’s my opinion on the sunset of mining incentives and on transaction anonymity.
—What’s yours?


* Ellery Davies is co-chair of the Cryptocurrency Standards Asso-
  ciation. He was host and MC for the Bitcoin Event in New York.

Bitcoin Fungibility: A Benefit of privacy & anonymity

I was pointed to this article by Jon Matonis, Founding Director, Bitcoin Foundation. I was sufficiently moved to highlight it here at AWildDuck.

On Fungibility, Bitcoin, Monero and ZCash … [backup]

This is among the best general introductions I have come across on traceability and the false illusion of privacy. The explanation of coin mixing provides and coin_mixing-03excellent, quick & brief overview.

Regarding transaction privacy, a few alt-coins provide enhanced immunity or deniability from forensic analysis. But if your bet is on Bitcoin (as it must be), the future is headed toward super-mixing and wallet trading by desgin and by default. Just as the big email providers haved added secure transit,
Bitcoin will eventually be fully randomized and anonymized per trade and even when assets are idle. It’s not about criminals; it’s about protecting business, government and individuals. It’s about liberty and our freedoms. [Continue below image]

coin_mixing-04

How to thwart forensic investigation: Fogify explains an advanced mixing process

The next section of the article explains the danger of losing fungibility due to transaction tracing and blacklisting. I can see only ONE case for this, and it requires a consensus and a hard fork (preferably a consensus of ALL stakeholders and not just miners). For example, when a great number of Etherium was stolen during the DAO meltdown.

My partner, Manny Perez, and I take opposing views of blacklisting coins based on their ‘tainted’ history (according to “The Man”, of course!). I believe that blacklists must ultimately be rendered moot by ubiquitous mixing, random transaction-circuit delays, dilbert-060219and multiple-transaction ‘washing’ (intentionally invoking a term that legislators and forensic investigators hate)—Manny feels that there should be a “Law and Order” list of tainted coins. Last year, our Pro-&-Con views were published side-by-side in this whitepaper.

Finally, for Dogbert’s take on fungible, click here. I bought the domain fungible.net many years ago, and I still haven’t figured out what to do with it. Hence this Dilbert cartoon. 🙂
____________
The author is co-chair of The Cryptocurrency Standards Association.
He also presents on privacy, anonymity, blind signaling & antiforensics.

Bitcoin can arbitrage Netflix VPN workaround

I almost overlooked This Forbes article. It was published in June 2016. It is not about Bitcoin. Rather, it discusses the Netflix effort to thwart forbes-logoVirtual Private Networks (VPNs), which had been used to circumvent geographic content restrictions.

The  author describes a fascinating work-around. It probably doesn’t break any government law—although it most certainly violates the Terms of Service which users acknowledge when they sign up or log into their Netflix account.

The workaround begins in paragraph 4, with the title: “The Solution”. It describes a self-balancing market for p2p use of desirable residential IP addresses. For example: USA has the largest number of movie and TV titles. The author proposes an automated process of bidding for temporary remote control of USA Netflix subscriptions, using the subscriber’s internet connection as a gateway, while content is delivered to Beijing, Dubai or Fiji.

Effectively, Bitcoin is used as the backbone of a clever negotiating, bidding and settling mechanism. Since USA IP addresses have a premium value to foreign netflix-logo-01Netflix subscribers, it enales USA members to auction the temporary use of their Internet connections.

Of course, using Bitcoin to arbitrage the disparate value of residential Internet connections doesn’t explain the technical process of relaying movies through remote user gateways. That part is achieved by adding an arbitrage-activated VPN proxy into members who choose to bid or auction regional access. Netflix is looking for the IP addresses of commercial VPN gateways and not the IP addresses of its own individual members. Although, I have not yet tested the work-around described, it should be transparent to both users.

For me, this is a particularly elegant application of capitalist economics. In fact, I recently sold my patent on a similar bid-for-attention mechanism that stops Spam without blocking anything that each individual user would find desirable, even if it is unsolicited, commercial or sent in bulk.

The key information [excerpt from linked article]:

“Basically, the number of users trying to watch U.S. Netflix would vastly outnumber the users trying to watch Australia Netflix so U.S. connections would be oversubscribed. This can be resolved with a balancing mechanism with financial incentives, such as Uber surge pricing,” Yen told Forbes.

Bitcoin pile-s“When U.S. connections become oversubscribed, U.S. users would be able to make money by making their connections available while foreign users would have to pay more to access U.S. connections. Bitcoin could be used to facilitate these payments since it is anonymous, decentralized and has a low transaction cost.”

What makes this proposal so attractive, is that it thumbs a nose at any vendor that thinks that it can control the individual use or application of its product in the field for no good reason. (I consider geographic content restrictions to be  “No good reason”!). Regardless of EULAs and even national laws, in the end, it’s very hard to argue with grassroots phenomena and facts on the ground.

Hey! You’ll get no dog whistles here.

Ellery Davies is a frequent contributor to Quora. He is also co-chair of
Cryptocurrency Standards Association and chief editor at A Wild Duck

Will The Blockchain Outlive Bitcoin?

I was asked to answer this question by an editor who—like Mike Hearn—presumes that Bitcoin will die because of the current forking crisis. I believe that the future for both Bitcoin and the Blockchain is bright, despite current issues related to mining, block size, a transaction bottleneck and code evolution. My thoughts on Bitcoin are sprinkled all throughout this Blog, and especially at Quora. And so, I shall direct an answer at the other half of the question. Let’s rephrase it:

“The Blockchain is gaining popular recognition and related investment is booming. Why is this happening now—eight years after it hit the scene inside Bitcoin?”

First, a brief refresher in the Blockchain-Bitcoin parentage…

Bitcoin is the original Blockchain implementation. But, significant controversy has arisen around Bitcoin.

  • Some proponents believe that it is money—and that it may even have the potential to replace national currencies and disrupt state controlled monetary institutions
  • Others feel that it is simply a mechanism to transmit money (like a debit card or a Western Union cash transfer)
  • Some armchair pundits see Bitcoin as brief economic fad, like the tulip bulb mania that swept over Holland in the 17th century
  • Still others see it as a criminal tool, with little potential to transform businesses or consumer habits

But there is far less controversy about the underlying technology. The Blockchain is a method of distributing a ledger across all users (or as many who care to participate) in a manner that validates historical transactions,blockchain-01 but requires no central nexus and is permissionless.

With sufficient user participation, the blockchain offers advantages to complex transaction systems:

  • high user confidence (i.e. among customers, voters, taxpayers,
    land owners, patients, scientists, etc)
  • low cost
  • increased trust
  • robust data retention (i.e. distributed, fault tolerant storage)
  • security from hacking
  • resistance against human error or natural disaster
  • quick data extraction and ongoing auditing

These are compelling advantages for almost any transaction system designer. And so, all manner of financial institutions, genetic researchers, voting system designers, and, of course, bookkeepers, blockchain_logoaccountants or data aggregators, are rushing to exploit the potential for improving their business model by incorporating a blockchain into their design methodology.

This answers the question—But, allow me to add a caveat, because there is a catch—at least until a more universal understanding spreads across the community…

The Catch

The blockchain is still a new concept. It was introduced along with Bitcoin in a 2008 Whitepaper by an anonymous cryptographer. Because it is so new, pundits, process designers and investors must be very astute in implementing or justifying the use of blockchain based architecture. If they don’t, early investors or system users will likely feel that they sucked into another tulip bulb mania.

In a recent article, I explain that to qualify as a Blockchain (and, thereby, to convey the benefits listed above), a database design must embody 5 key concepts. It must be:

  • Open-source
  • Fully distributed among all users.
  • Any user can also be a node to the ledger
  • Permissionless to all users and data originators
  • Access from anywhere data is generated or analyzed

The article is brief, but the punchline should be gospel for anyone thinking of implementing a blockchain-based system. Here is the spoiler:

A blockchain is practically worthless if it is not both open source and permissionless.

Yet, it is these two design elements that many rushing to stake a claim are refusing to embrace. That’s because the desire to retain a proprietary interest or to ‘own the books’ is very alluring. It is built into our business DNA. For the past 40 years, business schools teach that controlling data is the key to profits. We have been taught that blockchain-02losing control over data leads to lapses in security or losing the edge over competitors.

For commercial ventures, it seems reasonable that releasing control or outright ownership of critical business data would undermine the value of a service or system. For complex government systems, transparency and loss of control would seem to weaken public security.

On the contrary! Although the Blockchain is not appropriate for every data storage system or transaction processing mechanism, partial blockchains are charlatans (i.e. systems that embody distributed storage, but are not both open source and permissionless). They do not achieve the benefits that designers are chasing.

Without a network that is fully distributed among its users as well as permissionless, open-source and readily accessible, a blockchain becomes a blockchain in name only. It bestows few benefits to its creator, none to its users—certainly none of the dramatic perks that have generated media buzz from the day Satoshi hit the headlines.

Related:

Thought leaders who back Trump

I have two very smart friends who share a rare trait. Since I have not asked them for permission to ‘out’ them in my Blog, I will call them ‘Dan’ and ‘Peter’. For this one Op-Ed, I will avoid photos, because some readers would recognize them.

I met Peter through business connections and his headline speech at a technical conference. Dan has been a close personal friend since immigrating to America 25 years ago. I’ll get to the rare quirk that they share—but2-person silhouette-s first, they have some other things in common…

  • They are each remarkably intelligent. Their respective patents stand among the most inspired business ideas in high-tech history
  • They have both launched high-tech start-ups—solving meaningful problems, employing others and creating impressive brands
  • They have sparkling, magnetic personalities— exuding trust, kindness and generosity.
  • They are each superlative communicators—equally adept with a pen, a TV camera, social media or in front of a live audience.
  • They communicate with confidence, con-viction and an uncanny gift of persuasion.
    They are unquestionably influential. Their eloquence and stature convey gravitas

Years from now, I doubt that either of these friends will point to this page as testament to their esteem among peers. You see, of my many smart and influential friends, these are the only two who support Donald Trump as a candidate for US president. I estimate that this makes them members of the “one percent” (No. Not that one percent).

How can this be? Can smart individuals honestly see Trump as a man that they trust to lead a nation, hold the nuclear codes, build respect among other nations, and honor our cultural diversity? Try as I might to deny it, I am forced to admit that at least two smart individuals support Donald Trump. How many other Peters and Dans are out there?

Here, then, is my personal plea to Dan and Peter. Are you listening, guys? In the open letter below, I have given up trying to change your minds. At this late stage of the election cycle, I appeal, instead, to your patriotism, your conscience and your heart…


Hi Dan {Hi Peter},

I don’t know if you watched Obama at the Singapore press conference today. It is painfully clear that every policy and bilateral agreement that he tries to enact is thwarted by partisan politics back home in our own country. These politics are motivated by the desire to make him look bad—and for these bad optics to rub off onto Hillary.

I can’t get into your mind on Trump, but I certainly appreciate and respect that we have different political philosophies. We both want a fiscally conservative administration, and a smaller, hands-off government; less debt, less tax redistribution, etc—But we have differences on guns, trade, abortion rights, global warming, the Supreme Court appointment process, and other social issues.

Regardless of our differences, I am very concerned at the neck-and-neck polls between two such different options: A sane, articulate, rational and experienced executive who may have lied about certain events—and a completely unworkable buffoon with an empire built on scams and bravado. I urge you with passion and urgency to please reflect and reconsider your endorsement of Donald Trump. Recant and recast your influence. This is not a Republican–vs–Democrat issue. Even a liar cast in the mold of Richard Nixon would be a far better choice than Donald Trump to lead our country. Trump will destroy our nation’s influence, reputation, economy, and alliances everywhere on earth. He is already well on his way to doing this.

I have always been impressed with your rapid rise as a thought leader. You are intelligent and very persuasive. Please switch horses, Dan. President Obama feels strongly that Trump is unfit to be the US President. I am more specifically concerned that he is unfit to be the object of your persuasive influence.

I see myself in Donald Trump—and I don’t like it!

Look at it this way, Dan: Trump and I share some “qualities”…

  • I have been known to exaggerate—when I believe that I will not get caught
  • I have used an alias to make phone calls (to make my organization look larger or my position seem more credible)
  • I sometimes speak with emphatic conviction before carefully checking facts
  • I have occasionally allowed myself to give into the lure of divisiveness and discrimination

But here’s the point, Dan: I know that these emotional and erratic tendencies make me unfit to govern the United States—especially if I lack a clear record of surrounding myself with critical advisers who are empowered to challenge me, delay my stupid statements and bravado, and with power to cut off my twitter feed before any random, venomous thought spits out from my ADHD brain.

More importantly, Trump doesn’t do these things occasionally. He does them every day, and with the passionate zeal of a bombastic, pathological liar.

If comparing Donald Trump to my low-brow idiosyncrasies fails to move you, then allow me to try reasoning with facts…
Is Donald Trump a legitimate candidate for US President?

You assert that liberals take Trump’s statements without context. I believe that I have observed the context. For example, how can you not be disturbed by a comment that Trump made today in reference to Obama’s firm stance against shooting cops. Trump said. There is something going on with Obama. I watched him and there is something going on there that we just don’t know about yet.” He made a similar statement after the Orlando nightclub bombing.

What the h*ll is that?! To me, it is obvious: He is using innuendo to push a conspiracy theory and hoping to cast FUD into anyone associated with Obama. For Trump, this is a frequent tactic. In fact, it is his modus operandi…

  1. Birther Issue: Claims that Obama was not born in the USA
  2. Religion: Claims that Obama is a Muslim or that Clinton is controlled by Jews
  3. Black Lives Matter: Claims that Obama fans the flames of anti-cop hate
— How can you not be disturbed when Trump criticizes a judge born in Indiana for being Mexican? (“We assume that he is Mexican–but that’s OK”). What kind of idiot statement is that?!

— How can you not be disturbed when Trump gets sucked into Tit for Tat with a Gold Star mother and claims that her Muslim upbringing prohibits her from addressing the DNC? (Even if this were true, what type of man would use this to gain points?!)

— How can you not be disturbed when Trump makes fun of a handicap or says that a distinguished prisoner of war is not heroic, because he was caught?

— How can you not be disturbed that a candidate for president makes reference to the size of his penis on a televised debate?

— How can you not be disturbed about a candidate that talks about the redeeming virtues of Saddam Hussein or Putin?

— How can you not be disturbed by Trump’s claim “I love the Bible more than anyone”? (I certainly don’t want a leader who uses the Bible as a blueprint for morality, but seriously: He made this claim—and then attempted to quote “Two Corinthians”.

— How can you not be disturbed by Trump’s crazy defense of his multiple corporate bankruptcies. He even claims that the US may need to renegotiate the national debt or simply print its way out of debt. Is this rational talk?

— How can you not be disturbed by Trump’s desire to deal with the cost of our Nato commitment by encouraging Japan and South Korea to obtain nuclear weapons? Is that the talk of a sane man?

— How can you not be disturbed by a candidate who sends a vile personal tweet about another candidates wife, and then deflects blame by saying “I didn’t start it”? Yes, he did! And, in the words of Anderson Cooper, “That’s the argument of a five year old!

— How can you not be disturbed by a candidate that tells his supporters to punch a demonstrator? —and that he will pay the legal bills [i.e. in the event that they are arrested for a crime orchestrated by the candidate].

— How can you not be disturbed by a candidate who sends a tweet that was lifted from a white supremacist web site, and then claims that the Star-of-David next to Hillary and a downpouring of $100 dollar bills is just a Sheriff’s Star?

— How can you not be disturbed by the only presidential candidate in 30 years who refuses to reveal his taxable income, and then uses the lame excuse that he is undergoing a government audit?

I hate to resort to name calling, but please tell me how you can endorse redneck, racist, white trash, like that?

You claim that I am just repeating lame propaganda by CNN, but I have eyes, ears, a good memory and an analytical mind. Trump is divisive, childish, vindictive and deceitful. It is not clear that he is a good businessman. But if he is, he has built his fortune on hollow promises, trickery, and walking away from his obligations. In the words of Mayor Michael Bloomberg, I know a con when I see one!

Please pause and reflect on this, Dan. You have more influence than you realize. Show your social media readers that you can reverse course. Your voice makes a difference. Donald Trump’s candidacy is far from viable. His words and actions are worse than lies. They are a disgrace. Please counter the insanity with your influence and your enviable soapbox.

God help us, if Americans align with Trump as they step into the voting booth—And God help me, if he wins. With such a thin skin and a history of bullying perceived enemies, Trump is certain to single me out for punitive vengeance.

Your friend (still, and always)
~Ellery

Why is Bitcoin Capped at 21M units?

I was asked this at Quora.com. But the query deserves a companion question, and so I approached the reply by answering two questions.


You might have asked “Why was Bitcoin designed to have a cap?” But, instead, you asked “Why is the cap set at 21 million bitcoins”. Let’s explore both questions starting with the choice of a circulation cap…

Why set the cap at 21 million BTC?

The choice of a cap number is arbitrary and in fact, it could be 1 or one hundred trillion. It makes no difference at all and it has no effect on the economy—even if Bitcoin wereStacks of Bitcoin to be adopted as a currency all over the world. If it were set to 1 BTC, we would simply discuss nano-BTC instead of 1 BTC for amounts of about $650.

In fact, we already do this today. For many purposes, people are concerned with very small payments. And to best discuss these payments, we have the Satoshi. There are 100,000 Satoshi to each bitcoin (BTC).

What is important, is that the total number of bitcoin (regardless of how many units there are) can be divided into very tiny fractions. That way, the total worldwide supply can be divided into smaller and smaller slivers as market adoption gains traction. Everyone needs to earn, save, spend or pay with a piece of the pie. All users need to know is what fraction of the pie do I control? and not how many ounces, pounds, Kg, or tons is the pie. That is just a number.

Incidentally, the same could be said of gold (it can be shaved very thin), but gold is not quite like computer bits. It has industrial and cosmetic value, and this intrinsic demand for gold (beyond it’s role as a pure monetary instrument) has an effect on supply and demand along with the influence of investment, circulation, savings and reserve.

Why is there a cap at all?

At the beginning of this answer, I suggested another question: Why is Bitcoin capped at all? After all, the monetary supply in every country grows. Even gold production is likely to continue for centuries to come. Why not Bitcoin?

Satoshi designed Bitcoin to eventually become a deflationary currency. I believe that he/she recognized inflation is an insipid tax that constitutes an involuntary redistribution of earned wealth. With a firm cap on the total number of units that exist, governments can still tax, spend and even enforce tax collection. They can go about business building bridges, waging war and providing assistance to the needy. But without a printing press in the hands of transient politicians, they can only spend money with the consent of their constituents and residents.

Of course, governments could borrow money by issuing bonds. But with a capped currency, they must convince creditors that the country has the will and the ability of to actually repay its debts from real dollars and not inflated dollars.

In effect, monetary policy is restricted to the business of the governed, but the money itself is not coined by a domestic treasury. It is the province of something that is far more certain than a human institution. It arises from pure math. It is open and transparent. Everyone is an auditor, because the bookkeeping is crowd sourced.

For prescient legislators and national treasurers, Bitcoin presents far more of an opportunity than a threat. It is good for government, business and consumers, because it forces an honest money supply. Ultimately, it builds trust in government, because no one can cook the books, water down wealth, or print their way out of debt.

What about recession. Isn’t it a result of deflation?

Deflation doesn’t lead to recession. Rather, it sometimes accompanies a recession. Recession is caused by an uncertain job market, war, a massive supply chain interruption or political upheaval. In one way or another, it boils down to a lack of confidence sparked by one of the economy’s core foundations: consumers, investors, business or creditors.

Bitcoin as currency removes a major impediment to confidence. By creating a system that cannot be rigged, it fosters trust in government along with an open and transparent treasury.

Ellery Davies co-chairs CRYPSA and was MC at The Bitcoin Event in New York. He writes for Quora, LinkedINWild Duck and Lifeboat Foundation, where he sits on the New Money Systems Board.