Wallet Security: Cloud/Exchange Services

3½ years ago, I wrote a Bitcoin wallet safety primer for Naked Security, a newsletter by Sophos, the European antivirus lab. Articles are limited to just 500 hundred words, and so my primer barely conveyed a mindset—It outlined broad steps for protecting a Bitcoin wallet.

In retrospect, that article may have been a disservice to digital currency novices. For example, did you know that a mobile text message is not a good form of two-factor authentication? Relying on SMS can get your life savings wiped out. Who knew?!

With a tip of the hat to Cody Brown, here is an online wallet security narrative that beats my article by a mile. Actually, it is more of a warning than a tutorial. But, read it closely. Learn from Cody’s misfortune. Practice safe storage. If you glean anything from the article, at least do this:

  • Install Google Authenticator. Require it for any online account with stored value. If someone hijacks your phone account, they cannot authenticate an exchange or wallet transaction—even with Authenticator.
  • Many exchanges (like Coinbase) offer a “vault”. Sweep most of your savings into the vault instead of the daily-use wallet. This gives you time to detect a scam or intrusion and to halt withdrawals. What is a vault? In my opinion, it is better than a paper wallet! Like a bank account, it is a wallet administered by a trusted vendor, but with no internet connection and forced access delay.

Exchange and cloud users want instant response. They want to purchase things without delay and they want quick settlement of currency exchange. But online wallets come with great risk. They can be emptied in an instant. It is not as difficult to spoof your identity as you may think (Again: Read Cody’s article below!)

Some privacy and security advocates insist on taking possession and control of their wallet. They want wealth printed out and tucked under the mattress. Personally, I think this ‘total-control’ methodology yields greater risk than a trusted, audited custodial relationship with constant updates and best practice reviews.

In case you want just the basics, here is my original wallet security primer. It won’t give you everything that you need, but it sets a tone for discipline, safety and a healthy dollop of fear.


Ellery Davies co-chairs Crypsa & Bitcoin Event, columnist & board member at Lifeboat, editor
at WildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.

Incentivize Bitcoin Miners After All 21M BTC Are Awarded

Individuals who mine Bitcoins needn’t be miners. We call them ‘miners’ because they are awarded BTC as they solve mathematical computations. The competition to unearth these reserve coins also serves a vital purpose. They validate the transactions of Bitcoin users all over the world: buyers, loans & debt settlement, exchange transactions, inter-bank transfers, etc. They are not really miners. They are more accurately engaged in transaction validation or ‘bookkeeping’.

There are numerous proposals for how to incentivize miners once all 21 million coins have been mined/awarded in May 2140. Depending upon the network load and the value of each coin, we may need to agree on an alternate incentive earlier than 2140. At the opening of the 2015 MIT Bitcoin Expo, Andreas Antonopolous proposed some validator incentive alternatives. One very novel suggestion was based on game theory and involved competition and status rather than cash payments.

I envision an alternative approach—one that also addresses the problem of miners and users having different goals. In an ideal world the locus of users should intersect more fully with the overseers…

To achieve this, I have proposed that every wallet be capable of also mining, even if the wallet is simply a smartphone app or part of a cloud account at an exchange service. To get uses participating in validating the transactions of peers, any transaction fee could be waived for anyone who completes 1 validation for each n transactions. (Say one validation for every five or ten transactions). In this manner, everyone pitches in a small amount of resources to maintain a robust network.

A small transaction fee would accrue to anyone who does not participate in ‘mining’ at all. That cost will float with supply and demand. Users can duck the fee by simply participating in the validation process, which continues to be based on either proof-of-work, proof-of-stake — or one of the more exotic proof theories that are being proposed now.


Ellery Davies co-chairs Crypsa & Bitcoin Event, columnist & board member at Lifeboat, editor
at WildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.

Sex Equality: I’m With Her

A Wild Duck guest editorial

Lydia Begag is a high school junior at Advanced Math and Science Academy in Massachusetts. She got our attention when she published an editorial critical of the school’s uniform policy. With eloquence and articulation, she laid out a brilliant and persuasive argument that the policy was anything but uniform. It was ambiguous, arbitrary and discriminatory.


I’m with Her
Ideas Regarding Sex Equality—Forget the Rest

Political and social turmoil are everywhere we turn, especially in the early months of 2017. Lunch conversations, small talk at work, and, of course, the media we consume have all become related to a singular topic: the United States government and its workings. Emotionally, I want to curl up in a ball and block out the political nonsense being spewed left and right until the day I die (pun very much intended)—but I feel intellectually obliged to confront the controversy.

All who live and breath America understand why politics have always been a hot topic for debate. Every ideology, action, and word are potentially contentious. Such is especially the case with modern feminism. Everyone seems to have a different opinion of it and portrays it in different ways, from the group of men wolf whistling at a woman on her way to her car after work to powerful cultural figures who associate themselves with the movement. Before we can even begin to familiarize ourselves with conflicting beliefs towards women and feminism in general and their reflection of a worrisome mentality, it is crucial to first understand feminism’s roots in the United States, and how interpretations of the word and the movement have varied throughout the years.

Feminism begins its legacy in 19th-century America, where its first-wave arises at the Seneca Falls Convention of July 1948. Prominent feminists of the era (including Elizabeth Cady Stanton—more on her later!) issued a Declaration of Sentiments for women that emulated the Declaration of Independence their husbands had crafted 170 years earlier. The document asserted that women had fundamental rights that were denied without cause, including suffrage. However, the first-wave feminist movement raised a series of questions regarding whether it was acceptable to promote black civil rights over and into women’s rights. Should the rights of black men be prioritized over establishing and recognizing rights for women? Should black women be considered in the fight for gender equality as well, or would that undermine the cause white women had been fighting for for so long? The moral conflict eventually resulted in a success for the women’s suffrage movement in 1920. White women, led by famous feminists such as Stanton, Alice Paul, and Lucy Burns, gained the right to vote in federal and state elections via the 19th Amendment to the U.S. Constitution. Women of color, however, were left in the dust and did not start to gain suffrage until 1965. This type of exclusive feminism did not end when women of color gained suffrage; it has proven itself to be significant even today.

The list of American feminist milestones goes on and on. Women experienced sexual liberation in the Roaring 20s, when life was grander and more exquisite than ever. They essentially took over maintenance of the U.S. economy when men went  to fight in the world wars, and Rosie the Riveter was born. Women were also becoming increasingly influential in politics. Such milestones included the first woman to run for president on a major-party ticket in 1972 to landmark Supreme Court cases asserting that a right to privacy does include guaranteed legal accessibility to abortion and contraceptives. Title 9, the amendment to the Education Amendments Act of 1972, enabled girls in schools across the country to receive the same benefits as their male peers. All of these milestones reshaped a woman’s role in society throughout the 20th century onwards, but they did not come without drawbacks. The ’20s was an intense era of sexist and classist attitudes. Female sexual liberation resulted in extreme objectification. After WWI was over and soldiers came home, women were whisked back into the households to resume their roles as obedient housewives. Male dominance made running for public office harder for a woman, despite having the opportunity. And let us not forget the controversy surrounding a woman’s right to privacy. A significant factor involves religious morals and/or other ethical reasoning that are not related to gender equality, but it is impossible to ignore the misogynistic rationale that many pro-lifers exhibit. All of the achievements we’ve had have seemingly been countered by just as much dissent as support, a persistent reality since Abigail Adams urged her husband to support gender equality.

We are currently in the era of what fundamentalist feminists call “Take A Shot Every time You Offend Someone With One of Your Comments.” That term, of course, is colloquialism at its finest. You’re probably more familiar with something called third-wave feminism. This type of feminism has become increasingly less focused on the kind of feminism Stanton was prominent for (Yay! Exclusivity!) and more on queer and non-white women. The concept of intersectionality was introduced in the late ’80s just before this third wave began. It has received great support by women of color and those who had always been ignored by exclusive feminists, but as we already know, dissent is just around the corner.

The most popular criticism focuses on a lack of cohesion. First wave feminism fought for and gained female suffrage. The second wave fought for the right for women to have access to equal opportunity in the workforce and an end to legal sex discrimination. What is third wave feminism’s goal? Is there even a goal, or are its advocates serving as the world’s determinators of what is PC and what is not? The stigma around the feminist movement has existed ever since its origins in this country, but the increasing disassociation of women from the term ‘feminism’ has become alarming in recent years. For every outspoken celebrity and political feminist there is out there (think Emma Watson, Shonda Rhimes, Nancy Pelosi) there is an equally prominent female figure that opposes the movement, such as Lana del Rey, Tomi Lahren, and Shailene Woodley. Here’s the kicker: these role models usually aren’t misogynistic or demeaning. They simply seek to avoid affiliation with the word itself and its modern day supporters. This is understandable; we’re a country founded on grounds of freedom. If a person doesn’t want to associate themselves with a movement, there’s no obligation to. However, the fact that women don’t even want to be labeled feminists because of what it has come to signify is something I find very problematic. I don’t see this as an inadequate reflection of what 21st century women believe in, but rather a poor reflection on the feminist crusade. The way I look at it is this: apples don’t fall off a tree because they are too heavy. Rather, they fall off because the stem is too weak to support them.

This creation of a conflict within a conflict has led to major confusion on what “right” feminism is. As defined by Merriam Webster, “feminism” is the theory of the political, economic, and social equality of the sexes. This most basic meaning of the word is something most women, if not all, should consider when they debate  whether or not to label themselves a feminist. Sex equality is really the only thing the third-wave feminist movement should be focused on. Issues such as racial inequality, and rights for LGBT and disabled persons, are a matter for a cause much broader than feminism (think egalitarianism). The more narrow a movement and its fight becomes, the more likely it is to accomplish its goals. The first two waves of feminism all had a set goal in mind, which was something that followed core feminism to the nines. In the midst of all of the social unrest that has risen since the ’80s, the feminist movement has been trying to take over the egalitarianist one. However, if women ever wish to gain social equality between the sexes, it is necessary to narrow the cause to its fundamental roots.

Another issue with the modern feminist movement is that, in the effort towards sex equality, many feminists have interpreted being equal to men as trying to act just like them. Men and women are different, biologically and perhaps psychologically, but of equal value. To quote Mary Ramirez’s “Dear Daughter: Here’s Why I Didn’t March For You”: “…we are biologically and physically and emotionally different from men, but that doesn’t mean we’re less. It means we’re special.”

Nonetheless, achieving social equality between the sexes is something I consider crucial, particularly for the girls just starting to grow up in this country. It is disheartening for women to live in a world where, from the moment we start to grow up and find ourselves in a male-centric society, life becomes a tale of denigration and overt sexualization. However, the problem with using modern feminism to change this sexist attitude is that it has turned into a male resentment club, and no longer seems to revolve around sex equality in society. Off the top of my head, I can think of multiple times where the “feminists” surrounding me on a daily basis have remarked on female superiority or denounced women who do not wholeheartedly accept their idea of feminism. Feminism should preach equality and acceptance. Instead, it has turned into a catty game of doing to the men what the men have done to us. We live in a world where raising people up has turned into knocking others down. Vulgarity and impertinence has turned into the ideal image of a “strong” woman, and has become more and more acceptable. The idea of a feminist who respects others’ opinions has seemingly been swapped with one that thrives off of the idea of being regarded as “bitchy,” angry, or disrespectful. We’ve come a long way since our feminist founding mothers marched down Pennsylvania Avenue fighting for suffrage, and unfortunately, it’s not for the best.

Envisioning myself in the world of politics five or ten years down the road…I won’t pretend it doesn’t worry me at times.Influential female politicians over the years have found not their beliefs or their policy agendas as the primary subject of media conversation, but rather whether or not they’re menstruating or have considered cosmetic surgery. Seeing myself and others in my current situation has worried me as well. Despite growing up in a privileged setting where I receive nothing but acceptance from my family, the school and work environment has offered me and similar girls slut-shaming, catcalling, and the craftiest of off-hand remarks (“Who are you trying to impress today with that outfit?”). A multitude of women who come from different backgrounds have experienced similar toxicity in their surroundings. Ultimately, any setting for a woman can be a problematic one, and a promotion of classic feminism could turn things around. To me, an advocacy for respect on both sexes’ parts—rather than claimed superiority—would be transformative in making these conditions for bearable for young American women and men. Right now, what we have is extreme exclusivity and not enough acceptance.

Want to call yourself a feminist? Great! Reluctant to associate yourself with the movement but still support sex equality? Sounds good! Don’t support sex equality and a reversal of traditional gender roles? That is still okay! Obviously if an opinion undermines the cause you are fighting for, you’re not inclined to encourage it. But what the American public needs to realize is that, when advocates contradict the cause of unity and respect with their actions and words change will not come. Crudity does not empower you; it only cheapens you.

As mentioned before, narrowing down the movement’s goals is also crucial in moving forward. In comparison to many nations around the world, the United States has seen great success when it comes to fighting for sex equality. The third-wave feminist movement does have some valid issues to advocate for—domestic violence, raising awareness for rape victims, pay discrimination, etc.—but also chooses to focus on trivial causes like Free the Nipple and eliminating “manspreading.” Perhaps it is because we have obtained legal equality (thanks, first two waves!). But now that social equity has become the main focus, a blur of ideas and beliefs have resulted in a chaotic, incohesive movement. If you consider feminism at its core, the social issue to fight for is clear. There are many causes worth fighting for: racial inequality, ableism, and marriage justness, to name a few. But for the love of God, leave the aspects that do not relate to sex equality for the egalitarians. They’re there for a reason.

Author’s Note:  Add a comment or question below. I will respond promptly.

— Lydia Begag

Bitcoin closes in on (US) $2000; Why it matters

At the beginning of 2016, Bitcoin was fairly steady at $430. Richelle Ross predicted that it would finish the year at $650. She would have been right, if the year had ended in November. During 2016, Bitcoin’s US dollar exchange rose from $433 to $1000. In the past 2 months (March 24~May 20, 2017), Bitcoin has tacked on 114%, rising from $936 to $2000.  [continue below image]…

If this were stock in a corporation, I would recommend liquidating or cutting back on holdings. But the value of Bitcoin is not tied to the future earnings or property value of an organization. In this case, supply demand is fueled—in part—by speculation. Yes, of course. But, it is also fueled by a two-sided network built on the growing base of utilitarian adoption. And not just an adoption fad, but adoption that mirrors the shift in our very understanding of bookkeeping, trust and transparency.

Despite problems of growth, governance and regulation, Bitcoin is more clearly taking its place as the future of money. Even if it never becomes “legal tender” in any country—and is used only as a mechanism of payments and settlement, it is still woefully undervalued. $2000 is not an end-game. It is a beginning.

Ellery Davies co-chairs Crypsa & The Bitcoin Event. He is a columnist & board member at Lifeboat Foundation,
editor at WildDuck and is delivering the keynote address at the 2017 Digital Currency Summit in Johannesburg.

United Air: Public relations nightmare

Check out the last minute of this Jimmy Kimmel video. It is a spoofed TV commercial for United Airlines. Based on recent events, it seems pretty authentic. Kimmel’s monologue is pretty funny too!

I have heard from a few people who defend United—offering an explanation of overbooking policy—or the rude defiance of the Asian doctor that was dragged out of the plane bloodied and on his back (and apparently, with a broken jaw). But, no matter how you spin this, United was incredibly foolish to issue a patently offensive statement about how clients were unfortunately “reaccommodated”.
Yeah! I’ll agree that it was certainly unfortunate. But, I am not too sure about this being an example of airline accommodation. Check out the Twitter reaction.
Typically, these things blow over and the public searches for the next low fare—even if it is lower by only one dollar. But this time, I think that United may feel the pain. Their methods and the ensuing arrogance of CEO, Oscar Munoz, are tantamount to flipping a middle finger at paying passengers.
Good luck with that, United Airlines!

Blockchain can dramatically reduce pollution, traffic jams

The World Economic Forum has posted an article that hints at something that I have also suggested. (I am not taking credit. Others have suggested the idea too…But advancing tech and credible, continued visibility helps the idea to be taken seriously!)

I am not referring to purchasing and retiring carbon credits. I like that idea too. But here is an idea that can enable fleets of autonomous, shared, electric vehicles. Benefits to individuals and to society are numerous. And the blockchain makes it possible early in the next decade. It is not science fiction.

The future is just around the corner. Non-coin applications of the blockchain will support great things. Goodbye car ownership. Hello clean air! The future of personal transportation is closer than you think.

Read about it at the World Economic Forum.


Ellery Davies co-chairs Crypsa & Bitcoin Event, columnist & board member at Lifeboat, editor
at WildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.

 

Friends at odds with ideology?

At Quora, I play, “Ask the expert”. Hundreds of my Quora answers are linked at top-right on this page. Today, I was asked “Would you stop being friends with someone—if you discovered that they are against gay marriage?”. This is my answer…


Would I stop being friends? Of course not. But I must qualify this answer…

If their position on abortion or marriage is driven by blind, rabid, religious ideology, then I probably wouldn’t have considered them a friend in the first place. In my circles, one’s personal faith should be a guide for moral behavior in a pluralist world. It should never be a substitute for science, common sense, or tolerance. So, for the purpose of this question, I will assume that they are not a right-wing religious conservative.

So, would I stop being friends? Not at all; as long as I can relate to them—intellectually or emotionally. Perhaps not on this matter, but at least on other issues that matter to both of us. My friends have a diverse matrix of opinions, and these often don’t coincide with my own.

Let me offer an example:

I live in America. I am Never Trumper. That is, I believe that our new president has a mental illness and that his election to high office has the potential for disaster (or at least significant ridicule and ‘missed opportunity’ among nations).  Among my extended circle of several hundred medium-close business and personal contacts, I know of only two individuals who supported Trump in the election. And now, 2 months into his presidency, they still support his policies and even his unstable, irrational temperament.

Do I still like these individuals; talk with them; and friend them on social media? Of course! A friend is a friend until they betray you—or until your perspectives are so far apart that you cannot reasonably communicate nor even relate to each other on all the other matters that count.

As I observe one of these two friends continue to support our president in light of behavior that I cannot accept, I begin to realize that he and I interpret events quite differently. We certainly don’t see eye-to-eye on a leader who—for me—is so clearly sophomoric, aberrant and dangerous. Sometimes, I wonder if I can call him a “friend”. But then I reflect on the tangential facts. They matter:

  • I think about all the reasons that we became friends, and the things that he has done for me
  • I think about his qualities, his family, and his work ethic
  • I think about all the people who view the world as he does

After all, Trump won the election and at least 40% of the popular vote. Since less than 1% of my friends voted for him, I may be in the majority—but I have probably lived in a bubble regarding domestic politics. My understanding and appreciation for the political landscape has been challenged.

Here is a second scenario (much more brief): I attended university in a state where smoking and drinking were legal, even for students. Yet, in college, I never used cigarettes or marijuana, and I had not yet started to drink wine or beer. I associated these activities with a derelict upbringing—and so I refused to room with, study with or become friends anyone who drank or smoked. I even refused to socialize with acquaintances who had a friend who drank or smoked.

In those days, I was referred to as being “square”—a term that means rigid, authoritarian, unbending and unrealistic. As you can imagine, I did not have many friends, until I lightened up a bit!

In summary, the question begs anyone who has firmly held beliefs to ask themselves if their beliefs should dictate their associations. Friendships are built on trust and shared experience—not just ideology or even important issues of the moment. In businesses, alliances are built on a common interest. But in life, friendships have more to do with nurturing, respect, selflessness and other personal qualities. Opinions on specific issues matter, but they are far down on the list of human qualities.


I originally ended my answer here. But, in consideration of all the above, I must point out that the ideology-friendship debate has limits. For example, I could not remain friends with someone who believed that the world was created in the past 6,000 years, that LGBT should be marched into concentration camps, that global warming is a hoax, that we must live under Sharia Law, or that woman should not be accorded personal freedoms and basic human rights. (I am not referring to abortion—that’s a bit more complex. I refer to FGM, the right to an education, to drive a car, or to not be covered in a burka). These are all issues of profound ignorance or intolerance. They represent two special classes of hate.

I didn’t mention my abhorrence and intolerance for these things, because of the way in which the original question is structured. It is highly unlikely that I am already friends with anyone so ignorant or intolerant.

Bitcoin ETF Buzz Offers Short Term Opportunity

If you follow Bitcoin at all, then you know that its value is spiking. It has already surpassed a massive spike on Thanksgiving night 2013, and this weekend, a single Bitcoin surpassed the cost of an ounce of gold.                             [continue below image]

Like any commodity, the exchange value of Bitcoin is driven by supply and demand. But, unlike most commodities, including the US Dollar, the Euro or even gold, the eventual supply is capped. It is a mathematical certainty. Yet, demand is affected by many factors: Adoption as a payment instrument, early signs that it is being considered as a reserve currency, fascination by Geeks and early adopters and its use as a preferred tool by some criminals.

But chief among reasons for acquiring Bitcoin is speculation. Whether it is buy-and-hold or day trading, speculators still outnumber those who use Bitcoin to settle debts or to buy and sell other products and services. (Earlier this week, I argued that speculation is responsible for 85% of demand and of transactions—but that’s another story).

It’s a bit ironic that speculation—in the early days of a new market—retards organic adoption. It contributes to uncertainty and volatility, and it reduces the fraction available to the markets that make it both useful and liquid. Yet, in free markets, speculation is a necessary and critical antecedent to adoption.

This week, short term speculators have an unusually keen opportunity to profit, especially if they know how to buy a ‘put’ or sell a ‘call’ (i.e. to leverage a bet for or against the direction of Bitcoin, without actually acquiring any). For example, you can bet that an exchange-traded stock will fall, because it has an options market. But it’s not as easy to bet against commodities that lack a futures or options market.

I am not going to give advice in this article. I am not a licensed investment professional and although I am bullish on long term, organic adoption of Bitcoin, I really don’t have an opinion on the current news or the short term prospects for a pull back. But, if you have an opinion on a current news event, then there is an immediate opportunity for you to make (or lose) a significantly leveraged sum in the next few days…

SEC and ETFs  (Alphabet soup of investment banks)

Next weekend, on Saturday March 11, the United States Securities and Exchange Commission (SEC) will approve or deny an application for the first regulated, recognized and significantly backed Bitcoin Exchange Traded Fund (ETF). Why is this significant? Because most investments are not hand picked by individual investors. Most investors choose the level of risk or diversification that seems reasonable for their life stage and then they leave the decisions to a formula, a market sector basket, or a fund manager. That is, they invest or park their money in a fund rather than betting on Space-X, PayPal or the local electric company.                             [continue below image]

If approved, an ETF potentially adds massive new demand for a commodity, by offering a financial instrument than can be subscribed by the vast fraction of funds, investors, pensioners and speculators who prefer to leave asset management to an organization, outside broker or formula.

The first ETF application is created and backed by the Winkelvoss twins. They were Olympic rowers, but found fame & fortune by contracting Marc Zuckerberg to create an early platform for Facebook. If their application is approved, a dozen more investment banks, brokers and hedge funds are standing by to jump in with both feet.

This morning, Cointelegraph put the odds that the ETF will be approved at 50%. Some analysts place the chances even higher. But consider that Bitcoin has already spiked dramatically in the past few weeks. The excitement is already reflected in the price. So, where is the opportunity?

The opportunity, as with any speculative decision, is in the dissonance between your research and hunch compared with the overall market expectation reflected in the current price. So, for example, if Bitcoin is accepted as the basis for an ETF (and if it continues to grow in more fundamental adoption), the current price is actually remarkably low. Under these assumptions, it hasn’t even begun its period of rapid ascent. Perhaps more obviously (and even more short-term), if you believe that an ETF will be blocked by regulators, then the recent rise is likely to be reversed quickly, at least in the minutes after the March 11 decision is announced.

So how can you profit from your belief that a commodity will drop in value? I leave that to your personal investment knowledge and research or your financial advisor. My purpose is not to advise, nor even to teach about puts and calls. It is to point out that a few people will win or lose a lot of real money this coming weekend—at least on paper. And it all hinges on whether they can correctly predict the outcome of a regulatory decision process.

Again, Bitcoin is a very limited commodity, There are only 15.2 million coins today, and there will never be more than 21 million coins. This does not present an obstacle to adoption, because the coins can be sliced smaller and smaller as needed. In a noteworthy demonstration of ‘good deflation’, there will always be enough units for everyone—even if the entire world adopts it for every transaction under the sun.


Ellery Davies co-chairs Crypsa & The Bitcoin Event. He is a columnist & board member at Lifeboat Foundation,
editor at WildDuck and is delivering the keynote address at the 2017 Digital Currency Summit in Johannesburg.

What Fraction of Bitcoin Value is Driven by Speculators?

At Quora, I occasionally play, “Ask the expert”. Several hundred of my Quora answers are linked at top right on this page. Today, I was asked “How much of Bitcoin’s value is driven by speculation”. This is my answer…


This is a great question! While the value of any commodity is determined by supply and demand, speculation is one component of demand. Another is the unique utility value inherent in a product or process. This is sometimes called ‘intrinsic value’.

It’s ironic that when a high fraction of value is driven by speculation, short-term value becomes volatile and long-term value becomes less certain—and less likely to produce returns for those same speculators.

Editor’s Note: In the past few weeks, a significant spike in Bitcoin’s value and trading volume relates to a pending regulatory decision expected at the end of next week. This activity is certainly driven by speculation. But for this article, I am considering periods in which the demands of individual events are less clear.

The value of Bitcoin is influenced by:

  • Day traders who buy and churn
  • Long-term speculators who buy and hold. This includes me.
  • Criminals who hope that cryptocurrency transactions can be more easily hidden than government backed currencies
  • Early adopters who use Bitcoin as a payment instrument or to send money
  • Vendors who accept the coin in exchange for products and services
  • Vendors who retain a fraction of revenue in Bitcoin (rather than exchanging to Fiat). To avoid a round trip, they seek to purchase materials, pay staff or settle debts with the Bitcoin they earned.

Here’s the rub: Bitcoin will not become a store of value unto itself (i.e. a currency), and it will not gain a significant fraction of the payment instrument market until the transaction volume of the first to user categories in the above list are overtaken by the the ones further down. Likewise, Bitcoin will not enter its biggest growth spurt until the last two items swamps the others as the largest motive for acceptance and use.

Put another way: Long term value must ultimately be driven by organic adoption from actual users (people who buy and spend Bitcoin on other things).

In another article, I expand on the sequence of events that must take place before Bitcoin grows into its potential. But make no mistake. These things will happen. In tribute to the brilliance of Satoshi, the dominoes are already falling.

In response to the question, I estimate that at the beginning of 2017, 85% of Bitcoin value is still driven by speculators. I have not analyzed wallet holding periods compared against the addresses of known vendors. Furthermore, it would be difficult to understand the relationship between the number of speculative transactions and the overall effect on value. Therefore, my figure is more of a WAG than an calculated estimate. But it’s an educated WAG.

The fraction of speculative transactions will drop significantly in the coming months—even as late speculators jump on board. That’s because uptake from consumers and businesses is already taking off. The series of reactions that lead toward ubiquitous, utilitarian applications has begun. Bitcoin’s value will ultimately be driven by use as a payment instrument and in commerce.

Because it is a pure supply-demand instrument, Bitcoin will eventually be recognized as currency itself. That is, it needn’t be backed by precious metal, pegged convertibility or a redemption promise. When that happens, you will no longer ask about Bitcoin’s value. That would be a circular question, since its value will be intrinsic. Instead, you will wonder about the value of the US dollar, the Euro and the Yen.

As a growing fraction of groceries, gasoline and computers that you buy are quoted in BTC, you will begin to think of it as a rock, rather than a moving target. One day in the future, there will be a sudden spike or drop in the exchange rate with your national currency. At that time, you won’t ask “What happened to Bitcoin today? Why did it rise in value by 5% this morning?” Instead, you will wonder “What happened to the US dollar today? Why did it drop in value by 5%?

VILE: USA treatment of tourists under Trump

 

I wrote this during Trump’s first address to a joint session of Congress (Day 40 as president). Pundits
praised his conciliation and delivery. Trump stayed on-point and appeared more “presidential” than in past.
This post is about action; not talk or appearance. It is testimony of his leadership earlier on the same day.

This weekend, Mem Fox—a well-known Australian children’s author—was pulled aside at the airport upon arrival. She describes a horrifying and undignified experience. One that made her abhor our country. Others in the room were treated even worse. Those who were not white, English-speaking and upper-middle-class were yelled at and mercilessly humiliated. No toilet or water was offered to arriving passengers—even a young woman with a baby.

You might wonder what was the reason for suspicion? She certainly doesn’t fit the profile of  a terrorist. Many American children grew up with her books. This was her 117th visit. She is white, wealthy, educated and articulate. (None of these traits are required to visit the United States). She was pulled aside and interrogated because her airline ticket appeared to be paid by her American publisher. The immigration official claimed that she was attempting to sneak in—and work in America, illegally.

Ms. Fox isn’t the only tourist to come forward today. The French Holocaust historian, Henry Rousso, was held for 10 hours at immigration. Was his entry suspicious? He has taught at Columbia University in New York and Sorbonne in Paris. He was visiting America to give a Keynote Address at Texas A&M. But just as with Mem Fox, the immigration agent learned that he was receiving a fee for his speech. He was told that he would handcuffed and deported on the next plain to Paris. If not for a sharp lawyer at the University, he would have would have been shipped away in humiliation and disgrace. Rousso sums up the experience with this observation: “The US is no longer quite the US.

Their experiences make a mockery of the Emma Lazarus’ words at the base of Miss Liberty: “Give me your tired, your poor, your huddled masses yearning to breathe free.” Apparently, under a Trump regime, even the upper class, the academics, and the distinguished don’t make the cut.

Is this the friendly and welcoming face that we wish to show our foreign visitors and academics? Do you think that they will travel to the United States or do business with us, if clueless border control agents behave in this manner?

What Chutzpah, Xenophobia, and misguided attempts at protectionism! Unfortunately interacting with minor officials under Trump seems a lot like the interaction between German citizens and Jack boots of the Nazi SS or Gestapo.

For many individuals like Fox and Rousso, it’s not just about fake news, narcissism, a string of lies, fearing the press, lashing out at critics, lining pockets at taxpayer expense, surrounding oneself with racists or buffoonery. Instead, it’s personal; it’s ugly; it reflects on all Americans; and it is reprehensible.

It doesn’t require a bipartisan gaggle of psychiatrists to recognize that our president is seriously deranged. That diagnosis is just plain common sense. Additionally, it doesn’t require a political analyst to observe Republican congressional leaders squirming in their chairs or struggling to show unity on the evening news. At least not if you avoid the ‘fake news’.

Now, we must summon the strength and the resolve to do something. Trump must not complete his first year in office. Even if his paranoia, vindictive ethos and contempt for the truth abates, think of the missed opportunities, the mass exodus of talent, the likelihood of a military orgy. Think of the lost business deals, the serious environmental damage and the fostering of hate between cultures. Think of a woman’s right to choose and the hard won LGBT right to marry and to be who they are.

Think about Mem Fox and Henry Rousso. I wish that I could get over the slimy behavior from his campaign trail, but here one last jab… Think about a leader who brags about his p*nis size and about grabbing woman by the p*ssy. Think like an individual who cares about the future of our nation, our alliances and our planet. Raise your voice. Join your neighbors. Seize the day. Do something!

In years of writing, I never thought that I would end an op-ed piece like this:

  • Resist
  • Defend
  • Restore our lost ethics and compassion
  • Embrace diversity—It is a core strength
  • Speak out for the environment
  • Deal honestly and fairly with other countries; lest they flee a relationship
  • The truth matters

MIT: 3 Big Blockchain Initiatives

MIT has never stood stand still in the presence of change and opportunity. Their Media Lab Currency Initiative is at the forefront of Blockchain and Bitcoin research. With the fracture of the founding core team, MIT stands to become the universal hub for research and development.

The initiative has a team of 22 people and—currently—seven research projects. It nurtures three startups that use cryptocurrency and blockchain in a variety of novel ways. Blockchain research now sits alongside transparent robots that eat real-world fish, solar nebula research, and other imaginative, futuristic projects in progress at the university.

The initiative has already funded the work of bitcoin protocol developers and has supported research, going far beyond bitcoin—even partnering with Ripple Labs and developing enterprise data projects.

Now, the MIT Media Lab Digital Currency Initiative is working on 3 big Blockchain ideas:

  1. Shattering online ‘echo chambers’
  2. Improving blockchain privacy
  3. Building central bank currencies

The DCI is led by former White House advisor and research director Neha Narula. Read about the three BIG blockchain projects at CoinDesk

Ellery Davies co-chairs Crypsa and The Bitcoin Event. He is columnist & board member at Lifeboat Foundation,
editor of AWildDuck and will deliver the keynote address at the 2017 Digital Currency Summit in Johannesburg.

Distributed Consensus: Beyond POW or POS

At the heart of Bitcoin or any Blockchain ledger is a distributed consensus mechanism. It’s a lot like voting. A large, diverse deliberative community validates each, individual user transaction, ownership stake or vote.

But a distributed consensus mechanism is only effective and faithful if the community is impartial. To be impartial, voters must be fairly separated. That is, there must be no collusion enabled by concentration or hidden collaboration. They must be separated from the buyer and seller; they must be separated from the big stakeholders; and they must be separated from each other. Without believable and measurable separation, all sorts of problems ensue. One problem that has made news in the Bitcoin word is the geographical concentration of miners and mining pools.

A distributed or decentralized transaction validation is typically achieved based on Proof-of-Work (POW) or Proof-of-Stake (POS). [explain]. But in practice, these methodologies exhibit subtle problems…

The problem is that Proof-of-Work can waste an enormous amount of energy and both techniques result in a concentration of power (either by geography or by special interest) — rather than a fair, distributed consensus.

In a quasi-formal paper, C.V. Alkan describes a fresh approach to Blockchain consensus. that he calls Distributed Objective Consensus. As you try to absorb his mechanism, you encounter concepts of Sybil attacks, minting inequality, the “nothing-at-stake” problem, punishment schemes and heartbeat transactions. Could Alkan’s distributed consensus mechanism be too complex for the public to understand or use?…

While I have a concern that time stamps and parent-child schemes may degrade user anonymity, the complexity doesn’t concern me. Alkan’s paper is a technical proposal for magic under the covers. Properly implemented, a buyer and seller (and even a miner) needn’t fully understand the science. The user interface to their wallet or financial statement would certainly be shielded from the underlying mechanics.

Put another way: You would not expect a user to understand the mechanism any more than an airline passenger understands the combustion process inside a jet engine. They only want to know:

• Does it work?  •  Is it safe?  •  Is it cost effective?  •  Will I get there on time?

So will Alkan’s Decentralized Objective Consensus solve the resource and concentration problems that creep into POW and POS? Perhaps. At first glance, his technical presentation appears promising. I will return to explore the impact on privacy and anonymity, which is my personal hot button. It is a critical component for long term success of any coin transaction system built on distributed consensus. That is, forensic access and analysis of a wallet or transaction audit trail must be impossible without the consent and participation of at least one party to a transaction.


Ellery Davies co-chairs Cryptocurrency Standards Association and The Bitcoin Event. He is columnist & board member at
Lifeboat Foundation, editor of AWildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.

Blockchain Scalability: Proof-of-Work vs BFT Replication

Research can seem bland to us laypersons. But, Marko Vukolić shares many of my research interests and he exceeds my academic credentials (with just enough overlap for me to understand his work). So, in my opinion, his writing is anything but bland…

Vukolić started his career as a post-doc intern at IBM in Zurich Switzerland. After a teaching stint as assistant professor at Eurecom and visiting professor at ETH Zurich, he rejoined the IBM research staff in both cloud computing infrastructure and the Blockchain Group.*

As a researcher and academic, Vukolić is a rising star in consensus-based mechanisms and low latency replicated state machines. At Institut Mines-Télécom in Paris, he wrote papers and participated in research projects on fault tolerance, scalability, cloud computing and distributed trust mechanisms.

Now, at IBM Zurich, Vukolić has published a superior analysis addressing the first and biggest elephant in the Bitcoin ballroom, Each elephant addresses an urgent need:

  • Scalability & throughput
  • Incentivize (as mining reward withers)
  • Grow & diversify governance & geographic influence
  • Anonymize transactions to protect privacy
  • Recognize & preserve ownership

Regarding the first elephant, scalability, Bitcoin urgently needs to grow its Blockchain dynamics into something that is living and manageable. To that end, Vukolić refers to a transaction bookkeeping mechanism that works as a “fabric”. That is, it does not require every miner to access the history-of-the-world and append each transaction onto the same chain in serial fashion. Rather than growing an ever bigger blockchain—with ever bigger computers—we need a more 3D approach that uses relational databases in a multi-threaded, transactional environment, while still preserving the distributed, p2p trust mechanisms of the original blockchain.

While clearly technical, it is a good read, even for lay enthusiasts. It directly relates to one of the elephants in the room.

I have pasted Marko’s Abstract below. The full paper is 10½ pages (14 with references).


Bitcoin cryptocurrency demonstrated the utility of global consensus across thousands of nodes, changing the world of digital transactions forever. In the early days of Bitcoin, the performance of its probabilistic proof-of-work (PoW) based consensus fabric, also known as blockchain, was not a major issue. Bitcoin became a success story, despite its consensus latencies on the order of an hour and the theoretical peak throughput of only up to 7 transactions per second.

The situation today is radically different and the poor performance scalability of early PoW blockchains no longer makes sense. Specifically, the trend of modern cryptocurrency platforms, such as Ethereum, is to support execution of arbitrary distributed applications on blockchain fabric, needing much better performance. This approach, however, makes cryptocurrency platforms step away from their original purpose and enter the domain of database-replication protocols, notably, the classical state-machine replication, and in particular its Byzantine fault-tolerant (BFT) variants.

In this paper, we contrast PoW-based blockchains to those based on BFT state machine replication, focusing on their scalability limits. We also discuss recent proposals to overcoming these scalability limits and outline key outstanding open problems in the quest for the “ultimate” blockchain fabric(s). Keywords: Bitcoin, blockchain, Byzantine fault tolerance, consensus, proof-of-work, scalability, state machine replication

* Like Marko, Blockchains, Cloud computing, and Privacy are, also my primary reserach interests, (GMTA!). But, I cede the rigorous, academic credentials to Marko.

BFT = Byzantine Fault Tolerant consensus protocols

Related—and recently in the news:

Ellery Davies co-chairs Cryptocurrency Standards Association and The Bitcoin Event. He is columnist & board member at
Lifeboat Foudation, editor of AWildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.

Getting your first Bitcoin; Choosing a wallet

There are at least four ways to acquire Bitcoin and three ways to store it…


Acquire Bitcoin: You can trade Bitcoin in person, accept it as a vendor, mine it, or buy on an exchange.

Store Bitcoin: You can keep your Bitcoin in an online/cloud service (typically, one that is connected to your exchange account), keep it on your own PC or phone, or even print it out and store it on a piece of paper. Like a physical coin, the piece of paper has value. It can be placed in your lock box or under your mattress.

Let’s look at the market for Bitcoin Wallets (all of these are free), and then we shall talk about Bitcoin exchange services. This includes my personal recommendation for the typical consumer or coin enthusiast…

1. Choosing a Wallet

You can start your search for a wallet on this page at Bitcoin.org. Use the drop down tabs to refine your search by platform: Mobile, Desktop, Hardware gadget or Web. Don’t overlook the web option. For many users, the wallet (and VAULT) included with an online exchange account is all you need.

Each wallet platform is further distinguished by operating system. For example, you can find a smartphone wallet for Android, Apple, Windows Mobile or Blackberry. Some popular apps are listed under more than one OS or platform.

When you click on any of the app logos, you will see a checklist of five key traits, according to reviewers at the Bitcoin Foundation:

  • Control over your money
  • Simplified validation
  • Basic transparency
  • Secure environment
  • Weak privacy

These are not necessarily critical traits/features. It depends on your needs and preferences. For example, everyone wants good privacy and security. But not everyone wants to control their private keys. That places the risk of loss, backup and/or the burden of inheritance issues on you, rather than a standardized recovery process. The feature comparison simply helps you to begin your own comparison and evaluation.

For Android users, my personal recommendation is Bitcoin Wallet by Andreas Schildbach (the logo is a tilted orange ‘B’). It is simple, secure, well maintained and very popular. (iPhone users: See my my suggestion in the recommendations, below).

2. Portable –vs– Online

Despite the simplicity and low cost of spending or sending Bitcoin between individuals and vendors, getting your first Bitcoin can be confusing, complex and even risky. For this reason, I suggest that Newbies open an account at a very established and trustworthy exchange.

In the near future, this will include most big banks. But for now, the safest and most reputable exchange is Coinbase in San Francisco. They are also the one with the highest level of regulatory compliance. Bitstamp of Slovenia and Great Britain is a close second. In my opinion, using either of these organizations as a currency exchange or a secure place to park your digital currency is a safe bet.

Both of these exchanges include a cloud wallet service that—when used properly—is safe and secure. But, because Bitcoin is still in its infancy, you will need to learn about sweeping funds into a ‘vault’ (to better protect against hacking) and you should also learn about portable backups and multi-sig (to protect your assets, in the event of forgetfulness, death or incapacitation).

With either type of wallet—device storage or online with an exchange—I recommend that you install and play with a portable wallet on your phone, just to get the hang of a few basic functions: Display wallet address for incoming money, Send money, Request money (i.e. send an invoice), and Pay with the QR-camera feature. All wallets serve these basic and critical needs.

Recommendations:

  • Coinbase is a most reputable exchange for buying/selling & storing Bitcoin
  • Bitcoin Wallet by Andreas Schildbach is an excellent choice for portable, secure storage. This app is available for Android phones only. Apple iPhone users may wish to try Bitcoin Wallet by Blockchain. I have not reviewed it. It has a slightly less friendly user interface but it is stable and very popular.

Related Reading:

Ellery Davies co-chairs Cryptocurrency Standards Association. He produces The Bitcoin Event, is board mem-
ber at Lifeboat Foundation and will deliver the Keynote Address at Digital Currency Summit in Johannesburg.

Can Bitcoin Flourish with a Capped Supply?

The answer may be counter-intuitive: Not only can Bitcoin be widely adopted under a supply cap, its trust and integrity are a direct result of a provably limited supply. As a result, it will flourish because it is capped.

Everyone Can Own and Trade a Limited Commodity, IF…

…if it is both measurable and divisible. Bitcoin has a capped supply just as gold has a capped supply. Although both assets will be mined for some time into the future, there is only so much that will ever be uncovered. Thereafter, the total pie cannot grow.

But the transaction units will continue to grow as needed, because the pie is divisible into very, very tiny units:

There will eventually be 21 million BTC and each coin is divisible into 108 units. This yields (21 million * 100 million), or 21 trillion exchangeable units. And, it can be divided further by consensus.

As Bitcoin is adopted—whether as a simple payment instrument, an investment asset or even as national currencies around the world—each unit of the limited supply simply rises in value. If thought of as a currency, with a value established by supply & demand, it leads to a deflationary economy.

But, Isn’t Deflation Bad for the Economy?

It’s common to associate deflation with economic ills. One need only glance back at the the last century to conclude that deflation coincides with wars, joblessness, recession and a crippling concentration of wealth. Perhaps, just as bad, the tools used to pull a nation out of deflation often force governments to cherry pick beneficiaries of stimulus spending.

But it is important to note that deflation plays no role in causing these things. On the contrary, it is an effect rather than a cause… In fact, when a supply cap is introduced as a designed control input for monetary policy, all sorts of good things follow. I address these in various answers at Quora. Dig in:

Ellery Davies co-chairs Cryptocurrency Standards Association. He was host and producer of The Bitcoin Event in New York.

Bitcoin Arbitrage: Can you profit?

At Quora, I occasionally play, “Ask the expert”. Several hundred of my Quora answers are linked at the top right. Today, I was asked if the difference between quotes at various Bitcoin exchanges presents a profit opportunity.

In addition to my answer, one other cryptocurrency enthusiast offered pithy, one-line response: He said “Buy local, sell internationally and pocket the difference!” I tend to believe the opposite is more likely to generate profit: Buy internationally and sell locally. But, I am getting ahead of myself. Here is my answer [co-published at Quora]…


Question:
A Bitcoin exchange in my country quotes a different rate than
international markets. Can I profit from the price difference?

Answer:
Buying and selling a commodity with the intention of profiting from the difference in price in various markets, regions or exchanges is called arbitrage. Typically, the item must be widely traded and fungible. Although it can be a tangible item (one that must be delivered or stored, like gold, oil, frozen orange juice or soy beans), arbitrage is more practical when applied to an ‘item of account’, such as foreign currency, equity shares, stock futures, or Bitcoin.

With this in mind, Bitcoin qualifies as a fungible item of account. If you see a different price at various exchanges (or if you believe that you can source personal sales at a higher price than the market spot price), then you have found an opportunity for arbitrage. But hold on! It is not so easy…

  1. The arbitrage opportunity is often illusory. For example, the cost difference that you observe in market quotes may be overshadowed by the bid/ask spread or by fees, which can be both fixed and a percentage.
  2. The arbitrage opportunity is transient. It is there for a few seconds and then it vanishes in the next quote. For this reason, successful arbitrage players must be very adept at day-trade techniques. To avoid massive risks, you need up-to-the-second quotes, fast trading tools, and the ability to simultaneously freeze your purchase and sale price.
  3. Trust is never golden! Even with these tools and promises, when a commodity begins to move in either direction, you will find that a buyer or seller often finds a way to renege on the agreed price. These are not random events…When a trading partner abandons a transaction, it always work against you.
  4. Some exchanges (and even some national regulatory agencies) prohibit rapid and repeated trading. This may be to discourage speculation or it may be designed as a circuit-breaker (a mechanism to avert the cascade effect that sometimes results from pre-programmed trades). These halts on quick trades can wipe out your gains, or worse. They can turn your investment into a horrible mess.
  5. Some big exchanges have built-in arbitrage mechanisms that quickly adjust prices and even buy and sell on their own account to keep their limit order books in sync. They are on the front lines and you aren’t! This fact, alone, should give you pause. Opportunity for an outsider is severely limited by these ‘inside’, self-adjusting trades.
  6. Other legal risks: If the transaction is later deemed to be illegal in the jurisdiction of any party, your exchange accounts may be frozen, fined, or your privileges revoked. Unlike p2p Bitcoin transactions, exchange transactions can be reversed. Again, these legal snafus will always work against you. In fact, sometimes, they were pre-planned scams from the start!
  7. Finally , there are sometimes good reasons for different prices in different markets. For example, national and local regulations may burden the consumer cost for an item, or the seller may be required to pay a fee or tax to some authority or regulatory agency. If you dodge these costs, you may be violating laws and subject to penalties or punishment. You may even put your customer at risk.

What about arbitrage pools or affiliate programs? Don’t be a sucker! If Gladiacoin could double your Bitcoin every 90 days, they wouldn’t need to set up a multi-level marketing scheme. They would simply start with a few hundred dollars and become billionaires by endlessly doubling their money.

I am neither an arbitrage player nor a day trader. These are just a few warning bells that come to mind when I think about such activity. You can be sure that this list of risks only scratches the surface. Bitcoin is remarkably fluid and many people flaunt regulations. For this reason, I am confident that opportunities for profitable arbitrage are rare and very tiny (small gain for a big risk).

Have I scared you away from Bitcoin arbitrage? If not, proceed with extreme caution and don’t bet the family ranch! Once you have some experience, come back and post feedback below. I have dabbled in options arbitrage, but never with Bitcoin or any currency. Since I don’t have first-hand experience, your feedback will be appreciated.

Ellery Davies is a frequent contributor to Quora. He is also co-chair of Cryptocurrency
Standards Association, host of The Bitcoin Event (New York), and editor at A Wild Duck.

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.

At this early stage, the only risk of missing the Bitcoin boat is to assume that it is a house of cards—or passing fad. It is not! It is more real than the California gold rush. But in this case, prospectors are subject to far less risk and chance.


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

Trump’s Behavior: A Rational Explanation

It is no secret that I am opinionated. Although flexible when presented with a contrary opinion, I am unapologetic in articulating blunt positions and pushing emotional buttons. After all, this is the luxury of having a bully pulpit. It’s also a blessing of the First Amendment and the Internet.

But there are boundaries—even for an opinionated and sarcastic Blogger. When I became editor of Wild Duck more than 5 years ago, I made a New Career Resolution. I committed to never discuss three topics. They were over-hyped, argued and litgated in other venues. I didn’t want the noise and I didn’t care to defend my opinion nor deal with the return fire. Not on these three issues..

I don’t expect you to click through all the links below—but as you can see, my New Career Resolutions were kicked to the curb. I broke two of three promises in the very first year!

Despite pontificating on all of these banned topics, on election day 2016, I made a new resolution to at least remain quiet about Donald Trump. I wrote six articles about him before the election. But the fact is that he has won. And for the past 3 weeks, I resisted the temptation to rant, whine, complain—or hold my breath until the family jewels turn purple. He won. He is our Chief Honcho Elect. ’Nuff said!

Well, at least this latest resolution was good for 3 weeks. Today, I break that commitment by linking to this article: Jane Goodall, the famed anthropologist and expert on primate behavior, offers a simple and scientific explanation for Donald Trump’s behavior and outrageous claims.

Donald Trump hoots & stomps at Jane Goodall

Donald Trump hoots & stomps at Jane Goodall

She demonstrates with rigorous academic precision, that Trump’s statements and attacks map directly onto chest-thumping, tree dragging, hooting and stomping of lowland gorillas. And not every act is a metaphor! For example, male Gorillas don’t just attack others they perceive as competitors, they berate, degrade, lie, bully and demonstrate p*nis size to ensure that they get their way. Even more interesting, they increase their humiliation and attacks on any other male who fails to support their earlier attacks.

Seriously, this is no joke! It’s academically valid and very illuminating. Don’t just take it from me…check it out here. And just for the record, this post is not about Trump. It’s a wildlife documentary and a tribute to a highly respected scientist.

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. 🙂
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The author is co-chair of The Cryptocurrency Standards Association.
He also presents on privacy, anonymity, blind signaling & antiforensics.