Was SHA-256 cracked? Don’t buy into the retraction!

SHA-256 is a one way hashing algorithm. Cracking it would have tectonic implications for consumers, business and all aspects of government including the military.
 
It’s not the purpose of this post to explain encryption, AES or SHA-256, but here is a brief description of SHA-256. Normally, I place reference links in-line or at the end of a post. But let’s get this out of the way up front:
 
One day after Treadwell Stanton DuPont claimed that a secret project cracked SHA-256 more than one year ago, they back-tracked. Rescinding the original claim, they announced that an equipment flaw caused them to incorrectly conclude that they had algorithmically cracked SHA-256.
 
“All sectors can still sleep quietly tonight,” said CEO Mike Wallace. “Preliminary results in this cryptanalytic research led us to believe we were successful, but this flaw finally proved otherwise.”
 
Yeah, sure! Why not sell me that bridge in Brooklyn while you backtrack.

The new claim makes no sense at all—a retraction of an earlier claim about a discovery by a crack team of research scientists (pun intended). The clues offered in the original claim, which was issued just one day earlier, cast suspicion on the retraction. Something fishy is going on here. Who pressured DuPont into making the retraction—and for what purpose? Something smells rotten in Denmark!
Let’s deconstruct this mess by reviewing the basic facts:

  • A wall street, financial services firm proudly announces the solution to a de facto contest in math and logic
  • They succeeded in this achievement a year ago, but kept it secret until this week
  • One day later (with no challenge by outsiders),* they announce a flaw in the year-old solution

Waitacottenpickensec, Mr. DuPont!! The flaw (an ‘equipment issue’) was discovered a year after this equipment was configured and used—but only one day after you finally decide to disclose the discovery? Poppycock!

I am not given to conspiracy theories (a faked moon landing, suppressing perpetual motion technology, autism & vaccinations, etc)—But I recognize government pressure when I see it! Someone with guns and persuasion convinced DuPont to rescind the claim and point to a silly experimental error.

Consider the fallout, if SHA-256 were to suddenly lose public confidence…

  • A broken SHA-256 would wreak havoc on an entrenched market. SHA-256 is a foundational element in the encryption used by consumers & business
  • But for government, disclosing a crack to a ubiquitous standard that they previously discovered (or designed) would destroy a covert surveillance mechanism—because the market would move quickly to replace the compromised methodology.
I understand why DuPont would boast of an impressive technical feat. Cracking AES, SSL or SHA-256 has become an international contest with bragging rights. But, I cannot imagine a reason to wait one year before disclosing the achievement. This, alone, does not create a conundrum. Perhaps DuPont was truly concerned that it would undermine trust in everyday communications, financial transactions and identity/access verification…
 
But retracting the claim immediately after disclosing it makes no sense at all. There is only one rational explanation. The original claim undermines the interests of some entity that has the power or influence to demand a retraction. It’s difficult to look at this any other way.
 
What about the everyday business of TS DuPont?
 
If the purpose of the original announcement was to generate press for DuPont’s financial services, then they have succeeded. An old axiom says that any press is good press. In this case, I don’t think so! Despite the potential for increased name recognition (Who knew that any DuPont was into brokerage & financial services?) I am not likely to think positively of TS DuPont for my investment needs.
 

* The cryptographic community could not challenge DuPont’s original claim, because it was not accompanied by any explanation of tools, experimental technique or mathematical methodology. Recognizing that SHA-256 is baked into the global infrastructure: banking, commerce and communications, their opaque announcement was designed to protect the economy. Thank you, Mr. DuPont, for being so noble! 

Stunning 1st image of a Black Hole

Eight of 347 scientists: Their achievement is above the fold in major newspapers


Yesterday (Sep 5, 2019), the Breakthrough Prize Foundation awarded $21.6 million US dollars to the scientists behind a stunning achievement. They imaged a black hole. Although the image was announced and released 5 months ago, the story is still unfolding.

The Breakthrough Prize is funded by Russian-Israeli billionaire Yuri Milner. It is the highest-paying science prize for researchers in life science, math, and physics.

There are many black holes in our galaxy and some small ones in our own galactic “neighborhood”. Yet the EHT team* focused on M87, a black hole in the center of another Galaxy, 55 million light years from our solar system.

This is pretty far, but it is a massive black hole with a bright accretion disk (stuff around the event horizon), and it is orthogonal to our vantage point. How big is the M87 black hole? It is bigger than our entire solar system!

At this unfathomable distance, it is difficult to image anything smaller than an entire galaxy. But by combining data from instruments and math teams around the world, scientists released in April an actual photograph. To be precise, it is the shadow of a black hole, but it clearly shows the accretion disk, event horizon and a hole in the middle. In fact, it shows a perfect, glowing donut.

* The EHT = Event Horizon Telescope

To achieve the implausible, scientists combined data from 8 radio telescopes around the world, including two operated by the European Southern Observatory in Chile (producer of the first video, below). Although data was captured as radio waves, a team of 347 scientists pieced the information together into an actual image. What you see in the paragraph above is not an illustration based on data. It is a genuine photograph.

As you view the 1st video below, you may not feel that it is new. Even with the Big Bang in question, black holes are certain fact, and images have been circulating for years. But—until now—those were all artist’s renderings. There has never been an actual photo of a black hole. This is a first.

A web search turns up many videos about the achievement. Some are less than 2 minutes, and some are 2 hour documentaries. I like these two videos: [1] a 17 minute video documenting the effort to achieve this milestone and clearly explaining the result—and [2] an 11½ minute Ted Talk:

  1. In the Shadow of the Black Hole
  2. Inside the Black Hole That Made History

Can Bitcoin transactions be made private?

The blockchain is public, yet a Bitcoin wallet can be created anonymously. So are Bitcoin transactions anonymous? Not at all…

Each transaction into and out of a wallet is a bread crumb. Following the trail is trivial. Every day, an army of armchair sleuths help the FBI. That’s how Silk Road was brought down.

The problem is that some of that money eventually interacts with the real world (a dentist is paid, a package shipped or a candy is purchased at a gas station). Even if the real-world transaction is 4 hops before or after hitting the “anonymous” wallet, it creates a forensic focal point. Next comes a tax man, an ex-spouse or a goon.

The first article linked below addresses the state of tumblers (aka “mixers”). They anonymize an open network by obfuscating the trail of bread crumbs.

Mixers/tumblers aren’t the only way to add a layer of privacy to Bitcoin transactions. The Lightning Network spec includes an optional 17-hop onion routing (just like TOR’s 4 step onion routing). I have not yet seen the feature expressed in wallets or services, but if implemented, it will be even more private and trustworthy than a mixer, because there is no middle party to trust (by you) or squeeze (by investigators). It has the potential to makes any crypto Bitcoin even more anonymous than cash.

Certain cryptocurrencies (not Bitcoin) have anonymity baked in by design. Monero, ZCash and Dash are privacy tokens that use very different approaches to eliminate the bread crumbs. Monero appears to have one distinct advantage: Like the TOR network, it is trustless. But there are benefits to each approach.

The Race to Own One Bitcoin

Owning one full bitcoin is becoming a recognized attainment goal. And thereby hangs a tale.

Is it just a numbers game? Isn’t the unit a bit arbitrary and meaningless?…

The logistics and the math are compelling. I recognized the importance of reaching this personal milestone more than 8 years ago. But I was a nobody. No one cared. Then, in April 2019, we started to see articles in legitimate venues about the goal—articulated in exactly this way. I borrowed the title of this post from this article in Medium.

Who Says So?

In the Before Time, the drum beat came from me, Charlie Shrem and Andreas Antonopoulos. In the Middle Age, Tim Draper, Craig Wright and the Winklevoss twins contributed to the siren call. But in the Modern Era (the past few days), it has become a mainstream mantra. Coinbase CEO, Brian Armstrong, added his voice to the idea that owning one full Bitcoin is not just an exercise in numerology.

“For better or worse, I do think owning one whole Bitcoin will increasingly become a big deal. Only 21M will ever be produced. Some people already own much more than one.”

—Brian Armstrong, Aug 25 2019

“If you own 1 BTC, you’re mathematically guaranteed to be top 3/1000 richest in the world, in BTC terms. (21m / 7B).”

—Changpeng Zhao, Aug 25 2019

“If you own 0.28 BTC and HODL, you can be certain no more than 1% of the current world’s population can EVER own more BTC than you. A modest investment of $1,830 today can ensure you are a 1%er in a future Bitcoin world.”

—Steve Lee, Aug 25

In a March editorial, Xapo CEO, Wences Casares advised investment fund managers: Most portfolios should allocate up to 1% to Bitcoin”. He also said:

“ If Bitcoin does succeed, 1 Bitcoin may be worth more than $1 million in 7 to 10 years.”

— Wences Casares, CEO of Xapo; PayPal Board of Directors

Despite getting religion early on, I have mixed feelings about this. The investor mindset— HODL, flipping and converting to Fiat—is the biggest threat to adoption, ubiquity, fluidity and utility. Currently, 98% of all transactions are driven by people buying or selling bitcoin, rather than using bitcoin to buy lettuce, a new SUV or a family vacation. That’s the problem. Bitcoin will fail to gain mainstream appeal and adoption until the fraction of transactions driven by purchase & sale, salary, debt payment, real-estate and buying groceries dwarfs the fraction driven by traders or conversion into and from Fiat.

Yet, it is impossible to resist the lure of a deflationary commodity during the early adoption era. The supply cap and adoption math clearly points to a rising unit value. What is the point in having the capacity and foresight to recognize a new technology or a radically transformative paradigm if you cannot treat it as an investment asset, while waiting for adoption?

I don’t know how we will push through the chicken-and-egg problem of volatility–utility–adoption–ubiquity. But I am confident that Bitcoin will ultimately reign supreme—not just as a payment instrument—but as a store of value and a leading international currency.

For now, this opinion is still in the minority. Otherwise a commodity with only 18 million units in circulation would have a far higher value than the current exchange rate. It is from this certainty and disparity that opportunity arises.

For those that don’t quite get Bitcoin, owning one full bitcoin seems like an arbitrary goal to achieve. After all, it is a useless token that can be imitated by other—better—cryptos. To these folks, Bitcoin is a fad, a fools gold, or an outright scam.

Do you own a whole Bitcoin? Few will own more than a fraction

What they don’t get is the legitimate, organic, two-sided network that buttresses bitcoin and no other currency. A new-age intrinsic value that surpasses the utility & scarcity of gold, but with benefits that outstrip gold and fiat. The inherent value and the pillars that support value are unlikely to be eroded or transferred, even during periods of technical crisis, hacking or regulatory hysteria.

If something better than Bitcoin comes along, two things will happen to ensure supremacy:

  • Improvements will be folded into Bitcoin. After all, a trusted crypto is open source, transparent and license free. The leader can snag any feature or improvement.
  • If another chit is more fluid, flexible, friction free or private, Bitcoin will remain the background reserve through which other “instruments” derive value. This is already occurring.

So, should you buy into the hype? Should you accumulate one full bitcoin while you still can? At the risk of obnoxious immodesty, here is one more quote. Add it to the list at the top of this article. Then, decide for yourself!

“The handwriting is on the wall. Popular adoption is a work in progress. But it is, nevertheless, fait accompli. This handwriting is indelible.”

—Ellery Davies, A Wild Duck

Related:


Ellery Davies co-chairs CRYPSA and produced The Bitcoin Event in New York. He writes for QuoraLinkedINWild Duck and Lifeboat Foundationwhere he sits on the New Money Systems Board.

Betty’s Table: Something completely different

Let’s start with a backstory. The real story is in the last ⅓, but don’t jump ahead just yet! We’ll paint a backdrop of rich texture and introduce key characters: Me, Betty, my mom and brother, Betty’s son, Gaston and my daughter. But wait! I’m getting ahead of myself.

Do you remember Betty? Of course you do! She was friends with my older brother, Chuck, after he graduated from college. I was still in middle school, but I looked up to her and hoped that she would become my sister-in-law. How cool is that!

I grew up in a Chicago suburb. In this photo from the 1970s Betty prepares a Sedar meal at our home. (Hence, a box of Matzo on the right).

Betty and Chuck never felt the electricity needed for romance. But we didn’t lose Betty to the wind. She formed a close personal and professional friendship with my Mom. They worked together at Mom’s antique store and the two of them started several business ventures.

Eventually, Betty got married and moved to France with her new husband. He had managed a Chicago restaurant, but got a job at much fancier restaurant in Paris.

I visited Paris in the 1980s after graduating from college. Betty had already been there for 4 years, and our families had all but lost touch.

This was an impulse trip. Northwest Airlines started non-stop service to France. To announce the new flights, they cut the fare to $99 with no advance reservations needed. It was as easy as stepping onto a bus. And so, I flew to Paris for a long weekend. I had no plan, didn’t speak the language, and didn’t know anyone—except Betty and her son, Gaston.

When Betty moved to France, Gaston was just 8 years old. Now, at 12, he was speaking French more fluently than his mom. I borrowed him as personal translator and tour guide. (Today, he lives in Poland with his son and daughter).

On the left (1980s), 12 year old Gaston shows me the Eiffel Tower. 20 years later, I visited with my daughter (not shown). On the right, Gaston returns with his daughter. Life comes around!

Betty’s Rising Star

Any friend of our family—or Betty’s family—knows that she is incredibly artistic. She has always been oozing with talent. Regardless of the medium, painting and sculpture are second nature to her. In France, she became a sensation—living and working there for more than 20 years.

But recently, Betty divorced and moved back to Chicago. Eventually, she started a summer arts camp for children in Wisconsin. I am certain that she would have renewed many projects with Mom, but my mother died of Ovarian cancer years ago. That chapter has ended for all time.

Betty continues to thrive as an artist. She paints murals and is constantly offered private commissions to paint a specific thing—or for a special occasion. With rising stature and prolific output, she is doing well.

Poignant and Affective

Now that you have the background, here is a very short story. It’s more about me than it is about Betty. If you’re into happy endings, you may want to wait for the unwritten epilogue. This one is filled with happy memories, but very sad as it reaches present day. That’s because the happy memories may be only in the past.

Today, I experienced a pang of nostalgia and a terrible emptiness. To empathize or console, click to enlarge the photo collage and look closely at each image…

Betty paints a table for Ellery

Photos in the top row were taken 36 years ago. Bottom photos were taken today. This was my kitchen table for all but eight of those 36 years. It got lots of use, even after it was replaced in our kitchen. But now, I can’t bear to look at it. It sings out too many happy memories. Memories of the past. Memories that overwhelm my constitution.

Top Row (May 1983): Mom took the 3 photos in the top row. Betty is customizing an expandable table with a mural for my new home. Flowers and birds line up perfectly, with or without the expansion leaf. Just as with this ostrich egg, Betty’s Escher-like talent can wrap an illustration around a surface and lock it back onto itself like a jigsaw puzzle.  »

Bottom Row (August 2019): The bottom row shows the table being loaded onto a dumpster in front of my home. It saw its last meal a few months ago. Now, I am divorced and alone. My daughter has just left for college on the other coast. She is 2,700 miles away and the home is just too filled with stuff to sell, rent—or even to continue using on my own. I need to downsize. And to be honest, the happy memories of the past are too painful for this table too stay so close to me.

Homework at Betty’s table

In 2011, I flew across the country to care  for my ailing father. Back home, my wife remodeled the kitchen and bought a new glass table. Since then, Betty’s beautiful table has lived in our cellar. But, even after we separated, it came upstairs frequently—as if it wanted to be sat at and used. I have dragged it up and re-assembled it whenever we had a cookout, when my daughter operated a lemonade stand, and even after my wife left the nest. She occasionally borrowed it for an event of her own. I was happy to loan it to her. After all, Betty and this table have been a silent part of our lives for so long.

But now, it is time to shed a tear and say good bye.

This was a grand table. Just like the love for my daughter, it is still sturdy and functional. I love it and I will miss it. Even though the choice is mine, I cried as I took it out to a dumpster to become buried in a landfill of rubbish. Just like people, it will eventually return to its organic roots.

No one will ever sit at this table again. No one will ever eat at it. No one will ever think of Betty, when they gaze at the beautiful art—except, perhaps, in this sad story.

I wonder how Betty is doing today? I wonder if she ever thinks of Mom. I wonder if she will ever see this article. I may see Betty again, but once the dumpster is picked up, I will never again see Betty’s beautiful table. Perhaps, you will shed a tear with me. I just don’t know if I did the right thing.

I considered including a photo of my daughter’s princess wand next to my Halloween wig. But for now, I cannot bear to share it. Wig and Wand at the top of a box in a trash dumpster—too much to deal with.

The dumpster will be at my home for 10 days, as I sweep out a lifetime of memories—mostly happy ones. Why am I sad?

Spending Bitcoin in Person is Easy (What happens in background is elegant)

Today, I was co-host of an online cryptocurrency symposium—taking questions from hundreds of visitors. A common question goes something like this:

Can Bitcoin be used in person—or is it just for internet commerce?

Our panel had a moderator, and also an off-screen video director. As I cleared my throat in preparation to offer a response, a voice in my ear reminded me that it was not my turn. The director explained that another panelist would reply. It was a highly regarded analyst and educator in Australia. Realizing that that she was calling the shots, I deferred.

I was shocked as I listened to this far off colleague suggest that Bitcoin is not useful for in-person payments. I wonder how he explains this to the grocers, tailors, lawyers, theme parks and thousands of retailers who save millions of dollars each year by accepting bitcoin—all without risk of volatility and even if they demand to instantly convert sales revenue into Fiat currency.*

Of course it can be used in person, Numb-nut!
(I kept this thought to myself. I know better than
to criticize another panelist).

An in-person transaction, such as paying for a meal after consumption, is an ideal use scenario. It benefits everyone: The seller captures greater value and the buyer is unlikely to need bank-brokered arbitration. He only needs a receipt. He will never demand a 90-day return warranty, claim that he was shipped an empty box, nor complain about the amount charged.†

But this isn’t about my clueless colleague. It is about the ease of using Bitcoin in person and the interesting stuff that happens in the background. Let’s look at a simple purchase scenario — and then we’ll dig in to marvel at the settlement process. This is a true story, told in 7 bullets. It occurred in the summer of 2015—just 5 years after the very first use of bitcoin to purchase anything (Bitcoin Pizza Day was May 22, 2010).

  • It’s 2 AM on a moonlit Sunday morning. Driving from Boston to New York, I rehearse the Bitcoin presentation that I will deliver at a startup clinic hosted by LaGuardia Community College and the Cryptocurrency Standards Association. Wracked by hunger, I pull off the last exit in Connecticut and find the Darien Diner. Great food! My meal costs $12.
  • As I take one last bite of midnight quiche, I realize that I forgot my wallet! No cash; no driver’s license. Although I have a smartphone, it is brand new. I have not yet loaded it with credit cards. But I can access to my passwords and accounts.
  • I scope my surroundings. The waiter is the only one on the main floor. He is also the cashier. Seeing no other customers or staff, I figure that the owner or cook is in the kitchen; probably the only other person on site. I approach the cash register, hoping that the waiter will accept my apology—and trust that I will pay on my return trip in a few days. Before I launch into a poor-man’s excuse, I spot a placard shown below. Bitcoin is among the diner’s accepted payment methods. Pretty neat for 2015!
  • Bitcoin accepted hereI ask the cashier how I can pay with Bitcoin. His response catches me off-guard: “I have no ideaThey told me that you would know.” What?! Does this guy recognize me? Does he know that I am on my way to give a Bitcoin lecture? This seems very unlikely. Gradually, I understand what he means, and I know what to do…
  • I point my smartphone at the QR code (It’s taped to the cash register next to the words: “We accept Bitcoin”). In fact, this restaurant is fully on board. I am amazed to see that a display on the register offers a custom code that is encoded with the exact meal cost. That’s really cool! So, I shift my camera to that code.
  • Immediately, my wallet asks if I would like to add a tip. (It’s hosted by an online exchange, but an application wallet will also work). I add $3 and press SEND.
  • A thermal printer next to the till spits out a narrow receipt. At the very bottom, where it would typically say “Paid with MasterCard ending in −3862”, it says “Paid with Bitcoin”. The buzzing sound of that receipt printer tells the cashier that I am good to go. Good food in the tummy and a bill has been paid. Case closed; Return to car; Drive to New York. Note to self: Find other Bitcoin vendors on trip.

What Really Happened?

In the seconds between authorization and a printed receipt, fascinating things occurred around the world. Seriously Fascinating—just like magic! It is transforming the way payments work and—eventually—the way we view, understand and manage cash. ‡

  • When I clicked SEND, a limited subset of Bitcoin credentials was presented to a massively distributed, worldwide network of miners. In effect, I informed the bookkeepers that I wish to have $15 transferred to the restaurant’s public address.
  • Seconds later, the original credentials were voided (this solves the ‘double spend problem’) and a new transaction was added to public ledger that we call the blockchain. It now reflects my slightly reduced wealth.

But wait! It gets even more fascinating…

The “miners” that settled the transaction and provided the new Bitcoin credentials needn’t have any awareness that they just facilitated payment for a meal at a diner in Darien Connecticut. From their perspective, these individuals and large server farms in Iceland, China, Israel, and South Africa—and in college dorms spread across the world—are engaged in a massively distributed gaming competition. They are competing for rewards based on solving a math problem.

As you review that last paragraph, imagine the elegance of the global network. Imagine the power, robust nature, and benefit that comes from it’s redundant and decentralized architecture. Imagine the brilliance of an anonymous genius who goes by the name Satoshi. Imagine the incentive for disparate bookkeepers to play a critical role in balancing a world-wide ledger. Imagine that authorities cannot shut down the network or even slow down this global network. Imagine the trust that individuals, businesses, NGOs, banks and governments can put in a monetary supply and mechanisms of accounting. Imagine a world where this trust benefits everyone uniformly, fairly, and without a path to graft or inflation.

Bitcoin and the blockchain, introduced together, are not minor, incremental contributions to economics, bookkeeping, trust, and commerce. They are overwhelmingly significant contributions to the future of human society and every one of its institutions.


Notes / Caveats / Clarifications

† You may have heard that bitcoin transactions are immutable. This is a simplification. The public ledger is immutable, but transactions are reversible, if terms are clear to both parties. Just as with Ethereum, smart contracts are built into the technology. So are hooks to centralized mediation, if that’s what the agreement calls for. Charge-backs, refunds, warranty demands and other arbitration are all possible. These features are built into Bitcoin, but rarely used in this early era.

Most Bitcoin transactions today are payments; they are not charges. Although they do not typically accommodate bank-brokered returns, rescission and charge-backs, these are all possible, and often without requiring an authority to broker the dispute. But these traditional safeties or mitigation must be agreed upon in advance. No longer does the seller have all the power, or the buyer need to run to a credit card processor to complain. Sales are either immutable or brokered by a 2-party contract.

This is not your grand-daddy’s payment mechanism. It is so much more evolved!

‡ In 2017, Bitcoin went through a period of intense growing pain. Transactions became so slow and costly, that in person transactions became impossible, especially for any amount less than $500. If you needed a transaction to complete in less than an hour, you would need to enlist in a bidding contest. A quick confirmation could cost upwards of $30 US.

The restaurant payment related above was an on-chain transaction. Today, transactions that use the Lightning Network overlay may occur within a private channel apart from the blockchain. But ultimately, every change in bitcoin ownership results in an individual or aggregated entry onto the blockchain.

* Crisis in late 2017 and 2018

Sadly, in researching this article, I learned that the Darien Diner no longer accepts Bitcoin. Problems with transaction cost and delays in late 2017 and early 2018 discouraged a great many retailers. No one purchasing a $12 meal will pay $30 in fees, and a cashier is not going to wait 2 hours to validate payment from a customer who has already eaten a meal and wants to hit the road.

That glitch sparked a terrible flight from retail adoption. Even now (Q3 of 2019), retail penetration is sharply off its peak. We are barely clawing our way back to the early adoption rate. Vendors lost faith, and many don’t yet realize that their POS investment can now be safely be reactivated. Lightning Network to the rescue!

The Next Crisis

Another crisis is looming, but it too will be solved.

Although the Bitcoin network is fast and inexpensive, the proof-of-work method used by miners to arrive at a distributed consensus consumes far too much power to scale. Mass adoption would consume more power than the world currently generates.

And here’s the kicker: The mining incentive ensures that any new, inexpensive energy that might be discovered in the future would be gobbled up by miners with no additional benefits to society (or even to the Bitcoin network). All the new, free (or cheap) power would be diverted away from homes, businesses, manufacturing and public works. The incentive for grabbing every cheap watt is very much like a cancerous growth.

Clearly, this is not sustainable. Bitcoin mining already uses more power than all of Argentina. But great minds are working on the problem and alternative methods of guaranteeing a fair, crowd-sourced accounting consensus are being tested, analyzed and debated. We will get through this complex problem, and hopefully—this time—without demoralizing a key factor in the tetrad: Consumers, developers, vendors & miners.

China currency devaluation & US response

Today’s post is all about Why was it done? And What will be the effect?. But first, let’s recap what just happened…

In the past year, the exchange rate between the Chinese Yuan Renminbi and the US dollar has drifted between 6.75 and 6.95 ¥/$. But this morning, it shifted. The Yuan was intentionally devalued by the Chinese government to punish (or perhaps to provoke) the Trump administration.

Let’s start with a little recent history—narrated with a big dose of editorial sarcasm…

Yuan-Dollar Exchange RateTrump is not happy with China’s economic growth, leadership in 5G infrastructure, success in launching satellites, building new airliners, and of course their construction of islands off their own coast. (Do you suppose that the Chinese would make a fuss over construction projects in the Gulf of Mexico, even if it served a military purpose?!)

And so, Trump held rallies and press conferences. This is what he does best. He mumbled some trumped up complaints about an uneven playing field, and he slapped a series of escalating tariffs on Chinese imports.

Naturally, the Chinese retaliated by limiting their purchases of soybeans and pork, and they asked their own companies to scale back the purchase of US food, materials and machine equipment.

This led to a tit-for-tat. That’s not a surprise. A negative outcome was virtually guaranteed by the US president. Eventually, Trump followed through with even higher tariffs on even more goods, because that’s exactly what he said he would do—And since the Chinese didn’t cave to his demands, he became worried about sounding tough and saving face.

Mr. Trump claims that the Chinese government pays these high tariffs, rather than US consumers. And he doesn’t seem to realize that when no one is willing to pay, it retards commerce. When no one is buying, it is no longer a debate about who pays. Import tariffs don’t protect workers or industry, they simply thwart trade.

Yesterday, in the wake of increasing tariffs by the Trump administration, China devalued its currency, announcing an exchange rate of 7 ¥/$. This is not too radical. In fact, it is in line with recent history. After all, even a communist regime is limited in how much they can bend the exchange rate against another major currency. If they try to manipulate more than a little (or for more than a short period), they risk three undesired results:

  1. It bounces back with a vengeance
  2. Citizens lose buying power and they become enraged. Eventually, they revolt or begin using other currencies. Governments hate losing control over currency.
  3. The government goes bankrupt. After all, you cannot really manipulate the results of massive capitalist forces.

But the devaluation irks Mr. Trump. Having a sparing partner who keeps getting up off the floor, is stronger than you, and who claims the high moral ground is really infuriating. It gets under Trump’s orange skin—especially since he likes to hug the American flag at rallies.

Of course, manipulating currency is not unique to the Chinese. Although Trump probably doesn’t recognize or acknowledge it, America regularly tweaks interest rates through an obscure and mysterious agency called the Federal Reserve. That same agency licenses banks to create imaginary money out of thin air and loan it to real businesses for a profit, under a system called Fractional Reserve lending.

Lately, I have cross-published some of my favorite answers as a Q&A writer for Quora. Here are two answers that were posted this afternoon. In the second answer, we’ll get into America’s unique and precarious position as bearer of the reserve.


Answer:   It’s not!

What is bad for the US is our continuing trade deficit and our willingness to print currency to continue massive consumption in view of our withering industrial base. That is, we export far less than than we import from China. And the only thing we give them in exchange is paper promises.

We love to consume Chinese products, and we give back few tangible goods beyond soybean & pork, Hollywood movies and jumbo jets (and to our allies: weapon systems). These are legitimate industries, but they do not match the economic power of clothes, toys, computers, car parts, mobile phones, TVs, 5G infrastructure, etc, etc, etc.

Even most of our high-tech chips (an industry that we still dominate) are manufactured in Asia, Israel and Europe.

The reason the US retaliates against Chinese currency controls or tariffs with panic and/or sanctions is because individuals who do not understand economics (or wish to placate nationalistic sentiment) fear that a weak Yuan will continue to promote cheap exports into the US and an inability for US companies to get a fair price for their exports.

What they fail to understand is that a ‘fair price’ ultimately tracks back to what a nation produces and ships out to balance its consumption. Currency manipulation is an illusion* and sanctions cannot fix this.

And don’t even get me started about Huawei… The US is demonizing an innovative value leader in the next generation of communications infrastructure and gadgets for the sole purpose of diverting attention from its own failings and to buy short term advantage. The argument that Huawei’s ties to a communist government would lead the company to spy on western users is not only a red herring, it flies in the face of economic reality.


2. Question #2:

Why did US designate China
as a “currency manipulator?”

Answer

The US took this meaningless step because some individuals in the US government are arrogant, whiny, little brats that do not truly understand the nature of free market economics. They are reacting to declining US productivity and exports—or, perhaps their advisers don’t understand the self-balancing nature of capital markets.

The relationship between two global currencies cannot be manipulated apart from very short intervals. This short term manipulation is driven by short-sighted motives—and it ultimately backfires when assessed against the original goals.

If you depress the value of something by creating an “official” exchange rate, you would quickly bankrupt the government that made such a goofy proclamation. That’s why these announcements rarely produce lasting results. Economists recognize that when you closely track the outcome (with other factors normalized), results are almost always in opposition to original goals.

Chinese currency doesn’t need to be devalued, because the Chinese have been so incredibly productive over the past 30 years. They are producing so many high quality shoes, toys, computers, car parts, underwear and construction materials, that other nations are becoming lazy. Their currency has a low value, because they continue to ship huge quantities of low-price products to us and are willing to continue accumulating dollars. That is, throughout an enormous trade imbalance, they trust our ability to repay.*

This is why China’s Yuan is ‘cheap’. It is not because of anything that the US government does as a reaction to transient political or economic issues.

Likewise, attempting to ban a country from selling products internationally below what it costs in the domestic market is a useless and counterproductive law, even from the perspective of the consumer nation.

There is rarely a justifiable and rational “manipulation”—or more accurately, action—imposed by consumer nations on its trading partners (other than figuring out how to reboot their own industries!)

For every rule of thumb, there is an exception. I can think of a few punitive actions that are justifiable, because they protect things that cannot protect themselves in a free market: The use of prison labor, child labor, slave labor or any production that poses a health hazard (for workers or buyers) or that harms the global environment.

The problem with these practices is not they create an unfair marketplace. Rather, they represent morally and universally condemned activities that kill or subjugate. And so, pressure and uniform restrictions from outside nations helps to quarantine a practice and ultimately make it unprofitable. But economic pressure applied by coalitions or trading blocks for any other reason is destined to fail. You just can’t fly against the headwind of widely disbursed, free market, capitalist economics.

With respect to currency “manipulation”, monopoly trading blocks or underpricing, sanctions are not only ineffective, they are unnecessary. If we allow the economic activity to play itself out in a free, fluid and unregulated manner, these things not only work themselves out, they actually backfire on the manipulator!


* When I refer to America’s “ability to repay” (i.e. for all the things that we have consumed without exchanging products of equal value), I am not referring to handing the Chinese more and more green pieces of paper with portraits of dead presidents. Dollars can be created out of thin air by transient politicians who continuously raise the debt ceiling. This can lead to a collapse in value and the Chinese know this.

Rather, I am referring to the confidence that our trading partners have demonstrated (at least until very recently), that we will eventually restore the vigor and volume of our manufacturing industries—and also be willing to use most of these newly restored resources to work for them and not just to generate products for consumers back home.

Will nations, institutions and large pension funds continue to prop up the dollar at a time when industry is dying, exports are scant, and legislators keep raising debt—kicking the can down the road?

This unfounded trust in the great nation that triumphed in world wars and the space race cannot last forever. What will signal the turning point?

The signal has already been lit. This year, it’s just a flicker, but in the next two years, it may well ignite the tinder that leads to a global forest fire.

The reason that the US can get away with kicking the can so far down the road, is because the US dollar has been the de facto reserve currency for most international deals, even when neither party to a transaction is in the US or serving US interests. The use is milking a convenient truth: He who controls the reserve currency needn’t balance his books—not for a long while!

Very large contracts for ships, airplanes, oil, wheat, weapons and pork bellies are typically quoted and guaranteed in US dollars or dollar equivalents. This is not required by law, of course, but it arises from the fact that buyers and sellers do not trust the forward inflation of each others’ currencies. Since the US dollar tends to inflate very slowly, they agree to use dollars to settle their affairs.

This clearing house effect leads to an enormous US advantage and it is fed even by nations that despise America.

A few years ago, it seemed that the Chinese Yuan might take the mantle from the US dollar as de facto reserve currency. Even currencies of UAE or Qatar seemed like they might supersede US influence, because of their status as a banking hub or massive energy exporter. But this left many nations uncomfortable, because the Chinese government—though capitalist—is still communist. Energy and banking economies have shown signs of instability, and of course, the middle-east is constantly a source and target of terrorist activity.

All of these factors lead commercial interests to wonder if currencies backed by these nations will last for the decades of a big trade deal and if they will be sufficiently protected from manipulation or inflation by future kings or monetary Czars?

Enter Bitcoin

Sure Bitcoin is new; it’s controversial and it is requires a very different way of understanding money. But it is unquestionably fair, democratic, trustworthy and immutable. Nothing else even comes close.

Gradually, economists, banks, enterprises and governments are coming to the conclusion that the choice of a reserve currency is an issue of trust. And what can be more trustworthy than math and crowd-sourced bookkeeping?

What about volatility?

In the end, it’s not about volatility. Even today, payment processors will protect any vendor who accepts bitcoin, but wishes to convert revenue into local currency.

As Bitcoin becomes ubiquitous (not as an investment—but as a payment instrument, and ultimately as the value itself— it will also become stable. Ten years from now, if you observe a massive spike or dip in the dollar exchange rate, you will not wonder “What happened to Bitcoin today”? Rather, you will wonder what happened to the US dollar. That’s because you will be using bitcoin to pay for a head of lettuce, a new car or a vacation cruise, and the vendors will honor their current prices in bitcoin.

Should you toss out that dial-up modem?

Today, a reader asked me: “Is there any justification for keeping an external modem?

Of course, the word modem applies to current technologies, such as cable modems and ONT (the modem that connects a home or office to FIOS). But, I am pretty sure that this reader is asking about a POTS dial-up modem (POTS = Plain Old Telephone Service).*

Answer: It is safe to toss out this antique, save it for a museum, or let your 9 year old bring it to Show-&-Tell:

“My daddy used a Moh-dum. It’s how pre-historic humans got online in the Stone Age!! They called it America Online”.

Sometimes, a common tool passes into the realm of anachronism while it still sits in your tool box on your workbench. My daughter is already 18. Yet, she has never wound a watch, dialed a telephone (with a spring-loaded reciprocating dial), or tuned in a car radio. If it weren’t for an eclectic interest in the movie iRobot (Will Smith orders a pair of classic shoes from his grandfather’s era), I doubt that she would have ever experienced tying shoe laces.

But wait! Could a dial-up modem be useful when your lose Internet service—for example, during a storm or other service blackout? Not really. Who ya gonna call?!

If you have an urgent need to get online while your primary service is interrupted, you can create cell phone hotspot or ask a neighbor for temporary access to his WiFi signal. Holding onto your dial-up model is as useful as holding onto two tin cans connected by string. In most countries, you would have a hard time finding a modem that could answer your call at the other end!

If you are older than 35, then here is a friendly sound from your past (click YouTube image below). It is the sound of a dial-up modem connecting to a bulletin board or an internet gateway. If you used this type of modem, then you temporarily without phone service (unless you had an extra line of phone service). You even had to disable call waiting, so that the data connection was not interrupted.

* Incidentally, POTS is, itself, an extinct technology. Even if you have a twisted pair of copper wires entering your home and telephone jacks with red & green wires coming up from the cellar, it is very unlikely that this wire pair goes far beyond the phone pole outside your house. Your analog phone signal was converted from digital data far upstream and multiplexed with many of your neighbors into a high-speed data stream or onto a broadband carrier signal for distribution within your neighborhood and for long distance.

Instead of circuit switching your voice with the person you are talking to, telcos often use intranets and even the public internet, just like individual users with a VoIP SIP.


Modem Trivia

  • Dennis Hayes invented the PC modem. Hayes introduced a 300 bit per second modem in 1977 for $280. By the time that modems were being replaced by ASDL and direct connect cable services, the fastest 56,000 bps modems were often available for free after store rebate.
  • In the mid 1980s, new consumer modems bumped up data speed from 1200 bps to 2400 bps. Around that time, Hayes aired the first TV commercial for a computer component—rather than the computer itself (the Hayes modem). It was years before a 1991 TV commercial that promoted the brand and logo of an internal part (“Intel Inside”), rather than the product being advertised. Nutrasweet attempted the same ingredient branding at around the same time. Still later, in 1993, Intel introduced the Pentium CPU.

Hub, switch or router: Which do you need?

This article was originally an answer to a member of Quora, the Q&A site at which I am a columnist. I am active in bitcoin and computer networks.

The question:

I have a 2nd computer in a room with one network outlet. I prefer to use a network cable and not WiFi. I think that I need a“splitter”.

I realize that each device gets unique data. So it’s not as simple as adding a power strip with extra sockets. I have heard of hubs, switches and routers, but don’t know the difference. Which do I need. Will it cost an arm and a leg?

Answer

All you need is a very inexpensive switch. In fact, the best consumer model discounts for less than $15. I recommend one at the end of this answer, which also addresses your more general question.

So, what is the difference between a hub, switch and router? Let’s dig in…

1. Hub

A “hub” is a relic from the 1990s. Someone using that term today is probably referring to a switch.

In past decades, it was cheaper to use a single communications amplifier without dedicated circuit paths for each internal and external connection.

For example, if your maximum Ethernet speed is 100 Mbps, than this is all that is available to ALL conversations. So, even if someone wanted to backup to a local network device or stream from a disk drive attached to the router, they would be slowing down everyone — even the devices that are accessing the Internet.

2. Switch

But a switch is much better. It supports the maximum negotiated speed of each 2-way connection without slowing down any other connection. So, for example, if port 5 is connected to port 2, it does not impact port 7 which is connected to the WAN/Internet port.

Large models, like the 48-port unit shown here are typically managed switches and support Power-over-Ethernet. These costly enterprise features are not needed in a home or small office. In my opinion, the more important operational features have all become inexpensive and mainstream: auto-sense, auto negotiate, auto-fall back, jumbo frame, power save, and more.

3. Router

A “router” refers to the function that keeps track of packets entering and leaving your home or office. It ensures that returning packets get to the proper device. Some routers have only one WAN/Internet port and one LAN (local port). If the router has 4 or 8 ports, then it is really a router with an integrated switch.

If you have just one computer in your home and no wireless devices, the router connects directly between your cable modem (or fiber ONT) and the PC. If you have more than one computer, then you must either (a) have a switch (built-into the router or connected to the one LAN port), or (b) use the WiFi feature or add a Wireless Access Point (WAP).

Bonus Term: WAP

A WAP (wireless access point) is simply a WiFi radio. It’s just like an extra broadcast tower in your home. But, because it is wired directly to your router, it is *much* better than adding a WiFi or powerline repeater. It is also very inexpensive…

Popular consumer brands, like Linksys, D-Link, Netgear, Asus, TP-Link and Belkin, have all but abandoned this product segment. That’s because you can easily turn any old WiFi router into a WAP by turning off the DHCP feature. This allows the ‘main’ router to assign local IP addresses and handle packet routing. The 2nd router simply adds another radio spot to your home or office. Since the router function is much less expensive than the WiFi function, using a router does not add to the cost.

About Speed

In the early 1980s, there was a market war between various network standards and topologies. Most buyers realized that the once mighty Arcnet (created by Datapoint Corporation) was dying and that the winner would be either Token Ring (IBM) or Ethernet (created by Intel, Xerox & Digital Equipment).

Ethernet won that war with its hub-and-spoke topology and a speed of 10 Mbps.

It wan’t long until the speed was bumped up to 100 Mbps (called Fast Ethernet or “100base T”. Today, the sweet spot of price and performance is 1 Gbps. It’s 100 times faster than the original! There are still faster implementations at 10 or 100 Gbps, but these require professional cable installation, expensive gear and some very strict configuration requirements.

If your network might ever be used by multiple users or for video streaming (especially at 4K), be sure that you don’t accidentally purchase the older Fast Ethernet switch or router (or—heaven forbid—an old fashioned hub!). Just 3 or 4 years ago, you might have saved cash on the slower standard, but today, you can find gigabit switches and routers without paying a significant premium. In fact, reputable companies are not making 100 Mbps switches today. That would be like selling a 512 GB USB drive with USB 1 or 2. It just doesn’t make sense.


Now you know the difference between all three terms: Router, Hub (outdated) and Switch (often included with a router). And just for fun, you even know about another related device: WAP.

Incidentally, even if your router already has a 4 or 8-port switch, you may still need an additional switch. Consider these scenarios:

  • You have more than 4 wired devices
  • One of your cables goes from the cellar to an upstairs office. But, you have a few devices in that office. You can simply add a tiny switch. This is exactly what you need as your ‘splitter’.*
  • You wish to create a subnet to isolates your network devices and activities from another segment. This requires 2nd router instead of just a switch. Not to worry. Decent 4-port routers are available for under $30. In this case, you may not even care about the WiFi feature, which is the most expensive component of routers costing above $50.
* Switch Cost & Reputation

« I just purchased this Netgear GS305 for just $12.50. It’s a gigabit 5-port switch with terrific specs and reliability wrapped into a solid metal box. It sips very little electricity and the footprint is smaller than a slice of bread. I often see larger 8-port switches by Netgear and TP-Link discounted to $17. These are both very good consumer brands.

Open Letter to Cryptocurrency Doubters

Adam Ludwin of Chain offers this interesting (and, I believe, effective) attempt to explain crypto to high-profile doubters. It is an open letter to naysayers that argues against extreme positions on both sides of the “money revolution” argument.

Check out 8 quips by Jamie Dimon, CEO of JP Morgan Chase. I believed that he had moderated his position after originally panning Bitcoin / blockchain. These quotes contradict that impression. But, they were uttered before October 2016. They may not represent his current position…

Here at Wild Duck, we aren’t fully on board with Ludwin, because we represent one side of what he suggests are two ‘extreme positions’. But we certainly are closer in spirit to his side—especially, his effort to educate those that see zero value to to Bitcoin and no profound opportunities for the blockchain. They see only fad and frenzy.

Bitcoin and the blockchain are radical, transformative instruments. But they as not as radical as some claim. In fact, they address a profound technical problem that has been the subject of research and debate for more than 2300 years. They are a surprisingly natural product of the internet. With instant, inexpensive, portable and ubiquitous communication, it is possible to distribute consensus. That consensus can be applied to any set of records: ledgers, deeds, votes, and a many things that, at first, seem quite surprising—areas that we never previously thought of as a “ledger” or an ownership stake.

A: Let’s begin by reducing two concepts into the very simplest of definitions:

  • Bitcoin is the original, decentralized, permissionless cash.
  • The blockchain is a social consensus mechanism. It crowd-sources record keeping, commitment and all manner of accountability by adding a distributed and robust log that is fair, immutable, testable and measurable. Most importantly, it is open to public scrutiny. Effectively, the blockchain crowd-sources fair play.

B: Next, let’s set aside some growth pains. They are transient:

Both Bitcoin and the blockchain are a work in progress—and so they are flawed. But that doesn’t mean that their survival is threatened. Let’s dispel two common misconceptions. I won’t argue or elaborate here. The arguments are all over this blog:

  1. Bitcoin cannot be overtaken by a better coin with improved features. This is not a situation like Beta–vs–VHS. The entire community is transparent, open source, unlicensed and without proprietary barriers. Bitcoin will simply fold competitive advantages into its architecture. That process involves a messy democratic process among parties with different interests. But, ultimately, the process works.
  2. The blockchain will correct the energy consumption that is consumed in its current implementation. We have already demonstrated that it adapts and that democratic evolution is possible. Brilliant replacements for proof-of-work are in development.

C: Now, the part that the critics cannot accept:

Both Bitcoin and the blockchain will herald a profound and fundamental shift in offering secure, trustworthy, fair, decentralized and autonomous mechanisms—not just with payments (or currency), but across the board: voting, contracts (including settlement and arbitration), Proving ownership or transactions, including property deeds and corporate stakes, provable jury evidence, administrating & enforcing environmental trade credits, verifying scientific research (especially the outcome of blind tests).

These examples barely scratch the surface of fields that will be transformed or made better by blockchain technology.

D: The really radical application was also the very first implementation:

What about Bitcoin. Is it just a payment instrument, or will it become the money?

Indeed, Bitcoin is likely to replace government issued FIAT all over the world in our lifetime (not only as a payment instrument, but as the actual store of value, without being tied to any national currency or to an underlying asset or promise). But what critics don’t yet appreciate is that this will not impact a government’s ability to tax, spend or enforce tax collection.

It will lead to a deflationary economy and it will decouple a government from its own monetary policy. These are *not* bad things. They are good for all stakeholders. Ultimately, Bitcoin will be recognized as far more of an opportunity than a threat, even by banks and governments.

Even if you vehemently disagree with D, it is difficult to argue against C. The blockchain is as fundamental and profound a contribution to society as the pulley and lever. It it so natural an evolution of the internet, that it is more a discovery than an invention. (I am not attempting take credit away from Satoshi—I am only reclassifying his invention as revelation).

Is there an upper limit to future WiFi speed?

As with many recent posts, this was originally a reply to a member of Quora. I am a frequent columnist at this popular Q&A forum.

Is there a theoretical speed limit to
WiFi devices over the next 10 years?

Because of four recent practices,* it is difficult to predict an upper limit for future overall throughput:

  1. Channel bonding
  2. Beam steering (MIMO shaping and directing the antenna pattern)
  3. Mesh Networking (i.e. subdividing a service area into micro-cells). Residential examples: Google WiFi, Netgear Orbi or TP-Link Deco
  4. Ultra wideband or Ultra-high frequency: In 2017, both Netgear and Asus introduced routers with 802.11ad WiFi (‘WiFi AD’). Although it still not widely adopted, it adds a 60 GHz radio to the existing 2.4 and 5 GHz radios, supporting 7 Gbps network speed).

Note that none of these techniques demands a high output power per channel. They all use ‘tricks’ to achieve higher speeds. But the tricks are scaleable. There really is no upper limit to any of these techniques.

Mesh networks don’t increase overall bandwidth, but by reducing the signal power and service area (and having many more access points), there is more bandwidth available for each device.

The 60 GHz used by WiFi AD is so high, that it cannot pass through walls in a typical home—just within a room. On the other hand ultra-wideband transmission has been demonstrated and recently blessed by the FCC, but it is not yet a WiFi standard. With this method, it will be possible to send insanely high-speed, low power signals through walls to cover small areas.

How fast are ultra-wideband radios? How about terabytes per second, depending on distance? It’s difficult to imagine future applications that may need that speed. It dwarfs the real world data input capacity of our senses. Perhaps, someday, you will need to transfer the entire literature of all known civilizations into your brain under under 2 milliseconds. I suppose that it would be good for that purpose.


* I called these technologies “recent developments”. But actually, three of four practices have a long history in military, commercial and industrial applications.

a) Beam steering

Focusing an antenna pattern has been around for more than 75 years. Yagi TV antennas (popular in 1960s and 70s) are highly directional. Some TV broadcast towers are situated near the edge of a service area. They split their broadcast signal, through a phase delay and deliver the waveforms to an array of antenna. This allows them to steer the signal without any mechanical movement. Directional lasers or infrared beams are often used for communications.

b) Channel bonding (or reverse multiplexing)

I had an exceptional router in the 1990s that could combine backhaul services (not just switch from one to the other in case of a drop out). It boosted speed by distributing internet packets over three separate networks):2 separate cable services and an early cell phone modem.

c) Mesh/Cellular coverage

The ‘full-blown’ implementation was developed by Motorola in the 1980s to accommodate growth in the mobile telephone market. I am not aware of an earlier implementations that included graceful, real-time hand-off of a device in motion. Of course, hotels and large convention centers have used mesh networking for more than a decade.

What is a ‘Paper Wallet’? Do I need one?

Like many other recent articles at Wild Duck, this post is structured as a question-and-answer. That’s because it was originally my reply to a member of Quora, a Q&A site at which I am a Bitcoin columnist.

What is a ‘Paper Wallet’

A paper wallet is the ultimate offline wallet. It simply means that the private address to your crypto wallet is printed on paper — either as a string of characters, a QR code, or a series of seed recovery words.

If you destroy any electronic copy of your original wallet (e.g. the private keys that give you access to your wealth), then hiding this piece of paper is very similar to hiding a bar of gold. The only way that someone can steal it or know the amount it represents is to get their eyes and hands on something physical. They would need to know that you tucked it into your mattress or behind a secret panel of your cellar wall.

In my opinion, a paper wallet, though secure, presents a big risk to the owner—even bigger than the potential for a hardware wallet to be hacked. We’ll get to this later.

Example of a Paper Wallet »

Here is a paper wallet printed onto a card [click to enlarge]. There are web sites that will help you print one with a new or existing wallet address. One popular site is BitAddress. [Warning!] After printing and storing the paper wallet in a place that you believe is secure, that you will not forget—and that your family can get to some day in the future)—delete all electronic copies of your original address (i.e. if you did not create a completely new wallet in the process).

More about Paper Wallets

Like other wallets (a software app, or a dedicated hardware device), your wallet contains private keys that access your wealth on the blockchain. But in the case of a paper wallet, it is made private and secure by hiding this slip of paper where no one can ever see it or peek at it online. Think of it as if you are hiding a valuable diamond.

A paper wallet cannot be hacked, unless it is within range of a camera. But the diamond analogy breaks down, because a paper wallet has other risks than hacking…

It can be lost, damaged in a flood or fire or chewed by termites or your dog. More likely, it can be forgotten for years. When your heirs finally discover it under the mattress or taped to the back of a painting, they are unlikely to recognize its purpose and simply throw it out.


Hosted Wallet: Complete Opposite of Paper Wallet

You didn’t ask for the other extreme wallet scenario. But this seems like a good time to discuss it.

When it comes to security -vs- convenience & recovery, an exchange-hosted wallet is at the other end of the spectrum. With this type of wallet, you do not control your private keys. In fact, your crypto isn’t even in a wallet dedicated to you. Instead, it is aggregated with assets of all other clients. You are trusting the exchange to track your stake via a traditional account relationship. When you spend or receive Bitcoin (or other cryptocurrency), the transaction occurs withing the exchange. It is not transmitted directly to a blockchain or Lightning Network.

Advantages of an exchange hosted wallet:

  1. A reputable, hosted exchange (there are very few)‡ implements and follows rigorous backup, security and disaster practices. These safety practices are probably more diligent, standardized and adhered to than whatever you would do with a software, hardware or paper wallet.
  2. A reputable, hosted exchange maintains your account information and instructions in their records and acts on these instructions. As with a traditional bank or broker, they pass wealth to your heirs or executor, if you provide the beneficiaries and instructions in your account profile.

With a personal wallet under your control, it is more likely that your relatives will not know about your wallet, lose it, or fail to distribute assets as you intended. This will change in the future, as multisig becomes standardized and easier for end-users to understand and use. But for now, a traditional custodian has an edge in transmitting wealth from one generation to the next.

Disadvantages of an exchange hosted wallet:

  1. Your money could be completely lost if the exchange does not practice very good security practices, is dishonest or becomes insolvent. (It happened with more than half of the exchanges during the first 5 years after Bitcoin was unveiled!). It is less likely today, but only if you choose your exchange carefully.‡
  2. With Bitcoin and most cryptocurrencies, transactions are never anonymous, nor even very private. That’s a myth. But with an exchange hosted wallet, your wealth and activities are even more exposed to outside scrutiny. That’s because reputable hosts are quick to comply with subpoenas, court orders, tax authorities and even local police investigations. They want to be seen as safe. To project this image, they are proactively compliant with oversight and proposed regulations.
  3. Your money can be frozen or seized by the exchange (for whatever policies they deem appropriate) or from authorities outside the exchange. Often, the reasons make no sense to individual clients affected. This happened to me very recently!
  4. Large computer based servers experience technical glitches—which often coincide with your most urgent need to access funds.

Extreme Caution Recommended

BitAddress has an excellent reputation and has never been the focus of suspicion. Their source code is written in a popular script and is short enough to enable scrutiny by many developers and analysts. Additionally, the creation of your wallet and printout can be performed completely offline (no internet connection). You can further enhance safety by performing the wallet creation and printout from a PC that will never be connected to the internet. (Yes! It is that important to use paranoid practices to avoid exposure of your private keys).

Despite the quality reputation and transparency, I do not currently recommend using BitAddress to create a paper wallet.

  1. At the time of publishing, BitAddress has a problem with their web security certificate. This makes it possible for your web traffic to be hijacked by a DNS spoof. (This Blog does not have a security certificate at all, but you are not using it to store or create confidential information).
  2. Unnecessary risk is introduced by merging the process of creating a new wallet with conversion into a physical printout. Look for a tool that is completely off-line and that enables you to create a QR code or seed words for a wallet address that you already own.

Once BitAddress fixes the problem with security, the following process will protect your private keys from interlopers:

  • Go to bitaddress.org
  • Switch the internet off
  • Save the HTML file in a USD device
  • Restart the computer with a bootable Linux Live CD
  • Make sure that you are offline and open the HTML file
  • Follow the rest on bitaddress.org to create a paper wallet

If you download another tool to create a paper wallet, search for one that is open source and vetted by thousands of developers, users and armchair detectives. Choose one that is hosted by SourceForge or GitHub and carefully read user forums and reviews.


‡ Why are their few reputable cryptocurrency exchanges?

Regulations pertaining to cryptocurrency exchanges are not yet uniform, nor even widely understood. Additionally, there is no Federal account insurance for your hosted wallet. (Currently, the market is too volatile and risky for traditional underwriters to step up).

But, a well-capitalized exchange with high-profile investors is likely to adhere to rigorous security practices and unscheduled audits with public transparency. These reputable exchanges also work hard to comply with federal and regional regulators, and they comply with money transmitter practices, such as KYC, AML and RICO.

In my opinion, very few exchanges meet these rigorous standards, especially in this early era—which is often compared to the Wild West. Two very reputable exchanges are Coinbase (San Francisco) and Bitstamp (Founded in Slovenia and incorporated in the UK; Now, they are based in Luxembourg).

These big, reputable services mitigate the risk of hacking and theft by keeping most client assets in a ‘cold storage vault’ (off line and powered down). Your wealth is only attached to the internet when requested and in the quantity that you need. The rest is never exposed. Your online purchase or transaction is made after you have received email and text messages about the status of your coins.


This is 4th in a series of articles on Bitcoin & cryptocurrency wallets:


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

About the Fuss: Is Bitcoin really so important?

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

This is the question I was asked to answer:

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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


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

Does decentralized currency thwart crisis intervention?

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

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

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

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

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

Here’s how the options would be limited:

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

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

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

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

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

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

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

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

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

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

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


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

Can I Check Web Sites Visited by my Kids/Staff?

Early this morning, I was asked this question at Quora. It’s a pretty basic request of network administrators, including parents, schools and anyone who administers a public, sensitive or legally exposed WiFi hot spot.

Is there a quick and easy way to view, log, or otherwise monitor the web sites visited by people on your home or office network?

Yes. It’s free and and it is pretty easy to do.

It gets a bit trickier, if the individual on your network is using a VPN service that they have configured on their device.[1] A VPN does not stop you from logging their browsing, but all of their activity will point to the VPN address instead of the site that they are actually visiting. In that case, there is another way to monitor their activity. See note #1, below.

Before getting into this, I should mention that I believe that using covert methods to monitor a family member’s online activity is a terrible method of parenting. In my opinion, there are better ways to deal with the issue—parenting techniques that don’t undermine trust as they deal with safety.

I can think of at least three methods for logging the websites that people on your network visit. In the explanation below, we will focus on #2. For more information, dig into the notes at the bottom of this answer.

You can either…

  1. Configure your router to store logs of visited IP addresses [2]
  2. Set your router to use the DNS server at opendns.com, instead of the default server offered by your internet service provider. This involves a simple setting available in all routers. (Replace default DNS server addresses with 208.67.222.222 and 208.67.220.220)
  3. You can set up a proxy which redirects web traffic to one of the computers in your house or a third-party service. This is how the monitoring software for parents and custodial services monitor or block web traffic.

In the remainder of this quick tutorial, we focus on method #2..

Once you configure your router to use the two DNS servers at OpenDNS.com, create a free account on their web site. Then, enable the logging feature. It not only shows you visited domains, it maps them into actual domain names and subdomains—making it easy to search, sort or analyze traffic.

You can download a spreadsheets and sort by number of visits or by the domains visited. Logs are maintained for only two weeks. So, if you wish to maintain a history, you will need to visit OpenDNS and download them regularly. (Check their user forum. Someone has created a safe, single-line DOS command that downloads these activity logs to your PC).


[1] VPN, Onion Routing and Encryption

If an individual in your home or office is using a Virtual Private Network [VPN], they are effectively covering their tracks with method #3, above. You can see their connection to the VPN service, but that service is either trusted to destroy logs of visited web sites, or anonymize traffic, by routing it through a chain of users that have no way to back-trace and identify the requester’s address.

Since their traffic originates on your network, there are other things you can do to monitor their activities. For example, if they are not using end-to-end encryption, you can use method #3 yourself, to route data in and out through your own PC or service.

[2] Logging the IP address or domain of visited web sites is not a feature of all routers. I have three recent model routers — and only one of them has a feature to log traffic in and out of the network.

[3] OpenDNS cannot discriminate the individual device in your home or office that has accessed websites that it logs. The logs include the traffic for all HTTP access that originates through your internet service subscription.

But some remarkable feature of OpenDNS (other than it being completely free):

a) It speeds up your overall internet experience noticeably! Like Google’s free DNS service, it is more robust and more redundant than the default DNS settings recommended by your internet service provider.

b) It maps every IP address into a domain name. So when you log in to check your logs and statistics, you don’t need to figure what the numbers mean. You view a list that makes sense. You can even search for certain words or web sites.

c) It permits you to block websites based on a very rich set of 100 criteria, including violence, adult content, hate speech, etc.

d) It offers graphs of your network access including overall volume. An example is shown here:

Profit from Bitcoin without Investing or Trading

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

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

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

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

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

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

Other ways to profit from cryptocurrency

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

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

Slide #1, Item 3

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

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

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

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

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

Set-up

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

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

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

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

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

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

Why is this opportunity still available?

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

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

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

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

Slide #2

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

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

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

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

Conclusion: Is it too late to get into Bitcoin?

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

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

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


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

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

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


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

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

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

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


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

Cars

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

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

Popular Toys

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

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

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

Stocks & Bonds

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

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

Houses & Real Estate

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

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

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

Gold

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

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

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

Oil (aka “black gold”)

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

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

Money

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

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

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

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

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

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

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

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

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

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

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


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

Lack of standards prompts new Bitcoin wallet advice

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

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

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

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

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

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

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

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


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

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

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

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

Now, let’s talk about next time…

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

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

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

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

1. Trust a custodial exchange like Coinbase or Bitstamp

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

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

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

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

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

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

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

2. Take control of your private keys

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

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

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

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

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

What about wallets on a computer or phone?

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

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

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

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

Assisting with the BCH / BSV Fork

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

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

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

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

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

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

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


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

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

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


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

How can Bitcoin be divided into small units?

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

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

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


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

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

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

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

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

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

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

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

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

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

Pieces of Eight: Divisibility by design

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

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

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

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

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

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

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


* Assumptions / Exchange Rate

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

Related:


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

Why is it impossible to create more units of Bitcoin?

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

Related:


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