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Bob The Magic Custodian
Summary: Everyone knows that when you give your assets to someone else, they always keep them safe. If this is true for individuals, it is certainly true for businesses. Custodians always tell the truth and manage funds properly. They won't have any interest in taking the assets as an exchange operator would. Auditors tell the truth and can't be misled. That's because organizations that are regulated are incapable of lying and don't make mistakes. First, some background. Here is a summary of how custodians make us more secure: Previously, we might give Alice our crypto assets to hold. There were risks:
Alice might take the assets and disappear.
Alice might spend the assets and pretend that she still has them (fractional model).
Alice might store the assets insecurely and they'll get stolen.
Alice might give the assets to someone else by mistake or by force.
Alice might lose access to the assets.
But "no worries", Alice has a custodian named Bob. Bob is dressed in a nice suit. He knows some politicians. And he drives a Porsche. "So you have nothing to worry about!". And look at all the benefits we get:
Alice can't take the assets and disappear (unless she asks Bob or never gives them to Bob).
Alice can't spend the assets and pretend that she still has them. (Unless she didn't give them to Bob or asks him for them.)
Alice can't store the assets insecurely so they get stolen. (After all - she doesn't have any control over the withdrawal process from any of Bob's systems, right?)
Alice can't give the assets to someone else by mistake or by force. (Bob will stop her, right Bob?)
Alice can't lose access to the funds. (She'll always be present, sane, and remember all secrets, right?)
See - all problems are solved! All we have to worry about now is:
Bob might take the assets and disappear.
Bob might spend the assets and pretend that he still has them (fractional model).
Bob might store the assets insecurely and they'll get stolen.
Bob might give the assets to someone else by mistake or by force.
Bob might lose access to the assets.
It's pretty simple. Before we had to trust Alice. Now we only have to trust Alice, Bob, and all the ways in which they communicate. Just think of how much more secure we are! "On top of that", Bob assures us, "we're using a special wallet structure". Bob shows Alice a diagram. "We've broken the balance up and store it in lots of smaller wallets. That way", he assures her, "a thief can't take it all at once". And he points to a historic case where a large sum was taken "because it was stored in a single wallet... how stupid". "Very early on, we used to have all the crypto in one wallet", he said, "and then one Christmas a hacker came and took it all. We call him the Grinch. Now we individually wrap each crypto and stick it under a binary search tree. The Grinch has never been back since." "As well", Bob continues, "even if someone were to get in, we've got insurance. It covers all thefts and even coercion, collusion, and misplaced keys - only subject to the policy terms and conditions." And with that, he pulls out a phone-book sized contract and slams it on the desk with a thud. "Yep", he continues, "we're paying top dollar for one of the best policies in the country!" "Can I read it?' Alice asks. "Sure," Bob says, "just as soon as our legal team is done with it. They're almost through the first chapter." He pauses, then continues. "And can you believe that sales guy Mike? He has the same year Porsche as me. I mean, what are the odds?" "Do you use multi-sig?", Alice asks. "Absolutely!" Bob replies. "All our engineers are fully trained in multi-sig. Whenever we want to set up a new wallet, we generate 2 separate keys in an air-gapped process and store them in this proprietary system here. Look, it even requires the biometric signature from one of our team members to initiate any withdrawal." He demonstrates by pressing his thumb into the display. "We use a third-party cloud validation API to match the thumbprint and authorize each withdrawal. The keys are also backed up daily to an off-site third-party." "Wow that's really impressive," Alice says, "but what if we need access for a withdrawal outside of office hours?" "Well that's no issue", Bob says, "just send us an email, call, or text message and we always have someone on staff to help out. Just another part of our strong commitment to all our customers!" "What about Proof of Reserve?", Alice asks. "Of course", Bob replies, "though rather than publish any blockchain addresses or signed transaction, for privacy we just do a SHA256 refactoring of the inverse hash modulus for each UTXO nonce and combine the smart contract coefficient consensus in our hyperledger lightning node. But it's really simple to use." He pushes a button and a large green checkmark appears on a screen. "See - the algorithm ran through and reserves are proven." "Wow", Alice says, "you really know your stuff! And that is easy to use! What about fiat balances?" "Yeah, we have an auditor too", Bob replies, "Been using him for a long time so we have quite a strong relationship going! We have special books we give him every year and he's very efficient! Checks the fiat, crypto, and everything all at once!" "We used to have a nice offline multi-sig setup we've been using without issue for the past 5 years, but I think we'll move all our funds over to your facility," Alice says. "Awesome", Bob replies, "Thanks so much! This is perfect timing too - my Porsche got a dent on it this morning. We have the paperwork right over here." "Great!", Alice replies. And with that, Alice gets out her pen and Bob gets the contract. "Don't worry", he says, "you can take your crypto-assets back anytime you like - just subject to our cancellation policy. Our annual management fees are also super low and we don't adjust them often". How many holes have to exist for your funds to get stolen? Just one. Why are we taking a powerful offline multi-sig setup, widely used globally in hundreds of different/lacking regulatory environments with 0 breaches to date, and circumventing it by a demonstrably weak third party layer? And paying a great expense to do so? If you go through the list of breaches in the past 2 years to highly credible organizations, you go through the list of major corporate frauds (only the ones we know about), you go through the list of all the times platforms have lost funds, you go through the list of times and ways that people have lost their crypto from identity theft, hot wallet exploits, extortion, etc... and then you go through this custodian with a fine-tooth comb and truly believe they have value to add far beyond what you could, sticking your funds in a wallet (or set of wallets) they control exclusively is the absolute worst possible way to take advantage of that security. The best way to add security for crypto-assets is to make a stronger multi-sig. With one custodian, what you are doing is giving them your cryptocurrency and hoping they're honest, competent, and flawlessly secure. It's no different than storing it on a really secure exchange. Maybe the insurance will cover you. Didn't work for Bitpay in 2015. Didn't work for Yapizon in 2017. Insurance has never paid a claim in the entire history of cryptocurrency. But maybe you'll get lucky. Maybe your exact scenario will buck the trend and be what they're willing to cover. After the large deductible and hopefully without a long and expensive court battle. And you want to advertise this increase in risk, the lapse of judgement, an accident waiting to happen, as though it's some kind of benefit to customers ("Free institutional-grade storage for your digital assets.")? And then some people are writing to the OSC that custodians should be mandatory for all funds on every exchange platform? That this somehow will make Canadians as a whole more secure or better protected compared with standard air-gapped multi-sig? On what planet? Most of the problems in Canada stemmed from one thing - a lack of transparency. If Canadians had known what a joke Quadriga was - it wouldn't have grown to lose $400m from hard-working Canadians from coast to coast to coast. And Gerald Cotten would be in jail, not wherever he is now (at best, rotting peacefully). EZ-BTC and mister Dave Smilie would have been a tiny little scam to his friends, not a multi-million dollar fraud. Einstein would have got their act together or been shut down BEFORE losing millions and millions more in people's funds generously donated to criminals. MapleChange wouldn't have even been a thing. And maybe we'd know a little more about CoinTradeNewNote - like how much was lost in there. Almost all of the major losses with cryptocurrency exchanges involve deception with unbacked funds. So it's great to see transparency reports from BitBuy and ShakePay where someone independently verified the backing. The only thing we don't have is:
ANY CERTAINTY BALANCES WEREN'T EXCLUDED. Quadriga's largest account was $70m. 80% of funds are in 20% of accounts (Pareto principle). All it takes is excluding a few really large accounts - and nobody's the wiser. A fractional platform can easily pass any audit this way.
ANY VISIBILITY WHATSOEVER INTO THE CUSTODIANS. BitBuy put out their report before moving all the funds to their custodian and ShakePay apparently can't even tell us who the custodian is. That's pretty important considering that basically all of the funds are now stored there.
ANY IDEA ABOUT THE OTHER EXCHANGES. In order for this to be effective, it has to be the norm. It needs to be "unusual" not to know. If obscurity is the norm, then it's super easy for people like Gerald Cotten and Dave Smilie to blend right in.
It's not complicated to validate cryptocurrency assets. They need to exist, they need to be spendable, and they need to cover the total balances. There are plenty of credible people and firms across the country that have the capacity to reasonably perform this validation. Having more frequent checks by different, independent, parties who publish transparent reports is far more valuable than an annual check by a single "more credible/official" party who does the exact same basic checks and may or may not publish anything. Here's an example set of requirements that could be mandated:
First report within 1 month of launching, another within 3 months, and further reports at minimum every 6 months thereafter.
No auditor can be repeated within a 12 month period.
All reports must be public, identifying the auditor and the full methodology used.
All auditors must be independent of the firm being audited with no conflict of interest.
Reports must include the percentage of each asset backed, and how it's backed.
The auditor publishes a hash list, which lists a hash of each customer's information and balances that were included. Hash is one-way encryption so privacy is fully preserved. Every customer can use this to have 100% confidence they were included.
If we want more extensive requirements on audits, these should scale upward based on the total assets at risk on the platform, and whether the platform has loaned their assets out.
There are ways to structure audits such that neither crypto assets nor customer information are ever put at risk, and both can still be properly validated and publicly verifiable. There are also ways to structure audits such that they are completely reasonable for small platforms and don't inhibit innovation in any way. By making the process as reasonable as possible, we can completely eliminate any reason/excuse that an honest platform would have for not being audited. That is arguable far more important than any incremental improvement we might get from mandating "the best of the best" accountants. Right now we have nothing mandated and tons of Canadians using offshore exchanges with no oversight whatsoever. Transparency does not prove crypto assets are safe. CoinTradeNewNote, Flexcoin ($600k), and Canadian Bitcoins ($100k) are examples where crypto-assets were breached from platforms in Canada. All of them were online wallets and used no multi-sig as far as any records show. This is consistent with what we see globally - air-gapped multi-sig wallets have an impeccable record, while other schemes tend to suffer breach after breach. We don't actually know how much CoinTrader lost because there was no visibility. Rather than publishing details of what happened, the co-founder of CoinTrader silently moved on to found another platform - the "most trusted way to buy and sell crypto" - a site that has no information whatsoever (that I could find) on the storage practices and a FAQ advising that “[t]rading cryptocurrency is completely safe” and that having your own wallet is “entirely up to you! You can certainly keep cryptocurrency, or fiat, or both, on the app.” Doesn't sound like much was learned here, which is really sad to see. It's not that complicated or unreasonable to set up a proper hardware wallet. Multi-sig can be learned in a single course. Something the equivalent complexity of a driver's license test could prevent all the cold storage exploits we've seen to date - even globally. Platform operators have a key advantage in detecting and preventing fraud - they know their customers far better than any custodian ever would. The best job that custodians can do is to find high integrity individuals and train them to form even better wallet signatories. Rather than mandating that all platforms expose themselves to arbitrary third party risks, regulations should center around ensuring that all signatories are background-checked, properly trained, and using proper procedures. We also need to make sure that signatories are empowered with rights and responsibilities to reject and report fraud. They need to know that they can safely challenge and delay a transaction - even if it turns out they made a mistake. We need to have an environment where mistakes are brought to the surface and dealt with. Not one where firms and people feel the need to hide what happened. In addition to a knowledge-based test, an auditor can privately interview each signatory to make sure they're not in coercive situations, and we should make sure they can freely and anonymously report any issues without threat of retaliation. A proper multi-sig has each signature held by a separate person and is governed by policies and mutual decisions instead of a hierarchy. It includes at least one redundant signature. For best results, 3of4, 3of5, 3of6, 4of5, 4of6, 4of7, 5of6, or 5of7. History has demonstrated over and over again the risk of hot wallets even to highly credible organizations. Nonetheless, many platforms have hot wallets for convenience. While such losses are generally compensated by platforms without issue (for example Poloniex, Bitstamp, Bitfinex, Gatecoin, Coincheck, Bithumb, Zaif, CoinBene, Binance, Bitrue, Bitpoint, Upbit, VinDAX, and now KuCoin), the public tends to focus more on cases that didn't end well. Regardless of what systems are employed, there is always some level of risk. For that reason, most members of the public would prefer to see third party insurance. Rather than trying to convince third party profit-seekers to provide comprehensive insurance and then relying on an expensive and slow legal system to enforce against whatever legal loopholes they manage to find each and every time something goes wrong, insurance could be run through multiple exchange operators and regulators, with the shared interest of having a reputable industry, keeping costs down, and taking care of Canadians. For example, a 4 of 7 multi-sig insurance fund held between 5 independent exchange operators and 2 regulatory bodies. All Canadian exchanges could pay premiums at a set rate based on their needed coverage, with a higher price paid for hot wallet coverage (anything not an air-gapped multi-sig cold wallet). Such a model would be much cheaper to manage, offer better coverage, and be much more reliable to payout when needed. The kind of coverage you could have under this model is unheard of. You could even create something like the CDIC to protect Canadians who get their trading accounts hacked if they can sufficiently prove the loss is legitimate. In cases of fraud, gross negligence, or insolvency, the fund can be used to pay affected users directly (utilizing the last transparent balance report in the worst case), something which private insurance would never touch. While it's recommended to have official policies for coverage, a model where members vote would fully cover edge cases. (Could be similar to the Supreme Court where justices vote based on case law.) Such a model could fully protect all Canadians across all platforms. You can have a fiat coverage governed by legal agreements, and crypto-asset coverage governed by both multi-sig and legal agreements. It could be practical, affordable, and inclusive. Now, we are at a crossroads. We can happily give up our freedom, our innovation, and our money. We can pay hefty expenses to auditors, lawyers, and regulators year after year (and make no mistake - this cost will grow to many millions or even billions as the industry grows - and it will be borne by all Canadians on every platform because platforms are not going to eat up these costs at a loss). We can make it nearly impossible for any new platform to enter the marketplace, forcing Canadians to use the same stagnant platforms year after year. We can centralize and consolidate the entire industry into 2 or 3 big players and have everyone else fail (possibly to heavy losses of users of those platforms). And when a flawed security model doesn't work and gets breached, we can make it even more complicated with even more people in suits making big money doing the job that blockchain was supposed to do in the first place. We can build a system which is so intertwined and dependent on big government, traditional finance, and central bankers that it's future depends entirely on that of the fiat system, of fractional banking, and of government bail-outs. If we choose this path, as history has shown us over and over again, we can not go back, save for revolution. Our children and grandchildren will still be paying the consequences of what we decided today. Or, we can find solutions that work. We can maintain an open and innovative environment while making the adjustments we need to make to fully protect Canadian investors and cryptocurrency users, giving easy and affordable access to cryptocurrency for all Canadians on the platform of their choice, and creating an environment in which entrepreneurs and problem solvers can bring those solutions forward easily. None of the above precludes innovation in any way, or adds any unreasonable cost - and these three policies would demonstrably eliminate or resolve all 109 historic cases as studied here - that's every single case researched so far going back to 2011. It includes every loss that was studied so far not just in Canada but globally as well. Unfortunately, finding answers is the least challenging part. Far more challenging is to get platform operators and regulators to agree on anything. My last post got no response whatsoever, and while the OSC has told me they're happy for industry feedback, I believe my opinion alone is fairly meaningless. This takes the whole community working together to solve. So please let me know your thoughts. Please take the time to upvote and share this with people. Please - let's get this solved and not leave it up to other people to do. Facts/background/sources (skip if you like):
The inspiration for the paragraph about splitting wallets was an actual quote from a Canadian company providing custodial services in response to the OSC consultation paper: "We believe that it will be in the in best interests of investors to prohibit pooled crypto assets or ‘floats’. Most Platforms pool assets, citing reasons of practicality and expense. The recent hack of the world’s largest Platform – Binance – demonstrates the vulnerability of participants’ assets when such concessions are made. In this instance, the Platform’s entire hot wallet of Bitcoins, worth over $40 million, was stolen, facilitated in part by the pooling of client crypto assets." "the maintenance of participants (and Platform) crypto assets across multiple wallets distributes the related risk and responsibility of security - reducing the amount of insurance coverage required and making insurance coverage more readily obtainable". For the record, their reply also said nothing whatsoever about multi-sig or offline storage.
In addition to the fact that the $40m hack represented only one "hot wallet" of Binance, and they actually had the vast majority of assets in other wallets (including mostly cold wallets), multiple real cases have clearly demonstrated that risk is still present with multiple wallets. Bitfinex, VinDAX, Bithumb, Altsbit, BitPoint, Cryptopia, and just recently KuCoin all had multiple wallets breached all at the same time, and may represent a significantly larger impact on customers than the Binance breach which was fully covered by Binance. To represent that simply having multiple separate wallets under the same security scheme is a comprehensive way to reduce risk is just not true.
Private insurance has historically never covered a single loss in the cryptocurrency space (at least, not one that I was able to find), and there are notable cases where massive losses were not covered by insurance. Bitpay in 2015 and Yapizon in 2017 both had insurance policies that didn't pay out during the breach, even after a lengthly court process. The same insurance that ShakePay is presently using (and announced to much fanfare) was describe by their CEO himself as covering “physical theft of the media where the private keys are held,” which is something that has never historically happened. As was said with regard to the same policy in 2018 - “I don’t find it surprising that Lloyd’s is in this space,” said Johnson, adding that to his mind the challenge for everybody is figuring out how to structure these policies so that they are actually protective. “You can create an insurance policy that protects no one – you know there are so many caveats to the policy that it’s not super protective.”
The most profitable policy for a private insurance company is one with the most expensive premiums that they never have to pay a claim on. They have no inherent incentive to take care of people who lost funds. It's "cheaper" to take the reputational hit and fight the claim in court. The more money at stake, the more the insurance provider is incentivized to avoid payout. They're not going to insure the assets unless they have reasonable certainty to make a profit by doing so, and they're not going to pay out a massive sum unless it's legally forced. Private insurance is always structured to be maximally profitable to the insurance provider.
The circumvention of multi-sig was a key factor in the massive Bitfinex hack of over $60m of bitcoin, which today still sits being slowly used and is worth over $3b. While Bitfinex used a qualified custodian Bitgo, which was and still is active and one of the industry leaders of custodians, and they set up 2 of 3 multi-sig wallets, the entire system was routed through Bitfinex, such that Bitfinex customers could initiate the withdrawals in a "hot" fashion. This feature was also a hit with the hacker. The multi-sig was fully circumvented.
Bitpay in 2015 was another example of a breach that stole 5,000 bitcoins. This happened not through the exploit of any system in Bitpay, but because the CEO of a company they worked with got their computer hacked and the hackers were able to request multiple bitcoin purchases, which Bitpay honoured because they came from the customer's computer legitimately. Impersonation is a very common tactic used by fraudsters, and methods get more extreme all the time.
A notable case in Canada was the Canadian Bitcoins exploit. Funds were stored on a server in a Rogers Data Center, and the attendee was successfully convinced to reboot the server "in safe mode" with a simple phone call, thus bypassing the extensive security and enabling the theft.
The very nature of custodians circumvents multi-sig. This is because custodians are not just having to secure the assets against some sort of physical breach but against any form of social engineering, modification of orders, fraudulent withdrawal attempts, etc... If the security practices of signatories in a multi-sig arrangement are such that the breach risk of one signatory is 1 in 100, the requirement of 3 independent signatures makes the risk of theft 1 in 1,000,000. Since hackers tend to exploit the weakest link, a comparable custodian has to make the entry and exit points of their platform 10,000 times more secure than one of those signatories to provide equivalent protection. And if the signatories beef up their security by only 10x, the risk is now 1 in 1,000,000,000. The custodian has to be 1,000,000 times more secure. The larger and more complex a system is, the more potential vulnerabilities exist in it, and the fewer people can understand how the system works when performing upgrades. Even if a system is completely secure today, one has to also consider how that system might evolve over time or work with different members.
By contrast, offline multi-signature solutions have an extremely solid record, and in the entire history of cryptocurrency exchange incidents which I've studied (listed here), there has only been one incident (796 exchange in 2015) involving an offline multi-signature wallet. It happened because the customer's bitcoin address was modified by hackers, and the amount that was stolen ($230k) was immediately covered by the exchange operators. Basically, the platform operators were tricked into sending a legitimate withdrawal request to the wrong address because hackers exploited their platform to change that address. Such an issue would not be prevented in any way by the use of a custodian, as that custodian has no oversight whatsoever to the exchange platform. It's practical for all exchange operators to test large withdrawal transactions as a general policy, regardless of what model is used, and general best practice is to diagnose and fix such an exploit as soon as it occurs.
False promises on the backing of funds played a huge role in the downfall of Quadriga, and it's been exposed over and over again (MyCoin, PlusToken, Bitsane, Bitmarket, EZBTC, IDAX). Even today, customers have extremely limited certainty on whether their funds in exchanges are actually being backed or how they're being backed. While this issue is not unique to cryptocurrency exchanges, the complexity of the technology and the lack of any regulation or standards makes problems more widespread, and there is no "central bank" to come to the rescue as in the 2008 financial crisis or during the great depression when "9,000 banks failed".
In addition to fraudulent operations, the industry is full of cases where operators have suffered breaches and not reported them. Most recently, Einstein was the largest case in Canada, where ongoing breaches and fraud were perpetrated against the platform for multiple years and nobody found out until the platform collapsed completely. While fraud and breaches suck to deal with, they suck even more when not dealt with. Lack of visibility played a role in the largest downfalls of Mt. Gox, Cryptsy, and Bitgrail. In some cases, platforms are alleged to have suffered a hack and keep operating without admitting it at all, such as CoinBene.
It surprises some to learn that a cryptographic solution has already existed since 2013, and gained widespread support in 2014 after Mt. Gox. Proof of Reserves is a full cryptographic proof that allows any customer using an exchange to have complete certainty that their crypto-assets are fully backed by the platform in real-time. This is accomplished by proving that assets exist on the blockchain, are spendable, and fully cover customer deposits. It does not prove safety of assets or backing of fiat assets.
If we didn't care about privacy at all, a platform could publish their wallet addresses, sign a partial transaction, and put the full list of customer information and balances out publicly. Customers can each check that they are on the list, that the balances are accurate, that the total adds up, and that it's backed and spendable on the blockchain. Platforms who exclude any customer take a risk because that customer can easily check and see they were excluded. So together with all customers checking, this forms a full proof of backing of all crypto assets.
However, obviously customers care about their private information being published. Therefore, a hash of the information can be provided instead. Hash is one-way encryption. The hash allows the customer to validate inclusion (by hashing their own known information), while anyone looking at the list of hashes cannot determine the private information of any other user. All other parts of the scheme remain fully intact. A model like this is in use on the exchange CoinFloor in the UK.
A Merkle tree can provide even greater privacy. Instead of a list of balances, the balances are arranged into a binary tree. A customer starts from their node, and works their way to the top of the tree. For example, they know they have 5 BTC, they plus 1 other customer hold 7 BTC, they plus 2-3 other customers hold 17 BTC, etc... until they reach the root where all the BTC are represented. Thus, there is no way to find the balances of other individual customers aside from one unidentified customer in this case.
Proposals such as this had the backing of leaders in the community including Nic Carter, Greg Maxwell, and Zak Wilcox. Substantial and significant effort started back in 2013, with massive popularity in 2014. But what became of that effort? Very little. Exchange operators continue to refuse to give visibility. Despite the fact this information can often be obtained through trivial blockchain analysis, no Canadian platform has ever provided any wallet addresses publicly. As described by the CEO of Newton "For us to implement some kind of realtime Proof of Reserves solution, which I'm not opposed to, it would have to ... Preserve our users' privacy, as well as our own. Some kind of zero-knowledge proof". Kraken describes here in more detail why they haven't implemented such a scheme. According to professor Eli Ben-Sasson, when he spoke with exchanges, none were interested in implementing Proof of Reserves.
And yet, Kraken's places their reasoning on a page called "Proof of Reserves". More recently, both BitBuy and ShakePay have released reports titled "Proof of Reserves and Security Audit". Both reports contain disclaimers against being audits. Both reports trust the customer list provided by the platform, leaving the open possibility that multiple large accounts could have been excluded from the process. Proof of Reserves is a blockchain validation where customers see the wallets on the blockchain. The report from Kraken is 5 years old, but they leave it described as though it was just done a few weeks ago. And look at what they expect customers to do for validation. When firms represent something being "Proof of Reserve" when it's not, this is like a farmer growing fruit with pesticides and selling it in a farmers market as organic produce - except that these are people's hard-earned life savings at risk here. Platforms are misrepresenting the level of visibility in place and deceiving the public by their misuse of this term. They haven't proven anything.
Fraud isn't a problem that is unique to cryptocurrency. Fraud happens all the time. Enron, WorldCom, Nortel, Bear Stearns, Wells Fargo, Moser Baer, Wirecard, Bre-X, and Nicola are just some of the cases where frauds became large enough to become a big deal (and there are so many countless others). These all happened on 100% reversible assets despite regulations being in place. In many of these cases, the problems happened due to the over-complexity of the financial instruments. For example, Enron had "complex financial statements [which] were confusing to shareholders and analysts", creating "off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people could understand them". In cryptocurrency, we are often combining complex financial products with complex technologies and verification processes. We are naïve if we think problems like this won't happen. It is awkward and uncomfortable for many people to admit that they don't know how something works. If we want "money of the people" to work, the solutions have to be simple enough that "the people" can understand them, not so confusing that financial professionals and technology experts struggle to use or understand them.
For those who question the extent to which an organization can fool their way into a security consultancy role, HB Gary should be a great example to look at. Prior to trying to out anonymous, HB Gary was being actively hired by multiple US government agencies and others in the private sector (with glowing testimonials). The published articles and hosted professional security conferences. One should also look at this list of data breaches from the past 2 years. Many of them are large corporations, government entities, and technology companies. These are the ones we know about. Undoubtedly, there are many more that we do not know about. If HB Gary hadn't been "outted" by anonymous, would we have known they were insecure? If the same breach had happened outside of the public spotlight, would it even have been reported? Or would HB Gary have just deleted the Twitter posts, brought their site back up, done a couple patches, and kept on operating as though nothing had happened?
In the case of Quadriga, the facts are clear. Despite past experience with platforms such as MapleChange in Canada and others around the world, no guidance or even the most basic of a framework was put in place by regulators. By not clarifying any sort of legal framework, regulators enabled a situation where a platform could be run by former criminal Mike Dhanini/Omar Patryn, and where funds could be held fully unchecked by one person. At the same time, the lack of regulation deterred legitimate entities from running competing platforms and Quadriga was granted a money services business license for multiple years of operation, which gave the firm the appearance of legitimacy. Regulators did little to protect Canadians despite Quadriga failing to file taxes from 2016 onward. The entire administrative team had resigned and this was public knowledge. Many people had suspicions of what was going on, including Ryan Mueller, who forwarded complaints to the authorities. These were ignored, giving Gerald Cotten the opportunity to escape without justice.
There are multiple issues with the SOC II model including the prohibitive cost (you have to find a third party accounting firm and the prices are not even listed publicly on any sites), the requirement of operating for a year (impossible for new platforms), and lack of any public visibility (SOC II are private reports that aren't shared outside the people in suits).
Securities frameworks are expensive. Sarbanes-Oxley is estimated to cost $5.1 million USD/yr for the average Fortune 500 company in the United States. Since "Fortune 500" represents the top 500 companies, that means well over $2.55 billion USD (~$3.4 billion CAD) is going to people in suits. Isn't the problem of trust and verification the exact problem that the blockchain is supposed to solve?
To use Quadriga as justification for why custodians or SOC II or other advanced schemes are needed for platforms is rather silly, when any framework or visibility at all, or even the most basic of storage policies, would have prevented the whole thing. It's just an embarrassment.
We are now seeing regulators take strong action. CoinSquare in Canada with multi-million dollar fines. BitMex from the US, criminal charges and arrests. OkEx, with full disregard of withdrawals and no communication. Who's next?
We have a unique window today where we can solve these problems, and not permanently destroy innovation with unreasonable expectations, but we need to act quickly. This is a unique historic time that will never come again.
This post is about scarcity of Bitcoin, namely the fact that there will be just only 21 million bitcoin or 21 * 108 satoshis. Fun fact with bitcoin is that since it is digital, you can put as many decimals to at the end of one satoshi (e.g. lightning network makes 0,001 sats possible). Therefore, its scarcity is not absolute as it is for example with Koenigsegg luxury cars or Pokémon cards; you cannot make a fraction of a car or fraction of a card. Makes no sense. This means that the scarcity of these goods (car, card) result in a zero-sum competition; one person will own the good, one person will not own it. There is a winner and there is a loser. Zero-sum games can lead to conflicts; not with bitcoin.
Because, bitcoin's scarcity is not like that. Everyone can own some bitcoin, and there will be enough for everyone. But it will be a smaller and smaller slice of the pie, the more bitcoin becomes mainstream. As a result, there is no zero-sum competition because everyone can own a piece of pie. And the best part is that if you stack sats now, those will be worth more in the future (assuming the trend is up)!
WaykiChain CEO Gordon Gao: What is WaykiChain doing now?
https://preview.redd.it/i6sd5ax60ow41.jpg?width=1200&format=pjpg&auto=webp&s=8d4171bd4831ce2cfd6fa0bd9b598888d3a100cb Recently, there have been many thoughts on the development direction of blockchain and WaykiChain. I have found some certainty in the world of uncertainty. How does WaykiChain understand the development of the public chain? What is WaykiChain development direction based on these understandings? What should the community expect and pay attention to? I will share with you the answers to these questions. How does WICC increase prices? WICC is the basic digital currency on the WaykiChain public chain. According to its white paper, when this coin was issued in the early period, more than 70% of the chips were in circulation in the secondary market This is a relatively high proportion, comparing to most of blockchain projects. This high circulation ratio is like a double-edged sword. The disadvantage is that foundation has relatively weak control over its value in the secondary market. It is also difficult to manipulate the price to create some false market value to deceive the public. The advantage is that WICC can have a wide range of coin holders and community members. Meanwhile, more coin holders mean that when WICC is found to have price increase expectations, such expectations will be spread by the population, which can result in a large-scale network effect. In 2018, WaykiChain relied on this network effect to make a big hit in the market. At that time, the number of WICC holders was about 100,000 (WICC holders in exchange). However, the communities merely brought by price increase expectations are not sustainable. Those people came because of profit, and they will leave because of no profit. Those who made money or lost money on WaykiChain will scold after the currency price fell. In the bear market, it is almost difficult for people to have confidence in altcoins. It is difficult for people to invest in your long-term future with real money no matter what expectations they receive. Then, how to make WICC valuable in this bear market? We can conclude by the nature of price increases, which is fewer people selling and more people buying. Staking economy is an effective way to achieve“few people selling”. This kind of gameplay is not widely used in the traditional field as it is in the crypto circle. Most of Staking’s gameplay is to give you a dollar profit to make you unwilling to sell your 100 dollar coins. This approach may have a positive effect in the short term, but in the long term, it is no different from the Ponzi scheme. The other method is the DeFi. In DeFi, people need to collateralize their coins and get something that can bring value to them. For example, mortgage lending. When you are unwilling to sell your coins and lack money, the CDP mortgage lending system can meet your needs. At this time, the WICC in your hand becomes a “ticket” to participate in the CDP mortgage lending system. The collateralization generated by this real demand is often solid because such users are less likely to quit fast. Because they benefit from WaykiChain and believe this kind of service will generate value, so it is not a zero-sum game. In the end, most of the people here are winners, so they cherish their chips. Once there are more users, there should be more reasons for them to buy more continuously. The reason for most people who buy token is nothing more than to see some good news which can be predicted. Halving is predicted, so there was a decent run at the start of the year. The World Cup was also a prediction and it is a piece of good news for betting-related blockchain. This prediction of a high degree of certainty in time can prompt a frenzied influx. But other than this quadrennial prediction（Halving or World Cup） of events, what expectations do you have for the community? The first is the technical aspect. A good technical public chain can attract more developers, and more developers can build more business models and have more imagination. To realize the expectation of the business model, users should value the future business growth of your current track and the most direct promotion of the economic model after the growth. For example, the growth of the mortgage lending business. The total collateral of WICC gets bigger ->Less liquidated WICC ->WICC’ s unit price raises with the demand stays the same. Or growth in mortgage lending->WGRT destruction becomes more numerous->WGRT’s unit price raises. This business model creates a rigid value in a currency. Finally, there comes the marketing ability, the user toned to trust that you are able to attract more investors at some point in the future. All financial activities generate bubbles, and how big an asset you end up with depends both on how much beer you have and how much bubble you can pour. If building business value is about brewing, marketing, and storytelling, it’s about pouring beer out of the bubble. About liquidity When it comes to liquidity, some people’s understanding of liquidity of a coin is to be listed on more exchanges, some people know a bit about some financial markets, so they say liquidity is the depth of the order book. I recently get some inspirations from David in Coinbase. Liquidity can be measured by the time you spend to convert an asset to purchase power. Cash is with the best liquidity, as it is almost equal to purchasing power. Property is less liquid because there are very few situations where you buy something directly from the house. Usually, you will have to turn it into cash and buy something else. So there’s a long period between when you decide to sell the house and when you get the money, and the longer that period is, the less liquid it is. USDT is relatively liquid because OTC transactions, which is a mature market in the current situation, allow people to convert the USDT into fiat money in minutes. Note that the above mentioned is to turn assets into purchasing power, rather than cash out. These two are essentially different. For example, if I want to purchase some service from a crypto media, I often use Eth, BTC, USDT, not cash. So I don’t need to sell off my digital currency to exchange cash, but directly pay it, which becomes purchasing power. From this perspective, any merchant accepting digital currency payments is enhancing the liquidity of the digital currency. Because he shortens the time it takes for assets to become purchasing power. As I said before, the keyword of the Internet fights is traffic, and the keyword of digital currency is liquidity. Much of what WICC does is to increase liquidity. Listing on Exchange shortens the time for WICC to transform into the purchasing power of other digital currencies. In real application scenarios, many people are reluctant to undertake the risk of digital currency fluctuations. They only like to denominate in fiat currency, so WUSD (stablecoin) that is generated by collateralizing WICC has better potential than WICC to become purchasing power. Huatong Security accepts WUSD as a payment method to buy HK/US Pre-IPO stocks shortens the time when some people want to convert WUSD into the purchasing power of Hong Kong and US stocks (In the normal process, this user must first sell, exchange fiat currency, and then open an account to buy Hong Kong and US stocks). The new project WaykiX shortens the time required to transform WICC into the purchasing power of investing in various assets around the world. Bitcoin’s technology has not been greatly updated since its inception, but its value remains the leader because of its liquidity. Similarly, in my opinion, the market value of USDT has soared because liquidity is becoming more and more mature. WaykiChain’s future development is also inseparable from liquidity. About Defi As mentioned above, liquidity is important. If you want to improve liquidity, you can cash out first and use cash to purchase most of things you want. However cash out itself is not what a project expects, because it will dump the price when a lot of people doing that. Therefore, collateralizing assets, generating stablecoins, and then enabling stablecoins to generate purchasing power has become a perfect model, which is the essence of WaykiChain 3-Token Economy Model. Regarding purchasing power, first we need to know what users want to buy. Many public chain projects, including WaykiChain, have begun to explore what kind of products and services that users want to buy. For example, betting products, value-added game services, or even e-commerce. All of these end up with nearly no results. As speculators’ paradise, the cryptocurrency circle usually care about borrowing money to make money. So, there is nothing more interesting for them than lending and making money. These people may not have the need to play games or buy things, but they must have the demand to make money. Therefore, finance must be the right direction for blockchain projects. WaykiChain will all in DeFi for at least the next two years. Many people say that WUSD is a stablecoin, so it needs to be compared with USDT. Rather than emphasize WUSD itself, I would rather like to say that WaykiChain ’s CDP is a lending system and service, and WUSD is just a stable value certificate. I am more concerned about the capacity of the CDP lending business itself, and whether it can provide users with the value of lending. As for when WUSD can become a freely circulating currency, it will take a long time to see how much purchasing power is endowed. Maybe at first, WUSD could buy WICC, WGRT, then the index of various global assets, then other digital currencies, then some Hong Kong stocks and US stocks, and finally maybe you can buy two packs of snacks with WUSD downstairs. Simple preview of the new product WaykiX, users can trade all kinds of global assets, including digital currencies, indices, stocks, commodity futures, and even contracts. We have high expectations for this product because we feel it can meet the “purchase” needs of most existing community users. This product learns from the Synthetix project and adds some local elements of WaykiChain, including the technical security reinforcement, as well as the improvement of the economic model and the risk resistance level. Someone asked, Ethereum has a complete DeFi ecosystem, and there are countless projects to start a business together. Why does WaykiChain have the power to fight with Ether? I would like to share a few points. The DeFi of Ethereum is aimed at users of Ethereum. We are currently targeting WaykiChain users. There is no conflict at present. In addition, DeFi seems to have a variety of patterns. It is nothing more than the four major categories of deposits, loans, liquidity, and derivatives. Our current developer community is not as prosperous as Ethereum, so WaykiChain uses a point-to-face model to first construct the core and head of DeFi to ensure quality and safety. When it can form a minimum closed-loop, and then let developers support those long-tail applications. Although it is a bit contrary to the concept of decentralization, we believe that this is an indispensable process for the implementation of the blockchain public chain。 About community I mentioned three directions in the first chapter on how to create the value of WaykiChain, the first is technology, the second is business model and applications, and the third is the marketing model and bubble. In fact, a healthy blockchain community is also attracted by these three parts of value, a core developer community, some coin holders with business needs, and a group of speculation or investors. To achieve the top five public chains in the world, these three groups must be huge. WaykiChain attracts the core developer community through the leading technology mechanism and the friendliness of public chain development. This is the reason why WaykiChain has invested a lot of resources in the technical level of the public chain. WaykiChain continues to create value for currency holders to meet their needs through the DeFi business. And eye-catching marketing methods to attract investors and speculators when market conditions improve and new market capital are sufficient. The bull market is short while the bear market is long. In the bear market, WaykiChain needs to continue to play at the table in a way with a high winning rate. These are my personal opinions. Welcome to discuss more with me.
Best Quotes from Saifedean Ammous book "The Bitcoin Standard"
"Bitcoin can be best understood as distributed software that allows for transfer of value using a currency protected from unexpected inflation without relying on trusted third parties"
"While Bitcoin is a new invention of the digital age, the problems it purports to solve - namely, providing a form of money that is under the full command of its owner and likely to hold its value in the long run - are as old as human society itself"
"People’s choices are subjective, and so there is no “right” and “wrong” choice of money. There are, however, consequences to choices"
"I like to call this the easy money trap: anything used as a store of value will have its supply increased, and anything whose supply can be easily increased will destroy the wealth of those who used it as a store of value"
"For something to assume a monetary role, it has to be costly to produce, otherwise the temptation to make money on the cheap will destroy the wealth of the savers, and destroy the incentive anyone has to save in this medium"
"The monetary media that survived for longest are the ones that had very reliable mechanisms for restricting their supply growth - in other words, hard money"
"The choice of what makes the best money has always been determined by the technological realities of societies shaping the salability of different goods"
"Human civilization flourished in times and places where sound money was widely adopted, while unsound money all too frequently coincided with civilizational decline and societal collapse"
"Whether in Rome, Constantinople, Florence, or Venice, history shows that a sound monetary standard is a necessary prerequisite for human flourishing, without which society stands on the precipice of barbarism and destruction"
"History shows it is not possible to insulate yourself from the consequences of others holding money that is harder than yours"
"Some of the most important technological, medical, economic, and artistic human achievements were invented during the era of the gold standard, which partly explains why it was known as la Belle Epoque, or the beautiful era, across Europe"
"World War I saw the end of the era of monetary media being the choice decided by the free market, and the beginning of the era of government money"
"Government money is similar to primitive forms of money and commodities other than gold: it is liable to having its supply increased quickly compared to its stock, leading to a quick loss of salability, destruction of purchasing power, and impoverishment of its holders"
"With the simple suspension of gold redeemability, governments’ war efforts were no longer limited to the money that they had in their own treasuries, but extended virtually to the entire wealth of the population"
"Had European nations remained on the gold standard, or had the people of Europe held their own gold in their own hands […], history might have been different. It is likely that WorldWar I would have been settled militarily within a few months of conflict"
"The cause of the Great Crash of 1929 was the diversion away from the gold standard in the post-WWI years, and the deepening of the Depression was caused by government control and socialization of the economy in the Hoover and FDR years"
"All spending is spending, in the naive economics of Keynesians, and so it matters not if that spending comes from individuals feeding their families or governments murdering foreigners: it all counts in aggregate demand and it all reduces unemployment!"
"In essence, Bretton Woods attempted to achieve through central planning what the international gold standard of the nineteenth century had achieved spontaneously"
"Hyperinflation is a form of economic disaster unique to government money. There was never an example of hyperinflation with economies that operated a gold or silver standard"
"With government money, whose cost of production tends to zero, it has become quite possible for an entire society to witness all of its savings in the form of money disappear in the space of a few months or even weeks"
"Hyperinflation is a far more pernicious phenomenon than just the loss of a lot of economic value by a lot of people; it constitutes a complete breakdown of the structure of economic production of a society built up over centuries and millennia"
"Even if the textbooks were correct about the benefits of government management of the money supply, the damage from one episode of hyperinflation anywhere in the world far outweighs them"
"Hanke and Bushnell have been able to verify 57 episodes of hyperinflation in history, only one of which occurred before the era of monetary nationalism, and that was the inflation in France in 1795, in the wake of the Mississippi Bubble"
“The constantly increasing supply means a continuous devaluation of thecurrency, expropriating the wealth of the holders to benefit those who printthe currency, and those who receive it earliest. This is termed the CantillonEffect”
“Whether it’s because of downright graft, “national emergency,” or an infestation of inflationist schools of economics, government will always find a reason and a way to print more money, expanding government power while reducing the wealth of the currency holders”
“It is ironic, and very telling, that in the era of government money, governments themselves own far more gold in their official reserves than they did under the international gold standard of 1871–1914”
“A sound money makes service valuable to others the only avenue open for prosperity to anyone, thus concentrating society’s efforts on production, cooperation, capital accumulation, and trade”
“The twentieth century was the century of unsound money and the omnipotent state, as a market choice in money was denied by government diktat, and government-issued paper money was forced on people with the threat of violence”
“Sound money is an essential requirement for individual freedom from despotism and repression, as the ability of a coercive state to create money can give it undue power over its subjects, power which by its very nature will attract the least worthy, and most immoral”
“Sound money is a prime factor in determining individual time preference, an enormously important and widely neglected aspect of individual decision making. Time preference refers to the ratio at which individuals value thepresent compared to the future”
“Economist Hans-Hermann Hoppe explains that once time preference drops enough to allow for any savings and capital or durable consumer-goodsformation at all, the tendency is for time preference to drop even further as a“process of civilization” is initiated”
“Microeconomics has focused on transactions between individuals, and macroeconomics on the role of government in the economy ; [...] the most important economic decisions to any individual’s well-being are the ones they conduct in their trade-offs with their future self”
“The better the money is at holding its value, the more it incentivizes people to delay consumption and instead dedicate resources for production in the future, leading to capital accumulation and improvement of living standards”
“The move from money that holds its value or appreciates to money that loses its value is very significant in the long run: society saves less, accumulates less capital, and possibly begins to consume its capital”
“Civilizations prosper under a sound monetary system, but disintegrate when their monetary systems are debased, as was the case with the Romans, the Byzantines, and modern European societies”
“What matters in money is its purchasing power, not its quantity, and as such, any quantity of money is enough to fulfil the monetary functions, as long as it is divisible and groupable enough to satisfy holders’ transaction and storage needs”
“The best form of money in history was the one that would cause the new supply of money to be the least significant compared to the existing stockpiles, and thus make its creation not a good source of profit”
“Had government money been a superior unit of account and store of value, it would not need government legal tender laws to enforce it, nor would governments worldwide have had to confiscate large quantities of gold and continue to hold them in their central bank reserves”
“The fact that central banks continue to hold onto their gold, and have even started increasing their reserves, testifies to the confidence they have in their own currencies in the long term”
“Sound money is money that gains in value slightly over time, meaning that holding onto it is likely to offer an increase in purchasing power”
“Unsound money, being controlled by central banks whose express mission is to keep inflation positive, will offer little incentive for holders to keep it”
“With unsound money, only returns that are higher than the rate of depreciation of the currency will be positive in real terms, creating incentives for high-return but high-risk investment and spending”
“Savings rates have been declining across the developed countries, dropping to very low levels, while personal, municipal, and national debts have increased to levels which would have seemed unimaginable in the past”
“One of the most mendacious fantasies that pervades Keynesian economic thought is the idea that the national debt “does not matter, since we owe it to ourselves”
“Only a high-time-preference disciple of Keynes could fail to understand that this “ourselves” is not one homogeneous blob but is differentiated into several generations -namely, the current ones which consume recklessly at the expense of future ones”
“The twentieth century’s binge on conspicuous consumption cannot be understood separately from the destruction of sound money and the outbreak of Keynesian high-time-preference thinking, in vilifying savings and deifying consumption as the key to economic prosperity”
“It is an ironic sign of the depth of modern-day economic ignorance fomented by Keynesian economics that capitalism - an economic system based on capital accumulation from saving - is blamed for unleashing conspicuous consumption - theexact opposite of capital accumulation”
“Capitalism is what happens when people drop their time preference, defer immediate gratification, and invest in the future. Debt-fueled mass consumption is as much a normal part of capitalism as asphyxiation is a normal part of respiration”
“The only cause of economic growth in the first place is delayed gratification, saving, and investment, which extend the length of the production cycle and increase the productivity of the methods of production, leading to better standards of living”
“This move from sound money to depreciating money has led to several generations of accumulated wealth being squandered on conspicuous consumption within a generation or two, making indebtedness the new method for funding major expenses”
“As H. L. Mencken put it: “Every election is an advanced auction on stolen goods””
“As politicians sell people the lie that eternal welfare and retirement benefits are possible through the magic of the monetary printing press, the investment in a family becomes less and less valuable”53.“The majority of the technology we use in our modern life was invented in the 19th century, under the gold standard, financed with the ever-growing stock of capital accumulated by savers storing their wealth in a sound money and store of value which did not depreciate quickly”
“The contributions of sound money to human flourishing are not restricted to scientific and technological advance; they can also be vividly seen in the art world”
“In times of sound money and low time preference, artists worked on perfecting their craft so they could produce valuable works in the long run”56.“Modern artists have replaced craft and long hours of practice with pretentiousness, shock value, indignation, and existential angst as ways to cow audiences into appreciating their art, and often added some pretense to political ideals, usually of the puerile Marxist variety”
“As government money has replaced sound money, patrons with low time preference and refined tastes have been replaced by government bureaucrats with political agendas as crude as their artistic taste”
“The Use of Knowledge in Society, by Friedrich #Hayek, is arguably one of the most important economic papers to have ever been written”
“In a free market economic system, prices are knowledge, and the signals that communicate information”
“Prices are not simply a tool to allow capitalists to profit; they are the information system of economic production, communicating knowledge across the world and coordinating the complex processes of production”
“Any economic system that tries to dispense with prices will cause the complete breakdown of economic activity and bring a human society back to a primitive state”
“The fatal flaw of socialism that #Mises exposed was that without a price mechanism emerging on a free market, socialism would fail at economic calculation, most crucially in the allocation of capital goods”
“In an economy with a central bank and fractional reserve banking, the supply of loanable funds is directed by a committee of economists under the influence of politicians, bankers, TV pundits, and sometimes, most spectacularly, military generals”
“Creating new pieces of paper and digital entries to paper over the deficiency in savings does not magically increase society’s physical capital stock; it only devalues the existing money supply and distorts prices”
“Only with an understanding of the capital structure and how interest rate manipulation destroys the incentive for capital accumulation can one understand the causes of recessions and the swings of the business cycle”
“The business cycle is the natural result of the manipulation of the interest rate distorting the market for capital by making investors imagine they can attain more capital than is available with the unsound money they have been given by the banks”
“Contrary to Keynesian animist mythology, business cycles are not mystic phenomena caused by flagging “animal spirits” whose cause is to be ignored as central bankers seek to try to engineer recovery”
“Economic logic clearly shows how recessions are the inevitable outcome of interest rate manipulation in the same way shortages are the inevitable outcome of price ceilings”
“Monetary history testifies to how much more severe business cycles and recessions are when the money supply is manipulated than when it isn’t”
“A capitalist system cannot function without a free market in capital, where the price of capital emerges through the interaction of supply and demand and the decisions of capitalists are driven by accurate price signals”
“The central bank’s meddling in the capital market is the root of all recessions and all the crises which most politicians, journalists, academics, and leftist activists like to blame on capitalism”
“Imagining that central banks can “prevent,” “combat,” or “manage” recessions is as fanciful and misguided as placing pyromaniacs and arsonists in charge of the fire brigade”
“Central planning of credit markets must fail because it destroys markets’ mechanisms for price-discovery providing market participants with the accurate signals and incentives to manage their consumption and production”
“It is typical of the #MiltonFriedman band of libertarianism in that it blames the government for an economic problem, but the flawed reasoning leads to suggesting even more government intervention as the solution”
“Only when a central bank manipulates the money supply and interest rate does it become possible for large-scale failures across entire sectors of the economy to happen at the same time, causing waves of mass layoffs in entire industries”
“In a free market for money, individuals would choose the currencies they want to use, and the result would be that they would choose the currency with the reliably lowest stock-to-flow ratio. This currency would oscillate the least with changes in demand and supply”
“It is an astonishing fact of modern life that an entrepreneur in the year 1900 could make global economic plans and calculations all denominated in any international currency, with no thought whatsoever given to exchange rate fluctuations”
“The combination of floating exchange rates and Keynesian ideology has given our world the entirely modern phenomenon of currency wars”
“Hard money, by taking the question of supply out of the hands of governments and their economist-propagandists, would force everyone to be productive to society instead of seeking to get rich through the fool’s errand of monetary manipulation”
“Under a sound monetary system, government had to function in a way that is unimaginable to generations reared on the twentieth-century news cycle: they had to be fiscally responsible”
“For those of us alive today, raised on the propaganda of the omnipotent governments of the twentieth century, it is often hard to imagine a world in which individual freedom and responsibility supersede government authority”82“. The fundamental scam of modernity is the idea that government needs to manage the money supply. It is an unquestioned starting assumption of all mainstream economic schools of thought and political parties”
“Having the ability to print money, literally and figuratively, increases the power of any government, and any government looks for anything that gives it more power”
“By placing a hard cap on the total supply of bitcoins, Nakamoto was clearly unpersuaded by the arguments of the standard macroeconomics textbook and more influenced by the Austrian school, which argues that the quantity of money itself is irrelevant”
“Societies with money of stable value generally develop a low time preference, learning to save and think of the future, while societies with high inflation and depreciating economies will develop high time preference as people lose track of the importance of saving”
“With sound money, the government’s war effort was limited by the taxes it could collect. With unsound money, it is restrained by how much money it can create before the currency is destroyed, making it able to appropriate wealth far more easily”
“Unsound money is a particularly dangerous tool in the hands of modern democratic governments facing constant reelection pressure. Modern voters are unlikely to favor the candidates who are upfront about the costs and benefits of their schemes”
“Unsound money is at the heart of the modern delusion believed by most voters and those unfortunate enough to study modern macroeconomics at university level: that government actions have no opportunity costs”
“It is no coincidence that when recounting the most horrific tyrants of history, one finds that every single one of them operated a system of government-issued money which was constantly inflated to finance government operation”
“Unsound money makes government power potentially unlimited, with large consequences to every individual, forcing politics to the center stage of their life and redirecting much of society’s energy and resources to the zero-sum game of who gets to rule and how”
“In the world of fiat money, having access to the central bank’s monetary spigots is more important than serving customers. Firms that can get low-interest-rate credit to operate will have a persistent advantage over competitors that cannot”
“Banking has evolved into a business that generates returns without risks to bankers and simultaneously creates risks without returns for everyone else”
“In a world where central banks allocate credit, the larger firm has an advantage in being able to secure funding at a low rate which its smaller competitors cannot get”
“Bitcoin was the first engineering solution that allowed for digital payments without having to rely on a trusted third-party intermediary. By being the firstdigital object that is verifiably scarce, Bitcoin is the first example of digital cash”
“Whereas in a modern central bank the new money created goes to finance lending and government spending, in Bitcoin the new money goes only to those who spend resources on updating the ledger”
“Difficulty adjustment is the most reliable technology for making hard money and limiting the stock-to-flow ratio from rising, and it makes Bitcoin fundamentally different from every other money”
“Bitcoin is the hardest money ever invented: growth in its value cannot possibly increase its supply; it can only make the network more secure and immune to attack”
“The security of Bitcoin lies in the asymmetry between the cost of solving the proof-of-work necessary to commit a transaction to the ledger and the cost of verifying its validity”
“The Bitcoin ledger of transactions might just be the only objective set of facts in the world”
“Bitcoin is the first example of a digital good whose transfer stops it from being owned by the sender”
“Bitcoin presents a tremendous technological leap forward in the monetary solution to the indirect exchange problem, perhaps as significant as the move from cattle and salt to gold and silver”
“Without a conservative monetary policy and difficulty adjustment, Bitcoin would only have succeeded theoretically as digital cash, but remained too insecure to be used widely in practice”
“Bitcoin’s volatility derives from the fact that its supply is utterly inflexible and not responsive to demand changes, because it is programmed to grow at a predetermined rate”
“As the size of the market grows, along with the sophistication and the depth of the financial institutions dealing with Bitcoin, this volatility will likely decline”
“As long as Bitcoin is growing, its token price will behave like that of a stock of a start-up achieving very fast growth. Should Bitcoin’s growth stop and stabilize, it would stop attracting high-risk investment flows, and become just a normal monetary asset”
“Bitcoin is the cheapest way to buy the future, because Bitcoin is the only medium guaranteed to not be debased, no matter how much its value rises”
“The strict digital scarcity of the Bitcoin tokens combines the best elements of physical monetary media, without any of the physical drawbacks to moving and transporting it. Bitcoin might have a claim to make for being the best technology for saving ever invented”
“Any person who owns Bitcoin achieves a degree of economic freedom which was not possible before its invention”
“For the first time since the emergence of the modern state, individuals have a clear technical solution to escaping the financial clout of the governments they live under”
“Bitcoin, and cryptography in general, are defensive technologies that make the cost of defending property and information far lower than the cost of attacking them”
“If BTC continues to grow to capture a larger share of the global wealth, it may force governments to become more and more a form of voluntary organization, which can only acquire its “taxes” voluntarily by offering its subjects services they would be willing to pay for”
“Contrary to popular depictions of anarchists as hoodie-clad hoodlums, Bitcoin’s brand of anarchism is completely peaceful, providing individuals with the tools necessary for them to be free from government control and inflation”
“The invention of Bitcoin has created, from the ground up, a new independent alternative mechanism for international settlement that does not rely on any intermediary and can operate entirely separate from the existing financial infrastructure”
“Bitcoin can be seen as the new emerging reserve currency for online transactions, where the online equivalent of banks will issue Bitcoin-backed tokens to users while keeping their hoard of Bitcoins in cold storage”
“Bitcoin’s advantage is that by bringing the finality of cash settlement to the digital world, it has created the fastest method for final settlement of large payments across long distances and national borders”
“Bitcoin can be best understood to compete with settlement payments between central banks and large financial institutions, and it compares favorably to them due to its verifiable record, cryptographic security, and imperviousness to third-party security holes”
“BTC, having no counterparty risk and no reliance on any third-party, is uniquely suited to play the same role that gold played in the gold standard"
“If Bitcoin continues to grow in value and gets utilized by a growing number of financial institutions, it will become a reserve currency for a new form of central bank"
“The first central bank to buy BTC will alert the rest of the central banks to the possibility and make many of them rush toward it. The first central bank purchase is likely to make the value of BTC rise significantly"
“While central banks have mostly been dismissive of the importance of BTC, this could be a luxury they may not afford for long. As hard as it might be for central bankers to believe it, BTC is a direct competitor to their line ofbusiness”
“The modern central bank business model is being disrupted. Central banks now have no way of stopping competition by just passing laws as they have always done. They are now up against a digital competitor that most likely cannot be brought under the physical world’s laws”
“If the modern world is ancient Rome, suffering the economic consequences of monetary collapse, with the dollar our aureus, then Satoshi Nakamoto is our Constantine, Bitcoin is his solidus, and the Internet is our Constantinople”
“Should it achieve some sort of stability in value, Bitcoin would be superior to using national currencies for global payment settlements, as is the case today, because national currencies fluctuate in value based on each nation’s and government’s conditions”
“Bitcoin is the only truly decentralized digital currency which has grown spontaneously as a finely balanced equilibrium between miners, coders, and users, none of whom can control it”
“After years of watching altcoins get created, it seems impossible that any coin will recreate the adversarial standoff that exists between Bitcoin stakeholders and prevents any party from controlling payments in it”
“It is high time for everyone involved in BTC to stop concerning themselves with the question of the identity of Nakamoto, and accept that it does not matter to the operation of the technology, in the same way that the identity of the inventor of the wheel no longer matters”
“No single altcoin has demonstrated anything near Bitcoin’s impressive resilience to change, which is down to its truly decentralized nature and the strong incentives for everyone to abide by the status quo consensus rules”
“Contrary to a lot of the hype surrounding Bitcoin, eliminating the need for trust in third parties is not an unquestionably good thing to do in all avenues of business and life”
“A non-Bitcoin blockchain combines the worst of both worlds: the cumbersome structure of the blockchain with the cost and security risk of trusted third parties”
"“It is no wonder that eight years after its invention, blockchain technology has not yet managed to break through in a successful, ready-for-market commercial application other than the one for which it was specifically designed: Bitcoin”
“The most common potential applications touted for blockchain technology - payments, contracts, and asset registry - are only workable to the extent that they run using the decentralized currency of the blockchain”
“All blockchains without currencies have not moved from the prototype stage to commercial implementation because they cannot compete with current best practice in their markets”
“Any application of #blockchain technology will only make commercial sense if its operation is reliant on the use of electronic cash, and only if electronic cash’s disintermediation provides economic benefits outweighing the use of regular currencies and payment channels”
SegWit would make it HARDER FOR YOU TO PROVE YOU OWN YOUR BITCOINS. SegWit deletes the "chain of (cryptographic) signatures" - like MERS (Mortgage Electronic Registration Systems) deleted the "chain of (legal) title" for Mortgage-Backed Securities (MBS) in the foreclosure fraud / robo-signing fiasco
SegWit is a "clever innovation" brought to you by clueless / corrupt AXA-owned Blockstream devs;
MERS is a "clever innovation" brought to you by reckless / corrupt Wall Street bankers;
SegWit and MERS both work by simply deleting crucial "ownership data" for transactions.
Of course, the "experts" (on Wall Street, and at AXA-owned Blockstream) present MERS and SegWit as "innovations" - as a way to "optimize" and "streamline" vast chains of transactions reflecting ownership and transfer of valuable items (ie, real-estate mortgages, and bitcoins). But, unfortunately, the "brilliant bat-shit insane approach" devised by the "geniuses" behind MERS and SegWit to do this is to simply delete the data which proved ownership and transfer of these items - information which is essential for legal purposes (in the case of mortgages), or security purposes (in the case of bitcoins).
SegWit allows deleting the "chain of (cryptographic) signatures" for bitcoins - ie, SegWit supports deleting the cryptographic data specifying "who transmitted what bitcoins to whom" (as originally specified in Satoshi's whitepaper defining Bitcoin);
MERS (Mortgage Electronic Registration Systems) allowed deleting the "chain of (legal) title" for real-estate mortgages - ie, MERS supported deleting the legal "notes" specifying "who transmitted what mortgages to whom" (as previously tracked by banks / mortgage lenders / originators / notaries / land registries / "cadasters", etc.)
So, the most pernicious aspect of SegWit may be that it encourages deleting all of Bitcoin's cryptographic security data - destroying the "chain of signatures" which (according to the white paper) are what define what a "bitcoin" actually is. Wow, deleting signatures with SegWit sounds bad. Can I avoid SegWit? Yes you can. To guarantee the long-term cryptographic, legal and financial security of your bitcoins:
You should avoid sending / receiving / holding Bitcoins using the dangerous, new "SegWit" addresses. (As far as I understand, "SegWit" bitcoin addresses all start with a "3".)
You should just use safe, "normal" Bitcoin addresses - and avoid using unsafe "SegWit" addresses. (If I understand correctly, all "normal" Bitcoin addresses still start with a "1", while "SegWit" addresses always start with a "3".)
You can also use Bitcoin implementations which encourage using "normal" Bitcoin addresses. (As far as I understand, implementations such as Bitcoin ABC, Bitcoin Unlimited, Bitcoin Classic are being deployed mainly to support "normal", "non-SegWit" Bitcoin addresses - as well as market-based (bigger) blocksizes and (lower) fees.)
You can avoid Bitcoin implementations which require SegWit. (As far as I understand, SegWit2x, UASF/BIP148 are being deployed mainly to support "SegWit" Bitcoin addresses - as well as centrally-planned (smaller) blocksizes and (higher) fees).
MERS = "The dog ate your mortgage's chain of title". SegWit = "The dog ate your bitcoin's chain of signatures."
By deleting / losing the "chain of title" for mortgages stored in the MERS database (in the name of "innovation" and "efficiency" and "optimization" being pushed by "clever" bankers on Wall Street), MERS caused a legal and financial catastrophe for mortgages - by making it impossible to (legally) prove who owns which properties.
By deleting / losing the "chain of signatures" for Bitcoins stored in SegWit addresses (in the name of "innovation" and "efficiency" and "optimization" being pushed by "clever" devs at AXA-owned Blockstream), SegWit could end up causing a financial (and possibly also legal) catastrophe for Bitcoin - by making it impossible (or at least more complicated in many cases) to (cryptographically) prove who owns which bitcoins.
Wall Street-backed MERS = AXA-backed SegWit It is probably no coincidence that:
Clueless, corrupt bankers from Wall Street used MERS to recklessly delete the "chain of (legal) title" for people's mortgages;
And now clueless, corrupt devs from AXA-owned Blockstream want to recklessly use SegWit to delete the "chain of (cryptographic) signatures" for people's bitcoins.
by supporting the most ignorant developers and "leaders" (lying Blockstream CTO Greg Maxwell and CEO Adam Back, drooling authoritarian idiot Luke-Jr, vandal Peter Todd, etc);
by supporting a massive campaign of propaganda, censorship, and lies (on forums like r\bitcoin and sites like bitcointalk.org - both controlled by the corrupt censor u/Theymos) to try to force SegWit on the Bitcoin community.
Do any Core / Blockstream devs and supporters know about MERS - and recognize its dangerous parallels with SegWit? It would be interesting to hear from some of the "prominent" Core / Blockstream devs and supporters listed below to find out if they are aware of the dangerous similarities between SegWit and MERS:
Luke-Jr u/luke-jr - co-founder of and occasional contractor for Blockstream, in charge of Core's "BIP" numbering process, known for his [delusions] and authoritarianism - and for the messy SegWit-as-a-soft-fork kludge - now leading the brainwashed lemmings and sybils of r\bitcoin off the cliff, with his doomed UASF/BIP148;
Core / Blockstream devs might not know about MERS - but AXAdefinitely does While it is likely that most or all Core / Blockstream devs do not know about the MERS fiasco... ...it is 100% certain that people at AXA (the main owners of Blockstream) do know about MERS. This is because the global financial crisis which started in 2008 was caused by:
CDOs - collateralized debt obligations
MBSs - mortgage-backed securities
MERS - the company / database Mortgage Electronic Registration Systems which "lost" (deleted) millions of people's mortgage notes - leading to "clouded titles" which made possible the wave of foreclosure fraud and robo-signing, which eventually cost the "clever" banks tens of billions of dollars in losses.
Loans originated with MERS as the original mortgagee purport to separate the borrower’s promissory note, which is made payable to the originating lender, from the borrower’s conveyance of a mortgage, which purportedly is granted to MERS. If this separation is legally incorrect - as every state supreme court looking at the issue has agreed - then the security agreements do not name an actual mortgagee or beneficiary. The mortgage industry, however, has premised its proxy recording strategy on this separation, despite the U.S. Supreme Court’s holding that “the note and mortgage are inseparable.” [Compare with the language from Satoshi's whitepaper: "We define an electronic coin as a chain of digital signatures."] If today’s courts take the Carpenter decision at its word, then what do we make of a document purporting to create a mortgage entirely independent of an obligation to pay? If the Supreme Court is right that a “mortgage can have no separate existence” from a promissory note, then a security agreement that purports to grant a mortgage independent of the promissory note attempts to convey something that cannot exist. [...] Many courts have held that a document attempting to convey an interest in realty fails to convey that interest if the document does not name an eligible grantee. Courts around the country have long held that “there must be, in every grant, a grantor, a grantee and a thing granted, and a deed wanting in either essential is absolutely void.”
The parallels between MERS and SegWit are obvious and inescapable.
MERS separated (and eventually deleted) the legal information regarding the "conveyance" (transfer) of ownership of "realty" (real estate)
SegWit segregates (and allows eventually deleting) the cryptographic information regarding the sending and receiving of bitcoins.
Note that I am not arguing here that SegWit could be vulnerable to attacks from a strictly legal perspective. (Although that may be possible to.) I am simply arguing that SegWit, because it encourages deleting the (cryptographic) signature data which defines "bitcoins", could eventually be vulnerable to attacks from a cryptographic perspective. But I heard that SegWit is safe and tested! Yeah, we've heard a lot of lies from Blockstream, for years - and meanwhile, they've only succeeded in destroying Bitcoin's market cap, due to unnecessarily high fees and unnecessarily slow transactions. Now, in response to those legal-based criticisms of SegWit in the article from nChain, several so-called "Bitcoin legal experts" have tried to rebut that those arguments from nChain were somehow "flawed". But if you read the rebuttals of these "Bitcoin legal experts", they sound a lot like the clueless "experts" who were cheerleading MERS for its "efficiency" - and who ended up costing tens billions of dollars in losses when the "chain of title" for mortgages held in the MERS database became "clouded" after all the crucial "ownership data" got deleted in the name of "efficiency" and "optimization". In their attempt to rebut the article by nChain, these so-called "Bitcoin legal experts" use soothing language like "optimization" and "pragmatic" to try to lull you into believing that deleting the "chain of (cryptographic) signatures" for your bitcoins will be just as safe as deleting the "chain of (legal) notes" for mortgages: http://www.coindesk.com/bitcoin-legal-experts-nchain-segwit-criticisms-flawed/ The (unsigned!) article on CoinDesk attempting to rebut Nguyen's article on nChain starts by stating:
Nguyen's criticisms fly in the face of what has emerged as broad support for the network optimization, which has been largely embraced by the network's developers, miners and startups as a pragmatic step forward.
Then it goes on to quote "Bitcoin legal experts" who claim that using SegWit to delete Bitcoin's cryptographic signatures will be just fine:
Marco Santori, a fintech lawyer who leads the blockchain tech team at Cooley LLP, for example, took issue with what he argued was the confused framing of the allegation. Santori told CoinDesk:
"It took the concept of what is a legal contract, and took the position that if you have a blockchain signature it has something to do with a legal contract."
Stephen Palley, counsel at Washington, DC, law firm Anderson Kill, remarked similarly that the argument perhaps put too much weight on the idea that the "signatures" involved in executing transactions on the bitcoin blockchain were or should be equivalent to signatures used in digital documents.
"It elides the distinction between signature and witness data and a digital signature, and they're two different things," Palley said.
"There are other ways to cryptographically prove a transaction is correctly signed other than having a full node," said BitGo engineer Jameson Lopp. "The assumption that if a transaction is in the blockchain, it's probably valid, is a fairly good guarantee." Legal experts asserted that, because of this design, it's possible to prove that the transaction occurred between parties, even if those involved did not store signatures. For this reason, Coin Center director Jerry Brito argued that nChain is overstating the issues that would arise from the absence of this data. "If you have one-time proof that you have the bitcoin, if you don't have it and I have it, logically it was signed over to me. As long as somebody in the world keeps the signature data and it's accessible, it's fine," he said.
There are several things you can notice here:
These so-called "Bitcoin legal experts" are downplaying the importance of signatures in Bitcoin - just like the "experts" behind MERS downplayed the importance of "notes" for mortgages.
Satoshi said that a bitcoin is a "chain of digital signatures" - but these "Bitcoin legal experts" are now blithely asserting that we can simply throw the "chain of digital signatures" in the trash - and we can be "fairly" certain that everything will "probably" be ok.
The "MERS = SegWit" argument which I'm making is not based on interpreting Bitcoin signatures in any legal sense (although some arguments could be made along those lines).
Instead, I'm just arguing that any "ownership database" which deletes its "ownership data" (whether it's MERS or SegWit) is doomed to end in disaster - whether that segregated-and-eventually-deleted "ownership data" is based on law (with MERS), or cryptography (with SegWit).
Who's right - Satoshi or the new "Bitcoin experts"? You can make up your own mind. Personally, I will never send / receive / store large sums of money using any "SegWit" bitcoin addresses. This, is not because of any legal considerations - but simply because I want the full security of "the chain of (cryptographic) signatures" - which, according to the whitepaper, is the very definition of what a bitcoin "is". Here are the words of Satoshi, from the whitepaper, regarding the "chain of digital signatures": https://www.bitcoin.com/bitcoin.pdf
We define an electronic coin as a chain of digital signatures. Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership.
Does that "chain of digital signatures" sound like something you'd want to throw in the trash??
The "clever devs" from AXA-owned Blockstream (and a handful of so-called "Bitcoin legal experts) say "Trust us, it is safe to delete the chain of signatures proving ownership and transfer of bitcoins". They're pushing "SegWit" - the most radical change in the history of Bitcoin. As I have repeatedly discussed, SegWit weakens Bitcoin's security model.
The people who support Satoshi's original Bitcoin (and clients which continue to implement it: Bitcoin ABC, Bitcoin Unlimited, Bitcoin, Bitcoin Classic - all supporting "Bitcoin Cash" - ie "Bitcoin" without SegWit) say "Trust no one. You should never delete the chain of signatures proving ownership and transfer of your bitcoins."
We define an electronic coin as a chain of digital signatures.
So, according to Satoshi, a "chain of digital signatures" is the very definition of what a bitcoin is.
Meanwhile according to some ignorant / corrupt devs from AXA-owned Blockstream (and a handful of "Bitcoin legal experts") now suddenly it's "probably" "fairly" safe to just throw Satoshi's "chain of digital signatures" in the trash - all in the name of "innovation" and "efficiency" and "optimization" - because they're so very clever.
Who do you think is right? Finally, here's another blatant lie from SegWit supporters (and small-block supporters) Let's consider this other important quote from Satoshi's whitepaper above:
A payee can verify the signatures to verify the chain of ownership.
Remember, this is what "small blockers" have always been insisting for years. They've constantly been saying that "blocks need to be 1 MB!!1 Waah!1!" - even though several years ago the Cornell study showed that blocks could already be 4 MB, with existing hardware and bandwidth. But small-blockers have always insisted that everyone should store the entire blockchain - so they can verify their own transactions. But hey, wait a minute! Now they turn around and try to get you to use SegWit - which allows deleting the very data which insisted that you should download and save locally to verify your own transactions! So, once again, this exposes the so-called "arguments" of small-blocks supporters as being fake arguments and lies:
On the one hand, they (falsely) claim that small blocks are necessary in order for everyone to be run "full nodes" because (they claim) that's the only way people can personally verify all their own transactions. By the way, there are already several errors here with what they're saying:
Actually "full nodes" is a misnomer (Blockstream propaganda). The correct terminology is "full wallets", because only miners are actually "nodes".
Actually 1 MB "max blocksize" is not necessary for this. The Cornell study showed that we could easily be using 4 MB or 8 MB blocks by now - since, as everyone knows, the average size of most web pages is already over 2 MB, and everyone routinely downloads 2 MB web pages in a matter of seconds, so in 10 minutes you could download - and upload - a lot more than just 2 MB. But whatever.
On the other hand, they support SegWit - and the purpose of SegWit is to allow people to delete the "signature data".
This conflicts with their argument the everyone should personally verify all their own transactions. For example, above, Coin Center director Jerry Brito was saying: "As long as somebody in the world keeps the signature data and it's accessible, it's fine."
So which is it? For years, the "small blockers" told us we needed to all be able to personally verify everything on our own node. And now SegWit supporters are telling us: "Naah - you can just rely on someone else's node."
Plus, while the transactions are still being sent around on the wire, the "signature data" is still there - it's just "segregated" - so you're not getting any savings on bandwidth anyways - you'd only get the savings if you delete the "signature data" from storage.
Storage is cheap and plentiful, it's never been the "bottleneck" in the system. Bandwidth is the main bottleneck - and SegWit doesn't help that at all, because it still transmits all the data.
Conclusion So if you're confused by all the arguments from small-blockers and SegWitters, there's a good reason: their "arguments" are total bullshit and lies. They're attempting to contradict and destroy:
Satoshi's original design of Bitcoin as a "chain of digital signatures":
"We define an electronic coin as a chain of digital signatures. Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership."
Satoshi's plan for scaling Bitcoin by simply increasing the goddamn blocksize:
Satoshi Nakamoto, October 04, 2010, 07:48:40 PM "It can be phased in, like: if (blocknumber > 115000) maxblocksize = largerlimit / It can start being in versions way ahead, so by the time it reaches that block number and goes into effect, the older versions that don't have it are already obsolete."
The the notorious mortgage database MERS, pushed by clueless and corrupt Wall Street bankers, deleted the "chain of (legal) title" which had been essential to show who conveyed what mortgages to whom - leading to "clouded titles", foreclosure fraud, and robo-signing.
The notorious SegWit soft fork / kludge, pushed by clueless and corrupt AXA-owned Blockstream devs, allows deleting the "chain of (cryptographic) signatures" which is essential to show who sent how many bitcoins to whom - which could lead to a catastrophe for people who foolishly use SegWit addresses (which can be avoided: unsafe "SegWit" bitcoin addresses start with a "3" - while safe, "normal" Bitcoin addresses start with a "1").
Stay safe and protect your bitcoin investment: Avoid SegWit transactions.
[See the comments from me directly below for links to several articles on MERS, foreclosure fraud, robo-signing, "clouded title", etc.]
HODL alert: The future of Stellar is bright! CONCLUSIONS of Michael Dowling AMA
Michael Dowling, the Group CTO and Chief Architect for Blockchain Financial Services at IBM, held an AMA yesterday under the name i_love_golang for Stellar redditors interested in the direction of Stellar.org in 2018. Here are the main takeaways from the AMA: Question asked by siaubus: "Why did you pick Stellar for the project?" Answer by i_love_golang: 1: People Our team at IBM believe that people, not technology, make for solutions. More importantly, having the right people, with the right mindset, with the right incentives, with the right subject matter expertise, make for solutions that bring actual value to the world. In our experience working with the Stellar team, we saw a perfect match. The folks at Stellar, like us, want to see the world move past the 40+ year old fragmented system that we all suffer in today, but move towards a system that is more fair and equitable for all. 2: Asset Class XLM/Lumens market, while relatively small today, is growing, and growing fast. More and more people are buying Lumens and trading them, albeit for other cryptocurrencies, actively. Along with our partners at KlickEx, we have a strong desire (and requirement!) to also open the market for fiat (traditional currency) to XLM at the institutional level. Also important to us was knowing up front the full ownership structure of Lumens with respect to the founders and the development foundation managing XLM. The process is completely transparent and we (and you!) know the founders’ holdings of XLM. This helps us to ensure there’s as little financial conflict of interest as possible. 3: Technology The choice of tech, our team needed to take into considering some of the future capabilities and participants on the network. A very unique capability with Stellar is the ability to issue an asset directly on the network, and specify how that asset is managed on the network and what nodes validate and confirm transactions. That means we can work with other parties - such as traditional fiat currency issuers (stay tuned :) ) - and help them feel safe about issuing on-chain. Together with the technology we developed at IBM using Hyperledger Fabric, the ability to clear transactions with very fast settlement using Lumens was a no-brainer and a perfect match. Together, traditional - and non-traditional - Financial institutions can settle using a cryptocurrency/digital asset, with those transactions directly tied to counter-terrorism financing, AML, and KYC processes required by regulators around the world. Basically, its the missing piece those institutions need to move forward transacting with digital assets. CONCLUSION #1 One reason Stellar is a valuable company is because of its team. Jed McCaleb, the founder and visionary of Stellar, has been a disrupter since 2000 with eDonkey, one of the largest file-sharing network at the time. He created the first Bitcoin exchange Mt. Gox, co-founded Ripple, then took his experience from Ripple to create the company we now know as Stellar. Jed has built a strong team of software engineers, innovators, researchers, scientists, businessmen and businesswomen, relationship builders, financial advisers, and so on to bring Stellar to life. His board members are diverse, including people from Stripe, Apache Software Foundation, WordPress, AngelList, and now IBM. The resources that are available for Stellar to grow are rich and diverse. Will Jed’s disruptive track record prove once again with Stellar? Mr. Dowling goes on to say “XLM/Lumens market, while relatively small today, is growing, and growing fast.” He has inside information and can clearly see the direction of the XLM market. This should be an indicator of what will happen to XLM in 2018. Mr. Dowling said IBM invested in the technology because assets can easily be issued directly on the network and be easily managed. According to Jed McCaleb in https://youtu.be/GIMOrsPxlZg at 5:25, he talks about Bitcoin and Stellar and the flaws of Bitcoin that Stellar fixes (I highly recommend watching the video) “Bitcoin is this awesome innovation. The first thing it does is converts a real world resource, electricity, into a digital asset. So it takes something from the real world and puts it into the digital realm. The second thing it does is provides immutable public record. It’s basically a database that everyone can see but no one change arbitrarily… That’s great, Bitcoin solves the double spin problem [ of proving possession and transmitting volume]… [To fix problems of bitcoin] you might think well maybe we’ll just kind of keep adding [software] to Bitcoin until we get there, but that’s not really the way software works. You want to have the design from the beginning and solve these simple issues. Bitcoin was designed to be a new currency, it wasn’t really designed to be this unifying universal payment network. So that’s what Stellar does. It solves these three remaining issues.” Jed has watched Bitcoin rise and knows the strengths and flaws of Ripple, and with that knowledge, he built Stellar. Question asked by sintax_: "When does IBM plan to start using Lumens for transactions?" Answer by i_love_golang: Immediately. The week of the announcement, we transacted with a few tightly monitored real-world value transfers. Through this year, you’ll see that traffic increasing gradually as more transactions are allowed to move through without tight monitoring. Basically: this is real money, affecting real people. There is zero room for error, so we’re making damn sure the system is built for scale. CONCLUSION #2 It’s already in use. So far It works! Expect heavy traffic in the future. They are creating a platform that will be scaled to a large network. Question asked by FuckJimmyFallon: "Is the partnership with Stellar temporary or long term? Will the network be integrated with IBMs cross border payments permanently?" Answer by i_love_golang: This partnership is not just long term - it’s tight. Stellar joined the Hyperledger Foundation in addition to partnering on this project. There are many upcoming projects coming up this year about to be announced. Stay tuned :) CONCLUSION #3 The IBM partnership is permanent and secure! I was wondering how involved IBM would be with Stellar and this sums the question up. Also, more projects = more real-life use cases = more money transfers by XLM = higher market cap and traffic on the network. Don’t forget that the value of XLM increases as people place more intrinsic value of the stellar project as a whole, which comes along with disruptive projects and partnerships. Question asked by who_dat_swag: "How many partners from finance are on board with the project? How long do you expect to be using the stellar network and what might replace it?" Answer by i_love_golang: We have 1 major market maker (right now - again, stay tuned VERY soon), and 14 major institutions involved in direct or indirect capacity on the network. Starting in Q12018, you should see more of those institutions redirecting payment traffic on the network. This will be a slow, gradual increase over time. That’s the right way to do this kind of things. CONCLUSION #4 MORE PARTNERSHIPS! I remember watching Ethereum and Ripple in early 2017 before they announced large partnerships such as the Enterprise Ethereum Alliance (BP, Cisco, Intel, J.P. Morgan, Microsoft) and Ripple with financial institutions. Ethereum was $20 and Ripple was $.006. Look where they are today as they are more developed with a variety of partnerships. XLM have not hit this growth spurt in price and it is something that will happen within the next couple years. Remember, “this will be a slow, gradual increase over time” so this is for all of you noobs wondering why the price of Stellar hasn’t reached the moon. He also restates that there WILL be more traffic on the Stellar network. He has vision to the Stellar project that allows him to tell us this and I’m very optimistic. Last Question asked by macjesu: "Any other cool partnerships coming for the future?" Answer by i_love_golang: Oh, oh yes there are. Stay tuned. CONCLUSION #5 MOON. What are your thoughts about Stellar? What questions do you have about XLM/Stellar? Where do you expect to see Stellar next year at Q3 of 2018?
bat-brendaneich Admin 12:59 PM Thanks @bat-jennie. As people know we're deep into Mercury phase, with a few people working on Gemini (user-private ads, anonymous revenue share to user). We did the first batch of UGP grants last month and will do more in January. We're working on creator referral awards, to pay YouTubers and site owners who bring new users to the platform as measured by 30 days uptime in Brave. We had a successful pair of bizdev trips to NYC and London over last two months' time, getting close to announcing an ongoing partnership with a top-3 NYC media co. The tide is turning fast with publishers. Three years ago when I was thinking a lot about brave and studying problems in ad tech, I met with publishers and ad tech people in NYC. Some fear of ad blocking but mostly business as usual, even as programmatic plays launched in previous few years were hitting what now look like peaks (and trying to exit via M&A). Two years ago I met as Brave founder and pubs were mostly "you're an ad blocker, we hate you" but a few got the larger play. At that point I was thinking about Bravecoin and met with Stephan Tual and co. at Ethereum's London office; helpful but also clear it was too early to do "Bravecoin". Last year publishers started turning, because their revenue was going down y-o-y, partly from ad blocking but also from G and FB eating the best programmatic ads and owning the user. This year the worm has turned, so to speak -- no one discounts ad blocking and everyone is talking about GDPR + ePrivacy in Europe next year requiring consent for tracking, so with this as background I think we are well-positioned to move into Gemini phase of the BAT roadmap in 1H2018.
bat-jennie Admin 1:06 PM Wow, what an update! This is all very exciting news! I’m sure people are just dying to ask you their questions now! Let’s move onto those 🙂. Our first question comes from Modernity from Rocket Chat:
Why use a separate cryptocurrency (BAT) instead of just using ETH or a more established cryptocurrency?
bat-brendaneich Admin 1:08 PM Thanks, @modernity -- the answer is twofold: 1, to raise funds for the project (no shame in that); 2, to precreate the User Growth Pool before the sale to stake users with tokens, gratis. With ETH or other existing cryptocurrencies we would need a rich benefactor to endow the UGP and none were forthcoming. UGP+reserves wallet present notional value is $122M. I don't know of anyone who was willing to give us that much ETH. When I met with Ethereum folks in July 2015 and talked Bravecoin, I was inspired by "Social Credit" money theory. Give people tokens just for being citizens. That's the UGP.
bat-jennie Admin 1:10 PM @Robert.clark from Rocket Chat asks:
How do you envision the 'moat' of your startup being built? Is it about digging deep into the BAT reward system and creating truly better and more profitable ad experiences for the consumer as well as the advertiser, or more about the privacy focused / decentralized internet browsing experience?
bat-brendaneich Admin 1:13 PM Thanks @robert.clark -- we aim to standardize what we can and hope to work with Apple and Mozilla in W3C on anti-tracking specs in new year, so that's not the moat. The moat is attacking Google's main revenue source directly, while using as much chromium code as possible. That is a durable strategy as Google cannot diversify fast enough, and faces anti-competitive scrutiny in Europe that limits its ability to use MS-like tactics against us. If other browsers want to join in the platform, we will bring them on -- after we have built Gemini phase and specified endpoint as well as on-chain rules. In this light it is crucial we neutralize Chrome in every area where we do not differentiate by blocking by default. Note: blocking invisible trackers as well as all third party ads (and some 1st party that place with Google DFP), this gives 3-7x speedup on Android vs. Chrome, and Android Chrome has no extensions which means no adblockers. Google's "ad filter" is cosmetic and doesn't touch trackers or the ads its core business and public stock price depends upon (they'd be bad fiduciaries if they did hurt their revenue materially; I'd join the class action suit!). My view is G (and FB) are both "stuck"; they have limited ability to disrupt themselves, even ignoring usual big-company and innovator's dilemma problems. When thinking about moats and strategy, I find Mr. Spock's remark that "Military secrets are the most fleeting of all" helpful. Tech alone isn't a moat. Remember when Steve Jobs was rumored to be considering buying Dropbox? Then a bit later he said "that's just a feature" (meaning OS icloud integration)? The durable strategies go against deep conflicts of interest, in Google's case between Chrome users and G's ad business. Btw the latest on G's ad filter makes me think they'll get in legal and possibly antitrust trouble, the way they require verification. But we shall see!
bat-jennie Admin 1:18 PM @Irak from Rocket Chat asks:
Brave is an obvious buyout target for the major browsers and ad revenue companies. What do you believe would happen to BAT if a buyout occurs?
bat-jennie Admin 1:22 PM @Coke from Rocket Chat asks:
What are the Brave team's top three priorities at the moment?
bat-brendaneich Admin 1:24 PM @Coke, thanks. The BAT ones are 1/ more UGP grants, with sybil attack resistance; 2/ creator referral awards; 3/ publisher onboarding (the top-3 nyc media co. and others). For Brave we have 1/ bug fixes; 2/ performance and memory work; 3/ extension support on laptop/desktop.
bat-jennie Admin 1:26 PM @Steve-1 from Rocket Chat asks:
What’s the likelihood of BAT transitioning to its own independent blockchain at some point? Will BAT switch to an alternative Blockchain due to ETH scaling issues?
bat-brendaneich Admin 1:26 PM @steve-1 We have thought about this enough to view it as an option -- no token or coin of value should ever be marooned unless the human element goes wrong. For now we are confident in Ethereum scaling but we're keeping an eye (and will help if we can, as we grow).
bat-jennie Admin 1:27 PM @Decisive from Rocket Chat asks:
Is the UGP script locked in any way to prevent a mass sell off, or developepublisher payout via the smart contract, or is it to the discretion of the BAT team?
bat-brendaneich Admin 1:28 PM Hi @decisive: Currently locked in a wallet with keys held only by trusted/high-integrity founder-level people. We don't like fancy smart contracts; I'm skeptical of on-chain governance as right move for upgrading contracts; we're keeping it simple and vetting keyholders who are known and deeply invested in Brave. Only a few such people; I am one.
bat-jennie Admin 1:30 PM A user from Reddit asks:
How is the BAT browser extension planned or being developed? You have mentioned in the past that he heard Mozilla might be interested in integrating Brave into Firefox. Have there been any updates on that front?
bat-brendaneich Admin 1:31 PM First question may be about the idea of a BAT extension for other browsers, but that is premature. The big problem with UGP grants and Gemini-phase ad revenue shares to users is fraud. Just user-funded contributions has a fraud problem too: as with buy widgets, stolen CC identity => $20 charge to buy BAT => contribution at scale via sybils/mturk-users/bots-with-enough-work => settlement to colluding but verified (small blog) publisher. That's why I mentioned sybil-resistance above. So we can't just make a wish and try monitoring Basic Attention Metrics from an extension, and attributing BAT flows and creating user wallets, from extensions. There can be other problems, which I've noted elsewhere: lack of extension APIs to do all we do for the BAT platform to work (block ads/trackers, HTTPS Everywhere, Fingerprinting Protection, BAM and the ledger), extensions run in JS sandboxes with API limits. So to put first things first, we will build in Brave while keeping our code as separable from chromium (or the mobile webview on iOS) as possible. After we have those endpoing and on-chain specs I mentioned in pretty good shape, we can assess extension feasibility. On Mozilla, I can't speak for them. The friend who contacted after the BAT sale signaled interest but said it would take time, to which I said "same here" (per roadmap). I hope that answers the two reddit questions.
bat-jennie Admin 1:35 PM @badgamer5000 from Rocket Chat asks:
I've worked in the industry on both the publisher and advertiser side. Conceptually the model is fantastic. Cut out the costly middlemen, better rewards the publisher and the user. I'm struggling to see how online advertising moves into a permission-based model. Isn't there great risk of a sharp drop in available inventory for both publishers and advertisers? How do you see this transition period work? Maybe sites use a hybrid during this time? TLDR - How do you avoid short-term pain for publishers - who are already struggling massively - as they transition to BAT? Especially if Brave market share as a browser increases faster than people think.
bat-brendaneich Admin 1:35 PM @badgamer5000 I thought about that for over a year before founding Brave, so good q. Publishers already face ad blocking cohort of size. E.g. I've heard from CN that Wired and Pitchfork see 30% ad blocker cohort tempting to try to turn around, as Page Fair, Sourcepoint and others wanted to have a go at a couple years ago: 3/7 is ~43% lift if you can convert all those users, but you can't. Any on tech sites use a strong ad/tracking blocker such as uBO (which we admire and collab with where we can). They don't react well to hostile dialogs to "whitelist, subscribe, or get lost". Every site that tries that loses Alexa share, lol. So the pitch from us to pubishers is: you lost a large and valuable fraction of your readers -- we can win some back to a paying relationship, pure upside. Make it a positive sum game. On the ad side, we see such garbage, race to bottom, spray-and-pray deals that we don't worry about getting top brands and agencies doing trials next year; we are warming them up rn. The idea of user-private, low frequency (one a day), long-form/high-CPX video+landing page, personalized ads is strong. The local machine learning users get when they consent to the BAT ads can see everything: search queries, Amazon queries and consummations, click logs/tab constellations, absolute above the fold and Z-order visibility and viewability. All together we hope this can notice great opportunities for advertiser and user. E.g. you are shopping for a car, have not quite decided, have tabs open on BMW and Mercedes. You've even set a BMW dealer visit up for 1pm Saturday. Mercedes will pay ~$70 gross for a lead that will take a test drive at their home two hours ahead; 11am Sat we will give the user 70% = $49 in BAT. This is kind of a best-case and we haven't locked this deal down, so take it as a for-instance. But I'm not worried about getting ad trials, and moving to paying deals as we tune the local machine learning agent.
bat-jennie Admin 1:42 PM A user from Reddit asks:
We know that earning BAT isn’t supposed to constitute a full income, but how much money can a user realistically expect to earn per month watching ads?
bat-brendaneich Admin 1:45 PM I don't know. If you assumed every user could get a fixed piece of the ~$80B ad spend on digital in US this year, you might see $80B / 250M (people of age to act on ads) x .2 (programmatic share outside G/FB) x .15 = $9.60 per person year. But that is way low for our users, and take it as a lower bound. Brave's principles are: 1/ consent-based always (user, and publisher if they want to participate); 2/ no tracking data in clear off device to any servers; 3/ revenue share to inventory owner (ad slot owner; "inventory" on "supply side" means ad space) should be 70% (industry standard); 4/ as much or more rev share to user as to Brave, to align interests. So for user private ads, we will give 70% to user via BAT. If we do programmatic ad slots with pub as partner (recovering some of that revenue lost to ad blocking; positive sum game) we will give pub 70% and 15% to user, 15 to us. So suppose our users are more valuable than average (early adopters, web and tech and even crypto savvy); take that $320/person-year figure from above ($80B/250Mppl). 70% of 320 is $224. That is a notional upper bound. My BMW vs. Mercedes lead gen example suggests higher outliers but you don't by a new car every month, lol. Still, attention has not been fairly priced by deep/transparent markets. Let's find out how much users could make. I hope this helps.
bat-jennie Admin 1:49 PM @Tyler from Rocket Chat asks:
What was your reaction to the UGP being claimed so quickly?
bat-brendaneich Admin 1:49 PM Thanks, @tyler. I expected it to go fast and it suggests both high interest, and growth opportunity -- esp. as we add creator rewards for referring users who stick around 30 days.
bat-jennie Admin 1:50 PM A user from Reddit asks:
How does the BAT system differ from Patreon?
bat-brendaneich Admin 1:53 PM Great q, anonymous Reddit person! 1/ we are a user agent so work with any verified creator, whether they sign up with another site or not; 2/ we don't censor first parties (whether sites, accounts on YouTube, Twitch, etc.,) as a browser, beyond things like antiphishing/antimalware protection that all browsers use -- if you can verify you own the payable resource (domain name, account) by challenge/response and/or OAuth APIs, you get verified and your fans can support you. There are still censor risks in (2) at the moment, of course. DNS registrars, account systems, even Brave so we will move toward decentralized and anonymous operation over time -- that is the Apollo phase of the roadmap.
bat-jennie Admin 1:54 PM @Jscrypto89 from Rocket Chat asks:
Will there be function to donate/tip creator on the spot instead of waiting for the monthly payment?
bat-brendaneich Admin 1:55 PM @jscrypto89 That is timely, as our team thinks the ANONIZE2 protocol we use may support such spot contributions without loss of anonymity. The other challenge there is blockchain scaling, of course. With Bitcoin in the beta test, and with BAT on Ethereum now, the fees can add up. We're looking at this but the best anonymity and fee amortization is via the 30-days-of-uptime, private-on-device ledger reconciliation => settlement process.
bat-jennie Admin 1:56 PM @Frosty from Rocket Chat asks:
What is the most interesting thing you’ve encountered so far, and how has it affected your direction?
bat-brendaneich Admin 1:58 PM @frosty i have to say that learning about tokens (from GNT on, as ERC20 was standardized) and realizing I could do "Bravecoin" without having to set up a new blockchain, that was huge (obv. in terms of the token sale but also the UGP). Another interesting win was ANONIZE, created by CS profs who wanted to anonymize their class surveys. We were looking at randomized response and other techniques in 2015, but ZKP won. We look forward to the evolution of blockchains (zCash already has them; Ethereum hot topic) to absorb this area of research and put it into practice for everyone (ZKP = Zero Knowledge Proof).
bat-jennie Admin 2:00 PM @apertus from Rochet Chat asks:
When will BAT be implemented on mobile browsers specifically Android /iOS?
bat-brendaneich Admin 2:02 PM Thanks @apertus, and yes: Android ledgeBAT support is hot 1Q2018 initiative and we shall see about iOS. We have good relations with Apple and do not want to have a bad rejected-app day, so stay tuned.
bat-jennie Admin 2:02 PM @badger from Rocket Chat asks:
How does the BAT team plan to engage with and foster ease of use for non-technical user audiences?
bat-brendaneich Admin 2:04 PM @badger Great question, and we have been a bit short-staffed before 2nd half of this year to answer it well. All new browsers start from what E. von Hippel calls lead users, those who switch browsers fastest and even innovate on web stuff (as web devs, back end pros, power users, etc.). Even for a small-share browser appealing to lead users, we need to smooth out more UX and support more chromium extensions, and we will move fast to do so in 1H2018. For the non-tech users we aim to keep the defaults right and relieve them from having to learn about crypto. Rn funding the user wallet requires crypto -- but we want to make it easy to use a debit or credit card to do small monthly budget out of goodwill (people do $5-20/month). With UGP grants and then BAT ads, we really want the more average-at-scale/non-lead user, every user really, to have the option to let their wallet self-fund via UGP up front and then recurring BAT ad revenue and let it drain to their pinned and automatically-designated-by-BAM creators and sites. That's the steady state we think has simplest user model, no crypto in most users faces unless they want it, etc.
bat-jennie Admin 2:07 PM Thank you so much for all of the thoughtful answers, Brendan! To our dear viewers, we are just about to wrap up today’s AMA! But before we do… Brendan, we have one last question for you: Burnerman from Rocket Chat would like to know:
What color should my lambo be black like Batman or purple like a rapper? 😉 🚘
bat-brendaneich Admin 2:08 PM Black like Batman, of course 👍. Thanks @bat-jennie and everyone! :dancing-penguin:
The importance of an open, public ledger running on Layer 1
There is much discussion at the moment coming from privacy focused alts such as monero who are framing the public ledger of bitcoin as being some sort of detriment to its longterm utility. Let's allay those concerns by looking at the bigger picture here... Should an opaque ledger such as monero become the dominant currency, we would eventually end up with the exact same levels of subterfuge and corruption that bought the current system to its knees (through hidden shell companies and dodgy offshore accounts routed through complex financial instruments) that only a select few of the 'in-group' are privy to. In contrast, a transparent, global ledger allows us to hold those who are custodians of public funds to account; enabling glass governance, as well as allowing ethical corporations to expose their supply chains to public scrutiny. The more corporations that do this, the more consumers have a choice to 'vote with their pocketbooks' and deal only with companies that they deem align with their own set of moral standards. For example: if you don't want to be buying an engagement ring that's been involved in the blood diamond trade, you might choose to use a company that has exposed its supply chain on the global ledger to provide you with immutable proof that your purchase has an ethical supply chain. This does not mean we have to expose our own financial lives to the public. Don't want your girlfriend to know you've bought her that diamond ring? Buy it with lightning network and you will be afforded a much greater degree of individual privacy provisioning. Kinda' like the incognito window in Chrome in that respect. The key here is ensuring we maintain a public ledger that allows us to insist on full exposure for public officials, institutions and government bodies that should already be expected to be transparent in their actions and accountable to the citizenry funding them. This ultimately leads to a world where public representatives taking backhanders from lobbyists and greasing the palms of those in the 'old boys network' becomes a thing of the past due to the increase in crowd-based scrutiny and the ease by which automated algorithms will be able to immediately flag conflicts of interest that might otherwise take decades of research to uncover. It's currently very easy to cover up a government contract being awarded to your 'mates' with a Swiss bank account or offshore shell company... Try that on a public blockchain however and you're going to be immediately held to account by a crowd of watchers. Whilst privacy focused coins like monero will still have niche use cases in countries suffering from oppressive regimes (much like VPNs and TOR are essential tools for even the most basic of internet actions in such places), the vast majority of us will champion the more open public nature of bitcoin as a settlement layer, as it means all that increased public scrutiny will eventually lead to a system where we will have a direct influence over where our economic energy is spent, and even see our contributions being put to work in realtime instead of disappearing into a government spending sink hole... In a monero-esque world, all the cheating we have seen happening is actually amplified to extremes since there would be even less accountability than there is in the current rigged system. Whereas bitcoin leads to a system of radical transparency that finally puts an end to scandals such as the Cambridge Analytica Brexit debacle (where electoral funding rules were broken). This could never happen if their accounts had to run through the bitcoin public ledger and were vetted in realtime by the electorate. In essence, through transparency we end up with a system where everyone is incentivised to play nicely and, in doing so, we move beyond those old world zero sum games that are no longer fit for purpose in a global world that has realised consensus and collaborative networks are the best way of evolving those archaic hierarchical institutions and the species itself.
The problem of libertarian extremism - freedom as a public good
Let us define freedom as any action that can be made by any individual that will have a result which is valued positively by that individual. Those actions differ among individuals. The positive value we will call profit. Let us assume that a lack of freedom to do that action will not produce such a result and therefore profit is 0. Let us assume that a further lack of freedom either causes the individual to not do something that would stop something bad from happening to him or pushes him to do something that will hurt him. That we will call loss. Let us further assume that this lack of freedom benefits someone else who we can refer to as the coercer by limiting actions that might negatively affect them or by redistributing the benefits of the individuals actions to them. Finally let us assume that the number of coercers is small but the number of individuals is large and the coercer can limit freedoms arbitrarily to arbitrary individuals or groups of individuals. If we take on all of these assumptions we come to interesting conclusions. The loss of freedom produces a zero sum game among the coercer and individuals. The profit gained by the coercer who can control those individuals is the concentrated benefit received by controlling all individuals but the loss to each individual is dispersed among their large number. Also, the coercer can break individuals into groups and limit specific freedoms while still getting concentrated benefits but for different restrictions. In addition, the profit gained by fighting for an increase in freedom for each individual is much smaller than the loss suffered by fighting the coercer whose concentrated benefits are larger than the losses incurred fighting the individual. In other words, freedom is a public good while coercion is a private good. This so far is the same observation as Mancur Olson has made when observing interest groups in his work on “institutional sclerosis”, Bruce Bueno De Mosquita and Alastair Smith in their work on the selectorate theory, Daron Acemoglu and James A Robinson in their book “Why nations fail”, by public choice theory work of Buchanan and Tulock, Adolph Wagners observations known as the “Wagners law of increased state spending”, Peacock-Wiseman hypothesis and Milton Friedmans observation of why the United States tax system cannot and will not be reformed. However, things get more interesting. If freedoms comprise different actions for different individuals that means that freedoms are not binary but on a spectrum. More freedom in one area does not automatically mean more freedom in another. In other words, For each individual, fighting the coercer for his particular freedom is a priority, but each individual has different priorities. This means that, not only is freedom a public good, but it is also a dispersed public good. This is the worst public good possible. For public goods that come in a lump sum we have mechanisms of voluntary provision: assurance contracts, dominant assurance contracts, lotteries, bundling etc. We do not have mechanisms for dispersed public goods provision. This has interesting consequences for libertarians. There are two strategies that libertarians can use: radicalism and gradualism. Radicalism is generally denounced among libertarians because radical changes result in large amounts of pain. Revolutions, after all, are known for the bad effects and the pain they create. Gradualism exists in different forms but they all share one thing, failure. Even in policy shifts towards economic liberalization which happened during the fall of Soviet Union gradualism has failed in countries where it was implemented, grinding to a halt very quickly after the initial implementation. But countries which changed their policies drastically and “over night” saw those changes stick in the long term. This makes perfect sense when observing those changes from the perspective described above. If changes are quick and large they encompass a great number of freedoms that are valued by large numbers of individuals and thus turn a dispersed public good into a lumpy public good. Victory becomes a lump sum game in which one individual does not get wanted freedoms until the others do. This, however, is unfortunate news for libertarians because precisely the thing that they are trying to avoid, violent change is the only way which results in a change as large as to accumulate enough changes. This means that we can make an unfortunate prediction that if libertarian movement becomes more effective, it will be so because it is more extreme and non extreme parts of the movement unless subsidized by some benevolent billionaire will fade into obscurity as different groups fight and splinter over which freedom is the current priority, failing and finally giving up in frustration. Example is the experience of the libertarian movement in the United States which is the only libertarian movement of any concentration anywhere in the world and has routinely not only failed but splintered over priorities and disagreements. In contrast the international success of bitcoin has been shocking considering the fact that even though taken for granted today, the history of cryptocurrencies consists of Liberty Reserve whose founder ended up in prison and E-gold whose founder got shut down by United States FBI. Starting it was dangerous and it was clear that the use of it was going to be for violating government regulations in the form of capital control violations, tax evasion etc. Despite this in the early stages it attracted unexpected unanimous unwavering participation by libertarians. The strength of radical ideas in libertarianism over time might simply be showing an impact of incentives inherent in it. Which puts libertarians who want to avoid extremism between a rock and a hammer. There have been two mechanisms proposed by libertarians to avoid this problem and they don’t work: separation (modern version being seasteading) and cryptoanarchy. The first idea has been attempted at least two times with the Operation Atlantis and Republic of Minerva. Both were well funded and organized but were ended by Haitian and Tongan gunboats. The second idea is based on putting most of the economic transactions on the internet protected by encryption. Most of the economy is physical ,however, including internet infrastructure and as is clear by observing some authoritarian countries, internet is unregulated mostly by fiat or government inaction rather than by design. This means that it will be unregulated until it becomes a threat as in the case of Silk Road Marketplace or Defense Distributed company. Both approaches delay the conflict rather than avoid it and in the case of cryptoanarchy actually encourage conflict with the government by turning the internet into a larger political threat.
Bitcoin Core is supported and extensively tested on operating systems using the Linux kernel, macOS 10.12+, and Windows 7 and newer. Bitcoin Core should also work on most other Unix-like systems but is not as frequently tested on them. It is not recommended to use Bitcoin Core on unsupported systems. From Bitcoin Core 0.20.0 onwards, macOS versions earlier than 10.12 are no longer supported ... In either case this is not a zero sum game, since each player can have an M&M without the other player losing one. • You each start with an M&M but would like two M&Ms. We're back in a zero sum ... GOAL: BITCOIN BECOMES MONEY. Thus, Bitcoin is the most liquid good and the unit in which prices are reported. Achieved by Bitcoiners becoming better at benefiting one another. All other coins are seen as zero-sum competitors. I think one of the challenges we have in this space is that people take a monopolistic money system that they understand, which is the fiat system, 194 countries, 194 flags, 194 colorful currencies and monetary policies, and they think of that in terms of a zero-sum game or a winner-take-all system, and from that perspective, you would arrive at the conclusion that, okay, so when Bitcoin ... You’ll note that some of these goals conflict directly or indirectly with one another, but I feel like it’s important to get them all out there, so here goes: Accessible from both desktop and ...
ELI5: "What is a Zero Sum Game, and how do I play?"
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