The Value Of Bitcoin

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21

Quick one before we have to leave for the afternoon. I understand the relative focus on bitcoin, however hope that the webinar this afternoon will more focus on the general evolution of the blockchain and what role it could play in society. Despite the Ford T (Bitcoin) puttering along, it seems that that are potentially already GM (ETH) and possibly Toyotas (ADA?) on the planning board.
I think there are a number of key issues that need to be understood when looking at this domain:

  • Technology and its possibilities/ limitations
  • Processes, interconnections and dependencies
  • Stakeholders, their attitudes, interests and clout
  • How these issues are likely to play out over time
  • Approaches on how to analyse these issues
I believe that blockchain is much larger then cryptocurrencies, so it needs to be looked at from a larger perspective.
22

The Vertical Government, is the political system that we know.

This video, give a very good understanding of the way of work of this vertical systems:

The relationship of political power to money is rule #2 “Control the Treasury” minute 2:12

The bitcoin, cryptocurrency ideology is to bypass central systems, central banks, by giving the power of money creation and administration to the people. this can be checked when you read the text of genesis block that satoshi nakamoto put there “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”.

If government can not control the money, they are powerless.

Flat Government systems, is direct democracy, where the power is not delegated. You can see the status of this systems here: https://medium.com/enspiral-tales/direct-democracy-in-the-digital-age-eaa48467b1ed

Flat Government systems, have two problems to be practical:

1- The current vertical systems (the Government) dont want to give the power.

2- The citizen are not educated, prepare to work in this new type of human relationships.

DLT and Cryptocurrencies are a tool that help to solve problem 1.

Summary: we are in a point in history where we are moving from vertical to flat systems.

PoW like Erik and Chris Write, is part of the consensus mechanism. The problem is how to work with anonymous people whitout need thrust. Because Satoshi Nakamoto dont know that BFT algorithms exist. He decided to implement his own algorithm. The Satoshi solution was include a PoW (proof of work) to slow the the amount of people (miners) that can give good solutions to a determinate mathematical problem, if few miners can give good solutions, then few miners can cheating. This solution was very good when few transactions where processed, but now is a bad solution because slow the bitcoin network. bitcoin maximum transaction per second are 7, systems like paypal make hundreds and visa make thousands.

The second evolution in cryptocurrencies is the store in the blockchain of rules instead of fixed values, this rules was given the name of “smart contracts”. with this “smart contracts” any crypto can implement a settlement channel, think of this like visa and mastercard, off chain payments, this is the return of privacy, low fees and super fast payment processing. the original idea was named “lighting network”.

The third evolution in cryptocurrencies is the implementation of BFT algorithms, this will speed up the blockchain, and in the process will eliminate the need of miners and the high electric power use. But all it not so rosy, many proposed BFT algorithms are sacrificing anonymity and creating new central powers, the coin hoarders. (this is contrary to the original ideology of crypto).

UnityCoin is my design of a crypto, with the best features, that really put the money creation and control in the hands of organized citizens, (not miners, not hoarders, no central government, no central team), with full transparency, in a flat open government, where if I (the founder) fail to my duties the community can replace me any time and put another more capable citizen in place.

Note 1: We also agree that Ripple is a scam of the big banks and corporations, which does not mean you can not make money speculating with ripple.

Note 2: We believe that Chris really understand bitcoin, but the subject is so complex, extensive and new, that need some additional explanation like the write of Erik.

Note 3: We agree with Erik, https://www.macrovoices.com/macrovoices-content/list-research-roundup/1474-blockchain-debunked/file Bitcoin is a very successful experiment, just that. is not a fully developed alternative economic system. Also Agree DLT is a very great Thing.
Note 4: Erik, need to fix the writing in his article about the “lighting network”, because give the impression that the lighting network will replace some part of the bitcoin protocol. This is a addition to bitcoin (or any crypto) that just need a very small changes in the code to support it, to support off chain settlement.
Note 5: Erik, correctly see the Orwel, as the cryptocurrency that all the governments of the world want and will create. I would add that, in addition, a new type of government will be developed, something totally new, that will accompany a new well developed crypto currency, (UnityCoin). I already have a first design of this government (e-nation), and I hope to present it to this great group.

23

I think it is more complex than “value comes from the miners.” They’re necessary, but not sufficient.
As a long time client/server networking guy, it may sound really obvious, but you need both clients and servers for the bitcoin ecosystem to provide value. Even though the BCH miners were operational, a certain friend-of-a-friend was unable to access his BCH because his client didn’t support the new network.
So - both clients and server support are required for there to be “value”. Likewise, “the brand” is also key. The chicken and egg problem - you can build the network, and supply the miners, but unless people care, there’s also no value there at all.
The third element of bitcoin’s value is the buy-in from the consumer end. “People believe its valuable” and presto - it is.
So that’s three pieces that must all be operational for the value to be provided. Miss any one, and the value vanishes.

  1. miners processing transactions
  2. clients able to generate transactions
  3. people that want to use the network - and have faith in the brand. There’s no point having miners and clients if there isn’t anyone on the other side of your transaction.
    So bitcoin’s value: “the operational ecosystem” plus people who find it valuable. That last self-referential part is really key, and why I say the original creators of bitcoin were marketing geniuses. I really can’t put enough emphasis on the marketing aspect of the whole thing in terms of creating value.
    The “Mark” fellow we are listening to today was an early bitcoin marketeer - but I consider him (and those like him) an emergent property of the original genius. Well, that’s my belief anyway.
24

In the research and development (R&D) world, the concept of Technology Readiness Levels (TRLs) helps clarify the distinct levels of maturity at which an R&D solution exists. I think this concept relates to what Erik alludes to in his white paper when he talks about Blockchain being a proof-of-concept similar to the Wright Flyer being a proof-of-concept for the more advanced airplanes we use today. I am hoping this may be a useful tool in future discussions about how mature (or immature) various proposed crypto solutions are…
Here’s a summary of NASA’s TRLs.

25

Almost everything in nature, including government, is a mix of vertical and horizontal. Vertical government (the petty tyrant) still does not work well without lots of horizontal government (the family). When you say government is going from vertical to horizontal, I take it that you are seeing a collapse from tall shotr-tail bell curve to shorter, longer tail bell curve.
And though you are right that governments cannot well survive the loss of the control of money, then too governments do not take this lying down. Jesus triggered his death by overturning Ananias’ money changing tables, theatening his control of the temple money flow.
Others who challenged the legality of the IRS actions (for example, the author of the probably correct and formerly verifiable, but now unsubstantiatable and also irrelevant “The Law that Never Was”) have been put in prison, denied the opportunity for fair and legal trial with the admission of evidence, and held either until death (Peter Tenebaum’s dad) or until the case was no longer provable (TLTNW).
So I expect a full war, with the full force and power of the governments involved, until the governments figure out how to control it.
But on a lighter side, the bell curve of collapse has implications for BC: there is definitely a place for a BC that has high certainty against cheaters, and few large transactions. But there is also a place for lower-certainty coins with a higher frequency of fraud, as long as there is a way to quantify the amount of fraud ongoing, and devalue the entire currency together, and thus limit the cost of fraud.
The coin that can handle the whole spectrum will be the one that the governments will support, so long as they can write their own expenditures in at some level.
Provided that the “certain” storage really is certain and cannot be devalued by fraud, the system will also have the support of the gentry.
Provided that the losses are limited, and a person can move themselves to fewer losses as they work their way up the ladder, it may also have popular support.
So the coin that takes care of all that is the one to invest in; It will also be the coin most likely to succeed in the end. BC as it currently is, is simply a flat currency; it doesn’t sppport the needs of the most powerful game players well enough.

26

Erik T,
First of all, excellent analogy of using the Flyer of the Wright brothers to describe Bitcoin’s Distributed Ledger Protocol. That helps me explain Bitcoin to others a lot better. (I also believe Dave F has been saying a similar thing for a while, i.e. Bitcoin is the first solution but it won’t be the best implementation of the idea).
The following quotes from your paper pretty much align with what I see as Bitcoin’s fundamental flaw - i.e. insane energy consumption;

What if I were to tell you that the central design principle of Bitcoin’s Blockchain is a giant network-wide competition to waste electricity and computing capacity, and that each time someone proves that he has just wasted more electricity and more computational capacity in less time than anyone else in the contest, he wins a prize paid in freshly-minted bitcoin? I know that sounds utterly ridiculous, and frankly it is. No sane person should ever think this is a good way to run a distributed ledger protocol that is meant to scale up to support a global payment network with tens of thousands of participants. But that’s exactly the essence of Blockchain. Seriously.
So they intentionally made the mining process much more compute-intensive than it actually needs to be, for the express and intentional purpose of slowing the network down dramatically. The whole idea is to make sure that mining wastes so much electricity and consumes so much computing capacity that nobody could possibly ever buy enough computers to waste more electricity and computing power than the rest of the network combined is already wasting. Seriously – that’s the design goal. Read section 4 of the Bitcoin White Paper if you don’t believe me.
But here’s the problem: Only the winner of the math contest wins the prize. All the runners-up consume about the same amount of electricity in their failing efforts, only to lose the race by a tiny fraction. Once again, in a small proof-of-concept network, it’s not a big deal. But if tens of thousands of miners are competing to create the same block, and only one guy wins and gets paid for it, all the others still consumed all that electricity and no good came out of it! The severity of this problem grows exponentially with the size of the network. The global bitcoin network is already estimated to consume more electricity than some small nations. Let that sink in. More than entire nations.
Ultimately, I believe that the best implementation of the DLP will be the one which is most efficient - evolution works along the same principle. All the best, Luke
27

Energy use?
http://www.cbc.ca/news/canada/manitoba/bitcoin-mining-greenhouse-fish-farm-1.4470295

28
davefairtex wrote:
So bitcoin's value: "the operational ecosystem" plus people who find it valuable. That last self-referential part is really key, and why I say the original creators of bitcoin were marketing geniuses. I really can't put enough emphasis on the marketing aspect of the whole thing in terms of creating value.
I'm coming to the opinion that in most cases the narrative is more important than the underlying product (I think Tesla will similarly come unstuck when the hype doesn't equate to delivery). Get the story right and it doesn't really matter what you sell - with super low interest rates the money will come. And then it will go elsewhere as the narrative changes...
29

I think this link hasn’t been shared yet; interesting reading under this heading:
https://hackernoon.com/all-you-need-to-know-about-cryptocurrencies-an-ov…

30

My gut feeling (as I know virtually nothing about crypto currencies) is that it has to be backed by something physical.
The best physical asset is energy production. Bitcoin is the exact opposite, backed by energy consumption.
can imagine a crypto rouble for example backed by energy production in Russia traded between Nations that import energy from Russia.
Likewise, locally renewable energy production could issue a crypto currency to trade energy generated in exchange for local products. Created when energy is produced and destroyed when the energy is used.

31
Recall that the 1st computers were the size of most living rooms and consumed much power too. Progress was made so that today a hand held tablet has more computing power and consumes roughly the same amount of energy as a CF light bulb. If the truth matters to anyone, the modern ASIC Block Eruptors are very low power and run off of a very low power PI 3B computer which is about the size of a modern credit card. And heaven forbid we morph the discussion with the free energy from solar or wind or geothermal technologies. That would be so unfair.
Hmmm , , , credit/debit cards seem to be a nice segue into digital currencies don't they? It seems prudent to mention the only big difference between credit/debit card digital currencies and Blockchain digital currencies . . . That bears repeating: the only big difference between credit/debit card digital currencies and Blockchain digital currencies . . . But 1st, consider M.A. Rothschild ; Quote: Give me control of a nation’s money supply, and I care not who makes its laws.
Now, who has the ledger for keeping the credit/debit card digital currencies honest ??? Well, going there is very hard going for sure while throwing mindless trash at Digital Ledger Technologies that we know next to nothing about is so very easy as their much smaller and easier targets than the purveyors of today's horrifically dishonest digital currencies. It reminds me of the pattern of assault on the internet way back when Al Gore 1st invented it. It certainly doesn't look like the efforts to squash the internet held much sway at all. Can't dismiss the notion that today's trash against what appears to be an effort towards honest currency will have the same success that the internet trashing did.
32

After all, our financial system is set to empower militarization and mobilization; and bitcoin could concievably bid up the price of electricity past the point that people’s needs could compete. (How many BC do you bid for your electricity? You don’t have enough? I thought not.)
Moreover, our governments can nationalize the peoples’ stuff at will.
So while I think the scenario unlikely, I’ll acknowledge that it’s possible.
Let me propose a green alternative to BC. It’ll still be blockchain technology, and it’ll still use proof of work. But all calculations have to be done in pencil, and the miner’s name and sigature has to be at the top corner of the page, along with date and page number.
When you said “proof of work”, what did YOU mean by “work”? (Did you mean the kind of work I do? I thought not.) Kudos to climber99 for identifying the divergence. Yet the consumptive option is also the military option; and often the “take and consume” option when perfected can overrun the “produce” option when perfected.
If that is so, we may be in for a very bad time.
It’s no coincidence that though there are mhny types of cultures, nowadays all nations are of the agrarian-warlike variety.

33

wow, thanks for taking the time to write and share this. you did a masterful job of tackling this complex issue. I believe you are write on many fronts. I do actually hope you are wrong on The Orwell. Humanity needs an honest, decentralized solution. Problem is, humanity doesn’t always get what it needs. It often gets what it deserves. I have followed the investment space for years now. The level of ethical, good, moral behavior is appalling. We are not in short supply of great ideas. We are in short supply of ethical actors. So many ventures turn out to be run by immoral sociopaths that are running ponzi’s, mis-representing statements, not using segregated allocations, etc. the challenge, it seems, is to figure out how to build a decentralized model that protects against the pool of humanity that wants to take advantage of others. this should be an interesting story to watch unfold. thanks again for the great write up.

34

I just invented the RealNewsLedger and its associated coin called NoBullshit. Buy it up!

35

That seems to be what PressCoin (https://ico.presscoin.com/) tries to be.
*** No not him again with that PressCoin thing cheeky devil ***

36

Sounds good. Here you go:

https://powerledger.io/media/Necker-Island-Blockchain-Summit-Power-Ledger-Snapshot.pdf

and here:
https://cleantechnica.com/2017/06/29/solarcoin-cryptocurrency-earned-generating-solar-electricity/
There are dozens of more efforts if you want to use a search engine.

37

…oh what a difference a week makes!

Of course I can’t say I’m surprised…except that XRP (the Ripple coin) still has a market cap of $65 billion.
It should be closer to $0.

38

Thanks mrees999.
One key feature omitted in solarcoin and other crypos (to my knowledge) is the ability to shrink the money supply. The major advantage of a debt backed currency that we have now, otherwise known a fiat currency, is that money gets taken out of circulation when debts or interest get paid or debt gets written off. Hence fiat currencies are self limiting and can cope when we enter our Net energy descent at the end of our fossil fuel era.
Interested in hearing the thoughts of the crypto community on this issue.

39

Thanks for share this post for us. Its very very helpful all of us
Coinbase Customer Service

40

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