First, my background thoughts: I believe that key to the success of BCH is wider user adoption. But for widespread user adoption, we need orders of magnitude more merchants to be accepting BCH as payment for services and goods so that newcomers will see a compelling case of an ecosystem where they can use BCH in their everyday life, not in fringe cases. Having one or two merchants (in the best case scenario) within one's home city just won't cut it. Of course, in order for merchants to be accepting BCH, they need to see meaningful business in BCH, they won't go into all that trouble for the occasional monthly customer. And here is the problem: Unfortunately, even people that could be spending BCH with the merchants that are currently open to try this new currency often prefer to use fiat, that's Gresham's law in action. Way too many times I have read stories here of people noticing a merchant that is accepting BCH but they themselves did not give any business to said merchant. I have seen this in myself also, as in the few cases when I had the chance to use either fiat or BCH, usually I chose fiat not for the convenience, but because I did not want to see my "BCH total" go down. Of course, in order to combat this there is the "spend and replace" strategy, which I fully support. But it's hugely inconvenient to have to remember to go and buy BCH after you are done with your shopping, and calculate what you spent etc etc, I have never done it and I figure few people do. So here's my idea: How about wallets have an automatic "spend and replace" option? For the bitcoin.com wallet it would be as easy as integrating an exchange.bitcoin.com account with the wallet. But it could get even better and more versatile for all wallets: With an initial setup of API keys and syntax settings from an exchange of preference, each wallet could offer this functionality, which I believe would do a great deal of incentivizing people to use BCH whenever they have the chance. What do you think?
Can illicit transaction and lack of privacy strip Bitcoin of its store of value properties (Meditation on the recent bust of child trafficing gang using Bitcoin)
There is a discussion that the narrative for value proposition of Bitcoin started as a low cost and fast medium of exchange, then shifted to "digital gold" or in other words store of value, but in light of lack of privacy and anonymity, Bitcoin may not live up to its promise. Here are my thoughts on that. Money cannot be a store of value without being a medium of exchange, if no one was willing to take Bitcoin from you in exchange for other goods including other monies, Bitcoin would not have value. Clearly, this is not the case. No rational agent would spend appreciating money when they can pay with depreciating money. If Gresham's law is hard to grasp, the pizza story of Laszlo Hanyecz helps to get it. At least Laszlo made history. If you do it now - you will end up with regrets only. No Fortune articles about you will be written https://fortune.com/2018/02/26/laszlo-hanyecz-pizza-bitcoin/ At the high enough level of abstraction, money is an accounting layer for the economic value that essentially can be boiled down to work. It's a promise of future work. By design, fiat loses value over time. Bitcoin stores it. Free market has chosen Bitcoin to be money for its monetary properties = hardness. We can debate how and why it happened, but it's a fact. Now its salability increases like a snowball and it can't be stopped without catastrophic external forces. For ever-increasing salability/liquidity people don't need to want to spend it, they only need to be willing to accept it. This means it's guaranteed you can spend your Bitcoin at any moment when you urgently need to dip into your savings. I would argue that even if Bitcoin has no privacy at all it would still be the most superior money at the moment and the best savings preserving vehicle. Lack of anonymity would create extra risks of being targeted by bad guys though, but that's beyond the point. Censorship resistance is a feature of the Bitcoin protocol, which is not responsible for the censorship at fiat on- and off-ramps. If the transaction is valid and the government doesn't control the majority of the hashing power the tx cannot be stopped. Even with high volatility which was actually predicted as a quality of a good becoming global money, Bitcoin is already (surprisingly) used as a Unit of Account by some traders measuring their wealth and by Trace Mayer for accounting. And btw, Gresham's law applies to illicit transactions too. Most criminal activities are paid with USD or other fiat currencies. Reporting such news doesn't generate clicks, traffic and therefore ad revenue.
... still, lightning money is different from bitcoin on chain coins
you need to backup all the cheques, meaning for full security you need a backup for every new cheque you write or receive. A backup of a seed, the normal backup type for coins, also secures coins to be received in the future. Continous need for new backups is slightly inconvenient, in practice bitcoins stored in lightning channels carry a slightly higher risk
You need to be online frequently to watch your channels for wrong closing from your channel partner. This is impractical, and in practice bitcoins stored in lightning channels carry a slightly higher risk.
Sometimes you want to pay with on chain coins, sometimes you want to pay with liquidity you have in a lighning channel. Since there is a cost to loading up and closing channels, your money is divided in two pools. This means you need to have a slightly higher cash balance than otherwise would be necessary, at least for some actors, like businesses, who generally want to have all their money at work in the form of capital, not money.
TLDR and takaway point: While these concerns are rather small, the effect is that any holder of money, small or large, will prefer to hold coins on chain, which is the better money. This is basically Gresham's law, which make a statement on money types with slightly different traits that are pegged together. Lightning coins will be pushed off to others or converted to on chain, on chain coins will be kept.
I have realized that the King of Crypto has not been created yet (Long post).
I have been in the crypto space since at least the Mt.Gox era, although being a student I had no way of investing significantly in what I believed was the biggest revolution of our times. And, for most of that time, I was a bitcoin maximalist, thinking that bitcoin had to succeed, because a potential fail of bitcoin would lead to such a loss of trust in cryptocurrencies that no other coin would ever be able to grow and take its place. This, coupled with Gresham's law (good money drives out bad money) made me invest what I could (just a couple $ every few months) in bitcoin, and only in bitcoin. But I kept reading about all the advancements other cryptos made, and I wish that they would be implemented in btc. Fast forward to today. Bitcoin is a slow, unusable mess of a coin, with fees of over 35$ half of the time and completely controlled by a small group of people. If bitcoin reaches the "moon" of $1 000 000 per coin, that means those fees will be... $3000 for a simple transaction (provided there is no increased transaction demand). Lightning looks promising, but, the way I see it, centralizes the system in an unacceptable way. I have had enough. So I decided to move to greener pastures. I still believe that the failure of bitcoin will be a huge hit for cryptos, but I now also believe that it is inevitable. Bitcoin has some fatal flaws and cannot be fixed. Initially I tried Bitcoin Cash. But it looks like it just caters to the miners (asicboost, no other changes in the horizon apart from the blocksize increase), and lack of self-governance means it is just one problem away of imploding. Then I started looking at the altcoins. And I realized something. I will be heavily downvoted for this, but every single coin looked like a shitcoin to me. It was either controlled by a small group of people, completely unfinished/unusable, a scam, or all three together. Maybe I have not searched enough, but nowhere could I find a private, instant, zero-fee, fungible, self-governed, fairly distributed, not minewhale/country controlled, smart-contract compatible, scalable, safe, easy to use, deflationary electronic token. It might be somewhere in the 1300 cryptocurrencies in existence, but I doubt it. So I have realized that none of us is late to this. The coin that will become the King of cryptos has not been born yet, or it is somewhere out there, waiting to be discovered. I am not a developer, so I cannot contribute to the advancement of the cryptospace. But I can do my research. I can study, and look through all the new coins, and all the coins already existing. And I will find what I am looking for. And then I will buy some, tip it to other people, use it as a currency, and help it grow. P.S. You are welcome to make your suggestions to me. Please shill responsibly.
CMV: Bitcoin's replacement of all other currencies reign as monopoly over the global economy is inevitable
Currencies compete with one another based on their monetary properties. The role of currency is to serve as a ledger of account for an economy. Looking at past examples of intra-currency competition shows that whichever one has superior monetary properties will win out. See Their's Law. Also see Gresham's law Bitcoin is a new entrant to the currency market, and has properties unlike any other currency, most notably its supply is unexpandable beyond a fixed limit and is immortal (due to its decentralized nature). As such Bitcoin will compete against all other currencies gaining market share until 100%. Furthermore, its large network-effect lead protects it from all other crypto competitors--in other words, it takes a large advantage in monetary properties to overcome an established currency and while Bitcoin is overcoming that to currencies like USD and gold, it is not possible to have enough advantage over Bitcoin to scale it's moat as it is too close to "perfect" money--e.g. a perfect ledger
This is a footnote from the CMV moderators. We'd like to remind you of a couple of things. Firstly, pleaseread through our rules. If you see a comment that has broken one, it is more effective to report it than downvote it. Speaking of which,downvotes don't change views! Any questions or concerns? Feel free tomessage us. Happy CMVing!
Popular misconceptions about money, Bitcoin, and how all the competition between currencies will play out
Money is best seen as a social behavior or accounting tool a society uses to track favors. Sometimes a currency may have a non-monetary value (often called ‘intrinsic’ value) and a monetary value. All things being equal, a currency that has no non-monetary (intrinsic) value is a better currency than one that does. An economy does not need an expanding money supply to function. Inflation (monetary) cannot happen without an inflator; that is to say that the money supply does not grow uniformly, but rather some entity is granted new currency units which provides them a significant economic advantage other users of that currency (usually) do not have. Many people view the act of spending currency “using money”. This is an incomplete view that can lead to some very wrong conclusions. A better understanding of the use of a currency is that someone begins using a currency when he accepts it, continues using while holding it, and ends their use of it when they finally spend it. Savings...e.g. money stored under a matress, provides individuals, corporations, governments, and whole economies an ability to absorb economic disruption and take advantage of opportunities that arrive by remaining uncommitted to a particular investment. That is to say savers or hoarders provide a great deal of benefit to the underlying economy. In addition to this benefit, hoarding a currency provides it with liquidity which is essential to having a viable currency. Destruction of a currency such as if someone burned his or her own money bin, is effectively a form of altruism or charity, whereby they transfer their economic power to others via monetary contraction. That is, if someone were to acquire a bunch of money over their lifetime, and then burn it all, this person should be viewed as a selfless hero. A deflationary (or fixed supply) currency with equal or superior monetary properties cannot exist in equilibrium with inflationary currencies. Bitcoin is a deflationary currency with superior monetary properties vs ALL traditional currencies (fiat, gold, etc). And will compete against each of those currencies until they all die or bitcoin dies. Also Bitcoin is immortal. Money is a monopolistic market, where network advantages are very significant and provide a substantial barrier to new comers. Basically in order to overcome a lead in network effect advantage, a competing currency would have to offer very significant benefits over the market leader. Bitcoin appears to be doing this with respect to USD/EUGold/Etc, but the idea that alt coins could overtake Bitcoin would require an economic consensus for everyone to switch. And we all know how difficult a consensus change is to achieve; it would be the equivalent of someone saying they think an Elvis impersonator could come about that would supplant the original in popularity because he offers NEW features the original doesn’t, like officiating low-class weddings. Thus, a rational person could conclude that one day soon, everyone will be forced to accept Bitcoin, as no one will accept any other currencies. See Their’s Law. Governments obtain a fairly significant amount of their funding through seigniorage. Bitcoin will cut off this avenue of funding, so in addition to destroying gold and all fiat and altcoin currencies, it will impose financial discipline on governments, effectively putting an end to big government and unnecessary wars. To sum it up, Bitcoin is a panacea that cures the world’s economic and financial ills.
In economics, Gresham's law is a monetary principle stating that "bad money drives out good". For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will disappear from circulation. The law was named after Sir Thomas Gresham, a sixteenth-century financial agent of the English Crown in the city of Antwerp, to explain to Queen Elizabeth I what was happening to the English shilling. Her father, Henry VIII, had replaced 40 percent of the silver in the coin with base metals, to increase the government's income without raising taxes. Astute English merchants and even ordinary subjects would save the good shillings from pure silver and circulate the bad ones; hence, the bad money would be used whenever possible, and the good coinage would be saved and disappear from circulation.
When people have a choice of which to spend and which to hoard, they will tend to hoard the money that is a better money. The problem for all forms of fiat is that they are inferior for holding. No one wants to hold a currency that is inflating. Fiat has become a hot-potato that everyone wants to get rid of and no one wants to be left holding. This is manifesting in the form of rapid gains across the entire cryptosphere, in practically all of the leading coins. The vast majority of people buying crypto today do not actually understand why this is happening, they have only identified it as a phenomenon that has now trended in the same direction long enough, for so many years, that they have significant confidence it will continue to rise. However this trend is not good news for the people that control fiat and derive a large part of their wealth and power from their ability to shift the cost of printing more money onto the population at large and thus to enrich themselves dishonestly. Note today that South Korea is undertaking an emergency meeting to figure out what to do about cryptocurrency investing after South Koreans "discovered" bitcoin recently and began going in deep. Cryptocurrency, in all its leading forms, being inherently a better money than any form of government fiat simply because it is not subject to the whims of human management and corruption, is becoming a prime way for the masses to save. This is on the doorstep to creating a viable competitor to the stock market as a way to save. A large amount of the money now tied up in cryptocurrency undoubtedly would've found its way into Wall St. and similar traditional investment vehicles like property, had cryptocurrencies not existed. So all fiat is inferior for holding, and this was good for the stock markets of the world and the property markets of the world. This is a problem because someone has to hold fiat. And if all the world begins trying to get out of fiat and into cryptocurrencies, that has potential to creates the nightmare scenario that the state dreads above all: hyperinflation as people rush to escape a failing currency and those left holding the bag last lose most. This is why the US government is concerned about bitcoin, why places like Russia and China keep announcing bans or controls and then walking back on those ideas when they realize that bitcoin transactions cannot be regulated by the state in any reasonable way (well, they could turn off the internet, but that would result in open revolt of the populace, rock and hard place), and why South Korea is concerned now. The worst-case scenario for government is total repudiation of their currencies, ala Ecuador. But at the same time, the US government, and many other governments, have become afraid to take a hard line against new technologies because they all want to ride the wave of technological innovation and earn taxes from new industries that pop up, and they would rather not chase those industries into other countries and find themselves left out of the new technological bonanza. This also helps explain why multiple cryptocurrencies are doing well instead of just one, because the leading cryptocurrencies all have the properties of a good currency, better than fiat, and cryptocurrencies won't actually have to compete strongly with each other until fiat is replaced or deprecated worldwide. So why has BTC done better than all other cryptocurrencies in terms of unit price to this date apart from inflation-arbitrage. It's primarily because of mindshare and exposure and good-press. Think of BTC as being to cryptocurrency what AOL was to the internet in the 90's. At that time, AOL had created its own walled-garden and was on-boarding large numbers of people into using the internet in a safe and idiot-friendly way, while offering none of the power-features of the real internet. For the purposes of this analogy, Bitcoincash is the real internet of the 90's. And while massive numbers of people got into the internet for the first time through using AOL, it wasn't long before they realized they lived in a walled garden and the real thing was on the other side of that wall, and the whole world ultimately made the jump to the real internet. That is why so many of us think BTC will do well in the short-term as people are on-boarding into cryptocurrency through BTC, but that in the long-term, people will begin to realize that BCH is the real thing and why are we bothering to put up with the AOL of cryptocurrencies when this other thing, BCH, works so much damn better? And value will begin leaking out of BTC and into BCH, especially as use cases for BCH begin to multiply and an ecosystem of use-cases are built on top of BCH as a platform. That will begin to multiply the network-effect. And BCH devs are wisely keeping the use-cases as wide open as possible, that allows path-dependence effects to stay wide-open as well, allowing that ecosystem to grow. An ecosystem that the BTC-Core devs have already destroyed, strangling the baby in its crib, btw. So, in the same way that we had to educate the masses about cryptocurrency in general, it is now our task to explain to them why Bitcoincash is where focus needs to be going forward. Honestly, the hard work of validating the cryptocurrency concept is already done, now the job is to compete within the class, and we have every advantage.
The monetary system for a successful and sustainable future
Kinetically Charged Yield Bearing Asset Based Monetary System of Shared Economic Wealth In the same way our sun unconditionally delivers an indiscriminate share of energy to planet Earth that stimulates life, we present a comparative energy system to stimulate the movement of money, assets and hence overall commerce and economic activity in a fair, honest and rewarding process. It is an entirely new monetary system, which is based on movement, kinetics and velocity. We name the system Kinesis. The Kinesis system is an evolutionary step beyond any monetary system available in the world today. It enhances money as both a store of value and a medium of exchange, and has been developed for the benefit of all. Core to the mechanics of the system is the perpetual incentive and thus stimulus for money velocity. Outside capital is attracted into Kinesis via a highly attractive risk/return ratio and then put into highly stimulated movement, promoting commerce and economic activity. This is achieved through structuring money to represent 100% allocated title of an asset and then attaching a unique multifaceted yield system that fairly shares the wealth generated by the system according to participation and money velocity. Aside from offering the greatest store of value and striving to provide the most efficient medium of exchange, Kinesis is a monetary system focused on: minimising risk; maximising return; stimulating velocity and maximising the rate of adoption. Kinesis defeats Gresham’s Law of Money that asserts “bad money drives out good”, by highly incentivising “good money” to circulate and be utilised as an effective medium of exchange. Someone who values money over other money is inclined to hoard it and not use it as a payment currency, but rather use the less valued currency for payments. This model has been broken in the Kinesis system as the reward for using the valued currency is so tremendously strong. The primary currency chosen for the Kinesis monetary system is a kinetically charged physical gold based currency. Gold being the greatest store of value, indestructible in every sense, physically rare in quantity and has been appreciated by human civilisation as money for longer than anything else. It is the money created by our universe and not by people. It is created by a rare cosmic event of two neutron stars colliding, so rare that the first time this event was witnessed by humankind was 17 August 2017. Hold gold in your hands and you can feel its energy. It is the colour of stars, it is the money of the universe. Gold is the undisputed champion of fair, honest and sustainable money. Put allocated gold on a kinetically charged decentralised rail system and you have a very special monetary system. We believe this is what we have achieved, and a lot more. The Kinesis system can be overlaid on top of anything that can be standardised, traded and stored as value. Accordingly, we are developing a kinetically charged digital currency suite with allocated title of bullion, fiat bank notes, cryptocurrencies and other assets that are physically and digitally securely stored in our allocated Kinesis banking and asset management system. By attaching a yield to digital currencies, risk/return ratios can be forecasted and virtually all currency and investment asset markets can be targeted and infiltrated. As such, over time we plan for more currencies and assets to be added, ultimately infiltrating more markets spread across the world. Kinesis will attract capital from: Cryptocurrency markets – currently little to no yield The gold and silver markets – currently little to no yield Fiat currency markets – low to negative yield via debt based interest rates Investment asset markets – comparatively low yields for stock market and property investment Ultimately, if someone can get the same asset at the same price, but with significantly lower risk and higher return, it makes little sense for them to not choose the asset with the better risk/return ratio, particularly when significant returns are on offer. As the Kinesis monetary system is one that allocates title directly to the ultimate beneficial owner, where banks conversely hold legal title of their customer deposits and put those deposits at risk, the Kinesis system is in fact much less risky and with much greater return than legacy alternatives. With global low to negative interest rates, bail-in provisions, depositors’ insurance being removed, and with banks holding legal title to their customer deposits, it makes no logical investment sense to choose risk and nil-to-negative return over the alternative Kinesis system with negligible risk and high return. In comparison to legacy fiat money and fractional banking systems, Kinesis seems too good to be true, but it isn’t. Once clearly understood, Kinesis will lead a highly disruptive paradigm shift in money. Kinesis has taken the very best properties of both old-world money and new-world innovation and combined them together to power banking and commerce in a new fair, inclusive and incentivised way. The result is something extraordinarily powerful that will change the way we all view money forever. The primary elements of Kinesis are: Gold & Silver - The primary currencies offering allocated 1:1 title to physical gold & silver – the greatest stable and definable stores of value for use in commercial and private transactions and investment. Yield - A perpetually recurring yield generated from economic activity, not from debt based interest like fiat currency – providing definable value via Net Present Value (NPV) calculations for use in commercial, institutional and retail investment. Cryptocurrency technology – can only be enhanced. Blockchain peer-to-peer decentralised distributed ledger technology – blockchain may become obsolete, but distributed ledger technology can only be enhanced. Kinesis can never be destroyed as these elements will never go away, never be valueless and can only be enhanced. Nothing can take away intrinsic asset value and the value of future cash flows, and technology will only ever be enhanced. Gold and silver have survived the greatest test of all, time, and so too will Kinesis. Other cryptocurrencies with value determined by the anonymous decentralised blockchain payment capabilities and their controlled supply scarcity are all at risk of losing value as their initial founding value proposition is diluted by others coming into the market with enhanced solutions. This is evidenced by Bitcoins’ dominance continuing to fall and has been witnessed in many other industries and markets throughout history as competitors rise. A major contributing factor to the volatility in cryptocurrencies is that they are impossible to value. By intrinsically backing a currency, hence back-stopping the value and defining the risk, and then placing a yield on it, hence defining the return and providing superior value, then a currency which is safe, stable and rewarding is created with a highly attractive investment risk/return ratio attached. This form of currency has necessary real-world application in both commerce and private transactions, along with attracting capital from institutional and retail investors and savers. This is not just a currency, this is a new parallel monetary system to sit alongside but integrated into the legacy problematic centrally controlled fiat and fractional monetary and banking systems. Kinesis is the undeniable superior alternative. This model is highly revolutionary alone, however to take it the next step further, already in place is a highly disruptive retail and institutional commercialisation strategy with unique distribution and committed adoption from day one of launch. Pre-existing investment commitments are in place for the Kinesis currency suite which will surpass the largest ICO to date by a significant multitude. Kinesis is being developed and being brought to launch by a consortium of industry leading organisations in the precious metal trading, mining, refining, exchange, technology, blockchain, mobile banking, vaulting, postal system and marketing spheres. From launch the system will have extensive institutional and retail distribution, integration, liquidity and adoption. Our liquidity, which will be provided by professional bullion market participants and others, will enable billions of dollars of value to efficiently enter and exit the market. Direct and indirect integrations will provide for immediate adoption into hundreds of millions of users. With the evolution of blockchain, cryptocurrencies and mobile devices, the people of the world have been presented with a profound opportunity. It’s an opportunity to apply empowering creativity to money and be part of a person-centric revolution. We have now been enabled to adopt and support a system that individually and collectively benefits us all based upon nothing more than participation. This system combines new world decentralised technology with the oldest, fairest and most sustainable form of money, to empower and serve the interests of us all equally and capitalistically.
These days every time I receive Bitcoins I segregate them in two groups. If Bitcoins come from a known established source like Coinbase, it's one group of clean Bitcoins in my wallet. If it comes from less authoritative sources, an example could be an exchange with loose KYC policies or such, I start thinking to myself if these Bitcoins hadn't been used in a suspicious transaction and the exchange was used to tumble them by bad actors before said exchange sent them to me. This second group of Bitcoins bothers me a lot. I don't like that the coins I save for a rainy day may have bad histories that can cause me trouble in the future and usually swap these inferior coins for Monero. This absence of fungibility in Bitcoin directly affects my behavior in how I use the money. It could even be called a special version of Gresham's law, except it's reverse where Monero is actually better money in circulation. Some can call this paranoia, but I can't help it. In my mind there is a separation of Bitcoins into known good and possibly bad apples, and the latter is gotten rid of. I suspect quite a few Monero enthusiasts who have been in this scene for a while have now got accustomed to this, but for users who've just joined recently this can be a new curious train of thinking they could/should/would develop.
I think that this PBoC meeting is different. Here's why.
PBoC knows that it can affect the bitcoin price on a news release. Fees have been raised. This second meeting in a month... to recap their position? China is nearly powerless to stop capital outflows. Hundreds of billions have already left the country in very creative ways. Once a ratcheting down program of capital controls would receive the full weight of central bank efforts, the scramble by Chinese consumers will really be on (Gresham's Law). They would "lose face" and potentially unwind their economy. I think that this meeting is a turning point where the PBoC is now angling for a piece of the cryptocurrency action. Distributed, open digital currency is inevitable and the Chinese want the first sovereign seat at the table. Clout.
Does anybody know or understand that the market is a consensus based system. It allows buyers and sellers to set prices. We can rely on that because there is no one to control those prices. So we think. Markets work best to price the supply of goods and services to be sold. Goods and services are practically unlimited. But here is the issue. Bitcoin is money. It can’t be printed out of thin air unlimitedly. It has rules they We all agree to follow. We have been following these rules for almost 10 years. The network has grown and now we are at a point where we accept it as digital gold. That is the problem. Yet we are making a payment layer to use it as cash. How ironic? How does this relate to Nixon. Well Nixon with the stroke of a pen ended the Bretton Woods act. He didn’t wait for the market to say it was ok. He just did it. And after that the financial system has moved from a petro dollar to a debt based dollar. None of this was decided by the market. Now what is my point. Today we use markets to allocate capital for its best use. Until we got bitcoin. What started off as a simple concept has now become a war. This war involves no bombs. It involves your mind. They have been using money as a way to control for so long they are really good at it. And the best way to control bitcoin is to use the exchanges to control the price. It’s no different than what they do with gold. This is what you are seeing. They know the best way to keep bitcoin from being circulated is to keep the price low enough where it is appealing enough to own. But not appealing enough to spend. But why? Because banks will do anything to keep you on their system. That’s why we have Blockchain not bitcoin. That’s why we have a thousand shitcoins too. This is all made to keep bitcoin less desirable. Gresham law states bad money chases out good money. But extend this to a digital vs physical money. Digital money will chase out physical money. It cost less and is easier to use. But banks don’t want you using digital bitcoin. They want you to use their digital money. It’s always about control to them. Money is in unlimited supply. How do we overcome this. It’s pretty radical of a concept. Bitcoin is widely known and has global infrastructure behind it. It is growing. That what you want to see. But the exchanges have and are being used to slow this growth through the pricing mechanism. So we just reject the pricing mechanism and use something new. I can buy an unlimited amount of Coca Cola for $1. But why can’t I buy 100 satoshi’s for $1. I can. And if enough people decide to do this it becomes the consensus. Just like in a market. But why? Because global debt exceed GDP by 300%. Who owns this debt? The banks and central banks of course. So they can do whatever they want. And they are. Politicians are catering to them to keep from blowing up their economies. This is why we have bitcoin. It’s our protection from this screwd up banking system. Pierre calls it hyperbitcoinization. But the reality is within this construct of money and faith based system we have something that truly changes everything. Yet we are still playing by their rules. All it took was the signature of Nixon. With bitcoin all it takes is our will to pay $1 for 100 satoshi’s. And if the market feels this price is too high and floods it with coins it doesn’t matter. Because you don’t need a weaponized market that will do their bidding. Some ppl will get super rich. My hope is we will have more good actors with btc than we have malicious ones. And we can move into a future where the power of the few can no longer control the fate of the many. And if nation states want to keep their central banks it’s ok. But we don’t have to use their money system.
This is my first contribution to the CryptoCurrency, and as already been commented it's too long, you can scroll down to the MAIN PART, so, please comment about changes you would make to it or just your opinion in general. Thanks Remember Nash equilibrium, Gresham's law, the rules of the Stasi? So the banking system is similar to the Stasi. But that's not the topic. Why did crypto currency become currency in general? The Nobel laureate in economics would have answered something like this: "At some point in time, the market fell into Nash's equilibrium, where everyone suddenly agreed that counting bitcoin as a currency is normal." Why do men wear trousers, and women wear skirts? Historically, in Scotland it wasn't done that way. It's just that at some point everyone agreed that this should be so. Nash equilibrium. Generally ... What is the currency? A currency is a means of indirect exchange. Once the means of exchange were the feathers of a pheasant, which before that did not cost anything. But then the demand arose and people said: "The feather will be a currency, a means of indirect exchange." Gradually, the general requirements for currency were formed: it should be simply divided into parts, and its value does not change; It is easy to carry around; And it should have a long shelf life. Well and the main thing - people should be ready to use currency as a means of exchange. With the crypto currency the same thing happened: people were READY to use it. Now I'm ready to exchange my phone for bitcoin. It is clear that all other criteria for crypto currency is, perhaps, even better than any other currency (it is much easier to store, transfer, divide, and it is eternal). And why there was a crypto currency? One of the main reasons, in my opinion - is the huge embitterment of people on the banking system with all of its rules, which are being promoted under the auspices of a mythical struggle against scammers and other scoundrels. So, the current banking system is similar to the Stasi, to which I must explain why I have such a gait, and not another, and why I go to work such a route, and not another. And then, unless two-meter fences stop real criminals? When criminals need to break into the banking system, they just buy a bank. All these safety rules are, in fact, useless. Therefore, there is a global irritation of people by the banking system. This can be seen everywhere - and in business of any size, too, from small to large. The annoyance created a request for some kind of analogue to the current system. There was a crypto currency. And the process can not be stopped - the crypto currency will take its place in the world economy. What a question for now. The problem is that in fact, the crypto currency is not used today precisely as a means of exchange. The phenomenon is called the Gresham's law: no one wants to pay with the currency, which constantly and strongly becomes more expensive. Everyone has heard a story with two pizzas that were bought for 10 thousand BTC in 2010 (just curious if pizza shop kept those bitcoins until today). Who wants a pizza for $ 15 million? Or do you want to drive in a Toyota car, bought today for 30 BTC, after learning in a year that they paid $3 million for it? Therefore, the crypto currency is used as a means of accumulation and speculation. At the same time, the process of continuous growth leads to the fact that basic crypto-currencies lose their properties as a means of settlement - stability. They turn into the semblance of shares of a rapidly growing company. And who wants to sell or change the goods and services of treasuring shares today, if tomorrow they will cost more. This is problem. Stablecoin The volatility of the crypto currency is the subject of long-standing discussions, in which the words "bubble" and "speculative instrument" can often be heard. The problem is solved including the launch of special settlement crypto-currencies, the so-called "stablecoins". This is a crypto currency, the value of which is determined not only by the demand for it, but also by more established methods. In the world there were several attempts to create such stablecoins. As a rule, they were tied to either the value of the fiat currencies - the dollar, the euro - or raw materials (commododis) - oil, gold, and so on. But due to various reasons, they were not widely used. First of all, because the creators of such currencies violated the principle of blockchain - distribution and independence. They issued crypto currency, they sold it, and they bought security on the proceeds. And the fact that the security was stored and controlled by the release organizers did not inspire confidence in the community. Now there are more advanced projects. In general, there is a hypothesis that the future is behind the "stable", tied to commododes. It is based on the fact that in the society in general and in the economy in particular, the so-called fatigue of the material of the classical unsecured money. At the same time, we see that the same dollar, euro, yuan, Brazilian real and all other classical currencies are also subject to volatility. And all this against the backdrop of a global rise in the cost of money. The economy is looking for alternatives. But will the social request for a block of commodities be critically higher than for classical money? I am not sure. But the fact that it will be more than now - most likely. Right now, there are several interesting stablecoin projects in the world: There is a project Tether, which stably enters the TOP-50 on capitalization (just over $300 million). Tether is the dollar's coin, 1 to 1. In Israel, they launched a start-up, which tries to make a crypto currency, tied to oil. In fact, they are not yet very successful, because they can not solve the problem of oil storage - it is difficult to store. There are projects that try to link the crypto currency to computing power, to electricity, such as SONM. You can easily explain to your mother about the crypto currency, tied to gold. I have not talked about the main (yet) and most obvious commodity - gold. Gold is a commodity that everyone understands. Gold accounts for about 5-10% of the global investment market. Gold is a natural limited natural resource. According to open data, the gold reserves of governments are about 30 thousand tons, and about the same in the hands of citizens. Total about 60 thousand tons. About 3 thousand tons of gold is extracted every year. This is a stable figure that can not change dramatically in any direction due to distributed production in different countries and established technologies. Therefore, the value of gold, expressed in goods and services, practically does not change. All this makes gold the ideal equivalent of calculation. Actually, it was so throughout the history of human development. Even the first money was tied to gold until governments decided to replace the gold mining process with a simpler process of printing paper money. Well, the main thing: you easily explain to your mother about the crypto-currency, tied to gold. And she will understand you. Now there are several "golden" crypto projects. There are not so many, but everyone has a different concept: Impressive is the OneGram project from Dubai, which plans to raise $ 500 million for the ICO, which began on May 27 and which should end on September 24. For today, 22% of 12,400,786 tokens sold at $ 43.18 apiece are sold. "Dubai" and "gold" sounds somehow impressive, you must agree. OneGram is tied to the stored physical gold. They have a content, strange, in my opinion, a counter: they position themselves as a project for Muslims. In the world of blockade, any artificial limitation causes questions, because it contradicts the very concept of technology. True, according to the founders themselves, now most of the investors of the project are not Muslims. Still there is a project of the British Royal Mint - Royal Mint Gold, in which one token is tied to one gram of gold. The project raises questions from the point of view of decentralization. Another ambitious project is the American-Australian OZCoin. It is provided with 100 thousand ounces (slightly more than 2.8 tons) of gold at 24 carats. Also, there is a "Russian" Goldmint. I took the "Russian" in quotes, because it has international team. The project plans to hold ICO in September, and in May held pre ICO and collected for a couple of days $600 thousand. Imagine that there is an ingot of gold that is able to be transported quickly and cost-free to anywhere in the world without a chance of being stolen. Usually verification of the team removes 9/10 of the risk - the probability of "scam" or some illegal actions is equated to zero. I always say that Whitepaper, the business plan in the ICO world is secondary to the team. It does not matter what you do, but who you are. If tomorrow Elon Musk will grow cows, then investors will believe in his project. Overview of TOP-15 crypto-currency Now about the crypto currency in general. On the Internet, you can easily find sites where you can see the capitalization of each crypto currency, which is drawn at the crypto-exchange, its current price in dollars, the schedule of price changes, the amount of currency that is traded on the market. Such statistics will help a little to understand the beginning investors, but give at least a general idea of what is happening. I will briefly talk about several crypto-currencies in the TOP-50 on capitalization: what are their essence, advantages and disadvantages. And despite the fact that in many of them I invested money, I will not give any specific advice on investment here. MAIN PART
The analogy from the real world is gold. This currency appeared first on the market, and therefore occupies (so far) the first place in terms of popularity, capitalization and exchange rate relative to the dollar. All other currencies, which appeared later, began to be called altcoins, and bitcoin is still a benchmark, from which all are repelled. Bitcoin is a crypto currency that can only be sent, received and stored. In doing so, it has many disadvantages inherent in the architecture itself: it is slow, difficult to scale, requires a lot of power for mining, a lot of storage space, transactions are expensive, and cryptography can be hacked if desired. Here are the cons: Bitcoin is slow, means that transactions in bitcoin occur every 10 minutes. To confirm the transaction, you need to mine, and this is a very energy-intensive process. To increase the number of users (scalability), you need to increase the computing power of computers. Bitcoin was not such a decentralized system, as it was announced at the very beginning. Theoretically, the miners can unite into huge pools and manage the network. The maximum number of bitcoins that can be released is 21 million. To date, they have already produced 16.75 million. What will happen when the total volume reaches the limit? Obviously, there will be a so-called hardfork, when it will be decided to create a new version of the bitcoin-network. This means a big vote, if you want - holding a referendum among the holders of the bitcoins. The Chinese holders of the Crypto-currency were in favor of holding such a referendum already in September. After him, perhaps, the "constitution" of bitcoin will change. And we know how constitutions change easily and quickly in different countries ...
An analogy from the real world is the new Microsoft. "Ether" begins to press bitcoin in terms of popularity. Probably, this currency has more prospects. If bitcoin can act only as a means of exchange and storage, then Ethereum has a number of advantages. The main thing is the ability to create smart contracts. Now, this platform is the most popular in the world in the construction of the block economy, and is used with numerous ICO. Ethereum inherited almost all the diseases of bitcoin. Yes, it's faster - it updates every 10 seconds (that is 60 times faster), but it has the same scaling problems (the recent case with SONM is an example), power consumption and storage. It may well challenge the leadership of bitcoin in the near future.
An analogy from the real world is the new VISA. The project team is trying to make a new payment system so that it can make payments in all currencies. The advantage of this currency is that it is used by banks. However, it is not decentralized. Coins can not be mined, therefore, their number does not increase. Ripple has a huge speed advantage over BTC and ETH, but the operations are not so transparent. For the classical banking system, this is normal - there anonymity has never been welcomed.
An analogy from the real world is platinum, which is cheaper than gold. Absolute analog of the bitcoin. Faster, better in all respects - but just turned out to be the second. But it is worth it in terms of diversifying investment in the same bitcoin. However, there is nothing from the point of view of innovation.
The analogy from the real world is Alibaba (not Amazon). Alibaba - the largest online store with a multi-billion dollar turnover. But still understand that it is still not as steep as Amazon. Classic may even be more expensive than regular Ethereum, but there are some nuances. ETC appeared after the Ethereum hardfork, which occurred last fall, and still does not cause trust in the crypto community. The main attention is still paid to ETH, and all the iconic projects are being conducted on this platform.
Dash and NEM
The analogy from the real world is "not clear who." Honestly, I do not often see these currencies. NEM is mainly drawn in Japan, where it is officially allowed to buy and sell goods for crypto currency. The number of coins is always one less than 9 billion, additional emission is not provided, so there is no mining, but there is a so-called harvesting. A major jump in the NEM course occurred in May, when a closed Mijin platform was created on the basis of NEM, through which Japanese banks can conduct secure transactions. NEM is built on the example of bitcoin, but there are no fundamental differences in architecture. Dash - crypto currency, whose transactions are completely anonymous. Many people talk about this as an advantage, but think: why does an ordinary person have complete anonymity in transactions? Still, all decisions about changes in the "constitution" take place with the help of a general vote, that is, the Dash-network is completely decentralized. Naturally, both currencies work faster than a bitcoin and have a number of software advantages.
An analogy from the real world is the new Google. A real innovation in the world of crypto currency. It offers a fundamentally new paradigm that can change everything at all. IOTA is also called the "crypto currency of things". It appeared five years ago, but it has become popular just now. As soon as it entered the stock exchange, it immediately burst into the Top 10 crypto-currency. How does bitcoin work? In order to perform a bitcoin transaction, the miner must do some work to confirm the transaction. Spend time, huge amounts of energy and allocate space for storage. In the case of IOTA, you can independently confirm the transaction with your device - for example, a regular phone. Your smartphone confirms two other transactions. Those transactions are confirmed by other two. And so on. The more users, the faster and better the network. Now IOTA users have accumulated a critical mass and the currency has become very popular. There is no limit to scalability, no miners are needed, so transactions are free. You do not need to pay a commission to the miners, you do not spend computing power. In general, this is a real bomb that threatens to make a revolution. IOTA solves all problems inherent in bitcoin (limited, high demands on computing power, pseudo-decentralization, data growth and storage problem, slow speed).
The analogy from the real world is JFC Sistema. Briefly, unlike bitcoin, Monero emission is not limited, but transactions take up several times more space than bitcoin. But this is not the most interesting. In general, low-cost transactions, good translation speed, good mining.
An analogy from the real world is the Empire State Building. EOS - the evolution of the currency BitShares and Steemit (which, by the way, seriously criticized that does not prevent BitShares from getting close to the top 10 on capitalization). It is based on a breakthrough technology, which can be compared with the appearance of a blockade. In theory, they can replace Ethereum or enter into synergy with it. In terms of technology, the project is better than Ethereum. Developers have created a new language, and now the EOS platform creates an operating system on which it will be possible to build separate applications. The logic is this: all databases, all web programming will be transferred to the block system. New technologies will allow asynchronous launch of different applications, which will seriously increase the speed of the OS based on EOS. The team expects that the whole world will work on EOS. In general, to be honest, this is the world of "Crypt 3.0".
An analogy from the real world - ? A useful tool not to lose on converting, not to depend on the legislation of different countries, taxes and so on. There is also a similar currency Tether, which is tied to the dollar 1 to 1. If you want to sell or buy dollars on the blockchain, you should come here. These are not speculative instruments. (Here you need to understand that BitShares itself as a unit of account is also "floating"). It is used as a currency for collecting commissions for a transaction of a fiat currency. It can be speculated. But if we want to operate with fiat money in the blockchain, we can do it inside the BitShares system). And 5 more crypto-currencies from the top 50 If you look further, in the top 50 crypto-currencies there are a few notable projects. I will list a few.
An analogy from the real world is the stock exchange. It is essentially a stock exchange: an Ethereum platform on which you can exchange different cryptocurrencies (but they all have to be the ERC20 standard - this is the most common Ethereum standard on which most projects are developed). Everything is regulated by smart contracts. This is a new economic tool in the world of blockchain. In fact, they brought the derivatives into the blockchain, which no one had done before. It seems to me that this is a niche product, which, however, can grow 5-10 times.
An analogy from the real world is McDonalds. A good, fashionable currency, I see future in them. Fast, cheap in a transaction, profitable in the mining. It is loved by miners - in other words, market providers like it. And it is like McDonald's - does not belong to anyone. 99.9% of McDonald's shares are traded on the stock exchange, but the largest shareholder owns only 2% of the shares. Decreded as McDonalds.
An analogy from the real world is Netflix. Fantastic project. And by "fantastic" I do not mean "cool", but the original meaning of the word. The business model is incomprehensible, but the team is good. They try to work in the market of events predictions. While the project is in the alpha stage and no real money goes in there, the team really knows how to correctly analyze the data. Aragon can become crypto-Netflix. How they do it - I have no idea. But just to remind you, 7 years ago Netflix was unprofitable.
Found this Bitcoin (Cash) thesis on the core blockchain!
401523. Oct 2017 09:20:15
Bitcoin (Cash): Investment Thesis Introduction Bitcoin has the potential to become the best and fairest form of money to ever exist. It essentially rolls gold, cash, and our credit card system into one. It takes the strengths of each and leaves the weaknesses behind. It has the limited supply quality of gold, but can be used to purchase everyday items. It has the speed of a credit card, but respects and protects your privacy. Transactions are settled instantly like cash, but are recorded on a public ledger. Here are further comparisons to our modern day financial system:
Unlike credit cards, there is little cost in sending money from one party to another
Unlike credit cards, there is no threat of fraud or charge-backs
Unlike government currencies, you will always know the exact quantity in existence
Unlike banks and credit cards, transactions are settled in seconds and minutes, rather than business days
Unlike banks and credit cards, funds are almost immediately available for use
Unlike banks and other money transfer systems, there is no added cost to send money outside the country
Unlike government currencies, the threat of a rapidly increasing money supply does not exist
Unlike government currencies, a country’s stability is not at risk due to currency mismanagement
Unlike gold, storage costs are minimal
Unlike cash, it leaves a trail
With Bitcoin, we have money that is issued in a predictable, automatic, and transparent way. With Bitcoin, we have securable money that allows us as individuals to be our own bank. With Bitcoin, we don’t need to worry about government debt loads or inflation. With Bitcoin, we have money that knows no borders, is perfectly divisible, quickly transferable, and transaction markable. With Bitcoin, there are no credit card fees for merchants upon sale, and once funds are sent to you, they’re yours. You no longer need to wait business days to receive or use your money. These revolutionary aspects are what some financial gurus are missing when they say that Bitcoin is a fraud or a bubble. They are not able to see a new form of money superior to all forms before it; and frankly, it does not matter. Bitcoin does not care what they think. Bitcoin does not care, because as long as it retains the properties that make it great in the first place, it will remain superior and expand at its “internet-like” pace. However, if those superiorities disappear, then it is possible that those financial gurus could be right, and that leads us to Bitcoin’s problem. Bitcoin’s problem The first and most important step in finding a solution to any problem is to pinpoint the source, or root cause, of the problem. Without an understanding as to what the problem actually is, a proper solution cannot be accurately and effectively developed. The main problem with Bitcoin was not that it has had too little usage. On the contrary, Bitcoin’s problem was one that many small businesses face as they begin to grow quicker than anticipated. It reached a point where its limited capacity could not keep up with increasing demand; and as a consequence, a bottleneck formed and quality suffered. Specifically, the network could not process transactions fast enough, and this created a transaction backlog. As a result, fees rose from cents to dollars, and transaction times went from seconds and minutes, to hours and days. The user experience during this time was of such low quality that alternative cryptocurrencies began to take market share; and Bitcoin’s superiority was in question. For a moment, it seemed like those financial gurus could be right. Then, on August 1st, 2017, a potential solution called Bitcoin Cash was born. Bitcoin Cash was created to eliminate this network congestion and scale Bitcoin by increasing the number of transactions it could process. Bitcoin, with a 1 megabyte (MB) blocksize limitation, was only able to process roughly 3 transactions per second. Bitcoin Cash chose to upgrade this limitation by increasing the blocksize to 8 MB; which allows it to process roughly 24 transactions per second. With an increase in transaction capacity, users no longer needed to pay inflated fee prices for quickly confirmed transactions. They would only have to pay pennies, and transactions would be confirmed within seconds and minutes. The network could once again give users the experience that made Bitcoin great in the first place. However, this seemingly logical solution to the problem has been met with resistance; and because of this, adoption in Bitcoin Cash is not as widespread as it is for legacy Bitcoin. The majority of industry participants have been convinced to increase Bitcoin’s transaction capacity using alternative methods, and they perceive Bitcoin Cash as an afterthought. Just as those financial gurus dismiss Bitcoin, many dismiss Bitcoin Cash the same. To the naked eye, these conditions may lead one to believe that the future of Bitcoin Cash is bleak, and investment into it would be unwise. To a contrarian investor that thinks these circumstances will disappear once emotions die down and Bitcoin Cash’s superiority as a scaling method becomes apparent; these current conditions, and investment in them, make potential outsized gains possible – and that, is the basis for this paper. Going forward, we will go into detail regarding Bitcoin Cash from an investment perspective and cover topics pertaining to it. The goal is to keep this paper non-technical, and to remain as objective as possible. Even if you do not agree with it, hopefully, at the very least, you can appreciate the perspectives within. Let’s begin with a brief introduction to the scaling proposals that led to a divide within the Bitcoin community. Bitcoin’s scaling options: Bigger Blocksize vs. Segwit + Sidechains Problem defined: 1MB Limit = Network congestion = Slow confirmation times = High fees = Decreased user experience Two proposals emerged for solving this problem. An increase in blocksize was one, and a technological modification called Segwit was the other. With a larger blocksize, the network would increase the number of transactions it could handle by adding more transactions into each block. This method of scaling utilizes the actual Bitcoin Blockchain, and thus, is referred to as “on- chain” scaling. With Segwit, part of the data normally included in each transaction is removed, and this decreases the size of the transaction. This decrease in size allows for more transactions to fit within each block, without actually changing the size of the block. You can think of this as an addition-by-substitution solution (For further explanation: Click here). Additionally, the Segwit proposal also plans to scale Bitcoin using a secondary method called the Lightning Network. The Lightning Network is billed as something that can take Bitcoin to VISA+ levels of capacity with instantly-settled transactions that cost nothing; except for an onboarding and offboarding transaction using the actual Bitcoin blockchain. Aside from those two transactions, all other transactions conducted within the network are of no expense, and take place outside of Bitcoin’s Blockchain. Hence, it is referred to as “off-chain” scaling. What is the superior solution? Before making this determination, we need to do the following:
Define Bitcoin’s goal and how it can be achieved
Understand the core problem in relation to the goal
Analyze the proposed solutions in relation to the problem and goal
Goal > Problem > Solution Bitcoin’s goal The goal, or potential of Bitcoin, is to become the internet of money. That is, to become the backbone of our financial system, to serve as a store of value, and to be the main form of money used for everyday commerce throughout the world. More specifically, the goal is to have everybody in the world using Bitcoin. Not just the technically-savvy, not just the wealthy, not just the young: everybody. Bitcoin’s long-term goal is worldwide adoption. That is the objective. Goal rationale The more that transact with this fair form of money, the better off we are as a society As Bitcoin’s history has proven, the more people that use Bitcoin, the greater its value will be. If 6 people use it, it’s not very valuable. If 6,000 people use it, it’s going to be more valuable than 6 people using it. If 6,000,000 people use it, it’s going to be far more valuable than 6,000 people using it. If 6,000,000,000 people use it, it will be exponentially more valuable than 6,000,000 people using it. Simply put, adoption equates to an increase in value. For this reason, it is essential that growth conditions are optimal so nobody is restricted, or priced-out, from using it. How does adoption continue to grow? “As a good rule of thumb, proprietary technology must be at least 10 times “better than its closest substitute in some important dimension to lead to a “real monopolistic advantage.” – Peter Thiel, Zero to One One of the main points made by Peter Thiel in his book, Zero to One, is in order to dominate a market, it is necessary to create something 10x better than what currently exists. If you create something only marginally superior in a crowded marketplace, the superiority may not be recognized, and dominance is far less likely to be achieved. Bitcoin, as evidenced by its uniqueness and rapid growth since inception, qualifies under the 10x criterion. Specifically, Bitcoin is 10x better as form of money and 10x better as a payment system. Combined together, the following characteristics make it superior to the legacy financial system and the form of money used within it (Dollars, Euros, etc):
Cheaper to transact with
Faster settlement times
Superior store of value
Prior to the ‘high fee and slow confirmation time’ bottleneck, these four characteristics were Bitcoin’s main competitive advantages. Once Bitcoin lost the first two advantages, the alternative cryptocurrencies began taking market share away from it - just as any competitive business does when an industry leader takes a misstep. It was a lot like going to Chipotle for lunch only to find a line out the door and around the block, or with prices that doubled from your last visit. Under these circumstances, you, as the customer, would take your business elsewhere. You would go down the road to Panera Bread, or another alternative, until those conditions subsided. If those conditions persisted, Chipotle would lose you and others as customers, since people only tolerate those unfavorable conditions for so long. That previously long line at Chipotle would shrink, and so would their customer base. To ensure this type of scenario doesn’t happen to Bitcoin, those four 10x advantages need to remain. ‘Needs Improvement’ Aspects' For Bitcoin to reach its full potential, it will need to retain those four competitive advantages and improve in three other major aspects as well:
Additional use cases
Ease-of-use Keep it Simple Stupid (KISS) For the average, everyday person, Bitcoin can be overwhelming and intimidating to use. To alleviate this issue, the user experience needs to improve to a point where the normal person feels comfortable using it, which means simple – but still secure – storage; an easy, inviting way to pay for things; and attractive, user-friendly interfaces. It should be so simple to use that your grandma could do it. Quite simply, the fewer the steps the better (click, click, boom). Merchant Adoption To attain global adoption, Bitcoin must be used in everyday commerce. Without use in commerce, Bitcoin lacks utility. It would not be very useful, nor would it be possible to unlock its full potential or value. This makes merchant adoption very important to Bitcoin’s long-term success. Fortunately, Bitcoin holds almost all key advantages over the predominantly-used, credit card system of today. To put this on full display, let’s glance over the advantages and disadvantages of the credit card system - in comparison to Bitcoin - from the eyes of a merchant or business. Credit card disadvantages:
Merchants are charged roughly 3% of the transaction total ($100 charge = $3 fee)
Payment received is not immediately available
Payments take multiple business days to settle
The risk of fraud or chargebacks is present
Merchant is responsible for safeguarding customer’s data
Credit card advantages:
Main payment method used by masses
People are comfortable transacting with it
Easier to use
The currency used for transactions promotes spending over savings (will be discussed further)
The current advantages the credit card system has over Bitcoin can change, but the disadvantages cannot. Bitcoin easily outcompetes the credit card system in terms of speed and cost, as well as privacy. In addition, it is also advantageous for merchants to accept Bitcoin because the currency itself is of limited quantity and makes a better store of value. For that reason, as Bitcoin’s adoption grows, it is likely that merchants will offer discounts for customers that pay with it. The ease-of-use and comfortability factors will likely remain advantages of the credit card system in the short-term, but over the long-term, they should lessen as Bitcoin becomes ingrained into society and easier to use. However, the last credit card system advantage may remain for some time due to the nature of Gresham’s Law, where: “Bad money drives out the good” Gresham’s Law asserts that people will save money thought to be a reliable store of value (gold) while spending the form of money thought to be an unreliable store of value (government currencies). The reliable store of value, or “good money,” will be hoarded; while the unreliable store of value, “bad money,” will be spent. Bitcoin, as a commodity/currency hybrid with limited supply, can be recognized as a good store of value. This is why, at this stage, we primarily see it held as an investment. This is likely to persist for some time because people are currently more interested in its price-appreciation potential rather than using it to pay for things. As Gresham’s Law emphasizes, why spend good money when you can spend the bad? Potentially, in the distant future, it is possible that Gresham’s Law reverses, and good money drives out the bad. In this scenario, adoption would be massive to the point where Bitcoin’s market capitalization would be comparable to gold or other major currencies. If such a point is reached, businesses and everyday people will likely prefer Bitcoin over traditional currencies. If everybody has the good, why would you want the bad? In the foreseeable future, however, Gresham’s Law will remain valid, and merchants will carry the task of extracting the good form of money from their customers. Since Bitcoin holds the main advantages merchants care about, it is in their interest to do so. That is, as long as those advantages remain.
Author’s note: I typically don’t seem to approach problems the way most of us are expected to. In some ways I think this could be useful for various reasons, but unfortunately there are “side effects” as well. Once such side effect is my inability to use language in the standard way. The reader will have to forgive me for this, however, I believe that for this writing, the meaning and purpose will still translate to SOME players. If a few players can understand the content well enough, perhaps those who themselves HAVE a talent in language, might be able to translate the content in their own respective ways. Introduction
…it cannot be irrelevant whether or not the future quality of a currency is really assured or whether instead that it depends on the shifting sands of political decisions or the possibly arbitrary actions of a bureaucracy of official.~John Nash-Ideal Money
Ever since Satoshi put the 1mb cap on the block-size, the community has been dividing itself further and further, between those that want a dramatic increase in the limit and those that do not. This creates an uncertainly in the future quality of the currency, and I think both sides would admit that this necessarily affects adoption and the price of the bitcoin. The most popular sentiment SEEMS to be that “big-blockers” want to scale bitcoin to have a transaction capacity that would allow it to evolve to be a global currency. However, big-blockers also have the biggest hill to climb, because they must convince Core to bend to their mandate (and then convince the network to adopt such a proposal). Core seems to have no intention in even addressing this issue. Bitcoin is in a state of flux. The purpose of this writing is to put and end this flux. Re-solution and Rheomodes
If we can see what all of our opinions mean, then we are sharing a common content, even if don’t agree entirely.~David Bohm-On Dialogue
In order to do this I must be allowed to extend our language slightly. Rheomodes are a new mode of words (like verb, noun, pronoun, adjective etc.) created by Dr. David Bohm as an experiment to see if we can derive any value from taking emphasis off the noun and putting it onto the verb (in this instance rheo refers “to flow” or movement like an action word). In regard to bitcoin we might think of the distinction as the difference between “I’ll send you some BITCOIN” or “BITCOIN it to me”. The former treats bitcoin like a noun, and the latter like an action (a payment method). It might not be immediately obvious what the importance of introducing a rheomodes. And it is indeed a difficult subject to introduce. A rheomode refers to a type of perspective that could either be called “objective” or an “aggregate of all subject perspectives”. An easier way to say this is that a rheomode means ‘to call the groups attention to X’, where X depends on the definition of the rheomode. For the purpose of this essay the rheomode I wish to levate (call attention to) is “re-solution”. ‘Re’ (followed by a hyphen) in this instance, along with denoting the rheomode also implies “again”. ‘Solution’ in this instance, will not refer to the solution to a problem per se, but rather the mixture of two otherwise divided parts into a whole. The “again” or “re” implies that these separate parts were already a whole, and they were somewhat unnecessarily or unjustly divided (this creates an implication that there is a need or want for the parts to return to the whole, hence the connection to the root word ‘resolution’). This is the basic aspect of the concept of rheomode I wish to bring to our attention, and the rheomode itself, re-solution, means, essentially, “to bring to the community’s attention the spontaneous combining of two otherwise separate parts, in such a way that a new wholistic perspective arises for the group”. Now I will give an example of how we might use this rheomode in practice so that we might better understand its purpose and function. The Re-solution of Gresham’s Law and Tier’s Law After previously trying to re-solve the block-size debate with Gresham’s law, and the explanation that people will not circulate bitcoin, but rather they will hoard it versus a fiat counterpart, it has been brought to my attention that Gresham’s law isn’t necessarily applicable to bitcoin since there is no legal-tender law in relation to it. Furthermore, astute players (and usually proponents of big-blocks) point out that the bitcoin phenomenon should work in REVERSE to Gresham’s law-people will circulate bitcoin and drop fiat altogether. This is called Tier’s law and it is said to come into play in the absence of any legal tender laws. And here is where our example for our rheomode comes in (wiki):
The Nobel prize-winner Robert Mundell believes that Gresham’s Law could be more accurately rendered, taking care of the reverse, if it were expressed as, “Bad money drives out good if they exchange for the same price.”
Now we can use our rheomode in a sentence: Robert Mundell “re-solved” Gerham’s law with Thier’s law which such a statement. That is to say, by taking a higher level perspective, Mundell was able to present a more general perspective that encapsulated both of the laws, and because of the succinct and direct use of language he was able to call this generalized perspective to the attention of the academic community and citizenry of this world. (note: In the language I have been working on, I would call this observation transmutation, which basically refers to “that which changes, and that which doesn’t change. Here the common meaning of transmutation seems appropriate as well.) In going with Mundell’s insight we can begin to re-solve the future of bitcoin, without breaking Gresham’s or Tier’s law as follows. If bitcoin, left as is, became the new gold standard, people began to hoard it, and the velocity of fiat started to increase, we might view this phenomenon as a similar RESULT to Gresham’s law (even though the initial circumstances are not necessarily the same). If we raised bitcoin’s transaction capacity to facilitate a low fee coffee money, and bitcoin grew to be a world currency fast enough that fiat was effectively dropped altogether, we might view this phenomenon, instead, to be comparable to Tier’s law. Ideal Money: A COMMON Goal Each side of the debate seems to share a common interest in that they want to use bitcoin in the most optimal fashion possible. And each side shares a common interest in wanting to bring our global financial system into order. I want to paint two distinct pictures, big-blockers that wish to optimize bitcoin as a currency, and small-blockers, that might be thinking of bitcoin as a new age digital gold, which inspires optimized currency systems to run in and around bitcoin and the block-chain. Each of us has our own view on what ideal money might be, however we need to take note that a very brilliant man has spent many years meditating and speaking on the subject of Ideal Money. His definition for what would ultimately be Ideal Money comes down to basically, ‘money that doesn’t degrade in value/purchasing power over time’. Now this is a slippery definition, it is not in itself a solution (this is why it is called IDEAL). But it does provide us a basis or a ceiling that we might strive for. I have always understood this to support the small-blocker agenda, in that as bitcoin becomes a safe haven for inflation, government will be forced to print money of a better and better quality. The eventually “asymptotic” result being the ceiling or “Ideal”. I think though we can begin to re-solve both sides of the debate by using another perspective or definition in regard to a common goal or an Ideal Money. Here is another quote from Dr. Nash:
…to improve the conditions under which agreements regarding long-term lending and borrowing would be made, a money would be more or less equivalently good if it had a completely steady and constant rate of inflation. Then this inflation rate could be added to all lending an borrowing contracts.~Ideal Money
Now I think then I can see the possibility (like Thier’s law states) that the people could adopt bitcoin perhaps in a relatively short period of time, and drop fiat currency so fast that governments have no realistic time to adjust. Then bitcoin could become a global currency with a very moderate inflation rate for some period of time. This too I think could bring our global financial system into order, as bitcoin could either be continually optimize, or perhaps new currencies in the future could arise to take its place (but not fiat). This path though, does require a higher transaction capacity (ie bigger-blocks). The Re-solution of the Block Size Debate Now I believe we have brought about a great insight. I think it can now basically be shown that Ideal Money could be brought about using EITHER path for bitcoin. And this possibility changes the nature of the problem. If we can be allowed to suggest that both sides do in fact have legitimate claims to bringing about order to our financial system, then it is no wonder that sincere players are so passionate and adamant that their agenda pull through! In fact such a realization can be used to create 4 useful player archetypes I wish use to remember to use: the rational small-blocker, the irrational small-blocker; the rational big-blocker, and the irrational big-blocker. Notice that even if someone calls another player an “irrational X-blocker” there is still an implication from that person that the X side does in fact have rational players. This alone, it seems, could change the nature of the debate. I think some people will read this writing and be unsatisfied with the claim that I may have re-solved the block-size debate. I wish us to keep in mind the purpose and definition of our rheomode (re-solution), and especially that it means “to bring to the community’s attention the spontaneous combining of two otherwise separate parts, in such a way that a new wholistic perspective arises for the group”. This is what I have done, but what I have not done is the traditional use of the word “resolution”, I have not chosen or proved one side of the debate is correct. Instead, by showing both sides can lead to our shared goal, I believe I have served the stated purpose of this paper, which is to help bring bitcoin out of flux. Rational players on both sides now have a common goal and reason to come together. And it can be side that if each player cannot admit that there are rational players on both sides of the debate, then that player must be seen as insincere. Now much of the focus can be on finding the optimal PATH to take bitcoin on, rather than focusing on winning the debate, in the name of what each player KNOWS is “correct”. That is to say this paper, if successful, should alleviate pressure on Core, which in turn should bode well for the present day and long term health and circumstances of our beloved currency. In closing, I would like to say, I have now changed my stance on the block-size debate as a previously devote small-blocker. I am no long afraid of big blocks. I am no longer afraid of X-size blocks, and I hope now the reader no longer is either.
Cost, Value, Price, Money, and Emergy -- Developing ideas, request for references (and sanity check)
Over the past several months I've been developing some thoughts on fundamental underpinnings of economics, particularly the concepts of cost, value, price, money, and working in an ecological principle, emergy (with an 'M'). I've found some references, I'm seeking more for both conventional and unconventional thinking. The most recent draft is at Ello, "What's the value of the Universe in dollars? All of them". I'm not entirely satisfied, though it's shaping up fairly well.
My terms aren't quite as typically used in economic discussion, though close, and I believe defensible.
Goods: Variously and shorthand for, resources, products, services, labour, capital. Anything exchanged economically.
Cost: The requirements for producing or providing a good. All costs are opportunity costs.
Value: Here I mean use value, which is close to, perhaps the same as, utility. My aim however is to have a quantifiable and not merely rankable concept. Austrians may find this unfamiliar.
Price: Market value or exchange value. What two parties in a transaction agree to give up, or make available, to exchange a good.
I've been developing these ideas largely at The Other Place, within my Economics Collection. In particular, in date order:
A development of Emergy to Currency (26 Jan 2016). Elliott T. Campbell, David R. Tilley, "The eco-price: How environmental emergy equates to currency", Ecosystem Services. March 2014, Vol.7:128–140, doi:10.1016/j.ecoser.2013.12.002. "Energy flows through economies in a hierarchical pattern with vast amounts supporting the base while each step has less and less flowing through it. Money is inextricably connected to many of these energy flows in a countercurrent."
Value: a red herring (24 Feb 2016). The idea that in most market circumstances, setting a specific value on a good is a distraction. I'm now thinking I've taken this a bit too far, but it remains useful. Specifically, in many arguments the case is made that 1) value matters, 2) it cannot be precisely known (because it's an internal mental/psychic state), and therefore attempts to prescribe or control or quantify it are bound to failure. My upshot: so long as value exceeds costs the market's going to function. And, on the large/aggregate scale, ecological/biological type methods to assess value work sufficiently for analytic purposes.
As noted, this is a frequent topic of discussion. Among those discussing price, cost, and value that I'm aware:
Usual caveats -- this is Wikipedia, a guide but not a source. Reassuringly, economic value seems to match my use:
[E]conomic value is not the same as market price, nor is economic value the same thing as market value.
And yes, this seems like a continuing puzzle in economics:
The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods which can be exchanged. From this analysis came the concepts value in use and value in exchange.
In neoclassical economics, the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market... As such, everything is seen as a commodity and if there is no market to set a price then there is no economic value.
A/K/A "value in exchange".
In classical economics, the value of an object or condition is the amount of discomfort/labor saved through the consumption or use of an object or condition (Labor Theory of Value).
Steve Keen makes the claim that "value" refers to "the innate worth of a commodity, which determines the normal ('equilibrium') ratio at which two commodities exchange."
Citing: Steve Keen Debunking Economics, New York, Zed Books (2001) p. 271, ISBN 1-86403-070-4, OCLC 45804669 In which case, Steve and I disagree. See W.F. Lloyd and M. Say. Though:
To Keen and the tradition of David Ricardo, this corresponds to the classical concept of long-run cost-determined prices, what Adam Smith called "natural prices" and Karl Marx called "prices of production."
That I agree with more, though I'd clarify by calling it the innate cost. Any value must then exceed this cost. There's John Ruskin who wrote on the moral concept of value in Unto This Last. Notably:
It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as strictly as that of a mathematical quantity depends on the algebraic sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicanery.
Ruskin influenced Gandhi. Mises appears:
Economists such as Ludwig von Mises asserted that "value," meaning exchange value, was always the result of subjective value judgements.... Thus, it was false to say that the economic value of a good was equal to what it cost to produce or to its current replacement cost.
Among the classic works on the topic. Jevons' contents cover many of the topics and concepts I've been blundering into, though he's also concerned with the physical instanciation -- at the time of his writing, banknotes were still fairly new, and the were serious questions over multi-metallic standards (e.g., gold or silver, or gold and silver). Briefly:
"Want of coincidence in barter", measure of value, subdivision
Utility and value are not intrinsic
Value expresses a ratio of exchange (my: "price is a rate")
Functions of money: standard of value, store of value. (But not "medium of exchange")
Speculation of early history
Qualities of the material of money: utility/value, portability, indestructibility, homogeneity, divisibility, stability, cognizability
Credit documents and systems, banking system, and clearing-houses
The quantity of money needed by a nation
Does a revised model offer any explanatory power?
There are several questions, most pressing of which is "am I completely nuts". Running close behind is "what does this buy us"? I'd really like to be able to explain contradictions, paradoxes, or failures of existing economic theory in establishing value. There's the case of under-priced resources and the shutdown decision, noted above. The dual approach to pollution externalities is another. Not sure if this is Coase, Lucas, Rawls, or another, but essentially, if one party pollutes and another has to deal with the consequences, conventional economic theory can make an equal case that either the polluter pays a fine for the harm, or the nonpolluter pays the polluter not to pollute. Being able to explain this would be nice. If price is simply a control-system cost, then summing up control system costs over the entire economy ... doesn't really seem like a sensible operation. It tells you how much encouragement is needed to precipitate trade, but needn't address either cost nor value. This suggests that computing economic prices isn't ... all it's cracked up to be. And that perhaps cost is a better basis. It could well be that ecologists are chasing the wrong target. They should be mapping economic costs to ecological ones, not the other way around? Skimming Jevons, he addresses the cognizability of currency -- that is, you want people to be able to instantly recognise money as money. And not have to test it for worth or value. That's tickling some nerves, with Gresham's Law and Bitcoin both coming to mind. Gresham's Law: readily recognised value is a positive. Bitcoin; inherently noncognizable. Observed economic behavior should be describable or derivable from this explanation. Coming up with a normative this is how things should be story ... that doesn't describe reality, isn't particularly useful. It is, however, practical. I'm aware that some of what I'm suggesting goes against a few thousand years of economic thinking. On the other hand, some of what I've blundered into appears to be well in line with what's come before, and I'm independently deriving it. Some simple targets would be to describe products made or labour provided continuously. Being able to describe pricing behavior and pricing mechanisms, and to show how stocks (that is, fixed quantities of goods) or asset classes behave, would be useful. Describing monetary behavior more generally even more interesting. And that all remains a work in process. As I noted at the top: this is something I've been developing for the past couple of months. I'm researching what I can find of existing theory and understanding. Additional references, and noting where I'm off in the weeds would be highly appreciated.
Markets and Price-Setting: Thoughts on information, created goods and services, fixed-supply commodities, financial instruments, and other market values behave
I've been reflecting on Paul Mason's Postcapitalism, particularly as concerns what he identifies as a hum-dinger of information goods: Information goods destroy the price formation mechanism based on scarcity. That's one of a few cases in which markets as price-setting mechanisms fail, or are subject to very high degrees of ambiguity. Four particular instances come to mind:
Information goods, as identified by Mason.
Existing products -- effectively the resale market.
Financial assets: goods whose price is predicated on scarcity and some ascribed basis for value.
Extractive goods: resources which are used faster than their replacement rates.
Each poses specific failures to usefully set a market price that corresponds to the true costs of production. What I'm posing here is more an exploration of aspects I've found, and still find, contradictory. I'm not claiming to have final answers, though I'm starting to land a few good leads.
On "natural prices"
While much lay discussion of economics holds that the market price is the fair price for a good or service, the question of what a "natural" or "fair" price has occupied a great deal of economic thought and discussion since the time of the Greeks. Adam Smith in Wealth of Nations proposed a definition which remains close to what's commonly accepted today -- a total cost of inputs, plus normal profits:
When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price.
The cases I'm considering here all violate this in one way or another. This is troubling as they're increasingly key to economic activity.
Information wants to be free.
-- John Perry Barlow In an efficient market, quality information is consistently undervalued. In this case: fixed costs of production are high, but marginal costs of production are low. It takes a lot of time and research to create a quality book, a piece of music, software, news reporting, pharmaceutical, chemical process, etc., but once developed the costs of manufacture are far, far less, effectively zero in many cases. That's one fundamental contradiction of the "knowledge economy". There's the further problem of Gresham's law as applied to information: cheap, low-quality information tends to drive out high-value, but expensive-to-produce information. Ask anyone in the news, broadcast, or publishing industries.
There are good cars and bad cars (which in America are known as "lemons").
-- George Akerloff, "The Market for Lemons" This is the second-hand market -- goods which are re-sold by an initial buyer, after initial purchase. Flea markets, swaps, Craigslist, consignment stores. And antique shops and auctions. The fundamental characteristic of each of these is that the good already exists. There is no production function. Price, instead, is effectively a motivator -- what does it take to convince the holder of a good to part with it? There's a Spanish folk saying I've only recently learned, its English translation "Buy from desperate people, and sell to newlyweds." In both cases, the supply and demand curves are shifted to the advantage of the middleman buying in the first instance and selling in the second. In some cases, there's an alternative to buying used: you can buy a new item or make one yourself. For many utilitarian goods (clothing, furniture, children's toys, used books or records), the second-hand market offers considerable savings over new or self-made. Keepsakes and mementos have highly asymmetric valuations: the holder usually ascribes a high sentimental value, while others may view the item as little more than clutter or "old junk". In this case it's typically unlikely for the piece to be sold -- the holder's valuation is higher than any potential buyer's, unless the former is desperate. Antiquities or fine arts, as opposed to personal mementos and keepsakes with high sentimental value pose a different situation: if it is the specific item in question and not a functionally equivalent replacement that is sought, then there is no ascribable production cost. You cannot make a "new" original Rembrandt, or Picasso, or Ming Dynasty vase, or piece of ancient Egyptian art. Price of such goods is entirely dependent on the demand for such products. It calls into question the entire concept of what a "natural price" of such a good is. This case is actually the genesis for this essay -- the example I had in mind was of a Stradivarius violin -- there are about 650 left in the world, largely manufactured between 1680 and 1700, and present market values range from hundreds of thousands to millions of dollars. This despite notable failures for blind listening tests to distinguish or prefer Strads over other instruments. While modern mass-produced violins can be had for as little as £80 new, more expensive hand-crafted instruments comparable in tonal quality to a Strad fetch about £15,000. That's still a considerable discount on the Strad -- by a factor of 200. The embodied labor?
It takes around 120 hours to make a violin, 150 hours for a viola and 300 hours for a cello.
That's an all-in £125/hr cost of labor, assuming labor is the principle input. Similarly, nearly indistinguishable art forgeries are fairly common, there's the case of "Jefferson's Bottles", literally an instance of new wine in old bottles. Or forgeries of antiques, antiquities, and the like. In all cases, the immediate quality of the forgeries is quite difficult to tell, though dating of materials by radioisotopic means usually manages to distinguish them. What's changed is the perception. What marketers call "selling the story". Or, quite bluntly: changing the demand curve for a product. Extant products fall into two general categories:
Those for which there is an imbued additional value -- above and beyond the intrinsic use-value of the product. These are products which tend to be either asset classes (if the ascribed value is widely shared) or keepsakes (where the ascribed value is personal -- "sentimental"). Goods with high sentimental value rarely sell -- the owner ascribes more worth than the market. Works serving as an asset class (specie or fiat currencies, precious metals, stocks, bonds, other financial instruments) have effectively no sentimental value.
Those for which the intrinsic value is the primary consideration. This is the class for which the economizing purchaser can save a great deal over buying new.
And finally, extant goods have the "lemon" problem, and in fact, in the form of the used-car market, are the basis for George Akerloff's "The Market for Lemons" paper noted in the epigraph for this section. In the case of established goods (e.g., antiquities and fine arts), the asymmetry detailed by Akerloff tends to be minimized. In the case of certain complex goods: automobiles and electronics certainly come to mind, concerns on the part of the buyer over the serviceability of the good in question tends to 1) keep prices depressed and 2) limit the number of quality items actually offered to market -- the seller knows that it will be unlikely to recapture the true value of a quality item.
Because that's where the money is.
-- Willie Sutton, on why he robbed banks. Here, you've almost the inverse situation of information goods: marginal cost of production is exceptionally high - - there's either a workfactor cost, or simply a finite supply (for numerous reasons, to be explored more). Will Rogers on land: they're not making it anymore. The asset value of precious metals is that their supply is (theoretically) constrained by the high costs of mining. Bitcoin is similar. But the intrinsic utility of the good is close to nil. A dollar bill has little intrinsic value, or, if you prefer, a $100 dollar bill. It's a piece of paper, ink, and anti-copyright features. The production cost is a factor of regulatory limits on production. Gold and silver have some utility, but this is generally less than is reflected in its exchange value. Diamonds are a case of induced scarcity, though with a few other twists which tends to inflate the retail value while affording virtually no resale value. The added value by virtue of being money is referred to as seigniorage:
the difference between the value of money and the cost to produce and distribute it.
What's key is the "story": not all rare things are valuable, but all valuable things are rare. The key to creating a market for a given asset class is to convince people that other people are convinced of the value. It's a bit of a circular definition. Some assets have value ascribed to them. I've previously discussed what gives money value, in particular the United States Dollar. There are five key aspects:
It is legal tender: debts incurred must be considered legally discharged when paid in dollars, at least within the United States.
It is the required form of payment of taxes. That is, some 40% of total US economic financial turnover is in the form of tax obligations.
It is the global reserve currency. International debt settlements are generally paid in U.S. dollars.
It is the global payment standard for petroleum. That's about $3.1 trillion in global payments again, creating a use for dollars by every oil-importing nation.
It is the basis of paying off debts denominated in dollars, including consumer, mortgage, educational, and other loans.
Buy land. They ain't making any more of the stuff.
-- Will Rogers Other asset classes are real, in the sense that they're tangible, with real estate being a classic example. In Smith's time, the value of land was largely based on the produce one could derive from it: crops, lumber, cattle, fish. Perhaps wind or water power. In urban economics one learns that the value of housing (whether rented or sold) is based on the earning potential and travel time associated with it -- generally housing costs fall as one moves further from an urban center. But a secondary factor of housing is as an investment, though as many critics has pointed out, the long-term performance isn't particularly good, the carrying costs are high, the asset can be highly illiquid (especially when it's carrying a mortgage valued more highly than the property itself). In some areas title may be difficult to establish -- Hernando de Soto and Niall Ferguson discuss this in their respective books The Mystery of Capital and The Ascent of Money in the context of South America, and the resulting difficulties and alternative conventions. One interesting conclusion is that surplus profits of labor (or of business) tend to be subsumed by increasing housing (or office / store-space) costs.
These are also consistently undervalued. Any resource that's being extracted or consumed at rates greater than its replenishment is effectively an extractive good. The typical examples are minerals and mining, and fossil fuels, but this can include other and nominally renewable resources: topsoil, freshwater, groundwater, rhinoceros horn, timber, topsoil, fisheries.... The market price is set by the access price: how much effort it takes to extract the resource, but not a depletion allowance for the fact that the removed unit(s) will not be restored. The latter is a suggestion of many authors, including Herman Daly. It's interesting to note cases of societies which were formerly based on extractive technologies which have run through the entire resource and have lost their former wealth. A classic instance is the island nation of Nauru, briefly the wealthiest nation on a per-capita income basis during the 1980s due to deposits of phosphate rock -- bird guano -- valuable as fertilizer. Its 9,000 inhabitants on 21 km2 now rely on revenues for running a detention center for the Australian government. It's also served as a tax haven and offered passports to foreign nationals. The export land model of Jeffrey Brown describes the dynamics of oil exporting nations as domestic consumption rises to exceed total extraction capacity. Some analysis of the Arab Spring revolves around falling oil extraction in Egypt, Syria, and Libya as contributory causes, though a prolonged drought in Syria has also been mentioned. Cataloging a list of other nations formerly based on exported natural resource wealth could prove illuminating.
Overconsumption of Luxury Goods
As a counterpoint, there are products obtained unsustainably for which the market price is high (though possibly still undervalued). Rhinoceros horn would be an example, whale meat, and tropical hardwoods others. Often within what's a globally small market -- rhino horn is largely valued in south-east Asia and China, whale meat in Japan -- there's a significant social signaling status (Veblen good) for the product. Paradoxically, price is itself a signifier of signaling value, and total quantity demanded, while in excess of replenishment factor, is such that increasing the cost of the good doesn't reduce overall demand (or at least not sufficiently to avoid exhaustion or extinction of the source). Arguably the price is still too low (there should be an extinction/exhaustion premium), but even with increasing prices due to scarcity, the market response is not rational. Moreover, the value ascribed these goods isn't intrinsic to their practical application but to social signalling status. That is: a cheaper replacement would be inferior simply on the basis that it's cheaper, and hence, a weaker signal.
Information vs. Assets
The most striking aspect of Mason's Postcapitalism lecture is his juxtaposition of information goods, in which scarcity drives prices to zero, and of financial assets, in which an ascribed value increases the worth of an asset above its intrinsic value. But more critically:
The key contradiction in modern capitalism is in this emerging contradiction between free socially produced abundant [information] goods, and a system of monopolies, banks, and governments who are forced, in order to survive, to behave desperately to maintain this information asymmetry.
That is: Facebook or other service providers retaining proprietary control, and often, secrecy, over their APIs. There's an intrinsic fight between the network, information goods, and the hierarchy, proprietary and material goods. I further see the need for the financial system to see ever further growth, and interest payments, which a largely information-based economy is unlikely to provide.
In summary ...
I don't want to title this section "conclusions" because, generally, I'm far from them. I do hope this proves useful (and not too personally embarrassing to me) for further discussion / exploration on where and how value is ascribed and attributed.
Genuine Fake News Channel The Bitcoin Price. Ever since it sped up to $20,000, kissed it goodbye and fell to earth, speculators, optimists, and enthusiasts have been vying with each other to [ July 16, 2020 ] Market Wrap: Bitcoin Sticks Around $9,200 as Traders Eye Other Markets for Action Crypto News Search for: Home Basics Of Bitcoin REALIST NEWS – Gresham’s Law And Bitcoin Gresham’s law holds that “bad money drives out good money,”meaning that given a choice of currencies (broadly speaking, “money” that serves as a store of value and a means of exchange), people use depreciating “bad” money to buy goods and services and hoard “good” money that is appreciating or holding its value. Another day, another mainstream news outlet showing off its inability to reason about Bitcoin economics. Today we have Bitcoin’s Wild Ride Shows The Truth: It Is Probably Worth Zero in the Wall Street Journal where James Mackintosh informs us that, among other reasons, Bitcoin will ultimately be worth zero because:. Even if bitcoin worked better, it is in a Catch-22 because of Gresham’s Gresham’s law, observation in economics that “bad money drives out good.” More exactly, if coins containing metal of different value have the same value as legal tender, the coins composed of the cheaper metal will be used for payment, while those made of more expensive metal will be hoarded or exported and thus tend to disappear from circulation.
Gresham's law really says that “money overvalued artificially by government will drive out of circulation artificially undervalued money.” Donate Bitcoin to ... Trading Bitcoin - $BTC Still Struggling After Last Night's News 👉 Subscribe so you don't miss the next one: http://bit.ly/2QKVDdV Check below for events a... Bitcoin Analysis, Top bitcoin analysis, price prediction, Bitcoin Trading, Bitcoin 2018, Bitcoin Crash, Bitcoin Moon, Bitcoin News, Bitcoin Today, Best Bitcoin Analysis, Bitcoin price, Bitcoin to ... New crypto law passed! Hidden truth about Bitcoin's Halving ... #PundiX #Tron #Ethereum #IOTA #Ripple #XRP #Neblio #Starbucks #BAKKT #XRP #StellarLumens #Google #Vechain #Bakkt #cryptocurrency # ... Latest Bitcoin and Cryptocurrency news and trends. We take a look at the key events affecting the blockchain sector and review market movements. Combining both fundamental analysis and technical ...