Blog Archives

Solutions without Historical Templates: Cryptocurrencies and Blockchains

We’re accustomed to three basic templates for system-wide solutions or improvements:

1. an individual “builds a better mousetrap” and starts a company to exploit this competitive advantage;

2. a company invents something that spawns a new industry (the photocopier, the web browser, for example) and/or disrupts existing business models;

3. the central government decrees a strategy or investment, i.e. makes something happen (the Interstate Highway system in the 1950s, the space race to the moon in the 1960s, for example).

I don’t think any of these templates really captures the eventual impact of cryptocurrencies and blockchains, which I define broadly as any decentralized, distributed ledger.

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This South Asian Crypto Exchange Wants To Share Trading Fees With Tokenholders

Singapore based cryptocurrency exchange  BINEX.TRADE recently announced its token generation event for the BEX token. The company is building the first revenue sharing cryptocurrency platform in India and more extensive South East Asia market. The cryptocurrency exchange is planning to create 21 million BEX tokens that enable traders to take a share of the commission profits. An integral part of the token sale is the referral program that aims to benefit more South Asians as the blockchain revolution continues to grow.  (more…)

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Cryptocurrencies Are Under Attack but Interoperability Might Unlock a Synergy for Defense

Cryptocurrencies are under attack but it takes a discerning mind to identify the subtle, covert, and overt attacks against the industry. Cryptocurrencies are an interesting application of blockchain technology. They have shown an impressive ability to facilitate an unprecedented paradigm shift that could transverse the financial, political, and socio-economic landscapes globally. Simply put, blockchain technology and cryptocurrencies have the potential to usher in a new world order.

Cryptocurrencies such as Bitcoin, Ripple, Litecoin, and Monero have shown a potential to displace fiat currencies as a means of exchange, store of value, and as legal tenders. Blockchain such as Ethereum and NEO have shown impressive potential to power a smart-contract economy, eliminate middlemen, and to deliver an unprecedented level of trust in business.

The haters have arrived

Traditional financial institutions, governments, and critics have never hidden their displeasure with cryptocurrency and its potential to change the world. Last year, the SEC ruled that Bitcoin is not a currency, James Dimon of JPMorgan called Bitcoin an outright fraud, and government agencies all over the world started clamoring for increased regulation on the operation of cryptocurrencies.

As 2018 gets underway, the concerted efforts of critics and skeptics have had a combined effort of exerting downward pressure on the price and value of cryptocurrencies worldwide.

NYSE Bitcoin Index Level 2018

In the chart above, Bitcoin (blue) is down by a heart-breaking 40.8% in the year-to-date period. In contrast, Wall Street equities are up – the S&P 500 is up 1.47%, NASDAQ Composite is up 6.39%, and small caps in the Russell 2000 are up 2.28%. (more…)

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WAVES token up over 80% this week, could this be the ethereum killer everyone is talking about?

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According to Coinmarketcap, Waves (WAVES) is the 33rd largest cryptocurrency in regards to its market capitalization almost worth 1 billion at its current price of about $7.60 USD per WAVES token. However, over the past few weeks even with the dip in the cryptocurrency market, this cryptocurrency that was launched to trade sometime in 2016, has exhibited some impressive level of stability considering the fact that most other altcoins experienced a dizzily drop in price.  (more…)

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Is One Reason Why the Status Quo Disdains Bitcoin Is the “Wrong People Are Getting Rich”?

The psychology of money, wealth and speculative manias is endlessly fascinating. Most of what’s written on these subjects focus on the process of building wealth as if it were a quasi-science rather than a psychologically driven process. Only speculative manias attract a psychology-based analysis, usually characterized as some variant of the madness of the herd running off the cliff en masse.

But money and wealth are nothing but more sedate reflections of the same dynamics that drive speculative manias. Much has been written about cognitive biases and thinking fast and slow, but these explorations do not exhaust the psychology underpinning money, wealth and speculative manias.

Few things have unleashed the Monster Id of wealth and money quite like bitcoin and the cryptocurrencies. Compare the speculative manias of the dot-com era (1995 – 2000) and the housing bubble (2002 – 2007) with the crypto-mania: in the first two manias, the status quo embraced the mania as rational and justified: the Internet would continue growing for decades, housing never goes down, etc.

But the status quo has not embraced cryptocurrencies with the same ardor–why? Instead of endless justifications for valuations, the status quo is filled with reports that 97% of all economists view bitcoin as a bubble, and endless articles decrying the bitcoin bubble as a fools game that will deservedly burst, and soon.

Why did the status quo embrace irrationally exuberant bubbles in the 1990s and 2000s, but views the exuberance of cryptocurrencies with disdain? I think this is a fruitful topic to explore, largely because nobody seems to be asking this question.

Here are my suppositions:

1. The status quo reviles cryptocurrencies because the wrong people are getting rich.

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Regulating Cryptocurrencies–and Why It Matters

There’s a great deal of confusion right now about the regulation of cryptocurrencies such as bitcoin. Many observers seem to confuse “regulation” and “banning bitcoin,” as if regulation amounts to outlawing bitcoin.

Further confusing things is the regulation of cryptocurrency exchanges, where cryptocurrencies are bought and sold.

In China, for example, cryptocurrencies are not outlawed, but exchanges were shut down until regulators could get a handle on how to deal with the potential for excesses such as fraud, misrepresentation, etc.

A Wild West free-for-all is conducive to scammers, and so some thoughtful regulation that protects users is to be welcomed.

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My Crazy $17,000 Target for Bitcoin Is Looking Less Crazy

I think we can all agree that bitcoin (BTC) is “interesting.” One of the primary reason that bitcoin (and cryptocurrency in general) is interesting is that nobody knows what will happen going forward.

Unknowns and big swings up and down are characteristics of open markets.It’s impossible to forecast bitcoin’s future price because virtually all the future inputs are unknown.

We’ve lived so long with managed markets that only loft higher that we’ve forgotten that unmanaged markets are volatile and full of unknowns. We’ve forgotten that markets are reflections of all sorts of things, from human emotions to herd behavior to changes in the underlying Mode of Production, i.e. how stuff gets done, made, distributed and paid for.

Last May, when bitcoin was around $580, I distributed a back-of-the-envelope forecast of $17,000 per bitcoin to my subscribers and patrons ($5/month or $50 annually). 

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Why Is Bitcoin a Big Deal?

Why is bitcoin considered such a big deal? Why has it grabbed so much mind-share, and why is it skyrocketing? And why is the cryptocurrency sector going bonkers?

The short answer is that cryptocurrency is the first major innovation in money in 300+ years, back when central banks first emerged in the late 1600s as centralized clearing houses for international payments and sole issuers of national bank notes/currency.

(Those who trace central banking to the Bank of Amsterdam’s founding in 1609 might say it’s the first major innovation in 400 years.)

Why is it an innovation? There are four basic reasons:

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Japan Just Killed the “Bitcoin Will Be Banned” Meme

One of the most durable claims of cryptocurrency skeptics is that “governments will ban bitcoin once it threatens their fiat currency or their control.” Ben Bernanke recently gave voice to this claim as if it was received wisdom.

Sorry, crypto-skeptics: Japan just killed the “bitcoin will be banned” meme.Japan has established itself as the safe haven of all legit cryptocurrencies and cryptocurrency exchanges.

Japan is not just the world’s third largest economy; it is a keystone of the global economy in supply chains, ownership of overseas assets, capital flows and technology. Japan’s embrace of cryptocurrencies suggests the Japanese understand that adoption of crypto and blockchain technology offers whatever nation is firstest with the mostest in legal protection of these technologies will have a powerful competitive advantage.

Many crypto skeptics claim the U.S. can browbeat adopters of bitcoin into banning cryptos via various threats such as limiting access to U.S. banking. Memo to skeptics: Japan is too strategically important for the U.S. to browbeat over something as small in scale as cryptos. Furthermore, Japan is long past the point where it will automatically comply with every self-destructive demand of the American Imperial project.

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Bitcoin Might Not Displace Fiat Currencies Soon but Nothing Comes Close as a Store of Value

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Bitcoin seems to be the proverbial cat with nine lives as it continues to survive the onslaught of governments, regulators and traditional financial institutions. The digital currency lost some ground in the market after negative comments from the CEO of JP Morgan, Jamie Dimon who referred to the digital currency as a “fraud”. Dimon also said that he would sack any staff of his bank that trades in the currency, Yet, Bitcoin didn’t waste time in getting up from the backlash and it appears to be rallying up towards previous highs.

In addition to Dimon’s negativity, China initiated some tough measures against Initial coin Offerings (ICOs) which in turn affected the general cryptocurrency market negatively. Yet, the digital currency market responded in an amazing level of resilience as Bitcoin and Ethereum booked an amazing bounce in the following sessions. This piece looks at two reasons cryptocurrencies are here to stay despite criticism and cynicism from traditional financial institutions.

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Bitcoin, Sour Grapes and the Institutional Herd

If I had a bitcoin for every time some pundit declared bitcoin is a bubble, I’d be a billionaire. There are three problems with opining that bitcoin and cryptocurrencies are bubblicious:

1. Everything is in a bubble now: stocks, bonds, housing, heck, even bat guano is bubblicious. Exactly what insight is being added by yet another guru repeating the BTC is a bubble meme?

2. What’s the value proposition in declaring BTC is in a bubble? Spotting bubbles is like shooting fish in a barrel; the value proposition is in identifying the price/time tipping point at which bubbles pop.

3. Declaring bitcoin is a bubble is starting to sound like sour grapes. Sour grapes defined: those who missed the 10-bagger (never mind the 100-bagger) feel better by dismissing the whole thing as a fad and a bubble, but as BTC continues marching higher, it looks like they missed the boat but are too proud to admit they didn’t grasp the significance of cryptocurrencies and BTC in particular.

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What the Mainstream Doesn’t Get about Bitcoin

I’ve been writing about cryptocurrencies and bitcoin for many years. For example: Could Bitcoin Become a Global Reserve Currency? (November 7, 2013)

I am an interested observer, not an expert. As an observer, it seems to me that the mainstream–media, financial punditry, etc.–as a generality don’t really grasp the dynamics driving bitcoin and the other cryptocurrencies.

What the mainstream does get is speculative frenzy. New technologies tend to spark speculative manias once the adoption rate exceeds the Pareto Distribution’s critical threshold of 4%, and opportunities to buy into the new technology become available to the general public.

Just as radio and the Internet sparked speculative manias in their boost phase, cryptocurrencies have sparked their own speculative frenzy.

Where the mainstream goes wrong is assuming that’s all there is to bitcoin: a speculative mania. The Establishment often dismisses transformative technologies as fads or gimmicks; thus the infamous rejection of photocopy technology as only of interest to a dozen large corporations, personal computers belittled as being of limited utility (storing kitchen recipes), and so on.

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