Swedish central bank acknowledges benefits of cryptocurrencies
(CoinDesk) Sveriges Riksbank, Sweden’s central bank, has published a brief economic commentary on the impact of digital currencies on the retail payments market.Take-up remains limited
“Households make daily payments using cards and cash totalling 8 million in volume and to a total value of over SEK 3 billion. Even if the use of bitcoin in Sweden were to be much larger than the average exchange value of just over SEK 266,000, this is a relatively low value in relation to other types of payment. At present, there only seem to be around 25 swedish companies accepting Bitcoin.”
Risky but innovative
“It can contribute to meeting new payment needs and to making payments cheaper and more secure. Those who choose to use a particular payment service can be expected to do so because it gives them an added value in relation to other payment services. This also applies to virtual currencies, which can for instance make some cross-border payments simpler, faster and cheaper. Another advantage is if the payer does not need to share sensitive information, such as card number or bank account number, with the payee.”
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You say Bitcoin has no intrinsic value? Twenty-two reasons to think again!
Intrinsic Value Defined:
we will use the common Wikipedia entry for the intrinsic theory of
value. This is found at: http://en.wikipedia.org/wiki/Intrinsic_theory_of_value
An intrinsic
theory of value (also called theory of objective value) is any theory
of value in economics which holds that the value of an object, good or
service, is intrinsic or contained in the item itself. Most such
theories look to the process of producing an item, and the costs
involved in that process, as a measure of the item’s intrinsic value.
the properties that make it valuable? Some pundits like Warren Buffett
seem to remain stuck in the belief that only things you can touch, feel,
and see can be intrinsically valuable.
are unique or ground-breaking. These properties did not exist before
bitcoin. Some people would rightly point out that many of these
properties can be duplicated. There is, however, one extremely important
factor that separates bitcoin from any other digital coins on the
horizon: the protective shell created by the network that prevents it
from being hacked or commandeered
Bitcoin intrinsic value properties:
- It transcends nations, politics, religions, cultures and regulations.
These vary from country to country in ways that may seem bizarre to
populations out of its own borders. While one may believe that
governments always have their best interests at heart, it may be wise to
see that knife cuts both ways. Some drugs are banned in certain states
or countries that are allowed in others. Bibles are banned from purchase
is some countries. Religion, custom, dogma, superstitions prevent
various purchases based on man-made borders that continually shift over
time. These policies tend to be created by limited segments of
populations that can be self-serving. If one happens to be included in
the “correct” political party, race, religion, items can be purchased or
outlawed. It’s all opinion.
Is this a moral decision? Many of the same governments think it morally
acceptable to hold their own state-lotteries. The lotteries hold
significantly worse odds and tends to target those in the community that
are the least educated and most susceptible to poverty, alcohol abuse,
and have a generally poor understanding of mathematical probability.
Many have gone on to say that lotteries are simply “a tax on people bad
at math”. Many argue that this is a double standard of governments
which prevents them from taking the moral high ground.
the short term). It can’t be counterfeit. There is a record of who owns
it (by wallet id) and its validity is publicly known. It requires no
central clearing house. With any other currency, one must trust the
government from which it is issued will continue to maintain its value
by not “overprinting” to pay for its own mismanagement. You can send it
globally without having to trust anybody. This is not true with any
state issued country, bank, credit card company, or anybody else.
Volatility and long-term trust is still building, but when one transacts
in bitcoin, nobody gets in-between sender and receiver unless agreed
beforehand. It’s permission-less.
By making wallet IDs public, one can track the flow of money through
other transparent wallets. You cannot do that with any other currency.
You can use this feature to do things like monitor your children’s use.
This can make obsolete entire industries that are built solely on the
fact that money can be hidden, disguised, cheated, etc. These can also
happen to bitcoin, but pressure can be applied by the people to make it
transparent and accountable when needed. Auditors may insist on it for
compliance. The list of possibilities of this intrinsically valuable
feature can scarcely be imagined.
Plans for product layers on top of bitcoin to further its use to become
spendable based on contracts that can be programmed to complete with
built in variables, or be valid to purchase only certain items. Insist
your college bound kid buys books and not beer for example. Or based on
GPS in a cell phone, you could send your kids off shopping and it could
be programmed to be spendable only in certain stores.
Wallets containing the currency can be set to only unlock with more
than one signing key. This will leave hackers and thieves frustrated.
Try doing that with your grandpa’s money. It is an intrinsic piece of
bitcoin technology.
Prepaid credit cards can do some of these functions, but only to
locations and countries that accept credit cards. This list of locations
in countries outside of the US is actually decreasing with the amount
of fraud in the networks. Technically, the only item limiting of bitcoin
is the merchant’s acceptance of it. Given the natural law of least
resistance, these limitations could erode as more merchants around the
world realize the potential savings. The network effect will continue to
work its magic.
Absolute clarity of events and their corresponding order is available
in the block chain. Proof of ownership and purchase can be established
without a third party. The trusted and reliable distributed ledger
cannot reasonably be altered (barring a massive scale network attack
which becomes less likely as the network grows).
is nobody’s debt. Paying with bitcoin isn’t a “promise to pay”. It is
payment in full. This could potentially reduces fraud related expenses
on massive scale. http://www.statisticbrain.com/credit-card-fraud-statistics/ There
is no need for a merchant to get bank information or any other kind of
personal information that can be later used in identity theft.
It can defeat government issued capital controls. The same governments
try to hold their own citizens “hostage” monetarily by outlawing
movement of money outside its own borders. Ask any citizen from any
country ravaged by hyperinflation if this is important. Could it be
possible that it might ever become important
in the USA? If you can foresee the day people will be clamoring to get
out of the US dollar, where do you think they are going to go? Ask
Argentina.
As the money exists on the global ledger, all you need is the key. This
can be memorized, or written on any piece of paper – even confined
inside a microdot
the size of the period that ends this sentence. Some old time gold bugs
say you can’t bribe the border guards with bitcoin like you can gold. In
the future, border guards will have cellphones and internet access too.
We aren’t living in the 1960s Vietnam or before any longer.
The people in the USA may think this unimportant in their bubble view
of the world, but is this also true of the 150 or so currencies and countries with terrible track records?
Which other currency enjoys this property? Will enough of the world
outside of the US believe it to be so? Is it hard to imagine the
properties of bitcoin being intrinsically valued by populations
subjected to terrible economic policies? It only takes a billion people
in India fed up with corruption to want an escape mechanism out of the
control of the system. At that point, they won’t give a hoot about what
some American pundit said on “bubble vision” about intrinsic value.
If the citizens stand up united and demand a transparent government,
they can use bitcoin to follow the money in the same way governments use
powers at their disposal for surveillance on their own populations. In
today’s world money corrupts. In tomorrow’s maybe it will become
vice-versa. Let’s see if 86% of the world agrees that any tool that makes less opportunity for corruption is valuable.
You can program it to settle contracts based on certain events such as
date, proof of ownership, death, or a host of other factors that can be
validated programmatically without a third party to validate if the
conditions were met. It can be used as a record keeping asset tag, and
proof of ownership. Ownership of the private key to the bitcoin is by
definition, the owner. In addition, it can be the source record of
ownership for property title, copyrights, and intellectual property that
transcends borders and locally interpreted laws. In effect, the
records become the de-facto “single source of truth”. The currency
itself is globally accessible proof of ownership. Can these functions
and properties be reasonably argued to be valuable beyond the currency
itself?
Paying for items in a global world requires bank accounts. Bank
accounts are legal properties that can only be established with those of
legal age (18 in most locations). There is no minimum age requirement
to pay for items globally using bitcoin. How many people under 18 have
cell phones, AND need to spend money with no credit card. Smart
businesses have started to recognize this intrinsically valuable
potential.
The main attributes of money are often quoted these days, but one
attribute is rarely mentioned. Money has become surveillance. As people
continue to learn of the horrors of the NSA and other government efforts
to spy on every aspect of their lives, it only takes one person drunk
with power to make all the well-intention sounding policies reverse into
shocking horror. One government required Jews to register themselves
for easy identification, which was then used to “dispose” of them.
national origin, political party, age, place of work, address, and much
more can be determined by how and where one spends their money. To those
who think they have nothing to worry about because they are not doing
anything wrong, might ask themselves, what did the Jews have to fear
during the time they were self-registering? They also were not
(generally) doing anything wrong. That’s only one example in a history
littered with them. Is the ability to obscure one’s spending habits
intrinsically valuable? Is it possible to imagine how much of the
population of the world would think it is?
If one were to transfer value between large companies or nations, much
of the world has discovered bitcoin to be a very efficient payment
network to do this. If bitcoin was thought of as envelopes to be stuffed
with dollars or other currencies for transport, only the size of the
envelope itself that contains the dollars inside would be the limiting
factor. To increase the ability and usefulness of this feature, the
envelopes represented in bitcoin price will have to inflate enormously
to take on that load. The Federal Reserve and former Vice Presidents have caught on. So has smart Venture Capitalist firms that have a knack for being one step ahead of everybody else.
are being built up around the new currency (in use, if not government
recognition). Gold towns sprang up into eco-systems but crashed when
the gold veins ran dry. We know exactly how deep the bitcoin well can go
and the rate at which it will be found. What other modern day
ecosystems are being built because of the intrinsic values of a
currency?
for centuries. Bitcoin has the possibility to change the paradigm
completely. These banks will likely find ways to maintain their power
and wealth and there is nothing preventing them from moving into digital
currencies to maintain it. However, which other currency has the
possibility to change the dynamic? Many in the world will likely place
much value in the paradigm shift that is possible. When was the last
time a monetary unit threatened to rewrite the rules from the ground up?
from a whistleblower from the World Bank reports that all networked
banking infrastructure throughout the entire world can be traced back to
12 people who make decisions at the privately controlled US Federal
Reserve bank. Consensus driven, public records, and democratization of
money made possible by bitcoin, might change the rules.
the poverty riddled villages with no access to banking were able to
lift themselves out of poverty with simple abilities to pay suppliers
and start businesses. With the cross border scale and usability of
bitcoin, imagine the same results x 1,000. Are there any national
currencies up to this task?
Muggers of the future will be at a loss for what to do with the bitcoin
they can’t take from your wallet or purse. That money will be no good
to them without the private keys to spend it. There likely will no
longer be credit cards there was well. Could robbery itself become
obsolete? Hackers will soon have a difficult time stealing money from
multi-signature wallets.
Because of all of the reasons stated above, it might as well be called
the currency of freedom. Dictators will hate it. Totalitarian
governments will hate it in proportion equal to the amount of corruption the government enjoys.
The worst countries for freedom believe that money exist primarily to
serve the country and personal ownership of it is just an illusion they
can confiscate at will. Banks technically own it as soon it’s deposited.
Through court order, government taxation, or inflation, they always get
it back. Bitcoin offers some protection. We become our own bank.
Others might be open to the suggestion that if just ONE of these
factors is agreeable to most reasonable people, the description used by
Wikipedia might also be applied to bitcoin. A year from now, there
might be another list compiled that is just as long as this one – of
things that can’t possibly be imagined today.
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10 things you should know about Bitcoin and digital currencies
cryptocurrencies, but not all of them are.
to reach a broader demographic than Bitcoin did. As of March, more than 65 billion Dogecoins have been mined, and the production schedule of this
cryptocurrency is in production faster than most.
regulations on digital currencies, but it often warns about investment schemes and fraud. The Financial Crimes Enforcement Network (FinCEN), an agency under the Department of Treasury, took initiative and published virtual currency guidelines in 2013. Many countries are still deciding how they will tax virtual currencies. The IRS is specifically concerned with virtual currencies being used for unreported income.
outline the pros and cons of Bitcoin. The hearing ended up providing a
financial boost for the currency, because US officials talked about it as a
legitimate source of money, as opposed to only discussing its role in illegal
activities.
Wallet for Android runs on your phone or tablet. To store the Bitcoins, you have three options:
doing your own backups.
are responsible for them. Mobile apps allow you to scan a QR code or tap to
pay.
anything happens on their side or it gets hacked, you run the risk of losing
the Bitcoins, so extra backups and secure passwords are suggested.
is, Bitcoins can be stolen in huge quantities, just like money, and with no
centralized bank, there’s no way to recoup the losses. There are several types of Bitcoin ATMs, which exchange Bitcoins for flat currencies. Most machines are expensive and rare, ranging from $5,000 to $2,000. Skyhook,
a Portland, Oregon-based company, demoed a $1,000, machine at a conference this month. It is the first portable, open source ATM.
specific software, which is free and open source. The most popular is GUIMiner, which searches for the special number combination to unlock a transaction. The more powerful your PC is, the faster you can mine. In the early days, it was easy to find Bitcoins, and some people found hundreds of thousands of dollars worth of the cryptocurrency using their computers. Now, though, more expensive hardware is required to find them. Each Bitcoin blockchain is 25 Bitcoin addresses, so it takes a lot of time to find them on your own. The exact amount of time ranges depending on the hardware power, but mining all day could drive your energy bill up and only mine a tiny fraction of a Bitcoin — it may take days to mine enough to purchase anything.
security issues remain, and that will continue to be a problem. In 2013, Mt. Gox, a Japanese exchange, handled 70% of all Bitcoin transactions, but they lost some 750,000 Bitcoins in February 2014 and filed for bankruptcy, and nothing has been proven in the case. Since it’s universal, it’s useful for international transactions, and could be helpful for transactions in developing countries.
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On the origins of money: Darwin and the evolution of cryptocurrency
(CoinDesk) Charles Darwin first published his theory of natural selection in his book On the Origin of Species
in 1859. The result of over 30 years of research, Darwin delivered to
the world a new understanding of how modern species came to be, evolving
over generations.
The son of a wealthy English family, Darwin was not a man in need of money. Nonetheless, for On the Origin of Species and his other publications, Darwin received royalties that were most likely paid in British Sterling.
Still in existence, the British Pound has origins dating back as far as 750
A.D. making it the world’s longest-surviving active currency. At the
time, I wonder if Darwin recognized that the very currency by which he
was being compensated would one day be subject to his very theory of
natural selection?
It is a realization that would become far more evident 150 years later with the advent of blockchain technology.
For the fortunate minority throughout history, as with Darwin, a given
currency is not subject to question. It serves as the accepted means of
exchange and is recognized as such from the time one is old enough to
understand value.
In this way, currencies are not understood as subject to the laws of natural selection. For the less fortunate
majority throughout history, and likely for more fortunate generations
to come, this may not be the case.
Natural Selection
Natural Selection can be defined as the process by which specific traits become
more or less common in a population over time and it serves as the
foundation for the theory of evolution. It is the result of the relative
success or failure of these traits competing in a given environment.
Put more simply, it embodies the concept of “survival of the fittest”.
Darwin famously defended his theory by describing the various species of
finches observed on the Galapagos Islands.
He noted 13 separate species of finch within the ecosystem, each with its
own unique food supply. The key differentiating trait between each
species was the unique structure and size of beak. Darwin argued that
each specie of finch had evolved as the result of varied food supply,
where each beak was the best suited to each specific food source
available within their environment.
The law of natural selection is most often observed in nature but can also be applied outside of this
realm. Corporations are forced to continuously compete and evolve to
remain relevant and profitable. Those corporations with the necessary
traits such as the ability to innovate, adapt and comply with
regulations succeed, while many more go extinct.
Whatever the environment may be, specific traits prove advantageous while others do
not. It is in understanding which traits provide advantage and which do
not that once can better understand how the fittest survived, and
furthermore predict who the fittest will be in the future.
The Traditional Traits of Money
Before we can understand how natural selection applies to currencies, we must
first define the traditional traits that have been used to characterize
them. For the purposes of keeping in line with the language of Darwin,
we will refer to what is traditionally stated as a property of money as a trait.
Table 1.0 displays the commonly accepted traits that characterize money as well as an
estimated rating as to the ability of each specific medium, in this case
gold and fiat currencies, to fulfil these traits within the modern
environment on a scale of High, Medium, and Low.
While the ratings of these traits are subject to debate, the table below provides a relatively accurate representation.
Gold has long served as an established means of exchange as well as a
commodity. Gold coins were adopted by King Croesus around 550 BC. King
Croesus was no fool. He selected gold as it fulfilled many of the
necessary traits to act as money.
Relative to the era, it was highly fungible, non-consumable, durable and scarce. These traits were
strong enough to become a leading form of money simply because there was
nothing else around that fulfilled these requirements as well.
But why did the king not select stones or feathers? The answer is that
these forms failed to be fungible, highly divisible, secure, and scarce.
The fact that gold has remained a valued commodity for thousands of years speaks to the
importance of these specific traits. In fact, the combination of traits
possessed by gold and other precious metals eventually provided the
foundation for the next evolution in money, fiat currency.
In money’s next evolution of specie, fiat currency fulfilled several
critical traits to an even greater degree than gold. Paper was more
portable and could be more easily transacted. That is not to say it was
entirely superior. In many cases fiat currencies lacked durability, and
as we will see, would eventually become less and less scarce. In fact,
many fiat currencies have failed due to inflation; a inevitable result
of the inability of the currency to remain scarce.
As a specie of currency, fiat currencies were not perfect but nonetheless
flourished in the last millennia. But how can this be? Are the benefits
of better fungibility and transportability really that significant as to
reign as the dominant specie of currency for so long?
In reality, much of the credit for their rise, survival and success is due to the
existence of another less recognized trait. The trait of centralized
sovereignty lead to the creation and issuance of hundreds of new forms
of money. Table 2.0 displays the degree to which gold and fiat
currencies fulfill the traditionally recognized traits of money in
addition to the newly recognized trait of sovereignty.
As of May 2014, there were 193 recognized fiat currencies in circulation regularly competing in global markets.
Each of these currencies belong to the same specie, fiat. It is important to
recognize that dollars, euros and yen were not mined or extracted from
the environment. These are man-made; designed and issued by centralized
authorities.
For centuries, the specie of fiat currency has thrived as a result of this fact and that these forms of money could be
used to pay taxes. In the course of its existence fiat currency has
evolved from a hybrid, by which the currency has been backed by a valued
commodity such as gold, to a self-standing form of money with no
physical backing.
During this period of time, the most notable trait to have changed for the world’s most widely recognized fiat
standard, the US dollar, has been scarcity. Once backed by gold, the
dollar was severed from the commodity in 1971 and as a result its
scarcity is no longer a trait that the specie of fiat currency fulfills.
In fact, to the surprise of many, there no longer remains a single fiat
currency in existence that is backed by gold. This evolution, or what
could possibly be regarded as de-evolution, of fiat currency as a specie
may have significant implications on its ability to compete and survive
in an environment with dynamically changing conditions.
Cryptocurrency and the New Traits of Money
The invention of the block chain has given rise to a new specie of currency, that of cryptocurrency.
The arrival of cryptographic-based currencies has enabled key new traits
previously not possible with traditional forms of money. Furthermore,
the realization of such traits will likely have a dramatic impact on the
environment in which these currencies compete.
Table 3.0 now includes the specie of cryptocurrency when rated against the
traditional and newly realized traits of money. The two newly-realized
traits include the following:
- Decentralized:
Defined as the delegation of power from a central authority to regional
and local authorities. With regards to block chain-based
cryptocurrencies decentralization implies a trust-less and distributed
network. This trait is a dramatically new innovation as a direct result
of the invention of the blockchain and was impossible with any other
prior form of money. - Smart (Programmable): The
trait of smart currency indicates the capability to fulfill a growing
array of functions still yet to be determined. Existing innovations in
the cryptocurrency space foreshadow the potential that currencies could
be designed as such to not only act as currencies but represent other
forms of value as well.
Survival and Extinction
Extinction can most simply be described as the failure of a specie to compete in
an environment to such at a degree that it eventually ceases to exist.
The inability to compete itself may be the result of two primary causes;
increased competition from superior species or a dramatic change in
environment.
For the dinosaurs, particularly land-based species,
the traits of size and strength were essential to their rise to
prominence. Although these traits enabled them to thrive for centuries
they did not allow them to compete as a specie forever.
The advantages they enjoyed at the time also meant that they required large
consistent amounts resources, most particularly food and oxygen. As a
result, at the end of the Cretaceous Period many specie were unable to
survive what is widely believed to have been the arrival of a
earth-shaking comet known as the K-T Event.
Evidence suggests that a large comet impacted earth and darkened the sky with dust and ash.
The blocking of the sun starved sun-dependent plant life and resulted in
a sharp reduction to the supply of oxygen.
The Journal of Geophysical Research-Biogeosciences estimates that this event killed off
75% of species. The traits that had once helped dinosaurs flourish now
proved to be the traits that left them susceptible to extinction.
Meanwhile, studies show that the freshwater organisms of the time only lost 10% of
their species. The commonly accepted explanation is that the freshwater
species were already conditioned to endure annual winter freezes where
their oxygen supplies were diminished.
Their relatively limited dependence on oxygen insulated them from the effects of changes to their
environment allowing them to survive. Dramatic changes to the
conditions brought on by the K-T Event changed the paradigm and a new
combination of traits became necessary to ensure competitiveness and
survival. Meanwhile, the majority of land-based species disappeared
forever, their greatest strengths having become their greatest weaknesses.
Currency, like the dinosaurs, has already shown us that it is not always the immediately dominant specie that will survive
the test of time. In an era that has seen hundreds of highly evolved
fiat currencies go extinct, gold endures.
Charles Darwin’s theory of natural selection originated to provide an evidence based explanation
of the past. We now leverage this theory to look forward and understand
its implications on the future of currency. Given the ever-changing
conditions of the future, will gold and fiat currencies continue to compete or go the way of the dinosaur?
The New Paradigm – Currency Competition
According to a study of 775 fiat currencies by DollarDaze.org the average life expectancy of a fiat currency is 27 years. The study
also indicated the most common causes of any given currencies extinction are hyperinflation, monetary reform, war and independence.
With fiat currencies being so susceptible to failure, gold has long served as an alternative as it is more scarce and durable. In terms of scarcity, fiat currencies can be printed and inflated at the will of their authorities.
With regards to durability, the US Federal Reserve
estimates the longest average lifespan of any paper bill is 15 years
($100 bill) with the shortest lifespan being 3.7 years ($50 bill). As a
result, gold has maintained a relatively high value in the era of fiat
currency and remains the primary alternative store of value when faith
in fiat currencies waiver. In this way, these stores of value have
primarily competed based upon only two of the traits of money; scarcity
and durability.
Fiat currencies and commodities now enter a new
paradigm where money can exist that possesses even more dynamic traits.
Gold and fiat currencies are not capable of possessing the newly
inherent traits that would make them decentralized or smart
(programmable).
Cryptocurrency has arrived adding heightened
competition. To date, bitcoin is the most widely recognized
cryptocurrency, but it is not alone. In the 5 years that
cryptocurrencies have existed over 200 have been established and the
list is growing.
Furthermore, the currencies themselves are in a state of hyper-evolution
as they continue to take on a varied array of distinctive traits that
set them apart from one another within their own competitive ecosystem.
Equally as threatening to traditional forms of money, the conditions of the
environment in which currencies compete is in a constant state of
change. Undertones of growing distrust in centralized entities encourage
populations to considered alternatives stores of value.
Sovereignty,
once a trait that was necessary for the survival of a currency, may now
be falling out of favor. Centralized failures such as the US financial
crisis of 2008 or hyper-inflated fiat currencies such as Zimbabwe
dollars or Argentinian pesos compound these sentiments. The most
profound of these conditions is the growing awareness throughout the
world that decentralized trust is possible.
It is interesting to imagine what Charles Darwin would make of the current state of currency.
History would have us believe that the existence and survival of any
entity, be it plant, animal, corporation, or currency is the subject to
the laws of natural selection.
With this understanding, it is hard to imagine Darwin contesting the opinion that cryptocurrency will prove
a competitive force against traditional specie of money.
Ultimately, the real question may not be whether or not Darwin would predict the
survival of cryptocurrency, rather would he be willing exchange those
British Sterling pounds for it?
Author Bio:
Ryan Walker is an independent
consultant and cryptocurrency enthusiast based out of Denver, Colorado.
Here, he joins the dots between Darwin’s theory of evolution, fiat money
and the rise of cryptocurrencies.
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The Rise of Cryptosponsorships
Dogecoin, the Internet meme turned cryptocurrency, has never had trouble gaining publicity. In January the Doge community sponsored the Jamaican bobsled team at the Sochi Olympics, then in March the Dogecoin subreddit sponsored NASCAR driver Josh Wise at Talladega Speedway. It was an idea, it seems, that has spawned a host of imitators.
For those who don’t know, this is an annual road race from France (this year the starting points are Paris in the north and Bordeaux in the south) down through Spain to Marrakesh, Morrocco. The race is only open to students aged 18 to 28, and they may only use Renault 4 cars. The teams have 10 days to make it from start to finish, over a course that includes 1,500 miles of harsh North African desert. Established in 1997 in Rennes, the 4L Trophy is mainly done to provide children with school supplies. This year an estimated 80 tons of school furniture was delivered by 2,648 students representing 1,324 teams from 1,460 colleges. With a market cap of less than $200K at the time of this writing, it is unclear if the KARMA team will be able to raise the funds necessary to participate in the race, With a volume of 50 billion KARMA in existence, it seems that they wish to compete with both doge and Reddcoin as the default tipping currency for the internet, so this could see the value rise as people buy KARMA to help sponsor the team.
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Image courtesy: abc.net.au
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Another athlete being sponsored by crypto is Elsa Hammond who is attempting to row 2,400 miles across the Pacific Ocean from California to Hawaii in the first Great Pacific Race. Consisting of soloists or teams up to four, there are no sails or motors allowed, making this is a grueling test of physical and mental stamina. To help offset the cost ($336,000) Ms. Hammond, the only European contestant in the race, is asking donors for $70 (42 Pounds Sterling) per mile. In exchange Hammond will add your special woman’s name to her boat. She has also secured a sponsorship from Ultracoin whose founder has promised “substantial” amounts of Ultracoin after the completion of the event. With Ultracoin set to peak at 100 million coins the term “substantial” could really be anything, so that will be interesting to watch.
At the time of this writing Ultracoin has a market cap of over $400,000 and sell for roughly $.03 each, so the sponsorship could be significant. This would definitely be a good thing for Hammond since she plans to donate to gender equality charity The Great Initiative, as well as the Plastic Oceans Foundation.
VERTCOIN
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Top 5 national altcoins available today!
of the gate and make an impression on the world. However, some digital
currencies are not intended to be used across the globe. Instead, they
are implemented within a country’s economy in order to help boost the
nation’s finances.
the concept of bitcoin, and use it locally. In most cases, national
coins are not allowed to be used outside of the country, as their is
fear that the value of such coins will fall. This alternative to using
money keeps the government separate from cash, all the while putting
power in the hands of the people.
National Altcoins
5. Swiftcoin
most national altcoins, swiftcoin can not be mined off of a
computer. Instead, swiftcoins are purchased with cash or bitcoin. They
can also be earned by selling goods and services using Oswift.com.
Uruguay, and allows locals to set up accounts, as well as buy and sell
digital coins like bitcoin and swiftcoin for cash or precious metals.
4. Isracoin
is already one of the world’s most successful national altcoins. The
digital currency allowed for public mining on March 26th, and was
airdropped to citizens on May 6th.
four phase process to get more people on board with the digital
currency. This well thought out plan will help circulate and introduce
locals to a new way of spending money.
that can also be found in bitcoin, such as low interest on deposits and
low cost transaction fees. With Isracoin, the goal is to disrupt the
current banking system of Israel.
3. Spaincoin
is ideal for Spaniards as it allows them to break free from the
shackles of the government. It was launched on March 12th, just a few
days before Isracoin.
to have its own national digital currency, with a population of over 46
million people. Spain’s economy has been in a rough spot for the past
couple of years, and with Spaincoin, there is a good chance that there
will be brighter days for the country.
of the coin will get 100 SPA each, and then the next 50,000 people will
get 50 SPA each. This will allow for a more balanced distribution.
2. Scotcoin
only allow people a chance to establish a new financial structure, but
also helps Scots gain independence from Britain and the pound.
The new coin works as a plan B to keep order in the economy in case
there is a major collapse with its already existing system.
“This
is a one-shot opportunity for Scotland to truly become an international
powerhouse if we can take back the power of our monetary issuance as
credit, as opposed to issued debt with interest from privately owned and
operated banking interests and cartels.”
1. Auroracoin
is based in Iceland, and was sent as a way to save the country’s
economy. The virtual coin is based on litecoin, and was devised
by Baldur Friggjar Odinsson.
real identity, similar to bitcoin creator Satoshi Nakamoto, the coin is a
saving grace to the people of Iceland.
potential of getting the people of Iceland out of what seems like an
endless financial rut. Success can’t truly be determined until
Auroracoin has ample time to make an impact on Iceland.
the coin a big success, citizens are going to have to be patient and not
run off selling their coins for cash at the first chance they get.
world’s economical crisis has put a large cloud over finance, but
digital coins hope to correct this issue. The planet has changed to
where everything is digital. So the obvious solution to correct the
economy could be to make money go digital as well. Whether national
altcoins or bitcoin, crypto currencies are a potential solution that the
world shouldn’t ignore.
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What Dogecoin must do to survive
Tim Swanson is an educator, researcher and the author of ‘Great Wall of Numbers: Business Opportunities and Challenges in China’. Here, he explores the mining systems of dogecoin and litecoin to show how the dogecoin economy can thrive.
(CoinDesk) The key ingredient to the success of any decentralized public ledger, such as bitcoin, is incentivizing its transactional network to simultaneously secure the network from attackers and process transactions.
In the case of bitcoin, and in the case of virtually all other cryptocurrencies, this incentivization process is handled through seigniorage. Every 10 minutes (or 2.5 minutes for litecoin, or one minute for dogecoin) a fixed amount of bitcoins is paid to the labor force called “miners.” These miners are computational systems that perform never-ending mathematical calculations dubbed hashing. This hashing in turn creates security for the network; so as long as more than 50% of the hashrate is maintained by “good” systems, bad actors are prevented from manipulating the ledger.
The other key role these miners also fill is processing and including transactions into packages called blocks. Every 10 minutes, one miner is rewarded for processing these blocks with fixed income. Last month David Evans published a good overview of how this process looks from a labor input and supply output perspective.
For some advocates, one of the purported advantages of cryptocurrencies is that their money supply creation rate is actually deflationary (or contractionary) in the long run – in the short run, bitcoin’s expansionary rate is quite high, with inflation at 11.1% this year alone. That is to say, it is a hardcoded asymptote, tapering off over a known time period. In the case of bitcoin, the wage for the labor force (miners) is split in half roughly every four years (every 210,000 blocks), for approximately the next 100 years – until its money supply is exhausted at a final 21 million bitcoins.
Roughly 12.7 million bitcoins have already been paid to miners. With dogecoin’s 100 billion dogecoins, this process is accelerated, with the mining income dividing in half every two months. While it took about five and a half years for about 60% of bitcoin’s total monetary base to be distributed, as of today 78% of dogecoin’s reward (income) has already been divvied out to its workforce in less than six months.
What now for the workforce?
While this frenetically fast money supply has provided a psychological motivation for early adopters to partake in the dogecoin ecosystem, economic law suggests that this network will probably cease to exist in its current form within the next six months probably through a 51% attack.
The reason is simple: with every block reward halving, also called “halvingday”, the labor force is faced with a 50% pay cut. The contractors (laborers) incapable of profitably providing hashrate at this level can and will leave the work force for greener pastures. This same issue has impacted other altcoins in the past, such as MemoryCoin, which died after nine months due to a combination of factors including diminished block rewards (it attempted to divvy out its entire monetary supply in two years).
Early advocates of dogecoin like to point to outlier events such as the Doge bobsled team or sponsored NASCAR driver at Talladega or even a vaunted tipping economy (which is actually just faucet redistribution) as goal posts for growth and popularity, yet after two halvingdays the actual dogecoin block chain has lost transactional volume each month over the past four months and the labor force has also left for new employment elsewhere.
This is visualized in the following two graphs.
The first chart shows dogecoin’s collective hashrate. The black lines indicate when the “halvingday” or rather “income halvingday” occurred. Because the price level of a dogecoin remained relatively constant during this time frame, there was less incentive for miners to stay and provide labor for the network. If token values increased once again, then there may be incentives in the short-term for laborers to rejoin the network. Yet based on this diagram, roughly 20-30% of the labor force left after each pay cut.
The second chart shows on-chain transactional activity. The first three months are erratic because of how mining pools (similar to lottery pools) paid their workforce (miners). Following the first halving day in February, the network transaction rate fell to roughly 40,000 transactions per day and then leveled off to around 20,000 until 28th April 2014, when another halvingday occurred and the subsequent transactional volume remained relatively flat to negative. It is currently at 12,850 transaction per day, or roughly the same level it was during the first week of its launch five months ago.
Dogecoin’s falling hashrate
Now, some readers may claim that a lot of the transactional volume such as tip services and tip bots are being conducted off-chain and thus the total number of transactions is likely higher. And they would be correct. But that would completely defeat the purpose of having a block chain in the first place – a trustless mechanism for bilateral exchange that negates the need for “trust-me” silos (as Austin Hill calls them).
Also, while this topic deserves its own series of articles, there is little literature that suggests that tipping can grow
an economy; it is not a particularly good signaling mechanism or way to grow a developing economy (i.e., “China, you need more tipping activity to grow and prosper”).
However the key issue is this: if the trend continues and the network hashrate continues to fall 20-30% after each halvingday, then within the next two to four months it will be increasingly inexpensive for competing mining pools on other ledgers to conduct a 51% attack on dogecoin’s network, destroying its credibility and utility.
For instance, the chart below is the litecoin hashrate over the past six months. Litecoin is dogecoin’s largest competitor based on its proof of work (PoW) mechanism called scrypt:
One of the reasons the litecoin hashrate is not rising or falling at a constant rate but is instead jumping up and down erratically is that miners as a whole are economically rational actors. When the cost of producing security is more than the reward (block reward income), the labor force turns towards a more profitable process such as another alternative scrypt-based “coin” (note: bitcoin’s hashing method uses SHA256d whereas litecoin and dogecoin use scrypt). The same phenomenon of hashrate jumping up and down occurs with the bitcoin network.
For the sake of simplicity, the litecoin network can be viewed as roughly 200 GH/s versus the dogecoin кошелек network which is roughly 50 GH/s. To conduct a 51% attack on dogecoin today, an entity would need to control roughly 25-26 GH/s which is roughly one eighth the processing power of the litecoin network. The current ‘market cap’ for dogecoin is $35 million, assuming marginal value equals marginal cost, ceteris parebus on paper it could cost $17.5 million in capital and operating expenses to successfully attack the dogecoin network.
The chart above shows both the hashrate of litecoin (in red) and dogecoin with the vertical black lines representing the dogecoin “halvingday.” What this shows is that while dogecoin, for roughly one month in early 2014 was more profitable to mine than litecoin, the halvingday led to an exodus of labor.
If current prices and trends continue, which they may not, in two months the litecoin collective hashrate may hit 240 GH/s and dogecoins hashrate could shrink due to halvingday by another 20% to 40 GH/s. At this rate a successful 51% attack on dogecoin would require just one twelfth of the hashing power of litecoin which at the same prices levels would entail less than $10 million in capital and operating expenses to do.
Will dogecoin survive?
While the development team could theoretically switch its proof of work algorithm (to X11 as used in Dash), the doge community is really faced with six options:
- Merge mine. Namecoin was (and is) an independent block chain, but since block 19,200 about 80-85% of its network hashrate (and block rewards) are tied to bitcoin mining pools through a process called “merged mining.” The new sidechains project from Blockstream is attempting the same process. Charlie Lee, creator of litecoin explained how dogecoin could be “merged mined” with litecoin in a series of posts last month.
- Transaction fees. Both the development team and mining community could agree to float or raise transaction fees on the doge network, similar to what Mike Hearn has been discussing for bitcoin. In practice however, even if approved, very little actual commerce, and therefore transactions, is conducted on the dogecoin network. Thus it is unlikely that this will compensate the large drop in mining income. Similarly, as Gavin Andresen pointed out in Amsterdam this past Friday, increased transaction fees reduces the participation rate. It is important to note the actual transaction costs are much higher than stated – block rewards (token dilution) are usually not factored in.
- Proof of stake. There are several variations of proof of stake. Whereas bitcoin, litecoin, dogecoin and most other cryptocurrency experiments use a “proof of work” mechanism to protect the network from malicious entities, a proof of stake system, such as that used in NXT, will randomly assign a “mining node” called a “forger” – a poor marketing term for sure – to process all the blocks for the next minute. Because all of the other nodes in the network know which miner to trust, this lowers the amount of infrastructure needed to protect the network. In theory this sounds amazing. In practice however, most proof of stake systems end up almost immediately centralized in one manner or the other. Andrew Miller, Andrew Poelstra and Nicolas Houy call it “proof of nothing”. Perhaps Stephen Reed’s version can work in the future.
- Increase in market price. This would incentivize the labor force to continue providing security of the network with the expectation that the tokens they are given in return for their labor will continually appreciate in value. This is betting on hope. Charlie Lee pointed out the uphill task this would require beginning next year when rewards fall to less than one tenth what they are today, stating last month, “At dogecoin block 600,000, only 10,000 coins will be created per block. So in order for dogecoin to keep the same amount of security as today, dogecoin price would need to go up by 25 times. And dogecoin price would need to gain on litecoin by 50 times in order to catch up on litecoin’s security. And assuming everything stays the same, the market cap of dogecoin needs to reach $1.5 billion by January of next year.” For comparison, the ‘market cap’ of dogecoin today is roughly $35 million (note: it is probably not accurate to call it a ‘market cap,’ see Jonathan Levin’s explanation).
- Migration. Dogecoin could also migrate to a platform like Counterparty and become a fully secured altcoin with a dash of proof of transaction thrown in to inflate the coin with ongoing usage that this particular community likes to embrace. It could be fully protected by the bitcoin hashrate with no further need to try to acquire miners to protect it.
- Further experimentation. While it is unlikely the dogecoin has the resources to create secure production code in the shortened time frame, Robert Sams “growthcoin” and Ferdinando Ametrano’s “stablecoin” could provide a mechanism that enables the network to live on in a different manner.
While any or all of these may be tried out, it may be too little, too late. With that said, stranger things have happened. A rising tide lifts all boats and thus in the event that “bitlicense” approved exchanges on Wall Street come online this summer and new capital actually flows into bitcoin and other alternative ledgers, perhaps similar speculative funding will flow into dogecoin as well. However, this is not something that can be known a priori.
I contacted Jackson Palmer, creator of dogecoin for his thoughts on the situation. In his view:
“It is definitely a challenge that dogecoin (and all current-gen crypto currencies) will face in the future. As we discussed recently, it’s kind of a sad reality that people are purely profit driven and these decentralized networks we’ve built are reliant on profit-mongers to power and secure their viability. I’m very concerned about the impact of centralized mining and reliance on transaction fees could hold for bitcoin as it becomes less enticing to mine – really, the network can be held at ransom to attach hefty transaction fees if the mining pools are cherry picking as they create blocks. At the end of the day, I think the viability of cryptocurrency really hinges on a move away from PoW-based mining to something new and innovative that doesn’t just stimulate an arms race and put all the power back into the hands of the fiat-wealthy. I don’t have a solution unfortunately, but hopefully someone will find one and bring about a new generation of digital currencies in the coming five to ten years. That being said, cryptocurrency as a space is very unpredictable so it wouldn’t surprise me at all if dogecoin beats the odds and overcomes these challenges in some weird, wacky way. It’s in the community’s hands, and they’re certainly passionate about seeing it reach the moon, as am I.”
Can this happen to bitcoin?
To be balanced, below is the network hashrate for the Bitcoin network following its first halvingday on November 28, 2012:
The following two months, from December 2012 through January 2013, the hashrate stayed flat and in some weeks even declined. There were three reasons why the network did not decline precipitously like dogecoin:
- Despite the fact that very little real commerce actually takes place on the bitcoin network, there was some amount that did in 2012 and does today (primarily gambling and illicit trading of wares). Thus there was external demand for the tokens beyond miners and tippers.
- The token prices rose creating appreciation expectations. The price rose from $12.35 on 28th November 2012 to $20.41 on 31st January 2012. If miners believe and expect the price to increase in value, they may be willing to operate at a short-term loss.
- The first batch of ASICs from Avalon shipped and arrived to their customers at the very end of January. These provided roughly two to four orders of magnitude per watt in performance than the top competing FPGAs and GPUs. This is equivalent of miners being given sticks of dynamite instead of pick axes to tunnel through mountains.
While more research will be conducted and published in the following months and years before the next bitcoin halvingday (estimated to occur probably before August 2016), the bitcoin network faces a similar existential hurdle, though perhaps less stark once more ASIC processes hit similar node fabrication limitations. That is to say, in the next couple of years there will no longer be performance gains measured in orders of magnitude. They will likely compete on energy costs. Since most participants do not like paying transaction fees, incentivizing miners to stay and provide security will likely be problematic for the same income reduction issues. This scenario will likely be revisited by many others in the coming months and years.
Nothing personal
From a marketing perspective Dogecoin has done more to bring fun and excitement to this sub-segment of digital currencies than most other efforts – remember, USD can also be digitized and encrypted. In turn it brought in a new diverse demographic base to block chain technology, namely women. While some of the more outlandish gimmicks will likely not be enough to on-ramp the necessary token demand which in turn leads to token appreciation, this project has not gone unnoticed.
For instance, two weeks ago I had coffee with a bank manager in the San Francisco financial district. As we were wrapping up he asked me to explain dogecoin. I mentioned that what sets doge apart from the rest was its community was much more open towards self-ridicule, self-parody, less elitist and most importantly, women actually attended meetups.
He quickly surmised, “Oh, so it’s the wingman currency. It’s the friend you bring to the bar who is willing to look goofy to help you out.”
That is probably a fair enough assessment and it will likely need a wingman to survive.
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‘Cryptocurrency’ officially added to Oxford dictionary online
‘cryptocurrency’ to its database. The decision was made as part of a
quarterly update this May that also included the words ‘bikeable’,
‘snacky’ and ‘time suck’.
“A
digital currency in which encryption techniques are used to regulate
the generation of units of currency and verify the transfer of funds,
operating independently of a central bank.”
Usage examples
ODO further provided example sentences that, in part, aim to sum up the
values of those who are interested in the industry and community.
“Decentralized
cryptocurrencies such as bitcoin now provide an outlet for personal
wealth that is beyond restriction and confiscation.”
sentences describe how cryptocurrencies are valued based on supply and
demand, and highlight that the total value of the market is more than
$8bn.
Contemporary language
noted by Angus Stevenson, Head of Dictionary Projects at Oxford
University Press in a 2013 interview with CoinDesk, inclusion in the ODO
“doesn’t make any judgement on whether [the word] is good, bad,
worthwhile or anything else”.
Dictionary is more of a historical cannon that includes words and
definitions that have stood the test of time.
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NXT: Bitcoin rival or ally?
(BitScan) NXT is a relative newcomer to the cryptocurrency scene but in the six months since it was launched it has steadily risen in value and profile, now claiming the fifth spot on the Coin Market Cap table.
At the time of writing, NXT has just surpassed Dogecoin with a market cap comfortably over $30 million.
NXT’s Asset Exchange allows direct P2P trading of digital assets
an innovative new platform unveiled on Monday that enables direct P2P
trading of digital assets. The idea is simple but striking. The Asset
Exchange does for shares in companies and other digital assets what
bitcoin (and other cryptocurrencies, including NXT) do for cash. It’s
not the first entrant to the market, for sure; bitshares.org,
for example, is the NXT Asset Exchange’s direct competitor and was
already up and running before the AE launched. But NXT’s client is an
elegantly simple, easy-to-use platform, and the Exchange functionality
is integrated into the cryptocurrency from the ground up. To look at it
another way, NXT was conceived as the foundations of a digital economy,
whereas bitcoin was originally conceived as, primarily and
predominantly, a currency. Their relative timing and positioning give
them each unique advantages and disadvantages.
NXT vs Bitcoin
‘the next bitcoin’, the rival that will unseat the father and
grandfather of all altcoins. All of these claims have to be taken with
at least a pinch of salt, and very often a truckload. The reality is
that bitcoin is armoured from any such attack by a very powerful force: the network effect.
Put simply, this means that the sheer number of people using and
invested in bitcoin alone makes it very difficult for any contender to
unseat it. The more people join a network – be that a telephone network,
a social network or a currency network such as bitcoin – the more
useful it becomes and so the more it cements its own position. Thus
whatever the pros and cons of bitcoin vs other cryptocurrencies,
whatever advantages they offer in theory, it is extremely unlikely that bitcoin will lose its top spot any time soon.
NXT is built along different lines to bitcoin, both ideologically andpractically. It uses a proof-of-stake system and ‘forging’ rather than
bitcoin’s proof-of-work mining system, for example – something that has
drawn both admiration and controversy. This has various implications for
anything from coin distribution to power consumption and the hardware
needed to participate in the network. Unsurprisingly, dyed-in-the-wool
bitcoin-lovers have expressed doubt about some of NXT’s flagship
features; unsurprisingly, some of NXT’s cheerleaders see these same
features as killer advantages.
bitcoin. In fact, NXT offers features that can and likely will boost
bitcoin’s adoption, as well leveraging bitcoin’s popularity to improve
its own reach.
Ultimately, the world is a big
place and cryptocurrency hasn’t yet been taken up by more than a
fraction of one percent of the population. Like any other area of life,
cryptocurrency enthusiasts have a tendency to be tribalistic. At this
point, though, the real competition isn’t between bitcoin and other
cryptocurrencies. It’s between cryptocurrency and fiat systems. If one
cryptocurrency offers another a leg up and thereby increases the
adoption of both, that’s good for everyone.
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Top 5 businesses that accept Litecoin payments
(CoinReport) Litecoin is the second most valued digital currency on the market, only being bested by bitcoin. However, litecoin is not just a knock-off to the world’s first digital coin. It was intended by its developers to improve on the structure set forth by bitcoin.
The main two differences that separates litecoin from bitcoin:
1) Litecoin processes a block every two and a half minutes, while bitcoin processes a block every 10 minutes.
2) Litecoin will total 84 million coins, unlike bitcoin’s cap of 21 million.
The digital currency continues to catch individuals and business owners by storm, as more businesses are accepting it as a form of payment. CoinReport has compiled a list of the Top 5 businesses that have begun implementing Litecoin into their finances.
Top 5 businesses that welcome Litecoin payments
5. Ellenet
“Crypto currencies are the future, it’s plainly obvious and people need to understand that Bitcoin and other coins are not going away. Without sounding terse, you can’t stop progress.”
digital payments, it hopes to grow even larger. In addition, Ellenet works with digital mining company Petabit Pty. Ltd,
who works on mining both litecoins and bitcoins. The partnership with Petabit will allow Ellenet to get into more digital currency-based ventures.
4. Sean’s Outpost
3. eGifter
2. KnCMiner
“You will find the Litecoin payment method option when you complete an order through the checkout on our website.”
1. Benz and Beamer
“GoCoin makes it extremely easy for us to accommodate new customers looking to
pay with bitcoin and other emerging digital currencies like litecoin.
Their platform secures the coin exchange for cash within minutes,
creating a real win/win for my dealership and my customers.”
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