Table of Contents

Bitcoin Education Guide

Note that contents of this guide are gradually being ported to articles such as Bitcoin and crytocurrency on the Campfire Wiki.

Jump to the Table of Contents Nonsense

There is a lot of information here. It's daunting at first. There is finance, economics, mathematics, and more. The only way to begin the journey is to begin the journey. Pack some water and snacks. Remember that you will only learn through participating. But hopefully this guide helps you along in that process. Let us know where you most need help by emailing crawford.mathew@gmail.com with questions and suggestions. We plan to update this document based partially on the needs of the readers, at least for the foreseeable future.

“Science is the belief in the ignorance of experts.” -Richard Feynman

The Bitcoin world is a strange mix of taking the project very seriously , and not taking the status quo system seriously at all . This results in a uniquely warped cultural portal between the worlds above and below the rabbit hole. That's only natural. Don't freak out, but freak out . The looking glass needs quite a lens.

Stupid Legal Disclaimer : As is a common meme in the Bitcoin community, which generally laughs at the notion that those running the status quo financial system are “the experts”, we must mention that all this is

NOT FINANCIAL ADVICE. DO YOUR OWN RESEARCH.

If you enjoy the content here, and appreciate the time put into compiling it all, please subscribe to the Rounding the Earth substack newsletter and Youtube channel . I am just learning how to better use these tools now, but with the goal of producing content that educates broadly across communities during a time of great transition.

Table of Contents Nonsense

Bitcoin

Digital Ledger Technologies

Cryptocurrency

Web 3.0

Economics (aka Cryptoeconomicon)

Repairing Human Consciousness

Finance and Trading

Social Media (if you dare)

Memes and Humor

Bitcoin

While there is debate over “the first” [cryptocurrency] due to decades of research into digital currencies, Bitcoin is the one that launched a new era and has dominated for the market capitalization of the cryptocurrency space for a decade. That dominance is due to a combination of attributes that qualifies Bitcoin in so many people's minds as the first true cryptocurrency.

Before diving into this large document, understand this: Most everyone can learn the basics of Bitcoin. Also, the depths of Bitcoin go deep like mathematics. Choose your own adventure.

The Basics of Bitcoin

A brief summary of Bitcoin is as follows:

Bitcoin is an open source protocol, peer-to-peer electronic monetary system that employs a distributed network of nodes (miners) to agree on ledger updates and ensure security.

Such a succinct statement needs explaining, much like a deep theorem in mathematics or physics. However, we can start simple and break this down, bit by bit, pun intended.

Our simple summary only tells us so much, so let us examine the key characteristics of Bitcoin that make it so valuable.

  • Scarcity . The software that runs Bitcoin allows for the creation of 21 million Bitcoin. Ever. We talk much more about the economic effects of scarcity later in this document.
  • Decentralized . No one actor controls Bitcoin the way a central bank controls a fiat currency. This makes various attacks on the system (including the corruption of actors) far more difficult.
  • Private . Bitcoin has at times been called anonymous and at other times pseudonymous. The use of Bitcoin need not require the attachment of information about your identity.
  • Simple and Easy . Most people think of new code as necessarily beyond their capabilities. Even technologists can harbor such bias. However, Bitcoin turns out to be simpler and easier to use than most technology. Digital currencies can be transmitted seamlessly and with minimal cost anywhere in the world at very little cost. It does not even require the use of a bank or specialized financial processing system (like credit cards use).
  • Permissionless . Unlike many financial networks, anyone, rich or poor and regardless of credit history, can use Bitcoin.
  • Secure . The Bitcoin network uses a cryptographic algorithm called SHA256 (which may be upgraded further in the future) that has never been hacked, even by massive computing attacks.
  • Fungible . A currency or good is fungible when any one unit of it has the same qualities as any other. A good money is generally highly fungible, and Bitcoin is perfectly so.

We expand greatly on each of these properties throughout this guide, and talk about the aspects of Bitcoin's design that leads to each of these features.

It might be said that the Bitcoin network secures a payment system without the need for legal property rights insofar as “ownership” of Bitcoins depends on holding passwords, not on a central arbiter who controls the network. And in fact, on a coding level, Bitcoin payment systems are shockingly easy to set up! This new technology depends not so much on an immense jungle of complex code, like Microsoft Windows. The brilliance of Bitcoin is in the use of ordinary coding along solid economic principles. This will become clearer the more you learn about Bitcoin.

It may be worth reading the Wikipedia summary of Bitcoin , then taking it with a grain of salt because Wikipedia is a terrible place to learn about controversial topics.

There are a few good introductions to Bitcoin, the content of which overlaps substantially with much of this document.

  • Timestamps
  • Censorship resistant append only data structure that ensures immutability of the ledger .
  • Extends the reach of financial systems beyonds where traditional banks can profitably operate, essentially “banking the poor”.
  • Hires miners in an anonymous role to provide work in the completion of tasks that ensure the operation of the protocol and security of the network.

The Bitcoin White Paper

Here is the paper, written by the anonymous and mysterious Satoshi Nakamoto, that introduced Bitcoin to the world. My personal recommendation is to read it, then come back and read it again when you have learned more. Most Bitcoiners who have been in the investment community for years have read it several times.

The Proof of Work Protocol

As pointed out by numerous Bitcoin proponents such as Nick Szabo and Saifedean Amous, one important aspect of money, historically, is the unforgeable labor that goes into its production. It is not simply that gold is scarce. In fact, it is almost certainly the case that the gold in our solar system is many times in total the amount that has been mined by humans to date. But the finding, mining, and refining of gold ore, not to mention the uneconomical conception of atomic alchemy, is work on which gold's scarcity depends.

Take this as an intuitive introduction to the concept of proof of work that we will expand on in time.

The Prehistory of Bitcoin

Bitcoin was not an overnight development (and still isn't). Finding the right recipe for a digital, non-national non-centralized currency was a decades long project during which a variety of hurdles were discovered and solved. Note that two of the cyberpunks involved in the various phases of development, Hal Finney and Nick Szabo, are often suspected of being the elusive Satoshi Nakamoto.

Graphic source: Bitcoin_to_da_Moon

The 2007/8 mortgage bond collapse accelerated the inflation of the dollar supply dramatically, leading to a greater need for Bitcoin than ever.

Now in 2021, there are even numbers amongst the ranks of the wealthy and in traditional finance warning of upcoming hyperinflation .

The famous economic F.A. Hayek spoke about the need for engineering a new monetary system that could be subtly erected as a way to cut off the power supply of authoritarian government.

The story of mathematician-economist John Nash is also worth understanding. In the 1960s, Nash feared the results of the fiat currency system, and likely the Triffin dilemma in particular, and tried to flee the U.S. for Switzerland. He spent much of the rest of his career studying monetary economics. His work in game theory was awarded the Nobel Prize for Economics. He spent the last 20 years of his life studying and giving talks about his conception of Ideal Money .

A Brief History of Bitcoin

On January 3, 2009 the Bitcoin blockchain sprang to life. The very first block in the blockchain is known as the genesis block in Bitcoin lore. Though a genesis block is the first block of any blockchain.

Wait, So Who Runs Bitcoin?

No one person “runs” Bitcoin. There is an open source code repository on Github where many developers can submit code changes, but is ultimately managed by a handful of people. And then miners choose what code to run when there are disagreements that need to be settled by the market.

For a better and more complete answer, read Jameson Lopp's "Who Controls Bitcoin Core?"

The Antifragility of Bitcoin

Antifragility is the property of some systems described by Nassim Taleb as increasing in capability to thrive “as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures.”

Is Bitcoin Antifragile?

Given that Bitcoin has thrived more and more during the course of its life, we might answer, “yes”. But we might also leave that evaluation to a future time. Regardless, let us examine the reasons for which we might describe Bitcoin as Antifragile.

  • Bitcoin grows stronger in the face of shocks to essentially all other markets because those shocks encourage investors to seek a more stable investment and store of value as a result of each shock.
  • Attacks on Bitcoin have strengthened the network in numerous ways.
    • Hacks on exchanges have taught developers how to better secure Bitcoin in the future (when that Bitcoin would represent vastly more value).

In fact, developers and Bitcoin proponents encourage experimental attacks on the Bitcoin network in order to improve the system. So far this approach tends to be more successful than with disconnected status quo systems that must be improved in isolation. Currently, hackers flit from one honey pot to the next, resulting in hundreds of billions in damage annually , not to mention massive stores of valuable data .

  • Failures of the Bitcoin network might be costly, but solutions built into the system can then prevent future failures (just as with hacks).

Bitcoin Education Resources

This material moved to Bitcoin_Media

Practical Matters

Much of what you want to know is how to simply buy, hold, and sell Bitcoin. Here we go…

How to Buy Bitcoin

There are numerous options for those who want to buy Bitcoin, and each has its own features to consider. Since the technology is progressing rapidly, do not assume that this is an exhaustive list. This is just a way to get you started. Also, it is up to you to research your national and local laws to be certain of the legality of buying Bitcoin or other cryptocurrencies using any of these methods. Also, before you buy Bitcoin, read below about Bitcoin wallets , which are an essential part of the Bitcoin ecosystem's technology.

  • Bitcoin ATMs are a private way to buy Bitcoin, but often charge hefty fees. There are thousands of them all over the United States and in many countries worldwide.
  • You can buy Bitcoin on Bitcoin/cryptocurrency exchanges . These fees manage users very differently, so study up on them and decide what you want in the relationship. The fees range widely from low to medium-low both across and even within exchanges (CoinbasePro fees are lower than Coinbase fees, for instance), so it pays to do your homework.
  • LocalCoinSwap is a popular non-custodial marketplace for Bitcoin and other cryptocurrencies.
  • Hodlhodl.com is a p2p Bitcoin trading platform that does not hold funds.
  • You can “buy” Bitcoin using Paypal , but the fees are higher than most exchange fees and you do not even have control of your Bitcoin to withdraw or spend . In essence, it seems that you are really just buying exposure to a corporation's Bitcoin investment that you can only sell back to that one corporation.

Security is a Personal Responsibility

In the cryptocurrency world, there is no hotline to call that will fix your lost password or reverse a fishing attack. Since holding your own wealth is a personal responsibility, it is important to learn about and keep up with modern security principles.

Bitcoin/Digital/Cryptocurrency Wallets

You cannot have/hold Bitcoin without a Bitcoin wallet. Technically, you can have exposure to Bitcoin through third party investments, but let's not count the chickens in somebody else's incubator.

A digital (or cryptocurrency) wallet is a bit of a misnomer. A regular wallet stores cash, but a digital wallet does not. Digital assets simply exist on a ledger and graph where each node is associated with a public/private key pair necessary to send any fraction of the amount held at that node (according to the ledger) to another node.

In truth, a digital wallet is anything that stores just two pieces of information: the public key (address) and private key (password) associated with that address . That's it. That's all.

You may have read that a cryptocurrency wallet is a program , and many of them are or contain programs, but that's dinosaur-splaining.

Different Types of Wallets

There are a few different types of Bitcoin wallets. Do not worry if this seems confusing. The basic concept of a wallet is the most important thing to understand. Then focus on making a modest first purchase in a secure way in order to get your feet wet. Walking through that process will go hand-in-hand with understanding wallets.

Hot Storage Wallets

A wallet is hot if it is connected to the internet. A hot wallet has the benefit of being more use-ready. But it has the drawback of any security flaws that come with the hardware and internet connection. At the present time, in Bitcoin's growth phase, it is generally considered unwise to keep long term savings in hot storage. Hot storage will primarily be used in the future for high velocity cryptocurrencies or Bitcoin sidechains (one may be the other).

Cold Storage

If a hot wallet is one connected to the internet, cold storage describes bitcoin addresses and keys kept offline.

Paper Wallet

Paper wallets are considered to be the highest form of security, despite the name. These are cold storage, which reduces hacking potential. Also, they don't have to be paper. Metal does just fine.

  • Bitaddress.org is one domain that runs the algorithm that creates public/private keys (paper wallets) that you can print out and use.
  • HODLR Disks (pricey)
  • Video : Intro to Paper Wallets and Cold Storage

Software Wallet

Hardware Wallet

A hardware wallet is a secure hardware device, often similar to a thumb drive, specially designed to store a user's private keys. There are many commercial makers of hardware wallets.

These popular wallets may fit multiple categories above, so we aggregate them here:

  • Armory produces an open-source wallet with cold storage and multi-signature support.

Best Practices in Wallet Security

I will write more later on this topic, but learning by doing is the first best advice. Taking small steps means limiting mistakes. The most important thing to understand is that nobody is in charge of Bitcoin. That means that only you are in charge of your Bitcoin. If you lose your private key (password) and do not have a recovery seed for your wallet, then you have effectively lost your Bitcoin.

It is advisable to practice a seed recovery process.

Bitcoin Banking and Custodial Services

Just as there are wealth management services, there are companies dedicated to holding and keeping safe your Bitcoins. Security may be handled in multiple ways, including multi-signature wallets that keep you safe from having your Bitcoins simply stolen by somebody a custodian (or anybody else, hackers included).

While Bitcoin custodians were already operating, on July 22, 2020, the U.S. Office of the Comptroller of the Currency (OCC) gave clarifying guidance assuring the legality of federally chartered banks providing custody for clients' Bitcoin.

Bitcoin Banks

  • Avanti is the first American Bitcoin and cryptocurrency bank, founded by Caitlin Long and chartered in Wyoming, the one state that took the lead in accepting reasonable banking and financial regulations.

Bitcoin/Cryptocurrency Credit Cards

There are an assortment of credit and debit cards popping up, and they are not uniform in what they offer. Some allow payment via cryptocurrency. Others are standard credit cards that pay cash back in Bitcoin specifically. The latter of these is a new demand that adds buy pressure to the market. It may also be a great way for some people to ease into Bitcoin. I am applying for my first Bitcoin rewards card as of February, 2021.

Bitcoin for Cash Back

Bitcoin Vendor Payment Systems

Since we are on the subject of practicality, plenty of vendors are learning how to take Bitcoin payments. Here are several of the options available to vendors. Note that the authors of this document have not yet participated in the Bitcoin economy as vendors, we cannot give our own reviews. You may find some online if you search about.

Theory of Bitcoin

One important aspect of Bitcoin is that nobody controls Bitcoin. Or, more accurately, control over Bitcoin is decentralized [to a functionally important degree].

Here are some helpful articles:

Here are some articles that get into “the weird” [rabbit holes]:

Questions of Scaling

One challenge Bitcoin faces is in scaling. The Bitcoin network can only process between 3.3 and 7 transactions per second , or around 10,000 to 25,000 per hour. Clearly Bitcoin does not compete with the Visa network on that level. So, how will Bitcoin manage to become the center of the world economy?

The first thing to understand is that a store of value need not be a high velocity transaction system. The first priority of such a system is its security on all the levels we have already discussed.

Bitcoin proponents point out that all other digital transactions can take place on a “second layer” of digital networks designed to be interoperable with the Bitcoin network. This so-called Layer 2 includes the Bitcoin Lightning Network and is likely to incorporate other blockchains as “sidechains” in the future, all of which settle for interoperability and security on the Bitcoin blockchain often enough for excellent settlement security.

Monetary Economics (the basics)

Much of the theory of Bitcoin revolves around a thesis that Bitcoin provides an important upgrade to monetary economics as a superior store of value. In general, the currency that provides the best store of value acts as the world's primary reserve currency.

For anyone thinking they might be “too late” for Bitcoin, understand this: the prospect of Bitcoin's success is a worldwide shift in primary currency. If the world travels through the portal, you go with it. Should that take place, the earlier you stake your piece of the system, the better. And the returns will still be quite juicy .

Here are some helpful resources, articles, and videos:

Here, we explore Bitcoin monetary economics, though we go deeper in the Cryptonomicon of this guide.

Source for image

Why We Need Bitcoin

It is no secret that the world's central banks have been printing money at a faster pace than ever since 2008. Given the power to do so in order to solve short term problems, and the moral hazard that compels those with that power, we should expect central banks to look for problems to solve with money printing— if not create them . We are living in the Age of the Great Monetary War .

However, the "profits" gained (via the Cantillon effects) of creating money come at the expense of those who handle that new money last, or not at all. Those are people whose money is debased only. This adversarial effect creates conflict, both between and within nations. It also destroys incentives to save and invest. Even worse, quantitative easing discourages investment by those unable to tap into the growing leverage of the wealthy investment class destroying much of their participation in the process of contributing to technological generation. Thus the network of civilization begins to erode. When hyperinflation is reached, it falls apart. That point is rapidly approaching. We need hard money to limit or disintegrate the powers of central banks entirely.

Though many people do not fully recognize it, technology has always slowed and wealth creation along with it. Since 2010, there has been almost no economic growth in the world. This is due to a centralized economic system that uses military force to protect IP and shut down cryptography where possible, and the ability to throw money over the top of those who build companies outside of their circles.

One hull of the Dollar Titanic broke in October of 2019 when the repo markets failed.

The oil war that the Saudis set off (with Russia) on March 8, 2020 did not help the situation at all. It is unclear if the move was intended to coincide with the pandemic.

Collateralized Debt Obligations (CDOs)

Collateralized Loan Obligations (CLOs)

MERS

(re)hypothication

Non-inflationary Money Supply

Part of the [Bitcoin] solution to the problems inherent in central banking is to create a money with fixed supply. This eliminates the moral hazard of expanding supply for the purpose of accruing the largesse of Cantillon effects. Satoshi Nakamoto did this by setting the total supply in advance. There will only ever be 21 million Bitcoins.

Why 21,000,000?

That number comes from a few estimated computations. First, the Bitcoin protocol chose to target 10 minutes per block. Second, there are 52,560 10-minute block periods in a single year , or 210,240 10-minute periods in four such years (or 210,384 once we add the leap day). This rounds nicely to 210,000. Finally, Satoshi chose a geometric series of decreasing block rewards using the common ratio ½. This is because,

½ + ¼ + ⅛ + … = 1.

Multiply this series by the nice round number 100, and we get the block reward series:

50 + 25 + 12.5 + … = 100

So, with 210,000 blocks per Bitcoin “epoch”, we get 210,000 x 100 = 21,000,000 Bitcoins.

Reserve Currency Supported by Endless War

We have already mentioned the Triffin dilemma and we will talk about it in more detail in the Cryptoeconomicon section of this guide. But most simply put, the Triffin dilemma describes tensions between the nation whose currency is used as the global reserve and other nations that demand that currency in order to trade internationally with easily trusted currency.

A very serious problem arises when the reserve currency is inflated by the issuer nation, reducing the value of the reserves held by other nations. Such monetary inflation, as is happening quickly in the “QE to infinity and beyond” era, can lead other nations to seek alternatives. For instance, in 2018, Russia dumped its U.S. treasuries in favor of holding more gold as reserves.

Now that the U.S. is rapidly inflating dollar supply, affecting the balance of the petrodollar system in which dollars are used in most international oil trading (and in particular with Middle Eastern oil sellers), there is greater and greater pressure for the U.S. military to satisfy the demands of large scale bond holders such as Saudi Arabia. While many critics pointed to wars in the Middle East as motivated by oil (as in the U.S. would take control of the oil), the trillions of dollars spent may have been partially motivated by a precarious balance of international finance that favored the U.S. (until perhaps the start of endless wars in the Middle East) and would cripple major U.S. interests were the dollar to lose reserve currency status.

If Bitcoin succeeds, it will resolve the Triffin paradox once and for all, and the pressures for endless international war will subside.

Trust Minimization

There is no understanding the economics of Bitcoin without understanding trust minimization.

Until I write more in this section, I defer to this article or Nick Szabo's excellent writing on the topic .

https://medium.com/@colbyserpa/why-classify-code-as-law-trust-minimization-as-tribalism-6ed226b0b212

Store of Value

For the moment, just read this article , toward the end.

The Correct Definition of Technology

Substack article

Before we jump into the topic of technology, let us consider the level importance of the topic. You may already understand the immense power of technology in many levels, but we cannot overstate the importance of a good definition. A bad definition is like tunnel vision or blurry eyesight. It can leave us half-blind to the ways in which technology shapes the world.

What is technology?

Go to Wikipedia for the answer and you get a terrible definition —something like the one you were probably taught during your schooling indoctrination years:

Technology is the sum of techniques, skill, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation. Technology can be the knowledge of…embedded in machines…

To be sure, the Wikipedia answer explores a broad subset of the terrain of technology, pushing visions of academic research and silicon chips. But this terrain falls short. The definition is incomplete. The fundamental quality of technology is entirely missing— perhaps intentionally so ?

In order to understand technology, let us dive into a piece of economic history. Don't worry —we dodge the mathy stuff as it doesn't pertain much to our story ( but study that if you're interested! ). During the mid-twentieth century, one of the chief pursuits of economists was to describe an aggregate growth model , considered by some necessary for the completeness of neoclassical economic theory . In 1956, economists Robert Solow (MIT) and Travor Swan (Australian National University) simultaneously published what has become known as the Solow-Swan growth model . For this achievement and others, Solow received the 1987 Nobel Prize in Economics , though Swan was never acknowledged by the committee. Their model will be the source of our definition of technology.

Source: krugermagazine.com

Let us keep the Solow-Swan model (SSM) as simple as possible. We can certainly build an intuitive understanding of the model without learning how to read differential equations. Simply put, the SSM describes economic output is the result several inputs:

  • Capital : the stuff used in production that can be bought with money.
  • Labor: bodies that do stuff with capital that results in output products/services.
  • Technology: Wizard magic? We'll get to that.

Here are the first basic observations we make:

  1. Capital and labor scale the output linearly. If we double the number of workers and the amount of capital they have to work with, we then double the output of the economy. If we triple those inputs, we triple the output.
  2. We live in a world of exponential rates of wealth and production growth . Who would invest their resources (capital) in production if the output wasn't expected to be larger than the input?! Economic feedback loops result in the multiplication of capital repeatedly, resulting in an exponential output function. (linear in read, exponential in green)

Source: Wikipedia

So, given that labor and capital only result in linear scaling of outputs, and technology is the only other system input, that means that technology is the sole source of exponential growth! In fact, this gives us the best definition of technology—one based implicitly on results, and casts aside our biases of what qualifies as “academic” or “process of silicon machines”.

Technology is** **//anything//** **that grows resources.

So simple. So perfect. This will be a foundation on which we rebuild a lot of the terrible ideas that have led us into the era of The Monetary Wars .

Now, by defining technology implicitly (as opposed to relying on some narrower explicit definition), we might seek to at least describe some areas of technology in order to bring focus to the landscape. Ultimately any of the following might or might not be technology—we only know by evaluating the results of any action!

  • Machines (including computers)
  • Culture! We might even categorize religion here. (I consider culture the most underrated technology.)
  • Education
  • Law
  • Medicine
  • Weapons?
  • Agriculture
  • Business organization
  • Human relations (think international relations)
  • Literature

We'll stop here—not because we cannot think of other good sources of technology, but because those sources are truly limitless. Anything practical or productive you have ever thought—any creative energy—is a source of technology. Technology is all those things that are worth investing ourselves (time, energy, capital…all of it) in doing because by definition they make us better off .

Gresham's Law (and Thier's Law)

Gresham’s Law – ( Aristophanes ) Bad money drives out good [when two currencies are required by law to be accepted in parity].

“I would unironically wager money that this concept was in China prior to Aristophanes.” – Me

Gresham's law is often stated as, “bad money drives out good”. This aphorism does not fully explain itself, however, so we demonstrate with an example:

When a currency exists in a market place, coined in a metal, and a sovereign ruler decides to save money on new coinage by producing a coin decreed by the authority to be equivalent, but made with an inferior metal (a less useful, thus cheaper to purchase metal), then people in the marketplace spend the “bad (inferior) money” first, while hoarding/saving the “good (superior) money” any time they have the option.

Thus, Lord Gresham explained to Queen Elizabeth how coins seemed to have vanished from the marketplace. In the end, we should expect the saved (low velocity) coins to accrue in value over time relative to the spent (high velocity) coins regardless of the decree of values. Such pegs eventually break, as did the bimetallism policy of the U.S.

The notion of Gresham's law can be used to argue in support of the ideas of “ Bitcoin Maximalism ” in the short run and “ hyperbitcoinization ” due to Bitcoin's non-inflationary protocol. Their's law comes into play when the bad money's velocity reaches such a high rate that it undergoes hyperinflation relative to the good money to the point that nobody will even take it as a medium of exchange because they cannot get rid of it fast enough for any profit from the exchange not to tend negative. Thus the bad money simply dies off as a currency.

Here is an interview I gave about Gresham's law and its relationship with Bitcoin in 2019.

Metcalf's Law

Metcalf's law states that the value of a [telecommunications] network is proportional to the square of the number of nodes (users) of the system . The basic relationship comes from the fact that the number of edges of a graph is in proportion to the square of the number of vertices/nodes.

If there are n nodes/vertices, then each one can “shake hands” with n-1 others. Each handshake is counted twice this way (once for each of the two nodes that “shake hands”), so the total number of handshakes (edges) of a graph with n nodes is n(n-1)/2, which grows asymptotically at the rate of the square of the number of nodes: n^2.

There is debate over the degree to which Metcalf's law applies to networks outside of telecommunications networks, where first applied. However, there is good reason to view the law economically, which is to say that it applies best to a monetary network. After all, Metcalf's law is a statement of value . It has been pointed out that the values of Facebook and Tencent obey Metcalf's law as they grow, and that Bitcoin's price trajectory has also .

A particularly salient observation about the application of Metcalf's law to Bitcoin is that the Bitcoin network aligns incentives , game theoretically. Holders of Bitcoin on the network are themselves partial (proportional) owners of the value of the network , so it behooves them to help improve the lives and health of everyone else on the planet—particularly the poor (and those who might at any point be poor)—because every person who elevates to a life with stored wealth increases the value of the Bitcoin network. If the number of long-term wealth holders doubles, the value of each Bitcoin quadruples .

Back in February, John Isige estimated 130 million holders (HODLers) of Bitcoin, worldwide. At maturity, there might be 15 times that many users. This implies a mature value of one Bitcoin (in a logarithmic range of) at $34,000 x 15^2 = $7,650,000. Multiplied by 21 million Bitcoins, this value does approximate a reasonable guess at the future total of “broad money”, which is currently in the ballpark of $100 trillion in value . A deeper analysis could be more revealing, but that's hardly the point of this article.

The current state of the world is one of war: regional wars , forever wars , currency wars , and all manner of other wars . These wars cost the world trillions of dollars in value, not to mention loss of life and wastes of time. These conflicts are at least partially driven by the Triffin dilemma , which would cease to exist upon global Bitcoin adoption. Given the dampening rate of world GDP growth since the engineered mortgage bond crisis , such a reduction of costs might be counted as the greatest technological boost in modern history.

Now, here is what I would like for you to do: Imagine yourself to be a wealthy future Bitcoin holder with three whole Bitcoins worth over $20,000,000. You have a stake in the world, but obviously your own wealth and family matter most to you, so you hope to increase the value of your wealth. In the status quo, such wealth holders, not all of whom are wise enough to understand the damage they do both to others and themselves, invest in attacking others. This can happen through business, society, taxation that supports largely unnecessary militaries, and in seemingly innocuous ways like suboptimal zoning laws. A lot of people who aren't even sociopathic by nature go that route largely due to a misunderstanding of economic network effects. Now, let's pass through the Bitcoin portal to the other side…

Not so much in the networked Bitcoin world where Metcalf's law has become part of the standard economics curriculum. You understand that, at that moment, only a quarter of the people on planet Earth have long term wealth holdings [in the form of Bitcoin], so you look for some way to spend some of your money in such a way (education, medicine, pollution reduction technology, or any technology ) so as to improve the wealth producing and retaining abilities of others who would then join the network. Because every time the number of people with wealth doubles, the value of your remaining Bitcoin quadruples. Perhaps you will spend some of your stack helping the lives of others.

And at the very least, you're less likely to spend it attacking others.

In case you're wondering—yes, Metcalf's law is certainly at work in today's currencies. However, the effects are dampened or reversed by the costs and tensions associated with the Triffin dilemma.

Bitcoin Mining

Bitcoin miners participate in a mathematical game in order to earn the right to write the next block in the blockchain, updating the Bitcoin ledger. In some sense, miners provide the record keeping service—storing and updating the digital ledger. This lottery process takes around 10 minutes per block (but can take longer or shorter amounts of time).

Miners want to generate blocks (and thus earn Bitcoin) as efficiently as possible. This sets up a competition by which miners are constantly researching how to use energy in the most efficient possible ways. Such competition has already resulted in numerous technological breakthroughs and resulted in greater efficiency in the use of electricity.

One advancement in Bitcoin mining came in the form of application-specific hardware (ASICs) that eschew unnecessary actions/computations that waste a computer chip's time and lifespan. The adoption of ASICs dramatically improved the efficiency of mining, giving a short-term monopolistic advantage to those who employed the ASICs, and driving PC home miners out of the business. While some people complain that this limits mining to specialized companies, that is usually the way of most forms of production and was surely inevitable.

Mining Trivia:

  • The first block in the Bitcoin blockchain, also known as the genesis block , was mined on January 3, 2009 . While the usual time between blocks is around 10 minutes, the timestamp for the second block is six days later.
  • Most all Bitcoin mining is now performed by specialized computer chips called ASICs.
  • Every 2,016 blocks (roughly two weeks at ten minutes per block), the “difficulty level” is adjusted based on the amount of hashing performed mining recent blocks in order to keep the expected time per block close to 10 minutes.
  • Block Reward schedule and halvening countdown

Proof of Work

Historically, money has veered toward items of definitive scarcity. Gold is in particular hard to find, mine, and refine. Other money such as rai stones were extremely hard to come by. The effort it takes to generate these resources limits cannot be counterfeited, or the money fails (as did the rai stones, though the alchemists failed with gold). Thus, as the theory goes, money itself is proof of work accomplished, hence the proof of work (PoW) design of the Bitcoin mining algorithm that basically functions as a lottery over intervals of approximately 10 minutes, with miners winning the block reward lottery with probability equivalent to the proportion of the total work accomplished (the number of hashes performed by the equipment of each miner is like the number of lottery tickets received by each miner).

There is some controversy over using substantial supplies of electricity to generate Bitcoin due to associated externalities. As such, some developers propose various other algorithms for cryptocurrency mining. Among them are,

  • Proof of Authority (PoA) explained here is based on the reputation of elected representatives who participate in a blockchain.
  • Proof of Space and Time (PoST) ( wikipedia )
  • Stratum V1 and Stratum V2 are proposed mining protocols that aim at boosting mining decentralization.
  • Hybrids such as between PoW and PoS are being studied.

Time will tell if these other algorithms forge something more fundamental than energy expended in the creation of the money.

We delve further into PoW in future sections.

The Declining Block Reward Scheme

The reward a miner receives for winning the lottery allowing them to write the next block on the blockchain is known as the block reward . That miner also receives the sum total of all transaction fees paid for the transactions recorded in that block. The Bitcoin protocol runs a declining block reward scheme that halves the number of Bitcoin allocated for each block reward approximately every four years. The first block rewards were 50 BTC. After three “halvenings”, that reward now stands at 6.25 BTC in 2021.

See also

Mining Statistics and Facts

  • Charts.bitcoin.com Global has rate
  • Several nations have particularly embraced Bitcoin mining as an industry
    • June 29, 2020 ( amun blog ) The BTC mining industry is becoming increasingly tied to geopolitics, resulting in hashpower dominance leaving China.

Mining Companies

Don't expect me to go deep making a list, but I wanted somewhere to document a few.

Smart Contracts

A contract frameworks cooperation through terms and conditions of a partnership or agreement. Good contracts are written in plain and functional language, easily interpreted by all parties, including arbitrators (national-legal or otherwise). As such, a good contract seems on face like something that can and should be executed as programmatically as possible! Blockchain has ushered in such a reality in the form of “smart contracts”.

There is currently substantial debate as to how the world of smart contracts will truly operate in the future. Many Bitcoin proponents believe it is safer and more desirable for smart contracts to run on layer 2 of the Bitcoin network. However, smart contracts are being widely experimented with in the world of alt coins, and in particular Ethereum. At the very least, alt coins provide a playground for sandboxing with smart contracts. It might even be that most smart contracts live outside of the immediate Bitcoin network on sidechains in the future. Much is still up in the air.

Smart Contract Educational Resources

Bitcoin stands as a challenge to the national fiat currencies, particularly the dollar, that dominate global economics. So, it is only natural to consider the many financial twists and turns that the development of Bitcoin has taken and may take in the future. Some nations have banned Bitcoin, or tried to. These bans largely resulted in Bootleggers and Baptists games played out as per usual.

The Lightning Network

Learning the Lightning Network

Participating in the Lightning Network

  • Breez is a lightning network payment app

Bitcoin Statistics and Analytics

There is a lot to learn about the Bitcoin network and it takes time for the lessons to sink in to the point that it is clear what statistics are important, and why. We will try to expand this document in ways that clarify. In the meantime, we will post some resources here.

Bitcoin Price Analytics

A Lesson in Remaining Skeptical

There are sites like this that try to convince you that they know how to analyze price, but give you no reason to believe them. If you're not learning to a point of understanding, you're probably being manipulated. My personal favorite models do not give numbers close to theirs, but I take all that with a grain of salt. Ultimately, price is decided by markets. I may or may not get around to price modeling later in this educational guide .

Critiques of Bitcoin

There are many critiques of Bitcoin, from many angles. The quality of these critiques varies highly. There are some real critiques and obstacles to overcome. In fact, nobody can say for sure whether the Bitcoin protocol will change in the future (it almost certainly will improve to overcome some hurdles). But many of the critiques are terrible and easily answered once you learn more about Bitcoin.

Whether or not you want for Bitcoin to succeed, learning about these critiques means learning about money, mathematics, and computing—perhaps enough to help solve the problems at the core of the critiques. It may also be important to you to learn both sides of each critique in order to either know how far you want to go with investment in Bitcoin or other cryptocurrencies, not to mention evangelize “the money of the internet” to friends and foes alike. Here is a list of common criticisms of Bitcoin . Most of them are “Points Refuted A Thousand Times” (PRATTs). It is better to have a few links than to waste your time on people throwing them at you. We will eventually cover them all here, along with the real challenges Bitcoin faces in its ascendancy to monetary supremacy.

  1. The Carbon Footprint/Waste Argument: Bitcoin uses massive amounts of electricity in order to secure the network. As the energy consumption grows, Bitcoin's pollution will threaten the world!

This argument is usually made with a hand wave suggesting a cost-benefit analysis to back the argument, so most people only know that they saw somebody make the argument who seemed capable [to them], which is to say they haven't bothered to do the real work toward understanding the issue. However, in 2018, a couple of researchers did publish this analysis of the energy and carbon emissions costs of Bitcoin mining . The analysis is just good enough to confirm biases, but as Nic Carter points out , this “best analysis so far” comes woefully short of making a solid case.

The first thing to understand about Bitcoin energy usage is that the Bitcoin network is itself the answer to an extremely important optimization problem, namely,

What is the least amount of resources that can be purposed in the securitization of stored wealth?

Perhaps we will one day live in a post-scarcity world without need for storage of wealth. That day is not today.

The current costs of today's monetary system include,

  • A whopping 23% of the entire global workforce runs financial/banking systems. If most of those jobs can be automated in the ascendance of Bitcoin, we can stop wasting a lot of global talent that can be repurposed in all kinds of ways, including the development of more efficient energy systems and ecology management, just to name a couple.
  • All the resources used to run banks, including online banking and transaction systems. If you do not realize this system consumes substantially more electricity, not to mention many other resources, than does the Bitcoin network, it is time to rethink your understanding of the resources used in the status quo system.
  • The larger part of the U.S. military, most of which is unnecessary to protect our borders (you think somebody wants to drop boats of men on the beaches of Florida? Maybe Texas? Even the number of guns in California would intimidate most of the world's militaries, almost none of which have serious naval capability including transport capacity.) is devoted to protecting the world economic order, including the dollar (petrodollar) as the reserve currency of choice.

Meanwhile, Bitcoin mining is highly competitive. Outside of bull runs, Bitcoin prices often fall to levels at which mining is unprofitable at commercial energy prices. Thus, most mining is performed by large mining operations, with economies of scale, that compete for the world's least expensive energy.

Facts About Energy Used to Mine Bitcoin:

  • Hydrothermal energy, such as that produced by the massive Three Gorges Dam, comprises a significant proportion of the energy used to mine Bitcoin. This is often energy that would be (too) costly to connect to a grid or would suffer line loss getting to consumers. Miners often dodge the need for any grid infrastructure, locating next to production sources to use the energy on site bringing electricity costs to under 3 cents per KWhr (sometimes far less).
  • Most Bitcoins are mined using renewable energy.
  • Even when Bitcoin is mined with nonrenewable energy, it is often energy that would have been wasted, like small-chain carbon gases burned off at (oil) drilling/fracking sites. Stranded energy might as well be made productive, and the reality of line loss means that electricity cannot be transported beyond an effective 500 mile range resulting in substantial amounts of wasted, stranded energy. Why not use it to mine?
  • Bitcoin miners often seek out outdated, less efficient energy generation assets , and gives them a second life. For instance, a mining team I am connected with is building infrastructure at a decommissioned wind farm that would otherwise be permanently offline at this point. This results in stretching of the life span of renewable energy sources for no new additional carbon footprint.

There is even a competitive cryptocurrency industry in the works to improve the economics of energy production.

Finally, if ETH proves that proof of stake (PoS) security results in a better optimum, the Bitcoin network can simply shift away from proof of work (PoW) with a protocol change. If needed, a new PoS Bitcoin currency can be airdropped onto the Bitcoin network, one-for-one, to replace the old currency with the new before the mining pools are largely taken offline. This is why the network effect of Bitcoin is so important. Another possibility is a hybrid protocol that mixes PoW with PoS or another protocol to find a new form of optimization (similarly air dropped, preserving the value of the network).

Other arguments about this myth include additional observations:

  1. Quantum Computing will smash Bitcoin by allowing a single computer or computer cluster to capture (at least) 51% of the mining capacity in order to perform a Sybil attack on the Bitcoin network (destroying the security features that protect the system from manipulation), or otherwise brute force hack Bitcoin's encryption protocol. This renders Bitcoin worthless.

There is certainly reason for the Bitcoin community to follow the development of quantum computing with great awareness. Quantum computing is developing rapidly now, and the future might be orders of magnitude greater computing power resulting in brute force hacking of current encryption protocols. Quantum power might also allow for a capturing of Bitcoin mining at which point quantum computers may replace ASIC mining. So long as such computing is still decentralized and distributed, it will not change the game theoretic equilibrium that exists in decentralized mining.

One way to curtail the potential for brute force hacking is to find an upgrade to current cryptographic methods. Many encryption systems are already upgraded from using the trapdoor function associated with multiplication vs. factorization to elliptic curve computations that are far harder to invert (perform in reverse).

Still, even if there are solutions, there may be brief attacks on the network. Solutions to these attacks are still being debated and worked out in the Bitcoin community. Some proposed solutions include:

  • Blockchain reorganization to unwind the corruption of information associated with 51% attacks.
  • Finding superior trapdoor functions and thus encryption protocols. (This author believes we can and should start offering bounties for such mathematical research. Perhaps the development of quantum resistant alt coins acts as such a de facto bounty.)

Additional Reading

Whether or not a subset of Austrian economists want to define money as requiring a commodity as a value floor, it stands to reason that a universe that does not use up a commodity as its money is a wealthier universe. Not expending the commodity provides a Pareto improvement. I recently found out that John Nash also made this same argument !

  1. Nations Will Simply Ban Bitcoin.

Some nations have already tried to ban Bitcoin, and for the most part that fails on several levels. First, many people there find ways to get online and buy Bitcoin, regardless. Second, such bans generally have the pernicious effect of locking their own citizens out of investment in a next generation technology.

Regardless of what most nations do, the Bitcoin network exists with or without their government and whether or not their citizens store wealth on the blockchain. And if Bitcoin succeeds, their currencies will plummet in value relative to Bitcoin, regardless.

There is the concern that the U.S. or China could go after Bitcoin in numerous ways, including waging war on the miners. However, the game theory of Bitcoin works in Bitcoin's favor. If the U.S. or China bans Bitcoin, the other can embrace it and own a larger slice of the next generation of economic success.

Once upon a time, in the early 1400s, China built a Treasure Fleet that owned the Oceans around Asia and to Africa. Then some emperor had the boats burned. A few decades later, the Portugese invented and implemented sailing technology allowing them to round the Southern tip of Africa and establish the world's most profitable trade routes. This elevated the Portugese currency as the first global reserve currency—a currency that essentially every port of trade recognized and accepted.

Though trading power revolved around Europe and the East Indian Companies, after the Reformation of 1517, no one nation could “burn the boats” else their neighbor would eat their lunch. Ultimately, decentralized power (after the Vatican lost control of much of Europe) meant that no central decision could be made. Capitalistic trade thrived as any decision to impair its reach was held back by a prisoners dilemma between powerful competitor nations.

Lesson: So long as there is real competition, giving up access to next generation technology is a loser's decision. Sooner or later, technology breaks free and redefines the world.

Sadly, some nations make acquiring Bitcoin harder, so Bitcoin costs are at a measurable premium for buyers there. Nigeria stands out as one example.

Other failed examples and arguments against bans:

  1. Bitcoin Means Greater Wealth Inequality

This argument generally comes with made up statistics, or some handwavy arguments about the future. But the thrust of the argument is that more Bitcoin is held in the hands of fewer people than current stored wealth.

Rebuttals:

  1. Bitcoin Helps Criminals

Nobody with experience in finance above secretarial or clerking duties can make this argument with a straight face. The bulk of the world's illicit trading and money laundering has long channeled through fiat currencies, if not clever schemes involving rare works of art and other pricey, if illiquid assets. If this argument does not come along with an analysis of the aggregate summary of the currencies used in such transactions, don't take it seriously for even half a second. Maybe even laugh audibly to make the point.

Criminal activity was invented long before Bitcoin and never required cryptocurrency, though it is certainly the case that cryptocurrencies will reduce the costs of such transactions. That is the case for all business technologies, yet we are not generally insane enough to throw the baby out with the bathwater each time!

Fact: your Bitcoin is not tainted with trace amounts of cocaine.

  1. Proof of Work (PoW) eventually fails as a system for incentivizing miners.

Bank of International Settlements (BIS) paper making this argument .

This criticism points to a problem more real than most of the critiques we list. Many Bitcoin proponents agree that we do not yet have the answer. But as the BIS paper mentions, there is the possibility of changing the PoW algorithm to PoS, but a hybrid protocol might balance security and time concerns.

One theory suggests that in the future, Bitcoin whales (holders of many Bitcoins, which will include banks and other asset management groups) may subsidize mining because doing so inflates the value of their holdings. Though it seems more likely that such a tax be built into the protocol.

Second layer solutions, including sidechains and further iterations of the lightning network may also solve the problem by lightening the load on the core system, which might steer Bitcoin toward becoming primarily a chain of major financial settlements otherwise transacted on other blockchains—the monetary Amazon of many tributaries.

  1. The System of Bitcoin Incentives Fails When Block Rewards Vanish

Here is one paper that makes this argument.

Later in this document we talk about the new economic paradigm in which Bitcoin holders accrue wealth at the rate of world technological growth. This puts Bitcoiners in a position to care about the system stability enough to subsidize it. That might happen as a fee adjustment in the protocol and it might happen as a contribution to the mining pool (increasing security at cost to major wealth holders). Think of it as a rational, voluntary wealth tax.

  1. Bitcoin is just a bubble (economically).

In the end, we all die, and perhaps so does everything of economic value. So, there is a basic sort of truth to this critique, but in the most trivial sense. We could just as easily quip,

A bubble is any bull run in which you do not have a position.

But the real answer is spelled out in a combination of our Cryptoeconomicon and the unfolding of the future. We will see.

Down the Rabbit Hole

Now that you've learned a little about Bitcoin, it's time to talk about the weird. One day much of this may seem normal, but for now we all have some cognitive dissonance about the way the world works and the way it can work. The following resources and ideas may be correct or incorrect, but they are interesting and informative, regardless.

W ho is/was Satoshi Nakamoto?

It may be the greatest mystery of the twenty-first century. It is likely that Satoshi Nakamoto chose to remain anonymous due to the enormous powers that might crumble in the face of a monetary revolution. But there are some clues and plenty of investigators trying to find the elusive Bitcoin inventor.

The Primary Candidates

Let's just do this in alphabetical order:

Hal Finny

Dorian Nakamoto

John Nash

  • Nick Szabo was behind Bitcoin predecessor "bit gold" and is reported to have a similar writing style to Satoshi. If there were betting markets on the question, his odds would be better than most.
  • Craig Wright (a.k.a. “Faketoshi”…or my personal label “Satoshi Nokimono”) has long claimed that he is the infamous Satoshi Nakamoto and is even engaged in a court case to bolster his claim. He sure does spend a lot of time posing in ways that make him look smart. How could a man smart enough to write symbols on a board lose control of the million Bitcoins mined by Satoshi?
  • Claim : Craig Wright using falsified documents in court
  • Documents from the Craig Wright trial
  • Mar 31, 2021 ( craigwright.net ) How Bitcoin Won the Race… (ominous)
  • Satoshi Nakamoto is the name of a team . That might have been a team of cypherpunks including several of the aforementioned names (possibly even including CSW). It might also have been a government project (NSA?). Maybe even both. This theory holds a great deal of water, including the scraps of evidence put forth by CSW.
  • Opinion piece backing team theory

Bitcoin Narratives and Their Importance

There are numerous Bitcoin narratives at least partially because there is so much to the story of Bitcoin. It is interesting to see when and how these narratives and counter-narratives are pushed in the media. In terms of on-boarding new Bitcoin users, this may be at least partially because different aspects of Bitcoin appeal to different people. As a result, do not be particularly surprised to see highly ideological takes on Bitcoin in the media or hear them from your friends. In terms of public conversation, Bitcoin is in the eye of the beholder .

Peer-to-peer digital currency

On May 22, 2010, Laszlo Hanyecz traded 10,000 Bitcoin for two Papa John's pizzas delivered from another Bitcoiner. This is a proof of concept for the peer-to-peer aspect of Bitcoin as a digital currency. There are some people who suggest this is Bitcoin's primary purpose. But why then go to such great lengths as to invent a Byzantine fault tolerant global mining network? Dollars have been sent via Venmo for many years, already.

Black Markets

Opponents of Bitcoin (or perhaps those who want to accumulate while others are afraid) often play up the fact that Bitcoin has been used for illegal activities. This argument is pretty silly if you follow international finance where the U.S. dollar is the medium of exchange for the vast majority of the world's illicit transactions.

Besides, the Bitcoin ledger is public, allowing for a variety of identification and surveillance tools.

International Remittances

Store of Value Narrative

This is the primary Bitcoin narrative: Bitcoin is digital gold because it is the hardest form of money by design. Bitcoin lacks the difficulty of transportation that is a drawback for gold, so there is good reason to suggest that, so long as it survives attack, it will suck up the wealth storage value associated with all the world's currencies.

It is often argued that Bitcoin was not at first seen as a store of value. However, this email by the recipient of the very first Bitcoin transaction, Hal Finny, demonstrates that he was thinking about the “total monetary supply” theory of value from the start.

Understanding this point can help investors sort out the “Bitcoin Cash (BCH) is the 'real Bitcoin as conceived by Satoshi' nonsense.

Solver of the Triffin Paradox

While the store of value narrative stands out front and center, the Triffin dilemma is extremely important to understand due to its interrelations with international politics and conflicts.

Triffin paradox – (eponym Belgian-American economist Robert Triffin)

The Triffin paradox arises when one nation’s currency achieves reserve currency status.

Perhaps this forces a situation in which, as Nash puts it, “bad money is better than good money.”

Foreign nations must keep foreign exchange reserves (FX reserves) in order to do business (or pay down its liabilities) for which the reserve currency is required. This need increases the demand for the reserve currency artificially above the amount needed for the functioning of the reserve currency’s own national economy.

A natural question at this point is “How does a foreign nation acquire the reserve currency given that it’s not easy to exchange their own currency for it, directly?” The answer is to export something to the U.S. (or other reserve currency source nation) that the U.S. wants or needs. Most often this happens when a nation trades oil for dollars—or even bonds. In fact, if the U.S. dollar is going to serve as a store of wealth, then naturally the holder of the dollar intends to hold long-term in which case bonds are the preferred holding. The actual dollars will roll in later as coupon/interest payments on the bonds, if not when the principle on the debt comes due. This is currently known as the petrodollar system (or petrodollar recycling).

Also, oil exporters may not have internal mechanisms for investment for all the dollars they bring in, so they continue to invest even more in U.S. bonds.

We have a “common investor effect”!

Digital Ledger Technologies

You may already understand what it means that Bitcoin is a digital ledger that uses blockchain technology. You may or may not fully understand what blockchain means, or whether there are alternatives. Here we discuss a bit of this and a bit of that.

While a blockchain is a form of digital ledger technology (DLT), other forms might also be workable. And to properly test Bitcoin means to attack Bitcoin with the introduction of competing technologies which might then supplant the Bitcoin network and provide even greater value. But can that be accomplished?

Blockchain

A blockchain is a dumb database . At least, a blockchain is a linear Merkle tree database. Such a database is not ideal for many uses. Hierarchical databases like SQL have wider ranging applications (at least currently), so it is hard at first to understand the genius behind the use of blockchain for Bitcoin, which was the very first application of blockchain technology.

The Design Features of Blockchains

  • Cryptographic Features
    • Hash functions – A hash function is a function that operates by mapping a group of characters (this input is called a key ) to a value (which is the function's output) of specified length (which is often shorter in length). Think of the way the Dewey Decimal System orders books on the shelf at a library according to the attributes of each book, which could be thought of as a group of characters. Hash functions are often used to index data in such a way.
    • Asymmetric cryptography
    • Digital signatures
    • Zero-knowledge proofs
  • Append-only timestamped blocks
  • Distributed consensus algorithms
  • Networking

Blockchain Economics

There are many proposed economic use cases for blockchains from running an entire monetary system (Bitcoin) to handling secure product logistics and transportation . However, it is likely the case that blockchain either succeeds in the initial goal of handling money, or none of its other uses prove applicable in the real world. This is because the entire incentive system for those investing in the computing power depends on an economic return on that investment.

Resources for Learning About Blockchain:

Other Digital Ledger Technologies

While blockchain is the first DLT, its success turned a lot of attention toward testing out other schemes in order to find improvements. If Bitcoin's network can simply adopt such improvements, they may simply be incorporated into the Bitcoin protocol. It might be the case that DLT research leads to improvements for high velocity transaction systems only, but not for storing value.

While blockchain is a permissionless system, the more general DLT is a class of systems that include permissioned systems, meaning access to the system may not itself be fully decentralized.

Cryptocurrency (General)

Alt Coins

The term “alt coins” (alternative coins) came about to describe cryptocurrencies other than Bitcoin. This says a lot about Bitcoin itself. There are now thousands of alt coins. These include plenty of experiments, some worthy of investment and some not. But very many are scams and even Ponzi schemes. Be wary. There is reason to begin with a suspicion eye (an extra step toward ordinary skepticism)

I am personally skeptical of significant investment in nearly all alt coins. There are essentially two competitions at play: (1) a competition to become the world reserve currency, which could theoretically soak up $100T (that's Trillion) in value, and (2) everything else. Currently, the massively decentralized Bitcoin network has the clear lead to becoming (1) as expressed by Bitcoin maximalists and proponents of the Bitcoin standard . The race for (2) is crowded, no matter how we define it. Some of that will be explained below.

Why Alt Coins?

There are lots of motivations here. This is the Wild West, much like the advent of the internet in the late 90s.

  • There will be extensions of money that lead to the primary currency (likely Bitcoin) that are currently discussed as “sidechains”. These will be faster and cheaper to transact. Think of them all as “dollars” to Bitcoin's “gold”. Currently, alt coins are a big sandbox of people figuring out how to do all that. Much of the reason that Bitcoin is not as fast for high throughput transactions is that the security requires a globally distributed system of miners to check validations, so it is reasonable to separate long term savings in a more secure system to handle low capital velocity, and short term budget money that can run quicker, high velocity transactions.
  • Experimentation. Many of the people who will build out the new world monetary infrastructure are learning by engaging in alt coin projects. Some of these alt coins may survive something like the Dot Com bubble to become sidechains to Bitcoin.
  • Money/Scams. A lot of the alt coins are just plain scams. Anybody can build one and there are thousands. Be very wary of the ecosystem. It is one thing to claim a use case, and another entirely to engineer it, and yet another to implement it. What I mostly tell people is that these will rarely be worthwhile investments prior to Bitcoin's ascendancy to reserve currency status due to the opportunity cost of not holding Bitcoin.

I personally invest almost nothing in alt coins at this point, and even in the future, I suspect that for most sidechains, I will only hold what I need in order to participate in an economy where they get used. There are a few exceptions, but they are scarce.

General Classifications of Cryptocurrencies

With so many alt coins, it makes sense to farm most of them into categories by form and utility.

Stablecoins

Privacy Coins

Programmable Coins

  • Ethereum

Tokens

Large Capital Alt Coins

  • Algorand (ALGO) ( algorand.com ) has been making waves with market experiments of substantial scale . ALGO runs a “pure” proof of stake (PPoS) algorithm allowing for more than 1,000 transactions per second. Some believe ALGO will back whatever digital currency the Federal Reserve eventually develops.
  • Binance Coin (BNB) Some of the cryptocurrency exchanges have their own currency, and Binance is one of the biggest exchanges. Their BNB token allows holders to incur lower transaction fees making it a bellwether for market action.
  • Bitcoin Cash (BCH) A fork from the original Bitcoin (BTC) blockchain.
  • Cardano (ADA)
  • This video provides a description of the Cardano vision
  • Chainlink (LINK)
  • DOGE
  • Ethereum (ETH) ( ethereum.org ) The largest of the alt coins in terms of market capitalization. The programmability of ETH lends itself to a lot of experimentation, particularly within the Decentralized Finance (DeFi) space, but also other creative spaces such as gaming and non-fungible tokens . ETH stepped into the game with a protocol that allows developers to create smart contracts in the Turing complete language created for the purpose, called Solidity . Ethereum is both the most multi-purposed programmable cryptocurrency at this time, and also somewhat controversial in ways we might write more about later .
  • Litecoin (LTC) ( litecoin.com ) One of the early Bitcoin clones, and quite literally beginning with Bitcoin's code base. Sometimes promoted as “silver to Bitcoin's gold”. The biggest critique of Litecoin is that it is at best a Bitcoin close with a (much) lesser network, and thus currently useless outside of being a sandbox for experimentation. However, that experimentation could be important for Bitcoin and the cryptocurrency space.
  • Polkadot (DOT)
  • Ripple (XRP)
  • Tether (USDT) is the largest stablecoin project. Yet there is substantial debate over whether or not Tether represents a scam and the degree to which the USDT coins are fully backed.

Stablecoins

Definitions may vary, but a stablecoin is a digital currency that is tied to an asset (possibly simply a currency) that is “stable” in the larger status quo economy. Examples of such assets are the U.S. dollar, other national currencies, and gold.

The primary utility of a stablecoin is its ability to provide a portal between the fiat economy and digital currency and asset market participation (investment and trading). They allow for the trading of Bitcoin and other cryptocurrencies through a medium that is easier to handle on the many online exchanges, and to transmit capital cheaply and quickly between exchanges. This results in faster exchange arbitrage, keeping prices more in line to one another, and sometimes allows for the circumvention of regulations.

As of February 19, 2021, the market capitalization of all stablecoins sits at around $50B.

Some Theory on Stablecoins

Controversy Surrounding Tether

Oh boy…this is going to take a while. Will come back later.***

The primary controversy surrounding Tether is that the issuers were not transparent leaving no way to check to see whether USDT issues was truly backed by dollars as per the thesis of its stability. However, there was also some evidence of market manipulation. The controversy has been large due to the fact that around half of world Bitcoin purchases were made in USDT, though it is not clear how much of that represented initial investment versus trading.

In the meantime, here are some links to help understand the story:

Programmable Coins

Given that smart contracts and decentralized finance (DeFi) are two enormous applications of digital currency, it was inevitable that the cryptocurrency world experimented with directly programmable cryptocurrency networks.

Ethereum

Ethereum was birthed by Bitcoin developer Vitalik Buterin and is the 800 pound gorilla of this space.

I will write plenty here, but understand that this is one of the areas in which my knowledge set is less valuable relative to what else you can read from true experts in the niche.

Bullish cases for Ethereum (Application and Price)

  • Dec 16, 2020 ( finematics ) Bitcoin on Ethereum
  • Apr 15, 2021 ( Arthur Hayes ) A bullish case for ETH with good general discussion of traditional banking versus DeFi

Privacy Coins

Everybody loves their privacy. A great deal of the world's economy happens outside of the purview of government regulation. Whether nefarious or private for other reasons, there will always be a market for currencies that obfuscate buyers and sellers engaging in transactions. While Bitcoin is pseudanonymous, the Bitcoin blockchain ledger is highly transparent by design. Certainly Bitcoin has facilitated some criminal activity in the past, but is now recognized as less than ideal for private transactions. Technology organizations have been able to map enough information to transactions to know the identities of those who hold the private keys to a large and growing proportion of Bitcoin holders.

However, there are many attempts at creating protocols and systems that better obfuscate the parties of a transaction. The generic term 'privacy coins' applies to the cryptocurrencies created to facilitate anonymous transactions.

A reasonable market/investment theory on privacy coins is that they will all generally sink in value relative to Bitcoin, the most secure store of wealth, but will otherwise compete in their quasi winner-take-all tournament. However, this tournament may be a never-ending game with its own Red Queen's (technology) race between developers and hackers.

The Top Ten Privacy Coins by Marketcap (Feb 22, 2021)

Source: Cryptoslate

  • Monero (XMR) has long been at or near the top of the privacy coin lists due to clever 'ring signature' technology and stealth address scheme.
  • Zcash (ZEC)
  • Horizen (ZEN) uses a combination of transparent and shielded addresses.
  • NuCypher (NU)
  • Secret (SCRT)
  • Counos X (CCXX)
  • IZE (IZE)
  • MimbleWimbleCoin (MWC)
  • Keep Network (KEEP)

Tokens

Many people use the term token as a synonym for cryptocurrency. But this is a word that bridges to computer science where a “token” is a string of letters and numbers used in cryptographic security. The string is a “stand-in” for real data. Sometimes such a token obfuscates the real data, providing security, so we call it a “security token” (distinct from “tokenized securities” which we will discuss later).

Personally, I don't like the use of the term “token” as a catch-all for cryptocurrency due to idea of a token being discrete and amounts of cryptocurrency being infinitely divisible. But I don't know if that is a winnable language battle at this point. When something changes the world, it's hard to fight the momentum of language.

Source: cryptocurrencyfacts.com

Utility Tokens

Tokenized Securities

Non-Fungible Tokens (NFTs)

Substack article

As of early 2021, the latest hypes in the Bitcoin/cryptocurrency communities surround decentralized finance (DeFi) and what are called non-fungible tokens (NFTs). While DeFi is by far the larger and more interesting topic, this article is about NFTs.

Before I get to NFTs, let's talk about collectors of historical artifacts. There are collectors of all kinds of artifacts from belongings of historical figures, to art of all sorts, to war memorabilia, and almost anything else you might imagine that people get obsessively interested in. If you've ever looked through a collection, whether at a museum or somebody's private home, you might have seen certificates of authenticity stating that the artifacts are the real deal. Surely some such certificates have been faked, or their authors misinformed. But the existence of such certificates increases authenticity by a degree, and makes it harder to counterfeit that artifact going forward.

An NFT is a cryptographically protected certificate of authenticity, but backed by the security of whatever blockchain or whatever digital ledger technology stores the NFT's data. That data simply identifies

  • the address (public key) of the NFT,
  • the key (password) associated with that address allowing only the owner to send the NFT to another address (such as in the event of a sale), and
  • the object (digital or right to a real world item) of the NFT (or points to that data source, like to a database or website).

That's it. That's all. Except the details of the cryptocurrencies and networks on which the NFTs are generated and held. Those details might be important in terms of the stability of the system, its security, and associated transaction costs. But the NFT itself is simply a certificate that is extremely difficult to counterfeit.

So far, we hear stories of millions of dollars of art sold as NFTs . Those are the luxury items of extremely wealthy people and matter little to most of us. On a more common level, we are witnessing the advent of sports "cards" moving to the digital universe . I expect game companies to make the leap to fantasy draft games fairly soon. But perhaps the largest NFT market will emerge from video games.

Video games like Eve Online and World of Warcraft have large, liquid, and complex game item markets, already. That even spills out into the real world where players have been known to spend up to thousands of dollars to acquire game currency or rare items that take enormous time to obtain. In one case, an entire planet in the Entropia game universe sold for $6 million . The Eve Online developers even famously hired an economist onto their team as its in-game economy grew both valuable and increasingly complex. These valuables result in honey pots worth so much money that game account hacking has grown increasingly common.

Do not be surprised if items of high interest, or perhaps even all video game items, become NFTs in the future. Aside from the protections of security and anti-counterfeiting associated with cryptocurrency, NFTs will allow game players the ability to control the fruits of their own labor in economic market places. If you play video games at all, you might wind up owning NFTs, whether or not you imagine you would care to. Your children might grow up with a sense of familiarity with NFTs the same way generations past did with stickers and bubble-gum dusted cardboard .

In the meantime, imagine the next steps for similar uses of technology: birth certificates, drivers licenses, school transcripts, and even land deeds! Whether or not you think you care now, the NFT market may itself be a proof of concept for a complete economic paradigm shift.

Don't say I didn't warn you.

NFT Marketplaces

There are a few burgeoning marketplaces aiming at NFTs:

  • OpenSea appears to aim at becoming the Ebay of NFTs.

Sidechain Theory

Sidechains are one of the more important topics in cryptocurrency, so long as you believe in the theory that one cryptocurrency is likely to be the bedrock of the economy. Let us assume this is Bitcoin. A Bitcoin sidechain would then be another cryptocurrency that settles onto Bitcoin, or is backed by Bitcoin with a peg. This backing bases the sidechain as an alt coin with a floor in value, or provides additional security of the Bitcoin blockchain. It might even be the case that the central banks of nations issue fiat national currencies that settle as sidechains onto Bitcoin.

Currently, in the DeFi space, much of the tokenized market is currently powered by wrapped Bitcoin (more than 100,000 Bitcoin as of March, 2021).

Markets

There are several “on ramps” into cryptocurrency.

  • Exchanges (largest)
  • Bitcoin ATMs – These machines take in cash and issue paper wallets.
  • Bitcoin Locals
  • Miners (some people buy directly from Bitcoin mining operations)
  • ETFs now represent proxy exposure to Bitcoin (as do futures and some stocks)

Exchanges and Apps

There are many exchanges where cryptocurrencies are bought and sold. Understand that transacting on an exchange and holding money there always involves third party risks. Some people say ”[not] your keys, [not] your coin,“ warning that if you do not hold your Bitcoin on a private wallet, there is always the chance it can be requisitioned or otherwise manipulated.

  • CoinMarketCap's list of cryptocurrency exchanges ranked by volume. Take volume with a grain of salt as exchanges have ways of pumping up volume artificially to make themselves look more important and attract more users. Trust in this new technological environment is harder to determine and differentiate.
  • Note that there are many exchanges that require KYC/AML as per U.S. banking standards and some that do not. In the long run, cryptocurrency puts pressure on the regulatory environments that require these standards—something I may write more about in a later entry. U.S. exchanges are all required to perform KYC/AML documentation.
  • Exchange Fees Are Enormous for those who do not do their homework . Note that exchange fees are far smaller on limit orders than for those who submit market orders, which are in turn smaller than fees paid for “overly simple push button” non-exchange buys. You may pay 1.9% at Paypal, or 1.5% for a site-facilitated cryptocurrency purchase/trade, but you might only pay 0.25% for a market order and 0.1% for a limit order. I have even received significant rebates for making markets with limit orders on at least one exchange (no longer available). Do your homework on whatever exchange you choose.

U.S. Exchanges

There is a large difference between U.S. exchanges and those run away from the reach of U.S. regulation, though the effects vary. There are advantages and disadvantages of each regulatory environment, and it is important to become familiar with these. But most U.S. buyers of Bitcoin just want to know where they can exchange fiat currency (dollars primarily) for Bitcoin. These are the fiat portals set up for U.S. residents:

  • Bittrex ( exchange ) This exchange allows leveraged trading. Many traders have famously lost their investment and have been liquidated. For 99.9% of investors, this is a trap .
  • BitQuick ( exchange ) Don't know much about it.
  • Coinbase ( exchange ) The more expensive version of Coinbase, meant for people who need their hand held. In early 2021, Coinbase is moving toward an IPO that is getting a lot of attention. Personally, I suspect that Coinbase is over-valued at $100B and am surprised they hold as little BTC as they do as a company. Had they been on the Bitcoin standard, they'd be worth more.
    • Apr 6, 2021 ( twitter ) Coinbase earnings thread.
  • Coinbase Pro ( exchange ) The less expensive version of Coinbase for people who understand how trading platforms work. One of the world's largest exchanges. I bought my first Bitcoin here, but plan to change to another exchange since Coinbase reports more information t o the federal government.
  • Kraken ( exchange )
  • Gemini ( exchange ) The Winklevoss twins exchange is one of the larger exchanges. I am personally moving toward Gemini because they share less information with the federal government than does Coinbase.
  • Paypal ( sort of ) This is an expensive option with huge fees and no wallet control. Currently, I do not recommend it .

Large Exchanges Outside the U.S.

  • Binance ( exchange ) claims to have the world's largest volume, by far. Many alt coins trade there. They run their own blockchain, the Binance Smart Chain (BSC) .
  • Bitfinex ( exchange )
  • HitBTC
  • Huoni Global ( exchange ) is the second largest non-U.S. based cryptocurrency exchange.
  • KuCoin ( exchange ) Only requires KYC for substantial amounts of money.

Apps for Buying Cryptocurrency

  • Cash.app is part of Square, which is a large consumer/financial transactions company. I haven't yet researched where they source the Bitcoin they sell.
  • Swan automates Bitcoin buying straight from your bank account. I have not used it personally, but this process can help many investors dollar-cost average their investment.

Decentralized Exchanges

Decentralized exchanges are progressing, but do not yet have much market share. They may be the wave of the future, allowing clients to hold their own cryptocurrency while making trades. While I have experimented with one, I cannot currently vouch for any of them.

Futures and Derivatives Markets

The derivatives markets may get particularly interesting as the unusual nature of mining and risk are quite different for Bitcoin than for any other asset. There are already some derivatives contracts very specific to Bitcoin miners, for instance.

  • LedgerX runs futures, options, and swaps markets based on Bitcoin.
  • CME Group runs a Bitcoin Futures market and Options on those Bitcoin Futures.
  • Deribit is a Cryptocurrency Futures and Options Trading platform run out of Europe. The prices and contracts may look weird for multiple reasons: both because European options are different in definition than American options and because they are priced in BTC instead of in USD or the euro. Learning to think in terms of BTC takes time for new traders and market watchers.

Trading Cryptocurrency

First: don't.

Unless you are a pro, spend all your days and nights thinking about cryptocurrency trading, or are an insider to the industry, you should not think trading will go well for you. Even if you are in one of those categories, trading will not likely go well for you. There are scarce exceptions. Even top cryptocurrency hedge fund Blocktower Capital hasn't beat Bitcoin. So just HODL.

Also, it's a massive tax headache. I know this from experience.

Trading Bots

Okay, if you want to ignore my advice, consider what we know about trading bots. They're being sold all over the place. However, be skeptical .

In 2018, I traded as part of a two-man crew at Osiris Ledger LLC. We beat Bitcoin. But not without me babysitting trades day and night, and making thousands of alterations to the bot trades, depending on years of trading experience at some of the world's top hedge funds. Even then, we would have lost had I not pulled the plug before the big alt coin crash. All that work could have been for naught.

Analytical Metrics

Proceed with caution. There is a lot of nonsense out there. But you should be able to establish solid principles for understanding what is real and what is garbage after significant study of Bitcoin and cryptocurrency.

Price Analytics

  • CoinMarketCap displays prices, supply, and other metrics for an extremely wide array of cryptocurrencies.
  • Cryptocompare with live prices, research, and other analytics.

Bitcoin Price Theory

Of course, markets determine price. But a lot of people want to know if there is any good way to model Bitcoins price at a particular time. What fundamentals affect the price.

A few fundamentals that apply price pressure to Bitcoin might be:

  • Mining hashrate or total hashpower. The cost of mining Bitcoin gives an approximate floor for the price of Bitcoin. Of course, markets may not reflect that perfectly, but when you think about it, miners with higher electricity costs can turn off their machines and simply buy Bitcoin at some point, so price becomes more inelastic around that floor.
  • The Stock to Flow Ratio (S/F or S2F) has become a popular Bitcoin pricing model. While hashpower gives an approximate floor for Bitcoin price, it could be said that S2F gives an approximate ceiling.
  • Fractal Analysis. Now, there is fractal analysis and there is ” woo fractal analysis “ and then there is “crowd-driven woo fractal analysis”. We write more about this later. In this video I teach about Fibonacci to a math circle . This may be helpful to some audiences wondering what Fibonacci might have to do with financial markets (the key is that Fibonacci grows nearly like an exponential function).

We go into deeper detail later in the Cryptoeconomicon .

Decentralized Finance (DeFi)

The hype about DeFi is that the DeFi movement will allow investors to participate in market economies without the need for expensive and overly regulated third party intermediaries (like banks). Many believe these DeFi apps are among the “killer apps” of the cryptocurrency sphere. Since the primary thesis of Bitcoin is already as a killer app for avoiding banks, and a second layer of programmability is in its nascent state for Bitcoin, it may be that these apps are sandboxing for the future. It may also be that they succeed and/or can be simply merged into the Bitcoin ecosystem, perhaps as sidechains.

DeFi transactions make use of smart contracts (in addition to cryptography and blockchain) in order to govern transactions. The productive use of smart contracts is still under development. There may be flaws and unseen weaknesses in any system that uses smart contracts.

Early on, experimental DeFi apps were built on the Ethereum (ETH) network, so it might be said that the value of ETH is tied in many ways to the success of DeFi. As of early 2021, high gas fees are inhibiting the ETH network, so other networks have been built that have a chance of subsuming a lot of the value that has accrued to ETH. Supposedly ETH 2.0 fixes this. We will see.

Currently, I have very little experience with DeFi and plan to run some participatory experiments and continue to research and report back to this document.

Basic DeFi Educational Resources

  • What is DeFi? (I recommend subscribing to the Finematics channel)
  • A DeFi explanation video —just filter the hype of 10,000% returns. It is possibly true that early adopters who are savvy do that well with their earliest investment, but we should assume the early systems have risks that we haven't yet fully recognized, not to mention regulatory risks.
  • DeFi Pulse is a collection of market resources
  • Mar 18, 2021 ( cryptohayes ) Poor Wojak's Almanack: Farming DeFi tokens.

DeFi Lending and Borrowing Platforms and Ecosystems

  • The Binance Smart Chain (BSC) is starting to see some application.
  • Compound
  • Terra / Terra Station – I am currently reading about this application to see if it is wise to experiment with, but the terra station app (Chrome extension) wants permission to read and rewrite information that I send to websites, so I am extremely concerned with the security up front. One solution I am considering is to use an old computer solely as a DeFi computer. This is somewhat similar as a solution to keeping a laptop that is never connected to the internet to create paper wallets.
  • May, 2021 ( banklesshq newsletter ) The Never Sell Plan suggests that using decentralized finance, you never have to sell your Bitcoin or other crypto holdings. I would caution those new to the space not to jump into the fray with such promises because DeFi is so new. Even experienced cryptocurrency professionals are experimenting in this domain. Leverage is always tricky, and many Bitcoin proponents would tell you that leverage always represents credit and sometimes even fraud. There will be some of DeFi designed to be a trap to take your Bitcoin just as some of the alt coin market was designed to fleece undereducated investors. Some of this system may mature into highly useful pieces, but you should not dive in without reading and experiencing explanations, then perhaps experimenting with small amounts of money before relying on them.

Decentralized Exchanges (Dexes)

Decentralized Exchanges (Dexes) are one of the largest realms of experimentation going on in DeFi at least partially because centralized exchanges extract so much wealth from users of their platforms. It is noteworthy that the

Automated Market Making (AMM)

While traditional market making involves human traders taking risk ensuring minimally liquid financial markets with a bid-ask spread, AMM's use smart contracts with liquidity pools , instead.

Microlending

One of the ways many Bitcoin proponents expect Bitcoin or other cryptocurrencies to change the world is in the arena of microlending.

Solvency of DeFi

A good question might be how to understand when and whether DeFi platforms, ecosystems, and even individual lending/trading propositions will remain stable, or even try to compute a probability. This would allow us to better understand the value of investing in activities on these platforms.

This is a low priority for this document currently, but I plan to write more later.

https://twitter.com/CaitlinLong_/status/1366569506160533505

Entertainment on the Blockchain

Since entertainment involves economics, it is only natural that we see an explosion of entertainment development involving blockchain/cryptocurrency. Some of it is experimental and unlikely to last, but experience is the best teacher.

My Bitcoin maximalist instincts often lead me to tell people not to invest in nearly all alt coin projects. However, I am moving ever so gradually to a moderated view in which these projects help build out the ecosystem and bring attention to this next generation technology. Combine that with my thoughts on Metcalf's law, and I suspect that these projects are worth investing in for those who hold substantial amounts of cryptocurrency. But to the newbies, I still recommend starting with Bitcoin first and foremost as an investment.

Gambling on the Blockchain

Including the case of Silk Road, vice has led the way in cryptoeconomics beyond the core concept. That is only natural given the incentives to step outside the status quo system.

It seems highly likely that at some point a few cryptocurrency gambling sites are going to win big, drawing in users—particularly the types who already enjoy gaming and gambling on their phones. An interesting play might involve a clever twist on the highly lucrative fantasy league blueprint, particularly combined with NFTs.

Here are some of the platforms for gambling that have developed so far in the cryptocurrency ecosystem. I do not vouch for any of them since I have only spent a few minutes examining most of these projects. Nor have I bothered taking notes on the legality of any of them. Of course, many people won't care about that. Gambling isn't something I do much, so don't expect me to have serious notes here.

Games (other than gambling)

An assortment of games of numerous varieties have begun popping up on various blockchains, most notably on the ETH network. In fact, there are so many transactions taking place on the ETH chain now that users of various ETH tokens, in games and in more serious pursuits, have begun to complain about gas fees. This leaves ETH developers looking for solutions while other blockchain developers running programmable chains are working to perfect the recipe.

Due to the large amounts of data associated with gaming, it may very well be the case that gamers “choose” the path of programmable coins in terms of superior blockchain conception.

Here are some of the gaming projects I've found in a quick search on the internet. Note that some of these ecosystems are inviting players in to check out their games by providing monetary incentive in the form of free cryptocurrency .

  • Egamers.io seems to be a popular blockchain gaming news site.
  • Atari created their own token (ATRI) on the ETH blockchain. Not only is the ERC-20 token aimed at video gamers, Atari's traditional market, but also gambling on the blockchain .
  • Chainlink developed something called Verifiable Random Function (VRF) to spice up gaming. One way game developers can use verifiable randomness is to create provably fair games of chance, or simply moments of chance that are popular in in many role playing games as in various forms of “crafting” (“enchanting”, “mining”, or anything else that might involve the roll of the dice that might have been hacked in some games by inclined players). This technology is being employed in The Six Dragons , an RPG with a game world said to be larger than Skyrim (which has a reputation for being “just so friggin' huge, man”).
  • MintGox.com seems to be some kind of Bitcoin gaming arcade.
  • Bsv2048 is a version of the classic game 2048, except with an ante that allows for competing for BSV winnings on the BSV blockchain.

Art on the Blockchain

The recent explosion of NFT projects seems to be leading the way on blockchain art for now, but this is a nascent environment. Still, one artist managed to sell $3.5 million worth of art in a day.

Cryptocurrency NEWS Outlets

As always, recognize that NEWS can be biased by money, and Bitcoin is nothing if not money.

Bitcoin/Cryptocurrency/Digital Asset Conferences

One thing to understand about the many Bitcoin and digital asset conferences is that they are differently themed, both in terms of their focus (Bitcoin, DeFi, mining, etc.) and in terms of their audience (developers, investors, sheep, etc.). Before committing your time and money to one, be sure to learn all that you can about it.

Cryptocurrency Hackathons

Hackathons have been found to be a fun and productive way to get young minds into the mix of the growing ranks of cryptocurrency developers. Some are sponsored by the creators or users of various programmable cryptocurrencies to entice development on their ecosystems.

Here is a list of a few of these hackathons, but there is such fast rotation that you should not expect this one man documentarian to endeavor to keep up with it all.

Shopping

This may seem like a goofy entry, but we're talking about digital currency. This set of links includes information about how to use cryptocurrency either for buying products or selling them as a business owner. Transact at your own risk!

Online Shops that Take Bitcoin

Personally, I would use Bitcoin to spend only after exhausting all other currencies. However, there can be advantages, as you will see.

  • Bitpay runs both a phone app that enables payment using Bitcoin, and also a Prepaid Mastercard that provides a Bitcoin-to-fiat conversion.
  • Purse.io When you shop here, people in other countries who cannot buy Bitcoin legally in any other way will purchase goods for you on Amazon at a substantial discount for you. In other words, you get to sell your Bitcoin at substantial markups while doing your Amazon shopping! You can then take the money you would have spent and rebuy that Bitcoin (and then some if you like). It's an arbitrage of jurisdictional money controls that shouldn't exist.
  • Getpei.com (or simply 'pei')
  • Gyft.com is a sort of online gift card mall that takes Bitcoin.

Bitcoin Themed Shopping Outlets and Products

Air Drops

Suppose you own 1,000 XYZ cryptocurrency at an address on some network. Somebody can send more cryptocurrency to that same address (and all other addresses on that network [that meet some criteria]). This is known as an “air drop”.

Air drops can happen for all kinds of reasons.

  • Publicity Stunts : Often, such air drops are used as publicity stunts to raise awareness about the existence of some new cryptocurrency.
  • Distributing Forked Coins : This may be the most important form of air drop to understand as it relates to Bitcoin security. Suppose a new “forked” coin is created that competes with a previous version of a cryptocurrency. The new coin can be air dropped one-for-one onto all existing Bitcoin addresses. If the new coin turns out to be a true upgrade, the monetary system will simply gravitate toward its use. That might happen after trading between the old and the new, pushing relative value toward a new equilibrium that suggests a winner in the marketplace.

Taxation and Accounting

Taxation is a tricky topic. For those who simply buy/hold/sell long term, taxation is simpler. Currently, U.S. law treats those investments as capital gains.

In late 2017, the SEC gave guidance that crypto-to-crypto would not be considered “like kind transactions” meaning that every trade is settled against USD implicitly as a taxable event. (Hopefully I explained that correctly and will link at some point to be certain—do your own research.) Clearly, this regulatory situation is untenable as some people are starting to make thousands of such transactions annually. I personally made a six-digit number of transactions in 2018 alone. Imagine filling out your taxes, 25 transactions to a page. Yeah. Totally sucks. Just the energy used for a computer to do it might push us over the edge of global warming. Just kidding. I think.

Accounting

Currently, Bitcoin must be treated as an intangible asset , only marked-to-market at buy and sell points.

The tax situation gets tougher the deeper you go and the more complex your investments.

Tax Hacks

Most likely there are plenty of people investing in Bitcoin and other cryptocurrency with the goal of dodging taxes. In fact, this is one of the things digital assets have going for them: the government is not fully prepared to handle it all. However, I'm not taking that route (for now) and make no recommendation of butting heads with the IRS. On the other hand, financial games can be legally hacked. Here are some tips on how.

Software for Crypto Taxes

Scams

Every new technology involves a minefield of scams. While most people do not recognize it, the Dot Com Bubble and Crash was largely about the collapse of companies that had no economic future to begin with. Some of them were good faith efforts that failed, but many were run by “entrepreneurs” whose goals were to build the best facade as quickly as possible with faint hopes of attaining a productive economic feedback loop.

The cryptocurrency arena is deeper and more complex than the advent of the internet age. Understanding it is not simply a matter of learning about computing, but also piercing an understanding of economics and finance that is counter to centuries of propaganda campaigns! The educational systems deter the explorations that would enlighten most citizens. As a result, millions of people have fallen for both cryptocurrency project scams and crypto-Ponzi schemes alike.

Fortunately, we can learn from past failures. We can also focus on the simple by holding most of our currency at Bitcoin, in cold storage, without moving it until the industry matures.

Here are some of the scams, including Ponzi schemes, that have plagued the early days of cryptocurrency:

  • The Onecoin scam ( video ) was a multi-billion dollar scam of three million investors worldwide. The front woman of the project is still a missing person.
  • The Standard Twitter scam involves the use of simply cloned Twitter accounts made up to look like famous people (who would be trusted by man). Following a tweet by the real account, the fake account follows up the tweet with a message like, “I'm feeling generous. If you send any amount of Bitcoin to this address, I will send you twice that back in return. Only good until the end of the day!” The fake account often immediately blocks the original celebrity account so the owner of the account doesn't know the scam tweet is visible to all their followers. In one case, some serious hacking even took place to take control of Twitter accounts to run this scam.
  • The Plus Token Ponzi Scheme took control of around 1% of the entire Bitcoin supply . Plus Token disguised itself as a high-yield investment program and defrauded investors of over $3 billion worth of Bitcoin, Ethereum, and other cryptocurrencies. Fortunately, over 100 arrests have been made.
  • Bitconnect was found to be a Ponzi scheme and even involved murder along the way.
  • Stefan Qin's hedge fund Virgil Capital turned out to be a Ponzi scheme . Qin is a brilliant young man who may now spend many years in prison for his narcissistic tendencies.
  • There are numerous hard-to-verify claims of cryptocurrency exchanges freezing accounts for dubious reasons. These tend to be foreign-run exchanges with little if any regulation. Some exchanges do not even share their physical (home nation) location(s)!
  • Medium accounts have often been hacked to push scams similar to the Standard Twitter scam.
  • Mar 15, 2021 ( ssb.texas.gov ) Commissioner issues two orders stopping three online investment scams.

Some information to help protect you, aside from a generally good education about Bitcoin:

Web 3.0

Web 3.0 is the next generation paradigm of the internet. There are some sources that talk about Web 3.0 as an application of artificial intelligence in which user context drives the user experience. That may be true to some degree, but distributed systems are likely to play a major role, as well as digital money. Of course, the most secure digital money is Bitcoin, but other cryptocurrencies (possibly sidechains of Bitcoin) will surely play a role. Economics and incentives dictate the flow of technological development , so that role may be the central role.

One model of Web 3.0 is the fediverse , a portmanteau of federation and universe .

Web 3.0 Educational Resources

Early Web 3.0 Experiments

Tipping in cryptocurrency for appreciated content started a few years ago on some social media sites.

Economics (aka 'Cryptoeconomicon')

Cryptocurrency is forcing a grand re-evaluation of a great deal of economics—particularly monetary economics.

Technology

Capitalism

What is Technology?

See: The Right and Wrong Definitions of Technology (substack)

Before we jump into the topic of technology, let us consider the level importance of the topic. You may already understand the immense power of technology on many levels, but we cannot overstate the importance of a good definition. A bad definition is like tunnel vision or blurry eyesight. It can leave us half-blind to the ways in which technology shapes the world.

What is technology?

Go to Wikipedia for the answer and you get a terrible definition —something like the one you were probably taught during your schooling indoctrination years:

Technology is the sum of techniques, skill, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation. Technology can be the knowledge of…embedded in machines…

To be sure, the Wikipedia answer explores a broad subset of the terrain of technology, pushing visions of academic research and silicon chips. But this terrain falls short. The definition is incomplete. The fundamental quality of technology is entirely missing— perhaps intentionally so ?

In order to understand technology, let us dive into a piece of economic history. Don't worry —we dodge the mathy stuff as it doesn't pertain much to our story ( but study that if you're interested! ). During the mid-twentieth century, one of the chief pursuits of economists was to describe an aggregate growth model , considered by some necessary for the completeness of neoclassical economic theory . In 1956, economists Robert Solow (MIT) and Travor Swan (Australian National University) simultaneously published what has become known as the Solow-Swan growth model . For this achievement and others, Solow received the 1987 Nobel Prize in Economics , though Swan was never acknowledged by the committee. Their model will be the source of our definition of technology.

Source: krugermagazine.com

Let us keep the Solow-Swan model (SSM) as simple as possible. We can certainly build an intuitive understanding of the model without learning how to read differential equations. Simply put, the SSM describes economic output is the result several inputs:

  • Capital : the stuff used in production that can be bought with money.
  • Labor: bodies that do stuff with capital that results in output products/services.
  • Technology: Wizard magic? We'll get to that.

Here are the first basic observations we make:

  1. Capital and labor scale the output linearly. If we double the number of workers and the amount of capital they have to work with, we then double the output of the economy. If we triple those inputs, we triple the output.
  2. We live in a world of exponential rates of wealth and production growth . Who would invest their resources (capital) in production if the output wasn't expected to be larger than the input?! Economic feedback loops result in the multiplication of capital repeatedly, resulting in an exponential output function. (linear in read, exponential in green)

Source: Wikipedia

So, given that labor and capital only result in linear scaling of outputs, and technology is the only other system input, that means that technology is the sole source of exponential growth! In fact, this gives us the best definition of technology—one based implicitly on results, and casts aside our biases of what qualifies as “academic” or “process of silicon machines”.

Technology is** **//anything//** **that grows resources.

So simple. So perfect. This will be a foundation on which we rebuild a lot of the terrible ideas that have led us into the era of The Monetary Wars .

Now, by defining technology implicitly (as opposed to relying on some narrower explicit definition), we might seek to at least describe some areas of technology in order to bring focus to the landscape. Ultimately any of the following might or might not be technology—we only know by evaluating the results of any action!

  • Machines (including computers)
  • Culture! We might even categorize religion here. (I consider culture the most underrated technology.)
  • Education
  • Law
  • Medicine
  • Weapons?
  • Agriculture
  • Business organization
  • Human relations (think international relations)
  • Literature

We'll stop here—not because we cannot think of other good sources of technology, but because those sources are truly limitless. Anything practical or productive you have ever thought—any creative energy—is a source of technology. Technology is all those things that are worth investing ourselves (time, energy, capital…all of it) in doing because by definition they make us better off .

Thank you for reading. We hope you think hard on this topic and we plan to come back to this definition in future articles for the purpose of digging deep into challenging topics. As a teaser, we plan to add another twist: technology is in the eye of the beholder. Just as aggregating utility is difficult, the game theory of technology can get interesting when we realize that some actions and products may be technology for some, but not for others. Check back again in the future.

Capitalism

Let us dispense with political definitions. Capitalism is the application of technology.

See The Birth of Capitalism (substack)

In 1403, still early in China’s Ming dynasty , the Yongle Emperor Zhu Di ordered the construction of the historically massive fleet of hundreds of large boats known as the Treasure Fleet. Captained by Eunuch Grand Director and trusted confidant of the emperor, Zheng He, the royal fleet embarked on seven voyages to many nations, carrying diplomats, hunting pirates and enemies of the emperor, establishing valuable trade routes, and returning with tributes from various national leaders. Crewed by more than 20,000 marines, soldiers, and assorted travelers, these ships formed a formidable floating city that traversed the coasts of Asia and beyond. The seven voyages of the Treasure Fleet spanned nearly three decades through the reigns of the Yongle, Hongxi, and Xuande emperors. These adventures included diplomacy, trade, pirate hunting, and some other largely one-sided combat.

Source: Sarah Ward

The Xuande Emperor Zhu Zhanji, faced a different world than his grandfather who set the Treasure Fleet in motion. Mongolian rivals threatened from the land, not the sea. Zhanji also faced a growing rebellion from the menacing uncle whose experienced army Zhanji defeated. Within the empire, the merchant class grew wealthier amidst a new era of international trade dominance. Needing resources to fend off rivals, and not wanting to contend with the additional power of a rising merchant class, Zhanji had most of the boats burned. Fragments of the Treasure Fleet remained for a century, but China’s brief oceanic domination of international trade ended with the fleet’s seventh voyage, which returned to port in 1433.

By the late 1400s, Portuguese captain Bartolomeu Dias led ships around the Cape of Good Hope. A few years later, countryman Vasco da Gama made his way all the way around Africa and reached the trading post of Calicut (now Calcutta), India. Thus began the ascension of European capitalism, cutting out the middlemen of both the Mediterranean and the Silk Road, the latter of which suffered from combat to the East in concert with economic starvation due to loss of control of European markets.

Source: naval-encyclopedia

Europe was a different beast than China—united in Christendom under the Vatican, though ostensibly governed by elite royals under different banners, each with their own nations. The Reformation of 1517 effectively decentralized power by severing Vatican authority over the churches of many nations. Wealthier through trade and technology, these nations stopped sending so much tribute to the Vatican, and paid for larger standing armies of their own. Accumulating and holding wealth is easier when the security answers to you. The competing states of Europe had no choice but to embrace an emerging merchant class that made that independence possible. Any European nation that burned its boats (or other means of trade and production) would find itself outmatched by a wealthier neighbor that did not. In this, the world saw a new equilibrium of decentralized competitive interests.

Source: Oleh Anonim

Perhaps starting leaner (the European vessels were far smaller and fewer in number than those of the majestic Chinese fleet), and with the motivating need to return on the investments in expeditions proved an advantage. Competition and wealth pushed an arms race among nations inventing new sailing technologies for the purpose of reaching South and Southeast Asia with the goal of bringing back valuable goods such as spice and silk. Similarly, the great merchant families invested in more universities and libraries through this period of European Renaissance that perhaps only represented a rebirth locally to Italy, and an entirely original era for most of the rest of Europe. A chain of technological development birthed a virtuous cycle of wealth creation that went hand-in-hand with the exploration of technologies that lifted all boats .

Why?

Because no central authority could burn them.

Source: Cade Daum

Best Bitcoin Economics Guides

Having certain read all of them, including the ones yet written in the future, I hereby certify the following as the best guides to the deep (and growing deeper) topic of Bitcoin economics.

Define value as per Valerie's Q:

Repairing Technology's Reputation

Any sufficiently advanced technology is indistinguishable from magic .“ -Arthur C. Clarke (Clarke's Third Law)

The Monetary Wars Part II: The Right and Wrong Definitions of Technology lays out a solid definition of technology in economic terms.

Something is technology exactly when it expands net resources.

But there is a catch, and it's an important one:

Technology is in the eye of the beholder.

What exactly do we mean by this?

Source: Interestingengineering.com

Let us define two categories of technology:

  • A technology is symmetric when its existence expands resources in a decentralized way.
  • A technology is asymmetric when its existence expands resources in a centralized way.

Consider the wheel . It is hard to imagine a life not improved by the wheel. This curve of constant width makes travel so much easier that it is easy to imagine that everyone's life is improved by the wheel. Thus, we categorize the wheel as symmetric technology. In contrast, we might categorize advanced weaponry as asymmetric technology. With symmetric technologies, all boats rise . With asymmetric technologies, one boat rises —perhaps to the point of advantage that allows it to conquer all others .

Now, you may be thinking that these definitions are not so cut and dry, and that would be fair. There are technical issues with most core economic terminology such as with utility (which sounds simple, but gets complicated ) or happiness . There may be game theoretic equilibria that make technologies more and less symmetric . Nonetheless, the concept of symmetry is crucially important to humanity and the world we live in. We may adopt relative language ourselves at times.

Source: buddhamuseum.com

History is full of examples of changing tides of power among civilizations and kingdoms according to relative symmetries of technological advancements. In each case, the conditions are important in understanding the process. Wood block printing appeared no later than the 4th century in China, the first book in the 9th century, and moveable type by the 11th . Around 1440, Gutenberg's printing press appeared in Germany . Large scale printing raised literacy following these developments in both China and Europe.

In Europe, the establishment of the printing press during the 15th century changed civilization in fundamentally different ways than it did in China. Perhaps balances of power between wealthy families and provinces tipped here or there in China, but the Imperial system sustained. But in Europe, the printing press helped spur the Reformation , a decentralizing turn of events which continued as the birth of the capitalist era . As the technological advantages, harnessed into feedback loops, unconstrained by a central authority, grew in the West, the West completely pushed past China in power .

With a conception in mind of the symmetry-based distinction between centralized and decentralized technology, let us examine a handful of contrasting examples:

  • Most tasks that we associate with unskilled labor are that because they are so highly decentralized. This includes some, but not all, farm labor or construction tasks.
  • Artificial intelligence is highly centralized as there are few people or companies with the knowledge and capital to make it productive for them.
  • Most military technology begins as centralized technology, often leading to immediate military victory. Such victories often change the course of history. In time, these technologies are often then adopted more widely becoming more decentralized. Currently, nuclear arms are more centralized than are guns or hand grenades.
  • In fact, most technology begins under centralized, perhaps even individual control. But technology includes the business practices of utilizing new inventions, trading products, and decentralizing the effects in return for profit.
  • Fiat currencies are highly centralized in their design and control , even if used widely. Bitcoin is substantially more decentralized, with many thousands of mining and validating nodes around the world running open source protocols whose utility is then dictated by market participants.
  • Common vaccines are somewhat decentralized in the sense that all educated societies include people capable of making them. Newer mRNA vaccines are more centralized in that only a handful of corporations know how to design and produce them, and have control over the ingredients.
  • Gene editing technology is highly centralized at this juncture.

Questions worth asking:

  • Under what conditions does technology decentralize into symmetric benefits?
  • Can we steer the development of new technology in a way that helps maintain societal stability?
  • What effects does it have on individuals or societies when technologies remain asymmetric?
  • What can I do about it?

Utility Theory

Define utils

Relate market economics to utility

Monetary wealth allows for less stress in pursuit of utility

“Money doesn't buy you time, but it buys you the ability to ignore money.”

https://www.danheld.com/blog/2019/12/27/the-information-theory-of-money

Reserve Currency Economics

The dry Wikipedia definition of reserve currency : A reserve currency (or “anchor currency” which nobody actually says) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves.

If you feel like you just learned nothing, I don't blame you. This is a flawed definition, and even understanding why it is flawed will take some learning.

Ultimately, storing wealth means holding an asset that is considered a bedrock of wealth. Such an asset provides a basis of trust between counterparties for all kinds of reasons:

  • A bank's clientele wants to understand their wealth is safe.
  • Financial counterparties want high trust in transfers/trades of assets.
  • Counterparty risk is real. Counterparties want to know an institution they work with is not likely to bankrupt due to risky asset holdings.

These are not at all small concerns, and world banking and trade rests on managing these risks. Without a reserve currency, a great deal of economic activity would cease and society as we know it would look much different. Much poorer.

So, the “foreign” part of the Wikipedia definition is not necessary. However, it does relate to an extremely important topic known as the Triffin dilemma (or Triffin paradox). More about that later. In the meantime, know that many Bitcoin proponents see Bitcoin as solving the Triffin dilemma.

Note: In 1933, gold was confiscated from banks holding assets of U.S. citizens in order to bail out the Federal Reserve Bank. This could happen to some degree with Bitcoin, though it would be harder for this to happen with those who hold their own Bitcoin. Centralized sources of holding such as investment pools, exchanges, and custodial services, are more likely to be strong armed to give up the wealth of their clients.

Balance of Payments reveals supply and demand forces of a nation’s currency.

What Happened in 1971?

Only wrong answers, please.

The subject of what happened in 1971 has been the subject of much memeing as Bitcoin has grown in the public spotlight. This is no accident. The reason it matters so much that Bitcoin is hard money is because once the U.S. dollar gained clear world supremacy, U.S. policy makers and bankers saw fit to decouple it completely from hard money. Five decades later, the chickens of expansionary money monopoly (Monopoly money) are coming home to roost.

Cantillon Effects

It could certainly be said that Bitcoin has a Cantillon effect. But unlike fiat currencies that can be inflated without limit, Bitcoin's Cantillon effect is one time only and known from the start. It might be said that this allows for the world economy to move asymptotically close to a productive Pareto optimum as per the second welfare theorem .

It might also be said that Bitcoin has no Cantillon effect at all, but rather a similar accrual of value, but centered on investors in a new technology as opposed to technologically inert fiat money generators.

The Failure of Alt Coin Competition

Adoption

A suggested Lindy effect chart covering Bitcoin adoption.

S-Curve Adoption

We identify birds by their feathered wings. We tend to identify the most world-changing technologies by S-curve adoption. Why? Perhaps because it takes time for an understanding of a new technology to propagate, resulting in an early period that begins like an exponential function, rising slowly at first before entering into a fast-growth period in which recipients of the new understanding overlap heavily with the media/teachers, then flattens just as quickly in a period in which the “laggards” are brought on board out of necessity or easier affordability brought by mass scale. Or voodoo. I strongly suspect voodoo.

The basic math behind an (idealized) "ordinary" S-curve and a pretty picture:

Homework problem: Why do you think they call it an S-curve?

Here is another pretty picture with handy labels for “innovators”, “early adopters”, and people without foresight or money or something. It also includes a handy pointer suggesting we are at around 20% adoption, but without explanation for what population we're talking about, much less how that 20% figure was arrived at. This certainly doesn't represent world adoption because there aren't that many people holding money in banks at the present. I would assume it's made up, but I simply cannot imagine that people make up numbers and publish them on the internet.

In practice, these kinds of adoption curves never look this nice, but they do sorta bear resemblance to an S-curve model .

Several things jump out at us about this graph:

  1. Nobody at all thinks that pop music is a technology. But can you name an era in which four chords were used in combination with so many tempos and time signatures, and in so many permutations to better parent the youth? I thought not.
  2. Yeah, okay, these are mostly somewhat S-curvey.
  3. Adoption rates of new technologies seem to be speeding up on average.

Let's see where Dave the Wave thinks we are on the Bitcoin S-curve :

Wait, is this based on actual data? I don't see any data. Is that like 3%? By what metric are we measuring adoption? If Bitcoin is private, can we find a reasonable estimation tool for the number of Bitcoin users? Does it matter if we're talking local (U.S.) or global? If this is global, is there some expectation that we'll manage to onboard nearly every last person in Africa in the blink of an eye? According to bitcoinmarketjournal.com, an estimated 11% of Americans currently hold Bitcoin . This estimate is based on a survey and so is biased toward people who answer surveys [no citation]. That survey was from 2019 (even though the article was written in November of 2020) and shows a paucity of Bitcoin owners in the 65 and older age group. However, since a bunch of those people died during the pandemic of 2020 due to a rather deliberate lack of attention to the value of early treatment medication , we can adjust that number upward. (I guess that joke is the only treatment of the topic that was anywhere close to “too soon”.)

Now, in our quest to understand Bitcoin's possibly-S-curvey… cumulative adoption function (it's not an adoption rate , gah), perhaps we can at least analyze the growth in the number of blockchain wallets worldwide , as reported by statista.com (in order to understand the rate at which users are adopting Bitcoin). Actually, the people at statista.com call this a graph of wallet users , but how could they possibly know how many wallets each user has on average?! I have a bunch and I'm not telling anyone how many because I don't even know that off the top of my head and wouldn't tell you even if I did.

Um…something seems off here. Ah, right: it's the scale where the date(x)-axis jumps from three reporting points per year to once every four days. If you take a look at the actual numbers on the graph, wallet growth increased steadily from mid-2017 to mid-2020 at a rate of a little more than 30,000 per day. But in February, 2021, wallet users (or maybe just wallets because…we don't know) growing at a rate of nearly 100,000 per day. This represents a quick tripling in the Bitcoin (or Bitcoin wallet) adoption rate. And this faster new rate seems to be sustained since around the election. Exciting! Perhaps Bitcoin adoption really is bending up the bottom of the S-curve right at this very moment . Right in front of our eyes. And just beneath our feet. At the spot marked X on the map! And maybe in a notebook that we keep in that really really safe place that's kind of awkward to get to where nobody will ever find it.

But how far will it go?

There are some who forecast 90% penetration of Bitcoin into the U.S. market by 2030 . I still don't know what that means (who really cares about definitions in statistics, anyhow? Are we all just data savages?! ) and suspect there are not that many U.S. holders of long term wealth, but I could see that changing in time. Still, much as I love Bitcoin, this strikes me as optimistic. I could however envision 90% of U.S. wealth holders (outside of assisted living) storing Bitcoin by 2030 and 90% of Americans (outside of assisted living) using some form of cryptocurrency by that time, and perhaps all of that will be connected to the Bitcoin blockchain as sidechains. Then again, sometimes that Segway is too far ahead of its time to catch on and fails to climb the S-curve outside of the local police precinct.

So, after all of this “analysis”, let us summarize our conclusions:

  1. If Bitcoin is a technology, its adoption is probably growing according to some S-curvey-like shape.
  2. Since Bitcoin seems to be accelerating in adoption growth, much like the bottom bend of an S-like-curve, it hasn't yet failed as a technology…and might be beginning the climb up the steep part of the S-ish-curve.
  3. Lots of people on the internet make pretty curves with unsourced data or make hand wavy estimations when what we really want to understand is the rate of change and also the rate of change of the rate of change (or even steps in a step function if there is something unique about the pace of change from one Bitcoin epoch to another, maybe). I might have just made this part up for the summary, but it's true.
  4. Nobody considers pop music a technology.
  5. If Bitcoin is a new technology, you're not too late to achieve excess profits on an investment in the Bitcoin network. Unless you're reading this in the year 2072, in which case I'm delighted to know that artificial intelligence hasn't wiped out the human race (or that you're an alien or a robot).
  6. You subscribed to the right newsletter (unless you didn't because you don't know any better yet ).

Money is Proof of Work

Just for a moment, imagine a fair world. I know, I know, let's all sing kumbaya until we're bitter post-idealists plotting for vengeance against the others . But no, seriously, close your eyes and clear your mind. In a fair world, what would money represent?

Money represents storage of work.

Who decides when work was done? What constitutes valid proof?

For much of history, physical objects that were essentially impossible to counterfeit have served as such proof.

Gold pulled from the ground and refined

Game Theory

This topic is of extreme importance, and there is not yet a good guide on the internet, so I will be piecing this together slowly, but surely.

Prisoner's Dilemmas

While game theory is itself an enormous topic where mathematics and economics meet in highly practical theory, perhaps the most important element of game theory to understand is the prisoner's dilemma . The reason for its importance is that it represents a circumstance in which two people act rationally by defecting against one another, instead of cooperating.

Cooperation is central to the advancement of civilization, and many people of good will and philanthropic spirit find it at first baffling to find out that it might be rational for people not to cooperate under certain circumstances. People of experience surely know that there really is a cooperative bias manifest in human behavior.

Yes , there is a cooperative bias among humans. This is because most of the circumstances that we study in game theory as normal form games have equilibria that suggest that cooperation is rational. And that is great news, indeed. However, the prisoner's dilemma is the name given to just one normal form game where this isn't the case.

***show normal form table example with multiple graphics highlighting each agent's options as per the other's possible choices.

Now that you understand the idea of a prisoner's dilemma (if you did not already), let us build intuition as to real world circumstances that represent prisoner's dilemmas.

  • People want their members of Congress to negotiate Federal money coming to their state or region, but people hate that Congress is a big corrupt horse trading scheme. But voters who elect somebody who does not play the game they hate would find their locality to be the one paying in taxes without benefitting from (often unnecessary or overpriced) government programs. So, people willingly vote for scumbags . “At least he's my scumbag.” Sigh.

Scarce Solutions to Prisoner's Dilemmas

The Game Theory of the two technologies (symmetric vs. asymmetric)

Paradigm Shift in Property Rights

Article published to Substack (minus any edits I make here)

The world is changing rapidly these past few years, for better and for worse. There are as many perspectives on these changes as there are people old enough to understand the accelerating pace. However, in the end, economic impacts dominate the changing landscape.

Importantly, change is coming to the way we think of property. No, I'm not talking about the World Economic Forum's disturbingly blunt, ” you'll own nothing and be happy “ vision of the Great Reset. I'm talking about the way cryptocurrency has already begun to affect changes in conceptual thinking.

Before I go any further, there is the burden to make clear and attempt to intuit an axiom on which these arguments depend, which is that the world economy will function primarily using cryptocurrency . The exponential growth of valuable information that is increasingly digitized already looks to overwhelm tangible stores of value. There seems to be no near term cap to the growth in value of digital information. Certainly our proposed axiom fails if the people of the world revert to some kind of feral state, as happened when the Mayans failed to solve their resource bottleneck. A flying space rock could simply end human civilization in the blink of an eye, cosmically speaking. For the purpose of this article, we tether our axiom to the supposition of technological progress. Simply, in the absence of serious technological reversion, cryptocurrency (most likely buoyed by Bitcoin) will become the world's dominant form of money. And intuitively speaking, it is hard to imagine some form of “internet of money” not taking root . It seems equally hard to imagine users not preferring nearly all of the features designed into the current dominant forms of cryptocurrency since those features are specifically oriented toward providing each sovereign user with security and agency over their finances and assets.

The kind of paradigm shift that may already be taking place with the rise of cryptocurrency will surprise many people who have been accustomed to a system that has been around in one form or another for many centuries. The paradigm of property rights will seem intuitively normal to children growing up playing videos games with digital assets. However, those of us accustomed to the economy of yesteryear will take some time overcoming cognitive dissonance and getting used to it.

Most people have some sense that workers have a right to the fruits of their labor, though only some labor can be captured in tangible form(s). Such norms become community standards and have been codified into law as property rights . Property rights might fairly be described as a system that exists in equilibrium in which the economic incentives result in benefits that exceed the costs. The enforcement costs are often aggregated through the government, but there is nothing inherent about the goal of ensuring the right of individuals to negotiate the fruits of their labors that necessitates government involvement. It might be fairly said that property rights systems can be more or less decentralized, and in societies of increasing wealth inequality (perhaps including failing empires) the laws that govern these rights become increasingly gamed by those with enough power and wealth to bribe and bully in a political arena to which few citizens have real access.

In the digital age, information has achieved astronomical value that has increased in aggregate at an exponential rate. A handful of governments and corporations have all but monopolized much of the capturable value, turning the information extracted from consumers into monetized products or power. Large technology companies such as Google, Facebook, Microsoft, and others act as information vacuums at nearly zero cost aside from equipment, employees, and increasingly large lobbying budgets. This high level of de facto centralization of the value of information already appears problematic to many of us. It is the power to permission the markets, and thus to steer the expressed interests of participants. In this sense, we have moved closer and closer to what some critics have reasonably described as market socialism.

Cryptocurrency flips the recent evolution of the information economy and sets the stage for a new system in which digital information can be controlled by private key holders who can then seek rents for their own information in the form of payments (often micropayments) per view, share, or even edit. This gives rise to a modern conception of the Self-Sovereign Individual . Rather than depending on a government, backed by police and military power, to enforce property rights, access to property is simply implicit in the holding of unique private keys. Certainly, this change requires for wealth holders to take on a new form of responsibility over their keys and data. Let us now examine the potential benefits of doing so.

  1. Trust minimization. The payments made into the system in transactions (even if micropayments) do add up to tremendous payments for those providing system security. This is what allows for what many Bitcoin advocates call trust minimization , which allows for greatest ease of asset transfer without the need for risks associated with “trusted third parties”.
  2. Increases in Information Availability. Information markets produce financial incentives for people to make productive use of their own data, without need to fear its misuse . Or, rather, people will price their information contractually understanding their own value in keeping that data private. One topical example might be health or medical data, held in decentralized and encrypted form. People might choose to record more health data in secure form, then choose to give or sell it to researchers whom they deem trustworthy.
  3. Decentralization of Information Economies. Current tech giants that are accustomed to paying virtually nothing for information will gradually find themselves sharing the profits from that information in the form of the discussed payments, or finding themselves unable to collect information for which users would charge more for access. We can only speculate at this point what forms of equilibria markets will bring to the process. I expect to see small specialized companies form with expertise in making specific forms of data valuable in various ways.
  4. Reputation systems will rebalance. Those of us who profit from sharing information (whether in the form of basic data, articles like this one, or other forms) will find out information valuable to the degrees to which our reputations remain strong. This encourages a virtuous cycle of basic cooperation while discouraging the spread of disinformation. And instead of these reputation systems being centrally run like a government social credit score, there will emerge many diverse forms of reputation that do not require homage to some central ideology that runs the risk of singular existential mistakes.
  5. Taming “ the demon ”. The existential threat posed by runaway artificial intelligence must now cross a vastly more complex (and potentially impossible) economic barrier in order to achieve the runaway annihilation hypothesized in the story of the Paperclip Maximizer . Perhaps this slows the development of artificial intelligence to exactly the pace at which humanity can manage the reins so as not to allow for destructive inhuman domination. Simply the process of bidding up the values of the resources needed to produce a runaway paperclip manufacturing machine runs into payment for the externalities of excess paperclips in a market feedback loop.

I have little doubt that I am leaving advantages off this brief list. Perhaps some of them will only become apparent after the new paradigm takes firm hold of the world's economy. If you have quibbles with my list, or suggest further items to the list of benefits, please comment. In general, I would like these articles to encourage and produce discussion we can further build on.

For further reading on the topic of property rights in the era of Bitcoin/cryptocurrency, check out Konrad S. Graf's free online book Are Bitcoins Ownable?

Self-Sovereign Identity

Breaking All the Laws

The economic laws that made sense to us may be useful in the new world of Bitcoin economics. But their place in the cryptoeconomicon requires at least some of them to evolve. We are trained mentally to think of money in a world of constantly inflating currency and price indexes. Bitcoin changes the script. Here we talk about how that changes our conception of various economic laws according to first principles and root economic forces.

Metcalf's Law Revisited

Valerie's Q: How do we define the nodes? Implied: What are the implications to our notion of Metcalf's law?

There may be multiple notions of what constitutes a node. They may yield similar or different answers. We may even need to consider the possibility of multiple node classifications and try to redefine a more advanced version…

Bitcoin Maximalism

Since Bitcoin emerged as the first successful digital currency (a fact hard to argue against after surpassing a trillion dollar market value), investors have often looked for the next big thing. While some investors grew somewhat or extremely wealthy by getting into ETH from the start, altcoins have not yet made many people extremely wealthy aside from a successful founder here or there, and often through deceptive advertising. A number have been outright scams.

Bitcoin maximalism arose among Bitcoiners in order to refocus the attention of inexperienced technology investors on Bitcoin's clear lead in the most valuable use case possible: a complete rebuild of the world's monetary economy. In climbing toward that digital-gold summit, Bitcoin has accrued wealth for speculators at mind-boggling rates, doubling in value faster than once per year since its first transactions. While there are varying versions of Bitcoin maximalism, one basic conception might be as follows,

Until Bitcoin supplants all other forms of money as the new bedrock for all financial transactions, other cryptocurrency use cases cannot possibly compete as an investment. And the Bitcoin design can simply incorporate technological advancements into its expansive network to subsume new technologies that might emerge in an attempt to leapfrog Bitcoin's dominance.

However, even Bitcoin maximalists sometimes hold small amounts of other major cryptocurrencies as a hedge, just as keen internet tech investors who saw the broad power of Amazon or Google did not just go all in on either of those stocks. Perhaps something unexpected could take place, despite the impressive design and track record Bitcoin has enjoyed.

On a pure investment level, it is hard to argue in favor of another use case. For this reason, I personally hold more Bitcoin than all other investments combined, by a wide margin. There are some who call me a Bitcoin maximalist, but I will explain my own twist on the paradigm a little later in this document.

It is also clearly the case that most protocol improvements can simply be implemented on the Bitcoin network long before a new cryptocurrency using that improvement can close the gap from zero-to-Bitcoin, maintaining dominance through an already highly functioning network of around 10,000 full nodes and more than 100,000 nodes listening to the network to help validate transactions.

Beyond that technological network effect, institutional investment has begun to frame itself around Bitcoin. The Intercontinental Exchange (ICE) , known as perhaps the world's most competent group at building exchanges and clearing houses, built BAKKT (as in “backed by Bitcoin”) both to take a cut of the exchange business, but also as a place where they could learn to settle financial transactions in Bitcoin. One day most all of the world's stock, bond, and other financial transactions may settle on the Bitcoin blockchain. That day might be sooner than most people think. Once that begins, it will be even harder to supplant Bitcoin as the dominant cryptocurrency.

Counterpoint to Maximalism

Beyond Bitcoin Maximalism

Thinking Fast and Slow About Money

There are numerous forms of blockchain, or more broadly digital ledger

Hyperbitcoinization

If and when Bitcoin begins to ascend as the world's dominant (reserve) currency, the values of many scores of currencies and monies could vaporize and be absorbed into Bitcoin in a process termed hyperbitcoinization .

First, let us examine the broadest definition of a currency to fully understand what we're talking about. When most people think of “currency” they think of the dollar, euro, yen, yuan, or other national currency. However, debt such as treasury bonds are counted into the money supply. They too can be used to transact business where convenient.

Okay, what else?

Gold and precious metals are currencies. Add diamonds and precious stones to the list.

If bonds are currency, why not stocks? Sure, they are generally exchanged within a more defined and often walled off ecosystem. And indeed, in finance, stocks are often referred to as a company's currency. When the company wants money, so long as the company has a good track record of building positive economic feedback loops from which they can profit, they can conjure more stock to trade for money to further capitalize their ventures. It might as well be said that all fungible assets are currencies if they can be traded for any one other currency. While traversing the graph of currencies may be somewhat slower than processing a credit card, enough of any one of them can purchase a bicycle or a car or a house.

When Thier's law kicks in for any one of these currencies, its velocity as currency will slow to a minimal point that might be defined by its base commodity economy. Gold will still have some value as a soft, dense, and highly conductive metal useful in small quantities in some computer and electronic systems . But if gold is no longer hoarded as a store of value, its market value relative to Bitcoin will crash dramatically down to a point at which equilibrium is achieved relative to its desire as a productive industrial metal. This may already be underway in 2021.

The value above “commodity par” of each currency, if there is any, will accrue to Bitcoin. Those currencies without other purpose will disappear entirely.

***rebooting wealth growth (write me)

Various articles related to hyperbitionization

Unit of Account

The New Technological Era

Repurposing labor from finance

Dismantling of IP law

A Theory of Benevolent Bitcoin Whales and hyperprogress

What About Government?

Repairing Human Consciousness

This sounds like a tall order, but given the vast improvements in game theoretic dynamics, we might just see it happen.

https://twitter.com/GRITCULT/status/1365470522180579339?s=20

https://twitter.com/lalasugarloaf/status/1371277298066812931

The Pathological Horrors of Human History

The Rise of Corporatism

The Kunlangeta

The Pathological Horrors of Human History

Okay, sure, I'm being redundant. Let's get more specific.

The Rise of Corporatism

The Birth of Corporatism (substack)

Despair not, spare your enemies not, for God is with us .“ -Jan Pieterszoon Coen, Governor-General of the Dutch East India Company

To understand the birth of corporatism, we might reach back to the beginning of civilization or earlier. Such is inherent in the tasks of worthy books like James C. Scott's Against the Grain , whether or not they aim at this particular goal. But for most of human history, tribes, kingdoms, and empires were the dominant units of organized governance in a relatively straight-forward way. We might recognize the corpus or collegium of sixth century Rome as the first corporations, but this distinction becomes primarily rhetorical for our purposes. Our goal is to understand the inception of the kinds of corporations that so profoundly changed the balance of all human dynamics after the birth of capitalism .

Capitalism generated profound technology advancement and wealth throughout much of Europe from the late fifteenth century onward. Portugese and later Spanish merchants dominated ocean trade routes, as they were so motivated at the extreme end of the distribution of goods entering Europe through Mediterranean ports, with Italian or Ottoman merchants adding substantially to final costs. So powerful were the European oceanic trade empires that their currencies became almost universally accepted among merchants, sparking the modern reserve currency era .

Part of what distinguished European trading powers from the Chinese Treasure Fleet of the early fifteenth century was the clear profit motivation. Rather than building a massive-but-expensive “floating city” as was managed by the Chinese eunuch Zheng He with a powerful if vague diluted mission to represent Imperial China, the Europeans relied on a handful of boats focusing cargo space primarily on the valuable goods to be brought back largely from Asia. Diplomacy in the name of some far away crown was a secondary, but not primary concern.

Early trade expeditions that rounded Africa were funded by royals such as King Manuel I of Portugal, who chose Vasco da Gama to lead ships that eventually reached Calicut, in India. But such voyages were risky, with “boom or bust” returns. Eventually, traders learned to balance risk by diversifying both investors and voyages through corporate vehicles. In 1602, the Dutch East India Company was founded to those ends. This new form of corporation was granted a trade monopoly broadly in oceans and seas outside of the regional waters where affairs were directly managed by the Dutch crown.

What should be understood about the Dutch East India Company is that it operated largely as an independent organization from the government that birthed its charter. It is sometimes referred to as the world's first multinational corporation (MNC), though the British East India Company was chartered nearly two years prior in 1600 . The Dutch East India Company's power grew quickly during the seventeenth century under strong and brutal leadership. Financial backing with lower single-voyage risk allowed the Dutch merchants to quickly surpass rival Portugese and Spanish trade empires, taking control of valuable trade with Asia.

More profit and higher stakes led to moral transformation of the massive Dutch MNC. While abolition of slavery spread through European kingdoms during the centuries leading up to this new corporate era, the large trade empires of Europe faced temptations to make use of slaves in the Americas and also along the trade routes to Africa and Asia. While Christian Europeans successfully pushed for abolition of slavery throughout nearly all of Europe centuries earlier , and often fought against colonial slavery with varying degrees of success, the Netherlands hung on to slave plantations in its colonies until 1863. That system of slavery lasted more than six decades after the final termination of the Dutch East India Company that established them. East India Companies from numerous European nations also established colonies, conducted slave trade, and held slaves in contravention of their local laws and customs.

Perhaps this is a good time to define corporatism as we intend its distinction from traditional market capitalism.

Corporatism is the system in which market trade and activity takes place outside of the framework of law that otherwise restricts societal governance.

It makes further sense to distinguish corporatism from what usually gets described as laissez-faire capitalism , or Adam Smith's “system of perfect liberty”. Smith, most often referenced as the ” Father of Modern Capitalism “, is also often and rightly described as the first "anti-corporatist" . While he argued that wealth grows when nations stay out of the economic affairs of its citizens, he lambasted the legal asymmetries of corporate governance. In An Inquiry Into the Causes and Nature of the Wealth of Nations, he protested the monopoly powers with an implication of what we might call “the tail wagging the dog”,

The majority of a corporation can enact a bye-law with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever.

Before moving forward, let us clarify the distinction between capitalism and corporatism because it is so often lacking in sound conversation and analysis:

  • Capitalism describes the application of technology in positive feedback loops to produce goods and services to be consumed or traded freely.
  • Corporatism describes the application of force (including state force) in taking control of technology and production feedback loops.

What some people call ” Western capitalism “ or ” crony capitalism “ as pejoratives are part or all of what I'm more simply calling corporatism. Corporatism typically leverages a monopoly on violence for its parasitic ends. Sadly, the historical development of such terminology (“capitalist” was coined by Karl Marx as a pejorative ) has lent itself to a world of confusion, not to mention forms of revolution that killed many millions before deteriorating into Animal Farm s, which might as well be described as feral corporatist states .

The Dutch East India Company secured and maintained valuable trade routes and colonies until its dissolution on December 31, 1799, thanks in part to its ability to call on the Dutch naval forces to dispatch rivals and support local princes in a game of “picking winners” in far away lands such as Indonesia. During its nearly 200 year existence, this first MNC saw the first shareholder activism and even stock short-selling in Amsterdam. Not only were its moral practices distasteful to many Dutch citizens and shareholders alike, its leadership succumbed to temptations such as withholding funds from investors and cooking the books. The birth of the modern corporation quickly birthed new white collar crimes, or at least made them common. The profits that came in were too valuable for the kingdom or shareholders to want to let go of, or at least rein in, their new international mafia.

Throughout the 1700s, the British East India Company began to rival the Dutch East India Company, leading to four wars and a variety of related skirmishes between the incumbent Dutch and Rising British powers. The latter's exploits and wealth would eventually propel it to take on the role of the world's largest MNC. As with the Dutch East India Company, the British East India Company engaged in wealth extracting activities neither tolerated or legal within English borders. As with the Dutch, the British, through the MNC, reignited their participation in slavery, highly active in the trade and holding of slaves for more than a century.

As the Mughal empire that controlled most of the Indian subcontinent of South Asia faded in the early 1700s after two centuries of reign, the British East India Company seized control. Colonel Robert Clive led English (corporate) forces to victory over Mughal Nawab of Bengal in 1757 during the Battle of Plassey . Soon after Clive took control of Calcutta as well. French forces were also on the losing side as part of the Seven Years War that began the erosion of French colonial forces. As the British gained more complete control over India's valuable economic products, including opium to be sold in Chinese ports, the British pound sterling asserted monetary dominance over the French livre des tournois.

Source

The British enjoyed brutal corporate control over India for just over a century, aided by the use of violence to ensure monopolistic profits , and during that time took on powerful China in the First Opium Wars , the first of a series of defeats for China that demonstrated that European corporate power had surpassed what was likely the world's wealthiest nation for most of the previous 4,000 years. When the British East India Company dissolved back into the British Crown in 1874, it left a legacy of global terror in its wake. The increasing profits of European trade from the late 1400s onward tempted psychopathic men to climb the ladders of corporate power, then take advantage of relative asymmetries in technology to bring tens of millions of Asians and Africans under its control, at least partially, if not completely. While the birth of capitalism represented the widespread employment of economic feedback loops of technology to generate wealth and power, along with the erection of hierarchies of competency, the birth of corporatism represented the use of that power to take control of the economic feedback loops, along with the erection of hierarchies of psychopathy and sociopathy.

The Kunlangeta

The Kunlangeta (substack)

I couldn’t see where the collection of Burger King figurines fit in, but I supposed there was no reason why psychopaths shouldn’t have unrelated hobbies. ” –Jon Ronson, The Psychopath Test: A Journey Through the Madness Industry

In 2008, staff writer John Seabrook wrote about psychopaths in an article in The New Yorker entitled ” Suffering Souls “:

Psychopaths are as old as Cain, and they are believed to exist in all cultures, although they are more prevalent in individualistic societies in the West. The Yupik Eskimos use the term kunlangeta to describe a man who repeatedly lies, cheats, steals, and takes sexual advantage of women, according to a 1976 study by Jane M. Murphy, an anthropologist then at Harvard University. She asked an Eskimo what the group would typically do with a kunlangeta, and he replied, “Somebody would have pushed him off the ice when nobody else was looking.”

Amusingly, in the opening paragraph of an article in Psychology Today , psychology professor Dale Hartley wrote,

The Inuit people of Alaska have a word, kunlangeta, for “a man who … repeatedly lies and cheats and steals things and … takes sexual advantage of many women — someone who does not pay attention to reprimands and who is always being brought to the elders for punishment .” Anthropologist Jane Murphy revealed this in a study published in 1976. When she asked how the Inuit people dealt with a kunlangeta, one man told her, “Someone would have pushed him off the ice when no one was looking.”

Now, my point is not to have you guessing about whether or not plagiarism is a key aspect of psychopathy. It isn't. Plagiarism is likely more common among narcissists, including sociopaths. None of these things is the same as the other, and to the extent that there is any confusion, it should be pointed out that the entire history of clarifying these dangerous psychological abnormalities confuses even the professionals. As The Last Psychiatrist (TLP) once explained , the labeling of disorders changed from one DSM version to another, changing the entire philosophy of how we identify these conditions along the way. That TLP article further challenges the basic perspective of renowned psychopathy researcher Robert Hare.

My goal here wasn't to confuse you (media does a good enough job of that—can we even watch TV without somebody verbally treating psychopaths and psychotics as the same?) or to point out how confused professional psychologists and psychiatrists might be in their explorations of fundamental questions of human psychology. So, let's take a step back. The Seabrook paragraph was simpler, and to the point: there are people who, despite the basic societal structures and hierarchies that define and enforce boundaries, behave horribly toward other people. Psychopaths are rare people who neither feel empathy toward their fellow humans, nor care about societal norms . On an evolutionary scale, it might very well be the case that the occasional kunlangeta helped a tribe survive conjugation by another—the ones whom you might count on to do the dirtiest of dirty work. But implicit in such a hypothesis is a chicken-and-egg problem that may simply predate humanity. For the most part, humanity got along by pushing the kunlangeta off the ice .

Most people know the chilling tales of the psychopaths most talked about in Seabrook's article—the 15 to 20 percent of males in the prison population, some of whom commit crimes so baffling that the mental friction of conception (for most of us) allows late night comedians to entertain us with jokes about them.

I saw a girl crying, so I approached her, knelt down to her level and took her hand gently in mine. After a moment, I asked, “Where are your parents?” Then she cried even harder. I love working at the orphanage.

No, you're not a terrible person if you laughed. The resolution of the mental friction gets us. At least until it doesn't. When you've stopped laughing, it means the friction has resolved.

What most people understand less is how the same deviation of human psychology found perhaps 20 times as often among the hardest criminals coincides with perhaps similar proportions of corporate CEOs, lawyers, and media professionals . (image source: Lionsgate Films )

Perhaps the simplest explanations are intelligence or upbringing or both. It makes perfect sense that the smarter psychopath doesn't waste his life ( his only because nearly all psychopaths are men) strangling the neighbor over the remote control. It makes perfect sense that parental guidance can frame the course of life for a child whose perceptions of the world need help in framing. Such was the subject of a popular cable television series you may have watched.

Let's now think on a larger scale. Why would roughly 4% to 12% of CEOs be psychopaths (I've seen as high as 20% claimed, implying psychopaths might be statistically around 25 times as likely to become CEOs)? What is it about the human condition, or this era of civilization, that pushes the most potentially destructive people to the top of decision-making hierarchies? Is there some process inherent in the machinations of life on Earth that allows for this, and that we can deconstruct in order to prosper in a new era of happier, healthier, and less existentially dangerous living? Is there a way to decentralize power so as to limit the damage psychopaths might do, or better encourage hierarchies of competence and wisdom?

Ultimately, these are questions of game theory, of which I plan to write much about when time permits. Until then, a study of corporatism might prove revealing.

A History of Psychic Damage

Altered Reality

The Best Slave Pageant

Darwinian Sociopathy

Despair (time horizons of money)

A theory of restoration of virtue

Propaganda Targeting Bitcoin

PRATTs

Healing the Dark Crystal of False Ideological Dichotomies

It sure is interesting how even in an age when partisans seem to be [led] to different opinions on nearly every issue, people of all ideological and political persuasions are pouring into Bitcoin.

Emergent Order in the New World

The U.S. is in a position of exorbitant privilege .

Children will grow up with easy understanding of cryptocurrency. They will play games that involve cryptocurrency transactions, and learn to follow transaction history to understand markets and counterparties. Oh, and the technology.

Amusing Speculations

Who knows, some of this might be true!

  • Bitcoin Astronomy (parts 1 , 2 , and 3 )

Finance and Trading

For the most part, I think trading cryptocurrencies is dangerous for most people. The number of people I currently know who beat the opportunity cost of holding Bitcoin is currently zero (I am the only one, though I'm sure there are a handful of others). This is surely most of the reason why the HODL meme took such strong hold among those who make up the “Bitcoin cartel” (those early investors who soak up the liquidity together resulting in predictable scarcity).

However, judicious use of the knowledge surrounding Bitcoin finance and trading can still help build understanding.

Concepts:

  • Reflexivity theory states that investors base decisions on perceptions of reality more than on reality itself. The degree to which this is true subverts mean-reversion associated with simply efficient markets. Reflexivity can result in longer bull and bear runs—higher highs and lower lows relative to the baseline of the asset. In the case of Bitcoin, which has climbed more than an order of magnitude in value between peaks, this can be quite a substantial effect.
  • Fractal Markets. I'm going to start by saying that for most of my finance career, I rolled my eyes at the concept of fractal markets, even though I believed a limited degree in ordered news/information propagation effects associated with Elliot waves. However, I believe that the economic pressures on mining along with stock-to-flow pressures (not to mention fear/greed FUD/FOMO) do result in fractal patterns associated with Bitcoin's block reward halving cycles. Some readers may be more or less convinced of these notions after studying prior market histories. Here is a basic log normalized price chart that demonstrates some pattern behavior in Bitcoin:

Bitcoin Epochs

Bitcoin epochs are a useful conception in thinking through the history and further evolution of Bitcoin. Given that we see fractal price action in pattern with the Bitcoin block reward halvenings, we choose to define Bitcoin epochs in terms of the block reward cycles. This means every 210,000 blocks. Since it takes a little under four years to mine that many blocks, many people casually refer to four year cycles.

Source

At some point we will reorganize what follows in terms of Bitcoin Epochs as opposed to Bull/Bear markets by year.

Bitcoin Price History

The history of Bitcoin is a lot of fun. In particular, it is quite educational to relate (or find lack of relationship) events in Bitcoin's history with Bitcoin's price trajectory. Many Bitcoin proponents note that there is no bad news for Bitcoin. This depends on the retrospective observation, perhaps.

Hopefully reading through some of the history of Bitcoin's price ascension will help you make additional sense of many of the other topics covered in this guide. Note that 99Bitcoins.com has an exceptional history of Bitcoin events with a price chart relating each one to [maybe] trailing price action.

Histories of Bull Runs

On October 12, 2009, Finnish developer Martti Malmi sold 5050 Bitcoins for $5.02 giving Bitcoin its very first market value at $0.0009 per Bitcoin. There was still no public exchange for buying and selling Bitcoin.

The Bull Run of 2013

The Bull Run of 2017

The price of Bitcoin peaked at $20,089 on December 18, 2017.

  • July 17, McAfee…
  • Dec 21, 2017 Long Island Iced Tea name change signals the end of the bull mark.

The Bull Run of 2021

With the block reward halvening of 2020 in the rearview mirror and several times the mining supply being soaked up by investors, daily, the bull run of 2021 is right on schedule (the fractal cycle). One narrative being pushed is that the value of the Bitcoin network (a noninflationary and mildly deflationary asset) should be at least that of the current world gold supply (a mildly inflationary asset). This implies a Bitcoin price somewhere in the $400k to $500k ball park.

This time around, there are many Bitcoin-heavy hedge funds getting ahead of the curve, and somewhat reasonably in tune with an understanding of the fractal market.

Timeline (starting late 2020)

Laser Eyes and The Next Leg of the Bull Run

We may become irrational in thinking about [money] and fail to be able to reason about it like about a technology .“ -John Nash, recipient of the 1994 Nobel Prize in Economic Sciences

This article includes a price prediction—something I usually refrain from guessing.

First, let's take care of the stupid: I am not a financial advisor. Nor am I giving advice. Nor would I encourage you to ever take advice about Bitcoin from somebody with a title like “financial advisor” because much of the point of Bitcoin is that we're leaving the legacy system behind and entering an age of personal financial responsibility. Some people say, “Do your own research.” I can get behind that.

If you are unfamiliar with Bitcoin, now may be the time to begin what I can attest to being a long journey of discovery. If it doesn't make sense to you, do the reading neutrally, with the goal of learning, then see if it still doesn't.

Recently, after falling from an all-time high of around $64k to briefly under $30k, while still higher in price than at any time prior to 2021, Bitcoin was pronounced dead for at least the 416th time in its twelve-year history. Maybe Bitcoin is dead, but I doubt it. This Friday, the world's largest Bitcoin conference begins in Miami . Friends of mine are already there, enjoying festivities. Were it not for my belief that lives can be saved by proper arrangement of medical data , I'd be there myself.

So, where are we, exactly, in the grand story of Bitcoin?

I was awake all night during the 2020 election in November. I watched the Bitcoin market swing when expectation turned from Trump to Biden. Bitcoin then immediately marched steadily from around $11k to over $40k in price. Shortly thereafter, the laser eyes began . From MSN,

The origin of the meme is unclear, but it seems like it's part of a campaign to raise bitcoin's worth to a $100,000 valuation, according to a comment in the bitcoin subreddit. Tweets with both #Bitcoin and #LaserRayUntil100k also seem to support this reasoning.

As with most topics worth reporting about, MSN is wrong, or at least incomplete. Unlike dogecoin , Bitcoin doesn't need a campaign to propel its price. At least, not specifically. The laser eyes are just Bitcoiners having fun while the attention builds. But when will Bitcoin reach a price of $100k? Surely all these people don't plan to walk around shooting lasers out of their eyes forever, right? That makes everything from driving in traffic to having sex more difficult, and that's only funny for a day or two.

Source: Fiona Smith

Faster than you might think, whether or not you're a fan of Bitcoin.

I generally do not go on record with price predictions. In general, such predictions made publicly do a reputation little good. People always remember the one you got wrong, regardless of the hit-miss ratio. But I'm going on record now: shortly after the end of the Miami conference, Bitcoin will skyrocket in price to around $100k .

I suspect this could take no longer than a month. A few months ago, from further out, I said on Facebook that Bitcoin would hit $100k on July 17, but that was me joking that it could happen on my birthday. That might happen, but I suspect Bitcoin will hit $100k this month. That would require around a 170% price increase in four weeks.

I could be wrong. It might take longer. But I am ready to take off these laser eyes. They're starting to itch a little.

  • June 4, 2021 ( zerohedge ) Russia $186B sovereign wealth fund dumps all dollar assets
  • June 7, 2021 ( TheDossier ) The Colonial Pipeline hack, the Russians & Bitcoin
  • June 8 or 9, 2021 ( Nayib Bukele ) El Salvador approves a bill to make Bitcoin legal tender with a supermajority.
  • June 9, 2021 ( cnbc ) Interactive Brokers will offer crypto trading by the end of summer
  • July 7, 2021 ( bitcoinmagazine ) Members of Argentina's national congress submit bill to allow workers to receive salary in Bitcoin.
  • July 7, ( businessinsider ) Visa partnering with 50 Bitcoin companies to allow clients to spend and convert digital currencies.

Histories of Bear Markets

The bear runs pretty much encompass the 75% of the time between the bull runs. If that seems strange for an asset of such rapidly accruing value over the years, keep reading and learning more. It makes sense once you realize that most of the price increase has come on the tails of reward halvenings when supply evaporates and stock-to-flow pressures become dominant forces until the Fear of Missing Out (FOMO) kicks in and Bitcoin's price surges beyond levels that seem reasonable. Call them “bubbles” if you like, and perhaps this is momentarily fair, yet it happens at reliable intervals.

Note that during bull runs, mining operations sell out their Bitcoin stock near the highs and invest in the new wave of mining expansion. Hash rates skyrocket following the price, then essentially help define the new price floor.

The Bear Market from 2014-2016

The Bear Market From 2018-2020

Technically, Bitcoin's price at the start of 2018 and at the end of 2020 were nearly the same. But for nearly all of the rest of the time in between, it sagged below, down nearly 85% from the December 2017 highs. The alt coin markets suffered worse. Most alt coins lost 90% or more value relative to Bitcoin and 99% relative to the dollar.

Many in the mainstream media and finance celebrated the “bursting of the bubble” even though Bitcoin's gains were (once again) substantially more than the losses, and the price only briefly dipped below $6k in a range to $10k for most of the bear market.

There was a reprieve from the bear markets in 2019 when futures positions used to short Bitcoin “rolled off” meaning they were no longer being offered/traded on an exchange for a period. This led to a short squeeze and Bitcoin climbed from a low below $3,200 to a high of around $13,600 in the summer before ending the year in between.

Timeline

Bitcoin National Analysis

Because you love the trivia. You know you do. And you're tired of people making stuff to try to convince you of their supremacy.

Which Nations (Citizens) Own How Much Bitcoin?

Turkey

  • Mar 24, 2021 ( coindesk ) Turkey does not regulate cryptocurrency and it's thriving. Replaced Central Bank head (March 19) and moving toward crypto-national currency.

Social Media Cryptocurrency Follows (if you dare)

Okay, so you're down the rabbit hole, already. You want to listen in on the discussions of people who have been down there for a while in order to learn more, and organize the chaos. Good luck!

Currently migrating to Bitcoin_Media

CryptoReddit

Reddit is as selectively dumb as any other social media site on the internet. Beware . But you can find some gems there with your sieve. I rarely spend time there, but read threads friends send me from time to time.

If you are not familiar with reddit, one tip on managing your feeds is to make topic lists known as 'multis' .

Bitcoin is one of the topics for which reddit censorship reaches serious controversy levels. Reddit suffers a similar problem as Wikipedia. And as Mathew's law goes, “The more political the topic, the less reliable is Wikipedia.”

There are many more Bitcoin and cryptocurrency communities on reddit than these. Certainly enough to build an entire account for reading just Bitcoin news.

Other Social Media

In tandem with Web 3.0 development, the social media spaces in which cryptocurrency enthusiasts inhabit is likely to evolve quickly. We aim to keep up. Somewhat. Sanity permitting.

  • Steemit is a blockchain-based social media platform that encourages tipping for appreciated posts.
  • Torum touts itself specifically as a social media platform for cryptocurrency. I registered (Feb 24, 2001), but don't yet know much about it. I'm Infopractical there if you want to follow me, though I have no idea if I will participate yet.
  • Twetch has been around competing with Twitter as a decentralized network where you won your own data and earn money (in the form of BSV) for your content. Every interaction on Twetch is recorded on a public blockchain. The Twetch market allows for the buying, selling, and trading of NFTs, but this looks new as of February 2021. Not much is for sale yet. I registered as Rounding the Earth (@38177) . At Twetch, it appears that BSV can be used to purchase account upgrades, including the ability to make audio/video calls and delimit character counts of posts.

Memes and Humor

Once you've gone down the Bitcoin rabbit hole, and realize just how voluminous it is, it might strike you that it's all crazy. Or that the world is crazy. Or something like that. When you snap out of that confused state, and start to see the potential for a better world, you'll realize that you're trying to bridge a chasm between madness and sanity. How better to handle that than memes and laughs? There is no better way. There isn't.

Funny Cartoons

Funny Videos

Funny Websites

Meme Theory (and Practice)

Blockchain Pranks

Funny Cartoons

Funny Videos

Funny Websites

Meme Theory (and Practice)

Perhaps it is simply the case that humans (particularly in a day when much of education weakens the mind instead of strengthening it) are easier to reach through media they (are programmed to) understand, or to hit corners of the mind resistant to rational argumentation. Enter meme-theory!

Meme Theory

Common Bitcoin Memes

Have Fun Staying Poor

This one is more mean spirited than usual, but usually gets reflected at people who are being themselves mean spirited or throwing PRATTs around that waste everyone's time.

Laser Eyes (2021)

During the 2021 bull run, many public people are starting to add laser eyes to their social media pics. This is a Bitcoin insider signal, in particular to propel the run from $50k to $100k.

The ETH version (Bitcoin maximalists are constantly poking fun at Vitalik):

  • Elon Musk Memes

Blockchain Pranks

https://www.fincen.gov/news/news-releases/fincen-welcomes-first-ever-chief-digital-currency-advisor-and-first-director
http://financialcryptography.com/mt/archives/001463.html

Taproot:

Patented until 2018 or 2008? Matters in terms of claims over Satoshi's decisions

Self-Sovereign Individual:

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