New Bitcoin Security Problem:
http://joncave.co.uk/2014/08/bitcoin-sighash-single/If you create transactions and then send them off to a remote server for signing before injection, coins can be stolen.
What is the outlook for the month and when IPO? when is launch and are you working full time
Why not a honest good ol' premine instead of IPO? If there is an IPO, no one will know how many coins the devs have.
I suspect each and every IPO/ICO/ITO so far has had devs buying their own coins, and if they haven't, they've been just stupid because it's a risk free freeroll for extra money.
Yes. Even Ripple. Even if the devs own 98% and the community owns 2%, the devs can still benefit from pumping up price if the liquidity is thin.
What makes me the most sad, is that there are developers who bought in to Bitcoin at pennies. They made a lot of money already and very few of them gave back to the community or created something that moved the community forward. Everything is a money grab.
We have hundreds of money grab altcoins. Gimmicks. Whole cartels devoted to pump and dumps. Bitcoin is still in a penny stock and show pony, gimmick mentality. The Bitcoin ponzi fund, may stolen an eighth of the total Bitcoins in existence. Many of the early scams each individually netted over 200,000 Bitcoin, while Bitcoin was below a dollar.
An eighth to a fourth of the total Bitcoin is possessed by scammers if they didnt sell it off. The other half is lost, as the private keys were lost when early wallets were deleted.
People are launching exchanges, to manipulate altcoin prices. There is no standard for storing coins, checking balances or injecting transactions across different coins. The exchanges know the speculators are not running the wallet for the twenty coins they are speculating on. They know that only a fraction of the coins will ever be withdrawn, instead of being liquidated for Bitcoin. They know how much manipulation they can get away with.
Scammers gonna scam.
...The Obelisk/Darkwallet team has been the only one pushing Bitcoin forward in terms of standards. They could not even raise $20,000 compared to the millions that other projects have raised. Then you have RoboCoin. Everyone was excited about the ATMs, but it becomes a money grab and they decide to centralize the system and their system ended up being inferior to the open source ATMs. Biometric palm vein readers that are so invasive its something out of a dystopian scifi novel. In 2030 you wont need Bitcoin because cash is illegal and you dont need to carry around credit cards because you just have to put you hand under the Visa™ biometric palm vein reader after Visa™ buys Robocoin.
Coinbase has done a very good job. Bitpay has done very well in building a sales force and signing up Microsoft and the New York Times. sipa has improved Bitcoin with his libraries for deprecating OpenSSL and now headers first downloading. So Bitcoin has pushed forward, but we have not really seen the community come together and address the problems facing Bitcoin. It cannot organize on the scale required. We have not seen many Satoshi level technical achievement. Satoshi was brilliant, in terms of integrating existing ideas into something new and using the tools available to get it done quickly.
Bitcoin in Perspective So Bitcoin has pushed forward. However Satoshi is gone. There is no leadership or direction. Bitcoin is facing existential threats and the response has been underwhelming. Bitcoin as a technology works, but has some rough edges that cannot be fixed without a hard fork and therefore will not be fixed. However, the most daunting issues are social
- mining pool concentration (control of the network by half a dozen people instead of 10,000 or 100,000 people)
- continually declining price from the creation of new Bitcoin. If 100 million newly created coins are being dumped per year to pay for ASICs and electricity, the public must buy 100 million in Bitcoin per year, just to keep price where it is. The higher the price goes, the more people have to buy in per day, to keep it where it is. Bitcoin is very similar to gold, in that price increases, increase output and create a price ceiling (previously unprofitable gold mines become profitable as prices go over certain level). The Bitcoin price may continue its current decline, forever unless people can be convinced to pump more fiat into Bitcoin.
- the short term "get rich", mentality. No one is in this for the long term. As soon as Dogecoin became successful, it was colonized and destroyed by scammers. There is a level of imperialism, where projects are colonized by people who can best exploit or monetize them.
- exchanges are allowing free trades. They are offering substantial leverage and bots are driving price up and down $30 in five minutes. They drop price to attract buyers and then yank the price up to attract sellers. This is great for day traders, but frustrating for anyone serious about Bitcoin commerce. Exchanges may be manipulating price.
- I cannot tell if the teledilidonics "proof of sex coin" is real. I cannot tell the new altcoins apart from parodies anymore. There is an altcoin that makes miners input captchas every hour to prove that they are human.
- There is still significant legal and regulatory risk. Corporations play realpolitik. They will say "We support Bitcoin" while drafting legislation in secret to destroy it, that the politicians then pass off. Whenever a politician appears with a bill, it was usually written by a corporation or group of corporations in a trade association. The Bitcoin regulations are being written by Visa, Mastercard and Western Union.
- immaturity. The security oversights at MtGox were unacceptable. The drama at Ripple and disregard for fiduciary obligation to the asset holders, over a petty personal dispute (no one uses Ripple so this can be overlooked).
I think Bitcoin has a very strong appeal, because it is redecentralizing power and giving people back control that has been forcefully taken from them. It has survived on its psychological appeal. It is a political technology.
What is Money? There are two aspects of Bitcoin. There is a idea of "technological determinism" and that it was inevitable. The idea that technology is a force of nature that shapes society and determines its rules. Then there is Bitcoin as a political ideology of liberation. The idea that Bitcoin can liberate us from the power of control, the fines, the fees of oppressive financial institutions. Institutions which were imposed upon us and whose power over society allowed them to outlaw or marginalize alternatives.
In history there were hundreds of currencies within each nation state. As the nation state grew in power, it outlawed competing currencies. Community currencies and regional currencies have arisen very frequently, rapidly grown and then collapsed. The majority of the collapses were from the corruption within the administion of the currency. They would print and debase the currency without limit. Bitcoin was the first system, where the rate of currency creation was defined by mathematics and no longer at the whim of the administrators.
There is a technological aspect determining the properties of the asset, but there is also a sociological aspect concerning what drives adoption. Why do people adapt community currencies? Why do they arise, why do they grow, what would happen if they dont collapse for internal reasons (do they get crushed by the state)?
Then there is a question about what currency is.
Free Banking: Currency is credit issued by a bank. If you have a dozen banks, each issues their own bank notes (fiat, cash). If a particular bank is in default or shaky, then their bank notes or deposits may trade at 80 cents on the dollar, against notes issued by another bank. If the note is redeemable, for instance, for gold, and the bank makes bad loans and cannot honor convertibility then the bank liquidates and each person may receive 20 cents on the dollar in gold.
If the note is not redeemable, for anything then it is not clear what would cause the price of the note to crash. It its not clear the note would be worth anything. There is no basis setting the value of of the notes from a particular bank. If we have one hundred banks, issuing their own currencies, we initially assume the $1 nominal unit on each bank note from each bank are equal value. However, one bank may issue a thousand times as much currency as another bank. They each have an incentive to print money. If the value of the notes of each bank were equal, then inflation would cause the currency to be worthless.
Central Banking: Single NationA central bank, is a nation state, that creates money. It delegates sub-banks and sets the rules these banks may create money through. The central bank may say "You may create $8 in loans, for every dollar in deposits you have". A more complex system is "You can borrow up to $8 from me for every dollar in deposits, at an interest rate I set" The bank will add 2% to that interest rate for the loans it makes. So there is some constraint on money creation. However, if you model this system you have producers, you have commodities, you have labor and wages. As labor save up money, they put it in banks and it expands the monetary base. It keeps a certain level of unemployment to keep wages down, it privileges the producers (the people who derive income from buying commodities and labor for production).
The central bank can create money, but the exponential expansion of money from the money multiplier prevents this from being effective. Every dollar the central bank prints, ends up in deposits, which then creates additional dollars through loans the sub-banks make. So instead the central bank sells bonds. The central bank has an interest rate on its bonds and people will tolerate a 2% inflation without feeling trauma, so the central bank can inflate away and continually roll over its debt (sell new bonds, to pay coupons on old bonds).
If wages are increasing faster than commodity prices, then the central bank can hike interest rates, cause inflation and drive up unemployment and drive the wages back down. Inflation increases the supply of money, so workers can buy less goods, commodities for the money they have or wages they earn, therefore demand for goods decreases, produces cut back production and lay off some workers who become unemployed. Competition between the employed and unemployed, keeps wages from rising against commodities if the policy is set right.
Without this type of central bank policy, labor is finite and a fixed factor like land, which competes for uses. Social factors like unions come in and the power of labor increases disproportionately with its scarcity, compared to a commodity which is not governed by social factors.
If there is technological progress or GDP growth, it means the price of commodities is decreasing relative to labor. The labor is producing more and more commodities each year for the same input. So the central bank keeps the wages and commodity prices in line. It creates a fixed basket of goods and calls this the CPI. The CPI is the nominal cost to buy the basket of goods. The central bank keeps the CPI to wage ratio fixed, even as wage to GDP falls and as the labor hours, capital equipment and fix factors required to produce the goods in the CPI basket falls.
More and more goods will be produced for the same labor, but wages are kept down so that a worker has to work the same number of hours for the same amount of commodity. Then the surplus is consumed by inflation (debasing the national debt). As long as the rate of productivity growth + inflation is greater than the interest on the government debt, the debt can be rolled over forever. The relationship between wages and commodities can be held at stable levels.
In this model, the government raises money through debt. The banks, government and producers (corporations or owners of cashflow) have mutually beneficial relationship as allies against the population. The banks receive privileged ability to make loans in excess of their actual capital through the government (which corporations or other entities are not permitted). The producers receive cheap docile labor and privileges, subsidies, contacts from the money created through government debt and the government receives the privileges derived from control and administration of money created through such debt. The government also taxes.
For large companies, with influence the nominal tax rate is often very less than the benefits, subsidies and revenue derived from the government. The burden falls on the workers and the smaller corporations. This is true in the nations both with the least progressive and most progressive tax schedules.
Central Banking: Multiple Nations Multiple central banks with a one bank per country is similar to free banking, however the nations now produce exports and therefore have a reason to buy each others currencies. The currency price can now float and be set by a market.
Nations must keep wages low, so they can produce goods cheaply for export. If they nation produces goods that can be exported, then foreign nations must buy the currency to purchase the goods. If a nation's currency is too high against other currencies, a nation can devalue the currency through domestic inflation. Having a cheap currency relative to other currencies, means that a nation's labor and outputs are cheap compared to other countries. Nations may engage in competitive devaluation, to make their exports cheaper than other nations to grab larger market share in particular markets.
Nations can perform a "floating peg", by acquiring other currencies or assets and then buying/selling their own currency to maintain the price level relative to another currency or improve stability of the currency against spectators.
A country may maintain a peg against another currency, by printing money and dumping it on to the international markets, when their currency increases relative to the pegged currency. A nation may also prevent its citizens from exchanging domestic currency for foreign currency to buy imports and then hoard the foreign currency gained from exports, for other uses.
Note that a country mostly performing mineral extraction (primary sector) and creation of goods from these extracted resources (secondary sector) is isolated from changes to its foreign exchange rates. Both its costs (labor) and its commodity inputs are priced in domestic currency. A country reliant upon foreign mineral inputs or manufactured goods, has a domestic economy with input costs which are dependent on its foreign exchange rates.
Note that inflation in the value between the currencies of the central banks and inflation in the domestic economy are independent. The relationship is arbitrary, as the relationship between the price of wages/labor and commodities. If the domestic price factors are insulated from the foreign exchange rates
Brief History of Money Before, the 1800s the dominant power center was land owners. They possessed serfs for farming land and a small military for war against other belligerent landed, freudal powers. They derived income from serfs farming land. Grain certificates served as first form of deposits and currency. Grain was perishable and could not be stored, so landed elites imposed non-perishable gold as standard, to allow wealth to be accumulated in a non-perish form. Combat was specialized, capital intensive, horses, knights and pike-man. The landed nobles were militarily significant.
The most powerful feudal lord imposed himself as a hereditary king. The king allowed feudal powers in his domain to engage war among themselves. The kind organized military excursions against foreign powers. The crossbow was developed, highly specialized knights were now vulnerable to being killed by peasants and lost their military utility relative to mass formations of peasant. Military power became a matter of population and military significance of the landed nobles declined. The king seized the power to dispose and allocate ownership of land and seized taxation rights over the feudal estates.
Previously the king had only received income from primarily his land and estate. As the power of the state grew and the powers of taxation grew, a permanent state bureaucracy developed. The power of the state bureaucracy grew, become absolute and was unaccountable to the people (but especially to the other power centers within the state). The French Revolution occurred and the state bureaucracy was dispossessed. This culminated in the era of Napoleon around 1795 and resulted in the development of the republic form of government and later republic democracies.
The industrial revolution occurred. A single factory in Britain could produce more textiles than could be consumed by the country. Britain developed a navy, occupied North America, Africa, India, China as colonies. Colonies exported raw materials to Britain and were restricted to buying imported goods from Britain. Britain used its military power to impose its currency and demanded payment in silver coinage for salt in India, to drain the country of wealth and precious metals. To obtain money to pay these taxes, Indians mined silver, worked as soldiers for the British occupation force or produced raw materials for export to the British mainland.
Similar, to America today, the British were not allowed access the mainland Chinese market. Chinese goods were in high demand and there was a persistent trade imbalance between Britain (importing Silk, porcelain, tea) and China which did not allow foreigners into its domestic market. Therefore the British invaded China in the Opium War and created a market for opium, to balance out the trade and drain China of its gold and silver.
The modern form of government and currency was formed in the Gilded age. The power and wealth of the landed, hereditary nobility had been dispossessed by technological progress. The factory owner and industrialist (producers, later corporations) exceeded the landed nobility in prestige, power and income and became the new dominant power center. The conflict was between the state (the political class), bankers (financial class), the producers (the economic producers) and the unions (labor class).
The economic class dominated between 1870s and 1920s. The economic class failed to retain power and a new economic class developed in collusion with the political class. The banking class gained new powers and the existing federal reserve system (single nation central bank) was put in place by 1930s, replacing free banking. The economic class defeated the labor class by 1970s, by targeting inflation rates to unemployment and taking over the labor party. The economic class moved to transnational production to evade control of political class and as leverage against labor. Domestic polices were pushed through internationally which benefited the power centers (banking, political and economic class) at expense of labor or domestic development.
Financial imperialism reigned. Privileged countries in the world system had low capital reserves requirements and could make large loans and perform domestic development and foreign investment, while lesser nations were subject to higher capital reserve requirements. Nations were made to take on debt in a foreign currency and then their exchange rate was debased (similar to Russia today). Highly leveraged, institutions from the privileged countries with access to cheap capital sweep in and buy up natural resources and revenue producing, productive assets cheaply (similar to the domestic oligarchs of the Soviet Union during the market transition). Privileged, indebted countries, with powerful militaries, large trade imbalances and few significant exports derived as much as a third of their visible corporate profits from financial imperialism.
By 2010, the domestic banking institutions became dependent upon government for survival (following policies mandated by the political class). The banking class became transnational and through crisis imposed the Basel agreements internationally, as the existing system faced collapse under persistent trade imbalances and speculative folly. The centers of power devolved and merged. The three power centers (banking, political and economic) are no longer district, nationally or internationally. There is no longer a center or power but an amorphous series of tentative and eternally shifting power relationships.
The state obtained absolute power of mass surveillance, media censorship, detainment. However enforcement is extremely selective and based up realpolitik. You are more likely to be arrested for whistle blowing, filming a factory farm (domestic terrorism), evading capital controls (domestic terrorism) or embarrassing a corporation (domestic terrorism), politician or government agency than for personal or political behavior, which does not threaten power. Any viable or even merely annoying threat to existing power or institutions will likely be labeled an unlawful terrorist threat and will be violently repressed.
There is now a unified, international banking regulatory body, which can decide in a secret meeting to merely threaten possible regulation and effectively cut Bitcoin off from every single banking institution globally (Outside of Russia, China and Brazil). This is a realistic assessment.
Europe is already banning cash. Europe cannot expand tax rates further without eliminating the possibility of untaxed underground economies. A further increase in taxation, decreases net revenue as more activity is driven underground or offshore. Bitcoin is similar to cash, but more docile and controllable. All transactions go through exchanges and can be taxed/monitored. Purchases online are taxed. When physical cash is banned in Europe over the next two decades, we will see a migration to Bitcoin but also a crack down. Increasing government taxation over 40% of GDP, requires elimination of cash and international treaties against "tax competition". It requires that corporations are taxed for sales based upon the market rather than where the profits are realized.
Implications for Bitcoin It is clear that money is a social construct. Money is the result of power relationships and relationships between institutions. Money is both social and is created by institutionalized power or social convention. Gold was accepted as a universal, voluntary social agreement. Government money since 1910 is backed by lead. There was a transition from coercive, extraction (the opium wars, colonialism) with voluntary adaption to both coercive definition and imposition of currency.
Bitcoin is therefore an attempt to return to the pre-1920s scarce, finite, "sound money" with voluntary exchange by social convention rather than coercive imposition.
How does Bitcoin fit in, with the history of money? What gives Bitcoin value? Will ability of people to adapt Bitcoin as a standard voluntarily, be hampered by coercion by the state, or interests within the state whose interests are threatened by Bitcoin?
In terms of strategic position, to force the hands of government, two things are necessarily
- the software has to be developed to the point, that it becomes feasible for small nation states to adapt blockchain based currencies as the national unit. This will force a uniform regulatory treatment between nation state and privately issued digital currencies.
- There need to be unified standards for interoperability between digital currencies. They need to be transparently convertible during a transaction at the current spot prices. This means any merchant or institution accepting one currency, effectively accepts all currencies. It produces a two-sided market and separates the attributes of currencies people use for payment and currency received as payment. Merchants may be required by law to quote prices in local currencies, but payments can be settled in any unit.
The original Ripple Pay (not Ripple), there was USD as the unit of currency. Banks create money through extending credit. The idea in Ripple Pay was to allow each person to extend create to each other in a peer-to-peer network. Each person acts as a bank and the bank is disintermediated (similar to Bitcoin). However, Ripple Pay was still pegged to the dollar.
Bitcoin is at one extreme, a finite, intrinsically scarce asset. The other extreme is decentralizing credit creation down to the level of a "personal currency", where each person is a node in a graph issuing credit to each other and there are floating exchange rates between the personal currencies. This is the extreme of pushing the free banking credit creation mechanism down to the individual. If you are running a coal mine or steel plant on that type of system, it would be interesting whether the price levels are stable and how it affects output level.
Ripple Pay type systems, need serious consideration as possibilities for eliminating the dependence of Bitcoin/Skycoin on the legacy banking system.
