Lifeboat Foundation: Safeguarding Humanity
Toggle light / dark theme

Blog

Category: cryptocurrencies – Page 60

The user, “devops199”, triggered the flaw apparently by accident. When they realised what they had done, they attempted to undo the damage by deleting the code which had transferred ownership of the funds. Rather than returning the money, however, that simply locked all the funds in those multisignature wallets permanently, with no way to access them.

“This means that currently no funds can be moved out of the multi-sig wallets,” Parity says in a security advisory.

Effectively, a user accidentally stole hundreds of wallets simultaneously, and then set them on fire in a panic while trying to give them back.

Read more

What makes a better Internet possible? At Orchid Labs, our goal is to ensure that every person on Earth can have access to an open, decentralized, and uncensored Internet. We believe a better Internet is one that isn’t controlled by the few, but open to all.

Currently, Internet access for the majority of the people on Earth is censored and monitored. Because of this, many Internet users are blocked from freely communicating, collaborating, and accessing information. The current centralized system, which limits our ability to communicate and learn — while also harvesting and selling our personal data — is far from the full potential of what the internet could be and strays from the original intention of its creators.

That’s why we’ve launched the Orchid Protocol, an open-source overlay network that uses excess bandwidth on top of the existing Internet to ensure that people — no matter where they live on our planet — can have unrestricted access to information and collaboration. Orchid’s protocol combines surplus bandwidth, state-of-the-art encryption, and a decentralized infrastructure enabling any Internet user to participate and exchange bandwidth for payment in peer-to-peer transactions using Orchid tokens on the Ethereum blockchain.

Read more

“If one blockchain were to become dominant, then the others may well fade away.” #singularityuniversity

Bitcoin, the first practical implementation of blockchain technology, was the buying opportunity of all time. The price of bitcoin has risen faster than any other asset in history, including tulips at the height of the tulip bubble.

Bitcoin, Ethereum, and other cryptocurrencies, also known as “digital assets,” have been making headlines due to the unprecedented returns early adopters are making from their investments in these digital assets.

Though the price of cryptocurrencies grabs attention, the underlying technology, a distributed digital ledger called blockchain, is even more exciting.

Read more

How many individuals own at least 1 BTC?

I was asked this question today at Quora, a popular Q&A blog covering a variety of technical and economic disciplines. Under my alias “Ellery”, I am the most viewed author on Bitcoin and the blockchain.

While this question may sound like a good factoid for a trivia game, it is directly related to something with with far reaching impact on your pocketbook and your future. It goes to the heart of a debate between warring factions: In the 2nd half of this answer, I address the eternal question:

Is Bitcoin a pyramid scheme? Or are we still early on the adoption curve?

But let’s start with the question at hand…

There is no certain answer to the number of people who own Bitcoin or how many own more than 1 BTC. We know that tens of millions of wallets have been created, but this certainly doesn’t help. Although the value of every single wallet is publicly disclosed on the blockchain (most have a zero balance), there is no way to determine who owns each wallet. Some may be controlled by organizations or custodians on behalf of many individuals, while others may be just one of many wallets with a single owner.

Most of my Bitcoin is in a wallet or a vault hosted by Coinbase, the San Francisco exchange. When I log into my account to view my wallet ID, I see that I have dozens of wallets—all valid. The large number of wallets is not related to my wealth. Rather, it a byproduct of my many small transactions. Coinbase creates a new wallet each time that I buy, sell, or purchase something with my BTC. There are good reasons for this practice, but it certainly muddies the correlation between wallets and number of owners.

There are 16.6 million coins in circulation today (a bit less, since some have been irretrievably lost). That puts a cap answering the question. There cannot be more than this many people with a full BTC—currently worth about USD $5900.

But, we know that the number of individuals with a full coin is considerably less. After all, many people in my own circles own dozens of coins, and Satoshi is very likely to hold 1 million BTC. Coinbase and Bitstamp are just two of very many custodial exchanges (i.e. they offer a cloud wallet or vault service to their clients). They host many hundreds of wallets with more than 50 coins. In almost each case, the client has provided single-user taxpayer information to these services, and so it is very unlikely that a significant fraction of these wallets belong to more than a single person or family.

And, let’s not forget that a far greater fraction of exchanges fly under the covers. That is, they don’t collect taxpayer information or report the wallets that they administer to any authority—nor to analysts or journalists like me.

So, while no one can accurately estimate the number of individuals who own 1 or more BTC, the answer is very likely under 2.5 million, worldwide. 1

The number of people who have heard of Bitcoin is growing rapidly. In the United States, fewer than one in twenty people were aware of Bitcoin just 2½ years ago (at the beginning of 2015). By September 2017, almost one in four USA adults a reasonable idea what it is—and most of them could debate their position on its future. 2

There will never be more than 21 million bitcoin. This is the mathematical upper limit. Compare this with the current US population of 323 million. So even if all Bitcoin owners were in America (they are not!) and if no one owned more than 1 BTC, fewer than 1 in 19 Americans could own a full Bitcoin today and fewer than 1 in 15 after all bitcoin are mined.

If we consider the global population of 7.6 billion, fewer than 1 in 458 people could own a full Bitcoin today. Since most early adopters have more than 1 BTC, the actual fraction is probably much smaller than 1 in 25,000 individuals.

In the introduction, above, I said that the question about how many people own more than 1 BTC leads to a more profound question. In fact, this innocent trivia question, leads to insight about adoption and the economics of investing in a deflationary instrument as it spreads throughout commerce, investors and all sorts of institutions.

Moral of the story…

The original question asks for a simple number. It doesn’t ask for editorial perspective. But it’s tough to resist. With fewer than 1 in 25 thousand people owning a bitcoin, a reasonable question is:

Will adoption increase, even if interest is limited to only one sector?

For example, what if Bitcoin falters in all but one of these venues: Bleeding edge geeks, collectors, investors, p2p payments, interbank transfer, debt settlement, or treatment in some regions as a currency.

Answer: Even if Bitcoin continues to show strength in just one of these areas, it will eventually be used or accumulated by millions of new users—even if they don’t realize it!

Do you see where I am going with this? Even if you believe that Bitcoin will…

  • never be treated as a store of value (this is nonsense of course),
  • only be used on one continent (nonsense, again),
  • never erode payment & settlement services such as Visa or PayPal (it already has),
  • that governments can successfully block payments or deter growth (they cannot—and they are gradually realizing that it does not interfere with taxing or spending or sovereignty),
  • that another digital coin will overtake Bitcoin (it cannot—the reasons are subtle, but they are well understood)…

Even if you believe in all of these limiting factors, the overall demand for Bitcoin has barely begun. We have not even started climbing the hockey-stick curve toward limited adoption as an occasional, alternative payment mechanism.

At conferences and in my own classroom, I am often asked: Should I still acquire Bitcoin? —Or is it too late? After all, it has risen from a fraction of a penny to $6,000 in just a 7 years. And from under $1000 to $6,000 this year alone!

I am not a financial advisor. I often speculate, but never offer guidance. I embrace the wisdom that past performance is never an assurance of future gains. But, I ask students to look at the assumptions and at the math: Unlike US dollars, shares in Apple, pork bellies or gold pressed latinum, Bitcoin is firmly capped. There will never be more than a paltry 21 million coins. That means that each coin absolutely, positively must increase in value with even a modest adoption scenario.

The Argument Against Bitcoin

Bitcoin is a pure supply-demand commodity. Since the supply is fixed and well understood, the only argument against acquiring Bitcoin arises from a belief that demand will dwindle. This is the argument of someone who believes that Bitcoin will fail to gain any further traction in any sector.

Perhaps you believe that something else will displace it, or that governments will find a way to effectively defeat it. If you have been reading my Blog (or my Quora answers) for more than a few months, then you already know that neither scenario is realistic.

I believe that investment in Bitcoin a speculative asset retards adoption. I defend this opinion in many interviews and articles. Although I hope for fewer speculators and more ‘legitimate’ users, I own an outsize share of the world’s future value store, transfer media and fungible, liquid asset. I am guilty of the speculation that I seek to deter.

1 & 2 CRYPSA Research, Feb 2015 and Oct 2017, Cryptocurrency Standards Association. Polls conducted at Rein’s New York Deli in Vernon CT and Spectrum Center, Irvine CA.

Philip Raymond co-chairs CRYPSA, publishes Wild Duck and hosts the New York Bitcoin Event. He is on the New Money Systems board and kicks off Cryptocurrency Expo in Dubai. He frequently consults and presents.

The state of Illinois is testing a new way for people to prove their identities, albeit without the need to request their birth certificates and wait weeks for it to arrive in the mail. The state aims to give citizens more control of their data, as well as provide solace in knowing it’s more secure than ever.

To accomplish this task, the state is turning to the same blockchain technology that companies like Bitcoin and Ethereum utilize for their own networks. In August, the Illinois Blockchain Initiative — a collaboration launched by the state to explore blockchain and distributed ledger technology — announced it’s partnering with self-sovereign identity solutions firm Evernym to create an online ledger that’s only accessible to the owner of the ID and any other individuals they’re granted access. It’s very similar to how the technology could be used to track and share information between hospitals.

Read more

Bitcoin was hit by a double whammy this week. On Tuesday, Jamie Dimon of JP Morgan declared that Bitcoin is a fraud that will “blow up”. Then, just this morning, a Bitcoin exchange in China announced that it would shut its doors in response to verbal pressure from regulators and an uncertain regulatory environment.

Don’t ya just love it when bad news breaks on Bitcoin? I sure do! It creates a buying opportunity. After all, just look at what happened after the last five bouts of bad news: [updated Oct 2017—Click to reverse colors & enlarge]

In each case, the Bitcoin exchange rate dropped—very briefly—and then climbed higher with renewed vigor. Heck it, doubled from $2400 to $4800 in just the past month! But here’s a the real question: Does either bad news events have legs? Does it spell the end of Bitcoin adoption and enthusiasm, at least for now?

After all, if it were discovered that the math behind Bitcoin were flawed, and that anyone could create forged coins, the empire would come tumbling down. In my book, this would constitute a crisis. But what about now? Do these two damning events—and a 35% correction in the past week—constitute a long-term crisis? To answer, we must first determine if public fears over these two events are credible…

China and JP Morgan: (a) A frightened authority (b) Simple Ignorance

Like most governments, the Chinese are concerned that the growing flight to Bitcoin is impacting liquidity of their national currency. [A superb presentation by Andreas Antonopoulos—Click it, after you read this article]. They are also concerned about the large number of Bitcoin exchanges that operate outside of a tight regulatory framework. They obscure the flow of money in and out of the country and they are a clear scapegoat for tax evasion or other criminal activity. Like any agency charged with financial regulation, the Chinese seek to reign in and regulate these maverick exchanges.

It is interesting to note that the Chinese government is not discouraging Bitcoin mining or even personal savings—only the proliferation of unlicensed exchanges and quasi-anonymous users. After all, More than 50% of all mining is done in China, and it helps to balance the loss of liquidity in the national currency.

Bitcoin is experiencing increased adoption—not just as a payment mechanism—but as a new form of stored value. Is this is a bad thing for governments? Surprise! When a government loses control over its own reserve and monetary policy, it may present more of an opportunity than a threat—for both citizens and governments. Gradually, economists, treasury secretaries, reserve board governors and monetary tsars will are coming to the same conclusion. But regardless of your position on this point of debate, here is a fact that is less controversial…

When governments attempt to restrict an activity that cannot be economically monitored or enforced—or at least when they attempt to do it in a way that leaves no relief valve for hobbyists, business, commerce, research or NGOs—they ultimately fuel the activity that they set out to stifle. Ultimately, if the public cannot discern a reasonable basis for government censorship or excessive restrictions, it leads to interest, innovation, adoption and the emergence of hot new markets.

Consider, again, the graph of Bitcoin price –vs- Bad news events at the top of this page.

On each date highlighted above, there was a damning piece of information that should cause early adopters to reconsider their enthusiasm for Bitcoin. In fact, the Hearn Dump really should have ended the whole party. A core developer sold off his entire BTC savings and claimed that the experiment was a failure. He published an article with his reasons for believing that Bitcoin was dead. Likewise, the SEC decision to prohibit the creation of an exchange traded fund (the Winkelvoss ETF), it sent a clear signal that governments really didn’t consider cryptocurrencies to be an asset at all.

But the graph demonstrates that each piece of “bad news” fueled a miniature rally. That’s because Bitcoin has none of the elements of a pyramid scheme. It is not an MLM and it cannot be manufactured or controlled by any organization. Rather, it is an exercise in pure supply, demand and market recognition. It is pure adoption mechanism that leads to a two-sided network. It’s benefits multiply as more users join the party.

What about Jamie Dimon at JP Morgan? He says that Bitcoin will crash.

Bitcoin has had a rocky road these first 8 years. Major exchanges have been bankrupt or worse, enormous criminal conspiracies were among the early adopters, the SEC has prohibited the creation of an ETF based on cryptocurrency, rogue spin-off coins are driving a wedge among users, and there are serious problems related to scaling and governance. A casual observer might wonder who is in control and who can be held responsible? After all, the idea of an economic mechanism that is altered by democratic—but decentralized—factors is new and radical. How can Bitcoin evolve, adapt and grow in the absence of an authority at its heart?

This confusion arises from the newness and unfamiliarity of blockchain architecture. Skepticism is natural. Indeed, Bitcoin is guided by an authority, but it doesn’t reside at the center of the network. It resides at the edges. This is the concept behind Proof-of-Stake and Proof-of-Work. Unlike a classic authority, your will matters just as much as anyone else’s. It is exceptionally democratic, self-enforcing, and resistant to gaming.

This is a difficult concept to wrap our heads around, because it is so different than we were taught and it is different than we have experienced for centuries. For this reason, Jamie Dimon’s statement that there is nothing behind Bitcoin presents a buy opportunity for individuals who were late to the table. Jamie may not yet understand intrinsic value, but we can educate ourselves. Bitcoin has more standing behind it than the US dollar.

… But don’t take this as investment advice. Bitcoin should not be thought of as an investment. It is the future of money. Speculation (both day trading and long term buy-&-hold) act to retard the eventual adoption of Bitcoin as a serious monetary instrument. Although I have Bitcoin, I do not encourage people to think of it as an investment. It is more important that it be used for ordinary business and commerce:

  • Products and services
  • Loans and debt settlement
  • Stored value transfer (gift cads & prepaid services)
  • Escrow
  • Quotations and price guarantees
  • Interbank exchange
  • Smart contracts
  • Liens and letters of credit

When the fraction of Bitcoin transactions servicing these consumer and business activities exceeds the fraction driven by savers and speculators, the dominos will begin to fall rapidly.

Articles about Jamie Dimon and JP Morgan…

  1. Jamie Dimon: Bitcoin Is A Fraud
  2. John McAfee: I challenge Jamie Dimon’s bitcoin skepticism
  3. Crypto Is Here to Stay (Whatever Jamie Dimon Might Say)

Can we draw a conclusion? Certainly, we can. And, we can toss in a prediction. It’s not even a high risk prediction. The recent pullback has no fundamental basis. No legs at all. The two “bad news” are not just a red herring—they present a buying opportunity. If I were allowed to give investor advice (I am not; and I don’t), I would express my opinion with more verve and obvious conviction.

Caveat Emptor (Everything comes with a disclaimer)…

I am a Bitcoin educator, proponent, early adopter and blockchain consultant. But here is the contradiction: Although I am also a Bitcoin investor, I discourage others from treating Bitcoin as an investment. Use it, but please don’t save it!

Why do I discourage others from investing in Bitcoin?

It’s not that I don’t believe that Bitcoin will increase in exchange value. It will rise spectacularly, as adoption grows. But Bitcoin will not become ubiquitous and trusted until the majority of coins are recycled into the market for payments, settlement, loans, interbank transfers, escrow, contract settlement, etc. That is, its use for business and commerce must exceed the fraction of trades that are driven by savers and speculators. Until this happens, Bitcoin will remain volatile. It will be the subject of suspicion. It won’t be used for large settlements and it won’t become the money itself.

Speculation acts against fluidity. It won’t block the eventual acceptance of Bitcoin as a global currency. Hoarding is not a deal stopper. But It retards momentum and delays the inevitable.

Philip Raymond co-chairs CRYPSA, produces The Bitcoin Event, edits A Wild Duck and is moderator of LinkedIN Bitcoin P2P, the largest discussion group of it’s kind. He is keynote at this year’s Digital Currency Summit in Johannesburg and sits on the New Money Systems board at Lifeboat Foundation. Use the contact form to inquire about a live presentation or consulting engagement.

For the unwary, ICOs represent an even bigger risk, as uncertainty about how they should be regulated means most lack even basic protection of securities laws that governed the dotcom IPOs. As pure digital events, the online fundraisings are also exposed to familiar internet frauds, from phishing scams used to rip off the unwary to the hacking of the underlying software underpinning the new ventures — the fate that befell the first prominent ICO last year, for a company called the DAO.

Flood of initial coin offerings is aimed at bypassing Google and Amazon, but sceptics fear a bubble.

Read more

On August 1 2017, the value of a Bitcoin was at $2,750 US dollars. Today, just over one month later, it is poised to leap past $5,000 per unit. With this gain, many people are asking if Bitcoin has any genuine, inherent value. Is it a pyramid scheme? —Or is it simply a house of cards ready to collapse when the wind picks up?

In a past article, I explained that Bitcoin fundamentals ought to place its value in the vicinity of $10,000.* (At the time, it was less than $450, and had even fallen to $220 in the following year).

For many consumers viewing the rising interest in Bitcoin from the stands, there is great mystery surrounding the underlying value. What, if anything, stands behind it? This is a question with a clear and concise answer. In fact, it has a very definitive and believable answer—but it is easiest to understand with just a little bit of historical perspective.

At one time, G7 fiat currencies were backed by a reserve of physical Gold or the pooling or cross-ownership of other currencies that are backed by gold. That ended in 1971 when the Bretton Woods agreement was dissolved by president Richard Nixon in Ithaca NY.

Today, US currency is backed by “The good faith and credit of the American worker” (This is the government explanation of intrinsic value). But in truth its future value is loosely tied to one simple question: Does the typical vendor or consumer (for example, someone accepting a $20 bill in exchange for a movie ticket or 2 large pizzas) expect it to buy these same things in the next few months?

A considerable number of speculative components contribute to the answer. For example:

  • What About the Big Picture? DEBT! Everyone knows that a house built on debt cannot thrive forever without a continuous stream of productivity and income. Is the money being printed without a commensurate added value to the nation’s capacity to repay debts?
  • Public Trust: Good faith goes beyond debt. Can consumers and creditors be certain that a change of government won’t cause rampant inflation or a willful failure to retire future debt? Can they be assured that their fellow workers will continue to produce and export manufactured goods in ever increasing quantity?
  • Guns & Tanks: Citizens are compelled by law to pay their taxes in official state currency. Even for those who attempt to fly under the wire or use alternate currencies during the tax year, this ultimately forces fiat currency to be recognized and honored.
  • Geopolitical Stability: We have been a debtor nation for decades and we have significant political and economic disputes with our largest creditors (China and nations of oil-rich gulf states). What would be the effect of them (a) moving away from the dollar as their reserve currency, or (b) investing the trillions of dollars they have earned in some other country?

This list is not exhaustive, but all constituents boil down to two fundamental concepts: Supply-and-demand and How long will demand last?

The dollar is an invention of a transient government. Even with a long history and complex banking framework, it is no more real than Bitcoin. Supply and demand for any commodity is based on popular recognition, anti-counterfeit features, innate desire and public goodwill. The real question is what contributes to the desire to own or spend Bitcoin?

The answer is that Bitcoin is backed by something far more reliable and trustworthy than the transient whim of elected legislators. It is backed by something that carries more weight than the US government. What could possibly guaranty the value of a Bitcoin? After all, it does not convey ownership in gold, and it has no redemption guarantee. There is no engraving of Caesar on the coin. (In fact, there is no coin at all!)…

Answer: Bitcoin is backed by math, a firm cap, a completely transparent set of books, and the critical mass of a two-sided network. Although it can be taxed (like any asset), it can be owned and transferred with impunity and without recourse. These may not seem like critical components of intrinsic value, but they are. In fact, they define intrinsic value in the modern era.

Related:

Philip Raymond co-chairs CRYPSA, produces The Bitcoin Event, edits A Wild Duck and is keynote at this year’s Digital Currency Summit in Johannesburg.