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Crypto Currency Part 2 ; how will the Banksters Play
« on: 2015-03-24 23:45:05 »
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How will this potential level playing field be gamed and manipulated like the current money markets. I really hope that we develop the social awareness to realize the potential here and step away from the folly of our current system that lends itself to manipulation and scamming.



Block Chain 2.0: The Renaissance of Money

Source: Wired
Author: Kariappa Bheemaiah
Date: 2015.01.15

From 2008 to date, no other technology has been the subject of such fervent debate. Irrespective of your opinion, the rise in popularity of cryptocurrencies cannot be ignored. Today, there are a number of billion dollar businesses that accept Bitcoin as a form of payment. These include Dell, Reddit, Expedia, PayPal, and most recently, Microsoft. So for the uninitiated who have not yet grasped what Bitcoin and other cryptocurrencies are, you ought to catch up. This is not something that should be ignored and there is a vast array of resources that explain the concept. In this post I’ll try to make sense of the Block Chain Protocol and the emerging ecosystem that is growing on it.
Elements of Protocol Commonality: TCP/IP and the Block Chain

In December 1974, Vint Cerf and Robert Kahn designed something revolutionary: the TCP/IP Internet network protocol.

A protocol is like manners. When we say “Thank you’ to someone, the normal response we expect to hear is “You’re welcome.” There is no actual rule that states that someone has to do this. But it remains a formal protocol of communication that is commonly followed.

In a similar way, TCP/IP was first developed as a way for any computer to connect and communicate with the ARPANET. Since then, the project mutated exponentially to allow any computer to communicate with any other computer, finally metamorphosing today into the Internet of Everything.

But the base technologies have remained unchanged. The IP address still acts like a unique postal address that enables any phone, tablet or computer to identify itself on the internet, while the TCP technology guarantees delivery of the data packets by dividing them into segments. TCP and IP are used in conjunction to increase the probability of the data packet to get from origin to destination.

Leveraging on this mode of functioning, Tim Berners-Lee created the Hyper Text Transfer Protocol or HTTP, which became a way for Web browsers to communicate with Web Servers. Today, along with HTTP, a whole suite of protocols like DNS and ARP, work together to provide us with the network experience we are used to. Email, Search Engines, Web pages, API’s and other Internet Services (SaaS, PaaS, IaaS) are all products that have evolved on this framework giving us today’s digital economy.

Just as the TCP/IP-based internet led to a revolution in the way businesses functioned, the Block Chain protocol is repeating the same process all over again. Pundits even go so far as to say it is like watching the birth of the internet all over again.

So how does this all work? A Bitcoin network is a decentralized network. Hence, every time a transaction occurs between the members of this network, it needs to be verified and validated so as to ensure that every transaction occurring within the network is between two individual accounts and that there is no risk of double spending.

[ Also on Insights: What Does the Future Hold for Bitcoin? | An Introduction to the Bitcoin Blockchain ]

This process of verification is carried out by some members of the network called miners. The miners use specialized and easily available software along with the processing power of their computers to verify the transactions. This sounds simple enough, but the processing power required to do so is quite herculean. And since the miners are using their bandwidth and electricity to do the verification process, they need to be compensated.

This is where the Block Chain begin to take shape. Every few minutes a ‘block’ of all the transactions occurring over the Bitcoin network is created by a miner. Essentially the miner has created a verified transaction file which holds a copied record of all the transactions that have occurred in the network over the past 10 minutes. The word to highlight here is verified. The miner uses the computational power of his computer to assure all members of the network that each transaction is between 2 parties only and that there is no problem of double spending.

For his efforts, the miner is compensated in Bitcoins. This is where the math’s of the currency and the way that it differs from the normal fractional banking system kicks in. The total amount of Bitcoins that can ever exist is fixed at 21 million. As the quantity of money is fixed, the payment made to the miner is much like mining currency out of a reservoir.

As each transaction in every block is made at a specific time, each block is linked to the previous block of transactions. By grouping these blocks we get what is referred to as the Block Chain. And since this grouping of blocks occurs as per the protocol dictated by the algorithm underpinning the creation of Bitcoins, this protocol is defined as the Block Chain protocol.

This is where the TCP/IP and Block Chain protocols differ: TCP/IP is a COMMUNICATIONS protocol, whilst the Block Chain is a VALUE-EXCHANGE protocol.
Bitcoin, Altcoin, Dodgecoin… Who Cares? Only the Block Chain Matters

Since Satoshi’s White paper came online, other cryptocurrenies have proliferated the market. But irrespective of the currency and the frequently debated deflation issues, the underlying Block Chain protocol and the distributed computing architecture used to achieve its value remain the same.

Just as the open communications protocol created profitable business services by catapulting innovation, the Block-chain protocol offers a similar foundation on which businesses can create value-added chains. Using the integrity lattice of the transactions, a whole suite of value trading innovations are beginning to enter the market.


The payments systems used today were designed in the 1950’s and there’s a fixed minimum cost for every transaction. As a result sending small payments of say, $5, is not feasible using this system. (Although companies like DWOLLA have begun offering such services). The reason this hasn’t changed is quite simple; Remittances in 2013 were made at an average rate of 8.9% resulting in $48 billion in revenue. That’s a tidy revenue stream.

Just as TCP/IP allowed information to be transmitted instantly, today, the Block Chain Protocol allows the instant transfer of value irrespective of size. One company that is making use of this concept is ChangeCoin.

ChangeCoin offers a micropayment Infrastructure for the Web. Say you read an article on a popular website, but the freemium version only lets you read quarter of the article and requires a minimum subscription to access the entire article. With micropayments, the user can now pay just a few cents to read the entire article without engaging in an à la carte form of subscription. A good way forward based on this concept would be to cable TV subscriptions, where consumers can pay for the 4 or 5 channels that they regularly watch rather than paying for a suite of 200. Another application is for WiFi hotspots where users pay exactly their data consumption. A user could pre-allocate a connectivity budget and micropayment software could take care of paying for the data connection with no user intervention.

ChangeCoin has also created a boon for content creators and bloggers in the form of ChangeTip. Consumers can now use Bitcoin to tip a content creator with a small sum (even 5 cents) instead of just liking an article. Not only is this an innovative way to show appreciation but it will change the business model of content creation and curation.

Block Chain APIs

Companies such as CHAIN, now allow developers to build API’s on the Block Chain Protocol such as:

    API’s to allocate digital resources such as energy, bandwidth, storage, and computation to the connected devices / services that need them.Eg; FileCoin
    API’s for Oculus Rift- With access to the virtual world now becoming TROM-esque, developers are looking at creating API’s that can be used in the virtual space to make transactions, blurring the lines between virtual and real economies.
    Micropayment API’s tailored to the type of transaction being undertaken. i.e: Tipping a blog versus Tipping a car share driver. Very useful in a shared economy where consumers increasingly become prosumers.

Smart Contracts and Programmable Money

This relatively new concept involves the development of programs that can be entrusted with money. Smart contracts are programs that encode certain conditions and outcomes. When a transaction between 2 parties occurs, the program can verify if the product/service has been sent by the supplier. Only after verification is the sum transmitted to the suppliers account. By developing ready to use programs that function on predetermined conditions between the supplier and the client, smart programs ensure a secure escrow service in real time at near zero marginal cost. One company that is making dramatic foray here is Codius which offers an ecosystem for Smart Contracts.

Apart from Financial transactions, smart contracts are now entering the Legal System. Companies like Empowered Law use the public distributed ledger of transactions that makes up the Block Chain to provide Multi-Signature account services for asset protection, estate planning, dispute resolution, leasing and corporate governance. A prime example of this transition is seen ins a procedure referred to as ‘Coloring’ a Coin, in which a house can be sold in the form of a Bitcoin payment with the same ease and speed.

Digital Assets and Smart Property

Building up on colored coins, digital assets are assets whose ownership is recorded digitally. Bitcoins are of digital assets, but since the Block Chain is a decentralized asset registry, it can also be used to register ownership and transfer of any digital asset besides bitcoins. In this way, a digital bond could pay coupons and redeem the principal to the address holding the digital bond, without the need of custodians.

Taking this concept one step further is in the form of Smart Properties. A Smart Property is a property that has access to the Block Chain, and can take actions based on the information published there. Another way to look at it is that smart property can be controlled via the Block Chain. Eg: A car whose ownership is represented by a digital asset in the Block Chain. The physical car is connected to the internet and can read the Block Chain. Therefore it can keep track of the status of the digital asset representing it. As the digital asset is transferred from one address to another, the physical car can see this status update in the Block Chain and take necessary actions, i.e. change its owner… It’s a way of Automating the Internet of Everything.

What to Keep Your Eyes Peeled For in 2015

Ethereum and the MIST browser – Ethereum intends to bring together both a crypto ledger and a Turing-complete programming language, which is a language can be used to simulate any other computer language (not just its own). They intend to make a browser that is a Swiss-army knife of Block Chain and encryption tools that allow non-technical users to truly leverage the web.

Parallel block chains and side chains – Some developers have begun looking at the creation of different Block Chains as they do not believe on depending on a single Block Chain. Parallel Block Chains and Side Chains allow for tradeoffs and improved scalability using alternative, completely independent Block Chains thus allowing for more innovation.

The Philippines intends to put its Peso put on the block chain – Just as Africa leapfrogged wired telecommunications and skipped right to wireless, the Philippines intends to improve its financial services by integrating the Peso to the Block Chain. A dramatic initiative.

In Dec 2014, Don Tapscott, a leading authority on technology and innovation as well as a LinkedIn Influencer, did something characteristic of great men. He admitted he was wrong, noting: “Bitcoin… I used to think it would never fly. Now I think not only will it fly as a currency, but the underlying Block Chain technology of crypto currencies is a core part of the next generation of the internet that is radically going to transform not just commerce and the nature of the corporation, but many of our institutions in society and everyone needs to pay attention to this.”

For those who remain apprehensive, this could be partly due to my poor scribbling’s. But could it also be our innate resistance to change? After all, to quote Thomas R. Lounsbury: “We must view with profound respect the infinite capacity of the human mind to resist the introduction of useful knowledge.”

Kariappa Bheemaiah is a Quantitative Research Analyst at Grenoble Ecole de Management.
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Where there is the necessary technical skill to move mountains, there is no need for the faith that moves mountains -anon-
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Re:Crypto Currency Part 2 ; how will the Banksters Play
« Reply #1 on: 2015-10-22 14:55:48 »
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Why only Bitcoin Matters — (and why everything else matters less)


Posted on October 15, 2015 by DJC @digitsu in Bitcoin, money

The industry is abuzz with the new poster child of ‘disruptive’ innovation, Permissioned Ledgers.  I spent quite a bit of time earlier in the year consulting for big name firms on bitcoin blockchain and permissioned ledgers.  At the time I didn’t really view one preferably over the other, I considered each on its merits and useful applications.  Of course when you are paid to technically consult for a company, they don’t want your biases, they want your technical expertise.  Without fail, those of them who were interested in B2B models were interested more in a permissioned ledger, and those who were doing B2C models were interested in using Bitcoin to monetize their online business models.  Most that were interested in B2B solutions had very bank-like businesses dealing with near-money like value systems.  Decentralized ledgers are great as payment systems.  Bitcoin is digital money,  that runs on a decentralized ledger.  Notice the difference? The ledger part is just a small part of Bitcoin’s innovation which is the money aspect.  Because it is a money it is natural that banks or bank-like entities would want to steer clear of Bitcoin.  There are very strict laws surrounding the control of who gets to print money, what is legal tender, currency control laws, and Bitcoin turns all of that on it’s head.

When I used to compare the two for my clients I would tell them that Bitcoin was harder to create a business model on top of due to the yet unclear legal issues while with permissioned ledgers I saw a clear potential for profit in developing cost saving systems. I was quite impartial to this difference until only 6 months ago, seeing both as equally beneficial as a technology.  However, something happened in the interim that changed my views — Greece.  With the Greek crisis, the world witnessed how the will of the common people matters little against the will of the privileged few.  Many would like to blame the Germans but that would be unfair.  The german economy suffers with continued bailouts as well; “throwing in good money after the bad” those of us in the industry call it.  The central banking system is to blame, as whether deliberately or by greed or by chance, the world economy is starting to collectively crumble under the weight of our bad habits of spending, lending and investing with debt.  And we witnessed first hand that when the chips are down, it will be everyman for themselves. Bail-in clauses have been put in place in all major countries of the world, so that the banks have a right to take your money to save themselves before you.  They justify this as necessary to save the system as a whole.  But is it really?

As much as we would like to blame greedy fat cat creditors for not showing debt lenience for Greeks (at the end of the day no fat cat will ever lose their skin when the system collapses ) it actually boils down to a lot of Greek working class people owe a lot of German working class people money.  So somebody has to be the loser in this zero sum game.  How we get into these terrible lose-lose scenarios is due to how money is created and lent out by the central banks, but I’ll save this topic for a later post.  Today is about Bitcoin, and why its innovation as a money is immeasurably more valuable than any permissioned ledger in terms of disruptive and positive applications for the world.


Because Bitcoin first and foremost as a permissionless, censorship free, money gives us for the first time in over 80 years, Monetary Sovereignty.  What is monetary sovereignty? It’s your basic rights of personal property, applied to your money.  Ever since our gold has been confiscated from us and replaced by paper promises, we have not really owned our own money. Without monetary sovereignty, your money doesn’t really belong to you, it belongs to the central bank and thus is a poor long term store of value.  Not to mention the banks may choose to revoke your use of it selectively if they don’t approve of you or your business.  Banks started out as custodians to our money, now they have become more the gatekeepers overseers of the economy, deciding who can participate in it and who cannot.  They practice active economic censorship.  Such a money system cannot have any real long term value.  If you cannot control your own money then its value cannot be stable for you.

“But fiat money is a great historical store of value” some may say, “more so than the volatility of say gold/silver/oil over the last 100 years”.

But that is an illusion.  An illusion made possible by the fact that all the other monies are reckoned in terms of dollars.  If you flip that mindset around then you can clearly see that the value of USD has plummeted vs gold in the last half century, by 6000% (gold was 20 dollars an ounce in 1913, around 1200 dollars now).  Even if that weren’t the case, fiat money is about as useful a store of value as an electric powered heater in the arctic circle.  Great if you have a politically stable and constantly growing economy (electricity), utterly useless otherwise.  We are seeing signs now that the world economy is becoming more and more unstable, with crisis brought about by collectively over extending credit, spending debt, and the interconnectivity of our financial systems which makes economic mismanagement in one part of the world affect all the other parts.  We are also seeing that growth is slowing despite all efforts by the central bankers to stimulate it.  So the electricity is running out, and it is going to get really cold here out in the igloo.

Bitcoin allows people to keep their money private, away from prying eyes, or sticky fingered governments who would need collect more and more taxes to keep their regime from collapsing.  What started as well-meaning collection for the socialization of basic needs can quickly devolve into economically productive folks subsidizing a failing system.  This is what is happening to the EU and soon US as well.  We already see the signs of it, profitable corporations going to great lengths to avoid paying taxes, which forces the government to spend more money enacting stricter laws and enforcement of tax regulations.  It’s a vicious cycle.

Bitcoin is a threat to the current system.  It is a threat just by its existence alone.  As long as Bitcoin can be there as an alternative money system in the event that the current system suffers a catastrophic drop in confidence, the flight of people afraid of losing their savings will cause them rush to alternatives like gold, silver, CHF, Bitcoin.  And if it does come to pass, it is clear to see that only Bitcoin could be used practically for daily commerce under the strict monetary regime that will no doubt be imposed upon the world in a martial law fashion. (just ask any Greek who had to line up to withdrawal money at 60 EUR per day)

Bitcoin is unique among its kin.  It is the only cryptocurrency to have obtained the status of a money.  It got to where it is because when it was still growing nobody, including the bankers and the government, took it seriously.  Now that it has grown to a size where the cost of attacking the network is prohibitive even for nation states and proven that a digital money system free from government control can actually work. You can be sure that there is no way any government will ever allow another cryptocurrency to grow to this level of adoption and resistance to federal control again.  You only get to fool them once. Bitcoin fooled them.  It will not happen again.  That is why I don’t believe any other alternative cryptocurrency will ever achieve Bitcoin’s level of widespread adoption.  As those in power now lack the capability to attack the Bitcoin network in a direct way (the security of the Bitcoin network is presently beyond the processing power of any government to topple) they must resort to more clandestine ways to weaken, disrupt, and sow seeds of division among its community, whether by means of demonization, regulation, and finally by threat of violence if necessary.  This is why Bitcoiners must be extra vigilant against any changes to the network that would sacrifice any iota of decentralization, which is what keeps Bitcoin free from censorship or government coercion.

So if monetary sovereignty is the freedom that comes with using Bitcoin that we all want to preserve, is that all there is to the value of Bitcoin? Or is there a way to make money from it as well?  We are capitalists after all, and Bitcoin is a system whose security is based on aligning incentives of the network participants with profit-seeking.  This is the key reason why it has worked.  Now while it is certainly true that there is a lot of money being put into a collective conscious campaign to rebrand Bitcoin to just ‘blockchain technologies’, do not be fooled by this charade.  While blockchain without Bitcoin may have its uses as a cost savings initiative for banks, (no doubt given the amount of money being poured into the space), in my opinion, that is not as interesting in comparison to the work we can all help to do to ensure that Bitcoin remains the government-free alternative to fiat currencies, acting as a check and bounds to the central banking system.

So while many immediate opportunities may lie in the blockchain applications or permissioned ledgers, I would say that they matter very little in the long run.

And indeed, if the worst unimaginable were to happen with our current monetary system and we have squandered our best talents and efforts on cost cutting for banks and at the same time sacrificed our monetary sovereignty, then it won’t matter at all.
« Last Edit: 2015-10-22 14:56:45 by David Lucifer » Report to moderator   Logged
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