Think universal basic income is a pipe dream? Experiments all over the world are already showing its potential to transform society for the better.
Leader: “Why you should worry about intelligent machines”
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Category: economics – Page 190
The answer may be counter-intuitive: Not only can Bitcoin be widely adopted under a supply cap, its trust and integrity are a direct result of a provably limited supply. As a result, it will flourish because it is capped.
Everyone Can Own and Trade a Limited Commodity, IF…
…if it is both measurable and divisible. Bitcoin has a capped supply just as gold has a capped supply. Although both assets will be mined for some time into the future, there is only so much that will ever be uncovered. Thereafter, the total pie cannot grow.
But the transaction units will continue to grow as needed, because the pie is divisible into very, very tiny units:
There will eventually be 21 million BTC and each coin is divisible into 108 units. This yields (21 million * 100 million), or 21 trillion exchangeable units. And, it can be divided further by consensus.
As Bitcoin is adopted—whether as a simple payment instrument, an investment asset or even as national currencies around the world—each unit of the limited supply simply rises in value. If thought of as a currency, with a value established by supply & demand, it leads to a deflationary economy.
But, Isn’t Deflation Bad for the Economy?
It’s common to associate deflation with economic ills. One need only glance back at the the last century to conclude that deflation coincides with wars, joblessness, recession and a crippling concentration of wealth. Perhaps, just as bad, the tools used to pull a nation out of deflation often force governments to cherry pick beneficiaries of stimulus spending.
But it is important to note that deflation plays no role in causing these things. On the contrary, it is an effect rather than a cause… In fact, when a supply cap is introduced as a designed control input for monetary policy, all sorts of good things follow. I address these in various answers at Quora. Dig in:
- How does Bitcoin deal with deflation?
- Does Bitcoin deflation encourage ‘scarcity mindset’?
- Are 21 million Bitcoins enough?
- Why is there a limited amount of Bitcoin?
Philip Raymond co-chairs Cryptocurrency Standards Association. He was host and producer of The Bitcoin Event in New York. In his spare time, he edits A Wild Duck
Older than Sumerian script? The Danube Valley civilization is one of the oldest civilizations known in Europe. It existed from between 5,500 and 3,500 BC in the Balkans and covered a vast area, in what is now Northern Greece to Slovakia (South to North), and Croatia to Romania (West to East).
During the height of the Danube Valley civilization, it played an important role in south-eastern Europe through the development of copper tools, a writing system, advanced architecture, including two storey houses, and the construction of furniture, such as chairs and tables, all of which occurred while most of Europe was in the middle of the Stone Age. They developed skills such as spinning, weaving, leather processing, clothes manufacturing, and manipulated wood, clay and stone and they invented the wheel. They had an economic, religious and social structure.
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The relationship between the government and the auto industry is about to be transformed. But into what?
Eight years ago, that relationship hardly could have been more awkward. Two of the Detroit 3 were begging Congress for a lifeline. The federal government would later fire General Motors’ CEO, orchestrate a bankruptcy of GM and Chrysler and emerge as a shareholder in both — a highly un-American arrangement that would lead to a successful recovery, yes, but also lingering tensions and shame.
The relationship is different now, but it’s not necessarily better. The Obama administration shed the stake in the car companies but has wrapped its tentacles more tightly around the industry in many ways, including strict consent decrees to monitor safety and tough targets for fuel economy and greenhouse gas emissions.
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Hmmm.
Technological and human rights implications for the world
China adopted the highly controversial cyber security law on 7th November 2016. The legislation which will take effect in June 2017 was passed by its largely rubber – stamp parliament emphasizing the ‘objective need’ of China as a major internet power. The stated objective of the law is to counter the growing threats such as hacking and terrorism. Overseas critics of the law are not amused as it has already triggered concerns among foreign business and rights groups that the law threatens to shut foreign technology companies out of various sectors which China deems as ‘critical’. The legislation also incorporates contentious requirements for security reviews and for data to be stored on servers in China.
China recognizes that cyberspace profoundly impacts many aspects of national security; it is a national space; a space for military action, important economic action, criminal action and for espionage. So it controls Internet through the world’s most sophisticated online censorship mechanism infamously known outside China as the Great Firewall. The human rights advocates contend that the law will further tighten restrictions on Internet which is already stifled by highly regulated governmental control. The legislation was in drawing board stage for long. Beijing released the draft Cyber Security Law in July 2015 to make all key network infrastructure and information systems ‘secure and controllable’.
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There’s really no sector in the United States (or much of the world) that has been untouched by the development of advanced manufacturing technologies – and no one seems to be underestimating the importance of the further development of those technologies in order to keep the country competitive. To that end, in 2014 the government established the National Network for Manufacturing Innovation (NNMI), more commonly known as Manufacturing USA.
The program brought together the industrial, academic, nonprofit and governmental sectors to establish a network of advanced manufacturing institutes for the purpose of accelerating new manufacturing technologies. President Obama proposed that the network grow to 45 institutes over the course of 10 years, and as of today, 12 have been established. The 12th, which was just announced by the Department of Defense, will be the Advanced Tissue Biofabrication (ATB) Manufacturing USA Institute, and will be led by the Advanced Regenerative Manufacturing Institute (ARMI), based in Manchester, New Hampshire.
“The investments we are making in advanced manufacturing, including today’s announcement, will ensure that the innovations needed to develop, manufacture and commercialize cutting-edge processes and materials will happen right here, in America,” said Defense Secretary Ash Carter. “They will provide important benefits to our war fighters and will help strengthen the economy that is the bedrock of our national security.”
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Artificial intelligence (AI) technology has the potential to boost productivity but increase wealth inequality and wipe out millions of jobs, a research report by the White House claimed on Tuesday. With an increasing number of industries set to be affected by automation technology in the coming years, jobs could be displaced — a fear that has been voiced by academics and business leaders. Auto companies are developing driverless cars, and factories are seeing an increased use of robotics.
Because AI is not a single technology, but rather a collection of technologies that are applied to specific tasks, the effects of AI will be felt unevenly through the economy. Some tasks will be more easily automated than others, and some jobs will be affected more than others — both negatively and positively.
Researchers around the world have given varying estimates about the size of potential job losses. One recent estimate by Forrester suggests 6 percent of jobs in the next five years could be wiped out thanks to AI. The White House report cites a 2013 study from Oxford University suggesting that 47 percent of U.S. jobs are at risk because of AI. The report suggests that lower-skilled and less-educated workers could feel the heat the most. Overall, the White House report advocates a three-pronged approach to preparing for a future remade by AI that includes investing in AI for its benefits, training Americans for the jobs of the future and helping workers make the transition to new positions.
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At Quora, I occasionally play, “Ask the expert”. Today, I was asked if the difference between quotes at various Bitcoin exchanges presents a profit opportunity.
In addition to my answer, one other cryptocurrency enthusiast offered pithy, one-line response: He said “Buy local, sell internationally and pocket the difference!” I tend to believe the opposite is more likely to generate profit: Buy internationally and sell locally. But, I am getting ahead of myself. Here is my answer [co-published at Quora]…
Question:
A Bitcoin exchange in my country quotes a different rate than
international markets. Can I profit from the price difference?
Answer:
Buying and selling a commodity with the intention of profiting from the difference in price in various markets, regions or exchanges is called arbitrage. Typically, the item must be widely traded and fungible. Although it can be a tangible item (one that must be delivered or stored, like gold, oil, frozen orange juice or soy beans), arbitrage is more practical when applied to an ‘item of account’, such as foreign currency, equity shares, stock futures, or Bitcoin.
With this in mind, Bitcoin qualifies as a fungible item of account. If you see a different price at vaious exchanges (or if you believe that you can source personal sales at a higher price than the market spot price), then you have found an opportunity for arbitrage. But hold on! It is not so easy…
- The arbitrage opportunity is often illusory. For example, the cost difference that you observe in market quotes may be overshadowed by the bid/ask spread or by fees, which can be both fixed and a percentage.
- The arbitrage opportunity is transient. It is there for a few seconds and then it vanishes in the next quote. For this reason, successful arbitrage players must be very adept at day-trade techniques. To avoid massive risks, you need up-to-the-second quotes, fast trading tools, and the ability to simultaneously freeze your purchase and sale price.
- Trust is never golden! Even with these tools and promises, when a commodity begins to move in either direction, you will find that a buyer or seller often finds a way to renege on the agreed price. These are not random events…When a trading partner abandons a transaction, it always work against you.
- Some exchanges (and even some national regulatory agencies) prohibit rapid and repeated trading. This may be to discourage speculation or it may be designed as a circuit-breaker (a mechanism to avert the cascade effect that sometimes results from pre-programmed trades). These halts on quick trades can wipe out your gains, or worse. They can turn your investment into a horrible mess.
- Some big exchanges have built-in arbitrage mechanisms that quickly adjust prices and even buy and sell on their own account to keep their limit order books in sync. They are on the front lines and you aren’t! This fact, alone, should suggest give you pause. The opportunities for an outsider are severely limited by these ‘inside’, self-adjusting trades.
- Other legal risks: If the transaction is later deemed to be illegal in the jurisdiction of any party, your exchange accounts may be frozen or your privileges revoked. Unlike p2p Bitcoin transactions, exchange transactions can be reversed. Again, these legal snafus will always work against you. In fact, sometimes, they were pre-planned scams from the start!
- Finally , there are sometimes good reasons for different prices in different markets. For example, national and local regulations may burden to the consumer cost for an item, or the seller may be required to pay a fee or tax to some authority or regulatory agency. If you dodge these costs, you may be violating laws and subject to penalties or punishment. You may even put your customer at risk.
I am neither an arbitrage player nor a day trader. These are just a few warning bells that come to mind when I think about such activity. You can be sure that this list of risks only scratches the surface. Bitcoin is remarkably fluid and many people flaunt regulations. For this reason, I am confident that opportunities for profitable arbitrage are rare and very tiny (small gain for a big risk).
Have I scared you away from Bitcoin arbitrage? If not, proceed with extreme caution and don’t bet the family ranch! Once you have some experience, come back and post feedback below. I have dabbled in options arbitrage, but never with Bitcoin or any currency. Since I don’t have first-hand experience, your feedback will be appreciated.
Philip Raymond is co-chair of Cryptocurrency Standards Association,
host of The Bitcoin Event (New York), and editor at A Wild Duck.