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Archive for the ‘bitcoin’ tag

Aug 7, 2019

Spending Bitcoin in person is easy (What happens in background is elegant)

Posted by in categories: bitcoin, cryptocurrencies, economics

Today, I was co-host of an online cryptocurrency symposium—taking questions from hundreds of visitors. A common question goes something like this:

Can Bitcoin be used in person—or
is it just for internet commerce?

Our panel had a moderator, and also an off-screen video director. As I cleared my throat in preparation to offer a response, a voice in my ear reminded me that it was not my turn. The director explained that another panelist would reply. It was a highly regarded analyst and educator in Australia. Realizing that that she was calling the shots, I deferred.

I was shocked as I listened to a far off colleague suggest that Bitcoin is not useful for in-person payments. I wonder how he explains this to the grocers, tailors, lawyers, theme parks and thousands of retailers who save millions of dollars each year by accepting bitcoin—all without risk of volatility and even if they demand to instantly convert sales revenue into Fiat currency.*

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Jul 14, 2019

About the Fuss: Is Bitcoin really important?

Posted by in categories: bitcoin, cryptocurrencies, economics

This afternoon, an automated bot at Quora suggested that I answer a reader question. Quora is essentially an “Ask the expert” web site. It is the world’s largest, cataloged and indexed Q&A repository.

This is the question I was asked to answer:

Some pundits believe Bitcoin is a fad, while others seem to feel that it is better than sliced bread. I like sliced bread.* Is Bitcoin really that cool? —Or is it just a lot of Geeky hype?

One other columnist answered before me. Normally, I pass on an invitation, if a question has already been answered. But in this case, the individual answering the question has yet to see the light. He has wandered into the Church of the Blockchain, but he just didn’t realize that the man sweeping the floor is the prophet.

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Jul 14, 2019

Does decentralized currency thwart crisis intervention?

Posted by in categories: bitcoin, cryptocurrencies, economics

Here is another economics/policy question that I was asked to address at Quora. It provides great fodder for a quick Lifeboat economics review.

The US used quantitative easing to deal with one monetary crisis, and a bailout of the automotive and banking industry to deal with another. If nations, economies or individuals begin to embrace a decentralized currency, they will inevitably shift away from government issued money. Won’t this hinder a nation’s ability to intervene in a crisis?

Answering this question goes to the very heart of the ethics and politics of cryptocurrency.

Yes. Without centralized control over monetary policy, government options for intervention in a money crisis would be severely limited. But this fact may lead to a false impression…

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Jul 13, 2019

Profit from Bitcoin with out Investing or Trading

Posted by in categories: bitcoin, cryptocurrencies, economics

I find it encouraging that so many people want to know if they should get into Bitcoin. But, I am discouraged when I discover that “getting into” is a euphemism for investing, trading, flipping or HODL (Buy, then hold on for dear life).

Sure, Bitcoin is deflationary. If widely adopted, it is likely to increase in value. But adoption is being thwarted by traders. Today 95% of cryptocurrency transactions are by individuals or organizations buying or swapping cryptocurrency rather than using crypto to buy apples, a new car, or a family vacation.

Many people consider Bitcoin to be risky and not just as an investment! They think its risky to use a payment instrument. The perception of risk is associated with its widely fluctuating exchange rate. In the end, the exchange value won’t matter at all, because Bitcoin will be the money and not the dollar, yen, euro or pound. But, unfortunately, even though the argument for widespread adoption is compelling, it will not occur while we continue to see spikes and plunges on a graph.

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Jul 12, 2019

Cars, Gold, Houses, Toys & Stock: What gives value?

Posted by in categories: bitcoin, cryptocurrencies, economics


The title of this post is intentionally misleading. We frequently discuss the traits that lead to value here in the Lifeboat Blog. But today, I was asked a more nuanced question: “What things will hold their value?

And there is a ulterior motive in being a columnist for Lifeboat. Analyzing the dynamics of durable value leads to some surprising conclusions about the money supply and what a society chooses to use as money. We’ll get to this at end of this post.


We know that value comes from supply and demand. There are no exceptions. But, we have not addressed the properties that make an asset hold value over the long haul. Let’s consider some examples…

Cars

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Jul 9, 2019

How can Bitcoin be divided into small units?

Posted by in categories: bitcoin, cryptocurrencies, economics

As with other recent articles, this one was originally published as an answer to a member of Quora, a Q&A site in which I am a cryptocurrency columnist. And just like the previous one in this Lifeboat series (also posted today), this is a Q&A exchange with a newbie—a bitcoin beginner.

The question is simply: “How can Bitcoin be divided into units smaller than one?” While the answer may seem obvious to someone versed in math, statistics or economics, I see this question a lot—or something very similar.

I can explain by asking a nearly identical question; one that the enquirer can probably answer easily. The goal is to provide the tools to answer the question—and in a manner that helps the reader recall and make use of the answer in the future. This is how I approached an answer…


Puzzle me this: Can you divide 100 into smaller pieces? Of course you can! You just divvy it up. After all, it’s just a number.

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Jul 8, 2019

Why is it impossible to create more Bitcoin?

Posted by in categories: bitcoin, cryptocurrencies, economics

This article was originally an answer to a member of Quora, a Q&A site in which I am a cryptocurrency columnist. The reader is a “Bitcoin beginner”. If you understand the nature and purpose of a blockchain, the political leanings of Satoshi or the economics of a capped cryptocurrency, then this reviews things that you already know. But sometimes, a recap can be fun. It helps ensure that we are all on the same page…

In a previous post, we have already addressed a fundamental question:

It has nothing to do with how many individuals can own bitcoin or its useful applications. It simply means that—if widely adopted as a payment instrument or as cash itself—the number of total units is capped at 21 million. But each unit can subdivided into very tiny pieces, and we can even give the tiny pieces a new name (like femto-btc or Satoshis). It is only the originally named unit (the BTC) that is capped.

But, this article addresses a more primitive question. (Actually, it is a naïve question, but this adjective has a negative connotation, which is not intended). I interpret the question to be: What prevents me from creating, earning or being awarded an amount that brings the total circulation above 21 million BTC?

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Jul 8, 2019

Update: Building (and placing!) a Bitcoin ATM

Posted by in categories: bitcoin, cryptocurrencies, economics

A new section: Bitcoin ATM business model
has been added. Jump to “2019 Update

The good news is that building a Bitcoin ATM is easy and less expensive than you might expect. But, offering or operating them engulfs the assembler in a regulatory minefield! It might just be worth sticking to selling bitcoin on PayPal (visit this website for more information on that). You might also wish to rethink your business model —especially user-demand. That’s the topic of our 2019 update at the bottom of this article.

A photo of various Bitcoin ATMs appears at the bottom of this article. My employer, Cryptocurrency Standards Association, shared start-up space at a New York incubator with the maker of a small, wall mounted ATM, like the models shown at top left.

What is Inside a Cryptocurrency ATM?

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Jun 10, 2019

Blockchain, Bitcoin, and Law: A Distributed Disruption

Posted by in category: bitcoin

The future of the legal industry is being reshaped by a number of rapidly advancing technologies and the disruptive ideas they enable. Today’s lawyers are being advised to learn to code, develop an artificial intelligence (AI) application, and outsource discovery to machines. Of the many new technological drivers impacting law firms is the secure information exchange platform known as blockchain. Some see it as a the basis for the reinvention of economies while others simply see it as means of secure and incorruptible information exchange between counterparties. This cloud-based distributed ledger technology provides a source of irrefutable record of every transaction. In legal it is enabling fully automated self-executing smart contracts, and has the potential to help attorneys provide new services and create new value for clients and law firms. Blockchain is known as the structure underlying Bitcoin and other digital currencies, but its applications in the legal sector are still evolving. This article provides an overview of the technology, highlights example applications and case studies, and presents a possible timeline of future developments over the next decade or so.

Overview: Blockchain and Bitcoin

Blockchain and Bitcoin have gained notoriety lately as a potential solution to an outdated and burdensome system for managing financial transactions between counterparties. Today most financial transactions between counterparties are settled via financial intermediaries which adds time and cost to the settlement process. Blockchain offers a distributed ledger model whereby the parties settle directly with each other, the transactions are recorded, secure, and immutable, and the counterparty identities remain anonymous. The goal is to enable a simplified and trustworthy financial ecosystem- but these digital peer-to-peer networks, also challenge the authority of institutions (banks, regulators, and governments) and are thus creating disruption.

According to its advocates, the decentralized nature of blockchain and Bitcoin will cause much-needed disruption, with reverberations far beyond the financial realm. There is an element of social revolution in blockchain, thus it is often portrayed as a conduit for challenging the status quo. Though Bitcoin, a digital currency, is an explicitly financial innovation (i.e., for payments, transfer of funds) blockchain is far less specific. Blockchain serves a critical role in the administration of Bitcoin, and that of other digital currencies, but it can actually be used to complete other objectives and track the movement, transfer, and ownership of all sorts of things besides money (examples include luxury goods, education credits, property titles, and patents, to name a few). Though blockchain is structured like a traditional accounting tool—it’s fundamentally a ledger that tracks deposits in and payments out, and maintains a running balance—its uses go far beyond counting coins.

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Apr 1, 2019

Acknowledging Risks in Institutional “Stablecoin” Cryptocurrencies and Fractional Reserve Banking

Posted by in categories: bitcoin, business, cybercrime/malcode

(Originally posted March 7, 2019, on the Crowdfunding Professional Association’s website.)

The purpose of this memo is two-fold:

  • To highlight the possibility of risks to banking and finance sectors arising from new financial instruments based on blockchain technology; primarily from novel financial accounting methods and products called “stablecoins,” digital tokens, and cryptocurrencies.
  • To encourage regulators and policymakers to engage blockchain thought leaders, product developers and the community in general to better understand the economic and policy implications of public, private and permissioned blockchains; their application to banking and finance regulations; and how innovation may be encouraged in a safe, sound and responsible manner.

Like any technology, blockchain can and may be used to improve a variety of operational, identity, security and technology challenges that the future of digital banking, business and society face. Blockchain technology is also poised to create new and increasingly clever methods and economies for value, commodities, assets, securities and a slew of yet-to-be discovered financial instruments and products. However, no leap in technology and finance is ever made without risk. As policymakers and stewards of the current and future digital economy and ecosystem, we have an obligation to our constituents and the global banking and finance community to guide the growth and adoption of emerging fintech technology in a safe and sound manner.

To that end, three areas that have the potential for regulatory and compliance issues as companies such as JP Morgan Chase, embrace and develop blockchain technologies to leverage digital tokens, cryptocurrencies and novel accounting systems such as the so called “JPMCoin,” are highlighted:

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