How is bitcoin infinitely divisible? - Bitcoin Stack Exchange

ℳonero possesses every characteristic of Sound Money: durability, portability, divisibility, uniformity, limited supply, and acceptability.

There have been many forms of money in history, but some forms have worked better than others because they have characteristics that make them more useful. The characteristics of money are durability, portability, divisibility, uniformity, limited supply, and acceptability [1]. Let's compare two examples of possible forms of money:
Let's run down our list of characteristics to see how they stack up.
  1. Durability A cow is fairly durable, but a long trip to the market runs the risk of sickness or death for the cow and can severely reduce its value. Units of ℳonero cannot deteriorate or become broken in any way. It exists digitally within a decentralized peer-to-peer network which has no central point of failure.
  2. Portability. While the cow is difficult to transport to the store, ℳonero can be easily be transferred wherever an internet connection is available.
  3. Divisibility. A unit of ℳonero is practically infinitely divisible, up to 12 decimal places. A cow, on the other hand, is not very divisible.
  4. Uniformity. Cows come in many sizes and shapes and each has a different value; cows are not a very uniform form of money. Because accounts and transactions are encrypted, every unit of ℳonero is essentially freshly minted currency and thus treated equally.
  5. Limited supply. In order to maintain its value, money must have a limited supply. While the supply of cows is fairly limited, if they were used as money, you can bet ranchers would do their best to increase the supply of cows, which would decrease their value. The supply, and therefore the value, of ℳonero is established by code agreed upon by the network participants so that the amount of money created is known and controlled.
  6. Acceptability. Even though cows have intrinsic value, some people may not accept cattle as money. In contrast, as ℳonero adoption grows, people will be more than willing to accept your ℳonero. ℳonero can also be exchanged on numerous currency exchanges for any major currency in the world.
Well, it seems "udderly" clear at this point that ℳonero is a much better form of money than cattle.
Apply these same properties to other currencies like gold, USD, or Bitcoin and see how they stand up against ℳonero. Is gold portable? Is there a limited supply of US Dollars? Is every unit of bitcoin uniform? You will come to realize why ℳonero is perfectly sound money, the likes of which has never been seen before.
[1] Functions of Money, The Federal Reserve Bank; The Economic Lowdon Podcast (2020)
submitted by HorrorObjective5 to Monero [link] [comments]

Capital reservation - underestimated impact of Bitcoin?

An unappreciated philosophical and economic impact of Bitcoin from my perspective influenced by Adam Smith.
At least for me. Maybe you guys thought about this before, but this came as a light bulb eureka kind of moment for me the other day. Sorry for eventual typos, not native English-speaker. Also a warning for the Wall of text :)
Bitcoin is not only the censorship resistant, immutable, transparently scarce, store of value, transactional vehicle to name a few of the unique characteristics. All these characteristics make Bitcoin unique, not by themselves but the fact that it is bundled together in this perfectly balanced code. It is not only capital preservation, but actually capital transactional reservation. This type of characteristic is in my opinion revolutionary. Why is it? Let's have a quick overview of the current situation and division of labor, capital and ownership. In my interpretation of Smiths “An inquiry into the nature and causes of the wealth of nations” each member of society that is not dependent on the welfare and good will of others is part of the following three categories, often a little bit in each. Namely;
The providers of time (Labourer)
Most people find themselves in this category most of their lifetime, and almost everybody does at some point in life. This category gives up their time in exchange for value (money) which in turn can be exchanged for whatever needs might arise. A few advantages of being in this category is;
A few disadvantages with this category is;
The providers of capital (Investors)
Most people do also find themselves in this category to some extent through pension plans. However most people do also buy capital equipment in order to consume themselves. But a great portion of the economy is represented by this group. Instead of being paid for their time, they are being paid for the risk of off-putting consumption of their capital goods (or sometimes represented by currency) to the future and letting someone else use this capital in order to create value in the present.
Advantages are;
Disadvantages on the other hand;
Real estate (Landlord)
The final of the three parts of economy is the landlord. The landlord gets paid for letting his land be used for different purposes both for the investor and the labourer. For example, would an agricultural company sometimes rent the land of a great landowner to generate value for the general population and create labour-opportunities.
Advantages of being a landlord;
Disadvantages
These are the three principal value-categories which get a share of each transaction in an economy. Often all three get paid, but at the very least one of these categories have a share in each transaction that is made. Governments are to be considered a sort of landlord in this example. When you buy a burger from McDonalds, the labourer is paid to tend your meal, the landowner (McDonalds real estate) is paid a portion for rent and the franchise-owner (investor) is paid through profit. And of course the government shall have their share one way or the other.
So, how does this wall of text apply to Bitcoin? Well, up until recently the three categories above was the only way to place the transactions occurring in an economy since just holding cash would erode your buying power over periods of time. The incentives of the economy is spurring the three categories above since that would uphold all three of them and keep everybody happy. But Bitcoin introduced a fourth alternative: Capital reservation.
The further elaboration is made with the presumption that Bitcoin is the main transactional peg/vehicle for the global economy.
I, as either a labourer, investor or landowner because of Bitcoin, have the opportunity to reserve my capital from the transactional economy for however long I wish. This has a few wonderful impacts.
For one, when my capital is withheld the remaining Bitcoins get more valuable since there are fewer of them to transact with, creating more incentives to invest and work to obtain more. But, what if the value keeps rising? Would not that lower productivity and stop incentives for both investing, working or owning land? In the short term, perhaps. But this will also slow production making Bitcoin, as representing the whole transactional economy less valuable. Because there are fewer products to go around so each bitcoin gets you less food, drinks and other consumptions since people are raising the bar of what they are willing to pay and as soon as the wheels are slowing down in the economy the entrepreneurs, landowners and career-hungry labourers will see other peoples slacking and stacking as an competitive advantage. They will take advantage of the fact that companies, investors and workers are growing fat and happy with capital appreciation and start driving innovation, production and efficiency again to get their piece of the pie.
In a sense this will keep the already coming and going of “natural” business cycles but will likely smoothen them out and keep the state of the economy transparent for each to take advantage of in which manner they see fit. So by withholding your consumption you are actually contributing to the economy and reserving your capital at the same time. And since most people fall in and out of each category in different stages in their lifetimes the volatility of these cycles is likely to be less than with current inflationary fiat-systems. It is sort of a democratic way to force everyone in each category to take part in the economy. Even by opting out.
It will make preserving and parking your capital reasonable, accessible and transparent for yourself and the rest of the economy which is freedom in a whole new sense.
That's it, thanks for bearing with the wall of text.
submitted by plast_sked to Bitcoin [link] [comments]

My best attempt to simplify the math of a 10 million dollar Bitcoin [1₿=10million]

🤖₿ So 21 million #bitcoins will ever exist, unlike the dollar that is infinitely printed, which is why it loses value. A #bitcoin is infinitely divisible so no matter how expensive 1 coin gets, infinite fractions of it can be purchased and used. You don't have to buy 1 coin. It's value is the money and things of value behind it÷the number of bitcoins that exist. There are 36 million millionaires in the world today, so by the time every 1 of them try to grab a full bitcoin when it becomes a must have investment, there won't be enough for all of them. That easily pushes 1 coin past 1 million dollars in value when they try to grab a whole coin. Then there are 260 trillion in global #stock markets through #stocks and #derivatives, or what others call #institutionalmoney. The the first US #exchanges are opening to bitcoin and #cryptocurrencies this summer. Once bitcoin is allowed to be traded for stocks, which is only a matter of time now with the #stockmarket opening to the #cryptocurrency markets already, that makes that 260 trillion open to be put behind bitcoin. When that starts to happen; 260 trillion divided by 21 million #bitcoins, puts #1bitcoin over 10 million dollars a coin, or 12 million a coin to be exact. This will likely happen in our lifetimes with everything happening now. That makes every dollar invested even at an 11k price, to be worth 1k$ in possibly 10 years at this rate. ₿🤖
There's more to it like the halvings; about every 4 years the distribution of bitcoin going out gets cut in half. The first 4 years 10.5 million bitcoins went out and the demand and use was small so the price was cheap. From less than a penny cheap in 2009, to over 1000$ in 2013 after it first halved. After that from 2013 through 2016 with only 5.25 million bitcoins were being mined/made; then it halved again in 2016 for a second time & the price ran up to 20k a coin because the supply got cut in half to only 2.125 million bitcoins being created with higher demand and use cases. This is where we are now until summer 2020 when the 3rd halving will happen. After that, the next halving will only have 1.05125 million new #bitcoins getting created until 2024, with 10 trillion in value of institutional markets opening up to it. The potential for the next halving with the halved new coin supply, plus increased demand and use cases is anywhere from 100k to 500k in the short term by late 2020 or early 2021, then another 80+% drop as usual. But in short, at the current prices you're in a good position to be fine after the next correction/drop that'll come after the upcoming halving skyrockets the price. I for one won't stop accumulating till we break 20k again, aka the last all time high. My golden rule is to never buy during new all time high prices, and thankfully we're still under it. So learn about it now and stack up before we break 20k again, because after we do the growth will be stupid fast.
Calculated plug ins for 1 million and 10 million
submitted by BuyBitcoinWhileItsLo to Bitcoin [link] [comments]

I live in Australia. We have 10x less people than the US and represent 0.3% of the worlds population. There will never be enough BTC for every Aussie to own a single coin.

Edit: Bitcoin in almost infinitely divisible, but I hope this post paints a mental picture of the scarcity and value proposition of this beast.
Edit2: Adding a reply to how this matters re price:
This is meant to demonstrate how rare 1 Bitcoin is.
Let me try and explain why it matters for price:
Sellers are simply persons, companies, exchanges etc that invested in Bitcoin earlier and are now cashing out. Some are short term speculators cutting their losses after fomo'ing in at the peak and some are maybe long term holders taking profit. Or maybe a bit of both, you might have a long term holder cashing out because they feel the price is going lower...my point is that this is really all just noise in the long term. Youre either building or youre not.
Then you will have good news, bad news, governments telling you this will be the next reserve currency, or bluffing that they can/intend to outlaw Bitcoin and everything in between influencing speculators. Again, its just noise.
What matters is that say after all the noise there are net 10,000 genuine long term beleivers/builders still buying precious Bitcoin in 2019. That means that every now and then, they use their fiat to buy a little more Bitcoin. Even if no more long term builders/buyers join the fray over the next 8 years, the supply of new coins will be 75% less and the net long term demand roughly the same = higher price. This is the Bitcoin policy that attracts builders (or should i coin the term buidlers).
If history repeats though, we will have a lot more new long term beleivers join Bitcoin once then next wave (after the sellers are exhausted) occurs.
Do I make sense? Someone proove me wrong I guess?
Now, where are those sinks?
submitted by agent_kaleido to Bitcoin [link] [comments]

Bitcoin vs Gold

With central banks around the world debasing their currencies by printing money out of thin air, I have been giving increasingly more thought on converting my assets into hard money. The debate that rages on in my head is which is the superior hard money. Gold, the standard for hard money that has withstood the test of time over millennia, or Bitcoin, the world’s first decentralized cryptocurrency. Here are my thoughts.
Intrinsic Value
Gold is often toted as being superior to Bitcoin because gold, unlike Bitcoin, has intrinsic value as a commodity. That is, there is gold demand for purposes outside the functions of money. Gold is used in a variety of industries such as dentistry, electronic hardware, aerospace, jewelry, glass-making and more. This means that gold will have value whether or not gold is being used as money. Bitcoin, on the other hand, has no intrinsic value. If people do not accept Bitcoin’s monetary functions then it has no value.
However, if we accept Bitcoin as money, then the fact that it has no intrinsic value is a significant positive. A money founded on something of intrinsic value will always be subject to supply shocks. For example, imagine that demand for gold has been increasing steadily as the aerospace industry expands and gobbles up more gold. Then one day, our brilliant scientists come up with an alloy that renders the functions of gold in aerospace obsolete. The value of gold begins to drop rapidly as we no longer buy gold for aerospace and begin to melt down the existing gold components. The value of gold will always fluctuate based on the demand for its monetary and intrinsic properties. Bitcoin has the luxury of not being subject to intrinsic volatility.
In summary, I have some fear of people abandoning Bitcoin as money and as it has no intrinsic value, I could end up with nothing. However, the fact that it has no intrinsic value means that Bitcoin is resistant to supply shocks, making it a superior money with little chance of the demand dropping to zero.
Confiscation
To me, the threat of confiscation is a real one. The United States, Great Britain and Australia have all passed legislation in the past forbidding the ownership of gold. Citizens were required to exchange their gold for government paper. In the United States, failure to comply could have netted you a 10 year prison sentence.
Today private ownership of gold is allowed, but I am not positive this will remain the case. The political climate is becoming dangerous. The wealthy (and wealth creation itself) are increasingly demonized and cries for socialism and wealth distribution are growing ever louder. This coupled with an imminent economic collapse make ripe conditions to destroy wealth, through both inflation and confiscation.
Already I have concerns. If I convert my savings into gold and try to fly from China to the United States, will the government harass me or potentially even confiscate my gold holdings in the future? Even now, the US Customs and Border Protection state that I have to declare currency and monetary instruments in excess of $10,000, failure to do so may result in seizure. With Bitcoin I have no concern. No government can go through my bags and find Bitcoin to confiscate. As far as my understanding of Bitcoin goes, there is no, or very very little, risk of confiscation. Please correct me here if I am wrong.
Divisibility & Distribution
In terms of divisibility and ease of transfer, there is no debate that Bitcoin is infinitely superior. I am looking into making my first purchase of gold and damn is it a pain in the ass. If I wish to purchase it online at a place such as Schiff Gold, I would need a couple of months, at least, before I could hold my tiny gold bar. They suggest that I store any gold I purchase in their Singapore vault, but then I don’t feel like it is truly my gold and would have to pay storage fees. If I wish to purchase it here in China, I need to set up an appointment at a bank, and as much as I love China, I hate the idea of handing over my info to state run banks to make a gold purchase. Also I’m confined to purchasing units of 10g, 20g, 50g, 100g, 1kg. There is no easy way for me to purchase a value amount that is perfectly suitable for me.
All this being said, to me gold has one large advantage and that is its history and global distribution. Central banks around the world have massive gold reserves and it is common for everyday citizens to hold a little gold in wedding bands and other jewelry. Everybody knows and understands gold has value. It may be quite sometime before Bitcoin can achieve the same status. Already countries such as Russia and China have been increasing their gold reserves, undoubtedly preparing for an event where fiat money collapses and the world goes back to a hard money standard. Clearly the bet of these governments is a gold standard. And why not? It is what the world used for thousands of years and governments around the world already have large gold reserves.
At the end of the day, I still choose Bitcoin. I choose Bitcoin because I believe the power of the people will always be greater than the power of the government. Governments can try to maintain power by going back to a gold standard and confiscating the gold of citizens, but if people choose Bitcoin over gold, then it will not matter. Money and power will have become truly decentralized.
submitted by Cramson_Sconefield to Bitcoin [link] [comments]

"Bitcoin-as-Gold" v "Bitcoin-as-Cash" is one of the greatest victories they ever pulled on Bitcoin and we fell right into it

Folks, the idea that Bitcoin can't be "cash" because it's really "gold" goes way back. I remember first hearing it in 2013 I think. It goes like this.
Yeah, Satoshi set out to build "cash." But he made some fundamental mistakes, and built "gold" instead. "Digital cash" doesn't scale. It's kinda obvious, really - everyone's coffee purchases stored for all time? C'mon. That'll never work. So it turns out that Bitcoin doesn't really work well as "cash." But it does work great as "gold" - a "digital store of value" - so that's what it is. When we have sidechains (now Lightning Network) working, then you'll be able to use it as gold, and cash.
That's basically been the pitch for almost as long as I remember. And it worked on me, at first, because it made sense, at first. But as the politics developed and as I learned more about Bitcoin's so-called "scaling problem" I realized it was a manufactured crisis, that Satoshi was right when he wrote
The existing Visa credit card network processes about 15 million Internet purchases per day worldwide. Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost. It never really hits a scale ceiling.
Asking yourself if Bitcoin is really best adapted to be "digital gold" or "digital cash" is like asking if streaming audio is best suited as a replacement for "digital radio" or "digital record collection" - the answer is it's both and it's always been both. It's an asset-based money (like gold) that's infinitely divisible and which you can teleport anywhere person-to-person nearly instantly and nearly free (like cash). Gold. And cash. Not either / or. Both / and. That's why it's so valuable.
And now, we're called "Bitcoin Cash" as if we do not possess the gold-like "store of value" properties of the Segwit coin. That's bullshit. In fact, what's the point of Bitcoin that only function as a buy-and-hodl "store of value" coin when you can instead have a Bitcoin that is both a "store of value" and a means-of-exchange? The latter would have far greater utility, reach, and market value.
I like the idea of "Bitcoin Cash" as it reinforces the notion that Bitcoin was always intended to be a medium of exchange from the very start, but we lost a larger message along the way. I don't know how we reclaim this message, but the great minds need to come together to consider this. "Bitcoin-as-cash-not-gold" or "Bitcoin-as-gold-not-cash" is a toxic dichotomy. We need to rid ourselves of it.
submitted by jessquit to btc [link] [comments]

Bitcoin Cash to Be Valued at $12,000,000 Each

Enjoy =)
Larry Page = $41 billion
Bill Gates = $86 billion
All Cryptocurrency's = $200 billion
Amazon = $402 billion
Apple = $730 billion
USD in circulation = $1,500 billion
Gold Market Cap = $8,200 billion
Physical Money (notes/coins) = $31,200 billion
Stock Markets = $66,800 billion
All U.S. Money (bank deposits/loans) = $83,000 billion
But why doesn't EVERYBODY just convert ALL of the world's money of the ENTIRE PLANET to paying each other in gold? Gold is a great 'store of value', isn't it? Yes, it sure has value, but because it is inconvenient, hard to transport, slow, not divisible (without a third party), and difficult to keep from being robbed (without a third party), that is why the entire planet does not transact in gold, and hence why Gold's market capitalization is only $8,200 billion.
The only way this is possible, is if gold was more convenient to transact with than everything else, especially VISA. Which is impossible. You can't pay for a $100.37 item on Amazon.com, through the internet, without a third party, in a split second, by using gold.
Bitcoin (whitepaper version), can do 1,000,000 transactions per second CHEAPER than VISA. (It can probably do even more in the future), it's also at the same time a tangible currency (that takes trillions of video cards to create one single uncounterfeitable coin) aka "store of value".
So, for example's sake, let's add up all of the money (listed above), and "flood" the entire planet into using a currency ("store of value"), that is ALSO a payment system in itself BY DESIGN, able to send money to the other side of the planet, instantly, without needing to use ANY kind of outside third party, because the coin ITSELF is the third party IF it is the Whitepaper Version of Bitcoin. But if the witness data (aka transaction signatures) are segregated from the chain, then the coin (economy itself) is no longer ITS' OWN "third party" anymore, but prone to whoever wants to take advantage of the segregated witness data (whether its blockstream, bitcoin core, AXA, miners, or banks, doesn't matter). Because when the chain of digital signatures is no longer part of the blockchain, the incentive to take advantage of the system and introduce a traditional (bankegovernment) "third party" is now profitable/possible to do so. Whereas, originally, without SegWit, anybody who tried to do this would infinitely lose money in trying to do so---aka mining coins was more profitable than trying to do a 51% attack. Hence, with SegWit, we introduce a loop-hole into Bitcoin, allowing double spending of anyone's transactions, reversing anyone's transactions, halting anyone's transactions, freezing anyone's transactions, charge-backs, etc.
Now introduce $191,659 billion (see above) of the world's money to a ONE WORLD CURRENCY, that DOES NOT REQUIRE A THIRD PARTY.
17,912 x $650 current value of Bitcoin (whitepaper version) = $11,642,800 , for one coin.
90% of people who buy Bitcoin don't even know what is "Segwit" or "Blockstream" or "Satoshi" or "Whitepaper". They think it's the 'norm' that it takes hours upon hours (or even days) to get their Bitcoin. They assume that because it's "hard to get", then that is why it is valuable. Upon all of the other reasons. It's all media. It is exactly what BitConnect is doing. The only reason people are buying it, is because everyone is gambling, but are fully convinced that it is "investing". This is why Bitcoin is not going to lose its' value instantly. Nor is it going to skyrocket to an astronomical value like $100,000 instantly. But it will most definitely NOT be used as replacement currency by Walmart, Amazon, Sams Club, Coca Cola, Target, etc, and so on, it goes on FOREVER. All of these companies use VISA.
But what about other coins that already exist with little to no fees, instant transactions and end up having little to no traction and don't look like anyone cares about them??
For example.
These are the top ones I felt like choosing. I can explain every coin on the list. But the entire point, is that for EVERY one of these coins, Bitcoin Cash does it better. Bitcoin Cash has 0-conf (Bitcoin used to have it until the system could not accept anymore transactions and started backlogging transactions---aka full blocks). Bitcoin Cash has scripting functions (aka smart contracts). Bitcoin used to have it when the transaction fees only cost 1-5 cents per block... But no one wants to use the scripting functions anymore when you have to pay $5-$100 for each block.
There is a reason why Satoshi did not design Bitcoin (whitepaper version) like any of the other coins. It is because he already thought about those other designs.
Bitcoin legacy forfeited it's security model (whitepaper version) as soon as it changed protocol to SegWit.
submitted by MartinGandhiKennedy to btc [link] [comments]

What are Bitcoin and Other Cryptocurrencies Backed By?

Bitcoin was created back in 2009 and became the first cryptocurrency ever designed. Cryptocurrencies have become increasingly popular in the last few years as they offer an efficient and decentralized way of transferring money.
Cryptocurrencies have always been an alternative to banks and fiat money. But why do they have any value at all and who dictates what they are worth? The value of Bitcoin is really calculated through supply and demand. The digital asset itself is backed by nothing more than perhaps the blockchain ledger.
Every single cryptocurrency uses a blockchain ledger, a system that records transactions between two or more parties in a verifiable and permanent way. This certainly adds value to Bitcoin and cryptocurrencies. However, it is not what determines their price.
Why Things Have Value
Why does anything have any value at all? It has mostly because of supply and demand. Traditional currencies, for instance, are only backed by the government that issued them. Digital money, like Bitcoin, is not backed or linked to any physical reserves like gold and can certainly lose value due to different factors.
Cryptocurrencies have value because they require ‘work’ to exist. Cryptocurrencies are maintained thanks to the mining process, a process in which transactions are verified by different people. This process requires a certain amount of work, electricity, and money.
Key Factors That Affect The Value of Cryptocurrencies
Since most cryptocurrencies are not physically backed by anything, their value is determined through supply and demand based on a few important factors. One of the biggest advantages of cryptocurrencies is scarcity. The supply of most cryptocurrencies is fixed, and, unlike traditional currencies, no one can issue more than the maximum limit. This means that cryptocurrencies are deflationary by nature.
Another key factor that benefits cryptocurrencies is divisibility. Any cryptocurrency can be divided into smaller units. A simple change in Bitcoin’s code could allow the digital asset to be divided into infinitely smaller units at any time.
Additionally, transferring cryptocurrencies can be extremely fast and cheap compared to traditional methods. Fees are somewhat fixed no matter the amount you send, which means that theoretically you could send 1 million Bitcoins to someone and pay only a few dollars in fees (or even less).
In a way, one could say that Bitcoin and cryptocurrencies are backed by the public’s faith in them as they have realized that the current monetary system is not as robust as one might think.
Why Are Cryptocurrencies so Volatile Then?
In comparison to traditional currencies and even stocks, cryptocurrencies are far more volatile, meaning that the current price of any given crypto can change drastically in hours. It’s quite common to see Bitcoin’s price go up or down 5-10% within a few days. In fact, even in periods of low volatility, most cryptocurrencies still experience price moves of up to 1-2%, which is considered extremely high in traditional markets.
The explanation, however, is quite simple. Cryptocurrencies, in general, lack the liquidity that the rest of the markets enjoy. According to statistics from Statista, the average daily turnover in the global foreign exchange market was around $6.5 trillion daily. The cryptocurrency market, on average, sees around $80 billion in daily trading volume, and according to various sources, a lot of the volume is actually fake.
The problem with illiquidity is that someone who wants to sell or buy a huge amount of Bitcoin or any cryptocurrency will simply ‘eat’ all the orders in the order book of the exchange, catapulting the price up or crashing it. That is the only reason why cryptocurrencies, in general, are extremely volatile.
Some Cryptocurrencies Are Actually Backed by Things
There are, however, some cryptocurrencies that are backed by gold, assets, and even fiat money. Tether (USDT) became the most popular cryptocurrency backed by fiat, later known as a ‘stablecoin’.
Stablecoins
A stablecoin is designed to always be worth $1.00 by maintaining 1 dollar in some sort of reserve. The first stablecoin to become widely popular was Tether, however, there was a lot of controversy surrounding it. Most of the criticism came from the fact that Tether Limited was unable to prove they actually have the funds to cover all the Tether issued.
Additionally, on 30 April 2019, Tether Limited’s lawyer actually admitted that each coin is only backed by $0.74 in cash.
Currently, there are over a dozen stablecoins that are backed by fiat, commodities, and even cryptocurrencies. TrueUSD is similar to Tether but it is considered to be one of the most reliable stablecoins currently as the company behind it has been extremely transparent and conducted an independent audit back in March 2019.
A more complex stablecoin is Dai, which is backed by Ethereum and pegged to the dollar. The system behind Dai basically locks Ethereum in a public contract. If the value of Dai distances too far from $1, the system will make use of the contract to stabilize it back. There is, however, a small problem: Dai is not entirely decentralized as the technology behind it is being monitored by the Maker Foundation.
DigixDAO is another stablecoin and it’s backed by bars of actual gold. It is an ERC-20 token created back in 2014. The digital asset is entirely decentralized and autonomous and can in fact be extended to be backed by other precious metals and even physical assets. According to the company, the gold is stored in custodial vaults at the Singapore Safe House, and 1 DGX will always equal 1 gram of gold.
Cryptocurrencies Backed by Assets
Not all cryptocurrencies backed by assets are stablecoins. For instance, the first oil-backed cryptocurrency was introduced by Venezuelan President Nicolas Maduro back in 2017. El Petro, although highly criticized, is supposedly the first cryptocurrency to be backed by oil thanks to the country’s huge oil and mineral reserves.
Petro is, however, not pegged to anything, and its value can increase or decrease at any given time.
Tokenization of Assets
Something that has become quite popular over the last few years is the tokenization of traditional stocks and assets. There are countless blockchain startups tokenizing almost anything to represent ownership.
The tokenization of assets brings numerous benefits like greater liquidity, more transparency, cheaper and faster transactions, and more accessibility. Tokenization itself is quite difficult to regulate, and all tokenization assets have to be compliant with the law, something that issuers struggle to achieve.
Conclusion
While traditional cryptocurrencies are not necessarily backed by anything physical, they still hold a lot of value solely based on supply and demand. This is the case with numerous other assets and even fiat money.
Cryptocurrencies have come a long way and there is a wide variety of them. Stablecoins are the most popular when it comes to asset-backed cryptocurrencies. They serve as an alternative to fiat money and bring a lot of liquidity to the market. There are definitely concerns as people question their stability, however, they have become an important factor in the market.
Additionally, other projects aside from stablecoins have implemented asset-backed cryptocurrencies. There are numerous cryptocurrencies out there backed by precious metals, physical assets, stocks, and even other cryptocurrencies. We are definitely going to see even more in the near future as they bring a lot more security to investors and the crypto space in general.

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submitted by SwapSpace_co to CryptoTechnology [link] [comments]

10 Reasons Why Bitcoin is Better than Conventional Currency

  1. Theft resistance: Stealing of bitcoins is not possible until the adversary have the private keys (usually kept offline) that are associated with the user wallet. In particular, Bitcoin provides security by design, for instance, unlike with credit cards you dont expose your secret (private key) whenever you make a transaction.
  2. Btc cannot be falsified, dollars well you know When you transfer bitcoins to someone you don't hand over "a bitcoin". You submit a transaction to the network. The network makes sure your address is valid and has the proper value. So there is no risk of counterfeiting because there is nothing to counterfeit.
  3. Durability, Portability, Divisibility, How do you destroy a number? Bitcoins are as durable as the owner makes the keys. If the only copy of the key is on a computer and you throw out the computer, the bitcoins die with the hard drive. If the proper precautions are taken, the keys are as durable as the medium. In order to destroy the network, you would need to eliminate all computers running the software. This includes the computer running in space. It is possible but unlikely.
You can just travel among different countries with millions in Btc, you just have to memorize your private key, here is where btc is much more portable than gold, cash and even bank transfers that can have several limitations.
Without a way to instantly transport gold from person to person, which is impossible without some sort of incredible breakthrough resulting in teleportation, then transportation costs, or the reliance on central vaults to store the gold, remain an issue. then, the gold itself is so useful for much of the technology we rely on today, as well as technology that is being developed, that our gold supply is truly needed for industrial uses. For the first time in history, humans are actually “consuming” gold
Bitcoin is infinitely divisible. Currently, 1 bitcoin can only be broken down into 100,000,000 smaller units, known as satoshis. However, that limit is not set in stone. If, at some point, more than 2,100,000,000,000,000, or 2.1 quadrillion, units of currency are needed, then it would not be difficult to allow the currency to be broken down to another decimal point or two.
  1. It’s borderless. You could go to any country and use it. It is safer to carry bitcoins than to carry cash, especially if you bring a large amount of money or if you’re travelling to a country with higher crime rates. Bitcoin is easy to exchange to major local currencies, if you plan to travel to multiple countries and wish to avoid the hassle of exchanging money.
If the establishment doesn’t accept bitcoin payments, sell your bitcoins (through LocalBitcoins) or withdraw your money from ATMs with the help of payment cards.
  1. It’s not subject to the whims of a government. The supply is constant and the price is determined by free market demand. We can know how many bitcoin will be circulating in ten, twenty or seventy years, for example, are you able you know how many US dollars will be circulating at that moment, or how many of your fiduciary currency will be printed?
  2. Bitcoin transactions are instant. When a bitcoin is sent, the transaction immediately begins to spread through the network. The recipient can see that they have received the transaction instantly, or within a few seconds. Then, once it has been fully confirmed, it would be statistically improbable for it to be invalid. I would say impossible, but that is not completely true. However, after a few confirmations, you are more likely to win the lottery than have a transaction turn out to be invalid.
  3. Secure store of value. This use case is crucial in environments where citizens cannot trust that institutions will be responsible stewards of their hard-earned money. Consider the tragic case of a country like Venezuela, where individuals’ property and savings can be confiscated by authorities through law or inflation. Many Venezuelans are unfortunately unable to access traditional forms of exit such as emigration or stealthily accruing more stable sovereign currencies. With cryptocurrency, more Venezuelans have an alternative: They can opt to purchase or mine a secure store of value that cannot be confiscated or inflated away by their government because they alone control their private keys. (Indeed, cryptocurrencies are especially popular in Venezuela for precisely this reason.)
It is also very useful to send and receive remittances without paying high fees and only with your mobile, without having to go to a money exchanger physically
  1. Smart contracts. For example, let’s say that Alice would like to gift her granddaughter, Erin, with a sum of money upon her 18th birthday. Today, Alice’s option is basically to hire a lawyer to create a trust that will hold the funds and disburse them on the appointed date. Being a technologically-savvy grandmother, however, Alice knows that she can simply program a smart contract to do the same thing without having to employ an intermediary. Alice creates a cryptocurrency wallet for herself and another for her granddaughter Erin. Alice sends the equivalent of $10,000 to her wallet and programs a smart contract. The contract is set up so that on the day of Erin’s birthday—let’s say January 3, 2027—the contract will automatically move the funds from Alice’s wallet directly to Erin’s, where she will have complete control of those funds. Once Alice sets the transaction in motion, she no longer has access to the funds, just as if she had created a trust. (it works also for inheritances)
  2. It’s banking the unbanked. You can bypass the traditional banking system, avoid surveillance, and get rid of hefty fees. Cryptocurrencies remove the need to rely on this trusted third party to make a transaction. In effect, a cryptocurrency replaces a third party like Bank of America or PayPal with the network itself, which is managed by a distributed web of computers all across the world. This means that Alice can make a payment online directly to Bob whenever and wherever she wants, without needing to introduce another party which may be cumbersome or expensive. This also means that people without access to banking services can now take part in digital commerce.
Programmers, developers, online teachers, designers and anyone who can do online work can benefit from this bitcoin advantage, especially in poorer countries where most people can not access international bank accounts.
  1. Bitcoin has no risk of credit card fraud or credit card chargebacks, Compared to traditional payment methods, bitcoin is an attractive prospect for business owners, Bitcoin has no risk of credit card fraud or credit card chargebacks,This is a huge problem for the travel industry because the payments are often large.
For example, many European or American online stores block or avoid receiving credit card payments from Africa because of the fraud risks, with bitcoin, online stores could accept purchases from customers from Africa without chargeback risks, both parties win, the Buyers can access the merchandise and sellers can sell without risk.
submitted by raftoni to Bitcoin [link] [comments]

What are Bitcoin and Other Cryptocurrencies Backed By?

Bitcoin was created back in 2009 and became the first cryptocurrency ever designed. Cryptocurrencies have become increasingly popular in the last few years as they offer an efficient and decentralized way of transferring money.
Cryptocurrencies have always been an alternative to banks and fiat money. But why do they have any value at all and who dictates what they are worth? The value of Bitcoin is really calculated through supply and demand. The digital asset itself is backed by nothing more than perhaps the blockchain ledger.
Every single cryptocurrency uses a blockchain ledger, a system that records transactions between two or more parties in a verifiable and permanent way. This certainly adds value to Bitcoin and cryptocurrencies. However, it is not what determines their price.
Why Things Have Value
Why does anything have any value at all? It has mostly because of supply and demand. Traditional currencies, for instance, are only backed by the government that issued them. Digital money, like Bitcoin, is not backed or linked to any physical reserves like gold and can certainly lose value due to different factors.
Cryptocurrencies have value because they require ‘work’ to exist. Cryptocurrencies are maintained thanks to the mining process, a process in which transactions are verified by different people. This process requires a certain amount of work, electricity, and money.
Key Factors That Affect The Value of Cryptocurrencies
Since most cryptocurrencies are not physically backed by anything, their value is determined through supply and demand based on a few important factors. One of the biggest advantages of cryptocurrencies is scarcity. The supply of most cryptocurrencies is fixed, and, unlike traditional currencies, no one can issue more than the maximum limit. This means that cryptocurrencies are deflationary by nature.
Another key factor that benefits cryptocurrencies is divisibility. Any cryptocurrency can be divided into smaller units. A simple change in Bitcoin’s code could allow the digital asset to be divided into infinitely smaller units at any time.
Additionally, transferring cryptocurrencies can be extremely fast and cheap compared to traditional methods. Fees are somewhat fixed no matter the amount you send, which means that theoretically you could send 1 million Bitcoins to someone and pay only a few dollars in fees (or even less).
In a way, one could say that Bitcoin and cryptocurrencies are backed by the public’s faith in them as they have realized that the current monetary system is not as robust as one might think.
Why Are Cryptocurrencies so Volatile Then?
In comparison to traditional currencies and even stocks, cryptocurrencies are far more volatile, meaning that the current price of any given crypto can change drastically in hours. It’s quite common to see Bitcoin’s price go up or down 5-10% within a few days. In fact, even in periods of low volatility, most cryptocurrencies still experience price moves of up to 1-2%, which is considered extremely high in traditional markets.
The explanation, however, is quite simple. Cryptocurrencies, in general, lack the liquidity that the rest of the markets enjoy. According to statistics from Statista, the average daily turnover in the global foreign exchange market was around $6.5 trillion daily. The cryptocurrency market, on average, sees around $80 billion in daily trading volume, and according to various sources, a lot of the volume is actually fake.
The problem with illiquidity is that someone who wants to sell or buy a huge amount of Bitcoin or any cryptocurrency will simply ‘eat’ all the orders in the order book of the exchange, catapulting the price up or crashing it. That is the only reason why cryptocurrencies, in general, are extremely volatile.
Some Cryptocurrencies Are Actually Backed by Things
There are, however, some cryptocurrencies that are backed by gold, assets, and even fiat money. Tether (USDT) became the most popular cryptocurrency backed by fiat, later known as a ‘stablecoin’.
Stablecoins
A stablecoin is designed to always be worth $1.00 by maintaining 1 dollar in some sort of reserve. The first stablecoin to become widely popular was Tether, however, there was a lot of controversy surrounding it. Most of the criticism came from the fact that Tether Limited was unable to prove they actually have the funds to cover all the Tether issued.
Additionally, on 30 April 2019, Tether Limited’s lawyer actually admitted that each coin is only backed by $0.74 in cash.
Currently, there are over a dozen stablecoins that are backed by fiat, commodities, and even cryptocurrencies. TrueUSD is similar to Tether but it is considered to be one of the most reliable stablecoins currently as the company behind it has been extremely transparent and conducted an independent audit back in March 2019.
A more complex stablecoin is Dai, which is backed by Ethereum and pegged to the dollar. The system behind Dai basically locks Ethereum in a public contract. If the value of Dai distances too far from $1, the system will make use of the contract to stabilize it back. There is, however, a small problem: Dai is not entirely decentralized as the technology behind it is being monitored by the Maker Foundation.
DigixDAO is another stablecoin and it’s backed by bars of actual gold. It is an ERC-20 token created back in 2014. The digital asset is entirely decentralized and autonomous and can in fact be extended to be backed by other precious metals and even physical assets. According to the company, the gold is stored in custodial vaults at the Singapore Safe House, and 1 DGX will always equal 1 gram of gold.
Cryptocurrencies Backed by Assets
Not all cryptocurrencies backed by assets are stablecoins. For instance, the first oil-backed cryptocurrency was introduced by Venezuelan President Nicolas Maduro back in 2017. El Petro, although highly criticized, is supposedly the first cryptocurrency to be backed by oil thanks to the country’s huge oil and mineral reserves.
Petro is, however, not pegged to anything, and its value can increase or decrease at any given time.
Tokenization of Assets
Something that has become quite popular over the last few years is the tokenization of traditional stocks and assets. There are countless blockchain startups tokenizing almost anything to represent ownership.
The tokenization of assets brings numerous benefits like greater liquidity, more transparency, cheaper and faster transactions, and more accessibility. Tokenization itself is quite difficult to regulate, and all tokenization assets have to be compliant with the law, something that issuers struggle to achieve.
Conclusion
While traditional cryptocurrencies are not necessarily backed by anything physical, they still hold a lot of value solely based on supply and demand. This is the case with numerous other assets and even fiat money.
Cryptocurrencies have come a long way and there is a wide variety of them. Stablecoins are the most popular when it comes to asset-backed cryptocurrencies. They serve as an alternative to fiat money and bring a lot of liquidity to the market. There are definitely concerns as people question their stability, however, they have become an important factor in the market.
Additionally, other projects aside from stablecoins have implemented asset-backed cryptocurrencies. There are numerous cryptocurrencies out there backed by precious metals, physical assets, stocks, and even other cryptocurrencies. We are definitely going to see even more in the near future as they bring a lot more security to investors and the crypto space in general.

SwapSpace team is always ready for discussion. You can drop an email with your suggestions and questions to [[email protected]](mailto:[email protected]) Join our social networks: Twitter, Medium, Facebook, Telegram The best rates on https://swapspace.co/
submitted by SwapSpace_co to CoinBase [link] [comments]

Bitcoin Endgame Discussion

So I had a sort of epiphany the other day, you might dismiss this offhandedly but hear me out:
Bitcoin will eventually be worthless, but not soon (probably). This is because it will be eclipsed by fiat cryptoUSD at some point.
I strongly suspect that the US government or other governments are working on their own crypto currencies, that will replace paper money. There's nothing magical about bitcoin, we are a public beta-test, that once proven, will be rendered worthless by a national cryptocurrency that won't be mined, but will be issued by the central bank. Big banks are already working on using block chains for smart contracts. Note: they aren't using existing currencies with smart contracts, they are making their own. The USA similarly has no reason whatsoever to adopt bitcoin as a currency. The government stooges benefit MUCH more by making their own and replacing the paper dollar with it. Much like how they saw the benefit of fiat money over gold. No merchant still uses both gold coins and dollars for transactions, whatever the bank uses, they use.
Right now the main arguments for bitcoin's value are, in no particular order: I had more thoughts under each of these arguments but I can't be arsed to type them all out.
On that note, I'm currently bullish on bitcoin, buy it now but don't hodl too long...
submitted by Redcrux to Bitcoin [link] [comments]

Coin split?

When a stock's value goes up so much that it becomes out of reach to casual investors, the company will perform a stock split, assigning all holders of the stock some multiple of their current shares in an effort to drop the price of each individual share. For example, in a 3-for-1 stock split, every share that is owned gets tripled, so that those who are holding 100 shares are granted 200 more shares for a total of 300 shares. The effect of this maneuver is that the price would fall to 1/3rd its current value while the value of shares held does not change at all.
Is a coin split possible?
I know, of course, that Dash is infinitely divisible. But right now, a $3 cup of coffee costs 0.002 Dash, which isn't easy or pleasurable to communicate.
I also know there are names for particular divisions of Dash - i.e. that $3 cup of coffee is really just 2 "mDash" - but then we have the problem of brand identification. What is an mDash? Is that like Dash in the way Bitcoin Cash is like Bitcoin?
The only potential flaws I see in this is the possibly odd effects it could have on exchanges. If the "wallet" you see in your exchange account isn't actually a representation of what is on the blockchain, but instead your "wallet" is an entry in the exchange's own private database, then this could cause problems.
However, we should give this serious consideration. I like Dash because the development team and community are focused on making it a medium of exchange. If each Dash is worth $2000 (or, I think, more) then it will be very difficult to talk transactions in Dash.
Thoughts?
submitted by cultfitnews to dashpay [link] [comments]

What are Bitcoin and Other Cryptocurrencies Backed By?

Bitcoin was created back in 2009 and became the first cryptocurrency ever designed. Cryptocurrencies have become increasingly popular in the last few years as they offer an efficient and decentralized way of transferring money.
Cryptocurrencies have always been an alternative to banks and fiat money. But why do they have any value at all and who dictates what they are worth? The value of Bitcoin is really calculated through supply and demand. The digital asset itself is backed by nothing more than perhaps the blockchain ledger.
Every single cryptocurrency uses a blockchain ledger, a system that records transactions between two or more parties in a verifiable and permanent way. This certainly adds value to Bitcoin and cryptocurrencies. However, it is not what determines their price.
Why Things Have Value
Why does anything have any value at all? It has mostly because of supply and demand. Traditional currencies, for instance, are only backed by the government that issued them. Digital money, like Bitcoin, is not backed or linked to any physical reserves like gold and can certainly lose value due to different factors.
Cryptocurrencies have value because they require ‘work’ to exist. Cryptocurrencies are maintained thanks to the mining process, a process in which transactions are verified by different people. This process requires a certain amount of work, electricity, and money.
Key Factors That Affect The Value of Cryptocurrencies
Since most cryptocurrencies are not physically backed by anything, their value is determined through supply and demand based on a few important factors. One of the biggest advantages of cryptocurrencies is scarcity. The supply of most cryptocurrencies is fixed, and, unlike traditional currencies, no one can issue more than the maximum limit. This means that cryptocurrencies are deflationary by nature.
Another key factor that benefits cryptocurrencies is divisibility. Any cryptocurrency can be divided into smaller units. A simple change in Bitcoin’s code could allow the digital asset to be divided into infinitely smaller units at any time.
Additionally, transferring cryptocurrencies can be extremely fast and cheap compared to traditional methods. Fees are somewhat fixed no matter the amount you send, which means that theoretically you could send 1 million Bitcoins to someone and pay only a few dollars in fees (or even less).
In a way, one could say that Bitcoin and cryptocurrencies are backed by the public’s faith in them as they have realized that the current monetary system is not as robust as one might think.
Why Are Cryptocurrencies so Volatile Then?
In comparison to traditional currencies and even stocks, cryptocurrencies are far more volatile, meaning that the current price of any given crypto can change drastically in hours. It’s quite common to see Bitcoin’s price go up or down 5-10% within a few days. In fact, even in periods of low volatility, most cryptocurrencies still experience price moves of up to 1-2%, which is considered extremely high in traditional markets.
The explanation, however, is quite simple. Cryptocurrencies, in general, lack the liquidity that the rest of the markets enjoy. According to statistics from Statista, the average daily turnover in the global foreign exchange market was around $6.5 trillion daily. The cryptocurrency market, on average, sees around $80 billion in daily trading volume, and according to various sources, a lot of the volume is actually fake.
The problem with illiquidity is that someone who wants to sell or buy a huge amount of Bitcoin or any cryptocurrency will simply ‘eat’ all the orders in the order book of the exchange, catapulting the price up or crashing it. That is the only reason why cryptocurrencies, in general, are extremely volatile.
Some Cryptocurrencies Are Actually Backed by Things
There are, however, some cryptocurrencies that are backed by gold, assets, and even fiat money. Tether (USDT) became the most popular cryptocurrency backed by fiat, later known as a ‘stablecoin’.
Stablecoins
A stablecoin is designed to always be worth $1.00 by maintaining 1 dollar in some sort of reserve. The first stablecoin to become widely popular was Tether, however, there was a lot of controversy surrounding it. Most of the criticism came from the fact that Tether Limited was unable to prove they actually have the funds to cover all the Tether issued.
Additionally, on 30 April 2019, Tether Limited’s lawyer actually admitted that each coin is only backed by $0.74 in cash.
Currently, there are over a dozen stablecoins that are backed by fiat, commodities, and even cryptocurrencies. TrueUSD is similar to Tether but it is considered to be one of the most reliable stablecoins currently as the company behind it has been extremely transparent and conducted an independent audit back in March 2019.
A more complex stablecoin is Dai, which is backed by Ethereum and pegged to the dollar. The system behind Dai basically locks Ethereum in a public contract. If the value of Dai distances too far from $1, the system will make use of the contract to stabilize it back. There is, however, a small problem: Dai is not entirely decentralized as the technology behind it is being monitored by the Maker Foundation.
DigixDAO is another stablecoin and it’s backed by bars of actual gold. It is an ERC-20 token created back in 2014. The digital asset is entirely decentralized and autonomous and can in fact be extended to be backed by other precious metals and even physical assets. According to the company, the gold is stored in custodial vaults at the Singapore Safe House, and 1 DGX will always equal 1 gram of gold.
Cryptocurrencies Backed by Assets
Not all cryptocurrencies backed by assets are stablecoins. For instance, the first oil-backed cryptocurrency was introduced by Venezuelan President Nicolas Maduro back in 2017. El Petro, although highly criticized, is supposedly the first cryptocurrency to be backed by oil thanks to the country’s huge oil and mineral reserves.
Petro is, however, not pegged to anything, and its value can increase or decrease at any given time.
Tokenization of Assets
Something that has become quite popular over the last few years is the tokenization of traditional stocks and assets. There are countless blockchain startups tokenizing almost anything to represent ownership.
The tokenization of assets brings numerous benefits like greater liquidity, more transparency, cheaper and faster transactions, and more accessibility. Tokenization itself is quite difficult to regulate, and all tokenization assets have to be compliant with the law, something that issuers struggle to achieve.
Conclusion
While traditional cryptocurrencies are not necessarily backed by anything physical, they still hold a lot of value solely based on supply and demand. This is the case with numerous other assets and even fiat money.
Cryptocurrencies have come a long way and there is a wide variety of them. Stablecoins are the most popular when it comes to asset-backed cryptocurrencies. They serve as an alternative to fiat money and bring a lot of liquidity to the market. There are definitely concerns as people question their stability, however, they have become an important factor in the market.
Additionally, other projects aside from stablecoins have implemented asset-backed cryptocurrencies. There are numerous cryptocurrencies out there backed by precious metals, physical assets, stocks, and even other cryptocurrencies. We are definitely going to see even more in the near future as they bring a lot more security to investors and the crypto space in general.

SwapSpace team is always ready for discussion. You can drop an email with your suggestions and questions to [[email protected]](mailto:[email protected]) Join our social networks: Twitter, Medium, Facebook, Telegram The best rates on https://swapspace.co/
submitted by SwapSpace_co to CryptoCurrencyTrading [link] [comments]

What are Bitcoin and Other Cryptocurrencies Backed By?

Bitcoin was created back in 2009 and became the first cryptocurrency ever designed. Cryptocurrencies have become increasingly popular in the last few years as they offer an efficient and decentralized way of transferring money.
Cryptocurrencies have always been an alternative to banks and fiat money. But why do they have any value at all and who dictates what they are worth? The value of Bitcoin is really calculated through supply and demand. The digital asset itself is backed by nothing more than perhaps the blockchain ledger.
Every single cryptocurrency uses a blockchain ledger, a system that records transactions between two or more parties in a verifiable and permanent way. This certainly adds value to Bitcoin and cryptocurrencies. However, it is not what determines their price.
Why Things Have Value
Why does anything have any value at all? It has mostly because of supply and demand. Traditional currencies, for instance, are only backed by the government that issued them. Digital money, like Bitcoin, is not backed or linked to any physical reserves like gold and can certainly lose value due to different factors.
Cryptocurrencies have value because they require ‘work’ to exist. Cryptocurrencies are maintained thanks to the mining process, a process in which transactions are verified by different people. This process requires a certain amount of work, electricity, and money.
Key Factors That Affect The Value of Cryptocurrencies
Since most cryptocurrencies are not physically backed by anything, their value is determined through supply and demand based on a few important factors. One of the biggest advantages of cryptocurrencies is scarcity. The supply of most cryptocurrencies is fixed, and, unlike traditional currencies, no one can issue more than the maximum limit. This means that cryptocurrencies are deflationary by nature.
Another key factor that benefits cryptocurrencies is divisibility. Any cryptocurrency can be divided into smaller units. A simple change in Bitcoin’s code could allow the digital asset to be divided into infinitely smaller units at any time.
Additionally, transferring cryptocurrencies can be extremely fast and cheap compared to traditional methods. Fees are somewhat fixed no matter the amount you send, which means that theoretically you could send 1 million Bitcoins to someone and pay only a few dollars in fees (or even less).
In a way, one could say that Bitcoin and cryptocurrencies are backed by the public’s faith in them as they have realized that the current monetary system is not as robust as one might think.
Why Are Cryptocurrencies so Volatile Then?
In comparison to traditional currencies and even stocks, cryptocurrencies are far more volatile, meaning that the current price of any given crypto can change drastically in hours. It’s quite common to see Bitcoin’s price go up or down 5-10% within a few days. In fact, even in periods of low volatility, most cryptocurrencies still experience price moves of up to 1-2%, which is considered extremely high in traditional markets.
The explanation, however, is quite simple. Cryptocurrencies, in general, lack the liquidity that the rest of the markets enjoy. According to statistics from Statista, the average daily turnover in the global foreign exchange market was around $6.5 trillion daily. The cryptocurrency market, on average, sees around $80 billion in daily trading volume, and according to various sources, a lot of the volume is actually fake.
The problem with illiquidity is that someone who wants to sell or buy a huge amount of Bitcoin or any cryptocurrency will simply ‘eat’ all the orders in the order book of the exchange, catapulting the price up or crashing it. That is the only reason why cryptocurrencies, in general, are extremely volatile.
Some Cryptocurrencies Are Actually Backed by Things
There are, however, some cryptocurrencies that are backed by gold, assets, and even fiat money. Tether (USDT) became the most popular cryptocurrency backed by fiat, later known as a ‘stablecoin’.
Stablecoins
A stablecoin is designed to always be worth $1.00 by maintaining 1 dollar in some sort of reserve. The first stablecoin to become widely popular was Tether, however, there was a lot of controversy surrounding it. Most of the criticism came from the fact that Tether Limited was unable to prove they actually have the funds to cover all the Tether issued.
Additionally, on 30 April 2019, Tether Limited’s lawyer actually admitted that each coin is only backed by $0.74 in cash.
Currently, there are over a dozen stablecoins that are backed by fiat, commodities, and even cryptocurrencies. TrueUSD is similar to Tether but it is considered to be one of the most reliable stablecoins currently as the company behind it has been extremely transparent and conducted an independent audit back in March 2019.
A more complex stablecoin is Dai, which is backed by Ethereum and pegged to the dollar. The system behind Dai basically locks Ethereum in a public contract. If the value of Dai distances too far from $1, the system will make use of the contract to stabilize it back. There is, however, a small problem: Dai is not entirely decentralized as the technology behind it is being monitored by the Maker Foundation.
DigixDAO is another stablecoin and it’s backed by bars of actual gold. It is an ERC-20 token created back in 2014. The digital asset is entirely decentralized and autonomous and can in fact be extended to be backed by other precious metals and even physical assets. According to the company, the gold is stored in custodial vaults at the Singapore Safe House, and 1 DGX will always equal 1 gram of gold.
Cryptocurrencies Backed by Assets
Not all cryptocurrencies backed by assets are stablecoins. For instance, the first oil-backed cryptocurrency was introduced by Venezuelan President Nicolas Maduro back in 2017. El Petro, although highly criticized, is supposedly the first cryptocurrency to be backed by oil thanks to the country’s huge oil and mineral reserves.
Petro is, however, not pegged to anything, and its value can increase or decrease at any given time.
Tokenization of Assets
Something that has become quite popular over the last few years is the tokenization of traditional stocks and assets. There are countless blockchain startups tokenizing almost anything to represent ownership.
The tokenization of assets brings numerous benefits like greater liquidity, more transparency, cheaper and faster transactions, and more accessibility. Tokenization itself is quite difficult to regulate, and all tokenization assets have to be compliant with the law, something that issuers struggle to achieve.
Conclusion
While traditional cryptocurrencies are not necessarily backed by anything physical, they still hold a lot of value solely based on supply and demand. This is the case with numerous other assets and even fiat money.
Cryptocurrencies have come a long way and there is a wide variety of them. Stablecoins are the most popular when it comes to asset-backed cryptocurrencies. They serve as an alternative to fiat money and bring a lot of liquidity to the market. There are definitely concerns as people question their stability, however, they have become an important factor in the market.
Additionally, other projects aside from stablecoins have implemented asset-backed cryptocurrencies. There are numerous cryptocurrencies out there backed by precious metals, physical assets, stocks, and even other cryptocurrencies. We are definitely going to see even more in the near future as they bring a lot more security to investors and the crypto space in general.

SwapSpace team is always ready for discussion. You can drop an email with your suggestions and questions to [[email protected]](mailto:[email protected]) Join our social networks: Twitter, Medium, Facebook, Telegram The best rates on https://swapspace.co/
submitted by SwapSpace_co to CoinTelegraph [link] [comments]

What are Bitcoin and Other Cryptocurrencies Backed By?

Bitcoin was created back in 2009 and became the first cryptocurrency ever designed. Cryptocurrencies have become increasingly popular in the last few years as they offer an efficient and decentralized way of transferring money.
Cryptocurrencies have always been an alternative to banks and fiat money. But why do they have any value at all and who dictates what they are worth? The value of Bitcoin is really calculated through supply and demand. The digital asset itself is backed by nothing more than perhaps the blockchain ledger.
Every single cryptocurrency uses a blockchain ledger, a system that records transactions between two or more parties in a verifiable and permanent way. This certainly adds value to Bitcoin and cryptocurrencies. However, it is not what determines their price.
Why Things Have Value
Why does anything have any value at all? It has mostly because of supply and demand. Traditional currencies, for instance, are only backed by the government that issued them. Digital money, like Bitcoin, is not backed or linked to any physical reserves like gold and can certainly lose value due to different factors.
Cryptocurrencies have value because they require ‘work’ to exist. Cryptocurrencies are maintained thanks to the mining process, a process in which transactions are verified by different people. This process requires a certain amount of work, electricity, and money.
Key Factors That Affect The Value of Cryptocurrencies
Since most cryptocurrencies are not physically backed by anything, their value is determined through supply and demand based on a few important factors. One of the biggest advantages of cryptocurrencies is scarcity. The supply of most cryptocurrencies is fixed, and, unlike traditional currencies, no one can issue more than the maximum limit. This means that cryptocurrencies are deflationary by nature.
Another key factor that benefits cryptocurrencies is divisibility. Any cryptocurrency can be divided into smaller units. A simple change in Bitcoin’s code could allow the digital asset to be divided into infinitely smaller units at any time.
Additionally, transferring cryptocurrencies can be extremely fast and cheap compared to traditional methods. Fees are somewhat fixed no matter the amount you send, which means that theoretically you could send 1 million Bitcoins to someone and pay only a few dollars in fees (or even less).
In a way, one could say that Bitcoin and cryptocurrencies are backed by the public’s faith in them as they have realized that the current monetary system is not as robust as one might think.
Why Are Cryptocurrencies so Volatile Then?
In comparison to traditional currencies and even stocks, cryptocurrencies are far more volatile, meaning that the current price of any given crypto can change drastically in hours. It’s quite common to see Bitcoin’s price go up or down 5-10% within a few days. In fact, even in periods of low volatility, most cryptocurrencies still experience price moves of up to 1-2%, which is considered extremely high in traditional markets.
The explanation, however, is quite simple. Cryptocurrencies, in general, lack the liquidity that the rest of the markets enjoy. According to statistics from Statista, the average daily turnover in the global foreign exchange market was around $6.5 trillion daily. The cryptocurrency market, on average, sees around $80 billion in daily trading volume, and according to various sources, a lot of the volume is actually fake.
The problem with illiquidity is that someone who wants to sell or buy a huge amount of Bitcoin or any cryptocurrency will simply ‘eat’ all the orders in the order book of the exchange, catapulting the price up or crashing it. That is the only reason why cryptocurrencies, in general, are extremely volatile.
Some Cryptocurrencies Are Actually Backed by Things
There are, however, some cryptocurrencies that are backed by gold, assets, and even fiat money. Tether (USDT) became the most popular cryptocurrency backed by fiat, later known as a ‘stablecoin’.
Stablecoins
A stablecoin is designed to always be worth $1.00 by maintaining 1 dollar in some sort of reserve. The first stablecoin to become widely popular was Tether, however, there was a lot of controversy surrounding it. Most of the criticism came from the fact that Tether Limited was unable to prove they actually have the funds to cover all the Tether issued.
Additionally, on 30 April 2019, Tether Limited’s lawyer actually admitted that each coin is only backed by $0.74 in cash.
Currently, there are over a dozen stablecoins that are backed by fiat, commodities, and even cryptocurrencies. TrueUSD is similar to Tether but it is considered to be one of the most reliable stablecoins currently as the company behind it has been extremely transparent and conducted an independent audit back in March 2019.
A more complex stablecoin is Dai, which is backed by Ethereum and pegged to the dollar. The system behind Dai basically locks Ethereum in a public contract. If the value of Dai distances too far from $1, the system will make use of the contract to stabilize it back. There is, however, a small problem: Dai is not entirely decentralized as the technology behind it is being monitored by the Maker Foundation.
DigixDAO is another stablecoin and it’s backed by bars of actual gold. It is an ERC-20 token created back in 2014. The digital asset is entirely decentralized and autonomous and can in fact be extended to be backed by other precious metals and even physical assets. According to the company, the gold is stored in custodial vaults at the Singapore Safe House, and 1 DGX will always equal 1 gram of gold.
Cryptocurrencies Backed by Assets
Not all cryptocurrencies backed by assets are stablecoins. For instance, the first oil-backed cryptocurrency was introduced by Venezuelan President Nicolas Maduro back in 2017. El Petro, although highly criticized, is supposedly the first cryptocurrency to be backed by oil thanks to the country’s huge oil and mineral reserves.
Petro is, however, not pegged to anything, and its value can increase or decrease at any given time.
Tokenization of Assets
Something that has become quite popular over the last few years is the tokenization of traditional stocks and assets. There are countless blockchain startups tokenizing almost anything to represent ownership.
The tokenization of assets brings numerous benefits like greater liquidity, more transparency, cheaper and faster transactions, and more accessibility. Tokenization itself is quite difficult to regulate, and all tokenization assets have to be compliant with the law, something that issuers struggle to achieve.
Conclusion
While traditional cryptocurrencies are not necessarily backed by anything physical, they still hold a lot of value solely based on supply and demand. This is the case with numerous other assets and even fiat money.
Cryptocurrencies have come a long way and there is a wide variety of them. Stablecoins are the most popular when it comes to asset-backed cryptocurrencies. They serve as an alternative to fiat money and bring a lot of liquidity to the market. There are definitely concerns as people question their stability, however, they have become an important factor in the market.
Additionally, other projects aside from stablecoins have implemented asset-backed cryptocurrencies. There are numerous cryptocurrencies out there backed by precious metals, physical assets, stocks, and even other cryptocurrencies. We are definitely going to see even more in the near future as they bring a lot more security to investors and the crypto space in general.

SwapSpace team is always ready for discussion. You can drop an email with your suggestions and questions to [[email protected]](mailto:[email protected]) Join our social networks: Twitter, Medium, Facebook, Telegram The best rates on https://swapspace.co/
submitted by SwapSpace_co to CryptoMarkets [link] [comments]

What are Bitcoin and Other Cryptocurrencies Backed By?

Bitcoin was created back in 2009 and became the first cryptocurrency ever designed. Cryptocurrencies have become increasingly popular in the last few years as they offer an efficient and decentralized way of transferring money.
Cryptocurrencies have always been an alternative to banks and fiat money. But why do they have any value at all and who dictates what they are worth? The value of Bitcoin is really calculated through supply and demand. The digital asset itself is backed by nothing more than perhaps the blockchain ledger.
Every single cryptocurrency uses a blockchain ledger, a system that records transactions between two or more parties in a verifiable and permanent way. This certainly adds value to Bitcoin and cryptocurrencies. However, it is not what determines their price.

Why Things Have Value

Why does anything have any value at all? It has mostly because of supply and demand. Traditional currencies, for instance, are only backed by the government that issued them. Digital money, like Bitcoin, is not backed or linked to any physical reserves like gold and can certainly lose value due to different factors.
Cryptocurrencies have value because they require ‘work’ to exist. Cryptocurrencies are maintained thanks to the mining process, a process in which transactions are verified by different people. This process requires a certain amount of work, electricity, and money.

Key Factors That Affect The Value of Cryptocurrencies

Since most cryptocurrencies are not physically backed by anything, their value is determined through supply and demand based on a few important factors. One of the biggest advantages of cryptocurrencies is scarcity. The supply of most cryptocurrencies is fixed, and, unlike traditional currencies, no one can issue more than the maximum limit. This means that cryptocurrencies are deflationary by nature.
Another key factor that benefits cryptocurrencies is divisibility. Any cryptocurrency can be divided into smaller units. A simple change in Bitcoin’s code could allow the digital asset to be divided into infinitely smaller units at any time.
Additionally, transferring cryptocurrencies can be extremely fast and cheap compared to traditional methods. Fees are somewhat fixed no matter the amount you send, which means that theoretically you could send 1 million Bitcoins to someone and pay only a few dollars in fees (or even less).
In a way, one could say that Bitcoin and cryptocurrencies are backed by the public’s faith in them as they have realized that the current monetary system is not as robust as one might think.

Why Are Cryptocurrencies so Volatile Then?

In comparison to traditional currencies and even stocks, cryptocurrencies are far more volatile, meaning that the current price of any given crypto can change drastically in hours. It’s quite common to see Bitcoin’s price go up or down 5-10% within a few days. In fact, even in periods of low volatility, most cryptocurrencies still experience price moves of up to 1-2%, which is considered extremely high in traditional markets.
The explanation, however, is quite simple. Cryptocurrencies, in general, lack the liquidity that the rest of the markets enjoy. According to statistics from Statista, the average daily turnover in the global foreign exchange market was around $6.5 trillion daily. The cryptocurrency market, on average, sees around $80 billion in daily trading volume, and according to various sources, a lot of the volume is actually fake.
The problem with illiquidity is that someone who wants to sell or buy a huge amount of Bitcoin or any cryptocurrency will simply ‘eat’ all the orders in the order book of the exchange, catapulting the price up or crashing it. That is the only reason why cryptocurrencies, in general, are extremely volatile.

Some Cryptocurrencies Are Actually Backed by Things

There are, however, some cryptocurrencies that are backed by gold, assets, and even fiat money. Tether (USDT) became the most popular cryptocurrency backed by fiat, later known as a ‘stablecoin’.

Stablecoins

A stablecoin is designed to always be worth $1.00 by maintaining 1 dollar in some sort of reserve. The first stablecoin to become widely popular was Tether, however, there was a lot of controversy surrounding it. Most of the criticism came from the fact that Tether Limited was unable to prove they actually have the funds to cover all the Tether issued.
Additionally, on 30 April 2019, Tether Limited’s lawyer actually admitted that each coin is only backed by $0.74 in cash.
Currently, there are over a dozen stablecoins that are backed by fiat, commodities, and even cryptocurrencies. TrueUSD is similar to Tether but it is considered to be one of the most reliable stablecoins currently as the company behind it has been extremely transparent and conducted an independent audit back in March 2019.
A more complex stablecoin is Dai, which is backed by Ethereum and pegged to the dollar. The system behind Dai basically locks Ethereum in a public contract. If the value of Dai distances too far from $1, the system will make use of the contract to stabilize it back. There is, however, a small problem: Dai is not entirely decentralized as the technology behind it is being monitored by the Maker Foundation.
DigixDAO is another stablecoin and it’s backed by bars of actual gold. It is an ERC-20 token created back in 2014. The digital asset is entirely decentralized and autonomous and can in fact be extended to be backed by other precious metals and even physical assets. According to the company, the gold is stored in custodial vaults at the Singapore Safe House, and 1 DGX will always equal 1 gram of gold.

Cryptocurrencies Backed by Assets

Not all cryptocurrencies backed by assets are stablecoins. For instance, the first oil-backed cryptocurrency was introduced by Venezuelan President Nicolas Maduro back in 2017. El Petro, although highly criticized, is supposedly the first cryptocurrency to be backed by oil thanks to the country’s huge oil and mineral reserves.
Petro is, however, not pegged to anything, and its value can increase or decrease at any given time.

Tokenization of Assets

Something that has become quite popular over the last few years is the tokenization of traditional stocks and assets. There are countless blockchain startups tokenizing almost anything to represent ownership.
The tokenization of assets brings numerous benefits like greater liquidity, more transparency, cheaper and faster transactions, and more accessibility. Tokenization itself is quite difficult to regulate, and all tokenization assets have to be compliant with the law, something that issuers struggle to achieve.

Conclusion

While traditional cryptocurrencies are not necessarily backed by anything physical, they still hold a lot of value solely based on supply and demand. This is the case with numerous other assets and even fiat money.
Cryptocurrencies have come a long way and there is a wide variety of them. Stablecoins are the most popular when it comes to asset-backed cryptocurrencies. They serve as an alternative to fiat money and bring a lot of liquidity to the market. There are definitely concerns as people question their stability, however, they have become an important factor in the market.
Additionally, other projects aside from stablecoins have implemented asset-backed cryptocurrencies. There are numerous cryptocurrencies out there backed by precious metals, physical assets, stocks, and even other cryptocurrencies. We are definitely going to see even more in the near future as they bring a lot more security to investors and the crypto space in general.

SwapSpace team is always ready for discussion. You can drop an email with your suggestions and questions to [h[email protected]](mailto:[email protected]) Join our social networks: Twitter, Medium, Facebook The best rates on https://swapspace.co/
submitted by SwapSpace_co to SwapSpace [link] [comments]

Idea: Progeny AltCoins. Think of Bitcoin as Gold and a specifically programmed AltCoin-in-a-box as currency directly redeemable for Bitcoin held in a "Fort Knox" wallet.

So I have this idea which I haven't seen anywhere else, and wanted to share it to see if it makes sense or not.
My understanding is that bitcoin has some issues with transaction speed (and/or transaction cost) which causes people to worry about its ability to go mainstream and establish itself as a core global currency.
What if instead of expecting bitcoin to be as practical as USD, EUR, GBP etc, we actually thought of it more like the Gold of crypto?
Back when we tied our national currencies to gold, the paper notes were meant to be literally redeemable for gold (or silver, or coin, etc). The currency was tied to a guaranteed asset.
Paper is much easier to carry around than gold. It is much more divisible (infinitely so) than gold. It is more practical in virtually every way possible - it just has no value outside of the promise it carries. It promises to be worth gold. So as long as people believe gold has value, the paper has value. And whether gold is convenient for handling transactions or not is irrelevant.
So why not use Bitcoin the same way?
We need to program a specific "AltCoin-In-A-Box" program which anyone could easily run and create their own AltCoin.
It would work like this:
During setup of the new AltCoin, the new blockchain programmatically ties itself to a bitcoin wallet, which we will call "Fort Knox". An exchange rate is chosen, for example, 1BTC = 1000 ProgenyCoins, and the setup is complete.
An interface is then made available which allows people to buy your newly created ProgenyCoins from the "Federal Reserve" of ProgenyCoin-istan. Register your intent to buy (provide bitcoin address where BTC are coming from, and ProgenyCoins address where your ProgenyCoins will go), then send 1BTC to "Fort Knox" and await the (slow, painful, horrific) BTC transaction to be confirmed.
As soon as the BTC transaction is confirmed, "The Federal Reserve" sends you 1000 ProgenyCoins. "The Federal Reserve" can produce as many of these coins as it needs to meet the BTC deposit in Fort Knox, and will only pay out ProgenyCoins for that reason. Similarly, sending ProgenyCoins to "The Federal Reserve" will allow you to withdraw BTC to a BTC wallet of your choosing.
Buying ProgenyCoins from the fed on this brand spanking new tiny blockchain which is optimised for rapid, free transactions has now given you a practical local currency to use in everyday transactions which doesn't require the bitcoin chain, but still benefits from all of the value held in the bitcoin chain. If bitcoin rises in value, so too will the value of your ProgenyCoins. And since all of these new progeny coins are being created by locking BTC up in "Fort Knoxes" all over the planet, the value of BTC is likely to increase to match the increased demand and lost supply.
Basically, the parent BTC blockchain is spawning lightweight, mostly-independent, children chains to do the transaction work for it. Hence the progeny reference. Obviously.
Considerations and Risk
  1. By making the original code for this concept a well established opensource piece of software, the "AltCoin-In-A-Box" certificate of BTC redeemability will guarantee the value of every new ProgenyCoin you encounter. Presumably the "AltCoin-In-A-Box" software could also include a generic platform which will handle all such coin-wallets in one place.
  2. Each new coin will need to gain enough nodes/miners to ensure security against attacks before people can be confident trusting them to not steal their money. Perhaps an international organisation can help provide early stage node hosting for a fee paid by the originator of the currency? (I haven't really put any thought into the incentivisation for 'mining' - I guess transactions would need a miner fee to ensure people did run full nodes?)
  3. Many more I haven't thought of, I am sure.
Thoughts?
submitted by Aegist to Bitcoin [link] [comments]

Intergalactic Money: The deep impact of a self-evolving infinitely-scalable general-purpose realtime unforkable public blockchain federation

Intergalactic Money: The deep impact of a self-evolving infinitely-scalable general-purpose realtime unforkable public blockchain federation
Prologue: This article is a strategic response to the following crypto-related papers published in 2017: 1. “An (Institutional) Investor’s Take on Cryptoassets” by John Pfeffer of Pfeffer Capital and 2. “Plasma: Scalable Autonomous Smart Contracts” by Joseph Poon of Lightning Network and Vitalik Buterin of Ethereum Foundation.
John Pfeffer in his paper titled “An (Institutional) Investor’s Take on Cryptoassets” claims that “scaling solutions for blockchains in particular and decentralized networks including (implied) DAG-based networks such as PoS, Sharding, etc. are bullish for adoption and users/consumers but bearish for token value/investors. Even without those technology shifts, the cost of using decentralized protocols is deflationary, since the cost of processing power, storage and bandwidth are deflationary.” Farther he states “ It’s a mistake to compare monopoly network effects of Facebook or other centralized platforms to blockchain protocols because blockchain protocols can be forked to a functionally identical blockchain with the same history and users up to the moment if a parent chain persists in being arbitrarily expensive to use(i.e. rent-seeking). Like TCP/IP but unlike Facebook, blockchain protocols are open-source software that anyone can copy or fork freely.” Add regulatory pressures on bitcoin and public permissionless currency and its negative impact.

https://preview.redd.it/zjyhwcacmml11.jpg?width=636&format=pjpg&auto=webp&s=ea21ea7e6957cb39dfbb57fa3193e5805578d38d

It’s obvious from his statements; John is not aware of latest R&D projects focused on improving decentralized networks and advances in decentralized protocols especially “Unforkable Realtime Blockchains” such as Algorand, Bitlattice and Orch.Network based on Recursive STARKs and FHE/SHE. He is also ignorant of the fact that there are several projects working on self-evolving censor-proof quantum safe protocols such as Orch Network (token symbol: ORC and URL: https://orch.network/). These protocols have adopted a continuous development strategy while getting ready for next paradigm shifts in technology e.g. practical quantum computing and quantum internet. He also does not understand that a futuristic protocol token with infinite-divisibility integrated with a hybrid quantum-classical computational infrastructure can easily counteract and neutralize the deflationary nature of its own tokens and its limited supply hardcap making it infinitely scalable and elastic.
While I agree with his following statement: “A non-sovereign, non-fiat, trustless, censorship-resistant cryptoasset would be a far better alternative for most foreign currency international reserves. IMF SDRs are already a synthetic store of value, so could also be easily and sensibly replaced by such a cryptoasset.”, this necessarily does not make BTC the right candidate for several reasons: 1. BTC is not a self-improving self-evolvable fully censorship-resistant cryptoasset which is a must for it to qualify as a viable reserve asset and appeal to long-term institutional and high networth investors.
Bitcoins miners are mostly corporate entities having large investments in ASIC-based mining equipments. It’s not impossible to corner 51% mining power by a centralized resourceful entity compromising double spending protection and other trustless security measures built-in. So BTC is not truly decentralized. 2. The underlying hash algorithm and encryption protocol of BTC known as SHA-256 can be broken by multi-qubit quantum circuits and quantum computers under active development in labs across the world. So BTC is not future-proof and its very existence is threatened unless its core developers continuously modify and improve its underlying security model and technology. 3. Bitcoin is not infinitely-divisible that’s it’s not only upwardly non-scalable, the same is true for its downward scalability. In fact BTC has only 8 decimal places known as Satoshis(1 satoshi = 0.00000001 BTC)
Futuristic protocol tokens such as infinitely scalable minerless Orch(ORC) should be more attractive to long-term investors looking for an alternative non-sovereign, non-fiat, and trustless, censorship-resistant privacy preserving high-velocity cryptoasset.
In their paper titled “Plasma: Scalable Autonomous Smart Contracts” Joseph Poon and Vitalik Buterin defines their proposal as “Plasma is a proposed framework for incentivized and enforced execution of ‘smart contracts’ which is scalable to a significant amount of state updates per second (potentially billions) enabling the blockchain to be able to represent a significant amount of decentralized financial applications worldwide.” Now first thing is it’s not clear what do they mean by “Autonomous Smart Contracts” and what specifically autonomous component in Plasma it refers to. For example, an autonomous weapon would set the target and hit it on its own without any humans in the loop or an autonomous self-driving car would drive down to a destination point without any human navigating it.
Now contrary to their claims, their off-chain and second-layer scaling solution with Ethereum(ETH) as the root blockchain is neither censor-proof nor truly scalable as this requires state-channel based masternodes/validators. So it’s not a feasible solution at all as trust issues will crop up at every moment.
Moreover, Scalable Multi-Party Computation is feasible only in a platform that guarantees functional encryption i.e. query, exchange and computation between encrypted objects, data and entities which is possible only via recursive STARKs and Lattice-based FHE(Fully Homomorphic Encryption). A second-layer protocol like Plasma does not have the capability of providing functional encryption to all distributed anonymous parties having zero mutual trusts.
There is a repeated effort to push some dangerous products under a guise of advanced blockchains and decentralized platforms. For instance, hidden external oracles and corporate entity-controlled decentralized platforms. Blockchain applications live in their own digital realm, totally orthogonal to the real world and environment we live in. Be it decentralized application or a smart contract, their reach is limited to the space they can control. Any use case projection in our reality eventually confronts the following hard fact: how can an app efficiently and securely interact with the physical world? Now hidden external oracles like that of oraclize.it and hardware pythias are being marketed as the solutions to this problem. But (IMHO) internal encrypted entities of Orch (ORC) platform known as Degents having access to cryptographically reliable external software/hardware sensors-actors will transparently and securely interact with the external world/environment.
Only minerless future-proof general-purpose decentralized networks such as Orch(ORC) designed from scratch as an MPC(Multiparty Computation) platform can deliver truly scalable MPC solutions flawlessly and reliably to millions of consumers simultaneously without compromising on security and trustlessness.
The far reaching impact of a self-evolving infinitely-scalable general-purpose realtime unforkable public blockchain with built-in quantum safe privacy and multicompute features will be immeasurable and profound.
It would transform the whole universe of blockchain and decentralized networks inlcuding all blockchain-based and blockchainfree platforms such as DAG-based and DHT-based platforms e.g. IOTA, Nano and Holochain.
Orch Network (native token symbol: ORC and URL: https://orch.network) will enable and power following dapps and user-cases:

  1. Privacy-preserving Infinitely-divisible Hypercurrency and Confidential Global Payment System with integrated encrypted decentralized chat service
  2. Unmanned Decentralized Cryptoasset Exchanges
  3. Large-scale Federated IoT Networks
  4. Decentralized DNS Clusters
  5. Anonymous trading of Tokenized Financial Assets and Derivatives Contracts
  6. Automated Hedge Funds
  7. Crypto darkpools
  8. Temporal Insurance Products
  9. Global Supply chain and unmanned cargo ships and drones
  10. Realtime Encrypted Video Communication capable Anonymous Web Infrastructure
  11. High-velocity Non-sovereign Reserve Asset
  12. Near-Perfect Coin Mixer
  13. Decentralized Marketplace App
  14. Transparent Robust Stable Coins
  15. Decentralized P2P Storage of functionally encrypted data
  16. Permissionless ICO Platforms
  17. Decentralized and Encrypted Facebook, gmail, Twitter and google-like search/answer engines
  18. Decentralized CDNs
  19. Customizable Decentralized Governance System for blockchains and dapps
Another important thing that will boost the price and value of Orch Network token ORC is its integrated Turing Incomplete cyber contract protocol running Turing Incomplete cyber contracts written in Crackcity(a Turing Incomplete language derived from Crack and Simplicity) that runs on top of Crack Machine(s). Crack machines are Orch’s blockchain virtual machines.
Ethereum’s main deficiency and Achilles’ heel is its Turing Complete smart contract programming language Solidity.

  1. Turing-complete languages are fundamentally inappropriate for writing “smart contracts” — because such languages are inherently undecidable, which makes it impossible to know what a “smart contract” will do before running it.
(2) We should learn from Wall Street’s existing DSLs (domain-specific languages) for financial products and smart contracts, based on declarative and functional languages such as Ocaml and Haskell — instead of doing what the Web 2.0 programmers” behind Solidity did, and what Peter Todd is also apparently embarking upon: ie, ignoring the lessons that Wall Street has already learned, and “reinventing the wheel”, using less-suitable languages such as C++ and JavaScript-like languages (Solidity), simply because they seem “easier” for the “masses” to use.
(3) We should also consider using specification languages (to say what a contract does) along with implementation languages (saying how it should do it) — because specifications are higher-level and easier for people to read than implementations which are lower-level meant for machines to run — and also because ecosystems of specification/implementation language pairs (such as Coq/Ocaml) support formal reasoning and verification tools which could be used to mathematically prove that a smart contract’s implementation is “correct” (ie, it satisfies its specification) before even running it.
Turing-complete languages lead to “undecidable” programs (ie, you cannot figure out what you do until after you run them)
One hint: recall that Gödel’s incompleteness theorem proved that any mathematical system which is (Turing)-complete, must also be inconsistent incomplete [hat tip] — that is, in any such system, it must be possible to formulate propositions which are undecidable within that system.
This is related to things like the Halting Problem.
And by the way, Ethereum’s concept of “gas” is not a real solution to the Halting Problem: Yes, running out of “gas” means that the machine will “stop” eventually, but this naïve approach does not overcome the more fundamental problems regarding undecidability of programs written using a Turing-complete language.
The take-away is that:
When using any Turing-complete language, it will always be possible for someone (eg, the DAO hacker, or some crook like Bernie Madoff, or some well-meaning but clueless dev from slock.it) to formulate a “smart contract” whose meaning cannot be determined in advance by merely inspecting the code: ie, it will always be possible to write a smart contract whose meaning can only be determined after running the code.
Take a moment to contemplate the full, deep (and horrifying) implications of all this.
Some of the greatest mathematicians and computer scientists of the 20th century already discovered and definitively proved (much to the consternation most of their less-sophisticated (naïve) colleagues — who nevertheless eventually were forced to come around and begrudgingly agree with them) that: Given a “smart contract” written in a Turing-complete language, it is impossible to determine the semantics / behavior of that “smart contract” in advance, by mere inspection — either by a human, or even by a machine such as a theorem prover or formal reasoning tool (because such tools unfortunately only work on more-restricted languages, not on Turing-complete languages — for info on such more-restricted languages, see further below on “constructivism” and “intuitionistic logic”).
The horrifying conclusion is that: the only way to determine the semantics / behavior of a “smart contract” is “after-the-fact” — ie, by actually running it on some machine (eg, the notorious EVM) — and waiting to see what happens (eg, waiting for a hacker to “steal” tens of millions of dollars — simply because he understood the semantics / behavior of the code better than the developers did.
Last but not the least, increasing regulatory pressures on Bitcoin, Ethereum and other permissionless public cryptocurrencies/cryptotokens will impact their prices negatively in the medium to long-term.
The need for a hyperfast private zero-knowledge proof cryptocurrency that keeps payer-payee and payment data private and secure along with a decentralized scalable multicomputation platform can’t be overemphasized.
submitted by OrchNetwork to u/OrchNetwork [link] [comments]

I Finally Figured Out Bitcoin

I Finally Figured Out Bitcoin
Economists, Lieutenants, Agents in the Field,
lend me your ears!
www.fmz.com
For I have finally figured out bitcoin! And truthfully, this is one of my best mental achievements. And hopefully, through my ability to write clearly and explain things, I may be able to explain bitcoin to us all.
I had listened to this podcast of Stefan Molyneux on bitcoin. It was very good, but did not fully answer my question, "why does a bitcoin have any value?" However, what the podcast did do is bring my perception or "observation" up high enough that I could finally see and conclude how bitcoin does actually have value.
www.fmz.com
To understand why bitcoin has value, you first need to think about why currencies exist in the first place.
The answer from an economics 202 class is "to avoid barter."
Barter is horribly inefficient. If you are a cow herder and want a pint of ale, well, you're out of luck. Because you can't trade a whole cow for a measly pint of ale. Nor can you slice off pieces of beef from the live cow to make the trade more fair. Therefore, if any kind of economic trade and progress is to be made, you need a currency.
Historically, this has meant anything from gold and silver to salt and sea shells. But regardless of what item inevitably becomes an local economy's currency, they all have some key traits and qualities in common.
Divisibility - You can divide gold, silver or salt into measurable quantities. Pounds, ounces, grams, etc. This allows you to scale the currency to the value of the item you wish to purchase.
Durability - The currency cannot rot or decay over time. Milk is a bad currency because in 3 years time it will be quite gross. Gold in 3 years time will still be gold.
Store of Value - The currency must also maintain its value and purchasing power over time. If you're like Venezuela and constantly printing off more commie paper money, it will lose its value. But with a limited supply (gold, silver, diamonds, etc.) you can assume that currency will still have roughly the same amount of purchasing power as it did.
Finally, FMZ
Intrinsic Value - The currency must have some kind of real value. Gold can be used for jewelry. Silver can be used in electronics. Copper can be used in plumbing. Salt can be used in cooking. In other words, people will take it as a currency, because even if they don't use it themselves, they know somebody who will. It does have an intrinsic value unto itself.
And it is here (intrinsic value) where most people get lost on bitcoin.
Bitcoin meets all the OTHER characteristics and traits of a good currency. It's divisible. It's durable (infinitely as it is digital). And it will not decay (again, binary doesn't decay).
www.fmz.com
But precisely what practical, real world application does it have? You can't use it in electronics. You can't make jewelry (aka - buying sex) with it. So why does it have any intrinsic value at all?
The answer lies in comparing a currency's "intrinsic value" versus its value as a currency.
For example look at what has served as the primary currency throughout most of human history - gold.
Why does gold have intrinsic value? FMZ
Economists will answer, "because you can use it in jewelry" which is the polite person's way of saying, "men can buy sex with it."
But does that make any sense? That ONE thing you can do with gold, "make jewelry" is why it served as the standard currency for thousands of years across the planet? What you'll soon realize is that, yes, while gold can be used to make jewelry it serves a much more important function to society as a currency. In other words, an item's value as a currency is really not dependent on its intrinsic value. It just needs SOME intrinsic value to get people to have faith in it and start trading it.
Salt can be used to flavor and store food. Was that grounds enough to make it the Mali Empire's default currency?
Silver can be used to make jewelry and some industrial items. Was that grounds enough to make it the currency of the wild west?
Large clam shells could make some funky and uncomfortable bras in ancient Polynesia. Was that grounds enough to make it the default currency in the south Pacific?
Apparently so, because it DID HAPPEN. But not because of jewelry making potential or food storage potential. That was just "enough" intrinsic value to suffice. It was because those items provided more value to the economy as a currency than it did some as jewelry making materials or food flavoring. And to prove it an interesting comparison would be to compare the amount of gold (or silver) actually being used as jewelry versus that of currency, bullion or investment. I'd surmise over time, 90% of silver and gold has been used as a currency and NOT tiaras.
Understanding that a currency derives most of its value from its NON-intrinsic value traits, and only needs a "little" intrinsic value, this then puts the focus on how bitcoin derives it's "little" but necessary intrinsic value.
The answer is simple - scarcity.
Consider diamonds.
Why do they have value? FMZ
Taking the jewelry and industrial drilling uses of it away, why do they have value?
The answer is, they don't. They serve no purpose. At least from a PRACTICAL or PURPOSEFUL perspective.
But because they are so rare people will scramble for them. But understand what we're talking about when we talk about "scarcity" or "rarity." It is in relation to other things.
www.fmz.com
On this planet there is 9 quadrillion megatons of dirt and maybe 100,000 pounds of diamonds. Both dirt and diamonds have no real practical use or value, but diamonds are considered infinitely more valuable. Ergo, when we talk about scarcity, is merely a RATIO between two items that determine whether it is valuable or not. It is simply the ratio of the supply of one thing on the planet (copper) versus that of another (platinum).
And this is why bitcoin has that wee bit of necessary intrinsic value. It is very much like diamonds in that is has no practical use, but it is scarce. Matter of fact, diamonds, gold, silver, rare earth, etc., are constantly being dug up out of the ground. The makers of bitcoin have limited their supply to 21 million units forever, making it even more scarce.
In the end, bitcoin is really nothing more than a private sector currency akin to digital diamonds. And it is my opinion, you have a currency that is better than any official government fiat currency out there as it cannot be hyper-inflated away by a central bank. However, there are some drawbacks to bitcoin.
One, it is completely dependent upon the internet working. Any post apocalyptic event that shuts it down or turns off the electricity, and it's about as valuable as those gold ETF's you have. Two, it is not yet universally accepted by people. This may change over time, but it is a distinct (though growing) minority who use bitcoin. Three, it is such a threat to other established currencies I have no doubt in my mind governments will do everything they can to put the kibosh on it. Fourth, it can be undermined by another digital and more preferable currency.
Regardless, whether bitcoin ends up becoming a universally accepted currency is another matter. the key economic lesson to take from this is what drives the value of a currency is not so much its intrinsic value as much as it is the amount of value society puts on it as a tool for exchange.
FMZ
submitted by FmzQuant to u/FmzQuant [link] [comments]

Intergalactic Money: The deep impact of a self-evolving infinitely-scalable general-purpose realtime unforkable public blockchain federation

Intergalactic Money: The deep impact of a self-evolving infinitely-scalable general-purpose realtime unforkable public blockchain federation
Prologue: This article is a strategic response to the following crypto-related papers published in 2017: 1. “An (Institutional) Investor’s Take on Cryptoassets” by John Pfeffer of Pfeffer Capital and 2. “Plasma: Scalable Autonomous Smart Contracts” by Joseph Poon of Lightning Network and Vitalik Buterin of Ethereum Foundation.
John Pfeffer in his paper titled “An (Institutional) Investor’s Take on Cryptoassets” claims that “scaling solutions for blockchains in particular and decentralized networks including (implied) DAG-based networks such as PoS, Sharding, etc. are bullish for adoption and users/consumers but bearish for token value/investors. Even without those technology shifts, the cost of using decentralized protocols is deflationary, since the cost of processing power, storage and bandwidth are deflationary.” Farther he states “ It’s a mistake to compare monopoly network effects of Facebook or other centralized platforms to blockchain protocols because blockchain protocols can be forked to a functionally identical blockchain with the same history and users up to the moment if a parent chain persists in being arbitrarily expensive to use(i.e. rent-seeking). Like TCP/IP but unlike Facebook, blockchain protocols are open-source software that anyone can copy or fork freely.” Add regulatory pressures on bitcoin and public permissionless currency and its negative impact.
It’s obvious from his statements; John is not aware of latest R&D projects focused on improving decentralized networks and advances in decentralized protocols especially “Unforkable Realtime Blockchains” such as Algorand, Bitlattice and Orch.Network based on Recursive STARKs and FHE/SHE. He is also ignorant of the fact that there are several projects working on self-evolving censor-proof quantum safe protocols such as Orch Network (token symbol: ORC and URL: https://orch.network/). These protocols have adopted a continuous development strategy while getting ready for next paradigm shifts in technology e.g. practical quantum computing and quantum internet. He also does not understand that a futuristic protocol token with infinite-divisibility integrated with a hybrid quantum-classical computational infrastructure can easily counteract and neutralize the deflationary nature of its own tokens and its limited supply hardcap making it infinitely scalable and elastic.

https://preview.redd.it/lj2bgefhmml11.jpg?width=636&format=pjpg&auto=webp&s=ce282da0942d65464d7edf2c822fff4737f0aa87
While I agree with his following statement: “A non-sovereign, non-fiat, trustless, censorship-resistant cryptoasset would be a far better alternative for most foreign currency international reserves. IMF SDRs are already a synthetic store of value, so could also be easily and sensibly replaced by such a cryptoasset.”, this necessarily does not make BTC the right candidate for several reasons: 1. BTC is not a self-improving self-evolvable fully censorship-resistant cryptoasset which is a must for it to qualify as a viable reserve asset and appeal to long-term institutional and high networth investors.
Bitcoins miners are mostly corporate entities having large investments in ASIC-based mining equipments. It’s not impossible to corner 51% mining power by a centralized resourceful entity compromising double spending protection and other trustless security measures built-in. So BTC is not truly decentralized. 2. The underlying hash algorithm and encryption protocol of BTC known as SHA-256 can be broken by multi-qubit quantum circuits and quantum computers under active development in labs across the world. So BTC is not future-proof and its very existence is threatened unless its core developers continuously modify and improve its underlying security model and technology. 3. Bitcoin is not infinitely-divisible that’s it’s not only upwardly non-scalable, the same is true for its downward scalability. In fact BTC has only 8 decimal places known as Satoshis(1 satoshi = 0.00000001 BTC)
Futuristic protocol tokens such as infinitely scalable minerless Orch(ORC) should be more attractive to long-term investors looking for an alternative non-sovereign, non-fiat, and trustless, censorship-resistant privacy preserving high-velocity cryptoasset.
In their paper titled “Plasma: Scalable Autonomous Smart Contracts” Joseph Poon and Vitalik Buterin defines their proposal as “Plasma is a proposed framework for incentivized and enforced execution of ‘smart contracts’ which is scalable to a significant amount of state updates per second (potentially billions) enabling the blockchain to be able to represent a significant amount of decentralized financial applications worldwide.” Now first thing is it’s not clear what do they mean by “Autonomous Smart Contracts” and what specifically autonomous component in Plasma it refers to. For example, an autonomous weapon would set the target and hit it on its own without any humans in the loop or an autonomous self-driving car would drive down to a destination point without any human navigating it.
Now contrary to their claims, their off-chain and second-layer scaling solution with Ethereum(ETH) as the root blockchain is neither censor-proof nor truly scalable as this requires state-channel based masternodes/validators. So it’s not a feasible solution at all as trust issues will crop up at every moment.
Moreover, Scalable Multi-Party Computation is feasible only in a platform that guarantees functional encryption i.e. query, exchange and computation between encrypted objects, data and entities which is possible only via recursive STARKs and Lattice-based FHE(Fully Homomorphic Encryption). A second-layer protocol like Plasma does not have the capability of providing functional encryption to all distributed anonymous parties having zero mutual trusts.
There is a repeated effort to push some dangerous products under a guise of advanced blockchains and decentralized platforms. For instance, hidden external oracles and corporate entity-controlled decentralized platforms. Blockchain applications live in their own digital realm, totally orthogonal to the real world and environment we live in. Be it decentralized application or a smart contract, their reach is limited to the space they can control. Any use case projection in our reality eventually confronts the following hard fact: how can an app efficiently and securely interact with the physical world? Now hidden external oracles like that of oraclize.it and hardware pythias are being marketed as the solutions to this problem. But (IMHO) internal encrypted entities of Orch (ORC) platform known as Degents having access to cryptographically reliable external software/hardware sensors-actors will transparently and securely interact with the external world/environment.
Only minerless future-proof general-purpose decentralized networks such as Orch(ORC) designed from scratch as an MPC(Multiparty Computation) platform can deliver truly scalable MPC solutions flawlessly and reliably to millions of consumers simultaneously without compromising on security and trustlessness.
The far reaching impact of a self-evolving infinitely-scalable general-purpose realtime unforkable public blockchain with built-in quantum safe privacy and multicompute features will be immeasurable and profound.
It would transform the whole universe of blockchain and decentralized networks inlcuding all blockchain-based and blockchainfree platforms such as DAG-based and DHT-based platforms e.g. IOTA, Nano and Holochain.
Orch Network (native token symbol: ORC and URL: https://orch.network) will enable and power following dapps and user-cases:

  1. Privacy-preserving Infinitely-divisible Hypercurrency and Confidential Global Payment System with integrated encrypted decentralized chat service
  2. Unmanned Decentralized Cryptoasset Exchanges
  3. Large-scale Federated IoT Networks
  4. Decentralized DNS Clusters
  5. Anonymous trading of Tokenized Financial Assets and Derivatives Contracts
  6. Automated Hedge Funds
  7. Crypto darkpools
  8. Temporal Insurance Products
  9. Global Supply chain and unmanned cargo ships and drones
  10. Realtime Encrypted Video Communication capable Anonymous Web Infrastructure
  11. High-velocity Non-sovereign Reserve Asset
  12. Near-Perfect Coin Mixer
  13. Decentralized Marketplace App
  14. Transparent Robust Stable Coins
  15. Decentralized P2P Storage of functionally encrypted data
  16. Permissionless ICO Platforms
  17. Decentralized and Encrypted Facebook, gmail, Twitter and google-like search/answer engines
  18. Decentralized CDNs
  19. Customizable Decentralized Governance System for blockchains and dapps
Another important thing that will boost the price and value of Orch Network token ORC is its integrated Turing Incomplete cyber contract protocol running Turing Incomplete cyber contracts written in Crackcity(a Turing Incomplete language derived from Crack and Simplicity) that runs on top of Crack Machine(s). Crack machines are Orch’s blockchain virtual machines.
Ethereum’s main deficiency and Achilles’ heel is its Turing Complete smart contract programming language Solidity.

  1. Turing-complete languages are fundamentally inappropriate for writing “smart contracts” — because such languages are inherently undecidable, which makes it impossible to know what a “smart contract” will do before running it.
(2) We should learn from Wall Street’s existing DSLs (domain-specific languages) for financial products and smart contracts, based on declarative and functional languages such as Ocaml and Haskell — instead of doing what the Web 2.0 programmers” behind Solidity did, and what Peter Todd is also apparently embarking upon: ie, ignoring the lessons that Wall Street has already learned, and “reinventing the wheel”, using less-suitable languages such as C++ and JavaScript-like languages (Solidity), simply because they seem “easier” for the “masses” to use.
(3) We should also consider using specification languages (to say what a contract does) along with implementation languages (saying how it should do it) — because specifications are higher-level and easier for people to read than implementations which are lower-level meant for machines to run — and also because ecosystems of specification/implementation language pairs (such as Coq/Ocaml) support formal reasoning and verification tools which could be used to mathematically prove that a smart contract’s implementation is “correct” (ie, it satisfies its specification) before even running it.
Turing-complete languages lead to “undecidable” programs (ie, you cannot figure out what you do until after you run them)
One hint: recall that Gödel’s incompleteness theorem proved that any mathematical system which is (Turing)-complete, must also be inconsistent incomplete [hat tip] — that is, in any such system, it must be possible to formulate propositions which are undecidable within that system.
This is related to things like the Halting Problem.
And by the way, Ethereum’s concept of “gas” is not a real solution to the Halting Problem: Yes, running out of “gas” means that the machine will “stop” eventually, but this naïve approach does not overcome the more fundamental problems regarding undecidability of programs written using a Turing-complete language.
The take-away is that:
When using any Turing-complete language, it will always be possible for someone (eg, the DAO hacker, or some crook like Bernie Madoff, or some well-meaning but clueless dev from slock.it) to formulate a “smart contract” whose meaning cannot be determined in advance by merely inspecting the code: ie, it will always be possible to write a smart contract whose meaning can only be determined after running the code.
Take a moment to contemplate the full, deep (and horrifying) implications of all this.
Some of the greatest mathematicians and computer scientists of the 20th century already discovered and definitively proved (much to the consternation most of their less-sophisticated (naïve) colleagues — who nevertheless eventually were forced to come around and begrudgingly agree with them) that: Given a “smart contract” written in a Turing-complete language, it is impossible to determine the semantics / behavior of that “smart contract” in advance, by mere inspection — either by a human, or even by a machine such as a theorem prover or formal reasoning tool (because such tools unfortunately only work on more-restricted languages, not on Turing-complete languages — for info on such more-restricted languages, see further below on “constructivism” and “intuitionistic logic”).
The horrifying conclusion is that: the only way to determine the semantics / behavior of a “smart contract” is “after-the-fact” — ie, by actually running it on some machine (eg, the notorious EVM) — and waiting to see what happens (eg, waiting for a hacker to “steal” tens of millions of dollars — simply because he understood the semantics / behavior of the code better than the developers did.
Last but not the least, increasing regulatory pressures on Bitcoin, Ethereum and other permissionless public cryptocurrencies/cryptotokens will impact their prices negatively in the medium to long-term.
The need for a hyperfast private zero-knowledge proof cryptocurrency that keeps payer-payee and payment data private and secure along with a decentralized scalable multicomputation platform can’t be overemphasized.
submitted by OrchNetwork to u/OrchNetwork [link] [comments]

Bitcoin and Mises Regression Theorem

Hi guys,
Just wrote an article exploring Mises's Regression Theorem and Bitcoin. Text is below. Basically I hope to persuade people that Bitcoin does not need inherit value to become money.
http://www.marcolapegna.com/2017/11/24/marco-on-money-misenean-regressionpart-ii/
It’s been almost a month since my first post exploring monetary theory and crypto-currencies. I’m still working on the research into the inner workings of Bitcoin and crypto-currencies in general and while it’s been quite fun, it’s also very time consuming. So in the meantime I thought it would be nice to explore a part of monetary theory I find relevant to Bitcoin—Mises’ Regression Theorem (MRT).
I wrote about Bitcoin only one other time in a previous blog I discontinued sometime around 2013-2014. At the time there was some hype around Bitcoin and I was worried at how aggressively the libertarian community was pushing Bitcoin. My worry was that if Bitcoin turned out to be a scam, then the movement overall would take a big hit. To that effect I titled the blog post Bitcoin: Friend or Foe of Freedom?
My first thought was that Bitcoin violated MRT and hence was most likely a scam, but as I kept doing my research I changed my mind drastically.
But before we continue we should discuss what issues MRT helped to correct.
How Prices are Developed
The significant achievement of MRT is that it provides a credible theory on how prices develop in a monetary economy.
In economics 101 we all learn that prices for goods are set at the intersection of demand and supply curves. Demand curves are downward slopping indicating that that as the price of a good drops, we are willing to consume more of the said good.
This phenomenon is explained in economics by the concept of marginal utility.
Marginal utility is the derived satisfaction a consumer gets from consuming an additional unit of a good. This utility diminishes as the consumer continues to consume more of the same good. It’s safe to say we can all relate to this, for instance, most of us love chocolate, but after eating a few squares most of us will get sick if we continue to consume. Hence, our satisfaction from continuing to eat more chocolate will drop to near zero.
In economics, this is referred to as the law of diminishing marginal utility.
The law of diminishing marginal utility is why the demand curve for goods is downward slopping and in turn helps explain how the market formulates prices. This is where we run into problems though.
A demand schedule for a good is determined by the marginal utility of the good itself to the consumer, and the marginal utility of money, or simply the alternative uses of money to the consumer. However, to properly evaluate these alternative uses of money, the consumer needs existing prices of other goods in order to rank his choices. Therefore, in order for the market to formulate a price for good X, it needs the price of good Y, which in turn needs the price of good X. This circular argument represented a chasm in our collective understanding of monetary theory for a long time—until Mises came along.
Circularity and Bitcoin
But before we go on to explain how MRT addresses the problem of circularity, let us take a quick look at Bitcoin. Let us go back to 2008 when Bitcoin was first introduced into the market. Sure, you could easily argue that Bitcoin makes a better indirect means of exchange than paper money; it’s infinitely divisible, and as long as we have computers it’s more durable, it’s easily more portable than paper money, and one could easily make the argument the strength of the code has intrinsic value. This satisfies all the basic requirements for a particular good to become money in a society. Check, check, check, and check….With all that said though, how do you begin to formulate prices for goods in Bitcoin?
Let’s assume I’m a particular merchant selling my goods, how do I determine how many Bitcoins I am going to charge for my goods? My instinct is going to be to look at other merchants and see what they are charging their goods for in Bitcoin, so I can construct my own personal demand schedule for Bitcoins. Only problem is that other merchants are looking at me to do their own calculations. Hence, at first look it seems like Bitcoin is going nowhere fast.
Keep this issue in the back of your mind; we will get back to it.
Mises’ Regression Theorem
Ok so back to Mises.
Mises addressed the issue of circularity by suggesting an individual constructs his demand schedule of a certain good not by simultaneously looking at the prices of other goods on the market, but by recollecting the prices of the goods in a prior event in time. This will give the consumer a general array of prices in the economy from which he can rank his preferences and from there we can construct his demand schedule.
For example, if I am at the bread store holding $5, how do I decide how much bread to buy? First, I think of how much bread I already have at home, and rank my satisfaction of purchasing additional loaves, then I evaluate alternative uses of that $5 by recollecting previous prices of butter, fruit, and other goods. Based on these evaluations, I will rank the purchase of bread loaves either higher or lower than holding on to the $5.
While this model certainly works, the obvious problem is that at this point, the issue of circularity has been replaced by one of infinite regression. If today’s prices are determined by recollecting prices in a previous period in time, how are those prices formulated? By obviously looking at a period further back in time and so on the regression goes on indefinitely.
In MRT however, the regression is not indefinite. Eventually one would arrive at a period in time when the economy worked on a barter system. From the first instant that a merchant accepts a good from a trade not because of its end use, but because of its exchange value, the economy begins to formulate prices in terms of the accepted indirect means of exchange good. Once a particular good becomes the primary indirect means of exchange in an economy, and this good is accepted by the vast majority of participants, we term said good the “money” of that economy.
The implication of MRT is that for a good to become money, it must start out as a good that has perceived value in of itself. Otherwise it would never begin to be traded in a barter economy. After that, the qualities of durability, divisibility, and portability are essential to determine what good will function as money in a society.
Bitcoin and MRT in the Libertarian Community
There has been, there is, and will likely continue to be an intense debate in the libertarian community about the future of Bitcoin. Many of the detractors of Bitcoin use the MRT as proof that Bitcoin will never become money and hence is nothing more than either a pyramid scheme, Ponzi scheme, or fraud.
Peter Schiff is a prominent analyst and beloved figure in the libertarian community who has been a vocal detractor of Bitcoin. Although I have never seen him reference MRT directly, he employs a line of attack similar to the critics that charge Bitcoin with violating the MRT. The charge is that since Bitcoin has no end use in of itself, it has no chance to become money and hence all attempt to make it so are futile.
To Schiff, money must be a commodity. Gold for instance has a far longer history of being treated as money than bank notes; many detractors of Bitcoin—like Schiff—are in fact strong supporters of gold.
Detractors argue that gold instead of Bitcoin is perfectly compatible with MRT, since MRT explains gold’s emergence as an indirect means of exchange from the earliest barter economy to the last link between gold and the US dollar. To the gold bugs, it’s the use value of gold as jewellery that allowed gold to begin its emergence as money. Without this use, gold would never have developed as money.
Since Bitcoin really has no use or “inherit value” outside of indirect exchange, then it is in violation of MRT and hence can never become money. And since the valuations of Bitcoin are based on the future assumption that Bitcoin will become money, the whole thing is a swindle.
Why Mostly Everybody is Missing the Point
The predominant response by supporters of Bitcoin and MRT has been to come up with arguments as to how Bitcoin does indeed have some use value in of itself. In my view, some of the cases are good, while some seem downright silly. Either way this is an unnecessary step.
Bitcoin is perfectly compatible with MRT even if it has no use value.
As Davidson and Block point out in this paper (here). MRT says nothing about introducing a new indirect means of exchange in an economy that already has money. All MRT seeks to do is to explain how prices form originally, from the starting point of a barter economy.
Take central bank notes, nobody disputes that it is money in our society. Whether it’s Euros or US dollars none of these bank notes have direct uses other than possibly real expensive toilet paper. Despite this, prices for goods in terms of central bank notes developed. This is in large part because these bank notes could be converted to gold on demand, and since people had a history of the general array of gold prices in mind, this allowed them to evaluate alternative uses of these new bank notes. Now these participants in the economy could come up with new value scales that led to the creation of prices in bank notes instead of gold.
Back to Bitcoin and Circularity
Now that we have a solid understanding of MRT behind us, let’s get back to the issue of how to come up with prices of goods in terms of Bitcoin that I brought up earlier.
Well thousands of merchants are already selling their goods in Bitcoin, so how do they do it? Easy, at the time of sale they look at how much a Bitcoin is being traded for in USD and use that number to determine the Bitcoin price.
Exactly the same process that was used when central bank notes began to replace gold as money.
My aim in writing this post is not to prove how Bitcoin will undoubtedly replace central bank notes as money. There are many more factors to explore and in the end such a claim would be nothing more than speculation—that could prove to be right or wrong in the future.
My whole aim has been instead to show how Bitcoin does not need any “inherent value” to eventually succeed and become money. It is perfectly feasible for BTC to piggyback on central bank notes in order to establish prices as demonstrated by MRT.
submitted by Vecissitude to CryptoCurrency [link] [comments]

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