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Reggie Middleton v Paul Krugman pt 2, Inflation, Bitcoin and the Alt.coins

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#666666; font-family: Arial, Helvetica, sans-serif; font-size: 13px; line-height: 24.700000762939453px;">Here is the next segment in the presentations given at the North American Bitcoin Conference in Miami Beach.

 


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Wed, 01/29/2014 - 18:11 | Link to Comment madtechnician
madtechnician's picture

Reggie's posts on ZH only go live on the top for an hour or two - if anybody from ZH reads this message how can they be listed on the main ZH feed ?

 

That way there would be some really positive and constructive posts not just a load of anti-bitcoin trolls posting their shit.

 

Reggie if you see this message ask ZH why your posts are not on the ZH feed.

Wed, 01/29/2014 - 14:32 | Link to Comment q99x2
q99x2's picture

Contract lawyers should love bitcoin.

Wed, 01/29/2014 - 14:18 | Link to Comment WaEver
WaEver's picture

Still wating for the french bank run reggie or have you forgotten !
Verba volent, scripta manent (definitely ridiculous predictions with lots of fuzzy tables & maths)

Wed, 01/29/2014 - 13:35 | Link to Comment scattergun
scattergun's picture

Why would I give a crap how much someone paid in electricity costs and computer costs to solve a math problem someone else already knew the answer to?

Wed, 01/29/2014 - 16:00 | Link to Comment tip e. canoe
tip e. canoe's picture

because there are other math problems that someone else doesn't already know?

Wed, 01/29/2014 - 13:08 | Link to Comment teslaberry
teslaberry's picture

when you look at the history of money. money frequently starts as scrip ---basically notes backed by a promise to give something. 

 

'scrip' is word associated with prouduction of consumables. but a bank note is esesntially scrip for gold, or some other reserve it holds for which its notes can be redeamed. 

 

the proliferation of different types of scrip creates confusion in the pricing system and one 'scrip' to rule them all --a legal tender exlusory note-----is what we have come to accept as the paradigm of a soverign fiat. 

however--a fiat can only be redeamed by the redistributive power of your government. it is backed by police and armies and the promsie to confiscate assets through taxation , confiscation, nationalization, and of course DEBASEMENT ------in order to redeam assets to you in return for your notes. it just so happens, those redemptions are almost always settled in cash. which is why we see hyperinflatoin set in as the defining feature of a failed government. 

 

 

alt coins are nonsnse, the only 'alt' coin is bitcoin. and bitcoin is an altcoin signifiying a world wide panic out of fiat and into redeamables of other sorts, anything that govenrments cannot tax and steal. 

 

there is an old military adage that if you want to destroy your enemies---you trap them but you must give them an escape route. 

is physical gold the escape route? no. gold is money. that much is certain. thousands of years of human behavior prove this. the science fiction future that might prove otherwise is yet to come. 

 

as for bitcoin. ---it could very well be the trap/escape route. a number of people see the big banks , goldman in particular, attempting to co-opt the bitcoin network infrastrucutre. the winklevosses ....the nsa. whoever. 

 

maybe bitcoin is legit, maybe it isn't. time will tell. personally, i'm a big fan boy of the idea of independently issued digital scrip---which is the core idea of open source cryptocurrency-----, but it took me years of studying it to accept its legitimacy. and i have never owned more than 2$ worth of bitcoin that i used to test it out. 

the question is not whether digital currencie(s) will thrive. everything is online. your bank acccounts are online. the question is who will control them. and how many networks of control and co-exist in stable fashion for lengthy periods of time. 

ALL networks eventually die. 

bitcoin, 

every religion

every nation

the human race. 

the solar system. 

everything. 

 

 

 

 

 

Wed, 01/29/2014 - 15:57 | Link to Comment tip e. canoe
tip e. canoe's picture

big fan boy of the idea of independently issued digital scrip :: count me in the club with my 99 DOGEs.
the question is who will control them. :: 'tis indeed the question, perhaps the only one worth asking.

+1 :: very eloquence.   so beauty.   wow.


Wed, 01/29/2014 - 13:48 | Link to Comment madtechnician
madtechnician's picture

Yes - our universe is the biggest bubble that exists.

Wed, 01/29/2014 - 14:56 | Link to Comment silvermail
silvermail's picture

"our universe is the biggest bubble that exists."

But that is no reason to take a personal part in all other bubbles, is not it?

Wed, 01/29/2014 - 17:42 | Link to Comment madtechnician
madtechnician's picture

Well you are already a part of the Fiat bubble , you had no choice with that. At least with this bubble you actually have a choice.

Wed, 01/29/2014 - 12:30 | Link to Comment linrom
linrom's picture

How much is Middleton paying to ZeroHedge.com/ABC Media, LTD?

Wed, 01/29/2014 - 14:13 | Link to Comment Peter Pan
Peter Pan's picture

And is he paying in bitcoin, litecoin or cash?

Wed, 01/29/2014 - 15:44 | Link to Comment tip e. canoe
tip e. canoe's picture

SOAP

Wed, 01/29/2014 - 12:10 | Link to Comment madtechnician
madtechnician's picture

..

Wed, 01/29/2014 - 12:01 | Link to Comment SAT 800
SAT 800's picture

If I hear "Bitcoin" one more time, I'm going to scream. Stick to the commercial real estate, Reggie, you were doing great there; getting involved in Bitcoins is going to be like World War One; everybody loses and nobody gets covered in glory.

Wed, 01/29/2014 - 14:30 | Link to Comment q99x2
q99x2's picture

BitCoin !

Wed, 01/29/2014 - 11:54 | Link to Comment Mi Naem
Mi Naem's picture

"Reggie Middleton v Paul Krugman"

I know this is a wild guess, but does Reggie come out smellin' like a rose, here? 

May as well be the Globetrotters against the Generals. 

Wed, 01/29/2014 - 11:51 | Link to Comment geno-econ
geno-econ's picture

"Relatively little about"---- sounds like Reggie is adopting "economist talk " in describing Krugman

Wed, 01/29/2014 - 11:46 | Link to Comment silvermail
silvermail's picture

Between crypto currencies and human stupidity have something in common. This lack of limits.
The limit of separation on the parts (limit of depreciation) for Bitcoin and any other crypto currencies - it is infinity.

The limit for quantity emergence of various new crypto currencies - is also infinite.

And the limits of human stupidity - is also infinity!
Long live the new infinite money for people with infinite stupidity!

Wed, 01/29/2014 - 11:45 | Link to Comment silvermail
silvermail's picture

All these so-called crypto-currency will multiply like rabbits up to moment when their numbers will be equal to the number of fools on the planet.
And only when every fool on the planet will have its own personal crypto-currency, the bubble of crypto-currency will burst and all these so-called crypto-currency, will become equal zero.

Wed, 01/29/2014 - 11:46 | Link to Comment madtechnician
madtechnician's picture

That is as dumb as saying "All these so-called Internet's will multiply like rabbits up to moment when their numbers will be equal to the number of fools on the planet."

Wed, 01/29/2014 - 12:00 | Link to Comment silvermail
silvermail's picture

You do not find strange your attempt to compare the expansion of the Internet and crypto currencies?
With the same success you can compare the cinema and popcorn.

Wed, 01/29/2014 - 12:04 | Link to Comment madtechnician
madtechnician's picture

The internet could have been built on top of a multitude of different protocols. TCP/IP won because of its first-mover , network effect and efficiency advantages. There were dozens of protocols being used in computer communications just like TCP/IP , a comparison can be made here because bitcoin , just like TCP/IP has all the necessary attributes to win - ie efficiency , 5 year's first mover advantage (in computer terms that is like a millenia) and network effect. 12 months from now most of these Alt-Coins will be dead , and within 24 months ony 2 or 3 crypto currencies will still exist.

Wed, 01/29/2014 - 13:09 | Link to Comment One World Mafia
One World Mafia's picture

Aside from speculators, a monetary system is not something people like to waltz in and out of.  Which has the best cryptography such as a fully rigid curve, etc, and the Bitcoin protocol aint it.

Wed, 01/29/2014 - 13:47 | Link to Comment madtechnician
madtechnician's picture

Well please enlighten us oh master as to what is ?

Wed, 01/29/2014 - 14:02 | Link to Comment One World Mafia
One World Mafia's picture

Beats me.

Wed, 01/29/2014 - 12:36 | Link to Comment tip e. canoe
tip e. canoe's picture

just like to point out that the prediction of an eventual oligarchal structure by a defender of a protocol that is touted as being the "democratization of monetary systems" can be considered by some as richly ironic.

also, big difference between TCP/IP and the blockchain is that TCP/IP did not have a currency derivative attached to it that is being speculated upon as a store of value.

Wed, 01/29/2014 - 11:45 | Link to Comment GrinandBearit
GrinandBearit's picture

Reggie is just another crypto-coin bozo trying to make money of this modern day tulip bulb.  

Wed, 01/29/2014 - 13:16 | Link to Comment Reggie Middleton
Reggie Middleton's picture

You know, the biggest opportunity in Bitcoin and some of the better alts is the extreme ignorance and total lack of understanding of what is going on. 

Normally, there would be an arbitrage where the window of opportunity closes quickly, but in this case it is wide and remains so, driven primarily by so many people acting like they know what they are talking about but knowing close to nothing. 

While you guys are having conversations about currencies, an entire empire and massive fortunes are being built on the protocol. Yes, Bitcoin can easily be as big, or close to it, as the Internet.

Think of the coins as the websites and Bitcoin network as the Web.

Wed, 01/29/2014 - 21:50 | Link to Comment tip e. canoe
tip e. canoe's picture

While you guys are having conversations about currencies, an entire empire and massive fortunes are being built on the protocol.

with all due respect to you and the other empire builders, if these conversations aren't had now, they most definitely will be had later.    with the recent discovery of the hidden control mechanisms underneath its utopian surfaces, the Internet proves that.

Wed, 01/29/2014 - 17:11 | Link to Comment Toolshed
Toolshed's picture

Reggie, you and madtechnician, should either be embarassed or deeply ashamed of the absurd arguments in favor of bitcoin you both present here. Either you are both intentionally deceitful or astonishingly ignorant. And I know Reggie is not ignorant and can be insightful and brilliant when he wants to be. The ignorance of BTC by the masses, which you both spin as a positive, will actually facilitate it's control or destruction by TPTB. I will add no more to this topic, as more than enough has been said already. However, I will leave this link for readers to peruse at their leisure and decide for themselves what lies ahead for BTC.

http://gothamist.com/2014/01/29/ny_department_of_financial_services.php

Wed, 01/29/2014 - 17:44 | Link to Comment madtechnician
madtechnician's picture

This is a disruptive technology , akin to the jet engine vs. the piston engine or film vs. digital photography. Of course it is going to make some serious waves. However that does not mean you should shit in your pants and run away , you can run with it , even governments know it's a bad bet to bet against technology , technology only moves in one direction , they will have to move alongside soon enough , at this point they are still trying to figure out what the fuck it is ... It is natural to fight what you do not understand , but once you realise what it is ,,,

Wed, 01/29/2014 - 13:55 | Link to Comment madtechnician
madtechnician's picture

Yes precisely - because if these idiots knew what was actually taking place here they would have pushed the price upto infinity by now. I suppose we should be grateful that these idiots exist , by the time they realise what is taking place here it will be late in the game for them.

Wed, 01/29/2014 - 12:05 | Link to Comment madtechnician
madtechnician's picture

 

Hey Reggie,

I want to ask you this:

Have you done any cost analysis of the Alt-coins as in how much electrical power is used to run the transaction verification systems (aka mining) for any of them ?

I have been looking into this , and it is starting to look like these Alt-Coins will be burning up one hell of a lot of electricity compared to bitcoin if / when they scale up.

For example: Bitcoin doing x number of transactions per second uses y amount of electrical power , Litecoin doing x number of transactions = y times 10,000 , if bitcoin scales up into the hundreds of thousands of transactions per second , Litecoin Scrypt will not be able to compete with bitcoin because it will be using around 10,000 times more electricity to process an equivalent number of bitcoin SHA256 transactions , Litecoin would literally require a power station on every street corner.

Please tell me what you think about this and if you have looked into any of this.

Wed, 01/29/2014 - 14:00 | Link to Comment ebworthen
ebworthen's picture

http://www.coinwarz.com/calculators/litecoin-mining-calculator

Litecoin scrypt at the moment can't be mined efficiently with ASIC processors but rather Radeon video cards.

A simple home machine with one video card running 24/7 using ~400 Watts would profit ~$22/month.

But yes, it is all virtual and nothing is produced until you cash out and buy something or convert to fiat.

Wed, 01/29/2014 - 15:42 | Link to Comment tip e. canoe
tip e. canoe's picture

would profit ~$22/month :: bet ya 2 primecoins that one could profit even more if the ~350 watts of waste heat coming from that simple home machine was diverted into the home heating duct.

and buy something :: like electricity perhaps?   what if a nearby solar farm took crypto, would you buy it?

Wed, 01/29/2014 - 12:38 | Link to Comment tip e. canoe
tip e. canoe's picture

been wondering that as well, how scrypt compares with SHA-256 in terms of processing, thus electric consumption, once a critical mass of coins are mined.   figured scrypt was more energy-intensive in toto, but 10,000x?   can you be so kind to share some verification of that, for us lowly BSICs?

one important factor to consider as well is that scrypts are limited to GPUs, thus limiting the processor "arms race" (as satoshi aptly described) & continuing hardware obsolescence, opening up the crypto barriers to entry.    thus, the energy consumption (and blockchain security) will be distributed across a much wider net with scrypt vs. SHA.

this will also allow for greater innovation in capturing and reusing the waste heat for personal use, which is 90% of the electricity use.   freedogger already came up with an ingenious solution to heat his home from his mining rig over the weekend.

other factors to consider would be : residential vs. commercial rates, and global arbitrage of power costs.

 

Wed, 01/29/2014 - 12:40 | Link to Comment madtechnician
madtechnician's picture

Yeah but the whole point is efficiency. You do not want to be wasting electrical energy , you want to put that power to good use by solely verifying transactions not shunting data around a large memory. If you have to run a rack of computer servers pulling 10Kw of power to process 5000 transactions an hour using scrypt , well SHA256 on an ASIC can process that many transactions using just a few watts , with the exact same level of security. If Scrypt starts processing say 50,000 transactions per hour it will be using Megawatts of power. Not to mention the amount of extra silicon and hardware memory that is also required for the scrypt processor. You can fit over 100 SHA256 cores on a single 28nm silicon wafer die , you would be lucky to fit 4 cores of Scrypt on a die of the same size , 

Wed, 01/29/2014 - 15:29 | Link to Comment tip e. canoe
tip e. canoe's picture

Yeah but the whole point is efficiency. You do not want to be wasting electrical energy ,

totally.   but how much is a few watts?

if it's > 1, then it's less than 10000x efficient.    the question is how much?

as far as silicon goes, it's the most abundant resource on earth, even when it's synthetically made, no?

  

Wed, 01/29/2014 - 17:21 | Link to Comment madtechnician
madtechnician's picture

Double Post not sure if you got the earlier one:

 

Okay , here is the angle I am coming from. I am not talking about coin mining . I am strictly talking about the cost of the system processing transactions. If it's expensive to process transactions then that cost will ultimately be passed onto the consumer , that would be regarded as an inefficiency of the system.  If a system hashing rate is low , then it's transactional capability is also low. If you need to scale up that low hash rate system to a high speed system , then the amount of electricity required to do that would be directly proportional to magnitude of scale. So for example - note these numbers are for EXAMPLE only and are not written in stone -  a bitcoin server can hash at 1Gh/sec using 100 Watts of electricity ,  a Litecoin server can hash at 1Mh/sec using 100 Watts of electricity , this is 1000 times SLOWER than the bitcoin rate , but using the SAME amount of electricity. ergo , to get a Litecoin netwrok to process the same amount of transactions per second as bitcoin would therefore require 1000 times more electricity. I am using wild numbers here as you can see , but I am hoping you get the gist of what I am trying to say here, The hash rate of a system has direct proportionality to it's transactional capability ,  If these systems scale up , say to VISA / MasterCard speeds , then the Litecoin system , using this example would require its servers to use 1000 times more elctricity to process the same number of transactions. I have done some homework on this and it's starting to look like Litecoin would require around 10,000 more electricity to process transactions if running at the same transactional speed as bitcoin. Even if / when ASIC for Scrypt can be deployed , these will be seriously inefficient , still requiring massive amounts of electricty and a huge die size to accomodate all the extra memory that is required to run the highly inefficient & memory hungry Scrypt algo , these extra costs would be passed onto the consumer. Other Algo's such as Primecoin are even worse by magnitudes. It is almost as if whoever created bitcoin anticipated clone competitors in advance and therefore deliberately created an Algo which could be implemented easily on extremely efficient low power low cost ASIC modules. The market will ultimately decide which is the most efficicient system to use , I just wanted to give a heads-up on this one because I think it is being seriously overlooked by the Alt-Coin people.

Wed, 01/29/2014 - 18:12 | Link to Comment tip e. canoe
tip e. canoe's picture

got it, thanks for taking the time to explain.    i get your gist now.

interesting, if you're correct, then Koomey's Law remains true.   unfortunately, that would also mean that all alt-coins devised so far trend toward centralization in the security of the blockchains, because of the ever-increasing need for speed (and its associated costs).

do you understand why some would consider it less than a good thing?  maybe that will be irrelevant once ASICs come down to a consumer price point, especially in the secondary market.   i would sure prefer one over a GPU if they are that much more efficient.

 

Wed, 01/29/2014 - 18:23 | Link to Comment Matt
Matt's picture

I think you are missing Jevon's Paradox. If you have a 15 amp breaker dedicated to mining, and you are running a GPU rig with 4 video cards in it, consuming 1200 watts steady, and you upgrade to an ASIC that has 10 times the performance and uses one-tenth the power, for a total of being 100 times as efficient per hash, what will happen is that, on average, people will just keep adding hardware until they are back to 1200 watts.

The advantage is that the network becomes 100 times harder to hack. Also, if the currency keeps increasing in price, so that the mining / transaction fees are worth more, more hardware will be added to compete to get a larger piece of the pie.

Wed, 01/29/2014 - 19:15 | Link to Comment tip e. canoe
tip e. canoe's picture

yes, i'm definitely missing Jevon's paradox, so that brings us back to the arms race :)  it just seems counterproductive to incentivize constant hardware upgrades, unless you're a hardware manufacturer that is!

agree with mt that the algorithm that will reward efficiency will win the game in the end.   to what ends, who knows?

thanks for entertaining the thought-provoking discussion gentlemen.   much more healthy for the brain than slinging mud imho.

Wed, 01/29/2014 - 19:39 | Link to Comment madtechnician
madtechnician's picture

There will not be any more hardware upgrades necessary once 20nm is the norm , that will be it for quite some time.... Apparently KNC are working on 20nm right now.

Wed, 01/29/2014 - 21:07 | Link to Comment Matt
Matt's picture

As unit prices drop from ~$10,000 to ~$500 per unit, more and more hardware could be purchased at the same performance level, in a competition to get more of the new coins plus transaction fees.

Eventually, it should get to the point where mining is slightly more profitable than the cost of electricity. Of course, if the price per bitcoin increases, the race continues.

Wed, 01/29/2014 - 18:37 | Link to Comment madtechnician
madtechnician's picture

Surely , the Crypto coin that is going to "win" this race will be the Crypto currency that is the most efficient to process it's transactions on. I mean , it's great that Jumbo Jets exist , but you do not want to fly in a Jumbo to get from one town to the next. To use an energy intensive coin to make a small transaction is insane. The key here is Scaleabilty. Surely the coin which will scale the most efficiently will "win" this race. After looking at the power specs. of the other transactional verification equipment and it's source code I can tell you now that bitcoin is fucking slick as fuck ...

Wed, 01/29/2014 - 15:16 | Link to Comment Matt
Matt's picture

As I understand it, there is no relation between hashing power and number of transactions that can be processed, and therefore no direct relationship between electricity consumption and number of transactions.

If you had 3 CPU's mining a SHA256 or Scypt coin, it could process just as many transactions as 100,000 specialized ASIC machines. The difference is in terms of network security; someone could come along with 5 CPUs and overpower the 3, allowing that person to double-spend or alter the history of transactions.

Scrypt ASICs are supposedly in development by companies no one heard of before, and will probably be developed by established names if any Scrypt coin really takes off.

Energy Efficiency is not really a goal of most of the coins, it is driven by competition to make up as much of the network as you can (but less than 40% to prevent loss of confidence) in order to get the biggest chunk of the new units as well as the transaction fees. The more valuable the coins become, the more energy will be consumed mining that coin, regardless of which cryptographic algorithm is used.

Wed, 01/29/2014 - 15:36 | Link to Comment tip e. canoe
tip e. canoe's picture

thanks for the interesting comment.

The difference is in terms of network security; someone could come along with 5 CPUs and overpower the 3,

all the more reason to spread that security across as many CPUs as possible then, yes?

Scrypt ASICs are supposedly in development

if so, it seems the shibes are about to enter an arms race.

the more energy will be consumed mining that coin, regardless of which cryptographic algorithm is used.

is this true for a strictly PoS algorithm as well?


Wed, 01/29/2014 - 17:19 | Link to Comment madtechnician
madtechnician's picture

Okay , here is the angle I am coming from. I am not talking about coin mining . I am strictly talking about the cost of the system processing transactions. If it's expensive to process transactions then that cost will ultimately be passed onto the consumer , that would be regarded as an inefficiency of the system.  If a system hashing rate is low , then it's transactional capability is also low. If you need to scale up that low hash rate system to a high speed system , then the amount of electricity required to do that would be directly proportional to magnitude of scale. So for example - note these numbers are for EXAMPLE only and are not written in stone -  a bitcoin server can hash at 1Gh/sec using 100 Watts of electricity ,  a Litecoin server can hash at 1Mh/sec using 100 Watts of electricity , this is 1000 times SLOWER than the bitcoin rate , but using the SAME amount of electricity. ergo , to get a Litecoin netwrok to process the same amount of transactions per second as bitcoin would therefore require 1000 times more electricity. I am using wild numbers here as you can see , but I am hoping you get the gist of what I am trying to say here, The hash rate of a system has direct proportionality to it's transactional capability ,  If these systems scale up , say to VISA / MasterCard speeds , then the Litecoin system , using this example would require its servers to use 1000 times more elctricity to process the same number of transactions. I have done some homework on this and it's starting to look like Litecoin would require around 10,000 more electricity to process transactions if running at the same transactional speed as bitcoin. Even if / when ASIC for Scrypt can be deployed , these will be seriously inefficient , still requiring massive amounts of electricty and a huge die size to accomodate all the extra memory that is required to run the highly inefficient & memory hungry Scrypt algo , these extra costs would be passed onto the consumer. Other Algo's such as Primecoin are even worse by magnitudes. It is almost as if whoever created bitcoin anticipated clone competitors in advance and therefore deliberately created an Algo which could be implemented easily on extremely efficient low power low cost ASIC modules. The market will ultimately decide which is the most efficicient system to use , I just wanted to give a heads-up on this one because I think it is being seriously overlooked by the Alt-Coin people.

Wed, 01/29/2014 - 18:09 | Link to Comment Matt
Matt's picture

The hashing rate has nothing to do with transaction speed.

The hashing rate determines how secure a coin is against attack.

Are you talking about how fast unconfirmed transactions propogate through the network, or how fast those transactions are confirmed?

Block Time Target is compiled in at the time a coin is created. If you add more hashing power, it just gets more difficult to solve the hash in order to keep the average time between blocks at the target.

Right now, the network is rewarded for doing its work in exchange for new coins, and the transaction fees are a very small bonus. With bitcoin, new coins will stop being created in 2140, and then the network will have to rely solely on transaction fees to support itself. 

With Dogecoin, new coins stop being made in July 2015 (or they lied and there is no limit to the number of coins that will be created) and it must support itself on transaction fees, goodwill, or it will collapse.

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