Blockchain In a Zombie Apocalypse
By Chris at www.CapitalistExploits.at
With a strong focus on investing in game changing trends, whether in private or public markets, it's not surprising that the technology underpinning the Bitcoin digital currency has been more interesting to us than a gaggle of suntanned string bikinis.
I wrote about the technology recently, first here and then again here, and received lots of really interesting feedback.
At the same time I received lots of detractors of the blockchain technology emailing me. As far as I can tell, they fit into two main groups.
The first group don't understand what it is, how it works, or its potential applications, have no inclination to educate themselves accordingly, and are generally fearful of anything not yet in existence.
They would have been found criticizing the internet before it went mainstream, saying things such as "it's a tool to control the masses" by some never-been-seen (but we know they exist, really) group of old men in cardigans, huddled in a smoky room sipping Chivas and plotting the world's fate.
The second group, freshly indoctrinated by morons such as Al Gore, are to be found harking for the "old days".
By their logic we're all better off without technology, our homes should be made from sea shells, hemp, and egg boxes, our diets should consist of crickets, alfalfa and free range caterpillars, and our cars run on "friendly" electricity harnessed by happy thoughts.
What they forget about, though, is the fact that charging the electric car they just bought likely involves a power socket which sources its power from a nearby coal fired power station. How's that for "green"? It's not lost on me that this group will send me these thoughts via the internet, on a device which they're suggesting none of us should have.
It was therefore with glee that I received dozens of intelligent comments and questions to these articles from people genuinely interested and attempting to learn more, even if skeptical, an entirely healthy attribute. One reader in particular posed some very valid questions which I want to share with you today.
Please note that I don't pretend to have all of the answers on this particular topic and am really grateful and fortunate to have at my proverbial finger tips an exceptional team and a network of experts who know more about this than I.
So here goes the email:
First, I don't understand what a "blockchain" is.
Secondly, I am concerned that this technology is totally dependent upon a human constructed machine, and a supply of electricity. What would happen to your "assets", so carefully digitized, if electricity was somehow terminated throughout the world? (yes, I am sure you are laughing at this speculation)
Thirdly, I remember that "Bitcoins" have been easily stolen or lost in the past, and legal action has been difficult. This doesn't give me much confidence in this technology.
To make it clear, I am not necessarily arguing against this technology. I can see it being extremely useful, but at this point in time, I am still more comfortable holding a hundred dollar bill in my hand.
Let me deal with them one by one.
1) What is the Blockchain?
The first question requires a much longer explanation but at its core the "blockchain" is a public ledger of transactions. The transactions are collected in "blocks" and found in a random process called "mining". As transactions transfer ownership, each of these blocks represent an update of the user's balance on the network.
The technology is complex and not immediately easy to understand. There are lots of resources on the web providing granular explanations and I'd encourage anyone interested in this space to really dig in to understand the technology and the implications; it is going to completely revolutionize entire industries and 5 years from now it's likely that you'll be consuming products and applications which are just being developed today.
That is fine if you want to be a bystander to the investment opportunities but if, like us, you're not then now is the time to begin in earnest.
2) Concern with the technology dependent on a human-constructed machine and electricity
You're partly correct in saying that we're reliant on a human constructed machine but what's critical to understand is that the blockchain works like the internet in a sense that it's a network of machines. The failure of one or even millions of machines will not affect the operation of the system. It is decentralized and this provides it with many times the efficiency, safety and incorruptibility of any centralized system.
To your point on the reliance on electricity. Absolutely! It's a very real fact that we're reliant on a technology which, while it uses the internet which is decentralized, is reliant on electricity which is largely centralized. Centralization creates single points of failure not to mention inefficiency, corruption and abuse.
Two things come to mind when answering this question. The first is that in the modern world we're already completely tied to the availability of power, and the second involves a deeper discussion around what is happening in the power industry which itself is due for disruption.
Like it or not, today our assets are largely tied to machines, computers and electricity. Take, for example, your home. Who says you own it? A title register says so, and increasingly that title register is kept in electronic format on one or more databases. Your money held with a particular bank. Same thing. Try withdrawing your money from a bank when there is a power failure. Good luck. Try paying for gas with your credit card when the power is out.
What about your brokerage account, your business records?
Bitcoin and the blockchain, like any technology driven software system, are completely fragile in a non-digital world. Bitcoin, the blockchain, and any system remotely like it (including SWIFT) are dependent on a functioning global network, reliable power sources, cell phone towers, satellites and the infrastructure surrounding it all.
I don't believe the answer is to act like the Neanderthals we evolved from, dig holes in the ground and store grandma's pearl necklace. The answer lies in a better system.
The second thing that is important is that the power industry itself is due for massive disruption. I discussed this in an article on the electricity market and solar power.
In particular, the cost of solar as just one alternative will very quickly become a viable option for individuals and communities. The panels can be put up by homeowners requiring no centralized service.
This is an example of a decentralization of power (pun intended) moving from the large to the small. The same phenomenon we've been experiencing for the last 50 years but one which is gathering momentum and happening with greater speed.
3) Bitcoins have been stolen in the past and legal action was difficult
All true. I suspect that you're referring to the failure of Mt. Gox.
Risk can never be 100% eliminated and we're not about to change human behaviour which will include both the best and worst of humankind. As long as humans crawl the Earth we'll get bad actors, fraudsters, amazing wonderful people, geniuses and everything in between.
A few things are worth considering and understanding when thinking about fraud and security.
Firstly, by securing Bitcoin or any asset in a private wallet or in one of the many secure storage facilities, you can massively reduce this risk. The ability to do this is incidentally far easier than it currently is for you and I to take our fiat currency out of the bank and store it in a home safe.
Secondly, regulatory oversight is increasing in this space as it matures. Expect this to continue. For example, today Coinbase, a US based company, is many times larger than Mt. Gox ever was, has obtained all necessary regulatory approvals and licensing, including money transfer agent license and are licensed as a bank.
This means that you can hold fiat currency on the platform and exchange it for Bitcoin. The regulatory oversight of the "typical" bank used is much the same except the underlying system affords far greater levels of security and control to the individual (you and I).
As a point of disclosure: Partners at Seraph, who are also owners of the Capitalist Exploits site, are early stage investors in Coinbase and other companies not mentioned here which involve this technology. There. Bias disclosed.
- Chris
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The author didn't address a very real vulnerability: the internet backbone and major routes are nowhere near as decentralized as people assume.
There aren't many transoceanic fiber optic lines, for instance. We've already seen as few as ONE failing router bring down half of the world's internet traffic. We've also seen an outage at Amazon bring down entire worldwide services like Netflix and Twitter. We know for sure that the gov't is already tight with the major internet providers including carriers like Level3 and Verizon. These companies would happily install snooping tools (see below).
If the governments know about these single points of failure, they can leverage these to shut down Bitcoin and other blockchains deliberately. We know the US gov't is working to get a legal "internet kill switch" authority. Cryptocurrencies could be targeted "BECAUSE TERRORISM" at any point in the future. They don't have to shut down the whole internet, just the particular protocols/services/ports that crytptocurrencies use.
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Another big issue springs from the fact that the blockchain is publicly viewable (the author does mention this fact, but not that it can be a problem). Governments have already deduced the identities or transactions of individuals (like Dread Pirate Roberts) by watching the blockchain. There is absolutely no way to hide the blockchain, because by its very design it must be visible to all participants. If I have physical cash (even non-government-issued cash like local scrip), I can spend it without any government being aware of a transaction even happening. Not so with cryptocurrencies. They know a transaction occurred--it is up to them to deduce who were the parties involved. This can be done with very patient and sophisticated snooping.
Bitcoin is not the panacea many claim it to be; there is no perfect form of money.
Why would you assume that the government would stand by and let a currency take over the ecomony by a system which they are unable to tax. Ain't going to happen. "He who controls the money, controls everything" is another way of saying the government is always and everywhere going to control money.
Bitcoin could end up being a fad/scam.
But I have my metals already.
I'm only in 1% in bitcoin. 1% is enough to get a plane ticket out of Dodge if currency problems arise (like Greek bank freezes).
I don't carry gold or silver in my pocket. For me, Bitcoin makes more sense for EveryDayCarry emergency currency along with some cash.
Asides from my 401K, I have 0% in the stock market. I'd rather spend 1% in token support of bitcoin than the scary casino stock market right now.
It's not gold or silver, but I like the idea of people making the choice of what they want to use for currency.
Bitcoin is still too complicated for most people to get into. I think that part hurts it's adoption.
It's not like walking into a coin shop and exchanging fiat for gold or silver.
You guys should check out Gridcoin, a crypto that is mined by doing Boinc scientific distributed computing work -> gridcoin.us
"San Bernardino shooters received BitCoin payments from ISIS. US government leads global effort to shut down BitCoin"
Hint: it doesn't even have to be the truth!
Since ISIS is a CIA led operation, the 3 tall white guys who shot up San Bernardino would just be getting a US Government cheque. Syria (and Kurdistan) here we (USA) come, bang, bang, false flag.
Whale Gate — Hawaii Whale Coverup — They Have REsorted to Turning Off The Whale Cams
We are into the third week of January, and the Humpback whales have still not shown up in Hawaii. Usually they start showing up in early December.
In late December and early Jan, a few news stories were published showing scientists who were puzzled as to why there were so few whales.
Then around Jan 4 and 5th, a bunch of news stories came out to "deny" the missing whales, and throwing out all kinds of excuses.
Almost 2 weeks have passed since the "Whale Deniers" were trooped out to what we refer to as our mass media. I did an extensive internet review today, and found no evidence of whales showing up in Hawaii. You can bet a buck to a dollar that if whales had shown up, it would be plastered all over the news with lots of "I told you so!".
One of the excuses used was "We know so little about whale populations" which is a BALD FACED LIE.
- See more at: http://nukeprofessional.blogspot.com/2016/01/whale-gate-hawaii-whale-coverup-they.html#sthash.ifGCztu4.dpuf
When the fed prints money out of thin air, they give it to the bank.
The bank paid next to nothing for it but get the benefit at 100%.
When the bitcoin is mined it costs next to nothing.
The miner get the benefit of it at 100%.
With both systems, the original person gets 100% for nothing but evey other user has to pay full value for it.
That is bad enough, but when you remember that governments can block this block chain, it all falls down.
Somebody wrote the code that mines these bitcoins and who is to say that they are not doing the same as the fed, just printing?
You did not have to write the disclaimer at the end, it was very obvious that you are invested in this hopeless technology by the baseless arguments you put up to support it..
PH
Bitcion mining is extremely competitve with very small profits. The immense processing power requires very specialized equipment and large amounts of electricity. It's not at all similar to how the FED creates money by lending it into existence.
there are more cryptocurrencies than there are FEDs
"There were more than 669 cryptocurrencies available for trade in online markets as of 24 August 2015."
shysters are tripping over themselves trying to create value out of thin silicon
they try to mine (or buy in ) early to maximize the take, and hope it takes, and then sit on it hoping it appreciates, like the slimy Winklevoss twins (and Max Keiser).
There is one idea about bitcoin which is really weird to me. Why do the miners make money with this? What moral authority do they have? If it were a local system I believe that the community could make the money and use it for useful purposes in the communities interest, like for example, fixing the roads.
The miners don't print money like the banks in a fractional reserve system. The miners are a part of the community and they are paid for providing the computing power to process the transactions as well as storing a complete copy of the blockchain (which is where the decentralization and redundancy come from).
The block mining reward is also necessary as a means of getting bitcoins into circulation to allow new users a chance to acquire coins as the system gains in popularity.
True, not like the banks, but they are creating the bitcoin and making the profit. It's sort of like saying my accountant can create the money I use for keeping my books because he is providing a service. I don't buy the argument.
The small amount of bitcoins miners earn are a reward for investment in expensive equiment , electricity , and risk. Why would you not want to allow your accountant to earn something they produce that is trustworthy.
if everybody has loads of bitcoins, but they don't unload them to outsiders, they are worth nothing, zilch, dirt
they need people who are willing to exchange something of value for them to be valuable
the value doesn't come from electricity and computer expense, it comes from confidence (con)
gold is real, a bag of potatoes is real, fiat is confidence, bitcoins is confidence squared
fantacy money, you think you have wealth, then it vanished into the thin air it came from
confidence game, pyramid scheme, ponsi scheme
only those who are invested in them defend them, so vested in it
fantasy (sp)
Bitcoin has been evaluated by several governments and law enforcement agencies. They seem to have trouble figuring out if it is more like a commodity or a currency, but not a single one has declared it a Ponzi scheme or fraudulent in any manner. I believe that you simple don't understand it. If you have a government source for the Ponzi allegations please post it.
The bitcoin doubter is dubious of bitcoins because they can be stolen but the $100 bill that he's comfortable with can't be stolen? The $100 bill that he's comfortable with is being continually stolen by a thief he can't stop except by using some other currency not issued by thieves.
Where I live we have a mom and pop grocery store in town. The owner refuses to use scan codes, software and computers. It's run by a pencil, paper and a cash drawer. When we lost our fiber link our whole county was screwed up for a week. Anything that depended on telecom was useless. The pencil paper and cash drawer worked flawlessly though. I have read a couple of books on bitcoin and I think it, or something like it, would make a wonderful local currency system. At this point in human history I see the interconnected global marketplace getting hammered in the near future. That is why I'm not interested in it right now. Call me when it's been in use for 20 years.
"Bitcoin digital currency has been more interesting to us than a gaggle of suntanned string bikinis."
I'm more interested in the bikinis.
If you wait 20 years to adopt you'll have to buy in when bitcoins cost more than $100k each (in today's dollars). If you study how the coins are issued you will quickly see there there is a HUGE opportunity cost to waiting.
"What they forget about, though, is the fact that charging the electric car they just bought likely involves a power socket which sources its power from a nearby coal fired power station. How's that for "green"? It's not lost on me that this group will send me these thoughts via the internet, on a device which they're suggesting none of us should have."
No, not all power comes from coal, I charge my car with solar panels it costs me almost nothing other than the initial cost of the panels and maintenance.
Don't forget the batteries, an item that would be difficult to get during an off the grid type of catastrophe, or major manufacturing disruption. However, I commend your progressiveness, just something to think about.
Although it is dirty business, it's possible to build, rebuild or rejuvenate lead acid batteries yourself. They are very simple devices. I have a book around for how to do it. There are also some advanced charging systems that will keep your batteries going for a long time. I'm hoping that technology will create a battery that I can keep going for the rest of my life soon.
My concern with Bitcoin is not that the underlying technology is secure and free of inflation. My concern is that, in order to use your currency, you need to have a payment card that uses the VISA system, or some other competing Point-of-Sale transaction device. If my Visa debit card is rejected, so will your BC payment card. If dollars are not accepted from the shadow banking system, what guarentee is there that BC transactions will be accepted? Also, if I am going to try to circumvent the whole BC system, it would be foolish to try to break into wallets or the blockchain. The weak link is, and always will be, the payment/transaction method. What prevents an entity from stepping in front of the transaction and skimming or outright stealing the value in the now-opened wallet? No matter where the BC value is derived or stored, the transaction problem is the same everywhere, and is very suseptible to theft, in my opinion. Yes, the dollars in my checking account are similarly vulnerable, but I deal with a local bank with real people sitting at desks who know me personally, call me by name, and can help me get back fraudulently-taken funds.
As far as electronic transactions go, I am no Luddite. However, I have backed up my wealth with physical gold and silver coins and bars, physical cash (enough to pay my property taxes for five years), a physical piece of paper that says that I am the actual, unencumberded owner of my little house and my car, and I owe nothing to anybody... I will wait for a few years before diving into a BC world, not because I am an old head, but because it appears to me to be just another fiat currency layered atop the existing systems. In the event of power or internet failures, I can still put gas in my car using silver dimes or quarters, and I can still buy food and supplies using PM's that do not rely on electricity, only the agreement between me and the vendor of the value of a known coin.
You misunderstand how Bitcions are spent. A wallet is never "opened" during a spend. Credit card transactions are "pulls", but Bitcion spends are a "push" transaction. If you want to spend some Bitcoin you have to explicitly send it to someone - it is never pulled or drawn from your wallet.
I actually grabbed the real temperature data in early 2014, from 1880. Before they "jiggered" the data. And plotted it. At this link you can even download the whole spreadsheet, the more people who have it the better to preserve the record.
Bottom line....no global warming for 18 years, some wilder weather spikes, but more consistent weather overall (based on standard deviation)
Use facts when forming opinions, not other peoples opinions.
http://nukeprofessional.blogspot.com/2014/08/global-warming-real-informa...
Great link steveo...+1,000
Thanks for all your hard work, great site.
TY spread the word
The global criminals can be fought with facts and emotions, and the law of conservation of momentum
As i've said all along, it's a great idea....unfortunately it came out of an NSA incubator, and those fuckers would never relinquish control of money/currency...ever....
There will always be electric power. Even if it becomes scarcer and less ubiquitous there will be electric power. Even without a working grid there would always be some electric power locally produced.
There will always be computers too, and local wifi connection. Enough of them would survive even an EMP disaster, let alone the much more likely lesser disasters.
What there will not always be is "The Internet". You are deluded if you think the US government does not have distributed kill switches at the ready. Perfect false flag "We have turned The Internet off because of a massive virus attack". Nothing so permanent as that represented to be temporary.
This is why the Russians held tests last year to ensure that their national (Russian) part of "The Internet" is able to function even if it is cut off from the outside world ("sanctioned").
For sure there will always be IP (Internet Protocol) networks that operate using existing infrastructure hardware. But what there will not be is one single Internet that goes "everywhere". Those many IP networks will not be joined together into a single internetwork! Fragmentation of the one Internet (capital I) into multiple isolated IP networks isolates block-chains too and makes them only locally valid. Not much different from government canceling (dishonoring) your paper currency.
The US government can dishonor the paper greenback but that does not mean that you cannot physically carry your greenback paper to another country where such paper is widely accepted (eg Ecuador) and get value for it there. So too with block-chain once the US government pulls the kill switch and fragments the Internet into national IP networks (those countries that wish to run a national network). And all isolated national networks will be under government control.
Good points. There are likely other neworked private entities that are already prepared to counter any kill switch activites by anyone. Programs being downloaded from satelites to make many internets and/or intranets. There are a lot of good computer scientists, programmers, hackers, etc.. that dont work for goverments.
Funny that this article talks about well traversed points.
And leaves out everything even nearing true current convtroversy.
Enjoy getting reamed as the price plummets.
Prominent Bitcoin Developer Declares the Digital Currency a Failure http://fortune.com/2016/01/14/bitcoin-developer-quits/
Which is why Bitcoin is forking as we type, XT (like Hearn and his comments) are history, and little bitcoin marches on...
One rather obvious problem with block-chain is that, by design, it has unbounded growth.
Unbounded growth within a finite system sounds like a Ponzi scheme to me.
Fiat has unbounded growth. Bitcoin is limited to a total of 21 million coins. It is naturally constrained.
That would have been true if the technology was called blocks-list. Since it's a chain you can only store Merkle root for best-block tree and be as secure as you were, although without transaction details.
What worries me about Bitcoin more than the fact that it requires an Internet controlled by the military, and that TPTB could outlaw exchanges and conversion from fiat to Bitcoin and vice-versa because it is used by "terrorists"; is the religious fervor of its devotees, the absolute faith that it is infallible.
That is a big red light. I'm with you devotees in spirit - but I see a black hole.
Bitcoin would be extremely difficult to outlaw due to its decentralized nature. Also, government attempts to protect its currency with capitol controls are almost always a failure. Putting capital controls into place are an obvious admission of failure, that no one wants the currency they are trying to protect. The currency controls simply delay the inevitable. There are numerous examples from Argentina to Venezuela to the Roman Empire - outlawing a currency that is superior to the one you are trying to protect doesn't work.
Surely, you speak of Gold and Silver in your physical posession?
In addition, does that mean it would be easier for them to tax any wages paid with bitcoin immediately, and make it impossuible to work "'under the table"? I really dont know that much about it yet.
A matter of time before the Banksters figure out how to neutralize it.
"The failure of one or even millions of machines will not affect the operation of the system."
Righhhhhhttttttttttt ! Here is a fella who obviously understands complex systems and operations better than myself.
Ha! Here's the gist: like the Internet, Bitcoin is a dumb network. Its complexity is an emergent feature stemming from its growth, not the rules it's governed by. Old fashioned telephony system was a complex and smart system by design. It got ripped apart by dumb network. Now, the legacy financial infrastrucure we have now is about to be ripped apart by Bitcoin's dumb network, deja vu style.
A good job describing the trees but not the forest. Bit coin must be fully recognized by the political power structures. Why would they do that? My understanding, which may be flawed, is that bit-coin is not easily inflated. Countries of the world are reaching the end of an inflation cycle. Countries are about to enter a reform cycle. (eg see Catherine the Great.) I would agree that bit coin could replace SDR or be used by the BIS. Welfare states (Greece, Spain, California) would have to change for bit coin to be rolled out to the masses. Why wouldn't California wage a war on bit coin?
Actually I like the concept and it does take banking out of the CORRUPT bankster hands.
What will happen is that corrupt bankers though will take over this or lose their parasitical lifestyle. It has nothing to do with the concept of bitcoin but to do with the greed of the banksters.
Now it is a deflationary idea and now you attach it to an inflationary one, trading between say dollars and bitcoins what will it reveal now you cn measure the difference? The amount of hidden QE in the current system will be revealed and all of a sudden the banksters are exposed.
So if the they do not destroy it on the first they for sure will on the second or banksters will be like unicorns or rocking horse shit, priceless when there is none.
SO I AM ALL FOR IT AND IT MIGHT BE INTERESTING AS IT PROGRESSES TO DEVELOP OTHER FORMS OF THE SAME FOR SAY LOCAL TRADING EXCLUDING THE BANKSTERS FROM LOCAL TRADING AND THEIR CUT OFF THE TOP.
It has the ability to compete with/displace transactional processing! Loans and other bigger things will still be under the control of banks. AND, perhaps banks themselves will issue Bitcoin to you, BUT, it will likely come with a cost. In the end it's not so much about who has control (someone ALWAYS WILL) but how much it costs to go about your way.
Yes, the growth of Bitcoins, and this is the key part, has some more organic limit on it. I applaud this. I don't, however, think that it can be realized given the need for governments to manipulate currencies: yeah, it's like a Catch-22. In a growth environment it wouldn't likely make it. In what is sure to be a deflationary environment for decades (if not longer) it might have more of a chance: however, this would see us struggling to maintain our existing infrastructure, of which Bitcoin relies on.
When I was working in this field I saw that we could offer lower-cost transactions; unfortunately scaling killed us (and I don't see that it's really that much different today- security has it's costs).
To me, just saying that it's bad for the Big Bad Banks isn't enough. Utility. Value. Durability. Food, Shelter and Water, these are where I invest: it's physical, and I have pretty good utility, value and durability with them (I don't really need a new transactional currency to support them).