All Posts in “Cryptocurrency”

New Blog Post On Yours.org

Over the next twelve days, I’m going to be posting my blog posts on yours.org. Yours is bringing a market to blogging. It is fascinating to play with and I strongly suggest you check it out.


Right now, the prices of cryptocurrencies are very dependent on belief and speculation. People are investing in coins without understanding the underlying philosophy or use cases. They simply see prices going up and pile on. As a result, there are wild swings in prices between different cryptocurrency projects. Bitcoin was way up, then Litecoin exploded, and now Ethereum and Ripple are making a run.

As various coins charge up and down the charts, it’s easy to get lured into a fear of missing out. Watching Litecoin go up makes you question BCH. Watching Ethereum makes you wish you bought earlier. It is easy to lose sight of the long-term in the short-term ups and downs.

A lot of people will make a lot of money by correctly predicting what the money of the future is, but that is insignificant compared to the benefit of cryptocurrency in the long-run.

…..Check out the rest of the post on Yours.org 

Technical “Analysis”

In the past, a lot of the content around Crypto was focused on philosophy, economics, politics, technology, but more recently as the prices climb there are more finance types dominating crypto content.

If you go on Youtube today and search bitcoin, most of the top videos are what you could call technical analysis.

You could call it technical analysis, I prefer to call it stupidity.

Most of this “analysis” focuses on looking at charts displaying the price information of cryptocurrencies over time and pretending that past shapes on the charts somehow predict the future price.

Watching these videos genuinely boggles my mind. These guys are able to seriously deliver predictions about the price of cryptocurrencies without mentioning the actual use cases or ideas behind the product.

A rediulous example of this happened in November when a proposed fork of Bitcoin was called off and as a result the price of Bitcoin Cash immedietly spiked. To these technical “analysts” they were explaing this by looking at how BCH hit a “level of support” and “broke out from a wedge”. They were completely lost in the abstaction and unable to realize that the price was changing in relation to the actual product.

 

The price of something is determined by how much people are willing to pay for it. The price that someone was willing to pay in the past is a good first guess at what the price will be in the future. But if you are trying to predict what a price will do in the future, you need to pull your head out of your…. abstraction and think about the economics of the situation and not draw shapes on Bloomberg charts.

Cats on the Blockchain

The most popular thing in cryptocurrency right now is a game called CryptoKitties, that lets users buy, breed, and sell cartoon cats on the Ethereum Blockchain.

On the surface, it looks like nothing incredibly unique, but how it works using a blockchain in the background makes CryptoKitties interesting.

In game purchases and markets are not new. Games like World of Warcraft and others have markets for in-game assets. But in every case up until now, the relationship between a user and a game was like that of a customer and a bank. You held and could use the assets in the game so long as the game let me, but you didn’t truly own the asset.

Since CryptoKitties (CK’s) live on the Ethereum blockchain, when you pay Ether to buy a CK you trade for the key to the CK token which you from then on own and can choose to do what you want with.

The digital signature for the kitty that you possess works like it’s genome and is responsible for the characteristics you see when you use the CK interface. When you breed CryptoKitties, the offspring is created with some variation of the characteristics of the two parent cats.

New CryptoKitties are created regularly and denominated by their generation. Gen 0 being newly spawned by the network and not bred.

Having provable ownership of your CryptoKitties creates some interesting possibilities. You have the ownership keys and that ownership can’t be revoked, no matter what the makers of CryptoKitties decide.

Since your ownership keys are in your wallet, and not on an in-game ledger, you can trade or use them outside of the game. You could make a deal in person with a friend, or send it to a friend in China like you would with any cryptocurrency transaction. Since you can prove you have your CryptoKitty keys, 3rd parties can create applications that make use of the same identifying keys, allowing you to use your CKs outside of the actual CK interface.

In CK the developers control the emission rules for new CKs so they could increase the supply, but they cannot replicate, revoke, or re-assign ownership. Instead of having to trust the developer to respect your claim to in-game goods you truly do own them.

It is gimmicky, but it currently accounts for $1M+ in trade and more than 10% of all the transactions on Ethereum and its only been out for 4 days!

There has been a lot of theorizing about the potential of digital assets on blockchains. Playing with something as simple as CryptoKitties allows you to experience first hand and wrap your head around some of the possibilities about what it means to have provably unique digit assets and to be able to trade ownership of a good (instead of just currency) over a blockchain.

If you’re curious about it CryptoKitites, here are a few more resources:

Culture and Betting

It’s fun to talk about athletes, musicians, and cultural figures in financial terms. “His stock is low right now” or “he’s overrated.”

It makes for fun conversation, but what if you could buy low and sell high in reality and not just in the barber shop? What if you could put money on it. With cryptocurrency and decentralized prediction markets, you will be able to.

Betting on Everything

Up to now government regulation of gambling has kept betting to a limited scope. Sports mostly but occasional prop bets in politics and entertainment. This regulation appears at first glance to be a small annoyance, preventing some fun from being had, but it actually deeply harms the transmission of information through society.

Take music for example. Discovery of new artists is still driven largely by word of mouth. You likely have friends that have more musicians on their radar who help you discover new bands. These cultural influencers do this because they enjoy it. There is a pleasure that comes from being the one who knows about a great musician before they blow up. But what if there was a financial incentive for cultural discovery functions?

Take a rising artist. Right now Latin Trap is growing in popularity and at the head of it is a Puerto Rican rapper Bad Bunny. As a native English speaker, most people I know in Canada and the US, haven’t heard of him, but in the next two years, I’m almost certain you will.

What if I could make a bet that Bad Bunny will be a top 50 streaming artist on Spotify in 2018? What if everyone could bet on it?

This market would give us an opportunity to have fun and make money, but it would also be a great source of music discovery.

Instead of relying on friends or shitty click bait online magazine prediction lists, where there is no incentive to be right. You would see predictions from people who are confident enough to put money on it. You could check the market, see who has large bets to become popular in 2018, 2019, etc and check out their music.

Because the information you are getting is a consensus among people with skin in the game they have a much higher incentive to think deeply and the accumulated result is better information.

This isn’t a new insight–it’s well known that gambling markets are much more accurate than polls in elections around the world– but people underestimate how powerful the knowledge generated by prediction markets would be to society.

Beyond music, movie, and cultural recommendations we would find out a lot about what “society” actually thinks. Instead of low-cost virtue signaling, you would be able to find out what the consensus is for people that are actually willing to put money down.

Whether it is top streaming artists, global temperature changes, election results, or millions of other things it would create a larger incentive to be correct and improve the information we have to live our lives.

Why Cryptocurrency Matters

Cryptocurrency is the most liberating technology the world has ever seen. But, if you live a middle-class life in a developed country, the world-changing power might not be clear at first glance.

You live with reasonably secure banking, reasonably accessible credit, somewhat stable currency, and a government that has some respect for the rule of law. You’ve likely never experienced serious inflation, and as a result, it is easy to be complacent.

But for most of the world, the financial institutions we take for granted are non-existent. You can’t trust your bank, you can’t access credit, and you’ve lived through massive inflation that has eaten away your savings.

In Argentina, Venezuela, Greece, India, China, Nigeria, or most countries that make up the majority of the population on earth, innovation in money is desperately needed. And thankfully it has arrived.

Bitcoin and other cryptocurrencies mean that you can save some money instead of watching your Bolivars turn into nothing. They mean you can send money to relatives without outlandish fees. They mean you can get paid for your work online and work around burdensome restrictions.

Cryptocurrency puts power back in the hands of the individual. It incentives value creation and allows productive citizens to keep the value they are creating instead of having it siphoned off and destroyed by corrupt politicians and rent-seekers. This is an amazing advancement, but the true power of cryptocurrency won’t be seen until we experience the next great financial crisis.

There was a taste of this in Cyprus and Greece, where the price of Bitcoin skyrocketed as capital controls and bank “Bail-Ins” pillaged citizens wealth. But that was early days of bitcoin and the infrastructure to go from fiat to cryptocurrency was much less developed.

The next time a currency teeters on the edge of failure, no matter where it is in the world, it’s people will have a way to save their wealth from complete destruction.

Capital controls and other tricks to maintaining government power by pillaging citizens are ridiculous in a world with cryptocurrency. When you can simply walk out of the country with all of your wealth, the government will have much less recourse and ways to save itself from the destruction of its fiat currency.

Cryptocurrency matters, because it means that no matter where you are born, or what state you are a subject of, you can truly own the fruits of your labor. You can earn, you can save, you can support your family, and you can escape to a better country with the majority of your wealth intact. In just the beginning of an incredible transfer of power back into the hands of individuals that will keep governments in check.

What Is Bitcoin?

I first heard about bitcoin in late 2012. A friend sent me an article about it and the Winklevoss twins (of Facebook fame, or infamy).

From my interests in Finance and Economics I had become interested in sound money, but this first time I read about bitcoin, it made no sense to me. The thought that something on the internet could have a tangible value wasn’t even something that struck me as remotely possible.

The next time I remember it coming onto my radar was early 2013. I had started to go down the economics rabbit hole and was getting a lot more interested in political philosophy and free market economics. In that community, there are a lot of people who are obviously big fans of a potential stateless money. I became more and more excited about bitcoin the more I heard and read, but didn’t start using it for almost a year and a half.

What I found appealing and incredibly exciting was the power of this technology to liberate people around the world from the control of financial manipulation.

I talk about that a bit more here: http://ryanaferguson.com/2017/11/beautiful-chaos-cryptocurrency/

Bitcoin and cryptocurrency generally are incredibly exciting but can be difficult to pin down and explain. It can mean many things to many people.

I think a great comparison that I picked up from Andreas Antonopoulos is the internet.

If you ask for ten people to define the internet, you will get ten different answers.

It is a protocol; it is a network; it is the thing that lets you watch Netflix.

I think it is easiest to communicate about by focusing on the function that it serves; it is a tool that allows you to network and share with anyone else that is connected to the network. What makes the internet unique is its scale. It is the one information network to rule them all.

Similarly, bitcoin is a network that allows you to share value with anyone else that is using the network. What makes it unique is that, like the internet, it is distributed (not held or controlled by anyone) and that anyone with the right technology can join and use the network (there are no gatekeepers).

There is a lot more there, but at the most basic level, it is a way to send value to anyone anywhere.

The Beautiful Chaos of Cryptocurrency

I fell in love with the idea of cryptocurrency because of the power of stateless money.  The idea that you could create a currency, a currency, that anyone in the world could use, trade, and store easily was intoxicating.

That you could allow the unbanked to be banked and allow money to be sent from anywhere to anywhere for practically nothing. That is the bitcoin that I fell in love with and it is a shame that it has strayed so far from that ideal.

But from the small-scale chaos that’s come from the bitcoin scaling issue, you can see something beautiful about the market for the cryptocurrency. There are some small-scale political battles that take place and have consequence, but ultimately, all debates will be settled by the market.

The large block supporters lost the political battle, but regardless, there is once again a bitcoin that holds true to the original ideal of a money that empowers people around the world, bitcoin cash.

And it is not just one option. There are countless different coins competing to solve unique problems. Bitcoin, Bitcoin Cash, Ethereum, Dash, Monero, and dozens more that have sizable markets and legitimate use cases.

Bitcoin going off the rails is a bummer, but it is fairly insignificant in the greater scheme of things because of the free market in crypto.

In the past when wealth was trapped in fiat currency, you could do nothing but stand by and watch your wealth disappear as politicians destroyed the value of bolivars, pesos, and dollars. But now all you need to do is make a simple transaction on your phone or computer and in less than a minute you can change to one of the plentiful options that serve you best.

Less than a decade since the creation of the first cryptocurrency we are watching the development of a truly competitive market for money. It is crazy, chaotic, and scary, but it is beautiful to watch.