Now that Satoshi is a “Davos man”, does that make him “The Man”?
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Now that Satoshi is a “Davos man”, does that make him “The Man”?
Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services. In the NHS, the technology offers the potential to improve health care by improving and authenticating the delivery of services and by sharing records securely according to exact rules. For the consumer of all of these services, the technology offers the potential, according to the circumstances, for individual consumers to control access to personal records and to know who has accessed them.
Mike Hearn, a key developer in the bitcoin eco-circus, quit bitcoin on Thursday. He did so with much fanfare.
As is the norm these days, he shared his reasoning, angst and rage in a Medium blog post, saying that he quit due to a schism in the community about how to scale bitcoin.
FT Alphaville met Hearn last year in an off-the-record encounter with a bunch of hedgies, who were sounding him out on whether or not bitcoin had legs as an investment. Hearn himself struck us as very reasonable. He was down to earth, pragmatic and totally open about the challenges bitcoin was facing. He was, nevertheless, still optimistic.
Seemingly, that is no longer the case. Read more
Tips. The ultimate example of “unbundled” costs and discretionary performance-based income.
There are service staff who rely extensively on tips (waiting staff, bartenders, hairdressers, shoe-shiners, doormen, taxi drivers, hospitality staff, street entertainers) and then there are service staff which weirdly don’t (handymen, nurses, airline hostesses, Uber drivers, carers and a plethora of others).
So what to make of a fintech start-up, Xendpay, which would like to encourage discretionary tipping for foreign exchange services? Read more
One of the ironies of the information age is how it’s turning out to obscure rather than improve our understanding of what’s really going on. The pressure to report quickly errs towards unverified reporting, or reporting based on facts distributed via unchecked sources or biased lobby groups intent on propagating causes, which in turn leads to an abundance of misinformation which confuses everyone.
A racketeer like Mr Sergey Mavrodi, the man behind the MMM “transparent” pyramid schemes we drew attention to last week, flourishes in such an environment. The more contradictory the information about him on the internet, the better for him. The same goes for other transparent pyramid schemes (such as all cryptocurrencies). Historically-tested logic about why pyramids are economically flawed is reduced to an opinion, much the same way that scientifically-verified proof about how carbon emissions are causing climate change also gets reduced to an opinion by certain special-interest groups.
Below we share a Q&A with Mavrodi. And he’s done us a little video to prove that we are communicating with the man himself…
Touting Ponzi schemes, or as the hip and the cool prefer to call them these days ‘mutual aid’ programmes, is so much easier if you have a handy Marxist-esque ideology to hand.
Some snippets from the imaginarium of Mr. Sergey Mavrodi:
The modern world is bad. It is inhumane, unfair and unjust. This is the world of money. It is not for people. It is for those who who produce this money, for bankers and financiers, government and millionaires. And people are mere “pawns” in this game. They just serve them as attendants.
Techies look upon the financial world and find its messy structures hard to reconcile with the physical reality around them.
Which is why we’re going to propose that the blockchain fad is mostly about putting finance in terms that are understandable to techies — i.e. as something absolute – and having them learn for themselves through trial and error why that’s actually a flawed assumption in finance. Read more
You may have encountered some fanfare this week surrounding Nasdaq’s unveiling of “Linq”, its blockchain-enabled platform for managing and trading shares of private companies.
Here’s the extremely upbeat press release:
NEW YORK and LAS VEGAS, Oct. 27, 2015 (GLOBE NEWSWIRE) — Nasdaq (Nasdaq:NDAQ) today announced the initial roster of private company clients for Nasdaq Linq, its blockchain-enabled platform. The first participants will include: Chain.com, ChangeTip, PeerNova, Synack, Tango and Vera. Nasdaq will unveil a first-ever demonstration of its blockchain technology at the Money20/20 event today in Las Vegas.
The first platform of its kind, Nasdaq Linq is a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market. It will complement ExactEquity, NASDAQ Private Market’s cloud-based capitalization table management and stock plan administration solution. Nasdaq Linq clients will be provided with a comprehensive, historical record of issuance and transfer of their securities, offering increased auditability, issuance governance and transfer of ownership capabilities.
In movie parlance, 21 grammes is said to be the weight of the soul.
Keep this in mind as we explore 21 Inc’s big product reveal this week — a $399.99 Raspberry Pi that’s also a “bitcoin computer” — which, according to endorsements from Larry Summers (he of secular stagnation fame), Marc Andreessen and others, could be as big as the internet if not a solution to world peace. Read more
We started this post before a Greek deal rendered the discussion of a digital parallel currency moot. Nevertheless, it’s still worth looking to the Kenyan M-pesa for a better understanding of why it’s dangerous to treat fintech solutions as panaceas for economies struggling with productivity, poor credit profiles, tax collection issues and overall corruption without understanding what’s really at stake.
Kenya is often presented as an example of a country which has flourished thanks to mobile money adoption — the poster child that “digital payments can make the world a better place”.
But often forgotten is Kenya’s unique circumstances. The M-pesa mobile money system, owned and operated by Safaricom which is 40 per cent owned by Vodafone, was allowed an unchallenged monopoly in the country for a very long time. Read more
Earlier this week we gave fintech people a brief guide to the Greek crisis in a bid to explain why payments technology is unlikely to be part of any solution there.
On bitcoin specifically: why on earth would Greece want to replace the euro, a currency it already thinks too restrictive, with another which would be even more constraining and give Greeks even less control over monetary affairs!? Read more
They say crises define movements and people.
If that’s the case, purveyors of fintech payment solutions could soon be defined as those who stood ready to exploit a Greek national bankruptcy crisis for the benefit of “onboarding” users. Read more
Online retailer Overstock last week became the first company to offer a corporate bond, valued at $25m, in the form of a “crypto security”.
Unsurprisingly, the story was pumped up by the crypto trade press, which has a habit of taking statements from vested interests at face value.
But, as Bloomberg’s Mark Gilbert has hinted indirectly there’s something hypocritical about lauding a bond for its transparent blockchain traceability features while at the same time providing sketchier than sketchy details about all its other aspects. Read more
A Silicon Valley start-up that tried to offer trading in derivatives linked to private SV companies like Uber and Jawbone has been shuttered by the US authorities.
For the backstory here, you might want to first read this post from March on the Sand Hill Exchange.
Here’s the company’s version of what happened — published on Monday night, but since then “censored.”
We hope to have more on this a little later… Read more
The FT’s Richard Waters reports that Larry Summers, former US treasury secretary and secular stagnation theorist, is to form part of the advisory board at Xapo, a Silicon Valley Bitcoin start-up specialising in deep cold storage of bitcoins in Swiss vaults and the issuance of bitcoin debit cards.
Worth noting in this context, of course, is that Larry Summers is also the man arguing that bubbles are a bit of an inevitability in a secular stagnated world. Or as he explained in the Financial Times back in December 2014: Read more
Details of the hottest, most secretive bitcoin start-up in Silicon Valley have finally been revealed by chairman and soon-to-be CEO Balaji Srinivasan of 21 Inc in a post on Medium. They are, by and large, exactly what FT Alphaville reported them to be. Cold sharp summary: Bitcoin mining devices in toasters.
Calling this a simple internet of things play, however, would be lazy. To really put the audacity of Srinivasan’s vision into perspective one first has to go back in time to the days of the early internet. Read more
Some people may have had difficulty understanding what the hell Balaji S. Srinivasan, chairman-cum-ceo of secretive Silicon Valley start-up 21 Inc, is up to after reading his Medium “open for business” post.
The following slides, shared by potential investors in 21 Inc, may or may not help. But they certainly highlight the conceit on show here. Click to enlarge.
Why are the great and the good of the banking and financial services world suddenly extolling the virtues of blockchain, the technology that underpins the artificial scarcity of bitcoin?
Possibly because they’ve finally figured out that what the technology really facilitates is cartel management for groups that don’t trust each other but which still need to work together if they’re to protect the value and stability of the markets they serve.
Cartel enforcement, in that sense, appeals to all sorts of financial players from bankers and commodity producers to general asset creators. Read more
The company in question is called 21 Inc. Its business plan has hitherto been a closely guarded Silicon Valley secret. But we can now reveal how it plans to monetise the future of money. Welcome to the world claiming to exist beyond the Internet of Things…
On Wednesday FT Alphaville received a press release from a company called XBT Provider proudly announcing the launch of the “world’s first bitcoin traded note on Nasdaq Stockholm”.
The tracker product being offering, the press release claimed, would make bitcoin accessible to institutional investors by providing them with a liquid exchange-traded note.
Or as the marketing spiel put it, the product was set “to provide investors with convenient access to the returns of the underlying asset, US dollar per bitcoin, less investor fees.” Read more
Here’s a comment to note in the Bank of England’s “fundamental change” section of its One Bank Research Agenda discussion paper:
Technology is potentially transforming the landscape for money and banking. New digital or e-monies and new methods of payment and financial intermediation raise fundamental questions for financial regulation, money demand generally and central bank money in particular. For example, might central banks issue digital currencies and what would be the impact on existing payment and settlement systems? Is the cryptographic technology behind Bitcoin transformational? How will financial regulation need to adapt if new non-bank credit intermediaries emerge in scale?
Talk of official digital money, of course, is not new to FT Alphaville readers. Nor, for that matter is talk of collaborative non-bank credit unions that mint their own currencies for their own network use. Or even talk of digital money solutions that open up the central bank’s balance sheet to more people in a way that eases the safe-asset shortage. Read more
A cheaper, faster and more secure way to pay for things on the internet or on your smart phone.
Those are the usual claims you hear about Bitcoin. But on January 12, anyone transacting on the network may have come across an unusual problem: a near two-hour wait for a payment to be processed. Read more
Not to be missed in the ECB news fog: John Gapper’s account of an FT Davos lunch with Nouriel Roubini in which the formerly doom-saying NY Stern economist spelled out what polite and civilised society has always known but been keen to turn a blind eye to: the art market is actually a bit of a money laundering scam.
The key quotes not to be missed:
“Whether we like it or not, art is used for tax avoidance and evasion,” said Prof Roubini, himself an art collector. “It can be used for money laundering. You can buy something for half a million, not show a passport, and ship it. Plenty of people are using it for laundering.”
Prof Roubini argued that the art market had a series of characteristics that needed regulation. “While art looks as if it is all about beauty, as a business it is full of shady stuff,” he said. “We should correct it or it will be undermined over time.”
As the Bitcoin price crumbles….
… and the capital hole (economic flaw) at the heart of all cryptocurrency schemes is exposed, we thought we’d uncharacteristically look at what was actually good about the phenomenon of Bitcoin. Read more
A quick update on the scam-ridden world of Bitcoin — not to be confused, of course, with the (sacrosanct) technology of THE BLOCKCHAIN, still dubbed “promising” and “respectable” by VCs in the know — which seems to be fast descending into a blazing fireball of financial chaos, bankruptcy and despair.
On Monday, we had the suspension of Bitstamp, one of Bitcoin’s most reputable and liquid exchanges, founded and operated by two Slovenian kids in their 20s and funded to the tune of $10m by US-based hedge fund Pantera Capital (an arm of Fortress Investments) despite the youngsters’ lack of discernible financial credentials.
As of pixel time, the official line by way of CEO Nejc Kodric was still that a hack had pilfered $5m worth of Bitcoin from the company accounts but that Bitstamp would be back up and running within
24hrs, 48hrs, “soon”, and that customers should not worry because the company had more than enough reserves to cover their customer liabilities.*
What did you miss while you were away eating turkey and whatnot?
Well, there was that one thing about China’s State Administration of Foreign Exchange relaxing the rules on Chinese banks’ foreign-exchange holdings, allowing them to hold fewer dollars — a pretty useful ruling during a dollar shortage issue. Read more
Arrr, you can’t keep a good pirate down. As we’ll learn below, the suppression of buccaneering in one area soon prompts piratical hot spots else where.
Indeed, one of the things the bitcoin community is quickly learning — as it goes through about 600 years worth of banking lessons at hyper speed — is that piracy, theft and fraud is a naturally occurring cost in any money system. Call it the unintended bitcoin risk premium that anyone carrying the currency must bear. (Something that doesn’t include the risk associated with the crypto currency’s volatility.)
The lesson the community is still to learn, however, is that most ordinary folk don’t like these sorts of risks and expect risk mitigation to be a demonstrable aspect of any currency system they use. In fact, one of the things people love about today’s banking system is precisely its ability to compensate or refund people if they ever do find themselves victim of fraud, theft, hacking or sub-quality service. Read more
Someone once wisely said, “if you love something, let it go. If it returns, it’s yours; if it doesn’t, it never was.”
But as Willem Buiter, chief economist at Citi, points out on Thursday, that’s not the message those with a tendency for passion investments seem to have ever received. They want to imprison the thing they love most and keep them in a dark dingy basement.
In a note on the non-virtues of gold and bitcoin investing (and the upcoming Swiss gold referendum), Buiter notes:
- Gold is a fiat commodity currency (with insignificant intrinsic value).
- Bitcoin is a fiat virtual peer-to-peer currency (without intrinsic value).
- Gold and Bitcoin are costly to produce and store.
- Gold as an asset is equivalent to shiny Bitcoin.
- Central bank fiat paper currency and fiat electronic currency are socially superior to gold and Bitcoin as currencies and assets. There is no economic or financial case for a central bank to hold any single commodity, even if this commodity had intrinsic value.
- Forbidding a central bank from ever selling any gold it owns reduces the value of those gold holdings to zero.
Let’s close the week off with little bit of “history is just repeating itself” education for both the champions of private cryptocurrency, unaware of the private origins of evil fiat currency, and the “take away the banks’ power to create money!” Positive Money campaign in light of the recent deluge of historically myopic press releases in our inbox.
As the BoE’s historical timeline helpfully points out, the BoE came into being when a private syndicate decided to risk all in 1688 by providing the UK government with funding when no-one else was prepared to do so. This ultimately proved to be a very good decision. It turns out lending money to government on terms you can enforce and control can be very profitable, especially if it leads to wise public investments that improve the wealth of the nation and make it easier to collect taxes as a result. Read more
Steve Randy Waldman’s latest post at Interfluidity talks about econometrics, open science and cryptocurrency. He makes the point that the real potential of “blockchain technology” is rooted in the possibility that it could one day help many different groups and movements achieve consensus for the sake of mutual discovery and progress.
There is, in his opinion, a need to create a public forum in which scientists, academics and inventors can share data and research, and in a way that allows them to shed the mal-effects of groupthink and open themselves up to public scrutiny and refutation. Read more