You don’t even know what the thing is yet. How big it can get, how far it can go. This is no time to take your chips down. A million dollars isn’t cool, you know what’s cool?
A billion dollars.
And you know what’s even cooler than that? A trillion dollars via MMM, the Chinese Social Financial Network:
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
Nasdaq has launched Linq, a private blockchain-powered system designed to help private companies keep track of their share ownership in a bid (we think) to make themselves more investable in private markets.
Why is this a thing? Presumably because tech start-ups can’t be trusted to hire experienced accountants or company secretaries to comptetlybtrack three things for them. A problem if and when they want to tap private share markets fluidly and without legal or dilution risk. 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.
You may remember BitPay, the bitcoin payments processor, on account of its proud assertion back in May 2014 that it was (at that point) the world’s most well-funded Bitcoin company.
Well, it’s only been a year since BitPay managed to raise $30m from investors including PayPal founder Peter Thiel, Hong Kong billionaire Li Ka-shing and Sir Richard Branson — reportedly valuing the company at $160m — and yet, seemingly, much of that cash may by now be gone.
Talk of the Reddit forums on Friday was news that BitPay had not only u-turned on some of its free service promises, but was also letting staff go. Read more
Come with us on a journey back to March 3, 2014. A time just after the premier bitcoin exchange Mt.Gox suspended operations (on Feb 22) and when nobody really knew why.
The in vogue explanation was that Mt.Gox had suffered an unfortunate technological fault in the shape of a “malleability” issue.
But it was also a time when the likes of Marc Andreessen were keen to reassure the Bitcoin faithful that: “MtGox price decline has little do with BTC price itself, has lot to do with MtGox-specific issues”, that “like collapse of MFGlobal in commodities trading, the collapse of MTGox posed no system risk. Didn’t affect broader system” and that “In wake of MtGox shutdown, BTC is trading at same level as it was .. two months ago. (Up strongly since shutdown itself.) Markets work”. Read more
Alternative title: Lessons in altcoin manipulation, or, how to manage a China-related cash-out without spooking the bitcoin market.
Over the last few weeks, it’s not been Bitcoin but Bitcoin’s little brother litecoin which has been clocking up the bulk of Greek/China crisis related gains. (The community has, of course, been doing their best to talk the crisis up for the benefit of paper profits.) Read more
On the bitcoin.org website right now:
Which, just in case you didn’t catch the small print, magnifies to say:
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
Bitcoin wants to grow. Sadly, because the Bitcoin protocol restricts the size of every block mined on the network to 1MB, it can’t scale easily. There’s a limited amount of transactions/data that can be consolidated into every block, which creates something of an artificial scarcity problem.
Some maintain good old fashioned capitalism can resolve the problem. If there’s a limit, people who want to transact quickly should pay to have their transactions/data prioritised in the chain.
Miners, especially those having a tough time covering their costs these days, favour this approach. Their view is that the sooner block size is restricted, the sooner the market will be able to find a true value for bitcoin transactions. Also, it’s not healthy for the miner network to depend on speculative inflows forever. True miner revenue would be like giving bitcoin a proper business model. It might also help eliminate blockchain spamming and free-loading. 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
At cryptocurrency and fintech conferences, FT Alphaville often hears Bitcoin enthusiasts make the assertion that Bitcoin is superior to fiat currency because it eliminates debt from the monetary system.
But this, of course, is a fallacy.
Bitcoin may have the potential to create a fully-funded reserve system, but it certainly doesn’t eliminate debt from any system.
At best, Bitcoin’s public ledger records a transfer of digital access rights in the eyes of the clearing network. It does not, however, record or see the terms and conditions of that transfer. Read more
FT Alphaville attended Tomorrow’s Transactions 18th annual forum this week where all facets of blockchain and distributed-ledger systems were explored.
The most interesting ideas (at least to us) were those presented by Vitalik Buterin of Ethereum and Preston Byrne of Eris Industries. Both are focused on moving blockchain beyond bitcoin and towards useful real-world applications.
The former, for example, is focused on creating a so-called “Turing complete” public chain that would — as we understand it — allow anyone with coding capability to tap a globally distributed processing network to run their programmes upon safe in the knowledge that the underlying data can’t be falsified or manipulated. Read more
Followers of FT Alphaville’s Bitcoinmania series will be familiar with our generally sceptical position on all things bitcoin.
Indeed, over the course of more than 64 posts, we’ve presented a mostly negative case for bitcoin “the currency”, and remain confident that the open-source “people-cleared” cryptocurrency (which replaces one accountable and identifiable third party with 10,000 anonymous parties of dubious intent) is ill-suited for the job of currency in any stable economic system.
That said, we have reflected tiny bursts of enthusiasm for what blockchain technology, the distributed public ledger underpinning bitcoin, could do for the murky and shadowy world of OTC bilateral clearing. 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
If you think retail FX and spread-betting shops have a problem with one-way client risk, then don’t even dare to look into the Wild West stuff going on in crypto land. It’s the Bank to the Future Biff Tannen version of 1985 in Technicolor (Oculus Rift form naturally).
As we’ve noted before, Bitcoin markets are a hotbed for unscrupulous market practices. Everything from HFT, front-running, rebating, preferential order flow, poor margining, naked shorting, and now the truly popular one — active “collusion” by big players. It’s all there.
What’s really cute is that a lot of the time the cowboys think they’re being truly innovative with these strategies. (Michael Lewis obviously hasn’t penetrated their radar.)
On which note, unconfirmed reports come our way of the latest bearwhale scheme being hatched — this time being organised by a particular bearwhale called Benji — to corner the market with the cunning use of the “shake out the weak shorts and cause a short-squeeze” strategy. Read more
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.*
*Update: Bitstamp is back up and trading as of Friday evening. No change to the official narrative and no real explanation of who is covering the loss. Read more
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
If there’s anyone who knows about the benefits of “early adoption” it’s Bill Gates — the man who built an empire from understanding the value of access rights to software.
Should we really be surprised, then, that he’s also in favour of Bitcoin, a system that helps a whole new generation of software “early adopters” gain vast amounts of wealth through the cunning ability to spot a market that’s fit for monopolisation.
But that’s not even the value of Bitcoin, according to Gates! Here he is on Bloomberg gushing about how the virtual currency’s greatest feature is how cheap it makes payments processing: Read more
Jeffrey Robinson is an American author best known in media circles for his work on international financial crime via his 1995 book The Laundrymen.
Suffice to say, when one of the world’s best known financial-crime authors turns his attention to the world of cryptocurrencies, and in particular Bitcoin, it probably makes sense to pay attention. Especially when the book he publishes is called, BitCon: The Naked Truth About Bitcoin.
Sadly, for the Bitcoin faithful — as well as all the other reasonable institutions that seem to have been taken in — the verdict is not good. Robinson reduces the entire phenomenon to a classic swindle. A small cohort of ruthless predators taking advantage, as usual, of the naive and gullible via a carefully constructed and asymmetrical myth, which happens to appeal to those of a certain persuasion, encouraging them to take leave of their senses entirely.
Part of the fervour is driven by classic get-rich-quick sentiment, but the other and the more sinister part is based on the art of indoctrination, no different to that employed by cults focused on getting people to hand over their hard-earned cash for the the sake of reserving themselves a prime slot in heaven and/or the supposed system that comes after this one.
After days of speculation, Ars Technica has finally provided confirmation that the business model everyone in the finance world (not suffering from the Dunning Kruger effect) knew to be fantastical was in fact…fantastical.
For more on the greed dynamics that drive perfectly reasonable people to hand over hard-earned fiat cash to strange unregulated companies (with no track record) which promise to use that cash to handcraft depreciating money-printing machines, see our previous post here.
Safe to say, however, that if your business depends on collecting other people’s money to build money-printing devices that depreciate over time, the temptation to use those machines for yourself, rather than to deliver them to customers, may prove rather hard to resist. Read more
This is Jean-Paul Rodrigue’s stages of a bubble chart:
This is a chart of the price of Bitcoin from the BoE: Read more
The key finding of the BoE’s report on cryptocurrencies is that the technology which supports digital currencies, the distributed open ledger — also known as the blockchain — may have a potential and positive use in the wider banking and asset business.
This is contrary, however, to its position on the Bitcoin currency which it says in its current fixed supply form would expose the economy to significant deflationary risk if it was ever to be widely adopted by the public. Or as they put it:
…the inability of the money supply to vary in response to demand would likely cause welfare-destroying volatility in prices and real activity.
Okay, we know, this is now our fourth post on the BoE’s foray into the world of cryptocurrencies. But we think it may be the most interesting, given that it focuses on the economics at the heart of Bitcoin mining.
For example, who can resist this log scale chart of the computational power per address in the Bitcoin network?:
The BoE’s latest quarterly bulletin delves into the choppy waters of cryptocurrency innovation, providing some useful historical context into what’s going on. As we’ve already noted, the house view on Bitcoin “the currency” is sceptical due to its ultimate inflexibility relative to demand. But the BoE is much more open-minded about the potential of the distributed ledger that drives the Bitcoin system, and sees it a true innovation.
Before we get to the latter point, however, it’s worth presenting the Bulletin’s view on how all these new technologies fit into the monetary hierarchy picture.
As the Bulletin makes clear, while new payments “technologies” do have the potential to expand that unsupervised money base and add risk, they don’t always have to. Read more
The Bank of England is daring to open Pandora’s Bitcoin box with two major articles on the rise of cryptocurrencies in its latest Quarterly Bulletin, released on Thursday.
The two-minute take-away is that the report’s authors remain sceptical about Bitcoin’s potential as a currency (due to its inability to respond to aggregate demand), but are open minded about the potential of the technology of the distributed open ledger. As we’ll explain later, a lot of that open mindedness is related to the distributed ledger’s potential to bringing transparency to financial transactions outright, and also its potential to limit the system’s dependence on centralised clearers and counterparties.
The best thing about the report, however, is that it brings much needed clarity on the issue (and hierarchy) of the modern money system. Read more