April 19, 2019

What did you do for Bitcoin today?

The other day someone tweeted the above question, and it made me wanna write something positive about Bitcoin. Cause after all, if I believe in Bitcoin and the underlying philosophy of scarcity and long timeframes, I want to help it succeed.

What’s been bugging my mind though, is the questions whether there aren’t more urgent and trivial matters to support? The war in Yemen for example, or the climate crisis we are inevitably facing, or developing earth’s civilization into a space faring species. And yes, these all are matters of great importance and need our immediate attention. I feel grateful for people like Tilo Jung bringing the Yemen war into view of the German public, or the rebels fighting extinction on our planet brought by apocalyptic climate, and of course Elon Musk who’s making leaps and bounds in conquering outer space.

Yet, I sincerely believe that Bitcoin can positively influence all of the above problems. I think magical internet money will help making our world a better place. Here’s why:

1. Bitcoin is the hardest money ever created. It will ring in a paradigm shift for our global economy that will manifest itself by taking away power from governments and giving it back to the people.

In ten or twenty years from now, when Bitcoin is recognized and used as the world’s reserve currency, it will change the global economy in profound ways. Bitcoin will succeed because there will only ever be 21 Million Bitcoin and those Bitcoins enable censorship resistant, peer-to-peer and push only monetary transactions.

The hard cap on the issuance of Bitcoin will eventually make Bitcoin more scarce than gold, once the blockrewards have been halved for the 4th time in 2024. Hard money will force our economies back to balanced budgets and curb debt financing that is effectively borrowing current growth from future generations. The scarcity of Bitcoin will channel funding into sustainable projects only, that are more likely to bring a return on revenue than we have come to experience in an age of IPOs that focus on market share only, figure out monetization later and burn through VC money in the quest exit scam their way out of sound economics by selling of to unsuspecting retail investors.
The hard cap will also make it very difficult to fund their wars through taxpayer money by simply printing new money to fund their arms and weapons expenditures. If arms producers accept only Bitcoin, or Bitcoin-backed FIAT money, Governments will think twice before engaging in a war that they are unable to tax their citizens for funding. After all, governments will have to compete for their citizens tax money and free market between the best models of governance. If governments are unable to confiscate your push-only Bitcoin with the click of a button at the central banks computer, they have to incentivize citizens to pay their taxes for the services they provide and the promises they actually deliver on. While executive powers such as the police and the military will remain in power of law & order, Bitcoin certainly hands some of the budgeting power into the hands of the people.

2. Bitcoin is part of our transition from the industrial age into the information age. The internet has introduced us to a wealth of information and new ways of organizing society. Bitcoin will be the backbone of our civilization in which information is money.

Our species has developed from wandering foragers to settling farmers, who eventually invented the steam machine and kicked of the industrial age. Since the 1990s we’re indisputably changing our civilizations again and entering a 4th age. The information age is connecting us to ideas on a global scale within seconds and enables us to access the knowledge of the humankind at the click of a button. Within the next two or three decades physical work will be replaced entirely through automation and robots. What is already and will only become more valuable is the information shared, stored and accessed on the internet. This infrastructure of knowledge will be supported by a peer to peer money that enables us to make micro-transactions across space and time at the speed of light. In an economy of shared use and shared ownership, the only thing that we will care to move around with us freely is our knowledge and experience as well as our money. Bank accounts, gold deposits in swiss locker boxes, and national payment systems will have to be a thing of the past when you, me and the rest of our civilization embarks on a path of enlightenment aided by the internet.

3. Bitcoin fosters a high time preference thinking, and therefore gives us back sanity. Bitcoins scarcity and issuance rate will curb unbridled deficit spending and funnel investments towards sustainable projects that are greater than the sum of their parts.

Shopping is not a hobby, and future generations will be better off not spending their hard earned sats in the mall or on stuff’ at Amazon. Since the last Bitcoin will be mined in roughly 120 years from now, with the issuance rate decreasing by half every four years, there will be more gold than Bitcoin mined, in USD value, sometime in the next 10 - 20 years. While Bitcoins stock-to-flow ratio currently sits at the levels of silver, just 8 years later this ratio will be higher than that of gold and make it the most scarce monetary unit humans have ever invented. People will eventually discover Bitcoin for themselves as it is uniquely secure, resilient and temper-proof. Bitcoin is a hedge for gold and silver. Countries with negative interest rates such as in Europe, Japan and soon the US, will hedge into Bitcoin to ensure their reserves retain their value in a global competition of inflating currencies. Yes, countries with predatory governments such as Venezuela, China, Iran, Turkey will also charge into Bitcoin as a means of escaping international sanctions. Escaping US-controlled international’ organizations such as the World Bank, International Monetary Fund, Bank for International Settlements and World Trade Organization has to be the goal of emerging countries opposing the hegemony of the US government. Free riding on this accelerated adoption will be billionaires and millionaires hedging against quantitative easing, as well as institutional investors discovering the best performing asset of last 10 years. While this is great for all current hodlers of Bitcoin, it will equally have massive ramifications on how all of us do business today. Fractional reserve banking, debt spending, and negative interest rates will be a thing of the past, incentivizing us to focus our ambition and investments on long term projects. Ideally Bitcoin is helping our societies to vain off from the consumerists drug aka. shopping and steer our attention and money towards the development of meaningful inventions that have net-positive benefit for us as individuals and civil groups over a long time horizon.

4. Bitcoin is the energy-buyer of last resort, incentivizing the use of energy sources that would otherwise have been lost. In the quest for more efficient ways to mine bitcoin, Bitcoin is set to help humanity reach the goal of becoming a Kardeshev Type I energy civilization, removing restrictions on energy growth and raising the standard of living for everyone.

Bitcoin mining is already deployed as an energy preserving tool at oil fields in the middle east, at hydropower generators in Canada and China and at fracking wells in the US. Excess energy that cannot be stored or consumed otherwise is geared towards mining Bitcoin, securing the network and giving the energy producers a last chance of monetizing their energy resources. The quest of miners to find ever more efficient and cheaper sources of energy will propel research in production and research, enabling our civilization to store and use all of earths energy. Bitcoin will then act not only as one of the greatest distributor of wealth in our society, but will also level availability of energy resources for everyone and making our human organizations this much more scientific, as being based on cryptography and mathematics.

Bitcoin ultimately is the strongest equalizing weapon citizens can use to take power from governments rooted in theocracy and mono-culturalism. Peer-to-peer, free-speech money that cannot be seized or destroyed will benefit a multicultural and multi-polar world in which the greatest achievements ahead of us lie in sustainability and prosperity on a planetary scale.

Sats Bitcoin
March 22, 2019

Reader’s Digest Week 12 2019

You can soon buy a more useful version of the HTC blockchain phone for cash

Born out of the 2017 bear-market phone maker decided to build a blockchain’ phone. During the course of 2019 a phone with blockchain enabled features might finally become more useful. Just in time after Samsung loading their phones with hardware wallets.

How to achieve the same results of a professional bitcoin trader without taking the inherent risks

I swing-trade a little, mostly for fun on bitmex. Trading is extremely risky, even more so with cryptoassets and on margin. Longterm the best investment strategy is cost-averaging your position. Twitter CEO, Jack Dorsey, buys $10.000 worth of Bitcoin each week. For starters $10.00 will do!

Bitcoin Has Saved My Family

An amazing story of sound money and how it can save lifes in hyper-inflated economies.

Evaluating MKR

Ethereum based Project MakerDAO with its stablecoin project DAI has been in the news a lot lately, mainly because it’s a success and failure at the same time. There are now more than $200 Million worth of ETH locked up in DAI CDPs. At the same time, DAI has been everything but stable and worth as little as $0,92 to the Dollar. Above article brings light into the value of the underlying token MKR.

Suspicious behavior on Kraken exemplifies the gap between crypto and legacy market structure

I’ve used Kraken a lot, especially for trading as it’s the cheapest platform to trade FIAT<->Crypto in Germany that I know of. Naively, I believed Kraken to be an exchange free of internal manipulation. The Block corrected my believe.

Saving fee markets with second-price auctions

One of the biggest remaining questions with Bitcoin, as the BIS has pointed out, is the fee market for transactions once block-rewards are halved to insignificance. The Block reports some possible solutions.

Schnorr Signatures & The Inevitability of Privacy in Bitcoin

A must-read article for all Bitcoin freaks. The dev-team behind Bitcoin is working on headache-inducing cryptography that is an evolutionary step for Bitcoin but could rectify two of the greatest shortcomings’ of the young currency: privacy & tragedy of the commons. Definitely read until the end.

I Tested the Saving Technique That Promises Retirement at 40

A fun little excursion into the lives and habits of extreme savers. Very disciplined, but nothing I aspire to live by anytime soon.

Weekly Readers Digest
March 11, 2019

BlockFi Crypto Interest Account goes live today

The crypto lending platform BlockFi is going live with their interest accounts for Bitcoin and Ethereum. BTC or ETH loaned BlockFi will generate a 6.2% APR, with the collateral being custodied by the Wikelvoss owned and NY-State regulated Gemini exchange. The BlockFi interest account is available worldwide and interest is paid in crypto.

This offer looks to be a great example for the innovative products available for crypto-assets. It’s a very much needed first-step towards making crypto the new normal. While interest is only available for a minimum collateral of 1 BTC or 25 ETH an interest paying saving account is what will drive adoption in the real world. While bank accounts in Germany charge negative interest for savings great than, savers around the world are looking for opportunities to lock their cash and secure against central bank inflation targets of 2-5%.

While BlockFi delivers a seemingly great product there are many questions left regarding the security of the collateral. BlockFi after all is a start-up operating in a high risk market (crypto & lending). It has yet to be made clear, what happens to the collateral if BlockFi’s loan business goes bad or the volatility of Bitcoin outmatches BlockFi’s risk management systems and the collateral is used for a margin call. Lastly, as Gemini is the custodian of the Bitcoin you’re exposed to the exchange risk, where a hack of Gemini will leave you without your private keys but empty wallets.

Having said that the risk are not entirely clear yet, I applaud BlockFi for bringing interest bearing crypto accounts to market. Whether or not they deserve the name of savings accounts is a question to be explored. Invest wisely!

March 4, 2019

Thoughts on Bitcoin

The are roughly 15 months left until the next halving of the Bitcoin block reward. With the current development I think those few months will be huge:

  1. The weekly transaction volume on localbitcoins.com for Bitcoin has leveled-out around 50 Million USD per week, after a sharp increase and subsequent drop from the all-time high in 2017

Localbitcoins.com Transaction Volume in USDLocalbitcoins.com Transaction Volume in USD

With developing and emerging economies leading the charge, Bitcoin finds usefulness where its most immediate. Hyper-inflated Venezuela is leading the charge, where citizens flee into Bitcoin as a store of value. The worlds leading economy transacts at least 5 Million USD worth of Bitcoin on localbitcoins alone. The transaction volume on localbitcoins is an important metric because it is the largest over-the-counter exchange for local currencies for bitcoin worldwide and by definiton of person to person trading offers more privacy and security through its escrow system. It is the simplest and most accessible entry into the digital age of currency and offers plebs around the world an alternative to government regulated money without intrinsic value.

  1. JP Morgan Chase, the largest bank in the U.S., is creating a blockchain based coin. Previously JP Morgan CEO touted that Bitcoin had no value and a terrible investment. Now JP Morgan is leveraging similar technology to try and print their own currency. While JP Morgans choice for doing so is probably a nefarious one, it goes to show that there is utility and value in Bitcoin if a multi-billion company like JP Morgan tries to copy its playbook for its own riches.

  2. Facebook, the biggest social network in the world, who also owns the leading media platforms WhatsApp and Instagram, is going to issue its own token in 2019. Whatever the #zuckcoin is supposed to be, it’s another endorsement and free marketing for the No.1 cryptocurrency, according to market cap and clout, Bitcoin. This endorsement will reach 2.7 billion people across the messenger app, WhatsApp and Instagram. There are other social networks trying to roll-out their coins this year as highlighted in a recent New York times piece, and will add fuel to the fire started and lit by Bitcoin.

  3. Twitter is where the news networks get their news, and by extension of its CEO Jack Dorsey his other company Square, its betting on Bitcoin and the Lightning network for the longterm. Square is already selling Bitcoins to its US-customers, and Dorsey has hinted at the integration of the lightning fast Bitcoin transactions directly integrated into Bitcoin.

The moment Bitcoin becomes an integral part of Twitter, newsmaker and -breaker all over the world will be exposed to a new economic model in their pockets, enabling them to monetize themselves and their news privately and independently. Think of free speech money at an order of magnitude.

  1. The guy who arguably built the most successful electric car company of our times, has privately’ sent rockets to the ISS and smokes weed live on camera also owns Bitcoin and thinks it will be the native currency of the internet. The internet is already in everyones hands and makes it way into everything around us. If Bitcoin is the native currency of everything, its going to be the worlds reserve currency.

  2. If 2018 wasn’t already the year of financial institutions getting into Bitcoin, they will definitely take positions in 2019. Fidelity (USD 2.5 Trillion AUM), Intercontinental Exchange, the parent company of the NYSE, Chicago Mercantile Exchange, Deutsche Boerse, pension funds (USD 20 Trillion AUM worldwide) are all getting or are already on-board with Bitcoin. Plus, we will most likely see the first Bitcoin ETF launch this year, bringing easy custody solutions to investors.

  3. The Lightning Network is growing at lightning speed’. Bitcoins solution for fast and cost-efficient transactions is growing by +15% in capacity each month. There are now around 7,000 Lightning Nodes with a capacity of 750 BTC. Lightning is the fastest growing dAPP’ in the cryptosphere and will enable commercial adoption of Bitcoin and on-boarding of the next wave of HODLers.

  4. Periphery products like ABRA and even an improved Ethereum with its popular decentralized-financial solutions will introduce people to the powers of cryptocurrencies and increase adoption of Bitcoin as a store-of-value.