Bitcoin

Bitcoin

 

Bitcoins are cryptocurrency. That is to say "Off the books." As can be imagined, that might be appealing to some people. The problem arises with the question, "You may have a bitcoin but does anyone else want one?" That is to say, can you trade a bitcoin for a tomato?

 

Bitcoins enter the digital world when someone “mines” them by solving certain math problems. Mining operations have turned from college students sitting at their laptops to huge enterprises that use massive computing power to run ever more complex math calculations. Some of the computers dedicated to solving those math problems fill entire buildings.

 

Or so it is said.

It is also said the problems become harder so there will be a decreasing amount of bitcoins mined, so dilution will not occur.

The Bitcoin protocol was first described in a 2008 paper by Satoshi Nakamoto. “Satoshi Nakamoto” is probably a pseudonym, so it’s not clear whether the protocol was developed by an individual or a group of individuals, and attempts to identify the developer or development team have been unsuccessful. What we do know is how the protocol works. 

At the core of the Bitcoin system is the blockchain, a ledger that records the rightful owner of every balance of Bitcoin in existence. When you make a Bitcoin transaction, you effectively announce to the system that you would like to transfer a balance of Bitcoin on the ledger from one owner to another. These transactions are grouped into a block and members on the system then compete to be the first person to confirm that the transactions in the block are legitimate. Once a block is confirmed, the ledger, or blockchain, is updated to reflect the most recent transactions.

You can transfer a balance of Bitcoin from one address to another without revealing your actual identity in the physical world.

Bitcoin owners are not identified by their name or location, but by a string of characters known as a digital address. In other words, bitcoin owners are pseudonymous. You can transfer a balance of Bitcoin from one address to another without revealing your actual identity in the physical world. You only verify that you own the address.
Science writer Eric Holthaus wrote at Grist last week. (Grist is a hyperventilating modish internet site):

In Venezuela, where rampant hyperinflation and subsidized electricity has led to a boom in bitcoin mining, rogue operations are now occasionally causing blackouts across the country. The world’s largest bitcoin mines are in China, where they siphon energy from huge hydroelectric dams, some of the cheapest sources of carbon-free energy in the world. One enterprising Tesla owner even attempted to rig up a mining operation in his car, to make use of free electricity at a public charging station.

I do not know if that is true so his next claim should make you want to sit down and rest a moment. (Crazy behavior has more "currency" if it connects with other nonparticipants):

In just a few months from now, at bitcoin’s current growth rate, the electricity demanded by the cryptocurrency network will start to outstrip what’s available, requiring new energy-generating plants. And with the climate conscious racing to replace fossil fuel-based plants with renewable energy sources, new stress on the grid means more facilities using dirty technologies. By July 2019, the bitcoin network will require more electricity than the entire United States currently uses. By February 2020, it will use as much electricity as the entire world does today.

This is an unsustainable trajectory. It simply can’t continue.

 

This creates some nice symbolic sci-fi disaster themes.
Some people have made a lot of paper profits in this. But who is going to accept them in trade?
And the Tulip Mania wrecked the lives of some very hardheaded Dutchmen.
(includes stuff from Grist and Luther. There is a good, if old, article in Wired.)

Jones

The Jones Act

One of the Impediments to assisting Puerto Rico is the famous Jones Act, originally known as The Merchant Marine Act of 1920.

The Jones Act requires that shipments between two US seaports travel only on US-flagged vessels, built in US shipyards, with American owners and crews.
The original reason was to ensure the US kept a viable commercial shipping industry in case of war. World War I had just ended, so this need was evident at the time. Moreover, the act helped Seattle-based shipping lines pick up Alaskan freight business. (The Jones of the Jones Act was a legislator from Seattle.)

Today, the Jones Act gives a few US companies a legally enforced monopoly on cargo between the mainland US and Alaska, Hawaii, Puerto Rico, and Guam.

A 2012 New York Fed study found it costs twice as much to ship a freight container from the US East Coast to Puerto Rico than to nearby Haiti. And, as always, monopoly shows up in higher prices---for Puerto Ricans and other ports. More, it requires the unnecessary and redundant off-loading of ships bound for Puerto Rico in some intermediate designated rentier port so they can be reloaded by the designated rentier workmen on to the appropriate, designated rentier ship.

Voltaire on Diversity and, Accidentally, on Free Markets‏

Take a view of the Royal Exchange in London, a place more venerable than many courts of justice, where the representatives of all nations meet for the benefit of mankind.  There the Jew, the Mahometan, and the Christian transact together, as though they all professed the same religion, and give the name of infidel to none but bankrupts.  There the Presbyterian confides in the Anabaptist, and the Churchman depends on the Quaker’s word.
At the breaking up of this pacific and free assembly, some withdraw to the synagogue, and others to take a glass.  This man goes and is baptized in a great tub, in the name of the Father, Son, and Holy Ghost: that man has his son’s foreskin cut off, whilst a set of Hebrew words (quite unintelligible to him) are mumbled over his child.  Others retire to their churches, and there wait for the inspiration of heaven with their hats on, and all are satisfied.
If one religion only were allowed in England, the Government would very possibly become arbitrary; if there were but two, the people would cut one another’s throats; but as there are such a multitude, they all live happy and in peace.
--from Voltaire’s 1733 “Letters On the English.”  

Criminals and Innovation

It seems that Maksym Pashanin and Denys Pashanin rented Ms. Cory Tshogl's San Francisco condo through AirBnB and now refuse to leave. The brothers rented the one-bedroom unit in late May for 44 days but paid for just a month. After occupying the unit for 30 days they gained tenants' protections under California law. Tschogl, a San Francisco rehabilitation therapist for blind and low-vision people, is facing thousands of dollars in legal expenses and an eviction process of up to six months.

The brothers Pashanin have, not so coincidentally, also, as principals of Kilobite Inc., raised some $40,000 on crowdfunding platform Kickstarter for a video game that never materialized, leaving behind scores of angry donors. Kilobite Inc. took to Kickstarter in November to promise a June delivery of a zombie game called "Confederate Express," but has produced only a demo. Instead, Kilobite recently launched a new Kickstarter campaign, seeking $25,000 for another game called "Knuckle Club."   

Maksym Pashanin has sent Tschogl texts threatening to press charges against her for blackmail, negligence and malicious misconduct, including his claims that the tap water hurt his expensive espresso machine and exacerbated his brother's ulcer, Ms. Tschogl said, providing copies of the messages.

The emerging peer-to-peer markets have created unique opportunities and risks in which people trust Internet strangers based on reviews by other Internet strangers. It seems to have attracted the shameless as well.
Every new circumstance creates opportunity.

Shorting the Future

An interesting criticism has arisen out of the takeover market. A drug company called Valeant that grows by buying others, is trying to buy Allergan, a drug company that grows by developing new drugs.  It’s plan is to boost short-term earnings by  chopping two-thirds out of R&D. So engineering its structure--and cutting R&D--will improve earnings, and probably increase the stock price, but discourage innovation and long term development.
Now this criticism, from a money manager, seems surprised but steel corporations made money for years through depreciating and explicitly not repairing steel facilities because the repairs and upgrades were more expensive and the benefits less than the simple tax write-offs.
Tax distortions are not errors, they are bought and paid for by business and enacted by greedy idiots who do not have our long term financial health in mind.

Self Inflicted Perceptions

One wonders at the causes of malaise in a culture and the cures.

The S&P 500 has been up 74% since the day President Obama was inaugurated in 2009 and 12% so far in 2012.

While the stock averages are not necessarily reflective of the economy they are not isolated from it. More, some people are completely dependent upon it, either directly or indirectly. Yet the news media has discussed the markets rarely. The conservative outlets, especially FOX, have been quite mute about it. But it is especially interesting how quiet the Left has been.

Perhaps Obama has painted himself into such an anti-capital, anti-rich guy corner that he does not want to take credit for stock market improvement because the stock market is popularly associated with capital, wealth and the bad guys of Wall Street. That makes him less dependent upon objective measurements and more vulnerable to the subjective.

Strangely, that used to be his strength.

Lost Money is...Lost Money

As the oxymoronic Super-committee declined to come to grips with the plan to cut 1.3 trillion dollars in spending the next ten years, the next day the American stock market declined in response. A look at the Russell 3000, a collection of 3000 American companies, showed that the collected loss among these companies that day was 4 trillion dollars in value. 4 TRILLION DOLLARS. So the 1.3 trillion dollars in cuts was too much for the nation to tolerate, 4 trillion dollars in losses resulted which the nation presumably will just shrug off.

The ripple effect in the economy that government can generate, in this instance by NOT doing something, is impressive.

Strangely many think that inaction by the government is desirable with the logic that "at least they're not harming anything" but that is clearly simplistic.

Just because the lever is defective does not mean you can ignore the quality of the man with his hand on it.

market

This market is beginning to scare me. There is a strange mood abroad, as if everyone knew this was coming and will now just work happily into their 80's with no other demands on the world. It's like that relaxed fatalism one sees in illness: a wry smile, a shrug. There is an element of disbelief in this I think but there is no anger, no outrage towards those who brought this on us through their unbridled greed and their dismissive social disinterest. In Germany, the money-changers' homes would be cinders by now. It is true that everyone is to some extent to blame but many people are just hard working, unassuming family and business people and their culpability is little. Maybe I'm just overestimating what is coming.