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Cryptocurrency: An Alternate Standard of Money

Bitcoin and other Variants

Written by Barry Beck and Thomas Van Schuyler


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From - Thomas Van Schuyler - December 6, 2017

Some thoughts on Bitcoin (cryptocurrency) and the concept of the different forms money might take in the future. I am more interested in Bitcoin mining. I’m working on a project where my software would be built into kiosks. We are trying to offset expenses on my perspective clients and partners taking on the kiosk.

Solution #1 is allow for advertising on a kiosk screen that would be no less than 35 inches and as large as 65 inches.

Solution #2 is to put much more powerful computers with processors that can handle Bitcoin mining. The concept is an interesting one…Thoughts?

I should be more clear and not give such a narrow view of just Bitcoin - I should use the term cryptocurrency.

 



Important distinction - Bitcoin is one type or the best known example of a cryptocurrency - like other companies where identical or similar products were produced but the original, most popular, or best known brand name caught on as the generic term - like Xerox, Band-aid, Jell-O, Q-tips, Scotch tape, Kleenex, Dixie cups, Google, and Heroin (yes, Heroin was originally the brand name of a single company called Bayer-Heroin.)

About ten years ago, cryptocurrencies began to appear (perhaps not coincidentally during the last economic collapse in 2008.) It was extremely popular for a while since if the dollar ever collapsed, a cryptocurrency could become a possibility for the next default currency or currency of last resort - as the dollar is now (as was the British Pound Sterling in the 18th and 19th centuries and gold was through most of history.)

This could be a logical digital next step which I first wrote in the 1980s (see earlier pages) about the forms money has taken. Because money is an artificial man-made construct - like numbers, religion, grammar, language, the law - not something in Nature or handed down by God. A form of money valuable because people agree to make it so - like diamonds.

Some economists (such as Paul Krugman, recipient of the 2008 Nobel Prize in Economics), think its faulty logic and due for a collapse (like the tulip in 1600s Holland). In which case the price might crash (as it did a couple of times.) But even if it does not catch on as currency it still might work as a local trade currency or as a trade-pay system like PayPal or for speculation. So I started to gather notes and names of books and to understand it (see below.) and I was ready to join a group in San Francisco that was experimenting with teaching and building something profitable using Bitcoin or another cryptocurrency, but they disbanded due lack of interest. So the aspect I had the most trouble understanding (which was easy to build at the start in about 2009 but now is either time-consuming, or takes much computer power) is the engineering or mining aspect. - which is what you're interested in or perhaps a local form of trade for customers (like chips at a casino.) I got a Blockchain app and took a try at understanding how to build on it but did not get too far.

Notes on Cryptocurrency - books / concepts / notes / trends.

Books

Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money - Nathaniel Popper

The Anatomy of a Money-like Informational Commodity: A Study of Bitcoin - Tim Swanson

Bitcoin, the End of the Taboo on Money

Nakamoto - Bitcoin Peer-to-Peer

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order - Paul Vigna and Michael J. Casey

Understanding Bitcoin: Cryptography, Engineering and Economics - Pedro Franco

Andreas Antonopoulos on Singularity: "Bitcoin is not currency; it's the internet of money" (37.00)

http://www.youtube.com/watch?v=KW_wYvZ1eZg

The Anatomy of a Money-like Informational Commodity: A Study of Bitcoin - Tim Swanson

1) Bitcoin is like gold;

2) currencies should be used for transactions;

3) people are hoarding Bitcoin; therefore,

4) Bitcoin once again demonstrates that anything functioning like gold is a bad idea.

Keynesian - explanation of why the surge in gold is perfectly consistent with the deflationary environment. The only currency more controversial than gold: Bitcoins, the digital money that has a cult following in the corners of the internet.

Bitcoins are created by computers that perform productive tasks. Thus they can be earned by anyone, and then traded to vendors willing to accept them. The dollar value of that cybercurrency has fluctuated sharply, but overall it has soared. So buying into Bitcoin has, at least so far, been a good investment. What we want from a monetary system isn't to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that's not at all what is happening in Bitcoin. This is a deceptively deep point. People talk about currencies being "strong" or "weak" when they go up and down, as if the point of a currency is to rise over time. But the point of a currency is to facilitate transactions -- it's a bug of the system if sitting on the currency can make you rich. So to the extent that the experiment tells us anything about monetary regimes, it reinforces the case against anything like a new gold standard - because it shows just how vulnerable such a standard would be to money-hoarding, deflation, and depression.

Bitcoin is one of the first implementations of a concept called "crypto-currency". Based on this concept, bitcoin is designed around the idea of a new form of money that uses cryptography to control its creation and transactions, rather than relying on central authorities. On April 10, 2013, Bitcoin dropped from a price of $266 to $105 before returning to a value of $160 within six hours. Bitcoin (BTC) is a digital currency which was first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it an anonymous, peer-to-peer, electronic payments system. Bitcoin creation and transfer is based on an open source encryption protocol and is not managed by any central authority. The creation of new bitcoins is automated and may be accomplished by servers, called bitcoin miners that run on an internet-based network and confirm bitcoin transactions by adding codes to a decentralized log, which is updated and archived periodically. Each bitcoin is subdivided into 100 million smaller units called satoshis, defined by eight decimal places. Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution.

On July 15, 2014, on 13:42:19 GMT, Bitcoin mining surpassed 1,000,000,000,000,000,000,000,000 hashes (one yottahash) performed since its creation - The standard deviation for this computation is around 0.6%, which means the actual point of 1 yottahash may be 1-2 days earlier/later 1 to the 24th-Power hashes = 1 yottahash / hashes, hashrate, forging, standard deviation, yottahash, miner, parent, possession, ownership, protocol, cryptocurrency, Bitcoin (company) bitcoin (unit), ACH Petaflop - a unit of computing speed equal to one thousand million (1015) floating-point operations per second Peer-to-Peer Electronic Cash system: Bitcoin is worse is better - Gwern Branwen The History of ACH Payments

Definitions

Bitcoin (the technology not the company) Open source protocol rules for sharing across people and company to track, verify with encryption Digital wallet Decentralized - private Present banking since De Medici Centralized system of trust - and money making 2009 collapse of Bitcoin Allows strangers to trust (by eliminating or bypassing middleman and fee - the bank is out Mitigating corruptive or political control - by hidden ledger Public ledger constantly verified by separate computers Lock-chain - network-based ledger Disdain skepticism criticism curiosity crystallization acceptance All money is dependent on tentative trust

Debt: The First 5000 Years - David Graeber

Money: The Unauthorized Biography - Felix Martin

Coined: The Rich Life of Money and How Its History Has Shaped Us - Kabir Sehgal

Schumpeter between Keynesian and Austrian Martin and recent Debt author would say barter never exactly occurred but money even in ancient times was "debt" How to design a system that most effectively facilitates the exchange of goods and services and generates prosperity, while preventing the institutions that manage that system from abusing the trust that comes with that role Incorrect to focus on a commodity or metal - money was a social and technological innovation - currency is not itself money - Money is the system of credit accounts and their clearing what money represents Currency does not have value - the agreement is value - currency is the symbol Money - the settling and recording debt obligation Money - a coincidence of wants Barter is myth anthropologists say - Debt came before usually instead of barter - Martin & Graeber Metalist government enforce role / Chartist government is clearing house https://bitcoin.org/en/ YouTube - how it works - http://youtu.be/6tWtTsvmHJg

More Definitions

Address - A Bitcoin address is similar to a physical address or an email. It is the only information you need to provide for someone to pay you with Bitcoin. An important difference, however, is that each address should only be used for a single transaction.

Bit - Bit is a common unit used to designate a sub-unit of a bitcoin - 1,000,000 bits is equal to 1 bitcoin (BTC or B?). This unit is usually more convenient for pricing tips, goods and services.

Bitcoin - Bitcoin, with capitalization, is used when describing the concept of Bitcoin, or the entire network itself. e.g. "I was learning about the Bitcoin protocol today." bitcoin - without capitalization, is used to describe bitcoins as a unit of account. e.g. "I sent ten bitcoins today."; it is also often abbreviated BTC or XBT.

Block - A block is a record in the block chain that contains and confirms many waiting transactions. Roughly every 10 minutes, on average, a new block including transactions is appended to the block chain through mining.

Block Chain - The block chain is a public record of Bitcoin transactions in chronological order. The block chain is shared between all Bitcoin users. It is used to verify the permanence of Bitcoin transactions and to prevent double spending.

BTC - BTC is a common unit used to designate one bitcoin (B?).

Confirmation - Confirmation means that a transaction has been processed by the network and is highly unlikely to be reversed. Transactions receive a confirmation when they are included in a block and for each subsequent block. Even a single confirmation can be considered secure for low value transactions, although for larger amounts like 1000 US$, it makes sense to wait for 6 confirmations or more. Each confirmation exponentially decreases the risk of a reversed transaction.

Cryptography - Cryptography is the branch of mathematics that lets us create mathematical proofs that provide high levels of security. Online commerce and banking already uses cryptography. In the case of Bitcoin, cryptography is used to make it impossible for anybody to spend funds from another user's wallet or to corrupt the block chain. It can also be used to encrypt a wallet, so that it cannot be used without a password.

Double Spend - If a malicious user tries to spend their bitcoins to two different recipients at the same time, this is double spending. Bitcoin mining and the block chain are there to create a consensus on the network about which of the two transactions will confirm and be considered valid.

Hash Rate - The hash rate is the measuring unit of the processing power of the Bitcoin network. The Bitcoin network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 th/s, it meant it could make 10 trillion calculations per second.

Mining - Bitcoin mining is the process of making computer hardware do mathematical calculations for the Bitcoin network to confirm transactions and increase security. As a reward for their services, Bitcoin miners can collect transaction fees for the transactions they confirm, along with newly created bitcoins. Mining is a specialized and competitive market where the rewards are divided up according to how much calculation is done. Not all Bitcoin users do Bitcoin mining, and it is not an easy way to make money.

P2P - Peer-to-peer refers to systems that work like an organized collective by allowing each individual to interact directly with the others. In the case of Bitcoin, the network is built in such a way that each user is broadcasting the transactions of other users. And, crucially, no bank is required as a third party.

Private Key - A private key is a secret piece of data that proves your right to spend bitcoins from a specific wallet through a cryptographic signature. Your private key(s) are stored in your computer if you use a software wallet; they are stored on some remote servers if you use a web wallet. Private keys must never be revealed as they allow you to spend bitcoins for their respective Bitcoin wallet.

Signature - A cryptographic signature is a mathematical mechanism that allows someone to prove ownership. In the case of Bitcoin, a Bitcoin wallet and its private key(s) are linked by some mathematical magic. When your Bitcoin software signs a transaction with the appropriate private key, the whole network can see that the signature matches the bitcoins being spent. However, there is no way for the world to guess your private key to steal your hard-earned bitcoins.

Wallet - A Bitcoin wallet is loosely the equivalent of a physical wallet on the Bitcoin network. The wallet actually contains your private key(s) which allow you to spend the bitcoins allocated to it in the block chain. Each Bitcoin wallet can show you the total balance of all bitcoins it controls and lets you pay a specific amount to a specific person, just like a real wallet. This is different to credit cards where you are charged by the merchant. Comparative advantage of replacement currency such as crypto currency Now taking three business days to process - $4.30 Starbucks coffee Cashier Credit Card / CVV - credit card validation value code Front end processor (on behalf of merchant client Starbucks) / Acquiring bank pays merchant Card association (Visa & MC) / issuing bank (represented by) Payment processor ACH - auto clearing house network (releases payment) Regional fed reserve banks or clearing house payments company (computer owned by 18 largest banks) Two percent charged - payment processing - implemented for payments, fines, fees Premium card transaction costs by card issuer, ATMs, check fees, interest on those not paying on time Eight percent for foreign exchange - payments for transaction fees, settlement, checking, tax transaction SWIFT - spreads (hidden cost for currency transactions Costs for merchant - 250 billion dollars per year - ten percent increase each year Third party charges to verify person and for fraud All this hinders growth, efficiency, progress - unless the middlemen and third-parties decreased Visa MC de facto duopoly allowing manipulation market charges fees Also (not counting American Express action as bank) Barclays, HSBC, Wells Fargo, Citibank Multiplying effect of money creation - Reconciling and settlement for more intermediaries Bank notes, coins - fractional reserve banking - lots of debt - minimum amount of paper Further progress needed in electronic payments - Crypto-payments are lower cost and faster Bitcoin, Coin-base, Go-Pay - Overstock, Dell, Expedia, Dish Network are larger corps now using Block chain and Coin base - but more incentives to change occurring

http://www.critcrim.org/critpapers/milovanovic_postmod.htm

http://www.dyndy.net/

https://files.dyne.org/readers/Bitcoin_end_of_taboo_on_money.pdf

Bitcoin is a decentralized system of digital authentication that facilitates the circulation of value on the Internet without the presence of any intermediaries, a characteristic that has often gained it the definition of digital cash or crypto currency, since it can be used as money for payments. This is just the origins of this technology and its evolution. There is a biopolitical dynamics that govern the Bitcoin community as well specific characteristics of the technical realization, aiming to provide insights on the future of this technology as well a post-humanist interpretation of its emergence. The most powerful forces, those that interest us the most, are not in a specular and negative relation to modernity; to the contrary they move on transversal trajectories. On this basis we shouldn’t conclude that they oppose everything that is modern and rational, but that are engaged in creating new forms of rationality and new forms of liberation. Money is a fundamental medium upon which to build constituency and consolidate sovereignty. This research investigates the need for such a constituency, its urgency and emergence as a form of subjectivation. Ultimately we have a picture of the cultural context in which Bitcoin was grafted and has grown up to what it is now, offering keys to interpretation of its social and political aspects.

 


 

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