CFTC Penalizes Blockchain Protocol $250K, Files Action Against Successor DAO

The commission said bZeroX offered illegal, off-exchange trading of digital assets, and has also filed a civil action against the Ooki DAO......»»

Category: forexSource: coindeskSep 22nd, 2022

GoPro Hero 11 Black review: Larger sensor and stellar stabilization make this little camera even mightier

The new Hero 11 Black from GoPro keeps the design from last year's model but is souped up with stronger performance and new shooting modes. When you buy through our links, Insider may earn an affiliate commission. Learn more.The GoPro Hero 11 Black with its recognizable form-factor.Les Shu/Insider GoPro's new Hero 11 Black gets a bigger sensor and the strongest camera stabilization yet. It also adds three time-lapse modes, a wider lens view, and an "easy" mode. The design remains the same, but a longer-life battery is now included. GoPro's Hero 10 Black camera from 2021 is one of my favorite cameras. I use it often — especially when I travel — because it's compact and rugged, but most importantly, it shoots terrific 4K videos. It's fun to use, there are plenty of settings and modes to choose from, and GoPro has the best smartphone companion app of any camera maker. It's so good that it's hard to imagine how the new Hero 11 Black could top it — but it does.On the outside, the Hero 11 is a facsimile of its sibling, which makes you wonder if GoPro bothered at all. But it's what's underneath that you should care about. It has a larger sensor that not only shoots up to 5.3K resolution at 60 frames per second, but it lets you shoot in 8:7 aspect ratio, which allows for more flexibility when cropping.The image stabilization is stellar — no more bumpy footage that's common with early action cameras. The Hero 11 is not a radically new camera nor is it a must-have upgrade from the Hero 10, but it's refined and there are lots to love.What worksNew sensor delivers videos that look great and smoothIn-camera stabilization is the best from GoPro, yet8:7 aspect ratio makes it easy to crop a video for YouTube or TikTokWhat needs workEasy mode is too limitedConnecting an external mic still requires a pricey accessoryThere's no physical design change, and that's OKThe GoPro Hero 11 Black (right) shares the same exterior design as its predecessor, the Hero 10 Black (left).Les Shu/InsiderThe Hero 11 retains the same design and dimensions as the Hero 10 and Hero 9, which is fine because it works. It's compact and lightweight, and rugged enough for quick underwater shots or surviving accidental drops — without the need for an external housing. But, from previous experience, the exterior will easily scratch and ding if there's no protective covering.The rear touchscreen is where you make all the adjustments.Les Shu/InsiderThe color front screen is useful if you shoot mainly self-portraits (live streaming, TikTok, etc.), while the rear touch-enabled display is responsive most of the time. Settings and modes are all done here; otherwise, just power it on and hit the shutter button to start recording. The ingenious built-in "folding fingers" mount will work with any GoPro accessory you already own.The GoPro Hero 11 Black's "folding fingers" mounting system is compatible with every GoPro accessory ever made.Les Shu/InsiderWhile I appreciate this all-in-one design, I miss the ability to connect an external microphone or display. The HDMI port, located inside the battery chamber, doesn't natively support video or audio — you'd need to purchase the optional Media Mod accessory or the Hero 11 as part of the Creator Edition.I also wish there was a way to connect the camera to an external battery without exposing the battery. GoPro makes a battery door with a pass-through to the HDMI port, but this part seems to only come with the Volta tripod/battery accessory. I consider this a minor issue, as it won't affect most users.Bigger sensor means more flexibility in how you shootThe big updates are inside. A 27-megapixel, 1/1.9-inch sensor replaces the 23-megapixel, 1/2.3-inch sensor in the Hero 10. You can shoot videos up to 5.3K at 60 frames per second, even when using the TimeWarp speed effect. Throw in support for 10-bit color and you get videos that look rich and smooth. In daylight, the Hero 11's auto mode does a very good job at balancing the settings, although it does stumble with direct sunlight. The video resolution is high enough that you can grab decent-looking stills.The GoPro Hero 11 Black's new 1/1.9-inch sensor allows it to shoot videos in the 8:7 aspect ratio.Les Shu/InsiderThe new sensor also allows shooting in 8:7 aspect ratio. The benefit is when cropping into horizontal 16:9 (cinematic) or vertical 9:16 (Instagram or TikTok), you keep more of what's in the frame. If you love that super-wide lens look, the sensor adds the 16:9 HyperView, which is ideal for self-portrait shots where you want your entire body in the frame. The video above shows how large a 8:7 video is.Stabilization is so smooth that you'd think it was on a gimbalThe Hero 11 takes in-camera image stabilization to a new level. Since the Hero 6 Black, GoPro has perfected its HyperSmooth system with every new model. HyperSmooth 5.0 is the smoothest I've seen yet.The sample clip above was shot on a fast-moving speed boat that bopped up and down the New York Harbor, yet the video isn't bouncy and the Horizon Lock function kept things steady and even. You would have to shake the camera violently if a shaky picture is your intention. Gone are the nauseating footage shot with early GoPros.New time-lapse for night shotsDespite the larger size, don't expect nighttime shots to look as good. Unless you have proper lighting and a tripod, videos will look dark and noisy. This is the given for small sensors, although smartphones seem to be winning on this front.With that said, the Hero 11 can create some decent time-lapse videos at night. GoPro added three new modes that automatically adjust the settings for shooting star trails, vehicle light trails, and light painting. You would need a tripod and a dark setting, and you may need to play around with the settings or reposition the camera if there's a light source nearby, but they can be fun.As you can see from my vehicle light trails clip, there was actually way too much street lighting that painted the scene an ugly orange, but the light trails add a nice effect. Light painting was more successful as the environment was quite dark, but the painting process itself takes getting used to.I wasn't in an area where I could properly shoot star trails, but from previous experience with the Hero 10, you can capture the starry night sky provided there's no light pollution and you plug an external battery into the camera.Updated battery for longer shootsThe GoPro Hero 11 Black includes the new Enduro battery, which allows for longer shooting times and can withstand cold and hot temperatures.Les Shu/InsiderGoPro introduced a new, optional battery for the Hero 9 and Hero 10 last year. Called Enduro, it can handle cold and warm temperatures without affecting performance, and it can add 38% more battery life than the standard battery, according to GoPro.Enduro now comes standard with the Hero 11, but if you have batteries from the Hero 9 or Hero 10, those will work, too. Despite the extra battery life, it's still short if you plan to shoot often — carry spares or an external power bank.An easy mode that is too easyA new easy mode simplifies the setting options for photos, videos, and time-lapses, but it might be too limiting for some.Les Shu/InsiderAs GoPro cameras advanced, so has their user interface. There are now so many options for settings, modes, and views. Eventually, menu navigation becomes intuitive, but it can get overwhelming, especially if you need to make an adjustment on the fly.The Hero 11 adds a new Easy mode that takes away all those settings. You can pick the field of view, but the camera handles everything else. Easy mode reminds me of using early Hero cameras like the Hero 3, but I found myself actually wanting some ability to adjust the settings. I don't always need to do pro-level adjustments like ISO, but I do like to change up the resolution or frame rate. Easy mode is a good idea, but it's too limiting.GoPro Hero 11 Black specificationsSpecificationGoPro Hero 11 BlackSensor and processor1/1.9-inch, GP2 chipPhoto resolution27 megapixelsVideo resolution5K 60 fps, 4K 120 fps, 2.7K 240 fpsPortsHDMI (power only)BatteryEnduro 1,720-mAh lithium-ion rechargeableConnectivityBluetooth (smartphone pairing), Wi-Fi, GPSSize and weight (with battery)2.8 x 2 x 1.3 inches, 5.8 ouncesHow much does it cost?The GoPro Hero 11 Black is available now. It retails for $500, but if you bundle it with a GoPro subscription, which includes perks like no-questions-asked damage replacement, discounts on accessories, and cloud storage with the new online Auto Highlight feature, it costs $400 (the GoPro subscription is a good value if you use a GoPro a lot).There is also a Hero 11 Black Creator Edition for $700 or $580 when purchased with a GoPro subscription. Designed for content makers, this bundle includes the Media Mod accessory that lets you attach an optional microphone (there's also one built into it) for better sound capture, as well as connect to an external display over HDMI. It also comes with a light accessory and the Volta, a handgrip that doubles as a tripod, external battery, and wireless controller.Is the GoPro Hero 11 Black worth buying?Les Shu/InsiderIf you own the Hero 9 Black or the Hero 10 Black, I recommend waiting another year unless you need to replace a damaged unit. While the larger sensor and improved image stabilization are notable, there isn't anything revolutionary to warrant an early upgrade.Besides, both the Hero 9 and Hero 10 are still very capable. I have been using the Hero 10 and Hero 11 simultaneously and have not seen any huge difference in everyday use, performance, or video quality. In fact, the Hero 10 is still for sale as a lower price option, but you should spend $50 more for the Hero 11 if you're actually considering the Hero 10.For owners of older GoPro who are ready to step up, the Hero 11 Black is worthwhile. I also recommend adding a GoPro subscription if you aren't already a member, as the free replacement, cloud storage, and accessories discount are worth it if you are a power user.The big question is, why buy a camera at all when smartphones are just as capable? As an owner of an iPhone 13 Pro, I'd agree, despite having reviewed cameras for over a decade. While my iPhone is fine for casual shoots, I prefer using a GoPro when I have the intention to shoot videos, especially when traveling.I also don't have to worry about notifications interrupting me, and I don't have to fret about dropping my $1,500 phone. The GoPro is a nice companion to my phone.There's a GoPro Hero 11 Black Mini comingGoPro also announced a smaller version called the Hero 11 Black Mini.GoProGoPro also announced a smaller and lighter version of the Hero 11 Black, called the Hero 11 Black Mini. On sale on October 25 for $400 or $300 with a GoPro subscription, the Mini has the same performance specs as the standard Hero 11 Black.Because it's designed for quick, one-button shooting, there are no screens for previewing a shot or making adjustments to the settings — those would have to be made in advance via the GoPro app, but there is a small status display on the top.The battery is also built-in, which means you can't swap it out for a new one if it goes dead. There are two sets of folding fingers, which gives you flexibility in how to mount the camera.A spiritual successor to the beloved GoPro Hero Session, the Mini is for users — say, bikers and surfers — who want the best quality videos from a small camera, but without the fuss.From the pre-production sample I saw, the Hero 11 Black Mini has the same build quality as the Hero 11 Black. While it's smaller, it's nowhere as compact as the Hero Session. Review samples were not available at the time of the announcement, so I won't comment on overall use and performance until I can get our hands on one.A movie automatically made in the cloudOne of the features of the GoPro Quick smartphone app is called Auto Highlight. After offloading footage from the camera and to a phone, the app automatically pulls clips and combines them into a short movie, with graphics and music.GoPro is bringing this feature to its subscription service, which offers cloud storage for photos and videos that are automatically uploaded from a supported GoPro camera.Once the content is in the cloud, Auto Highlight will create a video and send it back to you, where you can do any fine-tuning. This removes the need to download files, which can eat into a phone's storage.The feature was not available to use during testing, but I did receive a "suggested" video on the app at time of posting. From experience, Auto Highlight doesn't always pick the scenes I would choose, and I often would need to make adjustments.That remains true with the video I received, although it's quite usable. I was not able to download it to my phone, which suggests kinks still need to be worked out. I will update this as I get more hands-on time with this feature.Some useful accessories to get with the GoPro Hero 11 BlackThe Volta is an accessory that functions as a grip, stand, external battery, and wireless controller.Les Shu/InsiderRead the original article on Business Insider.....»»

Category: topSource: businessinsiderSep 14th, 2022

Why the Ethereum Merge Matters

The "merge" will be one of the most significant shifts in crypto’s history, and could have a slew of far-reaching effects. In about a week, one of the most significant shifts in crypto’s history will happen when the blockchain Ethereum completes a software update known as “the merge.” The merge, which is tentatively scheduled for Sept. 15, will drastically reduce Ethereum’s energy usage, making it much more environmentally-friendly than Bitcoin. The merge could also have a slew of far-reaching effects, for better or worse: it could crash or turbocharge the price of Ether; spur mainstream adoption or reduce confidence in crypto; lessen some security risks, or exacerbate others. Here’s what a layperson should know about the transition. [time-brightcove not-tgx=”true”] How Ethereum’s blockchain will work—and why it’s so important To understand the merge, it’s important to understand why people use blockchains in the first place. One of the most important ideals of the technology is that no central authority can control it. Whereas a government might be able to manipulate a central bank to its whims, for example, a blockchain should be immune to that kind of pressure. It should be self-sustaining and dispersed in its power. And for years, Bitcoin and Ethereum—the two biggest blockchains—have operated without controlling bodies thanks to a process called Proof of Work. In it, the blockchain is operated and safeguarded by “miners,” who approve new and valid transactions by solving complex math puzzles, and get rewarded for their efforts in the blockchain’s currency. The complexity of the puzzles is supposed to make it extremely hard for hackers or tamperers to game the system. But solving these puzzles requires an enormous amount of energy. Miners have set up giant computing rigs all over the world that run day and night, solving these puzzles and guzzling electricity. Studies estimate that Bitcoin mining uses more power globally per year than most countries, including the Philippines and Kazakhstan. The enormous energy usage of Proof of Work—which, again, is built into its design—has caused widespread criticism from environmental groups, especially as countries try to reduce their emissions in the face of climate change. Proof of Work also has design issues in terms of security and scalability, some engineers argue. So while Ethereum’s first developers started to build the network on Proof of Work in 2014, they were already toying with the idea of eventually switching over to a new, untested system called Proof of Stake. In Proof of Stake, energy-guzzling miners are replaced by watchdogs known as “validators,” who deposit a significant amount of money (32 ETH, which is currently worth about $50,000) into the Ethereum network in order to be able to approve or deny transactions. Like miners, they earn money rewards for doing so. Under this system, a hacker or bad-faith actor would need to put an obscene amount of money into the system in order to game it—and in doing so, risk losing that money if they are discovered and kicked out. Core Ethereum developers have been working on the transition diligently for years. But they’ve encountered numerous challenges that have forced delay after delay, and turned the merge’s status into something of a running joke. Developers have explained that updating what is essentially the network’s operating system is incredibly difficult, especially given that it will be up and running the entire time: it will be akin to swapping out a car’s gas engine for an electric one while it’s barreling full-speed down a freeway. Potential positive effects of the merge Developers hope that pulling off such a risky move will be worth it for several reasons. The first is environmental. Because miners will no longer have a financial incentive to run computers around the clock, the network’s energy usage will drop by more than 99%, according to researchers at the Ethereum Foundation. Mike Brune, the director of the climate change campaign Change the Code/Not the Climate, wrote to TIME in a statement that the merge is a significant step in the right direction, and that he hopes Bitcoin will take the same path. “With fires raging around the world and historic floods destroying lives and livelihoods, state and federal leaders and corporate executives are racing to decarbonize as quickly as possible,” he wrote. “Ethereum has shown it’s possible to switch to an energy-efficient protocol with far less climate, air and water pollution.” This improvement in energy efficiency could be good for business. Many traditional companies and financial institutions have expressed trepidation about jumping fully into Ethereum due to its enormous carbon footprint. Vitalik Buterin, the founder of Ethereum, acknowledged as much in February, and actually encouraged skeptics to wait to use the blockchain until it was less environmentally damaging to do so. Read More: The Man Behind Ethereum Is Worried About Crypto’s Future If the merge goes off without a hitch, then corporate adoption could accelerate, especially by institutions with environmental, social and governance (ESG) mandates. Joe Lubin, a co-founder of Ethereum and the founder of the blockchain company Consensys, tells TIME that he’s talked with several “major financial institutions” who have been waiting until the merge to become “significantly involved” in Ethereum. Many other potential users have stayed away from Ethereum due to its high fees and congestion. The network wasn’t ready for the sharp uptick in users it received in 2021, forcing some people to pay hundreds of dollars in transaction fees. The merge won’t eliminate those fees, but Ethereum developers say that its completion will lay the groundwork for them to roll out new technologies to scale the network. The most crucial tool is called sharding, which splits the network’s data into smaller parcels, making the network faster and cheaper to use. Buterin said in February that sharding could eventually lower fees to around a nickel—and bring back many crypto users who had spurned Ethereum for other cheaper blockchains, like Solana and Avalanche. “It’ll take time to get there, but it basically takes us into an infinite-transaction-per-second throughput architecture,” Lubin says. “It’s about to go internet-scale.” Ethereum developers also believe that the switch to Proof of Stake will improve security and make the network more immune to attacks. A report by Consensys says that in order for an attacker to take over 51% of the network—which would allow them to re-write parts of the blockchain as they wish—it would require more than $11 billion. But there are plenty of risks But the merge also comes with significant risks. Ethereum served as the primary network for the frenzy of crypto activity that has emerged over the last two years, including in NFTs, decentralized finance (DeFi), and decentralized autonomous organizations (DAOs). If something were to go wrong in the transition, the well-being of all of those applications and organizations—which collectively handle more than $50 billion in user funds—would be in peril. Lubin, for what it’s worth, predicts the merge will be seamless and glitch-free for users. “It will be like Apple upgrading your iPhone operating system overnight, and you don’t even know what happened when you get on your machine in the morning,” he says. The merge could also cause a split in Ethereum’s user base. Given that Ethereum is decentralized, no one is forcing users to switch to the new system. If enough users or platforms decide to stick with an old Proof of Work version of Ethereum, then mass chaos and confusion could ensue over where the real value of tokens lies. Some Proof of Work miners have already signaled that they intend to resist the merge, and have started jumping back to an even older version of the blockchain, now known as Ethereum Classic. Many of these miners, however, are simply looking out for their own bottom line, as they invested in mining equipment that will soon be useless to Ethereum once it makes the switch. Almost all other Ethereum users have indicated that they will switch over to the Proof of Stake chain, making a full-out civil war improbable. “I think at least a temporary fork is likely: there’s an opportunity to make a quick Ether, and there are a lot of opportunists out there,” Lubin says. “But I can’t imagine wanting to build anything, or put anything of significant value, on a chain that has so many things that are fundamentally broken and abandoned.” Finally, some people are worried that the merge will make Ethereum more susceptible to censorship in the midst of a larger battle between crypto and the U.S. government. Last month, the Treasury Department prohibited Americans from using Tornado Cash, a service that helps crypto owners protect their anonymity. Any user who interacts with a Tornado Cash-related address risks violating U.S. sanctions. A large-scale Proof of Stake validator, like Coinbase, then, might choose to censor any transaction related to Tornado Cash to comply with the government. Such an action would run counter to crypto’s decentralization ideals. But Brian Armstrong, the CEO of Coinbase, said that he would rather his company shut down its staking operations than enable censorship. And Collins Belton, a prominent crypto lawyer and managing partner of legal firm Brookwood, tells TIME that he doubts the merge will have much impact on the U.S. government’s regulation strategies. “I don’t think the argument is likely to stick, to say that Proof of Stake is so fundamentally different that the U.S. government will shift its approach and will now start approaching validators,” he says. “I think it overestimates the government’s ability to really parse through these technical arguments.” Read more: A New U.S. Crackdown Has Crypto Users Worried About Their Privacy What happens next For the last couple of years, Ethereum developers have been rolling out test versions of the merge, searching for glitches and vulnerabilities in their code. On Tuesday, the merge’s final test run, known as the Bellatrix upgrade, was activated successfully, clearing the path for the real thing. The merge is now expected to happen on Sept. 15, although a series of complex technical factors could postpone it once again. At that point, experts will be watching the market closely to see if old versions of Ethereum skyrocket in usage, or recede to zero. At any rate, next week, new chapters of Ethereum and crypto will begin......»»

Category: topSource: timeSep 7th, 2022

A New U.S. Crackdown Has Crypto Users Worried About Their Privacy

Tornado Cash’s service has let hackers flourish, regulators say. But privacy experts worry the ban goes too far. The battle between the crypto community and the U.S. government over financial privacy just escalated dramatically, amid government efforts to crack down on criminals. Tornado Cash is a service that helps some cryptocurrency owners protect their anonymity by scrambling information trails on the blockchain. On Monday, the Treasury Department prohibited Americans from using the service, arguing that it has played a central role in the laundering of more than $7 billion. In a statement, the Office of Foreign Assets Control (OFAC), a Treasury Dept. agency, called Tornado Cash “a significant threat to the national security” of the United States, and alleged that it has been used repeatedly by North Korean hackers to launder money from multiple million-dollar thefts. [time-brightcove not-tgx=”true”] But the decision drew vicious backlash from many in the crypto community, who see it as a governmental overstep that runs contrary to their core values of privacy and autonomy. On Twitter, the crypto lawyer Collins Belton called it “arguably the most significant legal action that has occurred in crypto” and warned that it could produce “absolutely gargantuan ripple effects.” The Treasury’s decision could end up significantly altering the way users engage with crypto. It also sets the stage for a slew of fierce legal and rhetorical battles between the crypto industry and the U.S. government. Hiding crime When someone sends cryptocurrency from one account to another, a record of the transaction is etched into the blockchain forever. Investigators or eagle-eyed sleuths can then use this public information to follow money flows and learn about a person or company’s financial activity. The U.S. Department of Justice, for example, traced blockchain records to shut down a global child abuse website and arrest hundreds of offenders. This transparency has given rise to the creation of “mixing” services, which are designed to hide activity on the blockchain. A user can deposit cryptocurrency into a mixer, which uses complex cryptography to obfuscate the money’s trail and then send it to a brand new wallet address. From there, the user can recover the funds and eventually cash them out anonymously. As cryptocurrency has exploded in usage both for legal and illegal activity, mixers have become a “go-to tool for cybercriminals,” according to a recent report from the blockchain analysis firm Chainalysis. The study says that nearly 10% of all funds sent from illicit addresses are sent to mixers, and that the usage of mixers in illicit activity has increased significantly in 2022. “Mixers account for a small share of the overall cryptocurrency ecosystem, but play a significant role in illicit activity,” Andrew Fierman, the head of sanctions strategy at Chainalysis, wrote to TIME in an email. The role of North Korea One of the main drivers of this uptick is the increased activity of North Korean hackers, U.S. officials say. In April, U.S. Treasury officials accused the Lazarus Group, a hacking organization allegedly sponsored by North Korea’s government, of spearheading the $600 million hack of the popular crypto game Axie Infinity’s Ronin network. Those officials accused the North Korean government of using the hack to “generate revenue for its weapons of mass destruction and ballistic missile programs.” And the Ronin attackers used Tornado Cash to launder the money, officials say. They say that after $600 million was drained from the Ronin network into a wallet controlled by the Lazarus group, it was then sent to intermediary wallets, then rinsed via Tornado Cash, $10 million at a time. Tornado Cash developers’ attempts to block the Lazarus wallet from interacting with Tornado Cash were unsuccessful: about 18% of the total amount of Ether flowing through Tornado Cash in recent months—167,400 ETH—came from the Ronin hack, according to the blockchain analytics firm Nansen. Ari Redbord, the head of legal and government affairs at the crypto regulatory startup TRM Labs, says the Ronin hack was a major turning point with regards to crypto regulation. “Ronin really changed the way the U.S. government sees money laundering in the crypto space: they shifted from the idea that hacks were a financial crime to the idea that they were a true national security concern,” he says. Redbord estimates that a billion dollars in North Korean-related laundered funds have gone through Tornado Cash, and that the ten biggest hacks perpetrated by North Korean hackers employed Tornado Cash to launder those funds. So on Monday, the Treasury Department placed Tornado Cash and related smart contract wallet addresses on their Specially Designated Nationals (SDN) list, in the way they would an enemy of the state. Any Americans who interact with those addresses now may face criminal penalties. Crypto backlash But while Tornado Cash is used by criminals, it is also used widely and legally by all types of users. “There are all kinds of reasons people want to build anonymity: I don’t want anyone looking at my credit card statements or Venmo,” Redbord says. This week, Tornado Cash supporters have argued that the service is simply a neutral tool that can be used for good and bad: that it’s akin to virtual private networks (VPNs) or The Onion Router (TOR). “This is a rough equivalent to sanctioning the email protocol in the early days of the internet, with the justification that email is often used to facilitate phishing attacks,” Lia Holland, the campaigns and communications director at the digital rights nonprofit Fight for the Future, wrote in a statement. There are many reasons why someone would want to use Tornado Cash: An employee who gets paid by their company in crypto, for example, may not want their employer to know all of their financial details. An NFT enthusiast who has recently made a lot of money thanks to a savvy investment may not want to become the target of potential harassment or robbery. Tornado Cash may also be useful for those who live under oppressive governments. Vitalik Buterin, the founder of Ethereum, came out in defense of the service this week, writing on Twitter that he himself used Tornado Cash in order to donate to Ukrainian causes without putting the recipient organizations under extra scrutiny. And following the overturning of Roe v. Wade, donors to abortion funds may want to use Tornado Cash to keep their identities hidden. The brewing battles The Treasury’s decision to ban Tornado Cash could prove to be a significant turning point for crypto in several ways. First, it shows how far the U.S. government is willing to go in its attempts to corral crypto as it creeps toward mainstream adoption. Tornado Cash defenders have pointed out that the decision is unprecedented in that sanctions have been placed upon a piece of code as opposed to an entity. (Tornado Cash is not an incorporated organization, but a mechanism controlled by software logic.) This step could mean that other types of decentralized bodies, including other smart contracts or DAOs (decentralized autonomous organizations), might soon be in the crosshairs. Redbord, at TRM Labs, says that the treasury’s decision reveals the U.S. government’s desire to push crypto toward more centralized systems and platforms that are easier to regulate. The trading platform Coinbase, for example, has requirements that tie every crypto wallet to a verifiable human identity. “This action sends a message to crypto exchanges that they need to ensure that they have compliance controls in place to stop cyber criminals from using their platforms,” Redbord says. And some major crypto players have fallen in line. Circle, the issuer of the USD Coin (USDC), the second biggest stablecoin, froze over $75,000 worth of funds linked to Tornado Cash addresses. And Github, a software development platform owned by Microsoft, deleted the accounts of Tornado Cash developers. But crypto enthusiasts resist centralized attempts to control policies or transactions. Bitcoin, after all, was created in the wake of the 2008 financial crash, with early adopters seeking a global and unregulated form of currency resistant to the pressures of Wall Street. Many have flocked to crypto because it allows anonymous financial transactions, hidden from surveillance by authorities. In the last few days, Tornado Cash defenders have launched their own offensive against the decision, in several ways. First, they have drawn attention to a perceived logical flaw in the decision: that anyone who interacts at all with a Tornado Cash contract is doing so illegally. Individual users cannot reject incoming transactions—small amounts of cryptocurrency have been sent to prominent public wallet addresses—including those associated with Jimmy Fallon and Shaquille O’Neal—in a stunt that essentially dares the Treasury to take action upon an entire community. (Redbord, for what it’s worth, says he doubts that individuals were the target of the decision in the first place, or that OFAC will pay much attention to the campaign.) A much bigger battle may be in store: some prominent crypto lawyers have begun floating the idea of challenging the decision on constitutional grounds. “Banning software publication is banning speech,” Peter Van Valkenburgh, the director of research at Coin Center, said onstage at a crypto conference in Las Vegas on Monday. “Even laws that unreasonably chill speech are constitutionally suspect, and can be challenged even before enforcement.” As crypto enthusiasts look for a way forward, they must contend with several tough choices: how much to compromise their values in their quest to reach the mainstream; how to tamp down on illegal activities in systems that were built to be oversight-resistant; and whether to cooperate with governments or oppose them, thereby invoking even more ire and scrutiny. For now, it seems that many in the crypto space are responding forcefully to the Treasury’s decision by taking an ideological stand. “While most people won’t ever use a service like Tornado Cash, the government’s approach represents a dangerous precedent for limiting the right of Americans to use privacy tools for legitimate and lawful reasons,” Miller Whitehouse-Levine, policy director of The DeFi Education Fund, wrote in an email to TIME. “Privacy is not—and cannot become—a crime.”.....»»

Category: topSource: timeAug 10th, 2022

How We Should Really Think About Bitcoin Maximalism

How We Should Really Think About Bitcoin Maximalism Authored by Stephan Livera via, There has been a lot of digital ink spilled about the concept of Bitcoin Maximalism, but there are things the critics don’t understand... It’s time to clear a few things up. While there has been a lot of digital ink spilled over the years debating the concept of Bitcoin Maximalism, we seem to be going back to some of the same arguments over and over — notably in Nic Carter’s recent Medium post and Pete Rizzo’s Forbes post. Here are a few thoughts I want to add: Critics of Bitcoin Maximalism seem to believe that maximalists are just toxic, hoi polloi, and not technically savvy on the realities and realpolitik of the “crypto” world. Bitcoin Maximalists on the other hand tend to believe their worldview is the ethical, rational and pragmatic stance to take in a world corrupted by fiat currency. So, what does it really mean to be a Maximalist? WHAT IS BITCOIN MAXIMALISM? I view Bitcoin Maximalism as simply being the view that bitcoin will someday be global money and/or that we’ll live on a bitcoin standard. This is otherwise known as “Monetary Maximalism,” but where is the monetary Maximalist idea coming from? Generally, it is based on the idea that money is the most marketable good, and that bitcoin has superior monetary qualities. There is a tendency toward the most marketable good, as Ludwig von Mises spelled out in “Theory Of Money And Credit”: “The greater the marketability of the goods first acquired in indirect exchange, the greater would be the prospect of being able to reach the ultimate objective without further manoeuvering. Thus there would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.”  WHAT DO MOST BITCOIN MAXIMALISTS BELIEVE? In practice, most of the Maximalists I know are simply disinterested in non-monetary uses and are more interested in distinguishing Bitcoin from all of the “crypto” garbage out there. And at times like these, with so many crypto lenders stopping withdrawals (e.g., Celsius, Vauld, Voyager), filing for Chapter 11 bankruptcy (e.g., Voyager) or taking bailout deals (e.g., BlockFi, Voyager), there’s a strong case to say the Maximalists were right. At the time when newcomers were running like yield-chasing lambs to the slaughter on these platforms, it was Bitcoin Maximalists who were warning about the rule, “not your keys, not your coins,” and warning against high-risk yield platforms. WHAT DO MOST MAXIMALISTS ACTUALLY WANT? Really, what most Maximalists want is clear separation between Bitcoin and all the other stuff. As I see them, they are generally focused on promotion and support of Bitcoin. They may act to warn against false promises or against gambling on “cryptos,” or against inaccurate attacks on Bitcoin. They generally want the altcoiners to stop attacking Bitcoin as part of their marketing. Bitcoin has no centralized foundation with a marketing budget, but many altcoins do. Many altcoiners spend time trashing Bitcoin in public media as a means of marketing their altcoin. Altcoiners attacking Bitcoin is often a necessity because there’d be no need to even think about their altcoin unless you believed some FUD about Bitcoin. Historically, this has taken the form of, “Bitcoin isn’t fast enough, therefore use my faster altcoin.” In some cases, people associated with altcoins will explicitly sponsor attacks on Bitcoin. The executive chairman of Ripple, Chris Larsen, for instance, openly sponsored a $5 million attack on Bitcoin’s proof-of-work security (with a donation to Greenpeace USA). If altcoiners did not attack Bitcoin, and did not attempt to “ride the coattails” of Bitcoin by conflating things together in a “crypto” industry, there’d be far less conflict. MONETARY MAXIMALISM, NOT PLATFORM MAXIMALISM But Bitcoin Maximalism, as thought of in the context of Monetary Maximalism, can and should be contrasted with Platform Maximalism. The idea here is that everything should be built “on top of” Bitcoin and any alternatives should be discouraged completely. But I can rightly understand the critique of “Platform Maximalism” because not everything can be or should be built “on top of” Bitcoin. There will be some things that are simply not technically feasible to put on top of Bitcoin, or they would require making unacceptable trade-offs to do so, harming Bitcoin’s decentralization, strict supply cap, verifiability, accessibility or scalability. But critics of Bitcoiners will sometimes conflate and attack the Platform Maximalist view as though that is what all Bitcoin Maximalists believe, when Platform Maximalism is really a more rare view in practice. WHAT DOES “BEING BUILT ON TOP OF BITCOIN” MEAN, ANYWAY? Even this question becomes difficult to cleanly define. Most would say the Lightning Network, using bitcoin UTXOs to open/close channels, clearly is being built on top of Bitcoin. But when it comes to things like sidechains, federated sidechains, altcoin cross-chain swaps, etc., perhaps it’s less clear. For example, does a cross-chain atomic swap from Bitcoin to an altcoin count as being “built on Bitcoin”? Debatable. It certainly wouldn’t qualify as Bitcoin-only. That said, should stablecoins or IOU tokens be classified as altcoins, or just something different entirely? For example, the use of L-BTC on Liquid to represent pegged-in bitcoin IOUs seems an upfront and unobjectionable way to represent what’s going on. There is at least no altcoin that can be pumped and dumped by insiders onto unsuspecting retail investors. The amount of bitcoin pegged into the Liquid federation can be verified externally, and L-BTC can be viewed more like a money substitute, in the “money certificate” sub-category as outlined below: Source AND WHAT OF STABLECOINS? As for stablecoins, aren’t they just crypto-fiat? Firstly, the name is a bit misleading. They’re not really so stable, more just steadily declining, just like fiat currency is over time. Secondly, most people accept that for now, fiat is still dominant and that stablecoins may form part of the process of slowly shifting the world to a bitcoin standard. I could see pathways where some new users (often not in the Western world) start using stablecoins and then slowly transition over to using bitcoin once they are more comfortable. No matter how good stablecoins are for short-term payments, they are still not suitable for long-term savings. Stablecoins track fiat currency, which is continually decreasing in purchasing power. A key part of the case for Bitcoin maximalism is that billions of people around the world need something they can save with. This savings demand is also known as reservation demand, and it is a key component in the process of an asset becoming money. Source On the other hand, it’s also possible to see government regulatory action or legislative action come that regulates stablecoins in such a way that they lose their relative ease of use. For example, this could happen if stablecoins were to be regulated as money market funds, or with additional banking regulations that required KYC on every step of stablecoin use, or if private stablecoins were regulated heavily in favor of promoting government-issued central bank digital currencies (CBDCs). At that point, it would become even more clear that Bitcoin is uniquely censorship- and inflation-resistant. IS BITCOIN MAXIMALISM BORING? Is Bitcoin Maximalism boring or is it just consistent? Maybe savings shouldn’t be so “exciting,” anyway. What the world needs is definancialization, and part of that is the long-term process of sucking out the “monetary premium” that is currently held up in physical properties, stocks or bonds. Over time, we anticipate more people to choose Bitcoin, or “defect to” Bitcoin, if you like. Instead of stacking bonds, index ETFs or properties, people will stack sats. While savings might be “boring,” if we’re talking about exciting things, why not consider the impact that sound money would have on the world? There are all manner of sociological impacts that will come from bringing about non-state money. This is because fiat money changes culture. A lot of the altcoin projects seem more like chasing the next shiny thing, and they like to move fast and break things — but Bitcoin as a movement is about civilizational infrastructure. “BUT THERE ARE LOTS OF OTHER CHAINS WITH DEMONSTRATED VALUE” So, the claim that altcoins have demonstrated throughput or fees paid represents the protest of altcoiners that there are meaningful uses of altcoin chains and financial services being provided in a decentralized way. They argue that this will be a multi-chain world and some even go so far as to say that Bitcoin will be flippened because this activity is not taking place on Bitcoin. But really, how much of this was just because of the shitcoin casino factor? The leverage casinos can definitely pull a crowd, but is that the crowd that matters? Will these be the people who HODL through the big drawdowns, and stack consistently? Will these be the people who build companies, code and review software or build hardware that helps advance the Bitcoin monetary revolution? Altcoin promoters and apologists will point to the volume of transactions, fees paid, or total value locked (TVL), and the use of cross-chain “bridges” as to why it will supposedly be a multi-coin future. Some will argue that altcoins are building up an “economic engine.” But from the Bitcoin monetary maximalist POV, there’s little reason to continue holding utility coins anyway. See this critique of utility coins by Adam Back, CEO of Blockstream: Source It may well be that people use different rails to transfer value, but the Bitcoin revolution is very much about growing the base of HODLers/stackers/savers. Just like how you can use Zelle or PayPal or Cash App to send USD, the thing that helps the USD is that there are lots of people who want to hold it, and people who price their deals and exchanges in USD. So even if there is a lot of transactional flow on altcoin chains, or even if lots of stablecoins are flowing via altcoin chains, what matters is that bitcoin’s scarcity and overall qualities are valued by people. Even if bitcoin is “held on” Binance Smart Chain in a “smart contract,” how is this meaningfully different from say, bitcoin held by a custodian such as Coinbase, BitGo or the like? At the end of the day, all of Bitcoin’s coins are existing on Bitcoin’s ledger, there are just different custodians of it. The number of people HODLing bitcoin and wanting to stack it is what matters most. BITCOIN THE TOOL AND BITCOIN THE MOVEMENT Running with this idea from Sergej Kotliar of Bitrefill, it’s important for us to understand the difference between neutral “Bitcoin the tool” users, and those who are ideologically aligned with the Bitcoin movement (broadly speaking: cypherpunks and libertarians). Just as there are millions of BitTorrent users who would never go to a BitTorrent conference or consider themselves part of the “BitTorrent movement,” there are Bitcoin users who are similar. They use Bitcoin tools just by searching online for “best bitcoin wallet” or they use the already existing wallet by their providers e.g., wallet, as that has been around for ages. They even use shitcoin wallets like Exodus. Now, as maximalists and members of “bitcoin the movement,” we can certainly have our views about shitcoin wallets and companies that aren’t popular among Maximalists in the space ( or Coinbase as examples). But we do have to accept the reality that currently, shitcoin casinos have a lot more users. They may currently be able to drive more new users into shitcoin wallets than we can funnel into bitcoin-only non-custodial wallets. At least, for now. HOW BITCOIN THE MOVEMENT STILL WINS The main things that altcoins can’t match are the monetary properties and decentralization of Bitcoin. But in addition, they can’t match the size and quality of the Bitcoin movement. There are Bitcoin meetup groups around the world, developers working to advance the protocol and applications, peer-to-peer bitcoin trading in many cities and miners distributed around the world. Many people work to advance Bitcoin’s adoption because they believe it is the right thing to do. As a community of advocates, educators, builders — we do have the ability to drive the direction in terms of what gets built out, and the products and services that get taught to newcomers, especially if they are our family and friends. Altcoin communities are nowhere near as stable because the alts are so fickle, one day they are pumping 10 times, and the next it’s all gone bust or imploded. While the vast majority of altcoins that pump are basically one-hit wonders, as explained by Sam Callahan and Cory Klippsten of Swan Bitcoin, Bitcoin remains and carries on growing over time. Source While there are lots of users who aren’t strongly engaged with the movement, they do end up benefiting from the things done by “Bitcoin the movement.” I believe driving adoption of non-custodial scaling technology and privacy technology will be done by ideological Bitcoiners who want to ensure that Bitcoin remains freedom technology. And the benefits will flow down later to the “neutral” users who don’t really care that much either way. SUMMING UP So in summary, Bitcoin Maximalism is the view that we’ll live on a bitcoin standard. Maximalists want to clearly distinguish Bitcoin from “crypto.” They are focused on development, building, education and community growth. There is pressure not to shitcoin scam or shitcoin grift, and this is generally done for the sake of retail consumer protection. Other projects may exist, and they may even attempt to interoperate or connect with Bitcoin in some way, but ultimately, this is about the Bitcoin monetary revolution. *  *  * This is an opinion editorial by Stephan Livera, host of the “Stephan Livera Podcast” and managing director of Swan Bitcoin International. Tyler Durden Wed, 07/13/2022 - 17:00.....»»

Category: worldSource: nytJul 13th, 2022

Vleppo and Tokel make NFT rights legally enforceable in the real world leveraging Komodo technology

Kongens Lyngby, Denmark, 12th July, 2022, Chainwire A long-standing problem confronting the blockchain world and NFT owners is the distinct lack of contractual clarity and legal rights in the enforcement of digital asset transactions. Today, Vleppo and Tokel have successfully conducted a breakthrough digital procedure that will pave the way for the blockchain industry and […] Kongens Lyngby, Denmark, 12th July, 2022, Chainwire A long-standing problem confronting the blockchain world and NFT owners is the distinct lack of contractual clarity and legal rights in the enforcement of digital asset transactions. Today, Vleppo and Tokel have successfully conducted a breakthrough digital procedure that will pave the way for the blockchain industry and NFT owners to establish and enable their legal rights embodied in the NFTs and digital transactions to be made legally enforceable in the courts of law around the world.   In June 2022, Vleppo developed a Blockchain Contract Management System (“CMS”) that enables NFT owners to create a digital contract by embedding their NFT’s on-chain ID directly into the Blockchain record of the same digital contract. This seemingly simple digital procedure however has massive ground-breaking significance for the digital world.   Through this process, the NFT can now act as an immutable evidentiary anchor for the digital contract, forever linking the two together. This link is readily observable because Vleppo’s Blockchain system, called Alysides, which is a customized fork of the Komodo Protocol, is both public and permissionless.   This Vleppo Solution has for the first time finally addressed the longstanding concern of the blockchain industry and NFT owners about the lack of clarity on the legal enforceability of smart contracts as related to NFTs.   That Vleppo has developed a solution is most welcoming as well as providing a great sense of relief to holders of valuable NFTs.   For a contract to be legally enforceable it needs to fully satisfy the elements of (1) offer (2) acceptance (3) consideration (4) capacity of the parties to contract and (5) an intention between parties to create and be bound to legal relations. The first three elements are satisfied by any smart contract. Legal issues arise, however, when attempting to demonstrate that both parties intended to create legal relations and/or have the capacity to contract. This is because current smart contracts in isolation are incapable of definitively confirming that these qualitative elements of a legally enforceable contract have been met. Therefore, it is common practice for smart contracts to be accompanied by a separate natural contract.  By comparison, a digital contract or smart contract executed in the Vleppo CMS, where the ID of the NFT is embedded into the Blockchain record of the contract, ensures that the link between the NFT and underlying contract cannot be broken.   The Vleppo Solution is Blockchain agnostic as this unique solution delivers legal enforceability enhancement to NFT owners, regardless of whether the NFT is on Ethereum, Polygon, Solana, or any other Blockchain.  Furthermore, because of the Komodo Protocol’s superior design and lack of reliance on ‘gas-style’ transaction fees, Vleppo’s CMS can accommodate even the highly complex contractual arrangements in an affordable and efficient way in comparison to other popular protocols, such as Ethereum. Being Blockchain-enabled, Vleppo can provide further additional value-added services to users such as payments, escrow, and Blockchain-governed dispute resolution – essentially everything needed to execute and settle contracts.  Chris Sloan, Chair of the Emerging Companies Team at US legal firm Baker Donelson said: ‘The concept of, for example, embedding an NFT of a song into a Ricardian contract that defines a user’s rights with respect to that song is a nice marriage of the benefits of an NFT in terms of being able to track the distribution of a digital asset like that with traditional contract law’ during a panel discussion held on Thursday 7th July following the Vleppo and Tokel demonstration.  During the same panel discussion, Jesper Løffler Nielsen, Associate Partner at Focus Advokater, highlighted the disconnect between the desire and positivity in the EU to embrace Blockchain solutions for IP and action, referencing the 2019 “Blockchain Now and Tomorrow” European Commission Report stating ‘… but we (the EU) are moving slowly because that was in 2019 and now we are 2022 and as far as I know there hasn’t been any major leaps forward when it comes to recognizing some of these applications (of Blockchain and IP).’ Through the Vleppo CMS, a solution is now available to effectively manage the gap between the digital asset world and current legislation. Peter Coco, Vleppo’s CEO remarked “It has been a long slog. But it is a big delight for the Vleppo Team to be able to savor the sweet smell of success. At long last, the problem that has posed a challenge to the blockchain world and NFT owners, concerning the distinct lack of legal clarity and legal rights in smart contracts, is finally resolved. We would welcome the opportunity to help all blockchain companies and NFT owners to enhance their existing digital and smart contracts as well as their NFTs to be recognized as legally binding contracts in courts of law.”  Peter will be at DMCC Free Trade Zone in Dubai to meet with partners and investors in mid-late July to discuss the potential universe of applications of Vleppo’s technology and the next steps in helping owners of NFTs and other digital assets to unlock and monetize their value.  About Vleppo  Founded in 2018, Vleppo is a Web3 blockchain solution provider. Its applications have been focused on developing a Blockchain-integrated suite of business tools for freelancers, SMEs, and enterprises. For more information visit   Peter Coco can be reached directly via Telegram (@petercoco) and email (   About Tokel  Tokel is a platform that uses unique nSPV technology to deliver a simple, fast, and easy-to-use Blockchain NFT and token creation system. For more information visit   About Komodo Komodo is a community-oriented project, consisting of a customized version of the Bitcoin protocol (known as the Komodo Protocol) as well as a blockchain running on the Komodo Protocol.    Contacts Mr Peter Coco Vleppo ApS +380503161600 Updated on Jul 12, 2022, 8:02 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJul 12th, 2022

Crypto firm Voyager Digital files for bankruptcy amid large loan loss and contagion in the digital asset market

"This comprehensive reorganization is the best way to protect assets on the platform," Voyager told investors about its Chapter 11 filing. Fernando Gutierrez-Juarez/picture alliance via Getty Images Crypto lender Voyager Digital filed for Chapter 11 bankruptcy protection on Tuesday.  Voyager said it has been hurt by "prolonged volatility and contagion" in the crypto markets. The company also cited the failure of hedge fund Three Arrows to repay a loan as a reason it filed for protection.  Voyager Digital filed for bankruptcy protection on Tuesday as the crypto platform navigates through a meltdown in prices in the digital-asset market and its exposure to a hedge fund that failed to repay a multimillion-dollar loan. "This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers," CEO Stephen Ehrlich said in a press statement. In Chapter 11 filing with the bankruptcy court in the Southern District of New York, Voyager Digital listed Alameda Research Ltd. and Alameda Research Ventures among its creditors. Alameda, founded by crypto billionaire and FTX brokerage boss Sam Bankman-Fried, last month extended a loan to aid Voyager. Voyager's filing followed its warning in June that cryptocurrency hedge fund Three Arrows Capital, or 3AC, hadn't repaid a loan of 15,250 bitcoin and $350 million of the USDC stablecoin, amounting to more than $660 million. Three Arrows last week filed for Chapter 15 bankruptcy, crippled in part by its own exposure to the collapse of cryptocurrency luna. Meanwhile, the so-called "crypto winter" in the cryptocurrency market has pulled the market's valuation to roughly $905 billion after hitting an all-time high above $3 trillion in November. Bitcoin on Wednesday traded around $20,000, sliding from its all-time high above $68,000 in November. The "prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital on a loan from the company's subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now," said Ehrlich. Voyager said it has more than $110 million of cash and owned crypto assets on hand that will provide liquidity to support day-to-day operations during the Chapter 11 process.Crypto lenders Vauld and Celsius Network have also been hit by the crypto-market crisis, forcing each to recently suspend withdrawals. Celsius has paid down $183 million of its debt to decentralized exchange Maker, according to CoinDesk, citing blockchain data. Voyager Digital CEO Steve EhrlichVoyager Read the original article on Business Insider.....»»

Category: personnelSource: nytJul 6th, 2022

The Crypto Industry Was On Its Way to Changing the Carbon-Credit Market, Until It Hit a Major Roadblock

Crypto entrepreneurs hoped to revolutionize the carbon credit market to fight climate change. They've been met with resistance. Last year, the startup Toucan launched with a bold vision: it was going to use the blockchain to upend the entire carbon credits system. The traditional voluntary carbon market—in which polluting companies can pay for credits that fund emission-reducing efforts—was disorganized, archaic, and lacked incentives, Toucan’s founders argued. By pushing carbon markets onto the blockchain—a public and decentralized database—they felt they could turbocharge the climate fight with crypto economics, provide a global infrastructure data layer, and force polluting companies to either pay higher prices for carbon credits or seek more environmentally friendly approaches to their businesses. And upend the system they did—though not necessarily in the ways that they hoped. Toucan’s aim was to create infrastructure to facilitate the buying of carbon credits, which would be retired and then placed on-chain in the form of a new token. From there, the tokens would be stored publicly and safely, and could then be bought and traded like any other crypto asset, with the hopes of enticing prospective buyers who previously had no interest in the carbon credit world. And in October, millions of carbon credits started arriving on chain thanks to a campaign from another crypto environmental group called KlimaDAO. But many of them were attached to low-quality, long-dormant projects that didn’t actually improve the environment, according to some scientists and watchdogs. Market prices swung wildly, causing mild panic among traditional carbon-credit issuers and buyers. [time-brightcove not-tgx=”true”] Now, after several months of deliberation, Verra, the primary carbon credits issuer and a standard-bearer for the industry, has taken a stand against Toucan’s activity. On May 25, Verra announced it would ban the conversion of retired Verra credits into crypto tokens, which is Toucan’s central mechanism. After just seven months, the first phase of the crypto’s supposed carbon-credit revolution is over. Verra did open the door for a potential new chapter of collaboration, in which only live Verra credits could be tokenized. This would give Verra greater control and oversight over the flow of credits throughout these new markets. But Robin Rix, the chief legal, policy, and markets officer at Verra, told TIME that while his organization definitely wants to scale up the carbon-credit market, it is now leaning towards trying to do so through bank-led initiatives, like Carbonplace, as opposed to crypto ones. The decision will force Toucan and others to make a hard pivot in their operational models. Toucan’s initial response about Verra’s news was cautiously optimistic: it believes that Verra’s actions show Toucan’s outsize impact, and that despite Verra’s rhetoric about preferring banks, Toucan will nonetheless somehow play a role in this next stage of innovation. Carbon credit insiders, for their part, believe that while crypto carries long-term potential in the fight against climate change, many difficulties and obstacles stand in the way in the creation of a streamlined system that all parties are happy with. “Both crypto and carbon are pretty complex and difficult—And when you put them together, it’s like difficulty squared,” says Ollie Gough, strategy lead for the carbon-rating startup Sylvera. “Mistakes have been made—and we’re waiting to see how it pans out.” Streamlining a messy market The voluntary carbon market was developed in the ‘90s as a means by which companies in industries ranging from air travel to banking to oil could, in theory, track and offset their CO2 emissions. The idea was to ascribe a specific cost of the environmental damage of CO2 emissions, and then enable companies to purchase carbon offsets, which were similarly cost-assessed based on their ability to reduce environmental damage. Those credits might be tied to a forestation project, say, or a new wind farm. But three decades later, the carbon market is still largely unregulated and fragmented, with interested parties squabbling over criteria for inclusion and decision-making processes. Several studies have shown that the system has overvalued projects that have had little-to-no positive impact on the environment. One study from last year, for example, found that many forest-growing carbon-reduction projects in California systemically over-exaggerated their climate benefits. “I am continually underwhelmed by the quality we’re seeing,” Grayson Badgley, a co-author of that study and a research scientist at the climate nonprofit CarbonPlan, says. “I think there are a lot of low-quality carbon-offset projects that are out there, and I think their usefulness has been exaggerated.” Crypto proponents believe the blockchain could be wielded to keep a streamlined public record of the whole system. The blockchain, for example, could help solve the problem of “double counting,” in which two parties claim credit for the same emission-reducing action. Many members of the traditional carbon world were immediately intrigued. “It’s important to understand how untransparent the markets are,” Gough says. “This was really the first time ever you had some sort of indices roughly tracking the price at which the market was paying for carbon in a very public format.” Sweeping the floor Toucan hoped that other crypto projects would build on top of its infrastructure. In October, an organization called KlimaDAO did just that, creating its own token, Klima, that could be acquired with Toucan’s token, BCT, with the hopes of turning carbon credits into an in-demand market commodity. If crypto traders got involved and started investing in these tokens, KlimaDAO’s team argued, they might drive the price of the credits up, forcing polluting companies to either pay for higher-priced, higher-quality carbon credits or find more energy-efficient production methods. KlimaDAO’s first approach was what they called “sweeping the floor,” or rallying crypto enthusiasts to buy the cheapest carbon credits available via Toucan. (Cheaper credits are often attached to projects that the market has determined are of dubious environmental value, like Chinese hydropower dams.) The idea was to take all of the bad credits out of commission, so that only the better and more expensive ones remained. And crypto traders eagerly jumped in: in Toucan’s first six months, more than a quarter of all carbon credits bought on Verra were done so via Toucan and transferred on-chain. But there was one problem: most of these bad credits hadn’t been in circulation for years, because established carbon credit buyers already understood their lack of worth. Because of their age, many of these credits weren’t even eligible to be sold on some established trading markets. So instead, KlimaDAO’s tokens created fake value for worthless carbon-credits, worsening the situation. Suddenly, dozens of old projects that were once deemed unsellable began to reemerge, taking advantage of a gold rush and offering themselves up to this new clientele. “We aren’t convinced that ‘sweeping the floor’ is doing anything but increasing churn in a market that needs fundamental reform, not new software platforms,” Badgley and Danny Cullenward, policy director of Carbonplan, wrote on the non-profit’s website in April. The Toucan team, first excited by KlimaDAO’s entrance, now watched with alarm as scientists and carbon credit issuers like Verra began to criticize or distance themselves from crypto carbon projects. “I do think that hype ultimately wasn’t beneficial for everyone. It pushed expectations and prices into areas that made zero sense,” Raphaël Haupt, co-founder of Toucan, says. “And it’s really hard for an infrastructure provider like Toucan to suddenly have to play the police.” For months, the Toucan team debated on the best way to excise these bad credits from the system. In May, they finally changed their criteria to ban old, low-integrity credits. But the gaffe made clear the perils of a brash approach to a complicated problem. Haupt argues that Toucan had no choice but to take an imperfect approach—and that by doing so, they were able to both galvanize the crypto world’s interest while forcing issuers like Verra to adapt to their methods. “We don’t see retirement as the right way of doing things, but it was the lack of a clear system that forced us to take this route,” he said. “It was the first little door we could open to match the demand that exists right now.” Bigger problems with carbon credits Toucan’s efforts exposed some of the baseline flaws of the carbon market: the lack of a single standard of quality, and the likelihood that many sub-optimal projects end up being valued even if they aren’t helping the environment. In 2020, Greenpeace even went as far as calling the entire system “​​a distraction from the real solutions to climate change,” like actually reducing the emissions from fossil-fuel energy generation. Gough, at Sylvera, says it’s extremely difficult to establish a simple set of criteria for valuating carbon-offset projects because of all of the different factors in play. “You can try and do it by registry, age, or project type, but it doesn’t work: You will let some things in of low quality, and you will cut out actually high quality stuff,” he says. This year, a carbon-offset task force of hundreds of companies and sustainability experts were forced to scale back their efforts because they couldn’t agree on how to define a high-quality project. Meanwhile, many carbon-reducing programs already set in motion have also raised questions about viability. A recent study by Kyla Mandel in TIME found that current reforestation plans would require nearly 1.4 million square miles to meet their goals, which is nearly half of the continental United States. Even if all those trees get planted, there’s no guarantee of their long-term impact. “Trees can die, burn, or get chopped down,” says Badgley, all of which immediately negate any CO2 offsetting they’d offered. More crypto confusion Environmentalists and carbon market experts are also concerned by the volatility crypto introduces into their efforts. So much of crypto markets is currently fueled by speculation: the desire for traders to make money fast on tokens that swing wildly in value. “If [carbon-offset] prices keep fluctuating as widely as some of the crypto assets have been fluctuating, that makes it difficult…to plan and develop” carbon-reduction projects, says Ben Rattenbury, vice president of policy at Sylvera. In recent weeks, values have been depressed across the crypto world, and carbon crypto projects are no exception: As of writing, Toucan’s BCT token is less than half of what it was in February, and KlimaDAO’s token is a third of what it was in March. The number of credits coming on chain through those two projects has essentially grinded to a halt; with prices so low, there’s very little incentive for people to enter the market. Haupt, at Toucan, says he’s fine with this slowdown. “We’re in the consolidation phase. We came out guns blasting more than we thought,” he says. “We’re building this long-term, and it’s cool to have the opportunity to speak with different people on how they see the world and make sure we build a functioning system.” Toucan is far from the only player in this space. Since its launch last year, venture capital money has flooded into the space and a slew of new crypto carbon projects have been launched, each one jockeying for attention with what they argue is a unique twist or perspective. There’s Chia, an independent blockchain that’s forged a partnership with the World Bank’s Climate Warehouse; Flow Carbon, which is backed by WeWork founder Adam Neumann and just raised $70 million; Open Forest Protocol, Moss, and many more. Some of the projects collaborate and are interoperable; others are not. Many players in the space expect that some sort of consolidation will happen, although there is little agreement on exactly how that might come to pass. “Now we have like a trillion carbon projects that all want to bring carbon to web 3 that all use their own tokens and are not compatible with each other,” Haupt says. And then there’s the question of the climate harm of these blockchain projects themselves. In March, President Biden signed an executive order requesting research on the potential climate impact of digital assets, given the high energy costs of crypto mining. A letter written in response, penned by a climate-focused blockchain committee that included members of Toucan, conceded that “currently, Blockchains do have an energy problem,” before pledging to make the entire crypto industry net-zero in terms of greenhouse gas emissions by 2040, in part by switching completely to renewable sources of energy. (Some critics are skeptical that this is an achievable goal.) Verra halts Toucan’s activity Verra’s decision to stop the tokenization of retired credits means Toucan’s main activity will halt for the foreseeable future. Meanwhile, it’s unclear what will happen to 22 million retired credits that have already been placed on chain, and whether they will be worth anything going forward. Both the Toucan and Klima tokens dropped severely in price following Verra’s decision. The Twitter user who goes by Rez and is the head of protocol for the climate-crypto community Solid World DAO wrote on Twitter that Verra’s announcement sent the climate-crypto markets “into a sort of existential limbo.” Crypto carbon proponents hope they will be able to help Verra build a new system of tokenizing “live” credits as opposed to retired ones. But Verra’s legal officer Rix told TIME that Verra is leaning toward working with a project like Carbonplace, which was created by a consortium of banks including CIBC and UBS. Carbonplace has many similar aims to Toucan, including to scale and organize carbon markets. But crucially, it operates on a closed, proprietary system, as opposed to the blockchain, which theoretically allows anyone to see its code, contribute to its governance processes, and build on top of it. Verra choosing a more centralized project like Carbonplace would also allow greater control over who buys credits; Rix expressed concern over crypto tokens being used for shady purposes like laundering money. “Banks have sophisticated KYC [know-your-customer] processes in place. They’re regulated entities,” Rix says. “That strikes us as a very good model to follow and a way to work with credible leading financial institutions.” When asked if crypto projects could play a role in this next stage of development, Rix didn’t rule it out, and said Verra would begin a public consultation process. “It doesn’t have to be banks. It could be any entity that has sophisticated KYC checks and the infrastructure to be able to do this,” he said. “But [banks] are probably the direction things are going.” Haupt, in an interview on Wednesday morning, held out hope that Toucan and other crypto entities would be involved moving forward. “Given the point we are in this climate crisis, I don’t think restricting the amount of innovation you can have around this is the right way to go,” he says. “I personally think this is unstoppable: I don’t see a world in which only banks will have the monopoly over carbon.”.....»»

Category: topSource: timeMay 26th, 2022

The Real Reasons Behind the Crypto Crash, and What We Can Learn from Terra’s Fall

UST's downfall could have short-term and long-term ripple effects, especially as skeptical legislators like Elizabeth Warren survey the damage Crypto markets are in freefall this month—and their struggles have been gravely exacerbated by the demise of a $60 billion project that critics are calling a Ponzi scheme. The project in question is TerraUSD (UST), a stablecoin pegged to the U.S. dollar that its supporters hoped would upend traditional payment systems across the world. But it was wiped out in the span of days when investors panicked and tried to pull out their money, causing a vicious, self-enforcing bank run. The crash bankrupted many investors and pulled down the entire crypto market with it: over $400 billion in value was wiped out in terms of crypto market capitalization. [time-brightcove not-tgx=”true”] “This is among the most painful weeks in crypto history & one we’ll reckon with for a long time to come,” Jake Chervinsky, the head of policy at the DC-based lobbying firm Blockchain Association, wrote on Twitter. While Terra investors were the ones most immediately hurt, its downfall could have both short-term and long-term ripple effects for crypto and beyond, especially as skeptical legislators and regulators survey the damage. “People have lost their life savings through crypto investments, and there aren’t enough protections in place to safeguard consumers from these risks,” Massachusetts Senator Elizabeth Warren wrote in a statement to TIME. “We need stronger rules and stronger enforcement to regulate this highly volatile industry.” Here’s what happened, and what lies in store following the debacle. What happened, exactly? Terra’s rapid rise and fall can be difficult to explain succinctly without any prior knowledge of the blockchain. In fact, many of its boosters hid behind obfuscation and jargon to rebut some of its obvious flaws. Here’s a brief explanation. Terra is its own blockchain, just like Bitcoin or Ethereum. Its foremost product is the UST stablecoin, which is pegged to the U.S. dollar. Stablecoins are used by crypto traders as safe havens for when markets in DeFi (decentralized finance) get choppy: instead of converting their more volatile assets into hard cash, which can be expensive and trigger tax implications, traders simply trade them for stablecoins. Some stablecoins derive their value from being fully backed by reserves: if investors decide they ever want out, the stablecoin’s foundation should theoretically have enough cash on hand to repay all of them at once. UST, on the other hand, is an algorithmic stablecoin, which relies upon code, constant market activity, and sheer belief in order to keep its peg to the dollar. UST’s peg was also theoretically propped up by its algorithmic link to Terra’s base currency, Luna. For the last six months, investors have been buying UST for one main reason: to profit off a borrowing and lending platform called Anchor, which offered a 20% yield to anyone who bought UST and lent it to the protocol. When this opportunity was announced, many critics immediately likened it to a Ponzi scheme, saying it would be mathematically impossible for Terra to give such a high return to all of their investors. Terra team members even acknowledged that this was the case—but likened the rate to a marketing spend to raise awareness, in the same way that Uber and Lyft offered severely discounted rides at the beginning of their existence. But some blockchain experts say that last week, wealthy investors pulled off a maneuver in which they borrowed huge amounts of Bitcoin to buy UST, with the intention of making huge profits when the value of UST fell, otherwise known as short-selling. This caused UST to depeg from the dollar. A bank run ensued, with investors who had earned interest via Anchor scrambling to get out the door before it was too late. Their activity caused the linked currency Luna to also crash in what is known as a “death spiral.” As of now, UST is worth 12 cents, and Luna is worth fractions of a penny after being worth as much as $116 in April. The life savings of many Terra and Luna investors vanished in a matter of days. The r/Terraluna subreddit filled with people opening up about their mental health issues and contemplating suicide. “I’m going through some of the darkest, most severe mental pain of my life. It still doesn’t seem real that I lost $180,000,” one poster wrote. Terra dragged down Bitcoin and the whole crypto market Before Terra’s crash, cryptocurrency values were already on the decline, due in part to the Federal Reserve raising its interest rates. (They did so to stop inflation, which has caused people to spend less money.) But UST’s crash put another dent in the overall market, most centrally because Terra creator Do Kwon had bought billions worth in Bitcoin as a safeguard for UST. When he and the Luna Foundation Guard deployed more than $3 billion to defend the peg, in doing so he caused downward pressure on the market, causing other large investors to sell off their Bitcoin shares. Bitcoin hit its lowest point since December 2020, and Kwon’s ploy to save UST was unsuccessful. “The way these algorithmic stablecoins are designed, they have this upward force during bull markets, which is how they get so popular,” says Sam MacPherson, an engineer at MakerDAO and the co-founder of the software design company Bellwood Studios. “But the same forces act in reverse during bear markets and expose their fundamental flaws. So that is eventually what triggered [the crash].” The ripple effects were felt throughout the crypto ecosystem. Because firms sold around $30,000 of Ether in their own attempt to defend UST’s peg, Ether also plunged below $2000 for the first time since July 2021. As many investors tried to cash out their Ethereum-based stablecoins, their sheer number of transactions caused Ethereum’s transaction fees to spike, causing people to forfeit even more money. Coinbase, one of the crypto world’s biggest and most mainstream companies, slumped 35% last week. And the NFT ecosystem plunged 50% over the last seven days by sales volume, according to Cryptoslam. The cumulative effect was the loss of hundreds of billions of dollars across the ecosystem. Many worry that Terra’s crash is the first domino precipitating a long-foretold “crypto winter,” in which mainstream investors lose interest and values remain low for months.“ I suspect some cryptocurrencies will be worthless and that capital investment in the space will slow to a crawl as investors nurse their losses, much as we saw in the Internet bubble,” Bloomberg’s Edward Harrison wrote. So, what could happen next as a result of the crash? Regulations could tighten Stablecoins have long been drawing the scrutiny of regulators. Congress held a hearing weighing their risks and benefits in December. The same month, President Biden’s working group called for “urgent” action to regulate them. Terra’s crash gives even more ammo to regulators who argue that the space needs to be roped under government control. On May 12, Treasury Secretary Janet Yellen called for “comprehensive” regulations of stablecoins, saying that while the current crash is too small to threaten the whole financial system, stablecoins are “growing very rapidly. They present the same kinds of risks that we have known for centuries in connection with bank runs.” Hilary Allen, a professor at American University Washington College of Law who testified about the risks of stablecoins at the congressional hearing in December, says that the fallout of the Terra crash gives us a glimpse of what could be in store should crypto move toward the mainstream without regulation. “In a few years time, something like this could have many more pathways to cause broader harm, especially if the banks continue to get closer to this space,” she says. “I think it’s critical that regulators and policymakers see this moment as a time to put up whatever firewall they can between the traditional financial system and DeFi.” Massachusetts Representative Jake Auchincloss tells TIME that he’s in the process of drafting legislation requiring stablecoins to be federally audited. Auchincloss doesn’t seek to ban stablecoins, as he believes they could play a role in “keeping the U.S. dollar as the world’s reserve currency.” But he hopes to bring stablecoins under the purview of a federal bureau like the Comptroller of the Currency; to make sure stablecoin issuers can prove they have 90 days of liquid reserves; and to explore the idea of mandating that they provide insurance for customers. “We’re going to let private sector actors make their own risk-reward decisions, and we’re going to empower the federal government to ensure that there’s no systemic risk forming from the sector,” he says. Senator Warren has been one of the most vocal public detractors of crypto, and took Terra’s collapse as evidence for why regulators need to “clamp down” on stablecoins and DeFi “before it is too late.” Across the Atlantic, the European Commission is considering implementing a hard cap on the daily activity of large stablecoins, according to Coindesk. Much of the crypto world, meanwhile, seems to have become resigned to the reality of incoming regulation. “A lot of lives have been ruined. The rest of the crypto ecosystem needs to be open to working with regulators such that we can deter these types of situations from happening in the future,” MacPherson says. Boundary-pushing stablecoins might be over For many years now, ambitious blockchain developers have embarked upon the quest of creating a functional and safe algorithmic stablecoin, in the hopes that they might be more resistant to inflation than reserve-backed stablecoins and less susceptible to governmental oversight or seizure. But all of them eventually lost their peg and failed. UST, for a few months, was the medium’s crowning success story—and now is its biggest failure. Its crushing defeat will cast a long shadow over any developer that tries it next: venture capital firms and investors will likely be much more leery of jumping into similar models. Two other boundary-pushing stablecoins, Frax and magic internet money (MIM), saw massive drops in their market caps last week despite holding their peg to the dollar. “I think this has rightly destroyed any faith in the algorithmic stablecoin model,” Allen says. “It’s quite possible after Terra, we might never see them again—although I never say never when it comes to crypto.” Over the last week, many leaders in the crypto community have scrambled to distance UST from other types of stablecoins, arguing that reserve-backed stablecoins are comparatively secure and should be allowed to continue to flourish with minimal regulation. Chervinsky, at the Blockchain Association, wrote on Twitter that UST was “in a category of its own,” compared to other models that are “very stable and reliable.” Matt Maximo, a researcher at the crypto investor Grayscale Investments, wrote to TIME in an email that UST’s crash could lead to more demand for dollar-backed or overcollateralized stablecoins. Allen, however, argues that reserve-backed stablecoins still carry risk. “The best analogy with these reserve stablecoins is with money market mutual funds,” she says, referring to a type of fund whose failure helped trigger the 2008 financial crisis. “And those have had runs and have been bailed out.” (The economics journalist Jacob Goldstein made the same comparison in TIME’s Future of Money issue in October.) Venture capital may stop pouring money into crypto Over the past couple years, an astonishing amount of money has flown into the crypto space via venture capital firms, perhaps most notably from Andreessen Horowitz. Terra itself was the beneficiary of a slew of brand-name investors, including Pantera Capital and Delphi Digital. UST’s crash could raise mistrust on both sides. “It is likely that many of the institutions that have invested in the space may see significant short-term losses, resulting in a slowdown in venture investing,” Maximo writes to TIME. Chris McCann and Edith Yeung, general partners at the crypto-focused VC firm Race Capital, told Bloomberg this week that they had heard of deals falling apart, being repriced, or even founders getting “ghosted” by potential investors. MacPherson, on the other hand, turned the blame for Terra’s crash in part onto the VC firms that lent their institutional trust to the perilous project. “I think they should take some responsibility with how they’ve ruined some of these regular folks who invested in UST not knowing the de-peg risk,” he says. “Some of the [firms] made a lot of money off this, and I think they should compensate those who have lost.” At the moment, Terra’s major investors are being forced to decide whether to help bail the project out or cut and run. Many of them have been awfully quiet over the last week. Michael Novogratz, the billionaire founder and CEO of Galaxy Digital who got a giant Luna shoulder tattoo in January, has not tweeted since May 8. A representative for Lightspeed Venture Partners, a major crypto-focused firm that invested $250,000 in the Luna token, wrote that they remained committed to the space. “Lightspeed has been investing in blockchain for over 8 years. We see this as a computing paradigm shift that is bigger than the ebb and flow of the short term price of Bitcoin. We are doubling down, specifically in infrastructure, DeFi and emerging use cases,” they wrote. The hype over decentralized finance may be slowing Much of the promise of crypto lies in its decentralized nature: that its value doesn’t derive from manipulable controlling authority like a bank or a government, but rather sleekly-designed code and network effects. This week, some crypto enthusiasts have argued that Terra’s crash was a successful stress test for this hypothesis: that Bitcoin’s perseverance amid such a giant sell-off proves its durability. But Terra’s crash did reveal many centralized pressure points in the ecosystem, which, if they didn’t break, at least bent significantly. While there’s no CEO of crypto, one charismatic founder—Terra’s Do Kwon—was able to single handedly create a project that then erased hundreds of billions of dollars in value. He then used his position of power to defend his coin in the same way that the Federal Reserve might, in turn crushing the entire market. Kwon did not immediately respond to a request for comment. The attack showed the vulnerability of Curve pools—decentralized exchanges in which prices can shift quickly due to whales exiting or entering them—and Binance, the world’s largest cryptocurrency exchange, which did not have deep enough liquidity to sustain the massive amounts of UST entering circulation. In fact, the Terra saga shows that blockchain’s decentralized nature allows bad actors to have an outsized impact on the system. But many enthusiasts say that events like this actually help weed out those trying to take advantage of the system, and will lead to a more robust and more educated user base going forward. “The permissionless nature of the blockchain means that we can’t prevent it,” MacPherson says. “But I think we should do a better job of informing the public what the risks are.” Ponzi schemes might find fewer takers… or not Whether the debacle sticks in people’s minds as a learning experience is another question entirely. On Thursday, the controversial crypto entrepreneur Justin Sun announced an algorithmic stablecoin with 40% APR for lenders. Galois Capital, in a snarky response, tweeted: “This industry being a self-regulating one requires that learning happen. The results were mixed.” It seems that there are still plenty of crypto investors who will accept extremely high risk, so long as the prospect of extremely high riches remains......»»

Category: topSource: timeMay 17th, 2022

Bitcoin Is Peace For The 9/11 Generation, Part 1: The Dollar Is Not Safe

Bitcoin Is Peace For The 9/11 Generation, Part 1: The Dollar Is Not Safe Authored by Joe Consorti via Bitcoin Magazine, The perpetual warfare of the last two decades will lose its source of funding as we transition from fiat money to Bitcoin... ENDLESS WARS — ENDLESS PRINTING Sunday, April 29, 2001: for four months and 13 days, I was alive prior to the attacks on September 11. For practically my entire life, the United States has been embroiled in endless conflict. After Afghanistan’s refusal to extradite Osama bin Laden, George W. Bush declared war on Al Qaeda, dubbed the “war on terrorism.” This was the next evolution in a series of wars on the abstract. That statement is not to take away from the tremendous grief and tragedy of the situation. Thousands of Americans lost their lives on 9/11, and thousands more would lose their lives in the decade-long wars to follow. When the United States engages in war in its many forms, how do we finance it? The U.S. used to issue war bonds, and in times of strife the country would band together and purchase these bonds to help our brothers overseas — it was an act of patriotism. However, after the U.S. left the gold peg initially during WWI in 1913, there was no going back. Issuing paper currency during the battle was far easier, especially considering how frequently we’d be going to war in the decades after The Great War. To finance war, the government increases the supply of U.S. dollars domestically and abroad, both devaluing its own debt and increasing the invisible monetary burden of inflation on its citizens. However, this essay seeks to lay out the utility of going to war — why does the United States roll out its printing press at the first sign of trouble? Why are we seemingly eager to engage in a conflict, whether it’s a physical threat abroad or a metaphysical threat at home? Bitcoin offers a solution. A fixed supply of money, with no internal control over new issuance in times of great need. Sound money fixes irresponsible spending, because it introduces a higher price tag to every decision that gets made. This new cost is that of scarcity — do we dare wager our finite supply of money on this new venture? Bitcoin is difficult to seize. During war time, the government cannot barge into homes and demand families to forfeit their bitcoin, since bitcoin can be kept privately in a cold wallet using a private key, which can be memorized. Taxation isn’t so easy when you can store your wealth in your head — with seizure near impossible, a return to a fiat standard for those acclimated to a bitcoin standard would be improbable. With sound money, programmatic issuance, and immutable protocol rules, those with the tanks are forced to make prescient decisions about when, where, and why to spend their money. Bitcoin is sound money. The United States has no control over its issuance rules. The government is more than welcome to fire up some ASICs, mint new supply, and capture some transaction fees, but in times of great need, there is no way to magically create money to finance whatever efforts the government deems fit. Since unfettered money printing is no longer an option, this puts a far greater cost on entering new wars. Whereas currently, the incentives are aligned with going to war, so new money issued means debasement of the national debt at the expense of the currency-holders’ real wealth; on a bitcoin standard however, the incentives are aligned to avoid war at all costs, opting instead to make prudent decisions that are in the interest of upholding security at home. This infeasibility to engage in endless foreign conflict is why bitcoin represents peace for the 9/11 generation. THE DOLLAR IS NOT SAFE Your dollars get debased when wartime spending kicks in. When the United States government identifies a threat which they deem a matter of national security, the buck lies with them to lay out the best course of action. According to “The Bitcoin Standard,” by the end of WWI, Germany and Austria had seen 48.9% and 68.9% currency depreciation in comparison to the Swiss franc — which was still on a gold standard. In the fiat monetary system, the solution to every problem is to always create new money. Instead of strategizing prudently, the incentives are structured to benefit the central bank if more money is created instead. Think about it: At the time of writing, the United States government is burdened by approximately $30 trillion of debt. How do you suppose the United States is planning on paying that down? They won’t be austere — no politician would be elected on a platform that limits spending. They can’t have every citizen explicitly pay it off through taxes — no politician would be elected on a platform that taxes each citizen over $90,000. They can devalue their debt in real terms by creating new money. Ultimately, the burden lies with the citizens — as their savings lose value to the invisible tax of inflation. The government penalizes people trying to opt out of this melting ice cube with capital gains and appreciation taxes. The return to a sound money standard is unlikely at the current moment, given that responsible decision-making from the United States government would be required. So, at the governmental level, the problem of preventing your decaying wealth will not be solved. At an individual level, you can circumnavigate the devaluing of your wealth through savings technologies like Bitcoin. With a fixed 21 million supply, rest assured your savings cannot be diluted. “You are welcome to keep your savings in USD, but when bad things happen, they will create more USD, diluting your share of total USD.” — Blockware Solutions Bitcoin Mining Analyst, Joe Burnett With bitcoin, your ownership percentage of the asset will always remain constant, your share can never be diluted. When bad things happen, the powers that be fire up the money printers, add to their balance sheet like there’s no tomorrow, and pass the flaming hot potato to the population — letting them deal with their imprudent spending. Anybody else getting Marie Antoinette, “let them eat cake” vibes? In part two, we’ll explore some of the abstract wars the U.S. has engaged in over the last half-century, to build out the case as to why the dollar is not safe and how commodities like bitcoin represent peace for the war-torn and weary citizens of the United States. *  *  * You can find me on Twitter @JoeConsorti, thanks for reading. Tyler Durden Sat, 03/26/2022 - 17:30.....»»

Category: blogSource: zerohedgeMar 26th, 2022

The Dollar: A Victim Of Its Own Success?

The Dollar: A Victim Of Its Own Success? Authored by James Rickards via, America’s most powerful weapon of war does not shoot, fly or explode. It’s not a submarine, plane, tank or laser. America’s most powerful strategic weapon today is the dollar... The U.S. uses the dollar strategically to reward friends and punish enemies. The use of the dollar as a weapon is not limited to trade wars and currency wars, although the dollar is used tactically in those disputes. The dollar is much more powerful than that. The dollar can be used for regime change by creating hyperinflation, bank runs and domestic dissent in countries targeted by the U.S. The U.S. can depose the governments of its adversaries, or at least blunt their policies without firing a shot. Consider the following. The dollar constitutes about 60% of global reserves, 80% of global payments and almost 100% of global oil transactions. European banks that make dollar-denominated loans to customers have to borrow dollars to fund those liabilities. Being based in Switzerland or Germany does not allow you to escape from the dollar’s dominance. The U.S. not only controls the dollar itself. It controls the dollar payments system. This consists of the Treasury’s digital ledger of holders of U.S. debt, the Fedwire payments system among U.S. Fed member banks and the Clearing House Association (successor to the New York Clearing House and proprietor of CHIPS, the Clearing House Interbank Payments System) composed of the largest U.S. banks. A dollar payment going from a bank in Shanghai to another bank in Sydney runs through one of these U.S.-controlled payments systems. In short, the dollar is the oxygen supply for world commerce and the U.S. can cut off your oxygen whenever it wants. The list of ways in which the dollar can be weaponized is extensive. The U.S. uses the dollar to force its enemies into fronts, crude barter or the black market if they want to do business. Examples of the U.S. employing these financial weapons are ubiquitous. The U.S. slapped sanctions on Russia after the 2014 annexation of Crimea and invasion of Eastern Ukraine. The U.S. waged a full-scale financial war with Iran from 2011–13 that resulted in bank runs, hyperinflation, local currency devaluation and social unrest. The U.S. slapped stiff penalties on China for theft of intellectual property. Other obvious victims of U.S. financial weapons are North Korea, Syria, Cuba and Venezuela. The actions described above did not arise in the normal course of trade and finance. The Russian, Iranian and other sanctions noted are explicitly geopolitical, while the Chinese sanctions are geostrategic to the extent the U.S. and China are vying for technological supremacy in the 21st century. None of these sanctions would be effective or even possible without the use of the dollar and the dollar payments system. Yet for every action there is a reaction. America’s adversaries realize how vulnerable they are to dollar-based sanctions. In the short run, they have to grin and bear it. They’re fully invested in the dollar both in their reserves and in the desire of their largest companies like Gazprom (Russia) and Huawei (China) to become major global players. Our adversaries and so-called allies are not standing still. They are already envisioning a world where the dollar is not the major reserve and trade currency. In the longer run, Russia, China, Iran and others are working flat-out to invent and implement non-dollar transactional currencies and independent payments systems. I’ve been warning for years about efforts of nations like Russia and China to escape what they call “dollar hegemony” and create a new financial system that does not depend on the dollar and helps them get out from under dollar-based economic sanctions. These efforts are only increasing. Gold is the oldest form of money. The use of gold is the ideal way to avoid U.S. financial warfare. Gold is physical so it cannot be hacked. It is completely fungible (an element, atomic number 79) so it cannot be traced. Gold can be transported in sealed containers on airplanes so movements cannot be identified through wire transfer message traffic or satellite surveillance. Russia, for example, can settle its balance of payments obligations with gold shipments or gold sales and avoid U.S. asset freezes by not holding assets the U.S. can reach. Russia is providing other nations a model to achieve similar distance from U.S. efforts to use the dollar to enforce its foreign policy priorities. Even Europe is showing signs it wants to escape dollar hegemony. The German foreign minister has called for a new EU-based payments system independent of the U.S. and SWIFT (Society for Worldwide Interbank Financial Telecommunication) that would not involve dollar payments. SWIFT is the nerve center of the global financial network. All major banks transfer all major currencies using the SWIFT message system. Cutting a nation off from SWIFT is like taking away its oxygen. The U.S. had previously banned Iran from the dollar payments system (Fedwire), which it controls, but Iran turned to SWIFT to transfer euros and yen in order to maintain its receipt of hard currency for oil exports. In 2013, the U.S. successfully kicked Iran out of SWIFT. This was a crushing blow to Iran because it could not receive payment in hard currencies for its oil. This pushed Iran to the bargaining table, which resulted in a nuclear deal with the U.S. in 2015. But in the longer run, this is just one more development pushing the world at large away from dollars and toward alternatives of all kinds, including new payment systems and cryptocurrencies, possibly backed by gold. Imagine a three-way trade in which North Korea sells weapons to Iran, Iran sells oil to China and China sells food to North Korea. All of these transactions can be recorded on a blockchain and netted out on a quarterly basis with the net settlement payment made in gold shipped to the party with the net balance due. That’s a glimpse of what a future non-dollar payments system looks like. The bottom line is the world is looking to turn away from dollar dominance in global finance. It may end sooner than most expect. We are getting dangerously close to that point right now. Tyler Durden Fri, 02/25/2022 - 17:00.....»»

Category: blogSource: zerohedgeFeb 25th, 2022

Craig Wright Didn"t "Win" Anything (Except A Lot Of Undeserved Attention)

Craig Wright Didn't "Win" Anything (Except A Lot Of Undeserved Attention) Authored by Ben Muster via, It takes time to build a press operation so effective that you can chalk up a $100 million legal fine as a victory - but Craig Wright, the Australian computer scientist who claims to be the inventor of Bitcoin, managed to pull it off. On Tuesday, Wright, 51, was compelled to pay $100 million to a business venture called W&K Info Defense that he set up with the late developer Dave Kleiman.  In early 2018, Kleiman’s brother Ira sued Wright in a Miami court, a few years after Wright debuted the claim that he invented Bitcoin. Ira alleged that Wright designed the Bitcoin protocol with Dave under the pseudonym Satoshi Nakamoto, but also that Wright misappropriated a large portion of the early Bitcoins he and Kleiman supposedly mined (currently worth around $50 billion) and to which the Kleiman estate was entitled. For the sake of the Miami trial, both sides appeared to agree that Wright was one of the people behind the famed inventor, so the court didn’t press the issue. Ultimately, the jury determined that Wright hadn’t stolen from the duo’s mining operation, and Wright wasn’t made to shell out billions. The court did, however, order Wright to pay the joint business venture $100 million in damages related to “conversion,” the misuse of another’s property. Swiftly, Wright’s formidable press machine - particularly an outlet called CoinGeek that regularly leaps to his defense - rumbled into action, with outlets as prodigious as the BBC reporting that Wright won the “right to keep billions of dollars.” The Telegraph’s headline shouted: “I am Satoshi Nakamoto: Self-proclaimed inventor of bitcoin prevails in legal case.”  CNBC got roasted for its first headline: “Miami jury rules in favor of Craig Wright, finding him to be the sole inventor of bitcoin.” The site later corrected it. This case wasn’t about whether Wright is Satoshi. The case was strictly about whether Wright misappropriated billions of dollars in Bitcoins from the joint venture with Kleiman; the jury ruled he did not. That was the “big win.” But Wright was still slapped with a $100 million judgment, a small fact that multiple papers dismissed as insignificant in the context of his purported multi-billion dollar fortune, which may not even exist. Wright’s press team has a history of spin. In 2019, for instance, Wright registered a copyright for the Bitcoin white paper, claiming it amounted to “government recognition” that he was Satoshi. Though that was quickly undermined when another person filed their own copyright within days, Wright, in an email sent to me at the time, remained steadfast: “Now we can both show our credentials and see who ends up wearing an orange suit!” (False registrations bring only a $2,500 fine.) Or, similarly, when a libel case brought by Wright against Bitcoin evangelist Roger Ver was thrown out in court, Ed Pownall, Wright’s PR flack, assured me that the case was “only thrown out because of jurisdiction, not the content.” (That case was ultimately thrown out a second time.)  And yet, the latest round of credulous reporting shows the degree to which Wright’s team has succeeded in manifesting a new reality in which all events serve only to vindicate Craig Wright.  If you believe Wright is Satoshi, then you are not bothered by his alleged backdating of blog posts; his dissembling in court; his profligate legal threats which seem to frequently fall by the wayside; his inability, in 2016, to prove he is Satoshi using the original private keys. If you believe Wright is Satoshi, you also believe that he is in possession of that vast Bitcoin fortune. Which means that the $100 million he owes Kleiman is truly a pittance, relative to what he supposedly has. So when the Guardian announces that he has won the case, you will nod enthusiastically. It will also lead you to a somewhat circular conclusion: that the outcome of the trial, as The Telegraph put it, “shows [Wright] is the mysterious inventor of Bitcoin.”  The faulty logic here is concluding that the damages awarded to the Kleiman estate imply some kind of courtly recognition that Wright is Satoshi. Wright himself told Bloomberg, “The jury has obviously found that I am [Satoshi Nakamoto] because there would have been no award otherwise. And I am.” You could even say it would’ve been better for him if he had been fined the full $50 billion - a sum to which only Bitcoin’s true inventor would have access. This take requires you to ignore the obvious ethical implications of Wright’s argument: that he stole from an ailing man who considered him a friend. Beyond that, the fact that Wright was made to pay damages doesn’t amount to confirmation that he is Satoshi because, as D.C. blockchain attorney Stephen Palley tells Decrypt, “the court proceeded from the premise that it did not need to decide who Satoshi was, and the jury did not decide that issue either.”  From this perspective, the trial played out as a series of precarious bluffs, a game of legal chicken in which these basic facts of Kleiman’s lawsuit went unexamined. (The focus of the case was the duo’s business relationship, interrogated through emails surfaced in discovery.) In this interpretation of events, Wright staked his reputation on being Satoshi; Kleiman claimed Satoshi owed him money; neither man could back down, so the case proceeded on false grounds. It is really weird, when you think about it, that a years-long trial may well have proceeded from a financially useful but highly disputable “fact” agreed between plaintiff and defendant. So the jury’s verdict wasn't "recognition" by any stretch of the imagination—Wright's Satoshi claims were not up for vindication.  This would also mean that Wright does not have the vast fortune alleged to be in his possession, meaning $100 million is no small sum for him. So the real test next may be whether Wright can afford to promptly pay the $100 million. Tyler Durden Thu, 12/09/2021 - 17:40.....»»

Category: dealsSource: nytDec 9th, 2021

Why You Should Care About "Taproot", The Next Major Bitcoin Upgrade

Why You Should Care About 'Taproot', The Next Major Bitcoin Upgrade Authored by 'NAMCIOS' via, By making transactions cheaper, more efficient and more private, Taproot sets the stage for extra functionality on the Bitcoin network. Much has been written about Bitcoin’s Taproot upgrade, and plenty of resources exist to explain its technical concepts. However, in the author's opinion, a more comprehensive roundup of why Taproot is being implemented, what it will bring to the network, and what it might enable for the future, in plain English, is still lacking. Driven by the misconceptions that regular users have about Taproot and a certain lack of understanding, this essay leverages the technical resources that came before it to enlighten you to the broader implications of what is arguably the most significant upgrade to Bitcoin yet. WHY TAPROOT MATTERS In short and at the highest level of abstraction possible, the Bitcoin Taproot soft fork will optimize scalability, privacy, and smart contract functionality. It will bring about a new address type, allowing bitcoin spending to look similar regardless of whether the sender is making a simple payment, a complex multi-signature transaction, or using the Lightning Network. Moreover, Taproot addresses will allow users to save on transaction fees — the more complex the spending conditions, the more the user will save — compared to previous address types. By reducing the transaction size and making nearly any transaction appear like a simple, single-signature one, Taproot will also enable larger and more complex operations to be deployed on Bitcoin that were previously unfeasible or almost impossible. If you only use Bitcoin to hold coins long term and sparingly move them around between wallets, you might think Taproot will have little impact on you. But in fact, the possibilities that this soft fork will enable for Bitcoin's future are extensive, as Taproot lays the groundwork for more prominent and more significant developments to land on the network. For one, Taproot ultimately empowers the Lightning Network to unleash its full potential as a proper scaling technology for Bitcoin. Currently, the second layer protocol can be spotted in action in the Bitcoin blockchain, reducing coins' fungibility. Fungibility is vital for a monetary good to actualize the medium of exchange role because it allows for coins to be seen as equal. If transaction outputs were seen differently, they could suffer from discrimination by the receiver, preventing users from using their BTC for payments in certain conditions. In addition, the Lightning Network and other complex wallets and contracts will enjoy greater efficiency and lower transaction fees, further empowering the usage of Bitcoin as a medium of exchange. Enabled by Schnorr signatures, even the most complex transactions made between Taproot-supporting wallets will incur the same fees as simple ones. Furthermore, this reduction of costs and the increased flexibility and capabilities for smart contracts will ultimately enable very complex setups that were previously not feasible in Bitcoin. But to comprehend why Taproot is being implemented in Bitcoin, one must first understand how Bitcoin transactions work and the many upgrades that have been made up to this point, naturally leading to Taproot. A QUICK OVERVIEW OF HOW BITCOIN TRANSACTIONS WORK Bitcoin transactions work based on inputs and outputs, which are also equal since coins are not destroyed. If you want to send me 5 BTC, for instance, you would need to select precisely 5 bitcoin, else the transaction would be either incomplete, or you'd have too many funds. For the former, Bitcoin can't do much — you can't send funds you don't have — but for the latter, Bitcoin will give you the "rest" as change. Therefore, if you select 7.38 BTC to send me five, 2.38 will go back to you as change. So you'd have 7.38 as input and 2.38 + 5 as outputs, although you'd receive a little less than 2.38 because the network needs to deduct the transaction fees. When we talk about spending, we are referring to an output. Now that I have the 5 BTC you sent me, I can use it as I wish. I can send 3 BTC to Alice and 2 BTC to Bob, for instance, or I can send 5 BTC to Joe. Or I can keep the 5 BTC and HODL indefinitely. Unless I choose to hold it, I will be making a transaction regardless of the use I make of my new bitcoin. This latest transaction will get the 5 BTC output I have as input, and this transaction's output will be whatever I decide to send. Notice that since I received the 5 BTC in full, even if I want to send only 3 bitcoin, I will have to input all the 5 bitcoin into the transaction, and I'll get the rest back as change. What's essential in this dynamic is to realize the interaction of coins as inputs and outputs. When we spend, we are transferring a transaction output to another person. But to do that, we need to input it into a new transaction, and the other person will get the BTC as another transaction output. For that reason, the concept of a wallet is an abstraction intended to make things easier to acknowledge and understand by summing up all the transaction outputs you own. Because after all, that's all there is — transaction outputs (UTXOs). IMPROVING THE BITCOIN TRANSACTION MODEL The history of paying in bitcoin has changed a lot since the early days of the network. Overall, the UTXO model described above relies on scripts or contracts created using the Bitcoin Script "programming" language. This author has put “programming” in quotation marks because Bitcoin's scripting language can more accurately be seen as a verification language than one that provides computation directives. In essence, Bitcoin scripting is a way to specify conditions for spending a UTXO. There are three major constraints when considering Bitcoin Script and how its improvements are made: privacy, space efficiency, and computational efficiency — usually, improving one of these cascades into strengthening the other two. For instance, seeking to reveal less about a transaction and thereby improving privacy would entail submitting a smaller amount of data, reducing space needs for the transaction, and making it easier to be verified — it’s less computationally intensive. The community has been improving how Bitcoin transactions work by gradually introducing new script, or address, types. Ultimately, these changes have sought to enhance transactional privacy, make the transfer of funds more lightweight, and speed up the process of validating transactions. As a result, users have greater flexibility for creating scripts that increase the resilience of their savings, move funds around more efficiently and privately, and help unleash financial sovereignty. Albeit complicated for the end-user, technical tools have emerged to adopt these practices and abstract low-level technicalities, ensuring greater adoption of current best practices. One clear example of this is multisignature addresses, which once had to be done manually with Bitcoin Script but can now be effortlessly created with a smartphone or a laptop. The same is true for Lightning, Bitcoin's second-layer scaling solution for small and frequent payments. This Layer 2 is now available in mobile apps and allows for people to transact once-unfeasible amounts of BTC with each other instantly. Taproot, the latest upgrade to the Bitcoin protocol and arguably the most important one to date, is a natural evolution of the way Bitcoin transactions, and hence scripts, work. Enabled by Schnorr signatures, MAST and Tapscript, Taproot seeks to increase flexibility and privacy without compromising security. In the early days of Bitcoin, with legacy addresses, the sender of a transaction had to care about the receiver's wallet policy — its contract, or script — which was not only impractical but represented a significant privacy shortcoming. The contract had to be revealed when the transaction was sent for anyone to see; hence, the receiver's privacy was low. With the advent of pay to script hash (P2SH), Bitcoin changed that dynamic, and transactions started to be sent to the hash of the contract instead of the contract itself. This meant the contract wouldn't be revealed until the output was spent, and outputs became identical — just a hash. A hash is the output of a hashing function, which takes a variable-length input and returns an encrypted result of fixed length. Not only did this addition to Bitcoin transactions improve privacy by making all outputs look similar, but it also reduced the output size, thereby increasing efficiency. However, the contract had to become visible when spending and all of the spending conditions had to be revealed. The two downsides with this approach are privacy and efficiency, as any observer could learn about the different spending conditions — thus learning plenty of information about the spender — and the blockchain would be bloated with a large script with unnecessary logic — it only makes practical sense to verify the spending condition that was used to spend that output. The Taproot upgrade improves this logic by introducing Merklelized Abstract Syntax Trees (MAST), a structure that ultimately allows Bitcoin to achieve the goal of only revealing the contract's specific spending condition that was used. There are two main possibilities for complex Taproot spending: a consensual, mutually-agreed condition; or a fallback, specific condition. For instance, if a multisignature address owned by multiple people wants to spend some funds programmatically, they could set up one spending condition in which all of them agree to spend the funds or fallback states in case they can't reach a consensus. If the condition everyone agrees on is used, Taproot allows it to be turned into a single signature. Therefore, the Bitcoin network wouldn't even know there was a contract being used in the first place, significantly increasing the privacy of all of the owners of the multisignature address. However, if a mutual consensus isn't reached and one party spends the funds using any of the fallback methods, Taproot only reveals that specific method. As the introduction of P2SH increased the receiver's privacy by making all outputs look identical — just a hash — Taproot will increase the sender's privacy by restricting the amount of information broadcast to the network. Even if you don't use complex wallet functionality like multisignature or Lightning, improving their privacy also improves yours, as it makes chain surveillance more difficult and increases the broader Bitcoin network anonymity set. WHAT TAPROOT COULD ULTIMATELY ENABLE FOR AVERAGE BITCOIN USERS By making transactions cheaper, more efficient, and more private, the adoption of Taproot will set the stage for extra functionality to land on the Bitcoin network. As nodes upgrade and people start using Taproot addresses primarily, it will become more difficult for blockchain observers to spot and discriminate between senders and receivers, UTXOs will be treated more equally, and the broader Bitcoin network will be a more robust settlement network that enables complex functionality to be built on top. Layer 2 protocols and sidechains will be empowered to step up and leverage even more sophisticated smart contracts for coordinating funds on the base layer. The end-user might not construct these themselves, but they will benefit from more special offerings in the broader Bitcoin ecosystem with stronger assurances. Although some decentralized finance applications and use cases are already being implemented on Bitcoin, the greater smart contract flexibility and capabilities brought by the Taproot upgrade can ultimately allow even more use cases to be implemented and more complex functionality to be deployed while leveraging the strong security assurances of the Bitcoin network — which no other "cryptocurrency" can match. As bitcoin is actual money, long-term applications of decentralized finance can naturally only be built on top of it. Novelty networks such as Ethereum lack the monetary properties of the Bitcoin base layer and its security and robustness — part of the reason why most applications built on them have fallen short of accomplishing their value proposition over the long run. By patiently building up the foundations for a distributed, uncensorable, antifragile, and sovereign monetary network throughout its lifetime, Bitcoin is set to enjoy actual long term functionality and growth through a layered approach. The Taproot upgrade, which also comprises Schnorr, MAST and Tapscript, builds on that foundation by furthering the security and privacy of the base layer and enabling more complex applications to be built on top of it. Greater flexibility of the smart contract functionalities of Bitcoin brings about a new era of unthinkable possibilities, opening up the door for broader use cases to be implemented on the best monetary network humanity has ever known. Over the long term, upgrades like Taproot and Lightning might effectively render altcoins redundant and unnecessary. If a given functionality can be implemented in Bitcoin, the most robust and secure network, it is only natural that it will. While altcoins foster innovation and eventually showcase some exciting use cases, they can be more accurately seen as experimentation playgrounds. Once real use cases are found, they will likely be ported to Bitcoin –– their best bet for continued, long-term development and usage. *  *  * To learn more about Taproot, Aaron van Wirdum's technical overview is a good place to start. For a more extensive explanation, reference Kraken Intelligence's detailed report published earlier this year. If you want to jump into the specific proposals, read BIP340, BIP341 and BIP342. Tyler Durden Thu, 11/11/2021 - 20:20.....»»

Category: blogSource: zerohedgeNov 11th, 2021

Bitcoin Adoption Is The Start Of A Digital Revolution

Bitcoin Adoption Is The Start Of A Digital Revolution Authored by Emeka Ugbah via, The global adoption of bitcoin is only beginning as the world evolves toward a society based upon cryptographically secured money... It's remarkable how far we've come in only a little more than a decade. Since its launch in 2009 by the pseudonymous creator Satoshi Nakamoto, bitcoin, the world's first and largest cryptocurrency by market capitalization and dominance, has seen astonishing rises in value. Taking a look back at when the digital asset saw its first significant price increase, going from trading at a few fractions of a cent to 0.08 cents and then to $1, no one could have predicted with absolute certainty that we would one day live in a world where the asset would have gained over 6 million percent. Well, it happened in only 12 years. This astronomical growth gave birth to a whole new industry that has altered our perception of the financial world. It has also, just as expected, piqued the interest of millions of users worldwide. From nation-states to individuals, both private and publicly-owned companies and global financial institutions, these entities are either already invested and therefore now beneficiaries of this new monetary revolution, they are still on the sidelines thinking about how best to get involved, or just outrightly against the idea of this disruptive innovation, playing a blind eye to what it stands for, or just sadly oblivious of it. THE PANDEMIC VERSUS THE GLOBAL ECONOMY Image by Gerad Altmann from Pixabay 2020 was an inflection point for the entire global financial market. The pandemic, as well as efforts by different countries to contain it, resulted in an unprecedented collapse of the global economy. In an attempt to salvage the situation, central banks lept into action, printing so much money that it further skewed the already unbalanced supply and demand relationship. That action laid bare what was already known, the fact that the monetary policies of most developed nations, and by extension the less developed ones, are tethered to a flawed system. After the markets crashed, it became clear that adverse measures had to be adopted if the world isn’t to end up in yet another recession. These measures had to be adopted at all levels, from the individual to the national, as well as at the corporate and institutional levels. The cryptocurrency market wasn’t spared during the crash, of course. Devastating declines were experienced across the board. Bitcoin itself lost over 50% of its value in March 2021. But as a result of its intrinsically scarce nature, its recovery was unlike anything seen in modern times within the financial world. Over the space of eight months, Bitcoin was able to crawl and claw its way back up, breaking its previous all-time high of $20,000 reached at the peak of its 2017 bull run. And since then the price of the digital asset has been on an absolute tear, bulldozing its way through psychological levels of resistance, printing new all-time highs and defying all the fear, uncertainty and doubt thrown its way. As expected, this parabolic rise in the value of the asset didn't happen under the radar. Right before its steady climb, rumors and whispers of institutional interest in bitcoin began flooding the space, a lot of which was later confirmed by the institutions themselves. One such institution was MicroStrategy. THE CORPORATIONS JUMP IN New York City skyline view. Image by Manuel Romero from Pixabay In August 2020, MicroStrategy — the largest independent, Nasdaq-listed, publicly-traded cloud-based business intelligence provider — announced the purchase of 21,454 bitcoin for a total purchase price of $250 million, including fees and expenses. The company deliberated for months before deciding on a capital allocation approach. CEO Michael J. Saylor, went ahead to state that some macro factors — along with the public health crisis caused by the pandemic — forced governments around the world to adopt financial stimulus measures like quantitative easing to mitigate the crisis. Despite their best intentions, these measures may well depreciate the long-term real value of fiat currencies and many other various asset classes, along with many of those traditionally held by corporate treasury operations. The company's bitcoin acquisitions didn't stop at 21,454 bitcoin. Overall, MicroStrategy is said to hold a total of 114,042 bitcoin worth $6,966,574,887 based on the current price of the asset at the time of writing. Their total acquisition was purchased for $3.16 billion at an average price of $27,713 per bitcoin. Following the announcement of MicroStrategy's acquisitions, news broke that Ruffer, a UK-based wealth management firm, had followed suit. The financial firm invested 2.5 percent of its $27 billion portfolio into bitcoin in November 2020. But unlike MicroStrategy who still holds bitcoin to date, purchasing a few thousands more now and again, Ruffer’s game plan was different. They opted to take out their initial investment of $650 million in profit, and subsequently, when the price of bitcoin began showing signs of weakness just before the May 2020 crash, they sold their entire position, turning a $650 million investment into $1.1 billion in the process. If that isn’t evidence of the market's potential, it'd be difficult then to think of anything else that could be. The wealth management firm wasn't the only non-crypto or blockchain-native company to demonstrate this. The Tesla case, despite having a different twist, still pushed that narrative. The American electric vehicle and renewable energy company revealed in February that it had purchased 42,902 bitcoin worth $1.5 billion. They also announced that "according to relevant regulations and initially on a limited basis," they have begun making arrangements to accept bitcoin payments in return for their products. This news, as predicted, had a tremendous impact on the price of the digital asset, driving investors into a buying frenzy that drove the price up by more than 20% in just a few days that followed. As the months ticked by and the price of bitcoin verged into the unsteady waters that marred the second quarter of 2021, the air was saturated with fear, uncertainty and doubt. Different countries had begun yet again putting up measures to stifle the growth of the bitcoin and the entire cryptocurrency market, pushing out exaggerated data and false narratives about the Bitcoin network’s energy consumption, claiming that Bitcoin miningis not good for the environment. In the midst of all that, it was reported that Tesla had sold its bitcoin position and would no longer accept the asset as payment for their products. However, Tesla CEO Elon Musk, tweeted in response to the heat he had been receiving from the cryptocurrency community, saying that “Tesla only sold ~10% of holdings to confirm BTC could be liquidated easily without moving the market. When there’s confirmation of reasonable (~50%) clean energy usage by miners with a positive future trend, Tesla will resume allowing bitcoin transactions.” To date, the company still holds 42,000 bitcoin and is said to have no plans of selling. THE CHANGE OF AN INSTITUTIONAL VIEWPOINT It is interesting to think about how things have changed though. A few years ago, a number of these corporations and institutions that are now hovering around bitcoin and some of the major altcoins, had a completely different opinion. In 2017, analysts at Morgan Stanley, the American multinational investment bank, stated that “Bitcoin’s real value could be zero.” Fast-forward to 2021, Morgan Stanley became “the first big U.S. bank to offer its wealthy clients access to bitcoin funds.” Also in 2017, Jamie Dimon, a long time to-date opponent of bitcoin and CEO of JPMorgan Chase & Co., another investment bank, was quoted as saying, “Bitcoin is a fraud that will blow up;” furthermore that, “cryptocurrency is only fit for use by drug dealers, murderers and people living in North Korea.” Fast forward yet again to 2021, two of the investment bank’s strategists Amy Ho and Joyce Chang wrote; “In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.” Jamie Dimon himself, still unchanged in his view, recently stated that he still sees bitcoin as “worthless,” but “our clients are adults. They disagree. If they want to have access to buy or sell bitcoin, we can’t custody it — but we can give them legitimate, as clean as possible access.” Goldman Sachs, yet another multinational investment bank, reopened their cryptocurrency trading desk, a little over a year after they listed five reasons “why bitcoin is 'not an asset class', nor 'a suitable investment.’” PayPal and Visa, the payment processing behemoths who have also in the past expressed their stances against bitcoin, calling it “ridiculous as a store of value” and “unacceptable as a payment system,” now both have completely different stands. PayPal now allows users to buy and sell bitcoin as well as a few other cryptocurrencies on their platform, while Visa is working on enabling bitcoin purchasing on theirs. A complete 180-degree turn from where they both were years ago. An interesting turn of events by all standards, no? There are currently a few arguments floating around on this topic: Some schools of thought will argue that without the corporations and institutions, the entire bitcoin and cryptocurrency network won’t reach its full potential, and that mainstream adoption is vital for its continued growth, seeing as the corporations have the ability inject so much capital into the networks. Data has it that the Global Asset Management industry holds $103 trillion as AUM (assets under management). Retail portfolios, representing 41% of global assets at $42 trillion and institutional investments amounting to $61 trillion, or 59%. From the data gathered, if the global institutions were to adopt the 1% portfolio allocation model to bitcoin as suggested by JPMorgan Chase & Co., this would mean an additional $1.03 trillion would flow into bitcoin, which already has a $1.15 trillion market capitalization. That would probably see the price of the digital asset shoot towards the $120,000 range. So is there a valid point in that argument? Another argument is that these corporations and institutions are only getting into bitcoin and other cryptocurrencies — not because they support the growth of the networks nor have beliefs in the blockchain technology, decentralization and its impact on the future — but that they are all capitalists who will sell as soon as they make a profit, much like Ruffer did. If we are being completely honest, who isn't in it for the profit? Though most of the participants in the cryptocurrency space can boldly say that they are in it for a whole lot more. However, there's no doubt that wealth creation and preservation remains an underlying incentive. The increase in institutional interest and involvement within the space will inherently bring some form of stability reducing the wild price volatility that the digital asset market has been known for. The market will certainly have a whole lot more liquidity. It all makes for a bit of a conundrum because the lack of liquidity in the market is one of the reasons why institutions aren’t jumping in mass just yet. “The crypto asset class is relatively still too small, illiquid and lacking depth to absorb large pension funds like institutional investments that would otherwise move the markets,” - Amber Ghaddar, cofounder of decentralized capital marketplace AllianceBlock. The third argument is that for the institutions to be committed fully to allocating portions of their portfolio into bitcoin or other digital assets, regulatory clarity has to be achieved within the space. Institutions operate within certain regulatory frameworks, that’s a known fact. Bitcoin and other cryptocurrencies are largely unregulated. The philosophy behind the creation of bitcoin in the first place has decentralization at its core, which makes it a bit of a nightmare for regulators. MY THOUGHTS It is as clear as a bright, sunny day that regulators worldwide have bitcoin and the entire cryptocurrency market in their crosshairs. Why has it now become a thing after over a decade of being in existence? Is it because the entire space has now garnered so much popularity that it can no longer be ignored? Or is it because the regulators are only just starting to figure out how to peek through the multiple complex layers of this otherwise nascent financial innovation? Of these two scenarios, the first can certainly be considered valid to some extent. But the second scenario, if the regulators only just started scrambling to try and regulate the space because they think they have figured it out, then it probably means they haven’t. Bitcoin was designed to self-regulate and preserve. Embedded within the codes of the protocol are set rules and mechanisms put in place to enforce any and all needed regulations, from supply schedules to security. Its adherence to these rules is pertinent to the network's existence, buttressing the earlier mentioned self-regulatory and preservative point. There is a reason why it is considered a “trustless” payment network after alI, no? Now the argument that institutional adoption is required for bitcoin to attain its status as the hardest, most sound form of money, as well as a store of value is false, to say the least. The Bitcoin network was meticulously designed to be self-sustaining and its native currency transacted peer-to-peer by individuals who freely opted into its usage. As the number of users grows, so will its security, and as a result its value. With all that said, for lack of a better way to put these next few words, it’s a “if you can’t beat them, join them, or just leave them alone” thing. Tyler Durden Wed, 11/10/2021 - 22:45.....»»

Category: smallbizSource: nytNov 10th, 2021

Bitcoin & The US Fiscal Reckoning

Bitcoin & The US Fiscal Reckoning Authored by Avik Roy via, Cryptocurrencies like bitcoin have few fans in Washington. At a July congressional hearing, Senator Elizabeth Warren warned that cryptocurrency "puts the [financial] system at the whims of some shadowy, faceless group of super-coders." Treasury secretary Janet Yellen likewise asserted that the "reality" of cryptocurrencies is that they "have been used to launder the profits of online drug traffickers; they've been a tool to finance terrorism." Thus far, Bitcoin's supporters remain undeterred. (The term "Bitcoin" with a capital "B" is used here and throughout to refer to the system of cryptography and technology that produces the currency "bitcoin" with a lowercase "b" and verifies bitcoin transactions.) A survey of 3,000 adults in the fall of 2020 found that while only 4% of adults over age 55 own cryptocurrencies, slightly more than one-third of those aged 35-44 do, as do two-fifths of those aged 25-34. As of mid-2021, Coinbase — the largest cryptocurrency exchange in the United States — had 68 million verified users. To younger Americans, digital money is as intuitive as digital media and digital friendships. But Millennials with smartphones are not the only people interested in bitcoin; a growing number of investors are also flocking to the currency's banner. Surveys indicate that as many as 21% of U.S. hedge funds now own bitcoin in some form. In 2020, after considering various asset classes like stocks, bonds, gold, and foreign currencies, celebrated hedge-fund manager Paul Tudor Jones asked, "[w]hat will be the winner in ten years' time?" His answer: "My bet is it will be bitcoin." What's driving this increased interest in a form of currency invented in 2008? The answer comes from former Federal Reserve chairman Ben Bernanke, who once noted, "the U.S. government has a technology, called a printing press...that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation...the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to...inflation." In other words, governments with fiat currencies — including the United States — have the power to expand the quantity of those currencies. If they choose to do so, they risk inflating the prices of necessities like food, gas, and housing. In recent months, consumers have experienced higher price inflation than they have seen in decades. A major reason for the increases is that central bankers around the world — including those at the Federal Reserve — sought to compensate for Covid-19 lockdowns with dramatic monetary inflation. As a result, nearly $4 trillion in newly printed dollars, euros, and yen found their way from central banks into the coffers of global financial institutions. Jerome Powell, the current Federal Reserve chairman, insists that 2021's inflation trends are "transitory." He may be right in the near term. But for the foreseeable future, inflation will be a profound and inescapable challenge for America due to a single factor: the rapidly expanding federal debt, increasingly financed by the Fed's printing press. In time, policymakers will face a Solomonic choice: either protect Americans from inflation, or protect the government's ability to engage in deficit spending. It will become impossible to do both. Over time, this compounding problem will escalate the importance of Bitcoin. THE FIAT-CURRENCY EXPERIMENT It's becoming clear that Bitcoin is not merely a passing fad, but a significant innovation with potentially serious implications for the future of investment and global finance. To understand those implications, we must first examine the recent history of the primary instrument that bitcoin was invented to challenge: the American dollar. Toward the end of World War II, in an agreement hashed out by 44 Allied countries in Bretton Woods, New Hampshire, the value of the U.S. dollar was formally fixed to 1/35th of the price of an ounce of gold. Other countries' currencies, such as the British pound and the French franc, were in turn pegged to the dollar, making the dollar the world's official reserve currency. Under the Bretton Woods system, foreign governments could retrieve gold bullion they had sent to the United States during the war by exchanging dollars for gold at the relevant fixed exchange rate. But enabling every major country to exchange dollars for American-held gold only worked so long as the U.S. government was fiscally and monetarily responsible. By the late 1960s, it was neither. Someone needed to pay the steep bills for Lyndon Johnson's "guns and butter" policies — the Vietnam War and the Great Society, respectively — so the Federal Reserve began printing currency to meet those obligations. Johnson's successor, Richard Nixon, also pressured the Fed to flood the economy with money as a form of economic stimulus. From 1961 to 1971, the Fed nearly doubled the circulating supply of dollars. "In the first six months of 1971," noted the late Nobel laureate Robert Mundell, "monetary expansion was more rapid than in any comparable period in a quarter century." That year, foreign central banks and governments held $64 billion worth of claims on the $10 billion of gold still held by the United States. It wasn't long before the world took notice of the shortage. In a classic bank-run scenario, anxious European governments began racing to redeem dollars for American-held gold before the Fed ran out. In July 1971, Switzerland withdrew $50 million in bullion from U.S. vaults. In August, France sent a destroyer to escort $191 million of its gold back from the New York Federal Reserve. Britain put in a request for $3 billion shortly thereafter. Finally, that same month, Nixon secretly gathered a small group of trusted advisors at Camp David to devise a plan to avoid the imminent wipeout of U.S. gold vaults and the subsequent collapse of the international economy. There, they settled on a radical course of action. On the evening of August 15th, in a televised address to the nation, Nixon announced his intention to order a 90-day freeze on all prices and wages throughout the country, a 10% tariff on all imported goods, and a suspension — eventually, a permanent one — of the right of foreign governments to exchange their dollars for U.S. gold. Knowing that his unilateral abrogation of agreements involving dozens of countries would come as a shock to world leaders and the American people, Nixon labored to re-assure viewers that the change would not unsettle global markets. He promised viewers that "the effect of this action...will be to stabilize the dollar," and that the "dollar will be worth just as much tomorrow as it is today." The next day, the stock market rose — to everyone's relief. The editors of the New York Times "unhesitatingly applaud[ed] the boldness" of Nixon's move. Economic growth remained strong for months after the shift, and the following year Nixon was re-elected in a landslide, winning 49 states in the Electoral College and 61% of the popular vote. Nixon's short-term success was a mirage, however. After the election, the president lifted the wage and price controls, and inflation returned with a vengeance. By December 1980, the dollar had lost more than half the purchasing power it had back in June 1971 on a consumer-price basis. In relation to gold, the price of the dollar collapsed — from 1/35th to 1/627th of a troy ounce. Though Jimmy Carter is often blamed for the Great Inflation of the late 1970s, "the truth," as former National Economic Council director Larry Kudlow has argued, "is that the president who unleashed double-digit inflation was Richard Nixon." In 1981, Federal Reserve chairman Paul Volcker raised the federal-funds rate — a key interest-rate benchmark — to 19%. A deep recession ensued, but inflation ceased, and the U.S. embarked on a multi-decade period of robust growth, low unemployment, and low consumer-price inflation. As a result, few are nostalgic for the days of Bretton Woods or the gold-standard era. The view of today's economic establishment is that the present system works well, that gold standards are inherently unstable, and that advocates of gold's return are eccentric cranks. Nevertheless, it's important to remember that the post-Bretton Woods era — in which the supply of government currencies can be expanded or contracted by fiat — is only 50 years old. To those of us born after 1971, it might appear as if there is nothing abnormal about the way money works today. When viewed through the lens of human history, however, free-floating global exchange rates remain an unprecedented economic experiment — with one critical flaw. An intrinsic attribute of the post-Bretton Woods system is that it enables deficit spending. Under a gold standard or peg, countries are unable to run large budget deficits without draining their gold reserves. Nixon's 1971 crisis is far from the only example; deficit spending during and after World War I, for instance, caused economic dislocation in numerous European countries — especially Germany — because governments needed to use their shrinking gold reserves to finance their war debts. These days, by contrast, it is relatively easy for the United States to run chronic deficits. Today's federal debt of almost $29 trillion — up from $10 trillion in 2008 and $2.4 trillion in 1984 — is financed in part by U.S. Treasury bills, notes, and bonds, on which lenders to the United States collect a form of interest. Yields on Treasury bonds are denominated in dollars, but since dollars are no longer redeemable for gold, these bonds are backed solely by the "full faith and credit of the United States." Interest rates on U.S. Treasury bonds have remained low, which many people take to mean that the creditworthiness of the United States remains healthy. Just as creditworthy consumers enjoy lower interest rates on their mortgages and credit cards, creditworthy countries typically enjoy lower rates on the bonds they issue. Consequently, the post-Great Recession era of low inflation and near-zero interest rates led many on the left to argue that the old rules no longer apply, and that concerns regarding deficits are obsolete. Supporters of this view point to the massive stimulus packages passed under presidents Donald Trump and Joe Biden  that, in total, increased the federal deficit and debt by $4.6 trillion without affecting the government's ability to borrow. The extreme version of the new "deficits don't matter" narrative comes from the advocates of what has come to be called Modern Monetary Theory (MMT), who claim that because the United States controls its own currency, the federal government has infinite power to increase deficits and the debt without consequence. Though most mainstream economists dismiss MMT as unworkable and even dangerous, policymakers appear to be legislating with MMT's assumptions in mind. A new generation of Democratic economic advisors has pushed President Biden to propose an additional $3.5 trillion in spending, on top of the $4.6 trillion spent on Covid-19 relief and the $1 trillion bipartisan infrastructure bill. These Democrats, along with a new breed of populist Republicans, dismiss the concerns of older economists who fear that exploding deficits risk a return to the economy of the 1970s, complete with high inflation, high interest rates, and high unemployment. But there are several reasons to believe that America's fiscal profligacy cannot go on forever. The most important reason is the unanimous judgment of history: In every country and in every era, runaway deficits and skyrocketing debt have ended in economic stagnation or ruin. Another reason has to do with the unusual confluence of events that has enabled the United States to finance its rising debts at such low interest rates over the past few decades — a confluence that Bitcoin may play a role in ending. DECLINING FAITH IN U.S. CREDIT To members of the financial community, U.S. Treasury bonds are considered "risk-free" assets. That is to say, while many investments entail risk — a company can go bankrupt, for example, thereby wiping out the value of its stock — Treasury bonds are backed by the full faith and credit of the United States. Since people believe the United States will not default on its obligations, lending money to the U.S. government — buying Treasury bonds that effectively pay the holder an interest rate — is considered a risk-free investment. The definition of Treasury bonds as "risk-free" is not merely by reputation, but also by regulation. Since 1988, the Switzerland-based Basel Committee on Banking Supervision has sponsored a series of accords among central bankers from financially significant countries. These accords were designed to create global standards for the capital held by banks such that they carry a sufficient proportion of low-risk and risk-free assets. The well-intentioned goal of these standards was to ensure that banks don't fail when markets go down, as they did in 2008. The current version of the Basel Accords, known as "Basel III," assigns zero risk to U.S. Treasury bonds. Under Basel III's formula, then, every major bank in the world is effectively rewarded for holding these bonds instead of other assets. This artificially inflates demand for the bonds and enables the United States to borrow at lower rates than other countries. The United States also benefits from the heft of its economy as well as the size of its debt. Since America is the world's most indebted country in absolute terms, the market for U.S. Treasury bonds is the largest and most liquid such market in the world. Liquid markets matter a great deal to major investors: A large financial institution or government with hundreds of billions (or more) of a given currency on its balance sheet cares about being able to buy and sell assets while minimizing the impact of such actions on the trading price. There are no alternative low-risk assets one can trade at the scale of Treasury bonds. The status of such bonds as risk-free assets — and in turn, America's ability to borrow the money necessary to fund its ballooning expenditures — depends on investors' confidence in America's creditworthiness. Unfortunately, the Federal Reserve's interference in the markets for Treasury bonds have obscured our ability to determine whether financial institutions view the U.S. fiscal situation with confidence. In the 1990s, Bill Clinton's advisors prioritized reducing the deficit, largely out of a conern that Treasury-bond "vigilantes" — investors who protest a government's expansionary fiscal or monetary policy by aggressively selling bonds, which drives up interest rates — would harm the economy. Their success in eliminating the primary deficit brought yields on the benchmark 10-year Treasury bond down from 8% to 4%. In Clinton's heyday, the Federal Reserve was limited in its ability to influence the 10-year Treasury interest rate. Its monetary interventions primarily targeted the federal-funds rate — the interest rate that banks charge each other on overnight transactions. But in 2002, Ben Bernanke advocated that the Fed "begin announcing explicit ceilings for yields on longer-maturity Treasury debt." This amounted to a schedule of interest-rate price controls. Since the 2008 financial crisis, the Federal Reserve has succeeded in wiping out bond vigilantes using a policy called "quantitative easing," whereby the Fed manipulates the price of Treasury bonds by buying and selling them on the open market. As a result, Treasury-bond yields are determined not by the free market, but by the Fed. The combined effect of these forces — the regulatory impetus for banks to own Treasury bonds, the liquidity advantage Treasury bonds have in the eyes of large financial institutions, and the Federal Reserve's manipulation of Treasury-bond market prices — means that interest rates on Treasury bonds no longer indicate the United States' creditworthiness (or lack thereof). Meanwhile, indications that investors are growing increasingly concerned about the U.S. fiscal and monetary picture — and are in turn assigning more risk to "risk-free" Treasury bonds — are on the rise. One such indicator is the decline in the share of Treasury bonds owned by outside investors. Between 2010 and 2020, the share of U.S. Treasury securities owned by foreign entities fell from 47% to 32%, while the share owned by the Fed more than doubled, from 9% to 22%. Put simply, foreign investors have been reducing their purchases of U.S. government debt, thereby forcing the Fed to increase its own bond purchases to make up the difference and prop up prices. Until and unless Congress reduces the trajectory of the federal debt, U.S. monetary policy has entered a vicious cycle from which there is no obvious escape. The rising debt requires the Treasury Department to issue an ever-greater quantity of Treasury bonds, but market demand for these bonds cannot keep up with their increasing supply. In an effort to avoid a spike in interest rates, the Fed will need to print new U.S. dollars to soak up the excess supply of Treasury bonds. The resultant monetary inflation will cause increases in consumer prices. Those who praise the Fed's dramatic expansion of the money supply argue that it has not affected consumer-price inflation. And at first glance, they appear to have a point. In January of 2008, the M2 money stock was roughly $7.5 trillion; by January 2020, M2 had more than doubled, to $15.4 trillion. As of July 2021, the total M2 sits at $20.5 trillion — nearly triple what it was just 13 years ago. Over that same period, U.S. GDP increased by only 50%. And yet, since 2000, the average rate of growth in the Consumer Price Index (CPI) for All Urban Consumers — a widely used inflation benchmark — has remained low, at about 2.25%. How can this be? The answer lies in the relationship between monetary inflation and price inflation, which has diverged over time. In 2008, the Federal Reserve began paying interest to banks that park their money with the Fed, reducing banks' incentive to lend that money out to the broader economy in ways that would drive price inflation. But the main reason for the divergence is that conventional measures like CPI do not accurately capture the way monetary inflation is affecting domestic prices. In a large, diverse country like the United States, different people and different industries experience price inflation in different ways. The fact that price inflation occurs earlier in certain sectors of the economy than in others was first described by the 18th-century Irish-French economist Richard Cantillon. In his 1730 "Essay on the Nature of Commerce in General," Cantillon noted that when governments increase the supply of money, those who receive the money first gain the most benefit from it — at the expense of those to whom it flows last. In the 20th century, Friedrich Hayek built on Cantillon's thinking, observing that "the real harm [of monetary inflation] is due to the differential effect on different prices, which change successively in a very irregular order and to a very different degree, so that as a result the whole structure of relative prices becomes distorted and misguides production into wrong directions." In today's context, the direct beneficiaries of newly printed money are those who need it the least. New dollars are sent to banks, which in turn lend them to the most creditworthy entities: investment funds, corporations, and wealthy individuals. As a result, the most profound price impact of U.S. monetary inflation has been on the kinds of assets that financial institutions and wealthy people purchase — stocks, bonds, real estate, venture capital, and the like. This is why the price-to-earnings ratio of S&P 500 companies is at record highs, why risky start-ups with long-shot ideas are attracting $100 million venture rounds, and why the median home sales price has jumped 24% in a single year — the biggest one-year increase of the 21st century. Meanwhile, low- and middle-income earners are facing rising prices without attendant increases in their wages. If asset inflation persists while the costs of housing and health care continue to grow beyond the reach of ordinary people, the legitimacy of our market economy will be put on trial. THE RETURN OF SOUND MONEY Satoshi Nakamoto, the pseudonymous creator of Bitcoin, was acutely concerned with the increasing abundance of U.S. dollars and other fiat currencies in the early 2000s. In 2009 he wrote, "the root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." Bitcoin was created in anticipation of the looming fiscal and monetary crisis in the United States and around the world. To understand how bitcoin functions alongside fiat currency, it's helpful to examine the monetary philosophy of the Austrian School of economics, whose leading figures — especially Hayek and Ludwig von Mises — greatly influenced Nakamoto and the early developers of Bitcoin. The economists of the Austrian School were staunch advocates of what Mises called "the principle of sound money" — that is, of keeping the supply of money as constant and predictable as possible. In The Theory of Money and Credit, first published in 1912, Mises argued that sound money serves as "an instrument for the protection of civil liberties against despotic inroads on the part of governments" that belongs "in the same class with political constitutions and bills of rights." Just as bills of rights were a "reaction against arbitrary rule and the nonobservance of old customs by kings," he wrote, "the postulate of sound money was first brought up as a response to the princely practice of debasing the coinage." Mises believed that inflation was just as much a violation of someone's property rights as arbitrarily taking away his land. After all, in both cases, the government acquires economic value at the expense of the citizen. Since monetary inflation creates a sugar high of short-term stimulus, politicians interested in re-election will always have an incentive to expand the money supply. But doing so comes at the expense of long-term declines in consumer purchasing power. For Mises, the best way to address such a threat is to avoid fiat currencies altogether. And in his estimation, the best sound-money alternative to fiat currency is gold. "The excellence of the gold standard," Mises wrote, is "that it renders the determination of the monetary unit's purchasing power independent of the policies of governments and political parties." In other words, gold's primary virtue is that its supply increases slowly and steadily, and cannot be manipulated by politicians. It may appear as if gold was an arbitrary choice as the basis for currency, but gold has a combination of qualities that make it ideal for storing and exchanging value. First, it is verifiably unforgeable. Gold is very dense, which means that counterfeit gold is easy to identify — one simply has to weigh it. Second, gold is divisible. Unlike, say, cattle, gold can be delivered in fractional units both small and large, enabling precise pricing. Third, gold is durable. Unlike commodities that rot or evaporate over time, gold can be stored for centuries without degradation. Fourth, gold is fungible: An ounce of gold in Asia is worth the same as an ounce of gold in Europe. These four qualities are shared by most modern currencies. Gold's fifth quality is more distinct, however, as well as more relevant to its role as an instrument of sound money: scarcity. While people have used beads, seashells, and other commodities as primitive forms of money, those items are fairly easy to acquire and introduce into circulation. While gold's supply does gradually increase as more is extracted from the ground, the rate of extraction relative to the total above-ground supply is low: At current rates, it would take approximately 66 years to double the amount of gold in circulation. In comparison, the supply of U.S. dollars has more than doubled over just the last decade. When the Austrian-influenced designers of bitcoin set out to create a more reliable currency, they tried to replicate all of these qualities. Like gold, bitcoin is divisible, unforgeable, divisible, durable, and fungible. But bitcoin also improves upon gold as a form of sound money in several important ways. First, bitcoin is rarer than gold. Though gold's supply increases slowly, it does increase. The global supply of bitcoin, by contrast, is fixed at 21 million and cannot be feasibly altered. Second, bitcoin is far more portable than gold. Transferring physical gold from one place to another is an onerous process, especially in large quantities. Bitcoin, on the other hand, can be transmitted in any quantity as quickly as an email. Third, bitcoin is more secure than gold. A single bitcoin address carried on a USB thumb drive could theoretically hold as much value as the U.S. Treasury holds in gold bars — without the need for costly militarized facilities like Fort Knox to keep it safe. In fact, if stored using best practices, the cost of securing bitcoin from hackers or assailants is far lower than the cost of securing gold. Fourth, bitcoin is a technology. This means that, as developers identify ways to augment its functionality without compromising its core attributes, they can gradually improve the currency over time. Fifth, and finally, bitcoin cannot be censored. This past year, the Chinese government shut down Hong Kong's pro-democracy Apple Daily newspaper not by censoring its content, but by ordering banks not to do business with the publication, thereby preventing Apple Daily from paying its suppliers or employees. Those who claim the same couldn't happen here need only look to the Obama administration's Operation Choke Point, a regulatory attempt to prevent banks from doing business with legitimate entities like gun manufacturers and payday lenders — firms the administration disfavored. In contrast, so long as the transmitting party has access to the internet, no entity can prevent a bitcoin transaction from taking place. This combination of fixed supply, portability, security, improvability, and censorship resistance epitomizes Nakamoto's breakthrough. Hayek, in The Denationalisation of Money, foresaw just such a separation of money and state. "I believe we can do much better than gold ever made possible," he wrote. "Governments cannot do better. Free doubt would." While Hayek and Nakamoto hoped private currencies would directly compete with the U.S. dollar and other fiat currencies, bitcoin does not have to replace everyday cash transactions to transform global finance. Few people may pay for their morning coffee with bitcoin, but it is also rare for people to purchase coffee with Treasury bonds or gold bars. Bitcoin is competing not with cash, but with these latter two assets, to become the world's premier long-term store of wealth. The primary problem bitcoin was invented to address — the devaluation of fiat currency through reckless spending and borrowing — is already upon us. If Biden's $3.5 trillion spending plan passes Congress, the national debt will rise further. Someone will have to buy the Treasury bonds to enable that spending. Yet as discussed above, investors are souring on Treasurys. On June 30, 2021, the interest rate for the benchmark 10-year Treasury bond was 1.45%. Even at the Federal Reserve's target inflation rate of 2%, under these conditions, Treasury-bond holders are guaranteed to lose money in inflation-adjusted terms. One critic of the Fed's policies, MicroStrategy CEO Michael Saylor, compares the value of today's Treasury bonds to a "melting ice cube." Last May, Ray Dalio, founder of Bridgewater Associates and a former bitcoin skeptic, said "[p]ersonally, I'd rather have bitcoin than a [Treasury] bond." If hedge funds, banks, and foreign governments continue to decelerate their Treasury purchases, even by a relatively small percentage, the decrease in demand could send U.S. bond prices plummeting. If that happens, the Fed will be faced with the two unpalatable options described earlier: allowing interest rates to rise, or further inflating the money supply. The political pressure to choose the latter would likely be irresistible. But doing so would decrease inflation-adjusted returns on Treasury bonds, driving more investors away from Treasurys and into superior stores of value, such as bitcoin. In turn, decreased market interest in Treasurys would force the Fed to purchase more such bonds to suppress interest rates. AMERICA'S BITCOIN OPPORTUNITY From an American perspective, it would be ideal for U.S. Treasury bonds to remain the world's preferred reserve asset for the foreseeable future. But the tens of trillions of dollars in debt that the United States has accumulated since 1971 — and the tens of trillions to come — has made that outcome unlikely. It is understandably difficult for most of us to imagine a monetary world aside from the one in which we've lived for generations. After all, the U.S. dollar has served as the world's leading reserve currency since 1919, when Britain was forced off the gold standard. There are only a handful of people living who might recall what the world was like before then. Nevertheless, change is coming. Over the next 10 to 20 years, as bitcoin's liquidity increases and the United States becomes less creditworthy, financial institutions and foreign governments alike may replace an increasing portion of their Treasury-bond holdings with bitcoin and other forms of sound money. With asset values reaching bubble proportions and no end to federal spending in sight, it's critical for the United States to begin planning for this possibility now. Unfortunately, the instinct of some federal policymakers will be to do what countries like Argentina have done in similar circumstances: impose capital controls that restrict the ability of Americans to exchange dollars for bitcoin in an attempt to prevent the digital currency from competing with Treasurys. Yet just as Nixon's 1971 closure of the gold window led to a rapid flight from the dollar, imposing restrictions on the exchange of bitcoin for dollars would confirm to the world that the United States no longer believes in the competitiveness of its currency, accelerating the flight from Treasury bonds and undermining America's ability to borrow. A bitcoin crackdown would also be a massive strategic mistake, given that Americans are positioned to benefit enormously from bitcoin-related ventures and decentralized finance more generally. Around 50 million Americans own bitcoin today, and it's likely that Americans and U.S. institutions own a plurality, if not the majority, of the bitcoin in circulation — a sum worth hundreds of billions of dollars. This is one area where China simply cannot compete with the United States, since Bitcoin's open financial architecture is fundamentally incompatible with Beijing's centralized, authoritarian model. In the absence of major entitlement reform, well-intentioned efforts to make Treasury bonds great again are likely doomed. Instead of restricting bitcoin in a desperate attempt to forestall the inevitable, federal policymakers would do well to embrace the role of bitcoin as a geopolitically neutral reserve asset; work to ensure that the United States continues to lead the world in accumulating bitcoin-based wealth, jobs, and innovations; and ensure that Americans can continue to use bitcoin to protect themselves against government-driven inflation. To begin such an initiative, federal regulators should make it easier to operate cryptocurrency-related ventures on American shores. As things stand, too many of these firms are based abroad and closed off to American investors simply because outdated U.S. regulatory agencies — the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, the Treasury Department, and others — have been unwilling to provide clarity as to the legal standing of digital assets. For example, the SEC has barred Coinbase from paying its customers' interest on their holdings while refusing to specify which laws Coinbase has violated. Similarly, the agency has refused to approve Bitcoin exchange-traded funds (ETFs) without specifying standards for a valid ETF application. Congress should implement SEC Commissioner Hester Peirce's recommendations for a three-year regulatory grace period for decentralized digital tokens and assign to a new agency the role of regulating digital assets. Second, Congress should clarify poorly worded legislation tied to a recent bipartisan infrastructure bill that would drive many high-value crypto businesses, like bitcoin-mining operations, overseas. Third, the Treasury Department should consider replacing a fraction of its gold holdings — say, 10% — with bitcoin. This move would pose little risk to the department's overall balance sheet, send a positive signal to the innovative blockchain sector, and enable the United States to benefit from bitcoin's growth. If the value of bitcoin continues to appreciate strongly against gold and the U.S. dollar, such a move would help shore up the Treasury and decrease the need for monetary inflation. Finally, when it comes to digital versions of the U.S. dollar, policymakers should follow the advice of Friedrich Hayek, not Xi Jinping. In an effort to increase government control over its monetary system, China is preparing to unveil a blockchain-based digital yuan at the 2022 Beijing Winter Olympics. Jerome Powell and other Western central bankers have expressed envy for China's initiative and fret about being left behind. But Americans should strongly oppose the development of a central-bank digital currency (CBDC). Such a currency could wipe out local banks by making traditional savings and checking accounts obsolete. What's more, a CBDC-empowered Fed would accumulate a mountain of precise information about every consumer's financial transactions. Not only would this represent a grave threat to Americans' privacy and economic freedom, it would create a massive target for hackers and equip the government with the kind of censorship powers that would make Operation Choke Point look like child's play. Congress should ensure that the Federal Reserve never has the authority to issue a virtual currency. Instead, it should instruct regulators to integrate private-sector, dollar-pegged "stablecoins" — like Tether and USD Coin — into the framework we use for money-market funds and other cash-like instruments that are ubiquitous in the financial sector. PLANNING FOR THE WORST In the best-case scenario, the rise of bitcoin will motivate the United States to mend its fiscal ways. Much as Congress lowered corporate-tax rates in 2017 to reduce the incentive for U.S. companies to relocate abroad, bitcoin-driven monetary competition could push American policymakers to tackle the unsustainable growth of federal spending. While we can hope for such a scenario, we must plan for a world in which Congress continues to neglect its essential duty as a steward of Americans' wealth. The good news is that the American people are no longer destined to go down with the Fed's sinking ship. In 1971, when Washington debased the value of the dollar, Americans had no real recourse. Today, through bitcoin, they do. Bitcoin enables ordinary Americans to protect their savings from the federal government's mismanagement. It can improve the financial security of those most vulnerable to rising prices, such as hourly wage earners and retirees on fixed incomes. And it can increase the prosperity of younger Americans who will most acutely face the consequences of the country's runaway debt. Bitcoin represents an enormous strategic opportunity for Americans and the United States as a whole. With the right legal infrastructure, the currency and its underlying technology can become the next great driver of American growth. While the 21st-century monetary order will look very different from that of the 20th, bitcoin can help America maintain its economic leadership for decades to come. Tyler Durden Tue, 10/19/2021 - 23:25.....»»

Category: worldSource: nytOct 20th, 2021

Tech Innovators Lead The Charge To Ensure Bitcoin Adoption In El Salvador Is A Success

Open Bank Project, API3, Qredo & Sovryn Form Alliance with Banco Hipotecario to Power Bitcoin Adoption in El Salvador Q3 2021 hedge fund letters, conferences and more The Next Generation Of Blockchain Applications Berlin, XX October 2021 — A new alliance between Banco Hipotecario, TESOBE – the company behind the Open Bank Project – API3, […] Open Bank Project, API3, Qredo & Sovryn Form Alliance with Banco Hipotecario to Power Bitcoin Adoption in El Salvador if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The Next Generation Of Blockchain Applications Berlin, XX October 2021 -- A new alliance between Banco Hipotecario, TESOBE - the company behind the Open Bank Project - API3, Qredo and Sovryn will bring forth the next generation of Blockchain applications offering open banking solutions to provide financial inclusion to all in El Salvador. El Salvador's groundbreaking Bitcoin Law entered into force on September 7, 2021, introducing unfamiliar challenges for traditional financial institutions as well as more specific consumer needs related to bitcoin storage and currency exchange. Together, leaders in the blockchain space will utilize their resources and knowledge to facilitate a smooth adoption of bitcoin as legal tender, ensuring citizens reap the benefits of digital banking and national infrastructure can handle this momentous change. Banco Hipotecario, a national bank with a commercial focus, joined forces with the Open Bank Project and API3 to assess and facilitate solutions for Salvadorans and the financial service sector. API3 and Open Bank Project 10-year partnership has set major ambitions to merge traditional and decentralized industries. With Banco Hipotecario, the joint-partnership hopes to realize the potential for end-to-end open digital systems. The alliance has selected Qredo's decentralized custodial infrastructure to power bitcoin banking solutions in El Salvador. Alongside this, Sovryn, the Bitcoin-native decentralized trading and lending platform will provide the infrastructure to enable traditional banks to o er Bitcoin-native DeFi products such as lending, trading and Bitcoin backed-stablecoins to their customers. The collective aim is to accelerate the democratization of Bitcoin electronic payments and help citizens enjoy the benefits of digital and decentralized transactions. It will also support the nation’s larger financial framework to promote a smooth and effective integration of Bitcoin as legal tender, driving financial inclusion for Salvadorans. Bitcoin Adoption In El Salvador The Bitcoin phenomenon is propagating across Latin America. By leveraging Qredo’s revolutionary crypto infrastructure, which is entirely compatible with the Bitcoin Lightning Network used in El Salvador, combined with Sovryn’s ability to build on bitcoin, TESOBE’s APIs and API3’s Airnode, this alliance will support El Salvador’s seamless transition into a crypto-friendly financial services system. “This alliance is a great opportunity for El Salvador to create new financial products that support the needs of our Salvadoran citizens,” said Celina Padilla, president of Bank Hipotecario de El Salvador. “We are closer than ever to achieving true financial inclusion and I am proud that Banco Hipotecario is the first bank at the national level to carry out this type of alliance. Now everyone has their eyes on our country and on our bank.” “We are super excited and grateful for the opportunity to assemble this advanced Crypto Banking infrastructure, which will act as the foundation for a new breed of financial services in El Salvador,” says Simon Redfern, CEO of TESOBE and founder of the Open Bank Project. “Our combined technologies will help Banco Hipotecario deliver more transparent and inclusive financial services to Salvadorans – especially the underbanked part of the population – and will remove many of the uncertainties that stand between El Salvador and the advantages of cryptocurrency adoption.” “API3 is incredibly excited to announce this alliance and we can’t wait to see the synergies between these leading technologies in action. As the world’s financial system is modernized, we will help build a foundation for the future of digital banking that can easily be adapted to fit the needs of those who will benefit from it most,” says Heikki Vänttinen, Co-Founder at API3. "We are glad to get in at the ground zero of global bitcoinization," says Anthony Foy, Qredo CEO. “Qredo brings the scalability and instant settlement to underpin bitcoin banking infrastructure, making it possible to adopt crypto assets securely on a national scale, with none of the governance limitations imposed by private keys." Edan Yago, core contributor at Sovryn, commented: “With its adoption of Bitcoin, El Salvador has chosen to rewrite the script of its national finance system and to blaze a trail for other nations to follow. DeFi is now coming to the world and Sovryn is playing a crucial part in these early practical steps towards making Bitcoin adoption a reality in El Salvador and beyond.” About Banco Hipotecario de El Salvador Banco Hipotecario de El Salvador, a national bank with a commercial focus, offers a wide range of banking products and services such as consumer and corporate loans, savings accounts, credit and debit cards, and related financial services to individuals, small- and medium-sized enterprises and large corporations. About the Open Bank Project Led by Berlin-based software company TESOBE GmbH, the Open Bank Project is the leading API Management platform for banks that want to ensure a rapid and secure enhancement of their digital offerings. The Open Bank Project assists banks in deploying Open Banking platforms by providing access to over 450 standardised APIs, used by our vibrant global community of over 11,000 developers. About API3 The API3 Foundation is a Decentralized Autonomous Organization (DAO) that builds decentrally governed and quantifiably secure data feeds to power Web 3.0 applications without employing third-party intermediaries. Powered by Airnode-enabled first-party oracles, API3’s dAPIs are fully decentralized and blockchain-native APIs with quantifiable security. About Qredo Qredo is a decentralized digital asset management infrastructure and product suite designed to unlock new opportunities for institutional investors in digital assets and decentralized finance. Qredo's Layer 2 blockchain protocol enables users to seamlessly transfer and settle BTC, ETH, and ERC-20 tokens. Assets are secured by Qredo’s advanced Gen 2.0 multi-party computation (MPC), which provides tier-1 bank security and institutional-grade governance. About Sovryn Sovryn is a Bitcoin-native financial operating system that allows people to utilize their Bitcoin in decentralised applications. The Sovryn protocol provides an infrastructure using layer-2 technologies for the next generation of DeFi. For more details about the Sovryn tech stack, its use cases, and the SOV token see the Sovryn Black Paper. (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 7th, 2021

Irony: Envisioned To Be Fully Decentralized, Bitcoin Today Is Highly Centralized

If a cartel of Bitcoin miners wanted to, they could render the whole blockchain useless Q2 2021 hedge fund letters, conferences and more More than a decade ago when Satoshi Nakamoto wrote the original Bitcoin whitepaper, he envisioned a “peer-to-peer” electronic cash system that removes the possibility of a single point of failure, censorship, or […] If a cartel of Bitcoin miners wanted to, they could render the whole blockchain useless if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more More than a decade ago when Satoshi Nakamoto wrote the original Bitcoin whitepaper, he envisioned a “peer-to-peer” electronic cash system that removes the possibility of a single point of failure, censorship, or a centralized authority taking over the network. It was supposed to be fully decentralized. Fast forward to 2021 and look beyond the hype - you’ll be surprised to see that the Bitcoin network has become uncomfortably centralized. The Sacrificial Goat As Elon Musk pointed out in response to a Twitter thread by crypto bull Peter McCormack, Bitcoin is highly centralized with a small number of miners controlling a majority of the hashing power. The Bitcoin hash rate plunged 35% when a single coal mine in Xinjiang flooded in April this year. It was a stark reminder of how centralized the Bitcoin network has become. According to the Cambridge Bitcoin Electricity Consumption Index, China’s share of the global Bitcoin energy consumption has declined from 75% in September 2019 to 46% in April 2021. Miners have slowly been moving away from China, but it remains a dominant player in Bitcoin mining. In their attempt to improve scalability and security, the world’s leading blockchains have turned decentralization into the sacrificial goat. “Decentralization has lost its way. We’ve broken the dream by centralizing. We outsourced critical infrastructure because either we couldn't be bothered to run it ourselves or the task was simply too onerous,” says Minima founder Paddy Cerri. Minima, an ultra-lean base layer blockchain protocol, aims to leverage billions of smartphones and IoT devices to achieve “true” decentralization without compromising on security and scalability. Its protocol easily fits on a mobile device, enabling every user to run a full constructing and validating node. Since millions of users from around the world would be involved in mining the blocks and securing the network, it will be censorship-resistant. To take control of such a network, an individual or institution has to get hundreds of millions of users from across the globe on their side, which is practically impossible. Blockchain Without Incentives? Proof-of-Work (PoW) blockchains such as Bitcoin and Ethereum rely on a relatively small number of nodes to accept valid transactions and maintain the security of the network. But the nodes only validate transactions. They don’t mine new blocks. That’s the job left to miners. Miners are incentivized to find new blocks for the entire ecosystem. More often than not, where there are strong incentives, power gets concentrated in the hands of the few. In the case of Bitcoin, the hashing power is centered in the hands of the Chinese miners. If forced or incentivized by Beijing, these miners could take over the network. Decentralization reduces the level of trust the network participants place in one another. It deters each participant’s ability to exert control or degrade the network’s functionality. Even the Proof-of-Stake (PoS) blockchains have only a handful of whales staking most of the tokens, effectively controlling the underlying mechanisms. In short, there are no fully decentralized blockchains at this point. There need to be a lot of miners but a lot less incentives for mining blocks to achieve true decentralization. But why would people allocate their computing resources to mining if the monetary incentives aren’t attractive enough? Paddy Cerri argues that they would because they will be using their own devices to mine blocks for their own transactions. It wasn’t possible until a few years ago, but it is today with billions of active smartphones and the Internet of Things (IoT) devices. Is that an attractive enough proposition to get users onboard a fully decentralized blockchain? Probably not, at least not in the initial phase. Minima is running an incentives program for a limited time period to bring more people into the network. After that, it believes the protocol’s ease of adoption will accelerate the node count. Speed And Scalability Centralized actors restrict the security, speed, and scalability of blockchain technology. Ethereum is in the process of switching to the Proof-of-Stake (PoS) consensus mechanism with ETH 2.0, which would increase its capacity from just 15-30 transactions per second (TPS) today to around 100,000 TPS. ETH 2.0 uses the sharding mechanism to scale while maintaining security. Sharding involves dividing up the work by splintering the blockchain into different pieces, each shard validating a specific kind of action. The Ethereum 2.0 network will be more decentralized than the current Ethereum because staking as a smaller barrier to entry than mining. Cardano, which is getting a lot of attention since launching smart contracts functionality earlier this month, has become the most decentralized PoS network. According to data from Staking Rewards, almost 70% of the total Cardano (ADA) tokens in circulation have been staked to support the network and validate transactions. In PoW blockchains such as Bitcoin, the base layer has an upper limit on the number of transactions it can handle per second. Bitcoin is unbearably slow (just 4.6 TPS) at processing transactions. Lightning Network and other Layer-2 scaling solutions have emerged to reduce the workload on Bitcoin and help it scale. Closing Thoughts Decentralization along with security and scalability are the three pillars of a blockchain. Bitcoin and other blockchains that rely heavily on a small number of miners and stakers are highly vulnerable. That’s the bitter reality. It’s not too late for the popular blockchains to follow the path Minima has taken. By making every user a miner, the project has managed to achieve decentralization without sacrificing security and scalability. Updated on Oct 4, 2021, 1:08 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 4th, 2021

Snowden Didn"t "Flee to Russia": Obama Trapped Him There

Snowden Didn't "Flee to Russia": Obama Trapped Him There Authored by Brian McGlinchey via Stark Realities When Russian President Vladimir Putin granted citizenship to NSA whistleblower Edward Snowden on Monday, the news revived a long-simmering debate about the propriety of his revelations of U.S. government secrets. At the same time, it prompted reiterations of a widely-embraced falsehood: that Snowden “fled to Russia.” The disinformation-trafficking wasn’t limited to random people on social media. Among others, The New York Times, The Guardian, ABC, Christian Science Monitor and Canada’s CBC all asserted in the past week that Snowden “fled to Russia” in 2013 after revealing that the United States government had created a mass surveillance regime targeting its own citizens, in violation of the U.S. Constitution’s Fourth Amendment. What many people don’t realize — and what some people both inside the government and out of it purposefully ignore — is that Snowden wasn’t traveling to Russia, but merely through it. When he left Hong Kong after meeting with journalists Glenn Greenwald and Laura Poitras and turning over hundreds of thousands of stolen files, Snowden’s ultimate destination was Quito, Ecuador. It’s important to note that Snowden says that, before leaving, he destroyed his cryptographic keys that provided him access to the files, and didn’t bring any copies of the files with him. At the time, the Ecuadoran government was providing political asylum to Wikileaks publisher Julian Assange at the country’s London consulate, and Snowden hoped Ecuador would provide him asylum as well. Snowden’s itinerary was arranged such that he wouldn’t land in countries that would extradite him to the United States. Nor would he cross U.S. airspace along the way. He was to make four flights in all, taking him from Hong Kong to Moscow, then Havana, Cuba; Caracas, Venezuela and finally Quito. However, upon arriving in Moscow, Snowden was escorted by Russian security officials to an airport conference room, where they informed him that, while he was flying to Moscow, the Obama administration had invalidated his passport. He’d spend the next 40 days at the Sheremetyevo airport, during which he applied to 27 countries for political asylum. “Not a single one of them was willing to stand up to American pressure,” Snowden wrote in his memoir, Permanent Record, “with some countries refusing outright, and others declaring they were unable to even consider my request until I arrived in their territory — a feat that was impossible.” Seemingly tired of the spectacle, Putin granted Snowden asylum, and he’s been in Russia ever since. The essential point, however, is that Snowden is in Russia because the Obama administration deliberately trapped him there. In 2013 and ever since, rabid Snowden detractors have failed to acknowledge how that move by the Obama White House belied its own assertions that Snowden was a traitor who traveled to Moscow with highly valuable intelligence information and was at high risk of turning it over to the Russian government. Think about it: if Obama officials believed Snowden had possession of an extremely sensitive archive of top secret documents - as they insist but Snowden denies - why would they *want to trap him in Russia*? Because they knew it'd be easy to convince idiots he was a Kremlin spy. — Glenn Greenwald (@ggreenwald) September 26, 2022 Aside from revealing the unconstitutional surveillance regime, Snowden’s disclosures also proved that Director of National Intelligence James Clapper had committed perjury in testifying before Congress: Clapper didn’t merely escape perjury charges, termination or a shameful resignation — CNN actually put him on the payroll as a “national security analyst,” giving him a pulpit from which to continue spewing all manner of falsehoods on behalf of the national security establishment, on everything from Russiagate to Hunter Biden’s laptop. Meanwhile, though Snowden has been vindicated many times over — including a 2020 federal court ruling that the NSA’s surveillance program violated the Constitution — he’s compelled to live in Russia to escape prosecution under the Espionage Act of 1917. Which brings us to another myth that goes hand-in-hand with “fled to Russia” falsehood: Detractors routinely say Snowden was a “coward” to flee the United States at all. The noble course of action, they say, would be to go to trial in America and let a jury of his peers decide whether he was justified in exposing his government’s crimes by leaking secret documents to journalists. However, as government-whistleblower attorney Jesselyn Radack explained in a Wall Street Journal op-ed, that’s not how Espionage Act prosecutions work: “The Espionage Act has morphed into a strict liability law, which means the government does not have to show the defendant had a felonious intent. A defendant cannot argue that the information was improperly classified…The motive and intent of the whistleblower are irrelevant. And there is no whistleblower defense, meaning the public value of the material disclosed does not matter at all.” In short, the only way for Snowden to be treated justly is for him to be pardoned or given a plea deal with a very short sentence. As the intelligence community continues to wield excessive influence on our government, neither outcome is likely anytime soon. Stark Realities undermines official narratives, demolishes conventional wisdom and exposes fundamental myths across the political spectrum. Read more and subscribe at Tyler Durden Sat, 10/01/2022 - 23:30.....»»

Category: blogSource: zerohedgeOct 2nd, 2022

The Big Takeaways From Elon Musk’s Twitter Texts

Hundreds of Elon Musk’s private text messages about Twitter were made public Hundreds of Elon Musk’s private text messages about Twitter were made public Thursday in a Delaware court filing, part of a stack of evidence in Twitter’s forthcoming legal case against the Tesla CEO. Musk’s texts offer a rare insight into the private conversations of the man at the center of a business deal that captivated the world. The messages were mostly sent in March and April this year, a period when Musk began regularly criticizing Twitter publicly, announced he had acquired a minority stake in the company, agreed to join its board, then backed out and made a $44 billion hostile takeover bid before attempting to pull out of the deal. [time-brightcove not-tgx=”true”] Twitter is now suing Musk in an attempt to force him to go through with his agreement, finalized in April, to buy Twitter. In his attempt to get out of the deal, Musk argues that Twitter misled him over the number of fake accounts on its platform. The trial is scheduled to begin on Oct. 17. Read More: Whether or Not He Buys Twitter, Elon Musk Has Thrown the Company Into Turmoil The texts reveal how Jack Dorsey, Twitter’s co-founder, cheered Musk’s effort to buy and reform the platform from behind the scenes, and attempted to heal Musk’s deteriorating relationship with Parag Agrawal, Dorsey’s successor as Twitter CEO. They also show how, at the same time as he was soliciting financing for his Twitter deal, Musk was contemplating a “Plan B” to turn the platform into a blockchain-based social network. The messages suggest Musk soured on that plan after concluding it would be unfeasible. The texts reveal Musk’s contact list is a who’s who of business titans and media personalities, many of whom clambered to offer him their two cents as his plans for Twitter became public knowledge. Here are the big takeaways from Elon Musk’s Twitter text messages. Jack Dorsey’s behind-the-scenes role The texts reveal how Dorsey had pushed for months at Twitter to grant Musk a seat on the company’s board. On March 26, after Musk sent a series of tweets criticizing Twitter’s approach to free speech and asking whether a new platform was needed, Dorsey sent Musk a series of messages urging Musk to “help” turn the company around. “You care so much, get its importance, and could def help in immeasurable ways,” Dorsey wrote to Musk. Dorsey told Musk that in 2021, while he was still CEO, he had tried to convince Twitter’s board to give Musk a seat, but decided to quit after the directors declined. The board considered giving Musk a seat too risky, Dorsey’s texts say. “That’s about the time I decided I needed to work to leave [Twitter], as hard as it was for me,” Dorsey told Musk in the messages. (Dorsey resigned as Twitter CEO in November 2021, and stepped down from its board in May 2022.) Meanwhile, Musk’s tweets about the future of Twitter appeared to have spurred the company’s board to reevaluate their opposition to the billionaire taking a seat. Days later, according to the texts, Musk met Agrawal and Bret Taylor, chair of the Twitter board, for dinner at a quirky AirBnB in San Jose, California, surrounded by tractors, donkeys, and abandoned trucks. “Great dinner :)” Musk texted a group chat afterward. “Really great,” Taylor replied. “The donkeys and dystopian surveillance helicopters really added to the ambiance.” “Memorable for multiple reasons. Really enjoyed it,” Agrawal said. Two days later, Dorsey texted Musk. “I heard good things are happening,” he said. Read More: Elon Musk Is Convinced He’s the Future. We Need to Look Beyond Him The next day, April 4, Musk announced publicly he had been buying Twitter stock since January and had amassed an almost 10% stake in the company. The day after that, Agrawal tweeted out a statement saying Musk had agreed to join the Twitter board. After the news was announced, Dorsey criticized the board in a message to Musk. “Thank you for joining!” he wrote. “Parag is an incredible engineer. The board is terrible. Always here to talk through anything you want.” “I couldn’t be happier you’re doing this,” Dorsey added. “I’ve wanted it for a long time. Got very emotional when I learned it was finally possible.” Musk’s relationship with Parag Agrawal sours The texts provide a behind-the-scenes look at how Musk’s conversations with the Twitter CEO quickly deteriorated. The pair had a cordial exchange where they bonded over a shared love of coding and engineering. “I have a ton of ideas, but [let me know] if I’m pushing too hard,” Musk wrote to Agrawal on April 7. “I just want Twitter to be maximum amazing.” But two days later, after more tweets from Musk criticizing Twitter publicly, Agrawal sent him a terse message. “You are free to tweet ‘is Twitter dying?’ or anything else about Twitter – but it’s my responsibility to tell you that it’s not helping me make Twitter better in the current context,” Agrawal wrote. “Next time we speak, I’d like to […] provide you perspective on the level of internal distraction right now and how it’s hurting our ability to do work.” “What did you get done this week?” Musk wrote back. “I’m not joining the board,” Musk added in a followup message. “This is a waste of time. Will make an offer to take Twitter private.” As Musk began soliciting bankers and other tech billionaires for cash to finance his takeover, the court document shows Dorsey attempting to repair the damage between Musk and Agrawal. “I just want to make this amazing and feel bound to it,” Dorsey wrote to Musk on April 26, after getting him to agree to join a group call with Agrawal. “I won’t let this fail and will do whatever it takes. It’s just too critical to humanity.” Read More: The Twitter Whistleblower Needs You to Trust Him The subsequent messages suggest that the attempt failed. “You and I are in complete agreement,” Musk wrote to Dorsey after the call. “Parag is just moving far too slowly and trying to please people who will not be happy no matter what he does.” “At least it became clear that you can’t work together,” Dorsey replied. “That was clarifying.” How Musk soured on blockchain Another big takeaway from the text messages is that Musk was weighing an ill-fated plan to turn Twitter into a blockchain-based platform, even after he had decided to mount a hostile takeover of the company. “I have an idea for a blockchain social media system that does both payments and short text messages/links like Twitter,” Musk texted his brother, Kimbal Musk, on April 9. “You have to pay a tiny amount to register your message on the chain, which will cut out the vast majority of spam and bots. There is no throat to choke, so free speech is guaranteed.” Musk said he had a “Plan-B” for Twitter based on the blockchain. “My Plan-B is a blockchain-based version of Twitter, where the “tweets” are embedded in the transaction as comments,” he wrote in an April 14 message to Steve Davis, the CEO of Musk’s tunnel-drilling Boring Company. “So you’d have to pay maybe 0.1 Doge per comment or repost of that comment.” Dogecoin, or Doge, is a spoof cryptocurrency, named after a meme about a dog. Musk repeatedly tweeted about investing in the digital currency in 2021, which briefly sent its value surging before it crashed. But just 11 days later, Musk appeared to have changed his mind. Musk received a text from an intermediary who said he represented the billionaire CEO of the cryptocurrency exchange FTX, Sam Bankman-Fried. The intermediary said Bankman-Fried could offer Musk up to $5 billion in financing for his Twitter takeover if Musk agreed to let him “do the engineering for social media blockchain integration.” “Blockchain Twitter isn’t possible,” Musk shot back. “The bandwidth and latency requirements cannot be supported by a peer to peer network, unless those ‘peers’ are absolutely gigantic, thus defeating the purpose of a decentralized network.” Musk still agreed to meet with Bankman-Fried, but on one condition: “So long as I don’t have to have a laborious blockchain debate.” (Bankman-Fried did not end up contributing money to Musk’s Twitter bid.) Musk’s inbox blows up with big-name messages As Musk’s plans for Twitter began to dominate the news cycle, his inbox began to blow up with messages from public figures—including interview requests from high-profile journalists, outreach from fixers claiming to represent politicians, and informal commitments from some of Silicon Valley’s biggest investors to help fund the Twitter takeover. Gayle King, co-host of CBS This Morning, texted Musk on April 14. “ELON! You buying Twitter or offering to buy Twitter … Wow!” her message reads. “Now don’t you think we should sit down together face to face? This is, as the kids of today say, a ‘gangsta move’.” The message went on: “I don’t know how shareholders turn this down. Like I said, you are not like the other kids in the class.” Read More: A Complete Timeline of Elon Musk’s Business Endeavors The court filing shows Musk soliciting billions of dollars in financing directly, via informal messages with tech CEOs. On April 20, Musk texted Oracle CEO Larry Ellison to ask if he would be interested in contributing funding toward his Twitter takeover. An hour later, Ellison had offered him a billion dollars. (Ellison followed through, according to Bloomberg.) Other heavyweights from the business world whose messages appear in the filing include Microsoft CEO Satya Nadella, LinkedIn founder Reid Hoffman, media investor James Murdoch, and Salesforce co-CEO Marc Benioff. (Benioff is the owner and co-chair of TIME). Musk’s inbox also filled with messages from people on the overt political right, who appeared enthused by his public statements criticizing Twitter for being too left-wing. “Are you going to liberate Twitter from the censorship happy mob?” podcast host Joe Rogan asked in a message dated April 4. “I will provide advice, which they may or may not choose to follow,” Musk replied. And Ron DeSantis, the Republican Governor of Florida tipped for a run at the presidency in 2024, appeared to reach out through an intermediary. “Governor DeSantis just called me just now with ideas how to help you,” wrote Joe Lonsdale, a venture capitalist, in a message to Musk on April 16. “Let me know if you or somebody on your side wants to chat [with] him.” “Haha cool,” Musk replied......»»

Category: topSource: timeSep 30th, 2022

The Great Reset: The Bond Yield-Dollar Feedback Loop

The Great Reset: The Bond Yield-Dollar Feedback Loop Via Global Macro Monitor, The Great Reset is upon us.  All things as we have known and have become comfortably numb with, such as zero interest rates, negative real interest rates, quantitative easing (digital money printing), and Pax Americana, [and central bank dominance of the U.S. bond market] are being upended and overturned.  Beware of recency bias, folks, as the global structural shifts and changes are now ubiquitous. – GMM, Sep 23rd Here’s a quick primer that may explain the current global macro dynamic between the strong dollar and rising bond yields. We’ve been beating this drum for years. Central Banks Will Be Net Sellers Of Treasury Securities Central banks, both foreign and the Fed, who are and have never been price and market sensitive, have been the predominant buyers of Treasury coupon securities over the past 20 years.  Look at the following table from a July 2021 post, which set the stage for the inflation we are now experiencing.  Granted, the massive ramp in the budget deficit during COVID – to a 12-month trailing high of 19 percent of GDP in March 2021 – is unlikely to repeat, but ditto for the Fed’s Treasury purchases.  The markets did not have the ability to absorb such a massive new issuance without a major financial disruption and a spike in interest rates.  The markets will now have to absorb or step in and replace both the Fed’s demand as the balance sheet runs off (effective net Treasury selling) and the foreign central bank selling. Both have now morphed from the largest buyers to net sellers. Also, note from the above table the Fed’s purchase of almost 200 percent of TIPs issuance during the period; that is, all of it and then some.  Inflation expectations?  Managed! China Selling Treasury Holdings Once the largest foreign holder of U.S. Treasury securities, China has sold down its holdings by over 26 percent from its November 2013 peak.  We also have no doubt Japan’s holdings are down from the latest observation in July. However, the Bank of Japan (BoJ) seems more comfortable with a weakening yen but not at the recent rapid clip, which forced them to intervene in the currency market.  Japan intervened in the foreign exchange market on Thursday to buy yen for the first time since 1998, in an attempt to shore up the battered currency after the Bank of Japan stuck with ultra-low interest rates.   –  Reuters, Sep 22nd    Global Capital Flows And The Great Financial Crisis Before the Great Financial Crisis (GFC), the Fed raised its policy rate by 425 basis points, and long-term yields barely budged.  Were financial markets efficient in anticipating the GFC?   Hardly.  The technical position of the yield curve contributed to and helped cause the GFC. Alan Greenspan argued that the Fed lost control of the U.S. yield curve. Foreign central banks recycled their massive dollar purchases back into the U.S. bond market after intervening in home markets to keep their currencies from appreciating.  Central banks were still reeling from the 1997 Asian Financial Crisis, which taught them a hard lesson about letting currencies become too overvalued.     The foreign central bank Treasury purchases suppressed long-term rates and allowed the credit and housing bubble to continue for much longer than the Fed anticipated and desired.   Looking back, he [Alan Greenspan] says today: “We tried in 2004 to move long-term rates higher in order to get mortgage interest rates up and take some of the fizz out of the housing market. But we failed.” Something besides Fed policy was at work. Both Mr. Greenspan and his successor, Ben Bernanke, point to an unanticipated surge in capital pouring into the U.S. from overseas. – Council of Foreign Relations Are We Now In A Rising Bond Yield/Strong Dollar Feedback Loop? In our 2017 post, Orwellian Monetary Policy, we posited that tighter domestic monetary policy in a globalized capital market could, in effect, and paradoxically, create looser domestic financial conditions as foreign capital is sucked back into the U.S. markets.  We suspect that is what happened before the GFC and agree with Greenspan and Bernake on this point.  We wrote in the dystopian 1984 language,  “Tightening is Easing” Today’s World The moves in exchange and interest rates over the past few months have been violent. We suspect we are now in a bond yield-dollar feedback loop, where many central banks are forced to intervene in their home currency markets, selling their Treasury holdings to raise the dollars to ease the pressure on the home currency. On the margin – and prices are set by marginal buyers and sellers — their actions put downward pressure on U.S. bond prices, causing yields to rise.   We are unsure whether this is a reality or GMM fitting reality to a nice theory, but we deduce it fits the action we are currently witnessing in the global markets.  The same is true for all central banks whose currencies are under pressure.  Witness the positive feedback loop. Reflexivity Reflexivity in economics is the theory that a feedback loop exists in which investors’ perceptions affect economic fundamentals, which in turn changes investor perception. The theory of reflexivity has its roots in sociology, but in the world of economics and finance, its primary proponent is George Soros. – Invetopedia We don’t know if the markets are in a period of Soros’ reflexivity, where traders and investors understand the above model and are trading on it, causing yields to rise and the dollar to strengthen even further in a self-fulfilling prophecy.  We suspect it is so; in the same spirit of Milton Friedman’s pool player analogy, acting as if they understand the laws of physics even though they don’t.  Consider the problem of predicting the shots made by an expert billiard player. It seems not at all unreasonable that excellent predictions would be yielded by the hypothesis that the billiard player made his shots as if he knew the complicated mathematical formulas that would give the optimum directions of travel, could estimate accurately by eye the angles, etc., describing the location of the balls, could make lightning calculations from the formulas, and could then make the balls travel in the direction indicated by the formulas. Our confidence in this hypothesis is not based on the belief that billiard players, even expert ones, can or do go through the process described; it derives rather from the belief that, unless in some way or other they were capable of reaching essentially the same result, they would not in fact be expert billiard players. – Milton Friedman, Essays in Positive Economic, 1953 Where Are The Dollars Going? Moreover, where is all the liquidity going from the King-Kong dollar strength?   Our priors are more, or some are being transferred from foreign central bank holdings of Treasuries into private sector hands and recycled back into the U.S. short-end bond and money markets.   Nobody knows for sure, but after three 75 bps rate hikes and quantitative tightening well underway,  one would think that money liquidity would be shrinking.   However, it doesn’t seem to be the case as the Fed’s overnight reverse repo facility remains at record highs.  We suspect foreign capital is flowing into the short-end, which now provides decent yields of 3-4 percent, giving the gorilla strength to the U.S. dollar.  Are Financial Conditions Tight?   After the jumbo rate hikes and $90 billion per month being drained from the domestic financial markets as the notes and bonds roll off the Fed’s balance sheet, one would think so.  Our favorite indicator of U.S. financial conditions,, the Chicago Fed’s National Financial Condition Index (NFCI), a weighted average of a large number of variables (105 measures of financial activity). tells a different story, however.   Financial conditions remain slightly loose.  Upshot The U.S. financial markets are still flush with too much money, and the Fed has once again lost control of events. Something big will eventually break, but in the words of the great-late MIT professor Rudy Dornbush, In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could. – Rudiger Dornbusch Because we have reached the tipping point of excess money, liquidity, capital, or however you define it, which are creating global inflationary pressures, don’t count on the monetary cavalry coming to the rescue anytime soon or returning to the good old days of hurricane force central bank headwinds. Look how markets reacted to the U.K.’s unfunded tax cuts this week.  Britain’s new government announced a sweeping series of tax cuts on Friday, betting it had found the path to economic growth despite high inflation. But the market verdict was swift and negative: The value of British stocks and bonds fell sharply, while the pound sank to lows against the U.S. dollar not seen since 1985. – NY Times The Great Reset is upon us, folks.  Don’t fight it.  We expect global policymakers will eventually be forced to coordinate their actions.   Tyler Durden Fri, 09/30/2022 - 11:20.....»»

Category: blogSource: zerohedgeSep 30th, 2022

Elon Musk vs. Twitter: Here are all the juiciest private texts between Musk and his billionaire buddies discussing plans for Twitter

A trove of private messages between Elon Musk and notable figures in business and tech is part of Twitter's ongoing lawsuit against the billionaire. Tesla and SpaceX CEO Elon MuskSteve Nesius/Reuters Text logs show Reid Hoffman, Jack Dorsey, Joe Rogan, and many more texting Musk about Twitter.  Conversations ranged from praise of Musk's moves to financing his acquisition of the company. Texts also show who influenced Musk and what caused the breakdown of talks with Twitter executives.  Elon Musk's smartphone has been bombarded by billionaires, executives, bankers, and other notable figures from tech, finance, and media, all hoping to get a piece of his wild and wayward $44 billion acquisition of Twitter. Hundreds of his private text conversations were just released as part of Twitter's lawsuit against Musk, who is trying back out of the deal. Among those who showed up are fellow tech billionaires like former Twitter CEO Jack Dorsey, Oracle Chairman Larry Ellison, and FTX founder Sam Bankman-Fried, who was also interested in buying Twitter and offered Musk $5 billion to get in on his eventual deal, text logs show.Then there are the likes of TV personality Gayle King, who wanted Musk for a sit-down interview, podcaster Joe Rogan, Justin Roiland, co-creator of "Rick and Morty," and Mathias Döpfner, CEO of Insider parent company Axel Springer. James Murdoch and his wife Kathryn Murdoch make individual appearances, too.Musk also had extensive back and forth with Twitter executives, including board chair and Salesforce co-CEO Bret Taylor and current Twitter CEO Parag Agrawal. Talk between Musk and Agrawal went south quickly, prompting Musk to reveal that he'd decided to buy Twitter instead of join its board because a board seat was "a waste of time." Brother Kimball Musk was a frequent confidant on Musk's ideas for Twitter, or a possible competing platform.  Also notable in Musk's texts are the various people he solicited for either financing for the $44 billion deal or advice on running the company. Many others reached out to him to offer their help, thoughts, or sometimes money. David Sacks was invited to invest. Reid Hoffman, too, eventually suggesting he could put $2 billion toward a deal. Marc Benioff, founder of Salesforce, shows up to talk about a new operating system for Twitter. Musk friends Jason Calacanis and Tim Urban offer to help, along with VC's Joe Lonsdale, Adeo Russi and Riot Games founder Marc Merrill. Sean Parker texted once to say he was doing Twitter due diligence from his mother's apartment. The log makes clear that, at least at one point, Musk was serious about acquiring Twitter. Not until early May did Musk begin to discuss any concerns about the platform. That began with an exchange with Morgan Stanley tech banker Michael Grimes in which Musk asks him to "slow down" on the deal. The majority of the texts shown in the log span between March and mid-June, a few weeks before Musk sent Twitter a letter attempting to cancel the deal altogether. Now Musk is locked in a legal battle with the company, which is trying to force him to acquire it.See below for highlights of the juiciest exchanges between Musk and other Twitterati:Jack DorseyJack DorseyChesnot/Getty ImagesDorsey and Musk exchanged many texts in the days before Musk's involvement in Twitter became public. Eventually, Musk pointed to phone conversations he'd had with Dorsey as supportive of his decision to take the company private. In one text to board chair Bret Taylor from April 10, two days after he told Agrawal he intended to buy the company and not sit on its board, Musk wrote:"It's better in my opinion to take Twitter private, restructure and return to the public markets one that is done. That was also Jack's view when I spoke to him."Joe RoganJoe Rogan in March 2019.Michael S. Schwartz/Getty ImagesMusk has spoken to Rogan on his podcast twice, in one 2018 interview infamously smoking weed, leading to some corporate headaches for the Tesla CEO. Rogan first texted Musk about Twitter April 4, the day Musk's stake in Twitter became public, asking "Are you going to liberate twitter from the censorship happy mob?""I will provide advice, which they may or may not choose to follow," Musk replied.A few weeks later, after Musk had offered to acquire Twitter, Rogan on April 25 texted again. "I REALLY hope you get Twitter. If you do, we should throw one hell of a party," Rogan said. Musk replied with the "100" emoji.Parag AgrawalBrendan McDermid/ReutersThings appear to have started off friendly between Musk and Parag Agrawal, who took over from Dorsey as Twitter CEO less than a year ago. They texted about meeting in person with Taylor, the text log shows, as well as other video meetings. They touched on things that needed to improve on Twitter and Agrawal said April 3, a few days before Musk's decision to join the board became public, he was "super excited about the opportunity and look forward to working closely and finding ways to use your time as effectively as possible."The mood shifted quickly after Agrawal texted Musk on April 9, regarding Musk's asking on Twitter "Is Twitter dying?" Agrawal told Musk he was free to Tweet anything he wanted about Twitter, "But it's my responsibility to tell you that it's not helping me make Twitter better in the current context. Next time we speak, I'd like to provide you perspective on the level of internal distraction right now and how its hurting our ability to do work."Musk responded about 30 minutes later asking "What did you get done this week?" He immediately followed up with, "I'm not joining the board. This is a waste of time" and added, "Will make an offer to take Twitter private."Agrawal asked to get on the phone with Musk, who appears to have refused, as Taylor followed up a few minutes later, saying Agrawal had informed him of "your text conversation." Taylor asked to speak on the phone, too. Musk simply said "Please expect a take private offer." Taylor tried again to speak by phone, wanting to "understand the context.""Fixing Twitter by chatting with Parag won't work," Musk wrote back. "Drastic action is needed.""This is hard to do as a public company, as purging fake users will make the numbers look terrible, so restructuring should be done as a private company. This is Jack's opinion too."Musk again refused to get on the phone with Taylor, saying he was "about to take off" but could talk the following day.Larry EllisonJustin Sullivan/Getty ImagesMusk and Ellison also texted a number of times, with Ellison expressing support for Musk's effort to buy Twitter from the outset. On March 27, Ellison texted Musk to set up a call: "I do think we need another Twitter."When Musk on April 20 asked the Oracle founder if he wanted to take part in financing the deal, Ellison wrote: "Yes, of course." He offered to put up "A billion… or whatever you recommend." Musk recommend $2 billion, but Ellison only ended up putting in the $1 billion he initially offered. "This has very high potential and I'd rather have you than anyone else," Musk wrote to Ellison."I agree that it has huge potential… and it would be lots of fun," Ellison replied.Sam Bankman-FriedSamuel Bankman-Fried fPhoto by SAUL LOEB/AFP via Getty ImagesWill MacAskill, an advisor to FTX founder Sam Bankman-Fried, texted Musk on March 29 in hopes of connecting the two about Twitter, about two weeks before Musk moved to take over the company. It's unclear whether Musk knew immediately who Bankman-Fried was, as he asked MacAskill "you vouch for him?" after MacAskill suggested Bankman-Fried had been interested in buying Twitter "for a while" and was open to working with Musk "about a possible joint effort in that direction."To that Musk replied, "Does he have huge amounts of money?" MacAskill said he was worth $24 billion and that he'd already mentioned contributing $1 billion to $8 billion into any deal for Twitter, a number that could potentially have gone up to $15 billion with financing.Musk did not appear very interested. Bankman-Fried texted Musk directly April 1, saying he was "happy to chat about Twitter (or other things) whenever!" Musk responded "Hi!" adding that he was currently in Germany. Bankman-Fried offered to call at a time that worked for Musk's time zone, but there are no texts in the log showing that Musk responded. Bankman-Fried texted again about two weeks later, after Musk's offer to acquire Twitter was in full swing, saying he would "love to talk about Twitter." Musk does not appear to have responded.Morgan Stanley's Grimes then tried to connect Musk with Bankman-Fried on April 25, saying he could put $5 billion into Musk's deal to buy Twitter. Musk disliked Grimes' text explaining briefly who Bankman-Fried is and suggesting a meeting. But wrote of a meeting, "So long as I don't have to have a laborious blockchain debate."Joe LonsdaleJoe Lonsdale's comments sparked outrage online.Brian Ach/Getty ImagesBefore Musk's stake in Twitter became public, he began posting questions and polls to his many millions of followers on the platform about what its future should look like. Joe Lonsdale, cofounder of Palantir and an outspoken political conservative, texted Musk in response to a March 24 post he made asking "Should Twitter be an open source?"Lonsdale wrote to Musk saying he loved the question and he was going to bring it up at a "GOP policy retreat" he was heading to the next day. "Now I can cite you so I'll sound less crazy myself :). Our public squares need to not have arbitrary sketchy censorship.""Absolutely," Musk replied. "What we have now is hidden corruption!"Gayle KingGayle King (left)Michael Kovac/Getty Images for Moet & ChandonKing texted Musk a few times in an attempt to get him to do a sit-down interview with her. The first was on April 6, when King wrote: "Have you missed me. Are you ready to do a proper sit down with me? so much to discuss! Especially with your Twitter play... what do I need to do???"Musk responded by downplaying his involvement at the time, saying, "The whole Twitter thing is getting blown out of proportion" and "Owning ~9% is not quite control."Gayle texted Musk again about two weeks later, after Musk offered to buy Twitter outright."ELON! You buying Twitter or offering to buy Twitter wow! Now don't you think we should sit down together face to face this is as the kids say a 'gangsta move' I dont know how shareholders turn this down... like I said you are not like the other kids in the class."Musk responded a few days later suggesting only that Oprah Winfrey would make a good addition to Twitter's board under his ownership. "Wisdom about humanity and knowing what is right are more important than so called 'board governance' skills, which mean pretty much nothing in my experience," he wrote.Reid HoffmanGreylockMusk invited Reid Hoffman to take part in financing the Twitter deal on April 27. At first, Hoffman politely declined, saying "It's way beyond my resources. I presume you are not interested in venture $."Musk said VC money "is fine if you want.""There is plenty of financial support, but you're a friend, so just letting you know you'd get priority," he added.Hoffman proceeded to ask what "the largest $ that would be ok?" Musk suggested $2 billion, and Hoffman said "Great. Probably doable -- let me see." Musk then connected Hoffman to Morgan Stanley.The text log does not show why Hoffman eventually decided against putting up money for the deal, but he claimed earlier this month to be skeptical of it. Egon DurbanSilver Lake Partners' Egon DurbanREUTERSMusk first texted Egon Durban, a director at Silver Lake Capital and a Twitter board member and investor, on March 26, before his stake in the company was made public."This is Elon. Please call when you have a moment. It is regarding the Twitter board," Musk texted.The next day, Durban connected Musk via text with Agrawal, Taylor and Martha Lane Fox, another member of Twitter's board."Elon – everyone is excited about prospect of you being involved and on board. Next step is for you to chat so we can move this forward quickly. Maybe we can get this done in the next few days," Durban wrote. On April 5, Agrawal announced that Musk was joining the board. At some point, Durban and Musk may have had some kind of falling out. Their last text that appears on the log is from Musk on April 17, so after Musk offered to acquire Twitter."You're calling Morgan Stanley to speak poorly of me…" Musk wrote. A reply from Durban does not appear in the log.James Murdoch James Murdoch at the Tribeca FestivalPhoto by Arturo Holmes/Getty Images for Tribeca FestivalOn April 26, James Murdoch texted Musk about a connection that is not referenced elsewhere in the text log, saying "Thank you. I will link you up."Murdoch added, "Also, will call when some of the dust settles. Hope all is ok."Murdoch's wife, Kathryn, texted in the same thread to ask only, "Will you bring Jack back?"Musk replied, "Jack doesn't want to come back. He is focused on Bitcoin."David SacksElon Musk and David SacksGetty ImagesSacks and Musk texted several times casually about Twitter and exchanging links to posts on the platform. On April 26, Sacks asked Musk if he'd be interested in connecting with Justin Amash, a libertarian politician who asked Sacks for an introduction in order to be "helpful to Twitter." Musk replied, "I don't own Twitter yet."Two days later, Musk asked Sacks if he wanted to "invest in the take private?" Sacks replied "Yes but I don't have a vehicle for it (Craft is a venture) so either I need to set up and SPV or just do it personally. If the latter, my amount would be mice-nuts in relative terms but I would be happy to participate to support the cause.""Up to you," Musk said."I'm in personally, and will raise an SPV too if that works for you," Sacks wrote."Sure," Musk said.Sacks has tried to fight being part of Twitter's case against Musk, arguing he never committed to investing in the deal.Justin Roiland"Rick and Morty" was created by Justin Roiland and Dan Harmon.Warner Bros. Television DistributionRoiland, co-creator of popular adult cartoon "Rick and Morty," texted Musk on April 6, the day after Musk agreed to join Twitter's board."I fucking love that you're the majority owner of Twitter," Roiland said.He proceeded to suggest that Musk meet friends of his who had created a program to verify people's identities, "As in, if people choose to use it, it could verify that they are a real person and not a troll farm."Musk corrected him two days later, saying "I just own 9% of Twitter, so don't control the company." He said he would "raise the identity issue with Parag (CEO)." Are you a Twitter employee or someone else with insight to share? Contact Kali Hays at, on secure messaging app Signal at 949-280-0267, or through Twitter DM at @hayskali. Reach out using a non-work device.Read the original article on Business Insider.....»»

Category: dealsSource: nytSep 29th, 2022