Cryptocurrencies

[Jurgis]

https://on.acm.org/t/algorand-a-better-distributed-ledger/374

 

A distributed ledger is a tamperproof sequence of data that can be read and augmented by everyone. Distributed ledgers stand to revolutionize the way a democratic society operates. They secure all kinds of traditional transactions—such as payments, asset transfers, titling—in the exact order in which they occur; and enable totally new transactions—such as cryptocurrencies and smart contracts. They can remove intermediaries and usher in a new paradigm for trust. As currently implemented, however, distributed ledgers cannot achieve their enormous potential.

 

Algorand is an alternative, democratic, and efficient distributed ledger. Unlike prior ledgers based on "proof of work," it dispenses with "miners." Indeed, Algorand requires only a negligible amount of computation. Moreover, its transaction history does not "fork" with overwhelming probability: i.e., Algorand guarantees the finality of all transactions.

 

SPEAKER

Silvio Micali

Faculty at MIT and ACM A.M. Turing Award Winner

 

Date: 10/13/17

Time: 12:00 PM ET

Duration: 1 Hour

 

This is public service announcement for interested. I have no expertise in the area and the quality of this research/claims. ACM webinars are usually boring.

[Liberty]

Podcast on blockchain and cryptocurrencies:

 

http://investorfieldguide.com/hashpower/

[JimBowerman]

You need to be very clear why you are in these things, and what your thesis is.

 

You also need to mindful that the distributed security of Bitcoin isn't really working as claimed anymore, as >50% of miners are under the same 'controlling mind'.

 

SD

 

The switching costs are quite low for mining pools.  If there was rampant abuse by a certain pool, I believe most miners would quickly switch mining pools.

[SharperDingaan]

You need to be very clear why you are in these things, and what your thesis is.

 

You also need to mindful that the distributed security of Bitcoin isn't really working as claimed anymore, as >50% of miners are under the same 'controlling mind'.

 

SD

 

The switching costs are quite low for mining pools.  If there was rampant abuse by a certain pool, I believe most miners would quickly switch mining pools.

 

When the miners are mining in coordinated 'pools', and those pools are responsible for well over 50% of all the mining activity; the miners themselves are the abusers. While individual miners may switch between coordinated pools, there is no difference in the collective outcome.

 

SD

 

[rkbabang]

Podcast on blockchain and cryptocurrencies:

 

http://investorfieldguide.com/hashpower/

 

In case anyone missed this, episodes 2 & 3 are now out (only episode 1 was available when Liberty originally posted this) and all of them are excellent.

 

[turar]

Don't know if this was posted here before, but here's Jamie Dimon on bitcoin: https://www.bloomberg.com/news/articles/2017-10-13/jamie-dimon-lasts-one-day-on-his-vow-to-not-talk-about-bitcoin

 

I happen to agree with him. He completely understands how fiat currencies work, and how currencies MUST go hand in hand with governments and sovereign state power.

[Aberhound]

Paul Brodsky who writes the excellent MAI newsletter is moving to a Blockchain fund.

 

From: Paul Brodsky [mailto:pbrodsky@macro-allocation.com]

Sent: October-18-17 2:49 AM

Subject: Special Announcement

 

As you may know, in recent months I have been exploring and re-exploring a theme too compelling to ignore: the under-appreciated paradigm shift occurring in the way the world will exchange commerce, create wealth and use money. (I refer you specifically to Game Change, Golden Age, Test Time, Thick & Thin, Structural Shift, Mad Dogs & Gaslights, Cryptonite, and Gold, Dollars & Bitcoin, which may be accessed after free registration here.)

 

It is time to act. I am incredibly honored and excited to have been asked to become a partner and open the New York office of Pantera Capital, the leading fund devoted to digital assets and cryptocurrencies.

 

I have known Pantera’s CEO – Dan Morehead – for many years, since he was a macro fund manager. Dan saw the substantial opportunity set surrounding blockchain technology in 2013, and went “all-in”. Today, Pantera’s best-in-class Sand Hill Road team of entrepreneurs, technologists and analysts oversee funds positioned across the bourgeoning digital asset/crypto space.

 

On a personal level, I have been lucky enough to have enjoyed first-hand transformative shifts on Wall Street, including the advent and build-out of securitization, the swaps market and the Internet. Digitally-based peer-to-peer investing and value exchange sitting atop the Internet that rewards users rather than gatekeepers is just beginning to present itself. It is thrilling to join the premier firm in the space at the forefront of these nascent applications.

 

As for MAI, I plan to continue expressing my views in some way, shape or form. I will keep the website open so that you may access it. (Let me know if you misplaced your login credentials.)

 

For those with whom I discussed investing in PostModern Partners, it has become increasingly obvious to me that blockchain-based investing presents unparalleled risk-adjusted secular returns. While I believe PostModern would have offered an optimal investment program to take advantage of the fundamental problems facing economies and financial asset markets today, Pantera’s blockchain funds are set up to offer investors the opportunity to profit from solutions to those problems. As a Pantera Partner, I will be able to focus every day on applications that remedy much of what ails us.     

 

Please feel free to contact me directly -- anytime – if you would like more information about blockchain, digital assets, cryptocurrencies, Pantera, or anything else. I look forward to staying in touch.

 

Kind regards,

 

Paul Brodsky

(917) 538 - 1908

[writser]

Very smart move. Lots of suckers willing to hand over their money.

[doughishere]

https://charlierose.com/videos/31079

 

 

Friday 10/20/2017

A conversation about bitcoin, blockchain technology, and the future of digital currency, featuring Catherine Wood, C.E.O. and C.I.O. of Ark Investment Management; Paul Vigna, a reporter for The Wall Street Journal; and Lily Katz, a reporter at Bloomberg News.

[SharperDingaan]

Very smart move. Lots of suckers willing to hand over their money.

 

If they just build a portfolio of cryptocoin (Bitcoin, Ether, etc.) they (and their investors) deserve everything that is coming to them.

But if they go into existing businesses; and JV with them to fund block chain/smart contract applications that fundamentally change the 'plumbing' of their business - the sky is literally the limit. I teach a due diligence course in the implementation of block chain/smart applications that advocates doing something very similar to this :)

 

All it really needs is an existing (profitable) business, a group of developers, and a long-term funder. The JV gets bought out, the funder takes stock over cash, & resells later at inflated CF multiples when the applications deliver the greatly increased CF/share from automation.

 

Everybody involved ends up doing very, very well.

 

SD

 

 

 

 

   

[Mark Jr.]

I teach a due diligence course in the implementation of block chain/smart applications that advocates doing something very similar to this :)

 

I would like to know more about this course.

 

All it really needs is an existing (profitable) business, a group of developers, and a long-term funder. The JV gets bought out, the funder takes stock over cash, & resells later at inflated CF multiples when the applications deliver the greatly increased CF/share from automation.

 

Everybody involved ends up doing very, very well.

 

SD

 

We should talk.

 

- mark

 

 

 

 

 

[Mark Jr.]

I am reading "Blockchain Revolution" by Don Tapscott, and I find it to be quite fascinating so far.

Here you can find the most interesting excerpts:

 

 

Cheers,

 

Gio

 

Good one.

 

From an investment standpoint, the more recent Cryptoassets by Chris Burniske and Jack Tatar is pretty good so far (about halfway through).

 

Epicenter podcast episode with Ari Paul of Blocktower Capital is another rational investment perspective on all this.

https://letstalkbitcoin.com/blog/post/epicenter-202-ari-paul-blocktower-capital-and-the-cryptocurrency-opportunity

[Mark Jr.]

Don't know if this was posted here before, but here's Jamie Dimon on bitcoin: https://www.bloomberg.com/news/articles/2017-10-13/jamie-dimon-lasts-one-day-on-his-vow-to-not-talk-about-bitcoin

 

I happen to agree with him. He completely understands how fiat currencies work, and how currencies MUST go hand in hand with governments and sovereign state power.

 

Dimon is part of the same apparatus that cryptocurrency evolved to mitigate, so of course, from that perspective "it's a fad". The reality is, since every fiat currency is debasing itself, since every government behind fiat currencies is targeting inflation, suppressing interest rates and since many sovereign state powers are making "bail-ins" part of the calculus, had cryptocurrencies not been invented yet, they would be by now.

 

That is what I think is the primary driver behind all this. It's a type of capital flight, and since the ascent lately has been dizzying, it is starting to feed on itself. If it is a bubble, it's one of the first that hasn't been fueled by credit expansion, so in that respect "this time is different" at least in that aspect.

 

It's easy to say "it's a ponzi" or "it's backed by nothing" or it's "just a digital fiat" when you don't understand the underlying math. These things are an inelastic currency that use asymmetric cryptography to facilitate zero knowledge capital flow.

 

I've never seen anything as volatile is this stuff though. Price can drop 50% in a day or two. Then surpass previous highs within a week. One of best quips I heard to describe it was "bitcoin may be a pretty good long-term storage of value, but it's a terrible short term one". Maybe once crypto-currencies have been around for generations there will be some well known law or axiom showing that crypto-currency volatility is inversely proportional to stock market volatility by some factor symbolized by a letter from the greek alphabet.

 

I've always remarked that the price action is really a side show for me. It's the decentralization of the monopoly control over money that is the big deal, and it is happening, it's completely understandable why it's happening and it's an existential threat to people like Jamie Dimon.

 

As long as global governments are rigging the game, financially repressing savers and trying to chase all capital into the stock and bond markets, these things will not lose steam.

 

 

[Cigarbutt]

Links:

 

https://www.wired.com/story/captains-of-finance-dismiss-bitcoin-at-their-peril/

https://www.forbes.com/sites/johntamny/2017/10/22/bitcoins-surge-to-5600-reveals-why-its-a-junk-currency/#4ca9293f61c8

from Mark Jr: "These things are an inelastic currency that use asymmetric cryptography to facilitate zero knowledge capital flow."

 

One of my tests for investment ideas requires that I could convincingly explain the thesis to my 10 year-old in less than two minutes.

I'm not there yet.

First, I have to review the meanings of trust and agreement in the dictionary. 

Then again, who can you trust these days?

 

 

[rkbabang]

Links:

 

https://www.wired.com/story/captains-of-finance-dismiss-bitcoin-at-their-peril/

https://www.forbes.com/sites/johntamny/2017/10/22/bitcoins-surge-to-5600-reveals-why-its-a-junk-currency/#4ca9293f61c8

from Mark Jr: "These things are an inelastic currency that use asymmetric cryptography to facilitate zero knowledge capital flow."

 

One of my tests for investment ideas requires that I could convincingly explain the thesis to my 10 year-old in less than two minutes.

I'm not there yet.

First, I have to review the meanings of trust and agreement in the dictionary. 

Then again, who can you trust these days?

 

You can, and should, trust no one, which is why I'm bullish on crypto.

 

[Jurgis]

More fun info on Algorand. Seminar is today, so I removed time/date/location since I doubt that anyone will make it. I'm sure there's more info online.

 

----------------------------------------------

 

Algorand: Scaling Byzantine Agreements for Cryptocurrencies

Seminar Series: CSAIL Security Seminar 2017/2018

Speaker: Yossi Gilad

Speaker Affiliation: MIT CSAIL, Boston University

Host: CSAIL Security Seminar

 

Algorand: Scaling Byzantine Agreements for Cryptocurrencies

 

Abstract

 

Algorand is a new cryptocurrency that confirms transactions

with latency on the order of a minute while scaling to many

users. Algorand ensures that users never have divergent

views of confirmed transactions, even if some of the users

are malicious and the network is temporarily partitioned.

In contrast, existing cryptocurrencies allow for temporary

forks and therefore require a long time, on the order of an

hour, to confirm transactions with high confidence.

 

Algorand uses a new Byzantine Agreement (BA) protocol

to reach consensus among users on the next set of transactions.

To scale the consensus to many users, Algorand

uses a novel mechanism based on Verifiable Random Functions

that allows users to privately check whether they are

selected to participate in the BA to agree on the next set

of transactions, and to include a proof of their selection in

their network messages. In Algorand’s BA protocol, users

do not keep any private state except for their private keys,

which allows Algorand to replace participants immediately

after they send a message. This mitigates targeted attacks

on chosen participants after their identity is revealed.

 

We implement Algorand and evaluate its performance on

1,000 EC2 virtual machines, simulating up to 500,000 users.

Experimental results show that Algorand confirms transactions

in under a minute, achieves 125× Bitcoin’s throughput,

and incurs almost no penalty for scaling to more users.

 

Bio

 

Yossi Gilad is a postdoctoral researcher at MIT and Boston University. His research interests include designing, building, and analyzing secure and scalable networked systems.

Prior to this position he was a postdoctoral researcher at the Hebrew University of Jerusalem, and a research staff member at IBM Research. He is a recipient of the IETF/IRTF Applied Networking Research Prize (2017), the IBM Research Inventor Recognition Award (2015), and the Check Point Institute Information Security Prize (2013-2014).

[Fat Pitch]

Removing incentives makes 51% attacks costless. Bitcoin's consensus algo assumes everyone is a hostile actor so you put rules in place that makes it irrational to attack the network. I mean you still can attack bitcoin, but you are consuming electricity and depreciating your hardware.

 

Anything that promises huge scaling comes at the cost of security. Blockchain doesn't make sense for most businesses. They are better off using trusted execution environments which gives them strong encryption and you can scale rapidly using centrally hosted cloud infrastructure. ICOs are in a bubble since they lack mechanisms to capture any value. Only bitcoin and maybe eth are capturing any value.

 

If bitcoin can achieve store of value status, then the market valuation of any other use case will be peanuts.

 

More fun info on Algorand. Seminar is today, so I removed time/date/location since I doubt that anyone will make it. I'm sure there's more info online.

[porcupine]

I have a question for all the crypto longs:

 

When do you sell?

 

Do you hold until it becomes used as a currency? If it is used as a currency, would there be no tax revenue for the government (since all transactions are anonymous)? Assuming there will be no tax revenue, don't you think that the government will try and prevent it's use?

 

Apologies if this has been asked before.

[SnarkyPuppy]

I have a question for all the crypto longs:

 

When do you sell?

 

Do you hold until it becomes used as a currency? If it is used as a currency, would there be no tax revenue for the government (since all transactions are anonymous)? Assuming there will be no tax revenue, don't you think that the government will try and prevent it's use?

 

Apologies if this has been asked before.

 

Thesis (mine at least) isn't that it will be used as a currency. 

 

Bitcoin bull thesis is store of value / flight to safety (eg gold replacement).  This is more of a scarce deflationary commodity than a currency.

 

Other coins may have value (most won't) through use cases (e.g. You pay solar coin to use your neighbors excess solar capacity).  I suppose this is more of a currency depending on how you look at it. 

 

It probably will be taxed if either thesis plays out.  And if either thesis plays out, you'll have done well enough post-tax that not investing because of tax reasons would look silly. 

[rkbabang]

I have a question for all the crypto longs:

 

When do you sell?

 

Do you hold until it becomes used as a currency? If it is used as a currency, would there be no tax revenue for the government (since all transactions are anonymous)? Assuming there will be no tax revenue, don't you think that the government will try and prevent it's use?

 

Apologies if this has been asked before.

 

My answer is that I don’t know when to sell. It is still too early to get a good idea what it will even be used for in the end. I used to think that Bitcoin would be a currency, but now I’m not so sure. Like SnarkyPuppy above I think it might end up being a store of value like gold as well as a way to transfer large amounts of wealth between institutions or like wiring money and a Western Union replacement.  I think other coins will be used more like a currency. They will be faster and cheaper, but won’t be as secure. You will use bitcoin as your savings and the other as your checking (for an analogy).  There will be still other coins used mainly for smart contracts or to purchase specific goods and services. 

 

The other big unknown is how governments will react.

 

I do not know when to sell, but not in the next 10 years.  This is internet circa 1994. Everyone has now heard of it, but almost no one is using it. And a ton of people think it is a bunch useless hype.

[Guest Schwab711]

How do people look at the electricity consumption issue associated with bitcoin (or generally with blockchain technology)? If bitcoin is trying to be a currency, I don't really understand why it's worth knowing who held my specific coin 5 years ago and how it arrived in my hands. It seems unsustainable for bitcoin or any blockchain-based currency to carry all the unnecessary data with each transaction.

[no_free_lunch]

It seems unsustainable for bitcoin or any blockchain-based currency to carry all the unnecessary data with each transaction.

 

Bingo.

 

They are looking at scaling solutions...  It's just kind of crazy that it's valued at $120B and they haven't implemented scaling yet.  Usually when you develop a software solution that needs to scale you take care of that at step 1, not after the software is live.

[Guest Schwab711]

It seems unsustainable for bitcoin or any blockchain-based currency to carry all the unnecessary data with each transaction.

 

Bingo.

 

They are looking at scaling solutions...  It's just kind of crazy that it's valued at $120B and they haven't implemented scaling yet.  Usually when you develop a software solution that needs to scale you take care of that at step 1, not after the software is live.

 

I was just about to add to my comment about the dangers of using a rigid system with an indefinite life but you basically hit on it. I can't think of any system (especially a large system), physical or conceptual, that was planned at a single point in time and survived for more than a short time without change. The more you fork bitcoin, the more unsustainable each branch becomes for all sorts of reasons.

[formthirteen]

It seems unsustainable for bitcoin or any blockchain-based currency to carry all the unnecessary data with each transaction.

 

Bingo.

 

They are looking at scaling solutions...  It's just kind of crazy that it's valued at $120B and they haven't implemented scaling yet.  Usually when you develop a software solution that needs to scale you take care of that at step 1, not after the software is live.

 

There's a conflict between scaling the Bitcoin network and keeping the blockchain safe from tampering. That is why, to solve the scalability issue, most transactions will have to be moved to a layer built on top of the Bitcoin blockchain. The lightning network is one proposed solution:

https://lightning.network/lightning-network-paper.pdf

 

 

The payment network Visa achieved 47,000 peak transactions per second

(tps) on its network during the 2013 holidays[2], and currently averages

hundreds of millions per day. Currently, Bitcoin supports less than 7 transactions

per second with a 1 megabyte block limit. If we use an average of 300

bytes per bitcoin transaction and assumed unlimited block sizes, an equivalent

capacity to peak Visa transaction volume of 47,000/tps would be nearly

8 gigabytes per Bitcoin block, every ten minutes on average. Continuously,

that would be over 400 terabytes of data per year.

 

Clearly, achieving Visa-like capacity on the Bitcoin network isn’t feasible

today. No home computer in the world can operate with that kind of

bandwidth and storage. If Bitcoin is to replace all electronic payments in

the future, and not just Visa, it would result in outright collapse of the Bitcoin

network, or at best, extreme centralization of Bitcoin nodes and miners

to the only ones who could afford it. This centralization would then defeat

aspects of network decentralization that make Bitcoin secure, as the ability

for entities to validate the chain is what allows Bitcoin to ensure ledger

accuracy and security.

[Fat Pitch]

The single most important demographic opinion on Bitcoin: https://www.forbes.com/sites/spencerbogart/2017/11/08/7-stats-that-highlight-a-millennial-propensity-for-bitcoin/#4297b62232c4

 

Decent chance 120B will look very very cheap down the road.

 

It seems unsustainable for bitcoin or any blockchain-based currency to carry all the unnecessary data with each transaction.

 

Bingo.

 

They are looking at scaling solutions...  It's just kind of crazy that it's valued at $120B and they haven't implemented scaling yet.  Usually when you develop a software solution that needs to scale you take care of that at step 1, not after the software is live.