Bitcoin ETF and Bitcoin halving have fueled renewed excitement in the cryptocurrency world and it is time to catch up with the state of the market again. Dr. Stephen Perrenod joins Shahin Khan to go over the latest hot topics: Wall Street entering the Bitcoin market with about a dozen Bitcoin Exchange Traded Funds (ETF), the upcoming halving of newly minted Bitcoins, and the state of Central Bank Digital Currencies (CBDC).
Today my colleague Stephen Perrenod published the tenth edition of his biannual CryptoSuper500 report. We issued the following press release. (PR site link is here.)
The Tenth Edition of the CryptoSuper500 Report Shows Growing Dominance of Bitcoin
MENLO PARK, Calif. – May 25, 2023 –OrionX Research today released the tenth edition of its CryptoSuper500 list. The list recognizes cryptocurrency mining as a form of supercomputing application, tracks the top mining pools, and offers a snapshot of the cryptocurrency industry. CryptoSuper500 was developed by Dr. Stephen Perrenod, OrionX Partner and noted crypto analyst who has also created a top-ranking Bitcoin evaluation model and elucidated the concept of the “blockchain calendar”.
Cryptocurrency mining is a $10 billion annual revenue industry that primarily produces Bitcoin. It is an extremely secure yet decentralized blockchain for storing high value data and a highly secure token that rises in value on longer time frames and can be reused quickly and repeatedly on a global basis. With over 60% increase in price since the start of 2023, Bitcoin has received new attention as well as higher transaction fees.
“We began CryptoSuper reports four and a half years ago to share our perspective on the state of the industry and to understand the intersection of cryptocurrencies and supercomputing,” said Dr. Stephen Perrenod, OrionX Partner and Analyst. “What we have observed is the increasing dominance of Bitcoin both in terms of computing power and its market capitalization.”
When the ninth CryptoSuper500 list was released in November 2022, Bitcoin was responsible for 90% of the annual economic value of crypto mining production. That dominance has continued to grow so much that only two coins make the cut for the tenth list: Bitcoin and Dogecoin. While there are some 24,000 cryptocurrencies in existence, Bitcoin remains in a category by itself, representing 47% of all the total market capitalization. In other words, Bitcoin is worth nearly as much as all the other such coins combined,
The security of Bitcoin is indicated by its mining capacity, which currently generates 350 Exahashes/second, using custom ASIC-based computational power. “We anticipate that the Bitcoin global hashing rate will reach a Zettahash/sec (up from 0.35 Zhashes/sec today) by 2026 or 2027, despite the block reward subsidy halving that will occur in 2024,” said Perrenod. The latest mining rigs use 5 nm ASICs and models that support immersion cooling are becoming popular.
North America now boasts close to half of all Bitcoin’s mining power, a shift that took place after China banned crypto mining in 2021. The rise of mining in the United States and Canada has been driven by venture funded and publicly traded mining companies, now responsible for 18% of all Bitcoin mining and with a collective market cap well over $7 billion. OrionX estimates some 5 million reasonably powerful Bitcoin mining rigs are currently active.
Bitcoin has also become a natural currency for cybersecurity. The ultimate bit power asset, it can be viewed as a mechanism that converts electrons moving across voltage drops into highly secure bits that are cryptographically stamped into, and linked in, an exponentially hardened chain. Each block added at the end of the chain increases the security of all prior blocks of transactions. This makes the blockchain a highly secure data repository. “Major Jason Lowery of the US Space Force has argued in his MIT thesis titled Softwar that Bitcoin is secure ‘bit power’ and could be critical for cyber war utilization and for computer security more broadly. We agree,” said Perrenod.
Bitcoin mining’s appetite for electricity is directly related to its decentralized security and ability to create re-usable value. The common belief that low usage of computer power for a cryptocurrency is a desirable feature is only true for use cases that do not demand a similar level of security. The Bitcoin Mining Council has estimated that Bitcoin contributes just 1/900 of global CO2 emissions, and that the electricity sources are more than 50% green inputs.
Cryptocurrency technologies include blockchains, consensus algorithms, utility and security tokens and the technologies and applications that support them. These include digital wallets, crypto exchanges, non-fungible tokens (NFT), and decentralized finance applications (DeFi). The new “ordinals” capability enables the attachment of any type of document onto the Bitcoin blockchain. This has fueled interest in new uses of the chain with a resulting increase in transaction fees to miners to a run rate of around $1 billion per year. This is over and above the $9 billion block reward, the estimated value of new coinage that they mint.
OrionX views cryptocurrency mining using proof-of-work consensus algorithms as a specialized domain of decentralized high performance computing (HPC). The computational intensity of these algorithms is in practice proof-of-supercomputing, very high levels of computational power to support the security of a cryptocurrency.
The full list with additional explanation is available at OrionX.net/research.
About OrionX
OrionX is a Silicon Valley consulting firm offering Technology Research, Market Execution, and Customer Engagement services to high tech companies. More than 70 financial institutions and technology leaders in virtually every technology segment have trusted OrionX to provide advice, help set new break-away strategies, ignite brands, and grow market share. Visit us at OrionX.net.
* Note: This effort is an analysis of the technologies and trends surrounding blockchain and cryptocurrencies. It is not, and must not be considered as, financial, investment, or legal advice
Shahin is a technology analyst and an active CxO, board member, and advisor. He serves on the board of directors of Wizmo (SaaS) and Massively Parallel Technologies (code modernization) and is an advisor to CollabWorks (future of work). He is co-host of the popular RadioFreeHPC (“Car Talk” of supercomputing), OrionX Download, and Afero IoT podcasts.
An in-depth look into the proposed tax on Bitcoin’s electricity input. This article was featured on Medium’s ILLUMINATION. Full article on Medium. -By Stephen Perrenod
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Today my colleague Stephen Perrenod published the ninth edition of his biannual CryptoSuper500 report. We issued the following press release. (PR site link is here.)
Bitcoin in Unique Leadership Position with Ethereum’s Abandonment of Proof of Work*
The Ninth Edition of the CryptoSuper500 Report Evaluates Crypto Winter as Annual Economic Value of Proof of Work Supercomputing Drops to Under $7B
MENLO PARK, Calif. – November 22, 2022 –OrionX Research today released the ninth edition of its CryptoSuper500 list. The list, now four years old, recognizes cryptocurrency mining as a form of supercomputing application, tracks the top mining pools, and offers a snapshot of the cryptocurrency industry. CryptoSuper500 was developed by Dr. Stephen Perrenod, OrionX Partner and noted Crypto Analyst who has also created a top-ranking Bitcoin evaluation model and elucidated the concept of the “blockchain calendar”.
With Ethereum’s change in consensus algorithm in September, away from the security-first proof-of-work for token creation to the transaction speed-first proof-of-stake, and the current crypto winter in prices, cryptocurrency mining pools produced at a rate of less than $7B annual economic value (AEV), down from over $42 billion a year ago. The list is now completely dominated by Bitcoin, showing an AEV of $5.8 billion, down from $20 billion one year ago. Dogecoin is the new #2, but is much smaller in generated annual economic value than Bitcoin due to a more inflationary money supply algorithm, and lower security as measured by deployed hash-rate, a measure of the rate at which cryptographic puzzles are solved by supercomputing resources.
“Trends to watch going forward include faster and more energy-efficient mining hardware including some mining rigs that have liquid cooling, the continued dominance of the North American mining industry with public companies as major players, and the trend of increasingly green electricity and even carbon neutrality goals for the industry,” said Dr. Stephen Perrenod, OrionX Partner and Analyst. “We expect some consolidation in the publicly traded crypto miners, unless prices rise quickly from here, and see continued volatility, as well as promise in select cases, in the cryptocurrency industry.”
Bitcoin’s security relies on a specialized form of supercomputing that employs several million ASIC mining ‘rigs’, with many different owners, working around the globe in a synchronized competitive race, repeated every block (about 10 minutes’ worth of transactions). They execute the same open-source software, and encode value and transactions onto a shared but decentralized and publicly auditable blockchain. Such mining rigs are powered by custom Application Specific Integrated Circuits (ASICs) in Bitcoin’s case, while other proof-of-work cryptos use ASICs or hardware accelerators such as (Graphic Processing Unit) GPU chips.
Bitcoin’s electricity consumption is estimated to be approximately 0.5% of the global electricity use according to the University of Cambridge’s Centre for Alternative Finance. Unlike most electricity, it is used for production, not consumption. Bitcoin can be viewed as energy that is securely encapsulated as highly secured information, held as long-term value in the Internet.
Cryptocurrency technologies include blockchains, consensus algorithms, utility and security tokens and the technologies and applications that support them. These include digital wallets, exchanges, non-fungible tokens (NFT), and decentralized finance applications (DeFi). Cryptocurrency mining is a specialized domain of decentralized high performance computing (HPC).
There are now some 21,000 cryptocurrencies, up from 13,000 a year ago. Only a very small minority use supercomputing levels of resources. Most others will struggle to break away and are expected to be niche players or nearly worthless in the long run.
The full list with additional explanation is available at OrionX.net/research.
About OrionX
OrionX is a Silicon Valley consulting firm offering Technology Research, Market Execution, and Customer Engagement services to high tech companies. More than 70 financial institutions and technology leaders in virtually every technology segment have trusted OrionX to provide advice, help set new break-away strategies, ignite brands, and grow market share. Visit us at OrionX.net.
* Note: This effort is an analysis of the technologies and trends surrounding blockchain and cryptocurrencies. It is not, and must not be considered as, financial, investment, or legal advice.
The Top 6 coins by annual production value. We also list the algorithm, market cap and price and aggregate hash rate, as of November 11, 2022. Only Bitcoin and Bitcoin Cash are in the Exahash domain (over one billion times a billion hashes per second) for hash rate enforced security. Only Bitcoin, Dogecoin, and Ethereum Classic (that still uses proof of work) produce over $100 million per year. Only Bitcoin and Dogecoin pools make our cutoff of $50 million minimum per pool. The annual production here is based on nominal block times, not actual average block times; that results in somewhat over $6 billion annual run rate for Bitcoin in practice, based on the prior three months of mining.
Shahin is a technology analyst and an active CxO, board member, and advisor. He serves on the board of directors of Wizmo (SaaS) and Massively Parallel Technologies (code modernization) and is an advisor to CollabWorks (future of work). He is co-host of the popular RadioFreeHPC (“Car Talk” of supercomputing), OrionX Download, and Afero IoT podcasts.
The conversational AI, LaMDA seems to represent a significant advance in AI, bringing up discussions of AI sentience, consciousness, and personhood. It also underscores the urgency of thoughtful social policies based on ethical and legal frameworks. Also discussed is the state of Crypto and NFT: cryptocurrencies and non-fungible tokens. Should we look at them as technologies that might find valid use cases, investment vehicles that require close scrutiny, or both? These are very important topics in our times.
Which coins actually use the “Proof of Work” algorithms, the “mining” process, and how do they rank? Why CBDCs, why not just stablecoins? What are NFTs, what is real? Stephen Perrenod and Shahin Khan discuss these topics and a few more FUD items left-over from the last podcast. The latest CryptoSuper500 list includes the rankings and much else so be sure to check it out. And join in!
There is recurring cryptocurrency FUD (Fear, Uncertainty, and Doubt), usually leveled at Bitcoin but also cryptocurrencies in general. Steve Perrenod and Shahin Khan go over the list to demystify! On the menu: intrinsic value, criminal activities, energy usage, slow transactions, high fees, China’s significant mining capacity and then banning mining, dependence on electricity and internet.
The usual disclaimer: what you hear is not, and is not intended to be, financial or legal advice.
One well known Macro guru says his hedge fund friends are pivoting to Ethereum from Bitcoin. Maybe it’s a trade, but what about for the longer term investor? Full article on Substack. -By Stephen Perrenod
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Has Dark Matter been converted to X-rays in Neutron Star magnetic fields? Many people have heard of neutrinos (little ‘neutral ones’). But there is another dark matter candidate, never observed in the laboratory, which would have a mass much less than even the three known neutrinos. And is less well known than neutrinos. Full article on Medium. -By Stephen Perrenod
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
A new asset class has been born. Sift through the posts on your social media and you will find that just a few years ago, it was big news that Bitcoin had broken $1000. That was a big deal because it was the third time Bitcoin was priced more than $1k. Digital money was starting to look like a major new trend in information technology. But Bitcoin observers were used to volatility and it was going to take more than a few ups and downs to convince them.
Back in 2011, when it had topped $30, that too was seen by many as proof that it was “happening”, but it had gone back down, way down, to $2 by that December. But then it rose again, and in 2013 rallied all the way to $266. And back down to $70, only to climb to $1200 that November. And then down again and up again in 2014. No, not for the faint of heart.
It wasn’t just price volatility. The buying and selling process was too hard, it was not clear what was or wasn’t legal, and there were too many technical issues and scams. Some exchanges lost people’s money. In other cases, people forgot their passwords and their Bitcoins became permanently inaccessible. The coins were there but were untouchable. And so it’s been: a roller coaster ride with many setbacks.
You can’t learn about Bitcoin w/o learning the word “hodl”. Presumably, someone under the influence of some kind of libation, had posted an email in a forum with the subject “I am hodling”, misspelling the word “holding”. And so the crypto world has its legion of “hodlers” who allegedly never sell, expect, we must assume, when they do sell!
Between Feb 2014 and Dec 2016, it stayed in the $200-$800 range. But when it crossed $1000 a third time in Jan 2017, went back down but rose again to set a new high of $1.3k in March of 2017, well, it was starting to look pretty resilient. To some, it indicted that it was now the real deal, to some others, shaking their heads, it was tulip bulbs all over again.
It never went back below $1k. Through 2017, its price moved up and fast, thanks to exchanges that made it easy to buy it, favorable legal rulings that seemed to let it go forward some more, and more publicity that made it interesting. By Dec 2017, it had shot up to $18k. That’s for one single Bitcoin, which back in 2010 was worth 0.0025 cents. Someone had actually 10,000 Bitcoins to pay for pizza. $25. By that July, however, it was up to 8 full cents. Regretting the pizza purchase had come quickly, but it’s all relative.
But then it crashed and while going up and down, it eventually went all the way down to about $3400 in Feb 2019. Some took that as lessons learned, others thought it was time to buy more if they had the money. Then it started a slow climb, and every time the traditional financial markets showed instability or pushed things this way or that way, or some financial institution offered some kind of support, or some company made a big deal of investing in it, Bitcoin became a bit more competitive. Then Facebook talked up its own cryptocurrency plans and central banks hurried up to claim the space, and interest in crypto started building again.
Now as we approach the end of the year, a new phase for Bitcoin is starting. Places like Paypal have made it easy for their large and existing customers to buy Bitcoin, the stock market has done very well with profits to be taken and portfolios to be re-balanced, a new administration is coming, and major players are making visible and large bets on Bitcoin.
So once again, there is new demand, ease of acquisition, and a favorable environment, so Bitcoin price has shot up, past the $20k resistance and it is over $27k as of this writing.
All of that means another turn of the Bitcoin acceptance knob. Bitcoin is looking like the new asset class that a lot of people said it was. It has been volatile and may remain so, going up or down again as those who bought earlier do some profit taking and new arrivals hesitate. But a new asset class has been born.
Note: As usual, this is not investment or legal advice. Or any kind of advice. Walks down Wall Street are always random!
Shahin is a technology analyst and an active CxO, board member, and advisor. He serves on the board of directors of Wizmo (SaaS) and Massively Parallel Technologies (code modernization) and is an advisor to CollabWorks (future of work). He is co-host of the popular RadioFreeHPC (“Car Talk” of supercomputing), OrionX Download, and Afero IoT podcasts.
What’s behind Bitcoin’s soaring prices? Steve Perrenod and Shahin Khan look at the Cryptocurrency market and its history over the past decade. Here in one place, they run through and explain the major new innovations in crypto and take stock of their progress.
The usual disclaimer: what you hear is not, and is not intended to be, financial or legal advice.
OrionX is a team of industry analysts, marketing executives, and demand generation experts. With a stellar reputation in Silicon Valley, OrionX is known for its trusted counsel, command of market forces, technical depth, and original content.
Money is a universal intermediate good used as a form of wealth. People use it as the connector between other goods and services, and as a way to resolve debts. The first well-documented money was accounted for in Babylonian temples in the form of barley. You see already from this, that money has aspects of virtuality, and it has a definition as an accounting unit as well as serving as a medium of exchange and a store of value for delayed usage. Full article on Medium. -By Stephen Perrenod
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Bitcoin has falsely been declared dead by journalists and old fiat-economy wise men and women some 380 times. But it has survived many errors, shocks, and even splits from the main branch of its evolutionary tree. – By Stephen Perrenod
Bitcoin has survived many errors, shocks, and even splits from the main branch of its evolutionary tree. It has been declared dead by journalists and fiat economy wise men and women some 380 times. But these events, concerns, or self-interested attacks have not stopped Bitcoin. It keeps getting stronger, and every 10 minutes the security of all prior transactions is enhanced. Bitcoin is now functionally eternal, certainly positioned to survive beyond the year 2100. Full article on Medium. -By Stephen Perrenod
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
This article presents three two-parameter models for Bitcoin valuation with projections until the year 2050. Prices and supply, combined as market caps, and stock-to-flow and fractional supply remaining, were tabulated at each Block month boundary for the past ten Block years. – By Stephen Perrenod
OrionX is a team of industry analysts, marketing executives, and demand generation experts. With a stellar reputation in Silicon Valley, OrionX is known for its trusted counsel, command of market forces, technical depth, and original content.
Monday, May 11, 2020, witnessed the third Bitcoin a “halving”. That it happened in the middle of a pandemic and economic shutdown gives it more visibility as a new asset class and arguably a safe store of value. Here’s an explanation of what Bitcoin is, why it “halves”, and what that might mean to its value. – By Shahin Khan
OrionX is a team of industry analysts, marketing executives, and demand generation experts. With a stellar reputation in Silicon Valley, OrionX is known for its trusted counsel, command of market forces, technical depth, and original content.
Today is Block Year 12, and within the year it is Block Month 5, Block Day 137
Bitcoin Generates Its Own Calendar
Our Gregorian calendar is based on the Solar year, the Lunar month, and the Terrene (Earthly) day. Bitcoin has its own natural calendar that can be constructed to approximate our human calendar of years, months, and days.
But the details are a bit different, and since Bitcoin is a dynamic process built around the construction of blocks, block count, not regular calendar time, is the most relevant and precise way of looking at the passage of time in the Bitcoin context.
Bitcoin’s fundamental process driver is the construction of a chain of blocks. Blocks are created one at a time and chained together in a time chain, or blockchain. That process and the ever-growing chain drives Bitcoin’s security and its value. The value comes both from security and scarcity, and the money supply is created on a per-block basis, via a block reward for the winning miner.
The block count is the clock. It is the system’s heartbeat. Bitcoin has its own clock that has a rough correspondence with wall clock time. Yet it has its own cycles, years, months and days of somewhat different and varying duration from regular time but with an approximate correspondence.
I now describe a natural Bitcoin calendar system, based on the block length at the short end, the difficulty adjustment in the mid-range, and the Halving cycle at the long end.
We designate block height or block number by variable B.
The first year is designated Year 1, Anno Satoshi, 1 A.S. and it originated with the first block B = 1 that was completed on 9 January 2009.
Block Year, Block Month, Block Day And More
So now let’s look at the Block Era, Block Year, Block Quarter, Block Month, Block Fortnight, Block Week, Block Day, Block Hour, and Block Minute. They are roughly equal to our familiar calendar and time intervals, but not precisely.
Bitcoin is a dynamic process creating blocks approximately, but not exactly, every 10 minutes. So BlockTime will deviate from wall clock time. There is a self-correcting process within the Nakamoto consensus algorithm that is called the difficulty adjustment, and which occurs every 2016 blocks; this is approximately every two weeks of wall clock time. Increasing or decreasing the difficulty regulates the block interval back toward 10 minutes’ duration.
The block duration and the difficulty adjustment are two of our pegs for the Bitcoin calendar system.
The most important aspect of Bitcoin’s monetary policy are the Halvings, which occur every 210,000 blocks. The block subsidy (mining reward) is cut in half after each 210,000 blocks, which also roughly equals a four-year period.
The formula for Bitcoin supply creation and Halvings, denominated in Satoshis (each Bitcoin contains 100 million Satoshis). The original reward was 50 Bitcoins with Blocks 1 through 209,999 and then cut to 25 Bitcoins from Block 210,000 through 419,999 and so forth.
No need to memorize the formula!
Formula for Bitcoin supply, with 32 Halvings at each 210,000 blocks
No need to memorize the formula!
Block, Difficulty, Halvings Define The Calendar
So these three pegs of a block (Earthly: around 10 minutes), difficulty adjustment (Lunar: around two weeks), and Halvings (Solar: around four years) allow us to define a Bitcoin calendar system.
The calendar begins with B=1 on January 9, 2009, and that initiates the Age of Satoshi. Years are rendered as A.S. (Anno Satoshi), counting begins at year one. We are now in the 12th BlockYear, the last year of the third Reward Era.
Months and weeks are numbered from 1 to 12 and from 1 to 52, respectively, within a year. Like the Gregorian calendar, there are precisely 12 months, but the calendar has slightly more than 52 weeks.
It is easy to determine the natural rhythm of the Bitcoin calendar. Rows in italics are the three pegs we build the system around.
Solar
Block Century = 5,250,000 blocks (25 Eras, 100 Block years)
Block Era (Cycle, Reward Era) = 210,000 blocks
Block Year = 52,500 blocks (one-quarter of a Block Era)
Block Quarter = 13,125 blocks (one quarter of a Block Year, or three Block Months)
Lunar
Block Month = 4375 blocks (1/12 of a Block Year, and unlike Gregorian calendar, all of the equal length)
Block Fortnight = 2016 blocks (the difficulty adjustment period, and two Block Weeks)
Block Week = 1008 blocks (52 weeks plus a bit in a year, not unlike the Gregorian calendar)
Terrene
Block Day = 144 blocks (1/7 of a Block Week, 24 Block Hours)
Block Hour = 6 blocks (nominal block time is 10 ordinary minutes)
Block Minute = 0.1 blocks
We can refer to these either as BitYear, BitMonth, BitWeek, BitDay, BitHour, etc.,
We will see what the community gravitates toward. And in either case the abbreviations can be:
Solar: BCentury, BEra, BYr, BQ
Lunar: BMo, BFort, BWk
Terrene: BDay, BHr, BMin
Here are the formulae for the longer intervals
BCentury = int(B/5,250,000)+1
BEra = int(B/210,000)+1
BYr = int(B/52,500)+1
Within a given year, the quarter and month number are given by:
BQ = 1 + int (B/13125) — 4 * (BYr — 1)
BMo = 1 + int (B/4375) — 12 * ( Byr — 1)
One good thing is that we have no leap years, although there are definitely parties at each 4 BlockYear intervals for Halving Day.
The BlockYear has 52 weeks plus an extra short day of 84 blocks (14 BlockHours). It also has exactly 12 BlockMonths. The BlockMonth has 30.382 days, or 30 days plus a short day of 55 blocks (9 BlockHours and 1 additional block).
Example: Block #596323 on 24 Sep 2019–09–23 07:53:57 UTC
and the block corresponds to the 10th fortnight, the 19th week, and 131st day of Byr 12.
A More Accurate Basis For Analysis
I suggest that it is much more natural, appropriate, and accurate to do price, market cap, hashrate, transaction value and other studies on a Bitcoin Calendar basis, in order to examine correlations and co-integrations of these quantities with a time-related variable.
The results can then be converted to regular Gregorian calendar time after the analysis for presentation purposes.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Today, June 14, 2019, we released the second biannual list of Top 50 cryptocurrency mining pools.
We do this in conjunction with the Top 500 supercomputing list that is released twice a year, in June and November. That list has been a matter of national pride for the US, Japan, China, and many other countries.
Cryptocurrency mining is a specialized form of supercomputing, producing billions of dollars of economic value per year.
In the Information Age, money has become information. Bitcoin is energy converted to information and encapsulated as secure immutable transactions on a time chain. This is money in the Internet, that we call Money 3.0. Currently it is primarily a store of value, a sort of digital gold, but it continues to grow use cases as a medium of exchange, and unit of account.
Cryptocurrency mining operations are large-scale, run on clusters, but also consist of highly decentralized pools that anyone can join and contribute their equipment to the effort, for proportionate rewards. Most mining is done on custom ASIC computing rigs, highly optimized for the relevant crypto consensus algorithm.
Using statistics readily available on the hashing rates and block production rates for the large mining pools, we can tabulate the economic value produced by these pools.
We consider only mined coins, that is, those that use some type of Proof of Work algorithm such as Bitcoin’s Nakamoto consensus.
We do not consider coins created with other types of consensus mechanisms, since they require no significant supercomputer-class computation. This includes coins produced through premining, Proof of Stake, distributed Byzantine Fault Tolerance and the like since supercomputing resources are not involved.
While there are a number of lists that provide hash rates and block production rates for pools mining a single coin, our lists are the first aggregation of which we are aware.
This raises the question as to how to compare mined coins that have radically different hashing rates and whose consensus algorithms, although often similar to Bitcoin conceptually, differ in the details.
We settled on the economic value of the mined coins that are produced. This enables us to make comparisons across coins when rank ordering the list of mining pools.
We compare the dollar value of a day’s mining from a given pool, with that of other pools, across the top eight mined cryptocurrencies.
The top 10 mined coins have market caps above $0.5 billion dollars, and the #1 coin, Bitcoin, as of our snapshot taken on May 30, 2019, had a market cap of $154 billion.
When we rank order the top 50 mining pools we find that the top eight mined coins in economic value are: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), Zcash (ZEC), Bitcoin SV (BSV), Dash (DASH), and Monero (XMR). All of these except Monero are ASIC-friendly, and production is dominated by ASIC miners and clusters. Monero relies on GPUs.
For Bitcoin, Ethereum, and Litecoin we have used 30 day averages as of May 30, 2019 for block production and hash rates; for the other coins 7 day average data was available.
Table 1: Top 8 Mined Coins (all mining pools, not just Top 50)
Coin
Hardware class
Algorithm
New coins / day
Hash Rate
Hash units
Price 5/30/2019 US$
Economic Production per Day, Million $
Extrapolated Annual Production Million $
Bitcoin
ASIC
SHA256
1800
47.1
Exa
8701
15.662
5,717
Ethereum
ASIC
Ethash
13,600
172
Tera
284
3.862
1,410
Litecoin
ASIC
Scrypt
14,825
352
Tera
117.6
1.743
636
Bitcoin Cash
ASIC
SHA256
1800
1.36
Exa
469
0.844
308
Zcash
ASIC
Equihash
7200
4
Giga
86.9
0.626
228
Bitcoin SV
ASIC
SHA256
1800
2.03
Peta
222
0.400
146
Dash
ASIC
X11
1693
1.68
Peta
172.2
0.292
107
Monero
GPU
CryptoNight
1934
329
Mega
95.1
0.184
67
Totals
23.61
8,619
From Table 1above, which is across all pools, not just the Top 50, we see that total annual economic value run rate (extrapolated from the recent average daily values) is about $8.6 billion. About 2/3 of the economic value created is from Bitcoin production alone, with about $15 million produced per day recently. Ethereum amounts to around one-quarter of that at almost $4 million per day. The next six coins add another $4 million daily. Overall around $24 million per day is currently being mined from all pools.
The locations of top mining pools can be multi-country. The next Table summarizes the major host countries for the Top 50 pools; China, the US, and Hong Kong account for 70% of the top 50 pools and almost all of the top 10 operators. China alone is responsible for nearly half of the annual value produced by the Top 50 pools. The Mixed category includes various combinations of US, China, the EU, Russia, or other Asian or European countries. This category has grown as Chinese operators begin to move to other geographies, as a result of pressure from the government to constrain cryptocurrency mining in China.
Table 2: Host Countries, Top 50 Pools
Country
# Top Pools
Daily M$
Annual M$
China
18
10.717
3911.7
US
11
4.77
1742.5
Hong Kong
6
2.77
1009.6
Mixed
12
2.69
980.4
Other
3
1.18
430.0
Totals
50
22.12
8,074
Table 3: Top 10 Pool Operators (aggregated across coins)
MultiPools
Coins
Number
Daily M$
Annualized M$
Country
BTC(dot)com
BTC, BCH
2
3.06
1115
China
F2Pool
BTC, ETH, ZEC, BSV, LTC
5
2.76
1007
China
Antpool
BTC, LTC, ZEC, BCH, DASH
5
2.38
868
Hong Kong
Poolin
BTC, ZEC, LTC, BSV
4
2.26
825
China
SlushPool
BTC, ZEC
2
1.62
592
US
BTC.Top
BTC, LTC, BCH
3
1.47
537
China
ViaBTC
BTC, LTC,BCH
3
1.34
488
US
Huobi.Pool
BTC, ETH
2
0.69
251
China
NanoPool
ETH, XMR
2
0.50
182
US, EU, Asia
Bitcoin(dot)com
BTC, BCH
2
0.34
124
US
Totals
30
16.41
5,990
We have aggregated, for the top 10 operators, their results across all of the top eight coins, and summarized in Table 3 above. Some operators mine two different coins, others mine as many as five of the top eight. These pools account for, when broken out by coin, 30 of the entries in our Top 50 list.
The #1 operator is BTC.com based in China, and it produces $3 million a day of economic value. F2Pool, Antpool, and Poolin each produce over $2 million of cryptocurrency per day. Theselarge operators are responsible for $6 billion of the $8 billion annual production by the top 50 pools. Three of the five largest operators are in China, one is in Hong Kong, and one is in the US.
The winners in this race, for this second list, are Bitcoin, naturally, with BTC.com again as the top pool, and China as the host country for the most top mining pools, including both #1 and #2 positions. Hong Kong has the #3 pool. The US has the second largest number of mining pools.
The economic value of mining has increased substantially. In the first list of November, 2018 we looked at the Top 30 pools, responsible for some $5.5 billion of annual run rate of mining. This new list of Top 50 pools indicates $8.1 billion of annual cryptocurrency creation (even the Top 30 for this list amounts to well over $7 billion).
We intend to update this list again in November, 2019. Suggestions and comments may be sent to: stephen.perrenod@orionx.net
A presentation with the full Top 50 list is available at SlideShare.net:
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
An article in Barron’s written by Ben Walsh on Valentine’s Day is titled “JPMorgan Just Killed the Bitcoin Dream”.
JPMorgan Chase has announced an altcoin, a stable coin, for use by institutional customers. It will be tethered to the US dollar.
This development is the first such stable coin issued by a US bank. So that is noteworthy. And no doubt it will be useful in expediting transactions for corporate clients. But this is no Valentine’s Day Massacre of cryptocurrencies, no murder of Bitcoin, with its $63 billion market cap.
The major use cases envisioned are (1) securities settlement, (2) international payments processing, and (3) cash management for corporate subsidiaries. It is designed to increase speed and efficiency for these cases, and add flexibility in the cash management case.
Bitcoin does not put faith and trust in JPMorgan, the trust comes from the mining process. In that process, hashing algorithms encapsulate value and security, as transactions in validated blocks. These blocks are widely decentralized and replicated across the Internet.
Bitcoin already allows anyone, retail users as well as corporate clients, to send value across the globe in an hour or less, with fees less than a dollar. The Lightning Network second layer to Bitcoin allows even the tiniest transactions at extremely low cost.
So why use or trust JPMorgan’s coin? After all they have paid over $29 billion in fines and penalties for banking violations since 2000. It seems unlikely that the JPM coin would ever reach even that total valuation, since it is created and then destroyed after transactions have completed.
Retail users won’t have access to the JPMcoin. Actually if they want a dollar-tethered stable coin, there are already a slew of alternative coins for that, today. Perhaps in some distant future, JPMorgan would consider entering the retail stablecoin space.
Certainly for some corporate customers there will be a degree of convenience and familiarity with their existing banking relationship. And banking is ultimately all about trust.
In the immediate term, this coin might be a significant competitor to Ripple and its XRP, another centralized altcoin that has found traction in the international banking payments market. XRP is the third most valuable by market cap, after Bitcoin and Ethereum.
Bitcoin will be around at least until 2140, when the new coins issued as mining rewards have stopped, and after that it will be solely supported by transaction fees in what is already a trillion dollar economy, and growing. We cannot be as certain about the longevity of JPM’s new coin.
A privately issued stablecoin is nothing like Bitcoin. Let’s check in on Valentine’s Day 2020.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Suppose Bitcoin could scale. Many altcoins were created in the promise of handling more transactions, and with lower fees.
But Bitcoin can scale, and it will, thanks to the Lightning Network which went live in 2018. While small, it is growing rapidly.
Bitcoin is often criticized for lack of scalability, relative to traditional credit card, debit card, and mobile-based payment solutions. Currently it is capable of about 7 transactions per second onto the blockchain, whereas the Visa network can handle tens of thousands of transactions per second.
The implementation of Segwit, separating signature information, has allowed additional transactions to fit within a single block of the blockchain. Segwit was implemented as a soft fork in 2017 and nearly half of transactions currently use Segwit.
Other proposed solutions have included larger block sizes, but these have required hard forks leading to new coins. The overwhelming majority of hash power and of market cap have remained with original Bitcoin.
Bitcoin is in fact worth more than all 2000 plus altcoins combined.
There are many other approaches to scaling implemented by other cryptocurrencies desiring to address the scaling problem. These include non-ASIC friendly mining algorithms, and a variety of consensus algorithms that eschew mining, such as Proof of Stake, and Byzantine Fault Tolerant protocols more generally.
The second most egregious method is the airdrop, the “helicopter money” of the cryptocurrency world. This tends to be worth, in the long run, close to what you paid for it. The most egregious of all is premining, where insiders reward themselves first, while selling a ‘utility token’ that currently has no utility, and may never have, to others in an ICO.
The problem with these easy money solutions is that they can push up transaction rates greatly, but at an enormous sacrifice in security. You want fast transactions, just lower hash difficulty in mining, or eliminate it. Lower difficulty means lower security. And thus, it sacrifices the store of value aspect of their currency. (Think Venezuela or Zimbabwe).
If you want to conduct large numbers of low value transactions, that may be fine. If you lose your Starbucks card, do you worry about replacing it? Probably not. With a credit card, it’s different entirely.
The solutions described above, such as block sizes and different forms of mining or consensus algorithms, are on-chain solutions. The transactions are all on some “original” chain (which may have been a hard fork from Bitcoin).
An alternative way is to keep the Blockchain very secure, but then add off-chain scaling.
What: Payment Channels
Lightning is such an approach with Bitcoin, building payment channels that can handle many transactions within that channel. At some future date, the consolidated transfer of value for the channel is committed as a blockchain transaction.
Back to our Starbucks card. The card accepts fiat currency of a given amount and then is used as a payment channel until the funds are exhausted over some number of days as a result of your mild coffee addiction. The card, or payment channel, can then be topped up with funds added back into the channel.
Wikipedia has a good definition for the Lightning Network as a second layer payment protocol: “It features a peer-to-peer system for making micropayments of digital cryptocurrency through a network of bidirectional payment channels without delegating custody of funds.”
One opens a channel with another party and each makes a funding transaction on the blockchain to establish the channel. The channel can then be used for a series of ‘micropayments’ (not necessarily small, but smaller than the funding amount in the channel) that are handled within the payment channel.
After a few, or very many transactions, the channel may be closed out by either party and the net aggregate balance transferred is recorded onto the blockchain.
For example if I put in 0.3 Bitcoin initially, and you put in 0.2, the channel was opened with 0.5 Bitcoin total. You and I make a series of Lightning-based transactions, possibly all in one direction. (We’ve been betting on the price of Bitcoin at the end of each month, say).
Let’s also say we agreed to close the channel at the end of the year. And suppose, netted out overall, I sent you 0.2 Bitcoin over a number of transactions. In closing the channel we would commit the final balance in a blockchain transaction showing that you now have 0.4 Bitcoin of the original 0.5, and I now have just 0.1 Bitcoin. That closing transaction gets recorded on-chain.
If we wanted to continue to exchange, we would open and fund a new payment channel.
There is fraud protection; each party can monitor transactions over a chosen time interval. The party in error can lose (to the counterparty) their funding transaction or more.
The Bitcoin blockchain is highly innovative triple entry accounting (you, me, and the blockchain keep records) whereas the Lightning Network uses good old-fashioned double entry accounting (you, me).
How: It’s not just Channels, it’s a Network of Channels
The Lightning Network is more than just a set of disconnected bidirectional payment channels, it is a network of richly connected payment channels. Suppose Lionel wants to send a payment to Linda, but they have no direct channel established.
If they each have a channel established with Lee, they can route the payment through him as an intermediary and he may collect a small fee.
Or they can route through several unknown intermediaries. The network will tend to develop hubs with many connections and larger funding amounts, including commercial enterprises.
Representation of current Lightning Network early January 2019
Rapid Progress
As of early January 2019, the Lightning Network looks like the above image. There are 15,000 channels and almost 500 nodes. The carrying capacity is modest at $2 million presently, but the growth is exponential. The node count grew a factor of 4 in the month of November alone!
Who: Enabling software and Payment processors
Applications built on the Lightning Network are referred to as LAPPs.
There are several payment processors that merchants can use to enable receipt of Bitcoin payments via Lightning. These include BTCPayServer, CoinGate, GloBee, OpenNode, and Strike.
Implementations of Lightning Network Software include Lit from MIT Media Labs, LND and Neutrino from Lightning Labs, and Blockstream’s c-lightning.
The Future
The Lightning Network has the ability to go places that Visa, MasterCard, and PayPal cannot reach by enabling micro-transactions across the globe with extremely small fees. It is fraud resistant and has rapid verifiable transfer of the most secure cryptocurrency on the network layer, with eventual settlement onto the blockchain.
As a proof point, a work of art known as Black Swan was recently sold at auction to the < Low > Bidder for only 0.001 Satoshi or 4 millionths of a cent. (A Bitcoin is divisible into 100,000,000 Satoshis).
Another, more typical transaction and proof point was established at an Australian car wash with a transfer of over 1,000,000 Satoshis or about $40 US.
You wanted to buy coffee with Bitcoin? Now you can.
(The gory details: “The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments” J. Poon and T. Dryja, 2016 https://lightning.network/lightning-network-paper.pdf)
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Recently the International Monetary Fund produced a research report on Central Bank Digital Currencies, titled “Casting Light on Central Bank Digital Currency”, and available here:
Even the title is interesting in its omission of the terms cryptocurrency and blockchain.
The basic concept they were evaluating was that of central bank controlled digital currency issued for the benefit of retail users (individuals and non-banking businesses). These would exist alongside existing fiat currencies and be intended for domestic use primarily. Their value would have to be tethered to the related fiat.
The study reached several initial conclusions:
* CBDC could be the next milestone in the evolution of money.
* It is a digital form of fiat money, issued by the central bank.
* The ability to meet policy goals is one major issue.
* The demand for CBDC depends on the attractiveness of alternatives (cash, e-money).
* The case for adoption could vary from country to country.
* Appropriate design and policies should help mitigate risks.
* Cross-border usage would raise a host of questions.
Many Central Banks are Studying
A number of central banks around the world are studying CBDCs. This table from the IMF report indicates their publicly stated rationales, which include diminishing use of cash as other payment channels e.g. mobile become popular, efficiency gains for payment and settlement, and greater access for the unbanked or lightly banked to financial services.
But the key point is that CBDCs are quite antithetical to Bitcoin and mined cryptocurrencies in general (we exclude in this comparison airdrops, premined, and other largely centralized, but private, forms of cryptocurrency). CBDCs are closest to the tethered cryptos, but maintained by the fiat issuing authority itself.
Cryptocurrency
CBDC
Created by ‘miners’ running hashing protocols
Created by central bank
Predefined monetary policy
Variable monetary policy set by central bank committee
Transnational usage
Domestic usage primarily
Open triple entry ledger
Central bank permissioned ledger
Validation by private computer nodes
Validation by central bank
There is very little in common between Bitcoin and mined cryptocurrencies in general, and hypothetical CBDCs. Most existing fiat is already digital; a small portion is cash.
Disintermediation of Banking Balances
The main new alternative, besides existing fiat cash, for CBDCs are private payment channels (private e-money) such as PayPal and M-Pesa in Africa. These are similar to stored value cards with prepaid fiat balances, but with mobile interfaces. Here the account balances are managed by private companies, usually with a known partner, and a user needs to trust the company holding the balance.
Both new private money channels and CBDCs threaten to disintermediate balances held in bank checking and savings accounts. So do cryptocurrencies, of course.
These balances are used as reserves for banks to issue loans, so if they were moved to a cryptocurrency or a central bank ledger they are no longer available for lending (fractional reserve banking).
A fundamental difference is that cryptocurrencies are assets whereas fiat money is debt-based, created when banks issue loans. CBDCs in their basic form are not available as reserves for bank lending.
CBDCs would in essence just be a different form of fiat, tethered to fiat, and with the same accounting unit and value.
Cryptocurrency represents a challenge to the banking system and to central banks. It seems that the IMF may be encouraging central banks to sacrifice the interests of banks in order to maintain, and even increase, their own power.
Central Banks could Consolidate Power
The CBDC framework, like cryptocurrency, would move deposits away from the banks. Unlike cryptocurrency, which holds balances on an open ledger, accessed by private keys, CBDC balances would be held for individuals and businesses at the central bank. This means the central banks would be able to restrict access to funds owned by individuals. One can assume they would do this during crises or under court order.
Central banks could even apply interest to CBDC deposits, possibly even with negative interest rates during times of slackened growth.
Fractional reserve banking and the economy as a whole are based on the provision of credit by commercial banks, backed only by a small percentage of reserve balances held with the central bank. If deposits move in large amounts to CBDCs or cryptocurrencies, both of which are assets in the name of the depositor, the system of credit provision in the economy will have to be significantly transformed.
Or a system that allows banks to participate and hold reserves based in CBDC would have to be developed.
CBDCs of the simplest type discussed in this IMF paper seem like a way to protect the prerogatives and increase the power of central banks, and co-opt cryptocurrency. The losers would be traditional banks because their lending power would be decreased.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
The idea that bitcoin will consume an enormous fraction of the world’s electricity is hysteria.
In a recent article in the Communications of the Association for Computing Machinery, June 2018 issue, Nicholas Weaver (a lecturer in computer science at UC Berkeley) raised this issue, in what was otherwise a good article on the security issues around bitcoin.
Weaver quotes a statistic that cryptomining consumes more electricity than Ireland. This may be based on digiconomist.net, which runs toward the high end. Other estimates are only half as large.
He states “If there is profit in mining, the miners will keep using more and more power until there is no more excess profit available”.
This is true, but he overstates things. He evidences a lack of basic understanding of economics and how businesses operate, ignoring all the complexities that go into cryptomining.
Mining costs are a combination of fixed, and variable costs. The variable cost is primarily the electricity consumed. The fixed costs consist of facilities costs, equipment costs, and people and administrative costs. Equipment costs can run over 1/4 of the total.
Total global Hash rate over the past 12 months has grown from 5 to 38 Exahashes, a factor of 7.5.
Difficulty in the Nakamoto consensus protocol has grown by a factor of 7.
Revenue per Terahash per day grew from $1 to $3+ at the peak half a year ago and with the price collapse is down to $0.30. That is before electricity.
According to cryptocompare.com, with the current BTC price of $6500 and at $.10 per kWh for electricity the profit is just $0.06 per Terahash-day currently, but that is before any of the fixed costs are recovered.
If you are not covering your fixed costs plus variable costs you will not stay in business to consume electricity.
Here’s where Weaver really gets it wrong. He states “a 10x reduction in power consumption per hash for Bitcoin mining would have little real effect on Bitcoin’s power consumption. Instead, there would just be 10x as many hash computations needed to produce a block.”
Difficulty rates depend on the total cost burden.
His statement above completely ignores fixed costs. Whether it is an individual mining rig or a huge mining farm, the fixed costs of location, equipment and labor will generally be of order half the total cost.
Do-it-yourself miners in Mom’s basement or my friend Dan might ignore their location costs and equipment burden on their cooling and they might give away their labor for free. But their rigs aren’t as efficiently operated and their electric costs may be higher. They still have to amortize their equipment costs, at least for added ASICs and GPUs.
Suppose the gross revenue is $0.30 per THash-day and the fixed costs can be held to $0.10 and the electricity cost is $0.2. This is a breakeven business example with a large electricity burden.
Now reduce the power consumption per hash by 10x, in which case the total costs drop from $0.30 to $0.12. There would be incentive to increase total hash power by up to 2.5x not 10x. A factor of 4 overestimate.
In practice, it takes time to ramp up hash power. Supplies of equipment are tight. Data center spaces are limited. System administrators are not always available. There are both practical and regulatory restrictions on power available to mining farms.
Furthermore, ASICs and GPUs for Bitcoin and cryptocurrency mining are in particularly tight supply. As demand goes up, there is a bidding war with equipment going for premium prices. This drives up the fixed cost component of Bitcoin mining.
Doubling capacity takes many months, and is subject to financial planning scenarios about future crypto prices, equipment delivery time lags, and electricity prices and availability.
According to digiconomist.net on July 5th, Bitcoin is just 1/3 of 1% of global energy usage (1 part in 300). Global GDP is some $80 Trillion and annual transaction flows of Bitcoin are over $1 trillion. So for over 1% of the proportional GDP the related energy requirement is proportionally 3 times lower.
According to an article in ZeroHedge, gold mining is much more energy costly. Per $ of value produced bitcoin and gold are roughly comparable, but there is a lot more gold mined.
Spillway of Robert-Bourassa generating station, author: fargomeD, CC BY-SA 3.0
They state that per bitcoin the energy consumption is 6.6 million barrels of oil equivalent per year while the consumption for gold mining is 123 million barrels per year.
There are about 88 million ounces of gold produced per year, with a value of around $109 billion, versus 2/3 of a million Bitcoins, value around $4.3 billion. That’s a factor of 25 in value since bitcoin is 5 times more valuable comparing one coin to one ounce.
It seems that the total energy consumed in gold mining globally is around 19 times that of Bitcoin mining. And the number of bitcoins produced per year is dropping due to the halving every 4 years coded into the Nakamoto consensus.
The whole concept is designed to shift miners’ revenue toward transaction fees as the economy develops over time.
If you want to save the environment, focus on gold mining energy efficiency. Improve it by 5% and you can cover the entire Bitcoin mining energy budget.
For a variety of reasons, other cryptocurrencies are less energy intensive than bitcoin. They are also less secure, less battle hardened.
Bitcoin is a digital gold alternative that has the advantages of very low cost portability, and lower costs to secure and store.
It is a valid alternative to gold ownership as a store of value, and is a greener solution. There is a great deal of work (pun intended) on alternatives to Proof of Work mining, including Proof of Stake protocols and delegated Byzantine Fault Tolerant protocols. Also the growth of second layer solutions such as Lightning will support a larger economy and shift miners’ revenue more toward transaction fees.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
No, not asking if you own any Bitcoin. Or the IP address.
This blog is prompted by the Nicholas Weaver article “Risks of Cryptocurrencies” in the June 2018 Communications of the ACM.
He writes, rather misleadingly in our opinion:
“This was not because our Bitcoin was stolen from a honeypot, rather the graduate student who created the wallet maintained a copy and his account was compromised. If security experts can’t safely keep cryptocurrencies on an Internet-connected computer, nobody can. If Bitcoin is the ‘Internet of money’, what does it say that it cannot be safely stored on an Internet connected computer?”
Would you leave a gold coin lying around in the open? Lock that thing up in a safe or safety deposit box.
Bitcoin is not really the ‘Internet of Money’ so much as ‘Money in the Internet’. And the cryptocurrency was not on an Internet-connected computer. Those were the keys.
Your wallet holds one or more private keys, not cryptocurrency itself.
Key distinction (pun intended). The money doesn’t move off the distributed ledger. When it moves from one wallet to another what happens is the send process (that you initiate) changes which private key can access it. Namely the designated receiver’s key becomes the only one that works.
The graduate student’s indiscretion was in making a copy of the key that allowed the safe or safety deposit box to be opened by an unauthorized person. And then not properly securing it.
Where is the Bitcoin stored? Why in the distributed ledger, the blockchain, that is simultaneously existing in many places, but has a single verified history from the Nakamoto consensus protocol that committed it into the blockchain.
That is effectively the bank where all the safety deposit boxes are.
How do you get to your coin? With a key stored in a wallet, the private key. Visit your bank.
That key must be stored in a safe place. It can be in a hardware wallet (USB device typically) which is stored in a home safe. And then it has the same level of security as the gold coins in your safe.
Better, since you can keep another copy in another secure location (safety deposit box, for example).
The next best alternative is a pass phrase on a piece of paper again stored in a safe or safety deposit box. Or a paper wallet that can use a QR code.
There is no need for your private key to be sitting on the Internet.
If you use an exchange you can use their vault, or cold storage, option for most of your holdings. Then you are relying on their assurances that they are storing in offline devices.
When you do visit your Money in the Internet bank, do so from the privacy of your home, not from some insecure wifi in a cafe.
You go to the bank and take some gold coins out from your box and they are already less secure, but that is why they have guards at banks. And when you go out to your car with a couple of the coins, they and you are even less secure.
But we are used to doing that. We understand the procedures.
It’s just that there are new procedures that we have to get used to, with digital gold like Bitcoin. It’s rare to be physically mugged for Bitcoin.
Keep only moderate amounts of cryptocurrencies in exchanges with established security reputations, and modest amounts in mobile wallets.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
National Security considerations are often intimately intertwined with the adoption of new technologies.
Last year Tokyo hosted a meeting of the International Standards Organization, including a session on blockchain technology to examine ideas around standards for blockchain and distributed ledgers.
A member of the Russian delegation, who is part of their intelligence apparatus at the FSB, apparently said “the Internet belonged to the US, the Blockchain will belong to Russia.” In fact three of the four Russian delegates were FSB agents! By contrast, Chinese attendees were from the Finance Ministry, and American attendees were representing major technology companies, reportedly IBM and Microsoft among others.
Let’s unpack this a bit. The Internet grew out of a US military funded program, Arpanet, and the US has been the dominant player in Internet technology due to the strength of its research community and its technology companies in particular.
Blockchain and the first cryptocurrency, Bitcoin, were developed by an unknown person or persons, with pen name Satoshi Nakamoto. Based on email timestamps, the location may have been New York or London, so American or British citizenship for Bitcoin’s inventor seem likely, but that is speculation.
More to the point, the US is the center of blockchain funding and development activity, while China in particular has been playing a major role in mining and cryptocurrency development.
There are many Russian and Eastern European developers and ICO promoters in the community as well. The Baltic nations bordering Russia and the Russian diaspora community have been particularly active.
The second most valuable cryptocurrency after Bitcoin is Ethereum, which was invented by a Russian-Canadian, Vitalik Buterin. Buterin famously met with Russian President Vladimir Butin in 2017. Putin is himself of course a former intelligence agent.
The Growing Interest of Governments
The Russians reportedly want to influence the cryptographic standards around blockchain. This immediately raises fears of a backdoor accessible to Russian intelligence. Russia is also considering the idea of a cryptocurrency as a way to get around sanctions imposed by the American and European governments.
The Russian government has a number of blockchain projects. The government-run Sberbank had initial implementation of a document storage blockchain late last year. There is draft regulation around cryptocurrency working its way through the Russian parliament. President Putin has said that Russia cannot afford to fall behind in blockchain technology.
Given the broad array of applications being developed for cryptocurrencies, including money transfer, asset registration, identity, voting, data security, and supply chain management among others, national governments have critical interests in the technology.
China has been cracking down on ICOs and mining, but it is clear they think blockchain is important and they want to be in control. Most of their government concerns and interest appear to be centered around the potential in finance, such as examining the possibility of a national cryptocurrency (cryptoYuan).
China would like to wriggle free from the dollar standard that dominates trade and their currency reserves. They have joined the SDR (foreign reserve assets of the IMF) and have been building their stocks of gold as two alternatives to the dollar.
China’s biggest international initiative is around a new ‘Silk Road’, the One Belt, One Road initiative for infrastructure development across EurAsia and into the Middle East and Africa. One could imagine a trading currency in conjunction with this, a “SilkRoadCoin”. In fact, the government-run Belt and Development Center has just announced an agreement with Matrix AI as blockchain partner. Matrix AI is developing a blockchain that will support AI-based consensus mechanisms and intelligent contracts.
China’s One Belt One Road Initiative actually has six land corridors and a maritime corridor.
(Image credit: CC 4.0, author: Lommes)
The American military is taking interest in blockchain technology. DARPA believes that blockchain may be useful as a cybersecurity shield. The US Navy has a manufacturing related application around the concept of Digital Thread for secure registration of data across the supply chain.
In fact the latest National Defense Authorization Act requires the Pentagon to assess the potential of blockchain for military deployment and to report to Congress their findings, beginning this month for an initial report.
National Security
What is clear, is that blockchain and distributed ledger technology have the potential to be of major significance in national security and development for the world’s leading nations.
A range of efforts are underway by government, industry, and academia to understand blockchain technology and cryptocurrencies, to enhance the technology, and plan for the future. In that context, we see potential in the technology to impact many facets of society and global dynamics. That potential is now sufficiently developed for us to advocate a more visible presence by government agencies in helping shape the policy and academic research.
We encourage the US government to increase engagement with blockchain and distributed ledger technology. This can include funding research in universities, pilot projects with industry across various government agencies including the military and intelligence communities, the Federal Reserve, and the Department of Energy, NOAA and NASA, in particular.
Also the federal government should pursue standards development under the auspices of the NIST and together with ISO. Individual state governments are also promising laboratories for projects around identity, voting, and title registration.
Information has always been key to warfare. But there is little doubt that warfare is increasingly moving toward a battlefield within the information sphere itself. These are wars directed against the civilian population; these are wars for peoples’ minds. Blockchain technologies could play a significant role in these present and future battles, both defensively and offensively.
America was founded and grew rapidly largely in the context of the Industrial Revolution. The Information Age provides a similar opportunity and responsibility to set the course for the next century and beyond. As before, getting it right will not only assure the country’s continued success and leadership. It also arms the nation to solve problems that affect all of humanity.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
We often hear that we live in an Information Economy. We have an information-based economy, but we don’t have a pure form of “money as information”. Instead we have a hybrid of digital money and paper money with encoded information such as denomination and serial numbers and engraving details.
Money (Money 2.0, ‘paper’ fiat money) today is mostly information, but the modern monetary system was designed long before the Information Economy. Even so, money is mostly held in digital form, on the ledgers of banks, and as monetary reserves at central banks. Physical currency in circulation is a small fraction of the money supply. So today it is a hybrid. One can argue it is not fully suited to our rapidly evolving information economy.
Steven Mnuchin, Treasury Secretary, and Wife Posing as Bond Villains, while Enjoying Dollar Bills at the Bureau of Engraving
Bitcoin and cryptocurrencies collectively are Money 3.0, a form of money that is entirely digital, entirely information. Even if you have a physical bitcoin wallet or paper wallet, the money does not reside in the wallet, only the keys! The keys release bitcoin money held on the blockchain.
Trying to separate the blockchain from bitcoin or cryptocurrency is like trying to separate the economy from information in the information economy. The blockchain holds the ledger information, the cryptocurrency powers the economy. The term ‘blockchain’ does not appear even once in Satoshi Nakamoto’s seminal paper for bitcoin and cryptocurrency. See this OrionX.net podcast discussing Nakamoto’s vision and the Nakamoto consensus algorithm: https://youtu.be/ZLS5P7SYcyI
Today, market participants mostly look at the market cap of bitcoin and other cryptocurrencies, as if they were some sort of equity shares. But actually, they are currencies, or perhaps digital gold, and what is somewhat strangely called ‘market cap’ is actually the money supply for that currency. It is simply the price of bitcoin, times the aggregate number of bitcoins in circulation. Here, in circulation means securely committed to the blockchain through a cryptographic hashing algorithm.
The size of the economy for bitcoin is related not only to the money supply, but also how rapidly that turns over. In macroeconomics this is called monetary velocity. In fact GDP = M2*V where the GDP is equal to the M2 money supply and V is the velocity of that money. It reflects how fast money moves through the system per year.
In the US the GDP is about $19.5 Trillion, the M2 money supply is about $13.7 Trillion and the velocity is about V = 1.42. That is, on average, the money supply turns over 1.42 times per year. In fact the Federal Reserve has been worried that the velocity is too low. It has been dropping steadily, which is a symptom of stagnation.
Velocity of M2 Money: Federal Reserve of St. Louis
For bitcoin the velocity is much higher. It turns over about 20 times a year, V = 20. Today the money supply or market cap for bitcoin is about $158 billion. With a velocity of 20, that translates to a bitcoin economy that is over $3 trillion. That amounts to around 16% of US GDP (roughly equal to annual health care expenditures) and more than the GDP of The Netherlands. Bitcoin is not usually described in such terms, but this is a measure of the vibrancy of the economy for the cryptocurrency.
Many cryptocurrencies have even higher velocities. Bitcoin Cash, which has only been in existence a few months, has a velocity of 28 and a total economy of over $700 billion, similar to the GDP of Switzerland. The world economy of cryptocurrencies exceeds about $9 trillion. This is about twice the GDP of Japan.
While cryptoeconomies are much less developed and have high levels of speculation, the overall size is indicative of the great potential they provide utilizing “Money in the Internet”.
Bitcoin and other cryptocurrencies are enabling the Information Economy 2.0, where whole new forms of efficient exchange of value can be implemented with fewer or even no middlemen and at lower cost.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Well there are 20 flowers in the Bitcoin ecosystem. And over 1400 in the cryptocurrency ecosystem at present.
Salad forks, dinner forks, shrimp forks, dessert forks, tuning forks, pitchforks… so many kinds of forks..
Image credit: Ellen Levy Finch, CC BY-SA 4.0
Why fork a new cryptocoin? One can fork for technological improvements, one can fork to make money, and one can fork for ego, for the pride of “ownership”.
There were several software forks that occurred mainly in the 2015-2016 timeframe and known as XT, Classic, and Unlimited. Including Unlimited, they have had limited impact to say the least.
But let us look at hard forks, or coin splits, that have been so prevalent since August of last year.
Technology enhancements promoted in these forks are across several main categories:
Bigger blocks for scaling, shorter block times
Off chain or side chain transactions (Segwit for signature, more generally Lightning, etc.) for scaling
Different hashing algorithms for easier mining
More anonymity, security
Enhanced programmability, smart contracts
Increased money supply
How many hard forks and coin splits has Bitcoin had so far? In total there have been 20 such forks to date.
August 2017 – 2
October – 1
November – 1 and Segwit2x proposed, withdrawn
December – 14
January 2018 – 2 so far
This Cambrian Explosion of bitcoin forks is in large part a result of the increased transaction costs and delayed confirmation times with original BTC, Bitcoin Core. But it is also a sign of a healthy and growing blockchain universe. If cryptocurrencies were not seeing increased success, the rate of innovation, and the number of forks, would be smaller.
Here is a list of the most significant ones, all in the second half of 2017, and with current pricing, key features, and URL:
August – Bitcoin Cash, BCH, $2413, 8 MB blocks, bitcoincash.org
October – Bitcoin Gold, BTG, $323, equihash, bitcoingold.org
November – Bitcoin Diamond, BTCD, $22, 10 times number coins , X13 hash, btcd.io
December – Super Bitcoin, SBTP, $108, lightning and zero knowledge proofs and smart contracts, supersmartbitcoin.com
If you owned bitcoin prior to block 478558, you in principle own all 20 of the forked coins, including the most valuable one Bitcoin Cash, and mostly in a one-one ratio. Putting your hands on them is trickier.
That is a question as to what support particular private wallets or public exchanges provide. There are guides on the internet and YouTube as to how to retrieve although it seems more trouble and risk than justified in most cases. (This writer has managed to get some BCH and BTG separated out, but it is a somewhat nerve-wracking experience.)
For now it seems we have reached a point of exhaustion for the principal good ideas and the newest forks are more likely to be dodgy, or frauds, or duplicating others, or of limited potential.
Here is an important consideration: while increasing the transaction rate and lowering fees will bring greater utility to users, this does not contribute to the store of value or digital gold aspect. Bitcoin, the original Bitcoin core, is most valuable today for its store of value attribute, much more so than for its medium of exchange attribute.
Now it will be a race between development teams and marketing teams to see which of these forks/coins other than BCH and maybe BTG will have relevance and value going forward, and what value any of them can sustain.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Recent News: Segwit2x fork has been postponed indefinitely
Some say bitcoin acts more as digital gold then as a currency, more as a store of value than as a medium of exchange. It is very interesting to look at the various bitcoin forks with this question in mind.
Everything in life and in finance is a tradeoff. Gold works well as a long term store of value, but not so well as a medium of exchange. The US dollar works very well as a medium of exchange, but not well as a store of value in the long term. Even the Federal Reserve and other central banks hold gold as a reserve asset. It represents the bottom of the inverted money pyramid.
Now bitcoin is from its beginning more like gold in the sense that it is an asset with limited, predetermined supply. Dollars and other fiat currencies are debt-based since they come into existence when new loans are made, and their continual supply growth is rather assured; usually inflation occurs to varying degrees. See the Money 3.0 article for a longer discussion of this point.
Image: Silver ice cream fork, De Young Museum
There are 4 versions of bitcoin, 3 currently, and one possible fork. That was scheduled for mid-November as Bitcoin 2x (or B2X) a possible fork due to partial adoption of Segwit 2x, but it has now been indefinitely postponed due to lack of support.
As of today, approximate values for the 3 existing forks are:
Bitcoin BTC $11,530
Bitcoin Cash BCH $1560
Bitcoin Gold BTG $330
And Bitcoin 2x B2X had future values around $1600 before plunging on the announcement that it is now postponed. That value seems to have migrated to BCH.
All these cryptocurrencies have a supply of around 16.7 million accounting units, and all are limited to 21 million as the ultimate supply. And yet their prices are very different. Bitcoin has a first mover advantage but is that the whole story? How does one value BCH and BTG relative to BTC? In principle the various versions have both asset and currency characteristics.
Each of the alternatives to the original bitcoin is designed to facilitate faster, less expensive transactions. And this makes it more like a currency than a reserve asset.
BTC can be looked at like a large denomination bill, not as easily spent, although it is much easier to break into change than large bills are. Bitcoin Cash differs from BTC because it has a much larger blocksize, 8 MB. Bitcoin Gold differs in adopting a GPU-friendly mining algorithm, Equihash, rather than SHA-256 used by the others, which requires custom ASICs.
Bitcoin 2x adopts Segwit2x with a larger 2 MB block size.
Each of these three alternative coins is designed so that the system can process transactions more quickly and at lower cost, and so, along the spectrum of digital gold to currency, each is closer to a currency than the original BTC.
And that, somewhat counter-intuitively, is why original BTC retains a higher value.
In particular, the Bitcoin Gold is actually least like gold of all of these, since it will have the most accessible and thus fastest mining algorithm, and presumably could end up with the lowest transaction fees.
Image credit: bitcoingold.org
The respective values of the 3 or 4 types of bitcoin reflect this view. Bitcoin is the “slowest” and has the lowest velocity (slowest turnover) and highest value. Bitcoin Gold appears to be the most rapid and with lowest transaction fees, and thus has the lowest value.
Bitcoin Cash and a possible future Bitcoin 2x are between the two extremes. Since Bitcoin Cash has much larger blocks it has substantial miner support. Bitcoin 2x is favored by the user community that wants to facilitate more efficient transactions.
If you have a gold coin and some fiat currency, which do you spend first? You bought the gold coin in expectation that it would preserve its value and increase in terms of the number of currency units per coin.
So HODL (hold on for dear life) BTC, and spend or convert BTG and BCH seems the way to go for now. As always one should monitor how the different cryptocurrencies are developing in comparison to each other, in this very dynamic and volatile marketplace.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Warren Buffett is the most famous name in stock investing, the second richest person in the world, and a leading expert in valuing companies and securities. He also is a big investor in banks, including Wells Fargo, Goldman Sachs, and Bank of America. So he has a lot of vested interest in the current monetary and financial system.
He recently said that bitcoin is in a bubble, which may well be true. He also said “You can’t value bitcoin because it’s not a value-producing asset”.
And yet, as of today, bitcoin has a market cap which is over $120 billion, substantially more than Buffet’s net worth. Bitcoin can be valued, but not like a security or a company, which is what Buffet does so well.
As we have written elsewhere, bitcoin is a currency, money, a cryptocurrency. Some will say it is a digital asset, like a digital gold. We say it is Money 3.0 (fiat is Money 2.0, gold and silver coins were Money 1.0).
Do these have value? Although none has intrinsic value and each costs a nominal amount to make the one on the right is worth quite a bit more than the one in the center, and the one on the left, more still.
Yes, money is designed as a store of value, a medium of exchange, a unit of account. Cryptocurrencies have the same design goals.
Bitcoin is a unit of account in a secure, distributed ledger. It has been a much better store of value than fiat currency in recent years.
In fact in 2014, Buffet said “It’s a mirage”. And yet, the value of a single bitcoin has increased 20 times since late October, 2014 to about $5800 today.
Money is valued by what you can exchange it for in the economy, by its utility. It is valued against other currencies. Bitcoin can be valued the same way, and thus by the vitality of the bitcoin economy.
Within the cryptocurrency world, bitcoin is the reference benchmark, just as the US dollar is globally. Bitcoin gets valued every single day, every minute of the day, against all major fiat currencies and against hundreds of cryptocurrencies. Like those currencies it has an economy and a turnover (or velocity) of the currency.
One thing we don’t normally think of with respect to cryptocurrencies is interest, or dividends. It is possible to lend out bitcoin for interest, as one can do with dollars, euros, or even gold. But bitcoin has effectively thrown off two special dividends this year, in the form of forks of the bitcoin blockchain. These are known as Bitcoin Cash (forked in August) and Bitcoin Gold (forked in October). Collectively, those two are worth close to $700, representing over 9% dividend rate to date during 2017, based on the current bitcoin price.
And for someone who bought at the beginning of the year, when bitcoin was under $1000, the dividend is around 70%. Not shabby, and a very reasonable reward for accepting the volatility.
Bitcoin is a technology for internet money, network money that is independent of any government, and it can be hard to fathom for the newcomer. Buffett has always said he does not understand technology. He was late getting into Apple, for example. He has not examined the technology and potential of bitcoin and other cryptocurrencies sufficiently to have an informed opinion.
Bitcoin’s future value? It all depends on how the economy around bitcoin develops, but it will be quite an adventure. And bitcoin to bagels it will increase in value over the next several years.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Bitcoin, and cryptocurrencies more generally, can be a bridge to a better monetary future for the globe. In almost every nation today, fiat currency managed by a central bank is the norm. This is money that is inherently inflationary by design. Since central banks are controlled by national governments, and governments routinely run substantial deficits, the banks promote inflation in order to benefit their governments.
In our current low growth environment, the Federal Reserve has grown the money supply (M2 money stock) 4.9% during the past year when inflation is running at 2% or less. They are operating on an equation of around 2% inflation plus 2% to 3% GDP real growth for about 5% monetary growth.
Bitcoin has a very controlled and low absolute inflation, much less than 1%. There are currently 16.6 million bitcoins available, and there will never be more than 21 million, and that does not occur until over 100 years from now. In practice, Bitcoin is currently deflationary since the economy around Bitcoin is at present increasing very rapidly, at triple digit rates. It has been gaining value against fiat currencies quickly, albeit with very high volatility.
Bitcoin meets the attributes of currency, see our Money 3.0 article. It is not debt-based, as are all currently circulating fiat moneys, paper and digital money backed by nothing but debt (Money 2.0).
Akashi Kaikyo bridge is the world’s longest suspension bridge. GFDL license.
The entire financial system was at risk of collapse in 2008 due to accumulated debts and risky and fraudulent derivatives built on top of those debts. Trillions of dollars of wealth were destroyed, with Americans losing 40% of their net worth during a 3 year period.
In addition, the system is well-designed for the money center banking elites to pull more and more wealth into their own hands, through financial techniques that create no real wealth. Those who get to create the money lend it out and accrue the highest benefits.
A more stable system is required, and Bitcoin could play an important role, as an asset-based, not debt-based, currency. Dollars and Euros come into creation as new loans are issued by commercial banks. Central banks manage the reserve and equity requirements of those banks, but a large amount of leverage is inherent in the fractional reserve system.
Bitcoin comes into creation as a result of the mining process, that occurs as new transactions are forged into the blockchain. Bitcoin creation is a direct result of the operation of the economy around the cryptocurrency. Bitcoins are ‘minted’, not ‘printed’. Like fiat currency they have value due to scarcity and utility, and dependent on the growth of their economy.
Bitcoin and other cryptocurrencies can be the basis for more honest money, as well as for decreased transaction costs, and higher efficiency. Banking will change forever. Like fiat currency, bitcoin can be borrowed and it can be lent.
Those who are involved in Bitcoin today, a “peer-to-peer cash” are pioneering a future that could be a more stable, more honest monetary system. Today Bitcoin is young, has plenty of growing pains, and volatility, but it is now 8 years old and maturing rapidly.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
One of the largest banks in Japan, Mizuho, along with other Japanese banks, is looking to get into the blockchain game. CNBC reports “Japanese banks are thinking of making their own cryptocurrency”.
Except they are not, based on the information released so far. This will be mobile Yen, a use of blockchain to allow mobile users to spend Yen and send Yen. Mobile money. Not that there is anything wrong with mobile money, an electronic wallet, it can be quite useful.
This is not Nakamoto consenus, this is not mining of currency. It is a tethered currency. This is not an open source, globally distributed ledger with trust resident in the algorithm, the ledger, and the community.
I was married to a Japanese lady for over a quarter century, and have lived and worked in Japan. I know the Japanese mindset. This will be a highly constrained ‘currency’.
No doubt with all the constraints, and as a complete tether to the Yen, and with large banks behind it, they will be able to gain Japanese government approval.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
First they ignore you, then they ridicule you, then they fight you, goes the saying.
JP Morgan (not Jamie Dimon)
Jamie Dimon is CEO of JP Morgan Chase, arguably the most important money center bank. He recently called Bitcoin a “fraud”, heaping ridicule upon, and fighting with Bitcoin as well, with a single phrase. Because he is “afraid”.
It certainly is not a fraud. It is in fact a more advanced form of money our fiat currency; it is Money 3.0.
JP Morgan Chase, the combined bank, has been around since 1799 (Chase portion), over 200 years, and has a market cap of around $331 billion. Bitcoin and other cryptocurrencies have been around for less than 9 years and have a market cap of around $150 billion. That is over 1/2 of Visa’s market cap.
It would not be a surprise to see the total cryptocurrency market cap exceed that of JPM by the end of the decade.
Why did Jamie call Bitcoin a “fraud”? Because he knows he has to fight it. Cryptocurrency, or the Internet of Money as Andreas Antonopoulos likes to call it, is a steamroller that will severely disrupt banking as practiced today.
Who is really happy with their bank? You think it is your money you have in your bank, right? No, you have lent your money to the bank so they can lend it to others and make hefty profits on the spread. Why don’t you lend directly? You can use Bitcoin to do that, or dollars as well, through direct lending sites.
Try taking all of your savings and checking funds out of your bank tomorrow in cash. They probably won’t let you if you have more than $10,000. They have know-your-customer regulations and anti-money laundering regulations and many other restrictions. They don’t keep much cash on hand. You might hear “we can give you $2500 today, then come back next week”.
In his book Internet of Money, Antonopoulos tells a story about how he gave a talk at the Deutsche Bank. This is the equivalent of the Federal Reserve, for Germany, their national bank. He asked to be paid in Bitcoin; they couldn’t do it. Ok, could they send him dollars to his US bank. Okay SWIFT code, etc. Without going through all the gory details, the whole transaction took 16 days! His bank in the U.S. said, who is the Deutsche Bank?
You can easily transfer a few thousand dollars or more via Bitcoin in an hour or so. If you haven’t used Bitcoin yet, now is the time to learn about it, it will only grow in importance.
The real frauds here? JP Morgan and Jamie Dimon. They have paid over $30 billion in fines for multiple financial crimes since the Great Recession. Around 10% of their company market cap. But that huge sum is less than half the market cap of Bitcoin today.
Stephen Perrenod has lived and worked in Asia, the US, and Europe and possesses business experience across all major geographies in the Asia-Pacific region. He specializes in corporate strategy for market expansion, and cryptocurrency/blockchain on a deep foundation of high performance computing (HPC), cloud computing and big data. He is a prolific blogger and author of a book on cosmology.
Stephen Perrenod joins Shahin and Dan to make sense of Cryptocurrency/Blockchain/Bitcoin. They complete the discussion of a transaction’s journey, which they started in the last episode, and answer the common question: “can I separate Blockchain from Bitcoin?” This is the 3rd and final episode of a series that focuses on a deeper discussion of the basics of Blockchain technology.
OrionX is a team of industry analysts, marketing executives, and demand generation experts. With a stellar reputation in Silicon Valley, OrionX is known for its trusted counsel, command of market forces, technical depth, and original content.
