Power Point Presentation: Intro to Bitcoin Presentation – Oct 2014
It was a challenge for me to write something a bit more journalistic. I’m more accustomed to writing analysis.
krainian society has a low amount of trust, and high technical expertise. So, perhaps predictably, Ukraine’s Bitcoin scene is defined by isolated pockets of talented developers and miners (see did Ukrainians almost take over Bitcoin article by Bloomberg1). But it is absent of any substantial community of users or merchants. The public remains unaware of Bitcoin. A handful of people (myself included) are trying to change that by organizing clubs, Satoshi Squares, and educational resources.
The founder of Kyiv’s Kuna Bitcoin Agency2, a retail Bitcoin shop, explains on the agency’s website: “After the revolution we now have no fear nor anything to lose. Sounds like a perfect place for Bitcoin.”
Despite the violence and uncertainty, the mood in Ukraine is largely optimistic, more so the further you travel from the territories disputed by Russia where a low-intensity war is underway and where a substantial minority remains deeply skeptical of the West. For many others, the conflict in Ukraine is a long over-due divorce with the corruption and brutality of the Russian government — what Wikileaks dispatches revealed3 was considered a “mafia-government” by many diplomats.
Of course, there is concern too. Everyone is waiting to see how far Putin will push the covert invasion / uprising. He recently surprised many observers by stating Ukraine’s planned election for May 25th is “a step in right direction.” That means he’ll either be backing off, or launching a full scale invasion, or something in between.
Last month, the self-declared separatist mayor of Sloviansk, the Eastern Ukrainian city at the center of the covert invasion / uprising, said “We will take all necessary measures so that elections in the southeast do not take place.” Asked how he would accomplish this, he responded, “We’ll take somebody as hostage and hang him by the balls.” He also promised to destroy dissent, calling it “a harsh truth of life4.”
November seems like a life-time ago, and a world apart from today’s situation in Ukraine. The unrest began on November 21st. Victor Yanukovych was still Ukraine’s president. He was Moscow’s preferred candidate in the 2010 election (which he won), and earlier in the fraudulent 2004 election which was overturned by Ukraine’s Orange Revolution.
On November 21st, he announced the postponement of a planned accession agreement with the EU, a long, difficult process at the end of which, Ukraine might theoretically have joined the EU. Success was doubtful, but the process itself would have strengthened Ukraine’s ties with Europe. Even more importantly in the opinion of many Ukrainians, it would have symbolized a movement away from the corruption and criminality that replaced the Soviet Union. A minority of Ukrainians viewed the EU with skepticism and wanted closer ties with Russia, especially in Crimea and the two easternmost provinces known collectively as “Donbas,” the home of then-President Yanukovych.
London. Dec, 2013.
The Whole Debate
(Introduction to Bitcoin @ 1:22:00
Bitcoin vs Gold @ 1:38:40)
A lot of otherwise useful analysis of Bitcoin versus gold misses an important point. This analysis only considers physical gold, and points out its obvious disadvantages. Mainly, physical gold can’t be transported almost effortlessly, and almost instantly to anyone with an internet connection. Gold is also more difficult to divide and to verify. This analysis is accurate, but through the ingenuity of entrepreneurs, gold can behave like Bitcoin. In fact, it used to.
I’ve completed a buyback of the asset I issued, W4A-BOOK, on btct.co. I’m posting here for the sake of openness and transparency.
The asset W4A-BOOK was a new idea in crowdfunding. Rather than relying on philanthropy or advanced sales of my next book, I wanted to try selling shares of it. This would allow philanthropists to share in my success, should I find it.
The book is a memoir about getting recalled for a third combat tour (to Afghanistan) while becoming a radical libertarian.
I already have credentials as a writers:
Anyway, after some conversations with btct.co’s Ethan Burnside (a great gentleman), I applied to have securities issued. My application was approved on August 9th. A few days later, I attempted (and succeeded) in selling 100 of the 400 shares I issued for .24 BTC each. The 100 shares represented 10% ownership of the book and a 10% claim on all proceeds I might earn.
The reason I only sold 100 shares was because I was more interested in proving a concept than in raising money.
Step one seemed like a success. With 24 bitcoins in my paper wallet, I’m began writing (and attending bitcoin & libertarian conferences).
Then came the bad news that Btct.co was closing. See their website (https://btct.co/) for the announcement or bitcointalk.org (https://bitcointalk.org/index.php?topic=125629.msg3214807#msg3214807) for the discussion.
I considered the following:
1. Transfer of shares to another exchange.
2. Continued ownership of shares in private.
3. A buy-back of all shares.
I didn’t like #1 for several reasons:
– It takes time and effort to issue shares and since we still don’t know the details behind BTCT’s closure, I fear other Bitcoin stock exchanges might meet the same fate.
– The fee for issuing a security is usually 2 to 5 BTC. That’s a non-trivial amount when you’re only planning to raise 20-something BTC.
#2 was a possibility, though my main objective was proving a concept and perhaps generating a little publicity. If the stock exchange aspect was all handled privately, my goals wouldn’t really be met. There’d be no market for shares of the book.
My preference was #3, buying back all shares at the original issuing price — 0.24 BTC each. Since trading volume for this asset was extremely low, such a buy-back would cause most parties to break even or come close. #3 had another advantage: simplicity.
I communicated with shareholders via email. Those who responded represented over 90% of the outstanding shares. They agreed with #3. One of them, the largest shareholder, initially preferred #2, continuing our agreement in private. I was prepared to do that, but he deferred to my preference (which I described as a “slight preference” in our correspondence).
He gave me lots of encouragement for this project, and is another example of the good faith and integrity that always impresses me in the Bitcoin community.
Today, I completed the buyback. BTCT.CO had a system for actually buying back shares through their website, but they also had a warning that customers should withdraw their funds. I didn’t want to send money to a website which may be in regulatory trouble, so I shut off trading and executed the buyback by simply sending BTC to the public keys of all the shareholders. I emailed each of them a transaction ID.
I invite you all to purchase an advanced copy of the memoir: https://bitcoinstarter.com/projects/182 The new working title is “The Way Back”.
Originally posted on bitcointalk.org: https://bitcointalk.org/index.php?topic=307484.new#new
I was surprised to discover no readily available list of worldwide monetary supplies denominated in a common unit like dollars or ounces of gold but such a list is easily calculable from publically available data. Here, I use M2 data from the World Bank and the United Nations’ list of exchange rates. I repeated the calculation using M1 data from the Trading Economics data service.
A spreadsheet containing this analysis is available here.
So what do the numbers reveal and how do crypto currencies compare?
MOST VALUABLE M2 MONETARY SUPPLIES (in trillions of dollars)
|1. All Euros||$21.69 Trillion|
|3. United States||14.10|
|7. United Kingdom||3.87|
|10. Canada (2008 data)||1.97|
|12. Korea, Rep.||1.65|
|17. Russian Fed.||0.98|
|18. Hong Kong SAR||0.88|
MOST VALUABLE M1 MONETARY SUPPLES
|1. Euro Total||$7.03 Trillion|
|4. United States||2.55|
|5. United Kingdom||1.86|
|13. Korea, Rep.||0.44|
|14. Russian Fed.||0.42|
|16. Saudi Arabia||0.26|
|20. Hong Kong SAR||0.18|
One surprise (for my American mentality) is that dollars are not the biggest, nor second biggest monetary supply in terms of value. They are third or fourth biggest depending on whether one considers M2 or M1.
Please note, the data is imperfect: the M1 data is newer than the M2 data, but the difference in M2 versus M1 ranking also speaks to great differences in banking structure and practices in various countries.
The main difference between M2 and M1 is that M2 includes savings and money market accounts. The proportion of M2 to M1 varies widely between countries. Though the ratios may be off because some data is older than other data, in the United States, M2 is more than five times bigger than M1. In Luxembourg, it’s only 1.3 times bigger. In Saudi Arabia, it’s 1.5 times bigger.
COMPARING M2 WITH CYPTO CURRENCIES
As of the time of this writing (September 7th, 2013), all the Bitcoins in the world are worth about $1.39 Billion. That makes their supply slightly less valuable than the M2 monetary supplies of Chad, Guyana, Montenegro, but slightly more valuable than the M2 monetary supplies of Mauritania, the Maldives, Belize, El Salvador, Malawi and Tajikistan. Bitcoins are on the map!
All the Litecoins in the world are worth about $59 million dollars, which is a little better than half the value of the smallest M2 monetary supply reported by the World Bank, that of Sao Tome and Principe.
MEASURING VALUE PER NOTE
The methodology behind this last analysis is speculative, but interesting nonetheless. What if we measured the value-per-note of all mediums of exchange? What if we counted all the notes in the world (Dollars, Euros, Litecoins, Vietnamese Dongs, Yen, Rubles, Lira, etc), and then counted the value of all the notes. For any currency, we could then compare their percentage of world-wide notes to their percentage of value of all the monies.
For example, imagine a world in which only two mediums of exchange were used: Roman’s Rubles and Mises’s Marks. Imagine that a million of each circulated, but Mises’s Marks were three times as valuable as the Rubles.
It’s easy to quantify the difference. Mises’s Marks represent three quarters of the value and only half of the notes. This can be described by a factor of 1.5. Roman’s Rubles also represent half the notes, but only one quarter of the value. They can be given a factor of 0.5.
A real-world example would be comparing Vietnam’s money, the Dong to the Euro. Taken note for note, the Dong represents a quarter of all the money in circulation, but only 0.15% of the value (when considering M2). The Euro is almost the exact converse. Euros represent 0.15% of the notes, but a quarter of value of all mediums of exchange in this analysis.
What conclusions be gleaned from this data? Most interestingly, is this factor (percent of value divided by percent of notes) in any way measure trust?
Several methodological concerns come to mind:
1) Aggregating all mediums of exchange, including Tide, gold and pig tusks (used as a medium of exchange on Pentecost Island in Vanuatu) seems like the best approach. In this analysis, only M2 data and the two most valuable crypto currencies, Bitcoin and Litecoin, are considered.
2) How would gold be incorporated into this analysis, since there is no single obvious unit to represent a note? People trade in grams, ounces, bars, tonnes.
3) Should crypto currencies be compared with M2, M1, or not at all? The ranking of trust factors was similar for M2 data and M1 data.
4) Can value per note be a meaningful measure of trust or anything else? Perhaps monetary discipline? What correlations can be found with this ratio?
With these concerns in mind, here is a list of the most and least trust monies using M2 data:
|2. Kuwaiti Dinar||456|
|4. Bahraini Dinar||345|
|5. Oman Rial||337|
|6. Latvian Lats||245|
|7. U.K. Pound||198|
|8. Jordanian Dinar||183|
|10. Azerbaijan Manat||166|
|11. Swiss Franc||140|
|12. US Dollar/Bahamian Dollar/Panama Balboa||130|
|13. Australian Dollar||118|
|14. New Zealand Dollar||104|
|15. Singapore/Brunei Dollar/Libyan Dinar||102|
China’s Renminbi: 21.2
Japanese Yen: 1.3
CLOSEST TO PROPORTIONAL TRUST
(% money supply = % value of money supply)
Sri Lankan Rupee 0.987
Icelandic Krona 1.090
|3. Sao Tome Principe||0.0070|
|8. Sierra Leone||0.030|
Though the Bitcoin economy may still be small, the fact of it being larger than many national monetary supplies — after only five years, no less — makes its dismissal by lingering critics downright silly. (Not that the “honey badger of money” cares much about its critics.) The value-per-note analysis is even more surprising. If indeed the relative trust of various currencies can be measured by comparing value-per-note, then Bitcoin is already the champion (precious metals not considered), and Litecoin is threatening to take second place.
Not only are the advantages of Bitcoin over gold accentuated by the restrictions which entrench the world’s fiat systems, it is likely that Bitcoin’s emergence is a reaction to those restrictions.
It is hard to imagine their development in a completely free market where successful banking is based on service and competition instead of the political privilege which licenses select institutions to counterfeit, where regulatory burdens would be very low and tending toward increased efficiency, where, rather than restricting the flow of commerce across borders, major institutions would be dedicated to enabling it, where we could instantly transfer fractions of a commodity money to anyone in the world.
In such a free market, there would simply be no need for a crypto-currency without a commodity backing.
So what is Bitcoin’s value? It is a means of escaping the enforcement of the world’s currency monopolies, a jailbreak. It is a service, like Western Union, only cheaper, easier and faster. Bitcoin is a vehicle. Bitcoin HAS an intrinsic value as a wealth delivery service with the peculiar feature that wealth needs to transform into Bitcoin before it can be exchanged.
In an environment of extreme Bitcoin skepticism, a transaction would look as follows: wealth transforms into Bitcoin, zips instantly to anyone in the world (or beyond, so long as they have internet access), and then transforms out of Bitcoin.
People would be willing to thus transform their wealth so long as they are saving money, time or convenience over rival money transfer systems like conventional bank-wires, credit card purchases, or Western Union.
In the skeptical environment, the amount of wealth people leave in the form of Bitcoin would reflect the fees associated with changing wealth into and out of Bitcoin (for example, the fees charged by btc-e.com or mtgox.com).