BITCOIN
The Bitcoin Standard
If you would like to learn about Bitcoin, maybe one of the consideration is where to start. Since Bitcoin is a large and difficult concept to grasp.
It involves deep understanding and range of disciplines of theory and economic history before you can finally dive into the world of Bitcoin. This book is a good consideration to read to learn deeper about it.
In this book, you’ll learn many things.
1.Money was first used as a medium of exchange
People were doing barter or direct exchange. But here’s the problem: sometimes those things don’t align. That’s where money comes in. Because everyone wants it, you can use it for any transaction.
2.Gold became the basis for sound money
Gold became increasingly marketable as more and more nations issued paper currency backed by gold reserves. This was sound money, the markets had chosen gold freely as the best store of value, and money was now backed by it.
3.European governments devalued their currencies to fund their war efforts
In the first century , the Roman emperor Julius Caesar issued the “aureus,” a coin containing roughly eight grams of gold. It became a standard method of payment across the Roman Empire. But as growth in the Empire began to slow, rulers started coin clipping (a sneaky practice whereby a portion of the precious metal contained in coins was removed to bolster the government’s spending power).
4.Gold-backed money was replaced by government-backed money after the First World War
When the First World War came to an end, the European powers that had been involved in the conflict faced the thorny issue of revaluing their currencies. The obvious solution was to return to the gold standard, but a fair revaluation compared to gold would have been an unpopular admission of how little currencies were now worth.
Returning to the old exchange rates wasn’t possible, either, as it would have overvalued paper currencies. The result would have been a flood of citizens demanding gold for their paper receipts, gold that they could then have sold abroad for a profit.
So the governments chose to introduce fiat money(money backed by decree rather than gold).The adoption of fiat money led to an age of unsound money shaped by ever-greater intervention in the economy as governments scrambled to stabilize the value of their currencies.
5.Sound money is the basis for a functioning economy
Sound money is a great way of encouraging people to save and invest. It nudges us to think more about the future. After all, if we can reasonably expect our money’s value to increase over time, it makes sense to take a look at what we can do now to maximize our future income. And the more capital accumulation there is, the greater the chance of stable, long-term economic growth.
The problem with unsound money is that it distorts capital accumulation. When governments interfere with the money supply by, say, manipulating interest rates, they also interfere with prices. That’s an issue because prices give investors the information they need to make good decisions without having to learn every tiny detail about global events.
6. Unsound money leads to recessions and debt
Unsound-money policies like those implemented by European governments during the First World War create all sorts of problems. Two issues stand out are recessions and the endless accumulation of debt.
The overall effect is endless crisis. Government intervention causes recessions and the Keynesian response makes things even worse. But there is an alternative. We need to return to sound money and a new gold standard. The new technology of Bitcoin might just help us do that.
7. Bitcoin is unique in its scarcity
The way bitcoins are created leads to stability since the supply of the currency grows at a constantly diminishing rate. Here’s how that works. Like gold, bitcoins are mined. To access new coins, computers across the Bitcoin network pool their processing powers to solve complex algorithmic problems. That makes bitcoins unique. They’re the only good that is defined by absolute scarcity. The upshot is that bitcoin can never be devalued by manipulating the supply, making it a perfect store of value.
8. Bitcoin is unique in its security
That’s because of the Bitcoin ledger, which uses an innovative technology called the public blockchain. When mining computers crack an algorithmic puzzle, they create a block. This is essentially a record of all recent transactions and mining activity. Each block is added to a chain of older blocks, creating the Bitcoin blockchain. This ledger contains every last detail about every blockchain transaction ever completed.
9. Bitcoin could emerge as a new standard, though it faces challenges
When bitcoins were first used to complete a transaction in May 2010, an individual coin was valued at $0.000994 US dollars. Fast forward to October 2017 and that had risen to $4,200, an increase of 422,520,000 percent. And that’s just long-term volatility.
That brings us to the second challenge facing Bitcoin. If the currency is to become a new standard, it needs to grow, but growth, even for Bitcoin, would eventually depend on an increasing reliance on large, centralized institutions. That’s an issue when a currency is designed to give people an exchange system that doesn’t rely on government-approved third parties like banks.
One of the highlight from the book about Bitcoin,
“Bitcoin’s advantage is that by bringing the finality of cash settlement to the digital world, it has created the fastest method for final settlement of large payments across long distances and national borders”
IMF and Bitcoin
What exactly is the potential of crypto-assets? Whether its value goes up or goes down.
Even-handed approach
Before crypto-assets can transform financial activity in a meaningful and lasting way, they must earn the confidence and support of consumers and authorities. An important initial step will be to reach a consensus within the global regulatory community on the role crypto-assets should play.
Fast
- In developing economies, such advances can help secure property rights, increase market confidence and promote investment
- The underlying technology of crypto-assets — distributed ledger technology, or DLT — could help financial markets function more efficiently.
- Crypto-assets enable fast and inexpensive financial transactions, while offering some of the convenience of cash.
- Secure storage of important records is another promising use for DLT.
Better Balance
In my view, the fintech revolution will not eliminate the need for trusted intermediaries, such as brokers and bankers.Moreover, banks and other financial institutions will face challenges to their business models, should there be a large-scale shift away from government-issued currencies toward crypto-assets.
DNS, ICANN, and Seven Keys
What is DNS?
DNS stands for Domain Name System. The main function of DNS is to translate domain names into IP Addresses, which computers can understand. It also provides a list of mail servers which accept Emails for each domain name.
For example, in Bitcoin the DNS seed nodes only give you a list of IP addresses that are running (or were recently running) a Bitcoin client. In the source code you can see that the DNS seed nodes are contacted only to get a list of addresses.
DNS at its highest levels is secured by a handful of people around the world, known crypto officers.
There are seven physical keys, held by individuals across the world, that keep the internet glued together. They look after the system at the heart of the web: the domain name system, or DNS. It is run by US-based non-profit organisation Internet Corporation for Assigned Names and Numbers, or Icann.
The weight of the world-wide-web , rests on the shoulders of seven different people, with seven different keys. It all comes down to how the internet was built specifically, the Internet’s domain name system.
If someone were to gain control of ICANN’s database, that person would pretty much control the internet. For instance, the person could send people to fake bank websites instead of real bank websites.
To protect DNS, ICANN came up with a way of securing it without entrusting too much control to any one person. It selected seven people as key holders and gave each one an actual key to the internet.
It selected seven more people as backup key holders — 14 people in all. The ceremony requires at least three of them, and their keys, attend, because three keys are needed to unlock the equipment that protects DNS.
The physical keys unlock safe deposit boxes. Inside those boxes are smart key cards. It takes multiple keys to gain access to the device that generates the internet’s master key.
That master key is really some computer code known as a root key-signing key. It is a password of sorts that can access the master ICANN database. This key generates more keys that trickle down to protect various bits and pieces of the internet, in various places, used by different internet security organizations.
Sun Zhengyi
CEO Sun Zhengyi clearly admitted in the 2019–2020 interim financial report analysis meeting: He has made a mistake in his investment judgment on WeWork and is reflecting on it.
He seems to have lost to his disciple Neumann, Neumann who seems crazier than Sun Zhengyi succeeded in retiring, while Sun Zhengyi became the hero to become the “receiver”.
Softbank and the Vision Fund already own as much as 80% of WeWork. Of course, SoftBank CEO Sun Zhengyi is helpless and at the same time made a wise choice to take over WeWork.
As Sun Zhengyi said, although he is deeply regretful, his strategy and vision have not changed. If SoftBank fails to come up with an appropriate rescue plan in a critical moment, it will cause panic for the owners and tenants, and the cash flow will be fry up in 11months.
At that time, if there were delays in the payment of employee salaries, property rents and supplier payments, and the brand reputation established for many years fell to a negative value, then any visionaries would become a bubble.
With pioneers exploring the way, more companies and individuals have realized the potential market of co-working space concept. Various types of shared office brands is also springing up, and a hundred flowers have blossomed and a hundred schools of thought contend.
This is enough to prove that Neumann and Sun Zhengyi’s judgment on the trend of the co-working space offices market is not only correct, but also possess far insights.
Crony Capitalism
The premise of cryptocurrencies is that they don’t require a central banking system or government guarantees or large piles of gold in order to function as a unit of exchange. Instead, they depend on a public ledger system, usually one that works as a “blockchain.”
A few times an hour, everyone who has a new currency transaction to report sends out an announcement on the network of fellow traders. The new announcements all get bundled up into a “block” and everyone competes to see who can authenticate it the fastest.
Big groups of traders band together to authenticate the new transactions, and once a new block is authenticated it is attached permanently to the growing chain of blocks stretching all the way back to the launch of the currency.
The whole purpose of the blockchain is to provide a transparent, write-once history of every unit of currency — a public ledger that anyone can use to make sure that their money isn’t being stolen or double-spent. All without having to contend with a central financial or governmental authority.
Because nobody controls the blockchain, it is effectively impossible to rewrite without compromising the integrity of the software itself.
But what Ethereum, Bitcoin and other experimental currencies want to prove is that money can become code, defined no longer by its financial value but by a kind of computational value.
The deepest level of validation for BitCoin and Ethereum transactions is not volume or exchange rates but the processor cycles required to compute the next bit of the blockchain.
Software underwrites the financial transaction: the blockchain itself puts a computational layer underneath the idea of exchange-value. Bitcoin, Ethereum and many other digital currencies are “programmable money.”
This matters because the more we value things according to processor cycles instead of exchange value (or the price something can be sold for), the more we are committing to a future dictated by the logic of machines.
