Blockchain Revolution: from the internet of information to the internet of value

[Shyheels]

Who is Fundstrat?

[kneehighs]

"Fundstrat Global Advisors is an independent research boutique, serving a broad array of clients, including institutional investors, wealth advisors, pension funds and high net worth individuals."

http://www.fundstrat.com/wp-content/uploads/2017/06/Research_Capabilities_052317.pdf

[kneehighs]

Two regulatory leaders from the world's number one economy came out with very bullish blockchain/crypto news this last week.  

The  United Nations held a Blockchain For Impact Summit at the United Nations Plaza.

SEC Chairman Jay Clayton to the UN: blockchain technology holds “incredible promise” and Bitcoin will “replace the Dollar, the Yen, the Euro.”

CFTC (Commodities and Futures Trading Commission) Commissioner Rostin Benham, “We are witnessing a technological revolution. Perhaps we are witnessing a modern miracle.”

Zoom out to 2023 past the current bear trend and those who invested now wisely will reap the rewards, no doubt.

As Baron Rothschild said, "Buy when there's blood in the streets."  I'm dollar cost averaging accumulating across multiple positions--steadily and progressively.

The retail bubble may have just burst this last winter.  Wait till the next bubble with institutional money bursts.  I'll be selling in the next institutionally backed bull run highs, no doubt.  

Edited June 10, 2018 by kneehighs

[Shyheels]

Not such rosy news today though

http://money.cnn.com/2018/06/11/investing/coinrail-hack-bitcoin-exchange/index.html

 

 

[kneehighs]

That was bad news indeed.  It did send Bitcoin prices down, which carried with it the rest of the crypto market.

For those with a "zoom out to 2023" investment strategy, it's good news.  Just Dollar Cost Average and accumulate during this bear market.

For those who trade and can supposedly time the market, the simplest  "predictable"  thing I've noticed is Bitcoin prices tend to drop close to when Futures Contracts expire.  Price usually picks up thereafter.   

[Shyheels]

Another crypto robbery - for a bit over $30 million this time

https://www.bbc.com/news/technology-44547250

I realise traditional banks get robbed, but a $30 million robbery from a traditional bank would be one of those Oceans 11 crime-of-the-century type things. With crypto robberies that size or larger have become practically weekly events.  

[kneehighs]

Private users can keep their individual positions in cold storage USB drives such as:

https://www.ledgerwallet.com/products/compare (Ledger Nano)

https://trezor.io (Trezor Model T)

Best to keep crypto on exchanges when making trades. 

[Gudulitooo]

At least crypto is worth being robbed.

A good selling point.

[Shyheels]

Ever the optimist... 

Edited June 22, 2018 by Shyheels

[kneehighs]

Anyone here who thinks it’s too late to get into crypto to make parabolic gains needs to read this:

https://bonnerandpartners.com/what-a-nasdaq-vp-told-me-about-the-future-of-cryptocurrencies/#.WzlOcRKnNvg.reddit

Wall Street is planning on tokenizing the entire traditional investment industry.  When this happens, the world will change.  Instead of having to buy a whole Berkshire Hathaway stock, one will be able to buy a fractionalized amount. And Institutions will likely use bitcoin, ethereum, and maybe VET/THOR (who knows) to gateway in.   

And Security Token Offerings will greatly reduce fundraising costs as contrasted to traditional IPO costs.  Buckle up folks and DCA your way in.

In the meantime I’m 80% sure the current protracted bear market will end around August.  

 

 

Edited July 2, 2018 by kneehighs

[Shyheels]

I don’t think Warren Buffett is going to be wading in wholeheartedly - at least not as far as crypto goes, given his colourful descriptions of the value of crypto currencies.

[Shyheels]

This news story in the Melbourne Age this morning seems rather less sanguine about the prospects of crypto. 

https://www.theage.com.au/business/markets/bitcoin-bloodbath-nears-historic-levels-20180702-p4zox4.html

[kneehighs]

10 hours ago, Shyheels said:

I don’t think Warren Buffett is going to be wading in wholeheartedly - at least not as far as crypto goes, given his colourful descriptions of the value of crypto currencies.

Can't argue with you that Buffett might not be a fan.  Doesn't mean it won't happen.

9 hours ago, Shyheels said:

This news story in the Melbourne Age this morning seems rather less sanguine about the prospects of crypto. 

https://www.theage.com.au/business/markets/bitcoin-bloodbath-nears-historic-levels-20180702-p4zox4.html

At this stage in it's technology maturation cycle, Bitcoin/crypto is a series of bubbles.  It's gone from $30 to $3 and from $1000 to $250.  It's just a cycle that repeats itself.   When there is a bear market, major technological advances occur.  Volume is low, so there is time to build scale, security, and growth properties.

Ultimately, the value of crypto is what I believe in, not just the price rises.  This value comes from 2 points:

1.  In traditional banking, growth in the economy revolves around debt, which reduces fiat purchasing power over time.  You put your money in a bank.  Then the bank legally owns it.  Then the bank loans it out.  And multiple derivatives of property loans on the initial loan are created.  This created the crash of 2008.  In this model, growth revolves around a deflationary currency.  So spending more now actually makes sense.  With crypto, banking is based on savings of a deflationary currency which increases purchasing power over time.

2.  In traditional banking, the bank can censor your transactions based on politics.  My funds get frozen any time I travel, unless I notify the bank in advance.  With crypto, decentralized ledgers and currency creates censorship resistant control over with whom, when and where I choose to exchange monetary value.

As for me, I will continue to spend less than I earn and invest the difference.  

EDIT: Institutional Custody Solutions for crypto now available on Coinbase!!  This breakthrough is significant because it will allow institutional money to flow into crypto within legal regulatory framework of the SEC and FINRA.

https://blog.coinbase.com/coinbase-custody-is-officially-open-for-business-182c297d65d9

 

 

Edited July 2, 2018 by kneehighs

[Shyheels]

Buffett is not known as the Sage of Omaha for noth8ng. The man has made billions through canny investing and has a long and enviable record in spotting winners. When a man like that has such a profoundly negative view of something, crypto currencies in this case, it seems wise to listen.

[kneehighs]

23 minutes ago, Shyheels said:

Buffett is not known as the Sage of Omaha for noth8ng. The man has made billions through canny investing and has a long and enviable record in spotting winners. When a man like that has such a profoundly negative view of something, crypto currencies in this case, it seems wise to listen.

First off, 

You conveniently ignore my 2 point value propositions for Crypto.  As well you ignore the fact that today, Coinbase launched crypto for institutions, compliant with SEC and FINRA.

Second off, regarding Buffet:

Buffet came out and said "I woudn't invest in it because I don't understand it".

That is sound investment advice.  

Buffet is generally not tech savvy and heavily invested in banks too.

 

[Shyheels]

Actually he described Bitcoin as a breeding ground for Charletans, while his business partner Charlie Munger described trading in crypto as like “trading turds” - utterly valueless - and a kind of mass dementia.

Buffett may have missed out on Amazon and Google, but he also missed out on being burned in the dot com bubble a few years back.

As to the ability to spend crypto as opposed to spending regular money with the possibility that someone at a bank might freeze your funds - one cannot make an instant transaction with crypto as you can with cash money or a credit card. There is a lag in buying or selling crypto and given the extreme volatility of it, that lag could burn either party. I do not see any advantage in that.

Edited July 2, 2018 by Shyheels

[kneehighs]

Again, you conveniently ignored my first point about the risks involved with traditional fiat banking. 

Regarding Buffet, who cares?  You are debating on appeal to authority as opposed to acknowledging the weaknesses inherent in the flawed fiat banking system.  My arguments stand by virtue of being  conveniently overlooked. 

Just to entertain the moment, Buffet doesn't even use email.  He has only sent one email in his life.  You think he understands crypto?  Probably not. 

Might freeze your funds?  I had a transaction recently on my Citi card.  Citi froze my debit card for the entire weekend.  This also conveniently froze access to my online account.  When I asked  Citi who was the  merchant I conducted business with (to avoid repeating the error) they said it was confidential.  Yeah, okay.  I also got my funds frozen when on a trip in Copenhagen.  Bitcoin may yet need work to become a viable medium of exchange,  but that doesn't mean it won't happen for crypto.  Further, some cryptos are pegged to the dollar.  Some networks like VET/THOR create dual token economies.  The underlying asset is subject to volatility.  The second token is a "stable coin". 

 

 

 

 

[Shyheels]

As to worrying about fiat currencies and traditional banks - it seems to me to be worrying about, and devising extraordinarily complex solutions for, problems that have never cropped up in my life and don’t seem terribly likely to. Sure, security protocols can cause a credit card to be blocked when you’re using them in a foreign country or far from home (although that’s not happened to me) but to me these occasional inconveniences do not really merit this sort of extravagant responseshich seems to bring with it a whole host of complications and risks. 

Warren Buffett didn’t make his billions by being timorous or a fool. He seems a very down to earth man, and one worth listening to. There is a reason his old bridge playing partners are all millionaires...

[kneehighs]

Let's go back to the flawed fiat banking system.  And for this particular moment in time, Venezuela.   If you want to send dollars to Venezuela,  good luck.  It'll be "censored".  But with crypto, you have "censorship resistant" money.  So governments can't intercept transactions.  And it's working. 

I'm on reddit, and there's nothing so moving as interacting with a father of a family fighting to keep food on the table.   Wife and kids going hungry.  Local grocery stores not even carrying normal goods.  Black market sales.  When the rest of his local community is in shambles,  it's quite inspiring to see this man able to make ends meet though the use of crypto (nano and ethereum).  He makes ends meet not only for himself, but he shares with locals too.  The support from the reddit crypto community is incredible. 

I couldn't be more proud to be associated with a community of forward thinkers and early adopters in crypto. 

[Shyheels]

Indeed a borderless internet and economy can certainly work wonders in those situations. 

[kneehighs]

Looks like Turkey might be needing some monetary reform too.  Inflation rates are expected to All Time Highs in the near future.

Regardless, if anyone here wishes they could've bought in on the last bull run of crypto, we've probably hit bottom now.  There was a major Short Squeeze on bitcoin today.   This means, buy orders (which limit short losses), were automatically triggered.   

Consider that this time around, the infrastructure for institutional money to enter the space has been built during the bear season.  Why is institutional money significant?  First, all previous bull runs have been driven by retail investors.  Second, institutional money accounts for 60-70% of volume/price action in traditional markets.  This next bull run, crypto could hit a market cap of 5 Trillion dollars.  Coinbase has solved custodianship problems with the SEC/FINRA, the CBOE which has proper insurance and infrastructure applied for a Bitcoin ETF, and South Korea even legally recognizes exchanges as banks.  These gateways for institutions didn't exist at market peak last December 2017.  The market was worth about 900 Billion then.

Why is crypto/bitcoin valuable to institutions?  Because crypto re-establishes the property rights  to assets.  When you put money in a retail brokerage account, you don't really own the property rights to the asset.  The brokerage owns the asset.  The brokerage gives you an IOU.  So you own an IOU.  (Same holds true for banks.  Property Rights to the assets belong to retail banks.  Retail banks loan out the assets for mortgages.  And we know from 2008-9 what happens there).  The Depository Trust and Clearing Corporation owns the stocks.   

Anyway, the problem with The Dole Food Case from 2017 easily illustrates the property rights problem.  36.7 Million shares outstanding.  49.2 Million applications with valid brokerage statements for those shares.  The Wall Street accounting system failed at a rate of 12.5M phantom shares.  As there exists fractional reserving in banking, so the Dole case illustrates fractional reserving in securities.  As in the housing crisis banks were loaning out money they didn't have, securities are also being lent out by brokerages which don't actually own the property rights to the asset.

How many times has one institution who owns the true property rights to a Treasury Bond loaned it to another institution who claims they own the property rights, who then loans it out to another institution who also claims they own the property rights to the T Bond?  This is how the Fed is conducting securities policy in 2018.  For every 1 Treasury Bond that actually exists, there are 3 T Bonds reported.  Phantom assets that don't exist are being created.  

No one really knows how leveraged the securities industry is. 

In the same way bitcoin/crypto solves fractional reserve risks in retail banking, crypto solves the same for securities.

Distributed ledgers remove single points of vulnerability (which increases security), immutable ledgers make cooking the books impossible , traceable ledgers make searching transactions transparent, and peer-to-peer nature improves the speed of settlement process.  Ultimately, who owns the Property Rights to an asset is clarified through crypto.

There  is still time to get profitable entry points for this next bubble bull run.  

 

 

[Shyheels]

There are also a lot of good solid blue chip stocks around, and property is a safe bet - it’s real and they ain’t making any more of it.

[SF]

Vanguard Total Stock Market Fund - That's my game.....

[Shyheels]

Or go to Vegas, put it all on red, and let ‘er rip!

[kneehighs]

51 minutes ago, Shyheels said:

There are also a lot of good solid blue chip stocks around, and property is a safe bet - it’s real and they ain’t making any more of it.

What imaginary world do you live in where Blue Chip stocks don't issue more shares???  And what other imaginary world do you live in where they aren't making more property (real estate)?

I think my point was missed, lol.  Not my job to convince you though.  

48 minutes ago, SF said:

Vanguard Total Stock Market Fund - That's my game.....

That's cool.  It probably suits your personal risk to reward ratios right.  Wouldn't suprise me if sooner or later Vanguard ETF starts adding bitcoin ETF to diversify risk with an uncorrelated asset of bitcoin though.  

 

Edited July 18, 2018 by kneehighs

[Shyheels]

What imaginary world do you live in? Other than in Iceland, where volcanoes produce the occasional new island, or China where the military builts islands in the shallows of the South China Sea, I am hard pressed to think of anyplace where land is being produced - buildings, sure, but land? That’s what I mean by property. 

And I never suggested that blue chip companies don’t issue more stock. My reference to limited supply was purely, and directly, to property - land.

Edited July 18, 2018 by Shyheels

[Gudulitooo]

5 hours ago, kneehighs said:

the problem with The Dole Food Case from 2017 easily illustrates the property rights problem

To me the problem in the financial system is that too many possibilities are allowed. Period.

E.g. the fact that the authority entity decides to close its eyes for 3 days, entirely relying on the participants.

It is like the police decided to stop registering conflicts 3 days before the elections, or the worl cup soccer final, or whatever event, and left the individual kill themselves freely during this period, and let them do the justice themselves.

I mean, either they allow the activity and keep watching, or they stop controlling, but also freeze all activity.

The article below explained it the best to me. https://www.bloomberg.com/view/articles/2017-02-17/dole-food-had-too-many-shares

 

[kneehighs]

For those that are still following Bitcoin and crypto,  billionaire Mike Novogratz just called the market bottom.  It's a good time to Dollar Cost Average in by laddering out your Buy Limit orders on Bitcoin.

 

For what it's worth, I'm still skeptical with my crypto portfolio: about 60% BTC, 40% cash.  Its safer to remain liquid than call the market reversal too early.  Past BTC bear markets retraced around 80%.  This would take current BTC prices to around the 4K range.  IMHO, it's the Composite Operator engineering another capitulation after letting BTC run again.  (sorry for the financial techno jargon.  It's the only way I know how to talk).

There's so much good news right now.  ICE, the parent company of the New York Stock Exchange created BAKKT, which is to go active this November.   It's a Bitcoin exchange for all the Institutional Clients that the New York Stock Exchange serves.  Goldman Sachs is perfecting their custody storage systems, CoinBase.com has custody solved for institutions with more than 150M in crypto,  blah blah.

 

[kikepa]

I've worked with blockchain and dozens of other means of encrypting and authenticating information and transactions.  With all due respect to Marc Andreessen, who is quite adept at programming in communication environments while maintaining information integrity, he is nevertheless not an expert on information and transaction security. 

For example, "Andreessen is a proponent of Bitcoin and cryptocurrency^[ and has described the technology as "innovative and radical"."

I do not agree.  

Wikipedia states the issue clearly:  "Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been claimed with a blockchain."

The key here is the term "resistant."  Blockchain requires a lot of computing power to verify each transaction.  But that doesn't make it hack-proof, and the computing power required is a serious if not severe impediment to its use in commercial endeavors, particularly when infinitely less power-hungry means of providing both information and transaction security are available.  In fact, there are a number of hacks out there right now.

The most widely known such method uses TLS (transport layer security) by employing third-party certificate authorities whose number and credentials are tightly controlled.  You experience this every time you visit a website beginning with https, including hhplace and your bank.  Although some people claim "TLS can be hacked," the reality is that it securely handles billions of dollars of transactions each day.  See the comment here for TLS 1.2 details.  While TLS provides browser to server security, however, you're trusting your bank, Amazon, and others to perform transactions properly.  Nothing beats a printed statement and meticulous check/transaction records.  I stopped using credit cards altogether because there's no third-party verification of the bank's records except my own records.  I use a debt card and manually transfer funds as required.  But I haven't trusted any financial institution with any line of credit since 2011, when my credit card account at my now former bank jumped from a balance of $0 to more than $3,500 in three days and my bank refused to acknowledge the security breach, much less return my illegally obtained i.e. stolen funds.  Throughout the lawsuit, the bank routinely sent bad credit information to the credit bureaus.  I won the lawsuit in 2013 and they returned the funds, but they refused to lift a finger to help me repair my credit.  That took another four years.

So you see, in addition to my background in information/computer/networking security, I have just a *bit* of a personal perspective.  

Back to transactional security...  

Providing security for transactions, financial or otherwise, requires both parties have access to a second and secure avenue of communication, and for really important transactions, a third means, as well.  It also requires the ability to record and store all steps of the transaction with a trusted third party, one beyond influence by either party.

Consider the following hypothetical:

You're buying a used car.  Eight months ago you signed up with Consortium IV, a fictional third-party transaction security group comprised of 56 members.  Your bank also uses Consortium IV, but the seller and his bank use e-Verify IX, another fictional third-party transaction security group.

After all the legal paperwork is done, you need to pay for the car.  The seller posts the car for sale on Amazon but with a private buyer, you, as identified by your Amazon username.  You log in, verify the VIN matches the one on the car and the paperwork, as well as the negotiated sales price.  You hit buy, then confirm.  

Because the price of $15,000 is more than the maximum $2,000 limit you set months ago, the system kicks it over to Consortium IV for authentication/verification/validation.  You receive an e-mail, click the link, and type in the 12-digit alphanumeric code that was sent in a second e-mail.  

But you're REALLY careful, so you signed up for additional authentication on any purchases over $5,000...  You receive a phone call and the robocaller describes the item and the price, then asks you to press 1 to confirm the transaction and 9 to cancel it.  You press 1 and the transaction is primed to go.

Meanwhile, the seller goes through the same process through his e-Verify IX, and when he completes his phone call, his side of the transaction is primed, as well.

Since both e-Verify IX and Consortium IV are members of a larger, world-wide group of such services, they "trust" each other, but no further than they can spit.  Since both sides have provided the necessary information and multiple confirmations of the order, it goes through.  Both companies record the transaction, to which both parties have access and to both companies, but the transaction is encrypted and also stored with all companies party to this group for "distributed safe-keeping."  Only the two parties and their respective companies can unlock the encrypted copy, which is kept on everyone's servers, along with various transaction verification codes.

This sounds like a long process, but both users completed it in less than 60 seconds and the computers involved completed it in a microsecond, using less than one-millionth the electrical power of blockchain, which is WHY blockchain will never become any sort of widespread hit in the corporate world.

It's the same concept -- decentralized consensus -- with the same if not greater security, but without all the hype.

[Bubba136]

Wow, that’s saying a lot!