Category Archives: Bitcoin

Bitcoin's origin, early growth, and evolution

Bitcoin is based on the ideas laid out in a 2008 whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System.

The paper detailed methods for "allowing any two willing parties to transact directly with each other without the need for a trusted third party." The technologies deployed solved the 'double spend' problem, enabling scarcity in the digital environment for the first time.

The listed author of the paper is Satoshi Nakamoto, a presumed pseudonym for a person or group whose true identity remains a mystery. Nakamoto released the first open-source Bitcoin software client on January 9th, 2009, and anyone who installed the client could begin using Bitcoin.

Initial growth of the Bitcoin network was driven primarily by its utility as a novel method for transacting value in the digital world. Early proponents were, by and large, 'cypherpunks' - individuals who advocated the use of strong cryptography and privacy-enhancing technologies as a route to social and political change. However, speculation as to the future value of Bitcoin soon became a significant driver of adoption.

The price of bitcoin and the number of Bitcoin users rose in waves over the following decade. As regulators in major economies provided clarity on the legality of Bitcoin and other cryptocurrencies, a large number of Bitcoin exchanges established banking connections, making it easy to convert local currency to and from bitcoin. Other businesses established robust custodial services, making it easier for institutional investors to gain exposure to the asset as a growing number of high-profile investors signaled their interest.

At its most basic level, Bitcoin is useful for transacting value outside of the traditional financial system. People use Bitcoin to, for example, make international payments that are settled faster, more securely, and at lower transactional fees than through legacy settlement methods such as the SWIFT or ACH networks.

In the early years, when network adoption was sparse, Bitcoin could be used to settle even small-value transactions, and do so competitively with payment networks like Visa and Mastercard (which, in fact, settle transactions long after point of sale). However, as Bitcoin became more widely used, scaling issues made it less competitive as a medium of exchange for small-value items. In short, it became prohibitively expensive to settle small-value transactions due to limited throughput on the ledger and the lack of availability of second-layer solutions. This supported the narrative that Bitcoin's primary value is less as a payment network and more as an alternative to gold, or 'digital gold.' Here, the argument is that Bitcoin derives value from a combination of the technological breakthroughs it integrates, its capped supply with 'built-into-the-code' monetary policy, and its powerful network effects. In this regard, the investment thesis is that Bitcoin could replace gold and potentially become a form of 'pristine collateral' for the global economy.

Another popular narrative is that Bitcoin supports economic freedom. It is said to do this by providing, on an opt-in basis, an alternative form of money that integrates strong protection against (1) monetary confiscation, (2) censorship, and (3) devaluation through uncapped inflation. Note that this narrative is not mutually exclusive from the 'digital gold' narrative.

Read more: How does governance work in Bitcoin?

Read more: What is Bitcoin mining?

Bitcoin is not a static protocol. It can and has integrated changes throughout its lifetime, and it will continue to evolve. While there are a number of formalized procedures for upgrading Bitcoin (see "How does Bitcoin governance work?"), governance of the protocol is ultimately based on deliberation, persuasion, and volition. In other words, people decide what Bitcoin is.

In several instances, there have been significant disagreements amongst the community as to the direction that Bitcoin should take. When such disagreements cannot be resolved through deliberation and persuasion, a portion of users may - of their own volition - choose to acknowledge a different version of Bitcoin.

The alternative version of Bitcoin with the greatest number of adherents has come to be known as Bitcoin Cash (BCH). It arose out of a proposal aiming to solve scaling problems that had resulted in rising transaction costs and increasing transaction confirmation times. This version of Bitcoin began on August 1st, 2017.

Read more: What is Bitcoin Cash?

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What is Bitcoin? | How Do Bitcoin and Crypto Work? | Get ...

Bitcoin (BTC) may be flagging below $50,000, but its bull market is actually three years old this month.

Data from Cointelegraph Markets Pro and TradingViewconfirms that Bitcoin bulls have at least something to celebrate as 2021 draws to a close.

Despite disappointing when it comes to end-of-year price expectations, BTC/USD remains an order of magnitude higher than where it was even 18 months ago.

March 2020 marked a brief return to near-cycle lows in what had otherwise been a solid bull market ever since December 2018. At that time, Bitcoin capitulated to lows of $3,100 a level that was never seen, and likely never will be seen again.

It was Dec. 15, 2018, when Bitcoin ended an entire year of retracement from all-time highs of near $20,000. Compared to this years $69,000 peak, BTC investors have thus had exposure to as much as 2,125% gains.

Consolidation lasted for several months afterward, with April 2019 being the watershed moment as the market climbed toward the years high of $13,800.

The anniversary of peak bear is timely, coming as analysts weigh the chances of consolidation and a slow grind upwardcharacterizing the end of this year and the beginning of the next.

Welcome to the chop season, Cointelegraph contributor Michal van de Poppe summarized.

As Cointelegraph reported, Sept. 15 formed another birthday for Bitcoin in the form of it spending an entire year above $10,000.

While a return even to $20,000 is not in the cards for the majority of market participants, analysts are not discounting the idea that Bitcoin will dip considerably again in the short term.

Related:Analyst lists 21 factors calling for Bitcoin price upside But just 4 bearish signals

For popular trader Pentoshi, this could take the form of another leverage cascade to flush excessive speculation from the market.

Major support levels revolve around $40,000, a breach of which would put BTC/USD on course to challenge its dip from after Mays miner rout.

Conversely, a max pain scenario would in fact be a run higher toward $60,000, fellow trader Filbfilb arguedthis week.

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Happy bearday, Bitcoin: Its been 3 years since BTC bottomed at $3.1K - Cointelegraph

Though it briefly popped above $50,000 on Sunday, the price of bitcoin retreated at the start of the week.

The largest cryptocurrency by market value is trading at around $47,358 as of Monday afternoon, according to Coin Metrics.

Other top cryptocurrencies are also down, including ether, the second-largest cryptocurrency. Ether is currently trading at around $3,813.

Along with price movement, here are five important things that happened in the cryptocurrency space last week.

On Wednesday, crypto industry executives testified before the House Financial Services Committee.

The hearing was called by committee leader Rep. Maxine Waters, D-Calif., in an effort to understand crypto assets better and discuss potential regulation.

"Because of their nascent stage of development and unique underlying technology, digital assets trade in markets that are fundamentally different from traditional financial markets," Alesia Haas, Coinbase chief financial officer, said in her testimony. "As a result, existing regulatory regimes often do not accommodate this new technology."

The discussion was overall positive, rather than contentious, Jeremy Allaire, chief executive officer of Circle, the issuer of the stablecoin USDC, said after the hearing.

Also on Wednesday, Kickstarter announced plans to create a decentralized version of its crowdfunding platform.

"We're supporting the development of an open source protocol that will essentially create a decentralized version of Kickstarter's core functionality," the company wrote in a blog post. "This will live on a public blockchain, and be available for collaborators, independent contributors, and even Kickstarter competitors, from all over the world to build upon, connect to, or use."

The new protocol does not yet have a name, but Kickstarter plans to move its site onto the protocol in 2022,Bloomberg reported.

Developers activated Arrow Glacier, an upgrade to theEthereumnetwork,on Thursday.

The upgrade pushed back the so-called "difficulty bomb," which could potentially slow or freeze mining on Ethereum, back to June 2022. By that time, developers hope to have transitioned Ethereum from a proof-of-work model for mining to a proof-of-stake model.

Developers plan to introduce the "bomb" to motivate the transition to proof-of-stake, since it will make proof-of-work mining significantly more difficult.

Delaying the "bomb" gave developers more time to work on Ethereum 2.0, or Eth2, before the shift.

To learn more about Eth2, read here.

TheConstitutionDAOannounced in November that it would shut down afterbeing outbid for a rare copy of the U.S. Constitution during a Sotheby's auction. But the DAO's token, called PEOPLE, continues to surge.

PEOPLE hit an all-time high of 17 cents on Sunday, according to Coin Gecko. It's up over 152% in the last seven days.

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90% of bitcoin's supply has been mined and 4 other crypto updates you should know - CNBC

China makes all crypto currency transactions illegal after ordering shut down of Bitcoin mining in Sichuan province, leading to crypto market prices dropping

Cryptocurrency market is down 3.42% on the last 24 hours (9.50am, Friday 17 December).

After a year of gains and record highs, crypto currencies are enduring a turbulent time with unpredictable price changes.

Bitcoin and other leading crypto coins experienced a significant drop in share price after investors began dumping mining equipment as China announced fresh regulations.

It follows recent crashes brought on by Tesla making a u-turn on accepting Bitcoin as payment for its products and China clamping down on initial coin offerings, block exchanges and warned against speculative trading.

A further blow was dealt when China ordered Bitcoin mining in its Sichuan province to shut down completely and furthermore told banks to stop supporting crypto transactions, in a latest wave of restrictions on cryptos.

Now the countrys central bank, Peoples Bank of China, has effectively banned digital coins after announcing all transactions of cryptocurrencies are illegal.

The decision has already had an impact on the global crypto market.

Why is the crypto market down?

Chinas crackdown on cryptos comes days after Musks shock announcement.

Musks decision signifies a sharp u-turn for Tesla who only started accepting Bitcoin as payment for its services in February 2021.

It came after the electric car company bought $1.5b (1.06b) of Bitcoin shares, which in turn sent the market price of both the crypto and Tesla soaring.

The billionaire entrepreneur said: We are concerned about rapidly increasing use of fossil fuel for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.

Musk reaffirmed his belief that cryptocurrency has a promising future but that it cannot come at great cost to the environment, in his Twitter post.

Musk has been a long-time advocate of cryptocurrencies and the Tesla decision was felt across the market, with other digital tokens going down in price.

What is the price of Bitcoin and Ethereum?

The price of Bitcoin was 35,440.35 after the latest drop in prices (14 December), according to Coinbase.

Ethereums value is now 2,914.50.

Cryptocurrencies are seen as an alternative to traditional banking methods, cheaper to move money around due to not being regulated by the government or its banks.

The decision by Tesla, and announced by Musk, was seen by some as a slight on the credibility of cryptos to become a viable method of payment against physical currencies.

Which crypto prices are down?

Bitcoin wasnt the only cryptocurrency to feel the initial effects, with most of the top 10 all experiencing dips in value.

Dogecoin, which was initially set up as a joke in 2012 before seeing its shares skyrocket, has also dropped while Solana has seen its market price rise by more than 8%.

Musks influence cannot be underestimated as, even though the likes of PayPal, Mastercard and Facebook have backed cryptos, the Tesla announcement still rocked the market.

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This is what sparked the crypto market crash - prices of Bitcoin, Ethereum, Shiba Inu - NationalWorld

Billionaire investor Ray Dalio is impressed with bitcoin, the largest cryptocurrency by market value, and its blockchain.

"It has been an amazing accomplishment for bitcoin to have achieved what it has done, from writing that program, not being hacked, having it work and having it adopted the way it has been," Dalio, founder of the world's largest hedge fund, Bridgewater Associates, told MarketWatch on Wednesday.

"I believe in the blockchain technology. There's going to be that revolution, so it hasearned credibility."

Dalio reconfirmed that he owns "a little bit" of bitcoin, calling it "almost a younger generation's alternative to gold," he said. "Bitcoin is like gold, though gold is the well established blue-chip alternative to fiat money."

Similarly, bitcoin supporters see the asset as a digital gold, a store of value and a hedge against inflation.

"It has no intrinsic value, but it has imputed value, and it has therefore some merit," Dalio said.

By design, there is alimited supply of bitcoin. This scarcity iscentral to whybitcoin bulls argue for holding the cryptocurrency long-term as demand increases and supply declines, its value could theoretically appreciate.

However, Dalio continues to be concerned about the possibility of governments outlawing it.

"Bitcoin has a number of other issues. If itis a threat to governments, it will probably be outlawed in some placeswhen it becomes relatively attractive," he said. "It may not be outlawed in all places. I don't believe that central banks or major institutions will have a significant amount in it."

But, experts say it'd be quite difficult for a government to effectively ban bitcoin.

"I don't think even a concerted effort among different countries and different central banks could actually shut down bitcoin," James Ledbetter, editor of fintech newsletter FIN and a CNBC contributor, previously toldCNBC Make It. "I don't think that's technologically possible. But there are ways that bitcoin could be regulated."

Nonetheless, "I'm not an expert on bitcoin," Dalio told MarketWatch,"but I think it has some merit as a small portion of a portfolio."

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Don't miss: Billionaire Ray Dalio says he owns bitcoin, and its 'greatest risk is its success'

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Billionaire Ray Dalio: Bitcoin is like 'a younger generations alternative to gold' and has 'merit' - CNBC

On December 13, cryptocurrency Bitcoin reached 90 per cent of its maximum supply. A research by blockchain.com revealed that of the total supply of 21 million Bitcoins, 18.89 million have already been mined and are circulating in the market. The milestone comes almost 12 years after the first block, which consisted of 50 Bitcoins, was mined on January 9, 2009.

For the uninitiated, Bitcoin is one of the few cryptocurrencies with limited supply. Bitcoin inventor Satoshi Nakamoto capped the number of Bitcoin at 21 million, to make the cryptocurrency scarce and control inflation that might arise from an unlimited supply. Bitcoin is mined by miners who solve mathematical puzzles to verify and validate block of transactions occurring in its network. It is a process of adding new Bitcoins into circulation. After performing a set of transactions successfully, the miner is awarded a block of Bitcoins.

Before examining the implications of Bitcoins 21 million cap, it might be interesting to consider whether it will ever reach that figure.

It should be noted that every four years the reward for mining Bitcoin is halved. So, when Nakamoto created Bitcoin in 2008, the reward for confirming a block of transactions was 50 Bitcoins. In 2012, it was halved to 25 Bitcoins, and it went down to 12.5 in 2016. In May 2020, miners stood to earn 6.25 Bitcoin for every new block, and by the end of 2024 it is expected that miners will only earn 1.56 Bitcoins for verifying a block of transactions. This process is called halving and will continue till the last Bitcoin is mined.

It may seem that the worlds most popular cryptocurrency is close to being exhausted, but Bitcoins halving schedules predict that the remaining 10 percent supply will sustain until February 2140, as per blockchain.com.

Further, the total number of Bitcoins are not available for open market distribution. Chainalysis, an analytics firm, revealed that around 3.7 million Bitcoins have already been lost due to various reasons, including loss of access to ones private key, death and more.

As Bitcoins supply is nearing its limit, here are some notable implications it will have on investors and on the blockchain network.

After reaching 21 million supply in circulation, Bitcoin will become more scarce and miners will be dependent on transaction fees, instead of block rewards. The miners will start earning more out of the transactions that happen on these blockchains than from the mining itself.

It is worth noting that Bitcoin is not just a cryptocurrency, but a blockchain network that processes transactions on a distributed ledger framework. So the technology has far more use cases than just being a crypto asset.

Irrespective of any future efforts to change the underlying Bitcoin technology, experts continue to speculate on the future once the maximum limit is reached. Some analysts claim new technologies will likely help to cut the cost of mining(Bitcoin mining requires high-powered computers that make intensive use of electricity)which will eventually result in more profit for miners.

Others suggest that Bitcoin platforms will only be used for large transactions of very high value, which will offer sufficient revenue to keep stakeholders satisfied.

Currently, the average fee for every Bitcoin transaction is $15 (Rs 1,149 approx). Note that this fee was as low as $1.40 (Rs 106 approx.) last year, meaning that the price can continue to spike in some events like a crypto bust. However, there is no assurance that the cost of the mining process will remain high in the years to come.

Ankur Dubey, principal of investments at Jupiter Capital, toldindianexpress.comthat even after all Bitcoins are mined, crypto miners will still participate in the decentralised blockchain network because of the transaction fee they are making on the transactions. Perhaps, the focus at that point of time, may shift from mining the Bitcoin to facilitating the transaction, but the network as an overall entity will not suffer too much.

Dubey believes there is an inverse relationship between the prices and the total Bitcoin supply. Investors can expect the price to go up, as the supply of Bitcoin willcome down further. So, it is exactly the opposite, when the supply comes down, the prices move up rather than the other way around.

Meanwhile, another expert Hitesh Malviya, founder ofitsblockchain.com, finds It hard to predict how the Bitcoin price will look like after 120 years. He added, price will depend on the future demand, regulations. But one thing is for sure, Bitcoin will become the most scarce asset in the world by then.

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Heres what could happen after Bitcoin runs out of supply - The Indian Express

Dec 13 (Reuters) - As bitcoin, the world's largest cryptocurrency, struggles to recover after a massive crash, regulatory and private sector focus has turned to another part of the digital currency world: stablecoins.

The past week saw Meta Platforms Inc (FB.O) pilot its stablecoin payments wallet, while the world's largest payments processor Visa (V.N)launched a crypto advisory service and said stablecoins, might become the medium of exchange rather than cryptocurrencies.

Stablecoins are a form a virtual currency with values pegged to traditional assets such as the U.S. dollar or commodities, and their rise has accelerated discussion by central banks across the world about digital versions of their currencies.

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Analysts at digital platform Alkemi Network were among those who hailed Visa's move as evidence that the cryptocurrency and decentralised finance ecosystem is moving towards maturity.

"Making a visible attempt to play by traditional finance rules is definitely gathering momentum as a movement within the crypto ecosystem," they wrote.

Japan's financial regulator said last week it will come up with rules in 2022 to restrict the issuance of stablecoins to banks and wire transfer firms.

In the United States, even as top executives from major cryptocurrency companies including Coinbase (COIN.O) and Circle urged Congress to provide clearer bespoke rules for the industry, Treasury Secretary Janet Yellen and a group of bank chief executives discussed the need to regulate stablecoins.

Meta's cryptocurrency wallet, Novi, will allow users to send and receive money through the social media giant's messaging app WhatsApp and will use a stablecoin named Pax Dollar .

Research platform Delphi Digital says stablecoins have grown substantially in the past month, with the market capitalisation of the top five stablecoins swelling to nearly $150 billion from $129 billion. Tether, the largest stablecoin, has a market value of $76 billion.

Meanwhile, the central banks of Switzerland and France claimed success in Europe's first cross-border trial of central bank digital currency (CBDC) payments, after testing project Jura, named after the mountains between the two countries.

BARGAIN HUNTERS

With bitcoin capped at $50,000 for most of the week since its flash crash on Dec. 4, the market capitalisation of the 15,541 coins on the CoinMarketCap platform stood at $2.25 trillion compared with $2.6 trillion at the start of December.

Cryptocurrencies have benefited from easier cash conditions even in a higher inflation environment, but it was difficult to say what would happen as the Federal Reserve accelerates monetary tightening or gets ready to lift rates, said Chris Weston, head of research at brokerage Pepperstone in Melbourne.

"I feel like there would be headwinds, but as always with crypto the only thing you can have is an open mind," Weston said.

Bargain hunters have emerged. The number of active bitcoin addresses touched 1 million after the crash, according to a report from Arcane Research, its highest since the cryptocurrency plunged 35% in May.

"Sleeping bitcoin holders seem to have been woken up by the volatility," Arcane analysts said.

A notable dip buyer was Michael Saylor-led MicroStrategy Inc (MSTR.O), which added 1,434 bitcoins to its holdings for about $82.4 million, the company said last week.

Yet the number of bitcoin wallets holding more than 1,000 tokens fell during the week, potentially indicating profit-taking among larger players, Kraken Digital reported.

Cryptocurrencies topped the list of assets expected to experience a correction in 2022, as per a survey of 500 global institutional investors conducted by Natixis Investment Managers.

Another Visa survey showed 40% of global crypto owners would likely or very likely switch their primary bank to one that offers crypto-related products in the next 12 months.

The Natixis survey showed that only 4 in 10 institutions considered crypto a legitimate investment option although, of the 28% already investing in crypto, 90% expect to maintain or increase their allocation in 2022.

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Reporting by Lisa Pauline Mattackal in Bengaluru and Vidya Ranganathan in Singapore; Editing by Alison Williams

Our Standards: The Thomson Reuters Trust Principles.

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Stablecoins steal the limelight from subdued bitcoin - Reuters

Predictions for 2022 are coming in fast.

The chief executive of crypto exchange Krakensays the dollar is going to crash and bitcoin will see its price fall dramatically in 2022.

As part of that tumult, Jesse Powellurged investors this week to prepay healthcare and tuition expenses and take on more U.S. debt.

"Maybe I should stop making predictions. I'm going to say the dollar is going to zero. You should start stocking up on gasoline and milk right now. If you can prepay your healthcare and tuition bills you should probably do that right now," said PowelIin an interview with Bloomberg TV.

The dollar index fell 0.28% on Thursday, while sterling rose 0.40% to $1.3316 and the euro rose 0.19% to $1.1307.

"Take on as much U.S. dollar debt as you can because there will be a jubilee at some point. Interest rates are going negative so don't hold your currency in dollars," Powell added.

"I'm paying more attention to the U.S. dollar these days wondering where the bottom is. Seems like inflation is out of control and there is no end in sight," added Powell.

Powell also says the price of the most traded cryptocurrency, bitcoin, could drop to below $40,000 this winter and urged investors to buy the dip.

"A lot of people see anything anything under $40,000 as a buying opportunity," said Powell.

"Iwas personally buying when we dipped back close to $30,000, a few months ago. A lot of people have some dry powder on the sidelines just waiting to come back in at rock bottom prices," he added.

Bitcoin price is down 0.9% in the last 24 hours, according to CoinGecko, a price-tracking website for crypto assets. The price of bitcoin was trading 2.81% lower at $47,838 on Thursday.

Last month, cryptocurrencies across the board witnessed a wide selloff on with prices of some of the most popular tokens including bitcoin, ethereum, XRP, solana and dogecoin all declining sharply.

Bitcoin prices have taken a dive in recent weeks, falling more than 6% over last week and 26% over the past month.

"Think of bitcoin as a five-year-plus investment, up and down, day-to-day, week-to-week. You don't want to be trading this on short timeframes. It's more of a buy and hold investment," Powell added.

Powell had earlier predicted that bitcoin could touch over $100,000 by late 2021 and early next year.

Bitcoin operator Kraken supports over 90 cryptocurrencies in over 70 assets. Kraken is working on an NFT platform to give investors exposure in this asset as well.

Krakencould go public in 12 to 18 months, Bloomberg reported in June this year.

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Dollar Will Hit Zero With Bitcoin Below $40K In 2022, Crypto CEO Says - TheStreet

The Bank of England has said that bitcoin could be worthless and people investing in the digital currency should be prepared to lose everything.

In a warning over the potential risks for investors, the central bank questioned whether there was any inherent worth in the most prominent digital currency, which has soared in value this year to close to $50,000 (37,786) a piece.

The cryptocurrency peaked above $67,000 in early November, but suffered a sell-off after news first broke of the Omicron variant of coronavirus, before stabilising around its current level in the past week.

The deputy governor, Sir Jon Cunliffe, said the Bank had to be ready for risks linked to the rise of the crypto asset following rapid growth in its popularity. Their price can vary quite considerably and [bitcoins] could theoretically or practically drop to zero, he told the BBC.

The market capitalisation of crypto assets has grown tenfold since early 2020 to about $2.6tn, representing about 1% of global financial assets. About 0.1% of UK households wealth is in bitcoin and similar crypto assets, such as ethereum and Binance coin. As many as 2.3 million people hold crypto assets, at an average amount of about 300 each.

The Banks financial policy committee, set up in the wake of the 2008 financial crisis to monitor risks, said on Monday there was little direct threat to the stability of the UK financial system from crypto assets. However, it warned that, at the current rapid pace of growth, such assets could become more interconnected with traditional financial services and were likely to pose a number of risks.

Publishing its regular health check on the financial system, the Bank said major institutions should take a cautious approach to adopting crypto assets and that it would pay close attention to developments in the market.

Enhanced regulatory and law enforcement frameworks, both domestically and at a global level, are needed to influence developments in these fast-growing markets in order to manage risks, encourage sustainable innovation and maintain broader trust and integrity in the financial system, it said.

In a separate blogpost published on its website on Tuesday, a member of the Banks staff said bitcoin failed to fulfil many of the features required of a currency and that it risked being inherently volatile.

Thomas Belsham, who works in the Banks stakeholder and media engagement division, wrote: The problem is that, unlike traditional forms of money, Bitcoin isnt used to price things other than itself. As Bitcoiners themselves are fond of saying, one Bitcoin = one Bitcoin. But a tautology does not a currency make.

He said scarcity of the crypto asset which is limited to 21m bitcoin is among the key reasons for its attraction for investors, but this feature embedded into its design may even, ultimately, render Bitcoin worthless.

About 19m bitcoin is currently in circulation, with new coins added when miners validate changes to the blockchain ledger underpinning the cryptocurrency. While the ultimate number of bitcoin in circulation is not expected to be reached until February 2140, it would become harder to sustain this system over time, Belsham said.

Simple game theory tells us that a process of backward induction should, really, at some point, induce the smart money to get out. And were that to happen, investors really should be prepared to lose everything. Eventually.

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Bitcoin could become worthless, Bank of England warns - The Guardian

I'm having a hard time, living the good life, well I know I was losing time High Time - Grateful Dead

I had a long drive ahead of me. Nine hours down the coast, with a few stretches of time I knew I'd be out of streaming service range, and perhaps even out of AM/FM. Knowing this, I took a moment and dropped by my local Goodwill to take a gander at their CD collection before making my way. Lo and behold, I found a 3-CD boxed set of a Grateful Dead show from the 70s I had loved as a teenager, and figured that was the best bang for my couple of bucks: nearly three hours of guitars, feedback, percussive clomping and pitchy-sometimes-but-earnest-at-all-times singing. I bet the overlap of Bitcoiners and Dead Heads is slim, and I am not nearly as evangelical about the Dead's underlying fundamentals, but alas, as I drove further into the cosmic slop, a parallel between the two movements formed. As the hours flew by, I couldn't help but think how Bitcoin not only will bring about a global and free energy market, but with it, the re-commodification of time.

There's a lot of talk about time in the Bitcoin space, and for good reason. A fundamental mechanic of the solution to the Byzantine Generals problem is the immutability of the timestamp that orders all Bitcoin transactions. Without this component, the capped supply issuance that ensures digital scarcity would be meaningless; it doesn't matter how little bitcoin exists if one can just double-spend the same UTXO at a whim.

Proof-of-work creates immutable, decentralized truth by necessitating not just energy, but also the time spent searching for nonces for output hashes with enough leading zeroes to bring the next block header below the current difficulty target. Bitcoin does a brilliant job of utilizing the standardized local clock of a processor on the network to find an average of time spent (600 seconds target per block) across the whole network without relying on a centralized clock source to validate transaction orders. People like to scoff at Bitcoin transactions being inefficient, or slow, without realizing the implications of a global, digitally scarce, permission-less bearer asset with immutable, final settlement in under 30 minutes. The blockchain is simply a database of transactional signatures crystalized in impunity via a continuous hash string of blockheaders hashed with candidate block transactions in order to find the next blockheader. By stacking the previous blocks output hash on top of a universal forgetful function to find the next nonce, the serpentine chain of ledger becomes ever immutable; as every block stacks alongside the upward difficulty adjustment continuing its decade ascent, it becomes harder, and importantly, more wasteful for a bad faith actor to try and reorganize spends.

The act of spending electrical energy is not enough to find value in the digital space, it must be applied directly to spending time effectively, accurately computing within the consensus and thus securing the Bitcoin blockchain.

The Grateful Dead weren't always known by that name, and in fact, they got their first public audiences performing under the name The Warlocks. Unbeknownst to each other at the time, they shared that name with a young, upstart art band out of New York City. When the slow and lossy communications reached their respective coast via the new, blossoming independent music scene, they both decided to change their name. The Dead went on to see fairly imminent success throughout the following decades, whilst their counterparts changed their name to The Velvet Underground and enjoyed somewhat critical but overall muted popularity until a resurgence of their canon in the late 70s. Neither one of them wanted to spend the time to make a claim to their brand, and thus both moved on without so much any litigation or litigators. The Dead did a lot of things that are unheard of today in the hyper-commodification era of art, but perhaps none more important than allowing technologicly-savvy fans to bring their own recording equipment into their venues and tape the improvisation-heavy performances for their own, non-commercial use. A devoted taping community grew out of this allowance, and an entirely new way for hungry fans to engage with the product gave rise to a peer-to-peer market of tapes of shows highlighted for a spattering of personal reasons; someone's one-hundredth show, a birthday, New Year's Eve, debut of new material, a particularly good version of a beloved song, etc. Over time, this strictly-non-commercially-incentivized community drove each other to higher heights of recording quality, with new masters, new techniques, better microphones and better gear led to a powerful, decentralized taper community ready to offer their celluloid of choice for yours in a free market of experiences.

The particular boxed set I bought is from a series called Dick's Picks, named after the long time soundboard engineer of the band who utilized the data harvested from decades of trade and discussion amongst diehards to find the overwhelming favored shows of interest and, pulling from the archives of recordings directly from the band's own board, released commercial products of high quality directly targeted at the fans who made those shows famous in the first place by taping and trading their experience. I was a couple hours into my drive, stopping to feel the pain of filling my car with gas, when I decided to humor myself and see what these things sell for; it seemed kind of strange, knowing that nearly every show the band has ever played at this point has been recorded, located, and tagged online, legally, and for free, that these box sets could ever retain their value, furthermore proved by the fact I had found one for only a few dollars.

Imagine my initial confusion when I found that not only did they retain their value, the three discs were listed on eBay anywhere from $65-$150, appreciating at least three times in value since the February 1996 release. So not only did they compete with the slightly lower quality but freely distributed tapes, but by printing a limited run, they created supply less than ultimate demand. Had the person that donated this set to Goodwill taken the time to see its value on the open market, they might have made a different decision. Had an employee of Goodwill taken the time to search reseller markets, they might have priced the set with a higher premium.

The point isn't about whether these discs kept pace with gold from 1996 to 2021, but how they leveraged an open market of experiences to be commodified without innate commercial intent. The band put their advertising and commercial outreach into the hands of those that understood the product the best, resulting in deeper bond between the perceived value of the experience through the network of audience and the value of a high-fidelity commodity for re-experience. Certain nights, the group consciousness of a tuned-in-but-definitely-dropped-out masses, on the stage and off, came together in just the right way; those were the nights you wanted to play in your van on your four-and-a-half hour drive to the next night's show.

A whole community of trading tapes grew alongside the formidable touring empire of the band's now ubiquitous pop-culture presence. They always sold plenty of tickets, plenty of albums, plenty of t-shirts, and whatever loss of property they seemingly endured by allowing their fans this freedom was more than made up in other revenue streams. But beyond the obvious free marketing, production, and distribution, the band got something far more meaningful; they got a large following of humans to experience their lives listening to the recordings of the group. I don't care to convince you on their merits, that is not the point here, but I think anyone should agree there is simply something different about the way fans of this group behave in a lifestyle manner. This open network, completely symbiotic to the band's own commercial success, allowed a mutually perceived experience to be commodified and thus socially valued. The audience grew itself, and soon enough the market demanded less tape hiss and the more balanced highs of the eventually-released official discs.

One of the reasons those that did could even afford to drop out of the working class to abscond upon the concrete ribbons was sounder money. In fact, this particular night I happened on was recorded in winter 1970, before Nixon even took us off the gold standard. It took a minimum-wage worker less than a shift to afford the $4 ticket, and gas had not yet begun its rise from half a dollar in 1972 to a $1.35 in 1981. It didn't take a lot of time to earn enough for a three-show run, and hundreds of fans modeled lifestyle-supporting revenue streams around the nomadic culture; large craft bazaars would pop up in the parking lots with kitchens, arts and of course tape exchanges for those that missed a show to get up to date.

For many, the Grateful Dead were more than just a hobby, it was their life and livelihood. The lifestyle required such minimal overhead and the dollar was strong enough that the momentum of the summer of love spilled out into the hopeful halls and amphitheaters across the nation. The purchasing power of your time spent in labor was strong against the cheap price of goods and services; your time was worth something. As we find ourselves in an inflating goods and service market (in part) due to an expanding monetary supply, we find our time being devalued below our ability to keep the pace with rising prices. We work more and more and get less and less for it. This is a problem that can be solved (in part) with a technological upgrade to our monetary network. By imbuing our time laboring into a disinflationary and decentralized economic protocol, instead of fighting a compounding, hopeless struggle against the leaking entropy from an inflating dollar system, humans can spend more time making beautiful things for themselves and others. Bitcoin's dollar-denominated purchasing power does not rely on the dollar inflating more than the 2% target per year since the third halving algorithmically brought the relative-to-total supply issuance below 1.8%. Imagine a free, global market represented with a deflationary supply backed by geographically-independent, universally permissionless energy sources spending their time carving a hash string of blocks to communicate immutable transactional history through a network of peer-to-peer participants. There are very, very few use cases for a blockchain that would not be better served with a faster, more centralized database, but the historic ledger of volatility between human energy and capital is certainly at a level of demanding such necessity.

The history of humanity deserves a decentralized, open and yet immutable level of trust. Proof-of-work is not just the answer to the Byzantine Generals problem, it is also the first empirically sound answer to communally experienced time, and with it brings the assurance and ability for users to trust the commodity of time that is Bitcoin in the future. Bitcoin does change time preference in a literal time mechanism, for proof-of-work is a proof of history of spent computational power. It is a clock, just not a predictive clock. Mostly rubbish for planning future events, but in actuality it is an immutably true and decentralized standard of history and time; a decentralized time stamp server in order to solve the digital double-spend problem. Every payment a Bitcoin user receives of this digitally scarce bearer asset gets more purchasing power over time, and thus your economic incentive is to conserve your satoshis to maximize economic yield.

In these use cases, you can see the time preference variable changing directly alongside the economic incentive of the protocol. But when did this new standard of history go from being simply a shared database amongst cypherpunks to the immutable ledger of truth we all know today? I would argue it happened just before December 2012, as the nodes enforced the first halving upon the miners, just a few weeks before the astrological calendar of the Mayans ended. The implications that a new standard of time could have on human experience are vast. The path of a group society was incredibly modified with the mechanisms and technological advancements that allowed us to have a group consensus on months, days, hours, minutes and others. Through so-called quantum experiments such as the double-slit experiment, humans have in fact been able to see the modulation of wave forms of propelled atoms depending on the standard of time selected in the data harvesting. Perhaps we could recreate the experiment by taking snapshots each time a block is mined to look for demonstrative effects of a new standard of passing time in the observable universe. But regardless of what unknown implications of empirical, decentralized truth may come in the physics world, the way humans interact with time on a Bitcoin standard is quite different than how we used to on a fiat standard. You could make enough for a Dead ticket, the gas to get there, and a place to stay in a day of minimum wage work in 1970. This allowed more resources to be spent on capturing the shows in higher fidelity, and an abundance of human time to create a prolific culture around the group. The open-source community around Bitcoin makes it better, stronger and more available to serve more humans, but this social construct would not have coalesced around the protocol without the deflationary effects of the commodification of time via Bitcoin. You can save yourself a lot of time by using Bitcoin to save yourself a lot of time.

This is a guest post by Mark Goodwin. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Read more from the original source:
Bitcoin And The Commodity Of Time - Bitcoin Magazine