Category Archives: Bitcoin

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Patrons of restaurants including Bubba Gump Shrimp, Morton's The Steakhouse, and the Rainforest Cafe will soon have the option to earn bitcoin every time they buy a steak or a beer.

Restaurant giant Landry's is partnering up with crypto custody firm NYDIG to power a bitcoin loyalty rewards program at its 500 locations nationwide. Diners earn a point for every dollar spent, with 250 points translating to a reward of $25 worth of bitcoin.

Bitcoin touched a new all-time high of over $68,500 late Monday and is up nearly 350% from a year ago.

"Many Americans don't own bitcoin yet, because they haven't been comfortable going to an exchange and creating an account or they're not sure about investing their money," said Patrick Sells, Chief Innovation Officer at NYDIG.

"And now they're able to just say, 'Hey, let me get exposure by dining at a restaurant that I love, or trying a restaurant maybe I haven't been to,'" continued Sells.

Landry's tells CNBC it's hoping to go live with the new bitcoin program before Thanksgiving. It will be available to the 3.2 million members of Landry's loyalty program Landry's Select Club.

"This is a wonderful way to play without really putting anything at risk," said Trey Zeluff, Director of Digital Asset Strategy at Landry's.

Zeluff says the program is designed in part to help customers "gain comfort with the volatility" of bitcoin by watching their points grow and fall in purchasing power.

"With our legacy point system, their value was static, and in the context of inflation, they could even depreciate," continued Zeluff.

Landry's is also making a personal bet on bitcoin.

The company plans to hold a portion of its treasury reserves in bitcoin through NYDIG, though the company wouldn't share how much it plans to invest.

Landry's CEO and Chairman Tilman Fertitta, who also owns the Houston Rockets, has been bullish on bitcoin for a while. His NBA team takes bitcoin among other cryptocurrencies at its official online store, and Fertitta's luxury car dealership in Houston which sells Rolls-Royces, Bentleys, and Bugattis has accepted the digital coin since 2018.

"It's amazing how simple the transaction is, and it is here to stay. This is where it is, and it's inevitable that this was going to happen," Fertitta previously told CNBC.

Fertitta also offers bitcoin-backed loans for those who don't want to liquidate their crypto stake, in order to buy a car.

People choosing to transact in any cryptocurrency should exercise caution, according to accountants.

The Internal Revenue Service treats virtual currencies like bitcoinas property, meaning that spending bitcoin is considered the same as selling it.

"The one thing that a lot of people don't realize is that whenever you spend cryptocurrencies to buy a cup of coffee, or any type of consumer item, that triggers a capital gains event," said Shehan Chandrasekera, a CPA and head of tax strategy atCoinTracker.io, a digital currency tax software company that helps clients track their crypto across virtual wallet addresses and manage their corresponding tax obligations.

There's always a difference between how much you paid for the cryptocurrency, which is the cost basis, and the market value at the time you spend it. That difference can trigger income capital gains taxes, in addition to the other taxes you have to pay, such as sales tax.

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You'll soon be able to earn bitcoin every time you eat at Bubba Gump Shrimp or Morton's - CNBC

PARIS, FRANCE - JUNE 25: In this photo illustration, a visual representation of the digital ... [+] Cryptocurrency, Bitcoin is displayed in front of the Bitcoin course's graph on June 25, 2019 in Paris, France.

Everyone was stunned when the new mayor of New York City Eric Adams announced he was planning to receive his first three paychecks in Bitcoin, the cryptocurrency thats been dominating the financial headlines for the past year. The mayor of Miami, Francis Suarez, had already announced he would accept his first paycheck 100% in Bitcoin.

The mayoral announcements are still more signs that cryptocurrencies are no longer esoteric investments for the super-rich (or super-crooks) but have entered the financial mainstream.Back in May Deutsche Bank pronounced Bitcoin the third biggest world currency in terms of circulation. Only the euro and the U.S. dollar are bigger.

Mayor Adams himself says he intends to make New York City the center of the cryptocurrency industry.

Of course, the history of markets teaches us that what goes up must eventually come downespecially a commodity like crypto, whose rise has been fueled as much by media hype as by financial realities. Whether the current crypto boom turns out to be a crypto bubble, is impossible to say. What Bitcoin and other cryptocurrencies do have going for them are two virtues.

The first is that they are not state-denominated currencies, whose heads around the world have turned out to be inept or corrupt or both.

The other is cryptocurrencys reliance on blockchain, or Distributed Ledger Technology (DLT), to protect and authenticate its transactions.The on-going ledger of cryptocurrency transactions is never stored in any single location, which means no centralized version exists for a hacker to corrupt.Since the data is hosted by millions of computers simultaneously, its accessible to anyone on the internet. But its also protected because after every transaction within the shared ledger; and once all the ledgers match for every computer in the network; the transaction is encrypted with the rest in whats known as a block. The new block is then added to existing previous blocks to form a chain of blockshence the term blockchain.

All in all, blockchain is a built-in security system that prohibits a hacker or attacker from forcing open the distributed ledger without everyone knowing it.

As tech guru George Gilder argues in his book, Life After Google, using blockchain to share but also protect data poses a greater threat to Big Tech dominance of the internet than any government regulation or legislationjust as cryptocurrencies pose a useful challenge to the elites who control our state-denominated currencies.

But as always theres a catch. Blockchain is an adequate safeguard against existing cyber threats, but not against the future one posed by large-scale quantum computers.

As I mentioned in a previous column, blockchains encryption is based on Elliptical Curve Cryptography, which will be vulnerable to factorization by quantum computers that can decrypt the complex algorithms used by asymmetric encryption systems to secure almost all electronic data, including blockchain.The quantum attacker will simply look like another member of the shared ledger, in a cyber assault that will be undetectable and persistent.

CHICAGO, IL - DECEMBER 19: Traders trade VIX contracts at the Cboe Global Markets exchange ... [+] (previously referred to as CBOE Holdings, Inc.) on December 19, 2017 in Chicago, Illinois. Last week the exchange became the first in the Unites States to begin trading Bitcoin futures. (Photo by Scott Olson/Getty Images)

How vulnerable will cryptocurrencies like Bitcoin be?

Consider: in 2020 the total market cap of cryptocurrencies was $330 billion. Today it is approaching $2 trillion. Institutional investors account for 63% of trading in cryptos, compared to just 10% in 2017, which means a collapse of crypto value is bound to ripple through balance sheets all around Wall Street-and around the world.

Our most recent study conducted here at the Quantum Alliance Initiative done in conjunction with the econometric firm Oxford Economics indicates that a quantum attack on crypto precipitating a 99.2% collapse of value, would inflict $1.865 Trillion in immediate losses to owners, with nearly $1.5 trillion in indirect losses to the whole economy due to that collapse.

All in all, we are looking at a $3.3 trillion blow to the U.S. economy.

Thats a calculation based on cryptos current value. By the time a large-scale quantum computer emerges, by 2030 or so, cryptocurrencies will be even more imbedded in the global financial systemand the losses even greater.

Fortunately, theres a solution. The most immediate is post-quantum cryptography, i.e., deploying algorithm-based encryption that is impenetrable to future quantum attack but also to classical attack right now. Crypto exchanges have already drawn highly damaging attacks, like the one in 2018 on Bithumb, the South Korean crypto-currency exchange, which cost $30 million, or the assault on Poly Network this past August in which cyber thieves stole more than $600 million.

BEIJING, Dec. 4, 2020 A research team including renowned Chinese quantum physicist Pan Jianwei on ... [+] Dec. 4, 2020 announced a significant computing breakthrough, achieving quantum computational advantage. (Photo by An Zhiping/Xinhua via Getty) (Xinhua/An Zhiping via Getty Images)

The National Institute for Standards and Technology (NIST) is working on standards for post-quantum cryptography for rollout starting in 2024, but there is no reason to wait.Companies in the USA and Canada can offer solutions now, including hybrid solutions that offer the best of both post-quantum and quantum-based technologieswhile others are creating versions of DLT that incorporates quantum solutions from the start.

Make no mistake; regardless of Bitcoin and Ethereums ups and downs in the current marketseven if a Bitcoin bubble burstscrypto currencies are here to stay.Quantum-safe solutions can make sure they are stable and secure for a long time to come.

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Will Quantum Computers Burst The Bitcoin Boom? - Forbes

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Watch/Listen To This Episode:

In this episode of Bitcoin Spaces Live, host Christian Keroles (@ck_snarks) is joined by Aaron Segal (@LudiMagistr) to discuss his article for Bitcoin Magazine titled "Bitcoin Information Theory: B.I.T.". Aaron explains how entropy is closely related to money and how Bitcoin as information is ultimately a reduction of entropy. This is an extremely enlightening discussion, as Aaron applies the laws of thermodynamics to explain the monetary phenomenon that is Bitcoin. Other speakers include Guy Swann (@TheGuySwann), Mark Goodwin(@markgoodw_in), and Bitcoin TINA @BitcoinTINA

Full Transcript:

[00:00:07] CK: I'm really excited for this conversation. Im going to ping Mr. Aaron Segal quickly to get him to join. Were going to be talking about a really interesting subject, Bitcoin information theory. People like to refer to Bitcoin as digital gold. In my mind, that is a very limiting way to think about Bitcoin, just because gold was sound money in the past, does not limit Bitcoin to just being the digital incarnation of gold. It is far more than that. It is actually the removal monetary uncertainty. Aaron calls it entropy in his article. We are going to be spending the next hour or so, talking to Aaron about the article.

Before we get into that though, I want to tell you about Bitcoin 2022. I'm pretty sure, Aaron's going to be there. Almost everyone that you've been seeing speak on Bitcoin Magazine Spaces will be at Bitcoin 2022. It's going to be the biggest Bitcoin event in history. Bitcoin '21 was the biggest Bitcoin and crypto event in history. We are going for a three X on that. We're really trying to take the Bitcoin event space to the very next level, and it is going to be an absolute blast. There's going to be something for institutional investors, to core developers, to Bitcoin plebs. We have a four-day event, including a full-day music festival to celebrate the Bitcoin culture.

Extremely excited. You can use promo code Satoshi, or HSFP, Have Fun Staying Poor. They both give you 10%. If you pay with Bitcoin, you can save an additional $100. You can stack those. Pay with Bitcoin and you use one of those promo codes to save the maximum amount and do not wait to get your ticket. It's going to be an absolute blast. All right. That's enough for me. Aaron, what is up my man? Welcome back to Bitcoin Magazine Spaces And really excited to talk about your first article for Bitcoin Magazine. You've now contributed three, but this was your first one back in May.

[00:02:00] AS: Yeah. Thanks, CK. Nice hearing your voice again. Nice talking to you guys. Thanks for everyone for joining. Yeah, it's an interesting topic. Like CK just said, one of the genesis of this was my thinking about gold, and thinking about the whole digital gold narrative that was becoming a lot more pervasive last year. We'll call it during the first and second quarter of the year. Some point down the road, we can get into my background, but real quick, I've been on the buy side. I've been in the hedge fund industry for 17 years.

Ive approached this, my background, of course, as an investor, as an asset allocator. I've been involved in macro equity credit derivatives, traded all through the great financial crisis and saw the insanity that was occurring back then and have only seen it actually increase since then. You would have thought that that would have been the pinnacle of the insanity, but it was really just the beginning. For a lot of us, of course, Satoshi included, that was an eye-opening era. For me, I've been involved in so many different asset classes. Most recently, I work in a hedge fund. That's more involved in the credit industry and that's how I've gotten speaking with guys like Greg Foss, and has gotten closer to him, because we have some shared experience there and shared experience in the insanity of the credit market where real yields, they're now negative.

Essentially, I've started to see the world in which I operate become more and more administered, more and more manipulated over the years. That has just disturbed me more and more, as I've started to see the consequences, both socially, economically from a market perspective, from the ability of prices to actually make sense in a coherent fashion and the ability to model. My initial mentor, this guy named Marty Zweig, he was a legend in Wall Street in the 1980s-1990s. He was famous for actually predicting the bond crash in 1987, literally. That was on a they call it Black Monday. He was on this television show, like the predecessor to CNBC the day before, he predicted it literally that Sunday morning.

His mantra was always don't fight the Fed. That's because he grew up in this era where Greenspan had introduced this concept of moral hazard. They used to call it the Greenspan put. Now, Alan Greenspan, for those who don't know, was a central bank in the 1990. That was the lens in which I formulated my views. I also have always had this little tinkering interest in physics and theoretical physics and quantum theory and all this stuff I can nerd out on as a lay person.

When I started thinking about, this is before really, you had guys like Saylor talking about Bitcoin as what do they call it? Digital electricity. I had come across some of the work of Buckminster Fuller. Now, a lot of people also quote him too, but his theory of the kilowatt dollar. That got me thinking about the second law of thermodynamics.

Basically, just to frame this whole article is it's a amalgamation of the second law of thermodynamics, information theory, which was a theory that took thermodynamics in an entropy and applied it to networking and information and telecommunications in the 1950s-1960s. A guy named Claude Shannon was the grand master, the founder of that school of science. Then just my own economic background, my own tinkering as an investor. I think, honestly, that's the best way of learning the real merit of things is by tinkering in them. That's why I've always had a mistrust for economists. I really would implore it. This is nothing against economists. That's my background too, before I got into the field of investing.

If you ever come across somebody, who's giving you investing advice and they don't have any

money invested, I would be very weary of those people. Im buying all of these concepts and this background to formulate this equation. I'm going to use the term equation loosely, here because it's really just a thought experiment. It's not an equation that can necessarily be applied empirically for practical purposes. I think, it really helps frame, as CK was getting to and alluding to at the beginning, it helps frame why this is so much more than just digital. Because digital gold is just a store of value. It's not a transmission mechanism.

Just big picture. I don't want to get too deep into the weeds of the article itself, just regurgitating the actual article. I'd like to do a brief run through of what I'm getting at and the basic concepts, and then some of the implications, which are things that I didn't talk about in the article. I kept everything pretty abstract in the article. That way we can run with it and have hopefully, a more fun conversation. It's talks a bit more about some of the pragmatic applications of these ideas.

Yeah. Basically, for those who aren't familiar, the second law of thermodynamics is basically saying, hot things always cool down, unless you do something to stop them. Another way of expressing that is that disorder, which is characterized quantitatively as entropy always increases over time. There's a really great quip by this astrophysicist that I came across when I was doing research for this article. I think, this can be applied to anything in the shitcoin, altcoin space.

If your theory is found to be against the second law of thermodynamics, I can give you no hope. There is nothing for it, but to collapse in deepest humiliation. He wrote that in 1915, but I think that applies pretty well to a lot of things that are going on right now. That's thermodynamics in a real simple nutshell. Information theory, like I mentioned is pioneered by this guy named Claude Shannon, mid-20th century. He was a computer scientist. He applied it to, how can a signal that's going across a telecommunications network be transmitted with a minimal loss of information?

When you start to ask that question as an engineer, you then need to start defining what information means. We were just at the precipice of this information revolution at this time. It might seem like a thought that we all think about a little more frequently now. I don't think it's necessarily what the everyday person thinks about, but I think a lot of people probably in this room tend to have these kinds of big idea thoughts. Back then, it was really a very esoteric concept, because digital information was just non-existing.

The way he defined it, that I thought really was succinct and valuable is if information equals resolved uncertainty, entropy must be the uncertainty needing resolving. What you can deduct from that is that information equals resolved uncertainty. Uncertainty is entropy. Therefore, information equals reduced entropy, right? That's the first big step in trying to connect thermodynamic entropy to informational entropy. You end up with an equation where the more that you increase thermodynamic entropy, which is the more that you're expending real-world physical energy, the more you can reduce informational entropy, which is another way of saying, the more you can create structured, utilizable data.

Before I move on away from information theory, just another side that I came across in my research was, since Claude Shannon's original theory, in his original white paper, there have been a lot of subcategories of information theory, and they've been applied to many different fields. One of them is actually behavioral science. It's interesting from that perspective, because I think a lot of Bitcoiners really geek out on some of the behavioral science aspects.

It's becoming a bigger part of economic theory, too. There's behavioral economics now that has become more invoked, since guys like Daniel Kahneman came about in the 1970s, 1980s, and started to popularize it then. From the behavioral science perspective, they were trying to solve for what consciousness is.

That's just pernicious difficult thing, amorphous thing that we've tried to define as humans for many centuries now, and from a neurological and behavioral science background, they decided to bunch up consciousness into two key categories, which is our ability as humans to differentiate, which is to break down the whole into its constituent parts, and then integration, which is understanding the connection of these parts and reintegrating them.

Really, you can't have consciousness without both of them. You can have intelligence with one or the other, but you can't have consciousness without both of them, at least by this theory. I'm bringing this back to the relevance of this conversation is that when I was reading about that, it turn on a light bulb for me when it comes to praxeology. Praxeology, it's a concept, it's a philosophical concept, I guess you can say, regarding human action. You only really find it used within Austrian economics.

Again, there's probably a number of Bitconers in here who might be familiar with the term, who might be familiar with Austrian economics. For those who aren't, it's essentially a term that was corn by Ludwig von Mises, or Misses, I never know how to pronounce it. Essentially, it's the first principles of Austrian economics, which is that it assumes that humans act out of their own set of goals. Those goals are always base conscious desire, conscious belief system.

When I started to think about how to integrate this with information theory, so if consciousness is a form, of course, a form of information, and it's a form of reduced entropy, which is structured information, then if you have a system where that information is being manipulated, where that information is losing its signal, then you have a huge problem in terms of our ability to base our human behavior in a efficient way regarding our economic goals.

Basically, consciousness is reduced to entropy and if economics is the application of human actions towards goals and values. If the input to that belief system arise at goals that are flawed, because of the way our monetary system is structured, then the whole system devolves in error, because we are all making decisions based on what we believe to be rational, but the information that we're using to come to those conclusions is wrong. Our first principles are wrong.

Whats scary about that is you can go a long time in such a manner without realizing how bad it is, because we're all suffering from the same input problem. We're all receiving flawed information simultaneously together. That's how I tried to tie together I know this is all mouthful here. By the way, CK, just I can ramble. Pause, ask questions, whatever you want to do anytime. I'm getting I'm going off the deep end here.

[00:12:22] CK: I thought that was great, by the way. Maybe you even want to just, the last part, maybe just to repeat that one more time. Because I think, that's where we are right now. That's what you just described.

[00:12:33] AS: Yeah. Basically, a very fundamental concept in economics is to boil down like CK is saying, a fundamental concept in economics is that we base our decisions, whether or not to consume, whether or not to defer consumption, whether or not how and where to allocate resources based on a belief system. That belief system is based on our personal motives and goals. If that is based essentially, from our conscious state where we are taking differentiation and integration of our world around us, and if that world is being obfuscated by bad money, then our rational, or seemingly rational decisions will not be actually rational. They will seem that way, and they will seem that way for a very long time.

This is why I think Bitcoiners love the whole matrix analogy, because it's exactly what that is. It's a world that is internally accurate, but not real. I guess, you can go down a real deep rabbit hole and say then, what is reality? Reality is what we make of it or whatever. I'm not even trying to get philosophical here. You just have inputs that are manifested from an outside source, like they're manifested, not from our own actual action and behavior that is bootstrapping it. There's this external input that's driving it.

That, we in turn are reacting and basing our behavior off of that information. We are doing so, and it's creating flawed allocation of resources. Where does that leave us? I think, this is why this concept is only going to become more interesting actually, as we, I think, become more tuned to the interplay between energy, in real-world energy and money.

Of course, that will become much more apparent when we start to see how, for example, mining, which is a completely different rabbit hole. I don't think we have time to get into that. How mining can bootstrap as a first and last resort buyer. Always, a number of you in this chat are familiar with some of those ideas. There are people who are far better than I am at explaining them, so I'm just going to leave it at that. I do think as we become as a society, much more aware of the interplay here and how energy and money are just inextricably linked, because I don't think that's a given. I don't think people realize that. That's going to be key.

If the 21st century is really the century that we're going to see information as the scarce resource, information is what we need to harness. That's in comparison maybe to the 20th century, where carbon energy was really what bootstrapped society and bootstrapped human productivity. If that's the case, then we need to ensure that the economic activity is not wasting the energy itself. That's exactly the problem with monetary entropy, which is really, the crux of this equation.

When there's monetary entropy, you have a system that starts to leak. A system that leaks, thermodynamically speaking, is on sustainable. What is the equation? It sounds a lot more complicated than it is, honestly. Again, think of it more as a mental model. On one side, you have thermodynamic energy. I'm going to get into some aspects of the equation, because we only partially defined some of it so far, but I'll just give you the full equation first.

You have thermodynamic energy raised to the power of, in this case, you'll see X, and X stands for human innovation, or productivity. What I mean by that is that's essentially just technology. It's an input of technology, a variable for technology. The reason you raise it via power law is because that's how humanity scales. We take thermodynamic entropy. We basically take resources, we utilize them. Then we leverage our innovation to utilize those resources to a greater degree without needing further input. For any given input, if you have a greater power law, that means you have greater innovation associated with that.

You take thermodynamic energy, you raise it to the power of innovation, and that equals the negative of informational entropy. What I mean by that is that on the other side of that coin, the more energy you're utilizing and the more productivity you're scaling with that energy, you have negative entropy, which is on the informational side, which is what I'm saying without it is that you're taking information and you're making it more structured.

You're creating something out of it. What are humans? Humans are just little pockets of reduced entropy within a world that's constantly scaling up with greater entropy. There's this physicist, Brian Greene, who has a great quote. I'm just going to paraphrase it here. He basically calls it the entropy dance, which is the universe is essentially, on this timeline of greater entropy. Actually, that's how a lot of physicists defined time. Of course, Bitcoiners also have this weird association with how there's this intuitive association with Bitcoin in time.

Entropy is actually from a physicist standpoint, the only way that we can define what time even is. The only way you can actually determine time, other than just as a human concept, is there's an era of time that's based on entropy going from a lower level to a higher level over time. That doesn't mean there's not pockets of reduced entropy that form around that. That's all of what human progress is. That's all of what geological progress is. That's what a planet is. That's what the solar system is. We can do that on our small scale, too. That's what I mean on the right side of that equation when I refer to negative informational entropy.

That's what we are creating with physics on the other side of that. Now, there's one little variable that I haven't mentioned here, which is that when you raise thermodynamic entropy to the power of human and innovation, there's another variable in that human innovation. Exponent, which is monetary entropy. This is really what the crux of the whole problem is. Because money is a transmission mechanism, but it's also a technology. A technology, that if it's allowed to function at design, will allow information to scale. That's why you have to raise thermodynamic entropy to the power of that as well, because it's just like any other technology. It's something that can either increase productivity, or inhibit it.

We will define just for simple purposes, and what I did in this article is defined monetary entropy as a long-term inflation rate of that money, of whatever money system in question that you're talking with. In this case, let's say, we're talking about the dollar. Now, and it's a tricky definition, because then you have to define what inflation is. I think, a lot of us in here understand how slippery slope that can be. There's some arbitrary metrics, like CPI. None of them are perfect. They all have imperfect ability to actually assess inflation, because inflation is something that's subjective. It's something that is not based on an aggregate level of data. It's based on a fluid system, where prices are constantly fluctuating.

Just for simplicity purposes, just think of it as an inflation rate of money, whether that be the growth of a money supply, whether that be some aggregate inflation mechanism, but its some form of leakage to the system. If you have thermodynamic entropy, and you have a lot of innovation, that's great. You're creating a lot of negative informational entropy. That means you're creating a lot of information that can be utilized. It's good for society. It's good for productivity. It's how humanity scales.

If all of that is being obfuscated by monetary entropy, which we're subtracting from that power law, you end up missing out on so much of that human potential. In some ways, you could completely negate it. That's something, guys like Jeff Booth are really amazing at articulating is how technology is deflationary, but monetary inflation is basically this hamster wheel that we're on that's basically, we ended up spinning our wheels, because we don't allow that innovation to flourish. We don't allow it to do what it would otherwise do.

Maybe it does what it wants to do in certain fields. Maybe certain areas, we see massive technological innovation, massive deflation, but that ends up getting counterbalanced by some massive inflation in some other part of the world. A great example of that would be Moore's law, reducing the cost curve of semiconductors, but simultaneously, healthcare costs and education costs have gone through the roof, and real estate and all sorts of other things that have completely negated the benefit to humanity that may have otherwise caused.

Basically, you have this leakage in the system. When there's no leakage, when you have a pristine money that has zero entropy, everything can transmit from one side of the equation to the other fluidly, without anything obfuscating, without anything, getting in the way. That is really the aha. That's the crux of this. That's why I think money that can scale in this way, and it can scale not just as a store of value, but as a medium of transmission and as a medium of specialization, which we can get into in a little bit what I mean by that. That's really the crux of why this is so different from just digital gold. Before we go on, I'll pause there.

[00:21:47] GS: Aaron, first off incredible. Super, super smart. Do you think that inequation or inefficiency is like a purposeful, tactical thing? Or just a literal inefficiency of a money market?

[00:21:58] AS: Yeah, that's a good question. I tend to believe that I think, everyone in the system Not everyone, but I think, there's a lot of people in the system that generally genuinely think that the system we're in is good, is righteous, that everyone's just doing the best they can. I tend to think that these mistakes occur at the margin and over time and they compound. Because a great example of that, you can put together a system where you say, okay, We need more money because we need to fund this or that thing.

Then of course, a lot of that is war and bad things, of course. There's also good things. There's social welfare. There's actual goals that are ideologically valid. What happens is people don't see the long-term compounding effect of that one little policy, right? Then that puts you in a path dependent system, Because that involves creating more debt. Then when you create more debt, you reduce the money velocity. When you were just the money velocity, you need to print more money to create more GDP. When you do that, you need more debt and then you end up in a debt trap. Then everything else becomes even more path dependent, because you can't go back. You can't stop.

You have all these well-meaning people who maybe made decisions along the way that were incremental, or incrementally detrimental, but theyre well-intentioned, but they put us down this path. Now we're on this path that we can't get out of. That's actually a big theme of another article I wrote, where I really talk about, it's called Revenge of the Nodes. Its one of the more recent pieces I did, which really talks about the deterministic path that we're on. There's really no way out. The only way out is Bitcoin. Honestly, I'm not saying that just to talk our own book here. I genuinely haven't come across any alternative from an economic, from a societal standpoint.

I think that's why we're all here. I think, we all know that. I don't think it's purposeful. I think, it's just the nature of the system. There certainly are negative actors involved, but I don't think it's purposeful.

[00:23:46] GS: If I can actually add to that real quick, is that humans, particularly on a long enough time scale, humans are a product of their environment. The incentive structure of the legacy system is just bad. It's just a horrible incentive structure that leads to certain outcomes. What's funny is that, when we debate, or talk about whether or not these actors are malicious, or if they're just incompetent, or they're just responding, they're navely responding to the incentives without any judgment. I'm just a good banker. These are the policies that make a bank survive in this environment. It just so happens that I'm leveraged 40 to one. That's a terrible outcome, but they responded properly to the incentives to become a successful bank.

There's a degree of whether or not they're malicious or good from an intentions perspective. If the results are the same, does it really I think, we're in an environment of terrible incentives. It's more likely that will even create bad intention to actors, people who are simply there to abuse the system. Now, bad people, almost never think they're bad people. That's why evil is so dangerous. It's almost done almost always done righteously. I agree, this is fundamentally an incentive problem. It's a structural problem.

Our economic system is just fucked six ways from sideways. The only way to fix it is systemic incentives correction. The only way to do that is to start with the money. Without Bitcoin, there's no fixing the incentives. You're just wiping clean and starting from scratch on a bad incentive system, because you've led to the end result, which is destruction. Otherwise, we just go down this whole path all over again, and we have enormous amounts of pain in the short-term, just to kick the can for a whole another century-long, or 70-year cycle or whatever it is. Or we fix the incentives. We fix the money. Obviously, that is what Bitcoin is, and that's why it's such a profound innovation when you look at it from that context.

[00:25:49] AS: Yeah. I think that's spot on. At some point, if you start talking about, if you bring morality into this conversation, or ethics, you allow people to hide behind things. You allowed people to have a high-time preference with that, because you can say, Oh, that might all be well and good, but in the short run, we need to do this. In the short run, we need to solve for this. We see that with what's going on in the ESG movement. Then, of course, there are valid concerns about the environment, but then people misuse them, people misread them.

Again, it gets back to what Guy was just talking about with incentives. I'll read something from the article itself to touch on this a little bit. The crucial realization is it concerns the important paradigm shift inherent to Bitcoin is as follows. Fiat money involves a net increase in entropy. This cannot be overstated as it is imperative to the articles thesis, such a conclusion is reached despite money theoretically being a form of information that should reduce entropy when applied as intended. However, fiat unfortunately is not money as money was intended. Inflation, centralized, and this is the key part that gets to motives in the incentive structure.

Inflation, centralized, and thus arbitrary control of the rules of supply and attempts also controlling demand via administered risk-free rates, via global exchange rate volatility and competitive devaluations, mercantilism subsidies, free debt supporting zombie industries, opaque and uneven taxation enforcement, and many other behaviors, all conspire to create an aggregate equation of massive entropy and fiat money of economies.

Again, none of those things that I listed, they're all horrible. None of them are like, because of one bad actor, or one bad intention. They're all just a result. They're all a consequence of that, of a bad system. I think, another thing that's key about this too is, and this is something CK and I have talked about. I think we did another space is on this at one point. Obviously, there's a lot of crazy signs about inflation. Now that's a whole different conversation I'd love to have some point. Putting that aside, even if we were dealing with 2% annual inflation a year indefinitely, not only is the math of that extremely deleterious on just from compounding perspective, right?

Even if you lose your value 2% a year for 20 years, that's a horrible situation to be in. From a thermodynamic system, taking this back to the equation, of the article, theres actually, I think it was a Robert Breedlove, Michael Saylor interview, where Saylor gets into because he's got his engineering background. He likened it to an adaptive control system. I'm not an engineer. I have no engineering background, but he basically said, that's a common engineering term. It's a structural way that engineers go about trying to solve a problem. Adaptive control system requires a few things in order to be effective. It needs negative feedback.

Basically, it needs a system that has volatility, right? It needs to be able to receive volatile responses in order to react and adapt to them and adjust. That gets back to anti-fragility, which we'll get into in a little bit. You need that and you need a variable to control. You need to actually define what you're trying to control. In this case, Saylor absolutely noticed, that's a correct ledger, right? That's what the blockchain is. The variable you're trying to control is the correctness of the ledger.

Then the third variable that you need is a low error rate. This is what's key to the purpose of this conversation specifically, an error rate is just, when you have a system and you want it to have a long-term degree of integrity, from a thermodynamic perspective, you can't have just a leakage of energy, because that compounds over time.

Imagine if you're an engineer and you're trying to take an internal combustion engine and you're trying to make it more efficient. You're trying to make the same amount of energy input create a greater amount of horsepower as an output. Meanwhile, your tank is leaking 2% oil per day, and this is, I'm basically paraphrasing Saylor's analogy here. This is not my own. I thought that was just so perfect, and it's so related to the whole crux of this article, which is so even if you don't have hyperinflation, or some high level of inflation, if you're losing even 1% of the systems energy input per day, it's just not going to last.

Not only will you not increase productivity, which by the way, just so the point on productivity and I talked about that scaling function, right? You need to raise thermodynamic energy to the power of something. That power is human innovation, which is basically another way of saying, productivity. Productivity, we actually just got our third quarter of 2021 productivity numbers yesterday. I believe, it was the lowest level since 1981. We have workers working in more hours and producing the same or less output.

By the way, productivity, this is not just a one-quarter phenomenon. This has been a consistent, long-term, structural decline that's really been confounding economists for decades. I remember having this debate in 2007 with people trying to figure out why is productivity declining? We're in this golden era of the digital information technology, so why is productivity so weak? Productivity is weak because of the incentive structure that I was just talking about. The incentive structure is bad, because you have a high error rate. You have energy leaking out of the system.

Yeah. The bottom line here is that fiat money always has a monetary entropy above zero and Bitcoin always has a monetary entropy of zero, period. That's it. It never goes. We've never had that in any monetary system ever. Therefore, this equation can scale indefinitely.

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[00:32:22] CK: You talked about all the pitfalls of monetary entropy. Now you said, okay, Bitcoin fixes this effectively. That enables human productivity and to scale indefinitely. I feel like, we need to dig into that a little bit more.

[00:32:38] AS: What I meant by that is that, the only thing stopping you at that point from a societal perspective is your own innovation. There's nothing getting in the way. There's nothing obfuscating it at that point. There's nothing to say that this can't continue to scale. This actually gets into what I was just about the second little rabbit hole I was going to go into, which is that an implication from this equation is that the systems inputs, which are that thermodynamic energy on the left side of the equation, exhibit greater scarcity over time.

That's where people talk about resource scarcity. The whole concept of why resources are even scarce to begin with is because there's entropy. If there was no entropy, if the law of physics didnt entail the second law of thermodynamics, we wouldn't have a problem with resource scarcity. Entropy means that energy can only move in one way. We use energy and we create order out of disorder. We can't then go back. There are systems that we can create. That's part of what innovation is. You break an egg, you can't put the egg back together again. There's only a limited amount of resources as a result of that ever increasing degree of entropy.

Why does this matter? If the money is supposed to be a shock absorber to all of this, right? As we use more resources, in order to make ma make it so that humanity uses resources intelligently and applies them non-wasteful way, you need something to absorb the scarcity of all of that entropy. As I say in the article, if money is not permitted its intrinsic capacity to absorb this scarcity, other resources will need to fill that void. This increases the cost of information production, because there are fewer and fewer sources of increasing thermodynamic entropy from which to convert into decreasing informational entropy.

What I mean by that is you start to lose the price of all of those inputs, the price of all that thermo The Bloomberg commodity index is up 50%. Oil is up 43%. Gasoline prices are up 50%. This is versus pre-COVID levels. Not on a year-over-year basis. Natural gas prices in the US are up a 160%. UN food price index is up 40%. Base money supply is up 35%. Housing prices are up 20%. Rent prices, I believe, are up 18% though. They obfuscate with the owner equivalent to rent and the CPI number, which is a bullshit number. All of these things, all of these finite resources are what starts to absorb the monetary entropy that sound money should be absorbing instead. As a result, getting back to your question, CK, you can't scale as well because things become cost prohibitive.

The innovation becomes throttled by that. Resources that are meant to be utility goods, that are meant to actually be used end up being stores of value. Real estate is a utility good. Yes, it's an income producing property, but it is meant to be a dwelling. It is meant to be an object of utility. That's a whole different conversation. The point is that even when there's innovation occurring, it's done in a really centralized and lopsided way, where because Yeah, please go ahead.

[00:35:45] MG: I wanted to interject right here, because Saife talked about this and he's got a whole section in his new book, Fiat Standard. One of the things is that when you're talking about, when you see nominal values of things increase, the level of monetary entropy that is resulting from this is not merely in, like you're saying, it's not just in the fact that you're losing the savings in the communication of any value over a period of time, but it's also giving the appearance of profitability to things that aren't profitable.

A house is actually a maintenance heavy thing that is purely for utility. The idea of holding it as a store of value is actually a terrible idea. A house is a liability. It is not an asset. Unless, you are renting it out, unless it's an apartment building or something that is generating income, it is just a consumption good. Just like having a sandwich, or a car. That's all it is. Yet, the appearance of it having a nominal return, where the number is going up, even though its real value return is not positive, leads to so much misallocation of resources and to stuff that is not innovative.

Buying and sitting on a bunch of houses does nothing for the economy. It does nothing for progressing humanity forward. It's not actually producing a return. It's just producing nominal gain. Your number count is just going up with the amount of money and new debt being created in the system. The sheer amount of capital time and labor that could go to an innovative purpose, to something that has real gain, that's actually a productive company producing some positive good for humanity is completely being bastardized. It's being soaked up by all of these nominal returns in just holding stuff, in wasting commodities, just to sit on them. People talk about, oh, inflation not inflation, but deflationary currency that goes up in value means people are just going to hoard it.

That's a great thing, because money is not a productive asset. Of course, you want somebody to hoard money and not a tractor, a house, something that people actually need. If the value of the money is going up, that means everybody's income is going up. It's just a tally. You're actually not getting in the way of allocation of real resources and consumption goods that people desperately need to better their lives.

You're not you're not screwing up the price system by buying something that you actually don't have any demand for. You don't need another house. You're just parking value. Whereas, the flip side of it is it's oh, if the money is inflationary, oh, we're going to invest it. No, they're not. They're just going to hoard assets. They're just going to take things that people need off of the market. The rich are just going to hoard it, so that they don't lose money. The distortion of that is in trillions and trillions of dollars. Stuff that in a matter of five years, allocated in the right direction could have huge societal benefit and is instead, is just buying up real estate.

It's incredible the amount damage, that even a seemingly minor monetary entropy, or disincentive can cause, because there are second and third order effects that make things appear profitable that just aren't, that have no actual value or use in society, because you've destroyed the function of money. Youve destroyed the means of communicating that value. Everybody's just spending all of their time and energy on the business of translation, which is solved by money. Now, it's a new problem in society again that's not there, unless you put unnecessary entropy in the money.

Anyway, I just wanted to add that I actually have I'm at 13% battery and I'm at TabConf right now, just sitting in the corner. I thought I would have my battery pack with me and I'm stupid. I'm going to have to shut down my phone, so that I have enough battery power to get an Uber out of here at the end of it. I'm sorry, I was only in here for

[00:39:44] CK: Thanks for joining, Guy.

[00:39:45] GS: 15 minutes to hang out.

[00:39:46] AS: Thanks, Guy.

[00:39:47] GS: Thanks, guys. Take it easy, you all.

[00:39:49] AS: Just to add, by the way Guy does a reading of this article. If you guys are like I am, prefer to listen to your words. On Bitcoin Audible, he has a reading of it and he has his Guys Takes, which are awesome. Yeah, everything he said is spot on. I actually see someone wrote in here, they were shocked at my statistic that I gave about productivity being down.

I think, this is a really misunderstood concept. This is why even some of the smartest economists out there really get confused by this concept of why productivity is declining over the long run. Just to be clear, it is a very volatile statistic when used, because the way that it's defined is like I said, it's hours worked relative to output. All of these things are so abstract, so let's break it down for a second here. It's like, why is productivity problematic with a highly entropic money? Why is it so important for productivity to scale, to have a money where the ability to save it is pristine and why its transmission mechanism being completely transparent is so important.

Let's talk first principles here for a second. There's really only when you really break it down to its bare bones, there's only two sources of human prosperity. Two arrows that can cast this forward, from caveman into wherever we want to go. One is savings, which is another way. Economists call excess consumption. The other is specialization, and they're inextricably linked. The reason that they're so linked is savings is necessary. It's your pool for investment. It's your belief in the future. Up until agriculture and I guess, our ability to create surplus through agriculture and animal husbandry or the domestication of animals, we didn't really have extra savings, right?

We were just hunter gatherers living hand-to-mouth and going through in this cyclical process. There's a really interesting study I came across from NIH actually, which got into there's a lot of debate as to how the agricultural evolution route evolved, like what caused it and why it evolved basically throughout these disparate parts of the world and all of these completely different societies simultaneously.

It's amazing when you think about it. These are all people that never interacted once and yet, they came across the same conclusion on a scale of hundreds of years from one another, which, in the timescale of humanity is basically, no time at all. One of the conclusions they reached from this article, whether you believe it or not, I just found it to be interesting was that we thought that I think there's a pre-existing belief that agriculture was a result of societies that were struggling and that needed to innovate their way out of that problem.

What they found, actually, it was that societies that moved from hunting and gathering into agriculture, were actually prosperous societies. What they did was they were basically, trying to solve for robustness against uncertainty. That's what storing value was. The reason I'm bringing this back to specialization and savings is that when you have excess savings, when you have that cushion against uncertainty, which of course, we've take for granted now, but all societal collapse is previously were a result of lots of exogenous outcomes occurring that really blew up these the societies. They were very sensitive to volatility. They had that negative feedback in their system that told them, Oh, it's important to save. It's important to have this.

Then once you can do that, and once you have those excess savings, you suddenly have the ability to start specializing. There's that parable of the primordial fishing island, where you have this just this tiny little economy of two fishermen fishing. Only when you have excess fish that you're no longer consuming, can one of them invent some new skill. Then, that new skill creates more surplus. Then that creates new innovation, and so on and so forth. It's something we just take for granted at this point.

Actually, there's a lot of great work from a lot of Austrian economists that talk about how a lot of new Keynesians and monetarists have really changed the narrative, that savings is usury, right? The saving is bad and consumption. That's such a classic example of a bad system, where we're punishing savers. Is that if we save too much and there's no money velocity, money can't scale. I see people, there's this big altcoin economist on Twitter. I forgot her name, but she got all these PhD credentials. I don't think she's ever worked a day in her life, actually investing or anything. She's always talking about how Bitcoin is horrible for society, because it's never going to scale and there's going to be no money velocity.

Guess what? Our current system right now is horrible money I wrote down the stats here. By the way, money velocity is when $1 produces more output. If you have a dollar in the system and you have money velocity of two, that means for every dollar you put in the system, it creates $2 worth of GDP, right? When you have declining money velocity, you need more and more dollars to create the same amount of GDP. That's how you really get bad inflation. It's also how you get bad productivity. More importantly, it's how you get into a debt trap. A debt trap is what we're in.

Unequivocally, I don't think anyone who really knows anything about economics would say differently. When you come across anyone who tells you that Bitcoin is going to decrease money velocity, because it's just going to make everyone hoard and save as if that's a bad thing, point to what's going on. What's going on is that you have money velocity plummeting from, I believe, the pre GFC, pre great financial crisis range was around 1.8 times to two times. Now in the US, were at 1.1 times. We're basically getting close to breaking that one-to-one ratio, which would be horrible.

Japan, in comparison, their money velocity is at 0.4 terms. That started at around 1.6 times back in the late 1960s, early 1970s. Europe it's even worse. They're also below one time. 0.8 times and they were back 1.8 times in 1995. China's even bad. China's at 0.5 times versus 0.8 times in 1998. The only reason that US velocity is better than all of those is because we're the reserve currency. We have more avenues for global lending, despite these trends.

If you think about Bitcoin in comparison, why would the opposite system to this also have a low velocity? We have a system that is requiring more and more debt and more and more money printing for each dollar of output that we want to produce. We need more of those dollars of output to basically, fund that debt. It becomes this really bad, vicious cycle. The question to ask is, why would it not be the opposite? Wouldn't it be more intuitive that the opposite of a debt trap would actually involve an increase in money velocity over the long run? Once Bitcoin is monetized, once we're actually in a system where the Bitcoin is the unit of account.

Trying to take this back to what Guy was saying, and really bringing it into something that's tangible, let's talk about the current problem that we're in and why productivity in this particular quarter was so bad. Like I said, you had more hours worked for the same amount of output, and that's why productivity plummeted. We all know, we've all been reading all the headlines about this labor shortage. I'm actually working on a piece all about this. I have lot of views about why this labor shortage is structural, but that's a whole different rabbit hole.

Let's just take it as a given for the moment, that at least we have a labor shortage right now, and that's affecting our ability to be productive. How could Bitcoin help this? How could Bitcoin help this? First of all, like I just said, when you have more debt, you have less productivity. It's just a classic outcome of the production function, which is you have labor, capital as your inputs. If you have too much capital, you crowd out labor. You crowd out labor's ability to be productive.

Excerpt from:
Discussing Bitcoin Information Theory - Bitcoin Magazine

From left to right: Sen. Cynthia Lummis, R-Wyoming; Securities and Exchange Commission Chairman Gary Gensler; and Sen. Elizabeth Warren, D-Mass. All three are likely to play important roles as the country starts to shape regulations for cryptocurrencies such as Bitcoin. Tom Williams/CQ-Roll Call, Inc/Getty Images; Melissa Lyttle/Bloomberg/Getty Images; Graeme Jennings/Pool/Getty Images/Various hide caption

From left to right: Sen. Cynthia Lummis, R-Wyoming; Securities and Exchange Commission Chairman Gary Gensler; and Sen. Elizabeth Warren, D-Mass. All three are likely to play important roles as the country starts to shape regulations for cryptocurrencies such as Bitcoin.

Cryptocurrency is at a crossroads.

As its popularity explodes, the Biden administration is laying the groundwork to set rules for an industry that has surged in popularity, but has so far fallen into a regulatory netherworld.

That's sparking what's likely to be a heated debate about which agencies have the authority to regulate cryptocurrencies such as Bitcoin and what Congress' oversight responsibilities should be in a market that has grown to $2.5 trillion, or slightly less than the size of France's economy.

Currently, the expectations are that supervision will likely be spread across several regulators, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Yet there's a divergence of views of how tough rules should be, from lawmakers who believe the U.S. should embrace what they see as a financial revolution, to watchdogs alarmed about an industry they say is rife with fraud and bad actors.

Here are some of the key players to watch as that debate takes shape.

Securities and Exchange Commission Chairman Gary Gensler speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing on Sept. 14 in Washington, D.C. Gensler is likely to be a vital voice in shaping regulation for cryptocurrencies. Evelyn Hockstein/Pool via AP hide caption

Securities and Exchange Commission Chairman Gary Gensler speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing on Sept. 14 in Washington, D.C. Gensler is likely to be a vital voice in shaping regulation for cryptocurrencies.

Gensler, a veteran regulator who returned to Washington, D.C., to head the SEC, is perhaps the person who will most help determine the rules on cryptocurrencies.

As head of the SEC, he is tasked with protecting investors and ensuring fair and orderly markets.

At the Massachusetts Institute of Technology, he taught a popular course called "Blockchain and Money."

Confirmed by a vote of 53-45, Gensler has said in speeches and Congressional testimony that cryptocurrencies and related financial products should be subject to greater regulation.

"Right now, we don't have enough investor protection crypto," Gensler told the Aspen Security Forum in August. "Frankly, at this time, it's more like the Wild West."

Crypto-savvy congressmen on both sides of the aisle say they are glad Gensler speaks their language, but lawmakers who want fewer or less-stringent rules worry Gensler and the SEC will put in place tough new rules.

Whatever he unveils, Gensler has said he would like Congress to be involved.

"We need additional congressional authorities to prevent transactions, products, and platforms from falling between regulatory cracks," he said in August. "We also need more resources to protect investors in this growing and volatile sector."

Commodity Futures Trading Commission (CFTC) Acting Chairman Rostin Behnam in a file photo from the agency's website. Behnam is calling for the CFTC to have a major role in supervision of cryptocurrencies. Commodity Futures Trading Commission/Commodity Futures Trading Commission website hide caption

Having served as a member of the Commodity Futures Trading Commission since 2017, Rostin Behnam has been nominated to be its next chairman. (He is currently doing the job in an acting capacity.)

There is a turf war among regulators, primarily between the SEC and the CFTC, about which agency should have the main authority to regulate cryptocurrencies.

During his confirmation hearing before the Senate Agriculture Committee in October, Behnam made the case that the C.F.T.C. should have a bigger role in regulation, even as he acknowledged it would "be a departure from our historical role as a derivatives regulator."

"I think it is important to have a primary cop on the beat," he told lawmakers. "And certainly the C.F.T.C. is prepared to do that if this committee so wishes."

Behnam's argument goes to the heart of another basic question that regulators are grappling with: how to define cryptocurrencies. Currently they can be considered both commodities or securities, a confusion that speaks to the current lack of regulatory clarity.

Treasury Secretary Janet Yellen listens at a House Financial Services Committee hearing on oversight of the Treasury Department and Federal Reserve coronavirus pandemic response on Sept. 30, 2021 in Washington, D.C. Traditionally, Historically, Treasury has overseen the writing and implementation of new regulations across agencies. Al Drago/Pool/Getty Images hide caption

Treasury Secretary Janet Yellen listens at a House Financial Services Committee hearing on oversight of the Treasury Department and Federal Reserve coronavirus pandemic response on Sept. 30, 2021 in Washington, D.C. Traditionally, Historically, Treasury has overseen the writing and implementation of new regulations across agencies.

Historically, the Treasury Department has overseen the writing and implementation of new regulations across agencies, and when it comes to cryptocurrency, it is likely to play a similar role.

It just released a new report written by a group of regulators on "stablecoins" a cryptocurrency that's pegged to a traditional asset like the dollar.

In the report, Treasury called on Congress to clearly determine who has authority overr stablecoins. Otherwise, the Financial Stability Oversight Council, which Treasury Secretary Janet Yellen chairs, could implement new regulations, the report argued.

Sen. Elizabeth Warren, D-Mass., speaks during a Senate Armed Services Committee meeting on Sept. 28. Warren has called for stronger regulation for cryptocurrencies. Kevin Dietsch/POOL/AFP via Getty Images hide caption

Sen. Elizabeth Warren, D-Mass., speaks during a Senate Armed Services Committee meeting on Sept. 28. Warren has called for stronger regulation for cryptocurrencies.

Count Warren, the progressive senator from Massachusetts as a cryptocurrency skeptic. She has expressed her concerns about investor protection or the lack thereof.

Although cryptocurrencies are held by millions, they have also been used by bad actors, including to demand ransomware payments in virtual money. Hackers have also stolen funds from crypto exchanges.

Warren will likely help shape regulations as a member of the Senate Banking Committee, and she believes Congress needs to do more to regulate cryptocurrencies.

"Right now, our regulators, and frankly our Congress, is an hour late and a dollar short," she told Bloomberg TV. "We need to catch up with where these cryptocurrencies are going."

Sen. Cynthia Lummis, R-Wyoming, (R-WY) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on Sept. 28 in Washington, D.C. Lummis calls herself a ""HODler," or somebody who buys and holds onto cryptocurrencies even when volatile. Kevin Dietsch/POOL/AFP via Getty Images hide caption

Sen. Cynthia Lummis, R-Wyoming, (R-WY) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on Sept. 28 in Washington, D.C. Lummis calls herself a ""HODler," or somebody who buys and holds onto cryptocurrencies even when volatile.

Then there are the strong cryptocurrency supporters, like Lummis.

Wyoming's junior senator calls herself a "HODler," which is crypto-speak for someone who has bought cryptocurrency and continues to hold onto it despite its extreme volatility.

Lummis is one of only a few lawmakers personally invested in cryptocurrency, which means she personally could stand to gain or lose from the regulations shaped by Congress.

After her son-in-law introduced her to crypto, Lummis bough her first Bitcoin in 2013, for $330. Today, it is worth more than $60,000, and she has bought more cryptocurrency in recent months.

Lummis, a member of the Senate Banking Committee, is in favor of "light-touch regulation," she says. "We want the innovators to innovate. We want to create a space where the United States is the leader in opportunity for the creation and use of digital assets."

Sen. Pat Toomey, R-Pa., questioning Yellen and Powell during the Senate Banking, Housing and Urban Affairs Committee hearing on Sept. 28 in Washington, D.C. Toomey believes cryptocurrencies could be "as revolutionary as the internet." Kevin Dietsch/Getty Images hide caption

Sen. Pat Toomey, R-Pa., questioning Yellen and Powell during the Senate Banking, Housing and Urban Affairs Committee hearing on Sept. 28 in Washington, D.C. Toomey believes cryptocurrencies could be "as revolutionary as the internet."

As the ranking member of the Senate Banking Committee, Sen. Patrick Toomey has invested in cryptocurrency in Bitcoin and Ethereum. Earlier in his career, he was a currency trader.

Toomey has suggested cryptocurrency could be "as revolutionary as the internet."

Toomey, who will retire next year, has called on his colleagues and regulators "to recognize that open, public networks are here to stay," and he has emerged an outspoken voice against excessive oversight and regulation of cryptocurrencies.

Last month, after China effectively banned mining and trading Bitcoin, Toomey argued it was "a big opportunity to the U.S." to become a global leader in cryptocurrencies.

Rep. Darren Soto, D-Fla. is pictured in April 2014 when he served as a state senator in Florida. He's co-chair of the Congressional Blockchain Caucus. Phil Sears/AP hide caption

Rep. Darren Soto, D-Fla. is pictured in April 2014 when he served as a state senator in Florida. He's co-chair of the Congressional Blockchain Caucus.

Rep. Bill Foster, D-Ill., speaks AT at a House Select Subcommittee on the Coronavirus Crisis hearing on Oct. 2, 2020, in Washington, D.C. , He has been skeptical on cryptocurrencies. J. Scott Applewhite/AP, Pool hide caption

Rep. Bill Foster, D-Ill., speaks AT at a House Select Subcommittee on the Coronavirus Crisis hearing on Oct. 2, 2020, in Washington, D.C. , He has been skeptical on cryptocurrencies.

Rep. Warren Davidson, R-Ohio, listens during a House Financial Services Committee hearing, on Sept. 30 in Washington, D.C. He worries that Congress is moving too slowly to set rule for cryptocurrencies. Al Drago/Pool via AP hide caption

Rep. Warren Davidson, R-Ohio, listens during a House Financial Services Committee hearing, on Sept. 30 in Washington, D.C. He worries that Congress is moving too slowly to set rule for cryptocurrencies.

A diverse cast of lawmakers are also likely to help shape the future of regulation for cryptocurrencies.

Take Rep. Darren Soto, D-Fl., for example, who acts as the co-chair of the Congressional Blockchain Caucus.

He's spent most of his time in Congress focused on technology issues, and he says he sees a lot of possibility in cryptocurrency as an "emerging technology," although he is also worried about how bad actors use the cryptocurrency.

Or Rep. Bill Foster, D-Il. On Capitol Hill, few lawmakers have as strong a grasp on the technology underpinning cryptocurrency as Foster, who has a Ph.D. in high-energy particle physics from Harvard University.

Foster is skeptical of cryptocurrency he has concerns about the environmental impact of Bitcoin mining, for example.

There's also Rep. Warren Davidson, R-Ohio. A member of the House Financial Services Committee, Warren Davidson started paying attention to digital payments in the mid-2000s, he says.

Davidson worries that Congress is moving too slowly to set rule for cryptocurrencies.

"Industry is basically pleading, 'Give us some regulatory clarity,'" Davidson says. "We should be able to address this, and we could, and we can do it quickly."

Go here to read the rest:
Who to watch as a fight looms over the future of Bitcoin and cryptos - NPR

On Friday, Congress passed the $1.2 trillion infrastructure package, sending the legislation to President Joe Biden for his signature. But while the measure makes historic investments in roads and bridges, it also maintains a controversial new cryptocurrency tax reporting requirement that the Treasury Department could apply to miners.

Bidens Infrastructure Investment and Jobs Act requires brokers to report trader information on transactions of more than $10,000 to the IRS. The provision was added to the Senate version of the bill in late July after the Joint Committee on Taxation estimated that it would offset $28 billion of infrastructure costs over the next decade.

But the cryptocurrency community is more concerned about how the bill defines a broker more than the new tax requirements it imposes on them. Industry groups and think tanks, like the Chamber of Digital Commerce and Coin Center, have argued that the bills current language is too broad and vague and could impose these reporting requirements to miners and wallet developers, not just brokers like Coinbase.

Senators that are sympathetic to the cryptocurrency industry, like Sens. Ron Wyden (D-OR) and Cynthia Lummis (R-WY), tried to remedy the problem over the summer before the Senate passed the bill, joining with Sen. Pat Toomey (R-PA) for an amendment clarifying the role of brokers in the legislation. But the amendment was shot down when Sen. Richard Shelby (R-AL) objected to a unanimous motion to approve it in August. Shelby previously chaired the Senate Banking Committee.

Shortly after the Senates passage of the bill, the bipartisan Blockchain Caucus sent a letter to every House lawmaker calling on them to help fix the crypto pay-for.

Cryptocurrency tax reporting is important, but it must be done correctly, the lawmakers wrote in the August letter. When the Infrastructure Investment and Jobs Act comes to the House, we must prioritize amending this language to clearly exempt noncustodial blockchain intermediaries and ensure that civil liberties are protected.

Despite any efforts to change the language in the House, the problematic broker definition remains in the final bill.

In a statement to The Verge on Tuesday, Lummis said that she was working on a permanent legislative solution. The digital asset broker language in the infrastructure bill was problematic from the start, Lummis said. Im disappointed that the House wasnt able to rectify this language in their version of the infrastructure bill, and Im working on new legislation to make sure there is a fix to this.

Once Biden signs the legislation, the Treasury Department will have the sole authority to decide what entities would be considered brokers. A Treasury official previously told CNBC that it wouldnt target miners and hardware developers, but that promise doesnt prevent new administrations from going after them in the future.

Cryptocurrency groups are already preparing to bar the Treasury from changing its mind on miners in the future. Neeraj Agrawal, director of communication for Coin Center, said that the group would be pursuing legislative fixes to constrain the new language more permanently in a tweet on Monday. Its unclear what this remedy could look like as of publication.

Aside from the cryptocurrency reporting rules, the infrastructure package includes billions of dollars to improve roads, bridges, and other physical infrastructure across the country. The measure includes $65 billion to connect every American household to high-speed broadband over the next 10 years. Theres also $7.5 billion to build over half a million EV charging stations.

At a Monday White House press conference, Transportation Secretary Pete Buttigieg said that the bipartisan infrastructure deal will now become the law of the land but declined to answer additional questions on when to expect Biden to sign the bill. The White House has yet to announce the timing for a future signing ceremony.

Updated 11/9/21 at 1:34PM ET: Added a statement from Sen. Cynthia Lummis (R-WY).

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Controversial Bitcoin tax provision passes Congress with infrastructure bill - The Verge

Mining Bitcoins is a complicated process due to its intricate nature.

The world of cryptocurrency is growing by leaps and bounds every day. Unlike regular currencies that are printed, these digital assets, including Bitcoin the world's largest and oldest cryptocurrency are mined. It's the process of gaining a cryptocurrency by solving cryptographic equations using a massive computing system, electricity, and expensive software. So, if you want to know more about cryptocurrency and Bitcoin mining, read on.

What is Bitcoin mining?

If you have only heard of buying or selling Bitcoins, the term mining' may be a new one for you. But it is true that you can make your own Bitcoin if you have the required machinery. The cryptocurrency is created with the help of a complex and highly technical process. Post mining, new Bitcoins are introduced for circulation. However, crypto mining is not just about creating new coins. It also includes validating the cryptocurrency transactions on the blockchain.

How to mine Bitcoins?

Mining Bitcoins is a complicated process due to its intricate nature. To make it simple, let's take an example of precious metals and the way they are mined. For gold and silver, the person mining them extracts them through excavation. However, a person mining cryptocurrency will have to add new coins into circulation. For this, complex mathematical equations need to be solved.

How does it work?

To mine Bitcoins and other cryptocurrencies, you'd require huge processing power. The higher the processing power of your computer, the higher will be the mining speed and profit. You need computers that have software specially designed to solve complex mathematical equations. Mining Bitcoins constantly needs an active internet connection.

To mine Bitcoins, you need a GPU (Graphics Processing Unit) or Application-Specific Integrated Circuits (ASICs). These are the two methods of mining cryptocurrencies. As far as the GPU method is concerned, the computational power is increased with many GPUs that work together. However, talking about ASICs, they can produce more coins as compared to GPU but they are very expensive.

Bitcoin mining pools

If you cannot opt for your individual mining devices, you can go ahead and join a mining pool where your resources are clubbed with other people mining the coins. This will ensure enhanced processing power and improved results. This sounds good and better, right? However, you have to distribute the final output among all the miners involved in the mining pool. You wouldn't be able to earn the rewards solely as you could have done while mining individually.

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All You Need To Know About Bitcoin Mining - NDTV Profit

When hundreds of thousands of people in the Democratic Republic of the Congo (DRC) fled their homes after the eruption of the Mount Nyiragongo volcano on May 22, a blogger and a fledgling restaurant worker teamed up in the city of Goma and used bitcoin to help displaced families.

Chainglob crypto news founder Gloire Wanzavalere went to the makeshift refugee camp that sprang up nearly overnight, offering to give away bitcoin to displaced families.

He recruited by word-of-mouth, asking people if they knew someone who lost their home. But he quickly found that most of the families had already traded their phones for food. They also left most of their belongings behind, so didnt have the paperwork needed to open new bank accounts or acquire new devices.

These people lost everything. I understood it was rational for them to sell what they had left in order to buy food, Wanzavalere said. So we bought phones for eight people12 people benefited from our initiative, four among them already had their own smartphones.

Wanzavalere was inspired by online news of the bitcoin Beach project in El Salvador, which he said proved poor people can still use bitcoin despite the technical challenges and volatility.

Coming to their aid with bitcoin was a more powerful act than any marketing campaign could be. Thats when we told ourselves, OK, were going to do this in Congo, the crypto-focused blogger said.

They started with a small, circular workflow. Wanzavaleres mother owns a small shop in town that sells basic hygiene supplies and nonperishable goods. She agreed to accept bitcoin using her mobile phone, relying on apps like Wallet of Satoshi and Phoenix Wallet.

Because she is very excited about the idea of helping people with bitcoin, she is considering the option of bringing a few essential goods closer to the refugees, so they can buy what they need without going too far into town. But its a complex question in part because of security concerns, Wanzavalere said.

Meanwhile, Juvin Kombi, who works at Jikofood Restaurant, was busy this past summer setting up his companys first Lightning Network node. This allowed the restaurant to accept bitcoin payments without high transaction fees or long confirmation times. By September they were up and running, using the restaurants PC and sometimes their own personal smartphones when needed. Their preferred mobile wallet apps are Muun Wallet and Blue Wallet.

The learning process was very long, but the minimum research we have done has helped us understand bitcoin without any support, Kombi said. We realized that it was easy to set up. A simple wallet and an internet connection are sufficient. In addition, we are studying the possibility of setting up BTCPay Server in the near future.

So far just a few of the restaurants clients use bitcoin, Kombi added, including the displaced people Wanzavalere distributed the bitcoin to. However, they hope that as more people in the community learn about bitcoin that this payment option will set the small restaurant apart from local competition. The restaurant often hosts educational workshops for customers who want to learn more about using bitcoin.

Wanzavalere said he can relate to Kombis statement that bitcoin education takes a long time. Wanzavalere first discovered bitcoin after falling prey to an online scam in 2017. That inspired him to do more research into digital assets, and eventually start his own local crypto news blog.

The Congolese population is suffering greatly; it never had any stable currency except the U.S. dollar, Wanzavalere said. I am not a journalist. However, I started to write about bitcoin issues in Africa because there was a lack of information on the subject in French.

In the meantime, he fundraised for this grassroots program by inviting international bitcoin fans to participate in a Lightning Torch. First, he tweeted that anyone could join the torch, a chain of Lightning Network transactions created by strangers sharing an invoice and sending small amounts of bitcoin to pay it forward to the next invoice holder.

In total, 18 people contributed. Then the entirety of the funds were sent to me to be distributed to the beneficiaries, Wanzavalere said. In less than three hours, all the beneficiaries mastered it, learning how to receive and send money using a bitcoin wallet, which shows that in practice the Lightning Network isnt that complicated to use.

Next, Wanzavalere added, he plans to teach beneficiaries how to run a node, like Jikofood Restaurant does, in case they want to help expand the local bitcoin economy to include more small businesses that fully control their own funds. He may also hire some of the beneficiaries to work for his crypto blog.

We plan to raise more money to help an even larger part of the suffering population, Wanzavalere concluded. The money collected by the torch event was meant to be distributed without anything in return. However, this is a long-term idea. Paying the refugees in bitcoin for freelance work could be a source of more community engagement.

Editors note: French translation by @vallard14

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How African refugees used bitcoin to build their own grassroots economy - TechCrunch

The below is from a recent edition of the Deep Dive, Bitcoin Magazine's premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

As the bitcoin price hits another all-time high, lets dig into the behavior of what older coins are doing on the network. Their behavior helps determine the current state of market sentiment.

The spent volume age bands for coins older than three months helps to paint a clear picture of what happened at the previous all-time high. There was an increasing trend of older coins (supply greater than three months of age) being spent as price was bid up by new market entrants. The peak in spent volume share during this trend preceded the blow-off top in price back in April.

Since then, that activity has reversed trend with a few small recent events of older coins being spent over the last few weeks. This can indicate strategic profit taking in the market as a one-off type event, or as a potential new increasing trend of more older coins being spent as price rises. This all depends on how the holding conviction of participants has changed this cycle, and finding what levels of higher prices incentivizes more profit taking.

Even with the latest increase to spent volume, the older coin activity is still only 4% of supply being spent, which didnt have much downward impact on price as it recently broke new highs. Taking a deeper look at coins older than one year of age, the latest spent volume of this cohort is still relatively small at 1.5% of supply compared to over 4% of supply being spent on a consistent basis at the previous peak.

As older coins are spent, they are reset and become younger coins again. We can see that in the HODL waves for supply less than three months old which is starting to show some increases in the one-week to one-month age band.

Historically, the percentage of supply less than three months old will peak with all-time highs during bull market cycle runs. This marks a period where new demand buying and long-term holder selling is exhausted. Were far from this peak period and currently still at five-year lows.

So far, the older spent volume hasnt had much impact on this percentage of supply share yet. This indicates that we are just in the beginning stages of more long-term holders willing to sell to new market entrants. Like the bull market cycles in the past, we would expect to see this share of supply rise as olders coins are distributed to new market players.

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As Bitcoin Hits All-Time High, What Are Older Coins Doing On The Network? - Bitcoin Magazine

An altcoin project aiming to merge blockchain technology and wireless networks is in the midst of a rapid rise, far outperforming Bitcoin (BTC) and the altcoin markets at large.

Helium (HNT) shot from a low of $29.60 last Thursday to $54.05 in just seven days a staggering 82% rally.

The token is now the 43rd-largest crypto asset on the market, with a $5 billion market cap.

Helium aims to build a fully decentralized and global wireless network powered by open-source technology.

The platform is designed to allow people and organizations to operate WiFi hotspots and earn HNT as a reward for powering the network.

HNTs rally comes as the platform completes its first on-chain governance vote, allowing owners of the crypto asset to play a role in shaping the projects future.

It also follows an announcement from DISH Network late last month detailing a new partnership with Helium.

The internet service giant says it will be the first major carrier to utilize Heliums blockchain-based incentive model and allow customers to install their own 5G hotspots.

DISH Network is an early adopter of blockchain technology and first began accepting Bitcoin back in 2014.

DISH also announced a partnership with IOHK, the company behind Cardano (ADA), in September.

The two organizations are exploring strategic ways to further leverage blockchain technology with wireless communications.

Featured Image: Shutterstock/bestfoto77/Natalia Siiatovskaia

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Altcoin Project Targeting WiFi Revolution Outpaces Bitcoin and Crypto Markets, Soaring 82% in Seven Days - The Daily Hodl

Ken Griffin Founder and Chief Executive Officer at the multinational hedge fund Citadel LLC remains skeptical on bitcoin and its use cases. He believes that another cryptocurrency project such as Ethereum will become the most dominant in the digital asset universe.

Despite its ups and downs throughout the year, bitcoin has more than doubled its value in the past eleven months. Institutional adoption and significant support from prominent investors and entrepreneurs, some of whom often describe it as a great store of value, are among the factors that propelled the asset towards its current heights.

Separately, BTC even became legal tender in El Salvador in September, pushing its way through on a national level.

However, its not all sunshine and rainbows, and the primary cryptocurrency has its critics. One of them is Citadels CEO Ken Griffin. In a recent interview with DealBooks Andrew Ross Sorkin, he opined that bitcoin is too harmful to the environment, has low transaction speed, and is vulnerable to fraud activities.

Keeping these disadvantages in mind, Ethereum or another cryptocurrency based on its blockchain, which would have a smaller energy footprint and lower transaction costs, will steal BTCs dominance, he added.

The billionaire investor and owner of the Dallas Mavericks Mark Cuban also went in favor of Ethereum and its native token recently. According to him, beginners in the cryptocurrency industry should select ETH as an investment choice as it has the most upside potential.

Griffin also touched upon the rising inflation and financial crisis that started shaking most economies. He doubted that cryptocurrencies could solve those monetary issues, hinting that a digital dollar could be more beneficial in the initiative.

Still, he seems to support blockchain calling it a really interesting technology and a powerful way to maintain a decentralized ledger around the world.

In one of his previous appearances last month, Griffin once again bashed bitcoin and the alternative coins, claiming they could harm the American dollar. He further said it is a Jihadist call that some put their trust in digital assets instead of the national currency of the USA.

Even though Griffin does not fit as the biggest believer in the merits of cryptocurrencies, his organization would still offer its clients such exposure if there is regulatory clarity in the space:

We dont trade crypto because of the regulatory uncertainty. It will become a far more competitive market when theres regulatory clarity and that would be good I would trade it because it would meet the needs of our brokerage partners who want to have a tier-one firm making prices.

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Citadel CEO: Ethereum Is Superior to Bitcoin And Will Eventually Replace it - CryptoPotato