The Future of Bitcoin – Bitcoin As A Reserve Asset presented by Tuur Demeester at Bit Block Boom.
Blog post by Cousin Edgar Stumblefield.
Local government trying to raise taxes from a construction company. It could only be done in kind, so they had them build something that was not needed, but served as the payment for their taxes.
If Bitcoin was around during the time that many countries had financial problems, it would have given the country an alternative currency to work with.
Minsky moment ; happened in Russia ; 1998 ; sudden major collapse of asset values ;
Parent Population → Bottleneck (drastic reduction in population) → Surviving Individuals → Next Generation ;
Credit Boom → Minsky Moment → Next Generation
If Bitcoin is the only source of capital…
Adoption is non-intuitive
Adoption we have seen so far has been driven by engineers. That is going to continue with Generation Z, but it is also going to happen with the older generation as well. They will not even know they are being exposed to Bitcoin adoption. Might be disillusionment if some of these hopes do not come to fruition soon.
“Hidden adoption” is coming
4 weeks in the past 5 years ; then there were only 3 weeks when it went up 3 percent
Bitcoin ; 1 week with a serious draw down ; then 2 weeks of price rise ; then 2 weeks of rise ; can be very volatile, but…
Central bank asset? Originally the money had value, but over time it has because fractured ;
History of reserve assets
Back in the day, it was only gold, but the Breton Woods agreement among the various countries to get countries to go off the gold reserve ;
From gold to flat fragmentation
“Gold reserves” – gold bullion held by banks or central banks
IMF's definition of “Reserve Asset”
- readily available
- value shouldn't depend on country's residents
Central bank asset?
More and more countries are starting to buy exotic assets ; many are becoming more positive about Bitcoin
Federal reserve act was founded after a large banking crisis ; allows banks to bail out each other ; problem is that it concentrates the risk ; there may be a push for a federal reserve push
- Stress tests
- Custody tech: multi-sig, federated sidechains, time locks
- Legal: Bitcoin needs currency status
- Insurance: DTCC / Reinsurance / Central Bank?
- Division of labor
Right now, there is not an exchange standard ; there are some technologies coming out to help with that ; if there is a Man In The Middle Attack, there may be something in place to help to keep the coins from going to the hacker ;
- Bitcoin is…
- a superior savings asset
- a candidate reserve asset
- Minsky Moments can lead to HyperBitcoinization
- After Fork Wars (2017), next is Custody Wars
Tether , started in 2013 or 14 , tokens put into a storage and represent real dollars ; whether it is legitimate? I am afraid the dollars backing Tether may be deemed as fraudulent ;
Custody Wars – I mean there is going to be tension, governments are going to veer to one or the other model ; there are going to be different attentions given to different things ;
Outliers in Bitcoin ; research has been done, let's say you hold it for an average year, and take away the 10 best days, your line graph would be flat ; it may be because there is a repetitive bubble of word that goes around that Bitcoin is going up, more people buy it, etc. which affects the last few days on a cycle ;
Q: Could you address some of the rumors of Switzerland laws favoring robust custody solutions?
A: When it comes to off short jurisdiction, there is roughly two categories ; all of the off shore jurisdictions have been having problems due to having to reveal the information of the owners so that they can be taxed ; Banks are inundated with requests for custody solutions for Bitcoin ; there are Bitcoin companies that are buying up banks ;
Bitcoin gives you optionality ; you can bury it in your garden ; there is an enormous range ; also allows for auditability which is not true for traditional banks ; the way Bitcoin technologies works allows places to have your keys without getting into your Bitcoins ;
Tuur Demeester is founder of Adamant Capital and is currently ranked as the ninth most influential personality in the industry by cryptoinfluencers.io. He previously co-founded the Rothbard Institute and is an investor in the Bitcoin exchange Kraken. In January 2012, Tuur added Bitcoin (trading at $5 at the time) as part of the recommended currency basket of the Dutch-language investment newsletter he publishes, MacroTrends.
How to Get Your Cryptocurrency STOLEN presented by Ray Redacted at Bit Block Boom.
Blog post by Cousin Edgar Stumblefield.
Main Issue With Theft
Maturity with cybercriminals and cyberdefenses. The criminal maturity is much higher than cyberdefenses. If you are trying to break into cybercurrency, currently the benefits are very high, and the probability of being caught is very low.
With cryptoassets once your password is gone, it is gone (you can't ask to have your password reset) ;
Hygiene: The processes used to stay healthy
Password , Patch , Situational and Patch Hygiene
10. Bad OpSec
Ex: Taking a picture with a post it note in the background with your password ; posting messages on FB and Twitter bragging about how much money you are making with cryptocurrencies – thieves are more likely to go after those who are making a lot of money with crypto.
Open Source intelligence – can reverse engineer pictures to get your information
WiFi OpSec can hack into Wifi. Most likely to happen at a cryptocurrency convention.
MiTM (Man In The Middle) Attacks:
But I use a VPN! The problem with VPNs is that you add the VPN into the MiTM ;
- Use Custodial Sites ; Ex: Cryptopia or Mercatox ; KYC Paradox ; having to take a picture of your driver's license, or passport, and send it to places where you have no idea what their security is like.
If you don't own your private key, you don't own your bitcoin ; not just sharing it, or getting it to use ; it needs to be one you generate and control completely yourself.
- Avoid Airgapped 2FA and Hardware Wallets
Hardware Wallets ; less than 1 in 100 have a hard wallet
- Username and Password Re-Use ; when you use a password across various platforms, once one site is breached, it makes the other sites susceptible.
On your gmail account, you can create various email aliases ; example firstname.lastname@example.org can have email@example.com
- Airdrops & Twitter Scams ; Ex: give away free tokens if someone sends you their private key ;
5. Ransomeware ; use to be most popular, but now is cryptojacking (using someone's computer to mine) ;
4. Die – most people do not have a specific plan in place on how their cryptocurrencies will be handled when they have passed on ; can set up a dead man's drop ; can work with an attorney
3. Skip MultiFactor Entirely ; most people skip this ; #1 way to help keep your account from being hacked ; DO NOT depend on SMS ; MFA or “Have a Nice Day” ; any financial website you access should access MFA, otherwise you should not use that financial website ;
2. Use SMS instead of MFA
1. Social Engineering – Ex: Jimmy Kimmel sent someone on the street to ask people about their passwords and people would easily give out their passwords as the interviewer brought it up in the conversation ; when online, don't ignore pop up warnings ;
Ray Redacted is a network and Information Security researcher with 20 years of expertise in cyberdefense research, application solution design, and next-generation network architectures. Ray is a frequent writer, researcher, and speaker on topics such as encryption, malware reverse engineering, and the advanced persistent threats facing international law enforcement agencies. In addition to a degree from Purdue University and numerous industry certifications, he also has many years of front-line experience in the prevention and mitigation of attacks from cybercriminals, hacktivist groups, and nation state actors.
The Time Value of Bitcoin and Bitcoin Capital Markets presented by Nik Bhatia at Bit Block Boom.
Blog post by Cousin Edgar Stumblefield.
- BA in Economics from USC
- Masters in Finance, IE Business School, Madrid, Spain
- CFA charter holder
- Lightning Network is without counterparty risk, but has security risk, payment channel management risk
- Lightning allows for interest rate calculations
- We should develop a reference rate using these calculations
- Reference rates anchor the entire capital market, this is why bitcoin needs LNRR
- Bitcoin Risk Spectrum, credit spreads
- Vision for the future
If your bitcoin is not in cold storage, it is in a hot wallet, however, Lightning network is still good for Bitcoin
We can calculate interest in Lightning channel payment channels, but there is not, at the present time, a set way to do so. There is some talk on money made, but it has not been expressed as an interest rate.
- Fees, time-value , and security risk premiums are discussed in the The Bitcoin Lighting Network: Scalable Off-Chain instant Payments by Joseph Poo and Thaddeus Dryja
- A = P * ( 1 + r ) ^ t
- P = starting balance in LN payment channel(s)
- t = time of blocktime
- A = P + all routing fees collected
- Solve for r to determine interest rate
You can decide what you use for “t” (blocktime or earth time) ; you can also use hash time ; I do not have a magical solution as to what you should use for this equation ; the conversation needs to be had as to what should be used for these variables
LNRR (Lightning Network Reference Rate)
- Rates are published on a payment channel / HTLC / LN node level
- Rates are cryptographically provable due to hashing on all necessary inputs
- Rates are then published and averaged to form LNRR, somewhat following a LIBOR model (London interbank offered rate)
US Dollar Reference Rates
- US Treasuries are the “risk-free” rate, however any government can default at any time. The US Treasury is considered the most reliable (which is why money is lent at this rate plus a certain amount)
- LIBOR is an inter-dealer rate
- OIS (Overnight Indexed Swap ) is a swap rate using Fed Funds
- SOFR is a new repo-based reference rate
- US Dollar relies on one country
- US dollar relies on discretionary monetary policy
SOFR started by the Federal Reserve due to the manipulation of LIBOR. Took 2 or 3 years and thought of different ways for a reference rate. They take out the tails and come out with an average. Reference rates do not just happen. They have to be planned, so we need to plan out a rate for the Lightning Network. Over time can determine which works better than others and come up with a consensus.
US Dollar Risk Spectrum
- Corporate bonds, structured products, global agencies reference these rates for pricing, and investors use for relative value comparisons.
The more likely the product is to go up and down in value, the more risky it is viewed. Risk assessment is a moving picture due to the changing of variables and factors.
Bitcoin Risk Spectrum
- bitcoin in cold storage
- counterparty risk
Cold storage is the lowest risk level on the spectrum for bitcoin. Cold storage is the foundation for this capital market. Once you start to take counterparty risk, those keys are longer yours. They are controlled by ETFs , other corporations, etc. Some would rather take the counterparty risk because they trust the counterparty more than themselves (not confident in their own OpSec).
Example, I have some bitcoin in cold storage, I want to start a Lightning Node, but don't want to take a big counterparty defalt risk. Again, it is not risk free, but it is a different type of risk than if you lent your bitcoin off chain. When you do that, you take your bitcoin off chain, you are at the mercy of that person paying that you back (especially if you do not have any written agreement). If I am going to lend money on an exchange, you can ask for an interest rate above today's LNRR rate.
LNRR is potentially exciting because it gives the possibility of lending at a certain rate for off chain lending.
What is the difference between a loan at a bank or a bitcoin? If you had millions of dollars, you would have a liability risk. You put it in the bank, the bank now carries the risk. If you buy a treasury bond, the US Government now carries the risk.
- Hashing of necessary variables
Banks publish the interest rate to each other. They would prefer not to do this due to competition, but it is best to do so for the benefit of the market.
Reason LIBOR was manipulated was that those banks could make a little more money by bumping the rate in their favor ;
- bitcoin-denominated banks
- Hashed credit ratings
- Debt capital markets in your palm
- Reserve currency status
If a person borrows money through bitcoin, what if that person had a way to prove that they paid the money back? Then they would be able to increase their credit rating. Hash credit ratings could solve the problems of fake ratings in the lending world.
The word ‘banks' does not seem to be the prettiest word in the Bitcoin world. Maybe Lightning Network nodes can be developed to that kind of world. Would be nice if people could have access to off chain lending with a hash provable credit rating. We should have new words for bitcoin trading and lending.
Q: Do you think it is possible to create something that keeps someone's anonymity and still give someone a way to prove their credit worthiness?
A: That would be great if someone could keep their anonymous status and improve their credit rating ;
Nik Bhatia, a CFA charter holder, has worked at Payden & Rygel since 2016. At Payden & Rygel, a Los Angeles based investment firm, Nik currently works as an Investment Manager where he trades US Treasuries, interest rate futures, and other assets worth over $100 billion. His goal is to bring a capital market to Bitcoin in order for it to achieve status as a global reserve currency. Nik received his Bachelors in Social Sciences (Economics) from the University of Southern California in 2011, and received his Masters in Finance from IE University in Madrid, Spain in 2013.
What is mining?
What Should You Know Before Buying an ASIC Miner presented by Mike Clear at Bit Block Boom.
Blog post by Cousin Edgar Stumblefield.
Think of it like a really long math problem that requires some serious computation
Mining performs two key functions for Proof of Work (POW) algorithms
Mining confirms network transactions in the case of Bitcoin
Miners are rewarded / issued bitcoins as a reward for successfully completing the computation
What's proof of work?
Run your own full node (or prove you can do it)
Match hardware acquisition in current bitcoin holdings
Scale your initial investment to <5% total net worth (including current crypto holdings)
If you own one Bitcoin and you want to convert to 10 SO's
Then, your net worth is > $250,000.00
Measure ROI with mined coin as unit of account
Hobby or business?
Power / Electricity
Management Software: great for 1 or many miners
Hardware: ASICs, GPU Rigs, Cloud?
Solo, or Pool, Multi-pool, or coin specific?
Hobby or Business?
Plan for the financial implications of mining: #TAXES
Hard lessons in electrical work can be prevented by hiring a licensed electrician
Avoid running big ASIC's on 120v Power (it really does need this)
Plan for more power than you think you'll need.
If you happen to own a couple MW in solar, today's your lucky day!
Jumping around into many mining pools is not going to make your money ;
Bitmain is know for being controversial, but also makes a wide variety of hardware. Algo's including: SHA-256, SCRYPT, X-11, and SIA
Bitmain machines, the first 15 minutes you are mining on Bitmain's behalf ; you can use some proxies so that it will be mining for you ;
How long do they last?
Different users report different experiences
I've found that the more recent equipment lasts for 12+ months, and generally remains relevant throughout.
How much will I make?
It is impossible to say exactly what your mining investment will produce, but you can make an educated guess.
Most miners keep a detailed record of difficulty, estimated global hash power, and their own equipment hash power.
Online calculators can help in assessing future growth: Examples: whattomine.com ; coinwarz.com ;
Q: Do you have an exit strategy? What do you think of POS?
A: I think my exit strategy is to let things play itself out. I sell my miners as I use them. Typically my miners sell before I try to get rid of them, then I can turn around and buy two more. The only thing that has kept me from getting greedy is electrical power, otherwise I would mine until I got tired of mining.
Q: One of the allegations against Butterfly labs, they were pre-mining and then selling used machines. Have you ever seen evidence of this?
A: I have only seen that in refurbished machines, where they were used, sent back, repaired and then sent to me, but that is probably due to bench testing because you have to run the machine to know that it will run. The way you can really tell is by looking at global hash power. When it climbs at an exponential rate, then there are probably lots of miners being used. I don't have solid evidence, but there are some weird things happening in hash rates.
Q: Despite prices falling, is it possible that people are just really interested in mining?
A: I would say the answer is ‘no' because any person, business or hobbyist, unless motivated by animal spirits, are going to do it [mining] either because there is a gun to their head or that its profitable.
Q: Company in Japan is developing their own chip. nVidia is developing CPUs so how do you see the landscape changing in the future?
A: I think Moore's law is going to come into play. Companies are trying to create machines they can either sell to the miner or the gamer. I do see the landscape changing but not fast enough. I do make a solid effort to diversify as much as I can, but the cost is a huge motivator in what you should buy. For Bitmain, a couple of years back they only sold one type of machine, now they sell so many other machines. If you want to keep going with a miner, just don't forfeit your coins just because. After I ran the math, it was stupid to part with my bitcoins.
Mike Clear, owner of myhash.io, is Director of Business Development at Watchman Payment Systems. In his role, Mike helps companies secure payments between non-traditional funding sources such as financial aid, points, or other non-fiat balances utilizing software which delivers instant payment to approved vendors in the form of a one time use digital credit card. One such solution, known as Automated Bursar Billing enables college students to access their financial aid using only their student ID to purchase authorized goods & services, such as educational materials, prior to the start of classes.
Effectively Evaluating Cryptocurrencies presented by Austin Akers at Bit Block Boom.
Blog post by Cousin Edgar Stumblefield.
I am not a certified Financial Adviser
This is only for educational purposes
More about the Speaker
Sr. UI Engineer at All-State
Founder of Cryptoplex Management
Co-Organizer of free CodeCamp Dallas Chapter
How many of you have been hit with an ISO scam, or just dealt with something that did not go as you had hoped?
How many of you actually do research?
What are your resources?
How often do you keep up to date with your holdings / market?
What are your methods of approaching your evaluation?
1- The Software Developer Approach
Baseline of excellence – look at the accolades the person has gotten (ex: someone could have 15 years experience, but have done the EXACT SAME THING for 15 years)
Technical – how well do they know the tech behind the project
Social – too many “mad scientists” in the room can be harmful
Substance (ex: updating documentation, or changing the spelling of the word is not much of a contribution)
Ex: A person talks about Fastcoin, which clears the blockchain in 12 seconds ; on social media, the person has lots of posts, but last Github comment was in 2014.
Technical Goal Achievable / Logical
Consult a developer
Have them evaluate the milestones and codebase
2- The Business Approach
Look into every team member
Social Media – LinkedIN ; Facebook ; Instagram ; Twitter ; Forums ; Myspace
Evaluate their content
Evaluate the Whitepaper – What do I look for?
Is it clear and are there misspellings?
New Market vs Current Market Analysis (Cross-competitor analysis)
Vision – what are you looking to achieve?
Scope – is your vision remotely possible?
3 – The Financial Approach
Evaluating Market Cap, Volume
Look at Total / Circulating Supply
Check top wallets holding it
Market Cap, Volume, Circulating Supply, Price, and Current Exchanges
There is a relationship between market cap , volume , price , circulating supply
Length of Operation
Reputation in the Market
I go through a lot of forums and blog posts to check on the reputation of the exchanges ; Ex: Mt. Gox ; Had 3 breeches ; After 3 breeches I would not have my money in there ;
Some countries have loopholes on how they can get to your money. Be aware of this
Some exchanges have a high amount of people ;
If your exchange is down 5 hours out of every month, then that is time you are not making money ; you have to take this kind of thing into account ;
Pump and Dump
Spoofing (ex: have someone set a ridiculously high order that is never meant to be met)
Market making – random spike in volume to show there is interest in that crypto ; not necessarily bad, but you will want to be aware of this
Q: What are the top 3 exchanges you like to use?
A: Coinbase ; my most trusted ; I also have Bittrex ; and Ford Delta
Q: Besides Bitcoin, what is another project you would look at?
A: I tend to stay agnostic when it comes to Bitcoin, but I read code a whole lot; over Bitcoin, only Sego(via) would I say is the most promising; their transactions per second, theoretically, about 1 million per second; I already pulled their SDK and have been looking at it and their Ruby backend ;
Q: What do you think about Populus?
A: Ah, the one that is looking to do invoice disruption?; Let's say I have a business, and I get an order for 50,000 T-shirts; I go to the bank, and get a loan; there would be a ridiculous amount of interest; you fulfill the order, and then pay the bank back; What Populous allows is the the same thing, but decentralizes this kind of loan; Populous utilizes all the same algorithms that the other banks would use, but can still fulfill the invoice; the investor gets to set the interest rate.
Austin Akers is currently a Sr. UI Engineer at Allstate. He currently does Full-Stack and Solidity Development. Austin is heavily involved with developing junior developers, and encouraging community building in the DFW Startup Community. He is a co-organizer of the free CodeCamp Dallas Chapter, on the Board of Advisers for NoD Co-Working, an active member of the DFW Startup Community, Volunteer for Homeless Nexus and the Prison Entrepreneurship Program and a huge advocate for the utilization of blockchain technology for web applications.