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4 Lies Your Economics Professor Will Tell You About Bitcoin

· May 31, 2018 · 9:00 pm

Stop trying to reinvent the monetary wheel with Bitcoin, argues Robert Skidelsky, a member of the British House of Lords and professor emeritus of political economy at Warwick University.

[Note: This is an op-ed]


Old Man Yells at Bitcoin

In an article published last week, Skidelsky draws similarities between gold and Bitcoin, concluding that it’s incorrect to perceive flaws in money itself as the cause of “sick” economies. In other words, boom and bust cycles are natural occurrences, and the incumbent financial system is the best humans can do, if only the sluggish economies could just get it together.

Skidelsky argues:

The fact is that human societies have discovered no better way to keep the value of money roughly constant than by relying on central banks to exercise control over its issue and to act directly or indirectly on the volume of credit created by the commercial banking system. 

Old man yelling at Bitcoin

But let’s leave the Keynes versus Hayek debate for another article. Instead, what stands out like a sore thumb is not only the complacency and the knee-jerk reaction to defend the status quo, but doing so through ignorance of Bitcoin’s fundamental properties.

Amusingly, Skidelsky even acknowledges that “the technical details of the new cash-generation systems are difficult to grasp; their inspiration is not.”

A person from the early 20th century might have also said that “the technical details of the airplane are difficult to grasp; their inspiration is not.”

Hence, the mere attempt to improve money is rebuked because all previous attempts have failed to come up with anything better than the paper mill that is today’s financial system. Skidelsky dismisses Bitcoin as merely the latest attempt to use new technology “to stop money from going bad.”

Let’s take a look at some examples of the erroneous statements made by the emeritus of political economy.

Lie 1: It’s Created Out of Nothing

Paradoxically, although it is created out of nothing, it will offer no possibility of money ‘creation.’

First, bitcoins aren’t created out of “nothing.” Second, since it’s already being accepted as a medium of exchange in many places online and across the globe for goods or services, then it’s de facto money. 

A Washington County is Taking Steps to Halt Illegal Cryptocurrency Mining

Furthermore, energy, coding skills, resources, and time spent on software and hardware development and production are just some of the components required to run and maintain the Bitcoin network. It is also underpinned by a globally distributed network of users who all agree to play by the rules of the network for their own benefit.

The more users in this network, the greater the value of Bitcoin will become, according to Metcalfe’s law

Lie 2: No Elasticity

Bitcoin will be ‘mined’ in diminishing quantities until it is exhausted in 2040, having delivered 21 million digital coins. In other words, there is no elasticity in the currency… [T]he currency will run into the same problem as the gold standard: not providing enough money to support a growing economy and population.

First, Skidelsky is off by a century as the last bitcoin will be mined in 2140, though most will enter the supply by 2030.

Second, the problem was never with gold itself but the debasement of gold and thus the distortion of value. For example, most scholars believe it was the “clipping” of gold coins that was largely responsible for the fall of the Roman Empire. The publicly verifiable and immutable ledger of bitcoin ensures that this monetary network can’t be tampered with, unlike with fiat. 

Third, unlike gold, a bitcoin is merely the name of a digital unit (whose value is determined by the market). This makes it highly divisible. In fact, the smallest possible unit is one hundred millionth of a single bitcoin (0.00000001 BTC) — called a ‘satoshi’— making it possible to send tiny fractions of a penny at current market prices. This can’t be done even with digital fiat today, let alone physical cash or metal coins.

This, in fact, makes Bitcoin the most elastic form of money ever created as the 21 billion digital units equal to roughly 2,099,999,997,690,000 (over 2 quadrillion) satoshis according to the calculations presented here. What’s more, new layer-2 applications built on top of the Bitcoin blockchain, such as the Lightning Network, will enable the ability to send even smaller amounts off-chain.

Lie 3: Deflation Will Lead to ‘Hoarding’

This [lack of money supply] would be exacerbated by any tendency to hoard bitcoins.

Hoarding is a pejorative term for saving. If there is no saving, then there is no capital. And there can be no capitalism without capital.  

The “deflationary death spiral” argument against sound money is an overblown theory perpetuated by Keynesian economists, which is refuted here.

In fact, some argue that saving actually leads to greater consumption in the long-run. Saifedean Ammous explains this concept in his book, The Bitcoin Standard, stating:

A society which constantly defers consumption will actually end up being a society that consumes more in the long-run than a low savings society, since the low time-preference society invests more, thus producing more income for its members. Even with a larger percentage of their income going to savings, the low time-preference societies will end up having higher levels of consumption in the long-run, as well as a larger capital stock.

You can also read more about the advantages of having a capped supply in a new report from BitMex Research here.

Lie 4: Inflation

Cryptocurrencies provide no security against inflation.

Skidelsky doesn’t specify which inflation he’s actually referring to – monetary supply inflation vs. price inflation. Though the two are correlated, the latter is an integral feature of fiat currencies whose value is guaranteed to depreciate over time as more money is printed.

inflation versus deflation

Sooner or later, the incentive for governments and central banks to print more money becomes irresistible to the detriment of the population. Inflation is also sometimes referred to as a “hidden tax” that is much easier to impose on citizens as opposed to direct taxation. 

On the other hand, Bitcoin’s monetary supply is not only controlled but is fully transparent and known to all. Even the gold supply cannot be as accurately predicted. Whereas the 21 million digital units that will ever exist are a key property of the Bitcoin protocol that cements its digital scarcity.

Put differently, the millions of people around the world who use Bitcoin today know the supply is capped, which results in more accurate price discovery for goods and services. It is also important to note that people who use bitcoin are doing so voluntarily to store their wealth and move their money.

Bitcoin Is a Revolutionary Idea

With the advent of cryptocurrencies, for the first time in history, humans now have the option to choose their money. This is nothing short of revolutionary since throughout history there was always some central authority, be it the state, the church, or a banking cartel, maintaining a monopoly over money by decree, and ultimately, by force.

Bitcoin is a revolutionary idea

Comparatively, it is fiat currencies that provide no security against inflation. In fact, fiat currency supply is specifically designed to grow indefinitely as emission rate is controlled by a handful of unelected bankers through the artificial setting of interest rates.

Rubber will meet the road as more people realize they can now opt out of this system by buying Bitcoin. The good news is that people now have a choice between trusting bankers or a voluntary decentralized monetary network with no one in charge.

What other myths have you heard about Bitcoin? Share them below! 


Images courtesy of Shutterstock, Pexels, Bitcoinist Archives

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect those of Bitcoinist.com. Claims made in this article do not constitute investment advice and should not be taken as such.

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Dub 22

Home Run or Swing and a Miss? Cryptocurrency Winners and Losers for the Week Ending April 22, 2018

· April 22, 2018 · 5:15 pm

As John F. Kennedy was wont to say, “a rising tide lifts all boats.” Essentially, what benefits one, benefits all. When Kennedy first uttered those words, it was in 1963 and he was talking about the economy. Flash forward 55 years and – as the cryptocurrency market appears to be recovering from a depressing Q1 2018 bear run – the same sentiment is applicable once again.


This past week has been extremely gratifying for crypto community members who weathered Q1 2018’s bear market and made the choice to ‘hodl’ when others were panic-selling. At press time, the total cryptocurrency market cap was just over $394.9 billion – a more than 18% increase from the same time last week.

With the total crypto market cap on the rise, how have Bitcoin and its altcoin brethren fared over the past week? Well, Bitcoin is up roughly 8% – landing at a respectable $8957.95, up from its 7-day low of $8286.88. As to the altcoins? Let’s take a look…

Top 3 Cryptocurrency Winners…

Top 3 Cryptocurrency Winners…

These are the top three best performing cryptocurrencies based on 7-day market activity and with a 24-hour volume of at least $750,000.

Game.com (GTC)

24-Hour Volume: $252,617,000
Gain: 592.80%

Game.com is an ambitious project that combines several elements into a total blockchain-based gaming environment. A combination gaming platform, digital asset wallet, crowdfunding platform, and instant messenger, Game.com is riding high on a rising swell of popularity.

This time last week, GTC was trading at around $0.05 and has climbed to just under $0.35 per token. The sudden spike in value is no doubt due in large part to their partnership with Tron and this week’s announcement that Game.com would be running for a super delegate position in Tron’s upcoming Super Representative vote. A win in this election could not only push GTC prices even higher, but it would give Game.com a seat at the table and a voice in deciding Tron’s future.

Pundi X (NPXS)

Volume: $7,257,560
Gain: 234.72%

Pundi X is a project that aims to make every day crypto usage “as easy as getting bottled water.” It is a POS (point of sale) solution for retail businesses that will make it easy for brick-and-mortar businesses to accept cryptocurrencies in-store.

Earlier in the week, Pundi X’s token (NPXS) was trading at just over $0.0014. On Friday it peaked at an all-time high of $0.0054 before settling down to around $0.0048.

So why the sudden rise in price?

First, the token was recently added to Korea’s Coinrail exchange, which currently accounts for more than 25% of the token’s trade volume. Next was a favorable review of Pundi X’s new POS terminal in this month’s issue of The Nilson Report. Finally – and probably most significantly of all – Pundi X executed its first NPXS token buyback of roughly 200 ETH worth of tokens at a price more than triple that of the then-current market value.

Prices continued to climb in the wake of the buyback but are slowly starting to settle back down. Whether it settles in at a price higher than that of its 7-day low remains to be seen.

XinFin Network (XDCE)

Volume: $899.141
Gain: 201.51%

XinFin is a hybrid blockchain network that combines the power and transparency of public blockchains with the security and speed of private networks. Designed primarily to serve the global trade and finance industries, XinFin has been met with enthusiastic response and successfully concluded their ICO last month.

Since being listed on CoinMarketCap in mid-April, XDCE has been holding steady at around $0.003 per token. Last week, however, things started looking moonish for the cryptocurrency. Trading at $0.0034 this time last week, XDCE reached an all-time high of $0.0168 on Saturday before settling down to around $0.0115 at press time.

The sudden spike in price is most likely largely attributed to XDCE’s upcoming listing on Singapore’s largest crypto exchange – COSS – as well as a 12.5 million XDCE trading promotion. That, coupled with growing interest in XinFin as well as project team that is absolutely doing everything right, could spell continued gains in XDCE’s future.

…and the Top 3 Cryptocurrency Losers

…and the Top 3 Cryptocurrency Losers

Unfortunately, not all altcoins were watching the crypto market through green-tinted glasses this week. These are three worst performing cryptocurrencies based on 7-day market activity and with a 24-hour volume of at least $750,000.

Octoin Coin (OCC)

Volume: $878,826
Loss: -28.96%

Octoin combines crypto trading, mining, p2p exchange, and multi-cryptocurrency wallet functionality into one easy to use platform. The platform’s token, OCC, has been steadily declining ever since peaking at an all-time high of $19.02 in mid-March, however, this past week saw a bit sharper of a decline than in previous weeks. Trading at $3.21 just one week ago, the price has dropped by nearly a third to $2.26 at press time.

As far as what factors could be influencing the price drop, there isn’t much out there that is concrete. The Octoin team are hyping the hell out their platform through a series of mini-conferences and meetups, but there is also a lot of speculation as to the legitimacy of the project. A quick search on Google turns up numerous ‘Octoin: Legit or Scam?’ type articles and their BitcoinTalk thread is rife with investor complaints as well.

Mind you, none of this has been proven, but if I were a betting woman, I’d bet against a recovery for Octoin.

Ormeus Coin (ORME)

Volume: $8,212,730
Loss: -27.56%

Ormeus Coin is a digital money system that is backed by a $250 million crypto mining operation that – according to a February press release – is one of the largest industrial crypto mining operations in the world.

Prices for ORME have been all over the map, ranging from a low of $0.56 in September of 2017 to an all-time high of $3.62 in December that same year. Presently, however, things look quite different. Last Sunday saw ORME trading at $2.58, followed by a blink-and-you’ll-miss-it spike to $3.38 ahead of Ormeus’ global launch party and subsequent Ormeus Cash airdrop. Since then, however, ORME has resumed its downward slide and currently sits at $1.90.

Considering that Ormeus’ crypto operation is reported to be pulling in $6.7 million per month, what gives with the poor token performance?

The decline could be FUD-related. There were allegations on Reddit about market manipulation, but nothing was proven. The more likely scenario, however, is that we’re looking at a selloff in the wake of last week’s airdrop.

Will it recover? Given the team’s active participation within the community and that the mining operation does appear to be legit, I can see this one going back up.

Dragon Coins (DRG)

Volume: $8,404,190
Loss: -26.80%

Dragon Coin (DRG) is the native cryptocurrency of the Dragon Platform, which connects VIP gamer with “junkets”, casino VIP rooms across the globe that host private games and have a system of transferring funds via junket agents.

DRG has slowly been declining since it first started trading in late March of this year and that downward trend appears to be continuing. At this time last week, DRG was trading at $0.975 and it just kept meandering downward to a price of around $0.704.

I honestly can’t pinpoint any one single reason for the decline. The Dragon Coin team seems to be doing everything right, so perhaps it is just post-launch malaise and/or whales dumping.

One of Dragon’s milestones is to launch their own branded junket in Macau. If that happens, I can absolutely see prices going back up to previous highs – and higher.

Do you think that these tokens will continue their current price trends? Let us know in the comments below!


Images courtesy of AdobeStock, iStockPhoto

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect those of Bitcoinist.com. Claims made in this article do not constitute investment advice and should not be taken as such.

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Lis 30

The Top 25 ICOs With the Highest Returns (Infographic)

· November 30, 2017 · 2:30 am

Ultimately the market for ICOs is about the companies that make up that market. When you buy a token, you are holding a promise. You’re not holding a piece of that company. It’s important to understand at a deep level what that promise is.


From Skeptic to True Believer

For the past few days, I’ve examined the top performing ICOs that are backed by Ethereum’s ERC-20. Almost all of them are promises to deliver value and some even commit to a return on token.

Going in, I was skeptical about these high performing ICOs and their business plans. But except for a few gambling endeavors, the level of business innovation was shocking. As a marketer, I listened to the ICO hype of easy money from sleazy imposters and I was skeptical. But not anymore.

Take Golem for example, if you haven’t heard of Golem you’re not alone. Golem has given a 1958% return on their ICO from a year ago. That means had you invested just a $1000 in their ICO, it would be worth $19,580 today.

Golem’s business model is also innovative – this isn’t a commodity play. In short, Golem allows users to make money ‘renting’ out their computing power or developing software. And, they’ve tied their token value to the success of the overall platform which theoretically will increase the value of their token over time. That means if you’ve purchased a token or earned a token, that token may get even more valuable over time (on top of the 1958% return).

Golem (GNT) price chart - Coinmarketcap Nov 2017

But investing in utility backed tokens is a completely different intellectual experience than we are ever taught about invest and how to make money. It’s more Kickstarter than stock market, but the token has a secondary market which may pay off in the future.

I wanted to learn more about companies like Golem and the potential of tokens so I decided to research 25 of the top performers. I’ve also rated them by an innovation score based on my own business experience. Why? Because I went in with the theory that most of them would be “me too” copycats. I was wrong.

The innovation score is based on my evaluation of the ICO and its level of innovation relative to its non-blockchain competition. For example, DigixDao received an innovation score of 2 because it isn’t much different than a gold fund. So, the innovation ratings are not scientific – they are not meant to be.  But please, if you agree or disagree with my evaluation, let me know in the comments.

I love sharing what I discover, and I love to learn from your challenges and objections. So, let’s look at the Top 25 ICOs and compare your analysis with mine as I dive a little deeper in below.

Analysis of the Top 25 ICOs

Top 25 ICOs with the highest ROI – Click to view full infographic.

ICO Analysis Results

If you had purchased $1000 in each of these 25 ICO’s you’d be worth millions today. But if you had only analyzed Etheroll, the highest performing ICO on our list, you’d be forgiven if you called bullshit on the entire ICO scheme and skipped it altogether. Etheroll is just a dice game after all!

The fact is, a lot of these companies are not going to make it. We’ve seen this movie before and many people have lost money.

Does this mean you shouldn’t invest in ICOs or that you should skip them until there are more regulations in place? Perhaps, it depends on your risk threshold.

Yet, I believe we are on the verge of a completely new business evolution and I don’t see this as a fad. Far from it.

The economic value most of the 25 companies above are providing is real. Real disintermediation, real cost-cutting, and real efficiency that can’t be provided by anything but a blockchain.

There are going to be thousands of winners.

ICO winners

Summing It All Up

From an outsider’s perspective, ICOs look crazy. Admit it. But it was once crazy to invest in Kickstarter campaigns. It was crazy to invest millions in a twenty-year-old’s startup. It was crazy to buy Bitcoin.

Maybe ICOs are not so crazy.

As Jas Dhillon, a Principle at Moneytips told me:

Blockchain and ICOs are the undiscovered country.  Together they will drive a sea-change of innovation that will upend traditional power structures and enable the Internet to achieve its original dream of empowering individuals and transforming civilization. But it’s still uncharted, so investors beware.

The best way to navigate these new waters is to identify the ICOs backed by experienced teams with legitimate business models. The odds of success go up dramatically. If you start with a strong crew, you can make a lot of money investing in ICOs or any business endeavor for that matter.

No matter your personal view on the situation, big companies like American Express, Amazon and Microsoft are moving into the blockchain space. The question is, what’s going to happen with that space and will you be there to take advantage of it?

What do you think of the analysis of the Top 25 ICOs? Do you agree or disagree with any of the findings? Let us know in the comments below.


Images courtesy of Mark Fidelman, AdobeStock, Coinmarketcap

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