Wednesday, November 27, 2013

Living in Interesting Times: Decentralization becomes the rage, something new is released upon the world

At the risk of sounding cliché, I'll say it:  We are living in interesting times.

Decentralization has become the rage.  
The Pope (paradoxically, or not?) has championed decentralization.
People are sending bitcoins to charitable organizations in the Philippines, aiding recovery from Typhoon Haiyan.  Decentralized and open source search, content curation, and operating systems are becoming more popular.  And so on.

What to make of this?  So that you can get a good understanding of the implications of decentralization in today's world (and why many people have been championing it for so long), below is shown a video in which Andreas Antonopolous, founder of RootEleven (and several other bitcoin-based businesses), explains what decentralization is and why it is beneficial:

"In a way, hierarchical systems are a solution to the problem of direct access to information, direct access to each other, and communication scarcity.  When the problem no longer exists, (a) centralization hierarchy is the wrong solution." - A. Antonopolous

Tuesday, November 19, 2013

Day 2, Senate hearings: Bitcoin climbs in use, Congress Fails To Comprehend Bitcoin (Again)

"Bitcoin is an open standard, an open protocol, and an open source payment network.  Nobody owns the network, and nobody controls the network.  All of the users collectively own the network, its rules, and its ledger."- from Statement of BitPay CEO Anthony Gallippi, before the Subcommittee on National Security and International Trade and Finance and the Subcommittee on Economic Policy of The United States Senate Committee on Banking, Housing, and Urban Affairs, during the hearing on 'The Present and Future Impact of Virtual Currency,' November 19, 2013 
"Now we are engaged in a great Civil War, testing whether that nation, or any nation so conceived and so dedicated, can long endure. (...) It is rather for us to be here dedicated to the great task remaining before us (...) that government of the people, by the people, for the people, shall not perish from the earth." - Abraham Lincoln, Gettysburg Address, Nov. 19, 1863 
As today's Senate hearing on virtual currencies began, bitcoin rose to $704 USD, and continued to climb.

Monday, November 18, 2013

Day 1, Senate hearings: Bitcoin jumps from $650 to $750, USD (and Congress) is left in the dust

"What is called the dark web, also known as the deep web... (was) deliberately built to be untraceable, to protect the anonymity of the user." Sen. Tom Carper, Nov. 18, 2013 on CSPAN3, during the introduction to today's hearing on decentralized virtual currency.
As was to be expected, the panel's regulators in government focused on the worst possible imaginable crimes that they could dig up, attempting to connect them to bitcoin and other virtual currencies, in order to try to portray virtual currencies in an unfavorable light.  Interestingly, at no point during the hearing did any of the regulators who gave testimony make reference to decentralized virtual currency - in fact, their testimony completely failed to truly mention it or attempt to put it in a coherent sentence - nor did they acknowledge that such decentralized currencies are already beyond the control of governments.

Time and time again, courts in the United States have ruled to protect the right to anonymity.  One such case, in 1995, cited by Electronic Frontier Foundation in its defense of anonymity, included a decision by the US Supreme Court that "protections for anonymous speech are vital to democratic discourse," asserting that anonymous speech "exemplifies the purpose behind the Bill of Rights, and of the First Amendment in particular:  to protect unpopular individuals from retaliation... at the hand of an intolerant society."  In point of fact, today, Monday Nov. 18, 2013, the Electronic Frontier Foundation scored a significant victory that is now resulting in the release of hundreds of pages of documents from the government about the use of the unconstitutional Patriot Act, the use of which by government is currently being challenged in the courts.
Faced with this fact - and beyond any law on the books or interpretation of any law by the US Supreme Court, the fact that the strongest of decentralized currencies today is now immune to government attack -- the only thing that regulators in the hearing could do was to ignore and evade discussion of the most meaningful financial development to arrive on the scene in the United States since the production of the first US dollar.  Even a strong equilibrium attack run cheaply by governments against the bitcoin network would ultimately fail to do anything other than delay transactions for a day or two -- it would not be able to shut down the distributed, decentralized bitcoin network. And so, with grim faces, the regulators on today's panel did the only thing they could: ignore the decentralized virtual currency issue entirely.  The discussion was not a total loss, though: the second group of panelists (notably, none of whom were regulators) did not fail to take the opportunity to discuss decentralized virtual currency.

Here follow the most notable quotes from first the regulator panel, with the rest of the panelists' remarks shown in the order of the time they appeared:

Jennifer Shasky Calvery, Director of US Treasury's FinCEN:
"We work to achieve (our) mission by implementing the Bank Secrecy Act... Illicit actors might decide to use virtual currency... (it's) relatively anonymous.... does not typically have transaction limits.... may have been created to facilitate money laundering..."
"(This) is not nearly theoretical..." (References Liberty Reserve, Silk Road)
"It is also important to put virtual currency in perspective... Approximately 8 billion dollars in transactions (in virtual currency) over the past year."
"It is in the best interest of virtual currency users to comply with (our) regulations..."

Of course, anyone who is serious about their bottom line will not comply with additional burdensome regulations.  People are at this moment pursuing development of bitcoin anonymity solutions, including but not limited to, CoinJoin and DarkWallet (the latter of which has already exceeded its funding goal). In a day's time, the CoinJoin fund to support the development of strong cryptographic anonymity solutions has jumped from 16 BTC to over 31 BTC - a growth in value, at present prices, roughly equivalent to a collective donation by multiple individuals over a day's time of $10,000 USD (approximately doubling the amount the account already had). Exchanges that might face additional burdensome regulation will simply jump outside of USA borders, or locate on newly developing "offshore business platforms" which are maintained out at sea. If exchanges find that the regulatory environment makes it too tough for them to operate through websites, they can now fully distribute their bitcoin exchanges and related markets, so that no matter where they are in the world, they will never be able to be shut down due to the nature of decentralization.  Thus, it is not in the best interest of virtual currency users to, in the words of Jennifer Shasky Calvery, "comply."
It is in our interest to do what we please, either as individuals or associations, inside or outside the confines of today's 'nation-state of antiquity.'

Tuesday, November 12, 2013

Bitcoin and the future of "the public good:" Decentralization, anonymity, philanthropy

In the previous EdgedSolo post, a question was presented:  In light of developing "bitcoin anonymity" solutions, which will eventually (and fundamentally) alter the relationship between the indidual and the state, how will individuals and associations manage resources to maintain and enhance "the public good" at a time when government capabilities to do the same are diminishing?  This post will address that question, as well as some other relevant questions and issues.

First, some assumptions are going to be made for the purpose of addressing this question.  One assumption made here is that the progress of decentralized virtual currencies (particularly as solutions that enable anonymity evolve) will eventually liberate large numbers of individuals all over the globe to exercise greater ability to do what they want completely outside of the purview of governments.  Another assumption that will be made here is that many individuals will, upon realizing they are capable of doing so, will act primarily in a self-interested way, but that a growing number will become involved in micro-philanthropy - a practice of making small donations that collectively will comprise a significant part of the gifting economy.

In some ways, these assumptions are already borne out by data.  In many cases, as incomes rise, contributions to nonprofits decrease, and tax incentives - provided by governments that are currently able to do so - often enable higher levels of giving than would otherwise occur.  This, however, is a generalization, as current levels of giving to nonprofits vary widely from place to place in the United States.

Tuesday, November 5, 2013

#Bitcoin surge, new privacy and anonymity tools, gold vs. bitcoin, predictability and random walk

Today, bitcoin jumped in value - over the weekend, it could be purchased for under $200 USD in some places, and at the moment (around 10:30 am PST / 1:30 pm EST)  it has jumped almost to $260.  If you have not yet purchased bitcoin and are looking for a way to do so, you can watch the ticker and wait for the drop that is bound to come - it is known to fluctuate.  The short term outlook for bitcoin is a sharp increase in price, and the long term outlook, as usual, and based on its history over the year, reveals a constant climb in value marked by periodic volatility.  Even with this volatile activity, bitcoin has remained remarkably stable over the past 60 days, with the net climb in value trumping any periodic loss.

In this post I'll mention a few ways that you can easily get yourself set up to purchase bitcoin, as well as present a brief compilation of some new tools that provide privacy and anonymity of bitcoin transactions.
As well, a brief comparison of gold vs. bitcoin is provided today, along with some commentary on how decentralized virtual currencies are developing (predictability and random walk).

If you are new to this blog and do not yet have bitcoin, after clicking on 'Read more' below, you can see the rest of this post for free. The BitMonet setting for this blog currently allows one article view without charge or paywall. Additional posts can be seen by selecting the blue button under 'article access,' then click on the tweet button (tweet this article to read) in order to bypass the paywall, alternatively, you can pay in bitcoin equivalent to 5 cents (USD). (This supports my work on this blog, as do any contributions received through the 'Donate Bitcoin' button at the top of the blog).  In case you are wondering why the paywall only has a bitcoin or tweet-to-read option (no $USD option to pay), just look at the performance of bitcoin.  The BitMonet quasi-paywall is designed to encourage you to use bitcoin and demonstrate how it can be used to request or accept payment.

[[ Philosophical addition as of Nov. 7, 2013: @tristan_winters has released a very insightful post breaking down the "us vs. them" myth associated with schools of thought on the direction of bitcoin. ]]