The Bitcoin and Blockchain Thread - Pure Hype vs Investment Opportunity
In todays SCVR Paul Scott writes a great opinion piece on Bitcoin and Blockchain which has lead to several replies and responses.
It was suggested that a seperate thread was created to allow those who want to discuss it to do so while others can easily ignore it.
The Original thread is here.. https://www.stockopedia.com/content/small-cap-value-report-wed-6-dec-2017-ige-ezh-pla-rhl-num-mai-249693/
This thread is to continue the discussion. My original reply to Pauls points are as follows:
I don't hold any cryptocurrencies and I agree generally with the points Paul makes about it being a poor investment and a hype bubble, I think Paul has it about right. However, on the one point about government regulation....
The point of Bitcoin's distributed nature is that no one government can stop it and in fact its arguable that even if every government regulated against it it could be stopped.
You know how we laugh now when some old duffer MP says that if there is a riot then the government will just "switch off the internet" or something similar? Well I think there is a good chance that in 10 years time we will laugh at the fact that people said they were going to shut down cryptocurrencies.
The thing with technology is that it can't be uninvented, you can't put the genie back in the bottle.
I think its inevitable that some type of CryptoAssets (FYI you can have Crypto commodities and other crypto assets rather than just currency) are here to stay. Maybe not Bitcoin but we shouldn't disregard the whole subject.
Paul mentions Blockchain (the technology underneith Bitcoin) and that is the real gem in all this. Blockchain has the potential to change the world like the Internet has changed the world.
Its highly likely that many of our future investing sucesses will be made on buying companies at the forefront of blockchain.
I know this is an enlightened investment community and so I would like to recommend a Pod Cast series called "Invest Like the Best" by Patrick O Shagnessey. He does a mini series within that Podcast called "Hash Power".
Regardless of what you think about Bitcoin its well worth a listen.
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70 comments
I've read numerous explanations of cryptocurrency and block chains and still don't understand it. Regardless of the above, whether best thing since the internet or a massive bubble, it fails to pass my number one investing rule. Only invest if you know how the company makes its money.
Just got your head around blockchain and bitcoin? Well it turns out that is soooo 2017.
If you want to be fully 2018 ready then you need to get your heads around IOTA which uses a "Tangle" instead of a Blockchain which is probably better in lots of different ways for many commercial applications. The idea of IOTA is that it is an underlying transaction ledger for Internet of Things devices.
The main use case is micropayments, potentially machine to machine micropayments.....i.e. so your internet connected electric car can pay the internet connected charging station for its use and things like that.
As I said with Bitcoin the currency side may well be a bad investment but there may be interesting commercial uses for the underlying tangle technology that could cause some companies to outperform.
Why might it suceed - it fixes a lot of the technology issues with Blockchain such as scalability and processing time and transaction cost.
Why might it fail - it doesn't have the Blockchain hype behind it, its maybe seem as anti-blockchain and a competitor to ethereum although it is already being talked about as Next Generation BlockChain.
Its difficult to know if this is VHS or Betamax. In some ways you could be tempted to say that compared with Blockchain in terms of technology its Betamax, i.e. its technologically superior but risks losing the popularity battle. However, compared to Blockchain in terms of usability its more like VHS, i.e. its cheaper and easier to use. (those with a deep and nerdy understanding of the historical aspects of VHS vs Betamax need not bother tell me how I have mangled the analogy)
What could be the investing plays here - Bosch (BOSCHLTD on the Indian Exchanges) are investing in it?
Many large technology and consulting companies (Fujitsu, Accenture, etc) are seriously looking at it and so could come out winners if they get commercial uses into action quickly.
As with Blockchain I will be looking for real world uses that look like they may become disruptive to some industry or area.
this is a really strange story, so I think it's hype, but time doesn’t stand still and technologies are developing rapidly, so that's a chance that bitcoins/blockchains are a great opportunity for investment
stole this post off facebook explaining in laymans terms how Bitcoin works:
A lot of monkeys lived near a village.
I see South Korea is banning crypto trading.
I notice Vela Technologies (LON:VELA) has moved significantly today after selling some of its stake in BTL which was mentioned in this thread earlier. It still owns 2.3% of BTL which is the equivalent of 6.2 million GBP worth At the current price.
Whatever we may think here - and I think its a massive bubble - of concern to me is the power requirements of the bitcoin miners which has been recently extensively reported.
The current headline is that bitcoin miners are using the power equivalent of Denmark every day.
Biggest in Inner Mongolia - using local coal fired power stations - how does that work on global warming.
Cannot be allowed to continue.
My opinion - willing to hear contrary arguments - but do we want a currency that eats energy on this scale. There are many people in this country, I repeat, in this country which have to make a choice between feeding themselves or keeping themselves warm - so this feels sick to me.
Phil
Phil
The direction regarding power consumption is to move to a proof of stake model rather than a proof of work model. In other words exchanges and large miners will put up a bond and have a financial stake that they can have removed from them if they turn out to be “bad actors”. This will reduce the need for expensive (in power terms) processing to mine bitcoins.
I recommend the “ hash power” series of podcasts in the “invest like the best” series for more info on this type of thing.
Proof of stake is possibly fatally flawed because you can stake on both sides of a fork while with proof of work you have to choose. Probably better to structure the incentives so that the reward for "working" is lower.
The basis of a fiat currency is that there is always demand so long as taxes must be paid in it. A shopkeeper will accept a currency so long as he needs to buy it to pay his taxes and so long as his suppliers will accept it to pay theirs. Fiat currency is pushed into circulation by government expenditure. Should a government accept a currency other than its own fiat, and spend in another currency its own becomes worthless.
Even gold is of value only as long as it is needed to make printed circuits and fill teeth, otherwise the 'store of value' is based on the belief in a greater fool. Come the zombie apocalypse there will be no demand for gold.
If I could rely on stops being filled I may trade Bitcoin CFDs, but there is no way I would hold bitcoin or any other cryptocurrency as I am not convinced that I could sell them.
As there is no intrinsic demand, the bitcoin market is a speculative bubble, like so many before; and when there are no more greater fools it will collapse. When it settles to a steady price against fiat currencies it may get a new life as a medium of exchange so long as transaction costs are less than conversion of fiat currencies.
sorry had to delete post
This has been a interesting thread, not that I understood most of it, but I would just like to add a few points. The secret to everything is “individuality”, one of my favourite stories Three professionals attending the school reunion dinner, very expensive car arrives and out gets a very smartly dressed individual. The three are aghast when they realise that this is the classmate who was useless at everything. Everyone wants to know his secret. Dummy, that’s what they called him at school, says—"Well I buy and sell things—I buy for a pound and sell for five pounds- you can’t beat five percent” The intellect is one thing, knowing how to use it is another. To be successful you need and idea, and the ability to put that idea into action---the rest you can buy.
In the 1970’s when the steel works were booming, and coal was king, those with the power, the workers of this country, abused that power by striking and demanding double digit wage increases. Income tax was as high as 82 pence in the pound and unearned income, such as dividends, taxed at a further 15pence. Capital gains tax was two tiered with a short term higher rate for gains within twelve months. This country was nearing death and it looks like it could be repeated if we allow the politics of envy to take charge once again. Fortunately, we were rescued by a woman, who along with her very clever intellectuals realised that if the government taxed less it might earn more. And we lived happily ever after, except for inflation and interest rates. both reaching double digits. I guess I was Dummy, but I did employ some very clever people. Now you might think that I have gone off topic, but not if you really consider that great ideas need special people, not necessarily clever people, mixed with a fair dollop of simplicity to succeed. FACEBOOK not a Tulip.
In my example I was suggesting, PurpleBricks, eMoov and other registered large online house sales agents plus the land registry and maybe other government departments all participating in a private network where that relies on some type of financial bonding i.e. proof of stake rather than proof of work.
Where house deeds are replaced by digital tokens (which could be stored offline in cold storage wallets) and house buying transactions are recorded in the blockchain and the tokens are exchanged as the house is exchanged.
It was just an example though, a potential way that I could imagine our lives could be changed in future by Blockchain technology disrupting an existing way of doing things.
Cheers
Do you think house deeds are a bearer security? What happens if you try to sell a house with deeds that don't match the Land Registry records? (ignoring oddball cases like unregistered properties.)
I have no real idea but I assume it is then outside of the norm and other legal processes are involved. For example if you are trying to sell your deceased relatives property then you are able to do so because of Probate or some other legal grant of representation.
In the same way a process has to exist for difficult cases now it would need to continue to do so in future.
Cheers
Carey
What with crypto currency IPOs coming at us like flies, why should one particular flavour of these be of such value?
As you mention coming at us like flies, I was shocked to learn yesterday how many of these there now, around 1300. See : https://coinmarketcap.com/all/views/all/
I think that's staggering. And clearly everyman and his dog are jumping on the band wagon. But in answer to your question, for me they need to have useable value, and not just become another standalone currency that's not used anywhere. As its owner creates a fantastic tool to accumulate wealth very quickly.
The thing with the ICOs is that currently they raise huge amounts of money which isn't debt or stock or VC involvement and where you are only promising some tokens which can be used for a potential future service that may or may not exist in future.
Millions in cash for no obligations, no wonder they are popular!
Its quite possible that when a few of these go pop there will be community outrage, regulatory involvement and maybe some class action lawsuits as people try to get their money back.
Its likely that these will be a serious dent in crypto currencies but If you were trying to raise money for your silicon valley venture and you could get huge capital with no obligations then you would look at it seriously.
Thats why we end up with so many and why eventually there will have to be regulation.
I don;t think regulation will mean the death of crypto currencies, in fact it will be much needed to secure their future at that point.
Carey,
A very stimulating discussion over the last few days and whilst this will continue here I suggest we commence a new thread along the lines of "how we can profit from blockchain including crypto currencies"
The thread could start with the assumption that blockchain will be here for the long term and that eventually a sustainable crypto currency will develop supported by the worlds leading financial institutions.
The new thread would concentrate upon ideas for profiting from blockchain/crypto whereas the intellectual arguments would continue here.
Dave
Hi Dave,
We seem to have got stuck into the intellectual arguments and too much focus on Bitcoin and not enough on blockchain but it seems you can't talk about one without the other.
I'm not sure I personally want to start another thread because I don't want to be seeing to be flooding the board with posts on the subject.
Hopefully there is room for both in this thread but maybe I will split it out later? Or go ahead and do a new thread so that its not just me.
cheers
Carey
You may want to read this and similar articles: https://qz.com/1149772/the-murky-relationship-between-bitfinex-and-tether-is-raising-suspicions/
You may want to read this and similar articles: https://qz.com/1149772/the-mur...
That has striking resemblance to the John Law/Mississippi Company bubble which destroyed faith in paper money in France for 100 years. Same could happen to crypto.
Thanks I have already read that one.
It seems that Australia is moving to blockchain technology for its electronic share registration system and replacing its existing CHESS system: https://www.enterprisetimes.co...
See also this official press release: http://hub.digitalasset.com/hu...
I'm not clear, though, what advantages this will bring.
Meantime, the UK's share registration systems are in the stone age, with most private investors being deprived of their rights due to the nominee account system. See https://www.sharesoc.org/campa...
Best,
Mark
But is bitcoin even currency? Could it be ever used as such?
As I understand it, a bitcoin transaction doesn't go through until there is a consensus in the distributed ledger that the transaction is OK. This makes sense when the number of ledger-nodes and transactions are relatively small.
As the number of transactions increases and are for ever smaller fractions of a bitcoin so the number of nodes necessarily increases. This means the transaction will take longer to go through the ledger. As there are more and more bitcoin adopters so it becomes exponentially more difficult to achieve 'consensus'. At some point transactions will stop going through entirely.
I've seen figures that currently it costs about $1000 in transaction costs. This is peanuts if the transaction is in the seven figure range, but prohibitive if you're buying a cup of coffee. This will only get worse as bitcoin gets more popular.
Bitcoin can therefore not be used for its intended purpose.
Solutions have been thought up. One is to allow 'side-blocks' where transactions are only registered in a subset of adjunct blockchains. Another is to issue bitcoin backed paper, like a fiat currency.
These solutions recreate a central/clearing bank type system which bitcoin was supposed to get around. And if this is the end point we'd be better with a gold backed currency rather than a bitcoin backed currency.
Bitcoin, therefore, is not fit for purpose and a crash is inevitably coming.
All IMHO of course.
Hi FreakNomad,
You are highlighting the main flaw in Bitcoin there, the concensus process takes about 10 minutes I believe. Its not as simple as every node getting each transaction and recording it so the more nodes the longer it will take though. I think it will always take the same fixed 10 minute period.
The point of the recent Bitcoin forks into "Bitcoin Cash" and some of the other crypto currencies is to modify the technology to reduce the concensus process and make it faster. This makes it more centralised and easier for a nation state to shut down (see my reply to cig up above) and so alienates the bitcoin purists who want it as decentralise and difficult to shut down as possible. Hence the arguments between crypto currencies about which is best VHS ot Betamax.
The 10 minute period means that Bitcoin has a limitation to the number of transactions it can make a second - something like 8 to 10k per second (I can't remember exactly). VISA process something like 60,000 transactions a second so you can see there is a big gap before Bitcoin is capable of replacing the older technology. However, technology keeps getting better so it doesn't mean that cryptocurrencies won't be able to solve that issue.
You are right that it currenty doesn't work well as a currency but I think the main issue is not the ones you have mentioned, its because no-one is spending it. Everyone is hording it because it keeps going up, they are speculating with it not using it as a currency. If its not being spent for goods or services then although it can be used as a currency its not fulfilling that purpose right now.
Cheers
Carey
If anyone has Netflix there is an excellent documentary called 'Boom Boom Bust' by Terry Jones. Talks mainly about the financial crises of 2008 and how it came about but there they also explore some of histories previous bubbles.
I really enjoyed it and can see Bitcoin following similar patterns as history.
Apologies for nit picking - I just don't want anyone to miss it. It's called "Boom Bust Boom".
The companies that I am looking out for are ones that are using Blockchain to do things better than exists today. Blockchain is just a digital ledger that is very secure, can only be appended to and is really useful for tasks that involve:
Then you can start to imagine uses.
Consider that 15 years ago you didn't imagine that you would market your house mostly online via RightMove and estate agents would be under threat by PurpleBricks and others.
Now lets think about another part of the house buying process....
The ownership of your house is controlled through a single document - the house deed. This one bit of paper is the thing that shows you own a house pretty much. There is an enormous industry (legal conveyancing) that handles the exchange (transaction) of these deeds as a house moves from one owner to another. The government records the details in the land registry (a big ledger database).
This whole system is slow inefficient and hasn't changed for 100's of years. In my view its ripe for disruption.
Now imagine that we could get to a stage where the physical paper deed was replaced by a digital certificate or token. You would have to keep this token safe just like you do your paper house deeds.
The process of exchanging deed tokens and recording those transactions is perfect for Blockchain technology. All transactions showing change of ownership need to be recorded in a secure ledger.
A first mover in the industry (lets say PurpleBricks for the moment) could digitise and automate the conveyancing process, exchange of money and deeds and make that massively more efficient and so cheaper.
Conveyancing fees go down and its way easier so people adopt, PurpleBricks have a new revenue stream and conveyancing soliciters are a dying breed just like estate agents.
Thats a pretty easy to imagine future in my view. The main factor controlling the speed it happens is the speed in which governments are able to change.
If you can invest in the company who sells the blockchain technology to the government or the first mover who disrupts the traditonal process with new technology then you make some serious money.
I can think of quite a few other examples and i'm actively looking for companies with serious direction on feasable ideas like this.
Did you know for example that VISA is looking to replace the SWIFT banking system with a new version based on Blockchain. That could be massive if they can get it adopted first.
Carey
The problem is that any idea you can think of there are already multiple companies out there working on it, e.g.
Virtually any use case anyone here can imagine I can find existing examples of, it's a very crowded market. The real money will be made where the really clever people find use cases we can't think of yet. Consider this one for instance: https://moeco.io/
But as this article leads with :
https://www.weforum.org/agenda...
timarr
Hi Timarr,
I wasn't suggesting that the idea was new or novel or in any way my idea, it was just a real work example to explain how blockchain might provide a benefit in the real world.
You rightly point out that people are already doing this stuff, which is exactly my point as well. I want to find the companies that are already doing it and are doing it well and look like they will suceed and then invest in them.
The fact that the marketplace is crowded makes finding the winners difficult but thats a problem we have as investors in every sector right?
cheers
Carey
Hi Carey
Yes it does, that's definitional. Blockchain is a specific example or a more general type of system known as Distributed Ledger Technology (DLT). As this suggests the ledger is distributed across multiple participants, who all have access to the data on the ledger (this is a weakness if the data is commercially sensitive, although there are things like zero-knowledge proofs that potentially allow the data to be verified while remaining encrypted).
The blockchain itself, also as it suggests, is a chain of blocks, each one built on the previous one. It's the fact that to rewrite a record you have to rewrite all the records after it that makes the ledger immutable - i.e. impossible for a hacker to change (actually, at the limit that's not true, but that's too much detail). The only reason for having a chain of blocks is to allow data to be distributed but not copied. If you just have a centralised database you just trust whoever runs it; imposing the overhead of a blockchain on a centrally managed database would be crazy.
Decentralisation brings both benefits and downsides. The downsides include the data sharing alluded to above, the computational processing needed to implement the consensus process ("mining" in Bitcoin Proof of Work, although there are other consensus protocols), the communications bandwidth needed to synchronise databases, and the governance issues associated with multiple parties using the same data. The advantages include inherent robustness - if you have multiple copies of the database you're not dead if one is lost - and the lack of a requirement for a trusted third party to guarantee transactions (although actually you're delegating that trust to a software developer you've probably never heard of).
I see lots of common issues in the blockchain businesses we meet. Many of the use cases would actually be served better and cheaper by a centralised database. A lot want to put personal data on the ledger (under new privacy legislation consumers have the right to be forgotten - how do you forget someone whose identity is on an immutable ledger?) and there's usually a complete failure to address how you get multiple competing parties to agree to use the ledger.
As for this:
Nope, I want to invest in areas where reward is high relative to risk and where business cases and technology are proven. Trying to find a blockchain winner, and invest at a point where you can make money out of it, is akin to sticking your hand in a barrel of snakes and expecting to come out with a bag of gold.
Anyway, I'll leave it here. It's nice to see people are getting excited about the technology, it's genuinely worth getting excited about.
timarr
Hi,
Sorry, I wasn't very clear in my point about decentralisation. The point I was making is that a blockchain project doesn't have to be fully decentralised like a public blockchain like something built on Ethereum or a currency like Bitcoin.
Decentralisation is a defining feature but that doesn't have to mean thousands of public nodes. I could have 4 nodes in different datacenters that I own and I can use a blockchain. It meets the definiton of decentralised but actually is pretty centralised.
In that case I am losing one of the benefits of blockchain - that it can't be disrupted easily by regulation because I am not decentralised enough, but in my example regulation is not an issue, its the other features of blockchain that I am mostly interested in i.e. an append only database for recording transactions with strong authentication and the use of digital tokens to proove ownership of an asset.
I'm not sure its completely a barrel of snakes scenario but I agree that there are going to plenty of "jam tomorrow" stocks in this area (like many other sectors). I'm definitely going to keep an eye out for any that look compelling and take on slightly more risk on them than I would normally.
cheers
Carey
Basically there are two sets of questions you have to ask about any blockchain:
In a public blockchain you can't control the number of nodes (well, technically I suppose you can, but it would be a bit odd). In a private blockchain it depends upon the governance - but generally the point is that every member runs a node and the members don't trust each other, because otherwise they'd just share the data.
What you appear to be suggesting is a single organisation running multiple nodes - which is just a standard distributed database with knobs on where the benefits of blockchain are outweighed by the unnecessary additional costs. There are very few business cases I've come across that can justify the use of blockchain in a single organisation, mostly it's just easier to employ a decent database architect and sort out your access permissions properly.
Oh, and I'm not sure what you mean by strong authentication, which isn't an inherent property of a blockchain, but there are lots of companies looking at it as a use case: https://medium.com/@LetsTalkPa...
But there I go again ...
timarr
"Consider that 15 years ago you didn't imagine that you would market your house mostly online via RightMove and estate agents would be under threat by PurpleBricks and others.
Now lets think about another part of the house buying process...."
Actually I'm very surprised it has taken so long.
15 years ago we were mainly still using modems and the smart phone was still the best part of a decade away. Online businesses as we know them today couldn't possibly have worked, although plenty of people were predicting that they would happen. What mass global connectivity has done is cause a collapse in the cost of the distribution of digital content, which means that those legacy providers stuck with physical infrastructure are struggling to complete with new entrants.
Mass connectivity has other effects - the analogy with electricity is fascinating: originally electricity generators were used to replace factory based steam engines for no great benefit. It was only when Ford reorganised factory practices and their physical infrastructure that the real benefits started to come through nearly 40 years after electricity was introduced. Part of that change was centralisation of the electricity supply - it was argued for years that no one would trust a centrally run generating capability and that you would always need local backup.
Something similar is now happening with data - the "cloud" (which remember, is just someone else's computer) plus mass connectivity allows for data collection via IoT and centralisation on a mass scale. Andrew Haldane of the BoE describes this as adding a nervous system to the economy. As this happens we're seeing a shift from old economy to new, and the rise of a new generation of capital light, labour light companies - increasingly high paid jobs will depend on high intellect skills. That's going to have mass political ramifications.
And in the middle of this you have blockchain - a technology whose principal feature is that it allows two parties who don't know each other to transact with confidence. That's interesting, although given that my bank can identify me with 99.95% accuracy from the way I use my smartphone, the chances of anyone being truly anonymous anymore are vanishingly small.
Oh, as for anyone who thinks that Bitcoin transactions are anonymous - they are, but the devices you use to make those transactions are not :-)
It's fascinating, I absolutely love it, but I have no idea how this will play out.
timarr
High intellect = highly paid is not a given. It could turn out that making robots or finding out new med (it's fun) is like making music (it's fun, people will do it for fame & glory) and that people who want to be paid for it get bid out by people below them eager to get more "views" for their github "channel".
(And that would generally be good news, compared to the dystopia where people with knowledge extract rent from people without.)
It's the people with the intellectual skills who will have the options, even if they choose not to use them. And there will always be people who manage to succeed anyway, but their popularity also masks their scarcity. It's like the market for professional footballers - the kids see the Ronaldos and the Kanes of this world making a fortune and aspire to be like them, but the reality is that there are a few thousand players making that kind of money globally, and most scratch a living for 15 years locally and then go work in a supermarket.
The real impact was brought home to me earlier this week when I was having dinner with two guys, one from Ukraine and one from Syria. They had both escaped dire circumstances at home because they had high intellect skills that were valuable in a global marketplace. In both cases they had siblings back at home who'd made different life choices and were now stuck in pretty grim circumstances.
As I see it, the people with knowledge are already extracting rent from the people without - that's exactly the business model that Facebook, Google, etc are following. Governments are struggling to work out how to extract taxes from these organisation - and in the meantime are increasingly soaking the fixed assets of the old economy and worsening the problem.
And if the wealth disparity between rich and poor keeps on widening then Brexit and Trump will just be the beginning ... interesting, interesting times.
timarr
Agreed if you have skills of which there's a shortage you have an economic advantage compared to those who have only skills whose supply is abundant. No doubt either that there is currently a shortage of some "high intellect" skills (but already clearly not all). The question I'm interested in is whether this shortage of high intellectual skills will remain true within say the next 50 years.
The barrier to entry is there, but it's not that high, and better communications has lowered it considerably (a $100 device gives you access to basically all the education you may want). You can't learn say programming in a week, but you can learn it in a few years. If you're too old for it, your kids can. It's like mining, when there's a shortage, people look for some more to dig and for substitute materials or processes, and at some point there's too much.
Facebook and Google are not about tech. They don't have any particularly hard to imitate tech. The rent-seeking comes from regulatory arbitrage: basically they were the first (competent) mover in a winner-take-all game which is only legal because it takes some years to adapt the intent of the existing legal framework to previously unforeseen activities. But in due course the legal framework will adapt, as it always does.
Increasing wealth disparity is in the eye of the beholder: I would argue you're better off in effective lifestyle terms now on benefits (in a Western country at least) relative to a Google employee than a comparable situation from a few decades ago. The (Western) poor never had it so good.
Ok, so let's reverse the argument - can we make a case that says that low intellect will, on average, not lead to significantly lower incomes?
Well, yes it's possible - the increasing disparity of wealth, particularly since QE started, is leading to the rise of nationalism. Looking at the demographics it looks like there's a link between lower earnings, lower levels of education and people voting in favour of nationalistic candidates, as we've seen with Brexit and Trump. Typically nationalism puts up barriers to immigration, increasing the value of existing residents, who are able to charge more for their labour in a less competitive market.
If the movement of labour is restricted you'd expect to see a couple of effects. Firstly the wages of the lower paid would increase (no bad thing, allowing people to work for less than a livable wage is a disgrace in a civilised country). Secondly there'd be a push to replace people with automation - as the cost of labour increases then the price equivalent point for technology replacement also rises.
Now clearly not all jobs can be replaced by robots, but there'd be a trend where unskilled, semi-skilled and intermediary jobs are replaced by technology. That technology will be being developed and maintained by high-intellect workers with deep educational reserves developed through a tertiary STEM education and several years being immersed in the industry, experiences which will be hard to replicate through external means (such as self-learning via a smartphone).
These high intellect workers will not be constrained by national borders - people with high levels of educational achievement will be welcome everywhere, even in socialist post-Brexit Britain :)
So you end with a world where people with lower levels of educational attainment find themselves trapped within national borders, competing both with a fixed pool of similarly educated people and with increasingly pervasive technology. Meanwhile people of higher educational attainment with scarce sills are competing in a global marketplace with no borders (such as my Syrian and Ukrainian friends).
Ok, that's excessively dystopian and it won't happen, at least not like that. But the idea that even a clever person can upskill themselves into that market using Google and a smartphone isn't remotely credible. I can crowdsource standard software development for a few dollars an hour, it's a commodity. The type of skills I need are based on 5 to 10 years of tertiary training and experience in specific industries and technologies, allied to a set of communication skills that are rare in themselves.
The barriers to entry in the stuff I do - machine learning and AI, blockchain and cryptography, secure transaction processing and communications, ethical hacking and enterprise solution design - are really high. Maybe those too will be replaced when von Neumann's Singularity occurs, but I'm guessing I won't be around to see it ...
timarr
Most of the inefficiencies of the land registry database could be solved by having a more modern but still centralised database. The incremental benefits of having a distributed ledger would be tiny, or negative. That it's a slow process is to some extent a feature: it makes it harder to steal houses. Most people would not be happy to be kicked out of their home, while still having to pay the mortgage, because someone find out their private key ("password").
In any case, a distributed land registry database would still need to have one authority, which is gov.uk because ultimately it is the UK court system that resolves conflicts where 2 parties both claim to own the same house. Anarchic blockchains don't work well for this because any fork generates multiple conflicting claims on the same asset (while when you duplicate a crypto-coin you just get 2 coins, and the more the merrier).
Investing in blockchain software companies is weird: the basic idea is well documented, lot of code is open source. Why would anyone pay other the odds for blockchain software when they can download it from github and hire a couple of geeks to set it up?
Hey Cig,
Yes, I wasn't suggesting that the land registry database would actually be distributed. One of the reasons why I think Bitcoin and other public blockchain projects are likely doomed is that many of those projects would actually be much better if they used blockchain but were centralised or had some of the features of centraliation rather than being fully decentralised. Perversly one of the main features of public blockchain is also its main flaw.
Blockchain as a secure ledger doesn't necessarily have to mean decentralised although the public projects are at the moment.
Suggesting its a private key password is simplifying. No reason why you can't have your property ownership in an offline wallet hardware device. There isn't really much difference between an offline cold storage wallet (looks like a USB stick) than a physical piece of paper that is your deed right now. Both physical objects that need to be stored. Its just that when you come to use the wallet its not encumbered by hundreds of years of antequated tradition.
I'm not looking for blockchain software companies, i'm looking for companies who are applying blockchain technology to resolve real world problems. Anyone can or could have set up a website to advertise houses but a few companies did it first and did it well, i'm looking for the blockchain equivalents of those.
cheers
Carey
You can even trade your ICO's on a blockchain based exchange - in fact some people are suggesting that "coins" will replace shares as a new way for companies to raise capital ...
99% of this stuff is snakeoil. I'm involved on the periphery, I understand the technology and i can spot the more obvious frauds a mile off and I still don't have a clue which of these are going to make their founders a fortune. Leaving aside the fact that many of the business models are dubious and that a lot of the technology is actually untested at scale and not proven to be secure you also have a crowded trade where lots of ICOs are targeting the same business area - shipping logistics, for instance, is a popular area of focus.
Someone, somewhere will make a ton of money out of this but the only sure winners are the promoters. As P T Barnum said: "Every crowd has a silver lining".
timarr
The problem I have is security, if you have money in a bank you have a certain amount of security. If Bitcoin gets hacked and all the money ends up in Russia or China what then? The UK and EU plan to crackdown amid crime and tax evasion fears. Yes it is used by criminals as it's difficult to trace the owners. Here is a recent hack: https://www.reuters.com/articl...
You could argue that most of the £ you have is actually 'digital' - you physically don't have the cash in your hand but a number of a computer screen. What happens if your bank gets hacked and all your money ends up in Russia? (I know your protected by the government but just using it as an example).
I read that people actually using bitcoin is only up 27% this year. Bitcoin will only be taken as a serious currency when people use it for its intended purpose and not just buying it because they want it to go up in value.
Yes I take your point but with £s, I'm protected upto a certain amount, about £80k. If my bitcoins all disappear into cyber space then I have lost the lot. Until banks start using them as currency and they are guaranteed then I won't be using them.
It turns out that actually no-one is really using them for their intended purpose (as currency). Everyone is just owning them to speculate with.
Today Steam the games streaming company stopped accepting Bitcoin. It turns out that due to the hype Bitcoin keeps going up and down so much its too difficult to process transactions without the price moving as you try to do it.
So its becoming a worse form of money than fiat currencies when it was originally designed to be a better form of money.
Just been reading an article about Tether Limited and bitcoin, I don't fully understand but it all sounds very dodgy to me. I can see the whole thing come crashing down.
Until then many of us wouldn't hold them over-night even if we were prepared to use them as a means of [immediate] payment for trivial sums.
"What happens if your bank gets hacked and all your money ends up in Russia? (I know your protected by the government but just using it as an example)."
- That's the point, isn't it? Your money is backed by large financial institutions and, ultimately, the Bank of England (or other central bank). If one's crypto-currency is stolen by hackers and ends up in Russia (or wherever), who's going to find it and retrieve it? Answer: no-one is.
A timely reminder. Bitcoin mania is now going at full throttle. Recently I was made a bitcoin offer which used a hundred fold gearing.in an example. Needless to say, I declined.
Bitcoin has burst already numerous times, however each time it has rebounded. People see Bitcoin as digital gold, a way to store wealth and of course speculation. In a way, it is a bit absurd why Gold has value, I mean why does a block of yellow metal have the value it does. Bitcoin holds alot of the same principles that Bitcoin does.
Bitcoin, will in my view end up behaving alot like gold, after it crashes and rebounds again, numerous times.
agree with chee, bitcoin is now not so much a currency but a commoddity to trade. Dont know enough about the money laundering aspect but suspect by the time any effective regs come in then billions/ trillions of laudered money could be well gone, its this curret explosion of liquidity that will allow it. Similar to the pros selling into price spikes.
re security, only secure wya is to keep it in an isolated wallet that nonone else knows exists
For every hundred companies on the bleeding edge of a technology, ninety-nine will vanish without a trace and one will become huge. I'm willing to forego the gains from picking an early winners and wait until it becomes obvious.
My search so far for blockchain technology stocks has come up with the following. Yet to research each of them.
- 360 Bockchain (CSE: CODE)
- BTCS (OTCQB: BTCS)
- BTL (TSXV: BTL)
- Coinsilium (NEX : COIN)
- DigitalX (ASX : DCC)
- ExE Block Tech (TSXV: XBLK)
- Global Blockchain (TSXV : BLOC)
- Hive Blockchain (TSXV: HIVE)
- MGT Capital (OTCMKTS : MGTI)
- Riot Blockchain (NASDAQ : RIOT)
- Marathon Patent (NASDAQ : MARA)
Why research only stocks listed on old-school exchanges that blockchain technologies are supposed to replace? A quick google of "ICO list" will produce a few hundred (or thousands by now) more stocks to research.
Bitcoin, as it stands today, will not work because it actually inverts the way that sensible economics is supposed to operate. The direction of travel has been that we have become more efficient at using resources through the use of technology whereas Bitcoin actually relies on the inefficiencies in the Proof of Work process to prevent double spending. If you have a currency that actually costs more to produce than the value of the goods that it's paying for you do end up in a bit of an economic dead-end ...
Bitcoin is ideally suited to net-net transactions at the institutional level - imagine two banks netting off payments at the end of the day, or a scheme clearing payment to a large retailer. But it's really not an efficient retail payments method.
It's also clear that regulation of Bitcoin is coming - the latest Anti-Money Laundering regulations (AMLD5) specifically includes crypto-currencies. Now clearly you can't actually force individuals to identify themselves when they trade an anonymous crypto-currency - but you can regulate all of the institutions around the currency and force KYC processes in place. Which would mean that people can trade Bitcoin between themselves to their heart's content but to cash out they'd need to find someone willing to risk criminal proceedings - which no doubt some will do, for a significant laundering fee.
It's also a mistake to suggest that you can't track Bitcoins - you can't do it in any normal way, but it is possible to trace where coins have been and blacklist those that have been potentially used in dodgy situations. The analogy with gold or cash is only partial.
But I think the real business case for crypto-currencies has already been found - Ethereum is struggling to cope with the load imposed on its business by Cryptokitties ... it's an iron law of the internet, two minutes after something has been invented someone will start using it for cute cat pictures. Although they don't look very cute to me ...
http://www.bbc.co.uk/news/tech...
timarr
Actually these posts hit on the main bear case for bitcoin and other crypto assets, the fact that they aren't being used for the purposes they were designed for.
Lots of people are buying Bitcoin and other Crypto assets in order to use them as a store of value and to speculatively invest in them so transaction levels are high.
But apart from our unlucky pizza punter from many years ago no one is actually spending them for anything. So actually while they are working as a store of value and a mechanism to move money around they aren't functioning as an actual currency because they aren't being spent on goods or services.
This is one of the reasons I think they are a hype bubble that will eventually burst. I still believe they have a place and that they will still exist and be used in 10 years time and I believe that Blockchain technology will change our lives massively but that the coins or other assets aren't good investments right now.
There's a free lecture on "Will Bitcoin and the Blockchain change the way we live and work" at Gresham College (Museum of London, 6pm on 9 Jan, no booking required). Details here: https://www.gresham.ac.uk/lectures-and-events/will-bitcoin-and-the-block-chain-change-the-way-we-live-and-work. It will also be live streamed on the Gresham College Facebook page.
Processing a single bitcoin transaction currently takes about 260kW of electricity, for reasons explained in the talk.
A talk on Bitcoin at Gresham College. How delightfully ironic.
Gresham's Law - Bad money drives out good money.
my reaction up until now is 'its a bubble, that it cant last, its not back by anything etc etc
however there are 7 billion people in the world apparently the vast majority cant get bank accounts or access to finance. bitcoin could become what the internet was to publishing.
everyone said the internet was the wild west and unless youre in the music industry or film distribution its been tamed
i'm still on the fence but I intend to spend some time researching it and getting a more educated opinion
Even if when governments shut down crypto-currency exchanges others are able to pop up quickly (I don't know either way), for a currency to work it has to remain a trusted means of exchange. My bank notes bear a guarantee from the Bank of England which, when I hand them over as payment, make them more than an IOU from a stranger. Bitcoin and its ilk doesn't have that - it isn't backed by anything or any government, and no government is going to bail out a run on Bitcoin. But then Bitcoin isn't really being used as a currency anymore - just hoarded for its speculative, fleeting, increase in face value - surely a sign that it's in the late stage of a huge speculative bubble. What happens when the bubble bursts and there are no more buyers?
Now, a crypto-currency issued, controlled and guaranteed by a blue-chip government should very well have an important future as a means of payment (and of enduring financial speculation).
That story might be apocryphal!
I read somewhere that someone had bought a Bitcoin and used it to buy a pizza a few years ago, when Bitcoin first came out, just for fun. If he had kept that Bitcoin rather than spending it, he would be a multi-millionaire now!
@pka I'm afraid the pizza story is much worse than that. He paid 10,000 Bitcoins for the pizza, which at this month's peak pricing would be around $120 Million USD. Staggering numbers.
If that story is even true. One feature of a bubble is all the stories of gain and loss that circulate like fairy tales. Besides If one bitcoin is worth US$19,000 then buying a pizza for one bitcoin only cost US$19,000 in todays value.
It did indeed happen. May 22nd, 2010. 10,000 bitcoins for two pizzas:
https://bitcointalk.org/index....
Shauniekent wrote on today's SCVR board:
The point that’s missed here is actually that people are using and buying bitcoin as it’s better at being money, then traditional money. Think about that. It’s money taken to the next step improved using technology.
That may be true. But when my local Papa John's in Manchester has a sign proclaiming "We take Bitcoin!!, I'm forced to ask - why? What's the point? I can do all that via an app or (heaven forbid) cash.
What am I missing? I just can't' get my head around paying for pizza with Bitcoin. And aren't policeman looking younger these days.....
Thanks
Paul
Interesting announcement from Milestone (£msg), a small cap this afternoon
http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/MSG/13456297.html
"With the new Licence Agreement, Milestone's focus is principally on Digital Media and Fintech products utilising Blockchain technology"
Suggested BlockChain related investments to research contributed by other threads are:
BTL - on the Canadian Exchange
TechFinancials Inc (LON:TECH) - UK Microcap