Connect with us

Blockchain

Bitcoin Is Artificial Money — and for Some That’s a Problem

Why do some people cite Bitcoin’s design strength as it’s weakness?

Republished by Plato

Published

on


Why do some people cite Bitcoin’s design strength as its weakness?

Image: By Alexander Limbach, Licensed Adobe Stock

Occasionally, usually when speaking to new people about Bitcoin, I get comments along the lines of “The problem with it is that it’s entirely artificial.”

I’ll be honest — even when this comment, or a close approximation thereof, is raised as an an “objection” by someone, it’s never really registered with me. By that I mean I have literally skipped over it as if it was never stated in the first place because, well, of course it is.

However, having had the comment come up once again today, I finally — and quite unexpectedly — connected the dots about what this objection really means.

You see, this, as it turns out, is probably not a slight against Bitcoin itself. It’s more likely that this is an attempt to try and compare it to something like gold.

Bitcoin vs gold … yawn

We’ve been here before of course. I have written on this subject many times, endlessly comparing the two as a means of hedging against inflation, storing value and a medium of exchange.

My conclusion (spoiler alert) has always been that gold may be tried and tested over thousands of years, but Bitcoin is superior in almost every category in practical terms.

Of course, I am often accused of being biased, and while I do agree that it’s probably impossible for any human to write anything entirely unbiased no matter how hard you try, I still maintain that the world is ready and the time is right for Bitcoin to not only flourish, but to a be real, hard money alternative going forward. And, while there are still detractors and risks, I am certainly not alone in that school of thought.

However, now that I have fully acknowledged the statement and am dealing with it head on, it raises two interesting points:

  • Is it significantly relevant that Bitcoin is immediately compared to gold rather than fiat currency in these cases?
  • Since all modern money systems are entirely man-made and a product of the technology of the time of its creation, why is Bitcoin being singled out as being different because it is also “artificial?”

Of course it’s also possible that this is just a lazy objection thrown out randomly by people who haven’t really thought about it, but since it’s not uncommon, it’s surely worth a look.

Why gold and not fiat?

This really interested me, especially as this comment always comes from people very new to the concept or people who think they know what it is, but have not yet really grasped what they’re dealing with.

Bitcoin was, first and foremost, designed as a currency. At the moment and in its current form, the digital currency’s detractors gleefully point out that it doesn’t work terribly well in fulfilling that task, and it’s a point I concede, at least for now.

The fact is that when the Bitcoin network gets very busy, it simply can’t cope. Fees and confirmation times go through the roof and it just isn’t sustainable should more than, for example, a few tens of thousands of people try and use it simultaneously.

This, theoretically, will be solved by the Lightning Network in due course, but full deployment is still some time off and there a number of security concerns that need to be fixed, or at least mitigated, before that can happen.

Despite this element of Bitcoin being a work in progress, the store of value element of it is working very well, at least in my view. As “digital gold,” Bitcoin’s performance is nothing less than spectacular and carries all the advantages of a truly scarce asset without any of the disadvantages.

But it takes someone who has been in Bitcoin a while to understand this fully, so the fact that this objection about it being artificial is being compared to the supply of gold rather than the supply of fiat is curious. And yet it appears that this is the case.

But why? After all, gold’s dis-inflationary supply curve is actually very close to Bitcoin’s, but with one important difference: we don’t actually know how much gold there is, only that it’s a finite amount.

Why, therefore, would a “natural” asset like gold, with all the uncertainty that comes with that supply line, be seen as a preference over Bitcoin whose supply is fixed and known absolutely for the next 120 years? Why, in this case, is “non-artificial” perceived as better?

I’m guessing the answer is simply buried in human psychology somewhere. After all, Bitcoin is not usually something you “get” immediately, it takes a little time.

So, until that happens, your brain will try and associate it with something it knows that seems similar and, since money is too big a stretch to start with, gold seems a natural and logical compromise.

It’s just a theory, but it seems to fit the facts.

Artificial money?

Money, like society itself, is always evolving.

In fact, all the forms of money that have ever existed have been a product of the technology available at the time it was created.

So, for thousands of years, simple, but scarce, items were used as a medium of exchange, such as sea shells, some grains, beads and similar. All of these things, however, had significant limitations and, like everything that has a limitation, we humans find a way to make it better.

And we have always done it with technology.

As an example of this, consider the first minted coins. Once the process of how to do this was known, coins were minted in large numbers and became commonplace around the world.

Eventually, early forms of promissory notes emerged when it was understood that it was more convenient to store whatever backed the those notes (usually gold) in one place and transfer ownership without have to move it.

Technology also shaped the financial processes outside of physical money itself. For example, by the mid-to-late 1800s, the proliferation of the telegraph and the train network meant that communication between banks was much faster.

Therefore, it was possible for banks to speak to each other and debit or credit accounts with each other via paper records rather than physically moving coins, notes or bullion between them.

Later, when the gold standard ended fully in 1971 and all currencies became pure fiat currencies for good, technology made it easier to trade between them and increase levels of fractional banking.

In fact, when more money is required by governments (such as we have seen recently) it no longer even needs to be physically printed, instead having an entry on a computer screen amended to show a new number.

Make no mistake, all currencies used in the industrialized world today are definitely not natural — they are 100% artificial — and entirely backed by no more than the word of the government issuing them.

Every financial instrument we use is entirely artificial and there is no one alive (in an industrialized society) who has ever known anything different.

Bitcoin is simply the next logical application of the available technology. And, arguably for the first time since the original gold standard was in widespread use, it is a real, hard money alternative.

In that context and with that understanding, it seems odd that some people would reject Bitcoin purely on the basis it is “artificial,” and yet it happens. There must, therefore, be more to it.

Who says … ?

I believe this is fundamentally less about being “artificial” and more about “trust” and some of the follow up questions thrown out by the same objectors give us some clues along those lines:

  • Who says only 21,000,000 coins exist?
  • Who says that can’t be changed?
  • Who says I’ll definitely get my money if I send it to you?
  • Who says ….

The list goes on — but you get the picture.

In my view, the idea of being artificial is being confused with the idea of control. It’s clear who controls our fiat money and, as flawed as it is, it’s more or less working as it should, at least for now.

But it’s not immediately clear where these entirely —and apparently arbitrary — numbers and behind-the-scenes processes are coming from in terms of Bitcoin.

It’s almost as if someone made up the whole thing from scratch without a shred of reference to what already exists in the world … which is, of course, exactly what happened and exactly what it was designed to do.

That means Bitcoin is an entirely “designed” currency, thereby bringing us full circle back to the original objection. But does that help us in any way?

The Bottom Line

Now that I have properly acknowledged that the objection even exists and, hopefully, have some understanding why it’s here, I’m hopeful it’s one that can be easily dealt with.

Money evolves as we, technology and society evolve. It would be ludicrous, for example, for our modern society to still be using sea shells as a medium of exchange and such a thought is unfathomable.

But, at a time when we are already used to using money that primarily exists in digital form — Apple Pay, PayPal, even gift cards and online bill payments — using Bitcoin is hardly a stretch.

The subtle difference, I suppose, is that all these services evolved based around the money we used before and are just more efficient ways of moving the same stuff around.

But like anything that reaches a natural limit of efficiency, it is usually replaced by a step-change technology. Bitcoin provides the solution to both the systems required and the unit of currency itself.

In other words, Bitcoin is a complete solution for the modern, digital world.

And let’s face it, that was never going to happen “naturally.”

Source: https://medium.com/quantum-economics/bitcoin-is-artificial-money-and-for-some-thats-a-problem-87f222743c38?source=rss——-8—————–cryptocurrency

Blockchain

Americans Can Now Buy Dogecoin from 1,800 Crypto ATMs Across the Country

Republished by Plato

Published

on

The meme coin that exploded in popularity recently, Dogecoin, has reached another milestone as the Bitcoin ATM provider CoinFlip decided to list the token on 1,800 cryptocurrency ATMs in the United States.

Dogecoin Coming to 1,800 ATMs

Started as a joke digital token inspired by Shiba Inu, Dogecoin took the world by storm in the past several months, which has prompted the popular Bitcoin ATM provider CoinFlip to take action.

The Chicago-headquartered company announced yesterday that it had added Dogecoin to its growing network of over 1,800 cryptocurrency ATMs located in 46 states.

The statement informed that this milestone “validates the legitimacy of the coin and further showcases CoinFlip’s dedication to meet consumer and industry needs as coin popularities shift.”

Daniel Polotsky, the CEO and Co-Founder of the ATM provider, said that the move would enable the general population a more straightforward way to receive Dogecoin exposure.

“Given its growing popularity and recent mass adoption, we are dedicated to making sure that Dogecoin is a part of our portfolio of coins and encourage further support of this cryptocurrency in the coming months.” – he added.

Dogecoin’s Support from Musk, Snoop Dogg, and More

CoinFlip reasoned that the Dogecoin listing comes after the token received massive endorsements from some of the world’s most popular names. Perhaps it all started with the CEO of Tesla and SpaceX – Elon Musk.

The executive previously updated his Twitter bio to display “former Dogecoin CEO,” posted dozens of DOGE-related tweets, and even bought some for his son.

Ultimately, every Musk interaction caused an immediate price reaction as DOGE surged to new highs. Consequently, the token even entered the top ten cryptocurrencies by market capitalization.

Furthermore, this skyrocketing craze caught the attention of other famous individuals, including the US rapper – Snoop Dogg.

As such, it may not be a surprise that CoinFlip said that its decision came only after Dogecoin received “support from celebrities such as Elon Musk, Snoop Dogg, Gene Simmons, and Kevin Jonas.”

SPECIAL OFFER (Sponsored)
Binance Futures 50 USDT FREE Voucher: Use this link to register & get 10% off fees and 50 USDT when trading 500 USDT (limited offer).

PrimeXBT Special Offer: Use this link to register & enter CRYPTOPOTATO35 code to get 35% free bonus on any deposit up to 1 BTC.

You Might Also Like:


Source: https://cryptopotato.com/americans-can-now-buy-dogecoin-from-1800-crypto-atms-across-the-country/

Continue Reading

Blockchain

Bitcoin at $21,000? Is a buying opportunity coming soon?

Republished by Plato

Published

on

A series of on-chain metrics registered corrections when Bitcoin fell on the charts last week. In fact, BTC dropped down to as low as $43,000 briefly, with significant reshuffling seen after Futures Open Interest dipped by $4 billion too.

Other factors such as the Bitcoin funding rate experienced a reset as well, with Grayscale’s premium registering a low of -3.77%. AMBCrypto had previously reported about the positive reboot for the aSOPR, wherein it was identified that weak hands were getting washed out.

However, one particular metric carrying historical importance did not correct much. Interestingly, it could possibly alter the course of the rally going forward.

Bitcoin NUPL continues to avoid 0.5 reset

Source: Glassnode

According to Glassnode’s latest report, the strength of the current Bitcoin rally can be illustrated by BTC’s Net Unrealized Profit and Loss or NUPL. In the past, the NUPL has regularly retested the 0.5-mark during bull market corrections. While a 0.5 re-test was seen multiple times during both the 2013 and 2017 rallies, the same is yet to be identified in the current market.

Here, it’s worth noting that market dynamics have definitely altered over the years with respect to user profitability and hodling sentiment, with selling pressure not fueling massive outflows for Bitcoin.

Source: CryptoQuant

Further, data from CryptoQuant seemed to suggest that Bitcoin outflows from exchanges have continued to maintain their low levels over the week, with long-term hodlers unfazed by the 21% decline in cryptocurrency’s price.

The resilience exhibited by investors was coming to fruition at press time since Bitcoin had managed to establish a position above its immediate resistance of $47,400 over the last 24 hours.

While it is still a little early to predict the start of a new bullish leg for Bitcoin, according to Willy Woo, consolidation above $45,000 is a strong sign of stability.

If history repeats itself, does NUPL reset carry a damaging outcome?

While the NUPL has not registered a reset at 0.5 during this rally, historically, it has happened during every bull cycle. According to data, the realized price trading is currently $14,511, and if the NUPL drops down to 0.5, it would mean Bitcoin would possibly drop down to a floor price of $21,766.

That would mean a 55.76% drop from BTC’s press time position, a drop that will completely take away all of BTC’s gains since 15 December 2020.

While historical probabilities are worth pondering over, it is also important to consider the macro-difference between previous rallies and the current one, with Bitcoin at the receiving end of more adoption than ever before.

For instance, the average weekly investment into Grayscale’s Bitcoin Trust during Q4 of 2018 was $2 million. The average investment in GBTC for Q4 of 2020 was $217.1 million. Needless to say, the course of history for Bitcoin is indeed changing.


Sign Up For Our Newsletter


Source: https://ambcrypto.com/bitcoin-at-21000-is-a-buying-opportunity-coming-soon

Continue Reading

Blockchain

Litecoin is trading at a 1,800% premium via Grayscale’s LTC trust — But why?

Republished by Plato

Published

on

Shares in Grayscale Investments’ Grayscale Litecoin Trust, or LTCN, have been trading at a whopping 1,800% premium over the market rate of their underlying asset, Litecoin (LTC).

$319 per Litecoin? 

This difference is primarily due to retail investors’ inability to purchase shares directly from Grayscale Investments, whose funds are aimed exclusively at accredited investors.

LTC holdings per LTCN share (orange) and premium (blue). Source: Bybt.com

It costs $319 to buy a share in Grayscale Litecoin Trust. However, its LTC holdings per share are currently worth just $16.42. That means it’s almost 20 times more expensive to buy Litecoin via the trust than regular spot exchanges.

LTCN shares have recently traded for as high as $496 in November 2020 — 38% above Litecoin’s highest closing price in December 2017. Although the premium on Grascale’s Litecoin fund has been drastically cut over the past three months, LTCN shares remain an unattractive investment vehicle for retail traders.

The trust offers exposure to LTC without investors needing to handle or custody cryptocurrency. Nevertheless, its shares can only be sold by Grayscale Investments to institutional investors.

The unusual spread appears to have been driven by increasing retail demand for Litecoin ahead of the Mimblewimble privacy solution rollout, with Grayscale accumulating $258 million worth of LTC so far.

Arbitrage is not really an option

Grayscale’s Litecoin Trust aggressively ramped up accumulation in February, buying at a rate equal to 80% of new Litecoin being mined during the period.

However, anyone thinking about a potential arbitrage opportunity should note that all LTCN shares require a one-year holding period after they’re created. Besides, the trust requires all investors to be accredited, with a minimum of $25,000 to start.

The United States-based investment firm also offers trusts for other cryptocurrencies, including Bitcoin (BTC). The Grayscale Bitcoin Trust (GBTC) is the firm’s largest holding, with over $30 billion in assets under management.

In recent days, the Grayscale Bitcoin Trust traded at a discount to net asset value as the TSX Purpose Bitcoin ETF saw record inflows. A diminished appetite in the secondary markets creates a potential imbalance, as there is no redemption program for the Grayscale rust funds.

Had there been a way to convert those shares back to their LTC or BTC equivalent, a market maker would gladly buy the trust shares at a discount.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Source: https://cointelegraph.com/news/litecoin-is-trading-at-a-1-800-premium-via-grayscale-s-ltc-trust-but-why

Continue Reading
Blockchain5 days ago

Gemini collaborates with The Giving Block and others, adds donations option

Blockchain5 days ago

NextGen Blockchain Platforms Self-Organize to Win Government Contracts

Blockchain22 hours ago

Why Mark Cuban is looking forward to Ethereum’s use cases

Blockchain5 days ago

What Coinbase Going Public Could Do For Crypto

Blockchain2 days ago

Google Finance adds dedicated ‘crypto’ tab featuring Bitcoin, Ether, Litecoin

Blockchain4 days ago

Crypto Investment Fund to Sell $750M in Bitcoin for Cardano and Polkadot

Blockchain4 days ago

This was avoidable – The lost Bitcoin fortunes

Blockchain3 days ago

Economist warns of dystopia if ‘Bitcoin Aristocrats’ become reality

Blockchain3 days ago

Inverse Finance seizes tokens, ships code: Launches stablecoin lending protocol

Blockchain3 days ago

XRP, STEEM, Enjin Price Analysis: 27 February

Blockchain2 days ago

Korean Government To Levy Taxes On Bitcoin Capital Gains Starting 2022

Blockchain2 days ago

How KuCoin Shares (KCS) Can Create a Stream of Passive Income

Blockchain2 days ago

NBA Top Shot leads NFT explosion with $230M in sales

Blockchain3 days ago

3 reasons why Reef Finance, Bridge Mutual and Morpheus Network are rallying

Blockchain2 days ago

Top 5 cryptocurrencies to watch this week: BTC, BNB, DOT, XEM, MIOTA

Blockchain4 days ago

‘Bitcoin could reach $1 million or $1, and may do both of those’

Blockchain3 days ago

Here are 6 DEX tokens that have seen exponential growth in 2021

Blockchain2 days ago

Litecoin, Monero, Dash Price Analysis: 28 February

Blockchain2 days ago

Polkadot, Cosmos, Algorand Price Analysis: 28 February

Blockchain3 days ago

6 Questions for Kain Warwick of Synthetix

Trending