Yanis Varoufakis was Greece’s finance minister during the Greek economic crisis. In 2012, he explored utilizing a blockchain-based system to help manage some of the crisis. Varoufakis has spoken critically about bitcoin publicly on many occasions, he understands the power of bitcoin but feels its economics is dangerous.
During a Twitter thread on Bitcoiners engaging with people outside of our usual circles, I suggested Varoufakis, who, as a Keynesian, has clearly seen value in some aspects of Bitcoin. Rather poetically he retweeted the thread.
I wanted to write a short letter bringing him up to speed on some of the changes that have happened in Bitcoin, and whether the functionality now available will impact his opinions.
“The economy is too important to leave to the economists”
– Yanis Varoufakis
Dear Mr Varoufakis,
For a long time Bitcoin has pricked your interest, but after analysis of its economics you have been left with serious and very valid concerns, such as its deflationary issuance, and its ability to disarm governments from using money to stimulate the economy.
“powerful tendency to underestimate the ill-effects of deflation on a social economy”
“there can be no de-politicised currency capable of ‘powering’ an advanced, industrial society.”
As a great supporter of your work, I hope to address some of those concerns. I know you explored implementing a blockchain-centric solution during the Greek crisis, and that you are no stranger to the technology of Bitcoin or its tenets, so forgive me if I cover a few things you already know.
One of the computer-science solutions that makes Bitcoin possible is that it is free and open-source software, a sort of cooperative for software development and a direct response to the privatization of computer science during the early 1980s. Suggestions for improvements to the Bitcoin protocol are developed publicly. Anyone can contribute to Bitcoin, but for their contribution to be successful they must go through the arduous task of proving scientifically why a change is necessary, and trying to find consensus amongst Bitcoin’s users. Changes are accepted by the network through the software the users choose to run, and in this way the users of Bitcoin decide how it is defined.
Bitcoin is always in flux, forever changing, so our judgements about Bitcoin must also change.
It is important to note a number of impressive advancements that have happened over the past few years, namely the second-layer solutions pegged to Bitcoin made possible by a malleability fix in 2017. The most popular of these second-layer solutions is the Lightning Network, which is based on a concept first suggested by Satoshi Nakamoto, that a transaction can be securely held open for a period of time, and updated, before being committed to the blockchain. These “held” transactions (payment channels) can have value move within them quickly and easily. The Lightning Network is a bunch of payment channels all networked together. I can send value to you securely, privately, very quickly and for almost no cost through the network without having to have a direct channel to you, a bit like people passing information between degrees of separation.
Pegged protocols such as the Lightning Network mean on-chain Bitcoin transactions can be used for much more than just moving value from one person to another. The underlying blockchain should be seen as an irrefutable timeline, to which truths can be pegged. This extends beyond value transfer, and many further commodity uses for the world’s most digitally-secure and scarce data are being explored.
While we can question the ability of Bitcoin’s deflationary curve to make a good system of money, its ability to bootstrap a community of users, businesses, investors and those willing to secure the network (miners) has proven successful.
The question for Bitcoin in the future will be, do the users want to keep its deflationary curve or update the protocol to a more natively usable rate of inflation, or do they want that functionality outsourced to a pegged second-layer protocol?
Changing the Bitcoin protocol would involve that scientific and democratic method of seeking consensus from its users, which could prove impossible in this scenario, but that doesn’t mean the functionality can not be achieved through a second layer.
For example, your “fiscal money” suggestion of debt tokens for use by insolvent companies, as a second layer could leverage the security of Bitcoin’s blockchain, but not be limited by its many design or throughput limitations. By including a technology called “atomic swaps,” different fiscal monies could even be interoperable with each other. Utilizing the Lightning Network alone, society could create complete openness and transparency for public spending and, at the same time, privacy for its citizens. The Lightning Network’s capacity for transactions per second is practically limitless, and far outcompetes networks like Visa, so now suddenly money streaming for services is made possible. Even VAT could be collected at the point of sale, and users could configure precisely where those taxes go, streamlining tax collection from merchants and empowering tax as a democratic tool.
Another second layer to Bitcoin that has had some traction is the Liquid Network, a federated, much faster additional blockchain. The Liquid Network is currently being used as medium of account for a number of bitcoin exchanges, who are each nodes in the federation and can validate transactions and vote on changes such as inflation, not unlike Keynes’ bancor. The Liquid Network’s federation model would translate well to a representative democracy, with nodes geographically spread across regions. The Lightning Network can also run on top of the Liquid Network, if super fast/cheap throughput is needed for everyday transactions.
Yes, Bitcoin is an apolitical money, in that not one country can control it. Rather, control is in the hands of all the users within those countries via a very public agora, but a politicized money can also exist as a second layer, and one resistant to cronyism.
Boom/bust buffering such as fair weather surplus recycling is possible with Bitcoin and all of its protocols, using multiple signatures to securely lock up rainy day surplus, or second layers for stimulus such as inflation and issuing debt tokens. Bitcoin is a direct response to cronyism, and although it enriched a few lucky enough to be there early on, more bitcoin does not equal more power over the ability to produce bitcoin, unlike the current neo-liberal apparatus of wealth disparity. Disparity in bitcoin wealth allocation continues to decrease, as those made rich by the bootstrap effect burn through their funds. There is no reason why this trend would not continue.
Bitcoin is a commons regulated by the community as a whole, and like any healthy commons is being nurtured and developed by its users, who in turn have a duty of care over it. Bitcoin’s functionality has no bound, and its usefulness is only limited by the efforts we the users put into it.
Hopefully I have addressed some of your concerns, and that for you, Bitcoin can move from a catalyst of despair, to one of hope.
All the best,
The post Op-Ed: An Open Letter to Yanis Varoufakis About Bitcoin appeared first on Bitcoin Magazine.
Prepare For Liftoff: Bitcoin Loses Bear Market Trendline Against Altcoins
Aside from a few rare outliers, over the last several years, owning Bitcoin has been the better investment compared to other cryptocurrencies. Altcoins like Ethereum and others have only recently caught up, and BTC dominance has maintained the lion’s share of the crypto market cap.
However, dominance has lost an important trendline dating back four full years to the peak of the last bull market, and it could suggest a major turnaround is about to occur across the crypto market. Could this be the » Read more
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin season crypto investors have been waiting for?
Bitcoin Dominance Loses Crucial » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>Bear Market Trendline
” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin by comparison as investors searched for the next BTC.
Related Reading | Five Signs That Say Altcoin Season Hasn’t Even Started Yet
Those investors ended up learning the hard way that there is no replacement for Bitcoin. Altcoins plunged by as much as 99% in most instances, while Bitcoin wiped out only 84% of its gains by comparison. Both scenarios are now far in the rear view, and since then Bitcoin has a commanding lead.
BTC dominance has lost an important monthly trendline dating back to the top of the last bull market | CRYPTOCAP-BTC.D on TradingView.com
At the height of that fever, dominance reached as low as 35%, but has since remained around or above 63%. That key level was lost at the same time a pivotal trendline was, and now there could be no over-performance in Bitcoin for the next year or more.
The trendline in question dates back four years to the bull market peak, and has kept dominance supported ever since.
Altcoins Are Ready To Explode If Dominance Dives Further
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin season, which thus far the leading cryptocurrency by market cap has kept locked away for many years now.
A zoomed in view shows how many times BTC dominance tried to reclaim the line | CRYPTOCAP-BTC.D on TradingView.com
Losing the previous long term trendline resulted in some short term consolidation followed by a large move lower. A bearish retest of 70% BTC dominance failed, sending the important crypto market metric falling back lower to the second ascending trendline.
Related Reading | Altcoin Season Is Here: “Buy Crypto” Surpases Bitcoin Searches On Google
With the 63% level now lost also, BTC dominance should gravitate toward the mid-50% range, allowing altcoins to soar compared to Bitcoin for an extended period of time.
Altcoins could also theoretically hold up better in a wider correction, but that scenario is unlikely as the riskier assets typically are more volatile and react more sensitively to greater crypto market selloffs.
Featured image from Deposit Photos, Charts from TradingView.com
John McAfee faces more charges connected to money laundering and wire fraud
According to the United States Department of Justice, Manhattan Federal Court today charged John McAfee and his team’s executive adviser Jimmy Gale Watson Jr for fraud and money laundering conspiracy crimes.
McAfee has been charged with securities fraud, touting, and wire fraud among other offenses stemming from the fraudulent promotion of crypto that federal law recognized as securities.
On 6 October last year, United States watchdog, Securities Exchange Commissions (SEC) charged the founder of the McAfee antivirus software firm for allegedly making over $23 million in the process of shilling seven initial coin offerings. Jimmy Gale Watson Jr. was also charged for violating Securities’ law in real-time on Twitter for shilling the ICOs along with McAfee.
The ICOs reportedly raised $41 million in the process with half of those proceeds pocketed by McAfee.
Manhattan US Attorney Audrey Strauss alleged that the duo exploited social media and “enthusiasm” among investors in the “emerging crypto market” to make millions through “lies and deception.” She further claimed:
…[McAfee and Watson] allegedly used McAfee’s Twitter account to publish messages to hundreds of thousands of his Twitter followers touting various cryptocurrencies through false and misleading statements to conceal their true, self-interested motives.
The investors of these ICOs allegedly concealed the fact that they were compensating McAfee and his team for their promotional tweets through funds raised from public ICO investors.
While McAfee is currently detained in Spain on separate criminal charges filed by the DoJ’s Tax Division. Watson was arrested on 4 March in Texas and will be presented before a federal magistrate judge in the Northern District of Texas, today.
Sign Up For Our Newsletter
PAID Network exploiter nets $3 million in infinite mint attack
Paid Network, a DeFi platform aimed at real-world businesses, has been exploited today in an “infinite mint” attack that has sent PAID token prices plunging upwards of 85%.
While the exploit netted nearly $180 million in PAID tokens at the time of the attack — what would have comfortably been the largest exploit of a DeFi protocol — the hacker’s payday will end up being far less. One observer noted that the attacker’s wallet only converted some of their tokens to wrapped ether, leaving the rest in rapidly-devaluing PAID tokens:
Summary of $PAID incident:
Total PAID swapped to WETH: 2079.603371141493
Total PAID left in account: 594,717,455.71
Total amount in attacker account = $27,418,034.33
Stay Safe. pic.twitter.com/Lz93qGKAq0
— vasa (@vasa_develop) March 5, 2021
The attacker’s wallet still has over 57 million PAID tokens worth $37 million.
The exploit is conceptually similar to an attack on insurance protocol Cover that took place in late December last year. In that instance, the team took a “snapshot” of holders prior to the attack and issued a new token, returning the supply of the token to pre-exploit levels.
The team confirmed on Twitter that they are currently planning for a snapshot and restoration:
We are investigating the issue. We pulled liquidity, are creating a new smart contract, & will be restoring everyone’s original balances to before the hack.
Those with staked, Lpool & UniFarm $PAID will have their tokens be sent to them manually.
We will share more updates soon
— PAID NETWORK (@paid_network) March 5, 2021
However, token holders anxious for a resolution may be out of luck. Some in the community are speculating that the attack on PAID wasn’t an exploit at all, but instead a “rugpull” — a colloquial term for an insider designing contracts to specifically make them exploitable and swiping user funds.
Nick Chong of Parafi Capital noted on Twitter that Paid’s deployer contract, an externally controlled account, transferred ownership of the deployer to the attacker shortly before the mint, indicating that a member of the team either rugpulled, or errantly allowed the attack to take place with a security lapse:
Paid Network’s deployer, an EOA, transferred ownership of a contract to the attacker 30 mins before the minthttps://t.co/h14GdV4fCf
— Nick Chong (@n2ckchong) March 5, 2021
Additionally, a DeFi risk analysis account @WARONRUGS warned of exactly this exploit in late January, noting that the contract owner can mint PAID tokens at any time:
❌ Scam Advisory #86- PAID Network $PAID (0x8c8687fC965593DFb2F0b4EAeFD55E9D8df348df)
Reason: The owner can mint tokens and did mint tokens to fresh wallets who never bought the presale. Contract is behind a proxy.
Likeliness of losing all funds: Very High
— #WARONRUGS❌ (@WARONRUGS) January 25, 2021
An on-chain note sent to the attacker has ominously warned that “the LAPD will be in contact with Kyle Chasse very shortly.” Kyle Chasse is the CEO of Paid Network.
Paid Network did not respond to a request for comment by the time of publication.
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.