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Cryptocurrency and the Nature of Modern Money

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[The following is a public post to my new Patreon Presence, from where I’ll be doing all my cryptocurrency writing.]

This is my first post to this new medium of information exchange, Patreon. As a prelude to what I’ll be creating in exchange for your patronage in the days and months to come, let me introduce myself.

I’m Richard Nikoley. I live in the Sierras at 4,200 feet of elevation. I Graduated from Oregon State University in 1984. I was a US Navy officer. I was a financial services entrepreneur for a long time. I also traded options full time. My full bio is here.

I’ve also been a blog writer for a long time. My blog, FreeTheAnimal.com, began in November of 2003 and I just never stopped writing stuff for very long. That was 4,600 posts ago. It comes out to 330 posts per year out of a possible 365. On average, of course. Oh, and readers have, for the most part, graced me with 105,000 comments along the way.

What do I blog about? Almost a little bit of everything with various interests and diversions along the way. At various times, pretty heavy on politics, philosophy, social concerns, diet, health, low-carb, paleo, keto, weight loss (including my own), money, and trading.

So let’s delve into what this is going to be about…

It’s my intention to get people thinking about money in a whole new way, and I mean to its very core. This knowledge, then, facilitates engaging in rational asymmetric risk taking with a view towards downright crazy, lottery-like, life-changing payoffs.

When you think about the modern manifestation of money, a couple of things ought to come to mind. To some extent, it’s a supposed store of value. To a far greater extent, it’s a medium of exchange.

Why?

It’s a supposed store of value because it’s supposed to be relatively scarce and hard to get. This easily applies to something like gold. Has to be mined, literally, right out of the ground. That’s not easy to do or everyone would do it. On the other hand, gold is not a particularly great medium of exchange. Everyone would have to lug around clipping tools and gram scales just to transact business. Plus, it can get heavy, the more you amass. How would you go on an extended 1st Class vacation to Europe lugging around your gold and the tools you’d need to trade with it?

Currency—like cash, bank accounts, financial ledger balances and so forth—solves this problem. And with plasic…credit and debit cards…it’s hyper-solved. It’s as though it’s too easy to spend.

The thing to understand, however, is that the transactional ease by which modern money can be exchanged or spent is by a design that’s somewhat nefarious at its root. Have you ever wondered why it’s so necessary to have a “financial sector” in the first place? I’m speaking in broad terms here, encompassing everything from central banking, securities exchanges, stocks, bonds, options, and futures to a passbook savings account or certificate of deposit issued by your local branch office.

Why?

It’s because of inflation, which is that thing that makes modern money everything from an awful store of value to a downright disaster of value erosion and destruction. Let’s look. Suppose you were alive in 1900 and had $1,000. You held it. What would it be “worth” today, in terms of purchasing power? But let’s look at it the opposite way.

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You can run various scenarios yourself here. How about gold? $1,000 would have bought you 50 ounces of gold in 1900 at $20 per ounce. Today, gold is trading at $1,350 per ounce, making that 50 ounces worth $67,500.

Are you convinced, now, that government fiat currency (“fiat” meaning: it’s money ’cause we say it is and everyone agrees) is not a store of value at all? Modern fiat money, while very efficient in terms of ease of use and credit comes at a pretty hefty price when you consider how much wealth—as a store of value—dwindles away over time.

Here’s the circularity that’s baked into the whole cake: we have enormous “financial sectors” to “manage inflation.” So why just not inflate the currency as a matter of monetary policy in the first place? Well, because, you see, we have enormous “financial sectors” to keep busy and well fed. We also have this thing called “the economy” and the fear from all on high is that The Economy must grow, or stagnate and die. A growing economy is simply assumed to be a good thing.

Why?

We can assume that wealth and value creation is a good thing. It doesn’t automatically follow that inflating and eroding the medium of exchange we use to trade values is a good thing. It’s probably a bad thing.

We can understand why all governments inflate the national currency on purpose. An inflating currency motivates people to “buy it now” and this is a fundamental necessity for a growing and robust economy, or so it’s believed. Spend, spend, and spend some more.

Before I move onto how cryptocurrency is different in theory—plus, I believe, in practice now, owing to Bitcoin—perhaps read this primer: Deflation Is Always Good for the Economy. A quote:

According to most experts, a little bit of inflation can actually be a good thing. Mainstream thinkers are of the view that inflation of 2% is not harmful to economic growth, but that inflation of 10% could be bad news. (Indeed the Fed’s inflation target is 2%.)

Thus, we can conclude that at a rate of inflation of 10%, it is likely that consumers are going to form rising inflation expectations.

According to popular thinking, in response to a high rate of inflation, consumers will speed up their expenditure on goods at present, which should boost economic growth.

So why then is a rate of inflation of 10% or higher regarded by experts as a bad thing?

Clearly there is a problem with the popular definitions of inflation and deflation.

Cryptocurrency, like Bitcoin, is inherently deflationary.

Why?

Because it’s limited. In the case of Bitcoin, there will never be more than 21 million bitcoins, a limit that will be reached in 2140 when there will be no more coins to mine. (Each bitcoin is divisible by 100 million units, or Satoshis.) Even gold doesn’t have that feature since we don’t know how much of it there is, whether or not some enormous cache that could dilute the whole market is yet to be found, or what the future of mining technical and cost efficiency has in store. All we know is that so far it has been a reliable store of value and is inherently deflationary because of it—the limitation of supply.

A store of value that can also serve as a medium of exchange, whose supply is limited, is inherently deflationary because in order to secure some of it yourself you have to produce some value someone else wants more than whatever unit of that thing you’ve agreed to in exchange. So, and this is very important, over time, people will have to produce more and greater relative values for the same unit of the thing.

This is the exact opposite of what we tend to think makes and grows The Economy. In fiat currency land, everyone is obsessed with “making money.”

Why?

Because each unit is worth less and less in exchange for the things we need and want, to live and prosper (inflation). And, since we like the idea of prospering, we tend to desire more and better things as we progress through life, so everyone is waging two battles: get more and more money to get more and better stuff, and also get more and more money because it takes more and more money just to buy the “crappy” stuff we already have.

There’s the essence of your so-called growing and vibrant economy right there.

In gold or crypto land, it’s the opposite. Your money gets more valuable relative to stuff you may want over time because people are creating valuable stuff just to get a chunk of it so that they can sit back and watch it appreciate over time, such that they can buy more and better stuff with the money they already have.

Do you see the difference in fundamental motivations? It’s the difference between the drive to make more [increasingly valueless] money vs. the drive to create more and greater tangible values to trade for a sound store of value that can then be used to exchange for something else and will become more valuable while you wait.

Pretty nifty, and cryptocurrency is our path to that (how I became a believer). All of the foregoing is the basic theory. Of course, there are still problems to work out as we take the theory to practice and that’s what this space will be all about. Here’s a list of some of the issues, in no particular order.

  • Bitcoin is more of a store of value than it is an efficient medium of exchange, currently, especially for micro-transactions.
  • Easier and cheaper to exchange than gold, but not up to fiat-money debit-card standards in terms of speed and transaction cost.
  • Securing Bitcoin and other cryptos. It’s just like gold or physical cash in this regard. It can be lost or stolen.
  • Volatility is far too high relative to the fiat currencies that still run the “growing and robust economy,” so moving fully to crypto is not yet a practical reality for most.
  • The wild west aspect. There are hundreds of coins now, most worthless, some fraudulent pyramid schemes, and some outright con and theft schemes.
  • The tools aren’t fully integrated yet. You have to exchange with fiat currency in one of a number of places (who do you trust?). Then you have to buy other coins you might want in many other places. Then you have to secure them in still many other places. It’s a jungle out there.

In a nutshell, navigating all of that and more will be the prime mission of this space and above all, to do so rationally. It’s not often that an opportunity comes along for such potential asymmetrical rewards for such little risk. We’re not going to mess up on that.

…So, the traditional way this sales pitch is done is that I’m to create a few “Reports” and “How-To” guides and offer those free (“$349 value”). To get them for free, you subscribe to my publication…anything from a monthly newsletter to email alerts, or both. That normally sells for $149, but if you act now, it’s yours for only $69. Oh, and it’s guaranteed. You can receive a 100% refund at any time over the year and you get to keep all past issues and alerts, as well as the freebies.

But I said we’re going to start by being rational, we’re going to stay being rational, and we’re going to profit by being and staying rational at all times.

So here’s the deal: $5 per month, access to everything. You can cancel it on a whim and a couple of clicks any time.

That’s it. No gimmicks, no hype, no undercutting the core message of sanity and rationality at all times. Here’s what I’ll be putting up here:

1. A living Resources Page that’s regularly updated, where patrons can go for links, instructions, videos, etc. that are the nuts and bolts about where to go to do what in terms of crypto. It will grow to be a long list, but v1.0 will be up within a few days.

2. I’ll be posting one to two posts per week covering the general crypto environment, news, victories, defeats, economics, policy, monetary philosophy (kinda like the foregoing in this post).

3. All of my crypto trades, in and out, and price. Initially, I’ll be putting up a post that covers all of my current positions.

4. Heavy engagement with all patrons in the comments. And I will ensure that the best of those exchanges get delivered to patrons as a whole regularly. This creates a community of patronage.

5. A monthly summary of everything that was very, very important over the month. Part newsletter, part index of the past month with links and commentary.

6. Not immediately, but at some near point in the future, I’ll also begin addressing other ways to participate in crypto as a business sector. We’re talking about various technologies, both hardware and software, that service the sector. There are probably some excellent micro-cap stocks to look into.

7. Anything else that comes to mind that I want to do.

In closing, let me emphasize just one thing that this will not be: a market timing service. First of all, I don’t think they’ve ever really worked out who’s better at timing the markets, expert market-timers or screeching monkeys.

So we’ll leave market timing to the screeching monkeys.

The nature of this game is to view cryptocurrency as a store of value that, due to its limited nature, tends to be deflationary relative to fiat money, goods, and services and as such, we are looking to take small positions over time, increasing them by small amounts when warranted, and to hold for as long as it takes.

I hope you will give serious consideration to becoming a patron of this creative endeavor.

Richard Nikoley

I'm Richard Nikoley. Free The Animal began in 2003 and as of 2021, contains 5,000 posts. I blog what I wish...from health, diet, and food to travel and lifestyle; to politics, social antagonism, expat-living location and time independent—while you sleep—income. I celebrate the audacity and hubris to live by your own exclusive authority and take your own chances. Read More

36 Comments

  1. John on September 8, 2017 at 15:44

    Hell yeah, just signed up.

    One of the things that kept me from getting into cryptos sooner was the entire “jungle” aspect. It’s both scary and overwhelming at first. Probably what kept me from getting into cryptos sooner. It gets very real as soon as you lay any money on the line, even if that is inflationary fiat. If you do a good job navigating that jungle, I can think of a lot of people I will be sending your way.

    I’ve seen some people speculate that the cryptos will fully eliminate government fiat money (like the dollar) very soon. I’m at the point now where I hope that does not happen. I want the two systems up and running together, side by side. I personally love the idea of a marketplace of currencies, like the forex, except not dominated exclusively by government issuers.

    I personally love the idea of holding my money in deflationary currencies, while holding debts (like a mortgage) in inflationary currencies. I’m very excited by some of the companies that are being built on the blockchain as well. Some are even bridging the gap between cryptos and fiat.

    • Richard Nikoley on September 8, 2017 at 15:49

      I saw your patronage, John. You’re number four.

      Thanks, man. This is going to be a lot of fun and I am very motivated to help make sense out of it all.



  2. Rocco on September 8, 2017 at 16:50

    Here I was thinking I need to start learning this stuff and this comes along. Score. I’ve been a long time reader (joined up during the no soap days, which has made a HUGE positive difference in my life, btw) and always enjoyed your info and writing. Looking forward to ir!

  3. fearless on September 8, 2017 at 18:24

    I see the appeal of limited Bitcoin supply but isn’t it possible to create an infinite amount of other alternative crypto currencies? The existence of a substitute will detract from Bitcoin’s value, won’t it?

    • Richard Nikoley on September 8, 2017 at 18:37

      That’s a far thinking question, dude.

      I can see the theoretical problem. Trading and agitation for fun in crypto essentially creates the same problems in one way or another, or a few.

      It’s a problem I’d love to have. All anyone needs to do is stop buying their least favorite coins.

      But I don’t think it’s gong to compromise Bitcoin, the anchor digital, the reserve currency in crypto land.



    • Hap on September 9, 2017 at 21:10

      The answer is “maybe”…..if there is a market there will be “winners and losers” and there will be some sort of competition to determine that outcome…..which could fluctuate wildly. (at times).

      I haven’t thought it through but it seems similar to currency markets , complete with manipulation of sorts I just don’t comprehend. I did see today that six banks joined in consortium to support Bitcoin. Did not check to see which ones. Kind of doesn’t matter. All sorts of people and institutions will be falling over each other to get a piece of the action, if not outright attempt to control.

      If you like thrills and spills…..all this cryptocurrency stuff will be great fun.



    • Hap on September 9, 2017 at 21:18

      I have just about determined that the 5 bucks a month, at least for me, is an entertainment expense.

      I will probably drink one less Americano at CBTL….or buy two less cucumbers at Gelson’s.



  4. Martin Archer on September 9, 2017 at 10:18

    I’ve always wondered why the fuck the cost of living keeps rising. Food for example, still goes up in price, year after year, regardless of the incredible efficiency gains brought about by technology and research.

    • Richard Nikoley on September 9, 2017 at 10:47

      Yep, imagine where we’d be without the deflationary offset represented by high-tech, economic efficiency, economies of scale, sound capital investment, etc.

      Or, another way to look at it is that those things make it far easier for the State’s theft to go unnoticed by those not paying close attention. “Hey, my smart phone, computer and TV are WAY better than what I had three years ago and PLUS, they cost less. Just look at the price of HDTVs over the last decade, compared also to their size, reduced weight, far higher contrast ratios and more.



    • Martin Archer on September 9, 2017 at 11:27

      there’s obviously some sort of distinction between high tech gear and other industries like food, but one main difference is the entrenched crony capitalism/corporatism that doesn’t much affect high tech firms, as it does agriculture, automotive, and so many others that have no choice but to play the lobbyist game – because that’s the only game in DC



    • Hap on September 9, 2017 at 21:15

      Martin
      AG, automotive etc….are the dinosaurs. Yes, they have lobbyists.. but they don’t have the massive reach of the monstrous tech firms….through their aggregation and consolidation of so much personal information.

      These tech guys are at the leading edge of the nouvieaux croniists. They go deep into the government apparatus. The EU is flailing in an attempt to get at Google’s power. Most people acknowledge that Google technology was cutting edge for Obama elections.



    • Hap on September 9, 2017 at 21:35

      https://www.thetimes.co.uk/article/amazon-and-google-face-new-eu-tax-lk9snktps

      and….about cost of living rising. Yes…tech has helped create innovative and relatively cheap consumer items that people cannot either resist or cannot live without. While this shit is cheaper , faster, better…..most of the time… , you have to buy more, fixing is impossible, support is expensive, data gathering and intrusion into every facet of life is a major tech asset.

      Your cable and internet fees go up, energy costs are only slightly deflationary because we’ve discovered shitloads of fossil fuels. That will go up too because the grid is antiquated and /or will have to invest in decentralizing energy generation (ie panels etc). They will get you with electric cars, that the government mandates.

      Even Amazon is not inexpensive……we pay for all the “convenience” to buy more.

      Is the individual really being empowered and liberty maintained or expanded?

      All I know is that I spent two weeks at my Hawaii shack in the mountains , hiked in rain forest, split logs, derived water from catchment….saw almost no cars on the road. It was like being in a dream. I don’t yet have solar…..very expensive and somewhat inefficient in rain forest areas.



    • Bret on September 10, 2017 at 03:26

      Ron Paul used to say inflation was a hidden tax on the poor. But it’s not hidden, and the tax is not only on the poor, but on mattress stuffers and consumerist slavesheep as well (of course there is plenty of overlap among these three groups).

      People are scary stupid. Richard, you mentioned a while back that your employees wouldn’t take your money via 401k matching. I know too many people who think their government pension is going to keep them fed and happy for the next 20-50 years. Not even going to start on SS & Medicare.

      All I can say to these hundreds of millions of voluntary slaves is Thank You for being morons and reinforcing the scarcity-based value of knowledge and independence.

      Can’t wait to see where we go on the crypto project, Richard. Thanks for doing this. You are the man.



    • Richard Nikoley on September 10, 2017 at 07:13

      Hahahaha.

      I’m da man.

      Lots of great comments yesterday and overnight, and I’m behind reading and responding.

      Last minute, Bea snagged tickets for Kenny G and George Benson, 15 minutes down the hill at Ironstone Vineyard Amphitheater. Really good show by two masters (it was a double feature, Kenny first, then George, and Kenny came back out a time or two to play alongside George). Anyway, now NFL gets going today. Signed up with FuboTV to live stream the games ($20 for first two months, $35 per month after that) since we cut the cable, except for Internet service.

      Cable TV service fees are crazy. Talk about dinosaur legacy contracts creating massive inflation. Netflix, Hulu, and Prime are the future. And sports is really the only reason to care about live TV, which is why FuboTV. Sports centric, great app interface. I did a trial with PlayStation Vue, didn’t like it.



  5. Steve on September 9, 2017 at 19:44

    Great stuff Richard, the whole concept of money, and specifically cryptocurrencies, is something that is extremely interesting, but hard for me to really get my head around. The dramatic increase in value in Bitcoin the last year or so is exciting and seductive, but I’m worried it could be another hype-driven bubble like the dotcom boom of the 90s.

    Forgive me, this might sound like a stupid question, but what actually is the underlying fundamental value of bitcoin? Yes I can see how the finite supply makes it maintain (or increase) its value better than inflationary fiat currencies. But what is the value that is actually stored?

    Unlike say gold, which has aesthetic value and industrial applications, and a track record going back millenia as a trusted store of value, I can’t really see what the underlying fundamental value of bitcoin is, besides maybe its use for secretive/anonymous transactions, which seems like a rather niche use and doesn’t really seem to justify the current price. Even its use as a normal (non-secretive) medium of exchange, you say yourself it is inferior to fiat currency (debit cards etc).

    If this is indeed its main value, what is to stop another crytocurrency coming along that is even better (more secretive, or lower transaction costs) and everyone to suddenly drop bitcoin in favor of this better coin?

    As the commenter “fearless” alluded to above, while there may be a finite amount of bitcoins in the world (in theory making it a good store of value), if the underlying value of those bitcoins (its use as a secretive medium of exchange, or whatever other value bitcoin has) can be easily duplicated by other cryptocurrencies, doesn’t mean this it would actually be potentially inflationary and a very poor store of value?

    The coining of new crytocurrencies that can do the same thing as bitcoin, seems fundamentally similar to just creating new bitcoins, leading to inflation.

    • John on September 10, 2017 at 09:16

      “As the commenter “fearless” alluded to above, while there may be a finite amount of bitcoins in the world (in theory making it a good store of value), if the underlying value of those bitcoins (its use as a secretive medium of exchange, or whatever other value bitcoin has) can be easily duplicated by other cryptocurrencies, doesn’t mean this it would actually be potentially inflationary and a very poor store of value?

      The coining of new crytocurrencies that can do the same thing as bitcoin, seems fundamentally similar to just creating new bitcoins, leading to inflation.”

      Here’s the thing… yes, the underlying value of Bitcoin (limited supply, being decentralized, blockchain technology, and so on) can indeed be duplicated by another cryptocurrency (or even improved upon)…….but it cannot be done easily. It takes time, effort, knowledge, and capital. Bitcoin has been around 8 years, Litecoin 6…. so it would take years for a brand new crypto to establish itself as a competitor, and a decade before it could be number 1.

      Also, a lot of the new “cryptos” aren’t really currency…. they are tokens designed by companies that will have specific purposes. More similar to corporate stock than a dollar. The value of those tokens will largely be driven by the value of the companies, and many will be worth nothing. But, most of those tokens are being built on the Etherium Blockchain. So, those tokens don’t really compete with ETH, more like complement it. In that case, the expanding number of tokens actually gives value to Etherium.



    • John on September 10, 2017 at 09:23

      “The coining of new crytocurrencies that can do the same thing as bitcoin, seems fundamentally similar to just creating new bitcoins, leading to inflation.”

      Not really. Does the fact that aluminum, tin, and copper are more common than gold deflate the value of gold? After all, they are all metals.

      Venezula is flooding the market with Bolivars. Does that drive inflation of the US Dollar? Euro? Yen?

      New companies are created and issue stock every day. Does that drag down the price of Amazon? Google? Apple?



    • Steve on September 11, 2017 at 02:59

      “Does the fact that aluminum, tin, and copper are more common than gold deflate the value of gold? After all, they are all metals.”

      No, because gold has specific chemical properties that those other metals don’t have, giving it a unique value proposition. For the applications where you need gold, you can’t simply replace it with aluminium or tin.

      ” Venezula is flooding the market with Bolivars. Does that drive inflation of the US Dollar? Euro? Yen?”

      No, because those currencies have uses that can’t be replaced by Venezuelan Bolivars, e.g. pay taxes or buy things in USA, Europe, Japan. The US Government mandates that you pay your taxes in USD, it won’t accept Bolivars.

      “New companies are created and issue stock every day. Does that drag down the price of Amazon? Google? Apple?”

      No, because owning stock in Amazon has a value (sharing in the profits of the highly profitable ecommerce company Amazon) that can’t be replaced by owning stock in another company.

      In all these cases you mention, there is a unique value proposition in gold/USD/Amazon stock that is not duplicated by aluminium/Bolivars/non-Amazon stock etc.

      I am wondering what is Bitcoin’s unique value proposition that can not be duplicated by another crypto-currency (either existing now or potentially created in the near future). I am not t asserting that it doesn’t have one, I am simply asking what it is.

      Are the things you mentioned in your previous comment (decentralised, blockchain technology) unique to Bitcoin, or are they common features of crypto-currencies in general (or a subset of them)?

      Is not possible (and indeed quite likely, given the money to be made), for someone to create another crypto-currency with these same attributes (the same value proposition as Bitcoin) , and thus dilute the value of Bitcoins in the same way as creating new Bitcoins would?

      I can see how crypto-currencies in general may have a value proposition, and as the first/original one, Bitcoin has virtually monopolised all of that value for itself, hence its high price at the minute. But if and when the market identifies another solid coin (perhaps Richard will find one during his research into all the various altcoins out there, or perhaps someone will create one anew), won’t this dilute the value of Bitcoin: the value proposition of crypto-currency will be divided amongst 2 (and eventually more) different crypto-currencies? Unless of course Bitcoin has a unique value proposition that cannot be duplicated by another coin. Which I can’t see that it does to be honest.



    • Bret on September 11, 2017 at 06:40

      Steve, I remember the Cato daily podcast presenting a version of that argument three years ago and declaring Bitcoin a no-brainer sell at that time.

      I think the Herculean effort behind the math, technicalities, and networking is what gives Bitcoin its real advantage over the next couple of decades. That, plus the finite limit of units.

      I’m sure competition will bring Bitcoin’s value down at some future time, but I very much doubt it’ll be any time soon.



    • Bret on September 11, 2017 at 06:47

      Also, Bitcoin’s design is so uniquely brilliant that to mount a formidable opposition, competitors would have to essentially copy its design.

      The wild west nature of investing in this stuff is naturally going to attract the bulk of people to the premier brand rather than the copycats, unless the copycats can actually offer something else (more security, etc). Hard to imagine that happening any time soon.



    • John on September 11, 2017 at 07:16

      “I am wondering what is Bitcoin’s unique value proposition that can not be duplicated by another crypto-currency (either existing now or potentially created in the near future). I am not t asserting that it doesn’t have one, I am simply asking what it is.”

      First mover advantage. Can’t be duplicated by any other crypto. Plus, the infrastructure and track record that Bitcoin have. If you’re wondering, you can’t trade Ethereum or Litecoin on the Bitcoin network. They each have their own. You mention the track record of gold as contributing to it’s value, why wouldn’t track record apply to Bitcoin as well?

      “Is not possible (and indeed quite likely, given the money to be made), for someone to create another crypto-currency with these same attributes (the same value proposition as Bitcoin) , and thus dilute the value of Bitcoins in the same way as creating new Bitcoins would? ”

      Well, Litecoin is basically what you’re talking about here. It was started in 2011. So, go look at a price chart, and compare Bitcoin’s price in 2009-2011 to it’s price since. Has Bitcoin’s value been diluted? In terms of percentage of the market, yes. In terms of value compared to the dollar or gold? Not at all. I guess it depends on whether you’re more interested in a 100% stake in a million dollar industry, or a 45% stake in a billion dollar industry.

      “But if and when the market identifies another solid coin (perhaps Richard will find one during his research into all the various altcoins out there, or perhaps someone will create one anew), won’t this dilute the value of Bitcoin: the value proposition of crypto-currency will be divided amongst 2 (and eventually more) different crypto-currencies?”

      Your fear has already been realized, and in fact, it’s not 2 cryptos, but at least 3- Bitcoin, Ethereum, and Litecoin.

      Bitcoin’s market cap is $69.5 billion. Ethereum is second at $27.8. Even if Ethereum or Litecoin becomes number 1, that would still likely take a year or more, Bitcoin will still be a major player, and the crypto market will continue to grow over the next 5 years (explode might be a more accurate description).



    • Richard Nikoley on September 11, 2017 at 07:35

      Everyone making good points here and thanks for raising these issues, Steve.

      Of course, my whole strategy surrounding all of this is to essentially be putting at least half of my new buys into “the big three,” and spread the other half into small stakes, like $20-$50 each into a basket of the others that look promising, both adding to existing stakes a bit at a time and identifying others to jump into.

      These are all buy and hold plays. Not interested in timing, except to buy on sell off dips now and then. Stakes are small, so not worried about any of them going to zero. If any of these ones (like PotCoin) I got into for pennies ever go to $1,000, then I’ll probably sell at least half my stake for hundreds of thousands….

      There’s the nutshell.



    • Doug on September 11, 2017 at 07:45

      John –

      You can create a new crypto currency if you want, but Bitcoin has market effect now. Drug users and gamblers need Bitcoin 🙂 Prostitutes need them to place adds on Backpage. If you have wealth it is pretty easy to take Bitcoin wealth across borders without the banking system…very powerful stuff.

      If govt wanted to stop Bitcoin, they just need to loosen some laws 🙂



    • Richard Nikoley on September 11, 2017 at 08:06

      Heh, yea.

      Consider how absolutely clownish the US is. You can’t fly with more than $10K in cash, or something like that…or you must “declare” it, or something.

      You can have millions of $$$ worth of Bitcoin right on your smart phone and can transact peer-to-peer, smartphone to smartphone anywhere in the world, for any good or service you want.

      Cash is so primitive in the face of Bitcoin as to be laughable. Oh, and if you lose your cash or someone steals it, it’s gone. If you lose or someone steals your credit cards, you have a bitch of trouble in many places dealing with the fraudulent charges and trying to get a physical replacement in your hands.

      But if you lose or someone steals your smartphone, assuming you have 3-step security measures for getting into your phone, getting into your wallet, and then for sending BTC to anywhere, all you have to do is go to any kiosk, buy another smart phone (even using a local cell/data service for the time being…I had a TelCel SIMM in my iPhone 6 when living in Mexico), download the wallet app, and enter your 12-word recovery phrase, and bam, there’s all your coin.



  6. Hap on September 9, 2017 at 21:40

    Why is Apple holding a trillion dollars hostage in offshore accounts? Why isn’t it being used to “improve people’s lives”? Apple would like YOU to pay more taxes and submit to government domination, but they are going to hold that money hostage to a tax break to repatriate….which in a way they deserve since it is not that they are so greedy…the government is insatiable.

    • Bret on September 10, 2017 at 03:43

      Apple might as well let the blind baby birds pay the taxes. They (the latter) have asked for it by clamoring for so much government in their lives. Apple executives, by contrast, are too smart and capable for that.

      I used to be an angsty libertarian, and now I am so done caring about politics it isn’t even funny. There will always be an endless supply of stupid voluntary slaves who think government is God/Santa Claus (h/t P.J. O’Rourke). They are their own worst enemies, not the government. The government is merely a product of them.

      I realize there is no way to remediate or otherwise help them. So I’ll just stand back and laugh at them, and thank them for sacrificing all their independence and thereby giving my friends and family so many advantages in life through decreased competiton.



  7. SteveRN on September 10, 2017 at 17:02

    #35, I’m in on the ground floor. I feel like a trendsetter, at the leading edge of the curve.

  8. Mark on September 10, 2017 at 17:48

    Funny, on the last post before Patreon was even announced, I was going to comment that I would pay good money for your thoughts on crypto! Well you must have seen the value in it yourself. I just signed up as well.

    The trust you’ve built over the years, never bullshitting nor ignoring new evidence, makes me excited about the patreon Bitcoin thing. It’s hard to know who to trust about Bitcoin and regardless of how “right” you are, I know you won’t bullshit.

    • Richard Nikoley on September 10, 2017 at 19:56

      You got me.

      Shit, I can’t take you for a ride.



  9. Stark Brandstone on September 10, 2017 at 22:00

    Awesome, finally a business person with a financial services and trading backgrounds to discuss cryptocurrency with, rather than the earliest adopters who are celebrating their lottery winning luck and fanboys just hyped over the interesting technology updates.

    Looking forward to excellent writings and chats about Bitcoin, ethereum, maybe monero, though I think thats more of a currency than a store of value.

  10. thhq on September 12, 2017 at 04:54

    Nah I’m too much of a skeptic. Bitcoin et al sound like the new penny stock miners. It’s built on trust, hence speculation, and not even backed by a real hole in the ground.

    When will America recapitalize? Who will build the next steel mill, River Rouge, aluminum smelter or paper mill? I’ve watched decapitalization for the last 40 years of my career. Sawmills, paper mills, smelters, appliance factories closing around us, with no significant construction since the mid 1980’s.

    Bitcoin doesn’t fix our infrastructure. Rust never sleeps.

    • Richard Nikoley on September 12, 2017 at 06:23

      Context. It’s not bitcon’s job nor purpose to build steel and paper mills. It’s to store value and be a mutually agreeable medium of exchange.

      Next, you have it 180 degrees wrong. Cryptocurrencies are trustLESS systems. So-called trust, full faith and credit in monetary systems is why value has been siphoned off and stolen from the little guy for centuries, and still people go, “it’s not real money.” Biggest choking laugh of all time and exposes the utter delusion suffered by almost everyone.

      Here, the cure. You should laugh so hard you cough up blood.

      https://youtu.be/ONvg9SbauMg



    • thhq on September 12, 2017 at 07:22

      What I said was off the top of my head at 5 AM. After coffee I found this.

      https://www.google.com/amp/s/www.forbes.com/sites/johnwasik/2017/03/22/4-ways-to-tell-if-bitcoin-is-in-a-bubble/amp/

      Maybe you’re right. I’ve traveled enough in South America to see that mere nationhood is not enough to secure a currency’s value. But Bitcoin is being gamed right now and it will be gamed more. And it doesn’t fix our infrastructure like a corporate bond or a muni does.



  11. Greg on September 14, 2017 at 07:04

    Perhaps you nailed it early on in your post: money is primarily a medium of exchange, and not that useful as a durable store of value. What if the very idea that money of any kind can reliably preserve wealth is just a flawed concept?

    • Richard Nikoley on September 14, 2017 at 17:11

      Well, gold and other precious metals have sure proved reliable as both stores of value, and of course they are also a medium of exchange, and global too. But, there’s some inconvenience, as I outlined.

      Also, in terms of coinage, the government still found a way to inflate it:

      https://en.wikipedia.org/wiki/Methods_of_coin_debasement



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