The War On Cash/Financial Privacy-Negative Interest Rates

[Freitag]

Oh yeah, and at Consensus, JP Morgan announced they would integrate the anonymity technology behind Zcash, another crypocurrency, into their own blockchain technology.

“Monday, the company behind Zcash, the Zerocoin Electric Coin Company (ZECC) announces a partnership with JPMorgan Chase to add Zcash’s privacy technology to Quorum, an enterprise blockchain platform JPMorgan built on Ethereum, a network similar to bitcoin’s but focused on smart contracts.”

Interesting. One of the downsides of zk-SNARKs, the anonymity technology behind Zcash, is that it makes it impossible to audit the coin supply. So if a hacker found a way to to create coins out of thin air, so to speak, there's no way to detect or trace it. For this reason Zcash is said to have a "trusted setup", which means you must trust that the programmers will not use their knowledge to counterfeit coins.

[Wombaticus Rex]

Quite a piece, right here - blockchaining the entire global economy:
https://blog.sweetbridge.com/scott-vina ... 5d9d27c3e6

Vinay: So, tell me a bit about the supply chain space. What does it really look like? How does it really work? What is a supply chain, when people use it?

Scott: Well, first, let’s talk about the size of it. It’s $54 trillion of GDP globally, which … it’s two-thirds of the world’s global economy. Employees, the largest portion of people on the planet.

...

Vinay: Okay. So, that gives a sense of the scope.

Scott: Let me put it in a frame of reference, for example, particularly for those on the blockchain. Financial services, which has received so much attention related to the blockchain, is only 13 trillion.

Vinay: Okay. So, four times the size of all financial services.

Also, recent statements from China:
https://www.bloomberg.com/news/articles ... re-illegal

And Christine "Seven" Lagarde:
https://www.coindesk.com/imf-head-chris ... urrencies/

A nothingburger hedge wrestled from over a year of internal deliberation, no doubt. Our empire is a finely tuned machine!

[identity]

Scott: And a smart contract that, basically, makes it happen. So, think of this for music. This totally redoes the music industry, because all the creative industries have all these people that create stuff that, if they don’t do a lot of work to try to protect the things they create … they lose access to it. Now, they can actually say, “Let me put it out there. Let me just distribute it broadly. Allow it to be copied,” but, whenever it gets used, the system actually recognize it’s being used, and it uses a standardized terms of use to, basically, extract the value from it.

Vinay: It’s like compulsory licensing, without the compulsory.

Scott: Without the compulsory. Well, you could do this for software. Now, I can just put my software out there; and, as it gets used-

Vinay: And, where somebody’s using it-

Scott: I get paid.

Vinay: … Long chain.

Scott: I can do this with all sorts of intellectual property, chemical processes, scientific research, all sorts of things-

Vinay: Because you can prove when the thing is being used, because you’ve got this open back plane.

Scott: That’s it.

Vinay: And the open back plane-

Scott: And can measure actual economic impact, or economic use, of it, and I can get a piece of that.

So, the system will track everything I consume (words, sounds, visuals, chemicals, [patented?] edibles, etc.) so that the IP rights owners can get a piece of it? (And I thought things were rough trying to avoid f*c*book and goggles...)

[identity]

Vinay: So, I take the set of assets that I have, like a real estate portfolio. I figure out how to get it recognized as property inside of the Sweetbridge system, I bring it into the Sweetbridge system in such a way that it now has access to the liquidity, and all the other features, and that’s how the Sweetbridge economy grows.

Scott: Yeah.

Vinay: And I can pull the assets back out, and put them back into the real world very simply. They never actually leave the real world.

Scott: They never leave the real world, so why would you ever pull them out?

Vinay: Well, because there’s no different between them being inside and outside, apart from the fact that, once they’re in, they get access-

Scott: I can now transact with them in ways that I couldn’t before, and I can actually borrow from them-

Vinay: It’s almost like an extension module for the current system.

Scott: Yeah.

Vinay: You have a house. It’s got a set of APIs that allow you buy it, sell it, lease it, lend it, whatever it is; and then, you want this kind of Sweetbridge layer on top by putting the deed into the system in a recognized form, and now, it’s got all these kind of blockchain APIs on top of it. I mean, it’s almost like painting a layer of a new economy directly on top of the old economy.

Why do I have the feeling that this system might not help improve the situation for renters in a city where there is a lower than 1% vacancy rate, and where property values (and hence rental fees) may increase from anywhere from 10 to 40% per year due to overseas investors buying and flipping properties (with no intention of ever living in them)? This would seem to just make it easier to treat a house/condo/apartment as an investment from which to maximally profit, rather than as a place for yourself or others to affordably live.

[Wombaticus Rex]

Why do I have the feeling that this system might not help improve the situation for renters in a city where there is a lower than 1% vacancy rate, and where property values (and hence rental fees) may increase from anywhere from 10 to 40% per year due to overseas investors buying and flipping properties (with no intention of ever living in them)? This would seem to just make it easier to treat a house/condo/apartment as an investment from which to maximally profit, rather than as a place for yourself or others to affordably live.

You've been alive long enough to recognize certain patterns, is my take.

I didn't read that interview as remotely encouraging or hopeful. This will be used to strip mine the supply chain for efficiencies and arbitrage.

[Belligerent Savant]

.

"Bitcoin Prehistory"


http://www.themonetaryreset.com/2017/03 ... y.html?m=1

[Freitag]

One thing blockchain will be great for is tracking the provenance of documents (think of all the lost or forged loan origination documents during the mortgage crisis). Of course nobody knows exactly how the technology will play out, but malicious actors aside, it has the potential to shine a light on many dark corners of the world. (BTW a blockchain is a permanent, unalterable public record of something: money, documents, transactions, etc. Similar to a database but publicly auditable.)

[Elvis]

So tonight I dropped into ye olde nearby legal cannabis shop (there are at least ten within walking distance) and lo and behold, they now take credit & debit cards.

"Did the card companies and banks finally cave?" I ask. Answer: No; it's a go-around ultimately based on bitcoin.

There's a fee of about $3, the same as on the in-store ATM. One customer got the rundown from a budtender (that's what they're called): they scan your driver's license and keep all of the information about you (and the transaction). "I think I'll pay cash," said the dude, heading for the ATM.

I paid cash for 3.5 grams of Double Dream, bid thanks and marched homeward in the nippish autumn dark.

[Freitag]

"Did the card companies and banks finally cave?" I ask. Answer: No; it's a go-around ultimately based on bitcoin.

There's a fee of about $3, the same as on the in-store ATM. One customer got the rundown from a budtender (that's what they're called): they scan your driver's license and keep all of the information about you (and the transaction). "I think I'll pay cash," said the dude, heading for the ATM.

I paid cash for 3.5 grams of Double Dream, bid thanks and marched homeward in the nippish autumn dark.

Interesting. I know some cannabis vendors use Potcoin because banks won't deal with them, but didn't know they collect so much personal information. But crypto adoption is definitely spreading. For example yesterday I was browsing Yelp for a restaurant and one of the search filters was "accepts Bitcoin".

[Belligerent Savant]

.

Interesting developments emerging into this space... the next 12+ months will be noteworthy.



http://fortune.com/2017/12/01/bitcoin-p ... c-futures/

Bitcoin prices soared as high as $10,700 Friday after the main U.S. currency trading watchdog handed the Chicago Mercantile Exchange and Chicago Board Options Exchange a tentative go-ahead to offer bitcoin futures.

Following the news, the CME said it would begin offering bitcoin futures on Dec. 18. The CFTC also gave approval for bitcoin binary options to Cantor Exchange, a subsidiary of Cantor Fitzgerald.

Given assurance that the U.S. Commodity Futures Trading Commission would not stop the Bitcoin futures offerings, bullish investors sent the cryptocurrency’s price up by 7% on Friday. Bitcoin supporters are hoping that with major derivatives exchanges such as the CME and CBOE in the mix, funds from institutional investors will flow into the cryptocurrency sphere—a phenomenon that could add more stability to the volatile asset.

But the CFTC still warned investors to be wary of Bitcoin due to its temperamental nature. Earlier this year, the U.S. equities trading watchdog, the Securities and Exchange Commission, rejected a Bitcoin ETF proposal in part because of the underlying asset’s volatility.

“Market participants should take note that the relatively nascent underlying cash markets and exchanges for Bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority,” CFTC Chairman J. Christopher Giancarlo warned in a statement. “Investors should be aware of the potentially high level of volatility and risk in trading these contracts.”

The exchanges gained CFTC approval via a process known as self-certification, by which the exchanges analyze and prove to the commission that their products meet regulatory requirements. The commission added that it would continue monitoring Bitcoin futures closely.

Despite the rise, Bitcoin prices Friday are still below their all-time high from a few days earlier, when they breached $11,300.

https://www.bloomberg.com/news/articles ... o-catch-up



https://cointelegraph.com/news/its-an-o ... s-go-ahead

“It’s an orgy” is how one strategist described the breaking news that US regulators have approved Bitcoin futures to start this month.

The US Commodity Futures Trading Commission (CFTC) confirmed Friday that CME Group and CBOE had met the requirements for regulated trading, while Cantor Exchange would also be able to debut Bitcoin binary options.

The news quickly rippled out across the industry and media, with a stream of delighted bullish statements gracing Twitter and other platforms.

Bitcoin prices are reacting in kind as of press time, with a surge towards $11,000 well underway. Bitcoin has gained $700 in a matter of hours, with another $600 to go before all-time highs of $11,360 seen earlier this week are challenged.

Curious alternative responses are meanwhile coming from the likes of Digital Currency Group CEO Barry Silbert.

Speaking on CNBC about the futures approval, Silbert told the audience they should look to take profits from the price rally and put them into Ethereum Classic and ZCash.

“I think it is going to enable finally the approval of Bitcoin ETFs, and other digital currency ETFs, which is game-changing,” he added.

Ethereum Classic is currently among the biggest successes of Bitcoin’s huge price increases this week, with today’s reversal generating near 30 percent growth for the altcoin.

[Wombaticus Rex]

Some very important points here. Bear in mind FT Alphaville have been jeering about BTC for years now, but such engagements does lead to expertise over time

https://ftalphaville.ft.com/2017/11/29/ ... -problems/

There’s a popular opinion in cryptoland that the launch of bitcoin futures by the CME in December will trigger an investing rush as institutional investors and hedge funds wade into the market in size. This in turn, the theory goes, will see the price zoom even higher.

But here’s the thing. Smart money almost never takes unhedged directional bets.

To the contrary, it seeks out risk-free arbitrage opportunities that usually involve spread or basis-based trades that take advantage of market pricing anomalies.

...

So what’s the opportunity once the CME launches a reliable futures contract that’s both properly risk-managed and in full view of regulatory supervisors?

To understand this it’s worth taking a closer look at the details of the contract at hand. But also at why it’s been so incredibly hard to short bitcoin efficiently to date.

A few points become immediately obvious.

First, the CME contract as currently devised is set to be cash rather than physically settled. This is understandable to some degree. Imagine the security and monitoring burden for the CME of having to oversee delivery of actual (KYC/AML compliant) bitcoin into an inventory system and/or over to counterparties directly?

Cash settlement is much less of a potential liability in comparison.

And yet, it’s not without issue. Cash-settled derivatives depend on some sort of index to settle against, exposing it to Libor-style risks.

While august & powerful finance institutions have been know to disembowel themselves, it's not a common thing and I don't think the CME is setting up a slot machine capable of bringing down their house.

Another good, slightly longer piece on distributed vs. shared ledgers and blockchains vs. transaction chains:
https://ftalphaville.ft.com/2017/11/22/ ... lockchain/

[Belligerent Savant]

Excellent links, thanks for sharing.

(though I need to strengthen my finance comprehension --the minutiae around cash-settled derivatives in relation to indexes, and how that may increase/decrease regulatory risk... that's all a bit fuzzy to me; needs to be corrected as i do swim in this space to a degree..)

[Wombaticus Rex]

Excellent links, thanks for sharing.

(though I need to strengthen my finance comprehension --the minutiae around cash-settled derivatives in relation to indexes, and how that may increase/decrease regulatory risk... that's all a bit fuzzy to me; needs to be corrected as i do swim in this space to a degree..)

Well, "regulatory risk" in the sense that the letter & spirit of regulatory code would be exposing the actual counterparties to the risk of huge losses. The risk itself is hella straightforward, basically a fork between 1) user-level, can clearinghouses / counterparties use gaps between opening and closing prices to legally pocket free money from your trades, and 2) system-level, will the BTC/ETH or whatever price actually jump so much that the clearinghouses get washed like a casino facing a dozen "McGregor defeats Mayweather" anomalies in a single weekend.

So far, it has done that a few times. (Although as the end of that article notes, one of the experts they lined up thinks the CME has it covered -- the upfront margin / cost of maintaining your long term bets is high, but not at all out of proportion to the actual risk, measured in terms of past performance. As it so often is.)

What I like about Alphaville is the reliance on source material, so as these markets coalesce, I would recommend keeping an eye on Ms. Kaminska's coverage.

Doug Henwood's book on "Wall Street" is abundantly available in hardcover and really quite solid as a primer on US market structure.

[gnosticheresy_2]

https://www.mail-archive.com/cryptograp ... 10152.html

Re: Bitcoin v0.1 released
"Hal Finney" Sun, 11 Jan 2009 10:22:14 -0800

Satoshi Nakamoto writes:
> Announcing the first release of Bitcoin, a new electronic cash
> system that uses a peer-to-peer network to prevent double-spending.
> It's completely decentralized with no server or central authority.
>
> See bitcoin.org for screenshots.
>
> Download link:
> http://downloads.sourceforge.net/bitcoi ... -0.1.0.rar

Congratulations to Satoshi on this first alpha release. I am looking
forward to trying it out.

> Total circulation will be 21,000,000 coins. It'll be distributed
> to network nodes when they make blocks, with the amount cut in half
> every 4 years.
>
> first 4 years: 10,500,000 coins
> next 4 years: 5,250,000 coins
> next 4 years: 2,625,000 coins
> next 4 years: 1,312,500 coins
> etc...

It's interesting that the system can be configured to only allow a
certain maximum number of coins ever to be generated. I guess the
idea is that the amount of work needed to generate a new coin will
become more difficult as time goes on.

One immediate problem with any new currency is how to value it. Even
ignoring the practical problem that virtually no one will accept it
at first, there is still a difficulty in coming up with a reasonable
argument in favor of a particular non-zero value for the coins.

As an amusing thought experiment, imagine that Bitcoin is successful and
becomes the dominant payment system in use throughout the world. Then the
total value of the currency should be equal to the total value of all
the wealth in the world. Current estimates of total worldwide household
wealth that I have found range from $100 trillion to $300 trillion. With
20 million coins, that gives each coin a value of about $10 million.

So the possibility of generating coins today with a few cents of compute
time may be quite a good bet, with a payoff of something like 100 million
to 1! Even if the odds of Bitcoin succeeding to this degree are slim,
are they really 100 million to one against? Something to think about...

Hal

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[Belligerent Savant]

.
Good man, WRex; helpful clarity. Will pursue that book recommendation as well for my next reading assignment.

Another development of note:

https://techcrunch.com/2017/11/29/coinb ... -taxation/

Coinbase ordered to give the IRS data on users trading more than $20,000

Most digital currencies exist in a sort of twilight state just beyond the grasp of federal regulators, but the U.S. tax authority is starting to get savvy to this whole bitcoin thing.

On Wednesday, a federal judge in San Francisco ruled that Coinbase must supply the IRS with identifying information on users who had more than $20,000 in annual transactions on its platform between 2013 and 2015. After noticing that the number of tax returns claiming gains from virtual currency didn’t line up with the emerging popularity of digital currencies like bitcoin as an investment vehicle, the IRS asked Coinbase to hand over a broad swath of information on its users. Coinbase pushed back, and now the court has landed on a compromise that the company is calling a “partial victory.”

“Coinbase itself admits that the Narrowed Summons requests information regarding 8.9 million Coinbase transactions and 14,355 Coinbase account holders. That only 800 to 900 taxpayers reported gains related to bitcoin in each of the relevant years and that more than 14,000 Coinbase users have either bought, sold, sent or received at least $20,000 worth of bitcoin in a given year suggests that many Coinbase users may not be reporting their bitcoin gains,” the court documents read.

While cryptocurrency users who value the relative decentralization and privacy afforded by digital currencies won’t be happy, Coinbase succeeded in limiting the government’s initial request for information on all Coinbase users who made transactions from 2013 to 2015 to the smaller subset of high-value users.

The IRS initially requested nine kinds of user data, including “complete user profiles, know-your-customer due diligence, documents regarding third-party access, transaction logs, records of payments processed, correspondence between Coinbase and Coinbase users, account or invoice statements and records of payments.”

Rejecting some of those requests, today the court narrowed the scope of documents that the IRS can request from Coinbase to taxpayer ID number, name, date of birth, address, transaction logs and account statements, deeming the rest of the documents “not necessary.” Again, these personal data requests will only apply to accounts that have bought, sold, sent or received more than $20,000 in any of those types of transactions between 2013 and 2015.

As the court documents specify, the narrowed IRS request “applies to far fewer, but still more than 10,000, Coinbase account holders.”

You can read the court decision in full below.