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Monthly Archives: August 2016

Bitcoin: not just for Neckbeards anymore

Bitcoin is easy to mock. With Kim Dotcom, Mike Tyson, Mike Karpeles, Winklevii and Roger Ver as public faces of Bitcoin it’s tempting to write Bitcoin off as a nerd money fad.

However, things change quickly. Remember, only nerds used computers less than 20 years ago. Now everyone owns smartphones, tablets and 1-2 computers.

The video below does a good job showing the legitimate side of Bitcoin while also putting the adoption curve of any new tech in perspective with regards to cryptocurrency.

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Megaupload founder says buy Bitcoin

If you haven’t heard of Megaupload founder Kim Dotcom then hold on because you are in for a treat. His Wikipedia:

Kim Dotcom (born Kim Schmitz; 21 January 1974), …. first rose to fame in Germany in the 1990s as a teenage internet entrepreneur. In 1994 he received a two-year suspended sentence for computer fraud and data espionage because he was underage, and received a similar sentence in 2003 for insider trading and embezzlement.

Dotcom was the founder of now-defunct file hosting service Megaupload but has subsequently been accused of criminal copyright infringement and a host of other charges, such as money laundering, racketeering and wire fraud, by the U.S. Department of Justice. In January 2012, the New Zealand Police raided his home in Auckland and placed him in custody in response to the US charges. Dotcom was accused of costing the entertainment industry $500 million through unlicensed content uploaded to Megaupload which had 150 million registered users. Dotcom has denied the charges, and is currently fighting attempts to extradite him to the United States.

He has been called one of the world’s “largest tech entrepreneurs”. He changed his surname to Dotcom in 2005, apparently in homage to the stock market bubble that made him a millionaire. At the time, he was living in Hong Kong, where he set up Megaupload.

With that introduction out of the way Kim Dotcom has been tweeting that he’s releasing Megaupload 2.0 and it will run on Bitcoin.

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Arcade City to launch Sept 1st

Arcade City is a decentralized ride sharing service set to launch September 1st. It aims to compete with Uber and Lyft.

What makes Arcade City different is that it’s goal is to have the Arcade City network be the service. Riders and drivers will connect via an app and all payments will be automated peer to peer. There will never be a corporate Arcade City setting rates, policies etc. Cryptocurrencies like Bitcoin and Ethereum are set to the be payment methods.

Drivers and riders can name their own price. The market will work it out, in theory.

Arcade City is a test for a decentralized service going head to head vs major for-profit services like Uber and Lyft. Arcade City is a fascinating and ambitious project and one to watch.

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Bitcoin AKA Magic Internet Money

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Most people who have heard of Bitcoin think Bitcoin is Magic Internet Money.

In layman’s terms Bitcoin is a series of entries in a distributed ledger called the Blockchain. The entries in the ledger are secured through cryptography. Cryptography is also used to protect your online banking website. At a high level Bitcoin and your banking website security are similar. The only way to spend a bitcoin is to possess the secret key which matches a public entry on the Blockchain. Unlike a bank, the Blockchain is publicly accessible and censorship resistant.

No one person or entity controls Bitcoin or the Blockchain so no one can manipulate Bitcoin to serve their own purpose. Due to this distributed and decentralized ledger it’s impossible to counterfeit bitcoins and impossible to shut down Bitcoin. Bitcoin is a protocol running on thousands of computers across the globe. Since bitcoins are digital they are easily transferable and easily divisible (all advantages over gold).

Here is a randomly selected transaction from Blockchain.info This transaction shows 20BTC (~$11,000) was moved for a .00027BTC ($.11) fee. The transaction should be 100% confirmed, complete and irreversible within 30 minutes. No third parties required and the transaction is practically anonymous. Those bitcoins could be destined for anyone in the world. That’s not a problem for Bitcoin. Try that with gold or fiat currency. Moving $10k via a US bank requires a special form so the nice government men can keep an eye on you.

How do you send bitcoins?
(I won’t go into setting up an account to acquire bitcoins, there are plenty of tutorials. Here is a referral link for Coinbase.com if you want to shorcut that.)

Here is an example of a bitcoin address: 1EnhQvrtYDpKqMrDBM9C2UiNFdt3Jr9fAG and the corresponding QR code below. From the smartphone bitcoin app of your choice you scan the code, choose the amount and press send. The bitcoins arrive within minutes. Here’s a record of every transaction on that address (currently 0, feel free to send a small amount to see it on the blockchain). This may sound complicated but it’s not. Much easier than moving money from a bank account.

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BTW, Bitcoin’s market cap is now over $9 billion. If you still think Bitcoin is a joke here’s a list of the top 100 richest addresses. Many people store millions of USD in Bitcoins.

If anyone has heard of Bitcoin they’ve likely heard how Bitcoin was hacked (again) and how Bitcoin has been declared dead a dozen times by mainstream media. Casual observers may have heard that the Winklevoss twins opened a Bitcoin Exchange or they may have heard Mike Tyson lent his name to a Bitcoin ATM in Vegas.

You could say Bitcoin credibility is lacking.

I don’t believe you could write a worse story for Bitcoin if you tried. The largest exchange for buying and selling Bitcoin up until a few years ago was Mt Gox. Mt Gox stood for Magic the Gathering Online Exchange. Mt Gox was originally a place for neckbeards to trade Magic the Gathering game cards. True fucking story. Eventually Mt Gox became a place for neckbeards to trade bitcoins. Mt Gox imploded along with $460 million in client bitcoins. Bitcoin was declared dead, but what is dead can never die (extra GoT).

You see, Bitcoin is the Sewer Rat of Currencies. The TLDR of that article is that despite what’s been in the media, Bitcoin has never been hacked. Only the exchanges that sold Bitcoin have been hacked. In fact, Bitcoin has been tested over and over and has come back stronger each time. Bitcoin is a sewer rat. It can’t be killed but people keep trying.

bitcoin isn’t living in a bubble. Bitcoin is a sewer rat. It’s missing a leg. Its snout was badly mangled in an accident in last year. It’s not allergic to anything. In fact, it’s probably got a couple of strains of bubonic plague on it which it treats like a common cold. You have a system that is antifragile and dynamic and robust.

Bitcoin doesn’t give a fuck.

So why Bitcoin? Bitcoin has the six characteristics of money:

Objects used as money must withstand physical wear and tear
Check, bitcoins are digital. Theoretically they will last forever.

People need to be able to take money with them as they go about their business
Unlimited funds can be stored on a piece of paper or you can memorize a 12 word phrase.

To be useful, money must be easily divided into smaller denominations , or units of value
Bitcoin can be easily divided down to .00000001 AKA a Satoshi.

Any two units of money must be uniform or the same in the terms of what they will buy
All bitcoins are created equal.

Limited Supply
Money must be available only in limited quantities
There will only ever be 21,000,000 bitcoins and we already know the predetermined rate of inflation.

Everyone must be able to exchange the money for goods and services
This one is gaining traction everyday. You can use purse.io to get substantial discounts at Amazon using bitcoins.

With Trillions in QE, the EU in negative interest rate territory, Japan going all in on Abenomics and China building ghost cities it’s no wonder a decentralized currency like Bitcoin is starting to gain traction.

Whatever your portfolio looks like today consider it’s missing something if there’s no Bitcoin. Bitcoin could fail, but if it doesn’t then it’s future is incredibly bright. Bitcoin is the Internet of Money. A small position today could be the hedge you need against central banks, crazy politicians and a world gone mad. Caveat emptor, Bitcoin is extremely volatile.

If you add Bitcoin to your portfolio I highly recommend a hardware wallet like KeepKey. While Bitcoin the protocol is secure your greatest risk is leaving your bitcoins vulnerable to loss via sloppy security. Whatever you do, do *not* store your bitcoins with an online exchange.

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Book review: The Boy Plunger

The Boy Plunger is a biography of J.L. Livermore. J.L. Livermore (Jesse to those who didn’t know him) is the same person who is the subject of the seminal (no homo) investing tome Reminiscences of a Stock Operator.

While Reminiscences was known to be loosely based on Livermore’s life, The Boy Plunger endeavors to be a historically accurate biography of one of the most interesting financial figures ever born.

If J.L. Livermore were alive today he’d be selling Tim Cook’s gay AAPL short at 30 to 1 margin on Monday and by Tuesday be long 50 to 1. He was a fucking madman, much like our good patron saint of these halls, Le Fly. He made $100 Million in ONE week during the crash of 1929. That’s recorded as the most money ANYONE has made in seven days. Including that fuckface Zuckerberg. A few years later J.L. Livermore was bankrupt.

As appropriate to a man who became the richest person in the world inside of 7 days and then a few years later filing bankruptcy the story ends when he blows his brains out in a coat room at a NY hotel. It’s reported he did the deed with very little mess incurred. A gentleman to the end.

We pick up the story where young JL he left his mother at age 14 to move to Boston whereupon he walked into a bucket shop and lied to get his first job. A few short years later he is rubbing elbows with EF Hutton and then agreeing to being the savior Pierpont Morgan asked for (no Batman) when the entire market was going to collapse. You get a blow by blow account of the triumphs and tribulations of Mr Livermore and his impact on markets and companies that are still around today.

While his stock trades were interesting enough for several other books as a biography you really get a sense of the man who purchased and sold yachts for sport, bought a house that put William Chrysler to shame, used the Ziegfeld Follies as his personal farm system for mistresses and generally swung his enormous sack around on both the bull and bear side of the market for more than 25 years.

Throughout all the ups and downs J.L. maintains a stoic attitude and personal responsibility for every success and failure. He’s grounded 100% in what it is to be a Stock Operator. There are numerous quotes all of which are lessons in objectivity, controlling one’s emotions and being brutally honest with oneself when on the wrong side of a trade.

Cheers to you Mr Livermore.

(I highly recommend this book)

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