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An Inconvenient Truth

Fear, Uncertainty and Doubt (FUD) surround new markets, assets and commodities. This is especially true for cryptocurrency. Empirical analysis can cut through FUD and blatant lies. One piece of information that stands out at the moment is this:

In the three vertical columns we see BTC, BCH and BSV. These are the three SHA256 coins laying claim to being Bitcoin. BTC, BCH and BSV share the same hashing algorithm and therefore draw from the same pool of available mining resources. In other words, they compete for the available SHA256 hashing power.

The first two bars, Hash Rate and Network Nodes, indicate the inputs required to drive these networks. Think of it like a breakdown of how much SHA256 hash each network is running out of the total available sha256 hash. Network Nodes measures how many nodes are running the software for each coin. (The Nodes are debatable as a useful metric but that’s a topic for a separate post.)

You can see that BTC hash dominates at 98% of the total being used between the three coins. That’s a lot of energy and resources. This could be expected as Hash follows Price. Miners are pursuing profit and due to the dislocation in price with BTC the miners mine the most profitable coin (but not the most efficient).

The bottom two bars, Transactions and Block Sizes, show each coins percentage of the transactions and block sizes they are producing in relation to the other two. As you can see, BSV dominates here showing 75% of the transactions and a whopping 95% of the block sizes. This is efficiency.

If the top two bars are the coins inputs (the resources needed to drive the network) and the bottom two are the outputs (the production of these coins) we start to see An Inconvenient Truth for BTC fans. BTC consumes 98% of the hash but produces 20% of the transactions and only 5% fo the block size compared to BSV. BSV is vastly more efficient. BSV produces far most outputs with much less inputs, and it’s likely to get worse for BTC.

BSV is aggressively scaling the network while BTC remains stuck at 1MB. The future plans are for BSV to scale to Gigabyte and then Terabyte blocks. This would be 1,000x and 1,000,000x the capacity of BTC’s 1MB block limit. Ooof, for BTC holders that is inconvenient.

This is the data for the past 24 hours. BSV is averaging blocks that are 15-20x larger than BTC, with several blocks that are 100x plus the max capacity of BTC, for the past several days.

And the BSV network will get stronger as more transactions creates more incentives for miners. Meanwhile BTC’s plans to scale off chain weakens the network and moves fees from miners to trusted third parties.

This matters because the subsidy miners receive for mining blocks on the three networks will be cut in half again around mid 2024. The original design of Bitcoin is that fees from transaction volume would replace the diminishing block subsidy. BSV is on that path. BTC is not. This is a truth BTC does not want to face.

The data below shows the comparison in fees and miner profitability for BSV vs BTC. BTC fees have been as much as 100,000x more expensive. Incredible! Miner profitability varies often and usually favors BTC. This could change as BSV transaction volumes increase.

This has been a very slow road. I posted about this eventuality in December 2019. Maybe by end of year we’ll see the market catch up to these realities.

But this isn’t just about An Inconvenient Truth for BTC. BSV has a number of it’s own Inconvenient Truths to work though and one of them is the influence of a singularly frustrating polymath genius named Craig Wright. I wrote this about Craig Wright in November 2018:

Most geniuses are rarely appreciated in their own lifetime. The magnitude of their genius only recognized once the full impact is realized, which often takes decades. Another fact that is lesser known, many geniuses are assholes. You need look no further than Sir Isaac Newton for an example.

Dr Craig Wright, the Chief Scientist of nChain, fits the asshole genius description well. Dr Wright, when crossed, is a world class jerk and this character flaw may have been very costly during the past week’s events. Much like Isaac Newton, Dr Wright, “when angered, he became unbalanced and, it must be said, vindictive and petty.

Far be it for me to write a prescription for how anyone “should” act. Dr Wright has endured more personal attacks than anyone in this space and to his credit he’s weathered them well. I will note however that we each establish a track record for ourselves through our words and our actions and Dr Wright, while an undeniable genius, has an abysmal track record for honoring his word. An Inconvenient Truth for BSV is that Dr Wright’s failure or inability to make good on several claims regarding his disposition of 800,000+ BTC in 2020 has been a dark cloud over his credibility and the credibility of any project he attaches to, namely BSV.

Many people will point to pending lawsuits and larger machinations around securing patents as a defense for the delays. Maybe, but this remains An Inconvenient Truth nonetheless.

Even if Dr Wright never follows through on these statements I see a bright future for BSV. I cannot say the same for BTC and it’s broken economics. If I had to weigh the Inconvenient Truths against each other, I’ll take BSV every time.

So, I remain as always, irresponsibly allocated.

 

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El Salvador Isn’t Using BTC

Let’s get some facts straight on the stories about El Salvador adopting BTC as legal tender.

First, the average retail worker’s wage in El Salvador is ~$400/month. The average transaction fee on BTC is ~$5 and has recently spiked over $50.

Given these facts how would a person making $400 / month use a system that has fees for a single transaction that range from $5-$50? Using BTC just once a day at the lowest fees would result in $150 in fees in a month, or just over 1/3 of their earnings.

The real situation in El Salvador is that the government has partnered with a third party named Strike. Strike claims it will process BTC transactions on the Strike Lightning Network hub. This would require that users in El Salvador install Strike, purchase their BTC from Strike, custody that BTC with Strike and then they can “transact in BTC” using Strike. Using BTC natively *is not feasible*.

The reality is Strike acts more like a bank. The transactions on the Strike app don’t occur on BTC. They can’t due to fees. They occur off chain for the BTC that Strike has in their LN channel. And if a user wants to “close their account” on Strike and withdraw their BTC they have to pay a transaction fee.

This is not “using Bitcoin”. This is using Stike as a centralized bank and using their off chain ledger to transact. It’s a farce and it opens the entire game to corruption. Further, this points to how the BTC devs have handicapped BTC. BTC cannot serve a small country without a third party due to scalability limits and broken economics.

Although the facts point to the absurdity of the claim that El Salvador has adopted BTC as legal tender there are some interesting subtexts here.

Let’s say Strike is used. It would be the biggest test of LN to date. Let’s keep in mind less than 2 years ago LN was actively branded by LN fans as #reckless on social media, meaning that using LN was a risky endeavor and you could lose your funds. Has LN advanced far enough to handle whatever traffic *might* occur from Strike in El Salvador? Signs point to a firm no. LN is still very broken, but this test could be interesting. It’s a controlled sandbox as long as El Salvador users all use the Strike app.

El Salvador is encouraging it’s citizens to peg their savings to a very volatile BTC. Let’s imagine a scenario, however fanciful, where the citizens do adopt BTC on Strike to some measurable degree. Now those citizen’s buying power will fluctuate with BTC price. This could be good but more than likely it will be very bad for the next year. It’s risky either way.

This raises the question of what is the value of BTC? It’s limited to 6MB of data per hour for the entire globe. That’s an awfully small funnel to push global demand through.

The same scenario applies to ETH etc. This is not difficult due diligence!

Yet, billionaires are still buying BTC.

The future of digital assets will be programmable and frictionless to use. That asset will be able to host any country’s fiat currency natively as a token.

BTC does not meet this requirement.

 

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BTC CULT LIVE FROM MIAMI

The largest BTC conference in the world is happening this weekend. Day 1, June 4th, is available here:

Let’s see how BTC Miami is going:

Oof, let’s check in on a keynote from Day 1, Max Keiser and Michael Saylor.

The biggest reason to go to these conferences are the networking opportunities and contacts you make. Imagine paying money to go to a conference to talk to guys like this …

I encourage you to watch Day 1. See how far you can make it and if it makes you bullish on BTC. I watched a few hours of the stream. It was a train wreck. The crowd was noticeably uncomfortable and agitated. After all, they paid $1200 to be in a tent and sit on folding wooden chairs to hear people talk about HODLing. And those were the lucky ones. The rest of the ticket holders were outside waiting in a line that stretched for 14 blocks only to be told the venue was at capacity.

Perhaps more worrisome for BTC is that there was zero talk of innovation, scaling or future utility. There was plenty of discussion about price targets!

Day 2 livestream is here:

Next weekend the BSV focused Coingeek conference happens in Zurich, Switzerland. It will be live-streamed. Watch BTC Miami then watch Coingeek Zurich.

This is the investment opportunity of a lifetime. Do your due diligence now.

 

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SUCK IT BTC SNOWFLAKES

The speaker list for the (BSV focused) Coingeek Conference June 8-10 has been updated.

Looks who’s been added.

Mr AntiFragile himself, Nassim Nicholas Taleb is now listed as a speaker at Coingeek. Predictably, Crypto Twitter has erupted in fury. It’s hilarious.

Mr Taleb has been very critical of BTC for a long time. He’s recently been seen roasting small blockers like Erik Voorhees:

The BTC cancel culture is in full effect crying about Taleb’s scheduled appearance. They succeeded in scaring Gary Vaynerchuk (weak sauce) from the last Coingeek conference. Something tells me they won’t have the same luck this time around.

If Taleb will be joining, what are the chances of additional surprise speakers?

What do you make of Taleb speaking at the BSV focused Coingeek conference?

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Paint By Numbers TA

I have a few indicators that I consider my gold standard. These indicators have proven to be reliable over long timeframes. They are slow moving and are never wrong for very long.

Markets swooned fast and hard but zooming out gives us a better idea of what these large moves mean. Where are the current prices in relation to the 200 DMA? This gives us some grounding on risk reward going forward.

BTC went parabolic from 12k to 64k hitting the overbought red line multiple times.

As BTC formed a topping pattern on the daily cloud (chart below) it created a bearish TK cross on May 3rd at $53k before diving into the cloud to signal uncertainty and finally confirming support breakdown and bear mode at 44k. BTC needs 48k to regain bullish trend (price back above cloud).

On May 11 BTC price dove into the cloud to close under 50k.

I signaled this breakdown with:

When ETH broke above $2800 I declared it was now leading the market. Similar to 2018 ETH peaked ~4 weeks after BTC.

Despite a 50% correction ETH still hasn’t touched it’s 200 DMA. The 200 DMA acts as a magnet at all times on price. For this reason I suspect the market has more downside as ETH is the the current bellwether.

The counter to this is that ETH found support on the top of the daily cloud. However, to maintain bullish trend price must STAY above cloud which would mean ETH $3300 by July. Watch for any breakdown of ETH into the cloud as an omen the entire market has further downside near term.

Greed is a powerful drug. I broke some of my trading rules and went light on my sells into the height of the bull. It’s a lesson to learn. Unfortunately I’ve learned it more than once! As usual, I find my personal guru Jesse Livermore had the right answer all along.

When someone asks me about trading I tell them to pick 1-2 indicators and a single timeframe and trade it like a robot. It’s harder to do than it sounds.

There is a lot of news in the markets I’m not going to cover. Stick to the daily charts and be patient. I don’t think Crypto is out of the woods yet.

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CRYPTO MURDERED

BTC -45%
ETH -45%

Who could have seen this coming?

I posted this when BTC was at $56k

I’m glad to see the crash happen. There is so much malinvestment in shitcoins the entire market is distorted. DOGE to $1? Get the fuck out of here.

My only regret is I did not sell more during the bull run. I knew the crash was coming but I fear it will last much longer than I anticipated. Possibly 2+ years.

I’m watching $38,500 on BTC. Failure to hold this area for 24 hours means a retest of the lows and opens the door to $15k. That would be 75% retrace from the high. Isn’t crypto fun?

Maybe you’ve been paying attention to Elon’s tweets on BTC? He’s going through a learning curve. Do you see where he’ll end up?

 

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The Problem is Choice

The Matrix trilogy explores universal human themes of questioning authority and the hero’s journey to enlightenment. The protagonist starts out unaware he is trapped in a simulation to being fully aware of reality and a master of his own fate.

The Matrix is an updated exploration of Plato’s Cave allegory. Let’s take a brief look at the main themes of The Matrix and Plato’s Cave to see if there are any lessons for us in crypto markets.

Inside Plato’s Cave the prisoners see shadows cast on the wall by the puppeteers (similar to being trapped in The Matrix). The prisoner’s entire reality is based on the shadows. There is no concept of reality outside of the cave.

If the Crypto ecosystem is Plato’s Cave then there is no concept of reality outside of the puppeteers “number go up” narrative. It’s a grand show and the prisoners are quite content to watch it.

How do you identify a BTC maxi puppeteer? Lazer eyes!

Everyone starts out in Crypto as a prisoner in the cave. The puppeteers above are engaged full time in casting shadows that instruct prisoners to HODL and that Layer 2 is the answer to scaling BTC. Here’s an example of a puppeteer promoting buying pizza with MasterCard to support BTC. Does using MasterCard to buy pizza help BTC? Why not just use BTC?

Followed by this gem a few hours ago:

Pomp would like you to buy pizza with MasterCard to support BTC so you will ignore that BTC is no longer suitable to be used as a payment method. Hence the saying, “BitCoin is an IQ test”.

A minority of prisoners see Pomp’s shadows on the wall and then take on questioning what they see. They do independent research. They examine the facts free from the distractions of the shadows. They start to ask, “What is the Matrix?” Then, they slowly climb out of the cave and see the world for what it is. They break free from the Matrix.

The rest buy pizza with MasterCard and think they are making a difference for BTC.

I assert Crypto is currently comprised of 99% prisoners.

In Matrix Reloaded The Architect says:

Denial is the most predictable of all human responses. But, rest assured, this will be the sixth time we have destroyed it (Zion) and we have become exceedingly efficient at it.

Given this BSVUSD shorts chart you can see Bitfinex traders (backed by Tether) have become exceedingly efficient at destroying BSV price.

 

See the similarity?

Later in that same scene Neo is given the choice of saving humanity or saving his love interest Trinity. The Problem is Choice.

This aligns with the choice in Crypto. 4,000 Shitcoins promising their own version of financial Zion. You can have a different Trinity every night of the week, simply buy the latest pump and dump and you will move through your daily life, bank accounts and IRS taxes like Neo dodging Agent bullets. The Problem is Choice.

All that is required to continue living in the Matrix is to deny reality. Deny that Crypto is all a Ponzi with near zero real world usage. Deny that Tether is a scam, deny that $50 fees on BTC and $400 fees on Ethereum are irrelevant, deny that MasterCard is happy to see Crypto fail and deny that Michael Saylor is clueless.

It’s simple if you can look past the shadows. Bitcoin Scales or it Dies.

In The Matrix Cypher meets with Agent Smith to betray the human race. After 9 years in The Matrix trying to make it he wants to “remember nothing”.

 

Unfortunately there are a lot more Cyphers than there are Neos in the world.

The goal of the puppeteers isn’t to support peer to peer electronic cash. It’s to destroy the one coin that has the possibility of scaling for the entire world so their bags can go to the moon.

There is a game theory scenario called Prisoner’s Dilemma. In this scenario two prisoners are isolated and questioned regarding their alleged illicit activities. The only way the prisoners avoid jail is to, without prior agreement, tell the same story. Crypto is currently full of prisoners telling each other the same story. They see it’s to their benefit that the Ponzi continue. They don laser eyes on their Twitter profile and hang out in Whalepool chat rooms confirming their biases based on the latest Saylor tweet.

Any global solution must scale. The puppeteers never talk about scaling. Ignore the shadows and do your own homework or forever be a prisoner in a cave.

 

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DOGE Is Why We Can’t Have Nice Things

DOGE is up 10,000% in 100 days. $1 in DOGE in February is $100 today.

FinTwit has discovered DOGE and they have fallen in love:

DOGE is worth a good laugh but when FinTwit accounts start addressing new people in Crypto about the merits of DOGE I find that to be peak lunacy. I responded with exactly the answer to what he doesn’t understand and I promise you no one watched the video because that would require effort and an investing timeframe beyond 24 hours.

MeekMill is up 15% on his DOGE from yesterday. Congrats to him. But don’t be fooled, this will not last and for every dollar made someone will lose (except the exchanges, they always win and that’s why Coinbase lists so many Shitcoins).

This is beginning to resemble a carnival. “Step up and place your bets. Everyone is a winner!”

Look around for a serious project. One that is attempting to solve the problems that matter.

I have gone from being a crypto champion to a crypto curmudgeon. I’ve seen what’s possible and what’s at stake and I can’t unsee it. At times I wish I could.

If a joke coin like DOGE can threaten the market cap leaders with lower fees and faster transactions what does that say about the merits of BTC and others?

Till this resolves I’ll attempt to regain my good humor and remember, every DOGE has it’s day.

 

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A Primer On ETH

Vitalik Buterin was a barely 21 year old contributor with Bitcoin Magazine when he approached BTC Core about ideas he had for computation on BTC. By this time BTC was under control of Blockstream who were not interested in Vitalik’s project so they blew him off. Vitalik took his ideas and created Ethereum because his project was hamstrung by the limits Blockstream imposed on BTC.

That is the origin of Ethereum in a nutshell. BTC was being throttled and op codes (pieces of script present since the beginning of BitCoin) were being removed so Vitalik created Ethereum to fill the gap with ability to do computations.

I will give credit where it’s due. Creating Ethereum was a bold step from Vitalik and quite an accomplishment for his age. However, Ethereum is fundamentally flawed. Ethereum requires Gas to run computations. ETH has no halting mechanism so the ETH network will run a transaction computation until the gas attached to the transaction is exhausted or the transaction completes. This is very problematic for a global network. Fees are high, scaling is non existent and ETH is flirting with structural changes that hardcore ETH devs are skepitcal will ever launch.

The success of Ethereum and Litecoin led to an explosion of Shitcoins. We have thousands of coins and just as many “Crypto experts” with YouTube channels. The entire market is built on getting everything wrong about BitCoin. I estimate less than 5% of the “experts” understand what they are talking about.

What’s been missing is the knowledge that BitCoin is Turing Complete. Turing Complete means using native BitCoin script you can calculate any calculable number. This includes creating Smart Contracts or any other type of transaction. BitCoin can do it all as originally designed and does it in a way that avoids the problems of Ethereum.

BTC was not a hobby project. It was a decades in the making intellectual masterpiece. Well, until Blockstream got involved.

The problem is that BTC was stripped of it’s functionality, limited to small blocks and saddled with high fees by Blockstream so they could promote their own products. Here is the Blockstream white paper for reference of their vision for BTC in 2014. Enabling Blockchain Innovations with Pegged Sidechains

BSV removed the limits imposed by Blockstream and restored the missing op codes because there was a small group of people who understood the true power of BitCoin. BSV can do everything any other coin can do at low cost, nearly instantly and at large scale.

Do you understand now why I have been pro BSV on this blog through all the bullshit since 2017?

Ethereum is enjoying a lot of publicity and ridiculous gains at $3,000+. However, the truth is spreading about BSV vs Crypto and Ethereum. BSV will soon overtake all of it.

Here’s an Ethereum dev talking about Craig Wright and BSV. It’s a very good collection of videos spanning several years.

My timeframe for BSV assuming dominance is off by more than a year. Meanwhile BTC has gone on a huge run. It’s disgusting to watch if you understand what is at stake: honest money.

Maybe I’m a fool to be optimistic that the game isn’t rigged. Is the idea of a global honest money an unrealistic idea or will it be … Just Like Heaven?

 

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Memes Are The New Money

Viral images/videos are, at their essence, data. Sometimes this data travels the world many times over to the point it becomes a part of a culture’s shared experience. Today there are few opportunities to monetize a meme or any form of unique data on the Internet without access to large centralized platforms like Instagram or YouTube. The “network effect” benefits the network provider, not the content creator. TikTok is simply a new version of a record label.

According to LifeHacker:

The biggest TikTok influencers—ones like Charli D’Amelio (101.5 million followers), Michael Le (42.4 million followers), and Josh Richards (23.4 million followers)—all made at least $1 million in 2020, according to Forbes. However, most of that money is earned through the sales of merchandise and sponsored content for big brands, rather than ad revenue. In fact, TikTok only recently started to share ad revenue through its Creator’s Fund, which content creators have criticized for being underfunded, as they claim it typically only provides a few dollars per day.

They key here is that the biggest TikTok content creators do not make the majority of their revenue on TikTok yet TikTok is worth Billions. Many other examples include celebrities who, in addition to having a platform on Youtube, Twitch or TikTok, add an OnlyFans page so they can more easily facilitate receiving payments for their content.

This is all the early stage of something much, much bigger. A “new paradigm” where value is transacted peer to peer.

New markets begin with price discovery. During price discovery markets are very inefficient but eventually trend towards efficiency as they mature. To get my point across while being meta:

I assert we are in Medieval times with regards to monetizing data. There is a long road ahead to ending the centralized plutocracy where our personal data is a profit center for faceless and powerful elite. The key to breaking free is the stranglehold financial institutions have on transacting value. To be clear, I’m not much of a data conspiracy theorist nor am I anti-banks, but I do foresee a shift and a new world ahead.

Let’s look at some examples. First up is “disaster girl”. She’s 21 now and is selling an NFT for $500,000. Does that make you feel old? Does it make you feel poor? Does it make you feel old and poor?

Take a moment to ponder this transaction in context. NFTs are a new and extremely inefficient market fetching outrageous prices. What’s the point of owning a piece of viral internet history? How does it provide a ROI? In the future, each web page featuring a meme, or any piece of data that has value, could be monetized per view, if there were a low cost and efficient way to process a micro transaction.

TikTok could implement advanced revenue sharing per page view if they could get their head around the incentives. They probably won’t, but the next TikTok definitely will.

Another example of market discovery would be the NBA’s NFT collection:

The NBA’s Golden State Warriors have become the first major professional sports team to sell its own non-fungible tokens. These tokens, or NFTs, will be officially licensed digital memorabilia the team is calling its “legacy” collection. An NFT is a verifiable digital asset vouchsafed by blockchain technology.

You could be the owner of a GIF and a provable chain of custody on a blockchain that may or may not exist in 5-10 years for a few thousand dollars. What a deal!

Again, I point back to the fact that new markets are very inefficient. The craze for NFTs are like the craze for Beanie Babies. I can’t predict the future, and I don’t anticipate the death of NFTs, but I do think NFTs will evolve quickly and the value in owning a limited edition manufactured GIF will be very low in the future and likely near zero.

What will have value in the future will be original content and links to physical assets. Musicians publishing new songs, artwork and funny cat videos. Markets will move towards an efficient solution. I believe that solution will mature as we understand that data is the new money.

A meme is a particular yet valuable type of data. But rather than selling an NFT of a viral moment the world will move to a pay per view model. A fraction of a fraction of a cent per web page view creates an Internet based on value incentives. The Internet will transition to a series of micro transactions that are so small they are barely noticeable but, in aggregate, will add up to sustainable direct revenue to the content creator and will bypass the blood sucking middlemen. Content creators will be on the top of pyramid rather than the bottom.

 

Markets do not stay inefficient for long and we are on the cusp of the biggest market shift  in human history. The market for data.

The first platform to explore this market and capitalize on it will see wild success in the future but it will not be a platform deriving their revenue from traditional online sources.

NFTs will find their proper place. They will be used to track unique objects in the physical world. They will be used to transfer ownership of houses, cars and anything of value. In the future “disaster girl” would prove her ownership of her viral picture with licensing fees routing directly to her BitCoin wallet. It’s a big leap but I see markets solving this problem within a few years. Creators can build a content library that generates revenue for a lifetime.

The reason that valuing content in this matter has not already happened is we have had no way to interact peer to peer for small transactions. The third party processing costs were such that it was not efficient, or so we were told. YouTube is valued in the billions but the top 1% of 1% only make $20M. That seems like a pretty efficient revenue generator for YouTube but doesn’t scale per view? The barrier to entry is…..small transactions.

This is changing, if you know where to look.

Bit equals data.
Coin equals money.
Data is the new money.

BitCoin combines data and money.

HODL till your heart’s content but if your coin of choice can’t be used for micro transactions I suspect you’ll be on the wrong side of history.

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