Stores of Value

The previous post mentioned, 'While working through [bitcoin] lectures, I've noted a few topics worth pursuing on this blog. The first is' Core Developers. The second should have been this current post, but I'm taking a short detour because of the excitement and chaos provoked by Brexit, aka United Kingdom withdrawal from the European Union (wikipedia.org).

The UK electorate again addressed the question on 23 June 2016, in a referendum on the country's membership. This referendum was arranged by Parliament when it passed the European Union Referendum Act 2015. The result of this referendum held in June 2016 was 51.9% in support of an exit (17,410,742 votes) and 48.1% (16,141,241 votes) to remain.

On a whim, I looked at 'bitcoin brexit', and discovered that the bitcoin price spiked as the result of the vote became known. Since the price of gold also spiked, I wondered if there was any correlation. The following charts, from finance.yahoo.com, show the price action in both commodities over the last week.

Bitcoin (BTCUSD=X)

Gold Futures,Aug-2016

Although other factors were moving the price of bitcoin on the days before the vote, the Brexit result moved the price over the next hours before finding an equilibrium. Bitcoin enthusiasts like to promote the crypto-currency as a stable Store of value (wikipedia.org again)...

A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. The most common store of value in modern times has been money, currency, or a commodity like gold, or financial capital. The point of any store of value is risk management due to a stable demand for the underlying asset.

...but is it really? One point of view is Bitcoin as a Store of Value, Unit of Account, and Medium of Exchange (nakamotoinstitute.org), illustrated with a picture of King Kong.

Core Developers

While continuing to follow the Online Bitcoin Course (started March 2016), I received a message from the domain hosting the course.

In 2014, Coursera began developing a new technology platform to improve your learning experience, and to allow courses to run more frequently. The majority of our courses are now offered on the new platform. This month, we are closing the old platform. One or more courses you joined are on the old platform. Effective June 30, 2016, courses on the old platform will no longer be available. You should use this opportunity to save any relevant course materials or assignments.

That meant I had to finish the course by the end of this month. I'm already on the last lecture -- 'Lecture 11: The Future of Bitcoin' -- with only a 'bonus' lecture to follow, so I should finish in time. In any case, the last lectures are somewhat less interesting than the first, as they deal with topics that are mainly of interest to the academic community.

While working through the lectures, I've noted a few topics worth pursuing on this blog. The first is shown below.

Lecture 7.2 - Bitcoin core software (3:00)

Pictured are a handful of core developers at the time the course was created, around mid-2014. While researching this post, I discovered that the term 'bitcoin core developers' means different things to different people. Exluding Satoshi Nakamoto, the other five are listed on the page Bitcoin Development (bitcoin.org), under 'Bitcoin Core contributors (ordered by number of commits)'. Their names, along with the number of results returned by a Google search are as follows:-

• Wladimir van der Laan (10.800 results)
• Gavin Andresen (107.000)
• Jeff Garzik (42.700)
• Gregory Maxwell (84.700)
• Pieter Wuille (16.900)

A Reddit.com discussion appeared this week titled A thank you to Bitcoin Core developers. Although it's largely political, as is much of the noise around bitcoin, it's a sentiment shared by many.

Ethereum Crash Course

In the previous post, Bitcoin in the News : 2016-05, I wrote,

Trendy names are part of the bitcoin mystique. Here's another one. [Ethereum news story] A Google search on this blog picks up scattered transient references to 'Ethereum', apparently from the embedded news feeds in the right navbar, plus a couple of real references, including News : 2016-03. Time for a separate post on this topic?

Yes, it's time. The main site for the product/service is Ethereum Project (ethereum.org). It starts,

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.

Wikipedia's main article is Ethereum:-

Ethereum is a public blockchain platform with programmable transaction functionality. It provides a decentralized virtual machine that can execute peer-to-peer contracts using a cryptocurrency called Ether. [...] History: Ethereum was initially described in a white paper by Russian Canadian Vitalik Buterin, a programmer involved with Bitcoin, in late 2013 with a goal of building decentralized applications. As opposed to other "bitcoin 2.0" projects that were being built on top of the Bitcoin protocol, Ethereum created its own blockchain to provide greater development flexibility by inclusion of a Turing complete programming language.'

The phrase 'Turing complete' is computer science jargon for a full programming language. Also relevant is Wikipedia's Smart contract:-

Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. Smart contracts usually also have a user interface and often emulate the logic of contractual clauses.

The Wikipedia 'Ethereum' page references Ethereum, a Virtual Currency, Enables Transactions That Rival Bitcoin’s by Nathaniel Popper (nytimes.com):-

A new virtual gold rush is underway. Even as Bitcoin, riven by internal divisions, has struggled, a rival virtual currency -- known as Ethereum -- has soared in value, climbing 1,000 percent over the last three months. [...] Since Bitcoin was invented, there have been many so-called alt-coins that have tried to improve on Bitcoin, but none have won the following of Ethereum.

I had already picked up the NYT article in News : 2016-03, but neglected to mention Popper. He first appeared in News : 2016-01:-

[Two] stories were by Nathaniel Popper, writing for NYT's DealBook. Popper is the author of 'Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money' (Harper, 2015).

That's enough for this post. Keywords: smart contracts, gold rush.

Bitcoin in the News : 2016-05

I ended last month's Bitcoin in the News : 2016-04 with a prediction.

Now I'll look into the crystal ball at 'Bitcoin in the News : 2016-05', because there's one bitcoin story that was, that is, and that ever will be.

I could have said 'an easy prediction'. The latest 'Who is Satoshi?' furore lasted about a week.

• Australian Craig Wright claims to be Bitcoin creator (bbc.com)
• Australian Ends Attempt to Prove He Founded Bitcoin (nytimes.com)

Australia also figured in the bitcoin news towards the end of the month.

• Australia to sell £8m of seized bitcoins (bbc.com); 'A collection of bitcoins worth about £8m, which had been confiscated by police in Australia, will be auctioned off in June. The 24,518 bitcoins will be sold mostly in blocks of 2,000 - each with a market value of about £680,000.'

Other sources reported the total value in dollars as a range $12m - $16m, reflecting uncertainty over the pound-to-dollar exchange rate, the dollar-to-bitcoin rate, and the auction bids. The current price of bitcoin is $573. What would I bid for 2,000 of them?

That post 'News : 2016-04' also made the not-so-startling observation that 'web "journalism" is based on lists'. The current post, 'News : 2016-05', once again confirms this.

• The 5 biggest bitcoin and blockchain announcements at Consensus (finance.yahoo.com; video); '1. Creator claim [...]'; Yes, Australia again.
• Top 10 Myths About Bitcoin (nasdaq.com) '1. Bitcoin Is Dead [...]'; Yes, myths again, as in 'News : 2016-04'.
• Six Benefits of Taking Payments in Bitcoin (ditto); '1. Near-Instant Settlement [...]'

What's 'Consensus' when you start the word with an upper-case 'C'? The Yahoo article explained, 'The big bitcoin conference Consensus descended on Manhattan this week, and a number of significant companies chose it as a venue to announce news.' Trendy names are part of the bitcoin mystique. Here's another one.

• Bitcoin Miners Follow Profit to Ethereum Blockchain (coindesk.com)

A Google search on this blog picks up scattered transient references to 'Ethereum', apparently from the embedded news feeds in the right navbar, plus a couple of real references, including News : 2016-03. Time for a separate post on this topic?

Another story interested me because long ago I made a couple of business trips to the town. It's small stories like this one that make the big picture.

• Why a Swiss Tax Haven is Embracing Bitcoin (fortune.com); 'Zug wants to be "Crypto Valley" : Municipal bosses in the Swiss town of Zug have decided to accept the bitcoin cryptocurrency for payments up to the value to 200 francs ($206), in a new pilot project.'

I'll skip this month's scandals and jump to future months' news.

• After Months of Tests, the Big Bid to Scale Bitcoin is Nearing Launch (coindesk.com); 'Since Segregated Witness was announced last December, it has been one of the most anticipated software releases across the bitcoin community.'
• China Bitcoin Mining Growth May Help Overcome Worries Over 7/11 Halving (cointelegraph.com); 'Most Bitcoin users believe that the pending halving in July will have an effect on the cryptocurrency’s value.'

Both stories will certainly appear in a follow-up news post. And let's not forget the Australian auction -- $573 times 2000 -- suppose I bid an even million? (Australian dollars, of course, because I have no idea what they're worth either. Maybe I should just place my bid in bitcoin myself : 'Bidding 2000 bitcoin for 2000 bitcoin'. Is that really so silly? Do I buy the bitcoin to pay the bitcoin before or after the auction? And how much is the auctioneer's commission?)