Ziklag F8.23 - Crypto

and, like, why you should care…

SOS Discipline - Daily Proverb and Red Letter Reader

If you go looking fro trouble, it will surely find you. cf. Pr. 11:27

Chain of command is the design of trust. cf. Mt. 10:40

A Primer on Cryptocurrenty

and, like, why you should care…

Understanding Amara's Law

Amara's Law, named after futurist Roy Amara, highlights a recurring pattern with technological innovations: we often overestimate their short-term impact while underestimating their long-term effects. This principle helps explain why new technologies frequently experience initial hype followed by skepticism before their true potential becomes apparent.

Historical examples of Amara's Law include the mastery of fire, the adoption of electricity, and the rise of the internet. Each of these technologies faced initial excitement followed by a period of doubt before eventually transforming the world in profound ways. Cryptocurrencies and blockchain technology represent the latest stage in managing the migration of electrons, enabling the creation of secure, decentralized digital assets and systems. This "cryptocosm" has the potential to impact all aspects of life, from finance to social and political structures.

What Is Blockchain?

Blockchain, often hyped yet misunderstood, is essentially a shared, decentralized ledger maintained through a process called mining. Imagine an automated, ownerless Excel sheet that everyone can see and agree upon. In a blockchain, transactions are recorded in a decentralized manner, with no single entity controlling the ledger. Participants (miners) solve complex mathematical problems to validate and record transactions. Successful miners are rewarded with new cryptocurrency tokens. Each block is a timestamped set of transactions, forming a page in a ledger, linked chronologically to form a chain. The first block in a blockchain, known as the genesis block, sets the foundation for all subsequent blocks.

Blockchain uses asymmetric cryptography, involving a public key (shared with others) and a private key (kept secret), ensuring secure transactions and ownership. Losing your private key means losing access to your cryptocurrency. Once a block is added, it cannot be altered or deleted, with each new block adding another layer of security. Miners create blocks by validating transactions, while nodes ensure these blocks are legitimate, maintaining the blockchain’s integrity. Miners compete to solve mathematical puzzles, and the first to solve it adds the block to the blockchain. This process, known as proof of work, makes adding new blocks resource-intensive, preventing fraud.

All participants must agree on the blockchain’s state. If a participant’s copy deviates, it’s ignored by the network until it aligns with the majority. Blockchain relies on mathematical principles rather than human trust, eliminating the need for centralized authorities and reducing corruption risk. Everyone can see the blockchain, ensuring transparency. This shared ledger is immune to tampering by any single entity and operates without central control, enabling secure, borderless transactions and value storage. Blockchain is ideal for recording transactions, contracts, and agreements, and can revolutionize various industries by reducing intermediaries and increasing efficiency.

Understanding the Evolution of Money

Blockchain technology offers significant benefits, including more control for individuals and communities over their wealth and investments, transparency and trust through visible and verifiable transactions, reduction of systemic risk by decentralizing control, and reduction of corruption by minimizing central points of control. Blockchain’s decentralized nature also aligns with potential future economic systems, particularly in a space-faring civilization, by handling complexities dynamically and efficiently.

Money transcends cultural, religious, and social barriers, acting as a universal trust system. Life is filled with uncertainty and risk, but there are signs and opportunities for those open to embracing unconventional paths. The book aims to prepare readers for significant financial shifts, predicting that traditional banks and corporations may cease to exist as we know them, shifting towards a tech-driven world, particularly with cryptocurrency. Bitcoin will revolutionize the banking industry like email transformed postal services. Despite risks, the crypto market offers substantial potential for those with conviction and patience. The rapidly developing crypto space has its own terminology, reflecting its nascent and evolving nature, with imperfections and unpredictability inherent in this fast-paced environment.

Crypto represents a dramatic shift with far-reaching implications, potentially leading to significant wealth. It introduces scarcity into the digital realm, transforming value perception and creation. The rise of blockchain and AI will unleash unprecedented creative potential, altering various industries. Crypto offers decentralized systems of trust, eliminating traditional third parties, promoting transparency and equity, and fundamentally altering societal structures. While crypto is on the verge of mass adoption, it faces regulatory challenges. Open, decentralized systems are expected to prevail over closed, centralized ones. Technological innovations have always faced opposition but eventually bring profound changes. The book aims to help readers navigate and profit from the crypto revolution, emphasizing learning from past experiences and being first in new trends.

The Case for Bitcoin and Cryptocurrency

The cryptocurrency market represents a significant paradigm shift with vast implications for traditional financial systems. The potential failure of national currencies, mainstream adoption by banks, market crashes eliminating most altcoins, and government accumulation will run headlong into issues like human error, privacy, transaction costs, and control inherent in traditional banking systems.

The five driving principles of cryptocurrency are security, decentralization, anonymity, forgery prevention, and controlled supply, ensuring the robustness and reliability of cryptocurrencies. The shift from unregulated ICOs to regulatory oversight and institutional capital marks different phases of cryptocurrency development, with the approval of Bitcoin ETFs by the SEC signifying mainstream acceptance.

Crypto is part of a long historical trend, taking money out of human hands and putting it into cryptographically provable math. While the crypto market offers significant wealth opportunities, it is also fraught with risks and volatility.

We are still in the third inning of this shift. Driven by demand for transparency, immutability, privacy, and programmability, crypto's emergence is an inevitable player in the game of wealth, unless the lights go out for good. Positioning yourself to understand crypto as a form of money is important for those who hope to navigate the next era of financial systems.

The Power and Problems of Paper Money

Cryptocurrencies address issues of privacy, fees, forgery, human error, and arbitrary backing of paper money. Bitcoin, in particular, solves these problems due to its cryptographic, decentralized nature. Paper money originated as a government-backed contract, initially convertible into gold. The detachment from the gold standard in the 1970s led to inflation and reliance on trust in government backing. Financial transactions with paper money are visible to banks, government agencies, and corporations. International transactions incur multiple fees, contributing to inflation. Significant amounts of forged currency are in circulation, and risks include errors in transactions, hacking, and inflation due to unregulated money printing. The value of paper money is based solely on public trust, without intrinsic backing.

Bitcoin transactions are anonymous, have minimal fees compared to traditional banking, and are forgery-proof due to Bitcoin's design. Bitcoin has a capped supply of 21 million coins and is supported by extensive cryptographic and financial technology. Bitcoin and other cryptocurrencies offer more reliable, secure, and efficient alternatives to traditional currencies. Blockchain technology's potential extends beyond currency to areas like contract law and logistics.

The cryptocurrency space is rife with scams, and many new coins may not have long-term viability. Key indicators of legitimate cryptocurrencies include limited supply, adherence to cryptocurrency philosophy, and solving unique problems not addressed by Bitcoin. Avoid all cryptocurrencies unless thoroughly researched, and recognize common traits of scams such as pre-mines, central authority control, lack of real-world problem-solving, overhyped promises, and weak community support.

The Case for $1 Million Bitcoin

Bitcoin is compared to owning premium oceanfront property in its early stages, with the potential for massive appreciation. The approval of Bitcoin ETFs by the SEC in 2024 has bolstered its legitimacy and potential for growth. Various notable figures, including James Altucher, Wences Casares, Raoul Pal, and Harold Burger, have predicted Bitcoin reaching $1 million. Lucid Investment Strategies suggests Bitcoin could even reach $10 million, positioning it as a solution to the global debt crisis. Hyperbitcoinization is a rapid, voluntary transition from inferior currencies to Bitcoin, driven by its superior attributes. This process is expected to be quicker and less disruptive than hyperinflation, leading to significant productivity and wealth improvements.

Bitcoin, as a digital asset, distinguishes itself from traditional monetary networks like Visa and Mastercard through its ability to perform instant, cost-free settlements. If 1.75% of all global assets were allocated to Bitcoin, it would reach $1 million per coin. Bitcoin’s stock-to-flow (S2F) ratio, a measure of scarcity, places it in the same category as gold and silver.

Each halving event increases Bitcoin’s scarcity, driving its value higher. Bitcoin’s production requires significant electricity, making it difficult to fake and ensuring its scarcity. Bitcoin serves as a safe haven from inflationary and unstable fiat currencies. Bitcoin is viewed as one of the greatest asymmetric bets, with the potential for immense gains compared to the risk of owning none.The possibility of Bitcoin reaching $1 million is framed as a realistic scenario given its increasing adoption and value proposition.

Rise of the Altcoins

Bitcoin maximalists believe Bitcoin is the only legitimate cryptocurrency, dismissing altcoins as scams. While many altcoins (90-95%) are indeed scams, there are valid reasons for the existence of multiple cryptocurrencies. Creating a new cryptocurrency is relatively easy, often just requiring simple coding or copying existing code, leading to a proliferation of altcoins, many of which may not be valuable or trustworthy. Some altcoins address specific problems like transaction speed (e.g., Lightning Network for Bitcoin) or privacy (e.g., Monero). Cryptocurrencies can also integrate additional functionalities, like peer-to-peer storage (e.g., Filecoin).

Multiple cryptocurrencies will coexist, each solving different problems rather than being confined by geographic borders. Crypto boundaries are based on solving specific use cases rather than artificial geographic limitations. Smart contracts automate and enforce agreements, reducing the need for intermediaries and increasing efficiency.

Conclusion

Blockchain technology, with its decentralized, secure, and transparent nature, represents a significant advancement in managing and recording transactions. By eliminating the need for centralized control and relying on mathematical principles, blockchain offers a robust and incorruptible system that could transform various aspects of life and industry. Understanding Amara's Law helps us appreciate the potential long-term impacts of cryptocurrencies and blockchain technology. The evolution of money, driven by these innovations, promises a new era of financial transparency, efficiency, and security. As we navigate this rapidly evolving landscape, recognizing the opportunities and risks inherent in cryptocurrency investment is crucial for capitalizing on its transformative potential.