{"id":96258,"date":"2016-10-03T09:33:52","date_gmt":"2016-10-03T13:33:52","guid":{"rendered":"http:\/\/countingpips.com\/?p=96258"},"modified":"2016-10-03T07:34:22","modified_gmt":"2016-10-03T11:34:22","slug":"can-the-currency-of-the-darknet-find-its-way-into-the-light","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/10\/can-the-currency-of-the-darknet-find-its-way-into-the-light\/","title":{"rendered":"Can the Currency of the Darknet Find Its Way Into the Light?"},"content":{"rendered":"
October 3, 2016<\/div>
\r\n<\/div><\/div>

By WallStreetDaily.com<\/u><\/a> \"Can<\/p>\n

When Forbes, Fortune, and the Financial Times are covering every development, you know a new \u201crevolutionary\u201d technology is being ushered into the mainstream. But can Bitcoin and blockchain be pulled from the darknet?<\/strong><\/i><\/p>\n

\n

My initial introduction to Bitcoin came about five years ago, through an acquaintance who, in addition to engaging in certain black-market activities, \u201cmined\u201d the still-nascent digital currency using a sophisticated computer hardware setup in the basement suite of his parents\u2019 condo.<\/p>\n

This was just a couple years after Satoshi Nakamoto created the technology, motivated by the anger he felt in the aftermath of the global financial crisis.<\/p>\n

Like my acquaintance and Satoshi Nakamoto (which is almost surely a pseudonym; nobody really knows who invented this tech that\u2019s sweeping the land), Bitcoin and blockchain are all outlaw and fringe.<\/p>\n

Hype-driven headlines and moves by traditional, central-bank-tied institutions to get in on the new game have brought the technology closer to the mainstream.<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

But there are many questions to be answered before the world can willingly embrace blockchain.<\/p>\n

In today\u2019s issue, I outline several of these questions, and tomorrow, Wall Street Daily<\/em> Chief Investment Strategist Louis Basenese, one of the brightest minds on digital technology in the investment analyst community, will shed some more light in a Q&A.<\/p>\n

Decoding the Coin<\/h2>\n

Bitcoin is a type of \u00a0\u201ccryptocurrency\u201d, a name which captures perfectly its anti-government, anti-establishment nature. A \u201ccryptocurrency\u201d is a decentralized medium of exchange secured by cryptography.<\/p>\n

Decentralization is the essence of Bitcoin and its enabling technology, blockchain. \u201cPeer to peer\u201d is the defining relationship. There is no middleman.<\/p>\n

Bitcoin came first, but blockchain is what gives it life.<\/p>\n

Blockchain is basically a digital ledger technology; in this context, it records transactions where Bitcoin is the medium of exchange.<\/p>\n

It\u2019s a distributed database that relies on the network \u2014 thousands upon thousands of individuals running the software on their own computers \u2014 to record and validate transactions, \u00a0or blocks, and then add them to the an ever-growing chain.<\/p>\n

Members of the network compete to validate transactions. These are \u201cminers,\u201d and for their efforts, they\u2019re rewarded with additional coins.<\/p>\n

You too can participate in the Bitcoin economy. Companies such as Coinbase allow you to exchange government-issue currency for cyrptocurrency and offer mobile \u201cdigital currency wallets\u201d that allow you to transact with your smartphone.<\/p>\n

Coinbase, which was founded in June 2012, claims 4.5 million users and 9.7 million \u201cwallets.\u201d Forty-four thousand merchants are on board, and 8,000 apps have been developed to exploit its platform.<\/p>\n

The privately held company has raised nearly $120 million from venture capitalists and other investors.<\/p>\n

Here\u2019s the thing: \u201cI think the whole narrative of blockchain without Bitcoin will amount to very little.\u201d<\/p>\n

That\u2019s the conclusion Fred Ehrsam, a former foreign-exchange trader at Goldman Sachs Group Inc. (GS) and one of Coinbase\u2019s founders, offered Yahoo Finance during Consensus, the Bitcoin conference held in Manhattan in May 2016.<\/p>\n

Bitcoin\u2019s success is a direct result of the size of its decentralized, open network. Decentralization has combined with scale to create security, despite the fact that it\u2019s entirely open.<\/p>\n

The very size of Bitcoin \u2014 the number of blocks, the number of chains, the number of miners, the number of copies of the blockchain\/database \u2014 is what makes it secure; there are very few entities on Earth capable of summoning the computing power it would take to \u201chack\u201d the system.<\/p>\n

\u201cBitcoin isn\u2019t secure because of blockchain; it is secure because the effort and cost of subverting its blockchain is greater than the value of what\u2019s being protected,\u201d writes Nikolai Hampton in Computerworld. \u201cThe effort and cost that protect Bitcoin comes in the form of time, computing power and electricity.\u201d<\/p>\n

Hampton is a cryptography expert and a director at Australia-based Impression Research who consults on privacy, security, digital forensics, and incident response.<\/p>\n

He describes the recent media coverage of \u201cthe blockchain revolution\u201d as \u201cnothing but snake oil and marketing spin.\u201d<\/p>\n

Much of that hype is centered on the possibility of manufacturing a networkwide productivity boom. In the case of the financial services industry, that happens by limiting data proliferation via an \u201copt in,\u201d rules-based system.<\/p>\n

A litany of global financial heavyweights \u2014 including \u201ctoo big to fail\u201d U.S.-based Citigroup Inc. (C), JPMorgan Chase & Co. (JPM), and Wells Fargo & Co. (WFC) as well as Credit Suisse Group AG (CS), Royal Bank of Scotland Group Plc (RBS), and BNP Paribas SA (BNPQY) are coming together to explore the use of blockchain to modernize the existing banking system.<\/p>\n

So Bitcoin\/blockchain is no longer \u201coutlaw\u201d technology.<\/p>\n

Wrangling the Rebellion<\/h2>\n

Left open are several questions, the answers to which may help pull it further from the fringe.<\/p>\n

Among these questions is how private entities creating proprietary blockchains will protect their integrity. They won\u2019t have the network scale that secures Bitcoin.<\/p>\n

Why is \u201cgoing blockchain\u201d better than building or updating a regular database? Isn\u2019t \u201cdistributed ledger technology\u201d just a fancy phrase for \u201cdatabase\u201d? And can a technology founded on openness be adapted for \u201cclosed\u201d applications?<\/p>\n

Bitcoin is all about openness. Companies \u2014 financial institutions in particular \u2014 that try to streamline their disparate databases would be centralizing a concept whose very success is predicated on decentralization.<\/p>\n

But I can see how blockchain could substantially improve latency in financial transactions \u2014 settlement of equity trades, for example.<\/p>\n

There are certainly efficiencies to be realized by streamlining multiple existing databases across financial institutions to enable smoother transfer of assets among institutions as well as across borders.<\/p>\n

As a means of facilitating peer-to-peer transactions such as room sharing or ride sharing, Bitcoin and blockchain are obvious improvements over using a system that\u2019s guaranteed to include a third-party skim.<\/p>\n

With the slow-but-sure proliferation of distributed solar power, the technology could surely be adapted to enable the sale of electricity from one neighbor to another, cutting out the local utility.<\/p>\n

So it is exciting tech. And Lou Basenese is going to help us contextualize and understand where on the \u201chype cycle\u201d it sits right now.<\/p>\n

Be sure to check in tomorrow for Lou\u2019s highly informed perspective on Bitcoin and blockchain.<\/p>\n

\n

Upticks, Downticks<\/h2>\n

\"Uptick\" The Russell 2000 Index finished the third quarter with an 8.6% gain and is now up 10.1% for the year.<\/p>\n

\"Downtick\" Deutsche Bank AG (DB) shares hit a new all-time low on the stock\u2019s home Frankfurt Stock Exchange Friday as hedge funds expressed deepening concerns about the German giant by pulling business from the bank. Commerzbank AG (CRZBY) announced it would cut 10,000 jobs and suspend its dividend. Europe\u2019s financial system is far from healthy.<\/p>\n

\"Uptick\" Based on the Commerce Department\u2019s second revision of its initial estimate of second-quarter growth, U.S. gross domestic product (GDP) expanded by 1.4% from April 1 through June 30, up from 1.1%.<\/p>\n

\"Downtick\" The U.S. economy has expanded by 2.6% or less on an annualized basis for seven consecutive quarters. GDP has expanded by 2.5% over the trailing four quarters, the slowest such period since the Great Recession.<\/p>\n

\"Uptick\" OPEC\u2019s announcement of an \u201cagreement in principle\u201d to cut production buoyed crude oil prices. But the real impact \u2014 and whether there will be any actual reduction in the global supply of the sticky stuff \u2014 is far from clear<\/strong><\/a>.<\/p>\n

\"Downtick\" \u201cYou are way more likely to be killed by deer than by sharks, bears, and gators combined<\/strong><\/a>.\u201d<\/p>\n

Smart Investing,<\/p>\n

David Dittman
\nEditorial Director, Wall Street Daily<\/i><\/p>\n

The post Can the Currency of the Darknet Find Its Way Into the Light?<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com When Forbes, Fortune, and the Financial Times are covering every development, you know a new \u201crevolutionary\u201d technology is being ushered into the mainstream. But can Bitcoin and blockchain be pulled from the darknet? My initial introduction to Bitcoin came about five years ago, through an acquaintance who, in addition to engaging in certain […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-96258","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/96258","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=96258"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/96258\/revisions"}],"predecessor-version":[{"id":96272,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/96258\/revisions\/96272"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=96258"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=96258"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=96258"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}