Blockchain technology

[Mikey]

I think this is the crux of the matter as far as the IMF and central banks go. They want private, decentralized cryptocurrencies to become more popular and hope that this will lead to an acceptance of state-controlled cryptocurrencies to be issued later.

The real danger lies in whether this switch to a state-controlled cryptocurrency will come with a ban on cash and decentralized cryptocurrencies, because in that case, they will be able to monitor all transactions and even push through a negative interest rate, which the BIS already says is "an attractive possibility" to stimulate money spending in the economy.

There cannot be a "state-controlled cryptocurrency", because the term "crypto" implies "decentralized", which in turn implies "not controlled by anyone". Just adding the term "crypto" would be nothing more than a manipulative marketing trick, to increase acceptance of a system perhaps worse than the current one. "Regulation" of existing cryptocurrencies would be a different thing and could have positive effects IMO.

Cryptocurrencies are often blamed to be the reason for the end of cash. But this is far from the truth. As long as there are cryptocurrencies, there will be cash. Because everyone can print the private keys of an account on a piece of paper and give it to someone else: voilà! value transfer on paper.

That is why it is very important for people to be informed and not fall into this trap that is being set for us. From what I see right now, most people have still no understanding at all of this whole topic.

I absolutely agree!

 

[Carl]

There cannot be a "state-controlled cryptocurrency", because the term "crypto" implies "decentralized", which in turn implies "not controlled by anyone". Just adding the term "crypto" would be nothing more than a manipulative marketing trick, to increase acceptance of a system perhaps worse than the current one. "Regulation" of existing cryptocurrencies would be a different thing and could have positive effects IMO.

Cryptocurrencies are often blamed to be the reason for the end of cash. But this is far from the truth. As long as there are cryptocurrencies, there will be cash. Because everyone can print the private keys of an account on a piece of paper and give it to someone else: voilà! value transfer on paper.

This is probably semantics but you can definitely have a centralised distributed ledger. Ripple is a good example - there are plenty of nodes in the network but they are all controlled by one authority. But in current conditions that probably won't happen.

The banksters are changing their tune on bitcoin, and I do wonder if it is because the new Segwit+Lightning Network updates will provide off-chain transactions and will basically amount to a centralized banker takeover of BTC. This is one reason for all the Chinese forks of bitcoin.

https://medium.com/@jonaldfyookball/mathematical-proof-that-the-lightning-network-cannot-be-a-decentralized-bitcoin-scaling-solution-1b8147650800

 

[axj]

There cannot be a "state-controlled cryptocurrency", because the term "crypto" implies "decentralized", which in turn implies "not controlled by anyone".

"Crypto" is short for cryptography, which only implies the use of an encryption algorithm. Decentralization is a feature of most current cryptocurrencies, but not all. Ripple is centralized in the sense that there is one central authority that controls it and which can, for example, increase the number of Ripple units at any time.

And whether it is called "state-controlled cryptocurrency" or not, 80% of central banks and governments are considering doing it:
https://cointelegraph.com/news/central-banks-and-govts-are-pro-blockchain-80-consider-centralized-cryptocurrency

Cryptocurrencies are often blamed to be the reason for the end of cash. But this is far from the truth. As long as there are cryptocurrencies, there will be cash. Because everyone can print the private keys of an account on a piece of paper and give it to someone else: voilà! value transfer on paper.

Decentralized cryptocurrencies can act as a replacement for cash, though the transaction process still needs to be streamlined a lot. As far as state-controlled currencies go, I think it is also critical to oppose a cash ban for those, especially since nobody knows whether the current decentralized cryptocurrencies will get mass adoption or become illegal after they introduce their state-controlled versions.

 

[United Gnosis]

Cryptocurrencies are just ONE specific application running on top of blockchain technology. Yes, cryptocurrencies were the incentives needed to help the blockchains grow, but there are other applications which are often overlooked.

A blockchain is nothing more but a decentralized database/ledger, which can be trusted because of its cryptographic properties. It stores transactions of ownership of digital assets, which need not be "coins".

Definitely. You mentioned blockchain DNS which according to me is vital to the survival of a free internet; in that category i'd also lump blockchain messaging so that you can trust messages are sent by a specific source without being altered or ghost-banned by some central authority like Google and FB.

Oh. And not that i believe in centralized politics (or the ability of a ponerized/traumatized populace to reach effective decisions), but blockchain voting. That's a big one. Imagine a Catalonia-like scenario where individuals can vote in a decentralized manner, connecting for instance by NFC and wifi to other nodes in proximity to cast a cryptographically-secured vote on blockchain....

 

[Menna]

The Blockchain is here to stay it is like the internet not controlled by any one person or entity and many applications can be applied to itvabd come from it - it will continue to grow in popularity and usage.

Imagine a small village miles away from civilization. All they need is a solor panel cell phone that can receive txt/SMS messages powered by the solar panel powered by the sun and now they have a multinational bank. They can buy and sell and keep track of ownership if Cryptocurrency and smart contracts are used using the Blockchain as record keeping.

Because of the Blockchain and internet money/bitcoin and the alike everyone everywhere can be their own bank.

People will invent new ways of doing things the word can should be used more than can't

 

[Konstantin]

I found one interesting and simplified explanation of the blockchain technology.
_https://blockgeeks.com/guides/what-is-blockchain-technology/

“The traditional way of sharing documents with collaboration is to send a Microsoft Word document to another recipient, and ask them to make revisions to it. The problem with that scenario is that you need to wait until receiving a return copy before you can see or make other changes because you are locked out of editing it until the other person is done with it. That’s how databases work today. Two owners can’t be messing with the same record at once.That’s how banks maintain money balances and transfers; they briefly lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again).With Google Docs (or Google Sheets), both parties have access to the same document at the same time, and the single version of that document is always visible to both of them. It is like a shared ledger, but it is a shared document. The distributed part comes into play when sharing involves a number of people.

Imagine the number of legal documents that should be used that way. Instead of passing them to each other, losing track of versions, and not being in sync with the other version, why can’t *all* business documents become shared instead of transferred back and forth? So many types of legal contracts would be ideal for that kind of workflow.You don’t need a blockchain to share documents, but the shared documents analogy is a powerful one.”

William Mougayar, Venture advisor, 4x entrepreneur, marketer, strategist and blockchain specialist

A network of nodes
A network of so-called computing “nodes” make up the blockchain.


What is Blockchain Technology? A step-by-step guide than anyone can understand

Node
(computer connected to the blockchain network using a client that performs the task of validating and relaying transactions) gets a copy of the blockchain, which gets downloaded automatically upon joining the blockchain network.

Together they create a powerful second-level network, a wholly different vision for how the internet can function.

Every node is an “administrator” of the blockchain, and joins the network voluntarily (in this sense, the network is decentralized). However, each one has an incentive for participating in the network: the chance of winning Bitcoins.

Nodes are said to be “mining” Bitcoin, but the term is something of a misnomer. In fact, each one is competing to win Bitcoins by solving computational puzzles. Bitcoin was the raison d’etre of the blockchain as it was originally conceived. It’s now recognized to be only the first of many potential applications of the technology.

There are an estimated 700 Bitcoin-like cryptocurrencies (exchangeable value tokens) already available. As well, a range of other potential adaptations of the original blockchain concept are currently active, or in development.

 

[Mikey]

Interesting take by Antonopoulos on the "Bitcoin Bubble" (comparing it to the dotcom crash) while pointing out that the price of Bitcoin relative to fiat currencies is its least important aspect compared to all its other features.

This is a short segment of the full interview, also well worth watching.

http://<iframe width="560" height="...Xg" frameborder="0" allowfullscreen></iframe>

Bitcoin has been announced dead almost 200 times now: http://bitcoinobituaries.com

 

[Scottie]

Definitely. You mentioned blockchain DNS which according to me is vital to the survival of a free internet; in that category i'd also lump blockchain messaging so that you can trust messages are sent by a specific source without being altered or ghost-banned by some central authority like Google and FB.

That's something I would definitely like to see!

Oh. And not that i believe in centralized politics (or the ability of a ponerized/traumatized populace to reach effective decisions), but blockchain voting. That's a big one. Imagine a Catalonia-like scenario where individuals can vote in a decentralized manner, connecting for instance by NFC and wifi to other nodes in proximity to cast a cryptographically-secured vote on blockchain....

This is another huge one. At the same time, I doubt it will "just happen" because rigging votes is currently one of the primary methods of control. The psychos in charge aren't just gonna let that one go.

And that's my primary concern about all of this. We don't live in an ideal world. We live in this world, and that means things are controlled by a small number of people mostly for their own benefit. That's not just going to go away.

It's like Tesla Powerwalls and electric cars. Nothing about them is revolutionary. I can buy a bunch of 18650 cells from China and build my own PowerWall in my basement. Ignoring the pollution/manufacturing aspect, imagine if every house had solar panels and a giant battery backup. Imagine if your car had a super-efficient panel on the roof to charge its batteries. This is not outside the realm of possibility IF the development of better panels was accelerated and proper research was appropriately funded. That would be cool, right?

Right. But then what happens to the oil industry? They're not just gonna let go and "live and let live". The entire military-industrial complex exists and countless "wars" have been fought over basically the control of oil!

The same is true of banking. Money is power, so you're not just gonna toss out the banking system and TA-DA! Everything is wonderful.

To me, it's like the Superhero Syndrome: Don't worry, blockchain is gonna fix everything, so I don't have to worry. Well, probably not, but it IS going to play some key role. We just don't know how - yet.

Interesting take by Antonopoulos on the "Bitcoin Bubble" (comparing it to the dotcom crash) while pointing out that the price of Bitcoin relative to fiat currencies is its least important aspect compared to all its other features.

His point about the dotcom bust was especially interesting, because I suspect that's what will happen: cryptocurrencies will "crash" in such a way that something new will be born. The dotcom crash wasn't just financial as Antonopoulos says: it was also the birth of a different kind of internet - for better or worse.

Or, think about the Mobile Revolution: entire companies bet their future on the fact that mobile would be everything. Well, certainly, it's pretty big today. But many of them were dead wrong in their claims that by now, no one would be using a desktop or laptop computer any more. Oops!

And, at the moment there are many other problems. Imagine living in Puerto Rico right now. Your Bitcoin investments wouldn't be terribly useful, right? Mama Nature is pissed, there's social/political chaos, false flag attacks, and generally society globally is a bit, um, "strained" at present. That will all factor in somehow, but naturally no one knows how.

In any case, this is an interesting thread because we need to keep doing what we do with everything: reading reality carefully, adjusting course when necessary, and then "wait and see"... and then possibly strike when the iron is hot.

 

[Ca.]

Food Thieves in France, Cryptocurrency Food Fund and Spanish Ports (465)
Adapt 2030 Published on Oct 4, 2017

http://<iframe width="560" height="...=0" frameborder="0" allowfullscreen></iframe>

‘Mind-Boggling’ Math Could Make Blockchain Work for Wall Street Video
By Matthew Leising October 5, 2017, 11:00 AM GMT+2
https://www.bloomberg.com/news/articles/2017-10-05/-mind-boggling-math-could-make-blockchain-work-for-wall-street

A Biotech Company Changed Its Name to ‘Riot Blockchain’ and Its Stock Is Surging Video
Oct 4, 2017
https://www.bloomberg.com/news/articles/2017-10-04/from-biotech-to-bitcoin-bioptix-shifts-focus-to-blockchain
company’s announcement Wednesday that it’s renaming itself Riot Blockchain Inc. to reflect a new focus on buying cryptocurrency and blockchain businesses. After the Castle Rock, Colorado-based firm formally...

Blockchain Technology: Friend or Foe?
http://gcaptain.com/blockchain-technology-friend-or-foe/
August 4, 2017 Editorial
Links within:
MTS Logistics is a C-TPAT and ISO9001:2008 certified NVOCC specializing in LCL, FCL, and project sea freight shipments. With the help of their global agency network, they are able to provide import and export services to and from a wide range of international destinations including, but not limited to, South America, the Mediterranean, Europe, the Middle East, Oceania, and Asia. Currently they are one of the top 10 NVOCC’s by TEU for US export shipments and the 3rd NVOCC for TEU’s shipped from US Gulf ports with an A+ credit rating through D&B.
By Alysia Xirinachs

Amid chaos in an ever-changing industry, there lurks a new element that will impact the logistics industry possibly more than any alliance or economic slump has done in the past. But, will this new change be for the better?

As the logistics industry continues to grow, change, and now consolidate, perhaps the highest-impacting development will be seen from the side of technology. In recent years, the cargo shipping process has become lightning fast and, in theory, simpler than ever with the development of e-commerce. This technological speed was matched with terminal growth, service expansions, and the introduction of mega-container ships. The next move we will see in this Shipping Arms Race between the industry’s infrastructure and applied science should be digital, but now that global cargo trading has grown so substantially and with so many players involved, how can the technology keep track of global commerce on this scale? The answer seems to be Blockchain Technology.

Software that was developed by Satoshi Nakamoto, creator of Bitcoin, Blockchain is a digital ledger that records every transaction involved with, in our case, a shipment and cannot be amended retroactively. According to Eft.com, “each “block” of information in a blockchain will contain a timestamp and a link to a previous block.” Imagine that every player involved with a shipment will leave their “stamp” in the block created, which will show the part they played and the time in which they were involved.

TRANSPARENCY ON THIS SCALE IS IMPOSSIBLE! OR IS IT

Forbes.com notes that in a recent test of Blockchain technology completed in collaboration between Maersk and IBM, the journey of a 40-foot RF containing flowers was tracked from its origin in Schneider Electric in Lyon, France, to the Schneider Electric facility in the U.S. From point A to B, it sounds simple enough, but consider that this shipment of flowers encountered numerous agencies along the way including Customs Administration of Netherlands, U.S. Customs and Border Protection, U.S. Department of Homeland Security, and this is not including the usual stopping points: warehouses, rail yards, container yards, trucking facilities, loading vessels, trans-shipment ports, trans-shipment vessels, and more. The implementation of Blockchain technology would allow us to view all of these movements on a highly-secure, shared network, which will provide complete transparency to all essential players.

THIS TYPE OF TECHNOLOGY IMPACTS ALL DIGITAL MONETARY TRANSACTIONS, BUT WILL BE INDUSTRY-CHANGING FOR THE LOGISTICS AND SHIPPING INDUSTRY.

Ideally, all parties involved will be able to view the blocks in order to track the information they need. It will bring transparency to Per Diem costs accrued (one of the largest income factors for carriers), facilitate the terminals’ access to stow plans to better prepare for vessel arrivals, and allow for destinations to confirm payments are received, and terms met, for a shipment to be released more quickly. These are just a few potential applications. If a container is lost in the terminal or a seal is broken, the carrier can review the information blocks to better understand all actions (and parties involved) leading up to those situations. Aside from facilitating the control of costs, it will greatly increase technological efficiency, and decrease the necessity for paper documentation (and thus reduce costs.) The advantages seem endless.

ALTHOUGH THE ADVANTAGES APPEAR GREAT, FOR SOME, THE DISADVANTAGES MAY BE GREATER.

With technology increasingly simplifying the shipping process, the need of a “middle man” will decline, which could cause NVOCC’s and Freight Forwarders to become a thing of the past. Sources believe that if smaller players are not able to perform advanced logistic functions, they will be wiped out not only due to Blockchain development, but also due to the overall digitalization of platforms with online capabilities to match the demand and offer for cargo transportation (both containerized and bulk.) Consider what digital platforms, like Expedia, did to travel agents – there aren’t many around nowadays. Once the industry has reached the pinnacle of clarification, organization, and transparency, where will that leave the facilitators who have found their niche in the chaos? Will it render us obsolete?

NVOCC’s and Freight Forwarders have existed as navigators through the confusion between BCO’s and carriers, in order to ensure smooth operations with as few casualties (and additional costs) as possible. So, as the Arms Race between technology and infrastructure continues to reshape the industry, we will need to find a new edge to stay ahead of the game. Will we follow the carriers’ suite and form our own alliances? Or will all of this growth create new exciting mayhem in which we will thrive? Although there is a long way to go before Blockchain technology can be implemented on a global scale within the container shipping industry, we are excited to face the new benefits and challenges it will bring.

About the Author

Alysia Mercedes Xirinachs was born in Fort Lauderdale, FL. She completed her Bachelor’s degrees in Spanish Language and Literature and English Literature at the College of Charleston in Charleston, SC. Her passion for languages brought her to Italy, where she lived for 8 months studying Italian in Rome. Alysia previously worked for Mediterranean Shipping Company in Charleston, SC as a VIP Accounts Manager and Analyst. Currently she is working as an Operations Specialist at MTS Logistics, Inc. since February 2017.

This article originally appeared at http://www.morethanshipping.com/blockchain-technology-friend-foe/

 

[goyacobol]

from _https://fee.org/articles/imf-head-predicts-the-end-of-banking-and-the-triumph-of-cryptocurrency/

If privately issued virtual currencies remain risky and unstable, citizens may even call on central banks to provide digital forms of legal tender.

I think this is the crux of the matter as far as the IMF and central banks go. They want private, decentralized cryptocurrencies to become more popular and hope that this will lead to an acceptance of state-controlled cryptocurrencies to be issued later.

The real danger lies in whether this switch to a state-controlled cryptocurrency will come with a ban on cash and decentralized cryptocurrencies, because in that case, they will be able to monitor all transactions and even push through a negative interest rate, which the BIS already says is "an attractive possibility" to stimulate money spending in the economy.

Basically, state controlled cryptocurrencies are the opposite of the current decentralized ones because instead of anonymity there will be full control by the state, instead of a limited amount of Bitcoins they can still "print money" and create as much as they want. It's even worse than the current system where you still have cash for anonymity, but everything else is either exactly the same as the current system or worse.

That is why it is very important for people to be informed and not fall into this trap that is being set for us. From what I see right now, most people have still no understanding at all of this whole topic.

That's certainly a possibility. In the more immediate term, especially in the west, I think the Wall Street types just want another market to speculate in irresponsibly.

https://cointelegraph.com/news/wsj-goldman-sachs-planning-direct-bitcoin-trading

In the East, for sure, it seems they want to digitize everything. This is an interesting video and he has others similar:

https://www.youtube.com/watch?v=5uq9QiqwGrI

I share the same concerns that you guys are expressing. Centralization of cryptocurrencies that are no longer "crypto" would be the same old system only worse.

I am not sure what Putin and Russia have in mind exactly by their interest in a digitalized currency but at least I think they might be more honest and backed by gold compared to the US fiat currency. Transaction speed and savings on paperwork costs seem to be a couple of their reasons for trying it.

Russia's Mobile Operator Issues First Blockchain Bonds

Russia has gone a bit blockchain bonkers since president Vladimir Putin latched onto the idea at the more recent St Petersburg International Economic Forum

Major Russian mobile phone operator Megafon will issue RUB500mn worth of blockchain bonds in the first ever Russian blockchain bond issuance, Vedomosti reported on October 2.

All the bonds, issued on a blockchain platform developed by the National Settlement Depository (NSD), were bought by Raiffeisenbank, according to the report.

Russia has gone a bit blockchain bonkers since president Vladimir Putin latched onto the idea at the more recent St Petersburg International Economic Forum (SPIEF).

“Blockchain is now the number task,” first deputy Prime Minister Igor Shuvalov said at the SPIEF blockchain session, probably the third most powerful man in Russia. “The president is completely ill with this idea and understands that the gap and significant growth rates are based on the digital economy and technological leadership.”

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In what is remarkably rapid progress the Megafon bond was a test run of the new technology that could revolutionize the securities business. The zero-coupon bonds were sold at RUB982 ($17) each against the face value of RUB1,000, with corresponds to an annual yield of 7.77%. Megafon said that the main goal of issuing blockchain bonds is testing the new technology rather than attracting funds, therefore the volume of the issuance was rather small.
The scheme has its obvious advantages as the transaction took a few seconds as opposed to a few days under the traditional procedure. In addition, the issuance of bonds with a higher total value is expected to bring about additional cost savings thanks to declining paperwork. And that is the point of the blockchain: the settlement and registration processes are hardwired into the very structure of the blockchain, negating the need for expensive and time-consuming back-office work.

The blockchain format also helped to decrease risks as the issuer and the investors are able to observe the transaction in real time removing the classic “delivery vs payment” risks.

Everything related to blockchain and cryptocurrencies is extremely hot in Russia these days, also falling in line with the government's strategy for developing a "digital economy."

In August, Russia's leading exchange, the Moscow Exchange (MOEX) joined the blockchain craze and by preparing infrastructure for a cryptocurrency trading platform.

Around the same time, state-run lender VEB announced the launch of a blockchain competence centre aimed at introducing the technology to the country's public sector.

Meanwhile, Russia’s Federal Agency for Technical Regulation and Metrology (Rosstandart) appointed a new technical committee to work on the standardization of "the software and hardware of distributed register and Blockchain technologies".

In September, Burger King Russia launched Whoppercoin, a cryptocurrency which can be traded for Whoppers.

 

[mkrnhr]

Russia has decided to embrace technology and make it work both for the government, businesses and consumers.

The CryptoRouble is being worked on at the moment and should be available soon, although a precise timeline is not yet available.

[...]

A Russian CryptoRouble that can be easily exchanged for traditional Roubles in Russia and ostensibly anywhere else in the world, will automatically give the new cryptocurrency the confidence that many alternatives currently lack. Such a phenomenon will de-mystify the process for many possible cryptocurrency users.

At the same time, if in the eyes of the Russian government, a CryptoRouble is as legitimate a currency as the Rouble, it will allow wholesalers, retailers and possibly even independent financial traders to use the CryptoRouble to avoid the sanctions against Russian banks which their own anti-libertarian western governments have imposed.

[...]

President Putin justified the creation of the CryptoRouble on far more pragmatic grounds. He stated,

I confidently declare that we run CryptoRuble for one simple reason: if we do not, then after 2 months our neighbours in the EurAsEC (Eurasian Economic Community) will.

When a technology appears, the best is to learn it and make use of it instead of waiting for it to be used against you.

 

[Scottie]

Russia has decided to embrace technology and make it work both for the government, businesses and consumers.

The CryptoRouble is being worked on at the moment and should be available soon, although a precise timeline is not yet available.

[...]

A Russian CryptoRouble that can be easily exchanged for traditional Roubles in Russia and ostensibly anywhere else in the world, will automatically give the new cryptocurrency the confidence that many alternatives currently lack. Such a phenomenon will de-mystify the process for many possible cryptocurrency users.

Now that sounds like a good plan to me!

I'm sure the Russian banking system isn't exactly holy, but it certainly beats the Western world's Bank-o-saurus...

 

[Mikey]

This video makes the details of how cryptocurrency blockchains create trust (the souce of their value) easily understandable:

http://<iframe width="560" height="...g4" frameborder="0" allowfullscreen></iframe>

The technical protocol as such is convincing. However, that alone unfortunately seems to be not enough. Cryptocurrencies face problems having to do with human psychology:

I see two core reasons why bitcoin commands such value ... One is somewhat tautological, and that is the fact that bitcoin exists at all, that it seemingly cannot die. ... Bitcoin's decentralized design can resist any effort to shut it down, whether from outside or within its community of users.

That's what’s valuable about it. The more bitcoin shrugs off attacks, the more it highlights its core value as an immutable currency of the people. The second pillar beneath bitcoin's value is its scarcity.

There is, however, a paradox here: this scarcity feature could actually undermine bitcoin's appeal as a currency.

Bitcoin is in this narrow sense is a much better, highly liquid, digital version of gold. But so long as all these HODLers {Hold on for dear life} keep coins out of circulation, there won't be enough of them around for people to use it to buy goods and services.

The vast majority of bitcoin transactions aren't commercial in nature, and a number of merchants that experimented with bitcoin in 2014 and 2015 have since stopped accepting it.

Fast, low-fee transactions won't entice people to part with their bitcoin if they perceive that it's more valuable to hold it. In keeping with Gresham's Law that "bad money drives out good," they'll instead transact in an inferior currency. Such as the dollar.

Of course, any decent, functioning currency must be somewhat scarce in order to hold its value; no one wants to accept Venezuelan bolivars right now. But as many economists often point out, neither should a currency be overly appealing as a store of value. If too many people hoard the currency, too little gets into circulation as a medium of exchange, which in turn makes it less likely to be quoted as a unit of account.

... it's virtually impossible to imagine bitcoin's algorithm ever being altered to increase its supply {i.e. debasement}. Users, miners and businesses would never agree to such a diminishment in its value proposition.

Bitcoin, like any other cryptocurrency right now, is a first-time experiment. Success is not guaranteed at all. It will certainly be interesting to see what comes of it.

 

[Konstantin]

Thank you for this video, Mickey. It is a very complicated but very interesting in the same time. IT is hard to tell if cryptocurrencies will success in the future or not. And probably like everything else we will have to wait and see.

 

[axj]

Russia’s Crypto-Ruble Just Changed the Game
Oct 17, 2017 12:39 PM

For weeks now we’ve been getting very mixed signals out of the Russian Government about cryptocurrencies. On the one hand we see it embracing the new technology while at the same time going on the warpath against them. Because of that there is a lot of confusion in people’s minds as to what the endgame for cryptos in Russia looks like. I’ll try to clear this confusion up given what we know.

But, suffice it to say, this is very good news for both Bitcoin and the Russian economy. Give me a few minutes and I’ll explain why.

Putin’s Law

Vladimir Putin is very much a law and order kinda guy. If you watch Putin operate in the public arena he always does so with an eye towards the law. He believes strongly in the law. And cryptocurrencies, despite their obvious benefits to a Russian economy that needs the type of disintermediation cryptos offer, operate in a legal gray area that makes Putin uncomfortable.

So, the goal with Russian official crypto-policy is to stamp out the illegal activities – the money laundering, terrorism-financing, human-trafficking, etc. – while simultaneously using the technology to modernize Russia’s internal capital handling capabilities.

This is what the crypto-ruble is all about. It is a way for Russia and Russians to provide a gateway between the crypto-world and the so-called real one. It ensures that this new form of ruble properly tracks capital flow through the Russian economy.

By taxing crypto-rubles at the capital gains rate for those that cannot provide a paper-trail of ownership, Russia and Putin are incentivizing the development of low-cost crypto-payment systems to exchange rubles for goods only in cryptocurrencies that also track ownership, like Ethereum and others that have transparent blockchain histories.

The Russian Capital Invitation

Putin is openly inviting investment capital into Russia that is legal and above board. Russia wants legitimate businesses to operate in Russia in whatever currency they like as long as that business is transparent.

The crypto-ruble provides the means by which to convert, transaction-cost-free, back into the national ‘fiat’ currency to pay bills, taxes and the like. This is in direct opposition to how the U.S., for example, treats cryptocurrencies.

The 2014 I.R.S. rule that classified Bitcoin as ‘property’ means that every Bitcoin transaction, no matter how minor, creates a potential capital gains event. It means that buying a cup of coffee at Starbucks in Bitcoin is taxable for both the person buying the coffee (capital gains on the sale) and Starbucks when they go to sell those Bitcoins, buy dollars and pay salaries, order supplies, etc.

It’s why the capital that has moved into cryptocurrencies isn’t moving back out. It’s why the ICO market has exploded. Billions in profits actively looking for new investment opportunities without paying taxes.

It’s also the main reason why Amazon, for example, doesn’t take Bitcoin. Who wants that hassle?

Can you imagine Amazon’s Schedule D if it accepted Bitcoin?

The crypto-ruble’s structure dispenses with that for those that can prove ownership via the blockchain. Bitcoin allows for transaction transparency, so does Ethereum, Litecoin and many others.

Now, cryptos can exist side-by-side with rubles without worrying about the threat of double taxation, unless you earned your money in the murk, at which point Russia wants 13% capital gains. This new system won’t bring that capital back into the Russian economy, but it wasn’t coming back anyway.

Russia Embraces its Own Cryptos

By calling Bitcoin as a Ponzi scheme and an avenue for money laundering Putin and the Bank of Russia are simply attacking technologies that are not home-grown. They are, like every other person in the markets, ‘talking their book.’

Putin would prefer people use platforms that are Russian. Remember, he’s also a nationalist trying to bring Russia prestige in this important market going forward.

Ethereum and WAVES are both platforms designed by and built for Russia. So, you’ll notice that Putin has never spoken out against Ethereum. WAVES continues to fly under a lot of people’s radar, but it is just as disruptive as Ethereum.

They both provide a platform to act as Infrastructure as a Service (IaaS) for the next generation of internet-based applications. Ethereum is a kind of operating system for Internet 3.0 while WAVES is next generation forex exchange as well as providing an easy platform for issuing new public/private equity.

WAVES is what will back the Moscow Exchange’s move to trade cryptocurrencies and their derivatives. It will act at the gateway for all of the currency exchanges. So, if you have dollars, Bitcoins, rubles or Ethereum you can buy and sell stocks on the Moscow Exchange eventually.

All nice and legal. All above-board.

Evil Putin is looking for pension-fund investors seeing Russian bonds trading above 7% and he just gave fund managers a way to come in through the crypto-back door.

Don’t think for a second that Putin doesn’t like Bitcoin as a means to attract investor capital. This is what Russian Miner Coin is all about. He just wants it to be regulated so it can ensure the public sphere is maximized.

The Fight for Capital in Flight

Capital will always flow to where it is treated best.

Given the tenuous situation in the global financial and p0litical systems, Russia’s stable government is an asset. What investors need is the confidence of being able to get their money out after putting it back in.

The scheme for the crypto-ruble is part of that confidence-building process.

I know now, as an American investor, I can, for example, invest in a Russian company’s stock or bond offering directly. I can get paid my dividends or coupons in crypto-rubles, immediately exchange them for bitcoins or whatever currency I want to use as I see fit.

Oh, and if I never convert them back to dollars, I can put off paying taxes until I do.

That’s not really possible now, especially with sanctions. If it is possible, it’s expensive and a major hassle. Putin is a smart man with an excellent team around him. Moves like this are made in response to aggressive moves made by the U.S. to starve his country of capital, i.e. John McCain’s sanctions.

He and his team understand that providing a platform by which capital can enter Russia that is barred through normal means now is key to surviving the next couple of years. It’s not his responsibility to monitor what U.S. investors do, only that they comply with Russian law.

First-mover advantage is important here. If Russia continues to develop blockchain technology and embrace it in a relatively tax-free way, it won’t matter that it is ‘regulating’ the beautiful decentralized market of cryptos.

What will matter is that Russia treats its crypto-investors better than everyone else. In the fight for global capital flows, you don’t have to be perfect, you just have to be slightly better than everyone else. Arbitrage will take care of the rest.

And tax-free ruble/crypto exchange is the killer app that the crypto-market has been looking for to take it to the next level.

Russia got there first.

http://www.zerohedge.com/news/2017-10-17/russia%E2%80%99s-crypto-ruble-just-changed-game