Author Archives: Robert

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Why Bitcoin is Better Than Gold

Category : Uncategorized

Bitcoin (sometimes called "digital gold") has been more stable than gold for the last twenty-four days according to this Wall Street Journal article. The article points out that:

Some point to the drop (sic. drop in volatility) as a sign that investor perception of bitcoin is drawing closer to gold as a safe store of value.

So it appears Bitcoin may be finally catching on in the mainstream (though it has already performed as an alternative safe haven to a limited degree in some previously collapsing economies such as Cypress, Greece and Argentina). But as the global Bitcoin exchange infrastructure and liquidity have improved tremendously since those crises, Bitcoin now has practically instant global liquidity. Bitcoin's ability to settle accounts globally in minutes compared to physical gold needing a physical, expensive and risky shipment to do the same makes it a hands down winner in my opinion and that gap will only widen as Bitcoin becomes even more mainstream. 

The phrase "safe haven" is used to describe the flow of stored value from a perceived risky type of money into a perceived safer one. Perhaps one of the best resources to investigate the risks associated with current money systems is Jim Rickards. Author of two best sellers with dire predictions on the current money system, Rickards says something in this video with Greg Hunter I never heard him admit before. Rickards has always talked about IMF Special Drawing Rights being a candidate to replace the current fiat currencies of the sovereign countries. In other words, Special Drawing Rights are being proposed as a global fiat money system. What Rickards says in this interview is that he doesn't believe that the general public will fall for the trick again (the "trick" being the ability to create money out of thin air). What he ends up predicting is a return to a gold-backed currency and spends quite a bit of time speculating about the price that gold would need to be pegged to in order to avoid massive inflation or deflation. 

Bitcoin has no such pricing problem as it is an instantly self-adjusting and global market already in place. Rickards' proposed solution of pricing gold by governments totally ignores free market principles. With wide-spread belief that the governments already manipulate the gold price, he seems to believe that they will forget government price fixing schemes done with gold?  Another problem with Rickards proposals is when he suggests a type of "fractional reserve" gold backing of a currency where the government only needs to back a percentage of the printed money. I would think the now enlightened public would see through that scam and realize nothing would prevent a government from exceeding the legislated backing requirements. Governments could "cheat" at will, print as much fiat as they wanted and would capitulate when a "bank run" occurred when the public rushed the banks to get their gold. In other words, Rickards seems to be proposing a return to the mistakes of the past. Rickards also derides digital currency's potential problem of being hacked or lost through hardware failure which seems to indicate a certain level of ignorance on his part of how to prevent hacking ( perhaps a generational issue shared with Hillary Clinton) and how to backup critical data. But with all his misgivings about these potential losses he proposes a limited gold-backed currency so that it could retain the advantages of being digital. His proposal surely falls far short of the already established accountability and security of Bitcoin.

But back to the Wall Street Journal article … suppose Bitcoin is, indeed, on its way to becoming an alternative to gold? A visit to the World Bitcoin Network's Bitcoin Price Model and an adjustment to the gold setting there results in a Bitcoin price of an astounding $ 33,710.30 if Bitcoin is chosen as an alternative to just 10% of the current gold market! Ten percent is NOT that a large a market share to be beyond possibility especially if we consider that the demand for "safe havens" may be increasing. As it does increase Bitcoin simply could become the "safe haven" of choice among the new entrants and Bitcoin's market share would keep increasing. Here is the screenshot of the results of setting Bitcoin at a level of 10% of that of gold…

Screenshot from 2016-04-19 14:12:16

 

 


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The Gold VS. Bitcoin Debate

Category : Uncategorized

goldvsbitcoin

I often approach a discussion about Bitcoin by trying to learn where the other party is in their understanding of economic principles. The debate about what constitutes 'good money" goes all the way back to Aristotle (if not earlier) and it is safe to assume that the listener has not fallen as deep into the rabbit hole of economic theory as I have. During my three years of quite significant involvement with Bitcoin I've been exposed to many presentations comparing Bitcoin to fiat money (i.e. cash), credit cards, remittances (i.e. Western Union et. al.) and, of course, gold.

One of the most used ideas defending gold is that it is tangible and that you can hold it in your hand. While a part of me sees the wisdom of thta position I also see a looming pitfall in that it cannot be transferred easily nor inexpensively. This article goes further dealing with that difficulty than I ever have and concludes it (sic. gold) is essentially an abosolete relic from another age when it comes to being used as currency. The writer got plenty of flaming comments from gold lovers and the fact that gold is tangible seems to be a major theme among them. I found the comments as interesting as the article as they show a large variance in the understanding of the commenters when it comes to all the economic, historical and technological issues. The thought occurred to me that we may have to add scienctific knowledge into the mix because the idea of Bitcoin and digital currencies need of using "electrons" came up as a detriment but gold is as dependent on electrons as Bitcoin as is life itself. I left a comment there myself.


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Justice Department Disingenuous About Apple and Terrorism

Category : Uncategorized

It would seem that the U.S. Justice Department has been very far from honest when it represents that anti-terrorism is the reason they want Apple to create a "backdoor" into the I-phone. According this Wall Street Journal article there are twelve other cases that the Justice Department  is pursuing against Apple and in each one they are attempting to use the archaic 18th-century law called the All Writs Act to compel Apple to comply.

The letter, written last week from an Apple lawyer to a federal judge, lists the locations of those phone cases: Four in Illinois, three in New York, two in California, two in Ohio, and one in Massachusetts.

The problem regarding the Justice Department's hones representation of the situation to the American people is that NONE of the twelve cases involve national security. This is obviously a case where one of the highest regulatory agencies in the country stooped to the level of "crying wolf" for other reasons, as yet unknown. Their behavior warrants an investigation into the workings of the Justice Department itself. Are their motives the results of corruption? Do its leaders have stock options on Apple's competitors? Have they bet against Aplle shares (called selling them "short")? I struggle for a legitimate reason for such behavior.

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Bitcoin, Triple Entry Accounting, Collateralized Wages

Category : Bitcoin Technology

In his Feb. 10, 2014 Bitcoin Magazine article titled Triple Entry Bookkeeping With Bitcoin , Jason M. Tyra explains Bitcoin's potential effects to the accounting profession. In the article he writes

"Double entry bookkeeping revolutionized the field of financial accounting during the Renaissance period. Whereas simple ledgers had long been the standard for record keeping for merchants, the church and state treasuries, the growth of long distance trade and creation of the first joint stock companies resulted in firms whose records were too voluminous and complicated to provide any assurance of accuracy to their users….The double entry system solved the problem of managers knowing whether they could trust their own books."

Double entry accounting changed human history. It essentially enabled the employer-employee relationships to develop and, without them, companies such as Ford, IBM or Google would not be possible. The key benefit was that double entry accounting enabled bookkeeping practices to be used to help make sure the parties to the employment contracts were remaining honest.

Jason later goes on to explain the role of the independent auditor:

“Thus came the independent public auditor, whose role was (and is) to serve as an independent guarantor of financial information. Stakeholders placed their trust not in a firm’s management, who had a vested interest in presenting the rosiest of pictures to all who cared to ask, but in the auditors retained by management to vouch for them. It doesn’t take an attorney to see how a problem of agency is created by this arrangement. Do auditors work for the managers who hire and pay them or for the public that relies on their integrity in order to make decisions?

Realize that the emphasis to the last line is my own as I want to call attention to a very important detail he points out about who is paying the auditors. Who pays whom can be the crux of many potentially sticky tax and legal issues and to loyalty also so I need to add a disclaimer here that none of the following constitutes legal, tax or accounting advice. The “killer app” I'm about to describe could change many instances of employee/employer relationships into a completely different one just by use of some very simple Bitcoin features by enabling a change in the way employees get paid. This could have as large an effect on human history as the introduction of double entry accounting did.

Let's use an example of a small business that has an “employee” and, as is usually the case, the employee is an hourly employee (as opposed to a salaried one). Since the contracted term is “per hour” then the employee is “technically” owed an hours wage after they worked even a single hour. The usual employment agreement doesn't say the company would issue a pay check hourly, of course, but Bitcoin could easily accomplish this for any business that accepts Bitcoin.

How would this work? When a customer comes in and makes a purchase and paying with Bitcoin, there would need to be a Bitcoin based invoice generated to receive that payment. The invoive will display a public Bitcoin address for the customer to send payment to. Suppose that before the invoice is generated the computing program checks the time clock records to see if the company owes the employee wages. Upon discovery of a sufficient quantity of back wages (by sufficient I mean more than the payment of the customer) the invoice would receive the address of the “employee” to display rather than the address of the business. The program then just needs to do some internal accounting to make sure the hours are tagged as already paid. A key point is that the payment went direct from the customer to the “employee” and without any third party involvement. Such a possibility could completely change “employee” relationships into a totally different one. What kind I'm not totally sure.

Perhaps if we go over the details of the above transaction again but this time use what I think are more accurate and factual terms and words. Instead of calling them the company the “employer” let's call them the “borrower” because they owe the employee money. And rather than calling them the “employee” let's call them the “lender”. Now we end up with a borrower/lender relationship. In this link http://www.accountingcoach.com/blog/assigning-accounts-receivable it states “The purpose of assigning accounts receivable is to provide collateral in order to obtain a loan.” . The page http://www.accountingcoach.com/blog/what-is-accounts-receivable defines them as “goods and/or services.”. So before the “lender” makes a loan of their services they usually require that the borrower provide an “assignment of accounts receivables”. In our model, the lender/employee can opt into the invoicing process and the company can make sure there is actually a debt/wages owed.

So when the customer is about to make a payment we will call it an “accounts receivable” of the company. The payment is already promised as the collateral for the loan (to the employee) so the company records the payment from the customer in a separate “Accounts Receivable Assigned” ledger (a standard accounting practice from what I understand) as is described in those links.

As we started out saying, in tax compliance issues words are very important (especially the words of contracts and agreements between small businesses and the people that help them). By the use of borrowing and lending terminology along with the accounting terminology associated with assigning debt it becomes apparent that the typical employer is actually borrowing money from their employees.

Who is paying whom becomes important to determine whether the requirement to file a Form 1099 by a company is triggered. They are required to file one for anyone they pay over $600 in wages. In the above arrangement the payments is going directly from the customer to the lender. So who is paying whom? The employer didn't and the amount may or may not be required to be counted towards that limit.

But there is yet another layer of possible assignment using Bitcoin. Suppose the employee wants a loan themselves with a lender who is willing and perhaps even eager to accept Bitcoin for repayment. It would be trivial for the employee to provide a form where the address could be changed by the employee. The form could also have inputs for adding multiple addresses with differing execution dates, priority levels and payment amount limits for each level. The lender may have as a condition of the loan that they get paid first and the employee would then only need to substitute the address of their new creditor for their own.

 

back to the issue of "whom is paying whom", in such a case the payment of the customer doesn't go to either the company nor the "employee" but to the creditor of the employee. The above scenario is enough to give tax preparer's nightmares … but I see a potential of it happening.

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Is Google Bitcoin’s Friend Or Foe?

I got into a debate with a Google rep about Bitcoin vs. Google Wallet and, I realize I’m biased in my opinion but, I think I handed him his head.

Incredibly he hadn’t even looked into Bitcoin so I introduced him to alot of information. But then he started on how it was the same as Google Wallet. He gave a scenario of how I could send my buddy (sitting across from me) some money instantly too and asked why Bitcoin was different. I easily replied that, among other things, no one would know it was me sending it to him or that he had received it after I sent it. If I used Google they would know BOTH sides of the transaction.

Google is spying on everything we do. I get the strangest ads showing on web pages simply from some off the wall comment I made in an email. But I don’t think it is some tin foil hat conspiracy to look ahead and see where the current spying/advertising alliance won’t be satisfied until they know when and what we bought. I was seriously looking for a new computer monitor and had visited a number of retailer sites. The ads for monitors were on every site I visited. And then I finally “pulled the trigger” and bought one and guess what happened to the ads? They kept coming …. for months. It doesn’t cost anyone anything since I didn’t click them (except my own aggravation) but how long before Google wants to know that I bought so they can send me more effective ads? I don’t think too long.

But here we are 6 years after what many say is the biggest tech event since the Internet (which is itself bigger than Google of course) and I can’t think of anything Google has contributed. So why hasn’t the Bitcoin community gotten more vocal about Google’s absence? The Google Rep was not in some fluncky position. Rather he was a ways up the corporate ladder. I can’t say one event is proof of Google’s corporate policy but, again, nothing constructive from them comes to mind. Wall Street banks seem more involved than Google and that is a complete shame!

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Bitcoin Is A Black Box To Many Government And Tax Regulators

Category : Uncategorized

Earlier this week, the European Court of Justice decided to exempt bitcoin transactions from Value Added Tax (VAT). The IRS in the US made its ruling on Bitcoin way back in March of 2014. The European ruling has been heralded as good news for Bitcoin while the IRS ruling was not so welcomed.

The point is that governments across the globe have still not reached any type of consensus as to what, exactly is Bitcoin and how to treat it. And all this confusion in governments is happening when the introduction of Bitcoin was over 6 years ago.

That is because there has never been anything like Bitcoin before. The governance of current financial assets evolved when those assets were first, commodities such as gold or silver and later became debts recorded on paper. The computer but even more the Internet made the debt and paper model untenable. Only 3% of US currency is represented as paper “dollars” meaning only 3% of the money issued has any unique identifier attached to it (i.e. the serial number of the Federal Reserve Notes). The remaining 97% of currency has no such unique identifiers and, so, can be created ad infinitum.

Trying to make a mathematically and technology superior system such as Bitcoin match up with such a corrupt and irrational system as what the world governments now operate is an impossible task for regulators.

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List Of Potential Software/Protocols To Convert ADCoin To An Asset

Category : Digital Assets

This is just a quick "spaceholder" post to get the page started. I've at least looked at each of these and there are more coming available rapidly. I'm looking for input and feedback from the members as to what they want and methods of how they would like their earnings to become an asset.

Armoury Wallet (Hierarchical deterministic wallet, multi-sig capable, cold storage capable)

Colored Coin

Open Protocol

Open Assets

Smart Contracts