Can Bitcoin Survive - Part 2

The Bitcoin Cash Hash War

At 10.30 Craig Wright reveals his motive. That he wants to crush Roger and Jihan totally. He wants them to sell everything hey have to support ABC. At 11.30 Craig reveals that he(SV) is selling BTC. Today BTC fell through 4000. There will be panic. Lots of people have and are going to lose more money holding BTC or any crypto for that matter as they are all pegged to BTC. There will be a rush for the exits.

Whether Craig is Satoshi or not is irrelevant. This guy can certainly act on his pronouncements. He claims Roger and Jihan has at most 1.5 million BCH and not much BTC. Perhaps his group is selling BTC probably accumulated at less than $100. $3000 is still very good profit so we can say he can sell right down to $0 and still be smiling. Jihan has an IPO coming up. If BTC tanks like it is now he can kiss that IPO goodbye.

Bitcoin ABC hash rate just tanked today. Could be a switch to BTC to minimise losses but SV is still mining on. So Craig’s claim that ABC miners will give up before he does bears up. If that hash rate does not return ABC is toast.

How will this end?

Craig’s motive seem to be to get the banks and corporations to use BSV. Possibly a top down approach with banks offering BSV accounts to all their customers. If the incentive to banks is also controlling BSV then it could work. The road will be long nevertheless which is why he mentioned 2026.

BTC will not survive this price drop. It means no further development in mining technology. Some miners will shut down to lower the difficulty towards economic price equilibrium, and fire up again if the price recovers. If the Chain Death Spiral sets in then it is curtains. Block time will go so long that the chain will be unusable.

Who will be the winner

EOS is a third generation blockchain. The first was BTC with smart money. The second was Ethereum with smart contracts. And Eos with Smart contracts at scale. BTC depended on speculative money coming in from the real world economy. Ethereum depended on real world money coming into IPOs. EOS however is able to tap into sustainable real world income streams.

Whether you approve of gambling or not the gambling dapps on EOS are the first sustainable economically viable activity on a blockchain. This is real. Gambling is a human activity like eating and sleeping and sex. The operative word is sustainable. My estimate is that 10,000 Eos or roughly 40,000 dollars is now flowing into the EOS ecosystem daily and will escalate exponentially. This is real money coming in and it is here to stay and grow the ecosystem. Not speculation.

Then you will have Dapps like EVA taping into the ride share market. Another revenue stream from the real world economy and there could be others on the horizon.

If I am right about this then we should see a decoupling of EOS from BTC. That is the price of EOS will no longer follow BTC going down. Lets lay back and see how this plays out in the next few days.

Can Bitcoin Survive

If bitcoin was going to be a reserve currency it would have by now.

From its’ peak of 20K in January of this year it has drop month after month and is poised to break below 4000 soon. If bitcoin was going to be a reserve currency and hit mainstream, used by everyone as money then it would have done so by now. At least the adoption would be on an upward slope.

The above graph clearly shows that adoption growth stopped in January and we have been on a downward trend ever since. In the world of the internet, if you are not growing then you are dying. That is the awful truth. Bitcoin is just too volatile to be used as money. For that we need a stable coin. As a reserve currency, there is just too much push back from central banks. They are unable to control the issuance of bitcoins and they certainly do not want to elevate Satoshi and all the early adopters to become the richest people in the world. Even richer than countries. No no most countries that have large holdings of gold will prefer that gold be the reserve currency. The problem is that real gold reserves are not held by countries like the UK, EU and USA. They play around with paper gold and so far they have managed to hold back the price of real gold. The new Shanghai gold exchange and the possibility of a gold backed Yuan may break this impasse. We shall see.

Is this the end of the road for Bitcoin?

Bitcoin weakness is also its’ perceived strength – mining. As the price tracked upwards and asic miners became more efficient, home miners were driven out of the market towards large scale industrial miners controlling a few mining pools. This huge waste of energy to secure the chain would be fine if there was not another way. As it is when the price starts tracking downwards, all marginal operators will have to shut operations. No miner can afford to mine at a loss for long. The last to holdout will be those with access to the cheapest electricity and even these will have to give up as bitcoin price track towards $3000.

With the sharp drop in difficulty, block time for BTC have started to lengthen. This drop in difficulty is caused both by the Bitcoin Cash wars as well as the drop in price. Bitcoin may yet get snared up in the dreaded “chain death spiral“. 11 more days to the next difficulty adjustment.

Proof of Work and Proof of Stake

If you really don’t need to spend millions of dollars in electricity to secure the chain then why should you? Proof of work proponents have always insisted that we have to and that proof of stake is inherently flawed as it favours those who hold the most coins.

The EOS chain is delegated proof of stake, and have been live since June. It has humm along effortlessly gathering adoption and users at measurable rate weekly. Refer to Blocktivity and Dapp Radar. Barely 6 months old and there is an increasing number of high volume dapps building on the chain. Proof of stake works. EOS works and continues to improve with every update and upgrade.

The way to become money is not to try to be money.

Money is what everyone accepts as money. Unlike Bitcoin and almost all other cryptos EOS does not try to become money. It is a platform for fast, secure and free transactions. Because of this central banks may issue their currency on the EOS mainnet or their own sister chain. Cross chain transactions will not be a problem when transacting across several national currencies. Being a platform token EOS will not be a stable coin.

A stable token will emerge and gain worldwide adoption to the extent that everything worldwide is priced in this stable unit. What this is will be is yet to be seen but it is likely that something will happen. Perhaps the Bancor algorithm could pave the way towards such a stable coin or an exchange unit.

If this is the future then Bitcoin will have no future. We shall see.

What Is EOS?

Just another crypto coin, Right?
This was what I thought when I first learned about EOS in January of this year. Now that the EOS mainchain is launched and I have been able to play around with the EOS ecosystem, what I discovered is totally mind blowing.

What is an EOS account?

When you open up your EOS wallet and look at your account, this is what you see.

The components in your account are CPU, Network and Ram! This is a computer!! Your account is describing the power and resources your computer has. The amount of CPU ( EOS staked), the amount of bandwidth or network (EOS staked) and amount of RAM available. The smallest "account computer" possible is 0.1 EOS of CPU, 0.1 EOS of Bandwidth and about 4 Kb of Ram. This represent the minimum share in the power of the main "EOS computer" run by the Block Producers. Like a computer the RAM is where all the critical data for instant access by the "EOS computer" is stored.

Think of the "EOS computer" as a computer in the cloud and all EOS accounts are just different size computers that can use the resources of this "computer in the cloud" depending on the amount of EOS staked. Sending tokens, broadcasting, buying ram, running Dapps, voting and much more.

This is very different from what we have been used to thus far. With Bitcoin when we send a transaction say sending 0.01 BTC to another account we pay a fee of hopefully 0.0001 BTC which goes to the miner and the recipient gets 0.0099 BTC. ( Ethereum works in much the same way.) In EOS if we send 0.1 EOS the recipient receives the full amount of 0.1 EOS. The transaction fee is paid by the network. For the user this is a "free" transaction. What stops the network from being spammed is that the amount of resources your " account computer" has only allows you to make a finite number of transactions within a 24 hour period after which the capacity of the "account computer" is depleted and will have to be "recharged", before it can be used again. This is an ingenious solution!

It cost a minimum of 0.2 EOS to open an account. We can see that if 1 EOS is worth say $1000 one day, it would cost $200 to open up an account! This will severely affect the number of users right? Wrong! You only need an EOS account if you want to use the EOS blockchain, hodling, holding voting and moving EOS tokens, running your Dapps. 

Remember that EOS is a computer, and as a developer of a Dapp (ono) you will need to stake a certain amount of EOS to have access to CPU, Bandwidth and Ram on the EOS computer for your users to make transactions. The more popular and successful your Dapp the more resources you will need. Your users will sign up to your Dapp and they will use the services you offer without the need to own any EOS tokens or open up an EOS account. You can even reward your users with your own native tokens (ONO). This runs separate from the EOS blockchain. If the project fails you simply sells your EOS back into the market! This is like putting up capital to start a business and if the business fails you simply resell the assets to recoup your capital. Now, this is a model for mass adoption!

Expect to see a hosts of Dapps similar to Facebook, Twitter, Telegram all running on the EOS platform. Their users can singup to use these applications and they do not need to hold any EOS tokens or have an EOS account.

To drive the point home. Remember the game of space invaders? 

You can run this program on your little Z80, Atari, Commodore or Apple computer. It uses the CPU, bandwidth and Ram resources on your little computer. Well you can run this program on your little "Eos Account" computer. All the moves will actually be recorded on the EOS blockchain in real time.

Unlike Bitcoin, transactions (moves) on the EOS blockchain are extremely fast. Send a token and by the time you refresh your page the transaction have already confirmed on the blockchain. This is so incredible that you can run Virtual Reality applications on the EOS blockchain. The mind really boggles on what this EOS computer is really capable of. Think decentralised stock exchanges, micro transactions and instant payment systems.

So what is EOS and where is EOS headed?

The inventor of EOS is Dan Larimer. Prior to EOS he has already cut his teeth on Bitshares ( a decentralised exchange ) and Steemit ( a decentralised social media platform). Steemit and Bitshares currently occupy the top two spots in number of transactions processed as tracked on Blocktivity. These two projects are running on their own blockchains. Since then, Dan Larimer has announced that he will soon release Steemit 2.0 and Bitshares 2.0 on the EOS blockchain! and on top of this he will also introduce a stable coin.

We don't know what Steemit 2.0 and Bitshares 2.0 will be like but we can be very sure that they will be huge improvements over their previous incarnations having learned from the experience. A stable coin too! like Tether? The basis of a stable coin is the asset backing ratio. Tether boast a 1:1 ratio with USD but they have difficulty proving this. BitUSD on Bitshares is said to have a 3:1 asset backing. How will this new stable coin be received?

This is what is so incredible about EOS. Everything is different and new, and yet, so far, it all works!  Even before any Dapp is launched on the platform there is already a marketplace for Ram and soon Account Names too. Only stands to reason that a market for renting EOS tokens will develop in the near future. My conclusion is that the EOS as a platform will dominate the crypto space, and EOS as a token will be worth very much more than it is now.

                                _____________________________________________

Proxy account for block producer voting - investingwad

EOS is a blockchain, a community and a society all in one. A society is only as good as the people who run the system and in EOS these are the block producers.

It is so refreshing to see that in EOS, the people we elect to rule over us actually have to be nice to us. We elect our block producers with our votes Daily. It is crucial that we counter the influence of whales who may be block producers themselves and who will vote in their own interest. 

We need to expressly know the objectives, motives and actions of these block producers.

Most users will not have the time or expertise to question, query and research these block producers and hold their feet to the fire, so to speak. They can however delegate their vote to proxies who share the same interest as them, to vote on their behalf.

I think that investingwad will vote with our interest at heart.

You can set your proxy with the Greymass wallet. Or from their Github account.

                                 _____________________________________________

A point to note.

The downside is that if EOS are lost, the resources they represents are also lost to the network and cannot be used by anybody else. In Bitcoin, when coins are lost, they have no effect on the performance of the platform. This is why EOS has a policy or proposal to "recover lost resources" after 3 years of inactivity. This is like saying that every EOS account has a temporary 3 year lease on the resources it controls and if they are never used then these resources can be reclaimed by the community. Contentious, but we can agree that these resources are precious and should not be lost to the community. There may be amendments to this policy as everything in EOS can be changed, if the community agrees by way of referendum.

BTC Price Falling Again. Will We See The Chain Death Spiral This Time?

Another Bloodbath!

Above is the 4 hour Bitfinex candle chart. Bitcoin has just dipped below $6000 and there is good reason to expect similar drops as in the previous 3 occassions. That is $1000 USD drop. I suspect we may even see Bitcoin test levels as low as $3800.

What is important to realise is that below $5000 it is unprofitable for many commercial mining operations. I have covered this in my previous post.

Bear in mind that the mining difficulty will increase by perhaps 10% or thereabouts in the next 3 days. 10% increase in difficulty will have the same effect as a 10% drop in price. This combine effect of a huge price drop and a 10% increase in BTC mining difficulty may be the perfect storm or black swan event that set in motion the dreaded chain death spiral.

One must ask why mining difficulty have gone up so much in the last few weeks? Is it because of newer, more efficient miners being deployed? Bitmain have always endeavoured to make their miners available to the public promoting mining decentralisation. Bitfury and newer manufacturers in Korea and Japan, employing more efficient chips, have kept their technology to themselves. It is certainly not good for mining decentralisation and could very well backfire on them. The future for BTC is not bright with this 'sword of damocles' hanging over it.

Something is happening and it is still hard to imagine what the crypto landscape will look like after the dust settles. The guiding principle I suppose is to invest in the technology and not the hype, and even this is hard to do as we often can't tell what or how much is hype until reality sets in. Shucks.

If in doubt, sit on the sidelines and many ( 3 billion USD ) are certainly doing this. It would be better is crypto is based on Tether than BTC or USD. I broached on this in a previous article. Whether it will, depend on the users, and in my opinion this is much better than the whole market rising and falling with the price of BTC. At least this shift will enable each coin and project to be valued on its' own merit alone. If you have a better solution - do comment!

A Terrifying Future For Bitcoin - Chain Death Spiral

Oh No - Not another Bitcoin obituary! We have had lots of that. But .... 

10 Years
In another 6 months Bitcoin would be 10 years old. The technology should have matured by now with mass adoption worldwide. Its' aim was to be the financial platform for every decentralised financial application. Sadly after steady increase in adoption over the early years, growth has now stalled.

Bitcoin could not scale and time has run out. Lightning cannot be a solution because it depends on users first owning some bitcoin. Preaching to the converted is not a recipe for mass adoption.

Bitcoin Cash moved in with the promise of unlimited blocksize and unlimited transactions. However since inception in August the number of transactions have not increased.

This means that Bitcoin Cash is also not able to gain users apart from the disillusioned initial converts who moved over from Bitcoin. Bitcoin Cash could not built on or inherit all the existing infrastructure. Herein lies the problem - It may not have the time.

The Chain Death Spiral

This phenomenon whereby Bitcoin chain slows down and finally grinds to a halt because it is unable to react to a sudden drop in miner defection, is still in play. Thus far the price of Bitcoin have kept mining profitable. This stage is fast coming to an end.

Bitmain has just stopped mining with S7 on Hashnest leaving only S9. 

As of today at a BTC price of $6100 the profit margin for BTC mining on Hashnest is 22.5%. Bitmain's S9 are the most efficient industrial miners in use today. When BTC price was $8000 the profit margin was around 60%. I believe that mining with S9 will be unprofitable if BTC's price falls below $5000.

For mining to remain profitable at $5000, the mining difficulty must decrease. Miners will shut down operations or moved to mining Bitcoin Cash which also means that the price of Bitcoin Cash must increase. If this process takes place in an orderly fashion then BTC price and BCH price will converge to equality. However this process will hardly be orderly or even predictable. If  BTC loses miners suddenly, the death spiral will set in. But will Bitcoin Cash be the winner even with BTCs' demise?

It really depends of how the future shapes out for crypto. Will there be many coins for different purposes, will there be one coin to rule them all or will there be only one coin? This has yet to be determined.

The more important question is, upon which protocol will all or most decentralised financial applications be built? Before we answer this question we have to consider another fundamental blockchain issue. Proof Of Work or Proof Of Stake.

This is a security issue. Proof of Work implies that the cost of a 51% attack is so exorbitant in the case of BTC that even governments will not attempt it. This makes BTC the most valuable blockchain because it is the most secure. Proof of Stake implies that the people owning the tokens will not attack their own basis of  wealth. Which of these two system is more secure or should we have a hybrid system like what Ethereum is proposing.

In technology two things are evident. Good enough is enough for a technology to be adopted. Take the example of TCP/IP. From mere packet transfers to online streaming today. The technology need not be perfect to start with. Users will put up with the quirks because the benefits outweighs the inconvenience. The second is being first to market. Bitcoin was first to market and has remained unassailable thus far. 

My current belief is that Proof of Stake is good enough. This is proven by Bitshares and Steemit. These two systems are still operating live, and now occupy the number 1 and 2 spots in transactions activity. 

I predict that EOS will be first to market as the protocol upon which most or all financial applications will be built. EOS is the first blockchain protocol that can scale and be used at an enterprise and industry level. You can fit all of Steemit and Bitshares in it and still have room for more.

A bigger and better Steemit 2.0 will be built by Block One on EOS. Bitshares is poised to move to EOS. Everipedia an improved version of Wikipedia is set to launch on EOS. You could build versions of  Youtube, Facebook, Twitter and more on EOS. The advantage is that you do not need to run your own servers to do so. Imagine running an operation like Facebook without investing in the servers and specialist personnel to maintain them. Yes that can be done on EOS. Every existing centralised social media platform can be cloned, disrupted and displaced. I expect that most of the existing centralised social media platform, will move to EOS, before they are disrupted because they can and the cost savings are enormous.

A new world is upon us. Aptly named DAWN. Will it spell the end for Bitcoin? Maybe, maybe Not, but the future is exciting.